Marketing and the Internet

The Internet, a new communication channel, is having a profound effect on the conduct of business in both the domestic and international arenas. With the globalization of economies and technology helping eliminate distances, people living in different countries can communicate through the Internet as effectively as people physically located in the same city. The most important Internet development has been the explosion of marketing activity on the World Wide Web (WWW). The Web contributes to communication by combining sounds, graphic images, video, and hypertext to aid in the interpretation of text. (Paradesa Media's site, Learn the Net, is a multilingual guide to the using Internet in the language you prefer: English, Francais, Italiano, Espanol.)

The Associated Press reported that on 4-15-98 the United States Commerce Department said that business use is growing fastest. It said that business-to-business purchases, such as wholesale purchase of supplies, could reach $300 billion by 2002 and routinely save some of America's largest companies hundreds of millions of dollars by lowering their costs and reducing inventories. Marketers are incorporating the Internet, a mass medium, into their strategies. In order to formulate a marketing strategy, marketers develop the appropriate marketing mix that best matches the needs of the target market.

Target Market

Marketing efforts are aimed at specific target markets or those groups identified as potential users of the product or service. Organizations divide the whole market for their products into groups of consumers who have similar needs or similar purchasing behavior. The Internet community represents a desirable market for the goods and services of many companies.

United States

Surveys by IntelliQuest Information Group, Inc. found that 62 million adults aged 16 and over, use the Internet in the US, effectively representing 30 percent of the total US population. (IntelliQuest: 62 Million People Online in the US, Feb 9 1998, http://www.nua.ie/surveys/index.cgi?service=view_survey&survey_number=595&rel=no)

In 1995, 67% of US Internet users were male and 33% were female. (Defining the Internet Opportunity, O'Reilly & Associates, 10/1/95, http://www.oreilly.com/research/users/index.html) In 1998, males continued to dominate the web but only marginally at 57 percent of the total population, while women represented 43 percent. The largest age group category using the web was the 18 and 34 group who comprised 38 percent of the total population. (RelevantKnowledge: Males Continue to Dominate the Web, Feb 3 1998, http://www.nua.ie/surveys/index.cgi?service=view_survey&survey_number=587&rel=no)

The World

In 1994, 3 million people were connected to the Internet. As of February 1998, 112.75 million people were online throughout the world -- World Total 112.75 million, Africa 1 million, Asia/Pacific 14 million, Europe 20 million, Middle East 0.525 million, Canada & USA 70 million, South America 7 million -- (How Many Online? February 1998 http://www.nua.ie/surveys/hoow_many_online/index.html) Inter@ctive Week coined the term 'The Emerging 20' to distinguish those countries which may prove to be the most lucrative markets going into the 21st century. Most of the Emerging 20 are made up of Latin American, Asian and Eastern European countries. (The Emerging 20 Nations, http://www.cyberatlas.com/market/geographics/emerging_20_nations.html)

Mexico

There are about 100 Internet Service Providers (ISPs) in Mexico. CompuServe, with approximately 16,000 subscribers, has roughly 45% of Mexico's Internet market. (Boardwatch, May 1997, http://www.cyberatlas.com/market/geographics/north_america.html)

Surveys of major Latin American ISPs suggest over one million Latin Americans use the Internet, with the number of Internet users for businesses and homes increasing by almost 100 percent monthly. Brazil, Mexico and Chile have the largest networks in Latin America while Colombia and Panama are among the five fastest growing Internet networks. The primary Internet users in Latin America are universities, with growing use by banks, cinemas, car dealers, and computer and consulting service companies. Corporate communications, such as financial statements and company overviews, as well as client interactions like home banking and order tracking, are among the primary corporate uses of the Internet in Latin America. (Latin American Market Grows 100 percent, Jun 6 1997, http://www.nua.ie/surveys/index.cgi?service=view_survey&survey_number=236&rel=no)

According to a survey released by Nazco, Internet usage in Latin America increased by a 788 percent between 1995 and 1997. Of those users, 90% came from the upper-middle to upper strata of society. Also, 81% read English language sites. For the first time there were more women using the Internet than men. (Use of the Internet escalates in Latin America, Nov 20 1997, http://www.nua.ie/surveys/index.cgi?service=view_survey&survey_number=492&rel=no)

Marketing Mix

The Internet is great for bringing buyers and sellers together. The available information on the average Internet users can be used to target audiences. Web sites should serve the audience they are designed for, and reflect the strategies of the companies that create them. For example, when the relative cost of telephone services is high and there is a low penetration of PCs in the home, the target market is people logging on from work. Thus, the web site should be business to business orientated as opposed to consumer orientated.

Once a target market has been identified, a marketing mix can be developed to reach, appeal to, and convert this target into customers. A marketing mix is a specific combination of product, price, promotion (marketing communications), and place (distribution elements) designed to appeal to and satisfy the needs of the target market. The Internet can be incorporated into the marketing mix variables in various ways.

Product

The Internet is allowing companies to shift their emphasis from customer acquisition marketing to customer retention marketing. (Terry G. Vavra, After-Marketing: How to Keep Customers for Life Through Relationship Marketing, Business-One Irwin, 1992) An organization's survival depends on giving customers the products and services that they actually want. If a company can't relate electronically with its customers, it will be difficult for that company to survive in the future global market economy. Access to the Internet is directly related to a company's ability to make a profit in the future.

The Internet and email can be used as the primary means for communicating with customers, creating relationships, and fostering customer loyalty - which can lead to increased market share. Marketers can determine customers' preference by gathering information on the Internet. Since the Internet is interactive, information can be obtained through surveys and questionnaires administered online. Customer feedback mechanisms can be built into Web sites to enhance customer satisfaction and provide insight for improving products and customer service. Loyal patrons can be recognized and thanked through the use of customer tracking systems. For example, United Airlines recently emailed its Silver Wings Plus members asking them to visit the Web site and evaluate a special fare to Asia. It got 40 percent of its over-55 club to respond - for free.

In the US and Canada approximately 5.6 Million people or 15% have purchased online. (Spring '97 Release of the Internet Demographic Study http://www.commerce.net/work/pilot/nielsen_96/) Buying is different on the Internet in the areas of travel (airline and hotel reservations), banking, stock buying, news, automobiles (autotel), clothes (Levi's, Gap), books (Amazon), music (CDNow), and food (Peapod).

The Internet facilitates interaction between manufacturers and their customers. Customers can participate in the development process interactively with the producers. Interactivity between customer and producer marks a return to pre-order producing. Customers welcome the chance to participate in the design of their own highly personalized products and services. In his 1987 book, Future Perfect, author Stan Davis developed the idea of
Mass Customization, the large-scale production of goods tailored to individual customers' needs. Modern information technology, he asserts, enables the manufacturer to track the individual customer's preferences, and, by means of flexible automation, to individualize each product during assembly. Most importantly, by automating the customization process, the custom good can be produced at costs competitive with standardized goods. (Stanley M. Davis, Future Perfect, Reading, MA: Addison-Wesley, 1987) A successful example of a manufacturer applying mass-customization is Levi-Strauss & Company. For those customers willing to pay 25 percent above the list price, Levi-Strauss will create a pair of jeans to fit a customer's measurements.

Price

The Internet allows suppliers and manufacturers to find the best possible prices for raw goods and materials. Also, consumers can search for and obtain the lowest possible prices for the goods they want to purchase. Search engines can be used to find and compare prices on internationally available brand-name merchandise.

Yet, an economy based entirely on price competition results in strict standardization with products becoming commodities that meet some basic set of unyielding specifications. If price is everything, the low-cost producer is the only winner. (Thomas T. Nagle and Reed K. Holden, The Strategy and Tactics of Pricing, 2nd ed., Prentice-Hall, 1995)

The marketing concept isn't to sell a certain product or service, it's to satisfy the customers' needs. Sudden and abrupt discounting does not build partnering. It creates anxiety. A better strategy is to provide business solutions that differentiate the product. Marketers are problem solvers--they prevent problems. Marketers build brands. (David Aaker, Managing Brand Equity, Free Press, 1991; Building Strong Brands, Free Press, 1996)

Email can provide an efficient and effective way to acknowledge customers' requests. Customers will trust those companies that are attentive and responsive. The Internet allows businesses to build relationships with customers. Relationships bring revenues. (Regis McKenna, Relationship Marketing, Addison-Wesley, 1991) The interactive aspects of the Internet can prevent companies from becoming trapped in low-margin, price-based competition.

Promotion

The Internet is used to communicate customer value. (Adrian J. Slywotzky, Value Migration, Harvard Business School Press, 1996) Marketing communications should be integrated - public relations in the news; advertising in ads; direct response marketing in direct mail and telemarketing; and sales force in sales call. Public relations -- which include publications, events, news, community involvement, identity media, lobbying, and social investments -- should be used more by marketers. (Thomas L. Harris, The Marketer's Guide to Public Relations, Wiley, 1991)

Virtual selling is the application of information technology to bring all of the company's resources and capabilities to provide the customer with a complete solution to his or her unique requirements. The objective is to empower the salesperson to be an informed salesperson who virtually has the whole company's knowledge at his or her command and can provide total sales quality. Virtual selling is reducing the average sales cycle and increasing the lead-to-close ratio. (Thomas Siebel and Michael Malone, Virtual Selling: Going Beyond the Automated Sales Force to Achieve Total Sales Quality, New York: The Free Press, 1996)

Place

The Internet has the power to re-intermediate, to provide the service the middleman used to provide. Electronic markets allow consumers to directly access manufacturers.

Shopping is one of the most popular activities on the Internet, and the number of people who shop and buy products on the Internet is growing. A large majority of Web users -- 73 percent -- spend some portion of their time online searching for information about a specific product or service. More than half of these users -- 53 percent - has searched specifically when making a purchase decision. This is a significant increase over the findings in the fall 1995 survey, when 55 percent of all Web users used the Web for shopping and only 35 percent prior to an actual purchase. …But when it comes to shopping and buying behaviors, larger differences exist. Males are more likely to search for product information online than females and are more likely to make purchases. Not surprisingly, computer hardware and software is the leading category for attracting both shoppers and buyers on the Internet. ("STARTLING INCREASE" IN INTERNET SHOPPING REPORTED IN NEW COMMERCENET/NIELSEN MEDIA RESEARCH SURVEY, http://www.commerce.net/work/pilot/nielsen_96/press_97.html)