How significant is Internet marketing to businesses? Today, the answer to this question varies dramatically according to who is answering. For companies such as electronics company Cisco, the answer is ‘very significant’ – Cisco sell $9 million worth of hardware using the Internet each day. For fast-moving consumer goods (FMCG) companies such as Unilever the answer is ‘insignificant’ – the majority of their consumer sales will occur through traditional retail channels in response to promotional campaigns in traditional media. In 1998 advertising expenditure for Internet placed adverts was estimated at £8m, compared to £3 billion for TV and radio adverts.

Does, the relatively unimportance of the Internet to companies such as Unilever indicate that Internet marketing is of specialised interest only? We believe not, because the interesting question to ask is "how significant will Internet marketing be to businesses in the future; in 2, 5, or 10 years time?" This is the question many companies are asking themselves today, and is why it is important to understand this relatively new marketing phenomenon.

For example, Unilever is starting to use the Internet as part of brand building for its new products. In 1998 it launched its Mentadent toothpaste in the United States using traditional media campaigns and also offered samples in response to users clicking on an advert placed on health-related web sites. It received more than 40,000 requests for samples, far exceeding its expectations for this new medium. If businesses do not understand and start to apply the new marketing techniques and technology in this way, then they may not only miss an opportunity, but may even cease to exist.

The media portrayal of the Internet often suggests that it is merely an alternative for traditional advertising. In fact, the Internet can be readily applied to all aspects of marketing communications and can and will need to support the entire marketing process. As we move into the new millenium, organisations will use Internet technology in the form of intranets and extranets to support the operation of the internal and external value chains.

This book will cover all the different ways in which the Internet can be used to support the marketing process. Many organisations have begun this process with the development of web sites in the form of electronic brochures introducing their organisations’ products and services, but are now enhancing them to add value to the full range of marketing functions.

When reading this book, we would encourage a healthy cynicism in the reader; to adopt a questioning approach. When referring to the case studies and estimates of growth, ask what are the tangible benefits that have been delivered and what are the growth estimates are based on?

Remember, also that for every success story, there may be unrecorded instances of companies failing to deliver the foreseen benefits. The case study – INTERNET: Europe sales 'could top $1,990bn' – highlights the reasons for growth in Internet sales to both other businesses and consumers and describes some of the barriers which make estimation of the level of sales difficult.

The word marketing has two distinct meanings in terms of modern management practice. It describes:

1. The range of specialist marketing functions carried out within many organisations.

Such functions include market research, brand/product management, public relations, and customer service.

2. An approach or concept that can be used as the guiding philosophy for all functions and activities of an organisation. Such a philosophy encompasses all aspects of a business. Business strategy is guided by an organisations market and competitor focus and everyone in an organisation should be required to have a customer focus in their job.

The modern marketing concept unites these two meanings and stresses that marketing encompasses the range of organisational functions and processes that deliver products and services to customers and other key stakeholders such as employees and financial institutions. Increasingly the importance of marketing is being recognised both as a vital function and a guiding management philosophy within organisations. Marketing has to be seen as the essential focus of all activities within a organisation.

The marketing concept should lie at the heart of the organisation, and the actions of directors, managers and employees guided by its philosophy.

Modern marketing requires organisations to be committed to a market /customer orientation. All parts of the organisation should co-ordinate activities to ensure that customer needs are met efficiently, effectively and profitably. Marketing encompasses activities traditionally seen as the sole domain of accountants, production, HRM and information technology. Many of these functions had little regard for customer considerations. Increasingly such functions are being re-orientated, evidenced by the importance of initiatives such as Total Quality Management, (TQM), Business Process Reengineering, Just in Time (JIT) and supply chain management. Individuals functional roles are undergoing change from functional to a greater emphasis on process. As such they are being encouraged to become part time marketers. Processes have a significant impact on an organisations ability to service its customers needs.

The Internet can be applied by companies as an integral part of the modern marketing concept since:

• it can be used to support the full range of organisational functions and processes that deliver products and services to customers and other key stakeholders
• as a communications medium it can act as a ‘corporate glue’ that can integrate the different functional parts of the organisation
• it facilitates information management which is now increasingly recognised as a critical marketing support tool
• the future role of the Internet should form part of the vision of a company since its future impact will be significant to most businesses.

Without adequate information, organisations are at a disadvantage with respect to competitors and the external environment. Up to date, timely and accessible information about the industry, markets, new technology, competitors and customers are a critical factor in an organisations ability to plan and compete in an increasingly competitive marketplace.

European sales over the internet could rise by more than tenfold to $1,990bn by 2001, according to a report published yesterday. The first annual survey of electronic commerce in Europe undertaken for KPMG, the management consultancy, showed that over half the 500 companies interviewed believed the internet was vital to their global competitiveness.

The level of the sales forecast drew surprise from some analysts, who questioned its accuracy. One, who did not wish to be named, said KPMG's current internet sales estimate of $187bn, extrapolated from the survey, was "well wide of the mark". He put the level of sales at about half this. KPMG said the companies surveyed were at present conducting an average of 1 per cent of their sales on the internet, and expected this to rise to 10 per cent by 2001, and to 17 per cent, or £3,555bn, in 2003.

The "explosion" in European e-commerce will occur for a number of reasons, the report said. Firstly, the passage of the year 2000 computer bug problem and introduction of the euro will free up company resources to concentrate on the internet. Personal computer penetration, as well as the advent of interactive services via television, will stimulate consumer demand. A growing familiarity with the technology will also help. Thirdly, improvements to the telecommunications infrastructure will encourage usage and, finally, concerns about security will recede as technology improves.

Some 10 per cent of the KPMG survey sample, drawn from all the larger European and Scandinavian countries, were gaining at least 1 per cent of their revenues from the internet. Of these, 80 per cent had board-level support for e-commerce, against 56 per cent for the other companies, and more than two-thirds (against 40 per cent) had integrated e-commerce into their supply chains.

Further, the internet marketing budget for the leading 10 per cent was an average $222,000, compared with $129,000 for the other companies.

A quarter of those surveyed cited security issues as a "significant barrier" to their use of the internet. Among French companies, this figure jumped to two-thirds. The UK financial service industry was the least concerned about this issue. Almost a quarter of all respondents were concerned that too few potential customers were connected to the internet.

Christopher Price writing in the Financial Times. Friday, October 16^th 1998.

1. What factors will be responsible for the growth in Internet sales according to the article?

2. What additional factors may assist growth?

3. Why do you think some commentators question these figures?

4. What are the potential barriers to the these growth figures being attained? Include both reasons given in the article and other reasons.

5. Use the Internet to research the current estimate of European electronic commerce transactions. Attempt to explain the difference between the original and new estimate.

The case study – INTERNET: Europe sales 'could top $1,990bn' – highlights the key reason why many companies are seeking to harness the Internet. The reason is an additional source of revenue made possible by an alternative marketing and distribution channel. The marketing opportunities of using the Internet are indicated by the traditional marketing strategic grid for targeting new markets and products (Figure 1-1). The Internet can be used to achieve each of the four strategic directions as follows:

1. Market penetration. The Internet can be used to sell more existing products into existing markets. This can be achieved by using the power of the Internet for advertising products to increase awareness of products and the profile of a company amongst potential customers in an existing market.

2. Market development. Here the Internet is used to sell into new markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customer’s country.

3. Product development. New products are developed which can be delivered by the Internet. These would typically be information products such as market reports which can be purchased using electronic commerce.

4. Diversification. In this sector, new products are developed which are sold into new markets.

Companies can use the Internet to adopt new approaches to selling products which involve positioning in one part of the grid or in multiple quadrants. Examples of these applications are in the activity –using the Internet for new markets and products.

Activity –using the Internet for new markets and products.

For each of the following companies identify which positioning the company has adopted relative to Figure 1-1 Market and product strategic grid. Explain how the new markets or products are exploited.

1. Book retailer WH Smith purchase of the Internet bookshop (www.bookshop.co.uk) in 1998 for £9 million.

2. PC seller Dell Computer (www.dell.co.uk) who estimates that over $6 million worth of sales are supported every day by the Internet (to support buying decisions or to order items online).

3. The Economist Intelligence Unit publisher (www.eiu.com) who offers an extended range of reports for viewing and purchase over the Internet.

4. A UK company such as HR Johnson selling tiles to international distributors (www.johnson-tiles.com) who have created an extranet to obtain orders over the Internet.

The lure of new sales has attracted many companies onto the Internet, but there are many other benefits of establishing an Internet presence. Consider the example of the parcel courier companies. These companies now provide a range of customer services over the Internet which were traditionally delivered by telephone operators, thus reducing operating costs. This is illustrated in the mini-case study "parcel couriers use the Internet to improve customer service and reduce costs". In such situations, the online services may give better customer service if measured by convenience, but some customers will want the option of the personal touch and phone services must be provided for this type of customer. Many companies will also reduce the costs of the printing and distributing promotional material, price lists and other marketing communications.

In addition to increased sales and reduced costs, the Internet can be used to advantage in all of the marketing functions, for example:

• Sales. Achieved through increasing awareness of brands and products, supporting buying decisions and enabling online purchase, which is described in Chapter 12 –electronic commerce
• Advertising. The use of the web site for marketing communication is described in Chapter 8, and advertising is described in Chapter 10.
• Customer service. Supplementing phone operators with information available online and other techniques described in Chapter 2.
• PR. The Internet can be used as a new channel for PR and provides the opportunity to publish the latest news on products, markets and people (Chapter 8)
• Marketing research. Techniques for finding the range of marketing information are described in Chapter 4.

The Internet also changes the way in which companies does business with its trading partners. Extranets can be set up to reduce the costs of dealing with suppliers and provide marketing communications with suppliers. Such new ways of doing business are explained well by Ghosh(1988). The Internet offers a mechanism for companies to sell products direct to the customer. This process is known by American commentators as ‘disintermediation’, by Ghosh(1998) as ‘pirating the value chain’ or in plainer language ‘cutting out the middleman’.

<Disintermediation>

A company reduces the number of third parties it has to trade with. In particular it enables a company to sell direct to the customer.

To conclude this section, the benefits that are possible through deploying an Internet are illustrated by the case study about RS Components, which operates mainly in the business-to-business sector. This shows some of the measures that can be used to measure the success of a web site. Setting up such measurement systems is detailed in Chapter 13. The benefits of an Internet presence can be summarised using the 6Cs of, for example, Chaffey et.al.(1998):

1. Cost reduction. Achieved through reducing the need for sales and marketing enquiries to be handled by telephone operators and the reduced need for printing and distributing marketing communications material, which is instead published on the web site.

2. Capability. The Internet provides new opportunities for new products, services and markets to be sold into that may not have previously been practical.

3. Competitive advantage. If a company introduces new capabilities before its competitors, the it will achieve an advantage until its competitors have the same capability. Customers who transferred to Federal Express because of its new Internet services are likely to be less disposed to revert to an existing courier since they are "locked-in" to using the particular tools provided by Federal Express.

4. Communications improvement. These include improved communications with customers, staff, suppliers or distributors.

5. Control. An Internet and intranet may provide better tracking of customer behaviour and the way in which staff deliver services.

6. Customer service improvement. Provided by interactive queries of databases containing, for example, stock availability or customer service questions.

The Internet has existed since the late 1960s when a limited number of computers were connected in the United states to form the ARPAnet. This was mainly used to enable academics and military personnel to exchange defence information.

<The Internet>

The Internet refers to the physical network that links computers across the globe. It consists of the infrastructure of network servers and wide-area communication links between them that are used to hold and transport the vast amount of information on the Internet.

Why then has the Internet only recently been widely adopted for business purposes? The recent dramatic growth in the use of the Internet has occurred because of the development of the World Wide Web. This became a commercial proposition in 1993 after development of the original concept by Tim Berners-Lee, a British scientist working at CERN in Switzerland in 1989. The World Wide Web changed the Internet from a difficult-to-use tool for academics and technicians to an easy-to-use tool for finding information for businesses and consumers. How the World Wide Web works is described in more detail in Chapter 3. At this stage it can be considered as an interlinked publishing medium for displaying graphic and text information. This information is stored on server computers and then accessed by users who run web browser programs such as Microsoft Internet Explorer and Netscape Navigator which display the information and allow users to select links to access other web sites (the process known as ‘surfing’). Figure 1-2 gives an example of a web site accessed through the Internet Explorer web browser. This site has the web address or location ‘www.marketing-online.co.uk’ and provides information on different aspects of Internet marketing. The significance of the components of different web addresses is explained in Chapter 3.

<World Wide Web>

The World Wide Web is a medium for publishing information on the Internet. It is accessed through web browsers which display web pages and can now be used to run business applications. Company information is stored on web servers which are usually referred to as web sites.

Intranet and extranet are two terms that have arisen in the 1990s to describe applications of Internet technologies that do not involve communicating with customers, but rather with company staff (intranet) and third parties such as suppliers and distributors (extranet). While everyone connected to the Internet can access a company Internet web site, only those who have been given authorisation can access an intranet or extranet. This relationship between the Internet, intranets and extranets is indicated by Figure 1-3. It can be seen that an intranet is effectively a private company Internet with access to staff only. An extranet permits access to trusted third-parties and the Internet provides global access. In section 1.7 we consider possible business applications of the Internet, intranets and extranets.

<Intranet>

A network within a single company which enables access to company information using the familiar tools of the Internet such as web browsers. Only staff within the company can access the intranet, which will be password protected.

<Extranet>

Formed by extending the intranet beyond a company to customers, suppliers, collaborators or even competitors. This is again password protected to prevent access by Internet all users.

Figure 3 The relationship between intranets, extranets and the Internet

Internet marketing differs from conventional marketing since a different medium is used for communications. The different medium produces a different demographic profile to the overall population and these people behave in a different way to if they were using other media.

The characteristics of the Internet user population are typified in the tabloid media by use of derogatory terms such as anoraks, nerds, or perverts. The reality is that Internet access is only easily available to those sections of society with access to a computer at work or a sufficiently high disposable income to purchase one for home use.

The largest survey of the characteristics and behaviour of Internet users is the Graphic, Visualization, & Usability Center's (GVU) survey (www.gvu.gatech.edu). Note that this is a self-selecting survey, so its results cannot be considered widely representative of all web users. The typical demographic profile indicated by the 9th WWW User Survey 1998 survey is:

• average age of user is 35.1 years old
• 38.5% female and 61.5% male (16%,84% Europe)
• 63% access the web from home (42% Europe)
• average household income $52,000

It is apparent that that the profile indicates a predominantly male, young market with a high household income. Such a profile, of course, being of great interest to marketers targeting this type of person. Successive surveys have shown that the typical web user is ‘becoming more normal’ in other words their characteristics are becoming closer to the average in the general population. That is to say, the age of the average user is increasing and the proportion of women is increasing. Surveys by NOP in the UK, who are best known for political opinion polls indicate a similar profile. A consideration of approaches necessary to market to consumers with these characteristics is given in Chapter 15.

The characteristics of the Internet population and their behaviour mean that some approaches such as direct mailing, that traditionally work well, may fail when applied to the Internet community who are sometimes known as ‘Netizens’. It follows that rather than using conventional ‘push’ methods of promoting products through advertising, marketers need to also think in terms of which information is valuable to the customer. This more subtle approach is more likely to result in a sale if the information the customer needs to make their buying decision is supplied.

Another key difference is that marketing can be more interactive. Customers can readily ask questions through an on-screen form and the company can reply and vice versa. This gives the chance for new methods of direct and relationship marketing described as ‘one-to-one web marketing’ by authors such as Allen et.al.(1998). Direct marketing using the Internet is described in Chapter 11.

Janal(1998) considers how Internet marketing differs from traditional marketing in a number of key areas. These are summarised in Table 1-1.

Table 1 Key concepts of marketing in the new and old media (after Janal(1998))

The main differences that should be noted are:

• The cost of advertising is reduced in the new medium as more space becomes available.
• It is the customer who initiates the dialogue and who will expect their specific needs to be addressed. Web marketers need to promote their web sites effectively in order that the customer finds the information they are looking for.
• The user’s time is valuable and the time interacting with them will be limited. So this time must be maximised.
• Information is the main currency. Supplying information is arguably more important than appealing to emotions.

John Deighton writing in the Harvard Business Review encapsulates the differences between Internet marketing and traditional marketing in the phrase ‘interactive marketing’. Deighton(1996) highlights the following features of Internet marketing which distinguish it:

• the customer initiates contact
• the customer is seeking information (pull)
• high intensity medium
• can gather and store response of individual
• individual needs can be addressed and taken into account in future dialogues

The key elements to success on the Internet are often summarised as Content Community and Commerce. Content to capture and retain peoples attention, community and interactivity to enable customers and company to share information, values and beliefs and commerce to support sales. How these elements can be applied is described in more detail in Chapter 2. We will now briefly examine how potential customers may visit a web site since this is key to a successful site.

<Content>

Content is the design, text and graphical information which forms a web page. Good content is the key to attracting customers to a web site and retaining their interest or achieving repeat visits.

The generic term ‘new media’ is widely used to distinguish between the traditional delivery of information to consumers and digital or electronic methods of delivering this information. The Internet is only one of the new media. Other significant types of new media include digital television, CD-ROM and information kiosks. In this book we focus on the Internet and World Wide Web. Note that there is a consolidation of the way in which these new media are delivered with the potential for all these information sources to be accessed via a world wide web browser.

<Web site promotion>

The location of web sites is promoted by using online promotion methods such as advertising or listing in electronic catalogues and offline promotion methods which involve publicising a company web address in traditional marketing communications.

A notable difficulty for web marketers indicated by Table 1-1 is that it is difficult for potential customers to find a company web site. It is estimated that there are over 100 million web pages amongst which a company is competing for the attention of customers. It follows that promoting the location of the web site is critical for companies. There are two methods for this. First, offline promotion is used to provide users with the web address. This can be achieved by including the web address on traditional advertising newsletters, company stationery and other marketing communications. Second, online promotion is used to help users find the web site. Online promotion targets a number of methods which are summarised in Figure 1-4.

Staff monitoring web sites find that the most common method of people visiting a web site are search engines or directories, so it is important that each company is listed with such directories. Search engines and directories that are now commonly referred to as portals or Internet gateways are described in more detail in Chapter 4. Many larger companies now place adverts with news services, search engines or other widely used sites to attract customers to their sites.

Sites are also reached by users typing in the location or web address of the site which they will be aware of through offline promotion methods. A web address such as http://www.ftmanagement.com is technically referred to as a URL or universal resource locator. The format of web addresses are described in Chapter 3.

A detailed coverage of how to promote web sites is supplied in Chapter 10.

<Search engines>

Search engines are a special type of web site that provide an index of all words stored on the World Wide Web. Keywords typed in by the end-user are matched against the index and the user is given a list of all corresponding web pages containing the keywords. By clicking on a hyperlink the user is taken to the relevant web page.

<Web directories or catalogues>

Web directory sites provide a structured listing of web sites. They are grouped according to categories such as business, entertainment or sport. Each category is then sub-divided further, for example into football, rugby, swimming.

This section introduces Part 2 of the book which discusses key elements of Internet marketing strategy (Chapter 6) and explains how the Internet strategy can be integrated with other parts of the business (Chapter 7). Part 3 is intended to explain some of the technical details which constrain the implementation of a site. Marketers need to be aware of these constraints when creating (Chapter 9); promoting (Chapter 10) and maintaining (Chapter 13) a site.

As Quelch and Klein(1995) have noted, many companies have followed a natural progression in developing their web site to support their marketing activities. The following levels of development of a web site can be identified:

• Level 0. No Web site
• Level 1. Company places an entry in a web site listing company names such as www.yahoo.co.uk or www.yell.co.uk to make people searching the web aware of the existence of a company or its products. There is no web site at this stage.
• Level 2. Simple static web site created containing basic company and product information sometimes referred to as brochureware. With the average cost of a UK web site at £3,000, many companies currently exist in this category.
• Level 3. Simple interactive site where users are able to search the site and make queries to retrieve information such as product availability and pricing. Queries by e-mail may also be supported.
• Level 4. Interactive site supporting transactions with users. The functions offered will vary according to company. If products can be sold direct then an electronic commerce option for online sales will be available. Other functions might include an interactive customer service helpdesk which is linked into direct marketing objectives.
• Level 5. Fully interactive site providing relationship marketing with individual customers and facilitating the full range of marketing functions.

Typical current applications of web sites are shown in Table 1-2. This indicates that most companies who have a web site are at quite an early stage in its development (level 2) with the site being used for basic marketing information on the company and its products. A relatively small proportion of companies are using the Internet for sales of products or customer service.

Theodore Levitt writing in the Harvard Business Review in 1960, outlined the factors that underlie the demise of many organisations and at best seriously weaken their longer term competitiveness. These factors still provide a timely reminder of traps which should be avoided when embarking on Internet marketing:

1. Wrongly defining which business they are in.

2. Focusing on

Products

Production

Technology

Selling

rather than

customer needs

and market opportunities

3. Unwillingness to innovate and "creatively destruct" existing product /service lines

4. Shortsightedness in terms of strategic thinking

5. The lack of a strong and visionary CEO.

6. Giving marketing only "stepchild status" behind finance, production and technology

Any organisation that sees and hence defines its business in anything other than customer benefit terms has not taken the first step in achieving a marketing orientation. Any organisation that defines its business by what it produces is said to be suffering from "Marketing Myopia". Such myopia results from a company having a shortsighted and narrow view of the business that it is in.

If Internet marketing is to become integrated and fully established as a strategic marketing management tool, then the focus of attention needs to move towards understanding its broader applications within the total marketing process rather than just using it as a communication and selling tool. This is not to detract from the capability of the Internet to communicate and sell, but recognises that this is only one important aspect of the marketing process that the Internet can contribute towards. The danger for those currently considering developing Internet technology is that the focus of such involvement will be too narrow and the true power of the Internet and its potential contribution to the marketing process will be missed.

As mentioned in an earlier section, although nearly all companies will have a marketing strategy, many companies appear not to have a defined Internet marketing strategy. To maximise the benefits of the new medium, particularly as it becomes more widely used, a strategy which integrates the Internet into the overall strategy is required. The main elements of developing an Internet strategy which are explained further in Chapters 6 and 7 are:

1. Establish objectives. Establish what the requirements are for the customers, company and third-parties. Consider what the criteria for success will be, and how they are measured. Benchmark competitors.

2. Define scope. Which of the marketing functions will be prioritised for action?

3. Define branding strategy. How will the web site be used to support the existing site, or will a new brand be adopted to differentiate and promote the site?

4. Promotion strategy. What combination of online and offline promotion techniques will be used?

5. Establish timescales and resources. Who will be responsible for different aspects of the implementation such as content development, promotion and maintenance? What are the timescales for implementing different parts of the strategy?

6. Legal issues. Legal constraints on entering new markets must be acknowledged.

7. Implementation constraints. The effect of the physical siting and performance of the web server and its software on the customer experience must be considered as part of strategy.

8. Achieving management commitment and funding. The proportion of marketing budgets spent on web sites is limited. We will ask how much should be spent on strategy, content development, promotion and maintenance?

One of the key decisions in developing an Internet marketing strategy is deciding which marketing functions can be assisted by the Internet. There is a tendency amongst companies first using the Internet to restrict applications to promotion and selling. Further opportunities are available, and in this section, examples of the range of potential applications are given. Opportunities for using the Internet to support the marketing process can be divided in two different ways. First, we must consider that the Internet can be used for marketing communications both within and beyond the company. As well as using the Internet to communicate with customers, internal use of an intranet or an extranet facilitates communication and control between staff, suppliers and distributors. Second, the Internet, intranet and extranet can be applied at different levels of management within a company. Table 1-3 illustrates potential applications of both the Internet and intranet for supporting marketing at different levels of managerial decision making.

Table 3 Potential for using the Internet and intranet to support marketing functions

We will now summarise some of the potential for application of the Internet in individual marketing functions.

Alongside the constant monitoring of an organisation’s marketing environment, there must also be research into customers needs and wants (market research) and the monitoring of the effectiveness of marketing activity (marketing research).

Market research consists of two types of data; primary and secondary. Primary data consists of information obtained directly from interviews, discussions or questionnaires with customers and is generally new data. Secondary data consists of information obtained from internal or external sources that has been previously collected and collated. Market research should begin with the identification and assessment of secondary data sources. Such information is available from internal as well as external sources and will usually provide extensive data sourcing from which an initial understanding of the market and customers can be obtained. Primary research can then be conducted to verify findings and provide additional and potentially more relevant data.

The Internet provides a vehicle by which the marketer can gain rapid and often extensive access to secondary market and customer data. Such information is commonly held within the organisations’ own intranet and databases. Further sources include trade associations, industry bodies, Government departments and university libraries. Such sources are described in Chapter 4.

The Internet can be used to understand an organisation’s macro and micro marketing environment. By monitoring information available on the Internet, organisations can attain more accuracy in their assessment of the competitive situation and the identification of potential market opportunities. The Internet also provides a channel through which closer relationships can be established between suppliers and customers providing significant benefits in terms of efficiency and reliability to all parties.

Promotion is the element of the marketing mix which is concerned with communicating the existence of products or services to a target market. Burnett (1993) defines it as

‘the marketing function concerned with persuasively communicating to target audiences the components of the marketing program in order to facilitate exchange’.

A broader view of promotion is given by Wilmshurst(1993).

The four elements of the promotion or communications mix are

1. Advertising
1. Sales Promotion
1. Selling
1. Public Relations

Most organisations use a combination of these to communicate with their target audiences. The Internet provides organisations with a new media outlet that offers the opportunity to integrate all four promotional mix elements. Internet promotions can work in the same way as any other form of promotion and despite the media still being in its infancy and the audience being smaller and more fragmented , Internet promotions are set to expand rapidly. In January 1998 Toyota used the Internet as part of an integrated promotional campaign for the launch of the Avensis as described in the Mini-case study – Toyota use the Internet as part of promotional mix for the Avensis launch.

Since the Internet is a new medium, marketing staff are still undergoing a learning curve in terms of exploiting its full potential and integrating it with their offline promotional activities. Essentially, users have the choice of two options for advertising on the web. The first is to set up a web site and through this communicate key messages, images and buying information to the web site visitor. Such sites can incorporate interactive activity and sounds. The second option is to use banner ads which can increase brand recognition and communicate / reinforce brand values as well as providing a link to the web site. Banner ads can be placed against reserved key words on search engines (entering the search keyword "car", for example might display a banner advert for the Avensis") or can be placed on media sites with more tightly defined niche audiences. Banner ads are relatively unsophisticated and do no more than provide exposure to a message. The banners can provide opportunities for interaction and provision of further information Additional messaging can be contained on the advertisers own web site. While some Internet advertising is fairly primitive compared with other media, many have good creative execution and are integrated fully with their off line campaigns. For maximum impact, adverts on the web should be researched and planned as carefully as on any other medium. When combined with a promotion, the proportion of people clicking on the page (the click through rate) may increase from 2% to 10%. The latter figure has been achieved by when combined with a discount offer or competition.

<Banner advertisements ‘ads>

A rectangular area of screen which promotes a brand and/or encourages the user to click on it and visit the relevant web site.

The Internet provides marketers with an excellent channel through which to communicate sales promotions. Capital Radio in conjunction with Nestle launched a telephone response promotion targeted at children revising for their GCSEs offering revision tips and a guaranteed answer within 24 hours to E mailed queries. They received 10,000 phone calls per week over the two weeks that the promotion ran. However on further investigation they discovered that they didn’t answer 90,000 calls per week which proved to be an irritant to the caller and potentially detrimental to the brand. Capital put the information on the web and announced the new service on air. 3,500 people downloaded the revision tips and a further 1000 entered a competition which required filling in a lengthy data capture form. Sales promotions that allow users to accumulate some kind of reward (possibly financial) for each time they interact with a company on the Internet is one promotional strategy used to build longer term loyalty. Similarly the inclusion of gifts such as mugs and pens or other collectables can easily be incorporated onto a web site. Such examples demonstrate the power of the Internet to act as a channel for communicating sales promotion offers.

Public Relations activity on the web offers organisations scope for corporate communications, sponsorship, publicity and a direct vehicle for communicating press releases. The Internet provides scope for two way interaction, clear targeting of key opinion formers and journalists and the potential for communicating strong corporate brand messages. Several PR agencies are investigating the potential for organisations to further exploit the potential for electronic Public Relations.

The Internet can be used to facilitate traditional methods of public relations. It can also be used to expand the depth and breadth of PR.

Most press agencies now use the Internet as a primary source of information. Press releases can be sent by E-mail to agencies you are registered with and also made available on your web site.

With this new method of PR, a key difference is that a company can talk direct to the market via the corporate web site. Third party agencies and physical media still have a role, because of their credibility as an independent source of information and their wider circulation. Agency information can be supplemented by more detailed and timely information direct from the corporate web site. Another difference with the new PR is that traditional weekly and monthly publishing deadlines disappear as new stories appear by the minute. This has the obvious benefit that you can make an immediate impact and be better aware of the changing marketing environment. The obvious problem of the new PR is that your competitors have these advantages too. So it is likely that there will be an increased need for defensive PR.

Direct marketing is currently one of the fastest growing fields of marketing. The techniques it utilises can be spread across all the elements of the promotional mix. The following extract clearly identifies the purpose and scope of direct marketing.

Direct marketing on the Internet offers significant potential for customisation of products and services and personalising a message. The utilisation of databases and the interactivity of the Internet enable organisations to engage in one to one dialogue. As indicated above, the real benefit of direct marketing is its potential to use data to develop relevant dialogue and relationships with consumers. The Internet is currently not fulfilling its potential in this area with users of the Internet, but we will look at some examples of companies exploiting the potential for relationship marketing activity.

Electronic commerce has become the standard term recognised for business transactions conducted on the Internet. It is a term that encompasses a range of business activities such as selling online, online bill payments, home shopping/banking and improving efficiency in dealings with suppliers and clients (Hoffman and Novak, 1996). Some authors such as Zwass(1998) extend the meaning of electronic commerce to incorporate all marketing communications. For clarity, in this book, a narrower definition is used : electronic commerce is used to refer to paid-for business transactions.

The adoption of Internet commerce is currently variable according to the suitability of a product for online sales. In some sectors, the Internet is fast becoming the primary medium for products sales. By the end of 1997, Cisco, a supplier of network infrastructure, had achieved daily Internet based sales of $7 million (39% of sales). The computer manufacturer Dell now sells $6 million of Personal Computers via its web site each day. Both of these companies expect over half of their revenue to be derived from the Internet before the millenium.

In other sectors, the Internet is also becoming a preferred method of purchase. The Microsoft Expedia site sells holidays and flights worth over a million dollars each day. Amazon, the largest Internet bookshop saw revenue grow by over 800% between 1996 and 1997 to a total of $239 million. Figure 1-5 indicates the variation in popularity of products purchased using the Internet. Taken across a number of sectors the impact of the Internet becomes significant;. Business-to-business transactions were estimated to reach $160 billion by the year 2000 in The Economist of May 1997.

Electronic commerce has implications for existing channels of distribution regarding the logistics involved in delivery of products and services, how products and services are ordered, taxed and paid for. For consumers, a significant benefit of online shopping is that it provides access to a global marketplace of online shopping sites.

A concern over security of transactions is one barrier which will need to be overcome before wider consumer use of electronic commerce. Organisations such as Mastercard and Visa are working with other partners to develop a Secure Electronic Transaction (SET) standard for securing payment card transactions over the Internet. These issues, which will govern the adoption of electronic commerce are investigated further in Chapter 12. In Chapters 14 and 15, examples are provided of how electronic commerce has been used in the business-to-business and business-to-consumer market.

The Internet provides both a communication and distribution channel for the provision of

faster and more effective service delivery. Access to organisation resources and information, the interactive nature of the Internet and the linkage of Internet technology to other information technology hardware provide a wide range of opportunities for marketers to improve the service delivery process. An example of improved service delivery via the Internet is shown when the Royal Mail launched a web site which provides rapid access to information such as different types of postal services and a postal rates calculator where you can enter your packages weight and its destination to find out how much it will cost to send the package using each service. Users can request further information by entering their E mail and postal address. Legal and General was one of the first UK insurers to set up a web page site. Now it has added a package of on line financial products and services (Interplan) and plans an extranet for its representatives and agents. Account holders are able to access their accounts on the web site, make lump sum payments and increase/decrease monthly payments and withdraw any reserves. The company hopes to persuade more customers to link into Interplan to perform basic customer service such as notify changes of address.

The potential to develop improved customer service online can provide customers with significant added value. Federal Express has developed a site that is not directly designed for revenue generation but rather for convenience and cost saving to its customers. The company provides a tracker service for every parcel it transports and this service has now been included on its web site (Figure 1-6). Customers can now communicate on line and identify exactly where their parcel is at any time. The service whilst being efficient has also substantially reduced the number of phone calls that Federal express received. Most organisations can introduce customer care lines and customer information facilities that can easily be placed on line. Cost savings, ease of access and immediacy of response are three potential benefits offered from improving online customer service.

Figure 6 Customer service Internet parcel tracking application from Federal Express

1. The growth in use of the Internet for marketing has been dramatic since the inception of world wide web browsers in the early 1990s. KPMG estimated in 1998 that the European electronic commerce market would be worth nearly $2,000 billion by 2001.

2. The Internet is used to develop existing markets through enabling an additional communications channel with potential customers. It can be used to develop new international markets with a reduced need for new sales offices and agents. Companies can also add new products using the Internet.

3. The Internet can support the full range of marketing functions and in doing so can help reduce costs, facilitate communication within and between organisations and improve customer service.

4. Interaction with customers, suppliers and distributors occurs across the Internet. If access is restricted to favoured third parties this is known as an extranet. If Internet technologies are used to facilitate internal company communications this is known as an intranet – a private company Internet.

5. Internet marketing involves a different demographic profile to the general population since it is largely restricted to computer users. The profile is skewed towards young, high-income males. Internet marketing also differs in that the customer is seeking information and it is possible to set-up interactive dialogues with customers that are tailored to the customer’s preferences.

6. It is important for marketers to understand how visitors are likely to become aware of their web-site. Online and offline promotion techniques can then be used to capture new visitors using these methods that include:

• search engines
• directories
• banner adverts placed in online media
• links from other sites
• typing in a web address (URL)

7. Many companies do not possess a clearly defined Internet marketing strategy. It is important that the strategy is integrated with the marketing strategy and includes clearly defined objectives, scope, branding, promotion methods and legal/technical constraints.

8. Electronic commerce is the term used to describe transactions between a business and third parties such as customers, suppliers and distributors. Transactions can include paid for items or can be interpreted as the full range of transactions that occur as part of marketing communications.

9. The marketing benefits the Internet confers are advantageous both to the large corporation and the small-medium enterprise. These include:

• a new medium for advertising and PR
• a new channel for distributing products
• opportunities for expansion into new markets
• new ways of enhancing customer service
• new ways of reducing costs by reducing the number of staff in order fulfilment

Allen, C., Kania, D. and Yaeckel, B. (1998) Internet World Guide to One-to-One Web marketing. Wiley and Sons, New York.

Baker, P. (1998) Electronic commerce. Research Report 1998. KPMG Management Consulting.

Burnett (1993)

Chaffey, D, Bocij, P., Greasley, A. and Hickie, S. (1999) Business Information Systems. Technologies, development and strategy. FT Management, London.

Hoffman, D.L., and Novak, T.P.1996. Marketing in Hypermedia Computer-mediated environments:conceptual foundations. Journal of marketing, July.

Ghosh, S. (1998) Making business sense of the Internet. Harvard Business Review. March-April 1998 p127-35.

Kalakota, R. and Whinston, A. (1997) Electronic Commerce. A Manager’s Guide. Addison Wesley. Reading, MA.

Janal, D. (1998) Online marketing handbook. How to promote, advertise and sell your products and services on the Internet Van Nostrand Reinhold. New York.

Parry, K. (1998) Europe Gets wired. A survey of Internet use in Great Britain, France and Germany. Research Report 1998. KPMG Management Consulting.

Price, C, (1998) Internet: Europe sales 'could top $1,990bn' Financial Times. Friday, October 16 1998.
Levitt, T. (1960) Marketing Myopia Harvard Business Review, 43-56.

Wilmshurst (1993)

Zwass, V. (1998) Structure and macro-level impacts of electronic commerce: from technological infrastructure to electronic marketplaces. In Emerging Information Technologies. Kendall, K. Sage publications. Thousand Oaks, CA.

Benjamin, R. and Wigand, R. (1995) Electronic markets and virtual value chains on the information superhighway. Sloan Management Review. 62-72

Bickerton, P., Bickerton, and Pardesi, U. 1996. Cybermarketing. Butterworth Heinemann. Chartered Institute of Marketing series.

Available online for partial preview at: http://www.marketingnet.co.uk

Chase, L. (1998) Essential business tactics for the Net. Wiley and Sons, New York.

Cronin, M. 1996. Internet Strategy Handbook and Doing Business on The Internet. Harvard Business School Press.

Quelch, J. and Klein, L. (1996) The Internet and International marketing. Sloan Management Review, 60-75.

Marketing Online (www.marketing-online.co.uk) is a source for links to web sites concerned with Internet marketing strategy, implementation and practice. Produced by Dave Chaffey.

Internet Marketing: A Strategic Framework (web.ukonline.co.uk/Members/jim.hamill/topic4.htm) gives a brief paper by Dr. Jim Hamill reader in International Marketing, University of Strathclyde, Glasgow, Scotland, UK. Good summary of main work in this area with references to Quelch and Klein, Sterne, Cronin etc

Project 2000 (www2000.ogsm.vanderbilt.edu) was founded in 1994 by Tom Novak and Donna Hoffman at School of Management, Vanderbilt University, to study marketing implications of Internet. Useful links/papers.

MarketingNet (www.marketingnet.co.uk) Includes book extracts from Cyberstrategy and Cybermarketing books from Pauline Bickerton, a director of the company

KPMG Consulting Europe (www.kpmg.co.uk) is a source for regular reports on electronic commerce in Europe

Butler Group (www.butlergroup.co.uk) are UK IT analysts with reports on Electronic commerce and business use of the Internet

Durlacher Research (www.durlacher.co.uk) produces a quarterly newsletter defining the Internet services market in UK. Also contains information by industry and business size. Good for business-to-business. Also covers consumer access. BT sponsored.

Nua Internet Surveys (www.nua.ie) is the definitive source of news on Internet developments and reports on company and consumer adoption of Internet and characteristics in Europe and worldwide.

CyberAtlas (www.cyberatlas.com) gives Internet statistics including demographics; updated monthly

NOP Research Group (www.nopres.co.uk) are the main body conducting UK based research on consumer behaviour and characteristics

Iconocast (www.iconocast.com) gives monthly summaries of in-depth market research, online advertising and e-commerce reports from US perspective

Revolution magazine (www.revolution.haynet.com) has a web site for monthly UK magazine on new media including Internet marketing

This is the introductory chapter from:

To be published by FT Management in Autumn 1999.