Internet Marketing

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Internet Marketing
New Product Development and the Net
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Marketing ProcessesThat Can Be Digitized
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Topics

• High-tech battles
• Speed
• Flexible new products
• Standards

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High-Tech BattlesThe Browser Wars

• The browser battles started with a strong showing
  from Netscape. From a startup in 1995, Netscape
  became a billion-dollar company, the
  fastest-growing software company ever.
• Four generations of browser technology took
  Microsoft from sideline player to browser lead.
  The battles also led to controversy,
  anti-Microsoft newspaper editorials, and
  governmental antitrust attention.

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The Need for Speed

• Internet time refers to rapid change and
  evolution of
• Internet tools
• The marketplace
• Business practices
• An entire industry created in
• Internet time also refers to acceleration of
• New product development
• Competitive activity
• Business tactics
• Using the Nets communication research
  capabilities to bring new products to market
  quickly is essential

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Speed and Profits

• High profits from a successful early market entry
  can be plowed back into next generation products
• Slow entry and lost profits lead to erosion of a
  companys fortunes

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Speed and Innovativeness

• Slowness to market erodes consumers positive
  perceptions of a company
• Best-in-class companies use time pacing to govern
  new product activity
• Rapid product introduction is critical in
  high-tech markets
• Market leaders can count on high consumer
  interest, feedback and free advice
• Speed to market leads to learning
• Companies that use customer feedback have an
  important advantage over rivals

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Speed and Alliances

• Early market entrants attract leading-edge
  partners
• Third-party suppliers approach market leaders
  with enhancements and improvements
• Allies fill in product and marketing gaps to
  provide a complete solution for customers
• For the market leader, money and talent are too
  scarce to go it alone
• Distribution partnerships are key to getting
  product to market

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Speed and Standards

• Market leaders often play a key role in setting
  standards
• Companies that define standards can be in a
  strong strategic position for decades
• Rivalries between competing standards dont
  usually last long
• Once a standard is established, the marketplace
  swings dramatically toward it
• The losing standard sinks quickly
• VHS vs. Beta Max
• When standards matter, success breeds success

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Traditional New Product Development

• Too slow for Internet time
• Two main goals
• Uncover unmet customer needs
• Eliminate design mistakes before too many
  resources are committed
• Many new ideas enter the new product process
• Only a few new products emerge
• This process is expensive and time consuming

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Rapid New Product Development
Figure 8.6

• Internet time forces firms to find new ways to
  identify user needs and rapidly launch new
  products
• The keys
• Maintain flexibility as long as possible
• Accelerate the process of market feedback
• These methods work especially well for online
  products
• But they are spreading to the rest of the economy

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Modularity in Design

• Modular design breaks a new product into
  subsystems or modules
• Each module can be designed and tested separately
• Teams can work in parallel, rather than wait for
  a preceding group to finish its work
• Parallel efforts reduce dramatically the total
  time to launch new products
• Enables firms to handle speed and complexity in
  new product development

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Modularity in Design

• Modularity requires two design features
• Visible design rules
• Hidden design parameters
• Visible design rules define the ways that
  modules interact with each other and describe how
  they should fit together
• Hidden design parameters define how each module
  works internally
• Each team has full control over the hidden design
  parameters of its module
• Enables the team to delay final design choices as
  long as possible, to reflect marketplace feedback
  and to accommodate changing technologies

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Early Feedback

• Flexible new product development relies on the
  ability to get meaningful and rapid feedback from
  customers
• Identify new opportunities
• React to new designs
• Spot declining interest in existing products
• E-mail enables low-cost, rapid access to
  customers
• Can speed up feedback from lead users
• Faster and cheaper method of conducting surveys
• Using the Net to release early prototypes also
  permits valuable learning and testing

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Rapid Prototyping and Testing

• Alpha release limited release to trusted lead
  users and company employees
• May be asked to sign NDA
• The goal is to shape the product and understand
  how functional it is
• The competitive clock starts ticking with the
  alpha release
• Beta release public release to widely test and
  to continue to refine the feature set
• Key goals are reliability, compatibility, and
  fixing user interface problems
• Beta-testing is a form of advertising and
  sampling
• A valuable substitute for extensive testing

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Rapid Release

• Rapid product development sets the stage for
  profitability
• The ability to go to market quickly is a final
  key to success
• Time lost in the distribution cycle is even more
  damaging than time lost in development
• Once the product design is frozen and has been
  released to manufacturing, all time lost is pure
  cost

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Standards Marketing

• Standards are a defining feature of high-tech
  markets
• Standards determine
• How hard drives, floppy disks, screens,
  keyboards, and memory communicate with each other
• How computers connect to the Internet
• How files and messages are turned into packets
• How packets reach their destination
• Conventions are also important
• General practices that designers expect
• Not formally set by a standards body

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Two Types of Standards

• Open standard based on an official process of
  debate, consensus, and voting by an official
  standards body
• De facto standard established when a product or
  approach is so widely adopted that it becomes
  expected
• De facto standards are controlled by a single
  company open standards are not
• Sun Microsystems has submitted Java to the ISO
  for acceptance as an open standard
• Microsofts Active X a proprietary standard
  owned and controlled by Microsoft

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Creation of an Open Internet Standard
Figure 8.9
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Standards Strategy

• High-tech companies often have formal staff
  positions that set standards strategy
• Participate in the standards bodies
• Project which standards seem to be winning
• Managers need to decide which standards to deploy
  in their products
• Should base their products on open standards?
• Or should they try to win a battle in the
  marketplace with a proprietary standard?
• In high-tech markets, a single standard generally
  emerges and the winner takes all

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Standards Competition Leading to Domination
Figure 8.12
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Information Acceleration Systems

• Place consumers in a virtual buying environment
• IA systems simulate the information thats
  available to consumers when they make a purchase
  decision
• Virtual showroom visits
• Advertising (TV, magazines, newspapers)
• Review articles and consumer-oriented reports
• Word of mouth
• Are these virtual environments realistic enough
  to accurately measure behavior?
• Early evidence is positive, but mixed

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Solving Problems Online
Provides Strong Justification for Investing in
the Web

• Lower customer support costs
• Improved online value for customers
• Companies and consumers benefit
• Lower costs improve profit margins
• Savings can be passed through to consumers

Figure 6.3
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Cost Savings

• Online publishing saves the cost of printing and
  shipping manuals
• Software updates can be downloaded, saving the
  cost of burning and shipping CDs
• Virtual problem solving
• Inexpensive communication

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Traditional Customer Service Methods Are Expensive

• Sales calls and call centers
• Require expensive, assisted, real-time
  interactions
• Are labor intensive

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Headline
Name of Publication - Date

• Insert excerpts from a current article out of the
  business press (e.g. Wall Street Journal, Wired
  News, Business 2.0, or Fast Company) that talks
  about the importance of online customer support.
  I usually take excerpts out of the lead
  paragraph, and highlight keywords. There have
  been a number of articles talking about increased
  investments in online customer support.

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The ADR Framework

• Acquisition the cost of bringing in new
  customers
• Development costs incurred expanding the
  share-of-customer that firms receive from
  existing customers
• Retention costs to keep the business and loyalty
  of current customers