MARK 404 Advanced Internet Marketing

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MARK 404 Advanced Internet Marketing

• Tim Beal
• Session 2 15 July 2002

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Today

• Administration
• Overview of the Internet

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Administration

• Allocation of sessions
• Topics
• Any other business?

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Overview of the Internet and Web

• Hanson chapter 1
• With comments and disagreements
• Updated and additional material

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Hansons Topics

• The original WWW
• Commercial beginnings
• A .com world
• Marketing and technology
• Our approach in the book

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Radio revolution

• Hanson compares WWW with radio revolution
• First consider two main aspects of Internet
• Email
• WWW
• Differences between two
• Necessity to utilize both appropriately

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Email

• Proactive
• Needs recipients address
• Spam ineffective because doesnt have the right
  recipients
• Text based
• Cheap

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Web

• Reactive
• Needs to attract visitors
• Far greater functionality
• Multimedia, interactivity, personalisation,
  transfer of money
• More expensive
• Now to Hanson and radio

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The Original WWW

• Its 1922
• Radio suddenly transitions from a technology used
  primarily by the military and the shipping
  industry to a consumer and business phenomenon
• At the end of 1921, there are 5 radio stations
• A year later, there are 575
• Starting radio stations is the height of
  entrepreneurship
• Listening to radio is a runaway consumer fad
• Combing the ether is the hit of the day

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The Original WWW

• Radios impact on 1920s society
• It changes the way people think about distance
  and time
• Simultaneity no longer requires proximity
• Global events are experienced as they happen
• Performances in different cities can be heard in
  the neighbors living room
• Fast-breaking world stories and even the local
  weather are available at the flip of a switch and
  the turn of the dial

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The Original WWW

• Radio changed business, especially marketing
• It accelerated the economys transition to a mass
  market
• It facilitated the creation of national brands
• Firms could launch national marketing campaigns
  simultaneously
• New product store introductions could be
  synchronized with ad campaigns to build consumer
  interest
• Product positioning became more flexible
• Businesses learned to use this new, powerful
  method of reaching customers

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The Original WWW

• As an industry, radio struggled with generating a
  self-sustaining revenue base
• In 1926, radio stations were failing at a rate of
  15 per month
• Consumers still rushed to buy radios
• Ultimately, national networks of stations emerged
• A combination of national and local advertising
  made radio profitable
• Internet marketing shows many of these same
  uncertainties

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Books to Internet

• Succeeding communication revolutions
• Printing
• Books, newspapers
• Radio
• TV
• Internet
• Discussion what are similarities and
  differences?

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Hanson on changes

• The Internet changes the way companies connect to
  their customers
• It expands the opportunities for branding,
  innovation, pricing, and selling
• It leads to new ways of thinking about time and
  distance
• It opens up new distribution channels and markets

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Virtuous Web Cycle

• Is a business system with positive feedback
• Each element in the business system feeds off
  another element in the system and feeds into yet
  another element in the system
• If the cycle is strong enough, it can actually be
  a self-fulfilling expectation

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Virtuous Cycle for Net Growth
Lets look at how it works
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A Dot Com World

• The virtuous Web cycle leads to rapid growth of
• Consumer access
• Internet usage
• Content online

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Dot.com to dot.bomb

• Hansons optimism too glib
• Much of the effect of Internet has happened
  offline
• I.e. bricks and mortar companies using Internet
• Dot bomb may have peaked
• But

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But

• Internet Shutdowns and Bankruptcies Pass 800 Mark
  in February
• And
• Internet users still not buying online

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Nevertheless

• There ahs been rapid growth in users, hosts,
  activity
• Lets look at some data

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Figure 1 Trend of Internet Worldwide (1996-2002)
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Fig 2 Internet Users by region, 2002
Fig 1 Internet Users by region
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Fig 3 Asia and the digital divide
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Fig 3 Global distribution of Internet users,
2002
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Fig 4 Change in regional share of global
Internet, 1997-2002
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Fig 5 Numbers online - top Internet countries
2002
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Fig 6 Top Internet countries, 2001, by
percentage of population online
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Fig 7 Growth in numbers online 1997-2002 in
major Asian markets
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Internet in Asia

• Japan, though the most developed Asian economy
  has lagged in utilisation of the Internet and
  although broadband is growing fast it seems
  likely this will continue

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Internet in Asia

• The city states of Singapore and Hong Kong will
  continue to be the most advanced Internet places
  in Asia. However other Asian cities should not be
  overlooked. In particular country data on China
  tends to give a misleading impression and there
  are reports of very high Internet access in
  cities such as Beijing, Shanghai and Guangzhou
  Perhaps the same is happening in Bangalore,
  Hyderabad and Karachi

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Internet in Asia

• Beyond cities and city states South Korea and
  Taiwan will jostle for leadership in Asia

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Internet in Asia

• China, with its rapidly growing economy, and its
  large language area will soon be the major
  Internet market in Asia. Given the network
  effect, whereby the value of a network to its
  users grows exponentially with the size of the
  network, this has huge implications, especially
  for East Asian SMEs

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Internet users

• Rich countries?
• Profile of US users
• Reasons why other countries may not follow US
  pattern

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Fig 6 Internet use and wealth, 2000
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Fig 9 GVU Survey 1994-98 Change in gender
balance of Internet users
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Fig 10 GVU Survey 1994 -1998 age of Internet
users
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Fig 11 Age structure of Internet user compared
with general population
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Fig 12 GVU Survey 1995 -1998 Occupation of
Internet users
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Some other key results of this 10th survey in
1998 were

• Race
• The American respondents were overwhelmingly
  white (88), followed by Afro-Americans (2.3)
  and Asians (2.1). This can be compared with the
  ethnic breakdown in the 1990 United States census
  where 80 were white, 12 black (Afro-American)
  and 2.9 were Asian or Pacific islander.
  Blacks were clearly under-represented in the
  Internet community

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GVU results Location

• 33 of the US respondents were urban, 52
  suburban and 14 rural. In the 1990 census, 75
  of the population were urban and 25 rural. It
  seems that internet users were disproportionately
  urban/suburban

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GVU results Education

• 64 had college or some college, 17 had Masters,
  3.4 had a PhD, and 3.5 a professional
  qualification. In 1990, only 13 of the general
  population had a Bachelors degree and a further
  7 had a graduate or professional degree.
  Internet users were considerably better educated
  than average.

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GVU results Income

• Median family income was in the band 50-74, 000.
  In 1998 the median household income in the
  United States was 39,744. Survey respondents had
  significantly higher incomes than average, even
  though 9.4 were students.

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GVU results Occupation

• Trained professional 28.5 middle management
  11 student 9.4 self-employed 9.9, upper
  management 6.8. By comparison, although the
  categories are different, the 1990 census gave
  12 managerial and 14 professional. This
  suggests, as we would expect, that the Internet
  users were working in more highly skilled
  occupations than average

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User profile

• Users in US, and other mature Internet markets,
  are now much closer to average
• Less distinguishable from ordinary population
• Lessons for follower countries?
• Process of changing user profile may be quicker
• Process of adoption may vary in three ways

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Variations 1 and 2

• Leapfrogging of technologies and business models
• Eg use of wireless overcome shortage of wireline
  in China
• Adoption truncation
• US pattern of tickle down class and education
  ladder not good guide

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Variation 3

• Local variation
• Internet use affected by
• Local physical infrastructure
• Eg broadband cheaper in high density urban places
  like S, HK and ROK
• Political, social and cultural constraints
• Sex has been big driver of internet in US, not
  likely in Asia
• Business practices
• Lack of credit cards in China

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Types of websites

• Static billboards
• Dynamic billboards
• updated (advantage over print)
• Database-driven
• interactive
• links customers and products
• Storefronts
• e-commerce - purchase, pay (consume) online

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Hansons approach

• Look at Hanson
• Comments on website design from SME perspective
• More relevant to your major assignment

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Innovative Applications

• Stage I Publishing sites
• Stage II Databases and Forms
• Stage III Personalization

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Stage I Publishing Site
Figure 1.7
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Stage I
What makes this a Stage I Website ?
BroadcastsDisseminates Information
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Stage II Databases and Forms
Figure 1.8
To find out the travel distances between the host
cities
Select your starting point
Select your destination
Bordeaux Paris Toulouse Marseilles
Toulouse Marseille 404km
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Stage II
What Makes this a Stage II Website?
Ability to retrieve information to respond to
user requests
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Example of database driven site

• Air New Zealand

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Stage III Personalization
Figure 1.11
If you area team WC98 member and are using a
computer other than the one you originally joined
WC98, enter your nickname and password now.
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Stage III
What Makes this a Stage III Website?
More than ask-respondAnticipatesSuggests
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Example

• Amazon.com

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Consumer-to-Consumer Commerce

• Businesses deploy chat room technology
• Enables consumers to interact directly with each
  other
• Accelerates word of mouth
• Facilitates consumer-to-consumer commerce
• eBay
• Yahoo! Auctions

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Consumer-to-Consumer Commerce

• Consumer-to-consumer sites must build trust
• Systems that rate seller credibility
• Verify identities of buyers and sellers
• Insurance against fraud
• Escrow accounts to ensure products are shipped
• Bans on sellers who bid on their own products
• Bans on buyers who win, but dont complete the
  sale
• Successful auction sites blur the distinction
  between business and fun

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Business-to-Business Commerce

• volume much larger than e-tailing, and more
  rapidly growing
• Intra extranets provide a seamless link between
  businesses and their suppliers
• Companies create in-depth Web sites for their
  main customers
• Special pricing
• Special configurations
• Dedicated support
• This builds loyalty and repeat purchases

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B2B

• Dell computers

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Marketing Evolves as Technology Changes

• Technological innovation brought about the
  factory system enabled mass production
• Marketing emphasis was on logistics supply
  chain management
• Radio enabled national roll-out of brands
• Marketing emphasis was on selling
• Television coincided with the product brand
  management system of marketing
• Mainframe computers enabled new methods of
  segmentation customer management
• The Internet enables mass customization

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An Internet Framework
Figure 1.15
The Web is fundamentally about individuals using
a network to access digital products
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Is Hanson right?

• Partly, but
• Much of the Internet effect happens offline
• For most businesses it is the INTEGRATION of
  online and offline (Delivery, shop sales, brand)
  that is important
• Purely dot.com firms will always be small part of
  e-commerce

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SMEs and Internet managerial implications

• Be wary of technology fetishism
• Guiding principle business objectives come
  first, technology second
• Internet is a tool more simple and sharper the
  better
• SME should no be over-awed by technical experts
• Need understanding of limits, potential and
  function of technology

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3 dimensions of website

• Websites have 3 dimensions
• Static, Dynamic, Interactive
• Interactive
• Manual
• Automatic

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Interactive

• Manual
• Contact email
• Vital that emails are answered
• Promptly
• Correctly
• Does the SME have resources (inc language
  skills)?
• Automatic
• Not so appropriate for SMEs
• If you cant afford to do it properly, forget it

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Static and dynamic

• Static not much of a problem
• Dynamic
• Offers one of the webs greatest advantage over
  traditional media
• Ease, cheapness and speed of amending
• Preserves data integrity always the latest
  version on display
• BUT
• SME must give highest priority to having as much
  control and management as possible
• Even if this means having less attractive site

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Website design

• Catchwords
• Simplicity
• Economy
• Minimalism
• Guiding principle
• Ockhams razor
• Business objectives and functions achieved in the
  simplest manner
• Website commensurate with resources of SME

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Internet accelerates modernization
Traditional crafts
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SME imperatives

• Broaden geographical focus
• Not necessarily global
• Narrow business focus and develop distinctive
  competency
• Constantly analyse environment
• Technological, political, social
• Constantly question business model and process
• Re-examine relationship with customers,
  suppliers, distribution channels

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SME imperatives

• Beware of hype surrounding Internet
• B2C has glamour but,
• B2B cost savings and efficiency gains
• Technology does not work on its own
• Staff training and support vital

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Conclusions

• Internet and other communication revolutions
  similarities and differences
• Rapid growth of Internet
• Where customers are
• What customers are like
• How (US) past is uncertain guide
• Types of websites
• Internet and Marketing interaction
• How SMEs should approach Internet

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Next week

• Lizzie and Aaron on Chapter 2 Digital world
• I will be away in Taiwan Tues-Sun
• Ensure e-marketing topic is chosen and started on