The Internet and the Marketing Mix

Learning objectives
y Apply the elements of the marketing mix in an online
context.
y Evaluate the opportunities that the Internet makes
available for varying the marketing mix.
y Define the characteristics of an online brand.
Questions for marketers
y How are the elements of the marketing mix varied
online?
y What are the implications of the Internet for brand
development?
y Can the product component of the mix be varied
online?
y How are companies developing online pricing
strategies?
y Does ‘place’ have relevance online?

The marketing mix

y In 1963 Bartels said:
‘a marketer is like a chef in a kitchen … a mixer of ingredients’
y Variables used to define key elements of marketing strategy
y From the 4Ps of Jerome McCarthy to the 7Ps of Booms and
Bitner sometimes referred to as the services mix
y 4Ps – Product, Price, Place, Promotion
y 7Ps – add People, Processes and Physical Evidence
y 8th P – online Partnerships
The 4Ps and the 4Cs
Cost
Product

Communications
Price with
company

Customer needs
Place and wants

Promotion Customer
convenience

Mixing the mix online

y Which variables are important for the ideal customer?
y Price and quality?
y Where they buy?
y So need to decide on target markets first and do the
research on the mix variables.
y Remember the mix is not generic for all customers,
but for segments.
The elements of the
marketing mix

Figure 5.1 The elements of the marketing mix

The 4 Ps
y Product
y Price
y Place
y Promotion
4P + 3P = 7 Ps?
y 4 Ps +
y People
y Process
y Physical Evidence
y Part of a service-oriented model of marketing

4Ps and TCP/IP?

y How can we extend the marketing mix to the
Internet?
y Product: Extend the product online?
y Price: New pricing models for the Internet?
y Place: Internet placement and distribution?
y Promotion: (future lecture) New methods of
promotion?
Product and the Internet
y Research and development of products to fulfill
consumer need
y Internet implications:
1)Vary core product?
2)Change extended product (e.g. accessories,
merchandise, etc.)?
3)Research
4)New product development/diffusion

1)Core Product Variations

y Provide additional information? Transaction
services?
y Focus: Existing customer base
y New customer segments? New business
propositions?
y Focus: Extending existing product/brand
y New complementary product sales? Selling
advertising space on my site?
y Focus: Adding new products and services
Product introduced
y ‘The element of the marketing mix that involves
researching customers’ needs and developing
appropriate products’
y Core product
y The fundamental features of the product that meet the
user’s needs.
y Extended product
y Additional features and benefits beyond the core
product.

Core Product Variations

y Can I keep up with other businesses using similar
strategies?
y Focus: Squelching threats to product
y Can the product be offered digitally?
y Focus: New products sold strictly online
y Can the product be customized online?
y Focus: Addressing specific consumer need
What’s a prosumer?
• A customer taking an active role in product design
• Professional + consumer (pro features, amateur
skill level)
• Producer + consumer (product customization)
• Producing + consumer (consumer creates goods
for their own use)
• Proactive + consumer (consumer
suggestions/corrective measures)

Bundling the Core Product

y Offering complementary services
y May require affiliates/new markets
2)Change the Extended Product
y Endorsements/awards/testimonials
y Customer lists/comments
y Warranties/guarantees/money-back offers
y Customer service
y Tools for selection/use of product
y Can be offered free or for a fee

Extended product options

y Examples:
y Add-on services – gift wrapping @ Amazon
y Endorsements
y Awards
y Testimonies
y Customer lists
y Customer comments
y Warranties
y Guarantees
y Money back offers
y Customer service (see people, process and physical evidence)
y Incorporating tools to help users during their use of the product – Citroën
exCeed
y Information – extranets
Build Customer Magnets
y Establish portals
y Develop product communities online
y Product resource centers
y Extranets

3)Online Product Research

y Online focus groups
y Online questionnaires and surveys
y Customer feedback or support forums
y Data mining through web access logs
4)Quicker Product Development
y Market research
y Network-savvy product launches
y Virtual organizations

Quicker Product Diffusion

y Product roll-out to various markets
y Viral marketing & word of mouth
y Rapid spread of ideas/the “Digg” effect (slashdotted)
y Product in the hands of early adopters and
influencers
y Stickiness of product web sites/media
y Provide context: physical, mental, social
 Stickiness Factors
y Excellence/Uniqueness
y Aesthetics/Association
y Engagement/Expressive
y Functionality of site
y Nostalgia
y Personification
y Cost/Value

The Long Tail

Zipf’s law, showing decrease in popularity of items within an ordered

Figure 5.4
sequence
Internet and branding
y Brand depends on customer perception
y Perception is influenced by added-value
characteristics of the product
y Added-value characteristics need to be sustainable

Web-based brand experience

y The promise of convenience
y The promise of achievement (users achieve their
goals)
y The promise of fun and adventure
y The promise of self-expression and recognition
y The promise of belonging
Brands online
Dayal et al. (2000) say, ‘on the world wide web, the brand is the
experience and the experience is the brand’. They suggest that to build
successful online brands, organisations should consider how their
proposition can build on these possible brand promises:
y the promise of convenience – making a purchase experience more
convenient than the real-world, or for rivals;
y the promise of achievement – to assist consumers in achieving their goals,
for example supporting online investors in their decision or supporting
business people in their day-to-day work;
y the promise of fun and adventure – this is clearly more relevant for B2C
services;
y the promise of self-expression and recognition – provided by
personalization services such as Yahoo! Geocities where consumers can
build their own web site;
y the promise of belonging – provided by online communities.

Plus trust and reassurance.

Changing Brand Identity Online

y Transfer traditional brand online

y Brand variant: New perspective/branding initiatives

y Partner with existing digital brand

y Create a new digital brand

 Changes to brand perception and behaviour as a result of using the
Figure 5.7
Internet for research
Source: AOL (Brand New World), 2004, Base: All 750 Respondents

Naming of New Brands

y Law of the Common Name
y Art.com? No…
y Distinctive brand name
y Consider photography.com vs. flickr.com
y Law of the Proper Name
y Short/simple/suggestive of category
y Unique/alliterative/speakable
y Shocking/personalized
Price and the Internet
y Increased price transparency
y Downward pressure on price
y New pricing approaches
y Alternative pricing structures

Purchase method –
digital products
y Purchase
y Rental or subscription
y Pay per use
1.Price Transparency
y Reduced regional differential pricing
y Price elasticity:
y Price is elastic when a small price change affects
demand levels
y Price is inelastic when a large change in price affects
little change in demand

Price inelasticity online

y Consumers won’t always choose the cheapest
price
y Consumers purchase based on familiarity, trust,
quality, etc.
y Satisficing behavior:
y Consumers will choose a sufficiently-satisfying price
level based on semi-rational purchasing behavior
2.Downward pressure on price
y Lower overhead
y Influence of price transparency
y Prevalence of discount retailers
y Increased competition
y Pressure to increase value of product to maintain
pricing levels

Setting the online price

y Reduced cost-plus pricing structures
y Target-profit pricing
y Volume purchase incentives
y Competition-based pricing
y Market-oriented pricing
y Premium pricing (higher perceived quality)
y Penetration pricing (set price below competitors)
New Pricing Approaches
y Auctions (forward and reverse)
y Forward (B2C) = highest bidder purchases
y Reverse (B2B) = lowest price offered by supplier
y Dynamic pricing
y Alternative pricing models

B2B reverse auctions

y Will these become popular?
y Yes
y 10-20% reductions achievable
y No
y Only 2% prefer for B2B
y 50% do not choose lowest bidder
y 87% stay with current supplier
y Many have stopped experimenting

See Baker et al. (2001)

Figure 5.10 Alternative pricing mechanisms- software & music online

Place
y Place of purchase
y New channel structures
y Channel conflicts
y Virtual organizations
1) Place of purchase
y Seller-controlled
y Seller-oriented
y Neutral
y Buyer-oriented (uncommon in B2C)
y Buyer-controlled (uncommon in B2C)

Advantages of online placement

y Reach: search engines, intermediaries, neutral sites
y Richness: collecting customer information and
providing information to the customer
y Affiliation: forming appropriate partnerships
online
y Localization: Countries or regions
2) New channel structures
A Distintermediation

B Reintermediation

C Countermediation

3) Channel conflicts
Dependent on:
1. A communication channel only.
2. A distribution channel to intermediaries.
3. A direct sales channel to customers.
4. Any combination of the above.
Channel factors in placement
• Intermediaries will change
• Channel conflicts
– Direct sales vs. wholesalers
– Direct sales vs. sales representatives
• Strategies:
– Communication only?
– Distribute to intermediaries?
– Direct sales?
– Or a combination of the above…

4)Virtual Organizations
y Organizations without boundaries
y Distributed production (third parties)
y Geographically dispersed
y Dependence on telecom and data networks
y “Vertical integration”
Link :
y Show reach rate of each company (use search engine &
key
“link: URL” in the search box, ie.
Google :Link:http://www.au.edu

or

Yahoo: http://siteexplorer.search.yahoo.com

The 5th P: People

y Organization’s interaction with its consumers and
stakeholders
y Various feedback channels to consumer
y Email and autoresponders
y Online chat and mediated callback
y FAQs, site tools, virtual assistants
Options for replacing people
y Autoresponders.

y E-mail notification.

y Call-back facility.

y Frequently Asked Questions (FAQ).

y On-site search engines.

y Virtual assistants

Stages of Inbound Email

y Customer support request
y Receipt of email and acknowledgement
y Routing of email to proper group/person
y Composition of response
y Follow-up!
Two more Ps …
y Process
y Methodology of marketing
y Tactics to support marketing throughout the value
chain
y Physical evidence
y Customer usage of product
y Customer experience of the web site

Key concepts in improving the

online customer experience
y Usability (ISO)
y The extent to which a product can be used by specified users to
achieve specified goals/tasks with effectiveness, efficiency and
satisfaction in a specified context of use.
y Accessibility
y An approach to site design intended to accommodate site usage
using different browsers and settings particularly required by the
visually impaired.
y Also helps Search engine optimisation
y Persuasion
y Maximising returns from web investments