Slide 5.
Chapter 5
The Internet and the
Marketing Mix
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.2
Questions for marketers
• How are the elements of the marketing
mix varied online?
• What are the implications of the Internet
for brand development?
• Can the product component of the mix be
varied online?
• How are companies developing online
pricing strategies?
• Does ‘place’ have relevance online?
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.3
Questions for marketers
• How are the elements of the marketing
mix varied online?
• What are the implications of the Internet
for brand development?
• Can the product component of the mix be
varied online?
• How are companies developing online
pricing strategies?
• Does ‘place’ have relevance online?
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.4
The marketing mix
• In 1963 Bartels said:
‘a marketer is like a chef in a kitchen … a mixer
of ingredients’
• Variables used to define key elements of
marketing strategy
• From the 4Ps of Jerome McCarthy to the 7Ps of
Booms and Bitner sometimes referred to as the
services mix
– 4Ps – Product, Price, Place, Promotion
– 7Ps – add People, Processes and Physical Evidence
– 8th P online = PARTNERSHIPS
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.5
An alternative view
• Frenchman Albert Frey suggested:
– OFFERING
Product, packaging, service and brand
– METHODS/TOOLS
Distribution channels, personal selling,
advertising and sales promotion
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.6
The 4Ps and the 4Cs
Cost
Product
Communications
Price with
company
Customer needs
Place and wants
Promotion Customer
convenience
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.7
Mixing the mix online
• Which variables are important for the ideal
customer?
– Price and quality?
– Where they buy?
• So need to decide on target markets first
and do the research on the mix variables
• Remember the mix is not generic for all
customers, but for segments
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.8
Figure 5.1 The elements of the
marketing mix
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.9
Product introduced
• ‘The element of the marketing mix that
involves researching customers’ needs
and developing appropriate products’
• Core product
– The fundamental features of the product that
meet the user’s needs.
• Extended product
– Additional features and benefits beyond the
core product.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.10
Core product options
• Ghosh (1998) Digital value
• Rayport and Sviokla (1994) describe
transactions where the actual product has been
replaced by information about the product
• Mass customisation – Levi
• Extent of product
– Subset – WHS iDTV
– Bundling – easyJet
• Product info more readily available (Allen and
Fjermestad, 2001)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.11
Extended product options
• Examples:
– Add-on services – gift wrapping @ Amazon
– Endorsements
– Awards
– Testimonies
– Customer lists
– Customer comments
– Warranties
– Guarantees
– Money back offers
– Customer service (see people, process and physical evidence)
– Incorporating tools to help users during their use of the product –
Citroën exCeed
– Information – extranets
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.12
Conducting marketing research
online
• Online focus group
• Online survey
• Customer feedback or forums, possibly on
independent sites
• Web logs
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.13
Figure 5.2 Pearson Custom Publishing
([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.14
Figure 5.4 Interactive sales dialogue
Source: First Direct ([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.15
Figure 5.5 Zipf’s law, showing decrease in popularity of items within an
ordered sequence
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.16
Brands
• A brand is described by Leslie de
Chernatony and Malcolm McDonald in
their classic book 1992 book Creating
Powerful Brands as
‘an identifiable product or service
augmented in such a way that the buyer or
user perceives relevant unique added
values which match their needs most
closely. Furthermore, its success results
from being able to sustain these added
values in the face of competition’.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.17
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:
• the promise of convenience – making a purchase experience more
convenient than the real-world, or for rivals;
• 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;
• the promise of fun and adventure – this is clearly more relevant for
B2C services;
• the promise of self-expression and recognition – provided by
personalization services such as Yahoo! Geocities where
consumers can build their own web site;
• the promise of belonging – provided by online communities.
Plus trust and reassurance.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.18
Figure 5.6 Dorset Cereals website
([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.19
Figure 5.7 Napster Canada site
([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.20
Figure 5.8 Changes to brand perception and behaviour as
a result of using the Internet for research
Source: Brand New World (2004)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.21
Price implications
• View 1 – decreased prices inevitable
– Price transparency
– Customer knowledge increases
– Price reduction and standardisation
• View 2 – decreased prices unnecessary
– 89% purchase books from first site
– Only 10% are aggressive bargain hunters
– For corporate buyers internal changes are main
benefit
– Amazon, RS prove this? See Baker et al. (2001)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.22
Figure 5.9 The influence of brand knowledge on purchase.
Matrix for question ‘I will buy a product if …’
Source: Brand New World (2004)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.23
Differential pricing
• Options – reduce or transfer. Other options
• Precision
– Setting prices more accurately through testing (price
indifference band)
– e.g. Zilliant
• Adaptability
– Rapid changes (dynamic pricing).
– e.g. Concert tickets
• Segmentation
– Different charges according to profiling
– e.g. Ford and core vs fill-in customers
See Baker et al. (2001)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.24
B2B reverse auctions
• Will these become popular?
• Yes
– 10-20% reductions achievable
• No
– Only 2% prefer for B2B
– 50% do not choose lowest bidder
– 87% stay with current supplier
– Many have stopped experimenting
See Baker et al. (2001)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.25
Purchase method – digital products
• Purchase
• Rental or subscription
• Pay per use
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.26
Pricing options
• Cost-plus
– Add profit margin to operational costs
• Target profit pricing
– Based on breakeven
• Competition-based pricing
• Market-oriented
– Premium-pricing
– Penetration pricing
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.27
Figure 5.10 Pricerunner
([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.28
Figure 5.11 mySupermarket aggregator
([Link])
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.29
Figure 5.12 Price elasticity of demand
for a relatively elastic product
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.30
Figure 5.13 Price elasticity of demand
for a relatively inelastic product
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.31
Place 1 – place of purchase
• A. Seller-controlled sites are those that are the main site of the
supplier company which are e-commerce enabled.
• B. Seller-oriented sites are controlled by third parties, but are
representing the seller rather than providing a full range of options.
• C. Neutral sites are independent evaluator intermediaries that
enable price and product comparison and will result in the purchase
being fulfilled on the target site.
• D. Seller-oriented sites are controlled by third parties on behalf of
the seller.
• E. Seller-controlled sites usually involve either procurement posting
on buyer-company sites or those of intermediaries that have been
set up in such a way that it is the buyer who initiates the market
making.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.32
Evans and Wurster view of place
• Reach. This is the potential audience of the e-commerce
site. Reach can be increased by moving from a single
site to representation with a large number of different
intermediaries. Allen and Fjermestad suggest that niche
suppliers can readily reach a much wider market due to
search engine marketing (chapter 8).
• Richness. This is the depth or detail of information which
is both collected about the customer and provided to the
customer. This is related to the product element of the
mix.
• Affiliation. This refers to whose interest the selling
organisation represents – consumers or suppliers. This
particularly applies to retailers. It suggests that
customers will favour retailers who provide them with the
richest information on comparing competitive products.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.33
Place 2 – new channel structures
A Distintermediation
B Reintermediation
C Countermediation
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.34
Place 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.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.35
Place 4 – virtual organisations – what are
they?
• Kraut et al. (1998) suggest the following features
of a virtual organisation:
1 Processes transcend the boundaries of a
single form and are not controlled by a single
organisational hierarchy.
2 Production processes are flexible, with
different parties involved at different times.
3 Parties involved in the production of a single
product are often geographically dispersed.
4 Given this dispersion, co-ordination is heavily
dependent on telecommunications and data
networks.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.36
Virtual organisations - alternatives
1. Co-alliance model. Effort and risk is shared
equally by partners.
2. Star-alliance model. Here the effort and risk is
centred on one organisation that subcontracts
other virtual partners as required.
3. Value alliance model. This is a partnership
where elements are contributed across a supply
chain for a particular industry. This is effectively
the value network of Chapter 2.
4. Market alliance model. This is similar to the
value alliance, but is more likely to serve several
different marketplaces.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.37
Promotion
• ‘Promotion unfortunately has a range of
meanings. It can be used to describe the
marketing communications aspect of the
marketing mix or, more narrowly, as in sales
promotion. In its very broad sense it includes the
personal methods of communications, such as
face to face or telephone selling, as well as the
impersonal ones such as advertising. When we
use a range of different types of promotion –
direct mail, exhibitions, publicity, etc we describe
it as the promotional mix.’
Wilmshurst (1993)
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.38
Promotion tools
1 Advertising
2 Sales promotion
3 Personal selling
4 Public relations
5 Direct marketing
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.39
Using promotion to vary the mix
1. Reviewing new ways of applying each of the elements of the
communications mix such as advertising, sales promotions, PR and
direct marketing.
2. Assessing how the Internet can be used at different stages of the
buying process.
3. Using promotional tools to assist in different stages of customer
relationship management from customer acquisition to retention. In
a web context this includes gaining initial visitors to the site and
gaining repeat visits through these types of communications
techniques:
– reminders in traditional media campaigns why a site is worth visiting,
such as online offers and competions;
– direct e-mail reminders of site proposition – new offers;
– frequently updated content including promotional offers or information
that helps your customer do their job or reminds them to visit.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.40
Options for replacing people
• Autoresponders. These automatically generate a response when a
company e-mails an organisation, or submits an online form.
• E-mail notification. Automatically generated by a company’s systems
to update customers on the status of their order, for example, order
received, item now in stock, order dispatched.
• Call-back facility. Customers fill in their phone number on a form and
specify a convenient time to be contacted. Dialling from a
representative in the call centre occurs automatically at the
appointed time and the company pays which is popular.
• Frequently Asked Questions (FAQ). For these, the art is in compiling
and categorising the questions so customers can easily find (a) the
question and (b) a helpful answer.
• On-site search engines. These help customers find what they’re
looking for quickly and are popular when available. Site maps are a
related feature.
• Virtual assistants come in varying degrees of sophistication and
usually help to guide the customer through a maze of choices.
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009
Slide 5.41
Methods of managing inbound contacts
•Make contact point clear
Customer defines •Use FAQ to reduce enquiries (Measure)
•Use drop down lists to categorise query
•Use autoresponse with service promise
Receipt & (number of hours)
acknowledgement •Give alternative information source
(phone or web page)
•Large organisations use intelligent software to
Routeing categorise and prioritise messages and
forward them to relevant staff
•Use templates for common responses
Response •Answer ALL of the questions
•Add question to knowledge base
• Offer callback or follow up for key enquiries
Follow-up
• Use phone if e-mail is not solving problem
Chaffey, Internet Marketing 4th Edition, © Pearson Education Limited 2009