CHAPTER 4
The Impact of Digital Media and
Technology on the Marketing Mix
Introduction
What is marketing What are the
Originality
mix variables
• The series of • Product, price, • Proposed by
seven key place, promotion, Jerome
variables people, process McCarthy (1960)
and people
• Still used as an
• Widely referred to essential part of
4 Ps – product,
price, promotion formulating and
and place implementing
marketing
strategy.
Introduction
Purpose of marketing mix
Example
• Provides a simple strategic • If the aim is to increase sales of a
framework for varying different product, options include
elements of an organisation’s decreasing price and changing the
product offering to influence the amount or type of the promotion.
demand for products.
The elements of the marketing mix
1. Product
The product element of the marketing mix refers to characteristics of a product, service or
brand.
Product decisions are informed by market research where customers’ needs are assessed and
the feedback is used to modify existing product.
There are many alternatives for varying the product in the online context.
1. Product
Internet-related product decisions can usefully divided into decision
affecting core product and extended product.
Core Extended
product product
Refers to the main product Refers to additional
purchase by the consumers to services or benefits
fulfill their needs
of the core product
E.g. Restaurant food E.g. Warranty
Car
Camera Kids eat for free
1. Product
• The main implications for migrating a brand online include:
Options for Options for Options for
varying the core offering digital changing the
product products extended product
Speed of new
Conducting Speed of new
product
research online product diffusion
development
1. Options for varying the core product
Some companies there may be options for new digital products which will typically be
information products that can be delivered over the web.
For example, a travel company, providing video tours or resorts and accommodation
The markets transformed most by the Internet are those where products themselves can be
transformed into digital services e.g. music (download), newspaper (online access to articles)
Options for varying the core product
• However, Internet also introduces 2 options of selling products
• Using economies of scale enabled by technology to offer tailored
Mass versions of products to individual customers or groups of customers
• E.g. [Link] provide custom made furniture, clothing, jewelry
and electronic kits.
customisation
• Bundling combines several product or service
options into a package of services, typically at a
Bundling discounted price.
• E.g. [Link] offer air asia flights + hotels
discount.
2. Options for offering digital products
Companies such as publishers, TV companies and other media owners who can offer digital
product have great flexibility to offer range of product purchase option
For example, subscription, pay-per0view, bundling and ad-supported content.
The digitization of products present opportunities to some industries and threats to others.
3. Options for changing the extended product
Internet can be used to vary the extended product
For example, provide online information on such as awards, testimonies, customer comments,
customer service, warranties
This is important because it become as a source of value to engage customers before they have
to pay for the products and services.
Example
4. Conducting Research Online
The internet provides many It can be used as a relatively
option for learning about low cost method of collecting
products. marketing research.
Method of research online:
For example, trying to 1. Online focus group
discover customer
2. Online questionnaire survey
perceptions of product or
service. 3. Customer feedback
4. Web analytics
Example
5. Speed of new product development
The internet provides a platform which enable new products
to be developed rapidly to test new ideas and concepts.
Explore different product options through online market
research.
E.g. Use owns panel of consumers to test opinion more rapidly
6. Speed of new product diffusion
In early days of Internet, to remain competitive, organization
will have to roll out new products more rapidly to international
market.
Word-of-mouth communication is important that will give
impact on the rate of adoption of new products, especially
through the Internet.
Also known as ‘viral marketing’.
Branding in a digital environment
• Branding is important online and offline as it helps customers
differentiate between products and services from different manufacturers
and producers.
• A brand is much more than the name or logo associated with a product.
• However, in Internet market, loyalty is decreased because it encourages
consumers to trial other brands after researching online.
• Of course, the likelihood of a consumer purchasing will depend upon their
knowledge of the retailer brand or product.
Example of Branding
Nestle Breakfast Cereal Ice Cream Food
Success factor for brand sites
Creating a compelling,
Considering how the
interactive experience
site will influence the
including rich media
sales cycle by
which reflects the
encouraging trial
brands.
Develop permission
marketing
2. Price
The price variable of the marketing mix refers to an organization’s pricing policies which are
used to set prices for products and services.
Two basic approaches commonly adopted for pricing on the Internet :
1. Start up business – low prices to gain customer base
2. Existing companies have transferred their existing prices to the web
Implication of the Internet for the price
Increased price
transparency
Alternative pricing
Downward
structure or
pressure on price
policies
New pricing
approaches
1. Increased price transparency
• There are 2 contradictory effects of the Internet on price that are related
to price transparency.
Differential pricing
• Price charge to the customers is different according to countries
Price elasticity of demand
• The change in demand of a product or service in response to
changes in price.
1. Increased price transparency
• E-commerce companies need to review their strategy towards the impact
of aggregators which facilitate price comparison.
• One strategy for companies in the face of increased price transparency is
to highlight the other features – such as the quality of the retail
experience.
2. Downward pressure on price
The competition caused by price transparency and increased number of competitors is the
main reason for downward pressure on price.
The Internet also tends to drive down prices since Internet only retailers that do not have a
physical presence do not have the overheads of operating stores and distribution network.
Online companies can operate at lower pricing levels. Discounting of the most popular
products is another pricing approach to acquire customers or drive sales.
3. New pricing approaches (including auction)
•
The Internet has proved An offer is a
to have the commitment for a
technological capacity trader to sell under
to create new pricing certain conditions such
options. as minimum price.
A bid is made by a
trader to buy under the
conditions of the bid.
[Link] pricing structure or policies
Different type of pricing may be possible on the Internet particularly for digital, downloadable
products.
Further pricing options include:
1. Basic price
2. Discounts
3. add-ons and extra products and services
4. Guarantees and warranties
5. Refund policies
3. Place
• Place variables of marketing mix refers to how the product is
distributed to customers.
• In online context, products or services is distributed through
navigating from one site to another.
• E.g. retailer of mobile phone sell and distribute its products in
the company’s website and third party website.
Implication of the Internet for the place
Place of
purchase
virtual New channel
organisations structure
channel
conflicts
1. Place of purchase
• Example of places for virtual
marketplace:
• There is no physical
limitation on Place of purchase – Buyer –oriented
fulfillment Sites – [Link]
• Internet is a global
virtual environment
that crosses
geographical
boundaries.
2. New channel structure
• When considering channel • The main types of
structures, it is important to
phenomena that
remember that there may
be implications for the companies need to
physical distributions develop strategies are:
channel [Link]
• E.g. grocery retailers have to 2. Reintermediation
identify the best strategy for
picking customers’ good 3. countermediation
prior to home delivery
3. Channel conflicts
Channel conflicts arise when disintermediation gives a company the opportunity to sell
direct and increased profitability on products. It threaten distribution arrangements with
existing partners.
Channel conflict also involve other stakeholder e.g. sales representatives. Sales
representatives may see the Internet as a direct threat to their livelihood.
3. Channel conflicts
• To assess channel conflict, there are different form of channel the
Internet can take:
A A distribution
communication channel to
channel only intermediaries
A direct sales Any
channel to combination of
customers the above
4. Virtual organisations
What is
virtual A company that uses Implication 1. Companies should
organisation? information and identify opportunities for
communications providing new services
technology to allow it and products to
operate without physical customers looking to
boundaries between outsource their external
different functions. processes.
E.g. Conduct customer
It provides customized survey in virtual
services by outsourcing environment by an
production and other outside company rather
functions to third parties. than by having employees
conduct a focus group.
4. Virtual organisations
Implication Implication
2. Internet can facilitate such
alliances in providing competitive
advantage to organisations 3. Electronic partneship can
operating B2B markets since their also be used to deliver
core competences can be marketing mix.
complemented by partnership with
third parties.
E.g. advertising through Paid
It can also support B2C Search networks (e.g. Google
markets. E.g. Dell can Ad Words)
compete price on pice and
quality in its consumer
markets through its use of Promoting services through
alliances. feeds on price comparisons
search engine (e.g. Trivago)
4. Promotion
•
The promotion variable refers to how marketing communications are used to inform
customers about its products
Digital marketing techniques are highly important and have
significant implication for marketing communications planning
Implication of the Internet for the promotion
Assessing how
Review new ways
the Internet can
of applying each
be used at
elements of
different stages of
communication
the buying
mix
process
Using promotional tools to
assist in different stages of
customer relationship
management
4. Promotion
• The main elements of the promotional mix:
Advertising Selling
Implementation: Implementation:
Interactive display Virtual sales staff,
ads site merchandising
4. Promotion
• The main elements of the promotional mix:
Sales promotion Public relations
Implementation: Implementation:
Incentives such as Blog, -newsletter,
coupons, rewards social networks
4. Promotion
• The main elements of the promotional mix:
Direct mail Word-of-mouth
Implementation:
Implementation:
Viral, email a
Opt in email
friend, social, link