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CHAPTER NINETEEN

MARKETING AND THE INTERNET

Prepared by Jack Gifford

Miami University (Ohio)

© 2000 South-Western College Publishing

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THE INTERNET AND THE WORLD WIDE WEB

A communication conduit and a marketplace Available worldwide 24 hours a day Dynamic entrepreneurial environment Is changing the nature of marketing

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EVOLUTION AND GROWTH

Developed in the 1960s for the US military to provide uninterruptable communication in the event of sabotage or attack

Later used by colleges and universities for research

First used for commercial purposes in 1991

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EVOLUTION AND GROWTH

Between 1993 and 1998, the number of hosts grew from 1,313,000 to 36,739,000

The traffic carried on the Internet by December of 1998 was doubling every 100 days

The World Wide Web is a subset of the Internet

The Web comprises millions of virtual sites that only exist as data in computers

Each of these sites is nothing more than a collection of associated electronic documents called pages; the first page displayed as a Web site is called the home page

© 2000 South-Western College Publishing 5

WHO IS USING THE INTERNET?

In 1993, only 60 countries were linked to the Internet. By 1999, 241 countries were listed by the Internet Assigned Number Authority and more than 150 countries had direct access to the Internet.

The USA and Canada account for 87 million of the estimated 151 million people on line worldwide.

Average age of users in 1998 was 35.1% Women in 1998 represented 38.7% of users, and is

rising rapidly

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WHO IS USING THE INTERNET?

By June of 1998, 50% of the North American population between the ages of 16-34 claimed to be Internet users

As time passes, the users of the internet are becoming a representative cross section of the North American population

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THE INTERNET’S EFFECT ON MARKETING STRATEGY

By the year 2000, the Internet marketing should exceed 327 million people

Online buyers will increase from 18.6 million in 1998 to 64.6 million in 2002. Volume will increase to over 270 billion dollars by 2002

Over 50% of the people accessing the Internet are watching less television and spending more time on the Internet

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THE INTERNET’S EFFECT ON MARKETING STRATEGY

Marketers are communicating with these individuals via… E-mail News groups and

discussion lists Launching new home

pages Sponsoring established

groups, lists, sites and bulletin boards

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Electronic mail is the most widely used service of the Internet

Companies can communicate with existing or potential customers as individuals

Spamming = unwanted commercial e-mail

THE INTERNET’S EFFECT ON MARKETING STRATEGY: Electronic mail

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THE INTERNET’S EFFECT ON MARKETING STRATEGY: General newsgroups and Discussion Lists

The exchange of information among individuals with common interests Provides useful

information to marketers in terms of product usage, marketing research, pricing and promotion

May act as moderator or sponsor

What design features would you like to see in your next sports car?

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Generated in-house or through outsourcing Direct sales of products or services or as an

informational/support function Role of banners, search engines and “smart

agents” Keys to site traffic generation include…

THE INTERNET’S EFFECT ON MARKETING STRATEGY: Launching a corporate home page

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Banners Registration with online search engines Easy-to-guess addresses Include web address in print and broadcast

advertisements Advertise through off-line subscription

services Frequently changes in web site content Pay consumers to view the site Contests, entertainment, free services

THE INTERNET’S EFFECT ON MARKETING STRATEGY: Launching a corporate home page

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THE INTERNET’S EFFECT ON MARKETING STRATEGY: Tracking the traffic

Marketers need to be able to measure the effectiveness of their efforts Track frequency of

access and time spent on page

Record number of clicks or hits while within site

Use of response forms or contests

Use of cookies

Subscriptions Requests for information

using forms or e-mail Actual sales stimulated

through direct orders or 1-800 calls

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THE INTERNET’S EFFECT ON MARKETING STRATEGY: Conducting marketing Research Online

Online information search engines General use Industry specific Governmental sources Trade magazines and

journal archives Access to university

research Electronic news services

(text, audio, video clips)

Electronic surveys Ensures completion of all

items Eliminates coding error due

to database digital nature of data captured

Convenient for respondent Low cost of collection and

use Use of specially designed

software Demographic bias potential

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THE INTERNET’S EFFECT ON MARKETING STRATEGY: Industry newsgroups & discussion lists

Online venues for exchanging ideas, debating issues, providing intellectual support, and promoting new technology.

Establishes a network of colleagues with similar goals and interests

Popular discussion lists deal with... Online advertising Consumer research Database marketing Relationship marketing Internet sales

© 2000 South-Western College Publishing 16

PRIVACY AND SECURITY ISSUES FOR ONLINE COMMERCE

Privacy and security issues seem to become more complex as technology provides unscrupulous individuals with new and better tools for breaking the law, causing chaos, and intruding into personal affairs.

Traditional legal and moral issues such as copyright infringement, pornography, and fraud will continue to plague all businesses

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PRIVACY AND SECURITY ISSUES FOR ONLINE COMMERCE

New issues now facing electronic commerce involve exchanging value (electronic cash), personalized online activity (cookies), protecting sensitive data files (firewalls), and actively seeking new customers (spamming)

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PRIVACY AND SECURITY ISSUES FOR ONLINE COMMERCE: Electronic cash

Credit cards and security concerns

Encryption algorithms $50 credit card fraud limits Identification and tracing

transaction (Pentium III issues)

CyberCash electronic money

Electronic banking

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PRIVACY AND SECURITY ISSUES FOR ONLINE COMMERCE: Firewalls

Firewalls are special computer programs that check all incoming and outgoing information streams for proper identification and authorization

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PRIVACY AND SECURITY ISSUES FOR ONLINE COMMERCE: Spamming

Spamming involves the transmission of commercial messages to individuals via electronic medium

Is considered by some individual consumers as an invasion of privacy and a theft of time and money

Potential legislation?

© 2000 South-Western College Publishing 21

THE INTERNET’S IMPACT ON THE MARKETING MIX

Communications technology will allow people, for the first time in history, to easily search worldwide for and obtain the lowest price for the goods they purchase.

Intelligent agents will automatically comparison shop for goods specified by consumers.

The World Wide Web and Internet is becoming one of the dominant business-to-business methods of transaction

© 2000 South-Western College Publishing 22

THE INTERNET’S IMPACT ON THE MARKETING MIX

The World Wide Web and the Internet will have a profound impact on every dimension of the marketing mix. Its effective and efficient use by marketers in the 21st century is absolutely essential for success…and even survival. Your future success in business will be, at least partially, dependent upon YOUR understanding and creative use of this new communication medium!