Internet Marketing Intro

Momentum builds for Internet marketing as businesses stretch their reach toward an avalanche of web surfers. Just a decade ago, the Internet was merely a conversation topic within small tech circles. Today, the Internet hosts businesses from merchandise to service, many which operate solely through their web storefront.

Forrester Research projects online worldwide commerce – including business-to-business and business-to-consumer transactions – to reach $6.8 trillion by the close of 2004, with North America capturing $3.5 trillion, more than half of the worldwide wealth.

While this customer landscape expands from the malls and downtown onto their glowing computer monitors, Internet corporations climb to meet demand. Shopping portals emerge as the easiest and most comprehensive online catalogs, streamlining thousands of merchants into one simple grid. Shopping and marketing evolve, giving merchants national, even worldwide, visibility easier than ever before. Customers shop at home purchasing from large, well-known merchants or small, niche shops in the same manner. Packages are traceable at every stop, then conveniently delivered to their door. The Internet redefines communications, billing and the age old motto: location, location, location.

Headlines trace this marketing revolution from its amateur beginnings to Wall Street. Yahoo! acquired 22 companies since its inception including, most recently, Overture, Inktomi and HotJobs. Similarly, what began as a hobby grew into a mammoth IPO in August of 2004 when Google (NASDAQ: GOOG) announced its offer of 19,605,052 shares of Class A common stock at $85 per share. Froogle, its shopping portal, remains in beta. Ebay, from humble beginnings, dominated the innovative live auction platform, acquiring PayPal in October of 2002. MSN Shopping boasts more Fortune 500 retailers than any other shopping portal, hosting RedEnvelope, Dell, Circuit City, Neiman Marcus, Blue Nile and JC Penny.

Moving forward, we’ll watch Google’s acquisition in Keyhole.com unfold, as search technology migrates deeper into military capability providing commercial use by everyday citizens.

As customers steadily migrate to and accept online shopping within their normal conduct, offline commerce increases as well. Research shows many consumers conduct product research online, make purchase decisions by navigating through online storefronts, then making their actual purchase offline. Companies that have an online store show significant offline sales growth once on the Internet as well.

Purchasing and marketing patterns have evolved and changed. Year-over-year total retail sales grew 7.8 percent between 2003 and 2004 (based on second quarter earnings). While ecommerce sales grew 23.1 percent year-over-year, according to the latest statistics announced by the U.S. Department of Commerce. Ecommerce sales growth already beat traditional shopping at astounding rates. Businesses that ignore the online customer significantly hinder their overall profitability.

Why are consumers migrating to online commerce? People are busier, trying to juggle the dynamic demands of career, home and family. Corporations are under intense pressures to improve profits, while employees work harder than ever. Online commerce is convenient, user-controlled and open 24/7 year-round. Consumers aren’t limited by geography, making product and service purchases from merchants anywhere in the world. With this broader reach comes improved selection and pricing – all with one click.

Business opportunity lies, then, in creating the ideal strategy to reach a refined target audience, expanding marketing reach and visibility. In addition to basic business promotion and advertising, Internet Marketing improves and, in some cases, reduces customer service and relationship management cost. To accomplish their goal, businesses and merchants have many more options than ever before – spanning both online and offline channels. Each strategy has its own uses.

Websites can improve a businesses image, add value to customer services, offer a new venue for shopping and become a continual and ever-growing brochure or information source. When a website offers frequently updated content, articles or activities, it encourages prospects to come back again and again to learn and discover new things. Each visit becomes another opportunity to solidify brand loyalty and encourage a purchase. Like offline shops and services, every business has to attract the walk-in customer.

Attracting customer attention is not the same online as we’ve learned to treat it offline. There are no fuzzy hamburger costumes, strobe lights or blimps that span thousands of miles in reach to bring someone in. Similarly, though attempts have been made to combine service and product providers into a mall or industrial complex styled medium, websites largely stand-alone out there. To draw attention into a website, online marketing includes banner advertisements, emails, shopping portals and traditional direct marketing contact such as telemarketing, catalogs and mailers. What could be better in reaching an online customer than using a direct link?

Planning and Strategy
The Internet marketing strategy that works for one business is not necessarily the right strategy for another. Each campaign depends on a unique ratio and blend of customer demographics, services or products offered, business objectives, capabilities reputation. Our Internet marketing plan should be developed, tested, implemented, analyzed and revisited each year or as the business needs change and the Internet grows.

The following questions solidify target audience demographics. Businesses that understand their audience can take small steps in reverse – from the customer to the sale – developing the ideal path toward profits.

•    What's the current economic environment?
•    What opportunities and obstacles does the business face?
•    What business objectives are desired?
•    What does the business sell?
•    Who are the customers?
•    How computer and Internet-suave are the customers now and in one year?
•    Why should customers buy the product or service with the business instead of its competitors?
•    How is product or service communication managed with customers?
•    Who does what, when?
•    How is progress and success measured (ROI, cost-per-lead, cost-per-acquisition)?
•    What internal trends are forthcoming (sales volume monthly and annually, revenue, profits, traffic and conversion, usability)?
•    Who competes?
•    Who are current customers (segmentation, attitudes and behavior)? Who are customers a year from now?
•    What are the distribution channels (direct and indirect)?
•    What is each customer experience (scenarios help to envision each step and expectation)?

While these are broad questions, each may be adapted to various industries and business models.

The Communications, Media & Technology Group (CMT) at Booz-Allen and Hamilton, a leading International management and technology consulting firm, conducted an industry survey evaluating successful e-business companies to determine the e-business impact on the global competitive landscape. The companies analyzed include Amazon, AOL, Yahoo, Dell and Hotmail. Results, published in “Insights, Vol. 7, Issue 1” entitled Ten Success Factors in e-Business, reveal that:

•    92 percent of senior executives worldwide believe the Internet will transform or have a major impact on the global marketplace

•    61 percent believed the Internet would facilitate achieving strategic goals as technology offers opportunities for companies to improve customer service, gain global reach and reduce costs. 30 percent said the Internet demands a complete business strategy change in order to align with competition.

•    Worldwide CEOs felt companies would be forced to restructure as the Internet enables extended enterprise (89 percent), stimulates a more open and proactive corporate culture (88 percent) and encourages the transformation from traditional hierarchical organization to networks of changing teams.

The Internet’s importance in today’s business landscape is undeniable. Consumer perceptions of corporate online visibility and marketing efforts grow more critical each day. To meet this demand, however, the study concluded that many major corporations, while aware of changes needing to take place within the organization, struggled to follow-through with implementation. The key questions they recommended established businesses ask themselves are:

•    Which business segments should get top priority for e-business?

•    What are the biggest associated challenges and threats?

•    Which business models are suitable and actionable?

•    How should the new business be developed—out of the current organization or through a new, separate entity?

•    Are the right people on board to do e-business?

•    What partnerships and alliances are needed for a successful launch?

•    What are the implications for business processes and IT infrastructure?

•    Do we want to prevent, admit or foster the cannibalization of our established business?

By analyzing major e-business companies and their marketing model, the study unveiled ten identifiable criteria for success along the customer life cycle in the new economy. The following chart arranges each critical success factor:

Ten Success Factors in E-Business
Viewed more closely, the companies analyzed each had practices in place to address the following steps:

1.    Vision and Top Management Commitment: a Prerequisite for Successful Strategy Development and Implementation

Successful e-business approaches are based on a clear vision, which is the starting point as well as the reference for development and implementation of strategic decisions. The vision requires full senior management support.

2.    Strategic Alliances: Focus on Core Contributions

In the large number of alliances which are necessary to cover the whole value-chain in e-business, senior management must concentrate on those partners who already have a significant impact on their own business success and are thus of strategic importance.

3.    Branding: Guide through the Data Jungle

In many highly competitive markets only the number 1 or number 2 brand can operate profitably in the long run. In such markets, the brand becomes a decisive competitive factor, due to its signaling function, its impact on the emotional purchasing experience, and its guarantee of quality and security in the virtual world. Yahoo! was one of the first companies to recognize the value of branding in the technology-driven i-world and is a prime example of the fact that not only established brands can move into the i-world, but that new brands can also be established successfully.

4.    e-pricing: Competitive Advantage through Differentiation

The increasing market transparency of the i-world can be countered by intelligent price management. e-business provides the chance to achieve extremely flexible and complex price determining systems as well as new approaches to price differentiation. This creates new possibilities for sustainable earnings; in the long run the only ones who can escape fierce price competition are those who have mastered the complex set of instruments.

5.    Individualized Service Offerings: Value Added for the Customer

e-business enables companies not only to offer a large variety of products in mass markets, but, in addition, to personalize the sales environment and processes in such a way that they offer the customer decisive value added compared to the traditional buying process.

6.    Process Design in e-business: Centered Around the Customer

Customer-orientation is the key to success in e-business. The implementation of customer-orientation requires end-to-end processes, which differ markedly from those in the real world. The process design must ensure a smooth interaction of software interfaces (Website) and of processes arranged upstream and downstream.

7.    1-to-1 Marketing: Personal Touch in Mass Marketing

e-business allows you to systematically attract customers in a mass market with the help of a product/ service suite tailored to individual needs. 1-to-1 marketing utilizes personal customer information for the benefit of both sides.

8.    Community Building: Customer Retention through Networking

e-business provides the means for customers to network among themselves. Establishing a community which is functioning around one’s own brand generates enormous value-added. Moreover, the market position is very difficult to attack. So far, few established players have successfully encouraged a strong community.

9.    HR-Strategy: Management of the No. 1 Bottleneck

For established companies, recruiting and retaining capable staff becomes bottleneck factor number 1 in the expansion of their e-business activities. Innovative people strategies are therefore a key to success. Looking at the example of Intel, it becomes clear how flat hierarchies, high team orientation, genuine delegation of responsibility and attractive incentive schemes can be integrated into a future-orientated corporate culture.

10.    Strategic Use of IT: Core Capabilities in e-Business

The complexity of the essential IT infrastructure as well as the investment which will be necessary are driven by three dimensions: the integration of the existing systems, the degree of coverage of the process chain, and the existing standardization throughout the company. In any case the IT architecture must be of a modular structure and scalable to allow rapid growth. The corporate IT organization must be flexible and aligned to the radical requirements of e-business. Hotmail who boldly claimed “to change the way people communicate” is today—supported by strategic use of IT—by far the biggest provider of free-of-charge e-mail on the World Wide Web.

As always, the particular industry and environment dictates the optimal blend of each strategy. While all ten steps should be addressed, how we weigh importance on each may vary. The study concludes: “A successful e-business model requires an integrated approach to build the capabilities needed to put the key success factors into practice. Three phases have to be addressed in parallel:

•    Strategy profiling

•    Business modeling and experimentation

•    Implementation and innovation

In each of the phases, four major streams of activities have to be carried forward:

•    Strategy/organization/alliances

•    Operations/e-customer lifecycle engineering

•    Talent game plan

•    Technology game plan

The first phase, strategy profiling, comprises (for example) the identification of opportunities and threats, the development of product/service strategies and business models, and the definition of alliance requirements. The latter includes the development of a long list of potential partner candidates, to be followed by individual screening and evaluation. At the same time, customer lifecycle capabilities and gaps are being base-lined, and a talent game plan and a technology game plan are being developed. 

During the second phase, strategy and people/processes are fine-tuned, an organizational blueprint is defined and alliance talks are set up. Concurrently, operational activities are being prototyped, staffing requirements are defined, and a prototype application is built under the technology game plan. 

The third phase consists of implementing the business model and repeatedly evaluating the organization and product/service offering, monitoring operational performance targets, and updating the operational blueprints.”