1 [Home] [Current Edition] [Compendium] [Forum] [Web Archive] [ Archive] [Guestbook] [Subscribe] [Advertising Rates] The Use of the Internet in Business-to- Business Marketing: Demographic Characteristics and Intercorrelations among Internet Marketing Variables from American and European Companies Journal of Internet Banking and Commerce, December 2005, vol. 10, no.3 (http://www.arraydev.com/commerce/jibc/) By Despina A. Karayanni, Lecturer of Marketing, University of Patras, Department of Business Administration, Greece Despina Karayanni is Lecturer of Marketing in the University of Patras. Her research interests lie mainly in the fields of high technology marketing, pharmaceutical marketing, relationship marketing and the Internet marketing. See also the University of Patras' Web Site By George J. Avlonitis, Professor of Marketing, Athens University of Economics and Business, Department of Marketing and Communications, Greece George Avlonitis is Professor of Marketing in the Athens University of Economics and Business, Head of the Department of Marketing and Communications. For more information see also the Athens University Web Site Abstract In this paper we present some preliminary results from a major Internet survey which examined the use of the Internet in a firm's marketing strategies. Specifically we describe the profile of businessto-business respondents together with the descriptive statistics of Internet use intensity, strategic goals, product, promotion and sales strategies through the Internet. The intercorellations among the resulted factor scores of strategic goals and Internet marketing strategies with product complexity and Internet use depict some useful conclusions for Internet marketers and researchers. Some directions of future research are also discussed. INTRODUCTION Internet is a new technology breakthrough which has invaded almost every aspect of communication, with users expanding at exponential growth rates. For example, according to the Forrester Research (2003), inter-organizational e-commerce in North America will exceed $2.7 trillion, by Notwithstanding that there is a growing consensus about the benefits of the use of the Internet in their
2 business activities, a few firms report quite disappointing e-business results (Strauss, J., El-Ansary, A. & Frost, 2003). Also, Thomson and Kaul (1995) suggest that success on the Internet can be measured by the number of site visits (hits), and they note, however, that very few companies report significant sales. In addition, Kurlwich (1995) states that most companies generate very little business from WEB advertising at present and that in reality, the main advantage of the WEB is the experience that they gain about the marketing strategies to be used when the network becomes a major commercial tool for everyone. On the other hand, the Internet technology is endowed with the qualities of interactivity, demmasification and asynchronous that alter the rules of communication process (Rogers, 1991), therefore demanding the transformation of the communication strategies. As a consequence, new marketing paradigms have to be shaped in order to provide business models applicable in the field of this new marketing phenomenon (Glazer, 1991, Hoffman and Novak, 1996a, Thomson and Kaul, 1995). THE STUDY The purpose of this paper is to present some descriptive statistics and intercorrelations among variables from a major international research on Internet business-to-business marketing strategy. The conceptual framework of this major study is presented on Scheme 1. According to this conceptual framework, the Internet Marketing Strategies which refer to the strategic goals of the use of Internet, as well as to product, promotion and sales strategies associated with the use of Internet, tend to be affected by the size of the company, its product/market strategy and its experience in using Internet. The impact of Internet Marketing Strategies and their antecedents on sales and export performance, the marketing effort and the channels of distribution is also considered. In this paper we examine the Internet Marketing Strategies and how they are influenced by two selected antecedents, namely the Use Intensity (a variable measuring Experience with Internet) and the Degree of Product Complexity (a Product/Market Strategy variable). Specifically in this paper we address the following issues: We identify some basic demographic characteristics of respondent companies, including size, nationality, field of endeavour, product complexity and intensity of Internet use, in terms of percentage of marketing budget
3 allocated to the Internet use. We identify the degree of the Internet inclusion, i.e. the use intensity of the Internet on their marketing strategies, in terms of strategic goals, product, promotion and sales strategies. We identify the interrelationships of Use intensity of the Internet and product complexity with the aforementioned strategic goals and Internet marketing strategies and We put forward some recommendations useful for the providers of Internet. METHODOLOGY Traditional dating approaches typically involve a man initiating contact with a woman. The findings of this study suggest that African-American men may have unique psychological concerns with regard to online dating. This is illustrated by their preference to wait for automated information about prospective matches rather than initially searching online for prospective matches. An understanding of the gender differences among African-Americans can help understand if it is necessary to advocate a change in this behavioral pattern among African-American men. Sample A ten pages long questionnaire was developed and sent by to the top marketing executives of 400 business-to- business firms. The sample was randomly selected from the business-to-business directories of the Yahoo WEB portal. Initial and follow-up efforts generated 78 responses, producing a response rate of 19.50% which is acceptable as it compares favourably with response rates obtained in similar large-scale surveys from executives/managers (Gatignon and Robertson, 1989). The following three Tables show certain characteristics of the sample companies. From these companies, about 70% were using Internet the last two years, 20% started four years ago, while the remaining 10% had an experience exceeding four years. Nationality Table 1. Nationality of the Respondents Nationality Freq. Percent USA Canada Europe Total Size Table 2. Size of the Respondent Companies Number of Employees Freq. Percent and more Total
4 Field of Endeavour Table 3. Field of Endeavour of the Respondent Companies Field of Endeavour Freq. Percent Software Development Manufacturing Equipment Hardware Manufacturing Chemical & Plastics Home Equipment Automobiles Packaging Scientific and Medical Equipment Office Automation Equipment Apparel Total Variables and their Measurement The study reported in this work-in-progress necessitated the measurement of three blocks of variables: Experience with the Internet Use Intensity of the Internet: The respondents were asked to indicate the percentage of their total marketing budget that Internet accounted for (mean 11.57, st.d ).. Product/Market Strategy Degree of product complexity: The respondents were asked to indicate whether their product was simple, relatively simple, or complex. The variable was treated as a dichotomous one (0=simple or relatively simple, 1=complex). Internet Marketing Strategies i. Strategic Goals The respondents were asked to indicate on a 5-point Likert scale, the importance (5="extremely important" to 1="of little importance") of using Internet for each of the following strategic goals: Table 4. Strategic Goals for the Use of the Internet Strategic Goals Mean St. Dev. 1. Gaining Marketing Edge over the Competition Building Brand Identity
5 3. Establishing a Lead Position Keeping Up with the Competition Finding New Markets Globally Cost Effectiveness Preservation of Existing Customers New Product Research Finding New Markets Locally Finding New Vendors Finding New Coalitions Environmental Scanning A factor analysis reduced the above variables into four factors, which explained 62.7% of variance in the original variables. Specifically the factors are : Marketing Research: new product research, environmental scanning, finding new vendors and cost effectiveness. Gaining Competitive Advantage: gaining marketing edge over the competition, keeping up with the competition and establishing a lead position. Expansion of markets: finding new coalitions, finding new markets locally and finding new markets globally. Preservation of markets: preservation of existing customers and building brand identity Factor scores were computed for each of these factors to be used in the analysis. ii. Product Strategy The respondents were asked to indicate the extent to which they were using Internet for the following product planning activities, using a 5-point Likert scale (5="to a large extent", 1="to a limited extent"): Table 5. Internet Product Strategy Activities Mean St. Dev. 1. Faster Discovery of Customer Needs Better Cooperation of the R&D of the Company 2. with External Resources of Information Greater Customization of the Products to the 3. Customers' Needs Faster Product Life-Cycles Faster New Product Testing Stocking Less Inventory iii. Promotion Strategy The respondents were asked to indicate, using a 5-point Likert scale (5="to a large extent" 1="to a limited extent") the extent to which the message in their Internet ads placed emphasis on the following strategic issues:
6 Table 6. Internet Promotion Strategy Activities Mean St. Dev. 1. Product Benefits Corporate Image Product Characteristics Brand Identity Unique Advantage of the Product Differences from other Competitive Products lternative Uses of the Product iv. Sales Strategy The respondents were asked to state, using a 5-point Likert scale (5="to a large extent", 1="to a limited extent"), the extent to which their salesmen were making use of the Internet for the following purposes: Table 7. Internet Sales Strategy Activities Mean St. Dev. 1. Customer Service and Relationships Sales Leads Knowledge of the Market Sending Electronic Catalogs to the Customers Market Segmentation and Customer Classification Keeping Customer Databases Taking Orders Audiovisional Presentations FINDINGS Table 8, below, shows the correlations between the antecedents (Use Intensity of Internet, Product Complexity), and the Internet Marketing Strategies. Use Intensity of the Internet and Marketing Strategies It appears that the use of Internet is associated with the companies' strategic goal of gaining competitive advantage. Indeed, according to Porter (1991), the top management that invests in information technology is doing so because tends to perceive it as a strategic weapon for gaining competitive advantage.
7 Table 8. Relationships Between Use Intensity, Product Complexity and Internet Marketing Strategies Pearson's r *signif. at 0,05 - **signif. at 0,01 Internet Marketing Strategies Use Intensity of the Internet Product Complexity Strategic Goals Marketing Research Gaining Competitive Advantage 0.39** 0.02 Expansion of Markets * Preservation of Markets Product Strategy Better Cooperation of the R&D of the company wirh external * resources of information Faster Discovery of Customer Needs 0.30* 0.21 Faster Product Life Cycles 0.47** Stocking Less Inventory Greater Customization to the Customer's Needs 0.40** 0.20 Faster New Product Testing 0.43** Promotion Strategy Corporate Image Brand Identity Product Benefits Product Characteristics Differences from Other Competitive Products Alternative Uses of the Product 0.37** 0.23* Unique Advantage of the Product Sales Strategy Knowledge of the Market Market Segmentation and Customer Classification 0.28* 0.00 Keeping Customer Databases Sending Electronic Catalogs to the Customers Customer Service and Relationships Audiovisional Presentations Sales Leads 0.33* 0.01 Taking Orders
8 Considering the positive relationships between the Use Intensity of Internet and the company's Product Strategy (faster discovery of customer needs, better product customization, new product testing and faster product life cycles), as well as Sales Strategy (use of Internet by the salesforce for market segmentation and customer classification), we may argue that Internet has helped companies to put market orientation into practice. In other words, it is being used for identifying and targeting specific micro segments (niching), discovering customer needs into these segments and customizing their product/service mix to these specific needs. Indeed, firms interested in marketing in a hypermedia computer-mediated environment adopt a market orientation (Hoffman and Novak, 1996a). Thus, the virtual world of Internet helps companies to follow demand-side strategies rather, than simply making and selling products. They seem to adopt a demand-side thinking (Rayport and Sviokla, 1996). The lack of significant relationships between the Use Intensity of Internet and the variables pertaining to Promotion Strategy, is aligned with the practice of industrial marketing, which entails that advertising is necessary, still not sufficient for the accomplishment of actual sales. It plays a supporting role to the sales department's efforts to maintain and expand their customer portfolio. However, it seems that the companies which use extensively Internet, emphasize ad messages which have to do with the "Alternative Uses of the Product". This supports the argument put forward by Cronin (1993) that the content of Internet advertisment message should be mainly informational. Degree of Product Complexity and Internet Marketing Strategies According to Benjamin and Wigand (1995) "products that are easy to describe favor electronic markets" and "... producers of physical manufactured goods now sold through catalogs and those in which computer technology can simplify product complexity and reduce asset specificity can be connected through the information highway". The negative relationship of Product Complexity and the strategic goal of Market Expansion supports the views of Benjamin and Wigand indicating that industrial companies capitalize on Internet for direct selling of simple products, or for relatively simple buying situations, (straight rebuy). The positive relationship between Product Complexity and the product strategy variable of better cooperation of R&D with external resources, may indicate that Internet is being used by business-tobusiness companies in their effort to develop new products with external cooperation. This is so, because product complexity and financial risk tend to impose the transfer and exchange of knowledge, assets and experience through collaboration patterns (Bucklin and Sengupta,1993, Gambardella, Garcia and Fontes,1995, Hausler, Hohn and Lutz,1994). Also, product complexity implies a higher degree of market ambiguity-uncertainty (Moriarty and Kosnik,1989), in terms of product utility and operability. In other words, customers may not understand what needs the product could satisfy.therefore, the advertising message in Internet should place emphasis on product applications and product uses and our results confirm this. CONCLUSION Management of the companies marketing industrial products and services acknowledge Internet as a competitive weapon and formulate certain strategies in order to capitalize on the benefits provided by this technology. Apparently Internet assist companies to put marketing orientation into practice. More specifically, companies utilize Internet in all their activities pertaining to the successful commercialization of their products. In addition, they involve their sales departments with Internet, mainly with the aim to facilitate the crucial task of market segmentation and targeting, as well as for discovering sales leads. However, while the companies with simple or relative simple products are more inclined to set the strategic goal of market share increase through the use of Internet, companies marketing complex products are more likely to use Internet in order to facilitate their collaboration with other actors in developing new products. FUTURE RESEARCH
9 Closing this paper, we need to stress that since companies recognize Internet as a strategic weapon and deploy certain Internet Marketing Strategies, we need to focus on the performance of these strategies, in productivity and efficiency terms, in order to evaluate the contribution of the electronic superhighway in the effectiveness of business-to-business marketing strategies. Special performance measures have to be developed in order to substantiate how a firm's performance may be influenced by the Internet Marketing Strategies. Along similar lines, we need to develop specific measures in order to evaluate quality issues of a firm's Internet Marketing Strategy. For example, we may use productivity enhancement, increase of sales, or efficiency improvement as direct performance measures. However, indirect performance measures, such as improvement of corporate image, increase of brand equity and reinforcing of a firm's public relations may be more difficult to be used as quality evaluation measures of a firm's Internet Marketing Strategy. The above issues may be major objectives for future research in the scope of Internet marketing literature. References Bucklin Louis P. and Sengupta Sanjit (1993), "Organizing Successful Co-Marketing Alliances." Journal of Marketing, 57, April, Benjamin R., Wigand R,(1995), "Electronic Markets and Virtual Value Chains on the Information Superhighway," Sloan Management Review, Winter, Cronin Mary J (1994), Doing Business on the Internet: How the Electronic Highway is Transforming American Companies, NewYork:Van Nostrand Reinhold. Gambardella, Garcia-Fontes (1996), "Regional Linkages through European Research Funding" Econ. Innov. New Technology Vol 4, Glazer Rashi (1991), "Marketing in Information Intensive Environments: Strategic Implications of Knowledge as an Asset" Journal of Marketing,55, October, Hausler, Hohn, Lutz (1994), "Contingencies of Innovative Networks:A Case Study of Successful Interfirm R&D Collaboration," Research Policy Hoffman L. Donna, Novak P. Thomas, Chatterjee Patrali (1995), "Commercial Scenarios For The WEB: Opportunities and Challenges," Journal of Computer-Mediated Communication, 1(3), December. Hoffman D. Novak T (1996a), "Marketing in Hypermedia Computer-Mediated Environments:Conceptual Foundations" Journal of Marketing, July. Hoffman L. Donna, Novak P. Thomas (1996b), "A New Marketing Paradigm for Electronic Commerce" Krulwich Robert (1996), "High Stakes in Cyberspace" Moriarty and Kosnik (1989), "High-Tech Marketing: Concepts, Continuity, and Change" Sloan Management Review, Summer, Porter Michael and Victor Miller (1991), "How Information Gives You Competitive Advantage." In "Revolution in Real Time: Managing Information Technology in the 1990s". Boston: Harvard Business Review Press, 59. Quelch A.John, Klein R.Lisa (1996), "The Internet and International Marketing" Sloan Management Review, Spring, Rayport J, Sviokla J (1996), "Exploiting the Virtual Value Chain" The McKinsey Quarterly, 1, Rogers M. Everett (1991), "The Critical Mass in the Diffusion of Interactive Technologies in Organizations", Harvard Business School Research Colloquium, Harvard Business School, Boston, MA,
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