INTERNET MARKETING MKTG-311

Transcription

1 INTERNET MARKETING MKTG-311 Fall 2009 Dr. Joseph S. Kraemer 1

2 MKTG INTERNET MARKETING Tuesday 5:30 8:10 pm Dr. Joseph Kraemer jskraemer@cox.net (office) (home) COURSE OVERVIEW: This course provides students with an understanding of the general principles of Internet marketing. Through a combination of lecture, discussion, and assigned case readings, the course explains the impact of the Internet-Telecom technology revolution on marketing models and strategies. Cases used include, among others, Netflix, Amazon, the Gap, Priceline, Apple s ipod/iphone, and Inditex/Zara. Industry examples come from a range of industries including the electronics, retail, automotive, travel/hospitality, and tee-shirt industries. One class is dedicated to the impact of relevant public policy issues on Internet marketing (e.g., concern for privacy, taxation, digital rights management, and consumer protection in an online marketplace). Grading is based on class preparation, a team project, an individual paper, and a final exam. Business students are provided the opportunity to improve their business knowledge and apply what they have learned in other courses. Students from schools other than Kogod will improve their understanding of business in general and Internetbased marketing in particular. TEXT: Internet Marketing: Foundations and Applications (Second Edition) by Carolyn F. Siegel, Houghton Mifflin (2006) READINGS: Selected Harvard Business School Cases (Available in a course pack) GRADING: Mid-term Exam 35% Final Exam 25% Team Project 20% Victoria s Secret Case 15% (V/S may be submitted as an individual paper or a two student paper) Class Preparation 5% (Based on the student s ability to discuss both the assigned readings and the class preparation questions contained later in this syllabus. All students are expected to be prepared not just those who volunteer.) (Instructor option to award up to an additional 5% for class preparation/participation) 2

3 (Note: With the prior permission of the instructor, students desiring extra credit may submit an optional paper that will be due at the end of the semester.) CLASS ATTENDANCE: MANDATORY - - THREE UNEXCUSED ABSENCES WILL RESULT IN A FAILING GRADE & TWO LATES EQUAL ONE UNEXCUSED ABSENCE. THERE ARE ONLY 12 CLASS SESSIONS; YOU SHOULD NOT BE HERE IF YOU CAN NOT ATTEND AT LEAST TEN CLASSES. ACADEMIC INTEGRITY Academic integrity is paramount in higher education and essential to effective teaching and learning. As a professional school, the Kogod School of Business is committed to preparing our students and graduates to value the notion of integrity. In fact, no issue at American University is more serious or addressed with greater severity than a breach of academic integrity. Standards of academic conduct are governed by the University s Academic Integrity Code. By enrolling in the School and registering for this course, you acknowledge your familiarity with the Code and pledge to abide by it. All suspected violations of the Code will be immediately referred to the Office of the Dean. Disciplinary action, including failure for the course, suspension, or dismissal, may result. Additional information about the Code (i.e. acceptable forms of collaboration, definitions of plagiarism, use of sources including the Internet, and the adjudication process) can be found in a number of places including the University s Academic Regulations, Student Handbook, and website at < If you have any questions about academic integrity or standards of conduct in this course, please discuss them with your instructor. 3

4 MKTG INTERNET MARKETING Fall 2009 August 25: 1. Course Administration & Orientation; Grading Process; Attendance Rules 2. Lecture: Shopping and Buying on the Internet 3. Text: None 4. Reading: None September 1: 1. Lecture: Shopping and Buying (continued) 2. Text: Chapter 3 (Identifying Internet Users) ; Chapter 9 (Product in the Internet Marketing Mix - ONLY pages ) 3. Reading: Gap Inc. by John Wells & Elizabeth Raabe (Harvard, July 2006) September 8: 1. Lecture: Technology-based Infrastructure 2. Text: Chapter 2 (Internet Fundamentals); Chapter 8 (Using Data Tools to Enhance Performance) 3. Reading: Netflix (Harvard, November 2007) September 15: 1. Lecture: Promotion: Advertising, Portals, & Search 2. Text: Chapter 7 (Taking Marketing Research to the Net); Chapter 12 (Promotion in the Internet Marketing Mix) 3. Reading: ipod vs. Cell Phone: A Mobile Music Revolution? by David Yoffie (Harvard Business Review, February 2007) September 22: 1. Lecture: Pricing and Auction-based Models 2. Text : Chapter 10 (Price in the Internet Marketing Mix) 3. Reading: Paid Search: The Innovations Thant Changed the Web (Indiana University, 2006) September 29: 1. Lecture: Relationship of Selected Public Policy Issues to Internet Marketing 2. Text: Chapter 5 (Legal and Ethical Issues; Privacy and Security Concerns); Chapter 6 (Taking Internet Marketing International) 3. Reading: We Googled You by Diane Coutu (Harvard Business Review, June 2007) Distribution of Midterm Exam Review Questions 4

5 October 6: REVIEW SESSION FOR MID-TERM EXAM Students should be prepared to discuss the exam review questions October 13: MID-TERM EXAM (35% OF COURSE GRADE) October 20: 1. Lecture: Placement on the Web and Digital Intermediaries and Channels 2. Text: Chapter 11 (Place in the Internet Marketing Mix) 3. Reading: Barack Obama: Organizing for America 2.0 by Mikolaj Jan Piskorski & Laura Wing (Harvard, April 2009) October 27: 1. Lecture: Supply Side Marketing (B2B) 2. Text: Chapter 9 (Product in the Internet Marketing Mix - ONLY Pages ) 3. Reading: Arrow Electronics (Harvard Business Review, May 2001) November 3: 1. Lecture: Business Planning 2. Text: Chapter 13 (The Web Marketing Plan) 3. Reading: Strategy and the Internet by Michael Porter (Harvard Business Review, March 2001) 4. Class Case Paper Due/Class Discussion of Case: Victoria s Secret New Product Launch (15% OF COURSE GRADE) Distribution and Review of Final Exam Review Questions November 10: Team Marketing Plan Presentations (20% OF COURSE GRADE) November 17: REVIEW SESSION FOR FINAL EXAM Students should be prepared to discuss the exam review questions November 24: THANKSGIVING HOLIDAY NO CLASS December 1: 1. Lecture: Business Planning (continued) 2. Text: Chapter 13 (The Web Marketing Plan) Optional Papers Due (requires instructor permission) December 8: FINAL EXAM (25% OF COURSE GRADE) 5

6 MRKT 311: INTERNET MARKETING READING LIST Dr. Joseph Kraemer (office) Text: Internet Marketing by Carolyn Siegel, Second Edition, Houghton Mifflin (2006), ISBN: Paperback edition available Class Discussion Cases/Readings: 1. Strategy and the Internet by Michael Porter(Harvard Business Review, Reprint R0103D, March 2001) 2. We Googled You by Diane Coutu (Harvard Business Review, Reprint R0706X, June 2007) 3. ipod vs. Cell Phone: A Mobile Music Revolution? by David Yoffie ( , February 2007) 4. Arrow Electronics ( , revised May, 2001) 5. Netflix (Harvard , November 2007) 6. Paid Search: The Innovation That Changed the Web (BH 231, Kelley School of Business, Indiana University, 2006) 7. Gap Inc. by John Wells & Elizabeth Raabe (Harvard , revised July 20, 2006) 8. Barack Obama: Organizing for America 2.0 by Mikolaj Jan Piskorski & Laura Wing (Harvard , April 4, 2009) 6

7 MARKETING 311 INTERNET MARKETING CLASS PREPARATION FOCUS QUESTIONS Based on review Of (1) the assigned case reading; (2) the textbook; and (3) class notes, students should be prepared to discuss these questions/issues in class. Furthermore, these questions, or ones very similar, may be featured prominently on the midterm and final exams. Students may work collaboratively on preparing responses to these questions. SEPTEMBER 1 ( Shop and Buy ) 1. All products and many services may be sold online. However, some are more suitable than others. Rank order the following by suitability for online selling: Antique Early American Coins ( ); Women s Apparel; Books; Consumer Electronics; New Automobiles; Assault Rifles. Why? 2. At any given time, what percentage of Americans can be expected to be off line? How many of these are permanently off line? What difference does this make to an online business? 3. What benefits does the Gap derive from its online [Direct] business in comparison to its store-based business? [In part, your response should be based on the average employees and average sales at a Gap store in the U.S., data that can be derived from the Gap case reading.] SEPTEMBER 8 ( Technology ) 1. Which of the three proposed options for Netflix s online video service (case, p ) would you recommend? Please provide the business logic that supports your recommendation. 2. How does the concept of long tail economics relate to the business strategy of Netflix (case, lecture appendix)? 3. Why would you expect channel conflict to be easier to manage at the Gap than at Levis? SEPTEMBER 15 ( Promotion ) 1. Online advertising is growing and taking ad spend share from traditional mass media. Why? 2. Why are mobile devices (e.g., smart phones) expected to transform electronic commerce? How? 3. Be prepared to discuss the Digital Music Ecosystem with particular emphasis on the roles of Apple/iPod and cell phone providers (e.g., AT&T, Verizon). [Note: Read the assigned case and see page 18 of the class Public Policy class lecture.] 7

8 SEPTERMBER 22 ( Auctions & Pricing ) 1. Auctions (forward and reverse) are most useful under what types of market structures? Reverse auctions are most useful with what types of products? Explain. 2. How do you measure the efficiency and the effectiveness of online advertising? 3. Assume that Victoria s Secret is launching a new line of underwear for men. If the target market were to be loyal existing female customers buying for spouses and boyfriends, how useful would paid search be as an advertising format? Explain. 4. Assume that Tata Motors is launching a modified Nano automobile tailored to the American market. [The Nano is a four passenger automobile being launched initially in India for a price of approximately $2,500 U.S.] Name two search terms for use on Google that you believe would have a high ROI on the cost to Nano to use paid search. Why? 5. Why are advertisers excited to be able to access online social networks for ad placement? SEPTEMBER 29 ( PUBLIC POLICY ) 1. From both the buyer s and the seller s perspective, why is PayPal useful? 2. What is the solution to the Sales Tax Case Study (p. 14 of the Public Policy class lecture)? 3. Why and how is technology diffusion relevant to the issue of digital have-nots? [See the public policy class lecture.] 4. Respond with supporting business logic to the question: Should Fred hire Mimi despite her online history? Would your opinion change if the Google search had pulled up a single misdemeanor marijuana possession conviction of Mimi at the age of 19? Explain. OCTOBER 6 MIDTERM EXAM REVIEW OCTOBER 13 MIDTERM EXAM OCTOBER 20 ( Intermediaries & Supply Channels ) 1. During the election campaign, now-president Obama stated that One of my fundamental beliefs from my days as a community organizer is that real change comes from the bottom up. Explain how this principle applied to Obama s use of the Internet during his campaign. In addition, explain whether or not Obama should keep OFA 2.0 focused on continuing a permanent campaign using volunteers linked online to push his agenda. Could OFA 2.0 disintermediate the traditional Democratic Party. 8

9 2. Based on the hospitality case in the class lecture, be prepared to discuss: (1) the impact of the web on the distribution channels of travel service providers (e.g., hotels, airlines) over the last ten years; (2) the strategic relationships that exist between virtual travel agents and the travel service providers; (3) the probable impact of the current recession on those relationships; and (4) assuming you owned a single site travel agency, how you would use the web to expand your business in the current economic environment. OCTO BER 27 ( Supply Side Marketing ) 1. On balance, is the Express proposal an opportunity for, or a threat to, A/S? Explain your response and make a recommendation with supporting business logic as to how A/S should proceed given its business mix (case, Intermediaries class lecture p ). NOVEMBER 3 ( Business Planning ) 1. Define, distinguish and provide examples of: BTO, BTD, and BTF. Explain what it would take to transition the American automobile industry to BTO and what the implications would be for suppliers, the auto companies, and the dealers. 2. Distinguish channel mastering from disintermediation. Provide examples of when each may be the proper strategy for a business. 3. In Porter s opinion, did the Internet increase or decrease the average profitability of established industries? Use his five forces model as the basis for your opinion. 4. According to Porter, does the Internet provide sustainable competitive advantage? Explain in terms of Porter s two key factors: Operational Effectiveness and Strategic Positioning. 5. Since we cannot predict the future, of what value is planning to an enterprise? Which is the easiest planning, executing, or learning/adjusting? Explain. 9

10 Academic Support Services ADDITIONAL INFORMATION If you experience difficulty in this course for any reason, please don t hesitate to consult with me. In addition to the resources of the department, a wide range of services is available to support you in your efforts to meet the course requirements. Academic Support Center (x3360, MGC 243) offers study skills workshops, individual instruction, tutor referrals, and services for students with learning disabilities. Writing support is available in the ASC Writing Lab or in the Writing Center, Battelle 228. Counseling Center (x3500, MGC 214) offers counseling and consultations regarding personal concerns, self-help information, and connections to off-campus mental health resources. Disability Support Services (x3315, MGC 206) offers technical and practical support and assistance with accommodations for students with physical, medical, or psychological disabilities. If you qualify for accommodations because of a disability, please notify me in a timely manner with a letter from the Academic Support Center or Disability Support Services so that we can make arrangements to address your needs. Pandemic Planning In the event of a declared pandemic (influenza or other communicable disease), American University will implement a plan for meeting the needs of all members of the university community. Should the university be required to close for a period of time, we are committed to ensuring that all aspects of our educational programs will be delivered to our students. These may include altering and extending the duration of the traditional term schedule to complete essential instruction in the traditional format and/or use of distance instructional methods. Specific strategies will vary from class to class, depending on the format of the course and the timing of the emergency. Faculty will communicate class-specific information to students via AU and Blackboard, while students must inform their faculty immediately of any absence due to illness. Students are responsible for checking their AU regularly and keeping themselves informed of emergencies. In the event of a declared pandemic or other emergency, students should refer to the AU Web site (www. prepared. american.edu) and the AU information line at (202) for general university-wide information, as well as contact their faculty and/or respective dean s office for course and school/ collegespecific information. 10

11 VICORIA S SECRET NEW PRODUCT LAUNCH NOTE: This paper may be submitted by a single student or by a team of two students. Due date is November 10. Situation Victoria s Secret is the leading U.S. seller of women s lingerie. As a line extension, the company has decided to enter the men s underwear market. The assumption by Victoria s Secret management is that the men s underwear market has tremendous growth potential but is dominated by traditional suppliers (e.g., Jockey, Fruit-ofthe-Loom) that provide the same old staid, boring, white underwear year-after-year. The theory is that Victoria s Secret will introduce color and style to men s underwear and thereby tap a tremendously underserved market. Because males are uncomfortable in Victoria s Secret stores, the initial and only channel to be used for sales of men s underwear will be a web site with the URL of For at least two years after product launch, no other sales channel than this web site will be used; marketing/promotion may be online or off line or both. This line extension is a very serious initiative that is being counted upon to increase revenues and build brand equity. The company has invested over $25 million to date and expects to spend almost at much to establish the product line over the next two years. The goal is to launch in the third quarter in time for the Christmas buying season. Core Issues & Your Assignment: You are the Marketing Manager for this new product line. You are responsible for putting together the Internet marketing plan for the men s underwear product line. You recognize that the key issue that will drive your product launch is the following: Is the target market for the initial product roll out (i.e., the first 24 months) female, or male, or both? A corollary question is also critical: Is this a way to sell more products to VS s existing customer base [90%+ female] or is this focused on attracting new customers [either male or female or both]? You must decide these two questions before you respond to the set of questions below. Your boss, the VP of Marketing, has asked that you provide a summary of your proposed Internet-based marketing campaign. The time period will be from three months before product launch until 24 months after launch. The instruction from your boss is that the summary must address the following questions with supporting justification for your answers: (a) Who will be the buyers (i.e., the target market)? 11

12 (b) Why will they buy? (c) How should the products be priced? [discount from, premium to, same as the traditional product in the market], (d) What will they buy?, (e) What should be the online and off line promotion mix [includes advertising (note there are ten online advertising formats described/discussed in the text), direct marketing, personal selling, sales promotions, and PR]?, (f) How will you use the Internet to reach the target market?, (g) How do you intend (if at all) to leverage the brick and mortar stores that Victoria s Secret has all over the U.S.? [if none, explain why]; and (h) assuming a successful launch, after the initial 24 month launch period, what changes do you expect in terms of target segments, product mix, additional channels, and/or promotional campaign?. Please ensure that your paper addresses each of the questions that your boss wants covered. The paper is to be not less than ten pages in double spaced text format excluding attachments and any graphics/illustrations you prepare as examples of promotional material. A bibliography is required, and all sources must be referenced as footnotes using standard academic formats. 12

13 OPTIONAL EXTRA CREDIT PAPER: THE CANDY CASE MRKT INTERNET MARKETING NOTE: This paper is optional and available at the discretion of the instructor. Before preparing this paper, you must have instructor permission. Due date for this paper is no later than December 1. SITUATION: Your spouse and you are the sole proprietors of a homemade candy business in Dewey Beach, Delaware, a summer resort on the Atlantic Ocean. The candy is made on site at your store, and you and your spouse actually live above the store. You own the store and the upstairs apartment where you live without any debt since the building came to you as part of your grandmother s estate. You and your spouse are both 28 years of age. The 2008 gross revenue of the business was $700,000, essentially all of which was generated between May and September. Your annual pretax profit was $250,000 (before paying any salary to your wife or yourself). Your business has no on line marketing or sales. All of the business results from walk in customers during the summer vacation season (i.e., May September). Although your primary line of business is candy, recently you added home made ice cream at the store. While you do not actually make the ice cream, you have contracted with a local creamery to make a dozen flavors under contract using a proprietary family ice cream recipe. The ice cream makes heavy use of sugar and butter fat and has proven to be an ideal summer treat for adults and children. Last summer was the first season that the store sold ice cream, and 20% of the annual revenue (i.e., $140,000) came from ice cream, the remainder from candy. You expected to increase the ice cream revenue by approximately 50% in the coming 2009 summer season while holding candy sales steady at about $560,000. Your estimates for 2009 do not include any incremental revenues from Internet sales (see below). You have two competitors in Dewey, both of which are small family businesses like yourself. All three of you have approximately identical market shares of the local summer season candy business. While you cannot know for sure, you suspect that the other businesses have revenues and financial performance similar to yours. Essentially, the in-dewey vacation season candy business operates in a very stable competitive environment. 13

14 You are content to work only five months a year and live at the beach all year long. However, your spouse is more aggressive and wants to expand the business. She has developed a concept to take the business online so as to continue to service customers when they return home after the summer, as well as add new customers all over the region, the U.S. in general, and maybe even foreign countries. She intends to reinvest the increased profit from the online business into the store and its products/services so as to achieve sustainable local competitive advantage and a material increase in local market share at the expense of your two local competitors. By her calculation, the cost of online entry would be less than $50,000, and that sum could be borrowed from the bank. She is convinced that her plan is a no brainer and should be implemented immediately. You are worried that she has underestimated both the effort and the cost of marketing and selling online, as well as overestimated the probability of success. Intuitively, you recognize that this will be a bet-the-company decision. Once you take on debt, go online, compete with whatever may be out there online, and upset the local currently stable competitive situation, for better or worse, things will never be the same. Therefore, you want to make sure that your spouse and you know what it is that need to do, how fast you can do, what the cost will be, and the probability of success. Therefore, you decide to create an Internet Marketing Plan using Carolyn Siegel s Internet Marketing book as a guideline and framework. THE ASSIGNMENT You are to create an Internet Marketing Plan assuming the fact set presented above. This marketing plan must answer each of the following questions: (a) Are both your products (i.e., candy and ice cream) suitable for online selling; (b) Who will be the buyers? (c) Why will they buy? (d) How should the products be priced? [discount from, premium to, same as your store price], (e) What will they buy in terms of your two existing lines of business?, (f) What should be the promotion mix [discuss ALL the components described in the text book]?, (g) How will you use the Internet to touch the target market?, and (h) What off line and online advertising formats [AS DEFINED IN THE TEXT] will you use - and why will you use them? Additional questions that must be answered include the following: 1. Is going on line to become a clicks-and-bricks business a sound business decision? Why? 2. How would you expect your two local competitors in Dewey to respond, if at all? 3. Is the estimated $50,000 investment the correct estimate of start-up cost? If not, is the expected investment materially higher or lower? 14

15 ASSIGNMENT ADMINISTRATION 1. The paper should be approximately ten double-spaced text pages excluding the bibliography. 2. All sources must be footnoted and appropriate attribution given. Use of sources without attribution will result in a failing grade. 3. You are expected to do web searches on potential competition. This would include visiting web sites. This is integral to your assessment of the business expansion. 4. If you are not familiar with Dewey Beach, then go on line and check the place out so you can have a sense of the local market. [Also, it is a great summer place for young people in their 20s and 30s.] 15