MOBILE AND INTERNET Lecture 3 MARKETING MAGDALENA GRACZYK
THE ELEMENTS OF THE MARKETING MIX Source: D. Chaffey (2006) Internet Marketing Strategy implementation, and Practice, Prentice Hall, p. 215
PRODUCT
PRODUCT ON INTERNET MARKETING Product: all the benefits through time that the user obtains from the exchange. The virtual product is seen as the union of tangible and intangible aspects, which is adapted and personalized according to the variety and variability of individuals preferences by customizing the product with the active help of consumers. A product can be delivered from producer to consumer in digital form (mp3 for music, avi for movies, pdf for books and magazines, and so on) thus contextualizing their fruition in the digital framework.
PRODUCT OPTIONS FOR CHANGING THE EXTENDED PRODUCT How the Internet can be used to vary the extended product? endorsements awards testimonies customer lists customer comments warranties guarantees Money-back offers customer service (see people, process and physical evidence) Incorporating tools to help users during their selection and use of the product
PRODUCT CONDUCTING RESERACH ONLINE Online focus group Online questionnaire survey Customer feedback or support forums Web logs Tipping point - Using the science of social epidemics explains principles that underpin the rapid spread of ideas, products and behaviours through a population.
PRODUCT CONDUCTING RESERACH ONLINE The Tipping Point explains the three simple principles that underpin the rapid spread of ideas, products and behaviours through a population 1 The law of the few - the spread of any new product or service is dependent on the initial adoption by connectors who are socially connected and who encourage adoption through word-of-mouth and copycat behaviour 2 The stickiness factor - 1 Excellence: perceived as best of breed 2 Uniqueness: clear one-of-a-kind differentiation 3 Aesthetics: perceived aesthetic appeal 4 Association: generates positive associations 5 Engagement: fosters emotional involvement 6 Expressive value: visible sign of user values 7 Functional value: addresses functional needs 8 Nostalgic value: evokes sentimental linkages 9 Personification: has character, personality 10 Cost: perceived value for money. 3 The power of context - products should be devised and tested to fit their context, situation or occasion of use
PRODUCT THE LONG TAIL CONCEPT The long tail concept - A frequency distribution suggesting the relative variation in popularity of items selected by consumers. He found that if the variation in popularity of different words in a language is considered, there is a systematic pattern in the frequency of usage or popularity. Zipf s law suggests that if a collection of items is ordered or ranked by popularity, the second item will have around half the popularity of the first one and the third item will have about a third of the popularity of the first one and so on. In general: The kth item is 1/k the popularity of the first.
PRODUCT THE LONG TAIL CONCEPT It can be applied to the relatively popularity of a group of web sites or web pages or products on an individual site, since they tend to show a similar pattern of popularity. Source: D. Chaffey (2006) Internet Marketing Strategy implementation, and Practice, Prentice Hall, p. 223
PRODUCT THE LONG CONCEPT One reason for increased product variety on the Internet is the ability of online retailers to catalog, recommend, and provide a large number of products for sale. For example, the number of book titles available at Amazon.com is more than 23 times larger than the number of books on the shelves of a typical Barnes & Noble superstore, and 57 times greater than the number of books stocked in a typical large independent bookstore. Looking at the issue from another perspective, they estimate that 40% of sales are from relatively obscure books with a sales rank of more than 100,000 (if you visit Amazon, you will see that every book has a sales rank from 1 for the most popular to over 1 million for the least popular). This indicates the importance of the long tail for online retailers like Amazon, since 40% of sales are from these less popular books which cannot be stocked in a conventional bookstore (a large real-world book store would typically hold 100,000 books). In a Pricing context, another benefit for online retailers is that less popular products cannot be readily obtained in the real world, so Amazon can justify higher prices for these books. Brynjolfsson et al. (2003) stimated that averageamazon prices for an item in the top 100,000 is $29.26 and in less popular titles $41.60.
PRODUCT THE INTERNET AND BRANDING Branding -The process of creating and evolving successful brands. Brand - The sum of the characteristics of a product or service perceived by a user. Three essential characteristics of a successful brand: brand is dependent on customer perception; perception is influenced by the added-value characteristics of the product; the added-value characteristics need to be sustainable. Brand experience - The frequency and depth of interactions with a brand can be enhanced through the Internet.
PRODUCT THE INTERNET AND BRANDING Deyal (et al. 2000) suggest that to build successful online brands, organisations should consider how their proposition can build on these possible brand promises: the promise of convenience making a purchase experience more convenient than the real-world one, or that with rivals; the promise of achievement to assist consumers in achieving their goals, for example supporting online investors in their decision or supporting business people in their day-to-day work; the promise of fun and adventure this is clearly more relevant for B2C services; the promise of self-expression and recognition provided by personalisation services suchas Yahoo! Geocities where consumers can build their own web site; the promise of belonging provided by online communities.
PRODUCT THE INTERNET AND BRANDING Traditional measures of brand equity and online measures of brand equity Source: D. Chaffey (2006) Internet Marketing Strategy implementation, and Practice, Prentice Hall, p. 225
PRODUCT BRAND IDENTITY Brand identity - The totality of brand associations including name and symbols that must be communicated. When a company launches or relaunches an online presence, it has the following choices with regards to brand identity: 1 Transfer traditional brand online 2 Extend traditional brand: variant 3 Partner with existing digital brand 4 Create a new digital brand
PRICE
PRICE ON INTERNET MARKETING Price: everything given by the acquirer in terms of money, time and effort given to obtain the product. From the consumer s perspective, the main benefits of the Web concern the reduction of information asymmetries that allow the consumer to compare prices in real time and gain more transparency. Moreover, the implementation of Artificial Intelligent Agents enable to make automatic and tailored comparisons of prices and features, reducing the price in terms of time and effort. Internet makes it possible to modify prices in real time; this could lead to dangerous price competitions.
PRICE ON INTERNET MARKETING Price variable - The element of the marketing mix that involves defining product prices and pricing models. Pricing models - Describe the form of payment such as outright purchase, auction, rental, volume purchases and credit terms. The main implications of the Internet for the price aspect of the mix are: 1. increased price transparency and its implications on differential pricing; 2. downward pressure on price (including commoditisation); 3. new pricing approaches (including dynamic pricing and auctions); 4. alternative pricing structure or policies.
PRICE - INCREASED PRICE TRANSPARENCY Price transparency - Customer knowledge about pricing increases due to increased availability of pricing information. Differential pricing - Identical products are priced differently for different types of customers, markets or buying situations. Price elasticity of demand - Measure of consumer behaviour that indicates the change in demand for a product or service in response to changes in price. Satisficing behaviour - Consumers do not behave entirely rationally in product or supplier selection. They will compare alternatives, but then may make their choice given imperfect information. Commoditisation - The process whereby product selection becomes more dependent on price than on differentiating features, benefits and value-added services.
PRICE - DOWNWARD PRESSURE ON PRICE Price transparency is one reason for downward pressure on price. The Internet also tends to drive down prices since Internet -only retailers which do not have a physical presence do not have the overhead of operating stores and a retailer distribution network. A further reason for downward pressure on price is that companies looking to compete online may discount online prices. Diamantopoulos and Matthews (1993) suggest there are two aspects of competition that affect an organisation s pricing: the structure of the market - the greater the number of competitors and the visibility of their prices the nearer the market is to being a perfect market the perceived value of the product Perfect market - An efficient market where there are an infinite number of suppliers and buyers and complete price transparency.
PRICE - DOWNWARD PRESSURE ON PRICE Baker et al. (2000) suggest that companies should use the following three factors to assist in pricing. 1 Precision 2 Adaptablity 3 Segmentation
PRICE - DOWNWARD PRESSURE ON PRICE Setting pricing 1 Cost-plus pricing - This involves adding on a profit margin based on production costs. 2 Target-profit pricing - This is a more sophisticated pricing method that involves looking at the fixed and variable costs in relation to income for different sales volumes and unit prices. Care needs to be taken that differential prices are not evident to different customers. This method is often used in a B2B context according to the volume of goods sold. 3 Competition-based pricing - This approach is common online. The advent of price-comparison engines such as Kelkoo (www.kelkoo.com) for B2C consumables has increased price competition and companies need to develop online pricing strategies that are flexible enough to compete in the marketplace, but are still sufficient to achieve profitability in the channel. 4 Market-oriented pricing
PRICE - DOWNWARD PRESSURE ON PRICE Setting pricing 4. Market-oriented pricing - Market-oriented pricing. Here the response to price changes by customers making up the market are considered. This is known as the elasticity of demand. There are two approaches. Premium pricing (or skimming the market) involves setting a higher price than the competition to reflect the positioning of the product as a high-quality item. Penetration pricing is when a price is set below the competitors prices to either stimulate demand or increase penetration. This approach was commonly used by dotcom companies to acquire customers. The difficulty with this approach is that if customers are price-sensitive then the low price has to be sustained otherwise customers may change to a rival supplier.
PRICE - DOWNWARD PRESSURE ON PRICE Kotler (1997) suggests that in the face of price cuts from competitors in a market, a company has the following choices which can be applied to e - commerce: Maintain the price (assuming that e-commerce-derived sales are unlikely to decrease greatly with price since other factors such as customer service are equally or more important). Reduce the price (to avoid losing market share). Raise perceived quality or differentiate product further by adding-value services. Introduce new lower-priced product lines.
PRICE NEW PRICING APPROACHES Forward auctions - Item purchased by highest bid made in bidding period. Reverse auctions - Item purchased from lowest-bidding supplier in bidding period. Offer - A commitment by a trader to sell under certain conditions. Bid - A commitment by a trader to purchase under certain conditions. Dynamic pricing - Prices can be updated in real time according to the type of customer or current market conditions. An offer is a commitment for a trader to sell under certain conditions such as a minimum price. A bid is made by a trader to buy under the conditions of the bid such as a commitment to purchase at a particular price.
PRICE NEW PRICING APPROACHES
PRICE ALTERNATIVE PRICING STRUCTURE OR POLICIES The Internet offers new options such as payment per use, rental at a fixed cost per month or a lease arrangement. Further pricing options which could be varied online include : basic price discounts add-ons and extra products and services guarantees and warranties refund policies order cancellation terms.