FHF McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

part 5 FHF 13-2 Chapter 12 Dimensions of Marketing Strategy Chapter 11 Customer-Driven Marketing Chapter 13 Digital Marketing and Social Networking

FHF What is Digital Marketing? E-Business  Carrying out the goals of business through use of the Internet Digital Media  Electronic media that function using digital codes Digital Marketing  Using digital media to develop communications and exchanges with customers 13-3

FHF Growth and Benefits of Digital Communication Digital media has created opportunities for businesses to: Create relationships with consumers Target markets more precisely Reach new markets worldwide 13-4

FHF Digital Marketing Has five key characteristics 1. Addressability : The ability for a business to identify consumers before they make a purchase 2. Interactivity : Allows customers to express their needs and wants directly to the firm in response to its communications 3. Accessibility : Allows consumers to find information about competing products, prices, and reviews and to become more informed about a firm and the relative value of its products 4. Connectivity : Keeps customers and businesses connected with each other 5. Control : Consumers’ ability to regulate the information they receive via the Internet 13-5

FHF Using Digital Media in Business  Digital media have created new ways of doing business and shopping Fast communication More interactive Comparison shopping easier Easier to conduct marketing research and advertise 13-6 …continued on next page

FHF Using Digital Media in Business  Digital media have lowered the cost of communication and transactions  Digital media are more similar to traditional media than they are different  Growing problem with controlling employee access to digital media Wasting time at work on personal communications 13-7

FHF Digital Media and the Marketing Mix Some key differences between digital and traditional media in the marketing mix:  Communications are richer, faster and more interactive  Companies can reach target markets more easily, affordably and quickly  They help marketers utilize new resources in seeking out and communicating with customers 13-8

FHF Digital Media and the Marketing Mix Digital media let marketers and consumers share information  Websites  Online social media sites   Listservs 13-9 …continued on next page

FHF Ways Users Spend Time on the Internet RankSectorGlobal Reach 1Search85.9% 2General Interest Portals85.2% 3Software Manufacturers73.4% 4Online Communities66.8% % Source: Nielson Reports, “Global Faces and Networked Places,” March 2009, p

FHF Product Considerations Digital media connectivity creates opportunities to add services and benefits to products  Some products only available digitally  Internet can make it easier to learn about and anticipate consumer needs  Competition makes quality and service offerings more important than ever 13-11

FHF Distribution Considerations The Internet is a new distribution channel  Processing orders electronically can reduce inefficiencies, cost and redundancies  Can also increase speed  Shipping times and costs are important to customers 13-12

FHF Promotion Considerations Promotion is one of the best applications for digital media  Consumer consumption patterns are changing The products they want to buy The way they get information  Marketers must react and give consumers what they want 13-13

FHF PepsiCo.PepsiCo.’s Online Promotions PepsiCo. PepsiCo.’s Online Promotions PepsiCo. Online promotions have made Pepsi the #1 soda in China  Pepsi holds 23% of soda market in China  Online social media is essential when marketing in China and other markets with many Internet users  “Pepsi Creative Challenge” was a massive online promotion to celebrate the 60th anniversary of the People’s Republic Source: “Pepsi’s Web-Smart Thrust into China,” Businessweek, September 28,

FHF Price Considerations  The most flexible element of the marketing mix  Digital media can enhance a product’s value by providing service, information, and convenience Discounts and sales can be quickly communicated Deals websites allow consumers to compare prices of products 13-15

FHF Price comparison Many websites allow consumers to compare prices to find the best deals 13-16

FHF Online Social Networks  A web-based meeting place for friends, family, co-workers and peers that lets users create a profile and connect with others for a variety of purposes Build relationships with customers Provide product information Learn about customer needs Contact new target markets Starbucks, Dell, eBay and Google all excel at using social media for marketing StarbucksDelleBay 13-17

FHF Types of Consumer-Generated Marketing and Digital Media Two factors sparked the increase in consumer-generated information: 1. Increased tendency for consumers to publish their thoughts, opinions and reviews of products via blogs and other digital media 2. Consumers tend to trust other consumers over corporations 13-18

FHF Blogs and Wikis Blogs (Web-Logs)  Web-based journals through which authors can editorialize and interact with other Internet users  2/3 of Internet users read blogs  Give consumers power over companies because they cannot control what bloggers write Wikis  Websites where users can add or edit content of posted articles  Monitoring wiki sites can give corporations ideas about how consumers feel about their company or products 13-19

FHF Most Popular Blog A liberal conglomeration news website Mostly links to stories on other sites Launched in 2005 by former conservative commentator Arianna Huffington Over 3,000 bloggers contribute, 60 employees Also utilizes vlogging (video blogging) More than 28 million visitors a month 13-20

FHF Video and Photo Sharing Video Sharing  Lets users upload videos to the Internet  Viral Marketing : Using video sharing and online social networking sites to spread an advertisement or message about a product  Companies increasingly use consumer-generated content for ads rather than professional ad agencies Photo Sharing  Similar to video sharing sites, but allow users to upload, edit and share photos instead  Businesses use photo sharing to display images of products 13-21

FHF PodcastingPodcasting Podcasts  Audio or video files that can be downloaded form the Internet via a program that delivers content to listening devices or personal computers  Convenient  Can listen on an Mp3 player or other portable device  Popular with the demographic 13-22

FHF Social Networks  2/3 of consumers have visited online social networking sites  There are many different sites and the number is growing MySpace Facebook LinkedIn Twitter 13-23

FHF  The largest social networking site in the world  Appeals to a broad demographic  Fastest-growing demographic is women over 55  Encourages consumer interaction with companies and products  Good resource for marketers  Market research  Low-cost means of advertising  Reach new markets 13-24

FHF  A social network for professionals  A profile resembles a résumé  Facilitates professional networking, job searches and recruiting  Companies use the site to familiarize people with their business 13-25

FHF  Twitter is a hybrid social networking and micro- blogging site  140 characters or less  Companies announce sales, promotions and product updates via tweets  Can help (re)build customer relationships 13-26

FHF Virtual Worlds  Allow users to select an avatar and live out an alternative life online Many virtual worlds allow users to buy and sell goods, services, even real estate Big business: Nearly $300 million on advertising in virtual worlds annually 13-27

FHF Virtual Worlds Have a Downside  Although they can be lucrative, some companies may choose to avoid virtual-worlds and similar systems Negative publicity when gamers claim addiction A Hawaii resident sued the creator of virtual-world game Lineage II Claimed game rendered him unable to function normally Played for 20,000 hours over five years (or hour days) 13-28

FHF Advertising in Virtual Worlds  Search engine Bing advertised on the social game FarmVille and generated 400,000 Facebook fans in a day Users gained virtual currency in FarmVille by becoming a Bing Facebook fan FarmVille is a virtual world farming game available through Facebook 13-29

FHF Mobile Marketing  Consumers increasingly do their business and shopping from mobile devices and smartphones Marketers can use digital media to their advantage Requires adapting to new technologies and consumption patterns 13-30

FHF More Adults Use Cell Phones as Primary Phone Source: USA Today Snapshot, March 7, 2009, A1.

FHF What kind of digital technology user are you?  Creators : Create their own media outlets (e.g. blogs, podcasts, videos)  Critics : People who comment on blogs or post ratings and reviews  Collectors : Collect and organize content generated by creators and critics  Joiners : Includes anyone who becomes a user of social networking sites or other online communities to connect and network  Spectators : Read online information but to not join communities or post anywhere  Inactives : Do not participate in online digital media; numbers are dwindling Developed by Charlene Li and Josh Bernoff of Forrester Research 13-32

FHF Using Digital Media to Learn About Consumers  Digital media is a great learning tool  Market research Gathering data on consumers Asking consumers about preferences  Crowdsourcing involves using communities if interested consumers to gather input and feedback for marketing purposes  Can help small businesses on limited budgets compete with large businesses 13-33

FHF Legal Issues in Internet Marketing: Privacy  Shopping on the Internet allows companies to better track consumers Cookies are often used for tracking  Laws and regulations cannot keep up with the rapidly- changing Internet Federal Trade Commission considering creating legislation that limits information companies can gather online  The Better Business Bureau and other organizations can help organizations develop privacy policies 13-34

FHF Legal Issues in Internet Marketing: Identity Theft  Occurs when criminals obtain personal information that allows them to impersonate someone else in order to access financial accounts and make purchases Security breaches are serious threat to organizations and individuals Phishing is using a familiar website to deceive people into divulging private information 13-35

FHF Main Sources of Identity Theft Source: “Consumer Sentinel Network Databook, 2009,” The Federal Trade Commission, February 3, 2010, p. 3, (accessed May 12, 2010).

FHF Legal Issues in Internet Marketing: Online Fraud  Includes any attempt to conduct fraudulent activities online  Cybercriminals are increasingly using online social networking sites and other digital media to commit fraud They sometimes use social networking sites to pose as charities and collect donations  Always be careful what information you give out when online; and used trusted sites whenever possible 13-37

FHF Legal Issues in Internet Marketing: Intellectual Property  Intellectual property can include songs, movies, books, electronics, software, etc.  It is generally protected by patents and copyrights, but these can be difficult to enforce globally  Piracy and illegal sharing costs global industries billions annually  90% of illegal software copying is done by businesses 13-38

FHF Digital Media and how They are Changing Marketing  Digital media can make your company more efficient and productive Transition to digital media can be challenging Correct blend of traditional and digital media in marketing mix takes time and consideration Future marketing opportunities will require a knowledge of digital media and how to use them