Economics, Global, and Other Issues in E-marketing
Characteristics of E-marketing N 2 K utilizes the concept of virtual communities to increase revenue and profits. The scope of advertisement has been changed from mass advertisement to a targeted one. Competition intensifies due to new extranets, mostly “online only” competitors. The company is basically an online company, using a new business model.
The Components of Digital Economics Digital products: One of the major differences between the marketplace and the marketspace is the possible digitization of products and services. The consumers: The tens of millions of people worldwide that surf the Web are potential buyers of goods and services offered or advertised on the Net. The consumer are looking for bargains, customized items, collectors’ items, entertainment and more. The Sellers: Hundreds of thousands of storefronts are available on the Net, advertising and/or offering millions of items of items. Every day it is possible to find new offerings of products and/or services.
The infrastructure companies: Thousands of companies provide the hardware and software necessary to support E-marketing. Many companies that provide software also provide consulting services on how to set up a store on the Internet. The intermediaries: Intermediaries of all kinds offer their services on the Web. The role of these intermediaries as seen throughout the book and is different from that of regular intermediaries. The Support Services: Hundreds of support services are available, ranging from certification and trust, which assures security, to knowledge providers. Content Creators: Hundreds of media-type companies create and perpetually update web pages and sites.
Impacts of E-marketing on competitions Competition in the traditional markets is going through a fundamental change as can be seen in the Amazon.com versus Barnes & Nobel example. Amazon’s example demonstrates the following impacts on competition: Lower buyers’ search cost : Electronic markets reduce the cost of searching for product information. Speedy comparisons : Not only can the customers find inexpensive products, they can find them quickly. The customer does not have to go to several bookstores. Differentiation: Amazon.com provides customer with information that is not available in a physical bookstore such as communication with authors, almost real-time book reviews, and more.
Lower Prices: Amazon.com offers lower prices due to its lower cost. In some cases, prices are reduced by 40 percent. Lower Service: Amazon.com provides superior customer service
Michel Porter’s Competitive Model New Entrants SuppliersBuyers Substitute Industry Competitors Intensify of Rivalry Threats of New Entrants Bargaining Power of Buyers Threat of Substitute Bargaining power of Suppliers
There will be many entrants, some of which will be online exclusively. There will also be many out-of-town and global new entrants The bargaining power of the buyers is likely to increase due to availability of information and comparative analysis on the Web. There will be more sudstitute products and services ranging from digital products to innovative products/services that are Web based. The bargaining power of suppliers may decrease due to the increased number of suppliers, ease of conduct bidding, and the entry of small and foreign suppliers. The number of industry competitors in one location will increase.
Some Issues in Digital Economy and Success Factors Cost curves. The total cost curves of many physical products and services are U-shaped. With the digital product cost decline as quantity increases due to the proportion of the fixed component of the cost over more units. Buying versus renting. Just like with the physical products, in E-marketing one can rent, or a group can share, products. Availability of such options will influence both demand and prices. Bundling products/services. Bundling several products or services is especially common in software products that are digitized. Bundling is a useful price discrimination method and it is used extensively by vendors.
Potential Winners and Losers in E-Marketing Winners 1.Internet access providers 2.Portal providers 3.Providers of diversified internet services 4.E-marketing software companies 5.Proprietary network owner 6.Midsize manufacturers 7.Technology suppliers 8.Advertisement and target marketing companies 9.A few large resellers 10.Security, special infrastructure, and payment system providers 11.Online dedicated companies 12.Conventional retailers that use online extensively 13.Market makers
Losers 1.Most wholesalers, especially small ones. 2.Brokers 3.Salespeople 4.Nondifferentiated manufacturers