1. Class Discussion Notes MKT 390 - 401 September 19, 2001

2. Creating customer value online What is value? The entire product experience Defined by the customer Involves customer expectations Applied at all price levels Components of the value proposition – Online benefits Product attributes Include overall quality and specific features Higher and consistent quality mean higher prices Features are things like style, color, size etc. Benefits are features from the users perspective The Internet increases customer benefits Marketing mix customization User personalization Product and Pricing

3. Components of the value proposition - contd Branding Trusted brands translate to customer perceived benefits which translate to higher prices Branding decisions Use existing brands on the Net Pros Well known with strong brand equity Cons New product or channel is risky Repositioning of offline brand Channel differentiation Product and Pricing

4. Branding decisions – contd Create new brands Suggest something about the product Differentiate product from competitors Capable of legal protection Internet brands should be short, memorable, easy to spell and easily translatable Cobranding Maximize synergy and brand recognition Partnership should make sense Product and Pricing

5. Branding decisions – contd Internet domain names Use company name or trademark in web address Names may not be available Buy name from registered owner Create a modified name Cybersquatting Pick the right name First level domain names.com.org.net.mil.gov.co.countryabbreviation Product and Pricing

6. Support services Labeling Identify brand names Sponsorship Ingredients Instructions for use Safety information and certification Promotions Create product recognition and influence purchase decisions Product and Pricing

7. Components of the value proposition – Online costs Non-monetary cost reductions based on Internet technology The Net is convenient The Net is fast Self-service saves time One stop shopping saves time Integration saves time Automation saves energy Product and Pricing

8. Additional considerations for product development Market deconstruction Increasing velocity Short product life cycles Unusual business partnerships Knowledge management Complexity of products Product and Pricing

9. Product mix strategies Discontinuous innovations New product lines Additions/extensions of existing product lines Improvements or revisions of existing products Repositioned products Knock off low cost products Product and Pricing

10. New product trends – B2B market Value chain automation Improves efficiency in the entire process of producing and delivering product/service to the customer Affiliate programs Drive traffic to the site Targeted advertising Personalized promotions Customized web site content Sales Catalog aggregators Product configuration Brokerages Product and Pricing

11. Value chain automation – contd Payment/Financing Customer Service Distribution Relationship Marketing Outsourcing ASP – Application Service Provider Perform value chain functions for their clients offsite Pros Lower startup costs Minimal I/S staff Lower switching costs Cons Lack of control Product and Pricing

12. Information sharing EDI OBI – Open buying on the Internet Businesses must translate their data to a common format for exchange XML – Extensible Markup Language The language can be extended to accommodate new types of data Built into IE, Netscape, MS Office Centralizing Information Access Corporate portals Sites designed for company employees Extranets Corporate portals accessible to value chain partners Groupware Lotus Domino and others Product and Pricing

13. New product trends – B2C market Multimedia Conferencing software Webcams Streaming audio CD-quality audio Streaming video Internet telephony VoIP Product and Pricing

14. Assistive technologies Voice-activated computers Large type screen displays Type-to-speech or braille Speech to text telephony Eye gaze-to-type Media convergence Voice, video and data on corporate networks Wireless devices and the Web Cell phones PDAs Broadcast media and the Internet Product and Pricing

15. Efficient markets 5 characteristics of an efficient market Lower prices High price elasticity Frequent price changes Smaller price changes Narrow price dispersion Product and Pricing

16. The Internet is an efficient market Lower prices Factors that put downward pressure on prices Shopping agents Reverse auctions Tax-free zones Venture capital Competition Lower costs Order processing self-service JIT inventory Overhead Customer service Printing and mailing Digital product distribution costs Product and Pricing

17. The Internet is an efficient market – contd High price elasticity Frequent price changes Competition Shopping agents Easy to change prices Volume discounts easier to offer Experimentation is easier Smaller price change increments Response of price sensitive consumers Shopping agents Offline price changes more difficult Product and Pricing

18. The Internet is not an efficient market Price dispersion is not narrow Why not? Online market is immature Goods are price in a variety of ways online Variety of delivery options and charges Time sensitive shoppers Branding Switching costs Second-generation shopping agents Metamediaries Product and Pricing

19. Factors putting upward pressure on Internet pricing Distribution Affiliate programs Site development and maintenance Marketing and advertising Product and Pricing

20. Pricing strategies Penetration pricing Market skimming pricing Price leadership Promotional pricing 3 advantages of promotional pricing on the Internet Highly targeted High customer satisfaction with purchases Online customers are more loyal Segmented pricing Negotiation Dynamic pricing Product and Pricing