1. Marketing in the Internet Age
Chapter Three
Lecture Slides
Extended Version
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Professor
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2. Looking Ahead After studying this chapter, you should be able to:
Identify the major forces shaping the new Internet Age.
Explain how companies have responded to the Internet and other powerful new technologies with e-business strategies, and how these strategies have resulted in benefits to both buyers and sellers.
Describe the four major e-commerce domains.
Discuss how companies go about conducting e-commerce to profitably deliver more value to customers.
Overview the promise and challenges that e-commerce presents for the future.
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3. Opening Vignette: Canadian Tire
In business since 1922, now with 443 stores and 200 gas stations across Canada
Uses both corporate-owned stores and locally owned dealers
Slow to move their business online to avoid making the mistakes of those before them
One of the top three e-commerce sites in Canada
2 million visitors since its inception
Includes products only available online
Special promotions such as “Item or Hot Deals of the Week”
Allows subscribers to shop directly from eFLYER and receive weekly s from the company
Click-and-mortar retailing as a two-tiered system
How does this company avoid disintermediation of their own franchised dealers? What are the issues in play?
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4. Forces Shaping the Internet Age
Digitalization: today’s appliances and systems run on digital information, consisting of streams of zeros and ones
Embedded systems require proprietary software to run
Provides for a refrigerator that tells you when it runs out of beer
Connectivity: telecommunications networks transport digital information
Provides for a refrigerator that re-orders for you!
Digitalization
&
connectivity
The explosion
of the
Internet
The Internet
Age
Customization
&
customerization
New types of
Intermediaries
Figure 3-1
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5. Forces Shaping the Internet Age (continued)
Intranet: a network that connects people within a company to each other and to the company network
Extranet: a network that connects a company with its suppliers and distributors
The Internet: a vast public web of computer networks that connects users of all types all around the world to each other and to an amazingly large “information repository.”
Digitalization
&
connectivity
The explosion
of the
Internet
The Internet
Age
Customization
&
customerization
New types of
Intermediaries
Figure 3-1
©Copyright 2004, Pearson Education Canada Inc.

6. Forces Shaping the Internet Age (continued)
The Internet explosion:
400 million Internet users by the year 2000
Internet penetration in Canada reached 69% of the population 18+ years old by early 2001
Estimated number of Web surfers worldwide by year 2004: 1 billion
Visit the NUA website for current Internet statistics
Digitalization
&
connectivity
The explosion
of the
Internet
The Internet
Age
Customization
&
customerization
New types of
Intermediaries
Figure 3-1
©Copyright 2004, Pearson Education Canada Inc.

7. Forces Shaping the Internet Age (continued)
New types of intermediaries:
Click-only companies operate on a virtual basis only, with no physical presence that customers can see
Examples:
Amazon.com
Ing Direct
Click-and-mortar companies combine an online presence with traditional stores
Examples:
Mountain Equipment Co-Operative (MEC)
Canadian Tire
Digitalization
&
connectivity
The explosion
of the
Internet
The Internet
Age
Customization
&
customerization
New types of
Intermediaries
Figure 3-1
©Copyright 2004, Pearson Education Canada Inc.

8. Forces Shaping the Internet Age (continued)
Customization: taking the initiative to customize the market offering for the customer
Customerization: leaving it to individual customers to design the market offering
Prosumers combine production and consumption in one process.
Example:
Reflect.com
Digitalization
&
connectivity
The explosion
of the
Internet
The Internet
Age
Customization
&
customerization
New types of
Intermediaries
Figure 3-1
©Copyright 2004, Pearson Education Canada Inc.

9. “E” Terms
E-business: the use of electronic platforms to conduct a company’s business
E-commerce: buying and selling processes supported by electronic means
E-markets are marketspaces
E-marketing: efforts to communicate about, promote, and sell products and services over the Internet
E-purchasing (E-procurement): purchasing goods, services, and information from online suppliers
©Copyright 2004, Pearson Education Canada Inc.

10. Benefits to Buyers
Convenience: no traffic, parking, or limited store hours
Privacy: no human contact required
Greater product access/selection: unlimited selection is possible
Information: a wealth of available information on companies, products, and competitors
Interactive shopping: consumers can tailor the product offering to their tastes
Immediate results: consumers can order what they want when they want
©Copyright 2004, Pearson Education Canada Inc.

11. Benefits to Sellers
Customer relationship building: interaction with customers results in increased value and customer satisfaction
Cost savings: virtual space is much cheaper than physical space
Increased speed: communication moves at the speed of transmission
Increased efficiency: intermediaries are cut out
Flexibility: ongoing adjustments to product availability and pricing
Global reach: local companies can become global companies, instantly
©Copyright 2004, Pearson Education Canada Inc.

12. E-Commerce Domains
Business to consumer (B2C): the online selling of goods and services to final consumers
Forrester Research prediction: B2C sales in Canada will reach $18m by 2004
Products best suited to B2C:
travel services
financial services
music
clothing
computer hardware and software
flowers
gifts
Targeted to
consumers
Targeted to
businesses
Business
B2C
Consumer
Business
B2B
Initiated by
business
Consumer
C2C
Consumer
C2B
Business
Initiated by
consumer
Figure 3-2
©Copyright 2004, Pearson Education Canada Inc.

13. E-Commerce Domains
Business to business (B2B): using online resources to reach new customers, serve current customers more effectively, and obtain buying efficiencies and better prices
Gartner Group estimate: B2B will reach $3.6 trillion in 2003, compared with $107 billion in B2C
Open trading networks: huge e-marketspaces for B2B buyers and sellers
Private trading networks: B2B trading networks that link a particular seller with its own trading partners
Targeted to
consumers
Targeted to
businesses
Business
B2C
Consumer
Business
B2B
Initiated by
business
Consumer
C2C
Consumer
C2B
Business
Initiated by
consumer
Figure 3-2
©Copyright 2004, Pearson Education Canada Inc.

14. E-Commerce Domains
Consumer to consumer (C2C): online exchanges of goods and information between final consumers
Example:
eBay
currently has 30 million registered users
$5 billion in trades in the past year
Types of C2C websites:
collectible and used good exchanges
forums
discussion groups
newsgroups
chat rooms
Targeted to
consumers
Targeted to
businesses
Business
B2C
Consumer
Business
B2B
Initiated by
business
Consumer
C2C
Consumer
C2B
Business
Initiated by
consumer
Figure 3-2
©Copyright 2004, Pearson Education Canada Inc.

15. E-Commerce Domains
Consumer to business (C2B): online exchanges in which consumers search out sellers, learn about their offers, and initiate purchases
Examples:
Travelocity.com
Priceline.com
Targeted to
consumers
Targeted to
businesses
Business
B2C
Consumer
Business
B2B
Initiated by
business
Consumer
C2C
Consumer
C2B
Business
Initiated by
consumer
Figure 3-2
©Copyright 2004, Pearson Education Canada Inc.

16. Conducting E-Commerce
Click-only companies: e-tailers which operate only online without any brick-and-mortar market presence
Seller
Brick & mortar
store channels
Consumers
Brick-only marketers
Seller
E-Commerce
channels
Consumers
Click-only marketers
Brick & mortar
store channels
Seller
Consumers
E-Commerce
channels
Click-and-mortar marketers
Figure 3-3
©Copyright 2004, Pearson Education Canada Inc.

17. Conducting E-Commerce (continued)
Click-and-mortar companies: traditional brick-and-mortar companies that have added e-marketing to their operations.
Seller
Brick & mortar
store channels
Consumers
Brick-only marketers
Seller
E-Commerce
channels
Consumers
Click-only marketers
Brick & mortar
store channels
Seller
Consumers
E-Commerce
channels
Click-and-mortar marketers
Figure 3-3
©Copyright 2004, Pearson Education Canada Inc.

18. Reasons for dot.com Failures
Lack of research and planning
Over-reliance on spin and hype rather than sound marketing strategy
Over-spending on building brand identity and attracting customers
Non-sensical business models
Poor expense control
Notable examples:
eToys.com
Pets.com
Garden.com
©Copyright 2004, Pearson Education Canada Inc.

19. Sources of E-Commerce Revenue
Product and service sales income
Advertising income
Sponsorship income
Alliance income
Membership and subscription income
Profile income
Transaction commissions and fees
Market research and information fees
Referral income
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20. Types of Web Sites
Corporate web site: builds customer goodwill and supplements other sales channels, rather than selling the company’s products directly
Example:
McDonalds
Marketing web site: engages consumers in interactions that will move them closer to a direct purchase or other marketing outcome
Examples:
Toyota
Kraft Canada
©Copyright 2004, Pearson Education Canada Inc.

21. 7 C’s of Effective Web Site Design
Context: layout and design elements
Content: text, pictures, sound and video
Community: enabling user-to-user communication
Customization: tailoring the site to different users or allowing users to personalize the site
Communication: enabling site-to-user, user-to-site, or two-way communication
Connection: linking to other sites of interest to the user
Commerce: enabling commercial transactions
©Copyright 2004, Pearson Education Canada Inc.

22. Online Advertising
Online advertising: advertising that appears while consumers are surfing the Web
Types of online advertising:
Banner ads and tickers
Skyscrapers
Rectangles
Interstitials
Browser ads
Content sponsorship
Microsites
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23. Online Advertising (continued)
Viral marketing: messages or other marketing events that are so infectious that customers will want to pass them along to friends
Also known as “buzz”
Created by public relations
Can be very inexpensive and very effective
Examples:
MyPoints.com
Hotmail.com
©Copyright 2004, Pearson Education Canada Inc.

24. Web Communities
Web communities: web sites where members can congregate online and exchange opinions
Effective use of C2C properties of the Internet
Can become a home base for all of a user’s Web activities
Examples:
iVillage.com
MyFamily.com
@griculture Online
©Copyright 2004, Pearson Education Canada Inc.

25. Webcasting and
Webcasting: the automatic downloading of customized information of interest to recipients’ PCs
an attractive channel for delivering Internet advertising or other information content.
also known as “push” programming
Example
Infogate.com
In order to be effective, campaigns must be:
enriched
targeted to those who want them
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26. Challenges of E-Commerce
Limited consumer exposure and buying: users do more information gathering than actual buying
Skewed user demographics: users tend to be somewhat more upscale and technology oriented
Chaos and clutter: with millions of sites on the Web, it’s difficult to attract and hold attention
Security: the typical user does not trust that the Internet is a secure place to do business
Ethical concerns: tracking of usage and unauthorized use of private information remains a major concern
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27. Looking Back
Major changes in the marketing landscape are having an impact on marketing practices
Recent technological advances have created a new Internet age.
Marketers will have to add some Internet thinking to their strategies and tactics
©Copyright 2004, Pearson Education Canada Inc.