CHAPTER 2
LITERATURE OVERVIEW
2.1
Marketing Definition
Marketing is a process, which is a method of doing an activity generally
involving a series of procedures. The mission of marketing is to attract and
retain customers.
According to Mohammed, Fisher, et.al., 2002, p 3, “The classical marketing
approach involves four broad steps: market analysis, market planning,
implementation, and control.” Market analysis involves searching for
opportunities in the marketplace with unique skills. Market planning requires
segmentation, target market choice, positioning, and the design of the
marketing mix (4Ps). Market implementation includes the systems and
processes to go to market with marketing program and marketing control
refers to the informal and formal mechanisms that can be used by marketing
managers to keep the marketing program run well.
2.2
Internet Marketing
“Internet marketing is a process of building and maintaining customer
relationships through online activities to facilitate the exchange of ideas,
products, and services that satisfy the goals of both parties.” (Mohammed,
Fisher, et.al., 2002, p. 4).
14
15
Internet marketing has become an important component of marketing
nowadays. Globalization has forced marketers to move forward with no
boundaries and Internet is one of the most accurate tools to use.
The goal of Internet marketing is not only build relationships with online
customers but the main goal is to build offline as well as online relationships.
2.3
Eight
basic
steps
of
marketing
for
non-profit
organization
Marketing is an unfamiliar concept for many nonprofit organizations. These
organizations understand that marketing is more than just the old sense of
making a sale or obtaining a donation. Marketing is a way to satisfying the
consumer and donor needs.
According to Laura Schneider (www.marketing.com), there are eight steps
that will suggest marketing ideas that could make a significant difference.
1. Define the target, research similar organizations and associations.
2. Determine the desired outcome of marketing efforts.
3. Using the information gathered in Step 1 and 2 develop brochures and
marketing materials that describe the benefits, services, donation
opportunities, and values of organization.
4. Develop public relations strategy.
Be sure to use the media, other associations that are reaching out to the
same target market.
16
5. Develop and maintain a professional Internet presence by creating a
web site. A web site can be used as a great resource to display useful
information, news, monthly newsletters, events, create community,
share alternatives to donating money, and showcase the benefits of
organization.
6. Research and maintain prospect and customer databases. Do not let
these resources be wasted. Use them for special mailings, follow-up
telephone calls, event invitations, alliance development, research
profiling, and market segmentation.
7. Show and advertise the results and objectives that organization
achieves.
8. Always actively search for alliances with other organizations,
commerce, government, advertising media, and business. This step
alone often brings the most benefit to nonprofit organizations.
2.4
Seven Stages of Internet Marketing
Like a traditional marketing program, an Internet Marketing program involves
a process called The Seven Stages as shown in Figure 2.1 below. These seven
stages should be coordinated and internally consistent while the process
should be loop back continuously.
17
Figure 2.1 The Seven-Stage Cycle of Internet Marketing
According to Mohammed, Fisher, et. al., 2002, p. 8 the Seven Stages of
Internet Marketing are framing the market opportunity, formulating the
marketing strategy, designing the customer experience, crafting the customer
interface, designing the marketing program, leveraging customer information
through technology, and evaluating the results of the marketing program as a
whole.
2.4.1 Stage One: Framing the market opportunity
Many companies begin opportunity framing from their experience about a
market or a technology. This stage involves the analysis of market
18
opportunities. There are six steps, which can be used to evaluate the
attractiveness of the opportunity. Figure 2.2 below lists the steps that firms
should satisfy in order to frame market opportunity, as well as the benefits of
each step. It is important to note that these steps are not necessarily sequential
but it depends on the situation in which company could step into this process
at any point
Figure 2.2 Framework for Market Opportunity
Six steps in analyzing Market-Opportunity Framework:
1. Investigate the opportunity in an existing or new value system.
The value system is the entire chain of suppliers, distributors, competitors,
buyers, and intermediaries that bring an existing offering to market
19
therefore, a value system connect the processes and activities within and
among firms that creates benefits for intermediaries and end consumers.
Value is created from the first inputs through to the end: customer
purchase, usage and disposal activities.
Figure 2.3 Three types of Basic Value
As shown in Figure 2.3 above, firms should look at the value system with
a lens that yields ideas about new business possibilities. Three basic value
types:
1. Trapped value
This value can be obtained by creating more efficient markets by
lowering search and transaction costs and creating more efficient value
systems by compressing or eliminating steps in a current value system.
2. New-to-the-world value
Three ways to create this value are customizing offerings using
Internet and digital flexibility to make product more attractive,
20
building efficient community through Internet, and introducing newto-the-world functionality or customer experience.
3. Hybrid value
This value can be created by disrupting current pricing to make the
market more efficient, enabling ease of access to enhance the access
point and degree of communication between relevant exchange
partners, and radically extend reach by delivering cost effective.
2. Identify unmet or underserved customers needs.
The customer decision mapping process can be used to systematically
define unmet or underserved needs, by mapping the customers’ activities
and choices in assessing a specific experience within a value system.
Mapping the customer decision process may help generate new ideas
about unmet or underserved need.
3. Determine target customer segments.
Figure 2.4 Segmentation Approach
21
4. Assess resource requirement to deliver the offering.
The company needs to bring new offering through its own resources and
potential partners in order to win the market.
5. Assess competitive, technological, and financial attractiveness of
opportunity.
There are four areas that can be used to determine the character and
magnitude of the opportunity:
•
Competitive intensity.
Factors related in competitive intensity are:
i. The number and identity of competitors as shown below
in Figure 2.5 the Eastman Kodak competitors profile
ii. The strengths and weaknesses at delivering benefits from
the competitors
Figure 2.5 Competitor Profiling-Eastman Kodak
22
•
Customer dynamics
Elements of the customer dynamics for the market are:
•
1
The level of unmeet need
2
The level of interaction between major customer segments
3
The rate of growth
Technology vulnerability
These include the impact of the penetration of enabling
technologies and impact of new technologies on the value
proposition.
•
Microeconomics
This opportunity includes the market size and level of profitability.
6. Conduct a go/no-go assessment.
At this point, company should have a clear picture of marketing
opportunity and able to describe the value system for the industry and
have the strong sense for how intervention into value system and customer
decision process could create new benefits, enhance existing ones, or
unlock value traps in the current system.
2.4.2 Stage two: Formulating the Marketing Strategy
Traditionally marketing strategy consists of segmentation, targeting, and
positioning, and then supported by the marketing program which involves the
23
marketing mix- price, product, promotion and distribution. As shown in
Figure 2.6 below, all of these decisions are interdependent and interrelated
and cause difficulties in decision-making process.
Figure 2.6 Marketing Strategy Decisions
Segmentation is defining market into subunits of customers who are similar in
value within the product category or in terms of cost to serve, and
characteristics to a particular marketing program.
Targeting is the process of identifying and selecting the market segment,
which are most attractive to the firm because of profitability, cost to serve,
accessibility, growth potential, or other criteria.
Positioning is about affecting consumers’ perceptions of the product by
designing the marketing message so that the product is perceived to be both
unique and valued by the target market.
24
Internet marketing strategy is based upon corporate, business-unit, and overall
marketing strategies of the firm. This linkage shown in Figure 2.7 aligned the
marketing strategy goals, resources, and actions with the business unit
strategy.
Figure 2.7 Corporate, Business-Unit, and Marketing Strategy
2.4.3 Stage three: Designing the customer experience
Customer experience refers to a target customer’s perception and
interpretation of all the stimuli encountered while interacting with a firm.
The experience hierarchy can be used to further explore customer experience.
The hierarchy includes three stages of customer experience
25
2.4.3.1 Stage one: experiencing functionality
There are five core principals for experiencing functionality, as listed
below:
!
Usability and ease of navigation
This is measured by how well a website anticipate a user’s needs and
creates and intuitive path that allows the user to achieve goals.
!
Speed
Refer to the time required to display a web page on the user’s screen.
!
Reliability
Describe the extent to which a website experiences periods of
downtime or times when user cannot access its pages because of
planned maintenance of system crashes.
!
Security
Security will provide trust to the viewer of the website. Combining
security and convenience will lead to customer confidents, which
enhanced the customer experience.
!
Media accessibility
Websites need to be simplified and specifically designed for multiple
platforms.
The website must offer the ability to download various media
platforms.
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2.4.3.2 Stage two: experiencing intimacy
The second stage of the experience hierarchy is an experience that
invites intimacy with the firm. This stage consists of:
1
Customization
Customization is a website’s ability to change itself for each user.
2
Communication
Communication refers to the dialogue between the site and its
users. There are three forms of communication, firm-to-user
communication,
user-to-firm
communication,
and
two-way
communication.
3
Consistency
Consistency is the degree to which a customer experience at a
website or retail store is replicable over time.
4
Trustworthiness
Trustworthiness is a trait that is established over time, after users
have had several opportunities to evaluate a company’s services.
5
Exceptional value
If a firm offers exceptional values for the products, the customers
can become convinced and believed that the products are the best.
6
Shift from consumption to leisure activity
The website is designed so that customers will prefer visiting the
website to other work or leisure activity.
27
2.4.3.3 Stage three: Experiencing evangelism
In the final stage, the customer feel compelled to spread the word
about the product or brand. This stage consists of:
1
Taking the word to the market
The customers have a clear emotional connection with the product
or the brand and are likely to develop a passion for telling its story
and they will put considerable energy to convince others.
2
Active community membership
The customers in this stage will look for people who share the
same passion and form community participation.
3
“The company cares about my opinions”
The firm shows to the customers that they are unable to manage
the experience without the user, and the user is welcome to help
the firm.
4
Defender of the experience
In this stage, the customer takes great pleasure in telling others
about the product or service.
2.4.4 Stage Four: Crafting the customer interface
The design of customer interface is a primary means for creating an effective
marketing program and customer experiences.
The 7Cs Framework is used a bridge between the strategic goals of the
business and the challenge of designing and implementing an effective
customer interface.
28
2.4.4.1 The 7Cs Framework
1
Context
Captures its aesthetics and functional look-and-feel. Some sites
have chosen to focus heavily on interesting graphics, colors, and
design features.
Two key dimensions of context are function and aesthetics.
2
Content
Defined as all digital subject matter on a website.
Four dimensions of content are offering mix, appeal mix,
multimedia mix, and content type.
3
Community
Defined as a set of interwoven relationships built upon shared
interests. This sense of community can encourage customers to
return to a website, because:
•
Community can create attractive content
•
Community can make certain activities possible or easier, thus
satisfying needs not attainable individually
4
Customization
Defined as a site’s ability to modify itself to each user.
Dimensions of customization: personalization (login registration,
cookies, personalized e-mail, content and layout configuration,
storage, agents), tailoring by site (tailoring based on past user
29
behavior, tailoring based on behavior of other users with similar
preferences)
5
Communication
Refers to the dialogue that unfolds between the website and its
users. This communication can take three forms: firm-to-user,
user-to-firm, or user-to-user. Dimensions of Communication are
broadcast, interactive (e-commerce dialogue, customer service,
user input), hybrid.
6
Connection
Defined as the network of links between the site and other sites.
Dimensions of connection: links to sites, home site background,
outsourced content, percentage of home site content, pathway of
connection.
7
Commerce
Defined as transactional capacity of a site.
Dimensions of commerce: registration, shopping cart, security,
credit card approval, one-click shopping, orders through affiliates,
configuration technology, order tracking, delivery options.
2.4.5 Stage Five: Designing the Marketing Program
In this stage, firm should have a clear strategic direction. Moreover, the firm
should have decided the target segment and the specific positioning in the
customer mind.
30
This stage entails designing a particular combination of marketing actions.
The framework used to accomplish this task is the Marketspace Matrix
(Figure 2.8). The Internet marketer has six classes of levers (product, pricing,
communication, community, distribution, and branding) that can be used to
create target customer awareness, exploration, and it is hoped, commitment to
the firm’s offering.
Figure
2.8 The
MarketspaceMatrix
matrix
Figure
2.8 Marketspace
The traditional 4Ps of marketing are Product, Price, Promotion, and Place /
Distribution. All four of these choices are part of the Internet Marketing Mix,
plus two new elements: Community and Branding.
31
1. Product
The product is the service or physical good that a firm offers for
exchange. A wide range of products forms is being offered on the
Internet, including physical goods (e.g., clothing), informationintensive products (e.g., The Wall Street Journal online), and
services (e.g., online grocers). Frequently, the offerings are a
combination of all three forms. In the course of building customer
relationships, the firm can use a variety of products levers to build
enduring customer relationships.
2. Pricing
As firms strive to grow their profits, they often focus on decreasing
production costs or increasing product demand. In doing so, firms
tend to neglect one of the most important strategic areas involved
with growing profits: pricing. Price is an increasingly important
marketing lever and the Internet has created an entirely new
category of pricing tools for new new-economy firms to use.
Bundling is one pricing strategy that best suited for true Internet
products. Indeed, bundling can be thought of both as a product
strategy and a pricing strategy. There are two types of Bundling:
Pure Bundling which occurs when a firm offers its products only
as part of bundle and Mixed Bundling that involves selling goods
both individually and in bundles. The bundle price is generally less
than the sum of individual component prices. Mixed bundling is a
32
particularly easy and profitable pricing strategy to implement for
Internet electronic service products.
3. Communication
Marketing communication is an attractive activity that informs one
or more groups of the target customers about the firm and its
products. This communication includes all type of firm-level
communications: public relations, the use of sales representatives,
and online advertising. Advertising and other forms of
communication such as television and direct mail can make target
customers aware of firm’s offerings.
4. Community
Community is a set of interwoven relationship built upon shared
interests that satisfy its member’s needs that are not attainable
individually. One of the unique aspects of the Internet is the speed
with which communities can be formed. Equally important is the
impact that these communities can have on the firm. Communities
can be leveraged to build awareness (e.g., user to user
communication to make others aware of a product promotion),
encourage exploration (e.g., user groups discussing which
automotive options to purchase or not), and commitment (e.g.,
bonds between users lead to deepening involvement with the site).
33
5. Distribution
A distribution channel is the system of organizations involved in
the process of making a product or service available for
consumption or use. Marketing channels facilitate the exchange of
goods and services between buyers and sellers. The Internet, as
any other marketing channel, has emerged as a way to better serve
the needs of one or more customer segments. The Internet is a
direct substitute for the distribution systems of both online and
offline firms channel.
There are essentially two objectives of channels intermediaries:
efficiency and effectiveness. Channel efficiency can be defined as
the amount of resources required by a distribution system to make
a product or service available for consumption or use. The addition
of the channel intermediary reduces the number of interactions that
the manufacturer must undertake, although it is important to note
that the total number of interactions has actually increased.
The intermediary plays an even more important role in terms of
channel effectiveness, or the ability of the channel to perform
functions that create value for customers.
6. Branding
According to the American Marketing Association, a brand is a
name, term, sign, symbol, or design, or a combination of them
intended to identify the goods and services of one seller or group
34
of sellers and to differentiate them from those of the competition.
Branding plays two roles in marketing strategy. First, branding is
an outcome or result of the firm’s marketing activities. Marketing
programs affect how consumers perceive the brand, and hence its
value. Second, branding is a part of every marketing strategy; each
marketing activity is enhanced if the brand is strong, or suppressed
if the brand is weak.
2.4.6 Stage Six: Leveraging Customer Information Through Technology
There are three emphases in this stage as shown in Figure 2.9. First, is on the
implementation sequence of each decision. Second, the stages of each process
involve problem definition, data collection, data organization, data analysis,
and data utilization. Third, is the marketing research that used to evaluate and
targeting markets and support strategic marketing-mix decisions, database
marketing to measure customer acquisition, and customer relationship
management.
35
Figure 2.9 Customer Information System
In a customer-centric environment, firms have to make and act on three key
decisions:
1. Strategically select what markets to pursue (marketing research)
Internet marketing research has the potential to become one of the
most powerful tools for gathering marketing information.
Marketing research is a study of the requirements of distinct
markets, the acceptability of products and services, and the
methods of developing new markets. It is a systematic and
objective process used to collect, organize, maintain, analyze, and
present information about a specific market in order to identify and
36
define marketing opportunities and problems. Marketing research
connects marketers with their customers, consumers, and the
public.
Figure 2.10 Marketing Research
2. Learn more about customers and devise strategies to acquire target
customers (Database marketing)
Relatively recent advances in computer and Internet technology
have enabled marketers to more easily obtain and utilize
meaningful individual level consumer information, and to
reconnect with customers, as part of the marketing process.
Database marketing has the potential to augment the massproduced approach with increased attentiveness, customization,
and efficient spending, which would increase utility for
consumers-and
profits
for
organizations-when
carried
out
37
effectively. In database marketing, four general types of objectives
exist:
1
Identifying prospects
Identifying prospective customers, or leads, is important to
B2B and B2C marketers. Sales leads may be identified through
available lists or through interactive phenomena such as
website or e-mail newsletter registration.
2
Qualifying prospects
Prospects become qualified leads when they indicate an
authentic intention to buy, through processes such as visiting a
retailer’s website, requesting more information in response to
an e-mail newsletter and etc. When a qualified lead is available
through an interactive channel, the opportunity exists to
increase communication, learn more about a prospective
customer, and develop a pre-purchase relationship.
3
Acquiring a customer through the sale of good or service
Selling is a frequent objective of database marketing. For
example, company may review several daily-personalized
promotional offers for products that are available at specially
discounted prices.
38
4
Managing a relationship with a customer
When a customer makes an initial purchase and establishes a
relationship as a customer, database marketing may be used
effectively to manage this relationship.
3. Assess the long-term profitability of customers and retain key
customers (Customer Relationship Management)
Traditionally, marketers have focused more of their actions and
expenditures on acquiring customers than on retaining them.
Experts report, however, that placing increased emphasis on
customer retention can significantly impact marketing efficiency
and profitability. The Customer Relationship Management is
concerned with three primary directives. First, organizations need
to learn about their customers at the individual level, and respect
their differences. This will enable firms to recognize the customers
with whom it is likely to have a profitable relationship and provide
indicators for best serving each one. Second, organizations need to
formulate strategies for sustaining relationships with profitable or
potentially profitable customers. Third, tactics for advancing
relationship with customer by creating more value for them need to
be devised and put into action.
Ultimately,
Customer
Relationship
Management
is
about
generating loyalty among customers who are, or will become,
profitable. It is also about abandoning relationship with customers
39
who are not, or are unlikely to become, profitable. Firms can use
technology to obtain, organize, analyze, and utilize customerrelevant information, which can reduce the uncertainty associated
with each of the three major types of decisions.
2.4.7 Stage Seven: Evaluating the Marketing Program
Metrics drive organizational behavior in a number of ways, including helping
to clarify strategic objectives, communicating the strategy, tracking
performance, tracking performance, increasing accountability, and aligning
objectives. Good metrics are relatively easy to measure in a timely fashion.
They are unambiguous, easy to interpret, and robust. A change in the metric
reflects a change in the outcome it is supposed to measure. In addition,
metrics need to be generally accepted by business stakeholders and linked to
the desired business outcomes.
The financial metrics, customer metrics, and branding and implementation
metrics best capture a firm’s marketing performance. Taken together, they
enable managers to understand the drivers of a firm’s performance in the
marketplace. Financial metrics measure bottom-line results and are at the
most
aggregate
level.
Customer-based
metrics
capture
marketing’s
performance in building customer-based assets that translate into financial
results. Marketing implementation metrics in Figure 2.11 assess how well
each element of the marketing program performs in terms of building
customer assets.
40
Figure 2.11 Marketing Metrics Framework
2.5 Critical success Factors for Internet Marketing:
1. Customer advocacy and insight
Internet enables a much greater degree of interaction with customers,
designing and promoting this interaction around customer’s needs and
progressively gaining deeper insights are critical components of creating
positive customer experience. Marketing professionals will need to
strategically collect information from many disparate sources, create
41
insightful customer mosaics, and effectively translate them into marketing
strategies and tactics.
2. Integration
The Internet represents both a new channel and a new communications
medium. The networked-economy marketing professional needs to have an
integrated or holistic view of the customer and the enterprise in order to
create a uniquely advantaged strategic plan. Beyond strategy, a marketing
manager must fundamentally understand how to integrate these new tools into
the overall marketing mix.
3. Balanced thinking
An Internet marketing professional needs to be highly analytical and very
creative. It requires understanding the dynamic tension between one to one
marketing and mass marketing and being able to strike a strategic balance
between them. It is also requires determining the appropriate customer data
requirements. Understanding the strategic and tactical implications of the
Internet, leveraging the rapid learning environment and accelerated decisionmaking process it creates, and then creatively applying the insights gleaned
from analysis are critical success factors for all Internet marketing
professionals.
4. Passion and entrepreneurial spirit
Although very hard to objectively assess, passion, is what will differentiate
leaders from followers in the networked economy. Passion can be used to fuel
42
the entrepreneurial instincts and vision, crating tools as they lead their teams
to success.
5. Willingness to accept risk and ambiguity
The Internet has enabled customers to have much more information and many
more choices than ever before, thus shifting the balance of power toward the
customer and creating the need for a whole new set of marketing tools.
Having the courage to try new things is the key to developing breakthrough
Internet marketing. The risk and ambiguity of managing in such uncharted
territory is tremendous, and the most successful Internet marketers will be
willing to pay at the edges.
2.6
SWOT Analysis
A SWOT analysis is an instrumental framework in Value Based Management
and
Strategy
Formulation
to
identify
the
Strengths,
Opportunities and Threats for a particular company.
Weaknesses,
SWOT stands for
Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is used
to identify ways to minimize the affect of weaknesses in our business while
maximizing our strengths.
SWOT confines strengths and weaknesses to company's internal workings
while opportunities and threats refer only to the external environment.
Strengths and Weaknesses are internal value creating or destroying factors
such as assets, skills or resources a company has at its disposal relatively to its
43
competitors. They can be measured using internal assessments or external
benchmarking
Opportunities and Threats are external value creating or destroying factors a
company cannot control, but emerge from either the competitive dynamics of
the industry or market or from demographic, economic, political, technical,
social, legal or cultural factors.
Strength:
A firm’s strengths are its resources and capabilities that can be used as a basis
for developing a competitive advantage. A strength could be:
•
specialist marketing expertise.
•
a new, innovative product or service (good reputation among
customers)
•
location of business, favorable access to distribution networks
•
quality processes and procedures
•
any other aspect of business that adds value to product or service.
•
Strong brand name
Weakness:
The absence of certain strength may be viewed as weakness. In some cases a
weakness may be the flip side of strength. For example a firm with large
amount of manufacturing capacity and this capacity may be considered a
strength that competitors do not share but it can also may be considered a
44
weakness if the large investment in manufacturing capacity if the large
investment in manufacturing capacity prevents the firm from reacting quickly
to changes in strategic environment. A weakness could be:
•
lack of marketing expertise
•
undifferentiated products and service (i.e. in relation to competitors)
•
location of business, lack of access to distribution channels or best
natural resources
•
poor quality goods or services
•
damaged reputation (a weak brand name)
Opportunities:
The external environmental analysis may reveal certain new opportunities for
profit and growth. An opportunity could be:
•
a developing market such as the Internet.
•
mergers, joint ventures or strategic alliances
•
moving into new market segments that offer improved profits,
•
a new international market, removal of international trade barriers.
•
a market vacated by an ineffective competitor (an unfilled customer
need)
45
Threats:
Changes in the external environmental also may present threats to the firm. A
threat could be:
•
a new competitor in home market
•
price wars with competitors
•
a competitor has a new, innovative product or service, emergence of
substitute products
•
competitors have superior access to channels of distribution
•
taxation is introduced on product or service
•
new regulations, increased trade barriers
A firm should not necessarily pursue the more lucrative opportunities. Rather,
it may have a better chance at developing a competitive advantage by
identifying a fit between the firm’s strengths and upcoming opportunities. In
some cases, the firm can overcome a weakness in order to pursue a
compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of
these factors can be constructed. The SWOT Matrix which also known as
TOWS Matrix is shown as below:
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SWOT / TOWS MATRIX
Table 2.1 SWOT Matrix
Opportunities
Threats
1
Strengths
Weaknesses
S-O
W-O
strategies
Strategies
S-T
W-T
strategies
Strategies
S-O strategies pursue opportunities that are a good fit to the company’s
strengths.
2
W-O strategies overcome weaknesses to pursue opportunities
3
S-T strategies identify ways that the firm can use its strengths to reduce its
vulnerability to external threats
4
W-T strategies establish a defensive plan to prevent the firm’s weaknesses
from making it highly susceptible to external threats.