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Marketing on the
Internet
Electronic Commerce on the World Wide Web
Learn about the following topics:
To print-out the entire text of Chapter 24, download the Word
6 file.
Introduction
Unless you’ve been living in a cave, you probably recognize the Internet
as one of the hottest buzzwords of the 1990s. Although it seems like
a new medium, this giant network of computer networks has actually been
around since the early 1960s. Over the last four decades, the Internet,
or "Net," has evolved from a network for government and university
researchers into an "infotainment" tool used by millions around
the globe.1 Use of the Internet exploded
in the early 1990s with the development of the World Wide Web (WWW
or Web), which organizes the immense store of information on the
Internet into interconnected "pages" of text, graphics, audio,
and video. (If you are interested in learning more about the development
of the Internet and World Wide Web, explore these Web sites: Life
on the Internet and History
of the Internet and WWW.)
What is new is the notion of using the Internet as a marketing medium.
With the Internet growing at an astonishing pace in recent years, marketers
around the world are racing to take advantage of its interactive nature
to communicate and foster exchanges and relationships with customers,
suppliers, and others. Some marketers refer to this use of the Internet
for carrying out marketing activities as electronic commerce, or "e-commerce."
In this "virtual" chapter of Pride/Ferrell / MacKenzie /
Snow’s Marketing: Concepts and Strategies, Canadian Tenth Edition,
we explore how marketers are taking advantage of the opportunities made
possible by the Internet and the World Wide Web to conduct electronic
commerce. We begin our study with a brief examination of the ways marketers
are using the Internet for marketing research. Then, we focus on marketing
strategy--target markets, product, promotion, distribution, and price--as
it is implemented through the Internet. Finally, we consider some marketing
environment issues related to the Internet, particularly security and
ethical and legal concerns.
Before we get started, if you are a novice, or a "newbie,"
at "surfing the Net," or if you want more detailed information
about the Internet, we would like to recommend that you begin with the
Internet Resources section of the Marketing Learning
Centre’s Resource Centre. There you will find links to Internet users’
guides, a glossary, and other helpful resources. Otherwise, dive right
into Chapter 24 and begin working on the Internet Exercises. As you
read this chapter, feel free to select any highlighted words to explore
the Web sites mentioned in the text.
Marketing
Research on the Internet
The Internet, particularly the World Wide Web, offers marketers a unique
opportunity to gather vast amounts of demographic and usage-related
marketing data with which to better understand their customers.
Marketers can gather secondary data on the Internet by accessing government
sources, such as Statscan data,
or by going to private information providers, such as A
C Nielsen. Researchers can also access data from organizations,
such as World Opinion or
Strategis
Web sites. Information about current events, trends, target markets,
competitors, and much more may be found in the many newspapers and trade
magazines available online, including Canada
Newswire, Maclean
Hunter Business Publications, Bizlink,
and Marketing magazine.
The Web also gives marketers an excellent opportunity to conduct competitive
analysis by visiting competitors’ Web sites to gather information about
their product offerings, services, prices, etc.
A more direct means of gathering marketing information is to ask Web
users for it. Many Web sites encourage visitors to register in order
to maximize their use of the site or to gain access to premium areas;
some even require it. Registration forms typically ask for basic information
such as name, e-mail address, and age, from which marketers can build
user profiles for their own use or to sell to other companies. Labatt
Breweries, for example, asks visitors to its Web site to fill out
a questionnaire regarding their likes, dislikes, and personal interests
in order to create a database consisting of thousands of names. Some
Web sites even offer contests and prizes to encourage users to register.
Marketers can conduct surveys to learn more about the people who access
their pages, offering prizes as motivation for participation.
Marketers also gather intelligence and communicate internally through
intranets, which employ the infrastructure and standards of the
World Wide Web. Special software called "firewalls" permit
employees to access their firm’s intranet while barring unauthorized
users. Through intranets, employees can develop their own Web pages
and share details of their operations and projects with other company
employees, whether they are across the hall or around the world. FedEx,
for example, has more than 60 intranets and is equipping its 30,000
office employees around the globe with Web browsers so that they can
navigate both the ever-expanding company intranet and the external World
Wide Web.2 Intranets provide an opportunity
for organization-wide marketing intelligence to permit the coordination
and integration of efforts to achieve a true market orientation. When
various departments and functional areas of a firm can quickly share
vital internal information about inventories, production, or even quality
tests, the whole company improves its ability to serve both internal
and external target markets.
Marketing
Strategy
Marketers are incorporating the Internet into their marketing strategies
in various ways. In this section, we will look at some of these by considering
target markets, product, promotion, distribution, and price.
Target
Markets
Marketers are not only mining the Internet for information about their
customers, but they are also recognizing that the Internet community
is a lucrative target market. A recent survey by AC Nielsen found that
31 percent of Canadians over the age of 12 use the Internet.3
This research also found that Ontario had the highest number of Internet
users, followed by Quebec; the majority of Internet users were between
the ages of 25 and 44 with a 47 percent female, 53 percent male split.
Although Internet usage is growing, e-commerce (doing business on the
Internet) has not grown as fast. Only 4 percent of the Canadian population
make purchases using the Internet. Canadians cited convenience as the
major reason for using e-commerce and concerns about security as the
major reason for not cyber shopping. A recent Business Week Harris
poll conducted in the United States found that Internet users were well
educated—73 percent had attended college and had above average incomes.
Internet use by consumers in other countries, including Mexico, England
and Germany, is soaring as well.4 Thus,
the Internet community represents a desirable market for the goods and
services of many firms, making it even more important that marketers
understand this medium.
Marketers are also recognizing that the World Wide Web represents an
exceptional opportunity to reach specific target market segments. Canadian
Pacific Hotels, for example, a Toronto-based firm, has identified that
the demographic profile of many Internet users is consistent with its
target market, 34- to 55-year-olds with incomes of $80,000 or above.
Canadian Pacific Hotels has 45
percent of its customer base originating in foreign countries. Its Internet
site allows business and vacationing customers to access information
ranging from local attractions and weather conditions to reservation
confirmations.5 Air
Canada has also identified a match between the demographic characteristics
of Internet users and their target market. It has launched a Web site
that allows customers to book their flights.
New
Products for the Internet
The exponential growth of the Internet and the World Wide Web presents
exciting opportunities for marketers to reach customers with new products.
So many new products have been introduced or are under development,
and technology is changing so fast, that we can mention only a few examples
of Internet-related products. Obviously, the industry best positioned
to take advantage of the Internet is computers, both hardware and software.
Many computer programs, including Netscape Navigator, Microsoft’s Internet
Explorer, and Sun’s Java programming language, have been developed to
help consumers exploit the World Wide Web. Netscape Navigator is the
most widely used Web browser, and Netscape continues to upgrade its
product with new features to enhance use of the Web. Other marketers
have capitalized on Netscape’s success by developing "plug-ins"
for Netscape Navigator that allow Web browsers to view video and use
other technologies on the Web.
Commercial online services, such as America Online (AOL), provide subscribers
with ready access to the Internet as well as unique content and services.
AOL and other commercial services also compete fiercely with local and
national Internet Service Providers (ISPs), which offer full Internet
access at very competitive rates. Many telecommunications firms—including
AT&T, Bell Canada, and MCI—have launched Internet service providers
as well. It is not even necessary to own a computer to access the World
Wide Web. Through Web TV, consumers
can surf the Web using their television and a special remote control
device. Several companies are working to develop a low-cost information
appliance that will make it possible to access the vast amounts of information
on the Internet as easily as operating a microwave or using a credit
card.
Once on the Net, users need to be able to find what they are looking
for, a task made increasingly challenging by the proliferation of accessible
information. Without search engines and directories to keep track of
and index the information available on the World Wide Web, this task
would be tantamount to searching for that proverbial needle in a haystack!
Services such as Yahoo!, Excite,
Alta Vista,
Infoseek, and Lycos
help users find in seconds a URL (Uniform Resource Locator, a Web site
"address") or piece of data that might otherwise take days
to find. Consequently, these services are among the most heavily accessed
sites on the Internet.
Marketers are also creating Web sites to support existing products.
Through FedEx’s Web site, for example,
customers can track shipments, find the nearest drop-off site, request
a pickup, download software for printing labels, and request invoice
adjustments. The three-year-old site experiences about five million
hits (the number of times a Web page or element in a page is accessed)
per month, including about 900,000 tracking requests. These save money
by not going through FedEx’s Call Center, which is more time consuming
and expensive for the company.6 Several
marketers of consumer food products, including Kraft
and Nabisco, have created
Web sites with recipes and tips on entertaining to help consumers get
the most out of their products. Many television networks have created
Web sites to augment their programming with viewing guides and additional
content to enhance viewers’ enjoyment. The Web page for the Discovery
Channel, for example, offers schedules for that network, as well
as for the Animal Planet and The Learning Channel networks, and feature
articles and online shopping opportunities. Some television shows even
have their own Web sites.
Marketers are also using the World Wide Web to create unique products
to satisfy the needs of their target markets. GolfWeb,
for example, provides links to 35,000 golf-related Web pages, a virtual
ProShop, and the opportunity to subscribe to special services such as
handicapping and online games. GolfWeb users also see golf-related advertising,
which accounts for 35 percent of GolfWeb’s revenues.7
Another hot new product is city guides. At Toronto
Star CitySearch, for example, Net surfers can find out about local
clubs, sporting events, and recreation opportunities, movie listings
and reviews, restaurants and businesses, museums, and news and weather,
and exchange views on local issues. Many major cities now have one or
more such city guides.
The success of Web sites like CitySearch and GolfWeb corroborates analysis
by Business Week that suggests that the most successful online
marketers do not just duplicate existing businesses online, but fully
exploit the interactive capabilities of the World Wide Web for the benefit
of their customers. The most successful Web pages become "virtual
communities" where "like-minded cybernauts congregate, swap
information, buy something, and come back week after week."8
One such community is Tripod, where
Generation Xers can chat, exchange messages on virtual bulletin boards,
and share information about topics ranging from safe sex to career development.
Much of the content has been developed by "members" of the
Tripod community. Tripod, like many online communities, is free, but
it requires members to register to access the site, and more than a
quarter million have already done so. Tripod expects to generate $5
million in revenues in 1997 by accepting advertising and selling T-shirts
and other merchandise.9 Online communities
like Tripod and Women’s Wire succeed
by taking advantage of the interactive nature of the Internet, and they
encourage Web browsers to hang out and contribute to the community instead
of clicking elsewhere. Because these communities have well-defined demographics
and common interests, they represent a valuable audience for advertisers.10
Promotion
Advertising, in fact, is probably one of the best ways marketers can
take advantage of the World Wide Web. Thousands of well-known firms,
from The Coca-Cola Company to
IBM Canada,
from Wal-Mart Stores to Fidelity
Investments, have set up Web pages to tout their products, circulate
company information, entertain and inform users, list job opportunities,
and interact with customers. More and more companies are recognizing
the value of the World Wide Web to provide "infotainment"
which can foster brand identity and loyalty and develop long-term relationships
with customers.11
Marketers are also advertising their products on the Web sites of other
organizations. You are most likely to encounter these in the form of
banner ads, which are small, static, or animated rectangular
ads that typically appear at the top of a Web page. Users can click
on the banners to visit the advertiser’s site for more information.12
Many Web sites, including GolfWeb and Tripod, fund their Web sites through
banner ads for other marketers. Using Web search engines or indexes,
you are likely to see keyword ads, which link a specific ad to
text or subject matter that a searcher may enter. For example, every
time someone conducts a keyword search for the term "laptop"
on Yahoo!, a banner ad for an IBM
product pops up because the company purchased the rights to that and
some 200 other terms on Yahoo!13
Button ads are small square or rectangular ads with just a corporate
or brand name or logo; these usually appear at the bottom of a Web page.
Like banner ads, clicking on the button takes the user directly to the
advertiser’s Web site.14 You are likely
to see button ads for Netscape Navigator and/or Internet Explorer at
the bottom of many Web pages. Clicking on these buttons takes you directly
to the site to download the latest browser software. Interstitials,
or in-your-face ads, are more like traditional television commercials
with video and sound.15 For example, when
browsers visit the work area at Tripod,
an animated ad for Procter & Gamble’s Scope mouthwash pops up in
a separate window. These ads are controversial, however, because some
Web users consider them intrusive.16
Advertising on the Internet has many advantages, although for Canadian
companies, some problems still exist. Internet advertisers can target
specific customer groups, similar to direct mail, with the added advantage
of monitoring who has seen the ad. As technology improves to allow for
increased transmission speeds, Internet advertising can include animation,
video, and sound. Improved technology provides advertisers with the
possibility of designing tiered ads that can recognize the type of equipment
the Internet user has, as well as the ads that are appropriate for that
particular equipment. Internet ads can be changed quickly, within hours
or a day, allowing companies to respond fast to competition. However,
one area of concern for Canadian advertisers is reaching the Canadian
market. Many high traffic sites on the Internet are American. Placing
ads on these sites has been likened to companies in Toronto, Montreal,
or Vancouver placing ads in American magazines such as Cosmopolitan
to reach Canadian women.17
The actual dollar amount of advertising on the World Wide Web is the
subject of some debate, but no one doubts that Web advertising generates
millions of dollars in revenues for companies that choose to carry such
advertising. Jupiter Communications forecasts that advertising on the
World Wide Web and commercial online services will generate $8 billion
(U.S.) in revenues by the year 2002, about 4.1 percent of total advertising
dollars. Until recently, the bulk of Web advertising has been for high-tech
products such as computers, office equipment, and telecommunications.
However, consumer goods companies, recognizing the opportunity to reach
specific target markets, are increasing their budgets for online advertising
as well. Excite, Inc., the number-two search engine, has seen its percentage
of advertising for nontechnical products grow from 38 percent to 59
percent in the past six months.18 As Andrew
S. Grove, CEO of computer chip giant Intel Corp., says, "Net advertising
is becoming a big deal."19
A New
Channel of Distribution
Beyond advertising on the Web, the Internet is increasingly becoming
a retail venue. From computers to travel reservations, the Internet
provides an opportunity for marketers to encourage exchanges. According
to Jupiter Communications, online shopping now stands at $2.6 billion
(U.S.), and the Internet research firm projects that figure will rise
to $37.5 billion over the next five years. Dell
Computer already sells more than $1.5 million worth of computers
online every day.20
The Cookbook Store, a Toronto-based retail store that recently won
the Canadian Bookseller of the Year Award from the Book Publishers’
Professional Association, sells globally through its Web site. However,
Alison Fryer, owner of the Cookbook Store, admits that only a small
percentage of her customers actually buy through the Web site. She cites
people’s reluctance to put credit card information into cyberspace as
the main reason. Customers will, however, view the Web site and then
visit the store, use the 800 number, or fax their orders.21
Services can also be marketed online. For example, Canadian
Airlines accepts telephone and online orders for a variety of travel
services. Travel Web handles
hotel reservations online and achieved over $500,000 in bookings in
its fourth month of operation. At Century
21’s Web site, you can search for the home of your dreams anywhere
in Canada, get information about mortgages and credit and tips on buying
real estate, learn about the company’s relocation, services, and more.
TD Greenline
is one of several online brokerage firms that offers online trading
of stocks and bonds, and provides quotes, news, research, planning,
and other specialized services. The Web site for H&RBlock
offers tips to help make tax time a little less, well, taxing! The success
of these retailers will surely inspire even more firms to consider making
online distribution a part of their marketing strategy.
Price
For most marketers, the Internet’s effect on pricing strategies relates
to consumers’ ability to gain quick access to prices. For example, customers
can access many auto makers’ Web pages, configure an ideal vehicle,
and get instant feedback on its cost from the manufacturer. This helps
customers in comparative shopping and gives manufacturers that want
to make price a key element in their marketing mix another opportunity
to get pricing information to customers.
Some organizations are implementing low-price policies through the
Internet. Most major airlines are now publicizing their fares over the
Internet and, in some cases, offering lower prices to customers who
are willing to wait to book their flights at the last moment. Canadian
Airlines and Air Canada,
for example, make seats available over the Internet and gives customers
a chance to save money by making travel arrangements online. Lowering
the cost of promotion through the World Wide Web may result in lower
product prices. Mailing catalogues, for example, is very expensive,
but if paper catalogues can be replaced by interactive ones on the World
Wide Web, it may be possible to pass the cost savings onto consumers
in the form of lower prices, thereby gaining a competitive advantage.
Marketing Environment Issues
To implement and control marketing strategies on the Internet, marketers
must consider some unique issues. In this section, we will take a brief
look at security issues and legal and ethical concerns associated with
marketing on the Internet.
Security Issues
Some consumers have been reluctant to make direct purchases on the
Internet because of valid concerns about security; however, technological
advances are minimizing the potential for theft. While some consumers
feel the Internet is too risky for financial transactions, others view
the risk as no greater than other credit card transactions in restaurants
or through telemarketing. Currently, most credit card companies limit
an individual’s liability for credit card theft at $50. Moreover, Netscape,
Microsoft, and other marketers have incorporated security features into
Web-browsing software that make it more difficult for "hackers"
to steal credit card numbers. Other enterprising firms are even working
to develop digital currency, much like the "credits" used
on Babylon 5 and other science fiction television shows, to facilitate
secure, private transactions. As such products become more widespread
and consumers gain more confidence in the Internet, online spending
will escalate.
Ethics and Legal Issues
The Internet has evolved so rapidly that numerous new legal and ethical
concerns have developed, and these are being hotly debated both online
and off. Because of the relative youth of the medium, attempts to regulate
the Net have been few thus far. Although organizations such as the Canadian
Direct Marketing Association and the Canadian Banker’s Association have
placed voluntary privacy codes to protect the information they collect
through electronic means, no laws presently exist in Canada to force
companies to regulate the information they collect or what they put
onto the Internet. Germany has made it unlawful to distribute pornography
through its borders. There is some question, however, as to whether
such laws can be enforced given the borderless nature of the Internet.
As the Net continues to grow and evolve, it is certain that more countries
will attempt to regulate Internet content and usage for the benefit
of their citizens.
Spam, or unsolicited commercial e-mail (UCE), is likely to be
the next target of regulation. Many Internet users feel that spam violates
their privacy and steals their resources, somewhat akin to receiving
a piece of direct mail postage due. Some angry recipients of spam have
organized boycotts against companies who advertise in this manner. However,
other users appreciate the opportunity to learn about new products.
Most commercial online services and Internet service providers now offer
their subscribers the option of filtering out e-mail from certain Internet
addresses that generate a large volume of spam. The debate over spam
is far from over.
Another privacy issue has to do with the information that some Web
sites collect from surfers. A survey by the Electronic Privacy Information
Center found that half of the Internet’s 100 most popular Web sites
compile personal information from visitors to their sites or through
mailing lists and other means.22 One way
that Web site owners can collect information is through the use of cookies,
which are lines of text that Web sites can store on your PC through
your Web browsing software. Cookies typically contain your site user
name, what Web page you last visited and when, and other information
the Web site owner might want to capture.23
They help Web sites track how often a particular user visits the site
and what he or she may look at while there. Of course, not all Web sites
take advantage of cookie technology to collect information, but some
Web sites exploit cookies to customize the content that users see when
they log onto a particular Web page. The ethical issue relates to how
such information is used or misused: If a Web site owner can use cookies
to link what a user looks at to a name and address, that information
could be sold to advertisers and other parties without the consent or
knowledge of users. This potential has left many Web surfers nervous
about cookie technology. A Business Week/Harris Poll survey found
that 65 percent of respondents are not willing to share personal and
financial information about themselves online so that online ads can
be targeted to their tastes and interests.24
The Electronic Privacy Information Center found that just 17 of the
100 sites it examined even mentioned this privacy issue, and that most
fell short of what the watchdog group considers adequate disclosure.
Many in the industry are urging self-policing on this issue to head
off potential regulations.25 In the meantime,
users of major browsing software, such as Netscape Navigator, can turn
off cookies if they have privacy concerns.
As the Internet continues to evolve, more legal and ethical issues
will certainly arise. Recognizing this, the American Marketing Association
has developed Marketing
Ethics on the Internet to guide members’ marketing activities on
the Internet. Such self-regulatory policies may help head off regulation
of electronic commerce.
With regard to ethical and legal issues, it is important to recognize
that over the years, a netiquette,
or Internet etiquette, has emerged to make interactions across the Internet
more effective, efficient, useful, and pleasant for all participants.
Those who violate this netiquette in e-mail or on discussion groups
have sometimes been subjected to retaliatory actions from angry users.
Regardless of the effectiveness and ethics of such retaliation, all
users of the Internet, including marketers, should make an effort to
learn and abide by the basic netiquette to ensure they get the most
out of the resources available on this growing medium. Fortunately,
most users of the Internet want to establish professional relationships
with other Internet users because they recognize the need for mutual
respect and trust when communicating in any public medium. They know
that doing so will allow them to maximize the opportunities available
on the Internet to foster long-term business relationships.
Notes
- Gary Welz, "The Ad Game," Internet World 7 (July
1996): 50-57.
- Amy Cortese, "Here Comes the Intranet," Business
Week, Feb. 26, 1996, 76-84.
- "AC Nielsen Internet Survey Raises Questions about
Future of E-Commerce", AC Nielsen News Release, Nov 24, 1997; "One
in Five Canadians in Cyberspace, According To Survey," AC Nielsen
News Release, Feb 1, 1996.
- Robert D. Hof, with Seanna Browder and Peter Elstrom,
"Internet Communities," Business Week, May 5, 1997, 64-80; and Amy
Cortese, "Business Week/Harris Poll: A Census in Cyberspace," Business
Week, May 5, 1997, 84-85.
- David Menzies, "Cyber-Sells," Financial Post 500,
1996, 32–42; Steven Theobald, "Selling More Stuff in Cyberspace,"
Toronto Star, July 1997, C1.
- Mark Walsh, "The Air Bill Joins the 8-Track," Internet
World 8 (Aug. 1997): 43-44.
- Kathy Rebello, with Larry Armstrong and Amy Cortese,
"Making Money on the Net," Business Week, Sep. 23, 1996, 104-118.
- Rebello, "Making Money on the Net."
- Andy Reinhardt, "From Pets to UFOs: Twentysomethings
Sound Off," Business Week, May 5, 1997, 66-67.
- Hof.
- Welz, "The Ad Game."
- Linda Himelstein with Ellen Neuborne and Paul
M. Eng, "Web Ads Start to Click," Business Week, Oct. 6, 1997, 128–138.
- Himelstein.
- Himelstein.
- Himelstein.
- Himelstein.
- "Net Advertising Holds Promise once the Bugs Are
Worked Out," Financial Post, Sept 14, 1996, 42.
- Himelstein.
- Himelstein.
- Dan McGraw, "Shootout at PC Corral," U.S. News
& World Report, June 23, 1997, 37–38.
- Theobald, "Selling More Stuff in Cyberspace."
- David E. Kalish, "Half of Top 100 Web Sites Gather
Personal Data on Users, Study Finds," The Austin American-Statesman,
June 9, 1997, A1, A6.
- Bill Mann, "Stopping You Watching Me," Internet
World 8 (April 1997): 42-46.
- Keith H. Hammonds, "Business Week/Harris Poll:
A Lot of Looking, Not Much Buying—Yet," Business Week, Oct. 6, 1997,
140.
- Kalish, "Half of Top."
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