Internet marketing strategy and practice

Instructor’s Manual
Internet Marketing:
Strategy, Implementation
and Practice
Fourth Edition
Dave Chaffey
For further instructor material
please visit:
www.pearsoned.co.uk/chaffey
ISBN: 978-0-273-71742-3 (web)
 Pearson Education Limited 2009
Lecturers adopting the main text are permitted to download and photocopy the manual as required.

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© Pearson Education Limited 2009
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This edition published 2009
The right of Dave Chaffey to be identified as author of this work has been asserted by him in
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ISBN: 978-0-273-71742-3
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binding or cover other than that in which it is published, without the prior consent of the
Publishers.

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Contents
Chapters Pages
1. Introducing Internet marketing 5
2. The Internet micro-environment 17
3. The Internet macro-environment 31
4. Internet marketing strategy 40
5. The Internet and the marketing mix 52
6. Relationship marketing using the Internet 61
7. Delivering the online customer experience 70
8. Campaign planning for digital media 80
9. Marketing communications using digital media channels 89
10. Evaluation and improvement of digital channel performance 97
11. Business-to-consumer Internet marketing 104
12. Business-to-business Internet marketing 110

Chaffey, Internet Marketing, 4th Edition, Instructor’s Manual
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C H A P T E R 1
Introducing Internet marketing
One sentence overview
An introduction to Internet marketing and the book structure
Notes on using slides for the first chapter in lectures – lesson
plan
1. Marketing transformation. Slides 4–6. Generate interest through opportunities for new
business applications online. Ask what the success factors have been for these companies – see
Activity 1.1. Ask how Google has extended it’s proposition since 1998.
2. What is Internet marketing? Slides 7–15. Apply the CIM definition to e-marketing. Ask
students how it contributes to marketing. What is digital or e-marketing? Use the preface
Figure P.1 to explain the scope.
3. What are e-commerce and e-business? Slides 16 and 17. Ask students to write down
definitions. Then show Figure 1.5 to explain the distinction between buy-side and sell-side
e-commerce.
4. Introduction to digital marketing strategy. Slides 18–24. Applications of Internet
Marketing. Start by asking about the need for a digital strategy. Review 5 Ss for a company,
such as easyJet or NW. Different contexts of Internet marketing (Slide 14) and an example
of an innovative C2C site (Slide 15). Also note how this site is being used for advertising to
this audience.
5. Structured planning for Internet marketing. Slides 25–7. Discuss the need for structured
planning and relate to your course structure.
6. Introduction to digital marketing communications. Slide 28–31. Explanation of medium-
discipline-channel and vehicle. Illustrates key tools by a worked example, for example,
searching for a credit card.
7. Differences between digital media and traditional media. Slide 32–37 Review the 6 Is
using Slides 20–23 with references to case studies used earlier in lecture or Travel Republic.

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Activities
Activity 1.1 Innovation in Internet marketing
Purpose
To illustrate innovation in online business models and communications approaches
Questions
1. Think about the innovation that you have witnessed during the time you have used
the Internet and World Wide Web. What would you say? Are the main sites used in
your country that have been created which have changed the way we spend our time
or buy online? In Table 1.1, are the sites that we believe have had the biggest
influence on online business models in the US and Europe, with more emphasis on
the most recent ones?
Answer
Not relevant.
2. What do these sites have in common that you think has made them successful?
Answer
This is provided in the book – in error!
• All these sites are American, so the funding and publicity they can achieve is
significant.
• You will notice that many of these sites (other than Joost, Last.fm and Skype which
were founded in Europe) were originally developed in the United States, with the
majority now used around the world. But in each country, similar types of businesses
have evolved, for example, the search engines Baidu in China and Yandex in Russia.
• Meet a fundamental consumer need
• Clear revenue model
• Memorable branding and experience
• Initially they had a straightforward proposition – offering one service
• Generally they were first-movers
• Notable that many have taken several years before becoming widely known and used.

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Activity 1.2 What’s in a term – what do we call this ‘e-thing’
Purpose
To illustrate how different marketers perceive Internet marketing
There is a range of terms used to describe Internet marketing – it is called by different terms by
different people. It is important that within companies and between agency and client, there is
clarity on the scope of Internet marketing, so the next few sections explore alternative
definitions.
Question
One simple, but revealing, method of assessing how commonly these terms are used, is
to use the Google syntax which returns the number of pages which contain a particular
phrase in their body or title.
Type into Google the following phrases in double quotes or use in title: ‘phrase’ for these
phrases and note the number of pages (at the top right of the results page):
Phrase
(i) ‘E-business’
(ii) ‘E-commerce’
(iii) ‘Internetmarketing’
(iv) ‘E-marketing’
(v) ‘Digitalmarketing’
Answers to activities can be found at www.pearsoned.co.uk/chaffey
Answer
At the time of writing, the following table shows that of the marketing-related terms, ‘Internet
marketing’ is the most popular but this may change, as it is a misleading term, which omits
other electronic communication techniques. Companies that promote their services online will
often use keywords on the page, which reflect the words that are being searched for.
In the United Kingdom, specialist e-marketing agencies and the new media publications tend to
refer to digital marketing and their usage of the term will eventually have an influence.
Phrase Pages containing phrase Pages containing title
‛Digital marketing’ 2,640,000 119,000
‛E-marketing’ 7,750,000 360,000
‛Internet marketing’ 40,100,000 2,590,000
‛E-business’ 32,000,000 909,000
‛E-commerce’ 93,600,000 5,090,000

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Figures collected in December 2008 using Google 2005 syntax ‛phrase’ and intitle: and then
reviewing the numbers top right.
Additional terms for comparison:
SEO 263,000,000 13,800,000
PPC 49,500,000 3,260,000
‘E-mail marketing’ 14,800,000 582,000
‘Viral marketing’ 4,650,000 173,000
‘Social media’ 147,000 949,000
‛Digital marketing’ 560,000 14,000
‛E-marketing’ 4,500,000 123,000
‛Internet marketing’ 12,000,000 942,000
‛E-business’ 19,000,000 1,100,000
‛E-commerce’ 18,500,000 2,000,000
For comparison, figures collected in December 2005 using Google 2005 syntax ‛phrase’ and
intitle: and then reviewing the numbers top right.
Activity 1.3 Why are C2C interactions important?
Purpose
To highlight the relevance of C2C transactions to B2C companies
Activity
Consult with fellow students and share experience of C2C interactions online. Think of
C2C both on independent sites and organisational sites. How can C2C communications
assist these organisations?
Answer
Examples mentioned may include:
1. User-generated content (UGC), a feature of Web 2.0, for example, reviews of products,
either on the retailer site (e.g. www.ebuyer.com), or on third party review sites.
2. Online auctions, for example, eBay.

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3. Online forums are important for B2C publishers, for example, www.e-consultancy.com/
forums
4. Contributing to customer support sites. These are specialist models. C2C is mainly an aid
for support of technical products such as software (see www.symantec.com).
Activity 1.4 Innovation in Internet marketing
Purpose
To illustrate similarities and differences between digital and traditional media.
Instruction
Make two columns. On the left, write down different digital media channels and on the
right the corresponding communications disciplines, such as advertising, direct marketing
or PR which are most appropriate.
Answer
The digital media channels are based on Figure 1.9.
Digital media channel Traditional discipline
1. Search – SEO No direct comparison, although PR is important
and related to Advertising messages, but no
media investment.
2. Search – Pay Per Click Advertising
3. Online PR Public Relations
4. Online Partnerships – Affiliate Marketing No direct comparison, but Sales Promotion is
closest.
5. Interactive Ads Advertising
6. Opt-in e-mail Direct marketing
7. Viral Marketing Public Relations
Activity 1.5 Integrating online and offline communications
Purpose
To highlight differences in marketing communications introduced through the use of the
Internet as a channel and the need to integrate these communications with existing channels.

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Activity
List communications between a PC vendor and a home customer over the lifetime of a
product such as a PC. Include communications using both the Internet and traditional
media. Refer to channel-swapping alternatives in the buying decision in Figure 1.13 to
develop your answer.
The table below shows different forms of integration between the channels
Table: Examples of communications initiated by customer and company
Communication initiated by customer Communication initiated by Company
Phone call to company Advert to generate awareness, placed in
newspaper or PC magazine
Visit to web site to review prices and
specification
Phone call or e-mail by courier company to
arrange delivery of PC
Phone call or e-commerce purchase of PC Traditional mail-out or e-mail after 1 year to
describe upgrade service
Support call to solve problem Traditional mail-out or e-mail after 3 years to
describe new product offers
Complaint about repair Call to arrange visit (from sub-contracted
company)
Exercises
Self-assessment exercises
1. Which measures can companies use to assess the significance of the Internet to
their organisation?
Reference to Chapters 2 and 3 may assist with this question.
• Level of Internet access or media consumption of different types of services amongst
customer base.
• Sales influenced directly or indirectly by competitors.
• Suitability of product for sale online (Chapter 4).
• Competitor activity.
2. Why did companies only start to use the Internet widely for marketing in the 1990s,
given that it has been in existence for over 30 years?
The recent dramatic growth in the use of the Internet has occurred because of the development
of the World Wide Web. This became a commercial proposition in 1993, after development of
the original concept by Tim Berners-Lee, a British scientist working at CERN in Switzerland

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in 1989. The World Wide Web changed the Internet from a difficult-to-use tool for academics
and technicians to an easy-to-use tool for finding information and delivering web applications for
businesses and consumers.
3. Distinguish between Internet marketing and e-marketing.
The objectives of each are similar – to support marketing activities towards their goals, that is,
customer acquisition and retention, and cost reduction. E-marketing can be considered broader
since it includes the additional media of interactive digital TV and mobile networks. Internet
marketing refers to the web, e-mail and databases.
4. Explain what is meant by electronic commerce and electronic business. How do they
relate to the marketing function?
E-commerce refers to transactions for the trading of goods and services conducted using the
Internet and other digital media. E-business is broader, including electronically mediated
transactions, which are internal and with suppliers as well as those to buyers. They are both
methods of supporting the marketing function – e-commerce refers to customer facing web
sites, e-business also includes links with partners and suppliers through extranets and internal
marketing communications through intranets.
5. What are the main differences and similarities between the Internet, intranets and
extranets?
Internet is available to all; others are restricted to those inside a company (intranet) and
favoured third parties such as large customers, suppliers and distributors (extranet).
6. Summarise the differences between the Internet and traditional media, using the 6 Is.
• Interactivity – not solely a push medium (e-mail), but also pull (customers search for
information). Information can be collected from customers via web pages (direct response).
• Intelligence – can monitor customers’ interests and profile them.
• Individualisation – it is possible to tailor e-mail and web communications (personalisation).
• Integration – of off-line and off-line channels (?) remains important.
• Intermediation – new intermediaries can be used as a route to market and there is also the
opportunity to sell direct.
• Independence of location – possible to reach a wider marketplace.
7. How is the Internet used to develop new markets and penetrate existing markets?
What types of new products can be delivered by the Internet?
International markets can be targeted without the need for sales/promotional infrastructure.
Fulfilment methods must enable delivery with minimal need for local servicing. The Internet may
give opportunities for new market segments such as the youth market that may have been
difficult to target previously. For existing markets, the Internet can be used to increase
awareness, and add value to a company and its products.

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Essay and discussion questions
1. The Internet is primarily thought of as a means of advertising and selling products.
What are the opportunities for the use of the Internet in other marketing functions?
Refer students to pages 14 through 17 that discuss opportunities in the areas of:
• marketing research
• ‘below the line promotions’
• customer service
• relationship building/loyalty enhancing.
Prompt students by considering the 4 different types of sites mentioned on pages 14 to 17.
2. ‘The World Wide Web represents a pull medium for marketing rather than a push
medium’. Discuss.
Refer students to the 6 Is, some of which describe differences in traditional and digital media.
This is also discussed in more detail at the start of Chapter 8 where different communication
models are referred to.
The text covers the stresses, the pull nature of the medium, for example, where a consumer
uses a search engine to find a product, but the question is intended to highlight the options for
push such as personalised e-mail promotion, targeted messages on web sites and banner
advertising (Chapter 8).
3. You are a newly installed marketing manager in a company selling products in the
business-to-business sector. Currently, the company only has a limited website
containing electronic versions of its brochures. You want to convince the directors,
of the benefits, of investing in the website to provide more benefits to the company.
How would you present your case?
The framework presented in Figure 1.8 on p. 26 gives a good structure for developing a case
and this is expanded upon in Chapter 4. The main elements of this approach are as follows:
• Understand changes in media consumption – how do their prospective(?) and customers
use the web to inform their buying decision?
• Set objectives in terms of number of site visitors and leads generated.
• Formulate a strategy to develop relevant content, that is, more depth than electronic
brochures, to help customers decide on relevant products or complete their jobs.
• Develop a plan to promote the site.
The directors will be interested mainly in generating new enquiries. Students may mention the
following benefits:
• Reach new audiences, for example, smaller businesses through pull effect of search engines.

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• Provide a new method of generating leads through offering whitepapers to download – see
example of B2B Web Analytics provider, for example, www.omniture.com – it is best if
students choose examples or are given companies to consider.
• Provide customer services to existing customers and promote alternative products (cross-sell).
4. Explain the main benefits that a company selling fast-moving consumer goods could
derive by creating a website.
The intention of this question is to highlight that the web is not suitable for selling all products.
But digital media may be used for generating awareness and brand building. This can be
achieved through banner advertising on third party sites. For example, www.handbag.com for a
cosmetics company engaging a female audience or www.fhm.com for a male audience.
The case study at the end of Chapter 8 features examples of different FMCG companies; this
may provide some inspiration in terms of the benefits of engaging directly with customers, which
has been less readily possible with other media. This engagement can occur through micro
sites hosted by publishers or by the brand. Consumers can be encouraged to opt-into e-
newsletters or get involved in SMS promotions.
Examination questions
1. Contrast electronic commerce with electronic business.
Both involve financial and informational electronic transactions. E-commerce transactions are
related to selling and B2B purchases. E-business includes these, but also refers to internal
marketing and business partner communications.
2. Internet technology is used by companies in three main contexts. Distinguish between
the following types and explain their significance to marketers:
(a) intranet
(b) extranet
(c) Internet.
Internet available to all, others restricted to those inside a company (intranet) and favoured third
parties such as large customers, suppliers and distributors (extranet).
3. An Internet marketing manager must seek to control and accommodate all the main
methods by which consumers may visit a company website. Describe these methods.
Although these are introduced in this chapter, Figure 1.9 provides a good summary of the main
methods, which are as follows:
• Search engines
• Online PR
• Partner sites
• Online advertising

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• E-mail marketing
• Viral marketing.
• Traditional communications driving visitors to the web site.
4. Imagine you are explaining the difference between the World Wide Web and the
Internet to a marketing manager. How would you explain these two terms?
The Internet is the network or the physical media such as wires that are used to deliver the
information while the World Wide Web is the published information that is, read by those
accessing it. The Internet is the equivalent of a TV transmitter and the World Wide Web is
equivalent to the programmes on the channels.
5. What is the relevance of ‘conversion marketing’ to the Internet.
Conversion marketing is the monitoring of the hierarchy of response to marketing
communications. Assessing and improving response rates can achieve more online sales. For
example, we can increase the reach of the site to turn more web browsers into visitors; we can
increase the conversion rate of the site to encourage more site visitors to achieve action and we
can increase conversion of leads to sales to increase turnover.
6. Explain how the Internet can be used to increase market penetration in existing
markets and develop new markets?
To increase penetration in existing markets, the Internet can be used to reach a greater
proportion of the target market within an existing country or marketplace. It can also, in
combination with other communication channels, be used to assist in converting more potential
customers to sale.
To develop new markets, the Internet can be used not only to reach new geographical markets,
but also to enter new markets. For example, supermarket Tesco.com uses the Internet to sell
‘white goods’, which it did not previously sell (Case Study 4 pp. 267–269).
This is introduced in Chapter 1, but covered in more detail on pp. 234–235.
Case study 1. eBay thrives in the global marketplace
Question
Assess how the characteristics of the digital media and the Internet, together with
strategic decisions taken by its management team, have supported eBay’s continued
growth.
Students should be guided as to whether they review the whole eBay business or the core
business (the marketplace).
It is best to divide this question into two parts.
1. How the characteristics of digital media have supported eBay’s growth?
A suitable framework for reviewing the unique aspects of digital media is Table 1.2 – ‘The 5 Ss
of Internet Marketing’. An interpretation of the differences between the old and digital media’.

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Also, if this case study is used later in this book, the section at the start of Chapter 8 on ‘The
characteristics of digital media may be useful.
The particular characteristics of digital media compared to traditional media that are important to
eBay are straightforward. They are as follows:
• Change from a, one-to-many communication model to one-to-one or many-to-many
communication model.
• The ability to create user-generated content listing products is also related to the one-to-one
aspect and is also important.
• From Push to Pull – eBay offerings are often visible within search engines.
• From monologue to dialogue (a two-way information exchange for enquiries about products
facilitated by e-mail).
• Ratings for sellers are important to generate trust (although, there are methods of falsifying
these).
• Community – the sense that users are part of a community and additionally are bypassing
traditional retail channels will be important from some users.
2. How strategic decisions have supported growth.
As with other cases based on SEC filings, that is, United States Securities And Exchange
Commission submission, this case is useful for showing how growth is dependent not only on
exploiting the right opportunities, but also about managing risks successfully.
Students may structure strategic decisions in different ways according to the level of the course
they are following, but since the case is in the beginning of the book, they could be advised to
simply look for success factors. Alternatively, if they have completed Chapters 4 and 5 on
Strategy and the Marketing mix respectively, these then provide alternative frameworks.
Strategic success factors students may mention include the following:
• Branding – a distinctive brand – the earlier brand name was perhaps less appropriate
although more direct.
• First mover advantage – gaining a critical mass through the foresight of the owner.
• Security and fraud – realising that this is important to reputation so investing in managing
this and controlling PR related to this. eBay has developed ‘Trust and Safety Programmes’
to manage this.
• Partnerships and acquisitions, which fit/relate well to the service, that is PayPal and Skype
• Communication of customer value proposition – the case describes how eBay explains this.
• Revenue model – the market has judged that this gives a good balance for sellers,
purchasers and eBay. Setting fees at the right level has enabled eBay to scale for some
time.
• Process Efficiency – the case describes how eBay measures and then seeks to improve the
key areas of Acquisition, Activation and Activity.

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• Growth strategies – these are covered in Chapter 4 and include market development
(geographic) and product development (new categories for consumers and businesses).
• Technology scalability – not referred to in this chapter, but eBay has been successful in
deploying technology that has supported the companies’ rapid growth.

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C H A P T E R 2
The Internet micro-environment
Describes how the Internet differs from other media in terms of marketing communications.
Notes on using slides for the second chapter in
lectures – lesson plan
1. The scope of the micro-environment. Slide 4. Ask students to imagine they are an
e-marketing manager for an international brand like 3M or Durex. What are the micro and
macro issues they face from Figure 2.1? Which are the most important?
2. Marketplace analysis. Slides 5–6. Talk through the online marketplace map diagram
(Figure 2.2) from left to right using an example, for example, a Bank. Stress integration
with offline channels (channel chains later). Illustrate with use of tools such as Google
Keyword Tool and Google Insights for Search (http://www.davechaffey.com/SEO-Best-
Practice/google-marketing-complete-list-of-free-tools).
3. Customer analysis and consumer behaviour. Slides 7–10. Conversion modeling
(advanced). Explain the need to assess demand for use of different services and then to
create a conversion funnel model.
4. Evaluation of demand levels. Slides 11–17. Structure around 3 levels of access: Influence:
Transact as shown in Slide 11. Ask different groups of students in a class to analyse main
findings from graphs and implications.
5. Customer characteristics. Slides 18–25. Covers consumer and business characteristics.
6. Consumer buyer behaviour models. Slides 26–33. Review strengths and weaknesses of
each model.
7. Competitors. Slides 34–35. Ask students to review benchmarking criteria for different site
types introduced in Chapter 1. Brief section since covered in later chapters, for example,
Chapters 4, 5 and 6.
8. Intermediaries. Slides 36–9. Ask students to identify different types of intermediaries or
portals. Different types of intermediaries were introduced earlier in the chapter in the
section on marketplace analysis. Best to introduce in context of business and revenue
models which are covered in the next section.
9. Intermediary models. Slides 40–50. Covers value chain analysis, disintermediation,
reintermediation and countermediation.
10. Business and revenue models. Slides 51–54. Alternatives reviewed in Slide 17.

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Activities
Activity 2.1 Changes in consumer buyer behaviour caused by digital
channels
Question
Although the model shown in Figure 2.15 provides a useful starting point for assessing
buyer behaviour, it is right to remember that the Internet has changed behaviour and in
some ways the model is not an accurate reflection of reality. What do you think are its
main weaknesses? We would suggest:
Answer (provided in book)
Limitations with traditional model in new Web 2.0 age:
• Process not necessarily sequential.
• Process compressed – for low involvement products, the decision can be made straightaway.
• Process will often start with a search and is mediated through search engines throughout,
with the searches refined iteratively from generic to specific plus brand, for example
‘fridge’, ‘upright fridge’, ‘comets fridge’, ‘whirlpool fridge’, ‘whirlpool 20TB L4’.
• The participation on the web and the creation of user-generated content (UGC) such as
reviews and ratings on the retail site and comparison intermediaries such as Revoo
(www.revoo.com) are important in the decision process.
• Viral marketing, and online E-PR PR can be more important for generating awareness (refer
to the WillItBlend case at the end of Chapter 1).
• In a virtual environment, trust becomes important as we will see below, so the strength and
familiarity of brands will be important.
Activity 2.2 Kelkoo.com, an example of revenue models for new
intermediaries
Purpose
To provide an example of the services provided by cybermediaries and explore their viability as
businesses.

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Questions
1. Visit the Kelkoo web site (www.kelkoo.com) shown in Figure 2.24 and search for this
book, a CD or anything else you fancy. Explain the service that is being offered to
customers.
This is well summarised by the tag line/proposition, top right: Compare. Buy. Save. It provides a
way for searching for and reviewing individual products to identify the most appropriate product
and potential suppliers compared on the basis of price.
2. Write down the different revenue opportunities for this site (some may be evident
from the site, but others may not); write down your ideas also.
• Commission on sales
• Fee for merchants to register (not likely, but may receive preferential position)
• Fee for buyers to use service
• Advertising space for merchants or other organisations
• Sale of technology to other non-competitive companies.
3. Given that there may be other competing sites in this intermediary category such as
Shopsmart (www.shopsmart.com), assess the future of this online business, using
press releases and comments from other sites such as Moreover (www.moreover.com).
This business is now profitable in several European markets. The latest press release reads:
‘London, 12/08/2002 – Kelkoo, the leading pan-European shopping search engine, announces
record quarterly results. The European group as a whole achieved a revenue of €3m in Q2 of
2002, representing a 65 per cent year-on-year growth over Q2 of 2001. Confirming its position
as a leading pan-European e-commerce operator, Kelkoo now attracts over 2.6 million monthly
visitors. Across the eight European markets where it operates, Kelkoo sends 3.5 million
qualified shopping visits to its network of 1000 clients’.
Activity 2.3 Which are the top portals?
To see the most important portals in your region, visit Nielsen//NetRatings
(www.netratings.com) and choose ‘Top Rankings’. This gives the top 10 most popular sites
in the countries listed. You will see that the largest portals such as MSN and Google can be
used to reach over 50 per cent of the Internet audience in a country. The pattern of top
sites is different in each country, so international marketers need to ensure that they are
equally visible in different countries.
Answer
No answer is provided since it links through, as activity simply points readers at an example
information source for their country. Top sites are indicated together with variations in user
media consumption in the different countries.

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Activity 2.4. Assessing the impact of the Internet on competitive forces in
different industries
Purpose
To assess, how some of the changes to the competitive forces, caused by electronic
communications impact particular industries.
Activity
Referring to Table 2.2, assess the impact of the Internet on a sector you select from the
options below. State which you feel are the most significant impacts.
1. Banking
2. Grocery retail
3. Book retail
4. B2B engineering component manufacturer
5. B2B software services company selling customer relationship management software
6. Not for profit organisation such as hospital, local government or charity.
Suggested answer:
Table 2.10 summarises the solutions to this question. The main forces to debate are the shift in
power between the bargaining power of buyers and suppliers.
The role of intermediaries in changing the competitive forces (not explicitly part of Porter’s
model) should also be stressed. This enables products to be compared more readily.
Moneysupermarket.com is an example from the banking sector.
Activity 2.5 Revenue models at Yahoo!
Purpose
To illustrate the range of revenue generating opportunities for a company operating as an
Internet pure-play. Yahoo! (www.yahoo.com) is a well-known intermediary with local content
available for many countries.
Activity
Visit one of the local Yahoo! sites for your region, for example, www.yahoo.co.uk and
explore the different site services that generate revenue. Reference the investor relations’
reports to gain an indication of the relative importance of these revenue sources.

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Answer
The main revenue sources for Yahoo! are as follows:
• Advertising revenue from its sponsored 'pay per click' ads and display or banner ads
• Affiliate revenue from Yahoo! Shopping
Subscription revenue for access to services such as Yahoo! e-mail or content
Activity 2.6 Revenue models at online marketing portals
Purpose
To illustrate the range of revenue-generating opportunities for online publishers. This activity
shows how ad-based revenue models are calculated and indicates the amount of revenue
generated by looking at three alternative approaches for publishing referencing three different
types of portal.
Question
Visit each of the sites in this category. You should:
1. Summarise the revenue models which are used for each site by looking at the
information for advertisers and affiliates.
E-consultancy (www.e-consultancy.com)
• Online revenue models include annual subscription and pay per view access to articles.
The site has limited advertising on a fixed monthly term basis.
• Traditional revenue models include training courses and conferences related to E-business
iMediaconnection (www.imediaconnection.com)
• This makes more use of online advertising than E-consultancy, for example Google
AdSense for publishers programme. It does not have subscription.
• It runs showcase events for which it charges suppliers to promote their services.
Marketing Sherpa (www.marketingsherpa.com)
• This mainly offers a pay per view model for articles and reports. Surprisingly, it has limited
advertising, so as not to annoy site visitors. Some of its reports are syndicated from other
online sources, so this is a commission-based model.
2. What are the advantages and disadvantages of the different revenue models for the
site audience and the site owner?
This answer can be broken down by the different revenue models as shown in the table below.
Given the advantages and disadvantages of each, it makes sense to have several models to
maximise monetisation of site visitors.

22
Revenue model Advantage Disadvantage
Online subscription Continuous revenue stream Difficult to get visitors to
commit to an ongoing
agreement
Pay Per View Instant fulfilment likely to appeal
if article or reports meets
someones immediate need.
Reports often more specialised
and more immediate than books.
Difficult to provide
sufficiently compelling
unique content that is not
already freely available on
the web.
Advertising Relatively easy to setup,
particularly if an established
programme like Google AdSense
where no advertisers have to be
recruited.
Advertisers have to be
recruited and payments
managed. If this fails, then
online ad inventory may be
unsold and so wasted.
Affiliate Individual transactions can be
significant value.
Difficult to recruit affiliates
and work best with high
volume consumer markets
rather than business markets.
Revenue only generated if
sale is made. A cost per click
arrangement is better for
publisher.
3. Given an equivalent audience, which of these sites do you think would generate the
most revenue? You could develop a simple spreadsheet model based on the following
figures
Monthly site visitors: 100,000, 0.5 per cent of these visitors clickthrough to affiliate sites where 2
per cent go on to buy business reports or services at an average order value of €100
A commission percentage is required to calculate this, assume 25 per cent of average order
value.
Calculation:
Visitors Clickthrough
rate
Affiliate
site visits
Conversion
rate
Sales Average
order
value
(Euros)
Revenue at
25%
commission
100,000 0.50% 500 2% 10 100 250
Monthly page views. 1,000,000, average of 3 ads for displayed for different advertisers at €20
CPM (we are assuming all ad inventory is sold, this is rarely true in reality)

23
Calculation:
Monthly
page views
Ad units
per page
Inventory
sold
Total ads
served
Cost per 1000
(Euros)
Total revenue
1,000,000 3 100% 3,000,000 20 60,000
You can see that this model is more appealing for the publisher in terms of revenue earned.
Subscribers to weekly newsletter: 50,000. Each newsletter broadcast 4 times per month has 4
advertisers each paying at a rate of €10 CPM.
Newsletter
subscribers
Newsletters
per month
Advertisers Inventory
sold
Total ads
served
Cost per
1000
(Euros)
Total
revenue
50,000 3 4 100% 600,000 10 6,000
Exercises
1. Why is environmental scanning necessary?
At the macro-level, it is important to understand new constraints such as legal and technical
constraints on conducting business. These may also present opportunities. At the micro-level, it
is important to be responsive to customers’ needs and competitors’ actions.
2. Summarise how each of the micro-environment factors may directly drive the content
and services provided by a web site.
• social – localised content for different cultures
• legal – privacy statement
• economic – funding and awards may be possible from governmental sources
• political – funding and awards may be possible from governmental sources
• technological – the incorporation of personalisation.
3. What are the main aspects of customer adoption of the Internet that managers
should be aware of?
• Consumer access percentage
• Role in influencing sale and achieving direct sales
• Role of the Internet in influencing different members of the buying unit.

24
4. What are the main changes to channel structures that are facilitated through the
Internet?
• Direct selling – disintermediation
• New intermediaries – reintermediation
• Countering new intermediaries – countermediation.
5. What are the different elements and different types of business models?
This is referred to in Figure 2.34 They are marketplace position, revenue model and commercial
model.
6. How should a marketing manager benchmark the online performance of competitors?
You should have identified the need to distinguish between benchmarking criteria that define
the company’s marketing performance in the industry and those that are specific to web
marketing, as follows:
• Financial performance. Available from About Us, Investor relations and electronic copies
of company reports. This information is also available from intermediary sites such as
finance information or share dealing sites such as Interactive Trader International
(www.iii.com) or Bloomberg (www.bloomberg.com) for major quoted companies.
• Marketplace performance. Marketshare and sales trends and significantly the proportion
of sales achieved through the Internet. This may not be available directly on the web site,
but may need to use other online sources. For example, new entrant to European aviation
easyJet (www.easyjet.com) has achieved over two-thirds of its sales via the web site and
competitors need to respond to this.
• Business and revenue models. Do these differ from other marketplace players?
• Marketing communication techniques. Is the customer value proposition of the site
clear? Does the site support all stages of the buying decision from customers who are
unfamiliar with the company through to existing customers? Are special promotions used on
a monthly or periodic basis? Beyond the competitors’ sites, how do they make use of
intermediary sites to promote and deliver their services?
• Services offered. What is offered beyond brochureware? Is online purchase possible?
What is the level of online customer support and how much technical information is
available?
• Implementation of services. These are the practical features of site design that are
described in Chapter 7 such as aesthetics, ease of use, personalisation, navigation and
speed.
A variety of alternative approaches to benchmarking are possible. Different frameworks can be
identified to help group criteria for benchmarking. Alternatives include the following:
1. E-CRM egg.
2. Balanced scorecard/My model.
3. Customer journeys.

25
4. Marketing mix – develop a detailed version of this. Problem – this is not user-centred – but
the E-CRM egg is.
Marketing mix Criteria
Product (Customer needs and wants) Range of products
Online Services/value proposition
Core product
Sales levels
Extended product offering
Branding
Price (Cost) Differential pricing
Place (Convenience) Representation on third party sites
Co-branding and partnering arrangements
Promotion (Communications) Attraction efficiency (visitor volume, share of
search)
Reach
Process (Customer experience) Conversion efficiency to online marketing
outcomes – engagement, conversion to
opportunity, conversion of opportunity to sales
Retention efficiency
People (Customer experience) Response quality – e-mail, co-browsing, chat
Physical Evidence (Customer experience) Usability
Accessibility
Performance
Availability
7. Describe two different models of online buyer behaviour.
Behavioural traits for example, Lewis and Lewis (1997) identified five different types of web
users:
Lewis, H and Lewis, R. (1997). Give your customers what they want. Selling on the Net. Executive
book summaries, Vol 19, No 3. March.
• Directed information seekers.
• Undirected information seekers.
• Directed buyers.
• Bargain hunters.
• Entertainment seekers.

26
Hierarchy of response models of adoption of site (e.g. Breitenbach and van Doren, 1998) for
stages in the buying decision are as follows:
• awareness;
• interest;
• evaluation;
• trial;
• adoption.
Breitenbach, C., van Doren, D. (1998) Value-added marketing in the digital domain: enhancing
the utility of the Internet. Journal of consumer marketing. Vol 15, No 6. 559–575
8. How can the Internet be used to support the different stages of the buying process?
See the Breitenbach and van Doren, 1998 reference details given in the previous question.
Essentially, online and off-line promotion techniques described in Chapter 8 are used to raise
awareness of the company and its web site, and the content and services on the web site then
help users in selecting products. A web site can provide more depth of information than other
media and also interactive tools to help users select the best service for them. For example, a
cell-phone company could give a series of questions that suggest to customers the best tariff for
them.
1. Discuss, using examples, how the Internet may change the five competitive forces of
Michael Porter.
This is summarised in Table 2.10. Reference to the paper by Porter (2001) is essential to
answer this question.
2. ‘Internet access levels will never exceed 50 per cent in most countries’. Discuss.
Suggested approach: data sources referenced in the Chapter suggest that only in developed
countries will the level of access be high. For example, The International Telecommunications
Union (ITU) (http://www.itu.int/ti/industryoverview/index.htm) is a useful source of information. In
most countries, for the foreseeable future, it appears that access levels will be less than 50 per
cent in terms of PC access. Further into the future access through digital TV via satellite and
mobile access may increase this figure.
However, the access figure is now approaching 50 per cent in some developed countries
although PC access saturation is approaching.
3. What are the options, for an existing organisation, for using new business models
through the Internet?
Look at attacking new markets and developing new products – Figure 4.12, p. 235. Look at new
methods of revenue generation, particularly through creating or partnering with an intermediary.

27
4. Perform a demand analysis for e-commerce services for a product sector and
geographical market of your choice.
This involves assessing the ratio Access: Influence: Buy in a country using data sources
referenced at the end of this chapter. The weblogs for analyst Hitwise are particularly useful if
you search on a particularly creative site.
5. Perform competitor benchmarking for online services for an organisation of your
choice.
A framework for this is referred to in Question 6 for the Self-assessment exercises.
6. What are the alternatives for modified channel structures for the Internet? Illustrate
through different organisations in different sectors.
The three main choices are as follows:
• Direct selling – disintermediation
• New intermediaries – reintermediation
• Countering new intermediaries – countermediation.
1. What options are available to a supplier, currently fulfilling to customers through a
reseller, to use the Internet to change this relationship?
We are seeking awareness of the options of disintermediation (Question 1 of Self-assessment
exercises or Question 1 of Essay and discussion questions) from the student or retaining the
status quo to avoid channel conflict. Should state two options?
2. What types of channel conflicts are caused by the Internet?
See question 1 of Essay and discussion questions. Channel conflicts occur when services
traditionally performed by channel partners, such as agents, resellers, distributors or retailers
are taken back by the manufacturer/supplier. This process is disintermediation or 'cutting out
the middleman'. Conflicts may be caused by:
• Direct sales (leading to reduced revenue for channel partner)
• Direct customer service (leading to less utilisation of channel staff)
• Direct delivery (leading to less utilisation of warehousing/distribution infrastructure and staff).
Conflicts may also occur if channel partners are offering better services/offers to the manufacturer.
3. What are virtual organisations and how can the Internet support them?
It is an organisation which uses information and communication technology, to allow it to
operate without clearly defined physical boundaries between different functions. It provides
customised services by outsourcing production and other functions to third parties. The virtual
organisations enable new products and services to be developed by a range of collaborators.
The Internet provides a low-cost mechanism to help collaborators share necessary information

28
through e-mail, discussion databases and project management tools made available via
document databases or groupware such as Lotus Notes/Domino.
4. Name three options for a company’s representation on the Internet in different types
of marketplace.
There are two ways in which this question could be answered. This could be clarified by
referring to the location at which e-commerce occurs. The options then, are as follows:
• Vendor-side e-commerce (company sells from own web site).
• Supplier-side e-commerce (to sell, the company has to visit its customer's site to respond to
requests for tender).
• Intermediary-side e-commerce (brokers who bring buyers and sellers together and offer
e-commerce facilities on-site).
Representation could also be considered in terms of these services at different site locations:
• corporate web site for investor and partner information;
• main open consumer web site with transactional e-commerce facilities;
• micro sites or extranets within main sites with restricted access to key customers;
• versions of the corporate or main site in overseas markets;
• intranet web site for internal marketing communications;
• micro sites within partner sites such as intermediaries and distributors.
5. Explain the term 'virtual value-chain'.
The virtual value-chain has the same components as a physical value-chain in terms of
processes such as product selection, creation and distribution. However, the linkages between
the processes are achieved electronically, and may not need human intervention.
6. What are the three key factors that affect consumer adoption of the Internet?
• Cost of access technology.
• Proposition – how is the need for Internet services perceived?
• Fears – concerns about privacy and security.
7. Summarise how the bargaining power of buyers may be changed by the Internet for a
commodity product.
The greater price transparency enabled by price comparison tools and online auctions all
increase the bargaining power of buyers.

29
8. How can the internal value chain be modified when an organisation deploys Internet
technologies?
The internal value chain is made more efficient through the use of workflow to enable
information transfer, for example, by e-mail. Information can also be shared more readily in
operational processes such as new product development (collaborative intranet), customer
enquiries and post-sales support.
Case Study 2 Zopa launches the peer-to-peer lending model
Question
Imagine you are a member of the team at the investors, reviewing the viability of the Zopa
business. On which criteria would you assess the future potential of the business and
the returns on your investment, based on Zopa’s position in the marketplace and its
internal capabilities?
Students should be given guidance on the extent to which you require an analytic answer based
on a detailed revenue model or a consideration of the strategic issues.
If a detailed revenue model is required, then some additional information will be necessary or
students will need to state their assumptions. The relevant section in Chapter 2 that students
can be asked to refer is 'Demand analysis and conversion modelling' in the section on
understanding customers.
Essentially this question is about revenue models and costs, so it requires the students to the
consider total costs of driving visitors to the site and converting them to sale in comparison with
revenue sources. Profitability will also be dependent on the long-term capability of the company
to gain revenue customers.
Students should mention these elements of a conversion based revenue model including the
following:
• Total market size for these products based on the size of existing loans market. Sub-set of
market that would meet Zopa's lending criteria.
• Cost of customer acquisition – this is a competitive market and it may be difficult to attract
visitors to the site, for example, using search engine marketing or off-line advertising.
• Cost of servicing sales – to what extent are phone contacts needed to facilitate sales?
• Conversion rate from visitor to lead to sale.
• Average revenue earned from each new borrower, which is based on 'charging borrowers 1
per cent of their loan as a fee, and from commission on any repayment protection insurance
that the borrower selects’.
• Lifetime value from customers based on attrition rates – will borrowers continue to use Zopa
or will they use it as a one-off?
• Flexibility on revenue model – for example, after launch, Zopa has gained additional
revenue from lenders.

30
The section in Chapter 8 on 'Conversion marketing objectives' also covers many of these
concepts.
From a strategic perspective, the issues that students should consider are as follows:
• Proportion of total loans market that this service will appeal to;
• Proportion of savings and investments market, this model will appeal to. It is a lot of effort
compared to other savings and investments methods for a limited differential. As a result it
will only appeal to a limited number of investors.
• Will the number of lenders balance the number of borrowers dependent on the appeal of
the proposition as noted above?
• Business model scalability – can it be applied in other countries and to other financial
products or beyond?
• Technology costs and scalability.

31
C H A P T E R 3
The Internet macro-environment
A review of the constraints and opportunities placed on Internet marketing by the broader
environment, for example, legal and political.
Notes on using slides for the third chapter in lectures – lesson
plan
Introduce through learning outcomes and questions for marketers (Slides 2 and 3).
1. Reminder of key issues in managing the macro-environment (Slides 4–6). You can also
refer to SLEPT or PEST at this point. Ask students, which are the most important aspects of
the macro-environment that require management. In an e-commerce environment, we are
mainly referring to constraints such as privacy ethics and law. But these can represent an
opportunity, if executed well compared to competitors.
Also review Slide 5 to discuss the frequency with which micro and macro factors need to be
reviewed. Play strategic agility clip (search for LBS or Donald Sull at www.ft.com/video).
2. Social issues. Slide 7. Limited section since social issues covered as part of consumer buyer
behaviour.
3. Legal and ethical issues. Focusing on Privacy legislation. Slides 8–17. In-depth coverage
in the book introduced in lectures is through Slides 8–11. Slide 13 gives an interpretation of
the PECR law, which is the most important law for controlling spam and cookie privacy.
4. Introduction to digital marketing technology. Slides 18–21. This introduction was
originally in Chapter 1 in editions 1 through 3.
5. Mobile and IPTV technology. Slides 22–33. Discusses mobile/wireless and interactive
Digital TV. Get students to think about the balance between the proposition and the barriers
to adoption. Includes barriers to adoptions.
6. Economic factors. Slide 34 reflects the lower access and e-commerce adoption within some
countries. It can be suggested that these are mainly cultural, for example, southern European
countries use less direct marketing traditionally, for example, catalogue buying, so it is
more difficult to make the change to buying online.

32
Activities
Activity 3.1 Assessing new technology options
Purpose
To illustrate the process for reviewing the relevance of new technology options.
Activity
You work for an FMCG (fast-moving consumer goods) brand and are attending an
industry trade show where you see a presentation about the next-generation (3G) mobile
phones which are due to launch in your country in one year’s time. You need to decide
whether your organisation adopts the new phone and if so when. Complete the following:
A suitable brand might be a drink brand such as Tango.
1. How would you assess the significance of this new technology?
Some possible approaches are as follows:
• Find analyst estimates of the percentage of the target market that are likely to have the
device over future years.
• Assess proposition – what it offers over existing technologies – see subsequent text.
• Conduct focus group discussions on user opinions about receiving advertising and online
services/content over this channel.
• Read trade and public press reviews of likely adoption.
• Look at success of similar previous technologies (WAP, GPRS).
• Look at success of similar technologies overseas (e.g. iMode).
2. Summarise the proposition of the new access devices for both consumers and your
organisation.
Produce a summary of the proposition as shown in Table 3.3 on p.168. Use manufacturers'
sites such as Nokia (www.nokia.com) to gain an appreciation of the proposition.
3. What recommendations would you make about when to adopt and which services to
offer?
Given the limited adoption of WAP and GPRS services, a cautious approach can be
recommended. Possible services include:
• Marketing with multimedia messaging.
• Providing content relevant to consumers, for example, games, competitions and promotions.

33
Activity 3.2 Overcoming SME resistance to e-commerce
Purpose
To highlight barriers to exporting among SMEs and suggest measures by which they may be
overcome by governments.
Activity
For each of the four barriers to internationalisation given in Table 3.6, suggest the
management reasons why the barriers may exist and actions that governments can take to
overcome these barriers. Evaluate how well the government in your country
communicates the benefits of e-commerce through education and training.
The following table solution suggests answers to this activity.
Barrier Management issues How can the barrier be overcome?
Psychological. Will the investment be recouped?
Do we have the human resources?
Success stories of companies who
have become exporters can show the
contribution to revenue possible and
the expenditure necessary.
Operational. Do we need to translate web
content for language and cultural
differences?
How do we deal with country
specific laws and taxation?
How do we build e-services?
How do we make transactions
secure?
Highlight availability and cost of
specialists for legal advice, export
documentation and translation,
Publicity about the range of low-cost,
off-the-shelf solutions for
implementing e-commerce.
Organisational. Do we have the right structure
and responsibilities?
Do we need to open new overseas
sales offices?
Provide training on best practice for
organisational structure and
employee development.
Product/market. Which market do we target?
Do products or packaging require
modification for overseas
markets?
Benchmarking from other countries
can help address these issues.

34
Exercises
1. Summarise the key elements of the macro-environment that should be scanned by an
e-commerce manager.
The most important are as follows:
• Legal. For updates on e-commerce legislation, see Marketing Law (www.marketinglaw.co.uk).
• Social. Ethical issues can be assessed through articles in the general press, for example,
The Guardian’s online channel (www.guardian.co.uk/online).
• Economic. Government statistical sites such as www.statistics.gov.uk can be used to
monitor this.
2. Give an example of how each of the macro-environment factors may directly drive
the content and services provided by a website.
• Social. Localised content for different cultures.
• Legal. Privacy statement.
• Economic. Funding and awards may be possible from governmental sources.
• Political. Funding and awards may be possible from governmental sources.
• Technological. The incorporation of personalisation.
3. What actions should e-commerce managers take to safeguard consumer privacy and
security?
Privacy statements should explain the actions taken to the customers. Firewalls should be
maintained to minimise the risk of unauthorised access to customer data. Data should be
backed up such that it cannot be deleted. The relevant data protection act in the country should
be followed.
4. Give three examples of techniques websites can use to protect the users’ privacy.
Privacy protection is achieved through protecting the users’ data as follows:
• Firewalls.
• Backing up data.
• Login/password.

35
5. How do governments attempt to control the adoption of the Internet?
Governments attempt to control the use of the Internet through policies to promote its use and
through monitoring messages through ISPs and through lobbying groups that control the
Internet.
See pp. 137–139.
6. Suggest approaches to managing technological innovation.
• Frequent review of new opportunities;
• Achieving balance between adopting all new technologies and conservative non-adoption;
• Careful selection of technologies that will achieve competitive advantage.
1. You recently started a job as e-commerce manager for a bank. Produce a checklist of
all the different legal and ethical issues that you need to check for compliance on the
existing website of the bank.
Suggested approach is as follows:
• Data protection legislation – use the 8 principles;
• Privacy law including use of cookies and e-mail for direct marketing;
• Distance selling law;
• Specialist industry bodies for legislation, for example, Financial Service Authority.
Students should be asked to refer to their local government data protection/privacy information
site such as www.informationcommissioner.gov.uk to ensure coverage of all data protection and
privacy (e-mail, cookies) actions.
2. How should the e-commerce manager monitor and respond to technological
innovation?
• Best to base around the concept of diffusion of innovation.
• Contrast between the risks and benefits of the earlier adopter and late majority adopter.
• Give examples of technologies that have generated hype, but have not delivered, for
example, WAP.

36
3. Benchmark different approaches to achieving and reassuring customers about their
privacy and security using three or four examples for a retail sector such as travel,
books, toys or clothing.
Suggested approach:
• This is not a formal essay question. It is a web activity to visit the sites of different players to
review their privacy and security statements for differences and emphasis attached to them.
• Include reference to certification bodies.
4. Select a new Internet-access technology (such as phone, kiosks or TV) that has been
introduced in the last two years and assess whether it will become a significant
method of access.
• Determine current levels of access.
• Evaluate how well it meets the criteria of a successful access technology (the web) in terms
of cost, speed and ease of use.
1. Explain the different layers of governance of the Internet.
Dyson (1998) describes different layers of jurisdiction or governance. They are as follows:
• Physical space comprising each individual country where their own laws such as those
governing taxation, privacy and trading and advertising standards hold.
• ISPs – the connection between the physical world and virtual world.
• Domains name control (www.icann.net) and communities.
• Agencies such as Truste (www.truste.org), which promote good practice.
2. Summarise the macro-environment variables a company needs to monitor when
operating an e-commerce site.
These are referred to as the STEP or SLEPT factors in this chapter:
• Social. Social trends in levels of access and what is acceptable ethical use.
• Legal. Legal constraints.
• Economic. Changes to economy affecting viability of service.
• Political. Government incentives or restrictions.
• Technological. New technologies to enhance service.

37
3. Explain the purpose of environmental scanning in an e-commerce context.
Environmental scanning and analysis is the process of continuously monitoring the environment
and events and responding accordingly. It involves scanning the micro-environment including
competitor activity and customer demand. Its purpose is to ensure that the company is
compliant with the latest laws and innovations.
4. Give three examples of how web sites can use techniques to protect the user’s
privacy.
• Cookies linked to an individual machine.
• Firewalls to prevent unauthorised access to databases.
• Access control through user names and passwords.
5. Explain the significance of the diffusion–adoption concept to the adoption of new
technologies to:
(a) Consumers purchasing using technological innovations.
Managers should review the percentage of user base who can use/access their site using a
particular technology, for example, Flash plug in.
(b) Businesses deploying technological innovations.
Managers need to review the competitive advantage possible through early adoption of an
innovation.
6. What action should an e-commerce manager take to ensure compliance with ethical
and legal standards of their site?
Review data protection requirements in different countries.
Case Study 3. Boo hoo – learning from the largest European
dot-com failure
Questions
1. Which strategic marketing assumptions and decisions arguably made Boo.com’s
failure inevitable? Contrast these with other dot-com era survivors who are still in
business, for example, Lastminute.com, Egg.com and Firebox.com.
These are the assumptions that ultimately led to the downfall of Boo.com since in total they
made it unprofitable:
• Demand for online services would be higher, given the increase in adoption of the Internet.
Yet, many users were not comfortable/familiar with purchasing online.
• Cost of customer acquisition would be lower.
• Conversion rates would be higher for visitors.

38
• Technology would not cause so many barriers to sale that is, slow download times and
usability problems. These issues are wellknown now, but were not at the time then.
• Channel conflicts would be less – it was difficult for Boo to strike a deal with many brands to
sell direct online, thus limiting its product range.
In retrospect and with the benefit of hindsight, many of these seem obvious, but the owners of
the business did not have experience of this marketplace although they did have online
experience through www.bokus.com for a simpler proposition in a single geographical market.
2. Using the framework of the marketing mix, appraise the marketing tactics of
Boo.com in the areas of product, pricing, place, promotion, process, people and
physical evidence.
The marketing mix is covered in Chapter 5, so this part of the question should only be set if this
concept has been covered previously.
These are aspects of how Boo.com applied the mix that students may comment on:
• Product. Premium brands were used, leading to premium prices. Unclear on mix between
sportswear and high street fashion. Scope relatively narrow, limiting target audience.
• Price. As mentioned in the case, there were issues of pricing in different regions. No
mentions of discounting are made, consistent with the brands premium positioning.
However, competitive selective promotions are today commonly used by many e-retail
brands.
• Place. Boo.com had a worldwide distribution, which was good for achieving reach, but
added to the cost-base of the company, impacting on promotion. A global launch of a new
brand was ambitious and can be contrasted with the more conservative approach from the
likes of Amazon and eBay.
• Promotion. To build the Boo brand and drive visitors, it was reliant on online advertising,
which gave rise to a high cost per customer acquisition that ultimately led to the brands
failure. The use of PR was more effective and is one of the successes of Boo. The
magazine appears overambitious and did not pay for itself through sales generated. At the
time, the promotion through online marketing techniques such as search engine advertising
and affiliate marketing techniques was limited in its possibilities. Today, these are more
effective for companies.
• Process. people and physical evidence. It is well known that the technology was too
advanced for a time when the vast majority was accessing the web over dial-up modems.
This led to a ‘clunky’ experience that resulted in the low conversion rates referred to in the
article. It also seems likely that the cost of providing customer service was not factored into
the business model.
3. In many ways, the vision of Boo’s founders was 'ideas before their time'. Give
examples of e-retail techniques used to create an engaging online customer
experience which Boo adopted, that are now becoming commonplace.
These are some of the approaches used:
• Creation of a strong brand based on quality and service.

39
• Advanced product selection using 3D images. This approach is now used by Dell, for
example.
• Use of online customer service persona or avatar. This approach is now used by IKEA for
online sales support through their ‘Ask Anna’ facility.
• Integration of off-line newsletter/catalogue with web site to help build a brand. Today such
newsletters are more commonly delivered online.

40
C H A P T E R 4
Internet marketing strategy
An introduction to stages involved in developing an Internet marketing plan.
Notes on using slides for fourth chapter in lectures – lesson
plan
1. Where does the Internet strategy fit? (Slides 4–9). The slides introduce the essence of
Internet marketing strategy compared to other strategies.
2. The need for a separate/integrated strategy. Slides 10–14. It shows the problems if no
specific e-marketing strategy is required (slide 11).
3. Situation review. Slides 15–19. Stage models of internal situation. See classic Quelch and
Klein model and alternative model for e-business in slide 14. Note that stage models tend to
apply to transactional e-commerce sites. Ask students which stages are relevant for five
different types of sites (Chapter 1)?
4. Goal setting. Discuss the types of benefits and objectives on Slides 20–25. Again useful to
review in groups/pairs for examples of the five site types introduced in Chapter 1.
Slide 21 shows the value of mapping KPIs and illustrates this for a typical transactional web
site.
5. Strategy Decision 1. Market and product development. Slide 26. Illustrate this with respect
to the growth of a company such as easyJet or Smile
6. Strategy Decision 2: Business and revenue model strategies. Slide 27. It is covered at the
end of Chapter 2.
7. Strategy Decision 3: Target market strategy. Slides 28–33. Show common targeting
options – relate to a company like Dell, Tesco.com or Euroffice.
8. Strategy Decision 4: Positioning and differentiation strategy. Including the marketing mix.
Alternative positionings are shown in Slide 34. Online value proposition examples are
shown in Slides 35–37.
9. Decision 5: Multi-channel distribution strategy. Slide 38 shows the continuum between
online and off-line focus. Slide 39 summarises some of the main factors that assess
importance of online to a company. Illustrate with reference to easyJet.

41
10. Decision 6: Multi-channel communications strategy. A channel coverage map is shown in
Slide 40.
11. Decision 7: Online communications mix and budget. This is covered in more detail in
Chapter 8.
12. Decision 8: Organisational capabilities. (7S). Alternative forms of structure and
responsibilities for e-commerce are shown in Slides 41–45.
Activities
Activity 4.1 Situation analysis for an e-commerce operation
Purpose
To introduce the different types of Internet marketing analysis required as part of the situation
review.
Activity
You are a newly incumbent e-commerce manager in an organisation that has operated a B2B e-
commerce presence for two years in all the major European countries. The organisation sells
office equipment and has been an established mail-order catalogue operation for 25 years. The
UK, Germany, France and Italy each have their own localised content. List the e-commerce-
related questions you would ask of your new colleagues and the research you would
commission under these headings:
• internal analysis;
Should refer to current stage of adoption, key performance indicators such as unique visitors,
leads, sales and return on investment, web traffic analysis, staffing, budget for e-commerce,
outsourcing. See the performance measurement frameworks in Chapter 9.
• external analysis (micro-economic factors);
Reach of web site of competitors. Online marketing mix compared to competitors (see
Chapter 5). Customer demand for services.
• external analysis (macro-economic factors).
SLEPT or STEP factors, in particular legal and political constraints.
Activity 4.2 Competitor benchmarking
Purpose
To understand the characteristics of competitor websites it is useful to know how to benchmark
and to assess the value of benchmarking.

42
Activity
Choose a B2C industry sector such as airlines, book retailers, book publishers, CDs or
clothing, or a B2B sector such as oil companies, chemical companies, construction industry
companies or B2B exchanges. Work individually or in groups to identify the type of
information that should be available from the website (and which parts of the site you will
access it from) and will be useful in terms of competitor benchmarking. Once your criteria
have been developed, you should then benchmark companies and summarise which you
feel is making best use of the Internet medium.
You should have identified the need to distinguish between benchmarking criteria that define
the companies marketing performance in the industry and those that are specific to web
marketing as follows:
• Financial performance. Available from About Us, Investor relations and electronic copies
of company reports.
• Marketplace performance. Market share and sales trends and significantly the proportion of
sales achieved through the Internet. This may not be available directly on the web site, but
may need to use other online sources. For example, new entrant to European aviation
easyJet (www.easyjet.com) has achieved over two thirds of its sales via the web site and
competitors need to respond to this.
• Business and revenue models (see Chapter 2). Do these differ from other marketplace
players?
• Marketing communications techniques. Is the customer value proposition of the site clear?
Does the site support all stages of the buying decision from customers who are unfamiliar
with the company through to existing customers? Are special promotions used on a monthly
or periodic basic? Beyond the competitors' site, how do they make use of intermediary sites
to promote and deliver their services?
• Services offered. What is offered beyond brochureware? Is online purchase possible, what is
the level of online customer support and how much technical information is available?
• Implementation of services. These are the practical features of site design that are described
in Chapter 7 such as aesthetics, ease of use, personalisation, navigation and speed.
The marketing mix covered in Chapter 5 is an alternative framework for answering this activity.
A variety of alternatives approaches to benchmarking are possible. Different frameworks can be
identified to help group criteria for benchmarking. Alternatives include:
1. E-CRM egg
2. Balanced scorecard/My model
3. Customer journeys
4. Marketing mix – develop a detailed version of this. Problem – this is not user centred – but
the E-CRM egg is.

43
Marketing mix Criteria
Product (Customer needs and wants) Range of products
Online services/value proposition
Core product
Sales levels
Extended product offering
Branding
Price (Cost) Differential pricing
Place (Convenience) Representation on third party sites
Co-branding and partnering arrangements
Promotion (Communications) Attraction efficiency (visitor volume, share of
search)
Reach
Process (Customer experience) Conversion efficiency to online marketing
outcomes – engagement, conversion to
opportunity, conversion of opportunity to sales
Retention efficiency
People (Customer experience) Response quality – e-mail, co-browsing, chat
Physical evidence (Customer experience) Usability
Accessibility
Performance
Availability
Activity 4.3 Assessing the significance of digital channels
Purpose
To illustrate the issues involved with assessing the suitability of the Internet for e-commerce.
Activity
For each of the products and services in Table 4.5, assess the suitability of the Internet for
delivery of the product or service and position it on the grid in Figure 4.10 with
justification. Make estimates in Table 4.5 for the direct and indirect online revenue
contribution in 5 and 10 years’ time for different products in your country. Choose
specific products within each category shown.

44
Answer
The first step is to source an estimate for the current time or estimate this. Future estimates can
be compiled through assessing the balance of increasing consumer demand from online
channels compared to traditional channels.
Activity 4.4 Online value proposition
Visit the websites of the following companies and, in one or two sentences each, summarise
their Internet value proposition. You should also explain how they use the content of the
web site to indicate their value proposition to customers.
• Tektronix (www.tektronix.com)
• Handbag.com (www.handbag.com)
• Harrods (www.harrods.com)
• Guinness (www.guinness.com)
Places to evaluate the OVP are on the home page, About Us and where the company is asking
the visitor to sign up to an e-mail newsletter as is the case with a resource centre (e.g. MyTek on
www.tektronix.com).
Activity 4.5 Which is the best organisation structure for e-commerce?
Purpose
To review alternative organisational structures for e-commerce.
Activity
1. Match the four types of companies and situations to the structures (a) to (d) in
Figure 4.27.
• A separate operating company. Example: Prudential and Egg (www.egg.com).
• A separate business unit with independent budgets. Example: RS Components
Internet Trading Channel (www.rswww.com).
• A separate committee or department manages and co-ordinates e-commerce.
Example: Derbyshire Building Society (www.derbyshire.co.uk).
• No formal structure for e-commerce. Examples: many small businesses.
2. Under which circumstances would each structure be appropriate?
3. Summarise the advantages and disadvantages of each approach.

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1. The organisation structures match as follows:
(a) Bullet 4. No formal structure for e-commerce.
(b) Bullet 3. A separate committee or department manages and co-ordinates e-commerce.
(c) Bullet 2. A separate business unit with independent budgets.
(d) Bullet 1. A separate operating company.
2 and 3 are best for the organisation. Some of the main advantages and disadvantages are
summarised in Table 4.8 on p. 260.
Exercises
1. Draw a diagram that summarises the stages through which a company’s website may
evolve.
Refer to Quelch and Klein (1996) model for services offered at different stages for a startup or
existing company or could be based on six levels of sophistication given at the start of the text
from:
• Level 0. No web site.
• Level 1. Company places an entry in a web site listing company names such as
www.yell.co.uk to make people searching the web aware of the existence of a company or
its products. There is no web site at this stage.
• Level 2. Simple static web site (brochureware).
• Level 3. Simple interactive site.
• Level 4. Interactive site supporting transactions with users.
• Level 5. Fully interactive site providing relationship marketing with individual customers and
facilitating the full range of marketing functions.
2. What is meant by the ‘Internet contribution’, and what is its relevance to strategy?
An assessment of the extent to which the Internet contributes to sales is a key measure of the
importance of the Internet to a company. It is a key measure used to control strategy since
companies can:
• use it to assess the current situation (their own percentage contribution) and that of their
competitors;
• use it to set future targets given the constraints of their marketplace;
• use it to measure whether targets achieved.

46
3. What is the role of monitoring in the strategic planning process?
Monitoring of visits to the site and marketing outcomes is part of the process since it indicates
whether strategic objectives have been achieved. How this can occur is discussed more in
Chapter 9.
4. Summarise the main tangible and intangible business benefits of the Internet to a
company.
Refer to section on potential business benefits within strategic goal setting, specifically Table 4.4.
The key benefits can be summarised as:
• Tangible: customer acquisition (new sales);
• Tangible: customer retention (incremental sales);
• Tangible: cost reduction;
• Intangible: image enhancement (corporate and brand).
5. What is the purpose of an Internet marketing audit? What should it involve?
The purpose is to assess the current marketing environment, internal and external. In particular,
market research must answer how effectively competitors are using the medium and how
customers are using it. The audit also considers use within the current company customer base.
6. What does a company need in order to be able to state clearly in the mission
statement its strategic position relative to the Internet?
Essentially, the relative significance of the Internet as a mechanism for delivering customer
service.
7. What are the market and product positioning opportunities offered by the Internet?
Refer to Figure 4.10. The matrix can be applied for the Internet to identify whether it will be used
to:
• promote/sell existing products to existing customers/markets (a common application);
• promote/sell existing products to new customers/markets, that is, sectors or geographically
(may readily open new international markets for products that can be delivered and
serviced remotely);
• promote/sell new products to existing or new customers/markets (new products give the
best opportunities for exploiting the new medium).
8. What are the distribution channel options for a manufacturing company?
Direct sales (disintermediation); through traditional distributors (wholesalers and retailers) and
through new online intermediaries (reintermediation).

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1. Discuss the frequency with which an Internet marketing strategy should be updated
for a company to remain competitive.
This question is intended to highlight the impact of the dynamism of the Internet. It is not
referred to directly in the chapter, or in existing literature, but should encourage the student to
think about the following characteristics of the marketplace, which suggest that five-year
marketing plans or even one-year marketing plans are probably inappropriate:
• rapid growth in access levels of customer base in different countries may affect feasibility/
demand for Internet services;
• speed at which new entrants can enter market;
• speed at which Internet can change their online services in terms of price and features;
• changes in distribution channel/marketplace, for example, advent of business portals and
auction mechanism for purchasing;
• introduction of new tax/export legislation.
• These all highlight the need for careful monitoring of the marketplace and rapid response on
a monthly basis. Porter’s five competitive forces can be used as a framework.
2. ‘Setting long-term strategic objectives for a website is unrealistic since the rate of
change in the marketplace is so rapid’. Discuss.
This question requires discussion of similar issues to question 1 in the previous text.
3. Explain the essential elements of an Internet marketing strategy.
The framework presented in this chapter uses the elements of a classic strategic marketing plan
namely:
• Goal setting (develop Internet marketing strategy).
• Situation review (develop Internet marketing strategy).
• Strategy formulation (develop Internet marketing strategy).
• Resource allocation and monitoring (define Internet marketing plan and monitor).
For an answer to this question one can review each area as it is presented in Chapter 4 noting
specific requirements for the Internet, that is the role of the Internet contribution in goal setting
and the promotion/communications elements.
4. Summarise the role of strategy tools and models in formulating a company’s strategic
approach to the Internet.
This question gives the opportunity to apply traditional models such as the strategic marketing
planning framework, portfolio analysis and competitive forces and newer models presented in
this chapter such as those by Quelch and Klein, de Kare-Silver and Kumar.

48
1. When evaluating the business benefits of a website, which factors are likely to be
common to most companies?
Refer to section on potential business benefits within strategic goal setting. The key benefits
can be summarised as:
• Tangible: customer acquisition (new sales);
• Tangible: customer retention (incremental sales);
• Tangible: cost reduction;
• Intangible: image enhancement (corporate and brand).
2. Use Porter’s five forces model to discuss the competitive threats presented to a
company by other websites.
Students could be asked to give examples as below.
• Threat of new entrants. For example, Amazon, AutoBytel, Jungle.com.
• Threat of substitute products and services. MP3 music versus CD. Disintermediation.
• Bargaining power of customers. Use of intermediaries such as Yahoo! Shopping that
enables product price comparisons.
• Power of suppliers. This is a relatively minor factor in terms of Internet marketing.
• Extent of rivalry between competitors. Increased rivalry since price comparison is more
readily possible and new products, services and ways of selling or business models will
rapidly occur using the Internet.
3 Which factors will affect whether the Internet has primarily a complementary effect or
a replacement effect on a company?
Kumar (1999) suggests:
• customer access to the Internet (high = replacement);
• the Internet can offer a better value proposition than other media (leads to replacement);
• product can be delivered over the Internet (leads to replacement);
• product can be standardised and user does not usually need to view to purchase (leads to
replacement).
4. Describe different stages in the sophistication of development of a web site, giving
examples of the services provided at each stage.
Refer to Quelch and Klein (1996) model for services offered at different stages for a startup or
existing company or could be based on six levels of sophistication given at the start of the text
from:

49
• Level 0. No web site.
• Level 1. Company places an entry in a web site listing company names such as
www.yell.co.uk to make people searching the web aware of the existence of a company or
its products. There is no web site at this stage.
• Level 2. Simple static web site (brochureware).
• Level 3. Simple interactive site.
• Level 4. Interactive site supporting transactions with users.
• Level 5. Fully interactive site providing relationship marketing with individual customers and
facilitating the full range of marketing functions.
5. Briefly explain the purpose and activities involved in an external audit conducted as
part of the development of an Internet marketing strategy.
The external audit should consider the state of the market in terms of customers and competitors.
Pertinent factors for the Internet include:
• the size of the market, in terms of potential customers who have access to the Internet;
• the type of marketplace (are customers purchasing through price comparison services?);
• how the market share varies across different countries and for different products and
services.
The way competitors of a company use the Internet medium should also be assessed. This
should include:
• how competitors make use of intermediaries on the Internet and for fulfilment;
• how the channel of competitors makes use of the Internet.
Should also include reference to the economic, political, fiscal, legal, social, cultural and
technological factors usually referred to by the SLEPT or STEP.
6. What is the importance of measurement within the Internet marketing process?
Monitoring of visits to the site and the marketing outcomes in terms of sales, customer
acquisition and retention is part of the process since it indicates whether strategic objectives
have been achieved. How this can occur is discussed more in Chapter 9.
7. Which factors would a retail company consider when assessing the suitability of its
product for Internet sales?
Students should refer to the ES test characteristics of de Kare-Silver.
1. Product characteristics. Does the product need to be physically tried, or touched before it is
bought? (Can it be standardised?)
2. Familiarity and confidence. Considers the degree the consumer recognises and trusts the
product and brand.

50
3. Consumer attributes. These shape the buyer’s behaviour – are they amenable to online
purchases with respect to access to the technology, skills available and whether they no
longer wish to shop for a product in a traditional retail environment?
8. Explain what is meant by the online value proposition, and give two examples of the
value proposition for web sites with which you are familiar.
The IVP is a unique feature or offer of the site for a customer, it may be based on existing
product differentiation based on quality or product features or cost. Ideally, the Internet web site
should have an additional value proposition to further differentiate the company’s products or
services. It can be defined in terms of some elements of the 7Ps.
Companies such as Amazon do this well stating they are ‘the world’s largest’ or ‘rapid delivery’
or ‘up to 40 per cent discounts’.
Case study 4. Tesco.com uses the Internet to support its
diversification strategy
Question
Based on the case study and your own research on competitors, summarise the
strategic approaches, which have helped Tesco.com achieve success online.
The strategic decisions covered in this chapter provide a useful framework for summarising the
strategic approaches adopted by Tesco.com.
• Decision 1: Market and product development strategies. Tesco has used the Internet to
extend its market into new product markets such as financial services, white goods and
DVD rental. While these are promoted through the store, the web provides a wider choice of
products, more detailed information about products and a method of purchase. The Internet
can also support entry into new geographical markets.
• Decision 2: Business and revenue model strategies. New revenue sources are available
through extending the product range online as explained above, but also with new digital
revenue streams such as those for music downloads and e-Diets. Tesco also supports
advertising on its site of related product such as financial services.
• Decision 3: Target market strategy. Tesco.com has a broad market of customer types, so it
less relevant for them to use online to selectively target these with communications.
However, the article explains how Tesco has used the web and e-mail channel to target
more closely through targeting different lifecycle groups – these are customers who are
grouped according to their level of adoption of online service. Tesco also uses the web to
target specific requirements such as diets and financial services through search engine
marketing.
• Decision 4: Positioning and differentiation strategy (including the marketing mix). Tesco
offers some unique online promotions and lower online prices for selected products such as
financial services, which could attract a percentage discount when purchased online. It
appears not to use the service elements of the mix for positioning beyond the slogan ‘You
Shop, We Drop’. But attention has been paid to improving the customer experience through
usability activities and reduction of download times.
The marketing mix, which is covered in Chapter 5, is also suitable for assessing some of
the tactical elements of Tesco.com strategy.

51
• Product.
• Price.
• Place.
• Promotion.
• Process, people and physical evidence.
• Decision 5: Multi-channel distribution strategy. This is straightforward. Tesco.com has taken
the decision to distribute Internet orders via stores unlike some rival such as Ocado
(www.ocado.com) who have setup distribution channels.
• Decision 6: Multi-channel communications strategy. This is not referred to in the article –
this describes the mix between online and off-line communications tools for driving visitors
to the site. Off-line communications in store and through direct mail are clearly important for
attracting visitors to the site.
• Decision 7: Online communications mix and budget. Again, this is not mentioned, although
the importance of e-mail marketing for customer communications is apparent.
• Decision 8: Organisational capabilities (7S). Tesco has achieved focus online by creating a
separate ‘Tesco.com’ brand and a separate division headed by Wade Gery.

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C H A P T E R 5
The Internet and the marketing mix
A review of opportunities that the Internet provides for varying the marketing mix.
Notes on using slides for the fifth chapter in lectures – lesson
plan.
1. Introduction to the marketing mix. Introduce through Slides 4 to 8.
2. Product. Introduce through Slide 9, looking at some examples of implications for core
product (Slide 10) and extended product (Slide 11). Examples are given in Slides 13
through 15. Methods for marketing research are featured in Slide 12. Slide 16 shows the
long tail, which shows the diversity of customer behaviour in selecting products.
3. The Internet and branding. Introduction to brands (Slide 17), online implications (Slide
18) and examples (Slides 19 and 20). Slide 21 shows impact on brand perception.
4. Price. Implications (Slide 22). Slide 23 shows the importance of brand online. Differential
pricing is summarised in Slide 24. B2B reverse auction is summarised in Slide 25. Purchase
method – digital products – is described in Slide 26. Pricing options – in Slides 27 and 32.
Examples of price-comparison site given in Slide 28 and 29. Slides 30 and 31 explain
alternative pricing mechanisms.
5. Place. (i) Place of purchase (Slide 33); Evans and Wurster model (Slide 34); (ii) New
channel structures (Slide 35 – Figures in Chapter 2); (iii) Channel conflicts (Slide 36) and
(iv) Virtual organisations (Slides 37 and 38).
6. Promotion. This is not covered at length in this chapter, since it is the main topic of
Chapters 8 and 9 (Slides 39–41).
7. People, process and physical evidence. People, process and physical evidence are
particularly important for service delivery. Options for supplementing people (Slide 42).
Process for managing inbound enquiries (Slide 43). See also Mini Case Study 5.4 on p 317.

53
Activities
Activity 5.1 How can the Internet be used to vary the marketing mix?
Purpose
An introductory activity that highlights the vast number of areas which the Internet impacts.
Activity
Review Figure 5.1 and explain the two most important ways in which the Internet gives
new potential for varying the marketing mix for each of product, price, promotion, place,
people and processes. State:
• new opportunities for varying the mix;
• examples of companies who have achieved this and
• possible negative implications (threats) for each opportunity.
Suggested Answers
Product
There are many alternatives for varying the product when a company is developing its online
strategy. These often arise as a need to differentiate the product offering to help distinguish the
offer from that of customers. These questions might include the following:
• How do we differentiate? How can we make our online presence different from our
competitors?
• How do we migrate brand online? Do we use a brand variant? (See separate article on
companion website.)
• Do we become a portal or ISP?
• Do we offer an extranet for key customers? What are the facilities?
• Do we offer personalised services that help build relationships with customers?
• Are there any other features of extended product that we can charge a premium for? For
example, some online booksellers charge for a gift-wrapping service.
Price
The advent of price-comparison engines have increased price-competition and companies will
need to develop pricing strategies that are flexible enough to compete in the marketplace, but
are still sufficient to achieve profitability in the channel. Online booksellers may decide to offer

54
a discount of 50 per cent on the top 25 best-selling books in each category, but only a 20 per
cent discount on less popular books
Place
The main issue is, if and when, to offer online sales or e-commerce facilities on the website.
This will be dependent on the nature of the project and projections of the resultant sales.
Some companies think of the website as the only place for online sales, but this is an
oversimplification. Companies may well make sales from their own website, but sales could
also occur on distributor websites, at neutral intermediaries, or even be procured on a
customer’s website. The strategy must define its online representation – which of these are
accommodated and how to avoid conflicts between the different channels.
Promotion
There are two main issues for promotion for the Internet channel and both concern the emphasis
that is placed on promotion. These are as follows:
• Investment in promotion compared to site creation. Since there is often a fixed budget for
site creation, maintenance and promotion, the strategy should give guidance to ensure that
there is a sensible balance and that the promotion of the site is not under-funded.
• Investment in online promotion techniques in comparison to offline promotion. Again, a
balance must be struck between the different techniques. First a company must be registered
with general information portals (search engines and directories such as Altavista, Yahoo
and Excite) that direct traffic to the site. Payment to an external company may result in
more effective promotion. The previous point is widely recognised, but less understood is
the need to develop a network of links from other sites to your own (referring sites). This
may be more significant in generating traffic to your site than listing in search engines,
since a paid-for listing on a more specialised referring site (a vertical portal), for example,
one of the Vertical. Net sites such as www.chemicalonline.com can give more prominence
to your site to a better defined target audience.
Activity 5.2 Assessing options online to vary product using the Internet
Purpose
To illustrate the options for varying the product element of the marketing mix online.
Activity
Select one of the sectors below. Use a search engine to find three competitors with similar
product offerings. List ways in which each has used the Internet to vary its core and
extended product. Which of the companies do you think makes best use of the Internet?
• Computer manufacturers;

55
• Management consultants;
• Children’s toy sector or
• Higher education.
The answer should consider the following:
• how the benefits of the core product offering is communicated via the Internet;
• how the extended product (which often refers to service and/or intangibles) has been
changed through the Internet and
• research used to inform new product development.
Activity 5.3 Assessing price ranges on the Internet
Purpose
To illustrate the concept of price transparency.
Activity
Visit a price-comparison site such as Kelkoo (www.kelkoo.com) or Pricerunner
(www.pricerunner.com). Choose one of the products below and write down the range of
prices from lowest to highest. What is the percentage premium charged for a product by
the most expensive company?
• low involvement purchase – CD or Book and
• higher involvement purchase – household appliance.
This is a straightforward activity that illustrates price transparency through examining a range of
prices.
The interesting behaviour is that relatively few consumers use these comparison services.
Instead they are satisfied, or decide, based on brand preferences or incomplete information.
Activity 5.4 Place of purchase on the Internet
Purpose
To illustrate the concept of representation and reach on the Internet.

56
Activity
For the same sector as you selected in Activity 5.2, find out which company has the best
reach in terms of numbers of links from other sites. Go to a search engine such as Google
and use the advanced search to find the number of sites that link to that site. Alternatively,
use the syntax: link: URL in the search box.
This is a straightforward web activity that indicates the number of links into the site.
Note that this syntax returns an incomplete number of sites. The Yahoo returns a more inclusive
set of links! Site Explorer (http://siteexplorer.yahoo.com).
Exercises
1. Select the two most important changes introduced by the Internet for each of the
7Ps.
• varying core product characteristics and extended product characteristics and
• researching consumer needs for new products.
2. What types of product are most amenable to changes to the core and extended
product?
Products most amenable to changes are digital products such as media and music or service
products such as information services, which can be delivered via the Internet.
3. Explain the differences in concept between online B2C and B2B auctions.
• B2C auctions are typically forward auctions. B2B auctions are typically reverse auctions.
The volume of online users has made these practical.
• Forward auctions. item purchased by highest bid made in bidding period.
• Reverse auctions. item purchased from lowest bidding supplier in bidding period.
4. Explain the implications of the Internet for price.
The main implications of the Internet for price are as follows:
• increased price transparency and its implications on differential pricing;
• downward pressure on price (including commoditisation);
• new pricing approaches (including dynamic pricing and auctions) and
• alternative pricing structure or policies.

57
5. What are the implications of the Internet for place?
The main implications of the Internet for the place aspect of the mix are as follows:
• place of purchase – vendor oriented, neutral or buyer oriented;
• new channel structures, for example disintermediation, reintermediation and countermediation;
• channel conflicts with distributors or sales force; and
• virtual organisations.
1. ‘The marketing mix developed as part of annual planning is no longer a valid concept
in the Internet era’. Discuss.
This is clearly unacceptable since product features and benefits, prices and distribution are still
important!
But in support of the statement, the point can be made that the customer oriented 4Cs perspective
on the marketing mix becomes more relevant:
• customer needs and wants (from the product);
• cost to the customer (price);
• convenience (relative to place); and
• communication (promotion).
This highlights the importance of assessing customer needs through research and the Internet
is a tool to achieve this. The increased availability of information about products through the
Internet tends to lead to commoditisation, so it can be argued that customers can compare the
mix for products more readily, thus making other factors such as the trust associated with a
brand more important. Customer relationship management, based on targeting, segmentation
and positioning, has become a more important element of annual planning in the Internet era.
2. Critically evaluate the impact of the Internet on the marketing mix for an industry
sector of your choice.
This is a straightforward answer assessing each element of the mix in the order it is presented
in the chapter.
3. Write an essay on pricing options for e-commerce.
This answer should illustrate options through digital products or services which have the most
options, for example, rental/subscription, pay per use, and unlimited usage. A suitable
framework is that of Baker et al. (2000), which suggests that companies should use these three
factors to assist in pricing:
These factors are (1). precision; (2). adaptability and (3). segmentation.

58
The implications on traditional pricing options presented by Bickerton et al. (2000) should also
be reviewed:
• cost plus pricing;
• target profit pricing;
• competition based pricing; and
• market orientated pricing.
4. Does ‘Place’ have any meaning for marketers in the global marketplace enabled by
the Internet?
Answer could start by describing the ‘death of distance’. This is particularly relevant for digital
products.
The answer can then discuss these four main areas:
• place of purchase;
• new channel structures;
• channel conflicts; and
• virtual organisations.
The Evans and Wurster (1999) framework of ‘Reach, Richness and Affiliation’ can also be used
to illustrate the relevance of Place.
Finally, the needs for localisation can be examined.
Examination questions.
1. Describe three alternative locations for transactions for a B2B company on the Internet.
• buy-side (purchaser oriented request for tender);
• neutral intermediary;
• vendor oriented (sell-side).
2. Explain two applications of dynamic pricing on the Internet.
• selling ‘distressed inventory’, for example, flight tickets, which must be used by a fixed date.
• price discovery by varying prices for different segments.
3. How does the Internet impact on an organisation's options for core and extended
(augmented) product?
The answer should stress that this depends on the nature of the product. The change is most
marked for digital products and services.

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4. Briefly summarise the implications of the Internet on each of these elements of the
marketing mix:
• Product: new digital products and value-adds.
• Price: price reduction, new pricing models.
• Place: new representation on intermediaries, direct-selling.
• Promotion: integration of online and offline techniques.
5. Explain the reasons why the Internet could be expected to decrease prices online.
Price transparency through easier comparison of prices or through intermediaries. Also reverse
auctions for B2B.
6. How can an organisation vary its promotional mix using the Internet?
New communication options include the following:
• search engine marketing;
• link building;
• banner advertising and sponsorship;
• PR;
• e-mail and
• affiliate marketing.
Case Study 5. The re-launched Napster changes the music
marketing mix
Question
Evaluate how Napster has varied each element of the marketing mix to compete with
traditional and online music retailers.
These are aspects of how Napster.com applied the mix that students may comment on:
• Product. The core product is the streamed music service available through subscription, but
extended product offerings include the sale of compatible MP3 players. The wide range of
products (more than 1 million) indicates a broad product range contrasting with existing
stores, but smaller than some online suppliers like iTunes.
• The article shows the importance of the Napster brand identity including its pedigree and
community experience in shaping the service.

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• Price. Different versions of the monthly subscription service are available according to
whether the music is kept on a computer or downloaded to the MP3 player. There are
options to purchase tracks by album or price, with cost reductions for volume purchases.
• Place. The Internet is the place of distribution, although Napster has signed agreements
with colleges, radio stations and stores selling MP3 players to distribute the service more
widely.
• Promotion. Establishing brand awareness and familiarity with Napster among potential
downloaders of music is the key. Offline media are arguably best for this. Unlike other
online services, relatively few prospects will Google ‘Online music download services’,
instead many prospects will have a consideration list and the aim of the offline
communications is to get Napster on the consideration list. Napster does use paid search
marketing, particularly when visitors are searching for the brand. It also uses affiliates to
extend reach into third party sites to promote the service (not covered in the article).
• Process. people and physical evidence. These are the different aspects of the customer
experience such as usability and customer service. These are perhaps less relevant for
Napster, but they are important to converting trial lists to subscribers and to renew their
subscriptions.
This is a relatively simple analysis. For a more in-depth question and answer, students could be
prompted to look more at the Napster offering compared to rivals such as iTunes and download
services run by e-retailers. This also works well as many students use such services, and so
will have strong opinions on them.

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C H A P T E R 6
Relationship marketing using the Internet
Techniques for achieving relationship marketing using the Internet.
Notes on using slides for the sixth chapter in lectures – lesson
plan
1. What is it? Slide 4 illustrates the links between CRM and other elements of marketing.
Slide 5 contrasts this with the transactional paradigm – you can ask students what each row
in the Table refers to. Slide 6 gives typical CRM applications and Slide 7, the data that are
accessed through the applications. Slide 8 shows the key aspect of targeting by value.
E-CRM benefits are summarised in Slide 9. Slide 10 is an example of customer advocacy
based on ratings.
2. Approaches to CRM. Slide 11 summarises the four key marketing activities involved with
the CRM. Slide 12 outlines the 5Is concept of Peppers and Rogers. These can be illustrated
in the context of a retail website or a B2B organisation.
3. Permission marketing. Slide 15 outlines the main elements of this. Visit
www.permission.com for an example of this in practice
4. Mass customisation and personalisation. This is illustrated by Slide 14, which can be used
as a framework by companies to assess their current CRM (X1) and future options (X3).
Slides 14 to 16 give an example of this. Slide 17 is an online community.
5. Implementing E-CRM. Slide 15 gives a model on how this can operate in an online context.
Slide 16 illustrates a practical application of permission marketing – opting into an e-
newsletter. Slide 17 reviews alternative methods of capturing e-mail contacts and profile
details. Slide 18 gives segmentation options. Slide 19 gives a summary of the IDIC
technique. Slide 20 gives a personalisation technique
6. Techniques for assessing and managing customer activity and value. Slides which
illustrate different techniques for assessing value include Slides 21 to 25. Slides 26 to 28
illustrate companies which use these techniques. This section contains fairly advanced
techniques, which are mainly relevant for professionals or postgraduate students rather than
undergraduate students. Slide 30 is a bridging slide between Chapters 6 and 7, showing the
link between CRM and customer service, since the focus in the latter part of Chapter 6 is on
promotion.

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Activities
Activity 6.1 Charity uses lifetime value modelling (LTV) to assess returns
from new e-CRM system
A charity is considering implementing a new e-mail marketing system to increase donations
from its donors. The charity’s main role is as a relief agency, to reduce poverty through
providing aid, particularly to the regions that need it most. Currently, its only e-mail activity is a
monthly e-newsletter received by its 200,000 subscribers, which features its current campaigns
and appeals. It hopes to increase donations by using a more targeted approach, based on
previous customer behaviour. The e-mail system will integrate with the donor database, which
contains information on customer profiles and previous donations.
The company is considering three solutions, which will cost between £50,000 and £100,000 in
the first year. In the charity, all such investments are assessed using Lifetime Value Modelling
(LTV).
Table 6.4 Lifetime value model for customer base for current system
Year 1 Year 2 Year 3 Year 4 Year 5
A Donors 100,000 50,000 27,500 16,500 10,725
B Retention 50% 55% 60% 65% 70%
C Donations
per annum
£100 £120 £140 £160 £180
D Total
donations
£10,000,000 £6,000,000 £3,850,000 £2,640,000 £1,930,500
E Net profit (at
20%)
£2,000,000.0 £1,200,000.0 £770,000.0 £528,000.0 £386,100.0
F Discount
rate
1 0.86 0.7396 0.636 0.547
G NPV
Contribution
£2,000,000.0 £1,032,000.0 £569,492.0 £335,808.0 £211,196.7
H Cumulative
NPV
contribution
£2,000,000.0 £3,032,000.0 £3,601,492.0 £3,937,300.0 £4,148,496.
7
I Lifetime
value at net
present value
£20.0 £30.3 £36.0 £39.4 £41.5

63
A Donors. this is the number of initial donors. It declines each year depending on the retention
rate (row B)
B Retention rate. in lifetime value modelling, it is usually found that it increases year-on-year,
since customers who stay loyal are more likely to remain loyal.
C Donations per annum. likewise, the charity finds that the average contributions per year
increase through time within this group of customers.
D Total donations. calculated through multiplying the values in row B and C.
E Net profit (at 20 per cent margin). Lifetime Value (LTV) modelling is based on profit
contributed by this group of customers; the value in column D is multiplied by 0.2.
F Discount rate. since the value of money held at a point in time will decrease due to
inflation, a discount rate is applied to calculate the value of future returns in terms of current
day value.
G NPV contribution. this is the profitability after taking the discount factor into account to
give net present value in future years. This is calculated by multiplying the value in row E
by the value in row F.
H Cumulative NPV contribution. – this adds the previous years’ NPV for each year.
I Lifetime value at net present value. – this is a value per customer calculated by dividing the
value in row H by the value in row A.
Question
Using the example of the lifetime value for the current donor base with the current
system, calculate the Lifetime Value (LTV) with the new system.
Answer
Table 6.4 Lifetime value model for customer base for current system
Current
Donors 100,000 50,000 27,500 16,500 10,725
Retention 50% 55% 60% 65% 70%
Donations per
annum
£100 £120 £140 £160 £180
Total donations £10,000,000 £6,000,000 £3,850,000 £2,640,000 £1,930,500
Net profit
(at 20%)
£2,000,000.0 £1,200,000.0 £770,000.0 £528,000.0 £386,100.0
Discount rate 1 0.86 0.7396 0.636 0.547

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NPV
contribution
£2,000,000.0 £1,032,000.0 £569,492.0 £335,808.0 £211,196.7
Cumulative
NPV
contribution
£2,000,000.0 £3,032,000.0 £3,601,492.0 £3,937,300.0 £4,148,496
.7
Lifetime value
at net present
value
£20.0 £30.3 £36.0 £39.4 £41.5
After system installed
Donors 100,000 51,000 28,560 17,422 11,498
Retention 51% 56% 61% 66% 71%
Donations per
annum
£102 £122 £142 £162 £182
Total donations £10,200,000 £6,222,000 £4,055,520 £2,822,299 £2,092,683
Net profit
(at 20%)
£2,040,000.0 £1,244,400.0 £811,104.0 £564,459.8 £418,536.5
Discount rate 1 0.86 0.7396 0.636 0.547
NPV
contribution
£2,040,000.0 £1,070,184.0 £599,892.5 £358,996.5 £228,939.5
Cumulative
NPV
contribution
£2,040,000.0 £3,110,184.0 £3,710,076.5 £4,069,073.0
£4,298,012
.5
Lifetime value
at net present
value
£20.4 £31.1 £37.1 £40.7 £43.0
Increase in
NPV for new
system £40,000.0 £78,184.0 £108,584.5 £131,773.0 £149,515.8
Return on
investment at
£50K –20.0% 56.4% 117.2% 163.5% 199.0%
Return on
investment at
£100K –60.0% –21.8% 8.6% 31.8% 49.5%

65
Exercises
1. Why is the Internet a suitable medium for relationship marketing?
The WWW provides a suitable method for collecting individual customer preferences and
delivering tailored information for each customer. E-mail also provides a two-way method of
interaction between company and customer.
2. Explain 'personalisation' in an Internet marketing context.
Personalisation is the delivery of information that is specific to an individual or group of similar
individuals. This could be information about a specific product range or information for smaller
customers. It can be delivered through specific web pages, or through personalised e-mail.
3. What is meant by ‘customer profiling’?
The use of the web-site to find out the customer’s specific interests and characteristics is
'customer profiling'. It can be used for market segmentation.
4. Explain the concept and benefits of ‘sense and respond’ approach to customer
communications.
The concept is that online web marketers can track the past behaviours of customers to customise
communications to encourage future purchases. The benefits are that relevant, targeted
communications about products or services that the customer is interested in can be delivered
at a low cost by e-mail or web. There is also less media wastage where communications are
paid for when they are not relevant for the prospect.
5. How can we respond to customer concerns about privacy when conducting one-to-
one marketing using the Internet?
Customers should be reassured about the privacy of their data. The key is openness. Companies
should do the following:
• send promotional e-mail or pass on details to other companies, only if they opt-in to this
arrangement;
• allow customers to access their data if required (one of the provisions of the Data Protection
Act);
• explain why information is collected and how it will benefit the customer and also
• clearly describe techniques such as cookies that affect privacy.
6. Explain the relationship between database marketing, direct marketing and relationship
marketing.
Databases are necessary to store the details of customers and their preferences, such as order
history. The database content can then be used to tailor direct marketing by providing offers to
customers that are consistent with their needs. This is the basis for relationship marketing –
understanding customer needs and then responding to them.

66
7. Explain the concept and applications of RFM analysis to different types of web
presence.
RFM is sometimes known as FRAC, which stands for Frequency, Recency, Amount (obviously
equivalent to monetary value), and Category (Types of product purchased – not included within
RFM).
For retailing, which is the main application of RFM, customers can be targeted through
personalised e-mail or website messages according to their level of activity, for example, active,
dormant.
For other types of companies, RFM can be used to assess activity levels when customers log-in
to a secure service such as an extranet.
8. How can a web-site integrate with telemarketing?
A website can be used to promote the use of telesales through the use of call-back systems
where the customers selects the time they can be called on phone to discuss a pre-sales, sales
or post-sales support question. Different phone numbers can also be used at different points on
the website meaning that the call-centre operator knows the context of the customer enquiry.
1. Explain the factors that influence the development of multichannel customer contact
strategies.
This question is about Integrated Marketing Communications. Key issues with managing a call
centre are to balance the following:
• customer service and customer satisfaction levels;
• cost – lower for shorter contacts and contacts that don’t repeat;
• conversion – may be higher for personal channels rather than web self-service.
2. Compare and contrast traditional transaction-oriented marketing with one-to-one
marketing using the Internet.
For transaction-oriented, read one-way push marketing communications targeted on achieving
a single sale as against interactive one-to-one marketing, which is targeted at increasing the
lifetime value of the customer through providing customer satisfaction and loyalty leading to
repeat orders/cross-sales.
3. Write a report summarising for a manager the necessary stages for transforming a
brochureware site to a one-to-one interactive site and the benefits that can be
expected.
Main suggested stages are as follows:
• identify incentives for encouraging customer to start dialogue;
• identify customer information needed to maintain relationship (e-mail, existing account
number);

67
• identify personalised information that will be delivered to the customer;
• decide on the correct tool to implement a one-to-one marketing;
• prototype concept, possibly reviewing with end-user customers;
• implement and test and
• review effectiveness.
4. Explore the legal and ethical constraints upon implementing relationship marketing
using the Internet.
Some of the issues that should be discussed are as follows:
• Privacy – use of opt-in, opt-out and cookies, selling of customer information to other
companies;
• Legal issues – involving use of data and e-mail under the United Kingdom and European
data protection laws.
• The neutrality of organisations offering to protect the consumer, such as Truste and Which
Web Trader – are they protecting the consumer, or do they only provide a minimum of
ethical protection?
• If customers are encouraged to opt-in, such as on the www.tesco.com/grocery site, then
there will be more opportunities to communicate with them.
1. Define and explain direct marketing within the Internet context.
Direct marketing enables specific offers to be provided to the customer either through direct
e-mail or web-page-based personalisation when they log-on to a site.
2. What characteristics of the Internet make it so conducive to the direct marketing
approach?
It is a low-cost method of contacting the customer (via e-mail). Detailed product information can
be delivered by the web-site. It is also relatively well targeted since a customer will often give
permission for contact to be made by e-mail by completing an online form on the web-site.
3. How does a company initiate one-to-one marketing with a company using the
Internet?
A company collects customer information through an online form that is used to collect a
customer’s contact details and product requirements. A good example of this is provided at
www.rswww.com, where RS Components have created an extranet facility to achieve one-to-
one marketing. A suitable offer is required to encourage the customer to complete the online
form; this is often access to free information or a service.

68
4. Explain the concept of a ‘virtual community’ and how such communities can be used
as part of relationship marketing.
A virtual community is a forum where web users can share information through facilities such as
chat rooms or discussion threads. Communities can be used to understand the customer’s
requirements from a company.
5. Suggest three measures a company can take to ensure that a customer’s privacy is
not infringed when conducting one-to-one marketing.
• The company should adopt the principle of permission marketing, where the customer’s
details are used for direct marketing only if the customer agrees to this.
• Provide opt-out on e-mail promotions for the customer to unsubscribe if they no longer
require the service.
• Data from one customer must not be divulged to another, for example, e-mail addresses
must not be mixed-up.
6. What is the role of a database when conducting one-to-one marketing on the
Internet?
Databases are used to store the details of customers, and their preferences such as order
history. The database content can then be used to tailor direct marketing by providing offers to
customers that are consistent with their needs. Databases can also be linked to personalisation
through e-mail or web pages.
7. What is 'web self-service'? What are the typical challenges in managing this?
A call-back system can be used on the website to achieve outbound telemarketing.
8. Explore opportunities and methods for personalising the interactive web session and
adding value for the individual customer.
Information about specific products and offers can be displayed. Interactive services could involve
customer support in product selection.
Case study 6. Dell gets closer to its customers online
Question
Describe approaches used by Dell within their site design and promotion to deliver
relevant offers for different types of online customers.
The answer should centre on different segmentation techniques. Different segments can then
be targeted by different media (e.g. paid search, display advertising, affiliates and offline
communications); on site through specific content for these audiences and through event-
triggered email communications.
Segmentation approaches include the following:
• geographic – Dell has a separate site for each country
• demographic – Dell can target different audiences by advertising or affiliate marketing on
different site types

69
• business versus consumer – Dell's site offers products in each of these areas
• value – higher value consumer audiences (gaming) and business audiences (larger
companies are offered separate content)
• vertical business markets (e.g. government, education and healthcare – particularly in core
markets such as the United States)
• lifecycle – first purchase or repeat purchase
• accessories and add-ons. Have they been purchased

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C H A P T E R 7
Delivering the online customer experience
Achieving a satisfactory online experience for the visitor.
Notes on using slides for seventh chapter in lectures – lesson
plan
1. Introduction. Slide 4 gives the elements of an online customer brand experience, which are
covered in this chapter and the previous two chapters. Slide 5 introduces the stages in web
site development and Slide 6 gives an example of a typical web design project. Slide 7
summarises the prototyping process.
2. Initiation stages. Slide 8 introduces the key concepts of accessibility, usability and
persuasion. Slide 10 gives an example of a site that integrates these three concepts.
3. Analysis stages. Slide 10 explains design tools like wireframes, blueprints and Information
Architecture IA). Slides 11 and 12 give an example.
4. Design stage. Slide 13 shows the components of different information types. Slides 14–17
give examples of different sites with different design approaches. Slide 15 illustrates the
narrow and deep concept of architecture. Slide 18 gives different information processing
modes, which can affect site impact. Slides 19–21 give examples of retail merchandising
examples.
5. Service quality. Applying service quality frameworks to the web: Slide 22 highlights
different aspects of service quality described in more detail in the text. Slide 23 shows how
online service delivered may vary with the value and complexity of a product using an
example from financial services. Slide 24 provides a summary of research on important
factors of design quality.
Activities
Activity 7.1 Options for outsourcing different e-marketing activities
Purpose
To highlight the outsourcing available for e-business implementation and to gain an
appreciation of how to choose suppliers.

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Activity
Question
A B2C company is trying to decide which of its e-business activities it should outsource.
Select a single supplier who you think can best deliver each of these services indicated
in Table 7.1. Justify your decision.
Answer
1. Strategy. Best conducted in-house since there is a detailed knowledge of the product and
market. However, if new media skills are not available, it may be better to consult a digital
media agency or management consultancy (preferable option shown).
2. Design. Call in the experts (the digital media agency) for whom this is their core skill.
3. Content development. Although the initial site may be outsourced, ideally to a digital media
agency, most companies bring this function in-house since it is key to communicate benefits
to customers.
4. Online promotion. Online promotion, for example, banner advertising and search engine
registration, (Chapter 8) is frequently outsourced to a new media agency since in-house
skills are unlikely to exist and techniques for both of these aspects vary greatly.
5. Off-line promotion. Off-line promotion, for example, print advertising and direct marketing
is frequently outsourced since to a traditional marketing agency.
6. Infrastructure. This is usually managed by a combination of the IT department and an ISP.
Table 7.1 Options for outsourcing different e-business activities
E-marketing function Traditional
marketing
agency
Digital
marketing
agency
ISP or
traditional IT
supplier
Management
consultants
1. Strategy Best option? Best option?
2. Design Best option?
3. Content and service
development
Best option (or
internal)?
4. Online promotion Best option?
5. Off-line promotion Best option?
6. Infrastructure Best option?

72
Activity 7.2 Allowing for the range in access devices
One of the benefits of accessibility requirements is that they help web site owners and web
agencies consider the variation in platforms used to access web sites.
Note error in final book (manuscript OK) – ‘times’ one symbol missed, for example, 1024 × 768.
Questions
1. Update the compilation in Table 7.4 to the latest values using Onestat.com or other
data from web analytics providers.
Googling ‘screen resolution popularity’ gives a range of choices, including the authors' own site.
2. Explain the variations. Which browsers and screen resolutions do you think should
be supported?
Currently, many sites target 800 × 600 although the majority have a higher resolution than this.
The data suggests that Firefox should be supported – approaching 30–40 per cent for sites with
more technical users.
Activity 7.3 An example of factors determining online service quality
Purpose
To understand the elements of online service quality.
Activity
Think back to your experience of purchasing a book or CD online. Alternatively, visit a
site and go through the different stages. Write down your expectations of service quality
from when you first arrive on the web site until the product is delivered. There should be
around 10 different stages.
Our expectations are informed by our peers and past experience. So when we shop online we
expect, or indeed demand, that the experience will be superior to traditional shopping. The list
of requirements is long.
1. Easy to find what you are looking for by searching or browsing.
2. Site easy to use, pages fast to download, with no bugs.
3. Price, product specification and availability information on site to be competitive and
correct, but we probably prefer great customer services to great prices – this is what will
keep us loyal.
4. Specification of date, time and delivery to be possible.
5. E-mail notification when order placed and then dispatched.

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6. Personal data remains personal and privacy and security are not compromised.
7. Verification for high value orders.
8. Delivery on time.
9. Returns policy enabling straightforward return or replacement.
10. …..and finally, quick online or off-line answers to questions when the expectations above
are not met. This means traceability through databases, someone who knows your order
status and can solve your problems
Exercises
1. Explain the term ‘prototyping’ in relation to web site creation.
The production of a trial version to test the web site concept either internally, or preferably with
a customer.
2. What tasks should managers undertake during initiation of a web site project? (NB:
the book says ‘web page’ in error.)
Managers should ensure the following:
• analysis/market research is conducted in a structured way – ask the audience;
• domain name is registered ASAP;
• review/assemble suitable suppliers and partners such as ISP, design agency;
• suitable process for developing site involving a prototype and testing;
• cost/benefit to set investment at right level;
• buy in from senior management team and staff;
• plan for online and off-line promotion;
• process for dealing with web-related enquiries or orders;
• Internet marketing plan (Chapter 4) highlighting all these issues.
3. What is domain name registration?
Reserving and paying for a web address URL for a company/product/promotion.

74
4. List the factors that determine web site ‘flow’.
Navigation is dependent on:
• Consistency;
• Simplicity;
• Context;
• Interactivity.
• In a word, ‘control’.
5. Explain the structure of an HTML document and the concept of ‘tags’.
HTML is explained briefly in Chapter 1. HTML is a markup language that is interpreted by the
web browser program running on a user’s machine to display the graphics and text in a
particular form. A tag is a specific instruction to display information in a particular way. For
example, a tag to display text in bold involves, placing at the start of text to be emboldened and
at the end. A tag for a hyperlink is divided into the destination and accompanying text as
follows:
HREF="http://www.marketing-online.co.uk" Click to go to Marketing Online
An HTML document has a header defining its title and then the body, which has the text and
graphic images.
6. List the options for designing web site menu options.
Some of the issues mentioned in the text are as follows:
1. Text menus, buttons or images;
2. Rollovers;
3. Positioning;
4. Frames;
5. Number of levels;
6. Number of options.
7. What is a hierarchical web site structure?
A tree-like structure as in Figure 7.10 (a) and (b).
8. What are the factors that control the performance of a web site?
These can be divided into:
• On web site hardware. speed of hard disk, amount of memory;
• On web site software. speed of web server;

75
• On web site web page design. overuse of graphics or frames can reduce download time for
a site;
• Link between a company and ISP or ISP and Internet;
• Congestion on the Internet itself.
1. Discuss the relative effectiveness of the different methods of assessing the customers’
needs from a web site.
• Based on internal staff’s knowledge of market needs;
• Questionnaires (without reference to site);
• Questionnaires (with reference to existing site or prototype);
• Focus groups (with reference to own site or competitor sites);
• Piloting (paper and real prototypes) with key accounts (useful for business-to-business
sites).
2. Select three web sites of your choice and compare their design effectiveness. You
should describe design features such as navigation, structure and graphic design.
Students should be advised to choose examples from within a single industry or a particular
type of web site such as portals. Question can also be phrased to add marketing effectiveness.
3. Explain how strategy, analysis, design and implementation of a web site should be
integrated through a prototyping approach. Describe the merits and problems of the
prototyping approach.
This is a straightforward question describing the project management of the creation of a web
site. The beginning of Chapter 7 and Figure 7.4 provide a framework for this.
4. When designing the interactive services of a web site such as online forms and
e-mails to customers, what steps should the designer take to provide quality service
to customers?
Students should consider different aspects of service quality identified by Parasuraman et al.
such as the following:
• Reliability. The ability to perform the service dependably and accurately;
• Responsiveness. A willingness to help customers and provide prompt service;
• Assurance. The knowledge and courtesy of employees and their ability to convey trust and
confidence;
• Tangibles. The physical appearance of facilities and communications;
• Empathy. Providing caring, individualised attention.

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1. What is web site prototyping? Give three benefits of this approach.
The production of a trial version to test the web site concept either internally, or preferably with
a customer.
Benefits are:
1. Content should have better customer orientation;
2. Reduces likelihood of errors;
3. Method of rapid creation of site.
2. What controls on a web site project are introduced at the initiation phase of the
project?
See answer to self-assessment exercises Question 2.
3. A company is looking to select an ISP. Explain:
(a) What is an ISP?
An ISP is a company providing access to the Internet or web site hosting services for
individuals or other companies.
(b) Which factors will affect the quality of service delivered by the ISP?
For connectivity:
• Availability of dial-in lines (busy tones);
• E-mail processing facilities.
For hosting:
• Speed of hardware and software used to host web sites;
• Availability (downtime).
For both:
• Speed of links to Internet.
4. How are focus groups used to gain understanding of customer expectations of a web
site?
Focus groups can be used to comment on existing or prototype versions of web sites of a
company or its competitors. They can be used to assess issues such as the following:
• Relevance of online information, value of online services;
• Integration with off-line products and services;
• Ease of use;

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• Visual appeal;
• Impact on existing brand values.
5. Name and briefly explain four characteristics of the information content of a site that
will govern whether a customer is likely to return to a web site.
Effective content must be:
• Relevant (for a range of audience types);
• Accurate;
• Up-to-date;
• Delivered rapidly;
• Clear (laid-out clearly on screen).
6. When the graphic design and page layout of a web site are being described, what
different factors associated with type and set-up of a PC and its software should the
designer take into account?
• Different versions of web browsers may display information differently.
• Different screen resolutions may display information differently.
• Users may select different text size options.
• Users may decide to switch off graphical images.
• With digital TV and WAP phones becoming more common, these platforms must be allowed
for also.
7. What is meant by opt-in? Why should it be taken into account as part of web site
design?
Opt-in is related to e-mail communications. When collecting information for direct marketing,
customers should be given the opportunity to choose whether they want to receive online or
off-line promotional material.

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Case Study 7. Refining the online customer experience at
dabs.com
Questions
1. The management of dabs.com has invested in several major upgrades to its online
presence to improve the online customer experience. Assess the reasons for the
need to invest in site upgrades by referring to the dabs.com example. To what extent
do you think major, regular site upgrades are inevitable?
In keeping with the theme of this chapter, this question is about managing the online customer
experience and prompts students to think about how often this needs to be addressed.
This can be approached through the classic arguments for and against regular frequent upgrades.
Arguments in favour of regular upgrades, many of which are mentioned in the case, include:
• Changes in new web standards enabling more sophisticated interfaces, for example, the
move from basic HTML to dynamic HTML to AJAX (Asynchronous Java and XHTML);
• Changes in product offerings and partnerships;
• Changes in branding;
• Changes in design styles;
• Changes in access device, for example, mobile and web PDAs;
• Changes in legislation, for example, accessibility laws such as the Disability and
Discrimination Act;
• Need to increase conversion rates to sale indicated by web analytics and usability studies.
Arguments against:
• Consumer behaviour remains similar (actually as design styles change, consumer behaviour
differs also).
• Cost! So the argument concerns the frequency of major upgrade, although the above
arguments suggest the need for a flexible architecture and content management system to
enable changes between upgrades.
2. Compare the quality of the online customer experience of dabs.com by visiting the
site and those of its competitors such as www.ebuyer.com and www.euroffice.com.
Explain the categories of criteria you have used to make your assessment.
Students should be advised to develop different personae and scenarios as described in the
chapter (e.g. new customer, existing customer, browsing customer against directed customer
with a product in mind).
Typical benchmarking criteria, which impact the experience that the students can evaluate
include:
• Ease of locating the site through search engines;

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• Usability. number of clicks to find product, ease of navigating to product, ease of purchase
once selected;
• Accessibility. compliance with laws;
• Marketing messaging for persuasion marketing. clarity of online value proposition and
establishing credibility of site;
• Branding and visual appeal;
• Site performance. can test by using a service like www.siteconfidence.co.uk;
• Support for problems.
Figure 7.1 is useful for showing types of benchmarking criteria.

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C H A P T E R 8
Campaign planning for digital media
Recommendations on how to structure online elements of a marketing campaign to integrate
with offline campaign elements.
Notes on using slides for eighth chapter in lectures – lesson
plan
1. Introduction. Slides 4 and 5. Start by explaining in context of digital marketing tools
introduced in Figure 1.9 in Chapter 1. Main issues to consider as with all campaigns
covered in Slide 5.
2. Characteristics of interactive marketing communications. Slide 6 summarises key
differences between new media and traditional media. Slide 7 gives an example of a
company that uses many of these techniques within its online presence. Slides 8 and 9 show
communication models to explain differences between traditional and new media. Slides 10
and 11 compare and contrast advertising in traditional and digital media.
3. Step 1. Goal setting and tracking. Slide 12 summarises key campaign metrics and Slide 13
places them into the context of a campaign example. Slide 14 gives a simplified conversion
model for goal-setting. Slide 15 (Figure 8.8) shows the importance of tracking offline
responses from online campaigns. Slides 16 and 17 give examples of how many customers
still prefer to respond to campaigns through traditional channels.
4. Step 2. Campaign Insight. Slides 18 and 19 show the type of picture that needs to be built
up – usage of different types of sites by different audience members. Slides 20 and 21 give
example of detailed insights comparing site and search popularity respectively.
5. Step 3. Segmentation and targeting. This topic has been discussed in previous chapters,
particularly in Chapters 2 and 4. Slide 22 gives a summary of different targeting and
segmentation approaches.
6. Step 4. Offer, message development and creative. Slide 23 gives an example of effective
online creative with prominent proposition and calls-to-action. The CODAR model (Slide
24) gives an example of how the creative may vary according to campaign objectives.
7. Step 5. Budgeting and selecting the digital media mix. Slides 25–29 show different model
approaches for setting the mix.
8. Step 6. Integration into overall media schedule or plan. Slides 30 and 31 introduces the
principles of effective integrated marketing campaigns while Slides 32–34 give example
campaigns.

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Activities
Activity 8.1 A framework for selecting media
Answer
No answer provided since this is more appropriate as a box. It will be corrected in a future
edition.
Activity 8.2 Creating a digital campaign budget
Purpose
To illustrate the type of budget created internally or by digital marketing agencies. Figure 8.20
shows an extract.
Activity
Download the spreadsheet from www.davechaffey.com/Spreadsheets to understand how
the different calculations relate to each other. Try changing the cost of media (blue cells)
and different click-through rates (blue cells) for which typical values are shown for a
competitive retail product. View the formulas to see how the calculations are made.
How would you make this model more accurate (i.e. how would you break down each
digital media channel further?)
Answer
1. Offline outcomes can be considered (e.g. phone calls).
2. The model is based on last-click attribution. It could be modeled across media.
3. Lifetime value could be considered rather than the value from first sale.
4. Digital media channels such as search marketing, online advertising and partners could be
broken down further to show particular types of sites or significant individual sites. This
may require some reference to relevant parts of Chapter 9.

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Exercises
1. Review the reasons why continuous marketing activity involving certain digital media
channels is preferable to more traditional burst or campaign-based activity.
Digital media gives potential to reach audience members at the key point in buying cycle when
they are actively seeking and reviewing products. This reduces wastage familiar from traditional
media when ads are displayed when the audience is not receptive. This is particularly relevant
for these digital media channels:
• Search engine marketing. Can target audience dependent on searches they perform.
• E-mail marketing. Can follow-up on-site visit and interest in product with e-mail campaign.
• Behavioural targeting through online advertising. Can follow-up ads for those who have
clicked through.
2. Describe the unique characteristics of digital media in contrast to traditional media.
In this chapter, the differences referred to at the start of the chapter are:
• From push to pull
• From monologue to dialogue
• From one-to-many to one-to-some and one-to-one
• From one-to-many to many-to-many
• From lean-back to lean-forward
• Changes in nature of marketing communications
• Increase in communication intermediaries
3. Give example goals for an online acquisition campaign in terms of response rates or
engagement with creative, cost and overall campaign effectiveness.
Figure 8.6 provides a relevant example:
• Response rate. Click-through rate
• Engagement with creative. Interaction rate, IR for online ads
• Cost. Cost per click and cost per acquisition are the main measures
• Overall. Cost per sale and number of leads or sales against target are the most important
measures.

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4. Review the options for targeting particular audience groups online with different
digital media.
Table 8.3 provides one approach to this answer. An alternative approach is to break down by
media channel, that is
• Paid search. According to keywords entered
• Online advertising. According to demographic profile of sites used
• E-mail marketing. All approaches in Table 8.3 are possible.
5. How should a company decide on the relative investment between digital media and
traditional media in a marketing campaign?
The answer should reference the difference in balance of investment between investment
according to campaign goals and type, that is brand campaign and direct response campaign
as suggested by Figure 8.17 will be different. Offline investment in advertising will tend to be
higher when generating awareness.
For a direct response campaign, the cost-of-acquisition of customers influenced online and
offline should be considered.
Econometric modeling is another approach to assess relative investment mentioned in the text
that can be referenced.
6. What are the options for integrating different types of digital media channels with
traditional media?
Customer journeys should be controlled as they switch between traditional channels and digital
channels, that is:
• Online to offline. Through prompting with phone numbers and providing chat options
• Online to offline. Providing clear web addresses and value propositions encouraging visitors
to the site
7. How can different forms of customer insight be used to inform campaign execution?
The main types of insight you should reference are:
• Site audience reach (size of sites) and composition (including media consumption)
• Online buyer behaviour and preferences
• Search behaviour
• Personas can be developed to characterise particular types of audience

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8. What are the issues that a marketer should consider when defining their offer and
message for an online campaign?
• Identification of primary offer and secondary offer
• Reasons to click-through to web site
• Prominence of call-to-action within creative format
1. Discuss the analogy of Berthon et al. (1998) that effective Internet promotion is similar
to a company exhibiting at an industry trade show attracting visitors to its stand.
Students should start by describing the analogy and then for each describe similarities and
differences, summing up overall.
• Attract to stand. Similarities. Difficulty for customer to find relevant sites/stands since there
is limited information in a paper or electronic directory. Differences: visual techniques can
be used to attract attention to a stand-visitor when they come near. There is no analogy for
this on the web. Grouping with similar stands may help, and there is a web analogy to this.
• Engage and inform. In both cases, customers will have expectations about quality of service
and information needs, which must be met. If a stand, or site, is busy or they cannot find the
information they need then the customer may leave, never to return!
• Call-to-action. In both situations, it is preferable to collect information about a customer – a
business card, or filling in a paper/electronic form, but brand awareness may be developed
in both cases and this may be either positive or negative, according to the quality of service.
2. Select a company of your choice and assess the effectiveness of the integration
between their traditional communications, digital media channels and their website.
• Dell is a good example of a company that integrates its online and offline communications
well. If you search in a search engine for Dell 'as advertised', you will see separate
categories for how they integrate:
• Catalogue
• Television
• Magazines
• Newspapers
• Online
3. Select a recent campaign from a charity and with reference to their website campaign
pages, identify how they should set campaign goals and review effectiveness.
Students should be advised to select an appropriate framework(s) for reviewing effectiveness,
for example:
• 5Ss – Sell, Serve, Speak, Sell and Sizzle

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• Visitor Volume, Quality and Cost measures (illustrated in Figure 8.5)
Different types of outcomes should be identified, for example:
• Donations
• Visits to campaign pages
• Visits to community pages
4. How should companies decide on the granularity of targeting in digital media
campaigns. Select two digital media channels to illustrate your examples.
Granularity refers to the size of different customer grouping that is used for targeting. This will
vary according to the type of media that is used for targeting. For different media, different
targeting criteria should be described, that is:
• Paid search. According to keywords entered
• Online advertising. According to demographic profile of sites used by audience
• E-mail marketing. All approaches in Table 8.3 are possible
1. Outline the range of goals that should be used to define success criteria for an online
marketing campaign.
Students should select an appropriate framework(s) for goal setting, for example:
• 5Ss – Sell, Serve, Speak, Sell and Sizzle
• Visitor Volume, Quality and Cost measures (illustrated in Figure 8.5)
2. Using an example from a business-to-business company, describe the options
available for targeting an audience through an e-mail newsletter.
See Table 8.3. Issues to consider:
• Relationship with company – prospect or customer
• Demographic segmentation, that is company size, sector, individual members of buying unit
• Pyschographic profile of individual decision maker
• Value of company (current and future)
• Lifecycle stage
• Behaviour – response to previous newsletters

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3. Explain why integration between online and traditional media will make a campaign
more effective overall.
Reference the characteristics of integrated marketing communications summarised by Pickton
and Broderick (2001) as the four Cs of:
• Coherence. Different communications are logically connected.
• Consistency. Multiple messages support and reinforce, and are not contradictory.
• Continuity. Communications are connected and consistent through time.
• Complementary. Synergistic, or the sum of the parts is greater than the whole!
The CODAR framework can also be referenced. This shows that certain media may be more
effective for different campaign goals, that is, idea forming, relationship-building, sales activation,
product experience and help.
4. Describe different options for testing the effectiveness of competing offers online.
5. Which do you think are the three most important changes in campaign
communications introduced by the emergence of digital media channels?
The answer may reference the differences referred to at the start of the chapter as:
• From push to pull
• From monologue to dialogue
• From one-to-many to one-to-some and one-to-one
• From one-to-many to many-to-many
• From lean-back to lean-forward
• Changes in nature of marketing communications
• Increase in communications intermediaries
6. Which considerations would determine the suitability of incorporating a mobile 'text-
to-win' promotion into an offline campaign?
• Usage of mobile amongst audience
• Anticipated response rate given offer
• Fit with brand
7. In which ways is the Long Tail concept relevant to campaign planning?
The Long Tail was introduced in Chapter 6 as part of the product element of the mix. From a
campaign perspective, it is relevant to the diversity of online customer behaviour which has
particular relevance for:

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• Search engine marketing. Does paid search advertising or SEO target the campaign head
or tail?
• Online advertising and PR. Does this target the most popular sites in the head or the
smaller sites which may be collectively important?
For each of these, it is a trade-off between the relative cost of targeting the head which tends to
be higher, but gives a greater reach and the tail which can be more resource intensive.
8. How should a confectionary brand assess the success of a campaign microsite in
uplift of branding metrics?
The branding metrics that are referenced in the chapter include:
• Brand awareness
• Brand favourability
• Purchase intent
Case study 8. A short history of Facebook
Questions
1. As an investor in a social network such as Facebook, which financial and customer-
related metrics would you use to assess and benchmark the current business
success and future growth potential of the company?
From comments in the case study, the main revenue model is ad-based advertising (CPC and
CPM). Facebook has said it will not sell customer data and there is no indication of affiliate
related models.
Customer-related metrics are related to engagement which indicates capability to sell ad space
– not simply users, but active returning users and the number of pages viewed per day. The
proportion of ad inventory sold is also important.
A basic answer will provide:
• Understanding of financial metrics – Revenue, Costs, Growth.
• Clear framework of different metrics types – efficiency versus effectiveness.
• Audience Engagement and satisfaction metrics such as those mentioned in the case.
A more competent answer will reference elements of profitability (e.g. ad revenue), alternative
models, (e.g. subscription) (although clear data not sold) costs (e.g. R&D, Development),
Operational costs of managing business (on a per active user basis).

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2. Complete a situation analysis for Facebook focusing on an assessment of the main
business risks which could damage the future growth potential of the social network.
Typical risks are:
• Ad revenue limited because of difficulty of engaging audience in ads
• Major privacy problem as with Beacon
• Intellectual Property Rights
• Technical problems with scalability leading to performance problems and increased technical
costs
• New entrant or alternative company offers superior experience – what is the likelihood of
this
Students could be encouraged to create a SWOT analysis. The likely probability and impact of
each risk should also be reviewed.
3. For the main business risks to Facebook identified in your answer to Question 2,
suggest approaches the company could use to minimise these risks.
• Ad Revenue. Review different forms of advertising. Test with users and advertisers.
• Privacy. Explain clearly at signup. Test changes to use of data with user-group of trusted
users. Explain reason for future changes clearly.
• Technical problems. Testing programme focusing on load testing.
• New entrants. Developing proposition to lock-in existing users, forming partnerships to
approach new audiences.

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C H A P T E R 9
Marketing communications using digital media
channels
A review of the relevance, and success factors for different online communications tools.
Notes on using slides for ninth chapter in lectures – lesson
plan
1. Introduction. Structured around six key digital media channels from Chapter 1 (slide 4).
2. Search engine marketing. Slide 5 shows the importance of search engines. Slide 6 shows
the SERPS listings and Slide 7 how click volume decreases with each position. Slide 8 is a
summary of the process for creating search engine listings. Slides 9 and 10 summarise the
main ranking factors for natural and paid search that are discussed in the text.
3. Online PR. Slide 21 is useful to compare online and traditional PR – ask students the
difference between them (e.g. loss/gain of control, time, diversity of methods). Slide 12
summarises the main online PR activities and Slides 13 to 16 summarise three of the main
activities.
4. Online partnerships. Slide 17 explains affiliate marketing.
5. Interactive advertising. Slide 18 shows variation in responses to online advertising. Slide
19 shows the model for online advertising. Slide 20 gives an example of behavioural
targeting. Slide 21 is a good site to ask students for their opinions on effective ads.
6. E-mail marketing. An example of an e-mail campaign is provided in slide 22. Options for
e-mail marketing tactics are presented in Slide 23. Slide 23 gives typical response rates.
Slide 25 gives an example of an Email service provider. Slide 26 notes the importance of
avoiding trapping as a ‘false positive’. Slide 27 shows a mobile marketing application.
7. Viral marketing. An example is shown in Slide 28.
8. Offline promotion of a web presence. Slide 29 shows a case study of the offline media
influence.
9. Summary. Slides 30 and 31 present an evaluation of strengths and weaknesses of digital
media channels.

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Activity
Activity 9.1 Selecting the best digital media channel mix techniques
Suggest the best mix of (online and offline) promotion techniques to build traffic for the
following situations:
1. well-established B2C brand with high brand awareness;
2. dot-com start-up;
3. small business aiming to export;
4. common B2C product, for example, household insurance;
5. specialist B2B product.
Answer
1. For a well-established B2C brand, offline advertising through TV and print are still
important to generate awareness. For example, at the time of writing Sky
(www.bskyb.co.uk) spends just 20 per cent of budget online and is an enthusiastic adopter
of online techniques. Online techniques such as search engine marketing (SEM) and online
advertising are commonplace.
2. Likely to be unable to afford offline media, and so will use a combination of Search
Marketing, Online PR and Affiliate Marketing (e.g. the approach used by Zopa, which is the
case study in Chapter 2.)
3. Search engine marketing is most effective for targeting.
4. Again SEM and affiliate marketing tend to have the most effective cost per acquisition.
Some display ad buying for awareness. E-mail marketing tends to be best used for retention
marketing, but could be used in this application – commonly used for loans. This requires
significant online investment to drive awareness.
5. Similar to answer 3, with SEM, possibly with ads in targeted e-mail newsletters or on niche
sites.
Exercises
1 Briefly explain and give examples of online promotion and offline promotion
techniques.
Online promotion techniques (Figure 1.9 which shows six types including those below):
• Search engine marketing (paid and natural).

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• Link building campaigns – referring links from related sites are also important in building
traffic to a site.
• Display advertising – used to drive traffic to sites by placing adverts on specific interest sites
or displaying adverts when particular keywords are entered. When users click on an
advertisement (a click-through) they are taken to a website with further information. Banner
advertising can also be used for other purposes such as brand building or offering
incentives. Banner adverts are usually paid for according to the cost per 1,000 people
viewing the advert (CPM).
• Affiliate marketing with partners (cost per acquisition).
• Advertising in e-mail newsletters.
• Co-branding and sponsorship.
• Viral marketing and word-of-mouth marketing.
Offline promotion techniques
Promoting the website address and highlighting the value proposition of the website in:
• Company stationery and promotional literature;
• Traditional media adverts in print, or on TV;
• Through PR.
2. Explain the different types of payment model for banner advertising.
• Per exposure. Typically through advertisement impressions (CPM) or possibly through the
length of time the user views an advertisement. May be per page, or for ‘run-of-site’.
• Per response. Payment only occurs according to the number of click-throughs that occur –
Cost per click (CPC).
• Per action. This is payment according to a marketing outcome such as a download of a
product fact sheet, a new sales lead received when users fill in an online form giving their
name and address or an actual sale placed online – Cost per action (CPA).
3. Which factors are important in governing a successful online banner advertising
campaign?
• Targeting the correct location and timing for the audience.
• Suitable creativity including incentive to encourage click-through .
• Good follow-up when user arrives on a site through tailored landing pages.
4. How can a company promote itself through a search engine?
The company needs to register its web address at the search engine, if not already included in
the index (this typically happens automatically when other sites link to it). The two other
techniques are search engine optimisation (SEO) displaying ads in the natural listings (no cost
per click) and sponsored listings (payment on a cost per click basis).

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5. Explain the value of co-branding.
Co-branding can be compared with advertising, over which it has the following benefits:
• it is usually for a longer period, giving time for an association to form;
• the power of the different brands may be more than their sum if there is good synergy
between companies;
• it can be cheaper than banner advertising since it is often a reciprocal arrangement.
6. How can Online PR help promote a new product?
As with traditional media, media mentions in online general and specialist newspapers and
magazines can assist. Creating buzz through comments by influencers in blogs and social
networks could help build interest and discussion about a product. This is related to viral
marketing.
7. How should websites be promoted offline?
Offline promotion techniques are listed in the answers for Question1.
8. What do you think the relative importance of these Internet-based advertising
techniques would be for an international chemical manufacturer?
(a) Display advertising
(b) Paid search marketing
(c) Affiliate marketing
To answer this question, we need to consider whether the advertising is targeting new or
existing customers and the capability to reach a business audience. These media are typically
most effective for customer acquisition. The strengths should be assessed through Table 9.5.
that is,
(a) Display advertising. Generates awareness of supplier or services. Could be used on
specialist portals used by target audience.
(b) Paid search marketing – This would have less wastage than (a) since ads can be controlled
such that they are only displayed when relevant searches are conducted.
(c) Affiliate marketing – Affiliate marketing is less relevant for B2B marketing of high value
items than for low-cost consumer items, so is the least relevant of the three options.
1. Discuss the analogy of Berthon et al. (1998) that effective Internet promotion is
similar to a company exhibiting at an industry trade show attracting visitors to its
stand.
Students should start by describing the analogy and then for each describe similarities and
differences, summing up overall.

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• Attract to stand. Similarities: Difficulty for customer to find relevant sites/stands since there
is limited information in a paper or electronic directory. Differences: visual techniques can
be used to attract attention to a stand-visitor when they come near. There is no analogy for
this on the web. Grouping with similar stands may help. There is a web analogy to this.
• Engage and inform. In both cases, customers will have expectations about quality of service
and information needs, which must be met. If a stand, or site, is busy or if customers cannot
find the information they need, then they may leave, never to return!
• Call-to-action. In both situations, it is preferable to collect information about a customer – a
business card, or filling in a paper/electronic form, but brand awareness may be developed
in both cases and this may be either positive or negative, according to the quality of service.
2. Discuss the merits of the different models of paying for banner advertisements on
the Internet for both media owners and companies placing advertisements.
The models that should be considered are as follows:
• Per exposure. Typically through advertisement impressions (CPM) or possibly through the
length of time the user views an advert. May be per page, or for ‘run-of-site’.
• Per response. Payment only occurs according to the number of click-throughs that occur.
• Per action. This is payment according to a marketing outcome such as a download of a
product fact sheet, a new sales lead received when users fill in an online form giving their
name and address or an actual sale placed online.
This question could be extended to include co-branding in the comparison.
Method Benefit/problems to media owner Benefit/problems to client
Per exposure + Similar to existing model, revenue
not dependent on creativity
+ Best revenue generating model
with least uncertainty
+ Cost of advertising well
known
− Pay for click-throughs that
do not result in sales
Per response − Dependent on creativity and timing
− Value of advertising cannot be
assessed in advance
+ Pay for active responses
− Cost will be less easy to
estimate
Per action − As above, but even greater
uncertainty – dependent on creativity
and site
+ Only pay for customers who
buy, or register
− Costs unknown
There is evidence from the United States that with over supply of banner advertising space, the
power of the client is increasing, and some large clients have been able to negotiate per
response, or per action deals.
3. Explain the factors which control the position of a company’s products and services
in the search engine results pages of a search engine such as Google.
This question requires separate treatment of ranking factors within the natural (on-page
optimisation, internal linking and external linking) and paid search results (maximum CPC bid
and quality score). These are summarized in Slides 9 and 10 accompanying this chapter.

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4. Compare the effectiveness of different methods of online advertising including
display advertisements, paid search marketing, and affiliate marketing.
The student should define effectiveness at the start of the question by referring to the ability of
the advertisement to inform, persuade, remind, build-brand or encourage action. These need to
be offset against the cost of placing the advert and the ease of finding a suitable online location
for its target audience.
See also Question 8 in the Self-assessment section.
1. Give three examples of digital media channels and briefly explain their communications
benefits.
See answer to self-assessment Question 1.
2. Describe four different types of sites on which online display advertising for a car
manufacturer’s site could be placed.
• General (horizontal) portal, for example, Yahoo!
• General online media, for example, Online Telegraph or Wall Street Journal.
• Vertical portal/online magazine, for example, TopGear.
• Targeted demographic in online magazine, for example, investment portal for those with
high disposable income.
3. Click-through is one measure of the effectiveness of online advertising. Answer the
following:
(a) What is ‘click-through’?
Each time a user clicks on an advert to take him through to a destination site.
(b) Which factors are important in determining the click-through rate of of a banner
advertisement?
The important factors are creative incentives, where placed (which site), when placed,
where placed (on site).
(c) Is click-through a good measure of the effectiveness of online advertising?
This depends on whether the main purpose of advertising is direct response or brand
advertising. For direct response, click-through is a useful measure but better measures are
based on the resulting marketing outcomes such as leads or sales. For brand advertising to
increase awareness of brands and products, this can be assessed through surveys on
brand preference using measures such as brand awareness, familiarity, favourability and
purchase intent.

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4. What is meant by co-branding? Explain the significance of co-branding.
Co-branding is an arrangement between two or more companies where they agree to jointly
display content and perform joint-promotion using brand logos or banner adverts. Its
significance is that it enables long-term relationships between complementary sites, which are
usually low-cost or reciprocal arrangements. It is a good method of providing relevant content
on a site without the cost of developing it.
5. What are ‘meta-tags’? How important are they in ensuring a website is listed in a
search engine?
Meta-tags are part of the HTML file, typed in by web page creators, which is read and displayed
by the browser. They are effectively hidden from users, but are used by search engines when
robots or spiders compile their index. They were formerly used to identify relevant sites when
users type in keywords into search engines; however, they are not the only criteria since the
number of times the keyword appears on copy and backlinks to a page have a greater influence.
6. Name three alternative types of e-mail marketing that can be used for promotion of a
particular website page containing a special offer.
Needs to distinguish between acquisition and retention.
Customer acquisition:
• Rented-list.
• Co-branded e-mail.
• Ad in third-party e-newsletter.
Customer retention:
• Newsletter.
• Campaign E-blast.
• Event-triggered e-mail.
7. Briefly evaluate the strengths and weaknesses of affiliate marketing for a well-known
retailer.
Advantages:
• controlled costs through ‘pay per performance’ cost per acquisition model;
• can reach wider audience through network of affiliates;
• can target individual products through strengths of different affiliates;
• affiliates can protect brand, for example, in search listings by displacing competitors.
Disadvantages:
• may be paying for some customers who are already familiar with offering (e.g. have
previously responsed to an advertisement, but affiliate is the last click before sale);

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• some level of affiliate fraud has been reported;
• a poorly selected affiliate can damage a brand;
8. Which techniques can be used to promote a website in offline media?
See answer to self-assessment Question 1.
Case study 9. Innovation at Google
Question
1. Explain how Google generates revenue and identify future levels of revenue given
some of the risk factors are for future revenue generation.
Google's revenue has traditionally been based predominantly on advertising which is divided
into these models:
• Pay Per Click Sponsored links within the Google Search Results (and partner search
engines such as AOL).
• Pay Per Click and CPM model within partner sites of the content network which includes
third-party sites such as newspapers and social networks and Google's own properties
such as YouTube. Increasingly, there is a move from text-sponsored links to dynamic
display ads and advertising such as those in YouTube.
Increasingly, revenue will be from Google Applications and associated storage deployed within
businesses as paid services (although basic services are often free). The Google Search
Appliance is a physical product sold to sites for providing their online search service.
Risk factors for future advertising revenue include:
• competition in bidding has traditionally driven up prices but this could fall as companies
become more effective at optimizing their investment through introducing wastage;
• advertising revenue from the content network may fall as site owners explore other ad
models and click-through rates on Google Ads fall as familiarity increases;
• ad-blocking (currently limited since not an automatic feature in browsers);
• click fraud;
• quality of search results falls due to spamming, so Google users turn to a competitor with
an improved search service.
Further risk factors are available in the SEC filings referenced in the case study.

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C H A P T E R 1 0
Evaluation and improvement of digital channel
performance
Issues involved with measuring and improving the results from a website and online marketing
communications.
Notes on using slides for tenth chapter in lectures – lesson
plan
1. Performance management. Slide 4 gives the criteria for improving performance. Slide 5
gives a summary of the performance measurement process and Slide 6 gives a performance
measurement framework of key metrics to report and analyse. Slide 7 shows attrition
through the shopping basket process and the need to improve step conversion. Slide 8 gives
a multichannel performance measurement framework. Slide 9 shows common measures for
traffic volume.
Slide 10 and 11 give an example of how multivariate testing can be used to improve the
results from a website.
Slide 12 highlights the need to integrate different data sources within a system available to
staff with different roles. Slide 13 contrasts two different methods of web measurement.
Slides 14 and 15 gives an example of the output from a web analytics package.
2. Maintenance and content management. Slides 16 and 17 summarise a content review and
update process. Slide 18 provides a summary of the capabilities provided by a CMS.
Activity
Activity 10.1 Optimising a content review process
Purpose
To assess how quality control and efficiency can be balanced for revisions to web content.

98
Activity
The extract below and Figure 10.14 illustrate a problem of updating encountered by this
company. How can they solve this problem?
In one word the answer is empowerment. The only way to increase the speed of the process is
to involve fewer staff and this means training them in the skills required for update.
In this case, the brand manager knows their product sector best, so they have to write the copy
and it is best if they have the sole responsibility for creation and review.
An additional check by the legal department may be necessary for certain types of changes. Of
course, they need to set up different reviewing processes according to the size of the changes
made.
A workflow system built into the content management system will also help remind staff at the
right time to review content and then update the status of the document for publishing.
Exercises
1. Why are standards necessary for controlling website maintenance? What aspects of
the site do standards seek to control?
Content quality will be poor without standards. Poor quality may be manifested by:
• brand and corporate identity inconsistent across site or compared to other channels;
• inconsistent navigation making the site difficult to use;
• poor copy with grammatical errors;
• broken links.
2. Explain the difference between hits and page impressions. How are these measured?
Page impressions are a more valuable indication of activity on a site than hits, since hits are
dependent on the number of graphical items that are downloaded on each page. The values are
measured in a ‘transaction log file’ on the web server that is added to for every piece of
information that is downloaded.
3. Define and explain the purpose of test and live versions of a website.
A test version is used to trial a site to identify and remove errors before it becomes live.
4. Why should content development be distributed through a large organisation?
By distributing content creation, the most knowledgeable people will be writing content.

99
5. What is the difference between online and off line metrics?
Online metrics are those collected on the site. These are mainly quantitative and indicate
patterns of use of different parts of the site. Offline measures are more typically qualitative and
involve surveying users for their attitudes and views about the site.
6. How can focus groups and interviews be used to assess website effectiveness?
These can be administered online or offline. Offline focus groups are useful to discuss a
prototype of a system. Online questionnaires are increasingly used to ask customers of their
experience of using a website.
7. Explain how a web log file analyser works. What are its limitations?
Software is used to review the ‘transaction log file’ on the web server that is added to for every
piece of information that is downloaded. Limitations are that the review is a batch process rather
than a real-time collection.
8. Why is it useful to integrate the collection of online and offline metrics?
This enables both quantitative and qualitative market research.
1. ‘Corporate standards for a website’s format and update process are likely to stifle the
creative development of a site and reduce its value to customers’. Discuss.
This answer is best tackled by developing a list of the advantages and disadvantages of
centralised control.
Arguments for statement (for central control/corporate standards)
(a) Greater consistency on site. Visual and brand identity. Fewer errors.
(b) Uses same tools for editing content, which will ease maintenance.
(c) Provides a framework to develop a site.
(d) Ensures marketing effectiveness.
Against statement (against corporate standards)
(a) More resources required.
(b) Ownership of content helps motivate staff developing content.
(c) Possibly, better tailoring to targets from academic information and marketing information.
(d) Promotes innovation.

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2. ‘There is little value in the collection of online metrics recorded in a web-server log
file. For measurement programmes to be of value, measures based on marketing
outcomes are more valuable’. Discuss.
This question contrasts the collection of quantitative data on a server log file, much of it of
dubious marketing value, with traditional marketing measures such as leads and sales. The
best method of tackling it may be to refer to the different measures from a log file analyser such
as WebTrends and analyse which are of marketing value, and which are not. These can then
be contrasted to hard marketing measures and more intangible market research on how the site
affects attitudes and perceptions of the company and its products.
3. You have been appointed as manager of a website for a car manufacturer and have
been asked to refine the existing metrics programme. Explain, in detail, the steps you
would take to develop this programme.
This would use the framework given in the answer to Examination question 7, but describe each
stage in more detail.
4. The first version of a website for a financial services company has been live for a
year. Originally it was developed by a team of two people, and was effectively
‘brochureware’. The second version of the site is intended to contain more detailed
information, and will involve contributions from 10 different product areas. You have
been asked to define a procedure for controlling updates to the site. Write a
document detailing the update procedure, which also explains the reasons for each
control.
The document should refer to the stages of updating a document given below, and identify
responsibilities for each. Standards for the extent of review and testing will vary according to
what is defined as a minor update and what is defined as a major update.
• Write
• Review
• Correct
• Publish (to test environment)
• Test
• Publish.
1. Why are standards necessary to control the process of updating a website? Give
three examples of different aspects of a website that need to be controlled.
Refer to the answer for Self-assessment question 1.
2. Explain the following terms concerning measurement of website effectiveness:
(a) Hits
A hit is recorded for each graphic or block of text requested from a web server. It is not a
reliable measure for the number of people viewing a page.

101
(b) Page impressions.
A page impression is a reliable measure denoting one person viewing one page.
(c) Referring pages.
A listing of the previous sites that users visited, which link to the current site.
3. Measurement of websites concerns the recording of key events involving customers
using a website. Briefly explain five different types of events.
Events include:
• customer arrives on site (from referring page);
• a user viewing a page (page impression);
• a user visiting a site (site visit/user session);
• customer fills in online form to request information or to register with company;
• customer places order;
• customer leaves site (exit page).
4. Describe and briefly explain the purpose of the different stages involved in updating
an existing document on a commercial website.
• Write
• Review
• Correct
• Publish (to test environment)
• Test
• Publish.
5. Distinguish between a test environment and a live environment for a website. What is
the reason for having two environments?
A test version is used to trial a site to identify and remove errors before it becomes live.
6. Give three reasons explaining why a website may have to integrate with existing
marketing information systems and databases within a company.
(a) For direct marketing – collecting customer information on the site needs to be added to the
customer database.
(b) For e-commerce – customer account information needs to be linked to the purchase.
(c) For measurement of performance review – integrating information on customer visits with
marketing outcomes such as offline communications and sales.

102
7. You have been appointed as manager of a website and have been asked to develop a
metrics programme. Briefly explain the steps you would take to develop this
programme.
(a) Define objectives
(b) Define measures
(c) Define process and responsibilities for collection and review
(d) Select tools
(e) Implement
(f) Review.
8. If a customer can be persuaded to register his or her name and e-mail address with a
website, how can this be used for site measurement purposes?
These are fundamental marketing outcomes that need to be linked to customer information.
Case Study 10. Learning from Amazon’s culture of metrics
Questions
1. By referring to the case study, Amazon’s website for your country and your experience
of Amazon offline communications, evaluate how well Amazon communicate their core
proposition and promotional offers.
Worldwide, the proposition is summarised by the well-known brand identity, which features
‘from A to Z’ suggesting the range of products and breadth within categories. Amazon used to
refer to itself as the world's largest bookstore.
In the article, the following sentence gives an idea of the different aspects of the custom value
proposition to watch out for.
‘It believes the main competitive factors in its market segments include ‘‘selection, price,
availability, convenience, information, discovery, brand recognition, personalised services,
accessibility, customer service, reliability, speed of fulfilment, ease of use and ability to adapt to
changing conditions, as well as our customers’’ overall experience and trust in transactions with
us and facilitated by us on behalf of third-party sellers’.
Googling Amazon will show the different propositions explained in your region.
For Amazon US, the proposition is clearest – the listing in Google states:
Amazon.com Books: New & used textbooks, biographies, children's
Online shopping from the earth's biggest selection of books, magazines, music, DVDs,
videos, electronics, computers, software, apparel & accessories, shoes and for books:
Amazon.com: Online Shopping for Electronics, Apparel, Computers
Online shopping for millions of new and used books on thousands of topics at everyday low
prices.

103
The fulfilment proposition in different countries will revolve around the minimum order for free
delivery. Discounting for different books will also vary according to their popularity.
2. Using the case study, characterise Amazon’s approach to marketing communications.
With reference to the six categories of e-communications tools described in Figure 1.9, probably
the key techniques are search engine marketing, affiliate marketing and partnerships with non-
competitive transactional websites.
In this respect Amazon’s approach is selective, using the techniques which are most cost-
effective. The other facet is the use of automation to enable specific advertising through the
natural and paid listings of the search engines. Testing of the best approach is important to
make these ads work.
The communications approach is described in the extract towards the end of the case starting:
‘Online advertising techniques include paid search marketing, interactive ads on portals, e-mail
campaigns and search engine optimisation’.
The affiliate and search engine marketing approaches are described earlier in the article.
3. Explain what distinguishes Amazon in its uses of technology for competitive
advantage.
The following are characteristic of Amazon’s use of technology:
• use of in-house technologies for personalisation;
• early adopter – Rapid adoption of new techniques, for example, Jeff Bezos has talked about
the merits of Web 2.0;
• extensive testing and optimisation to find the best approach;
• avoidance of monolithic projects, with focused teams tackling specific issues;
• infrastructure scalable to deal with rapidly increasing demand;
• approaches developed for one product must be extensible to others.
4. How does the Amazon ‘Culture of Metrics’ differ from that in other organisations
from your experience?
This question asks students to reflect on their own experiences. From the case, the following
are characteristic of Amazon’s approach:
• passionately driven from the top by Jeff Bezos;
• importance of metrics in governing all marketing and technology activities;
• arguments about the best marketing approach are often based on tests rather than those
who shout the loudest: ‘Data trumps intuition’;
• accepted wisdom is not accepted – tests are re-run since the approach may vary through time.

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C H A P T E R 1 1
Business-to-consumer Internet marketing
An overview and examples of how the Internet can support Business-to-consumer (B2C), in
particular retailers.
Notes on using slides for the eleventh chapter in lectures –
lesson plan
1. Slide 4 provides a framework showing the influences on online retail behaviour and
perception of experience.
2. Slide 5 reviews loyalty variables.
3. Examples: Slides 6 and 7.
4. Slide 8 is a strategic e-retail framework.
5. Slide 9 gives information sources influencing consumer selection of a product.
6. Slide 10 is an example of coupon redemption.
Activity
There are now no activities in this chapter because of the increase of content in Chapters 8 and 9,
although an activity is retained in the questions at the end of the chapter:
Exercise ‘Going shopping online’
Select a product or service of your choice that you are about to, or would like to be able to,
purchase. Visit as many websites as required until you find a product or service that could
meet your needs if you were to make a purchase. Make sure you take note of all the sites
you visit, the amount of time spent on each site and the type of information you might need
to help you make your product/service choice.
Now try to analyse your online shopping experience using by answering the following
questions:
1. the problem you were seeking to solve;
2. the extent of your information searching;

105
3. the choice criteria, which informed your decision making;
4. the purchase solution (your preferred product or service) and
5. evaluate the websites you have visited, in terms of how easy it was to find the information
that you needed to make your purchasing decision.
Answer
This answer relates best to Chapter 7 – Delivering the online customer experience and Chapter 5
– The Internet and the marketing mix.
This question is good at prompting questions involved in customer-centric marketing or user-
centred design.
Exercises
1. Make a list of classification variables, which a retailer might use when trying to
identify an online target market for (a) high-tech training shoes and (b) organic
beauty products.
Table 11.1 shows the potential classification variables:
(a) gender, age most appropriate
(b) gender, age, income and ethnicity
2. Explain the difference between classification and character variables.
(a) Classification variables are those personal attributes which tend to remain static throughout
an individual’s life time or evolve slowly over time. These variables are particularly useful for
marketers as they can help to identify particular consumers and target groups. Moreover,
according to Jobber (2007), profile segmentation variables can be used to group consumers
together in a meaningful way, so that they can be reached by suitable media communications.
Examples include demographic variables shown in Table 11.1
(b) Character variables are less straightforward to understand and identify as they are any
attributes of a consumer’s perceptions, beliefs and attitudes, which might influence online
behaviour and also shape an individual’s intentions to shop online, for example,
innovativeness, enjoyment, skills and experience and emotions.
3. Describe three different strategies an e-retailer might develop when creating an
online presence.
Select from the following:
• Established retailers using the Internet retail market strategically or tactically as a marketing
tool.

106
• Virtual merchants designing their operating format to accommodate the demands of online
trading.
• Intermediaries who link Internet technology and the retail supplier with the consumer.
• Manufacturers using the Internet to take their goods direct to the consumer. Any one of
these types could become the archetypal model Internet retailer.
4. Describe the different types of formats that an online retailer might follow:
• Bricks and clicks,
• Clicks and mortar and
• Pureplay
See also Information only strategies (adapted from Weltevreden & Boschma, 2008) in text.
5. From a resource-based view, explain the differences between resources and
capabilities.
• Resources are what are available in terms of budget for media, site design and people.
• Capabilities are concerned with how the resources are deployed in terms of processes
followed and effectiveness of outcomes produced.
1. Discuss whether you consider that all products on sale in the high street can be sold
just as easily via the Internet.
This depends on the need to evaluate before purchase. Standardised products such as books
and CDs that do not require assessment before purchase are preferable.
Australasia is home to approximately 2 per cent of the Internet users around the globe, whereas
the USA is home to 40 per cent. Describe how an online retailer might choose to target a
market. Illustrate your answer with examples.
The issues to consider are as follows:
• Large companies, like an online bookseller, are certain to target the largest markets such as
the USA first.
• The local market can still be significant although the users are only two per cent. It is more
likely to be entered by local, existing vendors. Entrants from other countries would need to
review options to partner with local players.
• New entrants require: building brand awareness, a convincing proposition to encourage
switching, efficient distribution and substantial investment for the above.

107
2. Select three websites that demonstrate the different ways in which a retailer might
use the Internet to interact with its customers. Compare the contents of the websites
and explain what the potential benefits are for the customers of each of the sites.
The content and services of these websites can occur using the categories listed in the chapter.
• Product information
• Financial information
• Company information
• Educational information and Press releases
• Recruitment information
• Marketing communication tool
• Direct communications
• Marketing research tool
• Sales channel (total or partial).
1. It was once predicted that the Internet would replace high street stores and that
within ten years the majority of retail purchases would be made online. However,
while online shopping is continuing to grow year-on-year, it still represents a small
part of the total retail spend. Explain why the early predictions have not been met
from either the perspective of the consumer or the retailer.
The evidence of sales can be presented to show that this is unlikely to be the case. Many still
enjoy the offline shopping experience, which cannot be replicated online. For certain
standardised products such as books, the Internet offers clear advantages, but despite this
physical bookshops will still exist after ten years of the prediction.
2. Tesco.com, has established a position of being the world’s leading online grocer
with an estimated sales turnover of £401m and profits up 37 per cent to £21m (as at
21 September 2005). However, Iceland was the first UK retailer to offer nationwide
delivery of a range of groceries ordered via the web and yet they have ceased to offer
this service.
Discuss why Tesco.com has been able to establish such a dominant market position?
This should reference both to initial adoption of the channel by existing customers and new
customers and the continued usage of the channel.
Issues to consider include the following:
• early/first mover advantage;
• senior management buy-in to establish a vision and strategy for Tesco.com;

108
• investment in specific offline advertising to encourage online adoption;
• use of existing customer data to migrate customers to digital channels (e.g. through direct
mail communications);
• ongoing communications through email and direct mail – touch strategy;
• evaluation of customer needs – attention on loyalty drivers through satisfaction surveys, etc
and
• creation of appropriate differential marketing mix including Product (new and existing online
products), Price (price testing of delivery), Place (use of comparison intermediaries) and
Promotion (effective use of online communication tools such as affiliates and paid search.
Case study 11. E-strategy in the UK retail grocery sector:
exploring the strategic pathways followed by the UK’s five
leading grocery retailers
Students should be prompted to refer to Ellis-Chadwick, F.E., Doherty, N.F. and Anastasakis, L.
(2007) ‘E-strategy in the UK retail grocery market: a resource-based analysis’, International
Journal of Managing Service Quality, Vol. 17, no. 6, 703–727.
Questions
1. By referring to the case study, map out the strategic pathways adopted by ASDA,
Sainsbury's, Tesco and Waitrose and highlight the resources and competencies
which helped each company to develop as an online grocery retailer.
A stage or capability model is an appropriate method of mapping this referencing that the
services offered.
2. Discuss the extent to which Tesco has achieved a competitive advantage through
superior IT resources.
This should be assessed through reviewing the role of technology in improving:
• consumer usability of site;
• marketing mix – e.g. product and pricing proposition;
• marketing of the site to existing and new Tesco customers and
• promotion of continued usage of the site.
3. Explain why the creation of a sustained competitive advantage becomes more
difficult to achieve as competitive rivalry increases.
This is dependent on the balance between differential propositions and switching costs. A
review can be based on comparing the marketing mix and features of the services, so that this
relates closely to the next question.

109
4. Visit the websites of ASDA/WALMART, Morrisons, Sainsbury's, Tesco and Waitrose
and explore each company site noting down novel and common features, for
example, recipes, customer surveys, promotional information, store locator, extent of
product range. Now summarise how each of the sites differ in terms of the services
offered.
No answer has been supplied, since this will vary through time.

110
C H A P T E R 1 2
Business-to-business Internet marketing
A summary of differences required by online marketing to businesses and case studies
illustrating the services that can be provided.
Notes on using slides for the twelfth chapter in lectures –
lesson plan
1. Slides 4 to 7 give screenshots of companies referenced in the case studies in this chapter.
2. Slide 8 gives a model of strategic value creation.
Activities
There are no Activities in Chapter 12.
Exercises
1. Evaluate and compare the factors likely to affect (a) a construction company and (b)
an insurance brokerage contemplating setting up a transactional website aiming to
develop online market share.
The factors that affect a business in buying and selling online should be reviewed separately,
although they can be reversed. The main factors relate to the suitability of product/service for
sale – for example, commodity products such as office equipment can be readily sold and
bought online, but a high value, complex service such as enterprise software will require a sales
team to explain its purpose and the sales option of a number of different decision makers in an
industrial buying unit.
2. Explain the difference between online market efficiency and online market
effectiveness.
Key chapter extracts:
‘Improving efficiency is important to all businesses but doing things right, in other words being
efficient is only part of the story as it is also important for an organisation to do the right thing in
other words be effective’.

111
‘According to Brown (1987), the critical difference between efficiency and effectiveness is that
“the former is cost focused and the later is customer focused”’.
See also Table 12.1
1. Discuss why a business operating in an industrial market might be cautious about
putting new product specifications on the company website.
Students may want to consider the following:
• fears of security compromising customer or company data;
• damages to the brand or corporate identity caused by poor service;
• giving away of new product information to competitors;
• cost/benefit;
• fear of channel conflict;
• role of sales representatives and
• erosion of margins.
The main fear is clearly competitor access to this data. If placed on the site before product
launch, it would give the competitor the option to develop communication strategies to counter
the launch. Additionally, the specifications could be used as part of the development of a rival
product. Finally, it may cause some confusion in the minds of customers who are considering
older products.
Simply put, detailed product specifications can be analysed by competitors and potential
purchasers to assess the strengths and weaknesses of the product.
2. Discuss to what extent trading online alters relationships between trading partners.
This question relates to the five forces introduced in Chapter 2. Online trading can potentially:
• increase transparency of pricing;
• make it easier to switch suppliers;
• encourage competition through auctions and
• reduce the ability for companies to negotiate prices.
3. Explain how Internet technologies can contribute to the development of online
business strategies.
This refers to new potential business and revenue models introduced in Chapters 2 and 4.
Chapter 4 also reviews 8 different strategy decisions, which can be reviewed. Using the Internet
to support product and market development is particularly important.

112
Examination question
1. Discuss the extent to which B2B e-marketplaces are fundamentally different to
traditional offline markets.
Differences between online marketplaces include the following:
• auction arrangements required more often by purchasers;
• less room for negotiation by suppliers;
• may be more limited in scale.
Case Study 12. B2B adoption of the Internet: Inspirational
Cosmetics
Questions
1. Assess the stage of the Internet adoption for
• Multichemical;
• Inspirational Cosmetics (IC) and
• The organic growers (suppliers).
2. Explain which factor and variables, Henrik Bjornesson is most likely to consider
when deciding how to achieve the business goals set by Rosemary Dulwich, the CEO
of Inspirational Cosmetics.
These should be referenced from Table 12.3 (Factors and variables affecting Internet adoption).
Customer demand should be the most important driver, but the technical feasibility and costs
will form part of a cost-benefit analysis.
3. Consider the likely stage of adoption of the suppliers of organic produce.
This repeats the first question. They will be at the initiation to adoption stage in Table 12.4
(Stages of internet adoption and influencing factors).
4. Suggest ways in which Inspirational Cosmetics might develop its use of the Internet
with these suppliers.
Regardless of the objective chosen, B2B strategies are likely to treat the Internet as another
channel to market and the objectives will be typically directed at achieving incremental value
from the channel. This incremental value could reach a different type of organisation (i.e. smaller
companies for companies with account teams serving large companies), different members of
the buying unit or a different geographic presence.

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