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Sunday, August 14, 2005

Cyber Marketing

Review Questions

1. Define e-business and e-marketing.
E-business is the continuous optimization of a firm’s business activities through digital or information technology. E-business involves attracting and retaining the right customers and business partners. It permeates business processes, such as product buying and selling. It includes digital communication, e-commerce, and online research, and it is used by every business discipline. (pp 2-3)

E-Marketing is the application of a broad range of information technologies for:

• Transforming marketing strategies to create more customer value through more effective segmentation, targeting, differentiation, and positioning strategies;
• more efficiently planning and executing the conception, distribution, promotion and pricing of goods, services, and ideas; and
• Creating exchanges that satisfy individual consumer and organizational customers’ objectives.

This definition sounds a lot like the definition of traditional marketing. Another way to view it is that e-marketing is the result of information technology applied to traditional marketing. E-marketing affects traditional marketing in two ways. First, it increases efficiency in traditional marketing functions. Second, the technology of e-marketing transforms many marketing strategies. The transformation results in new business models that add customer value and/or increase company profitability. (pg 2)

2. What are performance metrics and why are they important?
Performance metrics are specific measures designed to evaluate the effectiveness and efficiency of the e-business and e-marketing operations. This is so important in today’s e-business climate that media reports seem to be full of references to ROI (return on investment) and other measures of success for e-business strategies and tactics featured in the model. (pg 6)
3. What are some of the key legal issues that affect e-marketing?
Current and pending legislation can greatly influence e-marketing strategies. Chief among these are laws concerning privacy, digital property (including copyright), expression, and fraud. Examples include opt-out e-mail, digital property rights, and spam. (pp 6-7)
4. How does technology both raise and lower costs for companies?
Many firms have saved money on staff and paperwork via electronic order processing, billing, and e-mail. Conversely, technology can be a costly investment. Web page development can cost millions of dollars, and large e-commerce operations require expensive hardware and software, especially if they use extensive data gathering and distribution applications. Meanwhile, technology is emerging for improved security, new payment instruments, and low bandwidth. Over time, new technologies continue to emerge, which make current investments obsolete. Finally, putting technology to use entails a steep learning curve. Firms must therefore pay close attention to both technology and strategy if they are to succeed with a viable business model, on or off the Internet. (pg 8)
5. As a technology, how does the Internet compare with the telephone?
Referring to the property descriptions, the telephone is a mediating technology, has global reach, and has network externality. In contrast, the Internet has properties that create opportunities beyond those possible with the telephone, television, postal mail, or other communication media. It is these differences that excite marketers and have them wondering how to best capitalize on them. (pg 9)
6. What are some of the marketing implications of Internet technologies?
Exhibit 1-4 highlights the marketing implications of Internet technologies in the following categories: Bits not atoms, Mediating technology, Global reach, Network externality, Time moderator, Information equalizer, Scalable capacity, Open Standard, Market deconstruct, and Task Automation (pg 10)
7. What are the three main markets of e-business, and how do they differ?
Exhibit 1-5 highlights three important markets that both sell and buy to each other: Businesses, consumers, and governments. (page 11)
The business market is huge because a higher proportion of firms are connected to the Internet than consumers, especially in developing countries. Much of the B2B online activity is transparent to consumers because it involves proprietary networks that allow information and database sharing. Businesses that sell online face increasing competition due to globalization and lower market entry barriers brought about by the Internet. Because the Net contributes to market deconstruction, many firms are changing their entire supply chain structures—which often results in conflict between different marketing channels. This is especially true when manufacturers sell directly to consumers online, thus taking business from retail partners. On the other hand, many firms experience greater interdependence in their value chain due to electronic collaboration practices. Other issues include difficulties serving both offline and online customers, Information overload, and generating revenues in a digital economy. Finally companies in unlikely industries find it relatively easy to forge partnerships that supply value to customers. (pp 11-12)
The balance of power is shifting to consumers—one of the most fundamental changes to marketing because of the Internet. Marketers have practically lost control of brand images and must consistently underpromise and overdeliver, or be found out under the bright lights of the globally networked community. This community also differs greatly by average annual income, Internet penetration, and online usage. The Consumer market is concerned with privacy, safeguarding their children from objectionable Web sites, unsolicited e-mail messages, as well as provide convenience, self-service, speed, good customer service, personal attention, and value. Fortunately, e-marketing can meet all these needs. (pg 13)

The U. S. government is the world’s largest buyer, purchasing over $200 billion in goods and services every year. Add to this the purchasing power of U.S. states, counties, cities, and other municipal agencies, and this makes for a huge market. The governments of other countries are also major purchasers. Government agencies have many rules for suppliers to follow regarding qualifications, paperwork, and so on. Additionally, firms often must compete to be on the government list of approved suppliers, and then compete yet again for specific work contracts through a bidding process. Government agencies are generally very particular about timely delivery of quality products at reasonable prices. The good news is that small and large businesses usually have an equal chance of selling to governments, and that government Web sites announce their buying needs in advance of the bidding process. (pp 14-15)
8. In the context of e-marketing, what does “revenge of the consumer” mean?
Prior to the Internet age, sales orientated marketing appeared along with aggressive and deceptive sales practices. One hundred years of exposure to marketing strategies have made consumers more demanding and more sophisticated, and marketers will have to become better at delivering customer value. Marketers have practically lost control of brand images and must consistently underpromise and overdeliver, or be found out under the bright lights of the globally networked community. (pg 13)

Discussion Questions
9. As a marketer, do you agree with the U.S. executives who say “better quality customer relationships” is one of the most important e-business benefits? Why?

Global competition amongst firms greatly increases the need for additional value added attributes or services. This is because both competitors and consumers can easily and quickly check prices by visiting their respective Web sites. In fact, selling firms can provide customized Web pages to make it even easier for buyers. Competing sellers can thus view competitors prices and thus may try to match them. In this environment, firms must differentiate their products on some basis other than price that is important to buyers: non-price competition. Undoubtedly better quality customer relationships is critical in differentiation their product in this increasingly commodified market. (see question 11 as well.)
10. As a consumer, are you likely to benefit when e-business becomes “just business” in the near future? Explain your answer.
Major corporations such as Microsoft and Sony recognize this eventual online integration of e-business into everyday life. Thus the fierce competition to capture the entertainment system market as a gateway into the home market. Soon every device will become an interactive, customizable conduit for sales. This ubiquitous existence of technology will create a highly specialized market for consumers allowing them to find specialized products with greater ease. Very likely consumers’ buying habits, likes-dislikes, and other data will be recorded thus leading to privacy issues. This practice is already done by major credit card companies like Master Card, Visa, and American Express. Some students may be surprised to know that they are already being tracked by their CPU ID’s for any Pentium III processors or better. The just business part will seamlessly come as more and more users adopt the technology of the future. (Look at how telephones and tv changed marketing!)
11. Some economists suggest that the increase in e-commerce within the B2B market will lead to greater competition and more goods and services becoming commodities;that is, solely competing on price. How do you think this is likely to affect buyers within the B2B market? How would it affect sellers?
Competition might increase because purchasing firms can easily and quickly check prices for competing selling firms simply by visiting their Web sites. In fact, the selling firm will send e-mail and provide customized Web pages to make it even easier for buyers. Sellers can similarly view competitors prices and thus may try to match them. In this environment, firms must differentiate their products on some basis other than price that is important to buyers: non-price competition. They can use the Web to help them by conducting market research to see what customers want, how they perceive various competitive products, and by using these data to modify product offerings. They further can use the Web to customize communication to buyers thus adding value.
12. What concerns about consumer privacy are raised by the increased use of wireless computing and handheld devices outside the home or workplace?
The rapid proliferation of wireless networks outside the home and work place has resulted in increased concern over privacy. Security issues with hard-line Internet connections with “always-on” services like DSL and cable were concern enough already. Now with services that broadcast data throughout the air freely available to everyone, consumers have reason to be even more concerned. The same issues with privacy, credit cards numbers, personal information, etc. apply, except now people can listen in and even jump onto your network with a Pringle’s can for an antennae and a little know how. Encryption standards are still widely debated, but it is likely the added convenience will win out in the end.