The Internet and The Marketing Mix

Slide 5.
Chapter 5
The Internet and the
marketing mix
Chaffey et al., Digital Marketing: Strategy, Implementation and Practice, 5th edition Pearson Education Limited 2013
Slide 5.2
Learning objectives
Apply the elements of the marketing mix in an
online context
Evaluate the opportunities that the Internet
makes available for varying the marketing mix
Assess the opportunities for online brandbuilding
Slide 5.3
Questions for marketers

How are the elements of the marketing mix
varied online?
What are the implications of the Internet for
brand development?
Can the product component of the mix be varied
online?
How are companies developing online pricing
strategies?
Does place have relevance online?
Slide 5.4
The marketing mix

In 1963 Bartels said:
a marketer is like a chef in a kitchen a mixer
of ingredients
Variables used to define key elements of
marketing strategy
From the 4Ps of Jerome McCarthy to the 7Ps of
Booms and Bitner sometimes referred to as the
services mix
4Ps Product, Price, Place, Promotion
7Ps add People, Processes and Physical
Evidence
8th P online = PARTNERSHIPS
Slide 5.5
An alternative view
Frenchman Albert Frey suggested:
OFFERING
Product, packaging, service and brand
METHODS/TOOLS
Distribution channels, personal selling, advertising
and sales promotion
Slide 5.6
The 4Ps and the 4Cs

Product
Cost
Price
Communications
with
company
Place
Customer needs
and wants
Promotion
Customer
convenience
Slide 5.7
Mixing the mix online

Which variables are important for the ideal
customer?
Price and quality?
Where they buy?
So need to decide on target markets first and do

the research on the mix variables
Remember the mix is not generic for all
customers, but for segments
Slide 5.8
Figure 5.1
The elements of the marketing mix

Slide 5.9
Product introduced
The element of the marketing mix that involves
researching customers needs and developing
appropriate products
Core product
The fundamental features of the product that meet
the users needs.
Extended product
Additional features and benefits beyond the core
product.
Slide 5.10
Core product options

Ghosh (1998) Digital value
Rayport and Sviokla (1994) describe
transactions where the actual product has been
replaced by information about the product
Mass customisation Levi
Extent of product
Subset WHS iDTV
Bundling easyJet
Product info more readily available (Allen and
Fjermestad, 2001)
Slide 5.11
Extended product options

Examples:
Add-on services gift wrapping @ Amazon

Endorsements
Awards
Testimonies
Customer lists
Customer comments
Warranties
Guarantees
Money back offers
Customer service (see people, process and physical evidence)
Incorporating tools to help users during their use of the product
Citron exCeed
Information extranets
Slide 5.12
Conducting marketing research online

Online focus group
Online survey
Customer feedback or forums, possibly on
independent sites
Web logs
Slide 5.13
Figure 5.2
Customising maps according to customers preferences
Source: Ordnance Survey OS Select (www.osselect.co.uk)
Slide 5.14
Figure 5.3
Interactive sales dialogue
Source: First Direct (www.firstdirect.com)
Slide 5.15
Zipfs law, showing decrease in popularity of items within an ordered

sequence
Figure 5.4
Slide 5.16
Brands
A brand is described by Leslie de Chernatony
and Malcolm McDonald in their classic book
1992 book Creating Powerful Brands as
an identifiable product or service augmented in
such a way that the buyer or user perceives
relevant unique added values which match
their needs most closely. Furthermore, its
success results from being able to sustain these
added values in the face of competition.
Slide 5.17
Brands online
Dayal et al. (2000) say, on the world wide web, the brand is the
experience and the experience is the brand. They suggest that to
build successful online brands, organisations should consider how
their proposition can build on these possible brand promises:
the promise of convenience making a purchase experience more

convenient than the real-world, or for rivals;
the promise of achievement to assist consumers in achieving their
goals, for example supporting online investors in their decision or
supporting business people in their day-to-day work;
the promise of fun and adventure this is clearly more relevant for B2C
services;
the promise of self-expression and recognition provided by
personalization services such as Yahoo! Geocities where consumers
can build their own web site;
the promise of belonging provided by online communities.
Plus trust and reassurance.

Slide 5.18
Table 5.1
Traditional measures of brand equity and online measures of brand
equity
Slide 5.19
Figure 5.5
Dorset Cereals website (www.dorsetcereals.co.uk)

Slide 5.20
Figure 5.6
Napster Canada site (www.napster.ca)

Slide 5.21
Price implications
View 1 decreased prices inevitable
Price transparency
Customer knowledge increases
Price reduction and standardisation
View 2 decreased prices unnecessary

89% purchase books from first site
Only 10% are aggressive bargain hunters
For corporate buyers internal changes are main
benefit
Amazon, RS prove this?
See Baker et al. (2001)
Slide 5.22
The influence of brand knowledge on purchase. Matrix for question I

will buy a product if
Figure 5.7
Source: BrandNewWorld (2004)
Slide 5.23
Figure 5.8
Pricerunner (www.pricerunner.com)
Slide 5.24
Figure 5.9
mySupermarket aggregator (www.mysupermarket.co.uk)

Slide 5.25
Figure 5.10
Price elasticity of demand for a relatively elastic product

Slide 5.26
Figure 5.11
Price elasticity of demand for a relatively inelastic product

Slide 5.27
Figure 5.12
Alternative pricing mechanisms

Slide 5.28
Differential pricing
Options reduce or transfer. Other options
Precision
Setting prices more accurately through testing
(price indifference band)
e.g. Zilliant
Adaptability
Rapid changes (dynamic pricing).
e.g. Concert tickets
Segmentation
Different charges according to profiling
e.g. Ford and core vs fill-in customers
Slide 5.29
B2B reverse auctions

Will these become popular?
Yes
10-20% reductions achievable
No
Only 2% prefer for B2B

50% do not choose lowest bidder
87% stay with current supplier
Many have stopped experimenting

Slide 5.30
Purchase method digital products

Purchase
Rental or subscription
Pay per use
Slide 5.31
Pricing options
Cost-plus
Add profit margin to operational costs
Target profit pricing

Based on breakeven
Competition-based pricing
Market-oriented
Premium-pricing
Penetration pricing
Slide 5.32
Place 1 place of purchase

A. Seller-controlled sites are those that are the main site
of the supplier company which are e-commerce enabled.
B. Seller-oriented sites are controlled by third parties, but
are representing the seller rather than providing a full
range of options.
C. Neutral sites are independent evaluator intermediaries
that enable price and product comparison and will result
in the purchase being fulfilled on the target site.
D. Seller-oriented sites are controlled by third parties on
behalf of the seller.
E. Seller-controlled sites usually involve either
procurement posting on buyer-company sites or those of
intermediaries that have been set up in such a way that it
is the buyer who initiates the market making.
Slide 5.33
Figure 5.13
Google Product Search (www.google.com/products)

Slide 5.34
Evans and Wurster view of place

Reach. This is the potential audience of the e-commerce site.
Reach can be increased by moving from a single site to
representation with a large number of different intermediaries.
Allen and Fjermestad suggest that niche suppliers can readily
reach a much wider market due to search engine marketing
(chapter 8).
Richness. This is the depth or detail of information which is
both collected about the customer and provided to the
customer. This is related to the product element of the mix.
Affiliation. This refers to whose interest the selling organisation
represents consumers or suppliers. This particularly applies
to retailers. It suggests that customers will favour retailers who
provide them with the richest information on comparing
competitive products.
Slide 5.35
Place 2 new channel structures

A Disintermediation
B Reintermediation
C Countermediation
Slide 5.36
Place 3 channel conflicts

Dependent on:
A communication channel only.
A distribution channel to intermediaries.
A direct sales channel to customers.
Any combination of the above.
Slide 5.37
Place 4 virtual organisations what are they?

Kraut et al. (1998) suggest the following features
of a virtual organisation:
Processes transcend the boundaries of a single form
and are not controlled by a single organisational
hierarchy.
Production processes are flexible, with different parties
involved at different times.
Parties involved in the production of a single product are
often geographically dispersed.
Given this dispersion, co-ordination is heavily
dependent on telecommunications and data networks.
Slide 5.38
Virtual organisations - alternatives

Co-alliance model. Effort and risk is shared
equally by partners.
Star-alliance model. Here the effort and risk is
centred on one organisation that subcontracts
other virtual partners as required.
Value alliance model. This is a partnership
where elements are contributed across a supply
chain for a particular industry. This is effectively
the value network of Chapter 2.
Market alliance model. This is similar to the
value alliance, but is more likely to serve several
different marketplaces.
Slide 5.39
Promotion
Promotion unfortunately has a range of meanings. It
can be used to describe the marketing
communications aspect of the marketing mix or, more
narrowly, as in sales promotion. In its very broad
sense it includes the personal methods of
communications, such as face to face or telephone
selling, as well as the impersonal ones such as
advertising. When we use a range of different types
of promotion direct mail, exhibitions, publicity, etc
we describe it as the promotional mix.
Wilmshurst (1993)
Slide 5.40
Promotion tools
Advertising
Sales promotion
Personal selling
Public relations
Direct marketing
Slide 5.41
Using promotion to vary the mix

Reviewing new ways of applying each of the elements of the
communications mix such as advertising, sales promotions, PR
and direct marketing.
Assessing how the Internet can be used at different stages of
the buying process.
Using promotional tools to assist in different stages of customer
relationship management from customer acquisition to
retention. In a web context this includes gaining initial visitors to
the site and gaining repeat visits through these types of
communications techniques:
reminders in traditional media campaigns why a site is worth
visiting, such as online offers and competions;
direct e-mail reminders of site proposition new offers;
frequently updated content including promotional offers or
information that helps your customer do their job or reminds them
to visit.
Slide 5.42
Options for replacing people

Autoresponders. These automatically generate a response when a
company e-mails an organisation, or submits an online form.
E-mail notification. Automatically generated by a companys systems
to update customers on the status of their order, for example, order
received, item now in stock, order dispatched.
Call-back facility. Customers fill in their phone number on a form and
specify a convenient time to be contacted. Dialling from a
representative in the call centre occurs automatically at the appointed
time and the company pays which is popular.
Frequently Asked Questions (FAQ). For these, the art is in compiling
and categorising the questions so customers can easily find (a) the
question and (b) a helpful answer.
On-site search engines. These help customers find what theyre
looking for quickly and are popular when available. Site maps are a
related feature.
Virtual assistants come in varying degrees of sophistication and
usually help to guide the customer through a maze of choices.
Slide 5.43
Figure 5.14
Stages in managing inbound e-mail

Slide 5.44
Methods of managing inbound contacts

Customer defines
Make contact point clear

Use FAQ to reduce enquiries (Measure)
Use drop down lists to categorise query
Receipt &
acknowledgement
Use autoresponse with service

promise (number of hours)
Give alternative information source
(phone or web page)
Routeing
Large organisations use intelligent software

to categorise and prioritise messages and
forward them to relevant staff
Response
Use templates for common responses

Answer ALL of the questions
Add question to knowledge base
Follow-up
Offer callback or follow up for key enquiries

Use phone if e-mail is not solving problem

The Internet and The Marketing Mix

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Slide 5.

Questions for marketers

The marketing mix

The 4Ps and the 4Cs

Mixing the mix online

So need to decide on target markets first and do

The elements of the marketing mix

Core product options

Extended product options

Add-on services gift wrapping @ Amazon

Conducting marketing research online

Customising maps according to customers preferences

Source: Ordnance Survey OS Select (www.osselect.co.uk)

Interactive sales dialogue

Source: First Direct (www.firstdirect.com)

Zipfs law, showing decrease in popularity of items within an ordered

the promise of convenience making a purchase experience more

Plus trust and reassurance.

Traditional measures of brand equity and online measures of brand

Dorset Cereals website (www.dorsetcereals.co.uk)

Napster Canada site (www.napster.ca)

View 2 decreased prices unnecessary

The influence of brand knowledge on purchase. Matrix for question I

Source: BrandNewWorld (2004)

mySupermarket aggregator (www.mysupermarket.co.uk)

Price elasticity of demand for a relatively elastic product

Price elasticity of demand for a relatively inelastic product

Alternative pricing mechanisms

B2B reverse auctions

Only 2% prefer for B2B

See Baker et al. (2001)

Purchase method digital products

Target profit pricing

Place 1 place of purchase

Google Product Search (www.google.com/products)

Evans and Wurster view of place

Place 2 new channel structures

Place 3 channel conflicts

Place 4 virtual organisations what are they?

Virtual organisations - alternatives

Using promotion to vary the mix

Options for replacing people

Stages in managing inbound e-mail

Methods of managing inbound contacts

Make contact point clear

Use autoresponse with service

Large organisations use intelligent software

Use templates for common responses

Offer callback or follow up for key enquiries

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