ch04 11aug Final

Slide 8.
E-MARKETING STRATEGIES
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 8.2
Learning outcomes
 Assess the need for separate e-business and e-
marketing strategies
 Create an outline e-marketing plan intended to
implement the e-marketing strategy
 Distinguish between marketing communication
characteristics of traditional and new media.
Slide 8.3
Management issues
 How do we integrate traditional marketing
approaches with e-marketing?
 How can we use electronic communications to
differentiate our products and services?
 How do we redefine our marketing and
communications mixes to incorporate new media?
Slide 8.4
Marketing
 The definition of marketing by the Chartered Institute of
Marketing (http://www.cim.co.uk/) is:
‘Marketing is the management process responsible for identifying,

anticipating and satisfying customer requirements profitably’
 Which e-marketing tools can assist?

 Web, e-mail, databases, wireless and digital television.
Slide 8.5
How do e-tools support marketing?

 Identifying – how can the Internet be used for marketing research
to find out customers’ needs and wants
 Anticipating – anticipating the demand for digital services
 Satisfying – how to achieve customer satisfaction through the

electronic channel
 Profitably
Figure 8.1 The e-marketing plan in the context of other plans
Slide 8.7
E-marketing defined
 Achieving marketing objectives through use of
electronic communications technology
 Another similar term is digital marketing
 “The aim of strategic planning is to shape and
reshape the company’s businesses and products so
that they yield target profits and growth”.
Slide 8.8
What is e-Marketing?
 Internet or Online Marketing
 Marketing a brand of the internet
 Distributing information
 Promoting an organization
Slide 8.9
E-Marketing Methods
 Search engine marketing
 Display Advertising
 E-mail marketing
 Interactive marketing
 Blog marketing
 Viral marketing
Slide 8.10
E-Marketing Methods
 Search engine marketing
S
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Slide 8.11 a
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E-Marketing Methods
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2) Display Advertising
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 3) E-mail marketing (ex. Health related emails)

 4) Interactive Advertising
 5) Blog Marketing
 6) Viral Marketing (ex. Word of mouth)
Slide 8.12
 E-Marketing Strategies
 Market research
 E-mail marketing
 Direct sales
Slide 8.13
 Business Models
E-marketing
E-Commerce:
Publishing:
Selling goods Lead-Based- Sites:
Where you sell
And services Banner sites online
advertise
online
Slide 8.14
Advantages of eMarketing
 Availability of Information
 Saves money
 Expansion
 Low Cost
 Efficiency of Advertising
Slide 8.15
 Limitations / Disadvantages
 Technology
 Low connection speed
 Complication
 Intangibility
Slide 8.16
Working of E-market
 eMarket Services uses the following definition of
an e-market: it is open to several buyers and several
sellers.
 it is a trading platform, the e-market itself does not

sell nor buy goods or services traded on the
platform.
 it has at least one trading function.
Slide 8.17
Working of E-market
 Auctions
 a specific product or a specific quantity of products is being placed for
sale. The auction starts and ends at a pre-set time.
 Buyers can then submit bids during that period of time.
 Auctions help sellers get the right price for products ranging from fish
and flowers to chemicals and patents
 Catalogue
 A list of products and services offered by the sellers.
 Some catalogues list product information on a general level, others are
very detailed.
 Some are quite informative while others are more promotional. Some
carry pictures and others do not
Slide 8.18
Working of E-market
 Classified ads
 Classified ads display offers of specific products for sale or
wanted by a buyer.
 The ads are sorted by the type of product, brand or company.
 Online order
 When an order can be placed online for the articles listed
for sale in a catalogue or classified ad.
 Orders to various sellers can in this way be placed directly
on an e-marketplace.
Slide 8.19
Working of E-market
 Reverse auctions
 Alsocalled sourcing auctions or buyers' auctions, help
buyers to find the cheapest supplier for a contract.
 Within the auction the potential suppliers submit offers,
lowering the selling price for each submitted bid.
 They underbid each other until the supplier with the
lowest bid wins the contract.
Slide 8.20
Working of E-market
 Request for Quotation/Proposal/Bid (RFQ, RFP, RFB)
 The RFQ/RFP/RFB function can be used to request a price or
proposal on a product in a classified ad, a product listed in a
catalogue or products expected to be supplied by a company in
a supplier directory.
 The request is then typically sent to the trading partners by email
to be answered.
Slide 8.21
Working of E-market
 Supplier directories
 Supplier directories are databases of companies. Buyers can
find new suppliers and suppliers can get leads.
 You can search by products or services, by region or by
company.
 Directories typically include a brief description of the product
area of the company and contact details.
Slide 8.22
Working of E-market
 System integration
A further step is if the e-marketplace offers companies
(buyers and / or sellers) the ability to integrate the
order process with their Enterprise Resource Planning
(ERP) systems (from companies like IFS, SAP, Intentia,
Baan, and IBS).
 Internet platforms with such system integration are
sometimes called trading networks.
Slide 8.23
E-Marketing Planning and Strategies
 Competition - competitive forces, analysing competitors

 Monitoring environmental change - managing strategic
environmental issues
 Opportunities - market and sales opportunity analysis
 Competitive advantage - distinctive capabilities, cost and
differentiation strategies, product differentiation strategies
 Resource reviews
 Strategic fit - fitting both market opportunities and internal
capabilities
Slide 8.24

There are five types of company:
1.those who make things happen
2.those who think they make things happen
3.those who watch things happen
4.those who wonder what happened, and
5.those that did not know that anything had
happened
Slide 8.25
 Planning is essential
 It gives a sense of purpose and direction
 Stops constant fire-fighting
 Stops panicking
 Put managers in control
Slide 8.26
 marketing strategy is a cycle of integrated actions leading to a

sustainable competitive advantage
 strategic marketing seeks to secure and maintain competitive

advantage in order to meet the goals of the organisation
 it involves consideration of the interaction of three key variables:

external environment, organisation goals and strategies
1 objectives Strategic Focus
vision
what business are we in?
what business should we be
corporate objectives in?
what business should we
not be in?
2 situation marketing audit
review
SWOT analysis identify opportunities
target markets
formulate strategies product, price, promotion
3 strategies
and plans and
forecasts distribution strategies
budgets
4 action
Implementation programme action: products, prices,
promotion, distribution
control
Performance review and evaluation

Slide 8.28
 An e-marketing strategy needs to be fully integrated

into an organisation’s business and marketing strategies
and plans
 Rather than have a separate e-marketing strategy it
is important to have an integrated marketing plan
with an e-marketing plan as a sub-set of that marketing
plan
Slide 8.29
 E-marketing strategy as a detailed sub-set of

overall marketing planning
 But also part of the investment for a new web site
 And part of the investment in upgrading and

extending a website
Slide 8.30
Environment-strategy-performance model
Legal-ethical
Technology internet markets
E Competition
Other factors
SWOT
E-marketing plan
S
E-business
strategy E-marketing mix
E-marketing strategy
CRM
P Performance metrics
Slide 8.31

Environmental Influences
1. broad environmental variables: economy, technology, society
2. Industry variables: industry structure, lifecycle, specific

technology, structure of competition, strategies and performance
3. market variables: lifecycle, segment structure, demand

influences, purchase size and frequency
Slide 8.32
Goals (Objectives)
sustainable competitive advantage as a means to

sales, market share, profit and other objectives to
satisfy stakeholders.
Slide 8.33

Factors influencing company marketing strategies
Demographic/ Marketing and sales Technical/

economic information system physical
environment environment
Marketing and sales

intermediaries
suppliers
product
Target
place customer price Marketing
s
planning system
promotion
publics
competitors publics
Marketing
organisation and Social/
Political/ Marketing & sales implementation
legal cultural
organisation system
environment environment
system
Slide 8.34

Factors influencing
competitive Environmental factors
success e.g. rate of technological change
nature of competition
intensity of competition
Organisational factors
Strategic factors
e.g. size
e.g. long-term objectives
structure
strategic time horizon
culture
product-market strategy
innovation capability
Marketing factors Managerial factors

e.g. use of market research e.g. communication
customer service attitudes
product quality leadership style
Business Performance Source: after Baker & Hart

(1989)
Slide 8.36

Value creation for customers
Used to create Provide

Organisation
value for customers with
capabilities
customers desired benefits
Careful assessment
of these capabilities
what capabilities to
build
Internet
analysis of
website and e-
opportunities
commerce
choice of opportunities
to address
Slide 8.37
Creating value for customers

 surest way of gaining and keeping competitive
advantage is to create better value for customers

 customer come back for more and a long-term
customer relationship develops
 The internet and development of e-commerce
offers great opportunities for creating value for

customers
Slide 8.38
 value-defining processes [influenced by e-marketing]

 market sensing to understand what customers value (what
benefits buying)
 assess what the organisation creates from a customer
perspective
 value-developing processes [influenced by e-marketing]

 what creates customer value in the value chain?
 how can customer value be enhanced through product and

service development?
 what facilitates and inhibits better product or service delivery
Slide 8.39
 Value-delivering processes [influenced by e-marketing]

 can the product or service be better delivered?
 can it be made available at better times in better locations?
 Value-maintaining processes [influenced by e-marketing

 customer linking, channel bonding, managing brand equity
Slide 8.40
 But customer expectations change

 what customers consider excellent value today will probably be
average value tomorrow
 customers are increasingly demanding
 this is exacerbated by competitors who see advantage in meeting
these higher demands
 other companies develop product and service enhancements which
set new expectation standards
 change is endemic and built-in to most markets
 therefore, there is a need to continuously monitor and adapt
Slide 8.41
Potential benefits of an Internet site:
 Improvement in corporate identity and image

 Improved customer service
 Increased visibility among targeted segments
 Market expansion
 Online transactions
 Lower communication costs
Slide 8.42
Website generations:
1. First generation: static electronic brochures,
supplier broadcasting to many potential and

existing customers
2. Second generation: interactive website, with
product stock availability, FAQs and pricing

information; still supplier driven
3. Third generation: fully interactive website,
personalisation and market research information
collection
Slide 8.43
E-marketing planning
 A e-marketing plan is needed to detail the specific
objectives of the e-business strategy through
marketing activities
Value Chain
• A value chain for a product is the chain of actions that are performed
by the business to add value in creating and delivering the product.
• For example, when you buy a product in a store or from the web, the
value chain includes the business selecting products to be sold,
purchasing the components or tools necessary to build them from a
wholesaler or manufacturer, arranging the display, marketing and
advertising the product, and delivering the product to the client.
• The value chain model, as originally demonstrated by Porter (1985),

identifies nine strategically relevant activities that create value and
reduce cost in a specific business.
• These nine value-creating activities consist of five primary activities
and four support activities.
• The primary activities represent the sequence of bringing materials

into the business (inbound logistics), converting them into final
products (operations), shipping out final products (outbound
logistics), marketing, and service.
• The support activities include procurement, technology development,

human resource management, and firm infrastructure.
Figure 8.2 SOSTAC™ – a generic framework for e-marketing planning
Slide 8.49
SOSTAC
 Developed by Paul Smith (1999)
 Summarizes the different stages that should be
involved in a marketing strategy from strategy
development to implementation
Slide 8.50
Is a separate e-marketing plan required?
 Customer demand will be underestimated

 Existing and start-up competitors will gain market
share
 Duplication of resources
 Insufficient resources will be devoted to planning
 Insufficient customer data are collected
 Efficiencies available through online marketing will
be missed
Figure 8.4 Inputs to the e-marketing plan from situation analysis
Slide 8.53
Situation Analysis
 To understand the current and future environment in
which the company operates
 Involves consideration of all of these factors and
will form the basis for defining objectives, strategies
and tactics
Slide 8.54
Demand analysis
 What percentage of customer businesses have access to the
Internet?
 What percentage of members of the buying unit in these

businesses have access to the Internet?
 What percentage of customers are prepared to purchase your

particular product online?
 What percentage of customers with access to the Internet are

not prepared to purchase online, but are influenced by web-
based information to buy products offline?
 What are the barriers to adoption amongst customers and how

can we encourage adoption? Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 8.5 Customer demand analysis for the car market
Slide 8.56
Competitor Analysis
 The monitoring of competitor use of e-commerce to
acquire and retain customer
 Companies should review:

 Well-known local competitors
 Well-known international competitors
 New Internet companies locally and worldwide
Slide 8.57
Benchmarking solutions
 Financial performance
 Marketplace performance – market share and sales trends and significantly the
proportion of sales achieved through the Internet.
 Business and revenue models – 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
competitor’s 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 such
as aesthetics, ease of use, personalization, navigation and speed. rd
Dave Chaffey, E-Business and E-Commerce Management, 3 Edition © Marketing Insights Ltd 2007
Slide 8.58
Intermediary analysis
 Identifying relevant intermediaries for a particular
marketplace
 Identify strategic partners when executing an online
advertising campaigns
 To consider the way the marketplace is operating
Slide 8.59
Internal marketing audit

 Business effectiveness: Contribution of site to revenue, profitability and any indications
of the corporate mission for the site. The costs of producing and updating the site will
also be reviewed, i.e. cost-benefit analysis.
 Marketing effectiveness. These measures may include:

 leads; sales; retention; market share; brand enhancement and loyalty;
 Customer service.
 These measures will be assessed for each of the different product lines delivered through
the web site. The way in which the elements of the marketing mix are utilized will also be
reviewed.
 Internet effectiveness: These are specific measures that are used to assess the way in
which the web site is used, and the characteristics of the audience.
 Such measures include specialist terms such as hits and page impressions that are collected
from the log file, and also more typical techniques such as focus groups and questionnaires
to existing customers. From a marketing point of view, how clear the value proposition of the
site for the customer, is should be noted.
Slide 8.60
OBJECTIVE SETTING
Slide 8.61
SMART e-marketing objectives

 Specific
 Measurable
 Achievable
 Realistic
 Time-constrained
Slide 8.62
Examples of SMART e-marketing objectives

 Start-ups – acquiring a specific number of new customers or to sell advertising
space to generate a specified revenue that will hopefully exceed investment
in site creation and promotion!
 Established mobile-phone operator – increase customer retention by reducing

churn from 25 per cent to 20 per cent.
 Established media company – increase online revenue, target of 20 per cent

online contribution to revenue by offering new online services and media
sales.
 Established business-to-business engineering company – increase overall

revenue by 5 per cent, through targeting sales in new international markets.
 Reduce costs of routine customer service by 10 per cent to enable focus on

delivery of specialized customer service.
Assessment of the future online promotion contribution and online revenue
Figure 8.6
for The B2B Company, for Product A, Europe
Slide 8.64
The Online Revenue Contribution

 A measure of extent to which a company’s online
presence directly impacts on the sales revenue of
the organization
 Direct contribution of media, internet, other digital
media
Slide 8.65
Example online revenue contributions

Organisation Sector Online Overall
contribution turnover
Cisco B2B Networking 90% $19bn
hardware
easyJet B2C Air travel 90% £264m

Dell B2B, B2C 48% $25bn
Computers
Lands End Clothing B2C Clothing 11% $1.3bn
Book Club B2C Books 10% £100m

Associates
Electrocomponents B2B Electronics 7% £761m Group
Domino’s Pizza B2C Food 3.4% £76m

Tesco B2C Grocery 1.4% £18.4bn
Thomas Cook B2C Travel <1% £1.8bn
Slide 8.66
easyJet web site (www.easyjet.com)
Slide 8.67
DBS Oegland web site http://www.dbs.no
Slide 8.68
STRATEGY
Slide 8.69
De Kare Silvers ES test

1. Product characteristics. Does the product need to be physically
tried or touched before it is bought?
2. Familiarity and confidence. Considers the degree the consumer
recognizes and trusts the product and brand.
3. Consumer attributes. These shape the buyer’s behaviour – are
they amenable to online purchases in terms of access to the
technology skills available and do they no longer wish to shop
for a product in a traditional retail environment?
Slide 8.70
ES Test results
Product 1. Product 2. 3. Consumer Total
characteristics Familiarity attributes (30)
(10) and
confidence
(10)
1. Groceries 4 8 15 27
2. Mortgages 10 1 4 15
3. Travel 10 6 15 31
4. Books 8 7 23 38
Figure 8.8 Stages in target marketing strategy development
Slide 8.72
Target market strategies

 Evaluation and selection of appropriate segments
and the development of appropriate offers
 5 questions when developing strategy:
 Who are our customers?
 How are their needs changing?
 Which do we target?
 How can we add value?
 How do we become first choice?
Slide 8.73
Characteristics of new-media
marketing communications
 Interactivity
 Intelligence
 Individualization
 Integration
 Industry restructuring
 Independence of location
Summary of communication models for (a) traditional media,
Figure 8.9
(b) new media
Slide 8.75
Intelligence
Summary of degree of individualization for (a) traditional media (same
Figure 8.10
message), (b) new media (unique messages and more information exchange
between customers)
Slide 8.77
Individualization
Figure 8.11 Channels requiring integration as part of integrated e-marketing strategy
Slide 8.79
Integration
Slide 8.80
www.dell.com.my
Slide 8.81
Examples of integrated communication

tools
 The internet can be used as a direct-response tool
enabling customers to respond to offers and
promotions publicized in other media
 The web site can have a direct response or callback
facility built into it.
 The Internet can be used to support the buying
decision even if the purchase does not occur via
web site.
Figure 8.12 Channel integration required for e-marketing and mixed-mode buying
Slide 8.83
TACTICS
Slide 8.84
Online value proposition

 A clear differentiation of the proposition from competitors based
on product features or service quality.
 Target market segment(s) that the proposition will appeal to.
 How the proposition will be communicated to site visitors and in all
marketing communications. Developing a tag line can help this.
 How the proposition is delivered across different parts of the
buying process
 How the proposition will be delivered and supported by resources
 is the proposition genuine? Will resources be internal or external?
Slide 8.85
Example OVPs
 ‘Compare. Buy. Save’. Kelkoo (www.kelkoo.com)
 ‘Earth’s biggest selection’. Amazon (www.amazon.com)
 ‘Search the largest inventory of cars and trucks on the Internet.
More than 1.5 million listings, updated daily’
(www.autotrader.com)
 The Citibank site design (www.citibank.com) uses a range of
techniques to illustrate its core proposition and OVP. The main
messages are:
 Welcome to Citibank: The one-stop solution for all your financial needs.
 Look for a product or service; Learn about a financial product; Find a
location.
Slide 8.86
Issues with varying the mix online

 Do we vary the mix online or replicate offline?
 Is the offer clear – brand proposition, online offer
 Is online differentiation defined?
 Is online differentiation communicated?
 Key online mix variables
 Product
 Price
 Place
 Promotion
 Service: People, Process, Physical evidence
The Marketing Mix
Figure 8.13 The elements of the marketing mix

Slide 8.88
Product
 Extend range (Tesco)
 Narrow range (WH Smith iDTV)
 Online-only products (banks)
 Develop new brand (Egg)
 Migrate existing brand (HSBC)
 Partner with online brand (Waterstones and Amazon).
Slide 8.89
Product
Slide 8.90
Price
 Differential pricing:
 Reduce online prices due to price transparency and
competition (easyJet)
 Maintain price to avoid cannibalisation of offline sales
(Dixon)
 New pricing options (software, music):
 Rental
 Pay per use
 Reverse auctions (B2B)
 Dynamic pricing (Concert tickets).
Slide 8.91
Implications for price

 Increased price transparency
 Downward pressure on price
 New pricing approaches
 Alternative pricing structure or policies
Slide 8.92
Place
 Place = avoiding channel conflicts
 Disintermediation– sell direct
 Reintermediation – partner with new intermediaries
 Countermediation:
 Form new intermediaries

 Partner with existing intermediaries
 Distance from intermediaries.
(Abbey National)
Slide 8.93
Implications on place
 Place of purchase
 New channel structures
 Channel conflicts
 Virtual organizations
Slide 8.94
Promotion
 Selective use of new online tools for different stages
of the buying process and customer lifecycle
 Online only campaigns
 Integrated campaigns – incorporating online tools
into communications mix.
Options for the online vs offline communications mix (a) online > offline,
Figure 8.14
(b) similar online and offline, (c) offline > online
Slide 8.96
Service
 People
 Automate – use web self-service,
offer customer choice
 Process
 Change process for service – contact strategies
 Physical evidence
 Site design – differentiate or support brand
 Fulfillment quality.
Slide 8.97
Branding
Malcolm McDonald in their classic 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 8.98
Options for changing brand identity

online
 Transfer traditional brand online
 Extend traditional brand
 Partner with existing digital brand
 Create a new digital brand
Figure 8.15 Percent of marketing communications budget spent on e-communications
(n = 76)
Source: E-consultancy (2005)
Changes to brand perception and behaviour as a result of using the
Figure 8.16
Internet for research
Source: BrandNewWorld: AOL UK/Anne Molen (Cranfield School of Management)/Henley Centre, 2004
The influence of brand knowledge on purchase. Matrix for question ‘I will
Figure 8.17
buy a product if …’
Source: BrandNewWorld: AOL UK/Anne Molen (Cranfield School of Management)/Henley Centre, 2004
Slide 8.102
Actions
 What level of investment in the Internet channel is
sufficient to deliver services?
 What training of staff is required?
 What new responsibilities are required for effective
Internet marketing?
 Are changes in organizational restructuring
required?
 What activities are involved in creating and
maintaining the web site?
Slide 8.103
Control
 Conduct marketing research
 Analysis of web-server log files
 Intranets can be used to share information
Slide 8.104
REVENUE MODEL SALES
Slide 8.105
Why It’s Important
A revenue model determines how a company makes

money and how the company functions.
A well thought out model can mean the difference

between success and failure.
Understanding what revenue models entail can help

you understand more about how companies operate.
105
Slide 8.106
Key Terms
 revenue model
 e-zine  affiliate program
 blog  licensing
106
Slide 8.107
What Is a Revenue Model?
The type of revenue model revenue model

you choose will depend on how a company
generates income
the type of product or service
you intend to sell.
107
Types of Revenue Models
E-Commerce Revenue Models
E-Commerce Models Online Applications
Product Sales consumer goods, retail, wholesale
search engines, Web portals, directory pages,

Advertising
commercial Web sites
online fee-for-service, fee-for-transaction,
Service
subscriptions
Inter-Organizational procurement, supply chain, distribution
Third-Party e-malls, online auctions, online exchanges
Licensing intellectual rights, patents, copyrighted material
Section 8-1 108

Slide 8.109
The most basic revenue model involves selling one

product or related product line to customers who
use your Web site as they would a print catalog.
Section 8-1 Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
109
Slide 8.110
There are two types of products you can sell:
products you make, which you should sell at

a higher price than they cost to make
products you buy, which you should sell at a
higher price than you paid for them
110
Slide 8.111
A wholesale price is the price a supplier charges a

business for a product.
A retail price is the price a business charges

customers.
111
Slide 8.112
Like magazines, TV stations, and other media

outlets, Web sites can sell advertising space as a
source of revenue.
An online business must ensure that its ads will reach

its target audience.
Section 8-1 112

Slide 8.113
Most magazines, e-zine

newspapers, and information electronic magazine
services earn income by
selling advertising and
subscriptions.
An e-zine can also generate

revenue by selling
subscriptions.
Section 8-1 113

Slide 8.114
A specialized type of blog a public online

e-zine is the weblog, or journal kept by a
writer, or blogger;
blog. short for Weblog
Section 8-1 114

Slide 8.115
Another way to generate affiliate program

revenue is through an a partnership through
which an online
affiliate program. business delivers
customers to other
In exchange for bringing online businesses
business to your affiliates,
you receive a commission,
or a percentage of the
sales they make on that
business.
Section 8-1 115
Slide 8.116
The idea behind licensing is licensing the

simple. granting of
permission to use
intellectual property,
such as music,
Assume you have created photos, software
a product. Companies programs, and
inventions
would pay you a licensing
fee for the right to market,
copy, or use the product.
Section 8-1 116

Slide 8.117
In the case of musical compositions, licensing is a

critical form of protection.
Whenever a musical work is performed for the

public—beyond family and friends—the
performers must obtain a license.
Section 8-1 117

Slide 8.118
PURCHASING, LOGISTICS, AND SUPPORT

ACTIVITIES
Perspective
• In previous lectures we talked about ways that
goods and services are marketed, promoted,
and sold.
• In terms of the value chain, this involves:
– Identify customers
– Market and sell
– Deliver
• We now consider how technology can improve:
– Purchasing
– Logistics
– Support
119
120
Purchasing
Purchasing activities include:
• Identifying vendors
• Evaluating vendors
• Selecting specific products
• Placing orders
• Resolving issues that arise after receipt
of goods or services:
– Late deliveries
– Incorrect items or quantities shipped
– Defective items
121
Procurement
• The term procurement refers to all purchasing
activities, as well as the monitoring of all elements of
purchase transactions.
• Procurement also includes the management and

development of relationships with suppliers.
• In many case procurement staff must have detailed

knowledge about products.
• Specialized Web sites can aid in disseminating

necessary information.
Example: Neoforma
122
MRO supplies
• Maintenance, repair, and operating (MRO) supplies
are commodity items that companies buy on a
recurring basis.
• Price is usually the main selection criterion.
• By using a Web site to process orders, vendors in this

market can save the cost of printing and shipping
catalogs and the cost of handling telephone orders.
• Examples: W.W. Grainger, McMaster-Carr, Office

Depot, Digi-Key, Global Computer Supplies
123
Logistics
• Objective: Provide the right goods in the right
quantity in the right place at the right time.
• Major transportation companies want to be seen as

information management firms as well as freight
carriers.
Example: Freight tracking Web pages made available
by Schneider Logistics, FedEx, UPS.
• Logistics activities include receiving, warehousing,

inventory control, vehicle scheduling and control, and
finished goods distribution.
124
Support activities
Support activities include:

• Finance and administration
• Human resources
• Technology development
125
Finance and administration
• Making payments
• Processing payments received
• Planning capital expenditures
• Budgeting and planning
• Operation of the computing infrastructure
126
Human resources
• Hiring
• Training (not always)
• Evaluating employees
• Benefits administration
• Complying with government record-keeping

regulations
127
Developing technology
Activities included here depends on the nature of
the business or organization.
May include:
• Networking of researchers into virtual collaboration
• Posting of research results
• Publishing research papers online
• Providing connections to outside sources of research

and development services
128
Training
• In some companies training is handled by human
resources.
• In other organizations it may decentralized and be

done by individual departments.
• Where it occurs can depend on the type of training.
• Example:
 At DePaul orientation for benefits and for
incoming faculty is handled by a centralized
group.
 CTI does its own training for advising.
129
Examples
Examples of firms providing support activities
services:
• OnLine Benefits: Benefit management
• TheTrip.com: Employee travel policies
• CyLex Systems: Document storage
• PayMaxx: Payroll processing
• Driveway Business Solutions: Electronic file

130
storage
Forms of economic organization
Three different forms of economic organization:
• Markets: Buyers and sellers come together to
conduct transactions
• Hierarchies: Large organizations that conduct many

different business activities entirely within the
structure of the firm
• Networks: Firms coordinate their strategies,

resources, and skills sets by forming long-term, stable
relationships based on a shared purpose.
131
Effect of technology
• One trend in in purchasing, logistics, and support
activities is a move away from hierarchical structures
toward network structures.
• Highly specialized firms can now exist and trade

services very effectively on the Web.
• The emerging networks of firms are more flexible and

can respond to changes in the economic environment
more quickly than hierarchical companies.
132
Electronic data interchange
• Electronic data interchange (EDI) is a computer-
to-computer transfer of business information between
firms that use a standard format for representing the
information.
• The two businesses trading information are called

trading partners.
• Firms that exchange data in specific standard formats

are said to be EDI-compatible.
• The types of information include invoices, purchase

orders, requests for quotations, bills of lading, and
133
receiving reports.
Early efforts
• By the 1960s companies began exchanging punch cards
or magnetic tape with transaction data.
• Data communications improvements resulted in phone

lines being used to exchange information.
• In 1968 a number of freight and shipping companies

formed the Transportation Data Coordinating Committee
(TDCC).
•The TDCC created a format including all elements found

on bills of lading, freight invoices, shipping manifests, and
other paper forms.
• Standardization across industries remained difficult.

134
Broader standards
• In 1979, the American National Standards Institute
(ANSI) chartered a new committee, called the Accredited
Standards Committee X12 (ASC X12) to develop uniform
EDI standards.
• The ASC X12 standard benefited from member

participation across a wide variety of industries.
• The current standard includes specifications for several

hundred transaction sets, which are the names of the
formats for specific business data interchanges.
135
International standards
• Although the ASC X12 standards were quickly adopted
by major firms in the U.S., businesses in other countries
continued to use their own standards.
• In 1987, the United Nations published its first standards

under the title EDI for Administration, Commerce, and
Transport (UN/EDIFACT).
• The ASC X12 organization has voted to move its U.S.

standards toward the UN/EDIFACT standards, although no
date for the final migration has been set.
136
Paper versus EDI
•Example: A company that needs to replace one of its
metal cutting machines.
• The same messages are exchanged between the

departments, but EDI reduces paper flow and streamlines
the interchange of information both within and outside a
company.
137
Implementation
Trading partners can implement the EDI network and
EDI translation processes in several ways.
Each of these uses one of two basic approaches:

1. Direct connection
2. Indirect connection
138
Direct connection
• Each business in the network operates its own on-
site EDI translator computer.
• The EDI translator computers are then connected

directly to each other using modems and dial-up
telephone lines or dedicated leased lines.
• Trading partners using different communication

protocols can make direct connection options difficult
to implement.
139
Indirect connection
• A value-added network (VAN) is a company that
provides communications equipment, software, and
skills needed to receive, store, and forward electronic
messages that contain EDI transaction sets.
• In an indirect connection, the trading partners use

the services of a VAN for communication.
• The VAN often supplies EDI translator software as

part of their package of services.
140
Advantages
The benefits of using a VAN include:
• Support for only one communications protocol
• The audit log maintained by the VAN can be used to

resolve disputes.
• The VAN can provide translation if the partners use

different transaction sets.
Examples of VAN services include General Electric

Information Services, IBM Global Services, GPAS, and
Sterling Software.
141
Disadvantages
The disadvantages of using VAN include:
• Requires an enrollment fee, a monthly maintenance
fee, and a transaction fee.
• Using VAN is cumbersome for companies that want to

do business with a number of trading partners using
different VANs.
– Costs are unpredictable and tend to be higher
– There is not always a clear paper trail
142
EDI on the Internet
• The Internet was seen as a way to replace leased
lines and dial-up connections.
• Potential problems include:

– Concerns about security
– Inability to provide audit logs
– Third-party verification of message transmission
and delivery
143
Open EDI
• EDI on the Internet is called Open EDI.
• Many new firms offer Open EDI including:

– Commerce One
– EB2B.com
– VanTree
• The Internet allows customization for data

exchanges.
• New tools such as XML are helping trading partners

be more flexible in exchanging detailed information.
144
Financial EDI
• The EDI transaction sets that provide instructions to
a trading partner’s bank are called financial EDI
(FEDI).
• EDI-capable banks are those banks that are

equipped to exchange payment and remittance data
through VANs.
• Value-added banks offer VAN services for non-

financial transactions.
145
Perceived risk
• Many companies are reluctant to send over the
Internet FEDI transaction sets that contain transfer
instructions for large amounts of money (in some
cases millions of dollars) because of the perceived
low level of Internet security.
• Reliability of FEDI transaction sets is also an issue

since a delay in delivery of $10 million can result in a
large loss of interest income.
146
Hybrid solutions
• Hybrid EDI solutions use the Internet for part of
the transaction.
• For example, EDI-HTML translation services allow

EDI-enabled firms to communicate with firms that
are non-EDI-enabled.
– EDI-enabled firm transmits document to the
service
– The service translates this into HTML for the
non-EDI-enabled partner
– The partner’s response is translated back
147
Supply chain
• The part of an industry value chain that precedes a
particular strategic business unit is often called a
supply chain.
• A company’s supply chain for a product or service

includes all the activities undertaken by every
predecessor in the value chain to design, produce,
promote, market, deliver, and support each component
of that product or service.
• Example: Car manufacturer’s supply chain would

include engine manufacturers, steel fabricators, glass
manufacturers, etc.
148
Supply chain management
• In recent years businesses have realized that they
can save money and increase product quality by
negotiating more actively with suppliers.
• Companies can work together with suppliers to

identify new ways to serve customers more quickly
and cheaply.
• The process of taking an active role with suppliers

to improve products and processes is called supply
chain management.
149
Levels in the supply chain
• Business develop long-term relationships with a
small number of very capable suppliers, called the
tier one suppliers.
• Tier one suppliers work with a select group of their

suppliers in the same way. This second level is called
the tier two suppliers.
• Tier two suppliers work with tier three suppliers.
• The long term relationships created are called

supply alliances.
150
Value creation
• In exchange for stability, buyers expect price
reductions and quality improvements from their
suppliers.
• By working together, supply chain members

reduce costs and increase the value of the product
or service to the consumer.
• With clear communication up and down the supply

chain, each participant can know what the ultimate
consumer is demanding and can plot a strategy to
meet the demand.
151
Technology in the supply chain
• Clear communications and quick responses to
those communications are a key element of
successful supply chain management.
• The Internet and the Web can be very effective

communication enhancers.
• Software can help all members of the supply chain

review past performance, monitor current
performance, and predict when and how much of
certain products need to be produced.
152
Advantages
Suppliers can:
• Share information about demand fluctuations
• Receive rapid notification of product design changes and

adjustments
• Provide specifications and drawings more efficiently
• Increase speed of processing transactions
• Reduce cost of handling transactions
• Reduce errors in entering transaction data
• Share information about defect rates and types

153
Example
• Dell computer has used technology-enabled supply
chain management to give customers exactly what
they want.
• It reduced inventories from three weeks’ sales to

six days’ sales.
• Dell’s top suppliers have access to a secure Web

site that lets them see:
– The latest sales forecasts
– Planned product changes
– Defect rates and warranty claims
This enables the suppliers to plan better.
154

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Slide 8.

‘Marketing is the management process responsible for identifying,

 Which e-marketing tools can assist?

How do e-tools support marketing?

 Anticipating – anticipating the demand for digital services

 Satisfying – how to achieve customer satisfaction through the

 Internet or Online Marketing

 Marketing a brand of the internet

 3) E-mail marketing (ex. Health related emails)

 Low connection speed

 it is a trading platform, the e-market itself does not

 it has at least one trading function.

E-Marketing Planning and Strategies

 Competition - competitive forces, analysing competitors

E-Marketing Planning and Strategies

E-Marketing Planning and Strategies

 It gives a sense of purpose and direction

 Stops constant fire-fighting

 Put managers in control

E-Marketing Planning and Strategies

 marketing strategy is a cycle of integrated actions leading to a

 strategic marketing seeks to secure and maintain competitive

 it involves consideration of the interaction of three key variables:

Performance review and evaluation

E-Marketing Planning and Strategies

 An e-marketing strategy needs to be fully integrated

E-Marketing Planning and Strategies

 E-marketing strategy as a detailed sub-set of

 But also part of the investment for a new web site

 And part of the investment in upgrading and

E-Marketing Planning and Strategies

E-Marketing Planning and Strategies

2. Industry variables: industry structure, lifecycle, specific

3. market variables: lifecycle, segment structure, demand

E-Marketing Planning and Strategies

sustainable competitive advantage as a means to

E-Marketing Planning and Strategies

Demographic/ Marketing and sales Technical/

Marketing and sales

E-Marketing Planning and Strategies

Marketing factors Managerial factors

Business Performance Source: after Baker & Hart

E-Marketing Planning and Strategies

Used to create Provide

E-Marketing Planning and Strategies

Creating value for customers

advantage is to create better value for customers

offers great opportunities for creating value for

E-Marketing Planning and Strategies

 value-defining processes [influenced by e-marketing]

 value-developing processes [influenced by e-marketing]

 how can customer value be enhanced through product and

E-Marketing Planning and Strategies

 Value-delivering processes [influenced by e-marketing]

 can it be made available at better times in better locations?

 Value-maintaining processes [influenced by e-marketing

E-Marketing Planning and Strategies

 But customer expectations change

E-Marketing Planning and Strategies

Potential benefits of an Internet site:

 Improvement in corporate identity and image

E-Marketing Planning and Strategies

supplier broadcasting to many potential and