CHAPTER ONE INTRODUCTION 1.

1 Background

Technological change has been a major hallmark of economic development in recent years. An interesting and vital part of the technological change process has been the rapid evolution of information and communication technology (ICT). It is notable that the world is experiencing an IT revolution that has drastically changed many aspects of the human life from education, industry, economy, political to entertainment (Ajayi, 2002). In addition, unprecedented capabilities of IT have dramatically changed the ways in which the public and private sectors operate all over the world. ICT has become a major factor in the socio-economic development of every nation (Kelly, 1998). Ajayi (2002) further adds that with the world becoming a single market place without borders, developing countries with their liberalized economies have been forced to develop or adopt different means of enabling them participate effectively in global trade. The evolution of ICT especially the Internet has made significant changes in the trade environment in the world. With continued globalization of the world economies, for most enterprises, trade opportunities seem to be endless. The powers of the information age and technology together with the globalization of markets have resulted in traders and consumers being more informed and as a result have become more inquisitive and demanding. The market place has and still is changing radically as a result of the global changes. Customers have also changed in that they expect higher quality and greater customization (Lovelock et al, 1996). This in turn, has caused heightened competition and serious challenges to the survival and stability of firms. Consequently, to achieve better performance, the firms are departing from the traditional commercial strategies and tactics and are looking for ways to compete more effectively on the local, regional and global levels (Chaffey, 2001). The information superhighway is what many business leaders say will make these visions a reality. According to Kotler (2003), the digital revolution has place new set of capabilities in the hands of consumers and businesses, which has led to new forms of marketing and business. He further

adds that competitive pressures have forced organizations to adopt the marketing orientations, which calls for constant change as market conditions evolves, as a strategy for dealing with market turbulence. The search for competitive advantage has led to organizations to reconfigure their operations and by extension their organizations. Firms around the world are now embracing e-commerce in attempt to gain its enormous advantages. In Kenya, the banking sector operates in a relatively deregulated environment. The banking sector in Kenya comprises of 46 institutions, 42 of which are commercial banks, 3 mortgage finance companies, one non-bank financial institutions and one building society as at December 2006, according to CBK annual reports. Out of the 46 institutions, 34 are locally owned. The foreign banks comprised of 6 locally incorporated and 5 branches of foreign incorporate institutions (Nyangosi, 2006). The Kenyan banking industry has been expanding branch networking amid the introduction of branchless banking system, which include the use of EFTs, ATM cards, SMS banking etc. The annual reports of CBK clearly indicate that, branch network has been slowly expanding since 2002. By the end of December 2006, Kenya had a total branch network of 575, as compared to 486 branches in the period ended December 2002. The slow growth of branches can be attributed to the rapid rise of alternatives, which include electronic financial product through mobile phones and Personal computers. Kenyan banks have exponentially embraced the use of information and communication technology in their service provision. They have invested huge amounts of money in implementing the self and virtual banking services with the objective of improving the quality of customer service. Some of the ICT-based products and services include the introduction of SMS banking, ATMs, Core banking solution, Electronic clearing systems and direct debit among others. In mid 2005, Kenyas banking Industry moved a milestone by introducing Real Time Gross and Settlement system (RTGS) which was renamed Kenya Electronic Payment and Settlement System (KEPSS). This will facilitate the inter-bank financial data transfer. The development of e-banking services is expected to decongest banking halls and reduce the incidences of long queues in banking halls. Digital based financial services have made a significant contribution in covering the cost of offering financial services.

The banking industry has also over years continued to introduce a wide range of new products, prompted by increased competition, embracing ICT and enhanced customer needs. As a marketing strategy, the new products offered in this segment of market, continue to assume local development brand names to suit the domestic environment and targeting the larger segment of local customer base. All the above clearly indicate that, Kenyas banking Industry has great developments like any other banking market in the world 1.2 Statement of the Problem As the banking fraternity continues to make forays into the retail segment of the market, it is becoming more paramount that customers be given value for their hard-earned deposits. The new banking environment is about differentiating banking products, increased choices, security and accessibility. The ability of financial institution to deliver products and services in the most efficient and effective manner, will therefore be the key to performance and relevance. In Kenya, majority of banks have introduced internet banking, mobile banking and other ebanking facilities, to enhance delivery channels to their customers. It is however, important that the introduction of these products be accompanied with programs to broaden consumer horizon by enhancing their knowledge in the new and more innovative way of conducting banking business. From a review of related literature, it is evident that organizations that have invested in internet marketing stand to benefit more as compared to those who dont. Internet marketing creates borderless markets allowing companies to market their products globally. As indicated by Spar and Bussgang (1996), internet marketing reduces the marketing costs of companies by enabling the buyers and sellers complete transactions cheaply, instantaneously, and anonymously. Retie (2002) asserts that companies that adopt internet marketing have increased sales as a result of expansion in markets, reduced costs in marketing communication tools, better management of marketing information and improved feedback mechanism from customers. However, while internet banking is fast and convenient mode of conducting banking transactions, this is yet to gain acceptance among banking consumers, due to fears of apprehension in this mode of banking. Like many other developing countries, e-banking in

Kenya is at its formative stages. Not many banks have embraced e-banking but majority have at least one or two technology based delivery channels. The non adoption of e-banking by banks has been attributed to impaired non-availability of infrastructure and legislation to support ebanking. Other stumbling blocks include; Internet costs, security of banking transactions, complexity of use, among others. Consequently, the currently study seeks to establish the extent these challenges have affected usage of Internet banking in Kenya.

Furthermore, this research envisages internet banking as the future of the banking industry in Kenya in the wake of globalization of world economies. The study considers the fundamental role of bank marketing within the dynamics of e-commerce. Despite the increasing importance of internet marketing, the adoption or rather extent of adoption of internet marketing is not known. 1.3 Research Questions

Therefore, the proposed study seeks answers to the following questions; i. ii. iii. What is the extent of internet banking by firms in the banking industry in Kenya? What are the benefits gained from the use of internet banking? What are the challenges faced in adopting internet marketing by firms in the banking industry in Kenya?

1.4

Objectives of the Study

The objectives of this study are; To determine the extent to which Kenyan banks are using internet banking To establish the accrued benefits from the use of internet banking To establish the challenges faced in the use of internet banking

1.5 Justification of the Study The results of this study will be important to the following; Banks in Kenya as they may be able to adopt internet marketing in order to compete in the global arena. The Government of Kenya, specifically; the Ministries of Planning, Information and Trade, as they may be used to develop an internet policy document that will support initiatives for revamping the economy. Promotional companies as these may be used in developing internet strategies and internet marketing programs.

1.6

Scope of the Study

The current study covers the specific internet tools used by commercial banks to carry out their marketing activities. Due to resource constraints, the study will be limited to a survey of commercial banks with a presence in Mombasa district.

1.7

Meaning of Operational Terms

Internet marketing; internet marketing is a sponsored website that describes the products and services offered by sellers and allow buyers to search for information, identify what they need and place orders using credit cards.

Navigation; refers to a process through which shoppers collect information about products.

E-commerce; means that the company or site offers to transact or facilitate the selling of products and services online.

E-business; describes the use of electronic means and platforms to conduct a companys business.

Product; refers to anything of value offered in the marketplace for attention, use, or consumption, to satisfy a need.

Price; can be defined as a measure of the value of exchange, i.e. the value of benefits received by customers and the value of compensation given to sellers for their product.

Place; refers to the distribution channels that the company uses the move its products from the point of origin to the point of consumption.

Promotion; are the means by which firms attempt to inform, persuade, and remind consumers directly or indirectly- about the products and the brands they sell.

People; This includes all human actors who play a part in service delivery and this influences buyers perceptions. They are the firms employees, customers, and other customers in the service environment.

Processes; These involve actual procedures, mechanisms, and flow of activities by which services are delivered.

Physical Evidence; refers to the environment where the service is offered, i.e. where firms and customers interact.

1.8

Conceptual Framework of Internet Banking

Product

Price

Place Internet marketing by banks Promotion

People

Physical evidence

(Source; Author, 2012)

CHAPTER TWO LITERATURE REVIEW 2.1 Introduction

This section reviews literature that is relevant to the study. The literature distinguishes Internet marketing from traditional marketing as marketing strategies that support modern marketing concept. The section further outlines the processes involved in internet marketing, using the framework of the 7 Ps. Theoretical and empirical literature reviews have both been adequately addressed in the chapter.

2.2 2.2.1

Theoretical Review Internet Marketing

Marketing has two distinct meanings in terms of modern management practice: It is understood as the range of specialist marketing functions carried out within many organizations such as marketing research, brand/product management, public relations and customer service. It is also seen as an approach or guiding philosophy for all functions and activities of an organization. Such philosophy encompasses all aspects of business. Business strategy is guided by an organizations market and competitor focus and everyone in an organization should be required to have a customer focus in their job (Chaffey et al, 2000). Marketing encompasses activities traditional seen as the sole domains of accountants, production, human resource management and information technology. Increasingly such functions are being reoriented, evidenced by the importance of initiatives such as Total Quality Management (TQM), business process Re-engineering (BPR), Just-In-Time (JIT) inventory systems and supply chain management (Chaffey, 2000). The Internet can be applied by companies as an integral part of the modern marketing concept. According to Chaffey et al (2000), internet marketing can be defined as the use of the internet and related digital technologies to achieve marketing objectives and support the modern marketing concept. These technologies include the Internet media and other digital media such as cable and satellite together with the hardware and software which enable its operations and use. The term electronic commerce or e-commerce is often used in a similar context to internet marketing and has become a similar term recognized for business transactions conducted on the internet. It encompasses a range of business activities such as selling online, online bill

payments, home shopping/banking and improving market efficiency dealings with suppliers and clients (Hoffman and Novak, 1997). Zwass (1998) extends the meaning of e-commerce to incorporate sharing business information and maintaining business relationships over the internet. According to Kotler (2001), internet marketing is a sponsored website that describes the products and services offered by sellers and allow buyers to search for information, identify what they need and place orders using credit cards. Kotlers definition is no different from many others except in asserting that payment is by credit card. Although credit cards are the main mode of payment it is important to note that not all internet transactions are completed online. For example, business enterprises may order goods from their suppliers online and make payments at a later date either by cheque, bank transfers etc The internet revolution has been represented by many authors as the sole ingredient of the new economy. However, a heavy reliance on connecting networks can be risky when communications is only a means for achieving larger objectives not the end itself. On the other hand there are revolutionary features of todays business environment that truly distinguish the new economy of the technological age. Thus internet marketing of goods entails the incorporation of all the 4 Ps (Product, Price, Place and Promotion) of marketing and in the case of services the 7 Ps (Product, Price, Place and Promotion, People, Physical evidence and Process) in the firms marketing efforts. In essence it is the application of all the fundamental principles of marketing via the web. Unlike mainstream marketing, internet marketing is entirely web-based as opposed to the traditional media. 2.2.2 Benefits of Internet Banking

The use of internet marketing in the business world presents an array of benefits to be enjoyed by the producers or marketers of products. Retie (2002) outlines that these benefits can be seen in four perspectives namely; market penetration, market development, product development and diversification.

In terms of market penetration, internet marketing can be used to sell more existing products into existing markets. This is achieved through online advertising to increase awareness of products and the profile of a company amongst potential customers in an existing market. On market development, the internet can be used to sell to new markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customers country. However, this requires an individual company overcoming the barriers to becoming an exporter or operating in a greater number of countries. Product development is concerned with the development of new products and services that are delivered via the net. These are typically information products such as market reports which can be purchased using electronic commerce. The diversification aspect of internet marketing focuses on the development of new products that are sold in new markets (Rettie, 2002).

According to Rettie (2002) the tangible benefits to the producer include cost reduction, increased sales from expansion into new markets, reduced time in customer service, reduced printing and distribution costs of marketing communication tools. Increased sales are achieved through increased awareness of brands and products in addition to the measure that support online purchasing. Internet marketing also reduces the cost of conducting market research as search engines, online questionnaires amongst other internet tools ease the process of finding a range of market information. The intangible benefits to the producer can be observed in the enhanced brand, improved and rapid responsive marketing communications, improved customer service, identifying new partners while supporting the existing ones, better management of marketing information and improved feedback systems from customers about products.

The marketing literature suggests that exemplary online shopping experiences can lead to greater customer loyalty and hence, secure future revenues (Fornell, 1992). Better online customer experiences could potentially reduce the cost of future customer transactions and new customer acquisition, decrease price elasticity of demand, and minimize the likelihood that customers will defect if quality falters (Anderson, 1994). This therefore creates a sustainable long-term advantage, stemming from reputation created by building trust and relationships with customers.

Rettie (2002) concludes that the benefits of internet marketing can be summarized using the 6 Cs. These are; Cost reduction that is achieved through reducing the need for sales and marketing enquiries to be handled by telephone operators and the reduced need for printing and distribution of communication material, which is instead published on the website. Capability in which the internet provides new opportunities for new products and services and for exploiting new markets. Competitive advantage as a company is able to introduce new capabilities before its competitors and thus achieve competitive advantage until its competitors have the same capability. Communications improvement with customers, staff, suppliers, and distributors. Control as the Internet provides better market research through tracking of customer behaviour and the way that staff deliver services. Customer service improvement that is provided by interactive queries of databases containing, for example, stock availability or customer service questions.

2.2.3

Challenges of Internet Marketing

The international presence of the Net creates several new challenges or obstacles because the Internet has expanded the firms business reach to several potential markets worldwide, where cultural, legal, economic, and social systems differ from country to country. The main problems can be categorized as either economic or social challenges.

Economic challenges The economic systems of countries differ greatly with developed countries have efficient economies as opposed to Third World countries. Rabe (2001) and Singh et al (2001) indicate that economic barriers present the largest challenge to Internet marketing in developing countries. Physical infrastructure especially the availability and accessibility of telecommunication systems impede the ability of firms in developing economies to participate in e-commerce. Many rural areas do not have telephone lines or electricity to be able to use this technology. This limits the reach of internet marketing to a few segments in the market.

In addition, the cost of using the Internet together with the cost of required equipments further aggravates this issue in developing economies. Therefore companies in these economies will have to wait for further infrastructural development to bring prices down before they can take full advantage of e-commerce.

Most of the consumers in developing economies still pay by cash rather than credit cards. The lack of ability or interest to execute credit transactions is an enormous barrier to e-commerce. Credit cards are the most useful tool as a way of payment by Internet. Since the use of credit cards as a means of payment is not universally available globally, companies should develop other means to receive payments. Third World countries are also faced with low penetration of credit card companies that further hinders e-commerce.

One of the most common worries with creating efficient and trustworthy online commerce concerns the security of financial transactions which occur over the network. Credit cards provide the most obvious answer. Yet an unencrypted message containing the credit card number could be viewed by an unscrupulous system operator as it passes by an encapsulated package. Thus there is relative risk involved in these type of purchases (Notess, 1995). Nevertheless, as experience shows, the probability of this is low because of the vast amounts of information flowing over the network and the general lack of time available to system administrators. But as long as consumers doubt the safety of the transfer, there is a problem selling online.

Social challenges Although among cultures culture has different meanings and importance, one must be aware that in the internet community there is a general agreement that it should not be used for such marketing purposes as direct advertising and mailing (Gattiker et al, 1996). Privacy is a growing

concern in most developed and developing economies, with some countries enacting laws regulating internet marketing practices, such as unsolicited mail.

Culture and sensitivity to cultural differences plays a critical role in successful international business, and so much so international e-commerce. Understanding how the Web fits into a countrys culture is necessary in forming successful customer relations. Sites targeting foreign consumers, business or even governments should appear friendly to them, which usually requires translating the site into the local languages (Shannon, 2000). Different languages and cultural platforms compound the complexity of doing e-business overseas, but a bigger barrier may well be the attitude and culture of business and government entities, which must learn what to expect from e-business.

Other barriers to trade such as a limited skill base, weakness of regulatory regimes, as well as inadequate transportation and distribution networks, further limit the capacity of firms in developing economies to benefit from the implementation of e-commerce (Nielson and Morris, 2001). Consequently, the establishment of a public Internet based e-commerce environment that succeeds in helping firms in developing countries gain access to electronic markets requires the provision of complementary services that reduce the transaction costs associated with negotiating and fulfilling contracts and with ensuring contract terms between trading parties are met. Moreover, these e-commerce services must be readily accessible at prices that are affordable to users.

2.3

Empirical Literature

Extant literature is replete with studies on electronic commerce and marketing. In an article titled Managing in Marketspace, Rayport and Sviokla, (1994) argue that technology has allowed the information about a product or service to be separated from the product or service itself. The authors add that this new market space has three elements: Content is what is being sold (i.e. what you take delivery of), this can be information, a service or a physical product; Context is

how the content is presented for sale. Key to consumer loyalty, once the consumer is loyal to a particular context, there is a large potential for related transactions; and infrastructure describes how the buyer and seller are brought together. Traditionally all three elements would be managed by a single player to develop a brand. Now the three elements will be segmented and can be managed separately to create brand value. Also, physical products have been replaced with information-based services, whilst near-zero marginal costs of additional customers invalidates old concepts of pricing. Consequently, companies must look to exploit the breadth of the electronic channel and develop context loyalty first, thereafter exploit it with various contents (Rayport and Sviokla, 1994).

Klein and Quelch (1996) looked at e-commerce from an international context. They argue that e-commerce will develop along two paths: information to transaction (established companies) or transaction to information (start-ups). Web sites must be built to reduce costs for customers (e.g. customers' service, transactions) or to generate revenue from them (e.g. product information, promotions, market research, transactions) E-commerce should enable buyers and sellers to come together where they previously could not. This is a critical area of growth for international companies. Technology (connection to the network) will become more important than size for companies marketing on the Internet. Other scenarios foreseen by the authors are; standard pricing, the changing role for intermediaries, and companies dominating markets.

Gosh (1998) described four business opportunities that are provided by the Internet: (1) linking companies directly to customers, suppliers, and other interested parties, (2) allowing companies to skip other players in the value chain, (3) using the Internet as a tool for developing new products and services for customers, (4) allowing companies to dominate the electronic channel of an entire industry or segment, control access to customers, and set business rules.

Evans and Wurster, (1999) dwell on the aspect of navigation, which they aver is now a separate business with three aspects: reach, affiliation, and richness. Reach refers to the number of different categories and products a consumer interface (e.g. store, catalog, and Web site) can

cover. Reach also refers to the number of customers a business can interact with. Affiliation refers to whose interests are most important to the merchant: the customer's, the retailer's or the supplier's? Richness is how much information can be exchanged between a producer and consumer. Richness has two aspects: customer information and product information. They further add that, brands, as a source of rich information (particularly those based on fact based beliefs), will lose much of their value The value chain will break down in most industries. Navigators will be able to capture most of the value in an industry as the other elements of the supply chain (e.g. physical retailers, distributors, and manufacturers) become commoditized.

2.4

Conceptual Framework of Internet Banking

Zwass (1996) suggests that the established way to analyze and develop complex systems (such as e-commerce) is to organize them in a meaningful structure. Consequently, the literature is presented as they apply to the marketing mix model of product, place, price, promotion, people, process, and physical evidence. 2.4.1 Product

A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need (Kotler, 1991). In an e-commerce marketing strategy it is important to remember that information is now its own viable product. Many of the literature reviewed address this area. Rayport and Sviokla (1994) discuss transactions where the actual product has been replaced by information about the product and Evans and Wurster (1999) discuss navigation as its own business. This change has resulted from technology that has brought down the cost of collecting and disseminating information about consumers and products. Evans and Wurster (1999) describe navigation as the process through which shoppers collect information about products. In the physical world, a shopper who wants to buy something has to

manually sift through the millions of choices. This usually requires a shopper to travel to a store and inspect the products. Unless they want to travel to various stores, they are limited to the information at one particular store. A complete search of all offerings would be extremely expensive, time-consuming and practically impossible. Instead consumers rely on product suppliers and retailers to aid them in the search. This allows the suppliers and providers to use the consumers' cost-of search as a competitive advantage. However, on the Internet, consumers can search much more comprehensively and at virtually no cost. Suppliers and retailers must realize that product information can be delivered to consumers by a third party. Indeed, pure navigators such as Yahoo have already become major players in this business (Evans and Wurster, 1999).

2.4.2

Place

For most companies the place aspects of the marketing mix involve marketing channels. Marketing channels can be defined as interdependent organizations involved in the process of making a product or service available for use or consumption (Kotler, 1991). Due to the size of its marketplace, the Internet will have the most profound effect on place in the marketing mix. Ecommerce puts the purchase decision anywhere connection to the Internet exists. Klein and Quelch (1996) discuss the global reach of the Internet in creating a larger marketplace and the strong growth of a network's utility. Evans and Wurster (1999) discuss reach, the number of eyeballs that view a Web site. They claim that reach is the most visible difference between ecommerce and the physical world. The Internet will allow organizations to skip over parts of the value chain. Gosh (1998) discussed how the Internet could be used to bypass the value chain. Examples most often involve marketing the product on the Internet in order to bypass the retailer. US based computer manufacturers such as Dell and Gateway 2000 do this. United Parcel Services (UPS) has a program to set up e-commerce sites for businesses that ship with them (Gosh, 1998). According to Evans and Wurster (1999), the navigational Web sites will allow small niche producers easier access to the markets. They will be able to skip over parts of the value chain that traditional

suppliers have historically relied on for competitive advantage. Traditional suppliers could respond to this by keeping their product out of navigational Web sites to block their development. However, this strategy would be technically difficult and would only be successful if other large producers acted similarly. Furthermore, it would be a tremendous advantage for a single producer to defect from the group and offer its product and the only defense available to other producers would be follow to suit. A more successful strategy would be to enter into joint ventures or expand a supplier's Web site to offer competitors' products (Evans and Wurster, 1999). It is critical to quickly develop a large customer base in e-commerce. Rayport and Sviokla (1994) describe the place of e-commerce in terms of two aspects: context in which the transaction occurs (e.g. an electronic on-screen auction replaces a face-to- face auction) and the infrastructure that enables the transactions to occur (e.g. computers and communication lines replace car lots). Rayport and Sviokla (1994) claim that customer loyalty must be first gained in the context dimension. The first mover advantage is very important because Internet standards could make the competitive advantages of a particular context difficult to sustain. By their very nature, standards will allow organizations to duplicate the design and features of competitors' Web sites. However, the courts may provide some protection for e-commerce store designs (Reuters, 1999). Organizations that are first to offer a large breadth of products to consumers will have an advantage. The marketplace on the Internet could consolidate quickly as many e-retailers will attempt to become category killers, places where consumers can go for all their shopping needs. The success of category killers can be seen in the bricks and mortar world (e.g. Wal-Mart). Category killers on the Internet would have the following advantages: physical space is less of a constraint, expansion would be easier on the Internet, and stores can customize offerings to consumers. Instead of navigating hundreds of sites to find what they need, consumers will stay with the sites they find convenient. Magnet stores or category killers can be expected to form around a number of dimensions such as product, service, customer segment, and industry (Gosh, 1998). 2.4.3 Price

Price is the only element of the marketing mix to generate revenues. As Kotler (1991) suggests, all other elements of a business operation represent costs. Internet pricing decisions will be just as important as they traditionally have been. The Internet will lead to increased price competition and the standardization of prices. Klein and Quelch (1996) point out two counteracting effects of the Internet on price. First, a supplier can use the technology to discriminate pricing between consumers, for example, in different countries. However, if they do not take precautions the consumers may be able to quickly find out about the price discrimination and object to it. Klein and Quelch (1996) suggest that taken together these factors would lead to increased standardization of prices across borders. Also, the ability to compare prices across all suppliers using the Internet and online shopping services will lead to increased price competition. Finally, the price of providing Internet-based services often contains little or no marginal costs. Economic theory predicts that the price of a product or service will approach its marginal cost as competition intensifies. Organizations will have to employ new pricing models when selling over the Internet. Rayport and Sviokla (1994) point out that the ability of technology to offer services at a cheaper cost would make it difficult to determine the appropriate price for a consumer. Voicemail, for example, is solely an information-based service, which provides the consumers with a replacement for the traditional answering machine. However, consumers are willing to pay even more for the service than they would for an answering machine due to the convenience and added features (Rayport and Sviokla, 1994). 2.4.4 Promotion

Promotion encompasses all the various ways an organization undertakes to communicate its products' merits and to persuade target customers to buy from them (Kotler, 1991). Incumbent retailers and manufacturers have certain advantages when promoting products and services on the Internet. Evans and Wurster (1999) discuss these advantages in relation to the richness of information they can provide consumers. The Internet provides a low cost way for the manufacturer to build a direct link with the consumer.

Incumbents can use their traditional sources of consumer information (e.g. product testing, focus groups) in addition to the information that is easily collected from e-commerce sites (e.g. sales information, customer demographics). Using data mining they can build customer profiles that allow them to offer distinct promotions that are tailored to their customers. This advantage is at its greatest when the consumer is interested in detailed product information or the product is marketed as state-of-the-art. Such rich product information is most useful when the consumer is evangelistic, enthusiastic and the product has a strong connotative context (Evans and Wurster, 1999). Branding will continue to play an important role in Internet marketing. As Klein and Quelch (1996) point out, new users tend to explore sites with familiar brands first. Recent surveys have shown that 46 per cent of new online shoppers prefer to buy from merchants they had previously bought from off-line. Even 34 per cent of repeat online shoppers preferred the familiar off-line store sites (Kane, 1999). Brands that equate their products with an experience (e.g. feelings, associations, and memories) will likely be more effective than brands based on facts about a product. Belief-based brands associate themselves with attributes such as high quality or reliability. These attributes can be easily proven by an impartial display of the facts on a navigator's Web site. Even if the facts confirm the brand, it may only be rendering the brand redundant. Brands that are associated with a mixture of beliefs and experiences should play up the experiential side of the brand (Evans and Wurster, 1999). There are important limitations to promoting on the Internet. Privacy concerns may make consumers unwilling to give up information. Technologies such as privacy programs allow consumers to prevent data from being collected. In addition, consumers may realize the value of this information and demand a premium for it (Evans and Wurster, 1999). However, Web marketers can use consumer information to create substantial value for the consumer. As consumers recognize this value they will be more likely to share their information. In addition, when detachment, objectivity, and comprehensiveness characterize the purchase decision, the richness of product information provided does not provide as strong an advantage. Other

problems for manufacturers presenting rich product information include the reach of their Web sites and the lack of credibility in a single product Web site versus an independent site that compares multiple products (Evans and Wurster, 1999). 2.4.5 People

The people element of the marketing mix refers to how an organizations staff, interact with customers and other stakeholders during pre and post sales. Smith and Chaffey (2001) suggest that online, part of the consideration for the people element of the mix is the consideration of the tactics by which people can be replaced or automated. Some of the options include; auto responders that automatically generate a response when customer emails an organization, or submits an online form. Email notification that is automatically generated by a companys systems to update customers on the status of the order, for example, order received, items currently in stock, order dispatched. There are also callback facilities in which customers fill in their telephone number on a form and specify a convenient time to be contacted. Dialing from a representative in the call center occurs automatically at the appointed time and the company pays which is popular. Frequently Asked Questions (FAQ), for these, the art is compiling and categorizing the questions so customers can easily find the question and a helpful answer. Onsite search engines that assists customers find what they are looking for quickly are popular when available. Site maps are a related feature.

2.4.6

Physical Evidence

Smith & Chaffey (2001) indicate that in an online context, physical evidence refers to the customers experience with the company through the website and associated support. Consumers online look at certain aspects of the web page, and just like a physical shop, may or may not visit it again. Some of these aspects include; the ease of ordering, product selections, product information, price, the website performance (ease of navigation, appearance, etc), on-time delivery, product presentation, customer support and privacy.

2.4.7

Process

The process element of the marketing mix refers to the methods and procedures companies use to achieve all marketing functions such as research, product development, promotion, sales, and customer service. The restructuring of the organization and channel structures described for the product, price, place and promotion all require new processes (Smith & Chaffey, 2001). A graphical representation of the conceptual framework is seen below. In the model, the 7 Ps, i.e. product, price, place, promotion, people, physical evidence, and process are the independent variables, and intent marketing practices the dependent variable.

CHAPTER THREE RESEARCH METHODOLOGY 3.1 Introduction

This chapter provides a description of the procedures and methods that the researcher will adopt in conducting the research. The study will be guided by the research study objectives in developing the research methodology. The chapter discusses the research methodology applied in respect to the research design, study population, sampling design, sampling method and techniques, data collection and analysis methods, techniques and procedures. 3.2 Research Design

This is a descriptive study aimed at determining whether firms in the banking industry in Kenya have adopted Internet marketing and to what extent. According to Emory (1996), a descriptive

study is concerned with who, what, where and how of a phenomenon, which is the objective of the current study. 3.3 Sampling

The current study is targeting selected commercial banks in Mombasa. According to a list provided by the Central Bank of Kenya, there are 55 branches of commercial banks in Mombasa. The sample will be drawn 10 per cent of the total population, (i.e. 6 branches). Each branch will be expected to provide at least 5 respondents to bring to sample size to thirty (30). 3.4. Data Collection The study will use both primary and secondary data to achieve its objectives. Primary data study will be collected by way of structured questionnaires. The fact that questionnaires are mainly used for descriptive or explanatory research because they work best with standardised questions that are interpreted the same way by all respondents informed the researchers choice for this instrument. Specifically, a Likert-style rating scale will be used to collect opinion data as is the most frequent used variation of the summated rating scale. Likert- rating scale refers to summated scales consisting of statements that express either a favourable or unfavourable attitude towards the object of interest. Respondents will be asked to respond to statements related to the usage of Internet marketing techniques. The scale will be as follows; 5 very large extent, 4 large extent, 3 moderate extent, 2- small extent, 1 no extent at all. Thereafter the scores will be totaled to measure the respondents attitude. 3.5. Data Analysis and Presentation Descriptive statistical measures such as percentages and frequencies will be used to analyze closed ended questions, with the aid of SPSS computer software application. These techniques are usually used in descriptive surveys as they employ factual information about a situation to provide an understanding of performance levels. The results will then be presented in tables, frequency bar charts and pie charts.

References Allen, E. and Fjermestad, J., (2001). E-commerce marketing strategies: a framework and case analysis. Logistics Information Management Journal, Volume 14. Ajayi G. O. (2002). African Response to Communication Technology Revolution; Case Study of the ICT Development in Nigeria, African Technology policy Studies network, Special Paper No. 8, Nigeria. Bussgang, J. (1996). The Internet is revolutionizing business, but who is setting the rules? Harvard Business Review,

Chaffey, E and Smith, J., (2000). E-Marketing Excellence: The Heart of E-Business, Oxford, Butterworth Heinemann. Evans & Wurster, (1999), Getting real about virtual commerce, Harvard Business Review, November issue. Gosh, S., (1998),Making Business Sense of the Internet, Harvard Business Review, March issue. Kahn, R. E, (1999), Evolution of the Internet, World Communication and Information Report, 1999 2000, UNESCO. Klein, L, and Quelch, J, (1996). The Internet and International Marketing, Sloan Management Review, Vol 37, No. 3, pp 60 -75. Kotler, P, (2001), Marketing Management, Millennium Edition, Prentice Hall Inc. Rayport, J. and Svioka, J. (1994). Managing in the marketspace. Harvard Business Review, November issue Rettie, R. (2002). How will the Internet change marketing? Kingston University, Surrey, United Kingdom. Zwass, V. (1998), Foundations of Information Systems, Irwin/McGraw-Hill, New York.

APPENDIX I QUESTIONNAIRE The questionnaire seeks to collect data on the extent of use of Internet banking by selected commercial banks in Kenya. While the objective is academic, the results of the survey will be critical to determine in determining the best Internet banking practices, challenges and benefits/opportunities of Internet banking. Your support in completing the questionnaire is greatly appreciated. SECTION A GENERAL INFORMATION (This section requires you to give information regarding the firm. Please tick or fill-in where applicable) 1. Name of the bank 2. Branch _________________________________ _________________________________

3. Title of the respondent

_________________________________

SECTION B EXTENT OF USE OF INTERNET BANKING Indicate the extent to which your bank undertakes the following activities ONLINE. On a scale of 1 to 5 where; 1 Very large extent; 2 Large extent; 3 Moderate extent; 4 Small extent; and 5 No extent at all. (i) Product New product development & launching Product sampling Information on product features Explaining product benefits Offer product warranties After-sales services (ii) Price Publishing price lists Offering discounts online Publishing online price comparisons Online invoicing Online payments (iii) Place Online distribution channels Soliciting orders Processing orders Delivery of services online [1] [1] [1] [1] [2] [2] [2] [2] [3] [3] [3] [3] [4] [4] [4] [4] [5] [5] [5] [5] [1] [1] [1] [1] [1] [2] [2] [2] [2] [2] [3] [3] [3] [3] [3] [4] [4] [4] [4] [4] [5] [5] [5] [5] [5] [1] [1] [1] [1] [1] [1] [2] [2] [2] [2] [2] [2] [3] [3] [3] [3] [3] [3] [4] [4] [4] [4] [4] [4] [5] [5] [5] [5] [5] [5]

(iv) Promotion Placing advertisements on the Internet Running product offers online Holding contests online Tracking sales online Prospecting for customers online Online sales presentations Negotiating online Handling client objections online Online press releases Online announcements on price changes Sending catalogues & brochures online (v) People Automated customer call centers Automated email responders [1] [1] [2] [2] [3] [3] [4] [4] [5] [5] [1] [1] [1] [1] [1] [1] [1] [1] [1] [1] [1] [2] [2] [2] [2] [2] [2] [2] [2] [2] [2] [2] [3] [3] [3] [3] [3] [3] [3] [3] [3] [3] [3] [4] [4] [4] [4] [4] [4] [4] [4] [4] [4] [4] [5] [5] [5] [5] [5] [5] [5] [5] [5] [5] [5]

(vi) Processes Online market research Online product development (vii) Physical Evidence Company Website Product selections Reassurance of consumer privacy [1] [1] [1] [2] [2] [2] [3] [3] [3] [4] [4] [4] [5] [5] [5] [1] [1] [2] [2] [3] [3] [4] [4] [5] [5]

SECTION C BENEFITS OF INTERNET BANKING What benefits has the bank experienced as a result of Internet banking? Increased sales volumes

Increased market share Increased profits Increased awareness Reduced costs Improved customer service Improved market research Better management of marketing information Other (please specify) _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ __

SECTION D CHALLENGES EXPERIENCED IN INTERNET BANKING On a scale of 1 11, please rank the following challenges that the organization faces while using Internet banking. The value 1 represents the greatest challenge while the value 10 represents the least challenge faced. High accessibility cost Lack of confidentiality Insecurity Poor internet connection Low interest from customers Complexity of use

Lack of skilled knowledge Use of outdated software & hardware Lack of government support Other, (please specify) _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ____ D.2) What methods does the bank use to address the above identified challenges? (Please list) _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ___