MASINDE MULIRO UNIVERSITY OF SCIENCE AND TECHNOLOGY

NAMES: VINCENT MOTOCHI- SIT/G/01/10 COURSE: E-COMMERCE TECHNOLOGIES COURSE CODE: MIT 842E COURSE INSTRUCTOR: MR. ANSELMO IKOHA

TOPIC:

E-COMMERCE

ADVERTISING

AND

MARKETING

Abstract The purpose of this article is to explore e-commerce issues, such as marketing and logistics problems, and create viable recommendations. The issues that e-commerce faces will be examined through the marketing mix. Exploring the ideas of product, place, price and promotion, and applying them to ecommerce problems is the main focal point of this article. It is believed that the four concepts of the marketing mix equally play a critical part in the success of ecommerce. Therefore, concentrating on these concepts will prove to be of the utmost importance as an e-commerce provider.

1.0

INTRODUCTION

Internet marketing (IM) is also known as digital marketing, web marketing, online marketing, or e-marketing. As the name states, it is the advertising of products or services over the Internet. However, it also implies marketing through the wireless media and through e-mail. Electronic customer relationship management (ECRM) systems are also categorized under Internet marketing. IM can be creative, as well as, technical through its design, development, advertising, and sales over the Internet. This paper is a secondary research regarding how E-commerce gradually forms part of our daily lives. It concerns different aspect of advertising in terms of electronic commerce.

2.0 2.1

LITERATURE REVIEW USE OF INTERNET FOR MARKETING SUCCESS

Because Internet grew in only five years lagrosen (2005), and there are no barriers for time or location, marketing online has become the new era in E-commerce with petty variable cost per customer Deighton, J. (1997). Marketers use full color advertising that appeal similar to both young and old- to attract people all over the world. The Internet is now considered as a much greater resource than traditional means of advertising Hale (1997): E-mail use to transfer text and multimedia messages, Listservs Hamill (1997) latest information sent on specific themes to groups/managers, Newsgroup electronic conferencing leading to the development of ideas, as well as, worldwide networking opportunities Heinen (1996), File transfer protocol (FTP) high speed file transfer as a virtual fax, WWW menu-driven access to host resources Sandelands (1997), etc. All industries have subject matter experts (SMEs)

Marquis, S. (2001), who are responsible to unify and apply knowledge from different vendors and sources to solve industry problems. To prepare a Web site merging SME knowledge with other reference sources is one of example of Internet model, Frost, R. (1999), to retain and attract customers. A well designed Web site can lead to an interesting, low cost means for sales promotion to worldwide customers. Marketers should also refer to the AIDA model-Attention, Interest, Desire and Action- to successfully attract customers by introducing the right advertising on Internet Lagrosen (2005).

2.2

INTERNET MARKETING

Most people worldwide can use the Web since it is affordable and easy to access Bennett (1997). Internet is a fast and flexible means for marketing. Shopping on the Internet is convenient as there is no time restriction, it is comfortable since it is in a user friendly environment and there is also an instant satisfaction of ordering, paying and delivering [31]. A one-to-one basis, as well as, a two way communication with customers through the Internet is possible. Enhancing brand image, creating awareness and providing customer service are more important than just selling the products or entertaining customers Lace (2004). With better technologies, companies can create a stronger brand image and thus increase sales. It is easier to get customers feedbacks and use them to improve. On the other side, it is easier for customers to receive a kind of acknowledgement; feeling that they did not waste their time Wex (1996). Nowadays, people live a busy life and shopping online is time consuming for them. The company also saves time since whenever a customer uses his/her credit card to purchase a product, through the Web Trak software from Aurum Software, the company can access customers details Heinen (1996). Marketing communication includes expenditure on direct response marketing rather than the old standard mass communication; E-marketing is seen as a promotional as well as informational tool Pallhawadana (2002). E-communities Barnatt, C. (1998), or moderated group chat Ruyter, K. (2002)-where customers with similar interests can interact-are strategies to build relations through Internet. This new era of commerce is beneficial for marketing logistics, a global presence, to establish and maintain a competitive edge, shorten components of supply chains, for cost savings and research advantage Wilson, T.D. (1998).

2.3

INTERNET ADVERTISING

Clearly, Internet advertising is different in some fundamental ways from other forms of advertising. Researchers and practitioners seem to have identified four key differences. First, it compresses the hierarchy of effects. Traditionally, marketers have talked about the need for setting different kinds of objectives for advertising and marketing based on the notion that advertising works on the communication aspects of the hierarchy (e.g. awareness, attitude) while marketing works on the higher-level behavioral goals (e.g. purchase, brand loyalty). Advertising traditionally took place in the media while the retail environment was the place to focus on changing behaviors. Of course, there have always been messages that exist in the cracks of this definition. For example, direct mail does not use a traditional mass medium and is very much focused on achieving a behavioral result. Nevertheless, it is often thought of as form of advertising though a very specialized one that uses different techniques than magazine or television advertising. But on the Internet all the lines blur and compress. Banner ads might build awareness of a brand, but they are most often also designed to encourage click-through to a Website that often sells the products or services presented on the banner. Much of the early literature on Internet advertising focused on the profit potential of this compression between message delivery and purchase (see for example, Berthon, Pitt, & Watson, 1996; Bush, Bush, & Harris, 1998; Gugel, 1997; Li & Coyle, 1997; Paul, 1996). A second major difference between Internet advertising and other forms of advertising is that the Internet was the first widely available consumer medium that enabled the sometimes elusive properties of interactivity. The trade and popular press widely heralded the benefits of interactivity starting in the 1980s, often without any definition of what interactivity is (McMillan, 1999a, 1999b). Researchers have also examined intrusiveness, or lack thereof, as a unique characteristic of Internet advertising. As Internet advertising was first developing, some felt that it lacked enough intrusiveness to be effective. But the Internet message that is intended to persuade often is positioned at least one click away from the banner, hyperlink, or other Internet advertising. In essence, the consumer has to request the ad rather than having it intrude upon his or her life. But advertisers have become clever at making their ads intrusive with tools such as pop-up ads that appear on top of a message, pop-under ads that stay on a screen after the target Website is closed, interstitial ads that take over the screen and so forth. Recent research

suggests that these more intrusive forms can lead to irritation and ad avoidance (Edwards, Li, & Lee, 2002).

3.0 3.1

DESIGNING FOR PROFIT AND PERFORMANCE Web site design strategy

Web design has evolved from static hypertext publishing in the early days to dynamic multimedia, Web database application servers. More importantly, new business models that bring savings, revenues, and customer relationships are being incorporated into commercial Web site design. There are two generic Web site design strategies: informational/communicational strategy; and on-line/transactional strategy, Informational/communicational strategy

In the informational/communicational strategy, the Web is used to support but not to replace a companys main business activities. Companies do not limit themselves to just marketing on the Web. As a matter of fact, they look at other traditional media of advertising and marketing study in order to meet their business goals and marketing objectives. Looking at Web marketing as another tool in the companys marketing arsenal (Clark, 1997), the informational/communicational design is the most common use of Web marketing today. On-line/transactional strategy The on-line/transactional strategy invariably provides an electronic catalog of products for sale. Visitors can browse through the catalog and order products online. Although the informational/communicational design often provides an electronic catalog as well as ordering information (e.g. by phone, fax, or e-mail), it does not support on-line transaction. Without on-line ordering Web database capability, it hardly exploits the potential of the Web as an interactive medium. The on-line/transactional strategy is what most proponents of marketing on the Web expect. Griffith and Krampf (1998) indicated that the ability to enhance a companys overall sales was a significant decision factor to establish a Web site.

3.2

E-commerce Web site design models

There is no doubt that many Web design models exist on the Internet and new models are increasing expeditiously. EC is not just about doing business over the Internet, it is about

changing the way companies do business. It is about creating new business models while transforming traditional ones. The first four models that related to the informational/communicational design are: a) brand awareness and image building model; b) cost saving model; c) promotion model; and d) info-mediary model. Brand awareness and image building model Web sites that apply this model provide detailed, rational information about the firm and its offerings. They may also serve as a signal to current and prospective customers and competitors that the firm is on the cutting edge. The model reaches motivated customers with an information/image-rich communications message. 3.2.1 Cost saving model Saving from commercial activity on the Web includes cost-effective savings and productivity savings. By directly meeting information needs, a Web site can be highly cost-effective. Many companies now use their Web site to support the ownership phase of the customer service life cycle. Productivity savings arise from reduction in order and processing costs and more efficient inventory management. Cost savings result through reduced brochure printing and distribution costs and reductions in order-taking as customers use fill-out forms to prepare their own orders. As control is effectively transferred to the customer, customer satisfaction might actually be increased. Examples of the cost saving model include:. Microsoft (www.microsoft.com) provides voluminous support material, live audio broadcasts of Microsoft conferences, product user groups, and free download of the patch and supplemental programs. Promotion model The promotion model represents a unique form of advertising that attracts a potential customer to a site. The objective is to attract the user to the commercial site behind it. In many cases, Web sites provide free gifts to get users attention. The gifts typically include digitized material such as software, photographs, music, and consumer reports. Examples of the promotion model include:. Auto-By-Tel (www.autobytel.com) offers a comprehensive consumer report for all major manufacturers. It attracts consumers to visit the site

to read the report and compare the price. The Website produces significant sales for local car dealers. 3.2.2 Info-mediary model An info-mediary may offer users free Internet access or free hardware in exchange for detailed information about their surfing and purchasing habits. This is more likely to succeed than the pure promotion model. Data about consumers and their buying habits are extremely valuable. Especially when that information is carefully analyzed and used to target marketing campaigns. Some firms are able to function as info-mediaries by collecting and selling information to other businesses. The model can also work in the other direction: providing consumers with useful information about the Web sites in a market segment that compete for their dollar. Examples of the info-mediary model include:. Audio Review (www.AudioReview.com) is a site that allows users to exchange information with each other about the quality of products and services or the sellers with whom they have had a good/bad purchase experience. The following eight models that are based on the on-line/transactional design strategy include: a) brokerage model; b) retail model; c) mall model; d) advertising model; e) subscription model; f) community model; g) manufacturer model; and h) customization model. These are popular models that provide on-line transaction services for companies to make profits on the Web.

3.2.3 Brokerage model Brokers are match-makers. They bring buyers and sellers together and facilitate transactions. Those can be business-to business (B2B), business-to-consumer (B2C),or consumer-to-consumer (C2C) markets. A broker makes its money by charging a fee for each transaction it enables. Examples of the brokerage model include:. eTrade (www.eTrade.com) is an on-line financial brokerage, where customers place buy and sell orders for transacting financial instruments. Also,

travel agents fit into this category. In this model, the broker charges the buyer and/or seller a transaction fee. Some models work on volume and low overhead to deliver the best-negotiated prices.

3.2.4 Retail model E-tailers are an Internet version of classic wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction. In some cases, the goods and services may be unique to the Web and not have a traditional ``brick-and-mortar storefront. Examples of the retail model include:. eToys (eToys.com) is a toy business that operates only over the Web. The method of selling may be list price or auction.

3.2.5 Mall model An e-mall hosts many on-line merchants. The mall typically charges setup, monthly listing, and/or per transaction fees. The virtual mall model may be most effectively realized when combined with a generalized portal. Also, more sophisticated malls will provide automated transaction services and relationship marketing opportunities. Examples of the mall model include:. Yahoo! Shopping (Shopping.Yahoo.com) is a cyber shopping mall. It allows customers to visit just one site for all their shopping needs. Since it is an attractive and well promoted site, it attracts many more visitors than any individual store could.

3.2.6 Advertising model The Web-advertising model is an extension of the traditional media-broadcasting model. The broadcaster, in this case, a Web site, provides content (usually, but not necessarily, for free) and services (like email, chat, or forums) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model only works when the volume of viewer traffic is large or highly specialized. Examples of the advertising model include:. Yahoo! (Yahoo.com) is a high-volume traffic typically tens of millions of visits per month driven by generic or diversified content or services. The high volume makes advertising profitable and permits further diversification of site

services. Competition for volume has led to the packaging of free content and services, such as email, stock portfolio, message boards, chat, news, and local information.

3.2.7 Subscription model Users pay for access to the site. High value added content is essential. Generic news content, viable on the newsstand, has proven less successful as a subscription model on the Web. A 1999 survey by Jupiter Communications found that 46 per cent of Internet users would not pay to view content on the Web. Some businesses have combined free content (to drive volume and ad revenue) with premium content or services for subscribers only. Examples of the subscription model include:. Quote.com (www.Quote.com) is an example of a site profitably selling investment information. It creates a unique and ``must have content that draws investors to pay a subscription fee for the information.

3.2.8 Community model The viability of the community model is based on user loyalty (as opposed to high traffic volume). Users have a high investment in both time and emotion in the site. In some cases, users are regular contributors of content and/or money. Having users who visit continually offers advertising, info-mediary or specialized portal opportunities. The community model may also run on a subscription fee for premium services. Examples of the community model include: . Family Radio (FamilyRadio.com) is a Christian radio station site. It is predicated on the creation of a community of users who support the site through voluntary donations. Not-forprofit organizations may also seek funding from charitable foundations to support the organizations mission.

3.2.9 Manufacturer model This model is predicated on the power of the Web to allow manufacturers to reach buyers directly and thereby compress the distribution channel (i.e. eliminate wholesalers and retailers). The manufacturer model can be based on efficiency (cost savings that may or may not be passed on to consumers), improved customer service, and a better understanding of customer preferences. The model has the potential for channel conflict with a manufacturers established supply chain. Examples of the manufacturer model include:. Micron (www.micron.com), a

computer manufacturer, sells its computer directly to customers on the Web. Since there is no intermediary the distribution costs or cost-of-sales shrink to zero.

3.2.10 Customization model This model provides customers with content that is customized to meet their preferences. By completely customizing information needs, a Web site can be highly attractive to visitors. While this model represents a novel use of e-commerce technology, it is unclear how large a paying market exists for this kind of information. Examples of the customization model include: . My.Netscape (My.Netscape.com) is a personalized portal. The generic nature of a generalized portal undermines user loyalty. The personalized portals allow customization of the interface and content. This increases loyalty through the users own time investment in personalizing the site. The profitability of this portal in based on volume and possibly the value of information derived from user choices. 3.3 MARKETING STRATEGIES

There are different marketing strategies for the Internet: 1) Targeting This is different from the traditional segmentation because the customers come to you, they initiate contact, control information flow and control message content. Accessibility is primordial for customers. Market the Web sites through packaging or click-through from other companies Web sites Pierson (1997). Click-though banner advertising is a sort of digital word-of-mouth which is becoming a stronger means of the Web Pallhawadana (2002). 2) Product Strategy Brand recognition is made clear on the Internet but the number of purchase is not there yet. Sometimes the products are not available on the Web site and consumers hesitate before getting this particular product. To increase their confidentiality, recognized vendors should be mentioned on the Net. Authenticity is important for both sellers and products. 3) Pricing Strategy In the long run, it will be good if firms can concentrate on offering products with the unique characteristics. Online shoppers will differentiate by the benefits and quality of the products/services. Otherwise, a low price strategy should rely on cost advantage and high volume to be able to compete.

4) Distribution Strategy - There is a necessity of a direct-to-customer mechanism. The industry has to be the first providing unique services to always be ahead of competitors. 5) Promotional Strategy This depends on the marketing research and consumer preferences. A frequently asked questions (FAQ) section should be provided in the Web site and high-level marketing officers should also be involved for a stronger marketing message for the companys vision Pierson (1997). 4.0 Conclusion

The Internet network is a marketing channel use by advertisers, marketers, and society to find the right combination of marketing mix to best suit customers needs. It is important for a company of this era to have access to the Internet to be more successful. Internet marketing does not only target consumers, but also Internet advertisements client marketers from companies. This is so because companies prefer to hire specialist in creating a Web site. People always find themselves under stress of working long hours and they do not have enough time for social activities or even shopping. They thus develop this new millennium where IM through E-commerce becomes an everyday thing and routine for them. E-mail is as famous as direct marketing in supporting Ecommerce activities. There is no one best form of Internet advertising. Sometimes a simple brand-building message is suited for the marketing objectives of a given organization. At other times, that message may need to add a direct-response component. And sometimes the organization may need to take more control over the content environment through forms of corporate communication and/or electronic transactions. Regardless of where a specific advertising format might appear in the typology of Internet advertising, it should to be sensitive to the unique characteristics of the Internet: compression of the hierarchy of effects, interactivity, intrusiveness, and personalization. Many practitioners suggested it is quite possible that these same characteristics are now extending beyond the Internet to other media. As Negroponte (1995) posited in his pioneering treatise on Being Digital, the job of the communicator is no longer about moving atoms from one place to another but rather it is about the transmission of digital bits. Internet advertising may very well be just the first manifestation of the shift to digital advertising that extends across many different media forms. A future question might well be: what is digital advertising?

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