Info

•Recently, (he rapid growth in awareness of, and software and support for. such internal information network« or intranets makes It likely tint this could be among the first stages for compmes establishing a Web site in the future.

Figure 10.1 Evolutionary paths of a website (source: Queich and Klein, 1996).

whether it is an established brand or a new start-up. Quelch and Klein identify two models as seen in Figure 10.1.

An established company is more likely to create an information site first and then gradually move towards the ability to conduct transactions, whereas an Internet start up has to be conducting transactions from day one in order to create the market. The development of the brand follows as the company builds a reputation for itself in cyberspace.

In this model it should be easier for the established brand with a financial cushion, to transfer its brand to the Web than for the Internet start-up to succeed. Given a one in three failure rate for traditional start-ups, we should not be throwing our hands up in horror at Lhe failure rate of Internet start-ups. The failure of boo.com in spring 2000 was partly due to its failure to be able to conduct transactions from the outset due to problems with its website. Thus, having raised customer awareness, they could not use the site, and the cost of continuing to finance the venture with no customer revenue left the company continually playing catch-up. This situation was exacerbated by a general downturn in dotcom stocks.

Quelch and Klein (1996) have some concerns about the Web in international marketing. These are:

h Standard pricing - customers will soon become aware of any price discrimination across different markets ■ Intermediaries - if a firm is an intermediary, what is its continuing role and value when the customer can deal with the manufacturer directly « Global operating implications - 24 h order taking and customer response; inventory/shipping expertise; international market expertise; cross-border price/ quality issues; language and cultural barriers; import regulations; government influences (tax, data security) h Website maintenance - the research identified that the annual costs for site maintenance are between two and four times the initial launch cost.

Bowen (1998) suggests that no one has yet come close to realizing the full potential of the Internet; it may be that they never do because the Internet is limited more by people's imagination than by technology. Individuals, whether acting as managers or as entrepreneurs, who have the ability to think laterally will be the major source of competitive advantage. Box 10.6 provides two examples of companies who have used the Internet as a marketing tool.

ROX 1C.S: WEAV5.MS THf Wr.B

The London International Group (LIG) wanted to increase awareness of 1 Jure* in llic US. ;

The Internet was being used by the kind of) in mg people-, which the company sought, but J

a campaign on MTV was launched to drive the traffic to the Internet. Once there, visitors j found an offering that followed a delicateline between wit and smut, and the offer of free j

Durex samples to anyone who filled in and e-mailed back a questionnaire. Within 2 ; moii:lr. l.ie>-om,i<i'!\ had \ i iW res] u hii h helped build Hiehiaiiii in ,he 1 :■>.n11 provided the company with a large amount of useful marketing data.

Transactional sites where products can be purchased have to try and keep ahead of j

I he new entrants where the cost of entry is low. The clever marketing ploy is to play to j the Internet's strengths. Amazon, the online bookshop which originated in the US and :

h.i- million books on offer, is often referred to as 'the biggest bookshop in the |

world'. For Amii/.on to maintain its competitive edge it has "created a community of j customers/users who enjoy going into its 'chat areas' to give or read opinions on j books, CDs, etc. Amazon is using the internet's interactivity to provide a service unmatchable by an ordinary bookshop, and at Liu -.¡me time contribute towards building a loval group of customers.

(Sottrce: adiiptai pvm Bcmvti, 1998)

Establishing a web presence

Companies have three options in establishing their web presence.either in-house, outsourced or by acquisition. The examples below offer insights to each of these different routes (Briones, 1999) while a more mechanistic approach to establishing a web presence is offered by December and Randall (1994) in Box 10.7.

Toysmart.com

This company is a retailer of educational toys and had planned to expand from one store and a catalogue operation from 6-10 new stores. However, due to a slow real estate market the company ended up switching its attention to the Internet. At thaitime it was called Holt Educational Outlet, but the name was changed in 1999 to reflect its new focus. The company wanted to go beyond building a website and actually integrate its entire organization with computer software, including business processes, such as accounting and inventory management.

It was decided to develop an in-house expertise and to hire and. train full-time staff to operate the site. While the company recognized it could hire in the help, it felt that this route was not conducive to transferring the knowledge base to the employees. By signing with a software company as a beta site, they got a lot of training as the software was developed and improved. In the end it is estimated the cost of the toysmart.com site, excluding training, was $500 000. A traditional store cost $250 000 to build. In 1998 the company's revenue was $12 million - double what it was in 1996 before the launch of the site. In 18 months after the launch of the site, the sales went from zero to 60% of the company's revenue. The rest comes from its one store.

Fragrance counter

Fragrance counter is an online supplier of fragrances. It is a division of a health and beauty care distributor based in New York. Initially only two people were involved in setting up the site, and as a result they had to outsource the technical capability to launch the site, as neither knew how to build and maintain a site. Using America Online's back-end technology, and the services of a communications company to design the graphics, the site was launched in September 1995. Since all technical setup and maintenance were outsourced, the biggest problem for the company was inventory. The site was serviced from the same warehouse as the wholesale business, and conflict arose when, for example, there were 12 products on the shelf and a wholesale customer wanted 12 but an online customer wanted a couple. In 1996 Fragrance counter got its own aisle in the warehouse, and expanded to a warehouse within a warehouse in 1997. Also in 1997 the company looked for a web contractor to take it beyond the America Online audience. Again this was outsourced, as the company felt they were merchants first and foremost, and did not want to become top-heavy with technical people. There are disadvantages to outsourcing such as loss of control and additional costs, but outsourcing lets you pick the best available talent and a fresh perspective by selecting an agency with the best technical, creative, media and research capability.

Getty images

The final option is to acquire a business. London based Getty Images is a provider of stock photos and film footage. It has 25 stores world-wide and a revenue of $184 million. In adopting e-commerce the company had a total mind-shift, from a physical business based on sales through representatives, to a digital one where customers control the buying environment. The company had complex pricing and licensing procedures which would not have been compatible with web customers, so long-standing business procedures where radically altered. To make the transition to e-commerce as fast as possible, the company acquired a web based provider of royalty free images. Within 6 months of the acquisition Getty had converted one of its six brands to e-commerce. In order to make the customer experience hassle-free, the company simplified pricing (licensing possibilities were reduced from 92 to 30), the research process, the clearance of credit cards and starting up accounts and provided seven by 24 h help desks and service centres. By 1999 the company offered e-commerce for four of its six brands, and 25% of the Web customers were new to the firm. While acquisition may be an expensive route to e-commerce, especially as more and more user friendly software becomes available, Getty managers believe that it still is a useful option for the larger company. Once acquired, the development of the site is an on-going process; buying or building a site is just the start of the process (Briones, 1999),

I i'miI'.m . ii ni W.indjl! i nil I iiu- .,i> appi.i.iih web \vi\s\ I'li; lm malni«', .1 pie -e-ii on ill«- Well I Ivir .Hi" ■ i\ eii'Ulel'l- .mil li\.e pioi o-'.i' i'i In.id (In-- .ippio.i. I.

i 1. Audience .information - knowledge about the target audience aft well at, the actual j ' ones who use the "information i 2. Purpose statement - reasons and scope for the Web presence j 3. Objective blatemcnt - specific glials the Web should accomplish

Din;... niiti'i -.mIidii L,w ltd- i .ihni.il .lie-uhjec' liiman: '".e We'-. ■ ■. 11 s li.-.hm I terms of information provided to users of the Wrb and the information the Web pjll^

.■. W.-li -a .i'i ilii .limn ii.--. i iiu», i 1:i- i-leuu'pi thai ;-n nilo .. hiJ. ni , Ii ..-a j

| (->. Web presentation r the means bv which the information is delivered to the user, i The processes are:

! i. Planning - is the proccss of defining the overall goals for the Web

' -\iull\-i- i- the pim e-.s .it ■». il I i»-r. i ij.» aiul iump.:ii i-', in.omialmii . ■ • - «111 ilie Wh i and its operation in order to improve the Well's overall quality

!)i-.i".ii 1:. Ihr 1'iniis , u heiehi ¡lie \\i h ilesi^nei^ build on !h. V\s -i-> - ... ■ :i\ limi. .'ii. I in.iki ile. 1-11111s .-11:1.11; lioi\ ..well'- ,u In..I 11 •iilpiiiliMll, -.ii.uikl !■ hiii-mi 1 1 led

4. Implementation - is the process of actually building the Web ijself via f LI.VIL,

III- * Inpnu'iil i'. the I'lOie . o< eiv-ui me, liial , he ollle. pim e-, ontiii n-ami 1: -.. . •In- Wi !■ nseli 1 ii.-mi', p .'-euleil '.'.ell to 'lit Inteii'i" iisei ! .!'\ 1 il* i" ..'ile. ..ii- :in i analysis of audience information, usability and use patterns.

{vinrcr: Dirunlvr mid RiuuIiiH, I994-)

Usage

Even in 5 years' time the Internet may not be a large player in business to business exchanges in the US. However, it will grow faster than other channels. It is estimated that it will grow at a 49.6% compound annual rate to $53.4 billion by 2004 (Table 10.3). This will be five times faster than its nearest rival, direct mail, which will grow by 10% to $293.3 billion. Other rivals including radio, newspaper, television, telephone and magazines will grow by less than 10%.

As well as general usage, there are examples of companies who are reengineering the supply chain by using the ability of the Internet to remove distance. Womex is, for example, a website which brings together buyers of general goods, mostly in small factories based in Asia. The company has visited numerous companies in Asia, taking photographs of products and putting them on its website. Buyers can then see what is available, along with the information they require on lead time,

Table 10.3 US business to business annual sales - figures in billion of US dollars (source: Marketing News November 22 ,1999, p. 3)
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