7. Marketing Futures

Marketing and e-Commerce

Electronic commerce is the general term for a buying and selling process conducted via electronic media. Electronic markets are “marketspaces”, rather than physical “marketplaces”, sellers offering their products electronically for buyers to purchase electronically.

Since the mid-1990s, e-commerce has become synonymous with the Internet, and in particular with the World Wide Web. Today, thanks to browser software, even novices can surf the Web and experience fully integrated text, graphics, images and sound. Users can send e-mail, access information, exchange views, and – most interestingly for us – shop for products.

Online marketing, then, is marketing conducted through interactive Internet- mediated means, normally involving that part of the Internet known as the Web. Although in its infancy, electronic shopping has grown markedly in recent years. In 2001, a third of all UK households have begun to enjoy Internet access, with some 3 million adults making at least one electronic purchase every four weeks. In the United States, the figures are even more impressive, with some 60% of all Web users (40 million households) having shopped online. Current estimates suggest global online revenues of some $1.4 trillion by 2003.

The Online Consumer

When asked to describe the online shopper, people typically think of a young, techie professional male. However, the Internet is no longer a geek’s playground. Although the Internet population is still younger, more affluent, better educated, and more male than the general population, it is changing rapidly. Some 70% of users now have no degree, 65% earn less than £30k, 46% are women and 22% of users are aged 55+. With such increasing diversity, the Web is becoming an evermore attractive option for product and services marketing.

Internet users also differ psychographically. Using VALS2, Forrester Research have identified ten different online shopper profiles, ranging from Wizards (skilled users who identify strongly with the Web) to Socialites (those strongly oriented towards social contact on the Web). Online consumers even differ in their responses to marketing. Whereas traditional marketing targets respond somewhat passively to marketing communications, online consumers prefer to interact with suppliers and respond negatively to advertisements aimed only at selling. Indeed, the online consumer has far greater control over the marketing messages he/she attends to than at any time in history. Creating an Online Presence

A company can establish an online presence by either buying space on a commercial online service (e.g. AOL, Prodigy), who design the store front and introduce subscribers, or by building its own Web site. With the increasing costs of the former, the latter has become the most popular option.

Sites vary considerably in purpose and content. The most basic type is the corporate site, designed to build customer goodwill rather than sell products directly. For example, you can’t buy ice cream on the Ben & Jerry’s site, but you can learn about the company’s products, play games or send a free e-card. Corporate sites also provide standard corporate information and are an excellent way of communicating with the customer.

Other companies prefer to create a marketing site, designed to engage consumers in an interaction that will move them closer to a marketing outcome. Such a site may include a catalogue, have an online ordering facility, and/or carry promotional features such as special offers, competitions and sales events. Today, it is possible to do everything online from send flowers or buy a car, to obtain medical advice or apply for credit. Even in business-to-business markets, the possibilities are enormous.

Online Communications

Companies spend large sums trying to build their Internet brands and attract visitors to their Web sites. In 1998, $2 billion was spent on online advertising, a figure expected to rise to $8.9 billion this year. Costs are also very reasonable in comparison to other media. For example, a prominent ad on a major US sports portal costs around $300000, but it achieves around 20 million hits.

However, the biggest challenge in online advertising is to obtain reliable metrics. It is very easy for surfers to ignore or close banner ads, for instance, and the actual impact of online advertising remains very difficult to determine.

There are, however, other marketing opportunities on the Web which are quite different to traditional media. Individual consumers have set up newsgroups and bulletin boards devoted to their favourite products, there are commercially sponsored Web communities in which to exchange information and views, and it is even possible to stroll through virtual malls and explore a range of stores in the “company” of a friend on the opposite side of the world. Increasingly, marketers are also making more effective use of e-mail for targeted direct sales campaigns and entertainment companies are hosting extravagant Webcasts to promote new products and services. The Challenges of Online Marketing

Online marketing offers great promise for the future. Yet, despite all the hype, online marketing may also be many years away from realising its full potential. There are a number of challenges facing the industry, some common examples being:-

Limited Consumer Exposure and Buying: Although rapidly expanding, online marketing still only reaches a limited marketspace and appears very poor at converting window shoppers to purchasers (only 14% of visitors to a site even in the US make a purchase). There can also be significant barriers to consumer entry, such as prohibitive Internet access costs and issues of credit status.

Skewed Demographics and Psychographics: The Web audience may be coming more mainstream, but online users still tend to be more affluent and technically oriented. This is reflected in the dominance of travel products, computer products and financial service products in online retailing.

Security: Consumers still worry about security during online transactions. Despite dramatic improvements in online security systems (thanks largely to the US pornography industry, which has developed much of the software!), online marketers still have much to do in providing customers with the reassurances they need for electronic purchasing to become mainstream.

Ethical Concerns: Related to the above, privacy is also a huge concern. Marketers can gather a huge amount of information about a customer when he/she visits a site and are increasingly using this information to market products and exchange lists with other companies. Such practices raise important ethical issues.

Chaos and Clutter: The Internet offers millions and millions of pages of information. Navigating it can therefore be frustrating, confusing and very very time consuming for consumers. In this chaotic and cluttered environment, ads go unnoticed and pages overlooked. The average Web surfer’s attention must be captured within just 8 seconds or he/she will move on to another site. This leaves very little time for marketers to promote or sell their goods!

For many marketers, including the Internet superstars such as Amazon.com, the Web is still not a money-making proposition. Less than half of the world’s Web sites are profitable. Yet, despite the challenges above, companies large and small are adding online marketing to the marketing mix. As it continues to grow, online marketing will prove a powerful tool for building customer relationships, improving sales, communicating information and delivering products more efficiently and effectively – until something else comes along, of course!!!