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Introduction
E-commerce marketing                                              Numerous strategic frameworks have been
strategies: an                                                    proposed to help organizations market
integrated framework                                              themselves on the Internet (Kalakota and
                                                                  Whinston, 1997; Rayport and Sviokla, 1994).
and case analysis                                                 Many of these strategic frameworks represent
                                                                  new versions of familiar themes in the
Eric Allen and                                                    marketing process. This paper will show that
Jerry Fjermestad                                                  by integrating the new strategic frameworks
                                                                  with the traditional marketing model a more
                                                                  thorough framework can be developed. Then,
                                                                  the integrated framework will be applied in
                                                                  the analysis of e-commerce strategy for
                                                                  Nabisco, an established consumer products
                                                                  company that has begun to formulate its
The authors                                                       e-commerce strategy.
Eric Allen is a Graduate Student in the School of
Management, and Jerry Fjermestad is a Professor in the
School of Management, Center for Multimedia Research,             Framework integration
both at New Jersey Institute of Technology, Newark,
New Jersey, USA.                                                  Zwass (1996) suggests that the established
                                                                  way to analyze and develop complex systems
                                                                  (such as e-commerce) is to organize them in a
Keywords
                                                                  meaningful structure. As a means of
Electronic commerce, Marketing strategy, Marketing mix,           comparing the frameworks presented, the
Consumer products, Internet, Grocery                              major concepts of each article will be
                                                                  discussed as they apply to the traditional
Abstract                                                          marketing mix model of product, place, price
Demonstrates the usefulness of the traditional marketing          and promotion. In addition to the four Ps
model in developing e-commerce marketing strategies.              model, we will also discuss how each
Discusses four e-commerce frameworks and integrates               framework addresses shifting consumer
them with the traditional marketing model (product, price,        expectations. Table I summarizes four articles
promotion, and distribution) to develop a complete                that provide strategic frameworks for thinking
framework. Discusses how the e-commerce strategies                about online relationships between
could be applied to a real company using the integrated           manufacturers, retailers, and consumers.
model.                                                            Table II shows how the major concepts of
                                                                  each framework map to the traditional
Electronic access                                                 marketing model.
The research register for this journal is available at
                                                                  Product
http://www.mcbup.com/research_registers
                                                                  A product is anything that can be offered to a
The current issue and full text archive of this journal is        market for attention, acquisition, use, or
available at                                                      consumption that might satisfy a want or need
http://www.emerald-library.com/ft                                 (Kotler, 1991). In an e-commerce marketing
                                                                  strategy it is important to remember that
                                                                  information is now its own viable product.
                                                                  Many of the frameworks reviewed addressed
                                                                  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
Logistics Information Management
Volume 14 . Number 1/2 . 2001 . pp. 14±23                         This research was supported by the New Jersey
# MCB University Press . ISSN 0957-6053                           Center for Multimedia Research.
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


Table I The e-commerce frameworks
Article                        E-commerce business framework                                                        Major consequences
Managing in marketspace        Technology has allowed the information about a product or service to be              Erosion of brand equity
(Rayport and Sviokla,          separated from the product or service itself. This new market space has              Physical products replaced with information
1994)                          three elements:                                                                         based services
                               (1) Content is what is being sold (i.e. what you take delivery of). This             Near-zero marginal costs of additional
                                      can be information, a service or a physical product                              customers invalidates old concepts of
                               (2) Context is how the content is presented for sale. Key to consumer                   pricing
                                      loyalty, once the consumer is loyal to a particular context, there is         Companies must look to exploit the breadth
                                      a large potential for related transactions                                       of the electronic channel ± develop
                               (3) Infrastructure describes how the buyer and seller are brought                       context loyalty first, then exploit it with
                                      together                                                                         various content
                               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
The Internet and               E-commerce will develop along two paths: information to transaction                  Technology (connection to the network) will
international marketing           (established companies) or transaction to information (start-ups)                    become more important than size for
(Klein and Quelch, 1996)       Web sites must be built to reduce costs for customers (e.g. customers’                  companies marketing on the Internet
                                  service, transactions) or to generate revenue from them (e.g. product             Standard pricing
                                  information, promotions, market research, transactions)                           Changing role for intermediaries
                               E-commerce should enable buyers and sellers to come together where                   Companies dominating markets
                                  they previously could not. This is a critical area of growth for
                                  international companies
Making business sense of       Four business opportunities that are provided by the Internet:                       Replace intermediaries and value chain
the Internet (Gosh, 1998)      (1) linking companies directly to customers, suppliers, and other                       members
                                     interested parties                                                             Increased customers’ loyalty
                               (2) allowing companies to skip other players in the value chain                      New competitors and customers
                               (3) using the Internet as a tool for developing new products and                     The emergence of category killers
                                     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
Getting real about virtual     Navigation is now a separate business with three aspects: reach,                     Brands, as a source of rich information
commerce (Evans and               affiliation, and richness                                                           (particularly those based on fact based
Wurster, 1999)                 Reach refers to the number of different categories and products a                      beliefs), will lose much of their value
                                  consumer interface (e.g. store, catalog, and Web site) can cover. Reach           The value chain will break down in most
                                  also refers to the number of customers a business can interact with                 industries
                               Affiliation refers to whose interests are most important to the merchant:            Navigators will be able to capture most of
                                  the customer’s, the retailer’s or the supplier’s?                                   the value in an industry as the other
                               Richness is how much information can be exchanged between a producer                   elements of the supply chain (e.g.
                                  and consumer. Richness has two aspects: customer information and                    physical retailers, distributors, and
                                  product information                                                                 manufacturers) become commoditized

                change has resulted from technology that has                           information at one particular store. A
                brought down the cost of collecting and                                complete search of all offerings would be
                disseminating information about consumers                              extremely expensive, time-consuming and
                and products. Evans and Wurster (1999)                                 practically impossible. Instead consumers rely
                describe navigation as the process through                             on product suppliers and retailers to aid them
                which shoppers collect information about                               in the search. This allows the suppliers and
                products. In the physical world, a shopper                             providers to use the consumers’ cost-of-
                who wants to buy something has to manually                             search as a competitive advantage. However,
                sift through the millions of choices. This                             on the Internet, consumers can search much
                usually requires a shopper to travel to a store                        more comprehensively and at virtually no
                and inspect the products. Unless they want to                          cost. Suppliers and retailers must realize that
                travel to various stores, they are limited to the                      product information can be delivered to
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E-commerce marketing strategies: a framework and case analysis                     Logistics Information Management
                                  Eric Allen and Jerry Fjermestad                                 Volume 14 . Number 1/2 . 2001 . 14±23


Table II The electronic commerce marketing framework
Framework                     Product                       Place                        Price                     Promotion              Customer centered
Managing in                   Content ± what is             Infrastructure ± how         Pricing based on cost
marketspace (Rayport          being sold (what do           was the sale                 has no place
and Sviokla, 1994)            you take delivery             possible?
                              of?)?                         Context ± how is it
                                                            presented for sale?

The Internet and                                            Global reach                 Standard pricing          Global branding        Understanding the
international marketing                                     Market makers                                                                 global consumers
(Klein and Quelch, 1996)

Making business sense of Tool for developing                Companies can skip                                                            Links companies
the Internet (Gosh, 1998) and delivering new                other players in an                                                           directly to customers,
                          products and services             industry value chain                                                          suppliers, and other
                          to customers                      Companies are able                                                            interested parties
                                                            to dominate the
                                                            electronic channel of
                                                            an entire industry or
                                                            segment, control
                                                            access to customers,
                                                            and set business rules

Getting real about            Navigation as a               Reach                                                  Richness               Affiliation
virtual commerce (Evans       separate business
and Wurster, 1999)

                consumers by a third party. Indeed, pure                                reviewed addressed place. Klein and Quelch
                navigators such as Yahoo! have already                                  (1996) discuss the global reach of the Internet
                become major players in this business (Evans                            in creating a larger marketplace and the
                and Wurster,1999).                                                      strong growth of a network’s utility based on
                  The Internet can also serve as a platform for                         Metcalf’s law. Evans and Wurster (1999)
                new product innovations. Companies can use                              discuss reach, the number of eyeballs that
                the direct access to consumers to collect                               view a Web site. They claim that reach is the
                information that will help them better develop                          most visible difference between e-commerce
                products to meet the consumers’ needs. For                              and the physical world.
                international companies this can provide                                  The Internet will allow organizations to skip
                adaptations and customizations for local                                over parts of the value chain. Gosh (1998)
                markets (Klein and Quelch, 1996) or create                              discussed how the Internet could be used to
                niche products. Companies can also leverage                             pirate the value chain. Examples most often
                their reach to consumers to sell advertising                            involve marketing the product on the Internet
                during transactions (Gosh, 1998).                                       in order to bypass the retailer. Computer
                                                                                        manufacturers such as Dell and Gateway
                Place                                                                   2000 do this. UPS has a program to set up
                For most companies the place aspects of the                             e-commerce sites for businesses that ship with
                marketing mix involve marketing channels.                               them (Gosh, 1998). According to Evans and
                Marketing channels can be defined as                                    Wurster (1999), the navigational Web sites
                interdependent organizations involved in the                            will allow small niche producers easier access
                process of making a product or service                                  to the markets. They will be able to skip over
                available for use or consumption (Kotler,                               parts of the value chain that traditional
                1991).                                                                  suppliers have historically relied on for
                  Due to the size of its marketplace, the                               competitive advantage. Traditional suppliers
                Internet will have the most profound effect on                          could respond to this by keeping their product
                place in the marketing mix. E-commerce puts                             out of navigational Web sites to block their
                the purchase decision anywhere a connection                             development. However, this strategy would
                to the Internet exists. All of the frameworks                           be technically difficult and would only be
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


successful if other large producers acted                              is ‘‘located’’ on some 25 million computer
similarly. Furthermore, it would be a                                  screens. With the success of category killers,
tremendous advantage for a single producer                             some are starting to move outside their
to defect from the group and offer its product                         categories. Amazon.com now sells CDs and
and the only defense available to other                                toys among other things (Evans and Wurster,
producers would be follow to suit (this is an                          1999). Gosh (1998) further suggests that
example of the tragedy of the common                                   manufacturers need to figure out how to
economics principle). A more successful                                embed their products in these magnet stores.
strategy would be to enter into joint ventures                         This may be a key for the long-term survivors
or expand a supplier’s Web site to offer                               over the next few years.
competitors’ products (Evans and Wurster,
1999).                                                                 Price
   It is critical to quickly develop a large                           Price is the only element of the marketing mix
customer base in e-commerce. Rayport and                               to generate revenues. As Kotler (1991)
Sviokla (1994) describe the place of                                   suggests, all other elements of a business
e-commerce in terms of two aspects: context                            operation represent costs. Internet pricing
in which the transaction occurs (e.g. an                               decisions will be just as important as they
electronic on-screen auction replaces a face-                          traditionally have been; however, most of the
to-face auction) and the infrastructure that                           frameworks did not discuss price.
enables the transactions to occur (e.g.                                  The Internet will lead to increased price
computers and communication lines replace                              competition and the standardization of prices.
car lots). Rayport and Sviokla (1994) claim                            Klein and Quelch (1996) point out two
that customer loyalty must be first gained in                          counteracting effects of the Internet on price.
the context dimension. The first mover                                 First, a supplier can use the technology to
advantage is very important because Internet
                                                                       discriminate pricing between consumers, for
standards could make the competitive
                                                                       example, in different countries. However, if
advantages of a particular context difficult to
                                                                       they do not take precautions the consumers
sustain. By their very nature, standards will
                                                                       may be able to quickly find out about the
allow organizations to duplicate the design
                                                                       price discrimination and object to it. Klein
and features of competitors’ Web sites.
                                                                       and Quelch (1996) suggest that taken
However, the courts may provide some
                                                                       together these factors would lead to increased
protection for e-commerce store designs
                                                                       standardization of prices across borders. Also,
(Reuters, 1999).
                                                                       the ability to compare prices across all
   Organizations that are first to offer a large
                                                                       suppliers using the Internet and online
breadth of products to consumers will have an
                                                                       shopping services will lead to increased price
advantage. The marketplace on the Internet
could consolidate quickly as many e-retailers                          competition. Finally, the price of providing
will attempt to become category killers, places                        Internet-based services often contains little or
where consumers can go for all their shopping                          no marginal costs. Economic theory predicts
needs. The success of category killers can be                          that the price of a product or service will
seen in the bricks and mortar world (e.g. Wal-                         approach its marginal cost as competition
Mart). Category killers on the Internet would                          intensifies.
have the following advantages: physical space                            Organizations will have to employ new
is less of a constraint, expansion would be                            pricing models when selling over the Internet.
easier on the Internet, and stores can                                 Rayport and Sviokla (1994) point out that the
customize offerings to consumers. Instead of                           ability of technology to offer services at a
navigating hundreds of sites to find what they                         cheaper cost would make it difficult to
need, consumers will stay with the sites they                          determine the appropriate price for a
find convenient. Magnet stores or category                             consumer. Voicemail, for example, is solely
killers can be expected to form around a                               an information-based service, which provides
number of dimensions such as product,                                  the consumers with a replacement for the
service, customer segment, and industry                                traditional answering machine. However,
(Gosh, 1998). For example, the largest                                 consumers are willing to pay even more for
physical Barnes & Noble bookstore in the                               the service than they would for an answering
USA still carries only 200,000 titles.                                 machine due to the convenience and added
Amazon.com offers 4.5 million volumes and                              features (Rayport and Sviokla, 1994).
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


Promotion                                                              programs allow consumers to prevent data
Promotion encompasses all the various ways                             from being collected. In addition, consumers
an organization undertakes to communicate                              may realize the value of this information and
its products’ merits and to persuade target                            demand a premium for it (Evans and
customers to buy from them (Kotler, 1991).                             Wurster, 1999). However, Web marketers
Incumbent retailers and manufacturers have                             can use consumer information to create
certain advantages when promoting products                             substantial value for the consumer. As
and services on the Internet. Evans and                                consumers recognize this value they will be
Wurster (1999) discuss these advantages in                             more likely to share their information. In
relation to the richness of information they                           addition, when detachment, objectivity, and
can provide consumers. The Internet                                    comprehensiveness characterize the purchase
provides a low cost way for the manufacturer                           decision, the richness of product information
to build a direct link with the consumer.                              provided does not provide as strong an
Incumbents can use their traditional sources                           advantage. Other problems for manufacturers
of consumer information (e.g. product                                  presenting rich product information include
testing, focus groups) in addition to the                              the reach of their Web sites and the lack of
information that is easily collected from                              credibility in a single product Web site versus
e-commerce sites (e.g. sales information,                              an independent site that compares multiple
customer demographics). Using data mining                              products (Evans and Wurster, 1999).
they can build customer profiles that allow
them to offer distinct promotions that are                             Customer centered
tailored to their customers. This advantage is                         Companies are changing how they market
at its greatest when the consumer is interested                        their products in order to better satisfy
in detailed product information or the                                 consumers’ needs. Traditional marketing has
product is marketed as state-of-the-art. Such                          become more expensive and less effective over
rich product information is most useful when                           time. The concept of brand management,
the consumer is evangelistic, enthusiastic and                         which was developed just after the Second
the product has a strong connotative context                           World War, was the last major advancement
(Evans and Wurster, 1999).                                             in marketing practices. However, brand
   Branding will continue to play an important                         management has become part of the problem.
role in Internet marketing. As Klein and                               Rival products differ so little that brands have
Quelch (1996) point out, new users tend to                             become hard to promote. Various attempts to
explore sites with familiar brands first. Recent                       re-organize companies or motivate sales
surveys have shown that 46 per cent of new                             forces have not solved the problem. Now
online shoppers prefer to buy from merchants                           companies can use the Internet to enter into a
they had previously bought from off-line.                              dialogue with their customers. They can
Even 34 per cent of repeat online shoppers                             replace the salesperson while increasing the
preferred the familiar off-line store sites                            level of service. In doing so they can use one
(Kane, 1999). Brands that equate their                                 medium for the customer and exploit and
products with an experience (e.g. feelings,                            discover customers’ individual interests
associations, and memories) will likely be                             (Sealy, 1999).
more effective than brands based on facts                                With the Internet it is possible to gain
about a product. Belief-based brands                                   permission to discuss your products, as
associate themselves with attributes such as                           opposed to interruption marketing, such as
high quality or reliability. These attributes can                      television commercials. Advertising, research,
be easily proven by an impartial display of the                        sales, promotions, coupon distribution, and
facts on a navigator’s Web site. Even if the                           customer support can all be done on the
facts confirm the brand, it may only be                                Internet. Eventually companies can develop
rendering the brand redundant. Brands that                             relationships with customers that will allow
are associated with a mixture of beliefs and                           them to continuously re-supply after initial
experiences should play up the experiential                            permission is obtained. Retailers will weaken
side of the brand (Evans and Wurster, 1999).                           in power and trade-marketing expenses for
   There are important limitations to                                  manufacturers will start to go away in favor of
promoting on the Internet. Privacy concerns                            improving products and promoting brands
may make consumers unwilling to give up                                (Sealy, 1999). The frameworks reviewed only
information. Technologies such as privacy                              touched on this important factor.
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


The shifting importance of marketing                                   developed to replace these competitive
mix elements                                                           advantages with new ones.
Besides changing the elements of the                                      For established companies, doing business
traditional marketing mix in isolation, some of                        online risks damage to brands and
the most profound effects of the Internet will                         distribution relationships that currently
come in how the trade-off between elements                             represent key competitive advantages. New
of the marketing mix operates. Evans and                               strategies will often require a company’s new
Wurster (1999) point out that traditionally                            businesses to compete against old ones
the amount of products a retailer could carry                          (Evans and Wurster, 1999). For example,
in one place (their reach) was inversely                               many conventional retailers have hesitated to
proportional to the amount of information                              embrace electronic commerce because they
they could present about the product in their                          fear that when consumers shop online, they
promotions (richness). The Internet has                                will make fewer impulse purchases and
eliminated that tradeoff. Internet retailers can                       become more price-sensitive (Maruca, 1999).
offer many more products than the largest                              Resistance to change in these areas will be
bricks and mortar retailer and provide                                 great. The larger the organization, the greater
detailed product information at the same time                          trouble it may have. The Internet will reduce
(Evans and Wurster, 1999). Warehousing and                             the competitive advantage of scale in a
distribution are no longer part of navigation                          number of ways and global companies will
and selection. Therefore manufacturers are                             have to coordinate the Internet strategies of
no longer limited in the size of their market                          all their subsidiaries to preserve their brands
and the amount of information they can                                 and prevent confusion across markets (Klein
present to consumers through promotions.                               and Quelch, 1996).
                                                                          Established companies must face up to the
                                                                       challenge and determine the opportunities the
Nabisco: a case analysis                                               Internet creates and how their traditional
Background                                                             business models are threatened (Gosh, 1998).
Almost every company has to rethink its                                The value chain for incumbent manufacturers
strategies due to the changes that the Internet                        and retailers is being deconstructed because
brings. For some, the implications are                                 the value to consumers derived from entire
obvious, but for others they are not. As a                             segments of that chain can be achieved more
traditional manufacturer of packaged                                   efficiently and effectively through the use of
consumer goods, Nabisco falls into the latter                          the Internet (Evans and Wurster, 1999). Even
category. Nabisco, a multi-billion dollar snack                        if the overall percentage of sales on the
food company, has major competitive                                    Internet averages just 5 per cent across all
advantages in the traditional supermarket                              categories, that shift will still create
distribution channels. Its Biscuit division                            tremendous pressure on physical retailers,
currently spends 10 per cent of sales in trade                         particularly in the USA (Maruca, 1999).
(retail) marketing for items such as special                              To date Nabisco has established a
promotions and in-store displays. In addition,                         significant presence during the land grab
the Biscuit division maintains a fleet of trucks                       phase of the Internet referred to by Evans and
that provide direct store delivery, which is an                        Wurster (1999). For the US market, the
advantage that few competitors can afford.                             company currently has a number of Web
Direct store delivery and Nabisco’s dominant                           sites:
market share in the biscuit category ensure                            .    a corporate information site;
that Nabisco’s products receive the most shelf                         .    a recipe site that provides consumers with
space in stores and cross shoppers’ paths                                   recipes that feature Nabisco products;
more than competitor products. However,                                .    each of its two domestic operating units
these competitive advantages will diminish in                               has Web sites that contain games and
a market dominated by online grocery                                        promote the units brands;
shopping. Advantages critical for a bricks and                         .    online shopping for Nabisco brand
mortar grocery manufacturer such as in-store                                merchandise (e.g. mugs, dolls, and
displays, product presentation and shelf space                              trains), along with specially packaged
do not directly transfer to an online                                       food products;
environment. Strategies will have to be                                .    various brand specific sites.
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


Nabisco has also started an e-business group                           Product
to address the larger strategic issues presented                       Collected Internet information would provide
by the Internet.                                                       Nabisco with the ability to spot entirely new
                                                                       markets. Nabisco may have to compete with
Growth of the online grocery business                                  niche shops over the Internet and should start
The online grocery shopping industry is                                a business unit designed to compete in niche
positioned for tremendous growth in the                                markets. A niche business unit would be able
coming years. Although current sales are                               to respond to the marketing information that
estimated at $1.8 billion annually (Dykema,                            indicates a new product is desired by a smaller
1999), they are expected to reach $3.5 billion                         segment of the market. A niche business unit
by 2002 (Munarriz, 1999) and $37 billion, 4                            would also help Nabisco respond better to
per cent of domestic sales, by 2004 (Dykema,                           international consumer needs. Finally, niche
1999). Some projections call for 20 per cent                           products would give the company’s product
of all grocery orders to be placed online by the                       development labs a chance to use promising
year 2007 (Munarriz, 1999).                                            developments that could not achieve the
   The incentive for grocers to go online is to                        critical market mass required by today’s cost
establish relationships with customers that                            structure.
will allow them to automatically replenish
homes regularly. This will result in a                                 Place
consistent cash flow (Dykema, 1999).                                   Strategies designed to halt or slow the
Therefore, being the first to offer quality                            deconstruction of the value chain are unlikely
service through an expansive distribution                              to work. The company could work with bricks
system is critical to the industry. It will take                       and mortar retailers to try to preserve the
some time for the industry to reach its                                current way of doing business. Most likely
potential because distribution centers will                            strategies would be to keep Nabisco products
need to be established across the country. On-                         off online grocer sites or not support the
line grocers will also have to develop ways to                         online grocers. This strategy would only work
help consumers break their old habits of                               if other consumer product manufacturers
weekly shopping trips to local stores                                  followed and also held out. However, none of
(Dykema, 1999).                                                        them would take the risk of being left behind
   Despite the obstacles and what could be                             in the new channel. Nabisco would also find it
seen as slow growth projections for the                                difficult to compete by selling its product
immediate future (from $1.8 billion to $3.5                            online because it would not have the reach
billion by 2002), it is clear that online grocers                      consumers would want. Consumers typically
will be a significant retail force in the industry                     do not purchase grocery items in isolation and
within the next five years. Beyond five years,                         they would be unlikely to pay the high
growth at a much greater rate cannot be ruled                          shipping costs to deliver such a low priced
out. The growth of online grocery shopping                             product for on demand consumption.
will clearly have an impact on packaged                                   Nabisco needs to quickly develop an online
consumer product suppliers by changing the                             customer base and ensure that its products
business models they have operated under for                           are offered on sites that have all the products
decades.                                                               consumers want. Nabisco could form
                                                                       alliances with other consumer products
Implications of the integrated framework                               companies (e.g. Heinz, Campbell’s, P&G).
Nabisco’s current corporate strategy is to                             However, only one brand of each item would
build total brand value. Total brand value                             be offered unless the industry as a whole
calls for satisfying customers faster and more                         decided to open its own online grocery. A
completely than the competition. As online                             more useful alliance on the part of
grocers become a significant force in the                              manufacturers would be to promote online
market this general strategy may still be                              retailing standards. To counteract the
useful, but the specifics of an Internet strategy                      ‘‘sticky’’ technologies that online retailers
will have to be developed. Using an Internet                           would be developing to retain customers,
strategy framework that has been integrated                            consumer products manufacturers should
around the traditional 4Ps marketing model,                            develop standards for technologies that would
some of the implications for Nabisco’s                                 allow consumers to switch online grocers
Internet strategy are discussed.                                       easily. The industry would also want to
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E-commerce marketing strategies: a framework and case analysis                    Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                Volume 14 . Number 1/2 . 2001 . 14±23


encourage standards that would allow                                   Price
consumers to select products from                                      Nabisco should be prepared to respond to
manufacturers’ sites even if the purchase and                          increased price pressures on the Internet.
distribution occurred through the online                               Services like priceline.com and the potential
grocer. In order to gain leverage in enforcing                         for the consolidation of online grocery
these standards, the manufacturers, or                                 services could bring the quick dissemination
Nabisco in particular, should provide an                               of competitive price information to
online service that allows consumers to                                consumers, increasing price pressures.
navigate their selection of online grocery                             Increased price pressures would play to the
providers. The site would provide                                      benefit of the traditional large producers like
information about online grocers that                                  Nabisco. In physical products there are still
consumers would be interested in such as the                           tremendous benefits in economies of scale
price of the service, service quality measures                         and incumbent companies have much more
and the geographic area the service is offered                         experience producing and selling their goods
in. Sponsoring manufacturers could embed                               under the constraints of intense price
themselves in the online grocer’s site by                              pressures.
offering promotions through online grocers                                Nabisco should consider new pricing
who are complying with industry standards.                             models for its products. For example, it could
   Nabisco will need to carefully manage                               start programs with online retailers that would
changes in the industry’s value chain.                                 allow consumers to subscribe to a cookie or
Nabisco, like other companies, will have to be                         snack of the month. This would allow it to
careful not to damage its brands and its
                                                                       better service existing consumers by
relationship with existing distributors and
                                                                       introducing new products. Also, the
retailers. For a substantial part of the
                                                                       subscription process would also allow for
company’s business it provides the
                                                                       identifying and establishing relationships with
distribution itself through direct store
                                                                       its best customers.
delivery. A business model where consumers
buy groceries online, directly from large
                                                                       Promotion
regional warehouses, would negate the value
                                                                       Nabisco should continue to aggressively
of direct store delivery. It would also cut into
                                                                       promote its brands on the Internet,
the volume of product carried by direct store
                                                                       particularly brands based on experience.
delivery, which is crucial for offsetting fixed
                                                                       Most Nabisco brands are based on
costs (e.g. trucks). The company will have to
                                                                       experience. For example, many of the brands,
determine a divestment strategy for its direct
                                                                       such as Oreo, have a nostalgic appeal. In
store delivery assets as online grocery
                                                                       addition, it would be difficult for any online
shopping grows in popularity. In addition,
                                                                       grocery store to represent taste, the most
change management plans will have to be
developed to help management and                                       critical piece of information for consumers
employees adapt to changes in business                                 about Nabisco’s products. The best
practices that have been competitive                                   approximation of this would be publishing
advantages for decades. Online grocers will                            consumers’ taste satisfaction surveys. The
do the navigation and distribution functions                           most effective way to use brands to
performed by supermarkets. Then online                                 distinguish Nabisco’s products in an online
grocers will split into delivery services and                          environment is to focus on presenting
grocery information sites. These sites could                           information about the experiences associated
link directly to manufacturer sites to provide                         with its brands. However, some brands, such
consumers with product information. The                                as SnackWell’s, are belief driven. In that case,
rationalized distribution networks would be                            the belief is that SnackWell’s products are
able to respond to consumer requests from                              healthier than other snacks. Consumers truly
manufacturers within days, even if the                                 focused on health concerns could easily take
product was not already in the distribution                            advantage of information on an online
channel. This would allow Nabisco, in                                  grocer’s site to determine which products are
essence, to sell directly to its customers.                            the healthiest. This would either destroy the
Manufacturers will no longer need bricks and                           credibility of the SnackWell’s brand or make
mortar retailers to provide their products to                          attempts to establish the brand as healthy
consumers.                                                             redundant.
                                                                  21
E-commerce marketing strategies: a framework and case analysis                      Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                  Volume 14 . Number 1/2 . 2001 . 14±23


Customer centered                                                      Price
An online service that allows consumers to                             .   The Internet will lead to increased price
navigate their selection of online grocery                                 competition and the standardization of
providers would give manufacturers the                                     prices.
opportunity to collect additional consumer                             .   Organizations will employ new pricing
information. This would transfer                                           models when selling over the Internet.
informational power from online grocers to
consumers and help in the deconstruction of                            Positioning
the value chain, which would allow                                     .  Incumbent retailers and manufacturers
manufacturers such as Nabisco to become                                   have certain advantages when promoting
closer to consumers. Eventually the supply                                products and services on the Internet.
chain will break down in new ways.                                     .  Branding will continue to play an
Consumers will no longer rely on grocery                                  important role in Internet marketing.
stores to help them narrow their choice of                             .  There are some important limitations to
products and navigate through the                                         promoting on the Internet, including:
selections. To operate successfully in this                               privacy concerns, limits to the ability to
environment Nabisco will have to develop                                  promote certain brands and a potential
relationships directly with consumers. The                                lack of credibility from single product
opportunity exists for companies to know                                  Web sites.
their customers’ preferences so well that they                         In addition, the Internet changes the trade-
can predict their needs accurately enough to                           offs between elements of the marketing mix,
ship directly to them before they place an                             for example the dependencies between place
order.                                                                 and promotion are not as strong on the
                                                                       Internet. Also, companies are changing how
                                                                       they market their products in order to better
Conclusion                                                             satisfy consumers’ needs. With the Internet it
                                                                       is possible to gain permission to discuss your
Although many of the e-commerce strategy                               products, as opposed to interruption
frameworks offer a unique contribution to                              marketing, such as television commercials.
strategic planning, integrating these models                              Based on an analysis that uses the
into the traditional product, price, place and                         traditional four Ps model and integrating
promotion framework can provide a more                                 other online strategy frameworks, Nabisco
complete analysis of strategy. The                                     should pursue the following online marketing
conclusions from this combined analysis are                            strategies:
summarized as follows:                                                 .    Use the Internet to develop new products
                                                                            and services.
Product                                                                .    Help the consumer choose an online
.  Information has become its own product                                   grocer by encouraging standards and
   on the Internet.                                                         disseminating information.
.  The Internet will serve as a platform for                           .    Prepare itself to operate in an increasingly
   new product innovations.                                                 price competitive marketplace.
                                                                       .    Emphasize those brands that relate to
Place                                                                       experiences over facts.
.  The Internet has created the largest                                .    Develop customer centered marketing
   marketplace ever. It puts the purchase                                   practices.
   decision anywhere where a connection
   exists.
.  The Internet allows organizations to skip
                                                                       References
   over parts of the value chain.
.  It is critical to quickly develop a                                 Dykema, E.B. (1999), ``Online replenishers deliver’’, The
   large customer base in online                                             Forrester Report, Vol. 11, pp. 114-18.
   commerce, because organizations that                                Evans, P. and Wurster, T.S. (1999), ``Getting real about
                                                                             virtual commerce’’, Harvard Business Review,
   are first to offer a large breadth of                                     November, pp. 84-94.
   products to consumers will have an                                  Gosh, S. (1998), ``Making business sense of the Internet’’,
   advantage.                                                                Harvard Business Review, March, pp. 126-35.
                                                                  22
E-commerce marketing strategies: a framework and case analysis                      Logistics Information Management
                 Eric Allen and Jerry Fjermestad                                  Volume 14 . Number 1/2 . 2001 . 14±23


Kalakota, R. and Whinston, A.B. (1997), Electronic                     Munarriz, R.A. (1999), ``The online grocer invasion’’.
       Commerce: A Manager’s Guide, Addison-Wesley,                          http://www.fool.com/specials/1999/
       Reading, MA.                                                          sp991201groceries.htm? ref=yhoolnk, Fool.com, 1
Kane, M. (1999), ``Registers are ringing online’’. http://                   December.
       dailynews.yahoo.com/h/zd/19991207/tc/                           Rayport, J.F. and Sviokla, J.J. (1994), ``Managing in the
       19991207043.html, ZDNet/Yahoo! News                                   marketspace’’, Harvard Business Review,
                                                                             November, pp. 141-50.
       Technology Headlines, December 7, 1999.
                                                                       Reuters, Judge Grants Injunction against (1999).
Klein, L. and Quelch, J.A. (1996), ``The Internet and
                                                                             barnesandnoble.co m ± http://dailynews.yahoo.com/
       international marketing’’, Sloan Management
                                                                             h/nm/19991203/wr/bn_injunction_2.html , Yahoo,
       Review, Vol. 37 No. 3, pp. 60-75.                                     December 3.
Kotler, P. (1991), Marketing Management: Analysis,                     Sealy, P. (1999), ``How e-commerce will trump brand
       Planning, Implementation , & Control, Prentice-Hall,                  management’’, Harvard Business Review, July,
       Englewood Cliffs, NJ.                                                 pp. 171-6.
Maruca, R.F. (1999), ``Retailing: confronting the                      Zwass, V. (1996), ``Electronic commerce: structures and
       challenges that face bricks-and-mortar stores’’,                      issues’’, International Journal of Electronic
       Harvard Business Review, July, pp. 159-68.                            Commerce, Vol. 1 No. 1, pp. 3-23.




                                                                  23

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10.1.1.167.1837

  • 1. Introduction E-commerce marketing Numerous strategic frameworks have been strategies: an proposed to help organizations market integrated framework themselves on the Internet (Kalakota and Whinston, 1997; Rayport and Sviokla, 1994). and case analysis Many of these strategic frameworks represent new versions of familiar themes in the Eric Allen and marketing process. This paper will show that Jerry Fjermestad by integrating the new strategic frameworks with the traditional marketing model a more thorough framework can be developed. Then, the integrated framework will be applied in the analysis of e-commerce strategy for Nabisco, an established consumer products company that has begun to formulate its The authors e-commerce strategy. Eric Allen is a Graduate Student in the School of Management, and Jerry Fjermestad is a Professor in the School of Management, Center for Multimedia Research, Framework integration both at New Jersey Institute of Technology, Newark, New Jersey, USA. Zwass (1996) suggests that the established way to analyze and develop complex systems (such as e-commerce) is to organize them in a Keywords meaningful structure. As a means of Electronic commerce, Marketing strategy, Marketing mix, comparing the frameworks presented, the Consumer products, Internet, Grocery major concepts of each article will be discussed as they apply to the traditional Abstract marketing mix model of product, place, price Demonstrates the usefulness of the traditional marketing and promotion. In addition to the four Ps model in developing e-commerce marketing strategies. model, we will also discuss how each Discusses four e-commerce frameworks and integrates framework addresses shifting consumer them with the traditional marketing model (product, price, expectations. Table I summarizes four articles promotion, and distribution) to develop a complete that provide strategic frameworks for thinking framework. Discusses how the e-commerce strategies about online relationships between could be applied to a real company using the integrated manufacturers, retailers, and consumers. model. Table II shows how the major concepts of each framework map to the traditional Electronic access marketing model. The research register for this journal is available at Product http://www.mcbup.com/research_registers A product is anything that can be offered to a The current issue and full text archive of this journal is market for attention, acquisition, use, or available at consumption that might satisfy a want or need http://www.emerald-library.com/ft (Kotler, 1991). In an e-commerce marketing strategy it is important to remember that information is now its own viable product. Many of the frameworks reviewed addressed 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 Logistics Information Management Volume 14 . Number 1/2 . 2001 . pp. 14±23 This research was supported by the New Jersey # MCB University Press . ISSN 0957-6053 Center for Multimedia Research. 14
  • 2. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Table I The e-commerce frameworks Article E-commerce business framework Major consequences Managing in marketspace Technology has allowed the information about a product or service to be Erosion of brand equity (Rayport and Sviokla, separated from the product or service itself. This new market space has Physical products replaced with information 1994) three elements: based services (1) Content is what is being sold (i.e. what you take delivery of). This Near-zero marginal costs of additional can be information, a service or a physical product customers invalidates old concepts of (2) Context is how the content is presented for sale. Key to consumer pricing loyalty, once the consumer is loyal to a particular context, there is Companies must look to exploit the breadth a large potential for related transactions of the electronic channel ± develop (3) Infrastructure describes how the buyer and seller are brought context loyalty first, then exploit it with together various content 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 The Internet and E-commerce will develop along two paths: information to transaction Technology (connection to the network) will international marketing (established companies) or transaction to information (start-ups) become more important than size for (Klein and Quelch, 1996) Web sites must be built to reduce costs for customers (e.g. customers’ companies marketing on the Internet service, transactions) or to generate revenue from them (e.g. product Standard pricing information, promotions, market research, transactions) Changing role for intermediaries E-commerce should enable buyers and sellers to come together where Companies dominating markets they previously could not. This is a critical area of growth for international companies Making business sense of Four business opportunities that are provided by the Internet: Replace intermediaries and value chain the Internet (Gosh, 1998) (1) linking companies directly to customers, suppliers, and other members interested parties Increased customers’ loyalty (2) allowing companies to skip other players in the value chain New competitors and customers (3) using the Internet as a tool for developing new products and The emergence of category killers 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 Getting real about virtual Navigation is now a separate business with three aspects: reach, Brands, as a source of rich information commerce (Evans and affiliation, and richness (particularly those based on fact based Wurster, 1999) Reach refers to the number of different categories and products a beliefs), will lose much of their value consumer interface (e.g. store, catalog, and Web site) can cover. Reach The value chain will break down in most also refers to the number of customers a business can interact with industries Affiliation refers to whose interests are most important to the merchant: Navigators will be able to capture most of the customer’s, the retailer’s or the supplier’s? the value in an industry as the other Richness is how much information can be exchanged between a producer elements of the supply chain (e.g. and consumer. Richness has two aspects: customer information and physical retailers, distributors, and product information manufacturers) become commoditized change has resulted from technology that has information at one particular store. A brought down the cost of collecting and complete search of all offerings would be disseminating information about consumers extremely expensive, time-consuming and and products. Evans and Wurster (1999) practically impossible. Instead consumers rely describe navigation as the process through on product suppliers and retailers to aid them which shoppers collect information about in the search. This allows the suppliers and products. In the physical world, a shopper providers to use the consumers’ cost-of- who wants to buy something has to manually search as a competitive advantage. However, sift through the millions of choices. This on the Internet, consumers can search much usually requires a shopper to travel to a store more comprehensively and at virtually no and inspect the products. Unless they want to cost. Suppliers and retailers must realize that travel to various stores, they are limited to the product information can be delivered to 15
  • 3. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Table II The electronic commerce marketing framework Framework Product Place Price Promotion Customer centered Managing in Content ± what is Infrastructure ± how Pricing based on cost marketspace (Rayport being sold (what do was the sale has no place and Sviokla, 1994) you take delivery possible? of?)? Context ± how is it presented for sale? The Internet and Global reach Standard pricing Global branding Understanding the international marketing Market makers global consumers (Klein and Quelch, 1996) Making business sense of Tool for developing Companies can skip Links companies the Internet (Gosh, 1998) and delivering new other players in an directly to customers, products and services industry value chain suppliers, and other to customers Companies are able interested parties to dominate the electronic channel of an entire industry or segment, control access to customers, and set business rules Getting real about Navigation as a Reach Richness Affiliation virtual commerce (Evans separate business and Wurster, 1999) consumers by a third party. Indeed, pure reviewed addressed place. Klein and Quelch navigators such as Yahoo! have already (1996) discuss the global reach of the Internet become major players in this business (Evans in creating a larger marketplace and the and Wurster,1999). strong growth of a network’s utility based on The Internet can also serve as a platform for Metcalf’s law. Evans and Wurster (1999) new product innovations. Companies can use discuss reach, the number of eyeballs that the direct access to consumers to collect view a Web site. They claim that reach is the information that will help them better develop most visible difference between e-commerce products to meet the consumers’ needs. For and the physical world. international companies this can provide The Internet will allow organizations to skip adaptations and customizations for local over parts of the value chain. Gosh (1998) markets (Klein and Quelch, 1996) or create discussed how the Internet could be used to niche products. Companies can also leverage pirate the value chain. Examples most often their reach to consumers to sell advertising involve marketing the product on the Internet during transactions (Gosh, 1998). in order to bypass the retailer. Computer manufacturers such as Dell and Gateway Place 2000 do this. UPS has a program to set up For most companies the place aspects of the e-commerce sites for businesses that ship with marketing mix involve marketing channels. them (Gosh, 1998). According to Evans and Marketing channels can be defined as Wurster (1999), the navigational Web sites interdependent organizations involved in the will allow small niche producers easier access process of making a product or service to the markets. They will be able to skip over available for use or consumption (Kotler, parts of the value chain that traditional 1991). suppliers have historically relied on for Due to the size of its marketplace, the competitive advantage. Traditional suppliers Internet will have the most profound effect on could respond to this by keeping their product place in the marketing mix. E-commerce puts out of navigational Web sites to block their the purchase decision anywhere a connection development. However, this strategy would to the Internet exists. All of the frameworks be technically difficult and would only be 16
  • 4. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 successful if other large producers acted is ‘‘located’’ on some 25 million computer similarly. Furthermore, it would be a screens. With the success of category killers, tremendous advantage for a single producer some are starting to move outside their to defect from the group and offer its product categories. Amazon.com now sells CDs and and the only defense available to other toys among other things (Evans and Wurster, producers would be follow to suit (this is an 1999). Gosh (1998) further suggests that example of the tragedy of the common manufacturers need to figure out how to economics principle). A more successful embed their products in these magnet stores. strategy would be to enter into joint ventures This may be a key for the long-term survivors or expand a supplier’s Web site to offer over the next few years. competitors’ products (Evans and Wurster, 1999). Price It is critical to quickly develop a large Price is the only element of the marketing mix customer base in e-commerce. Rayport and to generate revenues. As Kotler (1991) Sviokla (1994) describe the place of suggests, all other elements of a business e-commerce in terms of two aspects: context operation represent costs. Internet pricing in which the transaction occurs (e.g. an decisions will be just as important as they electronic on-screen auction replaces a face- traditionally have been; however, most of the to-face auction) and the infrastructure that frameworks did not discuss price. enables the transactions to occur (e.g. The Internet will lead to increased price computers and communication lines replace competition and the standardization of prices. car lots). Rayport and Sviokla (1994) claim Klein and Quelch (1996) point out two that customer loyalty must be first gained in counteracting effects of the Internet on price. the context dimension. The first mover First, a supplier can use the technology to advantage is very important because Internet discriminate pricing between consumers, for standards could make the competitive example, in different countries. However, if advantages of a particular context difficult to they do not take precautions the consumers sustain. By their very nature, standards will may be able to quickly find out about the allow organizations to duplicate the design price discrimination and object to it. Klein and features of competitors’ Web sites. and Quelch (1996) suggest that taken However, the courts may provide some together these factors would lead to increased protection for e-commerce store designs standardization of prices across borders. Also, (Reuters, 1999). the ability to compare prices across all Organizations that are first to offer a large suppliers using the Internet and online breadth of products to consumers will have an shopping services will lead to increased price advantage. The marketplace on the Internet could consolidate quickly as many e-retailers competition. Finally, the price of providing will attempt to become category killers, places Internet-based services often contains little or where consumers can go for all their shopping no marginal costs. Economic theory predicts needs. The success of category killers can be that the price of a product or service will seen in the bricks and mortar world (e.g. Wal- approach its marginal cost as competition Mart). Category killers on the Internet would intensifies. have the following advantages: physical space Organizations will have to employ new is less of a constraint, expansion would be pricing models when selling over the Internet. easier on the Internet, and stores can Rayport and Sviokla (1994) point out that the customize offerings to consumers. Instead of ability of technology to offer services at a navigating hundreds of sites to find what they cheaper cost would make it difficult to need, consumers will stay with the sites they determine the appropriate price for a find convenient. Magnet stores or category consumer. Voicemail, for example, is solely killers can be expected to form around a an information-based service, which provides number of dimensions such as product, the consumers with a replacement for the service, customer segment, and industry traditional answering machine. However, (Gosh, 1998). For example, the largest consumers are willing to pay even more for physical Barnes & Noble bookstore in the the service than they would for an answering USA still carries only 200,000 titles. machine due to the convenience and added Amazon.com offers 4.5 million volumes and features (Rayport and Sviokla, 1994). 17
  • 5. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Promotion programs allow consumers to prevent data Promotion encompasses all the various ways from being collected. In addition, consumers an organization undertakes to communicate may realize the value of this information and its products’ merits and to persuade target demand a premium for it (Evans and customers to buy from them (Kotler, 1991). Wurster, 1999). However, Web marketers Incumbent retailers and manufacturers have can use consumer information to create certain advantages when promoting products substantial value for the consumer. As and services on the Internet. Evans and consumers recognize this value they will be Wurster (1999) discuss these advantages in more likely to share their information. In relation to the richness of information they addition, when detachment, objectivity, and can provide consumers. The Internet comprehensiveness characterize the purchase provides a low cost way for the manufacturer decision, the richness of product information to build a direct link with the consumer. provided does not provide as strong an Incumbents can use their traditional sources advantage. Other problems for manufacturers of consumer information (e.g. product presenting rich product information include testing, focus groups) in addition to the the reach of their Web sites and the lack of information that is easily collected from credibility in a single product Web site versus e-commerce sites (e.g. sales information, an independent site that compares multiple customer demographics). Using data mining products (Evans and Wurster, 1999). they can build customer profiles that allow them to offer distinct promotions that are Customer centered tailored to their customers. This advantage is Companies are changing how they market at its greatest when the consumer is interested their products in order to better satisfy in detailed product information or the consumers’ needs. Traditional marketing has product is marketed as state-of-the-art. Such become more expensive and less effective over rich product information is most useful when time. The concept of brand management, the consumer is evangelistic, enthusiastic and which was developed just after the Second the product has a strong connotative context World War, was the last major advancement (Evans and Wurster, 1999). in marketing practices. However, brand Branding will continue to play an important management has become part of the problem. role in Internet marketing. As Klein and Rival products differ so little that brands have Quelch (1996) point out, new users tend to become hard to promote. Various attempts to explore sites with familiar brands first. Recent re-organize companies or motivate sales surveys have shown that 46 per cent of new forces have not solved the problem. Now online shoppers prefer to buy from merchants companies can use the Internet to enter into a they had previously bought from off-line. dialogue with their customers. They can Even 34 per cent of repeat online shoppers replace the salesperson while increasing the preferred the familiar off-line store sites level of service. In doing so they can use one (Kane, 1999). Brands that equate their medium for the customer and exploit and products with an experience (e.g. feelings, discover customers’ individual interests associations, and memories) will likely be (Sealy, 1999). more effective than brands based on facts With the Internet it is possible to gain about a product. Belief-based brands permission to discuss your products, as associate themselves with attributes such as opposed to interruption marketing, such as high quality or reliability. These attributes can television commercials. Advertising, research, be easily proven by an impartial display of the sales, promotions, coupon distribution, and facts on a navigator’s Web site. Even if the customer support can all be done on the facts confirm the brand, it may only be Internet. Eventually companies can develop rendering the brand redundant. Brands that relationships with customers that will allow are associated with a mixture of beliefs and them to continuously re-supply after initial experiences should play up the experiential permission is obtained. Retailers will weaken side of the brand (Evans and Wurster, 1999). in power and trade-marketing expenses for There are important limitations to manufacturers will start to go away in favor of promoting on the Internet. Privacy concerns improving products and promoting brands may make consumers unwilling to give up (Sealy, 1999). The frameworks reviewed only information. Technologies such as privacy touched on this important factor. 18
  • 6. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 The shifting importance of marketing developed to replace these competitive mix elements advantages with new ones. Besides changing the elements of the For established companies, doing business traditional marketing mix in isolation, some of online risks damage to brands and the most profound effects of the Internet will distribution relationships that currently come in how the trade-off between elements represent key competitive advantages. New of the marketing mix operates. Evans and strategies will often require a company’s new Wurster (1999) point out that traditionally businesses to compete against old ones the amount of products a retailer could carry (Evans and Wurster, 1999). For example, in one place (their reach) was inversely many conventional retailers have hesitated to proportional to the amount of information embrace electronic commerce because they they could present about the product in their fear that when consumers shop online, they promotions (richness). The Internet has will make fewer impulse purchases and eliminated that tradeoff. Internet retailers can become more price-sensitive (Maruca, 1999). offer many more products than the largest Resistance to change in these areas will be bricks and mortar retailer and provide great. The larger the organization, the greater detailed product information at the same time trouble it may have. The Internet will reduce (Evans and Wurster, 1999). Warehousing and the competitive advantage of scale in a distribution are no longer part of navigation number of ways and global companies will and selection. Therefore manufacturers are have to coordinate the Internet strategies of no longer limited in the size of their market all their subsidiaries to preserve their brands and the amount of information they can and prevent confusion across markets (Klein present to consumers through promotions. and Quelch, 1996). Established companies must face up to the challenge and determine the opportunities the Nabisco: a case analysis Internet creates and how their traditional Background business models are threatened (Gosh, 1998). Almost every company has to rethink its The value chain for incumbent manufacturers strategies due to the changes that the Internet and retailers is being deconstructed because brings. For some, the implications are the value to consumers derived from entire obvious, but for others they are not. As a segments of that chain can be achieved more traditional manufacturer of packaged efficiently and effectively through the use of consumer goods, Nabisco falls into the latter the Internet (Evans and Wurster, 1999). Even category. Nabisco, a multi-billion dollar snack if the overall percentage of sales on the food company, has major competitive Internet averages just 5 per cent across all advantages in the traditional supermarket categories, that shift will still create distribution channels. Its Biscuit division tremendous pressure on physical retailers, currently spends 10 per cent of sales in trade particularly in the USA (Maruca, 1999). (retail) marketing for items such as special To date Nabisco has established a promotions and in-store displays. In addition, significant presence during the land grab the Biscuit division maintains a fleet of trucks phase of the Internet referred to by Evans and that provide direct store delivery, which is an Wurster (1999). For the US market, the advantage that few competitors can afford. company currently has a number of Web Direct store delivery and Nabisco’s dominant sites: market share in the biscuit category ensure . a corporate information site; that Nabisco’s products receive the most shelf . a recipe site that provides consumers with space in stores and cross shoppers’ paths recipes that feature Nabisco products; more than competitor products. However, . each of its two domestic operating units these competitive advantages will diminish in has Web sites that contain games and a market dominated by online grocery promote the units brands; shopping. Advantages critical for a bricks and . online shopping for Nabisco brand mortar grocery manufacturer such as in-store merchandise (e.g. mugs, dolls, and displays, product presentation and shelf space trains), along with specially packaged do not directly transfer to an online food products; environment. Strategies will have to be . various brand specific sites. 19
  • 7. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Nabisco has also started an e-business group Product to address the larger strategic issues presented Collected Internet information would provide by the Internet. Nabisco with the ability to spot entirely new markets. Nabisco may have to compete with Growth of the online grocery business niche shops over the Internet and should start The online grocery shopping industry is a business unit designed to compete in niche positioned for tremendous growth in the markets. A niche business unit would be able coming years. Although current sales are to respond to the marketing information that estimated at $1.8 billion annually (Dykema, indicates a new product is desired by a smaller 1999), they are expected to reach $3.5 billion segment of the market. A niche business unit by 2002 (Munarriz, 1999) and $37 billion, 4 would also help Nabisco respond better to per cent of domestic sales, by 2004 (Dykema, international consumer needs. Finally, niche 1999). Some projections call for 20 per cent products would give the company’s product of all grocery orders to be placed online by the development labs a chance to use promising year 2007 (Munarriz, 1999). developments that could not achieve the The incentive for grocers to go online is to critical market mass required by today’s cost establish relationships with customers that structure. will allow them to automatically replenish homes regularly. This will result in a Place consistent cash flow (Dykema, 1999). Strategies designed to halt or slow the Therefore, being the first to offer quality deconstruction of the value chain are unlikely service through an expansive distribution to work. The company could work with bricks system is critical to the industry. It will take and mortar retailers to try to preserve the some time for the industry to reach its current way of doing business. Most likely potential because distribution centers will strategies would be to keep Nabisco products need to be established across the country. On- off online grocer sites or not support the line grocers will also have to develop ways to online grocers. This strategy would only work help consumers break their old habits of if other consumer product manufacturers weekly shopping trips to local stores followed and also held out. However, none of (Dykema, 1999). them would take the risk of being left behind Despite the obstacles and what could be in the new channel. Nabisco would also find it seen as slow growth projections for the difficult to compete by selling its product immediate future (from $1.8 billion to $3.5 online because it would not have the reach billion by 2002), it is clear that online grocers consumers would want. Consumers typically will be a significant retail force in the industry do not purchase grocery items in isolation and within the next five years. Beyond five years, they would be unlikely to pay the high growth at a much greater rate cannot be ruled shipping costs to deliver such a low priced out. The growth of online grocery shopping product for on demand consumption. will clearly have an impact on packaged Nabisco needs to quickly develop an online consumer product suppliers by changing the customer base and ensure that its products business models they have operated under for are offered on sites that have all the products decades. consumers want. Nabisco could form alliances with other consumer products Implications of the integrated framework companies (e.g. Heinz, Campbell’s, P&G). Nabisco’s current corporate strategy is to However, only one brand of each item would build total brand value. Total brand value be offered unless the industry as a whole calls for satisfying customers faster and more decided to open its own online grocery. A completely than the competition. As online more useful alliance on the part of grocers become a significant force in the manufacturers would be to promote online market this general strategy may still be retailing standards. To counteract the useful, but the specifics of an Internet strategy ‘‘sticky’’ technologies that online retailers will have to be developed. Using an Internet would be developing to retain customers, strategy framework that has been integrated consumer products manufacturers should around the traditional 4Ps marketing model, develop standards for technologies that would some of the implications for Nabisco’s allow consumers to switch online grocers Internet strategy are discussed. easily. The industry would also want to 20
  • 8. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 encourage standards that would allow Price consumers to select products from Nabisco should be prepared to respond to manufacturers’ sites even if the purchase and increased price pressures on the Internet. distribution occurred through the online Services like priceline.com and the potential grocer. In order to gain leverage in enforcing for the consolidation of online grocery these standards, the manufacturers, or services could bring the quick dissemination Nabisco in particular, should provide an of competitive price information to online service that allows consumers to consumers, increasing price pressures. navigate their selection of online grocery Increased price pressures would play to the providers. The site would provide benefit of the traditional large producers like information about online grocers that Nabisco. In physical products there are still consumers would be interested in such as the tremendous benefits in economies of scale price of the service, service quality measures and incumbent companies have much more and the geographic area the service is offered experience producing and selling their goods in. Sponsoring manufacturers could embed under the constraints of intense price themselves in the online grocer’s site by pressures. offering promotions through online grocers Nabisco should consider new pricing who are complying with industry standards. models for its products. For example, it could Nabisco will need to carefully manage start programs with online retailers that would changes in the industry’s value chain. allow consumers to subscribe to a cookie or Nabisco, like other companies, will have to be snack of the month. This would allow it to careful not to damage its brands and its better service existing consumers by relationship with existing distributors and introducing new products. Also, the retailers. For a substantial part of the subscription process would also allow for company’s business it provides the identifying and establishing relationships with distribution itself through direct store its best customers. delivery. A business model where consumers buy groceries online, directly from large Promotion regional warehouses, would negate the value Nabisco should continue to aggressively of direct store delivery. It would also cut into promote its brands on the Internet, the volume of product carried by direct store particularly brands based on experience. delivery, which is crucial for offsetting fixed Most Nabisco brands are based on costs (e.g. trucks). The company will have to experience. For example, many of the brands, determine a divestment strategy for its direct such as Oreo, have a nostalgic appeal. In store delivery assets as online grocery addition, it would be difficult for any online shopping grows in popularity. In addition, grocery store to represent taste, the most change management plans will have to be developed to help management and critical piece of information for consumers employees adapt to changes in business about Nabisco’s products. The best practices that have been competitive approximation of this would be publishing advantages for decades. Online grocers will consumers’ taste satisfaction surveys. The do the navigation and distribution functions most effective way to use brands to performed by supermarkets. Then online distinguish Nabisco’s products in an online grocers will split into delivery services and environment is to focus on presenting grocery information sites. These sites could information about the experiences associated link directly to manufacturer sites to provide with its brands. However, some brands, such consumers with product information. The as SnackWell’s, are belief driven. In that case, rationalized distribution networks would be the belief is that SnackWell’s products are able to respond to consumer requests from healthier than other snacks. Consumers truly manufacturers within days, even if the focused on health concerns could easily take product was not already in the distribution advantage of information on an online channel. This would allow Nabisco, in grocer’s site to determine which products are essence, to sell directly to its customers. the healthiest. This would either destroy the Manufacturers will no longer need bricks and credibility of the SnackWell’s brand or make mortar retailers to provide their products to attempts to establish the brand as healthy consumers. redundant. 21
  • 9. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Customer centered Price An online service that allows consumers to . The Internet will lead to increased price navigate their selection of online grocery competition and the standardization of providers would give manufacturers the prices. opportunity to collect additional consumer . Organizations will employ new pricing information. This would transfer models when selling over the Internet. informational power from online grocers to consumers and help in the deconstruction of Positioning the value chain, which would allow . Incumbent retailers and manufacturers manufacturers such as Nabisco to become have certain advantages when promoting closer to consumers. Eventually the supply products and services on the Internet. chain will break down in new ways. . Branding will continue to play an Consumers will no longer rely on grocery important role in Internet marketing. stores to help them narrow their choice of . There are some important limitations to products and navigate through the promoting on the Internet, including: selections. To operate successfully in this privacy concerns, limits to the ability to environment Nabisco will have to develop promote certain brands and a potential relationships directly with consumers. The lack of credibility from single product opportunity exists for companies to know Web sites. their customers’ preferences so well that they In addition, the Internet changes the trade- can predict their needs accurately enough to offs between elements of the marketing mix, ship directly to them before they place an for example the dependencies between place order. and promotion are not as strong on the Internet. Also, companies are changing how they market their products in order to better Conclusion satisfy consumers’ needs. With the Internet it is possible to gain permission to discuss your Although many of the e-commerce strategy products, as opposed to interruption frameworks offer a unique contribution to marketing, such as television commercials. strategic planning, integrating these models Based on an analysis that uses the into the traditional product, price, place and traditional four Ps model and integrating promotion framework can provide a more other online strategy frameworks, Nabisco complete analysis of strategy. The should pursue the following online marketing conclusions from this combined analysis are strategies: summarized as follows: . Use the Internet to develop new products and services. Product . Help the consumer choose an online . Information has become its own product grocer by encouraging standards and on the Internet. disseminating information. . The Internet will serve as a platform for . Prepare itself to operate in an increasingly new product innovations. price competitive marketplace. . Emphasize those brands that relate to Place experiences over facts. . The Internet has created the largest . Develop customer centered marketing marketplace ever. It puts the purchase practices. decision anywhere where a connection exists. . The Internet allows organizations to skip References over parts of the value chain. . It is critical to quickly develop a Dykema, E.B. (1999), ``Online replenishers deliver’’, The large customer base in online Forrester Report, Vol. 11, pp. 114-18. commerce, because organizations that Evans, P. and Wurster, T.S. (1999), ``Getting real about virtual commerce’’, Harvard Business Review, are first to offer a large breadth of November, pp. 84-94. products to consumers will have an Gosh, S. (1998), ``Making business sense of the Internet’’, advantage. Harvard Business Review, March, pp. 126-35. 22
  • 10. E-commerce marketing strategies: a framework and case analysis Logistics Information Management Eric Allen and Jerry Fjermestad Volume 14 . Number 1/2 . 2001 . 14±23 Kalakota, R. and Whinston, A.B. (1997), Electronic Munarriz, R.A. (1999), ``The online grocer invasion’’. Commerce: A Manager’s Guide, Addison-Wesley, http://www.fool.com/specials/1999/ Reading, MA. sp991201groceries.htm? ref=yhoolnk, Fool.com, 1 Kane, M. (1999), ``Registers are ringing online’’. http:// December. dailynews.yahoo.com/h/zd/19991207/tc/ Rayport, J.F. and Sviokla, J.J. (1994), ``Managing in the 19991207043.html, ZDNet/Yahoo! News marketspace’’, Harvard Business Review, November, pp. 141-50. Technology Headlines, December 7, 1999. Reuters, Judge Grants Injunction against (1999). Klein, L. and Quelch, J.A. (1996), ``The Internet and barnesandnoble.co m ± http://dailynews.yahoo.com/ international marketing’’, Sloan Management h/nm/19991203/wr/bn_injunction_2.html , Yahoo, Review, Vol. 37 No. 3, pp. 60-75. December 3. Kotler, P. (1991), Marketing Management: Analysis, Sealy, P. (1999), ``How e-commerce will trump brand Planning, Implementation , & Control, Prentice-Hall, management’’, Harvard Business Review, July, Englewood Cliffs, NJ. pp. 171-6. Maruca, R.F. (1999), ``Retailing: confronting the Zwass, V. (1996), ``Electronic commerce: structures and challenges that face bricks-and-mortar stores’’, issues’’, International Journal of Electronic Harvard Business Review, July, pp. 159-68. Commerce, Vol. 1 No. 1, pp. 3-23. 23