J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 pp. 27-39 ? M CB U N IVERSITY PRESS. 0736-3761 O M arketing on thecutive summary for managers and executive readers can be found at the end of this article Internet Pal ab Paul ls market opportunities Introduction With increased globalization of the world economies, for most enterprises, market opportunities seem to be endless these days. This in turn, of course, causes heightened competition among the players in order to achieve better performance. Consequently, departing from the traditional commercial strategies and tactics, innovative managers are looking for unique ways to compete more effectively on a local, regional and global basis. The information superhighway is what many business leaders say will make these visions a reality in everyday business. The information superhighway is being shaped by advances in digital telephone networks, interactive cable television, personal computers, online services and, finally, the Internet. These technological advances will inevitably change the face of business as we know it today. For most organizations, the information superhighway offers an abundance of opportunity. The Internet, in particular, provides corporate America with a broad and vast communications network that is driving the formation of a huge global electronic marketplace. The purpose of this article is to narrate the impact of the Internet on the marketing aspects of businesses as of today, its future, and how businesses can use its unlimited potential to their advantage.rk connection Background The Internet, also known as the “International electronic network,” began in 1968 by the Advanced Research Projects Agency of the Department of Defense. Originally, known as the ARPAnet, the Internet was started as an experimental network connecting different university computer centers throughout the country. In the 1 980s, ARPAnet was broken into two distinct networks called Milnet and NSFnet. Milnet was used primarily for government purposes, while NSFnet, funded by the National Science Foundation (NSF), was used to support education and research. The NSF promoted NSFnet’s use within the realm of higher education institutions and succeeded in establishing more than 3,000 institutional inter-networks by 1991. Its beginning as a not-for-profit facility intended to support the educational community has evolved into a global enterprise. The NSF continues to fund and promote the academic backbone which is now managed by Advanced Network Services, a consortium comprised of IBM, MCI and Merit. However, as a government agency, its charter makes it inappropriate for NSF to condone use of the NSFnet for the
purposes of private business. Thishas resulted in a number ofprivate concerns formingcommercial network backbones.These network backbonesprovide access to the NSFnet butdo not rely on it for connectivity.Commercial network backbonesprovided byThe author wishes to thank BridgidRoderick for her contribution to thisarticle.
Internet J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O UUNET Technologies International, Performance Systems, and General Atomics, are but a few of the providers in the USA through which companies may access backbone services that permit and promote business usage. The combination of NSFnet and commercially available backbone services forms what the Internet is today – the world’s largest collection of decentralized computer networks. There are over 30,000 estimated computer networks connecting more than 1.5 million computers to one another. Transmission Control Protocol/Internet Protocol (TCP/IP) is used by all of these networks as the standard communication protocol through which data communication is accomplished. At least 20 million people (actually estimated at 30 million) in 135 countries send and receive information through the Internet (Direct Marketing Magazine, 1995). This international nonprofit network mainly links educational, research andMarketing on the Internet government facilities, but also increasingly ties in corporate research and development sites. The Internet is the model for the information highway of the future. It is relatively open, costs little, and provides information on everything imaginable. The Internet is said to be the most “democratic part of the cyberspace” and is a linkage between the user and every other computer in the world, containing information on every existing subject. The Internet represents the new wave of technological communication that has, according to some analysts, become the next best communications medium, second only to telecommunications. The Net represents a $300 billion market. Over 30 million companies and households around the world use the Internet as a communications link through e-mail, interactive advertisement, bulletin boards, research and online discussion groups. At its most basic level, the Internet serves as a seemingly endless catalog of marketing messages and advertising in an interactive fashion. Only two years ago, one would have to be a computer veteran even to contemplate using the Internet for anything but e-mail, but today even small businesses are jumping on the bandwagon and are investing in their own personal gateway to marketing on the Internet. Marketing analysts are calling the Internet a tool for “guerrilla marketing.” Even large computer software companies, like IBM, Apple, AT&T, Microsoft, and Lotus Development are investing millions of dollars to develop new state-of-the-art tools and services aimed at helping companies expand electronic business through the Internet. Future growth and opportunity In December 1993, only $100 million worth of goods were sold over the Internet. But by 1995, the Internet market had grown to over $300 billion in goods sold (Boisseau, 1995). Business is rapidly adopting the Internet as the means through which it can efficiently and economically conduct marketing, research and support. This process is being facilitated by the proliferation of software that is more user-
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O friendly and makes information easily accessible to the users. With the number of users growing monthly at an estimated rate of 10 per cent and an average of one million people, the Internet is the fastest growing global telecommunications network in the world. Analysts have projected that 100 million will be using the Internet by the year 2000 (Direct Marketing, 1995).
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O Registered networks Businesses Nearly 75 percent of this astonishing growth is derived from the business community. More importantly, of the networks registered within the Internet worldwide, 63 percent are owned by businesses. The rate at which businesses are connecting to the Internet is accelerating – 2,000 per month and an increase of more than 260 percent between April 1994 and April 1995 (Kirkpatrick, 1995). The fact that the Net is relatively unregulated by the government and businesses do not need a license from the Federal Communications Commission (FCC) to go online helps the proliferation of its usage. This helps reduce costs and cuts the red tape normally involved in advertising. Large and small companies are embracing the Internet as a fundamental communication tool used to conduct daily business. Fortune 500 companies such as Xerox, IBM, Merrill Lynch, Motorola, Intel, Digital Equipment, Sun, and Hewlett Packard, are using the Internet as an important tool through which they communicate internally with their business partners and with their customers. Smaller businesses are also discovering the Internet to be a cost-effective communications means through which they can conduct research activities relating to their products, customers, and markets, as wellGrowing business communication as conduct efficient product sales transactions. By the year 2000, a projected 60 percent of large companies and 30 percent of midsize companies around the world will use the Internet or its equivalent for marketing and business purposes (Crain’s Chicago Business, 1994). User demographics The demographics of the Internet population lend further support to the fact that it is now an accepted and growing business communications means. Of the 20 to 30 million Internet subscribers, approximately 50 percent are 25 years of age or younger. This is due to a large educational community using the Internet. It is important to note that even with such a large number of relatively young subscribers, a meaningful number of subscribers (30 percent) use the Internet as a tool for supporting business endeavors, as well as for finding information on certain products and services the user may be interested in. Even those who are 45 and over use the Internet, though on a much smaller scale, with approximately five million users. Furthermore, 31 percent of households owned PCs (personal computers) in 1995. That figure continues to grow as more and more people are investing in home offices so that they can work at home. Analysts have predicted that of the 31 percent of household PCs, 85 percent or 9.6 million households will use online services by the year 2000 (Kirkpatrick, 1995). In addition, catalog and home shopping sales, now a $60 billion market, could quintuple by 2000 due to sales through the Internet (Computer World, 1994).
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O Growth problems Despite its phenomenal growth, not everything looks bright for the Internet. The online industry is growing less quickly than the likes of the VCR and cable industries when they were introduced to the market. Furthermore, the industry is suffering from a high turnover. For instance, 40 percent of online customers discontinue service from the Internet each year (Kirkpatrick, 1995).
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O Internet pros and cons Businesses are also catching on relatively slowly to the Net. Only 1 percent of worldwide advertising dollars were spent on the Internet in 1994 (Lipowitz, 1995). But forecasters are quick to point out that the Net is a growing media form and, as technology advances, businesses and households will use it for advertising and home shopping, respectively. Major issues in using the Internet There are several pros and cons associated with using the Internet for marketing purposes. Some primary advantages to businesses using the Net are described next. Global opportunities The Net access delivers a company with an opportunity to implement highly cost-effective vehicles not only for their own marketing and customer support needs, but also for positioning themselves globally. It is especially beneficial to smaller companies who want to expand their businesses globally, but do not have the capital and resources to do so. In addition, the Internet helps ease the red tape surrounding the prospect of doing business overseas, thus avoiding regulations and restrictions that companies must follow who are physically present in other countries and who advertise in international journals. More and more businesses are discovering that they have the ability to reach and communicate with current and potential customers abroad through the Internet with the same cost and ease as in the USA.Business on a global spectrum The Net is also growing in popularity in other countries. Singapore, for example, promotes itself as the “Intelligent Island,” with a plan called IT2000 supported by its National Computer Board. The objective of this plan is to become Asia’s center for information technology with the Internet as its heart. The Net is therefore promoted heavily within Singapore as an essential resource for every business. PIPEX in the UK and Internet Initiative in Japan, are two examples of commercial Internet providers that are prospering tremendously in countries other than in the USA (Business Europe, 1995; Ohmae, 1995). Accessibility Companies who use the Internet, not only for advertising, but for e-mail and customer ordering, increase their hours of business on a global spectrum. Instead of a typical eight-hour day, businesses have increased their opportunities by providing 24-hour access for branch offices, business contacts, and shoppers – access that is important in conducting business across different time zones or internationally. Expanding access indeed increases the number and coverage of potential customers. Utility Providing appropriate form, place and time utility (i.e. giving customers the opportunity to decide what they want, where and when) may result in a competitive advantage for the marketers. Especially, the Net furnishes product and service information to current and potential customers when they
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O want it (instead of bombarding and annoying them with mass marketing, direct marketing or telemarketing), and hence increasing the chances of trial/purchase/repurchase.
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O Advertisement effectiveness Traditionally, advertising has been one of the major forms of communication Major form of communication between a firm and its clients. Wells et al. (1995) reported eight basic types of advertising (brand, retail, political, directory, direct-response, business-to- business, institutional, and public service) designed to reach a diverse audience with varied objectives. In order to serve the desired role and function most effectively, advertisements may use many different types of media and vehicle for different target groups. For example, the media used for typical brand advertising may not be appropriate for business-to-business advertisements (see Table I). With the advent of technology, the Internet posits itself as one of the very few media alternatives that can be used for almost all advertising purposes across all possible market segments. Businesses/government/individual s can create and transmit advertisements on the Internet that can be accessed by anybody with a computer equipped with appropriate software. Such a convenience and marketing efficiency, both for the advertiser and the target audience, is making the Net popular for marketing practices all over the world. In addition, the Net has the capability to compile statistics regarding how many people viewed each advertisement on an hourly, daily, and monthly basis (reach), and for how long each viewer actually looked at an advertisement (exposure time). This helps companies track down the effectiveness of their advertisements in terms of the number of direct purchases – a much more effective mechanism than the existing ones for magazine advertisements or television commercials. Most of the Internet providers collect this information for companies who pay an extra fee. Furthermore, advertising on the Net is, on an average, costs merely a third of what it costs in the magazines and business journals, and a fraction of the price associated with television ads. This opens up avenues, particularly for smaller
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O firms, to reach their potential clients more cost-effectively (with a lower cost per million). F u n c t i o n s o f a d v e r t i s i n g Direct action (primary or Indirect action (primary or selective, commercial or selective, commercial or Types of advertising noncommercial) noncommercial) Brand (national Newspaper, magazine, television, Newspaper, magazine, television, consumer) radio radio Retail Newspaper, Yellow Pages, direct Newspaper, television, radio mail, television, radio Political Television, radio Television, radio Directory Yellow Pages Direct response Direct mail, catalog Business to business Direct mail, catalog, individual Business publication, directory professional journal, magazine Institutional Newspaper, magazine, television, (Corporate) radio Public service Newspaper, magazine, television, Newspaper, magazine, television, radio radio Table I. A framework of
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O commonly-used media for different types of advertising to serve various functions
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O Internet drawbacks Market research and analysis Although marketing on the Net can benefit companies of all sizes, smaller organizations may have the maximum gain. Small- to medium-sized enterprises across Europe, the USA, and the Far East have rushed to connect to the Net and should be able to communicate within the “global village” as effectively as major transnational corporations. The Internet furnishes direct customer contact, combined with the appropriate market and technical reference material, which gives organizations greater ability to identify earlier shifts in product and customer trends and to test new value propositions in response. This enables managers to recognize product and market opportunities sooner and to adopt more effective product, price, distribution and further promotion strategies relative to the customers’ needs. Ultimately, this ensues increased company revenue through elimination of uncompetitive product offerings and launching of new products better suited for the marketplace. As the above benefits suggest, there are several reasons why a company should advertise and/or market its products/services on the Internet. However, there are also several drawbacks to using the Net. Some of these disadvantages are described next.Protectingonlinesecurity Security The Net has very little security and any company using the Net risks disclosure of proprietary information. The Internet was originally designed for a free flow of communications – regulation and security were not considered when it was conceived and developed. However, with its increasing use for marketing and advertising, there is ample concern for security in terms of copyrights and other proprietary information. Because millions of users access the Internet everyday, it is a hot spot for computer hackers, pranksters and viruses. Anyone can go into the Net and change, manipulate or discard information, including advertisements. Although there are some basic safeguards to prevent this sort of practice, at best it can be described as inadequate. Even more threatening is that users can access businesses’ internal computer systems (if they are connected to the Net) and can find out classified information. Copyright protection is also in jeopardy when the creation of intellectual property and the upload of information, transmission, access and use of content occurs (Business Europe, 1995). Sheraton Hotels, for instance, learned the hard way when computer hackers booked every room in the world for them. The hotel chain lost millions of dollars in lost customers and in downtime to straighten the problem out. On another occasion, the Sheraton found that many of its customers’ reservations had been canceled by the pranksters on the Net. Since then, the hotel chain has taken significant measures in protecting its online security (Seal, 1995). Besides being successful in accessing businesses’ internal networks, computer hackers have also been known to access customers’ personal information (e.g. addresses and credit card numbers). As a consequence,
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O shoppers are wary of making financial transactions over the Internet. Both sellers and buyers are uncertain about the security of this process. Although there are no published cases that the hackers have accessed and used
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O shoppers’ credit card numbers, analysts say that it is fairly common when sellers do not implement adequate security for their clients (Dedy, 1995). How the Internet will be regulated for security purposes is unclear to date.Securityand regulation At the recent Internet World Conference in 1994, security and regulation were the primary topics. Attendees discussed the rapid development of commercial transactions and how it will mandate the development of security features to protect and foster electronic commerce (Mathews, 1995). The delegates also noted that they would like to see the government step in and enact regulations that would protect the content of what goes onto the Net, and also some kind of penalty for those who manipulate, alter or delete information. Still, the level of government intervention is nebulous and data privacy is a gray area. However, these problems are becoming more prevalent and defined, and it is only a matter of time before the Internet users must follow a set of rules or face penalties. In the meantime, many software and high tech companies are investing by leaps and bounds to figure out what can be done to make interactive shopping on the Internet secure. Firewall is one such mechanism that is either in use now or is being implemented by many businesses to attain that goal. It is a device that allows consumers to shop, but prevents hackers from creating havoc. These are combinations of “security algorithms and router communications protocols” that are used to prevent outsiders from tapping into corporate databases and e-mail (Sales and Marketing Management, 1995). They act as buffers between internal networks and larger external networks. Almost all companies that advertise on the Internet have firewall in place to protect their internal networks and databases (Pugh, 1995). The Sheraton is one prime example that uses a firewall to keep pranksters from accessing its reservations system. Digit scrambling Encryption is the scrambling of digits and the “secret” coding of numbers so that only the intended receiver will be able to translate the real credit card number, and in some cases, the real addresses and phone numbers of customers ordering through the Net. Mosaic, a translating program used by Netscape Corporation for its software, is the first such encryption program available to the sellers. However, Mosaic still has glitches and is not 100 percent secure by any means (Computer World, 1994). Currently, Netscape is partnering with Mastercard, Bank of America and MCI to build encryption and validation into its popular Web browser, the most used browser on the Internet. If Netscape is successful in this endeavor, most transactions through the Net will be nearly 100 percent secure. There are several other companies who are developing ways in which customers can exchange payment for goods over the Net. One such company, Softlock Services, has developed a proprietary system for credit card purchases. Shoppers obtain a “personal payment password” provided by the company for all transactions. All purchases
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O made with these passwords are directly sent to Softlock and then billed to the customers’ respective credit cards. Softlock makes transactions 100 percent secure by using passwords instead of credit card numbers (Direct Marketing Magazine, 1995). The only problem with this service is that customers can only make transactions with sellers that use Softlock for their billing.
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O First Virtual is another company that offers a similar service. It collects the money for the products purchased through the Net. The buyer’s account is charged and the seller’s account is credited. For security purposes, each transaction takes place in a “closed loop” system so buyers’ credit card information is protected from being displayed on the Internet itself. To use this service, both buyers and sellers need a mailbox through First Virtual. Companies are also warned to protect themselves and their products/servicesInfringement protection against infringement by others. A carefully worded copyright notice should appear on every screen and any logos and slogans should have Federal Trademark registration. Companies should also view e-mail, messages and documents as a postcard rather than a sealed envelope. High cost for the users Usage of the Net requires a hefty investment for common people. To access the Internet, a computer is needed with a minimum of 4Mb of RAM, a minimum 486SX-25 processor, and a 256 colored VGA monitor. Users also need a high-speed modem, an Internet connection, and a browser like Netscape or Mosaic, so that they can surf the Web. Accessibility Most modems, to date, are slow and deter users from using the Web efficiently. Also, multimedia features such as audio and video displays that make the Web so exciting, consume a tremendous amount of memory that most PCs do not have. Therefore it is sometimes, if not always, impossible for many users to download information to see it in its full color, graphics and sound. Control Internet advertising Advertisement over the Net reduces managers’ control considerably. Users of the Internet are difficult to target. Although 50 percent of the users are 25 years or younger, there is still another 50 percent of users from ages 25 and up. It is possible to reach all age groups, yet targeting certain age groups may be difficult. First of all, it cannot be measured applying the conventional methods used for television or magazine advertisements. For example, television has the Nielsen ratings and magazines focus on specific interests of different segments. To date, the Net is so broad and unknown, a company cannot possibly determine easily who or where to advertise on the Net. Furthermore, there are so many resources on the Internet, it is probable that users will not see a company’s advertisement at all unless they are prompted to search for certain products/services offered by that company. This may require a company to promote a product using the conventional tools that are more proactive (television, print, radio, direct mail etc.) even while using the Internet. Implementation Getting started Unlike advertisement through magazines and television, companies do not need a license from the Federal Trade Communications Commission to go online. Therefore, the first step is simply to find an Internet provider – a company that will
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O furnish a link to the Net. The second step is to find someone who will establish and maintain companies’ presence on the Net. There should be carefully drawn agreements with both entities establishing
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O rights and obligations. Costing and implementation of marketing on the Internet is relatively easy and very reasonable. Advertising Advertisers can buy advertisement space on the Net through a serviceBuying space on the Net provider, a private company set up to be a gateway to the system for a set of clients. Organizations can find individual consultants as easily as looking in the Yellow Pages. Many of these small firms actually advertise their services on the Internet. These specialized agencies will do everything from setting up, maintaining and promoting their clients’ advertisements. Monthly costs, depending on the complexity (color, graphics, sound and extent of content) are as little as $20 per month and average about $20,000 per year (Crain’s Chicago Business, 1994). Users need software such as Netscape, which gives them the capability of seeing the advertisement in full color, graphics, sound and video images. Netscape also helps users locate shopping networks through a user-friendly, Windows-compatible environment. The following are the primary shopping and advertising browsers available on the Net. Web shops. Web shops can easily be found through browsing the World Wide Web. It is the most well-known avenue for creating advertisements on what the Web calls “pages.” Companies with “T1” services and UNIX expertise should have no problem creating their own page in-house. Users simply access the advertisement by prompting a search that is related to the product. The Web shop currently serves 400 commercial enterprises, ranging from mom and pop flower shops to multinational companies such as AT&T. The cost is a flat fee of $25,000 per year (Computer World, 1994). Internet malls. Virtual shopping centers (e.g. Shopping 2000, Mecklermedia, Apple’s E-World, and AT&T’s E-Shop) advertise text, image or video to lure possible browsers of the Net. The cost to advertise on these electronic shopping malls is as little as $100/month to $25,000/year. This includes creating, maintaining and promoting the Internet advertisements. Creativeshopping Downtown Anywhere. Downtown Anywhere is a shopping network on the Internet that is set up like a city. It actually simulates shopping through the stores of the products that the user chooses from the menu. It is by far the most creative shopping network on the Net, but is much more expensive (over $75,000/year minimum). However, it is a lot of fun for users and also grabs their attention better than the other shopping networks because of its creativity (Mayfield, 1994). Internet Shopping Network. The Internet Shopping Network (ISN), recently purchased by the Home Shopping Network, sells 20,000 products for 1,000 vendors. It receives 250,000 orders per day on average. This is the fastest growing shopping network on the Internet. It expected to advertise 100,000 products and services by the end of 1995. The network is extremely accessible to users and is the best known shopping network on the Net today. Cost to advertise on the ISN ranges
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O from $25,000 to $75,000 per year (Crain’s Chicago Business, 1994). Sales and marketing research Advertising is not the only benefit to using the Internet. It also serves as a huge database for research and demographic data. Each transaction that takes place on the Net can be tracked to the user. Therefore, pertinent
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O Identifying product opportunities information about the purchaser can be collected to develop target-marketing strategies. Of equal importance, the Internet’s discussion boards and electronic mail provide marketing with a means to communicate directly with its customers. This capability provides organizations with the ability to identify product opportunities, changes in the competition, unaddressed customer needs, shifts in price/performance/value propositions, and a host of other indispensable information points that are difficult, if not impossible, to obtain through more traditional and more costly means. So far, the World Wide Web has proved to be the most popular medium for market intelligence, while CompuServe is known for offering the largest geographical spread – 2.4 million subscribers, 2,000 services, and 850 databases. These networks provide customer support, research, and product development ideas through e-mail, discussion boards, and demonstration facilities. Many researchers have found that the quality and accuracy of these responses from the customers tends to be more accurate and honest than that obtained from traditional focus groups, personal or telephone interviews. Equally important to business needs is that the Internet provides an effective two-way communication vehicle through which marketing may test ideas and concepts while minimizing the investments needed to launch either pilot programs or full-scale product introductions (Internet Business Center, 1994).Internet service provider The Microsoft Network is another medium for marketing purposes. Accessible through its Windows 95, it is more secure than existing services and more oriented toward business users. Its focus is on communications, sales and research. Since this software is part of the Windows 95, businesses do not have to pay for monthly dues. It is also in an easy user-friendly Windows format (Kirkpatrick, 1995). With the exception of the free access offered by Windows 95, the cost of marketing research and communication over the Net, which includes hook- up, is anywhere between $175 and $300 per month, depending on the company size. Businesses can hook up to services on the Internet through an Internet service provider, such as America online and CompuServe, among others. CommerceNet offers the first large-scale service for $15,000/year, including access to browse pages, place orders, coordinate production, schedule transportation, and provides many other business functions. Also included in this package is the Netscape browser, WWW servers, and all backbone and access equipment. This, however, does not include the cost of advertisement creation and space (Crain’s Chicago Business, 1994). Conclusion We argue that utilizing the Internet as a marketing tool is something that businesses today must consider. Whether a company is large or small, if it is not using or seriously considering the Internet as a marketing avenue in the near future, it will be at a competitive disadvantage over time.
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O However, companies should not limit themselves to just marketing on the Internet. They must also look at other traditional media of advertising and marketing research in order to meet their business goals and marketing objectives. Furthermore, when using the Internet, companies should use caution but at
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 OMany benefits the same time be assured that the Internet will reward the early adopters rather than those who wait until the later part of the 1990s. In closing, the Internet has many risks associated with its use, but it also has many benefits that may outweigh the threats. Companies who do not use it will be left out in the cold. An analyst from the Gartner Group summarizes this issue with the following: “fire up your Internet engines and ease into traffic – but drive slowly and don’t carry any valuables” (Computer World, 1994). References Boisseau, C. (1995), “Internet rife with cyberspace,” The Dallas Morning News, March 4, p. 3C. Business Europe (1995), “EU information technology: not yet on the Internet?”, Business Europe, April 3. Comp uter World (1994), “Corporations looking to do business on the Internet ...,” Comp uter World, October 24, p. 79. Crain’s Chicago Business (1994), “Technology and accessibility giving Internet global impact,” Crain’s Chicago Business, November 14, p. T10. Dedy, T. (1995), “Pioneering firms launch auto ads into cyberspace,” Los Angeles Business Journal, April 10, p. 22. Direct Marketing (1995), “How to market on the Internet,” Direct Marketing (Conference Publication for the Marketing Advisory Board). Direct Marketing Magazine (1995), “Successful marketing on the Internet,” Direct Marketing Magazine, March, p. 39. Internet Business Center (1994), “Marketing on the Internet,” Internet Business Center, The Internet Group. Kirkpatrick, D. (1995), “As the Internet sizzles online services battle for the stakes,” Fortune, May 1, pp. 86-96. Lipowitz, A. (1995), “FTC limits on phone calls hanging up telemarketers,” Crain’s New York Business, May 1, p. 15. Mathews, J. (1995), “Internet world ’94: growing and growing,” Searcher, March, p. 34. Mayfield, D. (1994), “Forget lunch, let’s do the net,” The Virginia Pilot, April 18, p. 14. Ohmae, K. (1995), “Letter from Japan,” Harvard Business Review, May, pp. 154-63. Pugh, C. (1995), “A beginner’s guide to cyberspace,” The Houston Post, March 5, p. D1. Sales and Marketing Management (1995), “Cerfin’ the net,” Sales and Marketing Management, March, p. R18. Seal, K. (1995), “Consumers browse through hotels on computer network,” Hotel and Motel Management, February 6, pp. 3-3 0. Wells, W., Burnett, J. and Moriarty, S. (1995), Advertising: Principles and Practice, Prentice- Hall, Englewood Cliffs, NJ. Pallab Paul is Assistant Professor of Marketing at the Daniels College of Business of the University of Denver, Denver, Colorado, USA. Internet: firstname.lastname@example.org
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O Executive summary and implications for managers ande. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research u executives Interact, do not advertise: marketing on the Internet Will the “information superhighway” deliver? And, if it does, will it provide what most businesses now see as a promotional channel? Are traditional marketing management skills appropriate to the exploitation of the new medium? These questions – and many others – should exercise the minds of marketing executives examining their organization’s presence on the Internet. It is not sufficient simply to put up a site (however pretty) and leave it at that. Businesses must assess what they will get from a presence on the Internet. This could be straightforward advertising; it could be distance selling, customer service or market research. A combination of these could prove the most effective mix. In making the choice, managers need to consider how the Internet might change over the coming decade. A great deal is written about the new media and much of it is contradictory. To assess what is needed, let us consider the competences that seem most appropriate to the Internet as a communications tool. Direct marketing capability Businesses which do not appreciate the core skills and tactics of direct marketing are at a disadvantage. The best direct marketers have been on the Internet longer than any other marketing group. They see it (possibly wrongly) as another direct response medium where the tested tactics of copywriting, incentives and attention-getting will deliver business success. Furthermore, the principles of database marketing and relationship making – both emerging from the direct marketing concept – apply to marketing on the Internet. Public relations skills Boutié asserts, elsewhere in this issue of JCM, that PR professionals (along with politicians) have the appropriate skills to exploit the Internet.
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L . 1 3 N O . 4 1 996 O News management, opinion- former communications campaign management and writing skills all loom large in this argument. The idea of stakeholders and stakeholder communication also applies to this area of marketing communications. These competences, and the evidence that mass marketing techniques cannot work on the Internet, suggest that the days of traditional brand management could be numbered. This is not the same, please note, as saying that the brand is no longer relevant. It most certainly is, but brand managers need to change the basis of brand communications to encompass relationships and the dynamic way in which opinions are formed about a brand within the marketplace. As more “private” users come onto the net, its role will change. Users will be focused more on interests and opinions rather than the search for offers or information. A home page promoting a particular company will need to be pretty special if it is to deliver anything like the returns posited in articles
J U RN AL O F CO N SU M ER M ARK ETIN G, VO L. 1 3 N O . 4 1 996 O such as this one. Communicators need to move toward asking “What do you think?” rather than saying “here’s my product – buy it.” And Internet users will want full disclosure rather than selected highlights. It will not be sufficient simply to put up a brand; the rationale for a position and background information normally rooted to the planner’s desk need to emerge. Deception and secrecy are an anathema on the Net. This takes us to the next important issue – an issue that Paul addresses in some detail – security. I suspect that the Internet will never be wholly secure. It is too unstructured and chaotic to respond well to active control. And encryption techniques imply something to hide running against the “free exchange of information” principle underlying the development of the Internet. The idea of private information transmitted round the world on an open system is not only daft but fundamentally unsustainable. As more information goes online, the secrecy and privacy principles beloved of big business and bureaucrats (when it suits them) must be undermined. Only by excluding information from linked computers can any genuine secrecy sustain. A new paradigm begins to emerge, driven by the interaction of multiple individuals (and individual companies) rather than the decision to “publish” made by organizations controlling the information. The power transfers from managers to customers. The power lies with those best able to search, assess and apply free information rather than those who can store and control data. Or at least I hope so. The danger is – and it is a very real one – that governments will try to c control the uncontrollable. How might they do this? c control who has access either via licensing or by restrictive legislation, control the content through legislation – the attempted controls on pornography recently overturned by Federal judges indicate the w willingness to act in this respect, withdrawal of government from the Net into in-house systems to protect so- c called “secrets”, nationalization or regulation of the Net itself. Those who cherish the independence of the Internet must address these problems. As the Economist recently observed, the Internet is not simply another medium but a new platform on which media can grow. So long as this platform is collectively owned and controlled, the prospect for the Internet as a global communication revolution is bright. Any compromising of its independence destroys its integrity and value. Paul describes how the Net evolved and its rapid growth. He comments on the small proportion of marketing expenditure dedicated to it and asserts that businesses should get on the Net but act with caution. In this he is right, but these same companies must also put something else into the Internet – their commitment to unencumbered communications and free speech. If this does not happen, and businesses allow the system to fall into the control of regulators, it will act to reduce the trust that users have in other users’ fairness and openness. (A précis of the article “Marketing on the Internet”. Supplied by Marketing Consultants for MCB University Press)