The document discusses how digital technologies have transformed businesses by enabling remote and global operations, near real-time decision making, and a perfect marketplace where consumers have access to vast information and competitive pricing. However, it also notes that the digital world is unpredictable, with barriers to entry being low and market niches changing rapidly, making constant change and uncertainty the new normal for businesses. Marketing in particular faces uncertainty, as viral digital campaigns are difficult to replicate despite large investments in traditional campaigns.

1. Digital Marketing
Karl Meyer

3. Publisher’s Note
Every possible effort has been made to ensure that the information contained in this book is
accurate at the time of going to press, and the publishers and authors cannot accept
responsibility for any errors or omissions, however caused. No responsibility for loss or damage
occasioned to any person acting, or refraining from action, as a result of the material in this
publication can be accepted by the editor, the publisher or any of the authors.
Published by Cambridge Marketing Press, 2015
© Cambridge Marketing Press, 2015.
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5. Introduction
(i)
Page
Introduction
About the Author (iii)
Foreword (iii)
How to use this Guide (iv)
Additional Study Resources (v)
Section 1: The Digital Landscape
Chapter 1: Scope, Innovation and Opportunities
1.1 Introduction 1
1.2 Digital Technology Innovation 9
Chapter 2: The Benefits of Digital Marketing, Integration and
Customer Focus
2.1 The Benefits of Digital Marketing – Why Is It So Special? 29
2.2 The Integration of the Online and Offline World 38
2.3 Customer Focus for Effective Digital Marketing 50
Chapter 3: The Impact of the Digital Environment
3.1 The Rise in Online Consumer Power 61
3.2 Revenue Generation from the Internet 72
3.3 Digital Interaction and Online Customer Behaviour 80
Section 2: The Digital Toolkit
Chapter 4: The Digital Marketing and Digital Communications Mix
4.1 The Role of Digital Marketing Communications
within the Extended Marketing Mix 87
4.2 Digital Marketing Platforms – The Digital Communications Mix 98
Chapter 5: The Digital Hardware Landscape
5.1 Digital Hardware 111
5.2 Effective Coordination for Enhanced Customer Experience 117

6. Introduction
(ii)
Chapter 6: The Digital Landscape in Context
6.1 Technology Adoption and Diffusion 131
6.2 The Maturity of Digital Delivery Platforms and Their Different Contexts 138
6.3 Relationship Types and Transaction Contexts 146
6.4 Digital Selling Techniques and Technologies 154
Section 3: Digital in Action
Chapter 7: Developing Digital Activities to Support and
Enhance Multichannel Marketing
7.1 The Principal Actions of Digital Marketing Campaigns 169
7.2 Creative Online Tools to Generate Flexible and
Responsive Opportunities 180
7.3 The Advantages and Disadvantages of Multi-channel Marketing 184
7.4 Planning and Monitoring Online Marketing 188
7.5 The Immediacy of Digital Marketing – Opportunities and Risks 195
Chapter 8: Measuring Digital Campaigns
8.1 The Purpose of Measurement 199
8.2 Measurement Techniques and Technologies 214
8.3 Campaign Reviews – Measuring Performance 232
8.4 Analysing Customer Populations and Managing Digital Relationships 240
8.5 Summary – What is Digital Marketing? 242
Index 247

7. Introduction
(iii)
About the Author
Karl Meyer MBA
Karl Meyer, MBA, has worked for the past 20 years in the Internet Industry in both Technical
and Sales and Marketing Roles, and was Director of Channel Marketing Strategy for
WorldCom in EMEA. Clients included Ford UK, NASDAQ and the BBC. His roles took him
across most of Europe and the Middle East, culminating in working for King Hussein of Jordan.
Karl is currently Product Marketing Manager for Dante Ltd. His particular expertise is the use of
Web Analysis and Social Media to accurately target customers. He teaches the Digital
Programme and modules at Cambridge Marketing College, and is also joint author of the
Cambridge Marketing Handbook: Digital Marketing and author of the Cambridge Marketing
Handbook: Distribution for Marketers both published in 2015 by Cambridge Marketing Press.
Foreword
The internet, and digital communications generally, have been the most disruptive family of
technologies ever in the history of modern business and commerce. From the ability to buy
and sell goods around the world with minimal investment in infrastructure, to enabling traders
in currency, stocks and shares to work from their back bedrooms betting thousands on
exchanges half way around the world.
Digital communications has generated entirely new businesses (WhatsApp, Facebook,
YouTube) or changed the face of existing business models entirely. From car boot selling to
EBay trading or from independent bookstore to Amazon few business activities have
remained unchanged. But these changes (and many more like them) are merely the
publicly visible element of the digital iceberg.
Digital Marketing is notable by the scale and scope of changes it has experienced in the
past 20 years. Virtually no industry has changed so much and so rapidly. Any book, or course
will, by default, be almost out of date before it hits the bookshelves and so independent
research of the latest news and techniques is essential alongside this Guide which provides
guides and insights into the key technologies and methodologies within the digital marketing
sector.
In particular the division between digital business and digital marketing is particularly blurred
with marketing now taking an even greater role in the overall business strategy. Marketing is
no longer an ‘add-on’ activity but arguably can become the driver for business strategy. This
Guide therefore will provide insight into how marketing and business have become
integrated in the digital age.

8. Introduction
(iv)
How to Use this Guide
This Guide has been written specifically to assist marketers who are involved in both studying
and implementing digital marketing. It includes examples and activities to help reinforce your
learning, and recommended reading and website links for additional information. We
recommend that you work through the Guide from beginning to end undertaking the
exercises and supplementary reading included.
The Guide is part of a set, all written by professional marketers and tutors, designed to
provide clear and easy to read introductions to key marketing topics. The other Guides in this
set are: Marketing, Communications, and The Customer.
Within the Guide you will find the following icons used:
This icon defines a key learning concept within this topic area.
This icon identifies additional reading resources that can be used to gather extra
information or to reinforce learning about a particular concept.
This icon identifies tasks that are useful in widening your knowledge and applying
the concepts to your own organisation.
This icon identifies real-life examples that illustrate the key issues discussed.
This icon identifies websites with further information on the key issues discussed.

9. Introduction
(v)
Additional Study Resources
This Guide has been designed to provide you with all the core knowledge and skills you need
for this topic. However, marketing is a constantly changing discipline and in order to be a first
class marketer you must keep up-to-date with what is going on around you. Consequently
we strongly recommend that you read widely around the subject for this (and every) topic.
CMC Tutor Blog, Scoop.it! and YouTube Channel
Tutor Blog: www.marketingcollege.com/blog
Scoop.it!: http://www.scoop.it/u/charles-nixon
YouTube Channel: www.youtube.com/channel/UC0_uEMPBTxuUr8hH1Ikl70w
Magazines and Journals
We strongly recommend that you read around the subject from the daily and weekly press
and marketing journals and widen your studies by looking at key trade magazines that serve
the industry. These include:
Ad Age www.adage.com
Cambridge Marketing Review www.marketingcollege.com/blog/cambridge-
marketing-review/
Campaign www.campaignlive.co.uk
Marketing www.marketingmagazine.co.uk
Marketing Week www.marketingweek.co.uk
Media Week www.mediaweek.co.uk
Cambridge Marketing Handbooks
Cambridge Marketing Handbooks: Digital Marketing, Distribution for Marketers, Law for
Marketers, Marketing Communications, Marketing Philosophy, Marketing Planning, Pricing for
Marketers, Product Marketing, Research for Marketers, Services Marketing, and Stakeholder
Marketing, 2015, Cambridge Marketing Press
Recommended Books
Ryan D and Jones C, (2012), Understanding Digital Marketing: Marketing Strategies for
Engaging the Digital Generation, 2nd edition, London, Kogan Page
Chaffey D and Smith P R, (2012), Emarketing Excellence: Planning and Optimizing Your Digital
Marketing, 4th edition, Abingdon, Routledge
Charlesworth A, (2014), Digital Marketing: A Practical Approach, 2nd edition, Abingdon,
Routledge
Ryan D, (2014), The Best Digital Marketing Campaigns in the World II, 2nd edition, London,
Kogan Page

10. Introduction
(vi)
Recommended Articles
Collins, Katie, Tapp, A, Pressley A, (2010), Social Marketing and Social Influences: Using Social
Ecology as a Theoretical Framework, Journal of Marketing Management, 26, 13-14, 1181-1200
Bell D R, Choi J, Lodish, L M, (2013), What Matters Most in Internet Retailing, MIT Sloan
Management Review, 54, 1, 27-33
Barnett M, (2011), Online Brands Set Off on New Marketing Journey, Marketing Week, 15-18
Kumar V, Mirchandani R, (2013), Increasing the ROI of Social Media Marketing, MIT Sloan
Management Review, 54, 1, 55-61
Fernandez J, (Nov-2012), Social Advertising, Research, 558, 32-33
Moll M, (May-2012), Engage Through Augmented Reality, ADMAP, 30-31,
Woods A,(09-Nov-2011), The Great Ecommerce Opportunity, Marketing, 41-43,
Useful Websites
The Chartered Institute of Marketing
www.cim.co.uk CIM website with information and access to learning
support.
www.cim.co.uk/insight/tools-
and-templates/study-resources/
Direct access to information and support materials for all
levels of CIM qualification (available to CIM Members).
www.cim.co.uk/cuttingedge Weekly roundup of marketing news (available to CIM
members), awards and forthcoming marketing events.
www.cim.co.uk/insight/marketin
g-library-resources/
EBSCO, Emerald, iLibrary and more.
Publications on line
www.ft.com Extensive research resources across all industry sectors,
with links to more specialist reports. (Charges may apply).
www.economist.com Useful links, and easily-searched archives of articles from
back issues of the magazine.
www.mad.co.uk Marketing Week magazine online.
www.brandrepublic.com Marketing magazine online.

11. Introduction
(vii)
Sources of useful information
www.esomar.org/ European Market Research Association.
www.asa.org.uk/asa/ Advertising Standards Association – useful for the Codes
of Practice.
www.marketresearch.org.uk The Market Research Society. Contains useful material on
the nature of research, choosing an agency, ethical
standards and codes of conduct for research practice.
www.statistics.gov.uk Detailed information on a variety of consumer
demographics from the Government Statistics Office.
www.data.gov.uk/publisher/ce
ntral-office-of-information
Government News.
www.quickmba.com/ Quick reference website for business models.
Exhibitions to Attend
Technology For Marketing www.t-f-m.co.uk/
Online Marketing Fair www.onlinemarketingshow.co.uk/
Social Marketing www.socialnetworking-forum.com/
Wikipedia – A note on its use
Wikipedia is a good place to start any research on a new subject. Whilst content now goes
through some review to remove obvious errors of fact, the encyclopaedia is not definitive
and can be incorrect. Always check any information with a second source. Wikipedia is a
good source for other sources.

12. Introduction
(viii)

13. Digital Marketing
SECTION 1
THE DIGITAL LANDSCAPE

15. Chapter 1: The Scope, Innovation and Opportunities of Digital Marketing
Digital Marketing 1
Chapter 1: Scope, Innovation and Opportunities
The expected learning outcomes for this chapter are that you will understand the
scope, innovation and opportunities associated with digital marketing offered by new
technologies including:
 The internet of things
 Location-based marketing
 Big data
 Data mapping and mining
 Crowdsourcing
 Misalignment of international development
 Kurzweil’s law of accelerating returns
1.1 Introduction
Digital systems have allowed businesses of every type to dramatically restructure their
operations. Call Centre staff can now be located anywhere in the world (and even at home)
enabling both massive economies of scale and also the ability to operate 24*7 without the
need to have expensive night shifts (or, as in many cases, to off load the expensive nightshift
staff to an economy where anti-social hours of working are not considered a problem). The
ability to control business operations remotely allows supply chains to be absorbed where
needed or ancillary parts of the organisation to be hived off depending on what offers the
best returns on capital at the time.
 Money and, most importantly, ownership of assets, can be legally separated from
core business activities allowing businesses to be run as tax efficiently as possible (or
to avoid tax, depending on your point of view)
 Distance is no longer a barrier – if you wish to play poker with a Frenchman and a
German then what does it matter if the servers are located in the UK or Gibraltar (for
the players it makes no difference, for the company and the tax authority this
complexity generates a new range of opportunities and headaches respectively)

16. Section 1: The Digital Landscape
2 Digital Marketing
 Time no longer has the same meaning within a digital world. Whereas banks worked
a 5 day 9:30 to 3:30 operation with downtime overnight to batch process
transactions, the always connected world now expects access and most importantly
control of money 24*7. Decisions that once took days are now expected in minutes.
Wonga.com makes a virtue of being able to decide on a loan and transfer money in
a matter of minutes. Whether this is a good or bad thing is left to the reader to
decide
Within the news cycle the concept of ‘stopping the press’ is increasingly irrelevant. Users now
expect the electronic version of their newspaper to provide minute by minute updates of
football scores not a 12 hour out of date summary of yesterday’s news.
The time available to make decisions is also reduced. Planning cycles are now constrained
by the need to adapt to the faster pace. Before, a lengthy business lunch was needed to
get to know the client, now the client expects the first prototype to be released and market
tested before their coffee is cool enough to drink. The ability to react quickly is now more
important than ever.
Digital communications now offer a virtually perfect marketplace for goods and information.
It is increasingly hard to offer overpriced goods or to sweep bad product reviews under the
carpet. In a digital world where everything is permanently available, yesterday’s news is no
longer today’s chip wrapper but is always available to be viewed, shared and dissected.
Even the longevity of businesses is in doubt. The decline of physical businesses (from
Woolworths in the UK to Sears in the USA and Canada) can be attributed to the rise of digital
commerce. The high street travel agent is no longer the ‘go-to’ option for most holiday
makers.
However, it is not only physical businesses that have suffered. Yahoo, which was once the
most powerful search engine businesses in the world with a market capitalisation of $97 billion
at its peak, saw that fall to less than $12bn in only 2 years. The number of digital businesses
that have been touted as rising stars, burned through $billions then faded just as quickly is
huge (Bebo, Myspace, Friends Reunited, pets.com). In this new digital landscape no-one is a
sure-fire winner and even winning last year is no assurance of success (or even survival) this
year. The digital marketplace is one where barriers to entry are minimised and market niches
can open and close in rapid succession making change and uncertainty the only certainties
(Porter, 2008).
So, in a world where everyone is your competitor, no-one can overprice goods, everyone
knows your secrets, service is expected 24*7 and taking 10 or 20 minutes to agree a price
could mean the difference between winning or losing the contract, how can a business
adapt, survive and thrive?
Within the marketing landscape, uncertainty is even more acute. Every managing director
wants you to produce the next YouTube sensation yet no one knows how to do that. The
qualitative differences between a viral video achieving millions of views for virtually no cost
and a carefully crafted $multi-million, multi-national campaign which achieves no
measurable benefit are tiny.

17. Chapter 1: The Scope, Innovation and Opportunities of Digital Marketing
Digital Marketing 3
Just as Mark Twain said:
“A lie can travel half way around the world while the truth is putting on its shoes.”
The inadvertent digital slip-up of an overtired and undertrained support desk operator on
Twitter can spread around the world far faster than the most elegant press release ever will.
One only needs to review the parody posters created from Conservative and UKIP election
materials to recognise that the internet can easily prick any marketing bubble and create far
more damage than benefit.
What can be learned?
One of the first lessons to be learned about digital business and digital marketing is that the
landscape has radically changed and that most of the agreed norms are no longer valid.
The previous paradigm was of a hierarchical, top down, structure with strong central
management pushing messages and controlling the lower levels. Message direction was
largely one way – If the message was not getting through, simply shout louder. The modes of
communication were also well understood, well controlled and small in number. The number
of variables could be understood and controlled.
Within the digital marketplace, none of these exist. Marketing communications is now a two-
way process. Users can speak, want to speak and demand to be heard. With free access to
information the organisation can no longer control the message – if the first 5 results for your
product on Google are negative reviews then your marketing will not only fail but has
already failed. No longer are there a restricted number of media channels which can be
effectively managed or controlled but a virtually infinite array of bloggers, commentators,
reviewers or just plain interested parties who are not under any form of control.
Pre-digital Post-digital
Structure Top down hierarchical Flat peer to peer
Communication Push Two way
Modes Few, well controlled Effectively infinite, uncontrolled
Table 1.1 The pre-digital and post-digital world
The key lesson to learn from this change is that there needs to be a shift in
emphasis from Marketing (and) Communication to Marketing through Communication.

18. Section 1: The Digital Landscape
4 Digital Marketing
Marketing has become, and will continue to develop into, an increasingly two-way,
conversational, activity. Responsiveness and reactivity will be essential. Customers will need
to consider companies as, if not friends, then trusted partners. Customers can, if managed
carefully, become advocates of the business. The relationship will need to become less
hierarchical and more about the meeting of equals.
Like all relationships these will need maintaining and nurturing over time.
In essence, marketing has suddenly become much, much more complex. Life will never be
the same again.
The digital environment
This Guide will provide insights into the key drivers of this new ‘marketing through
communication’ paradigm and offer a means to understand the opportunities and risks in
this digitally enabled marketing environment.
This digital environment covers not only the raw technologies used but also the ways these
technologies have changed the attitudes and activities of businesses and customers.
Digital communications – breaking down barriers
Porter explains very clearly the pressures organisations face from both within their chosen
industry and from external organisations (Suppliers, Customers, New entrants, and New
Services) (Porter, op.cit.).
Figure 1.1: Porter’s five forces

19. Chapter 1: The Scope, Innovation and Opportunities of Digital Marketing
Digital Marketing 5
The emergent digital environment has disruptively affected all these areas in virtually every
sector outside large scale mass production and raw material production or processing.
Across the majority of the commercial environment, digital communications have removed
barriers to entry through a combination of processes and increased access to information.
Let’s have a look at how each of these forces has affected an example organisation.
1. New entrants
The clearest example of this disruptive force is probably the growth and emergence of
Amazon at the expense of both independent book sellers and even large established
organisations such as Borders. Amazon is often used as an example of predatory pricing
forcing existing suppliers out of the marketplace but the deep discounting was a
consequence of their business model rather than the driver behind the model. Amazon was
able to leverage existing businesses and new technologies to reduce their cost base
dramatically.
For the most part, small bookshops would order very small volumes of each title (with the
exception of major ‘blockbuster’ titles) – usually no more than 2-3 of each title at a time.
Book warehouses then already had to have processes in place to allow picking and packing
of small quantities of individual books and shipping those to stores.
Equally at the launch of Amazon, many carriers and postal services (particularly federal or
government owned postal services) which offer door to door deliveries were starting to suffer
losses and were seeking new high volume contracts to support their infrastructures. They were
then willing to offer Amazon very attractive bulk volume deals (particularly for pre-sorted mail
items).
These two factors allowed Amazon to look to remove the ‘middle man’ of bookstores and
pick and ship directly to end users. By doing this Amazon was able to remove a huge capital
cost from their business model (the stores) and replace them with a digital sales model.
In this example the digital element (the website) is actually a relatively minor part of the
digital transformation of the business model – without the ability to link-in the warehousing
and delivery activities into a coherent whole, the business model would not be able to
support deep discounting.
Amazon, by replacing stores with a parcel delivery service, changed the bookstore business
model from a capital intensive, fixed cost based structure to one with a much lower fixed
cost and a variable cost base.
Since this first breakthrough Amazon has of course diversified into a wide range of other
services (including marketplaces, computer hosting and cloud services) but the original
disruptive model was not predicated purely on inserting digital communications into an
existing business but instead succeeded because it was based on understanding how digital
communications supported a new business model.
2. Switching products and services
Within this sector, two examples stand out. iTunes and Netflix.

20. Section 1: The Digital Landscape
6 Digital Marketing
iTunes
For Apple, the development of an entire eco-system of devices and digital delivery has
enabled it to dominate the digital music delivery market and arguably directly cause the
slow demise of both physical media and the high street stores. In 2013 there were fewer than
300 record stores in the UK. Figure 1.2 shows the huge decline in CD sales in the US.
Figure 1.2: US CD sales volumes (millions) Source: www.airbeats.com
However it is interesting, in context of the changing digital environment, to note that Apple
launched the iPod 18 months before the iTunes store. For that first 18 months it was necessary
to purchase physical media, copy that onto your Apple (windows software only appeared in
mid-2002) then copy that onto the iPod. Prior to the launch of the iTunes store, less than
1,000,000 iPods were sold yet once the ecosystem was completed with the store the sales
volumes accelerated rapidly with 11 million sold in the next 14 months and 31 million sold in
2005 (Apple, 2015). From this distance it is uncertain why Apple delayed the launch of the
iTunes Store for 18 months compared to the iPod but it is clear that it was this disruptive
change that triggered the huge shift in purchasing and consumption of digital content. The
recognition that the paradigm of the music format being crucial disappeared to be
replaced by the concept of the music itself being crucial.
It is notable that sales of dedicated iPod devices are now rapidly falling as the functions are
incorporated into many other Apple devices. However the delivery infrastructure will
continue to deliver content (of a wider range of types) and so the replacement or dropping
of the iPod device is unlikely to affect the overall ecosystem.
Netflix
Netflix is an interesting example of an organisation that has been able to utilise the rapid
changes in the digital environment to adapt its own business model and thrive through the
first two generations of internet technologies.

21. Chapter 1: The Scope, Innovation and Opportunities of Digital Marketing
Digital Marketing 7
At launch in 1997, Netflix used a traditional DVD rental model with its use of the internet
limited to that of a website ‘selling’ its services. In this model it was (like Amazon) using the
mail services as a replacement and proxy for the physical distribution model of Blockbuster.
In 1999 it adapted its model from a per rental fee plus postage to that of a monthly fee and
free returns to reflect the changes in both usage and also to migrate its occasional use (and
therefore potentially disloyal) customer base into a more secure repeat revenue based
(creating a barrier to entry for competitors by ringfencing its customers). This change to a
repeat revenue model was instrumental in its successful Initial Public Offering (IPO) in 2002.
Up to this time Netflix was not doing anything ‘special’. There was no secret to its success and
there would have been very few barriers to entry for another organisation but the next
change to their model was dramatic: Video Streaming.
In 2007 Netflix began offering a video streaming option – removing the delivery of physical
media and allowing a video-on-demand service to users. This service relied on the
implementation of effective broadband internet speeds to its customer base. This change in
business model has moved Netflix from the DVD rental space into an area closer to
cable/satellite TV providers. They have been able to use the secure revenue stream from one
business to leverage access to another. By the end of 2011 Netflix had over 24 million
monthly subscribers in the USA.
International expansion has been solely through the video streaming route – this has avoided
the capital costs of creating physical distribution in new territories and has enabled a faster
expansion rate than would otherwise have been possible.
The core difference between Apple and Netflix is within the ownership of the content. Apple
sells you the content whereas Netflix ‘lends’ you the content for a single use. Partially this is a
reflection of the technical difficulty of storing HD quality movie length videos in a home
environment, but largely due to the different consumption modes of the content. Whereas
most listeners will listen to music many times, the number of movies which are watched on a
short repeat cycle is much lower.
This demonstrates that the business model selected needs to be a combination of both
technology and understanding the user – and the ability to understand users is crucial.
Technology can enable change and even drive change but in the end the business needs
to meet the customers’ needs.
3. Supplier driven competition
Despite the opportunities offered by disintermediation there has been relatively little
significant impact of supplier side business innovation in the B2C sector. The reason for this is
uncertain but is probably due to the recognition that there is considerable value add
provided by many existing providers. As in the previous examples, (books, music and video)
the publishers themselves can offer a less complete offering to the users (being restricted to
their own material), and so the increased transaction cost incurred by searching through
multiple suppliers would outweigh any possible price reductions available by cutting out the
retailers.
A recently emerging trend has been the growth in self-publishing with authors and musicians
publishing work through Amazon and iTunes and so by-passing the traditional publishing
houses. The most notable success story in this would be the “Fifty Shades” series of books
which were originally self-published as eBooks. However the books only became financially

22. Section 1: The Digital Landscape
8 Digital Marketing
successful once adopted by a publisher and produced as a physical book. This
demonstrates the continued value of intermediaries such as both publishing houses and
retailers (Kingston University, 2013).
Within the B2B marketplace there have been some examples of supplier driven
disintermediation. The most notable would be within the food industry with farmers now
being able to sell produce direct to processors (sometimes even on the futures markets) and
avoiding the traditional merchants (Green et al, 2008). The growth in digital marketplaces
and the ability for producers to communicate directly and efficiently has enabled this
process. This activity is still in its early stages.
Another example would be crowdsourced funding – both for business to business funding
(www.fundingcircle.com) which focuses on providing lower cost borrowing and enhanced
returns for investors, or new business investment such as www.kickstarter.com offering a route
to funding avoiding the normal venture capital routes. These two examples also
demonstrate customer entry into markets.
4. Customer entry into marketplaces
Leaving aside the role of services such as EBay, possibly the best examples of Customer Entry
are within the real estate marketplace. The internet allows sellers to bypass (almost)
completely the use of estate agencies and dramatically reduce costs. In some countries
(particularly Scotland) the legal structures prevent such arrangements and there is still a
great deal of customer resistance to direct buying and selling.
Other examples of this phenomenon are the rapid growth of eBay selling and of the
resource/asset sharing economy highlighted by concepts such as AirBnB for rooms, ZOPA for
per-to-peer lending and Crowdcube for equity financing.
Customer resistance and inertia are the biggest factors preserving the status quo and also
reducing the levels of competition between existing players
5. Inter-business competition
Porter indicates that businesses will tend toward the position of oligopoly with a minimal
number of players acting in concert (either formally or informally) in order to preserve their
positions and revenues (McCall, 1982). No player will act in such a way that risks retaliatory
behaviour from another. The best example of such behaviour is that of the UK power supply
industry. Since 2013, 6 main players control 95% of all consumer power supply contracts.
Prices between these ‘big 6’ vary only marginally and, due to the variability in contract terms
and terminology, it is often very hard to identify compelling reasons for switching. Prices tend
to rise across all suppliers in what appears to be a very co-ordinated manner. Each supplier
appears to take turns in being the cheapest and most expensive provider so that switching
between suppliers seems to be a largely pointless task. As a result over 60% of customers
have not switched supplier (Consumer Focus, 2013).
In this area it would appear that there is substantial opportunity for digital communications to
break this oligopoly. Digital switching sites (www.uswitch.com) offer the ability to compare
services from a range of providers and to help with the process of moving supplier.

23. Chapter 1: The Scope, Innovation and Opportunities of Digital Marketing
Digital Marketing 9
One of the consequences of this has been the growth of a small group of migrant customers
moving rapidly between suppliers on a regular basis with a substantial majority of customers
never moving. This serves two purposes. Firstly the ‘big 6’ are assured of a continual revenue
stream from the inertia laden customers with a minor variation as customers move in and out.
Secondly, because the market of active switchers is much smaller than the total market, new
entrants are not able to gain substantial customer numbers and so cannot reduce their
prices enough (a vicious cycle).
Here, digital communications should work to help break down this market. Full access to
information (predicated by the internet) and simplified process would, in theory, create a
perfect market. However this does not happen due to human factors.
Inertia and FUD (Fear, Uncertainty and Doubt) lead to market imperfections. Put simply, most
users consider the transaction costs (time and effort) to be too great and then justify their
indecision using FUD – “I’ll probably get it wrong and end up paying more”, “Even if I do get
it right what’s to say that decision will be correct in 3 months’ time and I’ll have to do it all
over again”, “It’s all a big con and no-one ever saves any money anyway”.
The same processes apply in other similar markets such as Insurance and Banking and
demonstrate again that technology and access to information via technology is only a small
part of the marketing process and much more consideration of the human factors needs to
take place.
Effective understanding of the interface between technology and customers is
key to managing risk within the digital environment.
1.2 Digital Technology Innovation
Over the past 20 years, the Internet has provided a sea-change in the way that the majority
of Europeans work, connect and collaborate. From the early days of dial-up modems and
connection speeds of less than 10kbit/s to the current generation of always-on, multi-
megabit, mobile enabled connectivity that we have come to consider as a utility like
electricity or water, the Internet is virtually un-recognisable. As the technologies have
developed, the networks and the applications have changed radically. As the number of
tablets, smartphones and wireless devices grows then the number of systems connected to
the Internet is greater than the number of people on the planet. The EU predicts that by 2015
there will be 25 billion wirelessly connected devices globally – more than 8 devices for every
person. By the end of 2012, Cisco estimated the data volumes from all these devices
reached 885 petabytes (885 million gigabytes) per month.

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Figure 1.3 Growth of connected devices Source: CISCO, 2013
This increase in user numbers and data volumes will only escalate as newer technologies
arrive. The so-called Internet of Things (IoT) will drive a large proportion of this growth.
1.2.1 The internet of things
The Internet of Things
Until recently the majority of growth in the number of connected devices (devices
connected to the internet) has been from equipment that is used by humans. However
from 2013 the growth patterns have changed so that ‘things’ have been the growth area.
These are devices, computers, remote sensors even traffic lights and street lights that are
connected to the internet and are sending and receiving data with very little human
input. This internet of things (IoT) is a significant change in the dynamics of the internet.
With IoT more and more autonomous devices will be connected to the Internet. These range
from traffic lights and bus stop signs through to stress sensors on buildings, bridges and wind
turbines. These devices will report on their status and their surroundings continuously allowing
for a connected ‘smart city’ which will manage many aspects of the environment without
human interaction. The next generation of electricity and gas meters will be ‘smart devices’
able to transmit readings, predict costs and ultimately switch suppliers based on usage
patterns. NEST are now selling smoke alarms and home thermostats that are connectable to
the internet and can be controlled by smartphones. The next generation of devices is likely
to focus on the healthcare market with the ageing generations looking to maintaining
independence through the use of technology.
The Internet of Things will radically change users’ relationship with data and also how business
relates to users.

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Consider how many internet connected devices exist in your home. Consider the
opportunities for internet enabling other equipment and devices in the home.
Figure 1.4 The Internet of things
Within this web of devices the relationship between users and data will change radically.
During the first generations of the internet, users would connect to the internet for relatively
short periods of time, usually at work or in the home and transact with companies essentially
under their own terms. Within the Internet of Things users will have the opportunity to interact
much more frequently from a wider variety of devices and from virtually any location (even
on planes). However this will not be the most significant change – this is primarily a case of
doing more of the same.
The most important change will be that these devices, and more, will be communicating
independently of the user and will be providing businesses and government more and more
detailed information.

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Outside retail environments, connected devices are being used to monitor and measure
traffic volumes across the motorway and trunk roads and provide this information not only to
roadside signs but also to transport companies (http://trafficmaster.co.uk/). ANPR
(Automated Number Plate Recognition) is used to track specific vehicle movements in and
out of areas and even some airport car parks are beginning to use this to allow prepaid
vehicles access. The next step of using this to pay for high street parking cannot be far away.
1.2.2 Location-based marketing
Location-based Marketing
From the early stages of internet marketing it has been possible to target marketing based
on the location of the user. Even crudely identifying the country or city of the user can add
value to the marketing offering. The capability of mobile devices to use GPS can fine tune
this location sensitivity to the street or even store offering marketers even greater control
and customisation.
With all these devices recording information and transmitting it for central analysis, the era of
location based marketing is fast approaching.
Your mobile phone already has the capability to track your position and businesses are
beginning to use this to track how shoppers move through shopping centres (Gallagher,
2011). Currently this information is anonymised, but the next steps to being able to push
targeted advertising and offers to the user as they pass near a shop is already being planned
(Path Intelligence, 2015). Major retailers are working to develop systems that will use face
recognition to enable targeted advertising, and combining the two technologies would be a
logical next step (AdAge, 2015).
Coupling this real-time information with historical information from loyalty cards would enable
businesses to provide highly tailored marketing information to users. The next question is how
these campaigns will be delivered.
The almost ubiquitous access to smartphones would allow adverts and even offer codes to
be sent to the device for immediate use.

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Figure 1.5 Sample mobile voucher including location based services
The emerging push for smart watches and particularly the opportunities for devices such as
Google Glass (Google-enhanced Internet connected spectacles) will offer increased
opportunities for push marketing. Just as phone prices are subsidised by data contracts,
concepts like this may require devices to be subsidised by users agreeing to accept
advertisements and location and context sensitive adverts would be particularly attractive
both to senders and, to a lesser extent, receivers. The use of location information leads to
issues of Data Privacy and Security.
Data privacy and security
As the news of data snooping from organisations such as the NSA and GCHQ demonstrates,
the quantity of information produced by users is immense. Commercial use of intercepted
data is clearly illegal but there are substantial data protection and privacy issues with the use
of any data.
All personally identifiable data must of course be collected, managed and used in
accordance with the relevant laws but there are significant concerns relating to the use of
anonymisation and pseudoanonymisation of data (Kapur, 2015).
Many organisations claim that pseudoanonymisation of data will protect the privacy of users
whilst still allowing valid market research on the data. The difficulty with this approach is that
a variety of techniques (either deliberate or accidental) can reinstate personal tracking of
data (Ritchey et al, 2013). This reinstatement of Personally Identifiable Information (PII) has
been demonstrated in both theory and to an extent in practice.

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GCHQ in the UK is mandated to store only email headers (containing the sender,
recipient and subject) and domain level browser history. If an insurance company were to
be able to discover that your computer had been used to access on-line medical
directories, chat forums on medical websites and then medical insurance quote sites then
this may influence their decision making process for offering cover. It may seem that this is
an unlikely scenario but if you consider the advertising features on sites such as
www.outlook.com or www.theguardian.co.uk you will notice that adverts are closely
related to recent browsing history on the device. These sites use services such criteo.com.
These services state that data is anonymous but with the growth of web based social
media sites provides a wealth of browser information which could be linked.
Visit www.criteo.com. Think about the opportunities this type of service offers and
the potential risks associated. How would this lend itself to your organisation?
Another notable aspect of privacy is the willingness of users to allow data sharing on their
behalf. A primary example of this data sharing is the use of Facebook, Twitter and Google+
ids as common sign-in identities on a wide variety of sites. Within this process significant
amounts of PII have been shared and when coupled with the information on the destination
site can provide very detailed profiling data.
There is often a disconnect between the level of information marketers would
like to gather and process about customers and the level of information that those same
individuals would themselves be willing to share with others.
If you use Social Media sites, investigate their data privacy policies. Look through
your past history of interactions. What information can you capture about your lifestyle,
interests, politics, shopping habits?

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1.2.3 Big data
The growth in usage of the internet has dramatically accelerated in the past 10 years. Back
in 2010 Google Chief Executive, Eric Schmidt, noted that the amount of data collected since
the dawn of humanity until 2003 was the equivalent to the volume we now produce every
two days.
 In 2013 internet data, mostly user-contributed, accounted for 1,000 exabytes
 Every day we create 2.5 quintillion bytes of data
 90% of the data in the world today has been created in the past two years
 Every minute 100,000 tweets are sent globally
 Google receives two million search requests every minute
At present much of this growth in data is being generated by users but over the next few
years this will be overtaken by data generated by machines – the so-called ‘internet of
things’ which we have already touched on. These devices (often embedded in other
machines or acting as remote sensors) generate data continuously – this data needs to be
transmitted, stored, analysed and acted upon and this puts huge demands on the network
infrastructure and the ability to store, analyse and use this data.
Within a marketing environment there are two areas of interest within the scope of ‘Big
Data’:
 Personal Information
 Business/impersonal Information
The marketing use of personal information is straightforward to understand. If we can identify
(through passive data from personal devices or via data actively shared by the user with the
business) we can understand more about how the customer acts and interacts both with our
organisation and other organisations. By examining the Social Media output of a user it is
possible to identify which businesses they use, like and dislike. By interacting via forums it is
possible to use customers as an extended survey audience or focus group.
The business information that can be gained from ‘Big Data’ takes many forms and is usually
(though not exclusively) less personalised and of higher volumes. This could take the form of
traffic flows on nearby roads, power consumption data, or even recycling waste data. This,
taken individually, is usually lower quality data but the sheer volumes of this data and the
power of techniques such as data mapping and data mining, mean that significant patterns,
trends and insights can be discovered.

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For example if traffic data outside a large out-of-town shopping centre is
available (either from services such as trafficmaster or even the car park barriers) this could
be linked to the sales volumes of the stores. Coupled with weather information and
information on local school holidays, this raw information could provide predictive insight
to the business on likely sales volumes (and so staffing levels), product mix and even
timings of busy and quiet periods.
Taking information from one location of current sales volumes compared to a range of
data sources and indicators could help determine strategies for other store locations. For
this to be successful the process needs to be robust and statistically valid.
Analysing ‘big data’
There is an often quoted phrase that “Correlation does not prove causation” – it is vital that
any data analysis exercise is designed to ensure that false causations are not identified. Just
because sales data from June and July shows that sales increased as temperatures rose
does not mean sales will always increase with temperature or that the temperature had any
effect. It could simply be a result of an improved layout in the store just before a warm spell.
All data analysis needs to ensure that the data is fully representative and also that variables
are considered in closely understood groups so that accurate predictions can be made.
In a widely studied example, numerous epidemiological studies showed that
women who were taking combined hormone replacement therapy (HRT) also had a
lower-than-average incidence of coronary heart disease (CHD), leading doctors to
propose that HRT was protective against CHD. But randomized controlled trials showed
that HRT caused a small but statistically significant increase in risk of CHD. Re-analysis of the
data from the epidemiological studies showed that women undertaking HRT were more
likely to be from higher socio-economic groups (ABC1), with better-than-average diet and
exercise regimens. The use of HRT and decreased incidence of coronary heart disease
were coincident effects of a common cause (i.e. the benefits associated with a higher
socioeconomic status), rather than cause and effect, as had been supposed (Lawlor et al,
2004).
The techniques used to analyse this huge volume of data are variously called Data Mapping
and Data Mining.

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1.2.4 Data mapping and data mining
Data Mapping
Most organisations store data about customers in a wide variety of different places and
formats. Individually it can be hard to marry these up unless organisations can link these
disparate sources. Data Mapping allows organisations to form an holistic view of customer
interactions to improve their understanding of the business.
Data mapping involves the correlation of different data sources in order to extract or
manage the data. It can also be used to allow the transfer of data from one system to
another.
Used effectively, this process can offer organisations the ability to transfer information
between legacy and new systems or transfer data to suppliers or downstream organisations
to improve the effectiveness of the business. It can offer significant marketing insights by
linking different sales and marketing systems (for example website and physical store data or
loyalty card information).
Figure 1.6 Schematic of data mapping
As can be seen from the figure above, data fields from one data source (FirstName,
LastName, ZIP) can be correlated with fields in another source. This would then allow other
information to be linked – purchase history, payment preferences (PayPal or credit card) can
then be aggregated. This mapping example uses PII but with sufficient data it would be
possible to link ‘anonymised’ data sources with personal data.

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Data Mining
With the vast quantities of data stored in organisations it can be extremely hard for
companies to identify links and trends in data. Data Mining provides a set of techniques to
help companies develop greater knowledge about their business and its processes.
Data mining is also known as data discovery and knowledge discovery. The major steps
involved in a data mining process are:
 Extract, transform and load data into a data warehouse
 Store and manage data in a multidimensional database
 Provide data access to business analysts using application software
 Present analysed data in easily understandable forms, such as graphs
The first step in data mining is gathering relevant data critical for business. Company data is
either transactional, non-operational or metadata. Transactional data deals with day-to-day
operations like sales, inventory and cost, etc. Non-operational data is normally forecast, while
metadata is concerned with logical database design. Patterns and relationships among
data elements render relevant information, which may increase organisational revenue.
Organisations with a strong consumer focus deal with data mining techniques providing
clear pictures of products sold, price, competition and customer demographics.
For instance, the retail giant Wal-Mart transmits all its relevant information to a
data warehouse with terabytes of data. This data can easily be accessed by suppliers
enabling them to identify customer buying patterns. They can generate patterns on
shopping habits, most shopped days, most sought for products and other data utilising
data mining techniques.
Both of these techniques can be considered to be part of the process of Business
Intelligence.
Business intelligence
Business intelligence (BI) is the use of computing technologies for the identification, discovery
and analysis of business data – like sales revenue, products, costs and incomes.

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BI technologies provide current, historical and predictive views of internally structured data
for products and departments by establishing more effective decision-making and strategic
operational insights through functions like online analytical processing (OLAP), reporting,
predictive analytics, data/text mining, benchmarking and Business Performance
Management (BPM).
The vital aspect is that data mapping and data mining techniques are only of value if the
raw information and data they manage is combined with a level of business understanding.
This combination of information and insight is commonly known as Knowledge Management.
Knowledge management
Knowledge Management, is a concept and a term that arose in the early 1990s.
Quite simply one might say that it means organising an organisation's information and
knowledge holistically.
Very early on in the Knowledge Management movement, Davenport offered the still
widely quoted definition:
"Knowledge management is the process of capturing, distributing, and effectively using
knowledge." (Davenport, 1994).
This definition has the virtue of being simple, stark, and to the point. A few years later, the
Gartner Group created a second definition of Knowledge Management, which is perhaps
the one most frequently cited
"Knowledge management is a discipline that promotes an integrated approach to
identifying, capturing, evaluating, retrieving, and sharing all of an enterprise's information
assets. These assets may include databases, documents, policies, procedures, and previously
un-captured expertise and experience in individual workers." (Duhon, 1998).
Knowledge Management focuses primarily on the information stored and managed within
an organisation. However now that many organisations are ‘virtual organisations’ the
information may be located across many companies in many different countries both within
wholly owned subsidiaries or, increasingly, external business partners. The real challenges now
exist in being able to collect and collate this disparate information.
The technical challenges of this are dramatically reduced by the internet and by cloud
based management information services but there remain significant legal issues with sharing
information collected in one country under one legal structure with another company which
may operate under a very different data protection structure.

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Where Does Your Data Live?
The ‘tax efficient’ structures of multi-national organisations such as Google and Amazon
are well known and have often been criticised. However, one area of these complex
structures that is not often discussed are the data ownership and protection issues.
For example, all users who are not residents of the United States or Canada have a
contract with "Facebook Ireland Ltd", located in Dublin, Ireland. Under European law
Facebook Ireland is the ‘data controller’ for Facebook.com, and therefore,
Facebook.com is governed by European data protection laws. This offers users outside the
USA arguably enhanced data protection than those within the USA.
Other organisations may have different legal structures and so it can be very difficult to
assess exactly what data resides under what jurisdiction. It is potentially possible for some
services contracted with a company to be under different legal structures to others
depending on where individual business units are legally based.
Furthermore the legal jurisdiction may differ from the physical location of the data.
Although EU Facebook users have contracts within the EU, the data may either be stored
on servers based in the USA or the USA may be a transit point for the data. This could bring
that data into the domain of US government organisations.
With the latest developments in the use of Virtual Machines (multiple logically divided
servers located on common hardware) and even Virtual Data Centres (where a logical
data centre may itself be distributed across hardware located in many different sites
across different countries) it may actually be virtually impossible to state definitively
‘where’ your data is stored and therefore what data protection laws need to be
considered.
When undertaking these data mining or mapping activities it is important to understand, as
far as is practical, where data is stored and under what jurisdiction it was collected. The
temptation is of course to assume that the structures are similar enough for these distinctions
not to matter but this is a potentially very dangerous assumption. Again assuming that
because you have been given access to the data gives permission to use and process this
data can have serious consequences.
Understanding the potential risks arising from these factors is a vital first step when planning
marketing activities using customer data.
1.2.5 Business development in the digital age
The internet has not only changed the way that businesses operate but has also changed
the way that businesses can be created and has opened a huge new variety of modes in
which a business can be launched, funded and managed.

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The internet has, in its relatively short history, many examples of businesses started by two or
three college friends in a student bedroom which have become huge $multi-billion
organisations. From Apple and Microsoft to WhatsApp and Tumblr this well-trodden path is
etched into the collective consciousness as the route to unimaginable riches.
What is less known about this development path are the processes and planning required to
reach even the start-up phase. Also un-reported are the dozens of failed businesses for every
$multi-billion success.
Business success factors
There are a number of crucial success factors within any business but they can be grouped
into eight main areas:
 Market Identification – it is vital that any business can clearly and accurately identify
its target market and be able to communicate this both internally and externally to
customers and funders. The internet itself can, of course, provide copious statistics on
overall market size and segmentation of that market, both in terms of geography but
also demography. Given that the initial uptake of the internet was primarily by the
young (18-30) and relatively rich (AB and C1) it is unsurprising that the first waves of
business were focused on reaching this market. As these users reach saturation with
little real-term growth in numbers increasingly businesses will need to seek alternative
(and possibly, initially, less attractive) segments in order to avoid competition.
 Needs Identification – is the service offered needed by the market identified? The era
of “Build it and they will come” has long passed (if indeed it ever existed) so it is
important to identify what the potential customers need and from that what the
product or service needs to offer (both in terms of benefits and features)
 Delivery – once the market and the service have been identified and specified can
the service be created and delivered? It may be possible to identify a need to deliver
HD video on demand to rural areas not covered by cable TV but is it possible to
create such a service cost effectively and to a standard and price that the market
will bear?
 Scalability – every business wants success but what if that success is unaffordable? Do
costs scale smoothly with market or does the service model have substantial step
changes in technology/cost that make growth hard to sustain? If 10,000 customers
costs X does 10,001 cost 2X? These step changes have hampered many businesses
as the cashflow out of the business may not match the income during the growth
phases
 Affordability – can the business afford to start and grow? Amazon’s business
leveraged existing delivery companies meaning that much of the cost of the business
scaled linearly with customer numbers. However, businesses such as Cable and
Satellite TV have had upfront costs that must be spent before even the first customer
is acquired. Can the business afford to ‘burn’ money during this period and will
investors be prepared to wait?
 Repeatability/ Specialness – is what the company does repeatable by any other
company or does it rely on anything ‘special’ or secret? The area of patents and
Intellectual property is beyond the scope of this Guide but any organisation planning

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a new business venture will need to examine both the opportunities for protecting the
business and the risks of using technologies or techniques that have already been
protected by other organisations.
 Profit – can the business turn a profit? Is there a clear breakeven point (or points) and
are these realistic and achievable? Many businesses can afford long periods of loss-
making provided the funders can identify clear routes to eventual profit.
 Exit – in the first dotcom boom many organisations had fairly clear exit strategies – be
bought by Microsoft, Intel or Cisco. Now the market is much more diffuse with
Google, Facebook, Microsoft, Yahoo and many more all being potential acquirers of
interesting companies (or technologies and patents).
Funding opportunities
All businesses need money. That is one of the only givens within any business plan. There will
always be a period where the business will be spending more money than it is earning. This
period may be relatively short or very extended but an external source of funding will always
be required.
In the early stages of the internet the excitement engendered by the huge potential led to
an entire industry of venture capitalists wishing to use money from established ‘old world’
business and fund these new opportunities. These ‘angels’ were willing to fund businesses
quite substantially until public share offerings allowed them to recoup their investment (with
profit) and cycle it back into new ventures. The success of the VC  IPO  VC loop was
driven by what appeared to be an insatiable desire from investors for internet based stocks.
Figure 1.7 Venture capital funding cycle
Of course not all businesses succeeded to IPO stage and unless a buyer could be found the
venture capitalists would lose their money. What maintained this cycle was the hugely
inflated launch prices for IPO shares which ensured sure a positive return from the successful
companies that the failure rate could be tolerated.

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However, after the dotcom bubble burst in 1999-2001 and the financial crash of 2008, this
level of funding has been progressively harder to access. VC companies became much
more reluctant to fund speculative businesses and preferred to wait until the business had
become established before stepping in to fund the expansion cycle. With the rates of return
on offer from the successful companies being so much lower, VCs could tolerate fewer
failures and so were not willing to fund business until a level of success was assured.
In addition, most major banks are unwilling to lend money to small speculative business
opportunities due to the high risks of failure and extremely risk averse lending criteria imposed
following the financial crash.
For digital businesses this has been a particular issue as these business types tend to have
fewer assets to secure borrowing on and also tend to have more substantial periods of
negative cash flow requiring funding.
Figure 1.8 Typical cashflow comparisons between digital and traditional business
types
This has caused major issues for businesses wishing to launch or seek funding for new
ventures.
Since the 2008 crash there has been an interesting development within the field of business
finance – the concept of crowdsourcing.
1.2.6 Crowdsourcing
Crowdsourcing is a process where organisations use the reach of the internet
and the ability to communicate rapidly with large numbers of people in order to raise
funding for projects.

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Crowdsourcing can be seen as a reaction to two drivers following the 2008 global crash:
 Extremely low savings rates
 Negative sentiment towards major multi-national organisations
With central bank interest rates averaging at less than 1%, most commercial banking
organisations have no need to borrow money from individual savers and so are offering
interest rates approaching zero. This means that many net savers (who in almost all countries
outnumber borrowers) are seeking means to earn improved rates on their savings.
Crowdsourcing seeks to cut out the ‘middlemen’ of both banks and Venture Capitalists and
link potential investors with businesses seeking funding.
Crowdsourced funding is typified by services such as Kickstarter.com and FundingCircle.com.
Kickstarter and other similar organisations act much more like miniature venture capital
operations with funding being based around specific project activities (either creative
activities or the development of prototype technologies) whereas FundingCircle type
organisations act more typically like business loan providers.
Unsurprisingly, crowdsourced funders such as FundingCircle tend to focus on the financial
returns on offer (many offering rates of return around 5-10%) whereas kickstarter type
businesses focus much more on the creative opportunities available and the chance to own
early versions of technology.
Both of these services differ from venture capital funding in that neither service type acts to
transfer shares or ownership of the business to the funders. VC activities were focused on
equity as the return offered for funding. These VC ventures were extremely highly leveraged
with substantial percentages of the ownership being transferred in return for funding.
Crowdcube among others is beginning to change the landscape here by offering individuals
the opportunity to invest in a similar way, and at a similar stage, to a VC but with very much
smaller investment levels and risk.
1.2.7 The unique nature of digital businesses – the law of accelerating returns
One of the defining characteristics of digital businesses is the growth potential available. A
successful business can achieve growth rates unimaginable by a physical (off-line) business
model. The figure below demonstrates the potential.

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Figure 1.9 User growth rate
This graph shows two types of businesses. The dotted line shows a business starting out with a
reasonable user base serviced by 10 outlets. The business then grows at 20% per quarter
compounded.
The solid line shows a business starting out with only one outlet (and so 1/10th of the customer
base) yet because this is a digital business with a potentially global reach and no need to
roll-out physical infrastructure, it can double in size every quarter. As can be seen, the off-line
business, even though it started 10 times bigger, is overtaken by the on-line business half-way
through the third year. By the end of the fourth year the online business has dramatically
outstripped the physical business. This type of growth is available through two factors:
 The ‘law’ of accelerating returns
 The reduction of the limitations on growth
The ‘law’ of accelerating returns is often attributed to Kurzweil who postulates that the
measure of the rate of technological progress doubles every ten years (Kurzweil, 2001). This
doubling in every fixed period of time produces the classic exponential growth curve as seen
in Figure 1.9 and it is this growth that is virtually unique to digital businesses.
This exponential growth rate is particularly recognisable within many ‘pure play’ digital
businesses such as Social Media and on-line content businesses. Within these organisations
the concept of the ‘networked’ industry applies (Shy, 2011).

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What Does Networked Industry Mean?
A networked industry refers to the concept of an industry that relies upon networks of
customers and/or suppliers all agreeing to the use of common platforms or standards.
Examples of these range from agreement on common fax standards which enabled all
buyers of any fax machine to interoperate. Without a ‘network’ effect, a proliferation of
standards would have prevented the use of faxes becoming commonplace in the 1970s
and 80s.
Another example would be the domination of VHS tapes over the arguably technically
more advanced Betamax. The manufacturers of VHS ensured the capability existed for
simple and cost effective duplication of pre-recorded tapes. This helped generate a
network effect that produced a positive feedback loop. As more tapes became
available the demand for machines increased meaning producers were more willing to
invest in producing content on the VHS format in preference to Betamax (or videodisc) so
reinforcing the dominance of the format.
In all networked industries the initial growth rates can be quite slow as momentum needs
to build before the positive feedback effect kicks in. As a result substantial marketing effort
may be required at an early stage (far in excess of that which the user base may suggest)
but this can often then be reduced as the user volumes grow.
A modern physical example could be considered the electric car marketplace. The
market is currently constrained by a lack of charging facilities – this results in slow take-up
of vehicles which then makes the charging facilities expensive and poorly used. The
manufacturers are therefore having to undertake substantially more marketing on these
vehicles than the market would normally support and provide significant front loaded
investment in anticipation of future market growth.
Within digital businesses the positive feedback cycle is particularly noticeable. As more users
select one organisation (say a Social Media site) then through their network of contacts and
contacts of contacts the site rapidly gains users. Examples of this include sites such as
FriendsReunited, LinkedIn and of course Facebook. But other sites also work in the same way.
YouTube succeeded because it became known as the place to view videos, and so when
an individual or business wanted to host a video itself, YouTube became the default choice.
Once momentum has built it becomes increasingly hard for new entrants in the market to
break this cycle and it requires a disruptive change to behaviour in order to gain traction.
This disruptive change can be seen in the relative fortunes of Facebook and FriendsReunited.

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Facebook vs FriendsReunited
FriendsReunited launched in 2000 with 3000 members and by the end of its first 12 months
had reached 2.5 million users rising to 15 million users by 2005 when it was valued at £120
million. The site initially focused on allowing old school friends to link up and share contacts
and memories. After a hugely successful launch and acquisitions and mergers of the
company, growth and users faltered until it was relaunched at the end of 2013 with an
estimated value of less than £6million.
Facebook launched in February 2004 with less than 500 users (most of those being profiles
acquired from other systems). Again focusing on allowing friends to connect and share
information. In contrast to FriendsReunited the site now has over 1 billion users and a value
of over $15billion.
So, why did one succeed and one fail to capture interest? There are two primary reasons
for the differing fortunes of these two companies. Interest and Interaction.
Interest - FriendsReunited focused on reminiscing - it was setup because its owner
wondered what an old school friend was doing after 10 years whereas Facebook was
always focused on the present and the future – letting friends know what they were doing
or planning to do. In this difference the first seeds of the success of Facebook were sown.
By definition the present and future offer greater opportunities for sharing and also require
users to continually connect and find out more. With FriendsReunited the temptation was
to visit once or twice, find out what your old school friends were doing and then….. leave.
Once the first investigations had been done there was little incentive to return or interact.
Interaction was then the second success factor. Because Facebook allowed and
encouraged continual updates and uploading of photos, videos, etc., users were
encouraged to keep connecting to see what their friends had uploaded and comment
and contribute themselves. Other friends then were encouraged by Facebook members
to join the site and so ‘join the party’ and this resulted in the snowballing of user numbers
and interaction.
These two factors turned Facebook into an active ‘networked’ business whereas
FriendsReunited became a relatively static directory site.
It is interesting to note that these two businesses launched either side of the (notional)
boundary between Web 1.0 and Web 2.0. Web 1.0 (FriendsReunited) was a relatively static
and hierarchical infrastructure with limited user interaction and contribution. Web 2.0
(Facebook) was typified by massively increased interaction and user content creation. This
change was the biggest disruptive change to the web since its launch in 1992.

42. Section 1: The Digital Landscape
28 Digital Marketing
1.2.8 Misalignment of international development
With the global reach of the internet and the ability for products and services to be
purchased, sold and shared worldwide it is often thought that the internet is an homogenous
whole and that services can be offered to a global audience without needing to consider
local conditions.
Barring the obvious legal restrictions there are still structural and cultural differences between
regions, countries and even sections of countries. These can dramatically affect both the
take-up of services and particularly the marketing required for services.
It is vital therefore that the market analysis and testing understands these differences and
reflects them within the marketing and communication plans.
Examine the different market profiles for the mobile phone markets worldwide.
The take-up of different phone types varies greatly between countries. Much of this can
be explained by the different contract models used. Many countries offer ‘free’ phones
alongside monthly contracts whereas others sell the phone separately from the contract.
In these countries, lower priced phones tend to predominate as users are less willing to pay
$100s extra for a particular phone. Equally in developing countries with low penetration of
personal bank accounts pay-as-you-go phones are more popular than contract phones
simply because many users cannot easily pay monthly direct debits.
The marketing of both phones and phone contracts therefore varies greatly.
Free Postage from China? How Do They Do That?
If you examine eBay you will find many products sold with very low or free postage even
though those items are being shipped from China. How is this possible? This is a legacy of
the international postal regulations. As part of these the postal service in the sending
country sets its own fees for postage and keeps all of this income. The receiving postal
company has to deliver the item in the destination country without charge.
When postal volumes were evenly matched and low and comprised mainly letters and
postcards then this structure was simple and avoided the complex contra-payments to
other postal services.
However this now skews the cost effectiveness of shipping goods between countries.

43. DIGITAL MARKETING
INDEX

45. Index
Digital Marketing 247
24*7 access ...................................................37
7Ps of digital marketing.........................87, 88
—A—
Abandonment........57-58, 128, 160, 174-177
Advertising online.........................................75
Advocacy..................................554, 211, 213
Affiliates................154, 161, 166-167, 240-242
Analytics...........................40, 58, 76, 128, 138,
142, 223, 226-232, 239, 243
App(s).......................... 38, 41-43, 48, 113, 188
Augmented reality............................. 186-187
—B—
Big data.................................1,15-16, 214, 231
Blogs and discussion forums.....................121
Business success factors ............................. 21
—C—
Collaboration............................. 104, 138, 143
Consumer power....................................8, 161
Conversion funnel ......................................155
Corporate trolling....................................50,54
CRM ...........................72, 77-78, 151, 211, 232
Crowdsourcing ................................... 1, 23-24
Customer expectations ................. 38, 80, 83
Customer experience.................... 34, 38, 43,
66, 96, 111, 117, 127, 173, 179
Customer journeys .......................................57
—D—
Data mapping......................1, 15-19, 78, 231
Data mining..............................................15-20
Data privacy ................................... 13-14, 222
Digital dashboards.....................................223
Digital environment....................4-6, 9, 61-85,
90, 95, 97, 147
Digital hardware................................. 111-129
Digital interaction.........................................80
Digital technology innovation ..................... 9
Disintermediation .....................7-8, 61, 69-70,
147-148
Distance selling regulations...............176-177
—E—
Email ..............................93, 142, 154, 161-167,
214-215, 227, 233
Engagement.......................138, 141-142, 186
—F—
Fear, uncertainty and doubt (FUD) ........... 9,
36, 205-206
Freemium services...................................52-53
Funding opportunities ................................. 22
—G—
Gaming............................................ 98-99, 107
Government................ 146, 148-149, 151-152
—H—
Heat maps................................................... 128
—I—
Infomediaries ..........................................72, 79
Integrated campaigns......................184, 185
Internet of things .......................... 1, 10-11, 15
Interstitials..............................................180-182
—L—
Law of accelerating returns..............1, 25-25
Lingubots .............................................180, 183
Location-based marketing ....................1, 12
Logfile analysis ............................ 216, 220-222
Logfile reporting ......................................... 218
Loyalty.............................12, 17, 31, 50-51, 65,
68, 70, 61, 85, 96, 105, 156, 158-159, 179,
188, 192, 210, 236, 242
—M—
M commerce.............................................. 113
Measuring.................................... 122, 199-243
Metrics..........................82, 138, 143, 199, 221,
223, 228, 231-234
Monitoring ................................... 188, 228-229

46. Index
248 Digital Marketing
Multi-channel marketing...................184, 188
—N—
Natural conversation banners.........154, 157
Near field communication enabled
adverts (NFC)........... 71, 113, 117, 187-188
Networked industry.................................25-26
—O—
Online support ..............................................84
Online surveys ............................ 232, 236, 239
—P—
Pay per Click (PPC).................. 52, 72, 75, 76,
119-120, 141, 143, 161, 165-167, 171-173,
192, 215, 222, 227, 230, 235
Photo, audio and video sharing sites......99,
101
Planning ..................................2, 188, 197, 243
Pop-ups ........................................174, 180-181
Porter’s five forces.......................................... 4
—Q—
QR codes .......................71, 93, 113, 117, 183,
186-188, 213
—R—
Real-time marketing ...............................38-40
Reputation...................................80, 82-85, 96
Revenue generation .............................61, 72
RSS ......................................33, 98, 99, 105, 106
—S—
Sales funnel................... 57, 155-157, 169-170,
177, 186, 190, 219
Scalability.........................21, 55, 121, 138-140
Screen real estate........................................ 44
Search engine optimisation (SEO)......... 118,
125-127, 141, 144, 167, 220, 235
Shopping carts..................... 47, 154, 157, 174
SMS........................99, 103-104, 114, 118, 154,
161, 163
Social media ........................................163-164
Social media marketing .....................99-100,
104, 144, 150, 186, 215, 230
Superstitials ...........................................180-181
—T—
Tagging analytic solutions........................ 221
Touchpoints................................................. 145
Tracking.......................124, 161, 188, 214, 222
—U—
User generated content (UGC) .........30-31-,
101, 227
User forums and groups ...............98, 99, 104
—V—
Viral marketing ...............98-99, 109, 180, 184
—W—
Wearables ...........................................111, 114
Websites............. 104, 118, 142, 178, 186, 215
Widgets ...................................... 56, 98-99, 106
Wikis ...........................................98-99, 104-105
Word of mouth .......................................50, 54