Fundamentals of Marketing, MAR1010 Week 8
Chapter 13 and 14
Discuss the role of a company's salespeople in creating value for customers and building customer relationships.
Identify and explain the six major sales force management steps.
Discuss the personal selling process, distinguishing between transaction-oriented marketing and relationship marketing.
Define direct marketing and discuss its benefits to customers and competitors.
Identify and discuss the major forms of direct marketing.
This chapter continues the discussion of communication methods begun in Chapter 12. It focuses on personal selling and direct marketing. Personal selling is the interpersonal arm of marketing communications in which the sales force interacts with customers and prospects to make sales and build relationships. Direct marketing consists of direct connections with carefully targeted consumers to both obtain an immediate response and cultivate lasting customer relationships.
Selling is one of the oldest professions in the world. Today, most salespeople are well-educated, well-trained professionals who work to build and maintain longer-term customer relationships. They listen to their customers, assess customer needs, and organize the company's efforts to solve customer problems. The sales force serves as a critical link between a company and its customers.
A sales force can be organized such that it has a territorial structure. In this structure, each salesperson is assigned to an exclusive geographic area and sells the company's full line of products or services to all customers in that territory. A product sales force structure is one in which the sales force sells along product lines. In a customer sales force structure, the sales force is organized along customer or industry lines. Many companies, particularly those that sell a wide variety of products to many types of customers over a broad geographic area, use a complex sales force structure that combines several types.
Personal selling consists of a seven-step process. The first is prospecting and qualifying, followed by the preapproach, approach, presentation, handling objections, closing, and follow-up. All of this should lead to long-term customer relationships.
Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. Most companies still use direct marketing as a supplementary channel or medium for marketing their goods. However, for many companies today, direct marketing is more than that--it constitutes a new and complete model for doing business.
Effective direct marketing begins with a good customer database. This database is an organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. The database can be used to locate good potential customers, tailor products and services to the special needs of targeted consumers, and maintain long-term customer relationships.
There are several forms of direct marketing, including telephone marketing, direct mail marketing, catalog marketing, direct response television marketing, and kiosk marketing. A very powerful approach for many companies is integrated direct marketing, which involves using carefully coordinated multiple-media, multiple-stage campaigns.
Direct marketers and their customers usually enjoy mutually rewarding relationships. Sometimes, however, a darker side emerges. The aggressive and sometimes shady tactics of a few direct marketers can bother or harm consumers, giving the entire industry a black eye. Direct marketers know that, left untended, such problems will lead to increasingly negative consumer attitudes, lower response rates, and calls for more restrictive state and federal legislation.
A stereotype of a salesperson is one of a fast-talking, ever-smiling peddler who travels his territory foisting his wares on reluctant customers.
Today, most professional salespeople are well-educated, well-trained men and women who work to build long-term, value-producing relationships with their customers.
Lear Corporation is one of the largest, fastest-growing automotive suppliers in the world. It attributes its success to many factors, including its 145-person sales force.
Lear's limited customer base, consisting of only a few dozen customers in all, allows Lear's sales teams to get very close to their customers. Lear often locates its sales offices in customers' plants.
Sales forces are found not only in business organizations that sell products and services, but also in many other kinds of organizations.
Colleges use recruiters to attract new students.
Churches use membership committees to attract new members.
Hospitals and museums use fund-raisers to contact donors and raise money.
The U.S. Postal Service uses a sales force to sell Express Mail and other services to corporate customers.
The Nature of Personal Selling
The people who do the selling go by many names: salespeople, sales representative, account executive, sales consultants, sales engineers, agents, district managers, marketing representatives, and account development reps are a few of the names.
The term salesperson covers a wide range of positions.
At one extreme, a salesperson might be largely an order taker, such as the department store salesperson standing behind the counter.
At the other extreme are order getters, whose positions demand the creative selling of products and services.
The Role of the Sales Force
Personal selling is the interpersonal arm of the promotion mix. It involves two-way, personal communication between salespeople and individual customers.
It can be more effective than advertising in more complex selling situations.
The sales force serves as a critical link between a company and its customers.
They represent the company to customers.
The salespeople also represent customers to the company, acting inside the firm as champions of customers' interests and managing the buyer-seller relationship.
Salespeople need to be concerned with more than just producing sales--they should work with others in the company to produce customer satisfaction and company profit.
Sales force management is the analysis, planning, implementation, and control of sales force activities.
Designing Sales Force Strategy and Structure
A company can divide sales responsibilities along any of several lines.
In the territorial sales force structure, each salesperson is assigned to an exclusive geographic area and sells the company's full line of products or services to all customers in that territory.
This organization clearly defines each salesperson's job and fixes accountability.
This sales method increases the salesperson's desire to build local business relationships that improve selling effectiveness.
This type of organization is often supported by many levels of sales management positions.
In the product sales force structure, the sales force sells along product lines.
The product structure can lead to problems if a single large customer buys many different company products.
In a customer sales force structure, the sales force is organized along customer or industry lines.
Separate sales forces may be set up for different industries, for serving current customers versus finding new ones, and for major accounts versus regular accounts.
Organizing the sales force around customers can help a company to become more customer focused and build closer relationships with important customers.
A complex sales force structure is often used when a company sells a wide variety of products to many types of customers over a broad geographic area.
Salespeople can be specialized by customer and territory, by product and territory, by product and customers, or by territory, product, and customer.
No single structure is best for all companies and all situations.
Once the company has set its structure, it is ready to consider sales force size.
Many companies use some form of workload approach to set sales force size.
Using this approach, a company first groups accounts into different classes according to size, account status, or other factors that relate to the amount of effort required to maintain them.
The company then determines the number of salespeople needed to call on each class of accounts the desired number of times.
Sales management must also decide who will be involved in the selling effort and how various sales and sales support people will work together.
The company may have an outside sales force, an inside sales force, or both.
Outside salespeople travel to call on customers.
Inside salespeople conduct business from their offices via telephone or visits from prospective buyers.
Inside salespeople include support people, sales assistants, and telemarketers.
Most companies are now using team selling to service large, complex accounts.
Teams might include experts from any area or level of the selling firm, including sales, marketing, technical and support services, R&D, engineering, operations, finance, and others.
The move to team selling mirrors similar changes in customers' buying organizations.
Team selling does have some pitfalls. Selling teams can confuse or overwhelm customers who are used to working with only one salesperson. Salespeople who are used to having customers all to themselves may have trouble learning to work with and trust others on a team. Difficulties in evaluating individual contributions to the team selling effort can create some compensation issues.
Recruiting and Selecting Salespeople
At the heart of any successful sales force operation is the recruitment and selection of good salespeople.
According to the Gallup Management Consulting Group's research, the best salespeople possess four key talents: intrinsic motivation, disciplined work style, the ability to close sales, and the ability to build relationships with customers.
When recruiting, companies should analyze the sales job itself and the characteristics of its most successful salespeople to identify the traits needed by a successful salesperson in their industry.
Recruiting will attract many applicants from whom the company must select the best.
The selection process can vary from a single informal interview to lengthy testing and interviewing.
Many companies give formal tests to sales applicants.
Tests typically measure sales aptitude, analytical and organizational skills, personality traits, and other characteristics.
New salespeople may spend anywhere from a few weeks or months to a year or more in training.
The average initial training period is 4 months. Then, most companies provide continuing sales training via seminars, sales meetings, and the web throughout the salesperson's career.
Training programs have several goals.
Salespeople need to know and identify with the company, so most training programs begin by describing the company's history and objectives, its organization, its financial structure and facilities, and its chief products and markets.
Salespeople also need to know customers' and competitors' characteristics, so the training program teaches them about competitors' strategies and about different types of customers and their needs, buying motives, and buying habits.
Because salespeople must know how to make effective presentations, they are trained in the principles of selling.
Finally, salespeople need to understand field procedures and responsibilities.
Compensation is made up of several elements: a fixed amount, a variable amount, expenses, and fringe benefits.
The fixed amount, usually a salary, gives the salesperson some stable income.
The variable amount, which might be commissions or bonuses based on sales performance, rewards the salesperson for greater effort.
Expense allowances, which repay salespeople for job-related expenses, let salespeople undertake needed and desirable selling efforts.
Fringe benefits, such as paid vacations, sick leave, accident benefits, pensions, and life insurance, enhance job satisfaction.
Management must decide what mix of these compensation elements makes the most sense for each sales job.
Different combinations of fixed and variable compensation give rise to four basic types of compensation plans.
Salary plus bonus.
Salary plus commission.
Compensation should direct the sales force toward activities that are consistent with overall marketing objectives.
Through supervision, the company directs and motivates the sales force to do a better job.
Companies vary in how closely they supervise their salespeople. They use various tools.
An annual call plan shows which customers and prospects to call on in which months and which activities to carry out.
A time-and-duty analysis could be performed. Figure 13-2 shows how salespeople spend their time.
Many firms have adopted sales force automation systems, computerized sales force operations for more efficient order-entry transactions, improved customer service, and better salesperson decision-making support.
Sales managers must also motivate salespeople.
Management can boost sales force morale and performance through its organizational climate, sales quotas, and positive incentives.
Organizational climate describes the feeling that sales-people have about their opportunities, value, and rewards for good performance.
Many companies adopt sales quotas, which are standards stating the amount they should sell and how sales should be divided among the company's products. Compensation is often related to how well salespeople meet their quotas.
Various positive incentives, such as sales meetings, sales contests, and honors, merchandise and cash awards, trips, and profit-sharing, are also used to motivate sales forces.
Management gets information about its salespeople in many ways.
Sales reports are weekly or monthly work plans and longer-term territory marketing plans.
Call reports are based on salespeople's completed activities.
Expense reports show what salespeople will be partly or wholly repaid.
Formal evaluation forces management to develop and communicate clear standards for judging performance.
The Personal Selling Process
The selling process consists of several steps that the salesperson must master. These steps focus on the goal of getting new customers and obtaining orders from them.
Steps in the Selling Process
The selling process consisting of seven steps:
The first step is prospecting, which is identifying qualified potential customers.
Salespeople must often approach many prospects to get just a few sales.
Although the company supplies some leads, salespeople need skill in finding their own.
Salespeople also need to know how to qualify leads--identifying the good ones and screening out the poor ones.
Prospects can be qualified by looking at their financial ability, volume of business, special needs, location, and possibilities for growth.
The preapproach step is where salespeople learn as much as possible about an organization and its buyers.
Salespeople can consult standard industry and online sources, acquaintances, and others to learn about a company.
Salespeople should set call objectives, which may be to qualify a prospect, to gather information, or to make an immediate sale.
The approach step is where salespeople meet and greet a buyer to get a relationship off to a good start.
This step involves salespeople's appearance, opening lines, and the follow-up remarks.
During the presentation step of the selling process, salespeople tell the product "story" to a buyer, presenting customer benefits and showing how the product solves the customer's problems.
The need-satisfaction approach calls for good listening and problem-solving skills.
The qualities that buyers dislike most in salespeople include being pushy, late, deceitful, and unprepared or disorganized.
The qualities buyers value most include empathy, good listening, honesty, dependability, thoroughness, and follow-through.
In handling objections, salespeople should use a positive approach, seek out hidden objections, ask the buyer to clarify any objections, take objections as opportunities to provide more information, and turn the objections into reasons for buying.
Closing is the process of getting the order.
Salespeople should know how to recognize closing signals from the buyer, including physical actions, comments, and questions.
Salespeople can use one of several closing techniques.
They can ask for the order.
They can review points of agreement.
They can offer to help write up the order.
They can ask whether the buyer wants this model or that one.
They can note that the buyer will lose out if the order is not placed now.
The last step in the selling process is follow-up. This is necessary if salespeople want to ensure customer satisfaction and repeat business.
Personal Selling and Customer Relationship Management
The principles of personal selling as just described are transaction- oriented; their aim is to help salespeople close a specific sale with a customer.
In many cases, companies want profitable long-term relationships with customers they can win and keep.
The sales force usually plays an important role in building and managing profitable customer relationships.
Today's large customers favor suppliers who can sell and deliver a coordinated set of products and services to many locations and who can work closely with customer teams to improve products and processes.
With the trend toward more narrowly targeted or one-to-one marketing, many companies are adopting direct marketing, either as a primary marketing approach or as a supplement to other approaches.
Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.
The New Direct-Marketing Model
Most companies still use direct marketing as a supplementary channel or medium for marketing their goods.
For many companies today, however, direct marketing is more than just a supplementary channel or medium.
Especially in its newest transformation--Internet marketing and e-commerce--direct marketing constitutes a new and complete model for doing business.
This new direct model is rapidly changing the way companies think about building relationships with customers.
Benefits and Growth of Direct Marketing
For buyers, direct marketing is convenient, easy to use, and private.
Direct marketing gives buyers ready access to a wealth of products and information, both at home and around the globe.
Direct marketing is immediate and interactive--buyers can interact with sellers by phone or on the seller's website to create exactly the configuration of information, products, or services they desire, and then order them on the spot.
For sellers, direct marketing is a powerful tool for building customer relationships.
Using database marketing, today's marketers can target small groups or individual consumers, tailor offers to individual needs, and promote these offers through personalized communications.
Direct marketing can be timed to reach prospects at just the right moment.
Direct marketing gives access to buyers that the company could not reach through other channels.
Direct marketing offers a low-cost, efficient alternative for reaching their markets.
As a result of these advantages to both buyers and sellers, direct marketing has become the fastest-growing form of marketing.
Customer Databases and Direct Marketing
A customer database is an organized collection of comprehensive data about individual customers or prospects, including geographic, demo-graphic, psychographic, and behavioral data.
The database can be used to locate good potential customers, tailor products and services to the special needs of targeted consumers, and maintain long-term customer relationships.
A customer mailing list, in contrast, is simply a set of names, addresses, and telephone numbers.
Companies use their databases in many ways.
They can use a database to identify prospects and generate sales leads by advertising products or offers.
They can use a database to deepen customer loyalty.
Or they can use the database to profile customers based on previous purchasing and to decide which customers should receive particular offers.
Forms of Direct Marketing
The major forms of direct marketing are:
Telephone marketing uses the telephone to sell directly to consumers and business customers.
It has become the major direct-marketing communication tool.
Telephone marketing now accounts for more than 39% of all direct-marketing media expenditures and 36% of direct-marketing sales.
Marketers use outbound telephone marketing to sell directly to consumers and businesses.
Inbound toll-free 800 numbers are used to receive orders from television and print ads, direct mail, or catalogs.
Properly designed and targeted telemarketing provides many benefits, including purchasing convenience and increased product and service information.
However, the recent explosion in unsolicited telephone marketing has annoyed many consumers.
When the FTC opened registration for its "Do Not Call List" in mid-2003, nearly 10 million consumers registered 13 million phone numbers in the first three days.
Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a person at a particular address.
Using highly selective mailing lists, direct marketers send out millions of mail pieces each year.
Direct mail accounts for nearly 23% of all direct-marketing media expenditures and 31% of direct-marketing sales.
Direct mail is well suited to direct, one-to-one communication.
Direct mail permits high target-market selectivity, can be personalized, is flexible, and allows easy measurement of results.
Three new forms of mail delivery have become popular.
Fax mail: Marketers now routinely send fax mail announcing special offers, sales, and other events to prospects and customers with fax machines.
Email: Many marketers now send sales announcements, offers, product information, and other messages to email addresses.
Voice mail: Some marketers have set up automated programs that exclusively target voice mailboxes and answering machines with prerecorded messages.
Catalog marketing has grown explosively during the past 25 years.
Annual catalog sales are expected to grow to more than $176 billion in 2008.
Ninety-seven percent of all catalog companies now present merchandise and take orders over the Internet.
Web-based catalogs present some challenges. They are passive and must be marketed. Attracting customers is much more difficult for a Web catalog than for a print catalog.
Direct-response television marketing takes one of two major forms.
Direct-response advertising is where direct marketers air television spots, often 60 or 120 seconds long, that persuasively describe a product and give customers a toll-free number for ordering.
Infomercials are 30-minute advertising programs for a single product.
For years, infomercials have been associated with somewhat questionable pitches.
But major corporations have been using info-mercials to sell their wares.
With widespread distribution on cable and satellite television, the top three shopping networks combined now reach 248 million homes worldwide, selling more than $4 billion of goods each year.
Kiosks are information and ordering machines in stores, airports, and other locations.
Integrated Direct Marketing
Too often, a company's individual direct-marketing efforts are not well integrated with one another or with elements of its marketing and promotion mixes.
Integrated direct marketing is a power approach that involves using coordinated multiple-media, multiple-stage campaigns.
Public Policy and Ethical Issues in Direct Marketing
The aggressive and sometimes shady tactics of a few direct marketers can bother or harm consumers, giving the industry a black eye.
Direct-marketing excesses sometimes annoy or offend consumers.
Dinner-time or late-night phone calls are especially bothersome.
So-called heat merchants design mailers and write copy intended to mislead buyers.
Some direct marketers pretend to be conducting research surveys when they are actually asking leading questions to screen or persuade customers.
Invasion of privacy is perhaps the toughest public policy issue now confronting the direct-marketing industry.
It seems that almost every time consumers enter a sweepstakes, apply for a credit card, take out a magazine subscription, or order products by mail, telephone, or the Internet, their names are entered into some company's already bulging database.
Although consumers often benefit from database marketing, many critics worry that marketers may know too much about consumers' lives.
The direct marketing industry is addressing issues of ethics and public policy.
Direct marketers know that, left untended, such problems will lead to increasingly negative consumer attitudes, lower response rates, and calls for more restrictive state and federal legislation.
Most direct marketers want the same things that consumers want: honest and well-designed marketing offers targeted only toward consumers who will appreciate and respond to them.
Identify the major forces shaping the new digital age.
Explain how companies have responded to the Internet and other powerful new technologies with e-business strategies, and how these strategies have resulted in benefits to both buyers and sellers.
Describe the four major e-commerce domains.
Discuss how companies go about conducting e-commerce to profitably deliver more value to customers.
Give an overview the promise and challenges that e-commerce presents for the future.
Some say the new digital technologies have created a new economy. Few would disagree that the Internet and other powerful new connecting technologies are having a dramatic impact on marketers and buyers. There are four forces that underlie the new digital age. These include digitalization and connectivity; the explosion of the Internet; new types of intermediaries; and customization and customerization.
Much of the world's business today is carried out over networks that connect people and companies. Intranets, extranets, and the Internet itself have all changed the way companies do business, and customers find the products and services they want. The explosive worldwide growth in Internet usage forms the heart of the so-called new economy. But the Internet has also allowed new companies to compete, and the formation of new types of intermediaries and new forms of channel relationships caused existing firms to re-examine how they served their markets. Finally, the new technologies have allowed companies to customize both their products and their messages to consumers, but more importantly, they have introduced the concept of customerization, in which the company leaves it to individual customers to design the offering they want.
Conducting business in the new digital age will call for a new model for marketing strategy and practice. Some strategists envision a day when all buying and selling will involve direct electronic connections between companies and their customers. But the fact is that today's marketing requires a mixture of old economy and new economy thinking and action.
E-business involves the use of electronic platforms such as intranets, extranets, and the Internet to conduct a company's business. E-commerce is more specific than e-business. E-commerce involved buying and selling processes supported by electronic means, primarily the Internet. E-marketing is the marketing side of e-commerce.
There are several e-marketing domains, including business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), and consumer-to-business (C2B). Each of these domains meets specific needs of each of the segments addressed, and they all continue to grow.
E-commerce is conducted in many ways. Companies can be "click-only" in that they are located only on the Internet. They include e-tailers, search engines and portals, Internet Service Providers (ISPs), transaction sites, content sites, and enabler sites. Many companies today, however, are "click-and-mortar" companies, because they maintain their traditional channels of distribution while simultaneously providing an Internet channel.
There are various types of websites. Corporate websites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships, and generate excitement about the company. Marketing websites engage consumers in an interaction that will move them closer to a direct purchase or other marketing outcome. Online advertising includes such things as banner ads and tickers; skyscrapers, which are tall, skinny ads at the side of a web page; rectangles; and interstitials--online ads that pop up between changes on a website. Viral marketing involves creating an email message or other marketing event that is so infectious that customers will want to pass it along to their friends.
E-commerce continues to offer both great promise and many challenges for the future. Online marketing will become a successful model for some companies. However, there is a darker side to Internet marketing. One major concern is profitability, especially for B2C dot-coms. Although expanding rapidly, online marketing still reaches only a limited marketplace.
There are also broader ethical and legal questions. Online privacy is perhaps the number one e-commerce concern. Many consumers also worry about online security, as well as the privacy rights of children. Many companies have responded to consumer privacy and security concerns with actions of their own. Still, examples of companies aggressively protecting their customers' personal information are too few and far between.
Office Depot's store sales have flattened recently, but its online sales have soared, more than doubling in just the last two years. The retailer's web unit booked $2.1 billion in online revenues last year, accounting for 18.5% of total sales.
The combination of online and in-store selling gives Office Depot customers anywhere, anytime access to the retailer's wares, along with piles of helpful information.
Selling on the web lets Office Depot build deeper, more personalized relationships with customers, both large and small.
Office Depot has formed more than two dozen online partnerships to bring additional services to small business customers. Such services range from Internet postage, web hosting, and sales intelligence data, to online incorporation for new businesses.
Importantly, Office Depot's web operations don't detract from store sales. Instead, Office Depot has created synergy between the "clicks" and the "bricks" by carefully connecting the online and store's side of its business.
Integrated click-and-mortar companies such as Office Depot now capture a greater share of online sales than their Internet-only competitors.
Recent technological advances, including the widespread use of the Internet, have created what some have called a new economy.
Few would disagree that the Internet and other powerful new connecting technologies are having a dramatic impact on marketers and buyers.
Major Forces Shaping the Digital Age
There are four specific forces that underlie the new digital age.
Digitalization and Connectivity
Much of the world's business today is carried out over networks that connect people and companies.
Intranets are networks that connect people within a company to each other and to the company network.
Extranets connect a company with its suppliers, distributors, and other outside partners.
The Internet is a vast public web of computer networks; it connects users of all types all around the world to each other and to an amazingly large "information repository."
With the creation of the World Wide Web and web browsers in the 1990s, the Internet was transformed from a mere communication tool into a certifiably revolutionary technology.
The explosive worldwide growth in Internet usage forms the heart of the so-called new economy. The Internet has been the revolutionary technology of the new millennium, empowering consumers and businesses alike with blessings of connectivity.
The average U.S. Internet user visits the web 30 times a month at home and 66 times a month at work, spending more than 30 minutes per visit.
New Types of Intermediaries
The formation of new types of intermediaries and new forms of channel relationships caused existing firms to re-examine how they served their markets.
At first, the established brick-and-mortar firms dragged their feet hoping that the aggressive click-only firms would falter or disappear.
Then they wised up and started their own online sales channels, becoming click-and-mortar competitors.
Customization and Customerization
The old economy revolved around manufacturing companies that mainly focused on standardizing their production, products, and business processes.
In contrast, the new economy revolves around information businesses. Information has the advantages of being easy to differentiate, customize, personalize, and send at incredible speeds over networks.
Customization differs from customerization.
Customization involves taking the initiative to customize the market offering.
In customerization, the company leaves it to individual customers to design the offering.
Marketing Strategy in the Digital Age
Conducting business in the new digital age will call for a new model for marketing strategy and practice.
Some strategists envision a day when all buying and selling will involve direct electronic connections between companies and their customers.
The new model has fundamentally changed customers' notions of convenience, speed, price, product information, and service.
The fact is that today's marketing requires a mixture of old economy and new economy thinking and action.
Companies need to retain most of the skills and practices that have worked in the past.
But they will also need to add major new competencies and practices if they hope to grow and prosper in the new environment.
E-Business, E-Commerce, and E-Marketing in the Digital Age
E-business involves the use of electronic platforms--intranets, extranets, and the Internet--to conduct a company's business.
Countless companies have set up websites to inform about and promote their products and services.
Most companies have also created intranets to help employees communicate with each other and to access information found in the company's computers.
Companies also set up extranets with their major suppliers and distributors to enable information exchange, orders, transactions, and payments.
E-commerce is more specific than e-business.
E-business includes all electronics-based information exchanges within or between companies and customers.
In contrast, e-commerce involves buying and selling processes supported by electronic means, primarily the Internet.
E-markets are "marketspaces" rather than physical marketplaces.
Sellers use e-markets to offer their products and services online.
Buyers use them to search for information, identify what they want, and place orders using credit or other means of electronic payment.
E-commerce includes e-marketing and e-purchasing.
E-marketing is the marketing side of e-commerce. It consists of company efforts to communicate about, promote, and sell products and services over the Internet.
E-purchasing is the flip side of e-marketing. It is the buying side of e-commerce. It consists of companies purchasing goods, services, and information from online suppliers.
Benefits to Buyers
Internet buying benefits both final buyers and business buyers in many ways.
It can be convenient.
Buying is easy and private.
The Internet often provides buyers with greater product access and selection.
E-commerce channels also give buyers access to a wealth of comparative information about companies, products, and competitors.
Online buying is interactive and immediate.
Benefits to Sellers
There are also many benefits to sellers.
The Internet is a powerful tool for customer relationship building.
The Internet and other electronic channels can also reduce costs and increase speed and efficiency.
E-marketing can also offer greater flexibility, allowing the marketer to make ongoing adjustments to its offers and programs.
The Internet is a truly global medium that allows buyers and sellers to click from one country to another in seconds.
The four major e-marketing domains are:
The popular press has paid the most attention to B2C (business-to-consumer) e-commerce--the online selling of goods and services to final consumers.
Online consumer buying continues to grow at a healthy rate.
Today, almost two-thirds of U.S. households surf the Internet. Increasingly, the Internet provides e-marketers with access to a broad range of demographic segments.
Internet consumers differ from traditional offline consumers in their approaches to buying and in their responses to marketing.
People who use the Internet place greater value on information and tend to respond negatively to messages aimed only at selling.
E-marketing targets people who actively select which websites they will visit and what marketing information they will receive about which products and under what conditions.
The Internet is most useful for products and services when the shopper seeks greater ordering convenience or lower costs. The Internet also provides great value to buyers looking for information about differences in product features and value.
Consumer goods sales via the web are dwarfed by B2B (business-to-business) e-commerce.
Most major business-to-business marketers now offer product information, customer purchasing, and customer support services online.
Some B2B e-commerce takes place in open trading exchanges, which are huge e-marketspaces in which buyers and sellers find each other online, share information, and complete transactions efficiently.
Increasingly, online sellers are setting up their own private trade exchanges. These exchanges link a particular seller with its own trading partners.
Private exchanges give sellers greater control over product presentation and allow them to build deeper relationships with buyers and sellers by providing value-added services.
Much C2C (consumer-to-consumer) e-commerce and communication occurs on the web between interested parties over a wide range of products and subjects.
C2C involves interchanges of information through forums and Internet newsgroups that appeal to specific special-interest groups.
Forums are discussion groups located on commercial online services such as AOL and CompuServe.
Newsgroups are the Internet version of forums.
C2C means that online visitors don't just view consumer product information. Increasingly, they create it. They join Internet interest groups to share information, with the result that "word of web" is joining "word of mouth" as an important buying influence.
C2B (consumer-to-business) e-commerce allows today's consumers to communicate more easily with companies.
Most companies now invite prospects and customers to send in suggestions and questions via company websites.
Companies of all types are now engaged in e-commerce. The different types of e-marketers are:
Click-Only versus Click-and-Mortar E-Marketers
The Internet gave birth to a new species of e-marketers--the click-only dot-coms--which operate only online without any brick-and-mortar market presence.
Brick-and-mortar companies have now added e-marketing operations, transforming themselves into click-and-mortar competitors.
Click-only companies come in many shapes and sizes.
E-tailers are dot-coms that sell products and services directly to final buyers via the Internet.
This group includes search engines and portals.
Internet service providers (ISPs) are click-only companies that provide Internet and email connections for a fee.
Transaction sites take commissions for transactions con-ducted on their sites.
Content sites provide financial, research, and other information.
Enabler sites provide the hardware and software that enable Internet communication and commerce.
Table 14-1 shows that a dot-com's revenues may come from any of several sources.
Many established companies moved quickly to open websites providing information about their companies and products.
Most resisted adding e-commerce to their sites. They worried that this would produce channel conflict--that selling their products or services online would be competing with their offline retailers and agents.
However, they soon realized that the risks of losing business to online competitors were even greater than the risks of angering channel partners.
Most established brick-and-mortar companies are now prospering as click-and-mortar companies.
Most of these click-and-mortar companies have found ways to resolve channel conflicts.
Established companies have known and trusted brand names and greater financial resources. They have large customer bases, deeper industry knowledge and experience, and good relationships with key suppliers. By combining online marketing and established brick-and-mortar operations, they can offer customers more options.
Let's Discuss This
Would you rather buy online from a company whose name you know? Are you willing to buy online, giving out your credit card number, to someone you never heard of before? How do you decide?
Setting Up an E-Marketing Presence
Companies can conduct e-marketing in any of the four ways
The first step in conducting e-marketing is to create a website.
The most basic type is a corporate website.
These sites are designed to build customer goodwill and to supplement other sales channels, rather than to sell the company's products directly.
Corporate websites typically offer a rich variety of information and other features in an effort to answer customer questions, build closer customer relationships, and generate excitement about the company.
These sites generally provide information about the company's history, its mission and philosophy, and the products and services it offers.
Other companies create a marketing website.
These sites engage consumers in an interaction that will move them closer to a direct purchase or other marketing outcome.
Such sites might include a catalog, shopping tips, and promotional features such as coupons, sales events, or contests.
Creating a website is one thing; getting people to visit the site is another.
The key is to create enough value and excitement to get consumers to come to the site, stick around, and come back again.
This means that companies must constantly update their sites to keep them current, fresh, and exciting.
A key challenge is designing a website that is attractive on first view and interesting enough to encourage repeat visits.
To attract new visitors and to encourage revisits, one expert suggests playing close attention to the seven Cs of effective website design.
Context--the site's layout and design.
Content--the text, pictures, sound, and video that the website contains.
Community--the ways that the site enables user-to-user communication.
Customization--the site's ability to tailor itself to different users or to allow users to personalize the site.
Communication--the ways the site enables site-to-user, user-to-site, or two-way communication.
Connection--the degree that the site is linked to other sites.
Commerce--the site's capabilities to enable commercial transactions.
Ultimately, it is the value of the site's content that will attract visitors, get them to stay longer, and bring them back for more.
E-marketers can use online advertising to build their Internet brands or to attract visitors to their websites.
Online ads that pop up while Internet users are surfing online include banner ads and tickers.
Skyscrapers are tall, skinny ads at the side of a web page, while rectangles are boxes that are much larger than a banner.
Interstitials are online ads that pop up between changes on a website.
Content sponsorships are another form of Internet promotion. Many companies gain name exposure on the Internet by sponsoring special content on various websites, such as news or financial information.
E-marketers can also go online with microsites, limited areas on the web managed and paid for by an external company.
Online marketers use viral marketing, the Internet version of word-of-mouth marketing. Viral marketing involves creating an email message or other marketing event that is so infectious that customers will want to pass it along to their friends.
Although online advertising serves a useful purpose, many marketers still question the value of Internet advertising as an effective tool.
Web surfers can easily ignore the advertising, and often do.
Still, online advertising is playing an increasingly important role in the marketing mixes of many advertisers.
The popularity of forums and newsgroups has resulted in a rash of commercially sponsored websites called web communities, which take advantage of the C2C properties of the Internet.
Such sites allow members to congregate online and exchange views on issues of common interest.
Visitors to these Internet neighborhoods develop a strong sense of community.
Such communities are attractive to advertisers because they draw consumers with common interests and well-defined demographics.
Cyberhood consumers visit frequently and stay online longer, increasing the chance of meaningful exposure to the advertiser's message.
Web communities can be either social or work related.
Email has exploded onto the scene as an important e-marketing tool.
To compete effectively in this ever-more-cluttered email environment, marketers are designing "enriched" email messages that are animated, interactive, and personalized messages full of streaming audio and video.
The recent explosion of spam--unsolicited, unwanted commercial email messages that clog up your emailboxes--has produced consumer frustration and anger.
The Promise and Challenges of E-Commerce
E-commerce continues to offer both great promise and many challenges for the future.
The Continuing Promise of E-Commerce
Its most ardent apostles still envision a time when the Internet and e-commerce will replace magazines, newspapers, and even stores as sources of information and buying.
Online marketing will become a successful business model for some companies. However, for most companies, online marketing will remain just one important approach to the marketplace that works alongside other approaches in a fully integrated marketing mix.
Eventually, as companies become more adept at integrating e-commerce with their everyday strategy and tactics, the "e" will fall away from e-business or e-marketing.
The Web's Darker Side
Along with its considerable promise, there is a "darker side" to Internet marketing.
One major concern is profitability, especially for B2C dot-coms.
Surprisingly few Internet companies are profitable.
One problem is that, although expanding rapidly, online marketing still reaches only a limited marketspace.
The web audience is becoming more mainstream, but online users still tend to be somewhat more upscale and better educated than the general population.
From a broader societal viewpoint, Internet marketing practices have raised a number of ethical and legal questions.
Online privacy is perhaps the number one e-commerce concern.
Most online marketers have become skilled at collecting and analyzing detailed consumer information.
This may leave consumers open to information abuse if companies make unauthorized use of the information in marketing their products or exchanging databases with other companies.
Many consumers worry about online security.
Consumers fear that unscrupulous snoopers will eavesdrop on their online transactions or intercept their credit card numbers and make unauthorized purchases.
Companies doing business online fear that others will use the Internet to invade their computer systems for the purposes of commercial espionage or even sabotage.
Of special concern are the privacy rights of children.
Many companies have responded to consumer privacy and security concerns with actions of their own.
Still, examples of companies aggressively protecting their customers' personal information are too few and far between.
Consumers are also concerned about Internet fraud, including identity theft, investment fraud, and financial scams.
There are also concerns about segmentation and discrimination on the Internet.
Some social critics and policy makers worry about the so-called digital divide--the gap between those who have access to the latest Internet and information technologies and those who don't.
A final Internet marketing concern is that of access by vulnerable or unauthorized groups.
As it continues to grow, online marketing will prove to be a powerful tool for building customer relationships, improving sales, communicating company and product information, and delivering products and services more efficiently and effectively.