E-marketing Strategy

The strategy element of an e-marketing plan defines how e-marketing objectives will be achieved. Strategy definition has to be tightly integrated into the e-marketing planning process since e-marketing planning is an iterative process from situation analysis to objec­tive setting to strategy definition (Figure 8.3). Key decisions in strategy definition for e-business were described in Chapter 5 (p. 295). To avoid significant overlap here, the reader is referred to that section. Another perspective on e-marketing strategy is provided by Econsultancy (2008) who explain that the output from the digital strategy will often be a series of strategic e-commerce initiatives in the key areas of customer acquisition, conver­sion or retention such as those shown in Table 8.5. These e-commerce initiatives will typically be prioritized and placed as part of a long-term e-commerce ‘roadmap’ defining required developments over a longer period of 18 months to three years.

The amount invested on the Internet should be based on the anticipated contribution the Internet will make to a business, as explained in the sections on objectives. In Chapter 5 (p. 285) we saw how Kumar (1999) identified four different criteria for deciding whether the Internet would replace or complement other channels to market. In this chapter, we con­sider an alternative model, the Electronic Shopping Test (Box 8.1), for reviewing the likely strategic importance of the Internet to a company as developed by de Kare-Silver (2000).

This test was developed by Michael de Kare-Silver to assess the extent to which consumers are likely to purchase a retail product using the Internet. De Kare-Silver suggests factors that should be considered in the ES test:

• Product characteristics. Does the product need to be physically tried or touched before it is bought?
• Familiarity and confidence. Considers the degree the consumer recognizes and trusts the product and brand.
• Consumer attributes. These shape the buyer’s behaviour – are they amenable to online purchases in terms of access to the technology skills available and do they no longer wish to shop for a product in a traditional retail environment? For example, a student familiar with technology may buy a CD online because they are comfortable with the technology. An elderly person looking for a classical CD would probably not have access to the technology and might prefer to purchase an item in person.

In his book, de Kare-Silver describes a method for ranking products. Product charac­teristics, familiarity and confidence are each marked out of 10, and consumer attributes are marked out of 30. Using this method, he scores products as shown in Table 8.6.

1. Market and product positioning

The Internet offers new opportunities for selling new products into new markets. These pre­sent strategic alternatives that need to be evaluated. These alternatives can be evaluated using the options first stated by Ansoff (1957). The risks involved with the four options of market penetration, market development, product development and both market and product devel­opment (diversification) vary, as shown in Figure 5.19 and explained in the commentary.

There may also be options for new digital products that could include information prod­ucts that can be delivered over the web. Such products may not be charged for, but will add value to existing products. Ghosh (1998) suggested developing new products or adding ‘digi­tal value’ to customers. He says companies should ask the following questions:

1. Can I offer additional information or transaction services to my existing customer base?
2. Can I address the needs of new customer segments by repackaging my current information assets or by creating new business propositions using the Internet?
3. Can I use my ability to attract customers to generate new sources of revenue such as adver­tising or sales of complementary products?
4. Will my current business be significantly harmed by other companies providing some of the value I currently offer?

In addition Ghosh (1998) suggests that companies should provide free digital value to help build an audience. He refers to this process as building a ‘customer magnet’; today this would be known as a ‘portal’ or ‘community’. There is good potential for customer magnets in specialized vertical markets served by business-to-business companies. For example, a customer magnet could be developed for the construction industry, agrochemicals, biotech­nology or independent financial advisers.

In 2009, Chris Anderson of Wired Magazine, gave the concept renewed impetus when he published the book ‘Free! Why $0.00 Is the Future of Business’. You can read his views on the issue of digital value here: www.wired.com/techbiz/it/magazine/16-03/ff_free.

2. Target market strategies

We have seen that we need to review the options for using the digital media to reach new markets or develop existing markets. Within both of these markets we need to analyse the target market in more detail to understand their needs and potential and then develop a strategy to satisfy these markets to maximize revenue. This is target marketing strategy and involves the four stages shown in Figure 8.11.

The first stage in Figure 8.11 is segmentation. Segmentation involves understanding the groupings of customers in the target market to understand their needs and potential as a revenue source in order to develop a strategy to satisfy these segments while maximizing revenue. Dibb etal. (2000) say that:

Market segmentation is the key of robust marketing strategy development… it involves more than simply grouping customers into segments … identifying segments, targeting, positioning and developing a differential advantage over rivals is the foundation of marketing strategy.

In an e-marketing planning context market segments will be analysed to assess:

1. Their current market size or value, future projections of size and the organization’s current and future market share within the segment.
2. Competitor market shares within the segment.
3. Needs of each segment, in particular unmet needs.
4. Organization and competitor offers and proposition for each segment across all aspects of the buying process.

The targeting approaches used for online acquisition and retention campaigns will naturally depend on established segmentation. Table 8.7 summarizes options for targeting customers online. The power of digital technology is that it makes it easier and more cost-effective to deliver targeted messages on a web page or in an e-mail compared to traditional media.

Let’s look at each targeting variable in a little more depth.

• Relationship with company. Campaigns will often be intended to target new contacts or existing contacts. But remember, some communications – such as e-newsletters and e-mail campaigns – will reach both. Marketers have to consider whether it will be cost-effective to have separate communications for new, existing and lapsed contacts – or to target each of these groups in the same communications but using different content aimed at each.

When visitors click through to your web site from online and offline campaigns, copy should be presented that recognizes the relationship or, again, provide a range of content to recognize each different relationship. Visit Microstrategy (www.microstrategy.com) to see how its registration page establishes the relationship.

• Demographic segmentation. This is typically based on age, sex or social group. Online demographics are often used as the basis for which sites to purchase display advertising or for renting e-mail lists. Demographics can also be used to limit or focus who pay-per-click search ads are displayed to.
• Psychographic or attitudinal segmentation. This includes attitudes to risk and value when buying, e.g. early adopter, brand loyal or price conscious. It is less straightforward to target on these attributes of a consumer since it is easier to buy media based on demo­graphic breakdown. However, certain sites may be more suitable for reaching a particular psychographic audience. The psychographic characteristics of the audience are still an important part of the brief, to help develop particular messages.

It is possible to collect attitudinal information on a site and add it to the customer profile. For example, Wells Fargo asks investors to select:

• • The type of investment preferred (individual stocks or mutual funds)
  • What type of investor best describes you (aggressive growth to more cautious).
• Value. The higher-value customers (indicated by higher average order value and higher modelled customer lifetime values) will often warrant separate communications with different offers. Sometimes digital channels are not the best approach for these customers – relationship managers will want direct contact with their most valuable customers, while digital channels are used to communicate more cost-effectively with lower-value customers. It is also worth considering reducing the frequency of e-mails to this audience.
• Lifecycle stage. This is very useful where customers follow a particular sequence in buying or using a service, such as online grocery shopping or online banking. As explained in Chapter 9, automated event-triggered e-mail marketing can be developed for this audi­ence. For example, bank First Direct uses a 6-month welcome strategy based on e-mail and direct mail communications. For other campaigns, the status of a customer can be used for targeting, for example not-purchased or used service, purchased once, purchased more than 5 times and active, purchased more than 5 times and inactive, etc.
• Behavourial targeting is one of the big opportunities provided by digital marketing. It involves assessing customers’ past actions in following links, reading content, using online services or buying products, and then follows up on these with a more rele­vant message based on the propensity to act based on the previous action.

Online options for behavioural targeting can be illustrated by a travel company such as lastminute.com:

• • Pay-per-click search engine marketing such as Google AdWords makes targeting possible according to the type of keyphrase typed when a potential customer searches for infor­mation. A relevant ad specific to a holiday destination the prospect is looking for, e.g. ‘Hotel New York’ can then be shown.
  • Display advertising makes behavioural targeting possible since cookies can be used to track visitors across a site or between sites and display relevant ads. If a site user visits the travel section of a newspaper site, then the ad about lastminute can be served as they visit other content on this site, or potentially on other sites.
  • E-mail marketing can be targeted based on customer preferences indicated by links they have clicked on. For example, if a user has clicked a link about a holiday in North America, then a targeted e-mail can be delivered relevant to this product or promotion. More sophisticated analysis based on RFM analysis (Chapter 9) can also be used.

When reviewing the options for which variables to use to target, the campaign planner must keep in mind that the variables selected for targeting should be those which are most likely to influence the level of response for the campaign. It is possible to target on many variables, but the incremental benefit of targeting on additional variables may not be worth the cost and effort of this targeting. Figure 8.12 indicates the general improvement in campaign response dependent on the type of targeting variables used. This approach is used by travel company Travelocity in their e-mail marketing. Speaking at the 2006 Internet Retailing Forum they described how they concentrate their efforts on behaviour suggesting purchase intent, i.e. when a visitor to their site clicks on a particular type of holiday, e-mails sent to the customer should be updated to reflect that.

Seybold (1999) identified five questions to help develop a customer-centric strategy for e-marketing (which are still relevant today; the questions apply equally to marketing). The questions are:

• Who are our customers?

This involves identifying target segments that share certain characteristics and needs. It was seen in Chapter 4 that different criteria for identifying segments include demographics and geographical location for the B2C market and organizational characteristics and members of the buying unit for the B2B market.

• How are their needs changing?

Understanding the needs of different segments when they venture online is important to the next stages of delivering value to the customer. Some segments may have originally been motivated by price, but in the online world, perhaps customer service becomes more impor­tant. This is closely related to buyer behaviour (Chapter 9).

• Which do we target?

This is an important strategic decision in e-marketing. Segments for targeting online are selected which are most attractive in terms of growth and profitability. These may be similar to or different from groups targeted offline. Some examples of customer segments that are targeted online include:

• • the most profitable customers – using the Internet to provide tailored offers to the top 20 per cent of customers by profit may result in more repeat business and cross-sales;
  • larger companies (B2B) – an extranet could be produced to service these customers, and increase their loyalty;
  • smaller companies (B2B) – large companies are traditionally serviced through sales repre­sentatives and account managers, but smaller companies may not warrant the expense of account managers. However, the Internet can be used to reach smaller companies more cost-effectively. The number of smaller companies that can be reached in this way maybe significant, so although the individual revenue of each one is relatively small, the collective revenue achieved through Internet servicing can be large;
  • particular members of the buying unit (B2B) – the site should provide detailed infor­mation for different interests that support the buying decision, for example technical documentation for users of products, information on savings from e-procurement for IS or purchasing managers and information to establish the credibility of the company for decision makers;
  • customers who are difficult to reach using other media – an insurance company looking to target younger drivers could use the web as a vehicle for this;
  • customers who are brand-loyal – services to appeal to brand-loyalists can be provided to support them in their role as advocates of a brand;
  • customers who are not brand-loyal – conversely, incentives, promotion and a good level of service quality could be provided by the web site to try and retain such customers;
  • customers at different stages in their lifecycle – we will see in Chapter 9 how web and e-mail personalization are used to target customers according to their depth of relation­ship with a company;
  • customers who show intent to purchase – this is the ‘sense and respond’ approach to targeting detail in Chapter 9.

• How can we add value?

We have seen in Chapters 5 and 6 that customer value is mainly dependent on the combi­nation of product quality, customer service quality, fulfilment time and price. Companies need to decide for each segment which of these is most important and then seek to adjust these elements accordingly as part of the marketing mix described in the next section.

• How do we become first choice?

To decide on this it is necessary to know how to position within the marketplace relative to competitor offerings. Positioning is related to how a consumer perceives a product in terms of the elements of value described above. It is stage 3 in Figure 8.11. A positioning statement is often developed to encapsulate this. Companies then need to decide how to highlight the benefits as a differential advantage over rivals’ products.

Having a clear, powerful positioning is crucial online, since it is so easy for customers to compare service providers when initially selecting a product. It is also important to cus­tomer retention since the first experience of a brand will determine whether the customer naturally returns to the supplier as first choice or initiates another search to find alternatives.

As mentioned in Chapter 5, in an e-marketing context the differential advantage and positioning can be clarified and communicated by developing an online value proposition (OVP). This is similar to a unique selling proposition, but is developed for e-commerce ser­vices. It builds on the core proposition for the company’s services. In developing a proposition managers should identify:

• • A clear differentiation of the proposition from competitors’ based on product features or service quality.
  • Target market segment(s) that the proposition will appeal to.
  • How the proposition will be communicated to site visitors and in all marketing com­munications. Developing a tag line can help this.
  • How the proposition is delivered across different parts of the buying process.
  • How the proposition will be delivered and supported by resources – is the proposition genuine? Will resources be internal or external?

Ideally, the e-commerce site should have an additional value proposition to further differen­tiate the company’s products or services. The site design will also need to communicate the core proposition of the brand or products.

Having a clear online value proposition has several benefits:

• it helps distinguish an e-commerce site from its competitors’ (this should be a web-site design objective);
• it helps provide a focus to marketing efforts and enables company staff to be clear about the purpose of the site;
• if the proposition is clear it can be used for PR and word-of-mouth recommendations made about the company. For example, the clear proposition of Amazon on its site is that prices are reduced by up to 40 per cent and that a wide range of 3 million titles is available;
• it can be linked to the normal product propositions of a company or its product.

Variani and Vaturi (2000) have conducted a review of failures in B2C dot-com companies in order to highlight lessons that can be learned. They believe that many of the problems have resulted from a failure to apply established marketing orientation approaches. They summa­rize their guidelines as follows:

First identify customer needs and define a distinctive value proposition that will meet them, at a profit. The value proposition must then be delivered through the right product and service and the right channels and it must be communicated consistently. The ulti­mate aim is to build a strong, long-lasting brand that delivers value to the company marketing it.

Conversely, Agrawal et al. (2001) suggest that the success of leading e-commerce companies is often due to matching value propositions to segments successfully.

Some of the best taglines have been developed by the start-up companies, for which the OVP is particularly important. For example:

‘Compare. Buy. Save.’ Kelkoo (www.kelkoo.com)

‘Earth’s biggest selection.’ Amazon (www.amazon.com)

‘Search the largest inventory of cars and trucks on the Internet. More than 1.5 million list­ings, updated daily’ (www.autotrade.r.com)

The Citibank site design (www.citibank.com) uses a range of techniques to illustrate its core proposition and OVP. The main messages are:

Welcome to Citibank: The one-stop solution for all your financial needs.

Look for a product or service; Learn about a financial product; Find a location.

Different OVPs can be developed for different products or different segments. For Citibank UK, the OVP for its Internet banking service is:

Bank whenever you want, from wherever you are. Citibank Internet Banking gives you the freedom and flexibility to manage your day-to-day finances. It’s secure, convenient and very easy to use.

Many strategic e-marketing planning decisions are based around the OVP and the quality of online customer experience delivered by a company. Interactive Web 2.0 features can be partic­ularly important for transactional sites in that they may enhance the user’s experience and so encourage conversion and repeat sales. Examples of how companies have developed their OVP through interactive features include customer reviews and ratings, podcast product reviews, a blog with customer comments enabled, buyers’ guide and video reviews. Figure 8.13 gives one example of a company that has put Web 2.0 customer reviews including the capability for cus­tomers to upload videos and photos at the heart of its OVP. You can read more detailed articles on developing the OVP through searching at www.davechaffey.com or www.google.com.

Once e-marketing strategies have been developed as part of the e-marketing plan, tactics need to be implemented to achieve these strategies. These tactics, and in particular the pro­motion or communications tactics, will be informed by the special marketing characteristics of electronic media. The Focus on section below summarizes some of the key differences before we review tactics.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).