Internet Marketing strategy concepts and definitions

This chapter aims to present a complete theoretical framework in order to justify an analysis of the previous findings. In the literature review, the evolvement of Internet marketing strategies will be evaluated. Previous research related to digital marketing strategy and the factors affecting customer satisfaction will be clarified. The review forms the principles on which the research is built, by identifying relevant theories and concepts that will be analysed using primary data. This chapter focuses on e-commerce, e-retailing, Internet marketing strategy and consumer behaviour.

2.2.1 Internet Marketing

Since business – to – consumer (B2C) online marketing is becoming increasingly popular in recent years, the population of online consumers is turning more mainstream and diverse (Kotler, 2008). Internet marketing strategy provides consistent direction for an organisation’s e-marketing activities, defined by Kotler (2007, p493), is becoming one of the mostly rapid increasing technologies of direct marketing and widespread use of the Internet and has a variety of impacts on both buyers and marketers. Therefore, the term Internet marketing refers to an external perspective of how the Internet can be utilised in connection with traditional media to supply and deliver services to customers (Chaffey, 2009). Smith and Chaffey (2008) state that:

E-marketing can identify, anticipate and satisfy customer needs efficiently

Identifying – needs from customer comments, enquiries, requests and complaints solicited via the web site’s e-mail facility

Anticipating – the Internet provides an additional channel by which customers can access information and make purchases – evaluating the demand is key to governing resource allocation to e-marketing.

Satisfying – achieving customer satisfaction through the digital channel, this relates to customer relationship management.

Efficiently – in an automated way, probably should mean efficiently, increasing lifetime value and maintain the vast armies of not-for-profit marketers.

[Chaffey and Smith, 2008, page 18]

The Internet brings convenience to consumers and has also permitted the creation of virtual retailers, which are characterised by having only an online presence, such as Amazon.com (Henderson and Er-Radi, 2000). Moreover, the key reason that drives business organisations to access online is to add value for customers by providing them with attractive and effective web sites. Kotler et al. (2008) consider that widespread use of the Internet and other technologies has given marketers a brand new way to create value for customers and build strong relationships with them. The web has basically changed customers’ concept of convenience, speed, price, product information and service. The authors also suggest that the success of click – only companies, such as Amazon, eBay and others – to re-examine how they served their markets (Kotler, et al. 2008, p839).

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The importance of an Internet marketing strategy was underlined by Chaffey et al. (2009), who said that a strong strategy is needed to provide consistent direction for an organisation’s e-marketing activities. Additionally, the Internet marketing strategy is a channel marketing strategy and determines the strategic significance of the Internet related to other communication channels which are used to communicate with customers at different customer touchpoints; for Internet marketing, many online organisations intended to use search engine optimization (SEO), pay-per-click (PPC) marketing, affiliates and e-mail marketing (Chaffey, et al. 2009, p201).

Obviously, the marketing mix (Kotler, 2001) can be applied by marketers to notify their Internet marketing strategy; the extension of 4Ps – 7Ps include: Product, Price, Place and Promotion, People, Process and Physical evidence (Booms and Bitner, 1981). The marketing mix is applied frequently to marketing strategy since it provides a simple strategic framework for changing different aspects of a company’s products helping to influence the demand for product within the target markets. Especially for an organisation which is involved directly in transactional e-commerce, digital media have implications for the significance of different marketing mix for different markets (Chaffey et al, 2009). Additionally, Lauterborn (1990) suggested the 4Cs framework the 4Cs imply more emphasis on customer wants and concerns than do the Ps: Convenience for the customer; Customer value and benefits; Costs to the customer; and Communication. This customer-centric approach also applies well to online markets; it follows that the selection of marketing mix should be based on detailed knowledge of buyer behaviour gathered through market research (Chaffey et al, 2009, p 279).

Dennis and Harris (2002) also indicate that one development has merit as being descriptive of the way marketers think about the customer. The 4Cs are as explained below:

C1 Convenience for the customer

‘Place’ (from the 4Ps), can be thought of as ‘Convenience for the customer’, recognising the customers’ choice to purchase in ways that feel convenient to them. C1 also includes key aspects of website design, such as navigation, layout and ease of purchase.

C2 Customer value and benefits

‘Product’, can be thought of as ‘Customer value and benefits’. E-retailers now specify products to a much better extent than previously, evaluating relationships to the customer and appreciation of benefits that customers want. When customers are buying online, they are far less likely to ask for help than when they are in store. E-shoppers need to be especially careful about describing products explicitly in terms of customer value and benefits.

C3 Cost to the customer

‘Price’ is represented as ‘Cost to the customer’, the real cost that the customer will pay, including packaging and shipping fee. Consumers often have a perception that prices should be lower online than in-store. Retailers often offer further pricing options includes: discounts; add-ons and extra products and services; guarantees and warranties; refund policies; order cancellation terms (Chaffey et al, 2009)

C4 Communication and customer relationships

‘Communication’ is equivalent to ‘Promotion’. It is a two-way process also involving attitudes and feedback from customers to suppliers. Dennis and Harris (2002) state that retailers spend more on advertising than manufacturers do, and they are closer to customers and have more access to customer feedback. Successful e-retailers often use offline advertising and promotion such as magazines and posters, integrated with online marketing communications. Online methods include banner ads and pop-ups, paid-for listings in search engines and affiliate programmes. E-retailers find it difficult to gain and satisfy customers’ emotional needs and wants. To achieve this, e-retailers can create a ‘web atmosphere’ using techniques, such as music, visual download and videos. Moreover, e-retailers can build a picture of products most likely to be bought by individual customers. For instance, Amazon (www.amazon.com) matches new books to existing customers who maybe interested in them, based on prior purchases and makes recommendations accordingly (Dennis et al, 2004 pp2-8).

2.3 E-commerce

Reynolds (2000) demonstrates that the Internet is changing the way people conduct normal business, whether this is finding new ways of revenue, obtaining new customers, or managing a new business supply chain. E-commerce enables businesses to sell products and services to consumers worldwide. According to Warrington et al. (2000), the intricacies of electronic commerce via the Internet and the World Wide Web have offered marketers an abundance of opportunities and challenges. E-commerce is growing at a tremendous rate, using the Internet initially as a communication and promotional tool, and later to perform distribution channels, discovering an entirely new situation of consumer purchasing behaviour. De Kare-Silver (2000) suggests that interactive technologies are doing away with the need for people to visit shops. The number of UK regular home web users has risen to 16.5m, time spent by home web users is also growing up, because they search for and use websites more (Gibson, 2002). Oz (2002) consists that consumers prefer to shop and buy on the Internet for three major reasons: convenience, saving time and comparative shopping. Ginn (2010) also demonstrates that online sales are a huge and growing part of the UK retail sector, and currently account for a quarter of all new retail businesses; online sales are predicted to reach £78 billion during 2010. Despite the increasing levels of Internet adoption and usage, Internet shopping in the UK represents less than 10% of all purchases and online shopping remains popular for certain products only (Soopramanien et al, 2007 cited in Office of National Statistics Omnibus survey, 2003). Moreover, Internet shopping is considered both safe and easy by many millions of consumers (Econsultancy, 2010). Therefore, selling products online offers huge potential opportunities for retailers; it also instantly enables businesses to reach customers who would not have visited their bricks and mortar store.

An ecommerce of long-lasting relationships’ has become a significant factor for marketers due to the increasing awareness of the financial benefits in maintaining customers (Sahota, 2004). According to cited from Reicheld and Schefter.’s research (2000), the unique economics of e-commerce make customer retention a necessity for the e-retailer’s survival in the digital world. Chaffey et al. (2009, p628) indicates that ‘since 2001 many retailers have accepted the Internet as a durable trading environment and have set about working out how to shape their companies to cope with the demands of trading and interacting in a virtual environment.’ The author also suggests that companies are able to discover substantial competitive advantages and customer value. Dennis et al. (2004) point out that there are a number of advantages for e-retailers. Firstly, location is not important; according to Amazon, the e-retailers can sell equally well to anyone anywhere in the world. Secondly, size does not matter; small e-retailers can compete on equal terms with large ones. Thirdly, the socio-demographic profile of e-shoppers is attractive to many retailers. Finally, online selling saves on the salary costs of traditional sales people.

Amazon.co.uk’s E-retail Mix

Convenience

According to Dennis et al. (2004, pp47-51), there are several factors which increase the level of customer convenience which can be a vital part in gaining and maintaining new customers. First and foremost, the amazon.co.uk search engine is fast and safe, as customers can quickly look up the desired products. Moreover, the site provides value-added services such as book reviews and ratings, and shows a comparison prices against its own price; thus, customers can see how much they are saving from Amazon. Besides, Amazon offers shopping technology which streamlines the customer buying process by maintaining personal information such as credit card number and shipping address, in order to save time and reduce problems. In some cases the website provides a guarantee that, if the transactions are unauthorised, it will reimburse the money to customers.

The authors also state that the main aim of Amazon.co.uk is to maximise customer convenience; one way of doing this is to inform the customer of product availability. Furthermore, the website also displays other books in the same category when customers are searching for similar books. The facility allows customers to have better choice and can increase sales. Customers can view their personal account anytime, which involves information about their previous orders with shipping details. In addition, customers can use account information to make their estimation and recommendations about other books that customer will consider (Dennis et al, 2004, p47).

Cost

Brynjolfsson and Smith (2000) justifies that Jeff Bezos, believed that online customers considered selection and convenience are more crucial than price. It is apparent that customers want to get a great price with excellent customer service. Most of the books from amazon are available at a discounted price; consumers can easily see three prices: ‘list price’, ‘our price’ and ‘how much you save’.

Communication

Jeff sets the aim of Amazon to be a customer-centric company, so that customers can opt in if they wish to receive more information. Amazon keeps watch on the customer’s ordering process through the database environment that suits all the details to the website. Therefore, it can follow the trail of the speed and customer performance of every step in a transaction, such as adding items in a shopping basket, completing an order and e-mail notification to the customer. In addition to that, Amazon usually recommends similar books relating to what other customers have bought. These traits lead customers make their choice quickly and they can they can read spotlight reviews by others. Every user can express their viewpoints about authors while publishers and authors can also contribute. Moreover, Amazon uses an integrated marketing communication strategy consists of advertising, public relations, promotions and online marketing. Online activity includes search engine marketing and front pages such Yahoo and MSN. The associate program uses other sites to promote Amazon by linking directly take users to Amazon’s site.

Computing

Amazon has developed a customised information system and dedicated ordering system, which is linked with suppliers to automatically order books. The company’s software processes the orders through interfaces or electronic data interchange with suppliers and the supply chain is computerised. Therefore, the company builds up a strong relationship with customers and suppliers. According to a customer research survey carried out by amazon.co.uk, 70 per cent of sales are collected by repeat customer of whom 97 per cent are satisfied or very satisfied with the service. Its FAQs part is informative as it displays all the key issues encompassing ordering process, delivery charges and return policies.

According to Saunders (2001, p76), customer value proposition is a vital feature defined by several factors, including cost, quality, speed of delivery, service during the interaction with the company, and innovation.

Cost. Customers usually want to pay the least money for the same quality of products they get.

Quality. Customers expect to pay to get the promised quality.

Speed. Companies can provide quick delivery is practicing this value proposition.

Service repair and replacement. Customers hope if they can call a company at anytime – 24 hours a day – to solve problems.

Innovation. Customers focus on the fastest, the newest, and the most advanced technology in the computer field. Companies often introduce new features to attract and obtain customers.

Additionally, Saunders(2001, pp103-106) also suggests that Amazon processes orders and ships books, CDs, videos and so on, however, customer satisfaction comes not only from timely and safety delivery of orders, but also from understanding customer expectations and meeting or exceeding their needs. Moreover, there are some elements may influence customer satisfaction:

Leave visitors to the site with a positive impression.

Stimulate potential buyers for visiting the store.

Make a customer’s encounters with the company a delight.

Personalise and customise service.

Perform as promised.

Exceed expectations.

Communicate the importance of customer satisfaction.

Do something better than anyone else does it.

Market knowledge as well as product.

Consequently, Dennis at el. (2004) summarises that Amazon has become one of the world’s largest booksellers. The company has achieved this position through specific customer centric factors by enhancing customer experience. Kargar (2004) supplements that Amazon’s marketing strategy was designed to strengthen and broaden the brand name, enhance customer visiting frequency to its web sites; build customer loyalty; encourage repeat purchases and develop increased products and services revenue opportunities. The company delivered several of media, business development activities and promotions to achieve these goals. Chaffey and Smith (2008) also demonstrate that collaborative filtering helps Amazon to identify and anticipate what customers might offer similar books those buyers who have similar interests.

2.2.5 Consumer behaviour

Internet consumer behaviour

Internet consumer research (Brown et al., 2001) indicates that convenience is the main reason why consumers use the Internet for the purpose of purchasing. E-shoppers tend to be concerned mainly with functional and utilitarian considerations (Dennis et al. 2009). The authors also demonstrate that functional considerations influence consumer attitudes towards an e-retailer, which in turn has an impact on consumers’ choice of e-retailer and then on actual e-retail activity, including shopping and continued loyalty behaviour. According to a survey by NPD online, 75 per cent of online shoppers said that good customer service would make consumers shop at the site again (Solomon et al. (2006) cited from Gilbert (1999), p316). Another recent study suggested by Wolfinbarger and Gilly (2003) ‘four factors were predictive of customer judgments about quality and satisfaction, customer loyalty and attitudes towards a website:

Fulfilment/reliability. (a)The accurate display and description of a product so that what customers receive is what they thought they ordered. (b) The delivery of the right product within the time frame promised.

Website design. This includes all elements of the consumer’s experience at the website (except for customer service), covering navigation, information search, order processing, appropriate personalisation and product selection.

Customer service. This needs to be responsive, helpful, willing service that responds to customer inquiries quickly.

Security/privacy. This involves the security surrounding credit card payments and the privacy of shared information.’

Chaston (2001, p25) identifies a five-phase customer purchase process, as shown in Figure 2.1, these are recognition of need, search for information, evaluation of alternatives, the purchase decision and post-purchase evaluation.’

Need

recognition

Information search

Information evaluation

Post-purchase

evaluation

Purchase

decision

Fig 2.1 A five-phase customer purchase process

Therefore, in presenting a process model, it is apparent that the e-commerce purchase model builder need to recognise that the market attention should be given to how the factors of involvement, the creation of clear difference between a company’s product and competition and time pressure may influence customer behaviour (Chaston, 2001, p30). Furthermore, a customer who is becoming a loyal user must experience satisfaction during the post-purchase evaluation phase. Kristensen et al. (1999) draws upon the customer satisfaction model, the combined influence of these factors causes the customer to reach results about both perceived ‘value for money’ and overall level of satisfaction.

Dennis et al. (2009, pp. 1123-1130) demonstrate factors influencing internet consumer behaviour, the conceptual foundations are illustrated in Figure 2.3:

Figure 2.3 The basic model

The authors propose that:

P1. E-consumer attitude towards an e-retailer will be positively influenced by customer perceptions of e-retailer image.

P2. E-consumer intentions to purchase from an e-retailer will be influenced by positive attitudes towards the e-retailer.

P3. Actual purchases from an e-retailer will be positively influenced by intentions to purchase from an e-retailer.

P4. Intention to shop with a particular e-retailer will be positively influenced by past experience.

P5. Actual purchases from an e-retailer will positively influence experience.

P6. E-consumer trust in an e-retailer will positively influence intention to e-shop.

P7. Past experience and cues that reassure the consumer will positively influence trust in an e-retailer.

P8. E-consumer attitudes towards an e-retailer will be positively influenced by e-interactivity.

From the viewpoint of marketing organisations, a marketing strategy is intended to enhance the probability or frequency of consumer behaviours. Understanding consumers is a critical issue in developing marketing strategies, not only for retailers to adapt to consumers, but also to change what consumers think and feel about a variety of market offerings (Peter et al, 1999). Laudon and Traver (2003) demonstrate that some demographic groups have much higher percentages of online usage than other groups. The demographic profile of the Internet – and e-commerce – has changed greatly since 1995. There are several factors that influence the consumer behaviour, including gender, age, ethnicity, community type, income level and education. Consumers usually choose to shop online because it can save time and offer a wider range of products, by not going to store; can shop when stores are closed; might find better prices. Transaction cost reduction happens to be the main motivator for selecting the online channel. However, there are two major criticisms of B2C marketing (Peter and Olson, 2008, pp2-16): firstly, it reaches only a small number of populations; secondly, consumers shop on the website to collect information about products and services but do not purchase. Consequently, several aspects could influence online consumer behaviours, for instance: whether consumers who want products are also Internet users; the size of the targeted e-retail market for the product or service and its geographic segmentation; whether buying the product or service through the Internet provides benefits to potential consumers.

Turban et al. (2002) illustrate that e-commerce can be referred to as a new distribution channel; as a result, the task of attracting customers to an online company, customer acquisition, can be difficult and expensive, because it is necessary to first convince unwilling customers to shop online at first. Companies must build brand loyalty with new and existing customers, many successful e-retailers are using innovative technology to provide extra value is aiming to attract and maintain customers (Solomon et al, 2006).

One of the benefits of doing Internet business is that it enables companies better understand their customers’ demands and buying habits, which will allow them to improve and customise their future marketing achievements (Turban et al, 2001, p128). For instance, Amazon can e-mail customers with announcements of new books published in a customer’s area of interest. Brown et al. (2001) point out that the Internet has transformed the social and spatial aspects of shopping for many consumers, thus, the Internet plays the role of facilitating the information search for consumers. The product acquisition process is increased by enabling consumers to access a significant amount of detailed information with regard to attributed product, comparative price, availability, and overall value proposition. Additionally, Peter and Olson (2008) state that marketing to consumers via the Internet has various benefits for marketers and that online B2C marketing requires marketers to achieve customers’ demands, just as traditional marketing does. Besides, online marketing allows products and services to be offered 24 hours a day, 7 days a week, therefore, offering products and services globally in an efficient and cost-efficient manner, more precisely, online marketing provides ways for developing one-to-one relationships with consumers and establishing consumer databases to be established for conducting online research.

However, Solomon et al. (2006, p319) state that e-commerce has its limitations. First of all, security is one important aspect. Some consumers’ credit cards and other identity information has been stolen. Secondly, is related to the actual shopping experience. Perhaps consumers will be satisfactory to buy digital cameras or books online, however, buying apparel in which customers should touch and try it on is necessary may be less attractive. Even though most companies have very liberal return policies, consumers still dissatisfied with large delivery and return postal charges for items. Some pros and cons of e-commerce are summarised in Table 2.2.

Table 2.2 Pros and cons of e-commerce

Benefits of e-commerce Limitations of e-commerce

For the consumer For the consumer

Shop 24 hours a day Lack of security

Less travelling Fraud

Can receive relevant information in seconds Can’t touch items

from any location Exact colours may not reproduce

More choice of products on computer monitors

More products available to less-developed countries Expensive to order and then return

Greater price information Potential breakdown of human

Lower prices so that less affluent can purchase relationships

Participate in virtual auctions

Fast delivery

Electronic Communities

For the marketer

The world is the marketplace Lack of security

Decreases costs of doing business Must maintain site to reap benefits

Very specialised businesses can be successful Fierce price competition

Real – time pricing Conflicts with conventional retailers

Legal issues not resolved

Source: Solomon et al. (2006) cited from Solomon, M. and Stuart,

E. W. (2001) Welcome to Marketing.com: The Brave New World of E-commerce.

Consumer decision making

According to Solomon (2009), a consumer purchase is a response to a problem, there are several steps of consumer decision making (1) problem recognition, (2) information search, (3) evaluation of alternatives, and (4) product choice. Before purchasing a product, consumers have to consider a variety of problems. Moreover, a useful way to characterize the decision – making process is to consider the abundant efforts that relates to the decision each time it must be made. Peter et al. (1999) emphasis that consumer decision making is based on the knowledge, meanings, and beliefs activated from memory and the attention and comprehension processes involved in exploring new information in the environment. Thus, consumers make purchasing decisions about which behaviours to perform to achieve their goals and to solve the problems.

To develop effective marketing strategies, marketers should know the types of problem-solving processes their consumers usually make purchase decisions. Marketers target several consumer segments, with different decision-making processes, may develop multiple strategies to affect the different decision outcomes (Peter and Olson, 2008). Gefen and Struab (2004) identify the concept of perceived risk in an individual purchase behavior model, and concluded the shopping behaviour can be regarded as a form of information gaining behaviour. Therefore, consumer choice of type of shopping is mainly affected by three factors: merchandise features, shopping device attributes and consumer characteristics.

The consumer’s decision to purchase or not to purchase the product or service is a significant factor for most marketers. It can express whether a marketing strategy has been wise, insightful, effective and efficient, or whether it was weakly planned (Schiffman et al, 2008). Thus, consumer behaviour is not only making a purchase decision or the action of purchasing, but also includes the full range of experiences associated with using or consuming products or services. Moreover, it also consists of the sense of pleasure or satisfaction delivered through possessing or collecting products (Schiffman et al, 2008, p98).

Customer Satisfaction

Hill and Alexander (2006) point out that in recent times, organizations have increasingly understand the importance of customer satisfaction. It is far less costly to maintain existing customers than to obtain new ones. Companies have invested enormously in improving performance in making a strong contribution to customer satisfaction, such as quality and customer service. Therefore, the authors supplement that the ‘fundamental justification for measuring customer satisfaction is to provide the information which enables managers to make the right decisions to maximise customer satisfaction and improve customer retention.’ (Hill and Alexander, 2006, p9)

Additionally, anyone involved in measuring customer satisfaction must have a specific understanding of the ways in which customers make and evaluate their purchase decisions. Lee et al. (2006) propose that a satisfied customer tends to return for future business and thereby contributes to the retention rate of the existing customers. Additionally, a satisfied customer is probably to offer positive word-of-mouth products or service about the purchasing experience. The World Wide Web spreads a virtual market place for customers to search for and purchase. Previous researches conducted that there were no remarkable difference between online and offline shopping environments which regard to customer satisfaction (Lee et al. cited in Smith and Rangaswamy (2003), pp.65). Besides, Szymanski and Hise (2000) investigate that the vital components of customer satisfaction framework are focused on the customer relationship management concept, including website convenience, provision of product information, web page design, and security concerns.

Amazon customer review

With the Internet’s increasing popularity, online consumer reviews have turned into a vital resource for consumers substituting and complementing other forms of business-to-consumer and offline word-of-mouth communication about product quality (Zhu and Zhang, 2010). Therefore, online consumer reviews can enormously influence consumers’ purchasing decisions. In order to reduce the search costs for reviews, Amazon has recently modified the way to display star levels for each item. Although it previously showed only an average star rating, it shows how many people rated the item with each of the 1-5 stars, thus, readers can choose to read reviews for a given star level.

An investigation by Chevalier and Mayzlin (2006), on average, reviews tend to be positive, they demonstrate that the addition of new, favourable reviews at one site results in a growth of the sales of a book at that site relative to the other site. Moreover, they also find ‘an incremental negative review is more powerful in decreasing book sales than an incremental positive review is increasing sales’ (Chevalier and Mayzlin, 2006, pp.345-347). Consumers regularly read and respond to written reviews, not merely the average star ranking summary provided by the website. Moreover, the authors conclude that customer reviews tend to be positive at both sites and that