Fourth Edition

nterne Strategy, Implementation and Practice

Dave Chaffey Fiona Ellis-Chadwick Richard Mayer Kevin Johnston Edited by Dave Chaffey

F T Prentice Hall FINANCIAL TIMES

An imprint of Pearson Education Harlow, England • London • New York • Boston • San Francisco • Toronto

Sydney • Tokyo • Singapore • Hong Kong • Seoul • Taipei • New Delhi

Cape Town • Madrid • Mexico City • Amsterdam • Munich • Paris • Milan

Contents

Preface Guided tour About the authors Acknowledgements

Internet marketing fundamentals

1 Introducing Internet marketing Learning objectives / Questions for marketers / Links to other chapters Introduction - how has the Internet transformed marketing? Digital marketing in practice The EConsultancy interview: Ted Speroni, Director, EMEA (Europe-Middle East and Asia), HP.com Definitions - what is Internet marketing and multichannel marketing? E-marketing defined Digital marketing defined E-commerce and e-business defined Introduction to digital marketing strategy Key features of Internet marketing strategy Applications of Internet marketing Digital marketing benefits Alternative digital business models Different forms of online presence Challenges in developing and managing Internet marketing strategy A strategic framework for developing Internet marketing strategy Introduction to digital marketing communications The relationship between digital and traditional communications The key types of digital media channels What benefits do digital media provide for the marketer? Key challenges of digital communications

Case study 1 eBay thrives in the global marketplace

Summary Exercises

Self-assessment exercises Essay and discussion questions Examination questions

References Further reading Web links

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The Internet macro-environment Learning objectives / Questions for marketers / Links to other chapters Introduction Digital marketing in practice

The EConsultancy interview: Mike Clark, Managing Director of GD Worldwide, supplier to the social network bands

3'

The Internet micro-environment Learning objectives / Questions for marketers / Links to other chapters Introduction Different environment components Internal organisation characteristics and capabilities

Digital marketing in practice The EConsultancy interview: Martin Newman, Head of E-commerce at fashion chain Ted Baker

Online marketplace analysis Resources for analysing the online marketplace Customer analysis and consumer behaviour Demand analysis and conversion modelling Online demand for business services Online consumer behaviour 1 Information/experience seeking behaviour models 2 Hierarchy of response buying process models 3 Multichannel buying models 4 Trust-based models 5 Social interaction communication models Competitors Suppliers Intermediaries Portals Marketplace models Competitive forces Value creation and value chain analysis New channel structures Location of trading Commercial arrangement for transactions Business models in e-commerce Revenue models

Case study 2 Zopa launches the peer-to-peer lending model

Summary Exercises

Self-assessment exercises Essay and discussion questions Examination questions

References Further reading Web links

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51 53 56 57 57 72 74 75 78 82 84 86 88 90 91 96 97 98

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The rate of environment change Strategic agility Social factors Social exclusion Cultural factors Environmental and green issues related to Internet usage Legal and ethical issues of Internet usage Legal activities can be considered unethical Technological factors A short introduction to Internet technology How does the Internet work? From the Internet to intranets and extranets Web security Alternative digital technologies Assessing the marketing value of technology innovation Economic factors Globalisation Political factors Political control of online comparison intermediaries Internet governance Taxation Tax jurisdiction

Case study 3 Boo hoo - learning from the largest European dot-com failure

Summary Exercises

Self-assessment exercises Essay and discussion questions Examination questions

References Further reading Web links

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135 137 138 156 156 158 160 160 167

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Internet strategy development

Internet marketing strategy Learning objectives / Questions for marketers / Links to other chapters Introduction Internet strategy is a channel marketing strategy The scope of Internet marketing strategy

Digital marketing in practice The EConsultancy interview: Sharon Shaw, Standard Life, on strategy and planning

An integrated Internet marketing strategy Is a separate Internet marketing plan needed? A generic strategic approach Situation review Internal audit or analysis Strategic goal setting Frameworks for objective setting

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Strategy formulation 232 Decision 1: Market and product development strategies 234 Decision 2: Business and revenue models strategies 237 Decision 3: Target marketing strategy 239 Decision 4: Positioning and differentiation strategy (including the marketing mix) 244 Decision 5: Multichannel distribution strategy 251 Decision 6: Multichannel communications strategy 253 Decision 7: Online communications mix and budget 256 Decision 8: Organisational capabilities (7 S framework) 257 Strategy implementation 264

Case study 4 Tesco.com uses the Internet to support its diversification strategy 267

Summary 269 Exercises

Self-assessment exercises 270 Essay and discussion questions 270 Examination questions 271

References 27'1 Further reading 273 Web links 273

The Internet and the marketing mix Learning objectives / Questions for marketers / Links to other chapters Introduction

Digital marketing in practice The EConsultancy interview: William Reeves, Chief Operating Officer, online DVD retailer LOVEFiLM

Product The long tail concept The Internet and branding The importance of brand online Price 1 Increased price transparency 2 Downward pressure on price 3 New pricing approaches (including auctions) 4 Alternative pricing structure or policies Place 1 Place of purchase 2 New channel structures 3 Channel conflicts 4 Virtual organisations Promotion People, process and physical evidence People Process Physical evidence

Case study 5 The re-launched Napster changes the music marketing mix

Summary Exercises

Self-assessment exercises

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Contents ix

Essay and discussion questions Examination questions

References Further reading Web links

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Internet marketin and practice

implementation

6 Relationship marketing using the Internet 329 Learning objectives / Questions for marketers / Links to other chapters 329 Introduction 330

Digital marketing in practice The EConsultancy interview: Timo Soininen, CEO, Sulake (Habbo Hotel) 331

Key concepts of relationship marketing 333 Benefits of relationship marketing 334 Differentiating customers by value 335 Customer loyalty 336 The relationship between satisfaction and loyalty 337 Net Promoter Score 338 Key concepts of electronic customer relationship management (e-CRM) 339 Customer engagement 340 Benefits of e-CRM 341 Marketing applications of CRM 342 CRM technologies and data 342 Customer lifecycle management 344 Permission marketing 345 'Right touching' through online contact strategies 347 Personalisation and mass customisation 349 Online and multichannel service quality 350 Approaches to implementing e-CRM 350 Stage 1: Attract new and existing customers to site 350 Stage 2a: Incentivise visitors to action 351 Stage 2b: Capture customer information to maintain relationship 351 Stage 3: Maintain dialogue using online communication 354 Stage 4: Maintain dialogue using offline communication 355 The IDIC approach to relationship building 355 Techniques for managing customer activity and value 356 Lifetime value modelling 358 Loyalty schemes 369 Virtual communities and social networks 369 Marketing to consumers using independent social networks 372 Customer experience - the missing element required for customer loyalty 374

Case study 6 Dell gets closer to its customers online 375

Summary 377 Exercises

Self-assessment exercises 378 Essay and discussion questions 379 Examination questions 379

References 379 Further reading 381 Web links 381

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7 Delivering the online customer experience 386 Learning objectives / Questions for marketers / Links to other chapters 386 Introduction 387

Digital marketing in practice The EConsultancy interview: Steve Nicholas, Assistant Director of E-commerce, Guess 389

Planning website design and build 391 Who is involved in a website project? 393 Website prototyping and agile software development 395 Initiation of the website project 397 Domain name registration 397 Selecting an Internet service provider 397 Researching site users' requirements 399 Usability 400 Web accessibility 401 Localisation 404 Reviewing competitors' websites 405 Designing the information architecture 406 Designing the user experience 411 Developing customer-oriented content 412 Marketing-led site design 413 Elements of site design 413 Development and testing of content 423 Testing content 423 Tools for website development and testing 423 Online retail merchandising 424 Promote site 428 Service quality 428 Tangibles 430 Reliability 431 Responsiveness 432 Assurance 432 Empathy 433 The relationship between service quality, customer satisfaction and loyalty 435

Case study 7 Refining the online customer experience at dabs.com 436

Summary 439 Exercises

Self-assessment exercises 440 Essay and discussion questions 440 Examination questions 440

References 440 Further reading 443 Web links 443

8 Campaign planning for digital media 445 Learning objectives / Questions for marketers / Links to other chapters 445 Introduction 446

x Contents

Goals of interactive marketing communications 446 The structure of this chapter 447

Digital marketing in practice The EConsultancy interview: Matthew Finch, Warner Breaks, on silver surfers 448

The characteristics of digital media 450 Step 1. Goal setting and tracking for interactive marketing communications 457 Terminology for measuring digital campaigns 457 Examples of digital campaign measures 460 Conversion marketing value objectives 462 Step 2. Campaign insight 467 Customer insight for digital marketing campaigns 468 Step 3. Segmentation and targeting 470 Step 4. Offer, message development and creative 472 Step 5. Budgeting and selecting the digital media mix 475 1 Level of investment in digital media techniques in comparison to offline promotion 476 2 Selecting the right mix of digital media communications tools 3 Level of investment in digital assets Step 6. Integration into overall media schedule or plan Planning integrated marketing communications Key activities in media selection and planning

Case study 8 A short history of Facebook

Summary Exercises

Self-assessment exercises Essay and discussion questions Examination questions

References Further reading Web links

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9 Marketing communications using digital media channels Learning objectives / Questions for marketers / Links to other chapters Introduction How is this chapter structured?

Digital marketing in practice The EConsultancy interview: Nick Robertson, CEO, ASOS, on the tension between affiliate and brand marketing

Search engine marketing What is SEO? Advantages and disadvantages of SEO Best practice in planning and managing SEO Paid search marketing Advantages and disadvantages of paid search marketing Best practice in planning and managing paid search marketing Online public relations What is online public relations (E-PR)?

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Advantages and disadvantages of online public relations 524 Best practice in planning and managing online public relations 525 Online partnerships including affiliate marketing 534 Affiliate marketing 535 Advantages and disadvantages of affiliate marketing 536 Best practice in planning and managing affiliate marketing 537 Online sponsorship 538 Interactive display advertising 539 What is display advertising? 539 Advantages and disadvantages of display advertising 540 Best practice in planning and managing display ad campaigns 542 Opt-in e-mail marketing and mobile text messaging 547 What is e-mail marketing? 547 Opt-in e-mail options for customer acquisition 547 Opt-in e-mail options for prospect conversion and customer retention (house list) 548 Advantages and disadvantages of e-mail marketing 550 Best practice in planning and managing e-mail marketing 551 Mobile text messaging 554 Viral and electronic word-of-mouth marketing 556 What is viral marketing and word-of-mouth? 556 Advantages and disadvantages of viral marketing 559 Best practice in planning and managing viral marketing 559 Offline promotion techniques 561 Advantages and disadvantages of using offline communications to support e-commerce 563 Incidental and specific advertising of the online presence 563 Public relations 564 Direct marketing 564 Other physical reminders 564 Word-of-mouth marketing 564

Case study 9 Innovation at Google 565

Summary 567 Exercises

Self-assessment exercises 569 Essay and discussion questions 569 Examination questions 569

References 570 Further reading 572 Web links • 573

10 Evaluation and improvement of digital

channel performance 575 Learning objectives / Questions for marketers / Links to other chapters 575 Introduction 576

Digital marketing in practice The EConsultancy interview: Justin Basini, Head of Brand Marketing, Capital One 577

Contents

Performance management for digital channels 579 Stage 1: Creating a performance management system 580 Stage 2: Defining the performance metrics framework 582 Stage 3: Tools and techniques for collecting metrics and summarising results 586 The maintenance process 600 How often should material be updated? 601 Responsibilities in website maintenance 601 .Who owns the process? 602 Who owns the content? 604 Who owns the format? 604 Who owns the technology? 605 Content management 606

Case study 10 Learning from Amazon's culture of metrics 607

Summary 613 Exercises

Self-assessment exercises 614 Essay and discussion questions 614 Examination questions 614

References 615 Further reading 616 Weblinks 616

11 Business-to-consumer Internet marketing 618 Learning objectives / Questions for marketers / Links to other chapters 618 Introduction 619 Key themes and concepts 619 The consumer perspective: online consumer behaviour 619 Who are the online customers? 620 The retail perspective: e-retailing 627 Development of e-retailing 628 E-retail formats and operational strategies 629 Implications for e-retail marketing strategy 636

Case study 11 E-strategy in the UK retail grocery sector: exploring the strategic pathways followed by the UK's five leading grocery retailers 638

Summary 642 Exercises

Self-assessment exercises 643 Essay and discussion questions 644 Examination questions 644

References 644 Further reading 647 Web links 647

12 Business-to-business Internet marketing 648 Learning objectives / Questions for marketers / Links to other chapters 648 Introduction 649 Key themes and concepts 649 B2B trading environments and electronic marketplaces 650 Types of organisational markets 650 Growth, volume and dispersion of B2B electronic markets 651 E-marketplaces 653 Online marketing efficiency gains 656 How organisations make efficiency gains 657 Analysing the factors which influence the adoption of Internet technologies 659 Digital marketing strategies 661

Case study 12 B2B adoption of the Internet: Inspirational Cosmetics 664

Summary 665 Exercises

Self-assessment exercises 666 Essay and discussion questions 666 Examination question 666

References 666 Further reading 667

Glossary 668 Index 693