Transcript E-Marketing, 3rd edition Judy Strauss, Raymond Frost, and Adel I. El

E-Marketing, 3rd edition
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 15: E-Marketing in
Emerging Economies
© Prentice Hall 2003
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Overview of Global E-Marketing Issues



One of the big changes online: users from other countries, speaking languages
other than English, will increasingly dominate the Internet.
Worldwide Internet use is projected to increase by 60% from 2002 to 2004:

In 2002, 1/3 of all Internet users in the world lived in North America,

By 2004, North American users = 1/4 of the world’s active Internet users,

By 2004, more Internet users will be living in Asia Pacific countries than in
North America,

Between 2002-2004, the number of Latin American Internet users will
increase by a substantial 84%,

By 2004, Europe is projected to be home to the largest number of Internet
users in the world.
2 important effects of the increasing number of non-US Internet users on the
Internet:

Diversification of Web’s content & language,

Acceleration of the convergence of styles, tastes, and products to create a
more homogenous, global marketplace.
Year
2000
2001
2002
2003
2004
North America
97.6
114.4
130.8
147.7
160.6
Europe
70.1
107.8
152.7
206.5
254.9
Asia/Pacific Rim
48.7
63.8
85.4
118.8
173
Latin America
9.9
15.3
22.1
31
40.8
Africa and Middle
East
3.5
5.3
7.2
9
10.9
229.8
306.6
398.2
513
640.2
Worldwide Total
Active Adult Internet Users Aged 14+ Worldwide (in millions)
Source: Adapted from eMarketer, (2000)
Overview of Global E-Marketing Issues

Internet use varies greatly from country to country.

Country size and population have little bearing on Internet use:





Russia = only 7.5 million Internet users (5% of the population).
Singapore = 1.3 million Internet users (30% of all Singaporeans).
As Internet access and use accelerates around the world, so, too, will
e-marketing opportunities.
Where will the greatest challenges lie?
In countries with emerging economies—countries such as Russia, India,
Nepal, the Czech Republic, and China, which present different &
difficult decisions for e-marketers.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Emerging Economies
Countries vary in their level of economic development:


Developed countries = all of Western Europe, North America, Japan,
Australia and New Zealand.

Highly industrialized countries + use technology to increase their
production efficiency, result = a high gross domestic product (GDP) per
capita,

high GDP = citizens have enough discretionary income to buy items that
will make their lives easier, richer, and fuller,

Ideally suited for e-marketing activities.
Emerging economies = those with low levels of gross domestic product
(GDP) per capita that are experiencing rapid growth:

In North America, Mexico + Central and South American countries,

In Europe, former Baltic States + Eastern Europe,

Russia, Belarus, and the Ukraine,

Africa, Central Asia, South Asia and Southeast Asia,

China.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Importance of Information
Technology


To improve its level of economic development, a country can:
Increase efficiencies in the production, distribution, and sale of goods
and services.

For emerging economies, technology plays an especially important role.
The application of information technology can open up new, exciting,
global markets.

The Internet allows businesses in emerging economies to
instantaneously tap a global marketplace.

Successful marketing on the Internet can leapfrog a company from
nowhere to somewhere overnight.

Importance of Information
Technology


E-marketers from countries with emerging economies face a double
challenge:
 All the marketing issues and decisions,
 Unique challenges related to the conditions of operating within a
still developing nation.
Businesses operating in emerging economies must deal with:
 Fewer computer users,
 Limited credit card use,
 Lack of secure online payment methods,

Unexpected power failures.
Importance of Information
Technology

Internet marketing differences between developed and developing
countries for the greatest obstacles to e-commerce:
U.S. and European list:
Emerging economies list:
• Privacy concerns (31%),
• Censorship (24%),
• Navigation difficulties
(17%),
• Taxes (9%).
• Slow connection speeds (29%),
• Costs of domestic phone calls
(29%),
• Internet Service Provider costs
(19%),
• Lack of content in one’s own
language (10%),
•Lack of local content (10%).
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Country and Market Opportunity Analysis

An e-marketing plan guides the marketer through the process of
identifying and analyzing potential markets.

Global e-marketers must balance 2 different analytical approaches:

Market similarity = If they are operating from a country with an
emerging economy and want to target markets in developed
countries,
Market differences
= If they are based in an emerging economy and want to market to
their home target market,
= If they are from a developed economy and want to target groups in
an emerging economy.

Emerging economy
Emerging economy
Understand market differences
Understand
market similarities
Understand
market differences
Developed economy
Market Approaches Between Emerging and Developed Economies
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Market Similarity
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Concept of market similarity = marketers choose foreign markets that have
characteristics similar to their home market for initial market entry.
A United States-based company would target Canada, the United Kingdom, and
Australia before France, Japan, or Germany.
Amazon.com has used this strategy as it expanded globally. It has international
Web sites in the UK, France, Germany, Austria, and Japan:

Some similarities based on language,

High literacy rates, high Internet usage rates, and clearly defined market
segments willing to shop for books (and other products) on-line,

Credit cards are widely used for purchases,

Secure, trusted online payment mechanisms,

Efficient package delivery services.
Market similarity not only reduces (without eliminating) the risk of entry into
foreign markets but also helps explain why it targeted these countries in the
first place.
Market Similarity

E-businesses in countries with emerging markets make parallel target
market decisions.

www.munchahouse.com:
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Offers a wide range of products that Nepalis living overseas can send to
individuals back home.
Customers pay on the sites by providing their credit card numbers using a
secure server.

These are all crucial marketing decisions.

If the Muncha House marketer had targeted a domestic home market,
his marketing situation would be completely different.

One of the biggest differences between developed countries and
emerging economies = the limited use and acceptance of credit cards
in underdeveloped countries.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Credit Card Conundrum

Convenience & ease of transactions = 2 of the Internet’s greatest
benefits.

In developed countries: credit cards + secure online payment systems
make Web-based transactions easy.

But in countries with emerging economies, things aren’t so easy.
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
In Bolivia:
= Fewer than 200,000 credit cards are in circulation within a country
with a population of 8.3 million people.
Limited credit card use can severely restrict a target market’s
purchasing ability.
Credit Card Conundrum
Rita’s Pizza site in Vilnius, Lithuania:

Web site for ordering pizza, sandwiches, snacks, and beverages online.

The final screen for ordering indicates that Rita’s is strictly a cash business:
 Customers pay at the time of delivery (C.O.D.), or
 When they pick up the food at Rita’s.

Limited use/availability of credit cards limits what an e-marketer can do.

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Marketers must also analyze relevant buyer behavior within a market:

In Lithuania, local consumers are very reluctant to purchase products
online.

37% said it was easier and more fun to buy goods and services in a store
than online.

21% said it was more secure to buy goods and services in a store.
BUT, the business understood one important thing: its target market:

24% of all current Lithuanian Internet users are under 20 years old,

11% are between the ages of 20-25.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
E-Commerce Payment
in the Czech Republic
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
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The Czech Republic face the same challenges of limited credit card use and
consumer skepticism of online purchasing.
The Czech Republic is a relatively small country in central Europe
= 22% of the population are Internet users.
Online purchasing has increased dramatically there in recent years.
In 2000, most online purchases = airline tickets (28%), appliances (17%),
books (12%), consumer electronics (10%), videos (8%), music (6%), and
computer hardware (6%).
= A mirror shopping interests in developed countries.
The Czech Republic has many online retailing Web sites:www.obchodnidum.cz
(appliances, consumer electronics and mobile phones) and www.vltava.cz
(music, books, videos and software).
The country also has specialized Web sites: airline ticket agents , wine, etc.
Year
Average Monthly Sales
(in millions of Kronus)
Q1-99
5.9
Q2-99
9.9
Q3-99
18.2
Q4-99
25.6
Q1-00
28.0
Q2-00
30.0
Total Online Sales in the Czech Republic
Source: Adapted from American Chamber of Commerce… (2000)
E-Commerce Payment
in the Czech Republic
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In the Czech Republic: People fear online shopping.
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75% said that it was more secure buying goods/services in a store,
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65% said it was easier & more fun to buy goods and/or services in a store,
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61% said “you don’t know what you get when you shop online”,
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42% said they didn’t trust online brands.
Online marketers adapt their Web sites to the target market’s preferences:
www.musicabona.cz posts the following in its About Security section:

“Your personal data is transmitted via the secure SSL encoded transfer
system.

If you decide to become one of our registered customers, you needn’t fill in
your personal data and send it over the Internet at all upon subsequent
purchases.

If you do not think it is safe to send your personal data through the
Internet, you can send your order in writing, by fax or mail.

If you don’t want to disclose to us the number of your payment card, you
can pay by cheque.”
E-Commerce Payment
in the Czech Republic

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How do Czech consumers pay for their online purchases?
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31% make bank transfers,
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28% pay cash on delivery,
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21% pay with a credit card,
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9% make bank transfer through either a PC or mobile phone,
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8% pay with postal orders.
Czech citizens are reluctant to use online payment methods + only 35% of all
Czech adults have credit cards.
Innovative solution = eBanka:
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The oldest purely Internet Bank in Central and Eastern Europe.

The bank issues credit cards + handles secure and efficient online money
transfer accounts for purchases at many Czech Web sites.
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A customer opens an eBanka account, deposits money, uses it to make
online purchases.

This is the Czech version of digital cash.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Technological Readiness Influences
Marketing

In emerging economies, e-marketers must also deal with daunting
issues of basic technology:

Limited access to and use of computers and telephones,
High Internet connection costs,
Slow Internet connection speeds,

Unpredictable power supplies.


Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Computers and telephones

Customers must have access to a computer and an ISP to use the Internet:

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
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
In developed countries, this is not a problem.
Individuals can use computers at home, at work, at school, or at libraries
and other community institutions.
In emerging economies, computer access is a big problem.
Computer access is unevenly distributed throughout the world:
Ukraine has less than 2 computers for every 100 individuals,
Colombia has 3 1/2 computers per 100 citizens,
The United Sates has about 58 computers for every 100 citizens.
E-marketers should never underestimate the profound influence of limited
computer access on Internet marketing.
It directly limits market size.
Country
Estimated Total Number of
Personal Computers in Country
(in thousands)
Estimated Total Number of
Personal Computers per 100
Inhabitants
Colombia
1,500
3.5
Ecuador
275
2.2
Guatemala
130
1.1
India
4,600
0.5
Mexico
5,000
5.1
Morocco
350
1.2
Nigeria
750
0.7
Pakistan
590
0.4
Philippines
1,480
1.9
South Africa
2,700
6.2
Thailand
1,471
2.4
Ukraine
890
1.8
161,000
58.5
United States
Computer ownership in Selected Countries Source: ITU, (2001a)
Computers and telephones
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
Individuals & businesses need to be connected to the Internet though phones.
In developed countries, telephones are a common and prevalent commodity:

Most families have more than one telephone at home,

Many have multiple telephone lines,

Some even have several telephone numbers,

Many may have both fixed and mobile phones.
In countries with emerging economies, telephones are scarce and expensive.

1999, Indonesia = 2.9 phones/100 people, India = 2.7 phones/100 people,

The Philippines = 4.0 phones/100 people, Mexico = 11.2 ph./100 people,

In 2000, in Thailand, 91.5% of all Thais own a television, but only 27.7%
own a phone.
In emerging economies, telephone access has a very different pattern than in
developed countries.
Online firms can’t market to someone who has no computer or no means of
connecting to the Internet.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Internet Connection Costs

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Countries with emerging economies often have higher Internet-related
business costs:

Dial-up connection is the most common way of connecting to the Internet.

Dial-up connections use telephone lines.

Dial-up connection costs vary quite considerably in emerging economies.
The total price for Internet service is quite large in many countries.
 Labor costs may be quite low, but technology and other business costs can
be quite high.
Why?

Government-owned telephone monopolies:

The lack of competition among ISPs:
When both of these constraints are loosened, Internet growth accelerates,
creating a rapidly expanding domestic market for e-marketers.
UAE
Egypt
ISP Charges
Kuwait
Telephone Charges
Oman
Average
Saudi Arabia
Tunisia
Lebonan
Qatar
Jordan
Bahrain
Morocco
0
10
20
30
40
U.S. Dollars
Total Internet Connection Costs in Selected Arab Countries
Source: Adapted from Gray (2001)
50
60
70
80
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Slow Connection Speeds
And Web Site Design

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

Connection speed and Web site design = a issue in emerging economies:

A telephone line limits the speed at which data can be sent and received.

Current maximum speed for a modem connection is 56 kbps.

Emerging economies are seeking faster and better connections through
broadband and ISDN.
Download speeds has significant implications for Web site design, especially
the extent to which graphics are used.
The Web is a visual medium, and users expect to see pictures that move, swirl,
and morph into usual shapes + Web sites have sound.
 These elements slows the download rate.
In countries with emerging economies, where connections speeds are slow and
a user may be paying by the minute, download speed is a major consideration:

Need to understand how connection speeds influence download rates,

Just because graphic designers can do something cutting edge on Web
sites, doesn’t mean they should.
Slow Connection Speeds
And Web Site Design

E-marketers must see the world from their target market’s perspective
= understanding the target market’s total experience with a Web site.

In developed countries, users experience extremely slow download
times only occasionally.

In developing countries, slow downloads are an everyday occurrence.

To avoid this problem, e-marketers need to :





Understand the target market,
Consider the country’s overall bandwidth,
Keep graphics simple,
Limit the number of pictures,
Optimize the site for speedy and smooth downloads.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Electricity Problems

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

Sporadic electricity = Another challenge for countries with emerging
economies,
Nepal:

One of the poorest countries in the world, with an annual per capita
income <$250,

Rich in many natural resources, including water,

Has built a series of hydro electric dams throughout the country,

15% of all households in Nepal have electricity,

Most people living in major cities have electricity (sometimes without
electricity during the summer months).
In the summer of 2001, the Nepal Electrical Authority (NEA) could not generate
enough electricity for the entire country:
Electricity loss affected every business, including Internet-dependent
businesses.
All locally-hosted Nepali Web sites went down when the electricity was cut.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
Wireless Internet Access

Mobile phones and the supporting technology have the potential to
dramatically change the face of e-marketing around the world.
 Many countries have more mobile telephone subscribers than fixed-line
telephone subscribers.
 Cambodia, Chile, Ivory Coast, Morocco, Paraguay, Philippines, Senegal,
Uganda, and Venezuela are all countries with emerging economies.
Cambodia:

In 1993, first country in the world to have more mobile telephone subscribers
than fixed-line telephone subscribers.

Why?

Cost = Cell phones and the accompanying technology for mobile networks
were less expensive than fixed-line telephones.

History = “As a result of more than two decades of war…Cambodia has 4 to
6 million landmines in the ground” = digging up the ground to lay
telephone cable is simply too risky.

This case reminds international e-marketers that understanding country history
is an important element in assessing foreign markets.
1993
1998
1999
2000
2001
Cambodia
Finland
Austria
Bahrain
Senegal
Hong Kong
SAR
Belgium
Singapore
Ivory Coast
Botswana
Slovenia
Israel
Chile
United
Kingdom
Italy
Greece
Paraguay
Iceland
Portugal
Morocco
Uganda
Philippines
Venezuela
Rwanda
Selected countries that have more mobile telephones than fixed line telephone subscribers by year
Source: Adapted from Minges, (2001)
Wireless Internet Access


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
Mobile phone technology is an effective and relatively inexpensive path to
telecommunications, countries with emerging economies can leap frog
industrialized countries in terms of usage.
Challenges of wireless e-marketing:

How to modify existing Web site content for the smaller screens on cell
phone displays,

How to resolve potentially cumbersome text entry using tiny keypads

How to develop new content that consumers will want

How to price services,

How to develop easy, secure payment methods,

Understand that consumer behavior with the mobile Internet.
Text messaging: On PCs, E-mail length is not a problem with PCs. It is a
problem with mobile phones.
New content and new marketing strategies must be developed for wireless
Internet access.
Wireless Internet Access
Success story: How McDonald’s identified & capitalized on an e-marketing
opportunity by merging the anytime, anywhere capability of mobile phones
with China's interest in soccer and its rapidly growing consumer economy.
• During the 2002 World Cup Finals, McDonald’s developed a special SMS
promotion for the China market (world’s largest mobile telephone market).
• McDonald’s sent an SMS alert to selected mobile phone subscribers explaining
how to download coupons for free ice cream, how to get a special McSmilie
icon for their mobile phones, and how to download a McDonald’s theme song
as a special phone ringer.
• Results:
• Store sales increased
• Every mobile phone with a McDonald’s phone ringer promoted
McDonald’s every time the subscriber received an incoming phone call.
Overview
Overview of Global E-Marketing Issues
Emerging Economies
Importance of Information Technology
Country and Market Opportunity Analysis
Market Similarity
Credit Card Conundrum
E-Commerce Payment in the Czech Republic
Technological Readiness Influences Marketing
Computers and telephones
Internet Connection Costs
Slow Connection Speeds And Web Site Design
Electricity Problems
Wireless Internet Access
The Digital Divide
The Digital Divide

E-marketers have to consider the social environment in which their ebusinesses operate.

Nations with emerging economies may be in different stages of economic
development, which affects their social climate.

Least developed countries (LDCs) = countries with the world’s poorest
economies:




Economically underdeveloped,
Share one other common characteristic: excruciating poverty,
To describe the economic situation= the percentage of a country’s
population earning less than $2 per day.
In these, the world’s poorest countries, life is literally a war waged for survival.
The Digital Divide
In the least developed countries:










Meager incomes provide only the basic necessities.
Most meals are the same, consisting of rice, wheat, or corn.
Shelter is primitive.
People share a small room (earthen floor and no sanitary facilities).
Most of the population lives in rural areas, work is hard and time-consuming.
Productivity is low, household plots are small and only the crudest of farm
implements are available.
Farm output per person is barely sufficient to feed a farmer’s own family, with
nothing left to sell to others.
School age children may receive some formal education, but illiteracy remains
chronic for you and old.
Infant mortality runs 10 times higher than in the United States.
Only one physician per 5,000 people.
Country
Percentage of Population earning
below $2 a day
Bangladesh
77.8
Bolivia
38.6
Botswana
61.4
Central African Republic
84.0
China
53.7
Ecuador
52.3
El Salvador
51.9
Guatemala
64.3
Indonesia
86.2
Mali
90.6
Nepal
82.5
Nigeria
90.8
Zambia
64.2
International Poverty Lines for Selected Countries Source: Adapted from Table 4, World Bank, (2000)
The Digital Divide




A dual economy:

LDCs contain population segments with much higher income levels.

This divides the country into haves and have nots.
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Wealth is concentrated in a country’s largest city, usually the capital.
2 completely different economies exist side-by-side, they are centuries apart in
terms of economic and technological development.
Digital divide = “ between countries and between different groups of people
within countries, there is a wide division between those who have real access
to information and communications technology and are using it effectively, and
those who don't.”
“Industrialized countries, with only 15% of the world's population, are home
to 88% of all Internet users.
The Digital Divide
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The digital divide raises challenging questions for global policy makers,
international businesses, and local entrepreneurs.
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What responsibilities do these different groups have for narrowing the gap
between those that have and those that don’t have access to technology?
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Global policy makers at the United Nations, the World Bank, and the G8 believe
the answer is yes.
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Some e-marketers are successfully helping to close the digital divide.
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www.villageleap.com, the Robib village website (Cambodia):
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Women market traditional Cambodian silk weavings to overseas buyers,
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Money is reinvested in the local pig farm,
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Also allow villagers to send and receive medical information = reduce the
number of two hour road to the nearest hospital.