Transcript 20051289916188

E-Commerce Marketing
Strategies: An Integrated
Framework and Case Study
Eric Allen
Jerry Fjermestad
New Jersey Institute of Technology
Logistics Information Management, 14, 1/2, 2001, 14-23.
Introduction
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Many of the models for E-commerce
strategies that have been published have a
lot in common with the traditional four P’s
marketing model.
Integrating the new strategic frameworks
with the traditional marketing model provides
for a more thorough framework.
The framework is applied to Nabisco, Inc. to
generate strategic planning ideas.
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Framework Integration
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Zwass (1996) suggests that the established
way to analyze and develop complex systems
is to organize them in a meaningful structure.
Handout 1 summarizes four articles that
provide strategic frameworks for thinking
about on-line relationships between
manufacturers, retailers, and consumers.
Handout 2 and Table 2 show how the major
concepts of each framework map to the
traditional marketing model.
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Rayport & Sviokla, 1994
Framework:
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PRODUCT Content is what is being sold . Can be information,
a service or a physical product
PLACE Context is how the content is presented for sale.
PRICE Pricing based on cost
Infrastructure describes how the buyer and seller are brought
together
Consequences:
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Erosion of brand equality
Physical products replaced with the information services
Near-zero marginal costs of additional customers invalidates old
concepts of pricing
Companies must look to exploit the breadth of the electronic
channel - develop context loyalty first, then exploit it with
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Klein & Quelch, 1996
Framework:
 PLACE Global Reach; Market Makers
 PRICE Standard Pricing
 PROMOTION Global Branding
Customer Centered:
 Technology will become more important than size of
company
 Changing role fore intermediaries
 Companies dominating market
 Understanding the global market
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Gosh, 1998
Framework:
 PRODUCT Tool for developing and
delivering new products and services to
customers
 PLACE Companies can skip other players in
an industry value chain
Customer Centered:
 Links companies directly to customers,
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Management, 14,
1/2, 2001,
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suppliers,
and
other
Evans & Wurster, 1999
Framework:
 PRODUCT Navigation as a separate
business
 PLACE Reach
-describes the visibility of the customers interface and also of
the business
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PROMOTIONS Richness
-refers the amount of information exchanged between the
producer and the consumer
Customer Centered:
 Affiliation
- describes the interest of most importance with respect to the
merchant.
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Table 2
The Electronic Commerce Marketing Framework
Framework
Managing in
Marketspace – Rayport
and Sviokla
The Internet and
International Marketing
– Klein and Quelch
Making Business Sense
of the Internet - Gosh
Getting Real About
Virtual Commerce –
Evans and Wurster
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Product
Content – what is
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being sold (what do
you take delivery
of).
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Place
Infrastructure –
how was the sale
possible.
Context – How is it
presented for sale.
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Global Reach
Market Makers
Tool for
developing and
delivering new
products and
services to
customers.
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Companies
can
skip other players
in an industry value
chain.
Companies are able
to dominate the
electronic channel
of an entire
industry or
segment, control
access to
customers, and set
business rules.
Navigation as a
separate business.
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Reach
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Price
Pricing based on
cost has no place.
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Standard Pricing
Promotion
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Global Branding
Richness
Customer Centered
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Understanding the
global consumers
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Links companies
directly to
customers,
suppliers, and other
interested parties.
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Affiliation
The Traditional Marketing Model
(the 4 P’s Kottler’ s model)
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A Product is anything that can be offered to a market
for attention, acquisition, use, or consumption that
might satisfy a want or need
Place is Marketing channels- Supply Chains
Price is the only element of the marketing mix to
generate revenues.
Promotion encompasses all the various ways an
organization undertakes to communicate its products’
merits and to persuade target customers to buy from
them
Logistics Information Management, 14, 1/2, 2001, 14-23.
Product
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Information is now its own viable
product.
Internet can also serve as a platform for
new product innovations.
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Place
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Of all the elements in the marketing mix, the Internet
will have the most profound effect on the marketing
channels.
The Internet will allow organizations to skip over
parts of the value chain- Supply Chain. The Internet
becomes e-value chain.
Must maintain relationships w/ manufacturers,
suppliers and buyers- the supply chain
It is critical to quickly develop a large customer base
in on-line commerce.
Organizations that are first to offer a large breadth of
products to consumers will have an advantage.
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Price
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The Internet will lead to increased price
competition and the standardization of
prices.
Organizations will have to employ new
pricing models when selling over the
Internet.
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Promotion
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Incumbent retailers and manufacturers
have certain advantages when
promoting products and services on the
Internet.
Branding will continue to play an
important role in Internet marketing.
There are important limitations to
promoting on the Internet.
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Customer Centered
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Companies are changing how they
market their products in order to better
satisfy consumers’ needs: CRM-Supply
Chains
With the Internet it is possible to gain
permission to discuss your products, as
opposed to interruption marketing, such
as television commercials.
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The Shifting Importance of
Marketing Mix Elements
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The Internet will change the tradeoffs
between elements of the marketing mix.
Evans and Wurster (1999) point out that the
amount of products a retailer could carry in
one place (their reach) is no longer inversely
proportional to the amount of information
they could present about the product in their
promotions (richness).
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Nabisco: A Case Study
Background
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Nabisco, an $8 billion snack food company, has major competitive
advantages in the traditional supermarket distribution channels.
Nabisco’s current corporate strategy is to build total brand value. Total
brand value calls for satisfying customers faster and more completely
than the competition.
Its Biscuit division currently spends 10% of sales in trade (retail)
marketing for items such as special promotions and in-store displays.
In addition, the Biscuit division maintains a fleet of trucks that provide
direct store delivery which is an advantage that few competitors can
afford.
Direct store delivery and Nabisco’s dominant market share in the biscuit
category ensure that Nabisco’s products receive the most shelf space in
stores and cross shoppers’ paths more than competitor products.
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State of E-Marketing at
Nabisco (2000)
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To date Nabisco has established a significant presence during the land
grab phase of the Internet referred to by Evans and Wurster (1999).
For the U.S. market, the company currently has a number of web sites:
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A corporate information site
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A recipe site that provides consumers with recipes that feature
Nabisco products.
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Each of its two domestic operating units have web sites that
contain games and promote the units brands.
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On-line shopping for Nabisco brand merchandise (e.g. mugs, dolls,
and trains), along with specially packaged food products.
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Various brand specific sites
Nabisco has also started an e-business group to address the larger
strategic issues presented by the Internet.
Logistics Information Management, 14, 1/2, 2001, 14-23.
The Problem
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Current competitive advantages will diminish
in a market dominated by on-line grocery
shopping.
Advantages critical for a bricks and mortar
grocery manufacturer such as in-store
displays, product presentation and shelf
space do not directly transfer to an on-line
environment.
Strategies will have to be developed to create
new competitive advantages.
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Challenges
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For established companies, doing business on-line risks damage
to brands and distribution relationships that currently represent
key competitive advantages.
The value chain for incumbent manufacturers and retailers is
being deconstructed because the value to consumers derived
from entire segments of that chain can be achieved more
efficiently and effectively through the use of the Internet and
Supply Chains
Even if the overall percentage of sales on the Internet averages
just 5% across all categories, that shift will still create
tremendous pressure on physical retailers, particularly in the
United States.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Growth of the On-line Grocery
Business
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The on-line grocery shopping industry is positioned
for tremendous growth in the coming years.
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current sales are estimated at $1.8 billion annually
they are expected to reach $3.5 billion by 2002
and $37 billion, 4% of domestic sales, by 2004
Some projections call for 20% of all grocery orders to be
placed on-line by the year 2007.
The incentive for grocers to go on-line is to establish
relationships with customers that will allow them to
automatically replenish homes- a new form of SCM.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Implications of the
Integrated Framework
Logistics Information Management, 14, 1/2, 2001, 14-23.
Product
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Nabisco must use the information collected from the
Internet to develop new products for new markets.
Nabisco may have to compete with niche shops over
the Internet and should start a business unit
designed to compete in niche markets.
Niche products would give the company's product
development labs a chance to use promising
developments that could not achieve the critical
market mass required by today’s cost structure.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Place
Nabisco needs to quickly develop an on-line customer base and
ensure that its products are offered on sites that have all the
products consumers want.
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Promote on-line retailing standards to allow consumers to
switch on-line grocers easily, counteracting “sticky” web-sites
developed by e-grocers.
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Encourage standards that would allow consumers to select
products from manufacturers' sites even if the purchase and
distribution occurred through the on-line grocer.
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Must maintain relationships w/ manufacturers, suppliers and
buyers- the supply chain
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It is critical to quickly develop a large customer base in on-line
commerce.
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Organizations that are first to offer a large breadth of products
to consumers will have an advantage.
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If done correctly, would allow Nabisco to sell directly to its
customers –disintermediation reducing the Supply Chain.
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Place
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Provide an on-line service that allows consumers to
navigate their selection of on-line grocery providers.
Provide information about on-line grocers that
consumers would be interested in such as the price
of the service, service quality measures and the
geographic area the service is offered in.
Sponsoring manufacturers could embed themselves
in the on-line grocer’s site by offering promotions
through on-line grocers who are complying with
industry standards.
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Place - Strategies to Avoid
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Nabisco like other companies will have to be careful not to
damage their brands and their relationship with existing
distributors and retailers.
Most likely strategies would be to keep Nabisco products off online grocer sites or not support the on-line grocers.
Nabisco would also find it difficult to compete by selling its
product on-line because it would not have the reach consumers
would want.
Nabisco could form alliances with other consumer products
companies (e.g. Heinz, Campbell’s, P&G), thus forming B2B
Supply Chains.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Price
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Nabisco should be prepared to respond to increased price
pressures on the Internet. Increased price pressures would play
to the benefit of the traditional large producers like Nabisco.
Nabisco should consider new pricing models for its products,
such as product subscriptions (e.g. cookie of the month).
Logistics Information Management, 14, 1/2, 2001, 14-23.
Promotion
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Nabisco should continue to aggressively promote its brands on
the Internet, particularly brands based on experience.
Customer Centered
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An on-line service that allows consumers to navigate their
selection of on-line grocery providers would give manufacturers
the opportunity to collect additional consumer information- CRM.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Conclusion
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Although many of the e-commerce strategy frameworks offer a unique
contribution to strategic planning, integrating these models into the
traditional product, price, place and promotion framework can provide
a more complete analysis of strategy.
Based on an analysis that uses the traditional four P’s model, along
with integrating other on-line strategy frameworks, Nabisco should
pursue the following on-line marketing strategies:
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Use the Internet to develop new products and services.
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Help the consumer choose an on-line grocer by encouraging
standards and disseminating information.
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Prepare itself to operate in an increasingly price competitive
marketplace.
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Emphasize those brands that relate to experiences over facts.
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Develop customer centered marketing practices.
Logistics Information Management, 14, 1/2, 2001, 14-23.
Conclusion
E-commerce Frameworks
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+
Traditional 4 P’s Model
=
Integrating previously developed e-commerce
frameworks with the traditional 4 P’s model
provides a more comprehensive strategic
approach to exploiting opportunity offered by
e-commerce
Logistics Information Management, 14, 1/2, 2001, 14-23.