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E-Marketing, 3rd editionJudy Strauss, Adel I. El-Ansary,and Raymond Frost

Chapter 10: Product

Prentice Hall 2003

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OverviewMany Products Capitalize on InternetPropertiesCreating Customer Value Online

Online BenefitsAttributesBrandingSupport ServicesLabeling

E-Marketing Enhanced Product Development

Customer CodesignElectronic InputWeb Content DevelopmentInternet Properties Spur OtherOpportunitiesNew-Product Strategies for E-Marketing

A Taxonomy for Internet Products

New-Product TrendsValue Chain AutomationPromotion

Product ConfigurationBrokeragesCustomer ServiceDistributionRelationship MarketingOutsourcing

Information SharingCentralizing Information

AccessMultimedia

Assistive TechnologiesThree Types of Convergence

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Many Products Capitalize

on Internet Properties

Aproduct:

Abundle of benefits that satisfies the needs oforganizations/consumers and for which they are willingto exchange money or other items of value.

Items such as tangible goods, services, ideas, people,and places.

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on Internet Properties May be classified by the purpose for which they are

purchased:

Consumer products = purchased by an individual forpersonal consumption.

Businesses sell products to consumers in the business-to-consumer (B2C) market.

Consumers sell products to one another in the

consumer-to-consumer (C2C) market. Industrial products = used in the operation of an

organization, as components for manufacture into finalproduct, or for resale (B2B market).

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on Internet Properties Some new products are unique to the Internet (search engines).

Other products use the Internet as a new distribution channel +addunique technology-enabled services (books).

With the Internets properties of market deconstruction, customercontrol, and other e-marketing trends: Many challenges, A plethora of new opportunities.

The success ofClassmates.com demonstrates how a new and purelyonline product can use the Internets properties to build a successfulbrand.
http://www.classmates.com/http://www.classmates.com/

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on Internet Properties To create new products:

Research to determine what is important to customers, Design strategies to deliver more value than do competitors.

In line with the Sources, Databases, and Strategy model, tier twostrategies involve the marketing mix 4Ps and customer relationshipmanagement (CRM).

The process of designing these strategies is closely tied to the tacticsused to implement them.

The marketing mix (product, price, distribution, marketingcommunication) + customer relationship management (CRM) worktogether to produce relational and transactional outcomes withconsumers.

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Integrated MarketingCommunication (IMC)

Product:The Offer

Price:

The Value

Distribution Channels

RelationalOutcomes

Transactional

Outcomes

ConsumersCRM

Marketing Mix and CRM Strategies and Tactics for Relational and Transactional Outcomes

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OverviewMany Products Capitalize on Internet PropertiesCreating Customer Value OnlineOnline Benefits

AttributesBrandingSupport ServicesLabeling

E-Marketing Enhanced Product DevelopmentCustomer Codesign

Electronic InputWeb Content DevelopmentInternet Properties Spur OtherOpportunitiesNew-Product Strategies for E-Marketing





AccessMultimedia


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Creating Customer Value Online

Never has competition for online customer attention anddollars been more fierce.

To succeed, firms must employ that result in

Customer value = Benefits Costs.

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AccessMultimedia


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Online Benefits The Internet technology brings a new set of desired benefits:

Effective Web navigation, Quick download speed, Clear site organization, Attractive and useful site design, Secure transactions & privacy, Free information or services, User-friendly Web browsing and e-mail reading.

BUT as Internet technology evolves, user needs change, and theopportunities expand.

Marketers must make five general product decisions that comprise itsbundle of benefits to meet customer needs: attributes, branding,support services, labeling, and packaging.

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AccessMultimedia


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Attributes Product attributes include:

Overall quality: you get what you pay for = higher andconsistent quality generally means higher prices,

Specific features: Include such elements as color, taste,style, size, and speed of service.

Benefits are the same features from a user perspective (i.e.,what will the attribute do to solve problems or meet needs andwants?).

For example, Yahoo! provides a list of Web site categories(attribute), which helps users find things quickly online(benefit).

Product benefits are key components in the value proposition.

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Attributes The Internet increases customer benefits in many ways

that have revolutionized marketing practice: The move from atoms to bits: media, music, software, and other

digital products are presented on the Web. Product customization:

Tangible products such as laptop computers can be sold alone or withmany additional hardware and software items or services to provideadditional benefits at a higher price.

Intangible products, online research firms can offer many different

business services in a variety of combinations.

Information products can be reconfigured andpersonalized very easily, quickly, and cheaply, as

compared to manufactured products.

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Attributes The Internet offers users the unique opportunity to

customize products automatically without leaving theirkeyboards.

User personalization is another form of customization:

Through Web site registration and other techniques, Websites can:

Greet users by name, Suggest product offerings of interest based on previous

purchases,

Amazon.com

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AccessMultimedia


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Branding

Abrandincludes a name (McDonalds), a symbol (goldenarches), or other identifying information.

When a firm registers that information with the U.S.Patent Office, it becomes a trademark and is legallyprotected from imitation.

According to the U.S. government, a trademark is either aword, phrase, symbol or design, or combination of words,phrases, symbols or designs, that identifies anddistinguishes the source of the goods or services of oneparty from those of others.

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Branding A brand is:

A promise to customers, A brand name + its image = the benefits a user

desires, A way to establish trust for the customer.

Important online, because of concern over security andprivacy issues,

Trustworthy brand names add to customer-perceivedbenefits = higher prices,

The value proposition.

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Branding Customers and prospects develop brand images based on

every brand contact:

One-way media such as advertising and packaging, Two-way communication such as conversations with

the firms customer service or sales people on thephone, at trade shows, on Web sites, or in company-initiated e-mail.

When using the Internet, a firm must be sure that itsonline messages and employee e-mails convey a positivebrand image that is consistent with messages from allother contact points.

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Branding

Companies creating new products for online sale faceseveral branding decisions:

Whether to apply existing brand names or create newbrand names for new products,

Whether to lend their brand name as a cobrand with

other firms,

What domain name to use for the Web site.

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Branding 7 components for building a great global brand:

1. Research your corporate constituencies.

Information is critical for global brand building.2. Understand your business. Set guidelines based on

global objectives.3. Advance the vision. Decide on the desired

reputation, create a strategy to support it, and develop

a strategic positioning document.4. Release the power of communications. All

company communication should work together topromote the brand.

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Branding 7 components for building a great global brand:

5. Set up your communications infrastructure.

Build a communication council with the firmsadvertising, public relations, investor relations, andhuman resource specialists, both inside and outsidethe firm.

6. Include your employees in the message mix.

This is especially important in a time of PR crisis.7. Measure performance. Track progress toward

goals and determine communication effectiveness.

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Using Existing Brand Names

On the Web An existing brand name can be used for any new product:

Makes sense when the brand is well-known + has strong brand equity(value).

For example, Amazon added music CDs, videos, software, electronics, and

more to its product mix. When products with offline sales introduce onlineextensions choosing to use the same brand name (e.g., The New YorkTimes).

Some firms may not want to use the same brand name online andoffline, for several reasons: If the new product or channel is risky, the firm does not want to

jeopardize the brands good name by associating with a product failure. A powerful Internet success might inadvertently reposition the offline

brand. Sometimes the firm wants to change the name slightly for the new market

or channel, as a way of differentiating the online brand from the offlinebrand.

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Creating New Brands

for Internet Marketing If an organization wants to create a new Internet brand, a

good name is very important. Good brand names should:

Suggest something about the product (e.g.,www.Classmates.com), Differentiate the product from competitors (e.g., www.gurl.com), Be capable of legal protection.

On the Internet, a brand name should be: Short, Memorable, Easy to spell, Capable of translating well into other languages.

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Cobranding Cobranding:

When two different companies put their brand nameson the same product.

Common on the Internet and is a good way for firms tobuild synergy through expertise and brand recognition.

For example: Sports Illustratednow co-brands with CNN as CNNSI.

Even the Web site address displays the cobrand:sportsillustrated.cnn.com.

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Internet Domain Names Organizations spend a lot of time and money developing powerful,

unique brand names for strong brand equity. Using the company trademark or brand name in the Web address

helps consumers quickly find the site. For example, www.coca-cola.com.

Anatomy of a URL:

AURL (Uniform Resource Locator) = Web site address = IP

address (Internet Protocol) = domain name. Categorization scheme, similar to telephone area codes, that helps

computer users find other computers on the Internet network. Are numbers, but because users can more easily remember

names, a domain name server translates back and forth.
http://www.coca-cola.com/http://www.coca-cola.com/http://www.coca-cola.com/http://www.coca-cola.com/

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Internet Domain Names A domain name contains several levels:

http:// = hypertext protocol = The browser should expect data using thehypertext protocolmeaning documents that are linked together using

hyperlinks. www = world wide web = Not necessary and most commercial sites register

their name both with and without it. dell = second level domain = The name of the company or the brand name. com = top level domain = Firms must first decide in which top level domain

to register. Most businesses in the U.S. want .com,

The Internet Corporation for Assigned Names and Numbers (ICANN):

A non-profit corporation, A committee of experts to make decisions about protocol and domain name

assignment, registration,

Approves all new top level names such as the latest: biz, .info, .pro, .name,.coop, .aero, and .museum.

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Domain Designation Top Level Domain Name Number of Hosts(millions)

net Networks 47.8

com Commercial 44.5

edu Educational 7.8

jp Japan 7.1

ca Canada 2.9

de Germany 2.7

uk United Kingdom 2.5

au Australia 2.3it Italy 2.3

us United States 2.1

Largest Top Level Domain Names in January 2002 and Number of Hosts

Source: Data from Network Wizards (www.isc.org)
http://www.isc.org/http://www.isc.org/http://www.isc.org/http://www.isc.org/http://www.isc.org/http://www.isc.org/

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Registering a New Domain Name VeriSign provides domain registering services for a mere

$70/2 years/name.

Problems:

More than 97% of words in the dictionary alreadyregistered as domain names,

The online name a firm desires may not be available.

A dictionary name is not necessarily the best optionbecause it already has a meaning attached to it = difficultto build a competitive advantage.
http://www.verisign.com/http://www.verisign.com/

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Have an Extra $1.5 Million to Spare? Buy www.ad.com.

Source:GreatDomains.com
http://www.ad.com/http://www.greatdomains.com/http://www.greatdomains.com/http://www.greatdomains.com/http://www.greatdomains.com/http://www.ad.com/http://www.ad.com/http://www.ad.com/http://www.ad.com/http://www.ad.com/

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Information SharingCentralizing InformationAccessMultimedia


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Support Services Customer support (during and after purchases):

Is a critical component in the value proposition, Need knowledgeable customer service representatives, Is critical for some technical products for installation,

maintenance problems, product guarantees, andservice warranties.

Customer service: Works to increase customer satisfaction with the firms

products, Is a product benefit = an important part of customer

relationship management.

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Labeling Labeling at Web sites, customers can read:

How to install and use a software downloaded from theInternet,

Extensive legal information about copyright use on theirWeb pages,

Online labeling can serve many of the same purposes on theWeb as offline

Many brick-and-mortar businesses display the BetterBusiness Bureau logo on their doors to give the customer a

sense of confidence and trust. The TRUSTe privacy shield: If firms agree to certain terms of

use regarding privacy of customer information collected attheir site, they affix the TRUSTe seal to their Web sites aspart of a label.

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Microsoft Terms of Use Label

Source:www.microsoft.com. Copyright 2000 Microsoft Corporation, One Microsoft Way, Redmond,Washington 98052-6399 U.S.A. All rights reserved.
http://www.microsoft.com/http://www.microsoft.com/http://www.microsoft.com/http://www.microsoft.com/http://www.microsoft.com/http://www.microsoft.com/

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E-Marketing Enhanced

Product Development The move from atoms to bits adds complexity to online

product offers.

Developers must: Combine digital text, graphics, video, and audio, and use new

Internet delivery systems.

Must integrate front-end customer service operations with back-end data collection + fulfillment methods to deliver product.

This creates steep learning curves for traditional firms.

E-marketers need to consider several factors that affect productdevelopment and product mix strategies with new technologies.

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Customer Codesign The power shift to buyers allows for many unusual business

partnerships and for both business and consumer collaboration. Partners are forming synergistic clusters to help design customer products

that deliver value.

Internet technology allows this type of collaboration to occurelectronically across international borders as well.

Customer interaction in the early and late stages of productdevelopment can actually increase product success.

This is especially true when product codesign occurs with what is calledthe lead user of a product. This is a key person who uses the product and often innovates himself to

solve product use problems as they occur.

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Electronic Input Good marketers look everywhere for customer feedback to improve products.

With the increase of Web sites inviting customer product ratings, theproliferation of e-mail word of mouse, and the speed and reach of the Net,customers are quick to spread the word about product strengths andweaknesses.

Savvy firms monitor customer input electronically and refine products to meetcustomers needs.

Companies hire electronic clipping servicesfirms to scan the Internet looking

for company and product discussion = the electronic version of traditionalclipping services that read print media and clip out articles mentioning thefirm and its brands.

The electronic input process: Is similar to the use of marketing research to support product development; The scale is much larger because many customers worldwide can be involved and

provide quick feedback.

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Web Content Development On the Web, content is king. Customers visit Web sites for information, entertainment, and to buy

products. Content attracts users and keeps them returning.

5 tips for screaming content: Stay fresh. Update the site every day and at least once on the weekend. That

takes a huge commitment! Be relevant and unique. Deliver highly focused content that is differentiated

from competitive site content. Make it easy to find. Users want to find information or products immediately.

Also, dont include hyperlinks to other sites for content because users dont oftenreturn after they leave. Serve a smorgasbord of content. Integrate current news and facts with longer

features and commentary. Include interactive material relevant to the site, such asquizzes, calculators, searches, and so forth. Vary the format to include multimedia.

Deliver content everywhere. This includes Web sites, wireless devices, andspecial networks.

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Web Content Development A new breed of syndicated content providers has emerged to serve Web

developers: Is parallel to the Associated Press that feeds news to local and national newspapers

and magazines. Includes stock quotes, breaking news, sports updates, weather information, and

morein all formats from text to video.

An interesting trend involves users who want text-based content only: A small but growing group of Web users does not want the distraction of video,

sound, animation, and other non-text items, They favor simple text information, They block advertising content with special software and know exactly what they

want online, They do not like HTML e-mail.

Important because mobile handheld devices use mostly text content. Web content providers might consider how to pare down the features in special

areas for these users + charge a subscription fee for the content.

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Internet Properties Spur

Other Opportunities Market deconstruction created a disaggregation and reaggregation of product

and service components to form unusual new products and firms: These firms provide bundles of benefits difficult to achieve before the Internet. The AutoMall Online.

The Internet is a great information equalizer: Fierce competition + lots of product imitation + short product life cycles. In this environment, product differentiation is the key to keep from becoming a

price-driven commodity industry.

Online auctions: Not long after eBay came online, Amazon.com and others beganoffering auctions.

Short product life cycle: when Frank Sinatra died, BMGs five-person new-productdevelopment team created a lifetime tribute and a series of product offerings forthe Web site in six short hours.

Firms must respond quickly to new technology or lose. Innovation online is still rewarded.

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New-Product Strategies

for E-Marketing

Many new products were introduced by one-pony firms:

= The firm was built around the first successful

product, Netscape, Yahoo!, and Classmates.

Other firms added Internet products to an already

successful product mix: Microsoft.

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Product Mix Strategies How can marketers integrate hot product ideas into current product

mixes? There are 6 categories of new-product strategies based onmarketing objectives and other factors such as risk appetite,strength of current brand names, resource availability, andcompetitive entries:

1. Discontinuous innovations are new-to-the-world products neverseen before.

On the Internet = the first Web authoring software, cell phone/PDAcombination, shopping

agent, and search engine. There are many discontinuous innovations yet to come on the Internet. This strategy is quite risky, the potential rewards for success are great. E-marketers planning discontinuous innovations must remember that

their customers will have to learn and adopt new behaviorsthingsthey have not done before.

The new behavior must be easy and the perceived benefits worthwhile.

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Product Mix Strategies2. New product lines are introduced when firms take an

existing brand name and create new products in acompletely different category.

Microsoft created a new line when it introduced its Internet ExplorerWeb browser. Because the Netscape browser was already available,Microsofts entry was not a discontinuous innovation.

3. Additions to existing product lines occur whenorganizations add a new flavor, size, or other variationto a current product line.

The New York Times Direct is a slightly different version of the hard-copy edition, adapted for online delivery. It is yet another product inThe New York Times line, which includes the daily paper, weekly book

review, and others.

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Product Mix Strategies4. Improvements or revisions of existing products are introduced as

new and improved and, thus, replace the old product. Web-based e-mail systems improved on client-based e-mail systems

such as Eudora or Outlook because users could check and send e-mailfrom any Web connected computer.

5. Repositioned products are current products that are either targetedto different markets or promoted for new uses.

Yahoo! began as a search directory on the Web and then repositioneditself as a portal (an Internet entry point with many services).

6. Me-too lower-cost products are introduced to compete with existingbrands by offering a price advantage.

When America Online and other ISPs were charging per hour rates forInternet access, several other providers introduced unlimited use at flatrate pricing for $19.95 per month.

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A Word About ROI Need for performance metrics:

As feedback so firms can assess the success of their e-marketing strategiesand tactics.

When introducing new products, online or offline.

(The expected product revenue over time is forecasted) (marketing andother expenses) = an estimated ROI for new products prior to launch.

Payout = the R & D and other initial costs will be recovered at a particulardate based on projected sales.

Break-even date= when the product is projected to start making a profit. How long is acceptable? Internet projects had to break even within three

months or they would not get funded. Of course the exact timing varies byindustry.

ROI and break-even are important metrics for selling new product ideasinternally and for measuring their success in the market.

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E-Marketing Enhanced Product DevelopmentCustomer CodesignElectronic InputWeb Content DevelopmentInternet Properties Spur OtherOpportunitiesNew-Product Strategies for E-Marketing



Product ConfigurationBrokeragesCustomer ServiceDistributionRelationship MarketingOutsourcingInformation SharingCentralizing Information

AccessMultimedia


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Thousands of products based on Internet technologieshave been introduced.

These can be classified according to the customers towhom they appeal:

Each column represents a group of customers,

Each row in the exhibit represents a type of product.

This matrix is helpful because it displays areas of new-product opportunity.

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Content Provider Internet

Infrastructure

End User

Hardware Server farm, high-speed switch

Router, satellite,fiber-optic backbone

Modem, PC, WebTV, PDA, assistive

technologies,

convergence

products

Software Web authoring,encryption,

audio/video

digitizing

Enabling software

Protocols, TCP/IP,DNS

Web browser, e-mail client,

decryption,

audio/video player

software

Services E-commerceconsulting, Web

development, Web

design, application

service providers

ISP, backboneservice provider,

Web hosting

Web-based virusscan, auto updates,

calendaring, e-mail

Product Taxonomy

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Overview

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New-Product Trends

Cutting-edge products and the technologies that makethem work create digital value applying the followingconcepts:

Each represents a new brand, A new product line, Adiscontinuous innovation, A technology improvement.

New products (from wireless end user appliances to B2Bsoftware) success depends on how well they delivercustomer value by offering desired benefits or by loweringcosts.

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New-Product Trends

Many new products are unseen by the final consumer: BUT they form the engine that drives electronic commerce,

They are enabling products, Cisco Systems makes the hardware and software that

powers computer networks.

New technologies accelerate product change.

Most important technologies in 2002 = wireless/mobilecomputing, distributed content delivery and local caching,digital imaging, clustering and parallel computing, high scaleinteroperability, and universal network storage.

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New-Product Trends

4 new-product trends in the B2B market, with the potential to improve efficiencyand effectiveness in marketing functions such as sales, distribution, supply chainmanagement, and marketing research:

1. Value chain automation. Software products enable businesses toperform important marketing functions (value chain).

2. Outsourcing. Businesses look for providers of key value chain functions.Application service providers (ASPs) perform marketing functions on behalfof other businesses.

3. Information sharing. Organizations now share internal information withselected value chain partners. OBI and XML, two variations on electronicdata interchange (EDI), support information sharing.

4. Centralizing information access. Corporate portals = a singleintegrated interface to all of a companys data stores = reduce information

search times for their employees = cost savings + effectiveness.

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New-Product Trends

3 new-product trends operate primarily in the B2C market and have thepower to open up new markets:

1. Multimedia. Gains in network performance enables Internet

multimedia (from video on demand to Webisodes).

2. Assistive technologies. Clever developments allow for computeraccess by persons with a wide range of disabilities + use foreveryday applications such as listening to ones e-mail while driving.

3. Convergence of media. Expect the biggest initial improvementsin the corporate market with gains in consumer markets closebehind.

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Value Chain Automation

Value chain automation: Benefits = improvements in efficiency and effectiveness of

operations among suppliers, manufacturers, and the entiredistribution channel,

Automates existing business processes (order execution), Enables processes not previously feasible (data mining to uncover

consumer behavior patterns), Helps firms solve some of its main difficulties + lower costs =

lower prices for customers.

Enabling products = expensive, BUT properly installed and managed, they can bring

millions of dollars to the bottom line through new marketopportunities or cost savings.

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Value Chain Automation

6 benefits by purchasing off-the-shelf software solutions:

1. Rapid deployment: Installation team + after-sale support services + helps tointegrate existing systems with the new technology provided.

2. Relatively bug-free rollout of systems: Service quality of the businessimmediately improved.

3. Integrated solutions: Enabling technologies = integrated solutions that helpwith multiple functions in the value chain.

4. Large number of features: Increasing competition = more features offered.

5. Compatibility with business trading partners: Improves internal systemsconformity to industry standards + enhances its position in systems integration.

6. Cost savings: Infrastructure products save both time and money.

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Company Core Business

Commerce One Value chain management B2B portals

Redback Networks Broadband access solutions

Vignette E-relationship management through customized content

F5 Networks Internet traffic and content management

loadbalancing traffic across servers

Vitria Technology Value chain management

Exodus Scalable Web hosting services

E.piphany Customer relationship management

Internet Enabling Companies

Source: Adapted from Pegasus Research

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Promotion

2. Targeted Advertising: Marketers go to great lengths to target ads to appropriate demographic

and psychographic segments.

User surfing patterns form an excellent basis by which to target ads. DoubleClick sells services to target ads based on users surfing habits +

can follow the user from site to site around the Internet and target adsaccordingly.

3. Personalized Promotions: Many sites create custom Web pages for each user, targeting specific

promotions for each users individual preferences. Dynamically creating Web pages = a complex programming task. Firms such as Vignette automate dynamic creation of Web pages.

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Product Configuration

Proper component configuration = difficult tasks in high-tech productssale:

Well-trained sales force can properly configure products for end user,

BUT, many end users prefer to configure their own products online: For convenience, To speed delivery of the product, Self-service = product benefit.

Automatic configuration requires a software program = expert system. Enabling software guide users through the process of product

configuration based on their needs. Clients = communications, healthcare, and high-tech manufacturing

industries, where configurations for equipment and services are oftencomplex.

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Brokerages

Web auction sites: Are all the rage in the B2B, B2C, and C2C markets. Difficult to write + long to test and debug the software. Key characteristic = reliability.

Airline, food, gas, and water industries use reverse auction software todrive down prices for products purchased from their suppliers.

Payment/Financing: Barriers to trading in the B2B market = processing credit for purchases. Enabling software = automates providing, verifying, and processing

credit. Key characteristic = reliability. Software support B2B payments + financing + customer credit approvals.

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Customer Service

Generally, businesses dont respond very promptly to e-mail inquiries andcomplaints.

Ideally: messages should receive a personal response with 48 hours. BUT employee costs for e-mail customer service can be prohibitive, + businesses prefer to develop a consistent response to similar problems.

Enabling softwares help route + respond to e-mail customer inquiries: Immediately acknowledges e-mail + promises a response within a fixed

time frame, Can route the message ( scan for keywords) to the appropriate customer

service representative, Can call up previously messages + account information to help form a

context for the inquiry, Can compose a personalized response using artificial intelligence! Customer service representatives accept the generated response or

compose an entirely new response. Companies can double the productivity of their e-mail response teams.

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Distribution

Goal =just-in-time (JIT) delivery of products to avoidcarrying excessive amounts of inventory.

Main difficulty = coordination. Solution = enabling software that supports value chain

management.

Sun Microsystems: Does not make any of the components that go into its computers,

Coordinates all interactions in its value chain,

= the activities of its suppliers and its suppliers suppliers to ensurecontinued viability of the entire value chain.

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Overview





New-Product TrendsValue Chain AutomationPromotionProduct ConfigurationBrokeragesCustomer ServiceDistributionRelationship MarketingOutsourcingInformation SharingCentralizing Information

AccessMultimedia


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Relationship Marketing

Datamining customer information reveal importantmarketing opportunities.

Enabling software automates the task of profilingcustomers:

Identify customers characteristics,

Target e-mail promotions, Provide real-time profiling of consumer behavior

dynamic site configuration in response to that behavior.

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Overview



E-Marketing Enhanced Product DevelopmentCustomer CodesignElectronic Input

Web Content DevelopmentInternet Properties Spur OtherOpportunitiesNew-Product Strategies for E-Marketing


New-Product TrendsValue Chain AutomationPromotionProduct ConfigurationBrokeragesCustomer ServiceDistributionRelationship MarketingOutsourcingInformation Sharing

Centralizing InformationAccessMultimedia


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Outsourcing

Application service providers (ASPs) perform off-sitevalue chain functions for their client businesses.

Example =outsource payroll: manager logs onto the ASPs

Web site + enters the hour totals for each employee +hits submit, and a courier delivers the checks the nextday!

Distinction between application service providers and theenablers = location + support Enablers: business license software + install, configure, and

maintain the software on-site,

ASP: the software resides at the ASPs site + the businessaccesses the application remotely via a Web browser.

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Outsourcing

Advantages of the ASP: Lower startup costs, Lower or no information technology staff costs,

Lower switching costs, Particularly attractive for small businesses.

Disadvantages of the ASP: Lack of control over key customer data and business processes.

ASPs: Some can run an entire business = aggregate almost all of the value

chain functions for the client businesses. Other ASPs focus on a single value chain function such as payroll or

customer service.

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Application Service Provider Database

Source:WebHarbor.com
http://www.webharbor.com/http://www.webharbor.com/http://www.webharbor.com/http://www.webharbor.com/

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Information Sharing

Today businesses are sharing information with their value chain partners. Electronic data interchange (EDI)= generic term for the exchange of data

between businesses in digital form.

Benefits: Consistent standards = data do not need to be rekeyed by the receiving

business, Exchange is easier if the businesses agree on a common format for

exchanging data, BUT, this is complicated because most businesses store data in

proprietary formats.

2 solutions: Open buying on the Internet(OBI) = each business translate its data to a

common format for exchange, XML, allows each business to keep its own format while sending the

instructions for translation to the receiving business.

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Information Sharing

Extensible Markup Language (XML): Extensible = the language can be extended by the user to

accommodate new types of data. It has strong support = it is built into Internet Explorer, Netscape

Navigator, the MS-Office suite, etc. A number of industry standards groups base their content

definitions on XML.

To better understand XML:

Consider that a cook who is baking a cake needs both aningredient list and a recipe to be successful, The ingredient list corresponds to a companys data, The recipe corresponds to XML formatting instructions, The company receiving the information must have both in order to

decode the communication.

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Overview









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Centralizing Information Access

Corporate portals: Use Web-based technology to create sites specifically for a

particular companys employees. Are an extension of an earlier concept, the intranet (site for

internal consumption for corporate information such as news,policies, and procedures). A wide variety of corporate information storessuch as sales data,

groupware documents, and calendars. Translate data from all of the information stores into a common

interface for presentation to the employee.

Have the potential to save businesses millions of dollars byreducing the time that their employees spend searching forinformation.

Example: My.yahoo where users can customize the screen displayto include categories of information that they find useful.

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Overview









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Multimedia

Real-time multimediasound and video: Currently of fairly low quality when viewed or heard on a computer over the

Net. Limiting factor = lack of sufficient bandwidth. The quality of transmission is

directly proportional to the bandwidth of the communications channel.

Most users still connect to the Internet with modems operating at 56K orslower. BUT: growing penetration of high-speed access via cable modems, DSL

modems, and wireless technologies. AND, Cisco systems + other networking companies are working on

technologies for increased bandwidth at lower prices.

Multimedia technologies are available:

Conferencing software, Webcams, CD-quality audio, Streaming video, Internet telephony VoIP.

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Multimedia

MP3: Standard for CD-quality audio. Began almost as a renegade movement that has now become

mainstream. WinAmp = one of the first players to decode MP3 files.

But how does the user find the files online? Napster = first major service to allow users to share MP3 files from their

computers with the entire Net community. It maintained a database of MP3 availability but did not actually provide

the music. Legal battles with the recording industry finally forced Napster into

bankruptcy. Napster was still hoping to reemerge from bankruptcy thanks to a

partnership with Bertelsmann AG. BUT Napster may have trouble winning back market share from the

hundreds of MP3 search tools and services such as Morpheus.

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Multimedia

Streaming video: Requires more bandwidth than streaming audio. More heavily constrained by the lack of bandwidth online. BUT observers see a bright future for live video and video on

demand. broadcast industry and the video rental business could be

threatened by its development. SonicBlue's ReplayTV, a competitor to Sony's TiVo, allows users to

record broadcast video and then share it over broadband Internetconnections with other SonicBlue users.

Internet telephony: Transmits phone calls relies on the Web eliminating long-distance

charges.

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Multimedia

Voice over Internet Protocol (VoIP):

Major constraint = bandwidth. Voice quality is quite good, but it is not reliable.

Requires less bandwidth than streaming video, Internet telephonyis an attractive business proposition.

Net2Phone offers products that can complete long-distance calls

off the Net. Represents a threat to long-distance phone companies (for

international calls).

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Overview







Centralizing InformationAccessMultimediaAssistive TechnologiesThree Types of Convergence

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Assistive Technologies

Designed to help people with disabilities operate their computers.

Potential customers = Millions of people are for these productsnotjust disabled people.

Assistive technologies do allow persons with certain disabilities toproductively enter the workforce:

Voice-activated computers: Computer can be completely controlled by voice commands. In call centers, the caller interacts with the computer by speaking

commands.

Large-type screen displays. Help people with poor vision see andnavigate on their computer screens.

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Assistive Technologies

Type-to-speech or braille: Allows blind people to interact with a computer. Reads Internet pages aloud. Technologies are also being built into automobiles such as GMs OnStar system

= drivers can listen to e-mail messages and stock quotes while driving.

Important implications for Web page design = designers avoid graphics sincethe technology can only read text.

Speech-to-text telephony. The telecommunications device for the deaf(TDD) converts speech to text, allowing deaf people to hold telephoneconversations or conference online.

Eye gaze-to-type: People who are completely paralyzed can control a computer using eye gaze-

to-type technologies. The user controls her computer by staring at control buttons on the screen.

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Home Page Reader

Source:www-3.ibm.com/able/hpr.htm
http://www-3.ibm.com/able/hpr.htmhttp://www-3.ibm.com/able/hpr.htmhttp://www-3.ibm.com/able/hpr.htmhttp://www-3.ibm.com/able/hpr.htm

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Overview









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Three Types of Convergence

The marketing opportunities in media convergence are

tremendous.

3 types of convergence are attracting attention today:

(1) voice, video, and data on corporate networks,

(2) wireless devices and the Web,

(3) the Web with broadcast media.

Voice Video

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Voice, Video,and Data on Corporate Networks

Will allow corporations to have:

1 single switch for voice, video, and datacommunications rather than 3 separate systems.

Cisco is leading the charge in this market:

Supporting both the infrastructure and end userappliances such as IP telephones.

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Wireless Devices and the Web

Wireless devices: Cell phones and personal digital assistants(PDAs), With Web access + sometimes a global positioning function (GPS), Race to see whether cell phones or PDAs will become the preferred

platform for wireless Internet access, Many people think these devices are likely to merge = a single device

would serve as a combination cell phone, PDA, and Web browser.

Limitations:1. The screen size of PDAs & cell phones: Tiny cell phone screen can be used to check e-mail and retrieve weather,

news, and stock quotes. BUT Web content is designed for color on much larger displays. Web sites are starting to create content for the Wireless Access

Protocol (WAP) so that it displays correctly on these tiny screens. Interesting application running on a PDA is Auctioneer, used to track eBay

auctions.

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2. Bandwidth: Wireless networks are much slower than land line networks. BUT the market is growing rapidly. One technology to watch = WiFi networks built on the Ethernet

802.11b standard + 3G wireless cell phone networks.

Outside of the US, the current & potential market for wireless Web accessis greater (a higher penetration rate for mobile phone communications).

Why? Telephone companies in other countries usually charge by the minute for local

calls. Many users conclude that if they are going to be charged by the minuteanyway, they might as well have the additional benefit of wireless access. Consumers in many countries have to wait years for a telephone line to be

installedat a high price.

In Japan, DoCoMos i-mode service has attracted millions of users whocheck weather forecasts, sports scores, maps, stock trading, banking, etc.

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Wireless mobility of the future will have 6 components :1. Content provider. The firm creating wireless versions of current Web

content. This might include sites such as travelocity.com and B2B servicessuch as sales force automation.

2. Portal software. These firmssuch as Yahoo!, AOL, and Microsoftwill

provide a higher level of personalization, maintaining user preferences fora wide variety of content.3. Data aggregation agent. Companies such as Yodlee, Acxiom, and

Microsoft keep track of a users login and password information for quickmobile access to banks, stock brokerage accounts, and so fortha boonto business travelers.

4. Infrastructure. These firms provide wireless Internet access, parallel to

non-mobile ISPs.5. Transaction providers. American Express, Visa, and others will serve

online retailers by processing payments.6. Mobile devices. Cell phones + PDAs, or some convergence of the two

platforms, allowing the user to send and receive data.

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Broadcast Media and the Internet

iTV (interactive TV): Convergence is between broadcast media (television and radio) and the

Internet. Result = single appliance to receive broadcast content over the Internet. Major obstacle = lack of bandwidth to support full-motion video. Cable modems, DSL modems, and fixed wireless access to the home may

provide more bandwidth.

MSN TV: Users simply browse the Web on a TV screen. Not very successful because of the low resolution of TV screens +

consumers are not used to reading on a TV screen.

ABCs Enhanced TV: Users need to log onto ABCs Web site while they are watching TV. Users can get more information about the current broadcast, play games

with other users, and participate in polls and chats.

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Broadcast Media and the Internet

When the bandwidth does become available, it is unlikely that theWeb will be used only to serve TV and audio on demand.

A taste of the future = BrilliantDigital produces multipath movies inwhich viewers take a more active role.

Future products depend on the telecommunications industry: Since mid 2000: The industry started to collapse. $2 trillion lost in valuation + numerous high profile bankruptcies. Markets were flooded with products and services driving prices down

below profitable levels.

The products that survive in the long-term will be those that bestdeliver customer value.

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Infrastructure

* Verizon

* Sprint

Transaction

Provider

* AmEx

* Visa

Content Provider

Portal Software

Data Aggegration

Agent

Mobile Device

* Palm

* Nokia

* HP

Six Components of Mobile Communications

Source: Information from Peppers and Rogers Group (2001)

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Key Terms

Application service providers(ASPs)Assistive technologies

BrandCobrandingMedia ConvergenceCorporate PortalsDiscontinuous innovationsDomain name

Enabling technologiesExtensible Markup Language(XML)Internet telephony

IP address (Internet Protocol)

Just-In-Time (JIT) deliveryNew product linesOutsourcing

Personal Digital Assistant(PDA)ProductStreaming audioStreaming videoURL (Uniform Resource

Locator)Value chain automationVoice over Internet Protocol(VoIP)Wireless Access Protocol(WAP)

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Review Questions1. What are the arguments for and against using existing brand

names on the Web?2. List six new-product strategy categories and provide Internet

examples of each.3. Why is value tied to the entire product experience?4. What are some important criteria for Internet domain naming?5. How does labeling work on the Internet?6. What techniques can e-marketers employ to enhance new

product development?7. Why do e-marketers need to forecast revenue, expenses, ROI,

and payout for new products under consideration?8. What are the advantages to buying B2B software off the shelf?9. Why are technology standards like RosettaNet important?10. What is the major limitation to the use of multimedia over the

Net?11. What are assistive technologies?

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Discussion Questions

1. Of the three types of convergence, which do you think has thegreatest market opportunity? Why?

2. How can automating the value chain increase customer value?

3. Under what circumstances would it make sense to take an existingbrand name online? When would it not make sense?

4. Why do e-marketers often have difficulty estimating the revenues,costs, and payout or ROI of a new product under development?

5. What are some of the consumer privacy issues related to enabling

products for online promotional activities such as targetedadvertising and personalized promotions? How would you, as an e-marketer, respond to these privacy issues?

6 Do you agree with the CEO of Classmates com who says his firm

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