The Net for Secondary Data

Any computer connected to the Internet is like a book sitting on a library shelf. It is there to be accessed and used as a source of information. A major difference is that the information available on the Internet is not censored, reviewed, or authorized by anyone other than the owner of the computer. The information is also manageable; it can be changed and updated at any moment. This, of course, leads to a great number of Web sites containing information of questionable quality. Nonetheless, there are many ways that the Internet is better than the library. It is open 24 hours a day, the information is often more current, and users have equal access from all over the world. This information is also quick to find, easy to download to your computer, and there are no fines or late fees (as long as you don't break copyright law!).

It is important to remember that the library and other secondary data sources contain lots of information that is not available on the Internet. A good researcher will explore many information sources and then compare data for accuracy and appropriateness before making decisions.

What types of information do marketing managers need that might be available on the Net? It is important to collect information about consumers, competition, and other factors outside of the organization. These data help to answer the question: What opportunities and threats are in the business environment for a particular organization and industry? Armed with this knowledge, marketing managers can plan products, pricing, distribution, and promotion that better meet the needs of organizations and individuals.

In this chapter we focus on secondary data: information gathered by someone else who makes it available to us. Sources of secondary data on the Internet vary from the U.S. Census Bureau to online magazines and research companies that provide statistics and analyses to help marketers make decisions.

Environmental Scan

To identify threats and opportunities, a corporation wants information about the macroenvironment in which it operates. An environmental scan seeks market information about the following:

§ Demographic trends—Population characteristics such as age, income, and education

§ Social and cultural trends—Changing values and habits such as health consciousness and time poverty

§ Competitors—Brands that fulfill similar needs in the same market

§ Technological forces—Innovations outside an industry that can be applied to both products and processes, such as the Internet and laser technology

§ Resource availability—Land, labor, and capital availability

§ Economics— Business cycles and changes in income and spending patterns

§ Legal and political environments— Political leaders and legislation affecting particular industries

Much of this information is available on the Internet: some for free, and some for a fee. The Toyota Echo exercise will guide you to many sources of free information. Remember to evaluate it by determining its source, timeliness and general quality.

Toyota Echo

Automobile manufacturers are continually seeking information about changes in the automobile industry and its macroenvironment. This exercise focuses on the Toyota Company (www.toyota.com) and directs you to perform an environmental scan on their behalf as they gauge a new product introduction. The product is the Toyota Echo, actually introduced in fall 1999. It is a low price, high quality vehicle made for car buyers who are 18-33 years of age.

Demographics

Is there a large target college population for the Echo? An excellent source of demographic information on the Web is the U.S. Census site. Like many government Web sites it is free and maintained by your tax dollars. Maybe they should sell advertising! While the official census takes place every 10 years, the Census Bureau maintains more current statistics from other surveys. We will use the Census statistics to study the size and composition of the college market. Locate the U.S. Census Web site at www.census.gov. You should see a screen that looks similar to Exhibit 2 - 1.

At the Census site, click on subjects A-Z. Next find College Enrollment. Under "Historical Tables" click on Table A-7: College Enrollment of Students 14 to 34 Years Old. This information will help you advise Toyota on the attractiveness of the college student target market. Remember what we said earlier about Web sites constantly changing? If these instructions don't take you to this particular table, you can follow your nose through the new site to find the information for this exercise.

1. How many undergraduate students in this age group were enrolled in college during the most current year for which they have information? Caution! The figures listed are in thousands. There were 3,749,000 undergraduate students enrolled in college during the most recent year, which was 1998.

2. Is the trend up or down since the previous year? The trend in the amount of undergraduate students in the 14-34 year old group is up 244,000 since 1997.

3. Is the market better for female or male students? The market is better for females. In 1998, there were 5,824,000 female undergraduate students, while there were 5,069,000 male undergraduate students.

Exhibit 2 - 1 U.S. Census Bureau

Source: www.census.gov

Cultural Trends

How is the market changing? Would the Echo appeal to its target market? Visit American Demographics/Marketing Tools at www.demographics.com and follow the link to Marketing Tools Magazine. Conduct a full text search using the term "generation X." Review the articles to learn more about this market and answer the following questions. Be sure to read "The Lost Generation" in the April 1997 issue.

4. What is the spending power for young people on a yearly basis? The annual spending power for young people is rather high. It is estimated that young people spend around $89 billion a year. Their own money constitutes $57 billion of the total spending, and families provide $32 billion of the total.

5. Briefly describe three values held by Generation X that might affect Toyota's advertising messages. Generation X people are attracted to the brands of products. They tend to listen to the radio instead of reading the paper. They typically enjoy humorous advertisements.

6. Which media should Toyota use to reach Generation X consumers? Toyota should use the radio and television to market to the Generation X consumers. They could also sponsor events that Generation X people go to, such as rock concerts.

Competition

How does the Echo compare with the competition? Prior to finalizing the marketing strategy, you will assist Toyota in a competitive analysis. Visit the Toyota home page, www.toyota.com and find the Toyota Echo model.

7. Locate the vehicle specifications and write down what basic features are included and how many colors are available. The basic features of the Echo are a 180 horsepower engine that has 6,000 rpm (for the 4-cylinder). The engine has 1.5 liter with twin valves. The basic dimensions have seating capacity for 5 people. The colors available are absolutely red, alpine silver, black sand pearl, brilliant blue pearl, electric green, solid gold metallic, and super white.

8. Now find Edmund's automotive home page at www.edmunds.com and find their review of the Toyota Echo. List 3 competitors identified by Edmund's. The Ford Escort, Hyundai, and the Suziki Swift are all competitors of the Toyota Echo.

9. Look up Edmund's review of one of the competitors you identified above. How does the Echo compare with this competitor (strengths/weaknesses)? Echo has higher horsepower than the Suziki Swift. The Swift only has a 1.3 liter engine, and produces only 79 horsepower at 6,000 rpm. In addition, the Echo has a Drivetrain warranty of 5 years/60,000 miles, whereas the Swift has a shorter Drivetrain warranty of 3 years-36,000 miles. Nevertheless, the Echo has a MSRP of about $12,000, and the Suziki Swifts’ MSRP is just $10,000. Also, the Echo has lower reliability and gas mileage than the Suzuki Swift.

Deja.com

These sites are not the only way for Toyota to learn about competition. They can visit competitor's Web sites, read reviews in online magazines, and they can also check the Usenet. The Usenet consists of over 35,000 news groups, each one a forum for public discussion on a very specific topic. People post articles to newsgroups for others to read. Discussions range from the meaningful to the absurd, but marketing planners can learn about products and industries by monitoring discussions. There are even firms that, for a fee, monitor the Usenet and notify corporations of any bad rumors circulating about them. This gives them an opportunity to quickly post a response to dispel the rumor. You can do some of this sleuthing on your own. A highly specialized search engine called Deja.com has been developed to save and index all postings to the Usenet.

10. Let's taste the flavor of discussion about the Echo competition. Visit the Usenet at Deja.com on the Web at www.deja.com. Toyota would like to know which newsgroups to monitor in the future, so enter one Echo competitor in the discussion search box then click the Find button. What are four newsgroups you see listed? Note that Deja.com rates the ones nearer to the top as more relevant to your search. Four newsgroups listed for the Ford Focus are alt.autos.ford.focus, alt.autos.ford, rec.audio.car, and rec.autos.sports.info.

11. Check out some of the conversation and report on one thing that you learn which would be helpful to Toyota marketing managers. There seems to be a general consensus that many customers want a sedan that has a size between the Ford Taurus and Focus.

12. How would this information help Toyota? Maybe Toyota could change the size of the car to meet the demands of the market..

Putting It All Together

Now reflect on what you have learned so far to complete the following table. For each item listed, indicate one or more Web sites not mentioned in this exercise that provide secondary data for marketing decision making in the automobile industry. Use the search skills from the previous chapter to help out. Then rate each Web site in terms of content and style (the site's look/feel and ease of navigation) on a scale from 1 to 10 with 10 being the highest score.

Trend

Web site name and URL

Content

Style

demographic trends

http://www.odu.edu

http://www.sasked.gov

Social and cultural trends

http://www.fsl.orst.edu

http://www.wetheliving.com

competitors

American Suzuki Motor Corportation

http://www.suzuki.com

Ford Motor Company

http://www.ford.com

technological forces

http://www.autoweb.com

http://www.hta-bi.bfh.com

economies

The Economist

www.economist.com

legal and political environments

The Federalist Society

http://www.fed-soc.org

Leveraging Technology

Measuring Web Site Traffic

One crucial type of secondary data for Web sites is an analysis of traffic relative to the competition. For television shows, the Nielsen ratings provide these important data to help networks modify their programming and charge for advertising. For Internet ratings, Media Metrix, Nielsen//NetRatings, and @Plan perform the same function.

Nielsen//NetRatings uses a representative panel of over 14,000 of home users. Panel members agree to run software on their computers which will monitor their behavior as they surf the Internet. The software records where they go and how long they stay there. The software also reports back at scheduled intervals to Nielsen//NetRatings where the data are analyzed in the aggregate. Using these data, Nielsen//NetRatings is able to generalize results to the entire population of Web users. On their site you will find a list of the top 10 Web sites ranked by reach percentage. The demographic targeting reports allows users to select the target demographic that interests them and receive a list of sites matching that demographic. See Exhibit 2 - 2 and Exhibit 2 - 3.

Exhibit 2 - 2 Nielsen//NetRatings Demographic Targeting Query

Source: www.nielsen-netratings.com

Exhibit 2 - 3 Nielsen//NetRatings Demographic Targeting Report

Source: www.nielsen-netratings.com

Other available reports include:

§ Web Site Reports by property, domain, site or category

§ Bannertrack^sm Reports by impression, domain, or company

§ Audience Summary Reports by profile, or traffic

For these reports to be valid the panel must be statistically representative of the sampled population. After all, they are generalizing the behavior of millions of people based on the actions of thousands. And the stakes are very high since advertisers use the reports as the basis to make ad buys. Because many sites are ad-supported their very livelihood may depend on the reports.

So how does Nielsen//NetRatings generate a representative panel? Most marketers agree that the best way to form a panel is by randomly dialing phone numbers in the geographic area sampled. The reasoning? First, almost everyone owns a telephone. Second, the response rate from a phone call is higher than that obtained through a direct mailing. Basically, people have a harder time turning down a persistent voice.

The Net as Distribution Channel

Estimated time: 90 minutes

Chapter Outline

Learning Objectives

§ Online Distribution Channels

§ Direct Channel: Digital Products

§ Indirect Channel: Online Auctions

Auctions classified by market

Auctions classified by type of auction

Additional Services

How do Auction Houses Make Money?

§ Online Retailing: "e-tailing"

§ Leveraging Technology

Site Rating Services

§ Understand the Net as a direct distribution channel for digital products

§ Describe the current status of music delivered over the Net

§ Discuss the Net as an indirect distribution channel

§ Give an example of an online retailer and an agent intermediary

§ Identify several types of auctions

§ Describe several services offered by online auction houses

§ Explain the Net as electronic retailer in the distribution channel

Online Distribution Channels

The Internet is an important new distribution channel (the "place" component of the four P's). In this chapter we'll review the distribution function, then explore three major developments.

A distribution channel is a set of firms and individuals that facilitate the movement of product from producer to business user or consumer. Many companies use marketing intermediaries, such as wholesalers and retailers, between them and the consumer. These intermediaries often take ownership of the product and resell it to other intermediaries along the channel. This type of channel is called an indirect distribution channel. A typical indirect channel includes a manufacturer, wholesaler, retailer, and consumer. If no intermediaries are used, the channel is direct: product flows directly from producer to consumer or business user.

The Internet created reallocation of distribution channel functions, oftentimes to unlikely firms. In traditional automobile channels, for example, car dealers sold product, provided financing, and offered repair services. On the Net, new metamediaries do all this and more for a number of automobile companies on one Web site. In particular, the Net spawned three trends in distribution--disintermediation (e.g., selling software directly to consumers), new intermediaries (e.g., shopping agents bringing buyers and sellers together online), and metamediation (e.g., providing information and referrals for all aspects of a wedding, including reception sites, flowers, the cake, dresses, and the wedding registry).[i] Disintermediation results in lower costs to consumers and/or higher margins for the manufacturer. New intermediaries drive costs back up because there are more firms profiting from the sale. The metamediaries are particularly interesting since they are often organized around major purchases such as automobiles (www.Edmunds.com) or major life events such as weddings (www.theknot.com). Metamediaries save consumers enormous amounts of time by grouping related services on a single site and providing trusted information content. For example, Edmunds provides auto reviews, links to auto suppliers, insurers, financers, warranties, and after market options.

The Distribution channel is one marketing function most affected by the Internet. There are a number of exciting developments. This chapter will explore three of those developments:

§ Direct Channel: Digital Products—Direct distribution of media, music and software.

§ Indirect Channel: Online Auctions—Buying and selling on online auctions.

§ Online Retailing—Buying and selling on online storefronts. This can be done either directly from manufacturer to consumer or indirectly through one or more intermediaries.

Direct Channel: Digital Products

Direct distribution of media content, music, and software is a revolutionary practice made possible by the Internet. Suppliers can deliver content directly to the consumer on demand without using the U.S. Postal Service or the network of delivery trucks and carriers that typically deliver products to your door. In fact, any digital product can be delivered directly over the Net.

§ Media—Magazine and newspaper publishers create text and graphics and put them on Web sites for your review. Most are advertising supported, however some charge a subscription. Radio stations broadcast live using digital audio, and television stations are beginning to send video over the Net.

§ Music—Many online music stores such as CDNow allow customers to sample 30 seconds of a CD track prior to making a purchase. As of this writing, the major record companies were not allowing the entire content of a CD to be transferred over the Internet. Their concern—piracy. In addition to this, CD tracks are enormous files around 50MB in size. However, a compression scheme called MP3 allows CD tracks to shrink to about 1/10^th of their size. This allows individual tracks or even an entire CD to be downloaded over the Internet. The music can be played back on the user's computer or via a portable Walkman™ like device called the Rio. True to the music industry's fears, bootleg copies of CDs have appeared on the Internet. Lycos and Real.com even have search engines that help you locate MP3 files online. Napster.com provides software to turn any user's computer into a music server whose available titles will be cataloged on the Napster site for the Internet community. Napster has been so popular on college campuses that many universities now block access to Napster.

§ Software—One can purchase or sample software online: the supplier allows users to download directly over the Net to a computer.

Indirect Channel: Online Auctions

Online auctions are exploding in popularity on the Internet. You can find auctions on almost any item. Once the province of online auction houses such as Onsale and eBay, auctions are now offered by retailers such as Sharper Image and Amazon.com. In addition to selling products through traditional and online retail stores, these firms serve as intermediary agents when they bring buyers and sellers together in auctions. Auctions may be classified according to the markets (consumer or business) and according to the type of auction (Yankee, Dutch, and so forth.). Most auction houses offer a number of additional services such as escrow accounts and community forums.

Auctions classified by market

§ Business to Business auctions are generally not available to the public—even for viewing. Such auctions often involve thousands or millions of dollars for big ticket items such as natural gas purchases. They are becoming increasingly popular with businesses in commodity markets such as metals or in any businesses seeking to unload surplus inventory.

§ Business to Consumer auctions allow established retailers or wholesalers to sell excess inventory or odd lot sizes. Some of these retailers offer their own auctions as a part of their Web site. For example, Egghead.com, an online retailer of computer products, runs Surplusauction.com. Similarly, Sharper Image runs an auction on their site. Other retailers use an established auction house such as Onsale to sell their inventory.

§ Consumer to Consumer auctions provide a forum for individuals to sell to other individuals. The largest of these auction houses, eBay, lists over 3.5 million items in nearly 2,900 categories. On a daily basis eBay attracts more traffic than Amazon.com though many of these are return visitors checking up on their auctions. (source: www.mediametrix.com). Some individuals, so called powersellers, sell high enough volumes to make a living at eBay.

Auctions classified by type of auction

§ Regular auction—Regular auctions are also called basic or standard auctions. This is the type of auction with which you may be most familiar. The seller specifies a start price, stop time, and a minimum increment for bids. The sale goes to the highest bidder.

§ Reserve auction—A variation on the regular auction in which the seller establishes a minimum price below which she will not sell the item. The reserve price is not revealed to the bidders though the public is notified as soon as bidding exceeds the reserve price.

§ Automatic bidding—Automatic bidding is not really a type of auction but rather an option you may use with regular or reserve auctions. With automatic bidding you secretly set the maximum price you are willing to bid. A software agent then goes to work for you increasing your bid in response to other bidders' agents. If the current bid exceeds your maximum, then your agent stops bidding. Otherwise, your agent tries to win the bid.

§ Dutch auction—The seller offers multiple items for sale. The top bidders all receive the item at the very same price—the lowest winning bid. Imagine that the seller has two copies of a Ricky Martin CD. The high bid on the CD's is $11; the second highest bid is $9. Both of the high bidders get the CD for $9—the lowest winning bid.

§ Yankee auction—A variation on the Dutch auction where the high bidders pay different prices. For the example cited above the high bidder would pay $11 for the CD whereas the second highest bidder would pay only $9. This is one time in life when it pays to be the runner up!

§ Reverse auction—The hottest trend in Internet auctions is reverse auctions. In a reverse auction the user specifies the price she is willing to pay for a product or service such as an airline ticket. Suppliers bid for the user's business by trying to get closer to the user's price than any other supplier and thus win the user's business.

Additional Services

§ Reputation services—As odd as it may seem auction houses are one of the few places in cyberspace (or elsewhere) that your reputation follows you in a highly documented form. At the conclusion of a sale, the buyer and seller have an opportunity to rate one another both numerically and with written comments. These comments are stored by the auction house and are publicly accessible. The function of the ratings is to help buyer and seller evaluate one another's reputability. After all, money will be changing hands. The buyer wants to be sure that if she sends a check, the seller will deliver the goods. The seller wants to be sure that the buyer pays on time and does not bounce checks.

§ Insurance—Some auction houses offer free insurance up to a couple of hundred dollars to protect buyers and sellers through a transaction.

§ Escrow services—For big ticket items where the consequences of fraud are very severe, the buyer and seller may employ a third party to help manage the transaction. Companies such as i-Escrow and TradeSafe provide escrow services. The buyer sends payment to the escrow agent who informs the seller that payment has been received. The seller then ships the item. If the buyer does not complain to the escrow agent about delivery or condition of the goods within a specified period of time, then the escrow agent releases payment to the seller. The escrow agent takes a percentage of the sale for this service—about 5%.

§ Valuation services—Valuation services help the buyer get an independent appraisal of the value of the seller's goods. The appraiser takes a percentage of the sale to offer this service.

§ Discussion groups—Auction houses become communities in their own right with discussion groups in which the players can interact. Discussion groups are available for many item categories such as collectibles.

Exhibit 7 - 1 eBay Home Page

How do Auction Houses Make Money?

Some auction houses such as Yahoo! charge no fees and make their money by selling ads. Others such as eBay are fee supported. Auction house fees generally fall into the following categories:

§ Listing fees—Listing fees are paid by the seller in order to list her item for auction. Generally this is a nominal fee of at most a few dollars.

§ Featuring fees—Featuring fees are paid by the seller in order to make her item stand out in the listings. The item might appear on the home page or at the top of the listings for a particular category or in boldfaced type, and so forth. Featuring fees can be pricey.

§ Sales fees—The seller pays sales fees to the auction house at the end of a successful auction. The house receives a percentage of the high bid—around 2.5%.

Armed with this brief overview, this exercise will send you to eBay in order to view an auction. You'll need to register at eBay, but don't worry - registration is free. Start by visiting eBay at www.ebay.com. A screen similar to Exhibit 7 - 1 will greet you.

1. First let's start with statistics

a. How many items are on sale right now? There are currently 5,118,304 items on sale at ebay.com.

b. How many categories does eBay provide to list items? EBay offers 13 different categories to list the products.

c. How do you think eBay chooses its categories for organizing sale items? They might base their organization on how other business sell items and what categories those businesses use.

d. Do you think that having so many categories might cause sellers to list under the wrong category? Yes, I think that could be a potential problem. However, mistakes could happen either way (whether they have more or less categories).

2. Go ahead and register—"It's free!" Were you required to provide credit card information as part of the registration process? Why or why not? I was not required to give my credit card info. In my opinion, the reason eBay does not make consumers do this is that consumers probably don’t want to give their credit card information if they aren’t even buying anything. For me personally, I would have to trust a company before I would provide such information.

3. What steps are required in order to sell an item? In order to sell items on eBay, the user must be registered, provide a valid credit card if they are new to selling, and make sure they item you plan to sell is allowed on eBay. Next, they choose a category and decide if they will create a picture of the item.

4. What steps are required in order to buy an item? The steps involved with buying an item include choosing a category, browsing the gallery of items, and offering a bid for the product.

5. Find the link to "Big Ticket Items." (Hint: The link may be located on the site map page). Choose an item for which the auction has already been completed.

a. Complete the following table:

Item	Number of Bids	Number of Bidders	High Bid
Private Florida Island	40	20	$50,201.01

b. Does the number of bids match the number of bidders? If not, then why not? The number of bidders is lower than the number of bids. The reason is probably because bidders will increase their bid when they see that another customer has a higher bid. It is a good idea to start at a lower bid and watch the bids from other people instead of bidding high in the beginning.

c. Investigate the reputations of the seller and high bidder for the item by reviewing comments made about them by other eBayers. Complete the following chart:

Seller				Buyer
	Past 7 days	Past month	Past 6 months		Past 7 days	Past month	Past 6 months
Positive	0	0	1	Positive	0	0	0
Neutral	0	0	0	Neutral	0	0	0
Negative	0	0	0	Negative	0	0	0
Total	0	0	1	Total	0	0	0

d. Quote what you feel to be a representative comment made about the seller: There were 8 positive comments made about the seller, but they were not made recently. Some of the comments include that the seller is highly recommended and has quick e-mail response time. He is also known for prompt payment.

e. Quote what you feel to be a representative comment made about the buyer. There were not any comments made about the buyer. The buyer is a new member, so he or she has probably not bought or sold many items on eBay.

f. Based on your investigation, do you think that the transaction will be successful? Why or why not? It would be difficult to assess how successful this transaction would be. The seller seems like an honest and trustworthy businessman, based on the comments people made about him. This will be helpful for a successful transaction, but the buyer has to be willing and able to buy.

Online Retailing: "e-tailing"

Online retailing grows exponentially each year. Most products and services can now be purchased online. These include CDs, books, automobiles, insurance, furniture, and even home mortgages. Some of the larger online retailers such as Amazon and CDNow are established brands. Online retailing involves a number of distribution functions which may be performed either by the retailer or are outsourced to a third party such as Digital River. The functions include Web store design and hosting, order processing, order fulfillment, credit authorization, inventory management, merchandising, data warehousing and mining, and customer service.

§ Web store design—Design describes the actual creation of the store and layout of the pages. The best designs are intuitive and easy to navigate.

§ Web store hosting—Hosting means making the site publicly accessible by providing a computer system and Internet connection. The keys to Web hosting are keeping the store open and minimizing customer wait. The store is kept open by having redundant computer systems located in different parts of the country. If one site goes down the system transparently transfers all traffic to the others. Customer wait is minimized by maintaining high speed connections to the Internet, maintaining multiple high speed servers (server farms), and by using efficient software.

§ Order processing—Order processing should be user friendly and safe. The best systems provide customers with good feedback throughout the order process. The order processing system manages an electronic shopping cart for the customer, provides the customer with a secure form to fill out, runs a credit authorization and notifies the warehouse to ship the item.

§ Order fulfillment—Order fulfillment includes shipping and handling of the order. Web retailers often ship from warehouses strategically located near airports served by package delivery companies such as UPS and FedEx.

§ Merchandising—Merchandising includes increasing site traffic, cross selling, and bundling products. Improving site construction so that the site will appear higher in the search engine rankings can increase site traffic. Cross selling includes suggesting compatible products to customers—in fast food terms, "Would you like fries with that?"

§ Relationship marketing—Relationship marketing has become especially important on the Internet as software allows retailers to track their customers' identities and preferences. This software allows customers to be greeted by name and allows retailers to make product suggestions in keeping with customers' tastes. The software that assists in predicting customer preferences is called collaborative filtering software. It works by finding other customers who share your preferences and then suggesting products to you which interested those other customers.

§ Data Warehousing and data mining—Online retailers collect a tremendous amount of data about their customers and sales. Analysis of these data helps them redesign their Web sites to feature high demand products, as well as assisting in product mix and pricing decisions.

§ Customer service—There is a new generation of highly sophisticated software which assists e-tailers with customer service. One of the premier products in this category is called eGain. The eGain software scans incoming e-mail and then automatically routes it to the appropriate customer representative. The software also composes a suggested response to the message which the customer representative may accept or modify.

While e-tailers can perform all of the above functions themselves, some choose to hire other firms to provide these services—this is called outsourcing. Outsourcing distribution channel functions is a growing trend on the Internet. Since virtually all functions can be outsourced, the Internet allows for the creation of a virtual online business—one that runs no computer systems, employs no information systems staff, manages no inventory and fulfills no orders. Some companies such as Digital River and Pandesic provide comprehensive outsourcing of almost the entire business while others will outsource individual functions. You can even have a separate outsourcers manage each of the retail functions.

In this exercise you are going to build your own online store. Yahoo! Store is a comprehensive solution for small businesses seeking to establish an online storefront. Visit Yahoo! Store at store.yahoo.com.

Go ahead and test drive the store. You will actually create an online store in minutes. This is a free store with a catch—it expires after 10 days unless you pay the registration fee. You can sell anything you want at your store—don't worry, no one can place a real order. Looking for ideas? How about some stuff you have lying around your room? Once you have created the store make a printout of the home page and give it to your professor along with the URL for the store. The URL will be of the form store.yahoo.com/yourname. URL=http://www.store.yahoo.com/mcnabb.

Now complete the following chart listing the retail functions provided by Yahoo! store. Hint: you may need to explore some of the other items on the Yahoo! Store home page to answer these questions.

Function	Provided by Yahoo! Store (Y/N)?
Web store design	Y
Web store hosting	N
Order processing	Y
Electronic shopping cart	Y
Secure order form	Y
Credit authorization	Y
Warehouse notification	N
Order fulfillment	Y
Merchandising	Y
Relationship marketing	Y
Data Warehousing and data mining	N
Customer Service	Y

What type of retail operation defines your store (e.g., department store)? Explain in terms of amount of service and product assortment. My store is a specialty store that sells refrigerators. Thousands of refrigerator models would be sold and there would be a great amount of service. Salespeople in the company receive commission, so they will probably be very service-oriented since their pay relies on sales.
Who is your target market and what market position will your store occupy? The target market for McNabb Microfridges and Refrigerator’s would be all people who use the products. Families will be a large target market, as well as the restaurants and other commercial businesses that use refrigerators. It would be great if the market position is focused on the fancy restaurants who want a high quality product. That would be an optimal target market to position the refrigerators to.
What is the cost of running a store on Yahoo! Store? The cost of running a store in Yahoo varies with the size of the store. Small stores are $100 per month, larger stores are $300 a month, and a 5,000 item store would cost $700 a month.
Who are some of Yahoo! Store's more prominent clients? Magazine City, Fridgedoor.com, and Despair, Inc. are three of Yahoo! Store’s important clients.
What steps would you take to advertise your store? In order to advertise, it would be vital to recognize the target markets first and decide what will attract them to the store. Graphics and designs would be created to make the store “stand out”. The refrigerators would be separated into categories. Afterwards, the effectiveness of the advertising would be evaluated by how much sales the website contributed to.

Leveraging Technology
	Site Rating Services As sites proliferate it will become increasingly difficult for consumers to distinguish between reputable and non-reputable sites. Consumers will increasingly need to rely on reference services to select retail products and services. One rating service, Bizrate, is particularly interesting. Many Web sites agree to let Bizrate randomly sample their customer bases. They are like the J. D. Powers of the Web. The customers are surveyed immediately after completing the purchase and then again after the product is delivered (“exit survey”). The cumulative responses along different dimensions are then published on the Bizrate site. The dimensions include:
	Pre-purchase § Price § Product § Selection § Product § Information § Web site § Aesthetics § Web site § Navigation	Post-purchase § On-time Delivery § Product § Availability § (In-Stock) § Customer Support § Ease of Returns § Customer Loyalty
	Additionally Bizrate indicates the availability of the following services on each site. § Secure ordering/payment system (SSL/SET) § Online ordering shopping chart system § Online order tracking system § Customer information privacy § Gift wrapping § Live customer support § International shipping § Product search While Bizrate accepts no advertising or sponsorship, it makes money by selling detailed copies of reports to the merchants. These include trends over time along each dimension.

The Net as Marketing Communication Medium

Estimated time: 80 minutes

Chapter Outline

Learning Objectives

§ Online Marketing Communication

§ Marketing Communication at McDonald's

Public Relations

Advertising

§ Sales Promotions Galore

Putting It All Together

§ Leveraging Technology

Rotating and Targeted Ad Banners

§ Understand Web sites as electronic brochures

§ Explain two important types of online advertising

§ Describe how Web sites can be used for direct marketing

§ Discuss the use of Web sites for PR with various stakeholders

§ Discover places to send electronic press releases announcing new Web sites

§ Tell how the Web can be used for sales promotions

Online Marketing Communication

The Net is an important tool for marketing communication messages between marketers and their desired audiences. This, along with marketing research and distribution functions, is a major strength and use of the Net for marketers. Organizations promote to various audiences through advertising, public relations, sales promotion, personal selling, and direct marketing. Currently, marketers use all marketing communication tools online except for personal selling. In this chapter we discuss ways that firms use the Internet to promote their products, and then we give you a chance to explore the Web site of a firm that has done an excellent job of online promotion.

Advertising

For marketers, the Net is similar to a magazine or a television. These media have content (i.e., articles and programs) and they sell advertising. Some content providers offer classified advertising to Net users. Other content providers, who are especially successful at drawing large audiences, sell designated advertising space on their Web pages. These ads are called banners and buttons. You have already visited many Web sites and seen ads on their pages. Two sophisticated advertising techniques are keyword ads and ad servers.

§ Keyword ads— This technique is used by some of the search engines to target banner ads to the search terms that a user enters. For example, if you type Toyota as a search term, you might see ads for car dealerships or automobile parts at Toyota or its competitors.

§ Ad servers— Third party firms such as DoubleClick sell advertising and then deliver it to target users along with requested Web pages. Sophisticated ad servers actually track the pages that users visit around the Web to learn their psychographic profiles—"you are what you view". They then target ads based on the profile. Suppose you went from a site about music to check out the news at MSNBC. DoubleClick might deliver an ad for CD's along with the MSNBC page because they know you are a music lover. This is a brilliant strategy for advertisers because they know their ads are being delivered to appropriate users.

Sponsorships are another type of Web advertising. On television, the Hallmark Hall of Fame is an example of a program (content) sponsorship. On the Web, a company such as Kraft, develops recipe content and pays to place it on a Web site targeted to homemakers. The only way a user can tell that Kraft paid for the sponsorship is to look for logos or mentions of Kraft brands on the page. This type of advertising is not very common in traditional media, but generates about half of all Web advertising dollars.

Public Relations

The Web is an important vehicle for public relations activities. PR creates goodwill among an organization's stakeholders. It is important for a company to communicate with customers, employees, the government, the media, shareholders, and many other groups in order to influence public opinion. PR communication tools include special events, publicity through press releases, public service campaigns, and publications such as newsletters, brochures and annual reports. The term "brochureware" emerged to define Web sites that contain only product or company information. On the Web, companies use PR in some of the following ways:

§ Customer service communication with consumers via e-mail or Web forms

§ Online special events, such as the Victoria Secret Fashion Show in early 1999

§ Community building through chat rooms and discussion groups

§ Online information for various publics, such as product information and annual reports

§ Electronic press releases for PR publicity

Sales Promotions

Sales promotions are short-term incentives that aid the movement of product from producer to consumer. Some sales promotion tactics directed at consumers include coupons, rebates, samples, premiums, contests and sweepstakes. Most of these are currently offered on the Web, however, coupons, samples and contests/sweepstakes are the most widely used.

§ Coupons—Some firms, such as J. Crew deliver coupons in e-mail responses to dissatisfied customers. Others, such as Coupon Pages (www.couponpages.com) and Hot Coupons (www.hotcoupons.com) provide electronic coupons on the Web. Consumers print them or have them sent to their homes.

§ Samples—Many software firms allow users to download free 30-day trials of a particular program. Sampling encourages users to purchase the product after they've found it indispensable. CDNow and other music retailers allow users to sample a small portion of a sound track prior to purchase.

§ Contests/Sweepstakes—The Web is full of free giveaways. Users can enter contests by submitting answers to questions or writing why they like a particular product in 25 words or less. You can enter sweepstakes and win a wide assortment of cool prizes if your name is drawn. The exercise in this chapter gives you a chance to enter a sweepstake of your choice.

Personal Selling

The Net is not used for personal selling because the computer mediates communication between audience and content provider: it is impersonal. However, the Net is used to generate leads for salespeople. For example, Herman Miller, producer of office furniture, sells most of its products to businesses. A visit to their Web site at www.hermanmiller.com offers both business and government users a chance to contact a salesperson directly.

Direct Marketing

Direct marketing is communication to individually targeted users for the purpose of generating an immediate response—it is sometimes called 1:1 marketing. As a strategy, direct marketing is a bit confusing because it can appear in the form of advertising, sales promotion, or any other promotion mix element. For example, a coupon generated at the grocery store based on your particular purchase and a telemarketing phone call are both considered direct marketing. Marketers increasingly include direct marketing as a fifth promotion mix strategy because of its growing importance and its unique differences from the other communication mix tools. Traditional direct marketing strategies include direct mail (catalogs are a huge part of this), FAX messages, telemarketing, and direct response advertising such as infomercials and other selectively targeted ads with response mechanisms such as a 1-800 telephone number.

The Internet provides outstanding direct marketing opportunities for marketers because it allows for immediate two-way communication between customers/prospects and firms. It is especially important in the business-to-business market. Some online direct marketing tactics are the following:

§ Outgoing e-mail—Many firms build e-mail databases of customers and prospective customers and use them to send occasional messages. 3Com regularly sends e-mail notes to PalmPilot users suggesting product usage tips and recommending hardware or software updates based on the user's specific PalmPilot version. Any e-mail you receive from a firm that includes a hyperlink to a Web site is direct marketing. All e-mail messages that firms tailor to selected individuals and that request a response are direct marketing: the response can be anything from a reply to a purchase.

§ Personalized Web pages—After registering at a Web site, users may be greeted personally on their next visit and asked to respond with a purchase. An example of this occurs at Amazon.com when you log on. The Amazon home page greets you by name, and presents personal book or music suggestions tailored to your reading/listening habits, giving you a way to order them immediately.

§ Ad servers—We described these in the previous section on advertising. When an ad server sends an individualized ad to a particular user this is also considered direct marketing because the user can click on the ad to visit the advertised site.

Direct marketing is a particularly powerful tool because it helps firms to build relationships with their customers. Direct, personalized communication assists firms in retaining and building customer business over the long run: a much more efficient tactic than continually finding new customers. The Internet, and e-mail in particular, are "killer apps" for direct marketing relationship-building.

Marketing Communication at McDonald's

McDonald's sells hamburgers. Of course, you already knew that. Their success has had something to do with their menu items but a lot more to do with their savvy marketing promotions. In this exercise we look at their online promotional techniques, evaluating McDonald's PR techniques, and discovering online advertising opportunities for them. Visit www.mcdonalds.com.

Public Relations

13. McDonald's web site is a good example of how sites can be used for public relations. First, the site itself is a PR tool, similar to a product brochure that lists and describes its products—everything from food to merchandise. Second, it discusses many community services, including the Ronald McDonald Houses. Next, it helps customers find the nearest restaurant. Understanding that most of us know where our local McDonald's is, these savvy marketers introduced a trip planner that shows you where to find restaurants along the way. Finally, the McDonald's site communicates with many stakeholder groups in addition to consumers. Cruise the site and find at least three other stakeholders who are targeted on the site and complete the following table by describing the types of information McDonald's provides to each group.

Stakeholder	Type of Information
Employees	The McDonald promise to employees (including their competitive pay and benefits)
Shareholders	Dividend information and current financial press releases
Customers	Store locator, new happy meals, and special offers

14. McDonald's sponsors many sport teams, a beneficial PR activity. Locate and describe one sporting event described at the site. McDonald’s sponsors the Paralympic Games in Sydney. This sporting event allows disabled people to compete athletically with one another. McDonald’s is running a restaurant in Sydney to cater to the athletes.

Press Releases

15. What should McDonald's do to publicize its Web site? One easy way to advertise the address for a Web site is to put it on all promotional materials at the restaurant and in all ads. Another way is to ask related sites to provide free links to its page. Name one Web site that might want to link to McDonald's as a service to its audience, and explain why you think it is appropriate. (Hint: remember you can actually find out who is linked to McDonald's using the link operator you learned about in Chapter 1.) McDonald’s could have contests on the website. They could add a link to Donatos Pizza since they own the company and have an interest in the advertising of it.

16. A final PR step involves sending press releases to the search engines, and many other directories known for free Web site listing. For a summary of how to publicize a Web site, visit www.submit-it.com. After reviewing their free information on how to publicize a site (a "Web site marketing primer" is currently in the services section), list and briefly describe seven major ways one could publicize the McDonald's Web site. Note: if this section is not available when you do this exercise, search for other sites that discuss Web site promotion.

Method	Description
1. Issuing a press release	A newsworthy message that can be sent over e-mail, fax, etc.
2. Announcing in news groups	A word of mouth way of publicizing
3. Participating e-mail links	E-mails are sent directly to the participating person
4. Obtaining links from other web sites	Trading links with vendors and suppliers is a good way to go
5. Running on-site events	Contests and games that attract traffic
6. Issuing an E-newsletter	Keeps people up to date by mass-emailing them
7. Conducting a Marketing campaign	Allows companies to market their products and services

Note that Submit-it will do all the work of publicizing your site if you are willing to pay them. Some of the services like Submit-it claim to be able to have your site listed in the first screen that appears when a Web user queries for a related term using a search engine.

Advertising

17. McDonald's may even pay others to provide a link to its home page. These links are either in the form of banner ads or hyperlinks within content which the user can click-through to visit the advertised site. To explore sponsorship options for McDonald's, visit www.homearts.com, a site that provides lots of information and ideas for women about family and home. The folks at McDonald's enjoy a similar target market and family image, so this is a potential advertising sponsorship opportunity (at a mere $50/month to reach 1000 users). Examine cool tools and partners pages and come up with an idea for McDonalds. What topic could McDonalds write about, and what content could it provide that would help advertise products and naturally provide a link to their site? An interactive tool based on McDonald's products would be especially strong.

Topic	Basic content/tool idea
Olympic Games contest	McDonalds could have a contest that involves answering trivia questions about the Olympics. The prizes could be French fries, etc. This will attract customers to the restaurant, where they will buy more food.

18. Help McDonald's figure out where to buy banner ads on the Web. Suggest three sites that might be good ideas and tell why you picked each one. Hint: the information from question 3 might help.

Site	Reason
http://www.gobeyond.com	The site has strategic planning for deciding what banner ads to have.
http://www.brunching.com	They offer creative banner ads and a variety of choices.
http://www.justwebads.com	This site seems up to date and promises quick service and privacy.

Exhibit 8 - 1 Freestuff2000.com

Source: www.freestuff2000.com

Sales Promotions Galore

19. Contests, sweepstakes and games are popping up all over the Web. They build excitement about brands, and can encourage purchase. More specific to the Web, they draw the audience to a site and keep them returning. Sweepstakes are pure luck of the draw. Sponsors cannot require a purchase because then the sales promotion is considered a lottery and would be covered under gambling law. Conversely, contests require skill, such as correctly answering a trivia question. Visit the games and giveaways page at www.freestuff2000.com/giveaways , and you'll see a screen like that in Exhibit 8 - 1. In their sweepstakes section find a prize that is appealing to you. Follow the link to the site sponsoring the sweepstakes. What is the Web address and company name for the site sponsoring this sweepstakes? The web address is http://www.geocities.com/outreachcommunity/angelpin.htm. The company sponsoring the sweepstakes is the Outreach Community.

20. What is the first prize (the one that drew you to this page)? An angel pin drew me to this page.

21. What marketing purpose do you think this organization has for running the sweepstakes? The organization wants to show goodwill and increase their customer base.

Putting It All Together

22. Now that you've seen a few ways firms communicate with consumers using the Internet and learned a lot about the Net from this book, make a summary table demonstrating what you've learned. For each marketing communication tool, tell whether you think the Internet or traditional media (e.g., print, broadcast, postal mail) is better and why.

Tool	I = Internet T = traditional	Why?
Advertising	I	Many people have more time to use the Internet than other mediums of communication.
Public Relations	T	Newspapers and t.v. seem more effective
Sales Promotion	I	The promotion is more subtle then having salespeople bother customers with freebies, etc.
Personal Selling	T	Sometimes face-to-face communication provides better service.
Direct Marketing	I	The Net provides more immediate communication.

Leveraging Technology

Rotating and Targeted Ad Banners

Hit your browser's refresh or reload button on Yahoo!'s web site and you are likely to find that the banner ad on the page changes. Yahoo! sells its inventory of banner slots on a rotating basis. Advertisers are guaranteed a certain number of impressions over a period of time but other ads will be interspersed with theirs. This is not unlike the ads that rotate on a scoreboard during professional sporting events. However, sporting events have a distinct advantage—they know the characteristics of their audience and therefore can target ads to their needs. Magazines and newspapers have a similar feature called "selective binding." Advertisers in Time Magazine, for example, can select from among over 200 different versions: any market from doctors, business executives, or students to very specific geographic areas. It is likely that the issue of Time that you receive as a student will contain different ads and even a few different articles than issues created for other markets. In order to achieve the same level of efficiency in the online world, the industry developed targeted ads. The ad changes or rotates based upon the search words that you type into the search engine. Targeted ads cost more per impression because advertisers are more effectively able to reach their target based on psychographics (interests of users).

Even more impressive are ad networks such as DoubleClick which are able to track and target users as they move from site to site! How does DoubleClick track users across sites? It stores a file called a cookie on the user's computer that identifies the user by number. Whenever the user visits a site in the DoubleClick network, DoubleClick reads the cookie, looks up and/or modifies the user's profile, and then targets an appropriate ad. See Exhibit 8 - 2. The process is very efficient from a direct marketing point and extremely successful. DoubleClick delivers over 1.5 billion ads EACH DAY! Nonetheless, targeted ads do raise legal and ethical issues concerning privacy—especially since most users do not know they are being tracked. Is DoubleClick tracking you? Find the cookie files on your hard drive to see. Internet Explorer stores each cookie in a separate file in the Cookies directory. Netscape Navigator, by contrast, places all of the cookies in the same file called cookies.txt. Use the Windows find files feature to search for cookie. This will find cookies.txt (for Netscape) as well as the Cookies directory (for Internet Explorer). You can open cookie files in a text editor by double clicking on them. Exhibit 8 - 3 shows the contents of a cookie file for a newly installed computer. The user has visited exactly one site, www.travelocity.com. However, since Travelocity uses DoubleClick as their ad server a DoubleClick cookie is also written to the user's computer.

Exhibit 8 - 2 Tracking Users Site to Site

# Netscape HTTP Cookie File

# http://www.netscape.com/newsref/std/cookie_spec.html

# This is a generated file! Do not edit.

www.travelocity.com FALSE / FALSE 3875930236 grtng 1

.doubleclick.net TRUE / FALSE 4857204346 id A

Exhibit 8 - 3 Netscape Cookie File (cookie.txt)

At this point the user has two cookies on her computer—one from Travelocity and one from DoubleClick. The Travelocity cookie will allow Travelocity to greet the user by name on a subsequent visit. The DoubleClick cookie will be used to track the user around the Internet. The next time that the user visits a site on the DoubleClick network, DoubleClick will be able to target an ad to that user for a travel related service.