Support Material: Hackers, Hits and Chats
Keyterms: brand; broadband; bug; chat and discussion board; domain name; ISPs; marginal cost; marketing mix; network externalities; open source; scale; search engines; trademark; value proposition; winner takes all; VoIP; wireless; word of mouth
This section begins our discussion of the marketing mix. The four elements are product (the focus of this section), price, promotion and place. The combination of marketing mix decisions represents the marketing strategy for a company. We will focus on three broad areas as we discuss the marketing mix with respect to "Information Technology in Marketing":
- Tangible; Digital; Services
- Web-based Products
- Products enhanced by the Web
- Customer Service and Product Support
- Mass Customization
- Unique characteristics of digital products (software)
- Unique characteristics of web products (web businesses)
- Use of the web for traditional product marketing
Tangible; Digital; ServicesHow are tangible products, services, places and people impacted by the web as a medium for communications ? We will investigate this and more as we discuss the pruduct element of the marketing mix.
It is hard now to consider a type of product that would not benefit from a web presence. Products as diverse as a university education University of Delaware, sports star David Beckham, car Toyota Prius, religious organization Presbytarian Church and music band Arctic Monkeys all benefit from a web presence. Even I have a web presence, should you (remember your potential employer may google you, should you not try to 'control' what can be found) ? Thus while all products and services will benefit from a web presence there are certainly different degrees to that benefit depending on the nature of the product and service. There are products that are web-based only, i.e. there very existance is the web and then there are products whose utility is enhanced by the web. The web can actually change the entire utility and form of the product (news for example) or the web can simply serves as a channel for customer support, branding, advertising, community building or retail.
Web-based Products.There are a number of web-based products that have evolved recently as a consequence of the evolution of the web. These can be characterized as:
Products: Improving the web experience centers on better web-access and better search. Improved access is occuring through the roll out of broadband and wireless access, via companies such as your cable company. Google and Earthlink have recently partnered to launch free wifi access in San Francisco. Making access to the internet more convenient can only increase users access to the internet.
- Products that improve the web experience: search engines and ISPs for example
- Products that exploit the unique characteristics of the web, highlighted in the economics section: social networking sites; VoIP (Skype) and wikipedia are examples
Search is in a mode of constant innovation. Google, with its PageRank algorithm, has clearly taken a market lead, but it cannot afford to not continue to innovate its search technology. Microsoft is inevitably keen on being the leader in this space, and if history tells us anything, will be a serious competitor for google. Ask is also developing into a more serious competitor. The advantage of this type of competition clearly comes directly to the consumer in better search capabilities.
Products: Exploiting web characteristics
Social Networking sites: the most popular of which appears to be MySpace takes advantage of many of the characteristics of the web. Specifically the cost characteristics of very low marginal costs and the network externalities provided by each additional participant. MySpace allows users to easily connect with users of similar tastes and experiences. Connect with friends, and friends of friends. It allows users to blog without needing an independent blog. The more users the more useful MySpace is to each user. MySpace seems to have become more popular than friendster and the market will likely exhibit a winner takes all point as more people migrate from one service to another and as one service becomes more useful than the other due to the migration. The success of MySpace is articulated in an interview between Scoble and the MySpace CTO, when asked how MySpace became so popular, the CTO responded:
- They made sure influentials in Hollywood (stars, bands) were among the first users.
- They listen to their users and add features frequently (usually noticeable new features every week).
- They let the users tell them what to do. He mentioned that other services, like Friendster, tried to tell their users what not to do.
- When MySpace visitors first log on they already had a friend: the founder Tom. That was in contrast to other services where you had to work to find your first friend. His page also gave you a template to get started.
source: Secrets behind MySpace's success; Friendster lost steam. Is MySpace just a fad?
Voice over IP (VoIP): Skype, the leading provider of VoIP was recently purchased by eBay. Like MySpace Skype is able to take advantage of network effects, as the more users that use the service, the more useful the service is to each user. Skype takes advantage of the cost structure of adding users (little marginal cost impact) and of moving data over the internet. Skype can thus can offer its service for free which is creating pressure for other telephone systems (cellular or landline systems) to consider their pricing strategies.
Wikipedia: Wikipedia is a product for the internet community maintained and developed by the internet community. A little over five years old, it already has over a million entries and has been compared favourably with such venerable brands as the Encyclopedia Britannica (first published in 1768). While the Encyclopedia Britannica has already had to rethink its value proposition as a result of CD based encyclopedias such as Encarta, the free Wikipedia, freely available on the internet, with its distributed editorial process via an open source type model, is clearly a challenge to all forms of encyclopedias.
Products enhanced by the webMany products are enhanced by the capabilities provided by the web. Providing news is an obvious example. Latest news no longer needs to wait for the traditional media deadlines that are placed on media that need to operate to publication deadlines. When news happens it can be reported, and to a large extent there is pressure to report in real time in order to retain an audience. Unfortunately this pressure can sometimes lead to sloppy reporting where getting the story out is more important than the important task of fact checking.
Services like Google News is unique to the web. Rather than report news in real time, Google searches the web for news stories, and with the use of their algorithms, determines which are the relevant news stories, displays them, and links to the variety of sources reporting the story. This means of aggregating news content allows users to see what is relevant to a broad web audience, while also getting exposure to a variety of news sources with their inherent biases. The news readers and google's algorithm determine the top news stories, not the news editors. The blogosphere also presents a wealth of content, some of which is news reporting. This allows the democratizing of the media that would not exist without the web.
source: About Google News
BrandBrand is critical to the success of traditional products, and provides companies and products with good brand equity some marketing advantages over competitors with weaker brands. These advantages include:
Branding for internet-based products and services presents some unique challenges, these include:
- Ability to charge higher prices for similar products
- Ability to launch new products as brand extensions
Consider the meaning of the brand 'Google'. What do you think when you hear the term. Words that come to mind might include: search, trust, focused ? When I compiled this content I googled to seek out information on the internet relevant to this material. Note I use the term 'google' as a verb. Google is becoming part of internet lexicon, and this is something google needs to keep an eye on. While it is imperative to build a strong brand name and meaning, a company does not want to lose the right to that name (its trademark) as it becomes a generic term. Google recently asked Word Spy, an online dictionary, to remove the entry for google, which it described as a verb, to search.
- The lack of tangible product
- Inevitable newness of the brand
- Trust that is gained from the physical infrastructure of a company and product
According to James Cherkoff, Google and eBay spent nothing on above-the-line advertising when building their brands, but they did consult with customers at every step. Meg Whitman, eBay's CEO, has likened her job to that of 'a mayor running a town-hall meeting'.
Amazon.com is another internet brand that has achieved remarkable success. What does it mean in the minds of consumers? Is it synonimous with book selling on the internet (heavily tied to its first retail endevour) or has amazon been successful in avoiding this an having a broader meaning (online retailing in general).
Major internet brands have had a habit of shifting over a short period of time, speculating that the strong brands now are likely to be brands that were not so strong very recently. One can consider the strong word of mouth nature of the internet helps make brands, and similarly break brands. We can compare the major brands of 1998 and 2005, and then speculate the 2006 brands:
1998: AOL, Yahoo!, Netscape, Amazon.com, Priceline, Infoseek, Excite, Hotmail, MSN, Lycos
2005: Yahoo!, Microsoft, MSN, Google, AOL, eBay, MapQuest, Real, Amazon, Weather Channel
2007: Consider the five most important internet brands that come to mind ?
As noted above, a key advantage of developing a strong brand is the subsequent ability to launch additional products under the same brand. Amazon has done this by moving from solely selling books online to selling electronics, music, dvds and much more. Google has also launched a number of services, including Google Earth; Google Finance; Froogle and Google Local.
The above are examples of internet companies using their brand to roll out new products and services. Similarly brand extensions can be used to offer a 'free' version of a product, in order to try to gain lock-in from users who then switch to other versions of the product. Blogspot is an example of this, the free version from blogger.com (which is coincidently owned, as a result of a purchase rather than product development, by google.)
A critical element of a company's brand is the domain name it uses for its internet activities. Web-based businesses (such as Google, Yahoo!, eBay, MySpace, Amazon etc.) have more flexibility in terms of coming up with the appropriate domain name, which ultimately becomes their trademark and brand name. Clearly as part of that process they need to do extensive trademark searches to make sure they do not violate someone else's trademark, as well as consider how the brand they are considering is perceived not only in their current market 'space', but in future spaces.
Companies that are using the web to augment their business activities also need to acquire a domain name that helps them strengthen their brand. Typically a company will chose its company name as its domain name, but that is not always possible, especially given the internet is global (many company names are not unique around the world) and there are companies with the same name competing in different markets. Given the geographic separation and market separation prior to the internet, this was not really a problem from a trademark and branding standpoint. The web does change this somewhat.
Finally we should consider how branding on the internet is critical in terms of reinforcing a non-web brand. Much like other media company's choose to use to reach out to their customers, the web helps create and reinforce an impression of the company in the minds of its current consumers and potential consumers. The look and feel of a company's web-site should reflect the same imagary used in off-line materials. The quality of the services provided by the company's web presence should reflect the quality of service the company aspires to provide as part of its traditional business. Web consumers can be 'fickle' and turn on a brand very quickly (word of mouth) so not upholding your brand to your offline standards can be very damaging.
source: Google: the infinite quest; Protecting Google Brand "Tricky Business"; Google's company mission; How important is the brand? Web Analytics and Online Branding Metrics; Online Brand Metrics Revealed
sources: The Making Of A $2 Billion Brand; Everything about Google is simple and clear.; Study: Google Tops in Brand Loyalty; Top Ranking Brands and Channels for February 2002; Internet Branding By Numbers; Report: Internet Brands Reach Public Consciousness (1998) Top Ranking Brands and Channels for February 2002; Top U.S. Parent Companies and Stickiest Brands on the Web, February 2006; Top Internet brands in June 2005: Yahoo!, Microsoft, MSN, Google
Customer Service / Product SupportAs part of the augmented product (core; actual; augmented) customer service is critical to many products and services. Customer service is enhanced by the web for traditional products and services, and critical to the success of software and web-based products and services.
Traditional companies will include product information, FAQs and other useful information on their web-sites in order to support users of a product. Chat applets may be used for more direct dialogue with a customer who has a problem to resolve. HostMySite has a 'live chat' feature on the top right of its homepage. This offers customer support 24 x 7 x 365. Accessing the link you open a window that asks a couple of basic questions (name, e-mail, domain name) and then the question the customer has. Responses are remarkably swift. Airlines (for example US Airways) also offer strong customer support features for their customers, whether it is accessing travel planning solutions, dividend miles information or customer service issues in general (US Airways: Customer Service). The Wharton School's MBA program offers a discussion board for those applying to the school. This allows applicants to share insights with each other, while also asking questions of current students and the admissions committee. Some of this dialogue is certainly "customer service" in nature (for example: "is my application complete ?") Dell provides plenty of customer support via its site. The rationale for providing customer support on the internet are threefold:
The web has become a natural medium to support software products. Product support is essential for software due to the nature and complexity of the product and the need for constant upgrades and bug fixes. The web not only allows software marketers to answer questions in real time, but also to deliver upgrades and fixes when needed. Thus Microsoft pushes updates to users as they log on to their machines, updates to versions of software that might be necessary to avoid security risks for example. Skype is an example of a company that is continually developing and upgrading its software, which needs to be downloaded to the client-side machine (a user needs to download the file from the Skype web-site, and then execute the file). These updates are available on their web-site and they are able to remind users of the need to upgrade as they start their computers.
- the medium is less expensive than other media for support
- the medium offers more flexibility in terms of serving customers, and
- the medium is self-serve, available when the customer has support issues (not when the company is at work.)
Mass CustomizationMass customization reflects the ability of a company to provide a customized product, based-on an order that is received, that was not created prior to the receipt of that order. Customization is a part of a product strategy for many small businesses (think: someone building a deck for a house; a tailor measuring a customer for a suit; a chef preparing a gourmet meal) but it does not scale well. Mass customization focuses on those efforts at scale. Dell is an example of a company that produces mass customized products, using technology to enable the process. Its product, a computer, is not assembled until an order is received, and the assembly of the computers is based on the customers' specifications. Dell's entire business process is designed around mass customization and eliminating the need for inventory (although its supply chain sometimes grumbles it holds inventory to enable Dell's process). Dell's efforts gives it a competitive advantage over its competitors who use traditional channels to the consumer (i.e. while Dell takes the direct order from the customer, and can thus customize to that order, for others orders from consumers come for the most part in the retail store to purchase a pre-assembled product offering).
Characteristics that define mass customization include:
Mass customization is not simply offering a wide variety of choices that are available to ship immediately. It is also not personalization in the sense of the communications aspect of the promotions.
- a system that allows a customer to specify requirements
- advanced manufacturing systems (economies of scope)
- build to order approach
- minimum order quantity of one
sources: made for one; MadeForOne