Marketing and Eletronic Commerce

  1. Internet Background
    1. Internet History
    2. Network of Networks
    3. Packet Switching Technology
    4. Internet Tools
  2. Internet's Relevance to Business
    1. Media Models
    2. Consumer Demand Pull vs. Marketer Push
    3. Level of Involvement
    4. Structural Issues

Internet Background

Internet History.


US Department of Defence Advanced Research project.

1990s internet evolves into a commercial medium.

Network of Networks

The Internet is a network of networks. One of the reasons as to why nobody really knows how many people have access to the internet is because you have to determine:

  • How many networks access the internet (a number that's growing rapidly)
  • How many computers access each network
  • How many users access each computer

    A January 1997 survey found:

  • 16,146,000 hosts (computer on a network with Internet access)
  • 828,000 domains (networks on the Internet)

    Estimates suggest there are between 3 to 7 people per host with access to the internet.

    All the major commercial online providers, such as American Online, were traditionally networks in isolation (i.e. AOL users only had access to AOL information and other AOL users), and not a part of the Internet. This changed as demand for access to the Internet from their users forced them to create access or risk losing their customers. These providers now promote access to the Internet as a primary benefit of subcribing, their proprietary information secondary.

    Packet Switching Technology

    Two key advantages of packet switching technology that is incorporated into the internet are:

  • The ability to break a communication into many small "chunks"
  • The ability to route information the most efficient way

    Packet switching breaks down messages into very small chunks that are dispursed over the internet to arrive at the intended location and compiled in an efficent manner. The packets may take different routes (variable routing) if this is necessary (i.e. a node is busy or down). Thus the internet does not rely on any particular node (except for the receiver's node) and link between nodes, to deliver a message. It also allows several users to share a particular link.

    The following example explains this concept.

    Imagine you are part of a quartet performing in San Francisco. Your agent has been asked that you play at the Royal Albert Hall (London) the following evening at a "concert of a lifetime". As you are travelling to the airport in your limousine your agent is making your travel arrangements. Due to the short notice of departure you are unable to sit together. In fact, you have to fly American Airlines (via Chicago), the other three members have to fly US Air (via Philadelphia), Conowingo Air (via Jamaica) and Going Broke Air (via Iceland). You depart on your different airlines, taking your different routes, arriving in London the next morning. You then reassemble and prepare for the concert.

    Thanks Richard Gordon :)

    Internet Tools

    Users do not actually use the internet, much like a car driver does not actually use the highway. Users use the various tools (cars/vans/buses) of the internet to perform different tasks. Now we know why it has been termed the "Information Superhighway"!! The following are the more popular tools that are used on the internet.

    Internet's Relevance To Business.

    It is another medium of communication, with many unique attributes. It is also the first mass communications medium that facilitates transactions.

    Comparing www with other mass media
    Media Cont. Int. Comm. model Linear Obtrusive Control Presentation Reach Flex. Scalable Transactional
    Billboard N 1 to many L Y N P S N N
    Newspaper N 1 to many L Y Y P Q N N
    Magazines N 1 to many L Y Y P Q N N
    Direct Mail N 1 to many L Y Y P Q N N
    Radio N 1 to many L Y N A S N N
    T.V. N 1 to many L Y N AV Q N N
    WWW Y 1 to 1 N N Y AVP F Y Y
    Table key:
    Cont. Int.: N (no interactivity) Y (interactivity)
    Refers to the interactivity of the content delivered by the medium.
    Comm. Model: 1 to many (mass targeting), 1 to 1 (mass customization)
    Comm. Model refers to the communications model.
    Linear: L (Linear), N (Non Linear)
    This refers to the method in which the user can process the information.
    Obtrusive: N (unobtrusive) Y (obtrusive)
    Refers to whether the media pushes (obtrusive) the message to the consumer, or the consumer pulls (unobtrusive) the information.
    Control: N (no consumer control) Y (consumer control)
    Refers to whether the user has control over processing the information.
    Presentation: P (Print), A (Audio), V (Video), MM (Multi-media)
    This refers to the media available to rpesent the information.
    Reach Flex.: S (no flexiblilty) Q (moderate flexibility) F (determined by customer)
    This refers to the ability to use the media to cover breadths of marketplaces (i.e., local, regional, national and/or international).
    Scalable: Y (yes), N (no)
    Scalable refers to the marginal cost of increasing the audience size that is exposed to the message.
    Transactional: Y (yes), N (no)
    This refers to the ability to use the media to execute transactions.

    Media Models

    Traditional Media Model

    ------------------------->Communication flow
    Marketer--------Medium----------Target Audience
       ^                                  |
       |                                  |
       |                                  |
       |          Feedback                |
    <-------------------------Communication flow

    WWW Communication Model

    Marketer-->---<-----WWW---->---<----Target Audience
    Communication flow is from:
  • Marketer to WWW
  • Target Audience (TA) to WWW
  • TA to Marketer (via Email)
  • Marketer to TA
  • Top-Down vs. Mediated Environment

    The cost of using WWW as a communications medium is significantly less than more traditional marketing media (TV, Radio, Newspapers etc.) For a $5,000 investment a marketer can establish an effective web-site as the focal point of an online marketing effort. This is enabling (small) companies, that find other media cost prohibitive, to compete globally.

    WWW is also freeing up the publishing market which has traditionally been the territory of the very few (those that can afford it). Now small publishing companies are evolving and individuals have the ability to use WWW to "publish" information. The plethora of information, however, is creating an interesting dilemma: too much information creates individual processing problems. There is now a need for a market to evolve that focuses on efficient information delivery and processing.

    Consumer Demand Pull vs. Marketer Push Model

    All information is hosted on the marketer's computer servers and accessed on demand by the consumer. This allows the marketer to keep information current and targeted. Traditional media "deliver" information to their audience.
    Marketer Push (Traditional)
    Marketer Information-------------> Mass Market
    Demand Pull (Server host)
    Marketer Information <----------- Individual customer demand

    Levels of Involvement

    Approximately $300 million in 1996 was the total spent on WWW as a medium ($5bn predicted by the year 2000, Jupiter Communications). Is that the true picture of the marketing investment that companies have made in this medium?!!

    There are two considerations that one should keep in mind before evaluating media dollar comparisons:

  • The age of the medium (Wired magazine pioneered online advertising in 1994)
  • The Dollar value quoted is for online ads (banners) and not for online presence

    The true value of the medium should be reflected in its ability to allow a corporate presence to perform marketing functions, not just the value of the advertising banners which are essentially there to drive browsers to the online presence. Other media do not allow for a "presence" in the same sense that WWW does, thus dollar comparisons are invalid.

    Structural Issue

    WWW can be thought of as comprising three main components:
    1. Content
    2. Browsers
    3. Access
    HyperText Markup Language is the language that is used to develop WWW documents. This language was developed in 1989 by Tim Berners-Lee at the European Laboratory for Particle Physics (CERN) in Switzerland. It is available free to use. Click on the view option of your Netscape browser and scroll down to the view source option to view the HTML code that was used to create this document. This ability to view the source document makes learning the HTML language relatively simple. The need to learn the language is diminished by the use of WYSWYG HTML text programs. Sites that operate databases and animation use more advanced programs such as CGI and Java.

    "Browsers" are software programs that are used to view WWW documents. To put the HTML and browser in simple context you can use the analogy of the television. You have programs (developed content) and TV sets (browsers). The marketplace for browsers is very competitive. The market leader (and commercial pioneer) is Netscape's Netscape Navigator. Microsoft's Internet Explorer is emerging as a competitive threat, as one would imagine once Microsoft realized the value of an internet strategy.

    The third component is the access provider. To continue our TV analogy, the access provider is similar to your local cable company (assuming that you need a cable company to provide you access to the network and cable TV). An Internet user generally has access from two disctinct sources:

  • Work/School, using their corporate or school account
  • Home, using an internet service provider

    The marketplace for commercial internet service providers is very competitive. The types of companies involved can be broken down as follows:

  • Major service providers such as:
  • Telephone companies such as AT&T
  • Local Internet Service Providers such as Erols, Panix, Earthlink and some Local Delaware providers.