The Internet has provided a rare opportunity especially for small to medium sized enterprises. It moves organizations beyond the physical constraints of their traditional distribution channels and creates a world wide virtual community in which small and medium sized companies can compete with large enterprises. In this research, we focus on the use of the Internet as a virtual storefront where products are offered directly to customers. Our contention is that product characteristics play a major role in the successfulness of its marketing on the Internet. We reviewed benefits of online marketing along three channel functions and identified factors that impact the use of online marketing approach. A framework is proposed to help evaluate the chance for a company to succeed in e- commerce. Data of failed e-tailers in the last two years were collected and analyzed using the proposed framework.
The tremendous growth of the Internet has created opportunities for consumers and firms to participate in an online global marketplace. The Internet has provided a rare opportunity especially for small to medium sized enterprises (SMEs). It moves organizations beyond the physical constraints of their traditional distribution channels and creates a world wide virtual community in which SMEs can compete with large enterprises.
Pros and Cons of E-Marketing Approach
Channel selection is a complex task for both researchers and practitioners in marketing. Although Internet marketing has boomed in recent years, most companies have used it mainly for advertising or promoting corporate images. Not many companies have fully utilized the power of Internet marketing as a new channel for making transactions on the Internet. Besides the various technical obstacles, issues such as security of online trading, authentication, tax policies, etc., have yet to be overcome. The main reason that has prevented companies going online is the uncertainty involved as the Internet is an entirely new transaction channel. The existing research in channel design and selection has only considered the traditional channels, including direct and indirect marketing approaches. There are no documented results or research that provide a systematic method to guide evaluation, planning, and execution of the channel choice decision when it comes to Internet marketing.
Communication Channel: Exchange information between sellers and buyers.
The Internet is an extremely effective medium for accessing, organizing, and communicating information. Internet has manifold benefits regarding communication as:
(1) the ability to store vast amounts of information that can be searched and disseminated in a cost-effective manner which is accessible by virtually everyone on the Net;
(2) interactivity and the ability to provide information on demand; and
(3) provide perceptual experiences that are superior to a printed catalog.
The Internet can provide timely information to customers because of its ability for instant communication, and its availability 24 hours a day, 7 days a week. This means more interaction , better
customer services and quicker responses. The Internet can be used for both internal and external
communications. For external communication, it can be used to communicate with both suppliers and customers. The ways of communication on the Internet range from the most basic form of electronic mail (e-mail) service, mailing lists, and newsgroups, to participating in chat-room activities. It also allows for easy follow-up on customers’ needs and for expanding and adjusting marketing strategy accordingly. As a plus, greater reliance on Internet communication usually results in lower long-distance phone and fax costs. Another potential benefit of using the Internet is the ability to gather information about your customers via surveys and contests. The information can be used to assist new product development and introduction. Companies can design and personalize advertising for each customer through “push” technology. The communication also helps with identifying prospects, sales and relationship building , and deepening customer loyalty. Another factor that may be consider advantageous to certain types of products, but disadvantageous to others, is the fact that there is no actual face-to-face contact involved in the Internet communication. For the types of products that rely heavily on building personal relationship between buyers and sellers such as the selling of life insurance, and the type of products that requires physical examination, Internet marketing maybe less appropriate. On the other hand, the types of products that people feel embarrassed to purchase at traditional retail stores such as pornography tend to sell well online.
Transaction Channel: Generate sales activities.
The Internet offers small businesses many potential benefits to help them compete more effectively against larger companies with improved visibility. For example, small companies that play in niche markets (i.e., sell specialized or unique products or services) in which buyers and sellers are small and geographically dispersed, can use the Internet to reach a much bigger customer base. Cross-selling opportunities offered by the Internet has great potential for generating more sales transactions . The Internet can also ease transaction processing, especially for handling complex orders thereby reducing paperwork, increasing efficiency, replacing professionals tasks , hence reducing the transaction cost. The online payment system minimizes the processing fee and allows for small-fee transactions for micro-services. This is especially advantageous for SMEs because most of their business is generated from low-volume orders, allowing them to better compete with large cap companies. For business-to-business transactions, shortening the processing time also means the buyer can maintain a lower inventory level and reduce other related overhead for handling excessive inventory. The Internet allows for quick adjustment to market conditions which means it is possible to customize promotion and sales to individual customers, allowing for flexible pricing (e.g., permits prices to change faster). The relatively low entry and establishment costs for sellers getting into online marketing is another important reason for considering the Internet as an alternative channel for SMEs.
Distribution Channel: Physical exchange of products/services
On-line marketing offers more choices and flexibility and, at the same time, eliminates huge inventories, storage costs, utilities, space rental, etc. People tend to associate Internet marketing with direct marketing because companies participating in online marketing usually shortened the supply chain and reduced commission and operating costs. The ability to serve as both a transaction medium and a physical distribution medium for certain goods is a unique feature of Internet marketing. Such advantages can be best realized by companies that provide digital products/services such as software, music, news, consulting services, online ticketing and reservations, tele-medicine, insurance, banking, stock brokerage, tax, and other financial service industries. Using the Internet as the distribution channel can reduce not only the delivery cost substantially, but also ensures instant delivery of products/services.
Classification of Products/Services Selling on Internet
There is a broad range of products and services marketed on the Internet that range from consumable goods to durable goods, as well as online newspapers to business-wide consultation. Instead of modeling the problem at individual product level, we group the products into categories and analyzing the advantages of Internet marketing along each product group. This will provide a general picture regarding the effect of each factor (advantage) to the particular type of product. Once the classification grid is established, it can be used as the basis for analyzing individual product.