Ateneo De Manila University
Graduate School of Business
By: Alan L. Ocab
Prof. George Bagaman
Marketing Management I
In recent months, a number of Philippine businesses are scrambling to cash in on the Internet. Most of these companies are plainly happy with just a fantastic Web site. But is it worth it? Should businesses be on the Internet? Are businesses missing out by not logging on?
Much has been said on the Internet’s educational relevance. This paper now focuses on its business significance. This will also provide some insights on the Internet as a new marketing medium-how to effectively use it, its cost implications and its advantages.
What is the Internet
Asiaweek’s February 1996 issue opened: If you’re not in the Internet, you’re dead. A lot of things have been said about the Internet. But what really is the Internet and how does it affect the way people do business?
The Internet goes by different names. It is sometimes called simply as “The Net,” or “Information Superhighway,” “Cyberspace,” and many others.
The Internet is a global network which allow users low-cost connection to local networks and individual computers throughout the world. From an almost exclusively military and academic background, the Internet is rapidly becoming a significant commercial medium. The Internet offers businessmen and entrepreneurs an easy, inexpensive, and technologically sophisticated tool for selling goods and services.
Communicating via the Internet is emerging as the most intimate way for businesses to connect to their customers and, perhaps more importantly, to their competitors’ customers.
The basic technology behind the Internet has not changed significantly since its inception in the late 1960s. What has changed are the number of people using this infrastructure and the development of the World Wide Web (WWW). Built on a subset of computers on the Internet, the Web was created in 1989 as an easy way for researchers to share documents.
Alan L. Ocab
30 May 1997
The Internet Population
The most significant fact about the Internet population is the explosion in the growth of new users. International Data Corp. (IDC) of the U.S. predicted that the number of Internet users will grow from 63 million by the end of 1997 to more than 150 million by the year 2000. It also forecasted that by 2010 there will be over 1 billion Internet users— one-seventh of humanity. It added that the number of servers will grow from 120,000 in 1995, to 5 million in the year 2000.
Demographically, the picture is also changing. Each survey carried out indicates a broadening of the types of people connecting to the Internet, with the number of business users growing faster than any type. Internet users tend, compared with the population as a whole, to be more affluent, younger, and better educated.
Forrester Research of Boston estimated that the value of Internet commerce will grow from $3 billion in 1996 to $150 billion by the year 2000. Internet advertising will swell from $343 million in 1996 to $5 billion by the end of the century according to Jupiter Communications.
The Philippine Scene
Evoserve (http://www.evoserve.com), a Philippine ISP (Internet Service Provider), claims that as of March 1997, the Philippine Internet population grew to 200,000 users from 30,000 just a year ago. ISPs operating in the country now number eighty-four (84), a big jump from only nineteen (19) in January 1996. Computerworld Philippines (March 5, 1997) also cited that shipments of computers in the country increased by 36% last year, just slightly behind Japan (39%) but higher than Asia’s average of 32%.
Internet and Marketing
The Internet not only altered the lifestyle of the people but it also redefined marketing. Products which are digital based – software, music, information, etc. are already delivered via a telephone line. This fundamentally affected and greatly undermined historical distribution models.
New selling models such as “shareware,” “freeware” and “pay-as-you-use” are emerging to maximize the potential of the Internet. While these models will first emerge in particular sectors, such as the software industry, they will pervade all sectors eventually.
New forms of marketing are also emerging, such as web-based advertising, linked advertising, banner advertising, direct e-mail, push advertising(newest Internet venue which provides unlimited opportunities for reaching prospective customers), and an increase emphasis on ‘relationship marketing’.
Advertising on the Internet differs greatly from the style of advertising we see today in television and billboards. It is highly informative and less emotive. It is said that traditional advertising is 10% information and 90% persuasion, in the Internet it is 90% information and 10% persuasion.
To make profitable use of the Net, businesses need to appreciate its uniqueness. One of the worst mistakes is to see the Net as a mass marketing tool rather than an interactive one adapting its messages to each individual. Interactivity is what makes the Internet powerful for marketers.
Development of Internet Marketing
The development of the Internet as a marketing tool underwent stages. Understanding these stages is essential for one to fully appreciate the use of the net as a potent marketing tool.
Around 1992, following the introduction of the first browser, the user-friendly Web began to attract a growing audience that was soon recognized by businesses as a potential market. Since then, use of the Internet of business purposes has developed in three stages.
Stage 1 – Electronic marketing. The first businesses to take
advantage of the Internet were consumer-oriented retailers and manufacturers. They were followed in quick succession by a multitude of companies that wanted to make their product information available online. The Internet quickly proved to be a very powerful electronic medium that could reach global audiences very cost-effectively.
With content limited to static pages featuring text, graphics and animation, key technological considerations for companies included choosing the right Web servers, authoring tools, browsers and client-side scripting languages, as well as the right people to use these tools.
Stage 2 – Interactive narrowcasting. The next stage of development
saw the advent of interactive Web sites. These sites were initiated primarily to generate sales leads by allowing people to request product and service information and to volunteer contact information. This type of activity generates a great deal of valuable information-including lead qualification-which in turn enables companies to target sales and marketing information more specifically to the people who are interested in it.
At this stage of development, Web sites were being used as business tools, and additional technological considerations emerged, including the use of databases, programming languages, Web server application programming interfaces and security solutions.
Stage 3 – Internet Transaction Processing (ITP). Now in its third
stage of development as a business platform, The Internet has now become a place where companies are using ITP applications to do business at their Web sites. ITP allows organizations to open their internal systems to their customers and partners on the Internet, providing them with self-serve transactional capabilities that traditionally required the assistance of customer-service representatives. For example, instead of calling a service representative to request a replacement part, customers can log into the manufacturers customer-service application, order it themselves and even track the progress of the order. Or instead of calling an airline or travel agent to book a flight, a customer can simply log into an airline’s reservation system, check available flights and prices, and book the flight.
It would be helpful to cite businesses raking profits in the Net. Among them are the following:
Cyberian Outpost. A small computer store in Connecticut that has gone completely online. Last year they made $10 million and their online visitors were estimated at around 7000 people per day. The owner, Darryl Peck, said that they used to have a retail store but realized that there was far more potential on the net. Sales have been tripling every three months and more than half of their customers are from abroad. (Businessweek, October 21, 1996).
Hilton Hotel. Hilton is one of the hotels jumping into the online market. Last year they sold around $1 million worth of rooms online. One of the large benefits is the lower distribution costs, saving on labor, paper and back-office processing equipment. (cnet online)
Virtual Vineyards. Robert Olson, a former employee of Silicon Graphics and Peter Granoff, a wine expert, decided to build a web site to sell wine, spirits and specialty foods online. Their sales last year was estimated at $I million and increasing by 20% every month. Their key to success is information. Their site is not the only one selling wine on the Web but they have established credibility in the niche market by creating an authoritative presence. The information Virtual Vineyards is portrayed throughout the site is a complete package instead of having to link to various sites and newsgroups for information, (Technology Magazine No.2 1996)
Amazon bookstore (amazon.com). An online bookstore whose sales are rising by 34% monthly and are looking for annual sales of $17 million. They are taking advantage of the new internet-medium by creating virtual communities where people can congregate, exchange information, buy stuff and come back week after week (Businessweek, September 23, 1996).
Salami (salami.com). A Web site which sells breads, cheeses and meats on the Web. The owners, Richard Lodico and Vinny Barbieri decided to go online after people were requesting their goods from far away. Their Web site made $8000 a month last year with only $1800 a month in expenses.
Wedding Ideas. A Web site which answers common questions about wedding and provides detailed advice on how to plan one. The site made about $7,000 a month from advertisements.
The service fields also made a lot of money as a result of being noticed on the Web. A Japanese doctor advises on problem patients are too shy to ask about.
Consultants are earning excellent incomes online. Because of the networking capabilities available, one can actually connect with and meet hundreds of new people every month.
The hype of Internet commerce has focused on Web sites selling books, flowers, clothes and other retail goods. But the real Internet action, according to Forbes magazine (March 10, 1997), is in industrial goods. Since it opened its Web site in January this year, General Electric’s (GE) site generated $350 million in sales.
Why Business should be in the Internet.
- Fast growing new market.
- Greater reach. Ability to market the products/services throughout the world at a much lower cost..
- Lower customer service costs. The company information, customer support information, question and answer section, price lists are published only once. There is no need to physically mail them out. It is available to new and existing customers 24 hours a day.
- Market research. Due to the web’s interactive capability, businesses can track the customer’s preferences and profiles instantly.
- Lower fulfillment costs. Sales materials are available on the Web site and by e-mail. No staffing costs.
- Lower lead costs. The expense of generating new customers is very low. Leads are generated in a matter of days, not months.
- Testing. One can determine response before spending much money on direct mail and running ads in magazines.
- A Web presence is a lot cheaper than direct mail.
- Level the playing field. Small businesses can have Web sites which equal and surpass large corporate sites.
- Advertising is a fraction of the cost of traditional media.
- Ability to communicate clients immediately through electronic mail.
- A Web site is a new ideology in marketing in that one can approach a mass market in a one-to-one approach.
Promoting The Web site
Building a site doesn’t ensure people will visit. Businesses have to promote their sites and prominently display the URLs (Web address).
A number of Internet marketing consultants suggested some the effective promotion methods in the Internet:
1.Registration of the site in various search engines. Some, such as altavista and webcrawler will find your site eventually, but you can speed up the process by visiting their site and registering your URL. The popular search engines include yahoo, altavista, infoseek, magellan, hotbot and lycos. Also, the multi-submission page at (http://www.submitit.com) will register your site to hundreds of different search engines at one time for free. In the Philippines, yehey (http://www.yehey.com) and edsa (http://www.edsa.com.ph) are popular search engines; also a site called tanikalang ginto registers your site for free.
2.Classifieds, announcements to newsgroups and mailing lists.
The newsgroups are specific areas online where people discuss their common interests. Announce the site, offer information via e-mail.
3.Purchase of barter links from proven traffic zones.
4.Creation of publicity articles and submission to established media sources like magazines, newsletters, televisions and radio.
5.Advertising using of the Web site using conventional methods like print, direct-mail, and broadcast. The Web and e-mail address of the company or business should appear on the following: business cards and letterhead, print and display advertising, brochures, radio broadcast, press and publicity releases. Promotion of the site all over the place. Include Web addresses in catalogs, invoices, voice-mail greeting, stationary and on signs of the physical store that people visit.
6.Reciprocal links from similar businesses that are already on the web. In the Web, strategic alliances are needed. Unlike the old model, businesses on the web work with their competitors to normalize the consumer’s experience of spending money on the Internet. The biggest competition of Web business is the fear of online commerce in the mind of the prospect. The idea is to link with other sites that share your standards for quality and service as well as prospects similar to yours.
7.Press releases – Prior to the launch of the Web site, a press
release should be distributed to leading newspapers and magazines of the industry.
8.Reminder notices – Delivered to the customer through e-mail.
- 9.E-mailed newsletters – newsletters can also have an impact, acting
as an extension to the web site with the objectives of strengthening the brand image, increasing sales, and creating a sense of community with their readers. The ‘signature’ at the bottom of the business e-mails is the equivalent of a letter heading, and is an effective way of promoting your business.
- 10.Participation in on-line conferences and discussion list. – this is
The time to shoe one’s expertise and in such a way promote business can get a chance to show people his expertise and in such a way promote his business. For this technique to be successful, one should participate in the groups and list members of one’s target market.
11.Profiled Information Streams – refers to customized information
which is sent to each subscriber, based on their own personal information needs. Each customer creates a ‘profile’ of the kind of information they seek. Then, on an ongoing basis, they receive any information which meets their specific profile. This is most applicable when a business has a wide range of offerings, and customers require a great deal of information on an ongoing basis.
These marketing methods can be classified into outbound or inbound strategy according to Tom Bassos, IBM‘s Internet Marketing Strategy Manager.
Key Success Factors
Enough web sites have come and gone by. The following are the factors which were observed common to successful sites:
1.Content. The Internet is frequented by an intelligent community that expects informative content with clear benefits to them. This means not only starting off with great information about the businesses products or services, but also the industry itself, and other related topics. Also crucial is the frequency of change of the content. This keeps visitors coming back for more, and these people will eventually become your customers.
2.Host server. The most common reason direct selling in the web fail is technical. The site falls offline, key links between forms and their destinations falter. This problem often stems from underinvestment in basic site technology.
3.Web page design. A few simple guidelines to create an effective Web page:
Well Organized and Easy to Use – The site should have a simple
home page which acts as Table of Contents; visitors should be guided through the site, allowing them to explore and discover the sales process that will lead them to buy.
Good Navigation – Have options available so visitors can click back and forth, with an explanation of where the link will take them.
Simple Graphics – Large graphics takes time to load. If large pictures or graphics are unavoidable, warn the visitor that they have to wait. Provide text alternatives.
Headlines – A good headline will encourage visitors to further explore the site.
META tags – Those keywords which the search engines will be looking for.
Links to Develop Traffic – A web site without links is closed to outsiders. Try to establish return links to develop cross references traffic from other site.
Clearly Defined Sales/Information Process – The most overlooked part of a Web site. Have a sales letter, a special report detailing your experience, some information on your company, ways to order your product.
4. Price/Service Advantage. The Web works best as a selling medium for products that consumers already know. It would be an uphill battle to try to sell on the Web without a price or service advantage.
Marketing. Thousands of Web sites sit on the Web unnoticed, draining money. No company can make sales, advertise, offer customer service, or charge advertisers unless people visit the Web site, and they don’t necessarily come just because you build it. The site has to be promoted, so Web users can find it among increasing number of sites out there.
With all these things happening, businesses must temper their enthusiasm and must take time to plan their entry into the new medium,
Here are some of the things to do before jumping into the Net wagon:
1.Establish a clear goal of what you want in your commercial venture on the Internet. Is it for sales? brand recognition? Establishing initial contact? Provide support?. What kind of return is desired? How will it be measured? And over what time period? The potential and usefulness of the Internet goes far beyond sales.
2.Make a plan. It is amazing how many companies go into business
without a plan. On the Internet, this is a vital component. There is no, “If you build it they will come.” Things to be laid out include: How will you differentiate yourself from competitors? What type of Internet resources do I plan to make available? How will I get people to visit. Make a list of press contacts that you want to announce your offering to. The Internet is hot news, and once you are picked up by a magazine or newspaper, the others will follow. It is best to get someone to help you with it.
3.Get your hardware (PCs modem, etc.) contact an ISP.
4.Implement the design. See the discussion on Web page design. This is basically the technical side. It includes such things as interactive scripts for the site, customer tracking capabilities, and more depending on the situation. However, always remember that marketing people shouldn’t get bogged down with technical details. Hire a consultant.
If one already has a Personal Computer, he can right away take the minimum step of getting connected and using an e-mail address for around 1,800 Pesos. Monthly charges for a 30-hour Internet usage would range from 700-1000 Pesos.
The next step of setting a simple Web site would entail from 5000-7000 Pesos for 5-7 pages, depending on the type of information you want included in your Web page. The figure could go higher if you opt to hire a consultant to do the marketing and design of your site. Hosting the Web site in somebody else’s server would cost around 2,000 Pesos per month.
It is possible, therefore, to establish a basic Internet presence on the Web for less than 12,000 Pesos and monthly costs of 3,000 Pesos, although one may also decide to involve consultants with both general and Internet marketing skills to increase the effectiveness of his marketing both online and offline.
The Internet is already playing an important part in many areas of business activity, and it will rapidly increase in importance over the next few years. As a minimum, an email address is going to be as important as a fax number if a business is to have commercial credibility.
A number of factors will determine the further extent to which individual businesses should get involved in the Internet. This paper has been designed to provide small businesses with some of the information which will help them in the decision making process.
Whether or not it seems appropriate now to have an Internet access, or put up a Web site, the costs of these steps are low enough to allow some experimenting to be carried out at low risk. An early involvement in the Internet can, for may businesses, give a competitive edge over competitors who lack foresight or curiosity.
There would be a serious problem if a businessman has not been thinking about the Net. A few years from now the Net will be a big force. Profits may not be there initially, but getting the mindshare of your target market is already worth it.
Browser – The software a person uses to view the Web.
(.com) dot com – A commercial Web site.
Conference – A large chat session that features a main speaker and an audience that asks questions.
Discussion groups – An electronic message board on an online service, or the Net that contains messages focusing on a specific topic.
E-mail (Electronic mail). A means of exchanging typed messages between computer users in which messages are sent to specific addresses and store in mailboxes.
Home page – The front door to your virtual store. Your home page is just like any other Web page, except it is the first one that appears when someone enters your URL. The introductory or menu page of a Web site. A home page usually contains the site’s name and directory of its contents.
HTTP (Hypertext Transfer Protocol) – The communications protocol, or set of technical rules, through which Wold Wide Web information is linked on the Internet.
ISP (Internet Service Provider) – A company or organization that offers Internet access to customers for a fee.
Mailing list – An electronic discussion carried out with e-mail messages rather than an electronic message board. Rather than posting a message to a discussion board, you send it to a mailing list’s e-mail address.
Modem – A device that allows a computer to connect with other computers over standard telephone lines by dialing phone numbers.
Newsgroup – A message board on the Internet that focuses on a particular subject. Also known as Usenet.
Protocol – A set of technical rules that defines a specific method of doing something. A communications protocol governs a particular method of communicating.
Search Engines – Powerful computers that use “robots” or “spiders” that wander around the Web, finding pages and indexing all or part of them.
Server – A computer that stores files and makes them available to other users on a network or on the Internet.
Signature (.sig) – A block of information used to sign the end of an e-mail. It usually includes an author name, company name, e-mail address and other information.
URL (Uniform Resource Locator) – Think of a URL as an Internet telephone number or address. No two URL numbers on the Internet are the same.
Web site – A collection of Web pages. Your URL is the address for your Web site.
World Wide Web (also WWW, or the Web) – A collection of information located on many Internet servers that can be accessed with a browser or by navigating via hypertext links.
Alan L. Ocab