Executive Summary
This paper intends to examine the development of marketing strategies in relation to the Internet. An attempt will be made to look into how Internet marketing strategies have changed throughout the years. We will also explore the drastic shift in offline to online marketing and how Internet marketing is being utilized now. In addition, we will delve into how the future of Internet marketing would be with the progression of China (already the largest online demographic), India and Latin America. A new era of marketing has only just begun.
Introduction
Among all the inventions in the past decades, it is undeniable that the Internet has drastically altered the marketing and business landscape. Ask anyone ten years back; no one would have predicted that the Internet would be an integral part of marketing strategies utilized by large corporations and individuals all around the globe.
Internet marketing is the marketing of products or services over the Internet and related computer networks in three large markets: business-to-business (B2B), business to consumers (B2C), and business-to-government (B2G). It takes in a wide variety of practices and there are a number of different business models that can be followed.
Internet marketing or e-marketing can be categorized into a few main categories:
· Corporate Domain: Corporate websites/domain have been around since the late 90s and most companies have used this web presence to provide consumers with information about their products and services.
· Search Marketing: Paying a third party or search engine to get your website listed as the top few searches when consumers use search engines like Yahoo or Google.
· Out Bound and Syndicated Web Marketing: Some examples are email marketing where emails are sent out to individuals on a mailing list and invasive marketing like pop ups whenever you visit a webpage.
· Brand Extension: Examples are web advertising in which you see large banners or skyscraper advertising (IAB) model on websites and affiliate marketing, whereby advertisers enlist the service of other web to market their products.
· Community Marketing and social media marketing: Research indicates that this is the fastest growing area of growth for Web Advertising and Marketing. Nothing surprising considering the ever-increasing popularity of social media like facebook and twitter.
Historical Perspective
The history of Internet marketing began in the mid 1950s. At that period of time, companies began to make extensive use of computers to perform accounting tasks, payroll processing and production planning.
In the early 1970s, two early versions of the Internet were created: ARPANET which was created by the U.S Department of Defense and NSFNet which was established to enable the rest of the population in non-defense fields to use a network similar to ARPANET. Then several developments brought these 2 networks together to form the modern day Internet.
Up till the early 1990s, e-commerce transactions were fueled by the growth and acceptance of credit cards, automated teller machines (ATMs), and technological innovations like Electronic Funds Transfer (EFT) and Electronic Data Interchange (EDI), a system for exchanging business data, like invoices from one organization to another.
From the mid-1990s onwards, e-commerce began an exponential growth increase fuelled by technological innovations and applications.
Reflecting the early growth in the 1990s, a huge number of businesses in the U.S and Western Europe jumped on the bandwagon and started featuring activities associated with the sale and purchase of goods and services over the Internet, providing secure connections and innovations at the time like e-shopping carts and electronically authorized credit card payments which is what we see today.
A 2005 study by Rohm and Sutton[1] reveals different internet marketing initiatives in the mid 1990s from current internet strategies. Among early Internet marketers, strategic initiatives have emphasized on revenue generation, aggressive disintermediation (removing the middlemen) and the use of traditional transactional tactics like enticing customers with price discounts and unique product features.
How marketing techniques have evolved
Advertising used to be a simple game. Channels to publicize were through mediums like print, TV, radio, outdoor and sponsorship. Usually, most of the money went to the TV, because that was where majority of the masses tuned in on a daily basis. Hence, the more TV time you had, the more successful your advert will be, ceteris paribus.
When the Internet came about, a new revolution of marketing came about. Businessmen and individuals alike found it easy to link their businesses to websites. Businesses realized over time that with the Internet, they could advertise to a broader audience, which helped to generate more sales and profits.
In 2006, the Interactive Advertising Bureau reported that Internet advertising revenue for Q3 of that year exceeded $4 billion. A decade ago, the revenue was under $250 million. It was apparent that most of the money had to come from traditional sources of advertising. The message is clear: The money is shifting from offline to online.
Shift from offline to online
Online marketing allows marketing messages to be precise when targeting consumers. It also allows for flexibility to test variations of a message or campaign in near real time. For instance, running slightly different TV commercials in different cities and then companies can get informed quickly about the effectiveness of the campaign. What is impossible offline is now a routine online.
Advancement in technology has made marketing on the Internet more efficient and effective as compared to traditional advertising. Conventional means of marketing have become obsolete, as they are not able to impress upon the consumers and give them what they really want. Furthermore, internet marketing is more cost efficient than the conventional advertisements as it can make use of databases through data-mining to narrow down the targeted audience and in return, save money and improve results. The most commonly used methods are social networking marketing such as facebook, twitter and search engine marketing like Google.
This has hugely impacted the way products are sold and marketed, and more importantly, seen a significant shift in the balance of power towards the consumers. Marketing was once seen as a one-way broadcast channel where the big corporations are the ones solely driving the ideas. However, in the modern day world, effective marketing is based on a 2 way conversation approach between the consumers and the producers.
Modern Internet Marketing Strategies
Marketing in the 21st century is more about change and innovation. Likewise, the emphasis too has to switch to brand-building, customer-focused technology, building channel partnership, cost reduction, and integrating online and traditional media. Brand building takes the form of consistent design elements that communicate corporate ‘personality’ at each point of contact with supply chain partners. Customer-focused technology includes functions such as real-time specifications and status reports, secure private websites and monetary transactions, automated order processing and inventory managements systems for improving collaborations and communication with customer and supplier partners. Cost reduction is beneficial for both the consumers and producers as it increases profit margin and decreases the amount the consumers have to pay. Online and traditional media are integrated to bring about lower costs, a larger base of customers and more revenue.
Trends of Modern Day Internet Marketing
There are newer marketing techniques being invented all the time. It is important to know how the trend would be. Companies are inventing new techniques to find better ways to make revenue and establish their brand on the internet.
It is undeniable that the unprecedented growth of Internet marketing has outpaced traditional offline advertising. Consequently, the market share of Internet advertising is continuing to eat into the share of offline advertising. It must be noted that the other forms of advertising like television, newspaper and magazines still hold majority of the market share, but this percentage is expected to decrease in the coming years.
The growth in Internet marketing can be attributed to three factors, one being more advertisers basing their promotions online, secondly, the increasing penetration of Internet in developing nations and lastly, the rise of social networking sites like Facebook and Twitter. Because the Internet is a relatively new medium when compared to established mediums like newspapers and television, the full potential of the Internet is not entirely tapped yet.
Benefits of Internet Marketing
Business perspective
Data collection:
The company stores the information of the customer everytime a transaction is completed. The firm then uses this data in several ways. Firstly, it is used to analyse the most popular products sold. Secondly, the data can help the firm to segment their consumers, profiling them according to their spending habits. From there, promotional advertisements are sent to their emails.
Stronger relationship building:
Internet marketing has brought a whole new shopping experience to consumers. Companies like Amazon.com and Nike offer special offers or allow the customers to personalize their own products. Firms can also interact with consumers and learn what they want. This allows the firm to foster stronger bonds online with the customers and form a loyal and stable customer base.
Cost reduction:
Advertising online has a major benefit, which is saving on costs. Because staffing costs and retail costs are eliminated, cost of selling the goods is reduced. Furthermore, the channel of distribution is shorter online as the consumer are able to buy the goods directly.
Even playing field:
The Internet has leveled the business landscape for small and big firms. Both are presented with the same medium to channel their messages and sell their products. This is certainly good news for the small firms who now know that the big firms do not have much of an advantage over them.
Consumer perspective
Competitor analysis:
The internet allows business to analyse their competitor’s online strategy. Hence, new products, price changes are constantly being kept abreast. This enables a firm to react quickly to a change in their competitors’ strategy, be it lowering prices or improving products, consumers are the one that benefit in terms of better quality and services.
Cost reduction:
Likewise for consumers, lower cost is good news both for customers and businesses alike. Consumers get more value for money when they pay a lower price for the goods purchased.
Disadvantages of Internet Marketing
First, there is a predominant issue of consumer trust relating to the Internet. It is foreseeable that with the popularity in Internet advertising, transactions online are bound to increase as well. Phishing, fraud, identity theft and spam will rise in number. Consumers will be less trusting of activities related to the Internet.
Secondly, effective Internet marketing requires a rock solid database. With a need to get their hands on information of customers, data mining companies would be more aggressive in their methods to obtain accurate information. In the process, they might compromise consumers’ privacy and security by using unethical techniques to collate more information.
Discussion
On hindsight, the benefits of Internet marketing greatly outweigh the disadvantages. It has been shown that both firms and households place a high value on convenience, cost savings and effective advertising channels which facilitate a two way information flow between producers and consumers. This is especially favorable in societies which in which producers are becoming more competitive and consumers are becoming more online savvy and have a faster pace of life. While privacy and consumer trust pose valid concerns, these shortfalls can be mitigated through consumer education, cyber and privacy laws and the establishment of top trustworthy sites for internet marketing. Hence in the long run, the way ahead is for firms to continue developing their marketing power through the internet while at the same time addressing consumer concerns and to a certain extent, preserving more traditional forms of marketing to truly reach out to the masses.
Future considerations
One issue is how consumers will harness the Internet for marketing related activities in the forthcoming years. As discussed above, the Internet can be considered an extremely powerful tool in influencing the minds of the consumers. It is possible that search engines will be redeveloped further to fine tune more relevant and specific search results, companies will think of innovative ways to brand themselves as branding is the centerpiece for every marketing strategy.
Future trends of Internet marketing also include an understanding of the globalization of the world. It is hard to escape the astronomical growth of future global powerhouses like China and India, and not forgetting how countries in North America are improving web infrastructure for their mass populations. It will only be a matter of time before just as many users in developing countries having greater access to the Internet as their fellow counterparts in USA and Japan. This new era of global communication is indeed propelling the new global economy to greater heights. The effect on the future trends on marketing could be huge in the next few years.
As more nations are exposed to greater web penetration, citizens would be more sophisticated technology-wise. They would likely exploit the commercial advantages of web marketing and there would be another batch of new web users that will impact the face of web advertising. The western world would no longer be the main sources of demand and supply of goods and services as the future trends of Internet marketing takes on a whole new dimension through world-wide competition. However, it must be noted that there are several barriers standing in the way of countries like India and China being included to the competitive layer of global advertising, an example would be the different languages being conversed in and advertising techniques. Certain conservative Asians may not be open to the idea of being bombarded by a wide array of advertisement and may choose to close themselves out to this kind of exposure.
As marketing on the Internet begins to move to untouched terrains like India or China, it is becoming a necessity to hop on the Internet marketing bandwagon in order to succeed in a rapidly growing economy. The future of Internet marketing is certain to be affected by the huge potential in the untapped markets in these countries. Individuals in western nations like USA and UK ought to be alert as most of their focus is on the rapid advancement of Internet capabilities within their own field. They also need to go with the flow of the popularity of Internet marketing in these developing states and explore the ever- increasing opportunities in the marketplace that lie ahead. It must be specially noted that the old methods of Internet marketing cannot work efficiently. The old methods will get monotonous and routine after a while, losing its effectiveness. The outdated has to make way for the new, in this case, new marketing strategies.
Bearing that in mind, the idea of social media marketing is one that is geared towards the future. It is still in its infancy stage however it is playing a crucial role in the progress of online marketing. Facebook and Twitter have approximately hundreds of thousands of new users signing up every month.
Conclusion
With the above future considerations in mind, the Internet is a treasure cove of information and in a few years time, would be the main medium of communication. Online marketing has proven itself to be an essential tool to expand and develop the business or products. The reason why Internet marketing has been so successful is that it is able to influence the consumers subconsciously. However, strategies of internet marketing have to be harnessed properly or else there would be a backlash when consumers start to find it annoying and unethical. There is a thin line between internet marketing and spamming. And marketers should know how not to cross the line. Perhaps the use of Internet as a marketing tool is meant for greater things. If it is controlled and managed properly, the changes it brings forth can benefit both businesses and consumers immensely, leading to progress for humanity as a whole. That, only time can tell.
Reference
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[1] Fareena Sultan and Andrew Rohm, “ The Coming Era of ‘Brand in the Hand’ Marketing,” MIT Sloan Management Review, Fall 2005, vol 47, No, 1
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