250 Part 2 Digital marketing strategy development

Introduction
This chapter shows how the well-established strategic framework of the marketing mix can
be applied by marketers to inform their digital marketing strategy. It explores this key issue
of digital marketing strategy in more detail than was possible in Chapter 4 . As part of our
discussion of product we will review how the Internet can be used to support and impact
on the way brands are developed. The chapter is structured by taking a look at each element of the marketing mix in
turn, reviewing the implications of digital technology, with
online branding covered under Product.
What is the marketing mix?
Marketers will be familiar with the marketing mix, but this introduction is included for
context for digital marketers who are unfamiliar with it. The marketing mix – widely
referred to as the 4Ps of Product, Price, Place and Promotion – was originally proposed by
Jerome McCarthy (1960) and is still used as an essential part of formulating and implementing marketing strategy
by many practitioners. The popularity of the mix as a guide
for the application of marketing techniques is driven by the apparent simplicity of the
framework. However, in the 1980s the 4Ps was challenged for not referencing the importance of customer service.
The result was that the mix was extended to 7Ps, which include
three further elements (the service mix) that better reflect service delivery: People, Process and Physical evidence
(Booms and Bitner, 1981). Some writers argue that the service
mix should be subsumed within the 4Ps. Figure 5.1 summarises the different sub-elements
of the 7Ps. Since the 1990s there have been more changes in marketing thinking and
research and the outcome has been a shift in emphasis in the application of the marketing mix towards the
development of relationship building. Some writers even argue that
this is a paradigm shift altering the underlying marketing philosophy guiding the application of marketing tools and
concepts (Berry, 2008). Whereas others suggest the move to
more relationship-orientated marketing is in response to growing customer demands and
increasingly complex technology-driven trading environments (Singh et al., 2011)(Singh,
Agrariya and Deepali, 2011).
Marketing mix
The series of seven key
variables – Product, Price,
Place, Promotion, People,
Process and Physical
evidence – that are varied
by marketers as part of
the customer offering.
Online branding
How online channels are
used to support brands
that, in essence, are the
sum of the characteristics
of a product or service as
perceived by a user.
Using the Internet to vary the marketing mix
Product
People
• Quality
Promotion Price • Individuals
• Image Process
• Marketing • Positioning Place on marketing Physical evidence
• Branding • Customer
communications • List • Trade activities • Sales/sta
• Features focus
• Personal • Discounts channels • Individuals contact
• Variants • Business-led
promotion • Credit • Sales on customer experience
• Mix • IT-supported
• Sales • Payment support contact of brand
• Support • Design
promotion methods • Channel • Recruitment • Product
• Customer features
• PR • Free or number • Culture/ packaging
service • Research
• Branding value • Segmented image • Online
• Use and
• Direct added channels • Training experience
occasion development
marketing elements and skills
• Availability
• Remuneration
• Warranties
Figure 5.1 The elements of the marketing mix
Chapter 5 The impact of digital media and technology on the marketing mix 251

Note that the marketing mix concept has been criticised for not being customer-centric.
Lautenborn (1990) suggested the 4Cs framework, which considers the 4Ps from a customer
perspective. In brief, the 4Cs are:
●● customer needs and wants (from the product);

●● cost to the customer (price);

●● convenience (relative to place);

●● communication (promotion).

It is not the aim of this text to debate current thinking on marketing philosophy but it is
important to acknowledge the rise in importance of relationship building as this is key to
the application of digital marketing strategies and the application of the marketing mix
shown in Activity 5.1.
Digital media and technology provides many new opportunities for the marketer:
●● to vary the application of marketing mix;

●● to develop new routes to delivering competitive advantage;

●● to create new market positions;

●● to build and service relationships in increasing innovative ways;

●● to cut through the barriers of time and space and offer continuous and instantaneous

access to products and services.

Think about these opportunities while tackling Activity 5.1.
Purpose
An activity which highlights the scope for applying digital technology as a strategic
marketing tool.
Activity
Review Figure 5.1 and select two opportunities that give potential for varying the marketing mix. For each opportunity suggest
how each of the elements of the mix (Figure 5.1):
●● provide new opportunities for varying the mix;
●● give rise to possible negative implications (threats) for each opportunity;
●● create opportunities to use the mix to develop relationships.

Activity 5.1 How can digital media and technology be used to vary the marketing mix?
Digital marketing also has far-reaching implications for the relative importance of different elements of the mix for
many markets, regardless of whether an organisation is
involved directly in transactional e-commerce. Consequently, the marketing mix is a useful
framework to inform strategy development. First, it gives a framework for comparing an
organisation’s existing services with competitors’ and can also be used as a mechanism
for generating alternative strategic approaches. Digital marketing affects all aspects of the
traditional and service marketing mix and in this chapter we explore:
●● Product – looking at opportunities for modifying the core or extended product for digital environments.

●● Price – focussing on the implications for setting prices in digital markets; new pricing

models and strategies.

●● Place – considering the implications for distribution for digital marketing.

●● Promotion – exploring promotional techniques in advance of more detailed coverage of

new techniques in Chapters 8 and 9.

252 Part 2 Digital marketing strategy development
●●People, process and physical evidence – reviewing the principal ideas in advance of more
detailed discussion in Chapters 6, 7 and 10, where the focus is on how these elements of
the mix relate to customer relationship management and managing an organisation’s
digital presence.
In 2001, Chaffey and Smith recognised the growing importance of relationships, especially
within the digital marketing arena and proposed that an eighth element should be added
to the digital marketing mix: partnerships. They suggested that their eighth P was very
important as it enabled digital marketers to extend reach, and build affiliations (Chaffey
and Smith, 2012). This approach is today often known as co-marketing, where a strategic
or informal agreement is reached for two brands to work together to increase awareness
of their partner. Co-marketing, also known as ‘contra-deals’, has the advantage that it is
low-cost since the main cost is staff time to develop joint campaigns and share content. For
example, publisher Smart Insights has formed strategic partnerships with vendors such as
Hubspot, publishers such as MyCustomer.com, services such as Eventbrite, events companies such as UBM and
marketing membership bodies such as The IDM to help generate
awareness from the audience of the partner. Co-marketing can also involve working with
individual bloggers as part of influencer outreach (see Chapter 8).
As you read this chapter, you should consider which are the key elements of the mix that
vary online for the different types of online presence introduced in Chapter 1 – i.e. transactional e-commerce,
relationship-building, brand-building, media owner portals and social
networks. Allen and Fjermestad (2001) and Harridge-March (2004) have reviewed how
digital media and technology has impacted on the main elements of the marketing mix,
particularly for digital products. The opportunities they describe remain relevant.
Co-marketing
A partnership agreement
reached between
different businesses to
promote each other,
typically based on sharing
content (and potentially
promotions) principally to
the audience of owned
media channels such as
social media, blog and
email marketing.
Roberto Hortal explains why the marketing mix remains relevant today
Overview and main concepts
Roberto Hortal has worked as an e-business director with many years of experience
in different types of businesses operating in different countries. Examples of the UK
and global enterprises he has worked for include EDF Energy, RSA insurance group,
MORE THAN, easyJet and Nokia. He shares his experience of how the marketing mix
concept is applied when taking real-world decisions, when companies seek to shape
their online value proposition and performance in the digital marketplace.
The interview
Q. We often hear that the concept of the marketing mix isn’t that useful any
longer in this era of customer-first. What’s your view on its relevance today? Are
there any particular aspects of the mix which lend themselves to refining online?
Roberto Hortal: The marketing mix is a conceptual framework, and as such it is useful since it enables a common language to
be used in the planning, execution and
measurement of a number of coordinated activities that deliver the desired marketing
outcomes. Customer-centricity demands that organisations becomes a lot better at
collecting and reacting to customer insight and adapt their offering to best suit an ever
growing number of narrowing customer segments – ever approaching the ideal of the
completely personalised product. As complexity increases exponentially, it is crucial to
be able to rely on tried and tested concepts like the marketing mix.
I use the basic components of the marketing mix (such as the 4Ps) at work
daily, and as such, for me, the marketing mix remains a practical tool. In a digital environment routinely identifying and profiling
individual consumers over time and
adapting to their needs and wants, the 4Ps become elastic. Is my website a Place,
or is it an integral part of the Product? When more efficient digital channels directly
influence my ability to Price, do Place and Price become synonymous? This elasticity needs to be managed effectively to avoid
the pitfalls of too rigidly applying the
model. One must always challenge the validity of every tool in the Digital Marketing armoury; adding, changing and discarding
as business and customers evolve.
Proposed evolutions of the marketing mix concept (such as the 4Cs) may ensure it
remains relevant today. My personal view is we’re still some distance from seeing the
end of its useful life.
Q. Could you give some examples of where you introduced new ways of applying
the mix online.
Roberto Hortal: In my view, the key insight is that digital media can contribute to
every element of the mix. Therefore, we must avoid a narrow categorisation of digital
as contributing solely (or even primarily) to a single component of the mix.
While I haven’t come across an organisation that fundamentally disagrees with that
view, some organisations find it easier than others to put it into practice. I have worked
in organisations where the mix is embedded in the corporate structure with separate
Pricing, Product, Distribution (Place) and Marketing (Promotion) departments. Embedding a digital mindset across those silos
can be a daunting task.
I’ve experimented with channel pricing, as pricing is a critical driver of conversion
and business value in a services organisation. Straight online discounts have proven
difficult to justify. Online discounts aren’t valued by customers (in the age of price
comparison, they focus on the total price, rather than its components) and often do
not reflect a real lower cost to the business (lower costs to sell and serve are offset by
lower transaction value and lower retention rates). Using channel data as a pricing factor has proven a lot more successful: as
historical data is accumulated, it is possible to
really offer competitive prices to those customers identified as high value at the point
of application. An accurate value/propensity model can use the wealth of information
available from digital visitors (geography, visit trigger/campaign, past visits, customer
history, etc.) to drive truly personalised pricing. In this example, price follows place and
both price and promotion reflect the individual customer.
I’ve successfully extended the data-driven approach to other elements of the mix:
dynamic packaging (the creation of a personalised offering from the basis of a modular product) has proven successful many
times: at easyJet we built a product that
included car hire recommendations based on a predictive model that took destination, seasonality and party size as inputs –
increasing car hire uptake very significantly.
More recently I’ve applied the same insight-driven dynamic packaging approach to
RSA’s Central and Eastern European businesses, increasing sales of optional covers
and add-ons very significantly.
Further opportunities exist around selecting which default base products to present:
are you more likely to want a cheap energy tariff that tracks price rises or a fixed price
deal that ensures protection against future rises? What we know about you from your
digital ‘shadow’ may provide the clues we need.
Q. Online channels bring great opportunities to test propositions online. Can you
advise on approaches to testing propositions?
Roberto Hortal: I have used online channels to test propositions in a couple of ways.
I assign propositions randomly to visitors on first arrival to test interest/sales. I would
typically run this against a large control group (being offered the current main proposition) to both protect commercial results and
detect the effect of any external influences that maybe otherwise wrongly influence the experiment. This approach can be xtended
beyond the site, via randomised allocation of marketing messages on Display, Search etc. to measure a proposition’s
attractiveness. It’s important to test all
aspects of the proposition: a proposition successful at attracting interest may convert
badly if it can’t be priced at a level that matches customer expectations. I also provide
a modular proposition platform and allow customers to combine proposition elements.
We can easily analyse popular combinations as well as secondary correlations such as
the propensity to add a certain ancillary product to a particular proposition configuration, and understand the compound impact
on profitability, retention and advocacy
from what we know about each of the modular components in isolation.
I’ve found that proposition testing rarely fits neatly an A/B scenario, with tests
quickly developing into complex multivariate experiments with a significant number
of variables. It is important to ensure the tests are solidly planned, rigorously executed
and statistically significant. Free tools like Google Website Optimiser provide information to test and get the best out of website
contact. However, such tools will not prevent badly designed experiments from yielding wrong data. In my experience, the only
way to ensure valid tests and improved business results is to bring in the best analytical brain you can find. Analytics is the first
role I fill when I build a digital team from
scratch, it’s that important.
Q. Many organisations are now developing social media strategies. How do you
see the intersection between social media and the marketing mix since it clearly
impacts on product decision making and service?
Roberto Hortal: If I only had the answer … I take a radically different view of social
media than many of my peers. While most people see social media as a branding
and customer service channel, I see social media’s largest potential in the areas of
awareness, consideration and acquisition. This is not to say the best way to use
social media sites is to advertise in them. Far from it. The social nature of the Internet demands that brands engage in
conversation, and identify and incentivise brand
ambassadors to help amplify our messages. There is general acceptance of this,
but also a general shyness about steering conversations and seeking to extract immediate commercial value in the form of direct
sales. Risk-aversion takes over and
anecdotes used to prove the point that there is a risk that poor execution may lead
to a social backlash.
The risk is clearly real but there is also an opportunity to execute well and generate significant amounts of business and positive
buzz. I recently ran a campaign
with Poland’s largest social network (Nasza Klassa). A fairly simple personality quiz
mechanism was executed beautifully by my Polish team, resulting in what our partners characterised as the country’s most
successful campaign in terms of reach and
engagement, one that generated levels of sales comparable to those contributed by
mainstream e-marketing channels.
Social media spaces require nurture and respect, but we must not forget that so
do physical locations. In the same way that people like to go to the village Post Office
for a chat but also to do their banking, branded social media environments have the
potential to merge conversation and commerce in a seamless, altogether better proposition for both consumers and brands.
Q. Many organisations now are looking at providing new mobile propositions. A
key decision is whether to implement them as mobile app or mobile site. How do
you approach this platform decision?
Roberto Hortal: I start from the point of view of the user: Why would they use this
proposition? Where would they use the proposition? How would they find it first time,
and subsequently? Would they accept/appreciate the added engagement possibilities
of an app (alerts, updates, a permanent place on the home screen)?

ome scenarios where I have used this approach in the past include:
●● Insurance/energy sales. Website – neither mobile app nor mobile site. In this particular case I think the best option is to
provide a solidly usable, accessible web
sales capability that works well across devices. Rather than building separate
sites/capabilities for separate devices I prefer to ensure the basis of the experience is optimised – this principle ensures that
device-specificity doesn’t catch me
off-guard: sales websites I have managed worked well on iPhone the day it came
out as they were built of solid principles and standards that apply across devices.
I do use extensively the principles of progressive enhancement to provide a great
experience to segments of people on particular channels/devices such as modern
PC browsers and mobile browsers. However, the underlying principle of a solid,
accessible, easy-to-use site has never let me down.
●● Regular/emergency transaction. Apps – I look at regular events such as submitting an electricity meter reading or
unpredictable ones such as registering a motor
insurance claim as ideal candidates for a mobile app. Regularity breeds familiarity,
and regular events can benefit from app characteristics such as local storage, transparent login, notifications and a permanent
place on the user’s screen. These same
characteristics, together with the reassurance of being completely contained on the
device and not requiring uninterrupted Internet access, support the use of apps for
functionality perceived as critical. HTML5 may make these distinctions technically
irrelevant, but I expect customer behaviour will lag significantly so they will effectively apply for a long while yet.
●● Seamless access vs perceived value. An app’s installation is quite a disruptive
process: you need to open the shop interface, confirm credentials, find the app,
start a possibly long download (which may impact on your monthly limits), find the
app on the phone screens, start it, watch it initialise (including possibly entering
username and password for initial configuration) and finally access it – and from
now on it will take space permanently on your device, competing with your music
and movies. Quite an expensive process, from a usability point of view. Therefore
an app must have quite a high perceived value in order to get installed. On the other
hand, if casual use (particularly in conjunction with web searching/browsing) is what
is sought, then a mobile site is the best solution.
●● Fragmentation is finally the last of my current worries. We used to have to contend
with the iPhone and the iPad – two screen sizes in a universal app is manageable. Suddenly we have myriad versions of iOS,
Android, Windows Phone on a continuum of
screen sizes and very variable device capabilities (processor speed, camera/s, GPS,
NFC, etc.). This is turning into a big argument for HTML5 and mobile sites. Major platform/device combos will continue to be
relevant for apps, but I also expect the relative
size of this group of devices to shrink in relation to the universe of mobile devices –
serving most of which will only be practical through mobile web.
Product
The product variable of the marketing mix refers to characteristics of a product, service or
brand. Product decisions should be informed by market research where customers’ needs
are assessed and the feedback is used to modify existing products or develop new products. There are many
alternatives for varying the product in the online context when a
company is developing its online strategy. Internet-related product decisions can be usefully divided into decisions
affecting the core product and the extended product. The core
product refers to the main product purchased by the consumer to fulfil their needs, while the extended or augmented
product refers to additional services and benefits that are built
around the core of the product.
The main implications of the Internet for the product element of the mix are:
1 options for varying the core product;
2 options for offering digital products;
3 options for changing the extended product;
4 conducting research online;
5 speed of new product development;
6 speed of new product diffusion.
1 Options for varying the core product
For some companies, there may be options for new digital products which will typically
be information products that can be delivered over the web. Ghosh (1998) talked about
developing new products or adding ‘digital value’ to customers. The questions he posed
still prove useful today:
●● Can I offer additional information or transaction services to my existing customer base?

For example, a bookseller can provide customer book reviews, new title previews or sell
books online. A travel company can provide video tours of resorts and accommodation.
●● Can I address the needs of new customer segments by repackaging my current information assets or by creating

new business propositions using the Internet? For an online

bookseller, creating an electronic book service, or a DVD rental service.
●● Can I use my ability to attract customers to generate new sources of revenue such as

advertising or sales of complementary products? Lastminute.com, which sells travelrelated services, has a significant
advertising revenue; it can also sell non-travel services.
●● Will my current business be significantly harmed by other companies providing some of

the value I currently offer? Consider the consequences if other companies use some of
the product strategies described above.
Of course, the markets transformed most by the Internet are those where products themselves can be transformed
into digital services. Such products include music (download or
streaming of digital tracks – see the iTunes case study at the end of the chapter), books
(electronic books), newspaper and magazine publishing (online access to articles) and software (digital downloads
and online subscription services).
The Internet also introduces options for mass customisation of products, particularly digital products or products that
can be specified online. The Internet has provided
a channel through which manufacturers can not only sell the personalised products but
also use the Internet as a source of information for developing the latest catwalk designs.
ASOS has revolutionised the way fashionistas shop in the UK (and around the globe). This
online brand, launched in 2002 and now a leading online fashion retailer in the UK, introduced the ‘catwalk view’,
where fashion-hungry online shoppers can watch products being
walked down the runway before they buy. ASOS sells fashionable clothing from a range of
designers and its own in-house team. Their business model relies on quick turnover of ‘on
trend’ fashion items to the mid and lower ends of the clothing market (Swash, 2014).
Mass customisation (Davis, 1997; Pine, 1993)has been heralded as a business strategy
which derives benefits from the personalisation of products in which a customer takes a
more active role in product design (Kamail and Loker, 2002).
Digital marketing insight 5.1 discusses Alvin Toffler’s futuristic predictions about the
rise of the prosumer in 1980.
Companies can also consider how the Internet can be used to change the range or
combination of products offered. Some companies, such as online fashion retailers, may
only offer a subset of products online. Alternatively, a company may have a fuller catalogue available online than is
available through offline brochures. Bundling is a furtheralternative. Koukova et al. (2008) found that the Internet
has encouraged the bundling of
information-based products, such as newspapers, books, music videos, in physical and digital formats. Amazon
offered buyers of physical books the opportunity to buy the digital
version at a minimal price (Koukova et al., 2008). At the time of writing, Sky Box Office,
TalkTalk Box Office and Blinkbox offer various bundles of film, from downloads, buy,
rent and or keep (Recombu, 2015). The benefits for the sellers are that digital products provide opportunities to
leverage advantage as there are marginal costs involved with supplying digital versions and considerable cost
savings if customers switch to the digital offer.
Therefore, the introduction of physical and digital product bundles offers much scope for
new approaches to product delivery and pricing strategies (Koukova et al., 2008)(Koukova,
Kannan & Ratchford, 2008).
Finally, the Internet is a platform for providing information about the core features of
the product. However, the availability of information can impact on price as the price has
become more transparent. Comparison sites like Comparethemarket.com enable online
shoppers to assess the price of car insurance from many suppliers in one location.
The prosumer concept was introduced in 1980 by futurist Alvin Toffler in his book The
Third Wave. According to Toffler, the future would once again combine production
with consumption. In The Third Wave, Toffler saw a world where interconnected users
would collaboratively ‘create’ products. Note that he foresaw this over ten years before
the web was invented!
Alternative notions of the prosumer, all of which are applicable to e-marketing, are
catalogued at Logophilia WordSpy (www.wordspy.com):
1 A consumer who is an amateur in a particular field, but who is knowledgeable
enough to require equipment that has some professional features: (‘professional’ +
‘consumer’).
2 A person who helps to design or customise the products they purchase: (‘producer’ +
‘consumer’).
3 A person who creates goods for their own use and also possibly to sell: (‘producing’ +
‘consumer’).
4 A person who takes steps to correct difficulties with consumer companies or markets and to anticipate future problems:
(‘proactive’ + ‘consumer’).
An example of the application of the prosumer is provided by BMW, which used an
interactive website prior to launch of its Z3 roadster where users could design their
own preferred features. The information collected was linked to a database and as
BMW had previously collected data on its most loyal customers, the database could
give a very accurate indication of which combinations of features were the most sought
after and should therefore be put into production.

2 Options for offering digital products

Companies such as publishers, TV companies and other media owners who can offer digital products such as
published content, music or videos now have great flexibility to offer a
range of product purchase options at different price points, including:
●● Subscription. This is a traditional publisher revenue model, but subscription can potentially be offered for

different periods at different price points, e.g. three months, twelve

months or two years.

●● Pay-per-view. A fee for a single download or viewing session at a higher relative price
than the subscription service – e.g. music products from iTunes. Customers can enjoy
instant download in a similar way to a mobile company ‘pay-as-you-go’ model. Travel
publisher Lonely Planet enables visitors to a destination to download an introduction
for a fraction of the price of a full printed guide.
●● Bundling. Different channels or content can be offered as individual products or

grouped at a reduced price compared to pay-per-view.

●● Ad-supported content. There is no direct price set here. Instead, the publisher’s main

revenue source is through adverts on the site (CPM display advertising on-site using
banner ads and skyscrapers) a fixed sponsorship arrangement or CPC, which stands
for ‘cost-per-click’ – more typical when using search ad network publishing such as
Google Adsense (www.google.com/adsense.com), which accounts for around a third of
Google’s revenue. Other options include affiliate revenue from sales on third-party sites
or offering access to subscriber lists.
The digitisation of products presents opportunities to some industries and threats to
others. Newspapers is an example of an industry where the Internet has had a far-reaching
impact. Most popular quality newspapers are now successfully using subscription-based
business models to maintain their readership. Indeed, the Guardian, the Daily Telegraph
and the Independent (popular UK newspapers) have a larger online readership than the
equivalent print versions (Reid, 2014).
3 Options for changing the extended product
When a customer buys a new computer, it consists not only of the tangible computer,
monitor and cables, but also the information provided by the computer salesperson, the
instruction manual, the packaging, the warranty and the follow-up technical service. These
are elements of the extended product. Chaffey and Smith (2012) suggest these examples of
how the Internet can be used to vary the extended product: ●● endorsements;
●● awards;

●● testimonies;

●● customer lists;

●● customer comments;

●● warranties;

●● guarantees;

●● money-back offers;

●● customer service (see people, process and physical evidence);

●● incorporating tools to help users during their selection and use of the product.

Peppard and Rylander (2005) have researched how people assimilate information online
when selecting products and point out that it is important that the site replicates information about product selection
that would normally be provided by interaction in other channels by a member of sales staff by phone or face-to-
face. These facilities can be replicated
online. For example, the bank First Direct uses an interactive dialogue to recommend the
best options on their portfolio of financial products, e.g. savings, investments, mortgage
insurance.
Organisations should aim to identify sources of value to engage customers before they
have to pay for the products and services on offer. Ghosh (1998) suggested this was an
important trigger to encourage site visitors to engage with a brand on a first visit to a site
and/or to encourage return visits. He refers to this process as ‘building a customer magnet’
and the concepts he identified remain central to ‘portal’ or ‘community’ websites. Once
customers are attracted to a site and have begun to learn about the brand offer, the next
step is to provide extensions to the freely available offer. Ideally, customers will be encouraged to enter into a paid-
for relationship with the organisation. In other cases a premium
may be charged for new services – e.g. at Amazon Web Services there are limited offers for
new (qualifying) customers who are looking for unlimited capacity for support of software, data migration and cloud
services (AmazonWebServices, 2015).
4 Conducting research online
The Internet provides many options for learning about product preferences and it can be
used as a relatively low-cost method of collecting marketing research, particularly when
trying to discover customer perceptions of products and services. Sawhney et al. (2005) have
reviewed the options for using digital media for new product innovation where they contrast the traditional new
product research process with a digitally augmented co-creation
process. They suggest that online research tools should be evaluated according to how
they can be used: (1) front-end developments of ideation and concept against back-end
developments involving product design and testing, and (2) the nature of collaboration –
broad/high reach against deep/high richness.
Options for performing new product development research online include:
●● Online focus group. A moderated focus group can be conducted to compare customers’

experience of product use. Many companies now have permanent customer panels they
can use to ask about new ideas.
●● Online questionnaire survey. These typically focus on the site visitors’ experience, but

can also include questions relating to products.

●● Customer feedback or support forums. Comments posted to the site or independent

sites such as social networks may give suggestions about future product innovation.
Freshdesk (freshdesk.com) has developed a platform to enable a company to communicate and collaborate inside and
outside the company. The platform also has the capacity
to integrate with CRM, e-commerce and analytics systems. Companies using freshdesk
include Honda, 3M, Hugo Boss, Kuoni and Unicef.

●●Web analytics. A wealth of marketing research information is also available from

response data from email and search campaigns and the website itself, since every time
a user clicks on a link offering a particular product, this indicates a preference for products and related offers. Such
information can be used indirectly to assess customers’
product preferences.
Approaches for undertaking these types of research are briefly reviewed in Chapter 10.
5 Velocity of new product development
The Internet provides a platform which enables new products to be developed more rapidly as it is possible to test
new ideas and concepts and explore different product options
through online market research. Companies can use their own panels of consumers to test
opinion more rapidly and often at lower costs than for traditional market research. Google
is a highly innovative company and it has had many successes and failures, e.g. GoogleAdwords (success) and
Google Buzz and Wave (failure), Google Glass (enhanced wearable
technology and augmented reality glasses – shelved (Gibbs, 2015)). Another aspect of the
velocity of new product development is that the network effect of the Internet enables
companies to form partnerships more readily in order to launch new products.
6 Velocity of new product diffusion
In the early days of the Internet, Quelch and Klein (1996) noted that to remain competitive, organisations will have
to roll out new products more rapidly to international markets. Additionally, Malcolm Gladwell, in his book The
Tipping Point (2000), emphasised
the importance of word-of-mouth communication on the impact of the rate of adoption
of new products, especially through the Internet. In Chapter 9, we will see how marketers
seek to influence this effect through what is known as ‘viral marketing’.
Marsden (2004) provides a good summary of the implications of the tipping point for
marketers. He says that ‘using the science of social epidemics, The Tipping Point explains
the three simple principles that underpin the rapid spread of ideas, products and behaviours through a population’.
He advises how marketers should help create a ‘tipping point’
for a new product or service, the moment when a domino effect is triggered and an epidemic of demand sweeps
through a population like a highly contagious virus.
There are three main laws that are relevant from The Tipping Point:
1 The law of the few
This suggests that the spread of any new product or service is dependent on the initial
adoption by ‘connectors’ who are socially connected and who encourage adoption through
word-of-mouth and copycat behaviour. In an online context, these connectors may use
personal blogs, email newsletters and podcasts to propagate their opinions.
2 The stickiness factor
Typically, this refers to how ‘glued’ we are to a medium such as a TV channel or a website,
but in this context it refers to attachment to the characteristics and attributes of a product
or a brand. Gladwell stresses the importance of testing and market research to make the
product effective. Marsden suggests that there are certain cross-category attributes which
are key drivers for product success – e.g.,
●● Excellence: being perceived as best of breed;

●● Uniqueness: clear one-of-a-kind differentiation;

●● Engagement: fosters emotional involvement;

●● Cost: perceived value for money

3 The power of context

Gladwell (2000) suggests that like infectious diseases, products and behaviours spread far
and wide only when they fit the physical, social and mental context into which they are
launched. He gives the example of a wave of crime in the New York subway that came
to an abrupt halt by simply removing the graffiti from trains and clamping down on faredodging. It can be suggested
that products should be devised and tested to fit their context,
situation or occasion of use.
The long tail concept
The long tail concept is useful for considering the role of Product, Place, Price and
Promotion online. The phenomenon, now referred to as the ‘long tail’, following an article
by Anderson (2004), was arguably first applied to human behaviour by George Kingsley
Zipf, professor of linguistics at Harvard, who observed the phenomenon in word usage.
He found that if the variation in popularity of different words in a language is considered,
there is a systematic pattern in the frequency of usage or popularity. Zipf’s ‘law’ suggests
that if a collection of items is ordered or ranked by popularity, the second item will have
around half the popularity of the first one and the third item will have about a third of the
popularity of the first one and so on (Newitz, 2013). In general:
The kth item is 1/k the popularity of the first.
Look at Figure 5.2, which shows how the ‘relative popularity’ of items is predicted to
decline according to Zipf’s law from a maximum count of 1000 for the most popular item
to 20 for the 50th item.
In an online context, application of this ‘law’ is now known as ‘the long tail’ thanks to
Anderson (2004). It can be applied to the relative popularity of a group of websites or web
pages or products on an individual site, since they tend to show a similar pattern of popularity. There are a small
number of sites (or pages within sites) which are very popular (the
head which may account for 80 per cent of the volume) and a much larger number of sites
or pages that are less popular individually, but still collectively important. Returning to the

product context, Anderson (2004) argued that for a company such as Amazon, the long
tail or Zipf’s law can be applied to describe the variation in preferences for selecting or
purchasing from a choice of products as varied as books, CDs, electronic items, travel or
financial services. This pattern has also been identified by Brynjolfsson et al. (2003), who
presented a framework that quantifies the economic impact of increased product variety
made available through electronic markets. They say:
One reason for increased product variety on the Internet is the ability of online retailers
to catalogue, recommend, and provide a large number of products for sale. For example,
the number of book titles available at Amazon.com is more than 23 times larger than the
number of books on the shelves of a typical Barnes & Noble superstore, and 57 times
greater than the number of books stocked in a typical large independent bookstore.
Looking at the issue from another perspective, they estimate that 40 per cent of sales are
from relatively obscure books with a sales rank of more than 100,000 (if you visit Amazon,
you will see that every book has a sales rank from 1 for the most popular to over 1 million
for the least popular). This indicates the importance of the long tail for online retailers
like Amazon, since 40 per cent of sales are from these less popular books which cannot be
stocked in a conventional bookstore (a large real-world book store would typically hold
about 100,000 books). In a Pricing context, another benefit for online retailers is that less
popular products cannot be readily obtained in the real world, so Amazon can justify
higher prices for these books. Brynjolfsson et al. (2003) estimated that average Amazon
prices for an item in the top 100,000 is $29.26 and in less popular titles $41.60.
Branding in a digital environment
Branding is important online and offline as it helps customers differentiate between products and services from
different manufacturers and producers. Furthermore, branding is
how companies set themselves apart from their competitors. Perhaps most importantly,
‘branding affects perceptions since it is well-known that in blind product testing consumers fail to distinguish
between brands’ (Jobber and Ellis-Chadwick, 2013). Consequently,
how a brand is developed and presented online is particularly important because a website
visitor has limited physical cues to help form an opinion about a company and its services,
such as talking to a sales representative or the ambiance of the physical store. Branding
can add value across the supply chain, act as a barrier to competition, increase consumer
trust and generate high levels of profitability.
Before examining online brands let’s consider some brand basics. A brand is much more
than the name or logo associated with a company or products. Traditionally, manufacturers and producers develop
their products and services into brands in order to create unique
market positions in the minds of their customers (Jobber and Ellis-Chadwick, 2013). From
a manufacturer’s perspective, at a basic level, there are product categories such as washing power, soup, cars and
computers. To identify a unique position – within such basic
categories – a manufacturer builds a brand around the basic core product in order to distinguish their offer from the
competition. Unilever, global manufacturer of many wellknown household brands, produces the Persil brand, while
its rival Procter & Gamble,
produces the Ariel brand. Each brand can then be divided into variants, which extend customer choice within the
brand. In addition to manufacturer brands, there are also ownlabel brands (e.g. Sainsbury’s basics), which are brands
developed by distributors (in this
case UK supermarket Sainsbury’s). Own-label brands often provide lower-cost alternatives
to the customer than the category leader brands, which are often highly priced.
For physical products, brand producers take the core product, create a brand name and
image, and then augment the product through service, guarantees, design quality, packaging and delivery. The result
is customers can then choose between brands by selecting the
ones which best suits their needs and wants. However, it is not only manufacturers and
products that own brands that should be concerned with online branding. All businesses are perceived as brands and
the online presence is increasingly important in governing
brand perception. The company’s website, mobile apps and social media presence all affect
the perception of the brand and are part of the experience of a brand (see Chapter 7).
Social media provide a new platform to interact with brands.
A key concept at the heart of creating a brand is positioning and, according to Jobber
and Ellis-Chadwick (2013) ‘creating a unique position in the marketplace involves a careful choice of target market
and establishing a clear differential in the minds of the people’.
Offline brands are able to get into the minds of the customers, to position their brands
using a range of brand elements contributing to brand equity:
●● Brand domain – key target markets, where the brand competes;

●● Brand heritage – the background and culture of the brand;

●● Brand values – the core characteristics, e.g., price, quality, performance;

●● Brand assets –distinctive names, symbols, images;

●● Brand personality – the character of the brand;

●● Brand reflection – how the customer perceives themselves as a result of buying the

brand.
Online brands face a different set of challenges. However, it is important to differentiate between physical brands
that are migrating online and virtual brands. For established
physical brands, the online environment is often an extension of a well-established offline
business. Since the early days, the online environment has developed and markets have
become more stable, many brands have developed online. For example, the supermarket
brand Tesco has developed Tesco.com. In this instance, Tesco has been able to leverage
some advantage from its long-established offline brand to build credibility online. Since
1995, Tesco has grown its online offer into the world’s largest online grocery retailer
(Ellis-Chadwick, 2013). The brand has focussed on maintaining the quality of the offline
service online using all the traditional elements of brand building to position Tesco.com.
Migrating a brand in the other direction from online to offline is not as straightforward.
Now read Mini case study 5.1 to find out more.
For startup and established online brands, the issue of branding is more complex. The
Internet and digital technologies have changed the global brand landscape. Since 1998,
online brands have emerged and become household names in less than 15 years – e.g.
Google, Amazon, eBay, Facebook (Interbrand, 2014). Digital technology has also brought
distinctive features to the online brand experience (Morgan-Thomas and Veloutsou, 2013).
An online brand is very similar to its offline counterparts insofar as it incorporates a name,
set of symbols and product/service components. But according to Morgan-Thomas and
Veloutsou (2013), the major difference is the context in which the customer experiences the
brand. Online context tends to be:
●● information rich;

●● dynamic;

●● characterised by excessive information flows;

●● technologically innovative.

These authors (Morgan-Thomas and Veloutsou, 2013) expand further on the implications for online brand
experiences. On the negative side, the virtual nature of the digital
marketplace means there is a lack of physical cues and heightened challenges due to the
intangibility of the environment and increased uncertainty of what engaging in an online
experience will deliver. However, on the positive side, digital environments create opportunities for increased
interactivity and real-time brand experiences, which can be empowering for the customer. Therefore, an online
brand should seek to build links with customers
by delivering positive online experiences, which then lead to satisfaction and positive
intentions to interact with the brand in the future.
Consequently, positioning online brands requires marketers to think creatively about
the traditional elements of a brand and also consider new elements.
●● Online brand domain – where the brand competes. Google has established and maintained its market-leading

position in the search engine marketplace by following the

company’s mission to ‘organise the world’s information and make it universally
accessible’.
●● Online brand heritage – Guinness is a brand with heritage going back over 200 years;

use of the Internet has only been possible on a commercial scale since 1989, so online
brands must look for other ways to develop their heritage. One way to do this is by offering genuine value. Online
brands can get very close to their customers through use of
digital technology and should seek to develop genuinely valuable relationships.
●● Online brand values – the core characteristics, that the users of the brand value.

AltaVista (launched 1995) was an early free search engine, which originally provided a
clean user interface, similar to Google. But AltaVista soon lost market share when its
search experience was rated lower than that of its new rival Google and it added other
new services rather than focussing on the core deliverables the brand had to offer. It is
important for online brands to emphasise the benefits of engaging with the brand and
also to develop a unique personality that is engaging and shareable (Brown, 2014).
●● Online brand assets – distinctive names, symbols, images. Twitter is an example of an

online brand name which is distinctive, and with the bird symbol the brand assets help
its users quickly assimilate with the brand. It is important to ensure that a company
presents a standardised message at whatever touchpoint they interact with the online
brand (Brown, 2014).
●● Online brand personality – the character of the brand, which its customers use to

determine the added value offered by the brand and also to express their own individual
personalities through association with the brand (Valette-Florence et al., 2011). Online
brands need to understand their brands from the customer’s perspective.
●● Online brand reflection – how the customer perceives themselves as a result of buying

the brand. Being authentic and transparent about what the brand stands for is important if an online brand is to create
positive brand associations.