Internet Marketing

1. Internet Marketing New Product Development and the Net

2. Involve Customers in Design Process Market & Sell Products & Services Understand Markets & Customers Deliver Value Through Distribution Manage Customer Information Provide Customer Care Marketing ProcessesThat Can Be Digitized

3. Topics • High-tech battles • Speed • Flexible new products • Standards

4. High-Tech BattlesThe Browser Wars The browser battles started with a strong showing from Netscape. From a startup in 1995, Netscape became a billion-dollar company, the fastest-growing software company ever. Four generations of browser technology took Microsoft… from sideline playerto browser lead. The battles also led to controversy, anti-Microsoft newspaper editorials, and governmental antitrust attention.

5. The Need for Speed • Internet time refers to rapid change and evolution of • Internet tools • The marketplace • Business practices • An entire industry created in < 5 years • Internet time also refers to acceleration of • New product development • Competitive activity • Business tactics • Using the Net’s communication & research capabilities to bring new products to market quickly is essential

6. Figure 8.3 Profits and Speed to Market Speed and Profits • High profits from a successful early market entry can be plowed back into next generation products • Slow entry and lost profits lead to erosion of a company’s fortunes

7. Speed and Innovativeness • Slowness to market erodes consumers’ positive perceptions of a company • Best-in-class companies use time pacing to govern new product activity • Rapid product introduction is critical in high-tech markets • Market leaders can count on high consumer interest, feedback and free advice • Speed to market leads to learning • Companies that use customer feedback have an important advantage over rivals

8. Speed and Alliances • Early market entrants attract leading-edge partners • Third-party suppliers approach market leaders with enhancements and improvements • Allies fill in product and marketing gaps to provide a complete solution for customers • For the market leader, money and talent are too scarce to “go it alone” • Distribution partnerships are key to getting product to market

9. Speed and Standards • Market leaders often play a key role in setting standards • Companies that define standards can be in a strong strategic position for decades • Rivalries between competing standards don’t usually last long • Once a standard is established, the marketplace swings dramatically toward it • The losing standard sinks quickly • VHS vs. Beta Max • When standards matter, success breeds success

10. Figure 8.5 General Product Design Funnel Traditional New Product Development • Too slow for Internet time • Two main goals • Uncover unmet customer needs • Eliminate design mistakes before too many resources are committed • Many new ideas enter the new product process • Only a few new products emerge • This process is expensive and time consuming

11. Rapid New Product Development Figure 8.6 • Internet time forces firms to find new ways to identify user needs and rapidly launch new products • The keys • Maintain flexibility as long as possible • Accelerate the process of market feedback • These methods work especially well for online products • But they are spreading to the rest of the economy

12. Modularity in Design • Modular design breaks a new product into subsystems or modules • Each module can be designed and tested separately • Teams can work in parallel, rather than wait for a preceding group to finish its work • Parallel efforts reduce dramatically the total time to launch new products • Enables firms to handle speed and complexity in new product development

13. Modularity in Design • Modularity requires two design features • Visible design rules • Hidden design parameters • Visible design rules: define the ways that modules interact with each other and describe how they should fit together • Hidden design parameters: define how each module works internally • Each team has full control over the hidden design parameters of its module • Enables the team to delay final design choices as long as possible, to reflect marketplace feedback and to accommodate changing technologies

14. Early Feedback • Flexible new product development relies on the ability to get meaningful and rapid feedback from customers • Identify new opportunities • React to new designs • Spot declining interest in existing products • E-mail enables low-cost, rapid access to customers • Can speed up feedback from lead users • Faster and cheaper method of conducting surveys • Using the Net to release early prototypes also permits valuable learning and testing

15. Rapid Prototyping and Testing • Alpha release: limited release to trusted lead users and company employees • May be asked to sign NDA • The goal is to shape the product and understand how functional it is • The competitive clock starts ticking with the alpha release • Beta release: public release to widely test and to continue to refine the feature set • Key goals are reliability, compatibility, and fixing user interface problems • Beta-testing is a form of advertising and sampling • A valuable substitute for extensive testing

16. Rapid Release • Rapid product development sets the stage for profitability • The ability to go to market quickly is a final key to success • Time lost in the distribution cycle is even more damaging than time lost in development • Once the product design is frozen and has been released to manufacturing, all time lost is pure cost

17. Standards Marketing • Standards are a defining feature of high-tech markets • Standards determine • How hard drives, floppy disks, screens, keyboards, and memory communicate with each other • How computers connect to the Internet • How files and messages are turned into packets • How packets reach their destination • Conventions are also important • General practices that designers expect • Not formally set by a standards body

18. Two Types of Standards • Open standard: based on an official process of debate, consensus, and voting by an official standards body • De facto standard: established when a product or approach is so widely adopted that it becomes expected • De facto standards are controlled by a single company – open standards are not • Sun Microsystem’s has submitted Java to the ISO for acceptance as an open standard • Microsoft’s Active X: a proprietary standard owned and controlled by Microsoft

19. Creation of an Open Internet Standard Figure 8.9

20. Standards Strategy • High-tech companies often have formal staff positions that set standards strategy • Participate in the standards bodies • Project which standards seem to be winning • Managers need to decide which standards to deploy in their products • Should base their products on open standards? • Or should they try to win a battle in the marketplace with a proprietary standard? • In high-tech markets, a single standard generally emerges and the winner takes all

21. Standards Competition Leading to Domination Figure 8.12

22. Information Acceleration Systems • Place consumers in a virtual buying environment • IA systems simulate the information that’s available to consumers when they make a purchase decision • Virtual showroom visits • Advertising (TV, magazines, newspapers) • Review articles and consumer-oriented reports • Word of mouth • Are these virtual environments realistic enough to accurately measure behavior? • Early evidence is positive, but mixed

23. Solving Problems Online Provides Strong Justification for Investing in the Web • Lower customer support costs • Improved online value for customers • Companies and consumers benefit • Lower costs improve profit margins • Savings can be passed through to consumers Figure 6.3

24. Q: Where do these cost savings come from? Cost Savings • Online publishing saves the cost of printing and shipping manuals • Software updates can be downloaded, saving the cost of burning and shipping CDs • Virtual problem solving • Inexpensive communication

25. Traditional Customer Service Methods Are Expensive • Sales calls and call centers • Require expensive, assisted, real-time interactions • Are labor intensive

26. Headline Name of Publication - Date Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that talks about the importance of online customer support. I usually take excerpts out of the lead paragraph, and highlight keywords. There have been a number of articles talking about increased investments in online customer support.

27. The ADR Framework • Acquisition: the cost of bringing in new customers • Development: costs incurred expanding the share-of-customer that firms receive from existing customers • Retention: costs to keep the business and loyalty of current customers