The Internet And Marketing Essay, Research Paper
The Internet is the name for a group of worldwide information resources. These resources are so vast as to be well beyond the comprehension of a single human being. The increasing popularity of the Internet as a business tool can be attributed to current size and projected growth, as well as its attractive demographics. The potential of the Internet to provide an efficient channel for advertising and marketing efforts is overwhelming, and yet no one is really sure of how to best utilize the Internet for these purposes. It is clear that the costs, strategies and effectiveness of Internet marketing differ greatly from conventional marketing. What is the Internet– what we call the Internet today has its roots in a network set up by the United States Department of Defense in the early 1970’s. This network was established by the Advanced Research Project Agency. ARPAnet was connected to various military and research sites and was itself a research project into how to build reliable networks. In particular, research about how to build networks that could withstand partial outages, such as bombings, and still function was important. The theory was to create a system that required a minimum of information from computer clients, and allowed dissimilar computer systems to communicate with one another. This eliminated the need for computer users to carry magnetic tapes and insert them in order to transfer data from one computer to another. Now the computer could put its data into an envelope and address it to send a message on the network. The philosophy was that every computer on the network could talk with any other computer. These methods were so successful, that many of today=s networks adopted these standards. Although there has been much controversy surrounding the use of the Internet as an advertising medium, advertising agencies have not stopped talking about it until 1992, when the Web became user-friendly, Bob Metcalfe of Infoworld magazine said, APaid advertising, mostly as we=ve come to know and love it since the early settlement of Madison Avenue, can save the Internet.@ Although this view is a bit extreme, Metcalfe has some validity to his point. Paid advertising may make the Internet sustainably inexpensive, like television, newspapers, and other traditional media. Advertising on the Internet may also provide practical incentives for attracting the attention of Internet citizens to the information they need. Metcalfe expands this argument by indicating that the Internet is growing rapidly (Metcalfe, 1995). If indeed advertising can save the Internet, as Metcalfe argues, where is Madison Avenue in all of this? Slowly, advertising agencies are becoming aware of the Internet as a marketing vehicle. Yet the $138 billion advertising industry seems unprepared for what lies ahead. The ad business is still recovering from the severe recessions of the late eighties, and layoffs and cutbacks have left advertising agencies without the resources to invest in interactive technologies. A few of the bigger agencies are formally and actively looking into interactive media. But most efforts are small scale and highly theoretical, according to a recent Wall Street Journal article (Smith and King 1995). Interestingly enough, coming late into the information superhighway could be especially dangerous for advertising agencies, which have traditionally held strong stances among the media. Martin Nisenholtz, senior vice president and director of electronic marketing at Ogilvy and Mather is quoted as saying that ad agencies Aare going to get killed if they don=t wake up soon. It=s the largest single case of denial I have ever seen@ (Smith and King). It seems that many of the agencies are signing up with online services such as prodigy and America Online, yet fewer are willing to establish an Internet presence. Those that are on the Internet, such as Poppe Tyson, are starting to realize that more consumers are getting their information from the Internet. AWe want to put on our clients on it,@ says Walt Guarino, general manager of Poppe Tyson. AAnd if we=re not in it, we look dumb@ (Goldman 1994). Commercial businesses are the fastest-growing segment of the Internet because it provides a space in which you can gather information, communicate, and actually transact business. As businesses use the Internet more, and the Internet users become more accustomed to marketing activities, Internet marketing is becoming more and more popular. Marketing on the Internet involves both research and an active outflow of information. Marketing research is common on the Internet, where attitudes are tested, conversations actively pursued, and opinions solicited from many groups. Marketing plans are increasingly counting on Internet access for success. One of the prime uses of the Internet is in the area of customer support. Customers can reach a company on their own schedules, day or night, and obtain information. The customer support information only has to be transferred to an archive once, and yet it may be accessed by thousands of customers and potential customers. This is indeed a labor-efficient and cost effective method of distributing information. In addition, a business with a presence on the Internet is perceived as modern, advanced, and sophisticated. In these days of a highly-competitive global marketplace, the company that can reach and satisfy customers will have an advantage; and the Internet can help in maintaining relationships with customers. The Internet is also a fast and efficient way of networking with vendors and suppliers. With its global reach, the Internet can assist businesses in locating new suppliers and keeping in better touch with them to aid, for example, zero inventory planning. A business might locate and coordinate with suppliers in Taiwan, Norway, and New York. And the Internet system in some countries is often more stale than telephone service, which is often less reliable and less convenient. Maintaining up-to-date postings of a company=s product information and prices also allows vendors to have continuous access to information that is needed in order to promote and sell your products. Small suppliers find that they can compete with larger industries by being easily available via the Internet. In a business where the concept of getting closer to the customer is prevalent, the Internet is becoming increasingly important. Internet-assisted sales, where customers are sought and served on-line through Gophers and a variety of virtual storefronts, are also becoming more popular. Customers are sought before the sale and supported after the sale. Customer and product support and technical assistance by way of the Internet is time efficient. Many companies provide e-mail assistance, including both individual and automated replies to e-mail questions and requests for information. Technical sheets, specifications, and support are offered through Gophers and FTP. Relationships with vendors and outlets are maintained via the Internet. In some cases, companies are doing actual product sales on the Internet. In addition, if the product is amenable to Internet delivery, as with software and information, the actual product is delivered via the Internet. Some companies are arranging product delivery through the Internet, where companies can create and support actual distribution channels. In a recent study conducted on agencies= use of the Internet and online applications for marketing, ninety percent of the participants interviewed responded that their agencies were indeed currently researching online and Internet applications of advertising. Sixty percent of the agencies interviewed had not developed a separate division to handle the new technologies, and only forty percent had developed a new division. This would lead me to believe that the current roles of account management, research, media planning, and creative are burdened with the extra task and weight of discovering and managing the new technology, or that the clients are handling the new technology in-house. Sixty-seven percent of the agencies were aware of at least one of their clients who was using or had used an online application for advertising. Of those clients. Of those clients, the categories where their products/services fell were: transportation-31%, retail-24%, food and service-21%, technological/communication-10%, financial services-8%, entertainment-3%, and media-3%. An overwhelming number of participants indicated that the online advertising media of choice was Prodigy Services. However, many indicated America Online. Traditionally, America Online was not allowed for advertising, but they have allowed for corporate sponsorships of chat room events as well as strategic research. It seems from these results that these agencies are considering sponsorships and advertising communications effort. As with Online advertising, seventy-three percent of agency participants were not aware of any of their clients using or have used the Internet for advertising. Twenty-seven percent of respondents were aware of their clients who have used the Internet for advertising, and these clients fall into three categories: technological/communication industries-44%, transportation-33%, and retail-22%. The majority of agency respondents were not aware of how their client used the Internet for advertising. Home pages, databases, and information/FTP sites were popular methods of marketing on the Internet. Newsgroups and bulletin board systems were also used, though not as extensively as the other methods. In terms of perceived effectiveness, technical products and communications vehicles were rated as effective while transportation and retail were rated as unclear to whether they were effective or not. Overall, Online applications for advertising are perceived to be very effective, while Internet advertising is dragging behind. Clients are indeed demanding that their agencies be innovative and find new ways to disseminate messages. This challenge was the first publicly articulated by Edwin L. Artzt, chairman of Procter and Gamble, when he told a convention of ad-agency executives that traditional mass-market ads could be endangered. Likewise, Gerald Levin, CEO of Time Warner, told the same conference of the American Association of Advertising Agencies in White Sulphur Springs, West Virginia that agencies should become more active in the interactive business. Levin noticed that while clients who are involved with interactive media are often enthusiastic, Aagencies don=t always share their enthusiasm@ (McCormack 1994). In a survey of senior executives conducted by Northern Illinois University for Advertising Age, twenty-eight percent of CEO=s said that their agencies were not prepared for the information superhighway and twenty-seven percent said that they were not sure if their agencies were prepared. Marketing managers echoed this sentiment, with twenty-eight percent saying that their agency is ill-prepared, and thirty-one percent unsure. Furthermore, an overwhelming forty-seven percent of CEO=s do not think that they will need an advertising agency if the superhighway will permit them to talk directly to their consumers. Thirty percent of marketing managers agreed with their CEOs (Ward 1995). Every facet of conventional marketing strategy is challenged by the evolving communication potential of the Internet. This mandates that companies develop new, or at least revised methods of marketing. but not only is there no one who understands all of the Internet, there is no one who even understands most of the Internet. The growth of the Internet is overwhelming. Now that most four-year colleges are connected, people are trying to get primary and secondary schools connected, along with local libraries. People who have graduated from college and know what the Internet is good for are talking to their employers about getting corporations connected. The Internet is growing at a staggering rate of about ten percent a month as more colleges, universities, and businesses come online. Depending on which source you choose to use, the estimated number of users of the Internet varies between 5 and 35 million. In the early 1990’s, the network was opened up to a few large commercial sites, and the international Internet was expanding rapidly. The growth of the Internet can be attributed to several factors, not the least of which is the open availability and affordability of the medium. All of this activity points toward continued growth, networking problems to solve, evolving technologies, and job security for networkers. There are several reasons businesses would be interested in the Internet as a communication vehicle. The Internet eases communication, corporate logistical concerns, globalizes local businesses, helps to gain and maintain a competitive advantage, aids in cost containment, enhances and assists collaboration and development, promotes information availability, encourages marketing efforts, assists in the transmission of data, and establishes a corporate presence in the progressive interactive world (Ellsworth and Ellsworth 1994). The development of the World Wide Web mosaic browsers has furthered the expansion of Internet technology and use. The presentation of information on the Web is much more friendly than the older, more traditional methods, and the uniform interface provided by Web-browsers have facilitated a user-friendly environment (Smith and King 1995). This friendly atmosphere, combined with the ability to use any of the Internet=s tools within the hypertext culture, has been a catalyst for businesses to rush to the Internet in record numbers. Although there is little evidence that anyone is getting rich yet from this method of marketing, companies are flocking to the Web in anticipation of future payoffs. Some companies build and maintain their own home pages, while others spend thousands of dollars a month to let experts like Compuserve create the cyberspace-equivalent of fancy front doors and reception areas. While the Internet is doubling in size every year, the Web is doubling in size every few months, making this medium even more attractive to marketers (Goldman 1994). The citizens of the Internet have strong opinions about how the Internet should be used. To develop and maintain a positive image and customer acceptance, businesses need to be aware of the acceptable uses and customs of the Internet. Since the broadcasting of advertising on virtually all networks, the only way marketing on the net will work is if the Internet community has a good impression of, and wants to patronize your service. AGiving back to the Internet@ is an important concept for prospective Internet marketers. The Internet custom is that you can market your good sand services if you return something of genuine value. A similar concept, and closer to marketers MBA backgrounds, is that of Avalue added@ services, again pointing to the idea of obligation to provide something to the network community (Metcalfe 1995). Creating a business presence on the Internet is a multi faceted endeavor. There is obviously much time and effort involved in developing a marketing presence on the Internet. Although it can involve almost every Internet tool, it is often more successful when it is based on a more modest approach. There are numerous ways to create a business presence on the Internet. How a business chooses to use the Internet is simply a function of many factors including planned business goals, the marketing plan, and the level of market penetration desired. Using the Internet as an entrepreneurial tool is an audience participation sport; two-way communication is the valued and expected norm. The Internet encourages interaction, and encourages customers to be providers of information as well as users. One of the major challenges posed to Internet marketers is the method by which they communicate. In traditional media, the firm provided a message to the medium, which disseminates it to a mass market of consumers. In the new medium, the consumers and firm can interact with the medium, as in ANet surfing@, as well as provide the medium, to the point of setting up their own Internet servers. The most radical departure from traditional marketing environments is that consumers can provide product related content to the medium. Marketers must reconstruct the function of advertising to reflect this Amany to many@ communication method (Hoffman and Novack 1995). Responsible communication on the net is characterized by two marketing strategies; the marketing activity should further the development of the medium itself, and the activity should work with consumers to develop a shared understanding of the consumer benefits of the Internet. Internet citizens will be slow to attempt guerilla marketing strategies, and so knowledgeable marketers are inclined to do things according to the culture, needs and wants of the consumer (Verity 1994). As viewed on the Internet, advertising is intrusive, whereas marketing can be active and can provide valuable information and services as part of an effort to provide products and services. Businesses must make a paradigm shift from something highly intrusive and image oriented to something highly content-oriented in order to be successful on the Internet (Toffler 1980). The potential of the Internet and the Web is not only important to advertising agencies, but also highly influentuel in the retail market as well. Although many concerns exist about the prospect of the Internet as a retail environment, there has been a great number of retailers to establish sites on the Web. The potential customers these sights will bring retailers will help raise sales either directly, through Internet shopping, or indirectly, through product and company advertisement. As of yet, there is no sure way of knowing just how many customers are calling or walking into retail stores because of Internet marketing, but at the low cost, the potential for reaching a targeted audience is worth it. The following graph shows the projected Internet retail sales growth through the year 2010 (Sandberg 1996). The figures are based on the current rate of growth of the Internet and World Wide Web, coupled with current estimations of retail revenue through both direct Internet sales, such as the Acyber-malls@, and retail store traffic generation increase from Internet advertising.