Chapter 9 Digital Marketing and Social Networking TEACHING RESOURCES QUICK REFERENCE GUIDE Resource Location Purpose and Perspective IRM, p. 204 Lecture Outline IRM, p. 205 Discussion Starters IRM, p. 215 Class Exercises IRM, p. 216 Chapter Quiz IRM, p. 217 Answers to Issues for Discussion and Review IRM, p. 218 Answers to Marketing Applications IRM, p. 221 Answers to Internet Exercise IRM, p. 223 Answers to Developing Your Marketing Plan IRM, p. 224 Comments on Video Case 9 IRM, p. 226 PowerPoint Slides Instructor’s website Note: Additional resources may be found on the accompanying student and instructor websites at www.cengagebrain.com. PURPOSE AND PERSPECTIVE The purpose of this chapter is to provide students with an overview of changes and innovations in marketing. The digital revolution has generated new technologies that make the field of marketing simultaneously faster, easier, different, and more complex. First, the chapter presents definitions of key terms, such as digital media and electronic marketing. It stresses their increasing importance in the strategic planning process. Next, students are provided with an understanding of the role of digital media in marketing strategy and how digital media can be used as an effective marketing tool. Then the chapter provides information on how digital marketing influences consumer behavior and the marketing mix. Finally, the chapter outlines legal and ethical concerns related to digital media and electronic marketing. LECTURE OUTLINE I. Growth and Benefits of Digital Marketing A. Digital media—media available via computers, mobile devices, and other digital devices that have been released in recent years—are electronic media that function using digital codes. B. Digital marketing uses all digital media, including the Internet and mobile and interactive channels, to develop communication and exchanges with customers. C. Electronic marketing, or e-marketing, refers to the strategic process of distributing, promoting, pricing products, and discovering the desires of customers using digital media and digital marketing. F. The phenomenal growth of the Internet has provided unprecedented opportunities for marketers to forge interactive relationships with consumers. 1. As the Internet and digital communication technologies have advanced, they have made it possible to target markets more precisely and reach markets that were previously inaccessible. G. One of the most important benefits of e-marketing is the ability of marketers and customers to share information. 1. The Internet is changing the way marketers communicate and develop relationships. a. Today’s marketers can use the Internet to form relationships with a variety of stakeholders, including customers, employees, and suppliers. 3. For many businesses, engaging in digital and online marketing activities is essential to maintaining competitive advantages. b. Increasingly, small businesses can use digital media to develop strategies to reach new markets and access inexpensive communication channels. H. Digital media offer a whole new dimension to marketing that marketers must consider when concocting their companies’ marketing strategies. I. Some of the characteristics that distinguish online media from traditional marketing include (Table 9.1): 1. Addressability 2. Interactivity 3. Accessibility 4. Connectivity 5. Control II. Types of Consumer-Generated Marketing and Digital Media A. Social media are more consumer-driven than traditional media. B. Two major trends have caused consumer-generated information to gain importance. 1. The increased tendency of consumers to publish their own thoughts, opinions, reviews, and product discussions through blogs or digital media. 2. Consumers’ tendencies to trust other consumers over corporations. Consumers often rely on the recommendations of friends, family, and fellow consumers when making purchasing decisions. C. By understanding where online users are likely to express their thoughts and opinions, marketers can use these forums to interact with consumers, address problems, and promote their companies. 1. Types of digital media in which Internet users are likely to participate include social networking sites, blogs, wikis, media-sharing sites, virtual reality sites, mobile devices, applications and widgets, and more. D. Social Networks 1. A social network is defined as a “web-based meeting place for friends, family, coworkers, and peers that allows users to create a profile and connect with other users for the purposes that range from getting acquainted, to keeping in touch, to building a work related network.” 2. Today’s social networks offer a multitude of consumer benefits, including music downloads, apps, forums, and games. 3. Marketers are using social networks and their popularity with consumers to promote products, handle questions and complaints, and provide information to assist customers in buying decisions. 4. As the number of social network users increases, interactive marketers are finding opportunities to reach out to consumers in new target markets. 5. As social networks evolve, both marketers and the owners of social networking sites are realizing the incredible opportunities such networks offer—an influx of advertising dollars for social networking owners and a large reach for the advertiser. a. As a result, marketers have begun investigating and experimenting with promotion on social networks. 6. Many corporations are supporting Facebook pages and Yammer accounts for employees to communicate across departments and divisions; even staffing organizations use social media, bypassing the traditional e-mail and telephone channels. a. While billions of dollars in investments are being funneled into social media, it may be too early to assess the exact economic contribution of social media to the entire economy. E. Facebook 1. When Facebook surpassed Myspace in its number of members, it became the most popular social networking site in the world. a. Facebook markets to parents and grandparents as well as to teenagers. 2. Many marketers are turning to Facebook to market products, interact with consumers, and take advantage of free publicity. a. It is possible for consumers to become “fans” of major companies by clicking on the “like” icon on their Facebook pages. 3. Social networking sites are useful for relationship marketing, or the creation of relationships that mutually benefit the marketing business and the customer. a. Companies are using relationship marketing through Facebook to help consumers feel more connected to their products. F. Twitter 1. Twitter s a hybrid mix of a social networking site and a micro-blogging site that asks viewers one simple question—“What’s happening?” a. Users can post answers of up to 140 characters, which are then available for their “followers” to read. b. A limitation of 140 characters may not seem like enough for companies to send an effective message, but some companies have become experts at using Twitter in their marketing strategies. 2. Like other social networking sites, Twitter is also being used to enhance customer service and create publicity about company products. a. Marketers can pay Twitter to highlight advertisements or company brands to a wider range of users while they search for specific terms or topics. G. Blogs and Wikis 1. Blogs (short for “weblogs”) are web-based journals in which writers can editorialize and interact with other Internet users. 2. Blogs give consumers control, sometimes more than companies would like. a. Whether or not the blog’s content is factually accurate, bloggers can post whatever opinions they like about a company or its products. (1) Although companies have filed lawsuits against bloggers for defamation, they usually cannot prevent the blog from going viral. b. In other cases, a positive review of a product or service posted on a popular blog can result in large increases in sales. (1) Thus, blogs can represent a potent threat to corporations as well as an opportunity. 3. Blogs have major advantages: a. Rather than trying to eliminate blogs that cast their companies in a negative light, some businesses are using such blogs to answer consumer concerns or defend their corporate reputations. b. Many major corporations have created their own blogs or encourage employees to blog about the company. 4. A Wiki is a type of software that creates an interface that enables users to add or edit the content of some types of websites. a. One of the best known is Wikipedia, an online encyclopedia with more than 22 million entries in more than 285 languages on nearly every subject imaginable (Encyclopedia Britannica only has 120,000 entries). (1) The site is expanded, updated, and edited by a large team of volunteer contributors. (2) For the most part, only information that is verifiable through another source is considered appropriate. (3) Because of its open format, Wikipedia has suffered from some high-profile instances of vandalism in which incorrect information was disseminated. b. Wikis on controversial companies like Walmart and Nike often contain negative publicity about the companies, such as worker rights violations. (1) However, some companies have begun to use wikis as internal tools for teams working on a project requiring lots of documentation. (2) Additionally, monitoring wikis provides companies with a better idea of how consumers feel about the company brand. 5. There is too much at stake financially for marketers to ignore blogs and wikis. a. Marketers who want to form better customer relationships and promote their company’s products must not underestimate the power of these two tools as new media outlets. H. Media-Sharing Sites 1. Media-sharing sites allow marketers to share photos, videos, and podcasts but are more limited in scope in how companies interact with consumers. 2. While firms can promote their products through videos or photos, they usually do not interact with consumers through personal messages or responses. a. At the same time, the popularity of these sites provides the potential to reach a global audience of consumers. 3. Photo-sharing sites allow users to upload and share their photos with the world. a. Well-known photo sharing sites include Flickr, Picasa, Shutterfly, Snapfish, and Instagram. b. Flickr is owned by Yahoo! and is the most popular photo-sharing site on the Internet. (1) A Flickr user can upload images, edit them, classify the images, create photo albums, and share photos or videos with friends without having to e-mail bulky image files or send photos through the mail. b. Photo sharing represents an opportunity for companies to market themselves visually by displaying snapshots of company events, company staff, and/or company products. 4. Video-sharing sites allow virtually anybody to upload videos to the Internet. a. Some of the most popular video-sharing sites include YouTube, Metacafe.com, and Hulu. b. Video-sharing sites give companies the opportunity to upload ads and informational videos about their products. c. A few videos become viral at any given time, and although many of these gain popularities because they embarrass the subject in some way, others reach viral status because people find them entertaining. d. Businesses have begun to realize that they can capitalize upon consumer-generated content, which saves companies money because they do not have to hire advertising firms to develop professional advertising campaigns. 5. Podcasts are audio or video files that can be downloaded from the Internet with a subscription that automatically delivers new content to listening devices or personal computers. a. Podcasts offer the benefit of convenience, giving users the ability to listen to or view content when and where they choose. b. The fact that the majority of current podcast users are between 18 and 29 years of age, makes podcasts a key tool for businesses marketing to this demographic. c. Companies can use podcasts to demonstrate how to use their products or understand certain features. d. Through podcasting, many companies hope to create brand awareness, promote their products, and encourage customer loyalty. I. Virtual Sites 1. Virtual sites are offering significant opportunities for marketers to connect with consumers in unique ways. 2. Virtual sites include Second Life, Everquest, Sim City, and the role-playing game World of Warcraft. 3. Virtual realities are user-created, three-dimensional worlds that have their own economies and currencies, lands, and residents who come in every shape and size. 4. Internet users who participate in virtual realities like Second Life choose a fictional persona called an avatar. a. Residents of Second Life connect with other users, communicate with one another, purchase goods with virtual Linden dollars (which are convertible to real dollars), and even own virtual businesses. 5. Real-world marketers and organizations have been eager to capitalize on the popularity of virtual realities. a. In an effort to connect with consumers and build brand loyalty, Domino’s Pizza created a shop in Second Life that allows users to order pizza online. b. Other businesses are looking toward virtual worlds to familiarize consumers with their products. 6. Firms are also using virtual technology for recruiting purposes. a. Major companies have held virtual career fairs to recruit candidates from across the world. b. By interacting with the public virtually, businesses hope to connect with younger generations of consumers. J. Mobile Devices 1. Mobile devices such as smartphones, tablet computers, PDAs, and other mobile computing devices, allow customers to leave their desktops and access digital networks from anywhere. 2. Mobile marketing has proven effective in grabbing consumers’ attention. 3. Many brands have yet to take advantage of mobile marketing opportunities by making mobile-compatible websites and e-mails. 4. Some of the more common mobile marketing tools include the following: a. SMS messages—text messages of 160 words or less. b. Multimedia messages—takes SMS messaging a step further by allowing companies to send video, audio, photos, and other types of media over mobile devices. c. Mobile advertisements—visual advertisements that appear on mobile devices. d. Mobile websites—websites designed for mobile devices. e. Location-based networks—networks built for mobile devices. f. Mobile applications—software programs that run on mobile devices and give users access to certain content. K. Applications and Widgets 1. The most important feature of apps is the convenience and cost savings they offer to the consumer. 2. Certain apps allow consumers to scan a product’s barcode and then compare it with the prices of identical products in other stores or download store discounts. 3. Another application that marketers are finding useful is the QR scanning app. a. QR codes are black-and-white squares that sometimes appear in magazines, posters, and storefront displays. b. Smartphone users that have downloaded the QR scanning application can open their smartphones and scan the code, which contains a hidden message accessible with the app. c. The QR scanning app recognizes the code and opens the link, video, or image on the phone’s screen. d. Marketers are using QR codes to promote their companies and offer consumer discounts. 4. Mobile technology is also making inroads in transforming the shopping experience. a. Not only can shoppers use mobile applications to compare prices or download electronic discounts, they can also use mobile applications to tally up purchases and pay through their smartphones. b. As mobile payments gain in traction, companies like Google are working to seize on this opportunity. (1) Google Wallet is a mobile app that stores credit card information on the smartphone; when the shopper is ready to check out, he or she can tap the phone at the point of sale for the transaction to be registered. 5. Widgets are small bits of software on a website, desktop, or mobile device that enables users “to interface with the application and operating system.” a. Marketers might use widgets to display news headlines, clocks, or games on their webpages. b. Widgets downloaded to a user’s desktop can update the user on the latest company or product information, enhancing relationship marketing between companies and their fans. d. Widgets are an innovative digital marketing tool to personalize webpages, alert users to the latest company information, and spread awareness of the company’s products. III. Changing Digital Media Behaviors of Consumers A. Consumers now have a greater ability to regulate the information that they view as well as the rate and sequence of their exposure to that information. B. The Internet is sometimes referred to as a pull medium because users determine which websites they are going to view; the marketer has only limited ability to control the content to which users are exposed, and in what sequence. C. Some companies are using the power of the consumer to their advantage. 1. While negative ratings and reviews are damaging to a company, positive customer feedback is free publicity that often helps the company more than corporate messages do. 2. Because consumer-generated content appears more authentic than corporate messages, it can go far in increasing a company’s credibility. 3. While consumers can use digital media to access more information, marketers can also use the same sites to get information on the consumer—often more information than could be garnered through traditional marketing venues. 4. They can examine how consumers are using the Internet to better target marketing messages to their audience. 5. Marketers are also using the Internet to track the success of their online marketing campaigns, creating an entirely new way of gathering marketing research. D. Online Consumer Behavior 1. As Internet technology evolves, digital media marketers must constantly adapt to new technologies and changing consumer patterns. 2. With so many new technologies emerging, the attrition rate for digital media channels is very high, with some dying off each year as new ones emerge. 3. Forrester Research, a technology and market research company, emphasizes the importance of understanding the changing relationships in the online media world. a. By grouping online consumers into different segments based on how they utilize digital online media, marketers can gain a better understanding of the online market and how best to proceed. b. The Social Technographics Profile developed by Forrester Research groups the online community into seven segments according to how they interact with new digital media (Table 9.2). (1) Creators are those consumers who create their own media outlets, such as blogs, podcasts, consumer-generated videos, and wikis. (2) Conversationalists regularly update their Twitter feeds or status updates on social networking sites. (3) Critics are people who comment on blogs or post ratings and reviews. (4) Collectors gather information and organize content generated by critics and creators. (5) Joiners are anyone who becomes a member of Twitter, Facebook, or other social networking sites. (6) Spectators are those consumers who read what other consumers produce but do not produce any content themselves. (7) In actives are online users who do not participate in any digital online media. 5. Marketers need to consider if their online consumers are creating, conversing, rating, collecting, joining, or simply reading online materials. a. As with traditional marketing efforts, marketers need to know the best ways to reach their target market. IV. E-Marketing Strategy A. More than one-fourth of the world’s population uses the Internet, and this number is growing at a high rate. 1. There is a growing need for businesses to use the Internet to reach an increasingly Web-savvy population. 1. This makes it essential for businesses, small and large alike, to learn how to effectively use new social media. 2. Most businesses are finding it necessary to use digital marketing to gain or maintain market share. B Product Considerations 1. Digital media provide an opportunity to add a service dimension to traditional products and create new products that could only be accessible on the Internet. a. The ability to access product information for any product can have a major impact on buyer decision making. b. With larger companies now launching their own extensive marketing campaigns, and with the constant sophistication of digital technology, many businesses are finding it necessary to continually upgrade their product offerings to meet consumer needs. 2. Some companies now use online advertising campaigns and contests to develop better products. C. Distribution Considerations 1. Digital marketing can be viewed as a new distribution channel that helps businesses increase efficiency. 2. The ability to process orders electronically and increase the speed of communications via the Internet reduces inefficiencies, costs, and redundancies while increasing speed throughout the marketing channel. 3. Shipping times and costs have become an important consideration in attracting consumers, prompting many companies to offer consumers low shipping costs or next-day delivery. a. Walmart, for example, has a “site-to-store” system, whereby consumers get free shipping if they pick up their purchases at a Walmart store of their choice. 4. Distribution involves a push-pull dynamic—the firm that provides a product will push to get that product in front of the consumer, while at the same time connectivity aids those channel members that desire to find each other—the pull side of the dynamic. a. This process can help push products through the marketing channel to consumers or enable customers to pull products through the marketing channel. D. Promotion Considerations 1. All digital promotions attempt to increase brand awareness and market to consumers. 2. As a result of online promotion, consumers are more informed, reading consumer-generated content before making purchasing decisions and increasingly shopping at Internet stores. 3. Consumer consumption patterns are changing radically, and marketers must adapt their promotional efforts to meet these new patterns. 4. Almost any traditional promotions can be enhanced or replaced by digital media. a. For example, banks are using blogs, podcasts, and Twitter to post rates and financial products and to answer financial questions. E. Pricing Considerations 1. Pricing relates to perceptions of value and is the most flexible element of the marketing mix. 2. Digital online media marketing facilitates both price and nonprice competition because Internet marketing gives consumers access to more information about costs and prices. a. As consumers become more informed about their options, the demand for low-priced products has grown, leading to the creation of daily deal sites like Groupon, Crowd Cut, and LivingSocial. b. Several marketers are also offering buying incentives like online coupons or free samples to generate consumer demand for their product offerings. 3. Digital connections can help the customer find the price of the product available from various competitors in an instant. a. While this new access to price information benefits the consumer, it also places new pressures on the seller to be competitive and to differentiate products so that customers focus on attributes and benefits other than price. 4. Until recently, social networks like Facebook and Twitter were mainly used for promotional purposes and customer service. a. However, retailers and other organizations are developing e-commerce stores on Facebook so that consumers will not have to leave the site to purchase items. V. Ethical and Legal Issues A. How marketers use technology to gather information—both online and offline—raise many ethical and legal questions. 1. The popularity and widespread use of the Internet grew so quickly in the 1990s that global regulatory systems were unable to keep pace, although today there are a number of laws in place to protect businesses and consumers. B. Privacy 1. One of the most significant privacy issues involves the use of personal information that companies collect from website visitors in their efforts to foster long-term relationships with customers. a. Some people fear that the collection of personal information from website users may violate users’ privacy, especially when it is done without their knowledge. b. Hackers may break into websites and steal users’ personal information, enabling them to commit identity theft. a. Consumers worry that their information could be hacked, or their phones could be targeted with malware. (1) Many of these breaches occur at banks, universities, and other businesses that contain sensitive consumer information; this requires organizations to implement increased security measures to prevent database theft. c. Google and other Internet companies have also come under fire for privacy issues. 5. Another Internet privacy issue occurring more frequently is “scraping,” an activity where companies offer to collect personal information from social networking sites and other forums. 6. Due to consumer concerns over privacy, the FTC is developing regulations that would better protect consumer privacy by limiting the amount of consumer information that businesses can gather online. a. Web advertisers, who use consumer information to better target advertisements to online consumers, see it as a threat. b. In response to impending legislation, many Web advertisers are attempting self-regulation in order to stay ahead of the game. C. Online Fraud 1. Online fraud includes any attempt to conduct dishonest activities online. 2. Online fraud includes, among other things, attempts to deceive consumers into releasing personal information. 3. Cybercriminals are discovering ways to use sites like Facebook and Twitter to carry out fraudulent activities. a. For instance, it has become common for cybercriminals to create profiles under a company’s name. b. The fraudulent profiles are often created to either damage the company’s reputation or as a way to lure that company’s customers into releasing personal information that the cybercriminal can then use for monetary gain. 4. Organizations and social networking sites alike are developing ways to combat fraudulent activity on new digital media sites. a. However, the best protection for consumers is to be careful when divulging information online. b. Privacy advocates advise that the best way to stay out of trouble is to avoid giving out personal information, such as social security numbers or credit card information, unless the site is definitely legitimate. D. Intellectual Property 1. The Internet has also created issues associated with intellectual property, the copyrighted or trademarked ideas and creative materials developed to solve problems, carry out applications, and educate and entertain others. 2. YouTube has often faced lawsuits on intellectual property infringement. a. With millions of users uploading content to YouTube, it can be hard for Google to monitor and remove all the videos that may contain copyrighted materials. 3. The software industry is particularly hard-hit when it comes to the pirating of materials and illegal file sharing. a. Consumers view illegal downloading in different ways, depending on the motivation for the behavior. (1) If the motivation is primarily utilitarian, or for personal gain, then the act is viewed as less ethically acceptable than if it is for a hedonistic reason, or just for fun. 4. Consumers rationalize pirating software, video games, and music for a number of reasons: a. Many consumers feel that they just do not have the money to pay for what they want. b. Because their friends engage in piracy and swap digital content, they feel influenced to engage in this activity. c. For some, the attraction is the thrill of getting away with it and the slim risk of consequences. d. To some extent, there are people who think they are smarter than others; engaging in piracy allows them to show how tech savvy they are. 5. As digital media continues to evolve, more legal and ethical issues will certainly arise. a. As a result, marketers and all other users of digital media should make an effort to learn and abide by ethical practices to ensure that they get the most out of the resources available in this growing medium. DISCUSSION STARTERS Discussion Starter 1: Online Shopping, Technology, and Privacy Amazon.com is one of the Web’s most recognizable marketers. Visit the company’s website at www.amazon.com and describe how the company adds value to its customers’ buying experience. ASK: Have you ever shopped on Amazon.com? Most students will have purchased a product from Amazon at some point in their lives. ASK: What did you think about the experience? Did you enjoy it? Students may have a range of answers to this question—from complete satisfaction to dissatisfaction. ASK: Do you like how Amazon remembers you and recommends things to purchase based on your past purchases? Other companies, like Netflix, do a similar thing. Do you think more companies should employ similar technology? Would it convince you to buy more things? Students may have a strong reaction to these questions. Some people may feel that it is a violation of privacy to have a company track their purchases and recommend other things that they may want to buy. Other students may appreciate how it makes finding interesting products easier. Discussion Starter 2: Is Electronic Marketing for Everyone? ASK: In general, do you think that electronic marketing is effective at reaching target markets? Students may answer this question in a variety of ways. If strong sides emerge, you may want to set up a miniature debate, with some students arguing that it is an effective means of marketing, and the other side arguing that the effectiveness is overblown. ASK: When you indicate that you ‘Like’ or are a ‘Fan’ of a product or company on Facebook, does that make you more likely to be a customer of that company? Or are you merely passively indicating that you think that company makes quality products? It should be interesting to see how students answer this question. Reason would stand that they would be more likely to purchase products of which they are a ‘Fan,’ but that may not be the case. ASK: Can you think of any products that should not be marketed online? Students should use their imagination on this one. Make sure to have them explain their reasoning. CLASS EXERCISES Class Exercise 1: Online Social Networking and Marketing Note: This could easily be converted into a take-home assignment for either individuals or groups. Social networking is a popular method of communication for individuals, businesses, and organizations of all kinds. Conduct some research online and identify how companies are utilizing some of the most popular social networking sites in their marketing strategies. Consider the target markets businesses are trying to reach and whether you think they have been successful in reaching those markets via social networking sites. Are some companies doing really creative things to get customers’ attention? What are they doing, and how successful have they been? Class Exercise 2: Blogs are Big Business (and a Powerful Tool for Marketers) Whether businesses like it or not, bloggers have tremendous power. A positive review on a popular blog can mean exponential increases in sales. The opposite situation could be true for a negative review. Regardless of whether or not most bloggers are qualified to give advice about products, their readers pay attention and so, therefore, must marketers. Many companies now send out samples, free trips, stays in hotels, etc. to bloggers in the hopes of garnering praise on popular (and moderately popular) blogs. With literally millions of blogs already in existence, and new ones popping up all the time, this can amount to an overwhelming task for marketers. However, blogs can be a great way for companies to generate some low-cost publicity. This is why so many firms have resorted to appealing to bloggers. Have students do some research of their own on blogs. Undoubtedly, most students are aware of different blogs that they enjoy. Have them suggest a few (school appropriate) blogs and search for ways that marketers are utilizing the sites. They may find advertisements on the site. They may find reviews. They also may find brand names prominently displayed in the posts. If it is a blog about cooking, the blogger may prefer a particular kind of olive oil; or the blogger may profess a love of a certain brand of clothing on a fashion blog, for example. Then have students brainstorm on how they might be able to utilize blogs to market a particular product or service. Have them think about whether any products are particularly not appropriate for marketing via blogs. CHAPTER QUIZ 1. A __________ is a web-based meeting place for users to create a profile and communicate with other users. a. podcast b. social network c. connectivity platform d. linked communication tool e. virtual link 2. Marketers are taking advantage of mobile technology to help customers do all of the following except __________. a. compare prices and product features b. download coupons and other discounts c. connect with other consumers buying the same product d. make electronic payments e. receive advertisements 3. __________ is free publicity that often helps the company more than corporate messages do. a. Interactivity b. Enterprise 2.0 c. Company website d. Mobile advertising e. Positive customer feedback 4. A digital consumer who regularly posts comments on a company’s blog is mostly likely a __________. a. conversationalist b. joiner c. collector d. critic e. spectator Answers to Chapter Quiz: 1. b; 2. c; 3. e; 4. d. ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW 1. How does e-marketing differ from traditional marketing? There are many ways in which e-marketing differs from traditional marketing. Characteristics that separate e-marketing from traditional marketing include addressability, interactivity, accessibility, connectivity, and control. The interactivity of digital media allows e-marketing to be a two-way process, in which marketers can engage in conversations with consumers and consumers can provide quick feedback. Marketers are using consumer ratings, reviews, blogs, and other consumer-generated content to better understand consumer needs. Tools such as cookies allow marketers to collect real-time information on consumers as they visit their websites, which enables marketers to tailor products and promotions to specific target markets. Consumers also have more control than with traditional marketing because they are able to use digital media to rate and review company products as well as control what they view on the Internet. However, it is still important for marketers to realize that the primary components of marketing strategy continue to apply to e-marketing. For instance, digital marketers must still carefully consider product, distribution, promotion, and pricing when marketing online. 2. How can marketers exploit characteristics of digital marketing to improve relations with customers? Interactivity allows customers to express their needs and wants directly to the firm in response to its marketing communications. It represents a significant shift in how marketing is done because traditional marketing media usually involved one-way forms of communication. The feedback mechanisms used with traditional media were time-consuming and more expensive. By utilizing appropriate digital media, companies can facilitate interactivity and enable a conversation with the customer. Digital media like blogs and some social networks allow marketers to interact with prospective customers in real time (or a close approximation of it). The one-sided communication common to traditional marketing channels is being replaced with interactive conversations between customer and marketer. Interactivity provides the advantages of a virtual sales representative, with broader market coverage at lower costs. 3. Why are social networks becoming an increasingly important marketing tool? Find an example online in which a company has improved the effectiveness of its marketing strategy by using social networks. Social networks are appealing for a number of reasons. First of all, many different demographic groups (including hard-to-reach teenagers and young adults) are active on social networks. The low cost of advertising and participating in social networks is appealing to large and small companies alike. It is also appealing that companies can reach new target markets and better target existing ones via social networks. The opportunity to inexpensively gather market research data and to communicate with customers in real time is also an appeal of utilizing social networks. Students’ examples will vary. 4. How has new media changed consumer behavior? What are the opportunities and challenges that face marketers with this in mind? Consumers now have more control than ever before. They have access to greater amounts of information and are more likely to conduct research online before purchases. Consumers can also post bad reviews of products they did not like or provide free positive publicity for products that they do like. Digital media has increased the amount of information available and the power conferred on consumers. This presents opportunities for marketers to obtain free publicity from bloggers and others who are active online, but it also makes companies more careful about the risks and downsides of negative publicity and reviews. Companies also increasingly must provide additional online services and features in order to retain a competitive advantage. 5. Describe the different technographic segments. How can marketers use this segmentation in their strategies? The different technographic segments are as follows: • Creators are those consumers who create their own media outlets, such as blogs, podcasts, consumer-generated videos, and wikis. • Conversationalists regularly update their Twitter feeds or status updates on social networking sites. • Critics are people who comment on blogs or post ratings and reviews. • Collectors are perhaps the least recognized group of the seven. Collectors gather information and organize content generated by critics and creators. • Anyone who becomes a member of Twitter, Facebook, or other social networking sites is a joiner. It is not unusual for consumers to be members of several social networking sites at once. • Spectators are the largest group in most countries. It is not hard to see why. Spectators are those consumers who read what other consumers produce, but do not produce any content themselves. • In actives are online users who do not participate in any digital online media, but as more and more people begin to use computers as a resource, this number is dwindling. Marketers should be aware of and utilize these different segments because they all play an important role online. However, creators and critics are the two most important groups when developing a marketing strategy. Creators will help to disseminate information via blogs, podcasts, etc. Critics need to be an important component in a company’s digital marketing strategy, as the majority of online shoppers read ratings and reviews to aid in their purchasing decisions. 6. How can marketers exploit the characteristics of the Internet to improve the product element of their marketing mixes? The Internet can help firms better address the needs of their consumers through product features available online, improved customer service, and better marketing strategies. Digital media provide an opportunity to add a service dimension to traditional products and to create new products that could only be accessible on the Internet. Some companies also utilize online advertising campaigns and contests to help develop better products. 7. Describe how social media affects the push-pull dynamic of distribution? The role of distribution is to make products available at the right time, at the right place, and in the right quantities. It involves a push–pull dynamic—the firm that provides a product will push to get that product in front of the consumer, while at the same time connectivity aids those channel members that desire to find each other—the pull side of the dynamic. Social media can affect this push-pull dynamic of distribution. For instance, a blog or Twitter feed can help a marketer communicate the availability of products and how and when they can be purchased. This process can help push products through the marketing channel to consumers or enable customers to pull products through the marketing channel. 8. How do the characteristics of e-marketing affect the promotion element of the marketing mix? Promotion is the element of the marketing mix best suited for digital media. E-marketing allows for more targeted publicity. In fact, apps have allowed promotions to get so specific that they are offered to consumers as they walk by the appropriate store. The Internet and mobile marketing also allow for greater and faster communications, resulting in better and more successful promotional campaigns. 9. How has digital media affected the pricing of products? Give examples of the opportunities and challenges presented to marketers in light of these changes. Digital media facilitate both price and nonprice competition, because Internet marketing gives consumers access to more information about costs and prices. As consumers become more informed about their options, the demand for low-priced products has grown, leading to the creation of daily deal sites like Groupon and LivingSocial. Digital connections can help the customer find the price of the product available from various competitors in an instant. While this new access to price information benefits the consumer, it also places new pressures on the seller to be competitive and to differentiate products so that customers focus on attributes and benefits other than price. 10. Name and describe the major ethical and legal issues that have developed in response to the Internet. How should policymakers address these issues? The major ethical and legal issues are privacy, intellectual property protection, and online fraud. All of these problems have increased as use of digital media has increased. Students’ answers as to how policymakers can address these problems will vary. ANSWERS TO MARKETING APPLICATIONS 1. Amazon.com is one of the Web’s most recognizable marketers. Visit the company’s website at www.amazon.com and describe how the company adds value to its customers’ buying experiences. Students should have a variety of examples of how Amazon enhances the consumer experience. Examples may include personalized recommendations, 1-click purchasing, customer reviews, editorial reviews, or showing what most visitors to the page ultimately purchase. 2. Social networking has become a popular method of communication not only for individuals but for businesses as well. Visit the various social networking sites, such as Facebook and Twitter, and identify how companies are utilizing each of these sites in their marketing strategies. Students should be able to find several companies using social media to communicate with consumers. Interesting companies to visit include Southwest and Zappos, which interact with several different stakeholder groups through social media. 3. Some products are better suited than others to electronic marketing activities. For example, Art.com specializes in selling art prints via its online store. The ability to display a variety of prints in many different categories gives customers a convenient and efficient way to search for art. On the other hand, General Electric has a website displaying its appliances, but customers must visit a retailer to purchase them. Visit www.art.com and www.geappliances.com and compare how each firm uses the electronic environment of the Internet to enhance its marketing efforts. Students will recognize several differences between the products of Art.com and GE. Students can discuss why digital marketing strategies vary for the two companies (i.e., ease of shipping, existing distribution networks, and consumer needs). 4. Visit the information technology company website www.covisint.com and evaluate the nature of the business customers attracted. Who is the target audience for this business marketing site? Describe the types of firms currently doing business through this exchange. What other types of organizations might be attracted? Is it appropriate to sell any banner advertising on a site such as this? What other industries might benefit from developing similar digital media exchange hubs? Covisint targets several different business customers but features three groups on its homepage—healthcare companies, manufacturing companies, and companies looking for human resources solutions. The company also provides products and services to energy companies and any company that requires IT services like cloud computing. Because Covisint products would be researched and purchased by managers and executives at these companies, banner ads are not appropriate. Other B2B industries would benefit from such a hub. 5. Based on the information provided in the text, identify and map your social habits on social networking sites for the past week. Did you create content through blogs? Did you rate or recommend products or companies? Did you post photos of yourself at particular events or places on Facebook? Rate each of your online social activities according to how much influence you think they have had upon your friends or followers. Use 0 if you believe a particular activity had zero influence, 1 for slight influence, 2 for moderate influence, and 3 for significant influence. After you are finished ranking how much of an impact each of your online activities has had upon your friends and followers, determine whether you are an influencer of consumption behaviors. Do you think your friends would agree with you? Students’ answers will vary based on their social media habits. 6. Develop your analytical and communication skills using the Role-Play Exercises Online at www.cengagebrain.com. Students can visit the website and develop their analytical and communication skills. ANSWERS TO INTERNET EXERCISE Victors & Spoils To learn more about the world’s first creative ad agency built on crowdsourcing principles, including an opportunity to engage the world’s most talented creatives, look at the Victors & Spoils site at http://victorsandspoils.com. 1. How can Victors & Spoils be used to outsource advertising campaigns through co-creation and mass collaboration? Victors & Spoils has over 6,000 global community members working to develop ideas for advertising campaigns. For private projects, V&S matches certain members to client briefs and pays them up front. For public projects, V&S shares client briefs and then accepts submissions from members and pays them for the ideas that the client buys. These public projects provide V&S with several ideas that can be combined and refined to better meet client needs. The company believes that this strategy makes them more successful than a traditional ad agency, which has a limited number of creative people. 2. Victors & Spoils and crowdsourcing is built on the foundation that good ideas should come from anywhere. Is it possible that this new approach will eliminate traditional ad agencies and creative departments? Students’ answers will vary. Although crowdsourcing may change marketing and other industries, students may argue that many industries are set up to prefer the services of traditional ad agencies. However, with more jobs becoming temporary or contract, and with V&S providing access to more ideas, crowdsourcing may challenge the traditional advertising process. 3. If you want to engage in activities related to what would be found in the creative department of an advertising agency, how can Victors & Spoils help you launch your career? According to the website, Victors & Spoils provides three key membership benefits: • Opportunity: Access to the best brands and briefs out there. • Experience: You get to work with top creative directors in your area of expertise. • Connection: A community of friends and peers: create your own team and work with who you want from wherever you want. Any aspiring advertiser would build a strong portfolio and gain valuable skills without having to work his or her way up a corporate ladder. ANSWERS TO DEVELOPING YOUR MARKETING PLAN The information obtained from the following questions should assist you in developing various aspects of your marketing plan. Develop your marketing plan online using the Interactive Marketing Plan at www.cengagebrain.com. 1. Review the key concepts of addressability, interactivity, accessibility, connectivity, and control in Table 9.1, and explain how they relate to social media. Think about how a marketing strategy focused on social media differs from a marketing campaign reliant on traditional media sources. The ability of a marketer to identify customers before they make a purchase is called addressability. Many websites encourage visitors to register to maximize their use of the site or to gain access to premium areas. Interactivity allows customers to express their needs and wants directly to the firm in response to its marketing communications. It represents a significant shift because traditional marketing media usually involved one-way forms of communication. The ability to obtain digital information is referred to as accessibility. Because customers can access in-depth information about competing products, prices, and reviews, they are much better informed about a firm’s products and their relative value than ever before. Connectivity involves connecting customers with marketers as well as with other customers. It involves the use of digital networks to provide linkages between information providers and users. Control refers to customers’ abilities to regulate the information they view and the rate and sequence of their exposure to that information. Traditional media marketing campaigns were unidirectional, meaning the marketer put out a message and hoped that it reached the correct audience and achieved the desired effect. Customer response was slow to gauge and often inaccurate. New digital media have improved the flow of communications in both directions, allowing marketers to design better and more targeted campaigns while also giving consumers more power than ever before. Digital media technology makes it possible for visitors on a website to identify themselves and provide information about their product needs and wants before making a purchase. Armed with knowledge about individual customers, marketers can tailor marketing mixes more precisely to target customers with narrow interests. Addressability on social networks is achieved through their ability to provide a meeting ground for individuals and groups with similar interests and consumption patterns. The feedback mechanisms used with traditional media were time-consuming and more expensive. By utilizing appropriate digital media, companies can facilitate interactivity and enable a conversation with the customer. Digital media like blogs and some social networks allow marketers to interact with prospective customers in real time. The one-sided communication common to traditional marketing channels is being replaced with interactive conversations between customer and marketer. Consumer control is higher in a digital age because consumers can generate publicity, negative or positive, that is out of the control of the firm and can significantly affect sales. Customers can generate buzz about products, therefore creating a pull effect and increasing company sales. 2. No matter what marketing media are used, determining the correct marketing mix for your company is always important. Think about how social media might affect the marketing mix. Students’ answers will vary. They should be able to defend their reasoning no matter what stance they take. Their discussion should involve mention of the distinguishing characteristics of digital media, and perhaps also the technographic segments mentioned in the text. 3. Discuss different digital media and the pros and cons of using each as part of your marketing plan. Students’ answers will vary. Each student will have a different marketing plan, and each must cater his or her response to this question to the unique needs of his or her plan. Make sure students list the different digital media mentioned in the text (social networks, blogs, wikis, apps, video and photo sharing, virtual realities, podcasting, and widgets). COMMENTS ON VIDEO CASE 9.1: ROGUESHEEP’S POSTAGE APP: THE POSTCARD OF THE FUTURE. Summary This case discusses how a company is using mobile apps to supplant traditional postcards with digital ones. Rogue Sheep created the “Postage” iPhone app, a mobile app that allows users to choose from over 90 postcard designs, customize the design by inserting their own photos, and send the postcard to their friends or relatives. Since its introduction, the Postage app has won several awards and has broken into the social networking world. To create awareness of the product, Rogue Sheep uses a combination of traditional media, apps, social networking sites like Facebook, and free trials. Questions for Discussion 1. How do you think businesses could effectively use Rogue Sheep postcards in their communications program? Businesses can use the app to send digital postcards to remind customers about their products or special events. This application could potentially be customized to be a less expensive, more impactful business-to-the-consumer promotional postcard. 2. Is it possible for Rogue Sheep to advance its digital postcards to those who do not have access to iPhone apps? Since Rogue Sheep is continually creating new products and looking into new technologies, it seems feasible that digital postcards can be advanced beyond iPhones. Other likely candidates for non-iPhone digital postcards are laptops (some people bring their laptops with them on trips), smartphones, or iPads. 3. What are the advantages of the Rogue Sheep digital postcard over traditional postcards? Advantages include saving money on postcard and mailing costs, the speed with which a digital postcard can reach the recipient (versus snail mail), the ability to customize their postcards and share their designs with others via social networks, and the reduction of paper waste. Solution Manual for Foundations of Marketing William M. Pride, O. C. Ferrell 9781305361867, 9781305405769, 9780357033760
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