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Changing Market Relationships in the Internet Age

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Jean-Jacques Lambin

Chapter 4. Impact of internet on market-driven decisions

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1The objective of this chapter is to analyse the changes generated by the Internet technology in the relationships between the different market actors. The Internet technology expands the geographical size of the market, creates fonctions assumed by new market players, modifies consumers’ behaviour and expectations and reinforces the power of the market over the power of the firm. It creates virtual markets where consumers can find customised solutions to their problems, which cut across traditional market boundaries. These changes modify the balance of power among market actors, create new business opportunities and give rise to more equalitarian relationships between the firm and its customer base. In this chapter, we shall review the impact of Internet on each element of the marketing mix.

4.1. THE SOLUTION APPROACH AND THE VIRTUAL MARKET

  • 1 Lambin J.J. et al. (2007), op.cit., p. 129, see Exhibit 6.1.

2Strategic marketing defines the market by reference to generic needs, or by reference to “problems” experienced by potential customers. What operational marketing is proposing is, not products, but “solutions” to these problems. As the market-driven business philosophy is gaining acceptance in industry, many product companies have tried to partner with their customers and other market players to become a “solution provider” by selling solutions, i.e. “a unique combination of products and services components” that could solve a customer’s problem (Lambin et al., 2007, p. 129)1.

• THE SOLUTION APPROACH AND THE MARKETING MIX

  • 2 For a similar approach, see, Chekitan S. Dev and Don E. Schultz (2005), A Customer-focused Approach (...)

3In the solution approach, understanding customer’s problems is the priority objective. Potential customers raise questions like : How can I organise a nice birthday party 4 How can I insure the access control of my plant 4 How can I make a good espresso 4 How can I organise my personal and independent mobility problem 4 How can I decorate my home interior 4 In their cognitive space and in raising these questions, customers do not necessarily look after specific products but rather to a comprehensive solution, which can imply the use of a bundle of products and services. This is an “outside-in” view of the market which is fully customer-centric, in contrast with the traditional marketing concept which is more supply-oriented. The solution approach provides a different way to look at the elements of the marketing mix2.

  • Product : a solution-to-a-problem and the package of benefits that the product represents.

  • Place : a convenient access to the solution sought by the buyer.

  • Price : all the monetary and non-monetary costs (including price) supported by the customer to acquire the solution sought.

  • Communication : the information, messages, and signals communicated about the solutions available and about their distinctive qualities.

  • Selling : the negotiation process or the dialogue organised with the potential customer in her/his search for the appropriate solution to his/her problem.

4To achieve the solution sought, customers engage in different activities directly or indirectly related to the desired outcome. These related activities form, what is called a virtual market.

• What is a virtual market ?

5While in general markets are organised around the supply of products and services, the customer purchasing process is structured by reference to activities that are linked in his/her cognitive space. Virtual markets lead to an offering or to an assortaient of offerings defined by reference to all the activities undertaken and all the services sought by the customer to achieve a specific generic result. Thus, a virtual market represents en end-to-end temporal sequence of activities logically related in the cognitive space of customers who search for a solution to a generic need.

6For example, as illustrated in Figure 10, to achieve the “home ownership” generic need, customers might engage with contractors, realtors, insurance companies, mortgage firms, removal companies, telecom, interior designers, etc. Similarly, in the personal mobility virtual market, in addition to car purchasing, related activities cover car maintenance, car insurance, roadside assistance, emergency services dispatch, route support, stolen vehicle location, etc.

7In a virtual market, the activities undertaken by potential customers generally cut across traditional industry and product-market boundaries and are not necessarily in the traditional core business of the firm. As a result, virtual markets absorb a much higher proportion of customer spending than a specific product-market and represent a higher market potential. Thus to confine the market to the product-market may be misleading.

Figure 10. The Home Ownership Virtual and Meta Markets

Figure 10. The Home Ownership Virtual and Meta Markets

Source : Lambin et al. (2007)

  • 3 Sawhney M. (1999), Making New Markets, Business 2.0., May, 116-121. See also : Sawhney M., Balasubr (...)

8The challenge for the firm is to move from the rather abstract concept of virtual market to the “meta-market” (Sawhney, 1999 and 2004)3 that consists in an offering or in an assortaient of offerings defined by reference to all the elements (activities and services), which comprise the cognitive space of the client. In other words, a meta-market is created when the cognitive association between different logically related activities is reproduced in the physical market place, thereby streamlining customer activities and providing them with seamless experience.

9An agent that represents the different partners participating in the solution provided in the meta-market is called a metamediary. The Knot (www.theknot.com) and Ceremonie (www.ceremonie.com) are metamediaries for the bridal market (all you need for organising a wedding ceremony). Edmunds in the US (www.edmunds.com) is a metamediary for the car buying market (all you need about cars). Metamediaries solve four major consumer problems : search time, quality assurance, facilitated transactions for related purchases, and unbiased content information. Metamediary partners benefit by having traffic directed to their sites as well as co-branding with the metamediary. They pay commission for referrals. The key to a metamediary’s success is consumer trust.

• How to define a virtual market ?

10In defining a virtual market, the following procedure should be adopted.

  • Do not define your reference market in terms of product categories (cars, metallic grids, construction toys, etc.).

  • Refer to the result or the generic outcome customers want to achieve (personal mobility, access control, edutainment, etc...).

  • Identify all the activities, which, from the customer point of view, are part of the virtual market.

  • Create the reference meta-market by reproducing in the physical market place the mental associations made by the customers.

  • If necessary, augment the internal capabilities of the firm by finding the right partners to provide the solution sought by customers.

  • Present to customers the total solution they seek.

11Internet technology makes this solution-to-a-problem approach more achievable.

• The customer activity chain concept

  • 4 Vandermerwee S. (1993), Jumping into the Customer Activity Cycle, Columbia Journal of World Busines (...)

12Another example of virtual market is given by the customer activity cycle. In seeking a particular outcome, customers engage in temporal activities. These activities can be mapped along a customer activity chain (Vandermerwe, 1993 and 20004), which describes a sequence of directly or indirectly related activities undertaken by customers before, during, or after the purchasing decision.

  • Before, when customers are deciding what to do.

  • During, when customers are doing what they decided upon.

  • After, when customers are maintaining the results obtained, (reviewing, renewing, extending, upgrading, updating, etc.)

13This methodology can help managers to assess the opportunities for providing new kind of services in filling gaps in the activity chain that could give access to competitors.

  • 5 Vandermerwee S. (2000), op.cit.

14The case of IBM is interesting in this respect. In the late 1980, IBM was so fixated on PCs and mainframes (viewing itself as hardware provider) that it allowed consultants, software houses, procurements specialists and third-party maintenance providers to leap into IBM’s value gaps and siphon off both customers and potential wealth from the “global-networking-capability” market space (Vandermerwe, 2000, p. 32)5. Having redefined its business, in a first step, as providing “computerized solutions of managerial problems” and, in a second step, as providing “global-networking-capabilities”, today IBM earns more money from value-add-on services than from its hardware, software and middleware.

  • 6 Roegner E.V., Seifert T., and Swinford D.D. (2001), Putting a Price on Solutions, The McKinsey Quar (...)
  • 7 Foote N.W. Galbraith J., Hope Q. and Miller D., (2001), Making solutions the answer, The McKinsey Q (...)
  • 8 Sheridan S. and Bullinger N. (2001), Building A solution-based Organisation, Journal of Business St (...)

15On the solution-to-a-problem approach, see : Roegner Seifert, and Swinford, (2001)6 ; Foote, et al., (2001)7 ; Sheridan and Bullinger, (2001)8.

• Expected benefits of the solution approach

  • 9 Foote N.W., Galbraith J., Hope Q. and Miller D. (2001), op.cit.

16The decision of a firm to sell solutions is usually based on two objectives : (a) to obtain higher profit margins than the one obtained by the sales of products and (b) to generate longer customer contacts. Solutions are proving lucrative for many companies, even as the profitability and growth of their products have come under pressure. In the case of IBM, $38 billion of its revenue - 43 percent of the total - comes from the solution-related businesses it has developed since the early 1990s (Foote, et al., 2001, p. 84)9.

17Before adopting the solution approach firms must have a good understanding of what a solution is and how it differs from products or bundles of products and services. In the broadest sense, a solution is a combination of products and services that create value beyond the sum of its parts. Many companies are failing to become a successful solution-provider for one of the three following reasons.

  1. Some companies believe that they are selling solutions by merely bundling products and/or services that create little value when offered together and then have difficulty of obtaining a premium price.

  2. Second they underestimate the difficulty of selling solutions which cost more to develop, have longer sales cycle and demand a deep understanding of the customer problems.

  3. Third, many companies sell solutions (intangible services) much as they sell products and do not adopt a relationship selling strategy instead of the traditional transactional selling strategy.

18Thus, a solution is not simply the bundling together of related components. It is the level of customisation and of integration that sets solutions above products or services or bundles of products and services and that justifies a price premium.

19What makes a solution valuable and distinctive is that it focuses on results by applying some level of expertise and a proprietary method that justifies a premium price. The main benefits of the virtual market concept can be summarised as follows.

  • The concept is perfectly aligned on the customer views and thereby fully customer-oriented.

  • The concept facilitates the communication to potential customers.

  • The revenue potential of a virtual market is always larger than the discrete product-market.

  • It enables the firm to offer a total solution to customers, thereby building exclusivity, loyalty and trust.

  • It helps identifying growth opportunities in activities directly or indirectly related to the core service.

  • It helps identifying who are the indirect or potential competitors.

  • 10 Sheridan S. and Bullinger N. (2001), op.cit.

20The firm must create a solution-based organisation that requires a new more flexible set of competencies, because the sales process is less predictable than the sales of a product (Sheridan and Bullinger, 2001)10.

• Engaging online communities to design innovative solutions

  • 11 Von Hippel E., (1978), Successful Industrial Products from Customer Ideas, Journal of Marketing, 41 (...)

21The Internet technology offers new possibilities to acquire a deep understanding of customers’ problems. As shown by the seminal work of von Hippel (1978)11, it is often the role of the “would-be customer” to develop the idea for a new product and to select a supplier capable of making the product. In B2C markets, examples of breakthrough innovations initiated by innovative users include the mountain bike, the snowboards and also open source software developments like Linux. Many customers are not only knowledgeable, but are also able to develop solutions for themselves and the Internet has greatly facilitated forms of collaboration to design and create new products.

  • 12 Fuller J. and Hienerth C., (2004), Engaging the creative consumer, European Business Forum, Issue 1 (...)

22Innovative consumer behaviour can be seen in online communities. Online groups of enthusiastic consumers can be found for almost every product or service. Community-based innovation is a method of identifying and accessing consumers in online communities and then interacting with them to get valuable in put for new product development12. Consumers as members of online communities can add value to innovation at all stages, from idea generation stage to the concept and design and test stages.

23A popular example of active online community is the community formed around the Lego high-tech toys. With Lego Mindstorm (www.mindstorm.lego.com), users build real robots out of programmable bricks that can be turned into two legged walking machines, or into just about anything a teenage mind can envision. Today Lego offers in its Web site a downloadable software development kit that consumer enthusiasts can use to post descriptions of their Mindstorm creations, and of the software code, programming instructions and Lego parts that the device require. The company benefits hugely from the work of these volunteer customers. Each time a customer posts a new application for Mindstorm, the toy becomes more valuable.

24In a McKinsey Global Survey (McKinsey, 2007)13 on how companies are marketing online, the observation was that some two third of all survey respondents use online tools to involve their customers in product development ; about a quarter do so frequently. The reasons vary notably by industry, respondents in both financial services and manufacturing, for example, focus on testing concepts and screening ideas, while those in high tech focus on generating new ideas.

• From customer-orientation to customer co-creation

  • 14 Tapscott D. and Williams D.W., (2006), Wikinomics, How Mass Collaboration Changes Everything New Yo (...)
  • 15 As frequently observed in so-called “new” management theory, many old ideas are hidden behind new w (...)

25The customer-active paradigm is gaining increased popularity in the professional and academic literature with the publication of the bestseller book by Tapscott and Williams (2006)14, entitled Wikinomics. The book supports the view that the new communication technologies are democratising the creation of value through mass collaboration, i.e. through mass outsourcing. Mass collaboration relies on free individual agents to come together and cooperate to improve a given operation or solve a problem15. The Wikinomics business model is based on four basic principles : openness, peering, sharing and acting globally. This is a business model very different from the hierarchical, closed, secretive and insular multinational business model that dominates today’s markets, even if forms of co-opetition (as discussed above) are a well known topic in strategic management.

  • 16 Toffler A., (1980), The Third Wave, New York : Bantam Books.

26An interesting aspect of the business model promoted by Wikinomics is its emphasis on the potential development of a system of peer production where people join forces in self-organised communities to innovate and to produce new goods and services that rival those of the world’s largest and best financed enterprises. The concept of “prosumer” or of “presumption” was introduced16 to describe how the gap between producers and consumers is blurring, a concept which is different from “customer centricity” where companies decide what the basics are and collaborate with customers to create or customise goods and services. Such is the current view of the customer orientation concept described earlier in this book and which is viewed here as “company-centric”.

27The “prosumer-centric” paradigm is different and refers to a model where customers participate in the creation of products in an active and ongoing way. The consumers actually co-innovate and co-produce the product they consume. They will do it on their own terms, in their own networks and for their own ends.

  • 17 Prahalad C.K. and Venkat Ramaswamy, (2004), Co-Creation Experiences : The next Practice in Value Cr (...)

28In the words of the authors, “co-creating with consumers is like tapping the most uniquely qualified pool of intellectual capital ever assembled /.. :/ Products that don’t enable and invite customer participation will be anathema — said old-fashioned remnants of a less customer friendly era.” Customer co-creation is the ultimate level in the application of the consumer orientation concept. On this topic, read Prahalad and Ramaswamy (2004)17.

29This impending prosumer revolution is already taking shape as illustrated by the success of online market places like InnoCentive (www.innocentive.com) or yet2.com (www.yet2.com) where “seekers”, posting anonymously R&D problems, are meeting “solvers” who submit their solutions in a bid to capture cash prizes.

  • 18 Tapscott D. and Williams D.W., (2006), op.cit.

30In the late 1990s, P&G launched an internal survey and discovered it was spending $1.5 billion in R&D, generating a lot of patents, but using less than 10 per cent of them in its own products. The company, once renowned for its insularity, now makes every patent in its portfolio available for license through online market places to any outsiders having previous contacts with P&G (Tapscott et al., 2007, p. 103)18.

4.2. IMPACT OF INTERNET ON CHANNELS DECISIONS

  • 19 Drucker P. (2000), Can e-Commerce Deliver ? The World in 2000, The Economist, Special Issue, 122.

31The Internet technology is improving the efficiency of markets, creating market environment close to the situation of pure (or perfect) competition, where the tools of strategic marketing (differentiation, innovation, and loyalty) are to some extent neutralised. In this new context, as suggested by Drucker (2000)19, the firm controlling the delivery to the market has a major competitive advantage. In traditional business structures, selling is seen and organised as a servant to production. In e-business, instead of selling what it makes, the virtual company will sell what it can deliver, no matter who makes the products. The contact with the market and the savoir-faire in ternis of physical distribution and logistics become the core competence.

• The temptation of disintermediation

32A strategic issue raised by Internet is the reconfiguration of the distributive network. A commonly held view is that Internet will enable companies to deal directly with the end-customer, leapfrogging existing distribution networks and thereby reducing transaction costs. Why remunerate middlemen, the thinking goes, if one can communicate directly with the customer through an electronic link, giving her or him the possibility to place an order directly at a lower cost 4 This is called disintermediation.

33Once the potential of Internet applications identified, and before considering disintermediation, it is useful to verify whether each online application “complements” or “replaces” off-line operations. Online applications do not systematically replace traditional activities. In many cases, the best solution is a combination of the two, thereby promoting complementarities (the click-.-brick concept). A mistake would be to do online only what is done manually off-line, simply to generate costs reductions.

34In reality, the challenge is far greater. Taken separately, the cost of the direct contact is indeed lower, but managers need to view the total cost of the transaction. In many situations, the reduced cost of the person-to-person relationship can be offset by substantially increased logistics costs. The issue is not one of sidelining distributors, rather of redistributing the tasks and functions among the existing actors in the chain. This redistribution (or reallocation) of tasks is particularly relevant for product information, advice to customers, after-sales services, physical delivery, product and service bundling, and product demonstrations or trials.

• Going online and offline simultaneously ?

  • 20 Van Camp F. (2001), Online and Onland ? Channels Conflicts and How to Avoid them, Rotterdam Arthur (...)

35Offering the same products to the same customers under the same brand simultaneously online and offline is likely to generate major channel conflicts. As suggested by van Camp (2001)20, these conflicts can be internal or external. Internal conflicts are those between two or more of the channels-to-market the company employs ; external conflicts involve third parties.

36When a firm wants to add an online channel to its on-land existing distributive network, four types of internal conflicts are to be expected.

  • Cross channel cannibalisation. The creation of a new sales channel will trigger a redistribution of total sales volume across channels, which translates into cannibalisation of existing channels in favour of the new one. The key question is to know whether the new online channel has a complementary or a substitute effect on company sales.

  • Under utilisation of real estate. Most retail channels comprise physical assets of some sort, e.g. stores, branch offices, or call centres. Optimisation of the number, size, and utilisation of these assets is important, as they represent a large part of a company’s total cost. If substantial volume is moved to the online channel, the balance will be upset with a negative impact on the overall cost base.

  • Price disparities between channels. Online price levels tend to be substantially lower than in other channels, because Internet-based companies enjoy a much lower cost base and accept lower margins than traditional players. To be competitive online, these sites will have to match their Internet-based competitors. But does that mean they have to lower prices in other channels accordingly 4 Large price differences may upset customers who feel they pay too much offline.

  • Channel de-synchronisation. The two types of channels have very different practices and the natural tendency is to manage them independently. The problem is that customers do not differentiate between channels for the same brand. They simply select the most convenient channel, expecting a certain degree of integration between online and offline channels.

37In addition to these internal conflicts, external conflicts can also arise when independent third parties are associated in the distributive network. Direct online sales by the manufacturer have always risked antagonising the retailers they depend upon to sell their products.

  • Alienating traditional retailers by going direct to the market. Traditional channels partners are of course upset to see manufacturers go direct to market to establish a direct contact with their end-customers. As the online channels takes volume away from traditional channels, they may withdraw support for the company’s products and turn to competitors.

  • Losing channel control. Manufacturers try to control their channels by setting regional sales quota and by providing strict guidelines on product presentation and promotion. However, it is difficult to maintain the same control over the online channels of their downstream channel partners. As more and more retailers create their own click-&brick businesses, manufacturers may find it increasingly difficult to prevent their products from being offered online.

  • Moving value upstream. Value-added activities such as customisation and information about product models and performance, which were once performed downstream, may nowadays be done by the manufacturer itself. The provision of services and of information by manufacturers reduces the role and value-added of the retailers, whose roles are limited to the physical tasks of distribution which are also the most costly.

38Several options exist to conciliate online and offline channels which minimise potential conflicts.

  • To place on the company’s Web site little more than a banner presenting the company and a catalogue of products without price list. The distributors then perceive the site as a promotional support.

  • Charge on the Web site the same price than the market price but add delivery costs, which keep attractive the traditional distributor’s offering.

  • Sell on the Web site but return a commission to the distributors located in the geographic zone where the product is sold.

  • Adopt the same pricing strategy as the distributors, which is an aggressive strategy creating direct competition vis-à-vis its own distributor network.

  • 21 Birchall J. (2008), How to Cut in the Middleman ?, Financial Times, March 12.

39To meet this challenge of selling online by manufacturers, the case of the Shopatron Company (www.shopatron.com) is interesting21. Its owner has developed a Web site that allows manufacturers to sell online without annoying their retailers. His business takes customers orders and places them on Confident order exchange (Coex), an Internet based online exchange, where orders are taken up by a local retailer for delivery or the goods are held in a store to be picked up. Shopatron has now more than 400 brand manufacturers on its Coex system, which offers a solution to channel conflicts. Manufacturers paid a single set-up charge, followed by low monthly fee. Retailers can join for free, but pay a percentage of each sales and credit card processing cost to Shopatron. As consumer demand for instore pick-up increases, this system provides a win-win solution.

40Thus, the issue raised by Internet on distribution channel management is more a question of re-allocation of the distribution tasks among the different actors. It would be possible for a firm, for example, to deal directly with the end-customer where the provision of up-to-date information is at stake, while leaving to intermediaries those tasks requiring physical proximity.

• Securing E-commerce

41The majority of surveyed consumers still express reservations about online purchasing. Three main reservations are regularly mentioned : (a) low confidence in electronic payments security, (b) uncertainties about the delivery of the goods, and (c) protection of private life. Web companies have a vested interest in the success of the online channels and therefore have to maintain and develop customer confidence in online services by addressing these problems.

  • 22 To know more about transaction security, read : Strauss J., El-Ansary A., and Frost R. (2006), E-Ma (...)

42E-commerce encourages payment transactions which do not require physical funds, but involve only data transfer through credit or debit cards. Credit cards are the dominant form of payment, but the importance of popular debit cards, like Bancontact/Mister Cash, is growing. This allows merchants and consumers to pay and receive payment immediately, due to the electronic nature of this medium. Credit and debit cards are fast and easy but they do have a significant disadvantage. They do not require a signature to authorise a transaction, and this can lead to higher fraud rates. All a thief needs is a valid credit card number, name and expiration date. Security is an extremely important issue in e-commerce and thus merchants must take steps to ensure the security of their transactions. One way e-marketers are addressing transaction security is through the use of encryption algorithms22. This is also the role of e-market facilitators (see Section 4.1). Single factor identification, such as a username-password combination, is recognised as not strong enough to defend merchants or their customers. E-market facilitators like Entrust (www.entrust.com), Ogone (https://secrure. ogone.com), or Saferpay (www.saferpay.com) have developed Internet platforms for processing electronic payments in total security, using multifactor authentication. For sellers, using these services may be expensive and require a sufficient sales volume to bejustified.

43The organisation of a convenient system for delivering or collecting the goods purchased is a second important issue in e-commerce. The US case of Shopatron described in the previous paragraph is a good illustration of the type of solution provided by an e-market facilitator. In Europe, Kiala (www.kiala.com) is the leading service provider having set up a network of collection points enabling customers to pick up, pay for, and return their purchased goods quickly where and when it suits them better. The Kiala points network consists of nearby stores - grocery stores, dry-cleaners, newspaper shops, gasoline service stations, etc. - which offer easy access, wide opening hours even during the weekend, quality service, no queue, and secured storage space. As a result, customers can optimise their time by picking up their goods at a place of their own choice. The network is supported by an up-to-date communication technology which allows customers to track and trace their parcels on the Kiala’s Internet site and to be notified of their arrival or of their delay.

44In China, the postal system is unreliable and credit card use is low, China being still a cash-driven economy. Innovation is a necessity. Dangdang (www.dangdang.com) is an online retailer aspiring to be the Amazon.com of China. For organising delivery, Dangdang has a ready fleet of couriers on bicycles who zip around China’s major cities, delivering packages and collecting cash.

  • 23 Story L. (2008), Internet Firms Keeping ever-closer Tabs on You, International Herald Tribune, Marc (...)

45Private life protection is the third concern raised by many consumers. The individualisation of online communication creates the need for personalised data to customise the offering. Therefore, any element of information susceptible to differentiate the potential customer and to draw its detailed profile is gaining a commercial value. This explains the development of personal data banks and by way of consequence the highly sensitive issue of privacy and of private life protection on the Internet. A recent analysis of online consumer data (Story, 2008)23 has shown that large Web companies

46- Yahoo, Google, Microsoft or AOL - are learning more than ever before about the gritty details of what people search for and do on the Internet, gathering clues about a typical user preferences several hundred times a month. These companies use that data to predict what content people will most likely respond to. They can charge steep prices for carefully tailored ads because of their high response rates (see Section 4.5 below). These Web companies also noted that they have consumer protection policies, for example letting users choose not to be targets of some advertising, letting users edit the search histories that are linked to their user names or by voluntarily obscuring people’s computer identification addresses. Microsoft says it does not link any of its visitor’s behaviour to their user names, even if those people are registered.

  • 24 Curtis T (2007), Keeping Your Private Life off the Internet - Top 10 Privacy Protection Tips, Ezine(...)

47Keeping private life off the Internet is also everybody’s direct responsibility. Todd Curtis (2007)24 (www.ezinearticles.com) proposes ten privacy protection tips based on a combination of technology and common sense.

• European online retail spending

48According to a forecast formulated by Jupiter Research in 200525, online retail spending in Europe will total €117.1 billion in 2010, driven by the key markets of the UK, Germany, and France. Together, these three countries now account for 63 per cent of all European online retail spending. Average online spending per European will double to €806 in 2010 from €403 in 2004. Online buyers in the UK spend the most, an average of €671 each in 2005. The big spending in the UK is partly due to the fact its users buy items in the most varied online categories, compared with users elsewhere in Europe, and partly due to its generally higher price levels, compared with price levels in the rest of Europe.

49The growth in European online retail spending will vary from country to country. Markets where the penetration of online buying is now among the lowest (e.g. Ireland and Greece) will register the highest compound annual growth rate (CAGR), 32.5 per cent for Ireland and 30.7 per cent for Greece. In contrast, markets where the penetration of online buying is now among the highest (e.g. Sweden and Norway) will register the lowest CAGRs, less than 15 per cent for both.

50In 2010, Jupiter Research predicts that seven per cent of all European retail spending will be channeled through the Internet, with the online channel share ranging from 1.3 per cent in Greece and 13.2 per cent in the UK (www.jupiterresearch.com).

• The geographic market coverage

51Adopting the Internet technology does not necessarily imply that companies should suddenly start operating on a global stage. If Internet facilitates communication, international physical delivery and logistics still require specific competence and significant financial resources. Thus, decisions concerning market coverage should be taken only after considering the physical (delivery) and psychological (communication) implications.

  • 26 Ghemawat P. (2001), Distance Still Matters : The Hard Reality of Global Expansion, Harvard Business(...)

52The spectacular development of the New Information and Communication Technologies (NICTs) and the resulting globalisation of the world market can give the illusion that distance does not matter anymore. In reality, distance is a multi-dimensional concept and a distinction must be made between the four dimensions of distance (Ghemawat, 2001)26 : geographic (physical remoteness), administrative (preferential trading agreements), economic (wealth differences) and cultural (linguistic ties). The NICTs have eliminated only one component of geographic distance : the communication link.

  • 27 Morrison A, Bouquet C. and Beck J. (2004), Netchising : The Next Global Wave ?, Long Range Planning(...)

53As a result, an increasing number of companies are succeeding overseas without massive foreign investment by adopting a global business model called netchising (Morrison, Bouquet, and Beck, 2004)27. This new business model relies on the Internet for procurement, sales, and maintaining customer relationships, and non-equity partnership arrangements to provide direct customer interfaces and local adaptation and delivery of products and services. Netchising offers potentially huge benefits over traditional exporting or foreign direct investment approaches to globalisation.

4.3. IMPACT OF INTERNET ON PRICING DECISIONS

54One of the most dramatic changes expected of online shopping was the ability of consumers to compare prices for comparable products. Consequently, it was expected that people who use the Internet pay lower prices for the goods they buy, lower means here prices less than they would pay for the same goods at a traditional physical store. Research results provide support for this expectation but also identify circumstances in which Web users end up paying higher prices. Instead of a new age of perfectly competitive markets, research has found more price variations than expected, despite the availability of price comparison Web sites.

Price comparison sites

55One of the most important differences from physical markets is the ease with which online consumers and rival retailers can access comparative information about competing products characteristics and prices. There are sites, like Kelkoo (www.kelkoo.com), PriceScan (www.pricescan.com) or Priceline (www.priceline.com) or Expedia for airlines (www.expedia.fr) that search the Net for the lowest possible price for goods and services.

  • 28 Koch J.V. (2003), Are prices lower on the Internet ? Not always, Business horizons, January-Februar (...)

56Kelkoo.com, for instance, is the largest price comparison site in Europe. Kelkoo claims to have over 4 million visits per month from consumers within the UK alone, and price listings by over 4 000 retailers, including more than 40 of the 50 largest Internet retailers. Consumers now regularly check online prices and compare them with those in their local stores. As warned by Koch (2003)28, the price list users receive from the site reflects which firms have paid for the right to appear in favourable placement in the list. Thus, e-consumers can be misguided. Rather than helping them find the lowest price, the price comparison site may be helping them find its biggest advertiser.

57In reality, price comparison sites give firms a means to monitor each others pricing policy, thereby exchanging pricing information and promoting price-matching, an illegal behaviour in the physical market, but which can occur in the global electronic market with little effort. At price comparison sites like Kelkoo, the number of firms selling a given product changes almost daily and an online retailer needs to monitor this number and must be prepared to adapt its price in real time to respond to changes in the competitive structure of the market.

• Price discovery mechanisms on the Internet

58In any e-market, there are four main transaction mechanisms.

  • Standard price offerings, i.e. predetermined prices for a given product or service. This is similar to the typical catalogue pricing system used in B2C markets.

  • Auction, a method in which one organisation or an individual bids against others to buy goods from a supplier.

  • Reverse auction, also called request for quote (RFQ), is a method of procurement in which an organisation sets a price it is willing to pay and suppliers then bid to fulfil it. This method is used when buyers search for a product that does not exist yet or when they search for a better price for an existing product.

  • Exchanges. Exchanges tend to be Internet-based spot market for commodity products. Exchanges match “bid offers” with “ask offers” on e-market rules and inform the parties involved in the potential match.

59Thus electronic markets allow new price discovery mechanisms. An example is given by airlines auction last-minute for unsold seats to the highest bidder.

• Are Internet prices lower ?

  • 29 Harris E.S. and Abate J.T. (2000), United States : The Internet price index, Global Economic Monito (...)

60Several studies indicate that a large majority of net-buyers rate “lower prices” as the reason for buying online followed by “convenience” as second reason. The most comprehensive evidence available is provided by Lehman Brothers (2000)29 and indicates that most Internet prices are lower than those charged by bricks-and-mortar stores. Even after taking shipping costs into account, Internet prices were 38 per cent lower for apparels items ; 28 per cent lower for prescription drugs, alcohol, and cigarettes ; 4 per cent lower for home electronics and groceries, 4 per cent higher for hardware, and 9 per cent higher for toys. Overall, reports Lehman Brothers, the net prices of 93 different items were 13 percent lower than bricks-and-mortar prices, shipping included. Similar observations are made on e-marketplaces, where sellers are feeling price pressure when existing customers move online.

61Thus, the good news is that many consumers often do pay less when they shop on the Internet. The bad news is that there are situations in which buyers and sellers have different (asymmetric) information, which can result in higher prices.

• Pricing flexibility online

  • 30 Ozer M. (2002), The Role of Flexibility in Online Business, Business Horizons, January-February, 61 (...)

62Flexible pricing strategy has already been a popular strategy for many established companies and, perhaps, the best example is the airline industry which charges different prices for different people based on their travel patterns, what is called dynamic pricing or “contextual pricing” (Ozer, 2002)30.

63Net sellers using Customer Relationship Management software are collecting extensive information about e-consumers and can use this information to test their price sensitivity. The Internet gives companies better information about customers’ price sensitivity. It also gives them the flexibility to adjust prices instantly as circumstances change. Here are two examples.

    • 31 Baker W.L., Lin E., Marn M.V., and Zawada C.C. (2001), Getting Prices Right on the Web, McKinsey Qu (...)

    Measuring customers’ tolerance to higher prices. All products have a pricing indifference band : a range of prices within which price changes have little impact on consumers’ willingness to make a purchase. McKinsey (see Baker, et al., 2001)31 estimates that price indifference bands can range from 17 per cent for branded consumer health and beauty products to as little as 0.2 per cent or some financial products. A product location within this band can dramatically affect a company’s profit. Measurements of consumer tolerance for different prices levels are difficult, expensive and time consuming in the off-line market, but cheap and instantaneous on the Internet. For example, an Internet seller wants to test the sales impact of 3 percent price increase, it might quote the higher price to every fiftieth visitor to its site, observe the results and try another experiment the next day and this very easily and at a zero cost. The seller could then segment prospective customers to tailor prices accordingly.

  • Adaptingprices online. Off-line price changes take time and may require several months to communicate changes to distributors, to print and send new price lists and to implement the changes. Online pricing allows companies to make instantaneous adjustments to list prices and to profit from even small fluctuations in market conditions. When capacity utilisation is high, order lead times short, or inventory levels low, prices can be raised temporarily. When demand sags, a company might try an auction, lower prices, or targeted short-term promotions. Similarly, as products near the end of their life cycle, companies can test the consumers’ willingness to continue to pay the established price or to delay price reductions for several weeks.

64A successful flexible pricing strategy depends on how customers feel about it. As discussed below, perceived fairness should not be violated.

  • 32 Baye M.R., Gatti J.R.J., Kattuman P. and Morgan J. (2007), A Dashboard for Online Pricing, Californ (...)

65Online markets do present a number of novel features and characteristics that managers must be prepared to incorporate into their online business strategies. To go further on this topic, read the interesting article from Baye, et al., (2007)32.

• Higher prices on the Internet ?

  • 33 Koch J.V. (2003), op.cit.

66Koch (2003)33 has identified several situations where Internet users end up paying higher prices.

  • Branding effects. Differentiation and branding are the key tools used in the physical market to reduce consumers’ price sensitivity. The same effect is observed on the Web. For the e-consumer, buying a well-known brand, even more expensive, reduces her/his risk. Net consumers generally prefer the familiar and, frequently, the familiar constitutes a heavily advertised company (like Microsoft) or highly popular portals (like Yahoo, Google, or MSN) or a brand also operating in the physical market. Analysis of consumer click-through behaviour reveals that most e-customers do very little cross shopping, the majority purchasing their product (books, toys, music, electronic...) at the first Web site visited.

    • 34 Van Heck. (2002), How to Seize the Value of Online Auctions, European Business Forum, Issue 10, Sum (...)

    Auction frenzy. In auctions, frequently successful bidders pay unrealistically high prices because caught up in the frenzy of competition and bid well over what they would offer in a bricks-and-mortar environment. Most net auctions exhibit asymmetric information in particular where experience goods are involved and their precise condition quality unknownby the bidder (van Heck, 2002)34.

  • Tying and bundling. Tying refers to the practice of binding the sales of one good to the sale of another, while bundling occurs when several items are packaged together and sold for a single price, yet can be purchased separately. If a firm ties or bundles products together, it will charge a higher price while the marginal cost of supplying information goods is very small. It boils down to forcing the e-customer to pay a higher price to obtain the product she/he really wants.

  • Data mining. Popular portals like Google, Yahoo, or MSN can keep track of where users go and what they do when they get there and then use the information to build a profile of their interests. If Yahoo knows you are interested in politics, it might arrange for you to have an attractive advertisement for a book about politics and convenience might dictate the purchase at the price offered rather than expanding an effort to search for a lower price.

67A situation of “perfect price competition” is not necessarily prevailing in e-marketplaces. As discussed in Section 3.3 above, sellers can design strategies to resist price pressure from customers by building new types of competitive advantage.

• Price partitioning on Internet

  • 35 Xia L. and Monroe K.B. (2004), Price Partitioning on the Internet, Journal of Interactive Marketing(...)

68Online shopping also changes the price structures from what consumers are used to in the traditional shopping environment. Consumers are used to paying sales tax for their purchases. However, a shipping and handling fee is charged for online shopping. The shipping and handling fees thus become surcharges to the base price of the product. Separating the total cost into a base price and one or more surcharges has been labelled price partitioning. Sellers are using different tactics to structure these surcharges to attract consumers. For example, they may list a low base price of the product but increase the shipping and handling fee so the store’s product may look attractive in the price comparison sites. On the other hand, other sellers may include the surcharge in the base price and try to attract consumers by offering “free” shipping and handling. Xia and Monroe (2004)35 have examined empirically whether price partitioning on the Internet is effective. Overall, the results indicate that price partitioning can have a positive effect on consumers’ price perceptions and on purchase intentions. This effect is due, not only to a cost and benefit assessment by consumers, but also to the clarity that the partitioned prices offered. A partitioned price may enhance a store’s perceived trustworthiness and perceived fairness.

• Price customisation online

69Price customisation is the charging of different prices to end consumers based on a discriminatory variable, like weather, time of day, purchase quantity or a targeted segment, or buyer’s willingness-to-pay. Economists view the buyer’s willingness to pay as the ultimate discriminatory variable because this approach maximises firms profit in economic terms.

70The downside of customised pricing based on customers’ willingness-to-pay is its implementation difficulty. Based on customer data generated by CRM software, we have seen that the Internet technology through data mining facilitates breaking down the traditional barriers towards price customisation.

  • 36 Reinartz W. (2001), Customising Prices Online, European Business Forum, 6, Summer, 35-41.

71In the real world, implementation is difficult and Reinartz (2001)36 has identified five conditions to be held, regardless of whether the context is online or offline.

  1. Customers must be heterogeneous in their willingness to pay. Some are prepared to pay a high price, others will only be willing to buy at the lower price available.

  2. The market must be segmentable. The Web has significantly improved a firm’s ability to segment a market in terms of willingness to pay by tracking individual purchase through the Internet.

  3. Limited arbitrage. A person having purchased a product at lower price should not be able to resell it for a profit to customers having a higher willingness to pay.

  4. The costs of segmenting must not exceed the revenue due to customisation. The Internet technology has contributed to substantially reduce these costs.

  5. Notions of perceived fairness must not be violated. Perceived fairness is when the buyer feels that both parties in a transaction have gained.

72This last condition is crucial. Nobody likes to learn that the very same product has been sold under the same trade terms but at a lower price. In September 2000, Amazon charged different prices to consumers for exactly the same DVD with price differentials as high as €15. The knowledge that

  • 37 Krugman P. (2000), What Price Fairness ? New York Times, October 4.

73Amazon sells at different prices has provoked resentment and a feeling that the company is profiteering at the consumer’s expenses (Krugman, 2000)37.

74Price customisation is a very challenging strategy and should be adopted with care even if, from a technological point of view, such an implementation is indeed possible.

4.4. INTERNET ADVERTISING : A CONSUMER DOMINATED MEDIUM

75Internet advertising first appeared in 1964, 12 years later, online advertising share represents in the UK 11 per cent of the total media budget and 10 percent in the US. No longer is that the irrational money of venture-backed start-ups with dubious models. According to Nielsen/NetRatings, (www.nielsen-netratings.com) 25 per cent of all display ads in 2005 promoted Fortune 500 companies. After a brief market contraction in 2001 and 2002 in the US and in the UK, the online ad industry has been growing at 30 per cent for the past three years. Despite this rapid growth, online advertising remains new and fast evolving. During the early years, advertisers viewed the Internet as a source of cheap advertising and did not invest sufficiently in media research and in experimentation to identify the best tactics. After a decade it has been around enough for several best practices to emerge.

• Internet Advertising Growth

  • 38 IAB : Internet Advertising Bureau, Fact Sheet : Online adspend - 2006 (www.iabuk.net).

76The Internet advertising is gaining in popularity and more advertisers are continuing to realise the importance of online advertising in their marketing communication budget. In the UK, the IAB Online Adspent Study38 conducted in partnership with Price Waterhouse Coopers (www.iabuk.net) confirms the confidence that advertisers hold in Internet advertising as illustrated by the following facts.

  • Online spending in 2006 hit over £2 billion mark at £2, 015,8 billion.

  • Growth : Spending on Internet advertising grew by 41.6 per cent year-on-year on a like-for-like basis. This was at a time when the advertising industry as a whole managed growth of 1. 1 per cent.

  • Market share. Online’s share has grown to 11.4 per cent for the whole of 2006, up from 7.8 for 2005.

  • Online grew by $649.4m, meaning that the rest of the advertising market declined. Press, TV, Radio, Cinema, and Direct mail all experienced failing revenues.

77In the US, according to eMarketer (2007), online Ad spending will total to $19, 5 billion in 2007 and is expected to reach $36.5 billion in 2011, about 10 per cent of the total media budget. Despite this, growth in US online ad spending will be lower than it has been for the past three years, dropping from annual rates of over 30 per cent to just under 19 per cent in 2007 (www.emarketer.com, February 28, 2007).

• Benefits of Internet advertising

78The most important benefit of Internet advertising is the availability of information. Consumers can learn about products as well as purchase them, at any hour. Companies that use Internet can also save money because of reduced need for a sale force. Overall, Internet can help expand from a local market to both national and international marketplaces. And, in a way, it levels the playing field for big and small market players since, unlike traditional advertising media (press, radio and TV), entry into Internet can be a lot less expensive. Other benefits of Internet advertising are :

  • Advertising on the Internet is measurable. It is easy to monitor the number of hits and click-through advertising receives.

  • On-line advertising creates the opportunity for immediate interaction with and feedback from consumers, while traditional media do not.

  • The Web forte lies in its ability to provide extensive product information unlike traditional advertising media.

  • It is possible to deliver messages over the Web to a very narrowly defined target group.

  • Internet advertisements are not necessarily time-based. In the case of a Web site, it can be accessed 24 hours a day.

79More important are corporate Web sites where an entire site can be devoted to promote a company’s products. Such sites should not be necessarily sales-driven, but should focus on customer support and service, including product and supporting information to facilitate the buying process.

• Internet a customer-dominated medium

  • 39 Jakob Nielsen (1997), Why Advertising doesn’t Work on the Web, Alertbox for September 1. (www.useit (...)

80As observed by Jakob Nielsen’s Alertbox39, Internet advertising is very different from television. It is mainly a cognitive medium, whereas TV is mainly an emotional medium. This makes TV more suited for the traditional type of advertising. Where TV is warm, the Web is cold. It is a user-driven experience, where the user is actively engaged in determining where to go next. The user is usually on the Web for a purpose and is not likely to be distracted from the goal by an advertisement ; one of the main reasons click-through rate is so low. The active user engagement makes the Web more cognitive, since the user has to think about what hypertext links to click and how to navigate. The user is not on the Web to get an experience but to get something done. The Web is not simply a customer-oriented medium ; it is a customer-dominated medium. The user owns the back button. There is no way of trapping users in an ad if they don’t want it.

• How Internet advertising works ?

81In the beginning around 1997, advertising on the Internet meant banner ads, i.e. small rectangular boxes containing text and perhaps a picture and placed on relevant Web sites. A banner ad can have two different objectives, (a) branding effect to impress a company or a brand name in the consumers’ mind or (b) an interaction effect that is trying to get the e-visitor to do something right now as she/he looks at the ad. The response expected is to click on the ad, or to call a free telephone number, or to go to the store, or to do some other active thing such as buying now, downloading something or sign up for something today. Popular sites like Yahoo could charge $30, $50 even $100 per thousand impressions to run banner ads on their pages (www.doubleclick.com).

82At some point advertisers came to the conclusion that banner ads are not the most effective vehicle because banner ads are small and easily ignored and because the response rate to interactive ads is low. For most banner ads, the industry average seems to be between two to five clicks per 1 000 impressions of the ad. That is, if a banner ad appears on 1 000 Web pages, between two and five people will click on the ad to learn more. Those five clicks per thousand impressions don’t have much value to most advertisers. The reason is because those five clicks will not all generate sales. Out of 100 clicks, perhaps one person will actually do the desired response. So banner ads rates began to decline and today the typical rate is 50 cents per 1 000 impressions.

  • 40 Brain M. (2007), How Web Advertising Works ?, in (howstuffworks.com/web-advertising.htm), 24/05/200 (...)

83Web sites can charge a higher rate to get a targeted audience for the banner ad. For example, if you want to sell GPS, you can advertise on howstuffworks’ article about GPS (www.howstuffworks.com), thereby obtaining a significant increase of “click-through” and response rate for the banner ad40. Many other different advertising formats are on the Web today.

84A sidebar ad is similar to a banner, but it is vertically oriented rather horizontally. A side bar has more impact than a banner because it is two or three times larger than a banner and because the ad is with the viewer much longer. A typical sidebar ad has a click trough rate of 1 per cent (10 clicks per 1 000 impressions), or thee times that of a banner ad.

Table 5. European Online Ad Spending

Table 5. European Online Ad Spending

Source : www.emarketer, June 13, 2007

85A Pop-Up ad is an ad that pops-up in its own window when the e-visitor goes to a page. It obscures the Web page and it has to be moved out of the way. Pop-Under ads are similar but place themselves under the content read and are less intrusive. These ads annoy many users because it takes time to eliminate them but they are much more effective than banner ads, with on average 30 clicks per 1 000 impressions.

  • 41 Bruner R. E. (2005), The Decade in Online Advertising, 1994-2004, White Paper (www.doubleclick.com) (...)
  • 42 Row H. (2006), Double Click Touchpoints IV : How Digital Media Fit into Consumer Purchase Decisions (...)

86Rich media is gaining in popularity with advertisers over the past five years, reaching a 35 per cent share of all ad impressions by the end of 2004 (Bruner, 2005)41. Rich media is a term used to describe a variety of online advertising media experiences, including high quality animation, streaming audio and video, and software-like features that can be embedded in relatively small ad files, such as games, registration forms, and detailed marketing information. Increasingly, advertisers recognise that a significant amount of the effectiveness of online ads comes in the form of a “view through” that is when people visit an advertised Web site after seeing an online ad but without having clicked on the ad, navigating directly to the site on their own (Row, 2006)42.

• The challenge : personalised communication

  • 43 Interview of Eric Schmidt by Daniel C. and Palmer M., Google’s goal to organise your daily life, Th (...)

87The race to accumulate the most comprehensive database of individual information has become the new battleground for search engines as it will allow the industry to offer more personalised advertisements. These are the Holy Grail or the search industry, as such advertising would command high rates. Eric Schmidt, Google’s chief executive, said gathering more personal data was a key way for Google to expand. “The goal is to enable Google users to be able to ask the question such as, ‘What shall I do tomorrow and what job shall I take”’. (Daniel and Palmer, 2007)43. Yahoo unveiled a new search technology this year dubbed Project Panama, which monitors what Internet users do on its portal and uses the information to build a profile of their interests. The profiles are then used to display ads to the people most likely to be interested by them.

• How to differentiate a Web business site ?

  • 44 Strauss J., El-Ansary A. and Frost R. (2006), E-Marketing, New Jersey, Pearson Prentice-Hall, 4th E (...)

88A key role of strategic marketing is to differentiate the firm’s offerings from competition offerings. This objective of differentiation is more difficult online but also more important because of the lack of barriers of entry and the absence of protection of innovations. Strauss, El-Ansary, and Frost (2006, p. 221)44 propose six differentiations strategies unique to online businesses.

  • Site Environment/Atmospherics. To create a user friendly Web site that easily downloads, portrays accurate information, clearly shows the products and services offered, and is easily navigated.

  • Making the intangibles, tangible. To make offerings more tangible by using 3-D images, product image enlargements, trial downloads or customer reviews.

  • Building trust. To clearly define the company’s private policy and make sure it is strictly enforced by using encrypted payment process for transaction.

  • Efficient and timely order processing. To deliver what is promised to customers in a timely order, to meet the ease of ordering’s motivation.

  • Pricing. To offer price discounts as main incentive, a strategy difficult to sustain, because pricing is easy to imitate.

  • Customer relationship management. To forge long-term relationships with customers, customer tracking and personalisation.

  • Web sites having a well-known and strong brand image have a competitive advantage and the “brand” can become synonymous with the product as the best online provider. For example, Amazon.com is recognised today around the world as a leader on the Web in online book sales.

• Web 2.0 and Avatar-based Marketing

89Web2.0 is a second generation of Web-based communities which aim to facilitate creativity, collaboration, and knowledge sharing among users. Although the term suggests a new version of WWW, it does not refer to an update of technical specifications, but to changes in the way software developers and end-users use Webs. Web2.0 includes a social element where users generate and distribute content, often with freedom to share and re-use, thereby reinforcing the users control on this communication medium. Podcasts, Blogs, Wikipedia, YouTube, and social networks are examples of media offering user-generated contents45.

  • 46 Hemp P. (2006), Avatar-based Marketing, Harvard Business Review, June, 48-57. The word avatar is of (...)

90A particularly interesting case is Second Life, a three-dimensional virtual world (among others) accessible via the Internet in which users, through an avatar, are able to interact socially with thousands of people simultaneously. In this virtual world, the user - called the resident - can live a kind of second life through a projection of her/him self, called an avatar (Hemp, 2006)46. The basic avatars are human in appearance but avatars may be of either sex, have a wide range of physical attributes or be any virtual representation of a user in an online community. Through their avatars, residents can explore and meet other residents, socialise, participate in individual and group activities, create and trade items and services from one another. Second Life has its own economy and a currency referred as Linden dollars.

  • 47 Hemp P. (2006), op.cit., p. 50.
  • 48 Pellemans P., (1998), op.cit.

91The avatar is the most conspicuous online manifestation of people’s desire to try out alternative identities or project some private aspect of their self ego. Like the ancient rite of the bal masqué, modern technology helps people realise a deep-seated desire to experience what it would feel like to be someone else (Hemp, 2006)47. Through their avatars, people express more easily hidden aspects of their personalities, a long-known phenomenon in market research with the use of projective techniques in market surveys (Pellemans, 1998)48.

92Avatars are useful subjects for market research because consumers through their avatars overtly display their dreams. Thus, virtual worlds like Second Life become a kind of a laboratory test where firms can track how consumers interact with a product or a brand. Avatar can also be enlisted to play a marketing role, for example to design new products with a real world potential.

93In a recent McKinsey survey (2008)49 on how businesses are using Web 2.0, more than half of the executives surveyed said that they are pleased with the results of their investments in Internet technologies over the past five years, and nearly three-quarter say that their companies plan to maintain or increase investments in Web 2.0 technologies in coming years.

Notes

1 Lambin J.J. et al. (2007), op.cit., p. 129, see Exhibit 6.1.

2 For a similar approach, see, Chekitan S. Dev and Don E. Schultz (2005), A Customer-focused Approach can Bring the Current Marketing Mix into the 21st Century, Marketing Management, 14, 2, 18-24

3 Sawhney M. (1999), Making New Markets, Business 2.0., May, 116-121. See also : Sawhney M., Balasubramian S. and Krishnan, V.V. (2004), Creating Growth with Services, MIT Sloan Management Review, 45, 2, 34-43.

4 Vandermerwee S. (1993), Jumping into the Customer Activity Cycle, Columbia Journal of World Business, 28, 2, 46-64. See also. Vandermerwee S. (2000), How Increasing Value to Customers Improve Business Results, MIT Sloan Management Review, 42, 1, 27-37.

5 Vandermerwee S. (2000), op.cit.

6 Roegner E.V., Seifert T., and Swinford D.D. (2001), Putting a Price on Solutions, The McKinsey Quarterly, 3, 94-97.

7 Foote N.W. Galbraith J., Hope Q. and Miller D., (2001), Making solutions the answer, The McKinsey Quarterly, 3, 84-93.

8 Sheridan S. and Bullinger N. (2001), Building A solution-based Organisation, Journal of Business Strategy, January-February, 36-40.

9 Foote N.W., Galbraith J., Hope Q. and Miller D. (2001), op.cit.

10 Sheridan S. and Bullinger N. (2001), op.cit.

11 Von Hippel E., (1978), Successful Industrial Products from Customer Ideas, Journal of Marketing, 41, 1, pp. 39-49.

12 Fuller J. and Hienerth C., (2004), Engaging the creative consumer, European Business Forum, Issue 19, autumn, 54-57.

13 McKinsey Global Survey (2007), How companies are marketing online, (www.mckinseyquarterly.com/article).

14 Tapscott D. and Williams D.W., (2006), Wikinomics, How Mass Collaboration Changes Everything New York, Penguin Books.

15 As frequently observed in so-called “new” management theory, many old ideas are hidden behind new words. Co-opetition, partnerships, joint ventures, co-branding, co-creation, etc., are concepts and strategies in the management vocabulary and practice since many years and very close to the concepts of “sharing” and “peering”.

16 Toffler A., (1980), The Third Wave, New York : Bantam Books.

17 Prahalad C.K. and Venkat Ramaswamy, (2004), Co-Creation Experiences : The next Practice in Value Creation, Journal of Interactive Marketing, 18, 3, Summer, pp. 5-14

18 Tapscott D. and Williams D.W., (2006), op.cit.

19 Drucker P. (2000), Can e-Commerce Deliver ? The World in 2000, The Economist, Special Issue, 122.

20 Van Camp F. (2001), Online and Onland ? Channels Conflicts and How to Avoid them, Rotterdam Arthur D. Little, E-Business Center.

21 Birchall J. (2008), How to Cut in the Middleman ?, Financial Times, March 12.

22 To know more about transaction security, read : Strauss J., El-Ansary A., and Frost R. (2006), E-Marketing, New-Jersey, Pearson Prentice Hall, 4th edition, pp. 78-81.

23 Story L. (2008), Internet Firms Keeping ever-closer Tabs on You, International Herald Tribune, March 11.

24 Curtis T (2007), Keeping Your Private Life off the Internet - Top 10 Privacy Protection Tips, Ezine Articles, October (www.ezinearticles.com).

25 Jupiter Research (2005), European Online Retail Forecast 2005 to 2010 (www.jupiterresearch.com).

26 Ghemawat P. (2001), Distance Still Matters : The Hard Reality of Global Expansion, Harvard Business Review, 79, 8, 137-147.

27 Morrison A, Bouquet C. and Beck J. (2004), Netchising : The Next Global Wave ?, Long Range Planning, 37, 11-27.

28 Koch J.V. (2003), Are prices lower on the Internet ? Not always, Business horizons, January-February, 47-52.

29 Harris E.S. and Abate J.T. (2000), United States : The Internet price index, Global Economic Monitor, New York, Lehman Brothers.

30 Ozer M. (2002), The Role of Flexibility in Online Business, Business Horizons, January-February, 61-68.

31 Baker W.L., Lin E., Marn M.V., and Zawada C.C. (2001), Getting Prices Right on the Web, McKinsey Quarterly, 2, 55-63.

32 Baye M.R., Gatti J.R.J., Kattuman P. and Morgan J. (2007), A Dashboard for Online Pricing, California Management Review, 50, 1, Fall, 202-216.

33 Koch J.V. (2003), op.cit.

34 Van Heck. (2002), How to Seize the Value of Online Auctions, European Business Forum, Issue 10, Summer, 63-65.

35 Xia L. and Monroe K.B. (2004), Price Partitioning on the Internet, Journal of Interactive Marketing, 18, 4, 63-73.

36 Reinartz W. (2001), Customising Prices Online, European Business Forum, 6, Summer, 35-41.

37 Krugman P. (2000), What Price Fairness ? New York Times, October 4.

38 IAB : Internet Advertising Bureau, Fact Sheet : Online adspend - 2006 (www.iabuk.net).

39 Jakob Nielsen (1997), Why Advertising doesn’t Work on the Web, Alertbox for September 1. (www.useit.com/alertbox/9709ahtml).

40 Brain M. (2007), How Web Advertising Works ?, in (howstuffworks.com/web-advertising.htm), 24/05/2007.

41 Bruner R. E. (2005), The Decade in Online Advertising, 1994-2004, White Paper (www.doubleclick.com), April.

42 Row H. (2006), Double Click Touchpoints IV : How Digital Media Fit into Consumer Purchase Decisions (www.doubleclick.com), November.

43 Interview of Eric Schmidt by Daniel C. and Palmer M., Google’s goal to organise your daily life, The Financial Times, May 23. 2007.

44 Strauss J., El-Ansary A. and Frost R. (2006), E-Marketing, New Jersey, Pearson Prentice-Hall, 4th Edition.

45 For definition of these terms, go to (www.wikipedia.org).

46 Hemp P. (2006), Avatar-based Marketing, Harvard Business Review, June, 48-57. The word avatar is of Indian origin and describes the different incarnations of the Hindu God Vishnu.

47 Hemp P. (2006), op.cit., p. 50.

48 Pellemans P., (1998), op.cit.

49 McKinsey (2008), How Businesses are Using Web 2.0 : A McKinsey Global Survey (www.mckinseyquarterly.com/article).

Table des illustrations

Titre Figure 10. The Home Ownership Virtual and Meta Markets
Légende Source : Lambin et al. (2007)
URL http://books.openedition.org/pucl/docannexe/image/1650/img-1.jpg
Fichier image/jpeg, 400k
Titre Table 5. European Online Ad Spending
Légende Source : www.emarketer, June 13, 2007
URL http://books.openedition.org/pucl/docannexe/image/1650/img-2.jpg
Fichier image/jpeg, 338k

© Presses universitaires de Louvain, 2008

Conditions d’utilisation : http://www.openedition.org/6540