Chapter 3: The E-Marketing Plan

Learning Objectives
Overvie w of the E-Marketing Planning Process
The e-marketing planning process entails three steps: marketing plan creation, plan implementation, and plan evaluation/corrective action.

(PPT 3-2)

Creating an E-Marketing Plan

The e-marketing plan is a blueprint for e-marketing strategy formulation and implementation. It serves as a road map to guide the direction of the firm, allocate resources, and make tough decisions at critical junctures. The Napkin Plan The idea that many dot.com entrepreneurs were known to simply jot their ideas on a napkin over lunch or cocktails and then run off to find financing. This is also known as the just-do-it, activity-based, bottom-up plan. The Venture Capital E-Marketing Plan Dot.coms can be financed privately through angel investors or family/friends, or through venture capitalists. Venture capitalists invest in good ideas with competent people running the business and generally look for an exit plan to get their money and profits out of the venture within a few years.

A Seven-Step E-Marketing Plan

Seven key planning elements include a situation analysis, e-marketing strategic planning, the plan objectives, e-marketing strategy, an implementation plan, the budget, and a plan for evaluating success.

Step 1 Situation Analysis

The situation analysis is also known as the SWOT (strengths, weaknesses, opportunities, and threats) analysis which examines the internal strengths and weaknesses and the external opportunities and threats. Three key environmental factors that affect emarketing include legal, technological, and market-related factors.

Step 2 E-Marketing Strategic Planning

Strategic planning involves determining the fit between the organizations objectives, skills, and resources and its changing market opportunities, also known as tier 1 strategies. This includes segmentation, targeting, differentiation, and positioning.

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Step 3 Objectives
Objectives are to be task specific (what is to be accomplished), measurable (how much), time specific (by when) and realistically attainable.

Step 4 E-Marketing Strategies

E-marketing strategies involve the 4 Ps and relationship management to achieve plan objectives regarding the offer (product), value (pricing), distribution (place), and communication (promotion). These are called tier 2 strategies. The Offer: Product Strategies A firm can sell merchandise, services, or advertising on its Web site. They can create new brands for the online market or sell selected current or enhanced products in that channel. The Value: Pricing Strategies A firm must decide on how online product prices will compare with offline equivalents and usually use either dynamic pricing r online bidding. Distribution Strategies Many firms use the Internet to create efficiencies among supply chain members through direct marketing or agent e-business models. Marketing Communication Strategies Firms use Web pages and e-mail to communicate with their target markets and business partners. Firms build brand images, create awareness of new products, and position products using the Web and e-mail Relationship Management Strategies E-marketing communication strategies also help build relationships with a firms partners, supply chain members, or customers.

Step 5 Imple mentation Plan

This is the step in which the marketer selects the marketing mix the 4 Ps, relationship management tactics, and other tactics to achieve the plan objectives and then devises detailed plans for implementation. Importance is placed on information gathering tactics, web site log analysis, and business intelligence.

Step 6 Budget
Marketers need to determine the returns from an investment: cost/benefit analysis, return on investment (ROI), internal rate of return (IRR), and return on marketing investment (ROMI). Revenue Forecast The firm uses an established sales forecasting method for estimating the site revenues in the short, intermediate, and long term.

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Intangible Benefits intangible benefits include brand equity, brand awareness and similar objectives that may be difficult to measure. Cost Savings using the Internet creates efficiencies in the supply chain which typically increases profits by eliminating intermediaries. E-Marketing Costs Costs for e-marketing are wide reaching and may include costs for: employees, hardware, software, programming, and more. Costs for the Web site may include: technology costs, site design, salaries, marketing communications, and others.

Step 7 Evaluation Plan

Once the e-marketing plan is implemented, its success depends on continuous evaluation which means marketers must have a tracking system in place before the electronic doors open.

Chapter Summary
The e-marketing plan is a guiding, dynamic document for e-marketing strategy formulation and implementation. The purpose is to help the firm achieve its desired results as measured by performance metrics according to the specifications of the ebusiness model and e-business strategy. Although some entrepreneurs use a napkin plan to informally sketch out their ideas, a venture capital e-marketing plan will help show that the e-business idea is solid and the entrepreneur has an idea of how to run it. Creating an e-marketing plan requires seven steps. The first is to conduct a situation analysis by reviewing environmental and SWOT analyses, existing marketing plans and company/brand information, and e-business objectives, strategies, and performance metrics. In the second step, e-marketers perform strategic planning, which includes a marketing opportunity analysis to develop segmentation, targeting, differentiation, and positioning strategies (tier 1 strategies). Next, e-marketers formulate objectives, usually setting multiple objectives; they may use an objective-strategy matrix to guide implementation. In the fourth step, e-marketers design e-marketing strategies for the 4 Ps and relationship management (tier 2 strategies). In the fifth step, e-marketers develop an implementation plan with a suitable 4 Ps marketing mix, select appropriate relationship management tactics, design information-gathering tactics, and select other tactics to achieve their objectives. They must also devise detailed implementation plans during this step in the process. In the next step, e-marketers prepare a revenue forecast to estimate the expected returns from the plans investment and detail the e-marketing costs to come up with a calculation that management can use to determine whether the effort is worthwhile. In the final step of the plan, e-marketers use tracking systems to measure results and evaluate the plans success on a continuous basis.

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Chapter Outline
Opening Vignette: The Playboy Story (PPT 3-3)
Have the class read the opening vignette on the Playboy story. Discuss how CEO Christie Hefner not only used a strategic e-marketing plan to revitalize Playboy, but did so by converging several mediums into the complete Playboy experience. She did so by devising an e-marketing plan that would leverage their current brand and the 4.5 million readers. Playboy.com was the first U.S. Website for a nationally circulated magazine. Discuss how the revenue sources selected from their e-marketing plan were critical to their success and continued growth.

I. Overvie w of the E-Marketing Planning Process

(PPT 3-4)

A. Questions to be asked 1. How can information technologies assist marketers in building revenues and market share? 2. How can information technologies assist in lowering costs? 3. How can firms identify a sustainable competitive advantage with the Internet during constant change? B. This marketing process entails three steps: 1. Marketing plan creation 2. Plan implementation 3. Plan evaluation and corrective action Chapter 3 will examine the first of these steps: the e-marketing plan

II. Creating an E-Marketing plan

The e-marketing plan is a blueprint for e-marketing strategy formulation and implementation. The Gartner Group correctly predicted that up to 75% of all e-business projects prior to 2002 would fail due to fundamental flaws in planning. If brick-andmortar companies realize the importance that planning play in the success of their business, why would so many dot.com companies overlook this? A. The Napkin Plan (PPT 3-5) 1. Dot.com entrepreneurs wrote down ideas on napkins over lunch or cocktails. 2. Larger corporations have versions of this called just-do-it, activitybased, bottom-up plans. 3. This is considered a starting point, but not sufficient for long-term success.

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B. The Venture Capital E-Marketing Plan smaller firms may be able to start with the Napkin plan, but as a firm grows it will require capital, and financiers or investors will require a comprehensive e-marketing plan. 1. Types of investors (PPT 3-5) a. Private funds (usually the smallest amount of investment) b. Angel investors (contribute up to hundreds of thousands of dollars) c. Venture capitalists (may contribute up to millions of dollars) 2. Questions that business plans should over a. Who is the new ventures customers? b. How does the customer make decisions about buying this product or service? c. To what degree is the product or service a compelling purchase for the customer? d. How will the product or service be priced? e. How will the venture reach all the identified customer segments? f. How much does it cost (in time and resources) to acquire a customer? g. How much does it cost to produce and deliver the product or service? h. How much does it cost to support a customer? i. How easy is it to retain a customer? 3. Exit plan a. Investors look for a way to get their money and profits out of the venture b. Ideally, investors hope to go public and issue stock. The google.com IPO is an example of Venture Capitalists reaping the rewards from an investment. Google.com went public in August of 2004 at $85 per share under the ticker symbol GOOG. As of December of 2004, Google.com shares are trading for $171 per share after a high of $201 per share.

III. A Seven-Step E-Marketing Plan

(PPT 3-6)

Seven Key planning elements are included in the seven-step e-marketing plan. One commonly overlooked element that is crucial to the success of an e-business is feedback. Many experts recommend a contingency plan and trigger points that if reached will invoke strategy refinement. The steps of the e-marketing plans are detailed below. A. Step 1 Situational Analysis 1. Also known as a SWOT analysis which measures: a. Strengths (internal) b. Weaknesses (internal c. Opportunities (external) d. Threats (external

(PPT 3-7, 3-8)

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2. Environmental factors (PPT 3-7) a. Legal b. Technological c. Market-related factors 3. A firms strengths and weaknesses for the online world may be different than for its brick-and-mortar business. B. Step 2 E-Marketing Strategic Planning determining a fit between the organizations objectives, skills, and resources and its changing market opportunities. These tier 1 strategies may include: 1. Market opportunity analysis (PPT 3-9) a. Demand analysis b. Segment analysis 2. Supply analysis 3. Identifying brand differentiation variables 4. Positioning strategies C. Step 3 Objectives in general, an objective in an e-marketing plan takes the form: (PPT 3-10) 1. Task (what is to be accomplished) 2. Measurable quantity (how much) 3. Time frame (by when) 4. Sample objectives may be: a. Increase market share b. Increase sales revenue c. Reduce costs d. Achieve branding goals e. Improve databases f. Achieve customer relationship management goals g. Improve supply chain management D. Step 4 E-Marketing Strategies Marketers craft strategies regarding the 4 Ps and for customer and relationship strategies, called Tier 2 strategies. Tier 1 and Tier 2 strategies are interrelated. Tier 2 strategies may include: 1. The Offer: Product Strategies (PPT 3-11) a. Sell merchandise, services or advertising on the Website b. Online auctions c. Create new brands for the online market d. Sell selected current or enhanced products 2. The Value: Pricing Strategies how online product prices will compare with offline equivalents. Two pricing trends are: a. Dynamic pricing different price levels for different customers or situations b. Online bidding allowing customers to bid for products or services to alleviate for slow business periods. 3. Distribution Strategies firms use the Internet to distribute products or create efficiencies among supply chain members a. Direct marketing b. Agent e-business models

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4. Marketing Communication Strategies used to draw customers to a Web site and to interact with brick-and-mortar customers. 5. Relationship Management Strategies (PPT 3-11) a. Customer Relationship Management (CRM) b. Partner Relationship Management (PRM) E. Step 5 Implementation Plan marketers decide on the marketing mix, relationship management tactics, and other tactics to achieve the plan objectives. Tactics included: (PPT 3-13) 1. Information-gathering tactics 2. Web site log analysis 3. Business intelligence F. Step 6 Budget identifying the expected returns from the investment 1. Revenue Forecast (short term, intermediate, and long term) a. Intangible benefits (PPT 3-14) b. Cost savings 2. E-Marketing costs a. Technology costs b. Site design c. Salaries d. Development expenses e. Marketing Communication G. Step 7 Evaluation Plan the success of the e-marketing plan relies on continuous evaluation. (PPT 3-15) 1. Objectives 2. Balanced Scorecard 3. Return on Investment 4. CRM 5. PRM

Exercise Answers
(Exercise answers prepared by David Lan, University of Nevada, Reno, with assistance from the authors)

Note Discussion questions may require outside research whereas review questions do not require research beyond the text.
Review Questions 1. What are the seven steps in an e -marketing plan? The six steps are Situation analysis, e-marketing strategic planning, setting objectives, e-marketing strategy to meet plan objectives, implementation plan (marketing mix), budget, and evaluation of plan.

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2. Why do entrepreneurs seeking funding need a venture capital e -marketing plan rather than a napkin plan? Investors are looking for a well-composed business plan, and more importantly, a good team to implement it. The plan prepared by entrepreneurs for VCs should be about eight to ten pages long and contain enough data and logic to prove that (1) the e-business idea is solid and (2) the entrepreneur has some idea of how to run the business. Napkin plans on the other hand are not recommended when substantial resources are involved. This is because sound planning and thoughtful implementation are needed for long-term success in business and e-business. This principle became increasingly evident during the dot-com shakeout. 3. What is the purpose of the marketing opportunity analysis and the segment analysis? Marketers conduct a market opportunity analysis (MOA), including both demand and supply analyses, for segmenting and targeting. The demand analysis portion includes market segmentation analyses to describe and evaluate the potential profitability, sustainability, accessibility, and size of various potential segments. Segment analysis in the B2C market uses descriptors such as demographic characteristics, geographic location, selected psychographic characteristics (such as attitude toward technology and wireless communication device ownership), and past behavior toward the product (such as purchasing patterns online and offline). B2B descriptors include firm location, size, industry, type of need, and more. These descriptors help firms identify potentially attractive markets. Firms must also understand segment trendsare they growing or declining in absolute size and product use? 4. What four elements in tier one and five elements in tier two are devised for e marketing strategy? From Exhibit 3.5. Tier one Positioning, Differentiation, Segmentation, and Targeting. Tier two Offer, Value, Distribution, Communication, and CRM/PRM. 5. What is the purpose of an e -marketing objective-strategy matrix? One simple way to present the firms e-marketing strategies and accompanying goals is through an objective-strategy matrix. This is a graphical device that helps marketers better understand their implementation requirements (Exhibit 3.6). Each cell contains a yes or no, depending on how the marketer will link particular goals and strategies. 6. How do managers use budgeting within the e -marketing planning process? A key part of any strategic plan is to identify the expected returns from an investment. These can then be matched against costs to develop a cost/benefit analysis, ROI calculation, or internal rate of return (IRR), which management uses to determine whether the effort is worthwhile. This would include forecasting of revenue, intangible benefits, and cost savings. Revenue forecasting would estimate the level of Web site traffic over time, because this number affects the amount of revenue a firm can expect to generate from its site. Revenue streams that produce Internet profits come mainly from Web site direct 36

sales, advertising sales, subscription fees, affiliate referrals, sales at partner sites, commissions, and other fees. Intangible benefits are much harder to budget for, how does a manager account for brand equity or increased brand awareness? Putting a financial figure on such benefits is challenging but essential for e-marketers. Finally, money saved through Internet efficiencies is considered soft revenue for a firm. Examples of savings could include those from channel markups, not having to printing direct mail advertisements, postage, etc. 7. Why do e-marketing plans need an evaluation component? Once the e-marketing plan is implemented, its success depends on continuous evaluation. In general, todays firms are quite ROI driven. As a result, e-marketers must show how their intangible goals, such as brand building or CRM, will lead to higher revenue down the road. Also, they must present accurate and timely metrics to justify their initial and ongoing e-marketing expenditures throughout the period covered by the plan. Discussion Questions 8. If you had money to invest, what would you look for in a venture capital emarketing plan? Given the dot com shakeout, companies must have a comprehensive e-marketing plan to survive. The plan prepared by entrepreneurs for VCs should be about eight to ten pages long and contain enough data and logic to prove that (1) the e-business idea is solid and (2) the entrepreneur has some idea of how to run the business. William Sahlman (1997) of Harvard University identifies nine questions that every business plan should answer: Who is the new ventures customer? How does the customer make decisions about buying this product or service? To what degree is the product or service a compelling purchase for the customer? How will the product or service be priced? How will the venture reach all the identified customer segments? How much does it cost (in time and resources) to acquire a customer? How much does it cost to produce and deliver the product or service? How much does it cost to support a customer? How easy is it to retain a customer?

9. What kinds of questions should a firm ask in developing an e-marketing plan to serve customers in current markets through an online channel? Venture capitalists typically look for an exit plana way to get their money and profits out of the venture within a few years. These days, the golden exit plan is to go public and issue stock in an initial public offering (IPO). As soon as the stock price rises sufficiently, the VC cashes out and moves on to another investment.

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10. Why is it important for e -marketers to specify not only the task but also the measurable quantity and time frame for accomplishing an objective? Without concrete metrics measuring how much and when a task is considered complete, e-marketers run the risk of delaying and putting off objectives in their marketing strategy. A time element and minimum guidelines must be set for accountability, otherwise objectives may be postponed indefinitely. 11. Why would the management of American Airlines expect its e-marketers to estimate the financial impact of intangible benefits such as building brand equity through e-mail messages to frequent flyers? Determining value for intangible benefits is absolutely necessary for e-marketers. Given the dot com shakeout, e-marketers are continuously asked for figures on ROI and justification for continued spending. This entails research and analysis on potential flights booked from online advertising campaigns, site usage, etc. Putting a financial figure on such benefits is challenging but essential for e-marketers. The days of wanton technology spending are over, management is asking for proof of ROI.

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