Chapter 8

The new product development process

Product development The development of original products, product improvements, product modification, and new brands through the firms own product development efforts. New product innovation is very expensive and very risky.

70% to 90% of new consumer products fail within 12 months.

Why do new products fail?
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Overestimation of market size Design problems Incorrectly positioned, priced, or advertised Pushed despite poor marketing research findings Excessive development costs Competitive reaction

Idea generation: The systematic search for new-product ideas. Using internal sources (research and development) and external sources (distributors and suppliers).

Idea screening:
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Screening new products ideas in order to spot good ideas and drop poor ones as soon as possible. Executives provide a description of the product along with estimates of market size, product price, development time and costs, manufacturing costs, and rate of return. Evaluated against a set of company criteria for new products.
Concept development and testing: The product concept is a detailed version of the new product idea stated in meaningful consumer terms. A product idea is an idea for a product that the company can see itself offering to the marketplace A product concept is a detailed version of the idea stated in meaningful consumer terms A product image is the way consumers perceive an actual or potential product The testing concept is testing new products concepts with a group of target consumers to find out if the concepts have strong consumer appeal. - Testing new product concepts with customers, either symbolically or physically - Virtual reality, mock-ups Marketing strategy Designing an initial marketing strategy for a new product based on the product concept. The marketing strategy statement consists of three parts: 1. describes the target market, the planned value proposition and the sales / market share and profit goals for the first few years. 2. outlines the products planned price, distribution, and marketing budget for the first year. 3. describes the planned long-run sales, profit goals and marketing mix strategy. Business Analysis A review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the companys objectives. It has been carried out by sales history of similar products and estimating costs of marketing, production and R&D. Product development Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable marketing offering. Designing for (Mass) Manufacturing - Must be suitable for production in large numbers at reasonable cost - Rigorous testing car engines - What do customers think a well designed product will look/behave like?

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Test marketing The stage of new product development in which the product and marketing program are tested in realistic market settings.

Why Test Market?

1. Gives the marketer experience of marketing this category of product 2. Provides data as to likely target market, success of promotional strategies 3. Testing reduces uncertainty of full product launch 3 types of test marketing: 1.Standard Market Tests Small number of representative test cities (Newcastle) Helps to forecast national sales Competitors can monitor these trials and sabotage them price cutting, focused promotion etc 2. Controlled Test Markets Panels of stores nationally Control of in store placement, below-the-line promotion ,staff training Records purchases by individual consumers Difficult to get a good match between your target market and one retailer 3. Simulated Test Markets Simulated shopping environments Products on shelf next to selected competitors Commercialization Introducing a new product into the market. When? When will the timing be right? Buying cycle ice cream Where? National or international films What are the most attractive markets? To Whom? Is the target market understood? How to reach and persuade this audience? Appropriate media? How? How will the marketing budget be divvied up?

Managing New product development

Customer centered new product development: New product development that focuses on finding new ways to solve customer problems and create more customer satisfying experiences. Team-based new product development: An approach to developing new products in which various company departments work closely together, overlapping the steps in the product development process to save time and increase effectiveness.

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A company can install an innovation management system to collect, review, evaluate, and manage new product ideas.

Product life-cycle strategies

The product life-cycle is the course of a products sales and profits over its lifetime.

Product Development: Begins when the company finds and develops a new product idea. During product development, sales are zero and the companys investment costs mount. Introduction: Is a period of slow sales growth (early adopters) as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of the product introduction. Marketing objective: Create product awareness and trial Product: Offer a basic product Price: Use cost-plus formula Distribution: Build selective distribution Promotion: Heavy to entice product trial Growth: Is a period of rapid market acceptance and increasing profits. At this stage competitors come with rival products. Marketing objective: Maximize market share Product: Offer extension, service, warranty Price: Penetration strategy Distribution: Build intensive distribution Promotion: Reduce to take advantage of demand

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Maturity: Is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increase marketing outlays to defend the product against competition. Marketing objective: Maximize profits while defending market share Product: Diversify brand and models Price :Match or best competitors Distribution: Build more intensive distribution Promotion: Increase to encourage brand switching Strategies used to manage the PLC during maturity include:

1 - Modifying the market

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Increase the consumption of the current product. Look for new users and market segments. - Reposition the brand to appeal to larger or faster-growing segment. - Look for ways to increase usage among present customers.

2 - Modifying the product

Changing characteristics such as quality, features, or style to attract new users and to inspire more usage. - Improve durability, reliability, speed, taste - Improve styling and attractiveness - Add new features - Expand usefulness, safety, convenience

3 - Modifying the marketing mix:

Improving sales by changing one or more marketing mix elements. Cut prices - Launch a better ad campaign - Move into larger market channels
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Decline: Is the period when sales fall off and profit drops. Marketing objective: Reduce expenditures and milk the brand Product: Phase out weak items. Price: Cut price Distribution: selectivephase out unprofitable outlets Promotion: Reduce to minimal level

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Types of PLC

Style: A basic and distinctive mode of expression. Fashion: A currently accepted or popular style in a given field. Fad: A temporary period of unusually high sales driven by consumers enthusiasm and immediate product or brand popularity. What does the PLC tell us: A predictive device; forecasting the future A comparative device; comparison with competitors and other products within the same range. A Formative device; Assisting the design of future products and supporting strategies. A manipulative device; guiding responses and management of the marketing mix. Practical Problems of PLC Most of the times it is too difficult to: Identify which stage of the PLC the product is in. Pinpoint when the product moves to the next stage. Identify factors that affect products movement through stages. Forecast sales level, length of each stage, and shape of PLC. Develop marketing strategy because strategy is both a cause and result of the PLC.

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Chapter 9
What is a price
Price: The amount of money charged for a product or service, or the sum of all the values that customers give up in order to gain he benefits of having or using a product or service.

Valued based pricing: Setting price based on buyers perceptions of value rather than on sellers cost. Good-valued pricing: Remco v/d Berg

Offering just the right combination of quality and good service at a fair price. Value added pricing: Attaching value added pricing features and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors. Costs based pricing: Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk. 3 types of costs: Fixed costs: Costs that do not vary with production or sales level. Variable costs: Costs that vary directly with the level of production. Total costs: The sum of the fixed costs for any given level of production. 3 types of costs based pricing: Cost-plus pricing: Adding a standard markup to the costs of the product. Break even pricing: Setting price to break even on the costs of making and marketing a product. Target profit pricing: Setting price to make a target profit.

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Other Considerations Affecting Price Decisions

Overall Marketing Strategy - Pricing decisions must be compatible with other elements of the marketing mix - Luxury or value brand? - Target costing : pricing that starts with an ideal selling price, then target costs that will ensure that the price is met
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Organizational Considerations Who sets prices inside the organization? - Management - Product line managers Competitors Strategies and Prices - Your prices in the context of theirs - Pricing affects the nature, type and intensity of competition External Factors - Economic conditions - Taxes and quotas The market on demand Costs set the lower limit of prices while the market and demand sets the upper limit. Pricing in different types of markets: - Pure competition (uniform commodity: the going price) - Monopolistic competition (differentiation: range of prices) - Oligopolistic competition (few sellers, highly sensitive to each others pricing, buyers switch easily) - Pure monopoly (one seller) Analyzing the pricedemand relationship: - Different prices result in different levels of demand, as illustrated by the demand curve. The price elasticity of demand refers to how responsive demand will be to a change in price. Demand may be characterized as: - Inelastic (demand changes hardly with small price changes) Elastic (demands changes greatly) The demand curve: A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.

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New product pricing strategy

Market skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price. Price skimming: The company makes fewer but more profitable sales. Marketing penetration pricing: Setting a low price for a new product in order to attract a large number of buyers and a large market share.

Product mix pricing strategy

Product line pricing: Setting the price steps between products in a product line based on cost differences and customer perceptions of the value. Optional product pricing: The pricing of optional or accessory products along with a main product. Captive product pricing: Setting a price for products that must be used along with a main product. By product pricing:

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Setting a price for by-products in order to make the main products price more competitive. Product bundle pricing: Combining several products and offering the bundle at a reduced price.

Price adjustment strategies

Discount and allowance pricing: Reducing prices to reward customer responses such as paying early or promoting the product. Discount: A straight reduction in price on purchases under stated conditions or during a stated period of time. - Cash - Functional - Quantity - Seasonal Allowance: Promotional money paid by manufactures to retailers in return for an agreement to feature the manufacturers products in some way. - Trade-in-allowance - Promotional allowance Segmented pricing: Adjusting prices to allow for differences in customers, products, time or location. Selling a product or service at two or more prices, where the difference in prices in not based on differences in costs. Types are: - Customer pricing (different customers, pay different prices) - Product-form pricing (different versions of the product are priced differently) - Location pricing (different price for different locations) - Time pricing (price by season, week or hour) Psychological pricing: Adjusting prices for psychological effect. A pricing approach that considers the psychology of prices and not simply the economics. The price is used to say something about the product. Consumers usually perceive higherpriced products as having higher quality. Consumers use price less when they can judge the quality of a product by examining it or recalling experiences. Reference prices Prices that buyers carry in their minds and refer to when they look at a given product. Remco v/d Berg

Promotional pricing Temporarily pricing products below the list price, and sometimes even below costs, to increase short-run sales. It takes place in several forms: - Loss leaders (supermarkets, customers come to buy the disposable products but also buy other products that are more expensive). - Special event pricing (Christmas articles in January) - Cash rebates (directly from manufacture to customer) - Low-interest financing - Longer warranties - Free maintenance - Discounts Geographical pricing Setting price based on the buyers Geographic location. There are five geographical pricing strategies: 1. FOB-pricing (free on board) 2. Uniform-delivered pricing (opposite of FOB pricing) 3. Zone pricing (falls between FOB and uniform-delivered) 4. basing-point pricing (sellers selects a city and charges freight costs from that city) 5. Freight-absorption pricing Dynamic pricing: Adjusting prices continually to meet the characteristics and needs of individual customers and situations. International pricing: Adjusting prices for international markets requires consideration of many factors.

Price changes
Initiating price cuts: Cutting prices are lowering the prices to give an extra boost to sales and share. (price war at supermarkets) Initiating price increase: A successful price increase can greatly improve profits. (oil and gas) Buyers reaction to price changes: Price cuts could mean that your business is not doing well and you need to sell more. Competitors reactions to price changes: Look out if the competitors is not trying to take a bigger market share or that the competitor has more products and more markets so they get their profit from another market and try to destroy you.

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Public policy and pricing

Pricing Within Channel Levels - Pricefixing (seller must set prices without talking to competitors) - Predatory pricing (selling below costs with the intention of punishing a competitor or gaining higher long run profits by putting competitors out of business) Pricing Across Channel Levels - Price discrimination (sellers must offer the products for the same price as competitors) - Retail price maintenance - Deceptive pricing (price that misleads customers) - Price confusion (make it difficult for customers what price they need to pay)

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Chapter 10
Supply chains and the value delivery network
Producing and making products available to buyers requires building relationships with upstream and downstream supply chain partners. Upstream: Firms that supply the raw materials, components, parts, and other elements necessary to create a good. Downstream: Marketing channel partners that link the firm to the customer. Value delivery network The network made up of the company, suppliers, distributers, and ultimately customers who partner with each other to improve the performance of the entire system in delivering customer value. Marketing or distribution channels represent the downstream side of the value delivery network. What is a marketing or distribution channel?

Channel level: A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. Direct marketing: A marketing channel that has no intermediary levels. Indirect marketing channel:

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A channel containing one or more intermediary levels.

Channel conflict: Disagreement among marketing channel members on goals and roles, who should do what and for what rewards. Horizontal Conflict: Occurs among firms at same level of the channel (retailer to retailer) Vertical Conflict: Conflict between different levels of the same channel

Vertical marketing systems

Conventional distribution channel A channel consisting of one or more independent producers, wholesalers and retailers, each a separate business seeking to maximize its own profits for the system as a whole.

vertical Vertical marketing system(VMS): A distribution channel structure in which producers, wholesalers and retailers act as a unified system. One channel members owns the others, has contracts with them, or has so much power that they all cooperate. Corporate VMS

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A vertical marketing systems that combines successive stages of production and distribution under single ownership, channel leadership. Is established through common ownerships. Contractual VMS A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone. Franchise organization A contractual vertical marketing system in which a channel member, called a franchiser, link several stages in the production-distribution process. Administered VMS A vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties.

Horizontal marketing systems

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.

Multichannel distribution system

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. (also called: Hybrid marketing channels)

Trends in marketing channels are: Shift from Push to Pull - Demand driven supply chain The Customer is Gaining More Power in the Marketing Channel - Retailer consolidation

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The Elimination of Unnecessary Inventory - JIT, smart supply chains Focus on Core Capabilities - Outsourcing noncore activities to specialists Ethical issues in distribution: The Dominance of the Retailer - Slotting fee for shelf space Grey Markets - Unauthorized channels Levis/Nike and Tesco Exclusive Dealing - Manufacturer bans intermediaries from working with competitors Restrictions in Supply - Artificially limiting supply to maintain prices FairTrading - Small commodity producers bullied/blackmailed by large firms Nestle and coffee producers Disintermediation: The cutting out of marketing channel intermediaries by product or service producers, or the displacement of traditional resellers by radical new types of intermediaries. Customers buying directly removal of - Wholesalers - Warehouses - Retailers! Caused by: Improved Quality of Information and Communication - Databases - Narrowcasting communications channels - Number of niches to target - One2one relationships possible?

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Channel design decisions

Marketing channel design: Design effective marketing channels by analyzing consumer needs, setting channel objectives, identifying major channel alternatives and evaluating them. Setting channel objectives:

Objectives are stated in terms of targeted levels of customer service.

Channel objectives are influenced by: Cost Nature of the company The firms products Marketing intermediaries Competitors Environment Types of intermediaries: Company sales force Manufacturers agents Industrial distributors Number of marketing intermediaries: Intensive distribution: Stocking he product in as many outlets as possible. Exclusive distribution: Giving a limited number of dealers the exclusive right to distribute the companys products in their territories. Selective distribution: The use of more than one, but fewer than all, of the intermediaries who are willing to carry the companys product. Responsibilities of channel members The producer and intermediaries need to agree on the terms and responsibilities of each channel member. Evaluating the major Alternatives: Economic criteria Control issues Adaptive criteria

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Channel management decisions

Marketing channel management: Selecting, managing and motivating individual channel members and evaluating their performance over time. Selecting channel members Managing and motivating channel members Evaluating channel members

Supply chain management

Marketing logistics: Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points to meet customer requirements at a profit. Nature and Importance of Marketing Logistics - The right product to the right customer in the right place at the right time Goals of the Logistics System Cost Vs customer service Major Logistics Functions Warehousing Inventory management Transportation Logistics information management Integrated Logistics Management (teamwork) Crossfunctional teamwork Logistics partnerships Thirdparty logistics

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Chapter 12
The promotion mix
Promotion mix (Marketing communication mix) The specific blend of advertising, public relations, personal selling, sales promotion and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships. Advertising: Any paid form of non personal presentation and promotion of ideas, good, services by any identified sponsor. Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. Personal selling: Personal presentation by the firms sales force for the purpose of making sales and building customers relationships. Public relations: Building good relations with the companys various public by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories and events. Direct marketing: Direct connections with carefully targeted individual to both obtain an immediate response and cultivate lasting customer relationships. Integrated marketing communications (IMC) Carefully integrating and coordinating the companys many communications channels to deliver a clear, consistent, and compelling message about the organization and its products.

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Advertising
Advertising objective: A specific communication task to be accomplished with a specific target audience during a specific period of time. Informative Advertising Telling the market about a new product Describing available services Suggesting new uses for a product Correcting false impressions Informing the market of a price change Reducing consumers' fears Explaining how the product works Building a company image Building brand preference purchase now Encouraging switching to your brand receive a sales call Changing customer's perception of product attributes Persuasive Advertising Persuading customer to Persuading customer to

Reminder Advertising Building and maintaining the customer relationship Reminding consumer where to buy the product Reminding consumer that the product keeping it in the customers may be needed in the near future mind during off-season Affordable method: Setting the promotion budget at the level management thinks the company can afford. Remco v/d Berg

Percentage of sales method: Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price. Competitive-parity method: Setting the promotion budget to match competitors outlays. Objective and task method: Developing the promotion budget by: 1. Defining specific objectives. 2. Determining the tasks that must be performed to achieve these objectives 3. Estimating the costs of performing these tasks The sum of these costs is the proposed promotion budget. Advertising strategy: The strategy by which the company accomplishes its advertising objectives. It consist of two major elements: creating advertising messages and selecting advertising media.

Madison & Vine: A term that has come to represent the merging of advertising and entertainment in an effort to break through the clutter and create new avenues for reaching consumers with more engaging messages. Creative concept: The compelling big idea that will bring he advertising message strategy to life in a distinctive and memorable way. Execution style: The approach, style, tone, words, and format used for executing an advertising message. Advertising media: The vehicles through which advertising messages are delivered to their intended audiences.

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Evaluating advertising effectiveness. Measuring/Testing Gauging the success of the adverts PreTesting Takes place before the campaign is run May involve mock adverts with focus groups Limiting access to the advert cinemas PostTesting Statistical analysis of sales data Brand recognition/recall Advertising ROI the Holy Grail Half the money I spend on advertising is wasted; the trouble is, I don't know which half John Wanamaker, 1908 Return on advertising investment: The net return on advertising investment divided by the costs of advertising investment. Advertising agency: A marketing services firm that assists companies in planning, preparing, implementing, and evaluating all or portions of their advertising programs.

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Public relations
Building good relations with the firms various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories and events. Press relations or press agency Product publicity Public affairs Lobbying Investor relations Development

How does PR Work? - Low level persistence - News stories and events seem more real than adverts - Can work with those who avoid adverts and sales people - Can use media otherwise prohibited - Borrows credibility of third party

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Chapter 13
Personal selling
Personal selling: Personal presentation by the firms sales force for the purpose of making sales and building customer relationships. Sales person: An individual representing a company to customers by performing one or more of the following activities: - Prospecting - Communicating - Selling - Servicing - Information gathering - Relationship building Order taker: Department store clerk. Order getter: Demands creative selling and relationship building.

Sales force management

Sales force management: The analysis, planning, implementation and control of sales force activities. It includes designing sales force strategy and structure and recruiting, selecting, training, supervising, compensating and evaluating the firms salespeople. Territorial sales force structure: A sales force organization that assigns each salesperson to an exclusive geographic territory in which that salesperson sells the companys full line.

The selling process is transaction oriented.

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The purpose of the selling process is to help salespeople to close a specific sale with a customer. Building profitable relationships is a key goal for most firms. Large customers favor suppliers who can: Deliver a coordinated set of products and services. Work closely with customer teams to improve products and processes. Building relationships requires listening to customers, understanding their needs, and carefully coordinating the whole firms efforts to create value. Product sales force structure: A sales force organization under which salespeople specialize in selling only a portion of the companys products or lines. Customer sales force structure: A sales force organization under which salespeople specialize in selling only to certain customers or industries. Outside sales force (field sales force) Outside salespeople who travel to call on customers in the field. Inside sales force Inside salespeople who conduct business from their offices by telephone, the internet or visits from prospective buyers.

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The personal selling process

Selling process: The steps that the salesperson follows when selling (which include prospecting and qualifying), pre- approach, approach, presentation and demonstration, handling objections, closing and follow-up.

Sales promotion
Sales promotion: Short-term incentives to encourage the purchase or sale of a product or service. Can be targeted toward: - Final buyers (consumer promotions) - Retailers and wholesalers (trade promotions) - Business customers (business promotions) - Members of the sales force (sales force promotions) Several factors have contributed to the rapid growth of sales promotion: Product managers are facing more pressure to increase their current sales. - Companies face more competition from less differentiated brands. - Advertising efficiency has declined. - Consumers have become more deal oriented. Consumer promotion:

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Sales promotion tools used to boost short-term customer buying and involvement or to enhance long-term customer relationships. Event marketing: Creating a brand-marketing event or serving as a sole or participating sponsor of events created by others. Trade promotions: Sales promotion tools used to persuade resellers to carry a brand, give it shelf space, promote it in advertising and push it to consumers. - Discounts - Allowance - Free goods - Push money - Specialty advertising items Business promotions: Sales promotions tools used to generate business leads, stimulate purchases, reward customers, and motivate salespeople. Conventions, trade shows, sales contests, and many of the same tools used for consumer or trade promotions. Developing the sales promotion program: - Decide on the size of the incentive - Set conditions for participation - Decide how to promote and distribute the promotion program - Decide the length of the program - Evaluate the program

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Chapter 14
Direct marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. - Features oneonone communication in which offers are tailored to needs of narrowly defined segments. - Usually seeks a direct, immediate, and measurable consumer response. The new directmarketing model: - Direct marketing has undergone a dramatic transformation. - Most firms use direct marketing as a supplemental medium. - For many companies, direct marketing constitutes a new and complete model for doing business. - Some firms employ the direct model as their only approach. Growth of direct marketing: 10% of U. S. economy ($ 1.94 trillion) is generated by direct marketing sales. Direct marketing sales are expected to grow at 6.3% annually through 2011. Direct marketing continues to become more Web oriented. Internet marketing accounts for 18% of direct marketing sales and is expected to grow by almost 16% in the next 5 years. Benefits to buyers of direct marketing: - Convenient - Easy to use - Private - Ready access to products - Ready access to comparative information - Immediate and interactive Benefits to sellers of direct marketing: - Powerful tool for building customer relationships. Can target small groups or individuals Can tailor offers to individual needs - Offers a lowcost, speedy way to reach markets. - Offers greater flexibility. - Gives access to buyers they could not reach through other channels. Customer database: An organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data.

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Forms of Direct Marketing

Directmail marketing: Involves sending an offer, announcement, reminder, or other item to a person at a particular address. Largest direct marketing medium. Wellsuited to onetoone communication: - Permits high targetmarket selectivity - Can be personalized, and is flexible - Easy to measure results - Although CPM is higher than mass media, direct mail yields better prospects Constantly developing new methods and approaches. Catalog marketing: Direct marketing through print, video, or digital catalogs that are mailed to select customers, made available in stores, or presented online. Catalog marketing trends: More and more catalogs are going digital: - Minimizes costs and space is unlimited - Allows realtime merchandising Print catalogs are still the primary medium. - Can create an emotional connection to the consumer Expected catalog sales in 2011 = $185 billion.

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Telephone marketing: Used in both consumer and B2B markets. Marketers use outbound and inbound calls. Outbound: Sell directly to consumer Inbound: Toll free ordering or order faxing Donotcall legislation has impacted the telemarketing industry. Many outbound solicitations have shifted to other forms of direct marketing. Directresponse TV marketing: Directresponse television advertising (DRTV): - TV spots that are 60 or 120 seconds long. Infomercials: - A 30 minute or longer advertising program for a single product. Home shopping channels: - Entire cable channels dedicated to selling multiple brands, items, and services. Kiosk marketing: Information and ordering machines generally found in stores, airports, and other locations. E.g., instore Kodak kiosks allow customers to transfer pictures from digital storage devices, edit them, and produce highquality color prints. New digital direct marketing technologies: - Mobile phone marketing - Podcasts and vodcasts - Interactive TV (ITV)

Online marketing
Online marketing: Company efforts to market products and services and build customer relationships over the internet. Internet: A vast public web of computer networks that connects users of all types all around the world to each other and to an amazingly large information repository. Click-only companies: The so-called dot-coms, which operate only online without any brick-and-mortar market presence. Click and mortar companies: Traditional brick-and-mortar companies that have added online marketing to their operations. Trends:

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Almost all traditional companies have set up their own online sales and communication presence. Many clickandmortar firms are having more online success than their clickonly competitors.

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Online marketing domains: Business to consumer (B2C) (bol.com) Business to business (B2B) (makro / vikking direct) Consumer to consumer (C2C) (Marktplaats, Ebay) Consumer to business (C2B) (suggestions and questions)

Conducting online marketing: - Creating a Web site - Placing ads and promotions online - Creating or participating in online social networks - Using email

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Forms of online advertising: - Banner ads - Interstitials (Meaning in between, an advertisement that appears in a separate browser window while you wait for a Web page to load) - Pop up or pop under ads - Rich media ads (incorporate animation, video, sound, and interactivity) - Searchrelated ads (contextual advertising) Forms of online promotion: - Content sponsorships (sponsoring special content) - Alliances and affiliate programs (work with firms to promote each other) - Viral marketing (Internet version of wordof mouth) Creating or participating in online social networks (also called web communities). E.g., MySpace, Facebook, YouTube, Hyves. Marketers can participate in existing online communities or setup their own. - Results are hard to measure - Forum is user controlled; marketers must be careful not to intrude Using email: Permissionbased email marketing is key.

Irritation, unfairness, deception, and fraud: - Direct marketing excesses may offend consumers.

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Direct marketing has been accused of taking unfair advantage of impulsive or less sophisticated buyers. Internet fraud and phishing are growing concerns. Internet shoppers have security concerns, and are afraid of contracting computer malware.

Invasion of privacy: Do marketers know TOO much about consumers?

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