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The advantages and disadvantages of internet marketing

Our Company, Houston Incorporated has decided to expand into online sales. The goal is to continue to sell our products in the retail stores located throughout the United States but also establish a presence on the World Wide Web.

Your company has recently decided to expand into online sales. The company wishes to continue to sell its products in the retail stores located throughout the United States opportunities available for retail sales and provide a report to your manager which includes the advantages and disadvantages if marketing online,

As Marketing Manager, I was tasked to research online marketing opportunities available for retail sales. This report outlines the advantages and disadvantages of internet marketing, the potential impact of online sales to the company, and the requirements for a successful online marketing campaign.

Marketing and selling goods online electronically is made possible by software programs that execute the main functions of an e-commerce application. This soft enables product display, online ordering, and online processing.

Online marketing encompasses both e-business and e-commerce. E-commerce typical refers to transactions involving the exchange of money such as selling products to customers. E-business is a broader term that includes providing customers with descriptions and specifications for a given product.

Online marketing offer many advantages as this report shall show. Having a presence on the World Wide Web offers the opportunity to reach customers not only on a national level but globally. Doing business 7 day a week and 24 hours a day is a reality with online marketing. The gathering and analysis of information gather via online marketing is possible. This information can be used to improve marketing strategies both online and in traditional retail segment. The advantages far outweigh the disadvantages.

Increase sales, increased brand recognition coupled with the low cost of operating online leads to increase revenue. These are only a few of the overall impact of online marketing.

Executing a comprehensive online marketing plan encompasses virtually the same processes and procedures as traditional marketing. It also requires the establishment of a web site for product display, online ordering, and online payment systems to process payments.

The decision to expand into online sales is justified by this research. Expansion into online sales is a much more cost effective mean of growing the company. The recommended model is integration of the traditional retail segment with the new online arm. This is in opposition to establishing a purely online business. The current marketing strategies can be modified to include the online segment and used to promote the website.

Introduction

“The internet is becoming the town square for the global village of tomorrow.” That quote was attributed to Bill Gates, Cofounder of Microsoft. Tomorrow has come and according to an article on Reuter’s website, “Online retail sales in the United States could reach $248.7 billion by 2014, growing 60 percent from 2009.”

As Marketing Manager, my job is to do market research and develop market strategies. This report will outline the advantages and disadvantages if marketing online, the advantages and disadvantages if marketing online, the potential impact of online sales to the company, and the requirements for a successful online marketing campaign.

The goal of online marketing, similar to traditional marketing, is to communicate and provide value to the customer and manage relationships with customers that benefit the company and stakeholders. Online marketing encompasses both e-business and e-commerce. E-commerce’s typical refers to transactions involving the exchange of money such as selling products to customers. E-business is a broader term that includes providing customers with descriptions and specifications for a given product. Marketing and selling goods online electronically is made possible by software programs that execute the main functions of an e-commerce application. This soft enables product display, online ordering, and online payment processing.

The advantages of online marketing, including the ability to reach a larger market, far outweigh the disadvantages. Online selling tends to be very competitive and may necessitate lower pricing. This is one of the few disadvantages. Establishment of a globally presence and increased sales are ways that the company can be impacted.

However, having an internet presence does not guarantee success. It requires a comprehensive marketing strategy aimed at attracting new customers to our website. Online marketing has its own process and tools that contribute to the achievement of marketing goals and objectives.

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Research Findings

Advantages:

Similar to traditional business, online marketing presents many advantages and disadvantages. However, the advantages of online marketing significantly outweigh its disadvantages. Online marketing can expand the geographic reach of the company by accessing customers in markets where the company does not have a physical presence. In the ecommerce world, doing business around the globe, 7 days a week, 24 hours a day is a reality. (Hossein Bidgoli, 2002) Online Marketing or e-commerce creates the ability to sell virtually any product that can be sold in a traditional retail environment. Nights, weekends, holidays, and time zones are no barriers to e-commerce. Online marketing can also reach customers that for various reasons can not personally visit a traditional retail store. Another advantage of e-commerce is the ability to gather additional information about the customer via tools such as cookies, email, and online surveys. This information can be used to personalize marketing efforts in a way that can lead to higher trade volumes. E-commerce also provides increased flexibility for customers. Customers can make purchases without having to leave the comfort of their homes. The customer does not have to deal with the hassle of parking or the worry of losing contact with their small children presented by traditional retail methods. Shopping tasks can be accomplished from the safety of their homes with a few clicks of a mouse. Of course, increased sales are the first thing people thing about when they consider online market. Market research shows that online sales are trending up despite the current depressed retail market. . Revenue generated by online businesses and the online part of traditional retail businesses exceed $96 billion in 2006, up from $86 billion in 2004, according to the U.S. Census Bureau. An added advantage of online marketing is decreased cost. Traditional retail businesses have overhead costs that associated with online marketing. These include utilities, insurance, store lease, and labor. Lower overhead cost generally result in lower overall cost and increased revenue. Therefore, online expansion will give the company a globally presence at a relative low cost.

Disadvantages:

Online shopping is not attractive to all consumers. They cite the loss of social contact experienced when shopping with others. While many researchers do not see any fundamental differences between the traditional and online buying behavior, it is often argued that a new step has been added to the online buying process: the step of building trust or confidence. (Constantinides, 2004) Many consumers are concerned with the privacy and security issues associated with doing business online. Almost 95% of Web users have declined to provide personal information to Web sites at one time or another when asked. (Otto & Chung, 2000) Credit card fraud, unwanted solicitations, and use of their information for other than its intended purpose are a few of the reasons cited. The difficulty in attracting customers is another disadvantage to online marketing. That, coupled with increased competition due to the ease of comparative shopping greatly decreases the attractiveness of online marketing. Online consumers can quickly access information from other online businesses and make better decisions. In fact, some websites are designed solely for that purpose. Therefore, online pricing is very competitive. Additionally, online marketing does not afford the consumers the luxury of examining and getting a feel for the quality and fit of merchandise sold online and generally require the seller to have liberal return and refund policies. The lack of after sales service is another concern of online shoppers. Time also is a problem with online marketing in that consumers are not able to take immediate possession of their purchases and are faced with added expense for faster delivery.

Potential impact of online sales to the company:

The greatest impact to the company may be the establishment of a globally presence. This means company growth at relative low cost. . Online marketing does not require the overhead cost associated with maintaining a “brick and mortar” store. This results in lower cost, increased efficiency and greater profit margin. Another potential impact, online sales increases in-store sales. Having an online presence leads to increased brand recognition and consequently leads to increased in-store sales. Conversely, not having an online presence means loss of potential valuable customers. Online marketing creates the opportunity to interact with customers. Exchange of information facilitates product and process improvement and can lead to greater customer satisfaction. It also allows for greater flexibility in that website information such as price, product availability, and promotion can be readily adjusted in response to market conditions. Information gathered via online sales information can be used when considering future expansion of the traditional retail operations.

Requirements for a successful online marketing campaign

Developing a successful online marketing campaign comprises most of the same processes and procedures used in traditional marketing. The company will need to establish goals, objectives, strategies and tactics much like traditional marketing. Likewise, market research is required. When formulating objectives, strategies, and tactics for online marketing product display it is imperative that such customers requirements as ease of use, quick access to product information, and effective distribution networks including order tracking for transparency is addressed. Understanding consumers’ motivations and limitations to shop online are major consideration in making adequate strategic, technological, and marketing decisions. (Monsuwe, Dellaert, & De Ruyter, 2004) This is part of identifying your target audience and determining how to reach it, a very critical step. To attract customers, firms need to offer dynamic content, keep their sites fresh, and to install security devices to protect their customers’ privacy and interests. (Wei, Moreau, & Jennings, 2005) Customer retention should also be included in any successful online marketing strategy. Retaining online customers depends on the overall experience when visiting a website, which includes factors such as perceived value and trust (Pitta, Franzak, & Fowler, 2006; Wang & Head, 2007). In addition, every online business must be able to accept online payment. Customers need a level of confidence with your website and business when making on line payment. Integration between the e-business arm and the traditional business segments helps to promote confidence. (Gay, Charlesworth, & Esen, 2007) The reputation of the tradition retail environment can be extended to e-commerce. Likewise, an online presence enhanced the marketability of the traditional business. Traditional firms can adopt a range of strategies to combine offline and online market channels to derive synergies. For example Barnes and Nobles’ e-business model overlaps its traditional brick and mortal business model. Regardless of whether the merchandise is sold online or in a physical retail outlet, the warehousing operation is the same. (Rich, 2008) Retail companies should also integrate offline and online operations such as allowing customers to order online for pickup at stores. (Steinfield, Adelaar, & Liu, 2005) Lastly, print and word of mouth advertisement will be needed to attract customers to the web site.

Recommendations

Based on research data, the company should expand into the online sales arena by creating an ecommerce arm of our traditional retail operation. Expansion into online sales is a much more cost effective mean of growing the company. The recommended model is integration of the traditional retail segment with the new online arm. This is in opposition to establishing a purely online business. Analysis suggests that firms should tailor their e-commerce approaches to improve service to existing customers in addition to pursuing new customers and markets. (Adelaar, Bouwman, & Steinfield, 2004) Integration is advantageous in that perceived shopping risks are lower when a company also provides a physical location. Integrating online and offline operations adds additional cost saving measures such as such as ordering online for pick-up at physical location. . The current marketing strategies should be modified to include the online segment and used to promote the website

Conclusion

There are advantages and disadvantages to online marketing. While online marketing presents an opportunity for the company to expand its market nationally, even globally, online shopping is very competitive, as consumers have access to comparison shopping. In addition to reaching new markets, online marketing can also improve relationships with existing customers. To be successful, ecommerce websites must be properly designed so that it is easy to use, engages the customer, and provides a pleasant and trusting shopping experience. It must negate all perceived shopping risks such as concerns about giving financial or personal information, and after sale concerns such as refunds and after-sale service. Marketing strategy formulation for ecommerce businesses are very much like traditional marketing. Market research, goals, objectives, strategies and tactics are the making of a successful online marketing campaign. Analysis of the research data indicates that integration of the traditional brick and mortar operation with an ecommerce business segment is the best method of creating an online presence.

Annotated Bibliography

Adelaar, T., Bouwman, H., & Steinfield, C. (2004). Enhancing customer value through click-and-mortar customer experience. Telematics and Informatics, 21, 167-182.

This article explains how traditional retail stores can combine online marketing to increase geographic reach and to improve relationships with existing customers of physical stores. Dr. Thomas Adelaar, Assistant Professor, University of Amsterdam Business School. Ph.D. in Media and Information Studies, Michigan State University. Awards and Honors include; Winner of the Graduate Office Scholarship “Best Ph.D. Research Paper” in the Dept. of Telecommunications, Information Studies, and Media, MSU (2004). Dr. Adelaar currently has 7 publications in Academic Journals. Charles Steinfield is a professor and chair in the Department of Telecommunication, Information Studies, and Media at Michigan State University. In addition to his faculty position, Steinfield participates with the MSU Eli Broad College of Business Information Tech. Management Program. His research focuses on the organizational and social impacts of new communication technologies.

Constantinides, E. (2004). Influencing online consumer’s behavior: The web experience. Internet Research, 14(2), 111-126.

Dr. E. Constantinides conducted research showing that online marketing can increase business for companies at their physical retail locations. Dr. E. Constantinides is and Assistant Professor of Marketing, Netherlands. His research activities focus on strategic and commercial aspects of Ecommerce and E-media, and he is a member of the Scientific

Committee of the Social Media Research Center.

Gay, R., Charlesworth, A., & Esen, R. (2007). Online marketing. New York: Oxford University Press.

This book provides an overview of the advantages and disadvantages of online marketing as well as the techniques that can maximize revenues. Richard Gay is a professor at

the Newcastle Business School, North Umbria University. Alan Charlesworth is a Senior Lecturer in marketing and emarketing at the University of Sunderland. Rita Esen is a

Law Consultant and Visiting Lecturer at Durham University.

Hossein, B. (2002). Electronic commerce: principles and practice. Amsterdam, The Netherlands: Academic Press.

This book is a four-part overview of electronic commerce. The book provides a balance of theories, applications, and hands-on material. Dr Hossein Bidgoli is a Professor of Management Information Systems. School of Business and Public Administration           California State University, Bakersfield, California

Monsuwe (2004). , P., Dellaert, B., & De Ruyter, K. (2004). What drives consumers to shop online? A literature review. International Journal of Service Industry Management.

Using the technology acceptance model framework, the authors conducted a review of literature and identified website characteristics such as ease of use and usefulness as well as personal consumer traits as critical factors for online shopping. P. Monsuwe is a professor at Maastricht University, The Netherlands. His research focuses on the effects of media on strategy and decision-making processes, such as corporate environmental management.

Otto, J., & Chung, Q. (2000). A framework for cyber-enhanced retailing. Electronic Markets, 10(3), 185-191.

This article describes the advantages and disadvantages of online retailing for companies with existing brick and mortar retail locations, and provides a framework for analyzing whether the company should engage in online retailing. Q.B. Chung is an Associate Professor at Villanova University. He earned a PhD in Management from Rensselaer Polytechnic Institute, as well as an M.B.A. in Management Information Systems. He has over twenty two published journal articles, numerous published books and is a seminar speaker. J. Otto is an Assistant Professor with many publications involving Management Information Systems and Operations Research and Management Science.

Pitta, E., Franzak, F., & Fowler, D. (2006). A strategic approach to building online customer loyalty. Journal of Consumer Marketing, 23(7), 421-429.

The article integrates previous research to draw the conclusion that customer loyalty to online websites depends on the perception of value as well as emotional factors such as trust. Danielle Fowler, Ph.D. is an Assistant Professor at the University of Baltimore. She has many awards and grants including The John and Margaret Thompson Professorship in Management Information Systems, and the President’s Teaching and Learning Initiative Competition. Frank Franzak is a professor with Monash University and Director of Information Systems Honors Program.

Steinfield, C., Adelaar, T., & Liu, F. (2005). Click and mortar strategies viewed from the web. Electronic Markets, 15(3), 199-212.

The authors analyzed retail store websites and found that few engaged in online and offline integration such as allowing customers to order products online for pickup at physical store locations. Dr. Adelaar currently has 7 publications in Academic Journals. Charles Steinfield is a professor and chair in the Department of Telecommunication,

Information Studies and Media at Michigan State University. In addition to his faculty position, Steinfield participates with the MSU Eli Broad College of Business Information Tech. Management Program. His research focuses on the organizational and social impacts of new communication technologies.

Wang, F., & Head, M. (2007). How can the web help build customer relationships?

Information & Management, 44(2), 115-129.

The authors conducted empirical research to identify the factors critical for building customer relationships online and found that satisfaction, trust, and switching costs determined whether a customer would continue using a website. Dr. Milena Head is an

Associate Professor of Information Systems and the Associate Dean at the DeGroote School of Business, McMaster University, Canada. Specializing in eBusiness and Human Computer Interaction, she has published over 50 papers in academic journals, books and conferences. Her research interests include trust and adoption in electronic commerce, interface design, mobile commerce, identity theft, cross-cultural issues in electronic commerce and human computer interaction, e-retailing, and web navigation. Dr. Fang Wang is an Assistant Professor of Marketing at the School of Business & Economics, Wilfrid Laurier University, Canada. Her research interests include e-commerce,

e-marketing and marketing strategy. She has published in journals such as Journal of Consumer Marketing, Journal of Comparative International Management, Internet Research, and Journal of Business Strategies.

Wei, Y., Moreau, L., & Jennings N. (2005). A market-based approach to recommender

systems. ACM Transactions on Information Systems, 25(3), 227-266.

The research described in the article uses simulations to demonstrate the effectiveness of recommender systems for personalizing customer experiences and customer retention.

Yan Zheng Wei is Director of The Department of Broadband Wireless Management, Shenzhen, China. Dr. Nicholas Jennings is an Assistant Professor at The School of

Electronics and Computer Science, University of Southampton, UK.


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