For many years it has been recognised that the internet’s power, scope and interactivity provide businesses with a unique opportunity to transform their businesses. The internet has:
- Become an important channel for promoting relationship with customers and other partners (Ansari and Mela, 2003)
- Affected all of the elements of the marketing mix – promotion becomes highly interactive, pricing flexible and dynamic, products digital, and place virtual communication strategies of forms (Zettelmeyer, 2000)
- Influenced the structure of the competitive market and increased trading opportunities with new partners (Varadarajan and Yadac, 2002)
- Increased the capacity to deliver tangible gains through economic efficiencies (Vijayasarathy and Tyler, 1997)
How organisations make efficiency gains
Kalaignanam et.al. (2008) have suggested there are three distinct areas where efficiency gains in marketing operations:
- Decision information costs – efficiencies can result from using information to facilitate decision making and reduce information processing costs.
- Quality costs are incurred to ensure that the products or operations conform specifications. Internet technology can be used to significantly reduce these through gains in efficiency, – e.g. if a product does not conform to standards, the customer is likely to return to the goods, which has implications for staffing, quality control and can even lead to a breakdown in customer relations.
- Factor costs increase in proportion to the level of activity. Traditionally, they are used in the context of production activities encompassing material and labour costs. Factor coats in marketing operations comprise labour costs, material costs and miscellaneous costs (e.g. travel and rentals).
Organisations can use the interactivity of Internet technologies to improve the efficiency of their marketing by focusing on three types of cost.
Factors which influence the degree of adoption of Internet technologies
Some organisations have wholeheartedly embraced the use of Internet technologies whereas others ‘have been far more timid either developing small scale, experimental applications or completely ignoring the internet potential altogether. Four key dimensions within factors which determine an organisation’s levels of adoption of internet technologies are likely to significantly affect online marketing planning and ultimately the effectiveness and efficiency of an organisations internet operations. The dimensions (based on Ellis-Chadwick, 2008) are:
- Financial dimension
Businesses are beginning to consider carefully the internet’s potential to deliver economic gains. Ashworth et al. (2005) have stressed the importance of financial factors and how the extent to which business can benefit from economies of scale is likely to influence rates of Internet adoption. Businesses are also likely to evaluate the cost of operations, the availability of operational and development funding and the time line of online profitability. The outcome of analysis of financial variables is likely to critically affect the extent to which a business trades online, offers interactive services or invests in using the Internet to support its operations.
- Operational dimension
Grewal et al. (2004) highlighted the importance of the suitability of product range and the impact of logistical complexities of getting goods to bugers at acceptable costs and within an appropriate tome frame as ket determinants of whether business offer the Internet as a channel choice. For successful developments of the online channel, businesses also need to have in place a suitable technological infrastructure, and a supportive and technologically integrated supply chain. A business’s assessment of operational variables is likely to impact not only on the extent of development of online retail provision but also on the level of the online service provision. Other factors, which can be consolidated under the operational dimension, are company size and maturity and the choice of online format. Analysis of the operational factors is likely to influence the extent to which business integrated online and offline channels.
- Market dimension
A business’ perceptions and understanding of online market potential are cited as important indicators of the level and range of development of online market provision. Businesses tend to develop understanding of the market potential by assessing the suitability of the customer base (Grewal et al., 2004). However, researchers suggest it is also important to understand the customer experience in a multichannel trading environment if the online channel is to be seriously developed. From this viewpoint, businesses should assess customer’s perceived ease of use, convenience and levels of security in order to develop a realistic assessment of the market potential. Perceptions of online market potential, knowledge of markets served and market opportunities are likely to influence the extent to which businesses see the Internet as a new virtual world of trading opportunities.
- Strategic dimension
According to Doherty et al. (2003), strategic vision and leadership are critical to the development of a business’ use of Internet and web technologies. However, a clear vision needs to be supported by appropriate competencies and capabilities (Lee and Kim, 2007), say, suitable technological and internet marketing expertise (Lee and Brandyberry, 2003), appropriate technological, financial and operational resources for a business to use the internet effectively and efficiently to support its trading activities, develop a competitive positioning and capitalise on the opportunities created by trading in the new virtual world.
The implications are that for organisations wishing to engage successfully in developing transactional operations online there is a need to have certain factors in place. Perhaps most importantly well-resourced strategic leadership to navigate a course, which not only creates a clear online positioning but also a sustainable competitive advantage that is leveraged by maximising operational efficiencies and strategic effectiveness. But in addition, there should be evidence of rich and fertile traget market consisting of buyers who are motivated to buy online.
Chaffey, D. and Ellis-Chadwick, F., 2012. Digital marketing: strategy, implementation and practice (Vol. 5). Harlow: Pearson.