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E-business Innovative Marketing Strategy

Chapter One: Introduction

1.1 Background

The term E-business is today’s popular form of business by using old business models with the interaction of technology and gaining the most out of customer value and profits which is the future way of doing business. In E-business as like bubbles are bursting there is constant threats about security, but e-business is increasing to a whole new level, and will most likely keep doing so in the near future.

In the latest years Internet has proved as a very important marketing tool. By the use of the Internet the companies have developed relationships with the customers by using different systems in promotion and sales. So the inception of Internet has had effect on the way the individuals and organizations communicate around the world (Doole and Lowe, 2004). Briefly, in the last years marketing has gone online taking advantage of the market opportunities.

The estimates regarding the amount of business conducted electronically vary widely, but it is clear electronic business and electronic commerce have gained tremendous momentum worldwide over the past decade. Much media attention was given to the dot-com boom, but has since waned following the dot-com bust and economic downturn of the early 2000s. Despite the dot-com bust, it is clear many successful electronic businesses will evolve and thrive for many years, e.g., eBay and Ocado.

Nonetheless, E-business sector has become an increasingly competitive and dynamic business environment within the past decade. Consumers perceive firms having a web site as more customer-oriented, responsive, informative, high-tech, sophisticated, and likely to stay in business longer (Griffith et al., 1998). These discerning and demanding consumers have led many innovative organizations to look for appropriate marketing strategy on the internet marketplace with the aim of building better business position; on the one hand value into service offerings, satisfying and maintaining loyal customer and on the other hand effectively making strategic decisions thereby increasing the overall business performance. The ability to retain and lock-in customers in the face of competition is a major concern for online businesses, especially those that invest heavily in advertising and customer acquisition stares. However, creation of loyal and a satisfied customer base is an important determinant of marketing success. Research shows that loyal customers buy more of company’s product, they are cheaper to serve, less sensitive to price and brings in more customers by word of mouth (Reichheld, 1996). Therefore, developing, managing and maintaining loyal marketing relationship of the internet market place for instance is harmonious to how well you are marketing. Thus knowing how well you are marketing as a firm and making innovative marketing strategy to perform better in future which is required and inevitable in such a marketplace as the internet.

Obviously, decision making is essential about organization strategy to determine the future direction (Johnson & Scholes, 1997). The prime function of management is perhaps to make the right strategic decisions. According to Johnson & Scholes, (1997) strategic or long-term decisions are concerned with an organization’s overall objectives. Such corporate decisions include major capital investments, sources of finance, and product and market choices. Practically, the long-term directions are affected by strategic decisions of an organisation and are generally about attempting to complete some benefit for the company. Therefore, with the range of a company’s action are likely to be affected: Does (and should) the company focus on one area of action, or does it have many? The issue of range of action is fundamental to strategic performance (Johnson & Scholes, 1997).

In marketing strategy pricing is one of the most talked about but least understood of all the key marketing levers (DiCamillo 1996). Price is also the easiest of the marketing mix variables to manipulate and can be done so very quickly (Guiltinan and Paul 1985). The proliferation of e-commerce has already had a significant impact on how and where consumers shop. It also has the potential to make dramatic changes in the way goods are priced and how purchase decisions are made. In Internet shopping the cost (in both time and money) of comparison shopping is drastically decreased and price is a major element in purchase decision. A marketing manager strategically sets pricing to achieve the company’s objective.

1.2 Rationale

In e-business innovative marketing strategy change over the life cycle of a firm (Miller and Friesen, 1984) the strategy systems emerge over time, in response to changes in strategic goals, the business environment and the size of the firm. However the question of which marketing strategy is required for achieving to a goal or an objective. In this sense what marketing e-strategy required for? Implicitly, related to the current study by evaluating marketing e-strategy one firm going to make their future crucial decisions to improve their firm’s more in online business. Needless to say, marketing strategies depend upon basis for decision making and reflect the customer’s needs as well as the firm’s simultaneously. Companies and researches reflects the customer’s satisfaction and needs by calculating price, feature, amount, cycle time, effectiveness, output etc., of the products, services, and procedure as long as ways to calculate those things have to be present (Tapinos et al, 2005). What is new and has attracted little attention to some extent is to evaluate marketing e-strategy using decision- making variables and to see the impact on strategic decisions. This clearly shows those not only find the appropriate marketing e-strategy but in order to better control, understand, and improve what firms do and must do.

In this research there are two different cases virtual company; one is basically auction store eBay and another grocery store Ocado. The main reason to select different category companies because both are doing e-business and through this research it’s going to be defining their marketing e-strategies and implementing in the market are approximately same. That’s why this study evaluates two different category virtual stores and compares their marketing e-strategies. Therefore this study goes beyond just required marketing strategy using the internet as a market place but is a bold attempt to evaluate e-strategy using decision making variables and to see the impact on strategic decisions.

1.3 Significant of the Research

The marketing discipline has been showing to different changes and powerful challenges into the business stadium with the induction and dispersion of the online phenomenon. Constantly since this new multimedia surroundings of exchange appeared, many research have been performed about how it will influence the nature and prospect of marketing activities. This research is an attempt to categorize and summarize the literature about online marketing and enlighten the study routes that will contribute to the development of the discipline.

In reality, most firms will need to plan marketing strategies for both traditional or place aspects of the business, and the fast developing electronic or space dimensions of the business (Rayport &; Sviokla, 1994). Both approaches need to be co-ordinated in a cost effective manner whilst providing the customer with an effective and integrated solution. Some research has reported that the early adopters of e-business show a trend towards cost reductions and administrative efficiencies from e-procurement and self service applications used by customers and employees.

By contrast, more mature users focus on strategic advantage and generate this through an evolutionary model of organisational change (Ash and Burn, 2005). Researchers have also recognised the importance of the extension of e-commerce use to small and medium sized businesses in order to realise improvements in efficiency and effectiveness (Hauge et. al, 2004)

Managers need to contemplate their strategic approach to the electronic business opportunity in terms of both internal and external considerations at a particular point in time. Based on recent research (Perrott, 2002), this paper proposes a tentative framework that will assist managers to determine their organisation’s strategic positioning in the electronic arena.

1.4 Aims & Objectives


To identify what might be appropriate marketing strategies for this new era e-business.


  • To review literature on current developments in online marketing strategies.
  • Identify the e-strategies of the cases eBay and Ocado.
  • Review the strengths & weaknesses of e-strategies.
  • Identify immediate competition and implications for the cases eBay and Ocado.
  • How do customers react to the marketing e-strategies?

1.5 Purpose and Research Questions

The purpose of this thesis is to define required innovative marketing strategy of virtual stores using decision-making associated variables sternly to evaluate the impact on strategic marketing decisions.

There are many issues connected to this research problem, but we will only focus on certain aspects and a complete picture will therefore not be provided. The research questions we intend to answer are:

RQ1. What are the objectives for online marketing?

RQ2. How can the online product offer be described?

RQ3. How can the online pricing strategy be described?

RQ4. How is the Web site used as a communication, promotion medium, distribution and transaction medium?

RQ5. What influential innovative marketing e-strategy evaluation variables or indicators are associated with strategic marketing decisions in the online marketplace?

1.6 Scope and Limitations

This research will show the continuing progress in digitization and networking that is manifested in the rapid spread of the internet, information about product attributes, marketing strategy and especially in pricing process – which has long been considered a concomitant part of any article placed on the market – is now distributed independently from the product itself.

The growth in digitization has significantly increased a company’s freedom to both combine and diversify products, thereby enabling them to easily produce and offer a wide variety of product versions to their customers. Moreover, progress in networking has substantially increased the speed at which various product-related information can be distributed. At the same time, it has considerably expanded the range over which such information can be disseminated.

This research identifies the major scope and content of the studies about Internet marketing and displays the current state of the discipline. It also enlightens the main avenues or niche routes for future research by clarifying under investigated or unsettled areas. The framework of this review can serve as a skeleton explaining the accumulated state of knowledge about Internet marketing and can be a useful starting point for studies aiming to expand the views about this area further.

The current research has been limited and concentrated on required innovative marketing strategy up to company-level eBay and Ocado. The research is focused on evaluating virtual store marketing strategy for strategic decisions. Consequently, plethora of researchers have measured marketing strategy from diverse perspectives such as the financial perspective, process and supplier’s perspective, employee’s perspective innovation and development perspective.

  • The current study mainly focuses on the customer’s perspective.
  • The primary focus was on the online marketplace industry where the business model is emerging and fast spreading. Further the focal point will be on business to consumers (B2C). The companies studied involve UK firms providing service to UK users. The firms studied are eBay and Ocado.
  • The study was limited to customers or users within London, city in UK.

1.7 Signposting of the Study

Chapter One: Introduction

In order to improve a product or services to satisfy a need of a customer, once have to be able to improve or change it to meet their needs. In order to improve or change it, there is the need to know what the customer desire or want. In order to know and understand it, once have to be required innovative marketing strategy in online market. This first chapter will present the background and rationale behind innovative marketing e-strategy especially in pricing and the impact on strategic decisions in the online marketplace. Further this section will present the issue regarding marketing e-strategy which will lead to the purpose of this study.

Chapter Two: Literature Review

This chapter provides relevant existing theories and models of marketing e-strategy specially pricing in the online market place as well as a model modified by the author. The working model builds upon the presented theories and is used as a foundation for the following analysis.

Chapter Three: Research Methodology & Strategy

In this chapter, the research methodology & strategy is presented. The research approach that has been adopted in order to answer the research questions and to meet the purpose is described and motivated. The research methods used in this work are as well described and discussed.

Chapter Four: Empirical Analysis

In this chapter the results of both the qualitative and quantitative research are presented. The results will follow the outline of the working model. A brief companie’s overview are also presented.

Chapter Five: Analysis

In this chapter the analysis and discussion of the empirical data will be presented. The analysis is assessed through the two major issues in the study along with the working model.

Chapter Six: Conclusion

This chapter includes the conclusions of the research as well as reflections for recommendations, a discussion of the limitations and suggestions for further studies.

Chapter Two: Literature Review

2.1 Online Marketing Objectives

Online marketing can be described as a system for selling products and services to target audiences who use the Internet and commercial online services by utilizing online tools and services in a strategic manner consistent with the company’s overall marketing program (Janal, 1997, p. 39). Before going online, the company needs to have a marketing plan that is consistent with the goals and objectives set by the company. It is necessary to decide what the company wants to accomplish by going online (Janal, 1997). Pitt, Berthon and Watson (1996) point out that the objectives for marketing through Web sites vary depending on the company, but that many organizations do not even have clear and quantified objectives for being present on the WWW. Companies must divert from the thinking that even a bad Web site is better than none at all, because without clear objectives it will be hard to make appropriate marketing strategy through the Web site’s effectiveness.

The Web site can be characterized as something of a mix between personal selling and advertising and can move the customer through the six phases of the buying process: need recognition, information processing, develop specifications, search and evaluation, purchase and post-purchase evaluation. By attracting Internet surfers, establish contact with interested surfers, transform some of the interested surfers into interactive customers and keep these customers interactive, the Web site is acting as a mean to push the customer through the buying process. Converting surfers into customers can be considered a six-stage conversion process. The efficiency of the Web site in reaching the marketing communication objectives set for it, as well as in taking the surfer through the six stages of the conversion process, is shown in Table 2.1. (Pitt, Berthon & Watson, 1996)

Even though most companies wish their Web site to generate direct response orders and thereby set marketing communication objectives, there are many other objectives that can be achieved by marketing online (Mathiesen, 1995):

  • Generate direct response orders.
  • Increase brand awareness or corporate image.
  • Gather information about customer preferences to help guide future product development.
  • Improve customer service.
  • Test consumer response to discounts or other special offers.
  • Build a list of prospects for future promotions.
  • Find business partners, dealers, or franchisees for company’s products.
  • Recruit talent members, employees, subscribers, etc.

Table 2.1: A Model of the Conversion Process on the Web

Stages of






objectives for

each stage

Efficiency effect of the

Web site

Relevant measure Marketing strategies and tactics
1 Make surfers aware

of the Web site

Awareness efficiency Aware surfers Include web site address in all broadcast advertising and publicity, on product packaging, other corporate communication material.
2 Increase the

number of hits by

aware surfers

Locate ability / attract ability


Number of hits aware surfers Distinguish between passive and active surfers. Passive surfers are those who are not actively seeking the web site, but land on it nonetheless. Attract them through hot links, sponsored Web sites, sponsor web search engines such as Lycos and Yahoo. Active surfers are those actively seeking your Web site. Maximize their likelihood of finding you through multiple sites and names, faster service, speed, high bandwidth
3 Turn hits into visits Contact efficiency Number of active


Number of hits

Make the hit a worthwhile, interesting visit through quality of design. Visual appeal, graphics, sound, video, ease of use.
4 Convert active

visitors into


Conversion efficiency Number of


Number of active


Make it easy to establish a dialog. Attend to quality and speed of response. Respond to and explore ways of initiating dialog. Simplicity of ordering process. Alternative modes of ordering.
5 Cause purchasers

to repurchase

Retention efficiency Number of


Number of


Ability to update and exploit database.

Purchase satisfaction and extent of feedback.

Update and refresh Web site as frequently as possible. Update customers on their order status.

6 Maximize the overall efficiency of the Web site as a marketing tool Web site efficiency Awareness + locatability + contact +

conversion +retention

efficiency/5* (but can be weighted)

Ability to maximize all five Web site efficiency effects.

*An overall average Web site efficiency index, which can be thought of as a summary of the entire process.

Source: Adapted from Pitt, Berthon & Watson, 1996, p. 8

According to Janal (1997), the Internet is the world’s most efficient marketing tool and helps companies disseminate sales and marketing messages, create one-to-one relationships, educate prospects and support existing customers on a worldwide scale. The Internet provides the possibility to deal with customers worldwide that have pre-selected a specific company. Firms can use the Internet to generate revenues by increasing sales to existing customers and by attracting new customers (Peterson, Balasubramanian & Bronnenberg, 1997). The Internet is an important marketing tool because the market prefers the decentralized, open-access environment presented by the WWW for E-commerce (Hoffman & Novak, 1996b).

The Internet possesses unique features making it appropriate for creating close customer relationships (Honeycutt, Flaherty & Benassi, 1998). Janal (1997) proposes that the flexible publishing platforms of the Internet and commercial online services gives the marketer the possibility to establish relationships with the consumers. The relationships are created through online sales, support and service. On the Internet, the customers and the company are interacting with each other and this gives a very intimate selling situation (Janal, 1997).

However, no physical intimidation exists between buyer and seller and no middle parties may interrupt the communication process (Samli, Wills & Herbig, 1997). Quelch and Klein (1996), as well as Sanden (1998) claim that the Internet is not constrained by either location or time. For the millions of individuals connected to the Internet, traditional limitations of time and distance no longer apply. The computer in Sweden or Hong Kong is just as close are the office next door. Messages can be sent to thousands of potential customers simultaneously with one keystroke (Cronin, 1994). Furthermore, the Web site is completely accessible, since it can be read 24 hours a day, 365 days per year (Samli, Wills & Herbig, 1997).

The Web site can be used to create customized sales presentations affecting several senses and appealing to logic and benefits. Consumers can pick the sales presentation and information they want (Janal, 1997). By using a variety of Internet resources, the company can create a customer-oriented environment while obtaining information about customers’ specific interests, responses to new product offerings and feedback on the company’s performance. Additionally, the Internet offers the possibility for online ordering and delivery. Customers logging on to the Internet can continue to receive enhanced support services through the network. (Cronin, 1994)

The Internet provides quick feedback on the effectiveness of marketing activities, enabling performance-based marketing (Burke, 1997). Marketers can test both new product concepts and advertising copy over the Internet for instant feedback. In addition, the Internet permits new types of measurement tools, such as online surveys, bulletin boards, e-mail marketing lists, customer identification systems, advertising measurement and Web visitor tracking. (Quelch & Klein, 1996)

The fact that the Internet is neither time- nor location-bound can have a major impact on costs. Customers do much of the work that would normally be handled by office-clerks or human tellers (Sheth & Sisodia, 1999). According to Sandén (1998), the Internet increases the company’s efficiency. By publishing information on the WWW, the sales process can be improved and thus, the productivity rises considerably. In addition, the time spent to process orders is lowered dramatically. Less errors and facilitated processing has led to substantial time-savings. The automation of various administrative tasks is another reason for the increased efficiency and the possibility to serve a vast amount of customers effectively (Sheth & Sisodia, 1999). Administration costs related to paper-based processes such as postage, printing, and handling, will be reduced. (

The WWW is the least expensive printing press and offers the seller an unlimited amount of space to describe and demonstrate the product range. Add to this the low rent compared to storefront, and it is clear that selling online means low cost of entry (Hoffman & Novak, 1996; Janal, 1997). Jäger and Winberg (1996) underline the cost-effectiveness of the WWW by claiming that the costs are independent of the number of people exposed to the message, as well as how much information that is to be presented. They compare the WWW to a printed catalogue, where the costs are very much depending on these factors. It is proposed that performing direct marketing through the Internet may be one-fourth less costly than through traditional channels. The great segmentation possibilities and the low cost for creating differentiated messages on the WWW are also mentioned. As a conclusion, Jäger and Winberg (1996) point out that the cost-effectiveness for presenting messages on the WWW is depending on whether the target group is on the Web. The success of the campaign in relation to the costs of executing it must also be considered in order to evaluate the cost-effectiveness. By marketing online, the company gains competitive advantages compared to companies who are not online. The Internet also reduces the issues of company size, since consumers only care that they find the product needed at the right price. (Janal, 1997; Sandén, 1998; Sheth & Sisodia, 1999)

2.2 The Online Product Offer

According to Brännback (1997), the focus in marketing automatically changes from physical to informational when uses the Internet. In the traditional marketplace, the idea of the product is physical or tangible and occasionally accompanied by intangible features or services. On the Web site, a picture or description of its features will replace the physical product, and thus, the product becomes informational rather than tangible.

Not all products are suitable for online marketing. Peterson, Balasubramanian & Bronnenberg (1997) categorize products and services along three dimensions that are relevant when discussing the product’s suitability for online marketing. The dimensions are: value proposition, degree of differentiation, and cost and frequency of purchase. Concerning the first dimension, goods can either be low-cost, frequently purchased goods, or high-cost, infrequently purchased goods. The product is more likely to fit internet-based marketing if it is infrequently purchased and expensive. Goods can be classified along the second dimension according to whether they are tangible and physical, or intangible and service related. Online marketing is particularly well suited for certain types of intangible or service related goods. The third dimension reflects to what extent the product is differentiable or not. The Internet is an effective segmentation tool when it comes to products or services that can be subject to differentiation. Peterson, Balasubramanian and Bronnenberg (1997) illustrate the product and service classification grid presented below. (Table 2.2)

Table 2.2: Product and Service Classification Grid

Dimension 1 Dimension 2 Dimension 3 Examples of Products

and Services

Low outlay, frequently

purchased goods

Value proposition


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