E-Commerce has had a major impact on marketing departments. In the sense that every of the 4Ps in Marketing Mix for products of a business has seen the impact of E-Commerce.
The emergence of the Internet has transformed the shopping experience for billions of people around the world.
Today’s customers are able to follow their orders with online tracking in real-time and provide immediate feedback about a product through websites and blogs.
Are the days of the main street shop, malls and mega-shopping centers coming to an end?
Eventually, will all products be bought online or via smartphones?
How does E-Commerce impact 4Ps of Marketing Mix?
Let’s take a look at how the development and growing use of E-Commerce affected the implementation of technology into the Marketing Mix.
1. Impact of E-Commerce on Product
Customization. E-Commerce allows for higher customization to suit individual needs and cultural preferences of customers in the global market. Each consumer can be communicated with individually and individual product requirements can be built into the good or service to suit different preferences. Some examples would include airline tickets (time of the flight, class, seat number, luggage size, cars, hotels, site-seeing, etc.) and computers assembled to match the individual specification of each customer. When products can be tailored to the specific needs and wants of the customer, this will result in higher sales and profits.
Example 1: Audi uses an interactive website where customers can customize design features of their cars. They can not only change the color of a car, but also style of the wheels, interior materials or add car accessories. This gives customers an interactive and engaging online shopping experience as they can visualize the product before placing an order.
Wider product range. E-Commerce also allows for broader range of products to be offered. Businesses selling over the Internet can afford to stock a much wider range of goods than nearly all shops could financially justify. It is because businesses need sufficient demand before they can offer a variety of products. With the introduction of E-Commerce, businesses are able to sell more of different products to an enlarged customer base.
Example 2: Dell allows its customers to design their own personal computers through selecting their own specifications and add-on features. The tools of E-Commerce allow Dell, to sell an increasingly wide range of products.
Less packaging. With E-Commerce, packaging will be less of an issue for E-Tailers as packaging is not required to appeal to online customers. It is simply not needed for added promotion. Additional detailed information about the product and any new product updates can be placed on the company’s website. Reduced packaging helps to reduce overall costs which can then transform into higher profit margins for the business, or offering reduced prices for its customers. Hence, E-Commerce also means reduced waste for the benefit of the society as there is no need for excessive packaging any longer.
Better information. Thanks to E-Commerce, additional detailed information about the product and product updates can be placed on the firm’s website. The products being sold by a business can be promoted online as well making it more convenient for customers to access the information at any time. Product specifications can be very detailed and instruction manuals can be quickly translated into many different languages. Additionally, digital versions of products can be offer to customers.
Example 3: Audi stores the data and information about their products and customers in a database to determine the most popular products. These can then be used to develop various marketing strategy.
Less storage required. E-Commerce can benefit the business as there is no need to stock the product or display all of the products for the customers to see. Thereby, it reduces storage costs as paying for physical retail outlets is not longer required. Trading electronically also eliminates the problem of offering only limited stocks as space is not constrained anymore. So, the business does not need to limit itself to offering only the best-selling products.
Example 4: Amazon.com does not need a physical bookstore for storing books on its premises. Having a book shop would need to buy or rent premises to store all the books that are available for sale of the website.
While, E-Commerce has had a strong impact on the product, certain products still remain largely unaffected by the growth electronic trade, such as fresh food, specialist products such as prescription medication or expensive luxury products.
2. Impact of E-Commerce on Price
Transparency. Price transparency refers to the openness about prices charged by businesses. In other words, how easily customers are able to find out the prices. E-Commerce allows higher transparency of prices as customers can make instant comparisons using the Internet and other mobile technologies. This leads to higher market competition as now prices can not only be compared easily and rapidly by customers, but also by competitors, in both B2C and B2B markets. As majority of customers expect cheaper prices, they are now able to bargain for better deals based on greater price transparency.
Birth of price aggregators. As the Internet increases price transparency, it allows customers to access prices from all over the world and to make comparisons quite quickly easily. This intensifies competition between companies especially when people can use price comparison websites and smart phone apps known as price aggregators. Using price aggregators, customers can gain a better knowledge of prices of books, clothes, CDs and DVDs, flight tickets, children toys, insurance policies, etc. in an instant.
More competition-based pricing. Competition-based pricing is more likely to be adopted with E-Commerce. This is more favorable for consumers along with price transparency. Businesses need to be more competitive in terms of pricing strategies to maintain their market share against rival businesses. Business managers can near instantaneously adjust and update prices accordingly to better fulfill sudden changes in the level of demand.
Example 5: Apple’s iTunes offers competitive prices and allows people to purchase and download individual tracks from the CD album in its online music store.
Less premium pricing. Premium pricing is less likely to be adopted with E-Commerce. It happens when a traditional brick-and-mortar store enjoys being the only supplier of the product in a particular region. But when, E-Commerce becomes widespread, the regional monopoly is more vulnerable to price competition. It now faces a new threat from online businesses , hence is not able to set premium prices any longer.
Possible price reductions. The Internet allows businesses to cut out intermediaries – wholesalers and retailers – from the distribution process, hence eliminate intermediation costs. Typically, each intermediary adds a percentage mark-up in order to make its own profit. Thanks to E-Commerce, businesses can now sell directly to the consumer. After having lower costs, prices may then be reduced benefiting the customers.
Possible price increases. E-Commerce companies usually add shipping fees to the price of their products. These transportation costs, which are usually paid by customers, increase the final prices making them less competitive. In case of international trade – shipping products abroad – E-Tailers need to be aware of international trading regulations. There will be extra costs that will most likely apply such as customs and duties which are two common hurdles that come with selling goods internationally.
Dynamic pricing. Businesses trading online use data about consumers to charge different prices to different consumers depending on purchase history. Also, prices will be different during different times of the year depending on the level of demand.
Price should not be looked at in isolation, but it should always be considered with all other aspects of the Marketing Mix. It is because customers take holistic approach when making their purchasing decisions and do not buy products based only on money, but tend to go for products that offer the best overall value for money.
3. Impact of E-Commerce on Promotion
Quicker and cheaper promotion. Promotional opportunities have been greatly expanded by the Internet and other technological developments, and at the same time the costs of reaching huge numbers of potential customers has fallen dramatically. Without spending a huge amount of money every year to promote their products, businesses are able to benefit from the growing importance of globalization.
Internet technologies allowed many business organizations to cut costs by using online marketing strategies and yet appeal to a global audience. Marketers can use text, photos, audios and videos to promote their goods or services while customers can access more detailed information about products via online advertisements.
Example 6: Real estate agents can use the Internet to showcase homes and apartment for sale and rent using digital camera technology, so that clients can have virtual tours of the properties sitting in their home or office.
Relevant markets can be targeted easier. E-Commerce provides an additional medium of promotion to reach the exact group of customers specifically targeted. It allows marketers to create an online sales campaign that targets the needs and wants of any community in the world. This would not be possible with any other form of promotional media such as TV, radio or billboards. Companies can choose to promote their corporate vision and mission, develop their brand or promote their product range using the Internet. With more and more people having access to the Internet, E-Commerce will continue to prosper as a promotional tool providing businesses with further opportunities to attract specific target markets.
Allows interactive promotions. Banners, pop-ups, text messages, web pages, social marketing, QR codes, YouTube partnerships, paid search, Pay-Per-Click (PPC) or Pay-Per-View (PPV) – all of these terms were unheard of 20 years ago. Pay-Per-Click (PPC) schemes mean that the advertisers pay Google and Yahoo! each time a person clicks on the advertising banner.
Promotion can be spread very quickly and cheaply on the Internet through:
- Banner ads. The most common. The largest appear as elongated boxes at the bottom of the screen, covering about 2/3 of the screen width, hence the name.
- Interstitial ads. The ads that flash on the screen during the time your request is being handled.
- Pop-up ads. The ads that appear once a site has been loaded, but before you get access. They usually contain messages from the site company, but are increasingly being sold to independent entrepreneurs who want to take advantage of a popular site.
- Rich media ads. Ads that move, talk, beep, or flash.
After many people have already become used to various methods of interactive promotion, they often tend to ignore these advertisements.
Birth of Viral Marketing. E-Commerce has enabled firms to implement Viral Marketing as a promotional strategy which is a promotional technique that relies on the use of online social networks such as E-Mail, Facebook, LinkedIn, Twitter or YouTube. Viral Marketing is similar to word-of-mouth marketing but focuses on using social networks the internet. It allows such promotions to be seen by millions of potential customers around the world, hence can be a very cost-effective form of promotion. However, Viral Marketing has been questioned and criticized as being an unethical and undesirable form of promotion.
E-Commerce is a new media for Above-The-Line Promotion (ATL) and a new channel for Below-The-Line Promotion (BTL) using mainly interactive content and videos. How have traditional promotional methods including Above-The-Line Promotion (ATL) and Below-The-Line Promotion (BTL) evolved in response to these technological breakthroughs?
4. Impact of E-Commerce on Place (Distribution)
Global reach. The development of the Internet has fueled the potential of E-Commerce in reaching a potentially enormous customer base around the world at any time. Especially, it was enabling lots of businesses to reach a global audience at a fraction of the cost comparing with traditional methods of distribution which are rather expensive. To support the sale process, there are the specialist logistics companies ensuring that products sold online can reach customers on time. In fact, E-Commerce provided many opportunities for courier companies such as DHL and FedEx to grow in size.
Multilingualism. Thanks to E-Commerce, different languages can be used which offer a further advantage as a distribution channel in different languages can be used to capture an even larger audience. Paying for language translations of the company website, product descriptions and brochures is a relatively low cost comparing to the potential benefits of selling to customers from around the world. Users usually have an option to select their preferred language from the company’s home page. Most of the people in the world speak seven major languages such as Chinese, Hindi, English, Spanish, French, Arabic and Russian.
24/7 accessibility adds convenience. Buying through E-Commerce is often more convenient for customers than visiting retail outlets because purchases can be done from any place. Many shops have dedicated websites offering online purchases, in addition to their traditional retail stores, giving convenience to customers of shopping at any time regardless whether the actual shop is open or closed. Many schools, libraries and universities offer students remote online access to millions of E-Books, courses and research papers.
Shorter and lessened channels of distribution. E-Commerce shortens the channel of distribution as fewer intermediaries are used. This reduced length of supply chain reduces operating costs bringing enormous benefits.
Example 7: Amazon.com which was established in 1995 became the world’s largest book retailer in just six year by benefited from being able to use the Internet as a means of distribution - not having to use intermediaries to sell its products.
Destruction of traditional channels of distribution. The Internet provides a low cost alternative to traditional retail channels. Traditional distribution channels are being destroyed through creative innovations in the digital industry by cutting out the middleman, usually a wholesaler. However, physical outlets may still be essential to give consumers the confidence to buy over a businesses’ website; to provide non-internet subscribers the opportunity to buy the product; with some products, customers may want to inspect first before buying.
Not appropriate for all products. As E-Commerce remains a relatively new channel of distribution, it is still not appropriate for all products. It is mainly due to its impersonal nature – online businesses offer a relatively impersonal service. Customers may not be willing to purchase certain products online for various reasons: they cannot examine the product nor test the product on the spot; they may feel that online product descriptions are not or that it is too much of uncertainty to buy products online. Instead, such customers may prefer to buy product in a physical retail outlet to have a sense of security in directly dealing with people.
No matter whether distribution of products is done in the traditional way or online, distribution remains an integral part of any marketing strategy.
Online technologies have been be an effective element of the Marketing Mix. In this place, it is worth to mention that while E-Commerce has tremendous impact on 4Ps of Marketing Mix for products, on the contrary, it reduces the impact of the other three Ps in 7Ps of Marketing Mix for services including people, processes and physical evidence.
