1. E-MARKETING, 6TH EDITION
JUDY STRAUSS AND RAYMOND FROST
Chapter 2: Strategic E-Marketing and Performance
Metrics

2. Strategic Planning
 Strategic planning is the “managerial process of
developing and maintaining a viable fit between the
organization’s objectives, skills, and resources and its
changing market opportunities.” (Kotler and Keller, 2008)
 Two key elements of strategic planning are:
- The preparation of a SWOT analysis,
- The establishment of strategic objectives.

3. SWOT Analysis
Strengths, Weaknesses, Opportunities, and Threats
 It examines:
- The company’s internal strengths and weaknesses with respect
to the environment,
- The competition looks at external opportunities and threats.
 Opportunities may help to define a target market or identify
new product opportunities, while threats are areas of exposure.

4. Example: The Amazon story
Strength A smart and talented team that stayed focused and
learned what it didn’t know.
Weakness No experience in:
-Selling books
-Processing credit card transactions
-Boxing books for shipment
Opportunity To sell online.
Threat A full-scale push by one of the large bookstore chains to
claim the online market.

5.  A company’s strengths and weaknesses in the online world
may be somewhat different from its strengths and weaknesses
in the brick-and-mortar world.
 Barnes & Noble has enormous strengths in the brick-and-
mortar world but these do not necessarily translate into
strengths in the online world:
 Channel conflict = having to explain to channel partners why
customers can purchase for less online than in the store.

6. Internal Capability Examples
Customer interactions E-commerce, customer service,
distribution channels
Production and fulfillment SCM, production scheduling, inventory
management
People Culture, skills, knowledge management,
leadership and commitment to e-business
Technology ERP systems, legacy applications,
networks, Web site, security, IT skills
Core infrastructure Financial systems, R&D, HR
Key Internal Capabilities for E-Business
Source: Adapted from Kalakota and Robinson (1999)

7. Strategic Objectives
 Growth. How much can the firm reasonably expect to grow in terms of
revenues, and how fast?
 Competitive position. How should the firm position itself against other
firms in the industry? Viable positions are:
- Industry leader (Google, Microsoft),
- Price leader (Priceline.com),
- Quality leader (Mercedes),
- Niche firm (eMarketer),
- Best customer service (Dell, Amazon).
 Geographic scope. Where should the firm serve its customers on
the continuum of local to multinational?
 Other objectives. Companies often set objectives for the number
of industries they will enter, the range of products they will offer,
the core competencies they will foster, and so on.
Point of Parity  Point
of difference

8. Environment, Strategy, and Performance
Exhibit 2 - 1 Focusing on Strategy and Performance

9. Strategy
 It is the means to achieve a goal.
 It is concerned with how the firm will achieve its
objectives, not what its goals are:
1. The firm sets its growth and other objectives,
2. It decides which strategies it will use to accomplish them,
3. The tactics are detailed plans to implement the strategies.
 It is important to note that objectives (what), strategies
(How), and tactics (detailed outline) can exist at many
different levels in a firm.

10. From Strategy to Electronic Strategy
 The deployment of enterprise resources to capitalize
on technologies for reaching specified objectives
that ultimately improve performance and create
sustainable competitive advantage.
 E-business strategy
 Corporate / enterprise Strategy + Information Technology
 E-marketing strategy
 Marketing strategy + Information technology

11. From Strategy to Electronic Strategy
• Most strategic plans explain the rationale for the chosen objectives
and strategies. There are four appropriate types of rationale:
 Strategic justification shows how the strategy fits with the
firm’s overall mission and business objectives,
 Operational justification identifies and quantifies the specific
process improvements that will result from the strategy,
 Technical justification shows how the technology will fit and
provide synergy with current information technology
capabilities,
 Financial justification examines cost/benefit analysis and uses
standard measures (ROI, NPV).

12. From Business Models to E-Business Models
 Business model: a method by which the organization sustains
itself in the long term, and includes its value proposition for
partners and customers as well as its revenue streams.
 A firm will select one or more business models as strategies to
accomplish enterprise goals.
 Critical components:
 Customer value. Does the model create value through its product
offerings that is differentiated in some way from that of competitors?
 Scope. Which markets do the firm serve, and are they growing? Are
these markets currently served by the firm, or will they be higher risk new
markets?
 Price. Are the firm’s products priced to appeal to markets and also
achieve company share and profit objectives?

13. How does a firm select
the best business models?
 Critical components (continued………….)
 Revenue sources. Where is the money coming from? Is it plentiful
enough to sustain growth and profit objectives over time?
 Connected activities. What activities will the firm need to perform to
create the value described in the model? Does the firm have these
capabilities?
 Implementation. The company must have the ability to actually make it
happen.
 Capabilities. Does the firm have the resources (financial, core
competencies, and so on) to make the selected models work?
 Sustainability. The e-business model is particularly appropriate if it will
create a competitive advantage over time.

14. E-Business Models
 The direct connection with information technology
makes a business model an e-business model:
 E-Business Model = Business Model + Information Technology
 Values and Revenue
 Whether online or offline, the value proposition involves
knowing what is important to the customer or partner and
delivering it better than other firms.
 How e-marketing contributes to the e-business
model?

15. E-Marketing Contributes to the E-Business Model
E-Marketing Increases Benefits
Online mass customization Personalization
24/7 convenience
Self-service ordering and tracking
One-stop shopping
Learning, engaging, and communicating with customers on social networking sites
E-Marketing Decreases Costs
Low cost distribution of communication messages
Low cost distribution channel for digital products
Lowers costs for transaction processing
Lowers costs for knowledge acquisition
Creates efficiencies in supply chain
Decreases the cost of customer service
E-Marketing Increases Revenues
Online transaction revenues such as product, information, advertising, and
subscriptions sales; or commission/fee on a transaction or referral
Add value to products/services and increase prices
Increase customer base by reaching new markets
Build customer relationships and thus increase current customer spending (Share of
wallet)

16. Menu of Strategic E-Business Models
 A key element in setting strategic objectives is to take stock of the
company's current situation and decide the level of commitment to e-
business in general and e-marketing in particular.
 Questions prior to embarking on any e-business strategies:
 Are the business models likely to change in my industry?
 What does the answer to question I mean to my company?
 When do I need to be ready?
 How do I get there from here?

17. Pure
Play
Enterprise
Business Process
Activity
Pure dot-com
(Amazon)
Click and Mortar
(eSchwab, most retailers)
Customer
Relationship
Management
Brochureware
E-mail
Levelofbusinessimpact
Business transformation
(competitive advantage,
industry redefinition)
Effectiveness
(customer
retention)
Efficiency
(cost
reduction)
Exhibit 2 - 1 Level of Commitment to E-business
Source: Adapted from www.mohansawhney.com

18. Activity Level E-Business Models
 Online purchasing.
 Firms can use the Web to place orders with suppliers, thus automating the
activity.
 Order processing.
 This occurs when online retailers automate Internet transactions created by
customers.
 E-mail.
 When organizations send e-mail communications to stakeholders, they save
printing and mailing costs.
 Content publisher.
 Companies create valuable content or services on their Web sites, draw lots of
traffic, and sell advertising. Another type of content publishing, the firm posts
information about its offerings on a Web site, thus saving printing costs =
brochureware.

19. Activity Level E-Business Models
 Business intelligence (BI).
 This refers to the gathering of secondary and primary information about
competitors, markets, customers, and more.
 Online advertising.
 As an activity, the firm buys advertising on someone else’s e-mail or Web site.
 Online sales promotions.
 Companies use the Internet to send samples of digital products (e.g., music or
software), or electronic coupons, among other tactics.
 Pricing strategies.
 With dynamic pricing, a firm presents different prices to various groups of
customers, even at the individual level.

20. Business Process Level E-Business Models
 Customer relationship management (CRM) = retaining + growing business /
individual customers through strategies that ensure their satisfaction with the
firm and its products = keep customers for the long term + increase the
number and frequency of their transactions.
 Knowledge management (KM) = combination of a firm’s database contents
+ the technology used to create the system + the transformation of data into
useful information and knowledge.
 Supply chain management (SCM) = coordination of the distribution channel
to deliver products more effectively and efficiently to customers.
 With community building, firms build Web sites to draw groups of special-
interest users. Firms invite users to chat / post e-mail on their Web sites to
attract potential customers to the site.

21. Business Process Level E-Business Models
 Affiliate programs
 when firms put a link to someone else’s retail Web site and
earn a commission on all purchases by referred customers.
 Database marketing
 collecting, analyzing, and disseminating electronic
information about customers, prospects, and products to
increase profits.
 Enterprise resource planning (ERP)
 a back-office system for order entry, purchasing, invoicing,
and inventory control.
 Mass customization
 Internet’s unique ability to customize marketing mixes
electronically and automatically to the individual level.

22. Enterprise Level E-Business Models
 E-commerce refers to online transactions: selling goods and services on the
Internet, either in one transaction or over time with an ongoing subscription.
 Direct selling refers to a type of e-commerce in which manufacturers sell directly to
consumers, eliminating intermediaries such as retailers.
 Content sponsorship online is a form of e-commerce in which companies sell
advertising either on their Web sites or in their e-mail.
 A portal is point of entry to the Internet, such as the Yahoo! and AOL Web sites. They
are portals because they provide many services in addition to search capabilities.
 Online brokers are intermediaries that assist in the purchase negotiations
without actually representing either buyers or sellers. The revenue stream in
these models is commission or fee-based:
 The brokerage model are E*Trade (online exchange), and eBay (online auction),
 Broker Vs. Agent

23. Enterprise Level E-Business Models
 Online agents represent either the buyer or the seller and earn a commission for
their work.
 Selling agents help a seller move product.
 Manufacturer’s agents represent manufacturing firms that sell complementary
products to avoid conflicts of interest.
 Purchasing agents represent buyers.
 An online purchasing agent is called a buyer cooperative or a buyer aggregator.
 Shopping agents help individual consumers find specific products and the best
prices online (e.g., www.mysimon.com).
 The reverse auction, allows individual buyers to enter the price they will pay for
particular items at the purchasing agent’s Web site, and sellers can agree or not.
 A virtual mall is similar to a shopping mall in which multiple online merchants are
hosted at a Web site.

24. Pure Play
 Pure plays = businesses that began on the Internet, even if they
subsequently added a brick-and-mortar presence.
 E.g. E*Trade is a pure play, beginning with only online trading
 Pure plays face significant challenges: They must compete as new
brands and take customers away from established brick-and-mortar
businesses.
 One way to change the rules is to invent a new e-business model, as
Yahoo! and eBay did.

25. An Optimized System of E-Business Models
 E-business is the continuous optimization of a firm’s business
activities through digital technology.
 Firms usually combine traditional business and e-business models.
E.g. Schwab = combined its online and offline brokerages in a
unified system.
 The challenge: customers expect a high degree of coordination
between online and offline operations.
 The danger: the established corporate culture might squash e-
commerce initiatives or slow them down with the best of intentions.
 The solution: Many businesses have spun off their e-commerce
operations as wholly owned subsidiaries or pure plays so they
can compete without the weight of the parent business.

26. An Optimized System of E-Business Models
 A fully optimized e-business that uses the Internet
to sell is the sum of multiple e-business activities
and processes: E-commerce, business intelligence,
customer relationship management, supply chain
management, and enterprise resource planning as
represented in the following equation:
EB = EC + BI + CRM + SCM + ERP

27. Performance Metrics
 The only way to know whether a company has reached its objectives
is to measure results.
 Specific measures designed to evaluate the effectiveness and efficiency of
an organization’s operations.
 Armed with this information, the company can make corrections to be sure
it accomplishes the goal.
 Performance metrics should be defined along with the strategy formulation
so the entire organization will know what results constitute successful.
 Steps in measuring strategy effectiveness:
 Translate the vision, strategy, or e-business model into components that
have measurable outcomes that various departments can use to create
action plans,
 Communicate to employees what results the firm values.
 When employee evaluations are tied to the metrics, people will be
motivated to make decisions that lead to the desired outcomes.
 Web Analytics

28. The Balanced Scorecard
 BEFORE, to measure success, firms used:
 Financial performance, Market share, The bottom line (profits).
 BUT these approaches are narrowly focused and place more weight
on short-term results rather than addressing the firm's long-term
sustainability.
 NOW, they use: The Balanced Scorecard
 The scorecard approach links strategy to measurement by asking
firms to consider their vision, critical success factors for accomplishing
it, and subsequent performance metrics in four areas:
Customer, internal, innovation and learning, and financial.

29. Customer
Perspective
Internal Business
Perspective
Innovation and
Learning
Perspective
Financial
Perspective
Goals Measures Goals Measures Goals Measures Goals Measures
Exhibit 2 - 1 The Balanced Scorecard Has Four Perspectives

30. Four Perspectives
 The customer perspective
 Uses measures of the value delivered to customers.
 These metrics tend to fall into four areas:
time, quality, performance and service, and cost.
 The internal perspective
 Evaluates company success at meeting customer expectations
through its internal processes.
 The learning and growth perspective
 Companies place value on continuous improvement to
existing products and services as well as on innovation in
new products.
 The financial perspective
 Income and expense metrics as well as return on
investment, sales, and market share growth.

31. Scorecard Benefits
 Obtain timely information to update its strategy.
 Balance long-term and short-term measures and evaluate every part of the firm
and how each contributes toward accomplishing selected goals.
 It helps firms leverage their relationships with partners and supply chain members.
 Go beyond financial metrics in measuring many different aspects that lead to
effective and efficient performance.
 Creates a long-term perspective for company sustainability.
 Forces companies to decide what is important and translate those decisions
into measurable outcomes that all employees can understand.
 A great communication tool because employees can use the scorecard as a
guide to coordinate their efforts.
 Support employee evaluation in that individual performance can be tied to
successful outcomes on the metrics.
 A way to measure intangible as well as tangible assets.
 The are flexible and allow firms to select appropriate metrics for their
goals, strategies, industry, and specific vision.