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Internet Marketing: Strategy, Implementation and Practice
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An imprint of
Additional student support at
www.pearsoned.co.uk/chaffey
Internet Marketing: Strategy, Implementation and Practice, Third Edition provides a comprehensive guide to how organisations
can use the Internet to support their marketing activities, and covers all aspects of Internet marketing — environment,
analysis, strategy development, and digital marketing campaign-planning and execution.
The book is based on emerging academic models and examples of best practice from leading experts in digital media.
The practical knowledge developed through reviewing these concepts and practices will enable the reader to exploit the
opportunities of marketing using the Internet while minimising risks.
Strategy, Implementation and Practice Strategy, Implementation and Practice Internet Marketing Internet Marketing
THIRD
EDITION Ellis-Chadwick Mayer Ellis-Chadwick Mayer Chaffey Johnston Chaffey Johnston
‘The authors have been highly successful in showing that they not only understand the relevant academic
literature but are also familiar with the complexities of real life experienced by many practitioners.’
Dr Ahmad Jamal, Cardiff Business School
‘Comprehensive, up-to-date and practical in focus.’
Dr Lisa Harris, Brunel University
A Companion Website at www.pearsoned.co.uk/chaffey contains additional study materials for students, as well as
extensive links to relevant websites and extra pedagogical resources designed for lecturers.
Dave Chaffey (www.davechaffey.com) is an Internet Marketing trainer and consultant for Marketing Insights Limited. He is
a lecturer on e-marketing courses at Cranfield and Warwick Universities and the Institute of Direct Marketing. Dave has
been recognised by the CIM as one of the 50 marketing 'gurus' worldwide who have shaped the future of marketing.
Fiona Ellis-Chadwick is a lecturer in Marketing at the Business School at Loughborough University and is a member of the
Marketing and Retailing Research Group. Her work has been published in Journal of Business Research, International
Journal of Retail Distribution and Management, European Journal of Marketing, Internet Research, and Journal of Retailing and
Consumer Services.
Richard Mayer is a Senior Lecturer in Marketing at the University of Derby, where he is the programme manager for CIM
qualifications. He is also the Director of his own Marketing Training Company, specialising in Strategic Marketing, Business
to Business Marketing and Marketing Communications.
Kevin Johnston is a Senior Lecturer at Liverpool John Moores University, specialising in marketing, strategy and e-commerce.
He previously lectured at the University of Derby, where he created one of the UK’s first e-commerce degree programmes.
New features in this edition include:
In-depth global cases illustrating best practice and the challenges of online marketing from well-known global
e-businesses, including Amazon and eBay
Updated references to the full range of digital media, including blogging, RSS, instant messaging, podcasting,
digital TV and mobile marketing
Improved four-colour design to increase clarity and ease readability
Greater focus on strategy and development, with a revised chapter on Improving E-Marketing Performance
Additional student support at
www.pearsoned.co.uk/chaffey
ISBN 0-273-69405-7
9 780273 694052
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0273694057_COVER 11/5/06 13:48 Page 1
Internet Marketing
Strategy, Implementation and Practice
Visit the Internet Marketing, third edition Companion Website at
www.pearsoned.co.uk/chaffey to find valuable student learning material
including:
● Web links to case study materials, academic articles and examples of
best practice
● Guidance on tools and techniques for effective web sites
● A comprehensive online glossary
INMA_A01.QXD 17/5/06 12:00 Page i
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Third Edition
Internet Marketing
Strategy, Implementation and Practice
Dave Chaffey
Fiona Ellis-Chadwick
Richard Mayer
Kevin Johnston
INMA_A01.QXD 17/5/06 12:00 Page iii
Pearson Education Limited
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First published 2000
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ISBN-13: 978-0-273-69405-2
ISBN-10: 0-273-69405-7
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iv
INMA_A01.QXD 17/5/06 12:00 Page iv
Preface xiii
Guided tour xxii
About the authors xxv
Acknowledgements xxvi
1 An introduction to Internet marketing 3
2 The Internet micro-environment 41
3 The Internet macro-environment 97
4 Internet marketing strategy 151
5 The Internet and the marketing mix 214
6 Relationship marketing using the Internet 256
7 Delivering the online customer experience 301
8 Interactive marketing communications 348
9 Maintaining and monitoring the online presence 415
10 Business-to-consumer Internet marketing 451
11 Business-to-business Internet marketing 484
Glossary 514
Index 534
v
Brief contents
Part 1 Internet marketing fundamentals
Part 2 Internet strategy development
Part 3 Internet marketing: implementation and practice
INMA_A01.QXD 17/5/06 12:00 Page v
1
INMA_A01.QXD 17/5/06 12:00 Page vi
vii
Contents
Preface xiii
Guided tour xxii
About the authors xxv
Acknowledgements xxvi
1 An introduction to Internet marketing 3
Learning objectives / Questions for marketers /
Links to other chapters 3
Introduction – how significant is the Internet for
marketing? 4
Marketing applications of Internet marketing 5
Our changing media consumption 6
Our changing buyer behaviour 7
What is Internet marketing? 8
E-marketing defined 9
Digital marketing defined 10
E-commerce and e-business defined 11
E-business defined 11
Business or consumer model? 12
What benefits does the Internet provide for the
marketer? 14
A strategic approach to Internet marketing 18
How do Internet marketing communications differ
from traditional marketing communications? 20
A short introduction to Internet technology 26
How does the Internet work? 27
From the Internet to intranets and extranets 32
Case Study 1 eBay thrives in the global
marketplace 33
Summary 37
Exercises 38
Self-assessment exercises 38
Essay and discussion questions 38
Examination questions 38
References 39
Further reading 39
Web links 40
2 The Internet micro-environment 41
Learning objectives / Questions for marketers /
Links to other chapters 41
Introduction 42
Different environment components 43
Marketplace 45
Competitive forces 46
Value creation and value chain analysis 49
New channel structures 53
Location of trading in marketplace 57
Commercial arrangement for transactions 58
Business models in e-commerce 59
Revenue models 61
Customers 61
Assessing demand for e-commerce services 62
Online demand for business services 72
Online buyer behaviour 74
Customer persona and scenario analysis 75
Multi-channel customer experiences 77
Models of online buyer behaviour 78
Competitors 85
Suppliers 86
Intermediaries 86
Case Study 2 Zopa launches a new lending model 90
Summary 92
Exercises 93
Self-assessment exercises 93
Essay and discussion questions 93
Examination questions 94
References 94
Further reading 96
Web links 96
3 The Internet macro-environment 97
Learning objectives / Questions for marketers /
Links to other chapters 97
Introduction 98
Social factors 99
Social exclusion 100
Legal and ethical issues of Internet usage 101
Privacy legislation 101
Other e-commerce legislation 113
Technological factors 116
Alternative digital technologies 120
Digital radio 129
Security 131
Part 1
INTERNET MARKETING FUNDAMENTALS
INMA_A01.QXD 17/5/06 12:00 Page vii
CONTENTS
viii
Economic factors 136
Globalisation 137
Political factors 138
Internet governance 139
Taxation 140
Tax jurisdiction 140
Case Study 3 Boo hoo – learning from the largest
European dot-com failure 141
Summary 144
Exercises 144
Self-assessment exercises 144
Essay and discussion questions 144
Examination questions 145
References 145
Further reading 146
Web links 147
4 Internet marketing strategy 151
Learning objectives / Questions for marketers /
Links to other chapters 151
Introduction 152
Internet strategy is a channel marketing strategy 152
The scope of Internet marketing strategy 153
An integrated Internet marketing strategy 154
Is a separate Internet marketing plan needed? 154
A generic strategic approach 157
Situation review 160
Internal audit or analysis 160
External audits or analysis 166
Strategic goal setting 168
Frameworks for objective setting 172
Strategy formulation 174
Decision 1: Market and product development
strategies 176
Decision 2: Business and revenue models strategies 179
Decision 3: Target marketing strategy 180
Decision 4: Positioning and differentiation
strategy (including the marketing mix) 185
Decision 5: Multi-channel distribution strategy 191
Decision 6: Multi-channel communications
strategy 194
Decision 7: Online communications mix and budget 196
Decision 8: Organisational capabilities (7S) 197
Strategy implementation 204
Case Study 4 Tesco.com uses the Internet to
support its diversification strategy 207
Summary 209
Exercises 210
Self-assessment exercises 210
Essay and discussion questions 210
Examination questions 211
References 211
Further reading 213
Web links 213
5 The Internet and the marketing mix 214
Learning objectives / Questions for marketers /
Links to other chapters 214
Introduction 215
Product 217
The long tail concept 223
The Internet and branding 224
The importance of brand online 229
Price 231
1 Increased price transparency 231
2 Downward pressure on price 233
3 New pricing approaches (including auctions) 235
4 Alternative pricing structure or policies 237
Place 237
1 Place of purchase 238
2 New channel structures 240
3 Channel conflicts 240
4 Virtual organisations 242
Promotion 243
People, process and physical evidence 245
People 245
Process 248
Physical evidence 248
Case Study 5 The re-launched Napster changes
the music marketing mix 248
Summary 251
Exercises 252
Self-assessment exercises 252
Essay and discussion questions 252
Examination questions 252
References 253
Further reading 255
Web links 255
6 Relationship marketing using the
Internet 256
Learning objectives / Questions for marketers /
Links to other chapters 256
Introduction 257
Key concepts of relationship marketing 258
Part 2
INTERNET STRATEGY DEVELOPMENT
INMA_A01.QXD 17/5/06 12:00 Page viii
CONTENTS
Benefits of relationship marketing 258
Differentiating customers by value 260
Key concepts of electronic customer relationship
management (e-CRM) 262
Benefits of e-CRM 263
Marketing applications of CRM 264
CRM technologies and data 264
Customer lifecycle management 267
Permission marketing 268
Personalisation and mass customisation 270
Online and multi-channel service quality 272
Approaches to implementing e-CRM 272
Stage 1: Attract new and existing customers to site 273
Stage 2a: Incentivise visitors to action 273
Stage 2b: Capture customer information to
maintain relationship 273
Stage 3: Maintain dialogue using online
communication 275
Stage 4: Maintain dialogue using offline
communication 276
The IDIC approach to relationship building 277
Techniques for managing customer activity and
value 278
Lifetime value modelling 278
Loyalty schemes 286
Virtual communities 288
Customer experience – the missing element
required for customer loyalty 290
Case Study 6 Boots mine diamonds in their
customer data 291
Summary 293
Exercises 294
Self-assessment exercises 294
Essay and discussion questions 294
Examination questions 294
References 295
Further reading 296
Web links 296
7 Delivering the online customer
experience 301
Learning objectives / Questions for marketers /
Links to other chapters 301
Introduction 302
Planning web site design and build 304
Who is involved in a web site project? 306
Web site prototyping 308
Initiation of the web site project 309
Domain name registration 309
Selecting an Internet service provider (ISP) 310
Researching site users’ requirements 312
Usability 312
Web accessibility 314
Localisation 317
Reviewing competitors’ web sites 317
Designing the information architecture 318
Designing the user experience 322
Developing customer-oriented content 323
Marketing-led site design 324
Elements of site design 324
Site design and structure 324
Page design 332
Content design 332
Development and testing of content 334
Testing content 334
Tools for web site development and testing 334
Promote site 335
Service quality 335
Tangibles 336
Reliability 337
Responsiveness 337
Assurance 338
Empathy 338
The relationship between service quality, customer
satisfaction and loyalty 339
Case Study 7 Refining the online customer
experience at dabs.com 341
Summary 343
Exercises 344
Self-assessment exercises 344
Essay and discussion questions 345
Examination questions 345
References 345
Further reading 347
Web links 347
8 Interactive marketing communications 348
Learning objectives / Questions for marketers /
Links to other chapters 348
Introduction 349
The characteristics of interactive marketing
communications 350
Differences in advertising between traditional and
digital media 354
Integrated Internet marketing communications 357
Integration through time 360
Campaign response mechanics 362
ix
Part 3
INTERNET MARKETING:
IMPLEMENTATION AND PRACTICE
INMA_A01.QXD 17/5/06 12:00 Page ix
CONTENTS
x
Objectives and measurement for interactive
marketing communications 363
Conversion marketing objectives 365
Timescales for objective setting 366
Campaign cost objectives 367
Offline promotion techniques 370
Advantages and disadvantages of using offline
communications to support e-commerce 371
Incidental and specific advertising of the online
presence 371
Public relations 372
Direct marketing 372
Other physical reminders 372
Word of mouth 373
Online promotion techniques 373
1 Search engine marketing 373
(a) Search engine optimisation (SEO) 376
(b) Pay-per-click (PPC) search marketing 381
(c) Trusted feed 383
2 Online PR 384
What is PR? 384
What is online PR? 385
Differences between online PR and traditional PR 385
Online PR activities 386
3 Online partnerships 388
(a) Affiliate marketing 388
(b) Online sponsorship 390
4 Interactive advertising 391
Fundamentals of online advertising 391
The purpose of interactive advertising 392
Measurement of interactive ad effectiveness 393
Interactive ad targeting options 393
Interactive ad formats 394
Making banner advertising work 395
Buying advertising 395
5 E-mail marketing 397
Opt-in e-mail options for customer acquisition 398
Opt-in e-mail options for prospect conversion and
customer retention (house list) 398
E-mail marketing success factors 399
Managing inbound e-mail communications 400
6 Viral marketing 400
On-site promotional techniques 402
Selecting the optimal communications mix 403
Case Study 8 Making FMCG brands sizzle online 407
Summary 409
Exercises 410
Self-assessment exercises 410
Essay and discussion questions 411
Examination questions 411
References 411
Further reading 413
Web links 413
9 Maintaining and monitoring the online
presence 415
Learning objectives / Questions for marketers /
Links to other chapters 415
Introduction 416
Performance management for Internet marketing 417
Stage 1: Creating a performance management
system 418
Stage 2: Defining the performance metrics
framework 420
Stage 3: Tools and techniques for collecting
metrics and summarising results 424
The maintenance process 433
How often should material be updated? 434
Responsibilities in web site maintenance 435
Who owns the process? 435
Who owns the content? 438
Who owns the format? 438
Who owns the technology? 438
Content management 440
Case Study 9 Learning from Amazon’s culture
of metrics 441
Summary 446
Exercises 447
Self-assessment exercises 447
Essay and discussion questions 448
Examination questions 448
References 448
Further reading 449
Web links 449
10 Business-to-consumer Internet
marketing 451
Learning objectives / Questions for marketers /
Links to other chapters 451
Introduction 452
Key themes and concepts 452
Online customers 453
Who are the online customers? 453
Online customers’ expectations and motivations 457
E-retailing 462
Development of e-retailing 462
E-retailing: the virtual channel 467
E-retail activities 467
Information functions 467
Interactive functions 468
INMA_A01.QXD 17/5/06 12:00 Page x
CONTENTS
Who are the e-retailers and what are they selling? 469
Implications for e-retail marketing strategy 472
Case Study 10 lastminute.com: establishing and
maintaining a competitive position 478
Summary 480
Exercises 481
Self-assessment exercises 481
Essay and discussion questions 481
Examination questions 481
References 481
Further reading 483
Web links 483
11 Business-to-business Internet
marketing 484
Learning objectives / Questions for marketers /
Links to other chapters 484
Introduction 485
Key themes and concepts 485
B2B e-context 486
Online environment analysis 486
Commercial exchanges in B2B markets 493
The electronic marketplace 493
How organisations are using Internet technologies 495
Trading relationships in B2B markets 501
The exchange process 502
The buying function 502
Trading partnerships 503
Digital marketing strategies 504
Case Study 11 Growth, volume and dispersion of
electronic markets 506
Summary 510
Exercises 511
Self-assessment exercises 511
Essay and discussion question 511
Examination question 511
References 511
Further reading 513
Web links 513
Glossary 514
Index 534
xi
INMA_A01.QXD 17/5/06 12:00 Page xi
Supporting resources
Visit www.pearsoned.co.uk/chaffey to find valuable online resources.
Companion Website for students
● Web links to case study materials, academic articles and examples of best
practice
● Guidance on tools and techniques for effective web sites
● A comprehensive online glossary
For instructors
● Complete, downloadable Instructor’s Manual
● PowerPoint slides that can be downloaded and used as OHTs
For more information please contact your local Pearson Education sales
representative or visit www.pearsoned.co.uk/chaffey.
OneKey: All you and your students need to succeed
OneKey is an exclusive new resource for instructors and
students, giving you access to the best online teaching and
learning tools 24 hours a day, 7 days a week.
OneKey means all your resources are in one place for
maximum convenience, simplicity and success.
A OneKey product is available for Internet Marketing, third edition for use with
Blackboard™, WebCT and CourseCompass. It contains:
● Interactive Study Guide
● Assessment questions to test your understanding
● Flashcards to aid revision
● Video cases to give you real world application
For more information about the OneKey product please contact your local Pearson
Education sales representative or visit www.pearsoned.co.uk/onekey.
Convenience. Simplicity. Success.
INMA_A01.QXD 17/5/06 12:00 Page xii
Introduction
The Internet – opportunity and threat
The Internet represents a tremendous opportunity. For customers, it gives a much wider
choice of products, services and prices from different suppliers and the means to select
and purchase items more readily. For organisations marketing these products and services it gives the opportunity to expand into new markets, offer new services and
compete on a more equal footing with larger businesses. For those working within these
organisations it gives the opportunity to develop new skills and to use the Internet to
improve the competitiveness of the company.
At the same time, the Internet gives rise to many threats to organisations. For example, start-up companies such as Amazon (books) (www.amazon.com), Expedia (travel)
(www.expedia.com), AutoByTel (cars) (www.autobytel.com) and CDWOW (CDs)
(www.cdwow.com) have captured a significant part of their market and struck fear into
the existing players. Indeed the phrase ‘amazoning a market sector’ has become an
often-used expression among marketers.
The Internet – management issues
With the success stories of companies capturing market share together with the rapidly
increasing adoption of the Internet by consumers and business buyers has come a fastgrowing realisation that all organisations must have an effective Internet presence to
prosper, or possibly even survive! Michael Porter has said:
The key question is not whether to deploy Internet technology – companies have no
choice if they want to stay competitive – but how to deploy it.
What are these challenges of deploying Internet and digital technology? Figure 1 gives
an indication of the marketing activities that need to be managed effectively which are
covered in this book.
The figure shows the range of different marketing activities or operating processes
needed to support acquiring new customers through communicating with them on
third-party web sites, attracting them to a company web site, converting them to sale
and then using online media to encourage further sales. Applying the Internet as part of
multi-channel marketing to support customer journeys through different media is also a
major theme throughout this text. Management processes related to Internet marketing
include planning how Internet marketing can be best resourced to contribute to the
organisation and integrate with other marketing activities. The increased adoption of
Internet marketing also implies a significant programme of change that needs to be
managed. New forms of objectives need to be set, new communications strategies developed and staff developed through new responsibilities and skills.
xiii
Preface
INMA_A01.QXD 17/5/06 12:00 Page xiii
The Internet – new skills required?
The aim of this text is to provide you with a comprehensive guide to the concepts, techniques and best practice to support all the digital marketing processes shown in Figure 1.
This book is based on emerging academic models together with best practice from leading adopters of digital media. The practical knowledge developed through reviewing
these concepts and best practice is intended to enable graduates entering employment
and marketing professionals to exploit the opportunities of marketing using the Internet
while minimising the risks.
PREFACE
xiv
Figure 1 Key organisational processes for Internet marketing
Source: E-consultancy (2005), author Dave Chaffey
Customer service
Performance improvement including management information, web analytics and customer analysis
Supporting processes
Design guidelines and operating procedures
Technical infrastructure including service level management
Design and development
Site usability and accessibility
Merchandising
Content management
Content creation
Proposition development
Conversion/proposition
development
Offline campaigns
Online PR
E-mail marketing
Online ads/sponsorship
Partnerships/affiliates
Pay Per Click search
Search engine optimisation
Acquisition
Operating process
es
Creating the vision
Assessing technological innovation
Market analysis and competitor benchmarking
Financial analysis and modelling
Defining the multichannel customer experience
Managing customer information
Annual planning and budgeting
IT project and campaign planning and management
Strategy and planning
Interfacing with senior management
Interfacing with marketing and corporate
communications
Interfacing with IT
Staff development, education and retention
Managing external relationships
Vendor selection and management
Managing improvement and change
Managing relationships
Management process
es
Personalisation
Loyalty programmes
Touch strategy definition
Customer management
E-mail marketing
Outbound communications
Proposition development
Retention and
growth
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