Virtual online worlds - Enabling technologies to establish interwoven relationships to network constituents in an emerging virtual marketspace

Master's Thesis, 2007

181 Pages, Grade: 1st


Table of Contents




List of Figures

List of Tables

1. Introduction

Chapter I
2. Literature Review
2.1 The Role of the Internet for E-businesses & Marketers
2.1.1 Opportunities& Advantages of Enabling Tec hnologies Interactivity Intelligence Individualisation Integration Industry Restructuring Independence of Location
2.1.2 Challenges & Disadvantages of Enabling Technologies
2.2 E-Marketing Strategy & E-Marketing Mix
2.2.1 Product
2.2.2 Price
2.2.3 Place
2.2.4 Promotion
2.2.5 People
2.2.6 Physical Evidenc e
2.2.7 Process
2.2.8 Partnership
2.3 Relationship Marketing
2.3.1 Online Relationship Marketing
2.4 Technological Innovation & First-Mover Advantage
2.5 Sustainable Competitive Advantage
2.6 Online Consumer Behaviour in the Networked Economy
2.7 Social Networks& Virtual Online Communities
2.7.1 Social Networks
2.7.2 Virtual Online Communities User-generated Content & Consumer Empowerment Involvement Value Creation & Transfer
2.8 Literature Review Résumé

Chapter II
3. Methodology
3.1 Marketing Researc h Problem Definition
3.2 Marketing Researc h Approach & Researc h Strategy
3.3 Marketing Researc h Design
3.4 Marketing Researc h Methods & Tec hniques
3.4.1 Secondary Research Methods
3.4.2 Primary Researc h Methods Semi-Structured Telephone Interview Participant Observation Self-Administered Internet-Mediated Questionnaire Question Design
3.5 Sampling
3.6 Marketing Researc h Ethic s
3.7 Marketing Researc h Limitation

Chapter III
4. Second Life
4.1 Linden Research Inc.
4.2 Second Life Population & Demographics
4.3 Opportunities
4.4 Challenges

Chapter IV
5. Key Findings & Analysis
5.1 Demographics & Characteristics of Participants
5.1.1 Occupational Characteristic s
5.1.2 Premium & Non-Premium Profile Characteristics
5.1.3 Internet Utilisation & Primary Purpose
5.1.4 Virtual Worlds & Gaming
5.1.5 Corporate Arena
5.2 Motivation Characteristics
5.2.1 Awareness Initiation
5.2.2 Motivation Rationale
5.2.3 Membership Variances Amongst Avatars
5.2.4 Corporate Motivations First-Mover Advantage Interactive Communication Dimension
5.3 Participation Characteristics
5.3.1 Participation in Activities
5.3.2 Interactive Dimension
5.3.3 User-generated Content Generation
5.3.4 Engagement with Businesses
5.4 Benefit & Relationship Development Characteristics
5.4.1 Benefits Received from BusinessPresences
5.4.2 Real Life Nexus
5.4.3 Benefit for Businesses & Relationship Dimension
5.5 Key Findings & Analysis Résumé

Chapter V
6. Discussion & Areasof Further Researc h
7. Conclusion
8. References
9. Bibliographies
10. Appendices
I. Appendix A: Examples of Online Communities
II. Appendix B: Questionnaire Outline
III. Appendix C: Ethical Approval Form – Human Researc h Projects


I must thank my Cybermarketing lecturer and MSc dissertation supervisor Andrew Corcoran of the University of Lincoln, who has always been very supportive and guiding throughout the research study. His competence, assistanc e and encouragement are deeply adopted with gratitude.

I also would like to thank all lecturers of the University of Lincoln who made vital contributions to my personal knowledge in marketing. Their impetuses deepened my critical thinking and the development of a holistic picture in which marketing takes place are greatly appreciated. Especially, I must thank Dr. Barry Ardley, Nick Taylor, Allison Cheeseman, David M. Evans and Richard Chuang for their contributions.

Furthermore, I am very beholden to all organisations and participants, which made valuable contributions to this dissertation. Their answers, time and effort are gratefully received.

In addition, my wholehearted appreciation goes to my family and friends who have been very supportive and kept motivating me throughout the dissertation progress. I am deeply indebted to Stewart and Dustin Spiers who have provided me with constructive suggestions and encouragement throughout the revision proc ess.

Last but no least, I must thank all people supporting and guiding me through the bright and obfuscatory days of writing this MSc dissertation.

Benjamin Bac h



This dissertation analyses whether Second Life, as an emerging interactive online environment, provides marketers with the scope to establish interwoven relationships to network constituents, and highlights the importance and benefits arising from enabling technologies to business marketing operations.

Design / Methodology / Approac h

The correlation to previous work was critically addressed with a focal point set on relationship, and e-marketing approaches and strategies, whilst highlighting the potential of an utilisation of virtual worlds / communities. The methodological approach was of an inductive philosophy by gathering information about Second Life from a corporate and an individual point of view. This took the form of a self-administered Internet- mediated questionnaire, a semi-structured telephone interview and a participant observation.


Through a conceptual analysis of the virtual community of Second Life in terms of exploring reasons for participation and benefits received from an immersion into Second Life, the researc h study indicated that corporate involvement in this innovative environment can offer marketers with opportunities to establish relationships to existing and potential network constituents.

Research Limitations / Implications

This marketing research study identified limitations due to its topical nature, as the number of research publications is limited with regards to the momentum of Second Life’ sinnovative virtual 3-D environment and hence, research in this arena is only just emerging and has not been empiric ally tested. The evolving virtual world environment along with the possible necessity for marketers to both establish a presence and demonstrate innovative marketing approac hes to capture a tech-savvy audienc e, identify the implications for this dissertation.

Practical Implications

This paper provides a holistic picture of the importance of enabling technologies, while setting the pivotal point on the emergence of virtual communities, and Second Life in particular, and highlights its implication for relationship marketing attempts in an interactive and many-to-many communication arena.

Originality / Value

This dissertation thoroughly examines the emerging phenomenon of Second Life that is reaping an increased amount of media attention, both online and offline, and provides an indicator for individual and corporate motivation for participating in a new environment while underlining its value for marketers in the relationship marketing milieu.


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List of Figures

Figure 1: UK Online Retail Sector Value 2002 – 2006

Figure 2: UK Online Retail Sector Growth 2003 – 2006

Figure 3: Interactive Computer-Mediated Communication Environment

Figure 4: The Vicious Circle of Technology & Competitive Advantage

Figure 5: 7Ps of the Marketing Mix

Figure 6: The Transition Curve

Figure 7: Relationship Stages

Figure 8: The Six-Markets-Model

Figure 9: Stages of Industry Life Cycle

Figure 10: Innovation Adoption ProcessI

Figure 11: Innovation Adoption ProcessII

Figure 12: The Internet & Sustainable Competitive Advantage

Figure 13: Customer Orientation Framework

Figure 14: Decision-making Process

Figure 15: Factors Affecting the Online Consumer’ sBehaviour

Figure 16: Traditional Social Networks

Figure 17: Computer-Mediated Interwoven Social Networks

Figure 18: The Foundations of Community

Figure 19: MySpace Online Community

Figure 20: The Membership Life Cycle

Figure 21: The Relationship Life Cycle

Figure 22: The Value Triangle

Figure 23: Skype Mobile

Figure 24: The Customer Bonding Triangle

Figure 25: Stages of the Researc h Process

Figure 26: Framework for Responses to Interviewing

Figure 27: Closed-ended Questions Applied

Figure 28: Multiple Choice Questions Applied

Figure 29: Dichotomous Questions Applied

Figure 30: Open-ended Questions Applied

Figure 31: Unbalanced Alternative Response Questions Applied

Figure 32: Balanced Alternative Response Questions Applied

Figure 33: Second Life’s Web Site

Figure 34: Second Life Virtual Map

Figure 35: Second Life User Population

Figure 36: Second Life Demographics(Age Band of Active Users)

Figure 37: There

Figure 38: Entropia Universe

Figure 39: Habbo Hotel

Figure 40: Age Groups of the Participants

Figure 41: Nationalities of the Respondents

Figure 42: Occupational Role of the Participants

Figure 43: Initial Sources of Awareness

Figure 44: Membership Duration of the Participants

Figure 45: Amount of Avatar Friendships in Second Life

Figure 46: Perceived Benefits from Corporate Presenc esin Second Life

Figure 47: Preferred SL Attributes in Comparison to Real Life

Figure 48: Increase in Second Life Product Links to Real Life

List of Tables

Table 1: Internet Utilisation (per week)

Table 2: Activities& Regularity

Table 3: Perceived Importance of Second Life’s Attributes

1. Introduction

Technology introduces a new and constantly developing infrastructure ad infinitum and consequently, marketing is exposed to an accelerated dynamic environmental vicissitude. The Internet, and its inherent technological advancements, is having a decisive impact on the strategic marketing alignments in today’ s discontinuous and vastly fragmented global business environment. Digital technology, including the Internet, can be seen as an enabler of access to a global marketplace which is becoming more crucial to marketing and businesses en bloc in order to stay competitive. In addition, strategic marketing applications are being transformed whilst influencing on consumer behaviour by augmenting individual empowerment, and vice versa.

The marketing discipline metamorphoses into a new approach and suggests a paradigm shift from a transaction to a relationship focus, in which the customer is becoming increasingly proactive, and where interwoven and interactive relationships are being developed and retained. The Internet has accelerated and contributed a significant part in this paradigm shift because it has evolved from being an impersonal and commerce-driven first generation network to a collaborative and community-based network of relationships. This allows users to establish networks and to contribute user-generated content as a valuable source of knowledge sharing instead of being exposed to prefabricated content. The importance of strategic relationship building approaches in marketing, and the emerging numbers of Internet applications for social networking can provide marketers with new dimensions and opportunities to capitalise on the next generation of the Internet, which is fuelled by interaction and individualisation impulses.

Online social networks and virtual communities are emerging and being driven by immersed members sharing experiences and connecting with each other. This is facilitated by the increased individual communication approaches of the Internet and its applications. Since online communities address the basic human need for communication, information and knowledge sharing, marketers are starting to explore the innovative cutting-edge periphery, which may change the interactive marketing- customer relationship en bloc. One particular three-dimensional virtual world and community, i.e. Sec ond Life, ismost sonorously trumpeting during its current meteoric rise to the upper echelons of the virtual online environments, which is the object of research for this dissertation.

This dissertation critically examines the importance of enabling technologies and its implications, which have a crucial impact on the marketing strategies and identifies the significanc e of social networks and virtual online communities whilst investigating individuals’ and companies’ motivations for establishing a presenc e in Second Life. The first part, i.e. the literature review, identifies the implications of enabling technologies and its influence on the marketing strategy and the marketing mix. Furthermore, it provides a critical compendium of the potential necessity to apply advanced applications in order to develop a competitive advantage due to the rapid impetus of tec hnology and the increasing complexity of consumers.The critical reconnaissance of virtual online communities and its importance for tec h-savvy and innovative marketers, ties in with the methodological research approach in order to explore whether Second Life, as an emerging socially interactive 3-D online environment, provides marketers with a scope to establish interwoven relationships to network constituents, which forms the second part of this dissertation. After the research result are censoriously evaluated regarding members’ and companies’ reasons for motivation, along with benefits rec eived from an immersion in Second Life, a disc ussion will be provided in order to take a critical stance over virtual communities and its highly praised terrain for marketers.

Chapter I

2. Literature Review

The literature review is a critical examination of the theoretical scope and collected evidence on the emergence of a virtual environment for marketers. Furthermore, this review is focusing on providing an insight into the value of this emerging environment and thus the necessity of enabling technologies to organisations in today’ s dynamic business environment. This review of current literature sets a pivotal point by providing a conceptual overview of the importance of applying technologies to the marketing and business operations in order to establish interwoven relationships with network constituents while utilising the impetuously emerging environments of virtual online worlds and communities.

As consumers are becoming increasing proactive and demanding in terms of individuality and interactivity, virtual communities may represent an entirely new approach for businesses and individuals to interact with each other via the Internet in order to develop a relationship with network constituents. This literature review is divided into logical sections in order to systematically provide insights into how Internet technologies can impact on marketing en bloc, and how advantages regarding relationship and social network developments may be achieved in actively following the emerging trend of being immersed in socially interactive online customer environments, i.e. virtual worlds.

2.1 The Role of the Internet for E-Businesses & Marketers

According to Doole and Lowe (2004), information and communication technologies are growing at a tremendous velocity and have a major impact on the way global business is executed, while in partic ular the

Internet facilitates the integration of different technologies. Nowadays, technology is a vital influence that can underline the choice of implementation strategies of the international marketing mix and furthermore, “enables the more effective control of a firm’ s diverse international activities” (Ibid, p.403). The Internet has had, and still has, a vast effect on international trade, with physical geographic boundaries being abrogated by the increasing broadband penetration along with access to inherent tec hnologies.

Enabling tec hnologies provide businesses with the opportunity to operate globally by offering the ability to provide products and services to customers that would not have been able to reach without applying technologies. Therefore, the Internet, and its resulting technology advanced applications, can be identified as an enabler of a global marketplace, characterised by “equal access to information about products, prices and distribution” (Pires e t al., 2006, p.937). This can facilitate the bonding of larger and more distinct audiences in today’s highly fragmented business environment. Zhang (2004), cited in Talukder and Yeow (2007), argued that with the increase application of networked computers and “remarkable advances in telecommunications technologies, the Internet has been widely recognized as a valuable and inexpensive medium for network-enabled transfer of skills, information, and knowledge” (p. 82).

According to Internet World Stats (2007), 37.6m users are currently utilising the Internet in the UK, which amount to 62.3 per cent of the total UK population. Globally, 1.1bn Internet users, equivalent to 17.8 per cent of the world’ s population, exploit the Internet which identifies a global growth rate of 225 per cent since the year 2000. According to Datamonitor (2007), the online retail sector (Figure 1 & 2) grew by 33.4% to reach a value of £11.03m in 2006, while the sector is estimated to have a value of £33.5m, which identifies a forec asted increase of 157.8% since 2006. This remarkable increase in Internet usage acknowledges the actuality of this particular medium. The Internet may therefore become even more crucial to marketing and businesses en bloc in order to stay competitive and technologically advanced. Thus, according to Kotler (2001), cited in Chaffey e t al. (2003), “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” (p.134).

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Figure 1: UK Online Retail Sec tor Value 2002 – 2006

(Source: Datamonitor (2007) Online Retail In The United Kingdom. Industry Profile)

Digital technologies and the Internet have not only transformed the way business is done in the 21st century, it has also enhanced business application and utilisation opportunities even further, as well as influenced consumer behaviour and enhanced consumer empowerment (Krieger and Müller, 2003). The next generation of Internet applications and consumer interactions, referred to the buzzwords Web 2.0, or Web 3.0 respectively, connote a set of economic, social and technology trends that form a more mature and distinctive Internet, characterised by active user participation, openness and network effects in a two- or three-dimensional virtual environment (Hemp, 2006a).

Figure 2: UK Online Retail Sec tor Growth 2003 – 2006

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(Source: Datamonitor (2007) Online Retail In The United Kingdom. Industry Profile)

According to White (2007), Web 2.0 and Web 3.0 represent a technological process “in which consumers are taking the initiative and dictating the nature of their online relationships, whether with other people or with companies, brands or media” (p.20), e.g. by creating user-generated contents (cf. environments, i.e. blogs or virtual communities. However, those terms may be regarded as “pretty meaningless, but they serve to emphasise that there has been a real step-change in the consumer Internet interface” (Ibid, p.2). The role of the Internet for e- businesses and their marketing strategies “entails utilizing existing and emerging communication and data networks to impart personalized and uninterrupted communic ation between the firm and its customers” (Watson e t al., 2002, cited in Sheth and Sharma, 2005, p.611), whilst providing value for the customer and stakeholders throughout the e- marketing approach. Enabling technologies in today’ s dynamic competitive business environment can identify critical opportunities for businesses, as well as highlight significant challenges when applying innovative tec hnologies to business operations.

2.1.1 Opportunities & Advantages of Enabling Technologies

E-marketing provides a chance for business operations to be executed in a global marketplace by offering “an alternative route to market to traditional distribution channels” (Doole and Lowe, 2004, p.409), whilst vanquishing time and location constraints (Pires et al., 2006). According to McDonald and Wilson (1999), and Bocij et al. (2003), cited in Chaffey et al. (2003), the paradigm shift between traditional and new media marketing approaches is inherently identified by six determinants (6 Is framework), which highlights practical aspects, e.g. individualisation, as well as strategic issues, e.g. industry restructuring. Interac tivity

As the customer and other stakeholders proactively initiate the contact, companies can provide the individual with an adequate information supply “without human interventions” (Sheth and Sharma, 2005, p.612) because the customer is in control (Bickerton e t al., 2001). Furthermore, individual needs and wants of the customer “can be addressed and taken into account in future dialogues” (Chaffey et al., 2003, p.29) by encouraging a two-way communications loop. Interactivity in terms of generating content (Figure 3), e.g. submitting comments on companies newsgroups or virtual online networks, may enhance customer experience and enable customers and stakeholders to provide content to the media environment instead of purely receiving content (Hoffman and Novak, 1997, cited in ibid).

Figure 3: Interactive Computer-Mediated Communication Environment

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(Source: Fill (2006) Marketing Communic ations – Engagement, Strategies and Practice, 4th edition. Harlow, Pearson Education)

Interactivity may therefore be of vital importance as it offers the customer an interesting and constantly changing basis for their Internet experience, participation and curiosity. Intelligence

McDonald and Wilson (1999), cited in Chaffey e t al. (2003) argued that, “ the Internet can be used as a relatively low-cost method of collecting marketing research” (p.29), especially regarding customers’ and stakeholders’ perceptions of tangible and intangible goods, or marketing and channel management effectiveness. The Internet eases the marketing research process by profiling customers on the basis of information received in survey or feedback applications (Zikmund, 2000). This information can then be used to enhance businesses’ products and services on- and offline, and assist in determining customer satisfaction. Marketing research intelligenc e can also be applied in tracking where customers click on a particular web site using a “transaction log file” (Chaffey e t al., 2003, p.29). This technology enables businesses to respond in real time to buyer behaviour of customers as well as to other businesses (McDonald and Wilson, 1999, cited in ibid). Individualisation

Internet-based customisation delivers personalised content and servic es to the individual (Smith and Chaffey, 2005), whilst the marketing communications message can be tailored to the needs and wants of the customer as opposed to “traditional media where the same message tends to be broadcast to everyone” (Chaffey et al., 2003, p.29). This can be an important aspect in achieving customer relationships on a one-to-one basis, as customisation “can help to add value” (Smith and Chaffey, 2005, p.187) by way of tailored contents received by the individual, e.g. Dell Inc.’ s Premier Customer Account, that can enhance the specific relationship development between stakeholders and businesses. This is particularly important in satisfying specific personal needs and experiences, which can be created “by customizing information for individual customers” (Sheth and Sharma, 2005, p.613), e.g. iGoogle application, where users determine the content being displayed on the web site. Furthermore, the degree of customisation can be “controlled either by the firm or by the customer” (Mohammed et al., 2003, p.16) in order to provide to optimal two-way communications flow and the amount of rec eived customised contents. Integration

Integration provides a vital attribute when communicating on virtual and physical media formats as this determines the ideal mix of a company’s marketing communications. The Internet can be used, according to Chaffey e t al. (2003), as an integrated “direct-response tool, enabling customers to respond to offers and promotions publicised in other media” (p.31). Furthermore, the Internet can support the buying decision by offering service numbers to receive product information or assistanc e in placing an order. Synergy effects of integrated on- and offline marketing communications can be used to track purchases done, thus helping to enhanc e the whole servic e landscape for customers or stakeholders. According to Seybold (1999), cited in ibid, the integration of customer information with other databases of customer and order information must be consistently executed in order to receive a 360 ° view of the customer. In addition, the Internet provides communication improvements to all stakeholders in contrast to the traditional media, as instant communication via email, electronic data interchanges, and virtual online networks may easily proceed. However, the consumer can be alienated and confused by a non-uniform provision of a consistent message by companies through one or more points of interaction (Mohammed et al., 2003). Industry Restruc turing

According to Chaffey e t al. (2003), “disintermediation and reintermediation are key concepts of industry restructuring” (p.32), as new networking systems for managing the supply and value chain can be developed. As the business environment virtually and physically gets more intense and dynamic, information exchange and efficiency improvements are vital in order to sustain competitiveness and, more crucially, lower costs while, according to Sheth and Sharma (2005), “the primary advantage of e- marketing is reducing costs and enhancing reach” (p.612) to all involved and potential stakeholders. Bypassing existing channels of distribution is particularly important for channel management in order to deliver value to customers, such as free delivery from efficient distribution management. Thus, the Internet may become very important in considering a company’ s representation of intermediaries (Chaffey e t al., 2003).

2.1.6 Independenc e of Location

According to Sheth and Sharma (2005), the e-marketing approach allows reac hing customer, independent of location and time, to be accessible which may not be possible without applying this technology. The Internet makes it possible to enter global markets without being physically present in those markets due to the delivery of digitalised products, e.g. music downloads or software updates.

However, despite the merits of the Internet, interdependent challenges and disadvantages can be encountered whilst enabling those technologies. In particular, the Internet does not necessarily change “the elements and challenges associated with international marketing processes” but does change the nature and scope of international marketing strategies and “the solutions that are developed” (Doole and Lowe, 2004, p.404). Furthermore, enabling technologies may not alter the fundamental needs in establishing strong relationships to stakeholder (Mohammed et al., 2003); per contra, enabling technologies makes it an undeniable necessity but “adds an increased level of complexity” (Sheth and Sharma, 2005, p.612) to the process.

2.1.2 Challenges & Disadvantages of Enabling Technologies

According to Sultan and Rohn (2004), cited in Tiago e t al. (2007), “a few years back, enterprises questioned the role of the Internet in business performance, but today they cannot live without it, or outside it” (p.138). Although utilising the Internet can provide profound advantages in international marketing and business operations, it still encounters disadvantages and its application, combined with the constant technological dynamism, can be a vast challenge for marketers. International e-businesses are facing challenges regarding the cultural background of its global customers, as according to Doole and Lowe (2004), customers in “low context cultures are likely to embrace the Internet much more readily than those in high context cultures” (p.424). In addition, the Internet marketing strategy needs to integrate all aspects of the traditional marketing strategy in order to deliver a unified and conformed picture of their marketing communications and brand values.

Global Internet strategies should consider different infrastructural developments that are globally existent since lengthy web site loading procedures might alienate customers, especially those without broadband connections. Furthermore, poor web site performance or design and slow order fulfilment can negatively affect customers from doing business with an organisation (Doole and Lowe, 2004). Therefore, a company has to set the focal point on providing adequate and reliable interactive services throughout the whole online experienc e. As an increasing number of organisations are virtually present combined with proactive user behaviour (cf. 2.6), businesses have to ensure targeting the right audience with their communications campaign, virtually and physically, in order to overcome the Internet clutter. Adding value online (cf. is a fundamental prerequisite for companies to enable customers to experience something they are not able to encounter offline, as increasing customer value by providing additional access, content and information can be a crucial differentiator which requires skills and creativity (Turnquist, 2004, cited in Pires et al., 2007). Due to this, organisations have to ensure to continuously deliver value in a constantly developing online environment, otherwise the online presence will not stand out in the crowd in the networked economy (Mohammed et al., 2003; Chaffey et al., 2003). Furthermore, most online purchases require credit card information and thus, “it is in the supplier’s (and customer’ s) interest that the transaction is as safe and secure as possible” , according to Molenaar (2002, p.71), in order not to dissatisfy the purchaser. Another conflict, which might occur while applying the Internet purely as a sales medium, is that some buyers need an incentive to purchase online. Businesses which simply copy their physic al product range to their web site might force a buying conflict, in which the customer may not be convinced to purchase online, as the customers’ expectations and experiences may not meet the individual’ s needs and wants (Ibid).

In addition, the challenge of enabling technologies, due the easement of macro- and micro-environmental assessment of organisations in the global marketplace, facilitates benchmarking approaches, e.g. tracking new product launches of competitors or monitoring the networked economy, caused by the transparency of the Internet. This may identify a vital disadvantage for some businesses (Doole and Lowe, 2004). Thus, e- marketers must be able to constantly adapt innovative tec hnologies to their organisation in order to provide value to their existing and potential customers and stakeholders. Those businesses implementing the newest technology will be ahead of the competition (Taylor and England, 2005). With a constant and rapidly changing technology, businesses need to respond to technological changes and advances to retain and attract customers. The model of the vicious circle of technology and competitive advantage (Figure 4) identifies that technology adds no value until it has practical applications for the organisation and the user (Doole and Lowe, 2004).

Figure 4: The Vicious Circ le of Technology & Competitive Advantage

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(Source: Doole and Lowe (2004) International Marketing Strategy, 4th edition. London, Thomson Learning)

Technological knowledge and skills are prerequisites for implementing and adapting innovative technologies to business operations, and once a new technology is developed and implemented, another might already exist to supersede the previous one. Therefore, the framework identifies that technology, if embraced successfully, may result in competitive advantage (cf. 2.5) by virtue of an ever changing and dynamic infinite loop until technology stops, if it ever will.

Thus, the pace of development and adaptation of innovative technologies to business operations may have a vital impact on the strategic e- marketing alignment, as well as on the immanent tactics of the e- marketing mix.

2.2 E-Marketing Strategy & E-Marketing Mix

According to Ohmae (1999), cited in Smith and Chaffey (2005), a strategy is crucial, as “there is no point rowing harder if you are rowing in the wrong direction” (p.30). The e-marketing strategy directs the choice of the target segments, positioning and thus, the propositions of the ideal marketing mix based on the objectives to be ac hieved (Ibid). Therefore, the e-marketing strategy needs to be consistent and highly aligned with the firm’ s business strategy, goals, and resourc es in order to be effective (Mohammed et al., 2003), as a misalignment “can hamper the optimal execution” (Ibid, p.90). As the Internet develops and users continue to grow and change, and become more heterogeneous, strategic e-marketing approaches can encounter emerging opportunities, as well as challenges, of how to segment the market, define and select the target audience, position the company, and leverage the marketing mix programme (Ibid). Although the strategic Internet marketing approach has several similarities to the traditional approaches, it still requires a different method, as the environment is fundamentally diverse (Eid and Trueman, 2002). As the Internet marketing strategy provides a long-term scope and direction for a company’s e-marketing activity, businesses will have to internalise that “the potential will hardly be achieved unless the objectives are clearly defined and integrated into the company strategy” (Porter, 2001, cited in Tiago et al., 2007, p.139). Otherwise, despite the undoubted potential of e- marketing, the whole strategic marketing approach may not meet customers’ and stakeholders’ expectations.

Although the marketing strategy of online (pure-play companies) and traditional offline companies expanding its business online (bricks-and- mortar companies) can be diverse, the objectives may be identical in terms of generating sales and retain customers. While pure-play companies may align their segmentation, targeting and position choices purely on their strategic e-marketing orientation, bricks-and-mortar businesses encounter a different dimension, since those companies have to integrate online and offline marketing strategies, and thus decide whether to apply different or similar segmentation, targeting or positioning approaches (Mohammed et al., 2003; Bickerton et al., 2001). According to Bickerton et al. (2001), “the Internet can be used to help the marketer identify more sharply the segments in the market” (p.101), as companies, due to the Internet’ s easement of information-gathering processes, may “be able to more accurately segment customers” (Mohammed et al., 2003, p.96). However, the segmentation and the marketing strategy respectively, can “ also be affected by the increased speed with which marketers can gather information through the Internet” (Ibid, p.97). Companies may need to constantly monitor the dynamic environment which also require the “conceptualization, development, and evaluation of a targeted competitive offering” (Aaker, 2005, p.45) in order to develop a sustainable advantage (cf. 2.5) in the marketspac e. However, as the Internet can provide the opportunity for an enhanced gradation of segmentation, and thus, according to Merrier (2001), cited in Mohammed e t al., (2003), facilitate an understanding and identification of the customers, the positioning and targeting dimension of what the brand will stand for in the consumer’ s mind may be impeded. However, a gradation which is excessively fine or address to many different groups may turn out to be ineffective (Doyle, 2000, cited Smith and Chaffey, 2005).

According to ibid, e-marketing strategy and e-marketing en bloc “can assist in providing new techniques to identify, anticipate and satisfy customer needs efficiently” (p.32), while in parallel providing the tactical resourc es for achieving strategic objectives. According to Eid and Trueman (2002), international e-marketing “ has changed some elements of the marketing mix” (p.55), and thus online developments “affect every aspect of business, every aspect of marketing and every aspect of the marketing mix” (Smith and Chaffey, 2005, p.37) which may differ from the traditional dimension. However, as the traditional 4Ps of the marketing mix are still applicable, although this model “does not explicitly include any interactive elements” (Eid and Trueman, 2002, p.58), the increasing importance of the relationship dimension adds an emerging philosophy of how to approach customer and stakeholders (Grönroos, 1996). The main elements of the marketing mix, including key issues of how the mix may be transformed to fit to the tec hnological advanced environment, is summarised in marketing mix model of the 7Ps (Figure 5). According to Pickton and Broderick (2005), the marketing mix identifies the “range of marketing activities/ tools that an organisation combines and implements to generate a response from the target audience” (p.5). Therefore, those activities may need to be adapted to the dynamic tec hnologica l advanced environment, since according to Eid and Trueman (2002), the “marketing effort on the Internet will be an interactive strategy” (p.55).

Figure 5: 7Ps of the Marketing Mix

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(Source: Smith and Chaffey (2005) eMarketing eXc ellence, 2nd edition. Oxford, Butterworth-Heinemann)

2.2.1 Product

The product dimension of the e-marketing mix refers “to characteristics of a product, service or brand” (Chaffey et al., 2003, p.184), while the Internet “ presents companies with unique opportunities to enhance their product offerings” (Mohammed et al., 2003, p.241). According to Gosh (1998), cited in Smith and Chaffey (2005), “businesses should consider how to modify products and add digital value to customers” (p.43), because by enabling technologies certain goods can be delivered in a digitalised format, e.g. customised software updates or individual music downloads, which can provide an augmented benefit and value to the customer. This can also identify challenges due to the ease of competitive duplication. Furthermore, digitalised products and services can be tailored for the customer and by the customer, in order to meet the individuals’ needs and wants, while in parallel provide an interactive dimension (Harris and Dennis, 2002). In addition, the Internet provides the chance of product augmentations, new product developments, e.g. Apple Inc.’ s Developer Connection, and product assortments that may enhance participation, customer value and trust. However, according to Mohammed e t al. (2003), the Internet also “has led to an increase in the number of products variants offered” (p.248), whic h identifies an advantage for the customer in terms of a product personalisation, but may also create a buying conflict for customers due to the increased amounts of product offerings (Molenaar, 2002).

Nevertheless, interactivity and individualisation “have fundamentally changed a company’s ability to respond to its customers, and are especially valuable in helping the company form a meaningful relationship with a customer” (Mohammed e t al., 2003, p.250). The interactivity merits regarding the product dimension of the marketing mix can be identified as providing a responsive service interaction to offer augmented value to the product and customer respectively, and allow companies to gather valuable customer data. In addition, the individualisation aspect of the product provides customers with an increased possibility to tailor and personalise products in order to meet individual needs and preferences, while the company may be able to provide a more adequate product portfolio that can increase customer’ s adhesiveness (Ibid).

However, the product dimension may also face a challenge from a decreasing product-life span, due to rapid innovation proc ess in technology (cf. Figure 4). As technology evolves, product changes and adaptation (cf. Figure 7) may have to be executed with an increased momentum through which companies can encounter problems because of their dexterousness of applying innovative technologies to their business operations.

2.2.2 Price

With respect to the price dimension, the Internet provides “both new threats and opportunities for companies” (Karlsson et al., 2005, p.351). Due to its dynamism, the Internet may have an influence on the dynamic pricing decision of companies (Eid and Trueman, 2002). The transparency, the Internet can provide users with advantages in terms of comparing prices and thus, this medium may be considered to tend to drive down prices because of its disintermediation and commoditisation character (Karlsson et al., 2005). However, Kung et al. (2002) argued, “as easy it is for a price conscious customer to find the lowest pric e, the Internet increases the chances for the firms to find a buyer willing to pay a higher price” (p.280). Furthermore, in order to make an accurate price comparison “ online consumer must not only have the price available but also the shipping fees, sales tax, and other offer/ transaction information” (Ibid, p.278), which can add complexity to the buying process en bloc for customers in terms of comparing numerous offers on the Internet.

Nevertheless, the Internet enables companies to understand and measure customers’ reactions to price promotions and can ease the process of tracking gathered information to adjust prices dynamically to the customer’ s willingness to pay and to the demand and supply situation (Mohammed et al., 2003). By enabling technology, several cost efficient opportunities can be identified due to alternative online price approaches, e.g. bundling or volume discount pricing. According to Chaffey et al. (2003), “the Internet introduces new opportunities for dynamic pricing”

(p.199) in whic h prices “are fluid” (Mohammed et al., 2003, p.295), i.e. dynamically adapted due to environmental influences. “The Internet enhances the attractiveness of the dynamic pricing strategy” (Ibid, p.296) in two key directions, as decreased menu costs may result and furthermore, the ability to negotiate prices in real time online might be enhanced. Hence, companies can categorise and understand each customer segment, which can effectively facilitate an organisation’ s ability to provide segment-specific prices (Kung et al., 2002). However, as the price dimension offer a wide scope for interaction and individualisation, businesses have to be aware of possible grey marketing facilitations in case prices are too rigorously differentiated (Doole and Lowe, 2004).

2.2.3 Place

Wilson and Abel (2002), cited in Eid and Trueman (2002) argued that, “the Internet is borderless and the opportunity to sell over the net eliminates many natural barriers to entry” (p.58). Due to the Internet, businesses can distribute products on a global scale, while in parallel traditional intermediaries can be reduc ed and collaborative relationships may evolve, which can facilitate efficient channel management as the end-user and producer are directly connected (Eid and Trueman, 2002; Mohammed et al ., 2003). The Internet’ s opportunity of disintermediation approaches can result in economies of scales and cost efficiency, and vice versa. However, businesses that maintain intermediaries within their channel distribution management may gain closer interwoven collaborations with their middlemen and thus, may be able to exchange market information and establish important relationships in order to improve the channel efficiency en bloc (Doole and Lowe, 2004).

2.2.4 Promotion

According to Mohammed et al. (2003), “the Internet was designed to foster connectivity and allow efficient exc hange of information. It has potential to be more versatile than any other mass media channels” (p.339). The merits of e-marketing communication’ s individualisation dimension can be that the communication approach allows a more targeted execution and “are often based on one-to-one communic ations” (Doole and Lowe, 2004, p.423), which can be pivotal in a customer-centric marketing strategy. Furthermore, individualised marketing communications may be more relevant to the customer, as the individual controls the amount of information received and thus, the whole communications flow (Mohammed et al., 2003). Enabling the Internet for advanced communications proc esses can facilitate an interactive two-way symmetric communication dialogue and thus, may allow a cost-efficient marketing communication evaluation. Integrating promotional tools in an online environment can be seen as a creative basis for an interactive approach with the customer in order to enhance online experienc es, participation and deepen the communic ation impact (Smith and Chaffey, 2005). Nevertheless, the interactive dimension can be challenging, as businesses have to be cautious not to replicate conventional advertising material online (Bickerton et al., 2001) and integrate the offline with the online communications approach, and vice versa (Smith and Chaffey, 2005).

2.2.5 People

Smith and Chaffey (2005) argued that, “as more products add online service to enhance their offerings, ‘people’ become more and more important” (p.58), since everyone in an organisation may act as an ambassador and a sales person for the company (Ibid). According to Christopher et al. (1994) “an essential aspect of seeing people as part of the marketing mix is to recognize the different roles which the employees of an organisation have in impacting on both the marketing task and also customer contact” (p.17) thus, “people form an important part of the differentiation which can create added value for the customer” (Ibid, p.18). Grönroos (1996) argued, that people within the organisation and being involved in customer contact can be seen as part - time marketers, as they represent the organisation to the outside world. However, an organisation’ s staff must be adequately trained and motivated in order to deliver added value to the customer and may be a key resourc e in retaining customers (Smith and Chaffey, 2005).

2.2.6 Physic al Evidence

According to Smith and Chaffey (2005), physical evidence is crucial in terms of reassuring the customer about intangible goods of an organisation. Christopher e t al. (1994), refers this dimension to the customer service element with the main “objective of satisfying customers’ needs on a long-term basis” (p.13). Businesses can utilise guarantees, refund policies, awards, and customer endorsements to enhanc e encouragement of the customers (Smith and Chaffey, 2005). Physical evidence consists of an interactive element in terms of customer reviews and references in order to assure customers or potential customers to purchase a certain product or service from an organisation (Ibid). Furthermore, issues such as ease of use or navigation, availability and performance are crucial elements of the physical evidence dimension (Chaffey e t al., 2003). However, the challenge is to integrate physical evidence in the online and offline world to reinforce a consistent message, otherwise the brand can be damaged if those evidences are not managed adequately. According to Christopher et al. (1994), physic al evidence is interrelated to the people element of the marketing mix and thus, needs to be supportive and integrated in the mix en bloc to motivate a customer’ s purchase (cf. 2.6).

2.2.7 Process

Process performanc e is important in order to deliver and to improve services for the customer (Smith and Chaffey, 2005). This element of the marketing mix refers mainly “to the methods and procedures companies use to ac hieve all marketing functions such as promotion, sales and customer service” (Chaffey e t al., 2003, p.212). If a company is unable to deliver an adequate proc ess to support products or servic es, customer dissatisfaction can result, which affect the brand and may lead to the refusal of a repurchase (Christopher e t al., 1994).

Each of the seven elements of the marketing mix shall be interrelated by synergy with each other and “a key issue is the integration of the various elements of the mix so that they are mutually supportive in gaining the best possible match between the internal environment of the organization and the external customer environment” (Ibid, p.19). According to Smith and Chaffey (2005), another dimension, the partnership element, can be added to the marketing mix, as a new paradigm “characterised by a shift in activity from the conventional one-to-many communication model to the many-to-many communication model” (Hoffman and Novak, 1996, cited in Eid and Trueman, 2002, p.60).

2.2.8 Partnership

Partnership and collaboration approaches are getting increasingly important, as external forces are not stable and “can alter quickly and dramatically” (Christopher e t al., 1994, p.19). The partnership dimension is closely interrelated with the concept of relationship marketing, as the guiding networking notion seen on the Internet identifies many of the aspects that can be found in the collaborative orientation (Molenaar, 2002).

2.3 Relationship Marketing

According to Håkansson and Snehota (1995), cited in Gummesson (2004), “no businessis an island” (p.16) and thus, nothing happens in isolation in the latter-day business environment. Therefore, Bickerton et al. (2001) argued, “ it is scarc ely surprising that there has been a huge increase in networks of like-minded people” (p.53). “Relationships are at the core of human behaviour” and combined with networks and interaction, relationships have been at the core of business (Gummesson, 2002, p.9). According to ibid, the term six degrees of separation claims that no individual is separated from any other individual by more than six contacts, which may highlight that relationships are the emerging ground for marketers (Christopher et al., 1994).

Marketing is about to change and move from a transaction focus to a relationship focus (Ibid), i.e. from one-to-one marketing to many-to-many orientation (Gummesson, 2004). Relationship marketing defined as marketing on ” interaction in networks of relationships” (Ibid, p.16), can be presented as the opposite to transaction marketing, enabling “an alternative strategy to the traditional marketing mix approach, by means of obtaining competitive advantages and the best way to retain customers in the long run” (Little and Marandi, 2003, p.21; Christopher et al., 1994; Harris and Dennis, 2002).


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Virtual online worlds - Enabling technologies to establish interwoven relationships to network constituents in an emerging virtual marketspace
University of Lincoln  (Faculty of Business & Law)
International Marketing Strategy
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Virtual, International, Marketing, Strategy, E-Commerce, Digital Marketing, E-Marketing, Marketing Strategy, Second Life, Networking, Realtionship Marketing, Digital, eCommerce, Social Networks, Soziale Netzwerke, Online, Masterarbeit, Internet, Community, Communities
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MSc International Marketing Strategy Benjamin Bach (Author), 2007, Virtual online worlds - Enabling technologies to establish interwoven relationships to network constituents in an emerging virtual marketspace, Munich, GRIN Verlag,


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