The increasing relevance of online marketing

Table of Contents

Executive Summary

List of abbreviations

List of figures

List of tables

1. Introduction

2. Marketing communication

3. Online Marketing
3.1 Affiliate marketing
3.2 Keyword advertising
3.3 Search engine optimization (SEO)
3.4 E-mail marketing
3.5 Online advertising
3.6 Web.2.0

4. Statistical data and facts
4.1 Consumers
4.2 Products
4.3 Development of the online marketing

5 Increasing relevance of online marketing

6 Conclusions
6.1 Advantages and chances
6.2 Online vs. offline marketing
6.3 The role of branding

7 Transfer into the company

List of literature

Magazines:

Internet-sources

Executive Summary

The internet developed from is shadowy existence to an interactive information, communication and transaction medium. Interactive communication capabilities of web-enabled technologies increase consumer convenience, reduce information search costs, and make choice assistance and customization possible.

Consumers and companies populate two market environments today: the face-to-face and the virtual face-to-screen exchange relation.

More and more people buy online over the internet. The reasons are convenience, Choice, customization, communication, cost and control. The internet brings more transparency for the consumers.

The internet contains a lot of chances for companies: They can establish new distribution channels over the internet and herewith the possibility to deal global. Because these chances are the same for every company the competition increases rapidly. The challenge is to win this rat race and exploit all possible features in the marketing mix.

Instruments of the online marketing are affiliate marketing, keyword advertising, search engine optimization, e-mail marketing and online advertising.

Companies have the challenge to find the right online marketing mix and to convince the consumers that their product or services includes more value for them.

Important for the companies is to find the right mix of online and offline advertising because despite the still increasing amount of online users the traditional media are necessary to reach a wide target group.

List of abbreviations

illustration not visible in this excerpt

List of figures

Figure 1: Many-to-many- communication in the Internet. Source: Rumler 2002, p. 246

Figure 2: Aging structure of onliners and nonliners. Source: OVK 2007, p. 17)

Figure 3: Goods and services bought in the internet. Source: German Federal Statistic Office 2007, p. 35

Figure 4: Advertising statistic. Source: OVK 2008, p. 5)

Figure 5: German advertising budget. Source: OVK 2008, p. 8)

List of tables

Table 1: Organic Ranking Visibility. Source: PRWeb 2008

1. Introduction

The triumphal procession of online marketing can long term not be hold up. The trend in decreasing costs for fast online connections, the integration of personal computers in the living rooms and generation change in the executive suites of the marketing divisions are definite indicators for this. The internet faces new challenges and chances for consumers as well as for companies and administrations. Those, who stick to the past will have disadvantages.

On average every German uses the internet 58 minutes per day, reads the newspapers 26 minutes and magazines 18 minutes. At the same time the expenditures for online advertising are about 750 Mio Euro compared with newspapers and magazines which make up to more than 9000 Mio Euro. A glaring disproportion which impressively shows the potential and chances in online marketing.

The importance of online marketing increases because of two reasons (Neuburger 2003, p.304):

- on the one hand competition gets more and more intensive and it is not sufficient to distinguish compared to the competition but also to communicate this to actual and potential customers
- on the other hand the transparency in the internet ins increasing and companies must point out to their customers why they should accept a certain product or service.

2. Marketing communication

Following Meffert (2000, p. 8) marketing is defined as the planning, coordination and control of all marketing activities oriented to actual and potential markets. The company's target ought to be achieved by a permanent satisfaction of customer needs.

Beside the product- and service policy and the price management the communication is part of the marketing mix. It includes the different possibilities and instruments of communication with the customer to convince him for the advantages and benefits of a product or service and to affect him to purchase something (Neuburger 2003, p.303).

"One cannot not communicate". This famous sentence is from the communication scientist and philosopher Paul Watzlawick. Every behaviour is a kind of communication. Because behaviour does not have a counterpart (there is no anti-behaviour), it is not possible not to communicate. By the communication policy companies form their connections to all relevant groups like customers, suppliers, traders, employees or the publicity (Rumler 2002, p. 240). Digital media request new requirements to communication and advertising.

In the following figure the typical communication process via the internet is represented:

illustration not visible in this excerpt

Figure 1: Many-to-many- communication in the Internet. Source: Rumler 2002, p. 246.

Relevant marketing targets in relation with online advertising are beside image objectives and successful acquisition of new customers mainly the customer loyalty combined with the integration of the customer in the production process and to increase customer satisfaction (Link/Tiedtke, 2001 p. 20).

3. Online Marketing

Following Lammenett (2006, p. 17) there is no clear differentiation between the terms internet marketing, website marketing and online marketing available in literature. The discussion is going on, whether online marketing is an autonomous marketing form or if it is a part of the classic marketing mix.

There is following differentiation between online marketing and internet marketing:

- Internet marketing is the doing of marketing, this means the purposive usage of internet services (www, e-Mail, usenet, FTP, etc) for marketing purposes. Main part of the internet marketing mix is normally the own or a special internet site. In ideal case the internet marketing mix is integral part of the whole marketing mix.
- Online marketing includes measures which aim to attract visitors to the own or a certain internet site, from where business is initiated or generated.

Online marketing uses the internet as communication media and is to distinguish from the classical offline advertising like TV, newspapers, magazines and posters (Neuburger 2003, p.305). Online marketing is identified by digital propagation of advertising messages, the global distribution of cross-linked systems and the permanent availability of advertising messages.

Following Lammenett (2006, p. 19) online marketing includes the following instruments:

- Affiliate marketing
- Keyword advertising
- Search engine optimization (SEO)
- E-Mail marketing
- Online advertising

3.1 Affiliate marketing

After all affiliate marketing is nothing new, but a return to proven distribution channels. The partner (affiliate) promotes a product or a service of another enterprise (merchant) on his website. The affiliate obtains for every transaction or sale, generated by his marketing activities, a provision. Affiliate marketing offers a large opportunity for the affiliates, the network carriers and for the merchants. According to Forrester in 2003 21% of the whole online sales were generated by affiliate marketing (Lammenett 2006, p. 23-24).

3.2 Keyword advertising

Keyword advertising is the placing of a commercial advert, mostly a short text description, against payment. This form of advertising is also called "plaid placement", "sponsored links" or "performance marketing". Each of these adverts is combined with a link to a certain site or a landing page (Lammenett 2006, p. 83-84). Hardly any other advertising instrument allows such a demand-oriented flash of adverts. The searching user reveals this actual needs and concerns and receives on the return page adequate adverts – an easy and because of its high effectiveness a genial principle. Simultaneous the potential for performance measurement is excellent (Lammenett 2006, p. 118). With keyword advertising higher click rates are achieved than with banner advertising.

3.3 Search engine optimization (SEO)

Search engine optimization covers all measures which are adequate to get a better placement in the result sites of search engines. Search engine optimization is often called "web promotion", "web-optimizing" or "web ranking" (Lammenett 2006, p. 145). Following Lammenett studies from Nielsen/NetRatings in 2005 showed, that for 79 % of all internet users search engines are the first and most important contact point within buying decisions. A novel eye-tracking study showed, that the first 3 ranks of a searching result are noticed by 100% of the visitors:

illustration not visible in this excerpt

Table 1: Organic Ranking Visibility. Source: PRWeb 2008

The advertisements at the right column of the website have a bad position: only 50 % of all searching users read the first ad (Lammenett 2006, p. 147). A company can only reach an optimum output if they drive search engine optimization as well as keyword advertising. Disadvantage from SEO are the high current costs as well as the dependency from the search engine providers (Schumacher 2007, p. 380).

3.4 E-mail marketing

E-mail marketing is a kind of direct marketing via e-mail and is primarily used to guide users to the own or a certain website. Different types of e-mail marketing are (Lammenett 2006, p. 50):

- Stand-alone-campaign (also called e-mailings): they usually have only a limited duration. Target is to bring a product, a service or a company to a defined target group.
- Newsletter: they appear periodical and are used for customer retention by serving interesting and useful content.
- Newsletter sponsorship: compared with own newsletters companies can also relocate their advertising message in newsletters of other companies.

E-mails offer interesting possibilities which comparable conventional marketing instruments do not have; and this by an outstanding cost-benefit ratio. E-mail newsletters are the most efficient way to contact customers and interested parties regularly (Schwarz 2007, p. 455).

Essential success criteria for e-mail marketing are (Lammenett 2006, p. 81, 82):

- relevant and specific content for the target group
- the right frequency of transmission
- intelligent integration of incentives
- Usage of professional e-mail marketing software
- professional designed HTML-Newsletter templates

Companies must keep in mind that the transmission of unrequested adverting via e-mail is anticompetitive and therefore forbidden (§ 1 Law against unfair competition)

[...]