How many Ps in Internet Marketing?
This article is based on a presentation I gave to Penrith SWAP on August 22, 2000. Most of it is still relevant today.
I was rather disappointed that the speaker who immediately followed me used what I had said to promote a pyramid scheme set up to provide “free” web sites. It was some consolation when the promoters of the scam were later ordered by a court in the US to refund 100% of the entry fees they had charged to be part of this “free” service. Australian victims received their compensation through a fund managed by the ACCC.
Anyone who has ever worked in sales or marketing or who has done any formal management studies will be familiar with the idea of the “Four Ps of Marketing” – place, product, price and promotion. In the new paradigm (there’s another “P” word) of marketing on the Internet not only do the traditional “Ps” change meaning, but a whole new set of “Ps” gets added to the mix. We are going to look here at the changes in the old meanings and how the new “Ps” change what we used to do into what we need to do now.
“Place” is where the customer does business with you. This is not necessarily the same as the place you do business. You can have offices, warehouses, factories and all sorts of other locations, but what matters to the customer is where they have to go to trade with you. In the old tradition “place” was the shop or the office or the franchise outlet. It was physical and it cost you money to be there. In the Internet economy, “place” is in all those millions of computers which have access to the Internet. You still need the factories and the warehouses and the back office accommodation, but the transactions can now happen wherever the customers are and you don’t have to be there except in electronic form.
In the real world outside pyramid selling and other kinds of fraud, you have to have a product of some kind before you can have a business. Nothing about this changes if you move your business into the Internet age. Unfortunately, most of the talk about internet commerce (or “e-commerce”) has concentrated on selling across the ‘net as if this was the only use of the technology for business. Whatever your product, you can still use the Internet to help your business find new customers and work better with the ones you already have. Some products lend themselves very well to direct sale across the Internet because the product can be delivered electronically. The most successful at this have been software and, alas, pornography, and music (as electronic files, not on CDs) is about to boom. Other things that sell well are commodity items where the customers know what they are getting because it is the same everywhere – books, CDs, even cars. Services are a bit harder to sell and things where the heart rules the head, like buying your dream home, can be difficult too, but changing technology has a way of making difficult things come true.
Using the Internet changes nothing about the rules of pricing. You still go broke selling things at below cost, you still go broke selling nothing because it is too dear, there is still a market-clearing price where everything gets sold and everyone is happy (or so the economists say). The old adage that you can have any two of price, quality and service still applies. Certainly, you may be able to sell things across the ‘net at a lower price because your fixed and variable coats are lower, and you may be able to charge a premium for better service. You still need to know what your competitors are doing and you still need to know how much a sale costs you.
Nobody will buy from you unless they know that you exist and that you have something they want. The traditional forms of promotion meant that you went looking for customers. You told as many people as you could (or could afford to) about what you had to offer and then hoped that they would come to you. You still have to do this, and the biggest spenders on internet advertising have been the sites with the biggest sales. The opposite applies too (and it is not the same thing) – the biggest sellers have been the biggest advertisers. It is not uncommon to hear about companies spending 25% of turnover on advertising in order to build brand awareness. The thing that the Internet adds to promotion is the ability for customers to find you through non-traditional means, and the best example of this is the use of search engines. Potential customers can now find out about you by simply looking for what you have to sell. Promotion of any business on the ‘net, whether to generate online sales or just to let people know what you do, requires that you use the search engines effectively. It doesn’t happen automatically and it might cost you some money and time to get it done properly, but search engine promotion is essential.
The first of the new “Ps” recognises that things really are different now. There are new jobs, new skills, new things to know and new ways of doing things. What is in short supply is the people who can make it all happen. The shortage of people brings several other problems with it. One is that it is too easy for people who don’t know anything to pretend that they do. If nobody knows what a “web architect” does, then who can know if he can do it. Another problem is the old one of supply and demand – there is a shortage so prices go up and people become more expensive. Insufficient supply also allows loyalty to be optional for many people as they chase higher and higher incomes. On a really bad day, you can hire an expensive incompetent who will leave before the job is completed. At the other end, some of the work looks easy so bargains are offered by people wanting to learn on your payroll. Remember that if it looks too good to be true, it probably is. Don’t despair – there are good people out there at a price you can afford. Sometimes you just have to look a bit harder to find them.
In 1999 it was estimated that $20 billion worth of sales took place on the Internet in the USA. This was about 1% of total retail sales. In Australia, it is estimated that there are 5 million people with Internet access, yet total Internet sales are only about $600 million per year (which represents about 10% of sales for one of the smallest national grocery chains). There is enormous potential to reach the other 99% of potential customers, both for direct sales and to attract them to traditional businesses. The power of the Internet for marketing is its reach. 5 million users exceeds the audience for the highest-rated television program in the country and probably exceeds the number of newspaper and magazine readers. The Internet gives a business access to these people at much lower cost than traditional promotional methods and, in many cases, allows more profitable transactions with them.
You may wonder why this “P” is here, but the Internet changes the legal environment in which you do business. There are new challenges to intellectual property, where competitors can steal the contents of your web sites or even the product you have for sale on those sites. It is possible for people to register domain names (the part after the “@” in an email address) which look like trade names and then either demand money to hand them over to the rightful owner or to create confusing or defamatory web sites. Laws are being brought in to control the use of domain names (much as trade marks are controlled) but these laws are new and not yet tested. Another legal aspect is that the Internet creates new ways for you to get sued. What you say in a newsletter that goes to a few hundred of your customers or in a local paper that gets read by a few thousand readers can take on a whole new life when the potential audience is in the hundreds of millions. The laws on defamation on the Internet are still being worked out, but it can be very time consuming to have to defend a legal action from France for something you said in Australia even if you have committed no crime here.
The Internet is relatively new (at least the World Wide Web part of it is) and can still be news in itself. Just having a web presence can be a news story if you are in a business where such a thing is thought to be unusual. Another advantage for publicity is the speed with which things on a web site can be changed. If you can encourage people to keep coming back to your site, you can tell them things much more quickly (and inexpensively) than you can do through conventional means. Email mailing lists let you speak to your customers when you need to, when it is convenient for them, and at very low cost. The downside of all this publicity is that it can attract people you might not want to deal with, but nuisances can walk into your main street shop at any time as well.
On the Internet, nobody knows how big or small your business is. Just being there, however, with a good-looking web site gives you the presence of the big operators. Every new person who visits your site each day is the equivalent of a cold call or a brochure hand-out, but they take none of your time or money. Every person who comes back after the initial look comes closer to being a customer. With the right content on your site you can keep them coming back and make it easy for them to contact you. You can also build a virtual community around your business by involving your customers in promotional activities, mailing lists, newsletters, surveys, give-aways and so on at a much lower cost than the traditional ways.
To reinforce the idea that the Internet is a fundamental part of marketing your business today, just think how you would feel about a business without a telephone or fax. Certainly, there are some business which operate without these even today, but they occupy a very restricted set of niches. It has almost reached the stage where anyone without an email address is suspect, and many types of businesses already lack credibility if they don’t have at least a rudimentary web site. Of course, you can continue to operate in the traditional way, but if you keep doing the same things you will keep getting the same results. If you decide to change, you need to recognise that the rules may also change. The old “Ps” were good enough for the old days and the old ways, but the future is a foreign country and they do things different there.