Weblinks
A directory of Internet marketing links, including sources for statistics from the Internet environment, is maintained by Dave Chaffey at www.smartinsights.com . Latest updates are available at http://bit.ly/smartstatistics .
Learning objectives
After reading this chapter, you should be able to:
● Identify how the macro-environment affects an organisation’s digital marketing strategy, planning, implementation and performance
● Consider legal, moral and ethical constraints of digital marketing
● Identify aspects of each of the macro-environmental forces that are particularly relevant to digital marketing.
Chapter at a glance
Main topics
● The rate of environment change 123
● Technological forces 123
● Economic forces 142
● Political forces 144
● Legal forces 147
● Social forces 164
● Cultural forces 165
Case studies
Digital marketing in practice
The Smart Insights interview with Fred Bassett of Blue Latitude on online marketplace analysis 121 Case study 3: Zopa launches a new lending model 167
Chapter 3
The online macro-environment
Links to other chapters
This chapter provides a foundation for later chapters on digital marketing strategy and implementation:
● Chapter 4 looks at the development of a digital marketing strategy
● Chapter 5 considers the Internet and the marketing mix
● Chapter 6 explores relationship marketing using the Internet
● Chapter 7 looks at how to deliver the online customer experience
● Chapter 8 describes campaign planning for digital media.
Key questions for marketing managers related to this chapter are:
● How important are macro-environmental changes to my digital marketing strategy?
● How can I ensure my online marketing activities are consistent with evolving culture and ethical standards of online communities?
● How important is it for me to understand technological innovations?
● Which laws am I subject to when marketing online?
● How is social media marketing likely to impact on my business and what changes do I need to make in order to react to social changes in the online marketplace?
● What are the political influences which could influence my digital marketing planning?
● How do I keep up in a constantly changing marketing environment?
Scan code to find the latest updates for topics in this chapter
The waves of change Figure 3.1
Introduction
In Chapter 2 , we reviewed the influences on customers which shape the online marketplace or trading environment. In this chapter, we review how broader, macro-economic forces can influence digital marketing. These are forces which affect the trading environment but companies operating have limited direct influence over.
An indication of the challenge of assessing the macro-environment factors is pre- sented in Figure 3.1 . This figure of the ‘waves of change’ shows how fluctuations in the characteristics of different aspects of the environment vary at different rates through time. The manager has to constantly scan the environment and assess which changes are relevant to their sphere of influence. Changes in social culture, and particularly pop cul- ture (what’s hot and what’s not), tend to be very rapid. Introduction of new technologies and changes in their popularity tend to be frequent too and need to be assessed. Govern- mental and legal changes tend to happen over longer timescales, although, since this is only a generalisation, new laws can be introduced relatively fast. The trick for managers is to identify those factors which are important in the context of e-commerce which are critical to competitiveness and service delivery and monitor these. We believe it is the technological and legal factors which are most important to managing e-commerce, so we focus on these.
In the marketing literature, there are widely used mnemonics, which aim to act as an aide-memoire for the macro-environmental forces, e.g. PEST, SLEPT and PESTLE, where each letter represents a slightly different arrangement of the following macro forces:
● Political forces
● Economic forces
● Social forces
● Technological forces
● Legal forces
● Environmental forces
For the digital marketer, the most important to task is to carry out a thorough assessment of the forces that are shaping the online marketing environment and identify which forces
Introduction
have implications for their own marketing planning and strategic initiatives. The chapter proceeds by exploring each of the macro-environmental forces in the following order:
● Technological forces: changes in technology which influence marketing opportuni- ties; create new product development opportunities; introduce new ways to access target markets through channel integration; create new forms of access platforms and applications.
● Economic forces: cause variation in economic conditions; affect trading opportunities;
influence consumer spending and business performance; have significant implications for digital marketing planning.
● Political forces: national governments and transnational organisations have an impor- tant role in determining the future adoption and control of the Internet and the rules by which it is governed.
● Legal forces: determine the methods by which products can be promoted and sold online. Laws and ethical guidelines that seek to safeguard individuals’ rights to privacy and businesses’ to free trade.
● Social forces: cultural diversity among digital communities, which influences use of the Internet and the services businesses provide online.
The main reason for keeping track of changes in the macro-environment is to be aware of how changes in social behaviour, new laws and technological innovation can cre- ate opportunities or threats. Organisations that monitor and respond effectively to their macro-environment can create differentiation and competitive advantages which enable the business to survive and prosper. Given the significance of technology, we begin with this force as it is arguably a top priority for digital marketing planning.
Fred Bassett of Blue Latitude on online marketplace analysis Overview and main concepts
This interview with Fred Bassett of digital strategy consulting strategy firm Blue Latitude outlines a structured approach to online marketplace analysis in order to inform digital marketing strategy.
The interview
Q. Fred, you say there is an increasing demand for online marketplace analysis today. Why do you think this is? Surely most companies already understand their marketplace
Fred Bassett: The main driver is simply competitive pressure. Many companies have now optimised essential processes such as search marketing, email marketing and site conversion. This has led to many online markets becoming highly competitive environments in which improving performance is increasingly challenging.
Marketplace analysis helps identify opportunities for growth from discovering gaps in the market that competitors aren’t exploiting. In strategic terms, situation analysis helps identify gaps where customer segments aren’t well served by existing propositions.
At a more tactical level, we also identify quick wins in terms of online media alloca- tion, PR and partnership opportunities – where media investments such as paid search or display ads could be better spent.
The Smart Insights interview Digital marketing in practice
Q. What process do you follow in your environment analysis and mapping?
Fred Bassett: We have developed a five-stage situation analysis process. This starts with Business Insight Analysis which aims to identify the current goals and the chal- lenges of the business as highlighted by an online-specific SWOT analysis. Next is User Insight; since our approach is centred on the customer, we spend a lot of time understanding different customer clusters. We use existing research and data, or per- form new qualitative and quantitative research to define segments and personas for different customer groups.
Then we turn to Competitive Insight, where we analyse purchase behaviour in the context of the journeys web users take as they select products or seek information online and offline. For example, what sequence of search terms do they use as they visit different sites, which types of sites do they visit and how does the whole customer journey map out? The competitive insight analysis also involves benchmarking of the propositions of different competitors and sites.
We use a proprietary predictive modelling tool to assess which are the most influen- tial types of site that make an impact on purchase. This could involve analysis of tens of thousands of user journeys.
For each persona, we then create a probability model which indicates the influencing effect of each type of site. This is validated against data available from web analytics.
The final output is an environment mapping for each persona which summarises the influence of different sites such as portals, blogs, social media sites, search engines, etc. against their current and future potential value for the business in terms of oppor- tunities for partnering, PR or media spend.
Q. Wow that must require integration of many data sources. Which data sources typically inform the predictive model?
Fred Bassett: Well, it will vary a fair bit between sectors, but there are certainly many sources we leverage – over 20 in some cases.
Typical external data includes audience data from the likes of Hitwise and com- Score and keyword usage tools. This is blended with internal data such as historical search data, web analytics and purchase data. For customer insights within a sector we will also use analyst sources such as Forrester or Gartner.
One of the benefits of using data in this way is that we can work in and compare a brand’s online activities in different territories. We have performed situation analyses in over 22 territories across Europe, Asia, North and South America.
Q. How is the output from the model used by businesses?
Fred Bassett: We find the environment map [similar to those recommended at the start of Chapter 2] gives marketing directors the confidence to present a clear digital strategy based on evidence-based insights. We use the environment map to help for- mulate a strategy with the client and then we map this strategy against different busi- ness objectives in areas of customer acquisition, conversion and retention.
Within each of these areas, tactics are developed which may cover a number of areas from targeting new audiences, refining customer propositions and content or developing long-term partnership arrangements.
The visual mapping we use makes it easier for others in the business to understand and buy into the approaches used.
Q. Which types of sectors have you applied this model to?
Fred Bassett: The model scales well across different markets. We have used this approach on markets as varied as retail, pharmaceutical, not-for-profit and financial services.
The rate of environment change
In the ‘digital world’, changes in social culture and particularly pop culture (what’s ‘hot’
and what’s not) tend to be very rapid. Introduction of new technologies and changes in their popularity tend to occur frequently. Government and legal changes tend to happen over longer time scales. Therefore, digital marketers need to be alert to the forces that are important in the context of their own trading environment so they can aim to ensure the competitiveness of the business. They should also develop the capacity to respond to environmental changes and the emerging opportunities and threats by developing strategic agility , a concept strongly associated with knowledge management theory and based on developing a sound process for reviewing marketplace opportunities and threats and then selecting the appropriate strategy options.
Strategic agility is important for digital marketers to understand and they should con- sider how to ensure:
1 collection, dissemination and evaluation of different information sources from the micro- and macro-environment;
2 processes for generating and reviewing the relevance of new strategies based on creating new value for customers;
3 research into potential customer value against the business value generated;
4 implementation of prototypes of new functionality to deliver customer value;
5 measurement and review of results from prototypes to revise further to improve proposition or to end a trial.
Technological forces
Marketers need to understand digital and Internet technology and terminology, as making mistakes can have significant consequences. In this section, we explore digital technology, the Internet and web technology; we will also consider digital security, technology con- vergence and emerging technology. These are key factors, which currently have significant implications for digital marketing planning. As an example of the impact of the opportu- nities afforded by technology, Activity 3.1 explores the options for delivering mobile ser- vices to customers, which is a current concern for marketers.
A short introduction to Internet technology
The Internet has existed since the late 1960s, when a limited number of computers were connected for military and research purposes in the United States to form the ARPAnet.
The recent dramatic growth in the use of the Internet occurred because of the develop- ment of the World Wide Web . This became a commercial proposition in 1993 after devel- opment of the original concept by Tim Berners-Lee, a British scientist working at CERN in Switzerland in 1989. Today, the main principles of web technology hold true. Web con- tent is stored on web server computers and then accessed by users who run web browser software such as Google Chrome, Microsoft Internet Explorer, Apple Safari or Mozilla Firefox which display the information and allow users to interact and select links to access other websites. Rich media, such as Flash applications, audio or video content, can also be stored on a web server, or a specialist streaming media server .
Promoting website addresses is important to marketing communications. The technical name for web addresses is uniform (universal) resource locator (URL) .
The rate of environment change
Technological forces
Strategic agility The capability to innovate and so gain competitive advantage within a marketplace by monitoring changes within an organisation’s marketplace, and then efficiently evaluating alternative strategies, selecting, reviewing and implementing appropriate candidate strategies.
Internet
The physical network that links computers across the globe. It consists of the infrastructure of network servers and communication links between them that are used to hold and transport the vast amount of information.
World Wide Web The World Wide Web is a medium for publishing information and providing services on the Internet. It is accessed through web browsers , which display site content on different web pages . The content making up websites is stored on web servers.
Web server Used to store the web pages accessed by web browsers. They may also contain databases of customer or product information, which can be queried and retrieved using a browser.
Web addresses are structured in a standard way as follows: www.domain-name. extension/
filename.html
The ‘domain-name’ refers to the name of the web server and is usually selected to be the same as the name of the company, and the extension will indicate its type. The ‘extension’
is also commonly known as the generic top-level domain (gTLD).
Common gTLDs are:
● .com represents an international or American company (e.g. www.travelocity.com);
● .org are not-for-profit organisations (e.g. www.greenpeace.org);
● .mobi was introduced in 2006 for sites configured for mobile phones;
● .net is a network provider (e.g. www.amakai.net).
There are also country code top-level domains (ccTLDs) maintained by the Internet Corporation for Assigned Names and Numbers (ICANN), e.g.:
● .co.uk represents a company based in the UK (e.g. www.thomascook.co.uk);
● .au, .ca, .de, .es, .fi, .fr, .it, .nl, etc. represent other countries (the co.uk syntax is an anomaly!);
● .ac.uk is a UK-based university or other higher education institution (e.g. www.cranfield .ac.uk);
● .org.uk is for an organisation focussing on a single country (e.g. www.mencap.org.uk).
In 2011, the Internet Corporation for Assigned Names and Numbers, the not-for-profit organisation dedicated to registering, maintaining and coordinating the Internet address- ing system, began a programme of expansion for gTLD names. According to Beckstrom (2011), their aim is to give Internet users more choice and create business opportunities.
Between 1998 and 2010, 22 gTLDs came into general use but ICANN’s expansion pro- gramme for new gTLDs will allow the introduction of many more domains. However, the use of gTLDs, country-level domain names (ccTLDs) such as .au, .ca, .cn, co.uk, co.nz,
Context
Many years have been heralded as ‘The year of mobile’, where adoption of mobile web access and mobile commerce would grow rapidly. As long ago as 1999/2000 this was the case, yet if companies had invested in mobile facilities then, it’s unlikely they would have seen a return from their investment. Today, use of mobile devices and smart- phones is more commonplace, so it’s important for companies to consider how they can use these technologies within their marketing. This activity reviews the demand for popularity of mobile experiences in your country.
Activity
Use publicly available data to assess the importance of consumer access to mobile devices for different types of business. Determine for your country:
● The percentage of consumers accessing websites through mobile (divided into table and smartphone users and for different demographics).
● The percentage of visits buying online via smartphones and tablets (ideally broken down into different product categories).
● The proportion of readers who access their email and social media via a smartphone.
● The relative popularity of mobile sites compared with mobile apps for different purposes.
Environmental forces: the importance of the mobile web Activity 3.1
Uniform (universal) resource locator (URL) A web address used to locate a web page on a web server.
Web browser Browsers such as Google Chrome, Mozilla Firefox, Apple Safari and Microsoft Internet Explorer provide an easy method of accessing and viewing information stored as HTML web documents on different web servers.
Streaming media server A specialist server used to broadcast audio (e.g. podcasts) or video (e.g. IPTV or webcast presentations). Served streams can be unicast (a separate copy of stream is served for each recipient), multicast (recipients share streams) or peer-to-peer.
.de, .fr and the universal .com for US and pureplay companies is likely to remain dominant since marketers perceive that consumers like the familiarity and trust of companies using these domains. By 2015 ICANN had released more than 1000 new gTLDs, This created an opportunity for brands to take more control over their corporate image online but also increases the potential risk for fraud and counterfeiting. ICANN has set up the Trademark Clearing House to help brands set up their own gTLD and also to help protect brands’
identities. The new gTLDs to give some flexibility for startups to create brand names con- sistent with a web address. The lack of names had given rise to many creative brand names since web addresses for gTLDs were typically not available for dictionary-related words.
Domain names are part of a company’s brand property and digital brand managers should protect brand abuse of domains by other companies that might register variants of competitors’ brand domain names.
URL strategy
Today marketers often need to discuss different options for describing addresses for their content for campaigns. For example, is a country or blog referenced on a sub-domain or a sub-folder? How are different types of content or products structured within a folder hierarchy? The defined methods used are known for businesses as URL strategy. Digital marketing insight 3.1 describes some of the terminology you may encounter, as explained by Google.
How does the Internet work?
In this section, we briefly examine some of the fundamental aspects of Internet technol- ogy. It’s important that marketers understand the technological underpinning of digital
URL strategy A defined approach to forming URLs including the use of capitalisation, hyphenation and sub- domains for different brands and different locations. This has implications for promoting a website offline through promotional or vanity URLs, search engine optimisation and findability.
A clean URL which fits many of these aims is www.domain.com/
folder-name/document- name. Care must be taken with capitalisation since Linux servers parse capitals differently from lower-case letters.
A great example of different URL components is provided by Google engi- neer Matt Cutts (2007). He gives this example: http://video.google.co.uk:80/
videoplay?docid=-7246927612831078230&hl=en#00h02m30s Here are some of the components of the url:
● The protocol is http. Other protocols include https, ftp, etc.
● The host or hostname is video.google.co.uk.
● The sub-domain is video.
● The domain name is google.co.uk.
● The top-level domain or TLD is uk (also known as gTLD). The uk domain is also referred to as a country-code top-level domain or ccTLD. For google.com, the TLD would be com.
● The second-level domain (SLD) is co.uk.
● The port is 80, which is the default port for web servers (not usually used in URLs, when it is the default although all web servers broadcast on ports).
● The path is /videoplay. Path typically refers to a file or location on the web server, e.g. /directory/file.html.
● The URL parameter is docid and the value of that parameter is – 724692761 2831078230. These are often called the name, value pair. URLs often have lots of parameters. Parameters start with a question mark (?) and are separated with an ampersand (&).
● The anchor or fragment is ‘#00h02m30s’.
What’s in a URL?
Digital marketing insight 3.1