Case Studies Solution of Digital Marketing

Case Study 1. eBay thrives in the global marketplace Question: Assess how the characteristics of the digital media and the Internet, together with strategic decisions taken by its management team, have supported eBay’s continued growth. (It is best to divide this question into two parts). 1. How have the characteristics of digital media supported eBay’s growth? A suitable framework for reviewing the unique aspects of digital media is Table 1.2 – ‘The 5 Ss of digital marketing’. ‘An interpretation of the differences between the old and the digital media’. The particular characteristics of digital media compared to traditional media that are important to eBay are straightforward. They are as follows: Change from a one-to-many communication model to a one-to-one or many-to-many communication model. The ability to create user-generated content listing products is also related to the one-to-one aspect and is also important. From Push to Pull – eBay offerings are often visible within search engines. From monologue to dialogue (two-way information exchange for enquiries about products facilitated by e-mail). Ratings for sellers are important to generate trust (although there are methods of falsifying these). Community – the sense that users are part of a community and additionally are bypassing traditional retail channels will be important from some users. 2.

How have strategic decisions supported growth?

Strategic success factors students may mention include the following: Branding – a distinctive brand – the earlier brand name was perhaps less appropriate although more direct. First-mover advantage – gaining a critical mass through the foresight of the owner. Security and fraud – realising that this is important to reputation, so investing in managing this and controlling PR related to this. eBay has developed ‘Trust and Safety Programmes’ to manage this. Partnerships and acquisitions, which fit/relate well to the service, that is, PayPal and Skype. Communication of customer value proposition – the case describes how eBay explains this. Revenue model – the market has judged that this gives a good balance for sellers, purchasers and eBay. Setting fees at the right level has enabled eBay to scale for some time. Process efficiency – the case describes how eBay measures and then seeks to improve the key areas of Acquisition, Activation and Activity. Growth strategies – these are covered in Chapter 4 and include market development (geographic) and product development (new categories for consumers and businesses).

Technology scalability – not referred to in this chapter, but eBay has been successful in deploying technology that has supported the company’s rapid growth.

Case Study 2. Boo-Hoo – learning from the largest European dotcom failure 1. Which strategic marketing assumptions and decisions arguably made Boo.com’s failure inevitable? Contrast these with other dot.com era survivors that are still in business, for example, last minute.com Boo.com lacked the expertise, resources and capabilities to make a successful launch in 18 countries simultaneously. The founders had created a successful online book business in Scandinavia but Boo.com was a much more complex operation. Additionally, the underlying technology infrastructures were not in place and the ‘aspirations’ of the management team for the functionality of the website were way beyond the ‘know-how’ of developers at the time. Ultimately, Boo.com did not have a coherent strategy and so rather than building a scalable business that could grow over time they aimed to build a global business overnight. The company benefited from the high demand for high-tech stocks, which allowed money to constantly be pumped into the business. However, once the company demonstrated its inability to deliver, the launch date for the website was constantly put back. The failure to deliver on time linked with the stock market crash it was almost inevitable that the business would fold. In contrast, other businesses were making more scalable and sustainable plans. Companies like Tesco.com and new pureplays like Last minute.com. These are examples of businesses that looked at the potential in the marketplace and developed both sustainable and scalable solutions. 2. Use the framework of the marketing mix to apprise the marketing tactics of Boo.com in the areas of product, pricing, place, promotion, process, people and physical evidence.

4 P’s – product, pricing, place and promotion Boo.com wanted to offer a product range of branded goods to the 18- to 24-year-olds who were both fashion conscious and had good incomes. In essence, this approach was ok if the size of this target group at the time of launch was not as extensive as predicted and there were still many barriers to shopping online both for this group and other potential targets. This made a heavy demand on the promotional budget as Boo had to launch a new shopping concept; establish credibility for the brand and reinforce to the target audience that it was ‘ok’ to shop online. Boo failed on the logistic side, there were many problems associated with logistics throughout the supply chain. Goods were delivered late and returns were mishandled.

The extended service mix Shopping with Boo was a laborious process. Physical evidence: the user interface had many graphical features which meant slow download speeds and was not seen to be user-friendly. When it is working, the online environment created by Boo was sophisticated and offered many of the interactive features that shoppers were looking for; however, this was not the case for much of the time. Furthermore, many shoppers did not have broadband and as a consequence could not enjoy any of the benefits. Process: the shopping process did not work in a streamlined way and there were many angry customers. People: the website used JavaScript and Flash technology to allow Miss Boo, a salesassistant-style avatar to assist shoppers, but this did not work very well especially when using a 56k modem and dial-up connection.

More specifically, the marketing mix is covered in Chapter 5, so this part of the question should only be set if this concept has been covered previously. Details of the marketing mix that relate to Boo.com are as follows: •

Product. Premium brands were used, leading to premium prices. Unclear on mix between sportswear and high street fashion. Scope relatively narrow, limiting target audience.

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Price. As mentioned in the case, there were issues of pricing in different regions. No mentions of discounting are made, consistent with the brands’ premium positioning. However, competitive selective promotions are today commonly used by many e-retail brands.

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Place. Boo.com had a worldwide distribution, which was good for achieving reach, but added to the cost-base of the company, impacting on promotion. A global launch of a new brand was ambitious and can be contrasted with the more conservative approach from the likes of Amazon and eBay.

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Promotion. To build the Boo brand and drive visitors, it was reliant on online advertising, which gave rise to a high cost per customer acquisition that ultimately led to the brands failure. The use of PR was more effective and is one of the successes of Boo. The magazine appears overambitious and did not pay for itself through sales generated. At the time, the promotion through online marketing techniques such as search engine advertising and affiliate marketing techniques was limited in its possibilities. Today, these are more effective for companies.

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Process. People and physical evidence. It is well known that the technology was too advanced for a time when the vast majority was accessing the web over dial-up modems. This led to a ‘clunky’ experience that resulted in the low conversion rates referred to in the article. It also seems likely that the cost of providing customer service was not factored into the business model.

3. In many ways the vision of Boo’s founders were ideas before their time. Give examples of the eretail techniques used to create an engaging online customer experience which Boo adopted and in now becoming commonplace. When boo.com collapsed, the company left a legacy of the underlying e-commerce technology. This was bought for £250,000 by Dan Wagner, which enabled him through his company Bright Station to create an e-commerce solution package, which runs many of today’s successful online retailers’ web operations. The 3D images of products, sales assistant avatars and multiple country online stores are examples of some of the features of Boo.com operations that have now become commonplace, for example, IKEA for online sales support through their ‘Ask Anna’ facility.

Case Study 3. Zopa launches a new lending model Question Imagine you are a member of the team at the investors reviewing the viability of the Zopa business. On which criteria would you assess the future potential of the business and the returns on your investment, based on Zopa’s position in the marketplace and its internal capabilities? Students should be given guidance on the extent to which you require an analytic answer based on a detailed revenue model or a consideration of the strategic issues. If a detailed revenue model is required, then some additional information will be necessary or students will need to state their assumptions. The relevant section in Chapter 2 that students can be asked to refer is 'Demand analysis and conversion modelling' in the section on understanding customers. Essentially, this question is about revenue models and costs, so it requires the students to consider total costs of driving visitors to the site and converting them to sale in comparison with revenue sources. Profitability will also be dependent on the long-term capability of the company to gain revenue customers. Students should mention these elements of a conversion-based revenue model, including the following: Total market size for these products based on the size of existing loans market. Sub-set of market that would meet Zopa's lending criteria. Cost of customer acquisition – this is a competitive market and it may be difficult to attract visitors to the site, for example, using search engine marketing or offline advertising. Cost of servicing sales – to what extent are phone contacts needed to facilitate sales? Conversion rate from visitor to lead to sale. Average revenue earned from each new borrower, which is based on 'charging borrowers 1% of their loan as a fee, and from commission on any repayment protection insurance that the borrower selects’. Lifetime value from customers based on attrition rates – will borrowers continue to use Zopa or will they use it as a one-off? Flexibility on revenue model – for example, after launch, Zopa has gained additional revenue from lenders.

The section in Chapter 8 on 'Conversion marketing objectives' also covers many of these concepts. From a strategic perspective, the issues that students should consider are as follows: Proportion of total loans market that this service will appeal to. Proportion of savings and investments market, this model will appeal to. It is a lot of effort compared to other savings and investments methods for a limited differential. As a result it will only appeal to a limited number of investors. Will the number of lenders balance the number of borrowers dependent on the appeal of the proposition as noted above? Business model scalability – can it be applied in other countries and to other financial products or beyond? Technology costs and scalability

Case Study 4. Tesco.com uses the Internet to support its diversification strategy Question Based on the case study and your own research on competitors, summarise the strategic approaches which have helped Tesco.com achieve success online. The strategic decisions covered in this chapter provide a useful framework for summarising the strategic approaches adopted by Tesco.com. •

Decision 1: Market and product development strategies. Tesco has used the Internet to extend its market into new product markets such as financial services, white goods and DVD rental. While these are promoted through the store, the web provides a wider choice of products, more detailed information about products and a method of purchase. The Internet can also support entry into new geographical markets.

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Decision 2: Business and revenue model strategies. New revenue sources are available through extending the product range online as explained above, but also with new digital revenue streams such as those for music downloads and e-Diets. Tesco also supports advertising on its site of related product such as financial services.

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Decision 3: Target market strategy. Tesco.com has a broad market of customer types, so it is less relevant for them to use online to selectively target these with communications. However, the article explains how Tesco has used the web and e-mail channel to target more closely through targeting different lifecycle groups – these are customers who are grouped according to their level of adoption of online service. Tesco also uses the web to target specific requirements such as diets and financial services through search engine marketing.

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Decision 4: Positioning and differentiation strategy (including the marketing mix). Tesco offers some unique online promotions and lower online prices for selected products such as financial services, which could attract a percentage discount when purchased online. It appears not to use the service elements of the mix for positioning beyond the slogan ‘You Shop, We Drop’. But attention has been paid to improving the customer experience through usability activities and reduction of download times.

The marketing mix, which is covered in Chapter 5, is also suitable for assessing some of the tactical elements of Tesco.com strategy. •

Product

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Price

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Place

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Promotion

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Process, people and physical evidence.

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Decision 5: Multi-channel distribution strategy. This is straightforward. Tesco.com has taken the decision to distribute Internet orders via stores unlike some rivals such as Ocado (www.ocado.com) who have setup distribution channels.

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Decision 6: Multi-channel communications strategy. This is not referred to in the article – this describes the mix between online and offline communications tools for driving visitors to the site. Offline communications in store and through direct mail are clearly important for attracting visitors to the site.

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Decision 7: Online communications mix and budget. Again, this is not mentioned, although the importance of e-mail marketing for customer communications is apparent.

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Decision 8: Organisational capabilities (7S). Tesco has achieved focus online by creating a separate ‘Tesco.com’ brand and a separate division headed by Wade Gery.

Case Study 5. The new Napster changes the music marketing mix Question Assess how Napster competes with traditional and online music providers by reviewing the approaches it uses for different elements of the marketing mix. These are aspects of how Napster.com applied the mix that students may comment on: •

Product. The core product is the streamed music service available through subscription, but extended product offerings include the sale of compatible MP3 players. The wide range of products (more than 1 million) indicates a broad product range contrasting with existing stores, but smaller than some online suppliers like iTunes.

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The article shows the importance of the Napster brand identity, including its pedigree and community experience in shaping the service.

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Price. Different versions of the monthly subscription service are available according to whether the music is kept on a computer or downloaded to the MP3 player. There are options to purchase tracks by album or price, with cost reductions for volume purchases.

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Place. The Internet is the place of distribution, although Napster has signed agreements with colleges, radio stations and stores selling MP3 players to distribute the service more widely.

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Promotion. Establishing brand awareness and familiarity with Napster among potential downloaders of music is the key. Offline media are arguably best for this. Unlike other online services, relatively few prospects will Google ‘Online music download services’; instead, many prospects will have a consideration list and the aim of the offline communications is to get Napster on the consideration list. Napster does use paid search marketing, particularly when visitors are searching for the brand. It also uses affiliates to extend reach into third-party sites to promote the service (not covered in the article).

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Process, people and physical evidence. These are the different aspects of the customer experience such as usability and customer service. These are perhaps less relevant for Napster, but they are important to converting trial lists to subscribers and to renew their subscriptions.

This is a relatively simple analysis. For a more in-depth question and answer, students could be prompted to look more at the Napster offering compared to rivals such as iTunes and download services run by e-retailers. This also works well as many students use such services and so will have strong opinions on them.

Case Study 6. Dell gets closer to its customers online Question Describe approaches used by Dell within their site design and promotion to deliver relevant offers for different types of online customers. The answer should centre on different segmentation techniques. Different segments can then be targeted by different media (e.g., paid search, display advertising, affiliates and offline communications); on site through specific content for these audiences and through event-triggered email communications. Segmentation approaches include the following: •

Geographic – Dell has a separate site for each country.

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Demographic – Dell can target different audiences by advertising or affiliate marketing on different site types.

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Business versus consumer – Dell's site offers products in each of these areas.

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Value – higher value consumer audiences (gaming) and business audiences (larger companies) are offered separate content.

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Vertical business markets (e.g., government, education and healthcare – particularly in core markets such as the United States).

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Lifecycle – first purchase or repeat purchase.

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Accessories and add-ons– have they been purchased?

Case Study 7. Refining the online customer experience at i-to-i Questions 1. Select one country that i-to-i operates in closest to the area that you live. Define a persona based on the age and product needs and then identify the main customer journeys that form the customer for this persona. Which routes through the site would this user follow? For example, a 17-year-old gap year student in Australia who is looking to teach in China. Which browse and search navigation options would this site user follow to find relevant products? 2. Review the range of engagement devices on the i-to-i to engage the audience to generate leads. Engagement devices that are examples of content marketing to encourage signup include the following: TEFL taster – questions and answers to gain an idea of the experience; Ebooks – advice on teaching TEFL; Brochure; Example courses. 3. Identify key areas for improvement for i-to-i based on your use of the site. Use a suitable framework such as WEBQUAL or RACE (Chapter 1) to review and make recommendations.

Case Study 8. A short history of Facebook Note: Since the Facebook IPO in 2012, more information is available via the Facebook Investor relations site, including annual reports. Questions 1. As an investor in a social network such as Facebook, which financial and customer-related metrics would you use to assess and benchmark the current business success and future growth potential of the company? From comments in the case study, the main revenue model is ad-based advertising (CPC and CPM). Facebook has said it will not sell customer data and there is no indication of affiliate related models. Customer-related metrics are related to engagement, which indicates capability to sell ad space – not simply users, but active returning users and the number of pages viewed per day. The proportion of ad inventory sold is also important. A basic answer will provide the following: Understanding of financial metrics – Revenue, Costs and Growth. Clear framework of different metrics types – efficiency versus effectiveness. Audience engagement and satisfaction metrics such as those mentioned in the case. A more competent answer will reference elements of profitability (e.g., ad revenue), alternative models, (e.g., subscription) (although clear data not sold) costs (e.g., R&D, development), operational costs of managing business (on a per active user basis). 2. Complete a situation analysis for Facebook focusing on an assessment of the main business risks which could damage the future growth potential of the social network. Typical risks are as follows: Ad revenue limited because of difficulty of engaging audience in ads; Major privacy problem as with Beacon; Intellectual Property Rights; Technical problems with scalability leading to performance problems and increased technical costs; New entrant or alternative company offers superior experience – what is the likelihood of this? Students could be encouraged to create a SWOT analysis. The likely probability and impact of each risk should also be reviewed. 3. For the main business risks to Facebook identified in your answer to Question 2, suggest approaches the company could use to minimise these risks. Ad Revenue. Review different forms of advertising. Test with users and advertisers

Privacy. Explain clearly at signup. Test changes to use of data with user-group of trusted users. Explain reason for future changes clearly. Technical problems. Testing programme focusing on load testing. New entrants. Developing proposition to lock-in existing users, forming partnerships to approach new audiences.

Case Study 9. Innovation at Google Question 1. Explain how Google generates revenue and identifies future levels of revenue given some of the risk factors are for future revenue generation. Google's revenue has traditionally been based predominantly on advertising, which is divided into these models: Pay-per-click sponsored links within the Google Search Results (and partner search engines such as AOL). Pay-per-click and CPM model within partner sites of the content network, which includes third-party sites such as newspapers and social networks and Google's own properties such as YouTube. Increasingly, there is a move from text-sponsored links to dynamic display ads and advertising such as those in YouTube. Increasingly, revenue will be from Google Applications and associated storage deployed within businesses as paid services (although basic services are often free). The Google Search Appliance is a physical product sold to sites for providing their online search service. Risk factors for future advertising revenue include the following: Competition in bidding has traditionally driven up prices but this could fall as companies become more effective in optimising their investment through introducing wastage. Advertising revenue from the content network may fall as site owners explore other ad models and click-through rates on Google Ads fall as familiarity increases. Ad-blocking (currently limited since not an automatic feature in browsers);.Click fraud. Quality of search results falls due to spamming, so Google users turn to a competitor with an improved search service. Further risk factors are available in the SEC filings referenced in the case study.

Case Study 10. Learning from Amazon’s culture of metrics Questions 1. By referring to the case study, Amazon’s website for your country and your experience of Amazon offline communications, evaluate how well Amazon communicate their core proposition and promotional offers. Worldwide, the proposition is summarised by the well-known brand identity, which features ‘from A to Z’ suggesting the range of products and breadth within categories. Amazon used to refer to itself as the world's largest bookstore. In the article, the following sentence gives an idea of the different aspects of the custom value proposition to watch out for. ‘It believes the main competitive factors in its market segments include ‘‘selection, price, availability, convenience, information, discovery, brand recognition, personalised services, accessibility, customer service, reliability, speed of fulfilment, ease of use and ability to adapt to changing conditions, as well as our customers’’ overall experience and trust in transactions with us and facilitated by us on behalf of third-party sellers’. Googling Amazon will show the different propositions explained in your region. For Amazon US, the proposition is clearest – the listing in Google states: Amazon.com Books: New & used textbooks, biographies, children's Online shopping from the earth's biggest selection of books, magazines, music, DVDs, videos, electronics, computers, software, apparel & accessories, shoes and for books. Amazon.com: Online Shopping for Electronics, Apparel, Computers. Online shopping for millions of new and used books on thousands of topics at everyday low prices. The fulfilment proposition in different countries will revolve around the minimum order for free delivery. Discounting for different books will also vary according to their popularity. 2. Using the case study, characterise Amazon’s approach to marketing communications. With reference to the six categories of e-communication tools described in Figure 1.10, probably the key techniques are search engine marketing, affiliate marketing and partnerships with non-competitive transactional websites. In this respect, Amazon’s approach is selective, using the techniques that are most cost-effective. The other facet is the use of automation to enable specific advertising through the natural and paid listings of the search engines. Testing of the best approach is important to make these ads work. The communications approach is described in the extract towards the end of the case starting: ‘Online advertising techniques include paid search marketing, interactive ads on portals, e-mail campaigns and search engine optimisation’. The affiliate and search engine marketing approaches are described earlier in the article. 3. Explain what distinguishes Amazon in its uses of technology for competitive advantage.

The following are characteristic of Amazon’s use of technology: Use of in-house technologies for personalisation; Early adopter – Rapid adoption of new techniques, for example, Jeff Bezos has talked about the merits of Web 2.0; Extensive testing and optimisation to find the best approach; Avoidance of monolithic projects, with focused teams tackling specific issues; Infrastructure scalable to deal with rapidly increasing demand; Approaches developed for one product must be extensible to others. 4. How does the Amazon ‘Culture of Metrics’ differ from that in other organisations from your experience? This question asks students to reflect on their own experiences. From the case, the following are characteristic of Amazon’s approach: Passionately driven from the top by Jeff Bezos; Importance of metrics in governing all marketing and technology activities; Arguments about the best marketing approach are often based on tests rather than those who shout the loudest: ‘Data trumps intuition’; Accepted wisdom is not accepted – tests are re-run since the approach may vary through time.