Wednesday, June 22, 2005

Summary of class project requirements

Classmates blogs comments:
1) Comment 1
2) Comment 2
3) Comment 3
4) Comment 4
5) Comment 5
6) Comment 6

Topic Posts:
Topic Post 1: The Right Passage to India
Topic Post 2: Casting a Global Net
Topic Post 3: Lost in Translation

Blog-to-blog Posts:
Blog-to-blog post #1
Blog-to-blog Post #2

Team Posts:
Team Post #1 – Individual Post
Team Post #2 – Link to Group Post on Rachel Barret’s blog

Extra Credit:
Search Engine Results
Linking to a classmates blog

2nd Team Post: Group Posting on Amazon.com

Earlier, I posted an entry on Amazon.com and global markets. Here is a link to the consolidated post for the team I was on, entitled "Amazon.com Offers "Earth's Biggest Selection"". It contains permalinks to each team members blog entries on their topic areas. Enjoy!

SerachCio.com recently posted an article, entitled "Know thyself: Online branding tells all", from Forrester Research. The article gives some points on what to do when creating an online presence to ensure that your branding message is consistent and the user experinece is positive.

Extra Credit Post: Linking to a classmates blog

In a recent blog entry, entitled ”Winners and Losers of a Marketing Shift”, Brent Weinheimer analyzes the article, “The Vanishing Mass Market", which appeared in Business Week on July 12, 2004. Brent talks about the how many of the old mass media outlets are losing ground to the new digital media outlets, cable, and specialty print media and the resulting shift in marketing spend. This seems to revolve around not only the cheaper cost of the new digital outlets, but also the new level of segmentation that cable and new specialty print outlets provide. This new level of segmentation in delivery ties to the concept of permission-based marketing (users have given permission to marketers to send through their message by opting in to an e-mail list or by subscribing to a cable channel or magazine or newspaper).

The new digital medium provides marketers a new, relatively, inexpensive method to reach potential customers. Also, by using Search Engine Optimization (SEO), paid search, and opt-in e-mail, marketers can deliver messages to a focused segment of the population. Opt-in e-mail is the tool that most end users are probably most aware of. By signing up to receive notifications from a website, the end user is giving the marketer permission to send them messages about products that they would be interested in. With the increase in spam messages, I think the power of this tool may become weakened. Many times, anti-spam application filter out the legitimate e-mails that a person opted in to receive. One way around this that is beginning to grow in use is the use of RSS. I blogged about this recently.

Another way in which marketers are making use of the new digital medium is by finding ways to optimize their presence on search engines. SEMPO (Search Engine Marketing Professionals Organization) estimated that business spent $4 Billion on search engine marketing in 2004. That spend was expected to increase 38% in 2005. This amount of money includes paid search as well as organic search word results. Peak Positions posted an article comparing the two options for SEO. It seems that users prefer results coming from organic search word optimization over paid search. The article also states that a company that only uses one method will lose out on many potential customers. The article ”Yes, you may Sell Me Something Today” suggests that a company should focus its normal search engine optimization efforts around its core business and use the paid placement tools of Goggle Ad words or Overture to highlight special benefits or options.

This evolution in marketing, from mass to micro, will require a change in mindsets and costs. Marketers have traditionally paid to reach a particular demographic. With micromarketing, the group is becoming smaller and smaller and more defined. Cost structures will need to change to make this type of marketing worthwhile for marketers and companies to engage in, otherwise the potential benefits will be lost.

Tuesday, June 21, 2005

Topic Post 3: Lost in Translation

In my last topic post, I blogged about the need for companies to consider pricing and payment when setting up international websites. I briefly mentioned the need to modify the product to meet the target audience in the new region being entered. I’d like to try to expand on that in this entry as well discuss the importance of understanding the message that is being delivered to consumers in the region.

Entry into a new market happen many ways, some of these include licensing, joint ventures, or direct investment ( Kotler & Armstrong, pg 609-612). Our text also discusses the need to ensure that the product being marketed will work in the region being entered. To do this, marketers must decide if straight product extension or product adaptation is the right path forward (pg 613-614). Along with this, is the need to ensure the message used to “sell” the product will not only work in the region, but will adhere to the general message of the brand globally (pg 615).

One of the first issues that many companies see when they expand globally is that the catch line that is used to describe the product/brand does not translate effectively. In ”Lost in Translation”, Andrea Orr discusses the importance of balancing the need to localize the product and sticking to the overall brand message. Also, the author drive home the point that in the rush to expand globally, many companies simply translate the US message, not localize it for the region. Match.com is listed as an example of this. Chief Operating Officer Joe Cohen, who oversees the company's international operations and expansion efforts, says, "We learned that it was not just about taking the copy off our English site and translating it." He now understands that localizing a website is very different from translating it. "I'm at the point where I tell translators to forget the copy on the U.S. site," says Cohen. "I say, Let's talk about the meaning and the semantic message." Making sure that the nuance of the message that they are trying to deliver (trying to develop a relationship with their customers, so the customer can develop a relationship with someone else) is much more important than the straight translation.

Another issue that crops up when companies rush to the web is that the local sites are often not developed consistently and with the same purpose. Many times this is due to the rush to get a website up, a company will allow a local marketing group a lot of room to develop the web site as they see fit. Avon went through this issue. As they have worked to rebuild some of their 44 international websites, Avon sends out staff from the home office to work with local marketing groups to ensure that the final product adheres to the Avon standard for delivering the brand message while being localized to the regional market being served.

For me, this example drove home the need for each website to be true to the brand, regardless of the level of customization/localization. Xerox takes this consistency one step further. Xerox insists that all local sites confirm to site performance criteria. To ensure that business can be transacted smoothly, Xerox emphasizes the need for consistent performance across all sites, from the same quick response time to tight integration among the localized sites.

Hopefully, you can see from this blog entry and my previous entry that the rush to enter global markets must be balanced with delivering a consistent brand message and user experience. Consumers, business and personal, will remember a bad website experience just as much as a good one, maybe even more than a good one. As we have seen with the technologies like blogs, a message can be spread rapidly to a wide audience. Making sure that visitors to a website have a good experience can go a long way in solidifying a companies ability to expand globally successfully.

Topic Post 2: Casting a Global Net

In its "Trends 2005: Online Retail," Forrester Research indicates that online retailers will look to international expansion as one of the key areas for growth as competition becomes "increasingly fierce" in the maturing U.S. market. This fact seems to be backed up by research from Visa International and comSource Networks, Inc. According to Visa International, Global Internet sales will reach $150 billion this year, up 56% from $96 billion in 2004. By comparison, U.S. online retail sales grew 26% last year to $66.5 billion, up from $52.9 billion in 2003, according to comScore Networks Inc. These facts make it easy to see why retailers are pushing to create and/or increase their sales from international customers.

Kotler & Armstrong talk about the need to consider certain factors, such as which markets to enter and how to enter them, when considering expansion into global markets (pg 606-612). Also, they talk about how to create a marketing program that will effectively reach consumers in these new markets (pg 612). With the increase in acceptance of the Internet through out the world, companies are entering new markets rapidly, and at time accidentally.

”Casting a Global Net” talks about how retailers will need to remain conscious of the fact that basics of product, price, and payment still apply in the Internet age. Those retailers that do not address these items run the risk of not being successful in their push into new markets.

The importance of being able to present a customer with localized information about the products that are offered is important. Beyond offering localized product information, offering prices for products and shipping and handling costs in the local currency has proven to successful with international customers. Software exists that will recognize the visitors IP address and automatically converts product information and pricing to the local language and currency of the visitor.

Offering localized content will help to attract and keep visitors at a site, but without competitive prices a retailer will fail. One way that retailers are finding to help lower prices to retailers is to establish a local presence in the countries that they are doing the most business. At first this didn’t make much sense to me. But, once you consider the fact that a by having a local presence, a retailer pays a lower credit card interchange rate when they have a local presence in the country where the transaction occurs. In the UK, for example, a Visa credit card interchange rate for a $100 ticket would be $1.65 for a U.S.-based merchant without a local presence, but $1.30 for the same retailer with a local presence, according to Wells Fargo. Also, a local presence can reduce the shipping rates for products.

Having a localized presence is not without its challenges. One of the issues that the article highlights is the need to understand the local tax structure. If a site is conducting a few transactions in a country, the local government may turn a blind eye. But, as the number and size of the transactions grows, the implications for tax revenues will most definitely attract the local governments attractions. Thought users will have to pay their local taxes, the shipping costs and delivery time could be cut down because the product is being sent from a local site.

Beyond not offering competitive pricing and products and adhering to local laws, a retailer must remember to ensure that their website is clear on what countries they do business in. So, just because the Internet allows a retailer to have an international presence overnight, not thinking through the promotion mix thoroughly can have a disastrous effect on the company.

Monday, June 20, 2005

Blog-to-Blog Post #2

I’m a tech geek at heart. I love technology and trying to figure out how to best use it meet a need, whether it is business or personal. So, when Alex mentioned that wouldn’t a news aggregator be a better choice than permission based email to get a message to a consumer, I remembered a blog entry on the Online Marketing Blog. In his RRS Marketing Resource blog entry, Lee Odden links to RSSApplied.com. This website talks about the benefits marketers could see from using RSS. It describes how you can use existing software applications to create, deliver, and track your messages.

As people begin to understand the potential of RSS, I get the feeling that new a new industry will be spawned. Companies will be needed that understand how to use the new technologies to maximize the marketing message without it being diluted and uncontrolled.

Extra Credit - Search Egines

Here are links to the search engines that we used and the results that came up when I searched for my blog:

Google Search
Feedster Search
Technorati Search

Sunday, June 19, 2005

Topic Post 1: The Right Passage to India

Kotler and Armstrong talk about the need to find the right balance between a standardized and adapted marketing mix (pg 612) when putting together a marketing program to enter a new country. Companies that want to be successful usually end up with picking an approach that is somewhere in the middle. When entering countries that are developed or that have a significant population that is similar to consumer mix in the company's home country, the middle ground approach seems to have worked well. A recent article in the The McKinsey Quarterly, entitled "The Right Passage to India", the authors argue that the most successful multinational companies doing business in India are those that have not focused on trying to adapt their marketing mix to the Indian marketplace, but have treated India a bottom up development opportunity.

Why would companies want to invest such a significant amount of time, effort, and revenue into developing marketing strategies for India? India's GDP growth has been almost double that of the United States and United Kingdom over the last decade and is projected to have a continued annual growth rate of 7%. Couple this with an increasingly deregulated environment, and you have opportunities for foreign companies to gain, not only a foothold in India, but to gain a significant share of the markets they compete in.

With almost 80% of the Indian population in the middle and lower segments of income, multinational companies need to create and target products that will appeal to these consumers. The Indian consumer is not driven by price only. They will pay more for a product they perceive to provide additional features and are of superior quality that justify the additional cost. LG Electronics was able to achieve a top 3 position in India's consumer durable-goods and electronics market in 3 years using this approach. LG developed three offerings specifically for India, including a no-frills one to expand the market at the low end and a premium 21-inch flat TV for the middle segment. By keeping the price of the latter offering to within 10 percent of the price of TVs with conventional screens, LG persuaded many consumers to buy it.

The significance of 80% of the Indian population being in the middle and lower segments of income has had an effect on not just product offerings and pricing, but also on distribution systems. The organized retail distribution system in India only makes it to about 2% of the population. To be successful, companies have had to develop strong third party distribution systems to reach the second tier cities and villages that many of the consumers in the 80% reside in.

With an economy growing a significant pace and with many industries still trying to work out what the new deregulated operating environment looks like, the more successful multinational companies have found the having an Indian manager for their in country business is critical. Hyundai has shown that an expatriate CEO can work, if the rotation is longer than the typical 2-3 year assignment and a strong local second in command in place.

For the companies that have followed through on this type of investment, the returns have not been insignificant. "Of the 50-plus multinational companies with a significant presence in India, the 9 market leaders, including British American Tobacco (BAT), Hyundai Motor, Suzuki Motor, and Unilever, have an average return on capital employed of around 48 percent." These companies have an average of $1.3 Billion in revenues generated from their operations in India. These operations contribute, on average, 6.5% to their parent companies overall revenues and 10.6% of their parent companies after tax profits.

Friday, June 17, 2005

Blog-to-blog Post #1

This morning I came across an entry on Scobleizer's blog talking about the "Open Source Marketing Manisfesto" published on the Change This website. You might be wondering, much as I was, what do open source and marketing have to do with one another? One is based on the concepts of openness, sharing, and flowing in the direction the community is moving in, while the other seems to be geared towards directed and controlled messages. Can you guess where this is heading?

Remember back to our class discussion on Wednesday June 15th (Alex discussed the, Cluetrain Manisfesto) and you can see how adopting the principles touted by the open source community could transform the way that marketing strategies are created and executed in the near future. As a matter of fact, the Internet, through blogs, online diaries, homemade films, etc., has already started to remove some of the traditional control that companies have had on the branding of their products. It remains to be seen how marketing will adjust to the Internet and to the openness and "loss of control" it brings. Will companies respond like VW when it sued two Englishmen for the advert they created about the VW Polo, or will it be like Apple and allow the advert created by George Masters to flow freely over the Internet.

P.S. - Eric S. Raymond, President of the Open Source Initiative, is a signatory of the Cluetrain Letters.

Thursday, June 16, 2005

1st Team Post: Amazon.com and Global Markets

Amazon.com customer and long-term growth first and profits second approach dictates how the company approaches every aspect of its business. Amazon.com chairman and CEO, Jeff Bezos’ remarks at a shareholder meeting held on May 17th, 2005 where he talked about Amazon’s continued growth of service offerings and international websites are in line with this philosophy. “All of these investments are expensive in the short term and they don't pay out for years. And in the short term that can put Wall Street into a kerfuffle," Bezos told reporters after the meeting. "It's our job to stay heads-down, focused on the customer experience, focused on the long-term, and not let that change our strategy.”

In 1998, Amazon launched the first of its global websites, with local sites “opening their doors” in the United Kingdom and Germany. By 2002, Amazon had entered into the top 6 e-commerce markets in the world and with their purchase of Joyo.com, the company entered into the Chinese market. As it has expanded into foreign markets, the company has used what Kotler and Armstrong refer to as an “adapted marketing mix” (pg 612). A customer accessing an Amazon website globally will have, for the most part, the same experience. The websites are laid out in much the same manner, many of the same technologies that are available to consumers that access Amazon.com are available to customers that access any of the other global websites, and customers can order items from any of the websites regardless of where they are physically located. The company has also tried to follow the same practices it uses in its fulfillment and customer care systems in the US, in the regions it has expanded into. Page 4 of the company’s 2004 Annual report talks highlights how the fulfillment and customer care services have been expanded global: We fulfill customer orders in a number of ways, including through our U.S. and international fulfillment centers and warehouses; through fulfillment centers operated under co-sourcing arrangements, including our fulfillment center supporting www.amazon.co.jp; through outsourced fulfillment providers, including our fulfillment provider supporting www.amazon.ca; and through other third-party fulfillment arrangements. We operate customer service centers globally, which are supplemented by several co-sourcing customer service arrangements with third parties. The operation of local fulfillment centers has helped to significantly reduce the cost of and shipping time for many US titles that international customers were ordering, as these products are now stored locally.

All of this expansion has not been without the need to modify its product offerings and consumer payment methods and the need deal with local laws and competition. German law dictates pricing for books. This causes considerable issues for Amazon, as it has built its brand on being able to offer customers products at a discount. To get customers to visit and use Amazon.de, the company offers a wide range of products offered a higher discounts that could be found at other on and off line retailers. According to a November 2002 inSight report Japanese online customers are extremely averse to using credit cards for payment of online purchese. To work around this, Amazon.co.jp instituted the ability to pay cash on delivery for online purchases in November 2001. Another example of how Amazon has had to work with local laws is with the creation of its Canadian site. Canadian law calls for majority Canadian ownership of book retailers. Amazon.com was able to get around this law, legally, because it does not have a Canadian office or Canadian employees. Furthermore, Amazon.ca orders are fulfilled by Toronto-based Canada Post and sourced from Vancouver wholesaler BookExpress. (Retail Forward). According to a July 12, 2004 Businesweek.com article, Amzon.fr is facing fierce competition from local retailers, FNAC.com, Cdiscount,.com, and bookseller Alapage. Analysts say FNAC and other French-owned companies benefit from familiar brand names and, in some cases, better selection or lower prices than Amazon.

All of this work has proven to financially beneficial to Amazon’s bottom line. By 2004, international sales (all non-US regions except Canada) accounted for 44% of net sales and almost 33% of gross profit. Amazon believes that in the near future, international sales will account for 50% of net sales. Will this be achievable? With the continued growth in offerings, comes increased cost. These costs, along with other variables that come from international operations (currency fluctuations, taxes, etc.) make it seem that Amazon will need to re-evaluate its offerings (products and partnerships) if the 50% goal is to be achieved.

Monday, June 06, 2005

Why am I blogging

This blog is part of the required coursework for my MKTG 411-Introduction to Marketing class. The course is part of the Wharton Programs for Working Professionals Business Essentials certificate program offered by The Wharton School. I have been assigned to become a "topic expert" on Amazon.com's segmentation and global marketing strategies. I’m hoping to learn more about these areas and see how they correlate to how my employer decides on a marketing campaigns for the products it sells.

My intention is to use this blog to share information I learn about segmentation and global marketing. Also, this blog will be a spot for me to gather feedback from and collaborate with my teammates who are exploring other aspects of Amazon's marketing strategies as well as other classmates that are looking at the segmentation and global marketing strategies of other companies.