E-marketing 657
Extended product also includes incorporating
tools to help users during their use of the
product. For example, engineers can be pro-
vided with technical diagrams and updates on
regulations to assist them with their work.
Price
The changes to pricing and price models
introduced by the advent of the Internet have
been significant.
New buying models require new pricing
approaches, which have forced marketers to
radically rethink their pricing strategies. There
have been many experiments, some successful,
others less so. Examples include customer
unions such as LetsBuyit (www.letsbuyit.com)
and ‘name your price’ services such as Priceline
(www.priceline.com), transparent pricing and
global sourcing (particularly by giant procure-
ment mergers like Ford and Chrysler).
A growth in competition is caused partly
by global suppliers and partly by globalized
customers searching via the web to add further
pressure on prices. Many on-line companies
enjoy lower margins, with more efficient web-
enabled databases and processes which cut out
the middleman and his margin. These on-line
cost savings can be passed to customers to give
further downward pressure. Take the car mar-
ket: at launch, several new on-line car retailers
such as Virgin Cars (www.virgincars.com) and
Jamjar (www.jamjar.com) promised 30 per cent
savings.
Pricing is also under pressure through the
trend towards commoditization. Once buyers can
(a) specify exactly what they want and (b)
identify suppliers, they can run reverse auctions.
Price transparencyis another factor. As prices are
published on the web, buyer comparison of
prices is more rapid than ever before. Storing
prices digitally in databases also enables shop-
ping bots to find the best price. This customer
empowerment creates further downward pres-
sure on prices.
Prices are complex; options for the price
package include:
Basic price.
Discounts.
Add-ons and extra products and services.
Guarantees and warranties.
Refund policies.
Order cancellation terms
Revoke action buttons.Ironically, the money-rich and time-poor cus-
tomers in B2C markets may be much slower
purchasing on-line than buyers in B2B markets,
where transaction values are often higher and
savings more significant. B2B marketplaces,
known as exchanges or hubs, and auctions will
grow in significance. An increasing volume of
routine and repetitive buying will be carried
out in the B2B exchanges that survive the initial
competition. Major corporations are already
buying through on-line exchanges and auc-
tions. Healthcare company GlaxoSmithKline
started using on-line reverse auctions in 2000 to
drive down the price of its supplies. For
example, it bought supplies of a basic solvent
for a price 15 per cent lower than the day’s spot
price in the commodity market, and Queree
(2000) reported that on other purchases of
highly specified solvents and chemicals,
SmithKline Beecham is regularly beating its
own historic pricing by between 7 and 25 per
cent. Clearly, such new forms of buying have
major implications for suppliers, requiring
them to be able to participate in these exchan-
ges and review the impact on their margin and
cost structure.
A final consideration is the move from
fixed prices to rental, and leasing prices. Cars,
computers, flight simulators and now even
music can be hired or leased.Place
Place involves the place of purchase, distribu-
tion and, in some cases, consumption. Some
products exploit all three aspects of place on-
line, for example digitizable products such as
software, media and entertainment. Esther