4 Diversification
In this sector, new products are developed which are sold into new markets. The
Internet alone cannot facilitate these high-risk business strategies, but it can facilitate
them at lower costs than have previously been possible. The options include:
Diversification into related businesses(for example, a low-cost airline can use the web
site and customer e-mails to promote travel-related services such as hotel booking, car
rental or travel insurance at relatively low costs);
Diversification into unrelated businesses– again the web site can be used to promote
less-related products to customers, which is the approach used by the Virgin brand,
although it is relatively rare;
Upstream integration– with suppliers – achieved through data exchange between a
manufacturer or retailer and its suppliers to enable a company to take more control of
the supply chain;
Downstream integration– with intermediaries – again achieved through data exchange
with distributors such as online intermediaries.
The benefits and risks of market and product development are highlighted by the cre-
ation of smile(www.smile.co.uk), an Internet-specific bank set up by the Co-operative
Bank in the UK. smileopened for business in October 1999 and its first year added
200,000 customers at a rate of 20,000 per month. Significantly, 80% of these customers
were market development in the context of the parent, since they were not existing Co-
op Bank customers and typically belonged to a higher income segment.CHAPTER 4· INTERNET MARKETING STRATEGY
Figure 4.11Smile (www.smile.co.uk)