Managing Electronic Commerce and On-Line Marketing 329
Despite the possibility of being perceived as a spammer, savvy marketers are rac-
ing to take advantage of the potential of e-mail marketing.^26 One effective approach is
permission-based marketing,a term coined by Seth Godin to describe the e-mail market-
ing model in which marketers ask for the customer’s permission before sending e-mail
offers. Amazon.com, for instance, invites customers to receive free newsletters with
editors’ recommendations for books in specific categories such as business and cook-
ing. Targeted “opt-in marketing messages” are an increasingly important part of on-
line marketing strategy because they can yield impressive response rates of 18–25 per-
cent, compared with the average banner ad’s response rate of 1 percent (or less).^27
The Promise and Challenges of On-Line Marketing
On-line marketing is bringing profound changes to various sectors of the economy.
Consumers’ ability to order direct threatens to seriously hurt certain groups, particu-
larly travel agents, stockbrokers, insurance salespeople, car dealers, and bookstore
owners. These middlemen will be disintermediatedby on-line services.^28 At the same
time, some reintermediationwill take place in the form of new on-line intermediaries,
calledinfomediaries,which help consumers shop more easily and obtain lower prices.^29
Consider mySimon (www.mysimon.com), which acts as an intelligent shopping
agent for consumers looking for the best buys in categories such as books, toys, and com-
puters. A shopper seeking a digital camera can go to mySimon, click on cameras, then
digital cameras, scan the listing of makes and models, and locate the merchant offering
a particular camera at the lowest price. Similarly, DealPilot (www.dealpilot.com) helps
buyers compare prices of books, videos, DVDs, and CDs, while Point.com
(www.point.com) helps buyers compare cellular phone service offerings.
Among other changes, Quelch and Klein believe that the Internet will lead to
the more rapid internationalization of small- to medium-size enterprises.^30 The advan-
tages of scale economies will be reduced, global advertising costs will be less, and
smaller enterprises offering specialized products will be able to reach a much larger
world market.
At the same time, on-line marketers continue to face a number of challenges:
➤ Encouraging more buying:The major on-line buyers today are businesses rather than
individual consumers. Web marketers such as Priceline.com (www.priceline.com)
are among the many sites using techniques such as special pricing to encourage
more consumers to buy on-line. At auction sites such as eBay (www.ebay.com), many
buyers return because they like bidding for what they want and getting a bargain.
➤ Skewed user demographics and psychographics:On-line users are more upscale, younger,
and more Web-savvy than the general population, making them ideal prospects for
computers, electronics, and financial services. The challenge now is to expand the
on-line market and find ways of reaching diverse targeted segments. Eyeing the
assets of younger, wealthier investors who frequent on-line brokerage firms, for
example, Charles Schwab (www.schwab.com) acquired U.S. Trust so it could offer a
wider range of services, such as private banking, to this attractive segment.^31
➤ Chaos and clutter:The Internet offers millions of Web sites and a staggering volume
of information. Navigating the Web can be frustrating. Many sites go unnoticed and
even visited sites must capture visitors’ attention within 8 seconds or lose them to
another site.
➤ Security:Consumers worry about the security of credit-card numbers and other data
sent to Internet sites, while companies worry about systems espionage or sabotage.
The Internet is becoming more secure, but the race continues between new security