CHAPTER 4· INTERNET MARKETING STRATEGY
approach will be through field staff such as account managers. Specific web applications
such as the Dell Premier extranets will form part of the strategy to support these cus-
tomers. The model considers the different type of products a company sells from
lower-cost standardised products through to higher-cost customised products and serv-
ices such as network management.
We will return to this key decision about implementing customer contact strategies in
later chapters in the book.Decision 7: Online communications mix and budget
The decision on the amount of spending on online communications and the mix
between the different communications techniques such as search engine marketing, e-
mail marketing and online advertising is closely related to the previous one.
Varianini and Vaturi (2000) suggest that many e-commerce failures have resulted
from poor control of media spending. They suggest that many companies spend too
much on poorly targeted communications. They suggest the communications mix
should be optimised to minimise the cost of acquisition of customers. It can also be sug-
gested that optimisation of the conversion to action on site is important to the success
of marketing. The strategy will fail if the site design, quality of service and marketing
communications are not effective in converting visitors to prospects or buyers.
A further strategic decision is the balance of investment between customer acquisi-
tion and retention. Many start-up companies will invest primarily on customer
acquisition. This can be a strategic error since customer retention through repeat pur-
chases will be vital to the success of the online service. For existing companies, there is a
decision on whether to focus expenditure on customer acquisition or on customer reten-
tion or to use a balanced approach.
Agrawal et al. (2001) suggest that the success of e-commerce sites can be modelled
and controlled based on the customer lifecycle of customer relationship management
(Chapter 6). They suggest using a scorecard, assessed using a longitudinal study
analysing hundreds of e-commerce sites in the USA and Europe. The scorecard is based
on the performance driversor critical success factors for e-commerce such as the costs
for acquisition and retention, conversion rates of visitors to buyers to repeat buyers,
together with churn rates. Note that to maximise retention and minimise churn (cus-
tomers who don’t continue to use the service) there will need to be measures that assess
the quality of service including customer satisfaction ratings. These are discussed in
Chapter 7. There are three main parts to their scorecard:
1 Attraction. Size of visitor base, visitor acquisition cost and visitor advertising revenue
(e.g. media sites).
2 Conversion. Customer base, customer acquisition costs, customer conversion rate,
number of transactions per customer, revenue per transaction, revenue per customer,
customer gross income, customer maintenance cost, customer operating income, cus-
tomer churn rate, customer operating income before marketing spending.
3 Retention. This uses similar measures to those for conversion customers.
The survey performed by Agrawal et al. (2001) shows that:companies were successful at luring visitors to their sites, but not at getting these visitors
to buy or at turning occasional buyers into frequent ones.In the same study they performed a further analysis where they modelled the theoret-
ical change in net present value contributed by an e-commerce site in response to a 10%Performance
drivers
Critical success factors
that determine whether
business and
marketing objectives
are met.