Marketing the e-Business

Lisa Harris, Charles Dennis

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781135890971
• Edition: 2
• Topic: Negocios y empresa
• Subtopic: Negocios en general

Fully updated to reflect the latest developments in e-marketing, this useful text unpicks the challenges of e-marketing for many types of business. It uses topical case studies and accompanying web material to provide an up-to-date study of effective marketing strategies.

1 HISTORY, DEFINITIONS AND FRAMEWORKS

Introduction

In this scene-setting chapter we will review the history of the Internet and briefly describe the physical makeup and protocols which control it. You will then be introduced to some recent developments that will be covered in more detail later in the book. We will also examine some basic e-marketing terminology and discuss the key models of contemporary online business activity.

Topics Covered in this Chapter

• A brief history of the Internet
• Internet components, protocols and security
• Overview of recent developments
  • Governance
  • Access
  • Web 2.0
• Key e-marketing definitions
• Boo.com case study.

Learning Objectives

By the end of the chapter you should be able to:

• Discuss how the Internet has developed over the past 30 years.
• Explain the meaning of basic e-marketing related terminology.
• Explain how the basic infrastructure of the Internet is constructed and the relationship between the component parts.
• Discuss the marketing implications of macro issues such as e-governance policy and recent developments such as Web 2.0.

Recommended Reading

Cellen-Jones, R. (2003) Dot.bomb: The Strange Death of Dotcom Britain, London: Aurum

Berners-Lee, J. (1999) Weaving the Web. The Past, Present and Future of the World Wide Web by Its Inventor, London: Orion Publishing

Kuo, J.D. (2001) Dot.Bomb, Inside an Internet Goliath from Lunatic Optimism to Panic and Crash, London: Little, Brown

A Brief History of the Internet

In 1969 the Internet was just a demonstration project linking up four university campuses in the US but by the end of 2004 there were in excess of 934 million users across the world, according to the Computer Industry Almanac. This figure is predicted to grow to 1.35 billion users by 2008. The latest statistics of Internet growth can be found at the Clickz Network (see www.clickz.com). In addition to these fixed hosts that link individual desktop computers to the Internet, there will be mobile hosts linking up mobile phones using wireless technology.

The Internet was based on an original concept developed by the Rand Corporation in the early 1960s. The objective of the research was to provide the US with a communications network that would survive in the event of a nuclear conflagration. The project was codified into a set of protocols (eventually called TCP/IP) by Vinton Cerf during the mid-1970s and deployed across all the inter-linked networks in 1983. Growth between 1980 and 1987 shows numbers of hosts in the tens of thousands.

After 1987 when the US funding body NSF (National Science Foundation) started to work with the Internet, growth leapt into the hundreds of thousands. Many non-US academic sites and scientific and research bodies linked up at this point. It was inherent in the technology that new nodes could easily be added to the Internet, and this has permitted the exponential growth of users. Secondly, all messages were to be treated equally—there was no inherent prioritisation of messages—so no matter which computer was being used, all messages have equal rights regardless of whether the user is an employee of a large corporation or an individual accessing the Internet from home.

No single entity owns the Internet or is wholly responsible for its functioning. It is a decentralised network whose operation is influenced by a number of bodies, not least large commercial interests such as Cisco and Microsoft which help drive ICT standards and innovation in the marketplace itself. The ethos underpinning the Internet at this point was one of not-for-profit, and the lack of packet prioritisation underpinned an essentially democratic spirit amongst its user communities. It was only with the emergence of the World Wide Web (WWW) that individuals with little knowledge of such protocols could participate in this electronic medium. By use of hypertext (embedded links within electronic documents) and a pointing device such as a mouse, navigation amongst a series of web pages was made possible for novice users. The development of the web browser Mosaic in 1993 meant that rapid colonisation of the network by commercial interests began. It is from this point that online trading (or e-commerce) really took off.

Earlier forms of e-commerce include Electronic Data Interchange (EDI) which is the exchange of information and orders by trading partners using technically-defined templates. EDI originated in 1969 when a US rail freight company sought to optimise its freight shipments by using cabling alongside its tracks to link up with customers. The succeeding decades saw many large corporations taking up EDI (based on value-added networks operated by private sector organisations such as IBM) to the point where by 1995 there were in excess of 30,000 EDI networks in Europe alone.

As opposed to the Internet which uses protocols that are open and non-proprietary, these EDI systems are closed or proprietary systems which are open only to invited participants. These technical problems and restricted functionality contrived to ensure that EDI as a whole never achieved widespread credibility. The lack of a common standard for document formats meant that companies tended to get locked in to one supplier. It has taken the growth of the Internet with its universal standard to project electronic trading into mainstream commercial credibility, by allowing businesses to connect throughout the value chain, exchange real-time information and streamline business processes both internally and externally.

For more detail on the development of the Internet, Hobbes’ Internet Timeline identifies a chronology of events and the individuals behind them at www.zakon.org/robert/internet/timeline

Internet Components, Protocols and Security

The Internet as we know it to-day consists of small area networks belonging to individual organisations (Local Area Networks or LANs), networks spread across large geographic areas (Wide Area Networks or WANs) and individual computers. To connect to the Internet, a computer or network uses the TCP/IP protocol. Internet Protocols are rules that govern the transfer of data within computer networks.

The Internet itself usually utilises the UNIX operating system. Within the Internet there are more networks. These include:

• Backbone networks (e.g. the NTSNET system)
• Commercial networks (businesses with direct links to the Internet)
• Service providers who offer smaller firms with an Internet connection
• Non-commercial networks belonging to educational/research organisations
• Gateway networks provide their subscribers with access to the Internet.

Most Internet sites have an address or ‘domain name’ that performs the role of being the telephone number for individuals wishing to reach them. Transfer of information uses FTP (File Transfer Protocol). These files can contain images, video clips, sound recording, text or graphics. In short, the Internet is capable of transmitting anything that can be put in digital form. This means the cost of information transfer is becoming negligible, distance is increasingly irrelevant and content can be accessed almost immediately. For a relatively small outlay on a computer, a suitable telecommunications link (e.g. via a phone line and modem), and an online account provided by an Internet Service Provider, individuals located across the globe can access this massive network.

For the small business user, the physical components of the Internet are likely to look like this:

• Browser on computer
• Modem on computer
• Telephone line (dial-up or broadband) into telephone company (e.g. BT) network
• Internet account with Internet Service Provider (ISP).

Larger firms might look more like this:

• Browser on computer
• Computer connected to corporate server(s)
• Corporate server connected to corporate router
• Telecoms link from corporate router to telephone company
• High speed Internet account with ISP.

Benyon-Davies (2004) notes that customer concern over security breaches has been the most significant barrier to the growth of e-business. According to www.nielsen-netratings.com (November 2006) almost half of Britons online (45 percent) still have concerns about the handling of their credit card and personal information when shopping online. People over 55 are the most likely to have these concerns, 16–24 year olds the least likely. However, the latest online trading predictions from Nielsen/Netratings indicate that such fears are receding, with people dedicating 55 percent of their total Christmas gift spending to online sources—an average of £237 online and £197 on the high street per person. Despite this increased confidence, no credible business can afford to ignore Internet security issues. In summary:

• From a corporate perspective, Internet security is a subset of information security.
• The Internet was originally designed as an open network to guarantee the ability to share information.
• As it moved from the military and academic arenas into the corporate world where information and knowledge is an asset, the need to ‘protect’ the Internet became a key feature of global Internet access.

The following points should be borne in mind in order to help prevent security breaches:

• A prominently displayed security policy to ensure user awareness
• Restricted access to certain types of content or message attachments
• Secure computer rooms
• Password controlled access to the system
• Encryption of data in sensitive areas; for example, where credit card details are held
• Firewalls to protect the system from unauthorised access
• Specialist security detection software (e.g. virus software)
• Security alerts and reports
• Engage a reputable firm to perform attack and penetration tests.

Overview of Recent Developments

Internet Access

The UK government, which is committed to putting all government services online, has so far spent around £8bn on obliging its departments and the wider public sector to comply with its targets. It was originally estimated that 24-hour e-access to government services would save £3.5 billion per year, and a target date of end 2005 was set to ‘e-enable’ all public services. A special government department, the ‘Office of the e-Envoy’ employing 400 people was created to deliver on this promise. The 2005 target was met in terms of creating online channels into government, but the underlying government bureaucracy remains largely unchanged. According to Colin Muid, who ran the early ‘skunkworks’ programme examining how government could be changed through technology: ‘Back in 1996 we were saying “let’s clear up this mess”. Now, we’ve got a digital interface to that mess’ (Cross, 2006).

There is certainly little evidence as yet that all customers want or need online transactions, let alone any sign of payback from the government’s investment (Vincent 2004). E-government spending to date will be dwarfed in the next few years by projects such as the NHS National Programme for IT and the integration of Customs and Excise and Inland Revenue information systems. Historically, the success rate for implementation of large-scale computer projects is reported to be around 17 percent. The dotcom crash is another recent example of the consequences of ‘blind faith’ in new technology without consideration of the social implications, and it would appear that the UK government is now exercising some cautious optimism with the statement that ‘some of the newer technologies today will be mainstream by 2011 and the time will be right to roll out their widespread exploitation’ (Transformational Government Enabled by Technology, 2006: 19).

Diagram 1.1 shows how the profile of Internet access in the UK has changed since the mid-1990s. The rate of growth in Internet use has recently slowed significantly and is starting to plateau at around 60 percent of the population. A report from the Office of National Statistics (Oxford Internet Institute 2005) highlighted that of the 32 percent of UK adults who had still never used the Internet, 43 percent had no interest in doing so and 33 percent felt that they lacked the knowledge or the confidence to do so. These findings suggested the need for new features to attract users to existing channels, investment in new channels such as digital television and mobile, and a government policy focus on access incentives and training if online channels were to become truly mainstream.

Diagram 1.2 illustrates the take up of a range of technologies in terms of the extent of their penetration into mainstream usage. It highlights ...