Should we apply the traditional 4p's of marketing online?

Written by David Elvin

The purpose with this article is to explore if there is a pattern between frequent mistakes in online marketing. The hypothesis being evaluated is that many initiatives that fail do so because they are approached as traditional offline initiatives. In order to get a broad reference, the traditional marketing mix is used as a frame (Dibb et al., 2006; Hollensen, 2007). Examples of successful and less fruitful initiatives will be used throughout the text. The intent is that marketers used to the offline environment by reading this article increase their chances for succeeding with marketing efforts in an online world.

Literature review

Literature used in this paper is books within the field of marketing and appropriately peer-reviewed academic articles as well as business press. The literature consists of articles and books identified by the author as well as course literature for BUSN32 (Internet marketing, branding and consumers). Literature that was not part of the course curriculum has been added to broaden the range of examples to increase the depth of the analysis.

Comparing online and offline through the 4P lens

The marketing mix has been a framework used within marketing for decades. It was originally introduced by Borden 1964 but has been elaborated numerous times since then. It is widely known as the 4Ps, a concept founded by McCarthy. (Constantinides, 2006) Kotler as well as Shostack, Booms and Bitner have during the years all made attempts to adopt the model to fit the current environment (Kotler, 1976; Shostack, 1977; Booms and Bitner, 1981), but it can despite all adjustments be argued how useful the model is for marketers as an everyday tool (Romano & Ratnatunga, 1995; Constantinides, 2006; Scott, 2011).

There are numerous voices claiming that the 4P’s are not applicable when working with marketing online. Revisionists claim that a new paradigm is needed to understand marketing carried out online (Schultz, 2001; Kalyanam & McIntyre, 2002). Conservative voices rather argue that angles of the new environment should be incorporated into the old framework (Peattie, 1997; Bhatt & Emdad, 2001; Allen & Fjermestad, 2001; Möller, 2006).

The traditional model (Figure 1) will in this paper function as a framework for the attempt to find common mistakes in online initiatives that fails.

Figure 1.  (Adopted from Dibb et al., 2006; Hollensen, 2007)

Figure 1. 

(Adopted from Dibb et al., 2006; Hollensen, 2007)


The paper is structured with one section on each of the 4P’s. The sections all comprise of a short introduction to the P, followed by examples illustrating better and worse examples from the online setting and a short analysis of the reason for failure.

Product

The core of a retail offer is the product assortment (Zentes et al., 2011). The main difference between online and offline merchandising is the customer’s possibility to feel, touch and try on the products they have a potential interest in buying. Studies have been made were the lack of possibilities to feel, touch and try the products decreases the trust by consumers (Hoffmann et al., 1999). A product can be displayed in a stimulating and interesting way to generate ideas and tips for the customer in both offline and online environments (Bäckström et al. 2006). In addition to the product itself, the support services are tightly connected to the product, and included in this P (Dibb et al., 2006; Hollensen, 2007). The actual product can in online environments be supplemented with product ratings, product features, product configuration, inventory levels etc. (Hoffman & Novak, 1996).

Netflix Inc., was the worlds leading rent-by-mail DVD company with more than 1.1 million subscribers. The business model was that the subscriber paid a monthly fee for unlimited rentals provided they did not have more than 3 discs at the same time. The company did already early start distributing on demand film to their subscribers as an additional offer included in their subscription. In 2007, their shares reached  $299. In the autumn, the company announced that they would separate DVD rentals and streaming into two different companies. The market reacted strongly, and Netflix was forced to withdraw the new strategy and revert back to the original with both offerings in the same package. Despite the withdrawal, the damage was done, and the stock dropped 75% in a couple of months. (Shih et al., 2009; Scott, 2011; fundinguniverse.com, unknown)

The example shows that the company made the mistake to believe that they could use the same business model for a traditional off-line product (e.g. rent-by-mail DVDs) as for the new online product. This idea cost them both financially and reputation wise.

DELL failed to respond to a customer complaint coming in online within the customers expected timeframe. The customer quickly initiated a complaint storm online, and he did soon get followed by a wave of bad comments from thousands of unsatisfied customers (Armelini & Villanueva 2011).

The marketing is no longer a one-way street were the companies have all the power but rather a two way street on which all actors must squeeze themselves into and hope to come out on top. Anyone with an internet connection and a computer today has the possibility to create their own content and the word of mouth (e-WOM) becomes much more important to companies than ever before. (Armelini & Villanueva 2011) DELL committed the mistake to apply the customer complaint timelines equivalent to those in an offline environment when getting complaints online.

Place

In traditional marketing the place is the most important factor in order to drive success. The place is associated with high costs (Zentes et al., 2011). The physical space is of no importance to an online environment. This makes a possibility for huge cost cuts and a possibility to put warehouses on cheap locations. On the other hand does an offline environment miss the opportunity to build in their locations in their offering by using shopper-marketing experiences such as RFID, mobile technology, TV networks and virtual reality (Kirthi, Lal & Wolfram, 2008). All marketing activities influencing a shopper during the entire cycle from planning and execution are included in shopper marketing (Shankar et al., 2011).

To drive traffic to a site or a campaign online is different than doing it in the real life. Therefore there is a new set of tools that need to be used in order to be successful. In the online environment a good address does not guarantee success. You need to be out there and make sure that you are being seen in order to survive (Axelsson & Agndal, 2010; Laudon & Traver, 2010; Armelini & Villanueva, 2011).

Boo.com is an example of a company that failed because of their view of space and user experience. They developed an online shopping concept with known brands priced as offline. Boo.com invested heavily in a virtual space experience where they tried to replicate the feeling of being in a real store. For example, their online store had a 3-D model that could try on clothes. After less than 2 years in operation they had to file bankruptcy, as customers did not have bandwidth enough to actually use the “traditional shop made online”. (Stockport et al., 2001)

Boo.com made the mistake of trying to replicate traditional shopping rather than finding their own blue ocean.

Net-on-net is an example of company that has been working on making most possible out of space. They started out as an online company, but did after a couple of years start adding outlet warehouses to their business model. By building the warehouses, they complemented their online offering. (Froste, 2011)

Price

Price is of high importance when customers decide what to buy and whom to buy it from. In an on-line environment it is possible for the customers to compare numerous of competing products within just a few minutes as prices becomes very transparent (Bhatt & Emdad, 2001).  Numerous services make it easier to compare price and features (time and effort) (Dominici G., 2008). The new transparency creates new demands on your strategy. If you are competing on price, you have to be in the top. If you on the other hand compete on quality, the quality needs to be very well communicated to the customer, as s/he cannot feel the product when it is sold online. (Besanko et al., 2010)

The record industry did for a long period of time fight the online environment. They did claim that they never wanted to sell music any other way than on CDs with a full album sold as a package. They hunted piracy companies such as Napster, Grokster, Gnutella and Kazza and put all energy into inventing copy-protection systems. Meanwhile, Apple introduced iTunes store, and clearly demonstrated that customers were more than willing to pay for their music also in an on-line setting. (Isaacson, 2011) iTunes was later getting severe competition from Spotify who had a new thinking about price. They sold unlimited music for a fixed price. (Wessel, 2011)

The example shows that thinking traditionally about price as well as product does not work when others start to go online. Digital forms of selling require digital ways of defining price models.

The Estonian online company Cherry.ee made a deal with Estonian Air to sell vouchers for flights with a 40% discount. There was originally not set any limits as to how many vouchers each customer could buy as well as there was no maximum as to how many vouchers was on sale. The deal became a huge hit, and the outcome was that it closed a lot before it was promised.  Even the Estonian Consumer Protection Board and other organisations had to be involved to resolve the conflicts with disappointed customers. (Kerem & Sternad, 2011)

Estonian air used their traditional glasses when committing to the deal, and no one considered that the offer could become hype. The mistake caused a lot of bad reputation for both companies

Promotion

Yudelson argues that promotion includes both the information that is transmitted between the buyer and seller as well in-store marketing and customer relationship management (1999).

Pepsi made an experience in 2010 when they decided to allocate most of its marketing budget into social networks. They ran the Pepsi refresh project, and let go of their traditional marketing opportunities. Pepsi won millions of votes, fans and followers online, but their sales dropped from second to third largest in the United States. Social networks can act as amplifiers but should not replace traditional channels. (Armelini & Villanueva, 2011)

Pepsi did think traditionally, by the means that you should focus your efforts. By focusing all efforts into social networks they lost market share.

EepyBird made a film that generated a big hype about both Mentos and Diet Coke being spread to millions and millions. Mentos did rapidly start collaborating with EepyBird and did generate a lot of branding riding the wave. Coca Cola chose to stay passive with the explanation that the film did not fit with the brand personality of Diet Coke. They did at the same time launch Coke Zero which had a perfectly matching personality, but Coke failed to see this. Motley Fool commented Coca Colas attitude: “it helps explain why, unlike the Diet Coke-Mentos geysers, Coke’s stock has lain flat for five years”. Coke did later on try to involve more, but a lot was already lost by then. (MarketLine, 2011)

Coca Cola made the mistake to think traditionally when they got the opportunity to ride the wave of attention someone else had created for their brand online.

Discussion

The on-line environment means that there is a demand for new and different ways of marketing. The core concepts used before must be altered or completely changed. In the last ten years there have been both good and bad examples by companies when trying to adapt to the new circumstances. From the few examples included in this paper we can spot a trend that there are many different ways to go as well as there is more than one “correct” way to proceed. All examples do however show that it is important not to continue think traditionally. What we need to keep in mind is to a large extent what Smith & Zook explains; “in order to survive and become successful in the new on-line environment it is important to be able to react, combine and alter the marketing tools to include both the traditional offline medium as well as the tools for on-line marketing”. (Smith & Zook, 2011)

Conclusion

Online marketing requires different thinking than offline marketing. It is dangerous to think traditional and just move the activities/strategies/thinking online. All examples in this paper shows that going online either if it is by strategy or by being pushed (as in the Coke case) requires new thinking combined with tradition. Leaving all traditional thinking behind, as in the Pepsi case, can be very dangerous.

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