Internet Marketing

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Internet marketing is marketing that takes place via the Internet. The products and services marketed can come from either online (virtual) or offline (brick and mortar) businesses, however the marketing medium itself is the Internet.

Since the expansion of the Internet in the late 1990's, traditional forms of offline advertising have vastly diminished as many businesses have now adopted Internet marketing as their lead form of advertising. This form of marketing continues to grow each year at an ever accelerating rate, indicating that consumers are spending more money online and responding better to new and innovative Internet marketing strategies.

Internet marketing cannot be defined as a marketing strategy itself because it consists of many different fields that use practical and theoretical marketing strategies involving the Internet. It is better thought of as a marketing medium as opposed to a marketing strategy. In this article we will review some of the leading strategies used by businesses in marketing their products and services through the Internet.

Internet Marketing Strategies

Search Engine Marketing

Search engine marketing is a form of Internet marketing that focuses on search engine traffic in order to deliver prospective leads to a product or service. The three major search engines that receive the greatest share of worldwide searches are Google, Yahoo! and Bing. All three of these search engines provide search results in two primary forms. The first is in the form of natural or "organic" results, which refers to websites that are displayed by the search engine without the website needing to pay any money to be listed in the search result. The second is in the form of sponsored or "paid" results, whereby someone affiliated with the website will need to have paid the search engine money for the website to appear in the search results. All three of the major search engines make a clear distinction between organic and paid search results, meaning that searchers are aware whether or not a website is paying money to be listed in the search results.

Generally speaking, the more related a website is to a search query the more likely it is to be ranked higher in a search engines organic search results. Whilst this same rule holds true to some extent for paid listings, it is not always the case. Businesses offering to pay money for inclusion in paid search results may pay higher sums of money in order to have even completely unrelated, low quality websites ranked high in the paid results. This is an intentional function of the search engines, whereas unrelated, low quality content appearing in organic search results is not intended.

The general perception within the Internet community is that organic search results are of a higher quality, and are more relevant to search queries than paid listings, and that paid listings are more commercial in nature. This perception is often true due to two reasons. Firstly, in regards to the quality of the websites, organic search results cannot be directly bought by any business, but must instead be earned through the search engine believing that the websites displayed are in order of quality and relevance to the search query. This is not always the case with paid listings where money can outweigh relevance and quality. Secondly, in regards to the commercial nature of the website, non-profit websites will rarely pay money to be included in paid listings, whereas commercial websites often will.

It may seem that search engine users would rarely click on paid advertising ads in favour of organic search results, given the organic search results supposed greater quality and relevance. This is actually the case, with studies indicating that paid results receive approximately only a 15% clickthrough rate when compared to organic search results [1]. Nevertheless, it has been shown that paid search results are up to 3.5 times more likely to convert a visitor into a customer when compared to organic search results also advertising products and services [2]. This demonstrates that, despite the lower clickthrough rate of paid search results, there is a higher conversion rate of visitors to customers. This could be attributed to the customer being more likely to purchase a product or service when clicking a paid listing, given their knowledge that paid listings are likely to be commercial in nature.

There are two fields that look at increasing the ranking of websites in both organic search results and paid listings. The field of search engine optimization has evolved to focus on how to rank websites in organic search results, whereas the field of pay per click advertising focuses on how to receive more customers by targeting paid search results. These two fields will be discussed separately below.

Search Engine Optimization

A search engine looks at various factors on every web page within its index when determining which pages to return as results for a specific search query. Search engine optimization (SEO) looks at ways to enhance these factors so that a web page appears more attractive to search engines, and thus more likely to be returned as a result. Some of the techniques used in search engine optimization are recommended by the major search engines themselves (such as the use of relevant title tags, good page layout and accurate meta tag descriptions), whereas other techniques are forbidden and can result in the de-indexing of web pages that employ the forbidden techniques.

A webmaster can increase the organic search ranking of a website in two ways. Firstly, they can optimize the website itself so that it is more likely to rank higher in the search engines for related queries. Secondly, they can attempt to acquire inbound links (virtual references) from other websites. Whilst sounding simple in theory, it is not uncommon for corporations to have entire divisions of their company permanently dedicated to optimizing their website for search engines. The field itself is complex, as search engines constantly update their algorithms to counteract ranking manipulations. Search engine optimization specialists are in high demand among businesses of all sizes worldwide.

Pay Per Click Advertising

As the name suggests, pay per click advertising (PPC) is a form of Internet marketing whereby the advertiser is charged each time someone clicks on their advertisement. The three major search engines each have their own pay per click advertising programs which display advertisements alongside their organic search results (Google Adwords, Yahoo! Search Marketing and Bing Ads).

The field of pay per click advertising examines the best ways of creating ads so that they result in higher conversions, a lower cost per click and greater ad exposure. The more competitive a search query, the higher it may cost an advertiser to have their ad displayed in the paid (sponsored) search results. For this reason, the profit margin of more expensive, better selling products is not necessarily greater than on cheaper, worse selling products, as advertiser competition has a direct influence on the cost per click metric. Finding the ideal balance between a good conversion rate and a low cost per click is an intricate field of research within pay per click advertising campaigns.

Contrary to popular belief, the higher a sponsored search result appears on a search results page does not directly correlate to a higher profit margin when compared to the advertisement being given a lower ranking position. A comprehensive study has shown that the best return on investment is most often achieved with sponsored results appearing in the middle of the page, as opposed to the top [3]. Reasons for this include the increased cost of appearing higher in the sponsored search results does not directly compensate for any perceived higher click-through rate. Despite this paradox, the major search engines continue to charge higher sums of money for a paid search result to appear at the top of a page. Pay per click advertising is not exclusive to search engines. Many other websites, such as Facebook, offer pay per click advertising as part of their business model.

E-mail Marketing

E-mail marketing focuses on sending e-mails to already existing or prospective customers (often in the form of acquired leads) that have granted permission to receive promotional material from an individual or business. E-mail marketing is not to be confused with "spam", the main distinction between the two being that spam is unsolicited electronic mail whereas e-mail marketing focuses on sending solicited messages.

E-mail marketing relies heavily on the field of copywriting, where convincing a lead to purchase a product often takes place within the e-mail itself, and where the deletion of the e-mail may lead to a loss of sale. E-mail marketers often find the need to offer many useful, free digital products or services to a prospective customer before attempting to advertise a product. In this way a relationship is built between the business and the prospective customer before the advertising takes place. This can in turn lead to much higher conversions rates for the business when compared to other forms of Internet marketing.

E-mail marketing is also a great way for businesses to stay in contact with their customers to offer them future products and services.

Social Media Marketing

Social media marketing focuses on ways to build a company or product's branding on social media networks and/or advertise products directly. Social media is especially useful for businesses as it allows them an informal way to communicate with their clients and prospective customers, breaking many barriers that may normally be present to a business. An optimal marketing strategy used by businesses is not to sell their products directly to social media users, but rather use the social media channel as a means of positively branding their product in the eyes of the social media network's users. Strategies employed include creating free games, songs, and applications that in some way identify with the business or one of their products. By establishing a positive, non-advertising presence on social media networks (such as Facebook), businesses can employ marketing strategies such as these that lead to their customers participating in viral word of mouth advertising at no cost to the business. This leads to greater exposure and free branding for the business that could otherwise not have been bought cheaply.

An example of an interactive online service commonly used by both businesses and prospective customers is Twitter. Twitter is used by most large businesses both as a means of direct advertising and as a means of giving their already existing customers important news. Some businesses offer special promotions or even free products or services exclusively through Twitter. Thus, users are encouraged to view a company's "tweets" (messages on Twitter) regardless of whether they advertise a product or not. This in turn leads to increased sales and exposure that would otherwise not be available.

As the Internet is becoming increasingly more user-interactive, large corporations and smaller companies alike are being forced to establish a presence on social media networks as consumers become more savvy and begin to expect a greater level of transparency and interaction with the businesses they transact with.

Website Advertising

The most traditional form of Internet marketing, website advertising involves a business placing advertisements on another website in order to attract visitors to their own website. Businesses many advertise their products and services on external websites not belonging to them in exchange for a fee. The fee paid can be calculated in several different ways, including the number of times their advertisement is clicked, the number of times their advertisement is displayed, or the length of time their advertisement appears on the external website.

Advertising can take place on a website in many forms. It can vary from something as simple as a text message or a picture advertising a product which appears alongside the website's content, right through to a video or full screen presentation.

Advertising a product or service on other websites is beneficial to businesses as it gives them a means of exposure they would otherwise not have. Similar in theory to television, newspaper or radio advertising, website advertising relies on sending a large amount of commercial advertisements to prospective customers in the hope that they buy the product or service being advertised. One of the primary advantages of advertising on websites as opposed to offline mediums such as television and radio is that the business can track important statistics such as the amount of times their advertisements are viewed or clicked, conversion rates, and even how long people spend on their website before deciding to leave or buy a product. Statistics such as these prove invaluable to any marketing campaign, and are much more difficult if not impossible to ascertain when advertising via offline means. By knowing which advertisements receive the most responses, and which websites send the highest quality traffic, businesses can optimize their website advertising campaigns to maximize their potential profit.

Business Models

Online Businesses

Many businesses are entirely online in nature, having no physical products or offline services. The monetization models of businesses such as these typically consists of advertising, virtual products and services, or paid membership. Another popular business model is to offer paid technical support for third party products and services. Online businesses typically have drastically reduced operating costs when compared to their offline counterparts. Some examples of these reduced costs may include a lack of physical bricks and mortar estate, fewer employees (the Internet can automate many traditional jobs) and a worldwide market reach.

This section will describe some of the business models employed by online businesses.

Contextual Advertising

Many of the largest commercial websites on the Internet make the majority of their income from advertising other businesses on their website (for example, The New York Times, which uses Google Adsense to advertise other websites).

The main advantages of employing an advertising monetization model is the lack of a need to develop, support and market a product or service. On the same token however, having no product or service directly leads to the disadvantages of lack of a customer base (inability to advertise new products and services to customers) and no product recognition (missing out on viral marketing potential).

Virtual Products And Services

Traditionally referred to as "dot com" websites, some online companies make their income entirely from selling digital products and virtual services. The types of services offered can vary greatly, ranging from e-mail services (such as Hotmail), to social media networks (such as Facebook), to search engines (such as Google). Some virtual businesses make money by selling digital products. These digital products can range from online training courses in the form of eBooks, videos and audio files, right through to software applications that perform niche specific functions for customers.

Affiliate Marketing

Affiliate marketing is online commission based marketing, whereby a business receives a direct percentage of the profit for a sale they make for a third party company. Whilst affiliate marketing businesses are online in nature, the third party products and services they promote need not be. For example, many offline businesses, ranging from automotive companies, pharmaceutical companies and real world training seminars, will offer their affiliates a way to promote their products through the Internet.

The affiliate marketing business model is very similar to the contextual advertising one, in that the affiliate marketer's website will be advertising third party products and services. The main difference is the way the payment for the advertising is handled. Instead of the third party company paying for advertising, they pay only when an actual sale is made. This is a huge advantage for the third party company since they don't need to analyze any conversion rate statistics. This also gives good affiliate marketers an opportunity to make more money than through advertising if they are able to promote the third party company's product effectively.

Similar to advertising, the main advantage for affiliate marketers is that they don't need to create their own product or service. Likewise, the main disadvantage is a lack of viral marketing potential due to a lack of a product or service. One main advantage over contextual advertising however is that many companies will credit their affiliates with any future sales that a referred customer makes. For example, if a customer purchases a company's product through an affiliate, and then later on decides to purchase another product from the company, the affiliate will be credited with this additional sale, even though the affiliate only made a referral for the first product. This is often referred to as "lifetime commission", and whilst not all company's offer this form of commission to their affiliates, those that don't will often lose affiliates to competing companies that do.

Brick And Mortar Businesses

Some businesses have an online presence even though the products and services they offer are only based in the offline world. Some of these businesses may use the Internet to allow their customers to purchase their land based products and services, whilst others may have nothing more than a simple website containing information about their company along with a contact number, with no means for consumers to transact with them through the Internet.

Many brick and mortar businesses employ extensive Internet marketing strategies to advertise their land based products and services, often times with a much better planned campaign and a greater budget than most online businesses. The intention of offline businesses is usually not to drive prospective customers to their website, but rather directly to their real-world stores and offices.

The marketing strategies relied upon by brick and mortar businesses typically consist of advertising on third party websites and search engine marketing. The web page advertised will usually contain promotional information about the offline product or service, along with ways in which the visitor can go about purchasing it. E-mail and social media marketing are other strategies through which brick and mortar companies can make contact with both current and prospective customers, although these forms of Internet marketing are usually exclusive to larger land based companies who already have a highly recognizable brand name and an established online presence (an example of an international company that employs social media marketing extensively is Coca Cola [4]).

Up to half of small businesses lack any online presence at all, and fail to conduct any form of Internet marketing to advertise themselves. This demonstrates that smaller businesses are still failing to exploit the huge potential of online marketing and thus are missing out on customers they could otherwise attract. This trend is slowly reversing however, with studies indicating that the percentage of small businesses without an online presence is growing smaller each year [5]. The Internet has become an essential means of advertising for just about every kind of brick and mortar businesses imaginable. Even coffee shops, restaurants, designer stores and convenience stores can benefit from having an online presence, even if it is as something as simple as an address through which search engine users can locate them.

Advantages Over Offline Marketing

Performance Measurement

Perhaps the greatest advantage of Internet marketing over traditional forms of offline based marketing is that the Internet allows the real time tracking of just about every advertising statistic imaginable. Websites are able to receive important information about their visitors, including but not limited to the country the visitor is located in, the local time of their visit, the length of the visit and any other web pages that were viewed on the website. Statistics on which visitors went on to buy a product can also be easily obtained.

One of the most vital statistics provided to marketers is how the actual website was found by the visitor. Marketers can ascertain whether the visitor arrived at the website from an external website, typed in the website address manually, or found the website through a search engine (and if so, the exact search query that was used to locate the website). Marketers can then use this information to better optimize their Internet marketing campaigns. For example, if it was found that 30% of a website's traffic arrived through a specific search query in Google, and that search query was ranking number 3 within the organic search results, then the marketer could focus on attaining a first or second ranking through search engine optimization in order to increase the number of visitors (search engine users are more likely to click on an organic link the higher it appears within the search engine results page).

Marketers can also statistically compare the effectiveness of different copywriting and sales pitches by comparing conversion rates of visitors. They can also determine from which countries users respond the best to specific sales messages by monitoring conversion rates from those countries, and thereby offer different sales messages depending upon the country of origin of a visitor. The amount of testing and analysis available to marketers through the Internet that allows them to optimize their marketing campaigns is virtually unlimited. When compared to offline marketing strategies where the causation of a successful or unsuccessful marketing campaign cannot be easily determined, Internet marketing provides a much quicker, more robust and definitive means of separating effective strategies from ineffective ones.

Many tools are offered to webmasters to assist them in the tracking of visitor data (the most widely used ones being Google Analytics, Piwik, and AWStats). Marketers can use the statistics provided by such tools to perform comprehensive insights into user trends and create new marketing innovations. As a direct result of the ability for companies to measure customer trends and statistics through the Internet in such an accurate manner, many businesses have either forfeited or vastly reduced their spending on traditional advertising mediums.

Viral Potential

Traditional word of mouth advertising can take many months or even years before a message reaches a substantial number of people. A smart online viral marketing campaign has the potential to spread from a few hundred people to tens of millions overnight, giving a company or product an instant level of worldwide exposure that not even many large companies could match with years of planning. Whilst the ingredients necessary to create a successful viral marketing campaign may be varied and non-specific, smart businesses are able to tap into the psyche of large markets to determine what would make them tell their friends, family and complete strangers about a certain product or service through the Internet.

The Internet allows users to share information instantaneously with thousands of people. If a user posts a message on their blog, Twitter or Facebook account, or favourite social media platform, it will be instantly visible to all of their connected friends. If these friends find the message particularly enticing, they in turn may post the same message to their friends, creating a domino effect that is capable of reaching a massive audience in almost no time at all. Any Internet marketing campaign that takes advantage of social media wisely has the potential to "go viral" in this form. Instead of having to advertise to each user individually, businesses let the general population do the advertising for them.

Whilst television and radio may spread advertising messages, the advertisements typically lack a sense of trust with viewers. When an advertisement or marketing message is referred from a friend, it is much more likely that people will pay attention to it. Even if viral marketing strategies are not used to sell a product directly, the resulting branding that is created can cement a company in the minds of millions of online users, all with a minimal advertising investment.

Internet users may also discuss a company's various products and services through avenues such as online public forums and blogs, and make recommendations which will be visible to many people. Due to this, the potential for word of mouth advertising to spread is much greater through the Internet than it is in the offline world.

Target Audience

Many target markets are based worldwide, and are not exclusive to a specific geographical location. For example, people who have German shepherds would benefit from a guide on training German shepherds regardless of where they lived in the world. Whilst traditional marketing strategies may only target local audiences for otherwise international target markets, the Internet allows marketers to target the entire world with their marketing campaigns. This does not however mean that the Internet is incapable of targeting local audiences either. If a product or service is specific to a geographical region, then information obtained from a users Internet Protocol (IP) address can be used to ascertain their location and deliver a local advertisement. Taking this a step further, the same product can be marketed worldwide, but with a different marketing strategy depending upon where the user is located. Some countries may respond better to a certain type of advertisement than others, even if the same product is being advertised.

Many metrics can be obtained from people using the Internet, including their age, gender, income, likes, dislikes, browsing history, favourite websites and products purchased. These metrics can be further used to create very specific and targeted marketing campaigns. Not only does Internet marketing give businesses a much greater potential customer base, it also allows them to customize their campaigns to target audiences in a way that is not possible using offline marketing methods.

Cost

Internet marketing has several notable cost advantages over offline marketing. First and foremost, the Internet is able to automate many things, including finding prospective customers. Online communities where a target market may frequent are easily found, and the display of certain advertisements can be conditional upon the viewer meeting set criteria. For example, if a prospective customer is less likely to buy a product based on an available metric which has been statistically analyzed, then online advertising networks may give the advertiser the option of not displaying the advertisement to the person, thus saving the advertiser costs on advertising to a person that is less likely to make a purchase. An example of this is the "geo-targeting" feature in Google Adwords, whereby many advertisers restrict showing advertisements to third world or poor economy countries, or countries with a high instance of fraudulent transactions and refunds. The restrictions implemented don't necessarily have to be related to a person's geographical location, and can include many different metrics.

The true benefits of Internet marketing become apparent when search engine marketing and social media marketing are exploited to their full potential. The return on investment for well optimized campaigns within these fields can be significantly better than what offline advertising mediums can provide. Since search engines list websites for free, search engines in theory provide free advertising for websites. Those websites wishing to gain greater exposure in the search engines can typically do so for much lower costs than for the equivalent exposure offline. Since social media is run by communities, if a marketing campaign takes off well, the community itself will do the advertising on the business's behalf. The only noticeable free equivelant to this in the real world is through word of mouth advertising, which also exists online.

It shouldn't be said that all Internet marketing strategies are more profitable than offline marketing strategies. Both offline and Internet marketing strategies should be incorporated as part of an overall marketing plan. Planning is the key to any marketing strategy, and a poorly planned Internet marketing strategy can lead a company into bankruptcy just as much as a poorly planned offline one can. However, given proper planning, a good Internet marketing plan should deliver more leads for a lower investment than offline advertising. The primary reason for this is the many automated functions and data gathering that is exclusive to the Internet, along with its cyber infrastructure.

Related Resources

Lab

External

See Also

References

  1. Jansen, B.J. and Spink, A. (2009) 'Investigating customer click through behaviour with integrated sponsored and nonsponsored results', Int. J. Internet Marketing and Advertising, Vol. 5, Nos. 1/2, pp.74–94.
  2. Yang and Ghose: Analyzing the Relationship Between Organic and Sponsored Search Advertising Marketing Science, Articles in Advance, pp. 1–22
  3. Ghose and Yang: An Empirical Analysis of Search Engine Advertising: Sponsored Search in Electronic Markets, Management Science 55(10), pp. 1605–1622.
  4. Leslie, Sara, et al: Dispensing Happiness: How Coke Harnesses Video To Spread Happiness, Stanford Graduate School of Business.
  5. Small Businesses Step Up Online, emarketer.com, Retrieved 16th May 2011