The main implications of the digital Internet for the product element
1 options for varying the core product
2 options for offering digital products
3 options for changing the extended product
4 conducting research online;
5 speed of new product development
6 speed of new product diffusion
1 Options for varying the core product
For some companies, there may be options for new digital products which will typically be information products that can be delivered over the web. Ghosh (1998) talked about developing new products or adding ‘digital value’ to customers. The questions he posed still prove useful today:
● Can I offer additional information or transaction services to my existing customer base?
For example, a bookseller can provide customer book reviews, new title previews or sell books online. A travel company can provide video tours of resorts and accommodation.
● Can I address the needs of new customer segments by repackaging my current information assets or by creating new business propositions using the Internet? For an online bookseller, creating an electronic book service, or a DVD rental service.
● Can I use my ability to attract customers to generate new sources of revenue such as advertising or sales of complementary products? Lastminute.com, which sells travel-related services, has a significant advertising revenue; it can also sell non-travel services.
● Will my current business be significantly harmed by other companies providing some of the value I currently offer? Consider the consequences if other companies use some of the product strategies described above. Of course, the markets transformed most by the Internet are those where products themselves can be transformed into digital services. Such products include music (download or streaming of digital tracks. (electronic books), newspaper and magazine publishing (online access to articles) and software (digital downloads and online subscription services).
The Internet also introduces options for mass customisation of products, particularly digital products or products that can be specified online. The Internet has provided a channel through which manufacturers can not only sell the personalised products but also use the Internet as a source of information for developing the latest catwalk designs.
ASOS has revolutionised the way fashionistas shop in the UK (and around the globe). This online brand, launched in 2002 and now a leading online fashion retailer in the UK, introduced the ‘catwalk view’, where fashion-hungry online shoppers can watch products being walked down the runway before they buy.
2 Options for offering digital products
Companies such as publishers, TV companies and other media owners who can offer digital products such as published content, music or videos now have great flexibility to offer a range of product purchase options at different price points, including:
● Subscription. This is a traditional publisher revenue model, but subscription can potentially be offered for different periods at different price points, e.g. three months, twelve months or two years
● Pay-per-view. A fee for a single download or viewing session at a higher relative price than the subscription service e.g. music products from iTunes.
Customers can enjoy instant download in a similar way to a mobile company ‘pay-as-you-go’ model. Travel publisher Lonely Planet enables visitors to a destination to download an introduction for a fraction of the price of a full printed guide.
● Bundling. Different channels or content can be offered as individual products or grouped at a reduced price compared to pay-per-view.
● Ad-supported content. There is no direct price set here. Instead, the publisher’s main revenue source is through adverts on the site (CPM display advertising on-site using banner ads and skyscrapers) a fixed sponsorship arrangement or CPC, which stands for ‘cost-per-click’ more typical when using search ad network publishing such as Google Adsense (www.google.com/adsense.com), which accounts for around a third of Google’s revenue.
Other options include affiliate revenue from sales on third-party sites or offering access to subscriber lists. The digitisation of products presents opportunities to some industries and threats to others.
Newspapers is an example of an industry where the Internet has had a far-reaching impact.
Most popular quality newspapers are now successfully using subscription-based business models to maintain their readership.
3 Options for changing the extended product
When a customer buys a new computer, it consists not only of the tangible computer, monitor and cables, but also the information provided by the computer salesperson, the instruction manual, the packaging, the warranty and the follow-up technical service. These are elements of the extended product. Chaffey and Smith (2012) suggest these examples of how the Internet can be used to vary the extended product:
● endorsements;
● awards;
● testimonies;
● customer lists;
● customer comments;
● warranties;
● guarantees;
● money-back offers;
● customer service (see people process and physical evidence);
● incorporating tools to help users during their selection and use of the product.
4 Conducting research online
The Internet provides many options for learning about product preferences and it can be used as a relatively low-cost method of collecting marketing research, particularly when trying to discover customer perceptions of products and services. Sawhney et al. (2005) have reviewed the options for using digital media for new product innovation where they contrast the traditional new product research process with a digitally augmented creation process.
They suggest that online research tools should be evaluated according to how they can be used:
(1) front-end developments of ideation and concept against back-end developments involving product design and testing, and (2) the nature of collaboration broad/high reach against deep/high richness.
Options for performing new product development research online include:
● Online focus group. A moderated focus group can be conducted to compare customers’ experience of product use. Many companies now have permanent customer panels they can use to ask about new ideas.
● Online questionnaire survey. These typically focus on the site visitors’ experience, but can also include questions relating to products.
● Customer feedback or support forums.
● Web analytics. A wealth of marketing research information is also available from response data from email and search campaigns and the website itself, since every time a user clicks on a link offering a particular product, this indicates a preference for products and related offers. Such information can be used indirectly to assess customers product preferences.
5 Velocity of new product development
The Internet provides a platform which enables new products to be developed more rapidly as it is possible to test new ideas and concepts and explore different product options through online market research.
You’re Companies can use their own panels of consumers to test opinion more rapidly and often at lower costs than for traditional market research. Google is a highly innovative company and it has had many successes and failures, e.g. GoogleAdwords (success) and Google Buzz and Wave (failure), Google Glass (enhanced wearable technology and augmented reality glasses shelved (Gibbs, 2015)).
Another aspect of the velocity of new product development is that the network effect of the Internet enables companies to form partnerships more readily in order to launch new products.
6 Velocity of new product diffusion
In the early days of the Internet, Quelch and Klein (1996) noted that to remain competitive, organisations will have to roll out new products more rapidly to international markets. Additionally, Malcolm Gladwell, in his book The Tipping Point (2000), emphasises the importance of word-of-mouth communication on the impact of the rate of adoption of new products, especially through the Internet.
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