Internet Marketing

The Internet is quickly becoming a booming market option. Many companies use Internet marketing as a significant market channel. Consider these Internet facts.
  • Each generation has a new advertising technology . . . radio age to TV age to Internet age.
  • 500 million people have Internet access.
  • Almost 50 percent of the U.S. household are on line.
  • 98 percent of all large companies have Internet access.
Internet on-line sales are growing. Christmas sales for 1999 were up 1000 percent from 1998 on some sites. There are 32 publicly traded Web sites, such as America On Line (AOL) or Yahoo. Total sales for the 32 sites were $4 billion, but only five sites accounted for 75 percent of the total sales. The most successful sites were Amazon.com, Priceline.com, Egghead.com, Value America and Ebay.

Several companies (such as Arthur Andersen’s Enterprise Group, National Small Business United, Zdnet, Boston Consulting Group and the Yankee Group) have done studies focused on small firms of 100 employees or less. Selected findings from the various surveys include:
  • The percentage of small businesses with access to the Internet doubled from 21.5 percent in 1996 to 41.2 percent in 1998.
  • Small businesses that utilized the Internet had higher revenues when compared with those that did not; $3.79 million versus $2.72 million.
  • Internet sales account for less than 1 percent of total retail sales in the U. S. economy.
  • On-line retail marketing is growing at a 200 percent annual growth rate. Traffic online has been doubling every 100 days; but only 5 percent of customers who visit the Web site become customers.
The most common use of the Internet by small companies was for e-commerce. In a study of 1010 small firms by IBM and the U.S. Chamber of Commerce, 30 percent were found to have used the Internet for promotion/advertising, 37 percent for on-line ordering and 29 percent for receiving orders.

Internet sales are only a fraction of total consumer spending; $1.3 billion to $4 billion out of $2.5 trillion in consumer spending in 1997. Access Media International estimated that small business gained $3.5 billion in consumer sales in 1997 and predicts that number will reach $25 billion in 2000. Some analysts predict that by 2000, one-third of all business-tobusiness transactions, the largest component of e-commerce, will be conducted over the Internet. Those revenues are predicted to grow to $327 billion in 2002, with business-to-consumer sales topping $17 billion in 2001.

The Yankee Group has identified three phases that small- to medium-sized companies go through over time in their Internet development. Three phases are:
  1. Brochure-ware sites: Companies use the Internet primarily to advertise products. The firms gather customer prospect information and provide customer feedback and information requests.
  2. Pre-commerce sites: Firms use the Internet to create immediate orders off the Internet. However, on-line transactions are not part of these sites.
  3. Simple commerce sites: In this advanced stage of e-commerce, businesses accept orders and payments over the Internet. The sites are primitive compared to bigger company sites with little in security features.
Forrester Research, Inc., has divided the on-line retail market into three categories based on type of goods purchased.
  1. Convenience items: Low cost items such as books, music, apparel and flowers. Consumer items are expected to generate $32 billion worth of sales by 2003. Product selection and ease of shipping will keep customers ordering.
  2. Replenishment goods: This group will account for a projected $19 billion in sales by 2003. Items included are high frequency purchases like groceries, personal care, prescription refills and specialty foods. With the exception of specialty foods and refills, consumers will be slow to adopt this purchasing due to distribution issues.
  3. Research purchases: These are information driven purchases, such as travel arrangements, computers and automobiles. Airline tickets are the most often purchased item, accounting for almost two-thirds of the $56 billion spent in this category.
Research has shown consumers start with ordering of convenience items and that it takes a year before moving to the next category of items.

Advantages and Disadvantages
As highlighted in various studies, advantages and disadvantages of Internet use by companies are:
Advantages
  1. Allows small companies to compete with other companies both locally and nationally.
  2. Creates the possibility and opportunity for more diverse people to start a business.
  3. Offers convenient way of doing business transactions, with no restrictions on hours of operation.
  4. Offers an inexpensive way for small firms to compete with larger companies by their products available worldwide.
  5. Small companies that use the Internet have higher revenues; on average $3.79 million compared to $2.72 million overall.


Disadvantages

  1. Managing upgrades.
  2. Assuring Web site security.
  3. Avoiding being a victim of fraudulent activities on-line.
  4. Costs required to maintain a site.
  5. Finding qualified consultants.
  6. Finding and retaining qualified employees.
  7. No market for old computers.

Food Companies
Few food companies to-date have been successful with only using the Internet as their marketing avenue. Producers considering marketing over the Internet should consider some of the following:

  • Businesses which succeed most often on the Internet are those that are unique, commonly used and affordable.
  • When marketing livestock on the Internet you must be slaughtering and processing from a federally inspected plant, unless you only sell to clients in your state.
  • Unique businesses succeed on-line only if people can find them.
  • Promote your Web site by submitting it to several search engines repetitively and linking with other high-traffic, related Web sites.
  • Link (with permission) to many applicable Web sites, but be cautious about having too many links that quickly redirect consumers away from your site.
  • Don’t link to your competitors, but check out your competitors’ Web sites.
  • Hiring a professional Web site designer is often a good idea. Before doing this, check references and on-line work samples. Do-it-yourself design programs can be limiting and may create Web sites that look like many others.
  • Promote your Web site off-line by sending out cards and putting your Web address on every promotion piece.
  • Find a reliable service.
  • For information, look up http://www.extension.umn.edu/mainstreet or contact Rae Montgomery at (612) 624-2773, rmontgomery@extension.umn.edu. Washington State University also has a Web site, which offers resources for farmers wanting to market their products. Their Web site provides information on the pros and cons of Internet marketing, tips for success, links to other farmers’ sites, resource lists for more information and a glossary of Internet terms. The site location is www.agecon.wsu.edu.

A short glossary for new Internet users:

  • Browse: a program through which you view the Internet (i.e., Netscape or Internet Explorer).
  • HTML-Hyper Text Markup Language: the language used to create Web sites.
  • ISP-Internet Service Provider: Provides dial-up access between your computer and the Internet.
  • Link or Hotlink: a word or graphic you can “click on” to be taken to a new Web page.
  • Search engine: a Web site whereby you can locate Web sites for any particular topic by entering keywords. (Example: www.yahoo.com)
  • Server: the unit that houses your Web site.
  • Submission: registering your Web site with a search engine.

 
If you are ready to go on-line you will need:

  • A computer with a modem. The modem needs to be fast enough to handle the Internet or e-mail and to perform desktop publishing. ($600 and up)
  • Consider a second phone line to avoid busy signals while you are on-line promoting or researching your Web site. The cost for this second line will vary according to your local system; usually $15-$20 per month, although it may be higher in rural areas.
  • Consider a toll free number – a risk-free way for potential customers to inquire. ($5/ month, 10 cents/minute)
  • A user-friendly e-mail program (such as Microsoft Outlook) to manage client contact. (free - $5)
  • An Internet Service Provider (ISP) to provide dial-up service to the Internet. ($12.95 - $22.95 per month) If you use a commercial national service, make sure you have a local access number assigned to the company in your area and you will not be billed for long-distance calls each time you dial up. By looking at AOL: CNET Builder.com, you will find sites which will host your page for free. One such site is Yahoo ! GeoCities. This site provides Web page design hosts. The other hosts are mostly feebased sites, although four other Web hosts were listed who will host your site for free. Examples of fee based sites are OLM, charging $19.95 per month and Web hosting.com for $24.95 per month.

If you choose to hire a designer, here is what he/she will need to create an effective Web site.

  • Photographs representing your products and/or services.
  • Any printed material such as business cards, brochures and catalogs are helpful for formatting and content.
  • A storyboard that gives an idea how many pages and what each page should be about, as well as what you like and dislike.


Recommended Book
Sam’s Teach Yourself HTML in 24 Hours.

For Further Information
AOL: CNET Builder.com
www.smartbiz.com/sbs/dobiz.htm - Find the site titled Internet Business Smarts on this
site. Many sites are listed which are resources for a wide variety of information for
marketing on the Internet.


Resources
Hobbs, Jennifer, Internet Eclipse;
jennifer@webchoce.net.
Quinn, Tom, Promoting Your
Business Using the Internet;
Iowa State University
Extension, Ames, Iowa 50011.
E-Commerce: Small Business
Venture On-line; Office of
Advocacy, U. S. Small
Business Administration; July,
1999.