sales operations through the Internet in 14 countries and hns an established electronic

shopping mall in Europe. Tt has its own computerized order-processing system and
runs a growing chain of retail outlets.
So far access to TV shopping channels has been restricted to homes with
satellite or cable TV. In Europe, Germany, Sweden and the Netherlands lead in terms
of household penetration of cable systems. However, over the next few years,
marketers believe that the reach of TV shopping channels will increase as the cable
and satellite market grows. TV shopping channel operators believe that countries
such as the United Kingdom, France, Spain and Italy, with less than 20 per cent
satellite and cable penetration, have great potential for growth. Many experts think
that advances in two-way, interactive television will make video shopping one of the
major forms of direct marketing by the end of the century. The recent launch of the
Philips Web TV Box means that consumers need to own a TV and one of these boxes
to make sales on the Internet - if you have an electric plug and access to a phone line,
you can surf the Internet on your TV screen without buying a computer. 1 "

Online Marketing and Electronic Commerce

The most recent and fastest-growing form of direct marketing involves online
channels and electronic commerce. We discuss these channels in detail in the next
section.
(inline marketing is conducted through interactive online computer systems,
online marketing
A farm of direct marketing
which link consumers with sellers electronically. A modem connects the consumers
conducted through computer or TV set-top 'Web machine' with various services through telephone lines.
interactive online compute!' There are two types of online marketing channel: commercial online services and the
services, t&hich provide Internet
iwo-'way systems that link
crmsimners with sellers Commercial online services offer online information and marketing services
electronically. to Subscribers who pay a monthly fee. The best-known online services are America
Online, CompuServe and Prodigy, with more than 8,000,000, 2,500,000 aad
1,000,000 subscribers respectively,39 These online services provide subscribers with
commercial online services information (news, libraries, education, travel, sports, reference), entertainment (fun
Companies that offer online
and games), shopping services, dialogue opportunities (bulletin boards, forums, chat
information, entertainment,
boxes) and e-mail. With a few clicks of the mouse button at their home PCs,
shopping and other
marketing services to subscribers can order thousands of products and services electronically from dozens
subscribers •M.-/W pay the of major stores and catalogues. They can also do their banking with local banks: buy
company a monthly fee. and sell investments through discount brokerage services; book airline, hotel and car-
They make use of their own rental reservations; play games, quizzes and contests; check Consumer Reports
dedicated networks and ratings of various products; receive the latest sports scores and statistics; obtain
operate their own weather forecasts; and exchange e-mail messages with other subscribers around the
computers whiah ore country.
connected to the Internet,
thus offering somevohat After growing rapidly through the mid-1990s, the commercial online services
better security than the are now being overtaken by the Internet as the primary online marketing channel. In
Internet. fact, all of the online service firms now offer Internet access as a primary service. The
Internet is a vast and burgeoning global web of computer networks. It was created by
the US Defense Department during the 1960s, initially to link government labs,
contractors and military installations. Today, this huge, public computer network
links computer users of all types all around the world. Anyone with a PC, a modem
and the right software can browse the Internet to obtain or share information on
almost any subject and to interact with other users, 20
 Internet usage has surged with the recent development of the user-friendly
World Wide Web
World Wide Well access standard and Web browser software sueh as Netscape
(WWW or the Web)
Navigator, Microsoft Internet Explorer and Mosaic. Now, even novices can surf the Net
A pan of [he internet
with fully integrated text, graphics, images and sound. Users can send e-mail, exchange
that uses a standard
views, shop for produces, and access news, food recipes, art and business information.
computer language
The Internet itself is free, although individual users must usually pay a commercial
to allow documents
access provider to be hooked up to it.
containing text,
Rapid Growth of Online Marketing images, sound and
video to be sciif
In recent years, several large Internet marketing systems have failed because of a lack across the Internet
ol' subscribers or coo little use, or because consumers found the buying procedures
baffling and returned to the familiarity of conventional buying channels. The online
information and shopping services industry has its roots in the United States. Although
still in their infancy, Internet usage and online marketing are growing explosively.
According to a recent study, 23 per cent of people 16 or older in the United States and
Canada - more than 50 million people - have used the Internet in the last month, up
from just 1 million people in late 1994, An additional 12 per cent of adults use
commercial online services such as America Online and CompuServe. Currently, there
are some 105 million Internet users globally. Figure 22.1 shows Internet usage (users as
a percentage of population) for the top ten countries in the world. Internet usage is
estimated to be increasing at a rate of 12,000 new users per day, and some analysts
predict that there will be more than a billion users, with Internet transactions totalling
850 billion, by the year 2000.
Although most of the world's online marketing takes place in the United States
and the Internet is still some way from becoming a major promotion medium, European
marketers can no longer ignore the technology,31 There may now be as many as 4 to 6
million Web sites worldwide, and this number is growing by as many as 400 new sites
each week.22 Figure 22.2 shows that Internet users go online for a number of reasons,
ranging from browsing, work and education to entertainment, and not just for buying
things. In time, the biggest opportunity will
 Figure 22.2 Main Uses of the Internet
he for sales or service delivery across national borders. For example. 27 per cent df
the sales of the US Internet bookshop Amazon.com are abroad, frequently to
customers who would otherwise be unable to find the book they were looking for."
Virgin Radio, which launched Europe's first online radio station, offers a live audio-
feed direct to the computers of Internet users visiting the radio station's Web site.
The service (www.virginradio.eo.uk) is a live relay of Virgin via the Internet, which
can be accessed from anywhere in the world. It uses state-of-the art RealAudio
software, which allows the users to download free from the Virgin Radio site. Rut
instead of downloading (he file to the computer and then replaying it, using
RealAudio allows them to hear the material played to them direct over the Net. 24
Just as television hurst on to the media scene and dramatically
revolutionized marketing 40 years ago, so the explosion of Internet usage heralds the
dawning of a new world of electronic commerce. Electronic commerce is the general
electronic commerce term for a buying and selling process that is supported by electronic means.
A general term for a Electronic markets are 'market spaces' in which sellers offer their products and
buying and setting services electronically, and buyers search for information, Identify what they want
process that is and place orders using a credit card or other means of electronic payment. For
supported by example, a reporter wants to buy a 35 mm camera. She turns on her computer, logs
electronic means. on to the Shopper's Advantage Web site, clicks on cameras, then clicks on 35 mm
cameras. A list of all the major brands appears, along with information about eaeh
brand. She can retrieve a photo of each camera and reviews by experts. Finding the
camera she wants, she places an order by typing in her credit card number, address
and preferred shipping mode.
The electronic commerce explosion is all around us, as more and more
businesses begin to recognize the vast potential of electronic technology (sec
Marketing Highlight 22.2). A recent study found that 39 per cent of all Net users
have searched for product information online prior to making a purchase. Fifteen per
cent of Net users have purchased a product or service online, and the percentage is
growing daily. Early attempts to develop online shopping and electronic shopping
malls had been held hack by consumers' concerns about security, fraud and missing
or damaged products. But consumer confidence is expected to grow, as
improvements in technologies, standards and services are being achieved to make
online transactions a mainstav of twentv-first centurv commerce. 25
 Figure 22.3 Demographics of Internet Users

 The Online Consumer

When people envision the typical Internet user, many mistakenly imagine a pasty-
faced computer nerd or 'cyberhead'. Others imagine a young, technically minded,
up-scale male professional. Although such stereotypes are sadly outdated, the Net
population does differ demographieally t'rom the general population. Figure 22.3
summarizes the demographics of Internet users.
As a whole. Internet users remain an elite group. The Net population is
younger, more affluent, better educated and more male than the general
population.26 However, as more and more people find their way on to the Net, the
cyber space population is becoming more mainstream. Increasingly, the Internet
provides online marketers with access to a broad range of demographic segments.
The proportion of female Net users has doubled in the past two years to 41 per
cent. Although more than half of all users are professionals or managers, this
percentage is decreasing.
Net users come from all age groups. For example, the population of more than
4 million 'Net kids' (predicted to reach almost 20 million by the year 2000) has
attracted a host of online marketers. America Online offers a Kids Only area
featuring homework help and online magazines along with the usual games,
software and chat rooms. The Microsoft Network site carries Disney's Daily Blast,
which offers kids games, stories, comic strips with old and new Disney characters
and current events tailored to prcteens. Ten of the leading girls' entertainment
software publishers have joined forces to launch a special web site (at ww-
w.juMt4girls.com) th.-it promotes stories, games, dolls and accessories targeted at
8-12-year-old girls.27
Although Internet users are younger on average than the population as a
whole, 45 per cent are 40 years of age or older. Whereas younger groups are more
likely to use the Internet for entertainment and socializing, older Net surfers go
online for more serious matters. For example, 24 per cent of ,50-64-year-olds use
the Net for investment purposes, compared with only 3 per cent of those between
25 and 29. And although only 5 per cent of consumers over 65 use the Internet, 42
per cent of those users have purchased something online.
Internet users also differ psychographically from the general consumer
population. SRI, creator of the VALS 2 lifestyle typology discussed in Chapter 7,
is now developing an iVALS typology, which focuses on the attitudes, preference