Chapter 2

Situation Analysis

Situation Analysis

A brief introduction:

The online marketplace is complex and dynamic and organizations should carefully analyze the market
context in which they operate, identify opportunities and then plan how they can compete effectively.
Understanding an organization’s environment is a key part of situation analysis, and forms a solid
foundation for all types of marketing planning but especially when devising a digital marketing strategy

Customers: it is very important to research and look in depth into the customers’ characteristics,
behaviors, needs and wants

Marketplace analysis also includes assessing intermediaries, influencers and potential partners: a wide
range of influences including search engines, publisher media sites, blogs, review sites and social
networks should all be considered.
Marketplace analysis also involves reviewing opportunities and threats from digital media and
technology including new business and revenue models.

Competitors: Benchmarking customer propositions and communications activities against competitors

can identify opportunities for new approaches and digital marketing activities that need to be improved.

Macro-environment represents the broader strategic influences, including social, legal, environment,
political and technology influences.

Another major part of situation analysis involves an inward-looking, internal review of the effectiveness
of existing digital marketing approaches. current results from digital marketing by review of key
performance indicators (KPIs) and dashboards and the organizational capabilities and processes used to
manage digital marketing summarized as strengths and weaknesses.

Digital Marketing Environment

Micro-environment: it is also referred to as ‘the operating environment’, and focuses on the players
which shape the immediate trading environment. These players include the customers whose needs and
wants are to be satisfied, along with the competitors, intermediaries and suppliers.

Macro-environment: Sometimes known as ‘the remote environment’ and consists of external forces
which can significantly affect organizational success. These forces originate from the marketplace, which
is largely beyond the immediate control of an organization – e.g. economic conditions, changes to

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international trade legislation, technological developments and innovations, social change and political
interventions.

Each company has its own unique space within the marketing environment which is shaped by how they
interact with internal aspects of their own business, competing businesses and the wider marketing
environment

An organization should continually monitor the environment (micro and macro) = environmental
scanning to be able to do the proper and needed market analysis before drafting any digital marketing
strategy.

Online marketplace analysis helps to define the nature of the competitive market or “click ecosystem”.

- click ecosystem: Describes the customer behavior or flow of online visitors between search
engines, media sites, other intermediaries to an organization and its competitors.

Major online players such as Facebook, Google and Sales- force have developed their own infrastructure
or “online market ecosystem” which connects websites through data exchange, giving opportunities to
enhance the customer experience and extend their reach and influence.

- Online market ecosystem: Interactions between different online systems related to a specific
hardware or software technology which may be independent or developed by a particular
brand.

eg. API system known as the Facebook platform to enable exchange of data between websites and
applications including mobile apps.

Customer Journeys

Customer journey is a term commonly used by digital marketers to describe ‘touchpoints’ and “pain
points” which influence consumers as they access different types of website and content when selecting
products and services. Customer journey refers to the path followed by a customer via so-called
touchpoints before making a purchase decision. On the internet, however, the contact points of any
potential customers for a product or service can be precisely tracked with suitable tracking tools, even
across many channels. It is thus a snapshot of the entire customer experience — starting from the
customer’s first interaction with your company and brand and every interaction thereafter. It helps you
understand customer behavior throughout the buying process as well as customer needs and
expectations.

It can be visualized in a customer journey map.

A customer doesn’t usually decide to purchase an item immediately after finding out about it for the
first time. Usually, customers look at a product or a brand several times (online and offline) before
deciding on an action, known in marketing as touchpoints. The customer journey then proceeds through
these touchpoints up until the final purchase decision is taken.

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Example of a customer journey:

An amateur gardener discovers a new garden device in an opinion forum, which they find interesting. In
a brochure from the local do-it-yourself store, which was included with his newspaper, he finds out
some basic data about the product, for example, the technical features and price. His interest
intensifies. They search on the Internet for the product and want to read about whether other amateur
gardeners may have already reported on experience with the device. They use a rating portal. The
experiences from others inspire them, and they want to buy the device. They visit the manufacturer’s
website to find out where they can buy it, then they go to one of the specified online shops and order
the product.
In this example, there are several touchpoints.

Opinion forum
Do-it-yourself store brochure in the newspaper
Rating portal on the Internet
Manufacturer’s website
Online Shop of an authorized dealer

Touchpoints

There are many different types of media that can be considered interaction and contact points. There is
offline advertising media such as TV ads, radio spots, newspaper inserts and ads on billboards. However,
these forms of advertising cannot be tracked. Online touchpoints are more interesting for online
marketing, such as blogs, manufacturer sites, banner ads, opinion forums or experience portals. They
can be made fully visible in the form of customer journeys.

Pain point:

Problems in the customer experience with a product or service. A pain point can be related to a
particular interaction with an interface (in which case it is usually called a usability issue), to a journey as
the customer is trying to accomplish a goal, or to the longitudinal experience that a customer has with a
company.

To help understand different customer journeys to purchase, customer journey maps are a technique
used to model behavior of different audience personas

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Online Marketplace Map

To help understand the influences on online customer journeys in more detail it is useful to produce an
online marketplace map

This summarizes different customer groups and how they seek new products and services and the
different types of search results that may influence them.

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1- Customer segments: different target segments for an online business in order to understand their
online media consumption, behavior and the type of content and experiences they want online.

2- Search intermediaries: These are the main search engines in each country. Companies need to know
which sites are effective in harnessing search traffic and either partner with them or try to obtain a
share of the search traffic

3- Intermediaries and media sites: Media sites and other intermediaries such as individual influencers,
social networks, aggregators and affiliates are often successful in attracting visitors via customer search
or direct to their websites if they are mainstream brands.

4- Destination sites: These are the sites that the marketer is trying to attract visitors to - also include
presence on other social sites like Facebook and Twitter or mobile apps.

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‘online value proposition’, which is a summary of the unique features offered by brands in their online
services and presences - Marketers should evaluate their OVPs against competitors and think about
how they can refine them to develop a unique online experience.

Customer Characteristics

Understanding the individual nature of customers is fundamental to the marketing practice and
planning. You should look into the demographic, psychographic and behavioral variables of that
audience segment.

Demographic Variables: gender, income, education, race, age, lifestyle, cultural and social make-up

Psychographic and Behavioral Variables: Any aspect of a consumer’s perceptions, beliefs and attitudes
that might influence online behavior: knowledge, attitude, innovativeness and risk aversion,

Consumer Personas:

A persona is a fictional profile typically informed by research that represents a particular target
audience. It is considered as a thumbnail summary of the characteristics, needs, motivations and
environment of typical website users.

Personas are a tool which can help in understanding online customer characteristics and behavior.

Creating personas is a powerful technique for developing customer centered online strategies, company
presences and campaigns and forms part of marketplace analysis.

Some guidelines and ideas on what can be included when developing a persona.

The start or end point is to give each persona a name.

1 Build personal attributes into personas: ● demographic – age, sex, education, occupation and, for B2B,
company size, position in buying unit; ● psychographic – goals, tasks, motivation; ● webographics – web
experience (months), usage location (home or work), usage platform (dial-up, broadband), usage
frequency, favorite sites.

2 Remember that personas are only models of characteristics and environment: ● design targets; ●
stereotypes; ● three or four usually suffice to improve general usability, but more may be needed for

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specific behaviors; ● choose one primary persona whom, if satisfied, means others are likely to be
satisfied.

3 Different scenarios can be developed for each persona, for example: ● information-seeking scenario
(leads to site registration); ● purchase scenario – new customer (leads to sale); ● purchase scenario –
existing customer (leads to sale).

Customer Analysis

Analysis of their behavior is central to understanding of the trading situation and ultimately digital
planning. Consumer behavior analysis can be considered from two perspectives:

- Demand analysis. This involves understanding the potential and actual volume of visitors to an
online presence and the extent to which prospects convert to tactical and strategic outcomes,
e.g. lead generation and sales.

- Digital consumer behavior. Here a marketer wants to understand the needs, characteristics and
digital experiences or behaviors of target consumers. These variables are often collectively
referred to as customer insight. Based on this analysis, customer segments can be created which
will be used to develop targeting approaches

Conversion Models

As part of situation analysis and objective setting, experienced digital marketers build conversion or
waterfall models of the efficiency of their web marketing.

Conversion analysis: Using marketing communications to maximize conversion of potential customers to

actual customers.

This model is instructive for improving digital marketing within an organization since these different
types of conversion efficiencies are key to understanding how effective online and offline marketing
communications are in achieving marketing outcomes.

Antecedents affecting consumer behavior

Past online experiences will provide the basis for future evaluations.

1- Information Processing: IP involves the mental processes and senses an individual uses to interpret
the world they inhabit.

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2- Perceived ease of use: the easier a website or mobile site is to use the more likely a customer will
have a positive online experience

3- Perceived usefulness: the extent to which the digital offer fits with the customer’s daily life, for
instance, shopping, booking train tickets, banking

4- Perceived benefits: if a customer feels they will be rewarded in some positive way by engaging with a
digital offer this is likely to generate support for an online bran

5- Perceived control: if a customer is a skilled user of the digital technology in question then they will
feel they are able to function successfully in this environment.

6- Skill: refers to the customer’s ability to use the technology to achieve their desired goals
7-Trust and risk: Customers should be able to achieve their buying goals without feeling they are
exposed to undue risk

8- Enjoyment: is an outcome of a positive online experience

A digital marketer should consider how each of these antecedents can influence a customer’s
motivations to engage with the digital offer and also look for opportunities to create competitive
advantage by overcoming potential barriers. These eight antecedents can influence how the customer
thinks (cognitive state) and feels (affective state) about their online experience and affect the outcomes
of any subsequent behavior.

Porter’s Five Forces Model

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Porter’s Five Forces analysis is a business tool that helps determine the competitive intensity and
attractiveness of a market.
The Internet’s low barrier to entry means that many new businesses are appearing online, providing
near-infinite choices for customers.
This makes it important to consider new factors when devising a marketing strategy.

Competitors – Porter’s 5 forces

In 2001, Porter updated his model to encompass the influence of the Internet.

#1 Competitive intensity: forms the first of Porter’s Five Forces. Made up of all the factors that conspire
to create a “red ocean” type of industry. (Red ocean: sharks fighting over finite number of fish - the
more the competition, the redder the water)

#2 is how easy is it for a company to get into your industry. An example in the online business of ease of
entry is the web hosting business. It’s relatively easy for anyone to setup as a host and starts accepting
payments. This creates a “red sea” situation where there is a large pool of competitors.

#3 bargaining power of buyers, which in this case means customers. An example of buyer’s bargaining
power in online business is the online ad serving industry. The rates that advertisers pay for display
advertising continues to drop, an indication that the buyers have the leverage in this marketplace.

#4 the threat of substitutes. This tenet gauges how easy it is for a consumer to get what they need from
another industry. You’ll always have inertia and brand loyalty on your side if you’re one of the first to
market in your digital niche, but you’ll need more to make your digital service “sticky” to consumers as
they will have plenty of choices

#5 the bargaining power of vendors: This can be considered as an opportunity rather than a threat.
Companies can insist, for reasons of reducing cost and increasing supply chain efficiency, that their
suppliers use certain technologies and software solutions to process orders. Additionally, the Internet
tends to reduce the power of suppliers since barriers to migrating to a different supplier are reduced
particularly with the advent of business-to-business exchanges.

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SWOT Analysis

Performing a structured SWOT analysis to summarize the external opportunities and threats that are
presented by digital platforms is a core activity for situation analysis. Companies should consider their
own strengths and weaknesses (digitally). Summarizing the results through digital channel-specific
SWOT analysis. Appropriate planning to counter the threats and take advantage of the opportunities.

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Competitor Benchmarking

Competitor benchmarking is the term used for structured comparison of digital marketing approaches of
an organization’s services within a market.

Its purpose is to identify threats posed by changes to competitor offerings, but also to identify
opportunities for enhancing a company’s own web services through looking at innovative approaches in
non-competing companies.

Competitor benchmarking is closely related to developing the customer proposition and brand
experience and is informed by understanding the requirements of different customer personas,

Benchmarking of services has different perspectives which serve different purposes:

1- Internal capabilities such as resourcing, structure and processes vs external customer facing
features of the sites.

2- Different aspects of the customer lifecycle: customer acquisition, conversion to retention.

Capabilities are benchmarked in all the activities of each aspect. e.g., what are the capabilities of
a competitor within search marketing through reviewing their presence in the paid and natural
listings of the search engines.

3- Qualitative to quantitative: from qualitative assessments by customers through surveys and

focus groups through to quantitative analysis by independent auditors of data across customer
acquisition (e.g. number of site visitors or reach within market, cost of acquisition, number of
customers, sales volumes and revenues and market share); conversion (average conversion
rates) and retention such as repeat conversion and number of active customers.

4- In-sector and out-of-sector: benchmarking against similar sites within sector and reviewing out-
of-sector to sectors which tend to be more advanced, such as online publishers, social networks
and brand sites. Can be based on the expert evaluation of the suitability of the site for different
audiences as well as measures under the overall construction (which includes usability and
accessibility), message (which covers key brand messages and suitability for international
audiences) and contact (which shows integration between different audiences).

5- Financial to non-financial measures: Through reviewing competitive intelligence sources such as

company reports or tax submissions, additional information may be available on turnover and

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 profit generated by digital channels. But other forward-looking aspects of the company’s
capability which are incorporated on the balanced score measurement framework should also
be considered, including resourcing, innovation and learning.

6- From user experience to expert evaluation. Benchmarking research should take two alternative
perspectives, from actual customer reviews of content and usability to expert evaluations.

Online Marketing Intermediaries

Online intermediary sites provide information about destination sites and are a means of connecting
Internet users with product information. The best known online intermediaries are the most popular
sites such as Google, MSN and Yahoo! These are known as ‘portals’

Destination sites are typically owned by merchants, product manufacturers or retailers providing
product information.

Online intermediary site types:

- Directories (such as Yahoo! directory, Open Directory, business.com);

- Search engines (Google, Yahoo! Search, Bing);
- Virtual resellers (own inventory and sells direct, e.g. Amazon, CDWOW);
- Financial intermediaries (offering digital cash and payment services such as PayPal);
- forums, fan clubs and user groups (referred to collectively as ‘virtual communities’) or social
networks such as HabboHotel for youth audiences (www.habbo.com);
- evaluators (sites which act as reviewers or comparison of services) such as www.trip
advisor.com.

Macro Environment

For the digital marketer, the most important to task is to carry out a thorough assessment of the forces
that are shaping the online marketing environment and identify which forces have implications for their
own marketing planning and strategic initiatives.

PESTLE, where each letter represents a slightly different arrangement of the following macro forces:

● Political forces: national governments and transnational organizations have an important role in
determining the future adoption and control of the Internet and the rules by which it is governed.

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● Economic forces: cause variation in economic conditions; affect trading opportunities; influence
consumer spending and business performance; have significant implications for digital marketing
planning.

● Social forces: cultural diversity among digital communities, which influences use of the Internet and
the services businesses provide online.

● Technological forces: changes in technology which influence marketing opportunities; create new
product development opportunities; introduce new ways to access target markets through channel
integration; create new forms of access platforms and applications.

● Legal forces: determine the methods by which products can be promoted and sold online. Laws and
ethical guidelines that seek to safeguard individuals’ rights to privacy and businesses’ to free trade.

● Environmental forces: Environmental scanning and analysis of the macro-environment are necessary
in order that a company can respond to environmental changes and act on the forces which shape the
trading environment.

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