3.

LITERATURE REVIEW :

In this chapter, authors will present the theories on the 4 Ps of marketing mix, the traditional
and Internet marketing and their comparison. Theory is used to describe the relevant areas of
traditional marketing and Internet marketing in depth. Also clarifying the differences of
characteristics between them, showing the pros and cons related to either one.

3.1 Traditional marketing:

Marketing is considered to be a collective process where individuals or groups can exchange

goods or services based on their needs and wants. 16 The content of this process was
presented as marketing mix by Neil Borden for the first time in 1953, representing the
mixture of useful elements for marketing. This theory of marketing mix has been analysed
and rewritten about by many different authors through time. One of the authors that have
written about this theory and explained his point of view about the elements of marketing is
Philip Kotler, whose marketing mix is presented in this thesis. He considers the marketing
mix, a mixture of different tools or instruments for pursuing a marketing plan.17 In
traditional marketing the wants and needs of customers are being discovered and satisfied,
through traditional channels of communication such as face to face communication,
magazines, catalogues etc. The aim is to create products and services which sell themselves
by being what customers need and want.18 “Marketing is the process of planning and
executing the conception, pricing, promotion and distribution of ideas, goods and services to
create exchange that satisfy individual and organizational objectives.”19 The marketing mix
theory of Philip Kotler, the 4Ps are presented here in the following order, Product, Price,
Place and Promotion.

3.1.1 Product

According to Kotler20 Product is the solution to customers wants or/and needs. There are
different aspects of product that needs to be considered. Some examples of these are the
design, function and quality of the product. The marketer needs to know what kind of
appearance such as size, colour and generally design of product is wanted or needed. It is
also important to know what kind of functions the customer is looking for in the product. To
know what is required by the market, there is a need for research and studying the market.
There are 5 product levels, which create the customer value hierarchy. These levels are called
core benefit, basic product, expected product, augmented product and potential product. Core
benefit is the benefit of the product which the customer would be buying. For example
buying a spa ticket, one is buying the benefit of it which in this case would be relaxation and
rest. Basic product is the benefit turned into a product, providing the needed tools to create
the benefit for the customer. Expected product is what would fulfil customers expectations
mainly based on what is promised by the marketer. Augmented product is a product that
fulfils more than what the customer expects. Potential product is the possible wanted or
needed product by customers. Service is also a part of this P. It is the intangible good that a
company can offer to its customers and it is difficult good to provide, for satisfying
customers needs and expectations. One reason for this is the difficulty of measuring it fitting
the needs and expectations. Offering warranty is part of this P too. By providing warranty,
the company is not only offering a good customer service but also showing that it believes in
its own goods.

3.1.2 Price

Compared to other Ps in the marketing mix, pricing is easiest and quickest to adjust. As
Kotler presents21 it is an important part of the marketing strategy and it sends out a message
about the product, company and the image. The decision of pricing is dependent on what
goals the company wants to achieve. Does the company want bigger market share, maximum
profit or possibly a specific position in the market etc? Setting a price is a process and based
on the marketing mix theory there are 6 steps in this process. These are Selection of pricing
objectives, Determination of demand, Estimation of costs, Analysing competitors’ costs,
prices and offers, Selection of pricing method and Selection of final price. The firm should
decide on the objectives that it wants to achieve which would make the decision of price
setting clearer and easier. The demand and price are depended on each other and therefore it
is an important point for setting price. Different kinds of possible costs such as fixed costs,
variable costs etc. should be observed and estimated when setting the price. This is one of the
issues that have a large affect on price setting. Analysing competitor’s costs, prices and offers
is also very important in order to be able to compete with them and not stay behind. Based on
the different steps of the price setting process mentioned above, the company should decide
on a pricing method and set the final price accordingly.

Payment terms are part of this P. The different type of payments, credit terms and different
payment periods are issues to decide upon in a marketing process. The marketer should
consider different options and figure out the best way for different situations, depending on
the wanted result and the needs and wants of the customers.

3.1.3 Place

Place in marketing can be about location in the means of store, factory and storage. Also the
decisions on distribution channels and transport are part of it.22 The company should act on
the goals they want to achieve by the location they choose. Some examples of the factors that
have an affect on this decision are the cost of the chosen location, the amount the company
can spend in this area, the profitability of it and the space needed. The choice of place can be
very radical for the success of the business. For example, a company chooses a place outside
the city because of the wide space needed and the cost of it or a company that opens a new
store and wants to get the customers’ attention by situating it in a very busy and crowded
area where possible customers would drop in when passing by.

3.1.4 Promotion

Promotion is one of the important Ps of 4 Ps of marketing mix. The focus is mainly on how
the company could reach its targeted customers and communicate its message to them.23 The
figure below demonstrates the objectives of promotion mix which will be explained further
on in the text.

Sales promotion is a key factor in marketing campaigns, creating an incentive for customers
to buy the product or service. Sales promotion contains offers such as free trials, prizes,
warranties, coupons and etc. These are the offers that can attract mainly the customers that
are looking for a new thing and they probably would not become loyal customers. This
strategy can be used in high brand similarity markets where the seller wants to reach short
term high sales response and not so high permanent gain in market share. In a low brand
similarity market, this strategy can have a more permanent affect or gain on market share.
The amount of existing brands has grown by time and the competition is getting tougher.
Another issue rising from this is the price-oriented customers that are looking for the better
offer. For companies to be not just one of the brands they have to try more and present more
interesting promotion offers or “better” promotion tools than the competitors are using.
Promotion can be used in different ways, for example by targeting the new customers or
loyal customers or rewarding both in different ways. The bigger or more exceptional the
offer, the more attention the company can get from the customers.

Sales force is the face of company towards customers when providing or offering customers
solutions in either services or products. Their working process has become from just selling
to more complicated task. The sales representatives are the ones that bring the needs of
customers and the company together and create the mutual satisfaction.

Public relations involve creating and planning a program or event where the company can
promote and in some cases protect the products or the image. Some examples of these events
are presenting news or important information about the company to the press by having a
press conference. Another example can be informing and advising management about the
public issues and company position and image in different type on situations.

The aim is to prevent bad publicity and therefore it is important that the managers are aware
of what kind of practices they should avoid and what kind to get involved with to present a
good will for the company. The importance or effectiveness of this tool should not be
underestimated compared to the other tools in promotion mix. This tool plays a great role in
presenting and keeping the company image, values and position which is very important.
Advertising “is any paid form of non personal presentation and promotion of ideas or good
or services by an identified sponsor”.25 Advertisement can be done in many ways.
Advertisement is a way of communicating the offer to customers and it can be done in
different ways, in different shapes and through different channels. Most companies get an
outside help from the experts such as an advertising company, to make the decisions about
what the best way to do their advertising would be. The company that needs the advertising
should decide on the budget they have for the advertisement, what is the message they want
to give to the customers, which media they want to use and how they want to measure the
results. These are some important decisions to be made and it can easily happen that some
companies under- or over-spend for advertisement.

Direct marketing involves using different channels to reach the customers. This
communication can be done through face to face meeting, mailing, telephone, catalogue and
Internet. With direct marketing the company seeks for a measurable response from
customers. This is one way of building long term relationship with customers; for example,
by sending customers a birthday card on their birthday, information or club membership
offers etc. Direct marketing creates a personal feeling communication towards the customer.
Companies can be more aware of how to target which groups of customers.

Face to face selling is the most original one and is still used in many companies where they
send out their sales personal to meet the potential customers. The sales person communicates
directly with the customer and the offers and the deals are made.

Then there is direct mailing where the company sends a letter to the customer. This letter
can be an offer, announcement or reminder. Direct mailing tools have developed by time and
these added tools are fax, voice mail and e-mail. E-mailing is one effective tool because of
the time and money that can be saved by using it instead of sending the regular mail.

In catalogue marketing, companies send their catalogue to targeted potential customers

where they have the opportunity to order and purchase the products or services by responding
through Internet, telephone, mail or e-mail. This way of shopping has grown among
customers because of the comfort of shopping while being at home.

Telemarketing is another way of direct marketing where the sales personal call the
customers and tries to sell a product/service making an offer and possibly a deal. Other way
of telemarketing is providing a service for those who are already a customer and need
support.

So the communication goes in both directions in this situation, depending on the purpose of
either party.

There are some media channels used for direct marketing such as TV, radio and magazines
etc. For example there can be a number mentioned in these communications which customers
can use for ordering something they might get interested in. This way they are given the
opportunity to act when they are interested to purchase a good seen or heard through the
media. This way of marketing gives companies the opportunity to give different kinds of
offers to different kinds of possible buyers.

3.2 Internet Marketing :

Internet is used as a communication channel as a part of direct marketing. It has had a

large impact on marketing since it was invented and realized to be an effective marketing
tool. But the meaning and usage of it has changed through the years. In the beginning it
has been used mainly for communicating to customers through e-mailing and getting
response from them. It has helped the companies to be able to target their potential
customers more personally and knowing more about them has helped in knowing how to
approach different customers to get to their needs.26 Nowadays the concept of Internet
marketing has extended and opened more opportunities to companies in their marketing.
The website of the companies online has got a lot of attention and has become a very
common media for presenting the company, its offerings and image. Internet has become
a strong marketing tool in itself which can be compared separately to other marketing
tools. This growth can be seen both on a technical level and accessibility of it for
customers. Today many people have access to the Internet. 65% of all male and 53% all
female population of Sweden use Internet daily.27 With this large amount of possible
customers, the companies have access to a larger audience. The technical development of
the Internet and computers has made it possible for businesses to communicate their
message and image with no limitations. Internet is a new marketing tool that can be used
by companies in order to reach their customers.28 Internet marketing is defined as “the
application of the Internet and related digital technologies to achieve marketing
objectives and support the modern marketing concept”.

Internet marketing is often presented as a new theory of marketing however some argue
that basic concepts from the traditional marketing are still valid. The basics of marketing
mix are still applicable and Internet offers new opportunities to adapt them.

3.2.1 Product

“The Internet leads to faster discovery of customer needs, greater customization of the
products to the customer needs, faster product testing, and shorter product life cycles.”31
Internet offers the opportunity of developing new products or services. To develop a
product, there is a need for research on customers’ needs. Internet provides the
opportunity of offering a core prodcut that satisfies the customers’ fundamental needs,
 but it also enables the companies to offer additional services such as interactivity or more
information about the company’s core product. On Internet, a picture or description will
replace the physical product offered in the traditional marketplace or in stores. Providing
a complete and relevant product information is crucial in order for the customers to get a
realistic picture of the product and to make the product offered more attractive.32 Since
customers can not touch, feel or try the products chosen on Internet, companies that have
online shops should offer warranties for products sold.33 This practice increases
customers’ confidence thereby their willingness to buy on Internet. Companies that have
an online store should offer services of high quality to their customers. Services offered
on Internet by a company should reflect the following factors in order to satisfy
customers: reliability, responsiveness, competence, ease of use, security, and product
portfolio.

3.2.2 Price

Compared to the other elements of the marketing mix, Price is the most flexible element
since it can be adapted quickly to the market’s demand than other elements. Price on the
Internet has become very competitive. There are two reasons for that ; one is price
transparency on the Internet as it is much quicker and easier to compare prices by visiting
companies websites or by using price comparison sites.35 The other reason is the ability
to reduce costs such as store space and staff costs. In this sense, Internet is considered as
the most cost-effective marketing tool.36 Internet offers new methods of payment. The
online payment that uses mostly credit cards is seen as an efficient, convenient and
flexible payment method for both companies and customers.37 In fact, customers are the
ones who fill all the needed information such as their personal and credit card
information. This helps companies to save money and time by reducing administration
work. Moreover, customers have the possibility to pay their bills at any time and any
place they wish if only they have access to the Internet.38. However, security and privacy
issues make customers less confident when using this method.

3.2.3 Place

The Place element of the marketing mix traditionally refers to where the product is
distributed to customers. Internet offers a new way for distributing products through
online selling. Allen and Fjermestad argue that the Internet has the greatest implications
for Place in the marketing mix because it has a large market place.39 People can make a
purchase decision anywhere they are thanks to online selling.40 With Internet, companies
can expand from local market to both national and international markets. Internet can also
be used to exploit new markets.41 Companies can gain the advantage of the low cost of
advertising internationally without the necessity of a supporting sales infrastructure in
different countries.
 3.2.4 Promotion

The Promotion element of the marketing mix refers to how marketing communications are
used to inform customers about an organization and its products. Internet can be used to
review new ways of applying each of the elements of the communications mix which are
advertising, sales promotions, PR and direct marketing by using new media such as the
web and e-mail.42 Internet offers a new, additional marketing communication channel to
inform customers of the benefits of a product and assist in different stages of the buying
process. By using promotional tools on the Internet such as online offers, frequently
updated information and direct e-mail reminders, companies can encourage customers to
visit their sites. Internet Advertising: It is a form of advertising that uses the Internet to
deliver messages about a company and attract customers. It can be done in two ways: by
creating a website which can help a company to deliver all information to the potential
customers or by using banner advertisements which can lead the visitor to the relevant
website. It is critical for a company’s website to be well designed and informative in
order to attract many visitors in the target group.43 Sales promotion: With Internet,
marketers have a great opportunity to offer sales promotions such as competitions or
price reductions to those who visit the company’s website. This can encourage the
customers to visit that website again and this way of interacting with the customers
provides the means for the company to build a long term relationship with their
customers.44 Public relations: Internet is a new medium for Public Relations (PR).
Internet offers companies the opportunity to publish the news directly while in traditional
marketing they would wait for periodical publications.45 They can use Blogs, Podcasts /
Internet radio shows, Online newsrooms and media kits. Direct marketing: Internet
provides companies with a new tool for direct marketing and advertising that may be cost
effective and provide maximum delivery to targeted customers. By using e-mail
addresses, the company can establish a continuous dialogue with customers.

3.3 Traditional Marketing VS Internet Marketing

In this section the authors make a comparison between the main points of both traditional
marketing and Internet marketing. Here the 4 Ps are mentioned in comparison to each other to
give a clearer idea of different issues that either traditional marketing or Internet marketing carry
in their tools.

3.3.1 Product

Product in traditional marketing is tangible for the customer where as through a website in
Internet marketing is just a virtual image.47The customer can not experience the quality and size
of the product by seeing it on the website in the same way as seeing the product in a physical
store. Not being able to reach and feel the product physically, can create doubts for the customer
and have an affect on his/her purchasing desicion. When it comes to range of products offered
through Internet compared to physical stores, there is an advantage of possibility for a company
to offer a wide range of products on their website.48 The issues that can appear here are cost and
space for inventory and store space itself, where there is a connection between cost and space.
One important issue to point out is the customer service and how it can reach the customer. It is
more difficult to provide customer service through Internet compared to face to face contact
when the customer visits the physical store. The customer can get a quick response and reaction
from the staff when getting a service in the physical store, where as through Internet the
customer is dealing with a so called fixed service. And eventhough there might be possibility for
communicating through e-mail or support chat function, the response and communication of
service will not be as personal and quick as it could be when communicating face to face. One
issue that can affect the customers choice of purchase is the warranty of the good. This gives
comfort to customers, both in traditional marketing and Internet marketng but most importantly it
gives the secure feeling to those purchasing online. The customer that can not see and touch the
product when purchasing it would feel more sequre knowing that there is a warranty on the
product and this would make the choice of purchase easier and less risky

3.3.2 Price

The pricing of a product can be based on the costs of its process in reaching the market.50 When
a company does Internet marketing it has a bigger opportunity to save costs and therefor
possibility to have lower prices. One of the reasons for this is the cost of space for keeping the
products or the cheap way of communication through inernet such as communication by e-mail.
When marketing through Internet, the competition is very though which affects the pricing
reasons. The competitors are a click away when a potential customer is searching for information
on the Internet.51 Since payments for purchase through Internet are done by credit card mostly,
there can be some security issues that create problems. For example a customer would feel more
secure paying in the physical store where they can have more control over the payment process,
where as purchasing online they would be taking a risk when giving the credit card details.

3.3.3 Place

In traditional marketing, companies have the opportunities to decorate the stores in order to
create a specific athmospher that can attract customers. Some attractive tools to create that
atmospher can be music, colors, etc, but through Internet marketing it is almost impossile to
create a real sensation since a website is just a virtual image. Eventhough many of the websites
try to create an atmospher by adding the same tools for attraction, they can not create as real
experience as can be created in the physical store. The atmosphere of the store is mentioned to be
very important for sales of the products. For example if you see an unorganized store just filled
up with some clothes you hardly feel tempted to go in and look for anything. The way the store is
decorated gives a message about the company and its style.52 When one thinks about this, one
can realize the importance of the physical existence of the store. Think for example how the
company could offer the same atmosphere through the website. As an example we can consider
H&M, based on their website their aim is to have the same atmosphere on their website that they
have in their stores.53 But in the end the experience of stepping into the store is different than
clicking on computer when shopping. Internet helps companies to be reachable at any time,
regardeless of openings hours that phyical stores require.54 Also the possibility for the customers
to reach the store location online and the range of customers that can do that is much wider
compared to the physical location of the store.

3.3.4 Promotion

When it comes to promotion, one thing is clear in difference between the communication
through traditional tools and Internet and that is the speed. Speed of getting the message of
advertisement, news or any type of information through to customers is very quick through
Internet. This is a very important issue in the competetive world of business. Another difference
between promotion by Internet and promotion by traditional ways is the durability of the
marketing message the marketer wants to communicate with the customers. In traditional
manner, the message would receive attention during a limited amount of time, for example as it
is aired on TV or sent out as paper advertising. Where on the Internet, the marketer’s message to
the customers can exist constantly on the company’s website for example and it is accessable by
the customers 24/7.55 Through a website, a company can present itself in many ways where the
customer can study different aspects of the company and get to know it well where as this is not
possible in the same way through traditional tools for promotion.56 For example the complexity
of wide range of information can not be easiely fitted into a magazine advertising or TV
commercial etc. The tools for traditional promotion can be used mainly in communicating the
message shortly and consistantly. There is of course the burden of maintaining a website or
online commercials that consumes time, resources and money. But this should be weighted out
by the accessability and opportunity they provide. Another issue is the damage that a failed or
crashed website or other Internet service can have on a companys image.57 A good website is
very important for succeeding in online marketing. According to Sunday Times, some important
guidelines for a good website for a company are: * “Provide clear information on contacts,
delivery and refund policies.” * “Think "user journey" rather than individual pages.” * “Let
shoppers browse without having to register.” * “Keep sites simple and easy to use.” * “Offer an
effective search engine.” * “Market the site online and link it to search engines.” * “Provide
consistency of experience.” * “If the Internet does not offer the full bricks-and-mortar range, say
so.” * “Give complaints ID numbers.” * ”Build trust.” Nowadays a large group of consumers
have the problem of time but have the money to spend so therefore it can be easier for them to
shop online, by saving time when spending. The image, speed, design and generally every aspect
of the website of a company is very important and in a case of failure it can have big damages to
the company that can’t be even compared to lost sales.58 Communicating through Internet gives
an opportunity to the marketer to reach the targeted group easily and have a continues
relationship with them.59 Of course there are some great advantages in communicating through
traditional tools of promotion such as face to face communication with customers where the
company can get straight feedback and can measure the result more quickly.60 The
communication in this way is both sided where the customer has more opportunities to react on
the information or offer received.

3.3.5 Comparison model

The authors of this thesis have created a list of the main advantages of both traditional and
Internet marketing based on the theories presented above. The points mentioned in this model
highlight the main differences between the two approaches of traditional and Internet marketing.
This model presents the summary of the comparisons done earlier in this chapter based on the
literature presented in the theory section. The model is created to help the reader get a clearer
picture, when studying the differences in the parts of the marketing mix theory. The positive
aspects of either approach pointed out in this model can be radically important for some
businesses. One can see here that some points in both sides are not replaceable by marketing
through the other approach.