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Internet Marketing For All - E-Commerce For The Few

Introduction

An interesting paper* was published in the last few days. Its main message was that the Internet has created a strong competitive advantage for large companies and it may be difficult for small and mid-sized companies to overcome this disadvantage. Although the data only covers the years up to 2002, it is likely that the strong trends shown have continued since then. In this Newsletter the findings will be reviewed and you will see that possibly the paper came to completely the wrong conclusion.


* "Information and communication technology use: Are small firms catching up?" by Mark Uhrbach and Bryan van Tol, Science, Innovation and Electronic Information Division, Statistics Canada, published on February 23, 2004. The full paper can be found at this link.

 

The Internet Problem As Identified By Statistics Canada

The paper notes that there is a strong growth in the use of the Internet among all sizes of enterprise as shown by the table below:

Type of Information and Communication Technology Survey year Size of enterprise
Small Medium Large
% who use e-mail 2000 56 85 98
2001 62 89 96
2002 68 90 99
% who use the Internet 2000 59 87 97
2001 68 91 94
2002 73 92 99

Source: Survey of Electronic Commerce and Technology for 2000, 2001 and 2002
Statistics Canada - Published February 23, 2004

 

The definitions used by Statistics Canada were as follows:

Size of enterprise is based on the number of full-time employees Small Medium Large
Manufacturing Sector 0-19 20-499 500+
All Other Sectors 0-19 20-99 100+

 

This table confirms most people's experience that e-mail and the Internet are now the most important communication channels for all sizes of enterprise.

The paper goes on to say that the cost of websites and of e-commerce have made them affordable to only the large companies. A parallel is drawn with the adoption of Extranets and EDI (Electronic Data Interchange) or paperless transactions. The systems were so costly that only the largest companies could afford to make the major investments involved. They support this conclusion with the following data:

Type of Information and Communication Technology Survey year Size of enterprise
Small Medium Large
% who have a website 2000 21 55 65
2001 24 57 74
2002 27 62 77
% who sell online 2000 6 10 23
2001 6 12 15
2002 7 13 16

 

These tables raise more questions than answers. Certainly the Website information in 2002 might seem to support the conclusions. Over three quarters of large companies had a website while only one quarter of small companies did.

The '% who sell online' data is not so clear-cut. In 2000 nearly one quarter of the large companies were selling on line while a mere 6% of the small companies were. Surprisingly two years later the position among small companies is little changed. However one third of the large companies who were selling on line in 2000 seem to have dropped this by 2002. If this use of the Internet was so important, why did the usage drop? Selling online is what is also called E-commerce.

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What Is The Problem With E-Commerce?

E-commerce is the process whereby transactions can be completed and payments made entirely through secure channels on the Internet. For this, websites must be transactional. They must allow the purchaser to gain all the information they require for the transaction. They must then in complete security accept confidential data the purchaser will supply. This allows the purchase to be approved and the payment to be transmitted to the supplier. Unfortunately fraudulent individuals seek to derail these systems with increasingly sophisticated methods. Expensive countermeasures are put in place. However the required investments are substantial.

In some ways it is not surprising to see the drop in use among large corporations. There was an initial enthusiasm for E-commerce based on what the technology seemed to be offering. Then as the security needs upped the investment there was some cooling off. Undoubtedly the upward trend will resume but E-commerce is not for the faint-hearted.

The Internet Opportunity, Not The Internet Problem, For Small And Midsized Companies

The authors of the paper seem to have missed a fundamental function of the Internet. They are viewing the Internet from the same perspective as that discussed two years ago in a previous newsletter, Another thing Jack Welch got wrong. Of course it can be used to transmit incredible amounts of data from A to B. This does allow large corporations to look for new organizational approaches and models to operate their businesses.

As the authors of the paper said, "Many websites are now operating largely as a source of information. However, it is expected that they will also continue to become more transactional. This is a general trend occurring in e-commerce as enterprises are able to use their technology in a more functional manner." In fact their data does not seem to show this trend even for large companies. Undoubtedly the upward trend may have already resumed but progress will not be so rapid.

The authors went on to say, "However, not all small firms have the resources or ability to implement more complex technologies, such as online sales or websites. Large firms continue to expand their advantage in using such technologies. This may result in a competitive disadvantage that is difficult for small firms to overcome."

It is true that a website can facilitate E-commerce. However E-commerce is only part of a much wider function, Internet marketing. Here everyone has a chance.

So What Is Internet Marketing?

What does this other term, Internet marketing, mean? Perhaps it's worth re-examining what the term Internet means. The most fundamental and basic feature is that the Internet is a network. It provides the ability of A to find B and enter into contact. This explains the rapid growth of such social sites as FriendsReunited or now the new Google-hosted Orkut.

There are no standardized definitions for Internet marketing but the definition needs to be wide. Marketing ensures that products and services are designed to meet the needs of the target niche of customers and to communicate with such customers so that sales are made. The Internet is such a pervasive medium now that it naturally is involved in this total marketing function.

Everyone is doing Internet marketing now, whether they realize it or not. The only question is whether they are doing it well or doing it poorly. Potential customers are searching the web, either to find a supplier or perhaps to check whether someone out there could do a better job than their current supplier. If your company is not found on the Internet, then you leave the field to your competition.

Perhaps you feel you are not doing Internet marketing. Have you sent out an e-mail message to a customer today? What impression would that customer get? How might it compare with an e-mail message they might have received from a new potential supplier. If they go to check out your website, what will your customer find? Will they be impressed? So you're doing Internet marketing whether you like it or not. However this should not be seen as a problem. It is a great opportunity. The returns from Internet marketing will exceed by far any other way you have of trying to market and sell your products.

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Bringing The World To Your Doorstep For Your Better Mousetrap

The most important feature of the Internet is that it is a global, free network. Remember the olden days before Internet. So you had made the best mousetrap in the world. How could you get the world to come and beat a path to your doorstep? There were no easy solutions. Someone or other had to go door to door or send expensive direct mail shots or whatever. It took large amounts of money to mount a marketing and selling effort.

Now with the Internet, you have access to a free communication channel. Of course there is a huge amount of information out there to get in the way. In some ways it might resemble the Tower of Babel. However by using the right methods, this obstacle can be overcome.

Is A Website Expensive?

The authors of the Paper we were reviewing mention that the cost of a website may be a barrier for small and mid-sized companies. This is not true. The cost of setting up a website and the ongoing expenses involved in your Internet marketing program in the first year may be only a fraction of the cost of a junior sales assistant. The actual cost will depend on what you aim to do with your website.

What Is The Precise Website Objective?

A website can do a whole variety of functions to assist in the total marketing process. Here we will discuss only the absolute minimum objective for a website. This will give the highest return on investment (ROI) of any of the possible marketing initiatives.

The website can be a virtual presentation of the company. It should be designed for someone in your target market niche who knows nothing about the company. Such a visitor must be sufficiently intrigued by the website that they wish to contact the company. This is a tough challenge but it should be the minimum specification for the website. Newsletter #32 brought out some of the requirements in doing this.

Such a website for a mid-sized company must be fully optimized in terms of saleability, searchability, usability and credibility. Such a website can be developed for between $ 5,000 and $ 10,000. A similar budget should be assigned annually for Internet marketing and webmaster activities to ensure the total marketing and selling program is fully effective in revenue generating terms. These values include the company staff costs involved in these activities.

Levelling The Playing Field Between Large And Small Companies

Once the company is adequately represented on the Internet, then it is not at a disadvantage against any company whether big or small. Of course the company must be able to offer the customer at least comparable products and services to those of the competition. Smaller companies are well known for often giving better customer service than larger companies. The website can often be much more impressive than the actual physical assets of the company. So if the websites of the smaller and larger companies are in any way comparable, then the choice between the two may be much more evenly balanced.

Conclusion

So your competition is already doing Internet marketing. You are too but perhaps without realizing it and perhaps not very effectively. The returns from Internet marketing are sizeable. So improving your Internet marketing should be a key priority.

If you need help in applying these ideas, then please contact SMM. Our help can be configured to meet exactly the needs you have. Our strengths, experience, creativity and practical common sense can complement those of your company. So write us a Message today on what you're looking for without obligation without obligation.

Barry Welford

Feedback

So do you agree or disagree? Is this message right? Is there some part of this where you have a problem? Would you have liked more information on any of the issues? Whatever your reaction, please give us your feedback. In this way, we can tune the contact of future Newsletters to better meet your needs.

Copyright 2004 Barry Welford, Montreal, Quebec, Canada
Added to site 26 February 2004

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So do you agree or disagree? Is this message right? Is there some part of this where you have a problem? Would you have liked more information on any of the issues? Whatever your reaction, please give us your feedback. In this way, we can tune the content of future Newsletters to better meet your needs.

 
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