Authors:
Skender Mustafi
Lionel Jost
Tuan Nguyen
Written: 28th January, 2011
Edited by Skender Mustafi: 26th January 2021
Project: The relationship between online and offline marketing
Supervisor Prof. Dr. Uwe Leimstoll
Module: Applying Research Methodologies
Study program: M.Sc. in Business Information Systems
Institute: University of Applied Sciences Northwestern Switzerland
Abstract
The aim of this paper is to elaborate the relationship between online and offline marketing. As fundamental research problem has been taken the spread opinion that online marketing is only providing additional instruments to the traditional framework. Therefore, the marketing framework itself has been analyzed and connected with popular views on different online marketing aspects. Through careful studying of marketing strategies, goals and the marketing mix the question arises, whether the online marketing framework follows the same basic mechanics as the traditional framework, which would have to be a precondition to extend the traditional framework with the tools of the age of the internet. For the analysis, multiple marketing functions and examples of marketing instruments have been analyzed on the aspects of the compatibility to each other, of the differences, of the integration in the company and of the use and results of those activities and course of actions.
Despite the opinions of famous authors, this paper shows that online marketing and offline marketing are neither the same nor completely different frameworks. In fact, they both follow the same super concept but differ in details of the mechanics. The examples made in this paper show, that a certain marketing activity performed online and offline, does not necessarily contribute to the same marketing strategy, goal, or objective. To achieve an optimal integration of online and offline marketing, those differences must be understood by the companies and the tactics need to be implemented with careful coordination. Thus, the challenge for companies is not to decide whether they want to deploy online marketing or not, but moreover to rethink the concept of marketing within the company and out on the market.
Keywords
E-Business, Offline Marketing, Online Marketing, Marketing Instruments, Marketing Functions, Direct Marketing, Marketing Integration
Introduction
After twenty years of development of the internet as a promotional tool and high level technological and conceptual terms, the inter-company business relationships have drastically changed. These technical changes improved not only promotional tools but also all other marketing functions by electronic means. A new form of marketing emerged, nowadays known as online marketing. After the “dot com boom” also known as “dot com bubble” (Galbraith, Hale, & Conference, 2004) in 1995 to 2000, companies and researchers took the situation more seriously by seeing online marketing not just as a promotional tool but more as whole marketing form. After those developments in marketing, researchers presented evaluations and definitions which differ from each in many aspects, regarding core and extensional functionalities.
That online marketing is just part of marketing, providing just additional promotional tools, is the most spread opinion about the online-offline marketing relation. By analyzing different perceptions and opinions about online and offline marketing, this paper will elaborate the relationship between online and offline marketing. Firstly, both marketing terms must be defined to create a comparable basis. Through further analysis of marketing functions and instruments, this paper will allow an insight in the mechanisms inside these elements. Even though these elements share the same names they do not have to share the same meaning as well. Only by understanding the different perspectives of different experts on this topic the question about the widespread opinion can be answered and a practical approach of modern marketing integration in companies can be constructed.
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2 Offline Marketing
Through the continuous growth of marketing and its constant development, by practitioners introducing new techniques and approaches, marketing ideas and definitions have changed as well. In the very beginning, Bartels (1976) gave a percipient definition that “marketing is much more than selling and advertising”. By the time, all the changes and tools used to push marketing improvement into “perfection” have created many misunderstandings, such as the view that marketing is about creating needs and not value (Blythe, 2006).
Different authors outline different elements of marketing as important, thus they distinguish different definitions of marketing. Kotler et al. (1999) defined marketing as “a social and managerial process, by which individuals and groups obtain what they need and want through creating and exchanging products and value with others”.
Using other ways to approach the topic, the Chartered Institute of Marketing (CIM) (2010) identified that “Marketing is the management process responsible for identifying, anticipating, and satisfying customer requirements profitably. This process calls for management decisions on product, pricing, distribution, promotion and personal selling, and in some instances customer service.”
The Board of Directors of the American Marketing Association (2007) has approved following definition: “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
In Kotler’s definition, the needs and wants are in the center of the concept, creating incentives in the social and the managerial process. Blythe (2005) highlights terms need and want and explains that for most non-marketers a need is something which is essential to survival and a want is something which is no more than a passing fancy. Thus, in Kotler’s definitions, according to him, the terms need and want inherently are correct, but need to be explained. In contrast to Kotler, the CIM has put the customer and his requirements in the center. Furthermore, the CIM considers just the customers whose needs can be satisfied profitably. The American Marketing Association has a push concept for understanding of marketing. On one hand, they mention institutions and processes, which push offerings, and on the other hand, they consider customers, clients, partners, and society, which receive the offerings with value for them.
In the past, a lot of attempts to define and structure marketing have been made to create a framework, which helps businesses to plan and manage the marketing integration in the company. Moreover, many frameworks and (marketing-) plans have been developed to structure the topic. Despite the differences of all these frameworks, they all represent similar elements in some form or another. The core elements of the marketing framework consist of a situation analysis (e. g. SWOT) which is used to set marketing objectives. To achieve the marketing objectives a strategy is needed. The strategy implies the use of marketing functions such as product, price, place, and promotion. The carefully chosen mix of these functions, often referred as the tactics, implement the marketing strategies. The appropriate mix of tactics is then often called the marketing-mix. The implementation of these tactics then finally needs to be controlled to provide data for a new situation analysis (cf. e.g., Blythe, 2008, p. 262 or Chaffey, 2007, p. 299 and others). In this paper the consolidated definition of the marketing framework will be used as in Figure 2-1.
For better understanding of the further conducted analysis, this paper will mainly focus on the area in the red dotted frame of Figure 2-1; the objectives, strategies, and the marketing-mix (functions and instruments).
The collected definitions of marketing on the beginning of this chapter already indicate that marketing objectives and the marketing framework do not stand by themselves in the company. While explaining the marketing framework, it needs also to be outlined, that the situation analysis and the marketing objectives are part of the business strategy and objectives. The marketing framework should be understood as part of the business plan (cf. e. g. Kotler, Armstrong, Saunders, & Wong, 1999) and should therefore be at least strongly interconnected with other managerial tools in a company. Moreover, the situation analysis and the marketing objectives are at least interconnected (if not equal) with corporate objectives and strategies. Thus, the objectives of the introduced framework are very general and could include as suggested by Bythe (2008, p. 264), financial, philosophical, or qualitative aspects.
In contrast to marketing objectives, the strategies are not necessarily part of the corporate strategy. The strategies as described in this framework are for the achievement of marketing specific goals. A marketing strategy could be e. g. a market penetration strategy or a promotional strategy. Tactics, which implement a strategy would be between the strategy and the marketing mix. The tactics as well as the marketing functions and instruments are very marketing specific and have no direct connection to the business plan. Again, the marketing plan is part of the business plan, but those two aspects can be described as “marketing disciplines”. Therefore, these parts will be described in upcoming chapters.
2.1. Functions
All marketing activities and instruments can be categorized under certain marketing functions. Literature often refers to these functions as the “4P” (e.g., Kotler, Armstrong, Saunders, & Wong, 1999). In detail, the 4P consists of the elements ‘Product’, ‘Price, ‘Promotion’ and ‘Place’ (see Figure 2-2). Often it is also suggested to categorize the marketing instruments into even more than just these four functions (e. g. additionally ‘People’, ‘Process’, ‘Physical evidence’) (Boom and Bitner, 1981). In fact, there is no general agreement in the field of marketing about the amount of functions marketing mix consists of.
The model of the four functions ‘Product’, ‘Place’, ‘Price’ and ‘Promotion’ – introduced by McCarthy (1987)- is widely accepted and all the other functions can only be considered as extensions to (Simistir, 2009).
Marketing functions are often the traditional model thought as a certain subset of activities, which are interchangeable in some cases (cf. Kotler, Armstrong, Saunders, & Wong, 1999, p. 140). Thus, a marketing manager may assume that if he wants to increase the price of a product, he just must increase the budget for promotion as well. According to this example it would therefore be possible to optimize the marketing-mix mathematically, but this is not the case. The relationships of the marketing functions are more complex than that and despite companies offering mathematical analytics and optimization services for the marketing-mix (e. g. www.marketinganalytics.com), the effectiveness of those algorithms can hardly be proofed or measured. Marketing remains to be an art after all and not a science (Borden, 1964).
Nevertheless, while deciding for a marketing tactic, these four functions cannot be considered separately. Blythe states (2008, p. 9):” […] it is important to recognize that the elements need to be combined as a mix. Like a recipe, one ingredient of the mix will not substitute for another, and each ingredient must be added in the right quantities at the right time if the mix is to prove successful in achieving consumer satisfaction”. The functions have interconnections which ultimately depend on the chosen instruments.
2.2. Instruments
The marketing framework introduced in this paper defines the marketing instruments as the elements within the four marketing functions. The available marketing instruments are nearly countless and versatile and so far, it can be concluded, that the job of a marketer is to use the appropriate instrument to implement a strategy and to reach goals and objectives.
As mentioned in the previous chapter, functions are interconnected to each other, thus the term marketing-mix. Those connections between the functions are not static but depend mostly on the chosen instruments. Furthermore, the list of marketing instruments is constantly growing due to new technologies, new markets, and even new market sectors. The selection of the marketing-mix is not static, and marketers also must have different mixes parallel, which they constantly need to adjust to meet the customers’ needs (cf. Chaffey, 2007, p.366).
To define the relation between online- and offline marketing, only a few instruments which have great impact in marketing functions and in understanding of these functions will be introduced in chapter 4.2.
The root of the discussion about the relationship between online and offline marketing starts with the marketing instruments, based on the widespread discussion whether online marketing only provides additional instruments to the marketing framework or if online marketing needs to be distinguished from offline marketing. The following chapters will analyze this discussion by elaborating, beside other factors, online marketing instruments and compare those with offline marketing instruments.
3. Online Marketing
The first online advertisement appeared in 1993 (O’Reilly Media, 2008), thirty years after the creation of the internet. Since that time, the interest of companies in online business permanently grew, and that growth was reflected with the high investments in online marketing which reached over 23 billion $ just in USA in 2008 (Prioce Waterhose Coopers LLP, 2009).
During this time of dynamic changes of the online environment, and same time improvements of online marketing instruments, many authors were trying to find the right words to define online marketing. Some of the definitions lost their meaning because of the changes in marketing during the time and others influenced the overall understanding of online marketing, its importance, and its role in overall company marketing strategy.
3.1. Online Marketing Defined
One of the best-known authors for online marketing, Dave Chaffey, defined online marketing as: “Applying digital technologies which form online channels to contribute to marketing activities aimed at achieving profitable acquisition and retention of customers through improving our customer knowledge, than delivering integrated targeted communications and online services that match their individual needs.” (2007b) Chaffey summarizes the definition as: “Online marketing is achieving marketing objectives through applying digital technologies.” Earlier, cooperating with Smith and Chaffey (2005), based on the definition of traditional marketing of the UK Chartered Institute pointed out that “e-Marketing can identify, anticipate and satisfy customer needs efficiently”.
P.R. Smith (2003) stated that online marketing is “simply marketing on-line – keeping very close to customers forming relationship with them, keeping them happy and delighted online. E-marketing involves a dynamic dialogue, constant feedback and an array of new e-tools […]”
Others (e.g., Strauss, Ansary, El-Ansary, & Frost, 2005) defined online marketing as “the use of information technology in the processes of creating communicating and delivering value to customers, and for managing customer relationships in ways that benefit the organization and its stakeholders. Or simply as the result of information technology applied to traditional marketing.”
On the other hand, Michie (2007) specified that: “Internet marketing is essentially everything what you do, both online and offline, to influence people to buy your product or service from an online medium such a website.”
To summarize, all the authors with same or other words agree that online marketing is built on electronic means. Some of them, such as Michie, consider the offline acts to push the success of online marketing as part of online marketing acts (2007). Chaffey as bases of online marketing defines digital technologies which form online channels. For P.R. Smith the customer is in the center which should be kept close, happy and in a dynamic dialog. Other authors highlight the creation of values from customers using information technologies, and all tools which are used to push this value creation, regardless of online or offline, are part of online marketing.
3.2. Online Marketing Understanding
Online marketing is still in development, because the online environment is constantly in development, and as this development continues, different definitions about online marketing will continue emerging.
Despite all these differences, authors agree that online marketing is living and evolving alongside the developments of information technology. The Internet tools are crucial and indispensable in forming the online marketing concept and its understanding. Technically, improvements of online tools are improving online marketing. The discovery of new tools is changing online marketing understanding and its impact on overall company marketing.
According to this kind of understanding the authors can be grouped in three main groups:
- Ones who see online marketing as part of offline marketing
- Ones who see online and offline marketing as part of overall company marketing
- Ones who see offline marketing as part of online marketing
This kind of grouping is a result of the online marketing development, its place in company structure and its part in the overall marketing improvement and success. For companies which have low investment rate in online marketing, online marketing is just part of the offline marketing strategy, and in overall marketing, online marketing is considered as part of offline marketing. Other ones, such as pure online companies, consider offline marketing as part of online marketing in the overall company marketing. Beside these, there are some companies which consider overall company marketing as a composition of offline and online marketing, both valued as very important for overall successful company marketing.
Implementation and analyzing of marketing frameworks practically are very important, but not sufficient in explaining the relation between online and offline marketing, therefore analyzing core elements of marketing, functions and instruments, and their relations is necessary.
4. Online-Offline Marketing Relation
“The key question is not whether to deploy Internet technologies – companies have no choice if they want to stay competitive – but how to deploy it.” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, 2009, p. xiii). After considering how to deploy these technologies, the next question will need to be answered:
- How the companies consider online marketing and its relationship to offline marketing?
Many authors, such as Allen (2006), state that online marketing is not different. It is a direct extension of offline marketing and the concept of direct marketing and mail order apply on online marketing as well. Some companies have developed environments where online marketing and offline marketing are running independently in two different departments. Others, like new internet-oriented companies conclude that traditional marketing is more like an extension of online marketing strategy, rather than a strategy itself (West, 2010).
As we see, the relation of online and offline marketing has been defined differently depending on the importance of online marketing and overall electronic business in the company’s value creation. The new technologies have great impact in further development of online marketing, therefore, as Chaffey et al. conclude, the results delivered by technologies should determine investment in online marketing not the adoption of the technologies (2009). Therefore, the investments and the development of marketing strategies should be done according to the evaluated relationship of online and offline marketing and its impact in the company.
However, this is not giving a clear definition of the online and offline marketing relationship. To understand and see if online marketing provides nothing more than new marketing instruments, on the one hand the 4Ps and selected instruments from both online and offline marketing have to be considered, and on the other hand the marketing integration in companies has to be analyzed. Therefore, crucial in identifying the right relationship are answers of questions such as:
- Are online marketing functions the same as offline marketing functions?
- How deep is the difference between online and offline marketing instruments?
- Can the company achieve new objectives and goals with these instruments and functions?
- Does the company need new strategies in implementing selected instruments to achieve same or different goals?
- Does the company need to use different tools to achieve same goals with same instruments?
To answer these questions, we need to understand that online marketing instruments and functions directly depend on the overall e-business integration in all points of view. Therefore, we need to research what is the impact of online marketing on overall marketing plan and overall marketing framework.
4.1 The Relation Between Online- and Offline Marketing Functions
The 4P marketing functions are core elements of marketing mix both in online and offline marketing (see chapter 2.1). To understand the relation of online and offline marketing, the common points and the differences of these marketing functions must be analyzed. Therefore, the specific strategies and goals of each function in both marketing forms must be elaborated.
This paper analyzes just the relations between 4Ps, because other marketing functions are considered as additional and authors describe just superficially.
4.1.1. Product
Offline product is defined as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need (Kotler & Armstrong, 2008). Online product is defined by the LSE (2010) as an entity which can be digitally encoded and transmitted rapidly, accurately, and cheaply. It is the understanding of the product which is differing in online- and offline marketing not the supporting.
The overall product, as marketing function, cannot be easily defined as online or offline. The understanding of the product on the one side and the product environment on the other side clarify the range of products which exist between pure offline and pure online products (Figure 4-1). Depending in which place of the Figure 4-1 the product is, it has a direct impact on the product conception, defining goals and objectives and driving product strategies.
Not only online products are affected by the new environment but offline products as well. This impact on the product is also reflecting on product instruments and other online and offline marketing functions and their instruments. Moreover, the offline product is behaving differently in the offline- and in the online environment. Characteristics of placing the product in a store, such as physical evidence, time and place are not the same as “placing” the product in an online store. The product characteristics are not in the foreground anymore and are replaced by information. The product characteristics are not in the foreground anymore and are replaced by information. Consequently, this is undergoing direct impact over product transaction phases, production strategies, price, and many other aspects.
