Below-the-Line Vs Viral Marketing

Below-the-Line Vs Viral Marketing Marketing has played a central role in business success for decades and is ultimately concerned with the creation and retention of customers who through the purchasing of products generate profits for companies. It has been suggested that the cost of attracting new customers is much higher than maintaining existing ones and thus firms seek to build up efficient and effective retention systems for customers using a marketing mix. While the below-the-line promotional model has established itself as a major component of marketing mixes due to the rapid development of new technologies and globalisation another marketing form, viral marketing, has gained broad attention, (Lanman, 2003). The reason for this attention is that companies have demonstrated their success with minimum marketing budgets in generating millions of profits in using this tool. The International Direct Marketing Network measured the use of different marketing techniques and it found that 84% of firms used some form of below the line marketing (North, 1995). In this way the response of distribution of products and information can be measured immediately. However both organisations and individuals have been subject to an unprecedented rate of change in the way they pursue and are involved in business and commercial opportunities in the 21st century making the case for an expanded role for viral marketing ever more compelling, (Kalakota, 1999). These characteristics include the internationalisation and globalisation of business and the resultant intense competition from these trends which has created new dynamics within marketing structures for all companies, (Chesher Kaura, 1999). One of the most important needs for businesses currently is the need to satisfy increasingly demanding customers who expect immediate responses to their requests both for goods and information. The role of viral marketing in meeting such a need has continued to increase with the expansion of use and users of the Internet. Graham (1999) argues that viral marketing refers to strategies that are absorbed by the people that interact with the messages and then pass them on. Therefore the term viral marketing is often linked with the Internet because it provides a wide range of free channels such as email, website and chatting rooms in which to deliver initial messages. Additionally marketing is not solely about material things but deals with brands, experiences and acts of communication which can be defined as branded, (Moore, 2003). The choice of appropriate marketing model then to a large extent is associated with clear understanding of consumers on the part of organisations. Yet consumer behaviour is complex thus each marketing model has its own advantages and disadvantages in influencing these behaviours. As a result an effective marketing mix should meet key customer requirements in order for the company to succeed in the marketplace and at the same time the usage of any marketing mix strategy will be constrained by the corporate resources and business structures which can be deployed to generate opportunities. Therefore this paper will critically compare viral with below the line marketing models and aim to assess the importance of matching marketing strategies with business structure and characteristics of product through an analysis of Forever Livings usage of viral marketing. Below-the-Line Vs Viral Marketing An important perspective in marketing philosophy is the distinction between efficiency and effectiveness, (Anonymous, 1989). Thus a comparative analysis of below-the-line marketing models and viral marketing ones can be conducted using these twin elements as frameworks. The essential difference between efficiency and effectiveness is that the former is concerned primarily with cost and the latter is customer focused in terms of retention and generation capacities. This framework also corresponds with an understanding based on the core feature of marketing which is to satisfy customer needs in a profitable way by matching services or products with preferences. While above and below-the-line promotion has established itself as a major technique in communicating with customers new challenges facing marketing managers have led to the development of new marketing techniques. Generally speaking above-the-line refers to the usage of all the main advertising media such as TV campaigns and magazine advertisements whereas below-the-line activities are more focused on translating attitudes into sales such as with in store advertisements. Here also public relations become a vital part in the communication process, (Wilmshurst, 1994).However Tauber (1974) argues that a customer orientated marketing strategy easily discourages innovation within organisations such as with the RD process. This is because companies prefer following customers tastes rather than creating new demands avoiding then any risks associated with novel and innovative product development. This can be seen as a negative influence on growth for the whole industry in the long term. Thus viral marketing is argued to be an innovation in marketing which has emerged since 1996 utilising email at first as a global marketing network, (Jurvetson, 2000). The concept of viral marketing is one which is based on word of mouth and its first uses were conceptualised in terms of it being web-based word of mouth marketing. Accompanying further technological development and globalisation viral marketing as such seeks to take advantage of rapid multiplication to explode single messages to thousands at low cost as well as other complex marketing goals at the mature stage. Viral marketing is a method which allows small businesses to grow quickly through the spreading of their marketing message like virus and avoid consequently major entry barriers to the market and exclusionary techniques of competitors, (Jurvetson, 2000). However because of the nature of the Internet Dibb, Simkin and Vancini (1996) point out that all forms of word of mouth to a large extent depend on intangible assets such as brand image, trust and public relations in order to be successful. In this sense a successful viral marketing strategy needs to take advantage of other resources to build up brand image and relationships with customers. In summation different marketing mixes rely on different characteristics of products and industries, organisational competition as well as internal resources including material resources, intangible assets and human resources. Therefore understanding the advantages and disadvantages of each model is vital in helping marketers, whatever their field of business, carry out effective marketing practices. Business Structure An effective implementation of a marketing strategy relies on getting organised for the work and the route a company chooses depends on a variety of factors. However the first step for any type of company is understanding consumer behaviour. This understanding allows a company to position their products or service effectively in relation to the preferences of its target customers. However any customers purchasing decision process is a complex one thus it is useful to bear in mind some key influences on these decisions. First of all the development of technology particularly the Internet has changed both buyers and companies behaviour in various ways. For example research has indicated that the scale of the e-commerce market will reach $7.3 trillion in 2004, from $145 billion in 1999 reflecting its growing importance as means of doing business, (Suh Han, 2003). As a result it is vital that companies exploit the Internet along with other marketing tools such as direct marketing or in store sales to achieve promotional goals while viral in order to create new opportunities for growth in the future. In addition to advertising below-the-line practices play an increasingly important role in communicating and building close relationships with customers. For example Smith and Taylor (2004) argue that each element of the marketing mix communicates so that some major advertising campaigns need to be supported by public relations activities and also at the same time be supported for example by launch leaflets. Combining these elements maximizes the effect of promotions and advertising campaigns for companies. Kitchen Proctor (1991) claim that public relations is a growth area for companies because it is an effective way to generate positive word of mouth for a companys products. A further consideration to take into account when firms make strategic decisions about marketing techniques is the cultural and social effects on consumer behaviour. Web based delivery though can be said to circumvent some of these problems by allowing for easy tailoring to specific contexts due to the absence of any necessity for physical places to conduct marketing operations. Marketing researchers encourage the use of an integrated marketing mix as it is believed to be able to create competitive advantages and boost sales and profits whilst saving time, money and avoids some of the stresses involved in implementing marketing plans, (Harrison, 1995; Smith Taylor, 2004). From this perspective both below-the-line and viral marketing models should utilise different communication tools in relation to customers and developing productive relationships with them. For this reason there are key benefits of an integrated marketing approach yet there are also obstacles due to limited resources in terms of financial, time and personnel factors. In this case inefficiency might occur due to internal competition or unbalanced rationing of resources addressed due to over emphasis on one marketing tool. It can be strongly argued that a web-based viral marketing approach could balance conflicts among different departments as well as with suppliers simply because it seeks t o take advantage of others resources in assisting with the delivery of the companys marketing message, (Wilson, 1999). In considering these two approaches to marketing this work utilises a 4P framework as an analytical guide to their respective strengths and weaknesses. Product It is obvious that no matter what kind of marketing model companies choose the ultimate goal is to sell a product (service) to customers at a competitive price. However the product purchasing decision involves choices regarding brand names, guarantees, packaging and services which accompany the product. Reports suggest that expenditure on below the line marketing in Europe has grown rapidly in recent years due to intense competition, (European Marketing Pocket Book, 2000). Hence one of the most important goals for advertising campaigns is effective positioning of products. Ogilvys (1983) adage is for a business to never sell to a stranger which means it is important to understand the target audience and their purchasing behaviour and also build long term relationships with them. Companies therefore choose different tools in order to segment customers and then position their products in order to sell the right thing to the right people. Below the line marketing strategies often exploit sales people to communicate with customers face to face. This allows an organisation to gain information about customers deeper feelings about products rather than the more impersonal information gathered by web-based questionnaires. Also when companies adopt a viral marketing strategy customers are not able to touch the product or in other words they see tangible assets only portrayed on web pages. This means then that trust plays a major role in delivering the product message to consumers. This is why viral marketing firms use a strategy of giving away free product samples to customers. This is in order to build up trust in the company and brand and then utilise these customers through word of mouth to spread the product message further. Holt (2004) highlights trust as the essential lubricant of web-based business operating successfully with quality products being a critical factor for success in building up trust. Price Price is always used by buyers as an indicator of quality in that higher price tends to send a different message compared to lower pricing. The difficulty for companies is however is hitting the sweet spot in terms of price and quality. Therefore high price product firms prefer adopting differentiation strategies in order to maintain competitive advantages. A typical feature of below-the-line promotions though is an element of price war and price cutting in order to initially entice customers. This has the effect of increasing direct costs to the business and reduces the gross profit accordingly so that sales people have to work harder to earn the same amount as before the price cut. In contrast to below-the-line promotions companies with viral marketing models benefit from the lower cost of not having physical stores, sales people and/or expensive advertising campaigns on TV, radio or magazine and other expensive media forms. As a result viral marketing firms often offer extra disco unts to attract customers and it is suggested that one of the most important reasons for people purchasing online are the lower prices compared to traditional retail stores, (Reedy Schullo, 2004). Reedy and Schullo (2004) also argue as a result that it is vital electronic resources be integrated into marketing mix by both traditional offline as well as online retailers. However an important point worth highlighting is that of strategic versus tactical pricing. Strategic pricing refers to long term pricing which depends on how the company intends to position itself in relation to customers. An example of below-the-line marketing are the practices of the supermarket Tesco which has built a reputation for low prices or the lowest pricing in the town in which it operates. In this case its pricing strategy seeks to generate a competitive advantage while Marks Spenser in contrast utilises an image of better quality food at a higher pricing level in order to differentiate itself and thus avoid a price war with Tescos. Additionally although viral marketing models benefit from lower costs and be able to offer more competitive pricing products like health-related tablets firms tend to not be able to exploit a strong brand name for quality and effectiveness. Rather it is the low pricing which initially attracts customers. Therefore the importance of word of m outh is much more pronounced for the continued success of viral based marketing firms. Promotion As mentioned before researchers and economists have argue that the cost of attracting a new customer is five times that of maintaining an existing one, (Jobber, 2001). Companies attempt then to keep customers satisfaction level high and encourage them to purchase more products through the creation of brand loyalty. Below the line marketing forms by using direct promotion and a human sales force to build a close relationship with customers can be said to do this more efficiently. Examples can be seen from fashion brands like YSL and Christian Dior which deliver their brand images using highly trained and skilled personnel creating strong connections in the minds of customers between brand image and products and form a foundation for brand loyalty. However the cost of sales people as well as training investment is a balancing factor while viral marketing on the other hand is able to take advantage of free internet sources by using tools like email or low cost advertising presences such as banner ads on websites. It is also interesting to note that below the line marketing can be viewed as pushing information to consumers whether it takes the form of communication from sales assistants or leaflets in magazines and so on. In doing so companies attempt to communicate with customers by explaining and giving detailed product or service information to them. In contrast viral marketing can be seen as an information pulling tool which seeks to spread awareness of the product through popularisation. However marketing emails need to provide greater value for readers such as through being more entertaining, engaging or compelling in order that viral marketing message be more effectively taken up by readers, (Reed, 2005). A common inducement often used by companies is to pay those readers who pass on the message to others or can prove products bought have been done so on their recommendations. This can be problematic though due to fraud or other criminal activities. Related to this is the problem of sec urity features emerging in the use of the Internet whereby viral mail is treated as virus mail or junk mail (or spam) and thus the marketing message may be blocked from reaching its intended audience through the workings of such things as email filters. Distribution Brownlie and Saren (1992) argue that the concept of marketing has assumed many of the features of an ideology of faith which dominates the decisions of many organisations. In other words they believe companies must not only take into account giving customers what they need but also focus on the integration of these demands into other core business functions. This entails then the balancing of the satisfaction of consumers with the performance of other company requirements. Therefore it is particularly important for companies which adopt below-the-line strategies to choose an effective distribution channel which satisfies customers demands efficiently as well as other business participants such as suppliers and retailers. Likewise it is important for suppliers to have a physical in-store presence while manufacturers must show more interest in the basics of selling and displaying in store. In this case a well trained and motivated sales team plays a critical role in improving a company s in-store performance. However the costs associated with physical stores are high as well as the cost of training employees. The usage of internet based viral marketing models are able then arguably to better integrate resources at lower cost and concomitantly allows the building of stronger trading relationship between each partner within the business network. For example viral companies conduct strategies such as allowing each customer who makes a purchase to also act as a wholesaler for the company and in doing so encourage them to use their own network of contacts to sell more products for the company and at the same time profit from their selling. Therefore it is obvious that successful viral marketing companies are those which can successfully exploit customers networks and exploit word of mouth to spread rapidly rather than make use of expensive advertising campaigns or below-the-line promotions. Smith and Taylor (2004) though point out that the place of purchase also communicates within a marketing mix which means an item purchased in Selfridges has a differently perceived value to an item purchased online. In this sense strategic branding seems particularly important for companies who rely on in-store marketing. Adding value to physical places could be used as part of a branding strategy in maintaining competitive advantage over low cost viral marketing stores. Forever Living Reports indicate that viral marketing techniques are growing in popularity in their use among corporations in the US ranging from small businesses to multinational companies, (Bulkeley, 2002). Forever Living Product co. can be viewed as a successful example of the usage of viral marketing strategies which have contributed to its now multinational business network. According to Wilson (2000) successful viral marketing strategies refers to those which are able to take advantage of rapid multiplication in delivering the product or service message to as wide an audience as possible. In other words viral marketing is closely linked with the term and process of word-of-mouth marketing. In particular these methods have sought to take advantage of the rapid increase in internet usage and as a result web-based forms have become the most important resource for viral marketing techniques. For example Forever Living Product has promoted itself as an international firm which seeks to exploit natu ral sources in producing products contributing to peoples health. The company delivers its product information through the use of a website and seeks to recruit existing customers as wholesalers for its products as well as utilising them to deliver the marketing message. These inducements psychologically are an effective means of retaining existing customers and attracting new ones. Linked to this meeting peoples emerging demand for a better quality of life in terms of high health levels is a key factor for the success of Forever Living products. As such along with financial inducements the provision of information supporting the marketing message is a key ingredient for the companys marketing strategy. For this reason the Forever Living website is designed to provide customers with clear information about its products and services as well as information on how customers can join its business model. According to Solomon, Bamossy and Askegaard (2002) people spend a considerable amount of time in searching for information before they decide to purchase high price goods or luxury products. A web-based marketing model enables consumers who are interested in the products and services go to visit websites and acquire information in a convenient and flexible manner. However these advantages are countered by the tendency for viral marketing websites to provide too much information. Reed (2005) argues that efficiency in communicating a marketing message might decrease because of excessive information. Principles of web design then become important considerations to both enhance accessibility and decrease the dangers of information overload. Marketing mix In modern marketing literature the concept of marketing is often expressed as the achievement of corporate goals through meeting and exceeding customer needs better than competitors are able to, (Jobber, 2001). Viral marketing can describe any strategy that encourages customers to pass on a marketing message to others which creates opportunities for potential corporate growth, (Wilson, 2000). Viral marketing consequently as a form of marketing strategy is predicated and based on successfully understanding consumers in terms of what will satisfy them in product and service provision. However as has been mentioned consumer behaviour is both a complex and a dynamic process and therefore understanding this behaviour requires considerable amounts of information. The Internet is widely used as an effective tool in capturing a huge amount of digital data related to consumer behaviour and viral based marketing forms are in a good position to successfully make use of this data and also contri bute means of gathering it. However such information is largely generalised and unspecific given the amount of traffic which the Internet sees in terms of purchasing decisions. Thus Jackson (2000) contends that viral marketing works best only when the key consumer interaction has relatively broad appeal to the target market. Forever Living Product successfully entices people arguably through the opportunity to start their own business and offering the possibility of higher income levels. It is a message therefore with near universal appeal for people. It is also a message which allows for personal emotional investment to be made in products, in that customers will be positive about a product as their interest in selling it is related to their own financial gain. However a key factor for continued success is maintaining the quality of the products as studies indicate that negative word-of-mouth images spread twice as fast as positive images, (Haywood, 1991). In the case of Forever Livings aloe range of products the high quality is based on its International Aloe Science Council Seal of Approval for consistency and purity. Such external confirmations of quali ty add to and enhance the companys internal messages dealing with the quality of its products. Additionally the clear return and guarantee policies offered by Forever Living also contribute to its success since recourse is given to customers should products or the process of purchasing products not meet their expectations. These are considered to be the most important factors affecting customer behaviour in buying online as they enhance significantly customer trust in the product and organisation, (Reedy Schullo, 2004). Managers with communications responsibility must try to deal with complaints as well relate satisfaction dynamically considering the ease of spreading and access to information online. Haywood (1991) believes that people- talking is the best form to communicate but Blythe (2000) argues that the website of a company is principal initial source for the content of such communication. Therefore Forever Living Products website is designed to provide full information about the products as well as the business plan for those who want to get involved. In doing so the firm avoids considerable expense on physical stores and layout, personnel and the possibility of inefficient explanation and communication by sales person dealing with products. Providing contact points for additional customer questions also enhances the effectiveness for this model. Yet a weakness is that if initially the website is not successful in attracting customers it is unlikely they will return. In this sense the persuasive capabilities of below-the-line models with their human elements is missed. Forever Living is a multinational company which runs business in over 105 countries as the words largest grower, manufacturer and distributor of aloe vera, (Forever Living Product, 2005). It is fair to say that during the internationalisation process the Internet has been vital in spreading the business rapidly and easily compared to the opening of physical stores. It has also allowed the offering of an interactive tool tailored for communicating with global consumers in their respective national contexts. Traditionally communication media follow a passive one-to-many model where a firm reaches many current and potential customers through marketing efforts however feedback from customers in such models is limited, (Hoffman Novak, 1996). Forever Living operates a model of distributed computing that facilitates an interactive many-to-many communication tool and model. For example the website is designed to help customers build a solid stable business through professional training meet ings and regular recognition of their efforts. The running of the business online minimises the physical investment necessary and need for large product inventories but requires a motivated and efficient distribution channel. A significant advantage of this model is that full inventory and product control is integrated into supply and distribution as all of these elements from production to sale are realised within the website. This allows for large cost savings and creates a feeling of security for customers and wholesale sellers in the operations of the company. As discussed in the preceding section companies using below and above the line marketing tools view human resource as an important factor in the completion of these forms of marketing strategies successfully. In a positive sense they are able to exploit a skilled workforce in achieving promotional goals but negatively failure might arise from unenthusiastic sales personnel or negative sales manner in the conduct of the promotion. By using a website instead of a sales person along with already satisfied customers Forever Living minimises the risks of negative information provision and capitalises on cheap and effective positive information provision, (Wilson, 2000; Diorio, 2001). In addition to online ordering Forever Living also makes use of more traditional phone call services for those who are not able to access internet increasing its coverage. The online model also allows Forever Living circumvent the considerable entry barriers to participating in the health care market. These b arriers include large investment in physical assets as well as the brand loyalty for other manufacturers or certain retailers concretely established as a result of other marketing strategies. The creative use of the website as both a marketing tool and an intangible shopping space creates competitive advantages for the firm. Although the price of Forever Living products means they are not cheap due to general features of luxury health care goods and compared to pricings and costs associated with other luxury health care products Forever Living is able to compete on very effective grounds with other retailers. Viral branding strategy Over the last few years companies have increasingly moved to incorporate the World Wide Web into their overall marketing strategies. Viral marketing strategy in itself has changed the way to do the business and communicate online by taking advantage of the specific contextual advantages offered by the Internet. However along with internet based marketing the emerging challenge for viral marketing companies is to build up strong brand name in order to compete with below-the-line firms as well as other web-based and offline companies, (Jobber, 2001). The first associations that enter into customers consciousness in relation to a brand name are always those associated with products or product categories, (Franzen and Bouwman, 2001). Thus with Forever Living Product they have sought to link the brand name with superior ranges of aloe vera based products. The corporate research centre creates a professional image of the company matching with images of traditional high-tech pharmaceutical industries but meshes this with an appeal to naturalism and back to nature images associated with its products. The key message then contains both security over the high qualities maintained in the products manufacture but also the manner in which it is a natural product taking advantage of green sentiments among customers. Diorio (2001) argues that one of the obstacles to viral marketing is the difficulty in identifying triggers that can motivate customers to pass along the business message. Beaven and Scotti (1990) claim that consumers develop internal scripts related to their service transactions which they recall for future purchases of that service. Hence a satisfied personalised experience is a key driver in the repeat purchase of products. The tool used by Forever Living Product in this respect is the motivation from self-owned businesses joining satisfied product use with opportunities for personal financial reward. However its branding strategy also contributes to the success of its differentiation from other companies competing in the same market. Web-based branding strategy is able to reach a large amount of customers but the difficulty remains in establishing trust which is the main basis for long term customer relationships using this model. Also there are ethical issues related to viral ma rketing such as those arising from security of investment and personal privacy in providing information online especially financial information. Trust then for Forever Living is not only related to product quality and satisfaction but about providing a completely secure package for customers upon which trusting relationships can be built. Benefits of a website as an integrated marketing tool From an analysis of Forever Living which prefers the use of a website as the core technique and means of achieving marketing goals it is fair to say that the effective design of web sites contributes to whether it will be a success or not to a large extent. First of all the website is able to provide full information