Principles of Internet Marketing

By Ward Hanson

Review by Katy Thomas

Principles of Internet Marketing brings home the fact that the days of one-way information flow from marketer to consumer are over – the internet has profoundly changed the marketing profession as it once was. Written as a text, the book offers an in-depth look at all aspects of internet marketing, beginning with a framework for understanding Internet marketing and associated business models, then discussing important online marketing possibilities that emerge from that framework, and ending with an emphasis on implementation issues. To me, some of the most interesting lessons from the book include:

• Although controversial, the commercial promise of online communities is large, and rapidly growing.
• The informational side of pricing means that the Internet profoundly affects every company’s pricing actions.
• Implementing online marketing raises special issues of organization and legal constraints.

Online Communities

Hanson describes online communities as sharing four main characteristics: online tools, defining rules, collaborative production, and repeat use. While he addresses the debate surrounding these sites (with proponents highlighting the innovative methods of communication and focus for social interaction, and opponents viewing the online world as harming individuals and stifling true community), Hanson also points out the incredible growth of online communities, their high traffic, and the ability of businesses to succeed as community builders. Some keys to success include building hybrid communities (merging public and private good while carefully mixing sponsor and member content), mirroring existing community benefits (such as trade shows, professional forums and supply chain networks), and emphasizing growth to build increasing returns. Hanson’s discussion of the controversy is insightful, and his recommendations for success are thorough.

Internet Pricing

Chapter 11 includes an interesting discussion on many elements related to internet pricing, including real-time pricing (auctions, rental markets, and yield management), bundling, and price sensitivity. To me, the most valuable lesson regarded how the Internet can raise or lower price sensitivity among customers. Hanson discounts the common perception that the Net will always raise consumer price sensitivity and discusses how companies need to understand the different qualitative factors that affect price sensitivity on the Net. Some of these factors include the unique value effect, the substitute awareness effect, the total expenditure effect, the shared cost effect, the price-quality effect and the inventory effect.

Organizational and Legal Constraints

According to Hanson, organizational demands increase as a company’s site develops from Stage I (publishing) to Stage II (databases and forms) to Stage III (personalization). Changes are required to handle the increased speed, develop new skills, connect with outside resources, and avoid legal pitfalls. Hanson’s discussion on real-time marketing that goes hand in hand with this change is very informative. He discusses, for example, how to handle rising consumer, content, performance, and timeliness expectations through technology and resources. He also discusses how some of the most basic features of the Internet create legal complexities (such as the impact of digital environments on intellectual property, the problems that arise in a networked world, and the challenges personalized marketing creates for honoring individual privacy) that internet marketers must face every day.

These three lessons are only a small portion of the information shared in Hanson’s Principles of Internet Marketing. The text offers a well-written, in-depth, and systematic view of the profound changes in marketing that have been brought about by the Internet.