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Chapter 5 E-business strategy 301

Market development strategies Diversification strategies
Use Internet for targeting: Using the Internet to support:
• New geographic markets • Diversification into related businesses
markets • New customer segments • Diversification into unrelated businesses

New • Upstream integration (with suppliers)
• Downstream integration
growth (with intermediaries)

Market Use Internet for: Use Internet for:
Product development strategies
Market penetration strategies
• Market share growth – compete • Adding value to existing products
markets • Customer loyalty improvement – migrate • Developing digital products
more effectively online
(new delivery/usage models)
Existing existing customers online and add value • Changing payment models
to existing products, services and brand
(Subscription, per use, bundling)
• Customer value improvement – increase
• Increasing product range
customer profitability by decreasing
(Especially e-retailers)
cost to serve and increase purchase or
usage frequency and quantity
Existing products New products
Product growth

Figure 5.19 Using the Internet to support different growth strategies

1 Market penetration. This strategy involves using digital channels to sell more existing prod-
ucts into existing markets. The Internet has great potential for achieving sales growth or
maintaining sales by the market penetration strategy. As a starting point, many companies
will use the Internet to help sell existing products into existing markets, although they may
miss opportunities indicated by the strategies in other parts of the matrix. Figure 5.19 indi-
cates some of the main ways in which the Internet can be used for market penetration:
Market share growth – companies can compete more effectively online if they have web

sites that are efficient at converting visitors to sale and mastery of the online marketing
communications techniques reviewed in Chapter 9 such as search engine marketing,
affiliate marketing and online advertising.
Customer loyalty improvement – companies can increase their value to customers and so
increase loyalty by migrating existing customers online (see Mini Case Study 5.1 on BA
earlier in the chapter) by adding value to existing products, services and brand by devel-
oping their online value proposition (see Decision 6).
Customer value improvement – the value delivered by customers to the company can be
increased by increasing customer profitability by decreasing cost to serve (and so price
to customers) and at the same time increasing purchase or usage frequency and quan-
tity. These combined effects should drive up sales.
2 Market development. Here online channels are used to sell into new markets, taking advan-
tage of the low cost of advertising internationally without the necessity for a supporting
sales infrastructure in the customer’s country. The Internet has helped low-cost airlines
such as easyJet and Ryanair to enter new markets served by their routes cost-effectively.
This is a relatively conservative use of the Internet, but is a great opportunity for SMEs to
increase exports at a low cost, but it does require overcoming the barriers to exporting.