A Comparative Study on Marketing Mix Models for Digital Products

?
KanLiang Wang
1 Yuan Wang
1
JingTao Yao
2
1
School of Management, Xi'an Jiaotong University, P.R. China
2
Department of Computer Science, University of Regina, Canada
klwang@mail.xjtu.edu.cn, wy0179wang@163.com, jtyao@cs.uregina.ca
Abstract. The rise of the Internet and electronic commerce provide a
huge marketspace and unique transaction process for digital products.
It is signi¯cant to discuss whether established marketing models can be
revised for digital products. First, the unique features of digital products
are systematically reviewed, and then three typical digital products, in-
cluding e-books, anti-virus, and online translation services, are analyzed
and compared utilizing three established marketing models, including
4P, 4C, and 4S. We ¯nd that these marketing mix models have di®erent
suitability for three typical digital products. The intention of this paper
is to provide a reference for enterprises in selecting marketing mix model
according to product's categories and to provide a marketing strategy
tool kit.
1 Introduction
The integration of technology will lead to an overall shift in the behavior and
competition strategy of market participants [1]. It is interesting to discuss whether
established marketing models can serve for digital products while great changes
happen in market environment and in product's characteristics. By nature, dig-
ital products can be transacted and delivered through the Internet [2]. Infor-
mation, payment, and delivery related with digital product's transaction are
integrated into the Internet channel. For the transactions of physical products,
it must be accompanied by o®-line or physical logistics [3].
With unique characteristics in economic and physical property, digital prod-
ucts have many di®erences from physical products in marketing strategy. For
example, all digital products can be transacted without the need for a medium
to carry them, since the cost of distribution and production is near zero. The
problem is that margin-cost pricing is not available. So the suitability of 4P
(product, price, place, promotion) marketing model in an E-environment has
been questioned [4]. Mahajan and Venkatesh [5] share the same opinion, oppor-
tunity and challenge are brought to E-Business with the rapid development of
the Internet, still existing models may have objective con°icts, long-term pro¯t
?
This research is supported by NSF of China under Grants 70372049 and ChunHui
Project from Ministry of Education of China.maximization is appropriate for E-Business ¯rms as well, yet, increasing cus-
tomer share and realizing pro¯ts and/or cash °ow may be important in the
short term, so existing models may not ¯t well in E-Business situations.
About the validity of 4P marketing mix model in digital space, a typical
argument is \. . . marketers should focus on playing an active role in the con-
struction of new organic paradigms for facilitating commerce in the emerging
electronic society underlying the web, rather than in¯ltrating the existing primi-
tive mechanical structures. . . [6]". Following this issue, many new models are put
forward to replace the 4P model in digital marketspace[2][7][8][9][10][11][12][13],
such as 4C, 4S, 5P, 7P, ICDT and three \°ow" models. Among these alterna-
tives, the 4C and 4S model have wildspread in°uence. According to Lauterbor,
the 4P model can not ¯t well in E-market, which should be replaced by the 4C
model (consumer wants and needs, cost to satisfy, convenience to buy, and com-
munication)[7]. The 4S web marketing model (scope, site, synergy and system)
is put forward by Constantinides [10], which is designed for depicting enterprise
strategy in E-Business.
Therefore, the 4P marketing mix model may not valid on the Internet age,
the 4C and the 4S model are some alternatives. The intention of this research is
to study the suitability of those three marketing mix models for digital products
in digital space. It is hoped to ¯nd which marketing mix model ¯t well for
di®erent types of digital products. Therefore, a tool kit of marketing strategies
is developed for professionals selling digital products.
2 Characteristics and Categories of Digital Products
Di®erent marketing strategies may be applied to di®erent types of digital prod-
ucts due to their unique characteristics [14]. It is very important to sum up the
characteristics of digital products for investigating the suitability of the estab-
lished marketing mix model. Most digital products share the following economic
characteristics.
Production The production of digital products is always associated with a
huge ¯xed cost and negligible margin cost [15].
Public goods Digital products have some consumption characteristics of pub-
lic goods, such as non-exclusiveness and non-rivalry [16].
Network externality Contrary to the basic principle of traditional economics,
digital products with positive feedback abide by the principle of \more abundant,
more precious" [17].
It is possible that non-digital products share some characteristics above. But
digital products also possess some unique physical characteristics at the same
time.
Attrition-free Once produced, they will exist forever with the same quality.
Furthermore, the competition must spread between new digital products and
second-hand digital products.Changeability The content of digital products can be changed or customized
easily [18]. The integrity can not be controlled by manufacturer after downloaded
by users.
Replication It is most meritorious that digital products can be shared, repli-
cated, stocked and transferred easily. After the ¯rst copy of a digital product is
created, it can be manufactured with a very low marginal cost. Digital products
are composed of text, graph, and voice etc. They are heterogeneous because all
the components can be reconstructed quickly and easily. Therefore, it is impor-
tant to classify various digital products.
In this paper, we adopt the framework put forward by Hui & Chau [19] which
classi¯ed digital products into three categories according to three dimensions
including trialability, granularity and downloadability (Fig. 1). Those are utilities
and tools, content-based digital products and online services.
High
High
Low
Low
Trialability
Granularity
Online
services
Utilities
and tools
Contentbased
products
Downloadable
Interactive
Fig. 1. classifying digital products [19]
These three categories of digital products exhibit di®erences in trialability,
granularity and downloadability(See Table 1). We argue that di®erent categories
of digital products require di®erent marketing mix models .
Table 1. Characteristic comparison of di®erent categories of digital products [19]
Category Trialability Delivery mode Granularity Example
Content-based digi-
tal products
Low By download High e-book
Utilities and tools High By download Low Anti-virus software
Online services Medium Interactive Medium Online translation
3 Marketing Strategy Analysis of Di®erent Digital
Products
The classic 4P marketing model, the 4C marketing model and the 4S market-
ing model are summarized from di®erent business backgrounds. Constantinides
suggest that the background of 4P is industrialization which is characterizedby enterprise-centric[10]. With the shift of power from enterprise to consumer,
the 4C model is put forward, which is characterized by customer-centric. The
4S marketing model was created for E-Business environment [10]. For di®erent
business backgrounds of three marketing mix models, We argue that the 4P,
4C and 4S marketing mix models have di®erent suitability for three categories
digital products.
In this section, we will analyze the suitability of three models for three dif-
ferent categories of digital products.
3.1 4P Marketing Mix
The 4P model delimit four distinct, well-de¯ned and independent management
processes. Despite the consistent e®ort by many physical businesses to deal with
the 4P in an integrated manner, the drafting but mainly the implementation
of the P policies remains largely the task of various departments and persons
within the organization. Even more signi¯cant thought is the fact that the cus-
tomer is typically experiencing the individual e®ects of each of the 4Ps in diverse
occasions, times and places, even in case that companies take great pains to fully
integrate their marketing activities internally[10]. Enterprise can promote prod-
ucts through mixing four \P" strategies. A clear marketing strategy tool kit for
enterprises selling digital products is provided through analyzing di®erent cate-
gories of digital products with 4P as shown in Table 2. We ¯nd that promotional
tools of content-based digital products are more than others and combining tri-
alability is di®erent in three categories of digital products shown in Table 1. We
argue that the less trialability a digital product is, the more promotional tools
it needs.
3.2 4C Marketing Mix
With market competition shifting from product-oriented into customer-oriented,
some defects of 4P emerge. Under this condition, 4C marketing mix model is put
forward by Lauterbom who suggest the marketing strategies that involved prod-
uct, price, place and promotion are passe. Consumer wants and needs, cost to
satisfy, convenience to buy and communication are the catechism for our times[7].
This model considers a marketing problem from the consumer perspective[10].
The content includes four points. First, what the customer want should be sold
rather than what you can manufacture. Second, enterprise should take every
e®orts to decrease the cost of ful¯lling the customer's demand. Third, enterprise
should take every e®orts to give convenience to customer for purchasing. Finally,
communication with customer is more important than promotion. Analysis based
on the 4C model of three categories digital products is shown in Table 3.
Now that we have a marketing strategy tool kit which are from customer's
perspective for enterprises selling digital products. At the same time, we ¯nd
that the less trialability a digital product is, the more communication tools it
needs, which is the same ¯nding as the 4P model.Table 2. 4P marketing strategy of different digital products
Content-based digital products
(e-book)
Utilities and tools (anti-virus
software)
Online services (online
translation services)
Product
Products individual (the ssreader
divided e-book into single
chapter to sell)
Lock in (caj browser used by
China National Knowledge
Infrastructure)
Quickly update version (kv3000
anti-virus software put new
version each year)
Products individual (if you
purchase UFIDA U8 soft, you can
choose the module you need)
Binding (WPS Office)
Versioning (all version of WPS
Office)
Lock in (QQ client)
Products individual (stock
trade online of West
Stock)
Price
Nonlinear pricing (ssreader’s
reading card: RMB35/quarter，
RMB100/year，RMB180/two
years)
Individual price (products sold in
second hand market)
Value transfer (e-journal
provided in cfan web site, sell
quantity of journal is one of the
largest.)
Two-part price (fix monthly fee
of telephone and payment each
time)
Group price (user of kv3000 net
version/RMB10/month)
Name your price(priceline.com.tw)
Two-part price(after purchase U8
soft of UFIDA, you should pay
for using every year)
Value transfer(newhua.com is free ,
revenue come from advertisement
for huge visiting stream)
Individual price (lesson
online service of new
oriental in second hand
market)
Two-part price (there are
initial ISP service
payment then pay for
using each year)
Place
Web store (dangdang.com) Web site constructed by
manufacturer (jiangmin.com)
web store (newhua.com)
Web site constructed by
manufacturer
(russky.com)
Promotion
Recommendation(top 10 of
ssreader.com)
Personalization(When Mary
returns to the dangdang.com, it
responds “Hello Mary”)
Comparison shopping
(pconline.com)
Customization (Yahoo China)
User comment list (ssreader.com)
Individual recommendation (“we
know you buy some E-business
books last time, there are some
related books for you”)
Rules-based system(“the
exercises book is a good
complement to this book”)
Ordering tools(shopping baskets)
Advertisement is involved in
product(book of ssreader.com)
Requirement register
(ssreader.com)
Digital watermark (photosl.net)
Rules-based system (before
downloading update package,
please select version)
Ordering tools (shopping baskets)
Advertisement is involved in
product (flashget)
Trial (WPS Office provide limited
trial)
Authorization limitation (KV3000
net version can check virus, but
can not update)
FAQs (jiangmin.com)
Affiliates(russky.com)
FAQs (russky.com)
Instant Message (QQ)
BBS (bbs.russky.com) Table 3. Marketing strategy of different categories digital products based on 4C
Content-based digital products (e-book)  Utilities and tools
(anti-virus)
Online services (online
translation services)
Consumer
wants and
needs
Products individual (the ssreader divided
e-book into single chapter to sell)
Binding(browser is bind into e-book)
E-coupons(sozhao.com/tools/yhq/dangda
ng.asp)
User comment list (ssreader.com)
Requirement register (ssreader.com)
Classified advertisement (8848.com)
Quickly update version
(kv3000 anti-virus software
put new version each year)
Products individual (if you
purchase UFIDA U8 soft,
you can choose the module
you need)
Binding (WPS Office)
Versioning (all version of
WPS Office)
Advertisement of different
category (newhua.com)
Products individual
(stock trade online of
West Stock)
Version (online
translation of
netat.net.cn can restrict
different subject)
Advertisement of
different
category(multi-languag
e translation of
netat.net.cn)
Cost of satisfy
Nonlinear pricing (ssreader’s reading
card: RMB35/quarter, RMB100/year,
RMB180/2 years)
Individual price (products sold in second
hand market)
Two-part price (fix monthly fee of
telephone and pay each time)
Value transfer (e-journal provided in cfan
web site, sell quantity of journal is one
of the largest.)
Group price(user of kv3000
net version/RMB
10/month)
Name you price
(priceline.com.tw)
Two-part price (after
purchase U8 soft of
UFIDA, you should pay for
using every year)
Value transfer (newhua.com
is free , revenue come from
advertisement for huge
visiting stream)
Individual price (lesson
online service of new
oriental in second
hand market)
Two-part price (there
are initial ISP service
payment then pay for
using each year)
Convenience to
buy
Web store (dangdang.com)
Ordering tools (shopping baskets)
Security policy (see the privacy and
security notice on ssreader.com)
Comparison shopping (pconline.com)
Virtual reality (e360.cn)
Web site constructed by
manufacturer
(jiangmin.com)
Ordering tools (shopping
baskets)
Security policy (see the
privacy and security notice
on ssreader.com)
Trial (WPS Office provide
limited trial)
Web site constructed by
manufacturer
(russky.com)
Security policy (see the
privacy and security
notice on
ssreader.com)
Communication
Recommendation (the suggestion on
ssreader.com)
Personalization (When Mary returns to
the dangdang.com, it responds “Hello
Mary”)
Customization (Yahoo China)
Individual recommendation (“we know
you buy some E-business books last
time, there are some related books for
you”)
Rules-based system (“the exercises book
is a good complement to this book”)
Trial (free 17 pages in ssreader.com )
Online auction (ebay.com.cn)
FAQs (ssreader.com)
Digital community (Sun digital
community)
Rules-based system (before
downloading update
package, please select
version)
Advertisement is involved in
product (flashget)
Trial (WPS Office provide
limited trial)
Authorization limitation
(KV net version can check
virus, but can not update)
FAQs (jiangmin.com)
Auction (ebay.com.cn)
Affiliates (russky.com)
FAQs (russky.com)
Instant message(QQ)
BBS (bbs.russky.com)
Digital community (Sun
digital community) 3.3 4S Marketing Mix
The 4S model (web-marketing model, WMM) was put forward by Constanti-
nides [10]. It describes web marketing strategy with four elements begin with
\S" including scope, site, synergy and system. The goal of this model is to de-
sign and develop marketing mix for BtoC online projects through controlling
four \S" elements. In 4S model, the scope element is of primarily strategic char-
acter and outlines the decisions to be made on four areas: (a) the strategic and
operational objectives of the online venture; (b) the market de¯nition including
measuring the market potential and the identi¯cation/classi¯cation of the po-
tential competitors, visitors and customers of the site; (c) the degree of readiness
of the organization for E-Commerce; (d) the strategic role of E-Commerce for
the organization. The web site is therefore the functional platform of communi-
cation, interaction and transaction with the web customer. The prime mission
of the web Site is to attract tra±c, establish contact with the online target mar-
kets and brand the online organization. The synergy factor embraces a wide
range of issues divided into three categories: the front o±ce, the back o±ce and
the third parties. The front o±ce refers to conventional corporate communica-
tion and distribution strategies; The back o±ce synergy includes three issues:
(a) the integration of E-Commerce physical support into existing organizational
processes; (b) the legacy integration; (c) integration of the online operation into
the company's value system. The success in virtual marketplace often requires
co-operation with Internet partners outside the organization and its value sys-
tem. Finally, the system factor identi¯es the technological issues as well as the
site servicing issues to be addressed by the E-Commerce management.
The 4S model brings out how to prepare a web marketing strategy on two
issues. First, on strategic layout, the main strategic problem is planned which
is insurance of creating successful web marketing strategy. The 4S model em-
phasizes that web marketing strategy should consistent with enterprise strategy.
Web marketing strategies should integrate with other operation strategy and
take full advantage of competition advantage. Second, on operation layout, a
methodology for making web marketing strategy is provided.
4 Discussion
There is an interesting ¯nding in Table 2 and Table 3 that the lower trialability
of digital products is, the more promotional tools it needs. A probable explana-
tion is that digital products are a kind of experience products, consumers can
understand the product after purchasing it [3]. So the best promotion tool is
trial, through trial, consumer will persuade himself to purchase. Refering Table
1, utilities and tools is the best in trialability while content-based product is the
worst in trialability. So promotion of content-based product should be achieved
by multi-marketing tools except trial. The other two categories of products can
be promoted by trial. That is to say, three categories of products have notable
di®erence in promotion tools. We can sum up this point as:Trial is the best promotion tool for digital products. With high trialability, the
digital products needs less promotion tools. At the same time, with low trialability,
the digital products needs more promotion tools.
Table 4. Marketing strategy of different category digital products based on 4S
Content-based digital products
(e-book)
Utilities and tools(anti-virus) Online services(online
translation services)
Scope (strategy
and objective)
Market segmentation (demographic
variables, geographic variables,
psychographic variables and
behavioral variables)
Potential customers (profiles,
motivation, behavior and needs)
Internal analysis(internal resources,
value process, and the web
sustaining technology)
Strategic role of the web activities
(information platform, educational,
promotional and transactional)
Same as left Same as left
Web site (online
experience)
Link exchange (Coolgo e-book,
ssreader)
Advertisements
Factors of web site (domain,
content, design, layout,
atmosphere etc)
Optimize of speed of web site
Factors of web site (domain,
content, design, layout,
atmosphere etc)
Optimize of speed of web site
Factors of web site (domain,
content, design, layout,
atmosphere etc)
Synergy
(integration)
Web store (dangdang.com)
The back office (physical book
store)
Web site construct by
manufacturer (jiangmin.com)
The front office (updating
product installed in client)
Web site construct by
manufacturer (russky.net/trans/)
Third parties (outsource of
logistic)
System
(technology
requirement)
Technology requirement of web
site (stabilization, security,
software, hardware, protocol,
system service etc)
Preliminary payment system
(ssreader)
Technology requirement of
web site (stabilization,
security, software, hardware,
protocol, system service etc)
Instant payment system
(kv3000)
Post-payment system (net
version RMB10/month)
Technology requirement of web
site (stabilization, security,
software, hardware, protocol,
system service etc)
Instant payment system(in web
site (russky.net/trans/) payment
can be finished by SMS(short
message system) and network)
Delivery mode in Table 1 can partly explain di®erent place strategies in Ta-
ble 2. Value of content-based products can transfer through download mode, if
adopting a web store, the distributions cost is low. Value transfer of online ser-
vices need to interact with the customer, web site construction by manufacturer
is only a feasible way. For frequent updates (e.g., update of the package) of utili-
ties and tools, enterprises selling utilities and tools often constructed web site by
itself. Web stores is a feasible tool on condition that updates are not required.
Comparing 4S model with the 4P and 4C models, we ¯nd strategic elements
involved in 4S model that distinguish from others. It is combined of strategy mar-
keting with tactics marketing. For products needing manufactures construction
web site by itself as a distribution channel, it is necessary to select a target mar-
ket from the market segmentation according to position. Those are important
to design web site. The web site of online service is often constructed by man-
ufacturers and there are some strategic elements, including position and target
market selection, a®ect web site's business status except promotion instrumentincluding advertisement etc. That is to say, the 4S model is a feasible marketing
strategic tool kit for enterprises selling online service. There are parts of enter-
prises of selling utilities and tools constructing a web site by themselves, the
4S model is suitable for them. Enterprises selling content-based products seldom
construct web site by itself, the suitability of 4S model is low. The 4C model con-
siders a marketing problem from the consumer perspective. Customer's demand
can be easy ful¯ll while the di®erence ability of products is high. Therefore,
4C model is suitable for products with high di®erence ability. Content-based
products have the highest di®erence ability, which can reconstruct with di®erent
segments to distinguish from others and with no additional cost. Online services
have a medium di®erence ability which decided by its high trialability, but some
cost accompany trialing. Utilities and tools have low di®erence ability which can
not be reconstructed randomly. In summary, the 4C model has high suitabil-
ity of content-based products and medium suitability of online service and low
suitability of utilities and tools. The 4P model has more controllable ability of
four elements than others, so the 4P model is suitable for utilities and tools well.
The 4S model is suitable for utilities and tools on condition that manufacturer
constructing web site himself. Under this condition, it is best to combine the 4P
model and the 4S model. The other two products have medium suitability for
the 4P model. Analyzing of the above can summarized into three ¯ndings:
For content-based products, the 4P model is much more suitable than the 4C
model, while the 4C model is more suitable than the 4S model.
For utilities and tools, the 4P and the 4S models are more suitable than the
4C model.
For online service, the 4S model is more suitable than the 4P and 4C models.
5 Conclusion
There are three contributions of this study. First,with unique characteristics in
economic and physical property, the classic marketing models including 4P, 4C
and 4S have di®erent conditions in applying to the selling of digital product.
Second, for each catagroities of digital products, the priority of suitability of
established marketing mix models is provided. Third, there is an interesting
¯nding that the less trialability a digital product is, the more promotional tools
it needs.
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