Online Marketing In Sri Lanka Essay

This essay has a total of 3840 words and 21 pages.

Online Marketing In Sri Lanka

I. Online Marketing in Sri Lanka

1. Introduction

The development of online marketing in Sri Lanka is lagging behind when compared to
developed countries. The adoption of online marketing is more than a technical issue.
Country specific factors such as differences in culture and business environment are
influencing the nature and type of appropriate IT solutions including online marketing.
Therefore the marketing strategies must be suitable for the country to reach and
communicate with the target audience. Online marketing and selling has enabled business
organizations to provide better quality products and services, reduce costs and shorten
deliver times.

Kotlar defines online marketing as "marketing conducted through interactive online
computer systems, which link consumers with sellers electronically". (Kotlar et al, 1997)
A company engaging in online marketing can use methods ranging from hosting an informative
web site to taking orders over the internet to having a fully integrated Customer
Relationship Management and Order Management system over the internet.

The internet is considered as the engine of bringing phenomenal changes to business and
society and failure to adapt to these changes would face extinction. Therefore both the
Sri Lankan government and the private sector are conscious about the need to promote IT
and online marketing to achieve competitive advantage.

Online marketing is a sub system of e-commerce which is defined by Gartner Group, USA as
"a dynamic set of technologies, integrated applications and multi-enterprises business
processes that link enterprises and consumers together", which covers the use of
messaging, networking and applications to enable communication of business information.
E-Commerce could take place between businesses, business to consumers (e.g.
or between customers facilitated by an intermediate service provider (e.g. e-bay).

Online marketing has its own advantages such as improving productivity and competitiveness
as well as challenges and barriers. These, in relation to Sri Lanka, will be discussed in
this paper.

2. Current Status

A recent survey by the Department of Census and Statistics has found that only 9.7% of Sri
Lankans are computer literate although the overall literacy level is over 90%. The Colombo
district has the highest computer literacy of 20%. However the current trend of many
youngsters opting for IT education and the government policy of e-enabling Sri Lanka are
healthy signs that the computer literacy would take a steep upward trend in the years to
come. 10% of urban households report having computers as against a low 3% in rural areas.
Only 0.9% and 0.7% of households have access to email and internet respectively. The
number of email and internet connections has grown at an encouraging rate since year 2000
as shown in figure1. In addition many cyber cafes and workplaces also provide, to those
who patronage them, access to the internet.

Figure 1: Growth in Internet and Email Subscribers

Source: Data from

Sri Lanka has a well established and deep rooted private sector which is seemed to be far
ahead of the government sector in the use of technology and agility towards conducting
business. However, very recently, the public sector is also seen to be making a stride
towards developing its IT infrastructure. E-Government was a key area of focus at the
recent 2nd International Conference on e-Governance held in Colombo. The theme of this
event was "From Policy to Reality" and it looked at how Sri Lanka can effectively move
towards e-government especially with leanings from countries such as India and Singapore.

Online marketing in Sri Lanka takes many forms.
o Publishing information - Using ICT to expand access to company information
o Interactive marketing - Broadening customer participation through websites
o Transacting - Making goods and services available online
Many companies use the World Wide Web (WWW) to host a website to publish information and
thus improve access to Company information. Having a website has become the "in thing"
these days. Although the content is seen to be static over a period of time it is a good
stepping stone to the world of online marketing. This method was first used to promote Sri
Lanka as a tourist destination. The tourist board website (
provides a wealth of information for those interested in visiting Sri Lanka. The WWW is
now used by most organisations engaged in promoting tourism and many other business to
business and retail organizations enabling its customers to view products, services and
information and influencing their purchasing decisions. Some stores use mechanisms such as
3-D animation to enable customers to view products in 3 dimensional forms. E.g. Alankara
Jewelers ( provides images in 3-D form.

The next level is to use online marketing as an interactive marketing tool. E-Commerce
sites have the option of collecting customer specific data and personalizing the site /
targeting advertisements to suit the user. For example the Keells Supermarkets
( site collects user information at the time of registration and uses
this information to personalize the site for visitors. The Skywards customer loyalty
program web site ( uses customer information for target marketing as well
as providing customized services (such as meals and preferential seating) for airline
passengers using the already stored customer information. Dialog GSM ( uses
chatting for customer support but the facility does not appear to be adequately manned to
provide a prompt service.

Use of email newsletters is another economical means of online marketing. Many sites
request visitors to voluntarily register to receive email newsletters with information of
their choice. For example Comet Cable ( uses e-newsletters to send
latest updates of planned programs to those who register. However the number of companies
using this method is still handful.

Transacting or enabling the customers to buy and sell goods and services online is the
next level in online marketing. During the last 2 years we have seen an encouraging growth
in this area. All leading banks are web enabled and promote internet based transactions as
it helps improve their productivity and cost of operations. HSBC (, Sampath
Bank ( and Commercial Bank ( are some banks that use the
internet effectively. Sampath Bank recorded 10,000 customers under its "Sampath Vishwa"
online (only) account scheme in September 2004, according to its Product Manager. It
promotes this account by offering 0.25% extra interest as compared to the normal savings
accounts. Sampath Bank offers the value added service of making secure online payments to
all utility and telephone service providers as well as other establishments, thus locking
in its customer base. HSBC promotes its internet banking option by offering reduced
charges (e.g. 25% reduction in international money transfer charges) and loyalty programs.
An increasing number of urban working class is registering for online banking services due
to the convenience offered; ability to transact from ones desktop and round the clock
availability. The online presence of the Colombo Stock Market ( ), where bidding
is conducted online, is an example of a highly sophisticated e-business system.

The widespread growth of credit cards helps those wishing to engage in online
transactions. Leading Hotels in the country provide customers with the facility of making
reservations and payments online. Jetwing and Aitken Spence Hotels are some examples. In
the retail supermarket sector Keells Supermarkets ( is promoting
online purchases. Sites such as and bring together many
suppliers into a single site thus providing a one stop shop for Sri Lankan online
shoppers. According to the Marketing Manager at Jaykay Marketing (who manages both Keells
Supper and Pizza Hut sites) a significant % of their sales come from Sri Lankans
(including students) living in Northern America, Australia and Western Europe who make use
of the facility to send gifts, flowers, cakes and chocolates to their loves ones in Sri

The % revenue generated by online purchases is still insignificant in Sri Lanka. The
percentage of transactions relative to the number of hits too remains very low (except in
the case of banks which have frequent online customers). Due to the inequitable
distribution of Internet Readiness majority of online marketing activities tend to be for
highly specialized nitch markets. This very fact that the market penetration is low leaves
a huge potential for those wishing to enter the world of online marketing.

It is no secret that the internet opens global markets to those engaged in online
marketing. Thus a company going online does not limit its market size to consumers in Sri
Lanka but to those online customers all over the world. Popular store ODEL (
gets its entire online revenue from customers outside Sri Lanka.

The Business to Business (B2B) online marketing still remains at a primitive stage in most
local companies. The apparel industry, however, is leading the way by using the web not
only for marketing purposes but also for e-business applications such as order fulfillment
and placement.

3. Viability

The main objective of any business is profits and customer satisfaction. Online marketing
should be cost effective to provide the customers with added benefits. As development and
maintenance of a website costs time and money for a company e-business should be
implemented after careful study of its viability.

The cost per contact for marketing online is much lower compared to traditional methods
such as medial advertisements and direct mail. However companies may need to invest in
hardware, software and consultancy for building and hosting a web site. To recover this
capital investment companies should ensure that the benefit from reduced cost of
traditional marketing, automating marketing and selling processes (and thus reduction in
cost of workforce) and increased goodwill and sales outweigh the costs incurred.

According to survey conducted for US Customers the top most reasons for making online
purchases is the low prices offered online (figure 2). Also amongst the top five reasons
is that it is easier to compare product prices online. This makes it important for
companies to make their websites easy to navigate and provide easy comparison of prices.
However the bottom line remains that consumers are cost conscious and this demand for
companies to be competitive in their pricing and we can expect similar expectations in Sri

Figure 2: Reasons why US Customers make Online Purchases


Companies should ensure they have the technical competence to ensure a reliable,
consistent service to its customers on a continuous basis. This is especially important
where the company is considering online transactions through its website.

It is important to ensure that customer base is ready for online marketing. The customers
should perceive that engaging in online marketing is useful and that it is easy to use,
inorder for company's online marketing efforts to be viable. Figure 3 shows a model of
technology acceptance.

Figure3: Technology Acceptance Model

Source: Davis, 1999

4. Infrastructure

Compared to developed countries such as USA, Japan and other European countries, who are
pioneers in internet based marketing, Sri Lanka has to put in place many prerequisites to
make internet based marketing reachable and attractive to its customers. According to
statistics on the ICT Status in Sri Lanka infrastructure remains the lowest interms of
readiness. Appendix 1 provides more details on ICT readiness in Sri Lanka.

The availability of computers remains at a low 3.8% in Sri Lankan households whilst access
to e- mail and internet remain at 0.9% and 0.7% respectively. This low level of
connectivity to the WWW makes the potential for online marketing limited within Sri Lanka.

Limitations in communication also forces users to use normal channels such as telephone to
seek information, thus negating the benefits of online marketing. Navigating the internet
is frustrating and time consuming in most instances. The Web is much slower than in the US
or Japan. It isn't a matter of not having a fast modem (or ISDN), or of the U.S. sites
being saturated: it's the capacity of the local telecommunication lines and their
saturation. Most dial-up connections do hardly attain their promised data transfer rate of
33.6 kbps. However the introduction of ADSL technology (at 512 kbps and 2 mbps) by SLT
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