i h /m v*i /$£ f o b 
ETHICAL E-MARKETING FOR COMPETITIVE 
ADVANTAGE 
By 
A. K. G. RfD. Attanayake 
The Dissertation was submitted to the Department of Computer Science & 
Engineering of the University of Moratuwa in partial fulfillment of the 
requirement for the Degree of Master of Business Administration. 
Department of Computer Science & Engineering 
University of Moratuwa 
December 2005 
it M 
at^te OS 
University of Moratuwa 
86342 
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DECLARATION 
"I certify that this thesis does not incorporate without acknowledgement any material 
previously submitted for a degree or diploma in any University to the best of my 
knowledge and belief it does not contain any material previously published, written or 
orally communicated by another person or myself except where due reference is made in 
the text. I also hereby give consent for my dissertation, if accepted, to be made available 
for photocopying and for interlibrary loans, and for the title and summary to be made 
available to outside organizations" 
1 6 - 0 1 - 2 0 0 6 
Signature of the Candidate Date 
To the best of my knowledge, the above particulars are correct. 
Supervisor 
Table of Contents 
PART I - Research Preparation 
1 Introduction 1 
1.1 Background 1 
1.2 Why I selected this Research Topic 3 
1.3 Problem Statement 4 
1.4 Research Objectives 5 
f 
2 Literature Review 6 
2.1 What is E-Marketing ? 6 
2.2 Types of E-Marketing 7 
2.3 Internet Technologies 8 
2.4 Ethical Concepts 9 
2.5 Legal Background 12 
2.6 Measuring Ethical Interactivity - 4 
2.7 Measuring Competitive Advantage 17 
2.8 Importance and Benefit of the Study I 7 
PART II - Research Formulation 
3 Research Formulation 20 
3.1 Formulating Research Objectives 20 
. 3.2 Preparing Questionnaire 21 
3.3 Collection of Data Samples 22 
4 Sample Characteristics 24 
.4.1 General Sample Characteristics 24 
4.2 Local Sample Characteristics 25 
4.2.1 Sex 26 
4.2.2 Age 26 
4.2.3 Buying Duration 27 
4.2.4 Buying Frequency 27 
4.2.5 Average Internet expenditure per month 28 
4.3 South Asian Sample Characteristics 28 
4.3.1 Sex 29 
4.3.2 Age 29 
4.3.3 Buying Duration 30 
• 4.3.4 Buying Frequency 30 
4.3.5 Average Internet expenditure per month 31 
4.4 European Sample Characteristics 31 
4.4.1 Sex 32 
4.4.2 Age 32 
4.4.3 Buying Duration 33 
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4.4.4 Buying Frequency 33 
4.4.5 Average Internet expenditure per month 34 
4.5 North American Sample Characteristics 34 
4.5.1 Sex 35 
4.5.2 Age 35 
4.5.3 Buying Duration 36 
4.5.4 Buying Frequency 36 
4.5.5 Average Internet expenditure per month 37 
# PART III - Designing Research Methodology & Data Analysis 
5 Effectiveness of Customer Profiling process 39 
5.1 Preparing questionnaire 39 
5.2 Defining weights 40 
5.2.1 Weights on Likert Scale 40 
5.2.2 Weights on Indicator Questions 41 
5.3 Constructing Equation for Effectiveness 41 
5.4 Sample Analysis 42 
5.4.1 Local E-Purchasers 42 
5.4.2 E-Purchasers of South Asian region 44 
5.4.3 E-Purchasers of European Region 45 
5.4.4 E-Purchasers of North American Region 46 
5.4.5 Effectiveness - Summary 47 
6 Ethical E-Marketing for Competitive Advantage 49 
• 6.1 Methodology 49 
6.2 Ethical Interactivity 49 
6.2.1 Conceptualization 49 
6.2.2 Preparing Questionnaire 52 
6.2.3 Determining Relative Position Among Other Factors 55 
6.3 Competitive Advantage 56 
6.3.1 Conceptualization 56 
6.3.2 Preparing Questionnaire 57 
6.4 Defining Weights 58 
6.4.1 Weights on Likert Scale 58 
6.4.2 Weights on Indicator Questions 59 
6.4.3 Weights on General Attributes 61 
6.4.4 Relative Weights on Visible Forms 62 
6.4.5 Weights on Response Behaviors 63 
^ 6.4.6 Weight on Relative Position of Ethical Interactivity 63 
6.5 Construction of Functions 64 
6.5.1 Ethical Interactivity 64 
6.5.2 Competitive Advantage - Positive Response Behavior 66 
6.5.3 Relative importance of EI 66 
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6.6 Data Analysis - Regression Analysis 67 
6.6.1 Local Samples 67 
6.6.2 South Asian Region 71 
6.6.3 European Region 75 
6.6.4 North American Region 80 
6.6.5 Distribution of Ethical Interactivity among e-Purchasers 83 
7 Impact of Internet Laws on Unethical E-Marketing Practices 87 
7.1 Background 87 
7.2 Growth and Distribution of Internet Population 88 
7.3 Growth of unethical practices 89 
7.4 Laws affecting Ethical E-Marketing behavior 90 
7.5 Countries Position in Setting-up of E-Marketing Laws 91 
7.6 Laws Affecting E-Mail Marketing 93 
7.7 Laws and Practices Against Unethical Web Advertising 98 
7.8 Laws Affecting Customer Profiling and Privacy 101 
7.9 Laws Affecting online Children Protection 104 
7.10 Trends in Unethical Practices 108 
7.11 Reasons behind unethical practices 109 
7.11.1 Immense Competition 109 
7.11.2 Creating new market opportunities 110 
7.11.3 Providing maximum satisfaction to customers 110 
PART IV - Verifying Objectives 
8 Conclusions 112 
8.1 Effectiveness of Customer Profiling Process 112 
8.2 Ethical Interactivity for Competitive Advantage 114 
8.2.1 Local and South Asian e-Purchasers 114 
8.2.2 European e-Purchasers 115 
8.2.3 North American e-Purchasers 116 
8.3 Other Findings 118 
8.3.1 E-Marketing Practices Ethical Analysis 118 
8.3.2 Reasons behind creating Competitive Advantage via EI 118 
8.3.3 H o w Competitive Advantage can be automatically created through EI. 119 
8.4 Impact of Internet Laws on Ethical E-Marketing Practices 121 
8.5 Designing Ethically Interactive Site 124 
References and Webliography 127 
APPENDIX 1 130 
APPENDIX II 134 
APPENDIX III 139 
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Table of Figures 
Figure 1.1: Research topic relation to business and engineering disciplines 3 
Figure 2.1: Current online marketing efforts 9 
Figure 2.2: Customer sovereignty Vs Intrusiveness 15 
Figure 2.3: Measuring Ethical Interactivity 16 
Figure 4.1: e-Purchasers Regional Count Chart 24 
Figure 4.2: e-Purchasers Country count chart 24 
Figure 4.3: e-Purchasers Sex count chart 25 
Figure 4.4: Sex count chart - Local e-Purchasers 26 
Figure 4.5: Age group chart - Local e-Purchasers 26 
' Figure 4.6: Buying Duration chart - Local e-Purchasers 27 
Figure 4.7: Buying Frequency Chart - Local e-Purchasers 27 
Figure 4.8: Monthly Internet Expenditure chart - Local e-Purchasers 28 
Figure 4.9: Sex chart - South Asian e-Purchasers 29 
Figure 4.10: Age Group chart - South Asian e-Purchasers 29 
Figure 4.11: Buying Duration chart - South Asian e-Purchasers 30 
Figure 4.12: Buying Frequency chart - South Asian e-Purchasers 30 
Figure 4.13: Monthly Internet Expenditure chart - South Asian e-Purchasers 31 
Figure 4.14: Sex chart - European e-Purchasers 32 
Figure 4.15. Age Group chart - European e-Purchasers 32 
Figure 4.16: Buying Duration chart - European e-Purchasers 33 
Figure 4.17: Buying Frequency chart - European e-Purchaser 33 
Figure 4.18: Monthly Internet Expenditure chart - European e-Purchasers 34 
Figure 4.19: Sex chart - North American e-Purchasers 35 
Figure 4.19: Age Group chart - North American e-Purchasers 35 
Figure 4.20: Buying Duration chart - North American e-Purchasers 36 
Figure 4.21: Buying Frequency chart - North American e-Purchasers 36 
Figure 4.22: Monthly Internet Expenditure chart - North American e-Purchasers 37 
Figure 5.1: Effectiveness of Customer Profiling - Local e-Purchasers 44 
* Figure 5.2: Effectiveness of Customer Profiling - South Asian e-Purchasers 44 
Figure 5.3: Effectiveness of Customer Profiling - European e-Purchasers 45 
Figure 5.4: Effectiveness of Customer Profiling - North American e-Purchasers 46 
Figure 6.1: Scatter Plot - R vs rEI (Local e-Purchasers) 69 
Figure 6.2: Scatter Plot - R vs rEIWA (Local e-Purchasers) 69 
Figure 6.3: Scatter Plot - R vs rEIEM (Local e-Purchasers) 70 
Figure 6.4: Scatter Plot - R vs rEICp (Local e-Purchasers) 70 
Figure 6.5: Scatter Plot - R vs rEI (South Asian e-Purchasers) 72 
Figure 6.6: Scatter Plot - R vs rEIWA (South Asian e-Purchasers) 73 
Figure 6.7: Scatter Plot - R vs rEIEM (South Asian e-Purchasers) 73 
Figure 6.8: Scatter Plot - R vs rEIcp (South Asian e-Purchasers) 74 
Figure 6.9: Scatter Plot - R vs rEI (European e-Purchasers) 78 
Figure 6.10: Scatter Plot - R vs rEIWA (European e-Purchasers) 79 
Figure 6.11: Scatter Plot - R vs rEIcp (European e-Purchasers) 79 
Figure 6.12: Scatter Plot - R vs rEI (North American e-Purchasers) 82 
Figure 6.13: Scatter Plot - R vs rEIcp (North American e-Purchasers) 82 
Figure 6.14: Frequency Distribution of rEI - Local e-Purchasers 83 
% Figure 6.15: Frequency Distribution of rEI - South Asian e-Purchasers 84 
Figure 6.16: Frequency Distribution of rEI - European e-Purchasers 84 
Figure 6.17: Frequency Distribution of rEI - North American e-Purchasers 85 
Figure 6.18: Frequency Distribution of rEI - Total e-Purchasers 85 
Figure 6.19: Frequency Polygon Comparison 86 
Figure 7.1: Type of attacks and Misuse of Internet 108 
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Table of Tables 
Table 3.1: Countries Selected form Each Region 22 
Table 5.1: Weights on Likert Scale 40 
Table 5.2: Weights on Indicator Questions 41 
Table 5.3: Calculation of Effectiveness in Customer Profiling - Local e-Purchasers 42-43 
Table 5.4: Effectiveness of Customer Profiling - Regional Based 47 
Table 5.5: Effectiveness of Customer Profiling - Based on Age Groups 47 
Table 5.6: Effectiveness of Customer Profiling - Based on Sex 47 
Table 5.7: Effectiveness of Customer Profiling - Based on Buying Duration 48 
Table 5.8: Effectiveness of Customer Profiling - Based on Buying Frequency 48 
Table 5.9: Effectiveness of Customer Profiling - Based on Monthly Internet 
Expenditure 48 
Table 6.1: Conceptualization of Ethical Interactivity 51 
Table 6.2: Definitions of Indicators 54 
Table 6.3: Questions based on the El indicators 54 
Table 6.4: Determining relative positions among other Purchasing Attributes 55 
Table 6.5: Conceptualization of Competitive Advantage 56 
Table 6.6: Response Behaviors 57 
Table 6.7: Weights on Likert Scale 1 58 
Table 6.8: Weights on Likert Scale 2 58 
Table 6.9: Weights assigned - Web Advertising 59 
Table 6.10: Weights assigned - Email Marketing 60 
Table 6.11: Weights assigned - Customer Profiling 60 
Table 6.12: Weights assigned - General Attributes 61 
Table 6.13: Statistics on E-Mail Survey 62 
Table 6.14: Weights Assigned - Visible form of E-Marketing 62 
Table 6.15: Weights on Response Behaviors 63 
Table 6.16: Calculation of Ethical Interactivity and Response Behavior (Local Samples) ... .67-68 
Table 6.17: Calculation of Ethical Interactivity and Response Behavior 
(Indian Samples) 71 
Table 6.18: Calculation of Ethical Interactivity and Response Behavior 
(Pakistan Samples) 72 
Table 6.19: Calculation of Ethical Interactivity and Response Behavior 
(UK Samples) 75 
Table 6.20: Calculation of Ethical Interactivity and Response Behavior 
(Netherlands Samples) 76 
Table 6.21: Calculation of Ethical Interactivity and Response Behavior 
(Sweden Samples) 76 
Table 6.22: Calculation of Ethical Interactivity and Response Behavior 
(Poland Samples) 77 
Table 6.23: Calculation of Ethical Interactivity and Response Behavior 
(Canadian Samples) 80 
Table 6.24: Calculation of Ethical Interactivity and Response Behavior 
(USA Samples) 81 
Table 7.1: Growth of Internet population 88 
Table 7.2: Distribution of Internet Population 89 
Table 7.3: Countries with updated Laws 92 
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Acknowledgement 
This research report bears the imprint of many people. First of all I would like to give my 
sincere gratitude to my supervisor Mr. Kithsisri Samarasinghe. This dissertation could 
not have been written without him who not only served as my supervisor but also 
encouraged me throughout the research. 
Then I would like to give my special thank to Dr. Sanath Jayasena, Mr. Chathura de Silva 
and Mr. Prasanna Perera Who lectured me on the subject matters related to this research. 
Also I want to give special acknowledgment to Dr. Claire Gauzente, Assistant Professor 
of Marketing and Organization at the University of Angers, France and Dr. Ashok 
Ranchhod, Professor of Marketing at the Southampton Business School, UK for helping 
me by providing with models to carry out this research and helping me to clarify issues 
encountered during the research. 
Also I would like to thank Parry Aftab, Esq., Privacy Lawyer, head of Aftab Internet 
legal consultation firm, who provided me with large amount of Internet legal resources. 
Then I would like to thank Mrs. Brigit Scharder - Poland, Mr. Peter Borg - Sweden, Mr. 
Koert Bontjer - Netherlands, Mr. Baddis Bonkchilli - UK, Mr. Charlie Goldman - U S A 
who coordinated the collection of sample data from each country. 
Also I would like to take this opportunity to thank my colleagues, company friends and 
other people who helped me to fill the research questionnaire and providing me with 
invaluable suggestions and feedbacks. 
Last but not least I like to give special thank to loving wife for helping me throughout 
this research. This wouldn't have been success without her help. 
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A B S T R A C T 
Marketing practice is now busy integrating the potential o f information and 
communication technologies through the utilization of databases and Internet marketing 
tools. Billions of potential consumers can now be reached this way. Therefore rivalry 
firms are in a big competition to increase their market share by attracting maximum 
portion of potential e-Purchaser. A brief observation in the Internet shows that these firms 
go beyond the ethical limits and adapt unethical and aggressive E-marketing practices to 
win from the competition. 
The observation of marketing practice on the Internet can give an idea of the types of 
unethical practices that are either already in place or recommended by certain marketing 
consultancy sites. A simple analysis of many sites highlights two important issues. The 
first one is concerned with the gathering and selling of consumer information and the 
second one is concerned with the utilization of various marketing techniques such as pop­
up banners, deceiving banners and hyperlinks and other forms of intrusive mechanisms, 
by which make e-Purchasers discomfort and impinge on their personal privacy. 
Meanwhile advent of new powerful Internet Technologies and Tools would make the 
unethical practices to be carried out seamlessly in the Internet. 
Whereas the potentialities of ICT are endless, the very interactiveness of the Internet 
creates new and serious ethical problems reflected by the use of short-term aggressive 
actions. Given the fact that such powerful tools and techniques will become the norm 
within two to five years, experts advocate that firms that wish to differentiate themselves 
from their competitors will have to turn to E-marketing ethics in order to gain and keep 
consumers. Firms that follow ethical marketing stances are likely to be more 
Compet i t ive ly A d v a n t a g e d in the future. 
Adhering to these facts the possibility of creating Competitive Advantage through 
Ethica l In t e rac t iv i ty in E-Marketing was investigated in this research. The Ethical 
Interactivity in E-Marketing was evaluated through three visible forms of e-Marketing 
namely Web Advertising, E-Mail marketing and Customer Profiling. Ethical Interactivity 
in Web Advertising and E-Mail marketing is judged against three criteria (Nwachukwu 
model): Consumer sovereignty, Individual Autonomy and Harmfulness of product. To 
measure the Ethical Interactivity in Customer Profiling process (through information 
gathering), Gauzente and Ranchhod's seven-factor model (notice, choice, access, contact, 
security, horizon, and intrusiveness) has been used. 
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The importance paid to factors in each criterion can reflect the degree of ethical 
interactivity that the firm is willing to exhibit. In fact correct interpretation of these 
practices leads to empowered e-Purchasers creating Competitive Advantage for the firm 
and greater benefits for the e-Purchasers themselves. 
The room for creating Competitive Advantage is determined through the intensity of 
Posi t ive R e s p o n s e B e h a v i o r of the e-Purchasers towards the h igh E th ica l In te rac t iv i ty . 
To find out relationship between Ethical Interactivity and the Positive Response 
Behavior, the research has been carried out separately for Local, South Asian, European 
and North American e-Purchasers. Positive results found for European and North 
American regions. Hence there's a possibility in creating Competitive Advantage through 
Ethical Inactivity in these regions. 
Meantime the Effectiveness of the Customer Profiling process was examined too. This 
process is found to be highly effective among European e-Purchasers. Then the impact by 
the Internet laws towards the Ethical E-marketing practices was investigated. It was 
observed that the impact is low on unethical marketing practices due to difficulties in 
executing such laws (cross country issues) and lack of Internet governing body. In that 
perspective, this makes the Competitive Advantage through Ethical Interactivity a 
sustainable one. Finally some of the important factors were determined for designing an 
ethically interactive site, based on all the research findings. 
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