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America Online Christina Flynn Principles of Marketing February 26, 2002 Mission Statement "To become the world's most respected and valued company by connecting, informing and entertaining people everywhere in innovative ways that will enrich their lives." Introduction America On-line (AOL), the largest commercial on-line service provider in the US, has been presented with a daunting task. Remaining a viable competitor in an increasingly crowded, fast- changing and competitive market. . Consumer services are entering a highly contested market that is expected to be even more competitive with the arrival of telephone and cable television giants in the months to come. For example, AT&T dealt a devastating blow for AOL as well as hundreds of other Internet providers by offering five hours per month free Internet usage to its approximately 90 million customers, 20 million of whom already have personal computers.

AOL, the largest commercial on-line service, offers their customers more than access to the Internet.

AOL features include chat rooms, electronic magazines, software and entertainment services. Analysts believe that such content makes these services less vulnerable in the short run to AT&T's offerings. A value-added feature of AOL is its proprietary system that it provides users access to proprietary content. For AOL, that which makes them unique (proprietary system), also makes them most vulnerable.

AOL has aggressively marketed to the mass media of on-line users. Marketing efforts have focused on selling the idea of AOL as an easy-to-use, fun, interactive, "community" with a lot of content exclusively provided to its members. AOL distributes their software via direct mailings, inserts of diskettes as well as request forms for disks/CDs in magazines, downloadable web sites, OEM bundling agreements, media partnerships and retail sales. In 1995 AOL increased their level of direct marketing. As previously stated, AOL hopes to capture up to 97 million users, as well as expanding internationally.

America On-Line: Customer Value & Satisfaction America On-Line it has delivered customer value and satisfaction by its narrow focus on average consumers, and its determination to make using its services simple and clear. AOL is known for providing the most convenient and easiest-to-use interactive service available. The company pioneered technologies such as keywords for simple navigation and the buddy-list feature to enable instant messaging by displaying member's contacts who are online As the internet becomes more central to consumers daily lives, people are increasingly demanding ways, in addition to the PC, to access- anytime, any place- features and content they rely on. Through its AOL Anywhere initiative, the company is working to provide a new level of service bringing the average to the next stage of development.

AOL members can now access their e-mail, instant messages, news headlines, stock portfolios, and other key features over any telephone using simple, spoken commands and AOL-by-Phone; on wireless devices such as Sprint PCS and AT&T Digital wireless phones, Palms and other personal digital assistants and the new AOL Mobile Communicator, and on any PC with the personalizable AOL Anywhere Web site.

Consumers also are demanding faster connections to the Internet. Through AOL High Speed Broadband, members can enjoy rich media such as music, movies, and games as well as an always-on connection.

AOL's major competitor is Microsoft, which it already battles in the web portal business, dial-up access, and corporate software. Microsoft has a real advantage because of the power of its Windows operating system. Moreover, Microsoft is using its massive cash stockpile to make significant investments in interactive TV and cable, trying to establish its place as the access provider for cable TV set-top boxes.

Another competitor is the free service providers such as Kmart-Yahoo, NetZero, and Freei Networks. Many observers suggest that these free services threaten AOL's power.

America On-Line: Social Responsibility With the rapidly advancing technologies that are occurring in modern business, organizations are required to be ready, and able to adapt within their ever-changing environment. It is true across all diverse industries that in order to stay competitive, organizations must be able to utilize the various tools that technology has to offer. AOL is committed to serving the public-interest by using their unique talents to enrich peoples lives and strengthen communities around the world. They focus their attention on the areas where their expertise has the greatest impact.

Recommendations The increasingly different needs of customers necessitate a choice. A few years ago customers had a standardized set of needs, today those needs have, and are steadily changing. Failure to select target segments will further weaken AOL offerings by not meeting any set of needs fully. Creating a marketing organization that can respond to the high-paced competition of the On-line Services Business. The pace of technological change, and overnight changes in customer needs must be addressed in a timely fashion if AOL is to survive. Decrease the acquisition cost of customers. The range between consumer value and acquisition cost must be increased in order to become profitable. Given increasing price pressure from competition, raising fees is not feasible. The only option left is lowering the acquisition cost.