Electronic Commerce

1. MIS 6453 – Spring 2006 Electronic Commerce eCommerce Marketing Issues Instructor: John Seydel, Ph.D.

2. Student Objectives • Summarize the importance of identifying relevant market segments • Discuss how the stages of customer loyalty apply to ecommerce • Apply the 7 Cs to customer interface development • Describe web-based advertising concepts • Discuss why an understanding of search engine concepts is important in ecommerce

3. Overview of Marketing Strategy • Strategies address the marketing mix (4 Ps), but mostly the big P • General options • Product-based (e.g., Home Depot) • Customer-centered (pioneered on B2B sites; universities) • Trust-building is a key (on or off the Web) • The Web is an intermediate step between mass media (low trust) and personal contact (high trust) • Using the Web, firms can capture some of the benefits of personal contact yet avoid the high costs inherent with that approach • Various market segments thererfore need to be identified and targeted differently; first step in building customer-centered website

4. Segmentation Summary • Traditional perspective • Geographic • Demographic • Psychographic (personality, lifestyle, social class) • Occasion perspective (e.g., workday, vacations, holidays) • Behavioral perspective • Traditional (browser, buyer, shopper) • Web usage (simplifier, surfer, bargainer, connector, routiner, sportster) • Life cycle (relationship intensity varies) • Aware • Explorer • Familiar • Committed • Separated • Why does it matter? • Unlike with traditional commerce, we can build multi-segment, multi-feature sites in the virtual world • We can further customize the experience for individual users • This is a customerinterface issue

5. Context Site’s layout and design Content Text, pictures, sound and video that webpages contain Community The ways sites enable user-to-user communication Commerce Site’s capability to enable commercial transactions Customization Site’s ability to self-tailor to different users or to allow personalization Connection Degree site is linked to other sites Communication The ways sites enable site-to-user communication or two-way communication The 7 Cs of the Customer Interface

6. The success of a business depends on the extent that all of the Cs work together to support the value proposition and business model: Business Model Supporting Fit Do each of the 7Cs individually support the business model? Content Community Customization Communication Connection Commerce Reinforcement Is each of the 7Cs consistent with the others? Fit and Reinforcement of the 7Cs Context

7. The age old argument of form vs. function is being changed by the Web: Integrated High Aesthetically Dominant Frontier is gradually moving outward as technology advances Low Functionally Dominant Low High Function The 7 Cs – Design Context Aesthetics (Form)

8. Aesthetic Example — KMGI.com High form, low function: The KMGI approach used to make heavy use of visual elements, but lacked performance capability. Now, KMGI has integrated more functionality into its site, while still maintaining some of the strong visual elements. BEFORE AFTER

9. Notice the plethora of links The site is also text-laden Functional Example — Brint.com Low form, high function: Brint.com assumes its users have little need for visual elements or themes and instead seek ease of use and plentiful information:

10. Offering Mix Appeal Mix Multimedia Mix Content Type Dimension Products Cognitive functional, low price, availability, etc. Text Current Audio Information Image Choices Emotional humor, warmth, stories, etc. Reference Video Services Graphics The 7 Cs – Content Content refers to all digital information included on the site. There are four key dimensions to content, each carrying choices about how to convey the site’s content::

11. Bazaar Theme Park Club Shrine Theatre Cafe The 7 Cs – Community Apparent archetypes: Wander thru vast array of interest areas; no interaction Finite group of interest areas Focused on particular interest area; high member interaction High focus with minimal member interaction Particular focus with moderate member interaction Focus on common interest area with considerable interaction

12. Focus versus Interactivity A number of hybrid communities can be form by combining interactivity and focus in unique ways: Non-equilibrium state: Successfully managed communities will move toward higher levels of interaction Broad Bazaar Focus Theme Park Club Narrow Cafe Shrine Theater Limited Extensive Interactivity

13. The 7 Cs – Customization PERSONALIZATION Log-in Registration • The site recognizes return users and configures itself accordingly Cookies • Temporary files that track and gather data about user’s behavior Personalized E-Mail Accounts • Provided free-of-charge to site users Content/Layout Configuration • Users select layout and content based on their interests Storage • Sites provide virtual hard-disk storage Agents • Programs designed to perform simple tasks TAILORING Based on Past User Behavior • Many sites adjust themselves dynamically based on a user’s past behavior and preferences Based on Behavior of Other Users With Similar Preferences • Some sites make recommendations to the user based on preferences of other users with similar profiles

14. The 7 Cs – Communication • Taking advantage of the Internet • Far cheaper than any other medium • Operates 24/7/365 • Know which customers have read a message and when • Enables customers to find out information for themselves • Can build a bond with customers – interactive, addictive • Can communicate across borders and languages • Not as easy with traditional commerce

15. BROADCAST Mass Mailings Broadcast transmissions of large volumes of e-mail targeted at large audiences FAQs Answers to frequent questions E-Mail Newsletters Inform site subscribers of site changes, special offers, etc. Content-Update Reminders eMail reflecting user interest in a particular content area Broadcast Events Events can be broadcast from a website (webcast) that allows limited user control over such things as camera angle INTERACTIVE E-Commerce Dialogue Organizations and users trade email regarding order placement, tracking and fulfillment Customer Service Organizations can provide customer service through trading email or live online dialogue User Input User-generated content such as supplier ratings and user feedback to the site Communication Modes

16. Some Communications Options • 1:M non-responding (RFID.com) • 1:M responding (BizRate.com) • 1:M live interaction (webinars) • 1:1 non-responding (Hallmark.com) • 1:1 responding (Amazon.com) • 1:1 live interaction (chat, e.g., tech support)

17. Destination PATHWAY-OUT Links lead the user outside the environment of the site; links are absolute in that the user’s click causes an exit from the original website. Hub Portal Affiliate PATHWAY-IN Links are hybrid; the user’s click causes the retrieval of material from the same or other sites without exiting the current website. Outsourced Content Meta-Software The 7 Cs -- Connection

18. Linking to Other Sites • Links leading out (not necessarily off-site) • Destination: provides site- generated content with few links to other sites (e.g., NYTimes.com) • Hub: provides combination of site-generated content and selective external links (e.g., IndustryCentral.net) • Portal: exclusively provides links to other sites (e.g., Yahoo.com) • Bringing information in • Affiliates: direct users to affiliated websites (e.g., Amazon and Toys-R-Us) • Outsourced content: content generated by third parties (e.g., Real.com) • Meta-software: utility and plug-in software for narrowly-defined tasks (e.g., CNet’s Download.com)

19. The 7 Cs – Commerce TOOLS FOR ENABLING COMMERCE Registration • Allows the site to store information about users and user preferences Shopping Cart, One-Click Shopping • Facilitates online shopping by making it more user-friendly Security, Credit-Card Approval • Enables online transactions by allowing secure sharing of credit-card info Orders Through Affiliates • Sites must be able to track orders that come from and go to affiliates Configuration Technology • Users can test product compatibility, price trade-offs, product substitutions Order Tracking, Delivery Options • Once orders are placed, users can choose how they would like their products delivered and can track those orders from the site to their front doors.

20. Context Schwab.com is largely functional; the only graphics used are those that display market behavior. Content Schwab.com is an information-dominant site that generates all of its own material. Community There is very little interaction among Schwab.com users. The site focuses primarily on the financial needs of the individual. Commerce Schwab is essentially a broker with a transaction-based revenue model. There are also fee services that Schwab offers. Customization Schwab.com is highly customizable. Users can personalize the site’s content, layout, communication and access. Connection Schwab.com’s content and information is largely generated in-house; there are no links to outside sites. Communication Schwab.com provides e-mail news alerts. User response is limited. Basically, the site is a one-to-many, non-responding site. The 7Cs of Schwab.com

21. Managing Customer Relationships • Reconsider the customer life-cycle and how it’s managed • Acquisition costs: money a site spends to draw one visitor to the site • Conversion: • Converting a first-time visitor into a customer • Conversion cost – cost of inducing one visitor to make a purchase, sign up for a subscription, register, etc. • Retained customers: customers who return to the site one or more times after making their first purchases • It’s important, therefore, to build and maintain good relationships • This is CRM

22. Adding Value: Supporting the Customer Decision Process Any online offering must map the products and services onto the customer decision process: • What occasions trigger the need for my product? What tactics can be used to stimulate demand? Customer Decision Process • Needs Recognition • What information would the consumer need to make a selection? • Search for Ideas and Offerings • What post-sale services can the website offer to create loyalty? • Post-Sale Support and Perks • What are the key evaluation criteria that the consumer will use to evaluate my product/service? What information should the website offer to make the consumer comfortable with his or her choice? • Evaluation of Alternatives • Purchase Decision • What functionality should the site present to communicate privacy, trust and security?

23. Advertising on the Web • Why? • Stimulate demand for products/services • Link to/from affiliate sites • Banner ad: small rectangular object on a Web page • Interactive marketing unit (IMU) • Specifies ad formats • Standard banner sizes that most Web sites have voluntarily agreed to use • Banner exchange network: coordinates ad sharing • Banner advertising network: acts as a broker between advertisers and Web sites that carry ads • Note • Online advertising - is more tractable than offline advertising • Offline advertising – traditional TV, radio, billboard and magazine can be tagged with .com

24. A Challenge: Measuring Ad Effectiveness • Some things to measure • Cost per thousand (CPM): pricing metric used when a company purchases mass media advertising • Trial visit: first time a visitor loads a Web site page • Page view: each page loaded by a visitor • Impression: each time the banner ad loads • Where do we get the data? • Some tools • Server logs • Analysis software

25. Other Ad Formats • Popup windows • Or pop-under • Use sparingly • Popup blockers can thwart • Interstitial ads: when a user clicks a link to load a page, the interstitial ad opens in its own browser window

26. It’s All About Driving Traffic to a Website No spamming! Opt-in/opt-out E-mail Search Engines Domain Name eCommerce Website External Links Public Relations Via reciprocity Affiliates Best publicity is free! Advertisements Promotions Contests, free samples, . . .

27. Search Engines • Websites that help people find things on the Web • Search engines • Web directories (hierarchical listing by category) • Three components: • Spider, crawler, &/or robot: programs that automatically search the Web • Index or database: storage element of a search engine • Search utility: uses terms provided to find web pages that match • Site ranking: weighting factors are used by search engines to decide where URLs appear on search result lists • Positioning and optimization: combined art and science of having a particular URL listed near the top of search engine results

28. Paid Search Engine Inclusion and Placement • Paid placement (aka sponsorship) • Option of purchasing a high listing on results pages for a particular set of search terms • Rates vary • Constitutes around 40% of Internet advertising (compare to banner ads at 20%) • Try: Google search for “snow skis” • Search engine placement brokers • Companies that aggregate inclusion and placement rights on multiple search engines • Example: LookSmart (search “Sports” for skis)

29. How Search Engines Search <html> <head> <meta name = “keywords” content = “coke, coca-cola, the real thing, soft drinks, pop, mixers, cola” /> <title>Coca-Cola Homepage</title> </head> <body> <h1 align = “center”>Welcome to the Coca-Cola Homepage! </h1>   . . .

30. Summary of Objectives • Summarize the importance of identifying relevant market segments • Discuss how the stages of customer loyalty apply to ecommerce • Apply the 7 Cs to customer interface development • Describe web-based advertising concepts • Discuss why an understanding of search engine concepts is important in ecommerce

31. Now, Some More Work with Web Pages • We’ll continue with the example we started a while back • Let’s do a little (very little) reviewing first • Then we’ll add a few features • If time permits, this exercise will be the start of a real website

32. Review: Standard XHTML Document <html> <head> <title> . . . title goes here . . . </title> . . . scripts, style rules, meta elements, etc. . . . </head> <body> . . . this is where content and markup goes . . . </body> </html>

33. An Overview of XHTML Elements • A web document is a collection of XHTML elements • Note that XHTML is essentially HTML • XML compliant • Reformulation of HTML, but with stricter rules • Two types of elements • Standard • Empty • Each element • Has • Opening tag and closing tag is standard • Self closing tag if otherwise • May have attributes specified • Also: XHTML entities (like &nbsp;)

34. XML Syntax for Standard Elements • Either <tag attr1=“xxx” attr2=“yyy” attr3=“zzz” . . . > . . . content . . . </tag> • Or <tag attr1=“xxx” attr2=“yyy” attr3=“zzz” . . . > . . . content . . . </tag> • Why the difference? • More readable code (for us, not the computer)

35. Examples of Standard Elements • Paragraphs, headings, divisions • Hyperlinks • Lists • Tables • Forms • Objects • Display markup

36. Syntax for Empty Elements • Either <tag attr1=“xxx” attr2=“yyy” attr3=“zzz” . . . /> • Or <tag attr1=“xxx” attr2=“yyy” attr3=“zzz” . . . /> • Notice: no content; attributes provide full specification

37. Examples of Empty Elements • Images and embedded objects • Form input controls (e.g., text boxes) • Breaks, horizontal rules, etc. • Meta tags

38. Some Important XHTML Body Elements • Hyperlinks: <a> • Objects: • <img /> • <object>, or <embed> • Lists: <ul>, <li> • Tables: <table>, <tr>, <td> • Text blocks: <p>, <div> • Display: <font>, <i> or <em>, <b> or <strong>, <center> • Forms: <form>, <input>, <select>, <option /> • Style rules: <style> • Miscellaneous: <br />, <hr />

39. Referencing Other Files • Where? • Hyperlinks • Images (inline or background) • Objects (e.g., Flash movies) • And other places also, but beyond our scope • Absolute referencing: resources on another server • Relative referencing • Preferred • Need to specify relative to calling document • In same folder • In higher level folder • In lower level folder • In sibling folder

40. Appendix

41. Trust in Three Information Dissemination Models

42. Five Stages of Customer Loyalty

43. Funnel Model of CRM

44. Ad Format Guidelines

45. Banner Click-Through Rates Banner Click-Through Rates (Apr 2005-Jan 2006) Percent Month Source: Nielsen//NetRatings

46. Pool of Impressions 1,000 2% Pool of Visitors 20 5% Buyers 1 Ad Cost Model Cost per Impression: $15/CPM ($.015) Cost per visitor @ 2% click-through ($.015/.02= $.75) Cost per purchase @ 5% conversion ($.75/.05=$15.00)

47. Potential Profitability of Each Potential Site Can Be Determined

48. Affiliate Marketing Strategies • Affiliate marketing: one firm’s website includes descriptions, reviews, ratings, or other information about a product that is linked to another firm’s site • Affiliate site: obtains the benefit of the selling site’s brand in exchange for the referral • Cause marketing: affiliate marketing program that benefits a charitable organization

49. URL Brokers and Registrars • URL brokers: sell or lease domain names • Registrars: arrange for initial assignments of domain names • ICANN • Internet Corporation for Assigned Names & Numbers • Maintains a list of accredited registrars • Operates InterNIC.com • Domain name parking: • Permits purchaser of domain name to maintain a simple website so that domain name remains in use • Example: DirectNIC.com