Electronic Commerce COMP3210

2. Electronic Commerce COMP3210 Session 8: Marketing a WebSite and PromotingProducts andServices Dr. Paul Walcott Department of Computer Science, Mathematics and PhysicsUniversity of the West Indies, Cave Hill CampusBarbados © 2007 Dr. Paul Walcott The Department of Computer Science Mathematics and Physics, University of the West Indies, Cave Hill Campus, Barbados

3. Session Objectives • The objectives of this session are: • To provide a general introduction to Web marketing • To discuss product and customer-based marketing strategies • To categorise individuals into various market segments • To analyse Web customer behaviours through the use of customer relationship models • To describe methods used to promote your Web site

4. What is Marketing? • This is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to satisfy customers2.

5. What is Marketing Cont’d? • Marketing is more than sales; it is those set of activities that • Grabs a potential customer • Encourages them to buy your product • Actually gets them to purchase your product • Makes them a repeat customer

6. What is Marketing Cont’d? • Marketing theory describes the 4 P’s • Product: a company sells a physical product or offers a service • Price: the amount paid for the product or service • Promotion: the communication of the existence of the product to the market • Place (or distribution): ensuring that the right product or service is offered at the right place at the best time • Each of these “P”s contribute to your marketing mix

7. Marketing Strategies • The first stage (of a marketing strategy) is setting marketing objectives (where the organisation wants to be at the end of the strategic planning period) and goals (the objectives with specific numerical benchmarks and deadlines attached to allow management to measure achievement)3.

8. Marketing Strategies Cont’d • The second stage (of a marketing strategy) is specifying the core marketing strategy, i.e. specific target markets, competitive positioning and key elements of the marketing mix3.

9. Marketing Strategies Cont’d • The third (stage of a marketing strategy) is the implementation of tactics to achieve the core strategy3.

10. Marketing Strategies Cont’d • Marketing strategies may come in two forms • Product-based marketing strategy • Customer-based marketing strategy

11. Marketing Strategies Cont’d Product-based Marketing Strategy • When a customer is likely to buy or think about products in categories, a product-based marketing strategy is appropriate: • An example is an office supplier store where a customer may be looking for an office desk; the customer immediately thinks about the product category “office furniture” • See http://www.officedepot.com/

12. Marketing Strategies Cont’d Customer-based Marketing Strategies • Due to the great flexibility of Web sites (as opposed to traditional mass media) they can offer products and services that are targeted towards specific type of customers • First the customer types must be identified • A Web site on its home page might allow the user to select the required customer type, e.g. www.dell.com • This approach is more common on B2B sites than on B2C sites

13. Communicating With Different Marketing Segments • Trust and Media Choice • The Web is an intermediate step between mass media and personal contact • Mass media (e.g. TV) offers the lowest level of trust yet is still widely used today • The cost of mass media can be spread over a large number of people • Personal contact offers the highest level of trust; it is also the most expensive

14. Communicating With Different Marketing Segments Cont’d • In 1996 as companies began doing business online a splintering of the mass market occurred due to rising consumer expectations and reduced product differentiation • This led to a reduction of the usefulness of mass marketing • Advertisers subsequently began to identify market segment and sell to them

15. Market Segmentation • Market segmentation is the identification and targeting of specific portions of a market • Demographic characteristics are usually used to create market segments • E.g. age, gender, martial status and income level • Ring tones on Cell phones target market might be younger people between the ages of 10-20

16. Market Segmentation Cont’d • Market segments have traditionally been identified through the following categories: • Geographic segmentation • Demographic segmentation • Psychographic segmentation

17. Market Segmentation Cont’d Geographic Segmentation • When a company divides its customers into groups based on where they live or work this is referred to as geographic segmentation

18. Market Segmentation Cont’d Demographic segmentation • Demographic segmentation uses characteristics of people, for example age, gender, family size, income education, religion or ethnicity to group customers

19. Market Segmentation Cont’d Psychographic segmentation • Psychographic segmentation groups customers based on social class, personalities or approach to life • For example auto car companies may focus sports car advertising to people who have a high need for achievement

20. Market Segmentation Cont’d Web Market Segmentation • The design of the site can immediate appeal to different market segments, for example • For the young fashion-conscious buyer you may have a site with a wide variety of typefaces, bold graphics and bright colour product photos • For the older more established buyer you may have a more muted conservative style

21. Market Segmentation Cont’d • Companies can offer a form of one-to-one marketing by allowing customers to customise the retailer’s Web site • One example of this is Dell.com • Offers each customer its own Web site • Allows individual employees of its customers to create their own personalised pages

22. Market Segmentation Cont’d Behavioural Segmentation • This allows companies to target specific customers in different ways at different times • A person tends to have different requirements on different occasions • E.g. a person wanting a meal might go one place for breakfast and another for lunch • As a result a different user experience must be created depending on the behaviour of the user

23. Market Segmentation Cont’d Usage-based Market Segmentation • A person may visit the same Web site at different times for different reasons, as a result we must identify behavioural patterns • Some key behavioural patterns are: • Browser • Buyer • Shopper

24. Customer Behaviours The Behaviour of a Browser • A browser enters your Web site to browse or surf • In order to generate and maintain interest Web sites should use trigger words • These words jog the memory of visitors, reminding them to buy from the site • As a result users stay longer at the site

25. Customer Behaviours Cont’d The Behaviour of a Browser Cont’d • A Web site should include extra content related to the product or service offered • For example a company that sells printers could provide extra information about different types of paper and its use in desktop publishing

26. Customer Behaviours Cont’d The Behaviour of a Shopper • Shoppers arrive at a Web site wanting to buy a product or service, but require more information before purchasing, so they will get the best deal and the best-suited product

27. Customer Behaviours Cont’d The Behaviour of a Shopper Cont’d • What is important to shoppers are: • Comparison tools • Product reviews • A list of features • User control product/service level of detail • One day a user might be a browser, the next a shopper

28. Customer Behaviours Cont’d The Behaviour of a Buyer • Buyers arrive at your Web site ready to make a purchase • A good Web site design would prevent anything from getting in the way of the purchase • As a result a Web catalog might provide a box on the home page to enter the catalog number (e.g. www.argos.co.uk) and then allow the user to add the product to a shopping cart

29. Customer Behaviours Cont’d The Behaviour of a Buyer Cont’d • The primary goal is to get the the buyer to the shopping cart as quickly as possible • The shopping cart • Allows the buyer to create an account • Allows the user to log in after placing items into the cart • Logging in should be left to the end so that barriers are not placed in the shopping process

30. Customer Behaviours Cont’d The Behaviour of a Buyer Cont’d • Amazon.com offers a patented 1-click feature allowing: • Customers to purchase items with a single click • Any items purchased within 90 minutes of each other are aggregated into one order

31. Customer Behaviours Cont’d Alternative Behavioural Modes • A survey of 50,000 participants identified six groups of Internet users: • Simplifiers: who like convenience and are attracted to sites that could make life easier • Surfers: searches the Web for information and shop. They spend a lot of time on the Web and like to be entertained • To attract surfers, the content must be attractive, well displayed and updated regularly

32. Customer Behaviours Cont’d Alternative Behavioural Modes Cont’d • Bargainers: search for a good deal therefore frequent sites like eBay.com. This represents about 10% of the on-line population. • Bargainers are willing to search sites for the best terms and prices • Connectors: stay in touch with people over the Web. They use applications such as chat rooms, instant messaging services, electronic greeting cards and Web email

33. Customer Behaviours Cont’d Alternative Behavioural Modes Cont’d • Routiners: visit the same sites all of the time, e.g. to check news, or stock quotes • Sportsers: frequent sports and entertainment sites • It is important to note that these are results from only one study; however, other studies have found similar groups

34. Customer Relationship Intensity • There is a need to create a strong relationship between a company and its customers • A good relationship creates loyalty amongst customer

35. Customer Relationship Models • Two customer relationship model are: • Five stage model of customer loyalty • The stages are awareness, exploration, familiarity, commitment and separation • The Funnel Model • The stages are customer acquisition, conversion and retention

36. Customer Relationship Models Cont’d Five Stage Model of Customer Loyalty • Researchers have identified five stages of customer loyalty • Awareness: the name of the company/or its products are recognised. No interaction with the company has been made • Exploration: in this stage the customer finds out more about the products of the company. Communication may be through a Web site, the telephone or e-mail. This stage is about information interchange

37. Customer Relationship Models Cont’d Five Stage Model of Customer Loyalty Cont’d • Familiarity: The customer has completed several transactions with the company, although the customer is still willing to shop with competitors • Commitment: The customer is satisfied with the level of service and is therefore a repeat customer. Customers at this point are wiling to tell others about the service • Separation: This may result from disappointment in the level of service or product quality

38. Customer Relationship Models Cont’d Five Stage Model of Customer Loyalty Cont’d • These five stages are sometimes referred to as the customer life cycle • Grouping customers based on these stages is called life-cycle segmentation

39. Customer Relationship Models Cont’d The Funnel Model • Managers often want to identify the best way to attract and retain customers • The funnel model is a tool that managers use to analyse the effectiveness of their marketing strategy • This model is less abstract than the five stage model

40. Customer Relationship Models Cont’d The Funnel Model Cont’d • This funnel model allows companies to determine which advertising and promotion strategies actually work • It is divided into three parts: • Customer acquisition • Customer conversion • Customer retention

41. Customer Relationship Models Cont’d The Funnel Model Cont’d Customer Acquisition • This is the process of attracting new visitors to your site • The total amount of money that a Web site spends to attract one visitor is called the acquisition cost

42. Customer Relationship Models Cont’d The Funnel Model Cont’d Customer Conversion • This is the process of converting a first time visitor of a site to a customer • For advertising-supported sites this is the point when a visitor registers, or when they return several times • For sites with other revenue models this would be when a visitor purchases a good or service or subscribes to the site’s content

43. Customer Relationship Models Cont’d The Funnel Model Cont’d Customer Conversion Cont’d • The total money spent (on average) to induce a visitor to make a purchase on a site is called the conversion cost (most managers also include the acquisition cost)

44. Customer Relationship Models Cont’d The Funnel Model Cont’d Customer Retention • In many business the conversion cost is higher than the profit made on the average sale therefore it is important to encourage customers to return to the site to make another purchase • If the customer returns to the site a number of times after the first purchase, they are considered retained customers • The cost of getting customers to return to the site and make a purchase is called the retention cost

45. Customer Relationship Models Cont’d – The Funnel Model 500,000 ads shown on Web pages Needs identification Searches for information about alternative product and services 10,000 ad viewers become visitors 900 visitors become shoppers Evaluate alternatives and makes selections 500 shoppers complete their purchase Purchase Conversion of shoppers into loyal supporters 80 purchasers become loyal, repeat customers

46. Web Advertising • Advertising is about communication • Communication may be between a company and • Its current customers • Potential customers • Or former customers that the company is trying to regain

47. Web Advertising Cont’d Banner Advertising • Most Web advertising uses banner ads • A small rectangular object normally at the top of the Web page which displays stationary or moving graphics • These ads are created using animated GIFs, or objects created in Shockwave, Java or Flash) • These ads must be attention grabbing

48. Web Advertising Cont’d Banner Advertising Cont’d • Web ads have been standardised by an organisation called the Interactive Advertising Bureau (IAB) which is responsible for • Creating banner size standards (e.g. 728x90, 160x600, 300x250, or 180x150) • Encourage effective Internet advertising

49. Web Advertising Cont’d Banner Ad Placement • There are three ways that a company can have their banner ads displayed • (1) Use a banner exchange network • A banner exchange network arranges for banner ads for one company to be displayed on another company’s Web site • Each member site would accept two ads for each ad placed on someone’s site • The banner exchange network earns money by selling ad space to other businesses

50. Web Advertising Cont’d Banner Ad Placement Cont’d • (2) Pay a site to display the banner ad • Rates can be negotiated through an advertising agency • (3) Use a banner advertising network who acts as brokers between advertisers and Web sites that carry ads • They often broker space on large Web site like Yahoo, which has high traffic volumes and are therefore expensive