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Internet Marketing

Internet Marketing. Web Business Models. Do You Yahoo?. For 50% of US Web users: YES!!! A phenomenal Silicon Valley success story Yahoo! brand extensions provide value add for users Yahoo! games Yahoo! clubs Yahoo! chat Yahoo! auctions Yahoo! Stores

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Internet Marketing

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  1. Internet Marketing Web Business Models

  2. Do You Yahoo? • For 50% of US Web users: YES!!! • A phenomenal Silicon Valley success story • Yahoo! brand extensions provide value add for users • Yahoo! games • Yahoo! clubs • Yahoo! chat • Yahoo! auctions • Yahoo! Stores • Yahoo! leverages its brand and ability to draw traffic to generate multiple revenue streams

  3. Most Popular Web SitesYahoo! Leads Figure 5.1

  4. Yahoo! Brand ExtensionsThe Success of the Yahoo! Brand Figure 5.2

  5. Topics • Web benefits to firms • Closed loop marketing

  6. Web Benefits to Firms • The range of Web benefits • Business models can be based on improvements in product or service • Business models can be based directly on generating revenue • Let’s take a closer look at these broad classes of business models

  7. Build brand Build category Enhance quality Reduce costs Free trial Improvement-Based Biz Models Use the Net to Improve Products & Services Enhancement Efficiency Effectiveness • Support dealers • Support suppliers • Collect information

  8. Before We Look at Revenue-Based Biz ModelsLet’s Take A Look At Some Recent Headlines

  9. Headline Name of Publication - Date Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that profiles a company and its business model. I usually take excerpts out of the lead paragraph, and highlight keywords. I’ve found articles on the accumulating losses of a number of e-tailers that provide an interesting introduction to the subject of making money on the Web.

  10. Sponsorship Alliances Banner advertising Prospect fees Sales commissions Revenue-Based Biz Models Use the Net to Make Money Provider Pays

  11. Prospect Fees Click Through Banner Ads Impressions Sponsorship Fixed Payment Sales Commissions Purchase Risk Increases for the Web Site Being Paid Payment Mechanisms Which Company Bears the Risk? • Sponsorship least risky: fixed payment • Banner Ads: payment depends on impressions • Prospect Fees & Sales Commissions: depend on success of site and advertiser

  12. Figure 5.8 The Many Ways to Pay Online

  13. Bargaining Power Determines Who Bears Risk • Powerful sites shift risk to advertisers and demand sponsorships • Powerful advertisers demand accountability and negotiate for prospect fees of a share of transaction revenue

  14. Sponsorship Alliances Banner advertising Prospect fees Sales commissions Product sales Pay-per-use Subscriptions Bundle sales Revenue-Based Biz Models Use the Net to Make Money Provider Pays Customer Pays

  15. Building Value Bundles via Alliances • The Internet makes it easy to bring a wide range of resources together on a single site • Fast, cheap way to build a product or service offering (whole product) • A visit to any search engine illustrates Note: At this point in the lecture, it’s helpful to go to one of the major portals and identify sponsorships, alliances, affiliates, advertisers

  16. AlliancesA Marketing Challenge • Screen real-estate: • how big will my logo be? • where will it appear? • exclusive deal? • Revenue sharing • The deal you can make depends on the bargaining position of each partner

  17. Q: Are these Biz Models mutually exclusive? No • Companies try to generate revenues any way they can • Multiple revenue models are combined on the same site

  18. Closed Loop Marketing • Marketing is closed loop when specific customer responses to specific marketing actions can be tracked • For example: if an online ad encourages Web site registration, the campaign is closed loop if users can be tracked from ad exposure to the decision to register • Closed loop marketing leads to rapid learning • Marketers can experiment with prices, ad copy, and product features on selected samples of consumers

  19. On the Internet Nobody Knows You’re A Dog Figure 5.10 The Impact of Closed Loop Marketing • Marketers want two results from user responses • They want consumers to make a choice that leads to • information • improved customer satisfaction • a transaction • Marketers want to learn about visitors to their site

  20. Web Chains • A Web chain is a click sequence • Can be as short as a single click • Can be as long as all possible choices on a Web site • Decision points = event nodes • Ending point = result node • Common Web chain starting points • Company homepage • Search engine or portal • Banner ads

  21. BEGIN No Notice Rate (NNR) E1: Views Page with Paid Link (1-CTR-NNR) R2: Notices Ad but doesn’t click = Ad brand impact Click-through Rate (CTR) E2: Clicks Through to Company Web Site = Prospects Prospect Conversion Rate (PCR) (1-PCR) New Customer (1-RR) E3: Views Web Site but Doesn’t Buy E4: Visits Web Site and Buys Repeat Buyer (RR) (1-OIB) R5: New Customer = (Ad brand + Web Site brand + Online profit + Future lifetime value) R4: No Immediate Purchase = (Ad brand + Web Site brand impact) END E5: Loyal Customer R6: Would have bought offline anyway = (Ad brand + Web Site brand + Online profit – Offline profit) R7: Only buy online = (Ad brand + Web Site brand + Online profit) Offline Buy Rate (OBR) Online Only (1-OBR) Web Chain of Events Figure 5.12 R1: Doesn’t Notice Ad = $0 benefit Offline Induced Buyer (OIB) R3: Offline Purchase = (Ad brand + Web Site brand + Offline profit)

  22. Evaluating Web Chains • Enables marketers to evaluate a wide range of Web strategies and tactics • Calculate • expected value of an impression • expected value of a prospect • expected value of a new customer • expected value of a repeat buyer

  23. Web Chain Benefits and ProbabilitiesFive Main Benefits Occur in the Chain • Online contribution: the incremental profit from an online sale • Offline contribution: incremental profit from the sale of products through the standard channel • Ad-brand impact: value to a visitor, who sees the ad but doesn’t click through • Web site brand impact: value of a visit to the Web site that results in benefits, but not a sale • Lifetime customer value: future value of profits from a new customer

  24. Evaluating Web Chains

  25. Cost and Performance Table 5.5 One of the best uses of Web chain analysis is to compare alternative methods of acquiring customers

  26. From Web Chains to Closed Loops • There’s a strong connection between Web chains and closed-loop marketing • A Web chain is closed loop if • the chain extends from the marketing offer to the desired marketing response • Each step is trackable • The Internet can be used to close the loop on traditional media advertising if unique identifiers are included with the ad • Dell newspaper ads contain a unique code

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