Electronic Commerce Eighth Edition

1. Electronic CommerceEighth Edition Chapter 4Marketing on the Web

2. Learning Objectives In this chapter, you will learn about: When to use product-based and customer-based marketing strategies Communicating with different market segments Customer relationship intensity and the customer relationship life cycle Using advertising on the Web Electronic Commerce, Eighth Edition Electronic Commerce, Eighth Edition 2 2

3. Learning Objectives (cont’d.) E-mail marketing Technology-enabled customer relationship management Creating and maintaining brands on the Web Search engine positioning and domain name selection Electronic Commerce, Eighth Edition Electronic Commerce, Eighth Edition 3 3

4. Web Marketing Strategies Marketing mix Element combination to achieve goals Selling and promoting products and services Marketing strategy Marketing mix with elements defined Four Ps of marketing Product Physical item or service sold Brand: customers’ product perception Electronic Commerce, Eighth Edition Electronic Commerce, Eighth Edition 4 4

5. Web Marketing Strategies (cont’d.) Four Ps of marketing (cont’d.) Marketing mix price element Amount customer pays for product Promotion Any means to spread word about product The issue of place (distribution) Need to have products or services available In many different locations Long-term problem Getting right products to the right places At the best time to sell them Electronic Commerce, Eighth Edition Electronic Commerce, Eighth Edition 5 5

6. Product-Based Marketing Strategies • Web presence must integrate with image, brand • Product-based organization • Managers think of physical objects sold or used • Customers think in terms of product categories • Examples • Web office supply stores (Staples) • Previous print catalog sales (Sears) • Both examples: • Organized Web sites from internal viewpoint Electronic Commerce, Eighth Edition 6

7. Electronic Commerce, Eighth Edition 7

8. Electronic Commerce, Eighth Edition 8

9. Customer-Based Marketing Strategies • Identify customer groups sharing common characteristics • Example: Saber Holdings • Four main groups (with potential subgroups) • Technique pioneered on B2B sites first • Customized product and service offerings • Match customers’ needs • B2C sites • Adding customer-based marketing elements • Example: university Web sites • Web sites designed with links for specific stakeholders Electronic Commerce, Eighth Edition 9

10. Electronic Commerce, Eighth Edition 10

11. Communicating with DifferentMarket Segments • Communications media selection to carry message • Physical world • Use building construction and floor space design • Example: Banks • Online firm • No physical presence • Customer contact through media and Web site • Communications media selection is critical • Online firm challenge • Customer trust with no physical presence Electronic Commerce, Eighth Edition 11

12. Trust, Complexity, and Media Choice • The Web • Intermediate step • Between mass media and personal contact • Potential customer Web communication • Offers advantages of personal contact selling • Cost savings of mass media • Mass media • Offers lowest trust level • Costs spread over any people Electronic Commerce, Eighth Edition 12

13. Electronic Commerce, Eighth Edition 13

14. Trust, Complexity, and Media Choice (cont’d.) • Complexity level inherent in product and service • Important factor in media choice • Mass media • Products with few characteristics, easy to understand • Expensive (deliver short messages) • Personal contact • Highly complex products and services • Customers may ask questions Electronic Commerce, Eighth Edition 14

15. Trust, Complexity, and Media Choice (cont’d.) • Web (middle ground) • Offers various elements • Deliver short, focused messages • Engage potential customer • Give customers ability to choose interaction level • Resistance to mass media messages • Successful campaigns • Rely on passive nature of media consumption • Web use • Capture benefits of personal contact • Avoid costs inherent in that approach Electronic Commerce, Eighth Edition 15

16. Market Segmentation • Divides potential customer pool into segments • Defined in demographic characteristics terms • Micromarketing • Practice of targeting very small market segments • Three categories to identify market segments • Geographic segmentation • Demographic segmentation • Psychographic segmentation • Television advertisers • Use three categories or combination Electronic Commerce, Eighth Edition 16

17. Companies try to: • Match advertising messages to market segments • Build sales environment for a product or service • Corresponds to market segment trying to reach Electronic Commerce, Eighth Edition 17

18. Market Segmentation on the Web • Web opportunity • Present different store environments online • Steve Madden site • Target: young, fashion-conscious buyers • Talbots site • More muted, conservative style • Limitations of physical retail stores • Floor and display space • Must convey one particular message • Web stores • Separate virtual spaces for different market segments Electronic Commerce, Eighth Edition 18

19. Offering Customers a Choice on the Web • One-to-one marketing • Offering products, services matched to needs of a particular customer • Dell • Offers number of different ways to do business • Home page links for each major customer group • Specific products, product categories links available • Dell Premier accounts • High level of customer-based market segmentation Electronic Commerce, Eighth Edition 19

20. Beyond Market Segmentation: Customer Behavior and Relationship Intensity • Recap • Companies target similar customer groups as market segments • One-to-one marketing • Chance to create individually unique Web experiences • Next step • Use the Web to target specific customers in different ways at different times Electronic Commerce, Eighth Edition 20

21. Segmentation Using Customer Behavior • Same person • Requires different products and services combinations • Depending on the occasion • Behavioral segmentation • Creation of separate customer experiences based on their behavior • Occasion segmentation • Based on things happening at a specific time or occasion Electronic Commerce, Eighth Edition 21

22. Segmentation Using Customer Behavior (cont’d.) • Online world single Web site design • Easier to meet needs of different behavioral modes • Elements appealing to different behavioral segments • Market research study • Preferences toward different product, service combinations • Web site features • How preferences affected by modes of interaction • Finding • People want range of interaction possibilities • Identified common behavior patterns Electronic Commerce, Eighth Edition 22

23. Segmentation Using Customer Behavior (cont’d.) • Browsers • Visitors just surfing or browsing • Web site: offer something to piques visitors’ interest • Trigger words • Jog visitors’ memories • Remind visitors of something they want to buy on the site • Have links to site explanations, instructions • Include extra content related to product, service • Leads to favorable impression (bookmark) Electronic Commerce, Eighth Edition 23

24. Segmentation Using Customer Behavior (cont’d.) • Buyers • Ready to make a purchase right away • Offer certainty • Nothing will get in way of purchase transaction • Shopping cart • Part of Web site • Keeps track of selected items for purchase • Automates purchasing process • Offers link back into shopping area • Goal • Get buyer to shopping cart as quickly as possible Electronic Commerce, Eighth Edition 24

25. Segmentation Using Customer Behavior (cont’d.) • Shoppers • Motivated to buy • Looking for more information before purchase • Offer comparison tools, product reviews, and features lists Electronic Commerce, Eighth Edition 25

26. Segmentation Using Customer Behavior (cont’d.) • Alternative visitor mode models • McKinsey & Company’s six behavior-based categories • Simplifiers (convenience) • Surfers (find information, explore new ideas, shop) • Bargainers (search for good deal) • Connectors (stay in touch with other people) • Routiners (return to same sites over and over) • Sportsters (spend time on sports, entertainment sites) • Challenge • Identify groups • Formulate ways of generating revenue Electronic Commerce, Eighth Edition 26

27. Customer Relationship Intensity and Life-Cycle Segmentation • One-to-one marketing and usage-based segmentation value • Strengthen companies’ relationships with customers • Good customer experiences • Create intense loyalty feeling toward the company, products, services • Typical five-stage model of customer loyalty • See Figure 4-6 Electronic Commerce, Eighth Edition 27

28. First four stages • Show increase in relationship intensity • Fifth stage (separation) • Decline occurs • Relationship terminates Electronic Commerce, Eighth Edition 28

29. Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) • Awareness • Customers recognize company name, product • Exploration • Customers learn more about company, products • Familiarity • Customers have completed several transactions • Aware of returns, credits policies, and pricing flexibility Electronic Commerce, Eighth Edition 29

30. Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) • Commitment • Customer experiences considerable number of highly satisfactory encounters • Develops fierce loyalty or strong preference • Separation • Conditions that made relationship valuable change • Parties enter separation stage • Life-Cycle Segmentation • Customer life cycle: (five stages) • Analyzing how customers’ behavior changes as they move through stages Electronic Commerce, Eighth Edition 30

31. Acquisition, Conversion, and Retention of Customers • Goal • Attract new visitors to a Web site • Acquisition cost • Total amount of money site spends (average) to draw one visitor to site • Conversion • Convert first-time visitor into a customer • Conversion cost • Total amount of money site spends (average) to induce one visitor to make a purchase, sign up for a subscription, or register Electronic Commerce, Eighth Edition 31

32. Acquisition, Conversion, and Retention of Customers (cont’d.) • Conversion cost may be greater than profit earned on the average sale • Retained customers • Return one or more times after making first purchases • Retention costs • Costs of inducing customers to return and buy again • Importance of measuring these costs • Indicates successful advertising, promotion strategies • More precise than classifying into five loyalty stages Electronic Commerce, Eighth Edition 32

33. Customer Acquisition, Conversion, and Retention: The Funnel Model • Funnel model • Conceptual tool • Understand overall nature of marketing strategy • Provides clear structure for evaluating specific strategy elements • Very similar to customer life-cycle model • Less abstract • Better at showing effectiveness of two or more specific strategies • Provides good analogy for the operation of marketing strategy Electronic Commerce, Eighth Edition 33

34. Electronic Commerce, Eighth Edition 34

35. Advertising on the Web • Effective advertising involves communication • Five-stage customer loyalty model: helpful in creating messages • Awareness stage • Advertising message should inform • Exploration stage • Message should explain how product, service works • Encourage switching brands • Familiarity stage • Message should be persuasive Electronic Commerce, Eighth Edition 35

36. Advertising on the Web (cont’d.) • Five-stage customer loyalty model (cont’d.) • Commitment stage • Reminder messages • Separation stage • Not targeted • Online advertising • Always coordinate with existing advertising efforts Electronic Commerce, Eighth Edition 36

37. Banner Ads • Banner ad • Small rectangular object on Web page • Displays stationary or moving graphic • Includes hyperlink to advertiser’s Web site • Versatile • Attention-grabbing • Uses animated GIFs and rich media objects • Created using Shockwave, Java, Flash • Marketing unit (IMU) ad formats • Voluntary standard banner sizes Electronic Commerce, Eighth Edition 37

38. Banner Ads (cont’d.) • Leaderboard ad • Designed to span Web page top or bottom • Skyscraper ad • Designed to be placed on Web page side • Remains visible as user scrolls through page • Advertising agencies • Create banner ads for online clients • Price range: $100 to more than $2000 • Companies can make their own banner ads Electronic Commerce, Eighth Edition 38

39. Banner Ads (cont’d.) • Banner ad placement • Use a banner exchange network • Coordinates ad sharing • Sites run one company’s ad • Company’s site runs other exchange members’ ads • Find Web sites appealing to company’s market segments • Pay sites to carry ad • Use a banner advertising network • Acts as broker between advertisers and Web sites that carry ads Electronic Commerce, Eighth Edition 39

40. Banner Ads (cont’d.) • New strategies for banner ads • Banner ads were a novelty initially • They now have decreased ability to attract attention • Solutions • Introduced animated GIFs with moving elements • Created ads displaying rich media effects (movie clips) • Added interactive effects (Java programs): respond to user’s click with some action • See Figure 4-8 Electronic Commerce, Eighth Edition 40

41. Electronic Commerce, Eighth Edition 41

42. Text Ads • Short promotional message • No graphic elements • Usually placed along Web page top or right side • Simple but very effective • Example: Google • Initially criticized for including obtrusive ads on its pages • Now clearly labels ads (to prevent confusion) • Inline text ad • Text in stories displayed as hyperlinks Electronic Commerce, Eighth Edition 42

43. Other Web Ad Formats • Pop-up ad • Appears in its own window • When user opens or closes Web page • Extremely annoying • Must click close button (small) in window of ad • Pop-behind ad • Pop-up ad followed by command (quick) • Returns focus to original browser window • Ad-blocking software • Prevents banner ads and pop-up ads from loading Electronic Commerce, Eighth Edition 43

44. Other Web Ad Formats (cont’d.) • Interstitial ad • User clicks link to load page • Interstitial ad opens in its own browser window • Instead of page user intended to load • Many close automatically • Others require user to click a button • Rich media ads (active ads) • Generate graphical activity that “floats” over the Web page itself Electronic Commerce, Eighth Edition 44

45. Site Sponsorships • Web sites offer advertisers opportunity to sponsor all (or parts) of their sites • More subtle way to promote products, services, brands • Goals similar to sporting event sponsors, television program sponsors • Tie company (product) name to an event (set of information) • Ethical concerns raised • If sponsor is allowed to create content or weave advertising message into site’s content Electronic Commerce, Eighth Edition 45

46. Online Advertising Cost and Effectiveness • Web sites make favorable impression on potential customers • Raises issue of measuring Web site effectiveness • Cost per thousand (CPM) • “M” from Roman numeral for “thousand” • Dollar amount paid for every thousand people in the estimated audience • Measuring Web audiences (complicated) • Web’s interactivity • Value of visitor to an advertiser • Depends on information site gathers from visitor Electronic Commerce, Eighth Edition 46

47. Online Advertising Cost and Effectiveness (cont’d.) • Visit • Occurs when visitor requests a page from Web site • Trial visit • First time a particular visitor loads Web site page • Repeat visits: subsequent page loads • Ad view: occurs if page contains an ad • Impression: each time banner ad loads • Click (click-through) • Action whereby visitor clicks banner ad to open advertiser’s page Electronic Commerce, Eighth Edition 47

48. Electronic Commerce, Eighth Edition 48

49. Online Advertising Cost and Effectiveness (cont’d.) • New metrics to evaluate number of desired advertising yield outcomes • Measure number of new visitors who buy first time after arriving at site • By way of click-through • Calculate advertising cost of acquiring one customer on the Web • Compare to how much it costs to acquire one customer through traditional channels Electronic Commerce, Eighth Edition 49

50. Effectiveness of Online Advertising • Online advertising • Remains difficult to measure • Major problem • Lack of single industry standard measuring service • Solution (2004) • Set of media measurement guidelines • Used by all online advertisers • Produce comparable ad view numbers • Difficulties remain • Site visitors change Web surfing behaviors, habits Electronic Commerce, Eighth Edition 50