E-commerce 2013 business technology society ninth edition Kenneth

E-commerce 2013 business. technology. society. ninth edition Kenneth C. Laudon Carol Guercio Traver

Chapter 6 E-commerce Marketing Concepts: Social, Mobile, Local Copyright © 2013 Pearson Education, Inc.

Class Discussion n Have you ever made a purchase based on something you have read or seen? What was the product and what made you interested? n Are there other ways for Companies to make a profit from marketers and advertisers? Copyright © 2013 Pearson Education, Inc. Slide 6 -3

Consumers Online: The Internet Audience and Consumer Behavior n Around 75% (89 million) U. S. households have Internet access in 2012 n Growth rate has slowed n Intensity and scope of use both increasing n Some demographic groups have much higher percentages of online usage than others v Gender, age, ethnicity, community type, income, education Copyright © 2013 Pearson Education, Inc. Slide 6 -4

Consumers Online (cont. ) n Broadband vs. dial-up audiences, new mobile audience n Lifestyle and sociological impacts v Use of Internet by children, teens v Use of Internet as substitute for other social activities n Media choices v Traditional media competes with Internet for attention v Television viewing has increased with Internet usage Copyright © 2013 Pearson Education, Inc. Slide 6 -5

Consumer Behavior Models n Study of consumer behavior v Attempts to explain what consumers purchase and where, when, how much, and why they buy n Consumer behavior models v Predict wide range of consumer decisions v Based on background demographic factors and other intervening, more immediate variables Copyright © 2013 Pearson Education, Inc. Slide 6 -6

A General Model of Consumer Behavior Figure 6. 1, Page 348 Copyright © 2013

Background Demographic Factors n Culture: Affects entire nations n Subculture v Subsets formed around major social differences (ethnicity, age, lifestyle, geography) n Social networks and communities v Direct reference groups v Indirect reference groups v Opinion leaders v Lifestyle groups n Psychological profile Copyright © 2013 Pearson Education, Inc. Slide 6 -8

The Online Purchasing Decision n Psychographic research v Combines demographic and psychological data v Divides market into various groups based on social class, lifestyle, and/or personality characteristics n Stages in consumer decision process: v Awareness of need v Search for more information v Evaluation of alternatives v Actual purchase decision v Post-purchase contact with firm Copyright © 2013 Pearson Education, Inc. Slide 6 -9

The Consumer Decision Process and Supporting Communications Figure 6. 2, Page 352 Copyright ©

A Model of Online Consumer Behavior n Decision process similar for online and offline behavior n General online behavior model v Consumer skills v Product characteristics v Attitudes toward online purchasing v Perceptions about control over Web environment v Web site features: latency, usability, security n Clickstream behavior Copyright © 2013 Pearson Education, Inc. Slide 6 -11

A Model of Online Consumer Behavior (cont. ) n Clickstream factors include: v Number of days since last visit v Speed of clickstream behavior v Number of products viewed during last visit v Number of pages viewed v Supplying personal information v Number of days since last purchase v Number of past purchases n Clickstream marketing v Developed dynamically as customers use Internet Copyright © 2013 Pearson Education, Inc. Slide 6 -12

Shoppers: Browsers and Buyers n Shoppers: 88% of Internet users 72% buyers v 16% browsers (purchase offline) v One-third of offline retail purchases influenced by online activities n Online traffic also influenced by offline brands and shopping n E-commerce and traditional commerce are coupled: Part of a continuum of consuming behavior n Copyright © 2013 Pearson Education, Inc. Slide 6 -13

What Consumers Shop for and Buy Online n Big ticket items v Travel, computer hardware, electronics v Consumers now more confident in purchasing costlier items n Small ticket items ($100 or less) v Apparel, books, office supplies, software, etc. v Sold by first movers on Web Physically small items n High margin items n Copyright © 2013 Pearson Education, Inc. Slide 6 -14

How Consumers Shop n How shoppers find online vendors v Search engines— 59% v Marketplaces (Amazon, e. Bay)— 28% v Direct to retail sites— 10% v Other methods— 3% n Online shoppers are highly intentional n Recommender systems Copyright © 2013 Pearson Education, Inc. Slide 6 -15

Trust, Utility, and Opportunism in Online Markets n Two most important factors shaping decision to purchase online: v Utility: n Better prices, convenience, speed v Trust: n Asymmetry of information can lead to opportunistic behavior by sellers n Sellers can develop trust by building strong reputations for honesty, fairness, delivery Copyright © 2013 Pearson Education, Inc. Slide 6 -16

Basic Marketing Concepts n Marketing v Strategies and actions to establish relationship with consumer and encourage purchases v Addresses competitive situation of industries and firms v Seeks to create unique, highly differentiated products or services that are produced or supplied by one trusted firm n Unmatchable feature set n Avoidance of becoming commodity Copyright © 2013 Pearson Education, Inc. Slide 6 -17

The Digital Commerce Marketing Platform n Multi-channel marketing plan v Web site v Traditional online marketing n Search engine, display, e-mail, affiliate v Social marketing n Social networks, blogs, video, game v Mobile marketing n Mobile/tablet sites, apps v Offline marketing n Television, radio, newspapers Copyright © 2013 Pearson Education, Inc. Slide 6 -18

Strategic Issues and Questions n Which part of the marketing plan should you focus on first? n How do you integrate the different platforms for a coherent message? n How do you allocate resources? v How do you measure and compare metrics from different platforms? v How do you link each to sales revenues? Copyright © 2013 Pearson Education, Inc. Slide 6 -19

Can Brands Survive the Internet? Brands and Price Dispersion n Vision: “Law of One Price, ”end of brands n Instead: v Consumers still pay premium prices for differentiated products v E-commerce firms rely heavily on brands to attract customers and charge premium prices v Price dispersion v Large differences in price sensitivity for same product v “Library effect” Copyright © 2013 Pearson Education, Inc. Slide 6 -20

Online Segmenting, Targeting, and Positioning Segmenting: Allows firms to differentiate products to fit consumer needs and charge different prices n Types of segmentation n v Behavioral v Demographic v Psychographic v Technical v Contextual v Search Copyright © 2013 Pearson Education, Inc. Slide 6 -21

The Digital Commerce Marketing Platform: Strategies and Tools n Internet marketing (vs. traditional) v More personalized v More participatory v More peer-to-peer v More communal n The most effective Internet marketing has all four features Copyright © 2013 Pearson Education, Inc. Slide 6 -22

Customer Engagement n Customer conversations about: v Products and services v Customer experience with products v Customer likes and dislikes n Conversations conducted through: v Web site feedback v Blogs v Facebook v Twitter Copyright © 2013 Pearson Education, Inc. Slide 6 -23

Generic Market Entry Strategies Figure 6 -11, Page 391 Copyright © 2013 Pearson Education,

Establishing the Customer Relationship n Web site functions to: v Establish brand identity and customer expectations n Differentiating product v Inform and educate customer v Shape customer experience v Anchor the brand online n Central point for all marketing messages Copyright © 2013 Pearson Education, Inc. Slide 6 -25

Traditional Online Marketing Tools n Search engine marketing (SEM) v Sponsored links v Search result display ads v Keywords v Search engine optimization (SEO) n Display ad marketing v Advertising networks v Ad exchanges, real-time bidding Copyright © 2013 Pearson Education, Inc. Slide 6 -26

How an Advertising Network Such as Double. Click Works Figure 6. 6, Page 372

Traditional Online Marketing Tools (cont. ) n E-mail marketing v Very inexpensive v 3% click-throughs in targeted campaigns v Permission marketing n Affiliate marketing n Lead-generation marketing n Sponsorship marketing Copyright © 2013 Pearson Education, Inc. Slide 6 -28

Social Marketing n Fastest growing type of online marketing n Long-term prospects unknown n Four features driving growth n Social sign-on n Collaborative shopping n Network notification n Social search (recommendation) Copyright © 2013 Pearson Education, Inc. Slide 6 -29

Twitter Marketing n Real-time interaction with consumers n 50% companies with 100+ employees using Twitter n Twitter marketing products v Promoted Tweets v Promoted Trends v Promoted Accounts Copyright © 2013 Pearson Education, Inc. Slide 6 -30

Blog Marketing n 43% of all U. S. companies use blogs for marketing n Ideal for starting viral campaigns n Can use blogs for both branding messages and advertisements n Blog advertising networks n Brand advocacy blogs Copyright © 2013 Pearson Education, Inc. Slide 6 -31

Viral Marketing n Form of social marketing n Customers pass along marketing message to friends, family, coworkers n Referred customers cost less to acquire and keep n Venues are e-mail, social networks, video and game sites Copyright © 2013 Pearson Education, Inc. Slide 6 -32

Mobile Marketing n 7% of online marketing, growing rapidly n Major formats: v Messaging (SMS) v Display v Search v Video n Other formats: v Quick Response (QR) codes v Couponing Copyright © 2013 Pearson Education, Inc. Slide 6 -33

Insight on Business: Class Discussion Mobile Marketing: Land Rover Seeks Engagement on the Small Screen n Why do mobile devices represent such a promising opportunity for marketers? n Have you ever responded to mobile marketing messages? n What are some of the new types of marketing that mobile devices have spawned? n What the disadvantages of social network marketing? Copyright © 2013 Pearson Education, Inc. Slide 6 -34

App Marketing n Revenue sources v Pay-per-app v In-app purchase v Subscriptions v Advertising n Most popular types of apps v Social network, banking, search, news n Retailer’s apps v Browsing and purchasing Copyright © 2013 Pearson Education, Inc. Slide 6 -35

Local Marketing n Marketing geared to user’s geographic location n Local searches: v 20% of all searches v 40% of mobile searches n Most common local marketing tools v Geotargeting with Google Maps v Display ads in hyperlocal publications Copyright © 2013 Pearson Education, Inc. Slide 6 -36

Multi-Channel Marketing n Average American spends 24% of media time on Internet, rest on other channels n Television, radio, newspapers, and magazines n Consumers also multitask, using several media n Internet campaigns strengthened by using other channels Copyright © 2013 Pearson Education, Inc. Slide 6 -37

Other Online Marketing Strategies n Brand leveraging n Customer retention strategies v Personalization and one-to-one marketing v Customization and customer co-production v Customer service n FAQs n Real-time customer chat systems n Automated response systems Copyright © 2013 Pearson Education, Inc. Slide 6 -38

The Mass Market-Personalization Continuum Figure 6. 13, Page 407 Copyright © 2013 Pearson Education,

Net Pricing Strategies n Pricing v Integral part of marketing strategy v Traditionally based on: n Fixed cost n Variable costs n Demand curve n Price discrimination v Selling products to different people and groups based on willingness to pay Copyright © 2013 Pearson Education, Inc. Slide 6 -40

Net Pricing Strategies (cont. ) n Free and freemium v Can be used to build market awareness n Versioning v Creating multiple versions of product and selling essentially same product to different market segments at different prices n Bundling v Offers consumers two or more goods for one price n Dynamic pricing: Auctions v Yield management v Flash marketing v Copyright © 2013 Pearson Education, Inc. Slide 6 -41

Long-Tail Marketing n Internet allows for sales of obscure products with little demand n Substantial revenue because n Near zero inventory costs n Little marketing costs n Search and recommendation engines Copyright © 2013 Pearson Education, Inc. Slide 6 -42

Insight on Technology: Class Discussion The Long Tail: Big Hits and Big Misses n What are “recommender systems”? Give an example you have used. n What is the “Long Tail” and how do recommender systems support sales of items in the Long Tail? n How can human editors, including consumers, make recommender systems more helpful? Copyright © 2013 Pearson Education, Inc. Slide 6 -43

Channel Management Strategies n Channels: v Different methods by which goods can be distributed and sold n Channel conflict: v When new venue for selling products or services threatens or destroys existing sales venues v e. g. , online airline/travel services and traditional offline travel agencies n Some manufacturers are using partnership model to avoid channel conflict Copyright © 2013 Pearson Education, Inc. Slide 6 -44

The Revolution in Internet Marketing Technologies n Internet’s main impacts on marketing: Scope of marketing communications broadened v Richness of marketing communications increased v Information intensity of marketplace expanded v Always-on mobile environment expands marketing opportunities v n Internet marketing technologies: v v v Web transaction logs Tracking files Databases, data warehouses, data mining Hadoop and Big Data Customer relationship management systems Copyright © 2013 Pearson Education, Inc. Slide 6 -45

Web Transaction Logs n Built into Web server software n Record user activity at Web site n Provides much marketing data, especially combined with: v Registration forms v Shopping cart database n Answers questions such as: v What are major patterns of interest and purchase? v After home page, where do users go first? Second? Copyright © 2013 Pearson Education, Inc. Slide 6 -46

Tracking Files n Users browsing tracked as they move from site to site n Four types of tracking files v Cookies n Small text file placed by Web site n Allows Web marketers to gather data v Flash cookies v Beacons (“bugs”) v Apps Copyright © 2013 Pearson Education, Inc. Slide 6 -47

Insight on Society: Class Discussion Every Move You Make, Every Click You Make, We’ll Be Tracking You n Are beacons innocuous? Or are they an invasion of personal privacy? n Do you think your Web browsing should be known to marketers? n What are the Privacy Foundation guidelines for Web beacons? n Should online shopping be allowed to be a private activity? Copyright © 2013 Pearson Education, Inc. Slide 6 -48

Databases Database: Stores records and attributes n Database management system (DBMS): n v n SQL (Structured Query Language): v n Software used to create, maintain, and access databases Industry-standard database query and manipulation language used in a relational database Relational database: v Represents data as two-dimensional tables with records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element Copyright © 2013 Pearson Education, Inc. Slide 6 -49

Data Warehouses and Data Mining n Data warehouse: v Collects firm’s transactional and customer data in single location for offline analysis by marketers and site managers n Data mining: v Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles Query-driven data mining n Model-driven data mining n Rule-based data mining n Copyright © 2013 Pearson Education, Inc. Slide 6 -50

Hadoop and the Challenge of Big Data n “Big data” v Web traffic, e-mail, social media content n Traditional DBMS unable to process the volumes—petabytes and exabytes n Hadoop v Open-source software solution v Distributed processing among inexpensive servers Copyright © 2013 Pearson Education, Inc. Slide 6 -51

Customer Relationship Management (CRM) Systems n Create customer profiles: v v v n Product and usage summary data Demographic and psychographic data Profitability measures Contact history Marketing and sales information Customer data used to: Develop and sell additional products v Identify profitable customers v Optimize service delivery, etc. v Copyright © 2013 Pearson Education, Inc. Slide 6 -52