E-commerce 2015 business technology society eleventh edition global

Chapter 6 E-commerce Marketing and Advertising 2016 Ltd. Copyright © 2015 Pearson Education, Inc.

Class Discussion Video Ads: Shoot, Click, Buy n What advantages do video ads have over traditional banner ads? n Where do sites such as You. Tube fit in to a marketing strategy featuring video ads? n What are some of the challenges and risks of placing video ads online? n Do you think Internet users will ever develop “blindness” toward video ads as well? Copyright © 2016 Pearson Education, Ltd. Slide 1 -3

Consumers Online: The Internet Audience and Consumer Behavior n Almost 75% (90 million) U. S. households have broadband Internet access in 2014 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 Income, education, age, ethnic dimensions Copyright © 2016 Pearson Education, Ltd. Slide 1 -4

Consumers Online (cont. ) n Broadband mobile v Significant inequalities in broadband access v Older adults, lower income, lower educational levels v Non-broadband household still accesses Internet via mobile or other locations n Neighborhood effects v Role of social emulation in consumption decisions v “Connectedness” Top 10– 15% are more independent n Middle 50% share more purchase patterns of friends n v Recommender systems Copyright © 2016 Pearson Education, Ltd. co-purchase networks Slide 1 -5

Consumers Online (cont. ) n Study of consumer behavior v Social science discipline v Attempts to explain what consumers purchase and where, when, how much, and why they buy v Consumer behavior models Attempt to predict or explain wide range of consumer decisions n Based on background demographic factors and other intervening, more immediate variables n n Profiles of online consumers v Consumers shop online primarily Copyright © 2016 Pearson Education, Ltd. for convenience Slide 1 -6

A General Model of Consumer Behavior Figure 6. 1, Page 375 Copyright © 2016

The Online Purchasing Decision n Five 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 © 2016 Pearson Education, Ltd. Slide 1 -8

The Consumer Decision Process and Supporting Communications Figure 6. 2, Page 376 Copyright ©

The Online Purchasing Decision (cont. ) n Decision process similar for online and offline behavior n General online behavior model v User characteristics v Product characteristics v Web site features: latency, usability, security v Attitudes toward online purchasing v Perceptions about control over Web environment n Clickstream behavior Copyright © 2016 Pearson Education, Ltd. Slide 1 -10

A Model of Online Consumer Behavior Figure 6. 3, Page 377 Copyright © 2016

Shoppers: Browsers and Buyers n Shoppers: Almost 90% of Internet users 74% 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 © 2016 Pearson Education, Ltd. Slide 1 -12

What Consumers Shop for and Buy Online n Big ticket items ($1000 or more) 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, and so on n Types of purchases depend on level of experience with the Web Copyright © 2016 Pearson Education, Ltd. Slide 1 -13

How Consumers Shop n How shoppers find online vendors v Highly intentional, goal-oriented v Search engines v Marketplaces (Amazon, e. Bay) v Specific retail site n 10% of Internet users don’t shop online v Trust factor v Hassle factors (shipping costs, returns, etc. ) Copyright © 2016 Pearson Education, Ltd. Slide 1 -14

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 Most important factors: Perception of credibility, ease of use, perceived risk n Sellers can develop trust by building strong reputations for honesty, fairness, delivery Copyright © 2016 Pearson Education, Ltd. Slide 1 -15

Digital Commerce Marketing and Advertising: 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 © 2016 Pearson Education, Ltd. Slide 1 -16

Multi-Channel Marketing Plan Web site 2. Traditional online marketing 1. v 3. Social marketing v 4. Social networks, blogs, video, game Mobile marketing v 5. Search engine, display, e-mail, affiliate Mobile/tablet sites, apps Offline marketing v Television, radio, newspapers Copyright © 2016 Pearson Education, Ltd. Slide 1 -17

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 © 2016 Pearson Education, Ltd. Slide 1 -18

Establishing the Customer Relationship n Web site functions to: v Establish brand identity and customer expectations n Differentiating product v Anchor the brand online n Central point for all marketing messages v Inform and educate customer v Shape customer experience Copyright © 2016 Pearson Education, Ltd. Slide 1 -19

Online Advertising n Online advertising v Display, search, mobile messaging, sponsorships, classifieds, lead generation, mail v Fastest growing form of advertising v Advantages: e- n 18– 34 audience is online n Ad targeting n Price discrimination n Personalization Copyright © 2016 Pearson Education, Ltd. Slide 1 -20

Traditional Online Marketing and Advertising Tools n Search engine marketing and advertising n Display ad marketing n E-mail marketing n Affiliate marketing n Viral marketing n Lead generation marketing Copyright © 2016 Pearson Education, Ltd. Slide 1 -21

Search Engine Marketing and Advertising n Search engine marketing (SEM) v Use of search engines for branding n Search engine advertising v Use of search engines to support direct sales n Types of search engine advertising v Sponsored links (keyword paid inclusion) v Keyword advertising v Network keyword advertising (context advertising) Copyright © 2016 Pearson Education, Ltd. Slide 1 -22

Search Engine Marketing (cont. ) n Search engine optimization (SEO) n Google search engine algorithms v Panda, Penguin, Hummingbird, Knowledge Graph n Social search v Utilizes social contacts and social graph to provide fewer and more relevant results n Search engine issues v Paid inclusion and placement practices v Link farms, content farms v Click fraud Copyright © 2016 Pearson Education, Ltd. Slide 1 -23

Display Ad Marketing n Banner ads n Rich media ads v Interstitial ads n Video ads v Far more effective than other display formats n Sponsorships n Native advertising Copyright © 2016 Pearson Education, Ltd. Slide 1 -24

Display Ad Marketing (cont. ) n Advertising networks n Programmatic advertising v Real-time bidding process (RTB) v Ad exchanges n Display advertising issues v Ad fraud v Viewability Copyright © 2016 Pearson Education, Ltd. Slide 1 -25

How an Advertising Network Such as Double. Click Works Figure 6. 7, Page 395

E-mail Marketing n Direct e-mail marketing v Messages sent directly to interested users v Benefits include Inexpensive n Average over 6% click-throughs for in-house lists n Measuring and tracking responses n Personalization of messages and offers n n Three main challenges v Spam v Anti-spam software v Poorly targeted purchased e-mail lists Copyright © 2016 Pearson Education, Ltd. Slide 1 -27

Spam n Unsolicited commercial e-mail n Around 60% of all e-mail in 2014 n Most originates from bot networks n Efforts to control spam have largely failed: v Government regulation (CAN-SPAM) v State laws v Voluntary self-regulation by industries (DMA ) v Canada’s stringent anti-spam laws Copyright © 2016 Pearson Education, Ltd. Slide 1 -28

Other Types of Traditional Online Marketing n Affiliate marketing v Commission fee paid to other Web sites for sending customers to their Web site n Viral marketing v Marketing designed to inspire customers to pass message to others n Lead generation marketing v Services and tools for collecting, managing, and converting leads Copyright © 2016 Pearson Education, Ltd. Slide 1 -29

Social, Mobile, and Local Marketing and Advertising n Social marketing/advertising v Fastest growing type of online marketing v Enormous audiences of social networks v Four features driving growth n Social sign-on n Collaborative shopping n Network notification n Social search (recommendation) Copyright © 2016 Pearson Education, Ltd. Slide 1 -30

Social Marketing/Advertising (cont. ) n Blog marketing v Educated, higher-income audience v Ideal platform to start viral campaign n Game marketing v Large audiences for social and mobile games v Used for branding and driving customers to purchase moments at restaurants and retail stores Copyright © 2016 Pearson Education, Ltd. Slide 1 -31

Mobile Marketing and Advertising n 35% of online marketing, growing rapidly n Major formats: v Display, rich media, video v Games v E-mail v Text messaging (SMS) v In-store messaging v Quick Response (QR) codes v Couponing n App marketing Copyright © 2016 Pearson Education, Ltd. Slide 1 -32

Local Marketing n Geared to user’s geographic location n Advertisers expected to spend around $32 billion on online local ads in 2014 n Most common local marketing tools v Geotargeting with Google Maps v Display ads in hyperlocal publications v Daily deals v Coupons Copyright © 2016 Pearson Education, Ltd. Slide 1 -33

Multi-Channel Marketing n Average American spends more than 45% of media time on digital media channels n Consumers also multitask, using several media n Internet campaigns strengthened by using other channels v Most effective are campaigns using consistent imagery throughout channels Copyright © 2016 Pearson Education, Ltd. Slide 1 -34

Insight on Business: Class Discussion Are the Very Rich Different from You and Me? n What distinguishes luxury marketing from ordinary retail marketing? n What challenges do luxury retailers have in translating their brands and the look and feel of luxury shops into Web sites? n How has social media affected luxury marketing? n Visit the Armani Web site. What do you find there? Copyright © 2016 Pearson Education, Ltd. Slide 1 -35

Other Online Marketing Strategies n Several strategies are more focused than traditional online and newer strategies v. Customer retention strategies v. Pricing strategies v. Long Tail marketing Copyright © 2016 Pearson Education, Ltd. Slide 1 -36

Other Online Marketing Strategies n Customer retention strategies v. Personalization and one-to-one marketing (interest-based advertising) n Retargeting n Behavioral targeting v Based on data from search engine queries, clickstream history, social network data, and integration of offline personal data and records v Effectiveness still inconclusive v Privacy issues Copyright © 2016 Pearson Education, Ltd. Slide 1 -37

Other Online Marketing Strategies (cont. ) n Customization v Changing the product v Information goods ideal for differentiation n Customer co-production v Customers help create product n Customer service v FAQs v Real-time customer chat systems v Automated response systems Copyright © 2016 Pearson Education, Ltd. Slide 1 -38

Pricing Strategies n Pricing v Integral part of marketing strategy v Traditionally pricing 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 © 2016 Pearson Education, Ltd. Slide 1 -39

Pricing Strategies (cont. ) n Free and freemium v n Versioning v n Creating multiple versions of product and selling essentially same product to different market segments at different prices Bundling v n Can be used to build market awareness Offers consumers two or more goods for one price Dynamic pricing Auctions v Yield management: Amazon v Surge pricing: Uber v Flash marketing: Rue La La, Haute. Look, Gilt Groupe v Copyright © 2016 Pearson Education, Ltd. Slide 1 -40

Long Tail Marketing n Internet allows for sales of obscure products with little demand n Substantial revenue because v Near zero inventory costs v Little marketing costs v Search and recommendation engines Copyright © 2016 Pearson Education, Ltd. Slide 1 -41

Insight on Technology: Class Discussion The Long Tail: Big Hits and Big Misses n What are “recommender systems”? Give an example of one 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 © 2016 Pearson Education, Ltd. Slide 1 -42

Internet Marketing Technologies n Internet’s main impacts on marketing: v 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 Copyright © 2016 Pearson Education, Ltd. Slide 1 -43

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 © 2016 Pearson Education, Ltd. Slide 1 -44

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 © 2016 Pearson Education, Ltd. Slide 1 -45

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 © 2016 Pearson Education, Ltd. Slide 1 -46

Databases Enable profiling n Store 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 © 2016 Pearson Education, Ltd. Slide 1 -47

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 © 2016 Pearson Education, Ltd. Slide 1 -48

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 Processes any type of data, including unstructured and semi-structured v Distributed processing Copyright © 2016 Pearson Education, Ltd. Slide 1 -49

Marketing Automation and Customer Relationship Management (CRM) Systems n Marketing automation systems v n Track steps in lead generation from product awareness to purchase CRM systems Manage relationship with customers once purchase is made v Create customer profiles: v n 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, and so on v Copyright © 2016 Pearson Education, Ltd. Slide 1 -50

A CRM System Figure 6. 10, Page 432 Copyright © 2016 Pearson Education, Ltd.

Online Marketing Metrics: Lexicon n Audience size or market share v Impressions v Click-through rate (CTR) v View-through rate (VTR) v Hits v Page views v Viewability rate v Stickiness (duration) v Unique visitors v Loyalty v Reach v Recency Copyright © 2016 Pearson Education, Ltd. n Conversion to customer v Acquisition rate v Conversion rate v Browse-to-buy ratio v View-to-cart ratio v Cart conversion rate v Checkout conversion rate v Abandonment rate v Retention rate v Attrition rate Slide 1 -52

Online Marketing Metrics (cont. ) n Social marketing n E-mail metrics v Conversation ratio v Open rate v Applause ratio v Delivery rate v Amplification v Click-through rate v Sentiment ratio Copyright © 2016 Pearson Education, Ltd. (e-mail) v Bounce-back rate Slide 1 -53

An Online Consumer Purchasing Model Figure 6. 11, Page 437 Copyright © 2016 Pearson

How Well Does Online Advertising Work? n Use ROI to measure ad campaign n Highest click-through rates: Search engine ads, permission e-mail campaigns n Rich media, video interaction rates high n Online channels compare favorably with traditional n Most powerful marketing campaigns use multiple channels, including online, catalog, TV, radio, newspapers, stores Copyright © 2016 Pearson Education, Ltd. Slide 1 -55

The Costs of Online Advertising n Pricing models v v v n Measuring issues v v n Barter Cost per thousand (CPM) Cost per click (CPC) Cost per action (CPA) Hybrid Sponsorship Online marketing/online sales can be correlated Offline purchases cannot always be directly related to online campaign In general, online marketing is more expensive on CPM basis, but more efficient in producing sales Copyright © 2016 Pearson Education, Ltd. Slide 1 -56

Web Analytics n Software that analyzes data at each stage of the customer conversion process v v v n Helps managers v v v n Awareness Engagement Interaction Purchase Loyalty and post-purchase Optimize ROI on Web site and marketing efforts Build detailed customer profiles Measure impact of marketing campaigns Google Analytics, Adobe Analytics, IBM Digital Analytics, Webtrends Copyright © 2016 Pearson Education, Ltd. Slide 1 -57