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Write a summary of attached PowerPoint presentations.  The summary can be a few pages long and should capture the goal of the presentation and any key points in it. Electronic Commerce Tenth Edition Chapter 4 Marketing on the Web 1 1 1 2 2 Learning Objectives In this chapter, you will learn: How firms use product-based and customer-based marketing strategies About communicating with different market segments To identify customer relationship characteristics About the customer relationship life cycle How companies advertise on the Web Electronic Commerce, Tenth Edition 2 2 2 3 3 Learning Objectives (cont’d.) About e-mail marketing strategies About technology-enabled customer relationship management How to create and maintain brands on the Web How businesses use social media in viral marketing campaigns About search engine positioning tactics and domain name selection strategies Electronic Commerce, Tenth Edition 3 3 3 4 4 Web Marketing Strategies Marketing mix Element combination to achieve goals Selling and promoting products and services Marketing strategy Marketing mix with elements defined 4 Electronic Commerce, Tenth Edition 4 4 5 5 The Four Ps of Marketing Product Physical item or service sold Brand: customers’ product perception Price Amount customer pays for product Customer value: customer benefits minus total cost Promotion Any means to spread word about product 5 Electronic Commerce, Tenth Edition 5 5 Electronic Commerce, Tenth Edition 6 Place (distribution) Need to have products or services available in many different locations Getting right products to the right places at the best time to sell them The Four Ps of Marketing (cont’d.) 6 Electronic Commerce, Tenth Edition 7 FIGURE 4-1 The four Ps of marketing contribute to marketing strategy © Cengage Learning 2013 7 Product-Based Marketing Strategies Web presence must integrate with image and brand Managers often think in terms of products and services sold Useful Web site design when customers use product categories Web site examples: Home Depot and Staples Not a useful Web site design when customers look to fulfill a specific need Design Web site to meet individual customer needs Offer alternative shopping paths 8 8 Electronic Commerce, Tenth Edition 8 Customer-Based Marketing Strategies Web sites to meet various types of customers’ specific needs Initial step: identify customer groups sharing common characteristics Make site more accessible and useful for each group Companies need to take view beyond internal perspective Example: university Web sites today focus design on needs of stakeholders (current students, prospective students, parents of students, potential donors, faculty) 9 9 Electronic Commerce, Tenth Edition 9 Communicating with Different Market Segments Communications media selection to carry message Physical world Uses building construction and floor space design Online firm Communications media selection: critical No physical presence Customer contact made through image projected through media and Web site Online firm challenge Obtain customer trust with no physical presence 10 Electronic Commerce, Tenth Edition 10 10 Trust, Complexity, and Media Choice The Web Broad intermediate step Between mass media and personal contact Web communication offers: Advantages of personal contact selling Cost savings of mass media Mass media advertising offers lowest trust level Still used successfully because costs spread over many people 11 11 Electronic Commerce, Tenth Edition 11 12 FIGURE 4-2 Trust in three information dissemination models Electronic Commerce, Tenth Edition 12 © Cengage Learning 2013 Click to edit Master text styles Second level Third level Fourth level Fifth level 12 Trust, Complexity, and Media Choice (cont’d.) Complexity level inherent in product and service Important factor in media choice Products with few characteristics and easy to understand Promotes well with mass media Mass media: expensive to produce Used primarily for short messages Highly complex products and services Promote well with personal contact Customers may ask questions 13 Electronic Commerce, Tenth Edition 13 13 Trust, Complexity, and Media Choice (cont’d.) Web occupies a wide middle ground Offers various elements Mass media messaging Personal contact interaction Anything in between People now resistant to mass media messages Successful mass media campaigns Rely on passive nature of media consumption Web user likely to be in an active state Better to use a trust-based model approach 14 Electronic Commerce, Tenth Edition 14 14 Trust, Complexity, and Media Choice (cont’d.) New Internet communications modalities for individuals and companies Web log or blog Website allowing people to post thoughts and inviting others to add commentary Retailers experimenting with blogs and social media as adjunct communication means Companies use the Web to engage in two-way communications resembling a high-trust personal contact mode of communication 15 Electronic Commerce, Tenth Edition 15 15 Market Segmentation Divides potential customer pool into segments Defined in demographic characteristics terms Micromarketing Practice of targeting very small market segments Hampered by cost increases Three categories to identify market segments Geographic segmentation Demographic segmentation Psychographic segmentation Television advertisers use all three categories 16 16 Electronic Commerce, Tenth Edition 16 Companies try to: Match advertising messages to market segments Build sales environment for a product or service Corresponds to market segment trying to reach 17 FIGURE 4-3 Television advertising messages tailored to program audience Electronic Commerce, Tenth Edition 17 17 Market Segmentation on the Web Web opportunity Present different store environments online Juicy Couture site targets young, fashion-conscious buyers Talbots site targets older, more established buyers Limitations of physical retail stores Floor and display space Must convey one particular message Web stores Separate virtual spaces for different market segments 18 Electronic Commerce, Tenth Edition 18 18 Offering Customers a Choice on the Web One-to-one marketing Offering products, services matched to needs of a particular customer Example: Dell Offers several 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 19 Electronic Commerce, Tenth Edition 19 19 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 20 Electronic Commerce, Tenth Edition 20 20 Segmentation Using Customer Behavior Same person Needs different combinations of products and services Depending on the occasion Behavioral segmentation Creation of separate customer experiences based on behavior Occasion segmentation Behavioral segmentation based on things happening at a specific time or occasion 21 Electronic Commerce, Tenth Edition 21 21 Segmentation Using Customer Behavior (cont’d.) Online world single Web site design Easier to meet needs of different behavioral modes Can include elements appealing to different behavioral segments Usage-based market segmentation Customizing visitor experiences to match the site usage behavior patterns of each visitor or type of visitor Categories of online behavior patterns Browsers, buyers, and shoppers 22 Electronic Commerce, Tenth Edition 22 22 Segmentation Using Customer Behavior (cont’d.) Browsers Visitors just surfing or browsing Web site must offer something to pique visitors’ interest Trigger words Prompt visitor to stay and investigate products or services Have links to site explanations, instructions Include extra content related to product, service Leads to favorable impression (bookmark) 23 Electronic Commerce, Tenth Edition 23 23 Segmentation Using Customer Behavior (cont’d.) Buyers Ready to make a purchase right away Offer direct route into purchase transaction Shopping cart Part of the Web site Keeps track of selected items for purchase Automates purchasing process Page offers link back into shopping area Primary goal: get buyer to shopping cart as quickly as possible 24 Electronic Commerce, Tenth Edition 24 24 Segmentation Using Customer Behavior (cont’d.) Shoppers Motivated to buy Looking for more information before purchase Offer comparison tools, product reviews, and features lists People do not retain behavioral categories from one visit to the next Even for the same Web site 25 Electronic Commerce, Tenth Edition 25 25 Segmentation Using Customer Behavior (cont’d.) Alternative models McKinsey & Company’s six behavior-based categories Simplifiers (convenience) Surfers (find information, explore new ideas, or shop) Bargainers (search for good deals) Connectors (stay in touch with other people) Routiners (return to same sites over and over) Sportsters (spend time on sports, entertainment sites) Must identify groups and formulate ways of generating revenue 26 Electronic Commerce, Tenth Edition 26 26 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 Typical five-stage model of customer loyalty First four stages show increase in relationship intensity Fifth stage (separation) Decline occurs, relationship terminates 27 Electronic Commerce, Tenth Edition 27 27 Touchpoints Online and offline customer contact points Touchpoint consistency Goal of providing similar levels and quality of service at all touchpoints FIGURE 4-4 Five stages of customer loyalty 28 Electronic Commerce, Tenth Edition 28 © Cengage Learning 2013 28 Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Characteristics of the five stages Awareness Customers recognize company name, product Exploration Customers learn more about company, products Familiarity Customers have completed several transactions Customers aware of returns and credits policies Customers aware of pricing flexibility Customers just as likely to shop competitors 29 Electronic Commerce, Tenth Edition 29 29 Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Characteristics of the five stages (cont’d.) Commitment Customer experiences highly satisfactory encounters Customer develops fierce loyalty or strong preference Separation Conditions that made relationship valuable change Parties enter separation stage Life-cycle segmentation Customer life cycle (the five stages) Using stages to create customer groups in each stage 30 Electronic Commerce, Tenth Edition 30 30 Acquisition, Conversion, and Retention of Customers Goal Attract new visitors to a Web site Acquisition cost Total amount of money site spends drawing one visitor to site Conversion Convert first-time visitor into a customer Conversion cost Total amount of money site spends to induce one visitor to make a purchase, sign up for a subscription, or register May exceed profit earned on average sale 31 Electronic Commerce, Tenth Edition 31 31 Acquisition, Conversion, and Retention of Customers (cont’d.) 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 32 Electronic Commerce, Tenth Edition 32 32 Customer Acquisition, Conversion, and Retention: The Funnel Model Funnel model Conceptual tool Provides understanding of overall nature of marketing strategy 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: large number of prospects with fewer and fewer converted to loyal patrons 33 Electronic Commerce, Tenth Edition 33 33 34 FIGURE 4-5 Funnel model of customer acquisition, conversion, and retention Electronic Commerce, Tenth Edition 34 © Cengage Learning 2013 Funnel model: tool for conceptualizing and evaluating alternative strategies Click to edit Master text styles Second level Third level Fourth level Fifth level 34 Advertising on the Web Effective advertising involves communication Five-stage customer loyalty model helpful in creating advertising messages Awareness stage Advertising message should inform Exploration stage Message should explain how product, service works Encourage switching brands 35 Electronic Commerce, Tenth Edition 35 35 Advertising on the Web (cont’d.) Five-stage customer loyalty model (cont’d.) Familiarity stage Message should be persuasive, convince customer to buy Commitment stage Customer sent reminder messages Separation stage Customer not targeted Online advertising Always coordinate with existing advertising efforts 36 Electronic Commerce, Tenth Edition 36 36 Banner Ads Banner ad Small rectangular object with stationary or moving graphic Includes hyperlink to advertiser’s Web site Versatile: informative and persuasive functions Attention-grabbing banner ads Use animated GIFs and rich media objects Created using Shockwave, Java, Flash Interactive marketing unit (IMU) ad formats Voluntary standard banner sizes Universal ad package (UAP) 37 Electronic Commerce, Tenth Edition 37 37 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 $5000 Companies can make their own banner ads 38 Electronic Commerce, Tenth Edition 38 38 Banner Ads (cont’d.) Banner ad placement Use a banner exchange network Coordinates ad sharing 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 39 Electronic Commerce, Tenth Edition 39 39 Banner Ads (cont’d.) New strategies for banner ads Banner ads were a novelty initially Lost ability to attract attention Solutions Introduce animated GIFs with moving elements Create ads displaying rich media effects (movie clips) Add interactive effects (Java programs): respond to user’s click with some action Create ads acting like mini video game Create ads appearing to be dialog boxes 40 Electronic Commerce, Tenth Edition 40 40 41 FIGURE 4-6 Disguised banner ads Electronic Commerce, Tenth Edition 41 © Cengage Learning 2013 Click to edit Master text styles Second level Third level Fourth level Fifth level 41 Text Ads Short promotional message No graphic elements Usually placed along Web page top or right side Deceptively simple but very effective Example: Google Initially criticized for including unobtrusive ads on its pages Now clearly labels ads to prevent confusion Inline text ad Text in stories displayed as hyperlinks 42 Electronic Commerce, Tenth Edition 42 42 Other Web Ad Formats Pop-up ad Appears in its own window When user opens or closes Web page Considered to be extremely annoying Must click close button (small) in window of ad Pop-behind ad Pop-up ad followed by a quick command Returns focus to original browser window Appears when browser is closed Ad-blocking software Prevents banner ads and pop-up ads from loading 43 Electronic Commerce, Tenth Edition 43 43 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 Example: 30 second ad before television show 44 Electronic Commerce, Tenth Edition 44 44 Mobile Device Advertising Tremendous usage growth for mobile devices connected to Internet Some mobile software applications (mobile apps) include advertising element Messages displayed from advertisers Part of the app screen or in a separate screen Mobile apps’ advertising space marketed in same way as Web sites’ banner advertising Electronic Commerce, Tenth Edition 45 45 Site Sponsorships Web sites offer advertisers opportunity to sponsor all (or parts) of their sites More subtle 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 46 Electronic Commerce, Tenth Edition 46 46 Online Advertising Cost and Effectiveness Companies want Web sites to make favorable impression on potential customers Raises issue of measuring Web site effectiveness Cost per thousand (CPM) for mass media advertising “M” from Roman numeral for “thousand” Dollar amount paid for every thousand people in the estimated audience 47 Electronic Commerce, Tenth Edition 47 47 Online Advertising Cost and Effectiveness (cont’d.) Measuring Web audiences (complicated) Web’s interactivity Value of visitor to an advertiser Depends on information site gathers from visitor 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 48 Electronic Commerce, Tenth Edition 48 48 Online Advertising Cost and Effectiveness (cont’d.) Page view Each page loaded by a visitor Ad view Occurs if page contains an ad Impression Each time banner ad loads Click (click-through) Action whereby a visitor clicks banner ad to open advertiser’s page 49 Electronic Commerce, Tenth Edition 49 49 50 FIGURE 4-7 CPM rates for advertising in various media Electronic Commerce, Tenth Edition 50 Click to edit Master text styles Second level Third level Fourth level Fifth level 50 Online Advertising Cost and Effectiveness (cont’d.) New metrics to evaluate 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 51 Electronic Commerce, Tenth Edition 51 51 Effectiveness of Online Advertising Online advertising effectiveness 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 52 Electronic Commerce, Tenth Edition 52 52 Effectiveness of Online Advertising (cont’d.) Online advertising as one element in marketing strategy Use variety of media to reach potential customers Online advertising developments AdAge.com, eMarketer, Online Publishers Association Online advertising much more effective using market segmentation 53 Electronic Commerce, Tenth Edition 53 53 E-Mail Marketing Can be a powerful element of advertising strategy Used to announce new products or features Used to announce sales on existing products Unsolicited Commercial E-mail (UCE, Spam) Electronic junk mail Wastes time, disk space, and consumes large amounts of Internet capacity Key element Obtain customers’ approvals Prior to sending marketing or promotional e-mail 54 Electronic Commerce, Tenth Edition 54 54 Permission Marketing Conversion rate Percentage of recipients responding to an ad or promotion Ranges from 10 percent to more than 30 percent on requested e-mail messages Opt-in e-mail Practice of sending e-mail messages to people who request information Part of marketing strategy: permission marketing 55 Electronic Commerce, Tenth Edition 55 55 Permission Marketing (cont’d.) Opt-in e-mail (cont’d.) More successful than mass media general promotional message Makes better use of customer’s time Return Path offers opt-in e-mail services Provides e-mail addresses to advertisers Rates vary depending on type and price of the product Minimum of about $1 to a maximum of 25–30 percent of the selling price of the product 56 Electronic Commerce, Tenth Edition 56 56 Combining Content and Advertising Using articles, news stories of interest to specific market segments Increases acceptance of e-mail Advertisers send content by: Using hyperlinks inserted into e-mail messages Takes customers to advertiser’s Web site content Easier to induce customer to stay on the site and consider making purchases Coordination across media outlets Important element in any marketing strategy 57 Electronic Commerce, Tenth Edition 57 57 Outsourcing E-Mail Processing Number of customers opting in to information-laden e-mails May outgrow capacity of an information technology staff Solution Company may use an e-mail processing service provider 58 Electronic Commerce, Tenth Edition 58 58 Technology-Enabled Customer Relationship Management Clickstream: the information gathered about visitors Technology-enabled relationship management Firm obtains information on customer behavior to Set prices, negotiate terms, tailor promotions, add product features, customize customer relationship Also known as: Customer relationship management (CRM) Technology-enabled customer relationship management Electronic customer relationship management (eCRM) 59 Electronic Commerce, Tenth Edition 59 59 60 FIGURE 4-8 Technology-enabled relationship management and traditional customer relationships Electronic Commerce, Tenth Edition 60 Click to edit Master text styles Second level Third level Fourth level Fifth level 60 CRM as a Source of Value in the Marketspace Marketspace Commerce in the information world Value creation requires different processes Firms use information to create new value for customers Track and examine Web site visitor behavior Use information to provide customized, value-added digital products and services Early CRM efforts failed Overly complex 61 Electronic Commerce, Tenth Edition 61 61 CRM as a Source of Value in the Marketspace (cont’d.) Current CRM efforts more successful Limit data collection to key facts Relevant to salespeople and customers Customer touchpoint Any occurrence of contact between customer and any company point Data warehouse (large database) Contains multiple sources of information about customers, their preferences, their behavior 62 Electronic Commerce, Tenth Edition 62 62 CRM as a Source of Value in the Marketspace (cont’d.) Data mining (analytical processing) Technique that examines stored information Looks for unknown, unsuspected patterns in the data Statistical modeling Technique that tests CRM analysts’ theories about relationships among customer and sales data elements 63 Electronic Commerce, Tenth Edition 63 63 64 FIGURE 4-9 Elements of a typical CRM system Electronic Commerce, Tenth Edition 64 © Cengage Learning 2013 Click to edit Master text styles Second level Third level Fourth level Fifth level 64 Creating and Maintaining Brands on the Web Branded products Easier to advertise and promote Each product carries reputation of the brand name Value of trusted major brands Far exceeds cost of creating them 65 Electronic Commerce, Tenth Edition 65 65 Elements of Branding Three key brand elements Product differentiation Clearly distinguish product from all others Relevance Degree to which product offers utility to customer Perceived value (key element) Customer perceives a value in buying product Brands can lose their value Environment changes 66 Electronic Commerce, Tenth Edition 66 66 67 FIGURE 4-10 Elements of a brand Electronic Commerce, Tenth Edition 67 Click to edit Master text styles Second level Third level Fourth level Fifth level 67 Emotional Branding vs. Rational Branding Emotional appeals Work well if ad targets in passive mode of information acceptance Television, radio, billboards, print media Difficult to convey on Web Active medium controlled by customer Rational branding Offer to help Web users in some way In exchange for viewing an ad Relies on cognitive appeal of specific help offered 68 Electronic Commerce, Tenth Edition 68 68 Affiliate Marketing Strategies Affiliate marketing One firm’s Web site (affiliate site) Includes descriptions, reviews, ratings, other information about a product linked to another firm’s site (offers item for sale) Affiliate site receives commission For every visitor following link from affiliate’s site to seller’s site Affiliate saves expenses Handling inventory, advertising and promoting product, transaction processing 69 Electronic Commerce, Tenth Edition 69 69 Affiliate Marketing Strategies (cont’d.) Cause marketing Affiliate marketing program benefiting charitable organization Visitor clicks on link (on affiliate’s Web page) Donation made by a sponsoring company Page loads after visitor clicks donation link Carries advertising for sponsoring companies Higher click-through rates than typical banner ad click-through rates 70 Electronic Commerce, Tenth Edition 70 70 Affiliate Marketing Strategies (cont’d.) Affiliate commissions Pay-per-click model Affiliate earns commission Each time site visitor clicks link, loads the seller’s page Pay-per-conversion model Affiliate earns a commission Each time site visitor converted from visitor into qualified prospect or customer 71 Electronic Commerce, Tenth Edition 71 71 Affiliate Marketing Strategies (cont’d.) Affiliate commissions (cont’d.) Affiliate program broker (clearinghouse or marketplace) Sites running affiliate programs Sites wanting to become affiliates 72 Electronic Commerce, Tenth Edition 72 72 Viral Marketing Strategies Viral marketing Relies on existing customers Tell other people (prospective customers) about products or service Use individual customers to spread the word about a company Example: BlueMountain Arts Electronic greeting cards E-mail messages that include link to greeting card site Social media sites being utilized Key to viral marketing: post often, but not too often 73 Electronic Commerce, Tenth Edition 73 73 Electronic Commerce, Tenth Edition 74 FIGURE 4-11 Viral marketing through social media © Cengage Learning 2013 74 Search Engine Positioning and Domain Names Ways that potential customers find Web sites Referred by friend Click a link on a referring Web site Referred by affiliate marketing partner See site’s URL in print advertisement, television Arrive unintentionally after mistyping similar URL Use a search engine or directory Web site 75 Electronic Commerce, Tenth Edition 75 75 Search Engines and Web Directories Search engine Web site that helps people find things on the Web Search engine major parts Spider (crawler, robot, bot) Program that automatically searches Web to find potentially interesting Web pages for people Index (database) Storage element of search engine Search utility Takes terms, finds matching Web page entries in index 76 Electronic Commerce, Tenth Edition 76 76 Search Engines and Web Directories (cont’d.) Web directories Provide classified hierarchical lists of categories Search engine ranking Weighting of factors Search engines use factors to decide which URLs appear first on searches for a particular search term Search engine positioning (search engine optimization, search engine placement) The combined art and science of having a particular URL listed near the top of search engine 77 Electronic Commerce, Tenth Edition 77 77 Paid Search Engine Inclusion and Placement Paid placement (sponsorship, search term sponsorship) Offer good ad placement on search results page For a price Buy banner ad space at the top of search results pages that include certain terms Search engine positioning: complex subject Spending on online advertising Grew rapidly in the early Web days Virtually zero in 1995 to about $8 billion in 2000 (U.S.) 78 Electronic Commerce, Tenth Edition 78 78 79 FIGURE 4-12 U.S. online advertising expenditures, actual and projected Electronic Commerce, Tenth Edition 79 © Cengage Learning 2013 Click to edit Master text styles Second level Third level Fourth level Fifth level 79 80 FIGURE 4-13 U.S. advertising expenditures by medium, 2010 estimates Electronic Commerce, Tenth Edition 80 © Cengage Learning 2013 Click to edit Master text styles Second level Third level Fourth level Fifth level 80 Paid Search Engine Inclusion and Placement (cont’d.) Search engine placement brokers Aggregate inclusion and placement rights on multiple search engines Sell those combination packages to advertisers Google does not use placement broker Sells services directly (Google AdWords program) Contextual advertising (potential flaw) Ads placed in proximity to related content Localized advertising Ads related to location on search results 81