Chapter 04 E-Marketing and Customer Relationship Management Part Two Using Technology for Customer Relationships in a Global Environment

Copyright © Houghton Mifflin Company. All rights reserved.4 | 2 Chapter Learning Objectives 1.To define electronic marketing and electronic commerce and recognize their increasing importance in strategic planning 2.To understand the characteristics of electronic marketing—addressability, interactivity, memory, control, accessibility, and digitalization—and how they differentiate electronic marketing from traditional marketing activities 3.To examine how the characteristics of electronic marketing affect marketing strategy 4.To understand how electronic marketing and information technology can facilitate customer relationship management 5.To identify the legal and ethical considerations in electronic marketing

Copyright © Houghton Mifflin Company. All rights reserved.4 | 3 Chapter Outline Marketing on the Internet –Consumer-Generated Electronic Marketing –Basic Characteristics of Electronic Marketing –E-Marketing Strategies Customer Relationship Management –Database Marketing –Customer Lifetime Value –Technology Drives CRM –Customer Satisfaction Is the End Result of CRM Legal and Ethical Issues in E-Marketing

Copyright © Houghton Mifflin Company. All rights reserved.4 | 4 Marketing on the Internet Electronic Commerce (e-commerce) –Business exchanges conducted over the Internet using telecommunications tools such as web pages, , and instant or text messaging Electronic Marketing (e-marketing) –The strategic process of creating, distributing, promoting, and pricing products for targeted customers in the virtual environment of the Internet

Copyright © Houghton Mifflin Company. All rights reserved.4 | 5 Benefits of E-Marketing Open and Instantaneous Flows of Information –Marketers and customers share information in real- time on prices, specifications, and product availability. Enhanced Customer Service Efficiencies –Rapid response and always-on availability Worldwide Scope –Opens markets to firms of all sizes

Copyright © Houghton Mifflin Company. All rights reserved.4 | 6 Source: “Internet Activities,” Pew Internet & American Life Project, July 2006,

Copyright © Houghton Mifflin Company. All rights reserved.4 | 7 Consumer-Generated Electronic Marketing Blogs Wikis Instant messaging/texting Online forums Online virtual worlds/games Mailing lists Podcasts Cell phone texting

Copyright © Houghton Mifflin Company. All rights reserved.4 | 8 Basic Characteristics of Electronic Marketing: Addressability Addressability is a marketer’s ability to identify customers before they make a purchase How E-Merchants Attain Addressability –Limit access to areas of their website to encourage customer registration –Offer contests and prizes in exchange for consumer information –Place “cookies” on visitor’s computer to track usage and preferences

Copyright © Houghton Mifflin Company. All rights reserved.4 | 9 Basic Characteristics of Electronic Marketing: Interactivity Interactivity is the ability to allow customers express their needs and wants directly to the firm in response to the firm’s marketing communications –Real-time interaction with customers –Broader market coverage at a lower cost Community refers to a sense of group membership or feeling of belonging Blogs are web-based journals where writers can editorialize and interact with others

Copyright © Houghton Mifflin Company. All rights reserved.4 | 10 Basic Characteristics of Electronic Marketing: Memory Memory is the ability to access databases or data warehouses containing individual customer profiles and past purchase histories and to use these data in real-time to customize a marketing offer. A database is a collection of information arranged for easy access and retrieval.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 11 Basic Characteristics of Electronic Marketing: Control Control refers to customers’ ability to regulate the information they view and the rate and sequence of their exposure to that information. –The Web is a pull medium because users control the information they view –Marketers have to work harder and more creatively to retain customers at their websites A portal is a multiservice website that serves as a gateway to other web sites.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 12 Basic Characteristics of Electronic Marketing: Accessibility Accessibility is the ability to obtain information available on the Internet. –Informs and educates the inquiring consumer about competing products and prices –Creates competition for the consumer’s attention

Copyright © Houghton Mifflin Company. All rights reserved.4 | 13 Basic Characteristics of Electronic Marketing: Digitalization Digitalization is the ability to represent a product, or at least some of its benefits, as digital bits of information.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 14 E-Marketing Strategies Distribution Systems Target Markets Product Marketing Promotion Mediums Pricing E-Marketing Strategy Considerations

Copyright © Houghton Mifflin Company. All rights reserved.4 | 15 Source: “comScore Networks Releases Top Web Properties Worldwide for December; Reviews Biggest Gainers for 2006,” comScore Networks press release, January 31, 2007,

Copyright © Houghton Mifflin Company. All rights reserved.4 | 16

Copyright © Houghton Mifflin Company. All rights reserved.4 | 17 Customer Relationship Management Customer relationship management (CRM) focuses on using information about customers to create marketing strategies that develop and sustain desirable long-term relationships. –A focus on CRM is possible in e-marketing because of marketers’ ability to target individual customers. –The ability to identify individual customers allows marketers to shift their focus from increase share of market to increasing share of customer. –CRM is often based on the use of information technology.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 18 The 80/20 Rule 80 percent of business profits come from 20 percent of customers. –Advances in technology allow marketers to profile customers in real-time and thereby assess their lifetime value (LTV) to the firm. –Some customers may be too expensive to retain given the low level of profits they generate. –Firms should focus instead on developing and managing long-term relationships with more profitable customers.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 19 Figure 4.1: Why Customers Defect Source: “CRM,” CRM Trends, (accessed January 4, 2007).

Copyright © Houghton Mifflin Company. All rights reserved.4 | 20 Legal and Ethical Issues in E-Marketing Personal Privacy Issues –Unauthorized placement of “cookies” on personal computers –Web site information requirements for registration –Collection of information from children Spam –Unsolicited commercial (UCE) Phishing –Sending fraudulent s that appear to come from a trusted, legitimate source and request personal information for the purpose of committing identity theft Misappropriation of Intellectual Property –Illegal copying of copyrighted software, movies, CDs, and other creative materials

Copyright © Houghton Mifflin Company. All rights reserved.4 | 21 Figure 4.2: The BBBOnLine Privacy Seal and Program Explanation Source: Reprinted with permission from BBBOnLine, Council of Better Business Bureaus, Arlington, VA.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 22 Figure 4.3 : Types of Goods and Services Marketed Through Spam Source: Ferris Research, in “Spam for Everyone,” The New York Times, January 31, 2005,

Copyright © Houghton Mifflin Company. All rights reserved.4 | 23 Source: Reprinted by permission of the American Marketing Association.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 24 Source: Reprinted by permission of the American Marketing Association.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 25 Source: Reprinted by permission of the American Marketing Association.

Copyright © Houghton Mifflin Company. All rights reserved.4 | 26 After reviewing this chapter you should: 1.Be able to define electronic marketing and electronic commerce and recognize their increasing importance in strategic planning. 2.Understand the characteristics of electronic marketing— addressability, interactivity, memory, control, accessibility, and digitalization—and how they differentiate electronic marketing from the traditional marketing environment. 3.Have examined how the characteristics of electronic marketing affect marketing strategy. 4.Understand how electronic marketing and information technology can facilitate customer relationship management. 5.Be aware of legal and ethical considerations associated with electronic marketing.