E-commerce business. technology. society. Kenneth C. Laudon Second Edition Kenneth C. Laudon Carol Guercio Traver Copyright © 2004 Pearson Education, Inc.

Chapter 8 E-commerce Marketing Communications Copyright © 2004 Pearson Education, Inc.

Learning Objectives Identify the major forms of online marketing communications Understand the costs and benefits of online marketing communications Discuss the ways in which a Web site can be used as a marketing communications tool Copyright © 2004 Pearson Education, Inc.

ESPN Motion: TV Ads to the Internet ESPN Motion: Leading-edge multimedia form of advertising System sends packets of video at slow bit rate; when entire video has been downloaded, it is playable Enables delivery of very high quality video over Internet Also delivers 15-20 second advertising clips either before or after video Higher quality than streaming video, causes less Internet congestion Copyright © 2004 Pearson Education, Inc.

ESPN Motion: TV Ads to the Internet Page 441 Copyright © 2004 Pearson Education, Inc.

Marketing Communications Online marketing communications: Methods used by online firms to communicate with consumer and create strong brand expectations Promotional sales communications: Suggest consumer “buy now” and make offers to encourage immediate purchase Branding communications: Focus on extolling differentiable benefits of consuming product or service Copyright © 2004 Pearson Education, Inc.

Online Advertising Paid message on a Web site, online service or other interactive medium, such as interactive messaging 2002: $6.3 billion spent, expected to grow to $9.1 billion by 2007 Advantages: Ability to target ads to narrow segments and track performance in almost real time Provide greater opportunity for interactivity Disadvantages: Concerns about cost versus benefit Concerns about how to adequately measure results Copyright © 2004 Pearson Education, Inc.

Online Advertising from 2000-2007 Figure 8.1, Page 445 Copyright © 2004 Pearson Education, Inc.

Online Advertising by Industry-2002 Figure 8.2, Page 446 Copyright © 2004 Pearson Education, Inc.

Forms of Online Advertisements Banners, pop-ups and rich media ads Search engine marketing: Paid search engine inclusion and placement Sponsorships Affiliate relationships Copyright © 2004 Pearson Education, Inc.

Banners, Pop-ups and Rich Media Ads Banners: Display promotional message in a rectangular box at top or bottom of computer screen Pop-ups: Appear on screen without user calling for them Pop-unders: Open underneath user’s active browser window and do not appear until user closes active window Rich media ads: Employ Flash, DHTML, Java, streaming audio and/or video Interstitials: Provide way of placing a full-page message between current and destination pages of user Superstitials: Rich media ad that is pre-loaded into browser’s cache and does not play until fully loaded and user clicks to another page Copyright © 2004 Pearson Education, Inc.

Types of Banner Ads Figure 8.3, Page 447 Copyright © 2004 Pearson Education, Inc.

Online Advertising Placement Methods Banner swapping: Arrangements among firms allow each firm to have its banners displayed on other affiliate sites for no cost Banner exchanges: Arrange for banner swapping among firms Advertising networks: Act as brokers between advertisers and publishers, placing ads and tracking all activity related to the ad Copyright © 2004 Pearson Education, Inc.

Online Advertising Vehicles Table 8.1, Page 450 Copyright © 2004 Pearson Education, Inc.

Most Popular Online Marketing Methods Figure 8.4, Page 450 Copyright © 2004 Pearson Education, Inc.

Search Engine Marketing: Paid Search Engine Inclusion and Placement Search engine marketing one of fastest growing and most effective forms of online marketing communications Paid inclusion – firms pay for inclusion in search engine index Paid placement – firms pay for a guarantee that it will appear prominently in results of relevant searches Overture.com and Google leaders in this technology Appropriate disclosure of paid inclusion and placement practices an issue Copyright © 2004 Pearson Education, Inc.

A Paid Listing on Overture.com Figure 8.5, Page 452 Copyright © 2004 Pearson Education, Inc.

Search Engine Policies on Paid Placement and Inclusion Table 8.2, Page 453 Copyright © 2004 Pearson Education, Inc.

Sponsorships and Affiliate Marketing Sponsorship: Paid effort to tie an advertiser’s name to particular information, event, venue in way that reinforces brand in a positive, yet not overtly commercial manner Advertorial a common form Affiliate relationship: Permits a firm to put its logo or banner ad on another firm’s Web site from which users of that site can click through to the affiliate’s site Sometimes called tenancy deals Amazon/ToysRUs an example Customer hijacking an issue Copyright © 2004 Pearson Education, Inc.

Insight on Society: Targeting Children Marketers now migrating to Web where estimated 20 million children in U.S. between ages 2-17 are active online Children’s Online Privacy Protection Act (COPPA) prohibits collection of personal information from children under age 13 Compliance has been generally good; however some companies have been fined by FTC for violations Copyright © 2004 Pearson Education, Inc.

Direct E-mail Marketing and the Spam Explosion Direct e-mail marketing: E-mail marketing messages sent directly to interested consumers who “opt-in” or have not “opted-out” Spam: Unsolicited commercial e-mail Spam is exploding out of control – March 2003, 45% of all Internet e-mail purportedly was spam Efforts to control spam: Filtering software (only partly effective) Self-regulation by industry (ineffective) Government regulation (no Federal legislation yet) Copyright © 2004 Pearson Education, Inc.

Spam Categories Figure 8.6, Page 459 Copyright © 2004 Pearson Education, Inc.

You’ve Got Spam Figure 8.7, Page 460 Copyright © 2004 Pearson Education, Inc.

Other Forms of Online Marketing Communications Online catalog: Provide equivalent of paper-based catalog Online chat: Provides equivalent of help from sales representative Public relations: Involves communicating with target audiences, or publics, using methods other than advertising Copyright © 2004 Pearson Education, Inc.

Beval’s Online Catalog Figure 8.8, Page 461 Copyright © 2004 Pearson Education, Inc.

Mixing Offline and Online Marketing Communications Traditional offline consumer-oriented industries have learned to use Web to extend brand images and sales campaigns Online companies have learned how to use traditional marketing communications to drive sales to Web site Most successful marketing campaigns incorporate both online and offline tactics Copyright © 2004 Pearson Education, Inc.

The Mix of Online and Offline Marketing Communications Figure 8.9, Page 463 Copyright © 2004 Pearson Education, Inc.

In contrast, Nordstrom seems to have found right mix Insight on Business: The Very Rich are Different From You and Me: Neiman Marcus, Nordstrom and Tiffany & Co. Online luxury retailers have had a difficult time translating their brands and look and feel of luxury shops into Web site that masses will see Cases in point: Nieman Marcus/Kate Spade and John Hardy Web site boutiques; Tiffany In contrast, Nordstrom seems to have found right mix Copyright © 2004 Pearson Education, Inc.

Online Marketing Metrics: Lexicon Impressions: Number of times an ad is served Clickthrough rate (CTR): Percentage of people who actually click on ad Hits: Number of http requests Page views: Number of pages requested by visitors Stickiness (duration): Average length of time visitors remain at site Unique visitors: Number of distinct unique visitors to site Loyalty: Percentage of visitors who return in a year Reach: Percentage of total number of consumers in a market who visit site Recency: Average number of days elapsed between visits Copyright © 2004 Pearson Education, Inc.

Online Marketing Metrics: Lexicon (cont’d) Open rate: In e-mail campaign, number of customers who open mail Acquisition rate: Percentage of visitors who register or visit product pages Conversion rate: Percentage of visitors who actually purchase something Attrition rate: Percentage of customers who purchase once, but never return within a year Abandonment rate: Percentage of shoppers who begin a shopping cart but then fail to complete the form and leave the site Retention rate: Percentage of existing customers who continue to buy on a regular basis Copyright © 2004 Pearson Education, Inc.

Marketing Metrics Lexicon Table 8.3, Page 467 Copyright © 2004 Pearson Education, Inc.

An Online Consumer Purchasing Model Figure 8.10, Page 470 Copyright © 2004 Pearson Education, Inc.

Customer Tracking and Marketing Strategies Used by U.S. Companies Figure 8.11, Page 471 Copyright © 2004 Pearson Education, Inc.

Does Online Advertising Work? True that clickthrough rates may be low, but these are just one measure of effectiveness Research indicates that most powerful marketing campaigns include both online and offline advertising Copyright © 2004 Pearson Education, Inc.

Online Marketing Communications: Typical Clickthrough Rates Table 8.4, Page 471 Copyright © 2004 Pearson Education, Inc.

Clickthrough Rates by Format Figure 8.12, Page 472 Copyright © 2004 Pearson Education, Inc.

Costs of Online Advertising Cost per thousand (CPM): Advertiser pays for impressions in 1,000 unit lots Cost per click (CPC): Advertiser pays pre-negotiated fee for each click ad receives Cost per action (CPA): Advertiser pays pre-negotiated amount only when user performs a specific action Copyright © 2004 Pearson Education, Inc.

Different Pricing Models for Online Advertisements Table 8.5, Page 473 Copyright © 2004 Pearson Education, Inc.

Traditional and Online Advertising Costs Compared Table 8.6, Page 474 Copyright © 2004 Pearson Education, Inc.

Software for Measuring Online Marketing Results WebTrends: Software program that automatically calculates activities at site, such as abandonment rate, conversion rate, etc. WebSideStory: Web service that assists marketing managers Copyright © 2004 Pearson Education, Inc.

Web Site Activity Analysis Figure 8.13, Page 475 Copyright © 2004 Pearson Education, Inc.

Insight on Technology: Web Site Metrics by WebSideStory WebSideStory.com: ASP that sells Web site analytics and optimization services to other firms Allows Webmasters to monitor and analyze Web traffic in real time, collect visitor intelligence, and enable faster adjustments to underperforming pages Major product: HitBox, which provides real-time traffic analysis Copyright © 2004 Pearson Education, Inc.

The Web Site as a Marketing Communications Tool Web site can be viewed as an extended online advertisement Domain name: First communication an e-commerce site has with a prospective customer Search engine optimization: Register with as many search engines as possible Ensure that keywords used in Web site description match keywords likely to be used as search terms by user Link site to as many other sites as possible Get professional help Copyright © 2004 Pearson Education, Inc.

Search Engine Ranking Criteria Table 8.7, Page 479 Copyright © 2004 Pearson Education, Inc.

Web Site Functionality Factors affecting effectiveness of a software interface: Utility Ease of use Factors in credibility of Web sites: Design look Information design/structure Information focus Responsiveness Copyright © 2004 Pearson Education, Inc.

Factors in the Credibility of Web Sites Table 8.14, Page 480 Copyright © 2004 Pearson Education, Inc.

Site Design Features that Impact Online Purchasing Table 8.8, Page 482 Copyright © 2004 Pearson Education, Inc.

Case Study: Ad Bombs, Ambush Marketing, Customer Hijacking and Other Invasive Marketing Techniques Grow on the Web Ad bomb (Ad-ware): Any computer program that is surreptitiously downloaded on a client computer for the purpose of calling for unwanted advertising without the user’s consent or intervention Ambush advertising: Gator.com’s mini-billboard Customer hijacking: self-executing programs downloaded onto client computers that permit a company to “hijack” customers of affiliate marketing sites, and redirect affiliate commission to hijacker Copyright © 2004 Pearson Education, Inc.