E-Marketing/6E Chapter 2 Strategic E-Marketing and Performance Metrics

Chapter 2 Objectives After reading Chapter 2, you will be able to: Explain the importance of strategic planning, strategy, e-business strategy, and e-marketing strategy. Identify the main e-business models at the activity, business process, and enterprise levels. Discuss the use of performance metrics and the Balanced Scorecard to measure e-business and e-marketing performance. Enumerate key performance metrics for social media communication. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Amazon Story Founded in 1995 as an online retailer. Did not become profitable until Q4 2001. In 2011, generated $48.1 billion in net sales, $631 million in net income. Leveraged its competencies into different e-business models. Core business is online retailing, “everything store.” Established e-commerce partnerships with Target, Macy’s, and others. Developer services provider. Content provider. Created the first affiliate program. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Amazon Story, Cont. Founder and CEO Jeff Bezos is not interested in expanding to the physical world. Amazon’s success is based on selection, lower prices, product availability, innovative technology, and better product information. Which of Amazon’s core competencies do you think will drive its strategy in the future? https://www.youtube.com/watch?v=98BIu9dpwHU ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Strategic Planning Explain the importance of strategic planning, strategy, e- business strategy, and e- marketing strategy. “A managerial process to develop and maintain a viable fit between the organization’s objectives, skills, and resources and its changing market opportunities”. Process identifies firm’s goals for Growth Competitive position Geographic scope Other objectives, such as industry, products, etc. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

ESP: Environment, Strategy, and Performance The e-marketing plan flows from the organization’s overall goals and strategies. The ESP framework illustrates the relationships among environment, strategy, and performance. A SWOT analysis of the business environment (E) leads to the development of strategy (S) and the measurement of performance (P). Performance metrics are designed to evaluate effectiveness and efficiency of e-business and e-marketing operations. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

ESP Framework ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Strategy Strategy is the means to achieve a goal. E.g. Growing 10% Military roots. Tactics are detailed plans to implement the strategies Objectives, strategies & tactics can exist at many different levels in a company. E.g. Growing 10% ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

E-Strategy E-business strategy Strategy that deploys enterprise resources to reach performance objectives and create competitive advantages. Corporate-level (enterprise-level) E.g. Wal-Mart, MIS with suppliers E-marketing strategy Strategy that capitalizes on information technology to reach specified marketing objectives. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

e-business projects Most strategic plans explain the rationale for the chosen objectives and strategies. Four appropriate types of rationale for e-business projects: Financial justification examines cost/benefit analysis and uses standard measures such as ROI. Operational justification determines whether the company has the staff capability to engage customers in social media. Organizational justification involves the corporate culture and its fit with the new strategy. Strategic justification shows how the strategy fits with the firm’s overall mission, goals, and strategies. Technical justification asks whether the company has the technical expertise needed to implement the project. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Business Models A business model is a method for long- term survival and a value proposition for partners, customers, and revenue. An e-business model is a method by which the organization sustains itself in the long term using information technology, which includes its value proposition for partners and customers as well as its revenue streams. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Selecting A Business Model A firm will select one or more business models as strategies to accomplish enterprise goals. Components of business model selections: Identify the main e- business models at the activity, business process, and enterprise levels. Customer value Scope Price Revenue sources Connected activities Implementation Capabilities Sustainability ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Selecting A Business Model, Cont. Customer value create value through product offerings that are differentiated from the competition. Scope which markets does the firm serve and are they growing? Price are the products priced to appeal to markets and achieve company share and profit objectives? Revenue sources where is the money coming from? Is it plentiful enough to sustain growth and profit objectives over time? ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Selecting A Business Model, Cont. Connected activities What activities will the firm need to perform to create value? Does the firm have those capabilities? Implementation Does the company actually have the ability to make it so? Capabilities Does the firm have the financial, core competencies, and human resources available to make the selected models work? Sustainability Will the model selected create a competitive advantage over time? ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

E-Business Models E-business models are defined by a method in which the organization sustains itself in the long term using information technology, which includes its value proposition for partners and customers as well as its revenue streams. Even though the Internet spawned the vast majority of e-business models, it is very important to remember that e- marketing and e-business models may operate outside the Internet. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

E-Business Models, Cont. Value and Revenue Value encompasses the customer’s perceptions of the product’s benefits, specifically its attributes, brand name, and support services. Value is similar to the marketing concept, which suggests that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs. Value can be determine by determining whether there are more benefits than costs: Value = Benefits - Costs Revenue E-business strategies help to decrease internal costs E-business strategies also increase the enterprise revenue stream.

Menu of Strategic E-Business Models A key element in setting strategic objectives is to take stock of the company’s current situation and decide the level of commitment to e-business in general and e-marketing in particular. The higher the firm travels up the pyramid, the greater its level of commitment to e- business. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Level of Commitment to E-Business Both online and offline (Dell and most retailers) e-mail, blog Pure dot-com (Amazon, MySpace) ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Activity-Level E-Business Models This level affects individual business activities that can save the firm money, is low risk, and can include: Online purchasing Order processing E-mail Content publishing Business intelligence (BI) Online advertising and public relations (PR) Online sales promotions Pricing strategies Social media communication Search marketing ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Business Process-Level E-Business Models This level changes business processes to increase the firm’s effectiveness and can include: Customer relationship management (CRM) Knowledge management (KM) Supply chain management (SCM) Community building Affiliate programs Database marketing Enterprise resource planning (ERP) Mass customization Crowdsourcing Freemium Location-based marketing ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Enterprise-Level E-Business Models The firm automates many business processes in a unified system. Some traits of this level may be: E-commerce: refers to online transactions: selling goods and services on the internet. Social commerce: uses social media to facilitate online sales. Direct distribution: is when manufacturers sell directly to consumers. Content sponsorship: is a form of e-commerce in which companies sell advertising on their Web pages, YouTube videos, or other online media. Portal: A portal is a point of entry to the internet that combines diverse content from many sources. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Enterprise-Level E-Business Models Social network sites: are those that bring users together to share interests and personal or professional profiles. Online brokers: are intermediaries who assist in the purchase negotiations without actually representing either buyers or sellers (Online exchange, Online auction, B2B exchange). Manufacturer’s agents represent more than one seller. Purchasing agents represent buyers. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Pure Play Pure plays are businesses that began on the internet. They represent the final level of the pyramid. Pure plays face significant challenges. They must compete as new brands. They may need to take customers away from established businesses. Some pure plays have redefined industries: Yahoo!, Twitter, and eBay. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Performance Metrics Inform Strategy Performance metrics (Key performance indicators KPIs) are specific measures designed to evaluate the effectiveness and efficiency of operations, online and offline. Performance metrics: Provide measurable outcomes. Must be easy to understand and use. Must be actionable. Can motivate employees to make decisions that lead to desired outcomes. Discuss the use of performance metrics and the Balanced Scorecard to measure e- business and e- marketing performance . ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Web Analytics Web analytics is the e-marketing term for the study of user behavior on Web pages. Metrics measure activities such as: Click throughs from advertising Page views Number of comments posted on a blog Number of fans on a company Facebook page Conversions to sales ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Data Collection Data for web analytics are collected in several ways: Website server logs, IP addresses are recorded Cookie files are written Page tags are inserted Geolocation tracks users Web analytics software helps companies analyze data on server logs for marketing purposes. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Online Marketing Measurement Tool Use ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard The Balanced Scorecard provides a framework for understanding e-marketing metrics. The Balanced Scorecard provides 4 perspectives. Customer perspective Internal perspective Learning and growth perspective Financial perspective ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard (Cont.) ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard: Customer Perspective The customer perspective scorecard includes ways to measure goals such as customer loyalty and retention, engagement, satisfaction, etc. Loyalty and satisfaction measures may include percentage of visitors who return to site, time between visits, and shopping cart abandonment. Customer engagement could include the number of comments, photos or videos posted. ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard: Internal Perspectives The Internal perspective scorecard includes ways to measure goals related to the quality of online services and measures for the entire supply chain. Number of customers who use service Number of complaints in social media Amount of time to answer customer e-mail Number of website updates per day ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard: Learning & Growth Perspectives The learning and growth perspective scorecard includes human resources, product innovation and continuous improvement of marketing processes. Number of new products and features Number of customer complaints and fixes Conversions from online leads ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

The Balanced Scorecard: Financial Perspectives The financial perspective scorecard includes ways to measure financial goals such as sales, profit and return on investment. Sales growth and market share Return on invested capital Average order value Individual customer profit ©2014 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Social Media Performance Metrics Unique visitors Page views Impressions Number of searches Search engine ranking Number of followers, registrations, or subscribers Enumerate key performance metrics for social media communica- tion ©2014 Pearson Education, Inc. publishing as Prentice Hall

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Brand Health Metrics Share of Voice (SOV) Sentiment Brand influence ©2014 Pearson Education, Inc. publishing as Prentice Hall

Engagement Metrics Content viewership Tagging, bookmarking or “likes” Membership/Follower Number of shares Content creation ©2014 Pearson Education, Inc. publishing as Prentice Hall

Action & Innovation Metrics 2-38 Action metrics Click-through to an advertiser’s site. Contact form completion or registration. Event attendance. Purchase. Innovation metrics Number of ideas shared. Trend spotting.

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