Electronic Commerce eCommerce Marketing Issues MIS 6453 – Spring 2006 Instructor: John Seydel, Ph.D.

Student Objectives Summarize the importance of identifying relevant market segments Discuss how the stages of customer loyalty apply to ecommerce Apply the 7 Cs to customer interface development Describe web-based advertising concepts Discuss why an understanding of search engine concepts is important in ecommerce

Overview of Marketing Strategy Strategies address the marketing mix (4 Ps), but mostly the big P General options Product-based (e.g., Home Depot) Customer-centered (pioneered on B2B sites; universities) Trust-buildingTrust-building is a key (on or off the Web) The Web is an intermediate step between mass media (low trust) and personal contact (high trust) Using the Web, firms can capture some of the benefits of personal contact yet avoid the high costs inherent with that approach Various market segments thererfore need to be identified and targeted differently; first step in building customer-centered website

Segmentation Summary Traditional perspective Geographic Demographic Psychographic (personality, lifestyle, social class) Occasion perspective (e.g., workday, vacations, holidays) Behavioral perspective Traditional (browser, buyer, shopper) Web usage (simplifier, surfer, bargainer, connector, routiner, sportster) Life cycleLife cycle (relationship intensity varies) Aware Explorer Familiar Committed Separated Why does it matter? Unlike with traditional commerce, we can build multi-segment, multi- feature sites in the virtual world We can further customize the experience for individual users This is a customer interface issue

The 7 Cs of the Customer Interface Context Site’s layout and design Commerce Site’s capability to enable commercial transactions Connection Degree site is linked to other sites Communication The ways sites enable site-to- user communication or two-way communication Customization Site’s ability to self-tailor to different users or to allow personalization Community The ways sites enable user-to- user communication Content Text, pictures, sound and video that webpages contain

Fit and Reinforcement of the 7Cs Context Content Community Customization Communication Connection Commerce Business Model Reinforcement Is each of the 7Cs consistent with the others? Supporting Fit Do each of the 7Cs individually support the business model? The success of a business depends on the extent that all of the Cs work together to support the value proposition and business model:

The 7 Cs – Design Context Aesthetics (Form) Integrated Aesthetically Dominant HighLow High Low Function Functionally Dominant Frontier is gradually moving outward as technology advances The age old argument of form vs. function is being changed by the Web:

Aesthetic Example — KMGI.com High form, low function: The KMGI approach used to make heavy use of visual elements, but lacked performance capability. Now, KMGI has integrated more functionality into its site, while still maintaining some of the strong visual elements. BEFOREAFTER

Functional Example — Brint.com Low form, high function: Brint.com assumes its users have little need for visual elements or themes and instead seek ease of use and plentiful information: Notice the plethora of links The site is also text- laden

The 7 Cs – Content Content refers to all digital information included on the site. There are four key dimensions to content, each carrying choices about how to convey the site’s content:: Dimension Choices Offering MixAppeal Mix Multimedia Mix Content Type Products Services Information Cognitive functional, low price, availability, etc. Emotional humor, warmth, stories, etc. Text Audio Video Image Graphics Current Reference

The 7 Cs – Community Bazaar Theme Park Club Shrine Theatre Cafe Apparent archetypes: Wander thru vast array of interest areas; no interaction Finite group of interest areas Focused on particular interest area; high member interaction High focus with minimal member interaction Particular focus with moderate member interaction Focus on common interest area with considerable interaction

Focus versus Interactivity Games.yahoo.comContactConsortium.com VoxCap.comBolt.com LeonardoDiCaprio.com Ifilm.com Women’s Cancer Conn. Trace.com A number of hybrid communities can be form by combining interactivity and focus in unique ways: Bazaa r Focus Theme Park Club ShrineTheater Cafe Interactivity Broad Narrow Limited Extensive Non-equilibrium state: Successfullymanaged communities will movetoward higher levels of interaction

The 7 Cs – Customization PERSONALIZATION Log-in Registration  The site recognizes return users and configures itself accordingly Cookies  Temporary files that track and gather data about user’s behavior Personalized Accounts  Provided free-of-charge to site users Content/Layout Configuration  Users select layout and content based on their interests Storage  Sites provide virtual hard-disk storage Agents  Programs designed to perform simple tasks TAILORING Based on Past User Behavior  Many sites adjust themselves dynamically based on a user’s past behavior and preferences Based on Behavior of Other Users With Similar Preferences  Some sites make recommendations to the user based on preferences of other users with similar profiles

The 7 Cs – Communication Taking advantage of the Internet Far cheaper than any other medium Operates 24/7/365 Know which customers have read a message and when Enables customers to find out information for themselves Can build a bond with customers – interactive, addictive Can communicate across borders and languages Not as easy with traditional commerce

Communication Modes BROADCAST Mass Mailings  Broadcast transmissions of large volumes of targeted at large audiences FAQs  Answers to frequent questions Newsletters  Inform site subscribers of site changes, special offers, etc. Content-Update Reminders  reflecting user interest in a particular content area Broadcast Events  Events can be broadcast from a website (webcast) that allows limited user control over such things as camera angle INTERACTIVE E-Commerce Dialogue  Organizations and users trade regarding order placement, tracking and fulfillment Customer Service  Organizations can provide customer service through trading or live online dialogue User Input  User-generated content such as supplier ratings and user feedback to the site

Some Communications Options 1:M non-responding (RFID.com) 1:M responding (BizRate.com) 1:M live interaction (webinars) 1:1 non-responding (Hallmark.com) 1:1 responding (Amazon.com) 1:1 live interaction (chat, e.g., tech support)

The 7 Cs -- Connection Destination Hub Portal Affiliate Meta-Software Outsourced Content PATHWAY-OUT Links lead the user outside the environment of the site; links are absolute in that the user’s click causes an exit from the original website. PATHWAY-IN Links are hybrid; the user’s click causes the retrieval of material from the same or other sites without exiting the current website.

Linking to Other Sites Links leading out (not necessarily off-site) Destination: provides site- generated content with few links to other sites (e.g., NYTimes.com) Hub: provides combination of site-generated content and selective external links (e.g., IndustryCentral.net) Portal: exclusively provides links to other sites (e.g., Yahoo.com) Bringing information in Affiliates: direct users to affiliated websites (e.g., Amazon and Toys-R-Us) Affiliates Outsourced content: content generated by third parties (e.g., Real.com) Meta-software: utility and plug-in software for narrowly- defined tasks (e.g., CNet’s Download.com)

The 7 Cs – Commerce TOOLS FOR ENABLING COMMERCE Registration  Allows the site to store information about users and user preferences Shopping Cart, One-Click Shopping  Facilitates online shopping by making it more user-friendly Security, Credit-Card Approval  Enables online transactions by allowing secure sharing of credit-card info Orders Through Affiliates  Sites must be able to track orders that come from and go to affiliates Configuration Technology  Users can test product compatibility, price trade-offs, product substitutions Order Tracking, Delivery Options  Once orders are placed, users can choose how they would like their products delivered and can track those orders from the site to their front doors.

The 7Cs of Schwab.com Context Schwab.com is largely functional; the only graphics used are those that display market behavior. Commerce Schwab is essentially a broker with a transaction-based revenue model. There are also fee services that Schwab offers. Connection Schwab.com’s content and information is largely generated in-house; there are no links to outside sites. Communication Schwab.com provides news alerts. User response is limited. Basically, the site is a one-to- many, non-responding site. Customization Schwab.com is highly customizable. Users can personalize the site’s content, layout, communication and access. Community There is very little interaction among Schwab.com users. The site focuses primarily on the financial needs of the individual. Content Schwab.com is an information- dominant site that generates all of its own material.

Managing Customer Relationships Reconsider the customer life-cycle and how it’s managed Acquisition costs: money a site spends to draw one visitor to the site Conversion:  Converting a first-time visitor into a customer  Conversion cost – cost of inducing one visitor to make a purchase, sign up for a subscription, register, etc. Retained customers: customers who return to the site one or more times after making their first purchases It’s important, therefore, to build and maintain good relationships This is CRMCRM

Adding Value: Supporting the Customer Decision Process Any online offering must map the products and services onto the customer decision process: Customer Decision Process Needs Recognition Search for Ideas and Offerings Purchas e Decision Post-Sale Support and Perks Evaluation of Alternatives What occasions trigger the need for my product? What tactics can be used to stimulate demand? What information would the consumer need to make a selection? What are the key evaluation criteria that the consumer will use to evaluate my product/service? What information should the website offer to make the consumer comfortable with his or her choice? What functionality should the site present to communicate privacy, trust and security? What post-sale services can the website offer to create loyalty?

Advertising on the Web Why? Stimulate demand for products/services Link to/from affiliate sites Banner ad: small rectangular object on a Web page Interactive marketing unit (IMU) Specifies ad formatsad formats Standard banner sizes that most Web sites have voluntarily agreed to use Banner exchange network: coordinates ad sharing Banner advertising network: acts as a broker between advertisers and Web sites that carry ads Note Online advertising - is more tractable than offline advertising Offline advertising – traditional TV, radio, billboard and magazine can be tagged with.com

A Challenge: Measuring Ad Effectiveness Some things to measuremeasure Cost per thousand (CPM): pricing metric used when a company purchases mass media advertising Trial visit: first time a visitor loads a Web site page Page view: each page loaded by a visitor Impression: each time the banner ad loads Where do we get the data? Some tools Server logs Analysis software

Other Ad Formats Popup windows Or pop-under Use sparingly Popup blockers can thwart Interstitial ads: when a user clicks a link to load a page, the interstitial ad opens in its own browser window

It’s All About Driving Traffic to a Website eCommerce Website Domain Name Search Engines Public Relations Promotions Advertisements External Links No spamming! Opt-in/opt-out Best publicity is free! Contests, free samples,... Via reciprocity Affiliates

Search Engines Websites that help people find things on the Web Search engines Web directories (hierarchical listing by category) Three components: Spider, crawler, &/or robot: programs that automatically search the Web Index or database: storage element of a search engine Search utility: uses terms provided to find web pages that match Site ranking: weighting factors are used by search engines to decide where URLs appear on search result lists Positioning and optimization: combined art and science of having a particular URL listed near the top of search engine results

Paid Search Engine Inclusion and Placement Paid placement (aka sponsorship) Option of purchasing a high listing on results pages for a particular set of search terms Rates vary Constitutes around 40% of Internet advertising (compare to banner ads at 20%) Try: Google search for “snow skis” Search engine placement brokers Companies that aggregate inclusion and placement rights on multiple search engines Example: LookSmart (search “Sports” for skis)

<meta name = “keywords” content = “coke, coca-cola, the real thing, soft drinks, pop, mixers, cola” /> Coca-Cola Homepage Welcome to the Coca-Cola Homepage!... How Search Engines Search

Summary of Objectives Summarize the importance of identifying relevant market segments Discuss how the stages of customer loyalty apply to ecommerce Apply the 7 Cs to customer interface development Describe web-based advertising concepts Discuss why an understanding of search engine concepts is important in ecommerce

Now, Some More Work with Web Pages We’ll continue with the example we started a while back Let’s do a little (very little) reviewing first Then we’ll add a few features If time permits, this exercise will be the start of a real website

Review: Standard XHTML Document... title goes here scripts, style rules, meta elements, etc this is where content and markup goes...

An Overview of XHTML Elements A web document is a collection of XHTML elements Note that XHTML is essentially HTML XML compliant Reformulation of HTML, but with stricter rules Two types of elements Standard Empty Each element Has  Opening tag and closing tag is standard  Self closing tag if otherwise May have attributes specified Also: XHTML entities (like )

XML Syntax for Standard Elements Either... content... Or <tag attr1=“xxx” attr2=“yyy” attr3=“zzz”... >... content... Why the difference? More readable code (for us, not the computer)

Examples of Standard Elements Paragraphs, headings, divisions Hyperlinks Lists Tables Forms Objects Display markup

Syntax for Empty Elements Either Or <tag attr1=“xxx” attr2=“yyy” attr3=“zzz”... /> Notice: no content; attributes provide full specification

Examples of Empty Elements Images and embedded objects Form input controls (e.g., text boxes) Breaks, horizontal rules, etc. Meta tags

Some Important XHTML Body Elements Hyperlinks: Objects:, or Lists:, Tables:,, Text blocks:, Display:, or, or, Forms:,,, Style rules: Miscellaneous:,

Referencing Other Files Where? Hyperlinks Images (inline or background) Objects (e.g., Flash movies) And other places also, but beyond our scope Absolute referencing: resources on another server Relative referencing Preferred Need to specify relative to calling document  In same folder  In higher level folder  In lower level folder  In sibling folder

Appendix

Trust in Three Information Dissemination Models

Five Stages of Customer Loyalty

Funnel Model of CRM

Ad Format Guidelines

45 Banner Click-Through Rates Banner Click-Through Rates (Apr 2005-Jan 2006) Source:Nielsen//NetRatings Percent Month

Pool of Impressions Pool of Visitors Buyers 2% 5% 1, Cost per Impression: $15/CPM ($.015) Cost per 2% click-through ($.015/.02= $.75) Cost per 5% conversion ($.75/.05=$15.00) Ad Cost Model

Potential Profitability of Each Potential Site Can Be Determined

Affiliate Marketing Strategies Affiliate marketing: one firm’s website includes descriptions, reviews, ratings, or other information about a product that is linked to another firm’s site Affiliate site: obtains the benefit of the selling site’s brand in exchange for the referral Cause marketing: affiliate marketing program that benefits a charitable organization

URL Brokers and Registrars URL brokers: sell or lease domain names Registrars: arrange for initial assignments of domain names ICANN Internet Corporation for Assigned Names & Numbers Maintains a list of accredited registrars Operates InterNIC.com Domain name parking: Permits purchaser of domain name to maintain a simple website so that domain name remains in use Example: DirectNIC.com