1 C6 - February 27, 2008 Business 54 - Introduction to eCommerce Spring 2008 C6 - February 27, 2008

2 Class Game Plan C6 - February 27, 2008  eMarketing I.  Lab Time.

3 C6 - February 27, 2008C2 - February 13, 2008 Business & Revenue Models Business Models  Business to Consumer.  Business to Business.  Business to Business to Consumer.  Consumer to Business.  Communities.  Exchanges-Marketplaces.  Governmental.  Peer to Peer.  Media. Revenue Models  Banner-Advertising.  Subscription.  Transactional.  ‘Begging’-Donations.  Middlemen.  Taxation.

4 C6 - February 27, 2008C2 - February 13, 2008 Introduction to eMarketing  Traditional Marketing focuses on the 4 P’s: Product-What am I selling? Price-What am I charging? Placement-Where am I selling? Promotion-How do I make prospective buyers aware?  All of these are also important in the Web space, but there are some differences: Product is the same regardless of whether it is sold online or offline. Placement of the product is, by definition, on the Internet.  To the remaining 2 P’s we need to add 2 more to get to the 6 P’s of eMarketing: Personalization. Persistence. (Promotion). (Price / Price Discrimination).

5 C6 - February 27, 2008C2 - February 13, 2008 Customer Acquisition Cost (CAC)  To sell your product, you need to first identify prospects and then convert them to customers.  Several ways to identify prospects: Market Research. Focus Groups / Polling. Referrals.  Many ways to acquire customers (sales channels): Paid Advertising (online and offline). Word of Mouth. Viral Marketing. Free Media. Spam. Junk Mail. Web Circles. Affiliates.

6 C6 - February 27, 2008C2 - February 13, 2008 Customer Acquisition Cost (CAC)  But there is a cost to do anything!  CAC is usually stated in an average per customer acquired: Spend $100 and acquire 10 customers, your CAC = $10  Cost usually varies by: Sales Channel. Time Line of the Acquisition Campaign. Scope of the Acquisition Campaign.  How much to spend is driven by the expected LCR (Lifetime Customer Revenue).  Rule of Thumb is CAC should not exceed one year’s worth of projected Customer Revenue.  Average eMarketing CAC is $5.

7 C6 - February 27, 2008C2 - February 13, 2008 Lifetime Customer Revenue (LCR) LCR is the amount of revenue you expect to collect from a customer: Three Year Perspective. Discounted Revenue Stream. Subject to faulty projections / assumptions. LCR – CAC > $0.7 Strategies to grow CAC: Increase initial purchase $ amount via free shipping, etc. Up Sell. Cross Sell. Follow-up Sales / Reminder Notices. Special Promotions / Sales-Deals. Retention Bonus / Frequent Flier Plans. Comparisons-Tradeoffs in CAC and LCR determine which Internet or Offline sales channels should be used. Also, it should drive Customer ServiceWhich customers to keep and which ones to prune. ALWAYS REMEMBER IT IS EASY (AND CHEAPER) TO KEEP AN EXISTING CUSTOMER WITH POSITIVE LCR THAN IT IS TO FIND & ACQUIRE A NEW ONE!

8 C6 - February 27, 2008C2 - February 13, 2008 Personalization  Tailoring your selling-marketing approach to select customer segments.  Knowing who the customer is so that you can personalize the GUI:  Involves grouping prospects & customers into categories: Usually 5 to 20 categories-groups. Usually 20 to 100 key demographics. Some key demographics are: Age Gender Prior Spend / Purchase History Geography Homeowner vs. Renter CategoryGenderAgeEthnicityZip Code….Home Owner? 1M18White93921Y 2M45Asian-Amer85260N 3F28White02146N 4F36African-Amer94921N 5F65Unknown33214N M Y

9 C6 - February 27, 2008C2 - February 13, 2008  Usually a moving day Behavior-Personalization Grid.  Use of ‘Cookies’ and Logins. CategoryGenderAgeEthnicityZip Code….Home Owner? 1M18White93921Y 2M45Asian-Amer85260N 3F28White02146N 4F36African-Amer94921N 5F65Unknown33214N M Y Personalization

10 C6 - February 27, 2008C2 - February 13, 2008  Targeted Direct Marketing.  Web Circles.  Referral Programs.  Lead Generation. Promotion

11 C6 - February 27, 2008C2 - February 13, 2008 Promotion / ‘Spamming’’  SPAM is generic targeted promotion: Buy lists. Mining your own data base.  Originally viewed as a substitute / competitor to Mass (Junk) Mailings.  Cost Advantage over traditional Mass (Junk) Mailings: Junk Mail =$3,000-$5,000 per thousand ‘eyeballs’, or CPM. Spam=$3-$7 per thousand ‘eyeballs’, or CPM.  Content Disadvantage: Fewer color and image capabilities. Not a ‘Keep for Later’ document. Subject Line Advertising.  Annoyance has reached critical mass: Federal intrusion via legislation or regulations. Spam Blockers (e.g., Algorithms, Challenge-Response). Decline in effectiveness. Distasteful to Fortune 1000 companies. Week Two

12 C6 - February 27, C6 - February 27, 2008 Questions…… (and maybe some) Answers

13 C6 - February 27, C6 - February 27, 2008 Lab Time.