E-Marketing 5/E Judy Strauss and Raymond Frost Chapter 2: Strategic E-Marketing and Performance Metrics ©2009 Pearson Education, Inc. Publishing as Prentice Hall

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. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Amazon.com Founded in 1995 as an online retailer. Did not become profitable until Q4 2001. In 2007, generated $14.8 billion in net sales, $476 million in net income. Leveraged its competencies into different e-business models. Established e-commerce partnerships with Target, Macy’s, and others. Provided developer services. Created the first affiliate program. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Amazon.com, cont. Amazon’s success is based on selection, lower prices, product availability, innovative technology, and better product information. CEO Jeff Bezos is not interested in expanding to the physical world. Which of Amazon’s core competencies do you think will drive its strategy in the future? ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Strategic Planning A managerial process to develop and maintain a viable fit between the organization and its changing market opportunities. Process identifies firm’s goals for Growth Competitive position Geographic scope Other objectives, such as industry, products, etc. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Other objectives, such as industry, products, etc. Growth: How much can the company reasonably expect to grow in terms of revenues, and how fast? Competitive position: How should the company position itself against other firms in the industry? Geographic scope: Where should the company serve its customers on the continuum of local to multinational? Other objectives, such as industry, products, etc. ©2009 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). ©2009 Pearson Education, Inc. Publishing as Prentice Hall

ESP Framework ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Strategy Strategy is the means to achieve a goal. E-business strategy Strategy that deploys enterprise resources to reach performance objectives, competitive advantages. E-marketing strategy Strategy that capitalizes on information technology to reach marketing objectives. ©2009 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. E-business models include the use of information technology to achieve long-term goals. Firm selects one or more models as strategies to accomplish enterprise goals. ©2009 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: Customer value Scope Price Revenue sources Connected activities Implementation Capabilities Sustainability ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Components of business model selections……. Customer value: does the model create value through its product offerings that is differentiated in some way from that of its competitors? Scope: Which markets does the company serve, and are they growing? Price: are the company’s products priced to appeal to markets and also 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? ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Connected activates: what activities will the company need to perform to create the value described in the model? Implementation: the company must have the ability to actually make it happen, which involves the firm’s systems, people, culture, and so on. Capabilities: does the company have the resources (financial, core competencies, etc.) to make the selected models work? Sustainability: The e-business model is particularly appropriate if it can create a competitive advantage over time. ©2009 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) ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Activity-Level Models The lowest level of the pyramid affects individual business activities that can save the firm money if automated using information technology or the internet. Order processing: this model occurs when online retailers automate internet transactions created by customers Online purchasing: companies can use the web to place orders with suppliers, thus automating the activity. E-mail: when organizations send e mail communications to stakeholders, they save printing and mailing costs. Content publisher: in this model, companies create valuable content or services on their web sites, draw lots of traffic, and sell advertising. Business intelligence (BI) this activity refers to the low cost online gathering of secondary and primary information about competitors, markets, customers and more. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Online advertising and public relations (PR): the company buys advertising on someone else’s email or web site. Online sales promotions: companies use the internet to send samples of digital products (e.g., music or software) Dynamic pricing strategies online: with dynamic pricing, a company presents different prices to various groups of customers. Social media communication: use facebook pages, twitter streams, blogs and more ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Business Process-Level Models The next level of the pyramid changes business processes to increase the company’s effectiveness. Customer relationship management (CRM): CRM involves retaining and growing business and individual customers through strategies that ensure their satisfaction with the company and its products. Knowledge management (KM): KM systems create a storehouse of reports, customer account information, product sales, and other valuable information managers can use to make decisions. Supply chain management (SCM): involves coordination of the distribution channel to deliver products more effectively and efficiently to customers. Community building online: companies build web sites to draw groups of special interest users. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

5. Database marketing: involves collecting, analyzing, and disseminating electronic information about customers, prospects and products to increase profits. 6. Enterprise resource planning (ERP): refers to a back office system for order entry, purchasing, invoicing, and inventory control. 7. Mass customization: refers to the internet’s unique ability to customize marketing mixes electronically and automatically to the individual level. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Enterprise-Level Models E-commerce, direct selling, content sponsorship: E commerce refers to online transactions: selling goods and services on the internet, either in one transactions or over time with an ongoing subscription. Direct Portal: a portal is a point of entry to the internet, such as the Yahoo. They are portals because they provide many services in addition to search capabilities. Social networking: sites are those that bring user together to share interests and personal or professional profiles. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Broker models Agent models Online exchange, hub: guru.com Online auction : eBay.com Agent models Manufacturer’s/selling agents Shopping agent Reverse auction: allows individual buyers to enter the price they will pay for particular items at the purchasing agent’s web site. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Pure Play Models Pure plays are businesses that began on the internet. They represent the top level of the E-Business 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: E*Trade, eBay, Yahoo!, MySpace. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Performance Metrics Performance metrics are specific measures designed to evaluate the effectiveness and efficiency of operations. Performance metrics: Provide measurable outcomes. Must be easy to understand and use. Must be actionable. Can be utilized for employee evaluations. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Web Analytics Web analytics, commonly called metrics, is the study of user behavior on Web pages. Metrics measure activities such as: Click throughs Visitor patterns Length of time spent on a page or site Conversions to sales Web analytics software helps companies analyze data on server logs for marketing purposes. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

Social Engagement Metrics Online measurement also includes metrics for evaluating Web 2.0 technologies. Social engagement metrics allow marketers to know how visitors participate, not just whether they landed on a page. Time spent viewing a video, playing a game, or listening to music. Writing a comment on a blog. Downloading a MP3 file, ring tone, or other content. ©2009 Pearson Education, Inc. Publishing as Prentice Hall

The Balanced Scorecard NOW, they use: The Balanced Scorecard = enterprise performance management systems that measure many aspects of a firm’s achievements. 50% of organizations worldwide have adopted the Balanced Scorecard with excellent results. The scorecard approach links strategy to measurement by asking firms to consider their vision, critical success factors for accomplishing it, and subsequent performance metrics in four areas: Customer, internal, innovation and learning, and financial.

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 ©2012 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. Exhibit 2.7 provides a list of customer goals and measures. ©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Four Perspectives The customer perspective: Uses measures of the value delivered to customers. These metrics tend to fall into four areas: time, quality, performance and service, and cost. E.g. Time from order to delivery, customer satisfaction levels with product performance, amount of sales from new products, and industry-specific metrics such as equipment up-time percentage or number of service calls.

Applying the Balanced Scorecard to E-Business and E-Marketing Metrics for the Customer Perspective Customer Perspective Scorecard for E-Business Firm

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 Exhibit 2.8 provides a list of internal goals and measures. ©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Four Perspectives The internal perspective: Evaluates company success at meeting customer expectations through its internal processes. E.g.: cycle time (how long to make the product), manufacturing quality, and employee skills and productivity. Information systems are a critical component of the internal perspective for e-business firms.

Applying the Balanced Scorecard to E-Business and E-Marketing Metrics for the Internal Perspective Internal Perspective Scorecard for E-Business Firm

THE BALANCED SCORECARD: LEARNING AND 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 Exhibit 2.9 provides a list of learning and growth goals and measures. ©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Four Perspectives The learning and growth perspective : Companies place value on continuous improvement to existing products and services as well as on innovation in new products. E.g. Number of new products and the percentage of sales attributable to each; penetration of new markets; and the improvement of processes such as CRM or SCM initiatives.

Applying the Balanced Scorecard to E-Business and E-Marketing Metrics for the Learning and Growth Perspectives Innovation and Learning Scorecard for E-Business Firm

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 Exhibit 2.10 provides a list of financial goals and measures. ©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL

Four Perspectives The financial perspective: = Income and expense metrics as well as return on investment, sales, and market share growth. The point is to understand what the company wants to accomplish and devise performance metrics to monitor the progress and see that the goals are reached.

Applying the Balanced Scorecard to E-Business and E-Marketing Metrics for the Financial Perspective Financial Perspective Scorecard for E-Business Firm

Scorecard Benefits Obtain timely information to update its strategy. Balance long-term and short-term measures and evaluate every part of the firm and how each contributes toward accomplishing selected goals. It helps firms leverage their relationships with partners and supply chain members. Go beyond financial metrics in measuring many different aspects that lead to effective and efficient performance. Creates a long-term perspective for company sustainability.

Scorecard Benefits Forces companies to decide what is important and translate those decisions into measurable outcomes that all employees can understand. A great communication tool because employees can use the scorecard as a guide to coordinate their efforts. Support employee evaluation in that individual performance can be tied to successful outcomes on the metrics. A way to measure intangible as well as tangible assets. The are flexible and allow firms to select appropriate metrics for their goals, strategies, industry, and specific vision.

©2009 Pearson Education, Inc. Publishing as Prentice Hall