1. E-Commerce Marketing and advertising concepts
Chapter 6

2. Learning Objectives Understand three e-commerce behavioral issues:
the key features of the Internet audience
the basic concepts of consumer behavior and purchasing, and
how consumers behave online
Identify and describe the basic digital commerce marketing and advertising strategies and tools
Identify and describe the main technologies that support online marketing

3. The Internet Audience
Before firms can sell their products online, they first must understand what kinds of people they will find online and how those people behave in the online marketplace
Two questions that are addressed include:
Who is online?
How do people behave online?

4. The Internet Audience
In 2015 in the US, around 260 million people of all ages had access to the Internet
Almost 91 million households in the US (over 75% of all households) had broadband access to the Internet
By comparison, 98% of all US households currently have televisions and 94% have telephones
Worldwide, around 3.1 billion people are online
Internet growth has slowed to about 2% a year in the US and it is unlikely that Internet access will reach the same levels as televisions or telephones in the near future

5. Intensity and Scope of Usage
The slowing growth rate in the US Internet population is compensated for, in part, by an increasing intensity and scope of use
Overall, over 71% of all American adults report logging on in a typical day
Internet use by teens is even more pervasive, with over 90% saying they go online daily, and about 25% reporting that they use the Internet almost constantly
People also spend more time online – almost 2 and a half hours per day
In 2015, mobile smartphones and tablets are major access points to the Internet and online commerce
About 194 million people, almost 75% of US Internet users, access the Internet using a mobile phone

6. Demographics and Access
The demographic profile of the Internet – and e-commerce – has changed greatly since 1995
Up until 2000, single, white, young, college-educated males with high incomes dominated the Internet
This inequality in access and usage led to concerns about a possible “digital divide”
Demographic similarities and differences can be assessed by looking at:
Gender, age, ethnicity, community type, income level, and education

7. Demographics and Access (cont.)
Gender
Roughly equal percentage of men and women users (84-85%)
Age
Young adults (18-29) form the age group with the highest percentage of Internet use (96%)
Adults in the group (93%) are also strongly represented
Another fast-growing group online is the 65 and over segment, 58% of whom now use the Internet
Teens (12-17) also have a very high percentage of their age group online (97%)
The percentage of very young children (0-11) has grown to 50%

8. Demographics and Access (cont.)
Ethnicity
Variation across ethnic groups is not as wide as across age groups
Ten years ago, there were significant differences among ethnic groups, but this has receded
Income level
About 97% of households with income levels above $75,000 have Internet access
Compare this to only 74% of households earning less than $30,000

9. Demographics and Access (cont.)
Education
Of those individuals with a high school education or less, 66% were online in 2015
95% of individuals with a college degree or more were online
In summary, the “digital divide” has indeed moderated, but it still persists along the age, income, and education dimensions

10. Other Internet Access Issues
In 2015, around 91 million US households had broadband service in their homes
Broadband adoption rates are lower for older adults, those with low levels of education, and those with low household incomes
Rural residents, African Americans, and Latinos are also less likely to have a home broadband connection
Consumer purchases on the Internet are influenced by “neighborhoods” where others purchase online
Social networks have a powerful influence on shopping and purchasing behavior
Membership in social networks has a large influence on discovering new independent music, but less influence on already well-known products

11. Consumer Behavior
Once firms have an understanding of who is online, they need to focus on how consumers behave online
The study of consumer behavior is a social science discipline that attempts to model and understand the behavior of humans in a marketplace
Models of consumer behavior attempt to predict or “explain” what consumers purchase and where, when, how much, and why they buy
The following slides describe:
a general model of consumer behavior
a more detailed model of online consumer behavior

12. A GENERAL MODEL OF CONSUMER BEHAVIOR (FIGURE 6.1)

13. A MODEL OF ONLINE CONSUMER BEHAVIOR (Figure 6.3)

14. Clickstream Behavior
Clickstream behavior refers to the transaction log that consumers establish as they move about the Web
They may move from search engine, to a variety of sites, then to a single site, then to a single page, and then, finally, a decision to purchase
Understanding individual user clickstream behavior may enable websites to be designed to better support this online purchase decision process

15. WHY CONSUMERS CHOOSE THE ONLINE CHANNEL (table 6.2)
REASON
% OF RESPONDENTS
Lower prices
59%
Shop from home
53%
Shop 24/7
44%
Wider variety of products online
29%
Easier to compare and research products and offers
27%
Products only available online
22%
Online customer reviews
18%
Better product information available 7%
Promotion via or text
Social media influence 1%

16. How Shoppers Find Vendors Online
Given the prevalence of “click here” banner ads, one might think customers are driven to online vendors by spur-of-the-moment decisions
In fact, only a tiny percentage of shoppers click on banners to find vendors
The three most common methods that shoppers use to find vendors online include:
Search engines
Online marketplaces (for example Amazon and eBay)
Go directly to a specific retail Web site
Online buyers are “goal-oriented” and intentional shoppers

17. Why More People Don’t Buy Online
Probably the largest factor preventing more people from shopping online is the “trust factor”
Distrust for online merchants
Credit card information loss
Use of personal information and invasion of privacy
Secondary factors can be summarized as “hassle factors”
Shipping costs
Returns
Inability to touch and feel the product

18. Digital commerce marketing and advertising strategies and tools
Online marketing has many similarities to, and differences from, ordinary marketing
The objective of both forms of marketing is to build customer relationships
But online marketing is also very different from ordinary marketing because the nature of the medium and its capabilities are so different
Four new elements of a comprehensive multi-channel marketing plan are:
Web sites
Traditional online marketing
Social marketing
Mobile marketing

20. Search Engine Marketing and Advertising
In 2015, companies will spend an estimated $25.7 billion on search engine marketing and advertising
Search engine marketing (SEM) refers to the use of search engines to build and sustain brands
Search engine advertising refers to the use of search engines to support direct sales to online customers
There are several different types of search engine advertising

21. Types of search engine advertising
Organic search
Search engines originally performed unbiased searches where Web sites were ranked based on a search engine’s algorithm
Paid inclusion
For a fee, search engines guarantee a Web site’s inclusion in its list of search results (often labeling them as sponsored links)
Keyword advertising
Merchants purchase keywords through a bidding process
Search engine optimization (SEO) is the process of improving the ranking of Web pages with search engines by altering the content and design of the Web pages and site

22. Search Engine Issues
While search engines have provided significant benefits for merchants and customers, they also present risks and costs
Search engines have the power to crush small businesses
Merchants may be at the mercy of search engines for access to the online marketplace
Other practices that degrade the results and usefulness of search engines include:
Link farms
Content farms
Click fraud

23. How an advertising network such as doubleclick works (figure 6.7)

24. Pricing Strategies
In the early years of e-commerce, sellers were pricing their products far below their marginal costs to attract new customers and achieve short-term success
Later, once the customer was part of a large, committed audience, then prices could be raised to the point where an online seller could achieve a profit through some combination of revenue models
Pricing is particularly difficult when information products and services have a marginal cost near zero
Several unique pricing strategies have been developed for online content and services

25. Online product, service, and content Pricing Strategies
Free and freemium
Users are offered a basic service for free, but must pay for premium or add-on services
The freemium revenue subsidizes the free services
Versioning
Creating multiple versions of information goods and selling essentially the same product to different market segments at different prices
Bundling
Offers consumers two or more goods for a reduced price
Dynamic pricing
Different from fixed-price strategies
Identifies different prices for different consumers, situations, and time periods

26. Internet Marketing Technologies
Online data sources
Web transaction logs – records user activity at a Web site
Registration forms
Shopping carts
Tracking files (cookies, etc.)
Databases, data warehouses, data mining, and big data
Customer relationship management (CRM) systems

27. Data Warehouse and Business Intelligence Applications

28. Customer Relationship Management (CRM) Systems
A CRM system is a repository of customer information that records all of the contacts that a customer has with a firm and generates a customer profile available to everyone in the firm with a need to “know the customer”
Data is collected through customer touch points
CRM systems assist firms in categorizing customers (potential customer, current customer, high-value customer, lost customer, etc.) and enabling them to best serve each individual customer based on their individual characteristics and needs
The basic idea of CRM is to treat different customers differently, because their needs differ and the value to the company also may differ

29. A customer relationship management system (Figure 6.10)

30. An online consumer purchasing model (Figure 6.11)