1. E-commerce Marketing & Advertising
IT 361: E-Commerce Systems
Chapter 4
E-commerce Marketing & Advertising
Readings: Chapter 6

2. “Know the customer” First Principle in marketing and sales is:
Who uses the web, who shop on the web and why, and what do they buy?

3. Consumers Online: The Internet Audience and Consumer Behavior
Around 85 million American households (70% of households) had broadband Internet access in 2013
Growth rate has slowed ( %, now 2-3%)
Intensity and scope of use both increasing
(↑usage → ↑comfort & familiarity →↑service to explore)
Some demographic groups have much higher percentages of online usage than other groups
Demographics to examine include gender, age, ethnicity, community type, income; education
Differences between broadband audience and dial-up
need to be taken into consideration when marketing

4. Consumers Online: The Internet Audience and Consumer Behavior
Location vs. Neighborhood effects (online – offline social ties)
Being located nearby other users of the online grocery increased the likelihood of purchasing at the site by 50%
(Importance of social ties and communication)
Ex: Amazon’s recommender Systems

5. Consumer Behavior Models
Who is your customer & How (s)he behaves
Attempt to predict/explain what consumers purchase and where, when, how much and why they buy.
Rule: If the consumer decision-making process can be understood, firms will have a much better idea how to market ad sell their products
Consumer behavior models based on background demographic factors and other intervening, more immediate variables

6. A General Model of Consumer Behavior

7. Background Demographic Factors
Cultural
Culture and subculture (ethnicity, age, lifestyle, geography)
Social
Reference groups
Direct (family, profession, religion, neighborhood, school)
Indirect (social class, lifestyle)
Opinion leaders (viral influencers)
Lifestyle groups (activities: hobbies, spots, events
interests :food, fashion, family
opinions: government, business, social)
Theory: once you understand a consumer's lifestyle or the lifestyle of a group of people, then you can design products and marketing messages that appeal specifically to that lifestyle group
Psychological
Psychological profiles
"People do not want your product or service." They do want answers to problems, solutions to needs, pathways to wants, or a secret door to their heart's desires.

8. Gillette knows that it doesn't sell blades. It sells clean shaves.
Revlon knows it doesn't sell nail polish. It sells romance.
Betty Crocker knows it doesn't sell cake mix. It sells, "Gee, mom, this cake is great!“

9. Why consumers choose the online channel?

10. The Purchasing Decision
Five stages in the consumer decision process:
Awareness of need
Search for more information
Evaluation of alternatives
Actual purchase decision
Post-purchase contact with firm

11. The Consumer Decision Process and Supporting Communications

12. The consumer decision-making process and types of offline and online marketing communications that supports this process and seek to influence the consumer before, during and after the purchase decision.
Both offline and online communication tools can be used to support the online consumer decision process in each of the 5 stages,

13. The Purchase Decision Process

14. A Model of Online Consumer Behavior
Figure 6.4, Page 349

15. Clickstream behavior
“deep” knowledge of the customer dynamically developed
Clickstream behavior of people online very close to the moment of purchase, enable marketers to understand what the consumer was looking for at each moment, and how much they are willing to pay, thus allowing marketers to precisely target their communications.

16. Most clickstream factors
Number of days since last visit
Speed of clickstream behavior
Number of products viewed during last visit
Number of pages viewed
Number of products viewed
Supplying personal information
Number of days since last purchase
Number of past purchases

17. Shoppers: Browsers and Buyers
Significance of online browsing for offline purchasing and vice versa should not be underestimated
E-commerce and traditional commerce are coupled and should be viewed by merchants and researchers as part of a continuum of consuming behavior

18. Online Shoppers and Buyers

19. Consumes use a variety & multiple of media. Online merchants should:
Ecommerce and traditional commerce are coupled and should be viewed by merchants as part of continuum of consuming behavior and not as radical alternatives once
Consumes use a variety & multiple of media.
Online merchants should:
build the information content of the site to attract browsers looking for information
Build content to rank high in SE
Put less attention on selling per se
Promote services and products in offline media

20. What Consumers Shop for and Buy Online
Online sales divided roughly into small ticket and big ticket items
Purchases of big ticket items (>$1000) (travel, computer hardware, consumer electronics) expanding
Top small ticket categories (apparel, books, office supplies, software, etc.) have similar characteristics—sold by first movers, small purchase price, physically small, high margin items (CDs, software), broad selection of products available

21. What Consumers Buy Online

22. Source: “ Factors affecting E-commerce uses in Saudi Arabia”, Khalil H
Source: “ Factors affecting E-commerce uses in Saudi Arabia”, Khalil H., University of Liverpool, 2010

23. Intentional Acts: How Shoppers Find Vendors Online
54% of shoppers use search engines
20% of consumers go directly to site
12% use comparison shopping or product rating sites
Most online shoppers plan to purchase product within a week, either online or at a store
Most online shoppers have a specific item in mind

24. Merchants can convert “goal-oriented” consumers into buyers by
Targeting their communications
Design their sites (easy access, product information, full selection, customer service)
At the very moment the consumer is searching

25. Why More People Don’t Shop Online
Major online buying concerns:
Trust
Security
Privacy
Hassle
Shipping costs
Inability to see/touch product
Return policy
Source: “ Factors affecting E-commerce uses in Saudi Arabia”, Khalil H., University of Liverpool, 2010

26. Trust, Utility, and Opportunism in Online Markets
Factors shaping the decision to purchase online:
Utility (Good deals, convenience, speed of delivery, ..)
Trust (opportunities behaviors by sellers) (reputation of honesty, fairness, and delivery of quality product = basic elements of brands). Ex: Amazon’s Book reviews
Online sellers who develop trust are able to charge premium price
Factors leading to trusting online relationship: Perception of web site credibility, ease of use, and perceived risk
Traditional ads are far more trusted than online ads
Personal friends & families are far more trusted than SN members

27. Basic Marketing Concepts
Strategies and actions firms take to establish relationship with consumer and encourage purchases of products and services
It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves.
Internet marketing
Using Web to develop positive, long-term relationship with customers, thereby creating competitive advantage for firm by allowing it to charge higher prices for products or services than competitors can charge (superior product or communicating the brands features)
is the marketing of products or services over the Internet .

28. Features of Internet Marketing
Can be more personalized
Participatory
Peer-to-peer
Not all types of internet marketing have these features (video ad vs. TV commercial, targeted videos)

29. Digital Commerce Marketing & Advertising Strategies & Tools
Elements of comprehensive multi-channel marketing plan:
Website
Traditional online marketing: search engine, campaigns,…
Social networking
Mobile marketing
Offline marketing

30. Strategic Issues & Questions

31. Strategic Questions 1. priorities
Where should you focus first? Build a website, develop a blog, or facebook page
Where second? Develop SN presence or offline
Do you have the resources to maintain a SN marketing campaign?
2. Integration of the different marketing platforms to deliver a single coherent branding message
3. Resource allocation

32. Websites as Marketing Platform – Establishing the Customer Relationship
Website performs 4 functions:
Establish the brand identity & consumer expectations (identify quality, price, support, reliability – create expectations)
Inform and educate the consumer
Shape the customer experience
Anchors the brand
The one place where one can find the complete story vs. ad

33. Online Marketing & Advertising Tools
Paid message on Web site, online service or other interactive medium, such as interactive messaging
2013: $42 billion spent, expected to grow
Advantages:
Ability to target ads to narrow segments and track performance in almost real time. Ad targeting
Provide greater opportunity for interactivity
Disadvantages:
Concerns about cost versus benefit
Concerns about how to adequately measure results

34. Online Advertising from 2004-2017

35. Forms of Online Advertisements
Search engine advertising: Paid search engine inclusion and placement
Display ads: banners, rich media &video ads
Sponsorships
Referrals (affiliate relationship marketing)
marketing
Online catalogs
Lead Generation

37. Search Engine Advertising: Paid Search Engine Inclusion and Placement
One of fastest growing and most effective forms of online marketing communications
Types:
Organic serach
Paid inclusion
Paid placement
Keyword advertising: Google AdWords
Network keyword advertising: Google AdSense

38. Search Engine Advertising: Paid Search Engine Inclusion and Placement (cont’d)
Google, Yahoo, MSN are leaders in this technology
Issues:
Appropriate disclosure of paid inclusion and placement practices
Link Farm
Content Farm
Search engine click fraud (when competitor hires third parties to fraudulently click on competitor ads to drive up costs)
Ad nonsense (Google AdSense ads that are inappropriate for content)

39. Search engine optimization:
Register with as many search engines as possible
Ensure that keywords used in Web site description match keywords likely to be used as search terms by user
Link site to as many other sites as possible
Update the content frequently
Design the site to become easily read by SE
Social Search attempts to use social contacts to provide search results (Google +1)

40. Display and Rich Media/Video Ads
Display ads: provided by 5 Top companies (banners, Rich media ads, sponsorship, video ads)
Banner Ads (oldest, least effective, lowest cost)
advantages over traditional
click through
identify & track users
Animation
Rich media:
boosts visits to websites by 300% (6X)
Interstitials
A good interstitials uses “animation”, “skip through” or “stop”

41. Video Ads
small spending compared to SE, fastest growing, most effective display ad
12X rich media, 27X banner ads
3 types: pre-roll, mid-roll, post-roll
Say Media, Advertising.com,

42. Online Advertising Placement Methods
Banner swapping: Arrangements among firms allow each firm to have its banners displayed on other affiliate sites for no cost
Advertising Networks
Advertising exchanges: Act as brokers between advertisers and publishers, placing ads and tracking all activity related to ad (RTB & managing) (Google DoubleClick Ad Exchange)

44. Sponsorships and Affiliate Marketing
Sponsorship: Paid effort to tie advertiser’s name to particular information, event, venue in way that reinforces brand in positive, yet not overtly commercial manner
Affiliate Marketing: Permits firm to put logo or banner ad on another firm’s Web site from which users of that site can click through to affiliate’s sit
pay-per-click vs. pay-for-performance
10% of retail sales
Affiliate brokers

45. Viral & Lead Generation Marketing
Viral Marketing
Advantages
Less expensive
Less use of online support
Online venues for viral marketing: , Facebook, Google+, YouTube, social games
Local Generation Marketing (inbound marketing) helps firms build websites, campaign, manage leads: initiate further contacts, track interactions, .. (Hutspot.com)

46. E-mail Marketing and the Spam Explosion
Direct marketing: sent directly to interested consumers who “opt-in” or have not “opted-out”
Spam: Unsolicited commercial
Spam is exploding out of control—70%–80% of all purportedly is spam
Efforts to control spam:
Technology (Filtering software) (only partly effective)
Government regulation (CAN-SPAM and state laws) (largely unsuccessful)
Self-regulation by industry (ineffective)
Volunteer efforts (not enough)

47. Other Forms of Online Marketing Communications
Online catalog: Provides equivalent of paper-based catalog
Blog advertising: Online ads related to content of blogs
Social network advertising: Ads on MySpace, Facebook, YouTube, etc.
Game advertising: downloadable ‘advergames’, placing brand-name products within games

48. How does social media influence consumer behavior?

49. Multi-channel Marketing: Integrating Offline and Online Marketing
Media consumption patters has changed: videos, twitters, facebook ..
Marketers use multiple channel to “touch” consumer ( , SN, SE, display ads on mobile, affiliate programs) to increase total media exposure.
Early vision; in the Internet economy, nearly all marketing communications would be online.
The most effective online ads are those that consistent imagery with campaigns running in other media at the same time.

50. Other Marketing Strategy: Customer Retention Strategy
Personalization marketing
Internet enables personalization on mass market (Amazon)
Behavioral targeting of ads (interest-based ads) (deliver tailored message + measure the results)
4 methods used to behaviorally target ads:
SE queries
Browsing history (clickstream)
Data from SN sites
Integration of online with offline
Times, Yahoo, MSN, AOL)

51. Other Marketing Strategy: Customer Retention Strategy
Customization
Customer co-production
“build-to-order” products create product differentiation (Niki, M&Ms..)
Information goods (New York Times, Yahoo, MSN, AOL)

52. Other Marketing Strategy: Customer Retention Strategy
Customer service (make or break a marketing effort): user ability to communicate with a company & obtain required information.
Help reduce customer frustration, cut the number of abandoned shopping carts & increase sales
“customer loyalty increases substantially when online buyers learn that customer service rep are available”
“customers are willing to pay more for superior customer services”
Customer Service Tools include:
Frequently asked questions (FAQs)
Real-time customer service chat systems :↓shopping cart abandonment rate ↑# of items purchased
Automated response systems

53. Net Pricing Strategies
Early view: Web would lead to a new world of information symmetry & empowered customers => Law of One Price
Pricing (putting a value on goods and services) an integral part of marketing strategy
Traditionally, prices based on:
Fixed cost
Variable costs
Market’s demand curve
Prices set to maximize profit: marginal cost = marginal revenue
Early years of ecommerce, marginal cost < marginal revenue (attract eyeballs + piggyback)

54. Net Pricing Strategies (cont’d)
Price discrimination: Selling products to different people and groups based on willingness to pay
Only work if firms can:
Identify the price each individual is willing to pay
Segregate the customers

55. Demand Curve

56. Net Pricing Strategies (cont’d)
Free products/services: Can be used to build market awareness. Difficult to convert the eyeballs into paying customers. Exceptions to free (valuable, exclusive, expensive, not widely distributed, unique, immediate consumption value)
Versioning: Creating multiple versions of product and selling essentially same product to different market segments at different prices
Bundling: Offers consumers two or more goods for one price. Based on the idea:
The marginal cost = 0
Many people would buy bundle for same or slightly higher price
Dynamic pricing: The value of the product = what the market is willing to pay
Auctions: for unique or unusual products
Yield management: different pricing for different markets to sell excess capacity (perishable, variation in demand, clearly defined segment, competitive market, market condition change rapidly)
Flash management

57. Internet Marketing Technologies
Web transaction logs
Registration forms
Shopping carts
Cookies and Web bugs
Databases, data warehouses, data mining and big data.
Customer relationship management (CRM) systems

58. Web Transaction Logs Built into Web server software
Records user activity at a Web site
WebTrends a leading log analysis tool
Can provide treasure trove of marketing information, particularly when combined with:
Registration forms
Shopping cart database

60. Cookies and Web Bugs
Cookies: Small text file that Web sites place on a visitor’s client computer every time they visit, and during the visit, as specific pages are accessed
Provide Web marketers with a very quick means of identifying customer and understanding prior behavior
Location of cookie files on computer depends on browser version
Web bugs: Tiny (1 pixel) graphic files embedded in messages and on Web sites
Used to automatically transmit information about user and page being viewed to monitoring server

61. Customer Relationship Management (CRM) Systems
Repository of customer information that records all contacts that customer has with firm and generates customer profile available to everyone in firm with need to “know the customer”
Customer profiles can contain:
Map of the customer’s relationship with the firm
Product and usage summary data
Demographic and psychographic data
Profitability measures
Contact history
Marketing and sales information

62. A Customer Relationship Management System

63. Online Marketing Metrics: Lexicon
Metrics that focus on success of Web site in achieving audience or market share
Impressions
Click-through rate (CTR)
View-through rate (VTR)
Hits
Page views
Stickiness (duration)
Unique visitors
Loyalty
Reach
Recency

64. Online Marketing Metrics: Lexicon (cont’d)
Metrics that focus on conversion of visitor to customer
Acquisition rate
Conversion rate
Browse-to-buy-ratio
View-to-cart ratio
Cart conversion rate
Checkout conversion rate
Abandonment rate
Retention rate
Attrition rate

65. Online Marketing Metrics: Lexicon (cont’d)
Social Network metrics
Group rating point
Applause ratio
Conversation ration
Amplification
Sentiment ratio
Duration of engagement
metrics
Open rate
Delivery rate
Click-through rate ( )
Bounce-back rate
Unsubscribe rate
Conversion rate ( )

66. An Online Consumer Purchasing Model

67. How Well Does Online Advertising Work
How Well Does Online Advertising Work? What is the most effective kind of online ads? Vs. offline?
Depends on; goal of campaign, nature o product, & quality of Web site.
Click-through rates may be low, but this is just one measure of effectiveness (Table 7.5)
ROI that counts
Research indicates that most powerful marketing campaigns include both online and offline advertising

68. Click-through Rates by Format 2000–2005
* As consumers become more accustomed to new online ads format, click-through rate tend to fall
SOURCE: SOURCES: Doubleclick, 2007a, b; eMarketer, Inc., 2007c; author estimates.

69. Comparative ROI
How effective is online ads compared to offline?

70. Business to Consumer Marketing Best Practices

71. The most powerful marketing campaign used multiple forms of marketing including online, catalog, TV, radio, newspapers and retail stores.
Traditional media (TV & print material) remain the primary means for consumers to find out about new products

72. The Costs of Online Advertising
Cost per thousand (CPM): Advertiser pays for impressions in 1,000 unit lots
Cost per click (CPC): Advertiser pays pre-negotiated fee for each click ad receives
Cost per action (CPA): Advertiser pays pre-negotiated amount only when user performs a specific action
Hybrid: Two or more of the above models used together

73. Web Analytics
Software that analyzes and presents data on each stage of the customer conversion process
Awareness
Engagement
Interaction
Purchase
Loyalty and post-purchase
Helps managers
Optimize ROI on Web site and marketing efforts
Build detailed customer profiles
Measure impact of marketing campaigns
Google Analytics, IBM Coremetrics, Adobe Analytics

74. Web Analytics and the Online Purchasing Process

75. Web Site Activity Analysis
Copyright © 2007 Pearson Education, Inc.

76. The Web Site as a Marketing Communications Tool
Web site can be viewed as extended online advertisement
Domain name: First communication e-commerce site has with prospective customer

77. Web Site Functionality
Factors affecting effectiveness of a software interface:
Utility
Ease of use
Factors in credibility of Web sites:
Design look
Information design/structure
Information focus
Responsiveness

78. Web Design Guides
Web site design:  The web designer must make various issues into consideration:
Speed vs. aesthetics:  Some of the fancier sites have serious problems functioning practically.  Consumers may be impressed by a fancy site, or may lack confidence in a firm that offers a simple one.  Yet, fancier sites with extensive graphics take time to download—particularly for users dialing in with a modem as opposed to being “hard” wired—and may result in site crashes.
Keeping users on the site:  A large number of “baskets” are abandoned online as consumers fail to complete the “check-out” process for the products they have selected.  One problem here is that many consumers are drawn away from a site and then are unlikely to come back.  A large number of links may be desirable to consumers, but they tend to draw people away.  Taking banner advertisers on your site from other sites may be profitable, but it may result in customers lost.
Information collection:  An increasing number of consumers resist collection of information about them, and a number of consumers have set up their browsers to disallow “cookies,” files that contain information about their computers and shopping habits.

79. Web Design Guides (cont.)
Site content. The content of a site should generally be based on the purposes of operating a site. For most sites, however, having a clear purpose be evident is essential. The site should generally provide some evidence for this position. For example, if the site claims a large selection, the vast choices offered should be evident. Sites that claim convenience should make this evident. A main purpose of the Internet is to make information readily available, and the site should be designed so that finding the needed information among all the content of the site is as easy as possible. Since it is easy for consumers to move to other sites, the site should be made interesting. To provide the information and options desired by customers, two-way interaction capabilities are essential.

80. Factors in the Credibility of Web Sites
SOURCE: Based on data from Fogg, et al, 2002.

81. Attribute encourage to use E-store

82. Factors for not using E-commerce

83. Attributes of e-store feature

84. Reasons for not using online purchase