1. ©2006 Prentice Hall ELC 310 Day 15

2. ©2006 Prentice Hall Agenda You should be working on your eMarketing Plans Due Nov 4 (3 Days away!) In class Presentations of your marketing plans will on be on Nov. 4 & 8 (Note change of days) Volunteers for Nov. 4 Steve, Dana, Beth, Louis, Christina & Nichole Nov. 8 David, Keith, Takefumi, Randy, Justin Exam # 3 in on November 11 Chap 12, 13 & 14, 6 essays (60 points), 10 M/C (40 Points). open books, open notes, 70 mins Today we will be discussing eMarketing Communications and CRM

3. ©2006 Prentice Hall13-1 E-Marketing 4/E Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 13: E-Marketing Communication

4. ©2006 Prentice Hall Which Media and Vehicles to Buy? Marketers spent more of their 2001 media budgets on the Internet than on radio or outdoor, but much less than on television or newspapers. This generalization is interesting, but not very useful for media buyers who plan a combination of media to achieve marketing communication goals for a particular campaign and brand. Media planners want both effective and efficient media buys. Effectiveness means reaching and gaining the attention of the target market, and efficiency means doing so at the lowest cost.

5. ©2006 Prentice Hall Efficient Internet Buys To measure efficiency before buying advertising space, media buyers use a metric called CPM (cost per thousand). This is calculated by taking the ad’s cost, dividing it by the audience size, and then multiplying by 1,000 (cost  audience x 1,000). Internet audience size is counted using impressions: the number of times an ad was served to unique site visitors. Example: in June 2002 a full banner ad at MediaPost.com, an advertising and media Internet portal, received 2.4 million impressions and cost $168,000 a month for a CPM of $70. (Incidentally, this firm charges an additional $10 CPM slotting fee for a specific position.) Magazines are usually the most expensive media to reach 1,000 readers; radio is often the least expensive.

6. ©2006 Prentice Hall Efficient Internet Buys Typical Web CPM prices are $7 to $15 CPM (Hallerman, 2002). MediaPost is higher because it reaches a select target in the B2B market. According to eMarketer in March 2002, the CPM ranges between $75 and $200 for e-mail ads, and between $20 and $40 for e- mail newsletter sponsorship. It is interesting to note that only 50% of Web site advertising is purchased using the CPM model (PricewaterhouseCoopers 2002). Performance-based payment, often called cost-per-action (CPA), includes schemes such as payment for each click on the ad, payment for each conversion (sale), or payment for each sales lead. This type of pricing is beneficial to advertisers, but risky for Web sites that must depend partially on the power of the client’s ad and product for revenues. CPM, CPA, and other online advertising pricing models are only part of the measurement picture.

7. ©2006 Prentice Hall Effective Internet Buys Once a firm decides to buy online advertising (medium), it faces the question of which vehicle (individual site) to use. Advertisers trying to reach the largest number of users will buy space at the portals such as Yahoo!, AOL and microsoft.

8. ©2006 Prentice Hall Web PropertyUnique Visitors in millions WorldwideU.S. Microsoft Corporation269.899.7 Yahoo Inc.219.592.5 AOL Time Warner169.688.0 Terra Lycos143.151.1 Google Inc.93.231.1 Amazon.com Inc.79.037.5 CNET Networks Inc.75.128.0 Primedia Inc.72.131.6 U.S. Government56.138.6 EBay55.932.9 Top Online Properties by Parent Company for January 2002 Source: Data from www.cyberatlas.internet.com www.cyberatlas.internet.com

9. ©2006 Prentice Hall Effective Internet Buys Ad servers track user click-streams via cookies and serve ads based on user behavior. One such firm, DoubleClick, served 55 billion ads to Web users along with client Web pages during May 2002. Nielsen-Netratings reports only about 70,000 unique ads in April 2002. DoubleClick technology can detect a user at a client site who then goes to a second client site (click stream), and serve the user an appropriate ad based on the user’s interests. DoubleClick data from three months in early 2002 revealed that 43.8% of its ads were targeted by key words or key values in this manner, while 5.5% were served to specific geographic areas and 1.3% by time of day (“DoubleClick Ad Serving...” 2002). http://www.doubleclick.com/us/

10. ©2006 Prentice Hall IMC Metrics Savvy marketers set specific objectives for their IMC campaigns, Then they track progress toward those goals by monitoring appropriate metrics.

11. ©2006 Prentice Hall IMC Metrics and Industry Averages Sources: 1 Hallerman (2002); 2 data from www.eMarketer.com; 3 Saunders (2001); 4 Gallogly (2002); 5 “DoubleClick Ad Serving...” (2002); 6 data from shop.org; 7 data from www.computerworld.com; 8 data from www.nielsen-netratings.com; 9 PricewaterhouseCoopers, LLP (2002).www.eMarketer.com www.computerworld.comwww.nielsen-netratings.com Metric Definition/formulaOnline Averages CPMCost Per Thousand Impressions CPM = [Total Cost  (Impressions)]  1000 $7 to $15 for banners 1 $75 and $200 for e-mail ads 2 $20 and $40 for e-mail newsletter 2 Click-through rate (CTR) Number of clicks as percent of total impressions CTR = Clicks  Impressions 0.3% - 0.8% for banners 3,5 2.4% rich media ads 5 3.2% - 10% opt-in e-mail 3,9 Cost Per Click (CPC) Cost for each visitor from ad click CPC = Total Ad Cost  Clicks Varies widely Google.com ranges from a few cents to a few dollars Conversion RatePercent of people who purchased from total number of visitors Conversion Rate = Orders  Visitors 1.8% for Web sites 6 5% for e-mail 9 Customer Acquisition Cost (CAC) Total marketing costs to acquire a customer Varies by industry $82 for online retail pure- plays; $31 for multi-channel brick and mortar retailers 7

12. ©2006 Prentice Hall Effectiveness Evidence Banner ads are generally ineffective: 0.5% of all users clicking on them. Exceptions: Rich media ads receive an average 2.4% click-through. The Mexican Fiesta Americana Hotels = 10.2% click-through  By narrow targeting = Americans living in 7 Eastern states + had just purchased an airline ticket to Cancun + were online 2 to 7 P.M. Monday through Wednesday. If users do click, they are likely to buy: 61% people who clicked, purchased within 30 minutes, 38% purchased within eight to 30 days later. E-mail = 3 to 10% click-through to the sponsor’s Web site + an average 5% conversion rate.  Catalog companies & retailers realize > 9% click-throughs on e-mail campaigns.

13. ©2006 Prentice Hall Effectiveness Evidence When banner ads are viewed as a branding medium: They increase brand awareness & message association, Build brand favorability & purchase intent. When online ads are bigger + placed as interstitials, or contained rich multimedia = they delivered an even greater impact.  Large rectangles are 3 to 6 times more effective than standard size banners in increasing brand awareness. Online + offline advertising work well together.  The Internet is as effective for increasing brand awareness, brand attributes, and purchase intent as TV and print—but much more cost-efficient.

14. ©2006 Prentice Hall14-1 E-Marketing 4/E Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 14: Customer Relationship Management

15. ©2006 Prentice Hall14-2 Chapter 14 Objectives After reading Chapter 14 you will be able to: Define customer relationship management and identify the major benefits to e-marketers. Outline the three legs of CRM for e-marketing. Discuss the eight major components needed for effective and efficient CRM in e-marketing. Differentiate between relationship intensity and relationship levels. Highlight some of the company-side and client-side tools that e-marketers use to enhance their CRM processes.

16. ©2006 Prentice Hall14-3 Cisco provides Internet networking systems for corporate, government and education clients. The Internet plays a major role in acquiring, retaining and growing customer business. 2.5 million users log onto the Cisco site each month. Cisco has become adept at online customer relationship management (CRM). The Cisco Story

17. ©2006 Prentice Hall14-4 Cisco set a goal to migrate customers to the online channel. In 1996, 5% of their customers placed orders on the Web site. In 2001, 90% of their orders came through the Internet. Cisco saves $340 million a year in customer service costs due to automation. Can you think of other B2B marketers that utilize the Internet as successfully as Cisco? The Cisco Story, cont.

18. ©2006 Prentice Hall14-5 Relationship Marketing Defined Relationship marketing is about establishing, maintaining, enhancing, and commercializing customer relationships through promise fulfillment. Relationship capital may be the most important asset a firm can have. A firm using relationship marketing focuses more on wallet share than on market share. More $ from each customer instead of more customers

19. ©2006 Prentice Hall14-6 Continuum from Mass Marketing to Relationship Marketing Mass marketingRelationship marketing Discrete transactionsContinuing transactions Short-term emphasisLong-term emphasis One-way communication Two-way communication and collaboration Acquisition focusRetention focus Share of marketWallet share Product differentiationCustomer differentiation

20. ©2006 Prentice Hall14-7 Stakeholders Firms can establish and maintain relationships with different stakeholder groups through Internet technologies: Employees who need training and access to data and systems used for relationship management. Business customers in the supply chain. Lateral partners, such as other businesses, not-for- profit organizations, or governments. Consumers who are end users of products and services.

21. ©2006 Prentice Hall14-8 Customer Relationship Management CRM is the process of acquiring, servicing, retaining and building long-term relationships with customers. The benefits of CRM include: Increased revenue from better targeting. Increased wallet share with current customers. Retention of customers for longer time periods. The cost of acquiring a new customer is typically 5 times higher than the cost of retaining a current customer.

22. ©2006 Prentice Hall Acquisition EmphasisRetention Emphasis Gain 6 new customers ($500 each) $3,000Gain 3 new customers ($500 each) $1,500 Retain 5 current customers ($100 each) $ 500Retain 20 current customers ($100 each) $2,000 Total cost$3,500Total cost$3,500 Total number of customers 11Total number of customers 23 Maximizing Number of Customers Source: Adapted from Peppers and Rogers (1996)

23. ©2006 Prentice Hall14-9 Customer Relationship Management, cont. CRM has 3 facets: Sales force automation (SFA). Marketing automation. Customer service. Used primarily in the B2B market, SFA helps salespeople to: Build, maintain, and access customer records. Manage leads and accounts. Manage their schedules.

24. ©2006 Prentice Hall14-10 Marketing automation software aids marketers in effective targeting, marketing communication, and monitoring of customer and market trends. Software solutions include e-mail campaign management, database marketing, and market segmentation. Most customer service occurs post purchase when customers have questions or complaints. E-mail and Web self-service are often used. Customer Relationship Management, cont.

25. ©2006 Prentice Hall 1. CRM Vision: Leadership, value proposition 2. CRM Strategy: Objectives, target markets 3. Valued Customer Experience Understand requirements Monitor expectations Maintain satisfaction Collaboration and feedback Customer interaction 4. Organizational Collaboration Culture and structure Customer understanding People, skills, competencies Incentives and compensation Employee communication Partners and suppliers 5. CRM Processes: Customer life cycle, knowledge management 6. CRM Information: Data, analysis, one view across channels 7. CRM Technology: Applications, architecture, infrastructure 8. CRM Metrics: Value, retention, satisfaction, loyalty, cost to serve Exhibit 14 - 4 Eight Building Blocks for Successful CRM Source: Adapted from Gartner Group (www.gartner.com)www.gartner.com 8 Building Blocks for Successful CRM

26. ©2006 Prentice Hall14-12 1. CRM Vision To be successful, the CRM vision must start at the top and filter throughout the company to keep the firm customer focused. One key aspect of CRM vision is how to guard customer privacy. The benefits of using customer data must be balanced by the need to satisfy customers and not anger them. TRUSTe provides its seal and logo to any Web site meeting its privacy philosophies.

27. ©2006 Prentice Hall14-13 TRUSTe Builds User Trust

28. ©2006 Prentice Hall14-14 E-marketers must determine their objectives and strategies before buying CRM technology. Many CRM goals refer to customer loyalty. An important CRM strategy is to move customers up the relationship intensity pyramid Another CRM goal involves building bonds with customers on 3 levels: Financial Social Structural 2. CRM Strategy

29. ©2006 Prentice Hall14-15 Three Levels of Relationship Marketing LevelPrimary BondPotential for Sustained Competitive Advantage Main Element of Marketing Mix Web Example OneFinancialLowPrice www.southwest.com TwoSocial Build 1:1 relationships Build community MediumPersonal communications www.palmpilot.com ThreeStructuralHighService delivery my.yahoo.com

30. ©2006 Prentice Hall14-16 3. Valued Customer Experience Consumers are constantly bombarded by marketing communications and unlimited product choices. According to Jagdish Sheth (1995), the basic tenet of CRM is choice reduction. Many consumers are “loyalty prone,” and will stick with the right product as long as its promises are fulfilled. Synchronous and asynchronous technologies can provide automated and human services that solve customer problems.

31. ©2006 Prentice Hall14-17 Relationships over Multiple Communication Channels AutomatedHuman SynchronousWeb 1:1 self-service Online transactions Telephone routing Telephone Online chat Collaboration tools AsynchronousAutomated e-mail Short message services (SMS) Web forms Fax on demand E-mail response Postal mail

32. ©2006 Prentice Hall14-18 Marketers collaborate within and outside the organization to focus on customer satisfaction. CRM, or “front-end” operations, can be linked with the entire supply chain management system (SCM), or “back-end” operations. Customer service reps have access to inventories. Producers and wholesalers constantly receive data that can be utilized for production and delivery. The use of extranets, two or more intranet networks that share information, allows CRM- SCM integration. 4. Organizational Collaboration

33. ©2006 Prentice Hall14-19 5. CRM Processes Firms use specific processes to move customers through the customer care life cycle.

34. ©2006 Prentice Hall14-20 CRM processes are used to: Identify customers. Differentiate customers. Customize the marketing mix. Interact with customers. Firms can identify high-value customers by mining customer databases and profiling customers in terms of: (RFM analysis) Recency of purchases. Frequency of purchases. Monetary value of purchases. CRM Processes, cont.

35. ©2006 Prentice Hall14-21 6. CRM Information The more information a firm has, the better value it can provide to each current or prospective customer. Firms gain much information by tracking behavior electronically. Bar code scanner data. Software that tracks online movement, time spent per page, and purchase behavior.

36. ©2006 Prentice Hall14-22 7. CRM Technology Technology greatly enhances CRM processes. Firms use company-side tools to push customized information to users. Client-side tools allow the customer to pull information that initiates the customized response from the firm.

37. ©2006 Prentice Hall14-23 Company-side Tools Company-Side Tools (push)Description CookiesCookies are small files written to the user’s hard drive after visiting a Web site. When the user returns to the site, the company’s server looks for the cookie file and uses it to personalize the site. Web log analysisEvery time a user accesses a Web site, the visit is recorded in the Web server’s log file. This file keeps track of which pages the user visits, how long he stays, and whether he purchases or not. Data miningData mining involves the extraction of hidden predictive information in large databases through statistical analysis. Real-time profilingReal-time profiling occurs when special software tracks a user’s movements through a Web site, then compiles and reports on the data at a moment’s notice. Collaborative filteringCollaborative filtering software gathers opinions of like-minded users and returns those opinions to the individual in real time. Outgoing e-mail Distributed e-mailMarketers use e-mail databases to build relationships by keeping in touch with useful and timely information. E-mail can be sent to individuals or sent en masse using a distributed e-mail list. Chats Bulletin boards A firm may listen to users and build community by providing a space for user conversation on the Web site. iPOS terminalsInteractive point-of-sale terminals are located on a retailer’s counter and used to capture data and present targeted communication.

38. ©2006 Prentice Hall14-24 Client-side Tools Client-Side Tools (pull)Description AgentsAgents are programs that perform functions on behalf of the user, such as search engines and shopping agents. Individualized Web portals Personalized Web pages users easily configure at Web sites such as MyYahoo! and many others. Wireless data servicesWireless Web portals send data to customer cell phones, pagers, and PDAs, such as the PalmPilot. Web formsWeb form (or HTML form) is the technical term for a form on a Web page that has designated places for the user to type information for submission. Fax-on-demandWith fax-on-demand, customers telephone a firm, listen to an automated voice menu, and select options to request a fax be sent on a particular topic. Incoming e-mailE-mail queries, complaints, or compliments initiated by customers or prospects comprise incoming e-mail, and is the fodder for customer service.

39. ©2006 Prentice Hall14-25 8. CRM Metrics E-marketers use numerous metrics to assess the Internet’s value in delivering CRM performance. ROI Cost savings Revenues Customer satisfaction One study named customer retention, ROI and customer lift (increased response or transaction rates) as the most important metrics.

40. ©2006 Prentice Hall14-26 CRM Metrics, cont. One very important CRM metric is customer lifetime value (LTV). The LTV calculation demonstrates the benefits of retaining customers over time and the need for building wallet share. LTV also illustrates that no matter how good customer retention is, the firm must still focus on customer acquisition activities. Exhibit 14.21 illustrates Customer LTV.

41. ©2006 Prentice Hall TotalRetention Total Net NPV at 10-Year YearCustomersRate Revenue Profit15%LTV 11,00060% $35,900 $ 5,900 $ 66.94 260065% 45,540 27,540 23,948 118.12 339070% 29,601 17,901 13,536 129.15 427375% 20,721 12,531 8,239 138.35 520578% 15,541 9,398 5,373 143.45 616079% 12,122 7,330 3,645 145.55 712680% 9,576 5,791 2,504 146.81 810180% 7,661 4,633 1,742 146.81 98180% 6,129 3,706 1,212 146.81 106580% 4,903 2,965 843 146.81 Customer Lifetime Value (LTV) Source: Adapted from Peppers and Rogers Group at www.1to1.com www.1to1.com