2. The New Economy. Outline. Marketing Challenges. Connecting with Customers Directly

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1 Connecting with Customers Directly 2. The New Economy Example: Land s End 3-D of Virtual Model Shan-Yu Chou 1 Shan-Yu Chou 2 Outline Marketing Challenges; Major forces driving the new economy; The changes in business and marketing practices. The E-Commerce Domains E-Marketing Source: Principles of Marketing by Kotler and Armstrong, the 10 th edition. Marketing Challenges Connecting via technology; Connecting with customers more directly, selectively, and in a more lasting way; Connecting with marketing partners: Inside partners, outside partners Connecting with the world. Shan-Yu Chou 3 Shan-Yu Chou 4 1

2 Connecting with Marketing Partners The Major Drivers of the New Economy Digitalization The Internet Explosion Disintermediation and Reintermediation; Customization and Cutomerization; Industry Convergence Shan-Yu Chou 5 Shan-Yu Chou 6 Buyer Benefits of E-Commerce Convenience Easy and private Greater product access/selection Access to comparative information Interactive and immediate Seller Benefits of E-Commerce Relationship building Reduced costs Increased speed and efficiency Flexibility Global access, global reach Shan-Yu Chou 7 Shan-Yu Chou 8 2

3 Old Economy vs. New Economy Old Economy vs. New Economy (Cont.) Product centered; Focus on profitable transactions; Marketing does the marketing. Customer-segment centered; Focus on customer lifetime value; Integrated marketing. Branding through ad; Focus on customer acquisition; No customer satisfaction measurement; Overpromise, Underdeliver Rational branding; Focus on customer retention; Measurement on satisfaction and retention rate; Underpromise, overdeliver Shan-Yu Chou 9 Shan-Yu Chou 10 E-Commerce Domains The Impact of B2C Web Sites Lower consumer search costs; Targeted to consumers Targeted to businesses Manufacturers can contact consumers directly; More intensive price competition among firms? Any online loyalty from customers? Initiated by businesses B2C B2B Disintermediation? Initiated by consumers C2C C2B Shan-Yu Chou 11 Shan-Yu Chou 12 3

4 The Impacts of B2B Sites More information and lower transaction costs; Prices are transparent; Buying alliances; Differentiation or price competition? More efficient markets. C2C E-Commerce Helping consumers exchange goods or information, e.g., ebay. Auction sites facilitate the exchange process; Newsgroups / forums Shan-Yu Chou 13 Shan-Yu Chou 14 C2B E-Commerce Allow consumers to search out sellers, learn about offers, initiate purchase, or dictate purchase terms; Some sites facilitate the feedback process between customers and companies. Pure Click Companies Search Engines and Portals; Internet Service Providers, e.g., AOL Commerce Sites, e.g., Amazon, CDNow Transaction Sites: ebay and Etrade; Content Sites, e.g., New York Times Shan-Yu Chou 15 Shan-Yu Chou 16 4

5 The Reasons for the failure of many dot-coms Low entry barrier and intensive competition; Conducting mass marketing; Over emphasis on acquisition vs. retention Poor web site design / distribution systems No sound business model which can deliver profits. Brick and Click Companies Channel conflict was initially a concern ; E-commerce often created new customers, rather than cannibalizing existing one; Many firms now enjoy greater success than their click-only competition. Why? Shan-Yu Chou 17 Shan-Yu Chou 18 E-Marketing Setting up web sites; Placing online ads and promotions; Creating or using web community; Building a revenue and profit model. Conducting E-Commerce Seven C s of Web Site Design Context Content Community Communication Connection Commerce Customization Shan-Yu Chou 19 Shan-Yu Chou 20 5

6 Websites Microsites Search ads Display ads Interstitials Online Promotional Opportunities Internet-specific ads and videos Sponsorships Alliances and affiliate programs Online communities Mobile marketing Burger King s Subservient Chicken Microsite Have it your way. Viral Marketing Shan-Yu Chou 21 Copyright 2012 Pearson Education Shan-Yu Chou 22 e-marketing Guidelines Word of Mouth Give the customer a reason to respond Personalize the content of your s Offer something the customer could not get via direct mail Make it easy for customers to unsubscribe Earned media Paid media Shan-Yu Chou 23 Copyright 2012 Pearson Education Shan-Yu Chou 24 Copyright 2012 Pearson Education

7 Platforms of Social Media Online Communities and Forums Blogs Social Networks Building a Revenue and Profit Model Sponsorship income Membership and subscriptions Profile income Product and service sales Advertising income Transaction commission and fees Referral income Shan-Yu Chou 25 Copyright 2012 Pearson Education Shan-Yu Chou 26 7