Chapter 6. E-commerce Marketing and Advertising

Learning Objectives Understand the basic concepts of consumer behavior and purchasing, and how consumers behave online. Identify and describe the major types, strategies and tools of online marketing and branding Identify and describe the technologies that support online marketing. Understanding the costs and benefits of online marketing communications Copyright 2016 Pearson Education, Ltd.

6.1 CONSUMERS ONLINE: THE INTERNET AUDIENCE AND CONSUMER BEHAVIOR Profile of online consumers The online purchasing decision Shoppers: Browsers or Buyers? What customers shop for and buy online How shoppers find vendors online Why some people don t shop online Copyright 2016 Pearson Education, Ltd. Slide 1-3

Consumer Behavior Models Consumer Behavior: is a social science discipline that attempts to model and understand the behavior of humans in a marketplace Consumer behavior models Attempt to predict or explain what consumers purchase and where, when, how much, and why they buy Based on background demographic factors and other intervening, more immediate variables Consumer decision-making process? Businesses Copyright 2016 Pearson Education, Ltd. Slide 1-4

Consumer Behavior Models Profiles of online consumers Why people choose the Internet channel to conduct transactions. Consumers shop online primarily for convenience Copyright 2016 Pearson Education, Ltd. Slide 1-6

Consumer Behavior Models The Online Purchasing Decision Why consumer purchase from a specific site? Consumer purchase decision process Five stages in consumer decision process Awareness of need Search for more information Evaluation of alternatives Actual purchase decision Post-purchase contact with firm Copyright 2016 Pearson Education, Ltd. Slide 1-7

The Online Purchasing Decision (cont.) Decision process similar for online and offline behavior But General online behavior model need to be modified to take into account unique features of e-commerce. General online behavior model User characteristics Product characteristics Web site features: latency, usability, security Mobile platform features Along with previously mentioned traditional factors (brand.. etc) Clickstream behavior refers to the transaction log that consumers establish as they move about the Web, from search engine to a variety of sites, then to a single site, then to a single page, and then, finally, to a decision to purchase. Copyright 2016 Pearson Education, Ltd. Slide 1-9

Shoppers: Browsers and Buyers In the United Kingdom (age 14 and older): 88.2% buyers 5.3% browsers (purchase offline) 6.5% Do not search or buy online The significance of online browsing for offline purchasing should not be underestimated One-third of offline retail purchases influenced by online activities E-commerce is a major conduit and generator of offline commerce. The reverse is also true, Online traffic is influenced by offline brands and shopping E-commerce and traditional commerce are coupled: Part of a continuum of consuming behavior and not as alternatives to one another Copyright 2016 Pearson Education, Ltd. Slide 1-11

What Consumers Shop for and Buy Online Big ticket items ($1000 or more) Travel, computer hardware, electronics Small ticket items ($100 or less) Apparel, books, office supplies, software, and so on In the early days of e-commerce, sales of small-ticket items vastly outnumbered those of large-ticket items. But consumers are now much more confident spending more online for big-ticket items. Copyright 2016 Pearson Education, Ltd. Slide 1-12

How Consumers Shop How shoppers find online vendors Highly intentional, goal-oriented Search engines Go directly to a Marketplaces (Amazon, ebay) Go directly to specific retail site 10% of Internet users don t shop online Trust factor Other factors (shipping costs, returns, etc.) Copyright 2016 Pearson Education, Ltd. Slide 1-14

Trust, Utility, and Opportunism in Online Markets Two most important factors shaping decision to purchase online: Utility Better prices, convenience, speed of delivery Trust Sellers can develop trust by building strong reputations for honesty, fairness, delivery of quality products Trust-building online mechanisms Ex.. Feedback forums such as Epinions.com, Amazon s book reviews from reviewers, and ebay s feedback forum Copyright 2016 Pearson Education, Ltd. Slide 1-15

Digital Commerce Marketing and Advertising: Strategies and Tools The objective of marketing to build customer relationships so that the firm can achieve above-average returns (both by offering superior products or services and by communicating the brand s features to the consumer). Online marketing (vs. traditional) More personalized More participatory More peer-to-peer More communal The most effective online marketing has all four features Copyright 2016 Pearson Education, Ltd. Slide 1-17

Comprehensive Multi-Channel Marketing Plan 1. Web site 2. Traditional online marketing Search engine, display, e-mail, affiliate.. 3. Social marketing Social networks, blogs, video, game 4. Mobile marketing Mobile/tablet sites, apps 5. Offline marketing Television, radio, newspapers Copyright 2016 Pearson Education, Ltd. Slide 1-18

Strategic Issues and Questions Which part of the marketing plan should you focus on first? How do you integrate the different platforms for a coherent message? How do you allocate resources? How do you measure and compare metrics from different platforms? How do you link each to sales revenues? Copyright 2016 Pearson Education, Ltd. Slide 1-20

THE WEB SITE AS A MARKETING PLATFORM: Establishing the Customer Relationship Web site functions to: Establish brand identity and customer expectations Differentiating product Anchor the brand online Central point for all marketing messages Inform and educate customer Shape customer experience Copyright 2016 Pearson Education, Ltd. Slide 1-21

Online advertising Online Advertising a paid message on a Web site, online service, or other interactive medium Display (banners, video, and rich media), search, mobile messaging, sponsorships, classifieds, e-mail Fastest growing form of advertising Advantages: 18 34 age audience is online the ability to target ads to individuals and small groups and to track performance of advertisements in almost real time Ad targeting: the sending of market messages to specific subgroups in the population Personalization Copyright 2016 Pearson Education, Ltd. Slide 1-22

Traditional Online Marketing and Advertising Tools 1. Search engine marketing and advertising 2. Display ad marketing 3. E-mail marketing 4. Affiliate marketing 5. Viral marketing Copyright 2016 Pearson Education, Ltd. Slide 1-24

Search Engine Marketing and Advertising Search engine marketing (SEM) the use of search engines to build and sustain brands Search engine advertising Use of search engines to support direct sales to online consumers Copyright 2016 Pearson Education, Ltd. Slide 1-25

Search Engine Marketing and Advertising Types of search engine advertising Organic search free inclusion and ranking of sites depends on unbiased application of a set of rules (an algorithm) imposed by the search engine Paid inclusion advertisements for a fee, guarantee a Web site s inclusion in its list of search results, more frequent visits by its Web crawler, and suggestions for improving the results of organic searching Sponsored links (keyword paid inclusion) Copyright 2016 Pearson Education, Ltd. Slide 1-26

Search Engine Marketing and Advertising Types of search engine advertising Keyword advertising Merchants purchase keywords through a bidding process at search sites, and whenever a consumer searches for that word, their advertisement shows up somewhere on the page Network keyword advertising (context advertising) Publishers (Web sites that want to show ads) join these networks and allow the search engine to place relevant ads on their sites, and receive a fee for any click-throughs from those ads Pay-per-click (PPC) search ads are the primary type of search engine advertising. Copyright 2016 Pearson Education, Ltd. Slide 1-27

Search Engine Marketing (cont.) Search engine optimization (SEO) Techniques to improve the ranking of Web pages generated by search engine algorithms. By carefully selecting key words used on the Web pages, updating content frequently, and designing the site so it can be easily read by search engine programs Copyright 2016 Pearson Education, Ltd. Slide 1-31

Display Ad Marketing The top five display ad companies in the United States are Facebook, Google, Twitter, Yahoo, and AOL. (IAB) an industry organization, has established voluntary industry guidelines for display ads. Copyright 2016 Pearson Education, Ltd. Slide 1-32

Display Ad Marketing Display ads consist of different kinds of ads: 1. banner ads 2. rich media ads (animated ads) 3. Sponsorships 4. video ads 5. Native advertising Banner ads Displays a promotional message in a rectangular box on the screen of a desktop computer or mobile device The oldest,most familiar, lowest cost and least effective Copyright 2016 Pearson Education, Ltd. Slide 1-33

Rich media ads Display Ad Marketing Ads that employ animation, sound, and interactivity, using Flash, HTML5, Java, and JavaScript more effective than simple banner ad. Interstitial ads (interstitial means in between ) is a way of placing a full-page message between the current and destination pages of a user. Copyright 2016 Pearson Education, Ltd. Slide 1-34

Video ads Display Ad Marketing are TV-like advertisements that appear as in-page video commercials or before, during, or after a variety of content Far more effective than other display formats Sponsorships is a paid effort to tie an advertiser s name to particular information, an event, or a venue in a way that reinforces its brand in a positive yet not overtly commercial manner. Copyright 2016 Pearson Education, Ltd. Slide 1-36

Native advertising Display Ad Marketing Advertising that looks similar to editorial content. native ads are most often found on social media, especially mobile social media, as part of a Facebook Newsfeed, Twitter Timeline, or Pinterest Promoted Pin. Mobile social networks do not have room for ads on the right side of the screen and therefore native ads in the form of posts that look like other posts are the favored option. Copyright 2016 Pearson Education, Ltd. Slide 1-37

Display Ad Marketing (cont.) Most firms, even very large firms, did not have the capability by themselves to place banner ads and marketing messages on thousands of Web sites and monitor the results. Specialized marketing firms called advertising networks help firms to make the entire process of buying and selling online ads more efficient. Advertising networks Connect online marketers with publishers by displaying ads to consumers based on detailed customer information Copyright 2016 Pearson Education, Ltd. Slide 1-38

Direct e-mail marketing E-mail Marketing Messages sent directly to interested users Benefits include Inexpensive In-house e-mail lists are more effective than purchased e-mail lists Measuring and tracking responses Personalization of messages and offers Three main challenges Spam Anti-spam software used to control spam that eliminate much e-mail from user inboxes Poorly targeted purchased e-mail lists Copyright 2016 Pearson Education, Ltd. Slide 1-40

Affiliate marketing Affiliate marketing Commission fee paid by advertisers to other Web sites (affiliate web sites) for sending customers to their Web site Visitors to an affiliate Web site typically click on ads and are taken to the advertiser s Web site In return, the advertiser pays the affiliate a fee, either on a per-click basis or as a percentage of whatever the customer spends on the advertiser s site Affiliate marketing generally involves pay-for-performance: the affiliate website gets paid only if users click on a link or purchase a product. Copyright 2016 Pearson Education, Ltd. Slide 1-41

Viral marketing Viral Marketing Marketing designed to inspire customers to pass message to others is a form of social marketing that involves getting customers to pass along a company s marketing message to friends, family, and colleagues It s the online version of word-of-mouth advertising There are a number of online venues where viral marketing appears: E-mail (e.x please forward this e-mail to your friends ), venues such as Facebook, Pinterest, Instagram, Twitter, YouTube, and blogs now play a major role. Copyright 2016 Pearson Education, Ltd. Slide 1-42

Social, Mobile, and Local Marketing and Advertising Social marketing/advertising The use of online social networks and communities to build brands and drive sales revenues There are several kinds of social networks, from Facebook, Twitter, Pinterest, and Instagram, to social apps, social games, blogs, and forums. Fastest growing type of online marketing Enormous audiences of social networks Copyright 2016 Pearson Education, Ltd. Slide 1-43

Social, Mobile, and Local Marketing and Advertising Mobile Marketing and Advertising Major formats: Display banner ads, rich media, video Can be served as a part of a mobile Web site or inside apps and games. Facebook is the leader in mobile display ad revenues, followed by Google and Twitter. Search Games E-mail Text messaging (SMS) In-store messaging Quick Response (QR) codes App marketing Copyright 2016 Pearson Education, Ltd. Slide 1-44

Social, Mobile, and Local Marketing and Advertising Local Marketing and Advertising The growth of mobile devices has accelerated the growth of local search and purchasing Geared to user s geographic location New marketing tools like local advertisements on social networks and daily deal sites are contributing to local marketing growth. Most common local marketing tools Geotargeting (using Google Maps) The most commonly used venues include Facebook, Google, Amazon Local, LinkedIn, Yahoo, Bing, and Twitter. The daily deal coupon sites, Groupon and LivingSocial, and location-based mobile firms such as Foursquare are also a significant part of this trend. Copyright 2016 Pearson Education, Ltd. Slide 1-45

Multi-Channel Marketing Marketers increasingly are developing multi-channel marketing programs (online and offline ) that can take advantage of the strengths of various media. Online marketing is not the only way, or by itself the best way, to engage consumers. Internet campaigns can be strengthened by also using TV, print, and radio. Several research studies have shown that the most effective online advertisements are those that use consistent imagery with campaigns running in other media at the same time. Copyright 2016 Pearson Education, Ltd. Slide 1-46

Other Online Marketing Strategies In addition to the traditional online marketing and advertising tools we have previously discussed, there are also a number of other, more focused online marketing strategies Here we examine tools aimed at Customer retention strategies Long Tail marketing strategy (Not required) Copyright 2016 Pearson Education, Ltd. Slide 1-47

Other Online Marketing Strategies Customer retention strategies There are some marketing techniques for building a strong relationship with customers and for differentiating products and services: Personalization and one-to-one marketing Customization and Customer Co-Production Customer service Copyright 2016 Pearson Education, Ltd. Slide 1-48

Other Online Marketing Strategies Personalization,one-to-one marketing (interest-based advertising) segments the market on the basis of individuals based on a precise and timely understanding of their needs, targeting specific marketing messages to these individuals. The Amazon and Barnes & Noble Web sites are good examples of personalization at work. Both sites greet registered visitors (based on cookie files), recommend recent books based on user preferences (stored in a user profile in their database) as well as what other consumers purchased, and expedite checkout procedures based on prior purchases. Copyright 2016 Pearson Education, Ltd. Slide 1-49

Other Online Marketing Strategies Personalization,one-to-one marketing (interest-based advertising) Behavioral targeting Also called, interest-based advertising (IBA). It s using online and offline behavior of consumers to adjust the advertising messages delivered to them online An advertising network could follow you across thousands of Web sites and come up with an idea of what you are interested in as you browse, and then display ads related to those interests. Based on data collected from search engine queries, your e-mail content, social network data, friends, purchases online, books read or purchased, newspaper sites visited and integration of offline personal data and records Most popular Web sites have more than 100 tracking programs on their home pages that are owned by third-party data collector firms who then sell this information in real time to the advertising network. Copyright 2016 Pearson Education, Ltd. Slide 1-50

Other Online Marketing Strategies Personalization,one-to-one marketing (interest-based advertising) Retargeting Involves showing the same or similar ads to individuals across multiple Web sites. Retargeting has become a popular tactic, used by 88% of marketers due to its effectiveness Copyright 2016 Pearson Education, Ltd. Slide 1-51

Other Online Marketing Strategies (cont.) Customization Changing the product not just the marketing message according to user preferences Customer co-production means the users actually think up the innovation and help create the new product. Many companies offer build-to-order customized products, creating product differentiation and customer loyalty. E.x: Nike, M&M s customized product New York Times, MSN, Yahoo customized content Copyright 2016 Pearson Education, Ltd. Slide 1-52

Other Online Marketing Strategies (cont.) Customer service Service can significantly help or hurt its marketing efforts. Customer loyalty increases when online buyers know that customer service representatives are available online or by phone and are able to resolve any problem quickly. Conversely, online buyers who do not receive satisfaction at these critical moments often terminate their relationship with the business and switch to a competitor that may charge more but deliver superior customer service Copyright 2016 Pearson Education, Ltd. Slide 1-53

Other Online Marketing Strategies (cont.) Customer service There are tools that companies can use to encourage interaction with customers: FAQs text-based listing of common questions and answers, Real-time customer chat systems a company s customer service representatives interactively exchange text-based messages with one or more customers on a real-time basis Automated response systems sends e-mail order confirmations and acknowledgments of e-mailed inquiries Copyright 2016 Pearson Education, Ltd. Slide 1-54

Web Transaction Logs A primary source of consumer information on the Web is the transaction log. Built into Web server software Record user activity at Web site Provides much marketing data, especially combined with: 1. Registration forms Gather personal data on name, address, phone, zip code, e-mail address And other optional information on interests and tastes 2. Shopping cart database Captures all the item selection, purchase, and payment data. 3. Information users submit on product forms, contribute to chat groups, or send via e-mail messages using the Contact Us option on most sites Copyright 2016 Pearson Education, Ltd. Slide 1-57

Web Transaction Logs For a Web site that has a million visitors per month, and where, on average, a visitor makes 15 page requests per visit, there will be 15 million entries in the log each month. Here are some interesting marketing questions that can be answered by examining a site s Web transaction logs, registration forms, and shopping cart database: Copyright 2016 Pearson Education, Ltd. Slide 1-58

SUPPLEMENTING THE LOGS: Cookies and Tracking Files While transaction logs create the foundation of online data collection at a single Web site, marketers use tracking files to follow users across the entire Web as they visit other sites Types of tracking files Cookies Flash cookies Beacons ( bugs ) Copyright 2016 Pearson Education, Ltd. Slide 1-59

SUPPLEMENTING THE LOGS: Cookies and Tracking Files Cookies Small text file placed by Web site Allows Web marketers to gather data: to identify the customer, prior behavior at the site, how many people are visiting the site. First-party cookies, Third-party cookies Flash cookies Created by Adobe Flash software Web beacons bugs Tiny (1-pixel) graphic files Can be used with flash cookies to create cross-site profiles. Automatically transmit information about the user and the page being viewed to a monitoring server Copyright 2016 Pearson Education, Ltd. Slide 1-60

SUPPLEMENTING THE LOGS: Cookies and Tracking Files Also another method to track consumers across devices is Deterministic cross-device tracking relies on personally identifiable information such as e-mail address used to log into an app and Web site on different devices. Facebook, Google, Apple, Twitter, have very large user bases and have both desktop and mobile properties that require logins are the most likely to be able to effectively exploit deterministic matching Copyright 2016 Pearson Education, Ltd. Slide 1-61

DATABASES, DATA WAREHOUSES, DATA MINING, AND BIG DATA In order to understand the data in transaction logs, registration forms, shopping carts, cookies, Web bugs, and other unstructured data sources like e-mails, tweets, and Facebook Likes, Internet marketers need massively powerful and capacious databases, database management systems, and analytic tools. Databases, data warehouses, data mining, and the variety of marketing decisionmaking techniques called profiling. Profiling uses a variety of tools to create a digital image for each consumer. The quality of a consumer profile depends on the amount of data used to create it, and the analytical power of the firm s software and hardware. Copyright 2016 Pearson Education, Ltd. Slide 1-62

Databases database is a software application that stores records and attributes Database management system (DBMS): Software used to create, maintain, and access databases SQL (Structured Query Language): Industry-standard database query and manipulation language used in a relational database Relational database: Represents data as two-dimensional tables with records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element Relational databases are extraordinarily flexible and allow marketers and other managers to view and analyze data from different perspectives very quickly Copyright 2016 Pearson Education, Ltd. Slide 1-63

Data Warehouses and Data Mining Data warehouse: Collects firm s transactional and customer data in single location for offline analysis by marketers and site managers The purpose of a data warehouse is to gather all the firm s transaction and customer data into one logical repository where it can be analyzed and modeled by managers without disrupting or taxing the firm s primary transactional systems and databases. Copyright 2016 Pearson Education, Ltd. Slide 1-64

Data Warehouses and Data Mining Data mining: analytical techniques that look for patterns in the data of a database or data warehouse, or seek to model the behavior of customers. Types of data mining (not required) Copyright 2016 Pearson Education, Ltd. Slide 1-65

Hadoop and the Challenge of Big Data Big Data refers to very large data sets in the petabyte and exabyte range in other words, billions to trillions of records, often from different sources. Web traffic, e-mail, social media content Traditional DBMS unable to process the volumes. Marketers are interested in Big Data because it can be mined for patterns of consumer behavior and contain more interesting knowledge than smaller data sets. Hadoop Is a software framework for working with various big data sets Open-source software solution Processes any type of data, including unstructured and semistructured Copyright 2016 Pearson Education, Ltd. Slide 1-66

Marketing Automation and Customer Relationship Management (CRM) Systems Marketing automation systems Refers to software platforms designed for marketing departments to automate repetitive marketing tasks are software tools that marketers use to track all the steps in the lead generation part of the marketing process Track steps from product awareness to purchase These software packages visualize most of the online marketing activities of a firm and then track the progression from exposure to display ads, finding your firm on a search engine, directing follow-up e-mail and communications, and finally a purchase. Copyright 2016 Pearson Education, Ltd. Slide 1-67

Marketing Automation and Customer Relationship Management (CRM) Systems Marketing automation products often integrate with CRM tools Once the business acquire a customer, customer relationship management systems take over the maintenance of the relationship CRM systems An important Internet marketing technology. 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. Customer Profile can contain: A map of the customer s relationship with the institution, Product and usage summary data, demographic and psychographic data, profitability measures, contact history, E-mail campaign responses, Web site visits. Copyright 2016 Pearson Education, Ltd. Slide 1-69

Marketing Automation and Customer Relationship Management (CRM) Systems Customer data used to: Develop and sell additional products Identify and retain profitable customers Optimize service delivery, and so on Reduce marketing costs Retain high lifetime value customers Improve customer loyalty Leading CRM vendors include Oracle, SAP, Microsoft, Salesforce.com, and SugarCRM, many of which offer cloudbased versions of their CRM products. Copyright 2016 Pearson Education, Ltd. Slide 1-71