Marketing on the Web ISM 4480 University of South Florida

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Marketing on the WebISM 4480University of
South Florida
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Objectives

• Four Ps of marketing.
• Product versus customer-based marketing
  strategies.
• Market segmentation.
• Personalization.
• CRM Customer life-cycle, Funnel model.
• Web advertising.
• Branding.
• E-mail, affiliate, and viral marketing.
• Search engine positioning and domain name
  selection.

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Four Ps of Marketing

• Product
• Product or service that company is selling.
• E-commerce physical or digital, commodity or
  customized?
• Price
• Amount customer pays for product.
• E-commerce price transparency (for commodity
  products).
• Promotion
• Means of spreading the word about product.
• E-commerce direct (11) marketing (vs. generic
  or 1N marketing).
• Place
• Locations where product can be purchased.
• E-commerce any-place/any-time availability.

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Two Marketing Strategies

• Product-based marketing strategy
• E.g., Amazon.com, Staples.com, ebay.com
• Organize products into categories such as books,
  electronics, audio/video, etc. for customers to
  browse.
• Customers must view their needs in terms of
  product categories.
• Customer-based marketing strategy
• E.g., Dell.com, Sabre Holdings.
• Organize products by customer segments such as
  large business, small business, home office,
  education, etc.
• More common on B2B sites than on B2C sites.
• A smart business should allow for both.

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Issues in Customer-Based Strategy

• How to identify groups of customers with common
  characteristics
• First step to market segmentation.
• How to reach those customers
• Mass media, personal contact, or web?
• Cost Web is the lowest cost strategy.
• Multiple touchpoints needed Web-only strategy
  not very effective some offline media is needed
  even for online businesses.
• How to track customer behaviors
• Record and mine customer clickstream data.
• Use prior customer purchases to estimate future
  purchases.

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Market Segmentation

• Definition Grouping potential customers into
  segments based on some characteristics in order
  to devise specific ad messages for each segment.
• Micromarketing Targeting very small market
  segments.
• Three categories of segmentation
• Geographic segmentation
• Segmenting people by their geographic locations
  such as country, city, suburban vs. rural.
• Demographic segmentation
• Segmenting based on age, gender, family size,
  income, education, religion, ethnicity, etc.
• Psychographic segmentation
• Segmenting based on social class, personality,
  lifestyle, etc.

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Market Segmentation on TV
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Beyond Market Segments Personalization

• Next step beyond market segmentation
• Understanding individual (not market segment)
  needs and tailor individual message for each
  user.
• One-to-one or direct marketing Done using
  personalization and/or customer relationship
  management (CRM) software.
• Personalization can be based on
• Customers behavior purchase history, content of
  purchase, web site usage.
• Customers profile age, occupation, marital
  status, etc.
• Customers interests Bridal shop, golf
  tournament, casual dining.

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Personalization on the Web

• Search engines (e.g., Google)
• Recommends companies based on users search
  keywords.
• Web retailers (e.g., Amazon)
• Recommends products based on customers prior
  purchase history, items in customers wish list,
  etc.
• Ad brokers (e.g., Doubleclick)
• Displays banner ads based on users profile and
  browser content.

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Personalized Marketing Example
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Customer Life Cycle
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Customer Relationship Management

• Goal is to create strong relationships with
  customers throughout its life-cycle.
• Why important
• Good customer experiences builds loyalty and
  repeat business.
• Provides cross-selling or up-selling
  opportunities.
• It costs five times less to retain an existing
  customer than gain a new customer.
• Customer acquisition costs
• Costs of attracting and converting a visitor into
  a paying customer (including conversion costs).
• Netflix 37 per customer (2004).
• E-Trade 250 per customer (2001).

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CRM Technology-Enabled vs. Traditional
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The Funnel Model Customer Acquisition,
Conversion, and Retention

• Wider base of funnel implies better strategy.
• Use to benchmark effectiveness of different
  marketing strategies.

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Advertising on the Web Banner Ads

• Rectangular ads placed on top or within a web
  page with URL link.
• May contain animated GIFs or rich media objects
  such as Flash, Shockwave, and Java (moving
  graphic).
• Banner sizes and formats established by Internet
  Advertising Bureau (IAB), a non-profit
  organization to promote effective web
  advertising.
• IAB-compliant ads use Interactive marketing unit
  (IMU) formats.
• Banner ads created by advertising agencies (e.g.,
  AdDesigner.com) for 100-5000.
• Banner ad placement coordinated by a banner
  advertising network
• Broker between advertisers and Web sites that
  carry ads.
• Doubleclick, ValueClick, LinkExchange.
• Ad cost/effectiveness determined as cost per
  thousand (CPM).

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Other Web Ad Formats

• Pop-up ad
• Appears in its own window when the user opens or
  closes a Web page.
• Can be blocked using ad blocking software (e.g.,
  Google toolbar).
• Pop-behind (pop-under) ad
• Pop-up ad that returns focus to the original
  browser window.
• Interstitial ad
• When a user clicks a link to load a page, the
  interstitial ad opens in its own window instead
  of the users intended window.
• Rich media (or active) ad
• Graphical activity that floats over a web page
  instead of opening in a separate window.

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CPM Rates
Personalized ads costs more than generic ads on
the web.
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E-Mail Marketing

• Sending e-mails to customers to advertise/promote
  products.
• Inexpensive, but often viewed as spam (less
  effective).
• E-mail lists can be purchased in bulk from third
  parties.
• Effectiveness determined by conversion rate
  (percentage of recipients responding to an
  ad/promotion).
• Opt-in e-mail (permission marketing)
• Sending e-mails only when customers request
  information on a particular topic, often during
  registration.
• Opt-out e-mail
• Bulk e-mailing but providing customers a way
  (e.g., link) to choose not to receive similar
  e-mails in future.

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Affiliate Marketing

• Works well when partner firms have a dominant web
  presence (e.g., Yahoo, Amazon.com, Edmunds.com).
• Affiliate site receives referral fees, while
  selling sites benefit from affiliates brand and
  savings on advertising and promotion.
• Affiliate commissions
• Pay-per-click (interested visitor).
• Pay-per-conversion (actual purchase).

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Viral Marketing

• Relies on existing customers (as referrers) to
  attract new customers.
• Powerful way to build customer base with minimal
  ad spending.
• Hotmail (Microsoft)
• Advertised its service by attaching a message
  Get your free e-mail from Hotmail at the end of
  every e-mail from its server.
• Generated 5 million users in 6 months, spending
  only 50,000.
• Blue Mountain Arts.
• One of the most-visited electronic greeting card
  company on the web, with very little advertising.

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Search Engine Positioning

• Effective way of reaching customers with minimal
  ad spending.
• Search engines deliver sites that meet users
  search criteria.
• May be embedded in search results or displayed as
  sponsored links at the top or right side of the
  search results page (Google).
• Paid placements
• Sites pay for preferred positioning on search
  results.
• Search engine ranking also determines positioning
  costs (e.g., Nielsen/NetRatings rankings of
  frequently visited Web sites).
• Google uses auctions to determine positioning.
• Search engine placement brokers aggregate
  inclusion and placement rights on multiple search
  engines.