E-Business Eighth Edition

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E-Business Eighth Edition

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Title: E-Business Eighth Edition

1
E-BusinessEighth Edition

Chapter 4Marketing on the Web

2
Learning Objectives

In this chapter, you will learn about
When to use product-based and customer-based
marketing strategies
Communicating with different market segments
Customer relationship intensity and the customer
relationship life cycle
Using advertising on the Web

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Learning Objectives (contd.)

E-mail marketing
Technology-enabled customer relationship
management
Creating and maintaining brands on the Web
Search engine positioning and domain name
selection

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Web Marketing Strategies

Marketing mix
Element combination to achieve goals
Selling and promoting products and services
Marketing strategy
Marketing mix with elements defined
Four Ps of marketing
Product
Physical item or service sold
Brand customers product perception

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Web Marketing Strategies (contd.)

Four Ps of marketing (contd.)
Marketing mix price element
Amount customer pays for product
Promotion
Any means to spread word about product
The issue of place (distribution)
Need to have products or services available
In many different locations
Long-term problem
Getting right products to the right places
At the best time to sell them

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Product-Based Marketing Strategies

Web presence must integrate with image, brand
Product-based organization
Managers think of physical objects sold or used
Customers think in terms of product categories
Examples
Web office supply stores (Staples)
Previous print catalog sales (Sears)
Both examples
Organized Web sites from internal viewpoint

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E-Business, Eighth Edition
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Customer-Based Marketing Strategies

Identify customer groups sharing common
characteristics
Example Saber Holdings
Four main groups (with potential subgroups)
Technique pioneered on B2B sites first
Customized product and service offerings
Match customers needs
B2C sites
Adding customer-based marketing elements
Example university Web sites
Web sites designed with links for specific
stakeholders

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E-Business, Eighth Edition
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Communicating with DifferentMarket Segments

Communications media selection to carry message
Physical world
Use building construction and floor space design
Example Banks
Online firm
No physical presence
Customer contact through media and Web site
Communications media selection is critical
Online firm challenge
Customer trust with no physical presence

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Trust, Complexity, and Media Choice

The Web
Intermediate step
Between mass media and personal contact
Potential customer Web communication
Offers advantages of personal contact selling
Cost savings of mass media
Mass media
Offers lowest trust level
Costs spread over any people

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E-Business, Eighth Edition
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Trust, Complexity, and Media Choice (contd.)

Complexity level inherent in product and service
Important factor in media choice
Mass media
Products with few characteristics, easy to
understand
Expensive (deliver short messages)
Personal contact
Highly complex products and services
Customers may ask questions

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Trust, Complexity, and Media Choice (contd.)

Web (middle ground)
Offers various elements
Deliver short, focused messages
Engage potential customer
Give customers ability to choose interaction
level
Resistance to mass media messages
Successful campaigns
Rely on passive nature of media consumption
Web use
Capture benefits of personal contact
Avoid costs inherent in that approach

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Market Segmentation

Divides potential customer pool into segments
Defined in demographic characteristics terms
Micromarketing
Practice of targeting very small market segments
Three categories to identify market segments
Geographic segmentation
Demographic segmentation
Psychographic segmentation
Television advertisers
Use three categories or combination

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Companies try to
Match advertising messages to market segments
Build sales environment for a product or service
Corresponds to market segment trying to reach

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Market Segmentation on the Web

Web opportunity
Present different store environments online
Steve Madden site
Target young, fashion-conscious buyers
Talbots site
More muted, conservative style
Limitations of physical retail stores
Floor and display space
Must convey one particular message
Web stores
Separate virtual spaces for different market
segments

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Offering Customers a Choice on the Web

One-to-one marketing
Offering products, services matched to needs of a
particular customer
Dell
Offers number of different ways to do business
Home page links for each major customer group
Specific products, product categories links
available
Dell Premier accounts
High level of customer-based market segmentation

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Beyond Market Segmentation Customer Behavior and
Relationship Intensity

Recap
Companies target similar customer groups as
market segments
One-to-one marketing
Chance to create individually unique Web
experiences
Next step
Use the Web to target specific customers in
different ways at different times

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Segmentation Using Customer Behavior

Same person
Requires different products and services
combinations
Depending on the occasion
Behavioral segmentation
Creation of separate customer experiences based
on their behavior
Occasion segmentation
Based on things happening at a specific time or
occasion

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Segmentation Using Customer Behavior (contd.)

Online world single Web site design
Easier to meet needs of different behavioral
modes
Elements appealing to different behavioral
segments
Market research study
Preferences toward different product, service
combinations
Web site features
How preferences affected by modes of interaction
Finding
People want range of interaction possibilities
Identified common behavior patterns

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Segmentation Using Customer Behavior (contd.)

Browsers
Visitors just surfing or browsing
Web site offer something to piques visitors
interest
Trigger words
Jog visitors memories
Remind visitors of something they want to buy on
the site
Have links to site explanations, instructions
Include extra content related to product, service
Leads to favorable impression (bookmark)

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Segmentation Using Customer Behavior (contd.)

Buyers
Ready to make a purchase right away
Offer certainty
Nothing will get in way of purchase transaction
Shopping cart
Part of Web site
Keeps track of selected items for purchase
Automates purchasing process
Offers link back into shopping area
Goal
Get buyer to shopping cart as quickly as possible

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Segmentation Using Customer Behavior (contd.)

Shoppers
Motivated to buy
Looking for more information before purchase
Offer comparison tools, product reviews, and
features lists

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Segmentation Using Customer Behavior (contd.)

Alternative visitor mode models
McKinsey Companys six behavior-based
categories
Simplifiers (convenience)
Surfers (find information, explore new ideas,
shop)
Bargainers (search for good deal)
Connectors (stay in touch with other people)
Routiners (return to same sites over and over)
Sportsters (spend time on sports, entertainment
sites)
Challenge
Identify groups
Formulate ways of generating revenue

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Customer Relationship Intensity and Life-Cycle
Segmentation

One-to-one marketing and usage-based segmentation
value
Strengthen companies relationships with
customers
Good customer experiences
Create intense loyalty feeling toward the
company, products, services
Typical five-stage model of customer loyalty
See Figure 4-6

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First four stages
Show increase in relationship intensity
Fifth stage (separation)
Decline occurs
Relationship terminates

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Customer Relationship Intensity and Life-Cycle
Segmentation (contd.)

Awareness
Customers recognize company name, product
Exploration
Customers learn more about company, products
Familiarity
Customers have completed several transactions
Aware of returns, credits policies, and pricing
flexibility

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Customer Relationship Intensity and Life-Cycle
Segmentation (contd.)

Commitment
Customer experiences considerable number of
highly satisfactory encounters
Develops fierce loyalty or strong preference
Separation
Conditions that made relationship valuable change
Parties enter separation stage
Life-Cycle Segmentation
Customer life cycle (five stages)
Analyzing how customers behavior changes as they
move through stages

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Acquisition, Conversion, and Retention of
Customers

Goal
Attract new visitors to a Web site
Acquisition cost
Total amount of money site spends (average) to
draw one visitor to site
Conversion
Convert first-time visitor into a customer
Conversion cost
Total amount of money site spends (average) to
induce one visitor to make a purchase, sign up
for a subscription, or register

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Acquisition, Conversion, and Retention of
Customers (contd.)

Conversion cost may be greater than profit earned
on the average sale
Retained customers
Return one or more times after making first
purchases
Retention costs
Costs of inducing customers to return and buy
again
Importance of measuring these costs
Indicates successful advertising, promotion
strategies
More precise than classifying into five loyalty
stages

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Customer Acquisition, Conversion, and Retention
The Funnel Model

Funnel model
Conceptual tool
Understand overall nature of marketing strategy
Provides clear structure for evaluating specific
strategy elements
Very similar to customer life-cycle model
Less abstract
Better at showing effectiveness of two or more
specific strategies
Provides good analogy for the operation of
marketing strategy

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E-Business, Eighth Edition
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Advertising on the Web

Effective advertising involves communication
Five-stage customer loyalty model helpful in
creating messages
Awareness stage
Advertising message should inform
Exploration stage
Message should explain how product, service works
Encourage switching brands
Familiarity stage
Message should be persuasive

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Advertising on the Web (contd.)

Five-stage customer loyalty model (contd.)
Commitment stage
Reminder messages
Separation stage
Not targeted
Online advertising
Always coordinate with existing advertising
efforts

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Banner Ads

Banner ad
Small rectangular object on Web page
Displays stationary or moving graphic
Includes hyperlink to advertisers Web site
Versatile
Attention-grabbing
Uses animated GIFs and rich media objects
Created using Shockwave, Java, Flash
Marketing unit (IMU) ad formats
Voluntary standard banner sizes

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Banner Ads (contd.)

Leaderboard ad
Designed to span Web page top or bottom
Skyscraper ad
Designed to be placed on Web page side
Remains visible as user scrolls through page
Advertising agencies
Create banner ads for online clients
Price range 100 to more than 2000
Companies can make their own banner ads

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Banner Ads (contd.)

Banner ad placement
Use a banner exchange network
Coordinates ad sharing
Sites run one companys ad
Companys site runs other exchange members ads
Find Web sites appealing to companys market
segments
Pay sites to carry ad
Use a banner advertising network
Acts as broker between advertisers and Web sites
that carry ads

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Banner Ads (contd.)

New strategies for banner ads
Banner ads were a novelty initially
They now have decreased ability to attract
attention
Solutions
Introduced animated GIFs with moving elements
Created ads displaying rich media effects (movie
clips)
Added interactive effects (Java programs)
respond to users click with some action
See Figure 4-8

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Text Ads

Short promotional message
No graphic elements
Usually placed along Web page top or right side
Simple but very effective
Example Google
Initially criticized for including obtrusive ads
on its pages
Now clearly labels ads (to prevent confusion)
Inline text ad
Text in stories displayed as hyperlinks

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Other Web Ad Formats

Pop-up ad
Appears in its own window
When user opens or closes Web page
Extremely annoying
Must click close button (small) in window of ad
Pop-behind ad
Pop-up ad followed by command (quick)
Returns focus to original browser window
Ad-blocking software
Prevents banner ads and pop-up ads from loading

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Other Web Ad Formats (contd.)

Interstitial ad
User clicks link to load page
Interstitial ad opens in its own browser window
Instead of page user intended to load
Many close automatically
Others require user to click a button
Rich media ads (active ads)
Generate graphical activity that floats over
the Web page itself

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Site Sponsorships

Web sites offer advertisers opportunity to
sponsor all (or parts) of their sites
More subtle way to promote products, services,
brands
Goals similar to sporting event sponsors,
television program sponsors
Tie company (product) name to an event (set of
information)
Ethical concerns raised
If sponsor is allowed to create content or weave
advertising message into sites content

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Online Advertising Cost and Effectiveness

Web sites make favorable impression on potential
customers
Raises issue of measuring Web site effectiveness
Cost per thousand (CPM)
M from Roman numeral for thousand
Dollar amount paid for every thousand people in
the estimated audience
Measuring Web audiences (complicated)
Webs interactivity
Value of visitor to an advertiser
Depends on information site gathers from visitor

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Online Advertising Cost and Effectiveness
(contd.)

Visit
Occurs when visitor requests a page from Web site
Trial visit
First time a particular visitor loads Web site
page
Repeat visits subsequent page loads
Ad view occurs if page contains an ad
Impression each time banner ad loads
Click (click-through)
Action whereby visitor clicks banner ad to open
advertisers page

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Online Advertising Cost and Effectiveness
(contd.)

New metrics to evaluate number of desired
advertising yield outcomes
Measure number of new visitors who buy first time
after arriving at site
By way of click-through
Calculate advertising cost of acquiring one
customer on the Web
Compare to how much it costs to acquire one
customer through traditional channels

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Effectiveness of Online Advertising

Online advertising
Remains difficult to measure
Major problem
Lack of single industry standard measuring
service
Solution (2004)
Set of media measurement guidelines
Used by all online advertisers
Produce comparable ad view numbers
Difficulties remain
Site visitors change Web surfing behaviors, habits

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E-mail Marketing

Key element
Obtain customers approvals
Before sending marketing or promotional e-mail
message

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Permission Marketing

Opt-in e-mail
Practice of sending e-mail messages to people who
request information
Part of marketing strategy permission marketing
More successful than sending general promotional
messages through mass media
Cost effective
Can cost less than one cent if company already
has customers e-mail address

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Combining Content and Advertising

Using articles, news stories of interest to
specific market segments
Advertisers send content by
Using inserted hyperlinks into e-mail messages
Takes customers to advertisers Web site content
Induces customer to stay on the site and consider
making purchases

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Outsourcing E-Mail Processing

Number of customers who opt-in to
information-laden e-mails
Can have rapid growth
Outgrow capacity of information technology staff
Solution
Use e-mail processing service provider

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Technology-Enabled Customer Relationship
Management

Clickstream
Information Web site gathers about visitors
Technology-enabled relationship management
Firm obtains detailed customers information to
Set prices, negotiate terms, tailor promotions,
add product features, and customize its entire
relationship with that customer
Customer relationship management (CRM)
Technology-enabled customer relationship
management
Electronic customer relationship management (eCRM)

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CRM as a Source of Value in the Marketspace

Marketspace
Commerce in the information world
Value creation requires different processes
Firms use information to create new value for
customers
Track and examine Web site visitor behavior
Use that information to provide customized,
value-added digital products and services
Early CRM effort failed
Overly complex

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CRM as a Source of Value in the Marketspace
(contd.)

Current CRM efforts more successful
Less ambitious in scope
Limit data collection to key facts
Customer touchpoint
Any occurrence of contact between customer and
any part of the company
Data warehouse
Large database
Contains multiple sources of information about
customers, their preferences, their behavior

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CRM as a Source of Value in the Marketspace
(contd.)

Data mining (analytical processing)
Technique that examines stored information
Looks for unknown, unsuspected patterns in the
data
Statistical modeling
Technique that tests CRM analysts theories about
relationships among elements of customer and
sales data

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Creating and Maintaining Brands on the Web

Branded products
Easier to advertise and promote
Each product carries reputation of the brand name
Value of trusted major brands
Far exceeds cost of creating them

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Elements of Branding

Three key brand elements
Product differentiation
Clearly distinguish product from all others
Relevance
Degree to which product offers utility to
customer
Perceived value (key element)
Customer perceives a value in buying product
Brands can lose their value
Environment changes

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Emotional Branding vs. Rational Branding

Emotional appeals
Work well if ad targets in passive mode of
information acceptance
Television, radio, billboards, print media
Difficult to convey on Web
Active medium controlled by customer
Rational branding
Offer to help Web users in some way
In exchange for viewing an ad
Relies on cognitive appeal of specific help
offered

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Brand Leveraging Strategies

Brand leveraging
Extend dominant positions to other products and
services
Examples
Yahoo!
Amazon.com

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Brand Consolidation Strategies

Market intermediary
Example
Della James online bridal registry
Now WeddingChannel.com
Created single registry connecting to several
local and national department, gift stores
Logo and branding of each participating store
Featured prominently on WeddingChannel.com site
Provides valuable consolidating activity for
registering couples, guests

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Costs of Branding

Transferring existing brands to the Web
Less expensive than creating entirely new brand
1998
Top 100 electronic commerce sites each spent an
average of 8 million
March 2000
Money supply began drying up
Companys Web presence promoting
Integral part of brand development, maintenance
Companys URL
On product packaging, mass media advertising

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Affiliate Marketing Strategies

Affiliate marketing
One firms Web site (affiliate site)
Includes descriptions, reviews, ratings, other
information about a product linked to another
firms site (offers item for sale)
Affiliate site receives commission
For every visitor following link from affiliates
site to sellers site
Affiliate saves expenses
Handling inventory, advertising and promoting
product, transaction processing

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Affiliate Marketing Strategies (contd.)

Cause marketing
Affiliate marketing program benefiting charitable
organization
Visitor clicks on link (on affiliates Web page)
Donation made by a sponsoring company
Page loads after visitor clicks donation link
Carries advertising for sponsoring companies

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Affiliate Marketing Strategies (contd.)

Affiliate commissions
Pay-per-click model
Affiliate earns commission
Each time site visitor clicks link, loads the
sellers page
Pay-per-conversion model
Affiliate earns a commission
Each time site visitor converted from visitor
into qualified prospect or customer
Affiliate program broker (clearinghouse or
marketplace)
For sites that run affiliate programs, want to
become affiliates

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Viral Marketing Strategies

Viral marketing
Relies on existing customers
Tell other people (prospective customers) about
products or service
Use individual customers to spread the word about
a company
Example BlueMountain Arts
Electronic greeting cards
E-mail messages that include link to greeting
card site

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Search Engine Positioning and Domain Names

Ways that potential customers find Web sites
Referred by friend
Referred by affiliate marketing partner
See sites URL in print advertisement, television
Arrive unintentionally after mistyping similar
URL
Use a search engine or directory Web site

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Search Engines and Web Directories

Search engine
Web site that helps people find things on the Web
Contains three major parts
Spider (crawler, robot, bot)
Program automatically searches Web to find
potentially interesting Web pages for people
Index (database)
Storage element of search engine
Search utility
Takes terms, finds matching Web page entries in
index

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Search Engines and Web Directories (contd.)

Web directories
Provide classified hierarchical lists of
categories
Search engine ranking
Weighting of factors
Search engines uses factors to decide URLs that
appear first on searches for a particular search
term
Search engine positioning (search engine
optimization, search engine placement)
Results from the combined art and science of
having a particular URL listed near the top of
search engine

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Paid Search Engine Inclusion and Placement

Paid placement (sponsorship, search term
sponsorship)
Option of purchasing top listing on results pages
for a particular set of search terms
Buy banner ad space at the top of search results
pages that include certain terms
Search engine positioning complex subject
Spending on online advertising
See Figures 4-13 and 4-14

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Paid Search Engine Inclusion and Placement
(contd.)

Search engine placement brokers
Companies that aggregate inclusion and placement
rights on multiple search engines
Sell those combination packages to advertisers
Google does not use placement broker
Sells services directly (Google AdWords program)
Contextual advertising (potential flaw)
Ads placed in proximity to related content
Localized advertising
Ads related to location on search results