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Marketing of High-Technology Products and Innovations E-Business and Internet Marketing Internet Perspectives Customers -Customer Control -Privacy Businesses Content Sites -Changing Rules of the Game -Threats to Traditional Businesses -Coping with Threats -Functions other than Sales (e.g. Supply Chain Management) -Portals -Cybermediaries -Online Communities -Vertical Hubs for B2B e-commerce Internet “Distribution Chain” • Device manufacturers: the device used by customer to access the Net— – Computers, hand-helds, set-top boxes • Operating systems vendors: software to operate the device – Can regulate software and access to programs used to access the Net • Browsers: software used to access information on the Internet Internet “Distribution Chain” (Cont.) • Internet Service Providers: control the infrastructure (“broadband”) for transmitting data – Phone, cable, satellite, wireless, fiber optics, DSL • Web hosting: services used to host Web sites • Search sites/portals: Information “content” sites customers go to to get useful Web information. Customer Perspective • Customer control • Privacy concerns Customers Gain Control in an On-line Environment • Customer gain information they choose – Improved information puts downward pressure on prices • Shopping bots – Move to “permission-based” marketing • Customers configure their own products, and even own Web-browsing experience – “Personalization” • Customer auctions pit supplier against supplier – B-to-B reverse auctions revolutionizing purchasing relationships Customers Gain Control in an On-line Environment • Customers break free of geographicallyconstrained purchasing – Loyalty will have to be honestly earned • Customers can shop anytime/anywhere – Customers gain efficiency and convenience • Customer word-of-mouth is more powerful. Privacy Concerns • “Cookies:” – Software that records browser’s Web habits that can be downloaded/uploaded by a site that a customer visits. • Combination of cookies + other data can build customer profiles • Cookies can be sold to advertisers Privacy Concerns (cont.) • In favor of cookies: – Customers will receive offers that match their interests – Improved information will lead to win/win marketing • Against cookies: – Abuse of customer information likely – Unrestricted sharing of information harmful Fair Information Practices Act • Companies must disclose how they collect and use information. • Customers can decide whether to allow information about them to be collected or used – “opt-in” procedures • Customers can inspect their data/correct errors • Government can impose penalties when companies violate these principles Do Internet Companies Adhere to these Principles? • Most use “opt-out” procedure: – Customer must take an action to prevent the company from collecting information about him/her • Companies share information with other companies without informing (let alone receiving consent) customers. How Reputable Companies Operate • Follow “opt in” procedures • Post (and follow!) privacy policies • Receive a “privacy seal” – www.truste.org What Surfers Can Do to Protect Privacy • Set security preferences on their browser software – Very inconvenient surfing – Download software to surf anonymously – Download software to accept cookies from only prespecified sites • Platform for Privacy Preferences (www.w3.org/P3P) Changing Rules of the Game in an On-line World • • • • Customer control Requires fewer fixed assets Companies less hierarchical Respond faster to the marketplace Threats to Traditional Businesses • • • • • • • • Extinction Loss of potential new revenue stream Cannibalization of existing revenue stream Alienating/confusing current customers Alienating existing distribution/sales channels Access to resources Attracting/retaining employees Downward pressure on prices Coping with Threats • Creative destruction: – Willingness to re-invent business model to capitalize on new technologies • Organizational Structure for On-line Unit • “Re-intermediation” Organizational Structure Options • Separate entity (skunkworks) – Pros: Capitalize on stock advantages; free reign to compete without shackles – Cons: Signals lack of willingness to be innovative within context of parent organization • Integrated within existing operations – Pros: Realize synergies between on- and off-line businesses – Cons: Conflicts of interest • Middle-ground – Minority stake in separate companies The Changing Role of the Intermediary • Disintermediation: bypassing of traditional intermediaries in favor of going direct on the Net. • Options for intermediaries – Do Nothing – Re-invent sources of value – New types of intermediaries Cybermediaries • Brokers • Electronic marketplaces – Hubs Other Internet Business Functions Streamline Supply Chain Management (Extranets/Intranets) Save on Ordering Costs On-line Recruiting Speed Product Development Reaching International Markets FIRM Get Feedback From Customers Coordinate Finance Customer Service Improve Business Relationships Other Business Functions Performed Using the Net: (in addition to revenue generation) • Supply Chain Management – Extranets • Save on Ordering Costs – EDI Internet-based – Electronic marketplaces with auctions • Speed Product Development – Intranets • Get Feedback from Customers • On-Line Recruiting Other Business Functions Performed Using the Net • • • • Reach International Markets Coordinate Finance Improve Business Relationships Move Customer Service On-Line – Automate inquiries Content (information) sites • Portals • On-line communities • Electronic marketplaces (“hubs”) On-Line Communities • Attract visitors based on common interests – iVillage.com; parentsoup.com • Focus on connectivity/interactivity – Chats, etc. • Members of on-line communities stay at the site longer, spend more money at the site than non-members Electronic Marketplaces • B2B hubs/communities that connect multiple buyers and sellers – Offer transaction efficiencies – Offer price savings (i.e. through reverse auctions) • Typically run by cybermediaries – Earn revenue as percent of transactions B2B Electronic Marketplaces • Vertical or Horizontal – Vertical: industry-specific • Chemconnect.com; e-Steel.com – Horizontal: cuts across industries, more likely to be function-specific • Adauction.com; MRO.com B2B Electronic Marketplaces • Concerns: – Antitrust issues arise from market dominance and monopoly-like economic power – Possible negative effects on long-term buyer/supplier relationships Keys to On-Line Success Build Repeat Site Traffic and Manage On-Line Customer Relationships Evaluate Traffic at the Site Promote the Web Site to Build Traffic Create Effective Web Site Design Web Site Design—4 Cs • Content – Focus on right information in the right format, with easy navigation – Requires customer research • Commerce – On-line selling must provide value beyond brickand-mortar channels Web Site Design—4 Cs • Customization – Use personalization to customize the browser’s experience • Community – Promote interactivity and sense of community Create “stickiness:” visitors have reasons to return repeatedly to the site. Promote the Web Site • • • • • • Traditional and on-line advertising List with search engines Traditional promotions Use affiliates Viral marketing Permission marketing Issues in On-line Advertising • On-line advertising doubled from 1997-1998; doubled again from 1998-1999. • On-line advertising represents only 2.8% of corporate advertising budgets. • Avoid gratuitous digitization; “brochure-ware” • Active model of customer informationacquisition – (vs. passive model of broadcast media) Types of On-line Ads Other (rich media, keyword searches) 11% Email ads 2% Sponsorship 27% Interstitials 4% Banner Ads 56% Banners • Pros: – Inexpensive – With enough creativity and repetition, can generate awareness • Cons: – Easy to ignore – Low click-through rates • Only .36% in 1999 Ways to Improve Click-Through Rates on Banners • Interactive Banners – Experiential • Target the ad appropriately using cookie data • Live Banners with video/sound – – – – “Rich media” Don’t take surfer away from host site Can use a direct selling model from the banner Require computing speed and bandwidth; more expensive to create – Higher response rate: click-on rates as high as 10% Interstitials-• “In your face;” “pop-ups” • Definitely attention-getting • Users find the annoying— – Must close pop-up window to continue surfing Interstitial Keyword Ads • To improve targeting of banner ads Co-Branding/Sponsorships • Advertiser sponsors a part of a content site • Keep sponsor clearly identified – Don’t blur line between information credibility and advertising Example of a Sponsorship Pricing of On-line Advertising • Function of: – Number of viewers – Degree to which population is a more narrowly-defined target • General portal audience vs. WSJ.com • Two pricing formats – CPM or “cost-per-click” • Need to measure number of viewers of on-line ads CPM or Cost-Per-Click? • CPM: – Based on more passive view of information acquisition – Assumes that exposing people to banners equates to an impression – May be viable for an awareness-building campaign • Cost-per-click: – Pay only when a surfer clicks on a banner – Consistent with the active view of information acquisition – Probably makes sense for a sales-oriented campaign Directories Search Engines List with Search Engines List with Search Engines • How Search Engines Work: – Send out spiders, or crawlers that store copies of Web pages and index some words from the page – When surfer types in words, search engine looks up words in its index and calls up the appropriate Web address – Search engines access only limited number of Web sites; • Therefore, important to register Web site with search engines List with Search Engines • Can can get URL on index by: – Registering with search engines – Circulating fresh content through the site regularly See more on search engines in the appendix, and slides at the conclusion of this file. Other Ways to Build Site Traffic • Traditional Promotions – Use sweepstakes, contests to get visitors to the site • Affiliates – Web sites that are cross-linked to another – May earn a commission on sales generated from referred traffic Other Ways to Build Site Traffic (Cont.) • Viral Marketing – Relies on Web site visitors to pass information/offers on to friends – Powerful in Internet environment – Requires compelling content • Permission-Based Marketing – Ask customer to opt-in to receive e-mail messages for marketing – Consistent with Relationship Marketing – Don’t spam! Evaluate Web Site Traffic • Use log files • Use software: – WebStat.com; Hitbox.com; Webtrends.com • Track data such as: – – – – – Hourly/daily/weekly monthly hits and unique visitors Top referring URLs Search engine sources Keywords searched Geo. Location (state/country) Build Repeat Site Traffic/Manage Online Customer Relationships • Personalization • Customer Service Personalization • Tailors customer’s browsing experience based on tastes and preferences – Cookies – Info the browser submits • Ex: Amazon.com • Boosts new customers, revenues • Benefits in other areas: forecasting, customer research/feedback Predicting Repeat Sales Correlations between online shoppers’ ratings of a variety of factors and their likelihood to buy again from the same site: LEVEL AND QUALITY OF CUSTOMER SERVICE: 65% ON-TIME DELIVERY: 55% PRODUCT REPRESENTATION: 47% PRODUCT SHIPPING AND HANDLING: 47% PRIVACY POLICIES: 41% EASE OF ORDERING: 22% PRODUCT SELECTION: 22% PRODUCT INFORMATION: 22% WEB SITE NAVIGATION AND LOOKS: PRODUCT PRICE: 21% 20% Hanrahan, Timothy, (1999), “Price Isn’t Everything,” Wall Street Journal, July 12, p. R20. Models of On-line Customer Service • Tiered approach – Start with self-help • FAQs – E-mail inquiry • Smart software – Tele-Web • Interactive chat with customer service rep – Personal contact Realizing the Internet’s Potential • Change is the norm • Moving toward “bricks-and-clicks” model. • Requires overturning old business models Net Hurdles to be Overcome • • • • • • • Congestion Security Privacy Technical Standards Quality of connections and Web sites Cultural Questions Internet Taxes More on Search Engines • Directories vs. search engines – Hybrids – Specialty search engines – Cost-per-click search engine: • Goto.com What “spiders” look for • HTML tags – Title tag – Meta tags • Keyword tags • Description tags – Link Tags – ALT Tags – Comment Tags – Headline Tags Determining Ranking • Keyword density – Total # of words on page \ # of times keyword is used • Percentage of relevance – Based on keyword density for each of the 6 HTML tags Search engines give differential weights to this information to determine the ranking of a particular Web page. Implications for Web Page Design • Know keywords on which to focus Web page description – Examine competitors’ pages/source code – Understand customer’s behavior – Rely on search engine “hints” • Don’t “spamdex” • Rely on software to optimize page Search Engine Scoring www.SearchEngineWatch.com Indexing Yes No Full Body Text All None Meta Description All but... FAST, Google, Lycos, NLight Meta Keywords All but... Excite, FAST, Google, Lycos, NLight ALT text AltaVista, Go, Lycos Excite, FAST, Google, Inktomi, NLight Comments Inktomi ALL Others Ranking Yes No Meta Tags Boost Ranking Go, Inktomi AltaVista, Excite, FAST, Google, Lycos, NLight Link Popularity Boosts Ranking AltaVista, Excite, FAST, Google, Go, Inktomi, NLight Lycos Submitting the Page • Manually – Go to search engine site – Add URL • Relying on automated submission process – AddWeb; Register-it – Mass submissions eliminate ability to tailor for individual search engine criteria Check Submission Status • Manually – Go to each Web site to see if indexed • Rely on third-party tools Caveats in Search Engine Positioning • Works only for “informed” customers who know what they’re searching for • May generate traffic; sales requires other considerations • Time consuming process – Outsource? • Morevisibility.com; Positionsolutions.com Search Engine Submission Guidelines Search Engine Submit more than Home Page Submit Limit Submitted Pages Appear In Non- Submitted Pages Appear in Overall Freshness AltaVista Yes About 5 pages per day 1 to 2 days About 1 month 1 day to 1 month Excite No 25 pages per week Within 2 weeks Up to 6 weeks 1 day to 3 weeks Google No No limit, but only sub a few pages per site 4 to 6 weeks 4 to 6 weeks 1 day to 6 weeks HotBot Yes 50 pages per day Within 2 months Within 2 months 1 day to 2 month Go (Infoseek) No 1 page per day Within 6 weeks Within6 weeks 1 day to 6 weeks Lycos (web index) Yes No limit, but stay below 50/day to be safe 3 to 6 weeks 3 to 6 weeks 1 day to 6 weeks Northern Light No No limit, but only sub a few pages per site 2 to 4 weeks 2 to 4weeks 1 day to 1 month