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ELC 310
Day 17
©2006 Prentice Hall
Agenda
• Schedule
• Oct 31 – eMarketing Communication & Customer
Relationship Management
• Nov 3 – eMarketing Plan Presentations
• Nov 7 – Quiz 3 Chap 12, 13 & 14
• Nov 10 - Change texts to e-business.marketing
• You Finishing your eMarketing Plans
• Due TODAY!!!!!
• In class Presentations of your marketing plans will on be on
Friday, Nov. 3
• Exam # 3 in on November 7
• Chap 12, 13 & 14, 6 essays (60 points), 10 M/C (40 Points).
open books, open notes, 70 mins
• Today we will be discussing eMarketing
Communications & CRM
©2006 Prentice Hall
E-Marketing 4/E
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 13: E-Marketing Communication
©2006 Prentice Hall
13-1
Direct Marketing
• Direct marketing includes techniques such as:
•
•
•
•
•
•
•
Telemarketing
Outgoing e-mail
Postal mail, including catalog marketing
Targeted online ads
Short message services (SMS)
Multimedia message services (MMS)
Instant messaging (IM)
©2006 Prentice Hall
13-21
E-Mail
• 22% of a typical Internet user’s in-box is
marketing-related e-mail.
• http://www.junk-o-meter.com/stats/index.php
• E-mail has advantages over postal direct mail.
• Average cost less than $0.01.
• Immediacy and convenience.
• E-mails can be automatically individualized.
• E-mail also has disadvantages.
• Consumer distaste for unsolicited e-mail or spam.
• E-mail lists are hard to obtain and maintain.
©2006 Prentice Hall
13-22
Metrics for Electronic and Postal Mail
E-mail
Postal Mail
Delivery cost per thousand
$30
$500
Creative costs to develop
$1,000
$17,000
Click through rate
10%
N/A
Customer conversion rate
5%
3%
Execution time
3 weeks
3 months
Response time
48 hours
3 weeks
©2006 Prentice Hall
13-23
Other Online Direct Marketing
Techniques
• Permission Marketing
• When consumers opt-in, they are giving permission
to receive commercial e-mail about topics of interest
to them.
• Viral Marketing is the online equivalent of word
of mouth marketing.
• Hotmail is a viral marketing success story.
• Movies such as Blair Witch Project were promoted
using viral marketing techniques.
©2006 Prentice Hall
13-24
E-Mail
•
Disadvantages:
•
•
•
•
Spam (unsolicited e-mail),
Difficulty in finding appropriate e-mail lists.
Consumers are much more upset about spam
then they are about unsolicited postal mail.
E-mail lists are hard to obtain and maintain. 3
ways to build a list:
1. Generated through Web site registrations, subscription
registrations, or purchase records,
2. Rented from a list broker,
3. Harvested from newsgroup postings or online e-mail
directories.
•
50% of the U.S. population has one or more email addresses but it is very difficult to match
them with individual customers and prospects in
a firm’s database.
©2006 Prentice Hall
Opt-In, Opt-Out
• Opt-in e-mail address = users have agreed to receive commercial e-mail
about topics of interest to them.
• Brokers rent lists to charge a fee for each mailing. The cost is:
• $150 CPM (Cost Per Thousand) for B2C market lists,
• 250 CPM for the B2B market / typical B2C postal mail list rental =
$20 CPM.
• Web users have lots of opportunity to opt-in to mailing lists at Web sites,
often by simply checking a box and entering an e-mail address.
• Lists with opt-in members get much higher response than do lists
without = response rates of up to 90%.
 Opt-in lists are successful because users receive coupons, cash, or
products for responding.
 Marketers are shifting marketing dollars directly to consumers for rewards in
lieu of purchasing advertising space.
©2006 Prentice Hall
Opt-In, Opt-Out
• Opt-out = users have to uncheck the box on a Web page to
prevent being put on the e-mail list.
• Questionable practice because users do not always read a
Web page thoroughly enough and may be upset at
receiving e-mail later.
• Opt-in techniques = part of a traditional marketing strategy
called permission marketing: it is about turning strangers
into customers.
• How to do this?
 Ask people what they are interested in, ask permission to send them
information, and then do it in an entertaining, educational, or
interesting manner.
• Opt-in techniques are expected to evolve and grow
considerably.
©2006 Prentice Hall
Viral Marketing
• Viral marketing
= When individuals forward e-mail to friends, co-workers,
family, and others on their e-mail lists
= Word of mouse.
• Viral marketing works and it’s free.
• Hotmail started with only a $50,000 promotion
budget ($50 -100 million needed to launch a brand
in offline):
• The firm sent e-mail telling folks about its Web-based email service,
• After 6 months = 1 million registered users,
• After 18 months = 12 million subscribers + Microsoft
acquired the firm for $400 million in Microsoft stock.
©2006 Prentice Hall
Messaging
• Short message services (text messaging) are
text messages sent over the Internet, usually
with a cell phone or PDA.
• Instant messages are sent among users who
are online at the same time.
• Marketers can build relationships by sending
permission-based information where
consumers want to receive it.
• Flight delays
• Music and movie schedules
©2006 Prentice Hall
13-25
Short Text Messaging (SMS)
• Short text messages = 160 characters of text sent by one user to
another over the Internet (with a cell phone or PDA).
• Instant messaging = short messages sent among users who are online
at the same time.
• SMS:
•
•
•
•
Uses a store-and-send technology = holds messages for a few days,
Is attractive to cell phone users to communicate quickly + inexpensively.
Are charged cell phone minutes= minimal cost compared to a conversation.
Is easy = users do not have to open e-mail to send or receive. They simply
type the message on the phone keyboard.
• 200 billion short text messages a month were flying between mobile
phones worldwide by the end of 2002.
©2006 Prentice Hall
Location-Based Marketing
• Location-based marketing = promotional offers that are
pushed to mobile devices and customized based on the
user’s physical location.
• The technology:
 A global positioning system (GPS) in a handheld device or
automobile,
 User address information stored in a database.
• Lycos spent $1.2 million in 2001 turning some Boston and
New York taxicabs into animated billboards by sending
relevant ads based on the cab’s physical location.
 The GPS device sent physical coordinates to the ad server,
 Financial ads were shown when the cab was in the financial
district, and so forth.
©2006 Prentice Hall
Which Media and Vehicles to Buy?
• Marketers spent more of their 2001 media budgets on the
Internet than on radio or outdoor, but much less than on
television or newspapers. This generalization is interesting,
but not very useful for media buyers who plan a
combination of media to achieve marketing communication
goals for a particular campaign and brand.
• Media planners want both effective and efficient media
buys.
• Effectiveness means reaching and gaining the attention of the target
market,
• and efficiency means doing so at the lowest cost.
©2006 Prentice Hall
Efficient Internet Buys
• To measure efficiency before buying advertising space,
media buyers use a metric called CPM (cost per thousand).
• This is calculated by taking the ad’s cost, dividing it by the audience
size, and then multiplying by 1,000 (cost  audience x 1,000).
Internet audience size is counted using impressions: the number of
times an ad was served to unique site visitors.
• Example: in June 2002 a full banner ad at MediaPost.com, an
advertising and media Internet portal, received 2.4 million
impressions and cost $168,000 a month for a CPM of $70.
(Incidentally, this firm charges an additional $10 CPM slotting fee for
a specific position.)
• Magazines are usually the most expensive media to reach 1,000
readers; radio is often the least expensive.
©2006 Prentice Hall
Efficient Internet Buys
• Typical Web CPM prices are $7 to $15 CPM (Hallerman, 2002).
• MediaPost is higher because it reaches a select target in the B2B
market. According to eMarketer in March 2002, the CPM ranges
between $75 and $200 for e-mail ads, and between $20 and $40 for email newsletter sponsorship.
• It is interesting to note that only 50% of Web site advertising is
purchased using the CPM model (PricewaterhouseCoopers 2002).
• Performance-based payment, often called cost-per-action (CPA),
includes schemes such as payment for each click on the ad, payment
for each conversion (sale), or payment for each sales lead. This type of
pricing is beneficial to advertisers, but risky for Web sites that must
depend partially on the power of the client’s ad and product for
revenues.
• CPM, CPA, and other online advertising pricing models are only part of
the measurement picture.
©2006 Prentice Hall
Effective Internet Buys
• Once a firm decides to buy online advertising
(medium), it faces the question of which
vehicle (individual site) to use.
• Advertisers trying to reach the largest
number of users will buy space at the portals
such as Yahoo!, AOL and microsoft.
©2006 Prentice Hall
Web Property
Unique Visitors in millions
Worldwide
U.S.
Microsoft Corporation
269.8
99.7
Yahoo Inc.
219.5
92.5
AOL Time Warner
169.6
88.0
Terra Lycos
143.1
51.1
Google Inc.
93.2
31.1
Amazon.com Inc.
79.0
37.5
CNET Networks Inc.
75.1
28.0
Primedia Inc.
72.1
31.6
U.S. Government
56.1
38.6
EBay
55.9
32.9
Top Online Properties by Parent Company for January 2002
Source: Data from www.cyberatlas.internet.com
©2006 Prentice Hall
Effective Internet Buys
• Ad servers track user click-streams via cookies and serve ads based on
user behavior. One such firm, DoubleClick, served 55 billion ads to Web
users along with client Web pages during May 2002.
• Nielsen-Netratings reports only about 70,000 unique ads in April 2002.
• DoubleClick technology can detect a user at a client site who then goes
to a second client site (click stream), and serve the user an appropriate
ad based on the user’s interests.
• DoubleClick data from three months in early 2002 revealed that 43.8%
of its ads were targeted by key words or key values in this manner, while
5.5% were served to specific geographic areas and 1.3% by time of day
(“DoubleClick Ad Serving...” 2002).
•
http://www.doubleclick.com/us/
©2006 Prentice Hall
IMC Metrics
• Savvy marketers set specific objectives for their
IMC campaigns,
• Then they track progress toward those goals by
monitoring appropriate metrics.
©2006 Prentice Hall
Metric
Definition/formula
Online Averages
CPM
Cost Per Thousand Impressions
CPM = [Total Cost  (Impressions)] 
1000
$7 to $15 for banners1
$75 and $200 for e-mail ads2
$20 and $40 for e-mail
newsletter2
Click-through rate
(CTR)
Number of clicks as percent of total
impressions
CTR = Clicks  Impressions
0.3% - 0.8% for banners3,5
2.4% rich media ads5
3.2% - 10% opt-in e-mail3,9
Cost Per Click (CPC)
Cost for each visitor from ad click
CPC = Total Ad Cost  Clicks
Varies widely
Google.com ranges from a
few cents to a few dollars
Conversion Rate
Percent of people who purchased from
total number of visitors
Conversion Rate = Orders  Visitors
Total marketing costs to acquire a
customer
1.8% for Web sites6
5% for e-mail9
Customer
Acquisition Cost
(CAC)
Varies by industry
$82 for online retail pureplays; $31 for multi-channel
brick and mortar retailers7
IMC Metrics and Industry Averages
Sources: 1Hallerman (2002); 2data from www.eMarketer.com; 3Saunders (2001); 4Gallogly
(2002); 5“DoubleClick Ad Serving...” (2002); 6 data from shop.org; 7data from
www.computerworld.com; 8data from www.nielsen-netratings.com;
©2006 PricewaterhouseCoopers,
Prentice Hall
9
LLP (2002).
Effectiveness Evidence
• Banner ads are generally ineffective: 0.5% of all users clicking on them.
• Exceptions:
• Rich media ads receive an average 2.4% click-through.
• The Mexican Fiesta Americana Hotels = 10.2% click-through
 By narrow targeting = Americans living in 7 Eastern states + had just
purchased an airline ticket to Cancun + were online 2 to 7 P.M. Monday
through Wednesday.
• If users do click, they are likely to buy:
• 61% people who clicked, purchased within 30 minutes,
• 38% purchased within eight to 30 days later.
• E-mail = 3 to 10% click-through to the sponsor’s Web site + an average
5% conversion rate.
 Catalog companies & retailers realize > 9% click-throughs on e-mail
campaigns.
©2006 Prentice Hall
Effectiveness Evidence
• When banner ads are viewed as a branding medium:
• They increase brand awareness & message association,
• Build brand favorability & purchase intent.
• When online ads are bigger + placed as interstitials, or contained rich
multimedia = they delivered an even greater impact.
 Large rectangles are 3 to 6 times more effective than standard size banners
in increasing brand awareness.
• Online + offline advertising work well together.
 The Internet is as effective for increasing brand awareness, brand attributes,
and purchase intent as TV and print—but much more cost-efficient.
©2006 Prentice Hall
E-Marketing 4/E
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 14: Customer Relationship Management
©2006 Prentice Hall
14-1
Chapter 14 Objectives
• After reading Chapter 14 you will be able to:
• Define customer relationship management and
identify the major benefits to e-marketers.
• Outline the three legs of CRM for e-marketing.
• Discuss the eight major components needed for
effective and efficient CRM in e-marketing.
• Differentiate between relationship intensity and
relationship levels.
• Highlight some of the company-side and client-side
tools that e-marketers use to enhance their CRM
processes.
©2006 Prentice Hall
14-2
The Cisco Story
• Cisco provides Internet networking systems for
corporate, government and education clients.
• The Internet plays a major role in acquiring,
retaining and growing customer business.
• 2.5 million users log onto the Cisco site each
month.
• Cisco has become adept at online customer
relationship management (CRM).
©2006 Prentice Hall
14-3
The Cisco Story, cont.
• Cisco set a goal to migrate customers to the
online channel.
• In 1996, 5% of their customers placed orders on the
Web site.
• In 2001, 90% of their orders came through the
Internet.
• Cisco saves $340 million a year in customer
service costs due to automation.
• Can you think of other B2B marketers that
utilize the Internet as successfully as Cisco?
©2006 Prentice Hall
14-4
Relationship Marketing Defined
• Relationship marketing is about establishing,
maintaining, enhancing, and commercializing
customer relationships through promise
fulfillment.
• Relationship capital may be the most important
asset a firm can have.
• A firm using relationship marketing focuses
more on wallet share than on market share.
• More $ from each customer instead of more
customers
©2006 Prentice Hall
14-5
Continuum from Mass Marketing to
Relationship Marketing
Mass marketing
Relationship marketing
Discrete transactions
Continuing transactions
Short-term emphasis
Long-term emphasis
One-way
communication
Two-way
communication
and collaboration
Acquisition focus
Retention focus
Share of market
Wallet share
Product differentiation
Customer differentiation
©2006 Prentice Hall
14-6
Stakeholders
• Firms can establish and maintain relationships
with different stakeholder groups through
Internet technologies:
• Employees who need training and access to data
and systems used for relationship management.
• Business customers in the supply chain.
• Lateral partners, such as other businesses, not-forprofit organizations, or governments.
• Consumers who are end users of products and
services.
©2006 Prentice Hall
14-7
Customer Relationship Management
• CRM is the process of acquiring, servicing,
retaining and building long-term relationships
with customers.
• The benefits of CRM include:
• Increased revenue from better targeting.
• Increased wallet share with current customers.
• Retention of customers for longer time periods.
• The cost of acquiring a new customer is
typically 5 times higher than the cost of
retaining a current customer.
©2006 Prentice Hall
14-8
Acquisition Emphasis
Gain 6 new customers
($500 each)
Retain 5 current
customers
($100 each)
Total cost
Total number of customers
Retention Emphasis
$3,000 Gain 3 new customers
($500 each)
$ 500
Retain 20 current customers
($100 each)
$3,500 Total cost
11 Total number of customers
Maximizing Number of Customers
Source: Adapted from Peppers and Rogers (1996)
©2006 Prentice Hall
$1,500
$2,000
$3,500
23
Customer Relationship Management,
cont.
• CRM has 3 facets:
• Sales force automation (SFA).
• Marketing automation.
• Customer service.
• Used primarily in the B2B market, SFA helps
salespeople to:
• Build, maintain, and access customer records.
• Manage leads and accounts.
• Manage their schedules.
©2006 Prentice Hall
14-9
Customer Relationship
Management, cont.
• Marketing automation software aids marketers
in effective targeting, marketing communication,
and monitoring of customer and market trends.
• Software solutions include e-mail campaign
management, database marketing, and market
segmentation.
• Most customer service occurs post purchase
when customers have questions or complaints.
• E-mail and Web self-service are often used.
©2006 Prentice Hall
14-10
8 Building Blocks for Successful CRM
1. CRM Vision: Leadership, value proposition
2. CRM Strategy: Objectives, target markets
3. Valued Customer Experience
Understand requirements
Monitor expectations
Maintain satisfaction
Collaboration and feedback
Customer interaction
4. Organizational Collaboration
Culture and structure
Customer understanding
People, skills, competencies
Incentives and compensation
Employee communication
Partners and suppliers
5. CRM Processes: Customer life cycle, knowledge management
6. CRM Information: Data, analysis, one view across channels
7. CRM Technology: Applications, architecture, infrastructure
8. CRM Metrics: Value, retention, satisfaction, loyalty, cost to serve
Exhibit 14 - 4 Eight Building Blocks for Successful CRM
Source: Adapted from Gartner Group (www.gartner.com)
©2006 Prentice Hall
1. CRM Vision
• To be successful, the CRM vision must start at
the top and filter throughout the company to
keep the firm customer focused.
• One key aspect of CRM vision is how to guard
customer privacy.
• The benefits of using customer data must be
balanced by the need to satisfy customers and
not anger them.
• TRUSTe provides its seal and logo to any Web
site meeting its privacy philosophies.
©2006 Prentice Hall
14-12
TRUSTe Builds User Trust
©2006 Prentice Hall
14-13
2. CRM Strategy
• E-marketers must determine their objectives and
strategies before buying CRM technology.
• Many CRM goals refer to customer loyalty.
• An important CRM strategy is to move customers up the
relationship intensity pyramid
Highest
intensity
Tell others about the brand
Advocacy
Community
Connection
Communicate with each other
Communicate with company
between purchases
Identity
Display the brand proudly
Awareness
Is on the list of
possibilities
• Another CRM goal involves building bonds with
customers on 3 levels:
• Financial
• Social
• Structural
©2006 Prentice Hall
14-14
Three Levels of Relationship Marketing
Level
Primary Bond
Potential for
Main Element of Web Example
Sustained
Marketing Mix
Competitive
Advantage
One
Financial
Low
Price
www.southwest.com
Two
Social
Build 1:1
relationships
Build community
Medium
Personal
communications
www.palmpilot.com
Three
Structural
High
Service delivery
my.yahoo.com
©2006 Prentice Hall
14-15
3. Valued Customer Experience
• Consumers are constantly bombarded by
marketing communications and unlimited
product choices.
• According to Jagdish Sheth (1995), the basic tenet
of CRM is choice reduction.
• Many consumers are “loyalty prone,” and will stick
with the right product as long as its promises are
fulfilled.
• Synchronous and asynchronous technologies
can provide automated and human services
that solve customer problems.
©2006 Prentice Hall
14-16
Relationships over Multiple
Communication Channels
Automated
Human
Synchronous
Web 1:1 self-service
Online transactions
Telephone routing
Telephone
Online chat
Collaboration tools
Asynchronous
Automated e-mail
Short message services (SMS)
Web forms
Fax on demand
E-mail response
Postal mail
©2006 Prentice Hall
14-17
4. Organizational Collaboration
• Marketers collaborate within and outside the
organization to focus on customer satisfaction.
• CRM, or “front-end” operations, can be linked
with the entire supply chain management
system (SCM), or “back-end” operations.
• Customer service reps have access to inventories.
• Producers and wholesalers constantly receive data
that can be utilized for production and delivery.
• The use of extranets, two or more intranet
networks that share information, allows CRMSCM integration.
©2006 Prentice Hall
14-18
5. CRM Processes
• Firms use specific processes to move
customers through the customer care life cycle.
Target
Acquire
Partners
Transact
Internet
Extranet
Service
Retain
Grow
Customer
©2006 Prentice Hall
14-19
CRM Processes, cont.
• CRM processes are used to:
•
•
•
•
Identify customers.
Differentiate customers.
Customize the marketing mix.
Interact with customers.
• Firms can identify high-value customers by
mining customer databases and profiling
customers in terms of: (RFM analysis)
• Recency of purchases.
• Frequency of purchases.
• Monetary value of purchases.
©2006 Prentice Hall
14-20
6. CRM Information
• The more information a firm has, the better
value it can provide to each current or
prospective customer.
• Firms gain much information by tracking
behavior electronically.
• Bar code scanner data.
• Software that tracks online movement, time spent
per page, and purchase behavior.
©2006 Prentice Hall
14-21
7. CRM Technology
• Technology greatly enhances CRM processes.
• Firms use company-side tools to push
customized information to users.
• Client-side tools allow the customer to pull
information that initiates the customized
response from the firm.
©2006 Prentice Hall
14-22
Company-side Tools
Company-Side Tools
(push)
Description
Cookies
Cookies are small files written to the user’s hard drive after visiting a Web site.
When the user returns to the site, the company’s server looks for the cookie
file and uses it to personalize the site.
Web log analysis
Every time a user accesses a Web site, the visit is recorded in the Web server’s
log file. This file keeps track of which pages the user visits, how long he
stays, and whether he purchases or not.
Data mining
Data mining involves the extraction of hidden predictive information in large
databases through statistical analysis.
Real-time profiling
Real-time profiling occurs when special software tracks a user’s movements
through a Web site, then compiles and reports on the data at a moment’s
notice.
Collaborative filtering
Collaborative filtering software gathers opinions of like-minded users and
returns those opinions to the individual in real time.
Outgoing e-mail Distributed e-mail
Marketers use e-mail databases to build relationships by keeping in touch with
useful and timely information. E-mail can be sent to individuals or sent en
masse using a distributed e-mail list.
Chats
Bulletin boards
A firm may listen to users and build community by providing a space for user
conversation on the Web site.
iPOS terminals
Interactive point-of-sale terminals are located on a retailer’s counter and used
to capture data and present targeted communication.
©2006 Prentice Hall
14-23
Client-side Tools
Client-Side Tools
(pull)
Description
Agents
Agents are programs that perform functions on behalf of the user,
such as search engines and shopping agents.
Individualized Web
portals
Personalized Web pages users easily configure at Web sites such as
MyYahoo! and many others.
Wireless data services
Wireless Web portals send data to customer cell phones, pagers, and
PDAs, such as the PalmPilot.
Web forms
Web form (or HTML form) is the technical term for a form on a Web
page that has designated places for the user to type information
for submission.
Fax-on-demand
With fax-on-demand, customers telephone a firm, listen to an
automated voice menu, and select options to request a fax be sent
on a particular topic.
Incoming e-mail
E-mail queries, complaints, or compliments initiated by customers or
prospects comprise incoming e-mail, and is the fodder for
customer service.
©2006 Prentice Hall
14-24
8. CRM Metrics
• E-marketers use numerous metrics to assess
the Internet’s value in delivering CRM
performance.
•
•
•
•
ROI
Cost savings
Revenues
Customer satisfaction
• One study named customer retention, ROI and
customer lift (increased response or transaction
rates) as the most important metrics.
©2006 Prentice Hall
14-25
CRM Metrics, cont.
• One very important CRM metric is customer
lifetime value (LTV).
• The LTV calculation demonstrates the benefits of
retaining customers over time and the need for
building wallet share.
• LTV also illustrates that no matter how good
customer retention is, the firm must still focus on
customer acquisition activities.
• Exhibit 14.21 illustrates Customer LTV.
©2006 Prentice Hall
14-26
Total
Retention
Total
Net
NPV at
10-Year
Year
Customers
Rate
Revenue
Profit
15%
LTV
1
1,000
60%
$35,900
$ 5,900
$ 5,900
$ 66.94
2
600
65%
45,540
27,540
23,948
118.12
3
390
70%
29,601
17,901
13,536
129.15
4
273
75%
20,721
12,531
8,239
138.35
5
205
78%
15,541
9,398
5,373
143.45
6
160
79%
12,122
7,330
3,645
145.55
7
126
80%
9,576
5,791
2,504
146.81
8
101
80%
7,661
4,633
1,742
146.81
9
81
80%
6,129
3,706
1,212
146.81
10
65
80%
4,903
2,965
843
146.81
Customer Lifetime Value (LTV)
Source: Adapted from Peppers and Rogers Group at www.1to1.com
©2006 Prentice Hall