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ELC 200 Day 9 Prentice Hall, 2003 1 Agenda Questions from last Class? Assignment 3 is posted in WebCt Due Feb 23 Quiz 1 Corrected Great results Feedback available in WebCT 6 A’s, 6 B’s, 2 C’s, 1 D and 1 no-take Question 1 is a “freebie” Everyone had the same wrong answer Today we will begin discussing Consumer Behavior, Customer Service, and Advertising Prentice Hall, 2003 2 Chapter 4 Consumer Behavior, Customer Service, and Advertising Prentice Hall, 2003 3 Learning Objectives Describe the factors that influence consumer behavior online Understand the decision-making process of consumer purchasing online Describe how companies are building one-toone relationships with customers Discuss the issues of e-loyalty and e-trust in EC Prentice Hall, 2003 4 Learning Objectives (cont.) Explain how personalization is accomplished online Describe consumer market research in EC Explain the implementation of customer service online and describe its tools Describe the objectives of Web advertising and its characteristics Prentice Hall, 2003 5 Learning Objectives (cont.) Describe the major advertising methods used on the Web Describe various online promotions Describe the issues involved in measuring the success of Web advertisements as it relates to different pricing methods. Understand the role of intelligent agents in consumer issues and advertising applications Prentice Hall, 2003 6 Ritchey Design Learns About Customers The Problem Small business designing and manufacturing mountain bike components 1995 Web site was a status symbol rather than a business tool The site did not: Offer enough customer information Enable the company to gain insight into their customers’ needs and wants Prentice Hall, 2003 7 Ritchey Design Learns About Customers (cont.) The Solution Customer surveys introduced the site Web Trader automatically saves and organizes answers in the database—this information is used to make marketing decisions Created an electronic product catalog Visitors can browse through the product catalog with detailed descriptions and graphics of products Prentice Hall, 2003 8 Ritchey Design Learns About Customers (cont.) The Results Ritchey does not yet sell directly to individuals online, because the company wants to maintain its existing distribution system Dealers can: Place orders on the site Learn about new products quickly Site is basically used for market research and advertising Prentice Hall, 2003 9 Exhibit 4.1 EC Consumer Behavior Model Prentice Hall, 2003 10 Consumer Behavior Online (cont.) Consumer types—individual consumers who commands most of the media’s attention Organizational buyers Governments and public organizations Private corporations Resellers Consumer behavior viewed in terms of: Why is the consumer shopping? How does the consumer benefit from shopping online? Prentice Hall, 2003 11 Variables in the Purchasing Environment Social variables—people are influenced by: Family members, friends, co-workers, “what’s in fashion this year” Cultural/community variables—where the consumer lives Other environmental variables: Available information, government regulations, legal constraints, situational factors Prentice Hall, 2003 12 Personal Characteristics Personal Differences Age and gender Marital status Educational level Ethnicity Occupation Household income Personality Lifestyle characteristics Prentice Hall, 2003 13 Exhibit 4.3 Amount of Money Spent on the Web Prentice Hall, 2003 14 Consumer Purchasing Decision Making Roles people play in decision-making Initiator—suggests/thinks of buying a particular product or service Influencer—advice/views carry weight in making a final buying decision Decider—makes a buying decision or any part of it Buyer—makes the actual purchase User—consumes or uses a product or service Prentice Hall, 2003 15 General Purchasing Decision-Making Model 5 major phases of a general model 1. 2. 3. 4. 5. Need identification Information search Evaluation of alternatives Purchase and deliver After-purchase evaluation Prentice Hall, 2003 16 How One-to-One Relationships Are Practiced Relationships as a two-way street: Customer information is collected and placed in a database Customer’s profile is developed Generate “four P’s” of marketing: Product Price Place Promotion Prentice Hall, 2003 17 How One-to-One Relationships Are Practiced (cont.) Doing business over the Internet enables companies to: Communicate better with customers Understand customers’ needs and buying habits better Improve and customize their future marketing efforts Prentice Hall, 2003 18 Exhibit 4.5 The New Marketing Model Prentice Hall, 2003 19 Personalization Personalization—the matching of services, products, and advertising content to individual consumer User profile—the requirements, preferences, behaviors, and demographic traits of a particular customer Cookie—a data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site Prentice Hall, 2003 20 Personalization (cont.) Major strategies used to compile user profiles include: Solicit information directly from the user. Use cookies or other methods to observe what people are doing online Perform marketing research Build from previous purchase patterns Prentice Hall, 2003 21 Collaborative Filtering Collaborative filtering—a personalization method that uses customer data to predict, based on formulas derived from behavioral studies, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles Variations of collaborative filtering Rule-based filtering, content-based filtering, activity-based filtering Legal and ethical issues Privacy issues Permission-based personalization tools Prentice Hall, 2003 22 Customer Loyalty & E-Loyalty Customer loyalty—degree to which customer stays with vendor or brand Important element in consumer purchasing behavior One of the most significant contributors to profitability E-loyalty—customer’s loyalty to an e-tailer Learn about customers’ needs Interact with customers Provide customer service Prentice Hall, 2003 23 Trust in EC Trust—psychological status of involved parties who are willing to pursue further interactions to achieve a planned goal EC vendors must establish high levels of trust with current and potential customers Particularly important in global EC transactions Level of trust determined by: Degree of initial success experienced with EC Well-defined roles and procedures for all parties involved Realistic expectations as to outcomes from EC Prentice Hall, 2003 24 How to Increase EC Trust Trust can be decreased by: Any user uncertainty regarding the technology Lack of initial face-to-face interactions Lack of enthusiasm among the parties Brand recognition is very important in EC trust EC security mechanisms can also help solidify trust Prentice Hall, 2003 25 Market Research for EC Goal–find information and knowledge that describes relationships among Consumers Products Marketing methods Marketers Aim—find relationship between Discover marketing opportunities and issues Establish marketing plans Better understand the purchasing process Evaluate marketing performance Prentice Hall, 2003 26 Market Research for EC (cont.) Market research includes gathering information about: Distribution Competition Promotion Consumer purchasing behavior Economy Industry Firms Products Pricing Prentice Hall, 2003 27 Market Research for EC (cont.) Various tools are used to conduct consumer market research: Questionnaires Surveyors Telephone surveys Focus groups Important first to understand how groups of consumers are classified Prentice Hall, 2003 28 Market Segmentation Market segmentation—process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales Geography Psychographics Demographics Benefits sought Segmentation is done with the aid of tools: Data modeling Data warehousing Prentice Hall, 2003 29 Conducting Market Research Online Powerful tool for research regarding: Consumer behavior Discover of new markets Consumer interest in new products Internet-based market research Interactive—allowing personal contact Gives better understanding of customer, market, and competition Prentice Hall, 2003 30 What Are We Looking For in EC Market Research? Major factors used for prediction are: Online market research attempts to find: Product information requested Number of related emails Number of orders made What products/services are ordered Gender Prentice Hall, 2003 Purchase patterns for individuals and groups Factors that encourage online purchasing How to identify real buyers and browsers How an individual navigates Optimal Web page design 31 EC Market Research (cont.) Interactive Internet-based market research Allows personal contact with customers Provides marketing organizations with greater ability to understand customer, market, and competition Identify early shifts in product and customer trends Enables marketers to identify products and marketing opportunities Develop products that customers really want to buy Prentice Hall, 2003 32 Online Market Research Methods Web-based surveys Free software to create survey forms and analyze results is available at supersurvey.com websurveyor.com Online focus groups—help overcome some problems that limit the effectiveness of Webbased surveys (sample size, partial responses) Prentice Hall, 2003 33 Online Market Research Methods (cont.) Tracking customer movements—learn about customers by observing their behavior rather than by asking them questions Transaction Clickstream behavior Cookies Web bugs http://news.com.com/2100-1017-243077.html Prentice Hall, 2003 34 Limitations of Online Market Research Methods Accuracy of responses Loss of respondents because of equipment problems Ethics and legality of Web tracking Focus group responses can lose something in the translation from an in-person group to an online group Eye contact and body language are lost Anonymity is necessary to elicit an unguarded response Prentice Hall, 2003 35 Data Mining Data mining—the process of searching a large database to discover previously unknown patterns; automates the process of finding predictive information New business opportunities generated by conducting: Automated prediction of trends and behaviors Automated discovery of previously unknown patterns and relationships Prentice Hall, 2003 36 Data Mining (cont.) Data mining tools and techniques: Neural computing Intelligent agents Association analysis Sample data mining applications Retailing and sales distribution Banking Broadcasting Airlines Marketing Prentice Hall, 2003 37 Web Mining Web mining—application of data mining techniques to discover meaningful patterns, profiles, and trends from both the content and usage of Web sites Web content mining Web usage mining Web mining is critical for EC due to the large number of visitors to EC sites Prentice Hall, 2003 38 Limitations of Online Market Research Lack of representativeness in samples of online users Online shoppers tend to be wealthy, employed, and well educated; results may not be extendable to other markets The right kind of sampling is achieved through verification of target audience or demographic Anonymity causes a loss of information about demographics and characteristics of the respondents Prentice Hall, 2003 39 Delivering Customer Service in Cyberspace Customer service—a series of activities designed to enhance customer satisfaction (the feeling that a product or service has met the customer’s expectations) Traditional: do the work for the customer EC delivered: gives tools to the customer to do the work for him/herself E-service—customer services supplied over the Internet Foundation of service Customer-centered services Value-added services Prentice Hall, 2003 40 Delivering Customer Service in Cyberspace (cont.) Value chain for Internet service Customer acquisition (pre-purchase support) Customer support during purchase—provides a shopping environment that is efficient, informative, productive Customer fulfillment (purchase dispatch)—timely delivery Customer continuance support (post- purchase)— maintain the customer relationship between purchases Prentice Hall, 2003 41 Customer Relationship Management Customer relationship management (CRM)—a customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company Building a customer-centered EC strategy Focus on the end customer Systems and business processes designed for ease of use Foster customer loyalty Prentice Hall, 2003 42 Customer Relationship Management (cont.) Actions for successful EC strategy Deliver personalized services Target the right customers Help the customers do their jobs Let customers help themselves Streamline business processes that impact the customers “Own” the customer ’s total experience by providing every possible customer contact Provide a 360-degree view of the customer relationship 43 Prentice Hall, 2003 Customer Service Tools Personalized Web pages Used to record purchases and preference Direct customized information to customers efficiently E-mail and automated response Disseminate general information Send specific product information Conduct correspondence regarding any topic (mostly inquiries from customers) Prentice Hall, 2003 44 Customer Service Tools (cont.) Call center—a comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Telewebs—call centers that combine Web channels with portal-like self-service; combine Justifying CRM programs—two problems Most of the benefits are intangible Substantial benefits reaped only from loyal customers, after several years Prentice Hall, 2003 45 Metrics Metrics—measures of performance; may be quantitative or qualitative Response times Site availability Download times Timeliness Security and privacy On-time order fulfillment Return policy Navigability Prentice Hall, 2003 46 ELC 200 Day 10 Prentice Hall, 2003 47 Agenda Questions from last Class? Assignment 3 is posted in WebCT Due Feb 23 Mastering Business Essentials Understanding Consumer behavior Today we will finish discussing Consumer Behavior, Customer Service, and Advertising Prentice Hall, 2003 48 AFUM Scholarship Last year AFUM awarded 3 $500 scholarships Criteria UMFK student that will have completed 24 Credits by this spring and is returning to UMFK next fall Complete a Letter of Commitment to scholarship and service One Letter of recommendation from a faculty member A resume Copy of your transcript (get from registrar) Turn in all materials to Prof. Stephen Hansen by March 3, 2006 Room 232 Nadeau Hall Prentice Hall, 2003 49 Web Advertising Advertising is an attempt to disseminate information in order to affect a buyer-seller transaction Interactive marketing—marketing that allows a consumer to interact with an online seller Two-way communication and e-mail capabilities Vendors also can target specific groups and individuals Enables truly one-to-one advertising Prentice Hall, 2003 50 Internet Advertising Terminology Ad views—number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views. Button—a small banner that is linked to a Web site Page—HTML document Click—a count made each time a visitor clicks on an advertising banner to access the advertiser ‘s Web site (ad clicks and click throughs) Prentice Hall, 2003 51 Internet Advertising Terminology (cont.) CPM (cost per thousand impressions)—fee an advertiser pays for each 1,000 times a page with a banner ad is viewed Hit—request for data from a Web page or file Visit—a series of requests during one navigation of a Web a site; a pause of request for a certain length of time ends a visit Prentice Hall, 2003 52 Why Internet Advertisement? 3/4 of PC users gave up some television time Well educated, high-income Internet users are a desired target for advertisers Internet is by far the fastest growing communication medium Advertisers are interested in a medium with such potential reach, both locally and globally Prentice Hall, 2003 53 Why Internet Advertisement? (cont.) Cost Online ads are cheaper than those in other media Ads can be updated at any time with minimal cost Richness of format Use of text, audio, graphics, and animation Games, entertainment, and promotions are easily combined in online ads Personalization Can be interactive Can target specific interest groups and/or individuals Prentice Hall, 2003 54 Exhibit 4.11 Adoption Curves for Various Media Prentice Hall, 2003 55 Advertising Networks Advertising networks (ad server networks)— specialized firms that offer customized Web advertising, such as brokering ads and helping target ads to selected groups of consumers One-to-one targeted ads and marketing can be: Expensive Very rewarding Very effective Prentice Hall, 2003 56 Targeted Advertisements: The DoubleClick Approach One-to-one targeted advertisements can take many forms 3M Corp. wants to advertise its multimedia projectors 3M approaches DoubleClick, Inc. and asks the firm to identify such potential customers How does DoubleClick find them? Using cookies, DoubleClick (doubleclick.com/us) monitors people browsing the Web sites Finds those people working for advertising agencies Prentice Hall, 2003 57 DoubleClick (cont.) DoubleClick then prepares an ad about 3M projectors that greets targeted people whenever they browse participating sites How is this financed? DoubleClick charges 3M for the ad Fee is then split with the participating Web sites that carry the 3M ads Based on how many times the ad is matched with visitors Prentice Hall, 2003 58 DoubleClick (cont.) DoubleClick expanded the service—Dynamic Advertising Reporting and Targeting (DART): Advertising control Ad frequency determination Providing verifiable measures of success DoubleClick brings: The right advertisement to The right person at The right time Prentice Hall, 2003 59 Advertisement Methods Banner--on a Web page, a graphic advertising display linked to the advertiser’s Web page Keyword banners Random banners Benefits of banner ads Customized to the target audience or one-to-one ads Utilize “force advertising” marketing strategy Direct link to advertiser Multi media capabilities Prentice Hall, 2003 60 Advertisement Methods (cont.) Limitations of banner ads High cost Click ratio—the ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad Declining click ratio—viewers have become immune to banners Prentice Hall, 2003 61 Advertisement Methods (cont.) Banner swapping—an agreement between two companies to each display the other’s banner ad on its Web site Direct link between one site to the other site Ad space bartering Banner exchanges—markets in which companies can trade or exchange placement of banner ads on each other’s Web sites (bcentral.com) Credit ratio of approximately 2:1 Still the largest Internet advertising medium Prentice Hall, 2003 62 Advertisement Methods (cont.) Pop-under ad—an ad that appears underneath the current browser window, so when the user closes the active window, they see the ad Interstitials– an initial Web page or a portion of it that is used to capture the user’s attention for a short time while other content is loading E-mail Several million users may be reached directly Problems: junk mail, spamming Prentice Hall, 2003 63 Advertisement Methods (cont.) Standardized ads—on February 26, 2001, the Internet Advertising Bureau, an industry trade group, adopted five standard ad sizes for the Internet: Larger and more noticeable than banner ads Look like the ads in a newspaper or magazine Users read these ads four times more frequently than banners Appear on Web sites in columns or boxes Prentice Hall, 2003 64 Advertisement Methods (cont.) Skyscraper ad—full column-deep Classified ad—a newspaper-like ad Sometimes as many as four on one Web page Interactive—click on a link inside the ad for more information about a product or service Prentice Hall, 2003 Special sites like classifieds2000.com Online newspapers, exchanges, portals , Regular-size classified ads is free Larger size or with some noticeable features is done for a fee 65 Advertisement Methods (cont.) URL (Universal Resource Locators) Advantages: Minimal cost is associated with it Submit your URL to a search engine and be listed Keyword search is used Disadvantages: Search engines index their listings differently Meta tags can be complicated Prentice Hall, 2003 66 Advertisement Methods (cont.) Optimizing Web content improves discovery by a search engine Keywordcount.com Searchenginewatch.com Paid search-engine inclusion Several search engines charge fees for including URLs near the top of the search results A debatable issue is the ethics of this strategy Prentice Hall, 2003 67 Advertisement Methods (cont.) Advertising in chat rooms Virtual meeting ground Free addition to a business site Allows advertisers to cycle through messages and target the chatter again and again Advertising can become more thematic More effective than banners Used for one-to-one connections Advertorial—an advertisement “disguised” to look like an editorial or general information 68 Prentice Hall, 2003 Advertising Strategies and Promotions Associated ad display (text links)—an advertising strategy that displays a banner ad related to a term entered in a search engine Ads as a commodity—direct payment made by the advertisers for ads viewed Viral marketing (advocacy marketing)—word-ofmouth marketing by which customers promote a product or service by telling others about it Customizing ads—one-to-one advertisement (Webcasting) Prentice Hall, 2003 69 Advertising Strategies and Promotions (cont.) Online events, promotions, and attractions Promotions designed to attract visitors are regular events on thousands of Web sites Contests Quizzes Coupons Giveaways Bargains on the Internet Lottery Free samples,give-aways, and sweepstakes Prentice Hall, 2003 70 Advertising Strategies and Promotions (cont.) Major considerations when implementing an online ad campaign: Clearly understood online surfers as target audience Powerful enough server prepared to handle the expected volume of traffic Assuming the promotion is successful, what will the result be? Evaluate the budget Promotion strategy Consider co-branding—bring together two or more powerful partners Prentice Hall, 2003 71 Special Advertising Topics Pricing of advertising Justifying the cost of Internet advertisement is difficult for two reasons: 1. The difficulty in measuring the effectiveness of online advertising and 2. Disagreements on pricing methods Pricing based on ad views Pricing based on click-through Prentice Hall, 2003 72 Special Advertising Topics (cont.) Payment based on interactivity The interactivity model bases ad pricing on how the visitor interacts with the target ad Payment based on actual purchase Pay for ads only if an actual purchase has been made (affiliate programs) Permission advertising (permission marketing)— advertising (marketing) strategy in which customers agree to accept advertising and marketing materials Prentice Hall, 2003 73 Special Advertising Topics (cont.) Measuring, auditing, and analyzing web traffic Site audit validates the number of ad views and hits claimed by the site Rating—looks at multiple criteria including content, attractiveness, ease of navigation, and privacy protection Sites with higher ratings command higher prices for advertising placed on their sites Companies use software to assess if placing ads really increases traffic to their sites Prentice Hall, 2003 74 Special Advertising Topics (cont.) Localization—the process of converting media products developed in one country to a form culturally and linguistically acceptable in countries outside the original target market Using internet radio for localization Internet radio—a Web site that provides music, talk, and other entertainment, both live and stored, from a variety of radio stations Prentice Hall, 2003 75 Software Agents in Customer-Related Advertising Applications EC agents support Need identification Product brokering Merchant brokering and comparison Buyer-seller negotiation Agents that support purchase and delivery Agents that support after-sale service and evaluation Prentice Hall, 2003 76 Fujitsu Uses Agents for Targeted Advertising in Japan Fujitsu (fujitsu.com) is a Japanese-based global provider of Internet-focused information technology solutions Has been using an agent-based technology called Interactive Marketing Interface (iMi) since 1996 Advertisers interact directly with consumers while ensuring that consumers remain anonymous Prentice Hall, 2003 77 Fujitsu (cont.) Consumers submit a personal profile to iMi Customers receive by e-mail : Product announcements Advertisements Marketing surveys Answer marketing surveys or acknowledging receipt of ads They earn iMi points redeemable for: Gift certificates Phone cards Prentice Hall, 2003 78 Software Agents in Customer-Related Advertising Applications (cont.) Character-Based Interactive Agents Avatars—animated computer characters that exhibit human-like movements and behaviors Social computing—an approach aimed at making the human– computer interface more natural Chatterbots—animation characters that can talk (chat) Mr. Clean at mrclean.com "Katie“ at dove.com Prentice Hall, 2003 79 Software Agents in Customer-Related Advertising Applications (cont.) Agents that support auctions Agents often act as auction aggregators, some provide real-time access to auctions Agents support consumer behavior, customer service, and advertising activities EC agents found at: Botspot.com Agentland.com Agents.umbc.edu Prentice Hall, 2003 80 Managerial Issues Do we understand our customers? What do customers want from technology? How is our response time? How do we improve and measure customer service? Should we use intelligent agents? Is our market research leading to customer acquisition? Are customers satisfied with our Web site? Should we advertise anywhere but our own site? Prentice Hall, 2003 81 Managerial Issues (cont.) What is our commitment to Web advertising, and how will we coordinate Web and traditional advertising? Should we integrate our Internet and non-Internet marketing campaigns? What ethical issues should we consider? Have we integrated advertising with ordering and other business processes? How important is branding? Prentice Hall, 2003 82 Summary Essentials of consumer behavior The online consumer decision-making process Building one-to-one relationships with customers Increasing loyalty and trust Online personalization EC customer market research Implementing customer service Prentice Hall, 2003 83 Summary (cont.) Objectives and characteristics of Web advertising Major online advertising methods Various advertising strategies Types of promotions on the Web Measuring the advertising success and pricing ads Intelligent agents Prentice Hall, 2003 84