Download E-commerce Marketing and Advertising

E-commerce 2015
business. technology. society.
eleventh edition
global edition
Kenneth C. Laudon
Carol Guercio Traver
Copyright © 2016 Pearson Education, Ltd.
Chapter 6
E-commerce Marketing and Advertising
Copyright © 2015
2016 Pearson Education, Inc.
Ltd.
Class Discussion
Video Ads: Shoot, Click, Buy
What advantages do video ads have over
traditional banner ads?
 Where do sites such as YouTube fit in to a
marketing strategy featuring video ads?
 What are some of the challenges and risks of
placing video ads online?
 Do you think Internet users will ever develop
“blindness” toward video ads as well?

Copyright © 2016 Pearson Education, Ltd.
Slide 1-3
Consumers Online: The Internet
Audience and Consumer Behavior
Almost 75% (90 million) U.S. households have
broadband Internet access in 2014
 Growth rate has slowed
 Intensity and scope of use both increasing
 Some demographic groups have much higher
percentages of online usage than others

 Income, education, age, ethnic dimensions
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Slide 1-4
Consumers Online (cont.)

Broadband and mobile
 Significant inequalities in broadband access
 Older adults, lower income, lower educational levels
 Non-broadband household still accesses Internet via
mobile or other locations

Neighborhood effects
 Role of social emulation in consumption decisions
 “Connectedness”


Top 10–15% are more independent
Middle 50% share more purchase patterns of friends
 Recommender systems Copyright © 2016 Pearson Education, Ltd.
co-purchase networks
Slide 1-5
Consumers Online (cont.)

Study of consumer behavior
 Social science discipline
 Attempts to explain what consumers purchase and
where, when, how much, and why they buy
 Consumer behavior models



Attempt to predict or explain wide range of consumer decisions
Based on background demographic factors and other
intervening, more immediate variables
Profiles of online consumers
 Consumers shop online primarily
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for convenience
Slide 1-6
A General Model of Consumer Behavior
Figure 6.1, Page 375
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SOURCE: Adapted from Kotler and Armstrong, 2009.
Slide 6-7
The Online Purchasing Decision
 Five stages in consumer decision
process
 Awareness of need
 Search for more information
 Evaluation of alternatives
 Actual purchase decision
 Post-purchase contact with firm
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Slide 1-8
The Consumer Decision Process and
Supporting Communications
Figure 6.2, Page 376
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Slide 6-9
The Online Purchasing Decision (cont.)
Decision process similar for online and offline
behavior
 General online behavior model

 User characteristics
 Product characteristics
 Web site features: latency, usability, security
 Attitudes toward online purchasing
 Perceptions about control over Web environment

Clickstream behavior
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Slide 1-10
A Model of Online Consumer Behavior
Figure 6.3, Page 377
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Slide 6-11
Shoppers: Browsers and Buyers

Shoppers: Almost 90% of Internet users


74% buyers
16% browsers (purchase offline)
One-third of offline retail purchases influenced by
online activities
 Online traffic also influenced by offline brands
and shopping
 E-commerce and traditional commerce are
coupled: Part of a continuum of consuming
behavior

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Slide 1-12
What Consumers Shop for and
Buy Online

Big ticket items ($1000 or more)
 Travel, computer hardware, electronics
 Consumers now more confident in purchasing
costlier items

Small ticket items ($100 or less)
 Apparel, books, office supplies, software, and so
on

Types of purchases depend on level of
experience with the Web
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Slide 1-13
How Consumers Shop
 How shoppers find online vendors
 Highly intentional, goal-oriented
 Search engines
 Marketplaces (Amazon, eBay)
 Specific retail site
 10% of Internet users don’t shop online
 Trust factor
 Hassle factors (shipping costs, returns, etc.)
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Slide 1-14
Trust, Utility, and Opportunism
in Online Markets
 Two most important factors shaping
decision to purchase online:
 Utility:
 Better prices, convenience, speed
 Trust:
 Most important factors:
Perception of credibility,
ease of use, perceived risk
 Sellers can develop trust by building strong
reputations for honesty, fairness, delivery
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Slide 1-15
Digital Commerce Marketing and
Advertising: Strategies and Tools
 Internet marketing (vs. traditional)
 More personalized
 More participatory
 More peer-to-peer
 More communal
 The most effective Internet marketing
has all four features
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Slide 1-16
Multi-Channel Marketing Plan
1.
2.
Web site
Traditional online marketing

3.
Social marketing

4.
Social networks, blogs, video, game
Mobile marketing

5.
Search engine, display, e-mail, affiliate
Mobile/tablet sites, apps
Offline marketing

Television, radio, newspapers
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Slide 1-17
Strategic Issues and Questions
 Which part of the marketing plan should
you focus on first?
 How do you integrate the different
platforms for a coherent message?
 How do you allocate resources?
 How do you measure and compare metrics from
different platforms?
 How do you link each to sales revenues?
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Slide 1-18
Establishing the Customer
Relationship
 Web site functions to:
 Establish brand identity and customer
expectations
 Differentiating
product
 Anchor the brand online
 Central point for all marketing messages
 Inform and educate customer
 Shape customer experience
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Slide 1-19
Online Advertising
 Online advertising
 Display, search, mobile messaging,
sponsorships, classifieds, lead generation,
e-mail
 Fastest growing form of advertising
 Advantages:
 18–34 audience is online
 Ad targeting
 Price discrimination
 Personalization
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Slide 1-20
Traditional Online Marketing and
Advertising Tools
Search engine marketing and advertising
 Display ad marketing
 E-mail marketing
 Affiliate marketing
 Viral marketing
 Lead generation marketing

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Slide 1-21
Search Engine Marketing and Advertising
 Search engine marketing (SEM)
 Use of search engines for branding
 Search engine advertising
 Use of search engines to support direct sales
 Types of search engine advertising
 Sponsored links (keyword paid inclusion)
 Keyword advertising
 Network keyword advertising (context
advertising)
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Slide 1-22
Search Engine Marketing (cont.)
Search engine optimization (SEO)
 Google search engine algorithms

 Panda, Penguin, Hummingbird, Knowledge Graph

Social search
 Utilizes social contacts and social graph to provide
fewer and more relevant results

Search engine issues
 Paid inclusion and placement practices
 Link farms, content farms
 Click fraud
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Slide 1-23
Display Ad Marketing
 Banner ads
 Rich media ads
 Interstitial ads
 Video ads
 Far more effective than other display formats
 Sponsorships
 Native advertising
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Slide 1-24
Display Ad Marketing (cont.)
 Advertising networks
 Programmatic advertising
 Real-time bidding process (RTB)
 Ad exchanges
 Display advertising issues
 Ad fraud
 Viewability
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Slide 1-25
How an Advertising Network
Such as DoubleClick Works
Figure 6.7, Page 395
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Slide 6-26
E-mail Marketing

Direct e-mail marketing
 Messages sent directly to interested users
 Benefits include




Inexpensive
Average over 6% click-throughs for in-house lists
Measuring and tracking responses
Personalization of messages and offers
 Three main challenges
 Spam
 Anti-spam software
 Poorly targeted purchased e-mail lists
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Slide 1-27
Spam
Unsolicited commercial e-mail
 Around 60% of all e-mail in 2014
 Most originates from bot networks
 Efforts to control spam have largely failed:

 Government regulation (CAN-SPAM)
 State laws
 Voluntary self-regulation by industries (DMA )
 Canada’s stringent anti-spam laws
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Slide 1-28
Other Types of Traditional Online
Marketing

Affiliate marketing
 Commission fee paid to other Web sites for sending
customers to their Web site

Viral marketing
 Marketing designed to inspire customers to pass
message to others

Lead generation marketing
 Services and tools for collecting, managing, and
converting leads
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Slide 1-29
Social, Mobile, and Local Marketing
and Advertising
 Social marketing/advertising
 Fastest growing type of online marketing
 Enormous audiences of social networks
 Four features driving growth
 Social sign-on
 Collaborative shopping
 Network notification
 Social search (recommendation)
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Slide 1-30
Social Marketing/Advertising (cont.)
 Blog marketing
 Educated, higher-income audience
 Ideal platform to start viral campaign
 Game marketing
 Large audiences for social and mobile games
 Used for branding and driving customers to
purchase moments at restaurants and retail
stores
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Slide 1-31
Mobile Marketing and Advertising
35% of online marketing, growing rapidly
 Major formats:

 Display, rich media, video
 Games
 E-mail
 Text messaging (SMS)
 In-store messaging
 Quick Response (QR) codes
 Couponing

App marketing
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Slide 1-32
Local Marketing
 Geared to user’s geographic location
 Advertisers expected to spend around
$32 billion on online local ads in 2014
 Most common local marketing tools
 Geotargeting with Google Maps
 Display ads in hyperlocal publications
 Daily deals
 Coupons
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Slide 1-33
Multi-Channel Marketing
 Average American spends more than
45% of media time on digital media
channels
 Consumers also multitask, using several
media
 Internet campaigns strengthened by
using other channels
 Most effective are campaigns using consistent
imagery throughout channels
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Slide 1-34
Insight on Business: Class Discussion
Are the Very Rich Different from You and Me?
What distinguishes luxury marketing from
ordinary retail marketing?
 What challenges do luxury retailers have in
translating their brands and the look and feel
of luxury shops into Web sites?
 How has social media affected luxury
marketing?
 Visit the Armani Web site. What do you find
there?

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Slide 1-35
Other Online Marketing Strategies
 Several strategies are more focused
than traditional online and newer
strategies
Customer retention strategies
Pricing strategies
Long Tail marketing
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Slide 1-36
Other Online Marketing Strategies
 Customer retention strategies
Personalization and one-to-one
marketing (interest-based advertising)
 Retargeting
 Behavioral targeting
 Based on data from search engine queries,
clickstream history, social network data, and
integration of offline personal data and records
 Effectiveness still inconclusive
 Privacy issues
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Slide 1-37
Other Online Marketing Strategies (cont.)
 Customization
 Changing the product
 Information goods ideal for differentiation
 Customer co-production
 Customers help create product
 Customer service
 FAQs
 Real-time customer chat systems
 Automated response systems
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Slide 1-38
Pricing Strategies
 Pricing
 Integral part of marketing strategy
 Traditionally pricing based on
 Fixed cost
 Variable costs
 Demand curve
 Price discrimination
 Selling products to different people and groups
based on willingness to pay
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Slide 1-39
Pricing Strategies (cont.)

Free and freemium


Versioning


Creating multiple versions of product and selling essentially same
product to different market segments at different prices
Bundling


Can be used to build market awareness
Offers consumers two or more goods for one price
Dynamic pricing




Auctions
Yield management: Amazon
Surge pricing: Uber
Flash marketing: Rue La La, HauteLook, Gilt Groupe
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Slide 1-40
Long Tail Marketing
 Internet allows for sales of obscure
products with little demand
 Substantial revenue because
 Near zero inventory costs
 Little marketing costs
 Search and recommendation engines
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Slide 1-41
Insight on Technology: Class Discussion
The Long Tail: Big Hits and Big Misses
 What are “recommender systems”?
Give an example of one you have used.
 What is the “Long Tail” and how do
recommender systems support sales of
items in the Long Tail?
 How can human editors, including
consumers, make recommender
systems more helpful?
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Slide 1-42
Internet Marketing Technologies
 Internet’s main impacts on marketing:
 Scope of marketing communications broadened
 Richness of marketing communications
increased
 Information intensity of marketplace expanded
 Always-on mobile environment expands
marketing opportunities
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Slide 1-43
Web Transaction Logs
Built into Web server software
 Record user activity at Web site
 Provides much marketing data, especially
combined with:

 Registration forms
 Shopping cart database

Answers questions such as:
 What are major patterns of interest and purchase?
 After home page, where do users go first? Second?
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Slide 1-44
Tracking Files
 Users’ browsing tracked as they move
from site to site
 Four types of tracking files
 Cookies
 Small text file placed by Web site
 Allows Web marketers to gather data
 Flash cookies
 Beacons (“bugs”)
 Apps
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Slide 1-45
Insight on Society: Class Discussion
Every Move You Make, Every Click You
Make, We’ll Be Tracking You
Are beacons innocuous? Or are they an
invasion of personal privacy?
 Do you think your Web browsing should be
known to marketers?
 What are the Privacy Foundation guidelines
for Web beacons?
 Should online shopping be allowed to be a
private activity?

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Slide 1-46
Databases
Enable profiling
 Store records and attributes
 Database management system (DBMS):



SQL (Structured Query Language):


Software used to create, maintain, and access databases
Industry-standard database query and manipulation language used
in a relational database
Relational database:

Represents data as two-dimensional tables with records organized
in rows and attributes in columns; data within different tables can
be flexibly related as long as the tables share a common data
element
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Slide 1-47
Data Warehouses and Data Mining

Data warehouse:
 Collects firm’s transactional and customer data in
single location for offline analysis by marketers and site
managers

Data mining:
 Analytical techniques to find patterns in data, model
behavior of customers, develop customer profiles



Query-driven data mining
Model-driven data mining
Rule-based data mining
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Slide 1-48
Hadoop and the Challenge of Big Data
 Big Data
 Web traffic, e-mail, social media content
 Traditional DBMS unable to process the
volumes—petabytes and exabytes
 Hadoop
 Open-source software solution
 Processes any type of data, including
unstructured and semi-structured
 Distributed processing
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Slide 1-49
Marketing Automation and Customer
Relationship Management (CRM) Systems

Marketing automation systems


Track steps in lead generation from product awareness to purchase
CRM systems


Manage relationship with customers once purchase is made
Create customer profiles:


Product and usage summary data, demographic and psychographic data,
profitability measures, contact history, marketing and sales information
Customer data used to:



Develop and sell additional products
Identify profitable customers
Optimize service delivery, and so on
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Slide 1-50
A CRM System
Figure 6.10, Page 432
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Slide 6-51
Online Marketing Metrics: Lexicon

Audience size or
market share

Conversion to
customer
 Impressions
 Acquisition rate
 Click-through rate (CTR)
 Conversion rate
 View-through rate (VTR)
 Browse-to-buy ratio
 Hits
 View-to-cart ratio
 Page views
 Cart conversion rate
 Viewability rate
 Checkout conversion
 Stickiness (duration)
rate
 Abandonment rate
 Retention rate
 Attrition rate
 Unique visitors
 Loyalty
 Reach
 Recency
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Slide 1-52
Online Marketing Metrics (cont.)

Social marketing

E-mail metrics
 Conversation ratio
 Open rate
 Applause ratio
 Delivery rate
 Amplification
 Click-through rate
 Sentiment ratio
(e-mail)
 Bounce-back rate
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Slide 1-53
An Online Consumer Purchasing Model
Figure 6.11, Page 437
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Slide 6-54
How Well Does Online
Advertising Work?
Use ROI to measure ad campaign
 Highest click-through rates: Search engine
ads, permission e-mail campaigns
 Rich media, video interaction rates high
 Online channels compare favorably with
traditional
 Most powerful marketing campaigns use
multiple channels, including online, catalog,
TV, radio, newspapers, stores

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Slide 1-55
The Costs of Online Advertising

Pricing models







Measuring issues



Barter
Cost per thousand (CPM)
Cost per click (CPC)
Cost per action (CPA)
Hybrid
Sponsorship
Online marketing/online sales can be correlated
Offline purchases cannot always be directly related to online
campaign
In general, online marketing is more expensive on
CPM basis, but more efficient in producing sales
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Slide 1-56
Web Analytics

Software that analyzes data at each stage of the
customer conversion process






Helps managers




Awareness
Engagement
Interaction
Purchase
Loyalty and post-purchase
Optimize ROI on Web site and marketing efforts
Build detailed customer profiles
Measure impact of marketing campaigns
Google Analytics, Adobe Analytics, IBM Digital
Analytics, Webtrends
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Slide 1-57
Web Analytics and the Online
Purchasing Process
Figure 6.12, Page 442
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