ELEVENTH EDITION

ELECTRONIC
COMMERCE
GARY P. SCHNEIDER

Chapter 4

Marketing on the Web

Cengage Learning 2015

 Learning Objectives

In this chapter, you will learn:

How firms use product-based and customer-based
marketing strategies
About communicating with different market
segments
To identify customers characteristics as they move
through the customer relationship life cycle
How companies advertise on the Web

Cengage Learning 2015 2

 Learning Objectives (contd.)

About e-mail marketing strategies

About technology-enabled customer relationship
management
How to create and maintain brands on the Web
How businesses use social media in viral marketing
campaigns
About search engine positioning tactics and domain
name selection strategies

Cengage Learning 2015 3

 Introduction

Case study: The Moths

The Moths began as a storytelling group: the Moth
Radio hour on National Public Radio
The Moths started giving corporate training
Businesses and organizations are interested in telling
their story to customers
Stories can be told in various channels

Cengage Learning 2015 4

 Web Marketing Strategies

Marketing mix
Element combination to achieve goals
Selling and promoting products and services
Marketing strategy
Marketing mix with elements defined

Cengage Learning 2015 5

 The Four Ps of Marketing

Product
Physical item or service sold
Brand: customers product perception
Price
Amount customer pays for product
Customer value: customer benefits minus total cost
Promotion
Any means to spread word about product

Cengage Learning 2015 6

 The Four Ps of Marketing (contd.)

Place (distribution)
Need to have products or services available in many
different locations
Getting right products to the right places at the best
time to sell them

Cengage Learning 2015 7

 FIGURE 4-1 The four Ps of marketing contribute to marketing strategy
Cengage Learning 2015

Cengage Learning 2015 8

 Product-Based Marketing Strategies

Managers often think in terms of products and

services sold
This is a useful Web site design when customers use
product categories
Web site examples: Home Depot and Staples
This is not a useful Web site design when customers
look to fulfill a specific need
Design Web site to meet individual customer needs
Offer alternative shopping paths

Cengage Learning 2015 9

 Customer-Based Marketing Strategies

Web sites to meet various types of customers

specific needs
Initial step: identify customer groups sharing common
characteristics
Make site more accessible and useful for each group
Companies need to take view beyond internal
perspective
Example: university Web sites today focus design on
needs of stakeholders (current students, prospective
students, parents of students, potential donors,
faculty)
Cengage Learning 2015 10
 Communicating with
Different Market Segments
Communications media selection to carry message
Online firm
Communications media selection: critical
No physical presence
Customer contact made through image projected
through media and Web site
Online firm challenge
Obtain customer trust with no physical presence

Cengage Learning 2015 11

 Trust, Complexity, and Media Choice

The Web
Intermediate step between mass media and personal
contact
Web communication offers:
Advantages of personal contact selling
Cost savings of mass media
Mass media advertising offers lowest trust level
Still used successfully because costs spread over
many people

Cengage Learning 2015 12

 FIGURE 4-2 Trust in three communication modes
Cengage Learning 2015

Cengage Learning 2015 13

 Trust, Complexity, and Media Choice
(contd.)
Complexity level inherent in product and service
Important factor in media choice
Mass media
Lowest level of trust
Low cost per viewer
Success depends on passive nature of media
consumption
Personal contact
Highly complex products and services
Customers may ask questions

Cengage Learning 2015 14

 Trust, Complexity, and Media Choice
(contd.)
Web occupies a wide middle ground
Short, focused messages
Long, complex messages
Back and forth dialog with customers
Web log (blog)
Website that allows people to post thoughts and
inviting others to add commentary
Used by many companies as a communication device

Cengage Learning 2015 15

 Trust, Complexity, and Media Choice
(contd.)
Social media
Examples: Facebook, Google+, Twitter
Can help companies create consistently-themed
discussions

Cengage Learning 2015 16

 Market Segmentation

Divides potential customer pool into segments

Defined by customer characteristics
Micromarketing
Practice of targeting very small market segments
Hampered by cost increases
Three categories to identify market segments
Geographic segmentation
Demographic segmentation
Psychographic segmentation
Television advertisers use all three categories
Cengage Learning 2015 17
 FIGURE 4-3 Television advertising messages tailored to program
audience Cengage Learning 2015

Cengage Learning 2015 18

 Market Segmentation on the Web

Web opportunity
Present different store environments online
Juicy Couture site targets young, fashion-conscious
buyers
Talbots site targets older, more established buyers
Limitations of physical retail stores
Floor and display space
Must convey one particular message
Web stores
Separate virtual spaces for different market segments

Cengage Learning 2015 19

 Offering Customers a
Choice on the Web
One-to-one marketing
Offering products and services matched to needs of a
particular customer
Example: Dell
Offers several 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

Cengage Learning 2015 20

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

Cengage Learning 2015 21

 Segmentation Using
Customer Behavior
Same person
Needs different combinations of products and
services
Depending on the occasion
Behavioral segmentation
Creation of separate customer experiences based on
behavior
Occasion segmentation
Behavioral segmentation based on things happening
at a specific time or occasion

Cengage Learning 2015 22

 Segmentation Using
Customer Behavior (contd.)
Online world single Web site design
Easier to meet needs of different behavioral modes
Can include elements appealing to different
behavioral segments
Usage-based market segmentation
Customizing visitor experiences to match the site
usage behavior patterns of each visitor or type of
visitor
Categories of online behavior patterns
Browsers, buyers, and shoppers

Cengage Learning 2015 23

 Browsers

Visitors usually surf or browse sites

A Web site must offer something to pique visitors
interest
Trigger words
Prompt visitor to stay and investigate products or
services
Have links to site explanations, instructions
Include extra content related to product, service
Leads to favorable impression (bookmark)

Cengage Learning 2015 24

 Buyers

Ready to make a purchase right away

Offer direct route into purchase transaction
Shopping cart
Part of the Web site
Keeps track of selected items for purchase
Automates purchasing process
Page offers link back into shopping area
Primary goal: get buyer to shopping cart as quickly
as possible

Cengage Learning 2015 25

 Shoppers

Motivated to buy
Looking for more information before purchase
Offer comparison tools, product reviews, and
features lists
People do not retain behavioral categories from one
visit to the next
Even for the same Web site

Cengage Learning 2015 26

 Alternative Models

McKinsey & Companys six behavior-based

categories
Simplifiers (convenience)
Surfers (find information, explore new ideas, or shop)
Bargainers (search for good deals)
Connectors (stay in touch with other people)
Routiners (return to same sites over and over)
Sportsters (spend time on sports, entertainment sites)
Must identify groups and formulate ways of
generating revenue

Cengage Learning 2015 27

 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
Typical five-stage model of customer loyalty
First four stages show increase in relationship
intensity
Fifth stage (separation)
Decline occurs, relationship terminates

Cengage Learning 2015 28

 FIGURE 4-5 Five stages of customer loyalty
Cengage Learning 2015

Cengage Learning 2015 29

 Customer Relationship Intensity and
Life-Cycle Segmentation (contd.)
Touchpoints
Online and offline customer contact points
Touchpoint consistency
Goal of providing similar levels and quality of service
at all touchpoints
Characteristics of the five stages
Awareness: customers recognize company name,
product
Exploration: customers learn more about company,
products

Cengage Learning 2015 30

 Customer Relationship Intensity and
Life-Cycle Segmentation (contd.)
Characteristics of the five stages (contd.)
Familiarity
Customers have completed several transactions
Customers aware of returns and credits policies
Customers aware of pricing flexibility
Customers just as likely to shop competitors
Commitment
Customers experience highly satisfactory encounters
Customers develop fierce loyalty or strong preference

Cengage Learning 2015 31

 Customer Relationship Intensity and
Life-Cycle Segmentation (contd.)
Characteristics of the five stages (contd.)
Separation
Conditions that made relationship valuable change
Parties enter separation stage
Life-cycle segmentation
Customer life cycle (the five stages)
Using stages to create customer groups in each stage

Cengage Learning 2015 32

 Customer Acquisition:
The Funnel Model
Conceptual tool
Provides understanding of overall nature of marketing
strategy
Clear structure for evaluating specific strategy
elements
Similar to customer life-cycle model
Less abstract
Better at showing effectiveness of two or more
specific strategies

Cengage Learning 2015 33

 FIGURE 4-6 Funnel model of customer acquisition
Cengage Learning 2015

Cengage Learning 2015 34

 Costs of Customer Acquisition,
Conversion, and Retention
Acquisition cost
Amount of money spent to bring one customer to the
site
Conversion
Converting a visitor into a customer
Conversion cost
May be greater than profit realized on first sale
Retained customers return to site again
Retention cost

Cengage Learning 2015 35

 Advertising on the Web

Five-stage customer loyalty model helpful in

creating advertising messages
Awareness stage: message should inform
Exploration stage: message should explain how
product, service works
Encourage switching brands
Familiarity stage: message should persuade
Commitment stage: customer sent reminder
messages
Separation stage customers not targeted

Cengage Learning 2015 36

 Advertising on the Web (contd.)

Online advertising
Must coordinate with existing advertising efforts

Cengage Learning 2015 37

 Banner Ads

Small rectangular object with stationary or moving

graphic
Includes hyperlink to advertisers Web site
Versatile: informative and persuasive functions
Attention-grabbing banner ads
Created using Shockwave, Java, Flash
Interactive marketing unit (IMU) ad formats
Voluntary standard banner sizes
Universal ad package (UAP)

Cengage Learning 2015 38

 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: $50 to more than $8000

Cengage Learning 2015 39

 Banner Ad Placement

Use a banner exchange network

Coordinates ad sharing
HitExchange, Voltrank
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
DoubleClick (Google), ValueClick

Cengage Learning 2015 40

 New Strategies for Banner Ads

Click through rates 0.3 to 0.5 percent

Some customers may be influenced without clicking
Approaches
Animated GIFs with moving elements
Display rich media effects (movie clips)
Add interactive effects (Java programs)
Respond to users click with some action
Ads acting like mini video game
Ads appearing to be dialog boxes

Cengage Learning 2015 41

 FIGURE 4-7 Disguised banner ads
Cengage Learning 2015

Cengage Learning 2015 42

 Text Ads

Short promotional message

No graphic elements
Usually placed along Web page top or right side
Deceptively simple but very effective
Example: Google
Initially criticized for including unobtrusive ads on its
pages
Now clearly labels ads to prevent confusion
Inline text ad
Text in stories displayed as hyperlinks

Cengage Learning 2015 43

 Other Web Ad Formats

Pop-up ad
Appears in its own window when user opens/closes Web
page
Considered an annoyance
Must click close button (small) in window of ad
Pop-behind ad
Pop-up ad followed by a quick command
Returns focus to original browser window
Appears when browser is closed
Ad-blocking software
Prevents banner ads and pop-up ads from loading
Cengage Learning 2015 44
 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
Close automatically or require user to click a button
Rich media ads (active ads)
Generate graphical activity that floats over the Web
page itself
Example: 30 second ad before television show

Cengage Learning 2015 45

 Mobile Device Advertising

Tremendous usage growth for mobile devices

connected to Internet
Some mobile software applications (mobile apps)
include advertising element
Messages displayed from advertisers
Part of the app screen or in a separate screen
Mobile apps advertising space marketed in same way
as Web sites banner advertising

Cengage Learning 2015 46

 Site Sponsorships

Web sites offer advertisers opportunity to sponsor all

(or parts) of their sites
More subtle
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

Cengage Learning 2015 47

 Online Advertising Cost and
Effectiveness
Companies want Web sites to make favorable
impression on potential customers
Raises issue of measuring Web site effectiveness
Cost per thousand (CPM) for mass media
advertising
M from Roman numeral for thousand
Dollar amount paid for every thousand people in the
estimated audience
Cost per click (CPC)

Cengage Learning 2015 48

 Online Advertising Cost and
Effectiveness (contd.)
Measuring Web audiences (complicated)
Webs interactivity
Value of visitor to an advertiser
Depends on information site gathers from visitor
Visit
Occurs when visitor requests a page from Web site
Trial visit
First time a particular visitor loads a Web site page
Repeat visits
Subsequent page loads
Cengage Learning 2015 49
 Online Advertising Cost and
Effectiveness (contd.)
Page view
Each page loaded by a visitor
Ad view
Occurs if page contains an ad
Impression
Each time banner ad loads
Click (click-through)
Action whereby a visitor clicks banner ad to open
advertisers page

Cengage Learning 2015 50

 FIGURE 4-8 CPM rates for advertising in various media
Cengage Learning 2015

Cengage Learning 2015 51

 Effectiveness of Online Advertising

Effectiveness 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

Cengage Learning 2015 52

 Effectiveness of
Online Advertising (contd.)
Online advertising as one element in marketing
strategy
Use variety of media to reach potential customers
Online advertising developments
AdAge.com, eMarketer, Online Publishers Association
Online advertising much more effective using
market segmentation

Cengage Learning 2015 53

 E-Mail Marketing

Can be a powerful element of advertising strategy

Used to announce new products or features
Used to announce sales on existing products
Unsolicited Commercial E-mail (UCE, Spam, bulk
mail)
Electronic junk mail
Wastes time, disk space, and consumes large
amounts of Internet capacity
Key element to avoid engaging in spam
Obtain customer approval prior to sending

Cengage Learning 2015 54

 Permission Marketing

Conversion rate
Percentage of recipients responding to an ad or
promotion
Ranges from 10 percent to more than 30 percent on
requested e-mail messages
Opt-in e-mail
Practice of sending e-mail messages to people who
request information
Part of marketing strategy: permission marketing
Example companies: ConstantContact, Yesmail,
Return Path
Cengage Learning 2015 55
 Combining Content and Advertising

Using articles, news stories of interest to specific

market segments
Increases acceptance of e-mail
Advertisers send content by using hyperlinks
inserted into e-mail messages
Takes customers to advertisers Web site content
Easier to induce customer to stay on the site and
consider making purchases
Coordination across media outlets
Important element in any marketing strategy

Cengage Learning 2015 56

 Outsourcing E-Mail Processing

Number of customers opting in to information-laden

e-mails
Can outgrow capacity of an information technology
staff
Solution
Use e-mail processing service provider
Manage e-mail campaign at cost of 1-5 cents per
address

Cengage Learning 2015 57

 Technology-Enabled Customer
Relationship Management
Clickstream: the information gathered about visitors
Technology-enabled relationship management
Firm obtains information on customer behavior to:
Set prices, negotiate terms, tailor promotions, add
product features, customize customer relationship
Also known as:
Customer relationship management (CRM)
Technology-enabled customer relationship
management
Electronic customer relationship management (eCRM)

Cengage Learning 2015 58

 FIGURE 4-9 Technology-enabled relationship management
and traditional customer relationships
Cengage Learning 2015
Cengage Learning 2015 59
 CRM as a Source of Value

Marketspace
Commerce in the information world
Value creation requires different processes
Information itself a source of value
Track and examine Web site visitor behavior
Use information to provide customized, value-added
digital products and services
Early CRM efforts failed
Overly complex

Cengage Learning 2015 60

 CRM as a Source of Value (contd.)

Todays CRM efforts more successful

Limit data collection to key facts
Automating data collection
Customer touchpoint
Any occurrence of contact between customer and any
company point
Data warehouse (large database)
Contains multiple sources of information about
customers, their preferences, their behavior

Cengage Learning 2015 61

 CRM as a Source of Value (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 customer and sales data
elements

Cengage Learning 2015 62

 FIGURE 4-10 Elements of a typical CRM system
Cengage Learning 2015

Cengage Learning 2015 63

 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

Cengage Learning 2015 64

 Elements of Branding

Three key brand elements

Differentiation
Clearly distinguishes 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
Due to environmental changes

Cengage Learning 2015 65

 FIGURE 4-11 Elements of a brand
Cengage Learning 2015

Cengage Learning 2015 66

 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

Cengage Learning 2015 67

 Affiliate Marketing Strategies

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 saves expenses
Handling inventory, advertising and promoting
product, transaction processing
Affiliate commissions
Pay per click, pay per conversion

Cengage Learning 2015 68

 Affiliate Marketing Strategies (contd.)

Affiliate program broker

Rakuten LinkShare, Commission Junction
Cause marketing
Affiliate marketing program that benefits 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
Higher click-through rates than typical banner ad

Cengage Learning 2015 69

 Viral Marketing Strategies and Social
Media
Viral marketing
Relies on existing customers
Tell other people (prospective customers) about
products or service
Example: BlueMountain Arts
Electronic greeting cards
Greeting card includes link to greeting card site
Social media
Goal: get community to discuss product or service in
a positive way
Build fan base of associated individuals
Cengage Learning 2015 70
 Search Engine Positioning and
Domain Names
Ways that potential customers find Web sites
Referral by a friend
A link on a referring Web site
Referral by an affiliate marketing partner
Sites URL in print advertisement, television
Unintentional visit after mistyping similar URL
Use of a search engine or directory Web site

Cengage Learning 2015 71

 Search Engines and Web Directories

Search engine
Web site that helps people find things on the Web
Search engine major parts
Spider (crawler, robot, bot)
Program that 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

Cengage Learning 2015 72

 Search Engines and Web Directories
(contd.)
Web directories
Provide classified hierarchical lists of categories
Search engine ranking
Weighting of factors
Search engines use factors to decide which URLs
appear first on searches for a particular search term
Search engine positioning (search engine
optimization, search engine placement)
Combined art and science of having a particular URL
listed near the top of search engine

Cengage Learning 2015 73

 Paid Search Engine Inclusion and
Placement
Paid placement (sponsorship, search term
sponsorship)
Offer good ad placement on search results page for a
price
Buy banner ad space at the top of search results
pages that include certain terms
Search engine positioning: complex subject
Spending on online advertising
Grew rapidly in the early Web days
Virtually zero in 1995 to about $8 billion in 2000 (U.S.)

Cengage Learning 2015 74

 FIGURE 4-12 U.S. online advertising expenditures, actual and projected
Source: Adapted from reports by ClickZ, eMarketer, Forrester Research,
Nielsen, and Internet Retailer

Cengage Learning 2015 75

 FIGURE 4-13 U.S. advertising expenditures by medium, 2015 estimates
Source: Adapted from reports by eMarketer, MagnaGlobal, and Nielsen

Cengage Learning 2015 76

 Paid Search Engine Inclusion and
Placement (contd.)
Search engine placement brokers
Aggregate inclusion and placement rights on multiple
search engines
Sell 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

Cengage Learning 2015 77

 Web Site Naming Issues

URLs should reflect company name or reputation

Troublesome domain names
Purchase more suitable domain names
Examples:
www.iflyswa.com changed to www.southwest.com
www.delta-air.com changed to www.delta.com
Companies often buy more than one domain name
In case user misspells URL
Redirected to intended site
Have different names or forms of names

Cengage Learning 2015 78

 Buying, Selling, and Leasing Domain
Names
Example: Artuframe
Purchased the URL art.com from Advanced Rotocraft
Technology
Combined new domain name with other marketing
strategies
When company failed, domain name bought by
another successful art company
Leasing the rights to domain names is an option to
selling

Cengage Learning 2015 79

 FIGURE 4-14 Domain names that sold for more than $2 million
Cengage Learning 2015

Cengage Learning 2015 80

 URL Brokers and Registrars

Broker sell, lease, auction domain names

Internet Corporation for Assigned Names and
Numbers (ICANN)
Maintains accredited registrars list
Registrars offer domain name search tools
Domain name parking (domain name hosting)
Service permitting domain name purchaser to
maintain simple Web site
Domain name remains in use at lower cost than a
typical Web site

Cengage Learning 2015 81