E-commerce 2017

business. technology. society.

13th edition

Chapter 6
E-commerce Marketing and
Advertising Concepts

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Learning Objectives
•
6.1 Understand the key features of the Internet audience, the basic
concepts of consumer behavior and purchasing, and how consumers
behave online.
•
6.2 Identify and describe the basic digital commerce marketing and
advertising strategies and tools.
•
6.3 Identify and describe the main technologies that support online
marketing.
•
6.4 Understand the costs and benefits of online marketing
communications.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Video Ads: Shoot, Click, Buy
• Class Discussion
– 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 they have towards
display ads?

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (1 of 3)
• First principle of marketing and sales is “know the
customer” Who is online, who shops online and
why, and what do they buy?.
• In 2016
– Worldwide, around 3.3 billion people of all ages had access to the
Internet.
– Over 75% (92 million) of U.S. households had broadband Internet
access.
– In the United Kingdom, broadband household penetration is
estimated to have reached 87%.
– similar penetration rate in Germany (86%).

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (2 of 3)
• Growth rate has slowed.
• The days of extremely rapid growth in the U.S.
Internet population are over.
• However, intensity and scope of use both
increasing:
– In 2016, more than 80% of the U.S. population regularly used the
Internet, spending a total of almost 5 hours and 45 minutes a day.
– teens is even more pervasive, with over 90% go online daily, and
about 25% use the Internet almost constantly.
– About 2.5 billion people, about 75% of all Internet users, access
the Internet using a mobile phone.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (3 of 3)
• The more time users spend online, becoming
more comfortable and familiar with Internet
features and services, the more services they are
likely to explore.
• Some demographic groups have much higher
percentages of online usage
– Income, education, age, ethnic dimensions.
– Up until 2000, single, white, young, college-educated males with
high incomes dominated the Internet.
– A roughly equal percentage of men (82%) and women (83%) use
the Internet in the U.S. today.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (1 of 3)
• Demographics (Gender, income, education, age,
and ethnicity) affect:
– online behavior.
– purchase products online.
– online banking.
– entertainment (movies, games, Facebook, and texting).

• 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.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (2 of 3)
• For marketers, the broadband audience offers unique
opportunities for the use of multimedia marketing
campaigns, and for the positioning of products especially
suited for this more educated and affluent audience.
• The explosive growth of smartphones and tablet computers
connected to broadband cellular and Wi-Fi networks is the
foundation for a truly mobile e-commerce and marketing
platform, which did not exist a few years ago.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (2 of 3)
• For a physical retail store, the most important factor in
shaping sales is location, location, location.
• For Internet retailers, customers can be served by shipping
services such as UPS or the post office or their services can be
downloaded to anywhere.
• Community effects
– Role of social emulation in consumption decisions - In general,
there is a relationship between being a member of a social
network and purchasing decisions.
– “Connectedness”
 Top 10–15% are more independent
 Middle 50% share more purchase patterns of friends
– Recommender systems & co-purchase networks (Amazon)

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (2 of 3)
• social networks have a powerful influence on
shopping and purchasing behavior:
– 40% of social media users have purchased an item after sharing
or favoriting it on Facebook, Pinterest, or Twitter.
– Facebook is the network most likely to drive customers to
purchase, followed by Pinterest and Twitter.
– Unexpectedly, social networks increase research online, followed
by purchase offline (sometimes referred to as ROPO), driving
purchase traffic into physical stores where the product can be
seen, tried, and then purchased.
– Showrooming effect where consumers shop in stores, and then
purchase online.
– Membership in an online brand community like Ford’s Facebook
page and community has a direct effect on sales

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Consumers Online: The Internet
Audience and Consumer Behavior (3 of 3)
• Consumer behavior models
– Study of consumer behavior; social science discipline
– Attempt to predict or explain wide range of consumer decisions
– if the consumer decision-making process can be understood,
firms will have a much better idea how to market and sell their
products.
– Based on background demographic factors and other intervening,
more immediate variables

• Profiles of online consumers

– Consumers shop online primarily for convenience.
– Overall transaction cost reduction.
– Trust in sellers.
– price and availability of free shipping are important consideration
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Figure 6.1: A General Model of Consumer
Behavior

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
The Online Purchasing Decision (1 of 2)
• Five stages in consumer decision process
– Awareness of need
– Search for more information
– Evaluation of alternatives
– Actual purchase decision
– Post-purchase contact with firm

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Figure 6.2: The Consumer Decision Process
and Supporting Communications

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
The Online Purchasing Decision (2 of 2)
• Decision process similar for online and offline
behavior
• General online behavior model
– User characteristics
– User Skills - how to conduct online transactions
– Product characteristics - some products can be easily described,
packaged, and shipped online.
– Website features: latency (delay in downloads), usability, security
– Attitudes toward online purchasing
– Perceptions about control over online environment

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
The Online Purchasing Decision (2 of 2)
• Clickstream behavior:
– refers to the transaction log that consumers establish as they
move about the Web, from search engine to a variety of sites,
then to a single site, then to a single page, and then, finally, to a
decision to purchase.

• Clickstream marketing:
– presupposes no prior “deep” knowledge of the customer and can
be developed dynamically as customers use the Internet.
– Ex. - search engine marketing (the display of paid advertisements
by search engines).
– what the consumer is looking for at the moment and how they go
about looking (detailed clickstream data).
– clickstream data is used (days since last visit, past purchases).
– If available, demographic data is used (region, city, and gender).
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Figure 6.3: A Model of Online Consumer
Behavior

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Shoppers: Browsers and Buyers
• Shoppers: Almost 90% of Internet users
– Over 77% buyers (who actually purchase something online)
– 13.8% browsers (purchase offline)

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Shoppers: Browsers and Buyers
• Online research influenced over $1.3 trillion of
retail purchases in 2016.
• Online traffic also influenced by offline brands and
shopping.
– Traditional print media (magazines and newspapers) and
television are the most powerful.
– Online communities and blogging are also very influential.
– Social networks.

• E-commerce and traditional commerce are

coupled: Part of a continuum of consuming
behavior
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Shoppers: Browsers and Buyers (Strategy)
1. Online merchants should build the information
content of their sites to attract browsers looking
for information,
2. build content to rank high in search engines,
3. put less attention on selling per se, and
4. promote services and products (especially new
products) in offline media settings in order to
support their online stores.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
What Consumers Shop for and Buy Online
• Small-ticket and big-ticket items.
• 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, etc.

• Sales of bulky goods, furniture, and large

appliances rapidly expanding
– Free shipping offered by Amazon and other large retailers has
also contributed to consumers buying many more expensive and
large items online such as air conditioners.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
What Consumers Shop for and Buy Online
how much consumers
spent online for various
categories of goods in
2015.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
How Consumers Shop
• How shoppers find online vendors
– A tiny percentage of shoppers click on display ads to find vendors.
– Highly intentional, goal-oriented
– Search engines
– Marketplaces (Amazon, eBay)
– Specific retail site.

• Convert “goal-oriented,” intentional shoppers into buyers

through:
– targeting their communications to the shoppers,
– designing their sites to provide easy-to-access and useful product
information, full selection, and customer service, and
– do this at the very moment the customer is searching for the
product.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
How Consumers Shop (Why some people do
not shop online)
• About 9% of Internet users don’t shop online
– Trust factor – the fear that online merchants will:
 cheat you,
 lose your credit card information,
 or use personal information you give them to invade your personal
privacy,
 bombarding you with unwanted e-mail and pop-up ads.
– Hassle factors (shipping costs, returns, etc.) and inability to touch
and feel the product.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Trust, Utility, and Opportunism in Online
Markets
• Two most important factors shaping decision to
purchase online:
– Utility:
 Consumers want good deals, bargains, convenience, and speed of
delivery.
– Trust:
 Perception of credibility, ease of use, perceived risk
 Consumers need to trust a merchant before they make a purchase.
 Sellers develop trust by building strong reputations for honesty,
fairness, delivery
 Feedback forums such as Epinions.com (now part of Shopping.com),
Amazon’s book reviews from reviewers, and eBay’s feedback forum
are examples of trust-building online mechanisms
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Digital Commerce Marketing and
Advertising: Strategies and Tools
• Features of Internet marketing (vs. traditional)
– More personalized
– More participatory
– More peer-to-peer
– More communal

• Not all types of online marketing have these four

features.
• The most effective Internet marketing has all four
features

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Multi-Channel Marketing Plan
• Website
• Traditional online marketing
– Search engine, display, e-mail, affiliate

• Social marketing
– Social networks, blogs, video, games

• Mobile marketing
– Mobile/tablet sites, apps

• Offline marketing
– Television, radio, newspapers

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Insight on Business: Are the Very Rich
Different from You and Me?
• Class Discussion
– 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 websites?
– How has social media affected luxury marketing?
– Visit the Armani website. What do you find there?

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
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?
– For instance, in Facebook marketing, an important metric is how
many Likes your Facebook page produces.
– In order to choose where your marketing resources should be
deployed, you will have to link each of these activities to sales
revenue.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Establishing the Customer Relationship
• Website functions (4 important functions) to:
– Establish brand identity and customer expectations
 Differentiating features of the product or service in terms of quality, price,
product support, and reliability. (Ex. Ford, Skoda)
– Anchor the brand online
 Central point for all marketing messages coming from different platforms.
– Inform and educate customer
– Shape customer experience

• Customer experience refers to the totality of experiences

that a customer has with a firm, including the search,
informing, purchase, consumption, and after-sales support
for the product.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Online Marketing and Advertising
• Online advertising
– Display, search, mobile messaging, sponsorships, classifieds,
lead generation, e-mail
– In the last five years, advertisers have aggressively increased
online spending and cut outlays on traditional channels.
– By 2018, online advertising expenditures will exceed TV
advertising
– Advantages of online marketing:
 18–34 audience is online (most desirable)
 Ad targeting to individuals and small groups and to track performance of
advertisements in almost real time.
 Price discrimination
 Personalization
• ad targeting is the sending of market messages to specific subgroups
in the population.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Online Marketing and Advertising

Spending on online advertising worldwide is expected to grow from €182 billion

in 2016 to over €312 billion by 2020 and comprise an increasing percentage of
total media ad spending.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Traditional Online Marketing and
Advertising Tools
• Search engine marketing and advertising
• Display ad marketing
• E-mail marketing
• Affiliate marketing
• Viral marketing
• Lead generation marketing

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Search Engine Marketing and Advertising
(1 of 5)
• Search engine marketing (SEM)
– Use of search engines for branding

• Search engine advertising (Ex. PepsiCo)

– Use of search engines to support direct sales
– The click-through rate for search engine advertising is generally
1%–4% (with an average of around 2%).
– The top search engine is Google, (market share of over 90%).
– Search engines are also used for:
 Strengthen brand awareness.
 Support costumer engagement.
 Gain more insights about costumer awareness and behavior.
 Insight into customer search patterns.
 Competitors brand awareness.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Search Engine Marketing and Advertising
(2 of 5)
• Types of search engine advertising
– Organic search: inclusion and ranking of sites depends on a
more or less unbiased application of a set of rules (algorithm)
imposed by the search engine.
– Paid inclusion: for a fee, guarantees a website’s inclusion in its
list of sites, more frequent visits by its web crawler, and
suggestions for improving the results of organic searching.
– Pay-per-click (PPC) search ads (primary type of search engine
advertising):
 Keyword advertising: merchants purchase keywords through a bidding
process at search sites, and whenever a consumer searches for that word,
their advertisement shows up somewhere on the page, usually as a small text-
based advertisement on the right, but also as a listing on the very top of the
page. (Ex. Google AdWords)
 Network keyword advertising (context advertising): publishers accept ads
placed by Google on their websites, and receive a fee for any click-throughs
from those ads (Ex. Google AdSense) Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Search Engine Marketing and Advertising
(3 of 5)
• Search engine optimization (SEO)
– techniques to improve the ranking of web pages generated by
search engine algorithms.
– the process of improving the ranking of web pages with search
engines by altering the content & design of web pages and site.

• Social search
– Utilizes social contacts and social graph to provide fewer and
more relevant results.
– Reviews your friends’ (and their friends’) recommendations, past
web visits, and use of Like buttons.
– Ex. Facebook Search

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Search Engine Marketing and Advertising
(4 of 5)
• Search engine issues
– Paid inclusion and placement practices: search engines have
the power to crush a small business by placing its ads on the back
pages of search results (dominated by google).
– Link farms: groups of websites that link to one another, thereby
boosting their ranking in search engines.
– Content farms: companies that generate large volumes of textual
content for multiple websites designed to attract viewers and
search engines.
– Click fraud: occurs when a competitor clicks on search engine
results and ads, forcing the advertiser to pay for the click even
though the click is not legitimate.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Search Engine Marketing and Advertising
(5 of 5) – other issues
– Search engine advertising saves consumers cognitive energy and
reduces search costs (including the cost of transportation needed
to do physical searches for products).
– The better optimized the page is, the higher a ranking it will
achieve in search engine result listings, and the more likely it will
appear on the top of the page in search engine results.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Display Ad Marketing (1 of 3)
According to Google, the top
performing ad formats are the
large rectangle, the medium
rectangle, the leaderboard, and
the half-page (Google Inc.,
2016).

The top five display ad

companies in the United States
are Facebook, Google, Twitter,
Yahoo, and Verizon (AOL and
Millennial Media), which together
account for almost 60% of U.S.
display ad revenue.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Display Ad Marketing (2 of 3)
consist of four different kinds of ads:
• Banner ads
– displays a promotional message in a rectangular box at the top or
bottom of a computer screen.
– are the oldest and most familiar form of display marketing.
– A banner ad is similar to a traditional ad in a printed publication
but has some added advantages.
– Banner ads often feature video and other animations.

• Rich media ads - more effective than simple banner ads.

– ad employing animation, sound, and interactivity, using Flash,
HTML5, Java, and JavaScript.
– exposure to rich media ads boosted advertiser site visits by nearly
300% compared to standard banner ads.
– Interstitial ads: a way of placing a full-page message between the
current and destination pages of a user
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Display Ad Marketing (2 of 3)
consist of four different kinds of ads:
• Video ads:
– Online video ads are TV-like advertisements that appear as in-
page video commercials or before, during, or after a variety of
content.
– Far more effective than other display formats

• Sponsorships
– a paid effort to tie an advertiser’s name to information, an event,
or a venue in a way that reinforces its brand in a positive yet not
overtly commercial manner.

• Native advertising
– advertising that looks similar to editorial content.
– In the online world, native ads are most often found on social
media, as part of a Facebook News Feed.
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Display Ad Marketing (3 of 3)
• Content marketing
– creates a content campaign for a brand and then tries to secure
placement on a variety of websites.

• Advertising networks
– Specialized marketing firms that connect online marketers with
publishers by displaying ads to consumers based on detailed
customer information.
– Advertising networks sell advertising and marketing opportunities
(slots) to companies who wish to buy exposure to an online
audience (advertisers).

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Display Ad Marketing (3 of 3)
• Display advertising issues
– Ad fraud: involves the practice of falsifying web or mobile traffic in
order to charge advertisers for impressions, clicks, or other
actions that never actually occurred. Large advertisers have
begun to hire online fraud detection firms (a growth industry) to
determine the extent of fraud in their campaigns.
– Viewability: Recent research by Google revealed that 56% of the
impressions served across its display advertising platforms,
including DoubleClick, are not viewable.
– Ad blocking: use of ad-blocking software, which can eliminate
display ads, pre-roll video ads, retargeted ads, and some types of
native ads on desktops and laptops. almost 25% of Internet users
in the United States are estimated to be employing ad blockers.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Figure 6.7: How an Advertising Network
Such as DoubleClick Works

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
E-mail Marketing
• Direct e-mail marketing
– Messages sent directly to interested users
– in-house e-mail lists are more effective than purchased e-mail
lists.
– Benefits include
 Inexpensive - high response rates and low cost
 Average around 3% to 4% click-throughs
 Measuring and tracking responses
 Personalization and targeting

• Three main challenges

– Spam - unsolicited commercial (junk) e-mail - averaged around
53% in 2016.
– Anti-spam software
– Poorly targeted purchased e-mail lists
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Types of Traditional Online
Marketing
• Affiliate marketing
– Commission fee paid to other websites for sending customers to
their website.
– Affiliate marketing generally involves pay-for-performance: the
affiliate or affiliate network gets paid only if users click on a link or
purchase a product.
– the advertiser pays the affiliate a fee, either on a per-click basis or
as a percentage of whatever the customer spends on the
advertiser’s site.
– Amazon has a strong affiliate program consisting of more than 1
million participant sites, called Associates, which receive up to
10% in advertising fees on sales their referrals generate.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Types of Traditional Online
Marketing
• Viral marketing
– Marketing designed to inspire customers to pass message to
friends, family, and colleagues.
– It’s the online version of word-of-mouth advertising, which spreads
even faster and further than in the real world.
– Benefits of customer referrals:
 increasing the size of a company’s customer base,
 less expensive to acquire because existing customers do all the acquisition
work, and
 tend to use online support services less, preferring to turn back to the person
who referred them for advice.
– They use different online venues: Email, Social media, ..

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Types of Traditional Online
Marketing
• Lead generation marketing
– uses multiple e-commerce presences to generate leads for
businesses who later can be contacted and converted into
customers.
– Services and tools for collecting, managing, and converting leads.
– Sometimes called “inbound marketing,” lead generation marketing
firms help other firms build websites, launch e-mail campaigns,
use social network sites and blogs to optimize the generation of
leads, and then manage those leads by initiating further contacts,
tracking interactions, and interfacing with customer relationship
management systems to keep track of customer-firm interactions.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
Online marketing should be
coupled with offline
marketing to achieve optimal
effectiveness.

marketers increasingly are

developing multi-channel
marketing programs that
can take advantage of the
strengths of various
media, and reinforce
branding messages
across media.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
• Multi-channel marketing: Message integration
– Integrating on-line & off-line marketing.
– Online marketing is not the only way, or by itself the best way, to
engage consumers.

• Customer retention strategies

– One-to-one marketing (personalization)
 segmenting the market based on a precise and timely understanding of an
individual’s needs, targeting specific marketing messages to these individuals,
and then positioning the product vis-à-vis competitors to be truly unique.
 One-to-one marketing is the ultimate form of market segmentation, targeting,
and positioning—where the segments are individuals.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
• Customer retention strategies
– Behavioral targeting (interest-based advertising)
 involves using the online and offline behavior of consumers to adjust the
advertising messages delivered to them online, often in real time (milliseconds
from the consumer’s first URL entry).
 interest-based advertising (IBA) (behavioral targeting) another name for
behavioral targeting.
 Behavioral targeting combines nearly all of your online behavioral data into a
collection of interest areas, and then shows you ads based on those interests,
as well as the interests of your friends.
 breadth of data collected: your e-mail content, social network page content,
friends, purchases online, books read or purchased, newspaper sites visited,
and many other behaviors.
– Retargeting: involves showing the same or similar ads to
individuals across multiple websites.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
• Behavioral Targeting (important notes):
– four methods that online advertisers use to behaviorally target
ads:
 search engine queries,
 the collection of data on individual browsing history online (monitoring the
clickstream),
 the collection of data from social network sites, and increasingly,
 the integration of this online data with offline data like income, education,
address, purchase patterns, credit records, driving records, and hundreds of
other personal descriptors tied to specific, identifiable persons.
– On average, online information bureaus maintain 2,000 data
elements on each adult person in their database.
– The currency and accuracy of this data are never examined, and
the retention periods are not known.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
• Customization and customer co-production
– Customization is an extension of personalization.
– Customization means changing the product—not just the
marketing message—according to user preferences.
– Customer co-production means the users actually think up the
innovation and help create the new product.
– For example, Nike offers customized sneakers through its NIKEiD
program on its website. Consumers can choose the type of shoe,
colors, material, and even a logo of up to eight characters. Nike
transmits the orders via computers to specially equipped plants in
China and Korea.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Other Online Marketing Strategies
• Customer service
– FAQs
 a text-based listing of common questions and answers, provide an inexpensive
way to anticipate and address customer concerns.
– Real-time customer service chat systems
 a company’s customer service representatives interactively exchange text-
based messages with one or more customers on a real-time basis.
 Chats with online customer service representatives can provide direction,
answer questions, and troubleshoot technical glitches that can kill a sale.
– Automated response systems
 send e-mail order confirmations and acknowledgments of e-mailed inquiries, in
some cases letting the customer know that it may take a day or two to actually
research an answer to their question.

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Price Discrimination
• Price discrimination
– selling products to different people and groups based on their
willingness to pay.
– If some people really want the product, sell it to them at a high
price.

• Free and freemium

– users are offered a basic service for free, but must pay for
premium or add-on services.
– Free content can help build market awareness and can lead to
sales of other follow-on products.
– free products and services knock out potential and actual
competitors (the free browser Internet Explorer from Microsoft
spoiled the market for Netscape’s browser).
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Long Tail Marketing
• Internet allows for sales of obscure products with
little demand.
– In a traditional market, niche products are so obscure no one ever
hears about them.
– One impact of the Internet and e-commerce on sales of obscure
products with little demand is that obscure products become more
visible to consumers through search engines, recommendation
engines, and social networks.
– generate profits from the sale of large number of obscure products

• Substantial revenue because

– Near zero inventory costs
– Little marketing costs
– Search and recommendation engines
Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved
Insight on Technology: The Long Tail: Big
Hits and Big Misses
• Class Discussion
– 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?

Copyright © 2018, 2017, 2016 Pearson Education, Inc. All Rights Reserved