E-commerce

Marketing
and
Advertising
Concepts
Consumer Behavior
Study of consumer behavior
◦ 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
behaviors or decisions
◦ Based on background demographic factors, marketing
stimuli, social network factors, and community factors

Profiles of Online Consumers

◦ Consumers shop online primarily for convenience

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The Consumer Decision Process
and
Supporting Communications

Slide 6-3
A General Model of Consumer
Behavior

Slide 6-4
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

Slide 6-5
The Online Purchasing
Decision (cont.)
Decision process similar for online and
offline behavior
General online behavior model includes
◦ Web site features (delay, usability, and security)
◦ Consumer skills regarding online purchasing
◦ Product characteristics (prod desc, ability to be shipped
over the internet)
◦ Attitudes toward online purchasing
◦ Perceptions about control over Web environment

Slide 6-6
The Online Purchasing
Decision (cont.)
Clickstream behavior refers to the
transaction log that consumers establish as
they move about the web from search
engine to websites, to pages, to the decision
to buy

Slide 6-7
A Model of Online Consumer
Behavior

Slide 6-8
Shoppers: Browsers and
Buyers
Shoppers: 89% of Internet users
◦ 73% 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 consumer behavior

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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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How Consumers Shop
How shoppers find online vendors
◦ Search engines
◦ Marketplaces (Amazon, eBay)
◦ Specific retail site
27% of Internet users don’t shop online
◦ Trust factor
◦ Hassle factors (shipping costs, returns, etc.)

Slide 6-11
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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Digital Commerce Marketing
and Advertising: Strategies and
Tools
Internet marketing (vs. traditional)
◦ More personalized
◦ More participatory
◦ More peer-to-peer (P2P encourages customers to engage other
customers by advocating a product or service to friends or
associates)
◦ More communal (A company directs its communal marketing efforts to
a small sub-set of its customers who then spreads the word to
potential new customers)

The most effective Internet marketing has all

four features

Slide 6-13
Multi-Channel Marketing Plan
1. Web site
2. Traditional online marketing
◦ Search engine, display, e-mail, affiliate

3. Social marketing
◦ Social networks, blogs, video, game

4. Mobile marketing
◦ Mobile/tablet sites, apps

5. Offline marketing
◦ Television, radio, newspapers

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Establishing the Customer
Relationship
Web site functions to:
◦ Establish brand identity and customer
expectations
◦ Differentiating product
◦ Inform and educate customer
◦ Shape customer experience
◦ Anchor the brand online using various marketing
messages using email, web, social media
◦ The web site is the central point for anchoring the brand

Slide 6-15
Online Advertising
Online advertising
◦ Display (banners, videos), search engine marketing,
mobile messaging, sponsorships, classifieds, lead
generation (generation of consumer interest or inquiry
into products or services of a business), e-mail, affiliate,
and viral marketing
◦ Online ads are the fastest growing form of advertising
◦ Advantages:
◦ 18–34 audience is online
◦ Ad targeting (sending messages to specific groups)
◦ Price discrimination
◦ Personalization

Slide 6-16
Traditional Online Marketing
and Advertising Tools
Search engine marketing and advertising
Display ad marketing
E-mail marketing
Affiliate marketing
Viral marketing
Lead generation marketing
Social, mobile, and local marketing and advertising

Slide 6-17
Search Engine Marketing and
Advertising
Use of search engines for branding
◦ http://searchengineland.com/top-5-ways-to-use-search-for-branding-66332

Search engine advertising

◦ Use of search engines to support direct sales

Types of search engine advertising

◦ Sponsored links or paid inclusion(A paid advertisement in the
form of a hypertext link that shows up on search results pages)
◦ Keyword advertising (purchase key words by bidding at search sites)
◦ Network keyword advertising (publisher accepts ads placed on its
site and receive a fee for any click-throughs from the ad)

Slide 6-18
Search Engine Marketing
(cont.)
Search engine optimization (SEO) process of improving
ranking of web pages with search engines
Social search
◦ Utilizes social graph (friend’s recommendations, past Web visits, Facebook
Likes) to provide fewer and more relevant results
Search engine issues
◦ Paid inclusion (company charges fees related to the inclusion of
websites in their search index)
◦ Link farms (group of web sites all hyperlinked to each other in the group)
◦ Content farms (large amounts of textual content which is specifically designed to
satisfy algorithms for maximal retrieval by automated search engines)
◦ Click fraud (using script file to click on website that get paid by how many visitors
to the sites click on the ads)

Slide 6-19
Search Engine Marketing
(cont.)
Search engine issues
◦ Link farms are websites that link to one another
◦ Content farms are companies that generate volumes of
textual content for multiple websites to attract viewers
and search engines
◦ They profit by attracting large numbers of readers and exposing
them to ads
◦ Click fraud occurs on the Internet in pay-per-click (PPC)
online advertising when a competitor clicks on a search
engine ads forcing the advertiser to pay for the click even
when it is not legitimate.
◦ The process could be automated costing advertisers lots of money

Slide 6-20
Display Ad Marketing
Banner ads take customers to advertiser web site
Rich media ads employ animation & sound
Video ads
Sponsorships ads (sponsoring an event)
Advertising networks help companies take
advantage of internet marketing/advertising
Advertising exchanges and real-time bidding

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How an Advertising Network
Such as DoubleClick Works

Slide 6-22
E-mail Marketing
Direct e-mail marketing
◦ Messages sent directly to interested users
◦ Benefits include
◦ Inexpensive
◦ Average more than 7% click-throughs for in-house lists
◦ Measuring and tracking responses
◦ Personalization of messages and offers
Three main challenges
◦ Users hate Spam
◦ Anti-spam software prevent spam email from getting
through
◦ Poorly targeted purchased e-mail lists

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Spam
Unsolicited commercial e-mail
65–70% of all e-mail
Most originates from bot networks
Efforts to control spam have largely failed:
◦ Government regulation (CAN-SPAM)
◦ State laws
◦ Voluntary self-regulation by industries (DMA )

Slide 6-24
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 into purchases

Slide 6-25
Social Marketing and
Advertising
Involves the use of social networks to build brands and
drive revenue
Fastest growing type of online marketing
Targets the enormous audiences of social networks
Four features driving growth
Social sign-on (Facebook & twitter links to login to site)
Collaborative shopping (friends chat online about prods)
Network notification (consumers share their approval/disapproval of
prods)
Social search (recommendations advice from friends and family)

Slide 6-26
Social Marketing and
Advertising (cont.)
Blog marketing (reaching business' prospects through
the use of blogs)
◦ Educated, higher-income audience
◦ Ideal platform to start viral campaign

Game marketing
◦ Large audiences for social games (FarmVille, Words with Friends)
◦ Used for branding and driving customers to purchase at restaurants and
retail stores

Slide 6-27
Mobile Marketing and
Advertising
Major formats:
◦ Display, rich media, video
◦ Games
◦ E-mail
◦ Text messaging (SMS)
◦ In-store messaging
◦ Quick Response (QR) codes
◦ Couponing
Mobile app marketing
◦ Using App Store Optimization to create an App Store listing that draws new
users in and makes your app findable
◦ Aims to drive more revenue and engagement from the people who already use
your app

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Local Marketing
Geared to user’s geographic location
◦ Local search and purchasing

Local searches:
◦ 25% of all searches
◦ 50% of mobile searches

Most common local marketing tools

◦ Geo-targeting with Google Maps
◦ Geo-targeting refers to the practice of delivering different content
to a website user based on his or her geographic location.
◦ Hyperlocal Display ads (next slide)

Slide 6-29
Hyperlocal Display Ads

Slide 6-30
Multi-Channel Marketing
People spend more 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

Slide 6-31
Other Online Marketing
Strategies
In addition to traditional online advertising and
marketing strategies (search engine, display, etc.),
several other strategies are more focused than
“traditional” online strategies
◦ Customer retention
◦ Pricing
◦ The “long tail”

Slide 6-32
Other Online Marketing
Strategies
The “long tail” is a graph showing popularity ranking. To the
right (yellow) is the long tail; to the left (green) are the few
that dominate. In statistics, a long tail of some distributions
of numbers is the portion of the distribution having a large
number of occurrences far from the "head" or central part of
the distribution.

Slide 6-33
Long-Tail Marketing
Internet allows for sales of obscure products with little
demand, the long tale
Long tail marketing concentrates on these less popular
products, developing a business sales model based upon
products in the “long tail.”
Substantial revenue because
◦ Near zero inventory costs
◦ Little marketing costs
◦ Search and recommendation engines

Slide 6-34
Other Online Marketing
Strategies
Customer retention strategies
◦ Personalization and one-to-one marketing
◦ Retargeting showing same ads across multiple websites
◦ Behavioral targeting (interest-based advertising)
◦ uses data from search engine queries, clickstream
history, social network, and integration of offline
personal data to target customers
◦ Privacy issues are a concern

Slide 6-35
Other Online Marketing
Strategies (cont.)
Customization: Changing the product not just the
message based on user preference
Customer co-production: Customers help create
or customize the product
Customer service
◦ FAQs
◦ Real-time customer chat systems
◦ Automated response systems

Slide 6-36
Pricing Strategies
Pricing
◦ Integral part of marketing strategy
◦ Traditionally based on:
◦ Fixed cost
◦ Variable costs
◦ Demand curve

Price discrimination
◦ Selling products to different people and groups based on
willingness to pay

Slide 6-37
Pricing Strategies (cont.)
Free and freemium
◦ Can be used to build market awareness
◦ Freemium is where you get a free basic service and the premium version is not

Versioning
◦ Creating multiple versions of product and selling essentially same product to
different market segments at different prices

Bundling
◦ Offers consumers two or more goods for one price

Dynamic pricing:
◦ Auctions
◦ Yield management (selling excess capacity)
◦ Flash marketing (flash sale)

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Internet Marketing
Technologies
Internet’s main impacts on marketing:
◦ Increase in scope of marketing communications
◦ Increase in the richness of marketing communications
◦ Expand information intensity of marketplace
◦ Always-on mobile environment expands marketing
opportunities

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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?

Slide 6-40
Tracking Files
Users tracked as they move from site to site
Four types of tracking files
◦ Cookies
◦ Small text file placed by Web site for understanding and identifying customers
◦ Allows web marketers to gather data on users
◦ Make shopping carts and quick checkout possible
◦ Flash cookies new way of tracing your movement on the Internet and
storing lots of information about you. (One disadvantage is that you
can't locate them in your browser because they are clear and not
easily seen in the list of cookies which you can access if you open the
browser cookie manager, nor do they appear in databases or other
browser-specific storage locations)

Slide 6-41
Tracking Files
◦ Web Beacons (“bugs”) uses Adobe Flash software to keep
track of users navigation through a single website or a
series of websites. They also go by the name of web bugs
and are normally used by websites that use third party
traffic monitoring and tracking services.
◦ Web beacons might be used in connection with cookies
to gain an understanding of how website's users
navigate through and process the content contained in
that website. This came about because users delete
cookies making browsing and tracking difficult

Slide 6-42
Databases
Database: Stores records and attributes
Database management system (DBMS):
◦ Software used to create, maintain, and access databases

SQL (Structured Query Language):

◦ 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

Slide 6-43
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

Slide 6-44
Customer Relationship
Management (CRM) Systems
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

Slide 6-45
A CRM System

Slide 6-46
Online Marketing Metrics:
Lexicon
Audience size or market share Conversion to customer
◦ Impressions (# of times Ad is served) ◦ Acquisition rate (visiting pgs)
◦ Click-through rate (CTR) ◦ Conversion rate
◦ View-through rate (VTR) ◦ Browse-to-buy ratio
◦ Hits ◦ View-to-cart ratio
◦ Page views ◦ Cart conversion rate
◦ Stickiness (duration) ◦ Checkout conversion rate
◦ Unique visitors ◦ Abandonment rate
◦ Loyalty ◦ Retention rate
◦ Reach ◦ Attrition rate
◦ Recency

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Online Marketing Metrics
(cont.)
Social marketing E-mail metrics
◦ Conversation ratio ◦ Open rate
◦ Applause ratio (# likes/post) ◦ Delivery rate
◦ Amplification (retweets/post) ◦ Click-through rate
◦ Sentiment ratio (ratio of positive to total (e-mail)
comments) ◦ Bounce-back rate
◦ Often times, consumers just view
the ad and do not click on the ad
but later on go to the website and
take the action – this has been
termed as Post-Impression
activities.

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An Online Consumer
Purchasing Model

Slide 6-49
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

Slide 6-50
The Costs of Online
Advertising
Pricing models
◦ Barter (exchange ad space for something of similar value)
◦ Cost per thousand (CPM)
◦ Cost per click (CPC)
◦ Cost per action (CPA)

Online revenues only

◦ Sales can be directly correlated

Both online/offline revenues

◦ Offline purchases cannot always be directly related to online campaign

In general, online marketing is more expensive on CPM

basis, but more effective

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Web Analytics
Software that analyzes and presents data on each stage of
the customer conversion process
◦ Awareness (new visitors)
◦ Engagement (page views, duration, content views)
◦ Interaction (posts, likes, comments, etc)
◦ Purchase (purchase, enter cart pg, register, abandon cart)
◦ Loyalty and post-purchase (repeat cust, service request, etc)

Helps managers
◦ Optimize ROI on Web site and marketing efforts
◦ Build detailed customer profiles
◦ Measure impact of marketing campaigns

Google Analytics, IBM Coremetrics, Adobe Analytics

Slide 6-52
Web Analytics and the Online
Purchasing Process
Figure 6.12, Page 397

Slide 6-53