Electronic Commerce

eCommerce Marketing Issues

MIS 6453 – Spring 2006

Instructor: John Seydel, Ph.D.

Student Objectives

Summarize the importance of identifying relevant market segmentsDiscuss how the stages of customer loyalty apply to ecommerceApply the 7 Cs to customer interface developmentDescribe web-based advertising conceptsDiscuss why an understanding of search engine concepts is important in ecommerce

Overview of Marketing Strategy

Strategies address the marketing mix (4 Ps), but mostly the big PGeneral options

Product-based (e.g., Home Depot) Customer-centered (pioneered on B2B sites;

universities)Trust-building is a key (on or off the Web)

The Web is an intermediate step between mass media (low trust) and personal contact (high trust)

Using the Web, firms can capture some of the benefits of personal contact yet avoid the high costs inherent with that approach

Various market segments thererfore need to be identified and targeted differently; first step in building customer-centered website

Segmentation SummaryTraditional perspective

Geographic Demographic Psychographic (personality, lifestyle, social class)

Occasion perspective (e.g., workday, vacations, holidays)Behavioral perspective

Traditional (browser, buyer, shopper) Web usage (simplifier, surfer, bargainer, connector, routiner,

sportster)Life cycle (relationship intensity varies)

Aware Explorer Familiar Committed Separated

Why does it matter?Unlike with traditional commerce, we can build multi-segment, multi-feature sites in the virtual worldWe can further customize the experience for individual usersThis is a customer interface issue

The 7 Cs of the Customer Interface

Context

Site’s layout and design

Commerce

Site’s capability to enable commercial transactions

Connection

Degree site is linked to other sites

Communication

The ways sites enable site-to-user communication or two-

way communication

Customization

Site’s ability to self-tailor to different users or to allow

personalization

Community

The ways sites enable user-to-user communication

Content

Text, pictures, sound and video that webpages contain

Fit and Reinforcement of the 7Cs

ContextContext ContentContent CommunityCommunity CustomizationCustomization CommunicationCommunication ConnectionConnection CommerceCommerce

Business ModelBusiness Model

ReinforcementIs each of the 7Cs consistent with the others?

Supporting FitDo each of the 7Cs individually support the business model?

The success of a business depends on the extent that all of the Cs work together to support the value proposition and business model:

The 7 Cs – Design Context

Aesthetics (Form)

Integrated

Aesthetically Dominant

HighLow

High

Low

Function

Functionally Dominant

Frontier is gradually

moving outward as technology

advances

The age old argument of form vs. function is being changed by the Web:

Aesthetic Example — KMGI.comHigh form, low function: The KMGI approach used to make heavy use of visual elements, but lacked performance capability.

Now, KMGI has integrated more functionality into its site, while still maintaining some of the strong visual elements.

BEFORE AFTER

Functional Example — Brint.comLow form, high function: Brint.com assumes its users have little need for visual elements or themes and instead seek ease of use and plentiful information:

Notice the plethora of

links

The site is also text-

laden

The 7 Cs – ContentContent refers to all digital information included on the site. There are four key dimensions to content, each carrying choices about how to convey the site’s content::

Dimension

Choices

Offering Mix Appeal MixMultimedia

MixContent Type

Products

Services

Information

Cognitivefunctional, low price,

availability,etc.

Emotionalhumor,warmth,stories,

etc.

Text

Audio

Video

Image

Graphics

Current

Reference

The 7 Cs – Community

BazaarBazaar

Theme ParkTheme Park

ClubClub

ShrineShrine

TheatreTheatre

CafeCafe

Apparent archetypes:

Wander thru vast array of interest areas; no interaction

Finite group of interest areas

Focused on particular interest area; high member interaction

High focus with minimal member interaction

Particular focus with moderate member interaction

Focus on common interest area with considerable interaction

Focus versus Interactivity

Games.yahoo.comContactConsortium.co

m

VoxCap.com Bolt.com

LeonardoDiCaprio.comIfilm.com

Women’s Cancer Conn.

Trace.com

A number of hybrid communities can be form by combining interactivity and focus in unique ways:

Bazaar

Focu

s

ThemePark

Club

Shrine Theater Cafe

Interactivity

Broad

Narrow

Limited Extensive

Non-e

quili

bri

um

sta

te:

Succ

ess

fully

managed c

om

munit

ies

will

m

ove

tow

ard

hig

her

levels

of

inte

ract

ion

The 7 Cs – Customization

PERSONALIZATIONLog-in Registration

The site recognizes return users and configures itself accordingly

Cookies Temporary files that track and

gather data about user’s behavior

Personalized E-Mail Accounts Provided free-of-charge to site

users

Content/Layout Configuration Users select layout and content

based on their interests

Storage Sites provide virtual hard-disk

storage

Agents Programs designed to perform

simple tasks

TAILORINGBased on Past User

Behavior Many sites adjust themselves

dynamically based on a user’s past behavior and preferences

Based on Behavior of OtherUsers With Similar

Preferences Some sites make

recommendations to the user based on preferences of other users with similar profiles

The 7 Cs – Communication

Taking advantage of the Internet Far cheaper than any other medium Operates 24/7/365 Know which customers have read a message

and when Enables customers to find out information for

themselves Can build a bond with customers – interactive,

addictive Can communicate across borders and

languages

Not as easy with traditional commerce

Communication ModesBROADCAST

Mass Mailings Broadcast transmissions of large

volumes of e-mail targeted at large audiences

FAQs Answers to frequent questions

E-Mail Newsletters Inform site subscribers of site

changes, special offers, etc.

Content-Update Reminders eMail reflecting user interest in a

particular content area

Broadcast Events Events can be broadcast from a

website (webcast) that allows limited user control over such things as camera angle

INTERACTIVEE-Commerce Dialogue

Organizations and users trade email regarding order placement, tracking and fulfillment

Customer Service Organizations can provide

customer service through trading email or live online dialogue

User Input User-generated content such as

supplier ratings and user feedback to the site

Some Communications Options

1:M non-responding (RFID.com)1:M responding (BizRate.com)1:M live interaction (webinars)1:1 non-responding (Hallmark.com)1:1 responding (Amazon.com)1:1 live interaction (chat, e.g., tech support)

The 7 Cs -- Connection

DestinationDestination

HubHub

PortalPortal

AffiliateAffiliate

Meta-SoftwareMeta-Software

Outsourced ContentOutsourced Content

PATHWAY-OUT

Links lead the user outside the environment of the site; links are absolute in that the user’s click causes an exit from the original website.

PATHWAY-IN

Links are hybrid; the user’s click causes the retrieval of material from the same or

other sites without exiting the current website.

Linking to Other Sites

Links leading out (not necessarily off-site) Destination: provides site- generated content with

few links to other sites (e.g., NYTimes.com) Hub: provides combination of site-generated content

and selective external links (e.g., IndustryCentral.net) Portal: exclusively provides links to other sites (e.g.,

Yahoo.com)

Bringing information in Affiliates: direct users to affiliated websites (e.g.,

Amazon and Toys-R-Us) Outsourced content: content generated by third

parties (e.g., Real.com) Meta-software: utility and plug-in software for

narrowly-defined tasks (e.g., CNet’s Download.com)

The 7 Cs – CommerceTOOLS FOR ENABLING COMMERCE

Registration Allows the site to store information about users and user preferences

Shopping Cart, One-Click Shopping Facilitates online shopping by making it more user-friendly

Security, Credit-Card Approval Enables online transactions by allowing secure sharing of credit-card info

Orders Through Affiliates Sites must be able to track orders that come from and go to affiliates

Configuration Technology Users can test product compatibility, price trade-offs, product

substitutions

Order Tracking, Delivery Options Once orders are placed, users can choose how they would like their

products delivered and can track those orders from the site to their front doors.

The 7Cs of Schwab.comContext

Schwab.com is largely functional; the only graphics used are those

that display market behavior.

CommerceSchwab is essentially a broker

with a transaction-based revenue model. There are also fee

services that Schwab offers.

ConnectionSchwab.com’s content and

information is largely generated in-house; there are no links to

outside sites.

CommunicationSchwab.com provides e-mail news

alerts. User response is limited. Basically, the site is a one-to-many, non-responding site.

CustomizationSchwab.com is highly

customizable. Users can personalize the site’s content,

layout, communication and access.

CommunityThere is very little interaction

among Schwab.com users. The site focuses primarily on the

financial needs of the individual.

ContentSchwab.com is an information-

dominant site that generates all of its own material.

Managing Customer Relationships

Reconsider the customer life-cycle and how it’s managed

Acquisition costs: money a site spends to draw one visitor to the site

Conversion: Converting a first-time visitor into a customer Conversion cost – cost of inducing one visitor to make a

purchase, sign up for a subscription, register, etc. Retained customers: customers who return to the site

one or more times after making their first purchases

It’s important, therefore, to build and maintain good relationshipsThis is CRM

Adding Value: Supporting the Customer Decision ProcessAny online offering must map the products and services onto the customer decision process:

Customer Decision Process

Needs Recognition

Search for Ideas and Offerings

Purchase

Decision

Post-Sale Support and

Perks

Evaluation of Alternatives

What occasions trigger the need for my product? What tactics can be used to stimulate demand?

What information would the consumer need to make a selection?

What are the key evaluation criteria that the consumer will use to evaluate my product/service? What information should the website offer to make the consumer comfortable with his or her choice?

What functionality should the site present to communicate privacy, trust and security?

What post-sale services can the website offer to create loyalty?

Advertising on the WebWhy?

Stimulate demand for products/services Link to/from affiliate sites

Banner ad: small rectangular object on a Web page Interactive marketing unit (IMU)

Specifies ad formats Standard banner sizes that most Web sites have

voluntarily agreed to useBanner exchange network: coordinates ad sharing Banner advertising network: acts as a broker between advertisers and Web sites that carry adsNote

Online advertising - is more tractable than offline advertising

Offline advertising – traditional TV, radio, billboard and magazine can be tagged with .com

A Challenge: Measuring Ad Effectiveness

Some things to measure Cost per thousand (CPM): pricing metric

used when a company purchases mass media advertising

Trial visit: first time a visitor loads a Web site page

Page view: each page loaded by a visitor Impression: each time the banner ad loads

Where do we get the data?

Some tools Server logs Analysis software

Other Ad Formats

Popup windows Or pop-under Use sparingly Popup blockers can thwart

Interstitial ads: when a user clicks a link to load a page, the interstitial ad opens in its own browser window

It’s All About Driving Traffic to a Website

eCommerceWebsite

E-mail

Domain NameSearch Engines

PublicRelations

PromotionsAdvertisements

External Links

No spamming!Opt-in/opt-out

Best publicity is free!

Contests, free samples, . . .

Via reciprocityAffiliates

Search EnginesWebsites that help people find things on the Web

Search engines Web directories (hierarchical listing by category)

Three components: Spider, crawler, &/or robot: programs that automatically

search the Web Index or database: storage element of a search engine Search utility: uses terms provided to find web pages that

matchSite ranking: weighting factors are used by search engines to decide where URLs appear on search result listsPositioning and optimization: combined art and science of having a particular URL listed near the top of search engine results

Paid Search Engine Inclusion and Placement

Paid placement (aka sponsorship) Option of purchasing a high listing on results

pages for a particular set of search terms Rates vary Constitutes around 40% of Internet advertising

(compare to banner ads at 20%) Try: Google search for “snow skis”

Search engine placement brokers Companies that aggregate inclusion and

placement rights on multiple search engines Example: LookSmart (search “Sports” for skis)

<html><head>

<meta name = “keywords” content = “coke, coca-cola, the real thing,

soft drinks, pop, mixers, cola”/><title>Coca-Cola Homepage</title>

</head><body>

<h1 align = “center”>Welcome to the Coca-Cola Homepage! </h1>

  . . .

How Search Engines Search

Summary of Objectives

Summarize the importance of identifying relevant market segmentsDiscuss how the stages of customer loyalty apply to ecommerceApply the 7 Cs to customer interface developmentDescribe web-based advertising conceptsDiscuss why an understanding of search engine concepts is important in ecommerce

Now, Some More Work with Web Pages

We’ll continue with the example we started a while backLet’s do a little (very little) reviewing firstThen we’ll add a few featuresIf time permits, this exercise will be the start of a real website

Review: Standard XHTML Document

<html><head>

<title> . . . title goes here . . . </title>. . . scripts, style rules, meta elements,

etc. . . . </head><body>

. . . this is where content and markup goes . . . </body>

</html>

An Overview of XHTML Elements

A web document is a collection of XHTML elementsNote that XHTML is essentially HTML

XML compliant Reformulation of HTML, but with stricter rules

Two types of elements Standard Empty

Each element Has

Opening tag and closing tag is standard Self closing tag if otherwise

May have attributes specified

Also: XHTML entities (like &nbsp;)

XML Syntax for Standard Elements

Either<tag attr1=“xxx” attr2=“yyy” attr3=“zzz” . . . >

. . . content . . . </tag>

Or<tag

attr1=“xxx” attr2=“yyy” attr3=“zzz” . . .

>. . . content . . .

</tag>Why the difference?More readable code (for us, not the computer)

Examples of Standard Elements

Paragraphs, headings, divisionsHyperlinksListsTablesFormsObjectsDisplay markup

Syntax for Empty Elements

Either<tag attr1=“xxx” attr2=“yyy”

attr3=“zzz” . . . />

Or<tag

attr1=“xxx” attr2=“yyy” attr3=“zzz” . . .

/>

Notice: no content; attributes provide full specification

Examples of Empty Elements

Images and embedded objectsForm input controls (e.g., text boxes)Breaks, horizontal rules, etc.Meta tags

Some Important XHTML Body Elements

Hyperlinks: <a>Objects:

<img /> <object>, or <embed>

Lists: <ul>, <li>Tables: <table>, <tr>, <td>Text blocks: <p>, <div>Display: <font>, <i> or <em>, <b> or <strong>, <center>Forms: <form>, <input>, <select>, <option />Style rules: <style>Miscellaneous: <br />, <hr />

Referencing Other Files

Where? Hyperlinks Images (inline or background) Objects (e.g., Flash movies) And other places also, but beyond our scope

Absolute referencing: resources on another serverRelative referencing

Preferred Need to specify relative to calling document

In same folder In higher level folder In lower level folder In sibling folder

Appendix

Trust in Three Information Dissemination Models

Five Stages of Customer Loyalty

Funnel Model of CRM

Ad Format Guidelines

45

Banner Click-Through Rates

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1.0

Apr May Jun Jul Aug Sept Oct Nov Dec Jan

Banner Click-Through Rates (Apr 2005-Jan 2006)

Source: Nielsen//NetRatings

Percent

Month

Pool of Impressions

Pool ofVisitors

Buyers

2%

5%

1,000

20

1

Cost per Impression: $15/CPM ($.015)

Cost per visitor @ 2% click-through ($.015/.02= $.75)

Cost per purchase @ 5% conversion ($.75/.05=$15.00)

Ad Cost Model

Potential Profitability of Each Potential Site Can Be Determined

Ad Site Site TypeCost per Clickthru

Visits / Month

Convrt Rate

Units Sold Sales

Revenue per visit Profitable?

Excite Search $0.30 3,986 0.48% 19 $800 $0.20 NoYahoo Directory $0.30 4,594 0.46% 21 $1,480 $0.32 No

IPF Wt. Lifting $0.50 78 12.82% 10 $450 $5.77 Yes

Affiliate Marketing StrategiesAffiliate marketing: one firm’s website includes descriptions, reviews, ratings, or other information about a product that is linked to another firm’s site Affiliate site: obtains the benefit of the selling site’s brand in exchange for the referralCause marketing: affiliate marketing program that benefits a charitable organization

URL Brokers and Registrars

URL brokers: sell or lease domain names Registrars: arrange for initial assignments of domain namesICANN Internet Corporation for Assigned Names &

Numbers Maintains a list of accredited registrars Operates InterNIC.com

Domain name parking: Permits purchaser of domain name to maintain a

simple website so that domain name remains in use

Example: DirectNIC.com