MODULE 5 E-COMMERCE MARKETING AND

A MODEL OF ONLINE CONSUMER BEHAVIOR

ADVERTISING

A GENERAL MODEL OF CONSUMER BEHAVIOR

INTERNET TRAFFIC PATTERNS: THE ONLINE
CONSUMER PROFILE
•Know the customer
• Who is online?
• Who shops online?
• Why?
• What do they buy online?
• What time?

INTERNET TRAFFIC PATTERNS: THE ONLINE

CONSUMER PROFILE
• Around 3.8 billion or 85% U.S. households have broadband
Internet access in 2019
•Intensity and scope of use both increasing THE ONLINE PURCHASING DECISION (CONT.)
• Some demographic groups have much higher percentages of
online usage than others
•Income, education, age, ethnic dimensions
THE CONSUMER DECISION PROCESS AND
INTERNET TRAFFIC PATTERNS: THE ONLINE SUPPORTING COMMUNICATIONS
CONSUMER PROFILE – (CONT)
• Type of Connection: Broadband and Mobile Impacts

• 50% of Hispanic and African-American homes have

broadband
• 40% of households with less than $20k in annual income have
broadband
• Community Effects: Social Contagion in Social Networks
-Role of social emulation in consumption decisions SHOPPERS: BROWSERS AND BUYERS
- “Connectedness” • Shoppers: 89% of Internet users
- Top 10–15% are more independent • 73% buyers
- Middle 50% share more purchase patterns of friends • 16% browsers (purchase offline)
- Recommender systems • One-third of offline retail purchases influenced by online
THE ONLINE PURCHASING DECISION activities
CONSUMER BEHAVIOR • Five stages in consumer decision process • Online traffic also influenced by offline brands and shopping
- Study of consumer behavior (https://www.youtube.com/watch?v=pNPDABjxcvo) • E-commerce and traditional commerce are coupled: Part of a
- Attempts to explain what consumers purchase and where, (1)Awareness of need continuum of consuming behavior
when, how much, and why they buy (2)Search for more information
(3)Evaluation of alternatives WHAT CONSUMERS SHOP FOR AND
• Consumer behavior models (4) Actual purchase decision BUY ONLINE
- Attempt to predict or explain wide range of consumer (5) Post-purchase contact with firm •Big ticket items ($1000 or more)
decisions • Travel, computer hardware, electronics
- Based on background demographic factors and other THE ONLINE PURCHASING DECISION (CONT.) • Consumers now more confident in purchasing costlier items
intervening, more immediate • Decision process similar for online and offline behavior •Small ticket items ($100 or less)
Variables • General online behavior model • Apparel, books, office supplies, software, and so on
• Consumer skills (level of using the computer) •Types of purchases depend on level of experience with the
• Product characteristics (style, design, materials) Web
• Profiles of Online Consumers • Attitudes toward online purchasing (positive/negative)
- Consumers shop online primarily for convenience • Perceptions about control over Web environment (how much HOW CONSUMERS SHOP
- (https://www.youtube.com/watch?v=eV0pmIinPmg) control a person
believe he/she has) •How shoppers find online vendors
• Web site features: latency, usability, security • Search engines (Google, Yahoo)
• Marketplaces (Amazon, eBay)
• Clickstream behavior - set of clicks performed by a user • Specific retail site (Walmart, Sunnies Studios, Shein)
 •Some of Internet users don’t shop online ESTABLISHING THE CUSTOMER RELATIONSHIP
• Trust factor • Web site functions to: SEARCH ENGINE MARKETING AND
• Hassle factors (shipping costs, returns, etc.) • Establish brand identity and customer expectations ADVERTISING
• Differentiating product
TRUST, UTILITY, AND OPPORTUNISM • Inform and educate customer
IN ONLINE MARKETS • Shape customer experience
•Two most important factors shaping decision to purchase • Anchor the brand online
online: • Central point for all marketing messages
(1)Utility:
• Better prices, convenience, speed ONLINE ADVERTISING
(2)Trust: • Online advertising
• Most important factors: Perception of credibility, ease of use, - Display, search, mobile messaging, sponsorships, classifieds,
perceived risk lead generation, e-mail
• Sellers can develop trust by building strong reputations for - Fastest growing form of advertising
honesty, fairness, delivery of quality products • Advantages:
• 18–34 audience is online
DIGITAL COMMERCE MARKETING AND • Ad targeting
ADVERTISING: STRATEGIES AND TOOLS • Price discrimination
•The most effective Internet marketing has all four • Personalization SEARCH ENGINE MARKETING (CONT.)
features: • Search engine optimization (SEO)
•Internet marketing (vs. traditional) TRADITIONAL ONLINE MARKETING • Social search
• More personalized AND ADVERTISING TOOLS • Utilizes social graph (friend’s recommendations, past Web
• More participatory • Ad targeting visits, Facebook Likes, Google +1’s) to provide fewer and more
• More peer-to-peer • Search engine marketing and advertising relevant results
• More communal • Display ad marketing • Search engine issues
• E-mail marketing • Paid inclusion and placement practices
MULTI-CHANNEL MARKETING PLAN • Affiliate marketing • Link farms
1. Web site • Viral marketing • Content farms
2. Traditional online marketing • Lead generation marketing • Click fraud
• Search engine, display, e-mail, affiliate • Social, mobile, and local marketing and advertising
3. Social marketing
• Social networks, blogs, video, game TRADITIONAL ONLINE MARKETING
4. Mobile marketing AND ADVERTISING TOOLS
• Mobile/tablet sites, apps • Ad targeting
5. Offline marketing • the sending of market messages to specific subgroups in the
• Television, radio, newspapers population
• foundation of price discrimination

SEARCH ENGINE MARKETING AND

ADVERTISING
• Search engine marketing (SEM)
- Use of search engines for branding
• Search engine advertising
- Use of search engines to support direct sales
- Brands pay for ads to appear as search results on search
engine results pages
• Types of search engine advertising
• Organic search
• Sponsored links (keyword paid inclusion)
• Pay-per-click
• Keyword advertising
• Network keyword advertising (context advertising)
 -a software that can eliminate display ads, pre-roll video ads,
reinforces its brand in a positive yet not overtly retargeted ads,
commercial manner. and some types of native ads on desktops and laptops, has
•Native advertising been growing
• advertising that looks similar to editorial content
•It is controversial E-MAIL MARKETING
•Content marketing • Direct e-mail marketing
• creates a content campaign or a brand and then • Messages sent directly to interested users
attempts to secure placement on a variety of websites • Benefits include
•Advertising networks • Inexpensive
• Appears to help firms take advantage of the powerful • Average more than 7% click-throughs for in-house lists
marketing potential of the Internet, and to make the entire • Measuring and tracking responses
process of buying and selling online ads more efficient and • Personalization of messages and offers
transparent. • Three main challenges
• Sell advertising and marketing opportunities (slots) to • Spam
companies who wish to buy exposure to an online audience • Anti-spam software
(advertisers). • Poorly targeted purchased e-mail lists
• Ex. Yahoo by Gemini, Google Display Network
• Advertising exchanges, programmatic advertising and real- SPAM
time •Unsolicited commercial e-mail
bidding •65–70% of all e-mail
• Ad exchanges - auction-based digital marketplace where ad •Most originates from bot networks
networks sell ad space to marketers •Efforts to control spam have largely failed:
• Programmatic advertising- automated, auction-based • Government regulation (CAN-SPAM)
method • State laws
for matching demand and supply for online display ads • Voluntary self-regulation by industries (DMA )
• Real-time bidding (RTB) - process used to match advertiser
demand for display ads with publisher supply of web page OTHER TYPES OF TRADITIONAL ONLINE MARKETING
space • Affiliate marketing
- Commission fee paid to other Web sites for sending
HOW AN ADVERTISING NETWORK customers to their Web site
SUCH AS DOUBLECLICK WORKS •Viral marketing
- Marketing designed to inspire customers to pass message
to others
•Lead generation marketing
DISPLAY AD MARKETING
- Services and tools for collecting, managing, and
•Banner ads
converting leads
•Rich media ads
•Video ads
SOCIAL MARKETING AND ADVERTISING
•Sponsorships
•Fastest growing type of online marketing
•Advertising networks
•Targets the enormous audiences of social networks
•Advertising exchanges and real-time bidding
•Four features driving growth
(1) Social sign-on
DISPLAY AD MARKETING
(2)Collaborative shopping
•Banner ads
(3) Network notification
-A banner ad displays a promotional message in a
(4) Social search (recommendation)
rectangular box at the top or bottom of a computer
screen.
SOCIAL MARKETING AND ADVERTISING
•Rich media ads
(CONT.)
-Rich media ads are ads that employ animation,
•Blog marketing
sound, and interactivity, using Flash, HTML5, Java, DISPLAY ADVERTISING ISSUES • Educated, higher-income audience
and JavaScript. • Ad fraud • Ideal platform to start viral campaign
•Video ads - Falsifying web or mobile traffic in order to charge advertisers • Game marketing
-are TV-like advertisements that appear as in-page video for impressions, clicks, or other actions that never actually • Large audiences for social games (FarmVille, Words with
commercials or before, during, or after a variety of occurred Friends)
content. • Viewability • Used for branding and driving customers to purchase
• Sponsorships - online ad impressions served are not actually viewed or even moments at restaurants and retail stores
- a paid effort to tie an advertiser’s name to particular viewable
information, an event, or a venue in a way that • Ad Blocking
MOBILE MARKETING AND ADVERTISING • Bundling data in a single location for offline analysis by marketers
• 75% of online marketing, growing rapidly - Offers consumers two or more goods for one price and site managers
• Major formats: • Dynamic pricing: • Data mining
• Display, rich media, video • Auctions • a set of analytical techniques that look for patterns in the data
• Games • Yield management of a database or data warehouse, or seek to model the
• E-mail • Flash marketing behavior of customers
• Text messaging (SMS) • Customer profile
• In-store messaging LONG-TAIL MARKETING • a description of the typical behavior of a customer or a group
• Quick Response (QR) codes •Internet allows for sales of obscure products of customers at a website
• Couponing with little demand • Big data
• App marketing •Substantial revenue because • huge data sets, often from different sources, in the petabyte
•Near zero inventory costs and exabyte range
OTHER ONLINE MARKETING STRATEGIES •Little marketing costs
•Average individual spends more than 40% of media •Search and recommendation engines CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
time on digital media channels SYSTEMS
•Consumers also multitask, using several media INTERNET MARKETING TECHNOLOGIES • Create customer profiles:
•Internet campaigns strengthened by using other •Internet’s main impacts on marketing: • Product and usage summary data
channels •Scope of marketing communications broadened • Demographic and psychographic data
• Most effective are campaigns using consistent imagery •Richness of marketing communications increased • Profitability measures
throughout channels •Information intensity of marketplace expanded • Contact history
•Always-on mobile environment expands • Marketing and sales information
OTHER ONLINE MARKETING marketing opportunities • Customer data used to:
STRATEGIES • Develop and sell additional products
WEB TRANSACTION LOGS • Identify profitable customers
•Customization: changing the product, not just the marketing • Optimize service delivery, and so on
message, according to user preferences •Built into Web server software
•Information goods ideal for differentiation •Record user activity at Web site A CUSTOMER RELATIONSHIP
• https://www.nike.com/ph/nike-by-you •Provides much marketing data, especially combined MANAGEMENT SYSTEM
• Customer co-production - in the online environment, takes with:
customization one step further by allowing the customer to • Registration forms
interactively create the product • Shopping cart database
•Answers questions such as:
OTHER ONLINE MARKETING STRATEGIES • What are major patterns of interest and purchase?
•Customer service • After home page, where do users go first? Second?
•FAQs (Frequently asked questions) WEB TRANSACTION LOGS
•Real-time customer chat systems
•Automated response systems TRACKING FILES
•Users browsing tracked as they move from site to
PRICING STRATEGIES site
• Pricing •Four types of tracking files
- Integral part of marketing strategy (1) Cookies
• Traditionally based on: - Small text file placed by Web site
• Fixed cost - Allows Web marketers to gather data
• Variable costs (2) Flash cookies
• Law of One Price (3) Beacons (“bugs”)
• Demand curve (4)Apps
• Price discrimination
-Selling products to different people and groups based on DATABASES, DATA WAREHOUSES, DATA
willingness to pay MINING, AND BIG DATA

PRICING STRATEGIES (CONT.) •Profiling

• Free and freemium
-Can be used to build market awareness
• Versioning
- Creating multiple versions of product and selling essentially
same product to different market segments at different prices
- profiling uses a variety of tools to create a digital image for
each consumer
• Database
- a software application that stores records and attributes
• Data warehouse
- database that collects a firm’s transactional and customer
MARKETING METRICS LEXICON including online, catalog, TV, radio, newspapers, stores

THE COSTS OF ONLINE ADVERTISING

• Pricing models
• Barter
• 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

DIFFERENT PRICING MODELS FOR

ONLINE ADVERTISEMENTS

AN ONLINE CONSUMER PURCHASING

MODEL

HOW WELL DOES ONLINE

ADVERTISING WORK?
• Use ROI to measure ad campaign
• Highest click-through rates: Search engine ads, permission
email campaigns
• Rich media, video interaction rates high
• Online channels compare favorably with traditional
• Most powerful marketing campaigns use multiple channels,