08 E-Commerce Marketing and Advertising

Bachelor: E-Commerce
8. E-Commerce Marketing and Advertising

Prof. Dr. Jella Pfeiffer
BWL XII: Digitalisierung, E-Business und Operations Management
BWL XII: Digitalisierung, E-Business und Operations

Prof. Dr. Jella Pfeiffer 1
Management
JUSTUS-LIEBIG-UNIVERSITÄT GIESSEN
Learning Goals
• Describe different forms of online advertising

• Understand the process of personalization
• Discuss the efficiency and effectiveness of e-
commerce advertising and metrics of
measurement

Management
Structure of Class
AND BEYOND
STAYING New Trends in

SUCCESSFUL E-Commerce (VR, AR,
BECOMING mobile)
SUCCESSFUL How to stay safe and

secure in the e-
WHAT TO DO commerce
How to implement and
measure an e-commerce environment?
HOW DOES IT What is offered in business‘ success? Security and Payment
e-commerce? Implementation and User System
WORK Products and Services Evaluation
in Electronic
How does it Commerce How do customers
technically work? behave and what do we
Technologies, How do e-commerce learn from their reviews?
Standards and companies create Customers in E-
Architecture value? Commerce
E-Commerce Business
Models How to get the
customer‘s attention?
E-Commerce Marketing
and Advertising
© Katemangostar/Freepik
Management
Agenda
Forms of online advertising
• 2 Personalization
• 3 Measuring online advertising success
4
Worldwide digital ad spending

Digital Ad Spending Worldwide
800 67.8% 70%
65.9%
700 63.6% 65%
645.8
Percentage of Total Media Ad Spending

Total Digital Ad Spending (in billion $) 60.9%
585.96
600 58.2% 60%
524.31
500 455.3 55%
51.0%
400 378.16 50%
335.6
300 45%
200 40%
100 35%
0 30%
2019 2020 2021* 2022* 2023* 2024*
Total digital ad spending Percentage of total media ad spending

Based on https://www.emarketer.com/content/worldwide-digital-ad-spending-2021 last accessed: 10.2021
Management
Online advertising
• Two main purposes of advertising
• Sales: promotional sales communications
• Branding: branding communications
• Online advertising - advantages
• Internet is where audience is moving
• Ad targeting
• Greater opportunities for interactivity
• Online advertising - disadvantages
• Cost vs. benefit
• How to adequately measure results
• Supply of good venues to display ads
Laudon and Traver (2019) pp. 392 - 457

Management
Traditional online marketing and advertising tools

• Search engine marketing and advertising
• Display ad marketing
• E-mail marketing
• Affiliate marketing
• Viral marketing
• …

Management
Online advertising spending in the USA (in

billions)
Online advertising spending in the USA for selected formats (in bn. USD)
Laudon and Traver (2019) p. 396

Management
Classification of Search Engine Marketing
Organic or Natural search

Paid search results
results

Management
Classification of Search Engine Marketing (cont.)
Network
Keyword
Advertising
Network Keyword
Advertising

Management
Classification of Search Engine Marketing (cont.)
SEM
SEO SEA
Paid Inclusion Pay-per-click
Natural Links Keyword Network

Advertising Keyword
Advertising SEM: Search Engine Marketing
Website
SEO: Search Engine Optimization
SEA: Search Engine Advertising
Management
Search Engine Marketing and Advertising

• Search Engine Marketing: Use of search engines for branding purposes
• Search Engine Optimization: techniques to improve the organic ranking of
web pages generated by search engine algorithms
• Search Engine Advertising: Use of search engines to support direct sales
• Search engine issues/problems:

• Click fraud
• Link farms
• Content farms

Management
Search Engine Advertising

• The over the years steady
click-through rate is 1%–
4%
• Out of 16 industries,
• the dating industry has
the highest click-through
rate,
• whereas legal industry –
the lowest
Smart insights. Retrieved on 04.06.2018 from:

http://www.smartinsights.com/search-engine-
marketing/search-engine-statistics/
Management
Action Time

Management
Display ad marketing
• Banner ads
• Rich media ads
• Interstitial ads
• Video ads
• Far more effective than
other display formats
• Sponsorships
• Native advertising

Management
Display ad marketing: Advertising Networks

How an advertising network works

Management
Display ad marketing
• Ad exchanges, programmatic advertising, and real-time bidding
(RTB)
• Display advertising issues/problems

• Ad fraud
• Viewability
• Ad blocking

Management
Other types of traditional online marketing

• E-Mail marketing:
Messages sent directly to interested
users (inexpensive, average click-
through rate: ~3%-4%)
• Affiliate marketing:
Commission fee paid to other websites
for sending customers to their website
(e.g. Amazon)
• Viral marketing:
Marketing designed to inspire
customers to pass message to others

Management
Social, mobile, and local marketing advertising

• Social marketing and advertising:
• Use of online social networks (e.g. Facebook) and communities (e.g., blog
-, or game advertising)
• Mobile marketing and advertising:
• Use of mobile platform
• Influence of mobile apps
• Local marketing:
• Geotargeting
• Coupons

Management
Mapping of Marketing Activities to the Decision

Process

Management
Agenda
22
Cookies
Cookie: Small text file that websites place on the hard disk of client computers that allows
D
to store data about the visitor on the computer and later retrieve it Laudon and Traver (2019), p. 430.
Example from amazon
First and third-party cookies
Example from ryanair

Management
Web beacons
• also called bug or pixel tag
• Tiny (1-pixel) graphic files embedded in e-mails or on webpages
Source: https://www.semanticscholar.org/paper/Privacy-Effects-of-Web-Bugs-Amplified-by-Web-2.0-
Dobias/ec05a0fad3fe24407a3c1b9ad0415c70dcb21ba1

Management
Personalization
• Classic webpage optimization without personalization:
Static page
How can we find a more effective

layout for our webstore?
Adtelligence (2015)
Management
Personalization
• Classic webpage optimization without personalization:
AB / Multivariate Testing
Adtelligence (2015)
Management
Personalization
• What types of data can be used?
Google
Cookie data Facebook
Customer Device Location CRM Data

parameters
Displayed ads Time E-Mail Newsletter BI Data
Affiliate links Shop data Weather ERP
Complexity and effort
Adtelligence (2015)
Management
Personalization
• Personalization: one individual page for everyone
Adtelligence (2015)
Management
Example: ADTELLIGENCE
• Case: Personalization at Adtelligence
• General data
• Target Group data
• Marketing channel data
• Multiple layouts
• Different content variants
• Automated AB and MVT testing
• Machine learning and optimization
1. Big data collection 2. In-memory data matching 3. Individualized, real-time customer experience
Adtelligence (2015)
Management
Example: ADTELLIGENCE
• Case: Personalization at Adtelligence
Adtelligence (2015)
Management
Action Time

Management
Agenda
33
The costs of traditional advertising

The costs of traditional advertising
Local $1,500–$15,000 for a 30-second commercial; $45,000 for a highly rated show
television
Network television $80,000–$600,000 for a 30-second spot during prime time (average ~$134,000)
Radio $100–$1,000 for a 60-second spot (depending on time of day and program rating)
Newspaper $120 per 1,000 circulation for a full-page ad

Magazine $50 per 1,000 circulation for an ad in a regional edition of a national magazine, versus $120 per 1,000
for a local magazine
Direct mail $15–$20 per 1,000 delivered for coupon mailings; $25–$40 per 1,000 for simple newspaper inserts
Billboard $1,500–$30,000 for large billboards for a 4-week period (min. 5–20 billboards)

Management
The costs of online advertising

Banner ads $1–$5 per 1,000 impressions, depending on how targeted the ad is (the more targeted, the higher
the price)
Video and rich media $20–$25 per 1,000 ads, depending on the website’s demographics
E-mail $5–$15 per 1,000 targeted e-mail addresses
Sponsorships $30–$75 per 1,000 viewers, depending on the exclusivity of the sponsorship (the more exclusive,
the higher the price)
Mobile display ads $1.50–$3.25 per 1,000 impressions, including media costs, charges for first- or third-party data
and service fees
Social network ads $0.50–$3.00 per 1,000 impressions, with news feed ads at the high end of the range

Management
A few important terms
Metric Explanation
Impressions Number of times an ad is served
Click-through rate Percentage of times an ad is clicked
Buyer Conversion rate Percentage of visitors who become customers
Open rate (e-mail) Percentage of recipients who open the e-mail
Delivery rate (e-mail) Percentage of recipients who receive the e-mail
Bounce-back rate (e-mail) Percentage of e-mails that could not be delivered
See lecture: Implementation and User Evaluation

Management

• Measuring issues:
Correlating online marketing to
online or offline sales

https://www.bloomberg.com/news/articles/2018-
08-30/google-and-mastercard-cut-a-secret-ad-deal-
BWL XII: Digitalisierung, E-Business und Operations to-track-retail-sales
Management
How well does online advertising work?

• Highest click-through rates
• Search engine ads
• Permission e-mail campaigns
• Most powerful marketing
campaigns use multiple
channels, including:
Online, catalog, TV, radio,
newspapers, stores
• Use return on investment
to evaluate campaign

Management
Action Time

Management
Marketing analytics – Example: Real-time

campaign tracking
• Unsubscribes/opt-outs: analyze the reasons!

• Forwards: Forwards can be tracked more effectively if
you incorporate a “send to a friend” button Benchmark. Retrieved on 09.06.20 from:
https://www.benchmarkemail.com/email-marketing/.
Retrieved on 18.09.17. from:
https://digitalmarketinginstitute.com/blog/understand-
effectiveness-guide-content-marketing-metrics

Management
Marketing analytics and the online purchasing

process
• Conversion of
visitors into
customers is a long-
term process that
may take several
months!
• Throughout this
process potential
consumers go
through several
stages.
Laudon and Traver (2019) pp. 443

Management
Summary
E-Commerce Marketing and Advertising
 Online advertising aims – just like traditional marketing
– at increasing sales and strengthening brands
 However, it allows for new types of interactions and
interactivity
 Different types of data allow personalization of
advertising and web experiences
 Success of E-Commerce advertising is difficult to assess
– requiring different metrics and assisting tools
Outlook:
 Security and Payment System

Management
Readings and Literature
Readings
• Laudon, K. C., and Traver, C.G. 2019. E-commerce 2019: business. technology. society (15th global ed.). Pearson, pp.
395 - 412, pp. 440 - 447

Management
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Management

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Bachelor: E-Commerce

8. E-Commerce Marketing and Advertising

BWL XII: Digitalisierung, E-Business und Operations

• Describe different forms of online advertising

BWL XII: Digitalisierung, E-Business und Operations

STAYING New Trends in

SUCCESSFUL How to stay safe and

• 3 Measuring online advertising success

Worldwide digital ad spending

Percentage of Total Media Ad Spending

Total digital ad spending Percentage of total media ad spending

Laudon and Traver (2019) pp. 392 - 457

Traditional online marketing and advertising tools

Laudon and Traver (2019) pp. 392 - 457

BWL XII: Digitalisierung, E-Business und Operations

Online advertising spending in the USA (in

Laudon and Traver (2019) p. 396

Classification of Search Engine Marketing

Organic or Natural search

BWL XII: Digitalisierung, E-Business und Operations

Classification of Search Engine Marketing (cont.)

BWL XII: Digitalisierung, E-Business und Operations

Classification of Search Engine Marketing (cont.)

Paid Inclusion Pay-per-click

Natural Links Keyword Network

Search Engine Marketing and Advertising

• Search engine issues/problems:

BWL XII: Digitalisierung, E-Business und Operations

Search Engine Advertising

Smart insights. Retrieved on 04.06.2018 from:

BWL XII: Digitalisierung, E-Business und Operations

Laudon and Traver (2019) pp. 392 - 457

BWL XII: Digitalisierung, E-Business und Operations

Display ad marketing: Advertising Networks

Laudon and Traver (2019) p. 405

BWL XII: Digitalisierung, E-Business und Operations

• Display advertising issues/problems

Laudon and Traver (2019) pp. 392 - 457

BWL XII: Digitalisierung, E-Business und Operations

Other types of traditional online marketing

Laudon and Traver (2019) pp. 392 - 457

BWL XII: Digitalisierung, E-Business und Operations

Social, mobile, and local marketing advertising

Laudon and Traver (2019) pp. 392 - 457

BWL XII: Digitalisierung, E-Business und Operations

Mapping of Marketing Activities to the Decision

Laudon and Traver (2019) p. 387

BWL XII: Digitalisierung, E-Business und Operations

• 3 Measuring online advertising success

Example from amazon

First and third-party cookies

Example from ryanair

BWL XII: Digitalisierung, E-Business und Operations

How can we find a more effective

Cookie data Facebook

Customer Device Location CRM Data

Displayed ads Time E-Mail Newsletter BI Data

Affiliate links Shop data Weather ERP

Complexity and effort

BWL XII: Digitalisierung, E-Business und Operations

• 3 Measuring online advertising success

The costs of traditional advertising

Newspaper $120 per 1,000 circulation for a full-page ad

Laudon and Traver (2019) p. 447