E-Commerce: Lecturer: Msc. Phan Tran Duc Lien

E-COMMERCE
Lecturer: Msc. Phan Tran Duc Lien

E-commerce
Marketing Concepts
8
Learning objectives:
1. Describe basic marketing concepts needed to understand
Internet marketing for different levels of products and
services;
2. Explain the branding concept and the rationale of branding;
3. Discuss the main technologies that support Internet marketing;
4. Examine basic e-commerce marketing and branding strategies;
5. Discuss the different techniques to establish online
customer relationship;
6. Explain how online market research is conducted.
BASIC MARKETING CONCEPTS IN INTERNET MARKETING
▸ Basic marketing’s concepts:
▹ Addresses the competitive situation of industries and firms.
▹ Seeks to create unique, highly differentiated products or services that produced or supplied by one trusted
firm or “little monopolies”: sole sources of supply to consumers.
▹ Designed to avoid mediocrity and competition: competition is limited and consumers are willing to pay
premium prices for products that unique;
▹ Use marketing to prevent products and services from becoming commodities.
1. Feature Sets
▸ Feature set: a bundle of capabilities and services offered by the product or service
▸ Task of marketing: identify and communicate to the customer the unique, differentiated capabilities and services
of a product or service’s feature set.
▸ Three levels of a product or service:
▹ The core product: center of the feature set. The core benefit the customer receives from the product.
▹ Ex: Washing Machine Electrolux (enduring/ lasting)
▹ The actual product: the set of characteristics designed to deliver the product’s core benefits.
▹ Ex: Electrolux – durability and ease of use
▹ The augmented product: product with additional benefits to customers beyond the core benefits embodied in
the actual product.
▹ Ex: Electrolux – product life warranty.
2. Products, Brands and the Branding Process
▸ The product’s brand: makes a product unique and different to the consumer.
▸ Brand: expectations when consuming or thinking about consuming a product or service from a specific company.
▸ Expectations based on criteria:

▹ Past experiences of whom actually used the product;
▹ Trusted experiences of whom have consumed the product;
▹ Promises of marketers who praise the unique features of the product in a variety of channels and media.
▸ Expectations created by brands: quality, reliability, consistency, trust, affection, loyalty and ultimately, reputation.
▹ Ex: Revelon’s founder: “In the factory we make cosmetics; in the store we sell hope”.
▸ Marketers:
▹ Identify the differentiating features of the actual and augmented products.
▹ Transmit the feature sets to the consumer via variety of marketing communication activities.
▹ Marketers’ promise develop Consumers’ experiences and expectations about a product.
▹ Ex: Iphone
▹ Devise and implement brand strategies.
▸ Strong brand requires a strong product.
▸ Closed-loop marketing:
▹ Marketers are able to directly influence the design of a core product based on market research and feedback.
▹ Happen in E- commerce not in tradition commerce.
▸ Brand strategy: plans for differentiate product from competitors and communicate differences effectively to the
marketplace.
▸ Brands can evoke certain feelings to customers.

▹ Ex: Nike feel running like an athlete. Volvo makes feel safe while driving in dark rainy nights.
▸ Brand equity:
▹ Brands differ in power and value in the marketplace.
▹ A set of five categories of brand assets and liabilities linked to a brand, its name and symbol add to or subtract
from the value provided by a product or service to a firm or to customers.
▹ Top five brands and estimated equity value: Apple ($234,241 million); Google ($167,713 million); Amazon
($125,263 million); Microsoft ($108,847 million); and Coca Cola ($63,365 million).
3. Segmenting and Positioning
▸ Product is positioned and branded as a unique, high- value product, especially suited to the needs of the segmented
customers.
▸ Segmenting the markets: firms differentiate products to meet the unique needs of customers in each segment.
▹ Maximize revenues by creating several different variations on the same product and charging different prices
in each market segment.
▹ For each market segment, firm offer a uniquely branded product.
▹ Ex: automobile manufacturers segment markets:
▹ Demographics (age, sex, income and occupation);
▹ Geographic (region);
▹ Benefits (special features);
▹ Psychographics (boost self-image and fulfils emotional needs).
4. Are Brands Rational?
▸ Is it rational to pay double for some product as compared to other?
▹ Market Efficiency: reducing the search costs and decision-making costs of consumers.
▹ Reliable Products: Strong brands signal strong products that work.
▹ Information-carrier: the prior information of the product.
▹ Risk Avoidance: reduce consumer risk and uncertainty in a crowded marketplace. Brands are like an insurance
policy, protecting firms against the risk of nasty surprises in the marketplace.
▸ Brands:
▹ Create micro-monopolies, increase market costs and results in above-average returns on investment or
“monopoly rents”,
▹ Introduce market efficiencies to the customers.
▹ Major source of revenue: lower customer acquisition costs and increase customer retention costs.
▹ The stronger the brand reputation, the easier it is to attract new customers.
4. Are Brands Rational?
▸ Customer acquisition costs: the overall costs of converting a prospect into a consumer including all marketing and
advertising costs.
▸ Customer retention costs: costs incurred in convincing an existing customer to purchase again.
▸ Successful brand can give a long-lasting, impenetrable unfair competitive advantage to an organization:
▹ Fair Competitive Advantage:
▹ based on innovation,
▹ efficient production processes,
▹ can be imitated and/or purchased in the marketplace by the competitors.
▹ Unfair Competitive Advantage:
▹ Cannot be simply purchased in the marketplace;
▹ patents, copyrights, secret processes, skilled or dedicated employees and managers
▹ Brand names.
INTERNET MARKETING TECHNOLOGIES
1. The Revolution in Internet Marketing Technologies
E-commerce Significance for Marketing
Technology Dimension
Ubiquity ‒ Marketing communications extended to home, work, and mobile platforms; geographic limits on
marketinghave been reduced.
‒ The marketplace has been replaced by “market space” and is removed from temporal and geographic
location.
‒ Customer conveniencehas beenenhanced and shoppingcosts have been reduced.
Global reach ‒ Worldwide customer service and marketing communications have been enabled.
Universal standards ‒ The cost of delivering marketing messages and receiving feedback from users is reduced because of
shared, global standards of the Internet.
Richness ‒ Video, audio and text marketing messages can be integrated into a single marketing message and
consuming experience.
Interactivity ‒ Consumers can be engaged in a dialogue, dynamically adjusting the experience to the consumer, and
makingthe consumer a co-producer of the goods and services beingsold.
Information density ‒ Fine-grained, highly detailed information on consumers’ real-time behavior can be gathered and analyzed
for thefirst time.
‒ The “data mining” technology permits the analysis of consumer data for marketing purposes.
Personalisation/ ‒ Enables product and service differentiation down to the level of the individual, thusstrengthening the ability
Customisation of marketers to create brands.
1. The Revolution in Internet Marketing Technologies
▸ Three broad impacts of Internet in marketing:
▹ Broaden the Scope of Marketing Communication: a huge number of people can be reached easily.
▹ Increased the Richness of Marketing Communications: combining text, video and audio content into rich
messages.
▹ Complexity of messages available;
▹ The enormous content accessible on a wide range of subjects;
▹ The ability for users to interactively control their experience.
▹ Expanded the Information Intensity of Marketing Communications: providing marketers (and customers) with
unparalleled fine-grained, detailed and real-time information.
2. Web Transaction Logs
▸ Transaction log: records user activity at a website and is built into the web server software.
Data Element Marketing Use
IP address of the visitor: 64.212.28.3 Used to send and return e-mails for marketing purpose
Data and timestamp: [14/ May/2001:15:01:18 -0500] Used to understand patterns in the time of day and year of customer activity.
Pages and objects requested and visited Used to understand what specific consumer was interested in finding (the click stream).
(“Get”statements): GET/images/traininglibararya rt.gif Used later to send “personalized” messages, “customized products” or simply return e-mail
regarding related products.
Response of the site server: 200 (usually “HTTP/1.1.” Used to monitor for broken links, pages not returned.
“HTTP/1.1” 304).
Size of pages sent (bytes ofinformation): Used to understand capacity demands on serversand communications links.
1996.
Name of page or site from which the consumer came to Used to understand how consumers come to a site and once there, their patterns of behavior.
this site: http://www.azimuthinteractive.com/
Name and version of the browser used: Mozilla/4.0 Useful for understanding target browsers, ensuring your site is compatible with browsers being
compatible; MSIE 4.01 used.
Name and version of the operating system, of the Useful for understanding the capabilities of target client machines; more recent operating
consumer’s client machine: Windows 95. systems indicate new machine or technically savvy user.
History of all the pages and objects visited during a Used to establish personal profiles of individuals analyze the site activity and understand the most
session at the site. popular pages and resources.
▸ WebTrends: leading log file analysis tool.
▸ Transaction log data become more useful combined with two visitor-generated data trails:
▹ Registration Forms: gather personal data on name, address, phone, post code, e-mail address and other
optional self-confessed information (interests and tastes).
▹ Users are enticed through various means such as free gifts or special services to fill out registration
forms.
▹ Shopping Cart Database: When users making purchase, enter additional information into the shopping cart
database, captures all the item selection, purchase and payment data.
▹ Potential additional information: information users submit on product forms, contribution to chat groups,
or send via e-mail messages using the “Contact Us”.
▸ Transaction logs, registration forms and shopping cart database can give answer to interesting marketing
questions:
▹ What are the major patterns of interest and purchase for groups and individuals?
▹ After the homepage, where do most users go first, and then second and third?
▹ What are the interests of specific individuals?
▹ How can we make it easier for people to use our website?
▹ How can we change the design of the site to encourage visitors to purchase our high-margin products?
▹ Where are visitors coming from (and how can we optimize our presence on these referral sites)?
▹ How can we personalize our messages, offerings and products to individual users?
3. Cookies and Web Bugs
▸ Transaction logs use cookies and web bugs to collect data.
▹ Cookie:
▹ Small text file that websites place on the hard disk of visitors’ client computers every visit and during the
visit.
▹ Allow a website to store data on a user’s machine and later retrieve it.
▹ Website generates an ID number for each visitor and stores that ID on the users’s machine using a cookie
file.
▹ The cookie may include:
▹ An expiration date;
▹ A path that specifies the associated web pages that can access the cookies;
▹ A domain that specifies the associated web server/domains that can access the cookie
▹ A security setting that provides it may only be transmitted by a secure protocol.
▸ Transaction logs use cookies and web bugs to collect data.
▹ Cookie:
▹ Cookie provides means of identifying the customer and understanding prior behavior at the site.
▹ Websites use cookies for the following reasons:
▹ To determine how many people are visiting the site;
▹ To identify whether they are new or repeat visitors; and
▹ To count how often they have visited.
▹ Cookie located:
▹ Microsoft’s Internet Explorer: c:\windows\cookies;
▹ Netscape browser: c:\ProgramFiles\Netscape\Users\Default\cookies.
▹ Web bugs :
▹ Tiny (1 pixel) graphic files embedded in e-mail messages and on websites.
▹ Used to automatically transmit information about the user and the web page being viewed to a
monitoring server.
▹ Clear or white-coloured, not visible to the recipient.
▹ Located: web browser “View Source” and “IMG” (image) tags on the page.
4. Databases, Data Warehouses and Data Mining
▸ Database: a software application that stores records and attributes systematically.
▹ Database management system (DBMS): organizations use to create, maintain and access databases.
▹ Relational database: DB2 from IBM and SQL databases from Oracle, Sybase.
▹ Relational databases: two-dimensional data records organized in rows, and attributes in columns.
▹ Extraordinarily flexible and allow marketers and managers to quickly view and analyze data from
different perspectives.
▹ Structured query language (SQL): industry-standard database query and manipulation language used in
relational databases.
▸ Data warehouse:
▹ Gather firm’s transactions and customer data into one logical repository where it can be analyzed and
modelled by managers without disrupting the firm’s primary transaction systems and databases.
▹ Data can be derived from firm’s core operational areas:
▹ Website transaction logs;
▹ Shopping carts;
▹ Point-of-sale terminals (product scanners) in stores;
▹ Warehouse inventory levels;
▹ Field sales reports;
▹ External scanner data supplied by third parties; and
▹ Financial payment data.
▸ Data warehouse:
▹ Data warehouse help firms answer questions:
▹ What products are the most profitable by regions and cities?
▹ What regional marketing campaigns are working?
▹ How effective is the store promotion of the firm’s website?
▹ Benefits of data warehouse,
▹ Segmentation;
▹ Increased revenues because business managers had a more complete awareness of customers.
▸ Data mining:
▹ Analytical techniques look for patterns in database or data warehouse, or seek customers’ behavior to develop
visitors and customers’ profiles.
▹ A customer profile: identify the group and individual behavior patterns occur online browse through firm’s
website.
▹ Data mining types :
▹ Query-driven Data Mining: simplest type of data mining and it is based on specific queries.
▹ Marketers can query data warehouse and produce database table ranks the top ten products sold by
each hour per day.
▹ Then change the content of the website to stimulate more sales.
▹ Model-driven Data Mining: use of a model that analyses key variables of interest to decision-makers.
▹ Rule-based Data Mining: examines the demographic and transactional data of groups and individuals
derive general rules of behavior for visitors.
5. Approaches in Data Mining
▸ Factual Approach
▹ Factual demographic and transactional data (purchase price, products purchased) and material viewed at the
site are analyzed data stored in a customer’s profile to segment the marketplace into well- defined groups.
▸ Behavioral approaches:
▹ “ Let the data speak for itself” and “collaborative filtering”
▹ Classify customers into “affinity groups” characterized by common interests.
▹ The difficulty: isolating the valid, powerful (profitable) patterns in the data and then acting on the observed
pattern fast enough to make a sale.
6. Advertising Networks
▸ Specialized marketing firms helped e-commerce sites to take advantage of the powerful tracking and marketing
potential of the Internet.
▸ Services: targeted e-mail campaigns, brand awareness programs.
▸ Ability to present users with banner advertisements based on a database of user behavioral database capabilities.
▸ Specialized advertisement servers: used to store and send to users the appropriate banner advertisements.
▹ Rely on cookies, Web bugs, and massive back-end user profile databases.
▹ Record the results, including sales.
▸ Controversial among privacy advocates: ability to track individual consumers across the Internet.
▸ Best-known advertising network: DoubleClick/ Google Ad Manager.
▹ Gives more engaging and dynamic ad experiences with support for video, native and custom ad formats.
▹ Customized video ad to give an individual touch
▹ Keep brand safe with combination of strong advertising policies, publisher controls and advanced technology.
7. Customer Relationship Management System (CRM system)
▸ A repository of customer information records all of the contact of a customer then generates a customer profile
“know the customer”.
▸ Supply the analytical software required to analyze and use customer information through Web and:
▹ Telephone call centers;
▹ Customer service representatives;
▹ Sales representatives;
▹ Automated voice response systems;
▹ Automated teller machines (ATMs) and kiosks;
▹ In-store point-of-sale terminals; and
▹ Mobile devices or m-commerce
▸ Firms' evolution towards a customer-centric and marketing-segment-based business.
▸ Like advertising networks: essentially a database technology with extraordinary capabilities for addressing the
needs of each customer as a unique person.
▹ Customer profiles contain:
▹ A map of the customer’s relationship with the institution;
▹ Product and usage summary data;
▹ Demographic and psychographic data;
▹ Profitability measures;
▹ Contact history summarizing the customer’s contact with the institution across most delivery; and
▹ Marketing and sales information containing programs received by the customer and the customer’s responses.
▸ CRMs can be used for aspects:
▹ To sell additional products and services;
▹ Develop new products;
▹ Increase product utilization;
▹ Marketing costs;
▹ Identify and retain profitable customers;
▹ Optimize services delivery costs;
▹ Retain high-lifetime value customers;
▹ Enable personal communications;
▹ Improve customer loyalty; and
▹ Increase product profitability.
E-COMMERCE MARKETING AND BRANDING STRATEGIES
1. Market Entry Strategies
▸ Pure clicks/first mover advantage strategy: utilized by companies such as Amazon, eBay and e-Trade
▹ Enter the market first and experience “first mover” advantages.
▹ The only providers for a few months, and copycats or fast followers (second movers) enter the market.
▹ Prevent competitors: growing audience size rapidly by spending the majority of marketing budget on building
brand (website) awareness.
▹ New entrants would not able to enter because customers would not willing to pay the switching costs and the
strength of the brand.
▹ Difficulty: they lack the complementary assets and resources required to compete over the long term.
▸ Difficulty: they lack the complementary assets and resources required to compete over the long term.
▹ Financial depth;
▹ Marketing and sales resources;
▹ Loyal customers;
▹ Strong brands; and
▹ Production or fulfilment facilities needed to meet the customer demands once the product succeeds.
▸ E-commerce:
▹ Expensive campaigns may have increased brand awareness, but not a trust, loyalty and reputation following.
▹ Site visits did not necessarily translate into purchases.
▸ New strategy:
▹ “Clicks and bricks”: online marketing integrated with offline physical stores.
▹ New firms established firms that have already developed brand names, production and distribution facilities
and the financial resources needed to launch a successful Internet business.
▹ “Clicks and bricks” brand extension strategy: web as an extension of existing order processing and fulfilment,
marketing and branding efforts.
2. Establishing Customer Relationship
▸ Permission marketing:
▹ Obtaining permission from consumers before sending them information or promotional messages.
▹ Opting-in: consumers agree to receive promotional messages.
▹ Opting-out: consumers do not want to receive messages.
▹ E-mail: very effective marketing tool which inexpensive to send, targeted, measurable and effective.
▸ Affiliate Marketing:
▹ One website agrees to pay another website a commission for new business opportunities it refers to the site.
▹ Amazon, eBay and other large e-commerce companies: own affiliate programs.
▹ Smaller e-commerce firms: join an affiliate network (affiliate broker acts as an intermediary).
▹ The affiliate network does:
▹ Brings would-be affiliates and merchants seeking affiliates together;
▹ Helps affiliates to set up the necessary links on their website;
▹ Tracks all activity; and
▹ Arranges all payments.
▸ Affiliate Marketing:
▹ Benefits:
▹ “Pay for performance” basis.
▹ Existence of an established user base.
▹ The presence of another company’s logo or brand name: prestige and credibility.
▹ Drawbacks:
▹ Too many links that are not relevant to a firm’s primary focus can lead to brand confusion.
▹ Websites with affiliate links also risk “losing” customers who click on a link and then never return (prevent
by having the link open in a new window that when closed returns the customer to the original site).
▸ Viral Marketing:
▹ Customers to pass company’s marketing message to friends, family and colleagues.
▹ Online version of the word-of-mouth advertising and spreads faster than real-world counterpart.
▹ Customer referrals advantages:
▹ Less expensive to acquire since existing customers do all the acquisition work;
▹ Use online support services less, preferring to turn back to the person who referred them for advice;
▹ Cost so little to acquire and maintain;
▹ Referred customers generate profits for a company much earlier than customers acquired through other
marketing methods.
▹ Shopping.com, ConsumerReports.org: provide product reviews by people who have bought and used of
products and services.
▹ Epinions.com and CNET: providing product reviews and links to online e-tailers.
▸ Blog Marketing:
▹ Created by private individuals wishing to make a public statement.
▹ According to SoftwareFindr:
▹ In 2019: 505 million blogs.
▹ Most famous: Tumblr (hosts 441 million blogs), WordPress (60 million blogs), Joomla (1.83 million blogs),
Drupal (1.1 million blogging.
▹ Bloggers agree to display advertisements on blogs, and firms pay a fee for each visitor who clicks on their
advertisements.
▹ Famous blog advertising: Monumetric, Infolinks, Google AdSense, Media.net.
▹ Blog advertising revenue: estimated about $746 million in 2012.
▸ Brand leveraging:
▹ Using the power of an existing brand to acquire new customers (reduces costs of acquiring new customers)
for a new product or service.
▹ Ex: Coca-Cola successful dominating the market by leveraging the Coke brand to a new product Diet Coke.
▹ Leveraging offline brands into the online world:
▹ Retail Industry: Kmart, Wal-Mart and JCPenney have leaped into the top 10 online retail firms in a very
short period, due to the strength of their offline brand.
▹ Financial Service Industry: Wells-Fargo, Citibank, Fidelity and Merrill Lynch acquiring millions of online
customers based on large offline customer bases and brands.
▹ Content Provider Industry: Wall Street Journal and Consumer Reports are the most successful
subscription-based content providers.
▹ Manufacturing and Retail Industry: Dell Computer successful in custom-built computers ordered by
telephone into a made-to-order computer ordered over the Internet.
ONLINE MARKET RESEARCH
▸ Market research: gathering information that help a firm identify the potential products
and customers.
▹ Primary Research:
▹ Gathering first-hand information using techniques (surveys, personal interviews and focus groups).
▹ Gain feedback on brands, products or new marketing campaigns.
▹ Secondary Research:
▹ Relies on existing, published information as the basis for analyzing the market.
▹ Can be completed online more efficiently, less expensively and often more accurately than offline.
▸ Two types of studied data:

▹ Quantitative Data: number, percentage can be analyzed using statistical programs that identify relationships
between certain variables or factors that affect how someone responds.
▹ Qualitative Data: data that cannot easily be quantified, such as opinions. Survey questions or content analysis.
1. Primary Research
▸ Online Surveys:
▹ A list of questions that researchers can approach groups of people to ask their views on virtually any
imaginable topic.
▹ Be administered more quickly and less expensively than traditional mail or telephone surveys.
▹ Can either hire an outside market research firm to conduct the survey or own create and administer.
▹ Improve the “response rates”: track respondents and to follow up who have not yet completed the survey.
▹ Response rates are the percentage of people who complete a survey.
▹ A low response rate leads the validity or believability of a survey’s results.
▸ Observation:
▹ Watching consumers as they make a purchase, or while they engage in some activity.
▹ Using cookies and other session monitoring tools: collect data on consumer preferences, dislikes and
challenges in order to improve the customers’ future experiences at the website.
1. Primary Research
▸ Personal Interviews
▹ Guided by a set of questions.
▹ Opportunity to gather more in-depth information on a topic.
▹ In-depth interviews with a target market segment: second phase of a research project, can yield more specific
answers to issues and questions.
▹ Disadvantages: amount of time required for gathering the information, the low response rate (difficult to
convince s/o to participate in an extended interview).
▹ Focus groups: researchers gather more specific responses to questions and to probe some issues more
deeply.
▹ Less structured to allow participants to voice their opinions and feelings.
▹ Consist of 6 to 12 participants who are members of a particular market segment or target market.
▹ Online focus groups: run for one hour in chat room. Participants cannot see each other and feel more
confident expressing themselves through typing.
2. Secondary Research
▸ Gathering information using websites as the information source.
▸ Reports about consumers and e-commerce:
▹ Jupiter Media Metrix and Forrester: rely on experienced analysts.
▹ Cyber Dialogue: uses online panels of consumers.
▹ SurveyMonkey: online survey.
▹ SurveyMonkey Genius: estimates survey performance and makes actionable suggestions to increase
survey effectiveness.
▹ SurveyMonkey CX: assists organizations in managing customer experience programs.
THANK
YOU!
Any questions?

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E-COMMERCE

Lecturer: Msc. Phan Tran Duc Lien

▸ Expectations based on criteria:

▸ Strong brand requires a strong product.

▸ Brands can evoke certain feelings to customers.

▸ Two types of studied data:

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