Chapter 6

E-commerce Marketing and Advertising

Copyright 2015
2016 Pearson Education, Inc.
Ltd.
 Class Discussion

Video Ads: Shoot, Click, Buy

What advantages do video ads have over
traditional banner ads?
Where do sites such as YouTube fit in to a
marketing strategy featuring video ads?
What are some of the challenges and
risks of placing video ads online?
Do you think Internet users will ever
develop blindness toward video ads as
well?

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 Consumers Online: The
Internet
Audience and Consumer
Almost 75% (90 million) U.S. households
have broadband Internet access in 2014
Behavior
Growth rate has slowed
Intensityand scope of use both
increasing
Some demographic groups have much
higher percentages of online usage
than others
Income, education, age, ethnic dimensions

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 Consumers Online (cont.)
Broadband and mobile
Significantinequalities in broadband access
Older adults, lower income, lower educational levels
Non-broadband household still accesses Internet via
mobile or other locations
Neighborhood effects
Roleof social emulation in consumption decisions
Connectedness
Top 1015% are more independent
Middle 50% share more purchase patterns of friends

Recommender systems - co-purchase networks

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 Consumers Online (cont.)
Study of consumer behavior
Social
science discipline
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
decisions
Based on background demographic factors and other
intervening, more immediate variables
Profiles of online consumers
Consumers shop online primarily for convenience

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 A General Model of Consumer
Behavior

Figure 6.1, Page 375 SOURCE: Adapted from Kotler and Armstrong, 2009.

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 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

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 The Consumer Decision
Process and
Supporting Communications

Figure 6.2, Page 376

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 The Online Purchasing Decision
(cont.)
Decision process similar for online
and offline behavior
General online behavior model
User characteristics
Product characteristics
Web site features: latency, usability, security
Attitudes toward online purchasing
Perceptions about control over Web environment

Clickstream behavior

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 A Model of Online Consumer
Behavior

Figure 6.3, Page 377

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 Shoppers: Browsers and
Buyers
Shoppers: Almost 90% of Internet users
74% 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
consuming 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
Highly intentional, goal-oriented
Search engines
Marketplaces (Amazon, eBay)
Specific retail site

10% of Internet users dont shop

online
Trustfactor
Hassle factors (shipping costs, returns, etc.)

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 Trust, Utility, and
Opportunism
Two most important factors
in Online Markets
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
Internet and
marketing (vs.Tools
traditional)
More personalized
More participatory
More peer-to-peer
More communal

The most effective Internet

marketing has all four features

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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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 Strategic Issues and
Questions
Which part of the marketing plan
should you focus on first?
How do you integrate the
different platforms for a coherent
message?
How do you allocate resources?
How do you measure and compare metrics
from different platforms?
How do you link each to sales revenues?

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 Establishing the Customer
Relationship
Web site functions to:
Establish brand identity and customer
expectations
Differentiating product
Anchor the brand online
Central point for all marketing messages
Informand educate customer
Shape customer experience

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 Online Advertising
Online advertising
Display, search, mobile messaging, sponsorships,
classifieds, lead generation, e-mail
Fastest growing form of advertising
Advantages:
1834 audience is online
Ad targeting
Price discrimination
Personalization

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Traditional Online Marketing
and Advertising Tools
Search engine marketing and
advertising
Display ad marketing
E-mail marketing
Affiliate marketing
Viral marketing
Lead generation marketing

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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
Types of search engine advertising
Sponsored links (keyword paid inclusion)
Keyword advertising
Network keyword advertising (context advertising)

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 Search Engine Marketing
(cont.)
Search engine optimization (SEO)
Google search engine algorithms
Panda, Penguin, Hummingbird, Knowledge Graph

Social search
Utilizes social contacts and social graph to
provide fewer and more relevant results
Search engine issues
Paid inclusion and placement practices
Link farms, content farms
Click fraud

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 Display Ad Marketing
Banner ads
Rich media ads
Interstitial ads
Video ads
Far more effective than other display
formats
Sponsorships
Native advertising

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 Display Ad Marketing
(cont.)
Advertising networks
Programmatic advertising
Real-timebidding process (RTB)
Ad exchanges

Display advertising issues

Ad fraud
Viewability

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 E-mail Marketing
Direct e-mail marketing
Messages sent directly to interested users
Benefits include
Inexpensive
Average over 6% click-throughs for in-house lists
Measuring and tracking responses
Personalization of messages and offers

Three main challenges

Spam
Anti-spam software
Poorly targeted purchased e-mail lists

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 Spam
Unsolicited commercial e-mail
Around 60% of all e-mail in 2014
Most originates from bot networks
Efforts to control spam have largely
failed:
Government regulation (CAN-SPAM)
State laws
Voluntary self-regulation by industries (DMA )
Canadas stringent anti-spam laws

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 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

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 Social, Mobile, and Local
Marketing and Advertising
Social marketing/advertising
Fastest growing type of online marketing
Enormous audiences of social networks
Four features driving growth
Social sign-on
Collaborative shopping
Network notification
Social search (recommendation)

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 Social Marketing/Advertising
(cont.)
Blog marketing
Educated, higher-income audience
Ideal platform to start viral campaign

Game marketing
Large audiences for social and mobile
games
Used for branding and driving customers
to purchase moments at restaurants and
retail stores

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 Mobile Marketing and
Advertising
35% of online marketing, growing
rapidly
Major formats:
Display, rich media, video
Games
E-mail
Text messaging (SMS)
In-store messaging
Quick Response (QR) codes
Couponing

App marketing

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 Local Marketing
Geared to users geographic location
Advertisers expected to spend around
$32 billion on online local ads in 2014
Most common local marketing tools
Geotargeting with Google Maps
Display ads in hyperlocal publications
Daily deals
Coupons

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 Multi-Channel Marketing
Average American spends more
than 45% of 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

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 Insight on Business: Class Discussion

Are the Very Rich Different from

You and
What distinguishes Me?
luxury marketing from
ordinary retail marketing?
What challenges do luxury retailers have
in translating their brands and the look
and feel of luxury shops into Web sites?
How has social media affected luxury
marketing?
Visit the Armani Web site. What do you
find there?

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 Other Online Marketing
Strategies
Several strategies are more
focused than traditional
online and newer strategies
Customer retention
strategies
Pricing strategies
Long Tail marketing

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 Other Online Marketing
Strategies
Customer retention strategies
Personalization and one-to-one
marketing (interest-based advertising)
Retargeting
Behavioral targeting
Based on data from search engine queries,
clickstream history, social network data, and
integration of offline personal data and records
Effectiveness still inconclusive
Privacy issues

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 Other Online Marketing
Strategies (cont.)
Customization
Changing the product
Information goods ideal for differentiation

Customer co-production
Customers help create product
Customer service
FAQs
Real-time
customer chat systems
Automated response systems

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 Pricing Strategies
Pricing
Integral part of marketing strategy
Traditionally pricing based on
Fixed cost
Variable costs
Demand curve

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

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 Pricing Strategies (cont.)
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
Bundling
Offers consumers two or more goods for one price
Dynamic pricing
Auctions
Yield management: Amazon
Surge pricing: Uber
Flash marketing: Rue La La, HauteLook, Gilt Groupe

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 Long Tail Marketing
Internetallows for sales of
obscure products with little
demand
Substantial revenue because
Near zero inventory costs
Little marketing costs
Search and recommendation engines

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 Insight on Technology: Class Discussion

The Long Tail: Big Hits and Big

Misses systems?
What are recommender
Give an example of one you have
used.
What is the Long Tail and how do
recommender systems support sales
of items in the Long Tail?
How can human editors, including
consumers, make recommender
systems more helpful?

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 Internet Marketing
Technologies
Internets main impacts on
marketing:
Scope of marketing communications
broadened
Richness of marketing communications
increased
Information intensity of marketplace
expanded
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?

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 Tracking Files
Users browsing tracked as
they move from site to site
Four types of tracking files
Cookies
Small text file placed by Web site
Allows Web marketers to gather data

Flashcookies
Beacons (bugs)
Apps

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 Databases
Enable profiling
Store 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

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 Data Warehouses and Data
Mining
Data warehouse:
Collects firms transactional and customer data
in single location for offline analysis by marketers
and site managers
Data mining:
Analyticaltechniques to find patterns in data,
model behavior of customers, develop customer
profiles
Query-driven data mining
Model-driven data mining
Rule-based data mining

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 Marketing Automation and
Customer Relationship
Management
Marketing (CRM)
automation Systems
systems
Track steps in lead generation from product awareness to
purchase
CRM systems
Manage relationship with customers once purchase is made
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

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 A CRM System

Figure 6.10, Page 432

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 Online Marketing Metrics:
Lexicon
Audience size or Conversion to
market share customer
Impressions Acquisition rate
Click-through rate (CTR) Conversion rate
View-through rate (VTR)
Browse-to-buy ratio
Hits
View-to-cart ratio
Page views
Cart conversion rate
Viewability rate
Checkout conversion
Stickiness (duration)
Unique visitors rate
Loyalty Abandonment rate
Reach Retention rate
Recency Attrition rate

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Online Marketing Metrics (cont.)
Social E-mail metrics
marketing Open rate
Conversation ratio Delivery rate

Applause ratio Click-through rate

Amplification (e-mail)
Bounce-back rate
Sentiment ratio

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 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

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 Web Analytics
Software that analyzes data at each
stage of the customer conversion process
Awareness
Engagement
Interaction
Purchase
Loyalty and post-purchase
Helps managers
Optimize ROI on Web site and marketing efforts
Build detailed customer profiles
Measure impact of marketing campaigns
Google Analytics, Adobe Analytics, IBM
Digital Analytics, Webtrends

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 Web Analytics and the Online
Purchasing Process

Figure 6.12, Page 442

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