E-COMMERCE

CHAPTER 4
MARKETING AND ADVERTISING IN E-COMMERCE

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 Online Consumer Behavior
 Online consumer behavior is the process of how consumers make
decisions to purchase products in ecommerce. 
 It includes the study of why, where, when, how often and under what
conditions consumers consume different goods or services.
 Consumers can be divided into two groups:
 Individual consumers and
 Organizational buyers (including governments, private corporations,
resellers, and non-profit organizations).
 These two types of buyers tend to have different purchasing behaviors
and usually are analyzed differently.

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 Online Consumer Behavior Cont.
 Companies are operating in an increasingly competitive
environment.
 Therefore, sellers try to understand customer’s needs and influence
them to buy their products and services.
 Customer acquisition and retention are key success factors, both
offline and online. 
 Through understanding the decision process, a business may be
better able to influence the buyer’s decision through improved
product design or advertising.

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Influencing Factors of Consumer
Behavior

Consumer/
Personal
Factors

E-Commerce Merchant &

Intermediary
Systems
Customer’s Factors
Decision

Environmental Product/
Factors Services
Factors

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 Influencing Factors of Consumer
Behavior Cont.
 Environmental factors
 The environment can influence a buyer decision
 Social variables: influence by friends, internet communities, social
networks opinions
 Community / Cultural variables: difference in behavior between
countries/ regions
 Products / Services Factors
 Pricing, promotions, quality of the products, customer services
 Merchant and Intermediary Factors
 Online transaction can be affected by the merchant that handle the
product
 Reputation, trust, marketing
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 Influencing Factors of Consumer
Behavior Cont.
 Consumer / Personal factors
 Demographic factors: age, gender, status, ethnic, income, education,
occupation
 Individual preference, behavior characteristics
 E-Commerce Systems
 The platform for online transaction: useful, ease of use, interactive
 Content element: aesthetics
 Security, protection, payment mechanism, etc.
 Consumers are more likely to buy from well designed e-commerce
system
 Sites with large set of functions
 Functions to prevent possible trouble
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 The Consumer Purchasing Decision
Process
 The consumer decision process also called the buyer decision process,
helps markets identify how consumers complete the journey from
knowing about a product to making the purchase decision.
 Understanding the buyer buying process is essential for marketing and
sales. 
 It consists of five major phases:
1. Need Identification
 Need identification occurs when a consumer identifies a need and
thinks of a product that might meet this need.
2. Information Search
 product brokering: Deciding what product to buy

 merchant brokering: Deciding from whom (from what merchant) to

buy a product
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The Consumer Purchasing Decision
Process Cont.
3. Evaluation of alternatives
 The consumer will use the collected information to develop a set
of criteria to evaluate and compare alternatives.
4. Purchase and Delivery
 After evaluating the alternatives, consumer will make the
purchasing decision, arrange payment and delivery.
5. Post-purchase Behavior
 Customer services and evaluation of usefulness of the product.

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 Players in the Consumer Decision Making
Process
 The following are the five major roles in buying decision:

1. Initiator: The person who recognizes and suggests the need

to buy a specific product or service.

2. Influencer: The person who tries to convince other people to

make a purchase.
3. Decider: The person who makes the final buying decision.

4. Buyer: The person who purchases the product or service and

pays for it.
5. User: The person who consumes or uses the product or
service.
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 Loyalty, Satisfaction, and Trust in E-
Commerce
 Customer Loyalty:
 A deep commitment to repurchase or re-patronize a preferred
product/service continually in the future, thereby causing repetitive
same-brand or same brand-set purchasing, despite situational
influences and marketing efforts that have the potential to cause
switching behavior.
 Increased customer loyalty can be accomplished by treating people in
the way that they expected to be treated (or better).
 Loyalty can result in cost savings and increased revenue in various
ways:
 Lower marketing and advertising costs.
 Lower transaction costs.
 Lower customer turnover expenses. 10
 Loyalty, Satisfaction, and Trust in E-
Commerce Cont.
 E-loyalty:
 Refers to a customer’s loyalty to an e-tailer or a manufacturer that
sells directly online, or to online loyalty programs.
 Factors may affect customer loyalty and e-loyalty:
 The quality of the relationship between retailers and their
customers.
 Customer loyalty is composed of trust, satisfaction, and commitment.
 Satisfaction and trust are particularly important because they will lead
to commitment.
 Satisfaction in E-Commerce:
 Satisfaction is one of the most important success measures in the B2C
online environment which lead to higher loyalty.
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 Loyalty, Satisfaction, and Trust in E-
Commerce Cont.
 Trust in general:
 The willingness of a person to believe in the actions taken by another
person.
 Trust in E-Commerce:
 There are several definitions of trust in e-commerce since there are different
types of trust. Examples are:
 Consumer trust in sellers
 Consumer trust in the computerized system
 Trust between buyers and sellers
 Trust in foreign trading partners
 Trust in E-Commerce intermediaries
 Trust in online advertisements
 Most E-commerce trust concentrate on consumer trust.
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 Loyalty, Satisfaction, and Trust in E-
Commerce Cont.
 How to increase trust in EC:
 Improve Your Website
 Affiliate with an Objective Third Party
 Establish Trustworthiness
 Online word-of-mouth

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 Mass Marketing, Market Segmentation,
and Relationship Marketing
 Mass Marketing and Advertising:
 Traditionally, marketing efforts were designed to attract everyone in
the market (the “masses”).
 Example: using a newspaper or TV ad usually means one-way
communication.
 Market Segmentation:
 The strategy that involves dividing a large group of consumers into
smaller segments and then implementing suitable advertisements to
target each segment.
 Relationship Marketing: Marketing method that focuses on building a
long-term relationship with customers.
 One-to-one Marketing: Marketing that treats each customer in a
unique way.
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 Personalization and Behavioral
Marketing
 Personalization:
 The matching of services, products, and advertising content with
individual consumers and their preferences.
 User Profile:
 The requirements, preferences, behaviors, and demographic traits of a
particular customer.
 Cookie: A data file that is placed on a user’s hard drive by a remote Web
server, frequently without disclosure or the user’s consent, which collects
information about the user’s activities at a site.
 Behavioral targeting: Targeting that uses information collected about
an individual’s Web-browsing behavior, such as the pages they have
visited or the searches they have made, to select an advertisement to
display to that individual.
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 Personalization and Behavioral
Marketing
 Collaborative Filtering:
 A market research and personalization method that uses
customer data to predict, based on formulas derived from
behavioral sciences, what other products or services a
customer may enjoy; predictions can be extended to other
customers with similar profiles.
 Personalization, behavioral targeting, and collaborative
filtering are the three generic strategies for one-to-one
marketing.
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 Market Research for E-commerce
 To sell more effectively, it is important to conduct proper market research
to find information and knowledge about consumers and products.
 Market Researchers:
 Gather information about competition, regulations, pricing, strategies,
and consumer behavior.
 The market researcher’s goal is to:
 Identify marketing opportunities and problems.
 Provide input for marketing planning.
 Find out how to influence the purchasing process.
 Evaluate the success of promotions and advertisements.

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 Market Research for E-commerce
 Observing customer’s movements online
 Transaction log: a record of user activities at a company’s website.
 Cookies
 Web Bugs: Tiny (usually invisible) objects concealed in a web page or
in e-mail messages.
 They transmit information about the user and his/her movements
to a monitoring site (e.g., to find out if the user has viewed certain
content on the web page).
 Spyware: Software that enters your computer like a virus does,
without your knowledge.
 It then enables an outsider to gather information about your
browsing habits.
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 Market Research for E-commerce
 Observing customer’s movements online
 Web Analytics: Dealing with the monitoring, collecting, measuring
and evaluating, and reporting tasks related to Internet data and
activities.
 Web Mining: The use of data mining techniques for both Web
content and usage in Web documents in order to discover patterns
and hidden relationships.
 Clickstream data: Data that describe which websites users visit, in
what order, and the time spent on each.
 This is done by tracking the succession of “clicks” each visitor
makes.

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 Web Advertising
 Interactive Marketing
 Online marketing, facilitated by the Internet, by which marketers and

advertisers can interact directly with customers, and consumers can

interact with advertisers/vendors.
 Basic Terminology
 Ad views: The number of times users call up a page that has a

banner on it during a specific period.

 Button: A small banner that is linked to a website; may contain

downloadable software.
 Click (ad click): A count made each time a visitor clicks on an

advertising banner to access the advertiser’s website.

 Page: An HTML (Hypertext Markup Language) document that may

contain text, images, and other online elements, such as Java applets
and multimedia files; may be generated statically or dynamically.
 Hit: A request for data from a Web page or file.

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 Web Advertising
 Basic Terminology
 Visit: A series of requests during one navigation of a website; a pause

of a certain length of time ends a visit.

 Unique visit: A count of the number of visitors entering a site,

regardless of how many pages are viewed per visit.

 Stickiness: Characteristic that influences the average length of time a

visitor stays in a site.

 CPM (cost per mille, i.e., thousand impressions): The fee an

advertiser pays for each 1,000 times a page with a banner ad is

shown.
 conversion rate: The percentage of clickers who actually make a

purchase.
 click-through rate/ratio (CTR): The percentage of visitors who are

exposed to a banner ad and click on it.

 Landing page: The page a viewer is directed to after having clicked

on a link.
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 Web Advertising
 Advertising Online and Its Advantages
 Cost: Online ads usually are cheaper than ads in traditional media.
 Media richness: Web ads can include rich and diversified media
(e.g., videos, animation).
 Easy updating: Updating can be done quickly and inexpensively.
 Personalization: Web ads can be either one-to-one or addressed to
population segments.
 Location-based: Using wireless technology and GPS, Web
advertising can be location based.
 Linking to shopping: It is easy to link from an online ad to a
vendor’s web store. Usually, it can be done in one click.
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 Online Advertising Methods
 Classified Ads
 These ads usually use text, but lately may include photos.

 The ads are grouped according to classification (e.g., cars, rentals).

 Display Ads
 These are illustrated advertisements that use graphics, logos, colors,

or special designs.
 Interactive Ads
 These ads use online or offline interactive media to interact with

consumers and to promote products, brands, and services.

 Banner
 A display that is used for advertising on a Web page (words, logos,

etc.).
 A banner ad is frequently linked to an advertiser’s web page.

 When users “click” on the banner, they are transferred to the

advertiser’s site.
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 Online Advertising Methods
 Pop-up ad (ad spawning)
 Appears due to the automatic launching of a new browser window

when a visitor accesses or leaves a website.

 e-mail marketing
 A form of direct marketing which uses e-mail as a means of

communicating commercial messages to an audience.

 e-mail advertising
 Adding advertisements to e-mail messages sent to customers.

 Search Engine Advertisement and Optimization

 Placing online ads on Web pages that show results from querying a

search engine.
 Keyword Advertising
 Links the appearance of ads with keywords specified by the advertiser.

 Google: The online advertising king.

 Viral marketing (viral advertising): Word-of-mouth marketing by
which customers promote a product or service by telling others about it.
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 Online Advertising Methods
 Advergaming
 The practice of using computer games to advertise a
product, an organization, or a viewpoint.
Search Engine Optimization (SEO)
 A process that improves the visibility of a company or
brands on the results page displayed by a search engine.
 SEO is performed in all types of online searches, including
video search, social network search, and image search.

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 Mobile Marketing and Advertising
 Mobile marketing

 Conducting marketing on or with a mobile devices.

 Mobile advertising (m-advertising)

 Ads sent to and presented on mobile devices.

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 Advertising Strategies and Promotions
 Spamming
 Using e-mail to send unwanted ads (sometimes floods of ads).
 Permission advertising
 Advertising (marketing) strategy in which customers agree to
accept advertisements.
 Affiliate marketing
 A marketing arrangement by which an organization refers
consumers to the selling company’s website.
 Ads as a Commodity (Paying People to Watch Ads)

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END

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