Electronic Commerce

Marketing a Web Site and Promoting Products and Services

1
Objectives
 The objectives of this chapter are:
 To provide a general introduction to Web marketing
 To discuss product and customer-based marketing strategies
 To categorise individuals into various market segments
 To analyse Web customer behaviours through the use of customer relationship models
 To describe methods used to promote your Web site
 What is Marketing?

 This is the process of planning and executing the

conception, pricing, promotion and distribution of
ideas, goods and services to satisfy customers.
What is Marketing Cont’d?

 Marketing is more than sales; it is those set of activities that

 Grabs a potential customer
 Encourages them to buy your product
 Actually gets them to purchase your product
 Makes them a repeat customer
What is Marketing Cont’d?

 Marketing theory describes the 4 P’s

 Product: a company sells a physical product or offers a service
 Price: the amount paid for the product or service
 Promotion: the communication of the existence of the product to the market
 Place (or distribution): ensuring that the right product or service is offered at the right place at the best time
 Each of these “P”s contribute to your marketing mix
Marketing Strategies

 The first stage (of a marketing strategy) is setting marketing objectives (where the organisation wants to be at the
end of the strategic planning period) and goals (the objectives with specific numerical benchmarks and deadlines
attached to allow management to measure achievement)3.
Marketing Strategies Cont’d

 The second stage (of a marketing strategy) is specifying the core marketing strategy, i.e. specific target markets,
competitive positioning and key elements of the marketing mix3.
Marketing Strategies Cont’d

 The third (stage of a marketing strategy) is the implementation of tactics to achieve the core strategy 3.
Marketing Strategies Cont’d

 Marketing strategies may come in two forms

 Product-based marketing strategy
 Customer-based marketing strategy
Marketing Strategies Cont’d

Product-based Marketing Strategy

 When a customer is likely to buy or think about products in categories, a product-based marketing strategy is
appropriate:
 An example is an office supplier store where a customer may be looking for an office desk; the customer
immediately thinks about the product category “office furniture”
 See http://www.officedepot.com/
Marketing Strategies Cont’d

Customer-based Marketing Strategies

 Due to the great flexibility of Web sites (as opposed to traditional mass media) they can offer products and services
that are targeted towards specific type of customers
 First the customer types must be identified
 A Web site on its home page might allow the user to select the required customer type
 This approach is more common on B2B sites than on B2C sites
Communicating With Different Marketing Segments

 Trust and Media Choice

 The Web is an intermediate step between mass media and personal contact
 Mass media (e.g. TV) offers the lowest level of trust yet is still widely used today
 The cost of mass media can be spread over a large number of people
 Personal contact offers the highest level of trust; it is also the most expensive
Communicating With Different Marketing Segments Cont’d

 In 1996 as companies began doing business online a splintering of the mass market occurred due to rising consumer
expectations and reduced product differentiation
 This led to a reduction of the usefulness of mass marketing
 Advertisers subsequently began to identify market segment and sell to them
Market Segmentation

 Market segmentation is the identification and targeting of specific portions of a market

 Demographic characteristics are usually used to create market segments
 E.g. age, gender, martial status, income level and geographic location
 Ring tones on Cell phones target market might be younger people between the ages of 10-20
Market Segmentation Cont’d

 Market segments have traditionally been identified through the following categories:
 Geographic segmentation
 Demographic segmentation
 Psychographic segmentation
Market Segmentation Cont’d

Geographic Segmentation
 When a company divides its customers into groups based on where they live or work this is referred to as geographic
segmentation
Market Segmentation Cont’d

Demographic segmentation
 Demographic segmentation uses characteristics of people, for example age, gender, family size, income education,
religion or ethnicity to group customers
Market Segmentation Cont’d

Psychographic segmentation
 Psychographic segmentation groups customers based on social class, personalities or approach to life
 For example auto car companies may focus sports car advertising to people who have a high need for
achievement
Market Segmentation Cont’d

Web Market Segmentation

 The design of the site can immediate appeal to different market segments, for example
 For the young fashion-conscious buyer you may have a site with a wide variety of typefaces, bold graphics
and bright colour product photos
 For the older more established buyer you may have a more muted conservative style
Market Segmentation Cont’d

 Companies can offer a form of one-to-one marketing by allowing customers to customise the retailer’s Web site
 One example of this is Dell.com
 Offers each customer its own Web site
 Allows individual employees of its customers to create their own personalised pages
Market Segmentation Cont’d

Behavioural Segmentation
 This allows companies to target specific customers in different ways at different times
 A person tends to have different requirements on different occasions
 E.g. a person wanting a meal might go one place for breakfast and another for lunch
 As a result a different user experience must be created depending on the behaviour of the user
Market Segmentation Cont’d

Usage-based Market Segmentation

 A person may visit the same Web site at different times for different reasons, as a result we must identify
behavioural patterns
 Some key behavioural patterns are:
 Browser
 Buyer
 Shopper
 Customer Behaviours

The Behaviour of a Browser

 A browser enters your Web site to browse or surf
 In order to generate and maintain interest Web sites should use trigger words
 These words jog the memory of visitors, reminding them to buy from the site
 As a result users stay longer at the site
 Customer Behaviours Cont’d

The Behaviour of a Browser Cont’d

 A Web site should include extra content related to the product or service offered
 For example a company that sells printers could provide extra information about different types of paper
and its use in desktop publishing
Customer Behaviours Cont’d

The Behaviour of a Shopper

 Shoppers arrive at a Web site wanting to buy a product or service, but require more information before purchasing,
so they will get the best deal and the best-suited product
Customer Behaviours Cont’d

The Behaviour of a Shopper Cont’d

 What is important to shoppers are:
 Comparison tools
 Product reviews
 A list of features
 User control product/service level of detail
 One day a user might be a browser, the next a shopper
Customer Behaviours Cont’d

The Behaviour of a Buyer

 Buyers arrive at your Web site ready to make a purchase
 A good Web site design would prevent anything from getting in the way of the purchase
 As a result a Web catalog might provide a box on the home page to enter the catalog number (e.g.
www.argos.co.uk) and then allow the user to add the product to a shopping cart
Customer Behaviours Cont’d

The Behaviour of a Buyer Cont’d

 The primary goal is to get the the buyer to the shopping cart as quickly as possible
 The shopping cart
 Allows the buyer to create an account
 Allows the user to log in after placing items into the cart
 Logging in should be left to the end so that barriers are not placed in the shopping process
Customer Behaviours Cont’d

The Behaviour of a Buyer Cont’d

 Amazon.com offers a patented 1-click feature allowing:
 Customers to purchase items with a single click
 Any items purchased within 90 minutes of each other are aggregated into one order
Customer Behaviours Cont’d

Alternative Behavioural Modes

 A survey of 50,000 participants identified six groups of Internet users:
 Simplifiers: who like convenience and are attracted to sites that could make life easier
 Surfers: searches the Web for information and shop. They spend a lot of time on the Web and like to be
entertained
 To attract surfers, the content must be attractive, well displayed and updated regularly
Customer Behaviours Cont’d

Alternative Behavioural Modes Cont’d

 Bargainers: search for a good deal therefore frequent sites like eBay.com. This represents about 10% of the
on-line population.
 Bargainers are willing to search sites for the best terms and prices

 Connectors: stay in touch with people over the Web. They use applications such as chat rooms, instant
messaging services, electronic greeting cards and Web email
Customer Behaviours Cont’d

Alternative Behavioural Modes Cont’d

 Routiners: visit the same sites all of the time, e.g. to check news, or stock quotes
 Sportsers: frequent sports and entertainment sites
 It is important to note that these are results from only one study; however, other studies have found similar groups
Customer Relationship Intensity

 There is a need to create a strong relationship

between a company and its customers
 A good relationship creates loyalty amongst
customer
Customer Relationship Models

 Two customer relationship model are:

 Five stage model of customer loyalty
 The stages are awareness, exploration, familiarity, commitment and separation

 The Funnel Model

 The stages are customer acquisition, conversion and retention
Customer Relationship Models Cont’d
Five Stage Model of Customer Loyalty
 Researchers have identified five stages of customer loyalty
 Awareness: the name of the company/or its products are recognised. No interaction with the company has
been made
 Exploration: in this stage the customer finds out more about the products of the company. Communication
may be through a Web site, the telephone or e-mail. This stage is about information interchange
Customer Relationship Models Cont’d

Five Stage Model of Customer Loyalty Cont’d

 Familiarity: The customer has completed several transactions with the company, although the customer is
still willing to shop with competitors
 Commitment: The customer is satisfied with the level of service and is therefore a repeat customer.
Customers at this point are wiling to tell others about the service
 Separation: This may result from disappointment in the level of service or product quality
Customer Relationship Models Cont’d

Five Stage Model of Customer Loyalty Cont’d

 These five stages are sometimes referred to as the customer life cycle
 Grouping customers based on these stages is called life-cycle segmentation
Customer Relationship Models Cont’d

The Funnel Model

 Managers often want to identify the best way to attract and retain customers
 The funnel model is a tool that managers use to analyse the effectiveness of their marketing strategy
 This model is less abstract than the five stage model
Customer Relationship Models Cont’d

The Funnel Model Cont’d

 This funnel model allows companies to determine which advertising and promotion strategies actually work
 It is divided into three parts:
 Customer acquisition
 Customer conversion
 Customer retention
Customer Relationship Models Cont’d

The Funnel Model Cont’d

Customer Acquisition
 This is the process of attracting new visitors to your site
 The total amount of money that a Web site spends to attract one visitor is called the acquisition cost
Customer Relationship Models Cont’d

The Funnel Model Cont’d

Customer Conversion
 This is the process of converting a first time visitor of a site to a customer
 For advertising-supported sites this is the point when a visitor registers, or when they return several times
 For sites with other revenue models this would be when a visitor purchases a good or service or subscribes
to the site’s content
Customer Relationship Models Cont’d

The Funnel Model Cont’d

Customer Conversion Cont’d
 The total money spent (on average) to induce a visitor to make a purchase on a site is called the conversion cost
(most managers also include the acquisition cost)
Customer Relationship Models Cont’d

The Funnel Model Cont’d

Customer Retention
 In many business the conversion cost is higher than the profit made on the average sale therefore it is important to
encourage customers to return to the site to make another purchase
 If the customer returns to the site a number of times after the first purchase, they are considered retained customers
 The cost of getting customers to return to the site and make a purchase is called the retention cost
 Customer Relationship Models Cont’d – The Funnel Model

500,000 ads shown on Web pages Needs identification

Searches for information about alternative product

and services
10,000 ad viewers become visitors

900 visitors become shoppers Evaluate alternatives and makes selections

500 shoppers complete their purchase

Purchase

Conversion of shoppers into loyal supporters

80 purchasers become loyal, repeat customers
Web Advertising

 Advertising is about communication

 Communication may be between a company and
 Its current customers
 Potential customers
 Or former customers that the company is trying to regain
Web Advertising Cont’d

Banner Advertising
 Most Web advertising uses banner ads
 A small rectangular object normally at the top of the Web page which displays stationary or moving
graphics
 These ads are created using animated GIFs, or objects created in Shockwave, Java or Flash)
 These ads must be attention grabbing
Web Advertising Cont’d

Banner Advertising Cont’d

 Web ads have been standardised by an organisation called the Interactive Advertising Bureau (IAB) which is
responsible for
 Creating banner size standards (e.g. 728x90, 160x600, 300x250, or 180x150)
 Encourage effective Internet advertising
Web Advertising Cont’d

Banner Ad Placement
 There are three ways that a company can have their banner ads displayed
 (1) Use a banner exchange network
 A banner exchange network arranges for banner ads for one company to be displayed on another
company’s Web site
 Each member site would accept two ads for each ad placed on someone’s site

 The banner exchange network earns money by selling ad space to other businesses
Web Advertising Cont’d

Banner Ad Placement Cont’d

 (2) Pay a site to display the banner ad
 Rates can be negotiated through an advertising agency
 (3) Use a banner advertising network who acts as brokers between advertisers and Web sites that carry ads
 They often broker space on large Web site like Yahoo, which has high traffic volumes and are
therefore expensive
Web Advertising Cont’d

Measuring Cost for Ads

 Several measurements exist including:
 Cost per thousand clicks (CPM)
 The number of new visitors that arrive via a click-through that buy on the site
 To measure Web audiences is complicated, however the following definitions are instructive:
 A visit occurs when a Web page is requested by a visitor; further page loads from the same site within a
time period is considered part of the same visit
Web Advertising Cont’d

Measuring Cost for Ads Cont’d

 A trial visit, is the first time a visitor loads a Web site
 When a visitor loads a page several time these are called repeat visits
 If a visitor clicks on an ad that is displayed on a Web page this is called a click-through
 Rates vary depending on how much demographic information is captured, and the kind of visitors the site attracts
 The cost per one thousand clicks may range from $1 to $50.
Web Advertising Cont’d

Other Web Ad Formats

 The pop-up ad is an ad that appears in its own window when the user opens or closes a page
 The pop-behind ad is a pop-up ad that is behind the existing browser window
 Ad-blocking software prevents these ads from displaying
 Rich media ads (active ads) generate graphics that float over the Web page
 These ads are attention grabbing, but intrusive
Marketing Methods

E-Mail Marketing
 E-mail may well be one of the greatest tools created for communication in the 20 th century
 Some of the ways that email has been used for marketing are:
 Permission marketing is the sending of emails to people who request further information on a product or
service (for example)
 Combining content (e.g. articles or news stories that are of interest to the target market) with advertising
messages
Marketing Methods Cont’d

Affiliate Marketing
 In affiliate marketing a Company’s Web site includes products or services offered for sale by another company in
exchange for a commission
 The affiliate’s site benefits from the selling site’s brand in exchange for the referral
 Amazon.com has over 800,000 affiliate sites
Marketing Methods Cont’d

Viral Marketing
 Viral Marketers rely on non-customers being told about products or services by existing customers
 The number of customers increase the way a virus increases
 An example of a viral marketing campaign is Blue Mountain Arts
 When an electronic greeting card is sent to a person, a link to Blue Mountain is included which they click
on to read the card; they are now more likely to send a card themselves
Web Site Naming

 People with established brands want to name their Web site after their brand
 Companies other buy more than one domain name, just in case the person misspells it (e.g. Yahoo.com owns
Yahow.com)
 In some cases the Web site domain is owned by some one else (e.g. virginatlantic.com -> viginatlantic.com)
 Domain names can be expensive, e.g. Altavista.com cost $3.3 million
Promoting Your Web Site

 Internet marketing is about capturing the attention of potential customers through promotion
 The guidelines used for direct mail marketing are also used for Internet marketing
 These guidelines are summarised by the acronym AIDA
Promoting Your Web Site Cont’d

 A – Attention
 The goal is to get the attention of the visitor which may be achieved through:
 The quality of the Web site
 The ease of navigation
 Personalisation
 Good graphics
 Attractive Banners
 Colour
Promoting Your Web Site Cont’d

 I – Interest
 Once the visitor’s attention has been captured, an interest in the product must be sparked.
 Quick response times and ease of navigation are vital at this point
 D – Desire
 A desire must be created for action
 Interactivity through navigation provides this
Promoting Your Web Site Cont’d

 A - Action
 The desired action is the customer placing an order, or the actual sale.
 At this point the information is sent off to the company to process and deliver (i.e. the fulfilment
phase)
Promoting Your Web Site Cont’d

 Several methods of promotion are in use today:

 The combination of online and off-line marketing (these must work together)
 Banner ads (very popular, however only about 0.5% of visitors click through)
 Email marketing (very cost effective and with good results, i.e. 5-15% response rate, however may clutter
customer’s in boxes)
Promoting Your Web Site Cont’d

 Traditional media: local newspapers, radio programmes and mass mailing campaigns
 It is important to promote your Web site on your Web site. This can be achieved through:
 The domain name; use the company’s name

 Negotiate reciprocal links, i.e. other Web sites linking to your site

 Search engines and directories

 Search engines locate sites based on keywords

 Directories are organised listing of Web sites

Promoting Your Web Site Cont’d

 Newsgroups and mailing list

 Promotion agreements5
 One company promotes another (e.g. 1-800-flowers.com customers can earn frequent-flyer miles with
American Airlines
 References

[1] Schneider, Gary, P., “Electronic Commerce: The second wave”, Thomson Course Technology, Fifth Annual Edition, 2004
[2] CFDC, “Glossary of Business Terms” Online document available at www.cfdccariboo.com/glossary.htm
[3] James, Judith, “General Glossary of Terms”, 2001. Online document available at
www.fuel4arts.com/sauce/10_glossary/glossary.htm
[4] Awad, Elias, M., “Electronic Commerce: From Vision to Fulfillment”, Pearson Prentice Hall, Second Edition, 2004
[5] Rayport, Jeffrey, F., Jaworski, Bernard, J., “Introduction to E-Commerce”, McGraw-Hill, Second Edition, 2004