Transcript Chapter 8: High Technology Marketing and the Internet

Marketing of High-Technology
Products and Innovations
Jakki J. Mohr
Chapter 11:
E-Business and Internet Marketing
Internet Perspectives
Customers
-Customer Control
-Privacy
Businesses
Content Sites
-Changing Rules of the Game
-Threats to Traditional Businesses
-Coping with Threats
-Functions other than Sales
(e.g. Supply Chain Management)
-Portals
-Cybermediaries
-Online Communities
-Vertical Hubs for B2B
e-commerce
Internet “Distribution Chain”

Device manufacturers: the device used by
customer to access the Net—


Operating systems vendors: software to
operate the device


Computers, hand-helds, set-top boxes
Can regulate software and access to programs used
to access the Net
Browsers: software used to access
information on the Internet
Internet “Distribution Chain” (Cont.)

Internet Service Providers: control the
infrastructure (“broadband”) for transmitting data



Phone, cable, satellite, wireless, fiber optics, DSL
Web hosting: services used to host Web sites
Search sites/portals: Information “content” sites
customers go to to get useful Web information.
Customer Perspective


Customer control
Privacy concerns
Customers Gain Control in an
On-line Environment

Customer gain information they choose

Improved information puts downward pressure on
prices



Move to “permission-based” marketing
Customers configure their own products, and even
own Web-browsing experience


Shopping bots
“Personalization”
Customer auctions pit supplier against supplier

B-to-B reverse auctions revolutionizing purchasing
relationships
Customers Gain Control in an
On-line Environment

Customers break free of geographicallyconstrained purchasing


Customers can shop anytime/anywhere


Loyalty will have to be honestly earned
Customers gain efficiency and convenience
Customer word-of-mouth is more
powerful.
Privacy Concerns

“Cookies:”



Software that records browser’s Web habits
that can be downloaded/uploaded by a site
that a customer visits.
Combination of cookies + other data
can build customer profiles
Cookies can be sold to advertisers
Privacy Concerns (cont.)

In favor of cookies:



Customers will receive offers that match their
interests
Improved information will lead to win/win
marketing
Against cookies:


Abuse of customer information likely
Unrestricted sharing of information harmful
Fair Information Practices Act


Companies must disclose how they collect and
use information.
Customers can decide whether to allow
information about them to be collected or used



“opt-in” procedures
Customers can inspect their data/correct errors
Government can impose penalties when
companies violate these principles
Do Internet Companies
Adhere to these Principles?

Most use “opt-out” procedure:


Customer must take an action to prevent
the company from collecting information
about him/her
Companies share information with other
companies without informing (let alone
receiving consent) customers.
How Reputable Companies Operate



Follow “opt in” procedures
Post (and follow!) privacy policies
Receive a “privacy seal”

www.truste.org
What Surfers Can Do to
Protect Privacy

Set security preferences on their browser
software



Very inconvenient surfing
Download software to surf anonymously
Download software to accept cookies from only
pre-specified sites

Platform for Privacy Preferences (www.w3.org/P3P)
Changing Rules of the Game in
an On-line World




Customer control
Requires fewer fixed assets
Companies less hierarchical
Respond faster to the marketplace
Threats to Traditional
Businesses








Extinction
Loss of potential new revenue stream
Cannibalization of existing revenue stream
Alienating/confusing current customers
Alienating existing distribution/sales channels
Access to resources
Attracting/retaining employees
Downward pressure on prices
Coping with Threats

Creative destruction:



Willingness to re-invent business model to
capitalize on new technologies
Organizational Structure for On-line Unit
“Re-intermediation”
Organizational Structure Options

Separate entity (skunkworks)



Integrated within existing operations



Pros: Capitalize on stock advantages; free reign to
compete without shackles
Cons: Signals lack of willingness to be innovative within
context of parent organization
Pros: Realize synergies between on- and off-line
businesses
Cons: Conflicts of interest
Middle-ground

Minority stake in separate companies
The Changing Role of the
Intermediary


Disintermediation: bypassing of traditional
intermediaries in favor of going direct on
the Net.
Options for intermediaries



Do Nothing
Re-invent sources of value
New types of intermediaries
Cybermediaries


Brokers
Electronic marketplaces

Hubs
Other Internet Business Functions
Streamline Supply
Chain Management
(Extranets/Intranets)
Save on Ordering Costs
On-line Recruiting
Speed Product
Development
Reaching International
Markets
FIRM
Get Feedback From
Customers
Coordinate Finance
Customer Service
Improve Business
Relationships
Other Business Functions
Performed Using the Net: (in
addition to revenue generation)

Supply Chain Management


Save on Ordering Costs




EDI  Internet-based
Electronic marketplaces with auctions
Speed Product Development


Extranets
Intranets
Get Feedback from Customers
On-Line Recruiting
Other Business Functions
Performed Using the Net




Reach International Markets
Coordinate Finance
Improve Business Relationships
Move Customer Service On-Line

Automate inquiries
Content (information) sites



Portals
On-line communities
Electronic marketplaces (“hubs”)
On-Line Communities

Attract visitors based on common
interests


Focus on connectivity/interactivity


iVillage.com; parentsoup.com
Chats, etc.
Members of on-line communities stay at
the site longer, spend more money at the
site than non-members
Electronic Marketplaces

B2B hubs/communities that connect
multiple buyers and sellers



Offer transaction efficiencies
Offer price savings (i.e. through reverse
auctions)
Typically run by cybermediaries

Earn revenue as percent of transactions
B2B Electronic Marketplaces

Vertical or Horizontal

Vertical: industry-specific


Chemconnect.com; e-Steel.com
Horizontal: cuts across industries, more likely
to be function-specific

Adauction.com; MRO.com
B2B Electronic Marketplaces

Concerns:


Antitrust issues arise from market dominance
and monopoly-like economic power
Possible negative effects on long-term
buyer/supplier relationships
Keys to On-Line Success
Build Repeat Site Traffic and Manage
On-Line Customer Relationships
Evaluate Traffic at the Site
Promote the Web Site to Build Traffic
Create Effective Web Site Design
Web Site Design—4 Cs

Content



Focus on right information in the right format,
with easy navigation
Requires customer research
Commerce

On-line selling must provide value beyond
brick-and-mortar channels
Web Site Design—4 Cs

Customization


Use personalization to customize the browser’s
experience
Community

Promote interactivity and sense of community
Create “stickiness:” visitors have reasons
to return repeatedly to the site.
Promote the Web Site






Traditional and on-line advertising
List with search engines
Traditional promotions
Use affiliates
Viral marketing
Permission marketing
Issues in On-line Advertising




On-line advertising doubled from 1997-1998;
doubled again from 1998-1999.
On-line advertising represents only 2.8% of
corporate advertising budgets.
Avoid gratuitous digitization; “brochure-ware”
Active model of customer information-acquisition

(vs. passive model of broadcast media)
Types of On-line Ads
Other
(rich media,
keyword
searches)
11%
Email ads
2%
Sponsorship
27%
Interstitials
4%
Banner Ads
56%
Banners

Pros:



Inexpensive
With enough creativity and repetition, can
generate awareness
Cons:


Easy to ignore
Low click-through rates
 Only .36% in 1999
Ways to Improve ClickThrough Rates on Banners

Interactive Banners



Experiential
Target the ad appropriately using cookie data
Live Banners with video/sound





“Rich media”
Don’t take surfer away from host site
Can use a direct selling model from the banner
Require computing speed and bandwidth; more
expensive to create
Higher response rate: click-on rates as high as 10%
Interstitials-


“In your face;” “pop-ups”
Definitely attention-getting
Users find the annoying—

Must close pop-up window to continue
surfing
Interstitial
Keyword Ads

To improve targeting of banner ads
Co-Branding/Sponsorships


Advertiser sponsors a part of a content
site
Keep sponsor clearly identified

Don’t blur line between information
credibility and advertising
Example of a Sponsorship
Pricing of On-line Advertising

Function of:


Number of viewers
Degree to which population is a more narrowlydefined target


Two pricing formats


General portal audience vs. WSJ.com
CPM or “cost-per-click”
Need to measure number of viewers of online ads
CPM or Cost-Per-Click?

CPM:




Based on more passive view of information
acquisition
Assumes that exposing people to banners equates to
an impression
May be viable for an awareness-building campaign
Cost-per-click:



Pay only when a surfer clicks on a banner
Consistent with the active view of information
acquisition
Probably makes sense for a sales-oriented campaign
Directories
Search
Engines
List with Search Engines
List with Search Engines

How Search Engines Work:



Send out spiders, or crawlers that store copies
of Web pages and index some words from the
page
When surfer types in words, search engine
looks up words in its index and calls up the
appropriate Web address
Search engines access only limited number of
Web sites;

Therefore, important to register Web site with
search engines
List with Search Engines

Can can get URL on index by:


Registering with search engines
Circulating fresh content through the site
regularly
See more on search engines in the appendix, and
slides at the conclusion of this file.
Other Ways to Build Site
Traffic

Traditional Promotions


Use sweepstakes, contests to get visitors to
the site
Affiliates


Web sites that are cross-linked to another
May earn a commission on sales generated
from referred traffic
Other Ways to Build Site
Traffic (Cont.)

Viral Marketing




Relies on Web site visitors to pass information/offers
on to friends
Powerful in Internet environment
Requires compelling content
Permission-Based Marketing



Ask customer to opt-in to receive e-mail messages
for marketing
Consistent with Relationship Marketing
Don’t spam!
Evaluate Web Site Traffic


Use log files
Use software:


WebStat.com; Hitbox.com; Webtrends.com
Track data such as:





Hourly/daily/weekly monthly hits and unique visitors
Top referring URLs
Search engine sources
Keywords searched
Geo. Location (state/country)
Build Repeat Site Traffic/Manage Online Customer Relationships


Personalization
Customer Service
Personalization

Tailors customer’s browsing experience
based on tastes and preferences


Cookies
Info the browser submits



Ex: Amazon.com
Boosts new customers, revenues
Benefits in other areas: forecasting,
customer research/feedback
Predicting Repeat Sales
Correlations between online shoppers’ ratings of a variety of
factors and their likelihood to buy again from the same site:
LEVEL AND QUALITY OF CUSTOMER SERVICE:
65%
ON-TIME DELIVERY:
55%
PRODUCT REPRESENTATION:
47%
PRODUCT SHIPPING AND HANDLING:
47%
PRIVACY POLICIES:
41%
EASE OF ORDERING:
22%
PRODUCT SELECTION:
22%
PRODUCT INFORMATION:
22%
WEB SITE NAVIGATION AND LOOKS:
PRODUCT PRICE:
21%
20%
Hanrahan, Timothy, (1999), “Price Isn’t Everything,” Wall Street Journal, July 12, p. R20.
Models of On-line Customer Service

Tiered approach

Start with self-help


E-mail inquiry


Smart software
Tele-Web


FAQs
Interactive chat with customer service rep
Personal contact
Realizing the Internet’s Potential



Change is the norm
Moving toward “bricks-and-clicks”
model.
Requires overturning old business
models
Net Hurdles to be Overcome







Congestion
Security
Privacy
Technical Standards
Quality of connections and Web sites
Cultural Questions
Internet Taxes
More on Search Engines

Directories vs. search engines



Hybrids
Specialty search engines
Cost-per-click search engine:

Goto.com
What “spiders” look for

HTML tags


Title tag
Meta tags






Keyword tags
Description tags
Link Tags
ALT Tags
Comment Tags
Headline Tags
Determining Ranking

Keyword density


Total # of words on page \ # of times
keyword is used
Percentage of relevance

Based on keyword density for each of the 6
HTML tags
Search engines give differential weights to this
information to determine the ranking of a particular
Web page.
Implications for Web Page Design

Know keywords on which to focus Web page
description





Examine competitors’ pages/source code
Understand customer’s behavior
Rely on search engine “hints”
Don’t “spamdex”
Rely on software to optimize page
Search Engine Scoring
www.SearchEngineWatch.com
Indexing
Yes
No
Full Body Text
All
None
Meta Description
All but...
FAST, Google, Lycos,
NLight
Meta Keywords
All but...
Excite, FAST, Google,
Lycos, NLight
ALT text
AltaVista, Go, Lycos
Excite, FAST, Google,
Inktomi, NLight
Comments
Inktomi
ALL Others
Ranking
Yes
No
Meta Tags Boost Ranking
Go, Inktomi
AltaVista, Excite, FAST,
Google, Lycos, NLight
Link Popularity Boosts
Ranking
AltaVista, Excite, FAST,
Google, Go, Inktomi,
NLight
Lycos
Submitting the Page

Manually



Go to search engine site
Add URL
Relying on automated submission
process


AddWeb; Register-it
Mass submissions eliminate ability to tailor
for individual search engine criteria
Check Submission Status

Manually


Go to each Web site to see if indexed
Rely on third-party tools
Caveats in Search Engine
Positioning



Works only for “informed” customers
who know what they’re searching for
May generate traffic; sales requires
other considerations
Time consuming process

Outsource?

Morevisibility.com; Positionsolutions.com
Search Engine Submission
Guidelines
Search Engine
Submit more
than Home Page
Submit Limit
Submitted Pages
Appear In
Non- Submitted
Pages Appear in
Overall
Freshness
AltaVista
Yes
About 5 pages per day
1 to 2 days
About 1 month
1 day to
1 month
Excite
No
25 pages per week
Within 2 weeks
Up to 6 weeks
1 day to
3 weeks
Google
No
No limit, but only sub a
few pages per site
4 to 6 weeks
4 to 6 weeks
1 day to
6 weeks
HotBot
Yes
50 pages per day
Within 2 months
Within 2 months
1 day to
2 month
Go (Infoseek)
No
1 page per day
Within 6 weeks
Within6 weeks
1 day to
6 weeks
Lycos (web index)
Yes
No limit, but stay below
50/day to be safe
3 to 6 weeks
3 to 6 weeks
1 day to
6 weeks
Northern Light
No
No limit, but only sub a
few pages per site
2 to 4 weeks
2 to 4weeks
1 day to
1 month