Transcript Chapter 9 - SCC Porter

Principles of Internet
Marketing
Chapter 9
E-Commerce Sites
Objectives
In this chapter you will learn about:
• What e-commerce is, who uses it, and how
• The various sources of revenue that e-commerce
marketers rely on to generate profits
• The means and methods of online store
development within the context of social media
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An Overview of E-Commerce
• E-commerce sites provide the ability to shop for,
research, and purchase products via electronic
payment transaction
– Either directly through their site or through a thirdparty payment processing site
• Over 86% of all Web users worldwide have made
at least one online purchase
• 93% of all Web users in Europe and 92% of Web
users in North America have made an online
purchase
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An Overview of E-Commerce
(continued)
Breakdown of e-commerce usage in various world regions, along with the global
total
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An Overview of E-Commerce
(continued)
• In terms of popularity, books and video games are
among the most popular purchases, along with
items that typically require direct consumer
interaction, such as clothing, accessories, and
shoes
– Indicating that for many people, the convenience of
Web shopping is enough to overcome the
inconveniences of not being able to experience the
items first hand
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An Overview of E-Commerce
(continued)
Most popular online purchases
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An Overview of E-Commerce
(continued)
• Benefits to consumer of online shopping:
– Convenience: Being able to shop at any time of day,
not having to wait in lines or push through crowds
– Not being bothered: One of the more annoying parts
of shopping is having pushy salespeople constantly
interrupting consumers
– Easy comparison shopping: Ability to compare
prices and features between retailers far more
quickly than they could by going from store to store
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An Overview of E-Commerce
(continued)
• Benefits to consumer of online shopping
(continued):
– Less expensive: Many retailers offer reduced prices
for making online purchases
– Personalized selection: Online buying habits can be
tracked, and used to offer a more personalization
– Wider selection: Web retailers don’t have to contend
with shelf space issues
– No sales tax: Most states still do not charge sales
tax for online purchases
– Historical order record
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An Overview of E-Commerce
(continued)
• Drawbacks to consumer of online shopping
– Shipping payments: Shipping can be fairly pricey
– Delivery wait time: Consumers may wait from 24
hours to a month or more before delivery
– Non-cash payment options only: Shoppers must pay
through credit card or other non-cash methods
– Inability to experience: Online shopping does not
offer the ability to try on clothes or feel texture before
buying, heavily reducing the product experience
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An Overview of E-Commerce
(continued)
• Drawbacks to consumer of online shopping
(continued)
– Lack of trust: Online shoppers need to trust that their
private information will not be stolen by hackers or
sold by the retailer
– Wider selection: Too many additional choices can be
overwhelming
– Unsocial: Online shopping is less social than
shopping with friends or others in real life
– Lack of assistance: Although sales people at
traditional retailers can be intrusive, they are also
available when shoppers have a question
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An Overview of E-Commerce
(continued)
• Many reasons why consumers select one online
store over another are similar to why they choose
one brand over another
– Positive experiences will likely result in return visits
– Positive experiences will likely result in positive
word-of-mouth
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An Overview of E-Commerce
(continued)
• Demographic breakdown of online shoppers shows
an older audience of 30-49 year olds, as opposed
to most social networking sites, which are
dominated by younger users
– Online shoppers tend to have higher annual income
– Online shoppers tend to have higher levels of
education
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Sources of Revenue
• One of the key requirements for any e-commerce
marketer is to set the right prices for their products,
determined by a number of factors:
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–
–
–
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Overall cost of doing business
Volume of business they expect to do
Overall demand for what they are selling
Prices set by competing companies
What the market will bear
• How much are consumers willing to pay
– How well established the brand is
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Direct Sales
• Direct sales represent the largest and most
important revenue stream for e-commerce sites
• Direct sale of products are made in numbers of
units, with each unit multiplied by the sale price
• Consumers who purchase products do so for one
of three reasons:
– They have a need for a certain type of product
– They want a certain type of product
– They are compelled to buy an item at or around the
time of purchase (impulse)
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Direct Sales (continued)
• Because online stores do not have floor space for
displays, sales people to point the shopper in a
specific direction, or signage hanging from the
ceiling, e-commerce marketers have only two
means of pushing their products to consumers:
– Page layout
– Compelling presentation of their product
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Direct Sales (continued)
• In the presentation of product, marketers generally
rely on three elements:
– Copy: Which can be used to describe the product, its
attributes, its value and any other important
information
– Pictures: Which are a visual reference so that
shoppers can see what they are buying
– Video: Video of the product is sometimes used to
demonstrate how the product works, market its
benefits, or build excitement for the product
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Direct Sales (continued)
This e-commerce site sells a variety of health-related products. Notice that on the page on the left, each product is shown with
only a small amount of information – just enough to interest the shopper. Once a shopper investigates a particular product more
closely by clicking on it (page on the right), the store provides more information, including a more detailed product description and
a list of specific features
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Direct Sales (continued)
The Home page on the left of the e-commerce site Ecomowers shows thumbnails of products to give shoppers a preview of what
the products look like. Once a product’s thumbnail is clicked on (page on the right), a larger picture of the product is shown. Notice
that below the main image are other thumbnails of the same product shot from different angles.
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Indirect Sales
• E-commerce marketers fall into 1 of 2 categories:
– Extensions of traditional offline retailers
– Their own entity without an offline component
• E-commerce sites may serve as a point of research
for shoppers before going to the retailer and making
their purchases offline
• 81% of internet users have used the Web to do
research on a product they’re considering purchasing
• E-commerce stores are even more effective in helping
to increase sales at offline entities
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Indirect Sales (continued)
• The importance that Web-generated information
bears in the decision to buy increases with the
value of the product (such as a home) or the weight
of the commitment (such as a long-terms cell
phone contract)
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Paid Memberships and Subscriptions
• Some e-commerce sites sell paid memberships and
subscriptions as well as (or instead of) actual physical
products
• Typically, subscriptions are for information or usage
that can be accessed on a Web site only after
payment has been made
• While subscriptions can be a good source of ongoing
revenue, subscriptions can be a hard sell
– Marketers have to make a compelling case for why a
user should pay every month or year for a particular
service
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Paid Memberships and Subscriptions
(continued)
Although most of the Marketwatch.com Web site provides free investment information, a number of paid
subscriptions offer more in-depth and expert information
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Paid Memberships and Subscriptions
(continued)
The online dating site JDate.com allows users to post a profile and search other user profiles for free, but this subscription screen
shows up as soon as a non-paying user tries to contact someone else on the site
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Advertising
• While advertising is not typically the primary source
of revenue for e-commerce sites, online advertising
can still provide a strong revenue stream to
marketers
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Advertising (continued)
The bottom of the Target site features the Jell-O brand front and center, generating co-op revenue from the manufacturer
for better, more visible page placement.
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Shopping on the Social Web
• The advent of social media tools has had a
significant impact on changing the online shopping
experience, in that consumers expect the online
stores they purchase from to go beyond simply
offering products to buy
• Customers expect e-commerce site to create an
intimate environment with personalized service and
peer-to-peer communication tools to aid product
research and allow avenues of honest feedback
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The Store Layout
• E-commerce marketers need to design and organize
their online stores to do the following:
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Spotlight specific items that the marketer wants to sell
Promote other saleable items
Lead customers to other promotional areas
Provide clear and uncomplicated navigation that
organizes products into categories
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The Store Layout (continued)
• E-commerce marketers need to design and organize
their online stores to do the following (continued):
– Offer easily accessible help, whether through live
chat, e-mail or another method of contact
– Give shoppers easy access to their account
information
– Present a shopping cart that can be easily accessed
at all times for item inclusion, removal or purchase
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The Store Layout (continued)
• The most valuable space on any e-commerce site is
the Home page above the fold
– Marketers pay particular attention to how this space is
presented
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The Shopping Cart and Check-Out
Process
• Every successful site needs a shopping cart and
check out process that is as efficient and painless
as possible
• The shopping cart holds the items that the
consumer wants to purchase
– Calculate the price times the quantity of each item
– Add the costs for all the items in the shopping cart
together
– Maintain a running total of all of the items being
purchased
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The Shopping Cart and Check-Out
Process (continued)
The shopping cart on Amazon.com. Like any quality shopping cart, this one reminds the user of the item(s)
they have seleted, and calculates the subtotal based on the price multiplied by the quantity.
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The Shopping Cart and Check-Out
Process (continued)
• A well-organized site will give the user access to his
or her shopping cart at all times to review their
intended purchases, and a well-executed shopping
cart will allow products to be removed as easily as
they are put into the cart
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The Shopping Cart and Check-Out
Process (continued)
• Nearly 75% of all online shoppers abandon their
shopping carts before making the final purchase for
a number of reasons:
– The process is too long, confusing, and cumbersome
– The site requires too much personal information
– The marketer adds too many extra charges to the
sub-total before final check out
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The Shopping Cart and Check-Out
Process (continued)
• Nearly 75% of all online shoppers abandon their
shopping carts before making the final purchase for
a number of reasons (continued):
– The page layout of the shopping cart and/or the
checkout process is poor and disorganized, causing
the consumer to question the legitimacy of the site
overall
– The brand has not built up enough trust with the
consumer to encourage them to take the risk and
purchase the product online
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The Shopping Cart and Check-Out
Process (continued)
• A successful check-out system needs to gather the
following information:
– The shopper’s shipping address (where the items
should be delivered)
– The method of payment
– The billing address, if the shopper intends to pay by
credit or debit card
– The desired shipping method
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Intuitive and Personal Content
Provision
• Online stores retain an intimate knowledge of each
and every customer
• Marketers can gain a significant advantage by
arranging the home page of their stores in such a
way that the products offered are the products most
likely to be desired by individual customers
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Intuitive and Personal Content
Provision (continued)
• Marketers can also use geotargeting to offer
products to different shoppers based on their
geographic location
• These methods provide both improved service as
well as help increase the potential for increased
spending
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Feedback and Reviews
• Consumers are more apt to trust their peers than
they are to trust marketers
• With the popularization of social media, e-commerce
stores increasingly allow users to communicate their
feelings about products:
– Ratings: Users can rate a product or media, usually
on a scale of one to five
– Reviews: Users are allowed to leave their reviews of
the product or media, expressing their opinions in
their own words, whether positive or negative
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Feedback and Reviews (continued)
• A a full third of all online shoppers have posted
reviews about a product after they have purchased it
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Feedback and Reviews (continued)
The customer review area for a product on Target.com. The average review rating is shown directly below the
product picture, and full reviews are shown a bit lower. Notice that each review also shows how many other
shoppers found that review helpful.
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Summary
• E-commerce is used by consumers across
practically all demographic boundaries, although
adults over age 30 and with higher annual income
are more apt to make use of e-commerce tools
• Brand and trust equity play a large role in shoppers’
decisions about where to make their purchases
– Factors that are especially important to customers
because concerns about providing sensitive
information are often a deterrent to shopping online
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Summary (continued)
• While there are many pros and cons associated
with shopping on the Web, convenience, time
savings, and potential for lower prices are among
the biggest reasons why consumers look to the
Web
• While direct sales is the primary means of turning a
profit, other avenues also exist, including indirect
sales in the case of consumers visiting an online
store to do research before making their purchases
at an offline store, the sale of membership
subscriptions, and advertising
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Summary (continued)
• The way an online store is designed is the key to
whether or not marketers can move their shoppers to
take action.
• E-commerce stores need to promote their most
important products up front, give consumers access to
other key products, and divide all products into
accessible categories
• Marketers can increase sales through social media
applications such as product reviews, personalizing
each store visit based on the individual consumer’s
shopping history, and making the cart and checkout
process as easy and trustworthy as possible
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