Transcript Chapter 6 - E-Commerce Marketing and Advertising Concepts

E-COMMERCE MARKETING
AND ADVERTISING CONCEPTS
CHAPTER 6
LEARNING OBJECTIVES
 Understand three e-commerce behavioral issues:

the key features of the Internet audience

the basic concepts of consumer behavior and purchasing, and

how consumers behave online
 Identify and describe the basic digital commerce marketing and advertising
strategies and tools
 Identify and describe the main technologies that support online marketing
THE INTERNET AUDIENCE
 Before firms can sell their products online, they first must understand what kinds
of people they will find online and how those people behave in the online
marketplace
 Two questions that are addressed include:

Who is online?

How do people behave online?
THE INTERNET AUDIENCE
 In 2015 in the US, around 260 million people of all ages had access to the
Internet
 Almost 91 million households in the US (over 75% of all households) had
broadband access to the Internet
 By comparison, 98% of all US households currently have televisions and 94% have
telephones
 Worldwide, around 3.1 billion people are online
 Internet growth has slowed to about 2% a year in the US and it is unlikely that
Internet access will reach the same levels as televisions or telephones in the near
future
INTENSITY AND SCOPE OF USAGE
 The slowing growth rate in the US Internet population is compensated for, in
part, by an increasing intensity and scope of use
 Overall, over 71% of all American adults report logging on in a typical day
 Internet use by teens is even more pervasive, with over 90% saying they go
online daily, and about 25% reporting that they use the Internet almost
constantly
 People also spend more time online – almost 2 and a half hours per day
 In 2015, mobile smartphones and tablets are major access points to the Internet
and online commerce
 About 194 million people, almost 75% of US Internet users, access the Internet
using a mobile phone
DEMOGRAPHICS AND ACCESS
 The demographic profile of the Internet – and e-commerce – has changed
greatly since 1995
 Up until 2000, single, white, young, college-educated males with high incomes
dominated the Internet
 This inequality in access and usage led to concerns about a possible “digital
divide”
 Demographic similarities and differences can be assessed by looking at:

Gender, age, ethnicity, community type, income level, and education
DEMOGRAPHICS AND ACCESS (CONT.)
 Gender

Roughly equal percentage of men and women users (84-85%)
 Age

Young adults (18-29) form the age group with the highest percentage of Internet use
(96%)

Adults in the 30-49 group (93%) are also strongly represented

Another fast-growing group online is the 65 and over segment, 58% of whom now use
the Internet

Teens (12-17) also have a very high percentage of their age group online (97%)

The percentage of very young children (0-11) has grown to 50%
DEMOGRAPHICS AND ACCESS
(CONT.)
 Ethnicity

Variation across ethnic groups is not as wide as across age groups

Ten years ago, there were significant differences among ethnic groups, but this has
receded
 Income level

About 97% of households with income levels above $75,000 have Internet access

Compare this to only 74% of households earning less than $30,000
DEMOGRAPHICS AND ACCESS
(CONT.)
 Education

Of those individuals with a high school education or less, 66% were online in 2015

95% of individuals with a college degree or more were online
 In summary, the “digital divide” has indeed moderated, but it still persists along
the age, income, and education dimensions
OTHER INTERNET ACCESS ISSUES
 In 2015, around 91 million US households had broadband service in their homes
 Broadband adoption rates are lower for older adults, those with low levels of
education, and those with low household incomes
 Rural residents, African Americans, and Latinos are also less likely to have a home
broadband connection
 Consumer purchases on the Internet are influenced by “neighborhoods” where
others purchase online
 Social networks have a powerful influence on shopping and purchasing behavior
 Membership in social networks has a large influence on discovering new
independent music, but less influence on already well-known products
CONSUMER BEHAVIOR
 Once firms have an understanding of who is online, they need to focus on how
consumers behave online
 The study of consumer behavior is a social science discipline that attempts to
model and understand the behavior of humans in a marketplace
 Models of consumer behavior attempt to predict or “explain” what consumers
purchase and where, when, how much, and why they buy
 The following slides describe:

a general model of consumer behavior

a more detailed model of online consumer behavior
A GENERAL MODEL OF CONSUMER BEHAVIOR
(FIGURE 6.1)
A MODEL OF ONLINE CONSUMER BEHAVIOR
(FIGURE 6.3)
CLICKSTREAM BEHAVIOR
 Clickstream behavior refers to the transaction log that consumers establish as
they move about the Web
 They may move from search engine, to a variety of sites, then to a single site,
then to a single page, and then, finally, a decision to purchase
 Understanding individual user clickstream behavior may enable websites to be
designed to better support this online purchase decision process
WHY CONSUMERS CHOOSE THE ONLINE
CHANNEL (TABLE 6.2)
REASON
% OF
RESPONDENTS
Lower prices
59%
Shop from home
53%
Shop 24/7
44%
Wider variety of products online
29%
Easier to compare and research
products and offers
27%
Products only available online
22%
Online customer reviews
18%
Better product information available
7%
Promotion via e-mail or text
7%
Social media influence
1%
HOW SHOPPERS FIND VENDORS ONLINE
 Given the prevalence of “click here” banner ads, one might think customers are
driven to online vendors by spur-of-the-moment decisions
 In fact, only a tiny percentage of shoppers click on banners to find vendors
 The three most common methods that shoppers use to find vendors online
include:

Search engines

Online marketplaces (for example Amazon and eBay)

Go directly to a specific retail Web site
 Online buyers are “goal-oriented” and intentional shoppers
WHY MORE PEOPLE DON’T BUY ONLINE
 Probably the largest factor preventing more people from shopping online is the
“trust factor”

Distrust for online merchants

Credit card information loss

Use of personal information and invasion of privacy
 Secondary factors can be summarized as “hassle factors”

Shipping costs

Returns

Inability to touch and feel the product
DIGITAL COMMERCE MARKETING AND
ADVERTISING STRATEGIES AND TOOLS
 Online marketing has many similarities to, and differences from, ordinary
marketing
 The objective of both forms of marketing is to build customer relationships
 But online marketing is also very different from ordinary marketing because the
nature of the medium and its capabilities are so different
 Four new elements of a comprehensive multi-channel marketing plan are:

Web sites

Traditional online marketing

Social marketing

Mobile marketing
SEARCH ENGINE MARKETING AND
ADVERTISING
 In 2015, companies will spend an estimated $25.7 billion on search engine
marketing and advertising
 Search engine marketing (SEM) refers to the use of search engines to build and
sustain brands
 Search engine advertising refers to the use of search engines to support direct
sales to online customers
 There are several different types of search engine advertising
TYPES OF SEARCH ENGINE ADVERTISING
 Organic search

Search engines originally performed unbiased searches where Web sites were ranked
based on a search engine’s algorithm
 Paid inclusion

For a fee, search engines guarantee a Web site’s inclusion in its list of search results
(often labeling them as sponsored links)
 Keyword advertising

Merchants purchase keywords through a bidding process
 Search engine optimization (SEO) is the process of improving the ranking of Web
pages with search engines by altering the content and design of the Web pages
and site
SEARCH ENGINE ISSUES
 While search engines have provided significant benefits for merchants and
customers, they also present risks and costs
 Search engines have the power to crush small businesses
 Merchants may be at the mercy of search engines for access to the online
marketplace
 Other practices that degrade the results and usefulness of search engines
include:

Link farms

Content farms

Click fraud
HOW AN ADVERTISING NETWORK SUCH AS
DOUBLECLICK WORKS (FIGURE 6.7)
PRICING STRATEGIES
 In the early years of e-commerce, sellers were pricing their products far below
their marginal costs to attract new customers and achieve short-term success
 Later, once the customer was part of a large, committed audience, then prices
could be raised to the point where an online seller could achieve a profit
through some combination of revenue models
 Pricing is particularly difficult when information products and services have a
marginal cost near zero
 Several unique pricing strategies have been developed for online content and
services
ONLINE PRODUCT, SERVICE, AND CONTENT
PRICING STRATEGIES


Free and freemium

Users are offered a basic service for free, but must pay for premium or add-on services

The freemium revenue subsidizes the free services
Versioning


Bundling


Creating multiple versions of information goods and selling essentially the same product to
different market segments at different prices
Offers consumers two or more goods for a reduced price
Dynamic pricing

Different from fixed-price strategies

Identifies different prices for different consumers, situations, and time periods
INTERNET MARKETING TECHNOLOGIES
 Online data sources

Web transaction logs – records user activity at a Web site

Registration forms

Shopping carts

Tracking files (cookies, etc.)
 Databases, data warehouses, data mining, and big data
 Customer relationship management (CRM) systems
DATA WAREHOUSE AND BUSINESS
INTELLIGENCE APPLICATIONS
CUSTOMER RELATIONSHIP MANAGEMENT
(CRM) SYSTEMS
 A CRM system is a repository of customer information that records all of the
contacts that a customer has with a firm and generates a customer profile
available to everyone in the firm with a need to “know the customer”
 Data is collected through customer touch points
 CRM systems assist firms in categorizing customers (potential customer, current
customer, high-value customer, lost customer, etc.) and enabling them to best
serve each individual customer based on their individual characteristics and
needs
 The basic idea of CRM is to treat different customers differently, because their
needs differ and the value to the company also may differ
A CUSTOMER RELATIONSHIP MANAGEMENT
SYSTEM (FIGURE 6.10)
AN ONLINE CONSUMER PURCHASING MODEL
(FIGURE 6.11)