Managing Online Marketing
Efforts
Module 9
Source: Strauss, Judy and Raymond
Frost (2001), E-Marketing, Prentice-
Hall: New Jersey.
Module 9 Objectives
1. Describe what is meant by E-Marketing
and E-Business.
2. Describe what are the 10 new rules of E-
Marketing.
3. Describe what are the challenges and
opportunities involved with E-Marketing.
4. Describe who is online,what impacts
online use, and how measured.
Module 9 Objectives
5. Describe the issues of the product
element online.
6. Describe the new product trends in the
B2B and B2C market.
7. Describe why the Net is efficient or not
efficient in terms of pricing.
8. Describe how the Net has impacted
distribution.
Module 9 Objectives
9. Describe the E-Business models.
10. Describe Online Marketing
Communication Strategies.
11. Describe How to Measure the Online
Audience.
12. Describe How the Net Helps Firms
Build 1:1 Relationships.
Module 9/Obj 1: What is meant
by E-Marketing and E-Business.
EB=EC+BI+CRM+SCM+ERP
– EB = E-Business
– EC = E-Commerce (transactions, e-tailing)
– BI = Business Intelligence
– CRM = Customer Relationship Mgmt - uses
digital processes and integrates customer
information gathered at each touch point.
– SCM = Supply Chain Management
– ERP = Enterprise Resource Planning (SAP)
Module 9/Obj 1: What is meant
by E-Marketing and E-Business.
E-Marketing
– Increases efficiency in
traditional marketing
functions.
– Technology of e-
marketing transforms
marketing strategies.
This results in new
business models that
add value and profits.
emarketer exercise
Module 9/Obj 1: What is meant
by E-Marketing and E-Business.
Level of commitment to E-Biz can vary
– Individual BusinessActivity - aim for efficiency
(cost reduction) Ex. Website for brochureware
– Business process - aim for effectiveness
(incremental sales, retention) (ex. CRM)
– Enterprise - the firm automates many business
processes in a unified system(ex.Click+Mortar)
Mary Kay Exercise
– Pure Play-business transformation (dot.com)
(competitive advantage, industry redefinition)
Module 9/Obj 2: The 10 new
rules of E-Marketing.
10 New Rules of E-Marketing
– 1. Power Shift from Sellers to Buyers - buyer
attention is a scarce commodity
– 2. Increasing Velocity - rapid change
– 3. Death of Distance - geographic location not
an issue when collaborating
– 4. Global Reach - borderless global economy
– 5. Time Compression - 24/7.
– 6. Knowledge Management Key - organize data
Module 9/Obj 2: The 10 new
rules of E-Marketing continued.
– 7. Market Deconstruction - separation of
product and information (ex. auto buying)
– 8. Interoperability - open standards for
software design so systems can work together.
– 9. Interdisciplinary Focus - Marketers have to
understand technology (MIS) .
– 10. Intellectual Capital Rules - Imagination,
creativity, and entrepreneurship (i.e. intangible
assets - intellectual property important).
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.
E-Marketing impacts different markets:
– B2C, B2B (1/2+ of volume online), C2C, B2G, G2C.
Consumers Empowered
– Consumers now have more control. They want:
Speed (ex. answer emails quick)
Privacy, safeguards, permission to contact and use information
Low prices, convenience, self-service
Service, personal attention/personalization (treat customers
important)
Value (exceed expectations)
Mass customization (adds value and can be automated).
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.
Consumers want in a website:
– 1 stop shopping with integrated solutions.
– Effective web navigation
– Quick downloads
– Clear site organization
– Attractive/useful site design
– Secure and private transactions
– Free information/services - consumers used to
online culture of getting something for free.
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.
Businesses must address:
– Competition, changing value chain structures, conflict,
and coordinating the front/back end.
Technology
– Costly and changing, but may offer LR savings
But can offer value to both firms and consumers if
done right:
– Benefits of customization, personalization
– Decrease Costs - 24/7 convenience, self-service
ordering and tracking, one stop shopping.
Module 9/Obj 3: Challenges/
Opportunities of E-Marketing.
2.2 million public Web sites with over 300
million web pages (400,000 private)
U.S. spent over $36.6 billion online in 1999
Worldwide 300 million+e-mails sent daily
E-commerce>$1.2 trillion by 2002
IBM e-revenues $1 billion monthly (5x
Amazons’) + saved $340 million online
38% etailers/72% online catalogs profitable
Module 9/Obj 3: E-Bay an
example of E-Marketing success.
Still successful despite E-Bay on track for $1
slowing economy as both billion in revenues in 2002
consumers and firm and 70% earnings growth
searching for stuff to sell. in next 2-3 years.
E-Bay takes a cut of every Has 85% of online
transaction - low risk as consumer auction market.
they don’t have to address Firms also set up shops to
inventory, warehousing, or sell at fixed prices.
fulfillment issues. Source: Time (11/5/01)
37.6 million users in 200 E-Bay Exercise
countries. 1/2 of users
referred to by other users.
Module 9/Obj 4:Describe who is
online and what impacts use.
Size of the Internet (2000)
– 41% of the US use Internet (110 million).
Online usage in U.S. becoming mainstream. 84% of all users
utilize e-mail: 4 trillion email vs. 107 billion first class mail.
57% North America shopped online, spend $460 annually.
– World adoption now growing faster with an estimated
275.5 million online than US.
Largest Internet population in N. America but 6 out of top 15
countries are European. These top 15 countries account for
84.6% of the world Internet users.
– Idiom exercise
Module 9/Obj 4:Describe who is
online and what impacts use.
Adoption Barriers
– In Industrial nations, B2C/C2C enticed businesses, in
developing nations the B2B market will lead consumers
– SocioCultural Issues - language, education, tangibility
(want to touch products), sociability, use of credit cards
– Technology Issues - in some countries low PC
penetration and communications infrastructure
concerns; another concern is that people getting online
with different devices with different screen sizes.
– Legal and Political Issues- censorship, intellectual
property, etc...
Module 9/Obj 4:Describe who is
online and what impacts use.
Attitude Toward Technology
– CAT - Consumer Acceptance of Technology
(done by SRI who did VALS).
CAT examines 3 levels: How technology benefits
individuals, the impact of technology on the image
of group one is in, and how society reacts to it.
– Technographics - Forrester Research
Looks at attitudes toward technology, income, and
primary motivation to go online
Opportunistic or pessimistic toward technology
Forrester Exercise
Module 9/Obj 4:Describe who is
online and what impacts use.
Home and Work Access
– Home has slower connections, relates to use.
ISP - like a utility service
– AOL has 54% of US ISP market
Wireless - growing but problematic, Europe
may lead North America here
Time Online - stay on longer when not
charged per minute (time charge in Europe)
Module 9/Obj 4:Describe who is
online and what impacts use.
Consumer Navigation Behavior
– Attention - concept of FLOW.
Flow is the state occurring during network
navigation that is (1) characterized by a seamless
sequence of responses facilitated by machine
interactivity, (2) intrinsically enjoyable, (3)
accompanied by a loss of self-consciousness, and
(4) self-reinforcing.
– Attention is a desirable and scarce commodity.
Module 9/Obj 4:Describe who is
online and what impacts use.
– Privacy - important to users. Marketers have to
consider when using e-mail databases and
collecting information
– User Control of Message - nonlinear, pull
rather than push for information, need for
navigation aids.
Needto understand click stream patterns (a user’s
Web surfing patterns).
Module 9/Obj 4: Media Metrix -
example of measuring online use.
Media Metrix It measures audience
One of the leading usage behavior in real
Internet audience time, click by click,
measurement firms page by page, minute
worldwide. by minute. Also has
A metering device that demographics for
measures actual sample. Has merged
software usage and with key companies.
web pages visited. Media Metrix
Like a Nielson box. Exercise.
Module 9/Obj 4: Measuring
online usage with technology.
Client-Side Data Collection
– Cookie files (ex. Double Click)
– Clickstream - PC Meter (ex. Media Metrix)
Server-Side Data Collection
– Website log software
– Real-time profiling track’s user’s movements
through a website-reports at a moment’s notice
Real-Space Approaches - offline data
collection (ex. bar code scanners)
Module 9/Obj 5: The issues of
the product element online.
Product Attributes Issues
– Product attributes include overall quality and
specific features. Need to consider features
from user perspective - I.E. benefits received.
– Internet’s impact on customer benefits has
revolutionized marketing: for example
customization/bundling that consumers can do
themselves (ex. Dell site when buy a
computer), and personalization.
Module 9/Obj 5: The issues of
the product element online.
Branding Issues
– Apply existing brand names online. Create new
brand names online. Cobrand with another
firm. Also, what domain name to use for web.
Support Services Issues-Customer support key.
– Provide support services during/after purchases.
– Help customers with installation, maintenance
problems, product guarantees, service
warranties, and overall customer satisfaction.
Module 9/Obj 5: The issues of
the product element online.
Labeling Issues
– For online - the terms of product usage, product
features, and other information comprise online
labeling at Web sites. Also copyright issues.
– BBBOnLine logo - for members.
– TRUSTe privacy shield - for meeting certain
terms of use regarding privacy of customer
information.
Module 9/Obj 5: The issues of
the product element online.
TRUSTe Labeling Post notice and disclosure
continued of collection and use
practices (policy)
Independent, nonprofit,
regarding PII (personally
privacy initiative -
identifiable information) -
provides seal/logo to those
Give users choice and
who meet its stated
consent over how PII used
philosophies.
Put data security and
Adopt/implement privacy
quality, and access
policy
measures in place to
TRUSTe Exercise safeguard PII
Module 9/Obj 5: The issues of
the product element online.
Product Cost Issues:
– Nonmonetary cost reductions:
Netis convenient, fast, saves time due to self-
service, one-stop shopping, automation, integration.
– Shopping agents make price comparisons easy.
– Factors though that increase price:
Distribution-shipproducts separately, ship overnight
Affiliate program commissions
E-firms spend a greater % of sales on promotion.
Site Development/Maintenance
Module 9/Obj 5: The issues of
the product element online.
Additional Product Issues
– Market deconstruction - disaggregation and
reaggregation of products/services.
– Velocity results in fierce competition, product
imitations, and short PLCs.
– Product differentation key.
– Power shifts to buyers - word of mouse.
– Knowledge management of customers.
– Move from atoms to bits increases complexity.
Module 9/Obj 6: The new
product trends in the B2B
4 B2B Trends:
– Value Chain Automation, Outsourcing,
Information Sharing, Centralizing Information
Access
– 1. Value Chain Automation
Automate existing business processes to improve
efficiency and effectiveness.
Exs. Order execution and data mining.
Module 9/Obj 6: The new
product trends in the B2B
1. Value Chain Automation continued
Benefitsto buying off-the-shelf enabling software:
rapid deployment, relatively bug-free rollout,
integrated solutions, large number of features,
compatibility with trading partners, and lower cost.
– Can aid with promotion - can customize
Affiliateprograms - referral fees to drive traffic to
sponsor (need to monitor and credit click throughs)
Targeted advertising - ex. DoubleClick helps target
ads based on surfing
Catalog aggregator compiles data into one database.
Module 9/Obj 6: The new
product trends in the B2B
1. Value Chain Automation continued
– Other ways can be used include:
Product configuration - expert systems
Brokerages
Payment/Financing - automates credit
Customer Service - must route, respond to emails
quickly, analyze for patterns
Distribution - Just-In-Time delivery
Relationship Marketing - data-mining
Module 9/Obj 6: The new
product trends in the B2B
2. Outsourcing
– Application Service Providers (ASP) - perform
value chain functions for client off-site.
Businesses access application via Web.
– Usually focuses on a single value chain
function (Ex. Payroll service)
Advantages: lower startup costs, lower IS staff
costs, lower switching costs.
Disadvantages: lack of control over key customer
data and business process.
Module 9/Obj 6: The new
product trends in the B2B
2. Outsourcing Continued
– VSP - Vertical Service Providers
Aggregates almost all value chain functions for a
client. Can run an entire business.
3. Information Sharing
– Electronic Data Interchange - EDI -
The exchange of data between businesses in digital
form. Consistent standards so a common format for
data interchange. Problem with proprietary formats.
Module 9/Obj 6: The new
product trends in the B2B
4. Centralizing Information Access
– Corporate Portals
Uses Web technology to create sites for employees -
extension of intranet. Portal translates all of firm’s
data into a common interface. Easier for employees
to search.
– Extranets
Corporateportals whose access has been opened to
value chain partners (ex. groupware software like
Lotus Domino).
Module 9/Obj 6: The new
product trends in the B2C
3 Primarily B2C Trends
– Multimedia, Assistive Technologies, and
Convergence of Media
1. Multimedia
– With cable modems and DSL modems:
Conferencing software, Webcams, Streaming audio,
CD-quality audio, Streaming video, Internet
telephony VoIP - Voice over Internet Protocol
Module 9/Obj 6: The new
product trends in the B2C
2. Types of Convergence of Media
Voice, video, and data on corporate networks - one
instead of 3 systems.
Wireless devices and the Web (ex. PDAs using
Wireless Access Protocol - WAP).
The Web with broadcast media - single appliance
that receives broadcast content over the Internet.
3. Assistive Technologies - to help disabled
Voice-activated computers, large-type screen
displays, type-to-speech or braille, speech-to-text-
telephony, and eye gaze-to-type (control by staring).
Module 9/Obj 7: Why the Net is
efficient in terms of pricing.
In an efficient market
– Lower prices due to shopping agents, reverse
auctions, tax-free zones, venture capital, and
competition.
– Lower costs of order processing (self-service),
JIT, less overhead with no retail storefront,
customer service cheaper online, save on
printing/mailing+digital product distribution
– Also Web has high price elasticity, with
frequent and smaller price changes.
Module 9/Obj 7: Why the Net is
not efficient in terms of pricing.
– There is Price Dispersion - greater price spread
between highest/lowest price because:
How goods priced online - Priceline vs. delta.com
Delivery options - ex. overnight more expensive
Time-sensitive shoppers - don’t search for best price
Branding - 5% of Web sites get 75% of hits
Switching costs may be high
Second-generation shopping agents - compares
benefits beyond price
Metamediaries - Web sites geared towards a life
event (ex. Edmunds); people like a 1 stop shop
Module 9/Obj 8: Describe how
the Net has impacted distribution.
– There is market deconstruction (removing
functions from some) and reconstruction
(reallocating functions to other intermediaries).
Disintermediation - process of eliminating
traditional intermediaries to reduce cost. Thought
would happen but intermediaries may be more
efficient.
With aggregation - intermediaries bring together
product from multiple suppliers (who make a high
volume of a narrow range of product) so consumers
have more choice in one location (ex. CDNOW).
Module 9/Obj 8: Describe how
the Net has impacted distribution.
– New intermediaries created - shopping agents,
buyer cooperatives, metamediaries
– New ways to match products to buyers -
shopping and collaborative filtering agents
– Negotiating Price - 2 way dialogue, bidding
– Much cheaper to process transactions online.
– Facilitating Function - ex. market research
– 3rd party logistics-outsourced - ex. FedEx
Module 9/Obj 8: How Internet
has impacted distribution.
– Buyers’ power increased.
Buyersnow have more information and access to
more suppliers.
– Some suppliers (ex. Walmart) who have used
electronic systems to notify suppliers have
gained power.
Suppliers that took early lead online and those that
built relationships with buyers also gained power.
Network of buyers and suppliers can exchange data
with Web-based interface
Module 9/Obj 9: Describe the
E-Business models.
A business model defines a revenue stream to
provider, benefits to consumer, and architecture to
deliver those benefits
– 1. Content Sponsorship - create web sites that draw
traffic (may be niche audience) and sell ads.
– 2. Direct Selling - benefits from disintermediation, works
with digital products and perishable products
– 3. Infomediary - online firm that aggregates and distributes
information (ex. marketing research done by Media Metrix)
– 4. Intermediary Models-Brokers, Agents,E-Tailers
Module 9/Obj 9: E-Business Models
Intermediary Models
– Brokerage - online exchange (E*Trade), online auction
– Agent - can represent seller or buyer:
– For Seller: selling agents- ex. affiliate programs, manufacturer’s
agent - ex. catalog aggregators, metamediary - represents a cluster
of manufacturers, e-tailers, and content providers organized around
a major event or asset purchase (ex. TheKnot), virtual malls
– For Buyer: shopping agents/2cd generation shopping agents,
reverse auction, buyer cooperative
– E-Tailer - bit vendors (ex. nytimes.com), tangible products
(cost premium for shipping since inefficient to ship 1 item)
Module 9/Obj 10: Online Marketing
Communication Strategies
ADVERTISING
– Growing from $1billion (98) to $22billion (04)
– USA spends 83% of world’s Internet ads
– 8% of ad budgets spent on Internet
– Brand advertising online - can do impression ads; but
for brand advertising best medium is still TV
– Direct response ads - create action; big strength for
Web as it leverages 2-way communication. Pay by
click through (action) vs.CPM (pay for eyeballs).
Module 9/Obj 10: Online Marketing
Communication - Advertising cont.
E-Mail - least expensive, text embedded in content; can
include graphics as bandwidth grows.
Web Site Advertising
– Banners and Buttons - builds awareness and changes
attitudes; but low click-through; evolved from click
here to animated GIF to interactive
– Sponsorships -editorial content and advertising
– Interstitials - daughter windows or pop ups; Java-based
ads that pop up while main content loading. Seems
slow loading and users must close.
Module 9/Obj 10: Online Marketing
Communication - Advertising cont.
In deciding media to buy consider:
– Effectiveness - reaching target market
– Efficiency - doing so at lowest cost
CPM-cost per thousand; Web averages $33.75 CPM
Technology sites have highest CPM
General Portals - ex. Yahoo and AOL get 15%
Internet traffic but 45% ad dollars
Vertical sites - focus on narrow topics get 20% ad
dollars; other niche sites 24%
Module 9/Obj 10: Online Marketing
Communication Strategies
SALES PROMOTION-
– E-Coupons
Use will grow as only 60% are aware they exist.
– Sampling
Free downloads for demo periods, clips.
– Contents/Sweepstakes - can increase stickiness
(length of stay on a Web site )
require skill. No purchase needed for
Contests
sweepstakes. Need to move customers to purchase
Module 9/Obj 10: Online Marketing
Communication Strategies
PUBLIC RELATIONS
– Content Sponsorship - free online content published by
firm to inform, persuade, or entertain.
– Brochureware but can expand to be interactive. Need to address
speed, navigation and search issues.
– Community Building -Chat rooms/discussion groups
– Online Events
Generate user interest, draw to site
– Online Customer Service-need to respond w/in 48 hours
but 1/2 of firms don’t respond which causes dissatisfaction.
Module 9/Obj 10: Online Marketing
Communication Strategies
PERSONAL SELLING - for generating leads.
DIRECT MARKETING
– E-Mail: Adv - no postage, convenient to respond (link),
automatically individualized; Disadv -lists,spam
How use E-Mail: announcements, newsletters, offers. Can use
graphics. Can generate or buy lists.
– Opt-In (volunteer) vs. Opt-Out
Opt-in has higher response rate but higher CPM, consumers
“paid to respond”, need to remind consumer they asked.
Permission Marketing - don’t want to be spam
Viral Marketing - word of mouth online
Module 9/Obj 11: How to
measure the online audience.
– Good audience measures critical- who reaching.
Hits - most simplistic, inflates count
Page Views - what about page length
Visitors - could be multiple visits by one
Site Stickiness - 1 hour sticky
Impressions - sold on # of impressions
Click-Through - performance measures
Metrics used to evaluate sites: CPM, click-through,
conversion rate (#orders, #visitors, cost per click,
cost per order, average order value.
Module 9/Obj 11: How to
measure the online audience.
Consumer-Centric Model - like Nielsen’s
– Software records clickstream data at panel user’s PC
(demographically segmented panel).
– Summarizes traffic patterns on site.
– May underestimate business use and smaller sites.
Site-Centric Model - Records data at Web site
server’s log file to reveal # of hits, page views, length of
visits, visitors. Needs to be conducted by 3rd party
auditors. Problems with caching, firewalls.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
Shift from mass mktg to individualized mktg.
Internet facilitates relationship marketing. Shift from customer
acquisition to retention-profits w/ fewer high-value customers.
Relationship Capital a key asset.
As customer attention and control is scarce, a firm’s ability to
build/maintain relationships with customers, suppliers, and partners
may be more vital than their capital and financial assets
Relationship Levels
One-financial bond through price strategies
Two-social interaction with customers
Three-add value through structural solutions
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
Customer Relationship Management (CRM)
– The process of creating and maintaining relationships
with customers.
– Holistic process of identifying, attracting,
differentiating, and retaining customers.
– Integrates firm’s entire supply chain to create customer
value at each step.
– Results in higher profits through more of customer’s
business.
– Stakeholders and technology important in development.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
CRM Process
– 1. Identifying Customers
Enticecustomers to provide more information
Track behavior electronically - privacy concerns
– 2. Differentiating Customers by value
20% customers = 80% profit
Value Differentiation - evaluate Lifetime Value and
RFM - recency, frequency, and monetary
Look at sales over time versus cost
– 3. Customizing Entire Marketing Mix
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
CRM-SCM Integration
– Need to seamlessly link back end (inventory and
payment) with front end (CRM) and the entire supply
chain. Entire supply chain must work together to focus
on needs and profits, but need info for this to work.
Advantages of Connecting Customers w/ SC
– Firms share transaction data so lower inventories and
timely production.
– Design products to better meet needs.
– Provide better customer service; meet needs better.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
Benefits of CRM
– Increased Profits - 5x to acquire than retain
– Lower promotion costs, higher response rates,
more effective salespeople, cost less to service
– Try to increase amount purchased by customer
– Customer retention (especially high value ones)
key but acquisition still important.
– Word-of-Mouth and Referrals
– Partnership Synergy - relationship 2 or more firms (B2B)
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
Building Partnerships Through
Communities
– Internet ideal for gathering people with similar
ideas/tasks (communities).
– Communities form at web sites in chat rooms,
bulletin boards, and distributed e-mail lists.
– If a firm builds/maintains the “watering hole”
where community gathers, can build
relationship with them.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships
Guarding Consumer Privacy
– Privacy a major concern; burden on marketers
to use info responsibly and not be too intrusive
– CRM based on trust - key is relationship
building through dialogue and better targeting.
– Better to have consumers opt-in, may get less
consumers but they will be open to message.
– Remember retention more profitable than
acquisition; relationship capital.
Module 9 Conclusions
– The Internet changes how to do business but
may be a bigger factor for B2B than B2C.
Time is compressed and buyers have more power,
control, and information. Need to make site easy to
navigate and use.
Marketers need to earn trust and build 1:1
relationships with customers.
While Internet may not takeover traditional retail, it
does significantly reduce costs.
Has implications for all elements of marketing mix.
– Any Questions.