Website
Marketing and
Design
Poitiers, September 23-27
Session 3 – Web Marketing Methods,
eCommerce Business Models
1
Topics
• Overview and Theories of Web
Marketing
• eCommerce Biz Models
• B2C: eCommerce takes off
• Case Study: Auto Industry
Part 1 - Introduction to Ecommerce I 2
Perry & W Robson
An Internet Framework
The Web is
Digital
Networked
Individuals
fundamentally
Marketing about individuals
using a network
Internet
Marketing
to access digital
Technology Economics products
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Marketing Evolves as Technology Changes
• Technological innovation brought about the
factory system & enabled mass production
– Marketing emphasis was on logistics & supply chain
management
• Radio enabled national roll-out of brands
– Marketing emphasis was on selling
• Television coincided with the product & brand
management system of marketing
• Mainframe computers enabled new methods of
segmentation & customer management
• The Internet enables mass customization
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Do You Yahoo?
• For 50% of US Web users: Yes!!
• A phenomenal eCommerce success story
• Yahoo! brand extensions provide value add for
users
– Yahoo! games
– Yahoo! clubs
– Yahoo! chat
– Yahoo! auctions
– Yahoo! Stores
• Yahoo! leverages its brand and ability to draw
traffic to generate multiple revenue streams
Part 1 - Introduction to Ecommerce I
Perry & W Robson
5
Most Popular Web Sites
Yahoo! Leads
Most Popular Web Sites
Figure 5.1
60%
51% 50%
50%
40% 35% 34% 33% 32%
28% 27% 26%
30% 24%
20%
10%
0%
aol.com
go.com
msn.com
tripod.com
yahoo.com
lycos.com
excite.com
geocities.com
microsoft.com
netscape.com
Part 1 - Introduction to Ecommerce I 6
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Yahoo! Brand Extensions
The Success of the Yahoo! Brand
Figure 5.2
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Web Benefits to Firms
• The range of Web benefits
– Business models can be based on
improvements in product or service
– Business models can be based directly on
generating revenue
• Let’s take a closer look at these broad
classes of business models
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Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
• Sponsorship
• Alliances
• Banner advertising
• Prospect fees
• Sales commissions
Part 1 - Introduction to Ecommerce I 9
Perry & W Robson
Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays Customer Pays
• Sponsorship • Product sales
• Alliances • Pay-per-use
• Banner advertising • Subscriptions
• Prospect fees • Bundle sales
• Sales commissions
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Closed Loop Marketing
• Marketing is closed loop when specific
customer responses to specific marketing
actions can be tracked
– For example: if an online ad encourages Web site
registration, the campaign is closed loop if users
can be tracked from ad exposure to the decision
to register
• Closed loop marketing leads to rapid learning
– Marketers can experiment with prices, ad copy,
and product features on selected samples of
consumers Part 1 - Introduction to Ecommerce I 11
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The Impact of Closed Loop Marketing
On the Internet
Nobody Knows
You’re A Dog…
• Marketers want two results from user responses
– They want consumers to make a choice that leads to
• information
• improved customer satisfaction
• a transaction
Part 1 - Introduction to Ecommerce I 12
– Marketers want to learn about visitors to their site
Perry & W Robson
Web Chains
• A Web chain is a click sequence
– Can be as short as a single click
– Can be as long as all possible choices on a
Web site
• Decision points = event nodes
• Ending point = result node
• Common Web chain starting points
– Company homepage
– Search engine or portal
– Banner ads
Part 1 - Introduction to Ecommerce I 13
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Web Chain of Events
Figure 5.12 BEGIN
No Notice E1: Views Page (1-CTR-NNR)
Rate (NNR) with Paid Link
R2: Notices Ad but
Click-through Rate (CTR) doesn’t click = Ad
R1: Doesn’t Notice
brand impact
Ad = $0 benefit
E2: Clicks Through
to Company Web
(1-PCR) Site = Prospects Prospect Conversion Rate (PCR)
New
Offline Induced E3: Views Web Site E4: Visits Web Site and Buys Customer
Buyer (OIB) but Doesn’t Buy (1-RR)
Repeat
(1-OIB) Buyer (RR) R5: New Customer
R3: Offline Purchase = (Ad = (Ad brand + Web
brand + Web Site brand + Site brand + Online
R4: No Immediate Purchase
Offline profit) = (Ad brand + Web Site E5: Loyal Customer profit + Future
brand impact) lifetime value)
R6: Would have bought offline
anyway = (Ad brand + Web Site R7: Only buy online =
brand + Online profit – Offline
Part 1 - Rate (OBR) Online
Offline Buy Introduction to Ecommerce I Only (1-OBR) (Ad brand14Web Site
+
profit) Perry & W Robson brand + Online profit)
Evaluating Web Chains
• Enables marketers to evaluate a
wide range of Web strategies and
tactics
• Calculate
– expected value of an impression
– expected value of a prospect
– expected value of a new customer
– expected value of a repeat buyer
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Web Chain Benefits and Probabilities
Five Main Benefits Occur in the Chain
• Online contribution: the incremental profit from an
online sale
• Offline contribution: incremental profit from the
sale of products through the standard channel
• Ad-brand impact: value to a visitor, who sees the
ad but doesn’t click through
• Web site brand impact: value of a visit to the
Web site that results in benefits, but not a sale
• Lifetime customer value: future value of profits
from a new customer
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Evaluating Web Chains
Behavior Rates Impact Values
Variable Level Variable Level
Click-through rate 2.7% Ad-brand impact $0.00
No-notice rate 70% Web site brand $.0.30
impact
Prospect conversion 15% Offline profit $15.00
rate
Repeat buying rate 90% Offline profit $23.00
Offline-induced buy 0.05 New customer LTV $125.00
rate
Offline buy rate 0.30
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Cost and Performance
Table 5.5
Time to
Reach
Cost per Cost per 4000
Site Impressions Cost Impression CTR Prospect Prospects
Ad About 2
Network 75,772 $2,075 $0.03 2.70% $1.01 weeks
Search About 4.5
Engine 16,670 $1,133 $0.07 5.50% $1.24 weeks
Special About 23
Type 1,887 $52 $0.03 9.50% $0.28 weeks
One of the best uses of Web chain analysis is to
Part Introduction to of acquiring customers
compare alternative1 -methodsEcommerce I 18
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From Web Chains to Closed Loops
• There’s a strong connection between Web
chains and closed-loop marketing
• A Web chain is closed loop if
– the chain extends from the marketing offer to the
desired marketing response
– Each step is trackable
• The Internet can be used to close the loop on
traditional media advertising if unique
identifiers are included with the ad
– Dell newspaper ads contain a unique code
Part 1 - Introduction to Ecommerce I 19
Perry & W Robson
Website
Marketing and
Design
Poitiers, September 23-27
Session 4 – B2C eCommerce
1
What is B2C?
Business-to-Consumer electronic commerce:
• eCommerce Buying = combines
ordering and paying online
Example – A consumer orders an
item of clothing on a web site and
completes the entire transaction
online
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B2C eCommerce Takes Off
Consumer spending online is on the rise!
1997 (Billions) 1998 (Billions) Growth
Paid for online $5.1 $11.0 54%
Ordered
online, paid $10.2 $15.5 34%
for offline
Offline orders
influenced by $44.8 $50.8 12%
the Net
Total $60.1 $77.3 32%
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B2C eCommerce Takes Off
Breakdown of Online Consumer Spending (US)
$4.7 – Ordered online,
paid for offline
$13.5 - Researched
online, ordered and
paid for offline $11.0 – Paid for online
$10.8 – Ordered
online, paid for offline
$16.3 - Researched
online, ordered and
paid for offline
BIG TICKET ITEMS SMALL TICKET ITEMS
(Cars, Refrigerators, etc) Part 1 - Introduction to Ecommerce I 23
Perry & W Robson (Clothing, Electronics, etc)
B2C eCommerce Takes Off
eCommerce Impact on Web Sites
100% 4% 5%
20%
9%
• Adding eCommerce raises
80% 37%
38%
14% 23% e-mail address not
available
the stakes
5%
30%
9% No response • eCommerce creates
60% 10% 4% 32% 9%
3+ days
incentives to improve
4%
10% performance and customer
40%
20%
20%
2 days responsiveness
5%
20%
50%
40%
54%
1 day
– E-mail response time is
23% 25% critical
0% – Web-server performance
Brand Content Financial Travel Shopping is important
Majority of eCommerce Sites with • eCommerce sites are most
One-Day Response - Introduction to Ecommerce I
responsive
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B2C eCommerce Takes Off
eCommerce Impact on Web Sites
• eCommerce creates strong incentives for
companies to enhance their online use of
personalization
– Raises the value of users’ online experience
– Improves customer loyalty
– Allows for detailed information gathering
• The personalization/eCommerce link is
especially strong for business-to-business
marketing
Part 1 - Introduction to Ecommerce I 25
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Consumer-to-Consumer Commerce
• Consumer-to-consumer sites must build trust
– Systems that rate seller credibility
– Verify identities of buyers and sellers
– Insurance against fraud
– Escrow accounts to ensure products are shipped
– Bans on sellers who bid on their own products
– Bans on buyers who win, but don’t complete the sale
• Successful auction sites blur the distinction
between business and fun
Part 1 - Introduction to Ecommerce I 26
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The Pace of eCommerce
Saving Money: The Simplest Reason to Buy Online
Figure 12.9 – Comparison of
Bestseller Prices
$35
• Regular lower prices $30
– An online site can $25
dramatically reduce $20
selling costs for $15
retailers $10
$5
– Competitive pressures $0
keep prices low A Man in Full Sugar Busters Into Thin Air Memoirs of a
Wolfe Steward Krakauer Geisha Golden
List
Part 1 - Introduction to Ecommerce I Amazon.com Barnes&Noble.com
27
Perry & W Robson Bestsellers For Less Wal-mart.com Shopping.com
The Pace of eCommerce
Saving Money: The Simplest Reason to Buy Online
• Sales tax is seldom charged on online purchases
– Products delivered electronically - software
downloads
– When the merchant doesn’t have a physical presence
in the state where the product is delivered
• Shipping costs vary
– Consumers notice and react to the cost of shipping
– Shipping to home addresses is expensive
• Package delivery companies are optimized for delivery to
commercial addresses
• One large delivery to a retailer is replaced by many small
deliveries Part 1 - Introduction to Ecommerce I 28
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The Pace of eCommerce
E-tailers Offer Assortment & Convenience
• Virtually unlimited shelf space
• 24/7 service
• Convenient for repeat purchases
• One-stop shopping
• Ability to comparison shop
Top Reason Cited for Retail Store Dissatisfaction, Christmas
Table 12.6
1998
1. Can’t find a salesperson 26% Physical
2. Unknowledgeable staff 18%
3. Parking problems 17%
Retail
4. Waiting in lines 14% Problems
5. Insufficient selection 13%
6. Crowded merchandise 7%
7. Unfriendly staff 7%
8. Difficulty finding things 7%
9. Inconvenient location Part 1 - Introduction to Ecommerce I5% 29
10. Hours not convenient Perry & W Robson 2%
The Pace of eCommerce
Entertainment
• Less developed due to technical issues such
as slow consumer access speeds
• Exception is adult entertainment, which
earned nearly $1 billion in 1998
• Other entertainment forums include
– auction sites
– chat rooms
– instant messaging
– discussion groups
Part 1 - Introduction to Ecommerce I 30
Perry & W Robson
Website
Marketing and
Design
Poitiers, September 23-27
End of Session 3 – Break
1
Payment Mechanisms
Which Company Bears the Risk?
Sponsorship Banner Ads Prospect Fees Sales Commissions
Fixed Payment Impressions Click Through Purchase
Risk Increases for the Web Site Being Paid
• Sponsorship least risky: fixed payment
• Banner Ads: payment depends on impressions
• Prospect Fees & Sales Commissions: depend
Part 1 - Introduction toadvertiser
and Ecommerce I
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The Many Ways to Pay Online
Possible Payment Approaches
Paid
Traffic
L1 - Time
Sponsorship Co-Brand
Impressions
L2 - Impressions
Leads Visits Downloads
L3 - Results
Buyers Users L4 - Expenditure
Figure 5.8
Part 1 - Introduction to Ecommerce I 33
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Competing Against the Net
Retailer Responses to the eCommerce Challenge
• Selective price discounts
– Bricks and mortar merchants can offer
discounts for products that can also be bought
online
• Concentrating attention on late adopters
of technology
– Some consumers have a lot of fear,
uncertainty and doubt about the online shopping
experience
– This slows their defection to new online outlets
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Competing Against the Net
Retailer Responses to the E-Commerce Challenge
Creating and staging
Differentiated
Stage Experiences
experiences
Competitive Position
• Pine and Gilmore stress
that the economy is Deliver Services
evolving toward
experienced-based
value
Make Goods
Undifferentiated
• Retailers function less
as sellers of products
than as stagers of
events Extract Commodities
Part 1 - Introduction to Ecommerce I
Market 35
Premium
Perry & W Robson Pricing
Competing Against the Net
Retailer Responses to the E-Commerce Challenge:
‘Clicks and Mortar’
Adopt the Internet to create a hybrid system
• Bricks and mortar retailers can move certain parts of
their retailing function online
• Physical locations often a superior way to
– Acquire customers
– Set up customer relationships
– Create a strong retail brand image
• The online presence
– Drives business to the physical locations
– Provides 24/7 convenience for loyal customers
– Adds new functionality – gift registries and shopping services
Part 1 - Introduction to Ecommerce I 36
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Bargaining Power
Determines Who Bears Risk
• Powerful sites shift
risk to advertisers and
demand sponsorships
• Powerful advertisers
demand accountability
and negotiate for
prospect fees of a
share of transaction
revenue
Part 1 - Introduction to Ecommerce I 37
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Selecting Specific EC
Opportunities & Application
• Understand:
– The possibilities of Ecommerce
• Map opportunities that match
current competencies and markets
– Many opportunities to create new
products and services
Part 1 - Introduction to Ecommerce I 38
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You Decide:
‘Pure Play’ vs. Bricks and Mortar
• Three dimensions
– the product (service) sold [physical / digital];
– the process [physical / digital]
– the delivery agent (or intermediary) [physical / digital]
• Traditional commerce
– all dimensions are physical
• Pure EC
– all dimensions are digital
• Partial EC
– all other possibilities include a mix of digital and
physical dimensions
Part 1 - Introduction to Ecommerce I 39
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Consumer-to-Consumer Commerce
• Businesses deploy chat room technology
– Enables consumers to interact directly with
each other
– Accelerates word of mouth
– Facilitates consumer-to-consumer commerce
• eBay
• Yahoo! Auctions
Part 1 - Introduction to Ecommerce I 40
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The Key to Success in eCommerce
Control of the two power axes:
battle for providing about building set of
greatest value & best unique competencies &
features, from customer controlling bargaining
perspective power
Threat of
Competitor New Entrants
power axis
Power of Existing Power of
Suppliers Competitors Customers
Creation of Value
Threat of chain power axis
Substitute Products
Part 1 - Introduction to Ecommerce I 41
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eCommerce Case Study
This
suggests
that auto
insurance,
loans and
leasing plans
are highly
desirable
partners for
both new
and used
car dealers
Part 1 - Introduction to Ecommerce I 42
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eCommerce Case Study:
The Automobile Industry
New intermediaries complicate the split of
profits between elements of the profit pool
The battle for customers
Example: Online car takes place during:
sales
1. Researching and selecting
the vehicle
2. Finding a dealer and price
3. Choosing financing,
insurance, warranty
4. Closing the deal
Part 1 - Introduction to Ecommerce I 43
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eCommerce Case Study
Table 12.3: Steps for Online Auto Buying
Consumer
Participation
(millions of
households)
Stage Service Providers Growth Drivers 1998 2003
1. Research and AutoSite Increase in online 2.0 7.9
select vehicle Car and Driver households
CarPrices.com Easy access to deep
Consumer Reports product information
Edmund’s from trusted brands
IntelliChoice Powerful word of mouth
J.D. Power
Kelley Blue Book
Manufacturers
Yahoo! Autos
2. Find a dealer Auto-By-Tel.com No-haggle pricing 0.8 5.2
and price AutoConnect Dealers hire Internet-
AutoVantage focused salespeople
Autoweb.com Dealers establish and
CarPoint improve web sites
Cars.com Dealers set up two-way
Dealers e-mail
Manufacturers
Priceline.com
StoneagePart 1 - Introduction to Ecommerce I 44
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eCommerce Case Study
Table 12.3 continued
Consumer
Participation
(millions of
households)
Stage Service Providers Growth Drivers 1998 2003
3. Choose Financing Increased comfort with 0.0 1.2
financing, CarFinance.com internet transaction
insurance and Ford Credit security
warranty GMAC Technology cooperation
Lending Tree between banks and
Insurance dealers
GEICO Direct Dealers accept third-
InsWeb party financing
Progressive Banks and insurers offer
Warranty incentives to go online
Warranty Dir.
Warranty Gold
4. Close the Saturn/Daewoo Higher quality vehicles 0.0 0.5*
deal Dealer networks easy to buy without a test
Luxury brands drive
Online buying Money-back guarantees
services and extended warranties Number
Fixed pricing allows rounded
dealers to close I
Part 1 - Introduction to Ecommerce sales up 45
online
Perry & W Robson
Website
Marketing and
Design
Poitiers, September 23-27
End of Sessions 3-4:
A Demain!
1