Marketing on the Web
ISM 4480 University of South Florida
Objectives
• • • • • • • • • Four Ps of marketing. Product versus customer-based marketing strategies. Market segmentation. Personalization. CRM: Customer life-cycle, Funnel model. Web advertising. Branding. E-mail, affiliate, and viral marketing. Search engine positioning and domain name selection.
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Four Ps of Marketing
• Product: – Product or service that company is selling. – E-commerce: physical or digital, commodity or customized? • Price: – Amount customer pays for product. – E-commerce: price transparency (for commodity products). • Promotion: – Means of spreading the word about product. – E-commerce: direct (1:1) marketing (vs. generic or 1:N marketing). • Place: – Locations where product can be purchased. – E-commerce: any-place/any-time availability.
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Two Marketing Strategies
• Product-based marketing strategy: – E.g., Amazon.com, Staples.com, ebay.com – Organize products into categories such as books, electronics, audio/video, etc. for customers to browse. – Customers must view their needs in terms of product categories. • Customer-based marketing strategy: – E.g., Dell.com, Sabre Holdings. – Organize products by customer segments such as large business, small business, home office, education, etc. – More common on B2B sites than on B2C sites. • A smart business should allow for both.
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Issues in Customer-Based Strategy
• How to identify groups of customers with common characteristics: – First step to market segmentation. • How to reach those customers: – Mass media, personal contact, or web? – Cost: Web is the lowest cost strategy. – Multiple touchpoints needed: Web-only strategy not very effective; some offline media is needed even for online businesses. • How to track customer behaviors: – Record and mine customer clickstream data. – Use prior customer purchases to estimate future purchases.
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Market Segmentation
• Definition: Grouping potential customers into segments based on some characteristics in order to devise specific ad messages for each segment. – Micromarketing: Targeting very small market segments. • Three categories of segmentation: – Geographic segmentation: • Segmenting people by their geographic locations such as country, city, suburban vs. rural. – Demographic segmentation: • Segmenting based on age, gender, family size, income, education, religion, ethnicity, etc. – Psychographic segmentation: • Segmenting based on social class, personality, lifestyle, etc.
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Market Segmentation on TV
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Beyond Market Segments: Personalization
• Next step beyond market segmentation: – Understanding individual (not market segment) needs and tailor individual message for each user. – One-to-one or direct marketing: Done using personalization and/or customer relationship management (CRM) software. • Personalization can be based on: – Customers’ behavior: purchase history, content of purchase, web site usage. – Customers’ profile: age, occupation, marital status, etc. – Customers’ interests: Bridal shop, golf tournament, casual dining.
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Personalization on the Web
• Search engines (e.g., Google): – Recommends companies based on user’s search keywords. • Web retailers (e.g., Amazon): – Recommends products based on customer’s prior purchase history, items in customer’s wish list, etc. • Ad brokers (e.g., Doubleclick): – Displays banner ads based on user’s profile and browser content.
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Personalized Marketing Example
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Customer Life Cycle
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Customer Relationship Management
• Goal is to create strong relationships with customers throughout its life-cycle. • Why important: – Good customer experiences builds loyalty and repeat business. – Provides cross-selling or up-selling opportunities. – It costs five times less to retain an existing customer than gain a new customer. • Customer acquisition costs: – Costs of attracting and converting a visitor into a paying customer (including conversion costs). – Netflix: $37 per customer (2004). – E-Trade: $250 per customer (2001).
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CRM: Technology-Enabled vs. Traditional
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The Funnel Model: Customer Acquisition, Conversion, and Retention
• Wider base of funnel implies better strategy. • Use to benchmark effectiveness of different marketing strategies.
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Advertising on the Web: Banner Ads
• Rectangular ads placed on top or within a web page with URL link. – May contain animated GIFs or rich media objects such as Flash, Shockwave, and Java (moving graphic). • Banner sizes and formats established by Internet Advertising Bureau (IAB), a non-profit organization to promote effective web advertising. – IAB-compliant ads use Interactive marketing unit (IMU) formats. • Banner ads created by advertising agencies (e.g., AdDesigner.com) for $100-5000. • Banner ad placement coordinated by a banner advertising network: – Broker between advertisers and Web sites that carry ads. – Doubleclick, ValueClick, LinkExchange. • Ad cost/effectiveness determined as cost per thousand (CPM).
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Other Web Ad Formats
• Pop-up ad: – Appears in its own window when the user opens or closes a Web page. – Can be blocked using ad blocking software (e.g., Google toolbar). • Pop-behind (pop-under) ad: – Pop-up ad that returns focus to the original browser window. • Interstitial ad: – When a user clicks a link to load a page, the interstitial ad opens in its own window instead of the user’s intended window. • Rich media (or active) ad: – Graphical activity that “floats” over a web page instead of opening in a separate window.
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CPM Rates
Personalized ads costs more than generic ads on the web.
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E-Mail Marketing
• Sending e-mails to customers to advertise/promote products. – Inexpensive, but often viewed as spam (less effective). – E-mail lists can be purchased in bulk from third parties. – Effectiveness determined by conversion rate (percentage of recipients responding to an ad/promotion). • Opt-in e-mail (permission marketing): – Sending e-mails only when customers request information on a particular topic, often during registration. • Opt-out e-mail: – Bulk e-mailing but providing customers a way (e.g., link) to choose not to receive similar e-mails in future.
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Affiliate Marketing
• Works well when partner firms have a dominant web presence (e.g., Yahoo, Amazon.com, Edmunds.com). • Affiliate site receives referral fees, while selling sites benefit from affiliate’s brand and savings on advertising and promotion. • Affiliate commissions: – Pay-per-click (interested visitor). – Pay-per-conversion (actual purchase).
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Viral Marketing
• Relies on existing customers (as referrers) to attract new customers. – Powerful way to build customer base with minimal ad spending. • Hotmail (Microsoft): – Advertised its service by attaching a message “Get your free email from Hotmail” at the end of every e-mail from its server. – Generated 5 million users in 6 months, spending only $50,000. • Blue Mountain Arts. – One of the most-visited electronic greeting card company on the web, with very little advertising.
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Search Engine Positioning
• Effective way of reaching customers with minimal ad spending. • Search engines deliver sites that meet users’ search criteria. • May be embedded in search results or displayed as “sponsored links” at the top or right side of the search results page (Google). • Paid placements: – Sites pay for preferred positioning on search results. – Search engine ranking also determines positioning costs (e.g., Nielsen/NetRatings rankings of frequently visited Web sites). – Google uses auctions to determine positioning. – Search engine placement brokers aggregate inclusion and placement rights on multiple search engines.
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