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					            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
                      Part 1 - Introduction to Ecommerce I   3
                                Perry & W Robson
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
                 Part 1 - Introduction to Ecommerce I   4
                           Perry & W Robson
                 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

Figure 5.1




             Part 1 - Introduction to Ecommerce I   6
                       Perry & W Robson
  Yahoo! Brand Extensions
The Success of the Yahoo! Brand
Figure 5.2




             Part 1 - Introduction to Ecommerce I   7
                       Perry & W Robson
     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

               Part 1 - Introduction to Ecommerce I   8
                         Perry & W Robson
    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


               Part 1 - Introduction to Ecommerce I    10
                         Perry & W Robson
      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
                       Perry & W Robson
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
                           Perry & W Robson
                       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
                                                               END

     Offline profit)                                                 E5: Loyal Customer        profit + Future
                                     = (Ad brand + Web Site
                                          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)               14
                                                                                            (Ad brand + Web 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

                 Part 1 - Introduction to Ecommerce I   15
                           Perry & W Robson
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
                  Part 1 - Introduction to Ecommerce I   16
                            Perry & W Robson
Evaluating Web Chains




     Part 1 - Introduction to Ecommerce I   17
               Perry & W Robson
     Cost and Performance

  Table 5.5




 One of the best uses of Web chain analysis is to
compare alternative1 -methods of acquiring customers
                Part  Introduction to Ecommerce I 18
                     Perry & W Robson
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

               Part 1 - Introduction to Ecommerce I   21
                         Perry & W Robson
 B2C eCommerce Takes Off
Consumer spending online is on the rise!




             Part 1 - Introduction to Ecommerce I   22
                       Perry & W Robson
     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

                                    • Adding eCommerce raises
                                      the stakes
                                    • eCommerce creates
                                      incentives to improve
                                      performance and customer
                                      responsiveness
                                        – E-mail response time is
                                          critical
                                        – Web-server performance
                                          is important
Majority of eCommerce Sites with • eCommerce            sites are most
       One-Day Response - Introduction to Ecommerce I
                     Part 1                                     24
                                           responsive
                             Perry & W Robson
 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
                          Perry & W Robson
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
                              Perry & W Robson
      The Pace of eCommerce
Saving Money: The Simplest Reason to Buy Online
                                             Figure 12.9 – Comparison of
                                                   Bestseller Prices
• Regular lower prices
  – An online site can
    dramatically reduce
    selling costs for
    retailers
  – Competitive pressures
    keep prices low

                  Part 1 - Introduction to Ecommerce I             27
                            Perry & W Robson
      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
                           Perry & W Robson
       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

                                                             Table 12.6
                                                             Physical
                                                             Retail
                                                             Problems



                      Part 1 - Introduction to Ecommerce I       29
                                Perry & W Robson
      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 to advertiser
                             and Ecommerce I
  on success of sitePerry & W Robson                32
The Many Ways to Pay Online




                                                Figure 5.8


         Part 1 - Introduction to Ecommerce I           33
                   Perry & W Robson
  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
                 Part 1 - Introduction to Ecommerce I   34
                           Perry & W Robson
   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
• Retailers function less
                                                 Undifferentiated



  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
                                Perry & W Robson
     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
             Perry & W Robson
  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
                       Perry & W Robson
            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
                              Perry & W Robson
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
                           Perry & W Robson
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
                                     Perry & W Robson
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
               Perry & W Robson
   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
                                  •     Researching and selecting
                                        the vehicle
                                  •     Finding a dealer and price
                                  •     Choosing financing,
                                        insurance, warranty
                                  •     Closing the deal
               Part 1 - Introduction to Ecommerce I           43
                         Perry & W Robson
  eCommerce Case Study
Table 12.3: Steps for Online Auto Buying




            Part 1 - Introduction to Ecommerce I   44
                      Perry & W Robson
  eCommerce Case Study
Table 12.3 continued
                                                                  Consumer
                                                                Participation
                                                                 (millions of
                                                                 households)
   Stage   Service Providers              Growth Drivers     1998         2003




                      Part 1 - Introduction to Ecommerce I                       45
                                Perry & W Robson
     Website
     Marketing and
     Design
       Poitiers, September 23-27


End of Sessions 3-4:
     A Demain!
                                   1

				
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