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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
                                     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
                                         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
     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

           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
                       Part 1 - Introduction to Ecommerce I                  17
                                 Perry & W Robson
       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
compare alternative -methods of acquiring customers
                Part 1 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!

                     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%
                      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
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%                          incentives to improve
                          4%                           3+ days
       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
                        Part 1                           24
                                                           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
                                             $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
                           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
     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 to advertiser
                             and Ecommerce I
  on success of sitePerry & W Robson                32
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
                            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

                                         Market
                     Part 1 - Introduction to Ecommerce I                                          Premium
                                                                                                     35
                               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
                                  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
                         Perry & W Robson
  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
                     Stoneage 1 - Introduction to Ecommerce I
                             Part                                                        44
                                    Perry & W Robson
    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
                           Part 1 -             dealers to close I
                                      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

				
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