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E-commerce 2021: Business. Technology.

Society. Learning Objectives
Sixteenth Edition
6.1 Understand the key features of the Internet audience,
the basic concepts of consumer behavior and purchasing,
and how consumers behave online.
Chapter 6
6.2 Identify and describe the basic digital commerce
E-commerce Marketing marketing and advertising strategies and tools.
and Advertising Concepts
6.3 Identify and describe the main technologies that
support online marketing.
6.4 Understand the costs and benefits of online marketing
communications.

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Consumers Online: The Internet

Video Ads: Shoot, Click, Buy Audience and Consumer Behavior (1 of 3)

• Class Discussion • Around 290 million in the U.S. have Internet access in
– What advantages do video ads have over traditional 2020
banner ads? • Growth rate has slowed
– Where do sites such as YouTube fit into a marketing
strategy featuring video ads? • Intensity and scope of use both increasing
– What are some of the challenges and risks of placing • Some demographic groups have much higher
video ads online? percentages of online usage
– Do you think Internet users will ever develop – Income, education, age, ethnic dimensions
“blindness” toward video ads as they have towards
display ads?

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Consumers Online: The Internet Consumers Online: The Internet

Audience and Consumer Behavior (2 of 3) Audience and Consumer Behavior (3 of 3)

• Broadband and mobile • Consumer behavior models

– Significant inequalities in broadband access – Study of consumer behavior; social science
– Older adults, lower income, lower educational levels discipline
– Non-broadband household still accesses Internet via – Attempt to predict or explain wide range of
mobile or other locations consumer decisions
• Community effects – Based on background demographic factors and
– Role of social emulation in consumption decisions other intervening, more immediate variables
– “Connectedness” • Profiles of online consumers
 Top 10-15% are more independent – Consumers shop online primarily for convenience
 Middle 50% share more purchase patterns of friends
– Recommender systems - co-purchase networks
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Figure 6.1 A General Model of Consumer

Behavior The Online Purchasing Decision (1 of 2)
• Five stages in consumer decision process
– Awareness of need
– Search for more information
– Evaluation of alternatives
– Actual purchase decision
– Post-purchase contact with firm

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Figure 6.2 The Consumer Decision Process

and Supporting Communications The Online Purchasing Decision (2 of 2)
• Decision process similar for online and offline behavior
• General online behavior model
– User characteristics
– Product characteristics
– Website features: latency, usability, security
– Attitudes toward online purchasing
– Perceptions about control over Web environment
• Clickstream behavior

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Figure 6.3 A Model of Online Consumer

Behavior Shoppers: Browsers and Buyers
• Shoppers: Over 92% of Internet users
– Over 82% are buyers
– Around 10% are browsers (purchase offline)
• Online research influenced about $2.6 trillion of retail
purchases in 2018
• Online traffic also influenced by offline brands and
shopping
• E-commerce and traditional commerce are coupled: Part
of a continuum of consuming behavior

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What Consumers Shop for and Buy

Online How Consumers Shop
• Big ticket items ($1000 or more) • How shoppers find online vendors
– Travel, computer hardware, electronics – Highly intentional, goal-oriented
– Consumers now more confident in purchasing – Search engines
costlier items – Marketplaces (Amazon, eBay)
• Small ticket items ($100 or less) – Specific retail site
– Apparel, books, office supplies, software, etc. • About 7.5% of Internet users don’t shop online
• Sales of bulky goods, furniture and large appliances, – Trust factor
rapidly expanding – Hassle factors (shipping costs, returns, etc.)

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Trust, Utility, and Opportunism in Online Digital Commerce Marketing and

Markets Advertising: Strategies and Tools

• Two most important factors shaping decision to • Features of Internet marketing (v s traditional)
er su

purchase online: – More personalized

– Utility: – More participatory
 Better prices, convenience, speed – More peer-to-peer
– Trust: – More communal
 Perception of credibility, ease of use, perceived
• The most effective Internet marketing has all four
risk
features
 Sellers develop trust by building strong
reputations for honesty, fairness, delivery

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Multi-Channel Marketing Plan Strategic Issues and Questions

• Website • Which part of the marketing plan should you focus on
first?
• Traditional online marketing
– Search engine, display, e-mail, affiliate • How do you integrate the different platforms for a
coherent message?
• Social marketing
– Social networks, blogs, video, game • How do you allocate resources?
– How do you measure and compare metrics from
• Mobile marketing different platforms?
– Mobile/tablet sites, apps – How do you link each to sales revenues?
• Offline marketing
– Television, radio, newspapers

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Establishing the Customer Relationship Online Marketing and Advertising

• Website functions to: • Online advertising
– Establish brand identity and customer expectations – Display, search, mobile messaging, sponsorships,
 Differentiating product classifieds, lead generation, e-mail
– Anchor the brand online – Advantages:
 Central point for all marketing messages  Best way to reach the 18-to-34-year-old audience
– Inform and educate customer  Ad targeting to individuals
– Shape customer experience  Price discrimination
 Personalization

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Traditional Online Marketing and Search Engine Marketing and

Advertising Tools Advertising (1 of 2)

• Search engine marketing and advertising • Search engine marketing (SEM)

• Display ad marketing (including video ads) – Use of search engines for branding

• E-mail marketing • Search engine advertising

– Use of search engines to support direct sales
• Affiliate marketing
• Types of search engine advertising
• Viral marketing
– Paid inclusion
• Lead generation marketing – Pay-per-click (PPC) search ads
 Keyword advertising
 Network keyword advertising (context advertising)

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Search Engine Marketing and

Advertising (2 of 2) Display Ad Marketing (1 of 2)
• Search engine optimization (SEO) • Banner ads
• Google search engine algorithms • Rich media ads
• Social search – Interstitial ads
– Utilizes social contacts and social graph to provide • Video ads
fewer and more relevant results – Far more effective than other display formats
• Search engine issues • Sponsorships
– Paid inclusion and placement practices
• Native advertising
– Link farms, content farms
– Click fraud

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Figure 6.6 How an Advertising Network

Display Ad Marketing (2 of 2) Works

• Content marketing
• Advertising networks
• Ad exchanges, programmatic advertising, and real-time
bidding (RTB)
• Display advertising issues
– Ad fraud
– Viewability
– Ad blocking

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E-mail Marketing Spam

• Direct e-mail marketing • Unsolicited commercial e-mail
– Messages sent directly to interested users
• Around 55% of all e-mail in 2020
– Benefits include
 Inexpensive • Most originates from bot networks
 Average around 3% to 4% click-throughs • Efforts to control spam have largely failed:
 Measuring and tracking responses – Government regulation (CAN-SPAM Act)
 Personalization and targeting – State laws
• Three main challenges – Voluntary self-regulation by industries (DMA)
– Spam – Canada’s stringent anti-spam laws
– Anti-spam software
– Poorly targeted purchased e-mail lists
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Other Types of Traditional Online Social, Mobile, and Local Marketing and
Marketing Advertising

• Affiliate marketing • Social marketing and advertising

– Commission fee paid to other websites for sending – Use of online social networks and communities
customers to their website
• Mobile marketing and advertising
• Viral marketing – Use of mobile platform
– Marketing designed to inspire customers to pass – Influence of mobile apps
message to others
• Local marketing
• Lead generation marketing – Geotargeting
– Services and tools for collecting, managing, and
– Display ads in hyperlocal publications
converting leads
– Coupons

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Insight on Business: Are the Very Rich

Multi-Channel Marketing Different From You and Me?

• Integration of online and offline marketing • Class Discussion

• Increasing percentage of American media consumers – What distinguishes luxury marketing from ordinary
use several media at once retail marketing?
– What challenges do luxury retailers have in
• Reinforce branding messages across media translating their brands and the look and feel of
• Most effective multi-channel campaigns use consistent luxury shops into Web sites?
imagery across media – How has social media affected luxury marketing?
– Visit the Net-a-Porter website. What do you find
there?

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Other Online Marketing Strategies Pricing Strategies (1 of 2)

• Customer retention strategies • Pricing: integral part of marketing strategy
– One-to-one marketing (personalization) • Traditional pricing based on fixed costs, variable costs,
– Behavioral targeting (interest-based advertising) demand curve
– Retargeting – Marginal costs
• Customization and customer co-production – Marginal revenue

• Customer service • Piggyback strategy

– FAQs • Price discrimination
– Real-time customer service chat systems
– Automated response systems

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Pricing Strategies (2 of 2) Long Tail Marketing

• Free and freemium • Internet allows for sales of obscure products with little
demand
• Versioning
• Substantial revenue because
• Bundling
– Near zero inventory costs
• Dynamic pricing – Little marketing costs
– Auctions – Search and recommendation engines
– Yield management
– Surge pricing
– Flash marketing

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Insight on Technology: The Long Tail:

Big Hits and Big Misses Internet Marketing Technologies
• Class Discussion • Internet’s main impacts on marketing:
– What are recommender systems? Give an – Scope of marketing communications broadened
example of one you have used. – Richness of marketing communications increased
– What is the Long Tail and how do recommender – Information intensity of marketplace expanded
systems support sales of items in the Long Tail? – Always-on mobile environment expands marketing
– How can human editors, including consumers, opportunities
make recommender systems more helpful?

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Web Transaction Logs Cookies and Tracking Files

• Built into web server software • Types of tracking files
• Record user activity at website – Cookies
– Flash cookies
• Provides much marketing data, especially combined
– Web beacons (“bugs”)
with:
– Tracking headers (supercookies)
– Registration forms
– Shopping cart database • Other tracking methods
– Deterministic cross-device tracking
• Answers questions such as:
– What are major patterns of interest and purchase? – Probabilistic cross-device tracking
– After home page, where do users go first? Second? • Becoming less useful due to Apple’s Intelligent Tracking
Prevention and similar technologies
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Insight on Society: Every Move You Make,

Every Click You Make, We’ll Be Tracking You Databases
• Class Discussion • Enable profiling
– Are beacons innocuous or are they an invasion of • Store records and attributes
personal privacy?
– Do you think your web browsing should be known to • Database management system (DBMS):
marketers? • SQL (Structured Query Language):
– Should online shopping be allowed to be a private – Industry-standard database query and manipulation
activity? language used in a relational database
– What impact may the California Privacy Protection
• Relational databases
Act have on DNT?

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Data Warehouses and Data Mining Hadoop and the Challenge of Big Data

• Data warehouse: • Big data

– Collects firm’s transactional and customer data in – Petabyte, exabyte range
single location for offline analysis by marketers and – Web traffic, e-mail, social media, content
site managers – Traditional DBMS unable to process the increasing
• Data mining: volume of data
– Analytical techniques to find patterns in data, model • Hadoop
behavior of customers, develop customer profiles
– Open-source software framework
• Query-driven data mining – Processes any type of data, even unstructured
• Model-driven data mining – Distributed processing

• Rule-based data mining

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Marketing Automation and Customer Figure 6.9 A Customer Relationship

Relationship Management (CRM) Systems Management System

• Marketing automation systems

– Track steps in lead generation
• CRM systems
– Manage relationship with customers once purchase
is made
– Create customer profiles
• Customer data used to:
– Develop and sell additional products
– Identify profitable customers
– Optimize service delivery, and so on
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Figure 6.10 An Online Consumer

Online Marketing Metrics: Lexicon Purchasing Model
• Audience size/market share metrics
– Impressions, click-through rate (CTR), page views,
viewability rate, stickiness, loyalty, reach, recency
• Conversion to customer metrics
– Acquisition rate, conversion rate, browse-to-buy ratio, cart
conversion rate, abandonment rate
• Video ad metrics
– View time, completion rate
• E-mail campaign metrics
– Open rate, delivery rate, click-through rate, bounce-back
rate
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How Well Does Online Advertising Work? The Costs of Online Advertising
• Use ROI to measure ad campaign • Pricing models
• Difficulty of cross-platform attribution – Barter, cost per thousand (CPM), cost per click
(CPC), cost per action (CPA), hybrid,
• Highest click-through rates: Search engine ads, sponsorship
permission e-mail campaigns
• Measuring issues
• Online channels compare favorably with traditional – Correlating online marketing to online or offline
• Most powerful marketing campaigns use multiple sales
channels, including online, catalog, TV, radio, • In general, online marketing is more expensive on
newspapers, stores CPM basis, but more efficient in producing sales
• Effective cost-per-thousand (eCPM)

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Figure 6.11 Web Analytics and the Online

Marketing Analytics Purchasing Process
• Software that analyzes data at each stage of the customer
conversion process
– Awareness
– Engagement
– Interaction
– Purchase activity
– Loyalty and post-purchase
• Helps managers
– Optimize ROI on website and marketing efforts
– Build detailed customer profiles
– Measure impact of marketing campaigns
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Careers in E-commerce Copyright

• Position: Digital Marketing Assistant
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