Electronic Commerce

Tenth Edition

Chapter 4
Marketing on the Web
 Learning Objectives

In this chapter, you will learn:

• How firms use product-based and customer-based
marketing strategies
• About communicating with different market
segments
• To identify customer relationship characteristics
• About the customer relationship life cycle
• How companies advertise on the Web

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 Learning Objectives (cont’d.)
• About e-mail marketing strategies
• About technology-enabled customer relationship
management
• How to create and maintain brands on the Web
• How businesses use social media in viral marketing
campaigns
• About search engine positioning tactics and domain
name selection strategies

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 Web Marketing Strategies
• Marketing mix
– Element combination to achieve goals
• Selling and promoting products and services
• Marketing strategy
– Marketing mix with elements defined

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 The Four Ps of Marketing
• Product
– Physical item or service sold
– Brand: customers’ product perception
• Price
– Amount customer pays for product
– Customer value: customer benefits minus total cost
• Promotion
– Any means to spread word about product

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 The Four Ps of Marketing (cont’d.)
• Place (distribution)
– Need to have products or services available in many
different locations
– Getting right products to the right places at the best
time to sell them

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 © Cengage Learning 2013
FIGURE 4-1 The four Ps of marketing contribute to marketing strategy

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 Communicating with
Different Market Segments
• Communications media selection to carry message
– Physical world
• Uses building construction and floor space design
– Online firm
• Communications media selection: critical
• No physical presence
• Customer contact made through image projected
through media and Web site
– Online firm challenge
• Obtain customer trust with no physical presence

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 © Cengage Learning 2013
FIGURE 4-2 Trust in three information dissemination models

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 Market Segmentation
• Divides potential customer pool into segments
– Defined in demographic characteristics terms
• Micromarketing
– Practice of targeting very small market segments
– Hampered by cost increases
• Three categories to identify market segments
– Geographic segmentation
– Demographic segmentation
– Psychographic segmentation
• Television advertisers use all three categories
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 Market Segmentation on the Web
• Web opportunity
– Present different store environments online
• Juicy Couture site targets young, fashion-conscious
buyers
• Talbots site targets older, more established buyers
• Limitations of physical retail stores
– Floor and display space
– Must convey one particular message
• Web stores
– Separate virtual spaces for different market segments

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 Segmentation Using
Customer Behavior
• Same person
– Needs different combinations of products and
services
• Depending on the occasion
• Behavioral segmentation
– Creation of separate customer experiences based on
behavior
– Occasion segmentation
• Behavioral segmentation based on things happening at
a specific time or occasion

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 Customer Relationship Intensity and
Life-Cycle Segmentation (cont’d.)
• Characteristics of the five stages
– Awareness
• Customers recognize company name, product
– Exploration
• Customers learn more about company, products
– Familiarity
• Customers have completed several transactions
• Customers aware of returns and credits policies
• Customers aware of pricing flexibility
• Customers just as likely to shop competitors

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 Customer Relationship Intensity and
Life-Cycle Segmentation (cont’d.)
• Characteristics of the five stages (cont’d.)
– Commitment
• Customer experiences highly satisfactory encounters
• Customer develops fierce loyalty or strong preference
– Separation
• Conditions that made relationship valuable change
• Parties enter separation stage
– Life-cycle segmentation
• Customer life cycle (the five stages)
• Using stages to create customer groups in each stage

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 Acquisition, Conversion, and
Retention of Customers
• Goal
– Attract new visitors to a Web site
• Acquisition cost
– Total amount of money site spends drawing one
visitor to site
• Conversion
– Convert first-time visitor into a customer
• Conversion cost
– Total amount of money site spends to induce one
visitor to make a purchase, sign up for a subscription,
or register
– May exceed profit earned on average sale
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Acquisition, Conversion, and Retention
of Customers (cont’d.)
• Retained customers
– Return one or more times after making first purchases
• Retention costs
– Costs of inducing customers to return and buy again
• Importance of measuring these costs
– Indicates successful advertising, promotion strategies
• More precise than classifying into five loyalty stages

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Customer Acquisition, Conversion, and
Retention: The Funnel Model
• Funnel model
– Conceptual tool
• Provides understanding of overall nature of marketing
strategy
• Clear structure for evaluating specific strategy elements
– Very similar to customer life-cycle model
• Less abstract
• Better at showing effectiveness of two or more specific
strategies
– Provides good analogy: large number of prospects
with fewer and fewer converted to loyal patrons
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 © Cengage Learning 2013
FIGURE 4-5 Funnel model of customer acquisition, conversion, and retention

• Funnel model: tool for conceptualizing and

evaluating alternative strategies
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 Advertising on the Web
• Effective advertising involves communication
• Five-stage customer loyalty model helpful in
creating advertising messages
– Awareness stage
• Advertising message should inform
– Exploration stage
• Message should explain how product, service works
• Encourage switching brands

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 Advertising on the Web (cont’d.)
• Five-stage customer loyalty model (cont’d.)
– Familiarity stage
• Message should be persuasive, convince customer to
buy
– Commitment stage
• Customer sent reminder messages
– Separation stage
• Customer not targeted
• Online advertising
– Always coordinate with existing advertising efforts

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 Banner Ads
• Banner ad
– Small rectangular object with stationary or moving
graphic
– Includes hyperlink to advertiser’s Web site
– Versatile: informative and persuasive functions
• Attention-grabbing banner ads
– Use animated GIFs and rich media objects
• Created using Shockwave, Java, Flash
• Interactive marketing unit (IMU) ad formats
– Voluntary standard banner sizes
– Universal ad package (UAP)
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 Other Web Ad Formats
• Pop-up ad
– Appears in its own window
• When user opens or closes Web page
– Considered to be extremely annoying
• Must click close button (small) in window of ad
• Pop-behind ad
– Pop-up ad followed by a quick command
• Returns focus to original browser window
– Appears when browser is closed
• Ad-blocking software
– Prevents banner ads and pop-up ads from loading
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 Online Advertising Cost and
Effectiveness
• Companies want Web sites to make favorable
impression on potential customers
• Raises issue of measuring Web site effectiveness
• Cost per thousand (CPM) for mass media
advertising
– “M” from Roman numeral for “thousand”
– Dollar amount paid for every thousand people in the
estimated audience

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 Online Advertising Cost and
Effectiveness (cont’d.)
• Measuring Web audiences (complicated)
– Web’s interactivity
– Value of visitor to an advertiser
• Depends on information site gathers from visitor
• Visit
– Occurs when visitor requests a page from Web site
• Trial visit
– First time a particular visitor loads Web site page
• Repeat visits
– Subsequent page loads

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 Online Advertising Cost and
Effectiveness (cont’d.)
• Page view
– Each page loaded by a visitor
• Ad view
– Occurs if page contains an ad
• Impression
– Each time banner ad loads
• Click (click-through)
– Action whereby a visitor clicks banner ad to open
advertiser’s page

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 Permission Marketing
• Conversion rate
– Percentage of recipients responding to an ad or
promotion
– Ranges from 10 percent to more than 30 percent on
requested e-mail messages
• Opt-in e-mail
– Practice of sending e-mail messages to people who
request information
• Part of marketing strategy: permission marketing

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 CRM as a Source of Value in the
Marketspace (cont’d.)
• Data mining (analytical processing)
– Technique that examines stored information
– Looks for unknown, unsuspected patterns in the data
• Statistical modeling
– Technique that tests CRM analysts’ theories about
relationships among customer and sales data
elements

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 © Cengage Learning 2013
FIGURE 4-9 Elements of a typical CRM system
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 Emotional Branding vs.
Rational Branding
• Emotional appeals
– Work well if ad targets in passive mode of information
acceptance
• Television, radio, billboards, print media
– Difficult to convey on Web
• Active medium controlled by customer
• Rational branding
– Offer to help Web users in some way
• In exchange for viewing an ad
– Relies on cognitive appeal of specific help offered

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 Affiliate Marketing Strategies
• Affiliate marketing
– One firm’s Web site (affiliate site)
• Includes descriptions, reviews, ratings, other
information about a product linked to another firm’s site
(offers item for sale)
– Affiliate site receives commission
• For every visitor following link from affiliate’s site to
seller’s site
– Affiliate saves expenses
• Handling inventory, advertising and promoting product,
transaction processing

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 Affiliate Marketing Strategies (cont’d.)
• Cause marketing
– Affiliate marketing program benefiting charitable
organization
– Visitor clicks on link (on affiliate’s Web page)
• Donation made by a sponsoring company
– Page loads after visitor clicks donation link
• Carries advertising for sponsoring companies
– Higher click-through rates than typical banner ad
click-through rates

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 Affiliate Marketing Strategies (cont’d.)
• Affiliate commissions
– Pay-per-click model
• Affiliate earns commission
• Each time site visitor clicks link, loads the seller’s page
– Pay-per-conversion model
• Affiliate earns a commission
• Each time site visitor converted from visitor into
qualified prospect or customer

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 Viral Marketing Strategies
• Viral marketing
– Relies on existing customers
• Tell other people (prospective customers) about
products or service
– Use individual customers to spread the word about a
company
– Example: BlueMountain Arts
• Electronic greeting cards
• E-mail messages that include link to greeting card site
– Social media sites being utilized
• Key to viral marketing: post often, but not too often
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 © Cengage Learning 2013
FIGURE 4-11 Viral marketing through social media
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 Web Site Naming Issues
• URLs should reflect company name or reputation
• Troublesome domain names
– Purchase more suitable domain names
– Examples:
• www.iflyswa.com changed to www.southwest.com
• www.delta-air.com changed to www.delta.com
• Companies often buy more than one domain name
– In case user misspells URL
• Redirected to intended site
– Have different names or forms of names

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