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
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2
An Internet Framework
Digital
Networked
Individuals
Marketing
Internet
Marketing
Technology
Economics
The Web is
fundamentally
about individuals
using a network
to access digital
products
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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
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Do You Yahoo?
• For 50% of US Web users: Yes!!
• A phenomenal eCommerce success story
• Yahoo! brand extensions provide value add for
users
–
–
–
–
–
Yahoo!
Yahoo!
Yahoo!
Yahoo!
Yahoo!
games
clubs
chat
auctions
Stores
• Yahoo! leverages its brand and ability to draw
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traffic to generate
multiple
revenue
streams
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Most Popular Web Sites
Yahoo! Leads
Most Popular Web Sites
Figure 5.1
60%
51%
50%
32%
30%
28%
27%
26%
24%
tripod.com
33%
microsoft.com
34%
lycos.com
35%
40%
excite.com
50%
20%
10%
netscape.com
geocities.com
go.com
msn.com
aol.com
yahoo.com
0%
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Yahoo! Brand Extensions
The Success of the Yahoo! Brand
Figure 5.2
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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
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Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
•
•
•
•
•
Sponsorship
Alliances
Banner advertising
Prospect fees
Sales commissions
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Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
Customer Pays
•
•
•
•
•
•
•
•
•
Sponsorship
Alliances
Banner advertising
Prospect fees
Sales commissions
Product sales
Pay-per-use
Subscriptions
Bundle sales
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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
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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
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– Marketers want to learn about visitors to their site
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
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Web Chain of Events
Figure 5.12
BEGIN
No Notice
Rate (NNR)
E1: Views Page
with Paid Link
(1-CTR-NNR)
R2: Notices Ad but
doesn’t click = Ad
brand impact
Click-through Rate (CTR)
R1: Doesn’t Notice
Ad = $0 benefit
E2: Clicks Through
to Company Web
Site = Prospects
(1-PCR)
Offline Induced
Buyer (OIB)
E3: Views Web Site
but Doesn’t Buy
E4: Visits Web Site and Buys
Repeat
Buyer (RR)
(1-OIB)
R3: Offline Purchase = (Ad
brand + Web Site brand +
Offline profit)
R6: Would have bought offline
anyway = (Ad brand + Web Site
brand + Online profit – Offline
profit)
Prospect Conversion Rate (PCR)
R4: No Immediate Purchase
= (Ad brand + Web Site
brand impact)
E5: Loyal Customer
Part
1 - Introduction
to Ecommerce
Offline
Buy
Rate (OBR)
OnlineI Only (1-OBR)
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New
Customer
(1-RR)
R5: New Customer
= (Ad brand + Web
Site brand + Online
profit + Future
lifetime value)
R7: Only buy online =
14
(Ad brand + Web Site
brand + Online profit)
Evaluating Web Chains
• Enables marketers to evaluate a
wide range of Web strategies and
tactics
• Calculate
–
–
–
–
expected
expected
expected
expected
value
value
value
value
of
of
of
of
an impression
a prospect
a new customer
a repeat buyer
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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
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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
impact
$.0.30
Prospect conversion
rate
15%
Offline profit
$15.00
Repeat buying rate
90%
Offline profit
$23.00
Offline-induced buy
rate
0.05
New customer LTV
Offline buy rate
0.30
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$125.00
17
Cost and Performance
Table 5.5
Time to
Reach
Cost per
Site
Ad
Network
Search
Engine
Special
Type
Impressions
75,772
16,670
1,887
Cost
Impression
$2,075
$1,133
$52
$0.03
$0.07
$0.03
CTR
2.70%
5.50%
9.50%
Cost per
4000
Prospect
Prospects
$1.01
About 2
weeks
$1.24
About 4.5
weeks
$0.28
About 23
weeks
One of the best uses of Web chain analysis is to
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I
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compare alternative
of acquiring
customers
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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 newspaperPartads
contain a unique code
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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
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B2C eCommerce Takes Off
Consumer spending online is on the rise!
Paid for online
Ordered
online, paid
for offline
Offline orders
influenced by
the Net
Total
1997 (Billions)
1998 (Billions)
Growth
$5.1
$11.0
54%
$10.2
$15.5
34%
$44.8
$50.8
12%
$60.1
$77.3
32%
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B2C eCommerce Takes Off
Breakdown of Online Consumer Spending (US)
$13.5 - Researched
online, ordered and
paid for offline
$10.8 – Ordered
online, paid for offline
BIG TICKET ITEMS
(Cars, Refrigerators, etc)
$4.7 – Ordered online,
paid for offline
$11.0 – Paid for online
$16.3 - Researched
online, ordered and
paid for offline
SMALL TICKET ITEMS
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(Clothing,
Electronics,
etc)
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B2C eCommerce Takes Off
eCommerce Impact on Web Sites
4%
100%
20%
80%
37%
38%
9%
5%
14%
23%
5%
9%
30%
60%
10%
4%
4%
10%
32%
9%
20%
40%
20%
5%
50%
20%
23%
54%
40%
25%
0%
Brand
Content Financial
Travel
Shopping
• Adding eCommerce raises
e-mail address not
the stakes
available
No response
• eCommerce creates
incentives to improve
3+ days
performance and customer
2 days
responsiveness
1 day
– E-mail response time is
critical
– Web-server performance
is important
Majority of eCommerce Sites with • eCommerce sites are most
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One-Day Response
responsive
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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
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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
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The Pace of eCommerce
Saving Money: The Simplest Reason to Buy Online
• Regular lower prices
– An online site can
dramatically reduce
selling costs for
retailers
– Competitive pressures
keep prices low
$35
Figure 12.9 – Comparison of
Bestseller Prices
$30
$25
$20
$15
$10
$5
$0
A Man in Full
Sugar Busters
Into Thin Air
Memoirs of a
Wolfe
Steward
Krakauer
Geisha Golden
List
Part 1 - Introduction to Ecommerce
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Perry & W RobsonBestsellers For Less
Amazon.com
Wal-mart.com
Barnes&Noble.com
27
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
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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
1998
1. Can’t find a salesperson
26%
2. Unknowledgeable staff
18%
3. Parking problems
17%
4. Waiting in lines
14%
5. Insufficient selection
13%
6. Crowded merchandise
7%
7. Unfriendly staff
7%
8. Difficulty finding things
7%
9. Inconvenient location
10. Hours not convenient
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2%
Table 12.6
Physical
Retail
Problems
29
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
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Website
Marketing and
Design
Poitiers, September 23-27
End of Session 3 – Break
1
Payment Mechanisms
Which Company Bears the Risk?
Sponsorship
Fixed Payment
Banner Ads
Impressions
Prospect Fees
Click Through
Sales Commissions
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
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to advertiser
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on success of site
and
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The Many Ways to Pay Online
Possible Payment Approaches
Paid
Traffic
Sponsorship
Impressions
Leads
Co-Brand
L1 - Time
L2 - Impressions
Visits
Downloads
Buyers
Users
L3 - Results
L4 - Expenditure
Figure 5.8
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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
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Competing Against the Net
Undifferentiated
• Pine and Gilmore stress
that the economy is
evolving toward
experienced-based
value
• Retailers function less
as sellers of products
than as stagers of
events
Stage Experiences
Competitive Position
Creating and staging
experiences
Differentiated
Retailer Responses to the E-Commerce Challenge
Deliver Services
Make Goods
Extract Commodities
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to Ecommerce I
Market
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Pricing
35
Premium
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
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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
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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
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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
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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
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The Key to Success in eCommerce
Control of the two power axes:
about building set of
unique competencies &
controlling bargaining
power
battle for providing
greatest value & best
features, from customer
perspective
Competitor
power axis
Power of
Suppliers
Threat of
New Entrants
Power of
Customers
Existing
Competitors
Threat of
Substitute
Products
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1 - Introduction
to Ecommerce
Perry & W Robson
Creation of Value
chain power axis
I
41
eCommerce Case Study
This
suggests
that auto
insurance,
loans and
leasing plans
are highly
desirable
partners for
both new
and used
car dealers
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eCommerce Case Study:
The Automobile Industry
New intermediaries complicate the split of
profits between elements of the profit pool
Example: Online car
sales
The battle for customers
takes place during:
1. Researching and selecting
the vehicle
2. Finding a dealer and price
3. Choosing financing,
insurance, warranty
4. Closing the deal
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eCommerce Case Study
Table 12.3: Steps for Online Auto Buying
Stage
Service Providers
Growth Drivers
Consumer
Participation
(millions of
households)
1998
2003
1. Research and
select vehicle
AutoSite
Car and Driver
CarPrices.com
Consumer Reports
Edmund’s
IntelliChoice
J.D. Power
Kelley Blue Book
Manufacturers
Yahoo! Autos
 Increase in online
households
 Easy access to deep
product information
from trusted brands
 Powerful word of mouth
2.0
7.9
2. Find a dealer
and price
Auto-By-Tel.com
 No-haggle pricing
AutoConnect
 Dealers hire InternetAutoVantage
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
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0.8
5.2
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eCommerce Case Study
Table 12.3 continued
Stage
Service Providers
Growth Drivers
3. Choose
financing,
insurance and
warranty
Financing
CarFinance.com
Ford Credit
GMAC
Lending Tree
Insurance
GEICO Direct
InsWeb
Progressive
Warranty
Warranty Dir.
Warranty Gold
4. Close the
deal
Saturn/Daewoo
Dealer networks
Luxury brands
Online buying
services
Part 1 -
 Increased comfort with
internet transaction
security
 Technology cooperation
between banks and
dealers
 Dealers accept thirdparty financing
 Banks and insurers offer
incentives to go online
 Higher quality vehicles
easy to buy without a test
drive
 Money-back guarantees
and extended warranties
 Fixed pricing allows
Introduction
to Ecommerce
I
dealers
to close sales
online
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Consumer
Participation
(millions of
households)
1998
2003
0.0
1.2
0.0
0.5*
Number
rounded
up 45
Website
Marketing and
Design
Poitiers, September 23-27
End of Sessions 3-4:
A Demain!
1