Managing Online Marketing
Efforts
Module 9
Source: Strauss, Judy and Raymond
Frost (2001), E-Marketing, PrenticeHall: New Jersey.
Module 9 Objectives
1. Describe what is meant by E-Marketing
and E-Business.
 2. Describe what are the 10 new rules of EMarketing.
 3. Describe what are the challenges and
opportunities involved with E-Marketing.
 4. Describe who is online,what impacts
online use, and how measured.

Module 9 Objectives
5. Describe the issues of the product
element online.
 6. Describe the new product trends in the
B2B and B2C market.
 7. Describe why the Net is efficient or not
efficient in terms of pricing.
 8. Describe how the Net has impacted
distribution.

Module 9 Objectives
9. Describe the E-Business models.
 10. Describe Online Marketing
Communication Strategies.
 11. Describe How to Measure the Online
Audience.
 12. Describe How the Net Helps Firms
Build 1:1 Relationships.

Module 9/Obj 1: What is meant
by E-Marketing and E-Business.

EB=EC+BI+CRM+SCM+ERP
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–
–
–
–
–
EB = E-Business
EC = E-Commerce (transactions, e-tailing)
BI = Business Intelligence
CRM = Customer Relationship Mgmt - uses
digital processes and integrates customer
information gathered at each touch point.
SCM = Supply Chain Management
ERP = Enterprise Resource Planning (SAP)
Module 9/Obj 1: What is meant
by E-Marketing and E-Business.
E-Marketing
–
–

Increases efficiency in
traditional marketing
functions.
Technology of emarketing transforms
marketing strategies.
This results in new
business models that
add value and profits.
emarketer exercise
Level of business impact

Business transformation
(competitive advantage,
industry redefinition)
Pure
Play
Enterprise
Effectiveness
(Incremental sales,
customer retention)
Efficiency
(Cost
reduction)
Pure dot-com
(E*Trade)
Click and Mortar
(eSchwab)
Business Process
Activity
Customer
relationship
management
Brochureware,
Order processing
Module 9/Obj 1: What is meant
by E-Marketing and E-Business.

Level of commitment to E-Biz can vary
–
–
–
Individual BusinessActivity - aim for efficiency
(cost reduction) Ex. Website for brochureware
Business process - aim for effectiveness
(incremental sales, retention) (ex. CRM)
Enterprise - the firm automates many business
processes in a unified system(ex.Click+Mortar)
 Mary
–
Kay Exercise
Pure Play-business transformation (dot.com)
 (competitive
advantage, industry redefinition)
Module 9/Obj 2: The 10 new
rules of E-Marketing.

10 New Rules of E-Marketing
–
–
–
–
–
–
1. Power Shift from Sellers to Buyers - buyer
attention is a scarce commodity
2. Increasing Velocity - rapid change
3. Death of Distance - geographic location not
an issue when collaborating
4. Global Reach - borderless global economy
5. Time Compression - 24/7.
6. Knowledge Management Key - organize data
Module 9/Obj 2: The 10 new
rules of E-Marketing continued.
–
–
–
–
7. Market Deconstruction - separation of
product and information (ex. auto buying)
8. Interoperability - open standards for
software design so systems can work together.
9. Interdisciplinary Focus - Marketers have to
understand technology (MIS) .
10. Intellectual Capital Rules - Imagination,
creativity, and entrepreneurship (i.e. intangible
assets - intellectual property important).
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.

E-Marketing impacts different markets:
–

B2C, B2B (1/2+ of volume online), C2C, B2G, G2C.
Consumers Empowered
–
Consumers now have more control. They want:






Speed (ex. answer emails quick)
Privacy, safeguards, permission to contact and use information
Low prices, convenience, self-service
Service, personal attention/personalization (treat customers
important)
Value (exceed expectations)
Mass customization (adds value and can be automated).
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.

Consumers want in a website:
–
–
–
–
–
–
–
1 stop shopping with integrated solutions.
Effective web navigation
Quick downloads
Clear site organization
Attractive/useful site design
Secure and private transactions
Free information/services - consumers used to
online culture of getting something for free.
Module 9/Obj 3: The challenges/
opportunities with E-Marketing.

Businesses must address:
–

Technology
–

Competition, changing value chain structures, conflict,
and coordinating the front/back end.
Costly and changing, but may offer LR savings
But can offer value to both firms and consumers if
done right:
–
–
Benefits of customization, personalization
Decrease Costs - 24/7 convenience, self-service
ordering and tracking, one stop shopping.
Module 9/Obj 3: Challenges/
Opportunities of E-Marketing.
2.2 million public Web sites with over 300
million web pages (400,000 private)
 U.S. spent over $36.6 billion online in 1999
 Worldwide 300 million+e-mails sent daily
 E-commerce>$1.2 trillion by 2002
 IBM e-revenues $1 billion monthly (5x
Amazons’) + saved $340 million online
 38% etailers/72% online catalogs profitable

Module 9/Obj 3: E-Bay an
example of E-Marketing success.



Still successful despite
slowing economy as both
consumers and firm
searching for stuff to sell.
E-Bay takes a cut of every
transaction - low risk as
they don’t have to address
inventory, warehousing, or
fulfillment issues.
37.6 million users in 200
countries. 1/2 of users
referred to by other users.




E-Bay on track for $1
billion in revenues in 2002
and 70% earnings growth
in next 2-3 years.
Has 85% of online
consumer auction market.
Firms also set up shops to
sell at fixed prices.
Source: Time (11/5/01)
E-Bay Exercise
Module 9/Obj 4:Describe who is
online and what impacts use.

Size of the Internet (2000)
–
41% of the US use Internet (110 million).

–
World adoption now growing faster with an estimated
275.5 million online than US.

–
Online usage in U.S. becoming mainstream. 84% of all users
utilize e-mail: 4 trillion email vs. 107 billion first class mail.
57% North America shopped online, spend $460 annually.
Largest Internet population in N. America but 6 out of top 15
countries are European. These top 15 countries account for
84.6% of the world Internet users.
Idiom exercise
Module 9/Obj 4:Describe who is
online and what impacts use.

Adoption Barriers
–
–
–
–
In Industrial nations, B2C/C2C enticed businesses, in
developing nations the B2B market will lead consumers
SocioCultural Issues - language, education, tangibility
(want to touch products), sociability, use of credit cards
Technology Issues - in some countries low PC
penetration and communications infrastructure
concerns; another concern is that people getting online
with different devices with different screen sizes.
Legal and Political Issues- censorship, intellectual
property, etc...
Module 9/Obj 4:Describe who is
online and what impacts use.

Attitude Toward Technology
–
CAT - Consumer Acceptance of Technology
(done by SRI who did VALS).
 CAT
examines 3 levels: How technology benefits
individuals, the impact of technology on the image
of group one is in, and how society reacts to it.
–
Technographics - Forrester Research
 Looks
at attitudes toward technology, income, and
primary motivation to go online
 Opportunistic or pessimistic toward technology

Forrester Exercise
Module 9/Obj 4:Describe who is
online and what impacts use.

Home and Work Access
–

Home has slower connections, relates to use.
ISP - like a utility service
–
AOL has 54% of US ISP market
Wireless - growing but problematic, Europe
may lead North America here
 Time Online - stay on longer when not
charged per minute (time charge in Europe)

Module 9/Obj 4:Describe who is
online and what impacts use.

Consumer Navigation Behavior
–
Attention - concept of FLOW.
 Flow
is the state occurring during network
navigation that is (1) characterized by a seamless
sequence of responses facilitated by machine
interactivity, (2) intrinsically enjoyable, (3)
accompanied by a loss of self-consciousness, and
(4) self-reinforcing.
–
Attention is a desirable and scarce commodity.
Module 9/Obj 4:Describe who is
online and what impacts use.
–
–
Privacy - important to users. Marketers have to
consider when using e-mail databases and
collecting information
User Control of Message - nonlinear, pull rather
than push for information, need for navigation
aids.
 Need
to understand click stream patterns (a user’s
Web surfing patterns).
Module 9/Obj 4: Media Metrix example of measuring online use.




Media Metrix
One of the leading
Internet audience
measurement firms
worldwide.
A metering device that
measures actual
software usage and
web pages visited.
Like a Nielson box.


It measures audience
usage behavior in real
time, click by click,
page by page, minute
by minute. Also has
demographics for
sample. Has merged
with key companies.
Media Metrix
Exercise.
Module 9/Obj 4: Measuring
online usage with technology.

Client-Side Data Collection
–
–

Server-Side Data Collection
–
–

Cookie files (ex. Double Click)
Clickstream - PC Meter (ex. Media Metrix)
Website log software
Real-time profiling track’s user’s movements
through a website-reports at a moment’s notice
Real-Space Approaches - offline data
collection (ex. bar code scanners)
Module 9/Obj 5: The issues of
the product element online.

Product Attributes Issues
–
–
Product attributes include overall quality and
specific features. Need to consider features
from user perspective - I.E. benefits received.
Internet’s impact on customer benefits has
revolutionized marketing: for example
customization/bundling that consumers can do
themselves (ex. Dell site when buy a
computer), and personalization.
Module 9/Obj 5: The issues of
the product element online.

Branding Issues
–

Apply existing brand names online. Create new
brand names online. Cobrand with another
firm. Also, what domain name to use for web.
Support Services Issues-Customer support key.
–
–
Provide support services during/after purchases.
Help customers with installation, maintenance
problems, product guarantees, service
warranties, and overall customer satisfaction.
Module 9/Obj 5: The issues of
the product element online.

Labeling Issues
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–
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For online - the terms of product usage, product
features, and other information comprise online
labeling at Web sites. Also copyright issues.
BBBOnLine logo - for members.
TRUSTe privacy shield - for meeting certain
terms of use regarding privacy of customer
information.
Module 9/Obj 5: The issues of
the product element online.

TRUSTe Labeling
continued

Independent, nonprofit,
privacy initiative provides seal/logo to those
who meet its stated
philosophies.
Adopt/implement privacy
policy
TRUSTe Exercise




Post notice and disclosure
of collection and use
practices (policy)
regarding PII (personally
identifiable information) Give users choice and
consent over how PII used
Put data security and
quality, and access
measures in place to
safeguard PII
Module 9/Obj 5: The issues of
the product element online.

Product Cost Issues:
–
Nonmonetary cost reductions:
 Net
is convenient, fast, saves time due to selfservice, one-stop shopping, automation, integration.
–
–
Shopping agents make price comparisons easy.
Factors though that increase price:
 Distribution-ship
products separately, ship overnight
 Affiliate program commissions
 E-firms spend a greater % of sales on promotion.
 Site Development/Maintenance
Module 9/Obj 5: The issues of
the product element online.

Additional Product Issues
–
–
–
–
–
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Market deconstruction - disaggregation and
reaggregation of products/services.
Velocity results in fierce competition, product
imitations, and short PLCs.
Product differentation key.
Power shifts to buyers - word of mouse.
Knowledge management of customers.
Move from atoms to bits increases complexity.
Module 9/Obj 6: The new
product trends in the B2B

4 B2B Trends:
–
–
Value Chain Automation, Outsourcing,
Information Sharing, Centralizing Information
Access
1. Value Chain Automation
 Automate
existing business processes to improve
efficiency and effectiveness.
 Exs. Order execution and data mining.
Module 9/Obj 6: The new
product trends in the B2B

1. Value Chain Automation continued
 Benefits
to buying off-the-shelf enabling software:
rapid deployment, relatively bug-free rollout,
integrated solutions, large number of features,
compatibility with trading partners, and lower cost.
–
Can aid with promotion - can customize
 Affiliate
programs - referral fees to drive traffic to
sponsor (need to monitor and credit click throughs)
 Targeted advertising - ex. DoubleClick helps target
ads based on surfing
 Catalog aggregator compiles data into one database.
Module 9/Obj 6: The new
product trends in the B2B

1. Value Chain Automation continued
–
Other ways can be used include:
 Product
configuration - expert systems
 Brokerages
 Payment/Financing - automates credit
 Customer Service - must route, respond to emails
quickly, analyze for patterns
 Distribution - Just-In-Time delivery
 Relationship Marketing - data-mining
Module 9/Obj 6: The new
product trends in the B2B

2. Outsourcing
–
–
Application Service Providers (ASP) - perform
value chain functions for client off-site.
Businesses access application via Web.
Usually focuses on a single value chain
function (Ex. Payroll service)
 Advantages:
lower startup costs, lower IS staff
costs, lower switching costs.
 Disadvantages: lack of control over key customer
data and business process.
Module 9/Obj 6: The new
product trends in the B2B

2. Outsourcing Continued
–
VSP - Vertical Service Providers
 Aggregates
almost all value chain functions for a
client. Can run an entire business.

3. Information Sharing
–
Electronic Data Interchange - EDI  The
exchange of data between businesses in digital
form. Consistent standards so a common format for
data interchange. Problem with proprietary formats.
Module 9/Obj 6: The new
product trends in the B2B

4. Centralizing Information Access
–
Corporate Portals
 Uses
Web technology to create sites for employees extension of intranet. Portal translates all of firm’s
data into a common interface. Easier for employees
to search.
–
Extranets
 Corporate
portals whose access has been opened to
value chain partners (ex. groupware software like
Lotus Domino).
Module 9/Obj 6: The new
product trends in the B2C

3 Primarily B2C Trends
–

Multimedia, Assistive Technologies, and
Convergence of Media
1. Multimedia
–
With cable modems and DSL modems:
 Conferencing
software, Webcams, Streaming audio,
 CD-quality audio, Streaming video, Internet
telephony VoIP - Voice over Internet Protocol
Module 9/Obj 6: The new
product trends in the B2C

2. Types of Convergence of Media
 Voice,
video, and data on corporate networks - one
instead of 3 systems.
 Wireless devices and the Web (ex. PDAs using
Wireless Access Protocol - WAP).
 The Web with broadcast media - single appliance
that receives broadcast content over the Internet.

3. Assistive Technologies - to help disabled
 Voice-activated
computers, large-type screen
displays, type-to-speech or braille, speech-to-texttelephony, and eye gaze-to-type (control by staring).
Module 9/Obj 7: Why the Net is
efficient in terms of pricing.

In an efficient market
–
–
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Lower prices due to shopping agents, reverse
auctions, tax-free zones, venture capital, and
competition.
Lower costs of order processing (self-service),
JIT, less overhead with no retail storefront,
customer service cheaper online, save on
printing/mailing+digital product distribution
Also Web has high price elasticity, with
frequent and smaller price changes.
Module 9/Obj 7: Why the Net is
not efficient in terms of pricing.
–
There is Price Dispersion - greater price spread
between highest/lowest price because:
 How
goods priced online - Priceline vs. delta.com
 Delivery options - ex. overnight more expensive
 Time-sensitive shoppers - don’t search for best price
 Branding - 5% of Web sites get 75% of hits
 Switching costs may be high
 Second-generation shopping agents - compares
benefits beyond price
 Metamediaries - Web sites geared towards a life
event (ex. Edmunds); people like a 1 stop shop
Module 9/Obj 8: Describe how
the Net has impacted distribution.
–
There is market deconstruction (removing
functions from some) and reconstruction
(reallocating functions to other intermediaries).
 Disintermediation
- process of eliminating
traditional intermediaries to reduce cost. Thought
would happen but intermediaries may be more
efficient.
 With aggregation - intermediaries bring together
product from multiple suppliers (who make a high
volume of a narrow range of product) so consumers
have more choice in one location (ex. CDNOW).
Module 9/Obj 8: Describe how
the Net has impacted distribution.
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–
–
–
–
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New intermediaries created - shopping agents,
buyer cooperatives, metamediaries
New ways to match products to buyers shopping and collaborative filtering agents
Negotiating Price - 2 way dialogue, bidding
Much cheaper to process transactions online.
Facilitating Function - ex. market research
3rd party logistics-outsourced - ex. FedEx
Module 9/Obj 8: How Internet
has impacted distribution.
–
Buyers’ power increased.
 Buyers
now have more information and access to
more suppliers.
–
Some suppliers (ex. Walmart) who have used
electronic systems to notify suppliers have
gained power.
 Suppliers
that took early lead online and those that
built relationships with buyers also gained power.
 Network of buyers and suppliers can exchange data
with Web-based interface
Module 9/Obj 9: Describe the
E-Business models.

A business model defines a revenue stream to
provider, benefits to consumer, and architecture to
deliver those benefits
– 1. Content Sponsorship - create web sites that draw
traffic (may be niche audience) and sell ads.
–
2. Direct Selling - benefits from disintermediation, works
with digital products and perishable products
–
3. Infomediary - online firm that aggregates and distributes
information (ex. marketing research done by Media Metrix)
–
4. Intermediary Models-Brokers, Agents,E-Tailers
Module 9/Obj 9: E-Business Models

Intermediary Models
– Brokerage - online exchange (E*Trade), online auction
– Agent - can represent seller or buyer:
–
–
–
For Seller: selling agents- ex. affiliate programs, manufacturer’s
agent - ex. catalog aggregators, metamediary - represents a cluster
of manufacturers, e-tailers, and content providers organized around
a major event or asset purchase (ex. TheKnot), virtual malls
For Buyer: shopping agents/2cd generation shopping agents,
reverse auction, buyer cooperative
E-Tailer - bit vendors (ex. nytimes.com), tangible products
(cost premium for shipping since inefficient to ship 1 item)
Module 9/Obj 10: Online Marketing
Communication Strategies

ADVERTISING
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Growing from $1billion (98) to $22billion (04)
USA spends 83% of world’s Internet ads
8% of ad budgets spent on Internet
Brand advertising online - can do impression ads; but
for brand advertising best medium is still TV
Direct response ads - create action; big strength for Web
as it leverages 2-way communication. Pay by click
through (action) vs.CPM (pay for eyeballs).
Module 9/Obj 10: Online Marketing
Communication - Advertising cont.

E-Mail - least expensive, text embedded in content; can
include graphics as bandwidth grows.

Web Site Advertising
–
–
–
Banners and Buttons - builds awareness and changes
attitudes; but low click-through; evolved from click
here to animated GIF to interactive
Sponsorships -editorial content and advertising
Interstitials - daughter windows or pop ups; Java-based
ads that pop up while main content loading. Seems
slow loading and users must close.
Module 9/Obj 10: Online Marketing
Communication - Advertising cont.

In deciding media to buy consider:
–
–
Effectiveness - reaching target market
Efficiency - doing so at lowest cost
 CPM-cost
per thousand; Web averages $33.75 CPM
 Technology sites have highest CPM
 General Portals - ex. Yahoo and AOL get 15%
Internet traffic but 45% ad dollars
 Vertical sites - focus on narrow topics get 20% ad
dollars; other niche sites 24%
Module 9/Obj 10: Online Marketing
Communication Strategies

SALES PROMOTION–
E-Coupons
 Use
–
Sampling
 Free
–
will grow as only 60% are aware they exist.
downloads for demo periods, clips.
Contents/Sweepstakes - can increase stickiness
(length of stay on a Web site )
 Contests
require skill. No purchase needed for
sweepstakes. Need to move customers to purchase
Module 9/Obj 10: Online Marketing
Communication Strategies

PUBLIC RELATIONS
–
Content Sponsorship - free online content published by
–
firm to inform, persuade, or entertain.
Brochureware but can expand to be interactive. Need to address
speed, navigation and search issues.
–
–
Community Building -Chat rooms/discussion groups
Online Events
 Generate
–
user interest, draw to site
Online Customer Service-need to respond w/in 48 hours
but 1/2 of firms don’t respond which causes dissatisfaction.
Module 9/Obj 10: Online Marketing
Communication Strategies
PERSONAL SELLING - for generating leads.
 DIRECT MARKETING

–
E-Mail: Adv - no postage, convenient to respond (link),
automatically individualized; Disadv -lists,spam
 How use E-Mail: announcements, newsletters, offers. Can use
graphics. Can generate or buy lists.
–
Opt-In (volunteer) vs. Opt-Out

Opt-in has higher response rate but higher CPM, consumers
“paid to respond”, need to remind consumer they asked.
Marketing - don’t want to be spam
Viral Marketing - word of mouth online
 Permission

Module 9/Obj 11: How to
measure the online audience.
–
Good audience measures critical- who reaching.
 Hits
- most simplistic, inflates count
 Page Views - what about page length
 Visitors - could be multiple visits by one
 Site Stickiness - 1 hour sticky
 Impressions - sold on # of impressions
 Click-Through - performance measures
 Metrics used to evaluate sites: CPM, click-through,
conversion rate (#orders, #visitors, cost per click,
cost per order, average order value.
Module 9/Obj 11: How to
measure the online audience.

Consumer-Centric Model - like Nielsen’s
–
Software records clickstream data at panel user’s PC
(demographically segmented panel).
Summarizes traffic patterns on site.
–
May underestimate business use and smaller sites.
–

Site-Centric Model - Records data at Web site
server’s log file to reveal # of hits, page views, length of
visits, visitors. Needs to be conducted by 3rd party
auditors. Problems with caching, firewalls.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

Shift from mass mktg to individualized mktg.

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Relationship Capital a key asset.


Internet facilitates relationship marketing. Shift from customer
acquisition to retention-profits w/ fewer high-value customers.
As customer attention and control is scarce, a firm’s ability to
build/maintain relationships with customers, suppliers, and partners
may be more vital than their capital and financial assets
Relationship Levels
 One-financial
bond through price strategies
 Two-social interaction with customers
 Three-add value through structural solutions
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

Customer Relationship Management (CRM)
–
–
–
–
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The process of creating and maintaining relationships
with customers.
Holistic process of identifying, attracting,
differentiating, and retaining customers.
Integrates firm’s entire supply chain to create customer
value at each step.
Results in higher profits through more of customer’s
business.
Stakeholders and technology important in development.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

CRM Process
– 1. Identifying Customers
 Entice
customers to provide more information
 Track behavior electronically - privacy concerns
–
2. Differentiating Customers by value
20% customers = 80% profit
 Value Differentiation - evaluate Lifetime Value and
RFM - recency, frequency, and monetary
 Look at sales over time versus cost

–
3. Customizing Entire Marketing Mix
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

CRM-SCM Integration
–

Need to seamlessly link back end (inventory and
payment) with front end (CRM) and the entire supply
chain. Entire supply chain must work together to focus
on needs and profits, but need info for this to work.
Advantages of Connecting Customers w/ SC
–
–
–
Firms share transaction data so lower inventories and
timely production.
Design products to better meet needs.
Provide better customer service; meet needs better.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

Benefits of CRM
–
–
–
–
–
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Increased Profits - 5x to acquire than retain
Lower promotion costs, higher response rates,
more effective salespeople, cost less to service
Try to increase amount purchased by customer
Customer retention (especially high value ones)
key but acquisition still important.
Word-of-Mouth and Referrals
Partnership Synergy - relationship 2 or more firms (B2B)
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

Building Partnerships Through
Communities
–
–
–
Internet ideal for gathering people with similar
ideas/tasks (communities).
Communities form at web sites in chat rooms,
bulletin boards, and distributed e-mail lists.
If a firm builds/maintains the “watering hole”
where community gathers, can build
relationship with them.
Module 9/Obj 12: How the Net
Helps to Build 1:1 Relationships

Guarding Consumer Privacy
–
–
–
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Privacy a major concern; burden on marketers
to use info responsibly and not be too intrusive
CRM based on trust - key is relationship
building through dialogue and better targeting.
Better to have consumers opt-in, may get less
consumers but they will be open to message.
Remember retention more profitable than
acquisition; relationship capital.
Module 9 Conclusions
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The Internet changes how to do business but
may be a bigger factor for B2B than B2C.
 Time
is compressed and buyers have more power,
control, and information. Need to make site easy to
navigate and use.
 Marketers need to earn trust and build 1:1
relationships with customers.
 While Internet may not takeover traditional retail, it
does significantly reduce costs.
 Has implications for all elements of marketing mix.
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Any Questions.