Databases & Data Mining
Operational Data Tools
 Techniques marketers use to learn more
about their own operations, competitors,
and customers
 Includes:
• databases
• cookies
• web analytics
data warehouses
server log files
Database

Collection of data structured for quick retrieval of
pieces for analysis & application
 History
– 1960s-how much your firm spent on advertising
this year
– 1980s-advertising dollars by state & year
– 1990s-drill down to city/month/zip code
– 2000s-predictive, based on past, what are we likely
to spend in future? How will this affect sales?
Database
 Benefits of use
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Identify best/worst customers
Better target promotions to customers
Help customers find what they need
Establish two-way communication with
customers
• Integrate data across business divisions
• Track competitors
Database
 Marketing Data collected
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Markets
Segments
Competitors
Suppliers
Partners
Data
 Consumer data collected
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Demographics, geodemographics
Transaction histories
Lifestyle
Behaviors
– clickstream, time spent on site
• Technical specifications
– browser type
Databases
 Marketers: suited for CRM activities
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customer contact
identify customers for special offers
cross or up-selling
tailoring advertising messages
predicting purchase rates
Database Planning & Design
 Usually done by IT department
• Plan to decide what they want & where to get it
from
• Organized by files, records, & fields
 In-house database: build from company
data
 Compiled database: buy from others who
collect data
Double Click
 Online advertising firm
• Started in 1996
 Purchased data warehouse firm Abacus in
1999
• Owns database with over 3.5 billion
transaction from 90+ million US households
– Largest proprietary buyer behavior database in US
Double Click’s Abacus
 Abacus Database Products
• B2C Alliance: consumer focused catalog &
specialty retail marketers
– Data from over 90 million households
• B2B Alliance: direct response marketers
– Data from over 75 million business contacts that
are actively purchasing
Double Click’s Abacus

Abacus Database Products
• Retail Solutions: specialty retailers who want to
increase store traffic within a defined trade area
– Highly targeted mailings for increased store sales
• Data Management Solutions: customized solution for
targeting “right” customers with “best” offer
– Multichannel databases, cross channel measurement, data
processing, and strategic/analytic services to assess your
customers’ behaviors
Data Warehousing
 Store houses for massive amounts of data
Data Mining
 Software systematically sifts through
databases looking for significant patterns
& correlations

Used to create predictive relationships
• profile credit card purchases
• probability a customer will purchase $500 of
goods from a catalog
• more than filtering, make predictions
Jiffy Lube

Began data warehouse project (1998)
• Head of marketing, IT, Enterprise data manager

Took 7 months to plan
• Longer to load 35 million vehicle records
• When Parent, Pennzoil, bought Quaker State added
another 15 million records
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Used to profile most profitable customers
• Target them with direct mail offers of services that
match their interests
Privacy Sensitive Tools
 Cookies: small data files automatically
placed on a user’s browser by a web site’s
server
• used to track & gather information
 Bugs: electronic GIF images placed by 3rd
party media & research companies
• collects cookie information on more than one
site
Privacy Sensitive Tools
 Server Logs: plain text files that track web
data
• interpreted by reporting programs
– user’s name, place requested, whether file was
received or not, size of file, browser used, date/time
of request, presence of firewall or not
– traffic counters
 Web Analytics: collecting, organizing &
analyzing data for marketing applications
Marketing Research
Overview of Marketing Research
 Primary vs Secondary Research
 Qualitative vs Quantitative Methods
 Research process
• state problem/question, develop plan, collect
& organize data, analyze data, report results
 Traditional research moving online
 New methods developing for e-commerce
Methods Moving Online
 Qualitative
• Focus Groups Online
• Interviews
Brainstorming
Chat Analysis
 Quantitative
• Surveys
• Reviews
• Simulations
Panels
Conjoint analysis
Online Focus Groups
 Earliest use documented in 1994
 Outgrowth of chat room technology
 Originally limited to Internet topics
 Serious trade publication coverage began
about 1998
 Now used for wide variety of topics
 Researchers divided on applicability
Process
 Determine target population
 Arrange technical resources & logistics
 Recruit sample
 Re-screen sample
• Identity & Internet, computing ability & resources
 Conduct focus group(s)
 Prepare transcripts
 Generate analysis and reports
Demonstration
Advantages
 Speed
• Avg. turnaround time 5 business days
– Transcripts available immediately
– Analysis and reports generated sooner
 Cost savings
• Travel
• Focus group facility rental/catering
• Transcription
 Access difficult-to-reach populations
• Specific user groups
Advantages
 Quality of Response
• Less opportunity for only a few participants to
dominate (potentially)
• Inclusive: most respondents answer every
question
• Anonymity increases participants' candor and
interaction with moderator
• Private treatment of "sensitive" topics
Disadvantages
 Online populations not representative
 No auditory and visual cues
• Tone of voice, Facial expressions, Body language,
Gestures, Group interactions
 Reliance on "emoticons”
• , “JK” & “LOL”
 Participant Resources
• Level of Internet experience, Typing/Writing skills,
Quality of computer and software
Other Issues
 Other Issues
• Site security
• False identities
• Attention to topic vs. external stimuli
• Maximum of 6 respondents suggested
• Labor Intensive
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Still Experimental...
Measuring Effectiveness of
Interactive Media
Began with Web Advertising
Measurement
 Most Measures tell cost effectiveness
• not tell if achieved desired effect
 Can refine media & creative choice in real
time
 Hit & Stickiness were first widely accepted
standards
• Found to be weak, but still used widely today
• Potential Industry Standard?
Hits
 The number of files served from a page
 When a visitor requests a page & it is
served, hits are the number of ads in the
page
• 3 banner ads, 1 graphic, 1 sponsorship--5 hits
• Fails to identify contact between ad & visitor
• Does not track what happens after page opens
Clicks
 Click Through: when a visitor clicks on a
banner ad, activates link, & goes to site
– does not capture purchase information
 Click Rate: Percentage of times ad is
clicked divided by number of times served
– ad on Yahoo comes in front of a visitor 500 times, it
is clicked 10 times, =2% click rate
 Conversion Rate: rate of those who click &
buy (=buyers/viewers)
Impressions
 Opportunity to see an ad/number of times
available for viewing
 CPM--cost per thousand--pricing
mechanism for ads
• vary for value of host site
• 2001 average CPM was $33/1,000 impressions
 Pages: Number of pages downloaded from a
site (but visitor may not view each page)
Visitors
 The total number of people who visit a web
site in a period of time
• If someone visits multiple times, each time is counted
(duplication)
 Unique visitor: unduplicated number of
people visiting in period of time
• identified by cookies or IP
 Eyeballs: number of site visitors that see an
ad
Stickiness
 Stickiness: total impressions/month
divided by unique visitors/month
• captures attractiveness
 Other relevant terms:
• Rate -- cost of placing ad
– 2000, CPM for health & fitness $42.50 average
– 2000, CPM for general news $37.47 average
Branding
Advertising & Traffic Building
Branding
 As Internet grows, branding becomes even
more important
• short run, strong brands: Amazon, EBay
 Brand includes
• name, symbol, design or other elements
• provides meaning & identifies ownership
• differentiates the product from competition
Building a Brand
 Branding Efforts
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Awareness
Brand promise
Character/Personality
Create Relationship
Shape behavior
Provide Reinforcement
How to Build Brand Awareness
Online
 Must use on & off-line promotions
• Advertising, sales promotions, direct
marketing, personal selling, & publicity
– 70% of consumers went to a site because of TV,
newspaper, & WOM
 Can use viral marketing to create a buzz
• Chat rooms, Screen beans, Tell a friend
campaign
Pillsbury
 Begun as flour milling company in 1869
• Marketed in more than 70 countries
 Pillsbury bake-off competition
– Over 50 years old
• Utilizes viral marketing with its own website
– $1 Million prize
– 50% of its 10,000 entries are received online
– Recipes on site emailed to friends
Burger King
 The subservient chicken
• “Have it Your Way” motto
• Get the chicken to do what you want
– 300+ actions
 Created by Crispin, Porter & Bogusky ad
agency (2004)
 Targeted toward 20-30 year olds
Burger King
 Viral Marketing Technique
• Promotions that spread word-of-mouth
 Launched on April 7, 2004
• Only 20 people told about it
– Friends of those at agency
• 20+ million hits
• Six minutes average stickiness
• Since promoted site in TV ads
Advertising & Traffic
 Novelty no longer guarantees traffic
• Estimated to be over 2 billion websites (2005)
 Building traffic expensive & difficult
 Essential beginning points
• Search engines
• Email marketing
Search Engines
 Search Engine Usage
 Search Engine Advertising
 Domain Names
Search Engine Usage
 90% of Internet users access a search
engine
 Most consumers type in product name on
search engine (28%)
• 23% link directly to domain name
• 9% type in brand name
 Importance of meta-tags
Search Engine Advertising
 Google
• Started in 1998
• 150 million searches per day
• Scans over 2 billion web sites
 Adwords program (2002)
• Bid for listing at top of search
– Average is .19 cents per click
• Pay based on clicks on link
Search Engine Advertising

Search generates too many results
• Few users go beyond first few pages in search
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List with ALL search engines
• Use meta-tags to improve placement
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Smaller firms most likely to benefit from search
engine optimization
• 38% of small business owners report that they use
some form of online advertising
Domain Names
Until 1984, Internet addresses had a 10-digit
numeric number
 Domain names introduced as letters instead of
numbers
 Hierarchical order of domains
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• Top level: .edu, .com, .net, .org, .gov, .mil
– And two digit country code
• More names added in 2000: .info, .biz, .name, .museum
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Brand hierarchy issue
Domain Names
 Not to exceed 67 characters
 Name should be trademarked
 Can register name online
• 80 different companies
• Verisign was the first
– 16 million names registered in 2001
 Own contract for 1-10 years
Domain Names
 Brand needs a great name
 Domain name should:
• reinforce branding
– short, descriptive, associated with firm/product,
easy to remember
• build traffic
• anticipate consumer behavior & mistakes
• avoid clutter
Email Marketing
 Valuable tool
• Better reach of market segment
• Lower cost
 Email lists cost about .10 - .50 per name
• Includes rental, email distribution, tracking, &
final reporting
 Direct mail marketing: 1-2% response rate
• Permission email gets 30-40% response
Easymail Interactive
 Oldest independent email list broker (1999)
 1500+ unique email lists
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Sorted by category
276+ million opt-in consumer email addresses
35+ million B2B
105 million international
Other Traffic Builders
 Sales Promotions
 Personal Selling
 Public Relations & Publicity
 Advertising
Sales Promotions
 Temporary inducements to stimulate
demand, build traffic, increase sales,
influence channel members
• found on 93% of commercial web sites
– contests, sweepstakes, coupons
– games, free samples, club memberships
 Marketers spent over $10 billion on these
efforts in 2004
Personal Selling

Sales person interacts with customer
• Email or instant messaging/chat
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Can be effective online
• Uncomplicated purchases
• Or to support the offline sale
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IBM combines online information with offline
sales negotiations for its high-end enterprise
computer systems
Public Relations & Publicity
 Sponsored programs to build image &
goodwill of firm
• community based events, plant tours, etc.
• live chats with executives
• schedule online events to launch product or
web site
 Volvo (2000) conducted the first digital
automobile launch
Public Relations & Publicity
 Providing information to the media to
generate positive consumer word of mouth
• email press releases to other media
• most corporate web sites have pressrooms
with archived press releases
Online Advertising
 First banner ad displayed by IBM on
Hotwire.com in 1994
 $263 billion total advertising dollars in
marketplace
 $9.6 billion spent on online advertising
(2004)
• 25% of total US advertising spending
– structural changes & growth ($0 in 1994)
Online Advertising
 Largest spenders are in consumer brands
• retail, music, & automotive
 Most direct response
• solicit immediate response with a click
 Focus on branding, awareness, positioning,
and product features/benefits
Banner Ads
 35% of total Internet advertising (2001)
• Interactive bulletin boards
 Response rate average .75 - .3% (2002)
• First banner in 1994 garnered 30% click
through
 More effective for national firms
Banner Ads
 Higher click through
bold colors
top of page placement
animation
call to action
limited exposure  larger size
 Getting larger over time
• Large frames can increase awareness by 40%
 Flash increases click rate by 19%
Other Forms of Advertising
 House Ads: pop-ups on own web site (AOL)
• Approximately 28% of advertising space on top
rated web sites (2000)
 Sponsorships: small button near sponsor’s
product/web site content
• Approximately 25% of all online advertising
revenue (2001)
Other Forms of Advertising
 Interstitials--rich media ads on web sites
• Like small TV ads
• 5-30 seconds
 Minimovies--cinema type ads filmed for
Internet showing
• 5-6 minutes
• viral marketing
BMW minimovies
 Created by ad agency Fallon Worldwide
• 85% of BMW buyers research car online before
buying
• BMW drivers spent more time with the brand
online than through television ads
• Cost $15 million to produce
• Launched in April 2001
– By July, 2001 over 6 million downloads
– Average 16 minutes stickiness on site
Other Forms of Advertising
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Yellow Pages Advertising--1.5% click through rate
online
• localized by zip code
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Classified ads--newspapers or portals (Yahoo)
• can search local or national
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Webcast ads--streaming audio/video broadcasts
• stream ads in web content
• 34% of all Internet users listen to web radio
Pricing
Standard Pricing
 Based on demand, set to maximize profits
 However,
many factors influence price
– internal objectives, cost, economy, competitors,
government, seasons, etc.
– cross-channel pricing (same in industry)
– multitier pricing (level of service)
 Prices often fall in range--ceiling, floor,
acceptable level
Online Pricing Issues
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Price sensitive consumers lead to increased
price competition
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Information symmetry
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Price transparency
– Intelligence agents (MySimon)
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Shipping/handling fees also relevant to price for
consumers
Factors Affecting Online Pricing
 Unique value asset
• unique features & benefits, higher price
 Substitute awareness effect
• awareness of alternatives impacts price
• easier to search for substitutes online
 Total expenditure effect
• spend a lot on purchase, shop for best price
Factors Affecting Online Pricing
 Shared cost effect
• different people choosing product versus
paying leads to higher prices
 Price-quality effect
• before buying use cues & signals to judge
quality
– trust, confidence, & role of established brands
 Inventory effect
• swing in price is greater for perishables
Different Pricing Models
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Fixed prices--one preset price
– Saturn
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Negotiated prices--haggle over price
– Honda
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Auctions--forward auction--bid up price, highest
wins
– Ebay
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Demand collection/name your own price
– Priceline.com
Different Pricing Models
 Falling price game--prices fall daily, buyer
can bid at price points
– JCPenney (2001); Discontinued (2002)
 Barter--non-monetary exchange
– Spun.com’s videogame trade
 Bundling--combine products into larger
packages for single fee
– Sprint --telecommunications and more
Dynamic Pricing
 Offered price that reflects demand,
inventory level, & buyer characteristics at
that time
• more easily implemented online
• perceived fairness issue
 Similar to real-time pricing
• rental markets, yield management, auctions
Rental markets
 Real-time pricing works well with real-time
users
 Product rental is an immediate need
– digital goods
– software rental
– charge for each use
Yield Management
 Matching of price & available capacity
• create restrictions, give lower price to
discriminate by sensitivity
– airlines
 Yield management most effective:
– fixed, perishable capacity services
– high level of fixed costs
– identifiable customer base with segments
– demand uncertainty & technology to deal with it
Yield management
 Can smooth uncertainties in demand
• combined with web application could be
applied to various industries
– tax preparation
– hair styling
Trust, Security, & Privacy
And Ethical Considerations
Some Areas of Concern
 Online Consumer Research
 Privacy of data
• ChoicePoint fired by Pennsylvania DOT
• Posted private drivers’ license records on the
web
• 2005 Government security report: SEC not
adequately protecting privacy of sensitive
financial data
Some Areas of Concern
 Information use
• Census data used in 1942 to round up Japanese
Americans for war camps
• 2000 Census first online data collection
– 65% response despite law requiring participation
 Information accuracy
• 2002 ChoicePoint sued for selling unregulated
data to US Government
– FBI, IRS, Drug Enforcement, Immigration
Some Areas of Concern
 Cyberterrorism
• Coined in 1980s
• Any major based computer attack on
government or economy
• Hackers
– Civil disobedience
– Attention to cause
– Spread fear
Cyberterrorism
 Since 9/11: unlawful attacks and threats of
attach against computers, networks, and
the information stored therein when done
to intimidate or coerce a government or its
people in furtherance of political or social
objectives
• Example: Denial of Service Attacks (2000)
– Ebay, Yahoo, CNN caused over $1 billion in losses
Cyberterrorism
 49% of IT professionals say a major cyber
attack on the US government is imminent
 72% say that the government will have a
hard time defending against it
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74% believe financial institutions will be hit
67% communication system
67% transportation infrastructure
64% utilities
Cyberterrorism
 Speculated attacks
• Bomb or electromagnetic weapon destroys
Internet infrastructure
• Viruses, denial of service attacks
• Stolen classified information
• Remote hijacking of control systems
– Financial markets, media broadcasts,
infrastructure (dams, power grids)
Cyberterrorism
 In first half of 2002, Internet attacks toward
400 companies in 30 countries grew 64%
 Private companies were twice as likely to
be attacked
• Compared to private, non-profit, & government
entities combined
Trust
 68% of consumer found profiling
acceptable
• 9% found it acceptable to make profits from
selling personal information to third parties
 Consumers do not mind organizations
using data for better service
• Concern is sharing of data
Trust
 Privacy Policies make clear to consumers
type of information collected & how it us
used
• 92% of web sites collect personal information
• 86% do not disclose what they will do with that
information
– legal implications
– lack of consumer trust
– bankruptcy issues
Security
 Needs for information control
• server security
• encryption software
 Staff responsibility:
keeping information
current & stay abreast of policies on
information access
Fraud
 Intentional exploitation of person, group or
enterprise
• FBI collected 49,000+ complaints in 2001
– $17.8 million dollar loss
• Most fraud reported on auction sites (42.8%)
– non-deliverable purchase/payments (20.3%)
• 76% C2C fraud, 24% B2C fraud
– common states: California, Florida, New York, &
Texas
Liability
 Duty, responsibility or obligation to
consumers
• responsible for not selling defective products
 Web sites often create disclaimers as a
disavowal of liability
• few guidelines on disclaimers
• do not necessarily limit liability
Build credibility & trust
 How to build consumer confidence
• E-Trust, independent ratings
• Ebay’s ratings of seller credibility
– verification of identities
– insurance against fraud
– escrow accounts
– ban on bidding on own products
– ban on buyers who do not complete sale
Legal Issues Related to the Internet
Local law firm specializing in e-commerce:
Kennedy Covington Lobdell & Hickman, L.L.P.
Bank of America Corporate Center, 100 North Tryon Street,
42nd Floor, Charlotte, North Carolina 28202-4006
Legal Issues
 Pace of online competition creates
problems
 Laws often develop after a practice has
been established
– law is well behind the practice
• Example legal issues:
– unsolicited communication
– personal jurisdiction
– intellectual property
Unsolicited Commercial Email
 California Business & Professions Code
(1998)
• Illegal to send UCE with out true domain name
source
– Internet Service Providers can regulate spammers
• UCE must include the phrase ADV for normal
advertising & ADV:ADLT for adult material
 Federal & many state governments are
considering similar SPAM laws
Personal jurisdiction
 A lawsuit may be brought against individual
in state where:
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person resides
business is transacted
harm occurs
contract was created
 A lack of geography complicates
jurisdiction
• jurisdiction can be created without physical presence
Personal jurisdiction case
 U.S. v. Jay Cohen (2000)
• Outcome: first conviction for illegally
accepting bets & wagers from Americans over
the Internet & telephones
– Federal Wire Wager Act (1964), 5 years in prison & a
$250,000 fine
• Kyl Bill (1998/2001) updates Wire Wager Act
– Illegal to offer online gambling, 4 years in prison &
$20,000 fine
– Failed in the House
Jurisdiction Tests
Interactive/Passive
Relations Test
 Interaction with target
market in given
location
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• 800# (two-way, active)
• one-way information
on website (passive)
Upload/Download
Status Test
 Country where
server’s site is
located has
jurisdiction
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• nation has priority
• not all cases have
followed this rule
Changes in Jurisdictional Reach
 2001 US Patriot Act greatly expands US
government monitoring of email, Internet, &
cell phone communications
 Unprecedented access to communications
 Gives US government dominance over
Internet backbone
Intellectual Property
 Copyright: the exclusive legal right to
reproduce, publish, & sell the matter and form of a
literary, musical, or artistic work
– easy to draw on other peoples’ work online
– P2P exchange controversy
 Trademark: a brand of a firm is given legal
protection because it is capable of exclusive
appropriation
– the firm has exclusive rights to the brand name
and/or brand mark
Using copyrighted material
 Not illegal to use material that is:
• already in the public domain
– time limit; US government material; idea or formula
 Fair Use provision says that:
– can use material for noncommercial purposes
– can use material that is primarily informational
– less material used, more covered by fair use
– less negative economic impact, more likely fair use
Domain names
 Steps: register domain name, pay for
ownership, & research whether it violates
existing copyright laws
• for example, .com, .edu, .org, .net have been
sold by Verisign
 Once you own the domain name, may be
able to sell it to other parties
Domain names
 Responsibility of individual (not Verisign)
to verify that there is no claim on a name
 Existing businesses & organizations retain
their domain name rights even if they have
not taken action to secure the name
 Each country has its own copyright laws
leading to further complications
Meta-tags
 Key words in HTML code on web sites used
by search engine
• can see them under “view page source”
 Cannot substitute inappropriate trademark
phrases in meta-tags
Intellectual Property Cases
 Net-related Copyright Interpretations
• Religious Technology Center v. Netcom
Online Communication Services et al.
(1995)
– Outcome: the World Wide Web “multiplies
the effect of market substitution”
• U.S. v. LaMacchia (1994)
– Outcome: No profit, no infringement
Intellectual Property Law
 No Electronic Theft (NET) Act of 1997
• First Web-oriented copyright legislation;
intended to close the “LaMacchia loophole”
– Federal crime to distribute or possess illegal
electronic copies of copyrighted materials valued
over $2,500 (even when profit is not involved)
– Maximum penalty: five (5) years in prison and a
$250,000 fine
Intellectual Property Cases
 Net-related Trademark Interpretations
• Avon v. Carnetta Wong (1996)
– Outcome: initial (court-based)
understanding of the relationship between
trademarks and domain names
• Oppendahl & Larson v. Advance Concepts
(1997)
– Outcome: Infringement occurs even if a
company’s name is hidden from view
Intellectual Property Law
 Anticybersquatting Consumer Protection
Act of 1999
• First Web-specific trademark legislation;
seeks to prevent “bad faith” registration of
domain names
 World Intellectual Property Organization
• Arbitration of allocation.com case (2001)
– Outcome: party may keep domain name even
though its held by someone else (generic term)
Property Protection
 “Foxing”
• netiquette term referring to FOX Broadcasting’s
self-policing activities
 Rapid speed is a concern
– Gnutella software
– Movies
 Can intellectual property be protected?
• Are laws enforceable on the Internet?