Lecture E-Commerce - Chapter 14: E-commerce marketing (part II)

In this chapter students will be able to understand key business concepts and strategies applicable to e-commerce. In this chapter, the following content will be discussed: Why not buy online? Trust, utility, and opportunism in online markets; basic marketing concepts; products, brands, and the branding process; web transaction logs; tracking files.

CSC 330 E-Commerce

Teacher

Ahmed Mumtaz Mustehsan

GM-IT CIIT Islamabad

Virtual Campus, CIIT

COMSATS Institute of Information Technology

T1-Lecture-14

E Commerce Marketing

Chapter-06

Part -II

For Lecture Material/Slides Thanks to: Copyright © 2010 Pearson Education, Inc

Understand key business concepts and strategies applicable to e-commerce

SOURCES: Based on data from eMarketer, Inc., 2011d.

Why not buy Online?

Slid

e

6-Trust, Utility, and Opportunism in Online Markets

Two most important factors shaping decision to

purchase online:

Utility; With reference to, the Better prices,

convenience of handling the site, The Response

/speed of interactivity of the marketplace

Trust:

◦Asymmetry of information can lead to

opportunistic behavior by sellers

◦Sellers can develop trust by building strong

reputations for honesty, fairness, delivery and

after sale service

Basic Marketing Concepts

Marketing:

Means the strategies and actions firms take to

establish relationship with a consumer to encourage

purchases of its products and services

Addresses competitive situation of industries and firms

Seeks to create unique, highly differentiated products

or services that are produced or supplied by one trusted firm

◦Avoidance of becoming commodity ( a good or

service for which there are many dealers; supplying the product; essentially identical)

◦Ideally having unmatchable feature set

Feature Sets

The bundle of capabilities and services offered by the

product or services

Three levels of product or service

Core product

The core benefit the customer received from the

product e.g., cell phone

Actual product

Set of characteristics that deliver the product’s core

benefits e.g., wide screen that connects to Internet

Augmented product

Additional benefits to customers beyond the core

benefits embedded in actual product

Basis for building the product’s brand e.g., product

warranty and after sale service

Feature Set

from the others in the market

Products, Brands, and the Branding Process

Brand:

Set of expectations consumers have when consuming,

or thinking about consuming, a specific product or

services from specific company

Most important expectations: Quality, reliability,

consistency, trust, affection, loyalty, reputation

Branding:

Process of brand creation (converting product to

Brand)

Closed loop marketing

When marketers are able to directly influence the

design of core product based on market research and

feedback

Products, Brands, and the Branding Process

Marketers devise and implement brand strategies

Brand strategy

◦A set of plans for differentiating a product from its

competitors and communicating these differences effectively to marketplace

A brand can represent cooperate value as an asset; it

can be customer loyalty or attachment can be seen as set of associations that customers have:

Brand equity

The estimated value of the premium customers are

willing to pay for using a branded product when

compared to unbranded products

1-Marketing Activities: from Products to Brands

Marketers aim to create a brand identity for a product based upon

Segmenting, Targeting, and Positioning(Product)

Market comprising many different kind of customers with different needs Firm seek to segment market to different group of customers in terms of product needs

Major ways used to segment, target customers

◦Behavioral

◦Demographic ( age, sex, income, occupation)

◦Psychographic (self-image and emotional needs)

◦Technical

◦Contextual

◦Search

Target the segment; Within segment, product is

positioned and branded as a unique, high-value product, especially suited to needs of segment customers

1-Are Brands Rational?

For consumers, a qualified yes:

◦Brands introduce market efficiency by reducing

search and decision-making costs

For business firms, a definite yes:

The Brand:

◦A major source of revenue

◦Lower customer acquisition cost (The overall cost

of converting a prospect into a consumer)

◦Increased customer retention (Convincing an

existing customer to purchase again)

◦Successful brand constitutes a long-lasting

(though not necessarily permanent) unfair

competitive advantage

Can Brands Survive the Internet?

Brands and Price Dispersion

Early postulation: “Law of One Price”—end of

marketing based on brands

◦With complete price transparency in a perfect

information marketplace there will be one world

price for every product would emerge

Instead:

◦Consumers still pay premium prices for

differentiated products

◦E-commerce firms rely heavily on brands to attract customers and charge premium prices

1-Can Brands Survive the Internet?

Brands and Price Dispersion

Substantial price dispersion on internet

◦Large differences in price sensitivity for same

product (highest and lowest price)

“Library effect” or “Catalog effect”; another tactic by online sellers

◦An attempt to appeal to consumers on the basis of total number of products offered under one

marketplace e.g Amazon.com

Impacts of E-commerce Technologies on

Marketing

Three broad impacts: (E-commerce Technology

Dimension)

◦Scope of marketing communications broadened

(Ubiquity, Global Reach)

◦Richness of marketing communications increased (Information Density ; text, video and audio contents)

◦Information intensity of marketplace expanded

◦(Personalization/customization, Social Technology)

1-The Revolution in Internet Marketing

Technologies

Internet marketing technologies:

1.Web Transaction logs

2.Tracking files

3.Databases, Data warehouses, Data mining

4.Customer Relationship Management systems (CRM)

1 Web Transaction Logs

Built into Web server software

Record user activity at Web site

Webtrends: Leading log analysis tool

Provides much marketing data, especially combined with:

◦Registration forms: Gather personal data on name, address, phone, zip, e-mail, and other optional

information on interest and tastes

◦Shopping cart database: captures all the item

selection, purchase and payment data)

1-1 Web Transaction Logs

Transaction log coupled with Registration Forms and

shopping cart provides treasure of marketing information leads to answer some interesting questions such as:

What are major patterns of interest and purchase?

After home page, where do users go first? Second?

What are the interest of specific individuals?

How can we improve the website, easier to use,

attractive design encourage visitors to purchase?

Where are visitors coming from? What they want?

How can we personalize our messages etc?

2 Tracking Files

Allow users browsing activities to be tracked as they

move from site to site Four types of tracking files

Cookies

◦Small text file placed by Web site (1 kB)

◦Allows Web marketers to gather data

◦Customers may delete cookies Implement privacy; Causing misleading analysis, wastage of efforts

Way forward?

Use Adobe Flash software; creates cookies called

Flash Cookies set to never expire (5 MB)

Beacons (“bugs”; 1-pixel graphic files; send message

to server)