Lecture E-Commerce - Chapter 13: E-commerce marketing (part I)

In this chapter students will be able to: Describe the major B2B business models, recognize business models in other emerging areas of e-commerce, understand key business concepts and strategies applicable to e-commerce.

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CSC 330 E-Commerce

Teacher

Ahmed Mumtaz Mustehsan

GM-IT CIIT Islamabad

Virtual Campus, CIIT

COMSATS Institute of Information Technology

T1-Lecture-13

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E Commerce Marketing

Chapter-06

Part -I

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Describe the major B2B business models

Recognize business models in other emerging areas

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Consumers Online: The Internet

Audience and Consumer Behavior

Around 73% (86 million) U.S households have Internet access in 2011

Growth rate has slowed

◦Intensity and scope of use both increasing

Some demographic groups have much higher

percentages of online usage than others

◦Gender, age, ethnicity, community type, income,

education

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The Internet Audience and

Consumer Behavior (cont.)

Broadband vs dial-up audiences, new mobile audience

Internet purchasing affected by neighborhood

Lifestyle and sociological impacts

◦Use of Internet by children, teens

◦Use of Internet as substitute for other social activities

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Consumer Behavior Models (basic Definitions)

Consumer behavior

understand the behavior of human in a marketplace.

Culture

behaviors.

Subcultural

Direct References groups

and schools

Indirect Reference groups

Life-style group

likes and dislikes social events, typically attended) interest and opinion

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Consumer Behavior Models

Life-style group

( food, fashion, family, recreation) and opinion.

Opinion Leaders (viral influencers)

skills and other factors.

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Consumer Behavior Models

Study of consumer behavior

◦Attempts to explain what consumers purchase and where, when, how much and why they buy

Consumer behavior models

◦Predict wide range of consumer decisions

◦Based on background demographic factors and other intervening, more immediate variables

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Background Demographic Factors

Culture: Affects entire nations

Subculture

◦Subsets formed around major social differences (ethnicity, age, lifestyle, geography)

Social networks and communities

◦Direct reference groups

◦Indirect reference groups

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A General Model of Consumer Behavior

SOURCE: Adapted from Kotler and Armstrong, 2009.

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The Online Purchasing Decision

Psychographic Research

Combines demographic and psychological data

Divides market into various groups based on social class, lifestyle, and/or personality characteristics

Stages in consumer decision process and supporting communications: (Both Online and Offline)

Awareness of need

Search for more information

Evaluation of alternatives

Actual purchase decision

Post-purchase contact with firm

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The Consumer Decision Process and Supporting Communications

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A Model of Online Consumer Behavior

Decision process similar for online and offline

behavior

General online behavior model

◦Consumer skills

◦Product characteristics

◦Attitudes toward online purchasing

◦Perceptions about control over Web environment

◦Web site features: latency, usability, security

Clickstream behavior

◦The transection log that consumer establish as they move about the web

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A Model of Online Consumer Behavior

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A Model of Online Consumer Behavior (cont.)

Clickstream factors include:

◦Number of days since last visit

◦Speed of clickstream behavior

◦Number of products viewed during last visit

◦Number of pages viewed

◦Supplying personal information

◦Number of days since last purchase

◦Number of past purchases

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Shoppers: Browsers and Buyers

Shoppers: 87% of Internet users

◦73% buyers

◦15% browsers (purchase offline)

One-third of offline retail purchases influenced by online activities

Online traffic also influenced by offline brands and shopping

E-commerce and traditional commerce are

coupled: Part of a continuum of consuming

behavior

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Online Shoppers and Buyers

SOURCE: Based on data from eMarketer, Inc.,

2011d

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What Consumers Shop for and Buy Online

Big ticket items

◦Travel, computer hardware, electronics

◦Consumers now more confident in purchasing

costly items

Small ticket items ($100 or less)

◦Apparel, books, office supplies, software, etc

◦Sold by first movers on Web

 Physically small items

 High margin items

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What Consumers Buy Online

SOURCES: Based on data from Internet Retailer, 2011.

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How Consumers Shop

How shoppers find online vendors

◦Search engines—59%

◦Marketplaces (Amazon, eBay)—28%

◦Direct to retail sites—10%

◦Other methods—3%

Online shoppers are highly intentional

◦Look for specific products, companies, services

Stumble Upon (encountered / bump into)

Recommender systems

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

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Trust, Utility, and Opportunism in Online Markets

Two most important factors shaping decision to

purchase online:

◦Utility:

 Better prices, convenience, speed

◦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

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Basic Marketing Concepts

Seeks to create unique, highly differentiated

products or services that are produced or supplied by one trusted firm

◦Unmatchable feature set

◦Avoidance of becoming commodity

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Feature Sets

Three levels of product or service

The core benefit the customer received from

product e.g., cell phone

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Feature Set

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Products, Brands, and the Branding Process

Brand:

Expectations consumers have when consuming, or thinking about consuming, a specific product

Most important expectations: Quality, reliability,

consistency, trust, affection, loyalty, reputation

Branding:

Process of brand creation

Closed loop marketing

When marketers are able to directly influence the design of core product based on market research and feedback

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Products, Brands, and the Branding Process

Brand strategy

A set of plans for differentiating a product from its competitors and communicating these differences effectively to marketplace

Brand equity

The estimated value of the premium customers are willing to pay for using a branded product when

compared to unbranded products

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Marketing Activities: from Products to Brands

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Segmenting, Targeting, and Positioning

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

Major ways used to segment, target customers

Within segment, product is positioned and branded as

a unique, high-value product, especially suited to needs

of segment customers

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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:

◦A major source of revenue

◦Lower customer acquisition cost

◦Increased customer retention

◦Successful brand constitutes a long-lasting

(though not necessarily permanent) unfair

competitive advantage

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Can Brands Survive the Internet?

Brands and Price Dispersion

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

◦Substantial price dispersion

◦Large differences in price sensitivity for same product

◦“Library effect”

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The Revolution in Internet Marketing

Technologies

Three broad impacts:

◦Scope of marketing communications broadened

◦Richness of marketing communications

increased

◦Information intensity of marketplace expanded

Internet marketing technologies:

◦Web transaction logs

◦Tracking files

◦Databases, data warehouses, data mining

◦Advertising networks

◦Customer relationship management systems

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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

◦Shopping cart database

Answers questions such as:

◦What are major patterns of interest and purchase?

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

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 Small text file placed by Web site

 Allows Web marketers to gather data

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Every Move You Make, Every Click You Make, We’ll Be Tracking You

Are beacons innocuous? Or are they an invasion of personal privacy?

Do you think your Web browsing should be known to marketers?

What are the Privacy Foundation guidelines for Web beacons?

Should online shopping be allowed to be a private activity?

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Database: Stores records and attributes

Database management system (DBMS):

◦Software used to create, maintain, and access

databases

SQL (Structured Query Language):

◦Industry-standard database query and manipulation language used in a relational database

Relational database:

◦Represents data as two-dimensional tables with

records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element

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A Relational Database View of

E-commerce Customers

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Data Warehouses and Data Mining

Data warehouse:

◦Collects firm’s transactional and customer data in single location for offline analysis by marketers and site managers

Data mining:

◦Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles

 Query-driven data mining

 Model-driven data mining

 Rule-based data mining

 Collaborative filtering

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The Long Tail: Big Hits and Big Misses

What are “recommender systems”? Give an

example you have used

What is the “Long Tail” and how do recommender systems support sales of items in the Long Tail?

How can human editors, including consumers, make recommender systems more helpful?

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Customer Relationship

Management (CRM) Systems

Record all contact that customer has with firm

Generate customer profile available to everyone in firm with need to “know the customer”

Customer profiles can contain:

◦Map of the customer’s relationship with the firm

◦Product and usage summary data

◦Demographic and psychographic data

◦Profitability measures

◦Contact history

◦Marketing and sales information

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A Customer Relationship Management System

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Generic Market Entry Strategies

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Establishing the Customer Relationship

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How an Advertising Network

Such as DoubleClick Works

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Viral marketing

Blog marketing

Social network marketing

◦Driven by social e-commerce

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Social Network Marketing: Let’s Buy Together

Why do social networks represent such a

promising opportunity for marketers?

What are some of the new types of marketing that social networks have spawned?

What are some of the risks of social network

marketing? What makes it dangerous?

Have you ever responded to marketing messages

on Facebook or another network?

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Social marketing and wisdom of crowds

◦Large aggregates produce better estimates and judgments, e.g.,

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Customer Retention

individual’s needs

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The Mass Market-Personalization Continuum

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Other Customer Retention Marketing

◦Real-time customer service chat systems

◦Automated response systems

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Net Pricing Strategies

Pricing

◦Integral part of marketing strategy

◦Traditionally based on:

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Net Pricing Strategies (cont.)

Free and freemium

◦Can be used to build market awareness

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Channel Management Strategies

Channels:

◦Different methods by which goods can be

distributed and sold

Some manufacturers are using partnership model

to avoid channel conflict

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End of: T1-Lecture-12

E Commerce Business Model

Chapter-05

Part-II Thank You

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