E Commerce Marketing - Chapter 06 - Part 1

CSC 330 E-CommerceTeacher Ahmed Mumtaz Mustehsan GM-IT CIIT Islamabad Virtual Campus, CIIT COMSATS Institute of Information TechnologyT1-Lecture-13T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncT1-Lecture-13E Commerce Marketing Chapter-06Part -IFor Lecture Material/Slides Thanks to: Copyright © 2010 Pearson Education, IncT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncObjectivesDescribe 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.T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncConsumers Online: The Internet Audience and Consumer BehaviorAround 73% (86 million) U.S. households have Internet access in 2011Growth rate has slowedIntensity and scope of use both increasingSome demographic groups have much higher percentages of online usage than others Gender, age, ethnicity, community type, income, educationT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncThe Internet Audience and Consumer Behavior (cont.)Broadband vs. dial-up audiences, new mobile audienceInternet purchasing affected by neighborhoodLifestyle and sociological impactsUse of Internet by children, teensUse of Internet as substitute for other social activitiesMedia choicesTraditional media competes with Internet for attentionTelevision viewing has increased with Internet usageT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncConsumer Behavior Models (basic Definitions)Consumer behaviorA social science discipline that attempts to model and understand the behavior of human in a marketplace.CultureShapes basic human values, wants, perceptions and behaviors.SubculturalSubset of cultures that form around major social differences.Direct References groupsOne’s family, profession or occupation, religion, neighborhood and schoolsIndirect Reference groupsOne’s life cycle stage, social class and lifestyle group.Life-style groupAn integeratted pattern of activities (hobies, sports, shopping, likes and dislikes social events, typically attended) interest and opinionT1-Lecture-12 iAmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncConsumer Behavior ModelsLife-style groupAn integrated pattern of activities (hobbies, sports, shopping, likes and dislikes social events, typically attended) interest ( food, fashion, family, recreation) and opinion.Opinion Leaders (viral influencers)Influence the behavior of others through their personality, skills and other factors.Psychological profilesSet of needs, drives, motivations, perceptions, and learned behaviors.T1-Lecture-12 iAmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncConsumer Behavior ModelsStudy of consumer behaviorAttempts to explain what consumers purchase and where, when, how much and why they buy Consumer behavior modelsPredict wide range of consumer decisionsBased on background demographic factors and other intervening, more immediate variables T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBackground Demographic FactorsCulture: Affects entire nationsSubcultureSubsets formed around major social differences (ethnicity, age, lifestyle, geography)Social networks and communitiesDirect reference groupsIndirect reference groupsOpinion leadersLifestyle groups Psychological profileT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncA General Model of Consumer BehaviorT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSOURCE: Adapted from Kotler and Armstrong, 2009.The Online Purchasing DecisionPsychographic ResearchCombines demographic and psychological dataDivides market into various groups based on social class, lifestyle, and/or personality characteristicsStages in consumer decision process and supporting communications: (Both Online and Offline)Awareness of needSearch for more informationEvaluation of alternativesActual purchase decisionPost-purchase contact with firmT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncThe Consumer Decision Process andSupporting CommunicationsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncA Model of Online Consumer BehaviorDecision process similar for online and offline behaviorGeneral online behavior modelConsumer skillsProduct characteristicsAttitudes toward online purchasingPerceptions about control over Web environmentWeb site features: latency, usability, securityClickstream behaviorThe transection log that consumer establish as they move about the webA Model of Online Consumer BehaviorT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncA Model of Online Consumer Behavior (cont.)Clickstream factors include:Number of days since last visitSpeed of clickstream behaviorNumber of products viewed during last visitNumber of pages viewedSupplying personal informationNumber of days since last purchaseNumber of past purchasesClickstream marketingDeveloped dynamically as customers use InternetT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncShoppers: Browsers and BuyersShoppers: 87% of Internet users73% buyers15% browsers (purchase offline)One-third of offline retail purchases influenced by online activitiesOnline traffic also influenced by offline brands and shoppingE-commerce and traditional commerce are coupled: Part of a continuum of consuming behaviorT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncOnline Shoppers and BuyersT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSOURCE: Based on data from eMarketer, Inc., 2011d. What Consumers Shop for and Buy OnlineBig ticket itemsTravel, computer hardware, electronicsConsumers now more confident in purchasing costly itemsSmall ticket items ($100 or less)Apparel, books, office supplies, software, etc.Sold by first movers on WebPhysically small itemsHigh margin itemsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncWhat Consumers Buy OnlineFigure 6.5, Page 365T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSOURCES: Based on data from Internet Retailer, 2011.How Consumers ShopHow shoppers find online vendorsSearch engines—59%Marketplaces (Amazon, eBay)—28%Direct to retail sites—10%Other methods—3%Online shoppers are highly intentionalLook for specific products, companies, servicesStumble Upon (encountered / bump into)Recommender systemsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSOURCES: Based on data from eMarketer, Inc., 2011d.Trust, Utility, and Opportunism in Online MarketsTwo most important factors shaping decision to purchase online:Utility: Better prices, convenience, speedTrust:Asymmetry of information can lead to opportunistic behavior by sellersSellers can develop trust by building strong reputations for honesty, fairness, delivery and after sale service. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncBasic Marketing ConceptsMarketing Strategies and actions to establish relationship with consumer and encourage purchasesAddresses competitive situation of industries and firmsSeeks to create unique, highly differentiated products or services that are produced or supplied by one trusted firmUnmatchable feature setAvoidance of becoming commodityT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncFeature SetsThree levels of product or serviceCore productThe core benefit the customer received from product. e.g., cell phoneActual productSet of characteristics that deliver the product’s core benefits e.g., wide screen that connects to InternetAugmented productAdditional 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 serviceT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncFeature SetFigure 6.6, Page 368T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncProducts, Brands, and the Branding ProcessBrand: Expectations consumers have when consuming, or thinking about consuming, a specific productMost important expectations: Quality, reliability, consistency, trust, affection, loyalty, reputationBranding: Process of brand creationClosed loop marketingWhen marketers are able to directly influence the design of core product based on market research and feedback.T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncProducts, Brands, and the Branding ProcessBrand strategyA set of plans for differentiating a product from its competitors and communicating these differences effectively to marketplaceBrand equityThe estimated value of the premium customers are willing to pay for using a branded product when compared to unbranded products.T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncMarketing Activities: from Products to BrandsFigure 6.7, Page 369T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSegmenting, Targeting, and PositioningMarket 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 customersBehavioralDemographicPsychographicTechnicalContextualSearchWithin segment, product is positioned and branded as a unique, high-value product, especially suited to needs of segment customersT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncAre Brands Rational? For consumers, a qualified yes:Brands introduce market efficiency by reducing search and decision-making costsFor business firms, a definite yes:A major source of revenueLower customer acquisition costIncreased customer retentionSuccessful brand constitutes a long-lasting (though not necessarily permanent) unfair competitive advantageT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncCan Brands Survive the Internet?Brands and Price DispersionEarly postulation: “Law of One Price”—end of brandsInstead:Consumers still pay premium prices for differentiated productsE-commerce firms rely heavily on brands to attract customers and charge premium pricesSubstantial price dispersionLarge differences in price sensitivity for same product“Library effect”T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncThe Revolution in Internet Marketing TechnologiesThree broad impacts:Scope of marketing communications broadened Richness of marketing communications increasedInformation intensity of marketplace expandedInternet marketing technologies:Web transaction logsTracking filesDatabases, data warehouses, data miningAdvertising networksCustomer relationship management systemsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncWeb Transaction LogsBuilt into Web server softwareRecord user activity at Web siteWebtrends: Leading log analysis toolProvides much marketing data, especially combined with:Registration formsShopping cart databaseAnswers questions such as:What are major patterns of interest and purchase?After home page, where do users go first? Second?T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncTracking FilesAllow users browsing activities to be tracked as they move from site to siteFour types of tracking filesCookies Small text file placed by Web siteAllows Web marketers to gather dataFlash cookiesBeacons (“bugs”)AppsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncEvery Move You Make, Every Click You Make,We’ll Be Tracking YouAre 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?T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncDatabasesDatabase: Stores records and attributesDatabase management system (DBMS): Software used to create, maintain, and access databasesSQL (Structured Query Language): Industry-standard database query and manipulation language used in a relational databaseRelational 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 elementT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncA Relational Database View of E-commerce CustomersFigure 6.9, Page 383T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncData Warehouses and Data MiningData warehouse: Collects firm’s transactional and customer data in single location for offline analysis by marketers and site managersData mining:Analytical techniques to find patterns in data, model behavior of customers, develop customer profilesQuery-driven data miningModel-driven data miningRule-based data miningCollaborative filteringT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncThe Long Tail: Big Hits and Big MissesWhat 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?T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncCustomer RelationshipManagement (CRM) SystemsRecord 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 firmProduct and usage summary dataDemographic and psychographic dataProfitability measuresContact history Marketing and sales informationT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncA Customer Relationship Management SystemT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncGeneric Market Entry StrategiesFigure 6-11, Page 391T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncEstablishing the Customer RelationshipAdvertising networksAd server selects appropriate ad based on cookies, Web bugs, backend user profile databasesAdvertising exchangesAuction ad slots over many advertising networksPermission marketingAffiliate marketingT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncHow an Advertising NetworkSuch as DoubleClick WorksT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncEstablishing the Customer RelationshipViral marketingBlog marketingSocial network marketingDriven by social e-commerceSocial sign-onCollaborative shoppingNetwork notificationSocial search (recommendation)Mobile marketingT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncSocial Network Marketing: Let’s Buy TogetherWhy 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?T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncEstablishing the Customer RelationshipSocial marketing and wisdom of crowdsLarge aggregates produce better estimates and judgments, e.g.,“Like” buttonFolksonomiesSocial taggingMobile platform marketingLocal marketingBrand leveragingT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncCustomer RetentionMass marketingDirect marketingMicromarketing Personalized, one-to-one marketing Segmenting market on precise and timely understanding of individual’s needsTargeting specific marketing messages to these individualsPositioning product vis-à-vis competitors to be truly uniquePersonalizationCan increase consumers sense of control, freedomCan also result in unwanted offers or reduced anonymityT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncThe Mass Market-Personalization ContinuumFigure 6.13, Page 407T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncOther Customer Retention Marketing TechniquesCustomizationCustomizing product to user preferencesCustomer co-productionCustomer interactively involved in product creationCustomer serviceFAQsReal-time customer service chat systemsAutomated response systemsT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncNet Pricing StrategiesPricingIntegral part of marketing strategyTraditionally based on: Fixed cost Variable costs Demand curvePrice discriminationSelling products to different people and groups based on willingness to payT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncNet Pricing Strategies (cont.)Free and freemiumCan be used to build market awarenessVersioningCreating multiple versions of product and selling essentially same product to different market segments at different pricesBundlingOffers consumers two or more goods for one priceDynamic pricing: AuctionsYield managementFlash marketingT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncChannel Management StrategiesChannels: Different methods by which goods can be distributed and soldChannel conflict: When new venue for selling products or services threatens or destroys existing sales venuese.g., online airline/travel services and traditional offline travel agenciesSome manufacturers are using partnership model to avoid channel conflict T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, IncEnd of: T1-Lecture-12E Commerce Business ModelChapter-05Part-IIThank YouT1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc