Informatics 2B Chapter 4: Marketing on the Web PDF

Informatics 2B Chapter 4: Marketing on the Web Learning Objectives In this chapter, you will learn: How firms use product-based and customer-based marketing strategies Strategies for communicating with different market segments To identify customer’s characteristics as they move through the...

Informatics 2B Chapter 4: Marketing on the Web Learning Objectives In this chapter, you will learn: How firms use product-based and customer-based marketing strategies Strategies for communicating with different market segments To identify customer’s characteristics as they move through the customer relationship life cycle How online advertising has developed and grown 2 Learning Objectives (cont’d.) About e-mail marketing strategies How to create and maintain brands on the Web How businesses use social media in viral marketing campaigns About search engine positioning tactics and domain name selection strategies 3  © Cengage Learning 2017 FIGURE 4-1 The four Ps of marketing contribute to marketing strategy The Four Ps of Marketing Product is the physical item or service sold – Brand is the customers’ product perception Price is amount customer pays for product – Customer value is customer benefits minus total cost Promotion – Any means to spread word about product Place – (aka distribution) the need to have products or services available in many different locations – Getting right products to the right places at the best time to sell them 5 Product-Based Marketing Strategies Managers often think in terms of products and services sold – Works well when customers think of needs in terms of product categories – Works poorly when customers look to fulfill a specific need – Design Web site to meet individual customer needs – Offer alternative shopping paths 6 Customer-Based Marketing Strategies Web sites designed to meet various types of customers’ specific needs – Initial step is to identify customer groups sharing common characteristics (demographic) – Make site more accessible and useful for each group Companies need to take view beyond internal perspective – Current university Web sites focus design on needs of stakeholders (current students, prospective students, parents of students, potential donors, faculty) 7 Communicating with Different Market Segments Media selection or choosing where to market and advertise a company can be critical for an online only firm – No physical presence – Only customer contact made through image projected through media and Web site Online firm challenge is to obtain customer trust with no physical presence 8 Trust, Complexity, and Media Choice The Web is a very broad, intermediate step between mass media and personal contact Web communication offers advantages of personal contact selling with mass media cost savings – Mass media advertising offers lowest trust level but many companies still use it successfully Product complexity is a factor in media choice Many companies use blogs to communicate – Blogs and social media allow companies to engage in two-way communications that more closely resemble the high-trust personal contact communication mode 9  © Cengage Learning 2017 FIGURE 4-2 Trust in three communication modes Market Segmentation Divides potential customer pool into segments defined by customer characteristics Micromarketing is the practice of targeting very small market segments – Hampered by cost increases Three traditional categories to identify market segments – Geographic segmentation (location) – Demographic segmentation (age, gender, family size, income, education, religion, or ethnicity) – Psychographic segmentation (social class, personality or approach to life) Television advertisers use all three categories 12  © Cengage Learning 2017 FIGURE 4.3 Television advertising messages tailored to program audience Market Segmentation on the Web Web presents an opportunity for different store environments online Retail stores have limited floor and display space – Must convey one particular message Web stores can provide separate virtual spaces for different market segments 14 Offering Customers a Choice on the Web One-to-one marketing offers products and services matched to needs of a particular customer Example: Dell – Offers several different ways to do business – Home page links for each major customer group Specific products, product categories links available – Dell Premier accounts High level of customer-based market segmentation 15 Segmentation Using Customer Behavior Same person requires different combinations of products and services depending on the occasion Behavioral segmentation is the creation of separate customer experiences based on behavior – Called occasion segmentation when based on things happening at a specific time or occasion Much easier in the online world to design a single Web site that meets the needs of visitors in different behavioral modes – Customizing visitor experiences to match site usage or visitor type is usage based market segmentation 16 Browsers Some visitors just surf or browse sites – Web site must offer something to pique visitors’ interest Trigger words prompt visitors to stay and investigate products or services – Links to explanations or instructions helpful for this type of visitor – Include extra content related to products and services Visitors who develop a favorable impression are more likely to buy or bookmark site for a return visit 17 Buyers Ready to make a purchase right away Site should offer a direct route into purchase transaction Shopping cart is the part of the Web site that keeps track of items selected for purchase and automates purchasing process – Page should offers link back into shopping area and allow shoppers to create an account Primary goal is to get buyer to shopping cart as quickly as possible 18 Shoppers Motivated to buy but looking for more information before purchase Offer comparison tools, product reviews, and features lists Person may visit a Web site one day as a browser and return later as a shopper or buyer – People do not retain behavioral categories from one visit to the next even for the same Web site 19 Alternative Models McKinsey & Company’s six behavior-based categories – Simplifiers (convenience) – Surfers (find information, explore new ideas, or shop) – Bargainers (search for good deals) – Connectors (stay in touch with other people) – Routiners (return to same sites over and over) – Sportsters (spend time on sports, entertainment sites) Must identify groups and formulate ways of generating revenue 20  © Cengage Learning 2017 FIGURE 4-4 Web site visitor categories based on a behavioral segmentation study Customer Relationship Intensity and Life-Cycle Segmentation Good customer experiences create feelings of intense loyalty One-to-one marketing and usage-based segmentation strengthen companies’ relationships with customers Typical five-stage model of customer loyalty – First four stages show increase in relationship intensity: awareness, exploration, familiarity, commitment – In the fifth stage (separation), decline occurs and the relationship terminates 22  © Cengage Learning 2017 FIGURE 4-5 Five stages of customer loyalty Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Characteristics of the five stages – Awareness: customers recognize company name, product – Exploration: customers learn more about company, products – Familiarity Customers have completed several transactions Customers aware of returns and credits policies Customers aware of pricing flexibility Customers just as likely to shop competitors 24 Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Characteristics of the five stages (cont’d.) – Commitment Customers experience highly satisfactory encounters Customers develop fierce loyalty or strong preference – Separation Conditions that made relationship valuable change Parties enter separation stage 25 Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Goal is to move customers into the commitment stage as quickly as possible and keep them there as long as possible Only want to see customers move into the separation stage if they are costing more to serve than they are worth 26 Advertising on the Web Can use five-stage customer loyalty model – Awareness stage: message should inform – Exploration stage: message should explain how product works and encourage switching brands – Familiarity stage: message should convince customers to purchase products or request a call – Commitment stage: message should reinforce good feelings and remind customers to buy – Separation stage customers not targeted in ads 27 Customer Acquisition Customer Acquisition: The Funnel Model Conceptual tool used to understand the overall nature of a marketing strategy – Also provides a clear structure for evaluating specific strategy elements Similar to customer life-cycle model but less abstract – Better job at showing effectiveness of two or more specific strategies 33  © Cengage Learning 2017 FIGURE 4-6 Funnel model of customer acquisition Costs of Customer Acquisition, Conversion, and Retention Benefits of acquiring new visitors are different for Web businesses with different revenue models Acquisition cost is the amount of money spent to bring one visitor to the site Conversion is converting a visitor into a customer – Conversion cost is the total amount of money a site spends to induce a visitor to purchase, subscribe or register Retained customers return to site after purchase – Retention cost is the cost of inducing customers to return to a Web site and buy again 35 Advertising on the Web Banner Ads Banner ad – Small rectangular object with stationary or moving graphic – Includes hyperlink to advertiser’s Web site – Versatile: informative and persuasive functions Attention-grabbing ads include audio and video – Created using Shockwave, Java, Flash Interactive marketing unit (IMU) ad formats – Voluntary standard ad sizes – Universal ad package (UAP) 37 Banner Ads (cont’d.) Leaderboard ad is designed to span Web page top or bottom Skyscraper ad is designed to be placed on the side of a Web page – Remains visible as user scrolls through page Two sizes of rectangle ads Advertising agencies and web site design firms create display ads for online clients – Price range $50 to more than $8000 depending on complexity 38 FIGURE 4-7 Interactive Advertising Bureau Universal Ad Package format standards © Cengage Learning 2017 Banner Ad Placement Use an banner exchange network which coordinates ad sharing Find Web sites appealing to company’s market segments and pay sites to carry ad – Most companies use an ad agency to negotiate rates and help with ad placement Use a banner advertising network as a broker between advertisers and Web sites that carry ads – Large networks such as DoubleClick (Google) offer may of the same services as ad agencies 42 New Strategies for Banner Ads Click through rates.3 to.5 percent – Research suggests Web site visitors are influenced by ads they don’t click but advertisers reluctant to pay for ads that don’t produce measurable results Approaches – Animated GIFs with moving elements – Display rich media effects (video clips) – Add interactive effects (Java programs) that respond to user’s click with some action – Ads appearing to be dialog boxes 44  © Cengage Learning 2017 FIGURE 6-3 Disguised Banner ads Text Ads Short promotional message with no graphic elements – Usually placed along Web page top or right side Google found these ads to be less obtrusive than display ads but very effective – Criticized for including unobtrusive ads on its pages, Google now clearly labels ads to prevent confusion Inline text ad are text in stories displayed as hyperlinks 46 Intrusive Ad Formats Pop-up ad appears in its own window when user opens/closes Web page and require the user to click a small close button in the window of the ad – Annoying and may create lasting bad will, but many advertisers find them to be effective Ad-blocking software prevents display ads and pop-up ads from loading Interstitial ads open in their own browser page when a user clicks to load a page – May close automatically or require user to close – Larger and more annoying than pop-up ads 49 Rich Media and Video Ad Formats Generate graphical activity that “floats” over the Web page itself – Always contain moving graphics and usually include audio and video elements Video ads are a form of rich media ad used on Web sites that deliver video – Either free standing or integrated into videos the site visitor selects to watch – A pre-roll video ad requires a visitor to view all or part of an ad before the content selected plays – Most video ads are 10 to 30 seconds long 52  © Cengage Learning 2017 FIGURE 4-9 Average time spent (hours per day) with various media, 2016 population estimates Mobile Device Advertising Tremendous usage growth for mobile devices connected to Internet Some mobile software applications (mobile apps) include advertising element – Messages displayed from advertisers – Part of the app screen or in a separate screen – Mobile apps’ advertising space marketed in same way as Web sites’ banner advertising 56 Site Sponsorships Web sites offer advertisers opportunity to sponsor all (or parts) of their sites – More subtle way of promoting products Goals similar to sporting event sponsors, television program sponsors – Tie company (product) name to an event (set of information) Ethical concerns raised if sponsor allowed to create content or weave advertising into site’s content – Should always be clearly identified as advertisement 58 Online Advertising Cost and Effectiveness Issue of measuring Web site effectiveness has become important Pricing metric is cost per thousand (CPM) for mass media advertising – “M” from Roman numeral for “thousand” – Dollar amount paid for every thousand people in the estimated audience Cost per click (CPC) is an alternative to CPM – Charge is for click 60 Online Advertising Cost and Effectiveness (cont’d.) Visit is when visitor requests a page from a Web site – Trial visit is the first time a particular visitor loads a Web site page – Repeat visit is subsequent page loads Page view – Each page loaded by a visitor Ad view – Occurs if page contains an ad Impression – Each time banner ad loads Click (click-through) – Action whereby a visitor clicks banner ad to open advertiser’s page 61 FIGURE 4-10 CPM rates for advertising in various media © Cengage Learning 2017 Online Advertising Cost and Effectiveness (cont’d.) Difficult for companies to gauge the cost and benefits of advertising on the Web Many have developed new metrics to evaluate the number of desired outcomes advertising yields – Number of new visitors who buy for the first time after arriving via a click- through can be used to calculate advertising cost of acquiring a customer on the Web Most analysts agree that online advertising is much more effective if properly targeted 63 E-Mail Marketing / Unsolicited Commercial E-mail (UCE, Spam) Can be a powerful element of advertising strategy – Used to announce new products or features – Used to announce sales on existing products Unsolicited Commercial E-mail (UCE, Spam, bulk mail) is electronic junk mail – Includes solicitations, ads or e-mail chain letters – Wastes time, disk space, and consumes large amounts of Internet capacity Key element to avoid engaging in spam – Obtain customer approval prior to sending 64 Permission Marketing Conversion rate is the percentage of recipients responding to an ad or promotion – Ranges from 10% to more than 30% on requested e-mail messages Opt-in e-mail is the practice of sending e-mail messages to people who request information – Part of permission marketing strategy – Example companies: ConstantContact, Yesmail, Return Path 65 Combining Content and Advertising Using articles, news stories of interest to specific market segments increases acceptance of e-mail Advertisers send content by using hyperlinks inserted into e-mail messages – Takes customers to advertiser’s Web site content – Easier to induce customer to stay on the site and consider making purchases Coordination across media outlets is an important element in any marketing strategy – Other marketing efforts undertaken at the same time should be consistent with the e-mail’s message 66 Outsourcing E-Mail Processing Number of customers opting in to information-laden e-mails can outgrow capacity of an information technology staff An e-mail processing service provider will manage an e-mail campaign at cost of 1-5 cents per address – Many companies will also help clients purchase lists of e-mail addresses from companies that compile lists 67 Branding on the Web Creating and Maintaining Brands on the Web / Elements of Branding Branded products easier to advertise and promote – Each product carries reputation of the brand name – Value far exceeds cost of creating them Three key brand elements – Product differentiation clearly distinguishes product – Relevance is degree to which product offers utility to a potential customer – Perceived value (key element) occurs when customer perceives a value in buying product 69  © Cengage Learning 2017 FIGURE 4-13 Elements of a brand Emotional Branding vs. Rational Branding Emotional appeals work well on television, radio, billboards and print – Ad targets in passive information acceptance mode – Difficult to convey on Web which is an active medium controlled by customer Rational branding offers to help Web users in some way in exchange for viewing an ad – Relies on cognitive appeal of specific help offered 71 Affiliate Marketing Strategies One firm’s Web site (affiliate site) includes descriptions, reviews, ratings, other information about a product linked to another firm’s site that offers the item for sale – Affiliate site receives a commission for every visitor who follows a link to the seller’s site Affiliate saves expense of handling inventory, advertising and promoting product, transaction processing Amazon.com was one of the first to create a successful affiliate marketing program on the Web 72 Affiliate Commissions / Cause Marketing Pay-per-click pays commission each time a visitor clicks the link and loads the seller’s page Pay-per-conversion pays when visitor becomes a qualified prospect or customer Affiliate program broker serves as a clearinghouse for sites interested in affiliate programs 74 Viral Marketing Strategies and Social Media Viral marketing relies on existing customers to tell prospective customers about products or service – BlueMountain Arts electronic greeting cards include a link to the greeting card site Social media marketing is best done using an indirect approach – Encourage community to discuss the desirability of a product or service – Web site followers on a company’s discussion activity are called fans 75 FIGURE 4-14 Viral marketing through social media © Cengage Learning 2017 Search Engine Positioning and Domain Names Ways that potential customers find Web sites – Referral by a friend – A link on a referring Web site – Referral by an affiliate marketing partner – Site’s URL in print advertisement, television – Unintentional visit after mistyping similar URL – Use of a search engine or directory Web site 77 Search Engines and Web Directories Web site that helps people find things on the Web – Spider (crawler, robot, bot) program automatically searches Web for potentially interesting Web pages – Index (database) is the storage element – Search utility takes search terms entered by visitors and finds matching Web page entries Search engine ranking uses factors to decide which URLs appear first on searches for a search term – Search engine positioning (optimization, placement) is the art and science of having a particular URL listed near the top of a search engine 78 Paid Search Engine Inclusion and Placement Paid placement (sponsorship, search term sponsorship) offers the option of purchasing a top listing on results page for a particular search term Another option is to buy display ad space at the top of search results pages that include certain terms Search engine positioning is a complex subject – Some sites use search engine placement brokers to sell ads and Google uses their AdWords program – Contextual advertising is ads placed in proximity to related content and localized advertising is ads related to location on search results 79  © Cengage Learning 2017 FIGURE 4-15 U.S. online advertising expenditures, actual and projected Source: Adapted from reports by ClickZ, eMarketer, Forrester Research, Nielsen, and Internet Retailer  © Cengage Learning 2017 FIGURE 4-16 Global advertising expenditures by medium, 2016 estimates Source: Adapted from reports by eMarketer, Nielsen, and ZenithOptimedia