This Document Contains Chapters 3 to 4 Chapter 3 Selling on the Web At a Glance Instructor’s Manual Table of Contents • Introduction • Learning Objectives • Teaching Tips • Quick Quizzes • Class Discussion Topics • Additional Projects • Additional Resources • Key Terms Lecture Notes Introduction Given the demand for photo and video storage, offering storage service would seem like an ideal online business, especially with the decreasing cost of storage space and high-bandwidth Internet connections. Many businesses do offer free or low-cost services, but because digital storage and Internet connections are commodities, it would be difficult for any of them to compete as the lowest-cost provider. The competition will be on features offered, not cost. In 2015, Google launched a photo storage service called Google Photos that is designed to provide the most wanted features for this type of service. Competitors have tried to do the same thing, but Google’s developers combined the company’s technical capabilities with research on how customers interact with technology. By combining their technology with information gathered from potential customers, the development team could enable the service to organize photos into categories automatically. This chapter teaches how companies choose revenue models and use their knowledge of customer needs to build useful experiences into their online business designs that will attract and keep those customers. Learning Objectives In this chapter, your students will learn about: • What a revenue model is and how companies use various revenue models online • Which characteristics identify specific revenue models • How some companies change their revenue models to achieve success • About revenue strategy choices that companies face when selling online • How to create an effective business presence on the Web • What factors enhance Web site usability • How companies use the Web to connect with customers Teaching Tips Revenue Models for Online Business 1. Introduce the topic by explaining that not all electronic commerce initiatives have the goal of providing revenue; some are undertaken to reduce costs or improve customer service. However, the focus of this chapter is learning about various models that online businesses currently use to generate revenue. These approaches can work for both business-to-consumer (B2C) and business-to-business (B2B) electronic commerce. Web Catalog Revenue Models 1. Note that many companies sell goods and services on the Web using an adaptation of a revenue model that is more than 100 years old. Provide a brief history of how Montgomery Ward, and Sears and Roebuck sold products using catalogs. Introduce the terms mail-order and catalog model. 2. Point out that many companies have adapted this revenue model to the online world by replacing or supplementing their print catalogs with information on their Web sites. Introduce the term Web catalog revenue model. 3. Note that many of the most successful online businesses using the Web catalog revenue model are firms that were already operating in the mail-order business and simply extended their operations to the Web. Other companies that use the Web catalog revenue model adopted it after realizing that the products they sold in their physical stores could also be sold on the Web. Discount Retailers: Getting a Great Deal Online 1. Discuss how discount retailers such asBuy.com (not Rakuten) began retail operations online using the Web catalog revenue model and low-cost strategy used by traditional discount retailers (Costco, Kmart, and Walmart). 2. Explain why traditional discount retailers were originally reluctant to implement online sales on their Web sites. Note that after some false starts and learning challenges, all eventually found online sales to be an important contributor to overall revenue and profits. Using Multiple Marketing Channels 1. Introduce the term marketing channel. Review how the companies below utilize multiple marketing channels. Use Figure 3-1 to illustrate two examples of how retailers might combine two marketing channels. • Best Buy finds that having two marketing channels lets them reach more customers and offer more products than it could by using either channel alone. • Home Depot encourages online sales by offering an option to have online orders shipped free to a nearby physical store location for the customer to pick up. • Talbots combines the benefits of these two marketing channels by offering in-store online ordering. • A retailer that mails print catalogs might include a product’s general description and photo in the catalog, but refer customers to the retailer’s Web site for detailed specifications or more information about the product. Adding the Personal Touch 1. Discuss how apparel sellers have adapted their catalog sales model to the Web. Introduce the terms personal shopper, virtual model and virtual fitting rooms. 2. Note that one problem that the Web presents for clothing retailers of all types is that the color settings on computer monitors vary widely. Most online clothing stores will send a fabric swatch on request and many Web catalog retailers have generous return policies. Quick Quiz 1 1. (True or False) Many companies sell goods and services on the Web using an adaptation of a mail order catalog revenue model that is more than 100 years old. Answer: True 2. (True or False) Some online stores include a feature that lets two shoppers browse the Web site together from different computers. Answer: True 3. The ____ is an intelligent agent program that learns the customer’s preferences and makes suggestions. Answer: personal shopper 4. The ____ is a graphic image built from customer measurements and description on which customers can try clothes. Answer: virtual model Fee-for-Content Revenue Models 1. Introduce the term digital content revenue model. Explain how this model is used by firms that own written information (words or numbers) or rights to that information. Legal, Academic, Business, and Technical Content 1. Discuss how the legal (LexisNexis), and academic and professional content (American Psychological Association and Association for Computing Machinery) have been reshaped by the fee-for content revenue models. 2. Note that online publishing saves costs and that some academic publishers are experimenting with new revenue models. Academic information aggregation services such as ProQuest Dialog and EBSCO Information Services purchase the rights to publications and resell those rights in various subscription packages. 3. Note that the Web also provides a way for technical content developers to reach retail customers. Electronic Books 1. Discuss how electronic books evolved and how the rapid growth has declined in the United States. There is some growth outside the U.S. Given that some books are better suited to electronic versions that others, physical books and electronic books will likely coexist for many years. Online Music 1. Discuss how the online music industry has been affected by the fee-for content revenue models. Introduce the term Digital Rights Management (DRM). Online Video 1. Discuss how the online video industry has been affected by the fee-for content revenue models. 2. Explain that online video sales have been hampered by three main issues that are now being solved: the large size of video files (which can make download times long and streaming feeds uneven), concerns that such sales might impair other sales of the video, and technological barriers that prevent downloaded videos from being played on a variety of devices. Quick Quiz 2 1. (True or False) The recording industry was quick to embrace online distribution of music. Answer: False 2. (True or False) The Digital Rights Management (DRM) software prevents the illegal copying of audio files. Answer: False Advertising as a Revenue Model Element 1. In this section, your students will learn how advertising revenue is incorporated into the revenue models of various content-providing online businesses. 2. Introduce the term advertising-supported revenue model. Note that it is the model used by broadcast network television in the United States. • Discuss the first challenge of using online advertising as the sole revenue source for a Web site. Specifically, there has been little consensus on how to measure and charge for site visitor views, even after almost 20 years of experience with the medium. Introduce the terms stickiness and sticky. • Discuss the second challenge of using online advertising as the sole revenue source for a Web site. Specifically, very few Web sites have sufficiently large numbers of visitors to compete with mass media outlets such as radio or television. Introduce the term demographic information. • Describe how using an increasing number of specialized information Web sites has helped resolve the second challenge. Two examples of successful advertising-supported sites that appeal to audiences with specific interests are The Huffington Post and the Drudge Report. Similarly, HowStuffWorks has a collection of pages that appeal to an array of visitors with highly focused interests. • Use Figure 3-2 to illustrate three strategies - general interest, specific interest, and collection of specific interests - for implementing an advertising-supported revenue model. • Introduce the terms portal or Web portal and Web directory. Advertising-Supported Newspapers 1. Explain how many newspapers and magazines sell advertising to cover the costs of converting their print content to an online format and operating the Web site. • Point out that although a Web site can provide greater exposure for a newspaper’s name and a larger audience for advertising that it carries, an online edition also can divert sales from the print edition. • Emphasize that there is no consensus among media industry analysts regarding whether a pure advertising-supported revenue strategy can work for newspapers or magazines in the long run. • Introduce the term paywall. Advertising-Supported Online Classified Ad Sites 1. Remind students that targeted advertising can command higher rates than general advertising. Note that one implementation of the advertising-supported revenue model that is successful is Web employment advertising. • Use Craigslist and similar sites as an example of sites that run most ads for free, only charging for a small proportion of the ads they carry. • Note that the most successful targeted classified advertising category has been Web employment sites. • Mention that another type of online classified advertising business is the used vehicle site. Advertising-Subscription Mixed Revenue Models 1. Note that firms have had varying levels of success in applying this mixed revenue model and a number of companies have moved to or from this model as they try to find the best way to generate revenue online. • Use The New York Times and The Wall Street Journal as examples. • Refer to Figure 3-3 to illustrate the revenue models used by a number of newspapers and magazines, including those that use the advertising-supported model, the advertising subscription mixed model with substantial content freely available, and the advertising-subscription mixed model with most content available only to subscribers. Quick Quiz 3 1. The ____ revenue model is the one used by network television in the United States. Broadcasters provide free programming to an audience along with advertising messages. Answer: advertising-supported 2. The ____ of a Web site is its ability to keep visitors at the site and attract repeat visitors. Answer: stickiness 3. The set of characteristics that marketers use to group visitors is called ____ information, and includes things such as address, age, gender, income level, type of job held, hobbies, and religion. Answer: demographic 4. A(n) ____ is a listing of hyperlinks to Web pages. Answer: Web directory Fee-for-Transaction Revenue Models 1. Introduce the fee-for-transaction revenue model, disinter mediation and reintermediation. 2. Engage students by discussing businesses that have been reshaped by the fee-for-transaction revenue model. Stock Brokerage Firms: Two Rounds of Disintermediation 1. Note that stockbrokers went through two rounds of disintermediation caused by discount brokers and online brokers. After these two rounds of disintermediation and the financial crisis of 2008, the brokerage firms that remain today do most of their business online. Insurance Brokers 1. Although insurance companies themselves were slow to offer policies and investments for sale online, a number of intermediaries that sell insurance policies from a variety of companies have been online since the early days of the Web. 2. Note that the General uses its Web site to reach buyers who may have trouble getting insurance and has been very successful in this specific niche of the market. Today most major insurance companies offer information and policies for sale on their Web sites. Event Tickets 1. The Web gave event promoters the ability to sell tickets from one virtual location to customers practically anywhere in the world. Additionally, the Web created opportunities for those who deal in secondary market tickets such as StubHub Online Banking and Financial Services 1. Note that online banking was slow to take off on the Web but now about 84% of all U.S. households use online banking services. 2. Banks benefit from serving their customers online because it costs the bank less to provide services online than to provide those same services through personal interactions with bank employees in a branch office. New online banks that are not affiliated with any existing bank now exist. 3. Introduce the terms bill presentment and account aggregation. Travel 1. Online travel sites have evolved to make money in various ways. They all collect any commissions that are paid and buy and sell rooms and airplane seats. Most run advertising on their Web sites in a combined advertising-fee revenue model. 2. Refer to Figure 3-4 to illustrate the Orbitz home page. Emphasize that the online travel sites were able to disintermediate many traditional travel agencies. 3. Note that cruise lines still view travel agents as an important part of their selling strategy and continue to pay commissions to travel agents on the sales that they make. 4. Explain that some small travel agencies have been successful by following a reintermediation strategy with a focus on specific groups of travelers. Automobile Sales 1. Some firms, such as Edmunds.com, provide an information service to car buyers. These firms are disintermediating the individual salesperson and the Web site becomes the new intermediary in the transaction, which is an example of reintermediation. 2. Some auto sales sites also sell advertising on their sites, which makes them, like the online travel agencies, examples of mixed fee-for-transaction and advertising-supported revenue models. Real Estate and Mortgage Loans 1. Most real estate brokerage firms have a strong online presence and the industry’s trade associated, Realtor.com, carries detailed descriptions and photos of houses listed for sale by member firms. Few, if any, real estate transactions are completed online, but these webs sites play a role in bringing buyers and sellers together. 2. The complexity and size of real estate transactions have made it difficult for online activities to displace completely the work done by individual real estate and mortgage brokers. Thus, this is one line of business that has been highly resistant to disintermediation caused by online technologies. The changes caused by online elements in the real estate and mortgage businesses have been minor. Fee-for-Service Revenue Models 1. Introduce the fee-for-service revenue models concept and explain that they range from games and entertainment to financial advice and the professional services of accountants, lawyers, and physicians. Online Games 1. Note that computer and video games are a $66 billion worldwide industry. Although many sites that offer games relied on advertising revenue in the past, a growing number include premium games in their offerings. 2. One of the fastest growing segments of the online games business is in the development and sale of games designed to be played on mobile devices such as smartphones and tablets. Professional Services 1. State laws have been one of the main forces preventing U.S. professionals (physicians, lawyers, accountants, and engineers) from extending their practices to the Web. 2. Many professional practices allow patients to make appointments online and an increasing number of professionals do online consultations. A large number of Web sites offer general health information and a growing number of physicians offer online consultations to established patients. 3. Some Web sites offer online mental health services to patients with therapists licensed in the patient’s jurisdiction, as some conditions may be easier to treat online since the patient does not have to leave home. Free for Many, Fee for a Few 1. Note that the basic economics of selling digital products are different than physical products. Digital products have large up-front costs, but additional costs can be made at very low additional cost. 2. Describe the revenue model in which a businesses can find it profitable to offer a digital product to a large number of customers for free, and then charge a small number of customers for an enhanced, specialized, or otherwise differentiated version of the product. Quick Quiz 4 1. The removal of an intermediary, such as a human agent, from a value chain is called ____. Answer: disintermediation 2. ____ is the introduction of a new intermediary into a value chain. Answer: Reintermediation 3. A(n) ____ service provides an electronic version of an invoice or billing statement (such as a credit card bill or a mobile phone services statement) with all of the details that would appear in the printed document. Answer: bill presentment 4. ____ is the ability to obtain bank, investment, loan, and other financial account information from multiple Web sites and display it all in one location at the bank’s Web site. Answer: Account aggregation Changing Strategies: Revenue Models in Transition 1. This section describes the revenue model transitions undertaken by five different companies as they gained experience in the online world and faced the changes that occurred in that world. Subscription to Advertising-Supported Model 1. Discuss the fact that at its peak, Slate had about 27,000 subscribers generating annual revenue of $500,000, which was far less than the cost of creating the content and maintaining the Web site. Slate is now operated as an advertising-supported site as part of the Bing portal. Advertising-Supported to Advertising-Subscription Mixed Model 1. Introduce the class to Salon.com, which has received acclaim for its innovative content and has moved its revenue model in the direction opposite of Slate’s transition. Advertising-Supported to Subscription Model 1. Introduce the class to Northern Light’s revenue model. Note that in January 2002, the company decided that the advertising revenue it was earning from the ads it sold on search results pages was insufficient to justify continuing the service. Northern Light’s new model generates revenue from annual subscriptions to large corporate clients. Multiple Changes to Revenue Models 1. As one example, it is interesting to note that Encyclopedia Britannica has gone from being a print publisher to a seller of information on the Web to an advertising-supported Web site to a mixed advertising subscription model– three major revenue model transitions in just a few short years. 2. Note that The New York Times Web site has gone through several revenue model transitions since opening in the mid-1990s. Revenue Strategy Issues for Online Businesses 1. In this section, your students will learn about some issues that arise when companies implement revenue models on the Web today. Your students will also learn how companies deal with those issues. Channel Conflict and Cannibalization 1. Introduce the terms channel conflict, cannibalization, and channel cooperation. Teaching Tip To learn more about channel conflict, see: http://www.reshare.com/solutions/conflict.jsp Strategic Alliances 1. Review examples of strategic alliances such as Levi’s and its retailers, or Amazon and Target. Luxury Goods Strategies 1. Explore reasons why people are still reluctant to buy luxury goods and high-fashion clothing items online and examine the methods used by companies, e.g., Chanel and Calvin Klein, Blue Nile, Ice.com and Costco to overcome these impediments. Overstock Sales Strategies 1. Briefly discuss the advantages of overstock stores online as compared to a physical outlet store. Quick Quiz 5 1. ____ can occur whenever sales activities on a company’s Web site interfere with its existing sales outlets. Answer: Channel conflict, Cannibalization 2. When two or more companies join forces to undertake an activity over a long period of time, they are said to create a(n) ____. Answer: strategic alliance Creating an Effective Business Presence Online 1. Introduce the terms presence and stakeholders. Identifying Web Presence Goals 1. Point out that a good Web site design can provide many image-creation and image-enhancing features very effectively; it can serve as a sales brochure, a product showroom, a financial report, an employment ad, and a customer contact point. 2. An effective site is one that creates an attractive presence that meets the objectives of the business or organization. A list of these objectives, along with some examples of Web site design strategies that can help accomplish them, appears in Figure 3-5. Making Web Presence Consistent With Brand Image 1. Note that different firms, even those in the same industry, might establish different Web presence goals. These Web presences convey the images each company wants to project. Not-for-profit organizations 1. Note that a key goal for the Web sites of many not-for-profit organizations is information dissemination. The Web allows these groups to integrate information dissemination with fund-raising in one location. 2. This combination of information dissemination and a two-way contact channel is a key element on any successful electronic commerce Web site. The ACLU home page, gives visitors an opportunity to learn about the organization and contribute money or join if their interests are piqued by what they see. 3. Not-for-profit organizations can use the Web to stay in touch with existing stakeholders and identify new opportunities for serving them. Teaching Tip To learn more about creating a Web presence, see: http://www.knowledgeway.org/living/create_web/ Quick Quiz 6 1. An organization’s ____ is the public image it conveys to its stakeholders. Answer: presence 2. The ____ of a firm include its customers, suppliers, employees, stockholders, neighbors, and the general public. Answer: stakeholders 3. (True or False) A key goal for the Web sites of many not-for-profit organizations is information dissemination. Answer: True 4. (True or False) This combination of information dissemination and a two-way contact channel is a key element on any successful electronic commerce. Answer: True Web Site Usability 1. In this section, your students will learn how the Web is different from other ways in which companies have communicated with their customers, suppliers, and employees in the past. How companies can improve their Web presences by making their sites accessible to more people and easier to use, and by making sure that their sites encourage visitors to trust and even develop feelings of loyalty toward the organization behind the Web site is also discussed. How the Web Is Different 1. Note that the failure to understand how the Web is different from other presence-building media continues to be an important reason that so many businesses do not achieve their Web objectives. 2. The Web gives even large companies the ability to engage in two-way, meaningful communication with their customers. Companies that do not make effective use of this ability will lose customers to competitors that do. Meeting the Needs of Web Site Visitors 1. Note that people seldom visit a Website by accident. They are there for a reason. Varied Motivations of Web Site Visitors 1. Discuss why a visitor might arrive at a Web site. Emphasize that addressing the implications of the many variations in visitor characteristics when building a Web site can help convert visitors into customers. Making Web Sites Accessible 1. Discuss how to make Web sites accessible. Note that a good site design lets visitors choose among information attributes, such as level of detail, forms of aggregation, viewing format, and downloading format. 2. Mention the differences between Adobe Flash and HTML5 when rendering animated graphic elements. Explain that some specific tasks that customers want to perform do lend themselves to animated Web pages. For example, the Lee® Jeans Fit Finder is a series of Flash animation pages that can help customers find the right size and style of jeans. One of the Lee® Jeans Fit Finder animation pages is shown in Figure 3-6. 3. Note that to be successful in conveying an integrated image and offering information to potential customers, businesses should try to meet the accessibility goals shown in Figure 3-7 when constructing their Web sites. Trust and Loyalty 1. Note that when customers buy a product, they are also buying that service element. A seller can create value in a relationship with a customer by nurturing the customer’s trust and developing it into loyalty. 2. Point out that customer service is a problem for many electronic commerce sites. Even today, e-mail responsiveness of electronic commerce sites is disappointing. Many major companies are slow to respond to e-mail inquiries about product information, order status, or after-sale problems. Usability Testing 1. Discuss the term and the importance of usability testing. Stress that a regular program of usability testing can identify issues and allow companies to resolve them before the cause user frustration and lost sales. Teaching Tip To learn more about usability testing, see: http://www.usabilitysciences.com/services/lab-based-usability-testing/usability-test and http://www.usability.gov/methods/test_refine/learnusa/index.html Customer-Centric Web Site Design 1. Introduce the customer-centric approach to Web site design. 2. Note that it leads to some guidelines that Web designers can follow when creating a Web site that is intended to meet the specific needs of customers, as opposed to all Web site visitors. 3. Web sites that are designed for mobile device users should follow a few additional guidelines. These rules help accommodate the use of devices with very small screens (compared to laptop or desktop computer users) and the tendency of mobile device users to be even less patient than other Web users. 4. Emphasize that Web designers should create sites focused on the customer’s buying process rather than the company’s perspective and organization. Using the Web to Connect with Customers 1. In this section, your student will learn how Web sites can help firms identify and reach out to customers. The Nature of Communication on the Web 1. Introduce the terms communication modes, personal contact model, prospecting, mass media, and addressable media. 2. Use Figure 3-8 to illustrate the position of the Web as a customer contact medium, located between the large markets addressed by mass media and the highly focused markets addressed by personal contact selling and promotion techniques. 3. Introduce the terms one-to-many communication model, one-to-one communication model, many-to-one communication model, and many-to-many communications. Quick Quiz 7 1. The defining characteristic of the ____ promotion process is that the seller is active and the buyer is passive. Answer: mass media 2. Putting the customer at the center of all site designs is called a(n) ____ approach to Web site design. Answer: customer-centric 3. In the ____ communication model, the firm’s employees individually search for, qualify, and contact potential customers. Answer: personal contact 4. ____ are advertising efforts directed to a known addressee and include direct mail, telephone calls, and e-mail. Answer: Addressable media Class Discussion Topics 1. Outline three ways in which businesses can create an effective presence on the Web. 2. Identify three companies on the Web and discuss their Web presence goals. 3. How is the Web different from other presence-building media? 4. What challenges are faced by businesses when creating a Web presence? Additional Projects 1. Identify a company that uses the Internet for marketing, sales, and promotions. Answer the following questions for the company of your choice: a. What is the name of the company? b. What is the URL of the company home page? c. History: Who founded it and when? Initial products/services and markets? Private or public? E-company or brick and mortar? d. Financials: Most recent year’s revenues? Most recent year’s profits? e. What are its main products and services? f. What is its target market and who are its customers? g. Who are its main competitors? h. How is the company using the Internet for marketing, sales, and promotions? 2. You are a Web business consultant and have been retained by Bob Drudge, the owner of refdesk.com. Bob needs to improve his Web presence by attracting more visitors, improving layout, making the site interesting enough that visitors stay and explore, and creating an impression consistent with the organization’s desired image. Submit your recommendations in a report. Additional Resources 1. User Centered Design: How to Make Usable, Customer-Centric Websites: (Video) https://www.youtube.com/watch?v=GwBBtTkUAcA 2. Portal: http://www.hku.hk/cc_news/ccnews100/portal.htm 3. Mobile Web Design: 10 Tips To Better Usability: http://www.hongkiat.com/blog/mobile-web-design/ 4. Nokia and Microsoft enter strategic alliance on Windows Phone, Bing, Xbox Live and more (video) http://www.engadget.com/2011/02/11/nokia-and-microsoft-enter-strategic-alliance-on-windows-phone-b/ Key Terms Account aggregation: the ability to obtain bank, investment, loan, and other financial account information from multiple Web sites and display it all in one location at the bank’s Web site. Addressable media: advertising efforts directed to a known addressee; includes direct mail, telephone calls, and e-mail. Advertising-subscription mixed revenue model: subscribers pay a fee and accept some level of advertising. Advertising-supported revenue model: broadcasters provide free programming to an audience along with advertising messages. Bill presentment: the service provides an electronic version of an invoice or billing statement (such as a credit card bill or a mobile phone services statement) with all of the details that would appear in the printed document. Cannibalization: occurs whenever sales activities on a company’s Web site interfere with its existing sales outlets. Catalog model: a traditional catalog-based retail revenue model where the seller establishes a brand image, and then uses the strength of that image to sell through printed information mailed to prospective buyers, who place orders by mail or telephone. Channel conflict: occurs whenever sales activities on a company’s Web site interfere with its existing sales outlets. Channel cooperation: giving customers access to the company’s products through a coordinated presence in all distribution channels. Communication modes: two general ways of identifying and reaching customers: personal contact and mass media. Customer-centric: putting the customer at the center of all site designs. Demographic information: the set of characteristics that marketers use to group visitors. Digital content revenue model: a model where companies sell rights to access the information they own. Digital Rights Management (DRM): limits the number of copies that can be made of each audio file. Disintermediation: the removal of an intermediary, such as a human agent, from a value chain. Fee-for-service revenue models: fee is based on the value of the service provided. Fee-for-transaction revenue model: businesses offer services for which they charge a fee that is based on the number or size of transactions they process. Mail-order: A traditional catalog-based retail revenue model where the seller establishes a brand image, and then uses the strength of that image to sell through printed information mailed to prospective buyers, who place orders by mail or telephone. Many-to-many communications: you communicate over the Web with other potential buyers. Many-to-one communication model: you communicate over the Web with an individual working for the seller. Marketing channel: a pathway to customers. Mass media: in this approach, firms prepare advertising and promotional materials about the firm and its products or services. They then deliver these messages to potential customers by broadcasting them on television or radio, printing them in newspapers or magazines, posting them on highway billboards, or mailing them. One-to-many communication model: communication in this model flows from one advertiser to many potential buyers. One-to-one communication model: both the buyer and the seller (or the seller’s representative) actively participate in this exchange of information. Paywall: an approach where free content is available up to a point at which fees begin. A visitor can access free content until hitting a wall, and then must pay to pass over that wall. Personal contact: in this model, the firm’s employees individually search for, qualify, and contact potential customers. Personal shopper: an intelligent agent program that learns the customer’s preferences and makes suggestions. Portal: a site that people use as a launching point to enter the Web. Presence: the public image an organization conveys to its stakeholders. Prospecting: the personal contact approach to identifying and reaching customers. Reintermediation: the introduction of a new intermediary, such as a fee-for-transaction Web site, into a value chain. Stakeholders: includes a firm’s customers, suppliers, employees, stockholders, neighbors, and the general public. Stickiness: a Web site’s ability to keep visitors at the site and attract repeat visitors. Sticky: a Web site’s ability to keep visitors at the site and attract repeat visitors. Usability testing: the testing and evaluation of a site by its owner to ensure ease of use for site visitors. Virtual fitting rooms: the increase in sales and the decrease in returns on Web sites that use virtual model services. Virtual model: a graphic image built from customer measurements and descriptions on which customers can try clothes. Web catalog revenue model: replacing or supplementing print catalogs with information on a Web site. Web directory: a listing of hyperlinks to Web pages. Web portal: a site that people use as a launching point to enter the Web. Chapter 4 Marketing on the Web At a Glance Instructor’s Manual Table of Contents • Introduction • Learning Objectives • Teaching Tips • Quick Quizzes • Class Discussion Topics • Additional Projects • Additional Resources • Key Terms Lecture Notes Introduction When women made the primary decisions about purchasing household products, advertising that portrayed men as inept may have made sense. Because men have started taking a larger role in these decisions, companies have had to change their advertising strategies. In 2012, Kimberly-Clark was criticized for portraying men as incompetent caregivers. Not only did they change their advertising, the company now engages in “dad-focused” social media outlets and participates in the annual Dad 2.0 Summit. Companies use advertising and marketing to develop long-term relationships with customers. The importance of telling an authentic, accurate, meaningful and consistent story through online and physical channels underlies the principles of branding, marketing, relationship management and communication discussed in this chapter. Learning Objectives In this chapter, your students will learn: • How firms use product-based and customer-based marketing strategies • Strategies for communicating with different market segments • To identify customers’ characteristics as they move through the customer relationship life cycle • How online advertising has developed and grown • About e-mail marketing strategies • About technology-enabled customer relationship management • How to create and maintain brands online • How businesses use social media in viral marketing campaigns • About search engine positioning tactics and domain name selection strategies Teaching Tips Web Marketing Strategies 1. Introduce the terms marketing mix and marketing strategy. The Four Ps of Marketing 1. Mention the four Ps of marketing: product, price, promotion and place. 2. Introduce the term product. Explain that the intrinsic characteristics of the product are important, but customers’ perceptions of the product, called the product’s brand, can be as important as the actual characteristics of the product. 3. Introduce the term price. Emphasize that students should think of price in terms of the total of all financial costs that the customer pays (including transaction costs) to obtain the product. Note that the total cost is subtracted from the benefits that a customer derives from the product to yield an estimate of the customer value obtained in the transaction. 4. Introduce the term promotion. 5. Introduce the term place (also called distribution). 6. Refer to Figure 4-1 to illustrate the four Ps of marketing and their contributions to overall marketing strategy. Product-Based Marketing Strategies 1. Introduce the term product-based marketing strategy. 2. Note that many retailers that began as catalog-based businesses organize their Web sites from an internal viewpoint—that is, according to the way that they arranged their products on store shelves or printed catalog pages. If customers arrive at these Web sites looking for a specific type of product, this approach works well. However, customers who are shopping to fulfill a specific need, such as redecorating a room or choosing a graduation gift rather than to find a specific product, might not find these Web sites efficient. Customer-Based Marketing Strategies 1. Introduce the term customer-based marketing strategy. 2. Explain that a good first step in building a customer-based marketing strategy is to identify groups of customers who share common characteristics. 3. As an example of an application of a customer-based marketing strategy, use a university Web content presentation that focuses on needs of primary stakeholders with specific links for each category, e.g., current students, faculty, prospective students, etc. Communicating with Different Market Segments 1. Emphasize that identifying groups of potential customers is just the first step in selling to those customers. An equally important component of any marketing strategy is the selection of communication media to distribute the marketing message. Trust, Complexity, and Media Choice 1. Explain that using the Web to communicate with potential customers offers many of the advantages of personal contact selling and many of the cost savings of mass media. Refer to Figure 4-2 to illustrate how three information dissemination modes compare on the important dimensions of trust and product (or service) complexity. 2. Point out that after years of being barraged with television and radio commercials, many people have developed a resistance to the messages conveyed in mass media. Emphasize that mass media advertising campaigns that are successful often rely on the passive nature of the media consumption experience. 3. Mention that the level of complexity inherent in the product or service is also an important factor in media choice. Products that have few characteristics or that are easy to understand can be well-promoted using mass media. 4. Note that the Web occupies a wide middle ground and can be used for delivering short, focused messages as well as longer, more complex messages. 5. Introduce the terms Web log(blog) and social media. Mention that blogs and social media provide ways for companies to engage in two-way online communications that more closely resembles the high-trust personal contact mode of communication than the low-trust mass media mode. They also allow companies to achieve these benefits without incurring the high cost of traditional personal contact techniques. Market Segmentation 1. Introduce the terms market segmentation, segments, micromarketing, geographic segmentation, demographic segmentation, and psychographic segmentation. 2. Emphasize that companies advertising on television often create messages designed to reach the likely audiences of various types of programs. These audiences represent one or more market segments. The market segments can be geographic, demographic, psychographic, or a combination of these. Use Figure 4-3 to provide examples. 3. Explain that companies do much more than just match advertising messages to market segments. They also build a sales environment for their product or service that corresponds to the market segment they are trying to reach. Market Segmentation on the Web 1. Note that the Web gives companies an opportunity to present different store environments online. 2. Point out that in the physical world, retail stores have limited floor and display space. These limitations often force physical stores to decide on one particular message to convey. By using the Web, retailers can provide separate virtual spaces for different market segments. Offering Customers a Choice on the Web 1. Introduce the term one-to-one marketing. 2. Point out that the Internet gives marketers the best opportunity for highly customized interactions with customers that they have seen since the heyday of the door-to-door salesperson in the 1940s and 1950s. Teaching Tip To learn more about market segmentation, see: http://www.netmba.com/marketing/market/segmentation/ Quick Quiz 1 1. The ____ element of the marketing mix is the amount the customer pays for the product. Answer: price 2. ____ includes any means of spreading the word about the product. Answer: Promotion 3. The practice of targeting very small market segments is called ____. Answer: micromarketing 4. In ____, marketers try to group customers by variables such as social class, personality, or their approach to life. Answer: psychographic segmentation Beyond Marketing Segmentation: Customer Behavior and Relationship Intensity 1. Note that the next step beyond market segmentation, even beyond one-to-one marketing, occurs when companies use the Web to target specific customers in different ways at different times. Segmentation Using Customer Behavior 1. Introduce the terms behavioral segmentation and occasion segmentation. Teaching Tip To learn more about behavioral segmentation, see:http://www.fuzzyl.com/blog/behavioral-segmentation-for-marketing/ 2. Explain that marketing researchers study how and why people prefer different combinations of products, services, and Web site features, and how their preferred modes affect their interaction with the site. Market researchers know that people want Web sites that offer a range of interaction possibilities. 3. Introduce the term usage-based market segmentation. 4. Discuss visitor categories used by marketers today. • Browsers: Explain that some visitors to a company’s Web site are just surfing or browsing. Introduce the term trigger words. • Buyers: Note that visitors who arrive in buyer mode are ready to make a purchase right away. The best thing a site can offer a buyer is a direct route into the purchase transaction. Introduce the term shopping cart. • Shoppers: Explain that some customers arrive at a Web site knowing that it offers items they are interested in buying. These visitors are motivated to buy, but they are looking for more information before they make a purchase decision. 5. Introduce Alternative Models. • Describe the six behavior-based categories identified by McKinsey & Company’s study: simplifiers, surfers, bargainers, connectors, routineers, and sportsters. • Refer to Figure 4-4 for objectives and characteristics of these visitors. • Emphasize that the challenge for Web businesses is to identify which groups are visiting their sites and formulate ways of generating revenue from each segment. Customer Relationship Intensity and Life-Cycle Segmentation 1. Emphasize that good customer experiences can help create an intense feeling of loyalty toward the company and its products or services. 2. Explain how many customers lose their connections to a particular seller and enter a final stage called separation. 3. Refer to Figure 4-5 to illustrate a typical five-stage model of customer loyalty. 4. Introduce the terms touchpoints and touchpoint consistency. 5. The following topics should also be discussed. • Awareness: Customers who recognize the name of a company or one of its products are in the awareness stage of customer loyalty. • Exploration: In the exploration stage, potential customers learn more about a company or its products. • Familiarity: After completing several transactions and being aware of a company’s policies regarding returns, credits, and pricing flexibility, customers will be in the familiarity stage of their relationship with the company. • Commitment: In order to lure customers from the familiarity stage to the commitment stage, companies sometimes make concessions on prices or terms. • Separation: As the intensity of the relationship fades, the parties enter a separation stage. 5. Your students should understand that an important goal of any marketing strategy should be to move customers into the commitment stage as rapidly as possible and to keep them there as long as possible. 6. Present the topic of life-cycle segmentation. Introduce the terms customer life cycle and life-cycle segmentation. Highlight ongoing research by Claritas and Donnelly into market segmentation and explain how companies can use segmented information to develop better relationships with their customers. Teaching Tip To learn more about the customer lifecycle, see: http://emailmarketing.comm100.com/email-marketing-ebook/customer-life-cycle.aspx Customer Acquisition: The Funnel Model 1. Introduce the term funnel model of customer acquisition. This model is used as a conceptual tool to understand the overall nature of a marketing strategy; however, it also provides a clear structure for evaluating specific strategy elements. 2. Point out that the funnel model is very similar to the customer life-cycle model; however, the funnel model is less abstract and does a better job of showing the effectiveness of two or more specific strategies. 3. Refer to Figure 4-6 to illustrate how the funnel is a good analogy for the operation of a marketing strategy because almost every marketing strategy starts with a large number of prospects and converts fewer and fewer of those prospects into serious prospects, customers, and finally, loyal customers. 4. Introduce the terms acquisition cost, conversion, conversion cost, retained customers, and retention costs. 5. Emphasize that measuring acquisition, conversion, and retention costs is important because it gives companies an idea of which advertising and promotion strategies are successful. 6. Point out that when considering techniques that can be elements of successful Web marketing strategies, not all techniques work well in all situations. Quick Quiz 2 1. In general, the creation of separate experiences for customers based on their behavior is called ____. Answer: behavioral segmentation 2. A(n) ____ is the part of a Web site that keeps track of selected items for purchase and automates the purchasing process. Answer: shopping cart 3. The total amount of money that a site spends, on average, to draw one visitor to the site is called the ____. Answer: acquisition cost 4. Customers who return to the site one or more times after making their first purchases are called ____. Answer: retained customers Advertising on the Web 1. Explain the usefulness of five-stage customer loyalty model in creating messages to convey to each of the audiences. Mention each stage and the corresponding messages: • Awareness stage: The advertising messages should inform. • Exploration stage: The messages should explain how a product or service works and encourage switching to that brand. • Familiarity stage: The advertising message should be persuasive. • Commitment stage: The customer should be sent reminder messages. • Separation stage: Advertisements are generally not targeted for this audience. 2. Most companies that launch electronic commerce initiatives already have advertising programs in place. Emphasize that online advertising should always be coordinated with existing advertising efforts. Display Ads 1. Introduce the term display ad (banner ad). Note that a variety of multimedia technologies (e.g., Shockwave, Java, Flash) is used to make attention-grabbing display ads. 2. Introduce the terms interactive marketing unit (IMU) ad formats and universal ad package (UAP). Note that UAP is most common format used on the Web today and review the UAP formats. 3. Introduce the terms leader board ad and sky scraper ad. 4. Discuss the topic of display ad placement. Introduce the terms ad exchange network and display advertising network. 5. Discuss new strategies for display ads. • Note that click-through rates now range from .3 percent to .5 percent, depending on the site’s content. • Although some recent research suggests that Web site visitors see and are influenced by banner ads that they do not click, advertisers are reluctant to pay for ads that do not produce directly measurable results. • Introduce the term animated GIFs. • Use Figure 4-7 to illustrate how some designers created banner ads that appear to be dialog boxes in the hope that confused users would click them. Intrusive Ad Formats 1. Introduce the terms pop-up ad, ad-blocking software, and interstitial ad. Rich Media and Video Ad Formats 1. Introduce the terms rich media ad, video ad, and pre-roll video ad. Text Ads 1. Introduce the term text ad. Note that the use of text ads was one of the innovations that helped Google become one of the leading search sites on the Web. Point out that it gave Google an effective way to earn money while providing users with a useful search experience. 2. Introduce the term inline text ad. Teaching Tip Briefly discuss the effectiveness of these ad formats, considering the potential downside of annoying the user and creating lasting a negative attitude toward a more intrusive advertiser. Mobile Device Advertising 1. Introduce the terms mobile apps and mobile ads. 2. Note the advertising space on mobile apps is sold in the same way that banner advertising on Web sites is sold. Site Sponsorships 1. Introduce the term site sponsorships. 2. Explain that companies that buy Web site sponsorships have goals that are similar to those of sporting event sponsors or television program sponsors, namely, that they want to tie the company or product name to an event or a set of information. Online Advertising Cost and Effectiveness 1. Introduce the term cost per thousand(CPM). 2. Students should understand that measuring Web audiences is complicated because of the Web’s interactivity and because the value of a visitor to an advertiser depends on how much information the site gathers from the visitor. 3. Introduce the term cost per click (CPC). Note that CPC measures are difficult to compare with the CPM measures used in all other (not online) modes of advertising. This limits general use of CPC measures by advertisers who buy all types of advertising. 4. Introduce the terms visit, trial visit, repeat visits, page view, ad view, impression, and click or click-through. 5. Refer to Figure 4-10 to illustrate a comparison of CPM rates for banner ads and other Web advertising media to CPM rates for advertising placed in traditional media outlets. 6. Explain that the effectiveness of online advertising remains difficult to measure. 7. Point out that market segmentation is an important element in online advertising success. Quick Quiz 3 1. A(n) ____ is a small rectangular object on a Web page that displays a stationary or moving graphic and includes a hyperlink to the advertiser’s Web site. Answer: banner ad 2. A(n) ____ is a banner ad that is designed to be placed on the side of a Web page and remain visible as the user scrolls down through the page. Answer: skyscraper ad 3. A(n) ____ is a short promotional message that does not use any graphic elements and is usually placed along the top or right side of a Web page. Answer: text ad 4. A(n) ____ is an ad that appears in its own window when the user opens or closes a Web page. Answer: pop-up ad E-Mail Marketing 1. Point out that industry analysts have been critical of some companies for sending e-mail messages to customers or potential customers. A few of these companies have even faced legal action after sending out masse-mailings. 2. Introduce the term spam, also known as unsolicited commercial e-mail(UCE), or bulk mail. 3. Emphasize that a key element in any e-mail marketing strategy is to obtain customers’ approvals before sending them any e-mail that includes a marketing or promotional message. Teaching Tip To learn more about e-mail marketing: http://blog.crazyegg.com/2013/02/21/review-email-marketing-services/ Permission Marketing 1. Note that sending one e-mail message to a customer can cost less than one cent if the company already has the customer’s e-mail address. 2. Introduce the terms conversion rate, opt-in e-mail, and permission marketing. 3. Explain that a marketing strategy that sends specific information only to people who have indicate dan interest in receiving information about the product or service being promoted should be more successful than a marketing strategy that sends general promotional messages through the mass media. Combining Content and Advertising 1. Point out that many companies have found that combining content with an advertising e-mail message is a successful strategy. 2. Explain that when a company uses e-mail to promote its products or services, any other simultaneous marketing efforts, such as press releases, print media ads, or broadcast media ads, should deliver content consistent with the e-mail campaign’s message. Outsourcing E-Mail Processing 1. Note that the job of handling e-mail lists and mass mailing software can quickly outgrow the capacity of the company’s information technology staff. Technology-Enabled Customer Relationship Management 1. Explain that the nature of the Web, with its two-way communication features and traceable connection technology, allows firms to gather much more information about customer behavior and preferences than they can gather using micromarketing approaches. 2. Introduce the terms clickstream, technology-enabled relationship management and customer relationship management (CRM)/electronic customer relationship management (eCRM). 3. Refer to Figure 4-11 to illustrate the seven dimensions of the customer interaction experience. Discuss how technology-enabled customer relationship management differs from traditional seller-customer interactions in each of those dimensions. CRM as a Source of Value 1. Introduce the term marketspace. 2. Explain that successful Web marketing approaches all involve enabling the potential customer to find information easily and customizing the depth and nature of that information; such approaches should encourage the customer to buy. 3. Introduce the terms data warehouse, data mining/analytical processing, and statistical modeling. 4. Refer to Figure 4-12 to illustrate the elements in a typical CRM system. Quick Quiz 4 1. The ____ of an advertising method is the percentage of recipients who respond to an ad or promotion. Answer: conversion rate 2. The information that a Web site can gather about its visitors is called a(n) ____. Answer: clickstream 3. In a CRM system, the multiple sources of information about customers, their preferences, and their behavior is entered into a large database called a(n) ____. Answer: data warehouse 4. ____ is a technique that tests theories that CRM analysts have about relationships among elements of customer and sales data. Answer: Statistical modeling Creating and Maintaining Brands on the Web 1. Explain that a known and respected brand name can present to potential customers a powerful statement of quality, value, and other desirable characteristics in one recognizable element. Emphasize that branded products are easier to advertise and promote because each product carries the reputation of the brand name. Elements of Branding 1. Note that the key elements of a brand, according to researchers at the advertising agency Young & Rubicam, are differentiation, relevance, and perceived value. 2. Use Figure 4-13 to summarize the elements of a brand. 3. Point out that brands can lose their value if the environment in which they have become successful changes. Emotional Branding vs. Rational Branding 1. Explain that companies that use rational branding offer to help Web users in some way in exchange for their viewing an ad. Rational branding relies on the cognitive appeal of the specific help offered, not on a broad emotional appeal. Affiliate Marketing Strategies 1. Introduce the term affiliate marketing. 2. Discuss the topic of affiliate commissions. Introduce the terms pay-per-click model, pay-per-conversion model and affiliate program broker. 3. Introduce the term cause marketing. Viral Marketing Strategies and Social Media 1. Explain that viral marketing relies on existing customers to tell the company’s prospective customers about the products or services they have enjoyed using. Much as affiliate marketing uses Web sites to spread the word about a company, viral marketing approaches use word of mouth from individual customers to do the same thing. 2. Point out that on social media Web sites, followers of a particular company’s discussion activity are called fans. 3. Introduce the term fan base. Search Engine Positioning and Domain Names 1. Potential customers find Web sites in many different ways. Note that many are directed to the site by a search engine or directory Web site. Search Engines and Web Directories 1. Introduce the terms search engine, spider (crawler, robot, or bot), index (database), and search utility. 2. Explain that marketers want to make sure that, when a potential customer enters search terms that relate to their products or services, their companies’ Web site URLs appear among the first 10returned listings. 3. Introduce the terms search engine ranking and search engine positioning/search engine optimization/search engine placement. Paid Search Engine Inclusion and Placement 1. Introduce the term paid placement, also called sponsorship or search term sponsorship. 2. Point out that online advertising is growing much faster than any other type of advertising or advertisings pending in general. Thus, online advertising is becoming a larger proportion of all advertising. 3. Use Figure 4-15 to show the amount of online advertising sold and projected to be sold in the United States from 2006 through 2017. 4. Use Figure 4-16 to show how online advertising compares to other U.S. advertising. Note that online advertising in the rest of the world is expanding rapidly as well, but outside the United States, online advertising is a smaller proportion of total advertising. 5. Introduce the terms search engine placement brokers, contextual advertising, and localized advertising. Web Site Naming Issues 1. Note that obtaining identifiable names to use on a Web can be an important part of establishing a Web presence that is consistent with the company’s existing image in the physical world. 2. Discuss buying, selling and leasing domain names. • Point out that some companies buy additional domain names to ensure that potential site visitors who misspell the URL will still be redirected (through the misspelled URL) to the intended site. • Address concerns of buying, selling, and leasing domain names. Note that many domain name sales details are kept private, but some of the highest prices paid that have been reported in the media appear in Figure 4-17. • Point out that some companies and individuals invested their money in the purchase of highly desirable domain names. Instead of selling these names to the highest bidder, some of these domain name owners decided to retain ownership of the domain names and lease the rights to the names to companies for a fixed period of time. Usually, these domain name lessors rent their domain names through URL brokers. 3. Discuss URL Brokers and Registrars • Introduce the terms URL brokers and domain name parking/domain name hosting. Quick Quiz 5 1. A(n) ____ is a company that serves as a clearinghouse or marketplace for sites that run affiliate programs and sites that want to become affiliates. Answer: affiliate program broker 2. ____ relies on existing customers to tell the company’s prospective customers about the products or services they have enjoyed using. Answer: Viral marketing 3. A(n) ____ is a Web site that helps people find things on the Web. Answer: search engine 4. ____ is a service that permits the purchaser of a domain name to maintain a simple Web site (usually one page) so that the domain name remains in use. Answer: Domain name parking, Domain name hosting Class Discussion Topics 1. Which affiliate marketing strategy do you think is the most effective? Why? 2. What are the advantages of an affiliate marketing strategy? 3. What is the Google AdWords program? Additional Projects 1. Read the following white paper. Better Brand Engagement with Display Formats: http://static.googleusercontent.com/external_content/untrusted_dlcp/www.google.com/en/us/doubleclick/pdfs/Better-Brand-Engagement-with-Display-Formats-Feb-2012.pdf. 2. What influence does display format have on the effectiveness of advertising? How are users’ opinions about brand impacted by display format? Summarize your thoughts in three to four paragraphs. 3. Visithttp://www.amazon.com/ and examine how this company implements behavioral segmentation. Write a report of approximately 200 words in which you describe two clear examples of behavioral segmentation on the site. Additional Resources 1. How to create a successful affiliate marketing program: http://marketing.about.com/cs/internetbasics/a/createaffiliate.htm 2. How banner ads work: http://www.howstuffworks.com/banner-ad.htm 3. It’s getting harder to deliver email, global study shows: http://www.gmanetwork.com/news/story/252219/scitech/socialmedia/it-s-getting-harder-to-deliver-email-global-study-shows 4. Simple Flat UI: Using Design Simplicity to Make Your Emails Stand Out: http://www.silverpop.com/blog/Simple-Flat-UI-Using-Design-Simplicity-to-Make-Your-Emails-Stand-Out 5. The secret to viral video marketing: http://www.theguardian.com/technology/2014/feb/26/secret-to-viral-video-marketing Key Terms Acquisition cost: total amount of money that a site spends, on average, to draw one visitor to the site. Ad view: describes a page load where the page contains an ad. Ad-blocking software: prevents banner ads and pop-up ads from loading. Ad exchange network: coordinates ad sharing so that other sites run one company’s ad while that company’s site runs other exchange members’ ads. Affiliate marketing: uses Web sites to spread the word about a company. Affiliate program broker: a company that serves as a clearinghouse or marketplace for sites that run affiliate programs and sites that want to become affiliates. Analytical processing: a technique that examines stored information and looks for patterns in the data that are not yet known or suspected. Animated GIFs: contain moving elements; used in banner ads to be more attractive to the user’s eye than stationary graphics. Behavioral segmentation: the creation of separate experiences for customers based on their behavior. Blog: Web site where people can post their thoughts and invite others to add commentary. Bot: a program that automatically searches the Web to find Web pages that might be interesting to people. Brand: customers’ perceptions of the product. Bulk mail: electronic junk mail that can include solicitations, advertisements, or e-mail chain letters. Cause marketing: an affiliate marketing program that benefits a charitable organization. Click: occurs when the visitor clicks the banner ad to open the advertiser’s page. Clickstream: the information that a Web site can gather about its visitors. Click-through: occurs when the visitor clicks the banner ad to open the advertiser’s page. Contextual advertising: techniques in which ads are placed in proximity to related content. Conversion: converting the first-time visitor into a customer. Conversion cost: the total amount of money that a site spends, on average, to induce one visitor to make a purchase or sign up for a subscription or register. Conversion rate: the percentage of recipients who respond to an ad or promotion. Cost per click (CPC): advertising where the site monitors the number of visitors who click an ad and charges for each click rather than for each time the ad is shown on a Web page. Cost per thousand (CPM): when a company purchases mass media advertising, it pays a dollar amount for every thousand people in the estimated audience. Crawler: a program that automatically searches the Web to find Web pages that might be interesting to people. Customer-based marketing strategy: an approach to Web site design that accommodates the differing needs of various types of customers. Customer life cycle: the five stages; analyzing how customers’ behavior changes as they move through the five stages can yield information about how they interact with the company and its products in each stage. Customer relationship management (CRM): occurs when a firm obtains detailed information about a customer’s behavior, preferences, needs, and buying patterns, and uses that information to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer. Customer value: benefits that a customer derives from a product minus the total of all financial costs that the customer pays (including transaction costs) to obtain the product. Data mining: a technique that examines stored information and looks for patterns in the data that are not yet known or suspected. Data warehouse: a large database used to store the multiple sources of information about customers, their preferences, and their behavior. Database: the storage element of a search engine. Demographic: a common characteristic of a group. Demographic segmentation: grouping customers by information such as age, gender, family size, income, education, religion, or ethnicity to group customers. Display ad (banner ad): a small rectangular object on a Web page that displays a stationary or moving graphic and includes a hyperlink to the advertiser’s Web site. Display advertising network: acts as a broker between advertisers and Web sites that carry ads. Distribution: the need to have products or services available in many different locations. Domain name hosting: service that permits the purchaser of a domain name to maintain a simple Web site (usually one page) so that the domain name remains in use. Domain name parking: service that permits the purchaser of a domain name to maintain a simple Web site (usually one page) so that the domain name remains in use. Electronic customer relationship management (eCRM): occurs when a firm obtains detailed information about a customer’s behavior, preferences, needs, and buying patterns, and uses that information to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer. Fan base: combined number of associated individuals following a company’s discussion activity on a social media Web site. Fans: those who follow a company’s discussion activity on a social media Web site. Four Ps of marketing: product, price, promotion, and place. Funnel model of customer acquisition: used as a conceptual tool to understand the overall nature of a marketing strategy, but it also provides a clear structure for evaluating specific strategy elements. Geographic segmentation: companies create different combinations of marketing efforts for each geographical group of customers. Impression: each time a banner ad loads. Index: the storage element of a search engine. Inline text ad: turning displayed Web site text into hyperlinks that lead to advertisers’ sites. Interactive marketing unit (IMU) ad formats: the standard banner sizes that most Web sites have voluntarily agreed to use. Interstitial ad: an intrusive type of advertising that occurs when a user clicks a link to load a page and the interstitial ad opens in its own browser window, instead of the page that the user intended to load. Leaderboard ad: a banner ad that is designed to span the top or bottom of a Web page. Life-cycle segmentation: using the customer life cycle to create groups of customers that are in each stage. Localized advertising: variation of paid placement ads that uses search engine page results generated in response to a search for products or services in a specific geographical area. Market segmentation: practice of dividing the pool of potential customers into groups, or segments. Marketing mix: describe the combination of elements that they use to achieve their goals for selling and promoting their products and services. Marketing strategy: occurs when a company decides which particular marketing mix it will use. Marketspace: commerce in the information world. Micromarketing: practice of targeting very small market segments. Mobile ads: advertising messages displayed from advertisers (other than the seller of the app). Mobile apps: programs that run on mobile devices. Occasion segmentation: behavioral segmentation that occurs when things happen at a specific time or occasion. One-to-one marketing: highly customized approach to offering products and services that match the needs of a particular customer. Opt-in e-mail: the practice of sending e-mail messages to people who request information on a particular topic or about a specific product. Page view: each page loaded by a visitor. Paid placement: the option of purchasing a top listing on results pages for a particular set of search terms. Pay-per-click model: the affiliate earns a commission each time a site visitor clicks the link and loads the seller’s page. Pay-per-conversion model: the affiliate earns a commission each time a site visitor is converted from a visitor into either a qualified prospect or a customer. Permission marketing: part of a marketing strategy where e-mail messages are sent to people who request information on a particular topic or about a specific product. Place: the need to have products or services available in many different locations. Pop-behind ad: a pop-up ad that is followed very quickly by a command that returns the focus to the original browser window. Pop-up ad: an ad that appears in its own window when the user opens or closes a Web page. Pre-roll video ad: a video ad at the beginning of a clip such as a television show or news update. Price: element of the marketing mix representing the amount the customer pays for the product. Product: the physical item or service that a company is selling. Product-based marketing strategy: a logical way to think of a business in terms of the products and services they sell. Promotion: includes any means of spreading the word about the product. Psychographic segmentation: marketers try to group customers by variables such as social class, personality, or their approach to life. Rational branding: companies offer to help Web users in some way in exchange for their viewing an ad. Rectangle ad: two of the four standard formats that are part of the universal ad package (UAP). Repeat visits: subsequent page loads that occur after the first site visit. Retained customers: customers who return to the site one or more times after making their first purchases. Retention costs: costs of inducing customers to return to a Web site and buy again. Rich media ads: generate graphical activity that “floats” over the Web page itself instead of opening in a separate window. Robot: a program that automatically searches the Web to find Web pages that might be interesting to people. Search engine: a Web site that helps people find things on the Web. Search engine optimization: the combined art and science of having a particular URL listed near the top of search engine results. Search engine placement: the combined art and science of having a particular URL listed near the top of search engine results. Search engine placement brokers: companies that aggregates inclusion and placement rights on multiple search engines and then sells those combination packages to advertisers. Search engine positioning: the combined art and science of having a particular URL listed near the top of search engine results. Search engine ranking: the weighting of the factors that search engines use to decide which URLs appear first on searches for a particular search term. Search term sponsorship: the option of purchasing a top listing on results pages for a particular set of search terms. Search utility: a program that creates a Web page that is a list of links to URLs that the search engine has found in its index that match the site visitor’s search terms. Segments: group of potential customers defined in terms of demographic characteristics such as age, gender, marital status, income level, and geographic location. Shopping cart: the part of a Web site that keeps track of selected items for purchase and automates the purchasing process. Site sponsorships: give advertisers a chance to promote their products, services, or brands in a more subtle way than by placing banner or pop-up ads on the sites. Skyscraper ad: a banner ad that is designed to be placed on the side of a Web page and remain visible as the user scrolls down through the page. Social media: a general term for Web sites such as Facebook or Google+ and online communication technologies such as Twitter that allow participants to exchange ideas and report news and information updates to each other. Spam: electronic junk mail that can include solicitations, advertisements, or e-mail chain letters. Spider: a program that automatically searches the Web to find Web pages that might be interesting to people. Sponsorship: the purchasing of a top listing in results listings for a particular set of search terms. Statistical modeling: a technique that tests theories that CRM analysts have about relationships among elements of customer and sales data. Technology-enabled customer relationship management: occurs when a firm obtains detailed information about a customer’s behavior, preferences, needs, and buying patterns, and uses that information to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer. Technology-enabled relationship management: occurs when a firm obtains detailed information about a customer’s behavior, preferences, needs, and buying patterns, and uses that information to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize its entire relationship with that customer. Text ad: a short promotional message that does not use any graphic elements and is usually placed along the top or right side of a Web page. Touchpoint consistency: the goal of providing similar levels and quality of service at all touchpoints. Touchpoints: online and offline customer contact points. Trial visit: the first time that a particular visitor loads a Web site page. Trigger words: Web site keywords that prompt a visitor to stay and investigate the products or services offered on the site. Universal ad package (UAP): the four most common standard Web ad formats used on the Web today. Unsolicited commercial e-mail (UCE): electronic junk mail that can include solicitations, advertisements, or e-mail chain letters. URL brokers: legitimate online companies that are in the business of selling, leasing, or auctioning domain names that they believe others will find valuable. Usage-based market segmentation: customizing visitor experiences to match the site usage behavior patterns of each visitor or type of visitor. Video ad: a form of rich media ad used on Web sites that deliver video that can be either free standing or integrated into videos the site visitor selects to watch. Viral marketing: relies on existing customers to tell the company’s prospective customers about the products or services they have enjoyed using. Visit: occurs when a visitor requests a page from the Web site. Web log: Web site where people can post their thoughts and invite others to add commentary. Instructor Manual for Electronic Commerce Gary P. Schneider 9781305867819
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