laudon traver e-commerce4e chapter07.pptmcs/courses/2008_01/... · mixing offline and online...

E commerceE-commercebusiness. technology. society.Fourth Edition

Kenneth C. Laudon

Carol Guercio Traver

Copyright © 2007 Pearson Education, Inc. Slide 7-1

Chapter 7Chapter 7

E M k ti C i tiE-commerce Marketing Communications


Vid Ad C B Bli dVideo Ads Cure Banner Blindness:String Master

Class Discussion What advantages do video ads have over What advantages do video ads have over

traditional stationary banner ads?

Where do sites like YouTube fit in to a Where do sites like YouTube fit in to a marketing strategy featuring video ads?

Wh t f th h ll d i k f What are some of the challenges and risks of placing video ads on the Web?

Do you think Internet users will ever develop ‘blindness’ towards video ads as well?


Actiontuners.com


Marketing Communications

Online marketing communications: Methods used by online firms to communicate with consumer and create strong brandconsumer and create strong brand expectations

Promotional sales communications: Suggest Promotional sales communications: Suggest consumer “buy now” and make offers to encourage immediate purchase

Branding communications: Focus on extolling differentiable benefits of consuming product or serviceor service

Many forms of online marketing communications: online advertising email


communications: online advertising, email marketing, public relations, and Web sites

Online Advertising

Paid message on Web site, online service or other interactive medium, such as interactive messaging

2007: $21 4 billion spent expected to grow to $24 7 2007: $21.4 billion spent, expected to grow to $24.7 billion by 2010

Advantages:Advantages: Adults (age 18-34) are using the Internet Ability to target ads to narrow segments and track

performance in almost real timeperformance in almost real time Provide greater opportunity for interactivity

Disadvantages:g Concerns about cost versus benefit Concerns about how to adequately measure results


Online Advertising from 2000-2011Figure 7.1, 19


SOURCES: Based on data from eMarketer, 2007a, 2005a; IAB/PricewaterhouseCoopers, 2007, 2005; Universal McCann, 2007, 2005.

Forms of Online Advertisements

Display and rich media/video ads Search engine advertising: Paid search Search engine advertising: Paid search

engine inclusion and placement SponsorshipsSpo so s ps Referrals (affiliate relationship marketing) E-mail marketing E-mail marketing Online catalogs Online chat Online chat Blog advertising


Table 7.2: Online Advertising Spending for Selected Formats

Format 2007 2011 % Change

Paid search $8 624 $16 590 92%Paid search $8,624 $16,590 92%

Rich media/video $1,755 $5,481 212%

Display ads $4,687 $8,190 75%

Classified $3,638 $6,930 90%

Referrals $1,733 $3,675 112%

Sponsorships $535 $504 -6%

E-mail $428 $630 47%

Total $21 400 $42 000 96%Total $21,400 $42,000 96%


Display Ads

Banners

Display promotional message in a rectangular box on a computer screen

Sometimes feature Flash video and animations or animated GIFsanimated GIFs

Pop-ups and pop-unders

Banners and buttons appearing on screen without user Banners and buttons appearing on screen without user calling for them

Although the most annoying form of marketing g y g gcommunication, twice as effective than normal banner ads in terms of click-through rates, simply because users unintentionally click on the ads while trying to close them


unintentionally click on the ads while trying to close them.

T f Di l Ad S ifi d bTypes of Display Ads Specified by Interactive Advertising Bureau (IAB)


Rich Media/Video Ads Rich media/video ads: Employ Flash, DHTML,

Java, streaming audio and/or videoJava, streaming audio and/or video The fastest growing form of online advertising:

about 212% from 2007 to 2011 Advantage: Boost brand awareness (by 10%)

rather than driving sales Interstitial ads Interstitial ads

Placing full-page message between current and destination pages of a userM t ti ll t th t d ft dMove automatically to the requested page after ad is read for some time

Good interstitial ads have option to “skip through” or “ t ” f h ’t i t t d“stop” for users who aren’t interested


Rich Media/Video Ads Superstitial ads

Off d b Vi i t Offered by Viewpoint

Rich media ad that can be any size up to full screen 900 x 500 and file size up to 600KBscreen 900 x 500, and file size up to 600KB

Differ from interstitials in that they are pre-loaded into browser’s cache and don’t play until fullyinto browser s cache and don t play until fully loaded

After ad is fully downloaded it waits until the user After ad is fully downloaded, it waits until the user clicks to another page before popping up in a separate window


Table 7.3: Web Sites That US Online Video Viewers Visit to Watch Videos Once a Week or More

Web Site Percentage of Respondents

YouTube 42%YouTube 42%

Television network, e.g., Abc.com 41%

News site, e.g., CNN.com 35%

Yahoo 25%

Google 24%

MySpace 19%

iTunes 7%

Other 19%Other 19%

Total (have watched online video) 74%

Have never watched online 26%


Search Engine Advertising: Paid Search Engine Inclusion and Placementg

One of fastest growing (from 1% of total online advertising spending in 2000 to >40% in 2007) and most effective forms of online marketing communications

Huge audience: 70 illi A i (>40% f li l ti ) 70 million Americans (>40% of online population) use a search engine daily, almost comparable to email user populationp p

In total, generating around 8 billion searches per month

Can be very effective by responding with ads matching the interests of users, creating click-through rate of 10-12%


12%

Search Engine Marketing Revenues


Search Engine Advertising: Paid Search Engine Inclusion and PlacementEngine Inclusion and Placement

Types:P id i l i Paid inclusion

Paid placement Keyword advertising Keyword advertising

Merchants buy keywords through bidding for ranking and visibility of their ads on search g yresult page

Google AdWords, Yahoo PrecisionMatch, Mi ft dC tMicrosoft adCenter

Network keyword advertising: Google AdSense


Search Engine Advertising: Paid Search Engine Inclusion and Placement (cont’d)g ( )

Google, Yahoo, MSN are leaders in this technology Issues:

Appropriate disclosure of paid inclusion and placement practices

Search engine click fraud Wh tit hi thi d ti t f d l tl li k When competitor hires third parties to fraudulently click on competitor ads to drive up costs)

When site publisher fraudulently clicks on ads posted on their sites to increase ad revenuetheir sites to increase ad revenue One variation is by using “click bots” that

automatically click on ads from hundreds of different IP addresses

Fraudsters call up a search results page where their Fraudsters call up a search results page where their competitor’ ads appear, and do not click on competitor ads, resulting in low ad popularity rank, which can result in their being pushed down the rank order of ads


Ad nonsense (Google AdSense ads that are inappropriate for content)

Sponsorships and Affiliate Marketing

Sponsorship: Paid effort to tie advertiser’s name to particular information, event, venue i th t i f b d i iti tin way that reinforces brand in positive, yet not overtly commercial manner

E W bMd id li k t it E.g., WebMd.com provides links to its sponsor like Philips’ product such as defibrillatorsdefibrillators

Affiliate relationship: Permits firm to put logo or banner ad on another firm’s Web site fromor banner ad on another firm s Web site from which users of that site can click through to affiliate’s site


affiliate s site

E-mail Marketing and the Spam Explosion Direct e mail marketing: E mail sent directly Direct e-mail marketing: E-mail sent directly

to interested consumers who “opt-in” or have not “opted-out”pMuch cheaper compared to traditional

direct mail: $5-$10 per 1,000 VS $500-$700 1 000$700 per 1,000

Spam: Unsolicited commercial e-mail Spam is exploding out of control 70% 80% of all Spam is exploding out of control—70%–80% of all

e-mail purportedly is spam Efforts to control spam:p

• Technology (Filtering software) (only partly effective)• Government regulation (CAN-SPAM and state laws)

(largely unsuccessful)


( g y )• Self-regulation by industry (ineffective)• Volunteer efforts (not enough)

Percentage of E-mail That Is SpamFigure 7.6, Page 434


SOURCE: Based on data from MessageLabs.com, 2007.

Spam CategoriesFigure 7.7, Page 435Figure 7.7, Page 435

Copyright © 2007 Pearson Education, Inc. Slide 7-23SOURCE: Symantec, 2007.

Other Forms of Online Marketing Communications Online catalog

Provides equivalent of paper-based catalog Provides equivalent of paper based catalog Was popular in early years, but quickly went out

because pages took so long to load Recently has gained back in popularity due to 54% of

online households now own broadband high-speed connections in 2007connections in 2007

Blog advertising: Online ads related to content of blogs Social network advertising: Ads on MySpace Facebook Social network advertising: Ads on MySpace, Facebook,

YouTube, etc. Game advertising: downloadable ‘advergames’, placing


g g p gbrand-name products within games

Targeted Marketing: Getting PersonalTargeted Marketing: Getting Personal

Behavioral targeting efforts increasing; one of f t t i li k ti t h ifastest growing online marketing techniques.

Recent acquisitions by Google, Yahoo, Microsoft of firms engaged in this type of marketing have raised concerns

Privacy groups, FTC are examining issues raised by targeted methodsy g


Mixing Offline and Online Marketing CommunicationsCommunications

The original idea of moving all traditional marketing based on mass media toward onlinemarketing based on mass media toward online approach did not happen

Traditional offline consumer-oriented industries Traditional offline consumer oriented industries have learned to use Web to extend brand images and sales campaigns

Online companies have learned how to use traditional marketing communications (printed

di d TV) t d i l t W b itmedia and TV) to drive sales to Web site Most successful marketing campaigns

incorporate both online and offline tactics


incorporate both online and offline tactics

Online Marketing Metrics: Lexicon Metrics that focus on success of Web site in Metrics that focus on success of Web site in

achieving audience or market share Impressions – no. of times an ad is served Click through rate (CTR) % times an ad is clicked Click-through rate (CTR) – % times an ad is clicked View-through rate (VTR) – % times an ad is not clicked

immediately but Web site is visited within 30 days Hits – no of http requests Hits – no. of http requests Page views – no. of pages viewed Stickiness (duration) – average length of stay at a Web

sitesite Unique visitors – no. of unique visitors in a period Loyalty – no. of pages viewed, frequency of single user

visits to the site % customers who return to site in a yearvisits to the site, % customers who return to site in a year Reach – % site visitors who are potential buyers or % total

market buyers who buy at a site Recency – time elapsed since last action taken by a buyer,


Recency time elapsed since last action taken by a buyer, e.g., site visit or purchase

Online Marketing Metrics: Lexicon (cont’d) Metrics that focus on conversion of visitor toMetrics that focus on conversion of visitor to

customer Acquisition rate – % visitors who register or visit product’s

pagespages Conversion rate – % visitors who make purchase Browse-to-buy-ratio – ratio of items purchased to item views View-to-cart ratio – ratio of “Add to Cart” clicks to product View-to-cart ratio ratio of Add to Cart clicks to product

views Cart conversion rate – ratio of actual orders to “Add to Cart”

clicks Checkout conversion rate – ratio of actual orders to

checkouts started Abandonment rate – % shoppers who add to cart but leave pp

the site Retention rate – % existing customers who continue to buy

regularly (similar to loyalty)


Attrition rate – % customers who do not return during next year after first purchase

Online Marketing Metrics: Lexicon (cont’d)

E-mail metricsO t % il i i t h d th il Open rate – % email recipients who read the email message

Delivery rate – % email recipients who received the Delivery rate – % email recipients who received the email

Click-through rate (e-mail) – % recipients who clicked g ( ) pthrough to offers

Bounce-back rate – % emails that couldn’t be delivered

Unsubscribe rate – % recipients who click unsubscribe

Conversion rate (e-mail) – % recipients who actually buy


buy

An Online Consumer Purchasing ModelFigure 7.9, Page 452


How Well Does Online Advertising Work?

What’s the most effective kind of online ads? How does online ad compare to offline one? How does online ad compare to offline one? These depend on goals of campaign, nature of

product, quality of Web site, and what you p q y ymeasure.

Click-through rates may be low, but this is just one measure of effectivenessone measure of effectiveness

From the next figure, as consumers become more accustomed to new online advertising gformats, click-through rates (for display ads and email) tend to fall.

However this is not true of video and rich media


However, this is not true of video and rich media

Click-through Rates by Format 2000–2005Figure 7.10, Page 454


SOURCE: SOURCES: Doubleclick, 2007a, b; eMarketer, Inc., 2007c; author estimates.

How Effective is Online Advertising Compared to Offline Advertising?Compared to Offline Advertising?

From the next figure, online channels f bl ith t diti l h lcompare favorably with traditional channels

Search engine has grown to be the most cost effective form of marketing communications

Cost effectiveness of targeted opt-in email g premains very strong

Research indicates that most powerful Research indicates that most powerful marketing campaigns include both online and offline advertisingoffline advertising


Comparative Returns on Investment


The Costs of Online Advertising

Cost per thousand (CPM): Advertiser pays for impressions in 1,000 unit lots

Cost per click (CPC): Advertiser pays pre-negotiated fee for each click an ad receives

Cost per action (CPA): Advertiser pays pre-negotiated amount only when user performs a specific action, e.g., register or purchase

Hybrid: Two or more of the above models used together


Average Cost Per Customer Acquisition for Select Media in the US, 2006

Internet search $8 50Internet search $8.50

Yellow pages $20.00

O li di l d $50 00Online display ads $50.00

E-Mail $60.00

Direct mail $70.00

Newspaper $25.00

Magazine $19.00

Television $17.00


Software for Measuring Online Marketing ResultsMarketing Results

WebTrends: Software program that automatically calculates activities at site, such as abandonment rate, conversion rate, etc.

Visual Sciences: Web service that assists marketing managersg g


Web Site Activity AnalysisFigure 7.12, Page 459


The Web Site as a Marketing Communications ToolCommunications Tool

Web site can be viewed as extended online advertisement

Domain name First communication e-commerce site has with

prospective customerprospective customer Should be short, memorable, not easily confused

with others, difficult to misspell Search engine optimization: Search engine optimization:

Register with as many search engines as possible Ensure that keywords used in Web site description match

keywords likely to be used as search terms by userkeywords likely to be used as search terms by user Place keywords in metatag and page title Link site to as many other sites as possible (creating ads,

Web sites, entering into affiliate relationships with other sites)


sites) Get professional help

Web Site Functionality

Factors affecting effectiveness of a software interface: Utility (useful)

Ease of use

Factors in credibility of Web sites: Design lookg

Information design/structure

Information focus

Responsiveness


Factors in the Credibility ofCredibility of Web SitesFigure 7 13 Page 464Figure 7.13, Page 464


SOURCE: Based on data from Fogg, et al, 2002.

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