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CSC 330 E-Commerce Teacher Ahmed Mumtaz Mustehsan GM-IT CIIT Islamabad Virtual Campus, CIIT COMSATS Institute of Information Technology T1-Lecture-13 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc T1-Lecture-13 E Commerce Marketing Chapter-06 Part -I For Lecture Material/Slides Thanks to: Copyright © 2010 Pearson Education, Inc T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Objectives  Describe the major B2B business models.  Recognize business models in other emerging areas of e-commerce.  Understand key business concepts and strategies applicable to e-commerce. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Consumers Online: The Internet Audience and Consumer Behavior  Around 73% (86 million) U.S. households have Internet access in 2011  Growth rate has slowed ◦ Intensity and scope of use both increasing  Some demographic groups have much higher percentages of online usage than others ◦ Gender, age, ethnicity, community type, income, education T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Internet Audience and Consumer Behavior (cont.)  Broadband vs. dial-up audiences, new mobile audience  Internet purchasing affected by neighborhood  Lifestyle and sociological impacts ◦ Use of Internet by children, teens ◦ Use of Internet as substitute for other social activities  Media choices ◦ Traditional media competes with Internet for attention ◦ Television viewing has increased with Internet usage T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Consumer Behavior Models (basic Definitions) Consumer behavior ◦ A social science discipline that attempts to model and understand the behavior of human in a marketplace. Culture Shapes basic human values, wants, perceptions and behaviors. Subcultural Subset of cultures that form around major social differences. Direct References groups One’s family, profession or occupation, religion, neighborhood and schools Indirect Reference groups One’s life cycle stage, social class and lifestyle group. Life-style group An integeratted pattern of activities (hobies, sports, shopping, likes and dislikes social events, typically attended) interest and opinion T1-Lecture-12 iAmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Consumer Behavior Models Life-style group An integrated pattern of activities (hobbies, sports, shopping, likes and dislikes social events, typically attended) interest ( food, fashion, family, recreation) and opinion. Opinion Leaders (viral influencers) Influence the behavior of others through their personality, skills and other factors. Psychological profiles Set of needs, drives, motivations, perceptions, and learned behaviors. T1-Lecture-12 iAmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Consumer Behavior Models  Study of consumer behavior ◦ Attempts to explain what consumers purchase and where, when, how much and why they buy  Consumer behavior models ◦ Predict wide range of consumer decisions ◦ Based on background demographic factors and other intervening, more immediate variables T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Background Demographic Factors  Culture: Affects entire nations  Subculture ◦ Subsets formed around major social differences (ethnicity, age, lifestyle, geography)  Social networks and communities ◦ Direct reference groups ◦ Indirect reference groups ◦ Opinion leaders ◦ Lifestyle groups  Psychological profile T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc A General Model of Consumer Behavior SOURCE: Adapted from Kotler and Armstrong, 2009. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Online Purchasing Decision Psychographic Research Combines demographic and psychological data Divides market into various groups based on social class, lifestyle, and/or personality characteristics Stages in consumer decision process and supporting communications: (Both Online and Offline) Awareness of need Search for more information Evaluation of alternatives Actual purchase decision Post-purchase contact with firm T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Consumer Decision Process and Supporting Communications T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc A Model of Online Consumer Behavior  Decision process similar for online and offline behavior  General online behavior model ◦ Consumer skills ◦ Product characteristics ◦ Attitudes toward online purchasing ◦ Perceptions about control over Web environment ◦ Web site features: latency, usability, security  Clickstream behavior ◦ The transection log that consumer establish as they move about the web A Model of Online Consumer Behavior T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc A Model of Online Consumer Behavior (cont.)  Clickstream factors include: ◦ Number of days since last visit ◦ Speed of clickstream behavior ◦ Number of products viewed during last visit ◦ Number of pages viewed ◦ Supplying personal information ◦ Number of days since last purchase ◦ Number of past purchases  Clickstream marketing ◦ Developed dynamically as customers use Internet T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Shoppers: Browsers and Buyers  Shoppers: 87% of Internet users ◦ 73% buyers ◦ 15% browsers (purchase offline)  One-third of offline retail purchases influenced by online activities  Online traffic also influenced by offline brands and shopping  E-commerce and traditional commerce are coupled: Part of a continuum of consuming behavior T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Online Shoppers and Buyers T1-Lecture-12 Ahmed Mumtaz Mustehsan SOURCE: Based on data from Copyright © 2010 PearsoneMarketer, Education, Inc Inc., 2011d. What Consumers Shop for and Buy Online  Big ticket items ◦ Travel, computer hardware, electronics ◦ Consumers now more confident in purchasing costly items  Small ticket items ($100 or less) ◦ Apparel, books, office supplies, software, etc. ◦ Sold by first movers on Web  Physically small items  High margin items T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc What Consumers Buy Online  Figure 6.5, Page 365 SOURCES: Based on data from Internet Retailer, 2011. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc How Consumers Shop  How shoppers find online vendors ◦ Search engines—59% ◦ Marketplaces (Amazon, eBay)—28% ◦ Direct to retail sites—10% ◦ Other methods—3%  Online shoppers are highly intentional ◦ Look for specific products, companies, services  Stumble Upon (encountered / bump into)  Recommender systems T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc SOURCES: Based on data from eMarketer, Inc., 2011d. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Trust, Utility, and Opportunism in Online Markets  Two most important factors shaping decision to purchase online: ◦ Utility:  Better prices, convenience, speed ◦ Trust:  Asymmetry of information can lead to opportunistic behavior by sellers  Sellers can develop trust by building strong reputations for honesty, fairness, delivery and after sale service. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Basic Marketing Concepts Marketing Strategies and actions to establish relationship with consumer and encourage purchases Addresses competitive situation of industries and firms Seeks to create unique, highly differentiated products or services that are produced or supplied by one trusted firm ◦ Unmatchable feature set ◦ Avoidance of becoming commodity T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Feature Sets Three levels of product or service Core product The core benefit the customer received from product. e.g., cell phone Actual product Set of characteristics that deliver the product’s core benefits e.g., wide screen that connects to Internet Augmented product Additional benefits to customers beyond the core benefits embedded in actual product. Basis for building the product’s brand e.g., product warranty and after sale service T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Feature Set  Figure 6.6, Page 368 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Products, Brands, and the Branding Process Brand: Expectations consumers have when consuming, or thinking about consuming, a specific product Most important expectations: Quality, reliability, consistency, trust, affection, loyalty, reputation Branding: Process of brand creation Closed loop marketing When marketers are able to directly influence the design of core product based on market research and feedback. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Products, Brands, and the Branding Process Brand strategy A set of plans for differentiating a product from its competitors and communicating these differences effectively to marketplace Brand equity The estimated value of the premium customers are willing to pay for using a branded product when compared to unbranded products. T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Marketing Activities: from Products to Brands  Figure 6.7, Page 369 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Segmenting, Targeting, and Positioning Market comprising many different kind of customers with different needs. Firm seek to segment market to different group of customers. Major ways used to segment, target customers ◦ Behavioral ◦ Demographic ◦ Psychographic ◦ Technical ◦ Contextual ◦ Search Within segment, product is positioned and branded as a unique, high-value product, especially suited to needs of segment customers T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Are Brands Rational?  For consumers, a qualified yes: ◦ Brands introduce market efficiency by reducing search and decision-making costs  For business firms, a definite yes: ◦ A major source of revenue ◦ Lower customer acquisition cost ◦ Increased customer retention ◦ Successful brand constitutes a long-lasting (though not necessarily permanent) unfair competitive advantage T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Can Brands Survive the Internet? Brands and Price Dispersion  Early postulation: “Law of One Price”—end of brands  Instead: ◦ Consumers still pay premium prices for differentiated products ◦ E-commerce firms rely heavily on brands to attract customers and charge premium prices ◦ Substantial price dispersion ◦ Large differences in price sensitivity for same product ◦ “Library effect” T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Revolution in Internet Marketing Technologies  Three broad impacts: ◦ Scope of marketing communications broadened ◦ Richness of marketing communications increased ◦ Information intensity of marketplace expanded  Internet marketing technologies: ◦ Web transaction logs ◦ Tracking files ◦ Databases, data warehouses, data mining ◦ Advertising networks ◦ Customer relationship management systems T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Web Transaction Logs  Built into Web server software  Record user activity at Web site  Webtrends: Leading log analysis tool  Provides much marketing data, especially combined with: ◦ Registration forms ◦ Shopping cart database  Answers questions such as: ◦ What are major patterns of interest and purchase? ◦ After home page, where do users go first? Second? T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Tracking Files  Allow users browsing activities to be tracked as they move from site to site  Four types of tracking files ◦ Cookies  Small text file placed by Web site  Allows Web marketers to gather data ◦ Flash cookies ◦ Beacons (“bugs”) ◦ Apps T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Every Move You Make, Every Click You Make, We’ll Be Tracking You  Are beacons innocuous? Or are they an invasion of personal privacy?  Do you think your Web browsing should be known to marketers?  What are the Privacy Foundation guidelines for Web beacons?  Should online shopping be allowed to be a private activity? T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Databases  Database: Stores records and attributes  Database management system (DBMS): ◦ Software used to create, maintain, and access databases  SQL (Structured Query Language): ◦ Industry-standard database query and manipulation language used in a relational database  Relational database: ◦ Represents data as two-dimensional tables with records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc A Relational Database View of E-commerce Customers  Figure 6.9, Page 383 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Data Warehouses and Data Mining  Data warehouse: ◦ Collects firm’s transactional and customer data in single location for offline analysis by marketers and site managers  Data mining: ◦ Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles  Query-driven data mining  Model-driven data mining  Rule-based data mining  Collaborative filtering T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Long Tail: Big Hits and Big Misses  What are “recommender systems”? Give an example you have used.  What is the “Long Tail” and how do recommender systems support sales of items in the Long Tail?  How can human editors, including consumers, make recommender systems more helpful? T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Customer Relationship Management (CRM) Systems  Record all contact that customer has with firm  Generate customer profile available to everyone in firm with need to “know the customer”  Customer profiles can contain: ◦ Map of the customer’s relationship with the firm ◦ Product and usage summary data ◦ Demographic and psychographic data ◦ Profitability measures ◦ Contact history ◦ Marketing and sales information T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc A Customer Relationship Management System T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Generic Market Entry Strategies  Figure 6-11, Page 391 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Establishing the Customer Relationship  Advertising networks ◦ Ad server selects appropriate ad based on cookies, Web bugs, backend user profile databases  Advertising exchanges ◦ Auction ad slots over many advertising networks  Permission marketing  Affiliate marketing T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc How an Advertising Network Such as DoubleClick Works T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Establishing the Customer Relationship  Viral marketing  Blog marketing  Social network marketing ◦ Driven by social e-commerce  Social sign-on  Collaborative shopping  Network notification  Social search (recommendation)  Mobile marketing T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Social Network Marketing: Let’s Buy Together  Why do social networks represent such a promising opportunity for marketers?  What are some of the new types of marketing that social networks have spawned?  What are some of the risks of social network marketing? What makes it dangerous?  Have you ever responded to marketing messages on Facebook or another network? T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Establishing the Customer Relationship  Social marketing and wisdom of crowds ◦ Large aggregates produce better estimates and judgments, e.g.,  “Like” button  Folksonomies  Social tagging  Mobile platform marketing  Local marketing  Brand leveraging T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Customer Retention      Mass marketing Direct marketing Micromarketing Personalized, one-to-one marketing ◦ Segmenting market on precise and timely understanding of individual’s needs ◦ Targeting specific marketing messages to these individuals ◦ Positioning product vis-à-vis competitors to be truly unique Personalization ◦ Can increase consumers sense of control, freedom ◦ Can also result in unwanted offers or reduced anonymity T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc The Mass Market-Personalization Continuum  Figure 6.13, Page 407 T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Other Customer Retention Marketing Techniques  Customization ◦ Customizing product to user preferences  Customer co-production ◦ Customer interactively involved in product creation  Customer service ◦ FAQs ◦ Real-time customer service chat systems ◦ Automated response systems T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Net Pricing Strategies  Pricing ◦ Integral part of marketing strategy ◦ Traditionally based on:  Fixed cost  Variable costs  Demand curve  Price discrimination ◦ Selling products to different people and groups based on willingness to pay T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Net Pricing Strategies (cont.)  Free and freemium ◦ Can be used to build market awareness  Versioning ◦ Creating multiple versions of product and selling essentially same product to different market segments at different prices  Bundling ◦ Offers consumers two or more goods for one price  Dynamic pricing: ◦ Auctions ◦ Yield management ◦ Flash marketing T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc Channel Management Strategies  Channels: ◦ Different methods by which goods can be distributed and sold  Channel conflict: ◦ When new venue for selling products or services threatens or destroys existing sales venues ◦ e.g., online airline/travel services and traditional offline travel agencies  Some manufacturers are using partnership model to avoid channel conflict T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc End of: T1-Lecture-12 E Commerce Business Model Chapter-05 Part-II Thank You T1-Lecture-12 Ahmed Mumtaz Mustehsan Copyright © 2010 Pearson Education, Inc