EBZ437: E-Business

Week 3: E-Marketing

Value creation
Value created is the difference between the consumers perceived benefit from a given product and the firms cost of providing that product. (J. and E. pg 96) Perceived Benefit What the customer values in a product or service Cost All cost incurred in the provison of the product or service Value
Difference between benefit and costs

Porters Value Chain

Value chain Primary activities

Inbound logistics: receiving, storing, distributing goods Operations: necessary activities for creating the goods or service Outbound logistics: getting the goods to the consumer can be physical or electronic Marketing and sales: enticing customers to buy your product/ service Service: after sales service

Value chain Support activities

Infrastructure: physical presence of the organisation including the office, plants, warehouses etc Human resource management: recruiting, managing, training and developing people Technology development Procurement: buying the necessary infrastructure

The 5 Ps of Marketing
Product Price Place Promotion & People Packaging

Product
Has it?
Sold well in the past via catalogues

Is it?
A service (finance, travel etc) In demand

Does it?
Lend itself to new marketing strategies

eg CreateSpace: https://www.createspace.com/ (formerly CustomFlix)

Price
Is it? Affordable Cheaper than physical shopfront equivalent Can we? Have special offers, incentives Reduce advertising costs Get the customer to do most of the work

Place
Physical location of site not important Market is much larger global Global -> more competition Consider geographic, legal and cultural boundaries Consider marketplace (Are we easy to find?)

Promotion and People

Internet site provides a window into an organisation - perceptions How to advertise?
Billboards etc Radio and TV Domain name Online banner ads

Staff - interaction with customers

Packaging
Cyber product must appeal to customer Should look professional Offer incentives Discounts Club memberships

Market Segmentation
Market segmentation
identify specific customers within specific markets - segments target segments with advertising messages

Segments
Usually defined in terms of demographic characteristics, age, gender, income etc

Micromarketing
Targeting very small market segments

Market Segmentation
Geographic segmentation (location)
Creating different combinations of marketing efforts for each geographical group of customers, country, city, neighbourhood, etc

Demographic segmentation
Uses age, gender, family size, income, education, religion, or ethnicity to group customers needs and preferences

Psychographic segmentation (lifestyle)

Groups customers by variables such as social class, personality, or their approach to life

Behavioural segmentation
Based on usage rates of products and services
http://www.anz.com/default.asp

The Internet Customer (Lawrence et al, 2003)

Any consumer of goods, services and/or information on the Internet
Readers of Web pages Recipients of email On-line subscribers Direct/indirect purchasers Internal intranet consumers

Internet Retail:
http://www.internetretailer.com/er http://www.internetretailer.com/2010/09/08/mobilecommerce-comes-together

Reaching Internet Customers

Not face-to-face, not local Customer not passive, waiting Early attempts Hotlists, internet malls Advertising Banners - passive Target advertisements - invitations Sponsorship of search engines, other pages

Advertising on the Web

Banner ad
Rectangular space on a Web page

Interactive marketing unit (IMU) ad formats

Standard banner sizes that most Web sites have voluntarily agreed to use

Banner exchange network

Coordinates ad sharing

Banner advertising network (DoubleClick:

http://www.google.com/doubleclick/)

Acts as a broker between advertisers and Web sites that carry ads

Advertising on the Web

Cost per thousand (CPM) Pricing metric used when a company purchases mass media advertising Trial visit First time a visitor loads a Web site page Page view Each page loaded by a visitor Click-through no. of times an ad is clicked on : http://www.google.com/doubleclick/advertis ers/richmedia.html

Other Web Ad Formats

Pop-up ad
Appears in its own window when the user opens or closes a Web page

Ad-blocking software
Prevents banner ads and pop-up ads from loading

Interstitial (something that comes between two other things) ad

When a user clicks a link to load a page, the interstitial ad opens in its own browser window

AdBlock
Adblock - removes ads
(https://addons.mozilla.org/en-US/firefox/addon/1865/)

Software to turn off banner ads on WWW sites Disables push technology, blocks cookies, blocks pop-ups and popunders Turns off sounds and freezes multimedia, etc

Shopping Agents
Return detailed description of item, price, direct link to virtual store BestBookBuys: http://www.bestwebbuys.com/books/ cnet.com.au Problems
Blocking access Rebundling: (Product bundling is a marketing strategy
that involves offering several products for sale as one combined produc ing of goods)

Site Sponsorships
Web sites offer advertisers an opportunity to sponsor all or part of a web site Give advertisers a chance to promote products, services, or brands in a more subtle way - associates the sponsor with a product, event or set of information Helps build brand images and develop reputation rather than generate immediate sales
European mGov conference:
http://www.mgovernment.org/events/mgov2008/home.html

E-Mail Marketing
Sending one e-mail message to a customer can cost less than one cent if the company already has the customers e-mail address Conversion rate
percentage of recipients who respond to an ad or promotion

Opt-in e-mail
sending e-mail messages to people who request information on a particular topic

Affiliate Marketing Strategies

Affiliate marketing
One firms Web site includes descriptions, reviews, ratings, or other information about a product that is linked to another firms site

Affiliate site
Obtains the benefit of the selling sites brand in exchange for the referral

Cause marketing
Affiliate marketing program that benefits a charitable organization

Brand Image
Key asset for building customer loyalty Organisations can use the web to affirm or build corporate identity or brand image E.g: Nokia Coca cola Ferrari

Branding
Elements of branding include: Differentiation
Company must clearly distinguish its product from all others

Relevance
Degree to which a product is useful to a potential customer

Perceived value
Key element in creating a brand that has value

Customer Relations
Commonly little consultation with customers regarding web site design Can be richer than buyer-seller Provide related information Attract other interested parties Encourage participation in surveys
E.g.Qantas: http://www.qantas.com.au/travel/airlines/hom e/au/en

Customer Relationship Management

Customer focussed business strategy for ebusiness Creating value by segmenting customers tailoring offerings Many application packages now available
OnContact: http://www.oncontact.com/

Electronic Customer Relationship Management

Is about the use of the Internet and applications to manage relationships with customers. Aims to:
Create long-term relationship with customers to help offset costs Reduce the number of customers defecting Increase the share of revenue through cross selling and up selling Increase profitability of low profit customers Focus on high value customers

Motivations (Kalakota & Robinson, 1999)

It costs 6 times more to sell to a new customer than an existing one A typical dissatisfied customer will tell 8 - 10 people about his/her experience Increasing annual customer retention by 5% can boost profits 85% Odds of selling a product to a new customer is 15%; existing customer 50% 70% of dissatisfied customers will return if problem fixed quickly

Why CRM?
Customers drive e-business Customers want
Prompt excellent service

Organisations need to understand their customers/clients from a multi-faceted point of view Improving customer satisfaction & increasing revenue from existing customers is seen as critical for survival

Customer relationship management

Customer selection: targeting the right customer Customer acquisition:
get new customers and encourage old customers to move onto the Internet

Customer retention: turn existing customers into repeat customers and keep them for as long as possible. Customer extension: involves cross selling to existing customers

Case Study - AMEX

A history of innovation

(Kalakota & Robinson, 1999)

Cargo agent, money orders, retail travel, credit cards & travellers cheques, financial services

1990s diversification into investment banks & brokerages failed

No customer focus Management by numbers

New e-business design focussing on CRM

Case Study - Amex

Traditional Amex: Product focussed Functionally-oriented systems cost reduction is key to success Task oriented E-bus Amex: Customer focussed Integrated service applications customer relationship is key to success Solution oriented

Personalisation & CRM

Customising products & services to fit customers needs requires analysis of customer behaviour during previous buying and inquiry interactions
eg what products were of interest?

May involve
Personalised web pages Proactive notification of upgrades, promotions etc

References
Jelassi and Albrecht (2005) Strategies for E. Business Creating Value through Electronic and Mobile Commerce Concepts and Cases, Prentice-Hall Chap 4, 5 Turban, E., Lee, J.K., King, D., McKay, J. and Marshall, P. (2008). Electronic Commerce: A Managerial Perspective (5th ed.). Prentice Hall, New Jersey, Chap 2. Schneider, G (2007). Electronic Commerce. Thomson Learning. Chapter 3 Lawrence, E., Newton, S., Corbitt, B., Lawrence, J., Dann, S. And Thanasankit, T. (2003) lnternet Commerce: Digital Models for Business 3rd edition, John Wiley & Sons, Brisbane, Chapter 7 Kalakota, R. and Robinson, M. (1999) e-Business: Roadmap for Success Addison-Wesley Longman, Reading, MA. Chapter 5