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Formulating Your E-Commerce
             Marketing Strategy

                        Don Bacon, Ph.D.
                    Daniels College of Business
                      University of Denver


Center for Management Development                 1
Hierarchy of Objectives
                                    Business
                                    Mission

                                     Business
                                    Objectives



                                    Marketing
                                    Objectives



                                    Marketing
                                     Strategy


                       Source: adapted from Kotler & Armstrong, Principles of Marketing
Center for Management Development                                                    2
Hierarchy of Objectives
                                      Example
      Business                 Increase agricultural productivity
      Mission

                                    Research new 3 fertilizers         “Specific,
      Business
     Objectives                      Raise profitability 20%           Measurable”


                           Increase sales 15%                  Reduce costs 5%
     Marketing
                                                                      “Specific,
     Objectives       Increase mkt share     Enter new foreign
                                                                      Measurable”
                       in domestic mkt             mkts


     Marketing         Increase product         Cut price and
      Strategy          availability and        call on large           “Actions”
                          promotion             farms abroad

                       Source: adapted from Kotler & Armstrong, Principles of Marketing
Center for Management Development                                                    3
Mission Statements


• Who is your customer? (demographics,
   psychographics, firmographics)
• What benefits are you offering?
• How will you deliver the benefits? (The
   technology you will use)

            DCB Examples

Center for Management Development                        4
Mission Statement Example

“Our mission is to bring better food choices to
  consumers through the application of advanced
  technology” (The NutraSweet Co., Kotler & Armstrong, Principles
   of Marketing, 5th Ed., p. 30)


 Benefit-oriented, not product-oriented
 Specific (?)
 A good mission statement helps avoid “mission
  creep” but enables a company to grow in
  appropriate directions

Center for Management Development                               5
Determinants of E-Commerce
                            Marketing Strategy
         Business
         Mission

         Business
        Objectives
                               Traditional        E-Commerce
        Marketing
        Objectives             Target-Market      Market-Related
                                 Definition       Technology Issues
        Marketing
                               Specification of   Four P-Related
         Strategy
                                the Four P’s      Technology Issues
                                 Product
                                 Promotion
                                 Price
                                 Place

Center for Management Development                                     6
E-Commerce Marketing
                              Strategy Opportunities

          Target-Market             •Segmentation online
            Definition

           Specification of         •Information products
            the Four P’s
                                    •Online promotion
             Product
             Promotion                 •Brochureware
             Price                     •Advertising
             Place                 •Service
                                        •Online customer service
                                        •Personalization/customization
                                    •Distribution online
Center for Management Development   •Tracking performance            7
Market-Related Technology
                                  Issues


•   Demographics
•   Psychographics
•   Firmographics
•   Technographics
•   Situational Segmentation



Center for Management Development               8
Traditional Market
                              Segmentation Variables
                     B2C                              B2B
Demographics                 Psychographics     Firmographics
• Age                        •   Demographics   • SIC code
• Gender                     •   Values         • Company size
• Stage in household         •   Activities        • Revenues
  lifecycle                  •   Interests         • People
• Social status              •   Opinions       • Geography
• Geography                  •   Possessions    • Contact’s title


Center for Management Development                               9
E-Commerce Market
                              Segmentation Variables
                     B2C                                      B2B
Demographics                 Psychographics            Firmographics
• Age                        •   Demographics           • SIC code
• Gender                     •   Values                 • Company size
                                  Likes technology
• Stage in household         •   Activities                • Revenues
                                  Sites visited
  lifecycle                  •   Interests                 • People
• Social status                   Online interests
                             •   Opinions               • Geography
• Geography                  •   Possessions            • Contact’s title
                                  Computer, Internet
                                    connection, browser • Technical
                                                          sophistication
Center for Management Development                         (Fax?)        10
Forrester’s Technographics


  Customers
     differ in:
  2) Attitude
  3) Income
  4) Motivation




  Center for Management Development                                              11
Source: www.forrester.com, downloaded 2/17/00, see also Mary Modahl (2000) Now or Never
Forrester’s Technographics




Center for Management Development                         12
          Source: www.forrester.com, downloaded 2/17/00
Forrester’s Technographics




Center for Management Development                               13
                Source: www.forrester.com, downloaded 2/17/00
Using Technographics


1)    Forrester surveys 250,000 North American households
      and uses cluster analysis to determine the 10
      technographic clusters.
2)    Forrester helps you survey your customers, asking 15 key
      questions.
3)    Forrester tells you which technographic categories are
      most common among your customers.
4)    Forrester tells you what it already knows about your
      segments so you can enhance marketing campaigns.

Center for Management Development                                14
Situational Segmentation

   Search Motive                             Design Implications
   Task Completion                           Easy information access
                                             and easy purchase
   Purchase-Related                          Easy Information Access
   Information Search
   Enduring Involvement                      Experiential design, lots
                                             of information
   Entertainment                             Experiential/novel
Adapted from Hoffman & Novak (1996). Marketing in Hypermedia Computer-Mediated Environments:
Conceptual Foundations. Journal of Marketing 60(July), 50-68.
Center for Management Development                                                      15
Market-Related Technology
                                  Issues


•   Demographics
•   Psychographics
•   Firmographics
•   Technographics
•   Situational Segmentation


    Strategies can be developed for each segment
Center for Management Development                  16
Information Products


• High cost of production
• Low cost of reproduction

Implications: Differentiate information products and
  try to integrate the demand curve.



Center for Management Development                      17
Demand in Differentiated Market
                       (Capturing Value)

Price                               Everyone to the left of
                                    this guy would have paid
                                    more than $X.


     $X




                            Quantity


Center for Management Development                              18
Demand in Differentiated Market
                     (Capturing More Value)
                      Marketer’s Ideal: Offer different prices to
                      different customers (price discrimination) to
Price                 maximize capture of value (revenue)

     $Z                                 Added revenue
     $Y                                                     Examples:
                                                            Printers, airfare,
     $X
                                                            cars, banner ads.
     $A



                          Quantity
   Any added revenue is attractive with information products because
   the marginal cost is so low.
Center for Management Development                                       19
Differentiating Information
                                      Products
                        “Versioning”
 • Convenience                      • Speed

 • Comprehensiveness                • Data Processing

 • Manipulation                     • User Interface

 • Community                        • Image Resolution

 • Annoyance                        • Support

                                      See Shapiro and Varian (1998). Versioning.
                                      Harvard Business Review, or Information Rules
                                      (same authors).
Center for Management Development                                             20
Information Products


• High cost of production
• Low cost of reproduction

Implications: Differentiate information products and
  try to integrate the demand curve.



Center for Management Development                      21
Top 5 Reasons Why You at
                         Least Need Brochureware


1.   Avoid looking technologically clueless.
2.   Answer FAQs.
3.   Be accessible 24x7.
4.   Reach worldwide audience.
5.   Provide basic information about your company
     and products.


Center for Management Development                   22
Site Design Basics
1) Identify who will be visiting your site and why they will
   want to visit.
2) Design a “template” that is consistent with your company
   image. Choose all graphics, colors, fonts, etc. to reflect
   your image.
3) Include address, e-mail and phone numbers.
4) Create a flowchart or site map that reflects the visitor
   benefits for the web site
5) Convert files to html
6) Load on your server
7) Test, test, test
8) Promote your site      See also Janal (2000) Marketing on the Internet
Center for Management Development                                           23
Optimizing Brochureware to
                                Bring in Leads
            What the prospect does…         Marketing
                                           Implications:
  Search the web via search engines     SEO, list with key
   or portals to find information and   portals. Include useful
                                        content on your site.
           possible vendors

        Identify a few suppliers who    Understand key
       appear to meet what might be     criteria; attempt to
                 your criteria          influence criteria.

              Send e-mail to each       Make it easy for
  Self-
qualified      supplier, asking for     prospects to
 leads?                                 contact you; follow
              salesperson contact       up quickly.
 Center for Management Development                             24
Advertising


•   Promotion action items
•   Budget allocations across online/offline
•   Traditional banner ads
•   Advertising options




Center for Management Development                 25
Action Items to
                               Promote Your Site:
1) Prepare good content
2) Submit to search engines
3) Issue and distribute press/news releases
4) Solicit reciprocal links
5) Buy search engine positioning (ppc engines)
6) Try newsletter advertising
7) Try direct mail
8) Try opt-in e-mail
9) Try banner advertising
10) Try affiliate programs
11) Try traditional media advertising (put your URL on everything!)
 Adapted from Boris Kontsevoi, Site Promotion Case Study, ClickZ Forum, March 24, 2000
Center for Management Development                                                26
“How is your site promotion budget
               allocated?”

                                                        On-Line
                                                         43%
               Off-Line
                52%
                                          E-Mail
                                           5%


                                    Note: 40% said “don’t know”


Center for Management Development   Source: Forrester Research, Inc. (June, 1999) 27
Traditional Banner Ads
• Full banner ads are 468x60 pixels, e.g.,



• Banners ad space is often sold based on CPM (cost
  per thousand impressions), typically $2-$50.
• Average CTR (click-through rate) is around 0.5% .
• Conversion rates are around 1-2%.
• Cost per acquisition may be around $150-200.
   = CPM/1000/CTR/CNVR = 10/1000/.005/.01 = $200
Center for Management Development                     28
Advertising Options
Payment methods                Ad formats          Ad delivery

• In kind                      •Text links         •On web site
• Sales commission             •Buttons            •In e-mail
•                              •Static banners     •In newsletter
  Pay per click
• Pay per                      •Animated banners
  impression                   •Pop-up windows
• Sponsorship                  •Rich media pop-ups


Center for Management Development                             29
Advertising


•   Promotion action items
•   Budget allocations across online/offline
•   Traditional banner ads
•   Advertising options




Center for Management Development                 30
Service Overview


• Value of service.
• Customer migration strategies.
• Customer satisfaction is related to service
  expectations.




Center for Management Development                      31
Service is Part of Your
                               “Augmented Product”


     Augmented product
                                     Service

                                     Product




 See Levitt (1980) “Marketing Success Through Differentiation – of Anything”
 Harvard Business Review.

Center for Management Development                                              32
Pricing and Ignorance

In commodity markets, if all
prices were known to all
buyers, sellers would not be
able to charge different
prices.




  “The difference in prices in a market are in indicator of
  the ignorance in the market”
Approximate quote from George Stigler (1961). The Economics of Information. Journal of Political
Economy 69(3).
 Center for Management Development                                                                 33
Pricing More Than Your
                                    Product
                                    Do the costs of search not
                                    outweigh the benefits on the
                                    Internet?

                                    Or are books not
                                    commodities?

                                    What do book sellers offer
                                    besides books?

                                     Figure 12.9, Hanson (2000) Principles
                                     of Internet Marketing

Center for Management Development                                            34
Drive Customers to Interact
                                          via Cost-Effective Media
                                           (“Customer Migration”)
 Reduced cost/interaction




                                                       •   Internet self-service
                                                       •   Automated call center
                                                       •   E-mail interactions
                                                       •   Call center
                                                       •   Individual calls
                                                       •   Mail
                                                       •   Face-to-face

                            But recognize that you must offer customers a medium
                            they are comfortable with (Peppers & Rogers).
Center for Management Development                                                  35
Tips for Moving Customers to
                                    the Internet

• Ease of use, ease of use, ease of use.
• Pick the right functions.
• Roll out functions over time (don’t overwhelm your
  customers!).
• Promote your functionality.
• Be patient with your customers’ level of
  proficiency with the Internet.
  Some of these points came from Helen Tueffel’s (VP at Solant) presentation at the
  July, 2000 IQPC B2B eCustomer Care Conference in Chicago.

Center for Management Development                                                     36
More Powerful Motivators for
                              Moving to the Internet

• Phase 1: Incentives for use of Internet.
   – Some services only available online
   – Reduced service fees online (Fidelity fees)
• Phase 2: Disincentives for use of other media.
   – Longer waiting times for using other media
   – Surcharges for using other media

   Some of these points came from Helen Tueffel’s (VP at Solant) presentation at the
   July, 2000 IQPC B2B eCustomer Care Conference in Chicago.
Center for Management Development                                                      37
If you want to keep them on the
                   Internet…

         You better keep them satisfied!



Center for Management Development          38
A Satisfaction Primer
     The Expectancy Disconfirmation Paradigm:
     Dissatisfaction occurs when performance falls
     short of expectations (negative disconfirmation).
     Satisfaction occurs when performance meets or
     exceeds (positive disconfirmation) expectations.
     Delight may occur when performance positively
     surprises the customer by delivering the
     unexpected.


Center for Management Development                        39
Customer Expectations

    Online Shopping Expectations
• Suggestions based on detailed customer input.
• Same day e-mail turnaround.
• Confirmation e-mail links to package tracking page.
• Customer product reviews, editorials from experts.
• No time limit on returns, vendor pays for return shipping,
  invoice includes return authorization.
• More than three shipping options; no charge for standard
  S&H.
Source: Forrester Research Inc., adapted from report in 1to1, February 2000
Center for Management Development                                             40
Typical Delays in Response to
                              Customer E-mail
Delay in responding to customer e-mail among Media Metrix’s top
30 e-commerce sites (September, 1999)
    Real time

       < 2 hrs

       2-8 hrs

     8-24 hrs

    24-48 hrs

     > 72 hrs

 No Response

             0%          10%         20%         30%          40%   50%
 Center for Management Development                                        41
            Source: Peppers & Rogers Group, 1to1, February, 2000
Performance v. Expectations
                                at B2B Sites

•   Only 50% of sites enabled transactions.
•   Only 13% had essential content at each decision point.
•   0% offered personalization.
•   1 in 5 allowed transactions in more than 3 currencies.
•   Some sites had as many as 7 levels of click-throughs.


Source: Forrester study reported in “B2B Web Sites Fail Usage Test.”
EcommerceTimes, January 12, 2000.
Center for Management Development                                      42
Service Overview


• Value of service.
• Customer migration strategies.
• Customer satisfaction is related to service
  expectations.




Center for Management Development                      43
Online Customer Service
 Customer service for every budget:

• Static FAQs
• Dynamic FAQ database:
   – RightNowTech (~$18,000/yr)
• Automatic e-mail response:
   – EchoMail/General Interactive ($100,000+)
• The human touch: Call center, online chat,
  personal e-mail response

Center for Management Development                 44
Using Static FAQs


1) Poll your customer service people to determine
   the most Frequently Asked Questions and the
   answers.
2) Create an HTML web page with these FAQs and
   answers and then link the page to your site.
3) Repeat steps 1 & 2 when you get the time.



Center for Management Development                       45
Using Dynamic FAQ
                              Knowledge Base on Site

    Search knowledge
    base by topic or
    keyword



   Knowledge Base                          Solved?
   delivers FAQs
                                                        Yes: Happy customer



  Armstrong floor                                               Rightnowtech.com
                                    No: repeat or send e-mail

    Source: conversations with Right Now Technologies
Center for Management Development                                         46
Using FAQ Knowledge Base
                                          via E-mail
            Send e-mail                                 E-mail FAQ link
             question



     System reads e-mail,                  Update database
   sends acknowledgement


          Knowledge Base                                     Yes
                                          Old FAQ OK?
         delivers likely FAQs
              to human

Rightnowtech.com Rightnowtech demo
                                                No
http://demo.rightnowtech.com/cgi-bin/du
                                          Write new FAQ
       Source: conversations with Right Now Technologies
 Center for Management Development                                        47
Ben & Jerry’s

• 5,000 e-mails per month.
• Backlog of 5,000 messages.

•   System seeded with just 12 FAQ’s.
•   FAQ database now covers over 100 topics.
•   Traffic down to 250 e-mails per month.
•   No e-mail backlog.

    Source: Right Now Technologies

Center for Management Development                    48
Automating E-mail Responses
                             to Customers
                                                    Send
            Customer                               solution
            Question                                  to
                                                  customer

                                Experienc
                              Experienc                  no
                             Experience
                              e


            Match?                                 Special
                              yes                 Attention?


                                                         yes                 yes
                       no                      Proper staff can
                                                   answer?
Center for Management Development                                                  49
                        Source: Hanson (2000) Principles of Internet Marketing
Matching with EchoMail

 1) Incoming e-mail is automatically classified using a
    dictionary of keywords and word relationships
    according to 5 attributes:
    a) Attitude (e.g., negative, neutral, positive)
    b) Issue (e.g., billing, merchandise, legal)
    c) Product
    d) Request (e.g., nearest location)
    e) Customer (e.g., name, address)
 2) Messages are answered automatically or sent to a
    human for personal response.
   Source: Technology Review, January/February 2000, p. 45
Center for Management Development                            50
The Human Touch


• Use call centers.
• Cross-train call center personnel to do online chat
  or e-mail.
   – Good luck. Some estimate a 15% success rate.




Center for Management Development                       51
Choosing Online Support
                                   Technologies

                            Call center, online chat
           Variable Cost



                              Qu
                                ali           Dynamic FAQ
                                      ty?
                                                     E-mail auto responder

                           Static FAQ
                                        Fixed Cost

Consider how many customers you have, and how unique the
customer service needs are.
Center for Management Development                                      52
U.S. Annual B2B Sales
                                                      Generated by Medium
           $500
           $450
           $400
           $350
           $300
Billions




           $250
           $200                                                                                         1999
           $150                                                                                         2004
           $100
            $50
             $0
                                                             Newspaper

                                                                         Direct Mail
                                                Television
                  Internet




                                                                                       Telephone
                                     Magazine
                             Radio




                                                                                                   Source: WEFA Group,
                                                                                                   Marketing News 7/3/2000

   Center for Management Development                                                                               53
Online Customer Service
 Customer service for every budget:

• Static FAQs
• Dynamic FAQ database:
   – RightNowTech (~$18,000/yr)
• Automatic e-mail response:
   – EchoMail/General Interactive ($100,000+)
• The human touch: Call center, online chat,
  personal e-mail response

Center for Management Development                 54
Personalization
• Customization and personalization
• Technologies for personalization/customization
   – Site customization
   – Endorsements
   – Collaborative filtering
   – Rules-based systems
   – Computer assisted self-explication (CASE)
• Anonymous personalization?

Center for Management Development                     55
Customized or Personalized?


Customization and personalization both lead to
  person-specific content, but
• Customization is user-controlled.
• Personalization is marketer controlled, or database
  driven (“sense and respond”).


Source: www.personalization.com
Center for Management Development                       56
Personalization Adds Value
For customers, personalization offers
•   Only the relevant products/services
•   Only the relevant information (including customized information
    products) individual.com
•   The most convenient interface
For the businesses, personalization offers
•   More customer information
•   Opportunities for price discrimination
•   More time on site
•   Better odds at cross-selling
•   Higher retention rates



Center for Management Development                                     57
One Experience with
                                  Personalization


On average, only 15% of buyers ever return to a site. For one
  company, personalization technology (collaborative
  filtering):

• Increased repeat by 27%
• Lengthened shopping time from 4 to 7 minutes.
• Increased number of products viewed from 6 to 10.



Source: Andy Borland, CEO ClickZ Network, August 1999.
Center for Management Development                               58
Customized Websites
  • Customer specifies desired content.
      – http://www.excite.com/
      – http://www.yahoo.com/
      – High fixed, low variable cost – good for businesses with
        thousands of customers with low LTV
  • For B2B customers, marketers may build customer
    extranet websites, including special pricing,
    dedicated support, and other valuable options
      – Low fixed, high variable cost – good for businesses with
        fewer customers with high LTV

Center for Management Development                             59
Endorsement Examples

• Endorsements may be customer-generated:
   – eBags customer ratings
   – Amazon reviewers
• Endorsements may be company generated:
   – Consumer Reports
   – Ideacafe.com tech reviews
• Endorsements work well when all consumers have
  similar needs and wants.

Center for Management Development                    60
Collaborative Filtering

Also known as recommender systems, collaborative
filtering involves identifying two customers with similar
product preferences and offering recommendations to
one based on the known ratings of the other.
 Examples:
 Jester site (joke recommendations):
 http://shadow.ieor.berkeley.edu/humor/

 Netflix (movie recommendations): http://www.
 netflix.com/ratings_intro.asp?sid=4
Center for Management Development                       61
Use Collaborative Filtering
                                   When…


1) Perception of products is highly subjective and
   unrelated to other customer attributes
2) Decision rules differ across customers
3) A formal decision model can’t be found




Center for Management Development                    62
Problems with
                              Collaborative Filtering

 Problems with Collaborative Filtering include:

 1) Prevalence of missing data and complex decision
 models means large samples required
 2) Insufficient data at start-up
 3) Customers may have to buy or rate many products
 before model can be used
 4) Predictive performance not great
Center for Management Development                       63
Rules-Based Systems

    Rules-based systems offer customers custom
    products and experiences based on the
    application of formal “if-then” like patterns.

    Examples include showing certain banner ads
    on certain pages, reminding customers of
    upcoming birthdays, or recommending products
    based on known customer needs or
    demographics.

Center for Management Development                     64
Rules-Based System Example


• Amazon book recommends appear to use
  past purchase data and collaborative
  filtering, but do so unobtrusively and so
  could be considered a rules-based system.




Center for Management Development              65
Rules-Based Systems (cont.)

Rules-based systems are used when:
1) Meaningful rules are available (from experts,
deduction, or reliable inference)
2) Customer preference follow simple, predictable
patterns

Problems with Rules-Based systems
The most predictive rules may require sensitive
customer information and/or asking detailed questions
(as with CASE systems).
Center for Management Development                   66
Computer Assisted Self-
                              Explication (CASE)


1) Experts determine appropriate decision rules for
   selecting products or services
2) Customers are asked to answer a list of questions
   related to the decision rule
3) Recommendations are offered based on the
   customers’ answers

Example: personalogic.com decision guides for cars, homes, pets, etc.
Center for Management Development                             67
Choosing Customization and
                                                  Personalization Tools
                       Complex and/or
                       qualitative or               Endorsements              Collaborative
Attribute complexity




                       intangible attributes                                    Filtering



                       Few and quantifiable          Rule-Based                    CASE
                       attributes                                           (Computer-Assisted Self-
                                                                                 Explication)



                                                Uniform Needs             Highly
                                                                          Differentiated Needs

                                                           Needs differentiation
                              Adapted from Figure 7.12, Hanson (2000) Internet Marketing
        Center for Management Development                                                              68
“Anonymous Personalization”


• Personalize your site interactivity without asking for private
  information.
• Don’t ask name, phone, email, etc. early in the relationship.
• Possible opening questions:
            Which industry is your company in?
            How do you plan to use a product like ours?
            What is your zip code?
 When respondents see benefit in offering a little information, they’ll be
                more likely to offer more information.

Cliff Allen (1999) Achieving Anonymous Personalization (I&II), found through www.searchz.com
 Center for Management Development                                                       69
Personalization
• Customization and personalization
• Technologies for personalization/customization
   – Site customization
   – Endorsements
   – Collaborative filtering
   – Rules-based systems
   – Computer assisted self-explication (CASE)
• Anonymous personalization?

Center for Management Development                     70
Distribution Online


•   Issues to consider in selling online.
•   Types of information consumers use.
•   Benefits of intermediaries.
•   Keeping existing channel happy.




Center for Management Development                         71
Does Selling Direct Online
                             Make Sense for You?
• Can I realize significant margins by selling direct?
• Will I have a sustainable competitive advantage?
• Can I offer most of the value currently offered by
  my existing distribution partners?
   – Can I physically deliver the product cost-
      effectively?
   – Can I offer the quantity and quality of
      information my customers typically need?
• If I will still need my sales force/retail outlets, do I
  have a plan for keeping them happy?
Center for Management Development                            72
Types of Information
  What types of information do consumers
   need to make a decision?
  • Primary Product Data (Product Trial)
     – Sensory: Taste, Touch, Smell, Sight, Sound
     – Performance: Fit/Compatibility, Function

   • Secondary Product data
         – Comparative v. Noncomparative
         – Price (w/discounts)
         – Objective v. Subjective
Center for Management Development                   73
Take a Sniff on the Web


• DigiScent’s iSmell for sale by
  12/2000 for $80-$120.
• 128 organic scents combine to form
  thousands of more complex smells.
• 700 computer-game developers have
  asked for software kit.
• Can turn in down or off.              Newsweek, August
• See also FirstSENX and AromaJet.      28, 2000, p. 61-62.



Center for Management Development                             74
Feel a Web Page


• Logitech’s iFeel will sell
  for $40
• Buttons, menus, and
  graphics with the right
  coding will cause force-
  feedback in the mouse
• User can select from a
  variety of feels

                                      Newsweek, August 28, 2000, p. 61-62.
Center for Management Development                                       75
eBags Example

                                            ebags.com

• Primary
   – Sight: many pictures
   – Touch: proxies with close-ups?
   – Function: product shown in-use.
• Secondary
   – Comparative: comparison tables
   – Subjective: customer ratings
Center for Management Development                       76
Quality of Information
                         Intermediaries May Provide


• Intermediaries enhance customer search by offering
   types of information that manufacturer’s typically
   don’t provide:
    – Objective comparisons with other brands
    – Subjective information
If these are very important to your customers,
   consider selling indirect online (through and
   intermediary)

Center for Management Development                   77
Other Benefits of
                                     Intermediaries
        1) Reduced customer search cost (fewer contacts
        needed)
        2) Provision of Product Information
           (esp. subjective)
        3) Collection of customer information
        4) Anticipation of customer needs
        5) Communication with customers (promotion)
        6) Assorting appropriate product mix
Center for Management Development                       78
Benefits of Intermediaries
                                            (cont.)
           7) Sorting (suggesting quality differences)
           8) Negotiation
           9) Order processing
           10) Storage and movement of products
           11) Financing
           12) Delivery
           13) Branding (assurance)
Cf. Kotler’s Marketing Management, McCarthy’s Basic Marketing
Center for Management Development                               79
Facilitating Purchase/Delivery
     No Intermediaries                          Intermediaries
 Buyers                 Sellers          Buyers               Sellers




Intermediaries are most beneficial in complex, fragmented markets.


Center for Management Development                                       80
Direct Can’t Do It All
                                      Direct    Inter-   Logistics
                                      online   mediary    partner
 Reduced customer search cost
 Subjective Product Information
 Customer information
 Anticipation of customer needs
 Communication with customers                  x-sell?
 Assorting product mix
 Sorting
 Negotiation
 Order processing
 Storage/movement of products
 Financing
 Delivery
 Branding (assurance)
Center for Management Development                                    81
Keeping Existing Channel
                                    Happy

• Sell online at a higher price.
• Sell online only to regions not served by existing
  sales force/retail outlets.
   – International?
• Train sales force to do acquisition, but use extranet
  for customer service/development/retention and let
  sales force keep the account.
• Train sales force how to offer value beyond what’s
  offered on the Internet (to selected segments?).
   – Travel agents?
Center for Management Development                         82
Distribution Online


•   Issues to consider in selling online.
•   Types of information consumers use.
•   Benefits of intermediaries.
•   Keeping existing channel happy.




Center for Management Development                         83
Metrics and Tracking


• ROI and metrics to consider for various types of
  sites
• Analyzing log files




Center for Management Development                      84
Hierarchy of Objectives
                                      Example
      Business                 Increase agricultural productivity
      Mission

                                    Research new 3 fertilizers         “Specific,
      Business
     Objectives                      Raise profitability 20%           Measurable”


                           Increase sales 15%                  Reduce costs 5%
     Marketing
                                                                       “Specific,
     Objectives       Increase mkt share     Enter new foreign
                                                                       Measurable”
                       in domestic mkt             mkts


     Marketing         Increase product         Cut price and
      Strategy          availability and        call on large          “Actions”
                          promotion             farms abroad

                       Source: adapted from Kotler & Armstrong, Principles of Marketing
Center for Management Development                                                    85
Establishing Your
                              Performance Measures

1) Identify all the objectives of your site (e.g.,
   generate leads, customer service, sell products,
   sell advertising, build the brand, etc.)
2) Prioritize your objectives
3) Identify meaningful metrics of each objective
4) Establish meaningful goals for metrics
5) Track metrics and compare with goals


Center for Management Development                     86
Sample Metrics to Consider
• Online metrics
  – Visitor
  – Visits (w/in 30 minutes)
  – Page views
  – Ad views
  – Hits
  – Views of thank you page
• Related Offline metrics
  – Calls to call center
  – Sales
  – Customer satisfaction

Center for Management Development                 87
Metrics for Ad Vehicles

• If your objective is to sell ad space, track
   – Cost per visit (subscribers and non-
     subscribers)
   – Page views per visit
   – Visits per week
   – Repeat visit rate
   – Also note demographics by page
   – Roll to Avg CPM and ad views per week
Center for Management Development                       88
Metrics for Direct Sales Sites

• If your objective is to sell products or services,
  track
   – Cost per acquisition
   – Visits per week
   – Conversion rates
   – Avg revenue per sale
   – Customer retention rates


Center for Management Development                      89
Metrics for Customer Service
                                    Sites

• If your objective is to offer cost-effective customer
  service, track
   – Reduction in use of call center
   – Reduction in use of human e-mail response
   – Visits to customer service pages (e.g., FAQ’s)
   – Customer satisfaction with service


 These objectives are also relevant to internal customer service
Center for Management Development                             90
Analyzing Log Files
      •Log files record all activity on your server
      •Log files are difficult to read without help

      joe.cerfin.com --
      [05/Dec/1999:14:03:23 -0400]
      “GET /page5.html HTTP/1.0”
      200 3291
      “http://www.yy.com/y.html”
      “Mozilla/4.0 [en] (Win95; I)”



Center for Management Development                     91
Software for Analyzing Log Files

     Consider http://www.webtrends.com
     Note types of reports
     Note definitions of key terms

     See also:
     http://dmoz.org/Computers/Software/Internet/Site_Management/Log_Analysis/




Center for Management Development                                           92
Establishing Your
                              Performance Measures

1) Identify all the objectives of your site (e.g.,
   generate leads, customer service, sell products,
   sell advertising, build the brand, etc.)
2) Prioritize your objectives
3) Identify meaningful metrics of each objective
4) Establish meaningful goals for metrics
5) Track metrics and compare with goals


Center for Management Development                     93

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Formulating Your E-commerce Marketing Strategy

  • 1. Formulating Your E-Commerce Marketing Strategy Don Bacon, Ph.D. Daniels College of Business University of Denver Center for Management Development 1
  • 2. Hierarchy of Objectives Business Mission Business Objectives Marketing Objectives Marketing Strategy Source: adapted from Kotler & Armstrong, Principles of Marketing Center for Management Development 2
  • 3. Hierarchy of Objectives Example Business Increase agricultural productivity Mission Research new 3 fertilizers “Specific, Business Objectives Raise profitability 20% Measurable” Increase sales 15% Reduce costs 5% Marketing “Specific, Objectives Increase mkt share Enter new foreign Measurable” in domestic mkt mkts Marketing Increase product Cut price and Strategy availability and call on large “Actions” promotion farms abroad Source: adapted from Kotler & Armstrong, Principles of Marketing Center for Management Development 3
  • 4. Mission Statements • Who is your customer? (demographics, psychographics, firmographics) • What benefits are you offering? • How will you deliver the benefits? (The technology you will use) DCB Examples Center for Management Development 4
  • 5. Mission Statement Example “Our mission is to bring better food choices to consumers through the application of advanced technology” (The NutraSweet Co., Kotler & Armstrong, Principles of Marketing, 5th Ed., p. 30)  Benefit-oriented, not product-oriented  Specific (?)  A good mission statement helps avoid “mission creep” but enables a company to grow in appropriate directions Center for Management Development 5
  • 6. Determinants of E-Commerce Marketing Strategy Business Mission Business Objectives Traditional E-Commerce Marketing Objectives Target-Market Market-Related Definition Technology Issues Marketing Specification of Four P-Related Strategy the Four P’s Technology Issues Product Promotion Price Place Center for Management Development 6
  • 7. E-Commerce Marketing Strategy Opportunities Target-Market •Segmentation online Definition Specification of •Information products the Four P’s •Online promotion Product Promotion •Brochureware Price •Advertising Place •Service •Online customer service •Personalization/customization •Distribution online Center for Management Development •Tracking performance 7
  • 8. Market-Related Technology Issues • Demographics • Psychographics • Firmographics • Technographics • Situational Segmentation Center for Management Development 8
  • 9. Traditional Market Segmentation Variables B2C B2B Demographics Psychographics Firmographics • Age • Demographics • SIC code • Gender • Values • Company size • Stage in household • Activities • Revenues lifecycle • Interests • People • Social status • Opinions • Geography • Geography • Possessions • Contact’s title Center for Management Development 9
  • 10. E-Commerce Market Segmentation Variables B2C B2B Demographics Psychographics Firmographics • Age • Demographics • SIC code • Gender • Values • Company size Likes technology • Stage in household • Activities • Revenues Sites visited lifecycle • Interests • People • Social status Online interests • Opinions • Geography • Geography • Possessions • Contact’s title Computer, Internet connection, browser • Technical sophistication Center for Management Development (Fax?) 10
  • 11. Forrester’s Technographics Customers differ in: 2) Attitude 3) Income 4) Motivation Center for Management Development 11 Source: www.forrester.com, downloaded 2/17/00, see also Mary Modahl (2000) Now or Never
  • 12. Forrester’s Technographics Center for Management Development 12 Source: www.forrester.com, downloaded 2/17/00
  • 13. Forrester’s Technographics Center for Management Development 13 Source: www.forrester.com, downloaded 2/17/00
  • 14. Using Technographics 1) Forrester surveys 250,000 North American households and uses cluster analysis to determine the 10 technographic clusters. 2) Forrester helps you survey your customers, asking 15 key questions. 3) Forrester tells you which technographic categories are most common among your customers. 4) Forrester tells you what it already knows about your segments so you can enhance marketing campaigns. Center for Management Development 14
  • 15. Situational Segmentation Search Motive Design Implications Task Completion Easy information access and easy purchase Purchase-Related Easy Information Access Information Search Enduring Involvement Experiential design, lots of information Entertainment Experiential/novel Adapted from Hoffman & Novak (1996). Marketing in Hypermedia Computer-Mediated Environments: Conceptual Foundations. Journal of Marketing 60(July), 50-68. Center for Management Development 15
  • 16. Market-Related Technology Issues • Demographics • Psychographics • Firmographics • Technographics • Situational Segmentation Strategies can be developed for each segment Center for Management Development 16
  • 17. Information Products • High cost of production • Low cost of reproduction Implications: Differentiate information products and try to integrate the demand curve. Center for Management Development 17
  • 18. Demand in Differentiated Market (Capturing Value) Price Everyone to the left of this guy would have paid more than $X. $X Quantity Center for Management Development 18
  • 19. Demand in Differentiated Market (Capturing More Value) Marketer’s Ideal: Offer different prices to different customers (price discrimination) to Price maximize capture of value (revenue) $Z Added revenue $Y Examples: Printers, airfare, $X cars, banner ads. $A Quantity Any added revenue is attractive with information products because the marginal cost is so low. Center for Management Development 19
  • 20. Differentiating Information Products “Versioning” • Convenience • Speed • Comprehensiveness • Data Processing • Manipulation • User Interface • Community • Image Resolution • Annoyance • Support See Shapiro and Varian (1998). Versioning. Harvard Business Review, or Information Rules (same authors). Center for Management Development 20
  • 21. Information Products • High cost of production • Low cost of reproduction Implications: Differentiate information products and try to integrate the demand curve. Center for Management Development 21
  • 22. Top 5 Reasons Why You at Least Need Brochureware 1. Avoid looking technologically clueless. 2. Answer FAQs. 3. Be accessible 24x7. 4. Reach worldwide audience. 5. Provide basic information about your company and products. Center for Management Development 22
  • 23. Site Design Basics 1) Identify who will be visiting your site and why they will want to visit. 2) Design a “template” that is consistent with your company image. Choose all graphics, colors, fonts, etc. to reflect your image. 3) Include address, e-mail and phone numbers. 4) Create a flowchart or site map that reflects the visitor benefits for the web site 5) Convert files to html 6) Load on your server 7) Test, test, test 8) Promote your site See also Janal (2000) Marketing on the Internet Center for Management Development 23
  • 24. Optimizing Brochureware to Bring in Leads What the prospect does… Marketing Implications: Search the web via search engines SEO, list with key or portals to find information and portals. Include useful content on your site. possible vendors Identify a few suppliers who Understand key appear to meet what might be criteria; attempt to your criteria influence criteria. Send e-mail to each Make it easy for Self- qualified supplier, asking for prospects to leads? contact you; follow salesperson contact up quickly. Center for Management Development 24
  • 25. Advertising • Promotion action items • Budget allocations across online/offline • Traditional banner ads • Advertising options Center for Management Development 25
  • 26. Action Items to Promote Your Site: 1) Prepare good content 2) Submit to search engines 3) Issue and distribute press/news releases 4) Solicit reciprocal links 5) Buy search engine positioning (ppc engines) 6) Try newsletter advertising 7) Try direct mail 8) Try opt-in e-mail 9) Try banner advertising 10) Try affiliate programs 11) Try traditional media advertising (put your URL on everything!) Adapted from Boris Kontsevoi, Site Promotion Case Study, ClickZ Forum, March 24, 2000 Center for Management Development 26
  • 27. “How is your site promotion budget allocated?” On-Line 43% Off-Line 52% E-Mail 5% Note: 40% said “don’t know” Center for Management Development Source: Forrester Research, Inc. (June, 1999) 27
  • 28. Traditional Banner Ads • Full banner ads are 468x60 pixels, e.g., • Banners ad space is often sold based on CPM (cost per thousand impressions), typically $2-$50. • Average CTR (click-through rate) is around 0.5% . • Conversion rates are around 1-2%. • Cost per acquisition may be around $150-200. = CPM/1000/CTR/CNVR = 10/1000/.005/.01 = $200 Center for Management Development 28
  • 29. Advertising Options Payment methods Ad formats Ad delivery • In kind •Text links •On web site • Sales commission •Buttons •In e-mail • •Static banners •In newsletter Pay per click • Pay per •Animated banners impression •Pop-up windows • Sponsorship •Rich media pop-ups Center for Management Development 29
  • 30. Advertising • Promotion action items • Budget allocations across online/offline • Traditional banner ads • Advertising options Center for Management Development 30
  • 31. Service Overview • Value of service. • Customer migration strategies. • Customer satisfaction is related to service expectations. Center for Management Development 31
  • 32. Service is Part of Your “Augmented Product” Augmented product Service Product See Levitt (1980) “Marketing Success Through Differentiation – of Anything” Harvard Business Review. Center for Management Development 32
  • 33. Pricing and Ignorance In commodity markets, if all prices were known to all buyers, sellers would not be able to charge different prices. “The difference in prices in a market are in indicator of the ignorance in the market” Approximate quote from George Stigler (1961). The Economics of Information. Journal of Political Economy 69(3). Center for Management Development 33
  • 34. Pricing More Than Your Product Do the costs of search not outweigh the benefits on the Internet? Or are books not commodities? What do book sellers offer besides books? Figure 12.9, Hanson (2000) Principles of Internet Marketing Center for Management Development 34
  • 35. Drive Customers to Interact via Cost-Effective Media (“Customer Migration”) Reduced cost/interaction • Internet self-service • Automated call center • E-mail interactions • Call center • Individual calls • Mail • Face-to-face But recognize that you must offer customers a medium they are comfortable with (Peppers & Rogers). Center for Management Development 35
  • 36. Tips for Moving Customers to the Internet • Ease of use, ease of use, ease of use. • Pick the right functions. • Roll out functions over time (don’t overwhelm your customers!). • Promote your functionality. • Be patient with your customers’ level of proficiency with the Internet. Some of these points came from Helen Tueffel’s (VP at Solant) presentation at the July, 2000 IQPC B2B eCustomer Care Conference in Chicago. Center for Management Development 36
  • 37. More Powerful Motivators for Moving to the Internet • Phase 1: Incentives for use of Internet. – Some services only available online – Reduced service fees online (Fidelity fees) • Phase 2: Disincentives for use of other media. – Longer waiting times for using other media – Surcharges for using other media Some of these points came from Helen Tueffel’s (VP at Solant) presentation at the July, 2000 IQPC B2B eCustomer Care Conference in Chicago. Center for Management Development 37
  • 38. If you want to keep them on the Internet… You better keep them satisfied! Center for Management Development 38
  • 39. A Satisfaction Primer The Expectancy Disconfirmation Paradigm: Dissatisfaction occurs when performance falls short of expectations (negative disconfirmation). Satisfaction occurs when performance meets or exceeds (positive disconfirmation) expectations. Delight may occur when performance positively surprises the customer by delivering the unexpected. Center for Management Development 39
  • 40. Customer Expectations Online Shopping Expectations • Suggestions based on detailed customer input. • Same day e-mail turnaround. • Confirmation e-mail links to package tracking page. • Customer product reviews, editorials from experts. • No time limit on returns, vendor pays for return shipping, invoice includes return authorization. • More than three shipping options; no charge for standard S&H. Source: Forrester Research Inc., adapted from report in 1to1, February 2000 Center for Management Development 40
  • 41. Typical Delays in Response to Customer E-mail Delay in responding to customer e-mail among Media Metrix’s top 30 e-commerce sites (September, 1999) Real time < 2 hrs 2-8 hrs 8-24 hrs 24-48 hrs > 72 hrs No Response 0% 10% 20% 30% 40% 50% Center for Management Development 41 Source: Peppers & Rogers Group, 1to1, February, 2000
  • 42. Performance v. Expectations at B2B Sites • Only 50% of sites enabled transactions. • Only 13% had essential content at each decision point. • 0% offered personalization. • 1 in 5 allowed transactions in more than 3 currencies. • Some sites had as many as 7 levels of click-throughs. Source: Forrester study reported in “B2B Web Sites Fail Usage Test.” EcommerceTimes, January 12, 2000. Center for Management Development 42
  • 43. Service Overview • Value of service. • Customer migration strategies. • Customer satisfaction is related to service expectations. Center for Management Development 43
  • 44. Online Customer Service Customer service for every budget: • Static FAQs • Dynamic FAQ database: – RightNowTech (~$18,000/yr) • Automatic e-mail response: – EchoMail/General Interactive ($100,000+) • The human touch: Call center, online chat, personal e-mail response Center for Management Development 44
  • 45. Using Static FAQs 1) Poll your customer service people to determine the most Frequently Asked Questions and the answers. 2) Create an HTML web page with these FAQs and answers and then link the page to your site. 3) Repeat steps 1 & 2 when you get the time. Center for Management Development 45
  • 46. Using Dynamic FAQ Knowledge Base on Site Search knowledge base by topic or keyword Knowledge Base Solved? delivers FAQs Yes: Happy customer Armstrong floor Rightnowtech.com No: repeat or send e-mail Source: conversations with Right Now Technologies Center for Management Development 46
  • 47. Using FAQ Knowledge Base via E-mail Send e-mail E-mail FAQ link question System reads e-mail, Update database sends acknowledgement Knowledge Base Yes Old FAQ OK? delivers likely FAQs to human Rightnowtech.com Rightnowtech demo No http://demo.rightnowtech.com/cgi-bin/du Write new FAQ Source: conversations with Right Now Technologies Center for Management Development 47
  • 48. Ben & Jerry’s • 5,000 e-mails per month. • Backlog of 5,000 messages. • System seeded with just 12 FAQ’s. • FAQ database now covers over 100 topics. • Traffic down to 250 e-mails per month. • No e-mail backlog. Source: Right Now Technologies Center for Management Development 48
  • 49. Automating E-mail Responses to Customers Send Customer solution Question to customer Experienc Experienc no Experience e Match? Special yes Attention? yes yes no Proper staff can answer? Center for Management Development 49 Source: Hanson (2000) Principles of Internet Marketing
  • 50. Matching with EchoMail 1) Incoming e-mail is automatically classified using a dictionary of keywords and word relationships according to 5 attributes: a) Attitude (e.g., negative, neutral, positive) b) Issue (e.g., billing, merchandise, legal) c) Product d) Request (e.g., nearest location) e) Customer (e.g., name, address) 2) Messages are answered automatically or sent to a human for personal response. Source: Technology Review, January/February 2000, p. 45 Center for Management Development 50
  • 51. The Human Touch • Use call centers. • Cross-train call center personnel to do online chat or e-mail. – Good luck. Some estimate a 15% success rate. Center for Management Development 51
  • 52. Choosing Online Support Technologies Call center, online chat Variable Cost Qu ali Dynamic FAQ ty? E-mail auto responder Static FAQ Fixed Cost Consider how many customers you have, and how unique the customer service needs are. Center for Management Development 52
  • 53. U.S. Annual B2B Sales Generated by Medium $500 $450 $400 $350 $300 Billions $250 $200 1999 $150 2004 $100 $50 $0 Newspaper Direct Mail Television Internet Telephone Magazine Radio Source: WEFA Group, Marketing News 7/3/2000 Center for Management Development 53
  • 54. Online Customer Service Customer service for every budget: • Static FAQs • Dynamic FAQ database: – RightNowTech (~$18,000/yr) • Automatic e-mail response: – EchoMail/General Interactive ($100,000+) • The human touch: Call center, online chat, personal e-mail response Center for Management Development 54
  • 55. Personalization • Customization and personalization • Technologies for personalization/customization – Site customization – Endorsements – Collaborative filtering – Rules-based systems – Computer assisted self-explication (CASE) • Anonymous personalization? Center for Management Development 55
  • 56. Customized or Personalized? Customization and personalization both lead to person-specific content, but • Customization is user-controlled. • Personalization is marketer controlled, or database driven (“sense and respond”). Source: www.personalization.com Center for Management Development 56
  • 57. Personalization Adds Value For customers, personalization offers • Only the relevant products/services • Only the relevant information (including customized information products) individual.com • The most convenient interface For the businesses, personalization offers • More customer information • Opportunities for price discrimination • More time on site • Better odds at cross-selling • Higher retention rates Center for Management Development 57
  • 58. One Experience with Personalization On average, only 15% of buyers ever return to a site. For one company, personalization technology (collaborative filtering): • Increased repeat by 27% • Lengthened shopping time from 4 to 7 minutes. • Increased number of products viewed from 6 to 10. Source: Andy Borland, CEO ClickZ Network, August 1999. Center for Management Development 58
  • 59. Customized Websites • Customer specifies desired content. – http://www.excite.com/ – http://www.yahoo.com/ – High fixed, low variable cost – good for businesses with thousands of customers with low LTV • For B2B customers, marketers may build customer extranet websites, including special pricing, dedicated support, and other valuable options – Low fixed, high variable cost – good for businesses with fewer customers with high LTV Center for Management Development 59
  • 60. Endorsement Examples • Endorsements may be customer-generated: – eBags customer ratings – Amazon reviewers • Endorsements may be company generated: – Consumer Reports – Ideacafe.com tech reviews • Endorsements work well when all consumers have similar needs and wants. Center for Management Development 60
  • 61. Collaborative Filtering Also known as recommender systems, collaborative filtering involves identifying two customers with similar product preferences and offering recommendations to one based on the known ratings of the other. Examples: Jester site (joke recommendations): http://shadow.ieor.berkeley.edu/humor/ Netflix (movie recommendations): http://www. netflix.com/ratings_intro.asp?sid=4 Center for Management Development 61
  • 62. Use Collaborative Filtering When… 1) Perception of products is highly subjective and unrelated to other customer attributes 2) Decision rules differ across customers 3) A formal decision model can’t be found Center for Management Development 62
  • 63. Problems with Collaborative Filtering Problems with Collaborative Filtering include: 1) Prevalence of missing data and complex decision models means large samples required 2) Insufficient data at start-up 3) Customers may have to buy or rate many products before model can be used 4) Predictive performance not great Center for Management Development 63
  • 64. Rules-Based Systems Rules-based systems offer customers custom products and experiences based on the application of formal “if-then” like patterns. Examples include showing certain banner ads on certain pages, reminding customers of upcoming birthdays, or recommending products based on known customer needs or demographics. Center for Management Development 64
  • 65. Rules-Based System Example • Amazon book recommends appear to use past purchase data and collaborative filtering, but do so unobtrusively and so could be considered a rules-based system. Center for Management Development 65
  • 66. Rules-Based Systems (cont.) Rules-based systems are used when: 1) Meaningful rules are available (from experts, deduction, or reliable inference) 2) Customer preference follow simple, predictable patterns Problems with Rules-Based systems The most predictive rules may require sensitive customer information and/or asking detailed questions (as with CASE systems). Center for Management Development 66
  • 67. Computer Assisted Self- Explication (CASE) 1) Experts determine appropriate decision rules for selecting products or services 2) Customers are asked to answer a list of questions related to the decision rule 3) Recommendations are offered based on the customers’ answers Example: personalogic.com decision guides for cars, homes, pets, etc. Center for Management Development 67
  • 68. Choosing Customization and Personalization Tools Complex and/or qualitative or Endorsements Collaborative Attribute complexity intangible attributes Filtering Few and quantifiable Rule-Based CASE attributes (Computer-Assisted Self- Explication) Uniform Needs Highly Differentiated Needs Needs differentiation Adapted from Figure 7.12, Hanson (2000) Internet Marketing Center for Management Development 68
  • 69. “Anonymous Personalization” • Personalize your site interactivity without asking for private information. • Don’t ask name, phone, email, etc. early in the relationship. • Possible opening questions:  Which industry is your company in?  How do you plan to use a product like ours?  What is your zip code? When respondents see benefit in offering a little information, they’ll be more likely to offer more information. Cliff Allen (1999) Achieving Anonymous Personalization (I&II), found through www.searchz.com Center for Management Development 69
  • 70. Personalization • Customization and personalization • Technologies for personalization/customization – Site customization – Endorsements – Collaborative filtering – Rules-based systems – Computer assisted self-explication (CASE) • Anonymous personalization? Center for Management Development 70
  • 71. Distribution Online • Issues to consider in selling online. • Types of information consumers use. • Benefits of intermediaries. • Keeping existing channel happy. Center for Management Development 71
  • 72. Does Selling Direct Online Make Sense for You? • Can I realize significant margins by selling direct? • Will I have a sustainable competitive advantage? • Can I offer most of the value currently offered by my existing distribution partners? – Can I physically deliver the product cost- effectively? – Can I offer the quantity and quality of information my customers typically need? • If I will still need my sales force/retail outlets, do I have a plan for keeping them happy? Center for Management Development 72
  • 73. Types of Information What types of information do consumers need to make a decision? • Primary Product Data (Product Trial) – Sensory: Taste, Touch, Smell, Sight, Sound – Performance: Fit/Compatibility, Function • Secondary Product data – Comparative v. Noncomparative – Price (w/discounts) – Objective v. Subjective Center for Management Development 73
  • 74. Take a Sniff on the Web • DigiScent’s iSmell for sale by 12/2000 for $80-$120. • 128 organic scents combine to form thousands of more complex smells. • 700 computer-game developers have asked for software kit. • Can turn in down or off. Newsweek, August • See also FirstSENX and AromaJet. 28, 2000, p. 61-62. Center for Management Development 74
  • 75. Feel a Web Page • Logitech’s iFeel will sell for $40 • Buttons, menus, and graphics with the right coding will cause force- feedback in the mouse • User can select from a variety of feels Newsweek, August 28, 2000, p. 61-62. Center for Management Development 75
  • 76. eBags Example ebags.com • Primary – Sight: many pictures – Touch: proxies with close-ups? – Function: product shown in-use. • Secondary – Comparative: comparison tables – Subjective: customer ratings Center for Management Development 76
  • 77. Quality of Information Intermediaries May Provide • Intermediaries enhance customer search by offering types of information that manufacturer’s typically don’t provide: – Objective comparisons with other brands – Subjective information If these are very important to your customers, consider selling indirect online (through and intermediary) Center for Management Development 77
  • 78. Other Benefits of Intermediaries 1) Reduced customer search cost (fewer contacts needed) 2) Provision of Product Information (esp. subjective) 3) Collection of customer information 4) Anticipation of customer needs 5) Communication with customers (promotion) 6) Assorting appropriate product mix Center for Management Development 78
  • 79. Benefits of Intermediaries (cont.) 7) Sorting (suggesting quality differences) 8) Negotiation 9) Order processing 10) Storage and movement of products 11) Financing 12) Delivery 13) Branding (assurance) Cf. Kotler’s Marketing Management, McCarthy’s Basic Marketing Center for Management Development 79
  • 80. Facilitating Purchase/Delivery No Intermediaries Intermediaries Buyers Sellers Buyers Sellers Intermediaries are most beneficial in complex, fragmented markets. Center for Management Development 80
  • 81. Direct Can’t Do It All Direct Inter- Logistics online mediary partner Reduced customer search cost Subjective Product Information Customer information Anticipation of customer needs Communication with customers x-sell? Assorting product mix Sorting Negotiation Order processing Storage/movement of products Financing Delivery Branding (assurance) Center for Management Development 81
  • 82. Keeping Existing Channel Happy • Sell online at a higher price. • Sell online only to regions not served by existing sales force/retail outlets. – International? • Train sales force to do acquisition, but use extranet for customer service/development/retention and let sales force keep the account. • Train sales force how to offer value beyond what’s offered on the Internet (to selected segments?). – Travel agents? Center for Management Development 82
  • 83. Distribution Online • Issues to consider in selling online. • Types of information consumers use. • Benefits of intermediaries. • Keeping existing channel happy. Center for Management Development 83
  • 84. Metrics and Tracking • ROI and metrics to consider for various types of sites • Analyzing log files Center for Management Development 84
  • 85. Hierarchy of Objectives Example Business Increase agricultural productivity Mission Research new 3 fertilizers “Specific, Business Objectives Raise profitability 20% Measurable” Increase sales 15% Reduce costs 5% Marketing “Specific, Objectives Increase mkt share Enter new foreign Measurable” in domestic mkt mkts Marketing Increase product Cut price and Strategy availability and call on large “Actions” promotion farms abroad Source: adapted from Kotler & Armstrong, Principles of Marketing Center for Management Development 85
  • 86. Establishing Your Performance Measures 1) Identify all the objectives of your site (e.g., generate leads, customer service, sell products, sell advertising, build the brand, etc.) 2) Prioritize your objectives 3) Identify meaningful metrics of each objective 4) Establish meaningful goals for metrics 5) Track metrics and compare with goals Center for Management Development 86
  • 87. Sample Metrics to Consider • Online metrics – Visitor – Visits (w/in 30 minutes) – Page views – Ad views – Hits – Views of thank you page • Related Offline metrics – Calls to call center – Sales – Customer satisfaction Center for Management Development 87
  • 88. Metrics for Ad Vehicles • If your objective is to sell ad space, track – Cost per visit (subscribers and non- subscribers) – Page views per visit – Visits per week – Repeat visit rate – Also note demographics by page – Roll to Avg CPM and ad views per week Center for Management Development 88
  • 89. Metrics for Direct Sales Sites • If your objective is to sell products or services, track – Cost per acquisition – Visits per week – Conversion rates – Avg revenue per sale – Customer retention rates Center for Management Development 89
  • 90. Metrics for Customer Service Sites • If your objective is to offer cost-effective customer service, track – Reduction in use of call center – Reduction in use of human e-mail response – Visits to customer service pages (e.g., FAQ’s) – Customer satisfaction with service These objectives are also relevant to internal customer service Center for Management Development 90
  • 91. Analyzing Log Files •Log files record all activity on your server •Log files are difficult to read without help joe.cerfin.com -- [05/Dec/1999:14:03:23 -0400] “GET /page5.html HTTP/1.0” 200 3291 “http://www.yy.com/y.html” “Mozilla/4.0 [en] (Win95; I)” Center for Management Development 91
  • 92. Software for Analyzing Log Files Consider http://www.webtrends.com Note types of reports Note definitions of key terms See also: http://dmoz.org/Computers/Software/Internet/Site_Management/Log_Analysis/ Center for Management Development 92
  • 93. Establishing Your Performance Measures 1) Identify all the objectives of your site (e.g., generate leads, customer service, sell products, sell advertising, build the brand, etc.) 2) Prioritize your objectives 3) Identify meaningful metrics of each objective 4) Establish meaningful goals for metrics 5) Track metrics and compare with goals Center for Management Development 93