Chapter 4Consumer Behavior, Internet Marketing, and Advertising

1. Describe the factors that influence consumer behavior online.

2. Understand the decision-making process of consumer purchasing online.

3. Describe segmentation and how companies are building one-to-one relationships with customers.

4. Explain how consumer behavior can be analyzed for creating personalized services.

5. Discuss the issues of e-loyalty and e-trust in electronic commerce (EC).

6. Describe consumer market research in EC.

7. Describe the objectives of Web advertising and its characteristics.

8. Describe the major advertising methods used on the Web.

9. Describe various online advertising strategies and types of promotions.

10. Describe permission marketing, ad management, localization, and other advertising-related issues.

11. Relate Web 2.0 and social networks to Internet market research and advertising.

• A GENERIC PURCHASING-DECISION MODEL– Five major phases:• Need identification• Information search

– product brokeringDeciding what product to buy

– merchant brokeringDeciding from whom (from what merchant) to buy a product

• Alternative evaluation• Purchase and delivery• Postpurchase behavior

• FROM MASS MARKETING TO ONE-TO-ONE MARKETING– Mass Marketing and Advertising– market segmentation

The process of dividing a consumer market into logical groups for conducting marketing research and analyzing personal information

– one-to-one marketing (relationship marketing)Marketing that treats each customer in a unique way

• personalizationThe matching of services, products, and advertising content with individual consumers and their preferences

• user profileThe requirements, preferences, behaviors, and demographic traits of a particular customer

• cookieA data file that is placed on a user’s hard drive by a remote Web server, frequently without disclosure or the user’s consent, which collects information about the user’s activities at a site

• behavioral targetingTargeting that uses information collected about an individual’s Web-browsing behavior, such as the pages they have visited or the searches they have made, to select an advertisement to display to that individual

Do You Know Enough About Your Visitors? How Different Are Your Consumers?Do You Have a diverse Products and Services portfolio?

• collaborative filteringA market research and personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles

• CUSTOMER LOYALTY– e-loyalty

Customer loyalty to an e-tailer or loyalty programs delivered online or supported electronically• Business Intelligence and Analytical Software

• SATISFACTION IN EC– Satisfaction is one of the most important success measures

in the B2C online environment• TRUST IN EC– trust

The psychological status of willingness to depend on another person or organization

– Observing Customers’ Movements Online• transaction log

A record of user activities at a company’s Web site• clickstream behavior

Customer movements on the Internet– Number of days since last visit– Speed of clickstream behavior– Number of products viewed, etc.

• Web bugsTiny graphics files embedded in e-mail messages and in Web sites that transmit information about users and their movements to a Web server

• spywareSoftware that gathers user information over an Internet connection without the user’s knowledge• clickstream data

Data that occur inside the Web environment; they provide a trail of the user’s activities (the user’s clickstream behavior) in the Web site• Web mining

Data mining techniques for discovering and extracting information from Web documents; explores both Web content and Web usage

• LIMITATIONS OF ONLINE MARKET RESEARCH– Accuracy of responses– Loss of respondents because of equipment

problems– The ethics and legality of Web tracking– The difficulty in obtaining truly representative

samples– The lack of understanding of the online

communication process and how online respondents think and interact in cyberspace

• HOW TO OVERCOME THESE LIMITATIONS– Identify the intended target audience or demographic

so that the right kind of sampling can be performed– Anonymity for target respondents may encourage

them to be more truthful in their opinions– Concerns about the security of the information

transmitted should be minimized– Companies may outsource their market research to

large and experienced companies that have specialized market research departments and expertise

• Advertising is an attempt to disseminate information in order to affect buyer–seller transactions– In traditional marketing, advertising was impersonal,

one-way mass communication that was paid for by sponsors

• interactive marketingOnline marketing, facilitated by the Internet, by which marketers and advertisers can interact directly with customers, and consumers can interact with advertisers/vendors

– ad viewsThe number of times users call up a page that has a banner on it during a specific period; known as impressions or page views

– pageAn HTML (Hypertext Markup Language) document that may contain text, images, and other online elements, such as Java applets and multimedia files; may be generated statically or dynamically

– click (click-through or ad click)A count made each time a visitor clicks on an advertising banner to access the advertiser’s Web site

– CPM (cost per thousand impressions)The fee an advertiser pays for each 1,000 times a page with a banner ad is shown

– conversion rateThe percentage of clickers who actually make a purchase

– click-through rateThe percentage of visitors who are exposed to a banner ad and click on it

– click-through ratioThe ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad

– hitA request for data from a Web page or file

– visit A series of requests during one navigation of a Web site; a pause of a certain length of time ends a visit

– unique visitA count of the number of visitors entering a site, regardless of how many pages are viewed per visit

– stickinessCharacteristic that influences the average length of time a visitor stays in a site

– Advertising Online and Its Advantages• Cost• Richness of format• Personalization• Timeliness• Location-basis• Linking• Digital branding

• advertising networksSpecialized firms that offer customized Web advertising, such as brokering ads and targeting ads to select groups of consumers

• BANNERS– banner

On a Web page, a graphic advertising display linked to the advertiser’s Web page

– keyword bannersBanner ads that appear when a predetermined word is queried from a search engine e.g Google Adwords

– random bannersBanner ads that appear at random, not as the result of the user’s action

– Benefits and Limitations of Banner Ads• major benefit is users are transferred directly to an

advertiser’s site, often the shopping page• major disadvantage of banners is their cost

– banner swappingAn agreement between two companies to each display the other’s banner ad on its Web site

– banner exchangesMarkets in which companies can trade or exchange placement of banner ads on each other’s Web sites

• POP-UP AND SIMILAR ADS– pop-up ad

An ad that appears in a separate window before, after, or during Internet surfing or when reading e-mail

– pop-under adAn ad that appears underneath the current browser window, so when the user closes the active window the ad is still on the screen

• E-MAIL ADVERTISING• NEWSPAPER-LIKE AND CLASSIFIED ADS

• SEARCH ENGINE ADVERTISEMENT– URL Listing– Keyword Advertising– search engine optimization (SEO)

The craft of increasing site rank on search engines; the optimizer uses the ranking algorithm of the search engine (which may be different for different search engines) and best search phrases, and tailors the ad accordingly

• Optimal Page Title Structure• Inclusion of Meta Descriptions• Include targeted content on the page• Verify no broken links• Include Sitemap• SEO-Friendly URL Structure• Inclusion of Alternate Image Tags• Do Cross browser testing• Check site speed

• Almost 50% of online ad spending in 2010• Types:– Paid inclusion or rank

• Inclusion in search results• Sponsored link areas

– Keyword advertising• e.g. Google AdWords

– Network keyword advertising (context advertising)• e.g. Google AdSense

• Nearly ideal targeted marketing• Issues: – Disclosure of paid inclusion and placement

practices– Click fraud – Ad nonsense

• GOOGLE—THE ONLINE ADVERTISING KING• ADVERTISING IN CHAT ROOMS• OTHER FORMS OF ADVERTISING– Advertising in Online Newsletters– Posting Press Releases Online– Video Ads– advergaming

The practice of using computer games to advertise a product, an organization, or a viewpoint

• social network advertisingOnline advertising that focuses on social networking sites– Types of Social Network Advertising

• Direct advertising that is based on your network of friends

• Direct advertising placed on social network site e.g facebook, youtube, etc

• Indirect advertising by creating “groups” or “pages”

– Sponsored Reviews by Bloggers

• VIDEO ADS ON THE WEB AND IN SOCIAL NETWORKING– Tracking the Success of an Online Video Campaign

• Web video analyticsA way of measuring what viewers do when they watch an online video

• viral marketingWord-of-mouth marketing by which customers promote a product or service by telling others about it– Viral Marketing in Social Networkshttp://www.milliondollarhomepage.com/

• OTHER ADVERTISING STRATEGIES– affiliate marketing

A marketing arrangement by which an organization refers consumers to the selling company’s Web site

– Ads as a Commodity (Paying People to Watch Ads)– Selling Space by Pixels– Personalized Ads

• WebcastingA free Internet news service that broadcasts personalized news and information, including seminars, in categories selected by the user

• ONLINE EVENTS, PROMOTIONS, AND ATTRACTIONS– Live Web Events

• mobile advertisingAds sent to and presented on mobile devices– Mobile Marketing e.g Admob

• PERMISSION ADVERTISING– spamming

Using e-mail to send unwanted ads (sometimes floods of ads)

– permission advertising (permission marketing)Advertising (marketing) strategy in which customers agree to accept advertising and marketing materials (known as opt-in)

• SOME IMPLEMENTATION ISSUES– admediaries

Third-party vendors that conduct promotions, especially large-scale ones

– Ad Exchanges– Advertisement as a Revenue Model– Measuring Online Advertising’s Effectiveness

• ad managementMethodology and software that enable organizations to perform a variety of activities involved in Web advertising (e.g., tracking viewers, rotating ads)

• localizationThe process of converting media products developed in one environment (e.g., country) to a form culturally and linguistically acceptable in countries outside the original target market

– Automatic Versus Manual Web Page Translation– Using Internet Radio for Localization• Internet radio

A Web site that provides music, talk, and other entertainment, both live and stored, from a variety of radio stations

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