Marketing of High-Technology Products and

InnovationsJakki J. Mohr

Chapter 11: E-Business and Internet

Marketing

Internet Perspectives

Content Sites -Portals -Cybermediaries -Online Communities -Vertical Hubs for B2B

e-commerce

Customers -Customer Control -Privacy

Businesses -Changing Rules of the Game -Threats to Traditional Businesses -Coping with Threats -Functions other than Sales (e.g. Supply Chain Management)

Internet “Distribution Chain”

Device manufacturers: the device used by customer to access the Net— Computers, hand-helds, set-top boxes

Operating systems vendors: software to operate the device Can regulate software and access to

programs used to access the Net Browsers: software used to access

information on the Internet

Internet “Distribution Chain” (Cont.)

Internet Service Providers: control the infrastructure (“broadband”) for transmitting data Phone, cable, satellite, wireless, fiber optics, DSL

Web hosting: services used to host Web sites

Search sites/portals: Information “content” sites customers go to to get useful Web information.

Customer Perspective Customer control Privacy concerns

Customers Gain Control in an On-line Environment

Customer gain information they choose Improved information puts downward pressure on

prices Shopping bots

Move to “permission-based” marketing Customers configure their own products, and

even own Web-browsing experience “Personalization”

Customer auctions pit supplier against supplier B-to-B reverse auctions revolutionizing purchasing

relationships

Customers Gain Control in an On-line Environment Customers break free of geographically-

constrained purchasing Loyalty will have to be honestly earned

Customers can shop anytime/anywhere Customers gain efficiency and convenience

Customer word-of-mouth is more powerful.

Privacy Concerns “Cookies:”

Software that records browser’s Web habits that can be downloaded/uploaded by a site that a customer visits.

Combination of cookies + other data can build customer profiles

Cookies can be sold to advertisers

Privacy Concerns (cont.) In favor of cookies:

Customers will receive offers that match their interests

Improved information will lead to win/win marketing

Against cookies: Abuse of customer information likely Unrestricted sharing of information harmful

Fair Information Practices Act

Companies must disclose how they collect and use information.

Customers can decide whether to allow information about them to be collected or used “opt-in” procedures

Customers can inspect their data/correct errors

Government can impose penalties when companies violate these principles

Do Internet Companies Adhere to these Principles? Most use “opt-out” procedure:

Customer must take an action to prevent the company from collecting information about him/her

Companies share information with other companies without informing (let alone receiving consent) customers.

How Reputable Companies Operate

Follow “opt in” procedures Post (and follow!) privacy policies Receive a “privacy seal”

www.truste.org

What Surfers Can Do to Protect Privacy

Set security preferences on their browser software Very inconvenient surfing Download software to surf anonymously Download software to accept cookies

from only pre-specified sites Platform for Privacy Preferences

(www.w3.org/P3P)

Changing Rules of the Game in an On-line World

Customer control Requires fewer fixed assets Companies less hierarchical Respond faster to the marketplace

Threats to Traditional Businesses

Extinction Loss of potential new revenue stream Cannibalization of existing revenue stream Alienating/confusing current customers Alienating existing distribution/sales

channels Access to resources Attracting/retaining employees Downward pressure on prices

Coping with Threats Creative destruction:

Willingness to re-invent business model to capitalize on new technologies

Organizational Structure for On-line Unit

“Re-intermediation”

Organizational Structure Options

Separate entity (skunkworks) Pros: Capitalize on stock advantages; free reign to

compete without shackles Cons: Signals lack of willingness to be innovative

within context of parent organization Integrated within existing operations

Pros: Realize synergies between on- and off-line businesses

Cons: Conflicts of interest Middle-ground

Minority stake in separate companies

The Changing Role of the Intermediary

Disintermediation: bypassing of traditional intermediaries in favor of going direct on the Net.

Options for intermediaries Do Nothing Re-invent sources of value New types of intermediaries

Cybermediaries Brokers Electronic marketplaces

Hubs

Other Internet Business Functions

On-line Recruiting

Streamline Supply Chain Management (Extranets/Intranets)

Reaching International Markets

Save on Ordering Costs

Coordinate Finance

Speed Product Development

Improve Business Relationships

Get Feedback From Customers

FIRM

Customer Service

Other Business Functions Performed Using the Net: (in addition to revenue generation)

Supply Chain Management Extranets

Save on Ordering Costs EDI Internet-based Electronic marketplaces with auctions

Speed Product Development Intranets

Get Feedback from Customers On-Line Recruiting

Other Business Functions Performed Using the Net

Reach International Markets Coordinate Finance Improve Business Relationships Move Customer Service On-Line

Automate inquiries

Content (information) sites Portals On-line communities Electronic marketplaces (“hubs”)

On-Line Communities Attract visitors based on common

interests iVillage.com; parentsoup.com

Focus on connectivity/interactivity Chats, etc.

Members of on-line communities stay at the site longer, spend more money at the site than non-members

Electronic Marketplaces B2B hubs/communities that connect

multiple buyers and sellers Offer transaction efficiencies Offer price savings (i.e. through reverse

auctions) Typically run by cybermediaries

Earn revenue as percent of transactions

B2B Electronic Marketplaces

Vertical or Horizontal Vertical: industry-specific

Chemconnect.com; e-Steel.com Horizontal: cuts across industries, more

likely to be function-specific Adauction.com; MRO.com

B2B Electronic Marketplaces

Concerns: Antitrust issues arise from market

dominance and monopoly-like economic power

Possible negative effects on long-term buyer/supplier relationships

Keys to On-Line Success

Create Effective Web Site Design

Promote the Web Site to Build Traffic

Evaluate Traffic at the Site

Build Repeat Site Traffic and Manage On-Line Customer Relationships

Web Site Design—4 Cs Content

Focus on right information in the right format, with easy navigation

Requires customer research Commerce

On-line selling must provide value beyond brick-and-mortar channels

Web Site Design—4 Cs Customization

Use personalization to customize the browser’s experience

Community Promote interactivity and sense of

community

Create “stickiness:” visitors have reasons to return repeatedly to the site.

Promote the Web Site

Traditional and on-line advertising List with search engines Traditional promotions Use affiliates Viral marketing Permission marketing

Issues in On-line Advertising

On-line advertising doubled from 1997-1998; doubled again from 1998-1999.

On-line advertising represents only 2.8% of corporate advertising budgets.

Avoid gratuitous digitization; “brochure-ware”

Active model of customer information-acquisition (vs. passive model of broadcast media)

Types of On-line AdsOther

(rich media, keyword searches)

11%

Email ads2%

Sponsorship27%

Interstitials4%

Banner Ads56%

Banners Pros:

Inexpensive With enough creativity and repetition,

can generate awareness Cons:

Easy to ignore Low click-through rates

Only .36% in 1999

Ways to Improve Click-Through Rates on Banners

Interactive Banners Experiential

Target the ad appropriately using cookie data Live Banners with video/sound

“Rich media” Don’t take surfer away from host site Can use a direct selling model from the banner Require computing speed and bandwidth; more

expensive to create Higher response rate: click-on rates as high as

10%

Interstitials-- “In your face;” “pop-ups” Definitely attention-getting Users find the annoying—

Must close pop-up window to continue surfing

Interstitial

Keyword Ads To improve targeting of banner ads

Co-Branding/Sponsorships Advertiser sponsors a part of a

content site Keep sponsor clearly identified

Don’t blur line between information credibility and advertising

Example of a Sponsorship

Pricing of On-line Advertising Function of:

Number of viewers Degree to which population is a more

narrowly-defined target General portal audience vs. WSJ.com

Two pricing formats CPM or “cost-per-click”

Need to measure number of viewers of on-line ads

CPM or Cost-Per-Click? CPM:

Based on more passive view of information acquisition

Assumes that exposing people to banners equates to an impression

May be viable for an awareness-building campaign Cost-per-click:

Pay only when a surfer clicks on a banner Consistent with the active view of information

acquisition Probably makes sense for a sales-oriented

campaign

List with Search Engines

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GVU's 10th WWW User Survey Oct-Dec, 1999

List with Search Engines How Search Engines Work:

Send out spiders, or crawlers that store copies of Web pages and index some words from the page

When surfer types in words, search engine looks up words in its index and calls up the appropriate Web address

Search engines access only limited number of Web sites;

Therefore, important to register Web site with search engines

List with Search Engines Can can get URL on index by:

Registering with search engines Circulating fresh content through the

site regularly

See more on search engines in the appendix, and slides at the conclusion of this file.

Other Ways to Build Site Traffic

Traditional Promotions Use sweepstakes, contests to get

visitors to the site Affiliates

Web sites that are cross-linked to another

May earn a commission on sales generated from referred traffic

Other Ways to Build Site Traffic (Cont.)

Viral Marketing Relies on Web site visitors to pass

information/offers on to friends Powerful in Internet environment Requires compelling content

Permission-Based Marketing Ask customer to opt-in to receive e-mail

messages for marketing Consistent with Relationship Marketing Don’t spam!

Evaluate Web Site Traffic Use log files Use software:

WebStat.com; Hitbox.com; Webtrends.com Track data such as:

Hourly/daily/weekly monthly hits and unique visitors

Top referring URLs Search engine sources Keywords searched Geo. Location (state/country)

Build Repeat Site Traffic/Manage On-line Customer Relationships

Personalization Customer Service

Personalization Tailors customer’s browsing experience

based on tastes and preferences Cookies Info the browser submits

Ex: Amazon.com

Boosts new customers, revenues Benefits in other areas: forecasting,

customer research/feedback

Correlations between online shoppers’ ratings of a variety of

factors and their likelihood to buy again from the same site:

Predicting Repeat Sales

Hanrahan, Timothy, (1999), “Price Isn’t Everything,” Wall Street Journal, July 12, p. R20.

Models of On-line Customer Service

Tiered approach Start with self-help

FAQs E-mail inquiry

Smart software Tele-Web

Interactive chat with customer service rep Personal contact

Realizing the Internet’s Potential

Change is the norm Moving toward “bricks-and-clicks”

model. Requires overturning old business

models

Net Hurdles to be Overcome Congestion Security Privacy Technical Standards Quality of connections and Web sites Cultural Questions Internet Taxes

More on Search Engines Directories vs. search engines

Hybrids Specialty search engines Cost-per-click search engine:

Goto.com

What “spiders” look for HTML tags

Title tag Meta tags

Keyword tags Description tags

Link Tags ALT Tags Comment Tags Headline Tags

Determining Ranking Keyword density

Total # of words on page \ # of times keyword is used

Percentage of relevance Based on keyword density for each of

the 6 HTML tagsSearch engines give differential weights to this information to determine the ranking of a particular Web page.

Implications for Web Page Design

Know keywords on which to focus Web page description Examine competitors’ pages/source code Understand customer’s behavior Rely on search engine “hints”

Don’t “spamdex” Rely on software to optimize page

Search Engine Scoring

Submitting the Page Manually

Go to search engine site Add URL

Relying on automated submission process AddWeb; Register-it Mass submissions eliminate ability to

tailor for individual search engine criteria

Check Submission Status Manually

Go to each Web site to see if indexed Rely on third-party tools

Caveats in Search Engine Positioning Works only for “informed”

customers who know what they’re searching for

May generate traffic; sales requires other considerations

Time consuming process Outsource?

Morevisibility.com; Positionsolutions.com

Search Engine Submission Guidelines

Search Engine Submit more

than Home Page Submit Limit

Submitted Pages Appear In

Non- Submitted Pages Appear in

Overall Freshness

AltaVista Yes About 5 pages per day 1 to 2 days About 1 month 1 day to 1 month

Excite No 25 pages per week Within 2 weeks Up to 6 weeks 1 day to 3 weeks

Google No No limit, but only sub a

few pages per site 4 to 6 weeks 4 to 6 weeks

1 day to 6 weeks

HotBot Yes 50 pages per day Within 2 months Within 2 months 1 day to 2 month

Go (Infoseek) No 1 page per day Within 6 weeks Within6 weeks 1 day to 6 weeks

Lycos (web index) Yes No limit, but stay below

50/day to be safe 3 to 6 weeks 3 to 6 weeks

1 day to 6 weeks

Northern Light No No limit, but only sub a

few pages per site 2 to 4 weeks 2 to 4weeks

1 day to 1 month