Marketing Communications

E-commerce business. technology. society. Fourth Edition

Kenneth C. Laudon Carol Guercio Traver

Chapter 7 E-commerce Mar ke ting Commun ica tions

Copyright © 2007 Pearson Education, Inc. Slide 7-2 Video Ads Cure Banner Blin dness: String Master Class Discussion  What advantages do video ads have over traditional stationary banner ads?  Where do sites like YouTube fit in to a marketing strategy featuring video ads?  What are some of th e ch all enges and r is ks o f placing video ads on the Web?  Do you think Internet users will ever develop ‘blindness’ towards video ads as well?

Actiontuners.com

 Online marketing communications: Methods used by online firms to communicate with consumer and create strong brand expectations  Promotional sales communications: Suggest consumer “buy now” and make offers to encourage immediate purchase  Branding communications: Focus on extolling differentiable benefits of consuming product or service  Many forms of online marketing communications: online advertising , email marketing, public relations, and Web sites

 Paid message on Web site, online service or other interactive medium, such as interactive messaging  2007: $21. 4 billion spent, expected to grow to $24. 7 billion by 2010  Advantages:  Adults (age 18-34) are using the Internet  Ability to target ads to narrow segments and track performance in almost real time  Provide greater opportunity for interactivity  Disadvantages:  Concerns about cost versus benefit  Concerns about how to adequately measure results

SOURCES: Based on data from eMarketer, 2007a, 2005a; IAB/PricewaterhouseCoopers, 2007, 2005; Universal McCann, 2007, 2005.

Forms of Online Advertisements

 Display and rich media/video ads  SeaSearchrch eenginengine adadvertising:vertising: PaidPaid seasearchrch engine inclusion and placement  Spon sor shi ps  Referrals (affiliate relationship marketing)  E-mail marketing  Online catalogs  Online chat  Blog advertising

Format 2007 2011 % Change Paid search $8, 624 $16, 590 92% Rich media/video $1,755 $5,481 212% Display ads $4,687 $8,190 75% Classified $3,638 $6,930 90% Referrals $1,733 $3,675 112% Sponsorships $535 $504 -6% E-mail $428 $630 47% Total $21, 400 $42, 000 96%

Display Ads

 Banners  Display promotional message in a rectangular box on a computer screen  Sometimes feature Flash video and animations or animated GIFs  Pop-ups and pop-unders  Banners and buttons appearing on screen without user calling for them  Althouggyggh the most annoying form of marketing communication, twice as effective than normal banner ads in terms of click-through rates, simply because users unintentionally click on the ads while trying to close them.

Rich Media/Video Ads

 Rich media/video ads: Employ Flash, DHTML, Java, streaming audio and/or video  The fastest growing form of online advertising: about 212% from 2007 to 2011  Advantage: Boost brand awareness (by 10%) rather than driving sales  Interstitial ads  Placing full-page message between current and destination pages of a user  MttilltthtdftdMove automatically to the requested page after ad is read for some time  Good interstitial ads have option to “skip through” or “t“stop” ”f for users wh o aren’t ’tit interest tded

 Superstitial ads  Offered by Viewpo in t  Rich media ad that can be any size up to full screen 900 x 500, and file size up to 600KB  Differ from interstitials in that they are pre-loaded into browser’ s cache and don’ t play until fully loaded  After ad is fully downloaded , it waits until the user clicks to another page before popping up in a separate window

Table 7.3: Web Sites That US Online Video Viewers Visit to Watch Videos Once a Week or More

Web Site Percentage of Respondents YouTube 42% Television network, e.g., Abc.com 41% News site, e.g., CNN.com 35% Yahoo 25% Google 24% MySpace 19% iTunes 7% Other 19% Total (have watched online video) 74% Have never watched online 26%

Copyright © 2007 Pearson Education, Inc. Slide 7-14 Search Engine Advertising: Paid Search Engine Inclusion and Placement  One of fastest growing (from 1% of total online advertising spending in 2000 to >40% in 2007) and most effective forms of online marketing communications  Huge audience:  70 m illion Amer icans (>40% o f on line popu la tion ) use a search engine daily, almost comparable to email user pppopulation  In total, generating around 8 billion searches per month  Can be very effective by responding with ads matching the interests of users, creating click-through rate of 10- 12%

Search Engine Marketing Revenues

Copyright © 2007 Pearson Education, Inc. Slide 7-17 Search Engine Advertising: Paid Search Engine Inclusion and Placement  Types:  PidiliPaid inclusion  Paid placement  Keyword advertising  Merchants buy keywords through bidding for rankinggy and visibility of their ads on search result page  Google AdWords, Yahoo PrecisionMatch, Microso ft adCen ter  Network keyword advertising: Google AdSense

Search Engine Advertising: Paid Search Engg()ine Inclusion and Placement (cont’d)  Google, Yahoo, MSN are leaders in this technology  Issues:  Appropriate disclosure of paid inclusion and placement practices  Search engine click fraud  When competit or hires thir d par ties to frau du len tly c lic k on competitor ads to drive up costs)  When site publisher fraudulently clicks on ads posted on their sites to increase ad revenue  One variation is by using “click bots” that automatically click on ads from hundreds of different IP addresses  Fraudsters call up a search results page where their competitor’ ads appear, and do not click on competitor ads, resulting in low ad popularity rank, which can result in their being pushed down the rank order of ads  Ad nonsense (Google AdSense ads that are inappropriate for content)

 Sponsorship: Paid effort to tie advertiser’s name to particular information, event, venue ithtifbdiititin way that reinforces brand in positive, yet not overtly commercial manner  EWbMdE.g., WebMd.com prov idliktitides links to its sponsor like Philips’ product such as defibrillators  Affiliate relationship: Permits firm to put logo or banner ad on another firm’ s Web site from which users of that site can click through to affiliate’ssite s site

E-mail Marketing and the Spam Explosion  Direct e -mail marketing: E-mail sent directly to interested consumers who “opt-in” or have not “opted-out”  Much cheaper compared to traditional direct mail: $5-$10 per 1,000 VS $500- $700 per 1,000  Spam: Unsolicited commercial e-mail  Spam is exploding out of control—70%–80%ofall% of all e-mail purportedly is spam  Efforts to control spam: • Technology (Filtering software) (only partly effective) • Government regulation (CAN-SPAM and state laws) ((gylargely unsuccessful ) • Self-regulation by industry (ineffective) • Volunteer efforts (not enough) Copyright © 2007 Pearson Education, Inc. Slide 7-21 Percentage of E-mail That Is Spam Figure 7.6, Page 434

SOURCE: Based on data from MessageLabs.com, 2007.

Spam Categories Figure 7.7,Page, Page 435

SOURCE: Symantec, 2007. Copyright © 2007 Pearson Education, Inc. Slide 7-23 Other Forms of Online Marketing Communications  Online catalog  Provides equivalent of paper -based catalog  Was popular in early years, but quickly went out because pages took so long to load  Recently has gained back in popularity due to 54% of online households now own broadband high-speed connections in 2007  Blog advertising: Online ads related to content of blogs  Social network advertising: Ads on MySpace, Facebook, YouTube, etc.  Game advertising: downloadable ‘advergames’, ppglacing brand-name products within games

Targeted Marketing: Getting Personal

 Behavioral targeting efforts increasing; one of fttfastest growi ng onli ne mar ktithiketing techniques.  Recent acquisitions by Google, Yahoo, Microsoft of firms engaged in this type of marketing have raised concerns  Privacy groups, FTC are examining issues raised byyg targeted methods

Copyright © 2007 Pearson Education, Inc. Slide 7-26 Mixing Offline and Online Marketing Communications  The original idea of moving all traditional marketing based on mass media toward online approach did not happen  Traditional offline consumer-oriented industries have learned to use Web to extend brand images and sales campaigns  Online companies have learned how to use traditional marketing communications (printed media an dTV)tdid TV) to drive sa les tWbitto Web site  Most successful marketing campaigns incorporate both online and offline tactics

Online Marketing Metrics: Lexicon  Metrics that focus on success of Web site in achieving audience or market share  Impressions – no. of times an ad is served  Click-through rate (CTR) – % times an ad is clicked  View-through rate (VTR) – % times an ad is not clicked immediately but Web site is visited within 30 days  Hits – no. of http requests  Page views – no. of pages viewed  Stickiness (duration) – average length of stay at a Web site  Unique visitors – no. of unique visitors in a period  Loyalty – no. of pages viewed, frequency of single user visits to the site, % customers who return to site in a year  Reach – % site visitors who are potential buyers or % total market buyers who buy at a site  Recency – time elapsed since last action taken by a buyer, e.g., site visit or purchase

Copyright © 2007 Pearson Education, Inc. Slide 7-29 Online Marketing Metrics: Lexicon (cont’d)  Metrics that focus on conversion of visitor to customer  Acquisition rate – % visitors who register or visit product’s pages  Conversion rate – % visitors who make purchase  Browse-to-buy-ratio – ratio of items purchased to item views  View-to-cart ratio – ratio of “Add to Cart” clicks to product views  Cart conversion rate – ratio of actual orders to “Add to Cart” clicks  Checkout conversion rate – ratio of actual orders to checkouts started  Abandonment rate – % shoppers who add to cart but leave the site  Retention rate – % existing customers who continue to buy regularly (similar to loyalty)  Attrition rate – % customers who do not return during next year after first purchase Copyright © 2007 Pearson Education, Inc. Slide 7-30

Online Marketing Metrics: Lexicon (cont’d)

 E-mail metrics  OtOpen rate – %iliithdthil% email recipients who read the email message  Delivery rate – % email recipients who received the email  Click-througg(h rate (e-mail) – % recipients who clicked through to offers  Bounce-back rate – % emails that couldn’t be delivered  Unsubscribe rate – % recipients who click unsubscribe  Conversion rate (e-mail) – % recipients who actually buy

How Well Does Online Advertising Work?

 What’s the most effective kind of online ads?  How does online ad compare to offline one?  These depend on goals of campaign, nature of ppqyroduct, quality of Web site, and what you measure.  Click-through rates may be low, but this is just one measure of effectiveness  From the next figure, as consumers become more accustomed to new online advertising formats, click-through rates (for display ads and email) tend to fall.  However, this is not true of video and rich media

SOURCE: SOURCES: Doubleclick, 2007a, b; eMarketer, Inc., 2007c; author estimates.

How Effective is Online Advertising Compared to Offline Advertising?

 From the next figure, online channels compare fblithtditilhlfavorably with traditional channels  Search engine has grown to be the most cost effective form of marketing communications  Cost effectiveness of targgpeted opt-in email remains very strong  Research indicates that most powerful marketing campaigns include both online and offline advertising

The Costs of Online Advertising

 Cost per thousand (CPM): Advertiser pays for impressions in 1,000 unit lots  Cost per click (CPC): Advertiser pays pre- negotiated fee for each click an ad receives  Cost per action (CPA): Advertiser pays pre- negotiated amount only when user performs a specific action, e.g., register or purchase  Hybrid: Two or more of the above models used together

Internet search $8. 50 Yellow pages $20.00 OliOnline dildisplay a ds $50. 00 E-Mail $60.00 Direct mail $70.00 Newspaper $25.00 Magazine $19.00 Television $17.00

Software for Measuring Online Marketing Results

 WebTrends: Software program that automatically calculates activities at site, such as abandonment rate, conversion rate, etc.  Visual Sciences: Web service that assists marketinggg managers

The Web Site as a Marketing Communications Tool  Web site can be viewed as extended online advertisement  Domain name  First communication e-commerce site has with prospective customer  Should be short, memorable, not easily confused with others, difficult to misspell  Search engine optimization:  Register with as many search engines as possible  Ensure that keywords used in Web site description match keywords likely to be used as search terms by user  Place keywords in metatag and page title  Link site to as many other sites as possible (creating ads, Web sites, entering into affiliate relationships with other sites)  Get professional help

Copyright © 2007 Pearson Education, Inc. Slide 7-42 Web Site Functionality  Factors affecting effectiveness of a software interface:  Utility (useful)  Ease of use  Factors in credibility of Web sites:  Design look  Information design/structure  Information focus  Responsiveness

Factors in the Credibility of Web Sites Figure 7.13, Page 464

SOURCE: Based on data from Fogg, et al, 2002.