E-commerce
business. technology. society.
Fourth Edition
Kenneth C. Laudon
Carol Guercio Traver
Copyright © 2007 Pearson Education, Inc. Slide 7-1
Chapter 7
E-commerce Marketing Communications
Copyright © 2007 Pearson Education, Inc. Slide 7-2
Video Ads Cure Banner Blindness:
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 the challenges and risks of
placing video ads on the Web
• Do you think Internet users will ever develop
‘blindness’ towards video ads as well
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Actiontuners.com
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Marketing Communications
• 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
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Online Advertising
• 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
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Online Advertising from 2000-2011
Figure 7.1, Page 419
SOURCES: Based on data from eMarketer, 2007a, 2005a; IAB/PricewaterhouseCoopers,
2007, 2005; Universal McCann, 2007, 2005.
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Forms of Online Advertisements
• Display and rich media/video ads
• Search engine advertising: Paid search
engine inclusion and placement
• Sponsorships
s ps
• Referrals (affiliate relationship marketing)
• E-mail marketing
• Online catalogs
• Online chat
• Blog advertising
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Table 7.2: Online Advertising Spending
for Selected Formats
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%
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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
• Although 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.
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Types of Display Ads Specified by
Interactive Advertising Bureau (IAB)
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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
• Move automatically ti to the requested page after ad
is read for some time
• Good interstitial ads have option to “skip through” or
“stop” for users who aren’t interested
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Rich Media/Video Ads
• Superstitial ads
• Offered by Viewpointi • 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 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
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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%
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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 million Americans (>40% of online population) use
a search engine daily, almost comparable to email
user population
p
• 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%
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Search Engine Marketing Revenues
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Search Engine Advertising: Paid Search
Engine Inclusion and Placement
• Types:
• Paid inclusion
i
• Paid placement
• Keyword advertising
• Merchants buy keywords through bidding for
ranking and visibility of their ads on search
result page
• Google AdWords, Yahoo PrecisionMatch,
Microsoft adCenter
• Network keyword advertising: Google AdSense
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Search Engine Advertising: Paid Search
Engine 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 competitor hires third parties to fraudulently click
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)
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Sponsorships and Affiliate Marketing
• Sponsorship: Paid effort to tie advertiser’s
name to particular information, event, venue
in way that t reinforces brand in positive, yet
not overtly commercial manner
• E.g., WebMd.com provides 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’s site
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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
e-mail purportedly is spam
• Efforts to control spam:
• Technology (Filtering software) (only partly effective)
• Government regulation (CAN-SPAM and state laws)
(largely unsuccessful)
• Self-regulation by industry (ineffective)
• Volunteer efforts (not enough)
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Percentage of E-mail That Is Spam
Figure 7.6, Page 434
SOURCE: Based on data from MessageLabs.com, 2007.
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Spam Categories
Figure 7.7, Page435
SOURCE: Symantec, 2007.
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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’, placing
brand-name products within games
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Targeted Marketing: Getting Personal
• Behavioral targeting efforts increasing; one of
fastest t growing online marketing 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 by targeted methods
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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 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 and TV) to drive sales to Web site
• Most successful marketing campaigns
incorporate both online and offline tactics
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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
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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
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Online Marketing Metrics: Lexicon (cont’d)
• E-mail metrics
• Open rate – % email recipients i who read the email
message
• Delivery rate – % email recipients who received the
email
• Click-through 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
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An Online Consumer Purchasing Model
Figure 7.9, Page 452
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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
product, 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
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Click-through Rates by Format 2000–2005
Figure 7.10, Page 454
SOURCE: SOURCES: Doubleclick, 2007a, b; eMarketer, Inc., 2007c; author estimates.
Copyright © 2007 Pearson Education, Inc. Slide 7-34
How Effective is Online Advertising
Compared to Offline Advertising
• From the next figure, online channels
compare favorably with traditional channels
• Search engine has grown to be the most cost
effective form of marketing communications
• Cost effectiveness of targeted opt-in email
remains very strong
• Research indicates that most powerful
marketing campaigns include both online and
offline advertising
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Comparative Returns on Investment
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The Costs of Online Advertising
• Cost per thousand (CPM): Advertiser pays for
impressions in 1,000 unit lots
• Cost per click (CPC): Advertiser pays prenegotiated
fee for each click an ad receives
• Cost per action (CPA): Advertiser pays prenegotiated
amount only when user performs
a specific action, e.g., register or purchase
• Hybrid: Two or more of the above models
used together
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Average Cost Per Customer Acquisition
for Select Media in the US, 2006
Internet search $8.50
Yellow pages $20.00
Online display ads $50.0000
E-Mail $60.00
Direct mail $70.00
Newspaper $25.00
Magazine $19.00
Television $17.00
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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
marketing managers
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Web Site Activity Analysis
Figure 7.12, Page 459
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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
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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
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Factors in the
Credibility of
Web Sites
Figure 7.13, Page 464
SOURCE: Based on data from Fogg, et al, 2002.
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