Online Consumer Behavior

1
Online Consumer Behavior
2
Different Types of Buyers

• B2B
• Small business 1-75 employees
• Over 25 million businesses
• 66 buy online, 50 have web sites
• Large business 250 employees
• 90 buy online have websites
• Approximately 7 million businesses

3
B2B Purchasing

• 40 of all B2B sales are done online
• More than 4.8 trillion in sales

4
Different Types of Buyers

• B2C
• US population is over 286 million
• 4.6 of world population
• Aging
• Becoming more ethnically diverse
• Growth in non-traditional households (76.5)

5
Internet Usage

• 46 of sessions are to conduct business
• 27 are recreation driven
• 70 of users connect from home
• 44 online 1 hours per day
• Consumers see web as critical for access to
  information
• But consumers can be misled

6
Cyberspace Demographics

• 64 of US population is online
• 32 of users have college degree
• Higher incomes
• Most users tend to be 35-54 years old
• Teens (12-17) most rapidly growing group
• Digital wallets
• 100 of college students are online

7
Cyberspace Demographics

• 52 of Internet users are women
• make most retail decisions
• 70 of online sales are by women
• Minority Groups
• 26 of African Americans online
• 49 of Hispanics
• 69 of Asian Americans

8
Cyberspace Demographics

• 49 of users are in a city
• 70 of homes in Portland Seattle online
• Only 14 of users are rural consumers
• 8 of Internet users have a disability
• 4 are blind

9
World Usage Statistics (2005)
Region of World Population Internet Penetration 5 yr. Growth Rate
Africa 14 1.8 258
Asia 57 8.9 183
Europe 11 36.8 161
Middle East 4 8.3 312
10
What consumers do online

• Communicating
• email most used function
• ICQ fastest area of growth
• multi-tasking work communications
• Seeking information
• Replacement of the library
• Most sought information online is travel
• 35 of buyers book flights online
• 26 of consumers track stocks online

11
What are college students doing?

• College students
• 67 browse for topics of interest
• 62 conduct academic research
• 41 get news online
• 31 make travel plans

12
What consumers do online

• Purchasing
• B2C sales are steadily growing
• Higher income consumers more likely to buy online
• Women more likely to purchase online
• 81 of college students have purchased online
• US European Teens spent 1.3 billion online in
  2001

13
What consumers do online

• Gaming
• 30 of all Internet users play games online
• 62 of young adults
• 41 of those 50
• Men are more loyal largest group of gamers
• Prefer football outer space games
• Women prefer business simulations classic
  arcade games

14
Gaming Industry

• U.S. video game market, 6.9 billion in revenue
  (1999)
• PC Game market, 1.5 billion in revenue
• Online game revenue, 106 million (1999)
• From Sony Everquest, Electronic Arts Ultima
  Online, and Microsofts Asherons Call
• 10/month subscription fee
• Online game revenue, predicted to be over 800
  million by 2005

15
Gaming Industry

• Traditional video and PC games cost millions of
  dollars to produce
• Sell for about 30 each
• Online games are less complex and can be made for
  approximately 75,000

16
The Groove Alliance

• Game making firm
• Started with Real Pool on CD-Rom
• Trade show success
• 3D Groove Plug In
• Ability to embed ads on pool table
• Real Pool sold out right to Shockwave.com

17
The Groove Alliance

• Since that time sold many more games
• Non-exclusive licensing agreements
• Tank Wars
• Merchandising rights retained by Groove Alliance

18
What Consumers do online

• Entertaining
• Online music most popular among those less than
  20 years old
• Online music sales will be over 5.4 billion
  (2005)
• Napster Peer-to-Peer exchange phenomena
• iPod iTune phenomena

19
Online Dating Industry

• 516 million in revenues (2005)
• Over 850 online dating services
• 59 of daters find it difficult to meet someone
  new
• Most likely place to meet people
• Work (22), Internet (18), Bars (18), Clubs
  (11)
• Downsides stigma anonymity (married)

20
Key Players

• Match.com
• Yahoo! Personals
• eHarmony
• Lavalife
• Traditional dating firms
• Its Just Lunch
• Social networking communities

21
Match.com

• Conceived in 1993
• Owned by Interactive Corporation
• Ticketmaster
• Worlds largest online dating firm
• 900,000 paying subscribers
• 12 million profiles posted
• January (2004), 29.6 million unique visitors

22
Match.com

• Partnered with several firms
• America Online Microsofts MSN
• Subscriptions as low as 12.99 per month
• New services include
• video, off line speed dating, friend list, travel
  site, MatchLive off line events

23
What drives usage

• Growth of technology
• Time starved lifestyle
• Information hungry
• Changes in marketing
• Greater focus on direct marketing initiatives

24
Reasons Consumers Buy Online

• Convenience
• repeat purchase
• one-stop shopping
• Assortment
• millions of products
• comparison shopping
• Save money
• bargains, taxes, free shipping

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Yet online context is different

• Online consumer behavior differs from real life
• Quality cues
• Stability of firm and product quality hard to
  judge
• Cognitive difficulty
• Consumers get frustrated when they cannot easily
  find information

26
How is the Internet Unique?

• Product features
• Search versus Experience goods
• Search products services that are easy for a
  consumer to evaluate
• predictable brand names, can test product
  features
• Experience difficult to understand and evaluate
• complex, highly subjective

27
How is the Internet Unique?

• Flow (peak/optimal experience)
• seamless sequence of responses
• loss of self-consciousness
• intrinsically enjoyable self-reinforcing
• Experienced by web users
• Balance between capability challenge
• Implies skill learning on web

28
How is the Internet Unique?

• Community
• Create involvement, loyalty, traffic, profits
• Changes control of marketers
• Requires collaboration rather than orchestration
• Virtual communities rebuild declining social
  connections
• ICQ fastest growing part of Internet
• AOL has 19,000 chat rooms accessed at once
• Six of twenty most heavily trafficked web sites
  were community based in 1998

29
Community Characteristics

• Use of communication tools
• Rules that define membership
• A strong focus
• Collaborative production of material by members

• Repeat use by members
• Social bonds
• Growth can be problematic because focus can be
  lost content breaks down

30
Types of communities

• Personal communities small network of linked
  individuals
• mainly direct communication within a small group
  that is familiar with one another
• Extended communities many small sub-groups
  within an overarching structure
• flexible in scale and scope
• create more personalization in smaller niches

31
Ways to Communicate

• Rings of personal, direct links
• Email networks/listservs
• Can use groupware for joint content creation
• Size/growth may hurt rings
• Content trees with messages going through a
  central point
• Bulletin boards with hierarchies by topic area
• Help maintain focus but allow for growth

32
Membership rules

• Strong communities seem to have strict membership
  rules
• initiation rites challenging tasks create ties
• strong interests passions
• Weak communities have lenient rules
• consumers tend not to commit
• can still be used, but firms attempt to escalate
  membership

33
Benefits of Community

• Changes width breadth of referrals
• most consumers rely on 3 people for WOM
• easy access to experts to more precise
  information

34
Benefits of Community

• Attractive content loyalty
• builds more content
• reduces member turnover
• leads to more hours on a site
• creates trust collaboration with consumers
• Form of marketing research
• Potentially sell profile information

35
EBays Community Mission

• We help people trade practically anything on
  earth. EBay was founded with the belief that
  people are honest and trustworthy. We believe
  that each of our customers, whether a buyer or a
  seller, is an individual who deserves to be
  treated with respect. We will continue to
  enhance the online trading experiences of all our
  constituentscollectors, hobbyists, small
  dealers, unique item seekers, bargain hunters,
  opportunistic sellers, and browsers. The growth
  of the EBay community comes from meeting and
  exceeding the expectations of these special
  people.

36
Hard to utilize

• Predicted to be a great Internet business model
• Many firms not able to capture it for
  profitability
• Those that exist have declining membership rates
  are costly to maintain

37
Negative Consumer Behaviors

• Social isolation
• Increased usage online leads to
• Decline in social interaction
• Increase in loneliness depression
• Less likely to shop in person, read the paper
• Internet addiction
• Loss of sleep
• Loss of physical relationships

38
Negative Consumer Behaviors

• Anti-corporate activism
• Unprecedented consumer power
• Complaint hate websites
• www.complaints.com
• www.walmart-blows.com
• www.gapsucks.org
• Corporate reactions
• Buy, Monitor, Respond, Ignore

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Interactivity The Six Is of Customer
Satisfaction

• Using Technology to be
• More Customer Focused

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OnStar

• Started in 1995
• Nations leading provider of in-vehicle safety,
  security, communications services
• Wirelss Global Positioning systems
• Telematics
• 4 million subscribers
• 2005, Standard on all new GM vehicles
• More than 50 models

41
OnStar

• Over 10 years, serviced 53 million subscriber
  interactions
• Average month
• 383,000 routing calls
• 43,000 remote door unlocks
• 23,000 road side assistance
• 27,000 remote vehicle diagnostic checks
• 15,000 emergency service requests
• 400 stolen vehicle assistance

42
OnStar

• Advanced Automatic Crash Notification System
  (AACN)
• Started in Malibu, 26 models by 2006
• Hands free calling (2000)
• 630 million minutes sold to subscribers
• New Command Center
• With OnStar sound studio for digital broadcasting

43
OnStar

• Strategic Alliances
• Leading public safety emergency medical
  organizations
• Association of Public Safety Communications
  Officials (APCO)
• Agencies supporting efforts to find missing
  children
• Americas Most Wanted

44
OnStar

• Award-winning advertising campaign
• Real Stories launched in 2002
• Users share life changing experiences
• 2005, OnStar brand reached 100 brand awareness
  among new vehicle buyers
• 80 of subscribers will only consider vehicles
  with OnStar for next purchase

45
Growth in Interactive media

• Marketers are
• Searching for new segments
• Wanting more efficient targeting
• Demanding more relevant consumer information

46
Growth in Interactive media

• Technology now offers more control of information
  marketers receive
• Interactivity is one area where marketers can use
  technology to more effectively reach out to the
  consumer

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Dimensions of Interactivity

• Selectivity
• extent to which users are offered content choices
• such as entertainment or shopping
• expands consumers options content
• able to deliver to more relevant personalized
  information to the customer

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Dimensions of Interactivity

• Ease of effort
• extent to which users must exert themselves to
  access content
• consumer confusion frustration with systems
  should decrease overtime

49
Dimensions of Interactivity

• Use monitoring
• extent to which the system monitors use
• monitor information, choices, track behaviors
• feedback to marketer, greater control with use of
  databases
• raises privacy issues

50
Dimensions of Interactivity

• Responsiveness
• degree to which a medium reacts to a user
• circumvent users prejudgments to prevent
  screening out of material
• allow for more focused shopping experiences
• can better cross sell

51
Dimensions of Interactivity

• Ease of Adding Content
• extent to which users may add material to the
  system that a mass audience can access
• users become sources of information
• word of mouth/brand advocates
• consumer complaints become more relevant

52
Dimensions of Interactivity

• Interpersonal Communication Potential
• extent to which media facilitates interpersonal
  communication
• Person-to-person interaction
• bi-directionality of communication relationship
  
• greater involvement with other consumers the
  marketer

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Dimensions of Interactivity

• Asynchronicity
• extent to which messages can be preserved and
  shifted at convenient times
• message permanence
• can combine information in personally relevant
  ways

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Interactivity

• Responsiveness is the most common feature used on
  web sites
• Systems are not yet meeting all consumer needs

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Customer Focus

• In addition to interactivity, marketers have
  other tools that they use to improve customer
  satisfaction
• ?Interconnection ? Interface
• ? Interactivity ? Involvement
• ? Integrity ? Individualism

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Interconnection

• Using networks to connect to individuals
• Internet is the worlds largest computer network
• Other technological human networks
• Requires establishing a network business strategy

57
Interface

• Creating digital assets that can be displayed or
  purchased
• Ease of use is especially important
• Primarily about communication
• An Effective interface should be designed to
  move people through the buying process
• May require cooperation of all functions of a
  business

58
Interactivity

• Facilitates relationship marketing
• Define previously
• Makes it easier and less expensive to
• create dialogue with customers
• gather consumer information
• give consumers greater choice options

59
Involvement

• Drawing customers into the marketing experience
  relationship
• increasing customer commitment
• truly adding value for the customer
• providing valuable information
• building unique experiences
• creating products/services that a customer relies
  on exclusively

60
Individualism

• Getting beyond segmentation to understanding and
  tracking individual
• direct marketing
• Can be a spectrum from use monitoring to
  interactive dialogue
• Databases used to mass customize communicate to
  individual measure effectiveness of messages

61
Integrity

• Privacy, security, confidentiality crucial
• Ethics become especially important
• Raises issues ?unsolicited email
• ?storing sensitive information

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Selling Online

• And Channel Issues

63
Marketing Mix
Product Strategy
Pricing Strategy
Promotion Strategy
Distribution Strategy
Channel Strategy component
Logistics Management component
The Marketing Mix
64
Channels of Distribution

• Supply channel brings materials supplies to
  manufacturer
• Distribution channel moves product from
  manufacturer to consumer
• thought to make the process of getting product to
  market more efficient
• Can carry broader product lines categories
• Are closer to the customer can develop
  knowledge/profile of target market

65
Channel Functions

• Market makers
• Buyers agents
• Seller agents
• Payment enablers
• Fulfillment providers
• Context providers

66
Product Flow
Negotiation Flow
Ownership Flow
Information Flow
Promotion Flow
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Transportation Company
Transportation Company
Transportation Company
Wholesalers
Wholesalers
Wholesalers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
Consumers
Consumers
The Five Flows
67
Two-Level
Three-Level
Four-Level
Five-Level
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Agent
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer
The Channel Structure
68
Distribution Strategies

• Direct distribution manufacturer to buyer
• Build-to-order direct sales
• mass customization
• Dell (1999) selling 40 million worth of
  computers on the web daily
• 75 of orders placed online
• 50 technical support online
• 2002 extended direct sales to kiosks in retail
  malls
• try product, place order on kiosk

69
Distribution Strategies

• Direct digital distribution some products will
  be completely digital someday
• music, airline tickets, hotel reservations, video
  games, magazines, newspapers, movie tickets,
  financial services
• Internets ease of creating direct distribution
  channels already impacting industries

70
Distribution Strategies

• Disintermediation--dropping layers of
  distribution channel
• travel agents, financial services, florists
• Delta sold 13 of tickets online in 2000
• 2001, travelers spent 19.4 billion purchasing
  tickets online
• Reintermediation--add layers
• real estate

71
Distribution Strategies

• Some firms have created exclusive distribution
  agreements
• Levis (1998 manufacturer sells online 2000
  exclusive arrangements created)
• Multichannel Distribution--2 or more distribution
  channels to better reach customers
• Gateway web site, telephone, retail stores
• Charles Schwab 24/7 channel strategy

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The Go-to-Market Strategy

• A plan for reaching serving the right customers
  in the right markets through the right channels
  with the right products and the right value
  proposition
• Total customer experience
• Attract most desirable customers
• High sales
• Lowest possible cost

73
The Go-to-Market Strategy

• An integrated multi-channel model
• Low cost, low touch channels
• Direct mail, Internet, Telephone
• High cost, high touch channels
• Volume distributors, Value-added partners, Field
  sales forces
• Take better advantage of low cost, low touch
  channels where appropriate

74
The Go-to-Market Strategy

• Make multiple channels work together
• Channels take on specific roles within the sales
  cycle
• Move lead generation to telephone sales
• Integrate the channels through information
  systems
• Management Information System (CRM)
• Designed for a specific target market
• Goal seamless customer experience

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Distribution Issues

• Channel Cannibalization loss of sales in one
  channel when a new one is created
• sales shifting from catalog to online
• Channel conflict can exist
• Goals diverge among channel members
• Disputes arise over responsibility for functions
  technology

76
Staples

• Sells office supplies, business services,
  furniture, and technology
• Locations in six countries
• 11 billion in annual sales
• 1 billion in online revenues (2001)
• 1,400 stores, catalog, kiosks
• Website first established in 1998

77
Staples

• Staples thought web would cannibalize other sales
• web actually increased sales
• Average yearly spending of small business
  customers increased 600 ? 2800 when shopped
  online
• When buyers shop all 3 channels, purchases are
  4.5 times greater than if shop only 1 channel

78
Web Channels

• Clicks only
• 1998 Venture capital firms provided 26 billion
  to Internet start-ups
• Average return for venture Internet start-up
  funds 25 (1998)
• Leading funds returning 100
• Most opportunities were cash burning companies
• just launched their services
• not attracted a customer base

79
Web Channels

• Mid-2000 IPO Internet Bubble
• An estimated 700-1000 of these Internet start-ups
  went bust
• Boo.com
• Toysmart.com
• Brandwise.com
• Clickradio.com

80
The Case of Amazon.com

• Opened virtual doors in 1995
• Evloved from books to department store
• Sells products in 220 countries
• Created first catalog in 2001

81
The Case of Amazon.com

• Personalized customer interaction
• Top etailer for brand recognition customer
  satisfaction
• 2003, earned first quarterly profit not tied to
  the holiday shopping season
• Exclusive partnerships with Target, Circuit City,
  Toys R Us, and Babies R Us

82
Web Channels

• Bricks clicks
• 70 of online retailers are bricks clicks
• outnumber clicks only
• In 2000, 33 of total bricks clicks sales were
  from the Internet

83
The Case of Walmart

• Opened in 1962
• Largest mass merchandiser
• 1.4 million employees, 4000 stores
• 218 billion in annual sales
• 100million customers visit each week
• 2001-2002 sales growth was 14
• First website in 1995

84
Walmart.com

• Founded in January 2000, initially independent
  from Wal-Mart Stores, Inc.
• Eventually integrated as separate business unit
• Return policy for online purchases in store
• Offers more than 600,000 stock keeping units

85
Walmart.com

• When independent had sales tax advantage
• Considering rolling out in-store kiosks
• Strategy Serve customers in the way they want
  to be served where they want to be served

86
What consumers want from online storefronts

• Convenience--75 of shoppers go online for this
  reason
• want it for returns too
• Information
• about store policies, product information,
  contact information,
• Sears estimates that 10 of its store appliance
  sales are influenced by information from
  Sears.com

87
What consumers want from online storefronts

• Speed
• want option of same day delivery
• Privacy Security
• want privacy policy
• studies show apprehensiveness about purchasing
  online with credit card
• yet 59 of sample reported using them

88
What consumers want from online storefronts

• Service
• want timely, human feedback
• Simplicity
• want simple, easy to use site technology
• Convergence
• want sites that feel like offline stores

89
Etailing

• Internet retailing 3rd most significant
  transformation of retail industry
• 1950s--shopping malls arrived
• 1970s--large discount stores nationwide chains
  arrived
• 1990s--Internet arrival
• 50 of Internet users were shopping online (2001)

90
Etailing

• 3.5 billion spent on online shopping in month of
  March, 2001
• top categories travel apparel
• Amazon sales leader 15.1 of online purchases,
  EBay second 14.5
• Online customer acquisition costs are 18 per
  person
• Online returns average 8 of online purchases
• higher in some categories, such as apparel

91
Etailer Decisions

• Service level
• Products Assortment
• Inventory turns
• Prices
• Returns After Market Service
• Trust Privacy
• Payment facilitation

92
An Etailer Predicament

• Shopping Basket Abandonment
• 65 of consumers leave their shopping basket
  before sale is completed
• Reasons
• Sticker shock at total shipping costs
• 40 experience technical difficulties
• Too complex order forms that take too long to
  download
• stock-outs, computer crash, rejected credit card,
  change mind at last minute

93
Customer Relationship Management (CRM)

• Managing the Individual Marketing Relationship
  Using Technology

94
Marketing to Individuals

• Segment homogenous group similar
  characteristics/buying behaviors
• A one-to-many communication model
• With CRM, marketers target the individual
• Direct interaction to create customer value,
  benefit the marketer, build relationship
• A one-to-one interactive communication model

95
Individual Personalization

• Beyond era of mass marketing
• Product differentiation through personalization
• unique solution for each individual
• features that benefit the individual
• match customer tastes without waste
• Yet, hard for consumers to sort through so many
  options hard to implement

96
Choice Assistance

• Online techniques databases can assist
  consumers in locating the best options for
  themselves
• set of products
• determine individuals tastes needs
• make recommendation
• simplify selection

97
Lands End

• Opened in 1963 as the Lands End Yacht Stores
• Averaged 15 mail orders per day
• Bought by Sears in 2002 for 1.9 billion
• 2005, Fifteenth largest mail order firm
• Annual sales of over 1.3 billion
• Target quality-conscious, middle-age consumers
  with traditional casual apparel

98
Lands End

• Direct merchant that acts as its own intermediary
• Multi-channel merchant
• Catalogs, stores, and website
• 269 million catalogs mailed in 2001
• 16 outlet and inlet stores in three countries
• Website online in 1995, initially offering 100
  products
• Today, every product in catalog sold online

99
Lands End

• 15 million web site visitors (1999)
• 61 million in revenue
• Considered worlds largest apparel website
• Known for customer service
• First firm with 24/7 order taking 800 number
• Lands End Live (talk with personal shopper)

100
Lands End

• Website also customer service oriented
• Lands End My Personal Shopper (live chat)
• Online style advice
• Swim suit fitting
• Three-dimensional model
• Build an oxford shirt

101
Lands End

• Online orders filled through catalog warehouse
• Size of 16 football fields
• Sort 10,000 pieces per hour
• Ship 150,000 orders per day
• Example of CRM using a multi-channel model
  resulting in seamless customer experience

102
Customization

• Mass customization combines individual level
  information with flexible manufacturing processes
• Web is efficient method of gathering information
  inputting it into production
• Democracy of goods technology can make
  available what used to be only for the very rich

103
Different types of customization

• Adaptive same basic product, users filter
  possibilities
• Cosmetic standard product, presented
  differently
• Transparent unique products without alerting
  customers
• Collaborative dialogue to articulate needs,
  identify offerings, customize products

104
Implication

• Can personalize as a point of differentiation
  create competitive advantage
• products web sites become problem solving tools
• online banking industry example

105
Relationship Building

• Efforts

106
Communication techniques

• Push communication techniques
• direct, forced communication
• email advertisements, banners/pop-ups, publicity
  
• Pull techniques
• indirect, on-demand communication
• more interactive
• viral marketing efforts, sign up for newsletter,
  links
• Creates value for both parties

107
Communication goals

• Create specific communication goals to build
  relationships
• sales/transactions
• dialogue/discussions
• research/gathering information
• service/disseminate information
• support/problem solving
• lead acquisition/new opportunities

108
Strategies Underlie these Goals

• Consumers strategies
• -life savings reward
• -fewer irrelevant ones
• -wider availability
• -seller responsiveness
• Adding value is key

• Marketers strategies
• -lifetime customer value
• -targeted messages
• -distribution efficiency
• -customer dialogue
• Involving consumers is important

109
Different Types of Relationships

• One half of relationship involves creating value
  for customers by exceeding expectations
• Can market at different individual levels,
  focusing on
• acquisition, development, or retention
• Can calculate potential ROI to figure out where
  best to focus efforts

110
Acquisition

• Initial cost of bringing in a new customer
• Can be reduced with online activities
• Should answer 3 questions, which are enhanced
  with online activity
• what to say to the customer
• when to make contact
• how much to spend on communicating with each
  customer

111
Development

• Expanding on share of customer
• Additional business from current customers
• Rely on learning and personalization
• Match or build services to tastes
• Customize to individual
• Bundling may occur
• Trust reliability become important

112
Retention

• Focus on keeping business and loyalty of current
  customers
• Online enhancements can inexpensively support
  loyalty
• Include product support with original sale
• May want to subsidize retention, even if it is a
  short-term loss

113
Peppers Rogers Group

• 13 offices around the world
• From US to Turkey
• 400 annual seminars
• Coined term one-to-one marketing
• Turned into CRM
• Customer based business strategies
• Know customer use that information to increase
  ROI
• Case studies

114
Implementation One-to-One Marketing

• Focus on share of customer
• Communicate to customers as individuals
• Initiate maintain dialogues to learn
• but marketers must be responsive
• Use the Internet Databases to track,
  understand, communicate with individuals
• Differentiate customers, spend more on those
  who are more valuable

115
Implementation continued

• Customer speak-gtmarketer listen, make together
• Customer makes offer to group of marketers,
  self-selection to create product
• Success is measured as lifetime value of a
  customer
• Single customer, more products (share of customer)

116
Summary CRM steps

• Identify record customers
• Sort them by needs, ideally treat as individuals
• Interact with them effectively
• Record interactions

• Customize marketing offer
• Update information in databases
• Sell the same customers more products in future

117
Organizing a Marketing Department
118
Marketing department organization

• Organized by
• geography (region)
• product (product management)
• brands (brand management)
• customer
• often used for e-commerce
• executive view --broad understanding of full
  marketplace

119
Customer management

• Specialization by customer portfolio
• Manager owns a group of customers and is
  responsible for their activity
• customers are tracked attempt is made to get
  greater share of customer
• Weakness is the range of knowledge needed for
  successful management

120
Databases Data Mining
121
Operational Data Tools

• Techniques marketers use to learn more about
  their own operations, competitors, and customers
• Includes
• databases data warehouses
• cookies server log files
• web analytics

122
Database

• Collection of data structured for quick retrieval
  of pieces for analysis application
• History
• 1960s-how much your firm spent on advertising
  this year
• 1980s-advertising dollars by state year
• 1990s-drill down to city/month/zip code
• 2000s-predictive, based on past, what are we
  likely to spend in future? How will this affect
  sales?

123
Database

• Benefits of use
• Identify best/worst customers
• Better target promotions to customers
• Help customers find what they need
• Establish two-way communication with customers
• Integrate data across business divisions
• Track competitors

124
Database

• Marketing Data collected
• Markets
• Segments
• Competitors
• Suppliers
• Partners

125
Data

• Consumer data collected
• Demographics, geodemographics
• Transaction histories
• Lifestyle
• Behaviors
• clickstream, time spent on site
• Technical specifications
• browser type

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Databases

• Marketers suited for CRM activities
• customer contact
• identify customers for special offers
• cross or up-selling
• tailoring advertising messages
• predicting purchase rates

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Database Planning Design

• Usually done by IT department
• Plan to decide what they want where to get it
  from
• Organized by files, records, fields
• In-house database build from company data
• Compiled database buy from others who collect
  data

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Double Click

• Online advertising firm
• Started in 1996
• Purchased data warehouse firm Abacus in 1999
• Owns database with over 3.5 billion transaction
  from 90 million US households
• Largest proprietary buyer behavior database in US

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Double Clicks Abacus

• Abacus Database Products
• B2C Alliance consumer focused catalog
  specialty retail marketers
• Data from over 90 million households
• B2B Alliance direct response marketers
• Data from over 75 million business contacts that
  are actively purchasing

130
Double Clicks Abacus

• Abacus Database Products
• Retail Solutions specialty retailers who want to
  increase store traffic within a defined trade
  area
• Highly targeted mailings for increased store
  sales
• Data Management Solutions customized solution
  for targeting right customers with best offer
• Multichannel databases, cross channel
  measurement, data processing, and
  strategic/analytic services to assess your
  customers behaviors

131
Data Warehousing

• Store houses for massive amounts of data

132
Data Mining

• Software systematically sifts through databases
  looking for significant patterns correlations
• Used to create predictive relationships
• profile credit card purchases
• probability a customer will purchase 500 of
  goods from a catalog
• more than filtering, make predictions

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Jiffy Lube

• Began data warehouse project (1998)
• Head of marketing, IT, Enterprise data manager
• Took 7 months to plan
• Longer to load 35 million vehicle records
• When Parent, Pennzoil, bought Quaker State added
  another 15 million records
• Used to profile most profitable customers
• Target them with direct mail offers of services
  that match their interests

134
Privacy Sensitive Tools

• Cookies small data files automatically placed on
  a users browser by a web sites server
• used to track gather information
• Bugs electronic GIF images placed by 3rd party
  media research companies
• collects cookie information on more than one site

135
Privacy Sensitive Tools

• Server Logs plain text files that track web data
• interpreted by reporting programs
• users name, place requested, whether file was
  received or not, size of file, browser used,
  date/time of request, presence of firewall or not
• traffic counters
• Web Analytics collecting, organizing analyzing
  data for marketing applications

136
Marketing Research
137
Overview of Marketing Research

• Primary vs Secondary Research
• Qualitative vs Quantitative Methods
• Research process
• state problem/question, develop plan, collect
  organize data, analyze data, report results
• Traditional research moving online
• New methods developing for e-commerce

138
Methods Moving Online

• Qualitative
• Focus Groups Online Brainstorming
• Interviews Chat Analysis
• Quantitative
• Surveys Panels
• Reviews Conjoint analysis
• Simulations

139
Online Focus Groups

• Earliest use documented in 1994
• Outgrowth of chat room technology
• Originally limited to Internet topics
• Serious trade publication coverage began about
  1998
• Now used for wide variety of topics
• Researchers divided on applicability

140
Process

• Determine target population
• Arrange technical resources logistics
• Recruit sample
• Re-screen sample
• Identity Internet, computing ability
  resources
• Conduct focus group(s)
• Prepare transcripts
• Generate analysis and reports

141
Demonstration
142
Advantages

• Speed
• Avg. turnaround time 5 business days
• Transcripts available immediately
• Analysis and reports generated sooner
• Cost savings
• Travel
• Focus group facility rental/catering
• Transcription
• Access difficult-to-reach populations
• Specific user groups

143
Advantages

• Quality of Response
• Less opportunity for only a few participants to
  dominate (potentially)
• Inclusive most respondents answer every question
• Anonymity increases participants' candor and
  interaction with moderator
• Private treatment of "sensitive" topics

144
Disadvantages

• Online populations not representative
• No auditory and visual cues
• Tone of voice, Facial expressions, Body language,
  Gestures, Group interactions
• Reliance on "emoticons
• ???, JK LOL
• Participant Resources
• Level of Internet experience, Typing/Writing
  skills, Quality of computer and software

145
Other Issues

• Other Issues
• Site security
• False identities
• Attention to topic vs. external stimuli
• Maximum of 6 respondents suggested
• Labor Intensive
• Still Experimental...

146
Measuring Effectiveness of Interactive Media

• Began with Web Advertising

147
Measurement

• Most Measures tell cost effectiveness
• not tell if achieved desired effect
• Can refine media creative choice in real time
• Hit Stickiness were first widely accepted
  standards
• Found to be weak, but still used widely today
• Potential Industry Standard?

148
Hits

• The number of files served from a page
• When a visitor requests a page it is served,
  hits are the number of ads in the page
• 3 banner ads, 1 graphic, 1 sponsorship--5 hits
• Fails to identify contact between ad visitor
• Does not track what happens after page opens

149
Clicks

• Click Through when a visitor clicks on a banner
  ad, activates link, goes to site
• does not capture purchase information
• Click Rate Percentage of times ad is clicked
  divided by number of times served
• ad on Yahoo comes in front of a visitor 500
  times, it is clicked 10 times, 2 click rate
• Conversion Rate rate of those who click buy
  (buyers/viewers)

150
Impressions

• Opportunity to see an ad/number of times
  available for viewing
• CPM--cost per thousand--pricing mechanism for ads
• vary for value of host site
• 2001 average CPM was 33/1,000 impressions
• Pages Number of pages downloaded from a site
  (but visitor may not view each page)

151
Visitors

• The total number of people who visit a web site
  in a period of time
• If someone visits multiple times, each time is
  counted (duplication)
• Unique visitor unduplicated number of people
  visiting in period of time
• identified by cookies or IP
• Eyeballs number of site visitors that see an ad

152
Stickiness

• Stickiness total impressions/month divided by
  unique visitors/month
• captures attractiveness
• Other relevant terms
• Rate -- cost of placing ad
• 2000, CPM for health fitness 42.50 average
• 2000, CPM for general news 37.47 average

153
Other relevant terms

• Reach--Percentage of users visiting site and
  exposed at least once in campaign
• Frequency--number of times visitor is exposed in
  campaign
• Run--specified length of time an ad will run on a
  site
• There are firms that specialize in these metrics

154
Usability Studies

• An Emerging Technique

155
Usability

• The measure of the quality of a user's experience
  when interacting with a product/system
• Applies to a Web site, software application,
  mobile technology, or any user-operated device

156
Oops I shook the whole cabinet
157
My comp has gone Nuts!
158
Hey I am really confused
159
Its so clear!!!!
160
Importance

• No manual for a Web site
• Large number of options
• Loss of sales - 50 of the potential sales from
  sites are lost because consumers cannot find what
  they want
• Loss of repeat visits - 40 of visitors do not
  return to a site when their first visit results
  in a negative experience

161
Goals for usability testing

• Diagnosing problems
• Comparing alternatives
• Verifying that you have met goals
• Elements ease of learning, ease of use,
  memorability, error frequency/severity,
  subjective satisfaction

162
Steps in Usability Testing

• Plan scope, issues, participants, location,
  budget
• Develop scenarios
• Recruit test participants
• Conduct usability testing
• Draw conclusions from results

163
Sample Test Contents

• Do users complete a task successfully?
• If so, how fast do they do each task?
• Is that fast enough to satisfy them?
• What paths do they take in trying?
• Do those paths seem efficient enough to them?
• Where do they stumble? What problems do they
  have? Where do they get confused?
• What words or paths are they looking for that
  are not now on the site?

164
Use of the test results

• Compile the data from all participants
• List the problems
• Sort the problems by priority and frequency
• Develop solutions
• Get expert advice if the solutions are not
  obvious
• Fix the problems
• Test the revised version to ensure you made the
  right design decisions