INSY 3330 Chapter 6 (copy)

The Online Purchasing Decision

Five Stages in consumer decision progress

– Awareness of need

– Search for more information

– Evaluation of alternatives

– Actual purchase decision

– Post-purchase contact with firm

Shoppers

Over 90% of Internet users

– Over 78% are buyers

– 13.2% are browsers (purchase offline)

Big Ticket Items ($1000 or more)

– Travel, computer hardware, electronics

– Consumers now more confident in purchasing costlier items

Small Ticket Items ($100 or less)

– Apparel, books, office supplies, software, etc.

How shoppers find online vendors

– Highly intentional, goal-oriented

– Search engines

– Marketplaces (Amazon, eBay)

– Specific retail site

About 8% of Internet users don’t shop online

– Trust factor

– Hassle factors (shipping costs, returns, etc.)

Two most important factors shaping decision to purchase \n online:

Utility:

▪ Better prices, convenience, speed

Trust:

▪ Perception of credibility, ease of use, perceived risk

▪ Sellers develop trust by building strong reputations for honesty, fairness, delivery

Features of Internet marketing (versus. traditional)

– More personalized

– More participatory

– More peer-to-peer

– More communal

Traditional online marketing

– Search engine, display, e-mail, affiliate

Social marketing

– Social networks, blogs, video, game

Mobile marketing

– Mobile/tablet sites, apps

Offline marketing

– Television, radio, newspapers

Website functions to:

– Establish brand identity and customer expectations

▪ Differentiating product

– Anchor the brand online

▪ Central point for all marketing messages

– Inform and educate customer

– Shape customer experience

Online advertising

– Display, search, mobile messaging, sponsorships, classifieds, lead generation, e-mail

– Advantages:

▪ 18–34 audience is online

▪ Ad targeting to individuals

▪ Price discrimination

▪ Personalization

Search engine marketing (SEM)

– Use of search engines for branding

Search engine advertising

– Use of search engines to support direct sales

Types of search engine advertising

– Paid inclusion

– Pay-per-click (PPC) search ads

▪ Keyword advertising

▪ Network keyword advertising (context advertising)

Social search

– Utilizes social contacts and social graph to provide fewer and more relevant results

Search engine issues

– Paid inclusion and placement practices

– Link farms, content farms

– Click fraud

Display advertising issues

– Ad fraud

– Viewability

– Ad blocking

Direct e-mail marketing

– Messages sent directly to interested users

– Benefits include:

▪ Inexpensive

▪ Average around 3% to 4% click-throughs

▪ Measuring and tracking responses

▪ Personalization and targeting

E-mail marketing challenges

– Spam

– Anti-spam software

– Poorly targeted purchased e-mail lists

Spam

• Unsolicited commercial e-mail

• Around 55% of all e-mail in 2017

• Most originates from bot networks

• Efforts to control spam have largely failed:

– Government regulation (CAN - SPAM)

– State laws

– Voluntary self-regulation by industries (DMA)

– Canada’s stringent anti-spam laws

Affiliate marketing

– Commission fee paid to other websites for sending customers to their website

Viral marketing

– Marketing designed to inspire customers to pass message to others

Lead generation marketing

– Services and tools for collecting, managing, and converting leads

Social marketing and advertising

– Use of online social networks and communities

Mobile marketing and advertising

– Use of mobile platform

– Influence of mobile apps

Local marketing

– Geotargeting

– Display ads in hyperlocal publications

– Coupons

Customer retention strategies

– One-to-one marketing (personalization)

– Behavioral targeting (interest-based advertising)

– Retargeting

Customer service

– FAQs

– Real-time customer service chat systems

– Automated response systems

Pricing

integral part of marketing strategy

Pricing Strategies

• Free and freemium

• Versioning

• Bundling

• Dynamic pricing

– Auctions

– Yield management

– Surge pricing

– Flash marketing

Long Tail Marketing

• Internet allows for sales of obscure products with little demand

• Substantial revenue because:

– Near zero inventory costs

– Little marketing costs

– Search and recommendation engines

Internet’s main impacts on marketing:

– Scope of marketing communications broadened

– Richness of marketing communications increased

– Information intensity of marketplace expanded

– Always-on mobile environment expands marketing opportunities

Web Transaction Logs

• Built into web server software

• Record user activity at website

• Provides much marketing data, especially combined with: – Registration forms

– Shopping cart database

• Answers questions such as:

– What are major patterns of interest and purchase?

– After home page, where do users go first? Second?

Types of tracking files

– Cookies

– Flash cookies

– Web beacons (“bugs”)

– Tracking headers (supercookies)

Databases

• Enable profiling

• Store records and attributes

• Database management system (DBMS):

• SQL (Structured Query Language):

– Industry-standard database query and manipulation language used in a relational database

• Relational databases

Data warehouse

Collects firm’s transactional and customer data in single location for offline analysis by marketers and site managers

Data mining

Analytical techniques to find patterns in data, model behavior of customers, develop customer profiles

Big data

– Petabyte, exabyte range

– Web traffic, e-mail, social media, content

– Traditional DBMS unable to process these Internet of Things

Hadoop

– Open-source software framework

– Processes any type of data, even unstructured

\- Distributed processing

Marketing automation systems

Track steps in lead generation

CRM systems

– Manage relationship with customers once purchase is made

– Create customer profiles

Customer data used to:

– Develop and sell additional products

– Identify profitable customers

– Optimize service delivery, and so on

Audience size/market share metrics

E.g. impressions, click-through rate (CTR), page views, viewability rate, stickiness, loyalty, reach, recency

Conversion to customer metrics

E.g. acquisition rate, conversion rate, browse-to-buy ratio, cart conversion rate, abandonment rate

Video ad metrics

E.g. view time, completion rate

E-mail campaign metrics

E.g. open rate, delivery rate, click-through rate, bounce-back rate

Pricing models

Barter, cost per thousand (CPM), cost per click (CPC), cost per action (CPA), hybrid, sponsorship

Measuring issues

Correlating online marketing to online or offline sales

Marketing Analytics

• Software that analyzes data at each stage of the customer conversion process

– Awareness

– Engagement

– Interaction

– Purchase activity

– Loyalty and post-purchase

• Helps managers

– Optimize ROI on website and marketing efforts

– Build detailed customer profiles

– Measure impact of marketing campaigns