CAP. 8 Flashcards
Introduction
CIO magazine (Wailgum, 2017): a customer relationship management (CRM) system will: help you better understand your customers’ needs and how to meet those needs whilst enhancing your bottom line. CRM systems link up info about customers from a variety of sources, including email, websites, physical stores, call centres, mobile sales and marketing and adv efforts. CRM data flows between operational system and analytical systems that sort through CRM data for patterns.
An effective CRM strategy can help an organisation increase revenues by:
* Providing products and services that are exactly what customers want;
* Offering better customer service;
* Cross-selling products more effectively;
* Helping sales staff close deals faster;
* Retaining existing customers and discovering new ones.
The application of technology to support CRM is a key element of digital business. Failure to build relationships largely caused the failures of many online businesses following huge expenditure on customer acquisition. Reichheld and Schefter (2000): acquiring online customers in the retail is so expensive that such start-up companies may remain unprofitable for at least two to three years; if you can keep customers loyal, their profitability accelerates much faster than in traditional businesses; it costs you less and less to service them. The relationship between customer loyalty and profitability has been questioned by Reinartz and Kumar (2002): there was little or no evidence to suggest that customers who purchase steadily from a company over time are necessarily cheaper to serve, less price sensitive, or particularly effective at bringing in new business.
Companies that base their marketing focus on the simple assumption that loyal customers are the most profitable will miss opportunities in targeting other potentially profitable customers.
The four marketing activities that comprise CRM involve:
1. Customer selection: defining the types of customers that a company will market to. Identifying different groups of customers for whom to develop offering and to target during acquisition, retention and extension. We may want to selectively target customer types who have adopted digital channels.
2. Customer acquisition: marketing activities to form relationships with new customers minimising acquisition costs and targeting high-value customers. Service quality and selecting the right channels for different customers are important.
3. Customer retention: marketing activities undertaken by an organisation to keep its existing customers. Identifying relevant offering based on their individual needs and detailed position in the customer lifecycle is key.
4. Customer extension: increasing the depth or range of products that a customer purchased from a company; this is often referred to as ‘customer development’.
Range of customer extension techniques for CRM that are particularly important to online retailers:
a) Re-sell. Selling similar products to existing customers.
b) Cross-sell. Sell additional products that may be closely related to the original purchase.
c) Up-sell. A subset of cross-selling but selling more expensive products.
d) Reactivation. Customers who have not purchased for some time encouraged to purchase again.
e) Referrals. Generating sales from recommendations from existing customers.
Although the concept of CRM is prevalent in current marketing thinking and provides a valuable framework for tactics to increase loyalty and profitability, it may not be reflect the way the customer views their dealing with a company. O’Malley and Tynan (2001): the concept of a long-term relationship or partnership may be more readily applied to b2b marketing than consumer marketing.
An effective CRM strategy can help an organisation increase revenues by:
- Providing products and services that are exactly what customers want;
- Offering better customer service;
- Cross-selling products more effectively;
- Helping sales staff close deals faster;
- Retaining existing customers and discovering new ones.
The four marketing activities that comprise CRM involve:
- Customer selection: defining the types of customers that a company will market to. Identifying different groups of customers for whom to develop offering and to target during acquisition, retention and extension. We may want to selectively target customer types who have adopted digital channels.
- Customer acquisition: marketing activities to form relationships with new customers minimising acquisition costs and targeting high-value customers. Service quality and selecting the right channels for different customers are important.
- Customer retention: marketing activities undertaken by an organisation to keep its existing customers. Identifying relevant offering based on their individual needs and detailed position in the customer lifecycle is key.
- Customer extension: increasing the depth or range of products that a customer purchased from a company; this is often referred to as ‘customer development’.
Range of customer extension techniques for CRM that are particularly important to online retailers
a) Re-sell. Selling similar products to existing customers.
b) Cross-sell. Sell additional products that may be closely related to the original purchase.
c) Up-sell. A subset of cross-selling but selling more expensive products.
d) Reactivation. Customers who have not purchased for some time encouraged to purchase again.
e) Referrals. Generating sales from recommendations from existing customers.
Marketing applications of CRM
CRM system to support the 4 activities is made of different applications:
1. Salesforce automation (SFA). Sales representatives are supported in their account management and phone-based sales through tools to arrange and record customer enquiries and visits.
2. Customer service management.
3. Managing the sales process.
4. Campaign management.
5. Analysis.
Case Study 8.1: How Warby Parker disrupted the eyewear industry
What is eCRM?
The interactive nature of the web combined with email communications provides an ideal environment in which to develop customer relation, and databases provide a foundation for storing info about the relation and providing info to strengthen it with improved, personalised services. This digital approach is eCRM.
It’s difficult to state where CRM ends and eCRM starts, since today they both make extensive use of digital technology and media. The ‘e’ prefix was used from the early 2000s to highlight the electronic element against a more traditional, offline customer relationship management model. Now that digital channels have become mainstream, eCRM can be seen as an optional term to use. Payne (2008): eCRM can be defined as: ‘business approach creates, develops and enhances relationships with carefully targeted customers to improve customer value and corporate profitability and maximise shareholder value’.
Digital marketing activities within the scope of eCRM, and which we’ll cover in this chapter, include:
* Using the web and online social presences for customer development, from generating leads through to conversion to an online/offline sale using email and web-based content to encourage purchase.
* Managing customer profile info and email list quality.
* Managing customer contact options through mobile, email and social networks to support up-sell and cross-sell.
* Data mining to improve targeting.
* Providing online personalisation or mass customisation facilities to automatically recommend the next-best product.
* Providing online customer service facilities.
* Managing online service quality to ensure that first-time buyers have a great customer experience that encourages them to buy again.
* Managing the multichannel customer experience as they use different media as part of the buying process and customer lifecycle.
From eCRM to social CRM
A new marketing approach, social CRM, has developed to determine how social media can be applied to develop customer relationships and customer value.
Econsultancy Best Practice Guide by Campbell (2013): ‘Social CRM involves a brand leveraging social media to build stronger relationships with customers, delivering consistent and relevant brand experiences across all touch points, and more effectively engaging and connecting employees and partners. These efforts will be complemented by the brand’s eCRM capabilities which enable it to manage, broadcast and direct interactions with consumers across all channels. The big payback for brands will come from seamlessly integrating these two types of customer interaction and exploiting the synergies across them to create exceptional customer experiences’.
Area that overlaps with eCRM are customer research, identifying new customers through social media and managing customer service through social media.
Sharma and Sheth (2004): importance of a trend away from mass marketing towards what’s known as one-to-one or customer-centric marketing. E-channels can have advantages in terms of delivering relevant messages and offers to customers at low cost. This approach can be characterised as sense and respond communications. Companies can also arrange triggered or follow-up email activity after a customer event such as a quote or an abandoned shopping basket to encourage purchase.
eCRM and social CRM programmes should be part of an overall business strategy customer-centric. The two approaches are complementary.
Benefits of eCRM
Using Internet for relationship marketing involves integrating the customer database with websites to make the relationship targeted and personalised. Marketing can be improved as follows:
* Targeting more cost-effectively.
* Achieve mass customisation of the marketing messages (and possibly the product).
* Increase depth, breadth, and nature of relationship.
* A learning relationship can be achieved using different tools throughout the customer lifecycle.
* Lower cost.
Customer engagement strategy
- The difficulty in finding opportunities to achieve attention online on all types of sites led to the emergence of the concept of customer engagement as key challenge with which digital marketers are increasingly concerned. cScape (2008): customer engagement as: repeated interactions that strengthen the emotional, psychological, or physical investment a customer has in a brand.
Haven (2007): customer engagement is: the level of involvement, interaction, intimacy, and influence an individual has with a brand over time.
The biggest difference in communications introduced by the growth of digital media and the web is that customers’ conversations are an integral part of communication. Proactively managing consumer participation through social media is essential.
Permission marketing
Permission marketing is an established approach that should form a practical foundation for CRM and online customer engagement; it was coined by Godin. Godin (1999): while research used to show we were bombarded by 500 marketing messages a day, with web and digital TV this has increased to over 3.000 a day. Dilution in the effectiveness of messages; from the customer’s POV, time is in ever-shorter supply, customers are losing patience and expect reward for their attention, time and info. He refers to the traditional approach as interruption marketing. Permission marketing is still a core concept within digital media today that works well when integrated with social media. Today is more known as inbound marketing; this describes how permission marketing fits in with digital marketing techniques. It’s about seeking the customer’s permission before engaging them in a relationship and providing something in exchange. The classic exchange is based on info or entertainment.
A customer agrees to engage in a relationship when they check a box on a web form to indicate that they agree to receiving further communications; this is referred as opt-in. This is preferable to opt-out.
Godin (1999): dating the customer involves:
1. Offering the prospect an incentive to volunteer;
2. Using the attention offered by the prospect to offer a curriculum over time, teaching the consumer about your product or service;
3. Reinforcing the incentive to guarantee that the prospect maintains the permission;
4. Offering additional incentives to get more permission;
5. Over time, using the permission to change consumer behaviour towards profits.
Methods to drive visitors to a website (1) and incentives are then used to profile the customer (2). Subsequent email or social network communications (3) and direct mail (4) to encourage repeat visits to website for future purchases or to learn more about the customer and increase the info in their profile (5).
Godin (1999): dating the customer involves:
- Offering the prospect an incentive to volunteer;
- Using the attention offered by the prospect to offer a curriculum over time, teaching the consumer about your product or service;
- Reinforcing the incentive to guarantee that the prospect maintains the permission;
- Offering additional incentives to get more permission;
- Over time, using the permission to change consumer behaviour towards profits.
Customer profiling
To engage a customer in an online relation, the minimum info that needs to be collected in an online form is an email address. We need qualified lead that provides with more info about customer to help decide whether customer is a good prospect who should be targeted with further communications. For b2b this could mean a visit by field sales staff or follow-up email to arrange it.
To continue the relation it’s essential to build a customer profile that details each customer’s product interest, demographics or role in the buying decision. This will affect the type of info and services delivered at retention stage. For customer to give info a company will offer incentive, establish trust and demonstrate credibility. Data protection and privacy law sets constraints on what can be collected from customer.
Peppers and Rogers (1999): how to use technology to build a one-to-one relationship; IDIC approach as a framework for using the web effectively to form and build relationships:
1. Customer identification.
2. Customer differentiation.
3. Customer interactions.
4. Customisation.
Nielsen (2000): having to register acts as a barrier to entering sites; the advice is to delay customer registration as late as possible.
Peppers and Rogers (1999): how to use technology to build a one-to-one relationship; IDIC approach as a framework for using the web effectively to form and build relationships:
- Customer identification.
- Customer differentiation.
- Customer interactions.
- Customisation.
Conversion marketing
To assess and improve the effectiveness of CRM implementation, evaluation using conversion marketing is useful. In an online context, this assesses show effective marketing communications are in converting:
- Web browsers or offline audiences to site visitors;
- Site visitors to engaged site visitors who stay on the site and progress beyond the home page;
- Engaged visitors to prospects;
- Prospects into customers;
- Customers into repeat customers.
At each conversion step, some visitors will switch channels, dependent on preferences and marketing messages. The dilemma is that the online channels are cheapest to service but have a lower conversion rate than traditional channels because of human element. It’s important to offer phone, live chat or email contact in online channels to help convert customers who need further info or persuading to purchase.
RACE is a development of the work by Agrawal et al. (2001): scorecard for effective conversion marketing, using a longitudinal study analysing hundreds of e-commerce sites in the US and Eu. The scorecard is based on the performance drivers or critical success factors for e-commerce, such as the costs for acquisition and retention, conversion rates of visitors to buyers to repeat buyers, together with churn rates. To maximise retention and minimise churn, service-quality-based drivers need to be evaluated. 3 main parts:
1. Attraction.
2. Conversion.
3. Retention.
Agrawal et al. (2001): companies were successful at luring visitors to their sites, but not at getting these visitors to buy or at turning occasional buyers into frequent ones.
Further analysis: modelled the theoretical change in net present value contributed by an e-commerce site in response to a 10% change in these performance drivers. Shows the relative importance of these drivers.
This modelling highlights the importance of on-site marketing communications and quality of service delivery in converting browsers to buyers and buyers into repeat buyers. It also highlights the need to balance investment between customer acquisition and retention.
Box 8.1: Using the RACE marketing value framework to increase sales
To maximise retention and minimise churn, service-quality-based drivers need to be evaluated. 3 main parts:
- Attraction.
- Conversion.
- Retention.
The online buying process
Companies that understand how customers use new media in their purchase decision-making can develop integrated communications strategies that support their customers at each stage of the buying process.
Individual preferences for using the web will differ. Lewis and Lewis (1997): 5 different types of web users who exhibit different searching behaviours according to the purpose of using the internet:
* Directed information-seekers.
* Undirected information-seekers.
* Directed buyers.
* Bargain hunters.
* Entertainment seekers.
Differences in buyer behaviour in target markets
There’s great variation in the proportion of user access in different countries. This gives rise to difference in buyer behaviour between different countries or between different segments according to how sophisticated customers are in their use of Internet.
Differences between b2c and b2b buyer behaviour.
Major differences in buyer behaviour between the b2b and b2c market:
1. Market structure
2. Nature of the buying unit
3. Type of purchase
4. Type of buying decision
5. Communication differences
Main differences between b2b and b2c is the number of buyers. Kotler (1997): in b2b there tend to be far fewer but larger buyers. The existence of suppliers are well known, so efforts to promote the website using methods such as banner adv or listing in search engines are less important than for consumer brands.
- Influences on purchase
In the digital environment, purchasers lack the physical reassurance we have when purchasing from a store. Consumers are looking for cues of trust when on a site, which can include brand familiarity, site design, type of content, accreditation, and recommendations.
Bart et al. (2005): developed a useful, widely referenced conceptual model that links website and consumer characteristics, online trust and behaviour.
The model of Bart et al. (2005) and similar models are centred on a site, but perceptions of trust are also built from external sources including the role of social media and friends.
First, we need to provide the physical stimuli to encourage visits to websites (traditional ads, direct mail, or physical reminders). Second, we need to ensure our site is optimised for search engines. Third, email is an online push medium, so it should be a priority objective of website design to capture customers’ email addresses in order that opt-in email can be used to push relevant and timely messages to customers.
- From monologue to dialogue
Creating a dialogue through interactivity is important. On the Internet there’s the opportunity for two-way interaction with the customer.
Websites, interactive digital TV and mobile phones enable marketers to enter a dialogue with customers. But digital dialogues also have a less obvious benefit. Interactive tools for customer self-help can help collect intelligence – clickstream analysis recorded in a web analytics can help us build up valuable pictures of customer preferences and help marketers ‘sense and respond’.
- From one-to-many to one-to-some and one-to-one
Traditional push communications are one-to-many. With new media ‘one-to-some’, reaching a niche or micro-segment is more practical – e-marketers can tailor and target message to different segments. They can move to one-to-one communications, where deliver personalised messages.
- From one-to-many to many-to-many communications
Hoffman and Novak (1996): new media are many-to-many communications. Here customers can interact with other customers via a website or in independent communities. The success of online auctions also shows the power of many-to-many communication.
- From ‘lean-back’ to ‘lean-forward’
New media are also intense media – they’re lean-forward media in which the website usually has the visitor’s undivided attention. This intensity means that the customer wants to be in control and wants to experience flow and responsiveness to their need.
- The medium changes the nature of standard marketing communications tools such as adv
Internet can be used for one-to-many adv. The overall message from the advertiser becomes less important, and it’s detailed info the user is seeking. The site can be considered as similar in function to an adv. Berthon et al. (1996): website as mix between adv and direct selling since it can also be used to engage the visitor in a dialogue.
Peters (1998): communication via the new media is differentiated from communication using traditional media in 4 different ways:
1) Communication style is changed, with immediate or synchronous transfer of info through online customer service being possible.
2) Social presence or the feeling that a communications exchange is sociable, warm, personal and active may be lower if a standard web page is delivered, but can be enhanced.
3) The consumer has more control of contact.
4) The user has control of content, through selection or personalisation facilities.
- Increase in communications intermediaries
Adv and PR with traditional media occurs through a potentially large number of media owners. Traditional media have migrated online, but in addition there’re a vast number of online-only publishers including horizontal portals such as search engines and specialist sites such as industry-specific sites. The online marketer needs to select the most appropriate of this plethora of sites to drive traffic to their website.
- Integration remains important
We should combine and integrate new and traditional media according to their strengths. We can then achieve synergy. It’s also important to support mixed-mode buying.
Inbound communications to a company need to be managed.
The characteristics of interactive marketing communications
- influence on purchase
- from monologue to dialogue
- from one-to-many to one-to-some and one-to-one
- from one-to-many to many-to-many communications
- from ‘lean back’ to ‘lean-forward’
- the medium changes the nature of standard marketing communications tools such as adv
- increase in communications intermediaries
- integration remains important
Assessing marketing communications effectiveness
A campaign won’t be successful it is meets its objectives of acquiring site visitors and customers but the cost of achieving this is too high. This constraint is usually imposed simply by having a campaign budget. It’s also essential to have specific objectives for the cost of getting the visitor to the site using different referrers combined with the cost of achieving the outcomes during their visit. This is stated as the cost per acquisition (CPA).
To control costs, it’s important to define a target allowable cost per acquisition.
VQVC: Volume, Quantity, Value, Cost of interactions. Measures used to assess digital media include:
Step 0 Volume or number of visitors. Measured as thousands of unique visitors. It’s preferable to using page views or visits as a measure of effectiveness, since it’s opportunities to communicate with individuals. A more sophisticated measure is reach or online audience share, only possible using panel data or audience data tools.
Step 1 Quality or conversion rates to action. Shows what proportion of visitors from different sources take specific marketing outcomes on the web. Bounce rate: to assess the relevance and appeal of the page that the visitor arrives on.
Step 2 Cost (per click). Cost of visitor acquisition measured specific to a particular online marketing tool, since it’s difficult to estimate for an entire site with many visitors referred from different sources.
Step 3 Cost (cost per action or acquisition). When cost of visitor acquisition is combined with conversion to outcomes this is the cost of customer acquisition.
Step 4 Return on investment (ROI). ROI is used to assess the profitability of any marketing activity, or investment. Different forms of ROI, depending on how profitability is calculated. Here we assume it’s just based on sales value or profitability based on the cost per click and conversion rate:
ROI = (Profit generated from referrer)/(Amount spent on advertising with referrer)
A related measure, which doesn’t take profitability into account, is return on adv spend (ROAS):
ROAS = (Total sales revenue generated from referrer)/(Amount spent on advertising with referrer)
Step 5 Branding metrics. Tend to be only relevant to interactive adv or sponsorship. They’re the equivalent of offline adv metrics. Step 6 Lifetime-value-based ROI. The value of gaining the customer isn’t just based on the initial purchase, but the lifetime value associated with the customer. It requires more sophisticated models, most readily developed for online retailers and online financial services providers.
Digital marketing communications
These techniques are often combined is a ‘traffic-building campaign’; this is a method of increasing the audience of a site using different online (and offline) techniques. Most important is minimising the cost of acquisition against volume required.
1. Search engine marketing (SEM)
Search engines are a primary way of finding info about a company and its products.
Chaffey and Smith (2012): importance of timing for traffic building.
How does Google work?
Search technology involves these main processes:
1) Crawling. The purpose of crawl is to identify relevant pages for indexing and assess whether they have changed. It’s performed by spiders, who access web pages and retrieve a reference URL of the page for later analysis and indexing.
Bots are software processes running on a search engine’s server that request pages, follow the links contained on that page and create a series of page references with associated URLs. This is a recursive process, so each link followed will find additional links that then need to be crawled.
2) Indexing. An index is created to enable the search engine to rapidly find he most relevant pages containing the query typed by the searcher. Rather than searching each page for a query phrase, a search engine inverts the index to produce a look-up table of documents containing particular words.
The index info consists of phases stored within a document and other info characterising a page. For the keywords in the document additional attributes will be stores such as semantic markup (<h1>, <h2> headings denoted within HTML), occurrence in Link anchor text proximity, frequency or density and position in document.
3) Ranking or scoring. The indexing process has produced a lookup of all the pages that contain particular words in a query, but not sorted in terms of relevance. Ranking of the document to assess the most relevant set of documents to return in the SERPs, occurs in real time for the search query entered. First, relevant documents will be retrieved from a run-time version of the index at a particular data centre, then a rank in the SERPs for each document will be computed based on many ranking factors, of which we highlight the main ones later.
4) Query request and results serving. The familiar search engine interface accepts the searcher’s query. The user’s location is assessed through IP address, and the query is passed to a relevant data centre for processing. Ranking occurs in real time for a particular query to return a sorted list of relevant documents and these are displayed on the search results page.
Keyphrase analysis
The starting point to successful search engine marketing is to target the right keyphrases. Keyphrase instead of keyword since search engines attribute more relevance when there’s a phrase match between the keywords that the user types and a phrase on a page. Companies should complete a gap analysis, which will identify keyphrases to target by showing the number of visitors they could attract compared to the actual positions or number of visitors they’re receiving.
Key sources for identifying the keyphrases customers are likely to type when searching for products include market knowledge, competitors’ sites, keyphrases from visitors who arrive at the site, internal site search tool and Google Keyword analysis tool. It’s useful to understand customer searching behaviour.
Box 8.2: How do we search?
Search engine optimisation (SEO)
Search engine optimisation (SEO): structured approach used to increase position of a company or products in search engine natural or organic results listings for selected keyphrases. Involves controlling index inclusion or ensuring as many pages as possible are included within the search engine. May be technical difficulties with this with some content management or e-commerce systems that need to be corrected.
Although each search engine has its own evolving algorithm with hundreds of weighting factors only known to the search engineers they employ, there are common factors that influence search engine rankings:
1. Content. Move away from keyword-focused content, towards relevant content written in natural language. Recent Google algorithm place a huge amount of value on semantic relevance ad optimisation. Relevance can also be increased adding the keyphrase in headings, linking anchor text in hyperlinks and using a higher density towards the start of the document.
2. Number of inbound links (page rank). The more links from good-quality sites, the better your ranking. Google uses page rank to deliver relevant results since it counts each link from another site as a vote. Not all votes are equal (greater weight to links from pages that have high page rank and have the same context or topical content as the page they link to). Weighting is also given where hyperlink anchor text or adjacent text contains text relevant to keyphrase. The best way to get other sites to create high-quality, relevant links to yours is to create unique, relevant content that can naturally gain popularity. Creating good content pays off: links are editorial votes given by choice, and the more useful content you have, the greater the chances someone else will find that content valuable and link to it.
Another key aspect of linking: architecture of internal links within the site. Keyphrases within the hypertext of different forms of navigation are important in indicating the context of a page.
3. Mobile-first user experience. In 2016 Google moved towards mobile-first indexing: primarily crawl the mobile version of websites, instead of desktop. Mobile optimisation is an important ranking factor. For Moz, mobile SEO best practices:
* Don’t block CSS, JavaScript or images;
* Site design for mobile – don’t use Flash or pop-ups and design for the fat finger;
* Optimise titles and meta descriptions;
* Use schema.org structured data;
* Optimise for local search;
* Think about your mobile site configuration.
Another factor is page-loading speed, connected to the user experience. Desktop sites should load in 3 seconds or less and mobile sites should load in 2 seconds or less.
4. Title HTML tag. Keywords in the title tag of a web page that appears at the top of a browser window are indicated in the HTML code by the <Title> keyword. This is significant in search engine listings since if a keyphrase appears in a title is more likely to be listed high. Each page should have a specific title giving the name of a company and the product, service or offer featured. Greater weighting to keyphrases at the left of the title tag and those with a higher keyphrase density. The Title HTML tag is vital in search marketing. If the Title tag appearing on the search results page is a relevant call to action that demonstrates relevance, you will receive more clicks, which equals more visits.
5. Meta-tags. Meta-tags are part of the HTML source file, typed in by web page creators, which is read by the search engine spider or robot. In past, search engine assigned more relevance to a site containing keyphrases in its meta-tags. There are two important meta-tags specified at the top of an HTML page using the <meta name=“content=” > HTLM keyword:
i. The keywords meta-tag highlights the key topics covered on a web page.
ii. The description meta-tag denotes the info that will be displayed in the search results page so is very important to describe what the website offers to encourage searchers to clickthrough to the site.
6. Alternative graphic text. A site that uses a lot of graphical material and/or plug-ins is less likely to be listed highly. The only text on which the page will be indexed will be the <Title> keyword. To improve, graphical images can have hidden text associated with them that is not seen by the user, but will be seen and indexed by the search engine.
Due to search engine spamming, this factor is assigned less relevance than previously, but it’s best practice to use this since it’s also required by accessibility law.
Paid search marketing
Paid search marketing or paid listings are similar to conventional adv. ‘Sponsored links’ are displayed on the right and/or above and below the natural search engine listings. Unlike conventional adv, the advertiser only pays when the ad is clicked, which then leads to a visit to the advertiser’s website – it’s often known as ‘pay-per-click marketing’. The relative ranking of these ‘paid performance placements’ is typically based on the highest bid cost-per-click value for each keyphrase.
It’s not a simple case that the company is prepared to pay the most per click gest top spot. The search engines also consider the relative clickthrough rates of the ads dependent on their position when ranking the sponsored links, so ads not relevant will drop down or disappear off the listing. The analysis of CTR to determine position is part of the quality score. Text ads are also displayed on third-party sites, which form a contextual ‘display network’ where contextual ads are displayed automatically according to the type of content. These are paid for on a CPC basis but ads can also be paid for on a CPM basis. The search networks and publishers share the feeds. They account for 30% of Google’s revenue. They enable to reach a wider audience on selectable third-party site, but need to decide how to use these to deliver different messages.
Facebook pay-per-click advertising
Facebook has adopted the PPC model from Google to monetise audience. You can target in Facebook and increase awareness of a service beyond Google, while limiting your exposure through a CPC investment.
Mini Case Study 8.1: HubSpot increases sales by 71% with Facebook campaigns
Beware of fake clicks, ad fraud and measurement errors!
The PPC ad networks detect multiple clicks from the same IP address and say they filter them out. There are techniques to mimic multiple clicks from different locations.
One of the main reasons behind the rise in mobile adv bot fraud is the existing issue of tracking/verification challenges. Advertisers need to try and overcome this problem with meticulous planning and inventory selection, with third-party verification.
World Federation of Advertisers (2016): ad fraud will cost the advertising ecosystem $50 billion per year by 2025. Eliminating ad fraud is difficult, so be aware of these issues when planning digital adv campaigns.
Mini Caste Study 8.2: How First Choice increased social interactions and blog traffic
2. Digital PR
The UK Chartered Institute of PR (2018) defines PR as: ‘PR is about reputation – the result of what you do, what you say and what others say about you. PR is the discipline which looks after reputation, with the aim of earning understanding and support and influencing opinion and behaviour. It’s the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics’.
Digital PR leverages the network effect of Internet. Mentions of a brand/site on other websites are powerful in shaping opinions and driving visitors to yours. Main element of digital PR is maximising favourable mentions of an organisation, its brands, products or websites on third-party websites likely to be visited by its target audience. The more links from other sites to yours, the higher your site will be ranked in the natural/organic listings. Minimising unfavourable mentions through online reputation management is also an aspect. Activities that can be considered to be digital PR:
A. Communicating with media (journalists) online. Internet to disseminate press releases through email and on-site, and on third-party sites.
B. Link-building. Link-building is key activity for SEO. It’s an element of online PR since it’s about getting your brand visible on third-party sites. Link-building needs to be a structured effort to achieve as many links into a website as possible from referring websites (reciprocal links), which will also improve your position in the search engine results pages.
C. Blogs and podcasts. Blogs are an easy method of regularly publishing web pages best described as online journals, diaries or news or events listings. They may include feedback comments from other sites or contributors to the site.
Podcasts are related to blogs, they can be generated by individuals or organisations to voice an opinion. Good channel for generating ‘though leadership’ content and becoming a b2b influencer. A big challenge for achieving visibility: contents can only currently be recognised by tags and it’s difficult to assess quality without listening to the start of it. Podcasts have decreased in popularity with the growth of streamed media services from media publishers.
D. Online communities and social networks. The human need to socialise and share experiences is the reason behind the popularity of online communities and social networks. There are opportunities to advertise on social networks. FB aims to facilitate this through ads, which lead through to a brand page or company page within FB where brands can collect feedback.
Social media and social CRM strategy
Social media marketing: important category of digital marketing that involves encouraging customer communications on a company’s own site, or social presences, or in specialist publisher sites, blogs and forums. It can be applied as a traditional broadcast medium. However, to take advantage of the benefits of social media it’s important to start and participate in customer conversations.
Boyd and Ellison (2007): social networking sites as: ‘Web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whim they share a connection, and (3) view and traverse their list of connections and those made by others within the system’.
Interactive capabilities to post comments or other content and rate content are missing from definition.
Creating a social media or customer engagement strategy is challenging since requires a change in mindset for the company since they may have to give up some control on their messaging to enable them to communicate with customers effectively. Cluetrain manifesto: ‘Conversation among human beings sound human. They’re conducted in a human voice. Most corporation only know how to talk in the soothing, humourless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do. Corporate firewalls have kept smart employees in and smart markets out. It’s going to cause real pain to tear those walls down. But the result will be a new kind of conversation. And it will be the most exciting conversation business has ever engaged in’.
The Cluetrain manifesto is a call to action, encouraging managers to change their culture and provide processes and tools to enable employees of an organisation to interact with and listen to customer needs in a responsible way.
Developing a social media strategy
There’s a tendency for managers to turn straight to the tools they’ll be using. This is not strategy, it’s tactics! Strategy development for social media should be informed by demand analysis of customer channel adoption and the commercial potential of the approach.
Customer adoption of social media tools vary according to customer segments/markets. Start by doing a marketplace analysis, to see which social tools and engagement techniques are most effective.
Next, the commercial benefits of social need to be reviewed and goals defined. Social media can be viewed as a customer engagement and retention tool. Social are used to deliver customer service or as alternative channels to email marketing to inform customers about new product launches or promotions.
Companies should make sure they try to provide excellent and measurable customer service contact across every channel their customers use.
POST is a framework for businesses to apply to help them develop a social media strategy; it’s a simplified version of SOSTAC:
* People. Understanding the adoption of social within an audience is an essential starting point.
* Objectives. Set different goals for different options to engage customers across different aspects of the customer lifecycle.
* Strategy. How to achieve goals. Social are a disruptive approach, you should imagine how social will support change.
* Technology. Decide on the best social platforms to achieve your goals.
Box 8.3: Customers want good customer service and don’t like being passed between channels
Live chat
Many customers are disconnected from someone who can answer their questions in real time. eDigital Research (2014): live chat has the highest satisfaction levels for any customer service channel. Forrester (2010): ‘Many online consumers want help from a live person while shopping online; 44% of them say that having questions answered by a live person is one of the most important features of a site’.
An online chat system provides customers with immediate access to help, and waiting times are often shorter than with a call centre. Live chat software can lead to cost savings:
* The reduction of contact centre costs by lowering average interaction costs;
* Increase of efficiency by allowing live chat representatives to handle multiple chats simultaneously, reducing the need to hire more people.
Social CRM strategy
Social CRM: used to help define the broad scope of social across the customer lifecycle and value chain.
Conversations can occur across a range of site types, including social networks but also in a company’s own blog, third-party blogs, reviews-and-ratings sites or in neutral web self-service forums.
Many organisations developed a social media governance policy to ensure that conversations are listened to and responded to accordingly.
The scope of social CRM is well illustrated by the 6 business application areas presented by Altimeter (2010); the scope of each area is:
1. Marketing. Monitoring, analysis, and response of customer conversations through social listening tools.
2. Sales. Understanding where prospects are discussing selection of products and services offered by you and competitors and determining the best way to get involved in the conversation.
3. Service and support. Customer self-help through forums provided by you and neutral sites.
4. Innovation. Using conversations to foster new product development or enhance online offerings is one of the most exciting forms of social CRM.
5. Collaboration. Digital business collaboration within an organisation through an intranet and other software tools to encourage all forms of collaboration that support business processes.
6. Customer experience. Use of social CRM to enhance the customer experience and add value to a brand, implied by many of the other aspects above.
The Five Ms provide another useful framework within the Altimeter (2010) report that can be used for reviewing strategy implementation. Five Ms:
1. Monitoring. Reviewing the method of social listening and deriving insights.
2. Mapping. Finding relations between individual or segments using different social platforms.
3. Management. Processes for implementing and reviewing strategy.
4. Middleware. The software tools and APIs used to monitor and gather insight.
5. Measurement. The measures used to assess social marketing effectiveness and ROI.
Categories of social media
A social media site is far more than simply a website. Most of these sites can be considered as software apps or web services, which give access to users at different levels of permission and enable management and storage of different forms of user-generated content. APIs for exchanging data with other web services interfaces are a key feature of social networks, which enable them and their members to extend their reach and influence by being incorporated into other sites.
The popularity of communities implemented on company sites or within social networks means that it’s important to manage these effectively.
An organisation has a choice of developing different types of community for b2c, and communities of purpose, position, interest and profession for b2b.
1. Purpose. People going through the same process or trying to achieve a particular objective.
2. Position. Communities set up for people who are in a certain circumstance.
3. Interest. For people who share an interest or passion.
4. Profession. Important for companies promoting b2b services.
Social are a low-cost method to create a community. Can customer interests be best served through a company-independent community?
If the answer is yes, it may be best to form (or buy) a community that is a brand variant, differentiated from its parent. An alternative is to promote products through sponsorship or co-branding on an independent community site or portal, or to get involved in the community discussions.
Companies can create their forums, although successful examples are rare since there’s fear that a brand may be damaged if customers criticise products, so some moderation is required.
A potential problem with a company-hosted forum is that it may be unable to get sufficient people to contribute to a company-hosted community. But initial recruitment of contributors and moderation has been used to grow the forum by software services company SAP, which has successfully created several niche communities to support its business.
What tactics can organisations use to foster community? Parker (2000): 8 questions organisations should ask when considering how to create a customer community:
1. What interests, needs or passions do many of our customers have in common?
2. What topics or concerns might our customers like to share with each other?
3. What info is likely to appeal to our customers’ friends or colleagues?
4. What other types of business in our area appeal to buyers of our products and services?
5. How can I crate packages or offers based on combining offers from 2 or more affinity partners?
6. What price, delivery, financing, or incentives can I offer to friends that our customers recommend?
7. What types of incentives/rewards can I provide customers who recommend friends who go on to make a purchase?
8. How can I best track purchases from WOM recommendations from friends?
A good approach to avoiding problems is to think about the difficulties the organisation may have with its community-building efforts. Typical problems:
1. Empty communities.
2. Silent communities. How to get people to participate?
* Seed the community. Moderator to ask questions or have a weekly or monthly question.
* Make it select. Limit it to key account customers or set it up as an extranet service only offered to valued customers as a value-add.
3. Critical communities. Many communities on manufacturer/retailer sites can be critical of brand.
Lurkers: read the messages but don’t actively contribute. The community can positively influence these people and build brand.
Social media platforms are a good way to build communities. People’s motivations for using these platforms have changed over the last few years.
The most influential network members will be highly connected and will discuss issues of interest with a wider range of contacts than those who are less connected.
Box 8.4: Social networks – success factors for social network marketing
Box 8.5: Micro-influencer marketing
It’s believed it’s important to target the highly connected individuals. But there’s much discussion about the influence of the influencers online. Researchers of community interactions believe that it’s the collective interactions between typical network members equally important.
Although there’s a clear wish to socialise online, it’s not straightforward to engage an online audience as they move between different sites. Only a small proportion will engage.
Mini Case Study 8.3: Nielsen’s 90-9-1 rule of participation inequality: encouraging more users to contribute
(a) Managing how your brand is presented on third-party sites. Set up monitoring services. It’s necessary to have the resources to deal with negative PR as part of online reputation management.
(b) Creating a buzz – online viral marketing. Online viral marketing often involves generating WOM and links through to a website, so it can be considered part of digital PR.
3. Online partnership
Partnerships are an important part of today’s marketing mix. Smith and Chaffey (2005): the eight P. 3 key types of online partnership: link-building, affiliate marketing and online sponsorship. All should involve a structured approach to managing links through to a site. The important types of partner arrangement are:
A. Affiliate marketing. Affiliate marketing has become popular with e-commerce companies. The great thing about it for the online retailer is that they don’t pay until the product has been purchased or a lead generated. It’s sometimes referred to as ‘zero-risk adv’.
B. Online sponsorship. It isn’t straightforward. Ryan and Whiteman (2000): online sponsorship as: ‘the linking of a brand with related content or context for the purpose of creating brand awareness and strengthening brand appeal in a form that’s clearly distinguishable from a banner, button, or other standardized ad unit’.
For the advertiser, online sponsorship has benefit that name is associated with an online brand that the site visitor is already familiar with. Sponsorship builds on this existing relationship and trust.
4. Digital advertising
Online ads provide a media multiplier or halo effect, which can help increase response rates from other online media.
This effect is suggest by research reported by MAD (2007) in the travel market, which involved asking respondents what their response to an online ad that appealed to them would be. Results:
* Search for a general term relating to the adv (31%);
* Go straight to the advertiser’s site (29%);
* Search for the advertiser’s name (26%);
* Click on the banner to respond (26%);
* Visit a retail store (4%).
This methodology shows reported behaviour rather than actual behaviour, but more than twice as many people are being driven to a search engine by banner adv than by clicking directly on it. Paid-search marketing needs to be optimised to work with banner adv, by anticipating searches likely to be prompted by the banner and ensuring a higher rank for search results.
Abraham (2008): online ads can stimulate offline sales.
Fundamentals of online advertising
Adv on web takes place when an advertiser pays to place adv content on another site. The process usually involves ad serving from a different server from that on which the page is hosted.
Adv is possible on a range of sites to drive traffic to an organisation’s destination site or a microsite or nested ad-content on the media owner’s site or on the destination site.
The purpose of digital advertising
Robinson et al. (2007): the two primary goals of online display adv are: -using display adverts as a form of marketing communication to raise brand awareness, -as a direct-response medium focused on generating a response. Cartellieri et al. (1997): objectives:
* Delivering content. The typical case, where a clickthrough on a banner adv leads through to a destination site giving more detailed info on an offer. This is where a direct response is sought.
* Enabling transaction. If a clickthrough leads through to a merchant this may lead directly to a sale. A direct response is also sought here.
* Shaping attitudes. An adv consistent with a company brand can help build brand awareness. Building awareness is a key aspect of online adv.
* Soliciting response. An adv may be intended to identify new leads or as a start for two-way communication. An interactive adv may encourage a user to type in an email address or other info.
* Encouraging retention. The adv may be placed as a reminder about the company and its service and may link through to on-site sales promotions.
Digital ad targeting options
Online ads can be targeted by placing them:
1. On a particular type of site (or part of site) that has a specific visitor profile or type of content. To reach large mass-market audiences, place an ad on a large portal home page such as MSN.
2. To target a registered user’s profile. A business software provider could advertise on FT.com to target finance director or IT managers.
3. At a particular time of day or week.
4. Where there’s relevant online behaviour. Behavioural ad targeting is all about relevance. These inferences are made by anonymously tracking the different types of pages visited by a site user during a single visit to a site or across multiple sessions. Other aspects of the environment used by the visitor can also be determined, such as their location, browser, and operating system.
Digital ad formats
The classic 468 by 60 pixel rotating GIF banner ad media owners now provide a choice of larger, richer formats that web users are more likely to notice. Message association and awareness building are much higher for flash-based ads, rich-media ads and larger-format rectangles and skyscrapers.
Other online ad terms include ‘interstitials’ (intermediate adverts before another page appears); the more common ‘overlays’ (appear above content); and pop-up windows (now less widely used because of their intrusion). Online advertisers face a battle with users who deploy pop-up blockers or ad-blocking software, but they’ll persist in using rich-media formats where they generate the largest response.
Robinson et al. (2007): research on factors that increased clickthrough to banner ads. Main variables:
* Banner size;
* Message length;
* Promotional incentive;
* Animation;
* Action phrase;
* Company brand/logo.
Media planning – deciding on the online/offline mix for advertising
This decision is taken by media planner. The mix between online and offline spend should reflect consumers’ media consumption and the cost-response effectiveness of each medium. Many cross-media optimisation studies (XMOS) shown: the optimal online spend for low-involvement products is high at 10-15% of total spend.
XMOS research: help marketers and agencies answer: ‘What’s the optimal mix of adv vehicles across different media for a given campaign to achieve its marketing goals?’
The mix between online and offline spend is varied to maximise campaign metrics such as reach, brand awareness and purchase intent.
The reasons for using and increasing the significance of online in the media mix are similar to those for using any media mix, as described by Scissors and Baron (2002):
* To extend reach.
* To flatten frequency distribution.
* To reach different kinds of audiences.
* To provide unique advantages in stressing different benefits based on the different characteristics of each medium.
* To allow different creative executions to be implemented.
* To add gross impressions if the other media are cost-efficient.
* To reinforce message by using different creative stimuli.
Large growth in programmatic adv, nearly 80% of US display spending; predictions are that programmatic ad spend will reach over $45 billion by 2019. Display Trading Council defines programmatic adv as: ‘use of automation in buying/selling of media, programmatic can apply to anything from display to digital-out-of-home and tv’.
Brands or agencies can use a demand-side platform to decide which impressions to buy and how much to pay, while publishers can use a supply-side platform to sell ad space to brands. The more data companies have, the more personalised the ads can become.
Even in the traditional media, there have been issues of ads appearing next to content that might not be in keeping with a brand’s positioning or may not work contextually. The other main issue with programmatic is the problem of ad fraud.
5. Email marketing
When devising plans for email marketing communication, marketers need to plan for:
* Outbound email marketing – email campaigns used as a form of direct marketing to encourage trial and purchases and as part of a CRM dialogue;
* Inbound email marketing – emails from customers such as support enquiries are managed. These are often managed today with chat and co-browsing sessions.
Despite the increase in spam, email can still drive good response levels; this is the case with in-house lists, so email communications to customers through e-newsletters or periodic email blasts are today a vital communications technique for companies. The main measures for evaluating email marketing are:
* Delivery rate. Online marketers check their deliverability to make sure their messages are not identified as false positive. Web-based email providers have introduced standard authentication techniques.
* Open rate – measured for HTML messages through downloaded images. It’s an indication of how many customers open an email, but it’s not accurate.
* Clickthrough rate – number of people who click through on the email of those delivery.
Mini Case Study 8.4: Malibu’s targeted eCRM strategy for its Malibutique event
Opt-in email options for customer acquisition
For acquiring new visitors and customers to a site, there are 3 main options for email marketing. From the POV of the recipient, these are:
1. Cold email campaign. The recipient receives an opt-in email from an organisation that has rented an email list from a consumer or a business email list provider. Although they’ve agreed to receive offers by email, the email is cold.
2. Co-branded email. The recipient receives an email with an offer from a company they have a strong affinity with. It’s warmer since there’s a stronger relationship with one of the brands and the subject line and creative will refer to both brands.
3. Third-party e-newsletter. A company publicises itself in a third-party e-newsletter. Can be in the form of an ad, sponsorship, or PR that links through a destination site. These placements may be set up as part of an interactive adv ad buy. E-newsletter placements can be cost-effective.
Email is most used as prospect conversion and customer retention tool using an opt-in or house list of prospects and customers who have given permission to an organisation to contact them.
6. Social media marketing
Social media marketing can be assisted through viral marketing approaches that harness the network effect of Internet and can be effective in reaching a large number of people rapidly. Smith and Chaffey (2005): viral marketing is a clever idea that makes compulsive viewing. This is a challenge for commercial companies since, to be successful, it will need to challenge convention and this may not fit well with the brand.
3 types of products virality, and WOM is one. To make a viral campaign effective, Kirby (2003):
1. Creative material – the ‘viral agent’. Includes creative message or offer and how it’s spread.
2. Seeding. Identifying websites, blogs or people to send the email to start the virus spreading.
3. Tracking. Monitor the effect and assess the return from the cost of developing the viral agent and seeding.
Offline marketing communications
They will never disappear – they’re effective at reaching an audience to encourage them to visit a site, but are also useful as a way of having an impact or explaining a complex proposition</Title></Title>
Techniques for digital marketing communications:
- SEM
- digital pr
- online partnership
- interactive adv
- email marketing
- social
