Chapter 6: E-commerce marketing and advertising

Question 1

What types of online marketing exist in order to establish and enhance/strengthen relationships with our customers?

Answer 1

Customer Relationship Management (CRM) is the process of managing interactions with existing as well as past and potential customers. It uses data analysis about customers’ history with a company to improve business relationships with customers, specifically focusing on customer retention and ultimately driving sales growth.

Question 2

Several internet marketing technologies exist that have broadened the scope and increased the richness of marketing communication. Explain the nature of these internet marketing technologies and how they contribute to the effectiveness of online marketing communications!

Answer 2

Main internet marketing technologies consist of:
1. Web transaction logs = tracks activities of users on websites and apps.
Useful to determine patterns of interest, purchasing behavior, to be able to assess the user-friendliness.

2. Cookies and Web beacons = cookies can only see activities of one site, while web beacons can track user activity beyond the site or source that implemented it.
   Also useful to determine patterns of interest, but also clickstream behavior of customers.
3. Databases, data warehouses, data mining = collect and store transactional and consumer data for offline analysis by marketers. Data mining consists of analyzing this data in order to formulate better customer profiles.
4. Advertising networks = An advertising network is a company that connects advertisers to websites that want to host advertisements. The key function of an ad network is an aggregation of ad supply from publishers and matching it with advertiser’s demand.
5. Customer relationship management systems = manage relationship with customers once purchase is made and create customer profiles. CRM is geared towards identifying profitable customers and building relationships with them.

Question 3

What types of online marketing metrics exist? Provide 2 examples within each type and explain how they are measured!

Answer 3

There are 4 types of online marketing metrics:
- Audience size/market share metrics = How many people can we reach? How big is an audience? What is our market share?
E.g. impressions: number of times a user potentially sees the ad.
click-through rate (CTR): number of times an ad has been clicked on.

• Conversion to customer metrics = How many customers do we acquire? How many of those do we convert to loyal customers?E.g., acquisition rate: % of visitors that are interested in the products (i.e. look at multiple pages or stay on the site for very long).
  conversion rate: % of visitors that become buyers.
• Video ad metrics
  E.g., view time
  completion rate
• E-mail campaign metrics
  E.g. open rate
  click-through rate

Question 4

Explain the concept of behavioral targeting!

Answer 4

Information from browsing websites can be collected from data mining, which finds patterns in users search history. Advertisers using this method believe it produces ads that will be more relevant to users, thus leading consumers be more likely influenced by them. If a consumer was frequently searching for plane ticket prices, the targeting system would recognise this and start showing related adverts across unrelated websites, such as airfare deals on Facebook. Its advantage is that it can target individual’s interests, rather than target groups of people whose interests may vary.

Question 5

What different types of online advertising exist ? Briefly explain every type!

Answer 5

Traditional online marketing and advertising tools include:
- Search engine marketing and advertising (SEO = get on top by paying) = paid inclusion, pay-per-click, keyword advertising.

• Display ad marketing = banner ads, rich media ads, video ads, native advertising, …
• E-mail marketing = direct e-mail marketing.
• Affiliate marketing = Commission fee paid to other Web sites for sending customers to their web site.
• Viral marketing = Marketing designed to inspire customers to pass message to others. Viral marketing is especially geared towards consumers sharing the message. An important aspact of viral marketing are referrals.
• Lead generation marketing = Services and tools for collecting, managing, and converting leads. Collecting information and discovering who could be your potential customers.

Question 6

What net pricing strategies can be distinguished ? Explain!

Answer 6

There are several net pricing strategies, such as:
- Free and freemium
= Can be used to build market awareness. This is a pricing strategy as well as a revenue model.

• Versioning
  = Creating multiple versions of product and selling essentially same product to different market segments at different prices.
• Bundling
  = Offers consumers two or more goods for one price.
• Dynamic pricing
  = several strategies such as auctions, yield management, surge pricing and flash marketing

Question 7

Explain the phenomenon of the long tail!

Answer 7

Internet allows for sales of obscure products with little demand. In the tails are unique products that are more difficult to sell. However, through e-commerce it is possible to sell them. Substantial revenue can be generated in this model since:
- There is little to no inventory costs: unique products so there isn’t much to store

• Little marketing costs because of search engines: unique products are essentially search engine optimized since there is a little amplitude of them available. So if someone searches for it, they are more likely to find your product.

Question 8

Explain the concept of Search Engine Marketing, search Engine Advertising and Search Engine Optimization. Provide examples of the type of search ads that exist (PPC ads, keywork and context advertising)!

Answer 8

Search engine marketing (SEM) = Use of search engines for branding. A form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages (SERPs) primarily through paid advertising.

Search engine advertising (SEA) = Use of search engines to support direct sales
Types of search engine advertising
- Paid inclusion
- Pay-per-click (PPC) search ads
- Keyword advertising

Search engine optimization (SEO) = By means of paying or using the right key words, one can become a top result in the search engine results.

Question 9

Explain the concept of advertising networks and how they work!

Answer 9

An advertising network is a company that connects advertisers to websites that want to host advertisements. The key function of an ad network is an aggregation of ad supply from publishers and matching it with advertiser’s demand.

Question 10

What type of costs exist to determine the effectiveness of online advertising?

Answer 10

Several types of costs to determine the effectiveness of online ads:

• Average cost per click
• Average cost per action
• Cost per thousand
• Barter
• Hybrid
• Sponsorship

Question 11

Describe how marketing analytics can be linked to the online purchasing process.

Answer 11

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