Class 3 Part 1

1
Class 3 Part 1

• Part 1 Consumer Behavior,
• Market Research, and
• Advertisement
• Part 2 B2B E-Commerce

2
Agenda

• Consumer behavior online
• E-loyalty and e-trust in EC
• Consumer market research in EC
• Internet marketing in B2B
• Web advertising
• major advertising methods
• online advertising strategies and promotions
• Managerial implications

3
Learning about Consumer Behavior Online

• A Model of Consumer Behavior Online
• The purpose of a consumer behavior model is to
  help vendors understand how a consumer makes a
  purchasing decision
• Independent (or uncontrollable) variables
• Intervening or moderating variables
• Dependent variables
• Roles people play in the decision-making process
• Initiator
• Influencer
• Decider
• Buyer
• User

4
The ConsumerDecision-Making Process

• A Generic Purchasing-Decision Model
• product brokering
• Deciding what product to buy
• merchant brokering
• Deciding from whom (from what merchant) to buy a
  product

5
One-to-One Marketing,Loyalty, and Trust in EC

• one-to-one marketing
• Marketing that treats each customer in a unique
  way
• One of the benefits of doing business over the
  Internet is that it enables companies to better
  communicate with customers and better understand
  customers needs and buying habits

6
One-to-One Marketing,Loyalty, and Trust in EC

• personalization
• The matching of services, products, and
  advertising content with individual consumers
• user profile
• The requirements, preferences, behaviors, and
  demographic traits of a particular customer
• user login
• cookie
• A data file that is placed on a users hard
  drive by a Web server, frequently without
  disclosure or the users consent, that collects
  information about the users activities at a site

7
One-to-One Marketing,Loyalty, and Trust in EC

• collaborative filtering
• A personalization method that uses customer
  data to predict, based on formulas derived from
  behavioral sciences, what other products or
  services a customer may enjoy predictions can
  be extended to other customers with similar
  profiles

8
One-to-One Marketing,Loyalty, and Trust in EC

• Customer Loyalty
• Customer loyalty is the degree to which a
  customer will stay with a specific vendor or
  brand for repeat purchasing
• Customer loyalty is expected to produce more
  sales and increased profits over time
• e-loyalty
• Customer loyalty to an e-tailer

9
One-to-One Marketing,Loyalty, and Trust in EC

• Satisfaction in EC
• Satisfaction is one of the most important
  consumer reactions in the B2C online environment
• Recent statistics show
• 80 of highly satisfied online consumers would
  shop again within 2 months
• 90 would recommend the Internet retailers to
  others
• However, 87 of dissatisfied consumers would
  permanently leave their Internet retailers
  without any complaints

10
One-to-One Marketing,Loyalty, and Trust in EC

• trust
• The psychological status of involved parties who
  are willing to pursue further interaction to
  achieve a planned goal
• How to Increase Trust in EC
• Good site usability
• Brand recognition
• EC security mechanisms can help solidify trust

11
Market Research for EC

• The Goal of Market Research
• To find information and knowledge that describes
  the relationships among consumers, products,
  marketing methods, and marketers

12
Market Research for EC

• market segmentation
• The process of dividing a consumer market into
  logical groups for conducting marketing research,
  advertising, and sales
• Segmentation is done with the aid of tools such
  as data modeling and data warehousing

13
Market Research for EC

• Online Market Research Methods
• Implementing Web-based surveys
• Online focus groups
• Hearing directly from customers
• Customer scenarios

14
Market Research for EC

• Tracking Customer Movements
• transaction log
• A record of user activities at a companys Web
  site
• clickstream behavior
• Customer movements on the Internet

15
Market Research for EC

• Web bugs
• Tiny graphics files embedded on e-mail messages
  that transmit information about the users and
  their movements to a Web server
• spyware
• Software that gathers user information over an
  Internet connection without the users knowledge

16
Market Research for EC

• Limitations of Online Market Research
• Too much data may be available
• To use data properly, it should be organized,
  edited, condensed, and summarized
• The solution to this problem is to automate the
  process by using data warehousing and data mining
• Some of the limitations of online research
  methods are
• Accuracy of responses
• Loss of respondents because of equipment problems
• The ethics and legality of Web tracking
• Lack of representativeness in samples of online
  users

17
Internet Marketing in B2B

• Organizational Buyer Behavior
• Organizations buy large quantities
• Transaction volumes are far larger
• Terms of negotiations and purchasing are complex

18
Internet Marketing in B2B

• Methods for B2B Online Marketing
• First B2B online desktop purchasing transaction
• Targeting customers
• Electronic wholesalers
• Other B2B marketing services
• Affiliate programs
• Infomediaries and online data mining services

19
Web Advertising

• Overview of Web Advertising
• interactive marketing
• Online marketing, enabled by the Internet, in
  which advertisers can interact directly with
  customers and consumers can interact with
  advertisers/vendors
• Two major business models for advertising online
  
• Using the Web as a channel to advertise a firms
  own products and services
• Making a firms site a public portal site and
  using captive audiences to advertise products
  offered by other firms

20
Web Advertising

• Some Internet Advertising Terminology
• ad views
• The number of times users call up a page that
  has a banner on it during a specific time period
  known as impressions or page views
• click (click-through or ad click)
• A count made each time a visitor clicks on an
  advertising banner to access the advertiser s
  Web site

21
Web Advertising

• CPM (cost per thousand impressions)
• The fee an advertiser pays for each 1,000 times
  a page with a banner ad is shown
• conversion rate
• The percentage of visitors who actually make a
  purchase or perform other desirable activities
• click-through rate (or ratio)
• The percentage of visitors that are exposed to a
  banner ad and click on it

22
Web Advertising

• hit
• A request for data from a Web page or file
• visit
• A series of requests during one navigation of a
  Web site a pause of a certain length of time
  ends a visit

23
Web Advertising

• unique visit
• A count of the number of visitors to a site,
  regardless of how many pages are viewed per visit
• stickiness
• Characteristic that influences the average
  length of time a visitor stays in a site

24
Web Advertising

• Why Internet Advertising?
• Television viewers are migrating to the Internet
• Advertisers are limited in the amount of
  information they can gather about the television
  and print ads
• Other reasons why Web advertising is growing
  rapidly
• Cost
• Richness of format
• Personalization
• Timeliness
• Location-basis
• Digital branding

25
Advertising Methods

• Banners
• banner
• On a Web page, a graphic advertising display
  linked to the advertisers Web page
• keyword banners
• Banner ads that appear when a predetermined word
  is queried from a search engine
• random banners
• Banner ads that appear at random, not as the
  result of the users action

26
Advertising Methods

• Benefits of Banner Ads
• By clicking on them users are transferred to an
  advertisers site, and frequently directly to the
  shopping page of that site
• The ability to customize them for individual
  surfers or a market segment of surfers
• Viewing of banners may be fairly high because
  forced advertising is used
• Banners may include attention-grabbing multimedia

27
Advertising Methods

• Limitations of Banner Ads
• Cost
• A limited amount of information can be placed on
  the banner
• Viewers have become somewhat immune to banners
  and simply do not notice them as they once did

28
Advertising Methods

• banner swapping
• An agreement between two companies to each
  display the others banner ad on its Web site
• banner exchanges
• Markets in which companies can trade or exchange
  placement of banner ads on each others Web sites

29
Advertising Methods

• pop-up ad
• An ad that appears in a separate window before,
  during, or after Internet surfing or when reading
  e-mail
• pop-under ad
• An ad that appears underneath the current
  browser window, so when the user closes the
  active window, he or she sees the ad
• interstitial
• An initial Web page or a portion of it that is
  used to capture the users attention for a short
  time while other content is loading
• 404 error

30
Advertising Methods

• E-Mail Advertising
• E-Mail Advertising ManagementFive guidelines
  that marketers should consider to leverage
  customer insights throughout the e-mail marketing
  campaign lifecycle
• Thinking about customer experience
• Making privacy protection a part of their brand
  promise
• Ensuring their recipients know about their
  privacy protection
• Measuring impact
• Legal issues (e.g., spam).

31
Advertising Methods

• Search Engine AdvertisementThe major advantage
  of using URLs as an advertising tool is that it
  is free
• Improving a companys search-engine ranking
  (optimization)
• Paid search-engine inclusion
• Advertising in chat rooms
• Advertising in newsletters

32
Advertising Methods

• advertorial
• An advertisement disguised to look like
  editorial content or general information
• associated ad display (text links)
• An advertising strategy that displays a banner
  ad related to a term entered in a search engine

33
Advertising Strategiesand Promotions Online

• affiliate marketing
• A marketing arrangement by which an organization
  refers consumers to the selling companys Web
  site
• viral marketing
• Word-of-mouth marketing by which customers
  promote a product or service by telling others
  about it
• Webcasting
• A free Internet news service that broadcasts
  personalized news and information, including
  seminars, in categories selected by the user

34
Advertising Strategiesand Promotions Online

• Customizing Ads
• Online Events, Promotions, and Attractions
• admediation
• Third-party vendors that conduct promotions,
  especially large-scale ones

35
Special Advertising Topics

• Permission Advertising
• spamming
• Using e-mail to send unwanted ads (sometimes
  floods of ads)
• permission advertising (permission marketing)
• Advertising (marketing) strategy in which
  customers agree to accept advertising and
  marketing materials

36
Special Advertising Topics

• Internet radio
• A Web site that provides music, talk, and other
  entertainment, both live and stored, from a
  variety of radio stations
• ad management
• Methodology and software that enable
  organizations to perform a variety of activities
  involved in Web advertising (e.g., tracking
  viewers, rotating ads)

37
Managerial Issues

• Do we understand our customers?

38
Managerial Issues

• Do we understand our customers?
• This is the most critical part of
  consumer-centered marketing
• How can we learn about our customers better?
• What do we need to know about them?
• What do they actually want when they visit our
  website, not what we think they want

39
Managerial Issues

• 2. Who will conduct the market research?

40
Managerial Issues

• 2. Who will conduct the market research?
• First, should we actually do that?
• The process is expensive and error-prone
• In-house vs. outsourcing

41
Managerial Issues

• 3. Are customers satisfied with our Web site?

42
Managerial Issues

• 3. Are customers satisfied with our Web site?
• Conduct customer surveys
• The ACSI scores are already available
• http//www.theacsi.org

43
Managerial Issues

• 4. How do we decide where to advertise?

44
Managerial Issues

• 4. How do we decide where to advertise?
• Web advertising is a complex process
• Outsource large-scale campaigns
• Consider affiliate programs
• Problem?
• Consider pay search engines

45
Managerial Issues

• 5. Should we integrate our Internet and
  non-Internet marketing campaigns?

46
Managerial Issues

• 5. Should we integrate our Internet and
  non-Internet marketing campaigns?
• Good idea to include the URL in the TV,
  newspaper, yellow pages, etc.
• To be more successful, ad campaign integration is
  a must

47
Managerial Issues

• 6. What ethical issues should we consider?

48
Managerial Issues

• 6. What ethical issues should we consider?
• Spam
• Sell email lists
• If we sell the list, should we share profits with
  the customers (the subjects of information)
• Using customer data for research
• Cookies

49
Managerial Issues

• Are any metrics available to guide advertisers?

50
Managerial Issues

• Are any metrics available to guide advertisers?
• Lots of secondary info on where and how to
  advertise online
• Lots of research resources in journals and
  periodicals
• The best way is to calculate ROI from the
  advertising campaign
• Major problem? (recall your stats course)

51
Class 3 Part 2

• B2B E-Commerce
• Selling and Buying
• in Private E-Markets

52
Agenda

• Introduction what is the B2B field?
• Major types of B2B models
• Sell-side e-marketplace
• Selling through intermediaries
• Selling through auctions
• Buy-side marketplaces
• E-procurement
• Reverse auctions
• Other methods
• Infrastructure and integration
• Managerial issues

53
Introduction what is the B2B field?

• Basic B2B Concepts
• business-to-business e-commerce (B2B EC)
• Transactions between businesses conducted
  electronically over the Internet, extranets,
  intranets, or private networks also known as
  eB2B (electronic B2B) or just B2B

54
Introduction what is the B2B field?

• Key business drivers for B2B
• The availability of a secure broadband Internet
  platform and private and public B2B
  e-marketplaces
• The need for collaborations between suppliers and
  buyers
• The ability to save money, reduce delays, and
  improve collaboration
• The emergence of effective technologies for
  intra- and interorganizational integration, and
• Possible to justify and measure the investment.

55
Types of B2B EC
56
Introduction what is the B2B field?

• Types of Transactions
• spot buying
• The purchase of goods and services as they are
  needed, prices are determined dynamically based
  on supply and demand
• Buyers and sellers dont know each other
• E.g., commodity exchanges (oil, sugar, corn, etc)

57
Introduction what is the B2B field?

• Types of Transactions
• strategic systematic sourcing
• Purchases involving long-term contracts that are
  usually based on private negotiations between
  sellers and buyers
• Direct buyerseller online negotiations

58
Introduction what is the B2B field?

• Benefits of B2B
• Creates new sales (purchase) opportunities
• Eliminates paper and reduces administrative costs
• Expedites processing and reduces cycle time
• Lowers search costs and time for buyers to find
  products and vendors
• Increases productivity of employees dealing with
  buying and/or selling
• Reduces errors and improves quality of services
• Makes product configuration easier

59
Introduction what is the B2B field?

• Benefits of B2B (continued)
• Reduces marketing and sales costs (for sellers)
• Reduces inventory levels
• Enables customized online catalogs with different
  prices for different customers
• Increases production flexibility, permitting
  just-in-time delivery
• Reduces procurement costs (for buyers)
• Facilitates mass customization
• Increases opportunities for collaboration

60
Introduction what is the B2B field?

• Limitations of B2B
• Channel conflict
• Operation of public exchanges
• Elimination of the distributor or the retailer

61
B2B Models

• Major types of B2B models
• Sell-side e-marketplace
• Selling through intermediaries
• Selling through auctions
• Buy-side marketplaces
• E-procurement
• Reverse auctions
• Other methods

62
B2B Models

• Sell-Side Models and Activities
• sell-side e-marketplace
• A Web-based marketplace in which one company
  sells to many business buyers from e-catalogs or
  auctions, frequently over the extranet
• Three major pricing methods
• Selling from electronic catalogs
• Selling via forward auctions and
• One-to-one selling, usually under a negotiated
  long-term contract.

63
Sell-Side B2B E-Marketplace Architecture
64
One-to-Many Intermediaries and Auctions

• Intermediaries distribute products to a large
  number of buyers
• Buy products from many vendors and aggregate them
  into one catalog from which they sell
• Also offer their products online via storefronts
• E.g., Amazon.com, SAMs Club
• See the screenshot below

65
One-to-Many Intermediaries and Auctions

• SAMs club

66
One-to-Many Intermediaries and Auctions

• Using Auctions on the Sell-Side
• Revenue generation
• Cost savings
• Increased page views
• Member acquisition and retention
• To bid, users have to register
• Databases of future business contacts
• http//asset-auctions.com example look at their
  management team

67
One-from-Many Buy-SideE-Marketplaces and
E-Procurement

• buy-side e-marketplace
• A corporate-based acquisition site that uses
  reverse auctions, negotiations, group purchasing,
  or any other e-procurement method

68
One-from-Many Buy-SideE-Marketplaces and
E-Procurement

• Inefficiencies in Traditional Procurement
  Management
• procurement management
• The coordination of all the activities relating
  to purchasing goods and services needed to
  accomplish the mission of an organization
• maverick buying
• Unplanned purchases of items needed quickly,
  often at non-pre-negotiated higher prices

69
One-from-Many Buy-SideE-Marketplaces and
E-Procurement

• E-Procurement Methods
• Conduct bidding or tendering (a reverse auction)
  in a system in which suppliers compete against
  each other
• Buy directly from manufacturers, wholesalers, or
  retailers from their catalogs and possibly by
  negotiation
• Buy from the catalog of an intermediary
• (e-distributor) that aggregates sellers catalogs

70
One-from-Many Buy-SideE-Marketplaces and
E-Procurement

• Buy at private or public auction sites
• Buy at an exchange
• Collaborate with suppliers to share information
  about sales and inventory, so as to reduce
  inventory and stock-outs and enhance just-in-time
  delivery
• Join a group-purchasing system that aggregates
  participants demand, creating a large volume
• E.g., see http//usa-llc.com/results.asp

71
The Group Purchasing Process
72
Buy-Side E-MarketplacesReverse Auctions

• request for quote (RFQ)
• The buyer opens an auction on its own server and
  invite potential suppliers to submit the bids
• The invitation to participate in a tendering
  (bidding) system

73
Reverse Auction Process
74
Other E-Procurement Methods

• desktop purchasing
• Direct purchasing from specific e-marketplaces
  without the approval of supervisors and without
  the intervention of a procurement department
• internal aggregation

75
Other E-Procurement Methods

• bartering exchange
• An intermediary that links parties in a barter
  a company submits its surplus to the exchange and
  receives points of credit, which can be used to
  buy the items that the company needs from other
  exchange participants

76
Infrastructure, Integration, and Software Agents
in B2B EC

• Infrastructure for B2B
• electronic data interchange (EDI)
• The electronic transfer of specially-formatted
  standard business documents, such as bills,
  orders, and confirmations, sent between business
  partners
• value-added networks (VANs)
• Private, third-party managed networks that add
  communications services and security to existing
  common carriers used to implement traditional
  EDI systems
• Internet-based (Web) EDI
• EDI that runs on the Internet and is widely
  accessible to most companies, including SMEs

77
Infrastructure, Integration, and Software Agents
in B2B EC

• Integration for B2B
• Integration with the existing internal
  infrastructure and applications
• Marketing databases, operational databases, EC
  applications, legacy systems, etc
• ERP software, payment systems, CRM packages, DSS
  applications
• Major vendors of management solutions
• SAP, IBM, Microsoft, Oracle, Ariba
• Integration with business partners

78
Infrastructure, Integration, and Software Agents
in B2B EC

• The Role of Standards in B2B Integration
• XML (eXtensible Markup Language)
• Standard (and its variants) used to improve
  compatibility between the disparate systems of
  business partners by defining the meaning of data
  in business documents
• Web Services
• An architecture enabling assembly of distributed
  applications from software services and tying
  them together

79
Infrastructure, Integration, and Software Agents
in B2B EC

• The Role of Software Agents in B2B
• The major role of software agents in B2C is
  collecting data from multiple sellers sites
• Software agents also collect information from
  business sellers sites for the benefit of
  business buyers

80
Managerial Issues

• 1. Can we justify the cost of B2B applications?

81
Managerial Issues

• 1. Can we justify the cost of B2B applications?
• Cost-benefit analysis before the implementation
• Top management support
• Consider impacts on other existing distribution
  channels
• Channel cannibalization
• Case-based methods
• Look at the previous implementations and their
  results
• Best practices, industry recommendations, etc

82
Managerial Issues

• 2. Which ERP vendor(s) should we select?

83
Managerial Issues

• 2. Which ERP vendor(s) should we select?
• Two approaches
• Select a primary large, well-established vendor
  such as SAP or IBM
• Select several systems or services from different
  vendors and integrate them
• Think in terms of future market trends
• Will I be able to leverage this system in future?

84
Managerial Issues

• 3. Should we restructure our procurement system?

85
Managerial Issues

• 3. Should we restructure our procurement system?
• Depends on the volume of transactions
• Future projections
• Are we large enough to attract large customers?
• A fundamental internal change must take place to
  restructure all internal processes

86
Managerial Issues

• 4. What are the ethical issues in B2B?

87
Managerial Issues

• 4. What are the ethical issues in B2B?
• Fraud in online auctions
• Access of private info by employees and partners

88
Managerial Issues

• 5. Will there be massive disintermediation?

89
Managerial Issues

• 5. Will there be massive disintermediation?
• Disintermediation and channel conflicts will
  occur
• Reintermediation may also occur