Online Consumer Behavior

Different Types of Buyers

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

B2B Purchasing

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

Different Types of Buyers

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

Internet Usage

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

Cyberspace Demographics

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

Cyberspace Demographics

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

Cyberspace Demographics

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

World Usage Statistics (2005)

Region Africa Asia % of World Population 14% 57% Europe 11% Middle East 4% % Internet Penetration 1.8% 5 yr. Growth Rate 258% 8.9% 36.8% 8.3% 183% 161% 312%

What consumers do online

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

What are college students doing?

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

What consumers do online

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

What consumers do online

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

Gaming Industry

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

Gaming Industry

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

The Groove Alliance

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

The Groove Alliance

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

What Consumers do online

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

Online Dating Industry

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

Key Players

 Match.com

 Yahoo! Personals  eHarmony  Lavalife  Traditional dating firms • It’s Just Lunch  Social networking communities

Match.com

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

Match.com

 Partnered with several firms • America Online & Microsoft’s MSN  Subscriptions as low as $12.99 per month  New services include: • video, off line speed dating, friend list, travel site, MatchLive off line events

What drives usage

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

Reasons Consumers Buy Online

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

Yet online context is different

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

How is the Internet Unique?

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

How is the Internet Unique?

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

How is the Internet Unique?

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

Community Characteristics

 Use of communication tools  Rules that define membership  A strong focus  Collaborative production of material by members  Repeat use by members  Social bonds  Growth can be problematic because focus can be lost & content breaks down

Types of communities

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

Ways to Communicate

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

Membership rules

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

Benefits of Community

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

Benefits of Community

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

EBay’s Community Mission

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

Hard to utilize

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

Negative Consumer Behaviors

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

Negative Consumer Behaviors

 Anti-corporate activism • Unprecedented consumer power • Complaint & hate websites – www.complaints.com

– www.walmart-blows.com

– www.gapsucks.org

 Corporate reactions • Buy, Monitor, Respond, Ignore

Interactivity & The Six I’s of Customer Satisfaction

Using Technology to be More Customer Focused

OnStar

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

OnStar

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

OnStar

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

OnStar

 Strategic Alliances • Leading public safety & emergency medical organizations – Association of Public Safety Communications Officials (APCO) • Agencies supporting efforts to find missing children – America’s Most Wanted

OnStar

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

Growth in Interactive media

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

Growth in Interactive media

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Dimensions of Interactivity

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

Interactivity

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

Customer Focus

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

Interconnection

 Using networks to connect to individuals • Internet is the world’s largest computer network • Other technological & human networks  Requires establishing a network business strategy

Interface

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

Interactivity

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

Involvement

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

Individualism

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

Integrity

 Privacy, security, confidentiality crucial  Ethics become especially important  Raises issues:  unsolicited email  storing sensitive information

Selling Online

And Channel Issues

Product Strategy Pricing Strategy Marketing Mix Promotion Strategy Distribution Strategy Channel Strategy component Logistics Management component The Marketing Mix

Channels of Distribution

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

Channel Functions

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

Product Flow Manufacturer Transportation Company Wholesalers Negotiation Flow Manufacturer Wholesalers Ownership Flow Manufacturer Information Flow Promotion Flow Manufacturer Manufacturer Transportation Company Transportation Company Wholesalers Wholesalers Wholesalers Retailers Retailers Retailers Retailers Retailers Consumers Consumers Consumers

The Five Flows

Consumers Consumers

Two-Level Manufacturer Consumer Three-Level Manufacturer Four-Level Manufacturer Five-Level Manufacturer Agent Retailer Wholesaler Retailer Wholesaler Consumer Consumer

The Channel Structure

Retailer Consumer

Distribution Strategies

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

Distribution Strategies

 Direct digital distribution: some products will be completely digital someday – music, airline tickets, hotel reservations, video games, magazines, newspapers, movie tickets, financial services  Internet’s ease of creating direct distribution channels already impacting industries

Distribution Strategies

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

Distribution Strategies

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

The Go-to-Market Strategy

 A plan for reaching & serving the customers in the

right

the channels with the

right right right

value proposition

right

markets through the products and  Total customer experience • Attract most desirable customers • High sales • Lowest possible cost

The Go-to-Market Strategy

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

The Go-to-Market Strategy

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

Distribution Issues

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

Staples

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

Staples

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

Web Channels

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

Web Channels



Mid-2000: IPO Internet Bubble



An estimated 700-1000 of these Internet start-ups went bust

–Boo.com

–Toysmart.com

–Brandwise.com

–Clickradio.com

The Case of Amazon.com

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

The Case of Amazon.com

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

Web Channels

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

The Case of Walmart

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

Walmart.com

 Founded in January 2000, initially independent from Wal-Mart Stores, Inc.

 Eventually integrated as separate business unit • Return policy for online purchases in store  Offers more than 600,000 stock keeping units

Walmart.com

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

What consumers want from online storefronts

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

What consumers want from online storefronts

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

What consumers want from online storefronts

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

Etailing

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

Etailing

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

Etailer Decisions

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

An Etailer Predicament

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

Customer Relationship Management (CRM)

Managing the Individual Marketing Relationship Using Technology

Marketing to Individuals

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

Individual Personalization

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

Choice Assistance

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

Lands End

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

Lands End

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

Lands End

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

Lands End

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

Lands End

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

Customization

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

Different types of customization

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

Implication

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

Relationship Building Efforts

Communication techniques

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

Communication goals

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

Strategies Underlie these Goals

 Marketers’ strategies lifetime customer value targeted messages -distribution efficiency customer dialogue  Consumers’ strategies life savings & reward fewer irrelevant ones -wider availability seller responsiveness  Involving consumers is important  Adding value is key

Different Types of Relationships

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

Acquisition

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

Development

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

Retention

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

Peppers & Rogers Group

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

Implementation: One-to-One Marketing

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

Implementation continued

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

Summary CRM steps

 Identify & record customers  Sort them by needs, ideally treat as individuals  Interact with them effectively  Record interactions  Customize marketing offer  Update information in databases  Sell the same customers more products in future

Organizing a Marketing Department

Marketing department organization

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

Customer management

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

Databases & Data Mining

Operational Data Tools

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

Database

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

Database

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

Database

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

Data

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

Databases

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

Database Planning & Design

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

Double Click

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

Double Click’s Abacus

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

Double Click’s Abacus

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

Data Warehousing

 Store houses for massive amounts of data

Data Mining

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

Jiffy Lube

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

Privacy Sensitive Tools

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

Privacy Sensitive Tools

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

Marketing Research

Overview of Marketing Research

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

Methods Moving Online

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

Online Focus Groups

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

Process

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

Demonstration

Advantages

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

Advantages

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

Disadvantages

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

Other Issues

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

Measuring Effectiveness of Interactive Media

Began with Web Advertising

Measurement

 Most Measures

tell cost effectiveness

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

Hits

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

Clicks

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

Impressions

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

Visitors

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

Stickiness

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

Other relevant terms

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

Usability Studies

An Emerging Technique

Usability

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

Oops I shook the whole cabinet

My comp has gone Nuts!

Hey I am really confused

Its so clear!!!!

Importance

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

Goals for usability testing

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

Steps in Usability Testing

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

Sample Test Contents

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

Use of the test results

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