E-COMMERCE AND VIRTUAL MARKETING

© 2009 South-Western, Cengage LearningMARKETING

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Chapter 8

E-COMMERCE ANDVIRTUAL MARKETING

8-1 What Is E-Commerce?8-2 The Growing Importance of E-Commerce8-3 Virtual Marketing and Distribution8-4 The Role of Promotion for E-Commerce

CHAPTER

8

© 2009 South-Western, Cengage LearningMARKETINGChapter 8

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Newsline - 08 Think/Pair/Share

Consumers Say No to Pets.com

Read it individuallyThink critically #1 & #2 individually Pair with two row members & discussShare with the entire class


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Focus Questions:Do you agree that using the

Internet is the same as socializing and shopping with your friends at the mall?

What problems might a business encounter if it tries to use the Internet only to sell products without realizing the other ways people use the Internet?

Cou

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, IN

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WHAT IS E-COMMERCE?

GOALS

Describe the 3 stages of development for e-commerce businesses.

Discuss the importance of the marketing concept to successful e-commerce.

8-1


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Marketing MattersPage 210

Make a list of the advantages and disadvantages of using the Internet to buy products and services.


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The Expanding Worldof E-Commerce

E-Commerce: involves business activities completed electronically via the Internet.

Exchange of goods, services & information via the Internet


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The Expanding Worldof E-Commerce

Includes: Purchasing/Selling productsProvide/Exchange InfoCustomer Service/SupportNot all businesses can complete all their activities using

the Internet but it can be used for many activities.


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From Bricks to Clicks

Click-Only Businesses: Companies that complete almost all of their business activities through the Internet.

1st known as ~ Dot.com Businesses

Ex: CustomInk.com & EastBay.com


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Brick-and-Mortar Businesses: Companies that complete most of their business activities by means other than the Internet.

Brick-and-Mortar – suggests that the companies relies on actual buildings, such as retail stores, offices, or factories to conduct its business.

Ex: Traditional Groceries Store


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Brick-and-Click Businesses: Companies that combine traditional business operations with the use of the Internet. (Combo)

Ex: Kohls, JCP, Foot Locker, etc.


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Stages of Development

Businesses generally progress through 3 stages as they develop their e-commerce presence on the Internet.


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1. Information Stage Simple Web site Form of one way communication Limitation - Customers cannot use

the site to interact w/ the business.

Ex: School Store Wikispace


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2. Interaction Stage (1 of 2)

Provide Information and Interact Click to Email option – request info,

ask questions, contact specific people. Provide databases – check product

availability, product costs, shipping costs, delivery dates


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2. Interaction Stage (2 of 2)

Limitation – offer order form for print and mail, but cannot place order directly over the Internet

EX: http://jacketsnthingsambler.com/

http://jacketsnthingsambler.com/


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3. Full Integration Stage Complete business transaction Place orders and pay for it online Track their shipments until delivered Obtain customer assistance at every step

Advantage – Do not have to be a click-only company to use full integration.


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Get the MessagePage 213

Critically Thinking

What factors might have contributed to the closing of the digital divide?

How would this information impact marketers hoping to target minorities?

What approach might such marketers take now that they would not have taken in 2000?


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Success in E-Commerce

Brainstorm some Advantages & Disadvantages of e-commerce.

Still need to identify the target market and need consumer needs to be successful in business.


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Advantages of E-commerce (1 of 2)

Immediate access to prospective customers all over the world.

Introduce new products or update product info instantaneously.

Communication is no longer confined to computers. Extended to notebooks, cell phones, PDAs.


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Advantages of E-commerce (2 of 2)

Marketing Research Tool.Customer access 24/7.Products delivered to computers

E-Tickets replace paper tickets.Small businesses can compete

more easily with large companies


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Disadvantages of E-commerce (1 of 3)

Easy to start w/o understandingProducts not described wellProducts not delivered on timeDamaged during shipmentsErrors in order processingCustomer service hard to obtainReturns/Defects difficult to return


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Disadvantages of E-commerce (2 of 3)

Businesses learned:Difficult to predict demandsCustomers expect 24/7 serviceWarranty/Repairs must be offered to

online customersMethods to accept returnsSecure websites to accept credit cards


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One of the Greatest Disadvantages of E-commerce (3 of 3)

Changing nature of competition &

Customers purchasing behaviorsBrick-n-mortar businesses

compete geographically E-commerce compete with all

businesses offering same products


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Marketing ConceptApplied to E-commerce

Still need to:Understand target marketKnow their needs and wantsHow to meet/satisfy those needs

and wants with a marketing mix.


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Marketing ConceptApplied to E-commerce

Offer products that customers want (Product)Distribute them effectively (Place)Make purchases affordable (Price)Make ordering and payments easy(Finance)Provide info in description/pictures (Promo)Answer questions

(Service)Provide expected services

(Product)Solve problems at every stage of sale

(Service)


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GROWING IMPORTANCEOF E-COMMERCE

GOALSIdentify evidence of the growth of the

Internet.Describe the various business uses of

the Internet for e-commerce.

8-2


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Growth of the Internet

No one recognized the potential of the Internet when it was first developed in 1950 as the military and research tool.

Over 120 Million business, organization and individual registered web sites were active worldwide in 2007.

Millions more added each year.


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Growth of the Internet

B2C: Business-to-ConsumerB2B: Business-to-Business

Many people/businesses around the world do not yet purchase online or small amountSome not even connected yet.Likely to increase by million/billions in the

futureLots of room for growth


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Business Uses of the InternetCommunicating (1 of 4)

Internet is a very efficient and effective communications tool for both individuals and businesses. Chat RoomBulletins boardPersonal MessengersWebcamsOnline WhiteboardsSocial Media (Facebook, MySpace, Twitter)


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Quick and InexpensiveNewslettersReportsOther important information for

employees and investors


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Provide detailed informationPost hours of operationsProvide contact informationProvide directions and maps to locations

If you do not post your info online you are missing many prospective customers.


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Common for business communicationPlace ordersProvide product infoShare dataSend emailsExchange documentsOffer trainingsUpdate online records


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Business Uses of the InternetGathering Information (1 of 3)

Much information is FREEProvided by government agencies, colleges,

libraries, & even private businesses

Other information can be purchasedResearch companies, professional & trade

associations & businesses publish info


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Improved capacity to gather consumer info

Customers encouraged to complete product registrations & warranty cards on their purchase

Allows company to collect info about consumer including an email address

Valuable information for future communication and promotional activities


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Websites now include:Requests for further informationRequests to be added to mailing lists

These options provide businesses with a list of prospective customers seeking more info.


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Business Uses of the InternetImproving Operations (1 of 2)

Internet has improved marketing activities and doing business.Salesperson can check availability of productsProduction manager can access transportation

records and see shipment detailsEngineers in different locations can collaborate

on product designs instantaneously.


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Business Uses of the InternetImproving Operations (2 of 2)

Businesses can compete nationally and internationally without cost of salespeople

Businesses locate other businesses to assist them w/ long distance transactions.DistributionCustomer ServiceBilling & Payment Collection


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VIRTUAL MARKETINGAND DISTRIBUTION

GOALSDifferentiate virtual marketing from traditional

marketing.Describe distribution methods used in

e-commerce.Identify distribution problems experienced by

e-businesses and how they can be resolved.

8-3


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Marketing Via the Internet

E-Commerce usually requires a combination of traditional marketing and:

Virtual Marketing: the completion of marketing activities primarily through the use of computer and Internet technologies


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Virtual MarketingExamples

Marketing research using online surveys and other electronic data-collection methods

Distribution of electronic versions of products & services such as e-tickets & e-books

Processes for making electronic payments and managing finances such as secure credit card transactions and online banking/bill payments

Communication & promotion strategies such as Internet advertising, email, live chats, blogs


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Virtual Marketing

E-commerce businesses also need to be able to use traditional marketing forms

Effective order processingProduct storageTransportation systems


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Virtual Marketing Issues

Some customers may not be comfortable with electronic paymentsCompanies need to have alternative payments

Some customers may not search onlineRequires traditional advertising/promotions

Need more attention to marketing planningNeed knowledge of new technologies


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Distribution for E-Commerce

Distribution is the marketing function that can determine success or failure for a company in e-commerce.

Major distribution changes in e-commerce: access to productsordering processingdistribution methods


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Finding and Buying Products OnlineIncreased competition Online shopping carts designed:

Complete ordersMake immediate paymentsSecurely submit orders

Confirmations occur almost instantaneously


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Internet has streamlined Order ProcessingPast – process for filling orders required a lot of

paperwork to be sent to every dept involved

Internet provides all the info at your fingertips

Order info sent via computer to depts. involved

Check order status via Internet (more on next

slide)


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Internet has streamlined Order ProcessingCustomers can check order status via Internet

Reduces errors - accuracy checked more easily

Save $ - on order processing & distribution costs

Savings Chart to follow…


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Cost Savings

Product SavingsComputer software 99%Banking services 89%Airline tickets 87%Stocks 78%Books 56%Toys and gifts 48%

Average Cost Savings for Businesses when Customers Use the Internet to Make Purchases


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Internet can make Product Distribution easier & less expensiveSoftware companies do not have to produce CD

– instead we download the softwareGovernment does not have to print & mail tax

forms & instruction books – online forms insteadNewspapers/Magazines have online editionsPhotographers post photos online instead of CD


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Distribution Problems & SolutionsTransaction Security (1 of 3)

Transaction SecurityOver half of all Internet consumers make at

least one online purchase every 3 months.Nearly 2/3 of all purchases started are ended

before the customer submits the final order.Business loses the sale and may have lost the

consumer completely due to problems with the purchasing procedures.


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One of the greatest concerns of customers is the security of the info they provide when placing an order online:

Personal info: Name, Address, Phone #, Credit Card #

1. Personal info can be stolen or misused while it is being transmitted or stored on computer

2. Business may misuse the info after the order has been processed


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E-commerce companies go through great lengths to provide security for customers

Advanced Security Technologies Offer the choice of fax or phone orders Bank account transfers (no credit card #) C.C. companies offer insurance so they aren’t

responsible for misuse of their info Privacy policies concerning use of private info


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Distribution Problems & SolutionsExpanded Distribution & Customer Service 1/4

Distribution activities were challengingStill needed to pack and ship online ordersCustomers often had questionsCustomers often needed help with assemblyIf product damaged or not what they wanted,

they wanted to be able to return/exchange itCustomers became dissatisfied with lack of

services provided w/ online purchases


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UPS & Fedex offer special delivery services to meet needs of online buyersShipments tracked instantly onlineEasy returns with preprinted labels, return

instructions and free pick-up servicesSome businesses offer arrangements for

returns made to local businesses


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Customer Service centers have been set up to respond to Internet customers.

Links to FAQs – immediate answers

Instruction manuals, product warranties & registration, & product replacement orders can all be found online for easy access


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New businesses have been developed to serve e-commerce distribution needs. Product Fulfillment Center: provides some

or all of the activities required to fill orders.Amazon.com – successful example

Does not produce productsSells products of other businesses by completing

ordering processing, product storage, order filling & packing and customer service.


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THE ROLE OF PROMOTIONFOR E-COMMERCE

GOALSDescribe how companies use

promotion on the Internet.Identify ways to increase the

effectiveness of online promotion.

8-4


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Communicating withInternet Users

Most people today are not using the Internet to purchase products when they are online.

Only 2% of Internet users say they go online with the intention of making a purchase.

Over 80% say they go online for communication purposes.

Consumers more likely to gather information on products and compare alternatives.


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Promotion – communication portion of marketing mix.Communicate information to encourage

customers to buy the products and servicesBrick-n-Click & Click-Only businesses

benefit from using Internet promotionsEven Brick-n-Mortar businesses are

developing informational websites


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Communicating with Internet UsersAdvertising Expenditures

1998 - less than $2 billion on e-advertising

2007 - over $9.7 billion for advertisements

Newer forms of promotions being developed:Call attention to company name/productProvide info in non-ad formatsLink info to company’s website


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Communicating with Internet UsersPromotion Methods

1. Online Advertising Compete for Internet user attention Use varied sizes, colors, placements, designs Banners – across the top or bottom of page Skyscrapers – vertically on page margins Small Boxes – within the text Links – to full page advertisements


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Latest Technologies Pop-Ups – advertisement that opens in a

new window when a web page is viewed. Video Clips – short clips to promote products Rich Media – variety of digital technologies

that provide interactive multimedia experiences for users.


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Online Ad ~ Internet Advertising Bureau (IAB) Established standards for size, appearance,

and use of Internet advertising methods.

One pop-up for each visit to the website Pop-up should be labeled w/ sponsor’s name Advertising videos should be limited to 30 sec

with viewer controls of video and audio


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2. Web Sponsorship Effective way to build recognition of a company’s

name and products with prospective customers

Sponsor’s name included on web site so that visitors see the name each time they visit.

Ex. Bank could sponsor a web site that helps consumers understand how to lease or finance the purchase of an automobile.


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3. Priority Placement Search engines allow companies to buy a top

spot on the search results list. Classified Advertising: search engines

display sponsor’s name, a link to its website, and a brief description or promo message in a column beside the search results.


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4. Information Websites Companies and organizations develop free

websites on topics of interest to their prospective customers

Believe if they inform the consumers, they are more likely to purchase related products


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5. Other types of promotion Companies develop email lists from:

email addresses of previous product consumers consumers who sent inquiries to the company purchasing emails lists from other companies

Provide online coupons for new products Promotions to encourage consumer requests

for free samples or informational CDs.


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Companies are increasingly using more informal and personalized methods of Internet communication.

Online newsletters Email messages sent to regular customers Business Blogs: regularly updated online

journals written by company experts. Online interest or social groups


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Customer Satisfaction withTypes of Shopping

Type % satisfiedShopping online 73%Shopping in stores 60%Shopping with catalogs 56%

Most consumers are satisfied with their shopping experience when they make purchases using the Internet.

Why ? ? ?Convenience, Time-Saving, One-Stop-Shopping


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Preparing forE-Commerce Marketing

Planning the Shopping ExperienceWebsite design and effective communication

principles are needed to attract consumers to the business & help them make a purchase.

Promotions must result in a sale and satisfy customers otherwise it was wasteful spending.


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Features Likely to IncreaseOnline Purchasing

Close-up images of products

Information on product availability

Shopping with catalogs

Product comparison guides

An easy-to-use search function

Toll-free customer service number

Consumer reviews and product evaluations

An easy-to-use “shopping cart” and check out feature


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Effective Promotional ToolsAn easy-to-remember, meaningful Internet address

Well-designed online advertisements

Advertisements in other media such as newspapers and TV

Registration with search engines to identify the company to people gathering information about its products

Customer service personnel to help customers & answer questions

Info collected about: who visits, when they visit, time spent, which pages & links are most popular, & what info influences their purchasesOnline chat rooms, discussions & clubs to exchange info w/customers

Email promotions/announcements to encourage regular visits to site

E-COMMERCE AND VIRTUAL MARKETING

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