Ebook E-Commerce 2014 (10/E): Part 2

(BQ) Part 2 book E-Commerce 2014 has contents: E-commerce marketing and advertising concepts; SOCIAL, mobile, and local marketing; ethical, social, and political issues in e-commerce; online retail and services, online content and media; social networks, auctions, and portals,... and other contents.

   323 Part Chapter E-commerce Marketing and Advertising Concepts CHAPTER Social, Mobile, and Local Marketing CHAPTER Ethical, Social, and Political Issues in E-commerce Business Concepts and Social Issues C h a p t e r E-commerce Marketing and Advertising Concepts Learning Objectives After reading this chapter, you will be able to: ■■ ■■ ■■ ■■ ■■ ■■ Identify the key features of the Internet audience Discuss the basic concepts of consumer behavior and purchasing decisions Understand how consumers behave online Identify and describe the basic digital commerce marketing and advertising strategies and tools Identify and describe the main technologies that support online marketing Understand the costs and benefits of online marketing communications Vi de o Ads: Shoot, Click, Buy I he age of online video ads is upon us, just in case you haven’t noticed Improvements in video production tools, higher bandwidth, and better streaming quality have fueled an online video surge Video production is no longer the exclusive province of just a few major players in New York and Hollywood, but instead has expanded to a much larger group of potential creators, including users themselves In addition, the ways online video can be viewed have also expanded, from desktop PCs and laptops to smartphones, tablet computers, netbooks, and Web-enabled television sets The online audience for videos is huge In July 2013, 187 million U.S Internet users watched online video content during the month, with each viewer spending an average of 22.5 hours! Because this is where the eyeballs are, video is an obvious advertising medium And just in time: Internet users have learned how to avoid traditional banner ads by instinctively moving their eyes to a different part of the screen Click-throughs on banner ads are miniscule but videos are another story: next to search engine advertising and focused e-mail campaigns, videos have the highest click-through rate In addition, nearly 100% of online spenders are video viewers, and they provide a highly desirable demographic with strong buying power Research by comScore has also found that retail site viewers who view videos are 64% more likely to purchase As a result, advertisers are jumping on the bandwagon Americans viewed nearly 19.6 billion video ads in July 2013, more than double the amount in July 2012 Video ads reached 55% of the total U.S population Google Sites (YouTube) delivered the highest number of video ads, with 3.4 billion, followed by the BrightRoll Platform (a video ad network) with 2.1 billion, and Adap.tv (a video ad exchange) also with 2.1 billion Hulu served about 1.2 billion video ads Firms are using online video for marketing in a variety of ways Many companies produce their own videos to promote their brands and sell products User-generated video reviews are another effective marketing mechanism EXPO is a consumer network that aggregates hundreds of thousands of video reviews created by over 200,000 members on its Web site, ExpoTV.com EXPO also distributes the product review videos to retailers such as Amazon, Walmart, and Target, to social media sites such as Facebook and YouTube, to manufacturer Web sites and mobile apps, and as paid media, including pre-roll, rich media campaigns, and newsletters via such firms as WebCollege, a leading provider of © EXPO Communications, 2012  325 326 C H A P T E R    E - c o m m e r c e M a r k e t i n g a n d A d v e r t i s i n g C o n c e p t s rich product information to a network of more than 1,000 retailers in North America and Europe EXPO has created a trusted database of videos that can be used as advertising by accepting reviews for any nationally available product and publishing all videos received, regardless of positive or negative opinion, as long as they meet quality standards EXPO screens each video for relevance and quality, and rewards members who submit quality reviews by offering recognition, contests, loyalty points, and special consumer programs By 2013, over 400,000 videos related to over 200,000 different products have been produced by EXPO members, and these videos have generated over 50 million views A study by comScore and EXPO using a sample of 25 video product reviews across various categories, such as electronics and consumer packaged goods, found that the highest performing reviews contained many of the same effective elements seen in professionally produced television commercials, and that the rates of presence of many of these elements were greater than those seen in regular online display ads comScore research indicates that after seeing a video product review, 40% more consumers considered the product unique and differentiated, and willingness to pay more for the product rose by 30% EXPO’s clients include consumer packaged goods brands such as Nabisco, Clairol, Febreze, and many others, as well as consumer electronics firms such as LG For example, for LG, EXPO collected 720 video product reviews of LG products that were viewed over 280,000 times, totaling over 6,000 hours of engagement On ExpoTV, there is an 11% click-to-commerce rate for the electronics category, which EXPO believes is driven by genuine and credible video reviews posted by peers that provide deeper knowledge and greater purchasing confidence to consumers Many large firms are moving into the online video advertising marketplace with sophisticated campaigns and big budgets For instance, Rite Aid was searching for ways to boost sales in a recessionary period One idea was to use its Web site to drive sales at its 4,600 retail stores In 2010, Rite Aid introduced its Video Values program Online visitors who watch videos about Rite Aid products receive a coupon that can be redeemed at the store If you watch 20 videos, you receive a $5 bonus coupon in addition to product coupons Currently, Rite Aid is streaming 500,000 videos a month, which are generating a 20% coupon redemption rate The coupons are personalized and participants have to register Rite Aid generates extensive demographic data on its most engaged customers who can later be contacted in e-mail campaigns In turn, bargain hunting sites and blogs add a social component to the effort by driving bargain hunters to Rite Aid’s site As of July 2013, the top 100 global brands collectively have about 1,400 YouTube channels with over 250,000 videos that have attracted 9.6 billion views Brands with over 40 channels include 3M, Disney, Nike, IBM, and Google The top 100 brands have invested over $4 billion in the creation of video assets Disney, Google, and Sony have achieved over billion total views, and 15 out of the 100 brands had more than 100 million views Media and consumer technology companies are by far the most active producers of online videos Smaller firms are also using video Online fashion retailer KarmaLoop offers KarmaLoopTV, with the objective of creating a community focused on Verge Culture, a demographic of young people heavily involved in music, fashion, sports, and the arts The videos feature exclusive interviews with fashion designers, brands, artists, and musicians Video Ads: Shoot, Click, Buy As of September 2013, KarmaLoopTV has more than 40,000 subscribers and over 21 million video views on YouTube, as well as a dedicated Web site, KarmaloopTV.com, with million unique visitors and 16 million page views per month Orabrush is another small firm that has successfully used video ads on YouTube, in its case, to build its business from the ground up Dr Robert Wagstaff, a dentist who invented a breath-freshening tongue cleaner, was unsuccessful marketing it through traditional channels Jeffrey Harmon, an MBA student at nearby Brigham Young University, whom Wagstaff had hired on a part-time basis, convinced him to give video ads a try He initially posted a YouTube video called “How to tell if you have bad breath” on Orabrush’s landing page, and found that it tripled Orabrush’s conversion rate From there, they decided to create Orabrush’s own YouTube video channel Today the channel has more than 100 videos, over 190,000 subscribers, and more than 50 million video views, and more importantly, has resulted in sales of over million units YouTube continues to account for 80% of Orabrush’s marketing effort, although it now also has a Facebook page People care and get excited about videos far more than banner ads and e-mail This makes videos an ideal advertising medium Several changes in the underlying technology of video advertising are helping to increase the effectiveness of these ads For instance, it is now possible to make video ads interactive so viewers can click on a product and add it to their shopping cart as the video is playing It’s sort of like “streaming e-commerce.” These “interactive video ads” are appearing throughout the Web, especially at newspaper sites as an alternative to display ads that are increasingly ignored Video ads can also be optimized, allowing retailers to change elements of the videos and measure the impact in near real time The introduction of the iPad in 2010 made viewing videos much more pleasant and mobile Interaction rates with videos displayed on iPads are six times higher than desktop PCs The challenge is figuring out how to package advertising messages more directly with the videos, and how to piggyback advertising onto millions of user-generated videos and measure the impact on sales Google, Yahoo, AOL, and literally hundreds of smaller firms are hard at work trying to attach the right ads to the right videos, a tricky process since computers cannot “understand” the content of videos (although they can “understand” the audio script—sort of) One start-up firm, YuMe.com, specializes in matching ads to popular online videos One risk: your ad is attached to a perfectly inappropriate video No one wants their product ads attached to stolen, pornographic, or inappropriate videos Another challenge is to figure out how to show the ad while the video plays without destroying the viewing experience The final challenge is to avoid turning the viewer off, and causing a kind of video blindness on a mass scale, which is the fate of display ads today One solution: YouTube now offers the TrueView ad format, which provides “skippable” ads that allow users to skip the pre-roll ad embedded in videos and which doesn’t charge the advertiser for skipped ads Skippable ads offer the prospect that the video ad marketplace will be self-cleansing with really unpopular, annoying, frequently skipped ads disappearing And for those ads where “the creative” works, as they say in the ad industry, the rewards are potentially huge For instance, Toyota’s Swagger Wagon campaign, featuring a couple of unhip GenX parents rapping, went a long way toward advancing the Toyota brand in a demographic that they otherwise had difficulty reaching  327 SOURCES: Corp.ExpoTV.com, accessed September 14, 2013; Karmalooptv.com, accessed September 14, 2013; “comScore Releases July 2013 U.S Online Video Rankings,” comscore.com, August 19, 2013; “The Top 100 Global Brands on YouTube,” Pixability TV 30 Webinar, June 19, 2013; “Rethinking the BrandRetailer-Consumer Ecosystem,” by Adam Paul, News.expotv.com, April 24, 2013; “Orabrush Surpasses 50 Million Views on Its YouTube Channel,” Orabrush.com, November 15, 2012; “Global Social Media Check-Up 2012,” Burson-Marsteller, July 2012; “As Seen on YouTube! Orabrush Reinvents the Infomercial,” by Joseph Flaherty, Wired.com, May 21, 2012; “YouTube Sees ‘TrueView’ Boosting Best Ads, eMarketer, Inc., December 28, 2011; “Yahoo Study Shows Changes in Online Video Audience,” Zacks.com, June 29, 2011; “The Video Viewing Audience,” eMarketer, Inc., (Lisa Phillips), February 2011; “Persuasive Potential of Consumer Produced Content,” comScore, December 2010; “YouTube to Introduce ‘Skippable’ Ads,” Wall Street Journal, June 29, 2010; “Video E-Commerce: Innovative Models Drive Sales,” by Jeffrey Grant, eMarketer, Inc., May, 2010; “How EXPO Helped LG Learn More about Their Customers,” EXPO, February 17, 2010; “Video Ad Start-Up YuMe Raises $25 Million,” by Brad Stone, New York Times, February 17, 2010 328 C H A P T E R    E - c o m m e r c e M a r k e t i n g a n d A d v e r t i s i n g C o n c e p t s P erhaps no area of business has been more affected by Internet and mobile platform technologies than marketing and marketing communications As a communications tool, the Internet affords marketers new ways of contacting millions of potential customers at costs far lower than traditional media The Internet also provides new ways—often instantaneous and spontaneous—to gather information from customers, adjust product offerings, and increase customer value The Internet has spawned entirely new ways to identify and communicate with customers, including search engine marketing, social network marketing, behavioral targeting, and targeted e-mail, among others The Internet was just the first transformation Today, the mobile platform based on smartphones and tablet computers is transforming online marketing and communications yet again The key changes in 2013 involve social networks, mobile marketing, and location-based services, including local marketing, as well as the increasing prevalence of digital video ads, as discussed in the opening case Table 6.1 summarizes some of the significant new developments in online marketing and advertising for 2013–2014 The subject of online marketing, branding, and market communications is very broad and deep We have created two chapters to cover the material In this chapter, we begin by examining consumer behav­ior on the Web, the major types of online marketing and branding, and the technologies that support advances in online marketing We then focus on understanding the costs and benefits of online marketing communications In Chapter 7, we focus on the social, mobile, and local marketing phenomenon in greater depth 6.1 Co  nsumers Online: The Internet Audience and Consumer Behavior Before firms can begin to sell their products online, they must first understand what kinds of people they will find online and how those people behave in the online marketplace In this section, we focus primarily on individual consumers in the businessto-consumer (B2C) arena However, many of the factors discussed apply to the B2B arena as well, insofar as purchasing decisions by firms are made by individuals For readers who have no background in marketing, we have created an online Learning Track, Learning Track 6.1, that discusses basic marketing and branding concepts Internet Traffic Patterns: the Online Consumer Profile We will start with an analysis of some basic background demographics of Web consumers in the United States The first principle of marketing and sales is “know thy customer.” Who is online, who shops online and why, and what they buy? In 2013, around 243 million people of all ages had access to the Internet Almost 85 million households in the United States (over 70% of all households) have broadband access to the Internet By comparison, 98% of all U.S households currently have televisions and 94% have telephones Worldwide, around 2.56 billion people are online Consumers Online: The Internet Audience and Consumer Behavior Table 6.1 What’s New in Online Marketing and Advertising 2013–2014 B u si n ess • Online marketing and advertising spending increases by 15%, compared to only about 3% for traditional media marketing and advertising • Social media marketing and advertising channels expand, but search and display marketing remains dominant • Mobile marketing and advertising grows at twice the rate of traditional online marketing • Local marketing and advertising based on geolocation services like Groupon and LivingSocial take off • Video advertising continues to be one of the fastest growing formats • Search engine marketing and advertising continues its dominance, but its rate of growth is slowing somewhat compared to other formats T ec h n olog y • Powerful, low-power, handheld mobile devices challenge the PC as the major online marketing and advertising platform Smartphones and tablet computers become prevalent Web access devices • Big data: online tracking produces oceans of data, challenging business analytics programs • Cloud computing makes rich marketing content and multi-channel, cross-platform marketing a reality • The Twitter, Facebook, and Pinterest platforms grow into valuable social customer relationship management tools, enabling businesses to connect with customers on social network sites S ociet y • Targeted advertising based on behavioral tracking on leads to growing privacy awareness and fears • Social network sites are accused of abusing customer profile information without providing sufficient user controls over profile distribution • Mobile GPS tracking of individual location information built into smartphones and other mobile devices raises privacy concerns Although the number of new online users increased at a rate of 30% a year or higher in the early 2000s, over the last several years, this growth rate has slowed to about 2%–3% a year in the United States E-commerce businesses can no longer count on a double-digit growth rate in the online population to fuel their revenues The days of extremely rapid growth in the U.S Internet population are over Intensity and Scope of Usage The slowing rate of growth in the U.S Internet population is compensated for, in part, by an increasing intensity and scope of use Overall, over 80% of adult users of the Internet report logging on on a typical day (Pew Internet & American Life Project, 2013a) Several studies also show that a greater amount of time is being spent online by Internet users—over hours a day (eMarketer, Inc., 2013a) In 2013, mobile smartphones and tablets are major access points to the Internet and online commerce About 143 million people, almost 60% of all U.S Internet users, access the Internet using a mobile device Owners of mobile devices spend over hours a day using  329 330 C H A P T E R    E - c o m m e r c e M a r k e t i n g a n d A d v e r t i s i n g C o n c e p t s them for nontelephone activities In 2013, around 125 million mobile users played games, around 75 million viewed videos, around 100 million visited a social site, and millions of others listened to music, shopped, and texted (eMarketer, Inc., 2013b) The more time users spend online, becoming more comfortable and familiar with Internet features and services, the more services they are likely to explore, according to the Pew Internet & American Life Project Demographics and Access The demographic profile of the Internet—and e-commerce—has changed greatly since 1995 Up until 2000, single, white, young, college-educated males with high incomes dominated the Internet This inequality in access and usage led to concerns about a possible “digital divide.” However, in recent years, there has been a marked increase in Internet usage by females, minorities, seniors, and families with modest incomes, resulting in a notable decrease—but not elimination—in the earlier inequality of access and usage (Pew Internet & American Life Project, 2013b) An roughly equal percentage (about 85%) of men and women use the Internet today Young adults (18–29) form the age group with the highest percentage of Internet use, at 98% Adults in the 30–49 group (92%) are also strongly represented Another fast-growing group online is the 65 and over segment, 56% of whom now use the Internet Teens (12–17) also have a very high percentage of their age group online (97%) The percentage of very young children (1–11 years) online has also spurted, to 45% of that age group (eMarketer, Inc., 2013c, 2013d) Variation across ethnic groups is not as wide as across age groups Ten years ago, there were significant differences among ethnic groups, but this has receded In 2012, user participation by whites is 86%, African Americans, 85%, and Hispanics, 76% About 96% of households with income levels above $75,000 have Internet access, compared to only 76% of households earning less than $30,000 Over time, income differences have declined but they remain significant with a 20% gap between the highest category of household income and the lowest Amount of education also makes a significant difference when it comes to online access Of those individuals with less than a high school education, only 59% were online in 2013, compared to 96% of individuals with a college degree or more Even a high school education boosted Internet usage, with that segment reaching 78% In general, educational disparities far exceed other disparities in Internet access and usage (Pew Internet & American Life Project, 2013b; eMarketer, Inc., 2013c, 2013d) Overall, there remains a strong relationship between age, income, ethnicity, and education on one hand and Internet usage on the other The so-called “digital divide” has indeed moderated, but it still persists along the income, education, age, and ethnic dimensions Gender, income, education, age, and ethnicity also impact online behavior According to the Pew Internet & American Life Project, adults over the age of 65, those who have not completed high school, those who make less than $30,000 a year, and Hispanics are all less likely to purchase products online Women are slightly more likely to purchase online than men, but not significantly so With respect to online banking, the demographics are similar—those 65 and older are less likely than any age group to bank online, while those with at least some college are more likely than Consumers Online: The Internet Audience and Consumer Behavior those with a high school diploma or less Online banking is also more popular with men than women No significant differences were found in terms of ethnicity (Pew Internet & American Life Project, 2012) Other commentators have observed that children of poorer and less educated families are spending considerably more time using their access devices for entertainment (movies, games, Facebook, and texting) than children from wealthier households For all children and teenagers, the majority of time spent on the Internet has been labeled “wasted time” because the majority of online use is for entertainment, and not education or learning (Richtel, 2012) Type of Internet Connection: Broadband and Mobile Impacts While a great deal of progress has been made in reducing glaring gaps in access to the Internet, there are significant inequalities in access to broadband service In 2013, around 85 million households had broadband service in their homes—70% of all households (eMarketer, Inc., 2013e) Research suggests the broadband audience is different from the dial-up audience: the broadband audience is more educated and affluent The Federal Communications Commission reports that only 50% of Hispanic and African American homes have broadband, and only 40% of those homes with less than $20,000 in annual income (Federal Communications Commission, 2012) The broadband audience is much more intensely involved with the Internet and much more capable of using the Internet For marketers, this audience offers unique opportunities for the use of multimedia marketing campaigns, and for the positioning of products especially suited for this audience On the other hand, the dial-up households still buy products online, visit news sites, and use social network sites—just not as frequently or intensely as broadband households The explosive growth of smartphones and tablet computers connected to broadband cellular and Wi-Fi networks is the foundation for a truly mobile e-commerce and marketing platform, which did not exist a few years ago Marketers are now beginning to use this new platform for brand development Community Effects: Social Contagion in Social Networks For a physical retail store, the most important factor in shaping sales is location, location, location If you are located where thousands of people pass by every day, you will tend to well But for Internet retailers, physical location has almost no consequence as long as customers can be served by shipping services such as UPS or the post office or their services can be downloaded to anywhere What does make a difference for consumer purchases on the Internet is whether or not the consumer is located in “neighborhoods” where others purchase on the Internet These neighborhoods can be either face-to-face and truly personal, or digital These so-called neighborhood effects, and the role of social emulation in consumption decisions, are well known for goods such as personal computers In general, there is a relationship between being a member of a social network and purchasing decisions Research on an Internet grocery found that being located near other users of the online grocery increased the likelihood of purchasing at the site by 50% (Bell and Song, 2004) Yet the relationship between “connectedness” (either offline or online) and purchase decisions is not straightforward or simple People who score in the top 10%–15% of connectedness “do their own thing”  331 332 C H A P T E R    E - c o m m e r c e M a r k e t i n g a n d A d v e r t i s i n g C o n c e p t s to differentiate themselves and often not share purchase decisions with friends In fact, highly connected users often stop purchasing what their friends purchase One can think of them as iconoclasts The middle 50% of connected people very often share purchase patterns of their friends One can think of these people as “keeping up with the Joneses” (Iyengar, et al., 2009) A Forrester Research study found that less than 2% of online purchases could be traced back to social networks, although for short-term, flash sales, the percentage rises to 6% (Forrester Research, 2011a) Other research reported by Goldman Sachs shows that social networks account for about 5% of online purchase activity, compared to search engines (31%) and recommendation engines (27%) (Dyer, 2011) Membership in social networks has a large influence on discovering new independent music, but less influence on already well-known products (Garg, 2009) Membership in an online brand community like Ford’s Facebook page and community has a direct effect on sales (Adjei, et al., 2009) Amazon’s recommender systems (“Consumers who bought this item also bought ”) create co-purchase networks where people not know one another personally, but nevertheless triple the influence of complementary products (Oestreicher-Singer and Sundararajan, 2008) The value of social networks to marketers rests on the proposition that brand strength and purchase decisions are closely related to network membership, rank, prominence, and centrality At this point, the strength and scope of the relationship between social network membership, brand awareness, and purchase decisions is not completely understood, although all researchers agree that it exists in a variety of contexts and in varying degrees (Guo, et al., 2011) Consumer Behavior Models consumer behavior a social science discipline that attempts to model and understand the behavior of humans in a marketplace Once firms have an understanding of who is online, they need to focus on how consumers behave online The study of consumer behavior is a social science discipline that attempts to model and understand the behavior of humans in a marketplace Several social science disciplines play roles in this study, including sociology, psychology, and economics Models of consumer behavior attempt to predict or “explain” what consumers purchase and where, when, how much, and why they buy The expectation is that if the consumer decision-making process can be understood, firms will have a much better idea how to market and sell their products Figure 6.1 illustrates a general consumer behavior model that takes into account a wide range of factors that influence a consumer’s marketplace decisions Learning Track 6.2 contains further information about the cultural, social, and psychological background factors that influence consumer behavior Profiles of Online Consumers Online consumer behavior parallels that of offline consumer behavior with some obvious differences It is important to first understand why people choose the Internet channel to conduct transactions Table 6.2 lists the main reasons consumers choose the online channel While price appears on this list, overwhelmingly, consumers shop on the Web because of convenience, which in turn is produced largely by saving them time Overall transaction cost reduction appears to be the major motivator for choosing the online channel, followed by other cost reductions in the product or service ... Billions) 20 13 20 17 A verage G rowt h R ate $19.6 $25 .6 8.1% Banner ads $8.6 $ 12. 2 7.4% Video $4.1 $9 .2 26.6% Classifieds $2. 7 $3.1 3.6% Rich media $2. 0 $5.4 24 .9% Lead generation $1.9 $2. 3 6.5%... November 15, 20 12; “Global Social Media Check-Up 20 12, ” Burson-Marsteller, July 20 12; “As Seen on YouTube! Orabrush Reinvents the Infomercial,” by Joseph Flaherty, Wired.com, May 21 , 20 12; “YouTube... Inc., December 28 , 20 11; “Yahoo Study Shows Changes in Online Video Audience,” Zacks.com, June 29 , 20 11; “The Video Viewing Audience,” eMarketer, Inc., (Lisa Phillips), February 20 11; “Persuasive