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Chapter 5: Selling to Consumers Online

Dr. Samim Al Azad (SAA2)


Post-doc (LU), PhD (SNU), MBA and BBA (DU)

Assistant Professor, Department of Management,


North South University
Learning Objectives

In this chapter, you will learn about:


• Web Marketing Strategies
• product-based marketing strategies, and
• customer-based marketing strategies
• Customer relationship intensity (life cycle)
• Acquisition, Conversion, and Retention Cost: Funnel Model
• Advertising on the web
– Banner, Pop-up ad, Pop-behind, text-ad, and E-mail Marketing
• Technology enabled Customer Relationship Management
(CRM)

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Product-Based Marketing Strategies

• Managers often think of their businesses in terms of


products and services they sell-
– Useful Web site design when customers use product
categories (sears.com)

• This approach works well


– when a customer arrive at a website and looking for a
specific type of product
– but not useful, when customers look to fulfill a specific
need

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Customer-Based Marketing Strategies

• Design Web sites to meet various types of


customers’ specific needs
– First step: identify customer groups sharing common characteristics
– Second step: creating website that acknowledges each group and
treat each differently (Uni web)

• Strategy pioneered on B2B sites


– B2C sites now adding customer-based marketing elements

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Communicating with different Market Segments:
Web as a communication mode

• The Web
– A communication mode that is an intermediate step
between mass media and personal contact

• Web communication offers:


– Advantages of personal contact selling
– Cost savings of mass media

• Mass media advertising offers lowest trust level


– Still used successfully because costs spread over many people

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Selection of Communication Channel
:Trust, Complexity, and Media Choice
• Complexity level inherent in product and service is
also an Important factor in media choice
1. Products with few characteristics and easy to understand promotes well
with mass media
2. Highly complex products and services promotes well with personal
contact
• Trust level also influences media choice
– High level of trust (Personal Contact)
– Low level of trust (Mass Media)

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Market Segmentation

• Divides potential customer pool into segments


– Segments are defined in terms of customer characteristics: age,
gender, income level, geographic lc.
– Micromarketing
• Practice of targeting very small market segments
• Hampered by cost increases (for mass media)

• Three categories to identify market segments


• Geographic, Demographic, and Psychographic segmentation

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Online Market Segmentation:
Customer Behavior

• Same person needs different combinations of


products and services
• Depending on the occasion
• Behavioral segmentation
– Creation of separate customer experiences based on their behavior
(meals)
– also called occasion segmentation
• Categories of common patterns of online behavior
– Browsers, buyers, and shopper

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Segmentation Using Customer
Behavior (cont’d.)

• Browsers
– Visitors just surfing or browsing
• Web sites must offer something to stimulate visitors’
interest
– Trigger words (remembering something)
• Prompt visitor to stay and investigate products or services

– Include extra content related to product, service


• Camping gear (camping destinations with photos and maps)

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Segmentation Using Customer
Behavior (cont’d.)

• Shoppers
– Motivated to buy
– Looking for more information before purchase

• Websites may offer


– Offer comparison tools, product reviews, and features lists

• People do not retain behavioral categories from one


visit to the next
– Todays visitors/shoppers are the future buyers

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Segmentation Using Customer
Behavior (cont’d.)

• Buyers
– Ready to make a purchase right away

• Websites may offer


– Offer direct route into purchase transaction
– Shopping cart: part of the Web site
• Keeps track of selected items for purchase
• Automates purchasing process
– Page offers link back into shopping area

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Customer Relationship Intensity

• Goal of Marketing
– Strengthen companies’ relationships with customers
• Good customer experiences can create intense feeling of
loyalty as relationship develop over time

• Typical five-stage model of customer loyalty


– First four stages show increase in relationship intensity
– Fifth stage (separation)
• Decline occurs, relationship terminates

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Customer Relationship Intensity
• Characteristics of the five stages
– Awareness
• Customers recognize company name, product
• They know company exists but have not had any interaction
– Exploration
• Customers learn more about company, products
• They might visit company website and communicate via
telephone or email
– Familiarity
• Customers have completed several transactions
• Customers aware of returns, credits, and pricing policies
• They are likely to shop and buy from competitors (still)
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Customer Relationship Intensity
• Characteristics of the five stages (cont’d.)
– Commitment
• Customer experiences highly satisfactory encounters
• Customer develops fierce loyalty or strong preference
– Separation
• Conditions that made relationship valuable change
• Parties enter separation stage

FIGURE Five stages of customer loyalty


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Advertising on the Web
• Customer Relationship Intensity model: helpful in creating
advertising messages
– Awareness stage
• Inform customer about the company or product
– Exploration stage
• Message should explain how product/ service works
• Encourage switching brands
– Familiarity stage
• Message should be persuasive, convince customer to buy
– Commitment stage
• Customer sent reminder messages
• Reinforce customers’ good feeling about the brand
– Separation stage
• Customer not targeted
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Acquisition, Conversion, and Retention of
Customers

• Online advertising always coordinate with existing


advertising efforts
– Goal: Attract new visitors to a Web site

1. Acquisition cost
– Total amount of money a site spends, on average, to draw
one visitor to a site

2. Conversion cost
– Convert first-time visitor into a customer
• to convince one visitor to make a purchase, or sign up for
a subscription

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Acquisition, Conversion, and Retention
of Customers (cont’d.)
3. Retained customers
– Return one or more times after making first purchases
– Costs of convincing customers to return and buy again
• Importance of measuring these costs indicates successful
advertising and promotion strategies
• Which advertising and promotional strategies are more
successful

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Customer Acquisition, Conversion, and
Retention: The Funnel Model

Funnel model
• Conceptual tool that provides understanding of overall
nature of marketing strategy
– Clear structure for evaluating specific strategy elements

• Very similar to customer life-cycle model


– Better at showing effectiveness of two or more specific
strategies

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FIGURE Funnel model of customer acquisition, conversion, and retention

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Technology-Enabled
Customer Relationship Management (CRM)

• Firms obtain customers’ behaviors, preferences, needs


and buying pattern to set prices, negotiate terms, tailor
promotions, add product features, customize customer
relationship
– Here, CRM allows firms to gather much more information about
customer behavior and preference

• Current CRM efforts more successful


– Information gathered from customer interactions on the company’s
Web site
• Combine with other information gathered

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Customer Relationship Management

1. Customer touchpoint
– Any occurrence of contact between customer and
company

2. Data warehouse (large database)


– Contains multiple sources of information about
customers, their preferences, their behavior

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Customer Relationship Management

3. Data mining (analytical processing)


– Technique that examines stored information
– Looks for unknown, unsuspected patterns in the data
4. Statistical modeling
– Technique that tests CRM analysts’ theories about
relationships among customer and sales data elements
5. CRM Analyst
– Formulate and revise strategies that meet needs of
customer (provide recommendations)

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FIGURE Elements of a typical CRM system
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