©2006 Prentice Hall ELC 310 Day 17. ©2006 Prentice Hall Agenda Schedule Oct 31 – eMarketing Communication & Customer Relationship Management Nov 3 – eMarketing

©2006 Prentice Hall

ELC 310

Day 17


Agenda• Schedule

• Oct 31 – eMarketing Communication & Customer Relationship Management

• Nov 3 – eMarketing Plan Presentations• Nov 7 – Quiz 3 Chap 12, 13 & 14• Nov 10 - Change texts to e-business.marketing

• You Finishing your eMarketing Plans• Due TODAY!!!!! • In class Presentations of your marketing plans will on be on

Friday, Nov. 3• Exam # 3 in on November 7

• Chap 12, 13 & 14, 6 essays (60 points), 10 M/C (40 Points). open books, open notes, 70 mins

• Today we will be discussing eMarketing Communications & CRM

©2006 Prentice Hall 13-1

E-Marketing 4/EJudy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 13: E-Marketing Communication


• Direct marketing includes techniques such as:• Telemarketing• Outgoing e-mail• Postal mail, including catalog marketing• Targeted online ads• Short message services (SMS)• Multimedia message services (MMS)• Instant messaging (IM)

Direct Marketing


• 22% of a typical Internet user’s in-box is marketing-related e-mail.• http://www.junk-o-meter.com/stats/index.php

• E-mail has advantages over postal direct mail.• Average cost less than $0.01.• Immediacy and convenience.• E-mails can be automatically individualized.

• E-mail also has disadvantages.• Consumer distaste for unsolicited e-mail or spam.• E-mail lists are hard to obtain and maintain.

E-Mail

http://www.junk-o-meter.com/stats/index.php


Metrics for Electronic and Postal Mail

E-mail Postal MailDelivery cost per thousand $30 $500

Creative costs to develop $1,000 $17,000

Click through rate 10% N/A

Customer conversion rate 5% 3%

Execution time 3 weeks 3 months

Response time 48 hours 3 weeks


• Permission Marketing• When consumers opt-in, they are giving permission

to receive commercial e-mail about topics of interest to them.

• Viral Marketing is the online equivalent of word of mouth marketing.• Hotmail is a viral marketing success story.• Movies such as Blair Witch Project were promoted

using viral marketing techniques.

Other Online Direct Marketing Techniques


E-Mail• Disadvantages:

• Spam (unsolicited e-mail),• Difficulty in finding appropriate e-mail lists.

• Consumers are much more upset about spam then they are about unsolicited postal mail.

• E-mail lists are hard to obtain and maintain. 3 ways to build a list: 1. Generated through Web site registrations, subscription registrations, or

purchase records, 2. Rented from a list broker, 3. Harvested from newsgroup postings or online e-mail directories.

• 50% of the U.S. population has one or more e-mail addresses but it is very difficult to match them with individual customers and prospects in a firm’s database.


Opt-In, Opt-Out

• Opt-in e-mail address = users have agreed to receive commercial e-mail about topics of interest to them.

• Brokers rent lists to charge a fee for each mailing. The cost is:• $150 CPM (Cost Per Thousand) for B2C market lists, • 250 CPM for the B2B market / typical B2C postal mail list rental =

$20 CPM. • Web users have lots of opportunity to opt-in to mailing lists at Web sites,

often by simply checking a box and entering an e-mail address. • Lists with opt-in members get much higher response than do lists

without = response rates of up to 90%. Opt-in lists are successful because users receive coupons, cash, or

products for responding. Marketers are shifting marketing dollars directly to consumers for rewards in

lieu of purchasing advertising space.


Opt-In, Opt-Out

• Opt-out = users have to uncheck the box on a Web page to prevent being put on the e-mail list.

• Questionable practice because users do not always read a Web page thoroughly enough and may be upset at receiving e-mail later.

• Opt-in techniques = part of a traditional marketing strategy called permission marketing: it is about turning strangers into customers.

• How to do this? Ask people what they are interested in, ask permission to send them

information, and then do it in an entertaining, educational, or interesting manner.

• Opt-in techniques are expected to evolve and grow considerably.


Viral Marketing

• Viral marketing = When individuals forward e-mail to friends, co-workers, family, and

others on their e-mail lists = Word of mouse.

• Viral marketing works and it’s free. • Hotmail started with only a $50,000 promotion budget ($50 -

100 million needed to launch a brand in offline):• The firm sent e-mail telling folks about its Web-based e-mail service, • After 6 months = 1 million registered users,• After 18 months = 12 million subscribers + Microsoft acquired the

firm for $400 million in Microsoft stock.


• Short message services (text messaging) are text messages sent over the Internet, usually with a cell phone or PDA.

• Instant messages are sent among users who are online at the same time.

• Marketers can build relationships by sending permission-based information where consumers want to receive it.• Flight delays• Music and movie schedules

Messaging


Short Text Messaging (SMS)

• Short text messages = 160 characters of text sent by one user to another over the Internet (with a cell phone or PDA).

• Instant messaging = short messages sent among users who are online at the same time.

• SMS:• Uses a store-and-send technology = holds messages for a few days, • Is attractive to cell phone users to communicate quickly + inexpensively. • Are charged cell phone minutes= minimal cost compared to a conversation. • Is easy = users do not have to open e-mail to send or receive. They simply

type the message on the phone keyboard.

• 200 billion short text messages a month were flying between mobile phones worldwide by the end of 2002.


Location-Based Marketing

• Location-based marketing = promotional offers that are pushed to mobile devices and customized based on the user’s physical location.

• The technology: A global positioning system (GPS) in a handheld device or

automobile, User address information stored in a database.

• Lycos spent $1.2 million in 2001 turning some Boston and New York taxicabs into animated billboards by sending relevant ads based on the cab’s physical location.

The GPS device sent physical coordinates to the ad server, Financial ads were shown when the cab was in the financial district,

and so forth.


Which Media and Vehicles to Buy?• Marketers spent more of their 2001 media budgets on the

Internet than on radio or outdoor, but much less than on television or newspapers. This generalization is interesting, but not very useful for media buyers who plan a combination of media to achieve marketing communication goals for a particular campaign and brand.

• Media planners want both effective and efficient media buys. • Effectiveness means reaching and gaining the attention of the target

market,

• and efficiency means doing so at the lowest cost.


Efficient Internet Buys

• To measure efficiency before buying advertising space, media buyers use a metric called CPM (cost per thousand).

• This is calculated by taking the ad’s cost, dividing it by the audience

size, and then multiplying by 1,000 (cost audience x 1,000). Internet audience size is counted using impressions: the number of times an ad was served to unique site visitors.

• Example: in June 2002 a full banner ad at MediaPost.com, an advertising and media Internet portal, received 2.4 million impressions and cost $168,000 a month for a CPM of $70. (Incidentally, this firm charges an additional $10 CPM slotting fee for a specific position.)

• Magazines are usually the most expensive media to reach 1,000 readers; radio is often the least expensive.


Efficient Internet Buys

• Typical Web CPM prices are $7 to $15 CPM (Hallerman, 2002). • MediaPost is higher because it reaches a select target in the B2B market.

According to eMarketer in March 2002, the CPM ranges between $75 and $200 for e-mail ads, and between $20 and $40 for e-mail newsletter sponsorship.

• It is interesting to note that only 50% of Web site advertising is purchased using the CPM model (PricewaterhouseCoopers 2002).

• Performance-based payment, often called cost-per-action (CPA), includes schemes such as payment for each click on the ad, payment for each conversion (sale), or payment for each sales lead. This type of pricing is beneficial to advertisers, but risky for Web sites that must depend partially on the power of the client’s ad and product for revenues.

• CPM, CPA, and other online advertising pricing models are only part of the measurement picture.


Effective Internet Buys

• Once a firm decides to buy online advertising (medium), it faces the question of which vehicle (individual site) to use.

• Advertisers trying to reach the largest number of users will buy space at the portals such as Yahoo!, AOL and microsoft.


Web Property Unique Visitors in millions

Worldwide U.S.

Microsoft Corporation 269.8 99.7

Yahoo Inc. 219.5 92.5

AOL Time Warner 169.6 88.0

Terra Lycos 143.1 51.1

Google Inc. 93.2 31.1

Amazon.com Inc. 79.0 37.5

CNET Networks Inc. 75.1 28.0

Primedia Inc. 72.1 31.6

U.S. Government 56.1 38.6

EBay 55.9 32.9

Top Online Properties by Parent Company for January 2002Source: Data from www.cyberatlas.internet.com

http://www.cyberatlas.internet.com/


Effective Internet Buys

• Ad servers track user click-streams via cookies and serve ads based on user behavior. One such firm, DoubleClick, served 55 billion ads to Web users along with client Web pages during May 2002.

• Nielsen-Netratings reports only about 70,000 unique ads in April 2002. • DoubleClick technology can detect a user at a client site who then goes

to a second client site (click stream), and serve the user an appropriate ad based on the user’s interests.

• DoubleClick data from three months in early 2002 revealed that 43.8% of its ads were targeted by key words or key values in this manner, while 5.5% were served to specific geographic areas and 1.3% by time of day (“DoubleClick Ad Serving...” 2002).

• http://www.doubleclick.com/us/

http://www.doubleclick.com/us/




IMC Metrics

• Savvy marketers set specific objectives for their IMC campaigns,

• Then they track progress toward those goals by monitoring appropriate metrics.


IMC Metrics and Industry Averages

Sources: 1Hallerman (2002); 2data from www.eMarketer.com; 3Saunders (2001); 4Gallogly (2002); 5“DoubleClick Ad Serving...” (2002); 6 data from shop.org; 7data from www.computerworld.com; 8data from www.nielsen-netratings.com; 9PricewaterhouseCoopers, LLP (2002).

Metric Definition/formula Online Averages

CPM Cost Per Thousand Impressions CPM = [Total Cost (Impressions)] 1000

$7 to $15 for banners1 $75 and $200 for e-mail ads2

$20 and $40 for e-mail newsletter2

Click-through rate (CTR)

Number of clicks as percent of total impressionsCTR = Clicks Impressions

0.3% - 0.8% for banners3,5

2.4% rich media ads5

3.2% - 10% opt-in e-mail3,9

Cost Per Click (CPC)

Cost for each visitor from ad clickCPC = Total Ad Cost Clicks

Varies widelyGoogle.com ranges from a few cents to a few dollars

Conversion Rate Percent of people who purchased from total number of visitorsConversion Rate = Orders Visitors

1.8% for Web sites6

5% for e-mail9

Customer Acquisition Cost (CAC)

Total marketing costs to acquire a customer

Varies by industry$82 for online retail pure-plays; $31 for multi-channel brick and mortar retailers7

http://www.emarketer.com/

http://www.computerworld.com/

http://www.nielsen-netratings.com/


Effectiveness Evidence

• Banner ads are generally ineffective: 0.5% of all users clicking on them. • Exceptions:

• Rich media ads receive an average 2.4% click-through. • The Mexican Fiesta Americana Hotels = 10.2% click-through By narrow targeting = Americans living in 7 Eastern states + had just

purchased an airline ticket to Cancun + were online 2 to 7 P.M. Monday through Wednesday.

• If users do click, they are likely to buy:• 61% people who clicked, purchased within 30 minutes, • 38% purchased within eight to 30 days later.

• E-mail = 3 to 10% click-through to the sponsor’s Web site + an average 5% conversion rate. Catalog companies & retailers realize > 9% click-throughs on e-mail

campaigns.


Effectiveness Evidence

• When banner ads are viewed as a branding medium:• They increase brand awareness & message association, • Build brand favorability & purchase intent.

• When online ads are bigger + placed as interstitials, or contained rich multimedia = they delivered an even greater impact. Large rectangles are 3 to 6 times more effective than standard size banners

in increasing brand awareness.

• Online + offline advertising work well together. The Internet is as effective for increasing brand awareness, brand attributes,

and purchase intent as TV and print—but much more cost-efficient.


E-Marketing 4/EJudy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 14: Customer Relationship Management


Chapter 14 Objectives• After reading Chapter 14 you will be able to:

• Define customer relationship management and identify the major benefits to e-marketers.

• Outline the three legs of CRM for e-marketing.• Discuss the eight major components needed for

effective and efficient CRM in e-marketing.• Differentiate between relationship intensity and

relationship levels.• Highlight some of the company-side and client-side

tools that e-marketers use to enhance their CRM processes.


• Cisco provides Internet networking systems for corporate, government and education clients.

• The Internet plays a major role in acquiring, retaining and growing customer business.• 2.5 million users log onto the Cisco site each

month.• Cisco has become adept at online customer

relationship management (CRM).

The Cisco Story


• Cisco set a goal to migrate customers to the online channel.• In 1996, 5% of their customers placed orders on the

Web site.• In 2001, 90% of their orders came through the

Internet.• Cisco saves $340 million a year in customer

service costs due to automation.• Can you think of other B2B marketers that

utilize the Internet as successfully as Cisco?

The Cisco Story, cont.


Relationship Marketing Defined• Relationship marketing is about establishing,

maintaining, enhancing, and commercializing customer relationships through promise fulfillment.

• Relationship capital may be the most important asset a firm can have.

• A firm using relationship marketing focuses more on wallet share than on market share.• More $ from each customer instead of more

customers


Continuum from Mass Marketing to Relationship Marketing

Mass marketing Relationship marketing

Discrete transactions Continuing transactions

Short-term emphasis Long-term emphasis

One-way communication

Two-way communication and collaboration

Acquisition focus Retention focus

Share of market Wallet share

Product differentiation Customer differentiation


Stakeholders• Firms can establish and maintain relationships

with different stakeholder groups through Internet technologies:• Employees who need training and access to data

and systems used for relationship management.• Business customers in the supply chain.• Lateral partners, such as other businesses, not-for-

profit organizations, or governments.• Consumers who are end users of products and

services.


Customer Relationship Management• CRM is the process of acquiring, servicing,

retaining and building long-term relationships with customers.

• The benefits of CRM include:• Increased revenue from better targeting.• Increased wallet share with current customers.• Retention of customers for longer time periods.

• The cost of acquiring a new customer is typically 5 times higher than the cost of retaining a current customer.


Acquisition Emphasis Retention Emphasis

Gain 6 new customers ($500 each)

$3,000 Gain 3 new customers ($500 each)

$1,500

Retain 5 current customers ($100 each)

$ 500 Retain 20 current customers ($100 each)

$2,000

Total cost $3,500 Total cost $3,500

Total number of customers 11 Total number of customers 23

Maximizing Number of CustomersSource: Adapted from Peppers and Rogers (1996)


Customer Relationship Management, cont.

• CRM has 3 facets:• Sales force automation (SFA).• Marketing automation.• Customer service.

• Used primarily in the B2B market, SFA helps salespeople to:• Build, maintain, and access customer records.• Manage leads and accounts.• Manage their schedules.


• Marketing automation software aids marketers in effective targeting, marketing communication, and monitoring of customer and market trends.• Software solutions include e-mail campaign

management, database marketing, and market segmentation.

• Most customer service occurs post purchase when customers have questions or complaints.• E-mail and Web self-service are often used.

Customer Relationship Management, cont.


1. CRM Vision: Leadership, value proposition

2. CRM Strategy: Objectives, target markets

3. Valued Customer ExperienceUnderstand requirementsMonitor expectationsMaintain satisfactionCollaboration and feedbackCustomer interaction

4. Organizational CollaborationCulture and structure

Customer understanding People, skills, competencies

Incentives and compensationEmployee communication

Partners and suppliers

5. CRM Processes: Customer life cycle, knowledge management

6. CRM Information: Data, analysis, one view across channels

7. CRM Technology: Applications, architecture, infrastructure

8. CRM Metrics: Value, retention, satisfaction, loyalty, cost to serve

Exhibit 14 - 4 Eight Building Blocks for Successful CRMSource: Adapted from Gartner Group (www.gartner.com)

8 Building Blocks for Successful CRM

http://www.gartner.com/


1. CRM Vision• To be successful, the CRM vision must start at

the top and filter throughout the company to keep the firm customer focused.

• One key aspect of CRM vision is how to guard customer privacy.

• The benefits of using customer data must be balanced by the need to satisfy customers and not anger them.

• TRUSTe provides its seal and logo to any Web site meeting its privacy philosophies.


TRUSTe Builds User Trust


• E-marketers must determine their objectives and strategies before buying CRM technology.

• Many CRM goals refer to customer loyalty.• An important CRM strategy is to move customers up the

relationship intensity pyramid

• Another CRM goal involves building bonds with customers on 3 levels:• Financial• Social• Structural

2. CRM Strategy

Advocacy

Community

Connection

Identity

Awareness

Tell others about the brand Communicate with each other Communicate with company between purchases Display the brand proudly Is on the list of possibilities

Highest intensity


Three Levels of Relationship MarketingLevel Primary Bond Potential for

Sustained Competitive Advantage

Main Element of Marketing Mix

Web Example

One Financial Low Price www.southwest.com

Two Social Build 1:1

relationshipsBuild community

Medium Personal communications

www.palmpilot.com

Three Structural High Service delivery my.yahoo.com


3. Valued Customer Experience• Consumers are constantly bombarded by

marketing communications and unlimited product choices.• According to Jagdish Sheth (1995), the basic tenet

of CRM is choice reduction.• Many consumers are “loyalty prone,” and will stick

with the right product as long as its promises are fulfilled.

• Synchronous and asynchronous technologies can provide automated and human services that solve customer problems.


Relationships over Multiple Communication Channels

Automated Human

Synchronous Web 1:1 self-serviceOnline transactionsTelephone routing

TelephoneOnline chatCollaboration tools

Asynchronous Automated e-mailShort message services (SMS)Web formsFax on demand

E-mail responsePostal mail


• Marketers collaborate within and outside the organization to focus on customer satisfaction.

• CRM, or “front-end” operations, can be linked with the entire supply chain management system (SCM), or “back-end” operations.• Customer service reps have access to inventories.• Producers and wholesalers constantly receive data

that can be utilized for production and delivery.• The use of extranets, two or more intranet

networks that share information, allows CRM-SCM integration.

4. Organizational Collaboration


5. CRM Processes• Firms use specific processes to move

customers through the customer care life cycle.

Ta rge t

A cquire

Transa c t

Se rvice

R e ta in

Grow

Inte rne t Extrane t

C ustome r

P a rtne rs


• CRM processes are used to:• Identify customers.• Differentiate customers.• Customize the marketing mix.• Interact with customers.

• Firms can identify high-value customers by mining customer databases and profiling customers in terms of: (RFM analysis)• Recency of purchases.• Frequency of purchases.• Monetary value of purchases.

CRM Processes, cont.


6. CRM Information• The more information a firm has, the better

value it can provide to each current or prospective customer.

• Firms gain much information by tracking behavior electronically.• Bar code scanner data.• Software that tracks online movement, time spent

per page, and purchase behavior.


7. CRM Technology• Technology greatly enhances CRM processes. • Firms use company-side tools to push

customized information to users.• Client-side tools allow the customer to pull

information that initiates the customized response from the firm.


Company-side ToolsCompany-Side Tools(push) Description

Cookies Cookies are small files written to the user’s hard drive after visiting a Web site. When the user returns to the site, the company’s server looks for the cookie file and uses it to personalize the site.

Web log analysis Every time a user accesses a Web site, the visit is recorded in the Web server’s log file. This file keeps track of which pages the user visits, how long he stays, and whether he purchases or not.

Data mining Data mining involves the extraction of hidden predictive information in large databases through statistical analysis.

Real-time profiling Real-time profiling occurs when special software tracks a user’s movements through a Web site, then compiles and reports on the data at a moment’s notice.

Collaborative filtering Collaborative filtering software gathers opinions of like-minded users and returns those opinions to the individual in real time.

Outgoing e-mail Distributed e-mail

Marketers use e-mail databases to build relationships by keeping in touch with useful and timely information. E-mail can be sent to individuals or sent en masse using a distributed e-mail list.

ChatsBulletin boards

A firm may listen to users and build community by providing a space for user conversation on the Web site.

iPOS terminals Interactive point-of-sale terminals are located on a retailer’s counter and used to capture data and present targeted communication.


Client-side ToolsClient-Side Tools(pull) Description

Agents Agents are programs that perform functions on behalf of the user, such as search engines and shopping agents.

Individualized Web portals

Personalized Web pages users easily configure at Web sites such as MyYahoo! and many others.

Wireless data services Wireless Web portals send data to customer cell phones, pagers, and PDAs, such as the PalmPilot.

Web forms Web form (or HTML form) is the technical term for a form on a Web page that has designated places for the user to type information for submission.

Fax-on-demand With fax-on-demand, customers telephone a firm, listen to an automated voice menu, and select options to request a fax be sent on a particular topic.

Incoming e-mail E-mail queries, complaints, or compliments initiated by customers or prospects comprise incoming e-mail, and is the fodder for customer service.


8. CRM Metrics• E-marketers use numerous metrics to assess

the Internet’s value in delivering CRM performance.• ROI• Cost savings• Revenues• Customer satisfaction

• One study named customer retention, ROI and customer lift (increased response or transaction rates) as the most important metrics.


CRM Metrics, cont.• One very important CRM metric is customer

lifetime value (LTV).• The LTV calculation demonstrates the benefits of

retaining customers over time and the need for building wallet share.

• LTV also illustrates that no matter how good customer retention is, the firm must still focus on customer acquisition activities.

• Exhibit 14.21 illustrates Customer LTV.


Total Retention Total Net NPV at 10-Year

Year Customers Rate Revenue Profit 15% LTV

1 1,000 60% $35,900 $ 5,900 $ 5,900 $ 66.94

2 600 65% 45,540 27,540 23,948 118.12

3 390 70% 29,601 17,901 13,536 129.15

4 273 75% 20,721 12,531 8,239 138.35

5 205 78% 15,541 9,398 5,373 143.45

6 160 79% 12,122 7,330 3,645 145.55

7 126 80% 9,576 5,791 2,504 146.81

8 101 80% 7,661 4,633 1,742 146.81

9 81 80% 6,129 3,706 1,212 146.81

10 65 80% 4,903 2,965 843 146.81

Customer Lifetime Value (LTV)Source: Adapted from Peppers and Rogers Group at www.1to1.com

http://www.1to1.com/

Documents

©2006 Prentice Hall ELC 310 Day 17. ©2006 Prentice Hall Agenda Schedule Oct 31 – eMarketing Communication & Customer Relationship Management Nov 3 – eMarketing