Chapter 4 Advertisement in Electronic Commerce

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© Prentice Hall, 2000

Chapter 4

Advertisement in
Electronic Commerce

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© Prentice Hall, 2000

Learning Objectives


Describe the objectives of Web advertisement,
its types and characteristics


Describe the major advertisement methods
used on the Web, ranging from banners to chat
rooms


Describe various Web advertisement strategies


Describe various types of promotions on the
Web


Discuss the benefits of push technology and
intelligent agents

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Understand the major economic issues
related to Web advertisement


Describe the issues involved in measuring
the success of Web advertisement as it
relates to different ad pricing methods


Compare paper and electronic catalogs and
describe customized catalogs


Describe Web advertisement implementation
issues ranging from ad agencies to the use
of intelligent agents

Learning Objectives
(cont.)

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Opening Vignette :


CD
-
Max Uses E
-
mail Lists to Advertise


CD
-

Max Enterprises


A two
-
person business specializing in CD
-
ROM
development


Operates a resource site for information delivery


Generated an e
-
mail list of site visitors


the list is also valuable to other advertisers


50 lists were created to fit different advertisers


outsourced the job of creating and maintaining the
lists, and selling them to potential advertisers, to
NetCreation which developed 275 lists from the
names collected at CD
-
Max


the list sales “surpassed” the company’s expectations


selling e
-
mail lists has become a lucrative business

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Web Advertising


Advertising is an attempt to disseminate
information in order to affect a buyer
-
seller
transaction


Why Internet Advertisement?


Three
-
quarters of PC users gave up some
television time


Internet users are well educated with high
-
income, which makes them a desired target for
advertisers


Ads can be updated any time with a minimal cost;
therefore they are timely and very accurate

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Ads can reach very large numbers of potential
buyers all over the world


Online ads are much cheaper in comparison to
television, newspaper, or radio ads. Such ads are
expensive since they are determined by space
occupied, how many days (times) they are shown,
and on how many national and local television
stations and newspapers they are posted.


Web ads can be media rich, including voice and
video


Web ads can be interactive and targeted


The use of the Internet is growing very rapidly

Web Advertising
(cont.)


Why Internet Advertisement?

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Internet Advertising Terminology



Effective Frequency




Hit




Impressions




Reach




Visit

Web Advertising
(cont.)


Ad views


Banner


Clicks (or ad
clicks)


Click Ratio


Cookie


CPM

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Interactive Marketing

Web Advertising
(cont.)


Consumer can click with his/her mouse on an ad for
more information or send an e
-
mail to ask a question

Volume sales

Customer data

Customer relationships

Passive

Passive

Active

Food, personal
-
care
products, beer,
autos

Credit cards,
travel, autos

Upscale apparel, travel,
financial services, autos

High volume

Targeted goods

Targeted individuals

Madison Ave.

Postal distribution
centers

Cyberspace

Television,
magazines

Mailing lists

Online services

Storyboards

Databases

Servers, onscreen
navigators, the Web

Mass Marketing

Direct Marketing

Interactive Marketing

Best outcome

Consumer behavior

Leading products

Market

Nerve center

Preferred
media vehicle

Preferred
technology

Worst outcome

Channel surfing

Recycling bins

Logoff

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Internet is the fastest growing medium in history

Web Advertising
(cont.)

Adoption Curves for Various Media
-

The Web Is Ramping Fast


Targeted Advertisement (one
-
to
-
one)

Web Advertising
(cont.)


The Double Click (DC) Approach


3M Corp. wants to advertise its $10,000
multimedia projectors


DC monitored people browsing the Web sites of
cooperating companies


then matches them against a database


then finds those people working for advertising
agencies or using Unix system (potential buyers)


then builds a dossier on you, your spending, and
your computing habits using “a cookie”


prepares an ad for 3M projectors


targeted for people whose profile matches what is
needed for 3M

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Pros of Internet Advertisement

Web Advertising
(cont.)


Internet advertisements are accessed on
demand 24 hours a day, 365 days a year, and
costs are the same regardless of audience
location


Accessed primarily because of interest in the
content, so market segmentation opportunity is
large


Opportunity to create one
-
to
-
one direct
marketing relationship with the consumer


Multimedia will increasingly make Web sites
more attractive and compelling

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Distribution costs are low (just technology cost),
so millions of consumers are reached at the
same cost as that of reaching one


Advertising and content can be updated,
supplemented, or changed at any time, and are
therefore always up
-
to
-
date


Ease of logical navigation


you click when and
where you want, and spend as much time as you
desire there

Web Advertising
(cont.)


Pros of Internet Advertisement

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Advertising Methods


Banners


Banners are everywhere


Keyword banners


Random banners


Benefits


be customized to the target audience


be customized to one
-
to
-
one targeted
advertisement


utilize “force advertising” marketing strategy


Banner Swapping


Direct link between one’s site to the other site


Ad space bartering

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Banner Exchanges


Swapping is a problem : a match is frequently not possible


Banner exchange organizations


a firm submits a banner


receives credit when shows others’ banners


can purchase additional display credits


specify what type of site the banner can be displayed on


use the credit to advertise on others’ sites


credit ratio of approximately 2:1


Example : Link Exchange offers help in banner design,
provides membership in newsgroups, delivers HTML
tutorials, and even runs contests. It acts as a banner
-
ad
clearing house for more than 200,000 small Web sites. It
also monitors the content of the ads of all its members.

Advertising Methods
(cont.)

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Paid Advertising and Ad Agencies


Advantage of using banners


ability to customize them to the target audience


ability to decide which market segments to focus
on


be customized to one
-
to
-
one targeted
advertisement


“forced advertising” marketing strategy is utilized


Splash Screen


Capture the user’s attention


Promotion or lead
-
in


Major advantage : create innovative multimedia

Advertising Methods
(cont.)

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URL (Universal Resource Locators)


Advantages:


minimal cost is associated with it


submit your URL to a search engine and be listed


keyword search is used


Disadvantages:


search engines index their listings differently


meta tags can be complicated

Advertising Methods
(cont.)

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E
-
mail


Several million users can be reached directly


Purchase e
-
mail addresses


Send the company information; low cost


A wide variety of audiences; customer database


Problem: Junk mail or spamming


Target a group of people that you know
something about

Advertising Methods
(cont.)

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Chat Rooms


Virtual meeting ground


Can be added to a business site for free


Allows advertisers to cycle through messages
and target the chatter again and again


Advertising can become more thematic


More effective than banners


Used in one
-
to
-
one connection

Advertising Methods
(cont.)

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Advertisement Strategies


Internet
-
base Ad Design


Advertisements should be visually appealing


Advertisements must be targeted to specific groups
or to individual consumers


Advertisements must emphasize brands and a firm’s
image


Advertisements must be part of an overall marketing
strategy


Advertisements should be seamlessly linked with
the ordering process


Designing Internet ads involve the following factors:

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Internet
-
based Ad Design: Important Factors

Advertisement Strategies
(cont.)


Page
-
Loading Speed


Graphics and tables should be simple and meaningful.
They need to match standard monitors.


Thumbnail (icons graphs) are useful.


Business Content


Clear and concise text is needed. A compelling page
title and header text is useful.


The amount of requested information for registration
should be minimal.

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Navigation Efficiency


Well
-
labeled, accurate, meaningful links are a must.


Site must be compatible with browsers, software, etc.


Security and Privacy


Security and privacy must be assured.


Option for rejecting cookies is a must.


Marketing/Customer Focus


Clear terms and conditions of the purchases,
including delivery information, return policy, etc. must
be provided.


Confirmation page after a purchase, is needed.

Advertisement Strategies
(cont.)


Internet
-
base Ad Design: Important Factors

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Passive Pull Strategy


Customer will visit a site if it provides helpful and
attractive contents and display


Effective and economical way to advertise,
unidentified potential customers worldwide


Advertising World is a non
-
commercial site that
can guide the process of finding the customer’s
wish


Yahoo is a portal search engine site which can
be regarded an effective aid for advertisement

Advertisement Strategies
(cont.)

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Active Push Strategy


Advertisement Strategies
(cont.)


Sending e
-
mails to the relevant people


Obtaining the mailing list is the process of
identifying target customers


Mailing list generation is done in companies
by using agent technology and cookies as
well as by filling out questionnaires (by
customers)

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Ad as a Commodity

Advertisement Strategies
(cont.)


CyberGold


exchange of direct payment made by the
advertisers for viewing ads


consumers fill out questionnaires


CyberGold distributes targeted banners


the reader clicks the banner to read it and,
passing some tests on its content, is paid for the
effort

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Implementing the Strategies


Customized Ad Strategy


Filtering the irrelevant information by providing
customized ads


One
-
to
-
One advertisement


Customized ads can be found in PointCast


personalized news and information by category
(Channel)


packaged by content providers, assembled by
PointCast, delivered on screen savers or at
prearranged times

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Implementing the Strategies
(cont.)




Comparison Aid as Medium of Advertisement

Product

Database

Mall

Operator

A

Product

Database

Mall

Operator

B

Product

Database

Mall

Operator

C

Meta
-
Malls Coordinator

Customer

Meta
-
Malls

Customer Assistant

Direct
Visit

Summary

and Index

Database

© Prentice Hall, 2000

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Online Events, Promotions and Attractions


How to entice Web surfers to read Internet ads


There are dozens of innovative ideas; here are some
examples :


Yoyodyne Inc. conducts give
-
away games, discounts,
contests & sweepstakes. Its entrants agree to read
product information of advertisers ranging from Major
League Baseball to Sprint communication.


Netzero and others offer free Internet access in exchange
for viewing ads.


www.egghead.com

uses real people to help you.

www.lucent.com

uses live people to talk to you over the
phone and then “push” material and ads to your
computer.

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CyberGold (
www.cybergold.com
), Goldmine
(
www.goldmine.com
) and others connect you with
advertisers who pay you real money to read ads and
explore the Web.


Netstakes runs sweepstakes that requires no skills; in
contrast with contests. You register only once and can
randomly win prizes (see
http://webstakes.com
). Prizes
are given away in different categories. The site is
divided into channels, each has several sponsors. They
pay Netstakes to send them traffic. Netstakes runs
online ads both on the Web and in several hundred
thousand e
-
mail lists that people requested to be on.


Free PCs will be given soon in exchange for obligation
to read ads.

Online Events, Promotions and Attractions
(cont.)

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Benefit : instead of spending hours searching
the Web, people can have the information
they are interested in delivered automatically
to their desktop via Web technology and the
Internet


Pre
-
specification profile, selection of
appropriate content, and download selection


4 types of push technology


self
-
service delivery


aggregated delivery


mediated delivery


direct delivery

Push Technology

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Pointcasting


Analogous to mass customization


Transmits the most relevant information directly to
the user


Push on the Intranet


Companies use push technology to set up their own
channels to pointcast important internal information
to either their own employees (on intranets) and/or
their supply chain partners (on extranets)


The Future of Push Technology


Drawback : the bandwidth requirements are large


Experts’ prediction : the technology will never fly

Push Technology
(cont.)

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Intelligent Agents


Product Brokering


Knows the customer’s profile


Tailors an ad to the customers, or asks them if
they would like to receive product information


Alerts the users to new releases, recommends
products based on past selections, or
constraints specified by the buyers

Economics and Effectiveness of
Advertisement


Exposure Models (CPM)


Click Through


Interactivity


Actual Purchase


Other Methods

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Payments are based on:

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Online Catalogs


To merchants, the objective of catalogs is
advertisement and promotion


The purpose of catalogs to customers is
providing a source of information and price
comparisons


Consist of product database, directory and
search capability and presentation function


Replication of text in paper catalogs


More dynamic, customized and integrated

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1) Dynamics of information presentation


Static Catalogs: The catalog is presented in
textual description and static pictures.


Dynamic Catalogs: The catalog is presented in
motion pictures and graphics and possibly sound.

2) Customization


Ready
-
made Catalogs: Merchants offer the
same catalog to any customer.


Customized Catalogs: Deliver customized
contents and display depending upon the
characteristics of customers.

Online Catalogs
(cont.)

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3) Integration with business processes


Integration with order taking and fulfillment


Integration with electronic payment


Integration with intranet workflow


Integration with inventory and accounting
system


Integration with supplier’s extranet


Relationship to paper catalogs

Online Catalogs
(cont.)

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Customized Catalog


Identify the interesting parts out of the whole catalog


Tool for aiding customers to concentrate on their needs



LiveCommerce


creating catalogs with branded, value
-
added
capabilities


locate the information


compose their order


individualized prices, products, and display formats


Let the system automatically identify the
characteristics of customers based on the transaction
records

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Special Advertisement Topics


To Advertise or Not


How Much to Advertise


Auditing and Analyzing Web
Traffic


Self Monitoring of Traffic


Internet Standards


Localization


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The Major Web Ad Players


Advertising agencies and Web
site developers


Finding market research
providers


Traffic measurement and analysis
companies


Networks/rep firms


Order processing and support

Special Advertisement Topics
(cont.)

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Managerial Issues


Make
Vs.

Buy (Ad agencies)


Finding the Most Visited Sites


Company Research


Commitment to Web Advertising


Ethical Issues


Integration : Advertisement,
Ordering, Other Processes