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Prentice Hall, 2002

1

Chapter 5


Advertisement in
Electronic Commerce

Prentice Hall, 2002

2

Learning Objectives

Describe the objectives of Web advertisement,
its types and characteristics

Describe the major advertisement methods
used on the Web

Describe various Web advertisement strategies

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Describe various types of promotions on the
Web

Discuss the benefits of push technology and
intelligent agents

Understand the major economic issues
related to Web advertisement

Learning Objectives
(cont.)

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Learning Objectives
(cont.)

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

Compare paper and electronic catalogs
and describe customized catalogs

Describe Web advertisement
implementation issues

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5

Opening Case:

Advertisement in the Digital Economy

Theknot.com and Wedding411.com

Information about planning weddings

Assistance selecting vendors

Site includes promotions and ads from vendors

Promosinmotion.com

VW bugs painted with Web site logos

Dislplayed online and offline

Topbulb.com

Online catalog for light bulbs

Also displays the off
-
line business

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Opening Case:

Advertisement in the Digital Economy

Toyota

Promotes its SUV with banners on altavista.com

Kelly Blue Book (kbb.com) links to Toyota site

IBM

Uses banners linked to college campuses to
promote recruitment

“Club Cyberblue” became the scheme for
restructuring their traditional plan

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Web Advertisement

Ad views


Banner



Click (ad click)

Click ratio


Cookie



CPM

Effective frequency

Hit

Impressions

Reach

Visit

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

Internet Advertising Terminology

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Web Advertisement
(cont.)

Why Internet Advertisement?

3/4 of PC users gave up some television time

Well educated, high
-
income Internet users are
a desired target for advertisers

Ads can be updated any time with a minimal
cost; making them timely and very accurate

Ads reach very large number of potential
buyers all over the world

Online ads are much cheaper in comparison to
television, newspaper, or radio ads

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Web ads effectively use text, audio, graphics,
and animation

Ads easily combine games, entertainment, and
promotions

Web TV and Internet radio are attracting more
people

Web ads can be interactive and targeted

The use of the Internet is growing very rapidly

Web Advertisement
(cont.)

Why Internet Advertisement?

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Web Advertisement
(cont.)

Internet vs. Traditional methods

Combining advertising media

Internet is the fastest growing medium in history

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Figure 5
-
1

Adoption Curves for Various Media

Source
: Morgan Stanley Technology Research.

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Web Advertisement
(cont.)

Objectives and growth of Internet
advertisement

persuade customers to buy a
certain product or service

Targeted Advertisement (one
-
to
-
one)

Customize ads to fit individuals

Can be expensive as well as rewarding

Gain cost effectiveness by targeting groups
(based on segmentation)

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Web Advertisement
(cont.)

Targeted Advertisement (one
-
to
-
one)

The DoubleClick (DC) Approach

3M /ciro,
wants to advertise its $10,000 multimedia
projectors

DC monitors people browsing the Web sites of
cooperating companies

Matches them against a database

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

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Web Advertisement
(cont.)

Targeted Advertisement (one
-
to
-
one)

The Double Click (DC) Approach for
3M Corp.
(cont.)

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

DoubleClick shares revenue with
cooperating partners

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Pros of Internet Advertisement

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

Web Advertisement
(cont.)

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Web Advertisement
(cont.)

Pros of Internet Advertisement
(cont.)

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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Advertisement Methods

Benefits

Customized to the target
audience or one
-
to
-
one
ads

Utilize “force
advertising” marketing
strategy

Direct link to advertiser

Multi media capabilities

Limitations

High cost

Declining click ratio

viewers have become
immune to banners

Size of banners is too
small


Banners
--
banners are everywhere

Keyword banners


Random banners


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Advertisement Methods
(cont.)

Banner swapping

Direct link between one site to the other site

Ad space bartering

Banner exchanges

Firm submits a banner

Receives credit when shows others’ banners

Can purchase additional display credits

Specify what type of site where the banner is
displayed

Use

the credit to advertise on others’ sites

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Banner exchanges
(cont.)

Credit ratio of approximately 2:1

Example: Link Exchange (bcentral.com)

Helps design banners

Provides membership in newsgroups

Delivers HTML tutorials

Runs contests

Is a banner
-
ad clearing house for more than
200,000 small Web sites

Monitors the content of the ads of all its
members

Advertisement Methods
(cont.)

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Standard (pop up boxes that look like
newspaper or magazine ads) and classified
ads

Micro
-
sites

5 advertising sizes larger than banners

Pop
-
up boxes at sites they are linked to

Classified ads

Special sites (classifieds2000.com)

Free or for fee depending upon size

Advertisement Methods
(cont.)

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E
-
mail

Several million users may be reached directly

Purchase e
-
mail addresses

Send the company information (low cost)

A wide variety of audiences (customer database)

Target a group of people that you know
something about

Problems:

Junk mail

Spamming


Advertisement Methods
(cont.)

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Advertisement Methods
(cont.)

Mobile phones

Interactive one
-
to
-
one ads

Location, situation, weather
-
related ads

Splash Screen

Capture the user’s attention

Promotion or lead
-
in

Major advantage: create innovative multimedia

Spot leasing

Permanent space on popular portal or Web page

Ads may be small and expensive

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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

Advertisement Methods
(cont.)

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Chat Rooms

Virtual meeting ground

Free addition to a business site

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

Advertising can become more thematic

More effective than banners

Used for one
-
to
-
one connections

Advertisement Methods
(cont.)

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Advertisement Strategies

Internet
-
based Ad Design

Visually appealing

Targeted to specific groups or to individual
consumers

Emphasize brands and a firm’s image

Part of an overall marketing strategy

Seamlessly linked with the ordering process

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Advertisement Strategies
(cont.)

Internet
-
based ad design: important factors

Page
-
loading speed

Graphics and tables

simple, meaningful,
and match standard monitors

Thumbnail (icon, graphs) are useful

Business content

Clear and concise text with compelling
page title and header text

Minimal amount of information requested
for registration

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Advertisement Strategies
(cont.)

Internet
-
based Ad Design: Important Factors
(cont.)

Navigation efficiency and compatibility

Links

well
-
labeled, accurate, meaningful

Site

compatible with browsers, software, etc.


Security and privacy

Security and privacy must be assured

Must provide option for rejecting cookies

Marketing Customer Focus

Clear terms/conditions of the purchases

delivery
information, return policy, etc.

Confirmation page after a purchase

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Advertisement Strategies
(cont.)

Pull (Passive) Strategy

Effective site provides helpful and attractive
contents and display

Effective and economical way to advertise,
unidentified potential customers worldwide

Advertising World

non
-
commercial site that
guides the process of finding customer’s
requests

Yahoo

portal search engine site regarded as
effective aid for advertisement

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Advertisement Strategies
(cont.)

Push (Active) Strategy

Sending e
-
mails to relevant
people

Obtaining mailing list

process
of identifying target customers

Mailing list generation

uses
agent technology, cookies, and
questionnaires (filled out by
customer)

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Advertisement Strategies
(cont.)

Associated Ad Display Strategy

Associate the content of a Web page with a
related ad like:

Search Yahoo on a topic, a banner pops up
offering “search for books at”

Amazon.com

Barnesandnoble.com

Keyword banners

Just
-
in
-
time strategy

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Advertisement Strategies
(cont.)

Ads as a commodity

CyberGold (MyPoints.com)

Direct payment made by the advertisers
for ads viewed

Consumers fill out questionnaires

CyberGold distributes targeted banners

Reader clicks the banner, passes some
tests on its content, and is paid for the
effort

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Advertisement Strategies
(cont.)

Viral marketing

word
-
of
-
mouth over the
Internet

Easily forwarded e
-
mail messages from sites

Forward sites by filling out e
-
mail addresses

“Advocacy marketing”

hotmail.com

Each e
-
mail sent invited free hotmail service

Company grew from 0 to 12 million in 18
months

Downsides

E
-
mail hoaxes

Spread of viruses

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Implementing the Strategies

Customized ad strategy

Filtering the irrelevant information by
providing customized ads

One
-
to
-
one advertisement

Customized ads in Webcasting

Personalized news and information by
category

Users select specific categories they want
to receive

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Implementing the Strategies
(cont.)

Comparisons as medium for advertisement

Customer compares alternative products and
services

Finds the least expensive place to purchase
the item

Uses the comparison site that lists vendors
and their prices for the product

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Figure 5
-
3

Illustrative Screen for Product Comparison

Source
: Korean Engine (no longer in business).

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Online Events, Promotions,

and Attractions

Enticing Web surfers to read Internet ads

Yoyodine, Inc.

Give
-
away games, discounts, contests,
sweepstakes

Entrants agree to read product information
of advertisers

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


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Online Events, Promotions,

and Attractions
(cont.)

Enticing Web surfers to read Internet ads

Egghead uses real people to help you

Lucent uses phone interviews that lead to
material and ads sent to your computer

Retailers provide special offers as shoppers
“check out”

Riddler provides opportunity to play games for
prizes

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Online Events, Promotions,

and Attractions
(cont.)

Enticing Web surfers to read Internet ads

Netstakes runs sweepstakes (no skills necessary)

Register only once to win prizes randomly
from different categories


Sends traffic to several channels that have
multiple sponsors

Runs online ads both on the Web and in
several hundred thousand e
-
mail lists

Offer free samples (freesamples.com)

Use company logo as cursor

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Push Technology

Benefits

Requested information they delivered
automatically to their desktop via Web
technology and the Internet

Decreases the number of hours used to search
the Web

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Push Technology
(cont.)

Pointcasting

mass
customization of
information

Pre
-
specification
profile

Select appropriate
content

Download selection


4 types of push
technology

Self
-
service delivery

Aggregated delivery

Mediated delivery

Direct delivery


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Push on the Intranet

Companies set up their own channels to pointcast
important internal information to:

their own employees (on intranets)

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 ads to the customers, or asks them if
they would like to receive product information

Alerts users to new releases

Recommends products based on:

Past selections

Constraints specified by the buyers

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Effectiveness and Pricing of Advertisement

Exposure Models

Multiple of number of
guaranteed ad views

Number of hits

Click
-
Through

Number of times
customers click on banner

Only effective for large
corporations

Interactivity

Based on how customer
interacts with the ad view

How much time was spent
viewing the ad

Actual Purchase

Referral fee based on
customers moving to ad site to
make a purchase


Methods for measuring advertisement
effectiveness, conducting cost benefit analyses,
pricing ads

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Online Catalogs

Evolution of online catalogs

Merchants

advertise and promote

Customers

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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Online Catalogs
(cont.)

Classifications of catalogs

Dynamics of information presentation

Static catalogs

textual description and
static pictures

Dynamic catalogs

motion pictures,
graphics, sound

Degree of customization

Ready
-
made catalogs: same catalog to all
customers

Customized Catalogs: customized contents
and display depending upon the customers

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Electronic catalogs allow integration of

Order taking and fulfillment

Electronic payment

Intranet workflow

Inventory and accounting system

Suppliers’ extranet

Relationship to paper catalogs

Online Catalogs
(cont.)

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Customized Catalogs

Assembled specifically for:

A company

An individual shopper

Customization systems can:

Create branded, value
-
added capabilities

Allows user to compose order

May include individualized prices, products, and
display formats

Automatically identify the characteristics of
customers based on the transaction records

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Special Advertisement Topics

How much to advertise

Permission advertisement

Measuring, auditing, and analyzing
Web traffic

Self
-
monitoring of traffic

Internet ad standards

Localization

Internet radio for localization

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Major Web ad players

Advertising agencies and Web site
developers

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

Finding the most visited sites

Company research

Commitment to Web advertising and
coordination with traditional advertisement

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Managerial Issues
(cont.)

Integrated marketing campaigns

Ethical Issues

Integrating advertisement with ordering
and other business processes

Content is critical