E-commerce 2023–2024: business.

technology. society.
Eighteenth Edition

Chapter 6
E-commerce Marketing
and Advertising

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Learning Objectives
6.1 Understand the key features of the Internet audience,
the basic concepts of consumer behavior and purchasing,
and how consumers behave online.
6.2 Identify and describe the basic digital commerce
marketing and advertising strategies and tools.
6.3 Identify and describe the main technologies that
support online marketing.
6.4 Understand the costs and benefits of online marketing
communications.

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In Mobi’s: Global Mobile Ad Network
• Class Discussion
– What advantages do mobiles have over traditional
banner ads?
– Where do social networking sites such as Facebook
fit in to a marketing strategy featuring mobile ads?
– What are some of the challenges and risks of placing
ads on the Web?
– Do you think Internet users will ever develop
“blindness” toward ads on the Web as well?

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Consumers Online: The Internet
Audience and Consumer Behavior (1 of 3)

• Around 300 million in the U.S. have Internet access in

2022
• Growth rate has slowed
• Intensity and scope of use both increasing
• Some demographic groups have much higher
percentages of online usage
– Income, education, age, racial and ethnic
dimensions

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Consumers Online: The Internet
Audience and Consumer Behavior (2 of 3)
• Broadband and mobile
– Inequalities in broadband access persist
 Older adults, lower income, lower educational levels have
lower broadband adoption levels
– Non-broadband households still access Internet via mobile or
other locations
• Community effects
– Neighborhood effects
– Role of social emulation in consumption decisions
– Relationship between being member of social networks and
purchasing decisions
 Increases research online/purchase offline(webrooming)
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Consumers Online: The Internet
Audience and Consumer Behavior (3 of 3)

• Consumer behavior models

– Study of consumer behavior; social science
discipline
– Attempt to predict or explain wide range of
consumer decisions
– Based on background demographic factors and
other intervening, more immediate variables
• Profiles of online consumers
– Consumers shop online primarily for convenience

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Figure 6.1 A General Model of Consumer
Behavior

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The Online Purchasing Decision (1 of 2)
• Five stages in consumer decision process
– Awareness of need
– Search for more information
– Evaluation of alternatives
– Actual purchase decision
– Post-purchase contact with firm

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Figure 6.2 The Consumer Decision Process
and Supporting Communications

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The Online Purchasing Decision (2 of 2)
• Decision process similar for online and offline behavior
• General online behavior model
– User characteristics
– Product characteristics
– Website features: latency, usability, security
– Attitudes toward online purchasing
– Perceptions about control over Web environment
• Clickstream behavior

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Figure 6.3 A Model of Online Consumer
Behavior

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Shoppers: Browsers and Buyers
• Shoppers: More than 92.5% of Internet users
– 83.5% are buyers
– About 9% are browsers (purchase offline)
– Only 7.4% don’t shop online
• Online research influences nearly two-thirds of all U.S.
retail sales
• Online traffic also influenced by offline brands and
shopping
• E-commerce and traditional commerce are coupled: Part
of a continuum of consuming behavior

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How Shoppers Find Vendors Online
• Shoppers are highly intentional and goal-oriented
– Typically, focused browsers
• Use search engines
• Many go directly to online marketplace (Amazon, eBay)
• Some go directly to specific retail websites

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Trust, Utility, and Opportunism in Online
Markets

• Two most important factors shaping decision to purchase

online
– Utility
 Better prices, convenience, speed
– Trust
 Perception of credibility, ease of use, perceived
risk
 Sellers develop trust by building strong
reputations for honesty, fairness, delivery

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Digital Commerce Marketing and
Advertising: Strategies and Tools

• Features of Internet marketing (versus traditional)

– More personalized
– More participatory
– More peer-to-peer
– More communal
• The most effective Internet marketing has all four
features

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Main Elements of a Comprehensive
Multi-Channel Marketing Plan
• Website
• Traditional online marketing
– Search engine, display, e-mail, affiliate
• Social marketing
– Social networks, blogs, visual, video, game,
metaverse and NFT
• Mobile marketing
– Mobile/tablet sites, apps
• Offline marketing
– Television, newspapers, magazines, radio
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Strategic Issues and Questions
• Which part of the marketing plan should you focus on
first?
• How do you integrate the different platforms for a
coherent message?
• How do you allocate resources?
– How do you measure and compare metrics from
different platforms?
– How do you link each to sales revenues?

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The Website as a Marketing Platform:
Establishing the Customer Relationship

• Website functions to:

– Establish brand identity and customer expectations
 Differentiating product
– Anchor the brand online
 Central point for all marketing messages
– Inform and educate customer
– Shape customer experience

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Online Marketing and Advertising
• Online advertising
– Display, search, mobile messaging, sponsorships,
classifieds, lead generation, e-mail
– Advantages
 Best way to reach the 18-to-34-year-old audience
 Ad targeting to individuals
 Price discrimination
 Personalization

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Traditional Online Marketing and
Advertising Tools

• Search engine marketing and advertising

• Display ad marketing (including video ads)
• E-mail marketing
• Affiliate marketing
• Lead generation marketing

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Search Engine Marketing and
Advertising (1 of 2)
• Search engine marketing (SEM)
– Use of search engines for branding
• Search engine advertising
– Use of search engines to support direct sales
– Pay-per-click (PPC) search ads
 Keyword advertising: Google Ads
 Google AdSense: Publishers (websites) allow
Google to place relevant ads on their sites
• Search engine optimization
– Important because Google makes frequent changes
to its algorithms
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Search Engine Marketing and
Advertising (2 of 2)
• Visual search
– Machine learning and computer vision
– Examples: Google Lens; Pinterest Lens
• Voice search
– Natural language processing
• Search engine issues
– Ranking practices
– Click fraud
– Content farms and link farms

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Display Ad Marketing (1 of 3)
• Banner ads
• Rich media ads
– Interstitial ads
• Video ads
– Far more effective than other display formats
• Sponsorships
• Native advertising
• Content marketing

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Display Ad Marketing (2 of 3)
• Advertising networks
– Specialized marketing firms involved in process of
buying and selling online ads
• Ad exchanges
– Digital marketplace that uses automated auction
method known as programmatic advertising
• Real-time bidding (RTB)
– Process used to match advertising demand with
publisher supply

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Figure 6.6 How an Advertising Network
Works

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Display Ad Marketing (3 of 3)
• Display advertising issues
– Ad fraud
 Sources: Botnets, browser extensions, ad targeting
firms; hired individuals
– Viewability
 Significant portion of online ads are not actually
viewed or viewable
– Ad blocking software
 Use is growing

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E-mail Marketing
• Direct e-mail marketing
– Messages sent directly to interested users
– Benefits include
 Inexpensive
 Average around 3% to 4% click-throughs
 Ability to measure and track responses
 Personalization and targeting
• Three main challenges
– Spam
– Anti-spam software
– Poorly targeted purchased e-mail lists
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Spam
• Unsolicited commercial e-mail
• Around 45% of all e-mail in 2022
• Most originates from bot networks
• Legislative efforts to control spam (CAN-SPAM Act)
have largely failed

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Other Types of Traditional Online
Marketing

• Affiliate marketing
– Commission fee paid to other websites for sending
customers to their website
• Lead generation marketing
– Services and tools for collecting, managing, and
converting leads

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Social, Mobile, and Local Marketing and
Advertising
• Social marketing and advertising
– Use of online social networks and communities;
blogs; influencer marketing
• Mobile marketing and advertising
– Search, display ads, games, e-mail, text
messaging, in-store messaging, Quick Response
codes; couponing
• Local marketing
– Local search; local advertising on social networks;
daily deal sites
• Examined in greater depth in Chapter 7
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Multi-Channel Marketing
• Integration of online and offline marketing
• Increasing percentage of American media consumers
use several media at once
• Reinforce branding messages across media
• Most effective multi-channel campaigns use consistent
imagery across media

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Insight on Business: Are the Very Rich
Different From You and Me?

• Class Discussion
– What distinguishes luxury marketing from ordinary
retail marketing?
– What challenges do luxury retailers have in
translating their brands and the look and feel of
luxury shops into websites?
– How has social media affected luxury marketing?
– Visit the Net-a-Porter website. What do you find
there?

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Other Online Marketing Strategies
• Customer retention strategies
– One-to-one marketing (personalization)
– Behavioral targeting (interest-based advertising)
– Retargeting
• Customization and customer co-production
• Customer service
– FAQs
– Real-time customer service chat systems
– Automated response systems

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Pricing Strategies (1 of 2)
• Pricing: integral part of marketing strategy
• Traditional pricing based on fixed costs, variable costs,
demand curve
– Marginal costs
– Marginal revenue
• Piggyback strategy
• Price discrimination

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Pricing Strategies (2 of 2)
• Free and freemium
• Versioning
• Bundling
• Dynamic pricing
– Auctions
– Yield management
– Surge pricing
– Flash marketing

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Long Tail Marketing
• Internet and e-commerce enables sales of obscure
products with little demand
• Substantial revenue because:
– Near zero inventory costs
– Little marketing costs
– Search and recommendation engines

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Insight on Technology: The Long Tail: Big
Hits and Big Misses

• Class Discussion
– What are recommender systems? Give an
example of one you have used.
– What is the Long Tail and how do recommender
systems support sales of items in the Long Tail?
– How can human editors, including consumers,
make recommender systems more helpful?

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Online Marketing Technologies
• Internet’s main impacts on marketing
– Scope of marketing communications broadened
– Richness of marketing communications increased
– Information intensity of marketplace expanded
– Always-on mobile environment expands marketing
opportunities

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Web Transaction Logs
• Built into web server software
• Records user activity at website
• Provides much marketing data, especially combined
with:
– Registration forms
– Shopping cart database
• Answers questions such as:
– What are major patterns of interest and purchase?
– After home page, where do users go first? Second?

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Cookies and Tracking Files
• First-party versus third-party tracking
• Types of tracking files
– Cookies
 First-party uses data only from website user is
visiting
 Third-party tracks users across websites
– Web beacons (“bugs”)
• Third-party tracking being phased out due public and
political resistance
– Example: Apple’s Intelligent Tracking Prevention
program for Safari browser
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Insight on Society: Going From Third to First

• Class Discussion
– Do you mind being tracked by third-party cookies?
– Why has Google been so slow to eliminate third-
party tracking compared to Apple?
– What do you think of Google’s current Privacy
Sandbox alternatives: FLEDGE and Topics?
– What is a data clean room and how does it help
preserve user privacy?

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Databases
• Store data in form of fields, records and files
• Relational database: represents data as two-dimensional
table
• Database management system (DBMS)
• SQL (Structured Query Language)
– Industry-standard database query and manipulation
language used in a relational database
• Nonrelational (NoSQL) databases
– More flexible data model; designed for managing
large sets of structured and unstructured data

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Data Warehouses and Data Mining
• Data warehouse: Collects firm’s transactional and
customer data in single location for offline analysis by
marketers and site managers
• Data mart: Subset of data warehouse in which a
summarized or highly focused portion of organization’s
data is placed
• Data lake: Repository of raw unstructured or structured
data that has not yet been analyzed
• Data mining: Analytical techniques to find patterns in
data, model behavior of customers, develop customer
profiles

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The Challenge of Big Data
• Big data
– Petabyte, exabyte range
– Web traffic, e-mail, social media, content
– Traditional DBMS unable to process the increasing
volume of data
• Hadoop
– Open-source software framework
– Processes any type of data, even unstructured
– Distributed processing
• Apache Spark
– Hadoop alternative
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Marketing Automation and Customer
Relationship Management (CRM) Systems

• Marketing automation systems

– Track steps in lead generation
• CRM systems
– Manage relationship with customers once purchase
is made
– Create customer profiles
• Customer data used to:
– Develop and sell additional products
– Identify profitable customers
– Optimize service delivery, and so on
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Figure 6.9 A Customer Relationship
Management System

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Online Marketing Metrics: Lexicon
• Audience size/market share metrics
– Impressions, click-through rate (CTR), page views,
viewability rate, stickiness, loyalty, reach, recency
• Conversion to customer metrics
– Acquisition rate, conversion rate, browse-to-buy ratio, cart
conversion rate, abandonment rate
• Video ad metrics
– View time, completion rate
• E-mail campaign metrics
– Open rate, delivery rate, click-through rate, bounce-back
rate
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Figure 6.10 An Online Consumer
Purchasing Model

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How Well Does Online Advertising Work?

• Use ROI to measure ad campaign

• Difficulty of cross-platform attribution
– Google update to ad attribution model
• Highest click-through rates: Search engine ads,
permission e-mail campaigns
• Online channels compare favorably with traditional
• Most powerful marketing campaigns use multiple
channels, including online, catalog, TV, radio,
newspapers, stores

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The Costs of Online Advertising
• Pricing models
– Barter, cost per thousand (CPM), cost per click
(CPC), cost per action (CPA), hybrid,
sponsorship
• Measuring issues
– Correlating online marketing to online or offline
sales
• In general, online marketing is more expensive on
CPM basis, but more efficient in producing sales
• Effective cost-per-thousand (eCPM)

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Marketing Analytics
• Software that analyzes data at each stage of the
customer conversion process
– Awareness
– Engagement
– Interaction
– Purchase activity
– Loyalty and post-purchase
• Helps managers
– Optimize R O I on website and marketing efforts
– Build detailed customer profiles
– Measure impact of marketing campaigns
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Figure 6.11 Marketing Analytics and the
Online Purchasing Process

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Careers in E-commerce
• Position: Digital Marketing Assistant
• Qualification/Skills
• Preparing for the Interview
• Possible Interview Questions

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