eMarketing eXcellence by Dave Chaffey and PR Smith 1
CHAPTER 3
INTRODUCTION TO E-
MODELS
eMarketing eXcellence by Dave Chaffey
and PR Smith
OVERALL LEARNING OUTCOME
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◻ By the end of this chapter, you will be able to:
• Appreciate the changing nature of business models
because of social media.
• Appreciate digital revenue models.
• Review and select models which are appropriate for
your business.
eMarketing eXcellence by Dave Chaffey and PR Smith
Introduction to E-Models
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◻ A model is anything that represents
reality.
◻ It could be a model aeroplane, a map, a
diagram, algebra or a formula.
◻ Here, we are particularly interested in
descriptive models that describe a
process i.e.,
◻ The current way in which a business operates
in its dealings with customers and
intermediaries such as media sites or price
comparison engines.
eMarketing eXcellence by Dave Chaffey and PR Smith
Introduction to E-Models
(Continued)
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◻ There are many different implications of change
across a variety of models:
◻ Customers develop new patterns of media
consumption and product selection, and brands
need to be visible at the right time in the right place
as consumers use search engines, review sites and
affiliates to choose their preferred supplier.
◻ So online marketers need to review their online
marketplace models to understand their digital
marketspace.
Introduction to E-Models
(Continued)
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◻ Businesses cross categories as supermarkets
become banks, as radical changes to business
models and revenue models are enacted.
◻ ‘Markets become conversations’ (Levine et al.
2000), where dialogue between customers and
between employee and customer drive the
relationships.
Introduction to E-Models
(Continued)
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◻ Value chains and distribution channels are
restructured as existing channel partners are
bypassed and new channel partners and value
networks are formed and reformed.
◻ Your suppliers or distributors may seek new
revenue from online ads and affiliate links and
this offers new opportunities for you to reach your
audience online.
◻ Marketing becomes transparent as customers
manage the relationship with companies rather
than the other way around.
Introduction to E-Models
(Continued)
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◻ Systems and control mechanisms are opened up
to customers.
◻ Brand equity changes from being visually driven
to interactively driven.
◻ Businesses can become what Charles Handy
(1995) calls a ‘box of contracts’, as many
functions are outsourced to form a virtual
business.
Online revenue models
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• In addition to direct selling online and brokering online
sales through an auction arrangement, there are nine
main ad revenue models that a budding web
entrepreneur or established site owner can use to
generate revenue.
• Revenue from subscription access to content
• Revenue from Pay Per View access to documents
• Revenue from CPM display advertising on site
• Revenue from CPC advertising on site
• Revenue from sponsorship of site sections or content
types
• Affiliate revenue (typically CPA, but could be CPC)
• Subscriber data access for email marketing
• Access to customers for online research
• Freemium models. (no time bound)
Online revenue models
(Continued)
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Online revenue models
(Continued)
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• FREEMIUM MODELS.
◻ The model is most commonly applied to online
software services or online publishing. The benefits
of the freemium model for the brands operating it
are:
🞑 Increased conversion to sale due to ease of
conversion from interest to trial of service to paid
service
■A much smaller proportion will convert to a paid
service because of the risk that it may not offer
value) – this is dependent on the quality of the
service.
Online revenue models
(Continued)
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• FREEMIUM MODELS. (CONTINUED)
🞑 Increased awareness of the service through
sharing of experiences by freemium users
compared to paid users (amplification through
network effects).
🞑 Other revenue models are possible through
freemium use such as advertising or affiliate.
🞑 Google is the ultimate example of a freemium
service where Adwords is the revenue model.
eMarketing eXcellence by Dave Chaffey and PR Smith
Intermediary models
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◻ Click ecosystem describes the flow of online visitors
between search engines, media sites, other
intermediaries, your competitors and you.
◻ Search engines act as a distribution system which
connects searchers for different phrases to sites.
◻ Companies need to analyze consumer use of
keyphrases entered from generic searches for
products or services, more specific phrases and brand
phrases incorporating their brand and competitor
names.
◻ They also need to assess using services to discover
which online intermediaries or competitors have the
best share of these phrases or are popular in their own
righteMarketing
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eMarketing eXcellence by Dave Chaffey and PR Smith
Intermediary models (Continued)
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◻ To help summarize the linkages and traffic flows in
your e-marketplace, it is urged to create an e-
marketplace map (Figure 3.1).
◻ This shows the relative importance of different online
intermediaries in the marketplace and the flow of
clicks between your different customer segments,
your company site(s) and different competitors via
the intermediaries.
◻ You need to know which sites are effective in
harnessing search traffic and either partner
with them or try to grab a slice of the search traffic
yourself.
eMarketing eXcellence by Dave Chaffey and PR Smith
Intermediary models
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b2b
eMarketing eXcellence by Dave Chaffey and PR Smith
Intermediary models (Continued)
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◻ Intermediary models introduce some concepts we will
refer to more fully in later sections; the main
members of the e-marketplace model are:
🞑 Customer segments.
🞑 Search intermediaries.
🞑 Intermediaries and media sites.
🞑 Destination sites.
Potential Partners include
■ Mainstream news media sites or portals include
traditional sites, e.g. FT.com
■ Niche/vertical media sites, e.g. E-consultancy,
ClickZ.com in B2B
■ Price comparison sites (also known as aggregators), e.g.
MoneySupermarket.com, Kelkoo, Shopping.com,
uSwitch
■ Superaffiliates.
Attribution models
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◻ We know that different customers buy in different
ways. Some visit your web site just once and
immediately buy (this makes analysing what works
easy).
◻ Others visit several times before buying (or
‘converting’).
◻ Some visitors actually remember and insert a
specific web address (URL) into a browser and arrive
at a site ‘directly’. Or, as is often the case, they
perform multiple searches and will be referred by
different types of site.
◻ Different customers take different journeys (using
different channels) to buy the same product.
◻ Channels include display ads; paid search (PPC);
Attribution models (Continued)
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◻ Conversion means achieving a goal
which could be making a sale, or a
customer making an enquiry, taking a
trial, registering for a newsletter,
registering for blog post updates, etc.
Micro
Conversion
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eMarketing eXcellence by Dave Chaffey and PR Smith
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eMarketing eXcellence by Dave Chaffey and PR Smith
Attribution models(Continued)
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◻ You cannot build the best picture of which channels
are influencing sales if your agencies are using
different tracking tools and different media
channels.
◻ To simplify the understanding of media effectiveness
a common approach is to attribute or credit the sale
or other outcome to the last click.
🞑 This is a good approach in that it avoids double
counting
◻ A common phenomenon in online advertising is the
display advertising halo effect where display ads
indirectly influence sales.
◻ These are sometimes known as ‘view-throughs’ or
post-impression effects.
◻ Measuring the ‘last click wins’ (last-click attribution
Communications Models
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◻ This section primarily explores how multi-
stage communications models are moving
into web-based community communications
models.
◻ Brief reference is also made to other
communications models including viral
marketing, affiliate marketing and permission-
based marketing.
◻ There are other communications models
including viral marketing, affiliate marketing
and permission-based marketing.
🞑 New models bring new opportunities.
Communications Models
(Continued)
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◻ In the last millennium, mass communications
models were popular – with a simple model showing
the sender (marketer) sending a message directly to
the customer:
◻ Then opinion leaders and opinion formers were
identified as important elements in communications
models.
◻ They were targeted to help encourage word-of-
mouth spread.
🞑 Here the sender sends a message and some of it goes
directly to the customer and some is picked up by opinion
formers who subsequently pass the message on to
customers.
Communications Models
(Continued)
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◻ Add in some feedback and interaction and
you’ve got conversations, with the arrows
also indicating flow-backs to the sender and
other customers.
🞑 A trialogue.
Figure 8.5 The communications model of Schramm (1955) applied to the Internet
Table Summary of differences in characteristics of traditional media and digital media (note that rows 10–12 are
similarities between the two media types)
Customer Information Processing
Models
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◻ This section leads you into e-customers by raising
more questions than answers about online
information processing.
◻ HOFACKER’S MODEL has five stages of information
processing which can be used to review the
effectiveness of the overall page template layout on a
site:
🞑 Exposure – is the message there long enough for a
customer?
🞑 Attention – what grabs the attention – movement,
colour . . . ?
🞑 Comprehension and perception – how does the
customer interpret the stimulus?
🞑 Yielding and acceptance – is the information
accepted by the customer?
Customer Information Processing
Models
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◻ Each stage acts as a hurdle, since if the site
design or content is too difficult to process,
the customer cannot progress to the next
stage.
🞑 The e-marketer fails.
◻ Hence, understanding how customers
process information helps marketers to
communicate more clearly
Customer Buying Models
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◻ What goes through a customer’s mind moments
before they purchase?
◻ What stages do they go through when making a
purchase?
🞑 To sell, you have to know how and why people buy.
🞑 E-Marketers should be able to select and draw a
suitable buying model for online customers.
◻ The choice of model obviously depends on the type
of purchase and the type of buyer.
🞑 High-involvement purchase (e.g. a car or a
smartphone) and
🞑 Low-involvement routine purchase (e.g. a can of
cola).
Customer Buying Models
(Continued)
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HIGH-INVOLVEMENT PURCHASE
◻ For a high-involvement purchase like a car, customers
go through a rigorous buying process from:
🞑 Problem identification to information search to evaluation to
decision to buy through to post-purchase.
◻A good web site (and/or good ads and
recommendations) help buyers move through all, or
most, of these stages in the buying process.
◻ Some buyers prefer to browse online and buy offline
(or just test drive), while others prefer to test, browse
and buy online.
◻ The integrated database and integrated
communications should be able to identify prospects
online and close sales offline, even if it means
Customer Buying Models
(Continued)
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LOW-INVOLVEMENT ROUTINE PURCHASE
◻ Not all purchases require this much effort (i.e. in
High Purchase).
🞑 There are many low-involvement purchases that we
make every day, which do not warrant this kind of
effort.
◻ Despite being almost 100 years old, and criticized
by some, the AIDA model of attention (awareness),
interest, desire and action is still used by many
professionals.
◻ There are many buying models such as ATR or
awareness, trial and reinforcement;
🞑 Generate awareness, facilitate an easy trial and then
reinforce it with advertising from then on.
Loyalty Models
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◻ We know that repeat business is, on average, five
times more profitable than new business.
◻ On the other hand, low loyalty has a high cost as
constantly recruiting new customers is expensive.
◻ You need to identify and target your ideal
customers and then move them up the Ladder of
Loyalty and a proportion of them up the Ladder of
Engagement so that;
🞑 They become loyal lifetime customers who also spend
more of their ‘share of wallet’ with you on an
extended product portfolio if the brand loyalty is
sufficiently strong.
Loyalty Models (Continued)
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The IDIC loyalty model
◻ Peppers and Rogers (1997) have applied their classic
work on building one-to-one relationships with the
customer to the web. They call it IDIC which stands for:
◻ Customer identification. This stresses the need to
identify each customer on their first visit and
subsequent visits. Common methods for identification
are the use of cookies or asking a customer to log on to
a site.
◻ Customer differentiation. This refers to building a
profile to help segment customers.
◻ Customer interaction. These are interactions
provided on-site such as customer-service questions or
creating a tailored product.
◻ Customer communications. This refers to
Loyalty Models (Summary)
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🞑 Quality product, quality service and
quality sites are basic prerequisites to
achieve online customer loyalty.
🞑 Reward schemes can also be used to
enhance loyalty.
🞑 A plan is needed to facilitate and
leverage the comments of advocates
and manage negative comments by
detractors.
Social Media Models
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◻ Business is undergoing massive changes in
its business models, particularly since the
introduction of social media.
◻ This section explores the power of social
media i.e.,
🞑 Why it has grown so rapidly and how it affects
customers (namely participation).
◻ To tap into communities, brands need to
plan for more open conversations with
consumers, listening carefully and then
responding.
Social Media Models &
The Ladder Of Engagement
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◻ The Ladder of Engagement is intended to show how
customers can drive the business (using the new social
media culture)
🞑 This is done through mobilizing customer engagement
in a carefully structured way.
◻ The ideal customer, or most valuable customer, does
not have to be someone who buys a lot.
🞑 The ideal customer could be an influencer who is a
small irregular buyer but who posts ratings and
reviews, as the reviews could influence another 100
people.
◻ The Ladder of Engagement goes far beyond shaping
stories and messages as it ultimately goes through to
shaping products, services, processes and even the
very way a business is run.
Nielsen’s 90-9-1 Rule
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Social Media Models &
The Ladder Of Engagement
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THE LADDER OF ENGAGEMENT
◻ Moving customers up the Ladder of Engagement
creates brand loyalty and can help improve an
organization’s processes, products and services.
🞑 Creates sustainable competitive advantage
🞑 Customers become more engaged and loyal to the
brand they are involved.
◻ The lower half of the ladder encourages customers to
engage via product ratings, reviews and discussions.
◻ The upper half of the ladder is higher-level user-
generated content (UGC), which encourages
customers to become co-creators of content,
products, services and even systems for the
organization.
Social Media Models &
The Ladder Of Engagement
39 (Continued)
Review and
rating as a
standard point
Social Media Models &
The Ladder Of Engagement
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THE LADDER OF ENGAGEMENT
◻ Collaborative co-creation
◻ Now we move to the higher levels of engagement
where customers and prospects collaborate on creating
ideas, ads, systems and products and services.
◻ IDEAS
◻ Dell’s IdeaStorm (www.ideastorm.com) generates ideas
on how to improve the business and uses systemized
suggestion boxes (Figure 3.19).
◻ Customers, and even non-customers, can suggest new
products and features, as well as better ways of
running the business; e.g. improvements in their
processes. Dell has earned US$10 m from the early
stages of IdeaStorm.
Social Media Models &
The Ladder Of Engagement
41 (Continued)
◻ IDEAS (Continued)
🞑 This may seem tiny to a company of Dell’s size, but
remember, this is brand engagement, a form of brand
promotion to the brand zealots, and it also contributes
something to the bottom line.
