1. business and industrial

E-M ARKETING /6E
C HAPTER 2
2-1
C HAPTER 2 O BJECTIVES
2-2

After reading Chapter 2, you will be able to:

Explain the importance of strategic
planning, strategy, e-business strategy, and
e-marketing strategy.

Identify the main e-business models at the
activity, business process, and enterprise
levels.

Discuss the use of performance metrics
and the Balanced Scorecard to measure ebusiness and e-marketing performance.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
T HE A MAZON S TORY
2-3
Founded in 1995 as an online retailer.
 Did not become profitable until Q4
2001.
 In 2009, generated $24.5 billion in net
sales, $902 million in net income.
 Leveraged its competencies into different
e-business models.
 Established e-commerce partnerships
with Target, Macy’s, and others.
 Provided developer services.
 Created the first affiliate program.

©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
2-4
THE AMAZON STORY, CONT.

Amazon’s success is based on selection,
lower prices, product availability,
innovative technology, and better product
information.

CEO Jeff Bezos is not interested in
expanding to the physical world.

Which of Amazon’s core competencies do
you think will drive its strategy in the
future?
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
S TRATEGIC P LANNING
2-5
A managerial process to develop and
maintain a viable fit between the
organization and its changing market
opportunities.
 Process identifies firm’s goals for
 Growth
 Competitive position
 Geographic scope
 Other objectives, such as industry,
products, etc.

©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
ESP: E NVIRONMENT, S TRATEGY,
AND P ERFORMANCE
2-6

The e-marketing plan flows from the
organization’s overall goals and strategies.

The ESP framework illustrates the
relationships among environment, strategy,
and performance.

A SWOT analysis of the business
environment (E) leads to the development
of strategy (S) and the measurement of
performance (P).
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
2-7
ESP F RAMEWORK
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
S TRATEGY
2-8

Strategy is the means to achieve a goal.

E-business strategy


Strategy that deploys enterprise
resources to reach performance
objectives, competitive advantages.
E-marketing strategy

Strategy that capitalizes on information
technology to reach marketing
objectives.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
B USINESS M ODELS
2-9

A business model is a method for longterm survival and a value proposition for
partners, customers, and revenue.

E-business models include the use of
information technology to achieve longterm goals.

Firm selects one or more models as
strategies to accomplish enterprise goals.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
SELECTING A BUSINESS
MODEL
2-10

A firm will select one or more business models as
strategies to accomplish enterprise goals.

Components of business model selections:
Customer value
Scope
Price
Revenue sources
Connected activities
Implementation
Capabilities
Sustainability
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
L EVEL OF C OMMITMENT
TO E-B USINESS
Level of business Impact
2-11
Business Transformation
(competitive advantage,
industry redefinition)
Pure
Play
Pure dot-com
Pure Dot-Com
(Amazon, MySpace)
(Amazon)
Enterprise
Effectiveness
(customer
retention)
Efficiency
(cost
reduction)
Both online and offline
Click
(Delland
andMortar
most retailers)
(eSchwab, most retailers)
Business Process
Activity
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
Customer
Relationship
Management
e-mail, blog
Brochureware
E-Mail
A CTIVITY -L EVEL
E-B USINESS M ODELS
2-12
1.
2.
3.
4.
5.
6.
7.
8.
9.
Online purchasing
Order processing
E-mail
Content publishing
Business intelligence (BI)
Online advertising and public relations (PR)
Online sales promotions
Pricing strategies
Social media communication
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
B USINESS P ROCESS -L EVEL
E-B USINESS M ODELS
2-13
1.
Customer relationship management (CRM)
2.
Knowledge management (KM)
3.
Supply chain management (SCM)
4.
Community building
5.
Affiliate programs
6.
Database marketing
7.
Enterprise resource planning (ERP)
8.
Mass customization
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
E NTERPRISE -L EVEL
E-B USINESS M ODELS
2-14
1.
2.
3.
4.
5.
6.
E-commerce
Direct distribution
Portal
Social networking
Online brokers
 Online exchange
 Online auction
 B2B exchange
Online Agents
 Selling agents
 Manufacturer’s agents
 Purchasing agents
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
P URE P LAY
2-15
Pure plays are businesses that began on
the internet.
 They represent the final level of the
pyramid.
 Pure plays face significant challenges.
 They must compete as new brands.
 They may need to take customers away
from established businesses.
 Some pure plays have redefined industries:
Yahoo!, Twitter, and eBay.

©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
P ERFORMANCE M ETRICS
I NFORM S TRATEGY
2-16

Performance metrics are specific measures
designed to evaluate the effectiveness and
efficiency of operations.

Performance metrics:

Provide measurable outcomes.

Must be easy to understand and use.

Must be actionable.

Can motivate employees to make decisions
that lead to desired outcomes.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
W EB A NALYTICS
2-17

Web analytics is the e-marketing term for the study of
user behavior on Web pages.

Metrics measure activities such as:


Click throughs from advertising

Page view

Number of comments posted on a blog

Number of fans on a company Facebook page

Conversions to sales
s
Web analytics software helps companies analyze data
on server logs for marketing purposes.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
D ATA C OLLECTION
2-18


Data for web analytics are collected in
several ways:

Website server logs

Cookie files

Page tags
Exhibit 2.5 lists some of the most used
online metrics.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
2-19
O NLINE M ARKETING
M EASUREMENT TOOL U SE
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
T HE B ALANCED S CORECARD
NOW, they use: The Balanced Scorecard
= enterprise performance management systems that measure many
aspects of a firm’s achievements.
-
50% of organizations worldwide have adopted the Balanced
Scorecard with excellent results.
-
The scorecard approach links strategy to measurement by asking
firms to consider their vision, critical success factors for accomplishing
it, and subsequent performance metrics in four areas: Customer,
internal, innovation and learning, and financial.
T HE B ALANCED S CORECARD
2-21

The Balanced Scorecard provides a framework
for understanding e-marketing metrics.

The Balanced Scorecard provides 4
perspectives.

Customer perspective

Internal perspective

Learning and growth perspective

Financial perspective
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
Customer
Perspective
Goals
Measures
Internal Business
Perspective
Goals
Measures
Learning and
Growth Perspective
Goals
Measures
Exhibit 2 - 1 The Balanced Scorecard Has Four Perspectives
Financial
Perspective
Goals
Measures
T HE B ALANCED S CORECARD :
C USTOMER P ERSPECTIVE
2-23

The customer perspective scorecard includes
ways to measure goals such as customer loyalty
and retention, engagement, satisfaction, etc.
 Loyalty and satisfaction measures may include
percentage of visitors who return to site, time
between visits, and shopping cart
abandonment.
 Customer engagement could include the
number of comments, photos or videos
posted.

Exhibit 2.7 provides a list of customer goals and
measures.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
F OUR P ERSPECTIVES
1.
The customer perspective:
-
Uses measures of the value delivered to customers.
-
These metrics tend to fall into four areas: time, quality, performance and
service, and cost.
E.g. Time from order to delivery, customer satisfaction levels with
product performance, amount of sales from new products, and
industry-specific metrics such as equipment up-time
percentage or number of service calls.
A PPLYING THE B ALANCED
S CORECARD TO E-B USINESS AND
E-M ARKETING
Metrics for the Customer Perspective
Customer Perspective
Example Goals
Build awareness of a new Web site service
Position firm as high tech
Increase number of software downloads from
the Web site
High customer satisfaction with Web site
High customer satisfaction with value of
online purchasing
Possible Measures
Survey target awareness of service
Number of visitors to the site
Survey target attitudes
Number from Web site log
Survey of target at Web site
Number of visits and activity at site
Number of complaints (e-mail, phone)
Number of abandoned shopping carts
Sales of online versus offline for same
products
Customer Perspective Scorecard for E-Business Firm
T HE B ALANCED S CORECARD :
I NTERNAL P ERSPECTIVES
2-26


The Internal perspective scorecard includes ways
to measure goals related to the quality of online
services and measures for the entire supply chain.

Number of customers who use service

Number of complaints in social media

Amount of time to answer customer e-mail

Number of website updates per day
Exhibit 2.8 provides a list of internal goals and
measures.
©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
F OUR P ERSPECTIVES
2.
The internal perspective:
-
Evaluates company success at meeting customer
expectations through its internal processes.
E.g.: cycle time (how long to make the product),
manufacturing quality, and employee skills and
productivity. Information systems are a critical
component of the internal perspective for e-business
firms.
A PPLYING THE B ALANCED
S CORECARD TO E-B USINESS AND
E-M ARKETING
Metrics for the Internal Perspective
Internal Perspective
Example Goals
Improve the quality of online service
Quality online technical help
Quick product cycle time
High product quality for online service
Possible Measures
Target market survey
Number of customers who use the service
Time to run the service software from Web
site
Amount of time to answer customer e-mail
Number of contacts to solve a problem
Number of problems covered by Web site
FAQ
Customer follow-up survey
Number of days to make the product
Product test statistics on specific
performance measures
Internal Perspective Scorecard for E-Business Firm
THE BALANCED SCORECARD:
LEARNING AND GROWTH PERSPECTIVES
2-29
The learning and growth perspective
scorecard includes human resources,
product innovation and continuous
improvement of marketing processes.
 Number of new products and features
 Number of customer complaints and
fixes
 Conversions from online leads
 Exhibit 2.9 provides a list of learning and
growth goals and measures.

©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
F OUR P ERSPECTIVES
3.
The learning and growth perspective :
-
Companies place value on continuous improvement to
existing products and services as well as on innovation in
new products.
E.g. Number of new products and the percentage of sales
attributable to each; penetration of new markets; and the
improvement of processes such as CRM or SCM initiatives.
A PPLYING THE B ALANCED
S CORECARD TO E-B USINESS AND
E-M ARKETING
Metrics for the Learning and Growth Perspectives
Learning and Growth Perspective
Possible Measures
Example Goals
Number of new service products to market in
Online service innovation
a year
Number of new service features not offered
by competitive offerings
Percent of sales from new services
Number of employee suggestions
Continuous improvement in CRM system
Number/type of improvements over time
Revenue per sales employee from Internet
High Internet lead to sales conversion
leads
Number of conversions from online leads
Number of accesses by employees
Increased value in knowledge management
Number of knowledge contributions by
system
employees
Innovation and Learning Scorecard for E-Business Firm
T HE B ALANCED S CORECARD :
F INANCIAL P ERSPECTIVES
2-32
The financial perspective scorecard
includes ways to measure financial goals
such as sales, profit and return on
investment.
 Sales growth and market share
 Return on invested capital
 Average order value
 Individual customer profit
 Exhibit 2.10 provides a list of financial goals
and measures.

©2012 PEARSON EDUCATION, INC., PUBLISHING AS PRENTICE HALL
F OUR P ERSPECTIVES
4.
The financial perspective:
= Income and expense metrics as well as return on investment,
sales, and market share growth.
The point is to understand what the company wants to accomplish
and devise performance metrics to monitor the progress and
see that the goals are reached.
A PPLYING THE B ALANCED
S CORECARD TO E-B USINESS AND
E-M ARKETING
Metrics for the Financial Perspective
Financial Perspective
Example Goals
Increase market share for online products
Double digit sales growth
Target 10% ROI within one year for each
new product
Lower customer acquisition costs (CAC) in
online channel
Possible Measures
Market share percentage (firm’s sales as
percentage of industry sales)
Dollar volume of sales from one time period
to the next
ROI
CAC (costs for advertising, etc. divided by
number of customers)
Financial Perspective Scorecard for E-Business Firm
S CORECARD B ENEFITS

Obtain timely information to update its strategy.

Balance long-term and short-term measures and evaluate every part
of the firm and how each contributes toward accomplishing selected
goals.

It helps firms leverage their relationships with partners and supply
chain members.

Go beyond financial metrics in measuring many different aspects that
lead to effective and efficient performance.
S CORECARD B ENEFITS

Forces companies to decide what is important and translate those
decisions into measurable outcomes that all employees can
understand.

A great communication tool because employees can use the scorecard
as a guide to coordinate their efforts.

Support employee evaluation in that individual performance can be
tied to successful outcomes on the metrics.

A way to measure intangible as well as tangible assets.