CHAPTER 2

Strategic E-Marketing and Performance

Metrics

Google’s mission: To organize the world’s information and make it universally

accessible and useful.

--Larry Page and Sergery Brin, Founders of Google

Larry Page and Sergery Brin, Founders of GoogleBorn : March 26, 1973 (age 41)Residence : Palo Alto, CaliforniaNationality: AmericanOccupation :Computer scientist ,Internet

entrepreneur

Known for :Co-founder and CEO of Google Inc.

Net worth : US$ 31.9 billion (July 6, 2014)Title :CEO of Google

#18 World’s Billionaires#12 in United States

Lawrence “Larry”Page

Sergey BrinBorn: Sergey Mikhaylovich BrinAugust 21, 1973 (age 40)

Residence :Los Altos, California

Nationality :Russian→ American

Occupation :Computer scientist, Internet entrepreneur

Known for:Co-founder of GoogleNet worth: US$ 31.5 (July 6 2014)

#19 World’s Billionaires

After this chapter, 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 e-business and e-marketing performance.

Company’s Goal

1. Growth2.Competitive Position3. Geographic Scope4. Other Objectives

Strategic Planning

- is the “managerial process of developing and maintaining a viable fit between the organization’s objectives , skills, and resources and its changing market opportunities”

Environment, Strategy, and Performance

Legal-Ethical TechnologyCompetitionOther Factors

Internet

Markets

SWOT

E-Business Strategy

E-Marketing Plan

E-Marketing Strategy

E-Marketing Mix CRM

E

P

S

Performance Metrics

The e-marketing plan is normally a part of an organization’s overall marketing plan, flowing from its overall goals and strategies. It starts with the business environment,where legal,ethical,technological,competitive,market-related,and other environmental factors external to the company create both opportunities and threats. Organizations perform SWOT (Strengths,Weaknesses,Opportunities,Threats). The Environment-Stategy-Performance (ESP) model might just as easily depict a brick-and-mortar business process– by removing a few Es. It underscores the idea that businesses are built not only on sound practices and proven processes but also with important technology transformations and e-marketing practices.

Performance Metrics - are specific measures designed to evaluate the effectiveness and efficiency of the e- business and e-marketing operations.

Strategy – it has been used to describe everything from “the course we chart, the journey we imagine and, at the same time , the course we steer , and the trip we actually make .

- it is concerned with how the company will achieve its “OBJECTIVES”, not what its GOALS are.

E-business Strategy- is the deployment of enterprise resources to capitalize on technologies for reaching specified objectives that ultimately improve performance and create sustainable competitive advantage.

E-marketing Strategy – is the design of marketing strategy that

capitalizes on the organization’s electronic or information technology capabilities to each specified objectives. In essence, e-marketing strategy is where technology strategy and marketing strategy wed.

FOUR APPROPRIATE TYPES OF RATIONALE

* Strategic justification * Operational justification

* Technical justification * Financial justification

Business Model – it is often mentioned in print and by executives

-is a method by which the organization sustains itself in the long term and includes its value proposition for partners and customers as well as its revenue streams.

Time-tested components as critical to appraising the fit of a business model for the company and its environment

- Customer Value - Connected activities -Scope -Implementation - Price -Capabilities -Revenue Sources - Sustainability

E-business Models - is a method by which the organizations sustains itself in the long term using information technology which includes its value proposition for partners and customers as well as its revenue streams.

Marketing concept -which suggests that the social and economic justification for an organization ‘s existence is the satisfaction of customer wants and needs while meeting organizational objectives.

Value - encompasses the customer’s perceptions of he product’s especially its attributes, brand name, and support services.

Value = Benefits -- Costs

E-Marketing Contributes to the E-Business Model

E-Marketing Increases Benefits

•Online mass customization ( different products and messages to different stakeholders

* Personalization (giving stakeholders relevant information) *24/7 convenience • Self-service ordering and tracking • One-stop shopping• Learning, engaging, and communicating with customers on social networking sites

E-Marketing Decreases Costs

• Low –costs distribution of communication messages (e.g.., e-mail)• Low –costs distribution channel for digital products• Low –costs for transaction processing• Low –costs for knowledge acquisition ( e.g.., research and customer feedback)• Creates efficiencies in supply chain ( through communication and inventory optimization• Decreases the cost of customer service

E-Marketing Increases Revenues

• Online transaction revenues such as product, information, advertising, and subscription fees, or commission / fee on a transaction or referral • Adds value to products / services and increase prices (e.g., online FAQ and customer support)• Increases customer base by reaching out to new markets • Builds customer relationships and, thus, increases current customer spending ( share of wallet)

E- business strategies help firms to decrease internal costs, often improving the value proposition for customers and partners. They can also increase the enterprise revenue stream, an important part of the e-business model.

Level of Commitment to E-Business

Pure Play

Enterprise

Business Process

Activity

Business transformation (Competitive advantage, industry redefinition)

Effectiveness(Customer retention)

Efficiency (Costs of sales)

Pure dot.com(Amazon ,Twitter)

Both online and offline (Dell and most retailers)

Customer relationship management

E-Mail, blog

Each level of the pyramid indicates a number of

opportunities for the company to provide stakeholder value and generate revenue streams using information technology . Because no single,

comprehensive , idea taxonomy of e-business models is available , we categorize the most

commonly used models based on the company ‘s level of commitment.

Activity Level Business Process Level Enterprise Level

1. Order Processing 1. Customer relationship 1. E-Commerce ,direct selling , content management (CRM) sponsorship

2. Online purchasing 2. Knowledge Management (KM) 2.Portal 3. E-mail 3. Supply Chain Management (SCM) 3. Social networking 4. Content publishing 4. Community building online 4. Broker models

* Online exchange, hub* Online auction

5. Business intelligence (BI) 5. Database marketing 5. Agent models6. Online advertising and 6. Enterprise Resource *Manufacturer’s /selling agent s public

relations (PR) Planning (ERP) *Shopping agent7. Online sales promotions 7. Mass Customization *Reverse auction8. Dynamic pricing strategies online9. Social Media Communication

E-Business Model Classification

Activity-Level E-Business Models - the lowest level of the pyramid affects individual business activities that can save the firm money if automated using information technology or the internet.

1. Online Purchasing- Companies can use the Web to place orders with suppliers, thus automating the activity.

2. Order Processing - This model occurs when online retailers automate internet transactions created by customers.

3. E-mail - When organization s send e-mail communications to stakeholders, they save printing and mailing costs.

4. Content publishing - in this model, companies create valuable content or services on their Web sites, draw lots of traffic, and sell advertising.

5. Business Intelligence (BI) – this activity refers to the low-cost online gathering of secondary and primary information about competitors, markets, customers, and more.

6. Online advertising and public relations (PR) - The company buys advertising on someone else’s e-mail or

website.7. Online sales promotions- companies use the internet to send

samples of digital products or to run sweepstakes, among other tactics.

8. Pricing strategies - online negotiation through auctions is one type of dynamic pricing initiated by the buyer instead of the seller. Technology allows this activity to be automated.

9. Social Media communication – companies use Facebook pages, Twitter streams, blogs and more, to engage customers and prospects .

Business Process-Level E-business Models- The next level of the pyramid changes business processes to

increase the company’s effectiveness. Customer relationship management (CRM) - involves retaining and

growing business and individual customers through strategies that ensure their satisfaction with the company and its products.

Knowledge management (KM) – is a combination of a company’s database contents, the technology used to create the system, and the transformation of data into useful information and knowledge.

Supply chain management (SCM) - involves coordination of the distribution channel to deliver products more effectively and efficiently to customers.

Affiliate programs – occurs when companies put a link to someone else’s retail Web site and earn a commission on all purchases by referred customers.

Database marketing - involves collecting, analyzing, and disseminating electronic information about customers, prospects, and products to increase profits. It is one of the oldest and most important strategies for e-marketers.

Enterprise resource planning (ERP) – refers to a back-office system for order entry, purchasing, invoicing, and involuntary control.

Mass customization - refers to internet’s unique ability to customize marketing mixes electronically and automatically to the individual level.

Enterprise –Level E-Business Models - at the enterprise level of the pyramid , the company automates many business processes in a unified system– demonstrating a significant commitment to e-business.

E-commerce – refers to online transactions : selling goods and services to the internet , either in one transaction or over time with an ongoing subscription price.

Virtual words – often create revenue through subscriptions—these are sites where uses can take the form of avatars and socialize in an online space of their own making.

Direct distribution – refers to a type of e-commerce in which manufacturers sell directly to customers, eliminating intermediaries such as retailers .

Content sponsorship online – is a form of e-commerce in which companies sell advertising either on their Web sites or through their e-mail.

Portal - is a point of entry in the internet, such as Yahoo! AOL Web sites. They provide many services in addition to search capabilities.

Social Networking sites - are those that bring users together to share interests and personal or professional profiles.

Online broker – are intermediaries who assist in the purchase negotiations without actually representing either buyers or sellers.

A business-to-business (B2B) exchange- is a special place because it allows buyers and sellers in a specific industry to quickly get connected.

Online agents- tend to represent either the buyer or the seller and earn a commission for their work.

Selling agents – help a seller move product. Manufacturer’s agents – represent more than one seller. Purchasing agent – represent buyers.

Pure Play - the final level of the pyramid. Pure plays are businesses that began on the internet, even if they subsequently added a brick-and-mortar presence.

Performance Metrics Inform Strategy

Performance metrics – also called KEY PERFORMANCE INDICATORS (KPI), are specific measures designed to evaluate the effectiveness and efficiency of an organization’s operations, both online and offline.

Four important things to measure strategy effectiveness 1. It translate its vision ,strategy, or e-business model into

components wit measurable outcomes.2. The performance metrics must be easy to understand and use.3. Metrics must be actionable.4. Finally ,when employee evaluations are tied to the metrics ,

people will be motivated to make decisions that lead to the desired outcomes.

Web analytics – is the e-marketing term for the study of user behavior on Web pages.

Balanced Scorecard – developed by two Harvard Business School professors in 1990 , is one such system with a huge adoption rate ( 57% to 64% of all global companies)

Online marketing Measurement Tool Use ( percentage of customers using the service)

0% 10% 20% 30% 40% 50% 60% 70% 80%

All channels’ performance in one reviewCustomer behavior across all touch points Offline customers behavior

Online customer- multiple visits

Value of campaign- influence and interactionAdvertising performance – number seeing the ad Online customer behavior – per visit/sessionIndividual online marketing campaign

Web analytics software help companies analyze all these data on server logs to uncover usage patterns. E-marketers use thousands of different performance metrics, often causing them to be lost in a sea of data. For the heavily used online metrics, according to a survey of 361 senior marketing executives in the United States and U.K.

Four Perspectives 1. Customer perspective 2. Internal perspective3. Learning and growth perspective4. Financial perspective

Example Goals Possible MeasuresBuild awareness of a new Website service Survey target awareness of service Engage customer on a site Number of comment

,photos, or videos photosIncrease number of software downloads Number from Web site log from the web siteValue for Business PartnersIncrease number of affiliates in program Number of affiliates over time

Customer Perspective

Example Goals Possible measuresImprove the quality of online Target market survey

service No. of customers who use the service No. of complaints in social media

Quality online technical help Amount of time to answer customer e-mail No. of contracts to solve a problem

Supply Chain Value to companyHigh supplier satisfaction Suppliers profits from our firm’s ordersPartner Value Partner contribution to product design

Internal Perspective

Example Goals Possible MeasuresOnline service innovation No. of new service products to market in

a yearNo. of new service features not offered by competitive offerings Percent of sales from new services

Continunous improvement in CRM No. of customer complaints and fixesSystem No./type of improvements over time

Learning and Growth Perspective

Example Goals Possible MeasuresIncrease markets share for online Market share percentage (firm’s sales products percentage of industry sales)

Double –digit sales growth Dollar volume of sales from one time period to the next

Target 10% ROI within one year for ROI each new product

Financial Perspective