Effectiveness Of Online Marketing Tools Marketing Essay

The present research paper is looking into effectiveness of online marketing tools on B2C websites. In this section a background in e-commerce, online marketing and online customers is provided in order to give the reader an introduction.

Background

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1.1.1. E-commerce

The development of the information communication technologies has brought changes to the way of doing business and lead to the birth of electronic commerce. Chaffey (2006) defined E-commerce as ‘both financial and informational electronically mediated transactions between an organization and any third party it deals with’. By the nature of business transactions, e-commerce can be classified into business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), consumer-to-business (C2B), and intra-organizational e-commerce (Dou & Chou 2002).

Business to consumer (B2C), the focus of our research, is defined by Chaffey (2006) as, ‘commercial transactions between an organization and consumers’. E-commerce transactions have grown significantly during the past years (Grover & Teng, 2001) and are expected to continue growing with double-digit annual growth rates (Daniels, Sehgal, & Vogel, 2008). According to Mulpura (2008) ‘Business-to-consumer (B2C) e-commerce and online retail sales reached $175 billion in 2007 and are predicted to reach $204 billion in 2008, $235.4 billion in 2009, $267.8 billion in 2010, $301 billion in 2011, and $334.7 billion in 2012’. One of the main reasons for the growth of B2C e-commerce is increasing number of internet users (Oppenheim, 2006).

1.1.2. Online Marketing

Internet created new ways of doing business for the companies but ‘Internet is not only a place for buyers and sellers to discover product information; it also plays a role of intermediary’ (Bailey & Bakos, 1997). Ab Hamid (2008) states that; ‘The emergence of Internet technology, particularly the World Wide Web, as an electronic medium of commerce offers new opportunities to industries to adopt the Internet as their alternative marketing tools (or as the only marketing channel)’.

There is still no widespread agreement regarding the nomenclature used to describe marketing through internet and terms such as hypermedia marketing, digital marketing, online marketing and e-marketing, have all been used at one time or another (Dholakia, 2005). Online marketing term will be used in our research. Elley and Tilley (2009) described online marketing as promotional activity on the internet, including email that can take many forms, including search engine marketing, email marketing, online advertising, social media, and affiliate marketing. These online marketing tools became one of the important communication tools for the companies to promote services and products in today’s economy. Shankar & Batra (2009) states, ‘Marketing communications through the online medium are growing rapidly’ and ‘The role of online marketing communications in the marketing mix is constantly evolving’ Shankar and (Hollinger, 2007). These views are also motivated by Reedy (2000) and he says online communications tools are started become an important ingredient in the promotional mix and its

1.1.3. Online customers

The Internet is no longer a novelty in the minds of today’s population as it is the access to it. In fact, the Internet and digital information have taken over many aspects of our lives from communication to information consumption to new ways of doing business. It has reinvented our vocabulary and gave new meanings to words in cyberspace, for example surfing, visitors, hits or navigate (Dobrowolski 2000). These changes in meaning can be discovered as well in the word ‘user’; it can mean a surfer or a visitor.

Now, in the 21th century, borders represented by gender, occupation and education in using or navigating the Internet and other digital mediums have been sponged away by habit, supported by changes in system technologies. So surfing the Internet, texting a mobile message or reading an online magazine is opened and, in fact, used by elderly, children or unemployed and technologies have become more mobile, real-time and interactive to support those behaviors. (Nicholas and …. 2003)

By now, it is a common knowledge that consumers of all ages shop online, but as Silverman (2000) and Seock (2008) point out, college students with ages between 18 and 22 are the ‘hottest’ market and can be the main customers to generate revenue and growth for online sales. The common trait argued in Seock’s (2008) research is that although college students are avid information seekers though the internet, the conversion rate to online buyers is very low, only 4,9 % from general online visitors buy also the products online (Kerner 2005).

InternetWorldStats shows that, in 2010, 92,5% of Sweden’s population was using the Internet, making it ‘one of the most developed Internet and broadband markets in the EU’, a so called ‘online nation’ [1] . All members of the age group 15 to 24 year old is using the Internet on a daily basis with an average of 155 minutes online per day [2] , but it is only the 3rd biggest age group that is actually shopping online, 72% of Swedish males aged 16 to 24 have purchased online in 2010, whereas 82% of the 25-34 female users have purchased in the last year [3] .

The trends in connectivity and being online also differ with age group. According to Internetstatistik.se, 15 to 24 year olds are more avid consumer of social media (66%) than e-mail (44%) [4] , which just emphasizes even more the need of new insight into what Shop.org names as social commerce. The problem arises into how to blend new social media and other new technologies into an effective online marketing strategy in order to obtain the wanted conversion from online visitors to online customers. What comes after building a Facebook company account, twittering about the new promotion and optimizing your website?

1.1.4. Effectiveness

New technologies have changed the ways customers and companies relate to one another and ‘has challenged the traditional process of transactions and the way communications between consumers and companies are managed (Ozuem, Howell and Lancaster, 2008). When evaluating this new technologies, it is important to consider the advantages and disadvantages of traditional and new channels as well as, from a managers point of view, translate them into effectiveness (Danaher and Rossiter, 2011). Companies are not using the whole potential of online marketing tools although they perceive them as effective (Teo 2005).

However, measuring marketing effectiveness poses numerous challenges due to the “multitude of possible metrics for assessing effectiveness” (Gray, 2006). Chaffey (2009) translates effectiveness as ‘doing the right thing’ and from a practical point of view ‘producing the required outputs and outcomes’. Kierzkowski, McQuade, Waitman and Zeissler (1996) expresses 5 wanted outcomes from a marketers point of view attract customers, engage customers, retain customers, learn about customers and relate to customers.

It is critical for companies to know; how do they attract customers to their website, engage them to turn into paying customers and also retain them to keep returning to your website. Chaffey 2009 states ‘Online communications techniques used to achieve goals of brand awareness, familiarity and favorability and to influence purchase intent by encouraging users of digital media to visit a web site to engage with the brand or product and ultimately to purchase online or offline through traditional media channels such as by phone or in-store’.

As Teo (2005) has established in his research, effectiveness does not have to translate necessarily only into revenue, but it can be measured in building customer relationships, traffic on the company’s website or another outcome that satisfies management. Our research will use the same 5 points outcome from Kierzkowski, McQuade, Waitman and Zeissler (1996) and will explore the different ways customers reach companies via internet.

1.2. Problem Discussion

What is the problem? (Borrowed or created)

Today, companies realized the potential of e-commerce and most of them already started to make use of this technology. Ščeulovs and Gaile-Sarkane (2010) state that, ‘E-commerce has now become a key component of many companies in the daily running of their businesses’. Thus, the e-marketing component of a company’s marketing strategy has grown in importance; Baker (2007) states that, ‘In a short period of time, e-marketing has become a facet of marketing that cannot be ignored’. New developments on internet technologies enables new ways of marketing, communication, gathering customer opinions and experiences about products, services and firms, and also allows personalized one-to-one marketing (Li and Bernoff, 2008).

Marketers are faced now with two important questions that they have to answer regarding:

Which online marketing tools to use for the wanted outcome?

Andrews, et al. (2007 cited in Ab. Hamid, 2008) point out that ‘for firms the increased importance of Internet channels can be seen in its contribution to disseminating information, enhancing consumer value, improving consumer satisfaction, loyalty and retention as well as consumer perception which in turn leads to better profitability and expanded market share’.

How to integrate them in the overall company strategy?

Baker (2007) noted that, ‘marketers need to carefully assess the significance of e-marketing and assimilate it, as appropriate, into all aspects of marketing from strategy and planning to marketing research, objectives setting, buyer behavior, marketing communications and the marketing mix’.

Given that the Internet has not only changed the way companies do business, but as well consumer’s behavior to shop or to look for information, the matter of effectiveness of online tools arises. Online marketing tools need to be identified well by the companies and marketers should validate the economics of their promotional activities against their effectiveness ( McQuade, S. (1996). In addition, the specific characteristics of the world wide web (traditional barriers of communication are broken, information and competition just at a click away) often result in a question that we will try to answer in this research:

Research question:

What tools are effective in attracting, retaining and engaging customers?

1.3. Research Problem

Questions that are developed from problem

Which online tools are customers responding to?

How effective is the online marketing tools to attract online customers?

How effective is the online marketing tools to engage online customers?

How effective is the online marketing tools to retain online customers?

Starting from an existing study on digital marketing, we have chosen to apply a similar model into a quantitative research that is questioning students in Sweden about the effectiveness of digital marketing tools. In this paper, we investigate the effectiveness of online marketing tools of B2C websites in Sweden.

2. Literature Overview

This section will present review of relevant literature relating to our research. We will identify the theoretical base on which our study will be built. What to base the study on?

2.1. E-commerce and B2C

Digital technology, particularly the internet, has been described as an enabler of a global marketplace, characterised by “equal access to information about products, prices, and distribution” (Strauss et al., 2006).

According to Chaffey (2009) e-commerce is ‘all electronically mediated transactions between an organization and any third party it deals with’. According to this definition non-financial transactions can be considered to be part of e-commerce.

Chaffey (2009) ‘Business-to-consumer (B2C) markets have made a significant contribution to the commercial development of the Internet encouraging wide-scale use of computer networks by a diverse and increasingly global range of consumers’

2.2. Online Marketing

Elley and Tilley (2009) defined online marketing as promotional activity on the internet, including email that can take many forms, including search engine marketing, email marketing, online advertising, social media, and affiliate marketing.

McQuade, S. (1996) states that there are several success factors for companies to be able to successful in the online market, these five factors are

Attract users.

Engage users” interest and participation.

Retain users and ensure they return to an application.

Learn about their preferences.

Relate back to them to provide the sort of customized interactions that represent the true “value bubble” of digital marketing.

e-marketing is the strategy that the agency or

organization uses the modern communication technical

methods to exchange the potential market into reality

market.

The

e-marketing is that we can use internet making

continuously services in the every step of products

pre-selling, products selling and products after-selling. It

runs in the whole process of business operating and

includes searching for new customers, services for old

customers.

2.2.1. Attracting

McQuade (1996) states that ‘the current clutter on the Internet virtually ensures that the “build it and they will come” model is insufficient to draw consumers, marketers need to actively attract users in the first place’.

Chaffey (2009+) ‘Before an organization can acquire customers through the content on its site, it must, of course, develop marketing communication strategies to attract visitors to the web site’.

Reed (2010) states online marketing drives traffic to your site and he also mentions this is probably the single biggest reason for using online marketing.

Baker (2009) states that; to bring in the customers, companies must ensure their website is visible to customers that’s why companies’ first priority is to be ensure their website is Search Engine Optimized.

Banner and display advertisement is another important marketing tool that generate traffic and increase the views of your website.

Social media tools generate traffic to your website and it’s also very important tool to engage current customers. Baker (2009) states ‘Social media can deliver new customers, but primarily is a terrific tool to communicate and engage current customers’.

“Engagement is driven by good design

and good content. The biggest explosion in

this area has been the growth of online

video to drive the message of business and

products across in a dynamic way. A recent

survey by Yahoo Pew has shown video can

increase e-commerce purchases by up to

40 percent.

According to Chaffey (2009) online marketing focus on three main activities; customer acquisition (attracting site visitor), conversion (generating leads and sales), and retention (encouraging the continued use of digital channels).

Reed (2010) states online marketing is an important tool and lists why it works for companies:

Online marketing drives traffic to your site: This is probably the single biggest reason for using online marketing.

Creates new ways to connect with your market: companies will become visible to a new set of prospects.

Builds trust: your clients and customers can get to know you through your online presence.

Starts a conversation: A two way of dialogue with your customers and prospects is much more effective than a one-way broadcast of your marketing message.

Creates value: If you can create a useful resource or interesting content targeted at your niche, they will keep coming back for more.

Builds communities and relationships.

Online marketing communications defined by Chaffey 2009 as ‘Online communications techniques used to achieve goals of brand awareness, familiarity and favourability and to influence purchase intent by encouraging users of digital media to visit a web site to engage with the brand or product and ultimately to purchase online or offline through traditional media channels such as by phone or in-store’.

2.2.2. Engaging

2.2.3. Retaining

2.3. Online Marketing Communications

There are several online marketing tools to attract customers and each tool must be chosen and applied carefully by the companies.

online marketing tools available for b2c companies

Developing the capability to create and maintain an effective online presence through a web site is a key part of Internet marketing. ‘Effective’ means that the web site and related communications must deliver relevance to its audience, whether this be through news content for a portal, product and service information for a business-to-business site or relevant products and offers for an e-commerce site. At the same time, ‘effective’ means the web site must deliver results for the company.

2.3.1. Social Media

‘Social media is defined as a group of Internet-based applications such as blogs, social networking sites, content communities, collaborative projects, virtual game worlds and social worlds that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user generated content’ (Kaplan & Haenlein, 2010).

The social media marketing connects service providers, companies and corporations with a broad audience of influencers and consumers (Weinberg 2009, 2-3.). Frick (2010) states that, ‘When you share content on social profiles and your network of friends in turn share it as well, the potential for reaching huge numbers of people with little effort and in a small amount of time could be construed as a tangible business transaction, at least in terms of its marketing potential’.

Increasing usage of social media and networks created new ways of marketing of products and services. According to Black, Harrison et. Al. (2010) ‘the uptake in use of social media tools is currently rising extremely quickly, Facebook now has over 400 million users and Twitter over 50 million’. With these high potentials companies realized the importance of social media and social media started to become a new way to reach potential customers. Kaplan (2010) states that each Social Media application usually attracts a certain group of people and firms should be active wherever their customers are present. A research done by Digital Brand Expressions indicates that 78 percent of client companies actively utilizing social media (sites such as LinkedIn, Facebook, YouTube, etc.) and only 41 percent of the respondents strategic social media communications plan [5] .

2.3.2. Search Engine Marketing (SEM)

2.3.3. Search Engine Optimization

Search Engine Optimization (SEO) is the process of identifying and fine-tuning elements and keywords of a Website to improve the traffic in order to reach the highest possible visibility from search engines. Hernández et al (2009) states that, ‘SEO tool tries to capture users who are actively looking for information about a product related to the firm, which converts them into potential clients openly expressing their needs’.

So SEO is the first thing to tick on your list – and it’s worth remembering that 50 percent of all online purchases start with a search.

SEO is a great tool to create brand awareness and increase the website visits. Highest ranking in search engines can attract more visitors to the website. According to Evans (2007) more than half of all visitors come from a search engine rather than from a direct link on another web page.

2.3.4. Mobile Marketing

Shankar and Balasubramanian (2009) define Mobile marketing as ‘a two- or multi-way communication and promotion of an offer between a firm and its customers using a mobile medium, device, or technology’. Marketing through mobile devices can be used to attract new customers or to retain them. Lubbe and Louw (2010) states that, ‘Mobile devices create an opportunity to deliver new services to existing customers and to attract new ones’.

Shankar et al. (2010) states that is improving the acquisition and enhancing the retention of customers is an important challenge in the mobile marketing context and the retailers need to better understand social networking to attract and retain customers.

Mobile marketing is taking off as more consumers are increasingly becoming dependent on their mobile device for their day-to-day needs, including music, voice and data communication, and photography (Shankar and Balasubramanian 2009).

2.3.5. Affiliate Marketing

Chaffey (2009) defines affiliate marketing as ‘a commission based arrangement where referring sites (publishers) receive a commission on sales or leads by merchants (retailers or other transactional sites)’. He also states that ‘Web site traffic can be developed through online partnerships such as affiliate marketing which involves partners being paid commission for each sale or lead’.

‘Affiliate marketing programs help firms to increase their reach and acquire other firms’ customers when the firms agree to refer their customers to the third parties’ (Akçura, 2010).

2.3.6. Display (Banner) Advertising

Display ads are paid ad placements using graphical or rich media ad units within a web page to achieve goals of delivering brand awareness, familiarity, favourability and purchase intent. Many ads encourage interactioın through prompting the viewer to interact or rollover to play videos, complete an online form or to view more details by clicking through to a site. Chaffey 2009

2.3.7. Permission E-mail marketing

A wide variety of e-commerce marketers are using permission-based e-mail communications to notify prospects of promotions and services, acquire new customers, increase sales, and, most importantly, develop and nurture an ongoing dialogue and relationship with their customers.

L’Oréal’s brand Lancôme uses email newsletters to keep in touch with customers and hence strengthen their brand loyalty (Merisavo and Raulas 2004).

The consumers exposed to e-mail marketing recommended the brand to their friends. E-mail also activated consumers to visit retail stores, buy the brand’s products, and visit the brand’s site on the internet via links. Brand attitudes were also positive among consumers who had received e-mail. The data show that consumers with higher brand loyalty appreciate regular communication from the brand more than the less loyal. From this we conclude that e-mail offers marketers an opportunity to further strengthen the brand loyalty of already loyal customers by keeping in frequent contact with them.

2.3.8. Online PR – Subscription and Feed tools. RSS etc.

Social Media

Membership

Dynamic content

2.3.9. Viral Marketing

Viral marketing for the real world.

Chaffey and Smith (2008) states that ‘Viral marketing harnesses the network effect of the Internet and can be effective in reaching a large number of people rapidly in the same way as a computer virus can affect many machines around the world’.

With viral techniques, traffic is built either through using e-mail (virtual word-of-mouth) or real-world word-of-mouth to spread the message from one person to the next (Chaffey and Smith, 2008).

BLENDTEC CASE STUDY

2.3.10. Permission E- mail Marketing

E-mail is most widely used as a prospect conversion and customer retention tool using an opt-in house-list of prospects and customers who have given permission to a company to contact them (Chaffey and Smith, 2008). For example, Lastminute.com has built a house list of over ten million prospects and customers across Europe.

2.3.11. Online PR

Maximising favourable mentions of your company, brands, products or web sites on third-party web sites which are likely to be visited by your target audience. (Chaffey, 2006).

According to Chaffey (2006) online PR include:

Communicating with media (journalists) online: setting up a press-release area on the web site; creating e-mail alerts about news that journalists and other third parties can sign up to; submitting your news stories or releases to online news feeds.

Link building: A structured activity to include good quality hyperlinks to your site from relevant sites with a good page rank.

Blogs, podcasting and RSS: Web logs or ‘blogs’ give an easy method of regularly publishing web pages which are best described as online journals, diaries or news or events listings,

Really Simple Syndication (RSS) is an extension of blogging where blog, news or any type of content is received by subscribers using the systems mentioned above.

Podcasts are related to blogs since they can potentially be generated by individuals or organisations to voice an opinion either as audio (typically MP3) or less commonly currently as video.

Managing how your brand is presented on third-party sites

As part of online PR it is useful to set up monitoring services. It is also necessary to have the resources to deal with negative PR as part of online reputation management.

Creating a buzz – online viral marketing.

member get member

2.4. Online customer

This section will present a short story of developments in digital interactive environment with regards to digital user definition and behavior in this environment and will present the new ‘digital player’ characteristics that is said to be transformed into the ‘Google generation

Starting with the term of ‘end-user’ which was pushed by scholars in the late 1970s to define the persons that would finally benefit from the usage of information, the growing number of users (we refer to tens of millions) in the coming 20 years after that have given birth to the term “consumers, as recognition to their new found (economic) powers” [6] .

Nicholas D. and Dobrowolsky T. (2000) argue the over-usage of the term ‘user’ in reference to the Internet and name it “a tired, over-used, cheap and misused word, which provides the information profession with a debased currency. It does not reflect the close and complex engagement that takes place between a person and today’s interactive information systems” [7] . Instead they introduce the term ‘player’ as a new name for the information consumer and characterize information seeking behavior as interactive, recreational, social and competitive with nuances depending on individual online engagement.

According to their following research in 2003, the digital player’s characteristics are [8] :

Enormous and unprecedented numbers; we have gotten used to see and speak of website traffic in millions.

All powerfull; power given by numbers, by huge choice possibilities and backed-up by governments.

Personal characteristics; they cover all age groups, education groups and gender. More then that, the research has revealed that “the Internet, initially a male dominated domain, now reflects the gender balance of the general population” [9] that needs a new demographic profiling in consumer behavior.

Huge choice is premonitory (not sure if it is the right word) of the next 2 characteristics:

Promiscuous users – short attention spans and short visits; Nicholas and Dobrowolski refer to users as ‘bouncers’. Online consumers bounce from website to another due to short attention spans, running against homepages they do not like, huge choice of websites, etc.

Promiscuous; consumers visit a lot of sites online, but purchase from just a few. (more explanation needed?)

Untrusting; all electronic media is two-dimensional and the information provider can be everyone.

cited in Seock 2008

Consumers across the age spectrum shop online, but college students aged 18 to 22 have been identified as the Internet’s “hottest” market and a prime source of future growth in online sales (Silverman, 2000). College students’ yearly expenditures reach near $200 billion (as cited in PROMO Xtra, 2003). They are heavy users of the Internet and have more access to this medium than most other population segments (Jasper & Lan, 1992; Kim & LaRose, 2004; U.S. Department of State, 2002). According to Harris Interactive (2002), 92% of college students own a computer and 93% access the Internet. Their online spending exceeds that of any other demographic group in the U.S. (O’Donnell & Associates, LLC, 2004). Roemer (2003) noted that U.S. college students’ online purchases came to $1.4 billion in 2002 following a 17% increase over the previous three years. In this vein, it is important for retailers and consumer educators to better understand college students’ online shopping behavior.

Chaffey (2009), ‘Age can affect levels of access to technology, computer literacy, and eventually, the extent to which individuals use the Internet as part of their shopping routines’.

Chaffey (2009), ‘At the higher end of the educational spectrum (university and college graduate) the internet is considered as essential if not indispensible. However , the digital divide is persistent and internet access is lower in areas with poorer educational achievement and lower-income schools.’d

Share of persons who use the Internet at least once a week

By age groups 16-74 years of age, shares in percent. Year 2010

Share of persons who ordered goods or services via the Internet during the last twelve months

By age groups 16-74 years of age, shares in percent. Year 2010. Orders made for private purposes

2.5. Effectivenes online

However, measuring marketing effectiveness poses numerous challenges due to the “multitude of possible metrics for assessing effectiveness” (Gray, 2006 ).

The analysis of advertising channel effectiveness and consumer

behavior has emerged as a key concept in the marketing discipline for researchers and

practitioners because it bridges consumer behavior and marketing strategy (Woodruff,

1997; Overby et al., 2004).

The operational and management processes of e-marketing

Online and offline communications techniques for e-commerce

There are different marketing communicati