1. Optimal Database Marketing Drozdenko & Drake, 2002 1

2. 2 Analyzing and Targeting Online Customers Chapter 16

3. Optimal Database Marketing Drozdenko & Drake, 2002 3 Objectives Examine the types of individual-level data that can be collected on the Internet. Explore how various types of data can be analyzed and utilized. Provide a foundation for targeting online customers. Examine how marketing programs are tested online.

4. Optimal Database Marketing Drozdenko & Drake, 2002 4 Data Collected via the Internet Customers can state preference on the Internet and this data can be used to help establish relationships. Reputable Internet marketers will protect customer data and clearly outline privacy policies. Individual-level customer data collected on the Internet can be classified as either registration, behavior, or source data.

5. Optimal Database Marketing Drozdenko & Drake, 2002 5 Registration Data Many e-commerce sites require consumers to register before they can make purchases, get information, or enter the Web site. Examples of Internet registration data typically collected include Name Title Business title (if the site is a b-to-b site) E-mail address Postal address (business or home) Phone number Fax number Age Income level Gender Competitive product usage Current consumption level Product attributes

6. Optimal Database Marketing Drozdenko & Drake, 2002 6

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9. 9 Behavior Data Types of customer behavior data that can be captured includes Visits Total page views Specific page views Time spent at the site Products purchased Customer service requests Access to personal account information Discounts used

10. Optimal Database Marketing Drozdenko & Drake, 2002 10 Source Data It is valuable for the marketer to know what media convinced a customer to visit the site. Digitrends quantifies the various influences that contribute to a consumer shopping online: 42% of online buyers shop on the Internet as a result of a promotional e-mail 41% shop online as a result of an article or site link 39% are guided by a search engine 38% are influenced by word of mouth 29% are directed by an online ad 27% are familiar with a site’s offline store 21% shop online as a result of a magazine article 19% are influenced by TV or radio commercials 17% are moved by print ads 12% are persuaded by direct mail

11. Optimal Database Marketing Drozdenko & Drake, 2002 11 Source Data The method of collecting source will involve one of the following: Construction of unique URLs for each link or online ad Construction of unique URLs for specific e-mail lists or direct mail lists Evaluation of log files to identify search engines referring customers. Collection of survey data at registration for customers who were driven by print or broadcast ads, magazine articles, or word of mouth.

12. Optimal Database Marketing Drozdenko & Drake, 2002 12 Understanding Internet Users and Online Buyers An online buyer is a subset of Internet users. An Internet user is younger, has a higher income and higher education than the general population.

13. Optimal Database Marketing Drozdenko & Drake, 2002 13 Internet Buyers Percent of individuals with an income level of $50,000 or more who have purchased on the Internet is 51.2%. Only 39% of individuals with incomes less than $50,000 have made purchases online. 36% of Internet users 55 and older have purchased something on the Internet. This contrasts to 49% of Internet users in the 35-54 age group who have made a purchase online, and 46% penetration of online purchasing in the 18-34 age group.4 The UCLA Internet Project found a correlation between tenure of Internet use and online purchasing penetration. 71% of individuals who were Internet users for 3-4 years had made a purchase online: online purchase penetration was 26% among individuals who had been using the Internet for less than a year.

14. Optimal Database Marketing Drozdenko & Drake, 2002 14 Key Trends in Internet Usage 96% of respondents reported the use of the Internet for marketing and sales applications in 2000. 62% reported the use of E-mail marketing in 2000. 97% of respondents report their companies have a Web site. In 1998, 87% of respondents reported their company had a Web site. Regarding the primary function of their company’s Web site, 80% of survey respondents indicated their sites were used for marketing/information; 60% reported sites were used primarily for lead generation, and 55% reported their sites are used for sales/E- commerce. In 2000, among the companies with Internet sites, only 69% reported measuring its effectiveness. For those companies measuring Web site effectiveness, 77% measured the productivity of their site by the sales generated, 62% evaluate the effectiveness in terms of the leads generated, 60% use home page “hits” as the key measure of effectiveness.

15. Optimal Database Marketing Drozdenko & Drake, 2002 15 Exhibit 16.4 Example Report Showing Visits and Specific Page Hits by Week

16. Optimal Database Marketing Drozdenko & Drake, 2002 16 Exhibit 16.5 Example Report Showing Dollar Sales and Page Hits by Week

17. Optimal Database Marketing Drozdenko & Drake, 2002 17 Exhibit 16.6 Example Report Showing Length of Time Spent by Page Visits

18. Optimal Database Marketing Drozdenko & Drake, 2002 18 Exhibit 16.7 Example Report Showing Number of Visits by Referring Page

19. Optimal Database Marketing Drozdenko & Drake, 2002 19 Driving Customers to Your Web Site There are many reasons why a loyal direct mail customer may resist doing business over the Internet. Technology - Doing business over the Internet requires a computer, a modem, and an e-mail account at a minimum. Some markets, such as the seniors market, are lagging far behind the average in Internet penetration. Preference - Some customers have a comfort level with doing business by mail or over the phone and will never feel comfortable providing credit card information over the Internet. Convenience - Some catalog shoppers make their selections while waiting for appointments at the doctor’s office, or at night in their bed. The computer does not lend itself to the convenience of shopping when their time permits.

20. Optimal Database Marketing Drozdenko & Drake, 2002 20 Targeting Online Customers Targeting online customers is very similar to the off- line world and consists of two major steps: Defining the target markets Executing a contact strategy The strategy will dictate the offer and message and the manner in which both are extended. E- commerce data can be used just as effectively to acquire, retain, re-activate and cross sell online customers as traditional direct mail.

21. Optimal Database Marketing Drozdenko & Drake, 2002 21 Online Analysis of Customers Just as customers are segmented by demographics, source, product affinity, or RFM for traditional direct marketing applications, they can be similarly segmented by these attributes for E- commerce applications. Marketers can also define your online target markets with regression modeling. Internet data can be used to predict customers likely to “click through” and order via a unique e-mail offer just as effectively as order behavior can be predicted for your off-line customers.

22. Optimal Database Marketing Drozdenko & Drake, 2002 22 Conducting Marketing Tests in the E-commerce World When preparing to implement an online marketing test program, proper planning is required to ensure the results will be readable, reliable and projectable. The exact same appropriate testing principles should be employed as discussed in chapter 14: Usage of appropriate sample sizes Observance of the “one change” rule Leveraging test winners to same universes in roll-out In addition, once testing results are final, marketers assess those results using the same tools as listed in Chapter 13: confidence intervals and hypothesis tests.

23. Optimal Database Marketing Drozdenko & Drake, 2002 23 Banner Ads Online banner ads can be priced on the basis of the number of impressions, number of orders or number of responses. An impression is the exposure of a banner ad to a Web page visitor. Typically, direct marketers specify the number of impressions they desire. Once that number is reached, the banner ad is pulled A click-through on a banner ad is analogous to someone opening the envelope in traditional direct mail. In both cases, the individual is looking for more information about the offer. Marketers will continue to run banner ads on those Web sites that yield the most impressions and the highest order conversion rates.

24. Optimal Database Marketing Drozdenko & Drake, 2002 24 Figure 16.9 Sample Size Determination Calculations

25. Optimal Database Marketing Drozdenko & Drake, 2002 25 Figure 16.10 Click-through Summary Report

26. Optimal Database Marketing Drozdenko & Drake, 2002 26 E-Mail Designing e-mail marketing campaigns is analogous to designing direct mail campaigns. To ensure a certain level of confidence in your test results, apply the appropriate rules given in Chapters 13 and 14 to all e- mail list, offer, and copy tests. In e-mail marketing, a list is rented and copy is provided to the owner for approval. The execution takes place by a vendor designated by the list owner or a third-party vendor who conducts broadcast e-mails. Some arrangements involve a stipulation that the copy contains an endorsement by the list owner.

27. Optimal Database Marketing Drozdenko & Drake, 2002 27 Review Questions 1. What are some of the types of data collected from online customers that are different from data collected from offline customers? 2. Discuss the characteristics of online buyers. 3. How is Web site effectiveness measured, and which of these measures are most important to online marketers? 4. Discuss the advantages of real-time databases. 5. Discuss the process of online testing. 6. Why are marketers attempting to move their customers online, and what are some of the methods marketers are using to do so?