1. McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 18, YOU SHOULD BE ABLE TO:
Describe what interactive marketing is and how it creates customer value, customer relationships, and customer experiences.
LO1
Explain why certain types of products and services are particularly suited for interactive marketing.
LO2
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3. LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 18, YOU SHOULD BE ABLE TO:
Describe why consumers shop and buy online and how marketers influence online purchasing behavior.
LO3
Define cross-channel shoppers and the role of transactional and promotional Web sites in reaching these shoppers.
LO4
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4. SEVEN CYCLES. ONE BIKE. YOURS.
LECTURE NOTES
SEVEN CYCLES. ONE BIKE. YOURS.
 Seven Cycles is the largest custom bicycle frame builder in the world.
 The company produces a broad range of road, mountain, cyclo-cross, triathlon, single-speed, and tandem bikes annually, and no two are alike.
 Seven Cycles uses its multilanguage Internet Web site ( to let customers get deeply involved in:
a. The frame-building process.
b. The selection of hubs, spokes, and handlebars to complete the bike.
 Its Web site enables customers to design their own bike frames using the company’s Custom Kit™ fitting system that considers the rider’s size and riding habits.
 This customization process and continuous feedback:
a. Makes for a collaborative relationship between:
 Seven Cycles.
 233 authorized dealers and distributors.
 Customers in 40 countries.
b. Results in a customer experience as unique as each bike made.
 Web site visitors can:
a. Peruse weekly news stories.
b. Learn about new-product introductions.
c. Link to the company president’s blog to get a unique perspective on the business.
d. Read employee biographies to learn more about the people who build the bikes.
e. Channel partners can obtain updated information from a 24/7 repository.
 Seven Cycles bike owners receive Communiqué, a monthly newsletter that allows them to learn about the firm’s activities, strategic partnerships, and new offerings.
 Seven Cycles is also experimenting with social media tools, such as Facebook and Twitter, as a means to build a stronger sense of community around the brand.
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5. Marketplace Marketspace Time Utility Possession Utility Form Utility
CREATING CUSTOMER VALUE, RELATIONSHIPS, AND EXPERIENCES IN MARKETSPACE
CUSTOMER VALUE CREATION IN MARKETSPACE
LO1
Marketplace
Marketspace
Time Utility
Possession Utility
Form Utility
I. CREATING CUSTOMER VALUE, RELATIONSHIPS, AND EXPERIENCES IN MARKETSPACE [LO1]
 Consumers and companies populate two market environments:
a. The traditional marketplace.
 Is where buyers and sellers engage…
 In face-to-face exchange relationships…
 In a material environment characterized by…
– Physical facilities (stores and offices) and…
– Mostly tangible objects.
b. The marketspace.
 Is an Internet-enabled digital environment characterized by…
 Face-to-screen exchange relationships and…
 Electronic images and offerings.
 Consumers now browse and purchase a variety of offerings in both market environments, and more are expected to do so in the future.
 Figure 18-1 Shows the growth in online shoppers and estimated retail sales in the U.S. since 2003.
a. About 94 percent of Internet users ages 15 and older shop online.
b. They are expected to buy $335 billion worth of products and services in 2012.
A. Customer Value Creation in Marketspace
 Marketers believe that the possibilities for customer value creation are greater in the digital marketspace than in the physical marketplace.
a. In marketspace, direct on-demand information is possible from marketers anywhere to customers anywhere at any time (place/time utility).
b. Operating hours and geographical constraints do not exist in marketspace.
c. Possession utility is accelerated.
 The greatest marketspace opportunity lies in its potential for creating form utility.
a. Interactive two-way Internet-enabled communication invites consumers to tell marketers exactly what their requirements are.
b. This makes possible the customization of a product or service to fit the buyer’s exact needs.
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6. FIGURE 18-1 Trend in online shoppers and online retail sales revenue in the U.S.
 Figure 18-1 Shows the growth in online shoppers and estimated retail sales in the U.S. since 2003.
a. About 94 percent of Internet users ages 15 and older shop online.
b. They are expected to buy $335 billion worth of products and services in 2012.
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7. Interactive Marketing
CREATING CUSTOMER VALUE, RELATIONSHIPS, AND EXPERIENCES IN MARKETSPACE
INTERACTIVITY AND INDIVIDUALITY IN MARKETSPACE
LO1
Interactivity
Individuality
Interactive Marketing
B. Interactivity, Individuality, and Customer Relationships in Marketspace
 Marketers benefit from two unique capabilities of Internet technology that promote and sustain buyer-seller relationships:
a. Interactivity. Listening and responding to consumer needs.
b. Individuality. Empowering consumers to:
 Influence the timing and extent of the buyer-seller interactions.
 Have a say in:
– The kind of products and services they buy.
– The information they receive.
– The prices they pay.
 Interactive marketing.
a. Involves two-way buyer-seller electronic communication in a computer-mediated environment in which the buyer…
b. Controls the kind and amount of information received from the seller.
c. Is characterized by choiceboard and personalization systems.
d. Transforms customers’ supplied information into customized responses to their individual needs.
1. Choiceboards.
a. A choiceboard:
 Is an interactive, Internet-enabled system that…
 Allows individual customers to design their own products and services by:
– Answering a few questions.
– Choosing offering attributes, prices, and delivery options from a menu.
 Collects precise information about a buyer’s preferences and behaviors.
 Enables a firm to become more knowledgeable about customers to better anticipate and fulfill their needs.
 Is essentially a transaction technology.
b. Collaborative filtering:
 Is a process that:
– Automatically groups people with similar buying intentions, preferences, and behaviors.
– Predicts future purchases.
 Gives marketers the ability to make a dead-on sales recommendation to a buyer in real time.
 Collaborative filtering applied each time you view a selection at Amazon.com and see “Customers who bought this (item) also bought….”
Choiceboard
Collaborative Filtering
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8. Personalization Permission Marketing MyYahoo! Opt-In Opt-Out
CREATING CUSTOMER VALUE, RELATIONSHIPS, AND EXPERIENCES IN MARKETSPACE
INTERACTIVITY AND INDIVIDUALITY IN MARKETSPACE
LO1
Personalization
MyYahoo!
Permission Marketing
2. Personalization.
a. Choiceboards and collaborative filtering are marketer-initiated efforts to provide customized responses to the needs of individual buyers.
b. Personalization systems are typically buyer-initiated efforts.
c. Personalization.
 Is the consumer-initiated practice of generating content on a marketer’s Web site.
 Is custom tailored to an individual’s specific needs and preferences.
d. Permission marketing:
 Is the solicitation of a consumer’s consent/approval (called “opt-in”) to:
– Receive tailored and advertising…
– Based on personal data supplied by the consumer.
 Is a proven vehicle for building and maintaining customer relationships.
e. Firms that successfully employ permission marketing adhere to three rules:
 Make sure opt-in customers only receive information that is relevant and meaningful to them.
 Ensure customers are given the option to opt out, or changing the kind, amount, or timing of information sent to them.
 Assure customers that their information (name, profile data) won’t be sold or shared with others.
 75 percent of adult Internet users are concerned about this issue.
Opt-In
Opt-Out
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9. FIGURE 18-2 Seven Web site design elements that drive customer experience
C. Creating an Online Customer Experience
 An ongoing challenge for companies is to:
a. Design and execute marketing programs that…
b. Capitalize on the customer value-creation capabilities of Internet technology.
 Companies realize that simply applying Internet technology to create time, place, form, and possession utility is not enough to create a marketspace presence.
 The quality of the customer experience produced by the firm is the standard for a meaningful marketspace presence.
 Customer experience.
a. Is the sum total of the interactions that a customer has with a firm’s Web site.
b. Starts from the home page through the entire purchase decision process.
 [Figure 18-2] Firms produce a customer experience through seven Web site design elements:
a. Context.
 Refers to a Web site’s:
– Aesthetic appeal.
– Functional look and feel.
– Reflected in site layout and visual design.
 Focuses largely on the firm’s offerings or information.
 Conveys the core consumer benefits of the offering.
b. Content.
 Applies to all digital information on a Web site.
 Includes the text, video, audio, and graphics to engage a Web site visitor.
 Provides a platform for the remaining design elements.
c. Customization.
 Is the ability of a Web site to modify itself or be modified by each user.
 Is prominent in Web sites that offer personalized content like MyYahoo!
d. Connection.
 Is the network of linkages between a firm’s Web site and other sites.
 These links:
– Are embedded in the Web site.
– Appear as highlighted words, a picture, or graphic.
– Allow a user to effortlessly visit other sites with a mouse click.
e. Communication.
 Refers to the dialogue that unfolds between the Web site and its users.
 Is to be interactive and individualized in real time like a conversation.
 Some Web sites now enable a user to talk directly with a customer representative while shopping the site.
f. Community.
 Encourages user-to-user communications hosted by the company to create virtual communities.
 Is shown to:
– Enhance customer experience.
– Build favorable buyer-seller relationships.
g. Commerce.
 Is the Web site’s ability to conduct quick and simple sales transactions.
 Amazon.com has mastered this design element with “one-click shopping.”
 Although every Web site has context and content, they differ in the remaining five elements based on its purpose.
a. Web sites that emphasize the actual sale of products and service only include the commerce element.
b. Web sites that are used primarily for advertising and promotion purposes emphasize the communication element.
 Companies:
a. Use a broad array of measures to assess Web site performance such as…
b. The amount of time per month visitors spend on their Web site, or “stickiness,” to…
C. Gauge customer experience.
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10. USING MARKETING DASHBOARDS Sizing Up Site Stickiness at Sewell Automotive Companies
LO1
Average Time Spent per Unique Monthly Visitor = ×
USING MARKETING DASHBOARDS
Sizing Up Site Stickiness at Sewell Automotive Companies
Average Time Spent per Unique Visitor (Minutes)
Dealerships commonly measure Web site performance by tracking visit, visitor traffic, and “stickiness”—the amount of time per month visitors spend on their Web site. To gauge stickiness, companies monitor the average time spent per unique visitor (in minutes) on their Web sites. This is done by tracking and displaying the average visits per monthly unique visitor and the average time spent per visit in minutes. This information is displayed on a marketing dashboard and is shown below:
Average Time Spent per Unique Visitor (minutes) =
Average Visits per Monthly Unique Visitor ×
Average Time Spent per Visit (minutes)
[See CH18TimeSpentVisitors.xls]
Your Challenge.
To assess whether the recent improvements in the company’s Web site has increased the amount of time per month visitors spend on the Web site.
Your Findings.
The monthly marketing dashboard traffic and time measures are displayed below for June 2006, three months before the Web site improvements (green arrow), and June 2007, three months after the improvements were made (red arrow). The average time spent per unique monthly visitor increased from 8.5 minutes in June 2006 to 11.9 minutes in June 2007—a sizeable jump. The increase is due primarily to the upturn in the average time spent per visit from 7.1 minutes to 8.5 minutes. The average number of visits also increased, but the percentage change was much less.
Your Actions.
Improvements in the Web site have noticeably “moved the needle” on average time spent per unique visitor. Still, additional action may be required to increase average visits per monthly unique visitor, such as:
 Analyze Sewell’s Internet advertising program and search engine initiatives with Google.
 Assess the links to automobile manufacturer corporate Web sites.
 Broaden print and electronic media advertising.
Average Time Spent per Unique Monthly Visitor (minutes)
Average Visits per Unique Monthly Visitor
Average Time Spent per Visit (minutes)
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11. Seeks Product Information
ONLINE CONSUMER BEHAVIOR AND MARKETING PRACTICE IN MARKETSPACE
WHO IS THE ONLINE CONSUMER?
LO2
Seeks Product Information
Likely to be:
Women
Young
Diverse
Educated
Affluent
Those with $75,000 Incomes Account for About 50% of Purchases
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12. MARKETING MATTERS Meet Today’s Internet Mom—All 38 Million!
LO2
MARKETING MATTERS
Meet Today’s Internet Mom—All 38 Million!
Do you have fond childhood memories of surfing the Internet with your mother? By 2013, 38 million mothers will be online regularly. They are 38 years old, married, college educated, and work outside the home.
A study conducted by C&R Research on behalf of Disney Online has identified four segments of mothers based on their Internet usage:
 Yes Mom (14%). Consists of moms who work outside the home, go online 8 hours per week, and value the convenience of obtaining information about products and services.
 Mrs. Net Skeptic Mom (31%). Consists of stay-at-home moms who are family-oriented and go online 6 hours per week for parenting, children’s education, food, and cooking information.
 Tech Nester Mom (32%). Consists of moms who believe the Internet brings their family closer together. They average 10 hours per week online and prefer online to in-store shopping.
 Passive under Pressure Mom (23%). Consists of moms who are Internet newbies and go infrequently online.
For most moms, the Internet has simplified their lives. It has been an invaluable information source for travel, financial services, cars, and family-related topics. Online moms ranked weather, food and cooking, entertainment, news, health, and parenting as the most popular Web sites to visit.
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13. FIGURE 18-3 Estimated percentage of online retail sales by product/service category: 2007 and 2012
B. What Online Consumers Buy
[Figure 18-3] Six general offering categories dominate online consumer buying:
 Items for which product information is an important part of the purchase decision but prepurchase trial is not necessary (computers, electronics, and books).
 Items for which audio or video demonstration is important (CDs and DVDs).
 Items that can be delivered digitally (computer software and travel reservations).
 Unique items (collectibles, specialty goods, and gifts).
 Regularly purchased items for which convenience is important (groceries).
 Highly standardized products and services for which information about price is important (insurance, casual apparel, and toys).
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14. FIGURE 18-4 Why consumers shop and buy online
C. Why Consumers Shop and Buy Online [LO3]
[Figure 18-4] Consumers refer to six reasons why they shop and buy online:
[ICA 18-1: Buying a Car: Marketplace vs. Marketspace (Part 1)]
1. Convenience.
a. Online shopping and buying is convenient.
 Consumers can visit a given retailer to browse and order products.
 Don’t have to deal with traffic, long aisles, and store checkout lines.
b. Online consumers can use bots, electronic shopping agents or robots that comb Web sites to compare prices and product or service features.
c. For convenience to remain source of customer value creation:
 Web sites must be easy to locate and navigate.
 Image downloads must be fast.
2. Choice. Choice has two dimensions:
a. Product or service selection offered to consumers.
b. Choice assistance through interactive Internet-enabled technologies:
 Invites customers to engage in an electronic dialogue with marketers to…
 Make informed choices.
3. Customization. Some customers prefer unique items that fit their specific needs:
a. Customization.
 Arises from Internet-enabled capabilities that…
 Make possible an interactive and individualized information and exchange environment for shoppers and buyers.
b. Customerization is the growing practice of:
 Customizing a product or service.
 Personalizing the marketing and overall shopping and buying interaction for each customer.
 Customerization combines choiceboard and personalization systems, which:
– Expands the exchange environment beyond a transaction.
– Makes shopping and buying an enjoyable, personal experience.
4. Communication.
a. The communication capabilities of Internet technologies takes three forms:
 Marketer-to-consumer notification.
 Consumer-to-marketer buying and service requests.
 Consumer-to-consumer chat rooms, instant messaging, plus social networking Web sites (Twitter, MySpace, and Facebook).
b. The interactive communication capabilities of Internet-enabled technologies:
 Increase convenience.
 Reduce information search costs.
 Permit choice assistance and customization.
c. Communication promotes the development of company-hosted and independent Web communities—Web sites that:
 Allow people to congregate online.
 Exchange views on topics of common interest.
d. A recent development is the creation of Web logs or blogs.
 A blog is a Web page that serves as a publicly accessible personal journal or commentary by an individual or for an organization.
 Blogs are popular because they provide online forums on a wide variety of subjects.
 Some firms routinely monitor blogs to gather customer insights.
e. Spam is communications that take the form of electronic junk mail or unsolicited .
 Online services now institute policies and procedures to prevent the spamming of their subscribers.
 The Controlling the Assault of Non-Solicited Pornography and Marketing Act (2004) or CAN-SPAM restricts information collection and unsolicited promotions on the Internet.
f. Internet-enabled communication also makes possible buzz:
 Is a popular term for word-of-mouth behavior in marketspace.
 Is influential for a variety of products (toys, movies, apparel, etc.).
g. Viral marketing:
 Is an Internet-enabled promotional strategy that…
 Encourages individuals to forward marketer-initiated messages to others…
 Via , social networking Web sites, and blogs.
h. There are three approaches to viral marketing:
 Embed a message in the product or service so that customers hardly realize they are passing it along.
 Make the Web site’s content compelling that viewers share it with others.
 Offer incentives (discounts, free merchandise, etc.) for referrals.
5. Cost.
a. The consumer cost of many popular items bought online is the same price or cheaper than in retail stores.
b. Dynamic pricing is the practice of changing prices for products and services in real time in response to supply and demand conditions.
 Is the result from Internet-enabled software.
 Is a form of flexible pricing that often results in lower prices.
 Is typically used for pricing time-sensitive, scarce, and out-of-date items.
c. Reduces a consumer’s cost of external information search, which includes the time spent and the hassle of shopping.
6. Control.
a. Consumers want control over their online shopping behaviors as they:
 Seek information.
 Evaluate alternatives.
 Make purchase decisions on their own time, terms, and conditions.
b. A segment of Internet users refrain from making purchases for privacy and security reasons due to a concern about a seventh “C,” cookies.
 Cookies:
– Are computer files that a marketer can…
– Download onto an online shopper’s computer or mobile phone who…
– Visit the marketer’s Web site.
 Cookies allow the marketer’s Web site to:
– Record a user’s visit.
– Track visits to other Web sites.
– Store and retrieve this information in the future.
 Cookies contain product preferences, personal, and financial data information that visitors provide.
 Cookies make possible customized and personalized content.
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15. CROSS-CHANNEL SHOPPERS AND MULTICHANNEL MARKETING
WHO IS THE CROSS-CHANNEL SHOPPER?
LO4
Cross-Channel Shopper
Compares Products Among Retailers
Obtains Information Not in Stores
III. CROSS-CHANNEL SHOPPERS AND MULTICHANNEL MARKETING [LO4]
Consumer marketspace browsing and buying in the traditional marketplace has led to:
 The rise of the cross-channel shopper.
 The importance of multichannel marketing.
A. Who is the Cross-Channel Shopper?
 A cross-channel shopper is an online consumer who researches products online and then purchases them at a retail store.
a. 51% of U.S. online consumers are cross-channel shoppers.
b. Cross-channel shoppers:
 Represent both genders equally.
 Are only slightly younger than online consumers.
 Are more educated.
 Earn significantly more money.
 Embrace technology than online consumers who don’t cross-channel shop.
 Want the right product at the best price.
 Don’t want to wait several days for delivery.
 Cross-channel shoppers research items online before buying in stores include the:
a. Desire to compare products among different retailers.
b. Need for more information than is available in stores.
c. Ease of comparing options without having to go to multiple retail locations.
Reduces Trips to Multiple Retail Locations
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16. CROSS-CHANNEL SHOPPERS AND MULTICHANNEL MARKETING
IMPLEMENTING MULTICHANNEL MARKETING
LO4
Multichannel Marketing
Transactional Web Sites
Cannibalization
B. Implementing Multichannel Marketing
 Multichannel marketing.
a. Blends different communication and delivery channels that…
b. Are mutually reinforcing in attracting, retaining, and building relationships with consumers who…
c. Shop and buy in the marketplace and online—cross-channel shoppers.
 The most common cross-channel shopping and buying path is to:
a. First, browse one or more Web sites.
b. Then, purchase an item at a retail store.
 Web sites play a dual role in multichannel marketing because they can serve as either a communication or delivery channel.
 Two general applications of Web sites exist based on their intended purpose: (1) transactional Web sites and (2) promotional Web sites.
1. Multichannel Marketing with Transactional Web sites.
a. Transactional Web sites are electronic storefronts that:
 Convert an online browser into an online, catalog, or in-store buyer.
 Use the six Web site design elements.
b. Transactional Web sites are most common among store and catalog retailers and direct selling companies.
c. Retailers and direct selling firms have found that their Web sites:
 Cannibalize sales volume from stores, catalogs, and sales representatives.
 Attract new customers and influence sales.
d. Transactional Web sites are used less frequently by manufacturers of consumer products due to the:
 Threat of channel conflict (see Chapter 13).
 Potential harm to trade relationships with their retailing intermediaries.
e. Some manufacturers use transactional Web sites in cooperation with retailers.
Channel Conflict
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17. CROSS-CHANNEL SHOPPERS AND MULTICHANNEL MARKETING
IMPLEMENTING MULTICHANNEL MARKETING
LO4
Promotional Web Sites
Interactive Experiences
Interest and Trial
2. Multichannel Marketing with Promotional Web sites.
a. Promotional Web sites:
 Advertise and promote a company’s products and services.
 Provide information on how and where items can be used or purchased.
 Engage the visitor in an interactive experience involving games, contests, coupons, and prizes.
 [Figure 18-5] Are effective in generating interest in and trial of a company’s offerings.
 Support a firm’s traditional marketing channel.
 Build customer relationships.
b. Multichannel marketers:
 Recently accounted for 70% of U.S. online retail sales in 2007.
 Are expected to register about 90% of U.S. online retail sales in 2012.
Separate Web Sites for Brands
Traditional Marketing Channel Support
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18. Interactive Marketing
Interactive marketing is the two-way buyer-seller electronic communication in a computer-mediated environment in which the buyer controls the kind and amount of information received from the seller.
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19. Choiceboard
A choiceboard is an interactive, Internet-enabled system that allows individual customers to design their own products and services by answering a few questions and choosing from a menu of product or service attributes (or components), prices, and delivery options.
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20. Collaborative Filtering
Collaborative filtering is a process that automatically groups people with similar buying intentions, preferences, and behaviors and predicts future purchases.
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21. Personalization
Personalization is the consumer-initiated practice of generating content on a marketer’s Web site that is custom tailored to an individual’s specific needs and preferences.
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22. Permission Marketing
Permission marketing is the solicitation of a consumer’s consent (called “opt-in”) to receive and advertising based on personal data supplied by the consumer.
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23. Bots
Bots are electronic shopping agents or robots that comb Web sites to compare prices and product or service features.
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24. Web Communities
Web communities are Web sites that allow people to congregate online and exchange views on topics of common interest.
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25. Blog
A blog is a Web page that serves as a publicly accessible personal journal for an individual or organization.
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26. Spam
Spam consists of communications that take the form of electronic junk mail or unsolicited .
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27. Viral Marketing
Viral marketing is an Internet-enabled promotional strategy that encourages individuals to forward marketer-initiated messages to others via , social networking Web sites, and blogs.
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28. Dynamic Pricing
Dynamic pricing is the practice of changing prices for products and services in real time in response to supply and demand conditions.
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29. Cookies
Cookies are computer files that a marketer can download onto the computer or mobile phone of an online shopper who visits the marketer’s Web site.
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30. Cross-Channel Shopper
A cross-channel shopper is an online consumer who researches offerings online and then purchases them at retail stores.
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