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Instructor’s Manual: Chapter 6 Teaching Objectives:  Identify the key features of the Internet audience.  Discuss the basic concepts of consumer behavior and purchasing decisions.  Explain how consumers behave online.  Describe the basic marketing concepts needed to understand Internet marketing.  Identify and describe the main technologies that support online marketing.  Identify and describe basic e-commerce marketing and branding strategies. Key Terms consumer behavior, p. 347 culture, p. 348 subculture, p. 349 direct reference groups, p. 349 indirect reference groups, p. 349 opinion leaders (viral influencers), p. 3495 lifestyle group, p. 349 psychological profile, p. 350 psychographic research, p. 351 clickstream behavior, p. 354 marketing, p. 359 Internet marketing, p. 359 feature set, p. 360 commodity, p. 360 core product, p. 360 actual product, p. 360 augmented product, p. 360 brand, p. 361 branding, p. 361 closed loop marketing, p. 362 brand strategy, p. 363 brand equity, p. 363 customer acquisition costs, p. 365 customer retention costs, p. 365 Law of One Price, p. 366 price dispersion, p. 366 library effect, p. 367 transaction log, p. 370 registration forms, p. 370 shopping cart database, p. 370 database, p. 377 database management system (DBMS), p. 377 SQL (Structured Query Language), p. 377 relational databases, p. 377 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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data warehouse, p. 378 data mining, p. 379 customer profile, p. 379 query-driven data mining, p. 379 model-driven data mining, p. 380 rule-based data mining, p. 380 collaborative filtering, p. 380 customer relationship management (CRM) system, p. 383 advertising networks, p. 388 permission marketing, p. 389 affiliate marketing, p. 390 viral marketing, p. 391 social shopping, p. 393 brand leveraging, p. 393 one-to-one marketing, p. 396 customization, p. 398 customer co-production, p. 398 transactive content, p. 399 frequently asked questions (FAQs), p. 400 real-time customer service chat systems, p. 400 automated response system, p. 400 pricing, p. 401 demand curve, p. 401 price discrimination, p. 402 versioning, p. 403 bundling, p. 404 channel, p. 406 channel conflict, p. 406 Brief Outline Netflix Develops and Defends Its Brand 6.1 Consumers Online: The Internet Audience and Consumer Behavior The Internet Audience Internet Traffic Patterns: The Online Consumer Profile Consumer Behavior Models Profiles of Online Consumers The Online Purchasing Decision A Model of Online Consumer Behavior Shoppers: Browsers and Buyers What Consumers Shop for and Buy Online Intentional Acts: How Shoppers Find Vendors Online Why More People Don’t Shop Online Trust, Utility and Opportunism in Online Markets 6.2 Basic Marketing Concepts

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Feature Sets Products, Brands, and the Branding Process Segmenting, Targeting, and Positioning Are Brands Rational? Do Brands Last Forever? Can Brands Survive the Internet? Brands and Price Dispersion on the Internet 6.3 Internet Marketing Technologies The Revolution in Internet Marketing Technologies Web Transaction Logs Supplementing the Logs: Cookies and Web Bugs Databases, Data Warehouses, and Data Mining: Developing Profiles Insight on Society: Marketing With Web Bugs Insight on Technology: The Long Tail: Big Hits and Big Misses Customer Relationship Management (CRM) Systems 6.4 B2C and B2B E-commerce Marketing and Branding Strategies Market Entry Strategies Establishing the Customer Relationship Insight on Business: Social Networking Marketing: New Influencers Among the Chattering Masses Customer Retention: Strengthening the Customer Relationship Net Pricing Strategies Channel Strategies: Managing Channel Conflict 6.5 Case Study: Liquidation.com: B2B Marketing Success Story 6.6 Review Key Concepts Questions Projects Web Site Resources Figures Figure 6.1 A General Model of Consumer Behavior, p. 348 Figure 6.2 Factors That Predict Online Buying Behavior, p. 351 Figure 6.3 The Consumer Decision Process and Supporting Communications, p. 352 Figure 6.4 A Model of Online Consumer Behavior, p. 353 Figure 6.5 Online Shoppers and Buyers. p. 355 Figure 6.6 What Consumers Buy Online, p. 358 Figure 6.7 Feature Set, p. 361 Figure 6.8 Marketing Activities: From Products to Brands, p. 362 Figure 6.9 Nash-equilibrium.com, p. 367 Figure 6.10 One Second from the Web Transaction Log of Azimuth-Interactive.com, p. 371

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Figure 6.11 Firefox Cookies Dialog Box, p. 373 Figure 6.12 A Relational Database View of E-commerce Customers, p. 378 Figure 6.13 Data Mining and Personalization, p. 379 Figure 6.14 A Customer Relationship Management System, p. 384 Figure 6.15 Generic Market Entry Strategies, p. 385 Figure 6.16 How an Advertising Network Such As Doubleclick Works, p. 389 Figure 6.17 The Mass Market-Personalization Continuum, p. 397 Figure 6.18 A Demand Curve, p. 402 Figure 6.19 The Demand for Bundles of 1-20 Goods, p. 405 Tables Table 6.1 A Growing Range of Online Activities: An Average Day in the Life of an Internet User, p. 342-343 Table 6.2 Changing Demographic Differences in Internet Access, p. 344 Table 6.3 The Impact of Broadband on Internet Activities, p. 346 Table 6.4 Why Consumers Choose the Online Channel, p. 350 Table 6.5 Media That Influence Consumers to Start Search for Merchandise Online, p. 356 Table 6.6 Internet Users’ Major Concerns About Purchasing Online, p. 359 Table 6.7 Major Types of Online Market Segmentation and Targeting, p. 364 Table 6.8 Impact of Unique Features of E-commerce Technology on Marketing, p. 369 Table 6.9 Marketing Uses of Data from Web Transaction Logs, p. 372 Teaching Suggestions Chapters 6 and 7 introduce the student to online consumer behavior, marketing and communications. Chapter 6 focuses on online consumer behavior and basic marketing. The challenge in both of these chapters is one of level and depth. Some students will have no background in marketing concepts, while others will have had some marketing courses or even be marketing majors. You may want to poll your students first to identify how much marketing and consumer behavior knowledge they already possess, and then build your lecture accordingly. The fundamental principles of marketing remain intact on the Web. Building online brands is a major source of financial and strategic strength for online firms; it is a major avenue for avoiding pure price competition and financial ruin. Nevertheless, the Web provides consumers with a whole new environment for interacting with firms since online behavior is different from offline behavior. Moreover, the tools and technologies for online marketing are very different from those for offline marketing. A good way to illustrate both the continuity and the novelty of Web marketing is to discuss the opening case in Chapter 6. Netflix demonstrates that it is possible for a pureplay, Web-based new business to develop a powerful brand name in a few years and take on the giants in its field. Review this case with students and consider what made this possible. Netflix obviously created a business model with details that existing firms had ignored. But then how was Netflix able to communicate to the consumer the benefits of

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this new business model? What alliances did it enter into and why? What was its business value proposition to the consumer? What other firms have used the same value proposition? Key Points Online Consumer Behavior. Most students are unaware of the basic behavioral realities with respect to online consumers. A basic ingredient of the old dictum, “know thy customer”-- who is on the Web, what they do when there, what they buy and look at-- is a very important prerequisite for successful marketing campaigns. Table 6.1 deserves a walk-through with students to establish what people do online; Table 6.2 provides insight into the changing nature of the Internet audience. Figures 6.1 and 6.4 provide summary models of the complex process of consumer purchasing. Some key points to make in this section are:  Online shopping includes both purchasers and browsers.  Online shopping strongly influences offline purchases.  Online shopping is largely intentional. Basic Marketing Concepts. This section reviews some basic concepts in marketing and applies them to the online world. The key concepts are brands, segmenting, targeting, and positioning. Brands allow firms to differentiate themselves in the marketplace, charge premium prices for their products, and thus achieve superior long-term returns on invested capital. Figures 6.7 and 6.8 provide a quick overview of what a brand actually is. It is important to note here that during e-commerce’s early years, many predicted the end of brands in a more or less “perfect” digital marketplace (the Web). In fact, brands have been the key ingredient for survival on the Web and have helped firms avoid the pitfalls of relentless price competition. As the students learn in later chapters, online firms have spent fortunes attempting to build national brands. Not only can brands survive the Internet, brands thrive on the Internet. Internet Marketing Technologies. The Internet and the Web provide marketers with a whole new set of exciting tools for brand building. This section covers Web logs, cookies, bugs, data warehouses, data mining, and customer relationship management systems. You will want to spend some time on each of these new techniques, noting that many of them come with a social cost, namely, the loss of privacy. A good place to end the discussion of new marketing techniques is the Insight on Society case, Marketing with Web Bugs, which describes the privacy implications of Web bugs. You could ask students what kinds of controls might allow marketers to use Web bugs but also protect individual privacy. The Insight on Technology case, The Long Tail: Big Hits and Big Misses, contains a description of a data mining technique called “collaborative filtering,” as it is coupled with the use of recommender systems. This provides a good introduction to rule-based models of data mining and the issue of who shall determine the rules.

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B2C and B2B Marketing and Branding Strategies. This section considers some strategic marketing issues like how to enter the market, establish the customer relationship, retain customers, price the product and manage the channels. Figure 6.15 gives an overview of choices facing firms entering the online market. The most important finding, contrary to what many commentators initially predicted, is that first movers into online markets have done poorly. Historically, first-movers always have performed poorly. Many of today’s ecommerce success stories illustrate the viability of other strategies, particularly brand extension and alliances. New ways of reaching the customer-- advertising networks, and permission, affiliate, viral, blog and social network marketing-- extend on the theme of this chapter that the Web provides new ways for marketing. The Insight on Business case, Social Network Marketing: New Influencers Among the Chattering Masses provides a more in-depth look at some of these new social marketing techniques, and also some of the risks they pose. This theme is emphasized again in the discussion of new ways to retain the customer; the most important are customization and personalization, which are uniquely possible on the Web. Figure 6.18 describes the changes in the demand curve for a product that is developed in digital markets where the marginal cost of the next unit of product is zero. You will want to spend several minutes on this phenomenon and then have the students consider how their own behavior is affected by bundling for digital products. For instance, how will they react to the offers of digital music sites to download a bundle of songs for $10 a month? The concluding case on Liquidation.com provides an excellent overview and opportunities for in-depth discussion on the variety of marketing techniques online firms can use to build their businesses. Case Study Questions 1. Why is Liquidation.com able to compete against eBay? Liquidation.com targets small and medium sized businesses, and it is able to provide a marketplace for large lot size liquidation. For example, Liquidation.com holds auctions for lot sizes ranging from 10 to 1000 units. eBay is primarily oriented toward smaller numbers of units and private individuals in lot sizes of 1. 2. How did Liquidation.com build trust in its site and services? Liquidation.com added customer service buttons and trusted Web site logos to many of its Web pages. It tried to associate with sites that were already trusted on the Web. 3. Why would retailers rather have a site dedicated to finding wholesalers rather than use the existing Liquidation.com site?

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Liquidation.com is aimed at wholesalers who are looking to find retail buyers. GoWholesale.com, another Liquidity Services company, targets retailers seeking longterm wholesale suppliers. Retailers might prefer this Web site because vendors who post items for sale may do so more systematically and consistently than they do on Liquidation.com. Liquidation.com is intended primarily for sales of discontinued, outdated, or slightly blemished goods. 4. What are the key elements in Liquidation.com’s core product, and how does it create an augmented product? The core product is a marketplace where sellers can quickly liquidate large quantities of goods and buyers can obtain large-lot low prices; the augmented product is a large variety of services. Click the Buyer Help or Seller Help links on the home page, and you will discover a large number of buyer and seller services. Perhaps the most important is "due diligence" services to weed out fraud and misrepresentation. 5. Find a product on the Liquidation.com site that is also for sale on eBay. Compare the prices per unit. What accounts for the price differential? On October 16, 2008, a seller on Liquidation.com auctioned ten new xBox 360 Platinum Systems with 20GB hard drives .The closing unit price was $107.50 and the total price, $1075.01. On eBay, several sellers offered similar xBox 360 systems at Buy It Now prices of around $300. The price differential is accounted for by lot size. A seller with a large number of units on hand is much more motivated to sell by lowering the price than a single private individual with a single unit. At times it is difficult, but not impossible, to find exact comparison products when comparing the sites, but encourage the students to try or come close in any event. End of Chapter Questions 1. Is growth of the Internet, in terms of users, expected to continue indefinitely? What will cause it to slow, if anything? The growth of the Internet is slowing, and the market penetration rates that television and the telephone (98% and 94%, respectively) have attained are not expected to be reached due to the cost and complexity of computer use required for Internet use. The growth rate will most likely continue to decrease until computer prices drop significantly, and computers become more user-friendly. 2. Other than search engines, what are some of the most popular uses of the Internet? Some of the most popular uses of the Internet are e-mail, which is the most popular; getting news; looking for hobby and other interest-related information; surfing the Web for fun, conducting work related research; and checking the weather. Users also often use the Web to research a product or service before buying it, do research for school or

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training, get sports scores and information, banking online, look for maps and directions, watch videos, and use instant messaging, among many other activities. 3. Would you say that the Internet fosters or impedes social activity? Explain your position. The Internet probably both fosters and impedes social activity at the same time. It fosters it because e-mail, instant messaging and social networks help people to easily stay in touch with friends and relatives. Online forums encourage people to ask questions and interact with people with similar interests, or who are going through the same stages in life. The Internet may impede social activity because it causes people to spend less quality time with family and friends since they spend more time in front of the computer. A Stanford University study has indicated that Internet users lose touch with those around them; they spend far less time talking with friends and family face-to-face and on the phone. 4. Why would the amount of experience someone has using the Internet likely increase future Internet usage? The more time an individual spends on the Internet, the more likely they will increase their future Internet usage. This is because the more time users spend online becoming comfortable and familiar with Internet features and services, the more likely they are to explore new services and offerings. Furthermore, the more time individuals devote to the Internet, the more likely they are to use the Internet instead of traditional media such as TV, newspapers, and radio. 5. Research has shown that many consumers use the Internet to investigate purchases before actually buying, which is often done in a physical storefront. What implication does this have for online merchants? What can they do to entice more online buying, rather than pure research? The fact that many consumers use the Internet to research products before actually making purchases has many implications for online merchants because it suggests that ecommerce is a major conduit and generator of offline commerce. This could mean that ecommerce and traditional commerce should integrate to alleviate the concern. It is very important for online merchants to build the information content on their sites to attract browsers, put less attention on selling, per se, and offer products in offline settings where users feel more comfortable and secure. 6. Name four improvements Web merchants could make to encourage more browsers to become buyers. Improvements that Web merchants could make to encourage more browsers to become buyers are:

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Target the goal-oriented, intentional shoppers with communications directed at them. Design Web sites to provide easy-to-access and simple to use product information. Make it easier to comparison shop. Make it easier to return merchandise. Create policies for better credit card and personal information security. Make it easier to locate items on the Web site. Create customer service facilities where users can get the answers to their questions and product advice. Increase delivery speeds. Present products more clearly. Create loyalty reward programs. Make the buying process quicker to complete.

7. Name the five stages in the buyer decision process, and briefly describe the online and offline marketing activities used to influence each. The five stages in the buyer decision process and the online and offline marketing activities used to influence them are:  Awareness of Need: Mass media advertising on TV, radio, in print media, targeted banner ads, interstitials, and targeted event promotions online, are used to promote the recognition of need in buyers.  Search for Information: People use catalogs, print ads, mass media, store visits, and product raters (e.g. Consumer Reports offline), search engines, online catalogs, visits to Web sites, and targeted e-mails from merchants online to search for products.  Evaluation of Alternatives: Off line consumers use reference groups, opinion leaders, the mass media, store visits, and product raters; online, they use search engines, online catalogs, visits to Web sites, product reviews, and user evaluations to evaluate the alternatives.  Actual Purchase Decision: Promotions, direct mailings, mass media and various print media affect the actual purchase decision offline; online promotions, lotteries, discounts, and targeted e-mail push the actual purchase decision online.  Post-Purchase Contact with Firm: Post purchase loyalty is inculcated by firms offline using warranties, service calls, parts and repair services, and through consumer groups. Online, post purchase loyalty is encouraged through the use of communities of consumption, newsletters, e-mails to customers, and online product updates. 8. Why are “little monopolies” desirable from a marketer’s point of view? “Little monopolies” are desirable from a marketer’s point of view because if consumers believe that a product is unique and highly differentiated from its competitors, a firm can

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position itself as the one trusted firm who can supply this product or fulfill this need. Consumers will believe that no substitute will suffice, and new entrants will have a difficult time matching the product or service’s feature set. Successful little monopolies reduce the bargaining power of consumers since they are the sole sources of supply, and they also give these firms a power advantage over their suppliers. 9. Describe a perfect market from the supplier’s and customer’s perspectives. The perfect market from the supplier’s perspective is one in which there are no substitutes. It should be difficult for new competitors to enter; customers and suppliers should have little power to influence pricing; and there should be little competition in the industry. The perfect market from the customer’s perspective is one in which there is lots of competition resulting in pure price competition and available substitutes. The market should be one in which new entrants can easily enter, and where customers and suppliers have strong bargaining power. Frictionless commerce where prices are driven down to their marginal costs, intermediaries are driven out of the market, and consumers deal directly with producers, would be ideal for consumers from a strictly price-oriented perspective. 10. Explain why an imperfect market is more advantageous for businesses. An imperfect market in which there is widespread price dispersion that can be exploited by marketers is more advantageous to businesses. 11. What are the components of the core product, actual product, and augmented product in a feature set? In a product feature set, the components of the core product are the core benefits a customer receives from buying the basic product. The actual product consists of the set of characteristics designed to deliver the product’s core benefits. For example, the components of the actual product may consist of a brand name that signals a strong product, reducing consumer risk and anxiety about a product and the features and capabilities that the product will deliver. The augmented product consists of the additional benefits the consumer receives. These include: warranties, support and repair personnel, installation and delivery guarantees, credit terms, and any additional post-sales support that a company offers. 12. List some of the major advantages of having a strong brand. How does a strong brand positively influence consumer purchasing? The major advantage of having a strong brand is that consumers are willing to pay a premium price to reduce market uncertainty. Strong brands also lower customer acquisition costs, increase customer retention rates, and can create a long-lasting, unassailable, unfair competitive advantage. Brand names constitute an unfair competitive advantage because they cannot be purchased or duplicated by competitors. A strong brand positively influences consumer purchasing by introducing market efficiencies. In a

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crowded marketplace, brands carry information to the consumer so that purchases can be made quickly and easily based on past consumption, and a set of expectations that the consumer knows beforehand will be met. Search costs and decision-making costs are reduced or eliminated, reducing the probability of nasty surprises in the marketplace. 13. How are product positioning and branding related? How are they different? Product positioning and branding are related because a product is positioned within a market segment based on the brand. Marketers attempt to present a unique, high value product that is especially suited to the specific needs of the segment customers. These tactics are different because positioning refers to creating a desired image for a company and its products within a chosen user segment, whereas branding refers strictly to the set of expectations that the company wants the general population to have. 14. List the differences among databases, data warehouses, and data mining. A database stores records and attributes organized into tables. Databases are maintained for e-commerce Web transactions, shopping carts, point-of-sale-terminals, warehouse inventory levels, field sales reports, and many other types of records. A data warehouse gathers all of the database information from customer and transaction databases and stores it in one logical repository where it can be analyzed and modeled by managers without disrupting or taxing the systems of a firm’s primary transactional systems and databases. Using the data warehouse, managers can query multiple databases to determine the answers to many marketing and financial questions enhancing their strategic decision making capabilities. Data mining is a different set of analytical techniques that look for patterns in database information or seek to model the behavior of visitors and customers. Web site data can be mined to develop customer profiles that identify patterns in group or individual behavior on the site. Data mining can be either query driven, model driven, or rule-based. Querydriven data mining is the simplest type; both databases and data warehouses can be queried. Marketers can answer specific questions such as, “What products sell better at different hours of the day?” and adjust Web site content accordingly. In model-driven data mining, a model analyzes the key variables in a strategic decision so that informed decisions can be made. In rule-based data mining, demographic and transactional data is examined, and general rules of behavior are derived for specific well-defined market segments. 15. Name some of the drawbacks to the four data mining techniques used in Internet marketing. The drawbacks to rule-based data mining are that there may be million of rules, many of them nonsensical, and many others of only short duration. Therefore, these rules need extensive culling and validation. All of the four data mining techniques face difficulties in that there can be millions of affinity groups and other patterns in the data that are

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temporal or meaningless. With all data mining techniques, it becomes tricky to isolate the valid, and therefore profitable, data and then act on it quickly enough to make sales. 16. Why have advertising networks become controversial? What, if anything, can be done to overcome any resistance to this technique? Advertising networks have become controversial because their ability to track individual consumers across the Internet is alarming to privacy advocates. Proposed legislation that would curtail the use of Web bugs and other tracking devices without consumer notification could help to overcome resistance to this technique. Giving consumers the option to opt-in or opt-out and making Web bugs visible as an icon on the screen could ease consumers concerns. Finally, privacy advocates believe that if a user clicks the icon, a disclosure statement should indicate any or all of the following: what data is being collected, how the data will be used, what other companies will receive the data, what other data it will be combined with, and if a cookie is associated with the Web bug. Consumers should be able to opt-out of any data collection done by the Web bug, and it should never be used to collect sensitive data such as medical, financial, job-related, or sexual matters. 17. Which of the four market entry strategies is most lucrative? The market entry strategy that has proven to be the most lucrative is the brand extender. This mixed clicks-and-bricks strategy integrates online marketing closely with offline physical stores. It uses the Web as an extension to already existing order processing and fulfillment, and marketing and branding campaigns. These firms have been the most successful because they already possess the financial depth, marketing and sales resources, loyal customers, strong brands, and production and/or fulfillment facilities needed to meet customer demands. 18. Compare and contrast the four marketing strategies used in mass marketing, direct marketing, micromarketing, and one-to-one marketing. Mass marketing, which is appropriate for products that are relatively simple and attractive to all consumers, uses national media messages aimed at a single national audience with a single national price. Direct marketing on the other hand, is directed at particular market segments that are deemed to be “likely purchasers” and uses direct mail or phone messages. Direct marketers generally do not offer wide price variations, but will offer special deals to loyal customers. It is most often used for products that can be stratified into several different categories. Micromarketing is the first form of true database marketing. It is aimed at geographical units such as neighborhoods or cities, or specialized market segments. Prices are dynamically adjusted to reflect market conditions and competitor pricing, and this can even be done on a daily basis.

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Personalized one-to-one marketing is suitable for products (1) that can be produced in very complex forms, depending on individual tastes, (2) whose price can be adjusted to the level of personalization, and (3) where the individual’s tastes and preferences can be effectively gauged. The marketing message is changed based upon the merging of internal behavioral, transaction, and demographic data. 19. What pricing strategy turned out to be deadly for many e-commerce ventures during the early days of e-commerce? Why? The pricing strategy that turned out to be deadly for many e-commerce firms in the early days of e-commerce was a low price leader strategy, which even resulted in “free” pricing. The idea was to attract enough eyeballs with free goods and services to amass a large, committed audience. It was supposed to achieve profitability through advertising and charging a small number of willing customers subscription fees for value-added services. Unfortunately, many early e-commerce businesses were unable to convert eyeballs into paying customers, and the strategy of piggybacking on a small number of users who would be willing to pay for premium services was not a great success. 20. Is price discrimination different from versioning? If so, how? Price discrimination is different from versioning because price discrimination is strictly the selling of products to different people or groups based upon their willingness to pay. Versioning involves creating multiple versions of a good or service and offering them at different prices. In versioning, reduced value versions that have less functionality can be offered for free or at reduced prices, while premium versions are sold at much higher prices. In this situation, consumers are aware that they are “getting what they pay for.” With price discrimination, it is the exact same product that is offered to different groups at different prices, concealing from each group the amount the other groups are paying. 21. What are some of the reasons that freebies, such as free Internet service and giveaways, don’t work to generate sales on a Web site? Freebies such as free Internet service and giveaways often did not cause the stimulus to sales that firms believed they would. This is because many so-called “freeloaders” never had the intention of paying for the product or additional products. They would simply switch to another free service if the one they were using began to charge fees or stop usage altogether if alternatives no longer existed. 22. Explain how versioning works. How is this different from dynamic pricing? Versioning works by having a set of slightly different products that can be sold successfully to different market segments. Low-priced or free versions can be less convenient, less comprehensive, slower, less powerful, and offer less support than higher priced models. Versioning differs from dynamic pricing because each version is sold at a

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fixed, predetermined price, and there are slight differences in functionality between versions. In dynamic pricing, auctions can be used to establish an instant market price based upon the price the market will bear. Yield management systems can be used to set prices for different markets and appeal to different segments in order to sell excess capacity. Auctions work for pricing unusual as well as commonplace goods; the differing price an article will bring in the marketplace is not based upon the version of the good or service, but rather upon the market dynamics at that particular moment in time. Yield management systems are generally profitable for perishable goods or where there are seasonal variations in demand or rapidly changing market conditions. Again, the product itself is no more or less functional than its higher or lower yielding counterparts despite the varying prices preset by managers. 23. Why do companies that bundle products and services have an advantage over those that don’t or can’t offer this option? Although consumers are apt to have very diverse ideas about the value of a single product, there is much more agreement on the value of a bundle of products. This often results in a price per product people are willing to pay for a bundle that is higher than the price they would be willing to pay for each product sold separately. Bundling reduces the variance in the market demand for goods, meaning that more people are willing to pay the same price for the bundle of goods. Bundler firms can pay higher prices to their suppliers for content, and they can charge higher prices to their customers for their bundles than can single good firms. Projects 1. Go to the SRI site (www.sric-bi.com/VALS/presurvey.shtml). Take the survey to determine what lifestyle category you fit into. Write a brief, two-page paper describing how your lifestyle and values impact your use of the Web for e-commerce. How is your online consumer behavior affected by your lifestyle? Student answers will vary depending on the VALS segment profile into which they fall. For example, an “actualizer/achiever,” according to the profile, is supposed to be interested in possessions and recreation that reflect a cultivated taste for the finer things in life. They prefer established, prestige products and services that demonstrate success to their peers. Such a consumer might use the Web to buy tickets to concerts, opera, and the ballet. They might frequent eBay or other auction sites in search of fine art or antiques. Actualizers and achievers might also be interested in product advertisements from such sites as Tiffany or Bloomingdale’s. An “experiencer” on the other hand, is supposed to be inclined towards exercise, sports, outdoor recreation, and social activities. This group of individuals is supposedly comprised of avid consumers who spend much of their income on clothing, fast food, music, movies, and videos. Students who fall into this segment profile might express an online purchasing penchant for such sites as REI.com, CDNow, Amazon, Music.com, and Moviefone.com.

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2. Find an example of a Web site that you feel does a good job of appealing to both goaldirected and experiential consumers. Explain your choice. To approach this project, it might be helpful for students to read the Wolfinbarger and Gilly article cited on page 358 of the text: “Shopping Online for Freedom, Control and Fun,” California Management Review (Winter 2001). Goal-oriented consumers are focused browsers looking for specific companies, products, and services. Features that appeal to goal-oriented consumers include: accessibility, convenience, selection, and information availability. According to Wolfinbarger and Gilley, goal-oriented consumers want a complete selection and want to serve themselves so long as information is easily accessible. They are not interested in “high-touch” customer service unless they encounter a problem, in which case, they want speedy answers responsive to their particular problem. Features that increase a sense of control and freedom such as order tracking, purchase histories, opt-in email notifications, etc. all appeal to the goal-oriented consumer. Experiential consumers are those who engage in “shopping for fun.” A different set of features, which offer surprise and amusement, appeal to experiential consumers who are looking for fun. These features might include: online community tools (bulletin boards, “ask the experts”), auctions, online sales events, and interactive content. Amazon is a good example of a site that appeals to both goal-directed and experiential consumers. An alternative approach to this project would be to supply the students with a site which you feel does a good job of appealing to both goal-directed and experiential consumers (such as Amazon), and ask students to list and explain the features of the site that do so. 3. Choose a digital content product available on the Web and describe its feature set. Students can choose from a myriad of different digital content providers to complete this project. For example, they could choose ClipArt.com, a graphic content publishing business that offers online subscriptions for clip art, Web graphics, photos, and fonts. In this case, the core product consists of a downloadable collection of clipart, photographs, Web art, fonts, and sounds. The actual product as purchased includes:  The brand name, which carries with it Jupiterimages’ position as a leading online image vendor and the brand name recognition of its parent company, Jupitermedia Corporation, which is a leading global provider of original images, information and research for creative, information technology and business professionals.  The quality of the product, including quick and easy access at one portal to over millions of images, animations, photos, fonts, and sounds  The product features, including the ability to use the content without paying a perimage cost, royalties, or extra payments (as long as you abide by the Usage Guidelines)  Site design, including simple keyword searching; links for specific types of art, such as clipart, photos, Web graphics, fonts, etc; availability of site in different languages such as Spanish, French, German and Italian.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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The packaging of the site, which would also include the above site, design features.

The augmented product includes:  BBBOnLine Reliability participation and Better Business Bureau membership; VeriSign Secured SSL certificate for Web site  Notification on the day your subscription expires (and reminders before then if you are on the "Newsletter and Updates" mailing list and no automatic subscription renewals without your expressed consent)  Simple downloading for product delivery  Online payment options including Visa, MasterCard, Discover, American Express, PayPal, Fax, and by check through the mail. 4. Visit Eluxury.com and create an Internet marketing plan for it that includes each of the following:  One-to-one marketing  Affiliate marketing  Viral marketing  Blog marketing  Social network marketing Describe how each plays a role, and create a presentation outlining your marketing plan. To complete this project, all students need is the information in the chapter, a visit to the Web site, and a marketer’s instincts. Creativity should be rewarded. The students might suggest a campaign that includes the following with specific products on the eLuxury site noted: 

One-to-one marketing: The information from the market research study must be recorded in one or more customer databases. Database mining can then be used to compile individual profiles. These should be analyzed to identify new market opportunities to specific customers, both current and new. Combine this data with the historical purchasing data of eLuxury’s customers and create a recommendation tool for the Web site. Aggregate the purchasing psychological profile data to send buyers a personalized email message suggesting new products they might be interested in buying. As a general rule, a company can expect that 80% of revenue will be contributed by 20% of their customers. Sustaining existing customers is also much less costly than developing new ones. Needs, specific “hot-button” messages, and offers can be tailored both in e-mail messages and can be displayed on the Web site to different groups or individuals.

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Affiliate marketing: Set up an affiliate program with other like sites. Students might look for luxury hotel or vacation sites to partner with. They could try luxury car dealerships such as Mercedes Benz, Ferrari, or Porsche. They might also set up affiliates with clothing designers that are not direct competitors. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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Viral marketing: Off the Internet, viral marketing has been referred to as “wordof-mouth,” “creating a buzz,” “leveraging the media,” or “network marketing.” Send e-mails to all eLuxury customers with an offer for a free small product of some sort: perhaps a bottle of cologne (men’s cologne to male customers) and a $10 off coupon on subsequent referrals for each new customer they refer to the site that makes a purchase. The new customer will also be offered a $10 off coupon code that can be easily transferred to the new customer via e-mail. New customers can then be offered additional incentives when they make their first purchase to entice them to complete the VALS survey.

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Blog marketing: Set up a store-sponsored blog with commentary on the latest products and fashions; send product announcements/samples to leading fashion blog commentators in order to encourage them to favorably mention products and Eluxury in their blogs.

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Social network marketing: Create videos featuring products to post on YouTube and other video-sharing sites, encourage social shopping via Yub.com by providing discounts or other incentives; set up product pages for specific products on MySpace and similar sites.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall