October 17, 2016

1. e-Marketing (eBiz/MKTG 543) Introduction and Course Overview ArvindRangaswamy Web address: www.arvind.info email: arvindr@psu.edu October 17, 2016

2. My Background in Digital Marketing (e-Marketing)

6. My Research Publications in This Area Rangaswamy, Arvind and G. Richard Shell (1997) “Using Computers to Realize Joint Gains in Negotiations: Toward An ‘Electronic Bargaining Table,’” Management Science, Vol. 43, No. 8 (August), p. 1147-1163 Winer, Russell S., John Deighton, Sunil Gupta, Eric J. Johnson, Barbara Mellers, Vicki G. Morwitz, Thomas O’Guinn, ArvindRangaswamy, and Alan G. Sawyer (1997), “Choice in New Media Environments,” Marketing Letters, Vol. 8., No.3, (July), p. 287-296 Degeratu, Alexandru, ArvindRangaswamy, and Jianan Wu (2000), “Consumer Choice Behavior in Online and Traditional Supermarkets: The Effects of Brand Name, Price, and Other Search Attributes,” International Journal of Research in Marketing, Vol. 17, No. 1, p. 55-78. Finalist for the best-paper award competition of IJRM for 2001 (with honorable mention). Winner of Jan-Benedict E.M. Steenkamp Award for Long-Term Impact (2011). Wind, Jerry and ArvindRangaswamy (2001), “Customerization: The Next Revolution in Mass Customization,” Journal of Interactive Marketing, Vol. 15,. No. 1, p. 13-32.

7. Research Publications in This Area Srinivasan, Raji, Gary L. Lilien, and ArvindRangaswamy (2002), “The Role of Technological Opportunism in Radical Technology Adoption: An Application to e-Business,” Journal of Marketing, Vol. 66, No. 3 (July), p. 47-60. Shankar, Venkatesh, Amy Smith, and ArvindRangaswamy (2003), “The Relationship Between Customer Satisfaction and Loyalty in Online and Offline Environments,” International Journal of Research in Marketing, Vol. 20, No. 2 (June), p. 153-175. Finalist for best-paper award of IJRM for 2003 (with honorable mention). Winner of Jan-Benedict E.M. Steenkamp Award for Long-Term Impact (2014). JiananWu and ArvindRangaswamy (2003), “A Fuzzy Set Model of Consideration Set Formation Calibrated on Data from an Online Supermarket,” Marketing Science, Vol. 22, No. 3, p. 411-434. Rangaswamy, Arvind and Gerrit Van Bruggen (2005), “Special Issue: Multichannel Marketing,” (Editors), Journal of Interactive Marketing, Vol. 19, No. 2 (Spring).

8. Research Publications in This Area Steckel, Joel, Russ Winer, Randolph E. Bucklin, Benedict Dellaert, Xavier Drèze, Gerald Häubl, Sandy Jap, John D.C. Little, Tom Meyvis, Alan Montogmery, and ArvindRangaswamy (2005), “Choice in Interactive Environments,” Marketing Letters, Vol.16, No. 3-4 (December), p. 310-320. Rangaswamy, Arvind, C. Lee Giles and SilvijaSeres (2009), “A Strategic Perspective on Search Engines: Thought Candies for Practitioners and Researchers.” Journal of Interactive Marketing, Vol. 23, No. 1 (February), p. 49-60.(10th Anniversary Special Issue). Hennig-Thurau, Thorsten, Edward C. Malthouse, Christian Friege, Sonja Gensler, Lara Lobschat, ArvindRangaswamy, and Bernd Skiera (2010), “The Impact of New Media on Customer Relationships,” Journal of Service Research, Vol. 13, No. 3 (August), p. 311-330. Finalist for the “Best Article” in Journal of Service Research in 2010.

9. Research Publications in This Area Sorescu, Alina, Ruud T. Frambach, Jagdip Singh, Arvind Rangaswamy, and Cheryl Bridges (2011), “Innovations in Retail Business Models,” Journal of Retailing, Vol. 87S, No. 1, p. S3-S16. Clement, Michel, ArvindRangaswamy, and SrikantVadali (2012), “Consumer Responses to Legal Music Download Services that Compete with Illegal Alternatives,” Service Science, Vol. 4, No. 1, p. 4-23 (Lead article). Ebbes, Peter, ZanHuang, and Arvind Rangaswamy (2016), “Sampling Designs for Recovering Local and Global Characteristics of Social Networks,” International Journal of Research in Marketing, Vol. 33, No. 3 (September), p. 578–599. Kalyanam, Kirthi, Peter Lenk, and Arvind Rangaswamy (2016), “Understanding the Structure and Evolution of Perceived Service Quality from Online User Ratings and Sentiments” (Working paper).

10. Outline for Today’sSession • Course overview • The emerging space of real-time, global, digital, networked organizations • Role of e-Marketing in a connected world

11. Course OverviewCourse web site at Canvas(Look under Syllabus tab)

12. Course Objectives • Provide an understanding of the business rationale for e-Marketing, and the potential value of e-Marketing to consumers, to companies, to the marketing function, and to society at large. • Expose students to the essential vocabulary they need to meaningfully discuss current developments in e-Marketing. • Offer useful frameworks for dissecting and understanding the elements of value creation, value delivery, and value appropriation via e-Marketing. And, to use these frameworks to leverage the online medium to strengthen customer relationships and exploit market opportunities. • Help students to critically evaluate an e-Marketing problem and develop strategic and operational plans appropriate for that problem. • Identify and articulate the key management issues that arise in implementing e-Marketing strategies.

13. Course Materials Required Materials Case packet with cases (available at bookstore). Any other materials will be handed in class, or posted as a link at Canvas course site. Canvas Course Web site All other materials required for the course are available under the Calendar tab at Canvas – keyed to each session.

14. Cases in the Course

15. Grading • Class participation (30%) • Group case presentations and write-ups (35%) • e-Marketing audit/new initiative (35%)

16. Class Preparation/Participation • Meet with group to prepare for class. • Quality of participation is far more important than quantity of participation. • Everyone is here to learn from each other.

17. 3-Stage Learning Process

18. Grading Criteria Illustrative criteria for evaluating content • Actionable and specific recommendations (versus generalrecommendations) • Conceptual framework guiding recommendations (i.e., rationale for recommendations) • Overall strategy • Basic financials • Operational/implementation considerations • Use of course concepts • Coverage of discussion questions • Internal consistency • Insightful -- brought out key lessons learned

19. Grading Criteria (Contd) Illustrative criteria for evaluating presentations • Focused? • Captured audience attention? • Quality of report/charts/presentation materials

20.      -- -  + ++ Grading ++ Outstanding – the work speaks for itself and reflects non-obvious and generalizable insights + Clearly beats my expectations/norms for the course  Meets my expectations for the course  - Below my expectations, but can improve  -- Should be taking another course

21. Introduction to Course Topics

22. Growth of the Internet Communications (~1980) Commerce (~1991) Community (~2003) Contraptions (~2009) Internet of everything (now)

23. The Evolution of OnlineFunctionality at Leading Companies Functionality Real time business Web-centric enterprise Process management Transactions Dynamic content Static content 1992 1997 2003 2007 2011 2000

24. Customer-driven Activities and flows Emerging Global Real-Time Enterprises Focused on Customers Real-time Enterprise e-Operations e-Marketing Supplier network Company’s digital infrastructure Customer/Market network Extranet Intranet Internet Emerging real-time organizations, powered by customer-centered information and process management architectures, for anticipating and responding to changing customer and market needs as fast, or faster than, those changes. 24

25. Digital, Mobile Networked Mobile Networked Networked Digital and Networked Mobile Analog Standalone Fixed location Digital, Mobile Museum Digital Digital-Networked-Mobile Convergence • Businesses becoming more real-time, global, social, and mobile

27. Growing Interest in Digital Marketing Each series is indexed to 100 for its maximum value during this period, and indicates the interest in the topic based`on Google searches conducted on those terms. The absolute number of searches for “Digital marketing” is much smaller than the absolute number of searches for “Marketing.” From www.google.com/trends (accessed October 7, 2016)

28. Changing Conceptions of Marketing • Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. -- American Marketing Association (July 2013) want us to be.” -- Senior executive of travel company

29. Changing Conceptions of Marketing • Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. -- American Marketing Association (July 2013) • Marketing is an adaptive, technology-enabled process by which firms collaborate with customers and partners to jointly create, deliver, and sustain value for all stakeholders. • Emerging view • “Marketing is a way of thinking and doing that enables us to be whatever today’s customers want us to be.” -- Senior executive of travel company

30. Find value • Sense market trends • Understand customers • Identify opportunities • Redefine markets Sustain value Refine value • Monitor customer experience • Personalize relationships • Develop complete offerings • Institute loyalty programs • Segment customers • Choose desirable segments • Craft value propositions • Validate/adapt value propositions Customer Relationship Repository Architect value Augment value • Build platforms • Generate externalities • Expand ecosystem • Enhance customer experience • Create offerings • Customize offerings • Simplify channels • Design customer experience Adapt Communicate value Realize value • Expand touchpoints • Price to maximize yield • Bundle/unbundle offerings • Adapt pricing/revenue strategy • Manage brand • Deliver consistent message • Optimize communications mix • Integrate communications The Marketing Process in a Connected Digital World Source: Adapted from Mohan Sawhney

31. Some Opportunities and Challengesfor Marketers Today • Real-time marketing • “Customerization” that increases value for all stake-holders • Market expansion (scaling) due to disappearing boundaries • Supply-demand integration (end-to-end visibility) • Loss of control (e.g., user-generated content) • Potential loss of brand power • Fragmentation of consumer decision processes (e.g., separation of choice from purchase) • “Tax” paid to Internet choke points (e.g., Google)

32. Real-Time Marketing

33. Real-Time Bidding for Ads(Realizing Value from Each Impression) Ad Exchange www.cnn.com Real-time understanding of visitor/context Show Ad of highest bidder for that visitor Ad inventory Exchange selects appropriate ad to show each visitor to partner web sites – billions of ads per day with a response latency of less than 100 milliseconds.

34. What Wal-Mart did on 9/11/2001 • Within a few hours of the 9/11 attacks, sales of flags and other patriotic items started skyrocketing. • On Sept 11, the 2,700 Wal-Mart stores sold over 100,000 flags (compared to 6,400 the previous year on that day), and over 200,000 on Sept 12th. • Detecting these increases, Wal-Mart locked up all the supplies it could find before its competitors (like Kmart) could react. • Real-time tracking and analysis helped “adapt” to a demand surge.

36. Real-Time Marketing is Really Tricky

37. Real Time Advertising thatWorked

38. Why Did This Tweet Backfire?

39. Customerization

40. Leverage Interactivity to Drive Customerization Personalization/ 1-to-1 Marketing Customerization Marketing customization  LoHi Mass Customization Standardization LoHi Operational customization 

41. Market Expansion

43. Ideas and Information • Floral ideas • Garden ideas • Home ideas • Gift ideas • Gourmet ideas • Store locator • Recommendations by budget • Best sellers Gift Recommendations Post-Sales Support • Gift guru • Favorite gifts • Gift frequency • Gift impossible • Gift baskets • Corporate gift services • Order receipt email • eQ&A online customer service • FAQ • Customer service inquiry form Perks • Miles earned with flower purchases • Free gifts • Discounts at AOL & BN with flower purchases • Member specials Augmenting the Offering(1-800-Flowers) • Gift reminder service • Holiday specials • Everyday celebrations suggestions • Special occasion suggestions • “Care and handling” • “Do it yourself” • Special events and educational workshops held at stores Flower / Gift Decision Process • Need Recognition Offering • Education on Flowers and Decoration • Search For Ideas and Offerings • Post Sales Support and Perks • Evaluation of Alternatives • Product price • Product picture • Product description • Delivery information • Delivery availability • Message Selection • Purchase Decision • Shopping basket • e-commerce transaction • Special shopping features • Delivery outside U.S. • 1-800-lasfloras.com • Gizmo fully-animated greeting cards • Physical cards in gifts Source: Adapted from Rayport and Jaworski

44. The Long Tail Phenomenon Twitter data from 2013. Source:https://www.oreilly.com/ideas/tweets-loud-and-quiet Hits: Few but very expensive Predicting hits gets harder but more important Danger zone? Tail: Many and (typically) cheap Need multiple tools to manage

45. Another Example of the Long Tail Source: www.openslatedata.com

46. The Tail Wagging the Dog? Free Marketing? -- Need for real-time monitoring -- Shifting money from media to content production/distribution -- But, low control Social Media Blogs YouTube CNN iReport …….

47. Declining Half-Life of Content

48. Challenges Associated with Social Media

49. Growing Roles of Search and Social Media in Marketing in the US *: Includes both Desktop and Mobile Aug 2016 data from http://www.comscore.com/Insights/Rankings

50. A Facebook Metric University # of Fans University # of Likes U.Penn8,655 Harvard19,728 Penn State 92,171 U. of Michigan95,630 U.Penn176,563 Harvard4,765,042 Penn State 383,793 U. of Michigan754,758 Michigan State 457,054 Ohio State 694,010 UT Austin 666,238 UCLA 424,230 Temple 76,742 (February 26, 2010) (October 6, 2016) In June 2010, Facebook replaced the “Become a Fan” with a “Like” button.