Digital Marketing (MKTG 635) Exam 1
Customer Centricity:
"... Is a strategy that aligns a company's development and delivery of its products and services with the current and future needs of a select set of customers in order to maximize their long-term financial value to the firm." -Peter Fader
"The shift to a CDJ-driven strategy has three parts:"...
"Understanding your consumers' decision journey; Determining which touch points are priorities and how to leverage them; and Allocating resources accordingly."
Understand the drivers of customer acquisition and retention:
- Acquisition: all customers are important, but some are more important than others (Think Whale Curve). Firms acquire customers by: Increase Market Size (expand their product space or enter new markets), Increase Marketing Investment (create awareness, generate trial, or convert non-buyers into regular customers through discounts and incentives), Increase Effectiveness Of Acquisition Programs (id more responsive, higher-value customers), and Generate Positive Word Of Mouth (customers trust friends more than advertising). - Retention: directly linked to expects customer lifetime value, expected lifetime = 1/(1-r). Some firms report customer churn rate (= 1-r) instead (5% reduction in churn could increase CLV by 35% to 95%). Measuring Net Promoter Scores (NPS).
Four Key Players of Display Ads: (with def.)
- Advertiser/Marketer: buys digital space for ads to reach customers. - Content Publishers: sells space to advertisers on their websites; range from large publishers like NYTimes.com personal blogs. - Ad Networks: an aggregator that collects ad inventory from publishers and sells it to advertisers (resellers). "Guaranteed Bulk Purchase". Uses a singular platform to sell. It specifically represents publishers and can more personally ensure that inventory goes to the highest bidder. - Ad Exchange: is a virtual marketplace where participating suppliers (such as publishers, ad networks, and other exchanges) sell their impressions to eligible buyers. 70% of ads come from here. Is often done through real-time auctions. Everyone has a fair shot at bidding on and winning any ad inventory made available, because it announces each impression and asks buyers if they are interested in buying said impression and at which price.
Several Trillion display ads were served to US users in 2020, more than doubling in the last 5 years.
- Avg CPM ranges from about $2.40-$2.80.. Typical internet user sees about 1700 display (banner) ads a month that costs advertisers about $60/yr.
Typical Digital Targeting Strategies: (With def.)
- Contextual Targeting: ad is matched to content it is displayed beside. - Demographics: publisher uses data that a customer has volunteered or provided elsewhere. - Geographic Targeting: user entered, inferred from IP, shared by mobile. - Behavioral Targeting: uses user prior clickstream data to find good matches for ad. Retargeting: ads shown to a user who searched for (or saw) a particular kind of content.
CLV = Contribution Margin (m) x [Retention Rate (r) / 1 - (r) + Discount Rate (i)] what does each mean in context to the formula?
- Contribution Margin(m) refers to the annual gross margin per customer (arises from profits on products or services purchased). - With a high Retention Rate(r), the customer is expected to stay longer with the firm and thus have a higher CLV. - Discount Rate(i) converts future cash flows into today's money from the firm. For example, if you put $100 into a bank account today that has 10% interest, then in 12 months' time you would have $110 in the bank. In this case, $110 next year is equivalent to $100 today.
CLV Caveats (CLV Calculations Ignore):
- Customer Heterogeneity: new customers are treated same as loyal customers. - Customer Referral Value (CRV): the most valuable customers based on CLV might not be the ones responsible for the most referrals. - Social Influence: a customers' risk of cancellation increased by 80% if one of their friends canceled the service recently. - Value Of Free Customers: e.g. you can post your resume for free on LinkedIn but recruiters pay a service fee to obtain resumes from these firms.
The computed CLV can be used for?
- Identifying what your individual customer is worth. Decide how much to spend to acquire a new customer. - Better predicting a certain customer's future behavior. Guide marketing spending decisions to retain an existing customer. - Deciding when to scale up or down marketing expenditure for a customer. Ensure to use marketing resources more efficiently.
"Programmatic" def. and its Evolution:
- Is a broad term referring to to automated technology infrastructure to deliver digital, mostly display, advertising. - Accounts for 67% of all display spending.
Creating mutually profitable exchanges: (2 points)
-It's not difficult to increase sales or grow market share; by dropping prices or by offering promotions. -Developing the right customers matters. Consider moving resources away from non profitable customers and allocating them to potentially profitable customers instead.
"Up to 90% of spend goes to advertising and retail promotions. Yet the single most powerful impetus to buy is often someone else's advocacy."
.
The Internet Advertising Bureau sets standards for display ads of all types. (thats it)
.
Programmatic Real-Time Bidding Processes in Ad Exchanges Use...?
... Customer information relevant to demographics and browsing behavior to benefit both advertisers and publishers. Competitions for impressions for broad targeted ads are higher but the bids could be lower for narrow/precise targets.
More than 60% of consumers of facial skin care products do online research about them after purchase -- ...? (From first reading)
... a touch point entirely missing from the funnel model.
Avg. Click-Through-Rates (CTR) are very low...? How low are they?
0.1% at the low-end to 0.46% at the high-end. (Google Display Network)
Whale Curve:
20% of customers provide more than 100% of the firm's profits.
Churn Rate:
= 1 - r
Native Ads:
Are sponsored contents that blends into the main story or editorial content of an article and thus customer engagement to the ads. Essentially are ads that look like articles to get more clicks.
Two Sides of Customer Value:
Based on customer experience and profitability, a customer falls into one of the following four quadrants: Stars, Vulnerable's, Free Riders, and Lost Causes. Firms should determine how many customers belong to each quadrant and distinguish high-value customers from low-value ones, in order to maximize (long-run) profits. It is not necessary to delight all customers. CLV determines High-Value from Low-Value. High-Value Customers: Vulnerable and Star Low-Value Customers: Lost Causes and Free Riders
Decoupling CDJ:
Breaking the links between some of the stages of the CDJ and then "steering" one or a few strategies. 1.) Show-rooming/Web-rooming (aka reverse Show-rooming): --> separates out the act of choosing a product from the act of purchasing. 2.) Pop-Up Stores used by DTC Brands: --> separates out the act of buying a product from the act of receiving. Customers see and buy items in a small store but not able to take them home immediately. 3.) Sharing Economy: --> Disconnects the link between purchasing and consuming; a separation of the activities.
Which of the the following statements is FALSE? A.) A social media platform can be a publisher for display ads as it can sell space to advertisers. B.) Retargeting ads work best when the customer is actively searching in the period category. C.) To get a guaranteed bulk contract, advertisers generally use ad exchanges. D.) Using CPM to measure the effectiveness of display ads could not be accurate due to fraud.
C.) To get a guaranteed bulk contract, advertisers generally use ad exchanges. Ad networks guarantee a specific price, quantity, and time frame through a bulk ad purchases contract, while ad networks provide a platform that runs real-time auctions to match advertisers and publishers. Publishers include any platform in which provide places to put display ads. Firms use retargeting strategies. While CPM is a dominant measurement of display ads, it is vulnerable to fraudulent ad impressions and thus firms consider other measurements such as CPC (Cost-Per-Click), offline conversation, brand lift, etc.
Customer Profitability:
Capturing value from customers
Fraudulent Ad Impressions:
Clicks that come from AI's rather than real life customers thus causing the ad to not be seen by its intended use but still showing numbers that say it's being used. To resolve this firms use Native Ads.
"Earned Media"
Customer-Created channels, such as communities of brand enthusiasts.
An online subscription service has calculated the customer lifetime value (CLV) for 100,000 users. Which of the following is a managerial decision in which the CLV could be useful to the company? A.) Determining which users to target based upon estimated profitability. B.) Determining its limits to user acquisition costs. C.) Determining investments into customer retention programs. D.) All of the above.
D.) All of the above. The computed CLV represents what your individual customer is worth and thus can be used for deciding how much to spend to acquire a new customer, retain an existing customer, and deciding when to scale up or down marketing expenditure for a customer.
Which of the following claims would be TRUE regarding customer decision journey? A.) It assumes that customers need to build initial awareness to move toward the next stage of of the journey. B.) The journey ends when a customer purchases a product or service. C.) It does not take into account social interaction across customers. D.) None of the above.
D.) None of the above. The CDJ assumes that customers can expand their consideration set as they obtain new information across stages, while the traditional funnel approach assumes that customers need to build awareness of all possible options before they move onto the next steps. In addition, the CDJ highlights the importance of the loyalty loop which occurs after the customer purchases a product or service and results in possible social interactions.
Customer Experience:
Delivering value to customers
DSP
Demand Side Publishers
DTC Brands stands for?
Direct-To-Customer Brands. and they are the ones "decoupling" the CDJ
What is the end goal of the CDJ?
End Goal is to get customers to subscribe.
What tactics are used to keep customers in the Loyalty Loop? (Be able to apply relevant examples to your own experiences)
Firms use tactics such as: Proactive Personalization: --> Take info from previous transactions from a customer to customize shopping experiences. Tailor the next interaction at the moment a customer engages. Contextual Interactions: --> Use knowledge about where a customer is in a journey physically (Think entering a hotel) or virtually (Think reading product reviews); Serve up a relevant message triggered by the customer's current context. Journey Innovation: --> Ongoing experimentation and active analysis of customers needs; Spot opportunities to extend the relationship with the customer. Ex. from own experience: --> When I went shopping for my PC at Microcenter they make you sign-up for a free rewards/membership program where they have recorded my name, email, and birth date. They are able to use this information to use a form of Proactive Personalization by using my previous transactions from there and my personal info to come up with more personal offers/deals; and also to be able have a better experience the next time I go in by showing me any rewards I may have accumulated over time.
Display Ads:
Include basic and adjustable ad formats (banner/video), augmented/virtual reality (AR/VR), social media, mobile video, emoji messaging and 360-degree video ads. Although ads' click-through-rates (CTR; the probability that customers click the ads) are quite low, they remain popular due to the lower costs, as compared to other traditional and digital marketing tools. Display Ads are generally measured by CPM (Cost-Per-Million) or CPT (Cost-Per-Thousand), instead of of CTR. As such, they are prone to get affected by fraudulent ad impressions.
An Impression:
Is a single ad on a single page loaded by a single user at one time.
Customers used to go through (a part of) customer journey with the same company in a...? (con.)
Joint or coupled manner
Getting customers costs more than...? (con.)
Keeping loyal customers.
Bounce:
No interactions aer the first pageview of a session; interaction(s) would be another pageviewor any of the many actions that we can record as hits (e.g., scrolling, clicking tabs, watching em-bedded videos, visiting at least one additional page, etc.).
What part of the CDJ can affect a customer's repurchase (i.e. Loyalty Loop) as well as other customer's CDJ via word of mouth?
Post-Purchase Experience
Customer Equity:
Refers to a firm-level metric that summarizes the entire customer base, equivalent to the total CLV across all existing and future customers. View customers as assets that bring (long-term) value to the firm; and can be used as a good proxy for company value.
Customer Lifetime Value (CLV)
Refers to the present value of (net) future profits from a particular customer. Note that the CLV takes into account profits (i.e. contribution), instead of such metrics as market share or revenue that ignores the costs involved in serving a customer. This takes into account both the value firms get from the customers and the value they give to customers.Note the CLV is calculated at the individual customer level (Total CLV = CLV per customer x number of customers). The CLV can be calculated using a formula: CLV= (m) x [(r) / 1 - (r) + (i)]
The CDJ assumes What? And How is the CDJ different from traditional marketing funnels?
The CDJ assumes that customers can increase the number of brands added for consideration across stages, as they further research purchase options through many different sources such as search, reviews, etc. As such, the CDJ is different because traditional marketing funnels assumes customers are to keep narrowing down options from a wide range of brands they are aware of.
What is the Loyalty Loop?
The Loyalty Loop brings a significant value via customer retention and potential new customer acquisition. It also makes advocates for the brand through word of mouth.
Assume that your site has pages A through D, and only one session per day exists, with the following pageview order. Which page has the highest bounce rate? Which has the highest exit rate for the given five days, respectively? Monday: Page A > Page B > Page C > Page D > Exit Tuesday: Page A > Exit Wednesday: Page B > Page C > Page A > Exit Thursday: Page C > Exit Friday: Page D > Page C > Page B > Exit
The Page with the highest Bounce Rate is Page C; While the Page with the highest Exit Rate is Page A... Page C has 100% bounce rate (1 bounce out of 1 session in which Page C is the first pageview), while other pages have the bounce rates of 50% (Page A) and 0% (Page B and D). Speaking of exit rates, Page A has 67% as 2 sessions (Tuesday and Wednesday) exits from Page A, out of 3 total sessions withPage A (Monday, Tuesday, and Wednesday). Other pages have 33% (Page B), 25% (Page C), and 50% (Page D)exit rates.
"Owned Media"
The channels a brand controls, such as websites.
The Customer Decision Journey (CDJ) (Google definition)
The moments of truth (MOT): Zero, First, and Second MOT's. The Zero MOT refers to the period of online searching before customers show up in a store or make an online purchase (i.e. consider and evaluate stages in the CDJ). The First and Second MOTs occurs when a customer purchases and consumes a product or service, respectively.
User:
The same user can appear as both user types (new and returning) within the same time period, if a new session was followed by one or more returning sessions. Also keep in mind that because of cookie deletion, the new users will undoubtedly be over-reported relative to actual site usage.
Exit Rate:
The total number of exits from a page / the total number of the sessions with the page (it's the same meaning as "the total number of (unique) pageviews for the page"); since each session must have an exit page, an exit is not a bad thing if it occurs aer a successful session(e.g., registration, e-commerce transaction, etc.).
How can firms increase the total CLV (= # of customers x CLV)?
Through both acquiring and retaining customers.
Give an example of Decoupling in your own experience:
When I (or anyone) shops at Amazon I'm being decoupled from the CDJ as Amazon is using a form of Show-rooming, by separating the actions of finding/choosing an item from purchasing those said items.
Session:
a period of user activity not interrupted by more than 30 minutes; overall, since a single user can generate many sessions, session count will be higher than user count.
The Customer Decision Journey (CDJ) (In class definition)
illustrates customers' purchase decision making process with four phases: Consider, Evaluate, Buy, and Post-Purchase Experiences (enjoy, advocate, bond).
Firms can increase profitability by...? (Include your own personal example)
stimulating demand from their existing customer base (customer development). For example, they can increase share of wallet, engage in cross-selling and upselling, and redefine their business. For me I have seen this with Chipotle when they used to not charge people for guacamole; however, once they became big enough and knew they could retain their customers they decided to charge extra for guacamole.
Exit Page:
the last page that is accessed during a session; note that a bounce occurs only in a single-hit session, whereas an exit must occur in each session.
"Nonworking Spend"
the people and technology required to create and manage content for a profusion of channels and to monitor or participate in them.
Bounce Rate:
the total number of bounces / the total number of sessions; a high bounce rate could be a negative indicator of user engagement in your website.
Average Session Duration:
the total recorded session duration / the total number of sessions; although this metric could represent greater engagement, it may not be accurate because GA has no way to calculate the amount of time that a user was still engaged aer the last hit is sent.
Average Time On Page:
the total recorded time for a page / the total number of sessions; in which GA was able to calculate the time for that page; this metric is based only on the number of instances in which another pageview followed and Google Analytics therefore able to calculate time on page.