Term Paper: Marketing Coined by Marketing Guru

Pages: 22 (6446 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Business - Advertising  ·  Buy This Paper

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[. . .] With this type of marketing, a Web site owner registers with an affiliate program and agrees to post another company's promotional links and banners. If a consumer clicks through these links and banners and completes a purchase, the web site owner received a commission for generating the sale, typically ten to fifteen percent of the sale. Affiliated marketing allows retailers to expand their online presence, grow their Web business, and capture the attention of specific target demographics.

Affiliate marketing offers an advantage over viral marketing because companies can track the number of sales to determine buying preferences and online behavior.

But, like viral marketing, affiliate marketing experiences a viral distribution effect. On average, users tell twelve other people about their online shopping experience, so the network of affiliates grows very fast. table below.

Wilson (1999) provides guidance for marriages between affiliates and merchants. First, the affiliate program should match the main focus of the merchant site as well as marketing values and philosophy. A merchant will be more attractive to affiliate visitors if they are related to the interests of the visitors. Affiliate programs work the best when links to the merchant are tightly woven into the content of the site. For example, links via product reviews and information are better than banners which should be limited to the site areas best targeted for the product or service. Merchant commissions should be enough to make the merchant/affiliate relationship worthwhile and merchants should schedule regular payments.

The merchant also needs to work closely with the affiliate to communicate ways they can improve sales and affiliates should share real-time reports with affiliates so that they will know how they are doing. Finally, the bottom line is what counts the most and revenue generation is always a more important metric than click-through rates.

One of the draw backs of affiliate marketing is that a merchant needs thousands of affiliates to make the strategy effective because twenty percent of affiliates account for eighty percent of all sales. However, it's difficult for the merchant to know which affiliates will account for those transactions. On average, a large online retailer has ten thousand affiliates.

Pay-for-performance facilitated by affiliate networks is becoming a widely desired method of online advertising because you get the same exposure as ads, but you don't pay anything unless you make a sale ("The E. In your Business," 2000). and, the effectiveness of affiliate networks is greater than banner ads because they automatically link like-minded sites together. Increasingly, the reach of affiliate networks is increasing. In the United.States, one of the largest affiliate networks deals with 250 million people. Allied companies average eleven percent higher revenue and twenty percent higher growth rates than unallied companies. A survey of fifty large U.S. online retailers found that thirteen percent of their revenues come from affiliate programs, with this number forecasted to jump to twenty percent this year.

Banner Ads

Web banner advertisement is generally a rectangular graphic, a GIF or JPEG image, placed on purchased space on a Web page. "Its goal is to attract the user long enough to compel a click through which is usually an invitation to visit another web site. Banners were one of the most popular forms of online advertising, accounting for more seventy percent of all online ads as indicated in statistics provided by Enbysk (2001). but, in 2000, this percentage dropped to forty-seven percent. Despite this decline in the use of banner ads, global spending on banners, buttons and links was still $1.6 billion in 2000.

Waxer (2000) argues that banner ads provide questionable value in online advertising. According to her work, banner ads never enjoyed a high click-through rate to begin with and the problem is getting worse. Banner click-through rates have dropped from only 1.35% in May 1997 to.39% in March 2000. Waxer believes this is because it's too difficult to lure Web surfers already suffering from information overload into boring rectangular boxes and recommends getting more attention by using interactive features such as drop-down menus, check boxes or video streams.

However, other research states that Internet visitors log onto the Internet with a specific purpose in mind and are simply not interested in banner ads which many users find irritating ("The E. In your Business," 2000). If interested in lead generation or sales, they believe that online advertisers are better off putting their time and resources into more appealing forms of advertising such as affiliate networks that obtain ten times the click through rates of banner ads.

Some feel that banners are necessary to help build brand even if they don't generate leads or immediate sales via direct click through. A study by Forrester Research ("DotCom Marketing - Banners Build Brand," Iconocast) showed that offline sales of an impulse food product rose nineteen percent among households exposed to a banner campaign in comparison with a control group that did not see banner ads even the click-through rate had only been.27%. Banner ad frequency was a factor in determining success. Those who saw the ad seven to ten times over a sixteen week period made twenty-eight percent more purchases than the control group. The conclusion of the study was that online banner ads work much like its offline counterpart; consumers get the message, but buy when it's convenient for them to do so.

Nevertheless, companies should try to maximize their return on investment with this type of unproven advertisement according to Waxer (2000). Online advertisers might consider banner exchange programs that where companies swap real estate space on their respective web sites. but, this offers a significant downside to companies that don't want to use their web site as a billboard for another company's business. A better option proposed by Waxer, especially if a company is interested in leads and immediate sales, is to negotiate the cost of a banner ad campaign based on the click-through rate instead of the traditional impression fees that change based on the number of times a banner ad is displayed. If paying based on impressions, online advertisers should be aware that they have a lot of bargaining power because the average price of banner ads is falling and the number of web sites that are seeking advertising is increasing. Cost per thousand (CPM) was only $30.52 by the end of 2000, with most site category pricing ranging from $20 to $45 ("DotCom Marketing - Banners Build Brand," Iconocast).

In addition to negotiating for the best price, it's important to optimize the effectiveness of the banner ad because the average Internet user views more than 830 marketing impressions every day. Reed (1998) provides many suggestions for the design and placement of banner ads. Surprisingly, the best click-through rates are for banners that are positioned among the content within the first screen of viewing, not the very top of the page. Banner ads placed one-third own the page can generate as much as a seventy-seven percent high click-through rate than ads placed at the top. and, ads placed in the lower right-hand corner of the first screen generate more than two hundred percent high click-though rates than ads at the top. Click-through rates are better for Web pages that only have one banner, but banners with different shapes or sizes will reduce this issue. The frugal use of color improves click-through rates, as does type that reverses out so it will contract with the web page its placed on. Rich media ads increase awareness, recall, purchase intent and perceptions. Studies have show lead generation success to be.05% with a rich media ad compared with.03% for a standard GIF banner. With regards to animation, there's a fine balance between getting noticed and being intrusive.

Reed's article also suggests the importance of messages that target specific audiences. Ads that use the company logo get near-zero click through. it's better to use tag lines that clearly identify the value proposition of a product. Ads need to have a strong concept, excellent art direction, creative copy writing, animation for the sake of reinforcing the concept, small sizes for quick load times (10K or less) and be brief and to the point.

Finally, banner ads that are rotated based on a time interval may have better click-through rates at sixty to seventy-five-second intervals than at fifteen to thirty second rotation intervals

Search Engines

Search engines at portals sites are an absolute must in online marketing (Waxer 2000). The top spot among Internet portals is Yahoo! Inc. which draws more than 48 million visitors each month and boasts more than 5,000 advertisers. Yahoo! accounts for close to 56% of all search engine referral, the amount of Web traffic worldwide directed to other sites. AltaVista, its closest alternative, lags far behind at 16%. In addition to Yahoo and Altavista, other sites with leading search engines include Excite, Hot Bot, InfoSeek, Lycos, Web Crawler, AOL and Google. Most of these search… [END OF PREVIEW]

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