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Principles of Marketing Unit 10: Digital, Social and Global Marketing; Ethics

Today's marketing happens on screens, across borders and under public scrutiny. This unit covers digital and social marketing and its key metrics, how firms enter and adapt to foreign markets, and the ethical and legal standards marketers must meet.

Covers: Digital marketing and owned, paid and earned media, Social media, influencer and mobile marketing, Digital metrics: CTR, conversion, CAC and ROAS, Global market entry modes, Standardization versus adaptation, The global trade environment, Marketing ethics, social responsibility and sustainability

Study guide

Digital marketing uses websites, search, email, social media, mobile apps and online video to engage consumers directly and measurably. Marketers sort media into three types. Owned media are channels the firm controls, such as its website, app and email list. Paid media are channels the firm pays to use, such as search ads, display ads and sponsored posts. Earned media are coverage and sharing the firm does not pay for, such as news stories, reviews and shares. Search engine marketing includes paid search ads and search engine optimization (SEO), which improves a site's ranking in unpaid results. Email marketing remains one of the highest-return tools when it is permission-based and relevant, rather than spam.

Social media marketing works best when brands join conversations instead of simply broadcasting ads. Firms use brand communities, user-generated content, and influencer marketing, in which people with large or highly engaged followings promote products. U.S. Federal Trade Commission rules require influencers to clearly disclose paid relationships. Viral marketing creates content so engaging that people pass it along on their own, but virality is hard to plan. Mobile marketing reaches consumers through phones using apps, texts, location-based offers and mobile payments. Because nearly everything online is trackable, digital marketing allows real-time testing and fast adjustment, but it also raises serious privacy concerns about how personal data is collected and used.

Digital campaigns are judged with a few core metrics. Click-through rate (CTR) is clicks divided by impressions. Conversion rate is conversions, such as purchases or sign-ups, divided by clicks or visitors. Cost per click (CPC) is ad spend divided by clicks. Customer acquisition cost (CAC) is total marketing spend divided by new customers gained. Return on ad spend (ROAS) is revenue attributed to ads divided by ad spend, so a ROAS of 4 means $4 of revenue per $1 spent. ROAS measures revenue, not profit, so a campaign with a high ROAS can still lose money if margins are thin. Comparing CAC with customer lifetime value shows whether acquisition spending pays off over time.

Firms going global choose among entry modes that rise in commitment, risk, control and profit potential. Exporting sells goods made at home, often through intermediaries, and is the lowest-risk option. Joint venturing partners with foreign firms through licensing (selling the right to use a process, trademark or patent for a fee or royalty), contract manufacturing, management contracting or joint ownership. Direct investment builds foreign-based assembly or manufacturing facilities, offering the most control and highest risk. Firms must decide how much to standardize or adapt. Product options include straight extension (no change), product adaptation and product invention, while promotion can use the same message or adapt it to local cultures and languages.

The global trade environment includes tariffs (taxes on imports), quotas (limits on import amounts), embargoes (bans on trade), exchange controls and nontariff barriers such as biased product standards. The World Trade Organization and regional economic communities such as the European Union and the USMCA reduce barriers. At home and abroad, marketing faces social criticism over high prices, deceptive practices, high-pressure selling, planned obsolescence and harm to the environment. Sustainable marketing meets present needs while preserving future generations' ability to meet theirs. Ethical firms avoid greenwashing (exaggerated environmental claims), protect consumer privacy, respect laws such as the CAN-SPAM Act and COPPA, and follow principles like consumer-oriented, value and societal marketing.

Key ideas

• Owned media are controlled by the firm, paid media are bought, and earned media are gained through others' coverage and sharing.
• Influencers must clearly disclose paid relationships under FTC rules.
• CTR, conversion rate, CAC and ROAS are the core digital performance metrics.
• A high ROAS does not guarantee profit, because ROAS is based on revenue, not margin.
• Global entry modes rise in commitment and control from exporting to joint venturing to direct investment.
• Firms choose between standardization and adaptation for both products and promotion.
• Sustainable and ethical marketing balance customer wants, company profits and society's long-run interests.

Formulas and rules

Common mistakes

• Calling a sponsored post earned media; if the firm paid for it, it is paid media.
• Dividing conversions by impressions instead of clicks when the question asks for conversion rate per click.
• Treating ROAS as profit; it measures revenue per ad dollar.
• Confusing licensing (selling rights for a royalty) with direct investment (owning foreign facilities).
• Mixing up quotas (limits on quantity) with tariffs (taxes on imports).

Before the test, make sure you can

• Classify channels as owned, paid or earned media.
• Explain influencer disclosure, viral marketing and privacy concerns in digital marketing.
• Calculate CTR, conversion rate, CPC, CAC and ROAS and interpret them.
• Rank global entry modes by commitment, risk and control.
• Identify straight extension, product adaptation and product invention.
• Distinguish tariffs, quotas, embargoes and exchange controls, and compute a tariff's price effect.
• Identify unethical practices such as greenwashing and deceptive pricing, and explain sustainable marketing.

Words to know

Digital marketing

Marketing through digital tools such as websites, search, social media, email, mobile apps and online video to engage consumers directly.

Owned media

Promotional channels owned and controlled by the company, such as its website, apps and email lists.

Paid media

Promotional channels paid for by the marketer, such as search ads, display ads and sponsored social posts.

Earned media

Public relations, press coverage, word of mouth and sharing that the brand does not pay for.

Search engine optimization (SEO)

Improving a website so it ranks higher in unpaid search engine results.

Influencer marketing

Enlisting people with established followings to spread the word about a brand, with paid ties clearly disclosed.

Viral marketing

The digital version of word of mouth: content so engaging that consumers seek it out or pass it along to others.

Click-through rate (CTR)

The percentage of ad impressions that result in a click.

Return on ad spend (ROAS)

Revenue attributed to advertising divided by the cost of that advertising.

Exporting

Entering foreign markets by selling goods produced in the company's home country, often with little modification.

Licensing

Entering a foreign market by selling a foreign company the right to use a manufacturing process, trademark or patent for a fee or royalty.

Joint ownership

A joint venture in which a company joins investors in a foreign market to create a local business that they share.

Direct investment

Entering a foreign market by developing foreign-based assembly or manufacturing facilities.

Straight product extension

Marketing a product in a foreign market without making significant changes to it.

Tariff

A tax levied by a government against certain imported products.

Quota

A limit on the amount of goods an importing country will accept in certain product categories.

Sustainable marketing

Socially and environmentally responsible marketing that meets present needs while preserving the ability of future generations to meet theirs.

Greenwashing

Making misleading or exaggerated claims about the environmental benefits of a product or company.

Sample practice questions

30 more questions like these, from level 1 to 5, are in the practice set.