Chapter 3
Selling on the Web:
Revenue Models and Building a
Web Presence
Learning Objectives
In this chapter, you will learn about:
• revenue models for selling on the Web
• establishing an effective business presence on the
Web
• meeting the needs of Web site visitors
• creating trust and building loyalty in Web site visitors
• testing usability in Web site design
• communicating effectively with customers on the Web
The Web Catalog Model
• The Web Catalog model is a revenue model of selling
goods and services on the Web, that is based on the
mail order catalog revenue model.
• In the Web catalog model, a Web site replaces or
supplements print catalog distribution with
information on its Web site.
Selling Goods and Services
• When the catalog model is expanded to a Web site, it
is called a Web-catalog model.
• Dell and Gateway are examples of selling computers
on the Web.
• Customers can place orders through the Web site or
by telephone.
Businesses Employing the Web
Catalog Model
• Computer manufacturers, for example Dell and
Gateway
• Apparel Retailers
• Flowers and gifts
• General Discounters
Computer Manufacturers
• Many of the most successful Web catalog businesses
are firms that were in the mail order business and
have simply expanded their operations to the Web.
• Personal computer manufacturers, such as Dell and
Gateway, have had great success selling on the Web.
• Dell has been a leader, allowing customers to specify
the configuration of their computer.
Luxury Goods
• For many types of products, people are still unwilling
to buy through a Web site.
• For example, luxury goods and high fashion items.
• The Web sites of Vera Wang and Versace are not
designed to generate income but to provide
information to customers who would then visit the
physical store.
• Evian is another site geared towards affluent
customers.
Apparel Retailers
• A number of apparel sellers have adopted their
catalog sales model to the Web.
– Eddie Bauer
– Land’s End
– L. L. Bean
– Talbots
• Their intentions are to have customers examine the
clothing and place orders through the Web site.
Flowers and Gifts
• Gift retailers have also successfully moved or
expanded their revenue models to the Web.
• 1-800-Flowers has created an online extension to its
highly successful telephone order business.
• Harry and David has opened a international Web site
to promote its existing catalog business.
Channel Conflict and Cannibalization
• Companies that have existing sales outlets and
distribution networks often worry that their Web sites
will take away sales from outlets and networks.
• Channel conflict can occur whenever sales activities
on a company’s Web site interfere with its existing
sales outlets.
• This problem is also called cannibalization, because
the Web site’s sales consume the sales that would be
made in the company’s other sales channel.
Strategic Alliances
• When two or more companies join forces to undertake an
activity over a long period of time, they are said to create a
strategic alliance.
• An increasing number of businesses are forming strategic
alliances to sell on the Web.
• Levi’s has created strategic alliances with JC Penney and
Macys.
• Amazon.com has formed strategic alliances with ToysRUs
to sell toys and with drugstore.com to sell health and
beauty products.
Strategic Alliances
Selling Information or Other
Digital Content
• Firms that own intellectual property have embraced the
Web as a new and highly efficient distribution mechanism.
• ProQuest is a Web site that sells digital copies of published
documents.
• The ACM Digital Library offers subscriptions to electronic
versions of its journals to its members and to libraries.
• Encyclopedia Britannica is an example that has transferred
an existing brand to the Web.
Advertising-Supported Model
• The advertising-supported business model is the
one used by network television in the U.S.
• The success of Web advertising has been
hampered by two major problems:
– No consensus has emerged on how to measure
and charge for site visitor views.
– Very few Web sites have sufficient numbers of
visitors to interest large advertisers.
Advertising-Supported Model
• Web Portals
– Only a few general-interest sites have sufficient traffic to
be profitable based on advertising revenue alone.
• Newspaper publishers
– It is still unclear whether advertising helps or hurts the
newspaper’s business as a whole.
• Employment Sites
– Employment sites are one implementation of the
advertising-supported revenue model that appears to be
successful.
Advertising-Supported Model
Advertising-Subscription Mixed Model
• In this mixed model, subscribers pay a fee and accept
some level of advertising.
• The New York Times and The Wall Street Journal use
a mixed advertising-subscription model.
• The Reuters wire service also uses a mixed model in
its Web offerings.
Advertising-Subscription Mixed Model
• Business Week offers a variation on the mixed model
theme; it offers some free content but requires a
subscription to access the entire site.
• ESPN sells advertising and offers a vast amount of
free information, but fans can subscribe to its Insider
service.
Fee-for-Transaction Models
• The travel agency business model involves receiving
a fee for facilitating a transaction.
• A number of online travel agencies began doing
business on the Web.
• Stock brokerage firms use a fee-for-transaction
model. They charge their customers a commission for
each trade executed.
Fee-for-Transaction Models
• Automobile Sales
– Auto dealers buy cars from the manufacturer and
sell them to consumers
• MSN Carpoint, CarsDirect.com and Autoweb.com
provide an information service to car buyers
– Each of these firms implements the fee-fortransaction revenue model in a slightly different
way
Fee-for-Transaction Models
• Insurance Brokers
– Insurance companies have been slow to offer
policies and investments for sale on the Web
– A number of intermediaries that sell insurance
policies have emerged, for example
Quotesmith.com
• Other Web sites that offer insurance policy
information, comparisons, and sales include:
– InsWeb, Answer Financial, Insurance.com, and
YouDecide.com
Fee-for-Transaction Models
• Event Tickets
– The Web offers event-promoters an ability to sell tickets
from one virtual location to customers practically
anywhere in the world.
• Real estate and mortgage loan brokers
– Online real estate brokers provide all of the services that
a traditional broker might provide.
• Online banking and financial services
– The greatest concerns that most people have when
considering moving financial transactions to the Web
are security and reliability.
Fee-for-Services Models
• The fee in this model is based on the value of the
service provided.
– These are neither broker services or based on the
number or size of transactions processed.
• These models range from games and entertainment to
financial advice and the professional services of
accountants, lawyers and physicians.
Fee-for-Services Models
• Online Games
– Many online games sites offer premium games.
– Site visitors must pay to play these games.
• Concerts and films
– As more households obtain broadband access to the
Internet, companies will provide streaming video of
concerts and films to paying customers.
• Professional services
– State laws have been one of the main forces preventing
U.S. professionals from extending their practices to the
Web.
Creating an Effective Web Presence
• Businesses always create a presence in the physical
world by building stores and office buildings.
• The only contact that customers and other
stakeholders have with a firm on the Web is through
its presence there.
• Creating an effective Web presence can be critical for
even the smallest and newest firm operating on the
Web.
Identifying Web Presence Goals
• On the Web, businesses have the luxury of
intentionally creating a space that creates a
distinctive presence.
• A Web site can perform many image-creation tasks
very effectively, including:
– Serving as a sales brochure
– Serving as a product showroom
– Showing a financial report
– Posting an employment ad
– Serving as a customer contact point
Making Web Presence Consistent with
Brand Image
• Different firms, even those in the same industry, might
establish different Web presence goals.
• Coca Cola and Pepsi are two companies that have
developed strong brand images and are in the same
business, but have developed different Web
presences.
• The Web presence conveys the image the company
wants to project.
Achieving Web Presence Goals
• An effective site is one that creates an attractive presence
that meets the objectives of the business or other
organization.
• Possible objectives include:
–
–
–
–
–
–
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attracting visitors to the Web site
making the site interesting enough
convincing visitors to follow the site’s links
creating an impression of corporate image
building a trusting relationship with visitors
reinforcing positive images of the organization
encouraging visitors to return to the site
The Toyota Site
• The Toyota site is a good example of an effective Web
presence.
• The site provides:
– a product showroom feature
– links to detailed information about each product
line
– links to dealers
– links to information about company
The Toyota Site
Quaker Oats
• Quaker Oats created Web sites that did not offer any
corporate presence until 1999.
• In 1999, Quaker Oats changed its Web page to
improve its general appearance and user-friendliness.
• The Toyota and Quaker Oats examples illustrate that
the Web can integrate an opportunity for enhancing
the image of a business with the dissemination of
information.
Not-for-Profit Organizations
• A key goal for many not-for-profit organizations is
information dissemination.
• The combination of information dissemination and a
two-way contact channel is a key element in any Web
site.
• The American Civil Liberties Union and American Red
Cross have created effective Web presences.
• Political parties and museums also use Web sites for
their image presences.
How the Web is Different
• When firms started creating Web sites in the mid
1990s, they often built simple sites that conveyed
basic information about their business.
• The failure to understand how the Web is different
from other presence-building media is one reason
that businesses fail to achieve their Web objectives.
• Firms must use the Web’s capability for two-way,
meaningful communication with their customers.
Meeting the Needs of Web Site Visitors
• Businesses that are successful on the Web realize
that every visitor to their Web site is a potential
customer.
• An important concern for businesses is the variation
in important visitor characteristics.
• People who visit a Web site seldom arrive by
accident; they are there for a reason.
• Technology variations among visitors (e.g.,
connection speed) should be a concern for Web sites.
Many Motivations of Web Site Visitors
• Creating a Web site that meets the needs of visitors
with a wide range of motivations can be challenging.
– to learn about products or services that the
company offers,
– to buy the products or services that the company
offers,
– to obtain information about warranty service, or
repair policies for products they have purchased
Meeting the Needs of Web Site Visitors
(cont’d)
– to obtain general information about the company
or organization
– to obtain financial information for making an
investment or credit granting decision
– to identify the people who manage the company or
organization
– to obtain contact information for a person or
department in the organization.
Making Web Sites Accessible
• One of the best ways to accommodate a broad range
of visitors’ needs is to build flexibility into the Web
site’s interface.
• Many sites offers separate versions with and without
frames and giving visitors the option to choose either
one.
• A good site design lets visitors choose among
information attributes, such as level of detail, forms of
aggregation, viewing format, and downloading format.
Trust and Loyalty
• When customers buy a product, they are also buying a
service element.
• A seller can create value in a relationship with a customer
by nurturing customers’ trust and developing it into loyalty.
• Customer service is a problem for many corporate sites.
• A primary weak spot for many sites is the lack of
integration between the company's call centers and their
Web sites.
Rating E-Business Web Sites
• Two companies routinely review electronic commerce
Web sites for usability, customer service, and other
factors.
– BizRate.com provides a comparison shopping
service and offers links to sites with low prices and
good service ratings for specific products.
– Gomez.com provides scorecards for electronic
commerce sits in specific categories.
Usability Testing
• Firms are now starting to perform usability testing of
their Web sites.
• Usability testing becomes more common, more Web
sites will meet their goals.
• Eastman Kodak, T. Rowe Price, and Maytag have
found that a series of Web site test designs helped
them to understand visitors’ needs.
Customer-Centric Web Site Design
• Putting the customer at the center of all site designs
is called a customer-centric approach to Web site
design.
• Electronic commerce sites are encouraged to focus
on the customer’s buying process rather than the
company’s perspective and organization.
Identifying and Reaching Customers
• An important element of corporate Web presence is
connecting with site visitors who are customers or
potential customers.
• Mass media is a one-to-many communication model,
the Web is a many-to-one communication model, and
personal contact is a one-to-one communication
model.
Measuring the Effectiveness of Web Site
Advertising
• The pricing metric in mass media is called cost-perthousand (CPM).
• Measuring Web audiences is more complicated.
• Banner ads are often sold on a CPM basis where the
‘thousand’ is 1000 impressions.
• Rates vary greatly and depend on how much demographic
information the Web site obtains about its visitors, but most
are within the range of $1 to $100 CPM.
Connecting with Customers
• Most businesses are familiar with two ways of
identifying and reaching customers: personal contact
and mass media.
• These two ways are referred to as communication
modes.
• Some experts also distinguish between broadcast and
addressable media.
Connecting with Customers
• The Web is an intermediate step between mass media
and personal contact.
• Using the Web to communicate with potential
customers offers many of the advantages of personal
contact selling and many of the cost savings of mass
media.
• GartnerGroup reported that customer-centric
marketing strategies would be an excellent fit for the
Internet marketplace.
Technology-Enabled Relationship
Management
• Technology-enabled relationship management occurs
when a firm obtains detailed information about a
customer and uses that information for marketing
purposes.
• This is also called customer relationship management
(CRM) or electronic customer relationship
management (eCRM).