Chapter 12 E

Internet Marketing
E-Commerce & Web
Raises site performance
More online performance, e.g., email
Web-server performance is critical – look for
Increases personalization
Biggest in B2B – seen as convenient, cost saving
and good service
Consumers fear privacy and reselling of data
Personalization based on perceived lifetime value
Personalization/e-commerce virtuous circle
Expands Site Scope
Customer acquisition costs
E*Trade 1996-7 $50 per customer and in 1998
$275 per customer
70% of first year revs on marketing, 30% in year
Results of high acquisition costs
Searches for methods
Premium on customer loyalty building
Desire to expand a customer’s online business
Take a Dip –
The Profit Pool
Goal – take advantage of customer traffic
Products and services that fit with current
customer purchases – Amazon?
Profitable items
Alliance Partners
Judge by The Profit Pool
ID different products and calculate their revenue
and profit share
Profit Pool Segments
Anchor services
Service providers at core of an ecommerce site
Extension services
Valuable partners with an anchor service
Neutral services
Components without high profits or
customer contact frequency
Online Selling
Redraws connections between buyers
and sellers
Complementary purchases
Consistent positioning
Complicates the split of profits between
pool members
Worries about losing access to
customers and high referral fees
E-Commerce Buying
Unique information source
To succeed as a retail tool
Price – monetary and non-monetary costs
kept lower than traditional alternatives
 Assortment – match buyer desires
 Convenience – superior timing, location
and buying process
 Entertainment – more fun than traditional
Monetary Cost
Full online price =
[Online price * (1 + tax rate)]
 + shipping cost
 + shopping/purchasing costs
 +extra cost if returns required
Regular Price + Tax
Lower regular prices
Book industry Amazon vs. Wal-Mart
Dangers of this strategy?
Offer lower prices on all items
Exchange rate
Tough to avoid GST – How could you do it?
Most avoid PST by not having a physical presence
Consumers in high tax provinces shift behaviour
Shipping Cost
Categories of goods
Digital information goods – near 0
Digital entertainment – transmission and data
storage costs
Hard goods – weight, speed of delivery
Perishables – high
Costs affect consumer decisions
Problems of shipping to home addresses
FedEx vs. UPS – Who will win?
Assortment and
Problems with traditional stores
Limited assortment, hours and advice
Physical vs. virtual inventory
Easier for e-commerce firms to add SKU’s
Centralized inventory management
Tap into repeat purchases – B2B
One-stop shopping – Chemdex
Comparison shopping – software and agents
Less developed due to available
Adult entertainment leads the way
One distribution system or two?
Channel conflict
Goal divergence
Responsibility disputes
Objectives of manufacturer and channel partners differ
Customer handling, territories, functions, technology
Differing perceptions of reality
Control of key customers
Exclusive distribution through corp. site or
contractual agreement
Proper Distribution
Dropping layers of distribution channel
Adding levels, e.g. auto-locating services
Better product
Learning about customer wants and needs
Efficient system of customer contacts
Quick and cheap market assess
Channel Benefits
Dell’s success
Real-time marketing
“Personally customized goods or services
continuously update themselves to
continuously track changing customer
needs, without intervention by corporate
personnel, often without conscious or overt
input from the customer.”
Internet Benefits
Link between customer and company
Details of purchase are automatically
Timing of purchase is known
Trust is established
Lower vulnerability to poaching
Know consumers
Understand local markets
Carry broad product lines within a category
Carry multiple product lines
Requires fewer contacts
Cost differences between physical and online
Cost of physical contact with customers
Can collect more data on transaction history,
preference measures and triggers
Customer coalitions
Customers join intermediaries to protect privacy and
share info
Agents – don’t lose control and get benefits of
Seller scope
Multipurpose vendor learns more about customers
E-Commerce Analysis
Industry Description
Traditional Selling Methods
Site and Service Comparison
Concept Description
Appropriate online
Customers online
Online value
Internet Marketing Plan
Basic Financial Analysis
Fundamental flaw
Gap or weakness
Competing Against
The Net
E-commerce is just another adjustment
Selective price discounts
Concentrating on late adopters
Creating and staging experiences
Playing on fear, uncertainty and doubt
Bundle pleasant surroundings and experiences with
products or services
Developing a hybrid system
Use physical locations to acquire customers, develop
complex relationships and create a strong brand image
Egghead Goes Virtual
Closed its small, mall-based stores in 1998
Capitalized on brand name
Avoids sales taxes except in Oregon
Increased number of SKU’s from 2000
Focusing on closeout material, its brand
name and buying experience
Downside – more expenditures on customer
acquisition, marketing and alliances
Ask Three Questions
How will e-commerce change our
customer priorities?
How can we construct a business
design to meet these priorities?
What investments do we need to make
in technology?
Rules of E-Business
Technology is no longer the afterthought
in forming business strategy but the
cause and driver
Ability to streamline the structure,
influence, and control of the flow of
information is more powerful than
moving and manufacturing physical
Rules II
Inability to overthrow the dominant, outdated
business design often leads to business
Goal of new business designs is to create
flexible outsourcing that offloads costs and
makes customers happy
E-commerce allows a company to become
“the cheapest,” “most familiar,” or “the best”
Rules III
Use technology to innovate, entertain and
enhance the entire purchase process
Business design increasingly uses
reconfigurable e-business community models
Management must align strategies,
processes and applications fast, right and at
the same time.
E-Business Architecture
Cross-functional processes
Integrated applications
IT Infrastructure
Danger IT people up ahead!
FedEx Experience – warehouse, fulfillment
and shipping specialist for National
Combines IT with JIT
Execution Framework
Provide a structure for defining,
communicating and monitoring new
Redesign core business processes to
align with organizational vision
Enable IT infrastructure to support
change, innovation and business goals
Need for Leadership
Status quo
Seek a safe haven by improving the
existing product mix
Return to chaos, risk, and uncertainty of
new product and services
Challenges Facing
Market Leaders
Manage top-line growth – acquisitions
Meet or exceed customer expectations
Customer driven – more responsive
Market evolution – more flexible
Implement partner/alliances –
Integrate multiple channels and and
multiple business units
Challenges II
Brand migration and product transition
Implement supply chain management –
shorter lead times by forecasting and
component availability
Change internally to gain a competitive
Guides to the Future
Emphasis will shift to e-business from ecommerce to derive the greatest value
True competitive advantage will happen when
new concepts, practices and performance are
combined to improve company and customer
bottom lines
Harness rising consumer demands,
globalization and information/communication.
Manager’s future responsibilities will change
but their organizational level probably won’t