Introduction to E-Commerce
In this chapter, you will learn about:
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Revenue models
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How some companies move from one revenue model to another to achieve success
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Revenue strategy issues that companies face when selling on the Web
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Creating an effective business presence on the Web
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Web site usability
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Communicating effectively with customers on the Web
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Mail order or catalog model
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Proven to be successful for a wide variety of consumer items
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Web catalog revenue model
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Taking the catalog model to the Web
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Apple, Dell, Gateway, and Sun
Microsystems have had great success selling on the Web
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Dell created value by designing its entire business around offering a high degree of configuration flexibility to its customers
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Retailers use the Web catalog model to sell books, music, and videos
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Among the most visible examples of electronic commerce
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Jeff Bezos
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Formed Amazon.com
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Jason and Matthew Olim
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Formed an online music store they called CDnow
Used the Web catalog revenue model
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People are still reluctant to buy luxury goods through a Web site
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Web sites of Vera Wang and Versace
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Constructed to provide information to shoppers, not to generate revenue
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Web site of Evian
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Designed for a select, affluent group of customers
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Lands’ End
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Pioneered the idea of online Web shopping assistance with its Lands’ End Live feature in
1999
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Personal shopper
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Intelligent agent program that learns customer’s preferences and makes suggestions
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Virtual model
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Graphic image built from customer measurements
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1-800-Flowers
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Created an online extension to its telephone order business
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Chocolatier Godiva
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Offers business gift plans on its site
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Firms that own intellectual property have embraced the Web as a new and highly efficient distribution mechanism
Š Lexis.com
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Provides full-text search of court cases, laws, patent databases, and tax regulations
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ProQuest
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Sells digital copies of published documents
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Š Broadcasters provide free programming to an audience along with advertising messages
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Success of Web advertising is hampered by
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No consensus on how to measure and charge for site visitor views z Stickiness of a Web site: the ability to keep visitors and attract repeat visitors
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Very few Web sites have sufficient visitors to interest large advertisers
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Web directory
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A listing of hyperlinks to Web pages
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Portal or Web portal
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Site used as a launching point to enter the Web
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Almost always includes a Web directory and search engine
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Examples: Yahoo!, AOL, AltaVista
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Subscribers
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Pay a fee and accept some level of advertising
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Typically are subjected to much less advertising
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Used by
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The New York Times and The Wall Street
Journal
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Advertising-Subscription Mixed
Revenue Models (continued)
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Business Week
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Offers some free content at its Business Week online site
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Requires visitors to buy a subscription to the
Business Week print magazine
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Businesses offer services and charge a fee based on the number or size of transactions processed
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Disintermediation
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Removal of an intermediary from a value chain
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Reintermediation
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Introduction of a new intermediary
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Fee based on the value of a service provided
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Services range from games and entertainment to financial advice
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Online games
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Growing number of sites include premium games in their offerings
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Site visitors must pay to play these premium games
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Concerts and films
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As more households obtain broadband access to the Internet, companies are providing streaming video of concerts and films to paying subscribers
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Professional Services
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State laws are one of the main forces preventing
U.S. professionals from extending their practices to the Web
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Subscription to advertising-supported model
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Microsoft founded its Slate magazine Web site z An upscale news and current events publication z Charged an annual subscription fee after a limited free introductory period z Was unable to draw sufficient number of paid subscribers z Now operated as an advertising-supported site
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Advertising-Supported to Advertising-
Subscription Mixed Model
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Salon.com
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Operated for several years as an advertisingsupported site
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Now offers an optional subscription version of its site
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Subscription offering was motivated by the company’s inability to raise additional money from investors
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Xdrive Technologies
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Opened its original advertising-supported Web site in 1999
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Offered free disk storage space online to users
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After two years, it was unable to pay the costs of providing the service with the advertising revenue generated
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Later switched to a subscription-supported model
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Northern Light
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Founded in August 1997 as a search engine with a twist
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Revenue model z Combination of advertising-supported model plus a fee-based information access service
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January 2002 z Converted to a new revenue model that was primarily subscription supported
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Encyclopædia Britannica
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Original offerings z The Britannica Internet Guide
Š Free Web navigation aid z Encyclopædia Britannica Online
Š Available for a subscription fee or as part of a CD package
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1999 z Converted to a free, advertiser-supported site
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2001 z Returned to a mixed model
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Š Channel conflict
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Occurs whenever sales activities on a company’s Web site interfere with existing sales outlets
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Also called cannibalization
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Channel cooperation
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Giving customers access to the company’s products through a coordinated presence in all distribution channels
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Strategic alliance
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When two or more companies join forces to undertake an activity over a long period of time
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Account aggregation services
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Increase the propensity of customers to return to the site
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Channel distribution managers
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Companies that take over the responsibility for a particular product line within a retail store
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An organization’s presence
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The public image it conveys to its stakeholders
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Stakeholders of a firm
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Include its customers, suppliers, employees, stockholders, neighbors, and the general public
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Objectives of the business
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Attracting visitors to the Web site
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Making the site interesting enough that visitors stay and explore
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Convincing visitors to follow the site’s links to obtain information
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Objectives of the business
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Creating an impression consistent with the organization’s desired image
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Building a trusting relationship with visitors
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Reinforcing positive images that the visitor might already have about the organization
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Encouraging visitors to return to the site
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Toyota site
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A good example of an effective Web presence
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Provides links to z Detailed information about each vehicle model z A dealer locator page z Information about the company and the financing services it offers
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Quaker Oats
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Web site does not offer a particularly strong sense of corporate presence
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Site is a straightforward presentation of links to information about the firm
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Redesigned site is essentially the same as the previous version
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Key goal for the Web sites
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Information dissemination
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Key element on any successful electronic commerce Web site
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Combination of information dissemination and a two-way contact channel
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Motivations of Web site visitors
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Learning about products or services that the company offers
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Buying products or services that the company offers
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Obtaining information about warranty, service, or repair policies for products they purchased
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Obtaining general information about the company or organization
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Motivations of Web site visitors
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Obtaining financial information for making an investment or credit granting decision
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Identifying the people who manage the company or organization
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Obtaining contact information for a person or department in the organization
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One of the best ways to accommodate a broad range of visitor needs is to build flexibility into the Web site’s interface
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Good site design lets visitors choose among information attributes
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Web sites can offer visitors multiple information formats by including links to files in those formats
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Goals that should be met when constructing
Web sites
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Offer easily accessible facts about the organization
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Allow visitors to experience the site in different ways and at different levels
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Sustain visitor attention and encourage return visits
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Offer easily accessible information
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A 5 percent increase in customer loyalty can yield profit increases between 25% and 80%
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Repetition of satisfactory service can build customer loyalty
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Customer service is a problem for many electronic commerce sites
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Companies that have done usability tests
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Conduct focus groups
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Watch how different customers navigate through a series of Web site test designs
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Cost of usability testing is low compared to the total cost of a Web site design or overhaul
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Putting the customer at the center of all site designs
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Guidelines
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Design the site around how visitors will navigate the links
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Allow visitors to access information quickly
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Avoid using inflated marketing statements
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Guidelines
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Avoid using business jargon and terms that visitors might not understand
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Be consistent in use of design features and colors
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Make sure navigation controls are clearly labeled
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Test text visibility on smaller monitors
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Conduct usability tests
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Personal contact model
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Firm’s employees individually search for, qualify, and contact potential customers
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Prospecting
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Personal contact approach to identifying and reaching customers
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Mass media approach
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Firms prepare advertising and promotional materials about the firm and its products
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Š Addressable media
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Advertising efforts directed to a known addressee
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Also called mass media
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One-to-many communication model
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Communication flows from one advertiser to many potential buyers
Š One-to-one communication model
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Both buyer and seller participate in information exchange
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Š Models used to generate revenue on the Web
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Web catalog
Digital content sales
Advertising-supported
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Advertising-subscription mixed
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Fee-for-transaction and fee-for-service
Š Companies undertaking electronic commerce initiatives sometimes
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Form strategic alliances
Contract with channel distribution managers
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Firms must understand how the Web differs from other media
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Enlisting the help of users when building test versions of the Web site is a good way to create a site that represents the organization well
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Firms must also understand the nature of communication on the Web
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