Chapter 3
Selling on the Web:
Revenue Models and Building a
Web Presence
Models
1.
2.
3.
4.
5.
The Web Catalog Model
Advertising-Supported Model
Advertising-Subscription Mixed Model
Fee-for-Transaction Models
Fee-for-Services Models
1. The Web Catalog Model
• Based on the mail order catalog revenue
model.
• Replaces or supplements print catalog
distribution with information on its Web site.
– Brand image
– Low cost
• Customers can place orders through the Web
site or by telephone
Businesses Employing the Web
Catalog Model
• Computer manufacturers
– Dell and Gateway
• Apparel Retailers
– Land’s End , Eddie Bauer, L.L. Bean
• Flowers and gifts
– 1-800-Flowers
• General Discounters
– Walmart
Luxury Goods
• People are still unwilling to buy some items
through a Web site.
• Luxury goods and high fashion items.
• Use Web sites to provide information to
customers who would then visit the physical
store.
Channel Conflict and Cannibalization
• Channel Conflict
– Web site interferes with its existing sales
outlets or network.
– Levi
(point to retailers)
• Cannibalization
– Web site’s sales consume the sales that would
be made in the company’s other sales channel.
Strategic Alliances
• 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.
• Amazon.com
– ToysRUs to sell toys
– Drugstore.com to sell health and beauty products.
– Target
Selling Information or Other
Digital Content
• Firms that own intellectual property have embraced the
Web as a new and highly efficient distribution mechanism
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From paper to web publication
Catalog of information
Always current, searchable
Usually have charge for access
• ProQuest - sells digital copies of published documents.
• LexisNexis – legal documents, publications, and news…
• Encyclopedia Britannica - has transferred an existing brand
to the Web.
2. Advertising-Supported Model
• Used by network television in the U.S.
– Advertising revenue support operations
• Web advertising has been hampered by two
major problems:
– No consensus has emerged on how to measure
and charge for site visitor views.
• Visitors or actual click?
– Very few Web sites have sufficient numbers of
visitors to interest large advertisers.
• Do visitors have “right” demographics
Advertising-Supported Model
•
Web Portals
– Use as “launching” site to enter the web
– Web directory or search engine; email…
– Only a few general-interest sites have sufficient traffic to be
profitable based on advertising revenue alone.
- Yahoo, AOL, MSN
•
Newspaper publishers
– It is still unclear whether web presence helps or hurts the
newspaper’s business as a whole.
•
Employment Sites
– Advertise employment
– Appears to be successful.
– Monster.com
3. Advertising-Subscription Mixed
Model
• In this mixed model
– Subscribers pay a fee
– Some level of advertising.
• The New York Times and The Wall Street Journal
– Most content for subscribers
– Reduced rate for print subscribers
• Business Week offers a variation on the mixed model
theme; it offers some free content but requires a
subscription to access the entire site.
4. Fee-for-Transaction Models
• The travel agency business model
– Receive a fee for facilitating a transaction.
– Orbitz – lowest air fares for 5 airlines
• Stock brokerage firms use a fee-for-transaction
model.
– Charge their customers a commission for each
trade executed.
– Etrade, Charles Schwab
Fee-for-Transaction Models
•
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
1. Customer goes on line to find car and price
2. Site then finds local dealer who will accept deal
3. Site charges dealer a fee for service
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.
• Ticketmaster
•
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.
– Some eliminating fee
5. Fee-for-Services Models
• The fee in this model is based on the value of the
service provided.
– Not based on number of transaction.
• Examples:
– Games and entertainment
– Financial advice
– 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
– 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.
– General information or referral sites
Creating an Effective Web Presence
• Creating an effective Web presence can be
critical for even the smallest and newest firm
operating on the Web.
– Only contact that customers has
• If only a web presence
– Influence other stakeholder
• Suppliers
• Stockholders
• Employees
Identifying Web Presence Goals
• On the Web
– Create distinctive image the company wants to
project.
• A Web site can perform many image-creation tasks
very effectively, including:
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Serving as a sales brochure
Serving as a product showroom
Showing a financial report
Posting an employment ad
Serving as a customer contact point
Achieving Web Presence Goals
• An effective site
– creates an attractive presence
– meets the objectives of the business
• Possible objectives include:
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–
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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
Not-for-Profit Organizations
• A key goal is information dissemination.
• Two-way contact channel is a key element
• 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
– Conveyed basic information about their
business.
• Web is different from other presence-building media
– Brochures
• Web’s capability
– Two-way, meaningful communication with their
customers.
– Email, online dialog, forms
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
– 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
• Build flexibility into the Web site’s interface.
– Text version, no plug-ins…
– Different for browser used
• 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, 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.
Usability Testing
• Firms are now starting to perform usability testing of
their Web sites.
- Determine if interactive contact with visitors
• As 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.
•
Technology-enabled relationship management occurs when a firm
– obtains detailed information about a customer
– uses that information for marketing purposes.
– called Customer Relationship Management (CRM) or electronic
customer relationship management (eCRM).
Connecting with Customers
• Most businesses are familiar with two ways of
reaching customers: personal contact and mass
media.
• The Web is an intermediate step between mass media
and personal contact.
• Using the Web to communicate with potential
customers offers
– advantages of personal contact selling
– cost savings of mass media