Industry = group of firms that market products that are close substitutes for each other
Where Forces are intense – below average industry performance can be expected
Where forces are mild – superior performance is common
NEXT SLIDE= Impact
What is the impact of the Digital environment on the Porters 5 Forces?
Well Buyer Power Increases – through wider choice, resulting in prices being driven down. Price transparency come into play as buyers know exactly what they are getting for the price they are paying. ?? Low Cost Airline Model - Has this reversed??
However, in B2B situation, there may be a case where the buyer forms a deeper relationship through the use of EDI software.
This can result in a buyer lock-in as their familiarity with the software may result in a reluctance to move.
The Power of suppliers however decreases – the digital landscape results in products becoming commoditised particularly through e-procurement sites.
New products are easily and faster introduced to market in the internet space and this can result in a much faster erosion of market share. Thus there is a real threat of substitutes in the internet space.
Barriers to entry are reduced – such issues as high street rents and sales forces do not become necessary
However, it must be noted – Internet services are easily copied – (back to market erosion)
It becomes easier to compete globally and products become less easy to differentiate
NEXT SLIDE = Value Chain
The Internal Value Chain as seen by Porter
Shows that every stage of manufacture, and each department of the organisation can add value to the product for the customer.
Next Slide = Value Adding through Market Research
What Digital Activities can be added to the Value Chain?
Market Research can be carried out using:
Feedback from clients – Feedback Forums; CRM follow-up (surveys) – Trip Advisor; CRM in booking engines.
Social Networks can provide valuable insights to trends and demographics – Fota Wildlife example
SEO – looking at how products are searched on-line - Spa Hotels, keywords, number of people searching in a given time period
Web Analytics – understanding what is happening on your site will show you what your customers are interested in or not – country house hotel promoting meeting rooms
Next Slide = Value adding through Marketing
Adding Value through Marketing Products
New Customers at low cost – paid search; affiliate marketing
Price Comparison Sites – product becomes available to a wider audience.
Using communities to encourage purchase- Weddings online
Dynamic Packaging- bundling together hotels and flights/cars – lastminute.com
Next Slide = Digital Competitors
In order to acquire new customers and retain existing ones – the digital environment makes is much easier to carry out Competitor SWOT
In Digital you should look at – Local Leading & International Influencers competitors with particular emphasis on New Entrants both in and out of sector as these can provide valuable insights to best, worst and next practices. –
Look at their web sites – what’s new – what works – what does not - how a hotel uses facebook; innovativeness of packaging.
Look at their Strengths and Weakness (which are controlled internally ) and see what opportunities and threats they face (external factors) – see what you can do to capitalise on these in your own business. - Rankings etc.
Always assess competitors based on their performance in the market and their capability to respond
NEXT SLIDE = Digital Customers
Digital Customers can be categorised as follows –
Those who have internet access; surfers, moving from site to site. Those whom are influenced by the internet but purchase else where; look at site and book hotel on phone Those who purchase on-line: use trusted sites Expedia etc.
Sample persona used in the hotel sector
It is important to convert these customers and measure conversions – some methods might include: Targeting a percentage of the total visitors for a product/key-phrase i.e. Gaining market share Setting a target for the number of new leads through the web site – unique phone nbrs; contact forms; RFQs Getting sign ups to newsletters – Response to specific promotions – using unique URLS – hotels newspaper advertising Increase repeat customers – using CRM to manage
NEXT SLIDE = HABITS OF DIGITAL CUSTOMERS
NEXT SLIDE = DIGITAL INTERMEDIARIES
Digital Intermediaries provide Support and are generally independent of Brand
Types – Information exchanges like Yahoo & Google Price Comparison Sites – Travel Supermarket.com Newspaper Portals – as important and magazines and printed media Auction Sites – eBay Forums – Boards; Linked-In Portals – have a range of functions and are very important as people spend most of their time here – can increase visibility through sponsorship/advertising. Some require user to register and can provide further marketing opportunities through direct targeting.
Infomedaries – carry information about their members which can be passed on – Facebook; Credit Bureaus
Countermediaries – not truly independent – have been set up in the banking sector and software sector.
NEXT SLIDE = IMPACT ON BUSINESS MODELS
NIB moving to internet banking- only 6% of their customers transact in cash – appointing Post Office as agent – what implications?
Server based to SaaS – change of way software is used - trained – etc. People no longer on client’s site training and implementing but now more call centre based dealing with on-line enquiries. Growth of on-line help – video on you tube – micro enterprises emerging.
Closure of high street retail outlets- less stock needed – lower costs
NEXT SLIDE = REVENUE MODELS
NEXT SLIDE = BLEEDING MARKETS
NEXT SLIDE = GREY MARKETS
What is a Grey market?
The grey market is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer.
The main type of grey market is imported manufactured goods that would normally be unavailable or more expensive in a the country they are imported to.
Grey-market goods are legal. They are sold outside normal distribution channels by companies which may have no relationship with the producer of the goods.
Frequently this occurs when the price of an item is significantly higher in one country than another.
Situation commonly occurs with electronic equipment - sold at a price high enough to provide a profit but under the normal market price.
Online auction sites such as eBay have contributed to the emergence of the video game grey market.
Google, eBay will remove any advertisements that violate trademark or copyright laws.
The Digital Micro Environment
CM522 – November 11th 2010
Digital Micro Environment - Content
• Porters 5 Forces Model & the Digital Marketplace
• How Digital Helps the Value Chain
• Digital Competitors
• Digital Customers
• Digital Intermediaries
• Digital Business / Revenue Models
• Digital Market Bleed
• Digital Grey Market Exports
• Who is your Digital Customer?
– Sample Persona
• How will you Convert & Measure?
• Digital Customers have power, they have done
their research & want an immediate response
Habits of Digital Customers
• -send tweets when thinking of buying a product
• -search Twitter and follow conversations about a
• -become fans of product pages, on Facebook,
related to products – goes viral
• -read reviews before purchasing
• -share information about your business and their
• -expect instant feed back; discount codes; affiliate
programs; real time information
• Provide support to Business and Consumer
– B2B & B2C “Information Exchanges”; Google; Bing etc.
– Price Comparison Sites – Travel Supermarket.com
– Newspaper sites
– Auction Sites - eBay
– Forums – Boards.ie (B2C); Linked-in (B2B).
– Portals – Yahoo Ireland
• Generally Independent of Brand and Service
– “Countermediaries” (not truly indep)
– May be owned by brand – Banking sector, Microsoft
Impact of Digital on Business Models
– closing down of retail - NIB
– move from Server based to SaaS
• DVD / Gaming Rentals
– retail to on-line libraries
• Subscription Access - The Times on-line
• Pay per download - iTunes
• Display Advertising (CPM) – Entertainment.ie
• CPC Advertising - Google; Bing
• Sponsored areas of site - Eircom Portal
• Affiliate Revenue – Constant Contact; Amazon; Ryanair
• Email Lists – opt in to partner marketing
• Easy access to causes Market Share to erode
• Internet Explorer vs Firefox
• Chrome vs Rockmelt
• Internet facilitates the Grey Market
• Easy Distribution
• Auction Sites Facilitate
• Country specific serial numbers
• DVD Region Codes prevent Grey Market