9781423903055 ppt ch03

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9781423903055 ppt ch03

  1. 1. Electronic Commerce Eighth Edition Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence
  2. 2. Learning Objectives <ul><li>In this chapter, you will learn about: </li></ul><ul><li>Revenue models </li></ul><ul><li>How some companies move from one revenue model to another to achieve success </li></ul><ul><li>Revenue strategy issues that companies face when selling on the Web </li></ul><ul><li>Creating an effective business presence on the Web </li></ul><ul><li>Web site usability </li></ul><ul><li>Communicating effectively with customers on the Web </li></ul>Electronic Commerce, Eighth Edition
  3. 3. Revenue Models <ul><li>Web business revenue generating models </li></ul><ul><ul><li>Web catalog </li></ul></ul><ul><ul><li>Digital content </li></ul></ul><ul><ul><li>Advertising-supported </li></ul></ul><ul><ul><li>Advertising-subscription mixed </li></ul></ul><ul><ul><li>Fee-based </li></ul></ul><ul><li>Can work for both sale types </li></ul><ul><ul><li>Business-to-consumer (B2C) </li></ul></ul><ul><ul><li>Business-to-business (B2B) </li></ul></ul><ul><li>Can work with one Web site, separate sites, or separate pages </li></ul>Electronic Commerce, Eighth Edition
  4. 4. Web Catalog Revenue Models <ul><li>Adapted from traditional catalog-based model </li></ul><ul><ul><li>Seller established brand image </li></ul></ul><ul><ul><li>Sold through printed information </li></ul></ul><ul><ul><ul><li>Mailed to prospective buyers </li></ul></ul></ul><ul><li>Web sites expand traditional model </li></ul><ul><ul><li>Replace or supplement print catalogs </li></ul></ul><ul><ul><li>Offer flexibility </li></ul></ul><ul><ul><ul><li>Order through Web site or telephone </li></ul></ul></ul><ul><ul><ul><li>Payment though Web site, telephone, or mail </li></ul></ul></ul><ul><li>Creates additional sales outlet </li></ul>Electronic Commerce, Eighth Edition
  5. 5. Web Catalog Revenue Models (cont’d.) <ul><li>Computers and consumer electronics </li></ul><ul><ul><li>Apple, Dell, Gateway, Hewlett-Packard, IBM, Sun Microsystems </li></ul></ul><ul><ul><ul><li>Sell full range of products </li></ul></ul></ul><ul><ul><li>Dell </li></ul></ul><ul><ul><ul><li>Allows product configuration; creates value </li></ul></ul></ul><ul><ul><li>Crutchfield and The Sharper Image </li></ul></ul><ul><ul><ul><li>Successful mail order expansion includes Web sites </li></ul></ul></ul><ul><ul><li>Best Buy, Circuit City, J&R Music World, Radio Shack </li></ul></ul><ul><ul><ul><li>Successful retail store presence expansion </li></ul></ul></ul><ul><ul><ul><li>Sell same products </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  6. 6. Electronic Commerce, Eighth Edition
  7. 7. Web Catalog Revenue Models (cont’d.) <ul><li>Books, music, and videos </li></ul><ul><ul><li>Most visible electronic commerce examples </li></ul></ul><ul><ul><li>Amazon.com Web-only retailer </li></ul></ul><ul><ul><ul><li>Originally sold only books </li></ul></ul></ul><ul><ul><li>Barnes & Noble, Blackwell’s, Books-A-Million, Powell’s Books </li></ul></ul><ul><ul><ul><li>Well-established physical book stores </li></ul></ul></ul><ul><ul><li>CDnow Web-only online music store </li></ul></ul><ul><ul><li>Tower Records, Sam Goody retail stores </li></ul></ul><ul><ul><ul><li>Created Web sites to compete with CDnow </li></ul></ul></ul><ul><ul><li>CD Universe copied CDnow approach </li></ul></ul>Electronic Commerce, Eighth Edition
  8. 8. Electronic Commerce, Eighth Edition
  9. 9. Web Catalog Revenue Models (cont’d.) <ul><li>Luxury goods </li></ul><ul><ul><li>Clientele reluctant to buy through Web </li></ul></ul><ul><ul><li>Vera Wang and Versace </li></ul></ul><ul><ul><ul><li>Web sites provide information </li></ul></ul></ul><ul><ul><ul><li>Shopper purchases at physical store </li></ul></ul></ul><ul><ul><ul><li>Heavy use of graphics and animation </li></ul></ul></ul><ul><ul><li>Evian </li></ul></ul><ul><ul><ul><li>Uses flash animation </li></ul></ul></ul><ul><ul><li>Tiffany & Co </li></ul></ul><ul><ul><ul><li>Graphics and animation require broadband connection </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  10. 10. Web Catalog Revenue Models (cont’d.) <ul><li>Clothing retailers </li></ul><ul><ul><li>Adapt catalog sales model to Web </li></ul></ul><ul><ul><li>Display clothing photos </li></ul></ul><ul><ul><ul><li>Prices, sizes, colors, tailoring details </li></ul></ul></ul><ul><ul><li>Customers examine clothing online </li></ul></ul><ul><ul><ul><li>Place orders through Web site </li></ul></ul></ul><ul><ul><li>Lands’ End online Web shopping assistance </li></ul></ul><ul><ul><ul><li>Lands’ End Live (1999) </li></ul></ul></ul><ul><ul><li>Text chat and call-back features </li></ul></ul><ul><ul><li>Lands’ End personal shopper agent (more recent) </li></ul></ul><ul><ul><ul><li>Learns preferences and makes suggestions </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  11. 11. Web Catalog Revenue Models (cont’d.) <ul><li>Clothing retailers (cont’d.) </li></ul><ul><ul><li>My Virtual Model (customers try clothes) </li></ul></ul><ul><ul><ul><li>Graphic image built from customer measurements </li></ul></ul></ul><ul><ul><li>Lands’ End </li></ul></ul><ul><ul><ul><li>Two shoppers using different computers </li></ul></ul></ul><ul><ul><ul><li>Simultaneously browse Web site together </li></ul></ul></ul><ul><ul><li>Online overstocks stores </li></ul></ul><ul><ul><ul><li>Reaches more people than physical store </li></ul></ul></ul><ul><ul><li>Problem with varying computer monitor color settings </li></ul></ul><ul><ul><ul><li>Send fabric swatch on request </li></ul></ul></ul><ul><ul><ul><li>Offer generous return policies </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  12. 12. Web Catalog Revenue Models (cont’d.) <ul><li>Flowers and gifts (gift retailers) </li></ul><ul><ul><li>1-800-Flowers </li></ul></ul><ul><ul><ul><li>Online extension to successful telephone business </li></ul></ul></ul><ul><ul><ul><li>Competes with online-only florists </li></ul></ul></ul><ul><ul><li>Godiva </li></ul></ul><ul><ul><ul><li>Offers business gift plans </li></ul></ul></ul><ul><ul><li>Hickory Farms and Mrs. Fields Cookies </li></ul></ul><ul><ul><ul><li>Offer familiar name brands on Web </li></ul></ul></ul><ul><ul><li>Harry and David </li></ul></ul><ul><ul><ul><li>Original Web site for informational purposes </li></ul></ul></ul><ul><ul><ul><li>Promoted catalog business </li></ul></ul></ul><ul><ul><ul><li>Added online ordering feature </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  13. 13. Web Catalog Revenue Models (cont’d.) <ul><li>General discounters (completely new businesses) </li></ul><ul><ul><li>Buy.Com </li></ul></ul><ul><ul><ul><li>Borrowed Wal-Mart and discount club sales model </li></ul></ul></ul><ul><ul><li>Many sites sold advertising (originally) </li></ul></ul><ul><ul><ul><li>Subsidized extremely low prices </li></ul></ul></ul><ul><ul><ul><li>Most sites now out of business </li></ul></ul></ul><ul><ul><li>Rely on volume purchasing strategy (now) </li></ul></ul><ul><ul><ul><li>Keeps prices low </li></ul></ul></ul><ul><ul><li>Fiercely competitive (thin margins: little profits) </li></ul></ul><ul><ul><li>Traditional discount retailers </li></ul></ul><ul><ul><ul><li>Costco, Kmart, Target, Wal-Mart </li></ul></ul></ul><ul><ul><ul><li>Slow to introduce electronic commerce Web sites </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  14. 14. Digital Content Revenue Models <ul><li>Highly efficient distribution mechanism </li></ul><ul><ul><li>Firms own written information or information rights </li></ul></ul><ul><li>LexisNexis: variety of information services </li></ul><ul><li>Lexis.com: traditional research product </li></ul><ul><li>ProQuest: sells published documents’ digital copies </li></ul><ul><li>Dow Jones newspaper publisher subscriptions </li></ul><ul><ul><li>Digitized newspaper, magazine, and journal content </li></ul></ul><ul><li>Association for Computer Machinery: digital library </li></ul><ul><li>Sellers of adult digital content </li></ul><ul><ul><li>Pioneered online credit card payment processing </li></ul></ul>Electronic Commerce, Eighth Edition
  15. 15. Advertising-Supported Revenue Models <ul><li>United States network television </li></ul><ul><ul><li>Provides free programming and advertising messages </li></ul></ul><ul><ul><ul><li>Supports network operations sufficiently </li></ul></ul></ul><ul><li>Site visitor views problem (measuring and charging) </li></ul><ul><ul><li>Stickiness </li></ul></ul><ul><ul><ul><li>Keeping visitors at site and attracting repeat visitors </li></ul></ul></ul><ul><ul><ul><li>Exposed to more advertising in sticky site </li></ul></ul></ul><ul><li>Obtaining large advertiser problem </li></ul><ul><ul><li>Demographic information </li></ul></ul><ul><ul><ul><li>Characteristics set used to group visitors </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  16. 16. Advertising-Supported Revenue Models (cont’d.) <ul><li>Successful sites attract specific groups </li></ul><ul><ul><li>About.com, HowStuffWorks, Drudge Report </li></ul></ul><ul><li>Web portals </li></ul><ul><ul><li>Yahoo! </li></ul></ul><ul><ul><ul><li>First Web directory </li></ul></ul></ul><ul><ul><ul><li>Search engine results presented on separate page </li></ul></ul></ul><ul><ul><ul><li>Search term triggered advertising </li></ul></ul></ul><ul><ul><li>Main portal sites (AOL, Excite, Google, MSN) </li></ul></ul><ul><ul><li>Smaller general-interest sites (refdesk.com) </li></ul></ul><ul><ul><ul><li>More difficulty attracting advertisers </li></ul></ul></ul><ul><ul><ul><li>C-NET (offers items to a specialized group) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  17. 17. Advertising-Supported Revenue Models (cont’d.) <ul><li>Newspaper publishers </li></ul><ul><ul><li>Publish print content on Web </li></ul></ul><ul><ul><li>Internet Public Library Online Newspapers page </li></ul></ul><ul><ul><ul><li>Links to worldwide newspaper sites </li></ul></ul></ul><ul><ul><li>Newspaper’s Web presence </li></ul></ul><ul><ul><ul><li>Provides greater exposure and advertising audience </li></ul></ul></ul><ul><ul><ul><li>Print edition sales loss (difficult to measure) </li></ul></ul></ul><ul><ul><ul><li>Operating costs not covered by advertising revenue </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  18. 18. Advertising-Supported Revenue Models (cont’d.) <ul><li>Targeted classified advertising sites </li></ul><ul><ul><li>More successful at generating adverting revenue </li></ul></ul><ul><ul><li>Web site profit potential </li></ul></ul><ul><ul><ul><li>Specialize in classified advertising </li></ul></ul></ul><ul><ul><li>Web employment advertising (CareerBuilder.com) </li></ul></ul><ul><ul><ul><li>Web directory and search engine advertising approach </li></ul></ul></ul><ul><ul><ul><li>Topics of interest; short articles (increases stickiness) </li></ul></ul></ul><ul><ul><ul><li>Monster.com </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  19. 19. Electronic Commerce, Eighth Edition
  20. 20. Advertising-Supported Revenue Models (cont’d.) <ul><li>Targeted classified advertising sites (cont’d.) </li></ul><ul><ul><li>Used vehicle sites </li></ul></ul><ul><ul><ul><li>AutoTrader.com, CycleTrader.com, BoatTrader.com </li></ul></ul></ul><ul><ul><ul><li>Accepts paid advertising and charge listing fee </li></ul></ul></ul><ul><ul><ul><li>Seller ad options: Web site only, print version inclusion </li></ul></ul></ul><ul><ul><li>Dedicated following product sites (VetteFinders) </li></ul></ul><ul><ul><ul><li>Caters to small audiences </li></ul></ul></ul><ul><ul><li>Product sites useful to buyer after use </li></ul></ul><ul><ul><ul><li>Musicians Buy-Line , ComicLink.com, The Golf Classifieds </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  21. 21. Advertising-Subscription Mixed Revenue Models <ul><li>Subscribers </li></ul><ul><ul><li>Pay fee and accept advertising </li></ul></ul><ul><ul><li>Typically less advertising </li></ul></ul><ul><ul><ul><li>Compared to advertising-supported sites </li></ul></ul></ul><ul><li>Web sites offer different degrees of success </li></ul><ul><ul><li>The New York Times (today) </li></ul></ul><ul><ul><ul><li>Bulk of revenue derived from advertising </li></ul></ul></ul><ul><ul><li>The Wall Street Journal (mixed model) </li></ul></ul><ul><ul><ul><li>Subscription revenue weighted more heavily </li></ul></ul></ul><ul><ul><li>Print edition and online editions </li></ul></ul><ul><ul><ul><li>Different model versions </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  22. 22. Advertising-Subscription Mixed Revenue Models (cont’d.) <ul><li>The Washington Post , Los Angeles Times </li></ul><ul><ul><li>Mixed revenue model variation </li></ul></ul><ul><ul><ul><li>No subscription fee charges </li></ul></ul></ul><ul><ul><ul><li>Current stories free </li></ul></ul></ul><ul><ul><ul><li>Pay for archived articles </li></ul></ul></ul><ul><li>Business Week </li></ul><ul><ul><li>Mixed revenue model variation </li></ul></ul><ul><ul><ul><li>Free content at online site </li></ul></ul></ul><ul><ul><ul><li>Requires paid subscription to print magazine </li></ul></ul></ul><ul><ul><ul><li>Archived article additional charge (over five years old) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  23. 23. Advertising-Subscription Mixed Revenue Models (cont’d.) <ul><li>ESPN </li></ul><ul><ul><li>Leverages brand name from cable television business </li></ul></ul><ul><ul><li>Sells advertising, offers free information </li></ul></ul><ul><ul><li>Collects Insider subscriber revenue </li></ul></ul><ul><li>Consumers Union (ConsumerReports.org) </li></ul><ul><ul><li>Subscriptions and charitable donations </li></ul></ul><ul><ul><li>Not-for-profit organization </li></ul></ul><ul><ul><ul><li>No advertising </li></ul></ul></ul><ul><ul><li>Free information </li></ul></ul><ul><ul><ul><li>Attracts subscribers and fulfills mission </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  24. 24. Fee-for-Transaction Revenue Models <ul><li>Service fee based on transaction number or size </li></ul><ul><li>Web site offers visitor personal service </li></ul><ul><ul><li>Formerly, human agents provided service </li></ul></ul><ul><li>Value chain </li></ul><ul><ul><li>Disintermediation </li></ul></ul><ul><ul><ul><li>Intermediary (human agent) removed </li></ul></ul></ul><ul><ul><li>Reintermediation </li></ul></ul><ul><ul><ul><li>New intermediary (fee-for-transaction Web site) introduced </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  25. 25. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Travel agents </li></ul><ul><ul><li>Receive fee for initiating transaction </li></ul></ul><ul><ul><li>Replaced by computers </li></ul></ul><ul><li>Online travel agents </li></ul><ul><ul><li>Saber system (Travelocity) </li></ul></ul><ul><ul><li>Expedia, Hotels.com, Hotel Discount Reservations </li></ul></ul><ul><ul><ul><li>All profitable </li></ul></ul></ul><ul><ul><li>Orbitz </li></ul></ul><ul><ul><ul><li>Five major U.S. airlines consortium </li></ul></ul></ul><ul><ul><ul><li>Generates advertising revenue </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  26. 26. Electronic Commerce, Eighth Edition
  27. 27. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Travel agents (cont’d.) </li></ul><ul><ul><li>Traditional travel agents being squeezed out </li></ul></ul><ul><ul><ul><li>Reduced or eliminated fees </li></ul></ul></ul><ul><ul><li>Smaller travel agents specializing (cruises, hotels) </li></ul></ul><ul><ul><li>Reintermediation strategy </li></ul></ul><ul><ul><ul><li>Travel agents focus on groups </li></ul></ul></ul><ul><ul><li>Cruise Web sites </li></ul></ul><ul><ul><ul><li>VacationsToGo.com, Cruise Specialists </li></ul></ul></ul><ul><ul><li>Group travel Web sites </li></ul></ul><ul><ul><ul><li>WaveHunters.com, WannaSurf </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  28. 28. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Automobile sales </li></ul><ul><ul><li>Web site removes salesperson negotiation </li></ul></ul><ul><ul><ul><li>Reduces costs </li></ul></ul></ul><ul><ul><ul><li>Provides buyers information service </li></ul></ul></ul><ul><ul><li>CarsDirect.com model </li></ul></ul><ul><ul><ul><li>Customers select specific car, site determines price and finds local dealer </li></ul></ul></ul><ul><ul><li>Autoweb.com and Autobytel model </li></ul></ul><ul><ul><ul><li>Site locates local dealers, car sells at small premium over dealer’s nominal cost </li></ul></ul></ul><ul><ul><li>Car salesperson disintermediated </li></ul></ul><ul><ul><li>Web site: new intermediary (reintermediation) </li></ul></ul>Electronic Commerce, Eighth Edition
  29. 29. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Stockbrokers </li></ul><ul><ul><li>Charge customers trade execution commission </li></ul></ul><ul><ul><li>Web-based brokerage firms (E*TRADE and Datek) </li></ul></ul><ul><ul><ul><li>Offer investment advice, fast trade execution </li></ul></ul></ul><ul><ul><ul><li>Creates competition </li></ul></ul></ul><ul><ul><li>Discount brokers and full-line brokers </li></ul></ul><ul><ul><ul><li>Web sites opened for stock trading and information </li></ul></ul></ul><ul><ul><ul><li>Transaction cost reductions (like online auto buying) </li></ul></ul></ul><ul><ul><ul><li>Stockbrokers disintermediated </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  30. 30. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Insurance brokers </li></ul><ul><ul><li>Quotesmith </li></ul></ul><ul><ul><ul><li>Internet policy price quotes direct to public (1996) </li></ul></ul></ul><ul><ul><ul><li>Independent insurance agents disintermediated </li></ul></ul></ul><ul><ul><li>Insurance policy information, comparisons, sales sites </li></ul></ul><ul><ul><ul><li>InsWeb, Answer Financial, Insurance.com, YouDecide.com </li></ul></ul></ul><ul><ul><li>Progressive Web site </li></ul></ul><ul><ul><ul><li>Provides quotes for competitors’ products too </li></ul></ul></ul><ul><ul><li>Major insurance company Web sites </li></ul></ul><ul><ul><ul><li>Offer information or policies for sale </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  31. 31. Electronic Commerce, Eighth Edition
  32. 32. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Event tickets </li></ul><ul><ul><li>Event promoters use Web </li></ul></ul><ul><ul><ul><li>Ticketmaster, Tickets.com, TicketWeb </li></ul></ul></ul><ul><ul><ul><li>Sell original tickets </li></ul></ul></ul><ul><ul><ul><li>Customers reside anywhere worldwide </li></ul></ul></ul><ul><ul><li>Secondary market tickets </li></ul></ul><ul><ul><ul><li>StubHub , TicketsNow </li></ul></ul></ul><ul><ul><ul><li>Operate as brokers </li></ul></ul></ul><ul><ul><ul><li>Connect ticket owners with buyers </li></ul></ul></ul><ul><ul><ul><li>Reduce transaction costs </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  33. 33. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Real estate and mortgage loan brokers </li></ul><ul><ul><li>Web sites provide all traditional broker services </li></ul></ul><ul><ul><ul><li>Coldwell Banker, Prudential </li></ul></ul></ul><ul><ul><li>National Association of Realtors Web site </li></ul></ul><ul><ul><ul><li>Realtor.com </li></ul></ul></ul><ul><ul><li>IndyMac Bank Home Lending </li></ul></ul><ul><ul><ul><li>Offers online credit review, decision in minutes, printing approval letter </li></ul></ul></ul><ul><ul><li>Successful Web mortgage brokers </li></ul></ul><ul><ul><ul><li>Ditech and E-LOAN </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  34. 34. Electronic Commerce, Eighth Edition
  35. 35. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Online banking and financial services </li></ul><ul><ul><li>No physical product </li></ul></ul><ul><ul><ul><li>Easy to offer on Web </li></ul></ul></ul><ul><ul><li>Web financial transactions concerns </li></ul></ul><ul><ul><ul><li>Trust and reliability of financial institution </li></ul></ul></ul><ul><ul><li>Solutions </li></ul></ul><ul><ul><ul><li>Use existing bank’s identification and reputation (Citibank Online) </li></ul></ul></ul><ul><ul><ul><li>Start online bank not affiliated with existing bank (First Internet Bank of Indiana) </li></ul></ul></ul><ul><ul><ul><li>Use different name (Bank One used Wingspan) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  36. 36. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Online music </li></ul><ul><ul><li>Amazon MP3, Apple’s iTunes, eMusic, Microsoft’s MSN Music, Napster, Rhapsody, Yahoo!, Walmart.com Music Downloads </li></ul></ul><ul><ul><li>Sell single songs (tracks) and albums </li></ul></ul><ul><ul><li>Sales revenue source </li></ul></ul><ul><ul><ul><li>Fee-for-transaction model </li></ul></ul></ul><ul><ul><ul><li>Some sites offer subscription plans </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  37. 37. Fee-for-Transaction Revenue Models (cont’d.) <ul><li>Online music (cont’d.) </li></ul><ul><ul><li>Problems </li></ul></ul><ul><ul><ul><li>Digital products easily copied </li></ul></ul></ul><ul><ul><ul><li>Stores promote own music file format </li></ul></ul></ul><ul><ul><ul><li>Buyers required to download and install software </li></ul></ul></ul><ul><ul><ul><li>Software limits number of audio file copies </li></ul></ul></ul><ul><ul><ul><li>Software does not prevent illegal copying </li></ul></ul></ul><ul><ul><li>Solution </li></ul></ul><ul><ul><ul><li>Adopting one standard file format </li></ul></ul></ul><ul><ul><ul><li>No copying restrictions </li></ul></ul></ul><ul><ul><ul><li>DRM-free MP3 format (Amazon) </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  38. 38. Online Video <ul><li>Copying control </li></ul><ul><ul><li>Use DRM software </li></ul></ul><ul><li>Three issues hampering sales </li></ul><ul><ul><li>Large file size </li></ul></ul><ul><ul><ul><li>Reduced by higher Internet connection speeds </li></ul></ul></ul><ul><ul><li>Fear of online sales impairing other sales types </li></ul></ul><ul><ul><ul><li>Potential serial release pattern impact </li></ul></ul></ul><ul><ul><li>Inability to play on variety of devices </li></ul></ul><ul><ul><ul><li>DRM not platform compatible </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  39. 39. Fee-for-Service Revenue Models <ul><li>Companies offer Web service </li></ul><ul><ul><li>Fee based on service value </li></ul></ul><ul><ul><ul><li>Not broker service </li></ul></ul></ul><ul><ul><ul><li>Not based on transactions-processed number or size </li></ul></ul></ul><ul><li>Online games </li></ul><ul><ul><li>Sales revenue source </li></ul></ul><ul><ul><ul><li>Advertising (older concept) </li></ul></ul></ul><ul><ul><ul><li>Pay-to-play premium games </li></ul></ul></ul><ul><ul><ul><li>Subscriptions </li></ul></ul></ul><ul><ul><li>Frequent player demographics </li></ul></ul><ul><ul><ul><li>40% over age 35 </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  40. 40. Fee-for-Service Revenue Models (cont’d.) <ul><li>Professional services </li></ul><ul><ul><li>Limited Web use </li></ul></ul><ul><ul><ul><li>State laws prohibit extension of practice </li></ul></ul></ul><ul><ul><ul><li>Patients may set appointments </li></ul></ul></ul><ul><ul><li>Major concern </li></ul></ul><ul><ul><ul><li>Patient privacy </li></ul></ul></ul><ul><ul><li>Significant barrier </li></ul></ul><ul><ul><ul><li>Patient diagnosis difficult without physical examination </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  41. 41. Revenue Models in Transition <ul><li>Need to change revenue model </li></ul><ul><ul><li>When Web users’ needs change </li></ul></ul><ul><li>Conditions after 2000 </li></ul><ul><ul><li>Funding became scarce </li></ul></ul><ul><ul><ul><li>Unprofitable growth phase </li></ul></ul></ul><ul><ul><li>Change model or go out of business </li></ul></ul>Electronic Commerce, Eighth Edition
  42. 42. Subscription to Advertising-Supported Model <ul><li>Slate magazine (e-zine) </li></ul><ul><ul><li>Upscale news and current events </li></ul></ul><ul><li>Success expectations were high </li></ul><ul><ul><li>Experienced writers and editors </li></ul></ul><ul><ul><li>Acclaim for incisive reporting and excellent writing </li></ul></ul><ul><li>Initial revenue source </li></ul><ul><ul><li>Annual subscription </li></ul></ul><ul><ul><ul><li>Did not cover operating costs </li></ul></ul></ul><ul><li>Now an advertising-supported site </li></ul><ul><ul><li>Part of MSN portal </li></ul></ul><ul><ul><ul><li>Increases stickiness </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  43. 43. Advertising-Supported to Advertising-Subscription Mixed Model <ul><li>Salon.com </li></ul><ul><ul><li>Acclaim for innovative content </li></ul></ul><ul><li>Initial revenue source </li></ul><ul><ul><li>Advertising-supported site </li></ul></ul><ul><ul><li>Needed additional money to continue operations </li></ul></ul><ul><ul><ul><li>Investors did not provide </li></ul></ul></ul><ul><li>Now offers optional subscription version </li></ul><ul><ul><li>Annual fee for Salon premium </li></ul></ul><ul><ul><ul><li>Free of advertising </li></ul></ul></ul><ul><ul><ul><li>Downloadable content </li></ul></ul></ul><ul><ul><ul><li>Additional content </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  44. 44. Advertising-Supported to Fee-for-Services Model <ul><li>Xdrive Technologies </li></ul><ul><ul><li>Free disk storage </li></ul></ul><ul><li>Initial revenue source (1999) </li></ul><ul><ul><li>Advertising-supported </li></ul></ul><ul><ul><ul><li>Pages contained advertising </li></ul></ul></ul><ul><ul><ul><li>Targeted e-mail advertising </li></ul></ul></ul><ul><ul><ul><li>Did not cover operating costs </li></ul></ul></ul><ul><li>Now subscription-supported service </li></ul><ul><ul><li>Monthly fee dropping </li></ul></ul><ul><li>Other similar companies (IBackup and Kela) </li></ul>Electronic Commerce, Eighth Edition
  45. 45. Advertising-Supported to Subscription Model <ul><li>Northern Light </li></ul><ul><ul><li>Search engine (includes own database) </li></ul></ul><ul><ul><ul><li>Results include Web site links and abstracts </li></ul></ul></ul><ul><li>Initial revenue source </li></ul><ul><ul><li>Combination (advertising-supported and fee-based) </li></ul></ul><ul><ul><ul><li>Individual article payment </li></ul></ul></ul><ul><ul><ul><li>Search results page advertising </li></ul></ul></ul><ul><ul><li>Did not cover operating costs </li></ul></ul><ul><li>Now subscription model </li></ul><ul><ul><li>Annual, large clients </li></ul></ul>Electronic Commerce, Eighth Edition
  46. 46. Multiple Transitions <ul><li>Encyclopedia Britannica </li></ul><ul><ul><li>Initial Web offerings </li></ul></ul><ul><ul><ul><li>Britannica Internet Guide </li></ul></ul></ul><ul><ul><ul><li>Encyclopedia Britannica Online </li></ul></ul></ul><ul><li>Initial revenue source </li></ul><ul><ul><li>Paid subscription site </li></ul></ul><ul><ul><ul><li>Low subscription sales </li></ul></ul></ul><ul><ul><li>Converted to free advertiser-supported site </li></ul></ul><ul><ul><ul><li>Sold educational and scientific products </li></ul></ul></ul><ul><li>Returned to mixed model </li></ul><ul><ul><li>Subscription plan and free content </li></ul></ul>Electronic Commerce, Eighth Edition
  47. 47. Electronic Commerce, Eighth Edition
  48. 48. Revenue Strategy Issues <ul><li>Implementations issues </li></ul><ul><ul><li>Channel conflict and cannibalization </li></ul></ul><ul><ul><li>Strategic alliances and channel distribution management </li></ul></ul><ul><ul><li>Mobile commerce </li></ul></ul>Electronic Commerce, Eighth Edition
  49. 49. Channel Conflict and Cannibalization <ul><li>Channel conflict (cannibalization) </li></ul><ul><ul><li>Company Web site sales activities interfere with existing sales outlets </li></ul></ul><ul><li>Retail distribution partner issues </li></ul><ul><ul><li>Levis: stopped selling products on company Web site </li></ul></ul><ul><ul><ul><li>Site now provides product information </li></ul></ul></ul><ul><ul><li>Maytag: incorporated online partners into Web site </li></ul></ul><ul><ul><ul><li>Site now provides product information </li></ul></ul></ul><ul><ul><li>Eddie Bauer </li></ul></ul><ul><ul><ul><li>Online purchases returnable at retail stores </li></ul></ul></ul><ul><ul><ul><li>Required compensation and bonus plans adjustments to support Web site </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  50. 50. Strategic Alliances and Channel Distribution Management <ul><li>Strategic alliance </li></ul><ul><ul><li>Two or more companies join forces </li></ul></ul><ul><ul><ul><li>Undertake activity over long time period </li></ul></ul></ul><ul><ul><li>Joining Web sites with channel distribution management firms </li></ul></ul><ul><li>Yodlee </li></ul><ul><ul><li>Relationship with portal site clients </li></ul></ul><ul><li>Amazon.com </li></ul><ul><ul><li>Joined with Target, Borders, CDnow, ToyRUs </li></ul></ul><ul><li>Handleman Company </li></ul><ul><ul><li>Manages music inventories (Walmart, KMart) </li></ul></ul>Electronic Commerce, Eighth Edition
  51. 51. Mobile Commerce <ul><li>Few companies successful generating significant revenues </li></ul><ul><ul><li>NTT’s DoCoMo I-Mode service (Japan cell phone) </li></ul></ul><ul><ul><ul><li>Send short messages, play games, obtain weather forecasts </li></ul></ul></ul><ul><ul><li>AvantGo (United States) </li></ul></ul><ul><ul><ul><li>Offers channels of information as PDA downloads </li></ul></ul></ul><ul><li>Mobile commerce: $400 billion by 2012 </li></ul><ul><ul><li>Requires larger memory, easier-to-use interfaces, higher screen resolutions </li></ul></ul><ul><ul><ul><li>E-mail, telephone, Web access, entertainment services convergence </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  52. 52. Creating an Effective Web Presence <ul><li>Organization’s presence </li></ul><ul><ul><li>Public image conveyed to stakeholders </li></ul></ul><ul><ul><li>Usually not important </li></ul></ul><ul><ul><ul><li>Until growth reaches significant size </li></ul></ul></ul><ul><ul><li>Stakeholders </li></ul></ul><ul><ul><ul><li>Customers, suppliers, employees, stockholders, neighbors, general public </li></ul></ul></ul><ul><li>Effective Web presence </li></ul><ul><ul><li>Critical </li></ul></ul><ul><ul><ul><li>Even for smallest and newest Web operating firms </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  53. 53. Identifying Web Presence Goals <ul><li>Business physical space </li></ul><ul><ul><li>Focus on very specific objectives </li></ul></ul><ul><ul><ul><li>Not image driven </li></ul></ul></ul><ul><ul><ul><li>Must satisfy many business needs </li></ul></ul></ul><ul><ul><ul><li>Fails to convey good presence </li></ul></ul></ul><ul><li>Web business site intentionally creates distinctive presence </li></ul><ul><li>Good Web site design </li></ul><ul><ul><li>Provides effective image-creation features </li></ul></ul><ul><ul><li>Provides effective image-enhancing features </li></ul></ul><ul><ul><ul><li>Serves as sales brochure, product showroom, financial report, employment ad, customer contact point </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  54. 54. Identifying Web Presence Goals (cont’d.) <ul><li>Making Web presence consistent with brand image </li></ul><ul><ul><li>Different firms establish different Web presence goals </li></ul></ul><ul><ul><li>Coca Cola pages </li></ul></ul><ul><ul><ul><li>Usually include trusted corporate image (Coke bottle) </li></ul></ul></ul><ul><ul><ul><li>Traditional position as a trusted classic </li></ul></ul></ul><ul><ul><li>Pepsi pages </li></ul></ul><ul><ul><ul><li>Usually filled with hyperlinks to activities and product-related promotions </li></ul></ul></ul><ul><ul><ul><li>Upstart product favored by younger generation </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  55. 55. Achieving Web Presence Goals <ul><li>Effective site creates attractive presence </li></ul><ul><ul><li>Meets business or organization objectives </li></ul></ul><ul><li>Objectives </li></ul><ul><ul><li>Attract visitors to the Web site </li></ul></ul><ul><ul><li>Make site interesting </li></ul></ul><ul><ul><li>Convince visitors to follow site’s links </li></ul></ul><ul><ul><li>Create impression consistent with organization’s desired image </li></ul></ul><ul><ul><li>Build trusting relationship with visitors </li></ul></ul><ul><ul><li>Reinforce positive image </li></ul></ul><ul><ul><li>Encourage visitors to return </li></ul></ul>Electronic Commerce, Eighth Edition
  56. 56. Achieving Web Presence Goals (cont’d.) <ul><li>Profit-driven organizations </li></ul><ul><ul><li>Toyota </li></ul></ul><ul><ul><ul><li>Good example of effective Web presence </li></ul></ul></ul><ul><ul><ul><li>Presence consistent with corporate goal </li></ul></ul></ul><ul><ul><li>Quaker Oats older Web site </li></ul></ul><ul><ul><ul><li>Offered little sense of corporate presence </li></ul></ul></ul><ul><ul><li>Quaker Oats current Web site </li></ul></ul><ul><ul><ul><li>Much better </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  57. 57. Electronic Commerce, Eighth Edition
  58. 58. Electronic Commerce, Eighth Edition
  59. 59. Electronic Commerce, Eighth Edition
  60. 60. Achieving Web Presence Goals (cont’d.) <ul><li>Not-for-profit organizations </li></ul><ul><ul><li>Web presence effort goals </li></ul></ul><ul><ul><ul><li>Image-enhancement capability </li></ul></ul></ul><ul><ul><ul><li>Provide information dissemination </li></ul></ul></ul><ul><ul><li>Successful site key elements </li></ul></ul><ul><ul><ul><li>Integrate information dissemination with fund-raising </li></ul></ul></ul><ul><ul><ul><li>Provide two-way contact channel </li></ul></ul></ul><ul><ul><li>American Civil Liberties Union (ACLU) </li></ul></ul><ul><ul><ul><li>Serves many different constituencies </li></ul></ul></ul><ul><ul><li>Political party Web sites </li></ul></ul>Electronic Commerce, Eighth Edition
  61. 61. Electronic Commerce, Eighth Edition
  62. 62. Web Site Usability <ul><li>Current Web presences </li></ul><ul><ul><li>Few businesses accomplish all goals </li></ul></ul><ul><ul><li>Most fail to provide visitors sufficient interactive contact opportunities </li></ul></ul><ul><ul><li>Improve Web presence </li></ul></ul><ul><ul><ul><li>Make site accessible to more people </li></ul></ul></ul><ul><ul><ul><li>Make site easier to use </li></ul></ul></ul><ul><ul><ul><li>Make site encourage visitors’ trust </li></ul></ul></ul><ul><ul><ul><li>Develop feelings of loyalty toward organization </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  63. 63. How the Web Is Different <ul><li>Simple mid-1990s Web sites </li></ul><ul><ul><li>Conveyed basic businesses information </li></ul></ul><ul><ul><li>No market research conducted </li></ul></ul><ul><li>Web objectives achievement failure </li></ul><ul><ul><li>Not understanding Web presence-building media </li></ul></ul><ul><li>Web objective achievement success </li></ul><ul><ul><li>Sites create organization’s presence </li></ul></ul><ul><ul><li>Sites contain standard information set </li></ul></ul><ul><ul><ul><li>History, objectives, mission, product information, financial information, two-way meaningful communication </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  64. 64. Meeting the Needs of Web Site Visitors <ul><li>Successful Web businesses: </li></ul><ul><ul><li>Realize every visitor is a potential customer (partner) </li></ul></ul><ul><li>Crafting Web presence is an important concern </li></ul><ul><ul><li>Know visitor characteristic variations </li></ul></ul><ul><li>Visitor at site for a reason </li></ul>Electronic Commerce, Eighth Edition
  65. 65. Meeting the Needs of Web Site Visitors (cont’d.) <ul><li>Web site visitor motivations </li></ul><ul><ul><li>Learning about company products or services </li></ul></ul><ul><ul><li>Buying products or services </li></ul></ul><ul><ul><li>Obtaining warranty, service, repair policy information </li></ul></ul><ul><ul><li>Obtaining general company information </li></ul></ul><ul><ul><li>Obtaining financial information </li></ul></ul><ul><ul><li>Identifying people </li></ul></ul><ul><ul><li>Obtaining contact information </li></ul></ul><ul><li>Visitors have: </li></ul><ul><ul><li>Various needs, experience, expectations, technology </li></ul></ul>Electronic Commerce, Eighth Edition
  66. 66. Meeting the Needs of Web Site Visitors (cont’d.) <ul><li>Making Web sites accessible </li></ul><ul><ul><li>Build interface flexibility </li></ul></ul><ul><ul><ul><li>Optional to use frames </li></ul></ul></ul><ul><ul><ul><li>Offer text-only version </li></ul></ul></ul><ul><ul><ul><li>Option to select smaller graphic images </li></ul></ul></ul><ul><ul><ul><li>Option to specify streaming media connection type </li></ul></ul></ul><ul><ul><ul><li>Option to choose among information attributes </li></ul></ul></ul><ul><ul><li>Controversial Web site design </li></ul></ul><ul><ul><ul><li>Animated graphics software use </li></ul></ul></ul><ul><ul><ul><li>Some tasks lend themselves to animated Web pages </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  67. 67. Electronic Commerce, Eighth Edition
  68. 68. Meeting the Needs of Web Site Visitors (cont’d.) <ul><li>Making Web sites accessible (cont’d.) </li></ul><ul><ul><li>Offer multiple information formats </li></ul></ul><ul><ul><li>Web site constructions goals </li></ul></ul><ul><ul><ul><li>Offer easily accessible organization facts </li></ul></ul></ul><ul><ul><ul><li>Allow different visitor experiences </li></ul></ul></ul><ul><ul><ul><li>Provide meaningful, two-way communication link </li></ul></ul></ul><ul><ul><ul><li>Sustain visitor attention and encourage return visits </li></ul></ul></ul><ul><ul><ul><li>Offer easily accessible information about products, services, and their use </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  69. 69. Trust and Loyalty <ul><li>Creates relationship value </li></ul><ul><li>Good service leads to seller trust </li></ul><ul><ul><li>Delivery, order handling, help selecting product, after-sale support </li></ul></ul><ul><li>Satisfactory service builds customer loyalty </li></ul><ul><li>Customer service in electronic commerce sites </li></ul><ul><ul><li>Problem </li></ul></ul><ul><ul><ul><li>Lack integration between call centers and Web sites </li></ul></ul></ul><ul><ul><ul><li>Poor e-mail responsiveness </li></ul></ul></ul><ul><ul><li>Unlikely to recover money spent to attract customers </li></ul></ul>Electronic Commerce, Eighth Edition
  70. 70. Rating Electronic Commerce Web Sites <ul><li>Review electronic commerce Web sites </li></ul><ul><ul><li>Usability, customer service, other factors </li></ul></ul><ul><ul><li>Gomez.com </li></ul></ul><ul><ul><ul><li>No longer publishes most scorecards </li></ul></ul></ul><ul><ul><li>BizRate.com </li></ul></ul><ul><ul><ul><li>Comparison shopping service </li></ul></ul></ul><ul><ul><ul><li>Links to low price and good service ratings sites </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  71. 71. Rating Electronic Commerce Web Site (cont’d.) <ul><li>Usability testing </li></ul><ul><ul><li>Helps meet Web site goals </li></ul></ul><ul><ul><li>Avoids Web site frustration </li></ul></ul><ul><ul><ul><li>Customers leave site without buying anything </li></ul></ul></ul><ul><ul><li>Simple site usability changes </li></ul></ul><ul><ul><ul><li>Include telephone contact information </li></ul></ul></ul><ul><ul><ul><li>Staff a call center </li></ul></ul></ul><ul><ul><li>Learn about visitor needs by conducting focus groups </li></ul></ul><ul><ul><li>Usability testing cost </li></ul></ul><ul><ul><ul><li>Low compared to Web site design costs </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  72. 72. Rating Electronic Commerce Web Site (cont’d.) <ul><li>Customer-centric Web site design </li></ul><ul><ul><li>Important part of successful electronic business operation </li></ul></ul><ul><ul><li>Focus on meeting all site visitors’ needs </li></ul></ul><ul><ul><li>Putting customer at center of all site designs </li></ul></ul><ul><ul><ul><li>Follow guidelines and recommendations </li></ul></ul></ul><ul><ul><ul><li>Make visitors’ Web experiences more efficient, effective, memorable </li></ul></ul></ul><ul><ul><li>Usability </li></ul></ul><ul><ul><ul><li>Important element of creating effective Web presence </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  73. 73. Connecting with Customers <ul><li>Important element of a corporate Web presence </li></ul><ul><li>Identify and reach out to customers </li></ul>Electronic Commerce, Eighth Edition
  74. 74. Connecting with Customers (cont’d.) <ul><li>Nature of Web communication </li></ul><ul><ul><li>Personal contact ( prospecting ) </li></ul></ul><ul><ul><ul><li>Employees individually search for, qualify, contact potential customers </li></ul></ul></ul><ul><ul><li>Mass media </li></ul></ul><ul><ul><ul><li>Deliver messages by broadcasting </li></ul></ul></ul><ul><ul><li>Addressable media </li></ul></ul><ul><ul><ul><li>Advertising efforts directed to known addressee </li></ul></ul></ul><ul><ul><li>Internet medium </li></ul></ul><ul><ul><ul><li>Occupies central space in medium choice continuum </li></ul></ul></ul>Electronic Commerce, Eighth Edition
  75. 75. Electronic Commerce, Eighth Edition
  76. 76. Summary <ul><li>Six main approaches to generate Web revenue </li></ul><ul><ul><li>Models work differently </li></ul></ul><ul><ul><li>Different business types use different models </li></ul></ul><ul><ul><li>Learn more about customers, business environment </li></ul></ul><ul><ul><ul><li>Change models </li></ul></ul></ul><ul><li>Channel conflict and cannibalization challenges </li></ul><ul><ul><li>Form strategic alliances with other companies </li></ul></ul><ul><ul><li>Contract with channel distribution managers </li></ul></ul><ul><li>B2C mobile commerce not widely successful </li></ul><ul><li>Create effective Web presence to deliver value </li></ul><ul><li>Must understand Web communication </li></ul>Electronic Commerce, Eighth Edition

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