Here are a list of the topics that will be discussed in this presentation. I will start by defining business-to-consumer. Next, I will discuss issues related to the Business side of B2C; followed by a discussion of the B2C customer. Then, I will discuss the aspect of B2C in the real world. We will do an exercise involving a real organization and how they solved a real B2C problem. Then we will look at a real organizations that has successfully incorporated B2C into their marketing plan. I will finish by summarizing main points that are essential to B2C. I have also provided a reading list at the end to provide you with further reference on the topic.
To define Business-to-Consumer, often referred to as B2C, we need to understand electronic commerce. E-commerce or E-business is trade that occurs over the Internet. E-commerce is often used when referring to consumer trade, whereas e-business is reserved for business trade. Trade can occur either between businesses (B2B), between consumers (C2C), between businesses and consumers (B2C) or consumers and businesses (C2B). Thus, when we discuss Business-to-consumer we are referring to a type of e-commerce that occurs between a business and the consumer.
Electronic Retailing or e-tailing is the selling of retail goods on the internet. E-tailing began in the mid 90’s with companies such as Dell computers and Amazon.com. B2C accounts for 10% of the total dollar value in e-tailing, while B2B comprises the other 90%. However, internet use is increasing drastically and online purchasing is expected to grow by 20% over the next 10 years. (1) (1) Roberta S. Russell, Bernard W. Taylor III; Operations Management 4 th Edition, p. 8
What might an organization want to consider before implementing B2C? The benefits vs. challenges. What about the market? Is the target community large enough to sustain the business? What are the customer behaviors? While the Internet may facilitate the emergence of new distribution channels, enhance sales and marketing as well as service effectiveness and efficiency; businesses should consider the cost of entry. They must ask themselves what are the necessary (product) ingredients, the relevant differentiators and the unmet needs of potential customers. “ Established companies need to deploy the Internet throughout their value chain, look for innovative ways to bring together virtual and physical activities, and concentrate on markets or processes for which the Internet offers real advantages.”(1) Businesses can gain insight by studying today's lead online consumers and successful online businesses. Therefore, continuous market research is necessary in order to understand the characteristics and dynamics of the online marketplace. (1) Roberta S. Russell, Bernard W. Taylor III; Operations Management 4 th Ediditon, p.41
The internet allows the organization to communicate directly with the customer. Hence, reducing or eliminating intermediaries. This reduction in human intervention saves the organization both labor costs and time. With two-way communication, the internet offers more immediate and direct consumer feedback; improving both customer service and the firms’ competitive advantage. On the Internet, retailers and customers are free of geographical constraints. Thus, allowing retailers to reach groups previously closed to them. This is advantageous in small market firms in which the local market may not be sufficient.
A well managed company is more successful than a company that is not; even more so online. Poor management is magnified when a company tries to go online. Online channels are expensive. Thus, effective management is required to motivate an organization wide commitment of resources. The rapid change and evolution of the internet can also contribute to cost and requires even more commitment from the organization. As we have seen from the benefits to B2C, intermediaries are reduced or eliminated. However, most businesses are unable to handle all of the one to one transactions on their own. Therefore, new intermediaries have been created to help facilitate customer transactions. This can be challenging in developing a supply chain the is both scaleable and flexible. Consumers are very sensitive to breakdowns in the supply chain. It is very difficult to win back a customer because of a late or unfulfilled order.
The wholesaler and retailer are replaced by new intermediaries. Infomediaries such as web assurance and customer relationship management (CRM) services, facilitate transactions between the organization and the customer. These services well be discussed in detail later on. The e-Retailer is a virtual storefront. An organization wanting to implement B2C could do so as an e-Retiler. The aggregators and portals are connected to other sites and have the ability to link the customer directly with sites related to what they are looking for. Frequently used aggregators, such as Google.com, help to eliminate the frustration of searching through numerous sites to find a simple item.
“ Companies with well-developed competitive advantages can gain efficiencies and closer customer contact through the Web.”(1) However, developing this advantage can be a challenge. Consumers behavior and their choices will change as e-commerce quickly evolves. It is important that the organization keep up with these changes and learn from their customers. Organizations that are quick to react to these changes will have the advantage over the offline alternative. Online retailers should ensure that their online solution addresses real offline compromises. "E-tailers must design their offering to beat offline alternatives on key comparison points, including price, selection and convenience. They must understand where the offline shopping experience leaves consumers dissatisfied. Then they must focus their online alternative in those areas to give customers a positive experience and compel them to return,“(2) B2C markets customization and personalization. While this may be a qualifying factor for the customer, it is shown to be secondary to brand name. Brand name and company image are order winners when a customer is searching for a particular product. This is magnified online. Online consumers are more likely to purchase from a bricks and mortar company than one they have not heard of. Organizations should work to strengthen their brands through offline marketing methods. Robert S. Russell & Bernard W. Taylor III, Operations Management 4 th Edition , Jennifer Jacobs, “How Online Retailers can Attract Customers,” Business Times (Mar. 10,2000)
To successfully incorporate B2C, is to understand the B2C customer. The B2C customer is empowered by technology. With increased technology, the customer has access to more and better information. This information leads to more choices. The internet has allowed them to go beyond their current boundary’s in search for low cost, quality products. The B2C consumer wants service that is fast and available 24 hours a day, seven days a week. They would also like this process to be quick and painless.
Why do some consumers hesitate to purchase online? Surveys have shown that consumers are reluctant to purchase online due to concerns regarding the security of their transactions. This is especially evident in the privacy of their credit card information. Because of these concerns many consumers have lied about or refused to provide personal information on a Web form. This inaccurate information can lead to problems for the organization later on. Consumer trust is essential to successful B2C plan.
Security issues are not the only thing keeping customers from purchasing online. Many consumers find the online shopping process to be confusing, full of complicated directions and annoying surprises. They complain of clicking through numerous pages, lengthy forms to be completed, and little assistance or customer service. These shoppers often become frustrated and abandon the site before completing their transaction. However, if they do make it to checkout, they are surprised by hidden costs, such as shipping, that were not disclosed before hand.
“ The B2C relationship is typically shorter term with shorter sales cycles. Interactions may be transaction-driven.”(1) What steps should an organization take to make the most out of these transactions and build an effective relationship with the customer? First of all, they must provide customer value that is superior to that of competitors. Typically this would be done by differentiating their service department, showroom or sales clerks from that of a competing firm. This may become more difficult to distinguish online, especially if the consumer is not familiar with the organization. The consumer is attuned to dealing with person-to-person transactions, it is important to build trust and credibility with these potential customers. Consumers are more likely to put their trust in a reputable, well known organization. (1) Edna Johnson Ragins; Alan J Greco, “Customer Relationship Management and E-business: More Than a Software Solution.” Review of Business (Winter 2003)
The overall goal the organization would like to see from the B2C relationship, is the conversion of visitors into buyers, and first time buyers into loyal customers. "It generally takes three purchases for a customer to imprint. The first is a trial as the customer samples the online experience. The second is confirming, as the customer revisits the site and purchases again. The third purchase cements the relationship and marks the point where loyalty and affinity develop."(1) What are some of the steps an organization can take to attract and keep new customers? Implementing CRM and web assurance services help to build on the attributes of trust and superior service. This is what the consumer is looking for when they go online to shop. (1)Jennifer Jacobs, “ How Online Retailers Can Attract Customers,” Business Times (March 10, 2000)
I had mentioned CRM (Customer Relationship Management) services earlier in the presentation. CRM can be used to gain clearer insight and more intimate understanding of customers’ buying behaviors. CRM is an infomediary that helps to “shape customers’ perceptions of the organization and its products through identifying customers, creating customer knowledge and building committed customer relationships.”(1) CRM begins by collecting information about the customer. Typical information gathered includes: demographics, preferences, past and current buying behavior. The information then can be analyzed to improve customer service practices, determine possible problems, as well as which customers are the most profitable and which are the most costly. The consumer information is used to create an ongoing relationship with the customer. The higher quality of the information and the more complete the information the better the company will be able to forecast customer behavior.
Intimate customer relationships offer the retailer several advantages. First, the relationship can create a committed customer. More than simply a repeat purchaser, the committed customer has an emotional attachment to the seller. These emotions can include trust liking and believing in the firm's ability to respond effectively and promptly to a customer problem. Committed customers can be viewed as company assets who are likely to be a source of favorable word-of-mouth referrals and are more resistant to competitors' offers. Better customer management can result in lower sales and service costs, higher buyer retention and, thus, lower customer replacement expenditures.
Customers must feel that they can trust a company. Companies can build trust by offering higher standards of privacy. One way trust can be enhanced is by Web Assurance Services. “Web assurance services are third-- party organizations that give consumers assurance of a website's conformance to the assurance service's standards. These standards may deal with the privacy of customers' information, transaction security, or the retailer's business practices.” (1) They can also bring greater consumer confidence to a company that is not well known. This confidence is increased if the assurance provider has an offline reputable image; such as the BBB. Online organizations must be prepared to discuss sales and privacy policies with customers. Web assurance services help to disclose this information with clarity, thus maintaining the quality of the website (1) Conni Lehmann; R Steve McDuffie; Bruce Runyan; L Murphy Smith, “Web Assurance Services: What Internal Auditors Need to Know,” Internal Auditing; Boston (Nov/Dec 2002)
Listed are the most commonly used Web assurance services. Each service provides a unique symbol. By clicking on the assurance provider's seal on a website, online shoppers can verify that they are at the genuine retailer's site. Clicking through to the assurance provider's site will also provide consumers with a statement that the retailer is in compliance with the service's standards. Sites that carry the BBBOnline seal must have been in business for at least one year, be members of their local BBB chapter, agreeing to abide by their standards, and committed to working with the BBB in resolving customer disputes. CPA WebTrust is offered by public accounting firms. Sites carrying this seal are issued a report by a CPA who has examined the organization’s business practices for e-commerce transactions and how well they comply with Webtrust standards. VeriSign provides a digital certificate of authenticity. The consumer is ensured that they are dealing with the genuine site, and the information sent via the web is protected from interception or altercation. TRUSTe is an organization sponsored by several of the larger Internet firms such as Microsoft and IBM. A website portraying this symbol will disclose to the consumer what personal information is to be collected, who is collecting it, how it is used, with whom it may be shared; as well as the consumers rights regarding these issues and correcting any inaccurate information.
To summarize what has been presented, we will take a look at two companies that have implemented B2C into their own organizations. We will begin with an exercise discussing and Atlanta based company, Nexchange. I will present a real problem they were faced with and I’d like to see if we could come up with actions that could be taken to correct it. Then we will look at Land’s End, a company that has excelled in B2C.
In 1999 Nexchange began looking at how shoppers were doing on its sites. (Nexchange creates stores for merchants inside sites such as CNN.com that have no e-commerce offerings of their own.) Although Nexchange's e-commerce partners reached 55 percent of all Internet users in the United States, only about 1 percent of shop visitors put up a credit card and paid for a purchase. "We comforted ourselves with the fact that we were doing about as well as everybody else," says Nexchange CEO Del Ross. Then Ross took a closer look. "We were celebrating something pretty low. We were appalled at how high our abandoned shopping cart rate was. The average abandonment rate is two-thirds, and ours was worse than average." What are some of the steps Nexchange could take to improve on this aspect? *Source: Stacy Perman, “E-tailing Survival Guide,”
After studying visitor feedback, Ross attacked the problem on several fronts. He found that the lack of any human touch spooked some shoppers, so Nexchange installed live text chat software from eGain, a company based in Sunnyvale, Calif., to give shoppers immediate online assistance from a customer service representative. Privacy concerns were another issue, and that led the company to place a prominent link to its privacy policy on the bottom of every webpage. Ross also decided to disclose shipping costs up front and ask customers to input their credit card information only at the last stage of checkout. "We surprised ourselves with how obvious some of the things that needed to be fixed were," he says. The results were even more surprising. "In eight months," Ross says, "our shopping cart abandonment rates dropped by about 30 percent and our sales volume increased dramatically." *Source: Stacy Perman, “E-tailing Survival Guide,” eComapny Now (Dec. 2000)
Lands’ End, established in the 1960’s, is a well known company with great service practices. In 1995 Lands’ End decided to expand their reputable image by becoming one of the first company’s to embrace web based e-commerce. By 2000 they had hosted 38 million visits and generated $138 million. Lands’ End has risen to the top in B2C by following the guiding principle that “what’s best for the customer is best for Land’s End.” The company has been innovative in using advanced technology to build closer relationships with its customers. With services such as personalized shopping accounts, instant messaging with a personal shopper, the ability to shop simultaneously with a friend from separate computers, a virtual model – which lets the customer try clothes on “their body”, and a sophisticated strategy - involving the U.S. Postal service for handling returns, have contributed to the overwhelming success of the sight.
To help me summarize the essentials to B2C, I have borrowed the 8 Best Practices developed by Bill Demas. Bill Demas is the VP for marketing at Vividence, a consulting firm in San Mateo, Calif., that analyzes Web traffic and online shopping experiences for e-tailing sites. 1) Sticker shock is a fast way to lose potential customers. Present product prices, shipping and handling, and taxes before you ask for billing and personal information. 2) Cybershoppers like to keep tabs on what they're buying. Give them a way to see a running tally of items and how much they've spent. 3) Users like to be able to remove items and modify quantities, especially after seeing the bill. In addition to "buy lists," add "wish lists" that let customers put items on hold while they decide what they want to purchase. Make it simple for customers to transfer items from the wish list to the buying list and vice versa. 4) Research shows that e-tail shoppers often put items in a cart and come back to the site later to make the purchase. Be sure to automatically save whatever was in the cart, even if there was no purchase. This is especially valuable at sites where the purchase is an expensive, considered one. *Source: Stacy Perman, “E-tailing Survival Guide,” eCompany Now (Dec. 2000)
5) It can be difficult for a shopper to figure out how to apply a special promotion to a purchase. Make this an obvious and simple step, and do it early in the checkout process. 6) Let customers know when a purchase is on the way or held up. If it's the latter, explain why and keep the customer up-to-date via e-mail. Provide a way for the customer to return to the site and check order status. 7) If a shopper is buying gifts, make it easy to send those gifts to a variety of different addresses. 8) Ask only for the information you need to process an order. Also, if shoppers need to go back a screen to correct an error, do not clear all the fields on the page and force them to fill out the form again. *Source: Stacy Perman, “E-tailing Survival Guide,” eCompany Now (Dec. 2000)
I had mentioned before that to be successful in B2C is to understand the customer. The customer should be the focus of any B2C web site. Determine their needs and tailor the site to meet them. Give the customer a reason to return to your site. Go beyond what they would expect from the alternative of offline services. Strive to build a relationship with the customer. A relationship of trust, customization and personalization. A relationship that is becoming more and more difficult to find offline. Study other companies and learn from their successes and failures. This is an ongoing process. Expect and strive to continuously learn from the B2C customer. Adopting Lands’ End’s motto, I would go as far as to say, “What’s best for the customer,” is best for B2C.
The information presented has been researched and adapted from the following list of articles, books and web sites.
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