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revenue models

This chapter discusses various revenue models that companies can use for their e-business websites, including web catalog models, digital content subscription models, advertising-supported models, and mixed advertising-subscription models. It provides examples of companies that have successfully implemented each type of model and outlines some of the considerations and challenges involved in each model.

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E- Business Ninth Edition Chapter 4 E-Business Revenue Models 1
E- Business, Ninth Edition 2 Learning Objectives In this chapter, you will learn about: • Revenue models • How some companies move from one revenue model to another to achieve success • Revenue strategy issues that companies face when selling on the Web • Creating an effective business presence on the Web • Web site usability • Communicating effectively with customers on the Web
E- Business, Ninth Edition 3 Revenue Models • Web business revenue-generating models – Web catalog – Digital content – Advertising-supported – Advertising-subscription mixed – Fee-based • Can work for both sale types – Business-to-consumer (B2C) – Business-to-business (B2B) • Can use same revenue model for both types of sales
E- Business, Ninth Edition 4 Web Catalog Revenue Models • Adapted from mail-order (catalog) model – Seller establishes brand image – Printed information mailed to prospective buyers • Orders placed by mail or toll-free telephone number • Expands traditional model – Replaces or supplements print catalogs – Offers flexibility • Orders placed through Web site or telephone • Payments made though Web site, telephone, or mail – Creates additional sales outlet for existing companies
E- Business, Ninth Edition 5 Web Catalog Revenue Models (cont’d.) • Computers and consumer electronics – Leading computer manufacturers • Sell a full range of products on the Web – Dell allows product configuration flexibility • Creates value – Crutchfield • Expanded successful mail-order catalog operations to include Web sites – Best Buy, J&R Music World, Radio Shack • Web sites sell same products as in stores
6 Web Catalog Revenue Models (cont’d.) • Computers and consumer electronics (cont’d.) – Marketing channel • Pathway to customers – Advantage of having several marketing channels • Reach more customers at less cost – Can combine marketing channels • Example: in-store online ordering • Example: mail catalogs with reference to retailer’s Web site 6E- Business, Ninth Edition
7 FIGURE 4-1 Combining marketing channels: Two retailer examples 7E- Business, Ninth Edition
E- Business, Ninth Edition 8 Web Catalog Revenue Models (cont’d.) • Books, music, and videos – Most visible electronic commerce examples – Amazon.com Web-only retailer originally sold books • Evolved into general retailer – Barnes & Noble, Blackwell’s, Books-A-Million, Powell’s Books • All adopted Web catalog revenue model – CDnow Web-only online music store • CD Universe copied CDnow approach – Tower Records, Sam Goody retail stores • Created Web sites to compete with CDnow
Web Catalog Revenue Models (cont’d.) • Luxury goods – Difficult to sell online • Customers want to see product in person or touch – Vera Wang and Versace • Web sites provide information • Shopper purchases at physical store • Heavy use of graphics and animation – Evian Web site • Presents information in a visually stunning way E- Business, Ninth Edition 9
Web Catalog Revenue Models (cont’d.) • Clothing retailers – Many adapted catalog sales model to Web – Display clothing photos categorized by type • Prices, sizes, colors, tailoring details – Want customers to examine clothing online • Place orders through Web site – Lands’ End online Web shopping assistance • Lands’ End Live (1999) • Online text chat and call-back feature • Ability to push Web pages to customer’s browser E- Business, Ninth Edition 10
E- Business, Ninth Edition 11 Web Catalog Revenue Models (cont’d.) • Clothing retailers (cont’d.) – Lands’ End personal shopper agent (more recent) • Learns preferences and makes suggestions – My Virtual Model (customers try clothes) • Graphic image built from customer measurements – Another feature allows: • Two shoppers using different computers to simultaneously browse Web site together • Only one of the shoppers can purchase items • Either shopper can select items to view • Selected items appear in both Web browsers
12 Web Catalog Revenue Models (cont’d.) • Clothing retailers (cont’d.) – Online overstocks stores • Reach more people than physical outlet stores – Problem: varying computer monitor color settings • Solution: send fabric swatch on request • Solution: offer generous return policies 12E- Business, Ninth Edition
E- Business, Ninth Edition 13 Web Catalog Revenue Models (cont’d.) • Flowers and gifts (gift retailers) – 1-800-Flowers • Online extension to successful telephone business • Competes with online-only florists – Godiva offers business gift plans – Hickory Farms and Mrs. Fields Cookies • Offer familiar name brands on the Web – Harry and David • Original Web site for informational purposes • Promoted catalog business and added online ordering feature
Web Catalog Revenue Models (cont’d.) • General discounters – Buy.com and Overstock.com • Borrowed Wal-Mart and discount club sales model • Sell merchandise at extremely low prices – Traditional discount retailers (Costco, Kmart, Target, Wal-Mart) • Slow to implement online sales on their Web sites • Had huge investments in physical stores • Did not understand online retailing world • Now use the Web catalog revenue model in their successful online sales operations E- Business, Ninth Edition 14
E- Business, Ninth Edition 15 Digital Content Subscription Revenue Models • Firms owning written information or information rights – Embrace the Web as a highly efficient distribution mechanism – Use the digital content revenue model • Sell subscriptions for access to information they own • Legal content – LexisNexis: offers variety of information services – Lexis.com: offers original legal information product
16 Digital Content Subscription Revenue Models (cont’d.) • Academic research content – ProQuest: digital copies of academic publications • Business content – Dow Jones newspaper publisher subscriptions • Sold digitized newspaper, magazine, and journal content subscriptions • Factiva: online content management and integration service • Technical content – Association for Computer Machinery (ACM): digital library 16E- Business, Ninth Edition
E- Business, Ninth Edition 17 Advertising-Supported Revenue Models • Used by United States broadcast network television – Provides free programming and advertising messages • Supports network operations sufficiently • Problem: measuring and charging site visitor views – Stickiness • Keeping visitors at site and attracting repeat visitors • Exposed to more advertising in a sticky site • Problem: obtaining large advertiser interest – Requires demographic information collection • Characteristics set used to group visitors
E- Business, Ninth Edition 18 Advertising-Supported Revenue Models (cont’d.) • Can obtain large advertiser interest by: – Using a specialized information Web site • Draw a specialized audience certain advertisers want to reach – Examples: • The Huffington Post and the Drudge Report • HowStuffWorks
19 FIGURE 4-2 Three strategies for an advertising-supported revenue model 19E- Business, Ninth Edition
20 Advertising-Supported Revenue Models (cont’d.) • Web portals (portal) – Site used as a launching point to enter the Web • Almost always includes a Web directory or search engine • Often includes other features – Web directories • Listing of hyperlinks to Web pages – Yahoo!: one of the first • Presents search term triggered advertising on each page 20E- Business, Ninth Edition
21 Advertising-Supported Revenue Models (cont’d.) • Web portals (cont’d.) – Portal sites using general interest strategy • AOL, Excite, Google, Bing – Portal sites not using general interest strategy • Help visitors find information within a specific knowledge domain • Advertisers pay more • Example: C-NET – Travel sites • Successful as advertising-supported online businesses • Example: Kayak 21E- Business, Ninth Edition
E- Business, Ninth Edition 22 Advertising-Supported Revenue Models (cont’d.) • Newspaper and magazine publishers – Sell advertising to cover Web site costs – Internet Public Library Online Newspapers page • Provides links to worldwide newspaper sites – Local shopping news, alternative press newspapers • Easier transition to advertising-supported Web revenue model – Newspaper’s Web presence • Provides greater exposure and advertising audience • Diverts sales from the print edition (difficult to measure) • Operating costs not covered by advertising revenue
E- Business, Ninth Edition 23 Advertising-Supported Revenue Models (cont’d.) • Targeted classified advertising sites – Can command higher rates than general advertising – Original version • Newspaper classified advertising – Growth of classified advertising Web sites • Very bad for newspapers • Example: craigslist – Web employment advertising • Most successful targeted classified advertising category • Examples: CareerBuilder.com, The Ladders and Guru.com, Monster.com
E- Business, Ninth Edition 24 Advertising-Supported Revenue Models (cont’d.) • Targeted classified advertising sites (cont’d.) – Used vehicle sites • AutoTrader.com, CycleTrader.com, BoatTrader.com • Accept paid advertising to sell cars, motorcycles, boats – Product sites with dedicated following (VetteFinders) • Successful by catering to small audiences – Potential classified advertising sites • Any site selling products useful to buyer after initial use • Musicians Buy-Line, ComicLink.com, The Golf Classifieds
E- Business, Ninth Edition 25 Advertising-Subscription Mixed Revenue Models • Subscribers pay fee and accept advertising – Typically less advertising compared to advertising- supported sites • Web sites offer different degrees of success – The New York Times (today) • Bulk of revenue derived from advertising – The Wall Street Journal (mixed model) • Subscription revenue weighted more heavily
26 FIGURE 4-3 Revenue models used by online editions of newspapers and magazines 26E- Business, Ninth Edition
E- Business, Ninth Edition 27 Advertising-Subscription Mixed Revenue Models (cont’d.) • ESPN – Leverages brand name from cable television business – Sells advertising, offers free information – Mixed model includes advertising and subscription revenue (collects Insider subscriber revenue) • Consumers Union (ConsumerReports.org) – Purely a subscription-supported site – Not-for-profit organization with no advertising – Free information • Attracts subscribers and fulfills mission
E- Business, Ninth Edition 28 Fee-for-Transaction Revenue Models • Service fee charged – Based on transaction number or size • Web site offers visitor transaction information – Personal service formerly provided by a human agent • Value chain – Disintermediation • Intermediary (human agent) removed – Reintermediation • New intermediary (fee-for-transaction Web site) introduced
E- Business, Ninth Edition 29 Fee-for-Transaction Revenue Models (cont’d.) • Travel – Travel agency revenue model: receive fee for facilitating a transaction • Travel agent adds information consolidation and filtering value – Computers also good at information consolidation and filtering • Travel agents have long used networked computers: Sabre Travel Network – Internet provided a new way to do business online
30 Fee-for-Transaction Revenue Models (cont’d.) • Travel (cont’d.) – Web-based travel agencies were new entrants • Examples: Travelocity, Expedia, Hotels.com, Hotel Discount Reservations, Orbitz • Generate advertising revenue from ads placed on travel information pages – Traditional travel agents: squeezed out • Surviving agencies charge a flat fee – Smaller travel agents specialize (cruises, hotels) • May use a reintermediation strategy (WaveHunters.com) 30E- Business, Ninth Edition
E- Business, Ninth Edition 31 FIGURE 4-4 Orbitz home page
E- Business, Ninth Edition 32 Fee-for-Transaction Revenue Models (cont’d.) • Automobile sales – Web sites implement the fee-for-transaction revenue model differently – CarsDirect.com model • Customers select specific car, site determines price and finds local dealer – Autoweb.com and Autobytel model • Locate local dealers, car sells at small premium over dealer’s nominal cost – Car salesperson: disintermediated – Web site: new intermediary (reintermediation)
E- Business, Ninth Edition 33 Fee-for-Transaction Revenue Models (cont’d.) • Stockbrokers – Original full-line brokers charged relatively high commissions • Provided advice – 1970s: deregulation resulted in discount brokers • Web-based brokerage firms: E*TRADE and Datek • Web allowed investment advice, fast trade execution online
34 Fee-for-Transaction Revenue Models (cont’d.) • Stockbrokers (cont’d.) – 1990s: discount brokers faced competition from online firms • Discount brokers and full-line brokers opened new stock trading and information Web sites – Online brokers offer transaction cost reductions – Traditional stockbrokers: disintermediated 34E- Business, Ninth Edition
E- Business, Ninth Edition 35 Fee-for-Transaction Revenue Models (cont’d.) • Insurance brokers – Quotesmith offered Internet policy price quotes directly to public (1996) • Independent insurance agents: disintermediated – Insurance policy information, comparisons, sales sites • InsWeb, Answer Financial, Insurance.com – Progressive Web site • Provides quotes for competitors’ products too – The General (General Automobile Insurance Services) Web site • Offers comfortable, anonymous experience
E- Business, Ninth Edition 36 Fee-for-Transaction Revenue Models (cont’d.) • Event tickets – Web allows event promoters to sell tickets from one virtual location to customers worldwide – Online agencies earn a fee on every ticket sold • Ticketmaster, Tickets.com, TicketWeb – Web created secondary ticket market (StubHub, TicketsNow) • Brokers connecting ticket owners with buyers • Earn fees on tickets resold for others, buy ticket blocks – Web created easy-to-find central marketplace, facilitating buyer-seller negotiations
E- Business, Ninth Edition 37 Fee-for-Transaction Revenue Models (cont’d.) • Real estate and mortgage loans – Web sites provide all traditional broker services • Coldwell Banker, Prudential – National Association of Realtors Web site • Realtor.com – 2008 financial crisis • Dramatically reduced number of mortgage brokers in business – Successful online mortgage brokers • Ditech and E-LOAN
E- Business, Ninth Edition 38 Fee-for-Transaction Revenue Models (cont’d.) • Online banking and financial services – No physical product • Easy to offer on Web – Web financial transactions concerns • Trust and reliability of financial institution – Solutions • Use existing bank’s identification and reputation • Start online bank not affiliated with existing bank (First Internet Bank of Indiana) • Use different name (Bank One used Wingspan) – Approach was not successful
39 Fee-for-Transaction Revenue Models (cont’d.) • Online banking and financial services (cont’d.) – Additional barriers preventing a more rapid rate of growth • Lack of bill presentment features • Lack of account aggregation tools – By 2012: • Industry analysts expect most banks (online and traditional) will offer aggregation services 39E- Business, Ninth Edition
E- Business, Ninth Edition 40 Fee-for-Transaction Revenue Models (cont’d.) • Online music – Recording industry: slow to embrace online distribution • Feared digital copying – Large online music stores • Revenue from fee-for-transaction model • Some sites offer subscription plans – Complicating issues • Stores offer limited number of digital music files • Stores promote their own music file format • Artists and recording companies invoke limits
41 Fee-for-Transaction Revenue Models (cont’d.) • Online music (cont’d.) – Complicating issues (cont’d.) • Buyers required to download and install Digital Rights Management (DRM) software • Varying restrictions confusing to consumers – Online music market industry failed to embrace the network effect gained by adopting one standard file format 41E- Business, Ninth Edition
42 Fee-for-Transaction Revenue Models (cont’d.) • Online music (cont’d.) – Some stores sold audio in a generally compatible file format with no copying restrictions • Mondomix MP3 and Smithsonian Folkways • Music not produced by major recording companies – Solutions • Adopt one standard file format, no copying restrictions, DRM-free MP3 format (Amazon in 2007) – By 2012: 80 percent of all music will be sold online 42E- Business, Ninth Edition
E- Business, Ninth Edition 43 Fee-for-Transaction Revenue Models (cont’d.) • Online video – Issues hampering prior sales • Large file size • Fear of online sales impairing other sales types • Inability to play on variety of devices – Overcoming the issues • New technologies improving delivery • Companies incorporating online distribution into revenue strategy • Delivery allowed on multiple devices – Through standard Web browser
44 • Electronic books – Forms of digital audio books • CDs (originally) and various types of digital files • Audible sells subscriptions – Allows monthly download of a certain number of books • Pricing is per book • Amazon.com – Offers books, newspapers, magazines, other digital format items • Delivered directly to its line of Kindle readers Fee-for-Transaction Revenue Models (cont’d.) 44E- Business, Ninth Edition
E- Business, Ninth Edition 45 Fee-for-Service Revenue Models • Companies offer Web service – Fee based on service value • Not a broker service • Not based on transactions-processed number or size • Online games – Sales revenue source • Advertising (older concept), pay-to-play for premium games, subscription fees – Average game player is 35 years old, playing computer or video games for 12 years
E- Business, Ninth Edition 46 Fee-for-Service Revenue Models (cont’d.) • Professional services – Limited Web use • State laws prohibit extension of practice • Patients may set appointments, receive online consultation – Major concern • Patient privacy – Law on the Web site • Legal consultations to United Kingdom residents – Martindale.com • Online version of Martindale-Hubbell lawyer directory
• Professional services (cont’d.) – CPA Directory • United States accounting professionals site – General health information • RealAge, Dr. Andrew Weil’s Self Healing, WebMD – Significant barrier • Patient diagnosis difficult without physical examination – Some physicians beginning to offer online consultations • For ongoing, established relationship patients Fee-for-Service Revenue Models (cont’d.) 47E- Business, Ninth Edition
Free for Many, Fee for a Few • Economics of manufacturing – Different for physical and digital products – Unit cost high percentage of physical products – Unit cost very small for digital products • Leads to a different revenue model – Offer basic product to many for free – Charge a fee to some for differentiated products • Examples: Yahoo e-mail accounts, bakery: free cookies 48E- Business, Ninth Edition
E- Business, Ninth Edition 49 Revenue Models in Transition • Companies must change revenue model – To meet needs of new and changing Web users • Some companies created e-commerce Web sites – Needed many years to grow large enough to become profitable (CNN and ESPN) • Some companies changed model or went out of business – Due to lengthy unprofitable growth phases
E- Business, Ninth Edition 50 Subscription to Advertising-Supported Model • Slate magazine – Upscale news and current events • Success expectations were high – Experienced writers and editors – Acclaim for incisive reporting and excellent writing • Initial revenue source – Annual subscription did not cover operating costs • Now an advertising-supported site – Part of the Bing portal • Value to Microsoft: increase the portal’s stickiness
E- Business, Ninth Edition 51 Advertising-Supported to Advertising- Subscription Mixed Model • Salon.com – Acclaimed for innovative content • Initial revenue source – Advertising-supported site – Needed additional money to continue operations • Now offers optional subscription version – Annual fee for Salon premium • Free of advertising • Additional content • Downloadable content
E- Business, Ninth Edition 52 Advertising-Supported to Fee-for- Services Model • Xdrive Technologies: offered free disk storage • Initial revenue source (1999): advertising-supported – Targeted e-mail advertising – Did not cover operating costs • 2005: bought by AOL – Switched to a subscription-supported model – Xdrive frequently adjusted its monthly fee downward – AOL closed the service in 2009 • Successful companies: fee based on storage amount used
E- Business, Ninth Edition 53 Advertising-Supported to Subscription Model • Northern Light search engine includes own database – Results include Web site links and abstracts of its owned content – Initial revenue source • Combination of the advertising-supported model plus a fee-based information access service • Advertising revenue: insufficient to cover service – Converted to a new subscription-supported revenue model • Mainly large corporate clients • Individual monthly billing option for articles accessed
E- Business, Ninth Edition 54 Multiple Transitions • Encyclopedia Britannica – Initial Web offerings (1994) • Britannica Internet Guide • Encyclopedia Britannica Online – Initial revenue source • Paid subscription site had low subscription sales – Converted to free advertiser-supported site (1999) • Advertising revenues declined – 2001: returned to mixed model with subscription plan and free content – Value added: sells reputation and the expertise
E- Business, Ninth Edition 55 Revenue Strategy Issues • Topics: – Web revenue models implementation issues – Dealing with the issues
Channel Conflict and Cannibalization • Channel conflict (cannibalization) – Company Web site sales activities interfere with existing sales outlets – Levis Web site and Maytag • Web sites no longer sell products • Sites now provide product, retail distributor information – Eddie Bauer • Online purchases returnable at retail stores • Required compensation and bonus plans adjustments to support Web site • Channel Cooperation made it successful E- Business, Ninth Edition 56
E- Business, Ninth Edition 57 Strategic Alliances • Strategic alliance – Two or more companies join forces • Undertake activity over long time period • Yodlee account aggregation services provider – Yodlee concentrates on developing the technology and services – Banks provide the customers • Amazon.com – Joined with Target, CDnow, ToysRUs • ToysRUs and Amazon suing each other
E- Business, Ninth Edition 58 Creating an Effective Web Presence • Organization’s presence – Public image conveyed to stakeholders – Usually not important • Until growth reaches significant size – Stakeholders • Customers, suppliers, employees, stockholders, neighbors, general public • Effective Web presence – Critical even for smallest and newest Web operating firms
Identifying Web Presence Goals • Business physical space – Focus: very specific objectives • Not image driven • Must satisfy many business needs • Often fails to convey a good presence • Web business site – Intentionally creates distinctive presences – Good Web site design provides: • Effective image-creation features • Effective image-enhancing features E- Business, Ninth Edition 59
E- Business, Ninth Edition 60 Identifying Web Presence Goals (cont’d.) • Web business site objectives: – Attracting Web site visitors – Keeping visitors to stay and explore – Convincing visitors to follow site’s links to obtain information – Creating an impression consistent with the organization’s desired image – Building a trusting relationship with visitors – Reinforcing positive images about the organization – Encouraging visitors to return to the site
61 Identifying Web Presence Goals (cont’d.) • Making Web presence consistent with brand image – Different firms establish different Web presence goals – Coca Cola Web site pages • Usually include trusted corporate image (Coke bottle) • Image: traditional position as a trusted classic – Pepsi Web site pages • Usually filled with hyperlinks to activities and product- related promotions • Image: upstart product favored by younger generation 61E- Business, Ninth Edition
62 Identifying Web Presence Goals (cont’d.) • Matching site design to function – Volkswagen of America site • Accomplishes important functions for the company • Provides links to detailed Volkswagen model information, links to a dealer locator page, links to information about the company, a link to a set of shopping tools – Volkswagen’s home page • Meets the needs of most visitors quickly and effectively – Volkswagen site enhances company image by providing useful information to customers online 62E- Business, Ninth Edition
E- Business, Ninth Edition 63 FIGURE 4-5 Volkswagen of America home page
Identifying Web Presence Goals (cont’d.) • Not-for-profit organizations – Web presence effort key goals: • Image enhancement and information dissemination – Successful site key elements • Integrate information dissemination with fund-raising • Provide two-way contact channel – American Civil Liberties Union (ACLU) • Serves many different constituencies – Web sites used to stay in touch with existing stakeholders, identify new opportunities for serving them E- Business, Ninth Edition 64
E- Business, Ninth Edition 65 FIGURE 4-6 ACLU home page
E- Business, Ninth Edition 66 Web Site Usability • Current Web presences – Few businesses accomplish all goals – Most fail to provide visitors sufficient interactive contact opportunities – Improving Web presence • Make site accessible to more people • Make site easier to use • Make site encourage visitors’ trust • Make site develop feelings of loyalty toward the organization
How the Web Is Different • Simple mid-1990s Web sites – Conveyed basic business information – No market research conducted • Web objectives achievement – Failed due to no understanding for Web presence- building media • Web sites designed to create an organization’s presence: – Contain links to standard information set – Success dependent on how this information offered E- Business, Ninth Edition 67
E- Business, Ninth Edition 68 Meeting the Needs of Web Site Visitors • Successful Web businesses: – Realize every visitor is a potential customer (partner) • Web presence is an important concern – Know visitor characteristic variations • Understand that the visitor is at the site for a reason • Varied motivations of Web site visitors – Why visitors arrive at Web sites • Learning about company products or services • Buying products or services • Obtaining warranty, service, repair policy information
E- Business, Ninth Edition 69 Meeting the Needs of Web Site Visitors (cont’d.) • Varied motivations of Web site visitors (cont’d.) – Why visitors arrive at Web sites (cont’d.) • Obtaining general company information • Obtaining financial information • Identifying people • Obtaining contact information • Following a link into the site while searching for information about a related product, service, or topic – Challenge to meet all motivations • Visitors arrive with different needs, experience, and expectation levels
E- Business, Ninth Edition 70 Meeting the Needs of Web Site Visitors (cont’d.) • Making Web sites accessible – Build interface flexibility options: • Frame use • Text-only version • Selection of smaller graphic images • Specification of streaming media connection type • Choice among information attributes – Controversial Web site design issues • Adobe Flash software use – Some tasks lend themselves to animated Web pages
E- Business, Ninth Edition 71 FIGURE 4-7 Lee® Jeans FitFinder Flash animation
E- Business, Ninth Edition 72 Meeting the Needs of Web Site Visitors (cont’d.) • Making Web sites accessible (cont’d.) – Offer multiple information formats – Consider goals in Web site construction FIGURE 4-8 Goals for business Web sites
E- Business, Ninth Edition 73 Trust and Loyalty • Creates relationship value • Good service leads to seller trust – Delivery, order handling, help selecting product, after- sale support • Satisfactory service builds customer loyalty • Customer service in electronic commerce sites – Problem • Lack integration between call centers and Web sites • Poor e-mail responsiveness
E- Business, Ninth Edition 74 Rating Electronic Commerce Web Sites • Companies routinely review electronic commerce Web sites for: – Usability, customer service, other factors – Sell the gathered information directly to the companies operating the Web sites • Include suggestions for improvements • BizRate.com posts ratings – Provides comparison shopping service – Compiles ratings by conducting surveys of sites’ customers
E- Business, Ninth Edition 75 Usability Testing • Importance – Helps meet Web site goals – Avoids Web site frustration • Customers leave site without buying anything – Simple site usability changes • Include telephone contact information • Staff a call center – Learn about visitor needs by conducting focus groups – Usability testing cost • Low compared to Web site design costs
E- Business, Ninth Edition 76 Customer-Centric Web Site Design • Important part of successful electronic business operation • Focus on meeting all site visitors’ needs • Customer-centric approach – Putting customer at center of all site designs • Follow guidelines and recommendations • Make visitors’ Web experiences more efficient, effective, memorable • Webby Awards site – Examples of good Web site design
E- Business, Ninth Edition 77 Connecting with Customers • Important element of a corporate Web presence • Identify and reach out to customers
E- Business, Ninth Edition 78 The Nature of Communication on the Web • Communication modes – Personal contact (prospecting) model • Employees individually search for, qualify, contact potential customers – Mass media • Deliver messages by broadcasting – Addressable media • Advertising efforts directed to known addressee • Internet medium – Occupies central space in medium choice continuum
E- Business, Ninth Edition 79 FIGURE 4-9 Business communication modes
E- Business, Ninth Edition 80 Summary • Six main Web revenue models – Models work differently – Different business types use different models – Companies change models as they learn more about: • Customers, business environment • Channel conflict and cannibalization challenges – One approach: channel cooperation • Effective Web presence delivers customer value – Web site visitors arrive with a variety of expectations, prior knowledge, skill levels, technology • Web communication fits in between personal contact and mass media

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revenue models

  • 1.
    E- Business Ninth Edition Chapter4 E-Business Revenue Models 1
  • 2.
    E- Business, NinthEdition 2 Learning Objectives In this chapter, you will learn about: • Revenue models • How some companies move from one revenue model to another to achieve success • Revenue strategy issues that companies face when selling on the Web • Creating an effective business presence on the Web • Web site usability • Communicating effectively with customers on the Web
  • 3.
    E- Business, NinthEdition 3 Revenue Models • Web business revenue-generating models – Web catalog – Digital content – Advertising-supported – Advertising-subscription mixed – Fee-based • Can work for both sale types – Business-to-consumer (B2C) – Business-to-business (B2B) • Can use same revenue model for both types of sales
  • 4.
    E- Business, NinthEdition 4 Web Catalog Revenue Models • Adapted from mail-order (catalog) model – Seller establishes brand image – Printed information mailed to prospective buyers • Orders placed by mail or toll-free telephone number • Expands traditional model – Replaces or supplements print catalogs – Offers flexibility • Orders placed through Web site or telephone • Payments made though Web site, telephone, or mail – Creates additional sales outlet for existing companies
  • 5.
    E- Business, NinthEdition 5 Web Catalog Revenue Models (cont’d.) • Computers and consumer electronics – Leading computer manufacturers • Sell a full range of products on the Web – Dell allows product configuration flexibility • Creates value – Crutchfield • Expanded successful mail-order catalog operations to include Web sites – Best Buy, J&R Music World, Radio Shack • Web sites sell same products as in stores
  • 6.
    6 Web Catalog RevenueModels (cont’d.) • Computers and consumer electronics (cont’d.) – Marketing channel • Pathway to customers – Advantage of having several marketing channels • Reach more customers at less cost – Can combine marketing channels • Example: in-store online ordering • Example: mail catalogs with reference to retailer’s Web site 6E- Business, Ninth Edition
  • 7.
    7 FIGURE 4-1 Combiningmarketing channels: Two retailer examples 7E- Business, Ninth Edition
  • 8.
    E- Business, NinthEdition 8 Web Catalog Revenue Models (cont’d.) • Books, music, and videos – Most visible electronic commerce examples – Amazon.com Web-only retailer originally sold books • Evolved into general retailer – Barnes & Noble, Blackwell’s, Books-A-Million, Powell’s Books • All adopted Web catalog revenue model – CDnow Web-only online music store • CD Universe copied CDnow approach – Tower Records, Sam Goody retail stores • Created Web sites to compete with CDnow
  • 9.
    Web Catalog RevenueModels (cont’d.) • Luxury goods – Difficult to sell online • Customers want to see product in person or touch – Vera Wang and Versace • Web sites provide information • Shopper purchases at physical store • Heavy use of graphics and animation – Evian Web site • Presents information in a visually stunning way E- Business, Ninth Edition 9
  • 10.
    Web Catalog RevenueModels (cont’d.) • Clothing retailers – Many adapted catalog sales model to Web – Display clothing photos categorized by type • Prices, sizes, colors, tailoring details – Want customers to examine clothing online • Place orders through Web site – Lands’ End online Web shopping assistance • Lands’ End Live (1999) • Online text chat and call-back feature • Ability to push Web pages to customer’s browser E- Business, Ninth Edition 10
  • 11.
    E- Business, NinthEdition 11 Web Catalog Revenue Models (cont’d.) • Clothing retailers (cont’d.) – Lands’ End personal shopper agent (more recent) • Learns preferences and makes suggestions – My Virtual Model (customers try clothes) • Graphic image built from customer measurements – Another feature allows: • Two shoppers using different computers to simultaneously browse Web site together • Only one of the shoppers can purchase items • Either shopper can select items to view • Selected items appear in both Web browsers
  • 12.
    12 Web Catalog RevenueModels (cont’d.) • Clothing retailers (cont’d.) – Online overstocks stores • Reach more people than physical outlet stores – Problem: varying computer monitor color settings • Solution: send fabric swatch on request • Solution: offer generous return policies 12E- Business, Ninth Edition
  • 13.
    E- Business, NinthEdition 13 Web Catalog Revenue Models (cont’d.) • Flowers and gifts (gift retailers) – 1-800-Flowers • Online extension to successful telephone business • Competes with online-only florists – Godiva offers business gift plans – Hickory Farms and Mrs. Fields Cookies • Offer familiar name brands on the Web – Harry and David • Original Web site for informational purposes • Promoted catalog business and added online ordering feature
  • 14.
    Web Catalog RevenueModels (cont’d.) • General discounters – Buy.com and Overstock.com • Borrowed Wal-Mart and discount club sales model • Sell merchandise at extremely low prices – Traditional discount retailers (Costco, Kmart, Target, Wal-Mart) • Slow to implement online sales on their Web sites • Had huge investments in physical stores • Did not understand online retailing world • Now use the Web catalog revenue model in their successful online sales operations E- Business, Ninth Edition 14
  • 15.
    E- Business, NinthEdition 15 Digital Content Subscription Revenue Models • Firms owning written information or information rights – Embrace the Web as a highly efficient distribution mechanism – Use the digital content revenue model • Sell subscriptions for access to information they own • Legal content – LexisNexis: offers variety of information services – Lexis.com: offers original legal information product
  • 16.
    16 Digital Content SubscriptionRevenue Models (cont’d.) • Academic research content – ProQuest: digital copies of academic publications • Business content – Dow Jones newspaper publisher subscriptions • Sold digitized newspaper, magazine, and journal content subscriptions • Factiva: online content management and integration service • Technical content – Association for Computer Machinery (ACM): digital library 16E- Business, Ninth Edition
  • 17.
    E- Business, NinthEdition 17 Advertising-Supported Revenue Models • Used by United States broadcast network television – Provides free programming and advertising messages • Supports network operations sufficiently • Problem: measuring and charging site visitor views – Stickiness • Keeping visitors at site and attracting repeat visitors • Exposed to more advertising in a sticky site • Problem: obtaining large advertiser interest – Requires demographic information collection • Characteristics set used to group visitors
  • 18.
    E- Business, NinthEdition 18 Advertising-Supported Revenue Models (cont’d.) • Can obtain large advertiser interest by: – Using a specialized information Web site • Draw a specialized audience certain advertisers want to reach – Examples: • The Huffington Post and the Drudge Report • HowStuffWorks
  • 19.
    19 FIGURE 4-2 Threestrategies for an advertising-supported revenue model 19E- Business, Ninth Edition
  • 20.
    20 Advertising-Supported Revenue Models (cont’d.) •Web portals (portal) – Site used as a launching point to enter the Web • Almost always includes a Web directory or search engine • Often includes other features – Web directories • Listing of hyperlinks to Web pages – Yahoo!: one of the first • Presents search term triggered advertising on each page 20E- Business, Ninth Edition
  • 21.
    21 Advertising-Supported Revenue Models (cont’d.) •Web portals (cont’d.) – Portal sites using general interest strategy • AOL, Excite, Google, Bing – Portal sites not using general interest strategy • Help visitors find information within a specific knowledge domain • Advertisers pay more • Example: C-NET – Travel sites • Successful as advertising-supported online businesses • Example: Kayak 21E- Business, Ninth Edition
  • 22.
    E- Business, NinthEdition 22 Advertising-Supported Revenue Models (cont’d.) • Newspaper and magazine publishers – Sell advertising to cover Web site costs – Internet Public Library Online Newspapers page • Provides links to worldwide newspaper sites – Local shopping news, alternative press newspapers • Easier transition to advertising-supported Web revenue model – Newspaper’s Web presence • Provides greater exposure and advertising audience • Diverts sales from the print edition (difficult to measure) • Operating costs not covered by advertising revenue
  • 23.
    E- Business, NinthEdition 23 Advertising-Supported Revenue Models (cont’d.) • Targeted classified advertising sites – Can command higher rates than general advertising – Original version • Newspaper classified advertising – Growth of classified advertising Web sites • Very bad for newspapers • Example: craigslist – Web employment advertising • Most successful targeted classified advertising category • Examples: CareerBuilder.com, The Ladders and Guru.com, Monster.com
  • 24.
    E- Business, NinthEdition 24 Advertising-Supported Revenue Models (cont’d.) • Targeted classified advertising sites (cont’d.) – Used vehicle sites • AutoTrader.com, CycleTrader.com, BoatTrader.com • Accept paid advertising to sell cars, motorcycles, boats – Product sites with dedicated following (VetteFinders) • Successful by catering to small audiences – Potential classified advertising sites • Any site selling products useful to buyer after initial use • Musicians Buy-Line, ComicLink.com, The Golf Classifieds
  • 25.
    E- Business, NinthEdition 25 Advertising-Subscription Mixed Revenue Models • Subscribers pay fee and accept advertising – Typically less advertising compared to advertising- supported sites • Web sites offer different degrees of success – The New York Times (today) • Bulk of revenue derived from advertising – The Wall Street Journal (mixed model) • Subscription revenue weighted more heavily
  • 26.
    26 FIGURE 4-3 Revenuemodels used by online editions of newspapers and magazines 26E- Business, Ninth Edition
  • 27.
    E- Business, NinthEdition 27 Advertising-Subscription Mixed Revenue Models (cont’d.) • ESPN – Leverages brand name from cable television business – Sells advertising, offers free information – Mixed model includes advertising and subscription revenue (collects Insider subscriber revenue) • Consumers Union (ConsumerReports.org) – Purely a subscription-supported site – Not-for-profit organization with no advertising – Free information • Attracts subscribers and fulfills mission
  • 28.
    E- Business, NinthEdition 28 Fee-for-Transaction Revenue Models • Service fee charged – Based on transaction number or size • Web site offers visitor transaction information – Personal service formerly provided by a human agent • Value chain – Disintermediation • Intermediary (human agent) removed – Reintermediation • New intermediary (fee-for-transaction Web site) introduced
  • 29.
    E- Business, NinthEdition 29 Fee-for-Transaction Revenue Models (cont’d.) • Travel – Travel agency revenue model: receive fee for facilitating a transaction • Travel agent adds information consolidation and filtering value – Computers also good at information consolidation and filtering • Travel agents have long used networked computers: Sabre Travel Network – Internet provided a new way to do business online
  • 30.
    30 Fee-for-Transaction Revenue Models (cont’d.) •Travel (cont’d.) – Web-based travel agencies were new entrants • Examples: Travelocity, Expedia, Hotels.com, Hotel Discount Reservations, Orbitz • Generate advertising revenue from ads placed on travel information pages – Traditional travel agents: squeezed out • Surviving agencies charge a flat fee – Smaller travel agents specialize (cruises, hotels) • May use a reintermediation strategy (WaveHunters.com) 30E- Business, Ninth Edition
  • 31.
    E- Business, NinthEdition 31 FIGURE 4-4 Orbitz home page
  • 32.
    E- Business, NinthEdition 32 Fee-for-Transaction Revenue Models (cont’d.) • Automobile sales – Web sites implement the fee-for-transaction revenue model differently – CarsDirect.com model • Customers select specific car, site determines price and finds local dealer – Autoweb.com and Autobytel model • Locate local dealers, car sells at small premium over dealer’s nominal cost – Car salesperson: disintermediated – Web site: new intermediary (reintermediation)
  • 33.
    E- Business, NinthEdition 33 Fee-for-Transaction Revenue Models (cont’d.) • Stockbrokers – Original full-line brokers charged relatively high commissions • Provided advice – 1970s: deregulation resulted in discount brokers • Web-based brokerage firms: E*TRADE and Datek • Web allowed investment advice, fast trade execution online
  • 34.
    34 Fee-for-Transaction Revenue Models (cont’d.) •Stockbrokers (cont’d.) – 1990s: discount brokers faced competition from online firms • Discount brokers and full-line brokers opened new stock trading and information Web sites – Online brokers offer transaction cost reductions – Traditional stockbrokers: disintermediated 34E- Business, Ninth Edition
  • 35.
    E- Business, NinthEdition 35 Fee-for-Transaction Revenue Models (cont’d.) • Insurance brokers – Quotesmith offered Internet policy price quotes directly to public (1996) • Independent insurance agents: disintermediated – Insurance policy information, comparisons, sales sites • InsWeb, Answer Financial, Insurance.com – Progressive Web site • Provides quotes for competitors’ products too – The General (General Automobile Insurance Services) Web site • Offers comfortable, anonymous experience
  • 36.
    E- Business, NinthEdition 36 Fee-for-Transaction Revenue Models (cont’d.) • Event tickets – Web allows event promoters to sell tickets from one virtual location to customers worldwide – Online agencies earn a fee on every ticket sold • Ticketmaster, Tickets.com, TicketWeb – Web created secondary ticket market (StubHub, TicketsNow) • Brokers connecting ticket owners with buyers • Earn fees on tickets resold for others, buy ticket blocks – Web created easy-to-find central marketplace, facilitating buyer-seller negotiations
  • 37.
    E- Business, NinthEdition 37 Fee-for-Transaction Revenue Models (cont’d.) • Real estate and mortgage loans – Web sites provide all traditional broker services • Coldwell Banker, Prudential – National Association of Realtors Web site • Realtor.com – 2008 financial crisis • Dramatically reduced number of mortgage brokers in business – Successful online mortgage brokers • Ditech and E-LOAN
  • 38.
    E- Business, NinthEdition 38 Fee-for-Transaction Revenue Models (cont’d.) • Online banking and financial services – No physical product • Easy to offer on Web – Web financial transactions concerns • Trust and reliability of financial institution – Solutions • Use existing bank’s identification and reputation • Start online bank not affiliated with existing bank (First Internet Bank of Indiana) • Use different name (Bank One used Wingspan) – Approach was not successful
  • 39.
    39 Fee-for-Transaction Revenue Models (cont’d.) •Online banking and financial services (cont’d.) – Additional barriers preventing a more rapid rate of growth • Lack of bill presentment features • Lack of account aggregation tools – By 2012: • Industry analysts expect most banks (online and traditional) will offer aggregation services 39E- Business, Ninth Edition
  • 40.
    E- Business, NinthEdition 40 Fee-for-Transaction Revenue Models (cont’d.) • Online music – Recording industry: slow to embrace online distribution • Feared digital copying – Large online music stores • Revenue from fee-for-transaction model • Some sites offer subscription plans – Complicating issues • Stores offer limited number of digital music files • Stores promote their own music file format • Artists and recording companies invoke limits
  • 41.
    41 Fee-for-Transaction Revenue Models (cont’d.) •Online music (cont’d.) – Complicating issues (cont’d.) • Buyers required to download and install Digital Rights Management (DRM) software • Varying restrictions confusing to consumers – Online music market industry failed to embrace the network effect gained by adopting one standard file format 41E- Business, Ninth Edition
  • 42.
    42 Fee-for-Transaction Revenue Models (cont’d.) •Online music (cont’d.) – Some stores sold audio in a generally compatible file format with no copying restrictions • Mondomix MP3 and Smithsonian Folkways • Music not produced by major recording companies – Solutions • Adopt one standard file format, no copying restrictions, DRM-free MP3 format (Amazon in 2007) – By 2012: 80 percent of all music will be sold online 42E- Business, Ninth Edition
  • 43.
    E- Business, NinthEdition 43 Fee-for-Transaction Revenue Models (cont’d.) • Online video – Issues hampering prior sales • Large file size • Fear of online sales impairing other sales types • Inability to play on variety of devices – Overcoming the issues • New technologies improving delivery • Companies incorporating online distribution into revenue strategy • Delivery allowed on multiple devices – Through standard Web browser
  • 44.
    44 • Electronic books –Forms of digital audio books • CDs (originally) and various types of digital files • Audible sells subscriptions – Allows monthly download of a certain number of books • Pricing is per book • Amazon.com – Offers books, newspapers, magazines, other digital format items • Delivered directly to its line of Kindle readers Fee-for-Transaction Revenue Models (cont’d.) 44E- Business, Ninth Edition
  • 45.
    E- Business, NinthEdition 45 Fee-for-Service Revenue Models • Companies offer Web service – Fee based on service value • Not a broker service • Not based on transactions-processed number or size • Online games – Sales revenue source • Advertising (older concept), pay-to-play for premium games, subscription fees – Average game player is 35 years old, playing computer or video games for 12 years
  • 46.
    E- Business, NinthEdition 46 Fee-for-Service Revenue Models (cont’d.) • Professional services – Limited Web use • State laws prohibit extension of practice • Patients may set appointments, receive online consultation – Major concern • Patient privacy – Law on the Web site • Legal consultations to United Kingdom residents – Martindale.com • Online version of Martindale-Hubbell lawyer directory
  • 47.
    • Professional services(cont’d.) – CPA Directory • United States accounting professionals site – General health information • RealAge, Dr. Andrew Weil’s Self Healing, WebMD – Significant barrier • Patient diagnosis difficult without physical examination – Some physicians beginning to offer online consultations • For ongoing, established relationship patients Fee-for-Service Revenue Models (cont’d.) 47E- Business, Ninth Edition
  • 48.
    Free for Many,Fee for a Few • Economics of manufacturing – Different for physical and digital products – Unit cost high percentage of physical products – Unit cost very small for digital products • Leads to a different revenue model – Offer basic product to many for free – Charge a fee to some for differentiated products • Examples: Yahoo e-mail accounts, bakery: free cookies 48E- Business, Ninth Edition
  • 49.
    E- Business, NinthEdition 49 Revenue Models in Transition • Companies must change revenue model – To meet needs of new and changing Web users • Some companies created e-commerce Web sites – Needed many years to grow large enough to become profitable (CNN and ESPN) • Some companies changed model or went out of business – Due to lengthy unprofitable growth phases
  • 50.
    E- Business, NinthEdition 50 Subscription to Advertising-Supported Model • Slate magazine – Upscale news and current events • Success expectations were high – Experienced writers and editors – Acclaim for incisive reporting and excellent writing • Initial revenue source – Annual subscription did not cover operating costs • Now an advertising-supported site – Part of the Bing portal • Value to Microsoft: increase the portal’s stickiness
  • 51.
    E- Business, NinthEdition 51 Advertising-Supported to Advertising- Subscription Mixed Model • Salon.com – Acclaimed for innovative content • Initial revenue source – Advertising-supported site – Needed additional money to continue operations • Now offers optional subscription version – Annual fee for Salon premium • Free of advertising • Additional content • Downloadable content
  • 52.
    E- Business, NinthEdition 52 Advertising-Supported to Fee-for- Services Model • Xdrive Technologies: offered free disk storage • Initial revenue source (1999): advertising-supported – Targeted e-mail advertising – Did not cover operating costs • 2005: bought by AOL – Switched to a subscription-supported model – Xdrive frequently adjusted its monthly fee downward – AOL closed the service in 2009 • Successful companies: fee based on storage amount used
  • 53.
    E- Business, NinthEdition 53 Advertising-Supported to Subscription Model • Northern Light search engine includes own database – Results include Web site links and abstracts of its owned content – Initial revenue source • Combination of the advertising-supported model plus a fee-based information access service • Advertising revenue: insufficient to cover service – Converted to a new subscription-supported revenue model • Mainly large corporate clients • Individual monthly billing option for articles accessed
  • 54.
    E- Business, NinthEdition 54 Multiple Transitions • Encyclopedia Britannica – Initial Web offerings (1994) • Britannica Internet Guide • Encyclopedia Britannica Online – Initial revenue source • Paid subscription site had low subscription sales – Converted to free advertiser-supported site (1999) • Advertising revenues declined – 2001: returned to mixed model with subscription plan and free content – Value added: sells reputation and the expertise
  • 55.
    E- Business, NinthEdition 55 Revenue Strategy Issues • Topics: – Web revenue models implementation issues – Dealing with the issues
  • 56.
    Channel Conflict andCannibalization • Channel conflict (cannibalization) – Company Web site sales activities interfere with existing sales outlets – Levis Web site and Maytag • Web sites no longer sell products • Sites now provide product, retail distributor information – Eddie Bauer • Online purchases returnable at retail stores • Required compensation and bonus plans adjustments to support Web site • Channel Cooperation made it successful E- Business, Ninth Edition 56
  • 57.
    E- Business, NinthEdition 57 Strategic Alliances • Strategic alliance – Two or more companies join forces • Undertake activity over long time period • Yodlee account aggregation services provider – Yodlee concentrates on developing the technology and services – Banks provide the customers • Amazon.com – Joined with Target, CDnow, ToysRUs • ToysRUs and Amazon suing each other
  • 58.
    E- Business, NinthEdition 58 Creating an Effective Web Presence • Organization’s presence – Public image conveyed to stakeholders – Usually not important • Until growth reaches significant size – Stakeholders • Customers, suppliers, employees, stockholders, neighbors, general public • Effective Web presence – Critical even for smallest and newest Web operating firms
  • 59.
    Identifying Web PresenceGoals • Business physical space – Focus: very specific objectives • Not image driven • Must satisfy many business needs • Often fails to convey a good presence • Web business site – Intentionally creates distinctive presences – Good Web site design provides: • Effective image-creation features • Effective image-enhancing features E- Business, Ninth Edition 59
  • 60.
    E- Business, NinthEdition 60 Identifying Web Presence Goals (cont’d.) • Web business site objectives: – Attracting Web site visitors – Keeping visitors to stay and explore – Convincing visitors to follow site’s links to obtain information – Creating an impression consistent with the organization’s desired image – Building a trusting relationship with visitors – Reinforcing positive images about the organization – Encouraging visitors to return to the site
  • 61.
    61 Identifying Web PresenceGoals (cont’d.) • Making Web presence consistent with brand image – Different firms establish different Web presence goals – Coca Cola Web site pages • Usually include trusted corporate image (Coke bottle) • Image: traditional position as a trusted classic – Pepsi Web site pages • Usually filled with hyperlinks to activities and product- related promotions • Image: upstart product favored by younger generation 61E- Business, Ninth Edition
  • 62.
    62 Identifying Web PresenceGoals (cont’d.) • Matching site design to function – Volkswagen of America site • Accomplishes important functions for the company • Provides links to detailed Volkswagen model information, links to a dealer locator page, links to information about the company, a link to a set of shopping tools – Volkswagen’s home page • Meets the needs of most visitors quickly and effectively – Volkswagen site enhances company image by providing useful information to customers online 62E- Business, Ninth Edition
  • 63.
    E- Business, NinthEdition 63 FIGURE 4-5 Volkswagen of America home page
  • 64.
    Identifying Web PresenceGoals (cont’d.) • Not-for-profit organizations – Web presence effort key goals: • Image enhancement and information dissemination – Successful site key elements • Integrate information dissemination with fund-raising • Provide two-way contact channel – American Civil Liberties Union (ACLU) • Serves many different constituencies – Web sites used to stay in touch with existing stakeholders, identify new opportunities for serving them E- Business, Ninth Edition 64
  • 65.
    E- Business, NinthEdition 65 FIGURE 4-6 ACLU home page
  • 66.
    E- Business, NinthEdition 66 Web Site Usability • Current Web presences – Few businesses accomplish all goals – Most fail to provide visitors sufficient interactive contact opportunities – Improving Web presence • Make site accessible to more people • Make site easier to use • Make site encourage visitors’ trust • Make site develop feelings of loyalty toward the organization
  • 67.
    How the WebIs Different • Simple mid-1990s Web sites – Conveyed basic business information – No market research conducted • Web objectives achievement – Failed due to no understanding for Web presence- building media • Web sites designed to create an organization’s presence: – Contain links to standard information set – Success dependent on how this information offered E- Business, Ninth Edition 67
  • 68.
    E- Business, NinthEdition 68 Meeting the Needs of Web Site Visitors • Successful Web businesses: – Realize every visitor is a potential customer (partner) • Web presence is an important concern – Know visitor characteristic variations • Understand that the visitor is at the site for a reason • Varied motivations of Web site visitors – Why visitors arrive at Web sites • Learning about company products or services • Buying products or services • Obtaining warranty, service, repair policy information
  • 69.
    E- Business, NinthEdition 69 Meeting the Needs of Web Site Visitors (cont’d.) • Varied motivations of Web site visitors (cont’d.) – Why visitors arrive at Web sites (cont’d.) • Obtaining general company information • Obtaining financial information • Identifying people • Obtaining contact information • Following a link into the site while searching for information about a related product, service, or topic – Challenge to meet all motivations • Visitors arrive with different needs, experience, and expectation levels
  • 70.
    E- Business, NinthEdition 70 Meeting the Needs of Web Site Visitors (cont’d.) • Making Web sites accessible – Build interface flexibility options: • Frame use • Text-only version • Selection of smaller graphic images • Specification of streaming media connection type • Choice among information attributes – Controversial Web site design issues • Adobe Flash software use – Some tasks lend themselves to animated Web pages
  • 71.
    E- Business, NinthEdition 71 FIGURE 4-7 Lee® Jeans FitFinder Flash animation
  • 72.
    E- Business, NinthEdition 72 Meeting the Needs of Web Site Visitors (cont’d.) • Making Web sites accessible (cont’d.) – Offer multiple information formats – Consider goals in Web site construction FIGURE 4-8 Goals for business Web sites
  • 73.
    E- Business, NinthEdition 73 Trust and Loyalty • Creates relationship value • Good service leads to seller trust – Delivery, order handling, help selecting product, after- sale support • Satisfactory service builds customer loyalty • Customer service in electronic commerce sites – Problem • Lack integration between call centers and Web sites • Poor e-mail responsiveness
  • 74.
    E- Business, NinthEdition 74 Rating Electronic Commerce Web Sites • Companies routinely review electronic commerce Web sites for: – Usability, customer service, other factors – Sell the gathered information directly to the companies operating the Web sites • Include suggestions for improvements • BizRate.com posts ratings – Provides comparison shopping service – Compiles ratings by conducting surveys of sites’ customers
  • 75.
    E- Business, NinthEdition 75 Usability Testing • Importance – Helps meet Web site goals – Avoids Web site frustration • Customers leave site without buying anything – Simple site usability changes • Include telephone contact information • Staff a call center – Learn about visitor needs by conducting focus groups – Usability testing cost • Low compared to Web site design costs
  • 76.
    E- Business, NinthEdition 76 Customer-Centric Web Site Design • Important part of successful electronic business operation • Focus on meeting all site visitors’ needs • Customer-centric approach – Putting customer at center of all site designs • Follow guidelines and recommendations • Make visitors’ Web experiences more efficient, effective, memorable • Webby Awards site – Examples of good Web site design
  • 77.
    E- Business, NinthEdition 77 Connecting with Customers • Important element of a corporate Web presence • Identify and reach out to customers
  • 78.
    E- Business, NinthEdition 78 The Nature of Communication on the Web • Communication modes – Personal contact (prospecting) model • Employees individually search for, qualify, contact potential customers – Mass media • Deliver messages by broadcasting – Addressable media • Advertising efforts directed to known addressee • Internet medium – Occupies central space in medium choice continuum
  • 79.
    E- Business, NinthEdition 79 FIGURE 4-9 Business communication modes
  • 80.
    E- Business, NinthEdition 80 Summary • Six main Web revenue models – Models work differently – Different business types use different models – Companies change models as they learn more about: • Customers, business environment • Channel conflict and cannibalization challenges – One approach: channel cooperation • Effective Web presence delivers customer value – Web site visitors arrive with a variety of expectations, prior knowledge, skill levels, technology • Web communication fits in between personal contact and mass media