Chapter 5 Consumer-Focused E-Commerce Copyright © 2003, Addison-Wesley The Dot-Com Revolution Internet growing exponentially In the late 1990’s, extrapolations.

Chapter 5

Consumer-Focused E-Commerce

Copyright © 2003, Addison-Wesley

The Dot-Com Revolution

Internet growing exponentiallyIn the late 1990’s, extrapolations based on then-current Internet growth rates suggested that the number of Internet users would soon exceed the population of the world

Exploding potential marketplace Small slice valuable if pie big enough

Improve customer service Hype


Cost of Entry

Bricks-and-mortar presence Purchase real estate Sales support equipment Very expensive

E-retailer or e-tailer Open standard infrastructure Virtual “storefront”

Low-cost real estate


Funding SourcesStartup costs may be lower than a physical presence, but development & buildout can still incur substantial costs

Angels Wealthy individuals, relatives, etc. Seed money for equity

Venture capitalists Investing companies Seed money for equity

Customer investment Computer and software ISP account Data entry


The Hook

A means of attracting customers Unique product or service Low price Convenience Customer services Free stuff

A good hook, by itself, is not enough and can actually prove to be a detriment to your business


Figure 5.1 Some sites offer free services.

Note buttons to left of Yahoo!


The Race To Be First

Accelerating rate of change Time to market & Cycle time are key

objectives Delays mean lost sales opportunities

First mover status The driving motivation for many dot-coms Just be first Must ask if the product or service is worth it,

not just “Am I first?”


Back to Business Basics

Brand name still counts Amazon, Barnes & Noble, and Borders Bricks-and-clicks strategy utilizes brand

awareness of traditional business when they move online

Brand name Implies stability Reduces perceived risk of fraud Minimizes returns hassle


Figure 5.3 The dot-com advertisers from Super Bowl XXXIV.

How many do you recognize?

Speed branding doesn’t work!

Super Bowl XXXIVAdvertisersAgillionAutoTraderBritannicaComputerEpidemicE-TradeHealtheon/WebMDHotJobsKforceLifeMindersMicroStrategyMonsterNetplianceOnMoneyOurBeginningOxygenPetsWall Street Journal InteractiveWebEx

Customer servicesAutomobilesEncyclopediasComputer informationAdvertising servicesStock tradingMedical informationJob placement servicesJob placement servicesDirect marketingBusiness intelligenceJob placement servicesInternet browsing appliancePersonal financeWedding invitationsWomen's issuesPet suppliesNews services

E-meeting tools

Product


Finding Potential Customers

Advertising Untargeted e-mail

Risk – spam Targeted e-mail

Still a risk of spam Search engines & directories

Target – be in top 20 following search Metatags


Figure 5.4 The metatag entries for a textbook’s Web page.


Search Engine Don’ts

Popular search terms such as “sex” & “Lord of the Rings” may yield hits to your site but not increase the success of your business. The objective is not to generate hits, but to increase the odds that your website appears within the top 20 search results for a potential customer who just might be looking for something like your product. Rather than including popular search terms, a better strategy is to exclude them (if they have nothing to do with your business) and focus on search terms that uniquely identify your product.


Creating Repeat Customers

Window shoppers generate zero revenue

Good Web site necessary Good Web site not sufficient Must offer the customer value

Personalized catalog Customer relationship management

(CRM)


Figure 5.5 A personalized Web page.

No, this customer was not recently married. CRM software does not always work as advertised.


Customer Relationship Management (CRM)

CRM is a powerful customer acquisition and retention tool that incorporates numerous technologies and applications to support sales & marketing. A typical CRM system captures data from all customer contact points and consolidates them in a customer database or data warehouse. Subsequent analysis of the data allows the company to identify individual customer preferences, track demographic trends, evaluate the effectiveness of an ad campaign, etc. Most CRM systems also support contact management (customer name, address, telephone), sales force automation, support, and other tools


Customer Relationship Management (CRM)

Customer acquisition/retention tool Sales and marketing support Data collected at all contact points Stored in data warehouse

Data analysis and data mining Ultimate objective is lock-in

Vested interest not to change


Sustainable Competitive Advantage

B2C front-end easy to copy Efficiency gains easier to protect

Value chain integration Supply chain integration

Customization of your products/services

One-to-one relationship marketing CRM

Risk – privacy violations


B2C Revenue Sources

Selling digital products Software, music, images, electronic

games Immune from diminishing returns Low distribution cost Danger – protecting intellectual property

Selling physical products Intense price competition Cost-control is key to profitability


Figure 5.7 Amazon’s virtual warehouse exists only in cyberspace.

Supplier A'sstock

Supplier B'sstock

Supplier C'sstock

Supplier D'sstock

Ship to customer

Amazon's stock

Significant reduction in operating costs by letting the suppliers of less popular products ship directly to the

customer


Selling services

Information is digital Fees

Per transaction – E-Trade Percentage fee – eBay, Expedia Arrange physical delivery – FTD


Selling Advertising

Ad types Banner ad – same window as page Pop-up ad – new window

Pop-under ad – hidden under page Pop-off ad – partly off page; must move

Few good efficiency measures Pricing models include CPM Real potential is market

segmentation


Figure 5.10 Measuring online advertising.

Measure Definition Click (or ad click) The act of clicking on an ad. Click ratio Ratio of visitors to a page who click on an ad. Click through The process of clicking on an ad and going to the advertiser’s

website. Also known as an ad click or a request. CPC Cost-per-click. CPM Cost per thousand impressions. Effective frequency Number of times a visitor is exposed to a particular ad per unit of

time. Hit Any request for an HTML document such as a web page or an

embedded document. Note that a single page view might imply several hits, one for each page element.

Impression The appearance of an ad on a web page. Also known as an ad view or a page view.

Page An HTML document. Page impression An aggregate count of the number of times a web site has been

accessed or viewed by a user. Each page impression is a hit. Page view The act of accessing a web page. Reach Number of visitors exposed to an ad over a given period of time. Unique visitor A person who returns to a website more than once during a

specified period of time. Visit A set of requests made by one user during one continuous

session. A single visit might represent multiple hits.

These measures are largely ineffective at calculating the success of a particular ad


Usage Charges and Subscription Fees

Free services are becoming more rare Giving stuff away debt, not profit

Evolving model may resemble TV Free, over-the-air channels Fee for basic cable service Additional fee for premium services Per-event fee for pay-per-view


Not-for-Profit Web Sites

Virtual communities Single focus Information, support, interaction Health support groups

Government-to-consumer (G2C) sites Information Services


Figure 5.11 The President’s Web site.


Payment Services

Credit cards Visa, MasterCard, AE

Escrow services Internet bill presentment and

payment Service provider consolidation model Customer consolidation model

E-cash and digital cash Pay for micro-transactions


Figure 5.13 The Visa network.

Visa Central

Issuing Bank Acquiring Bank

Cardholder Cardholder Merchant Merchant


Information Services

Objective Provide enough value to capture

visitors Higher advertising fees More usage fees

Search engines – Google Portals – AOL, MSN, Yahoo Bots, such as shopping bots

Chapter 5 Consumer-Focused E-Commerce Copyright © 2003, Addison-Wesley The Dot-Com Revolution Internet growing exponentially In the late 1990’s, extrapolations.

Documents

business slide

addisonwesley figure

yahoo slide

customer service hype

returns hassle slide

search results

potential customers

following search metatags