Web Business Strategy

WEB BUSINESS STRATEGY

Randall L. Schultz

University of Iowa

This overview of e-commerce is the introduction to the Web Business Strategy course at the University of Iowa. It was first written in 1999 and, with only minor modifications, seems applicable to the current competitive environment. It provides guidance for entrepreneurs starting new e-commerce ventures.

January, 2005

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WHAT IS WEB BUSINESS?

It is tempting to say that Web business is business on the Web, but there is much more to

it than that. The Internet has facilitated new ways of doing business and hence new businesses.

World-wide, real-time auctions (eBay), books and other products sold through affiliate programs

(Amazon.com) and third-party perishable inventory sales (invented but perhaps not perfected by

Priceline.com) are examples of businesses that require the Internet to operate.

Of course, some Internet commerce is simply an extension of sales to a new channel of

distribution. Wal-Mart on the Web is an Internet version of the traditional retail chain and Red

Envelope is a gift store on the Web that could, conceivably, exist without the Internet. Indeed,

the most successful e-commerce stores right now are so-called "bricks and clicks," which are

brick and mortar stores with Web sites.

Other sites serve information and service functions for traditional businesses, but even

here there are many examples of services that are highly-dependent on the Internet, such as

package tracking for Federal Express or UPS.

So Web business is business that is made possible by the Web. Your first challenge, then,

is to consider a business that is possible because of the Internet.

BUSINESS IDEA

Although you might have a Eureka! idea while sitting on your porch sipping lemonade, it

is far more likely that a good idea originates from a logical approach to idea generation. The best

place to start is with consumer needs and wants, because satisfying them is what successful

marketing—hence business—is all about.

Needs and Wants. Existing businesses have many ways to determine needs and wants of

customers or potential customers. Sometimes customers just tell them what they want, perhaps

by not buying their product! Or they may survey potential customers or simply observe

competition. But as an entrepreneur, you will have to figure out how to fill a new need or want.

One of the best places to start is with Consumer Problems.

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Think of some problems you are having as a consumer or business-to-business customer.

Chances are that other people are having the same problems. For example, why is it that it is so

difficult to find items from week to week in grocery stores? Sometimes they are out of stock, but

other times they have been dropped. So you have to go to another store for these items but then

they disappear from that store. Do we have time for this?

Maybe Web grocers are the answer. Or it may be that the need is just information—what

happened to this product? How can I replace my stock of it? Why can't someone do this for me?

If you list some of your frustrations as a consumer, you will probably end up with a good idea for

a new business.

Another logical approach to coming up with a new business idea is called Morphological

Analysis (as noted in Philip Kotler's Marketing Management. This is a technique that forces you

to consider new and different combinations of product features. Some of the combinations will

be products that already exist and so all you could do with that idea would be to enter an existing

market with the same product. Other combinations would be nonsensical, so it would make sense

to do nothing with them! But others may be so novel that they create new business categories

that no one had imagined before. Of course, such ideas could be worth millions.

Consider first this morphological diagram.

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Automobiles sold to adults through retail is automobile dealerships—not too much

opportunity here. But what about automobiles sold to adults through the Internet. This is

Autobytel.com! Autos sold to kids is nonsensical, but not toys sold to kids through TV. Is there a

business opportunity for music sold to kids over the Internet? There are new Internet businesses

selling premium pet food over the Internet. Are Internet investments for pets the next big thing?

A final approach to coming up with new business ideas is brainstorming. Get together

with people you trust and brainstorm new business ideas. The give and take may produce just the

right idea. Still, if the idea is not a response to a consumer need or want or a novel solution, it has

less of a chance of success.

Competing Technologies and/or Companies. Once you have a good business idea, you

must compare it with the solution offered by competing technologies or companies. Simply put,

your idea has to be first, different or better.

Fit with Skills and Interests. Perhaps the biggest mistake you can make as an

entrepreneur is to try to do something you are not qualified for or lack interest in. Just because

something is a good idea doesn't mean it is a good idea for you.

MAGIC. If your idea can be easily duplicated, you stand little chance of succeeding. But

there are some very logical steps you can take to protect your business idea against competition.

These are called MAGIC strategies, which stands for Marketing Actions Given Intelligent

Competitors. There are four levels of MAGIC strategies, but only two are relevant to protecting

Web business ideas. (Other MAGIC strategies apply to business and marketing plans.) For your

business idea, which of the following strategies can you use?

Actions That Cannot Be Matched:

• Domain name registration

• Patent on a way of doing business

• Trademarks

• Contracts with key customers

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• Unique capabilities

Actions That Probably Will Not Be Matched:

• Financial resources beyond competition

• Product or promotion inconsistent with competitors' product or promotion

Development Strategy. After coming up with a good business idea that compares

favorably with competition and can be protected from it, you must decide how you will develop

your new business. Without help, your business may get nowhere. But with help you may lose

some control over your equity. What you must do if you are to do more than just dream about a

new business is choose a development strategy and then pursue it. Another possibility is to work

for another Internet company first and use that experience as the springboard for your own

business.

BUSINESS MODEL

A business model is how a business makes money, i.e., profit. Sometimes marketers talk

about "the razor-blade theory of marketing." Gillette makes its money by "giving away" razors

and making profit on the blades. Similarly, Hewlett-Packard makes a lot of money on high-

margin cartridges for printers. Other companies rely on volume to make up for low margins.

Grocery stores must have high volumes to make profit on low-margin products. When grocery

stores add higher margin goods or services such as prepared food or catering, that changes their

business model. Similarly, automobile manufacturers have always had business models based on

the fact that they make much more profit on more expensive vehicles. This is because the cost to

manufacture an SUV, for example, is not proportionately more than the cost to manufacture an

entry-level car. Why do you think auto companies love to sell "fully loaded" vehicles?

One way to think about your business model is to figure out the revenue equation, total

revenue = price x quantity sold. It's surprising how many companies get into trouble by, say,

trying to sell a few items at low margins. The business model for computer retailers has shifted

as they have been forced to accept smaller margins. If volume doesn't change, they are in the

soup.

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Basic Business Models. There are just a few basic business models that account for most of Internet commerce.

• Advertising (make money by delivering an audience to an advertiser)

o Content (any non-product information on a site)

Free

Portal (general-content starting point)

No registration

Registration (allows for higher ad rates)

Vertical portal (specific-content starting point)

Niche (specific-content site)

Free + Premium (additional content available by subscription)

o Service (free services such as Internet access)

o Sales at cost ("zero" markup products for sale)

• Sales (make money by selling a product or service)

o Internet only

o Retail + Internet

o Manufacturer

• Fees (make money by facilitating sales for other parties)

o Transactions (such as trading stock)

o Auctions

o Exchanges (such as raw material or research projects sites)

o Aggregation (such as buying or selling groups)

In practice, business models are sometimes "pure" applications of each of these models, but often

are combinations of models. Of course, the shake-out among Internet businesses is almost

entirely due to companies not having a viable business model in the first place. Many Internet

companies covered up their poor business models by bragging about their traffic and spending

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investors' money. But without cash—and ultimately profit—their days were, or are, numbered.

Still, there are many examples of business models that seem to work.

Yahoo! is an Internet portal whose main way of making money is through advertising. It

has millions of eyeballs that are targets for advertising. On the other hand, Builder.com, c|net's

site for Web developers, attracts an "exclusive" audience and thus more specialized advertising.

It is a so-called "vertical portal" or community. Some vertical portals combine advertising

business models with sales business models, such as iVillage.com.

Perhaps the most common Web business is simply an Internet store. These can be either

traditional stores like Wal-Mart that have started selling on the Web or new DISCO (Direct

Internet Sales Channel Only) stores like Amazon.com. Either type makes money through a sales

business model.

To "disintermediate" is to cut out a channel of distribution member. Any brick and mortar

travel agency could tell you what e-tickets have done to their business.

Some companies are making money by saving money. Federal Express has used the

Internet to improve operating efficiencies and cut costs, thus increasing profit. CSX

Transportation, a railroad-based transportation company, gets its customers to fill out bills of

lading. Then they can literally watch their shipments move down rail lines. Such customer

involvement saves costs for CSX and enhances value for shippers.

ESPN.com has many loyal users, some willing to pay for premium content through

membership. The Wall Street Journal Interactive edition is obtained through a full subscription

and individual articles can be purchased for a fee.

One of the more unique Internet business models is affiliate programs. Amazon.com

pioneered this concept and has thousands of "dealers" getting commissions for book sales

originating from their sites.

Perhaps even more unique are the Internet auction and bidding models. eBay was the first

company to see the commercial possibilities of real-time Internet auctions and Priceline.com

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invented naming prices that consumers would be willing to pay for airline tickets, mortgages,

etc.

Since content-oriented sites need content, one way to make money is to sell your content

to another site. Kelley Blue Book provides their used car prices to MSN's Autos section, for

example.

Finally, many Internet business sites are designed to support existing businesses. The

relevant business model in this case is the existing business' model.

Business Plan. If an Internet year is equal to one month, you will have a couple of days to

write your business plan! Not to worry. If you show it to the right people, they are also on

Internet time. The key elements of a business plan include three of the things you have already

done: a good business idea, a viable business model and MAGIC strategies that protect your idea

from competition. In the next section on Web Marketing Strategy, we will consider the key

topics of buyer behavior, positioning and tactical marketing decisions.

BUYER BEHAVIOR AND PRODUCT POSITIONING

Peter Drucker said that the purpose of a business is to create a customer. Thus, the most

fundamental determinant of marketing success is meeting the needs and wants of some specific

segment of the market. You must start with a definition of the market you are planning to serve.

If it is books sold on the Web, the market would be the Internet Book Market. That market can

be segmented by demographics such as age and gender since there could be sites for women's

books or children's books, by psychographics such as lifestyle if products were designed for

homebodies or adventurers or benefits sought such as price, selection and service. The

intersection of each segment represents a possible market opportunity for a new product. For

example, you could start a book site for men who see themselves as adventurers and value

selection and service but care less about price, say Serengetibooks.com. Or you could market to

all possible segments of the market, like Amazon.com or Barnes & Noble.com.

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Your market coverage strategy defines your target market. If you went after the whole

market with one site, that would be an undifferentiated market coverage strategy. If you planned

to reach two or more markets with separate sites, say one for adults and a special site for

children, that is a differentiated market coverage strategy. A concentrated market coverage

strategy would be focus on just one market niche.

The market coverage strategy determines your target market. For example,

Amazon.com's target market is everyone (since they follow an undifferentiated strategy) while

our Serengetibooks.com's target market would be the segment of adventurous men who care

about selection and service.

Now you can begin to think about an exhaustive list of needs and wants for your target

market without fear of coming up with the wrong needs and wants. After all, you know who is in

the market.

If your product doesn't meet the needs and wants of a specific segment of the market—

possibly the whole market—it will fail. Hardly rocket science, you would think this point would

be so well understood that product failure rates would be low. But quite the opposite, they are

high, estimated to be about 85% for consumer packaged goods! You can avoid failure by

meeting consumer needs and wants.

But your product also must have meaning in the minds of consumers, something achieved

through positioning. Without meaning, your product will probably fail since people will be

confused about what it is relative to the competition. Why would someone visit a Web site they

didn't understand? They wouldn't.

Positioning starts with figuring out how consumers make buying decisions. Here a buyer

behavior analysis can help. This is a challenging task to do, but if you do it right, everything else

in positioning will fall into place. The goal is to uncover, through putting yourself in the shoes of

your buyers, the evaluative dimensions that they use to choose among brands in the target

market. You already have a head start. You know some of the benefits sought (from the

segmentation analysis) and most of the needs and wants. All you need to do is to arrange the

more important ones in a hierarchy, which you can even draw as a flow chart.

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The final part of positioning is to substantiate the meaning of the product with product

features. The product principle says that every product is a combination of physical and

psychological attributes. Perception of "rugged" in an SUV may be substantiated by styling (a

physical feature) or just a name. That's why almost all of the great rugged names have already

been used!

Serengetibooks.com hopefully sounds adventurous. Amazon.com sounds big. Barnes and

Noble sounds, well, like a physical bookstore where you could sit down to browse through books

with a cup of coffee. There are many other psychological attributes that can lend meaning to

your product as well. That is why we sometimes speak of a brand "personality." Who wants a

brand with no personality?

The core benefit proposition of a brand, then, is a restatement of its meaning in a few

words, perhaps just those words that represent the brand's positioning on the evaluative

dimensions. A Land Rover Discovery is a rugged but luxurious SUV. If you can't state a core

benefit proposition for your product you have done something wrong. And if you don't know

what it is, the consumer will never know. And that means no meaning. And that means failure.

MARKETING MIX

But you are smarter than that, so you have a product that meets the needs and wants of

your target market. You have a product with a clear meaning in the minds of your consumers and

are positioned where their preferences are. Finally, you have a product design that delivers on the

product promise. The next thing to make sure of is that you align the marketing mix with the

core benefit proposition.

It seems to be a surprise to some that the marketing mix variables are arranged in a

hierarchy. Indeed, almost every marketing textbook lists them in a different order! The 4 P's of

marketing should be in the order of product, price, place and promotion. In fact, since we have

determined the product strategy through positioning, there are really just 3 P's to worry about.

The final marketing mix variable is promotion. This means that promotion—

communicating product benefits to consumers—is the last thing to determine, and, in reality, is

the least important. Strategy dominates tactics, so no amount of pull promotion such as media

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advertising or push promotion such as sales force effort can overcome a product that has no

meaning. Nissan tried every promotion scheme imaginable in the past few years to no avail; sales

kept falling. Consumers wanted to know what Nissan meant but got "Enjoy the Ride." There are

not too many ironclad principles of marketing, but one of them is to advertise product benefits so

that consumers can form a meaning and thus basis for choosing the brand.

If there are inconsistencies among these tactical marketing mix variables, the product

may be less successful. Unlike surefire ways to fail such as not meeting needs or wants or not

having meaning, poor tactical strategies usually mean underperforming your competitors. But if

these variables are set right, i.e., logically derived from the core benefit proposition, then

everything will be fine if you have no competition. Say what?

DEALING WITH COMPETITION: MAGIC

Your market share would be 100% if you had no competition. One of your goals should

be to figure out how to stop competition in its tracks. This is another one of those areas where

logic can help (but where textbooks seem to miss the point). An approach that works in practice

is called MAGIC, and we have already seen a few MAGIC strategies that apply to Internet

businesses. To open up even more possibilities, here is a logical hierarchy of steps that you can

take to protect your marketing plan against competition. MAGIC stands for Marketing Actions

Given Intelligent Competitors, which is a pretty good assumption to make about your peers.<p>

Here are the things you should do, in this order:

• Take actions that cannot be matched.

• Take actions that probably will not be matched.

• Take actions that are not readily visible.

• Take actions that induce gamesmanship.

Patents, trademarks and copyrights are good places to start since they preclude direct

competitive reaction. Contracts have the same effect. If you have the contract to provide weather

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information to a portal, no one else can do that. You can also use unique capabilities since

unique means unmatchable.

After exhausting these things, you can try some things that probably won't be matched. If you

have deep pockets for example, you can probably outspend your competition. If you have a

product that is inconsistent with a competitor's product, you could communicate that to

consumers. If your product is natural and your competitor's is artificial, you could probably

benefit from a promotion based on this fact (as long as this is an important evaluation dimension

used to choose among brands—not like a clear cola, Crystal Pepsi, which no one cared about).

Assuming that you have taken all the actions that you can that cannot be matched or probably

will not be matched, then you can consider actions that are not readily visible. Your margins,

your research and development budget, your sales force compensation and so forth are not

apparent to competitors until perhaps it is too late. How can you price so low? (You have the

lowest costs.) How can you come out with so many new products? (You have put a lot of money

into R&D.) Why is your sales force beating down the bushes? (They have fat bonuses to earn.)

Questions like these will puzzle your competitors.

If you have exhausted your stronger MAGIC options, you can always rely on gamesmanship,

making targeted, short-term and understandable changes in your product, price, place and

promotion variables. These changes will be seen for what they are, short-term moves to get a

new product launched, new promotion to jump start a lagging product's sales or simply seasonal

or other predictable marketing actions that are intelligent if not unmatchable. Why does everyone

have holiday sales? Gamesmanship.

MAKING THE SALE

Sooner or later though, you would like to hear the cyber-equivalent of cha-ching. With a

Web business, there are four steps to making a sale:

• Arrival

• Navigation

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• Decision

• Purchase

First, someone has to arrive at your Web site. How they get there is tricky. Some Internet

business leaders spend lavishly on traditional advertising to get people to visit their site. Others

hope that directories and search engines will point their way. Through link exchanges, sites can

be connected with each other. Since nothing can happen until a potential customer arrives at a

site, the number of unique visitors is a major indicator of traffic and predictor of sales.

Second, your visitor has to navigate your site and find the product information they want.

Site navigation is as important to Internet commerce as parking lots and store layouts are to

traditional retail. For business sites, the information for your buyers must be better than the

information they are used to getting from your sales force.

Third, a decision to purchase must be made, and it would be good if the purchase happened

right then because it is so easy to click to the next store or business. Despite this obviousness,

some sites make it difficult to purchase. After building up a solid marketing plan, why lose

customers to a weak buying interface?

The final step is purchase. Incredibly, for most consumer products sold on the Internet,

shopping carts look and feel identical. It's as if Safeway, Bloomingdale's and The Gap all had

steel carts with gimpy wheels. Still, if you get the sale, your job is almost done. We say almost

because you have to follow through with service, support and product consistency that invite

repeat buying. You don't want to sell just once.

Putting all of these factors together, we can consider the process that consumers use when

shopping on the Internet. Let's apply it to Amazon.com. People trust Amazon.com and certainly

one-click buying provides ease of purchase. Purchase incentives for Amazon.com include sales

and promotions and Amazon's service is executed with great dedication and attention to detail.

Finally, Amazon offers buying rewards that make people want to come back and buy again. Are

we surprised that Amazon is so successful? I don't think so.

To summarize, the purchase process is:

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Trust Ease of Purchase Purchase

Incentives Buy Service

and Buying Rewards

Repeat

If this all seems so simple, that's because it is. There is virtually nothing new about Internet

marketing—just too few people who understand it and who can execute it. Successful marketing

is all about getting things approximately right rather than exactly wrong.

WEB COMMERCE

STORES

Electronic commerce is the selling of either products or information on the Web. For

products (or equivalently services) the two basic types of storefronts are individual stores and

networks or malls. Individual stores like Macy's, Staples or Internet retailer Bluefly.com have the

challenge of getting people to visit their site. The marketing connected with that is currently

quite traditional. A few companies spend a lot on media advertising to bring their sites to the

attention of their target market. In the "early" days of e-commerce, many companies used media

advertising to drive traffic to their sites, but at a very high cost: either the traffic didn't

materialize or the visitors didn't buy!

It was thought that Internet malls would be the cyberspace analog of shopping centers where

the mall is a destination that can be marketed itself. But destinations on the Web and "travel"

times between them are just instantaneous clicks, so malls have not really caught on. However, a

new Internet mall-equivalent, the portal or network, has provided a gathering point for

consumers to start their shopping. Each of the major portal sites from AOL.com to Yahoo! has

featured stores in their shopping areas. This is very much like a mall because, once at the portal,

the thinking is that a consumer would be more likely to buy from a portal merchant rather than

go to another portal to shop a very similar merchant.

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Unlike products, only some of which are perishable, most content is perishable and thus must

be sold on a timely basis. Whether it is sports news or financial information, content is only as

useful as its current relevance. For this reason, content sites often use a membership subscription

business model so that they do not have to make a sale every time someone visits.

SHOPPING CARTS

A shopping cart on the Web combines the physical attributes of products on shelves,

physical shopping carts and checkout lanes. Of course, not all stores use shopping carts, but the

idea is the same: products (or services), choices and payment transactions. The difference is that

with e-commerce this is all accomplished with one system.

Almost every electronic shopping cart works the same, which will be a very important

factor in choosing which one to use for your business. There is a product page that shows your

products for sale, a view page that shows what has been selected for the cart, an order page that

summarizes the products selected and covers shipping and billing information and an

ordertemplate page that connects with a database. This is also basically what the consumer sees.

What is different is how shopping carts are set up.

If you know HTML (Hyper Text Markup Language) you could create your own cart.

Many hosting companies provide do-it-yourself carts for free. The advantage of this approach is

that you have great flexibility and you control all aspects of the system. The disadvantage, of

course, is that you have to do it yourself.

Most sites use commercial shopping cart software and often hosting companies support a

few major brands of carts. Some carts can only be used on Unix/Linux or Windows platforms so

there is a three-level coordination needed: software, hosting company and platform.

Large site typically use <i>e-commerce solutions</i> developed by a computer company

such as IBM or big full-service Web developers.<p>

Finally, many merchants use packaged solutions that combine hosting, store creation and

payment. Yahoo! Store and Microsoft's MSN Business both offer end-to-end e-commerce

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solutions that are complete products that can be purchased by anyone. Both of these vendors

have large and small clients using their services.

In addition, complete stores can be set up in either a few clicks (e.g., Vstore.com or

CafePress.com) or by hosting your store on commerce sites like BigStep.com. Finally, Amazon's

zShops are something in-between: a store that is easy to set up but a part of a high-traffic

community.

From the consumer's point of view all shopping carts look virtually identical. This is the

reason that your business idea, business model and marketing plan (including how you present

your products in the selling environment) are what really matters. Shopping carts are one of the

ways that the Internet levels the playing field. The small stores and the big stores can have vastly

different scales and different levels of sophistication in Web site design, but at checkout time,

you could be almost anywhere.

PAYMENT SYSTEMS

Making the sale is good for your ego; collecting money is good for your wallet. In an e-

commerce transaction cash cannot be used, but credit cards can be accepted in real time and

checks can be accepted through the mail. Business-to-business accounts can be based on

purchase orders or procurement cards that result in direct billing. In addition, there are several

electronic payment methods:

• Electronic cash

• Electronic check

• Electronic wallet (storing credit, charge card and debit card information)

• Electronic credit (advancing credit)

• Electronic script/gift certificates/prepaid credit cards (purchasing credit)

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Electronic cash is possible but currently unrealized. DigiCash went bankrupt trying to

develop an electronic cash payment system. Electronic checks, on the other hand, have a small

but important share of the payments market. Electronic wallets that store credit card information

on a user's or server computer (to save entering this information with each purchase) and

electronic credit that is advanced against credit cards to do much the same thing are two of the

newer but unproven technologies. Script, similar to electronic credit, but issued as "money" has

yet to take off although microcommerce transactions seem to offer an opportunity for this

method of payment. There are, however, sites that offer electronic gift certificates, which are

equivalent to script.

Merchant Accounts. Many Internet businesses can get along quite well with traditional

payment methods. You could accept checks through the mail, for example. Or you could use

electronic checks to move the payment online. If you need to accept credit cards, though, you

must first establish a merchant account. This is a special bank account that gives you the right

(and provides the mechanism) for you to process credit card transactions.

These credit card transactions can be done through the mail or by telephone (as with catalog

sales). But if you want to allow consumers to use their credit cards from your Web site, you will

also need an Internet merchant account.

The final piece of the payment system is a payment processor, a company that takes your

credit card transactions and processes them through the banking system including bank

clearinghouses. CyberCash, Authorize.net and VeriSign.com are examples of payment

processors.

The match between a shopping cart and payment system is important if for no other reason

than the fact that not all carts work with all payment systems. The situation is exacerbated by the

fact that not all payment processors use the same bank clearinghouses, so that you must be sure

that your bank can accommodate your choice of shopping cart software or payment processor.

Fortunately, many hosting companies provide seamless integration for their clients.

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ORDER FULFILLMENT

Fulfilling orders differs depending on whether you are selling information or physical

products or services. Information on the Web is expected to be delivered immediately. The

information can be in the form of the Web pages themselves or as downloadable material. For

electronic commerce, the customer pays for the information in advance (by membership

subscription, for example) or as used. The latter, sometimes termed microcommerce, is not well

developed.

Order fulfillment for physical products involves the following steps:

• Inventory

• Warehousing

• Order processing

• Packing

• Shipping

Interestingly, the Internet adds only cost efficiencies to this process (as noted above). The

real work of delivering a product to a customer takes place in much the same way as in

traditional order fulfillment systems. This is why some virtual Internet companies are building,

of all things, physical warehouses!

Companies that are not good at order fulfillment will not be good at fulfilling orders on

the Internet. Although there are fulfillment vendors that provide "pick, pack and and ship"

services for Web businesses, their use depends on the same factors as would their use by

traditional businesses.

Distribution decisions are usually based on four factors: coverage, control, cost and

conflict. A Web business can maximize its coverage and control by handling distribution,

including order fulfillment, itself. But this also can be more costly than using a distributor.

Conflict between channel of distribution members is, of course, more problematic the more

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channel members there are. By using direct Internet sales, some manufacturers are minimizing

channel conflict by allowing dealers to share margins when they have a role in order fulfillment.

Naturally these steps are different for perishable products and services. Yet the point

about managing this unglamorous part of Web commerce is the same: if a customer does not get

what they paid for, they will no longer be your customer.

CUSTOMER SERVICE

It is easier to keep a customer than to get a customer. This is why order fulfillment is so

important. It also explains why customer service is crucial. One of the most important things to

realize about service and support is that, for the most part, it follows from product quality. Think

about these steps:

• Product quality

• Information about service and support

• Warranties

• Repair

• Customer retention policies

Consider the traditional automobile market. It used to be that one of the most important

factors to consider when purchasing a car was the quality of a dealer's service department.

Today, with new technology, with high build-quality and with low-maintenance engines and

equipment, it's possible to not need service except for changing the oil! The popularity of

leasing, where lease terms usually are covered by full warranties and often include all scheduled

maintenance, only adds to the point that product quality, broadly defined, minimizes the need for

service and support.

It is no different with Web commerce. Products that meet customer needs and wants and

deliver on the product promises will succeed. The ones that will fail are the ones that require

service and support.

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Even the best products, however, must be backed by an ability to make things right for the

customer if something goes wrong. Today customers expect total satisfaction or their money

back. They expect 24-hour support. And while quite willing to use electronic means to obtain

information on service, support, billing, etc., they want the ability to communicate with a human

by telephone, by chat, by voice chat or by email. Indeed, one of the most important customer

retention policies is just having someone who can override whatever policies are in place to deal

with certain problems. "Warranty expired a week ago? No problem, we can fix it." This approach

to service will retain the customer at far less cost than going out and finding a new one.

LAUNCHING YOUR SITE

Here is a checklist for launching your Web site:

Business idea

Protection of business idea through MAGIC

Business model

Market coverage strategy

Positioning strategy

Product design strategy

Marketing mix strategy

MAGIC strategy for entire marketing plan

Site plan

Site design (including shopping cart)

Site hosting (including payment system)

Merchant account/Internet merchant account

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Order fulfillment plan

Service and support plan

Business plan

We have covered all of these steps except actual site implementation (plan, design and

hosting). That is because this course is about Web Business Strategy while many companies

offer site implementation and business building-services. Your "business" is the most important

thing. If your business idea and business model are sound, you can come up with a sound

marketing plan. These three elements of business success will facilitate everything else.

While you may need some help with Web site development, you can begin placing these

elements into a business plan that can be used for the purpose of raising the capital you need to

launch your site. This capital can be used for Web site development and for expenses connected

with product design, patent protection and promotion.

There is some belief that, with Internet business opportunities, it is better to go, set, ready. In

other words, launch your site, make correction based on customer feedback and then put this all

down in a plan. If you wait a month, a "year" has passed. The opportunity may have passed too.

The Internet does not treat all competitors alike regardless of resources. Deep-pocketed rivals

can still dominate if for no other reason than the fact that they can move faster by putting more

money into their effort. But money can only buy so much smarts. If that wasn't true you wouldn't

see the colossal product and strategy failures by big companies.

You have a lot of things going for you. You are smart. You have energy. You are not subject

to organizational politics or resistance to change. That's why you are or can be an entrepreneur.

Web business is business made possible by the Web. What is possible for you?