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Document Sample
E-commerce
Name : Dr. Nasim Z. Hosein
E-Mail : nhosein@northern.edu
Phone number : 605-626-7724
1
Agenda
Marketing
Commerce
History of Internet
Computer, Networks
Intro to E-commerce
History of E-commerce
WWW
What is E-commerce
Forces shaping E-commerce
E-commerce today
Categories of E-commerce
What is a web based business
E-commerce marketing strategies
Setting up for E-marketing (online)
Benefits of E-commerce
Strategy Formulation
Business Model 2
Definition of Marketing
Philip Kotler
– Social and Managerial process by which
individuals and groups obtain what they need
and want through creating, offering, and
exchanging products of value with others.
This definition rests on the following core
concepts: needs, wants, demands, products, value,
cost and satisfaction, exchange and transactions,
relationships and networks, markets, marketers and
prospects.
3
Definition (cont)
Needs – exist in biology they are not
created by marketers – i.e. shelter, food,
clothing, safety, belonging, esteem
Wants – Need food want hamburger, fries,
coke.
Desire – Wants for specific products
backed by an ability and willingness to buy
them
4
Definition of Commerce
The exchange of goods and services for
money
Consists of:
Buyers - these are people with money who
want to purchase a good or service.
Sellers - these are the people who offer
goods and services to buyers.
Producers - these are the people who
create the products and services that sellers
offer to buyers. 5
Elements of Commerce
You need a Product or service to sell
You need a Place from which to sell the products
You need to figure out a way to get people to
come to your place.
You need a way to accept orders.
You also need a way to accept money.
You need a way to deliver the product or service,
often known as fulfillment.
Sometimes customers do not like what they buy,
so you need a way to accept returns.
You need a customer service and technical
support department to assist customers with
products.
6
History of The Internet
Started as a US government project in
1969.
The purpose was to create a net that can
function even if one center is destroyed in
a military attack.
- “Hub and spokes” can be useless if the hub is
destroyed.
- Network can continue to be functional even if
some nodes are destroyed, as long as
information can pass through other nodes.
Effective in 1971 with computers on both
coasts of the US. 7
In the 1980´s
Personal computers or terminals were
connected to a server.
The server was a mainframe, or connected
to a mainframe computer.
The mainframe was connected to another
mainframe of the company in another
location via dedicated lines.
Only large companies could afford the
expense and investment in equipment.
8
Today
Connections across countries and
continents made through dedicated fast
lines.
A company may have one local network
(LAN) in NY, which is connected to the
Internet through a Regional network.
Well established in N.A., Europe and
certain Asian countries
9
Computer classifications
Mainframes:
- term for very large computers
- used to handle large amount of data or
complex processes
- main advantage is reliability
Midrange:
- medium sized, less expensive and smaller
- usually a server
Micro-computer:
- work stations with computing capabilities
- single-users systems linked to form a network 10
What is a network
Series of points or nodes interconnected by
communication paths
Node is a connection point for transmitting
data
Network can interconnect with other
networks to form global networks
11
Benefits of a network
Facilitates resource sharing
Provides reliability
Cost effective
Provide a powerful medium across
geographical divide
12
Geographical Distance
Local area network (LAN): small area,
share a single server
Metropolitan area network (MAN): a
wider network, can bridge several LAN’s
Wide area network (WAN): a broader area
covered, can include several MAN’s
Internet: a network of networks that covers
the entire globe
14
Internet addressing system
Internet uses TCP/IP, therefore every computer on the
Internet has an IP address
IP address is numerical, separated by dots
Works with DNS:
- com: for commercial purposes
- net: for Internet Service Providers
- org: for non-profit, non-commercial groups
- gov: reserved for government
- mil: reserved for military
- int: reserved for international organizations
16
Assimilation of Technology
Technology first adopted to increase
efficiency – doing the same tasks faster
e.g. word processing instead of typing
Technology next adopted to increase
effectiveness – doing tasks not only faster
but better e.g. spreadsheets transformed
finance and accounting (as well as science
and other fields)
17
Introduction to E-commerce
E-Commerce, Web, Networks, Internet
The evolution of new businesses
The adoption of Brick and Mortar
companies to the new economy
Market failures and economic explanations
for the new economy
18
History of E-commerce
EC applications first Limited to:
developed in the early - Large corporations
1970s - Financial institutions
- Electronic funds - A few other daring
transfer (EFT) businesses
19
E-Commerce Mechanisms
Transformation of economic activity into
digital media
- Exchange information, content, agreements,
and services among parties that are connected
to through the Internet.
Enables new ways of creating, delivering
and capturing value to customers.
- Availability
- Convenience
22
World Wide Web (WWW)
World Wide Web (Web):
- A collection of documents that reside on computers,
and that can be accessed by other computers on the
Internet.
Multimedia documents:
- Text
- Images
- Sounds
- Drawings
- Video
Hypertext:
- Links to other documents
- Can begin execution of a program
23
Web Browsers
Computer programs that can:
- Display Web documents
- Follow links
- Execute other programs
- Enhance applications such as real-time audio
or video
Netscape and Internet Explorer
The Microsoft legal trouble due to the
Explorer.
24
Web Servers
Computers that run server software.
A server waits for request to arrive from a
user.
- The request is typically for a document.
The server sends (serves) the document to
the requesting computer.
Sometimes the server allows a user to fill
in information on a document, and the then
transfers the information to another
program or a server.
25
WWW and Internet
The World Wide Web (WWW) is not the
Internet
Access to the Internet doesn’t mean you
have e-commerce
WWW works in HTTP
Web pages works in HTML
Web browser provide access to
information on the WWW
27
What is E-commerce
Distributing, buying, selling and marketing
products and services over electronic systems
E-business for commercial transactions
Involves supply chain management, e-marketing,
online marketing, EDI
Uses electronic technology such as:
- Internet
- Extranet/Intranet
- Protocols
28
Forces Shaping the Digital Age
29
Forces Shaping the Digital Age
Digitalization & Internet Explosion
Connectivity – Explosive worldwide
– Intranets : connect people growth forms the heart of
within a company. the New Economy.
– Extranets : connect a – Increasing numbers of
company with its suppliers, users each month.
distributors, and outside – Companies must adopt
partners. Internet technology or risk
– Internet : connects users being left behind.
around the world.
30
Definitions
Internet:
- A collection of computers that speak a common
language – protocol
Intranet:
- Private version of the Internet
- Main purpose to share company information
and computing resources among employees
Extranet:
- Private network that users outside the company
can access
- Requires security and privacy
- Collaborate with other companies
31
Forces Shaping the Digital Age
New Types of Intermediaries:
– Direct selling via the Internet bypassed
existing intermediaries (disintermediation).
– “Brick-and-mortar” firms became “click-and-
mortar” companies.
– As a result, some “click-only” companies have
failed.
32
Forces Shaping the Digital Age
Customization and Customerization:
– With customization, the company custom
designs the market offering for the customer.
– With customerization, the customer designs
the market offering and the company makes it.
33
E-commerce as the Networked
Economy
Create value largely through gathering, synthesizing and
distribution of information
Formulate strategies that make management of the enterprise
and technology convergent
Compete in real time rather than in “cycle time”
Operate in a world characterized by low barriers to entry,
near-zero variable costs of operation and shifting
competition
Organize resources around the demand side rather than
supply side
Manage better relationships with customers through
technology
34
E-commerce Today
The Internet is the perfect vehicle for e-
commerce because of its open standards and
structure.
No other methodology or technology has proven
to work as well as the Internet for distributing
information and bringing people together.
It’s cheap and relatively easy to use it as a
medium for connecting customers, suppliers, and
employees of a firm.
No other mechanism has been created that allow
organizations to reach out to anyone and
everyone like the Internet. 35
E-commerce Today
The Internet allows big businesses to act like
small ones and small businesses to act big.
The challenge to businesses is to make
transactions not just cheaper and easier for
themselves but also easier and more convenient
for customers and suppliers.
It’s more than just posting a nice looking Web
site with lots of cute animations and expecting
customers and suppliers to figure it out
Web-based solutions must be easier to use and
more convenient than traditional methods if a
company hopes to attract and keep customers. 36
Four Categories of E-Commerce
Business originating from...
Business Consumers
Business B2B C2B
And selling
to...
Consumers B2C C2C
37
Distinct Categories of E-Commerce
Business to Business (B2B) refers to the full spectrum of e-
commerce that can occur between two organizations.
This includes purchasing and procurement, supplier
management, inventory management, channel management,
sales activities, payment management &service and support.
Examples: FreeMarkets, Dell and General Electric
Business to Consumer (B2C) refers to exchanges between
business and consumers, activities tracked are consumer
search, frequently asked questions and service and support.
Examples: Amazon, Yahoo and Charles Schwab & Co
38
Distinct Categories of E-Commerce
(cont’d)
Peer to Peer (C2C) exchanges involve transactions
between and among consumers. These can include third
party involvement, as in the case of the auction website
Ebay.
Examples: Owners.com, Craiglist, Monster
Consumer to Business (C2B) involves when
consumers band together to present themselves as a
buyer in group.
Example: www.planetfeedback.com
39
Convergence of e-Commerce Categories
Business originating from…
Business Consumers
Publishers order
paper supplies from Consumers search
Business
And Selling to…
paper companies out sellers, offers
and initiate
Amazon orders purchases from
from publishers Amazon
Consumers
Consumers buy
Consumers resell
thousands of Harry
copies on eBay
Potter books from
Amazon
40
What is a web-based business
Business that uses the WWW to fulfill it’s
business process
Four basic business processes:
- information dissemination
- data capture
- promotions and marketing
- transacting with stakeholders
Business objectives interact with web based
applications
41
Key Drivers of E-commerce
Technological – degree of advancement of
telecommunications infrastructure
Political – role of government, creating
legislation, funding and support
Social – IT skills, education and training of
users
Economic – general wealth and
commercial health of the nation
46
Key Drivers of E-business
Organizational culture- attitudes to R&D,
willingness to innovate and use technology
Commercial benefits- impact on financial
performance of the firm
Skilled/committed workforce- willing and able to
implement and use new technology
Requirements of customers/suppliers- in terms of
product and service
Competition- stay ahead of or keep up with
competitors
47
Appeal of E-commerce
Lower transaction costs - if an e-commerce site is
implemented well, the web can significantly
lower both order-taking costs up front and
customer service costs
Larger purchases per transaction - Amazon offers
a feature that no normal store offers
Integration into the business cycle
People can shop in different ways. The ability to
build an order over several days
– The ability to configure products and see actual prices
– The ability to easily build complicated custom orders
– The ability to compare prices between multiple
vendors easily
– The ability to search large catalogs easily
Larger catalogs
Improved customer interactions - company. 48
Limitations of E-commerce
To organizations: lack of security, reliability,
standards, changing technology, pressure to
innovate, competition, old vs. new technology
To consumers: equipment costs, access costs,
knowledge, lack of privacy for personal data,
relationship replacement
To society: less human interaction, social
division, reliance on technology, wasted
resources, JIT manufacturing
49
Technical limitations
There is a lack of universally accepted standards
for quality, security, and reliability
The telecommunications bandwidth is
insufficient
Software development tools are still evolving
There are difficulties in integrating the Internet
and EC software with some existing (especially
legacy) applications and databases.
Special Web servers in addition to the network
servers are needed (added cost).
Internet accessibility is still expensive and/or
inconvenient
50
Web based technology
Websites
E-mail
Search engines
Interactive communications
51
Old Economy Firms
Brick and Mortar companies need to adopt
to the new economy
- Create a new Internet company.
- Create a new subsidiary.
- Invest in an Internet competitor.
- Buy the technology from a consultant.
- Work with other firms to create an exchange.
- Integrate with suppliers and or customers.
52
Old Economy Firms
Failure of old economy companies to
adopt may result in:
- Loss of market share.
- Inability to meet new economy
competitors´prices.
- Reduced profits and cash flows.
- Inability to raise new financing.
- Loss of control in an acquisition by a new
economy firm.
53
Business Opportunity
The Internet revolutionized ways of doing
business
Entrepreneurs found ways to exploit
market failures and earn economic rents
New businesses were created that were not
feasible earlier
The new economy poses threats to old
economy firms that do not wish to adapt
The transformation is still in process. The
evolution continues
54
Benefits and Challenges of E-commerce
Benefits Challenges
Persistent connection with customers Cannibalization
New value for customers Channel conflict
Access to new customers Customer confusion
Scalability Investor confusion
55
Front end systems
Direct user interface with business processes
Accessible via WWW
Front-end systems:
- e-CRM
- e-marketing
- e-services
- e-marketplace
- e-auction
56
Marketing Strategy in the Digital Age
Requires a new model for marketing strategy
and practice
Some suggest that all buying and selling will
eventually be done electronically
Companies need to retain old skills and
practices but add new competencies
57
E-Business in the Digital Age
Involves the use of electronic platforms to
conduct company business.
– Web sites for selling and customer relations
– Intranets for within-company communication
– Extranets connecting with major suppliers and
distributors
58
E-Commerce in the Digital Age
More specific than e-business.
Involves buying and selling processes
supported by electronic means, primarily
the Internet.
Includes:
– e-marketing
– e-purchasing (e-procurement)
59
E-commerce vs. E-business
E-commerce is about doing business
electronically
E-commerce conducting financial
transactions electronically
E-business is conducting business on the
Internet
E-business is the transformation of
business processes through the Internet
60
E-Marketing in the Digital Age
The marketing side of e-commerce.
Includes efforts to communicate about,
promote, and sell products and services over
the Internet.
E-purchasing is the buying side of e-
commerce.
– It consists of companies purchasing goods,
services, and information from online suppliers.
61
Types of e-Marketers
62
Click-Only Companies
E-tailers
Search
Enabler
Engines and
Sites
Portals
Types of
Sites Internet
Content
Service
Sites
Providers
Transaction
Sites
63
Reasons for dot.com Failures
Poor research or planning.
Relied on spin and hype instead of
marketing strategies.
Spent too heavily on brand identities.
Devoted too much effort to acquiring new
customers instead of building loyalty.
64
Click-and-Mortar Companies
Most established companies resisted adding Web
sites because of the potential for channel conflict
and cannibalization.
Many are now doing better than click-only
companies.
Reasons:
– Trusted brand names and more resources
– Large customer bases
– More knowledge and experience
– Good relationships with suppliers
– Can offer customers more options
65
Setting Up for E-Marketing
Online Marketing
66
Setting up for E-Marketing
Options Corporate websites
– Build goodwill and
Creating websites relationships; generate
Placing online ads and excitement
promotions Marketing websites
Creating or using Web – Engage consumers
communities and attempt to influence
Using E-mail purchase
Website design
– 7 C’s of effective website
design
67
Conducting E-Commerce
Seven C’s of Website Design
Context Communication
Content Connection
Community Commerce
Customization
68
The 7C’s of Website design
Context Content
Site’s layout and design Text, pictures, sound and video
that web pages contain
Commerce Community
Site’s capabilities to enable The ways sites enable user-to-
commercial transactions user communication
Connection Customization
Degree site is linked to other Site’s ability to self-tailor to
sites different users or to allow users
to personalize the site
Communication
The ways sites enable site-to-
user communication or two-way 69
communication
Fit and Reinforcement of Cs
Business Model
Individually Supporting Fit
Context Content Community Customization Communication Connection Commerce
Consistent Reinforcement
70
Setting up for E-Marketing
Options
Online forms of ads and
Creating websites promotions
Placing online ads – Banner ads/tickers
and promotions – Skyscrapers
– Interstitials
Creating or using
– Content sponsorships
Web communities – Microsites
Using E-mail – Viral marketing
Future of online ads
71
Web Advertising
Banner ads: allows for more targeted advertising
Pop-up ads: pop-under ads are displayed in a separate
browser window beneath your main browser window
and remain there until you close them
This is a pop-up ad
Click here to close me
Skyscrapers: An advertisement on a Web site that is
vertically oriented on the page and larger than the
typical banner ad
72
Web Advertising
Interstitials: are usually full-page ads displayed while a user is
in transit from one page to another, triggered by code included in the
link
73
Web Advertising
Content Sponsorship: are sites that pay for placement in search
results on keywords that are relevant to their business
The upper: This is the part of the shoe that wraps around and over the top of the foot. It may be made of leather or a synthetic material that is lighter and
breathable (to reduce heat from inside the running shoe). The tongue of the upper should be padded to cushion the top of the foot against the pressure from the
laces. Often, at the back of the running shoe, the upper is padded to prevent rubbing and irritation against the achilles tendon.
The heel counter: This is a firm and inflexible cup which is built into the upper of running shoes and surrounds the heel. It is usually very firm so that it can control
motion of the rearfoot.
Post or footbridge: This is the firm material in the midsole which increases stability along the inner side (arch side; medial side) of the running shoe.
74
Web Advertising
Microsites: limited areas on the Web managed and
paid for by external companies
http://www.autotrader.com/
75
Viral Marketing
Gillette used viral marketing to
introduce the 3-bladed Venus
razor for women, greatly
expanding the audience reached
by its “Reveal the Goddess in
You” truck tour and beach-site
promotions. 76
Setting up for E-Marketing
Options
Web communities allow
Creating websites members with special
Placing online ads interests to exchange views
and promotions – Social communities
– Work-related
Creating or using
communities
Web communities Marketers find well-
Using E-mail defined demographics and
shared interests useful when
marketing
77
Setting up for E-Marketing
Options
E-mail marketing
Creating websites
Placing online ads and
– Key tool for B2B and
promotions B2C marketing
Creating or using Web – Clutter is a problem
communities
– Enriched forms of
Using E-mail
e-mail attempt to
break through clutter
– Spam is a problem
78
Benefits of E-commerce
To consumers: 24/7 access, more choices, price
comparisons, improved delivery, competition
To organizations: International marketplace
(global reach), cost savings, customization,
reduced inventories, digitization of
products/services
To society: flexible working practices, connects
people, delivery of public services
79
Benefits to Consumers
Convenience
Buying is easy and private
Provides greater product access and selection
Provides access to comparative information
Buying is interactive and immediate
80
Benefits to Organizations
Powerful tool for building customer relationships
Can reduce costs
Can increase speed and efficiency
Offers greater flexibility in offers and programs
Is a truly global medium
81
Benefits to Society
More individuals can work from home
Benefits less affluent people
Third world countries gain access
Facilitates delivery of public services
82
Discussion Questions
What features do you look for on a
Web site that you feel make the site
appealing?
What are your major concerns about
making online purchases?
What types of things can an online
retailer do to create a more secure
buying environment?
83
Online Ads and Promotion
Forms of online advertising & promotion:
– Banner ads & tickers (move across the screen)
– Skyscrapers (tall, skinny ads at the side of a page)
– Rectangles (boxes that are larger than a banner)
– Interstitials (pop up between changes on Web site)
– Content sponsorships (sponsoring special content)
– Microsites (limited areas paid for by an external
company)
– Viral marketing (Internet version of word-of-mouth)
84
Business Pressures
The term business environment refers to
the social, economic, legal,
technological, and political actions that
affect business activities
Business pressures are divided into the
following categories:
- Market (economic)
- Societal
- Technological
85
Major Business Pressures & the Role
of EC
86
Organizational Responses
Strategic systems
- Provide organizations with strategic advantages, enabling
them to:
Increase their market share
Better negotiate with their suppliers
Prevent competitors from entering into their territory
Continuous improvement efforts
- Many companies continuously conduct programs to
improve:
Productivity
Quality
Customer service
Business process reengineering (BPR)
- Strong business pressures may require a radical change
- Such an effort is referred to as business process
reengineering (BPR) 87
Organizational Responses
Business alliances
- Alliances with other companies, even competitors, can be
beneficial
- Virtual corporation—electronically supported temporary
joint venture
Special organization for a specific
Time-limited mission
Electronic markets
- Optimize trading efficiency
- Enable their members to compete globally
- Require the collaboration of the different companies and
competitors
88
Organizational Responses
Reduction in cycle time and time to market
- Cycle time reduction—shortening the time it
takes for a business to complete a productive
activity from its beginning to end
- Extremely important for increasing
productivity and competitiveness
- Extranet-based applications expedite steps in
the process of product or service development,
testing, and implementation
89
Strategy Formulation
Porter’s three generic strategies for
business:
- focus
- low cost leadership
- differentiation
Differentiation in the new e-commerce
sector is the key to success
90
Classic Framework for Strategy Management
Mission
Goals
Internal
External
Strategy (Company)
Analysis
Formulation Analysis
•Corporate
•Business-unit
•Functional
•Operating
Implementation
Control and
Monitoring
91
E-commerce and Organizations
Organizations that undertake e-commerce do so
from two possible starting points:
- new online organizations
- traditional established organizations
Factors for success:
- first-mover advantage
- differentiation in the marketplace
- flexibility and agility in the electronic
marketspace
92
Seven dimensions of E-commerce Strategy
Four positional factors Three bonding factors
•Technology: goal must be •Leadership: vision of CEO for e-
understood within its’ market and commerce
industry •Infrastructure: technology
•Market: must determine its’ target support for new model of
market and whether it is still business
open to new entrants •Organizational Learning: does
•Service: must know its’ the organization support internal
customer’s expectations learning
•Brand: must understand if it has
the ability to create a strong
brand
93
Technology Leadership
Involves more than hardware and software
Seven major areas:
- strategy: focus upon alignment and planning
- structure: focus upon becoming an e-organization
- systems: technology integration
- staffing: developing a strong pool of skills
- skills: developing the necessary knowledge
- style: add value to customers
- shared values: must build value to the organization
94
Service Leadership
Established strategies of customer still apply
Internet service strength derived from providing
additional information to the customer
Internet provides a low-cost, high-quality
service channel with a global reach
Call centre strategy must be defined
E-mail interface channel must be defined
95
Brand Leadership
Branding strength comes from being a first
mover
Brand reinforcement is a continuous task
Brand positioning can be defined using the
Internet service value chain
Brand followers need to reposition as
quickly and effectively as possible
Four brand
96
Developing a Winning E-strategy
Ensure that the project is backed by senior management
Develop a strategy before a Web presence
Develop a strategy by focusing on technology,
branding, marketing and service
Identify and use knowledge in the organization
Strategy must add value for customers and must change
as the requirements of the customers change
97
The Three Approaches to Strategy
Position approach: “Where should we be vs. our
competition?”
Resources approach: “what resources should we
possess?”
Simple rules approach: “What processes should we
follow?”
98
Three Approaches to Strategy
Position Resources Simple Rules
Strategic Logic • Establish position • Leverage resources • Pursue opportunities
• Identify an attractive • Establish a vision • Jump into the confusion
market
Strategic Steps • Build resources •Keep moving
• Locate a defensible
position •Leverage across markets •Seize opportunities
• Fortify and defend •Finish strong
Strategic Question • Where should we be? • What should we be? • How should we proceed?
• Unique, valuable position • Unique, valuable, • Key processes and
Source of Advantagewith tightly integrated inimitable resources unique simple rules
activity system
• Slowly changing, well- • Moderately changing, • Rapidly changing,
Works Best In structured markets well structured markets ambiguous markets
Duration of • Sustained • Sustained • Unpredictable
Advantage
• It will be too difficult to • Company will be too slow • Managers will be too
Risk alter position as conditions to build new resources as tentative in executing on
change conditions change promising opportunities
Performance Goal • Profitability • Long-term dominance • Growth
99
Business Model
100
Business Models
A method of doing business by which a
company can generate revenue to sustain
itself
Spells out where the company is positioned
in the value chain
Business models are a component of a
business plan or a business case
101
Business Plans & Business Cases
Business plan: Business case:
- A written document - A written document
that identifies the that is used by
business goals and managers to garner
outlines the plan of funding for specific
how to achieve them applications or
projects; its major
emphasis is the
justification for a
specific investment
102
The Content of a Business Plan
Mission statement and Marketing and sales
company description plan
The management team Operations plan
The market and the Financial projections
customers and plans
The industry and Risk analysis
competition Technology analysis
The specifics of the
products and/or services
103
Structure of Business Models
All business models must specify their
revenue model (the description of how the
company or an E-commerce project will
earn revenue)
Value proposition is the description of the
benefits a company can derive from using
EC
Revenue sources are
- Transaction fees - Affiliate fees
- Subscription fees - Sales
- Advertisement fees - Other models
104
Business Models in E-commerce
Method of doing business
Well-planned model gives a competitive
advantage
Impacts on sustainability and growth
Three areas:
- value stream
- revenue stream
- logistical stream
105
Transaction costs
Cost of providing some good or service through
the market
Effects of e-commerce and the internet that
impacts the business model
Searching for an obtaining information
Participating in a market
Policing and enforcing transactions
Bargaining and decision costs
Actual cost of buying or selling the product
106
Value Stream
Create long-term sustainability
Benefit for business stakeholders
Can be achieved in four ways:
- creation/participation in an e-marketplace
- creation/participation of virtual communities
- additional value offers
- exploitation of offers
107
Creation/participation in an e-marketplace
Reduce transaction costs directly/indirectly
Economics of e-market similar to traditional market
Can be setup by supplier/buyer or run independently
Buyer value:
- reduced costs
- improved service
- convenience
Supplier value:
- reduced costs
- differentiation
- reduced lead time
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Creation/participation of virtual
communities
Bringing together members of a community
Larger communities mean larger sources
Improves customer service
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Additional value offers
Value is added by improving product mix
Through association or partnership
Can be achieved with minimum costs
Can be integrated into the host sites
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Exploitation of offers
E-commerce/Internet economy founded on
information
Value can be added by using this information
Target customers demographically
Can bridge the uncertainty gap
Can post RFP’s
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Revenue Stream
Short-term realization of value proposition
Direct:
- cost reduction
- free offerings of service/products
- pricing strategies
Indirect:
- internet advertising
- selling customer information
- joining affiliate programs
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Logistical stream
Examines organization restructure to
deliver value added and revenue streams
Issues such as:
- organizational culture
- pre/post restructuring
- implementing information
- communication and training
- reward systems for motivation
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Kinds of business models
Brokerage: market makers bring together
buyer and sellers
Advertising: web advertising providing
advertising messages
Infomediary: collecting and disseminating
information
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Assessing a business model
Can be assessed by looking at the
marketing strategy
Can also be assessed by technology
- imitation
- complementary assets
Financial measures
Competitor benchmarking
Market analysis
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Traditional vs. New Business
Models
Traditional New Business
Production Mass Personalized
Manufactures push Customer Pull
Distribution Middleman Direct
Communications Closed Open
Finance Slow Fast
Difficult Easier
Markets Local Global
Mass Niche
Assets Physical Virtual 117
Consumer Decision Process
Problem - Recognition
PRE-PURCHASE Information Search
Evaluation of Alternatives
PURCHASE Purchase Decision
Satisfaction
POST-PURCHASE Loyalty
Disposal
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Consumer Decision Process — Flower Example
Flowers
Need recognition, potentially triggered by a
Problem - Recognition holiday, anniversary or everyday events
Search for ideas and offerings, including:
Pre-Purchase Information Search – Available on-line and off-line stores
– Gift ideas and recommendations
– Advice on selection style and match
Evaluation of alternatives along a number of
Evaluation of Alternatives dimensions, such as price, appeal, availability, etc.
Purchase decision
Purchase Purchase Decision Message selection (medium and content)
Post-sales support
Satisfaction – Order tracking
– Customer service
Post- Education on flowers and decoration
Purchase Loyalty Post sales perks
Disposal
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Metrics
Metrics: If it moves, measure it!
Measures of performance; may be quantitative
or qualitative
Response times Security and privacy
Site availability On-time order
fulfillment
Download times
Return policy
Timeliness
Navigability
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