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PROMISE Disintermediate Closer alignment of demand and supply Develop close and loyal relationship with endusers Leverage information Lower cost, price, higher sales, profit
Customer acquisition cost, “viral marketing” = CAC plummets with increased customers word of mouth; Why do most B2C’s fail? Expected too much “viral marketing”, but it is very rare, 6sigmas away from mean, only first movers, 3 months, “tipped market”
$90-180 Most .com’s 99%
<$40$40
CAC
t
WHAT WENT WRONG? Expensive customer acquisition cost Costly site development and maintenance Poor customer experience
Difficult to navigate Ask for too much information
Technology snags Narrow band access Slow servers
YET, THE PROMISE REMAINS Technology gets better, cheaper Broadband will be a boost Firms understand challenges better
Buyer centric exchange: commerce one
Easy supplier acquisition
Neutral exchange: ariba
Focus independent exchanges
Most of them failed in the B2B: suppliers run away when hear “auction”, main factor: supplier flow hard to establish critical mass on both sides, customer-suppliers
Likely outcomes
Market and revenue growth below expectations
Process efficiency may dominate auction
CHANNEL TRANSFORMATION: EXCHANGES
PROMOTION: ADVERTISING The steep descent of clickrates
2% to 0.4%
Lower banner ad costs Emphasis on sign-ups/ acquisition Is advertising on the net dead?
NET ADVERTISING WILL BE POWERFUL
Curse: you can measure its effectiveness! Strength: you can measure its effectiveness! Advertising is a low efficiency mechanism Substitute to complementary Better targeting; influence ‘consideration’ Can be more interactive and effective
ACQUISITION THRU’ THE NET: ART TO SCIENCE
NextCard: Experiment, learn, modify – real time
100 ads at a time from a stock of 2000 3 billion impressions on 100 sites; $3M/month 200,000 tests/ year! Example:
Five controls; two new ads Sign-ups same as controls However, balance transfer was expensive
3 cents versus 16 cents for each dollar transfer
New ad: one was twice as profitable as another
PRICING ON THE WEB Search bots
Www.Mysimon.Com was getting blocked out, why? Only attractive to price sensitive customers, as yahoo offers service+convenience+price
Destroyer of value? Modest success
Portals are becoming e-merchants Pay for listing, transactions Paradox: block bots but pay portals! A wide array of products Www.Yahoo.Com
Virtual groups: b2c to b2b Dynamic pricing and promotions
Ebooks, emusic time-sensitive valuation Basket promotions Learn more about demand curve: dynamic experimentation
PRODUCTS AND SERVICES: CUSTOMIZATION
One to one marketing Low cost customization Based on behavior inference
Collaborative filtering Clickstream analysis
Based on stated preferences Www.Landsend.Com
DRIVE TRAFFIC Old game: search engine optimization Pay for listing
www.Google.Com