Internet Marketing

E-Commerce

E-Commerce & Web Sites

Raises site performance More online performance, e.g., email Web-server performance is critical – look for

bottlenecks

Increases personalization Biggest in B2B – seen as convenient, cost saving

and good service Consumers fear privacy and reselling of data Personalization based on perceived lifetime value Personalization/e-commerce virtuous circle

Expands Site Scope

Customer acquisition costs E*Trade 1996-7 $50 per customer and in 1998

$275 per customer 70% of first year revs on marketing, 30% in year

two

Results of high acquisition costs Searches for methods Premium on customer loyalty building Desire to expand a customer’s online business

Take a Dip – The Profit Pool

Goal – take advantage of customer traffic Products and services that fit with current

customer purchases – Amazon? Profitable items

Alliance Partners Judge by The Profit Pool ID different products and calculate their revenue

and profit share

Profit Pool Segments

Anchor servicesService providers at core of an e-

commerce site

Extension servicesValuable partners with an anchor service

Neutral servicesComponents without high profits or

customer contact frequency

Online Selling

Redraws connections between buyers and sellersComplementary purchases

Consistent positioningComplicates the split of profits between pool membersWorries about losing access to customers and high referral fees

E-Commerce Buying

Unique information source

To succeed as a retail toolPrice – monetary and non-monetary costs

kept lower than traditional alternativesAssortment – match buyer desiresConvenience – superior timing, location

and buying processEntertainment – more fun than traditional

Monetary Cost

Full online price = [Online price * (1 + tax rate)]+ shipping cost+ shopping/purchasing costs+extra cost if returns required

Regular Price + Tax

Lower regular prices Book industry Amazon vs. Wal-Mart Dangers of this strategy?

Offer lower prices on all itemsExchange rateTaxes Tough to avoid GST – How could you do it? Most avoid PST by not having a physical presence Consumers in high tax provinces shift behaviour Dangers?

Shipping Cost

Categories of goods Digital information goods – near 0 Digital entertainment – transmission and data

storage costs Hard goods – weight, speed of delivery Perishables – high

Costs affect consumer decisions

Problems of shipping to home addresses FedEx vs. UPS – Who will win?

Assortment andConvenience

Problems with traditional stores Limited assortment, hours and advice

Physical vs. virtual inventory Easier for e-commerce firms to add SKU’s Centralized inventory management

Tap into repeat purchases – B2B

One-stop shopping – Chemdex

Comparison shopping – software and agents

Entertainment

Less developed due to available technology

Adult entertainment leads the way

Distribution

One distribution system or two?Channel conflict Goal divergence

Objectives of manufacturer and channel partners differ Responsibility disputes

Customer handling, territories, functions, technology Differing perceptions of reality

Control of key customers

Exclusive distribution through corp. site or contractual agreement

Proper Distribution

Disintermediation Dropping layers of distribution channel

Reintermediating Adding levels, e.g. auto-locating services

Reorganization Better product Learning about customer wants and needs Efficient system of customer contacts Quick and cheap market assess

Channel Benefits

Build-to-OrderDell’s success

Real-time marketing “Personally customized goods or services

continuously update themselves to continuously track changing customer needs, without intervention by corporate personnel, often without conscious or overt input from the customer.”

Internet Benefits

Link between customer and company exists

Details of purchase are automatically available

Timing of purchase is known

Trust is established

Lower vulnerability to poaching

Intermediaries

Benefits Know consumers Understand local markets Carry broad product lines within a category Carry multiple product lines

Requires fewer contactsCost differences between physical and online worldsCost of physical contact with customers

Data-Driven Intermediaries

Can collect more data on transaction history, preference measures and triggersIncentives Customer coalitions

Customers join intermediaries to protect privacy and share info

Agents – don’t lose control and get benefits of customization

Seller scope Multipurpose vendor learns more about customers

E-Commerce Analysis

Industry DescriptionTraditional Selling MethodsSite and Service ComparisonConcept Description Appropriate online Customers online Online value

Internet Marketing PlanBasic Financial Analysis Fundamental flaw Gap or weakness Launch

Competing Against The Net

E-commerce is just another adjustmentResponses Selective price discounts Concentrating on late adopters

Playing on fear, uncertainty and doubt Creating and staging experiences

Bundle pleasant surroundings and experiences with products or services

Developing a hybrid system Use physical locations to acquire customers, develop

complex relationships and create a strong brand image

Egghead Goes Virtual

Closed its small, mall-based stores in 1998

Capitalized on brand name

Avoids sales taxes except in Oregon

Increased number of SKU’s from 2000

Focusing on closeout material, its brand name and buying experience

Downside – more expenditures on customer acquisition, marketing and alliances

E-Commerce:Ask Three Questions

How will e-commerce change our customer priorities?

How can we construct a business design to meet these priorities?

What investments do we need to make in technology?

Rules of E-Business

Technology is no longer the afterthought in forming business strategy but the cause and driver

Ability to streamline the structure, influence, and control of the flow of information is more powerful than moving and manufacturing physical products

Rules II

Inability to overthrow the dominant, outdated business design often leads to business failure

Goal of new business designs is to create flexible outsourcing that offloads costs and makes customers happy

E-commerce allows a company to become “the cheapest,” “most familiar,” or “the best”

Rules III

Use technology to innovate, entertain and enhance the entire purchase process

Business design increasingly uses reconfigurable e-business community models

Management must align strategies, processes and applications fast, right and at the same time.

E-Business Architecture

VisionStrategyCross-functional processesIntegrated applicationsIT InfrastructureDanger IT people up ahead!FedEx Experience – warehouse, fulfillment and shipping specialist for National Semiconductor Combines IT with JIT

Execution Framework

Provide a structure for defining, communicating and monitoring new realities

Redesign core business processes to align with organizational vision

Enable IT infrastructure to support change, innovation and business goals

Need for Leadership

Status quo

Seek a safe haven by improving the existing product mix

Return to chaos, risk, and uncertainty of new product and services

Challenges FacingMarket Leaders

Manage top-line growth – acquisitionsMeet or exceed customer expectationsCustomer driven – more responsiveMarket evolution – more flexibleImplement partner/alliances – competitiveIntegrate multiple channels and and multiple business units

Challenges II

Brand migration and product transition issues

Implement supply chain management – shorter lead times by forecasting and component availability

Change internally to gain a competitive advantage

Guides to the Future

Emphasis will shift to e-business from e-commerce to derive the greatest valueTrue competitive advantage will happen when new concepts, practices and performance are combined to improve company and customer bottom linesHarness rising consumer demands, globalization and information/communication.Manager’s future responsibilities will change but their organizational level probably won’t