B2 B Lecture

Business to Business eCommerce

Dr. Mary Wolfinbarger

Internet Marketing

Definition

• B2B e-commerce refers to the _________of _________ _____processing and Internet communications for ______ services in the production of economic transactions

• Many B2B businesses are____________

B2B Transactions

Include:

• __________trade

• Purchases by businesses of _______, resources, technology, manufactured parts and components and capital equipment

• Services included __________ transactions including insurance, credit, bonds, securities

Size of Market

• Overall B2B transactions in US = $11.5T(2000)

• $336B are electronic (Jupiter Communications) – (comparison to B2C -- $45B at most)

• 2005: Predict $6.3T out of $15.1T – (Jupiter, US only)

• Or 4.5T worldwide? (Goldman Sachs)

Why the growth?

Anticipated productivity gains:1. _____ ________from automating

transactions2. Economic advantages of ___ market

intermediaries3. Consolidation of demand and supply

through organized________4. Changes in extent of _______integration

Cost Efficiencies

• Can reduce cost of __________before, during and after transaction“At every stage e-commerce avoids the need to translate

computer files into paper documents, a process that generally involves errors, delay and costly clerical personnel.” (Lucking-Reiley and Spulber 2000)

– Both websites and ____(electronic data interchange) are used

Cost Efficiencies

• Before: May lower cost of _________for suppliers or buyers and making _____and _______comparisons– Sales personnel are freed from _______product

availability and pricing; they can concentrate on account management and _________strategy

Cost Efficiencies

• During: Can ______communication regarding transaction details

• After: Lower cost of____________, monitor contractual performance, confirm_________, automatically ______ production and accounting records

Cost Efficiencies

“The potential cost savings in this area are substantial. Processing a purchase order manually, including paperwork, data entry, phone calls, faxes and approval requests, can be quite expensive, so online transactions might easily reduce costs by a factor of five or ten or more.” – Lucking-Reiley and Spulber 2000

Cost Efficiencies

Examples:• British Telecom has reduced external procurement

costs from $113 to $8 per transaction• Mastercard costs of processing purchase orders

has fallen from $125 to 40, number of days from 4 to 1.25 days

• Lehman Brothers: financial transactions are $1.27 for teller, $.27 for ATM, $.01 online

Efficiency Gains from Intermediation

Intermediairies can reduce __________ _____by

• Reducing cost of ______

• Certifying product_______

• Mitigating ______________ costs

• Providing ___________for buyer and seller commitments


Intermediairies can be “_______-_____” who create efficiencies by

• Creating institutions of________

• Adjust and communicate_______

• Clear_______

• Allocate ______

• Provide liquidity and immediacy


Intermediairies can be “market-makers” who create efficiencies by (continued)

• _________ markets• Providing market __________• Offering an _________of goods and services (e.g.

credit, supply chain management, appraisal, transportation, and storage, industry news on website)

• Bilateral negotiation is replaced w/ ______ bidding mechanisms


“Online markets have been established for aircraft parts, agriculture, apparel automotive parts, chemicals, computers and electronics, energy, financial instruments, food and beverages, health care, intellectual property, freelance services, laboratory supplies, industrial machinery, advertising, metals, office supplies, plastics, paper, printing services, telecommunications, shipping, and travel services.” –Lucking-Reiley and Spulber, 2000

Terms for Intermediation

• _______ markets: a marketplace targeting a single industry

• _________ markets: target many industries e.g. maintenance, repair and operations (MRO) sells materials like belts, pumps and light fixtures

• www.verticalnet.com

http://www.verticalnet.com/

Types of Intermediaries

E-commerce intermediaries can be classified into four main categories:

1. Brokers2. Auctioneers3. Dealers 4. ExchangesCan skip the intermediaries and go direct through

proprietary exchanges/networks or buy directly from the company (e.g. Intel.com)


Brokers:• Match buyers and sellers for a____

– Some resemble yellow pages directories, but with more comprehensive _________

– Brokers generally make money from ______ ___ paid by sellers

– Sellers can place product listings that resemble ______ ads

– Order fulfillment is typically up to the______

Types of IntermediariesAuctioneers:• In addition to matchmaking, set up a mechanism to

determine______– Internet tech. _______ ______of running an auction relative to

using posted prices– Auctions useful when there is _________ about market-clearing

prices– Some hold auctions of ______ inventory (e.g. One Media Place

sells advertising space)– Some hold _______ auctions where sellers compete for a

buyer’s contract– Example: www.FreeMarkets.com (largest reverse auctionneer)

http://www.freemarkets.com/


Dealers• Take _______ of goods provided by suppliers

and ______them to buyers– Post ____ prices for buyers and ___ prices for sellers– Early development has seen ____dealers as compared

to brokers, auctions or exchanges– Dealers are largely extensions of “___ economy”

distributors Examples: Grainger.com, EnronOnline (www.enron.com) (the world’s largest e-commerce site for global commodities)

http://www.enron.com/


Exchanges (also called marketplaces):• ______sided markets (like commodity markets)

– Provide services:• Rules of trading• Price transparency• Centralized Clearing

– Buyers and sellers observe the _____ of transactions as they ____ and expect to receive best available price

– Buyers settle their ___ position at end of day rather than settling each transaction individually

– Examples: Altra Energy (oil and gas), CheMatch (www.chematch.com)(chemicals), e-Steel (steel)

http://www.chematch.com/

Types of Intermediaries• Exchanges

– Many exchanges are ______-sponsored– Examples: 1) Sears, Carrefour and several other major retailers

started GlobalNetExchange to organize purchases from over 50,000 vendors

– 2) Boeing, Lockheed Martin, BAE Systems and Raytheon formed an exchange for aerospace parts and services with potential for $70B with 37,000 suppliers

– 3) Covisint (auto industry exchange – GM, Ford, Daimler-Chrysler)

• Industry consortia have put many of the independents out of business (also called ISMs –_______ _________ __________)

Types of Intermediaries• Exchanges

– By mid-2000, it was estimated that 60 buyer-dominated consortia, representing over 278 companies and $3 trillion in annual purchasing planned to establish their own electronic markets rather than relying on independent exchanges. (-Roberti 2000)

– Antitrust issues• Competitors can more easily exchange _____ info and thus

______• B2B sites could ________ participation by competitors• In industry-sponsored exchanges so far, ownership tends to be on

the side of the market having greatest concentration of market power

Types of IntermediariesExchanges: Challenges

– Competitors aren’t used to working together __________– Suppliers are _______to sign on (they don’t want to be

“squeezed”)– Transparency: posting ______ and contracts where

competitors can see them– Companies like buying from tried and true _______– Some companies don’t have the ________to participate

(e.g. hotel supply exchange failed)– Sensitizing managers to the notion of ________ ______– People hate_______

Private Networks

• _________exchanges between businesses

• More consistent with the way many businesses are already run

Private Networks

“…many old-line manufacturers…view B2B sites as cost-effective tools to improve and cement [existing] business relationships… rather than as a way to attract an entirely new set of buyers…they have balked at aggressively participating in independent trading sites that also feature the wares of rival suppliers…Instead, [they] are focusing on building up their own, company-specific sales platforms and techniques, and then helping longstanding customers adapt smoothly to them.” ---Wall Street Journal, May 21, 2001


• Some firms fall into more than one of these categories

• PlasticNet runs auctions for some transactions and acts as a broker by allowing its users to place classified ads for products

• MetalSite runs single-sided auctions for some clients, but operates a double-sided exchange as well.

• Industry consortia tend to run exchanges with multiple functions and tools

Future of Intermediaries

• Many Observers predict substantial _______ and market _______as markets become established

• Comprehensive up-to-date lists of B2B exchanges appear at www.line56.com

• and www.nmm.com

http://www.line56.com/

http://www.nmm.com/

What do buyers want?

• B2B buyers want many of the same qualities that B2C buyers desire– Only 41% of B2B companies respond to email inquiries

within 6 hours, only 65% in 24 hours (as in B2C, email responsiveness can be used to judge trustworthiness of a site)

– FAQ pages and search capabilities at many sites are poor– 45% of B2B buyers say they don’t go online because

they don’t trust suppliers

• ________ sites set expectations difficult to reach since B2B transactions are often more_______


• Over 4/5 companies said they would be more interested in buying online if “comprehensive services” were offered (e.g. collaborative product design or supply/inventory applications)

-- Jupiter Media Metrix, May 2001

Value of Collaboration

• Supply Chain _______

• Replenishment, Demand _________

• Online Product _______– Advantages?

• Faster to Market

• Higher Quality/Fewer Mistakes

• Lower Inventories, less working capital

• Better, cheaper designs


“The early focus was transactions, but win-win business relationships are built from collaboration – not just transactions.” --Tim Clark, Jupiter Media Metrix

• As e-markets develop, supplier _____ and ______ will complement the present focus on price


GEPolymerland.com lured enough customers online to make their venture worthwhile: How?

• Customers were involved in planning the site• Site is easy to navigate, fast, customer service is

high quality, website customization, access to technical information

• Not forcing customers online

Direct Marketing and B2B

• Internet direct marketing can be used in combination with mail and telephone

• Similar to direct mail, on web can combine ____ and_______

• Microsegmentation

• ___________ direct marketing


5 strategies:

1. Generate ____on the Internet

2. Use Internet to provide_______/______

3. Execute instant _______ fulfillment

4. Generate______

5. Enhance customer___________


1. Generating Leads

• Typical direct mail response is ___%

• Order generation below __%

• _______ ______seem to be declining


• The Internet can help in generating leads:– Generate leads in first place– Support use of __________ direct marketing

media– Track ______of efforts– Support ______organization


• The Internet can help in generating leads:– _______ (develop own list, rent for $250/300

per 1000 names)– Emails give _______ ______/inside track on

products– Email can be used to ______ ___on inquiries

or orders (follow-up generates more sales)– Email can also be used to follow up on

_______ meetings


• The Internet can help in generating leads:– Email ________(opt-in) contain info. useful

to recipient, but also marketing– Email _______– Email _________/web _________ groups– _________ banner ads


2. Using the Internet to Promote Products/Services

– Online _______(cheaper than offline)– Can be ________ for partner/re-seller release– Can use in conjunction with ______ ____– Can be live, pre-recorded or interactive


3. Executing Instant Information Fulfillment on the Net

• Fullfillment – responding to an information______

• Differences online– Dramatically closes need for ______ __________– Leads don’t “____” while waiting for information– Customers can try online______– Fullfillment can be________/__________


4. Generating Orders

• Internet forms help _______leads so sales effort is better allocated

• Straight __________can be handled without using personnel


5. Enhancing Customer Relationships:• Email ___________(as mentioned earlier)• _____and _______on website are

appreciated• ________websites can be developed for

specific businesses• Occasionally, customer ___________

develop (e.g. Cisco)

Lifestyle

B2 B Lecture