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E-commerce

Name : Dr. Nasim Z. Hosein


E-Mail : nhosein@northern.edu
Phone number : 605-626-7724

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

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

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.

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.

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.

In the 1980s
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.

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

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 LANs
Wide area network (WAN): a broader area
covered, can include several MANs
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
developed in the early
1970s
- Electronic funds
transfer (EFT)

Limited to:
- Large corporations
- Financial institutions
- A few other daring
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 doesnt 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 &
Connectivity
Intranets : connect people
within a company.
Extranets : connect a
company with its suppliers,
distributors, and outside
partners.
Internet : connects users
around the world.

Internet Explosion
Explosive worldwide
growth forms the heart of
the New Economy.
Increasing numbers of
users each month.
Companies must adopt
Internet technology or risk
being left behind.

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
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Forces Shaping the Digital Age

New Types of Intermediaries:


Direct selling via the Internet bypassed
existing intermediaries (disintermediation).
Brick-and-mortar firms became click-andmortar 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 ecommerce 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.
Its 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.
Its 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

Consumers

B2C

C2C

And selling
to...

37

Distinct Categories of E-Commerce

Business to Business (B2B) refers to the full spectrum of ecommerce 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


(contd)

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

And Selling to

Business
Publishers order
paper supplies from
paper companies

Amazon orders
from publishers

Consumers buy
thousands of Harry
Potter books from
Amazon

Consumers
Consumers search
out sellers, offers
and initiate
purchases from
Amazon

Consumers resell
copies on eBay

40

What is a web-based business

Business that uses the WWW to fulfill its


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
competitorsprices.
- Reduced profits and cash flows.
- Inability to raise new financing.
- Loss of control in an acquisition by a new
economy firm.
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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
Persistent
New

connection with customers

value for customers

Access

to new customers

Scalability

Challenges
Cannibalization
Channel

conflict

Customer
Investor

confusion

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 ecommerce.

It consists of companies purchasing goods,


services, and information from online suppliers.

61

Types of e-Marketers

62

Click-Only Companies
E-tailers
Enabler
Sites

Content
Sites

Types of
Sites
Transaction
Sites

Search
Engines and
Portals
Internet
Service
Providers

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
Creating

websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail

Corporate

websites

Build goodwill and


relationships; generate
excitement
Marketing

websites

Engage consumers
and attempt to influence
purchase
Website

design

7 Cs of effective website
design
67

Conducting E-Commerce
Seven Cs of Website Design
Context

Communication

Content

Connection

Community

Commerce

Customization

68

The 7Cs of Website design


Context

Content

Sites layout and design

Text, pictures, sound and video


that web pages contain

Commerce

Community

Sites capabilities to enable


commercial transactions

The ways sites enable user-touser communication

Connection

Customization

Degree site is linked to other


sites

Sites ability to self-tailor to


different users or to allow users
to personalize the site

Communication
The ways sites enable site-touser communication or two-way
communication

69

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

Creating

websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail

forms of ads and


promotions
Banner ads/tickers
Skyscrapers
Interstitials
Content sponsorships
Microsites
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
Creating

websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail

Web

communities allow
members with special
interests to exchange views
Social communities
Work-related
communities
Marketers find welldefined demographics and
shared interests useful when
marketing

77

Setting up for E-Marketing


Options
Creating

websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail

E-mail

marketing

Key tool for B2B and


B2C marketing
Clutter is a problem
Enriched forms of
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 corporationelectronically 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 reductionshortening 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
Porters 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
External
Analysis

Strategy
Formulation

Internal
(Company)
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 eunderstood 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
customers 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
Strategic Logic
Strategic Steps

Strategic Question

Resources

Simple Rules

Establish position

Leverage resources

Pursue opportunities

Identify an attractive
market
Locate a defensible
position
Fortify and defend

Establish a vision
Build resources
Leverage across markets

Jump into the confusion


Keep moving
Seize opportunities
Finish strong

Where should we be?

What should we be?

How should we proceed?

Unique, valuable position Unique, valuable,


inimitable resources
activity system

Key processes and


unique simple rules

Works Best In

Slowly changing, wellstructured markets

Moderately changing,
well structured markets

Rapidly changing,
ambiguous markets

Duration of
Advantage

Sustained

Sustained

Unpredictable

It will be too difficult to


alter position as conditions
change
Profitability

Company will be too slow


to build new resources as
conditions change
Long-term dominance

Managers will be too


tentative in executing on
promising opportunities
Growth

Source of Advantagewith tightly integrated

Risk
Performance Goal

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:
- A written document
that identifies the
business goals and
outlines the plan of
how to achieve them

Business case:
- A written document
that is used by
managers to garner
funding for specific
applications or
projects; its major
emphasis is the
justification for a
specific investment

102

The Content of a Business Plan

Mission statement and


company description
The management team
The market and the
customers
The industry and
competition
The specifics of the
products and/or services

Marketing and sales


plan
Operations plan
Financial projections
and plans
Risk analysis
Technology analysis

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
- Subscription fees
- Advertisement fees

- Affiliate fees
- Sales
- 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
108

Creation/participation of virtual
communities
Bringing together members of a community
Larger communities mean larger sources
Improves customer service

109

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

110

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 RFPs

111

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
112

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

113

Kinds of business models


Brokerage: market makers bring together
buyer and sellers
Advertising: web advertising providing
advertising messages
Infomediary: collecting and disseminating
information

115

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

116

Traditional vs. New Business


Models
Traditional
Production

New Business

Distribution

Mass
Manufactures push
Middleman

Personalized
Customer Pull
Direct

Communications

Closed

Open

Finance

Slow
Difficult
Local
Mass
Physical

Fast
Easier
Global
Niche
Virtual

Markets
Assets

117

Consumer Decision Process


Problem - Recognition

PRE-PURCHASE

Information Search
Evaluation of Alternatives

PURCHASE

Purchase Decision
Satisfaction

POST-PURCHASE

Loyalty
Disposal

118

Consumer Decision Process Flower Example


Flowers
Problem - Recognition

Pre-Purchase

Need recognition, potentially triggered by a


holiday, anniversary or everyday events

Search for ideas and offerings, including:


Available on-line and off-line stores
Gift ideas and recommendations
Advice on selection style and match

Evaluation of alternatives along a number of


dimensions, such as price, appeal, availability, etc.

Purchase decision
Message selection (medium and content)

Information Search

Evaluation of Alternatives

Purchase

Purchase Decision

Post-sales support
Order tracking
Customer service

Education on flowers and decoration


Post sales perks

Satisfaction

PostPurchase

Loyalty

Disposal

119

Metrics
Metrics: If it moves, measure it!
Measures of performance; may be quantitative
or qualitative

Response times
Site availability
Download times
Timeliness

Security and privacy


On-time order
fulfillment
Return policy
Navigability
120

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