Professional Documents
Culture Documents
Mirroring Capability
•substitute virtual activities for physical activities
•create parallel value in market space
New Customer Relationships
add value to products/ services
draw on info. in virtual value chain to deliver value to
customers
Exploit the value matrix
•gather
•organize
•select
•synthesize
•Distribute
Value for a product is dependent on:
•Information Content
•Context - the way it is presented
•Infrastructure - to distribute the information.
Dis-intermediation
Disintermediation is giving the user or the consumer
direct access to information that otherwise would require
a mediator, such as a salesperson, a librarian, or a
lawyer. Observers of the Internet and the World Wide
Web note that these new technologies give users the
power to look up medical, legal information, travel, or
comparative product data directly, in some cases
removing the need for the mediator (doctor, lawyer,
salesperson) or at the very least changing the
relationship between the user and the product or service
provider.
In economics, disintermediation is the removal of
intermediaries in a supply chain: “cutting out the middlemen".
Instead of going through traditional distribution channels, which
had some type of intermediate (such as a distributor, wholesaler,
broker, or agent), companies may now deal with every customer
directly, for example via the Internet. One important factor is a
drop in the cost of servicing customers directly.
Disintermediation initiated by consumers is often the
result of high market transparency, in that buyers are aware of
supply prices direct from the manufacturer. Buyers bypass the
middlemen (wholesalers and retailers) in order to buy directly
from the manufacturer and thereby pay less. Buyers can
alternatively elect to purchase from wholesalers. Often, a B2C
intermediary functions as the bridge between buyer and
manufacturer.
To illustrate, a typical B2C supply chain is composed of four
or five entities (in order):
• Supplier
• Manufacturer
• Wholesaler
• Retailer
• Buyer
In the past, traditional channels of distribution have always
had a place for the middleman. It was through these third party
channel partners that many companies could bring their products
or services to market in the most economical manner possible.
Middlemen have handled not only the sale of product, but also a
number of other functions including, lead generation, specification
of equipment, assistance with credit approval, warehousing and
aftermarket support.
A middleman can take a number of different forms. He or she
could be a wholesaler, distributor, retailer, sales agent or a
manufacturer's representative. Their sole purpose is to unite the
producer with the customer. Their value is in the ability to find
the customer, define the customer's needs, close the sale and
support the manufacturer.
However, as a result of advancing technologies and the
proper application of Internet strategies, it is no longer business as
usual for the middleman. The Internet changes all the rules. For
some established businesses these changes, such as reverse
auctions, marketplaces, industry portals and virtual buying groups,
represent a clear threat to the status quo enjoyed by many
performing middleman functions. This threat is continuing to lend
credence to the feared concept of dis-intermediation.
New methods and new technologies are being developed
everyday that make it possible to drop the third party middlemen
and reduce transactional costs. When the middleman is deleted
from the process or dis-intermediated, he or she is not party to the
profits previously generated in the transaction. The end result is
their ultimate demise.
But has the middleman been eliminated and replaced with
the World Wide Web? Or has their role been morphed into a
greater opportunity as a result of the Internet? By re-examining
their business models many of these entrepreneurs have re-
established themselves in the business cycle and elevated their
value in the eyes of both their customers and the manufacturers
they represent.
The Destruction of the Middleman
The Internet has changed all the rules and has posed a threat for
many established distribution channels. At risk are the agents and
distributors that man these channels. New business models such
as reverse auctions, industry portals and virtual buying groups
have emerged lending credence to the feared concept of dis-
intermediation.
e-Commerce pundits have long predicted the demise of
these middlemen as a result of going direct. In some cases these
predictions have become realities. Travel agents have already
experienced the shortening of supply chains as airlines encourage
their customers to purchase tickets directly from their web site.
Many airlines have provided lucrative incentives for customers
that book on-line rather than through travel agents. The reason for
this online push is simple: Airlines save an estimated $15 - $25
per transaction when travelers use their Web sites.
The manufacturers own web site can pose a threat to the
middleman as well. Leads generated here can be handled directly
by the principal and eliminate the need for the middleman.
Aftermarket parts are especially vulnerable to this occurrence.
Most consumers refer to the nameplate on equipment they are
dealing with then contact the web site of the manufacturer when
they have a need for service or parts replacement. The
middleman is completely circumvented in this instance and that
dramatically affects his revenue.
This may also be the case when a purchaser has the need for
either a replacement unit or an exact match to sit beside an
existing piece of equipment. The middleman could have sold
the original equipment and be completely bypassed when the
customer refers to a manufacturer's web site.
Online Market
Research
Market research involves gathering information that will help a
firm identify potential products and customers .There are two
general types of market research .
Continued …
9. Recency
10. Acquisition rate
11. Conversion rate
12. Attrition rate
13. Abandonment rate
14. Retention rate
1. Impressions are the number of times an ad is served .
2. Clickthrough rate (CTR) measures the percentage of people
exposed to an online advertisement who actually click on the
advertisment.
3. Hits are the number of http requests received by a firm’s
server .Hits can be misleading as a measure of site activity
because a “hit” does not equal a page : a single page may
account for several hits if the page contains multiple images or
graphics.A single site visitor can generate hundreds of hits .
4. Page views are the number of pages requested by visitors. A
single page that has three frames will generate three page views.
5. Stickiness (Duration) is the average length of time visitors
remain at a site .The longer amount of time a visitor spends at a
site , the greater the probability of purchase.
6. Unique visitors counts the number of distinct, unique visitors to
a site , regardless of how many pages they view.
7. Loyalty measures the percentage of users who return in a year.
This can be good indicator of the trust shoppers place in site.
8. Reach is typically a percentage of the total number of
consumers in market who visit a site.
9. Recency like loyalty, measures the power of site to produce
repeat visits and is generally measured as the average number
of days elapsed between shopper or customer visits.
10.Acquisition rate measures of the percentage of visitors who
register or visit product pages (indicating interest in the
product)
11.Conversion rate measures the percentage of visitors who
actually purchase something.
12. Attrition rate measures the percentage of customers who
purchase once , but never return within a year.
13.Abandonment rate measures the percentage of shoppers who
begin a shopping cart form but then fail to complete the form
and leave the site.
14.Retention rate indicates the percentage of existing customers
who continue to buy on a regular basis.
Online Advertisement : It is the most common and familiar
marketing communications tool .The advantages of online
marketing are the ability to target ads to narrow segments and to
track performance of advertisements in almost real time. Online
advertisements also provide greater opportunities for interactivity
– two – way communication between advertiser and the potential
customer .
Different forms of online advertisements include :
•Banner and rich media ads
•Paid search engine illusion and placement
•Sponsorships , and
•Affiliate relationships
•Direct E-mail marketing
Advertising
Metrics
click-through
Definition
click-through
The process of clicking through an online advertisement to the
advertiser's destination.
Information
While the click-through is often the most immediate response to an
advertisement, it is not the only interaction. Visitors may choose to
type a company's URL directly into the browser bar, or type the
company's name into a search engine box. This assumes, of
course, that the company's name and/or URL appears in its
advertisements.
Accurate counting of click-throughs involves excluding "robot clicks"
and duplicate clicks. This takes on added importance when click-
throughs are used as the measurement on which payment is
based.
click-through rate (CTR)
Definition
click-through rate (CTR)
The average number of click-throughs per hundred ad impressions,
expressed as a percentage.
Information
It is important to distinguish what a click-through rate does and does
not measure. The CTR measures what percentage of people clicked
on the ad to arrive at the destination site; it does not include the
people who failed to click, yet arrived at the site later as a result of
seeing the ad.
As such, the CTR may be seen as a measure of the immediate
response to an ad, but not the overall response to an ad. The
exception involves ads that display no identifiable information about
the destination site; in these cases the click rate equals the overall
rate.
Merely getting visitors to a site had value when Web
site traffic was generally accepted as a measure of success.
The trend towards profitability, along with better tracking
tools, has resulted in less interest in click-through rates and
more interest in conversion rates.
A high click-through rate does not assure a good conversion
rate, and the two rates may even share an inverse relationship. An
advertisement geared towards curiosity clicks will result in fewer
sales, percentage-wise, than an advertisement geared towards
qualified clicks.
conversion rate
Definition
conversion rate
The percentage of visitors who take a desired action.
Information
The desired action can take many forms, varying from site to
site. Examples include sales of products, membership registrations,
newsletter subscriptions, software downloads, or just about any activity
beyond simple page browsing.
A high conversion rate depends on several factors, all of which
must be satisfactory to yield the desired results -- the interest level of
the visitor, the attractiveness of the offer, and the ease of the process.
The interest level of the visitor is maximized by matching the
right visitor, the right place, and the right time.
The attractiveness of the offer includes the value
proposition and how well it is presented. It is worth noting
that small, impulse items typically have a higher conversion
rate than large, shopping items.
The visitor's ease of completing the desired action is
dependent on site usability which includes intuitive navigation
and fast loading pages.
cost-per-action (CPA)
Online advertising payment model in which payment is based solely on
qualifying actions such as sales or registrations.
Information
The actions defined in a cost-per-action agreement relate
directly to some type of conversion, with sales and registrations among
the most common. This does not include deals based solely on solely
clicks, which are referred to specifically as cost-per-click or CPC.
The cost-per-action (CPA) model is at the other end of the
spectrum from the cost-per-impressions model (CPM), with the cost-
per-click (CPC) model somewhere in the middle. In a CPA model, the
publisher is taking most of the advertising risk, as their commissions are
dependant on good conversion rates from the advertiser's creative units
and Web site.
Marketers looking for cost-per-action deals have
several options. Publishers with considerable excess
inventory may be willing to consider nonstandard offers.
Sites specializing in incentive programs are in a position to
offer CPA pricing on various types of leads, although the
usual caveats concerning incentivized traffic still apply.
Perhaps the most widespread use of performance-based
pricing is affiliate marketing, whereby
merchants/advertisers determine what actions they want
to reward and how much they are willing to pay.
CPM
Definition
CPM
Cost per thousand impressions.
Information
The CPM model refers to advertising bought on the basis of
impression. This is in contrast to the various types of pay-for-
performance advertising, whereby payment is only triggered by a
mutually agreed upon activity (i.e. click-through, registration, sale).
The total price paid in a CPM deal is calculated by multiplying the
CPM rate by the number of CPM units. For example, one million
impressions at $10 CPM equals a $10,000 total price.
1,000,000 / 1,000 = 1,000 units
1,000 units X $10 CPM = $10,000 total price
The amount paid per impression is calculated by dividing the
CPM by 1000. For example, a $10 CPM equals $.01 per impression.
$10 CPM / 1000 impressions = $.01 per impression
cost-per-click (CPC)
Definition
cost-per-click (CPC)
The cost or cost-equivalent paid per click-through.
Information
The terms pay-per-click (PPC) and cost-per-click (CPC) are sometimes
used interchangeably, sometimes as distinct terms. When used as
distinct terms, PPC indicates payment based on click-throughs, while
CPC indicates measurement of cost on a per-click basis for contracts
not based on click-throughs.
For example, consider a campaign where payment is based on
impressions, not clicks. Impressions are sold for $10 CPM with a click-
through rate (CTR) of 2%.
1000 impressions x 2% CTR = 20 click-throughs
$10 CPM / 20 click-throughs = $.50 per click
customer acquisition cost
Definition
customer acquisition cost
The cost associated with acquiring a new customer.
Information
Customer acquisition cost is calculated by dividing total
acquisition expenses by total new customers. However, there are
different opinions as to what constitutes an acquisition expense. For
example, rebates and special discounts do not represent an actual cash
outlay, yet they have an impact on cash (and, presumably, on the
customer).
Acquisition costs vary across industries and mediums. When
acquisition data is available, try to determine if you are comparing apples
to apples, so to speak. This is not always easy, as customer acquisition
data can be scarce, and the methodology is often sketchy.
Hit
Definition
Hit
Request of a file from a Web server.
Information
The term "hit" is perhaps the most misused term in online marketing,
mistakenly used to mean unique visitors, visits, page views, or all of the
above.
A hit is merely a request for a file from a Web server. A request for a Web
page counts as a hit, but so does a request for a graphic on a Web page.
Since the number of graphics per page can vary considerably, hits mean
very little for comparison purposes.
hybrid model
Definition
hybrid model
A combination of two or more online marketing payment models.
Information
A hybrid campaign might be a mix of impression-based (CPM)
and performance-based (CPC or CPA), or a mix of two performance-
based models. Hybrid deals are sometimes seen as a way to further split
the risk between publishers and advertisers.
Advertising campaigns sometimes bundle CPM and CPC in a
hybrid buy, and sometimes even CPA.
Affiliate programs have been known to offer a few cents per-click
in addition to paying for a sale, lead, download, or other conversion
activity.
impression
Definition
impression
A single instance of an online advertisement being displayed.*
Information
* This definition may be an over-simplification, as there is no
standard way to count impressions. All of the differences can add up to
very large discrepancies, yet people make purchases based on
impression every day.
So... what is the definition?
Currently, whatever a buyer and seller agree on.
page view
Definition
page view
Request to load a single HTML page.
Information
Page views are only important to the degree they play a part in a site's
revenue model. If a site earns much of its revenue from advertising,
then page views are important because of their contribution to ad
inventory. If a site only earns revenue on sales, then page views are not
a key statistic. Page views without corresponding sales may even be
viewed as an expense.
pay per click
Definition
pay per click
Online advertising payment model in which payment is based solely on
qualifying click-throughs.
Information
In a PPC agreement, the advertiser only pays for qualifying clicks to the
destination site based on a prearranged per-click rate. Popular PPC
advertising options include per-click advertising networks, search
engines, and affiliate programs.
Paying per click is sometimes seen by some as a middle
ground between paying per impression and paying per action. When
paying per impression, the advertiser assumes the risk of low-quality
traffic generated by the publisher. When getting paid for actions, the
publisher assumes the risk of low-converting offers by the advertiser. In
the PPC model, the publisher does not have to worry about the sales
conversion rate of the target site, and the advertiser does not have to
worry about how many impressions it takes to attract the specified
number of clicks.
pay per lead
Definition
pay per lead
Online advertising payment model in which payment is based solely
based on qualifying leads.
Information
In a pay per lead agreement, the advertiser only pays for leads
generated at their destination site. No payment is made for visitors who
don't sign up.
A lead is generally a signup involving contact information and
perhaps some demographic information; it is typically a non-cash
conversion event. A lead may consist of as little as an email address, or
it may involve a detailed form covering multiple pages.
One risk to the advertiser is the potential for fraudulent activity
by incentivized 3rd-parties or marketing partners. Some false leads are
easy to spot. Nonetheless, it is advisable to make a regular audit of the
results.
pay per sale
Definition
pay per sale
Online advertising payment model in which payment is based
solely based on qualifying sales.
Information
In a pay per sale agreement, the advertiser only pays for sales
generated by the destination site based on an agreed upon commission
rate.
Paying per sale is often seen as the payment model most
favorable to advertisers and least favorable to publishers. In such an
agreement, the publisher must not only be concerned with the quality and
quantity of his or her audience, but also the quality of the advertiser's
creative units and destination site.
If possible, many publishers avoid sales-based agreements,
preferring to stick to the CPM model. However, some publishers, facing
weak ad sales, have little choice but to accept sales-based agreements
to utilize remnant space.
For advertisers, pay per sale has some unique advantages
compared to pay per click and pay per lead. There are fewer concerns
about whether conversions are legitimate, and whether traffic is
incentivized or of low quality.
stickiness
Definition
stickiness
The amount of time spent at a site over a given time period.
Information
Stickiness is often measured in the average minutes per month
visitors spend at a site or network. Sometimes stickiness is measured in
terms of page views.
When defined as minutes per month, site stickiness is a
function of number of visits (repeat usage) and time spent per visit
(session stickiness).
unique visitors
Definition
unique visitors
Individuals who have visited a Web site (or network) at least once in a
fixed time frame, typically a 30 day period.
Information
Most measurements of unique visitors are estimates.
Sites often calculate unique visitors based on the IP address information
found in the log files, and sometimes through cookies. However, many
factors may skew the results.
Traffic rating companies typically calculate unique visitors by monitoring
actual usage of a group of volunteers, then applying the results to to the
Internet population. Results fluctuate considerably for small sites due to
their small sample sizes.
Web site traffic
Definition
Web site traffic
The amount of visitors and visits a Web site receives.
Information
Web site traffic was initially viewed as an all-important metric
for gauging success on the Web. This assumption was due in part to
the lack of other business metrics to explain the .com phenomenon.
Now much of the focus has shifted back to profitability, and Web site
traffic is only part of the equation.
Web site traffic x conversion = results
Web site traffic is still important, as you can't have conversions
without visitors, but it is becoming less important as a standalone
metric.