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1 Prentice Hall, 2002 (Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-Danielsen.

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Presentation on theme: "1 Prentice Hall, 2002 (Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-Danielsen."— Presentation transcript:

1 1 Prentice Hall, 2002 (Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-Danielsen

2 2 Prentice Hall, 2002 Overview for Class 5 Chapter 1 from Shapiro and Varian Group 1 Presentation (Nordang, Hovden, Bjerkvik, Tomren) Group 2 Student Presentation (Valderhaug, Golka, Kristensen) Chapter 4 from Tuban (begin 4.2-4.5) Consumer behavior online Demographics Consumer purchasing decision Matching products and customers: Personalization

3 3 Prentice Hall, 2002 The Information Economy Carl Shapiro Hal R. Varian

4 4 Prentice Hall, 2002 Systems of Products Complementary products Hardware/software Client/server Viewer/content Product lines High fixed cost, low incremental cost Leads to value based pricing

5 5 Prentice Hall, 2002 Unique Features Complements Different manufacturers Strategy for complementors as well as competitors Compatibility as strategic choice Standards and interconnection Product lines Lower quality may be more expensive

6 6 Prentice Hall, 2002 Information Anything that can be digitized Text, images, videos, music, etc. a.k.a. content, digital goods Unique cost characteristics Unique demand characteristics

7 7 Prentice Hall, 2002 Cost structure Expensive to produce, cheap to reproduce High fixed cost, low marginal cost Not only fixed, but sunk No significant capacity constraints Particular market structures Monopoly Cost leadership Product differentiation (versioning)

8 8 Prentice Hall, 2002 Rights Management Low reproduction cost is two-edged sword Cheap for owners (high profit margin) But also cheap for copiers Maximize value of IP, not protection Examples Library industry Video industry

9 9 Prentice Hall, 2002 Consumption Characteristics Experience good Browsing Always new Reputation and brand identity Overload Economics of attention Hotmail example Broadcast, point-to-point, hybrid

10 10 Prentice Hall, 2002 Technology Infrastructure to store, retrieve, filter, manipulate, view, transmit, and receive information Adds value to information Web = 1 terabyte of text = 1 million books If 10% useful = 1 Borders Bookstore Value of Web is in ease of access Front end to databases, etc. Currency

11 11 Prentice Hall, 2002 Systems Competition Microsoft-Intel: Wintel Intel Commoditize complementory chips Microsoft Commoditize PCs Apple Integrated solution Worked better, but lack of competition and scale led to current problems

12 12 Prentice Hall, 2002 Lock-In and Switching Costs Example: Stereos and LPs Costly switch to CDs Systems lock-in: durable complements Hardware, software, and wetware Individual, organizational, and societal

13 13 Prentice Hall, 2002 Network Effects Value depends on number of users Positive feedback Fax (patented in 1843) Internet (1980s) Indirect network effects Software Expectations management Competitive pre-announcements

14 14 Prentice Hall, 2002 Compatibility Examples Beta v. VHS Sony v. Philips for DVD Role of 3rd parties Read v. write standards Backwards compatibility? Windows 95 Windows NT

15 15 Prentice Hall, 2002 Basic Strategies Go it alone Partnerships (Java) Formal standard setting Widespread use Licensing requirements Competition in a market or for a market?

16 16 Prentice Hall, 2002 Policy Understand environment IP policy Competition policy Regulation Antitrust Electronic commerce Contracts Privacy

17 17 Prentice Hall, 2002 Information is Different… but not so different Key concepts Versioning Lock-in Systems competition, Network effects

18 Statistics on eCommerce growth Gruppe 1 Nils Einar Nordang, Karl Johan Hovden, Jan Tore Bjerkvik, Nils Kristian Tomren Internet Exercise 3, page 35

19 eCommerce er veksande, og framtida ser lys ut for e-businesses Mellom 2000 og 2001, vil andelen av Internett-brukarar som handlar online øke med 50%. Globalt vil andelen av Internett- brukarar øke frå 10% til 15%. Integrert offline og online shopping aktivitetar fører stadig til økte inntjenings-moglegheiter for bedrifter: heile 15% av alle Internett-brukarar har handla offline som et resultat av informasjon dei har funne online. Online-sikkerheit er den største bekymringa for brukarar som ikkje har handla online. Yngre Internett-brukarar brukar ikkje so mykje pengar som eldre brukarar.

20 Key numbers 2001... Prosentvis økning:

21 Internet brukarar i verden 2000/2001 Prosent av den totale voksne befolkning Prosentvis andel av befolkninga som personlig har brukt Internett den siste månaden. Landsgjennosnitt (31%)

22 Online shoppers 2000/2001 Prosent av Internett-brukarar Prosentvis andel av internett-brukarar som har kjøpt varer/tenester online den siste månaden

23 Future online shoppers Prosent av Internett-brukarar Prosent av Internett-brukarar som planlegg å kjøpe dei neste 6 månadane Country average (17%)

24 % Prosent av befolkninga som bruker Internett 20002001 Vekst 2000 - 1 + 7% Prosentvis andel av spesifikke aldersgrupper og kjønn som er Internett-brukarar (2001) Norge

25 B2B handel B2B handel vil i USA auke veldig raskt dei neste 5 åra. Frå $336 billionar i 2000 til $6.3 trillionar i 2005. I dag utgjer Online B2B aktiviteter 3 % av det totale markedet, men innan år 2005 vil det utgjere 42%.

26 B2C handel B2C handel over internett utgjorde i år 2000 $ 39 billionar. I løpet av 2003 vil dette tallet auke til $143 billionar. (Forrester Research Inc)

27 Kjelder: Tala er henta frå Taylor Nelson Sofres som er det 4 største foretaket innanfor markedsinformasjon på Internett Vi har også henta statistikk frå

28 28 Prentice Hall, 2002 Group 2 Anita Helene Valderhaug, Katrin Elisabeth Golka, Bjørn O. Kristensen Internet Exercise 7, page 79.


30 The company Technology Potential use of PVPlatform Use of M-commerce

31 The company Exists since 1998 First company in the world to demonstrate MPEG-4 video images streaming to mobile devices Leading Edge Company of the Year 2001

32 Technology PVPlatform including: -PVAuthor (encoding) -PVServer (serving) -PVPlayer (decoding) Runs on all wireless systems, e.g. GSM PVAirguide

33 Potential Use of PVPlatform Transmission of e.g.: -Financial news and online trading. - Sports highlights - SMS/video email - Movie trailers and tickets - Multiplayer role-play games

34 Use of m-commerce Targeted Advertisement Two-way video communications Instant e-commerce

35 Prentice Hall, 2002 Chapter 4 (begin)- 4.2 to 4.5 Internet Consumers, E-Service, and Market Research

36 36 Prentice Hall, 2002 Figure 4-1 EC Consumer Behavior Model Source: Zinezone, c/o GMCI Co.

37 37 Prentice Hall, 2002 Consumer Behavior Online (cont.) Consumer types Individual consumers Commands most of the media’s attention Organizational buyers Governments and public organizations Private corporations Resellers Consumer behavior viewed in terms of: Why is the consumer shopping? How does the consumer benefit from shopping online?

38 38 Prentice Hall, 2002 Consumer Behavior Online (cont.) Purchasing types and experiences 2 dimensions of shopping experiences Utilitarian—to achieve a goal Hedonic—because it’s fun 3 categories of consumers Impulsive buyers—purchase quickly Patient buyers—make some comparisons first Analytical buyers—do substantial research before buying

39 39 Prentice Hall, 2002 Consumer Behavior Online (cont.) Direct sales, intermediation, and customer relations Companies that sell only through intermediaries still need good relations with the end-users Example: Ford Motor Company Do not sell directly to consumers Recognize that drivers of Ford vehicles think of themselves as having a relationship with the company

40 40 Prentice Hall, 2002 Personal Characteristics and Demographics of Internet Surfers Environmental variables Social variables Cultural variables Psychological variables Other environmental variables

41 41 Prentice Hall, 2002 Personal Characteristics of Internet Surfers Personal characteristics and differences Consumer resources and lifestyle Age and gender Knowledge and educational level Attitudes and values Motivation Personality

42 42 Prentice Hall, 2002 Demographics of Internet Surfers Major demographics presented include Gender Age Marital status Educational level Ethnicity Occupation Household income

43 43 Prentice Hall, 2002 Demographics of Internet Surfers (cont.) The more experience people have on the Web, the more likely they are to buy online Two major reasons people do not buy online Security Difficulty judging the quality of the product

44 44 Prentice Hall, 2002 Figure 4-2 Amount of Money Spent on the Web

45 45 Prentice Hall, 2002 Consumer Purchasing Decision Making Roles people play in decision-making Initiator— suggests/thinks of buying a particular product or service Influencer— advice/views carry weight in making a final buying decision Decider--makes a buying decision or any part of it Buyer— makes the actual purchase User— consumes or uses a product or service

46 46 Prentice Hall, 2002 Consumer Purchasing Decision Making (cont.) Purchasing decision-making model 5 major phases of a general model Need identification—actual and desired states of need Information search Alternatives evaluation—research reduces number of alternatives, may lead to negotiation Purchase and delivery—arrange payment, delivery, warranties, etc. After-purchase evaluation—customer service

47 47 Prentice Hall, 2002 Table 4-2 Purchase Decision Making Process & Support System Source: O’Keefe and McEachern, 1998.

48 48 Prentice Hall, 2002 Figure 4-3 Model of Internet Consumer Satisfaction Source: Lee (2001)

49 49 Prentice Hall, 2002 Matching Products with Customers: Personalization One-to-one marketing Relationship marketing “Overt attempt of exchange partners to build a long term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” “Treat different customers differently” No two customers are alike

50 50 Prentice Hall, 2002 Figure 4-4 The New Marketing Model Source: GartnerGroup

51 51 Prentice Hall, 2002 Matching Products with Customers: Personalization (cont.) Issues in EC-based one-to-one marketing Customer loyalty—degree to which customer stays with vendor or brand Important element in consumer purchasing behavior One of the most significant contributors to profitability Increase profits Strengthen market position Become less sensitive to price competition Increase cross-selling success Save costs, etc.

52 52 Prentice Hall, 2002 Matching Products with Customers: Personalization (cont.) Issues in EC-based one-to-one marketing Meeting customers cognitive needs—organize customer service to meet needs of each skill set Novice Intermediate Expert E-loyalty—customer’s loyalty to an e-tailer Learn about customers’ needs Interact with customers Provide customer service

53 53 Prentice Hall, 2002 Matching Products with Customers: Personalization (cont.) Issues in EC-based one-to-one marketing Trust in EC Deterrence-based trust—threat of punishment Knowledge-based trust—grounded in knowledge about trading partners Identification-based trust—empathy and common values between partners Value of EC referrals Word-of-mouth Delivery of good or service sparks other users

54 54 Prentice Hall, 2002 Figure 4-5 The EC Trust Model Source: Lee and Turban (2001)

55 55 Prentice Hall, 2002 Matching Products with Customers: Personalization (cont.) Personalization Process of matching content, services, or products to individuals’ preferences Alternative methods Solicit information from users Use cookies to observe online behavior Use data or Web mining Personalization applied through Rule-based filtering Content-based filtering Constraint-based filtering Learning-agent technology

56 56 Prentice Hall, 2002 Matching Products with Customers: Personalization (cont.) Personalization (cont.) Collaborative filtering examples—recommends restaurants—personalized messages via cell phones—assists in purchase decision- making process based on user information Legal and ethical issues Privacy issues Permission-based personalization tools

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