ELC 310 Day 2.

ELC 310 Day 2

Agenda Questions? Quick review
Discussion of eMarketing Environment, Strategy and Performance (ESP) A more in-depth Discussion on Strategic eMarketing Assignment #1

Overview The Emergence of E-Marketing What is E-Marketing?
What Is E-Business? The Big Picture Tough Times E-Marketing in Context Environment, Strategy, and Performance (ESP) E-Marketing Environment Legal Factors Technology E-Business Markets What’s Next?

Review of First Class What’s eMarketing?
What’s the difference between eBusiness and eCommerce? What’s good thing did technology bring? Some bad things? Where are we in the life cycle of eBusiness?

Environment, Strategy, and Performance (ESP)
Business environment: legal, technological, competitive, market-related, and other environmental factors external to the firm = Opportunities and Threats, SWOT analyses = Strengths and Weaknesses, E-business strategies + e-business models + e-marketing plans = Help the firm accomplish its overall goals, Determine the success of the strategies and plans by measuring results. = Performance metrics, specific measures designed to evaluate the effectiveness and efficiency of the e-business and e-marketing operations.

Key environmental factors affecting e-marketing
1. Legal 2. Technological 3. Market-related factors

Legal Factors Current and pending legislation can greatly influence e-marketing strategies: Privacy: Difficult to legislate + Critical because consumers yield personal information over the Internet Opt-out when users must uncheck a Web page box to avoid being put on a company’s list, Difficult for governments to balance freedom of expression against consumer needs, New technology brings new opportunities for fraud: enforcement is difficult in a networked world.

Technology Technological developments influence:
The composition of Internet audiences, The quality of material that can be delivered to them. E-marketing is evolving through software advances: Technologies can target consumers according to their online behavior to give a firm a distinct competitive advantage.

Technology Technology lowers costs: Many firms have saved money on staff and paperwork via electronic order processing, billing, and . Technology requires costly investments: Web page development costs millions of dollars, E-commerce operations require expensive hardware and software, New technologies continue to emerge, which make current investments obsolete, Putting technology to use entails a steep learning curve.

What is the Internet? The Internet is a global network of interconnected networks: Millions of corporate, government, organizational, and private networks, The Internet consists of computers with data, users who send and receive the data files, and a technology infrastructure to move, create, and view or listen to the content.

What is the Internet? Three important types of networks form part of the Internet: Intranet = A network running internally in a corporation + using Internet standards (HTML and browsers) = a mini-Internet but only for internal corporate consumption, Extranet = An intranet with value chain partners + the access is normally only partial, Web = The portion of the Internet that supports a graphical user interface for hypertext navigation with a browser (Netscape / Internet Explorer). The Web is what most people think about when they think of the Internet.

It’s Bigger Than the Internet
Electronic marketing reaches far beyond the Web: Many e-marketing technologies exist = Customer relationship management, supply chain management, and electronic data interchange arrangements predating the Web, Non-Web Internet services such as and newsgroups = Effective avenues for marketing.

The Internet holds more than one Web: The Web that most users access from PCs, Subsets of the Web with content specially formatted for the unique display properties: Web TV, Personal digital assistants, Cell phones, Text-only browsers.

Offline electronic data-collection devices such as bar code scanners. Customer profiling cards Rite Aid Portion of the Web containing high-bandwidth content for users who have either cable modems or digital subscriber loop (DSL) connections.

Internet Properties and Marketing Implications
Marketers who grasp what Internet technologies can do will be better poised to capitalize on information technology. Internet properties: Create opportunities beyond those possible with the telephone, television, postal mail, or other communication media, More effective and efficient marketing strategy + tactical implementation + change the way marketing is conducted. E.g. The idea of digitizing data (bits not atoms) has transformed media and software delivery methods + created a new transaction channel.

Internet Properties and Marketing Implications
Internet technologies have changed traditional marketing in a number of critical ways: Power shift from sellers to buyers, Death of distance, Time compression, Knowledge management is key, Interdisciplinary focus, Intellectual capital rules.

E-Business Markets Once marketers identify appropriate markets, information technology facilitates relationships before and after the transaction with: Prospects Customers There are three important markets that both sell and buy to each other: Businesses Consumers Governments Partners, Supply chain members.

Business Market It is huge: more businesses are connected to the internet than consumers. It is transparent to consumers: it involves proprietary networks that allow information and database sharing. E.g. FedEx, the package delivery firm: Its customers can schedule a package pick-up using the Web site, Track the package using a PC or handheld PalmPilot, Pay the shipping bill online.

Consumer Market E-marketers must understand consumers in potential geographic segments: Iceland and Denmark = 2 of the most wired countries in the world = 60% Internet penetration, Consumers in many countries pay by the minute for local phone access = determine the kind of casual surfing practiced by Internet users.

Consumer Market The consumer market is huge and quite active online:
28% of consumers said they have shopped online or plan to shop online in the next six months, 15% purchased offline as a direct result of online information U.S. consumers are the biggest online shoppers, spending US$53 billion in 2001, an increase of nearly 20% from 2000.

Revenge of the Consumer
The rebellion started with television channel surfing using the remote control. Consumers did not seem to appreciate that commercials pay for broadcast TV programs. At the start of the 21st century, consumers have control via the mouse. When television, radio, print media, entertainment, and shopping all converge seamlessly on a computer-like device, consumers will truly have information on demand. Consumers are more demanding and more sophisticated, and marketers will have to become better at delivering customer value.

Consumer Needs What do customers want in the information economy?
Privacy: Customers want marketers to keep their data confidential + don’t want to be bothered by sales calls at home during dinner, To safeguard children from objectionable sites, Want marketers to ask permission before sending commercial messages, Want e-commerce to provide convenience, self-service, speed, good customer service, personal attention, and value.

Consumer Needs Fortunately, e-marketing can meet all these needs:
With mass customization (oxymoron?) individuals can contact firms over the Internet and receive responses tailored to their needs, Business can also customize and personalize products and communications to strengthen long-term relationships with customers. E.g. Amazon.com presents personalized Web pages to users

Government Market The U. S. government is the world’s largest buyer, purchasing over $200 billion in goods and services every year (see Add to this the purchasing power of U.S. states, counties, cities, and other municipal agencies, and this makes for a huge market. Small and large businesses usually have an equal chance of selling to governments + government Web sites announce their buying needs in advance of the bidding process.

Government Market Businesses wishing to sell to governments face challenges unique to this market: Follow rules regarding qualifications, paperwork, etc., Must compete to be on the government list of approved suppliers + compete for specific contracts through a bidding process, Have to conform to very particular timely delivery of quality products at reasonable prices.

What’s Next? Regardless of the current disillusion with e- business, many solid successes exist today and exciting new growth areas will soon emerge. Seven trends that will help businesses move forward into e-marketing : Integrating IT software Boom in Web services Collaboration software Dealing with too much data Data security Wireless is here to stay Growth in portable computing.

Chapter 2: Strategic E-Marketing
E-Marketing, 3rd edition Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 2: Strategic E-Marketing © Prentice Hall 2003

Overview Strategic Planning SWOT Analysis Strategic Objectives
Strategy Strategy to Electronic Strategy Business Models to E-Business Models E-Business Models Value and Revenue Strategic E-Business Models Performance Metrics The Balanced Scorecard

Strategic Planning Amazon uses strategic planning to get ready for a profitable and sustainable business future. Strategic planning = the “managerial process of developing and maintaining a viable fit between the organization’s objectives, skills, and resources and its changing market opportunities.” Two key elements of strategic planning are: The preparation of a SWOT analysis, The establishment of strategic objectives.

SWOT Analysis Strengths, Weaknesses, Opportunities, and Threats
It examines: The company’s internal strengths and weaknesses with respect to the environment, The competition and looks at external opportunities and threats. Opportunities may help to define a target market or identify new product opportunities, while threats are areas of exposure.

Example The Amazon story Strength
A smart and talented team that stayed focused and learned what it didn’t know. Weakness No experience in: Selling books Processing credit card transactions Boxing books for shipment Opportunity To sell online. Threat A full-scale push by one of the large bookstore chains to claim the online market.

Example A company’s strengths and weaknesses in the online world may be somewhat different from its strengths and weaknesses in the brick-and-mortar world. Barnes & Noble has enormous strengths in the brick-and-mortar world but these do not necessarily translate into strengths in the online world: Channel conflict = having to explain to channel partners why customers can purchase for less online than in the store.

Strategic Objectives The firm sets objectives such as:
Growth. How much can the firm reasonably expect to grow in terms of revenues, and how fast? Competitive position. How should the firm position itself against other firms in the industry? Viable positions are: Industry leader (Microsoft), Price leader (Priceline.com), Quality leader (Mercedes), Niche firm (Google.com), Best customer service (Dell.com).

Strategic Objectives Geographic scope. Where should the firm serve its customers on the continuum of local to multinational? Other objectives. Companies often set objectives for the number of industries they will enter, the range of products they will offer, the core competencies they will foster, and so on.

Strategy It is the means to achieve a goal.
It is concerned with how the firm will achieve its objectives, not what its goals are: The firm sets its growth and other objectives, It decides which strategies it will use to accomplish them, The tactics are detailed plans to implement the strategies. It is important to note that objectives, strategies, and tactics can exist at many different levels in a firm.

From Strategy to Electronic Strategy
E-business strategy: The deployment of enterprise resources to capitalize on technologies for reaching specified objectives that ultimately improve performance and create sustainable competitive advantage. Corporate-level business strategies including information technology components (Internet, digital data, databases, and so forth) become e-business strategies. E-Business Strategy = Corporate Strategy + Information Technology

E-business strategy flows from the firm’s environmental analysis.

Marketing strategy becomes e-marketing strategy when marketers use digital technology to implement the strategy: E-marketing strategy = marketing strategy + Information technology

Most strategic plans explain the rationale for the chosen objectives and strategies. There are four appropriate types of rationale: Strategic justification shows how the strategy fits with the firm’s overall mission and business objectives, Operational justification identifies and quantifies the specific process improvements that will result from the strategy, Technical justification shows how the technology will fit and provide synergy with current information technology capabilities, Financial justification examines cost/benefit analysis and uses standard measures (ROI, NPV).

From Business Models to E-Business Models
Business model: a method by which the organization sustains itself in the long term, and includes its value proposition for partners and customers as well as its revenue streams. A firm will select one or more business models as strategies to accomplish enterprise goals.

How does a firm select the best business models?
Critical components: Customer value. Does the model create value through its product offerings that is differentiated in some way from that of competitors? Scope. Which markets do the firm serve, and are they growing? Are these markets currently served by the firm, or will they be higher risk new markets? Price. Are the firm’s products priced to appeal to markets and also achieve company share and profit objectives?

How does a firm select the best business models?
Revenue sources. Where is the money coming from? Is it plentiful enough to sustain growth and profit objectives over time? Connected activities. What activities will the firm need to perform to create the value described in the model? Does the firm have these capabilities? Implementation. The company must have the ability to actually make it happen. Capabilities. Does the firm have the resources (financial, core competencies, and so on) to make the selected models work? Sustainability. The e-business model is particularly appropriate if it will create a competitive advantage over time.

E-Business Model = Business Model + Information Technology
E-Business Models The direct connection with information technology makes a business model an e-business model: E-Business Model = Business Model + Information Technology E-business model: method by which the organization sustains itself in the long term using information technology, which includes its value proposition for partners and customers as well as its revenue streams.

E-Business Models E-business models can capitalize on digital data collection and distribution techniques without using the Internet. Remember that e-marketing and e-business models may operate outside the Internet. The term e-business models to include both Internet and offline digital models throughout the rest of our discussion.

Value and Revenue Whether online or offline, the value proposition involves knowing what is important to the customer or partner and delivering it better than other firms. Value encompasses the customer's perceptions of the product’s benefits, specifically its attributes, brand name, and support services. Subtracted from benefits are the costs involved in acquiring the product, such as monetary, time, energy, and psychic. Value = Benefits - Costs

E-Marketing Contributes to the E-Business Model

Menu of Strategic E-Business Models
A key element in setting strategic objectives is to take stock of the company's current situation and decide the level of commitment to e-business in general and e-marketing in particular. Questions prior to embarking on any e-business strategies: .Are the business models likely to change in my industry? .What does the answer to question 1 mean to my company? .When do I need to be ready? .How do I get there from here?

E-Business Models at Various Levels of Commitment
Each level of the pyramid indicates a number of opportunities for the firm to provide stakeholder value and generate revenue streams using information technology. Because there is no single, comprehensive, ideal taxonomy of e-business models, we categorize the most commonly used models based on the firm's level of commitment.

Activity Level E-Business Models
Online purchasing. Firms can use the Web to place orders with suppliers, thus automating the activity. Order processing. This occurs when online retailers automate Internet transactions created by customers. . When organizations send communications to stakeholders, they save printing and mailing costs. Content publisher. Companies create valuable content or services on their Web sites, draw lots of traffic, and sell advertising. Another type of content publishing, the firm posts information about its offerings on a Web site, thus saving printing costs = brochureware.

Activity Level E-Business Models
Business intelligence (BI). This refers to the gathering of secondary and primary information about competitors, markets, customers, and more. Online advertising. As an activity, the firm buys advertising on someone else’s or Web site. Online sales promotions. Companies use the Internet to send samples of digital products (e.g., music or software), or electronic coupons, among other tactics. Pricing strategies. With dynamic pricing, a firm presents different prices to various groups of customers, even at the individual level.

Business Process Level E-Business Models
Customer relationship management (CRM) = retaining + growing business / individual customers through strategies that ensure their satisfaction with the firm and its products = keep customers for the long term + increase the number and frequency of their transactions. Knowledge management (KM) = combination of a firm’s database contents + the technology used to create the system + the transformation of data into useful information and knowledge. Supply chain management (SCM) = coordination of the distribution channel to deliver products more effectively and efficiently to customers. With community building, firms build Web sites to draw groups of special-interest users. Firms invite users to chat / post on their Web sites to attract potential customers to the site.

Business Process Level E-Business Models
Affiliate programs = when firms put a link to someone else’s retail Web site and earn a commission on all purchases by referred customers. Database marketing = collecting, analyzing, and disseminating electronic information about customers, prospects, and products to increase profits. Enterprise resource planning (ERP) = a back-office system for order entry, purchasing, invoicing, and inventory control. Mass customization = Internet’s unique ability to customize marketing mixes electronically and automatically to the individual level.

Enterprise Level E-Business Models
E-commerce refers to online transactions: selling goods and services on the Internet, either in one transaction or over time with an ongoing subscription. Direct selling refers to a type of e-commerce in which manufacturers sell directly to consumers, eliminating intermediaries such as retailers. Content sponsorship online is a form of e-commerce in which companies sell advertising either on their Web sites or in their . A portal is point of entry to the Internet, such as the Yahoo! and AOL Web sites. They are portals because they provide many services in addition to search capabilities.

A portal is point of entry to the Internet, such as the Yahoo! and AOL Web sites. They are portals because they provide many services in addition to search capabilities. Online brokers are intermediaries that assist in the purchase negotiations without actually representing either buyers or sellers. The revenue stream in these models is commission or fee-based: The brokerage model are E*Trade (online exchange), and eBay (online auction), A B2B exchange is a special place because it allows buyers and sellers in a specific industry to quickly connect.

Online agents represent either the buyer or the seller and earn a commission for their work. Selling agents help a seller move product. Manufacturer’s agents represent manufacturing firms that sell complementary products to avoid conflicts of interest. The catalog aggregator, brings together many catalog companies to create a new searchable database of products for buyers. A special type of agent = the metamediary, it represents a cluster of manufacturers, online retailers, and content providers organized around a life event or major asset purchase

Purchasing agents represent buyers. Shopping agents help individual consumers find specific products and the best prices online (e.g., The reverse auction, allows individual buyers to enter the price they will pay for particular items at the purchasing agent’s Web site, and sellers can agree or not. An online purchasing agent is called a buyer cooperative or a buyer aggregator. A virtual mall is similar to a shopping mall in which multiple online merchants are hosted at a Web site.

Pure Play Pure plays = businesses that began on the Internet, even if they subsequently added a brick-and-mortar presence. E.g. E*Trade is a pure play, beginning with only online trading Pure plays face significant challenges: They must compete as new brands and take customers away from established brick-and-mortar businesses. One way to change the rules is to invent a new e-business model, as Yahoo! and eBay did.

An Optimized System of E-Business Models
E-business is the continuous optimization of a firm’s business activities through digital technology. Firms usually combine traditional business and e-business models. E.g. Schwab = combined its online and offline brokerages in a unified system. The challenge: customers expect a high degree of coordination between online and offline operations. The danger: the established corporate culture might squash e-commerce initiatives or slow them down with the best of intentions. The solution: Many businesses have spun off their e-commerce operations as wholly owned subsidiaries or pure plays so they can compete without the weight of the parent business.

An Optimized System of E-Business Models
A fully optimized e-business that uses the Internet to sell is the sum of multiple e- business activities and processes: E-commerce, business intelligence, customer relationship management, supply chain management, and enterprise resource planning as represented in the following equation: EB = EC + BI + CRM + SCM + ERP

Performance Metrics The only way to know whether a company has reached its objectives is to measure results. Performance metrics = specific measures designed to evaluate the effectiveness and efficiency of an organization’s operations. Armed with this information, the company can make corrections to be sure it accomplishes the goal. Performance metrics should be defined along with the strategy formulation so the entire organization will know what results constitute successful.

Performance Metrics Performance metrics used to measure strategy effectiveness: Translate the vision, strategy, or e-business model into components that have measurable outcomes that various departments can use to create action plans, Communicate to employees what results the firm values. When employee evaluations are tied to the metrics, people will be motivated to make decisions that lead to the desired outcomes.

Assignment 1 Prepare a two to three page paper (not less than 500 and not more than 1000 words) that covers the listed requirements. Carefully articulate your career objectives (20%) Perform a SWOT analysis of your current situation as it relates to your desired career objectives (30%) Develop a strategic plan (less than a page!) the takes you from your current situation to your desired career objectives (30%) Develop a set of performance metrics that you will use to determine if your strategic plan is working. (20%) This assignment is due Tuesday, September 14 at 2PM.

The Balanced Scorecard
BEFORE to measure success, firms used: Financial performance, Market share, The bottom line (profits). BUT these approaches are narrowly focused and place more weight on short-term results rather than addressing the firm's long-term sustainability.

The Balanced Scorecard
NOW, they use: The Balanced Scorecard = enterprise performance management systems that measure many aspects of a firm’s achievements. 50% of organizations worldwide have adopted the Balanced Scorecard with excellent results. The scorecard approach links strategy to measurement by asking firms to consider their vision, critical success factors for accomplishing it, and subsequent performance metrics in four areas: Customer, internal, innovation and learning, and financial.

Four Perspectives The customer perspective:
Uses measures of the value delivered to customers. These metrics tend to fall into four areas: time, quality, performance and service, and cost. E.g. Time from order to delivery, customer satisfaction levels with product performance, amount of sales from new products, and industry-specific metrics such as equipment up-time percentage or number of service calls.

Four Perspectives The internal perspective:
Evaluates company success at meeting customer expectations through its internal processes. E.g.: cycle time (how long to make the product), manufacturing quality, and employee skills and productivity. Information systems are a critical component of the internal perspective for e-business firms.

Four Perspectives The innovation and learning perspective
= the growth perspective: Companies place value on continuous improvement to existing products and services as well as on innovation in new products. E.g. Number of new products and the percentage of sales attributable to each; penetration of new markets; and the improvement of processes such as CRM or SCM initiatives.

Four Perspectives The financial perspective:
= Income and expense metrics as well as return on investment, sales, and market share growth. The point is to understand what the company wants to accomplish and devise performance metrics to monitor the progress and see that the goals are reached.

Scorecard Benefits Obtain timely information to update its strategy.
Balance long-term and short-term measures and evaluate every part of the firm and how each contributes toward accomplishing selected goals. It helps firms leverage their relationships with partners and supply chain members. Go beyond financial metrics in measuring many different aspects that lead to effective and efficient performance. Creates a long-term perspective for company sustainability.

Scorecard Benefits Forces companies to decide what is important and translate those decisions into measurable outcomes that all employees can understand. A great communication tool because employees can use the scorecard as a guide to coordinate their efforts. Support employee evaluation in that individual performance can be tied to successful outcomes on the metrics. A way to measure intangible as well as tangible assets. The are flexible and allow firms to select appropriate metrics for their goals, strategies, industry, and specific vision.

Applying the Balanced Scorecard to E-Business and E-Marketing
Metrics for the Customer Perspective Customer Perspective Scorecard for E-Business Firm

Metrics for the Internal Perspective Internal Perspective Scorecard for E-Business Firm

Metrics for the Innovation and Learning Perspectives Innovation and Learning Scorecard for E-Business Firm

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