Covers Course Learning Outcome # 2 E-Business Handout # 2 Covers Course Learning Outcome # 2 Identify the elements of e-business environments and the main business and marketplace models for electronic communications and trading http://ect.ac.ae/elearn/

Marketplace Analysis for Chapter 2 Marketplace Analysis for E-Commerce 2

Learning Outcomes Complete an online marketplace analysis to assess competitor, customer and intermediary and competitor use of the Internet as part of strategy development Identify the main business and marketplace models for electronic communications and trading Evaluate the effectiveness of business and revenue models for online businesses.

What is an e-marketplace? A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically.

E-MARKETPLACE COMPONENTS: Products: Goods that can be delivered over the Internet front end: The portion of an e-seller’s business processes through which customers interact, including: the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway back end: The activities that support online order fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery Intermediary: A third party that operates between sellers and buyers to provide value added activities.

Types of Intermediaries Brokers Infomediaries

Types of Intermediaries Brokers: including: 1. buy/sell fulfillment 2. Virtual malls 3. Metamediaries

Types of Intermediaries: Metamediaries bring buyers and sellers together providing independent Info. They provide access to stores + transaction services. (ex: through a metamediary, the services of related to buying a house (the purchase, mortgage, insurance, and maintenance) which are provided by a large range of unconnected companies can be electronically linked online to meet customers’ needs Metamediaries include: - Comparison agents (aggregators): Collect Info and compare between different stores Shopping facilitators: provides services between buyers and sellers: translation, currency conversions….

Types of Intermediaries: Infomediaries B) Infomediaries (Info.+ Intermediary): they provide/control Info flow between those who want the Info and those who supply it, examples are: Online audience panel/research providers 2. E-mail list brokers obtaining permissions from consumers 3. Advertising networks: offer advertising services partly based on audience behavior in responding to ads.

Disintermediation, Reintermediation & Countermediation Disintermediation: the removal of intermediaries such as distributers or brokers that formerly linked a company to its customers. Reintermediation :The creation of new intermediaries between customers &suppliers providing services such as: supplier search & product evaluation. Countermediaion: marketers can’t rely on the online existence of existing intermediaries, instead they must create their own online intermediaries.

Figure 2.7 From original situation (a) to disintermediation (b) and reintermediation (c)

Figure 2.6 Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and (c) disintermediation omitting both wholesaler and retailer

The e-commerce environment All organizations operate within an environment that influences the way in which they conduct business, such environments create opportunities as well as threats. Strategy development should be strongly influenced by considering the environment the business operates in. To inform e-commerce strategy, the most significant influences are of: the micro-environment: customers, competitors, intermediaries and suppliers. Influences are provided by economic conditions, legislation and business practices Technological innovations

The capacity to respond to environmental opportunities and threats. Strategic agility: The capacity to respond to environmental opportunities and threats. Figure 2.1 The environment in which e-business services are provided

Characteristics of strategic agility to success in strategy development: Efficient collection, dissemination and evaluation of information resources. Effective process for generating and reviewing the relevance of new strategies based on creating new value for customers Efficient research into potential customer value against the generated business value Efficient implementation of prototypes of new functionality to deliver customer value 5. Efficient measurement and review of results from prototypes to revise further to improve proposition/end trial.

Conclusion: Analysis of marketspace (e-marketplace) is done by analyzing the environment’s elements on the micro and macro levels which is a key part of developing a long-term e-business plan or creating a short -term digital marketing campaign. It is essential to describe and study the online behavior of consumers between search engines, media sites and intermediaries.

Figure 2.3 An online marketplace map

Elements of an online marketplace map Customer segments, their behavior and type of content and experiences they will be looking for. Search intermediaries: companies need to know which sites are effective in harnessing search traffic and either partner with them or try to obtain a share of the search traffic using the search engine marketing and affiliate marketing techniques. Intermediaries and media sites 4. Destination sites: sites to which the marketer is trying to generate revenues. 5.Online value proposition: a statement of the benefits of e-commerce service that ideally should not be available in competitor offerings or offline offerings

Business Model (BM) Business Model (BM): refers to How a company is going to generate revenues Elements of a Business Model (BM): Value proposition Market/audience Revenue models and cost base Competitive environment Value chain and market place positioning Representation in the physical and virtual world Organizational structure Management

Business Model Perspectives There are three perspectives from which a business model can be viewed: Marketplace position perspective: Manufacturer----retailer----intermediary 2. Revenue model perspective: the intermediary markets the product and get commission as revenue / it sells the product and gets revenues. 3. Commercial arrangement perspective: fixed prices between Manufacturer, retailer and the intermediary, but the intermediary offers other alternatives (other products).

Figure 2.11 Alternative perspectives on business models

Examples of business models facilitated by the web: E-shop E-procurement E-malls E-auctions: e-bay Virtual communities Collaboration platforms Info. Brokerage Trust services

Revenue Models Types CPM cost per mille (thousand): number of times ads are displayed CPC cost per click: number of times the ads are clicked Sponsorship of site sections/content types: ex: HSBC sponsoring the money section on the orange broadband provider portal for a fixed amount per year. Affiliate revenue CPA cost per acquisition: commission based. Transaction fee: facilitating a transaction ex. PayPal 6. Subscription access to content/service 7.Pay per view 8.Subscriber data access for email marketing a site owner has data about consumers, he has permission to send them emails, so he charges any advertiser who wants his ads to be included in the site owner’s newsletter.

Factors affecting revenues in e-business models Number and size of ad units Capacity to sell advertising (what is your inventory of ads) Fee levels negotiated among different revenue models Traffic volumes Visitor engagement

Auction business models It is selecting the best match between the buyer and seller from a number of participants. It has the following roles: Price discovery: establishing a realistic market price through gathering of buyers, ex: antiques Efficient allocation mechanism: selling items that are difficult to distribute through traditional channels, ex: inventory with limited shelf life, or items available in specific times ex: theater tickets Distribution mechanism: by attracting particular audiences 4. Coordination mechanism: by coordinating the sale of a product to a number of interested parties; broadband license for telecoms.

Types of auctions Forward, Upward or English auction: (initiated by seller) mainly for consumer sites such as eBay. Sellers set the rules. Bids are placed within a time limit and the highest bid wins. Reverse, downward or Dutch auction (initiated by buyer), they are common in B2B, the buyer places a request for tender or quotation RFQ and suppliers compete by decreasing the price, usually the lowest price wins.

Assessing future success of a company The cost of acquiring a customer through marketing The contribution margin per customer (before acquisition cost) The average annual revenues from customers and revenues from banner advertising and affiliate revenues The total number of customers The customer churn rate (the proportion of customers that no longer purchase a company’s products in a time period)

Conclusion: retaining customers for repeat purchases governs the long term success of companies. Figure 2.5 B2B and B2C interactions between an organization, its suppliers and its customers

Terminology: Disruptive technology: new technology that help in creating new markets & value networks (social & technical resources within/between businesses. Customer journey: a description of multi-channel buyer behavior as consumers use different media to select suppliers, make purchases & gain customer support. Portal: an information & services gateway by providing search engines, directories, email, news….. Digital rights management: Using technologies to protect the distribution of digital services or content i.e. software, movies, music….