WebTrends Live Service Development Discussion Focus: Pricing & “Lock-In” Recap Service Development Exercise

Network Models Few Network Externalities: No standards, many substitutes, no advantage to work with dominant player Network Properties: only if WTL moves toward Virtual Community and Infomediary (Knowledge Leadership) role ControlOpenness Evolution: Recommended: Controlled Open Up sell MigrationMigration Revolution: Performance Discontinuity Current Play Build Migration Path to WT, NETIQ product line and full CRM systems

Causes of Service Switching Behavior Keaveney (1995) (1) Core Service Failure (2) Inconvenience (3) Pricing Service Encounter Failure Response to Service Failure Competition Ethical Problems Involuntary Switching Current Service: Satisfied But Need Service Recovery System Recommendation: Enhance Assurance and Responsiveness 24/7 Service Remote & On-Site Training is Key Leverage Database as Knowledge Asset

Service Switching Behavior Keaveney (1995) (1) Core Service Failure (2) Inconvenience (3) Pricing Service Encounter Failure Response to Service Failure Competition Ethical Problems Involuntary Switching Current Service: “One thing that would help customers is a subscription analysis service for their site.” “One area that would be a nice complement to WTL would be an analysis service. Provide analysis of your site statistics for a fee and make recommendations for improvement.” “More in depth information on what the statistics mean and how they can be used.” Recommendation: Mass Customize Analysis, Reporting and Training (Transparent or Collaborative Customization?)

Service Switching Behavior Keaveney (1995) (1) Core Service Failure (2) Inconvenience (3) Pricing Service Encounter Failure Response to Service Failure Competition Ethical Problems Involuntary Switching E-Biz Recommendations: Reward long-term commitments Price for low/intermediate ($0 - $35) user Base Rate Plus Volume or Service Component ---Volume based pricing.. PRO: allows WTL to grow with clients CON: costs don’t fall/ strains capacity raise price with volume --- Service-based pricing.. Reporting format (text vs. graphic) Standard vs. Custom Reports Number and Nature of Reports Enterprise Recommendation: Collaborative Pricing 50% core & 50% tech support/consulting Displaying base costs minimize contact opportunity

Switching Costs – “Lock-In” Switching Costs … CurrentlyRecommended Contractual Costs quarterly reward annual commitment commitment Psychological Search Costs m arginal Continuity Costs marginal account mgmt preference profiling training community

E-Business Lock-In Cycle Shapiro and Varian 1999 Brand Selection Lock-In (__ years) Sampling (__ months) Fully Integrated into Full-Service Trial Web-Management Process Profile Usage Test price/feature sensitivity Lock-in …How Long Does the Cycle Run? Scalability is Key -Transparent Customization to Cross sell -WTL Training -Community Hi Brand Awareness Personalize WOM Referral Program Conversion

Enterprise Lock-In Cycle Shapiro and Varian 1999 Brand Selection Lock-In ( __ years) Sampling (__ months) Fully Integrated into Full-Service Trial Web-Management Process Account Management Collaborative Customization Training Entrenchment Cross Sell through Profiling & Collaborative Customization Lock-in …How Long Does the Cycle Run? Value-Based Service Hi Brand Awareness Personalize WOM Referral Programs

Revenue Options Hagel and Armstrong 1997 Start-up Time Dollars Preemptive Acquisition Differential Pricing Ad Revenue Model Year 1 Year 2 Year 3+ Unlikely Usage-Based Pricing (Infrequent Usage) Going Rate: E-Biz Perceived Value: Enterprise Limited Trial: All Versions Currently: At or Above Market Price

Service Development Process Compile Recommended Feature List Define Features Evaluate Sustainability Prioritize Feature List Operational Feasibility Competitive Impact Examine Impact on: Structural Position Service Loyalty Model

Relative Structural Position How will WTL be repositioned?

Customer Value in Relationships CPV = Core Solution + Additional Services Price + Relationship Costs What is Impact of Recommendations on Customer Perceived Value?

Service Loyalty Model Value Loyalty Switching Costs Interpersonal Bond How Do Quality Enhancements Impact The Loyalty Model?

WebTrends Live Presentation Outline (Tentative) Situational Analysis: SWOT ServQual and CIT insights Current Structural & Market Positioning Key Marketing Goals Service Development Framework: Current Loyalty Drivers Value: Enhance Benefits/Reduce Costs Building Relationships Pricing Strategy & Building Lock-In Revised Loyalty Drivers and Sustainability of Offering Recommended Priorities and Market Positioning Appendix: Define and summarize feature list

WebTrends Live Assignment Distribute Workload and Develop Team Contract (3/4) Walk-Through First Draft Presentation (3/11) Deliver Final Executive Summary & Presentation (3/18)