2. Chapter 5 Consumer-Focused E-Commerce

3. Copyright © 2003, Addison-Wesley The Dot-Com Revolution Internet growing exponentially In the late 1990’s, extrapolations based on then-current Internet growth rates suggested that the number of Internet users would soon exceed the population of the world Exploding potential marketplace Small slice valuable if pie big enough Improve customer service Hype

4. Copyright © 2003, Addison-Wesley Cost of Entry Bricks-and-mortar presence Purchase real estate Sales support equipment Very expensive E-retailer or e-tailer Open standard infrastructure Virtual “storefront” Low-cost real estate

5. Copyright © 2003, Addison-Wesley Funding Sources Startup costs may be lower than a physical presence, but development & buildout can still incur substantial costs Angels Wealthy individuals, relatives, etc. Seed money for equity Venture capitalists Investing companies Seed money for equity Customer investment Computer and software ISP account Data entry

6. Copyright © 2003, Addison-Wesley The Hook A means of attracting customers Unique product or service Low price Convenience Customer services Free stuff A good hook, by itself, is not enough and can actually prove to be a detriment to your business

7. Copyright © 2003, Addison-Wesley Figure 5.1 Some sites offer free services. Note buttons to left of Yahoo!

8. Copyright © 2003, Addison-Wesley The Race To Be First Accelerating rate of change Time to market & Cycle time are key objectives Delays mean lost sales opportunities First mover status The driving motivation for many dot-coms Just be first Must ask if the product or service is worth it, not just “Am I first?”

9. Copyright © 2003, Addison-Wesley Back to Business Basics Brand name still counts Amazon, Barnes & Noble, and Borders Bricks-and-clicks strategy utilizes brand awareness of traditional business when they move online Brand name Implies stability Reduces perceived risk of fraud Minimizes returns hassle

10. Copyright © 2003, Addison-Wesley Figure 5.3 The dot-com advertisers from Super Bowl XXXIV. How many do you recognize? Speed branding doesn’t work!

11. Copyright © 2003, Addison-Wesley Finding Potential Customers Advertising Untargeted e-mail Risk – spam Targeted e-mail Still a risk of spam Search engines & directories Target – be in top 20 following search Metatags

12. Copyright © 2003, Addison-Wesley Figure 5.4 The metatag entries for a textbook’s Web page.

13. Copyright © 2003, Addison-Wesley Search Engine Don’ts Popular search terms such as “sex” & “Lord of the Rings” may yield hits to your site but not increase the success of your business. The objective is not to generate hits, but to increase the odds that your website appears within the top 20 search results for a potential customer who just might be looking for something like your product. Rather than including popular search terms, a better strategy is to exclude them (if they have nothing to do with your business) and focus on search terms that uniquely identify your product.

14. Copyright © 2003, Addison-Wesley Creating Repeat Customers Window shoppers generate zero revenue Good Web site necessary Good Web site not sufficient Must offer the customer value Personalized catalog Customer relationship management (CRM)

15. Copyright © 2003, Addison-Wesley Figure 5.5 A personalized Web page. No, this customer was not recently married. CRM software does not always work as advertised.

16. Copyright © 2003, Addison-Wesley Customer Relationship Management (CRM) CRM is a powerful customer acquisition and retention tool that incorporates numerous technologies and applications to support sales & marketing. A typical CRM system captures data from all customer contact points and consolidates them in a customer database or data warehouse. Subsequent analysis of the data allows the company to identify individual customer preferences, track demographic trends, evaluate the effectiveness of an ad campaign, etc. Most CRM systems also support contact management (customer name, address, telephone), sales force automation, support, and other tools

17. Copyright © 2003, Addison-Wesley Customer Relationship Management (CRM) Customer acquisition/retention tool Sales and marketing support Data collected at all contact points Stored in data warehouse Data analysis and data mining Ultimate objective is lock-in Vested interest not to change

18. Copyright © 2003, Addison-Wesley Sustainable Competitive Advantage B2C front-end easy to copy Efficiency gains easier to protect Value chain integration Supply chain integration Customization of your products/services One-to-one relationship marketing CRM Risk – privacy violations

19. Copyright © 2003, Addison-Wesley B2C Revenue Sources Selling digital products Software, music, images, electronic games Immune from diminishing returns Low distribution cost Danger – protecting intellectual property Selling physical products Intense price competition Cost-control is key to profitability

20. Copyright © 2003, Addison-Wesley Figure 5.7 Amazon’s virtual warehouse exists only in cyberspace. Significant reduction in operating costs by letting the suppliers of less popular products ship directly to the customer

21. Copyright © 2003, Addison-Wesley Selling services Information is digital Fees Per transaction – E-Trade Percentage fee – eBay, Expedia Arrange physical delivery – FTD

22. Copyright © 2003, Addison-Wesley Selling Advertising Ad types Banner ad – same window as page Pop-up ad – new window Pop-under ad – hidden under page Pop-off ad – partly off page; must move Few good efficiency measures Pricing models include CPM Real potential is market segmentation

23. Copyright © 2003, Addison-Wesley Figure 5.10 Measuring online advertising. These measures are largely ineffective at calculating the success of a particular ad

24. Copyright © 2003, Addison-Wesley Usage Charges and Subscription Fees Free services are becoming more rare Giving stuff away  debt, not profit Evolving model may resemble TV Free, over-the-air channels Fee for basic cable service Additional fee for premium services Per-event fee for pay-per-view

25. Copyright © 2003, Addison-Wesley Not-for-Profit Web Sites Virtual communities Single focus Information, support, interaction Health support groups Government-to-consumer (G2C) sites Information Services

26. Copyright © 2003, Addison-Wesley Figure 5.11 The President’s Web site.

27. Copyright © 2003, Addison-Wesley Payment Services Credit cards Visa, MasterCard, AE Escrow services Internet bill presentment and payment Service provider consolidation model Customer consolidation model E-cash and digital cash Pay for micro-transactions

28. Copyright © 2003, Addison-Wesley Figure 5.13 The Visa network.

29. Copyright © 2003, Addison-Wesley Information Services Objective Provide enough value to capture visitors Higher advertising fees More usage fees Search engines – Google Portals – AOL, MSN, Yahoo Bots, such as shopping bots