Electronic Commerce 043002

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Electronic Commerce043002

• Chapter 3 Selling on the Web Revenue
• Models and Building a Web Presence
• Dr. Mingli Song

Dr. Mingli Song - School of Computer Science,
Communication University of China, Beijing email
songmingli607_at_126.com
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Learning Objectives

• In this chapter, you will learn about
• Revenue models
• How some companies move from one revenue model to
  another to achieve success
• Revenue strategy issues that companies face when
  selling on the Web
• Creating an effective business presence (????) on
  the Web
• Web site usability (???)
• Communicating effectively with customers on the
  Web

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Key Terms

• account aggregation ????
• addressable media ?????
• advertising-subscription mixed revenue
  model ??????????
• advertising-supported revenue model ????????
• bill presentment ????
• cannibalization ??
• catalog model ??????
• category manager ??????
• channel conflict ????
• channel cooperation ????

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Key Terms

• channel distribution manager ????????
• communication modes ????
• customer-centric ???????
• demographic information ??????
• disintermediation ????
• fee-for-service revenue model ????????
• fee-for-transaction revenue model ????????
• fulfillment manager ??????
• mail order model ????
• many-to-many communication ??????
• many-to-one communication model ????????

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Key Terms

• mass media ????
• one-to-many communication model ????????
• one-to-one communication model ????????
• personal contact ????
• personal shopper ???
• portal (Web portal) ??(????)
• presence ??
• prospecting ???
• reintermediation ????
• stakeholder ?????
• stickiness ??

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Key Terms

• usability testing ?????
• virtual model ????
• Web catalogue revenue model ????????
• Web directory ????

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Revenue Models

• Revenue model of selling goods and services on
  the Web
• Based on mail order catalog (????) revenue model
  that predates the Web
• Mail order or catalog model
• Proven to be successful for wide variety of
  consumer items (???)
• Web catalog revenue model (????????)
• Taking the catalog model to the Web

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Computers and Consumer Electronics (????)

• Apple, Dell, Gateway, and Sun Microsystems
• Have had great success selling on the Web
• Dell
• Created value by designing entire business around
  offering high degree of configuration flexibility
  to its customers

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Books, Music, and Videos

• Retailers using the Web catalog model to sell
  books, music, and videos (????)
• Among the most visible examples of electronic
  commerce
• Jeff Bezos
• Formed Amazon.com in 1994
• Jason and Matthew Olim
• Formed online music store they called CDnow
• Used the Web catalog revenue model

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Luxury Goods (???)

• People are still reluctant to buy through a Web
  site
• Web sites of Vera Wang and Versace
• Constructed to provide information to shoppers,
  not to generate revenue
• Web site of Evian
• Designed for a select (???), affluent (???) group
  of customers

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Clothing Retailers (?????)

• Lands End
• Pioneered (??) idea of online Web shopping
  assistance with its Lands End Live feature in
  1999
• Personal shopper (?????)
• Intelligent agent program that learns customers
  preferences and makes suggestions
• Virtual model (????)
• Graphic image built from customer measurements

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Flowers and Gifts

• 1-800-Flowers
• Created online extension to its highly successful
  telephone order business
• Chocolatier (????) Godiva
• Offers business gift plans on its site

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General Discounters (???)

• Discounters sell merchandize such as computer
  equipment, software, consumer electronics, books,
  music CDs and sports equipment at extremely low
  prices
• Some of these Web discount retailers originally
  sold advertising on their sites to subsidize (??)
  their low product prices

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General Discounters Contd

• Beyond.com
• Closed its retail operation and sells the
  software it created for operating a Web catalog
  site
• Buy.com
• Realizes advertising revenues were not sufficient
  subsidies
• Relies on volume-purchasing (????) strategy to
  keep prices low

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Digital Content Revenue Models (????????)

• Firms that own intellectual property (????)
• Have embraced the Web as new and highly efficient
  distribution mechanism
• Lexis.com
• Provides full-text search (????) of court cases
  (????), laws, patent (??) databases, and tax
  regulations (????)

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Digital Content Revenue Models Contd

• ProQuest
• Sells digital copies of published documents
• ACM Digital Library (?????)
• Offers subscriptions to electronic versions of
  its journals to members and to library and
  institutional subscribers

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Advertising-Supported Revenue Models (?????????)

• Broadcasters provide free programming (?????) to
  an audience along with advertising messages
  (????)
• Success of online advertising hampered by
• No consensus (??) has emerged on how to measure
  and charge for site visitor views
• Stickiness (??) of a Web site ability to keep
  visitors and attract repeat visitors
• Very few Web sites have sufficient visitors to
  interest large advertisers (???)

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Web Portals (??)

• Web directory (Yahoo! for example)
• A listing of hyperlinks to Web Pages
• Portal or Web portal
• Site used as a launching point to enter the Web
• Almost always includes a Web directory and search
  engine
• Also includes other features such as free e-mail,
  chat room (???), shopping directories, file
  storage services, games, etc.
• Example Yahoo, AOL, AltaVista, and others

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Newspaper Publishers (?????)

• Many newspapers publish all or part of their
  print content on the Web
• Publishers experience sales losses as a result of
  online distribution
• The cost of operating Web sites cannot be covered
  by the revenue generated from selling advertising
  on the sites

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Targeted Classified Advertising (????) Sites

• Web employment advertising (????)
• Uses the same approach that search engine sites
  use to offer advertisers (???) target markets
  (????)
• Used vehicle (??????) sites
• Accept paid advertising from individuals and
  companies that want to sell cars, motorcycles,
  boats, etc.
• Give the seller the option of running the ad on
  the Web site or in the print version of the
  advertising newspaper

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Advertising-Subscription Mixed Revenue Models
(??????????)

• Subscribers (???)
• Pay a fee and accept some level of advertising
• Typically subjected to (??) much less advertising
• Used by
• The New York Times (????) and The Wall Street
  Journal (?????)

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Advertising-Subscription Mixed Revenue Models
Contd

• Business Week (????)
• Offers some free content at its Business Week
  online site
• Requires visitors to buy subscription to Business
  Week print magazine if they want to access the
  entire site

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Fee-for-Transaction Revenue Models (????????)

• Businesses offer services and charge a fee based
  on number or size of transactions processed
• Disintermediation (????)
• Removal of an intermediary (??) from value chain
• Reintermediation (????)
• Introduction of a new intermediary

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Travel Agents (???)

• A number of online travel agencies began doing
  business on the Web
• Expedia, Travelocity, Hotels.com, and Hotel
  Discount Reservations (also elong.com in China)
• In addition to earning commissions (??) from the
  transportation and lodging providers, these sites
  generate revenue from ads on travel info pages

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Automobile Sales (????)

• Salespeople can help customers learn about
  product features, arrange financing (??), make a
  purchase decision their job also includes
  extracting the highest possible price
• The buyer can purchase a car without negotiating
  with salesperson who is then taken out of value
  chain
• The car salesperson is disintermediated and the
  Web site becomes the new intermediary

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Stockbrokers (??????)

• Charge their customers commission for each trade
  executed
• A number of discount brokers opened after the U.S
  government deregulated (????????) the securities
  (??) trading business in the early 1970s
• In the 1990s, discount brokers faced new
  competition from online firms

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Insurance brokers (??????)

• A number of intermediaries that sell insurance
  policies (???) from variety of companies have
  been online since early days of the Web
• Quotesmith
• Began business in 1984 as a policy-quoting (????)
  service for independent insurance brokers
• Decided in 1996 to offer its service directly to
  the public over the Internet
• Disintermediated the independent insurance agents
  it formerly worked with

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Event Tickets (??)

• The Web offers event promoters ability to sell
  tickets from one virtual location to customers
  practically anywhere in the world (e.g.
  piao.com.cn)
• Online ticket agencies reduce transaction costs
  for both buyers and sellers of tickets

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Real Estate and Mortgage Loan Brokers
(????????????)

• Provides all of the services that traditional
  broker might provide---except that online brokers
  provide them through Web sites
• IndyMac Bank Home Lending
• offers mortgage loan and seeks online review in
  minutes
• approved customers can print an approval letter
  from their computers and take it the same day to
  buy a new house

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Online Banking (????) and Financial Services (???)

• The greatest concerns that most people have are
  security and reliability of the financial
  institution
• Online banks handle only a tiny portion of the
  worlds financial transaction
• Two barriers are preventing a more rapid rate of
  growth in the online banking business
• a lack of bill presentment (????)
• a lack of account aggregation (????)

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Fee-for-Service Revenue Models (????????)

• Fee based on value of service provided
• Services
• Range from games and entertainment to financial
  advice
• Online games
• Growing number of sites include premium (???)
  games in their offerings
• Site visitors must pay to play these premium games

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Fee-for-Service Revenue Models Contd

• Concerts and films
• As more households obtain broadband access to the
  Internet
• Companies are providing streaming (?) video of
  concerts and films to paying subscribers
• Professional Services (????)
• State laws
• One of the main forces preventing U.S.
  professionals from extending their practices to
  the Web

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Revenue Models in Transition (??)

• Subscription to Advertising-Supported Model
• Microsoft founded its Slate magazine Web site
• An upscale (???) news and current events
  publication
• Charged annual subscription fee after a limited
  free introductory period
• Was unable to draw sufficient number of paid
  subscribers
• Now operated as an advertising-supported site

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Advertising-Supported to Advertising-Subscription
Mixed Model

• Salon.com
• Operated for several years as an
  advertising-supported site
• Now offers optional subscription version of its
  site
• Subscription offering
• Motivated by companys inability to raise
  additional money from investors

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Advertising-Supported to Fee-for-Services Model

• Xdrive Technologies
• Opened its original advertising-supported Web
  site in 1999
• Offered free disk storage space online to users
• After two years, was unable to pay costs of
  providing the service with the advertising
  revenue generated
• Later switched to a subscription-supported model

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Advertising-Supported to Subscription Model

• Northern Light
• Founded in August 1997 as a search engine
• Revenue model
• Combination of advertising-supported model plus a
  fee-based information access service
• January 2002
• Converted to a new revenue model that was
  primarily subscription supported

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Multiple Transitions

• Encyclopædia Britannica (????????)
• Original offerings
• The Britannica Internet Guide
• Free Web navigation aid
• Encyclopædia Britannica Online
• Available for a subscription fee or as part of CD
  package
• 1999
• Converted to a free, advertising-supported site
• 2001
• Faced declining advertising revenues and returned
  to a mixed model the advertising-subscription
  mixed revenue model

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Revenue Strategy Issues

• Channel conflict (????)
• Occurs whenever sales activities on a companys
  Website interfere with existing sales outlets
  (??)
• Also called cannibalization (??) because the Web
  sites sales consume sales that would be made in
  the companys other sales channels
• Levi Strauss Company Began selling jeans online
  in mid-1998 and stopped in January 2000
• Maytags Web site allowed customers to order
  directly online and after 2 years of operation it
  decided to incorporate online partners into its
  Web site store design

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Revenue Strategy Issues Contd

• Channel cooperation (????)
• Giving customers access to the companys products
  through a coordinated presence in all
  distribution channels
• Eddie Bauer was selling through catalog and
  retail stores
• The company believed that online sales could
  become more attractive if customers were allowed
  to return unwanted products purchased online
• Eddie Bauer was able to convince all managers to
  support the Web site

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Strategic Alliances (????)and Channel
Distribution Management

• Strategic alliance
• When two or more companies join forces to
  undertake an activity over a long period of time
• Account aggregation services
• Increase propensity (??) of customers to return
  to the site
• Channel distribution managers (????????)
• Companies that take over responsibility for a
  particular product line within a retail store

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Creating an Effective Web Presence (??)

• An organizations presence
• The public image it conveys to its stakeholders
  (?????)
• Stakeholders of a firm
• Include its customers, suppliers, employees,
  stockholders (??), neighbors, and the general
  public

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Identifying Web Presence Goals

• On the Web, businesses and other organizations
  have the luxury of building Web sites
  intentionally to create distinctive presence
• Each entity that establishes a Web presence
  should decide features the Web site can provide
  and which of those features are the most important

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Achieving Web Presence Goals

• An effective site is one that creates an
  attractive presence that meets the objectives of
  business or organization
• Objectives of the business
• Attracting visitors to the Web site
• Making the site interesting enough that visitors
  stay and explore

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Achieving Web Presence Goals Contd

• Convincing visitors to follow the sites links to
  obtain information
• Creating an impression consistent with the
  organizations desired image
• Building a trusting relationship with visitors
• Reinforcing positive images that the visitor
  might already have about the organization
• Encouraging visitors to return to the site

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Profit-Driven (???) Organizations

• Toyota site
• A good example of an effective Web presence
• Provides links to
• Detailed information about each vehicle model
• A dealer locator page
• Information about the company and the financing
  services it offers

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Profit-Driven Organizations Contd

• Quaker Oats
• Web site does not offer a particularly strong
  sense of corporate presence
• Site is a straightforward presentation of links
  to information about the firm
• Redesigned site in 1999
• Essentially the same as previous version

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Not-for-Profit (????) Organization

• Key goal for the Web sites
• Information dissemination (??)
• Key element on any successful electronic commerce
  Web site
• Combination of information dissemination and a
  two-way contact channel

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Web Site Usability (???)

• Motivations of Web site visitors
• Learning about products or services that the
  company offers
• Buying products or services that the company
  offers
• Obtaining information about warranty (??),
  service, or repair policies (??) for products
  they purchased
• Obtaining general information about the company
  or organization

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Web Site Usability Contd

• Motivations of Web site visitors
• Obtaining financial information for making an
  investment or credit granting (??) decision
• Identifying the people who manage the company or
  organization
• Obtaining contact information for a person or
  department in the organization

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Making Web Sites Accessible (????)

• One of the best ways to accommodate a broad range
  of visitor needs
• Build flexibility into the Web sites interface
• Good site design
• Lets visitors choose among information attributes
• Web sites
• Can offer visitors multiple information formats
  by including links to files in those formats

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Making Web Sites Accessible Contd

• Goals that should be met when constructing Web
  sites
• Offer easily accessible facts about the
  organization
• Allow visitors to experience the site in
  different ways and at different levels
• Provide a meaningful, two-way (interactive)
  communication link with the organization
• Sustain (??) visitor attention and encourage
  return visits
• Offer easily accessible information about
  products and services

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Trust (??) and Loyalty (??)

• Studies by business researchers
• A 5 percent increase in customer loyalty can
  yield profit increases between 25 and 80
• Repetition of satisfactory service
• Can build customer loyalty
• Customer service
• A problem for many electronic commerce sites

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Usability Testing

• Companies that have done usability tests
• Conduct focus groups (????/????)
• Watch how different customers navigate through a
  series of Web site test designs
• Cost of usability testing
• Low compared to total cost of a Web site design
  or overhaul (??)

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Customer-Centric (???) Web Site Design

• Putting the customer at the center of all site
  designs
• Guidelines (????)
• Design site around how visitors will navigate the
  links
• Allow visitors to access information quickly
• Avoid using inflated (???) marketing statements

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Customer-Centric Web Site Design Contd

• Guidelines
• Avoid using business jargon (??) and terms (??)
  that visitors might not understand
• Build the site to work for visitors using the
  oldest browser software on the oldest computer
  connected through the lowest bandwidth connection
• Be consistent in use of design features and colors

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Customer-Centric Web Site Design Contd

• Guidelines
• Make sure navigation controls are clearly labeled
• Test text visibility on smaller monitors
• Make sure that color combination do not impair
  viewing clarity for color-blind visitors
• Conduct usability tests

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Connecting With Customers

• Personal contact model (??????)
• Firms employees individually search for, qualify
  (????), and contact potential customers
• Prospecting (???)
• Personal contact approach to identifying and
  reaching customers
• Mass media approach (??????)
• Firms prepare advertising and promotional
  materials about the firm and its products

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Connecting With Customers Contd

• Addressable media (?????)
• Advertising efforts directed to a known addressee
  (????)
• Also called mass media
• One-to-many communication model
• Communication flows from one advertiser to many
  potential buyers
• One-to-one communication model
• Both buyer and seller participate in information
  exchange

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Business Communication Modes
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Summary

• Models used to generate revenue on the Web
• Web catalog, digital content sales
• Advertising-supported
• Advertising-subscription mixed
• Fee-for-transaction and fee-for-service
• Companies undertaking electronic commerce
  initiatives to
• Form strategic alliances
• Contract with (????) channel distribution managers

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Summary

• Firms
• Must understand how the Web differs from other
  media
• Enlisting (??) help of users when building test
  versions of the Web site
• A good way to create a site that represents the
  organization well
• Firms must also
• Understand nature of communication on the Web

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Toyota U.S. Home page (2004)
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Toyota U.S. Home page (2009)
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Quaker Oats old Home Page
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Quaker Oats Home Page 1999 Redesign