MAR 6936798

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MAR 6936-798

• E-Commerce Marketing
• Spring 2003Downtown--MBA
• Blown To Bits
• Rich Gonzalez
• January 30, 2003 (Week 4)

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For Site/Model Evaluation

• Today Peruse Nielsen Tahir book Homepage
  Usability
• 1 Christine Bailiff
• 2 Jim Nguyen
• 3 Ahmed Bondagji
• 4 Louis Brunoforte Start thinking about
  selecting...

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URLs

• wsj.com

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Agenda January 30, 2003

• WSJ Online
• Porter
• Blown To BitsDiscussion
• Due For February 6
• Finish Pics

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Grading Criteria

• Start Out With 125 Points
• Areas for ImprovementF Format (Cover page,
  Headings, T ThoroughnessA AnalysisL Late
  (20 a day)

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PayPal Final Notes

• For Sending , For Personal Accounts.
• Price 0.00 per transaction and
• We deliver a product ideally suited for small
  businesses, online merchants, individuals and
  others currently underserved by traditional
  payment mechanisms.

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Services

• Relatively Intangible
• Simultaneously Production/Consumption
• Perishable
• Non-Standardized

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For February 6

• Blown to Bits, p.99 167
• Analysis Paper 3
• WSJ Online After the Bust, William Boston,
  WSJ Online, January 27, 2003
• BusinessWeekThe Start of A Dot-Comeback, BW,
  February 3, 2003http//www.businessweek.com/magaz
  ine/content/03_05/b3818061.htm

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For Today January 30

• Blown to Bitsp.1 - 97
• Weekly Analysis Paper 2 Due

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Weekly Analysis Paper 2

• Subject Blown To Bits
• Length 1.5 Pages -------125 points
• Due on January 30
• Subjects (use bolded headings)1. Information
  Asymmetries2. Deconstruction3.
  Disintermediation
• Any Other Concepts?

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Moores Law
of transistors
1965Double every 12 months 1975---Double every
24 months-----Sometimes 18 months
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Metcalfes Law

• def values the utility of a network as the
  square of its users
• Morse Code
• Telephone system
• Ethernet protocols
• Internet protocols

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Metcalfes Law
Net Utility
Nodes
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The Killer Application

• The killer app. (application) is the software
  product that entices a user to adopt a larger
  technology. Spreadsheets were the killer apps for
  PCs. Email is the killer app for the Internet.

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Killer App

• def. a new good or service that establishes an
  entirely new category and, by being first,
  dominates, returning several hundred percent on
  the initial investment
• Generative or destructive?

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Another View of Law
YNI
Time

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Figure 8.1 Lifecycles of the Telegraph,
Telephone, Cell Phone
U.S. Figures
Telephone Life Cycle
Number of users
Cell Phone Life Cycle
Telegraph Life Cycle
1840 1876 1877 1880 1900 1930
1945 1982 2002
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Economics of Things

• Seller Ceases To Own
• Replicate By Manufacture
• Deteriorate
• Requires Perfect Markets

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Economics of Information

• Sell, Yet Still Owned?
• Replicated at cost of ?
• Limit?
• Never Wears Out
• Requires Imperfect Markets

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Marketing Concept

• What is it?

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Customer Orientation

• A philosophy incorporating the marketing concept
  that emphasizes first identifying unmet needs,
  then satisfying them.
• Marketing MantraKnow your customer(s).

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Customer Orientation

• MetricsCustomer AcquisitionMarket
  ShareCustomer SatisfactionCustomer Profitability

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Customer Satisfaction

• Definition?

Expectations
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Quote and Revision

• There is only one boss the customer. And he can
  fire everybody in the company...by spending his
  money somewhere else. Sam Walton
• Only one person controls the mouse the
  customer. And he can fire everybody in the
  company...by clicking and going to some other
  site to spend his money. R. Gonzalez

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Customer Decision Process

• Recognize Problem
• Information Gathering
• Evaluation
• Purchase Decision
• Postpurchase Results

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1 to 1 Marketing

• Personalization
• Customization

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Luddites
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Diffusion of Innovations

• Innovation
• Discontinuous vs. Continuous
• WWW? (Figure 8.5) p227
• Adoption Factors p228
• Killer App
• Marketers As Change Agents

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3 Fundamental Business Shifts

• 1. Most transactionsB2C, B2B, C2C and C2C will
  become self-service digital transactions.
• 2. Customer service will become the primary
  value-added function in every business.
• 3. The pace of transactions and customer needs
  for customer service will force firms to adopt
  digital processes---for survival.

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New Economics of Information

• The evolving and advancing technologies for
  sharing and using information to
• Transform business
• Industry
• Competitive Advantage
• Britannica Example...
• ...is generalizable

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Strategic Competitive Advantage--Porter

• A competitive advantage is a super strength of a
  company, relative to competitors, that provides a
  distinctive value proposition to consumers, and
  is significantly valued by those consumers.
• It is sustainable.

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Encyclopaedia Britannica contd

• Strategic Competitive Advantage
• Quality Volume
• Sales Force
• 1,500 PriceLarge Margins
• Thoroughness

• Strategic Competitive Disadvantage
• Too Big For CD
• Commissions
• 75--50--0
• Too Slow To React

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Scenario

• Sales-----Up
• Profits-----Growth
• Employees---Growth
• Credit -------Up
• Reputation---Up
• Stock-----------Up
• What should you do?

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Themes in Blown To Bits

• SCA to SCD
• Legacy Assets
• Speed
• Seeing (what is visible)
• Not Zero-Sum

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Porters Competitive Business Model
New Entrants
BP of Sellers
BP of Buyers
Intraindustry Rivalry
Substitutes
Which is affected?
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The Porter framework

• The Porter Generic Strategy framework is well
  established.
• Three generic strategies -- Differentiation, Low
  Cost and Focus
• Strengths of the Porter approach are that it is
  well known, easy to understand and adaptable to
  e-commerce.

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Strategy

• The essence of strategy is choosing to perform
  activities differently than rivals do.
• Must be flexible to respond rapidly to
  competitive and market changes. Michael E.
  Porter
• What Is Strategy?, Nov-Dec 1996, HBR

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Figure 8.9 Internet Product Life Cycle
Prices Number of
Users Stage Time Line
Development Intro- Growth Maturity
Decline duction Positive
Profits Negative
Dial-up Access
Broadband Access
Wireless Access
Free ISP Access
Web TV
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Superior Value Proposition

• The value proposition is the total market
  offering to customers and is closely related to
  the Four-P marketing mix.
• A superior value proposition can be based on a
  superior product, price, distribution or
  promotion or a superior combination of these.

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Most Important Factor In Biz?

• Information
• Information
• Information

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Information Asymmetry

• Knowledge a Transaction Participant Possesses In
  Which You Are Not Privy To.
• How does this affect transactions?

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Information Asymmetries

• Vendors
• Consumers
• Buyers
• Price
• Assumption is that they exist

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Big Concepts

• Information
• Amplification
• Asynchronicity

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Evans Wurster

• Who are these guys?

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Blown To Bits Recommendations

• Clayton Christensen
• Edgar Bronfman, Jr. Seagrams
• Jacques Nasser, Ford Motor Co.
• Toby Lenk, eToys
• Jean-Marie Messier, Vivendi
• Shikhar Ghosh, Open Market, iBelong

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In Class Participation

• Comments Are From Discussion In Class About Blown
  To BitsWeekly Assignment Paper 2

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Information Asymmetry

• Creates inefficiency in transactionsfair price
  is not achieved
• Goal is to eliminate R R tradeoff make channel
  universally accessible
• Networks make IA collapse
• Balances scalesevens playing field
• Access to certain nets still allow IA (intra and
  extranets)
• Motivate buyer to have mistrust
• Access to information increases bargaining power

In Class Exercise
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Deconstruction

• Dismantling and reformulation of traditional
  business structures.

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Deconstruction

• Dismantling and reformulation
• Rarely happens across Whole business---Component
• Melts the glue business units
• Execs should be willing to reconstruct their biz
  model
• Going after max opportunity as opposed to fixing
  only a part

In Class Exercise
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Disintermediation

• Destruction/elimination of the intermediary
• Creates new types of intermediary, ie. Advisors,
  navigtors,
• Displaces the richness /reach curve without being
  at expense of richness or reach

In Class Exercise
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Disintermediated

• Retail computer shops
• Book stores
• Travel agents
• Customer service reps
• Insurance agents
• Pharmacy
• Video Rentals Netflix

In Class Exercise
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• Adding Richness Is the Best Way To Forestall
  Deconstruction

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Change, Techno, Info, Process...

• The Only Sure Winner Is the Customer

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Change, Techno, Info, Process...

• The Only Sure Winner Is the Customer

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What Is Wrong With This?
More info, more SCA
Its Linear
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E W Say
SCA
More info, LOTS more SCA
Information
Not Linear
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Information Is The Glue

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Weekly Analysis Paper 3

• Subject Blown To Bits
• Length 1.5 Pages, Cover Page--125 pts
• Due February 6
• Subjects (use bolded headings)1. Competing on
  Reach2. Competing on Richness 3. Competitive
  Advantage

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