Business strategies for ecommerce

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Business strategies for ecommerce I. What to
consider when developing an ecommerce site
Challenges and obstacles What matters II.
Portals III. Auctions
IV. Customer service
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An e-commerce site that's going to make money
must be inviting, well-organized, secure and
intuitive. Vaughan-Nichols,. S.J. (1998).
E-Commerce Step-by-Step ZDNet http//www.zdnet.co
.il/devhead/stories/articles/0,4413,2185923,00.htm
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• Major challenges for ecommerce retailers
• Brand development and promotion
• Generating online sales
• Attracting new customers
• Boosting customer loyalty and retention
• Improving after-sale customer service
• Cutting costs in after-sales customer service

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And Boosting customer traffic to offline stores
Cutting costs of sales transactions
Accelerating inventory turns Cutting general
advertising and promotion costs
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Major obstacles Understanding the technical
requirements for an ecommerce site Lack of a
clear business model to guide development Insu
fficient corporate resources Consumer fears
about security and privacy The difficulty of
integrating ecommerce web sites into the
companys other business processes
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What matters Having a well-designed,
easy-to-use site is the most important factor
in for online success Having a strong company
brand and well-known branded products Using an
effective site promotion strategy Linking with
the right search engines Having a presence on
the right portals or web communities
Offline promotion Successfully marketing the web
business
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• What matters in a web site
• Information organization and architecture is it
  easy to navigate? Search?
• Currency how frequently is content updated?
• Knowledge do the pages educate visitors about
  products and their uses?
• Interactivity does it offer the ability to
  provide feedback, ask questions, etc?
• Customization does it allow visitors to tailor
  content and information presentation?
• Community Does it allow visitors to share
  information with other visitors?
• Speed how quickly do pages download

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• What else?
• Having contact information on every page
• Having a site that works under minimal
  conditions (text-only...)
• Making it easy for people to inquire about your
  services, while they are still online (mailto
  links, short forms)
• Having a way to ask your web site visitors for
  their e-mail addresses
• This is an opportunity to resell them later,
  by sending them quality, informative helpful
  e-mail as a follow- up

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The important question to ask is, "Can I deliver
what I make or do anywhere in the world?" 1.
Decide if the product or service you sell is
deliverable to a Net audience Can it be sent
via the Net or delivered by physical means,
including FedEx or getting on an airplane
yourself? 2. Determine the added costs of
delivery If the cost of delivering is too
high, stop here 3. Find an e-commerce host and
get a bid Check carefully to make sure that
the services and protections you want are
offered
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Then 4. Determine whether the extra revenue -
minus the added cost of delivery and the
e-commerce site cost - produces an adequate
return 5. If it does, its time to go into
business You may find that these steps do not
produce a clear case for starting your e-commerce
project right now If they dont, repeat the
calculation quarterly until you find its time
to start.
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What must be managed? Ecommerce sites need a
reliable technical and social infrastructure to
support the Practice of sales skills via the
Internet Orchestration and management of
customer relationships and support Creation of
new relationships with customers, suppliers,
partners, and even competitors.
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Strategy for marketing to consumers
Awareness Attraction
Visit-engagement Purchase
Repurchase
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Awareness Announcements through letterheads,
business cards, brochures, packages, newspapers,
magazines and TV Carefully chosen address it
should be similar to the company name and easy
to remember Attraction Links from other
sites Search engines and indexes leading to the
site Site can be easily and quickly accessed
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Visit/engagement Information about products and
company Facilities careful use of scripting,
search engines, sound, video and
animation Purchase Multiple methods ordering
form, mail, fax, phone ordering and
e-mail Payment facilities cash, check, credit
card and direct account Delivery/booking
facilities mail, fax, call phone and e-mail,
package tracking Interactivity offers,
interaction with others
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Revisit and re-purchase (stickiness) Freshness
Whats New Changing content and features
Extended interactivity communities/clubs/user-t
o- user communication Extensive help FAQs
Link to other sites Customisation collecting
user information, meeting customer
needs Personalization, optional menu and
content requiring user input Customer loyalty
and service programs
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Once the business is off the ground, the next
strategic decision is to grow vertically or
horizontally Syndication is...the
next-generation business architecture of the
Internet Neil Weintraub http//www.herring.com/ma
g/issue46/neil.html These are horizontally
specialized web sites that form
partnerships They are syndicated into
collective business systems that provide both
superior economics for business and superior
benefits to customers Each participant of a
syndicated business specializes in either
physical production, virtual experiences, or
infrastructure.
Producers, channels, and syndicators
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Syndication divides the web-labor For producers,
the reality is that it doesn't matter so much
where customers see the product as how many of
them see it Those who run channels want to
attract as many customers as possible Who
produced the message is of secondary concern As
producers and channels focus on their core
businesses, they are done by clerks,
clearinghouses, and call centers to
syndicators This leads to aggregation and the
pooling of resources The difference between a
showroom and a showroom of showrooms
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Business strategies for ecommerce I. What to
consider when developing an ecommerce site
Challenges and obstacles What matters II.
Portals III. Auctions
IV. Customer service
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Portals Portal is a new term seen to be
synonymous with gateway It is a web site that is
(or wants to be) a major starting site for users
when they go online It is also a site that
users tend to visit as an anchor site Most
portals have adopted the Yahoo style of content
categories This involves a text-intensive,
faster loading page that visitors will find easy
to use and to return to Deeper in the site are
many different types of resources and services
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Portal sites have attracted stock market interest
because they are viewed as able to draw
traffic This means large numbers of numbers of
advertising viewers and higher rates Typical
services offered by portal sites
include Services shopping, chat, free email,
webhosting Resources directories of web sites,
news, weather information, stock quotes, phone
and map information, a facility to search for
other sites Portals are moving towards
personalization to make themselves sticky Excite
is among the first portals to offer users the
ability to create a site that is personalized
for them
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Portals are becoming large, all-purpose
ecommunities with high ecommerce potential,
including advertising revenue They do have some
disadvantages They dictate the content that you
are able to find They're a good aid for new
users, but they only serve up a slice of the
Internet They often point to sites that live
under the same corporate umbrella as they do,
rather than to the most relevant or informative
site on a given topic
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The term portal space means the total number of
major sites competing to be one of the
portals Leading portals include Yahoo, Excite,
Netscape NetCenter, Lycos, Go.com, MSN.com,
Snap.com With its own private array of sites
when you dial in, AOL is also a portal to its
own Web A number of large ISPs also offer
portals to the Web for their own users Now,
MA AOL -- Netscape ABC -- Go.com Disney --
Infoseek NBC -- Snap.com USA Networks --
Lycos
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What is the future of portals? One possibility is
that they become the new desktop the
webtop Sites begin to offer the types of
web-based services that replace those provided
by desktop software Email, schedule and
calendaring address databases, productivity
applications Then word processing,
spreadsheets This personalized desktop can be
accessed from anywhere on the net with any
device The network is the computer (assuming
lots of bandwidth)
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Why you might like it Ease of use Accessibility
Privacy (no corporate surveillance) Everything
you need in one place Lots of functionality with
a cheap, small, fast PC
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This would create a shift in the business model
of portals They were doorways, now they are
data guardians and full service
providers They take on the responsibility for
maintaining and upgrading shared software They
have to guarantee privacy, security, universal
access, and reliability They begin to compete
with software companies who would rather sell
individual packages to users than one server
version
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Another future is the enterprise portal Large
companies are developing their own customized
web
gateways on their intranets These local portals
give employees access to important corporate
information as well as the latest news, sports
scores and stock quotes The value is in the
retrieval and reporting of internal company data
through a well-organized and secure web
portal For example a user can pull corporate
data from IT (ERP, data warehouses, legacy
programs) and view the information and its
relationships on the desktop This is
individualized data-mining
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One company that builds enterprise portals is
Epicentric Epicentric
enables companies to build custom portals for
their intranet and extranets by providing content
and commerce aggregation and syndication
technology and solutions This requires an
enterprise server, a hosted service, or a
combination of the two, depending on customer
needs and requirements The Portal Server is
a Java application server that supports NT
and Unix Web servers The company also licenses
aggregation technology to vertical portal sites
on the Web
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Business strategies for ecommerce I. What to
consider when developing an ecommerce site
Challenges and obstacles What matters II.
Portals III. Auctions
IV. Customer service
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Web auctions are based on the ability to
negotiate in near real-time They allow best
price bargaining, guaranteed sales, minimal
collusion It is a one to many negotiation based
solely around price Some auction forms allow
rounds of negotiation, others do not The rules
of the negotiation are clearly spelled out for
all participants
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What makes auctions work? A successful auction
must have repeat business This requires building
a loyal community The community is based on the
development and maintenance of mutual trust
Social practices create and maintain trust
Posting comments about buyers and sellers and
link these comments to specific auctions
Target the advertising for auctions (appropriate
newsgroups and lists) Have clear statements
about privacy and security
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A standard online auction of an item will often
contain a Registration procedure Picture of
the item List of features Suggested comparison
price Instructions on how to bid for the
item Forms to fill out to place your
bid Description of the rules of the auction
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Item of sites selling this item
(n100) Other 49 Computer
47 Information
30 Consumer products 28 Collectibles
22 Auto equipment 17 Recreation/Trave
l 16 Arts and crafts 16 Financial
products 9 Antiques
9 Food and beverages 5 Real estate
7 Sports equipment or
7 memorabilia
The most popular category is other, which
highlights the broad range of goods and services
sold over the net
Beam, C. and Segev, A. (1998) Auctions on the
Internet A Field Study Working Paper 98-WP-1032
November 1998 (Revised)
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Requirements Support for a variety of auction
formats Integration of auctions with business
back-end applications to allow automated trading
processes Security, based on cryptography and
audit trails Preventing hackers from
sabotaging and buyers and sellers from
cheating or disrupting the auction Efficient
notification to inform bidders of the latest bids
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Different auction methods The commonly used
auction types are Open-cry (English)
auction Buyers gather at a physical or virtual
location at a pre- specified time Each
buyer can hear or see the bid submitted by other
buyers and has a limited time to offer a higher
counter- bid In physical auctions the responses
must be received within seconds In web
auctions, several minutes or hours will be
allowed for the response From Kumar and Feldman
(1998) Internet Auctions http//www.ibm.com/iac/
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Single and multiple round sealed bid
auctions Buyers must submit bids by a specified
deadline The bid information secret is until the
deadline Then bids are evaluated and the
winners are declared Single round auctions lack
the bidding frenzy of open cry auctions where
bidders try outbid their rivals In a multiround
sealed bid auction there is a deadline for each
round of bids At the deadline the auction is
closed or the bids from the current round are
publicized and a new round of bidding begins
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Dutch auctions These are good for perishable
items (food, airplane seats) It starts with a
very high asking price The price is decreased
until buyers bid and specify the number of
items they will purchase at the current
asking price The bid can then be lowered to
sell more while the inventory lasts The
auctioneer controls how fast the inventory
sells by controlling the lowering of the bid It
closes at a pre-specified time, when the items
are sold, or the price has fallen to a
pre-specified level (or some combination)
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The reverse auction (priceline.com) The buyer
sets a price she is willing to pay The auction
house bids the price out to sellers Sellers
compete to meet the bid If the bid is matched,
the buyer must purchase the item The auction
house takes a cut of the transaction The Vickery
auction Each submits one sealed bid Bids are
opened simultaneously and the winner has the
highest bid But the winner pays the price of
the second highest bidder
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The auction process Initial buyer and seller
registration Authentication of parties, exchange
of public keys Creation of a profile for each
trader reflecting interests in products and
spending limits Setting up a particular auction
event Describing the items being sold or
acquired and setting up the rules of the
auction The auction rules explain the Type
and procedures (open cry, sealed bid, Dutch)
Parameters (price, delivery dates, terms of
payment) Starting and closing dates and times
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Scheduling and advertising Items to be
auctioned in upcoming auctions are advertised,
and potential buyers are notified Popular
auctions can be mixed with less popular ones to
force people to be present in the less popular
auctions Bidding This involves the collection
of bids from buyers and implements the bid
control rules of the auction Minimum bid, bid
increment, deposits required with bids...
For open cry auctions there is notification of
the participants when new high bids are submitted
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Evaluation of bids and closing the auction The
auction closing rules are applied and the
winners and losers of the auction are
notified Trade settlement This final step
handles Payment to the seller Transfer of
goods to the buyer If the seller is not the
auctioneer, payment of fees to the
auctioneer and other agents (appraisers,
consignment agents, etc.)
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Auction security Auction house policy and seller
instructions dictate whether the auction is
accessible to the Public at large Buyers/seller
s registered with the auction services Buyers
registered to participate in the current auction
Access control mechanisms enforce these
rules Security mechanisms ensure that the site is
not sabotaged by an outsider This means
preventing unauthorized bids and alterations
and denial of service attacks
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Cryptography is important to auctions Trusted
third parties can enforce access rules and
digital signing of contracts to ensure
non-repudiation Encryption can prove that an
auction notice was posted and accessible during
a certain time period During bidding, encryption
is needed to ensure that a bid is not tampered
with, or disclosed to others In open cry
auctions, spurious bids must be prevented
These occur when the seller or auctioneer bid to
prompt the highest bidder to increase the
bid This means establishing a verifiable link
from each bid to a bidder
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Auction houses One-to-many auction The house
provides access to goods and services auctions
them to many buyers Consumer-to-consumer auction
The house brings together many buyers and
sellers at the same time and they negotiate with
each other Reverse auction The house allows the
buyer to set the price that sellers compete to
match Business to business auction One company
auctions off projects to contractors who submit
bids (procurement) or unwanted inventory
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Best practices Offer frequent auctions Email an
English auction bidder if the bid is
topped Offer secure payment processing Send out
regular email to subscribers Provide a search
engine Divide the site into categories Offer
phantom bidding services for English
auctions Update the front page frequently (every
24 hours) Run special programs to encourage
customer loyalty Offer additional services
Beam, C. and Segev, A. (1998) Auctions on the
Internet A Field Study Working Paper
98-WP-1032November 1998 (Revised)
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Business strategies for ecommerce I. What to
consider when developing an ecommerce site
Challenges and obstacles What matters II.
Portals III. Auctions
IV. Customer service
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Customer service the next-to-last
frontier Comparison shopping has made branding
and differentiation difficult If all your
competitors products can be arrayed along side
yours, competition based
on price differences becomes
a problem Whats left? Managing customer
relationships
"If you would like to press one, press one. If
you would like to press two, press two. If you
would like to press the pound key, press the
pound key... "
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The golden egg in marketing is to retain happy
customers, who not only keep buying from you, but
also tell their friends and associates that you
are the greatest company in the world Kuegler,
T. (1999). How can we help you online today?
http//www.searchz.com/Articles/0318991.shtml
The ideal scenario is to have an easy-to-use
site that meets a need users cant get in the
real world says Meg WhitmanCEO of Ebay Perez,
J.C. (1999). Online Stores Must Simplify, Says
Panel. http//www.thestandard.net/articles/displ
ay/0,1449,2548,00.html
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Goal of customer service is fulfillment The web
allows interactive customer services Instant
gratification Direct responses to immediate
needs Total and immediate responsiveness One-to-
one communication Personal interaction through
digital means (email, chat) Successful
fulfillment is a basis of the long-term
relationship with the customer
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Principles of customer service are well
established offline
Browsing
During the sale
After the sale
Managing the environment QA Demos Pre-sale
Creating the relationship Selling add-ons Closing
the sale
Maintaining the relationship QA
Services Updates Promotions Returns
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Jupiter Communications surveyed 125 major web
sites (content, consumer brands, travel, retail,
financial services) 42 never responded to
customer inquiries or took 5 days to
respond Retailers were the best 54 responded
within a day Financial services and travel
agencies were next 35 responded with one
day Among travel agencies, 19 took 3 days
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Customer service on the web Before the sale How
do you manage the environment for the visitor?
These are design and content development
issues Pre-sale service can be based on
Static FAQs and help pages Emailed QA Access
to real-time interaction with company
people Access to demos (real-time and
downloadable) Value-added information Access to
policies (privacy, security, returns)
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During the sale This requires dynamic forms of
service Multiple fulfillment options (online and
offline, including telephone ordering) Instant
verification of transaction (shopping cart and
sales sales totals) Links to add-on purchases
(or suggestions about them) Ability to end the
transaction Easy access to guarantees,
warranties, and privacy information Easy access
to return policies
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After the sale Using digital means to maintain
the relationship with the customer Prompt
delivery If appropriate, links to real-time
order and package tracking Real time QA with
company customer support (call-me buttons)
Using email updates to advertise
sales/promotions Easy access to clearly stated
return and exchange policies Using customer
loyalty programs to raise switching costs and
create lock-in
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Customer loyalty strategies Online, real time
events with other customers, celebrities, and
company people Online learning and training
seminars Online diagnostics Access to real time
analytic tools, reports, charts Automated
upgrades (software) Incentives to refer people
to the site Personalization
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New technologies are providing new opportunities
for customer service This helps the bottom
line Web-based customer support is much cheaper
than other forms of support (10X cheaper)
Web fulfillment 5 Phone fulfillment 50
House call fulfillment 500 Forrester
Research estimated 43 savings for web based
support for large companies (650 million and up)
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Examples Teleweb hand-holding products Call-me
buttons allow customers to speak with a company
support person while they are on site Once
connected, support can push web pages to the
customer with information that helps answer their
questions This is moving back into the
process and becoming important in closing the
sale Examples Webline, InteractiveAnswers (ATT)
ClicknConnect (MCI)
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eService Silknet Software http//www.silknet.com/
index_ns_main.asp Goal to improve efficiency and
increase customer enthusiasm and loyalty
by Integrating customers into the
business Engaging them in interactive,
personalized exchanges Leveraging their
knowledge to manage the customer
relationship Customers benefit because they can
conduct business when it is most suitable to
them Their feedback can guide the business into
providing products and services that better fit
their needs
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It views the customer from her point of view It
keeps a record of all interest points, and
purchases, service interactions, and follow up
activities It integrates fragmented customer
records across lines of business, divisions,
departments and legacy systems This leads to
one view of each customer Intelligent agents
guide customers and push appropriate pages when
needed Cost 150,000 for the basic package The
price goes up for of customers and service
reps who use it
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Another example is Roving Software, Inc
http//www.roving.com/main.htm Constant Contact
software Automatically continues a personalized
dialogue with your customer They are
contacted with targeted email even after they
leave your site Software agents automatically
alert customers to changes on the site, product
availability, and order shipment They are
proactively asked about their satisfaction, and
are alerted to promotions etc. This enhances
repeat buying and reduces service costs
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Outsourcing customer service A new option is to
hand over the management of customer
relationships to a company that specializes in
it PeopleSupport http//www.peoplesupport.com S
ervices include Serving your customers online
24 hours a day Providing them with comprehensive
self-help options Repling quickly and personally
to their email Handling your order taking,
fulfillment and credit card processing Capturin
g useful customer data instantly
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They have a button that allows two-way live
online chat 7-24-365 Customers speak
with eReps They will design an
interactive self-help knowledge base
This customized FAQ is continually
upgraded and refined to suit the clients
changing customer needs The software
tracks and records customer questions, buying
habits and product preferences They provide
up-to-the-minute reporting and real- time
feedback on customer issues, concerns and trends