Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS.

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Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563

Part One: Chapter Five Web Business Models “A good business model begins with an insight into human motivations and ends in a rich stream of profits.” Joan Magretta, Why Business Models Matter

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers Shift from occasional transaction to continuous analysis of customer behavior

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers Shift from occasional transaction to continuous analysis of customer behavior Shift from value distribution to value creation

Closed Loop Marketing Tracking customers from ad click to page views to purchase or exit Learning from and responding to customer interaction at each level Expanded accountability Accelerated learning curve on pricing, product quality and other variables

Closed Loop Marketing

Evaluating Customer Contact Online customer contact comes in many forms Website visits Banner advertising Email promotions Cell phone price checks

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value Expected value of a new customer

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value Expected value of a new customer Expected value of a repeat buyer

Evaluating Customer Contact

Customer Lifetime Value The ability to track, store and analyze individual behavior online allows firms to calculate the present value of the future cash flow attributed to the relationship with any one customer

Customer Lifetime Value The ability to track, store and analyze individual behavior online allows firms to calculate the present value of the future cash flow attributed to the relationship with any one customer Not every customer is created equal; high support costs can drive some customer relationship below zero value

Customer Lifetime Value

Web Benefits to Business Online strategies can bring direct and indirect benefits to firms Not every online tactic is profitable No formula for successful online business model Scale matters

Web Benefits to Businesses Cost reduction In banking, the switch from teller windows to ATMs to online transactions Supply chain coordination At Dell Computers, reduced inventory and faster response to changes in the market Also: improved customer knowledge, enhanced product quality and advanced branding

Revenue Benefits Online capabilities create new revenue opportunities

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com)

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com) Entirely new streams of revenue Selling music by the song at iTunes

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com) Entirely new streams of revenue Selling music by the song at iTunes Enhanced products drive revenue At Science, online content helps drive the magazine’s print sales

Revenue Models Permission sponsorship Banner advertising Prospect fees Sales commissions

Revenue Models Factors in selecting payment structure: Attitude toward risk Ability to monitor performance Current market emphasis Negotiating power

Selecting a Payment Structure Risk for Advertiser Risk for Ad Network Sponsorship Fixed Payment Banner Ads Impressions Prospect Fees Click through Commissions Purchase Increasingly Performance Based and Higher Rise for Web Site