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INTERNET MARKETING : INTEGRATING ONLINE AND OFFLINE STRATEGIES Chapter 2 The Internet Value Chain

3 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. SIMPLE, QUICK, AFFORDABLE eZconnect BUILDING A VALUE HERMAN MILLER

4 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. HERMAN MILLER CASE STUDY

5 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. FROM CHANNEL OF DISTRIBUTION TO VALUE CHAIN

6 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. CORE MARKETING PROCESSES Supply Chain Management Product Development And Management Customer Relationship Management

7 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. VALUE-CREATING ACTIVITIES

8 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. SUPPLY CHAIN MANAGEMENT PROCESSES 1. Selecting/Qualifying Desired Suppliers 2. Establishing/Managing Inbound Logistics 3. Designing/Managing Internal Logistics 4. Establishing/Managing Outbound Logistics 5. Designing Work Flow in Product-Solution Assembly 6. Running Batch Manufacturing 7. Acquiring/Installing/Maintaining Process Technology 8. Order Processing/Pricing/Billing/Rebates/Terms 9. Managing (Multiple) Channels 10. Managing Customer Services

9 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. FAST ZARA Figure 2-3 But Zara and its European counterparts know that if they don't lead the parade toward fast-fashion in the U.S., homegrown retailers certainly will. Chico's FAS (CHS), a Florida-based women's apparel chain, is already introducing new styles at more frequent intervals, luring shoppers with the slogan, "You'll find something new every day at Chico's." That's tough competition, all right. But Chico's still can't match Zara's efficiency: The U.S. company takes about six months to get an item from the drawing board onto store shelves, compared to as little as two weeks at Zara. Better keep an eye on this nimble Spanish retailer. BW 2006

10 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. ZARA ON YOU TUBE

11 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. ECOMMERCE, US LOW PRIORITY New York City – 2? San Francisco Chicago in September

12 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. FROM A TRADITIONAL CHANNEL TO A VALUE CHAIN

13 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Manage Supply Chain as Single Organization Close Customer Relationships  Customer Segments  Customer Experience and Relationships Cost Control Creates Customer Value Speed and Agility Extensive Metrics in Real Time Targeting Global Growth HOW DOES DELL DO IT?

14 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. DELL HAS BECOME MORE OPEN

15 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. CREATING A VIRTUAL VALUE CHAIN

16 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. MULTICHANNEL SERVICE RETAILER

17 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. BENEFITS OF INTEGRATED VALUE CHAIN Customer Centric Include Both Supply Chain & Channels of Distribution Extended Enterprise/Permeable Boundaries Provide Increased Customer Value  Improved Business Processes  New Technology Like RFID Specialized Value Propositions for Customer Segments

18 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Electronic Data Interchange (EDI) Enterprise Resource Planning (ERP) Web Services INTEGRATING BUSINESS PROCESSES

19 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. EDI - Paperless Transaction Processing Order Entry Generates Electronic PO Order Electronically Transmitted to Seller Order Moves into Seller’s Electronic System Electronic Acknowledgment Sent System Generates Instructions to Ship from Warehouse Electronic Invoice Sent to Purchaser Payment Made by Secure EFT

20 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. EDI is ‘OLD TECHNOLOGY’ Pre-dates Internet Requires Proprietary Systems and Value-Added Networks Expensive, Difficult To Use Internet Has Made Somewhat Easier, Less Expensive To Use

21 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. ERP - Integrating Internal Systems Internal Business Process Integration Necessary To External Systems Like EDI Automation and Integration Of All Internal Systems  Order Processing, Production Planning & Scheduling, Inventory Control, Distribution, Customer Relationship Management

22 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. REASONS FOR ERP Integrate Financial Data into Single Database Customer Order Data Moves Electronically/ Seamlessly Through System Standardize and Speed Up Manufacturing Reduce Inventory Levels Standardize and Make Accessible Human Resources Information

23 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Communications Between Enterprises Using Standard Hardware and Software WHAT IS ‘WEB SERVICES?’ Definition “Understanding WS” Definition 2JVN?term=web+services

24 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Enterprises Can Communicate With One Another Over The Common Platform of the Internet Independent of Systems Behind Enterprise Firewalls  Do Not Have to Replace Existing Systems “The Applications Interface, Not The Users” (Webopedia) WHY IS WEB SERVICES IMPORTANT?

25 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Applications Programming Interfaces (APIs)  Amazon, eBay and Many Others Use Free APIs That Allow Other Sites to Connect Easily  For Example, Google provides an API That Allows Sites to Use Google Maps on their Site and to Create Informational Overlays on the Maps AN IMPORTANT APPLICATION OF WEB SERVICES

26 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. USING WEB SERVICES 2 1 3

27 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. WEB SERVICES 2.0

28 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. BW ON CLOUD COMPUTING

29 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. WIDGET CASE STUDY Royal Caribbean Cruise Lines Needed Better Communication WithTravel Agents Identify Business Goals Develop Widgit (Flash-Enabled Window for agent portal) Promo Campaign (Print, Banner, s, Sales Training, Agent Contest) Updates to Encourage Use Primary business goals: o Reducing s and faxes to agents o Supporting both brands Four categories of information delivered most often to travel agents: o Company news o Special offers and deals for agents’ clients o Travel itinerary updates (particularly important during hurricane season) o Weather alerts, which agents typically share with customers Marketing Sherpa Case Study #CS828:

30 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation.

31 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. ONE YEAR LATER DownloadedAbout 7,000 Agents Downloaded Widget  1,000 As Result of Promo Contest Along opened keptMore than 90% of agents who downloaded and opened the tool kept it for more than a day used minutes46% of agents who downloaded the widget have used it for an aggregate of 120 minutes -- a high number because much of the activity takes place after users click through to the CruisingPower website interactions per weekUsers who kept the widget for more than a week average 28 interactions per week 54% of users are accessing the Royal Caribbean offers page 36% of users are accessing the Celebrity Cruises offers page

32 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. FIND WIDGETS OR MAKE YOUR OWN

33 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Transponder In an Automobile Cow With RFID Chip THE RFID FUTURE

34 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. eRETAIL ASSOCIATION SCHEMATIC

35 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. MORE APPS AS CHIP PRICES DROP

36 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. MANOR- SWITZERLAND’S LARGEST RETAILER /

37 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. DEVELOPMENT CENTER IN EUROPE

38 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. WORKING SUCCESSFULLY IN TRIALS In 5,000 Walgreen Stores?

39 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. Velocity (speed) Visibility (transparency) Variability (choice) Volume (scale) BENEFITS OF BUSINESS PROCESS TRANSFORMATION

40 Internet Marketing: Integrating Online and Offline Strategies © 2008 Thomson, a part of the Thomson Corporation. SUMMARY Speed, Price, Quality (not necessarily in that order) Are Key Customer Requirements Virtual Value Chains Provide Them By  Cutting Transaction Costs  Reducing Error Rates  Cutting Order Cycle Time Set Objectives Based On Customer And Corporate Requirements Use Appropriate Metrics To Evaluate Integration Of Systems INSIDE The Enterprise And BETWEEN Enterprises Is Key RFID Technology Will Speed/Give Access Cloud Computing – Next Major Development?