Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence

Models 1.The Web Catalog Model 2.Advertising-Supported Model 3.Advertising-Subscription Mixed Model 4.Fee-for-Transaction Models 5.Fee-for-Services Models

1. The Web Catalog Model Based on the mail order catalog revenue model. Replaces or supplements print catalog distribution with information on its Web site. –Brand image –Low cost Customers can place orders through the Web site or by telephone

Businesses Employing the Web Catalog Model Computer manufacturers –Dell and GatewayDell Apparel Retailers –Land’s End, Eddie Bauer, L.L. BeanLand’s End Flowers and gifts –1-800-Flowers1-800-Flowers General Discounters –WalmartWalmart

Luxury Goods People are still unwilling to buy some items through a Web site. Luxury goods and high fashion items. Use Web sites to provide information to customers who would then visit the physical store.

Channel Conflict and Cannibalization Channel Conflict –Web site interferes with its existing sales outlets or network. –Levi (point to retailers)Levi Cannibalization –Web site’s sales consume the sales that would be made in the company’s other sales channel.

Strategic Alliances Two or more companies join forces to undertake an activity over a long period of time, they are said to create a strategic alliance. An increasing number of businesses are forming strategic alliances to sell on the Web. Amazon.com –ToysRUs to sell toys –Drugstore.com to sell health and beauty products. –Target

Selling Information or Other Digital Content Firms that own intellectual property have embraced the Web as a new and highly efficient distribution mechanism –From paper to web publication –Catalog of information –Always current, searchable –Usually have charge for access ProQuest - sells digital copies of published documents.ProQuest LexisNexis – legal documents, publications, and news…LexisNexis Encyclopedia Britannica - has transferred an existing brand to the Web.Encyclopedia Britannica

2. Advertising-Supported Model Used by network television in the U.S. –Advertising revenue support operations Web advertising has been hampered by two major problems: –No consensus has emerged on how to measure and charge for site visitor views. Visitors or actual click? –Very few Web sites have sufficient numbers of visitors to interest large advertisers. Do visitors have “right” demographics

Advertising-Supported Model Web Portals –Use as “launching” site to enter the web –Web directory or search engine; … –Only a few general-interest sites have sufficient traffic to be profitable based on advertising revenue alone. - Yahoo, AOL, MSN Newspaper publishers –It is still unclear whether web presence helps or hurts the newspaper’s business as a whole. Employment Sites –Advertise employment –Appears to be successful. –Monster.comMonster.com

3. Advertising-Subscription Mixed Model In this mixed model –Subscribers pay a fee –Some level of advertising. The New York Times and The Wall Street JournalThe Wall Street Journal –Most content for subscribers –Reduced rate for print subscribers Business Week offers a variation on the mixed model theme; it offers some free content but requires a subscription to access the entire site.Business Week

4. Fee-for-Transaction Models The travel agency business model –Receive a fee for facilitating a transaction. –Orbitz – lowest air fares for 5 airlines Stock brokerage firms use a fee-for-transaction model. –Charge their customers a commission for each trade executed. –Etrade, Charles Schwab

Fee-for-Transaction Models MSN Carpoint, CarsDirect.com and Autoweb.com provide an information service to car buyers –Each of these firms implements the fee-for- transaction revenue model in a slightly different way 1.Customer goes on line to find car and price 2.Site then finds local dealer who will accept deal 3.Site charges dealer a fee for service

Fee-for-Transaction Models Event Tickets –The Web offers event-promoters an ability to sell tickets from one virtual location to customers practically anywhere in the world. Ticketmaster Real estate and mortgage loan brokers –Online real estate brokers provide all of the services that a traditional broker might provide. Online banking and financial services –The greatest concerns that most people have when considering moving financial transactions to the Web are security and reliability. –Some eliminating fee

5. Fee-for-Services Models The fee in this model is based on the value of the service provided. –Not based on number of transaction. Examples: – Games and entertainment – Financial advice – Professional services of accountants, lawyers and physicians.

Fee-for-Services Models Online Games –Many online games sites offer premium games. –Site visitors must pay to play these games. Concerts and films –Streaming video of concerts and films to paying customers. Professional services –State laws have been one of the main forces preventing U.S. professionals from extending their practices to the Web. –General information or referral sites

Creating an Effective Web Presence Creating an effective Web presence can be critical for even the smallest and newest firm operating on the Web. –Only contact that customers has If only a web presence –Influence other stakeholder Suppliers Stockholders Employees

Identifying Web Presence Goals On the Web –Create distinctive image the company wants to project. A Web site can perform many image-creation tasks very effectively, including: –Serving as a sales brochure –Serving as a product showroom –Showing a financial report –Posting an employment ad –Serving as a customer contact point

Achieving Web Presence Goals An effective site – creates an attractive presence –meets the objectives of the business Possible objectives include: –attracting visitors to the Web site –making the site interesting enough –convincing visitors to follow the site’s links –creating an impression of corporate image –building a trusting relationship with visitors –reinforcing positive images of the organization –encouraging visitors to return to the site

The Toyota Site The Toyota site is a good example of an effective Web presence.Toyota The site provides: –a product showroom feature –links to detailed information about each product line –links to dealers –links to information about company

Not-for-Profit Organizations A key goal is information dissemination. Two-way contact channel is a key element The American Civil Liberties Union and American Red Cross have created effective Web presences.American Red Cross Political parties and museums also use Web sites for their image presences.

How the Web is Different When firms started creating Web sites in the mid 1990s –Conveyed basic information about their business. Web is different from other presence-building media –Brochures Web’s capability –Two-way, meaningful communication with their customers. – , online dialog, forms

Meeting the Needs of Web Site Visitors Businesses that are successful on the Web realize that every visitor to their Web site is a potential customer. An important concern for businesses is the variation in important visitor characteristics. People who visit a Web site seldom arrive by accident; they are there for a reason. Technology variations among visitors (e.g., connection speed) should be a concern for Web sites.

Many Motivations of Web Site Visitors Creating a Web site that meets the needs of visitors –to learn about products or services that the company offers, –to buy the products or services that the company offers, –to obtain information about warranty service, or repair policies for products they have purchased

Meeting the Needs of Web Site Visitors (cont’d) –to obtain general information about the company or organization –to obtain financial information for making an investment or credit granting decision –to identify the people who manage the company or organization –to obtain contact information for a person or department in the organization.

Making Web Sites Accessible Build flexibility into the Web site’s interface. –Text version, no plug-ins… –Different for browser used Many sites offers separate versions with and without frames and giving visitors the option to choose either one. A good site design lets visitors choose among information attributes, such as level of detail, viewing format, and downloading format.

Trust and Loyalty When customers buy a product, they are also buying a service element. A seller can create value in a relationship with a customer by nurturing customers’ trust and developing it into loyalty. Customer service is a problem for many corporate sites. A primary weak spot for many sites is the lack of integration between the company's call centers and their Web sites.

Usability Testing Firms are now starting to perform usability testing of their Web sites. - Determine if interactive contact with visitors As Usability testing becomes more common, more Web sites will meet their goals. Eastman Kodak, T. Rowe Price, and Maytag have found that a series of Web site test designs helped them to understand visitors’ needs.

Customer-Centric Web Site Design Putting the customer at the center of all site designs is called a customer-centric approach to Web site design. Electronic commerce sites are encouraged to focus on the customer’s buying process rather than the company’s perspective and organization. Technology-enabled relationship management occurs when a firm –obtains detailed information about a customer – uses that information for marketing purposes. –called Customer Relationship Management (CRM) or electronic customer relationship management (eCRM).

Connecting with Customers Most businesses are familiar with two ways of reaching customers: personal contact and mass media. The Web is an intermediate step between mass media and personal contact. Using the Web to communicate with potential customers offers – advantages of personal contact selling – cost savings of mass media