Internet Marketing Strategy Week 5

Objectives Defining the business model Integrating Internet marketing strategy Levels of web development A strategic approach to Internet Marketing

Defining The Business Model the first determinant of a firm’s performance is its business model the method by which a firm builds and uses its resources to offer its customers better value than its competitors and to make money doing so

Determinants of Business Performance Business Model Components & linkages Dynamics Environment Competitive Macro Change Properties Underpinnings Performance

Internet Business Models Given such landscape-transforming properties of the Internet, the question is, How can a firm take advantage of them and make money. The Internet business model is the system – components, linkages, and associated dynamics – that takes advantage of the properties of the Internet to make money

Internet Business Models It takes advantages of the properties of the Internet in the way it builds each of the components – value, scope, revenue sources, pricing, connected activities, implementation, capabilities, and sustainability – and crafts the linkages among these components. Categorized as pure play or clicks-and-mortar –Pure play Internet business model - if firm does not have a bricks-and-mortar model. –Clicks-and-mortar is an internet business model conceived when a bricks-and-mortar model is in place

Properties of the Internet and the 5-Cs Internet Properties Mediating technology Universality Network externalities Distribution channel Time moderator Information asymmetry shrinker Infinite virtual capacity Low cost standard Creative destroyer Transaction-cost reducer 5-Cs Coordination Commerce Community Content Communication Business Model Environment Performance

Determinants of Firm Performance Business Model Customer value Scope Price Revenue sources Connected activities Implementation Capabilities Sustainability Internet Environment Performance

Taxonomy of Business Models Brokerage model – firms act as market makers who bring buyers and sellers together and charge a fee for the transaction that they enable. Advertising model – the owner of a web site provides some content and services that attract visitors. Charge advertisers fees for banners, permanent buttons … Infomediary model – a firm collects valuable information on consumers and their buying habits and sells it to firms which in turn can mine it for important patterns and other useful information.

Taxonomy of Business Models Merchant model – is the “e-tailer” model in which wholesalers and retailers sell goods and services over the Internet. Manufacturer model – try to reach end users directly through the Internet instead of going through a wholesaler or retailer. Affiliate model – a merchant has affiliates whose websites have click-through to the merchant. Community model – rest on community loyalty rather than traffic. A good example is iVillage.

Taxonomy of Business Models Subscription model – access to a web site is not free. Members pay a subscription price and in return receive high-quality content. Utility model – firms pay as they go. Activities are metered and users pay for the services that they consume.

Internet Marketing Strategy Block Strategy – firm erects barriers around its product market space by having inimitable capabilities and lowering prices. Run Strategy – an innovator often has to run. Running means changing some subset of components or linkages or business models or reinventing the whole business model to offer customers better value. Team-up Strategy – if a firm can not do it alone. Use strategic alliance, joint venture, acquisition, or equity position. Share in resources that it does not have.

David Teece argued that two things determine the extent to which a firm can profit from its invention or technology: imitability and complementary assets

Who Profits from Innovation I Difficult to make money II Holder of complementary assets makes money IV Inventor makes money III Party with both technology and assets or with bargaining power makes money High Low Imitability Freely Available or Unimportant Tightly Held and Important Complementary Assets

Strategies for Building Business Models I Run II Team-up Joint venture Strategic alliance Acquisition Internal development IV Block III Block Team-up Joint venture Strategic alliance Acquisition High Low Imitability Freely Available or Unimportant Tightly Held and Important Complementary Assets

Internet Technology Life Cycle Locate profit site Determine strengths and weaknesses of business model Build business model Defend competitive advantage Decide where in the Internet value network you want to be Build capabilities Build network Invest in infrastructure Win customers Build brand name Team-up/Run Sales Internet actions: Time EMERGING or FLUID GROWTH or TRANSITIONAL MATURE or STABLE

Levels of Web Development 1. Image/product information 2. Information collection 3. Customer support/service 4. Internal support/service 5. Transactions Personalization 1. Transactions 2. Customer support/service 3. Image/product information 4. Information collection/market research Multinational CompaniesInternet start-ups

Simple Framework for IMS development Develop Internet marketing strategy Define Internet marketing plan Design site Implement site Monitor (metrics) Review and modify

Strategic Marketing Planning Process 1. Mission 2. Corporate objectives 3. Marketing audit 4. SWOT analysis 5. Assumption 6. Marketing objectives & strategies 7. Estimate expected results 8. Identify alternative plans & mixes 9. Budget 10. Detailed implementation program – year 1 Measurement and review Phase 1 Goal setting Phase 2 Situation review Phase 3 Strategy formulation Phase 4 Resource allocation And monitoring