ELECTRONIC COMMERCE : CHALLENGES AND OPPORTUNITIES IN ASSESSING IT PAYOFF Pertemuan Matakuliah: A0814/Investment Analysis Tahun: 2009

Data, Information and Knowledge The capabilities of the e-commerce environment have facilitated data mining by combining mathematical and artifical intelligence alforithms with the rich data collection. While data mining is a the front-end and a technology to extract information from data, customer relationship management (CRM) is involved with making business decisions with this information. Bina Nusantara University 3

E-commerce has also brought to the forefront the issue of payoff as a consequence of consumer loyalty. Does the e-commerce channel amplify or erode consumer loyalty? Does the medium have anything at all to do with consumer loyalty? Bina Nusantara University 4

E-Loyalty: Your Payoff in Online Commerce In business-to-consumer (B2C) e-commerce, does a traditional virtue like loyalty still stand on the high pedestal in the online world? The unique economics of e-business make loyalty more important than ever. What are the metrics for loyalty? Bina Nusantara University 5

A Model For E-Loyalty Bina Nusantara University 6 Efficiency Time Ease of use Effort Value Price Quality Interaction Information Safety Load Time Novigation Satisfaction With Purchase Payoff = Loyalty Repeat customers Market share

Information technology in general has impacted businesses on any of the following metrics: –Productivity –Profitability –Consumer surplus In the case of electronic B2C commerce, the value to the customer may be derived from time savings, price, preference, and ease of transaction. Satistaction with purchases, experienced repeatedly, eventually leads to customer loyalty. Bina Nusantara University 7

Three factors contribute to satisfaction with the purchase: (1) the efficiency of the transaction as measured by metrics for ease of use, the effort required to search for the best product and complete the purchase, and the time involved in making a purchase (2) the value to the customer realized either as a better price or better quality, or both, of the product or services Bina Nusantara University 8

(3) the nature of the interaction that might largerly be a function of the design of the web sit. Customer loyalty is eventually what defines a sustained competitive advantage. Bina Nusantara University 9

The metrics for loyalty are increased market share, retention of customers, repeat purchases, and sales from retained customers versus new customers. Bina Nusantara University 10

E-Commerce Payoff Any technology can be viewed as yielding a payoff if it provides value. Value, in the electronic marketplace, can have varied connotations and oftentimes in ways that are very different from conventional marketplaces. Bina Nusantara University 11

5 Grid E-Commerce Value Time Distance or geography Relationships Interactions Product or services Bina Nusantara University 12

3 payoff criteria to provide value: Efficiency Effectiveness Strategic advantage Bina Nusantara University 13

EFFICIENCYEFFECTIVENESSINNOVATION/ STRATEGIC TIME More taks Less erro Number of clicks to access information Less load with a 24x7 service Enhancement customer satisfaction GEOGRAPHY Access to wider markets Search costs reduced with a single gateway access International sales International customers RELATIONSHIPS Time savings through use of intermediaries Cost saving Customer response to micro – marketing Customer retention by creating dependency to lock-in users INTERACTONS Product improvements resulting from user feedback Click stream Time COIN users PRODUCT/ SERVICE Through use of agents Better price Less time Enhancement customer satisfaction through online decision support tools New products, services Bina Nusantara University 14

Looking To The Future: Challenges in IT Payoff Assessment Digital dotcomes versus physical dotcom digital dotcoms are internet-based companies whose products or services are digintal in nature and therefore delivered over the internet physical dotcoms are companies whose products are physical but yet the company has a web-front for customers to buy products. Bina Nusantara University 15

IT capital (computer software, hardware, and networkin gequipment) contributed significantly to revenues and margins for digital dotcoms but not for physical dotcoms. Thus the physical dotcoms neet to work extra hard to translate IT investment into business results Bina Nusantara University 16

New Metrics –The e-commerce era has brought a plethora of new metrics. Some of these are a function of the conscious technology investment decisions by the company as well as the customer interaction with the company. –Examples include : Bandwith Traffic Number of hits Number of unique visitors Bina Nusantara University 17

Management of change –The challenge of implementing new technologies and managing this change has become an everyday reality in companies. –Change management skils coupled with objective metrics will help in the realization of payoff in this changing environment Bina Nusantara University 18

Balance of power –Electronic commerce has played the part of a disruptive technology on changing the balance of power in many business relationships Bina Nusantara University 19

Cascading effects –The most promising projections in terms of the use of e- commerce are in the area of business-to-business (B2B) commerce. –Form a payoff perspective, use of B2B offers numerous direct benefits such as increased efficiency and speed. –One of the challenge in B2B situation is to implment and evaluate metrics to measure forecast errors that might be reduced as a result of B2B commerce or work in process inventory that might be reduced due to more timely orders and supplies Bina Nusantara University 20

Value of collaboration –One of the paradoxes of electronic commerce is that one area that it has the biggest impact in is improving coordination, yet it is this coordination that has been the most difficult to evaluate. What were coordination costs before the advent of e-commerce? This is a difficult and challenging question and might be key to justifying the payoff from e-commerce. Bina Nusantara University 21