1. Revenue Models
4. E-Business

2. Web business revenue-generating models
Web catalog
Digital content
Advertising-supported
Advertising-subscription mixed
Fee-based
Same revenue model for both B2B/B2C sales

3. Web Catalog Revenue Models Brand image? Traditional Model
Printed information mailed to prospective buyers
Orders placed by mail or toll-free telephone number
Expands traditional model
Replaces or supplements print catalogs
Offers flexibility
Orders placed through Web site or telephone
Payments made though Web site, telephone, or mail
Yet another sales outlet!
Adapted from mail-order (catalog) model Can combine marketing channels

4. Web Catalog ... Revenue Models Books, music, and videos
Amazon.com- Started … Evolved
Web-only- online music, book
Luxury goods
Difficult to sell online
E.g., Vera Wang and Versace - Web sites provide information; Heavy use of graphics and animation
Combining marketing channels: Two retailer examples

5. Web Catalog ... Clothing retailers
Revenue Models
Web Catalog ... Clothing retailers
Display clothing photos categorized by type- Prices, sizes, colors, tailoring ...
Lands’ End
Online text chat and call-back feature
push Web pages to customer’s browser
Personal shopper agent
Learns preferences and makes suggestions
My Virtual Model (customers try clothes)
Problem: varying computer monitor color settings
Solution: send fabric swatch on request
Solution: offer generous return policies x

6. Digital Content Subscription
Revenue Models
Digital Content Subscription
Firms owning written information or rights
highly efficient distribution mechanism
subscriptions for access to information
ProQuest (digital publications), Wall Street Journal ... x

7. Advertising Revenue Models Network/Internet television
measuring/charging visitor/views
# of visitors, # of unique visitors, # of click- throughs
Stickiness
Keeping visitors at site and attracting repeat visitors
Exposed to more advertising in a sticky site
obtaining large advertiser interest
Requires demographic information collection

8. FIGURE 4-2 Three strategies for an advertising-supported revenue model
Can obtain large advertiser interest by:
Using a specialized information Web site
Draw a specialized audience certain advertisers want to reach
FIGURE 4-2 Three strategies for an advertising-supported revenue model 8 8

9. Advertising ... Revenue Models Web portals (portal)
A launching point- Web directories, Yahoo!
search term triggered advertising!
General interest strategy- Excite, Google, Bing
Specific interest strategy-C-NET
Advertisers pay more!

10. Advertising ... Revenue Models Newspaper and magazine publishers
Targeted classified advertising sites
higher rates than general advertising?
Original version: Newspaper classified advertising
Growth of classified advertising Web sites
Very bad for newspapers? E.g.: craigslist
Web employment advertising
Most successful targeted classified advertising category
Examples: CareerBuilder.com, bdjobs.com ...

11. Advertising-Subscription Mixed
Revenue Models
Advertising-Subscription Mixed
Subscribers pay fee and accept advertising
Less advertising …
Web sites offer different degrees of success
The New York Times- Advertising
The Wall Street Journal- Subscription revenue weighted more heavily
ESPN
Leverages brand name, cable interface
Sells advertising, offers free information x

12. Revenue Models
FIGURE 4-3 Revenue models used by online editions of newspapers and magazines
E- Business, Ninth Edition 12 12

13. Revenue Models Fee-for-Transaction
Service fee charged- Based on transaction ...
Travel agency
Web-based travel agencies are new entrants
Travelocity, Expedia, Hotels.com,
Also generate advertising revenue
Specialized travel agents (cruises, hotels)
Insurance brokers
Quotes directly to public (1996)- Independent insurance agents: disintermediated
Insurance policy comparisons, sales sites
Provides quotes for competitors’ products too

14. Revenue Models

15. Revenue Models Fee-for-Transaction ...
Online banking and financial services
No physical product; Easy to offer on Web
Trust and reliability of financial institution?
Strategy
Use existing bank’s identification and reputation
Start online bank not affiliated with existing bank
Use different name?
Barriers preventing a more rapid rate of growth
Lack of bill presentment features
Lack of account aggregation tools

16. Revenue Models Fee-for-Transaction ...
Online games - Sales revenue source
Advertising (older concept), pay-to-play for premium games, subscription fees
Physicians’ online consultations
For ongoing, established relationship patients

17. Free for Many, Fee for a Few
Revenue Models
Free for Many, Fee for a Few
Economics of manufacturing is different for physical and digital products. This leads to a different revenue model
Offer basic product to many for free
Charge a fee to some for differentiated products
Examples: Google Premium Services!
Free+mium

18. Strategy Managing Companies must adapt to revenue model
or went out of business
Some e-commerce Web sites needed years to grow large enough to become profitable (CNN and ESPN)
Due to lengthy unprofitable growth phases
Management Issues
Web revenue models implementation issues
Dealing with the issues x

19. Strategy- Channel conflict (cannibalization)
Managing
Strategy- Channel conflict (cannibalization)
Web sales/activities interfere with existing
Consider
Web sites no longer sell products
Sites now provide product, retail distributor information
Online purchases returnable at retail stores
Required compensation and bonus plans adjustments to support Web site
Channel Cooperation made it successful

20. Strategy Managing Strategic alliance
Amazon.com joined with Target, ToysRUs
ToysRUs and Amazon suing each other
Bangladesh?

21. Effective Web Presence
Organization’s presence
Public image conveyed to stakeholders- Customers, suppliers, employees, stockholders, neighbors, general public
Effective Web presence
Critical even for smallest and newest Web operating firms

22. Web business site objectives
Web Presence
Web business site objectives
Attracting Web site visitors
Keeping visitors to stay and explore
Convincing visitors to follow site’s links to obtain information
Creating an impression consistent with the organization’s desired image
Building a trusting relationship with visitors
Reinforcing positive images about the organization
Encouraging visitors to return to the site

23. Making Web presence consistent with brand image
Coca Cola Web site pages
Usually include trusted corporate image (Coke bottle)
Image: traditional position as a trusted classic
Pepsi Web site pages
Usually filled with hyperlinks to activities and product-related promotions
Image: upstart product favored by younger generation

24. Web Site Usability Web Presence Current Web presences
Few businesses accomplish all goals
Most fail to provide visitors sufficient interactive contact opportunities
Improving Web presence
Make site accessible to more people
Make site easier to use
Make site encourage visitors’ trust
Make site develop feelings of loyalty toward the organization

25. Trust and Loyalty Web Presence Creates relationship value
Good service leads to seller trust
Delivery, order handling, help selecting product, after-sale support
Satisfactory service builds customer loyalty
Customer service in electronic commerce sites
Problem
Lack integration between call centers and Web sites
Poor responsiveness

26. Benchmarking (Control)
Web Presence
Benchmarking (Control)
Review e-commerce Web sites for
Usability, customer service, other factors
Expert Support
Sell the gathered information directly to the companies operating the Web sites
Include suggestions for improvements
BizRate.com posts ratings
Provides comparison shopping service
Compiles ratings by conducting surveys of sites’ customers

27. Usability Testing Web Presence Helps meet Web site goals
Avoids Web site frustration
Customers leave site without buying anything
Simple site usability changes
Include telephone contact information
Staff a call center
Learn about visitor needs by conducting focus groups
Usability testing cost
Low compared to Web site design costs
Usability testing methods

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