1. Website Marketing and Design Session 3 – Web Marketing Methods, eCommerce Business Models 1 Poitiers, September 23-27

2. Part 1 - Introduction to Ecommerce I Perry & W Robson 2 Topics Overview and Theories of Web Marketing eCommerce Biz Models B2C: eCommerce takes off Case Study: Auto Industry

3. Part 1 - Introduction to Ecommerce I Perry & W Robson 3 An Internet Framework The Web is fundamentally about individuals using a network to access digital products Marketing TechnologyEconomics Internet Marketing Digital Networked Individuals

4. Part 1 - Introduction to Ecommerce I Perry & W Robson 4 Marketing Evolves as Technology Changes Technological innovation brought about the factory system & enabled mass production –Marketing emphasis was on logistics & supply chain management Radio enabled national roll-out of brands –Marketing emphasis was on selling Television coincided with the product & brand management system of marketing Mainframe computers enabled new methods of segmentation & customer management The Internet enables mass customization

5. Part 1 - Introduction to Ecommerce I Perry & W Robson 5 Do You Yahoo? For 50% of US Web users: Yes!! A phenomenal eCommerce success story Yahoo! brand extensions provide value add for users –Yahoo! games –Yahoo! clubs –Yahoo! chat –Yahoo! auctions –Yahoo! Stores Yahoo! leverages its brand and ability to draw traffic to generate multiple revenue streams

6. Part 1 - Introduction to Ecommerce I Perry & W Robson 6 Most Popular Web Sites Yahoo! Leads Figure 5.1

7. Part 1 - Introduction to Ecommerce I Perry & W Robson 7 Yahoo! Brand Extensions The Success of the Yahoo! Brand Figure 5.2

8. Part 1 - Introduction to Ecommerce I Perry & W Robson 8 Web Benefits to Firms The range of Web benefits –Business models can be based on improvements in product or service –Business models can be based directly on generating revenue Let’s take a closer look at these broad classes of business models

9. Part 1 - Introduction to Ecommerce I Perry & W Robson 9 Sponsorship Alliances Banner advertising Prospect fees Sales commissions Revenue-Based Biz Models Use the Net to Make Money Provider Pays

10. Part 1 - Introduction to Ecommerce I Perry & W Robson 10 Sponsorship Alliances Banner advertising Prospect fees Sales commissions Product sales Pay-per-use Subscriptions Bundle sales Revenue-Based Biz Models Use the Net to Make Money Provider PaysCustomer Pays

11. Part 1 - Introduction to Ecommerce I Perry & W Robson 11 Closed Loop Marketing Marketing is closed loop when specific customer responses to specific marketing actions can be tracked –For example: if an online ad encourages Web site registration, the campaign is closed loop if users can be tracked from ad exposure to the decision to register Closed loop marketing leads to rapid learning –Marketers can experiment with prices, ad copy, and product features on selected samples of consumers

12. Part 1 - Introduction to Ecommerce I Perry & W Robson 12 The Impact of Closed Loop Marketing Marketers want two results from user responses –They want consumers to make a choice that leads to information improved customer satisfaction a transaction –Marketers want to learn about visitors to their site On the Internet Nobody Knows You’re A Dog…

13. Part 1 - Introduction to Ecommerce I Perry & W Robson 13 Web Chains A Web chain is a click sequence –Can be as short as a single click –Can be as long as all possible choices on a Web site Decision points = event nodes Ending point = result node Common Web chain starting points –Company homepage –Search engine or portal –Banner ads

14. Part 1 - Introduction to Ecommerce I Perry & W Robson 14 Web Chain of Events Figure 5.12 R1: Doesn’t Notice Ad = $0 benefit Offline Induced Buyer (OIB) R3: Offline Purchase = (Ad brand + Web Site brand + Offline profit) No Notice Rate (NNR) E1: Views Page with Paid Link (1-CTR-NNR) Click-through Rate (CTR) R2: Notices Ad but doesn’t click = Ad brand impact E2: Clicks Through to Company Web Site = Prospects BEGIN (1-PCR) Prospect Conversion Rate (PCR) E3: Views Web Site but Doesn’t Buy E4: Visits Web Site and Buys New Customer (1-RR) (1-OIB) R4: No Immediate Purchase = (Ad brand + Web Site brand impact) Repeat Buyer (RR) R5: New Customer = (Ad brand + Web Site brand + Online profit + Future lifetime value) E5: Loyal Customer END Offline Buy Rate (OBR)Online Only (1-OBR) R7: Only buy online = (Ad brand + Web Site brand + Online profit) R6: Would have bought offline anyway = (Ad brand + Web Site brand + Online profit – Offline profit)

15. Part 1 - Introduction to Ecommerce I Perry & W Robson 15 Evaluating Web Chains Enables marketers to evaluate a wide range of Web strategies and tactics Calculate –expected value of an impression –expected value of a prospect –expected value of a new customer –expected value of a repeat buyer

16. Part 1 - Introduction to Ecommerce I Perry & W Robson 16 Web Chain Benefits and Probabilities Five Main Benefits Occur in the Chain Online contribution: the incremental profit from an online sale Offline contribution: incremental profit from the sale of products through the standard channel Ad-brand impact: value to a visitor, who sees the ad but doesn’t click through Web site brand impact: value of a visit to the Web site that results in benefits, but not a sale Lifetime customer value: future value of profits from a new customer

17. Part 1 - Introduction to Ecommerce I Perry & W Robson 17 Evaluating Web Chains

18. Part 1 - Introduction to Ecommerce I Perry & W Robson 18 Cost and Performance Table 5.5 One of the best uses of Web chain analysis is to compare alternative methods of acquiring customers

19. Part 1 - Introduction to Ecommerce I Perry & W Robson 19 From Web Chains to Closed Loops There’s a strong connection between Web chains and closed-loop marketing A Web chain is closed loop if –the chain extends from the marketing offer to the desired marketing response –Each step is trackable The Internet can be used to close the loop on traditional media advertising if unique identifiers are included with the ad –Dell newspaper ads contain a unique code

20. Website Marketing and Design Session 4 – B2C eCommerce 1 Poitiers, September 23-27

21. Part 1 - Introduction to Ecommerce I Perry & W Robson 21 What is B2C? eCommerce Buying = combines ordering and paying online Example – A consumer orders an item of clothing on a web site and completes the entire transaction online Business-to-Consumer electronic commerce:

22. Part 1 - Introduction to Ecommerce I Perry & W Robson 22 B2C eCommerce Takes Off Consumer spending online is on the rise!

23. Part 1 - Introduction to Ecommerce I Perry & W Robson 23 B2C eCommerce Takes Off Breakdown of Online Consumer Spending (US) $13.5 - Researched online, ordered and paid for offline $10.8 – Ordered online, paid for offline $16.3 - Researched online, ordered and paid for offline $11.0 – Paid for online $4.7 – Ordered online, paid for offline BIG TICKET ITEMS (Cars, Refrigerators, etc) SMALL TICKET ITEMS (Clothing, Electronics, etc)

24. Part 1 - Introduction to Ecommerce I Perry & W Robson 24 B2C eCommerce Takes Off eCommerce Impact on Web Sites Majority of eCommerce Sites with One-Day Response Adding eCommerce raises the stakes eCommerce creates incentives to improve performance and customer responsiveness –E-mail response time is critical –Web-server performance is important eCommerce sites are most responsive

25. Part 1 - Introduction to Ecommerce I Perry & W Robson 25 B2C eCommerce Takes Off eCommerce creates strong incentives for companies to enhance their online use of personalization –Raises the value of users’ online experience –Improves customer loyalty –Allows for detailed information gathering The personalization/eCommerce link is especially strong for business-to-business marketing eCommerce Impact on Web Sites

26. Part 1 - Introduction to Ecommerce I Perry & W Robson 26 Consumer-to-Consumer Commerce Consumer-to-consumer sites must build trust –Systems that rate seller credibility –Verify identities of buyers and sellers –Insurance against fraud –Escrow accounts to ensure products are shipped –Bans on sellers who bid on their own products –Bans on buyers who win, but don’t complete the sale Successful auction sites blur the distinction between business and fun

27. Part 1 - Introduction to Ecommerce I Perry & W Robson 27 The Pace of eCommerce Regular lower prices –An online site can dramatically reduce selling costs for retailers –Competitive pressures keep prices low Figure 12.9 – Comparison of Bestseller Prices Saving Money: The Simplest Reason to Buy Online

28. Part 1 - Introduction to Ecommerce I Perry & W Robson 28 The Pace of eCommerce Sales tax is seldom charged on online purchases –Products delivered electronically - software downloads –When the merchant doesn’t have a physical presence in the state where the product is delivered Shipping costs vary –Consumers notice and react to the cost of shipping –Shipping to home addresses is expensive Package delivery companies are optimized for delivery to commercial addresses One large delivery to a retailer is replaced by many small deliveries Saving Money: The Simplest Reason to Buy Online

29. Part 1 - Introduction to Ecommerce I Perry & W Robson 29 The Pace of eCommerce Virtually unlimited shelf space 24/7 service Convenient for repeat purchases One-stop shopping Ability to comparison shop Table 12.6 Physical Retail Problems E-tailers Offer Assortment & Convenience

30. Part 1 - Introduction to Ecommerce I Perry & W Robson 30 The Pace of eCommerce Less developed due to technical issues such as slow consumer access speeds Exception is adult entertainment, which earned nearly $1 billion in 1998 Other entertainment forums include –auction sites –chat rooms –instant messaging –discussion groups Entertainment

31. Website Marketing and Design End of Session 3 – Break 1 Poitiers, September 23-27

32. Part 1 - Introduction to Ecommerce I Perry & W Robson 32 Payment Mechanisms Which Company Bears the Risk? Sponsorship Fixed Payment Banner Ads Impressions Prospect Fees Click Through Sales Commissions Purchase Risk Increases for the Web Site Being Paid Sponsorship least risky: fixed payment Banner Ads: payment depends on impressions Prospect Fees & Sales Commissions: depend on success of site and advertiser

33. Part 1 - Introduction to Ecommerce I Perry & W Robson 33 The Many Ways to Pay Online Figure 5.8

34. Part 1 - Introduction to Ecommerce I Perry & W Robson 34 Competing Against the Net Selective price discounts –Bricks and mortar merchants can offer discounts for products that can also be bought online Concentrating attention on late adopters of technology –Some consumers have a lot of fear, uncertainty and doubt about the online shopping experience –This slows their defection to new online outlets Retailer Responses to the eCommerce Challenge

35. Part 1 - Introduction to Ecommerce I Perry & W Robson 35 Competing Against the Net Creating and staging experiences Pine and Gilmore stress that the economy is evolving toward experienced-based value Retailers function less as sellers of products than as stagers of events Retailer Responses to the E-Commerce Challenge Stage Experiences Deliver Services Make Goods Extract Commodities MarketPremium Pricing Undifferentiated Differentiated Competitive Position

36. Part 1 - Introduction to Ecommerce I Perry & W Robson 36 Competing Against the Net Adopt the Internet to create a hybrid system Bricks and mortar retailers can move certain parts of their retailing function online Physical locations often a superior way to –Acquire customers –Set up customer relationships –Create a strong retail brand image The online presence –Drives business to the physical locations –Provides 24/7 convenience for loyal customers –Adds new functionality – gift registries and shopping services Retailer Responses to the E-Commerce Challenge: ‘Clicks and Mortar’

37. Part 1 - Introduction to Ecommerce I Perry & W Robson 37 Bargaining Power Determines Who Bears Risk Powerful sites shift risk to advertisers and demand sponsorships Powerful advertisers demand accountability and negotiate for prospect fees of a share of transaction revenue

38. Part 1 - Introduction to Ecommerce I Perry & W Robson 38 Selecting Specific EC Opportunities & Application Understand: –The possibilities of Ecommerce Map opportunities that match current competencies and markets –Many opportunities to create new products and services

39. Part 1 - Introduction to Ecommerce I Perry & W Robson 39 You Decide: ‘Pure Play’ vs. Bricks and Mortar Three dimensions –the product (service) sold [physical / digital]; –the process [physical / digital] –the delivery agent (or intermediary) [physical / digital] Traditional commerce –all dimensions are physical Pure EC –all dimensions are digital Partial EC –all other possibilities include a mix of digital and physical dimensions

40. Part 1 - Introduction to Ecommerce I Perry & W Robson 40 Consumer-to-Consumer Commerce Businesses deploy chat room technology –Enables consumers to interact directly with each other –Accelerates word of mouth –Facilitates consumer-to-consumer commerce eBay Yahoo! Auctions

41. Part 1 - Introduction to Ecommerce I Perry & W Robson 41 Existing Competitors Threat of New Entrants Threat of Substitute Products Power of Suppliers Power of Customers Competitor power axis Creation of Value chain power axis The Key to Success in eCommerce Control of the two power axes: battle for providing greatest value & best features, from customer perspective about building set of unique competencies & controlling bargaining power

42. Part 1 - Introduction to Ecommerce I Perry & W Robson 42 eCommerce Case Study This suggests that auto insurance, loans and leasing plans are highly desirable partners for both new and used car dealers

43. Part 1 - Introduction to Ecommerce I Perry & W Robson 43 eCommerce Case Study: The Automobile Industry The battle for customers takes place during: 1.Researching and selecting the vehicle 2.Finding a dealer and price 3.Choosing financing, insurance, warranty 4.Closing the deal New intermediaries complicate the split of profits between elements of the profit pool Example: Online car sales

44. Part 1 - Introduction to Ecommerce I Perry & W Robson 44 eCommerce Case Study Table 12.3: Steps for Online Auto Buying

45. Part 1 - Introduction to Ecommerce I Perry & W Robson 45 eCommerce Case Study Stage Service Providers Growth Drivers Consumer Participation (millions of households) 1998 2003 Table 12.3 continued

46. Website Marketing and Design End of Sessions 3-4: A Demain! 1 Poitiers, September 23-27