e commerce
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e-commerce.pptTRANSCRIPT
Internet Marketing
E-Commerce
Topics
• E-commerce takes off• The pace of e-commerce• Distribution strategies• Competing against the Net
E-Commerce Takes Off
• E-Commerce Influence = the impact of the Net on purchases made entirely offline
Example: Consumer visits music web site to gather info on new releases, but visits retail store to make purchase
E-Commerce Influence, Ordering and Buying
E-Commerce Takes Off
• E-Commerce Ordering = capturing orders that are placed online but paid later via telephone or in-store
Example – A consumer purchases a new car through a web site, but drives to the dealer to pick it up
E-Commerce Influence, Ordering and Buying
E-Commerce Takes Off
• E-Commerce Buying = combines ordering and paying online
Example – A consumer orders an item of clothing on a web site and completes the entire transaction online.
E-Commerce Influence, Ordering and Buying
E-Commerce Takes OffConsumer spending online is on the
rise! 1997 (Billions) 1998 (Billions) Growth
Paid for online $5.1 $11.0 54%
Ordered online, paid for offl ine
$10.2 $15.5 34%
Offl ine orders influenced by
the Net $44.8 $50.8 12%
Total $60.1 $77.3 32%
Fig 12.3a
E-Commerce Takes OffBreakdown of 1998 Online Consumer
Spending$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 SMALL TICKET ITEMS
Fig 12.3b
E-Commerce Takes OffE-Commerce Impact on Web Sites
23% 25%
50%40%
54%20%
5%
4%32% 9%
10%
20%
4%
5%9%
10%30%
38%14% 23%37%
20%
4% 9% 5%
0%
20%
40%
60%
80%
100%
Brand Content Financial Travel Shopping
e-mail address notavailable
No response
3+ days
2 days
1 day
Figure 12.4 Majority of E-commerce Sites with One-Day
Response
• Adding e-commerce raises the stakes
• E-commerce creates incentives to improve performance and customer responsiveness– E-mail response time is
critical– Web-server performance
is important
• E-commerce sites are most responsive
E-Commerce Takes Off
• E-commerce 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/e-commerce link is especially strong for business-to-business marketing
E-Commerce Impact on Web Sites
E-Commerce Takes Off
• Total company purchases determines the amount of personalization Dell provides
• Greater personalization leads to even more purchases and a higher customer lifetime value
The Personalization/E-commerce Link
Figure 12.6: E-Commerce Is Reinforced by Personalization
Amountof
Personalization
E-CommerceActivity
E-Commerce Takes Off
• Acquisition costs have gotten higher– Pioneering sites like Amazon.com received massive
amounts of PR, which lowered their costs of acquisition– As competitors have entered the marketplace,
acquisition costs have climbed– Analysts recommend spending 70% of Year One revenues
and 30% of Year Two revenues on customer acquisition
• High acquisition costs lead to– A search for cheaper acquisition methods– A premium on building customer loyalty– A drive to expand the total amount of online business
done with a particular customer
E-Commerce Impact on Web Sites
E-Commerce Takes OffThe Profit Pool Concept
• Increasing the total amount of business done with a particular customer means that firms need to take advantage of opportunities to add products and services that fit well with current customer purchases and add profit to the firm
• Alliance partners can help to make this happen
• The profit pool is a useful tool to identify and evaluate potential online online partners
• A profit pool identifies the different products in an industry and calculates their industry share of revenue and their profitability
E-Commerce Takes Off3 Categories of profit pools
1. Anchor Services – Service providers that form the basis of an e-commerce Web site
2. Extension Services – Alliance partners with an anchor service
3. Neutral Services – Profit pool components without high profits or customer contact frequency
Desirable Features of Online E-Commerce Allies Anchor Service Extension Service
High customer acquisition cost Profitable pool component
Frequent customer content High profit/revenue ratio
Strong positioning Consistent position to anchor
Trusted Effective, reliable
Tab
le
12.1
E-Commerce Takes OffThis
suggests that auto insurance, loans and
leasing plans are
highly desirable partners for both new and used car dealersFigure 12.7
E-Commerce Takes Off
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
E-Commerce Takes Off
S tage S ervice Providers Growth Dr ivers
Consumer Par t icipat ion (millions of households)
1998 2003
1. R esear ch and selec t veh ic le
A ut oS it e Car and D r iver Car Pr ices .com Consumer R epor t s E dmund ’s I nt el l iChoice J .D . Power K elley B lue B ook M anuf ac t ur er s Y ahoo! A ut os
I nc r ease in online households
E asy access t o deep pr oduc t inf or mat ion f r om t r ust ed b r ands
Power f ul wor d of mout h
2 .0 7 .9
2 . F ind a dealer and pr ice
A ut o- B y- T el.com A ut oConnec t A ut oV ant age A ut oweb .com Car Point Car s .com D ealer s M anuf ac t ur er s Pr iceline.com S t oneage
N o- haggle pr ic ing D ealer s h ir e I nt er net -
f ocused salespeople D ealer s est ab lish and
impr ove web s it es D ealer s set up t wo- way
e- mail
0 .8 5 .2
Table 12.3: Steps for Online Auto Buying
E-Commerce Takes Off
Stage Service Providers Growth Drivers
Consumer Participation (millions of
households) 1998 2003
3. Choose financing, insurance and warranty
Financing CarFinance.com Ford Credit GMAC Lending Tree Insurance GEICO Direct InsWeb Progressive Warranty Warranty Dir. Warranty Gold
Increased comfort with internet transaction security
Technology cooperation between banks and dealers
Dealers accept third-party financing
Banks and insurers offer incentives to go online
0.0 1.2
4. Close the deal
Saturn/Daewoo Dealer networks Luxury brands Online buying services
Higher quality vehicles easy to buy without a test drive
Money-back guarantees and extended warranties
Fixed pricing allows dealers to close sales online
0.0 0.5*
Number rounded
up
Table 12.3 continued
The Pace of E-Commerce
• Web sites provide customers with information that’s difficult and expensive to get any other way
• Customers easily obtain information about– companies– products– services
• The Net has provided something new and valuable
E-Commerce Buying
The Pace of E-CommerceFor e-commerce to continue to grow as
quickly as forecasters expect, online selling must excel on the fundamentals that drive
buyersPrice Online buying is
cheaper than traditional methods
Assortment The range of products better matches buyer desires
Convenience The timing, location and buying process are superior
Entertainment Buying online is more fun than alternatives
The Pace of E-Commerce
• Regular lower prices– An online site can
dramatically reduce selling costs for retailers
– Competitive pressures keep prices low
$0
$5
$10
$15
$20
$25
$30
$35
A Man in Full
Wolf e
Sugar Busters
Steward
I nto Thin Air
Krakauer
Memoirs of a
Geisha Golden
List Amazon.com Barnes&Noble.com
Bestsellers For Less Wal-mart.com Shopping.com
Figure 12.9 – Comparison of Bestseller Prices
Saving Money: The Simplest Reason to Buy Online
The Pace of E-Commerce
• 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
The Pace of E-Commerce
• Virtually unlimited shelf space• 24/7 service• Convenient for repeat purchases• One-stop shopping• Ability to comparison shop
Top Reason Cited for Retail Store Dissatisfaction, Christmas 1998
1. Can’t find a salesperson 26%
2. Unknowledgeable staff 18%
3. Parking problems 17%
4. Waiting in lines 14%
5. I nsufficient selection 13%
6. Crowded merchandise 7%
7. Unfriendly staff 7%
8. Difficulty finding things 7%
9. I nconvenient location 5%
10. Hours not convenient 2%
Table 12.6
Physical Retail Problems
E-tailers Offer Assortment & Convenience
The Pace of E-Commerce
• 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
Distribution Strategies
Figure 12.13
Alternative Channel Responses
Channel Division
Electronic
CommercePhysical
Distribution
Manufacturer
DirectCybermediary
Existing
Retailers
Online
Traditional
Retailers
Experience
Economy
Channel Structure Options
• Shift sales entirely to manufacturer direct (Dell, Cisco)
• Use existing retailers and their web sites (autos, perfume)
Distribution Strategies
• Three sources of channel conflict
1. Goal divergence – objectives of manufacturer or service provider differ
2. Responsibility disputes – pertain to customer handling, territorial assignments, functions to be served and technology to be used
3. Differing perceptions of reality – actions may be misconstrued and lead to conflict
Channel ConflictTraditional distribution channels are
threatened by online commerce
Distribution StrategiesFigure 12.14 Likelihood of Channel
Conflict
12.7%
I ndustrial Manuf acturers
I ndustrial Customers
Manuf acturer's
Representative
I ndustrial
Distributor
Manuf acturer's
Sales Branches
I ndustrial
Distributor
Manuf acturer's
Sales Branches
Manuf acturer's
Representative
I ndustrial
DistributorDirect
Sales
Low
16.8%
3.6% 48.7%
8.6%
9.6%
Distribution StrategiesE-Commerce and the Proper Distribution
System• Disintermediation occurs when
layers of a distribution channel are dropped
Example – online brokerages substituting for stock brokers• Reintermediation occurs when
layers of a distribution channel are added
Example – services such as auto-locating that combine multi-vendor information and comparison shopping
Distribution StrategiesE-Commerce and the Proper Distribution
System• Build-to-Order
– Direct selling enables mass customization
– Allows companies to manufacture unique products quickly and cost effectively
– Lowers the cost of holding inventory
Distribution StrategiesReal-Time Marketing
• Personally customized goods or services continuously update themselves – Continuously track changing
customer needs– Without intervention by corporate
personnel– Often without conscious or overt
input from the customer
• Requires direct sales and direct distribution
Distribution Strategies
However, intermediaries reduce the total number of contacts a firm has
Channel Contacts and Learning
• Advantages of using intermediaries
– They know more about customers
– They have greater knowledge of local markets
– They carry a broader product line within a category
– They carry multiple product categories
Distribution StrategiesData-Driven Intermediaries
• Advantages of using intermediaries– They can build a profile of customer choices
based on a much wider array of business than a direct seller would acquire
• Incentives for using intermediaries– Customer coalitions – customers join
intermediaries that protect their privacy while sharing appropriate knowledge to vendors
– Seller scope – a multi-product vendor can learn much more about customers and use this info across product categories
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 E-Commerce Challenge
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
Market PremiumPricing
Un
diff
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nti
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iffere
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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