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From Commerce to From Commerce to E-CommerceE-Commerce

(and from Marketing to E- Marketing )(and from Marketing to E- Marketing )

E-Commerica 2005E-Commerica 2005

Dr. Efthymios ConstantinidesDr. Efthymios ConstantinidesAssistant Professor Assistant Professor

Faculty of Business, Public Administration Faculty of Business, Public Administration and Technology (BBT)and Technology (BBT)University of TwenteUniversity of Twente

e.constantinides@utwente.nle.constantinides@utwente.nl

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What’s so exciting about Internet?

Is E-Commerce really important?

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Fact 1: Internet=More Customer Fact 1: Internet=More Customer PowerPower

USUS Auto: 70% go to Internet and save $450 Travel: 2/3 use the Internet, 15% of tickets,

zero commission, lower rates (Travelocity, Expedia greater market capture than most airlines)

Over 2.000 travel agencies closed, airlines discontinued commissions to agents

Health: 80% search E-bay $ 34,2 bill (+44% over 2003)

11,1 bill used cars!!! Finance

– Stock trading, Insurance, mortgages, real estate

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NL Travel: 35% of vacations in 2004 booked

online 140 travel agencies out of business last

year Insurance: 60% use the Internet for

orientation, 10% of insurance contracts sold online

2004: 1,6 bln Euro online, 2005: (6 months) over 1 bln Euro online

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Why the Internet boosts Why the Internet boosts consumer power?consumer power?

Easy access to market information / transparency: savvy, information-driven consumers

More alternatives and choice

Easier transaction

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Fact 2:Fact 2: Traditional media power Traditional media power decreasesdecreases

US (2) Audiences ratings TV shows, prime TV

viewers down (50% since 1970 for the major channels)

Customers exposed to ads: 1/3 watch, 2/3 mute-switch-leave

Internet vs. TV: Internet users average about three hours a day working with the network, about 50 percent more time than the average television viewer watches TV.

Internet users watch about 20 minutes less TV than the average viewer.

10% of users prefer to miss TV than Internet

McKinsey: TV advertising in 2010: 35% as effective as in 1990

And Advertising costs increasing

Nederlanders zien slechts 18% van uitgezonden reclame 12 jan 2005

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6 Sept 2005

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Why is E-Commerce / Why is E-Commerce / E-Marketing important?E-Marketing important?

Revolution in almost all aspects of Marketing– New channel, new pricing options, individual

reach and promotions, new media communication

– Opportunities to find new product needs and launch new products

– Supports improved distribution and services

E-BusinessE-Business

E-Commerce E-Commerce

E-MarketingE-Marketing

Internet: the backboneInternet: the backbone

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E- BusinessE- Business

ERPERP

SCMSCM

PartnerPartnerAlliancesAlliances

E- CommerceE- Commerce

EmployeeEmployeeservicesservices

E- MarketingE- Marketing

E- ProcurementE- Procurement

E- LogisticsE- Logistics

KnowledgeKnowledgesharingsharing

E- FinanceE- Finance

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WWhhat is E-Commerce?at is E-Commerce?

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A collection of Web - based technologies, tools and business processes improving, supporting, supplementing or replacing traditional commercial practices

E. Constantinides

E-CommerceE-Commerce (today)(today)

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What Traditional Practices?What Traditional Practices? MARKETING RELATED (E-Marketing): Customer

Recruitment, Acquisition, Retention– Communication and interaction – Advertisement, Promotion, PR etc– Customer Data Collection, Direct Marketing– Market Research, R&D– Collaborative development of new products, services – Retailing - Selling, Invoicing, Payments, Delivery – Customer Service and CRM

PROCUREMENT (E-Procurement) SCM, LOGISTICS, Internet based EDI Online financial transactions (banking, investment,

insurances) etc

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More and more traditional firms adopt the Web as commercial strategy

Why– Traditional brick-and-mortar companies face

increasing pressures in a competitive marketing environment

– Internet: Major information source for consumer and professional buyer

A possible response is to introduce a variety of e-commerce initiatives that can improve

supply chain operation information raw materials purchase increase customer service open up markets to more customers

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Internet: An Economic, Internet: An Economic, Technological and Social Technological and Social

PhenomenonPhenomenon Online transactions revenues –

volume: (2010 10% of US retailing) Penetration rate:

1995 16 mil, today close to 1 bill users A new business environment Social effects and trends

E-Marketing and E-Marketing and the Web-Marketing Mixthe Web-Marketing Mix

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Marketing PlanningMarketing PlanningTraditional MarketingTraditional Marketing Virtual MarketingVirtual Marketing

??Product

Price

Promotion

Place

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4P Marketing Mix is unfit 4P Marketing Mix is unfit for E-Marketingfor E-Marketing

The 4Ps are not the critical factors. This because the Mix:- is focused on mass products / services - ignores customer needs, lacks interactivity - is tactical: lacks strategic dimensions- ignores the complexity of the online environment: you need more than the 4Ps to create and maintain a competitive proposition

Role of the 4Ps in E-Marketing: Role of the 4Ps in E-Marketing: elements of the Web Experienceelements of the Web Experience

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4S Web-Marketing mix4S Web-Marketing mix

Identifies the critical factors of the Online Marketing

Proposes an integrative approach for online marketing

Allows for:- Shorter planning periods and- “Flexible” strategy

Easy to conceptualize, remember,apply

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The Web - Marketing The Web - Marketing MixMix

Scope Site Synergy System

Source: E. Constantinides 1999

StrategicIssues

OperationalIssues

OrganizationalIssues

TechnologicalIssues

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Strategic and MarketingPlan

Definition of ordering and fulfilment

processes

Construction of Web frontand EDI interface

Construction of Communication interface

Identification of control processes of communication

interface

Identification of site control, support and maintenance

processes

Site testing

Site online

Typical stages of an E-Commerce ProjectTypical stages of an E-Commerce Project

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The Web - Marketing The Web - Marketing MixMix

Scope- Strategic Mission and Objectives

- Market Analysis• Competition Basis : Functionality, Reliability, Convenience, Price• Competitive analysis

- Potential Customers / Profiles:• motivation, behaviour, needs, goals, priorities, current way of fulfilling needs, customer value, Online segmentation? Technographics (Forrester), eTypes • Market Potential, Forecast, Trends

- Internal Analysis• Internal Resources, Processes, Values : Internet is sustaining or disruptive technology?

- Strategic Role • In relation to Resources, Processes and Values• Generic Roles: Informational, Promotional, Relational, Transactional, Educational etc. • Intranet, Extranet: possible added value for the organisation•Business model

Golden rule: Frequent Strategy Review

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Source: E. Constantinides

E*Trade - Amazon Strategic Decisions 1997-2001

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11

19

23

19

8

11

23

20

15

0

5

10

15

20

25

1997 1998 1999 2000 2001

Year

Num

ber o

f Str

ateg

ic D

ecis

ions

E*TradeAmazon

Source: : Constantinides E., 2004, Strategies for Surviving the Internet meltdown: The Case of Two Internet Incumbents, Management Decision Journal, vol 42, nr 1, pp 89-107

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Source: E. Constantinides

E*Trade - Amazon Strategic DecisionsPer Anshoff category

10

13

23

31

9

33

30

16

0

5

10

15

20

25

30

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Market Penetration Market Development Product Development Diversifi cation

Developm ent Strategy

Num

ber o

f dec

isio

ns 1

997-

2001 E*Trade

Amazon

Source: : Constantinides E., 2004, Strategies for Surviving the Internet meltdown: The Case of Two Internet Incumbents, Management Decision Journal, vol 42, nr 1, pp 89-107

30www.amazon.com131 product categories131 product categories

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The Web - Marketing The Web - Marketing MixMix

Scope SiteCustomer Oriented Content: Important questions to be asked:- What does the customer expect to find in my site?- Why the customer will make use of my site? - What could motivate the customer to come back to the site?Web Experience depends on a combination of factors affected by:• Domain Name, Design, Layout, Atmosphere • Simplicity, Functionality, Speed, • Findability, Navigation, Searchability (2005 research of Oneupweb:only one in eight Fortune 100

sites well optimized for search engines – 1of 11 last year, 1 of 25 in 2002)• Interactivity, Customisation• Service Online, User Feedback • Retention Strategy, Fresh Information, Fresh Features• Links• Privacy policy, customer protection• Perceived and actual security level• 4 Ps

Customer Oriented Positioning: Web Unique Selling Proposition

The Online Experience;Gold Rule: 8 seconds, 3-clicks

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Top 10 Retail Web Sites IntegratingOnline & In-Store Traffic, U.S. Home & Work, Winter 2003Retail Store Brands Index NumberCoach 2,707Neiman Marcus 1,862J. Crew 1,077Bloomingdale's 1,002Williams-Sonoma 956Pottery Barn 831Crate & Barrel 784Nordstrom 568Eddie Bauer 508Macys.com 476Source: Nielsen//NetRatings @Plan

Positive Web Experience drives more Positive Web Experience drives more Customers to physical outletsCustomers to physical outlets

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Main problem in creating Main problem in creating the right online the right online

experience:experience:Lack of knowledge on online consumer’s

and business customer’s behavior: Motivation Decision-making process Factors influencing the adoption of

products / services online

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62

30

61

2735

0

20

40

60

80

Number of references

Functionality /Usability

Functionality /Interactivity

Psychological/ Trust

Content/Aesthetics

Content /Marketing Mix

Web Experience: Main Building Elements

Source: Constantinides E., 2004, Influencing The Online Consumer’s Behavior: The Web Experience, Internet Research: Electronic Networking Applications and Policy, vol 14, nr 2, pp. 111-126

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FUNCTIONALITY FACTORS PSYCHOLOGICAL FACTORS

CONTENT FACTORS

USABILITY INTERACTIVITY TRUST AESTHETICSMARKETING MIX

         

ConvenienceCustomer service /after sales Transaction security Design

ProfessionalCommunication

Site navigationInteraction with company personnel Customer Data Misuse

Presentation Quality

Product assortment

Information architecture Customisation Customer Data Safety

Design elements

Reliability of Fulfilment process

Ordering/payment process Network Effects

Uncertainty reducing elements

Style / atmosphere Price

Search facilities and process  

Guarantees/return policies  

Attractive Promotions

Site speed      

Findability /accessibility        

The Web Experience Building Blocks The Web Experience Building Blocks

Source: Constantinides E., 2004, Influencing The Online Consumer’s Behavior: The Web Experience, Internet Research: Electronic Networking Applications and Policy, vol 14, nr 2, pp. 111-126

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The Web - Marketing The Web - Marketing MixMix

Scope Site Synergy

•Front OfficeIntegration with Marketing Activities- Advertisement- Promotions- Communication, PR- Distribution

•Back OfficeIntegration with Organisational Processes, Values- Production, Logistics - EDI, ECR- Delivery, Invoicing, Fulfilment- Total Quality Management, Control Systems- Legacy Integration: MIS, ERP Systems, Databases

• Third parties

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The Web - Marketing The Web - Marketing MixMix

Scope Site Synergy System

- Technology trends- Programming tools, browser independence- Content Management- Security level(s)- Payment systems- Hosting- Back ups- Interfacing- Traffic Data monitoring, Performance Analysis- System Administrator - Communication Interfaces- Site Support and Maintenance