global innovation management internet marketing in context

Global Innovation Management

Internet Marketing in Context


Markets & Customers: The Sales Cycle

• Target the market

• Create an awareness of the company's product or service– Q: What substitutes exist in the market?

• Develop a customer's interest in the product (or service) – Q: How do you motivate customer purchases?

• Educate the market about the product– Q:How it is used, how the customer will benefit?

• Close: Make the sale• Fulfill: Deliver the product• After-Market Service: Service, technical support,

warranty service and follow-up


disintermediation

Computer dealers

Automobile dealers

Yellow pages

Newspapers

Realtors

Manufacturers &

Merchants

Consumers


disintermediation

Computer dealers

Automobile dealers

Yellow pages

Newspapers

Manufacturers &

Merchants

Consumers


disintermediation

Computer dealers

Automobile dealers

Yellow pagesManufacturers

& Merchants

Consumers


disintermediation

Computer dealers

Automobile dealers

Manufacturers &

Merchants

Consumers


disintermediation

Computer dealers

Manufacturers &

Merchants

Consumers


disintermediation

Manufacturers &

Merchants

Consumers


disintermediation

ConsumersManufacturers

& Merchants

Web Sites


Re-intermediationism

ConsumersManufacturers

& Merchants

Web Sites

Integrator Sites

Price Search

Affiliate Programs

Networks


Market Models

• What market models from existing industries can provide guidance in investment in electronic markets, pricing of services, and delivery of "products"?

• At least three groups have an interest in market structure

– The market owner-managers– The buyers, and – The sellers


Matching Producers with Consumers

• Retail markets with consumer "price-taking"– The "retail" format is not optimal for electronic

commerce

• English (or progressive) auction market • Second-price sealed-bid auction market • First-price sealed-bid auction market • Dutch auction market



• Matching a buyer and a seller at a market price is complex

• Markets do not mystically clear at an equilibrium price under the guidance of an invisible hand

• ...matching buyer and seller at suitable transaction terms requires specific market mechanisms

• Each of these mechanisms has distinct

advantages



• Retail markets with consumer "price-taking"• In grocery stores, discount chains and so

forth, non-negotiable prices are marked on the goods for sale

• ...and consumers have the option of either taking the price as given, or not buying the product.

• Obviously, these prices cannot be set at random, since customers often have the choice of buying the same or similar products at a competitors


Auction Matching Mechanisms

• English (or progressive) auction market • Bids are freely made and announced publicly

until no purchaser wishes to make any further bid

• A utility maximizing bidder participates if and only if he can win the auction

• ...with a bid that is less than his reservation value for the good

• ... and thus drops out only if the bid "on the floor" equals or exceeds his reservation value


Second-price sealed-bid auction market

• Bids are not public, but sealed• The good is awarded to the highest bidder• ... but on the basis of the price set by the

second highest bidder


Matching Mechanisms

• First-price sealed-bid auction market • Bids are not public, but sealed• The good is awarded to the highest bidder at

the highest bid price.


Seven Main e-Marketing Models

Where competition takes place today


Value and Structure of e-Marketing(summary is posted to Blackboard)

P o te ntia l P ro fita b ility

Self-Organizing H

ierarchical

D is trib u tio nN e tw o rk

e -C a ta lo g

W e b 2 .0A llia nc e

O p e n S o u rc eA go ra

(M a rk e t)

e -T a ilo rA ggre ga to r

V a lu e C ha inInte gra to r


Online Catalogue

• Online catalogues – originally called Internet shopping malls– first Internet business models to gain widespread

attention; – they are also the simplest to implement.

• Post information in traditional mail-order catalogues to Web pages, – adding some provision for completing the purchase on-

line, such as a shopping cart, and checkout. • The primary value provided by an online

catalogue – the enormous potential selection of inventory that is

available. – This selection is often several orders of magnitude larger

than in physical stores, – a prospect made possible by low inventory acquisition

and carrying costs.


e-Tailer• e-tailers are value-adding intermediaries between producers

and customers, – taking responsibility for value selection and fulfillment,

pricing, and market segmentation.

• The major value proposition of this model is the vast reduction in inventory carrying costs, – in theory, e-tailers can often simply take an order, and

let someone else fulfill that order by shipping the inventory.

– Even payments processing may be outsourced to a bank.

• The primary value provided by an e-tailer is customer management – this is translated into much more efficient inventory

selection and display than can be achieved by ‘bricks and mortar’ retailers.

• As with online catalogues, the inventory selection is often several orders of magnitude larger than in physical stores, a prospect made possible by low inventory carrying costs.


Business Models Aggregator (e-Tailor)

P ro d u cer

P ro d u cer

P ro d u cer

A ggregat o r

C u s to m er

C u s to m er

C u s to m er

Ag o r a Allian c e

Ag g r eg a tio n Valu e C h ain

D is tr ib u tiv eN etw o r k

Hier ar c h ic a l

S e lf -O r g an iz in g

C o n tr o l

v a lu e in teg r a tio nL o w Hig h


Exchange

• An exchange facilitates the trading of information, goods, and services between buyers and sellers.

• Prices are "discovered" through real-time, on-the-spot negotiations,

• whether through one-to-one haggling or through multi-party auctions and exchanges.

• Internet exchanges are typically modeled on physical auctions • either open outcry, pit auctions with one seller and many

buyers, similar to those used in the trade of commodities; or • double auction markets, with many buyers and sellers, such as

those used for higher transaction volume markets for corporate stocks. Where pit auctions are often used to sell commodities.

• Rising price bids will be used in most cases; – but where goods are perishable such as fish or flowers, a declining price

‘Dutch’ auction (after the Holland flower markets) is used to speed up bidding.


Value Chain Integrator • Manages a large number of separately

owned businesses to create the cost savings and purchasing power of a traditional vertically integrated industrial firm, – but with the scalability, flexibility and

speed of response to new market challenges that are the hallmark of much smaller firms.

• Primary assets are – a large customer base – developed marketing channels

(especially Internet based), – good reputation and brand awareness.


Value Chain Integrator

• Compete on two value propositions:• Customer relationship management:

– Integrators generally need a dominant position in whichever market they intend to compete, because the assurance of sales will be necessary to encourage suppliers and developers to work with the integrator to meet their objectives at the lowest possible cost.

• Vendor management: – Integrators need sophisticated management systems to

lay out objectives, budgets and time schedules, and keep them updated for a variety of outside vendors.

– Often these involve very highly automated supply-chain logistics system, enterprise relationship management systems and customer relationship management systems operating on a common Integrator defined


Business ModelsValue Chain Integrator

Uses both Electronic and Logistic Networks

I n teg r a to r

P r o d u c er s

C u s to m er s

Ag o r a Allian c e



Hier ar c h ic a l


C o n tr o l



Open Source Alliance• Open Source business models are perhaps the most puzzling of

Internet enabled business models, • because of the difficulty in articulating the model’s value

proposition (which varies with the business) and • its revenue stream (which need not exist at all).

• Open Source projects are virtual networks of prosumers (individuals or firms that are both consumers and producers) centered on a particular project mission.

• Open Source businesses offer four value propositions:– Reputation building for the contributors– Market size is assured because the producers will be the

consumers.– 'Organic' contribution of producer services to the achievement

of a common goal (often a product). Customization of a complex product for the price of a small contribution (the customized services or code)

– Control (at the margin) over design of the product. Because the producers are the consumers, their contributions determine their own satisfaction.


Agora & Alliance

Bu y er

Bu y er

Bu y er

Bu y er

S e lle r

S e lle r

S e lle rS e lle r

P r ic e D isc o v e r yM e c h a n ism

Prosumer

Prosumer

Prosumer

Prosumer

Value Space

Ag o r a Allian c e



Hier ar c h ic a l


C o n tr o l



Infrastructure (Distributive Network)

• Distributive Network Infrastructure models are not really new, but have grown in sophistication and variety with the rise in use of the Internet. – Railroads, electric power and canals in the past were network

infrastructure industries that facilitated transport between a huge and variable set of geographical locations.

• The value generated by Distributive Network Infrastructure depends on whether traffic flows one way or two. – One-way traffic implies the delivery of a product, like cable TV,

electricity or gas– Two-way traffic implies communication between locations on

the network• Distributive Network Infrastructure models offer two value

propositions:– Network effects: Economies of production scale as the network

size grows.– Search, access and communication for people, data, and

services as the network size grows.


Social Network Platform (Web 2.0)

• Social network platforms provide a data-centric platform where stakeholder interactions generates content that is actively distributed, managed and analyzed by the business. – The key competence in social network platforms applications is

the management of databases updated from many disparate sources.

– Social network platforms as an emerging business model were promoted from 2005 onward by O'Reilly Media under the banner of Web 2.0, and have comprised the most important developments in Internet business models over the past two years. .

• Some of the business models enhance their value by embracing social networking. – eBay's adds value through the collective activity of all its

users, as they rate the social activity of others that they trade with, and as they put up for sale many items that wouldn’t be seen elsewhere on the Internet.

– Amazon sells the same products as competitors, but engages their customers to write an unparalleled number of user reviews – aftermarket feedback on the precise reasons that I might or might not like a product.


Sources of Competitive Advantage in e-Markets


Two Questions

• How do low-cost and differentiated products come about?

• Why is it that some firms can offer them better than others?

W h at?

How?

When?

Where?

Who

?

W h y ?


The Value Map

• Firms create that deliver low-cost or differentiated products– By performing the activities – Of their value configuration

– (i.e., value chain, value network, value shop, profit chain)

• To perform these activities– A firm needs resources (assets):

• Manpower, money, machines, methods, materials

• Plants, equipment, patents, scientists, brand name recognition, geographic location, client relations, distribution channels, trade secrets


Competences

• You best • (perhaps your only) • opportunities to compete are

– Where Product Market Needs– Cross with Competences

Y o u rC o m p eten ces

P ro d u ct M a rk etO p p o r tu n ities

C o m pe ti to r A'sC o m pe te nc e s

C o m pe ti to r B 'sC o m pe te nc e s

C o m pe ti to r C 'sC o m pe te nc e s

Yo u r C o m p eten c e


You Convince Competitors and Financiers By …

• Proving that your ideas can perform on Key Metrics (e.g., Profit)» Show me the money!

• This raises the question:– “What are the important Metrics?”

• The answer is complex … and is not necessarily “Profit”• Accounting metrics like Profit

– Measure the Past• Competitors and Financiers are interested in your future!

– Future Profits, Revenues, etc. are Unknown

• Thus Other Measures both needed and More Important than Profit!

global innovation management internet marketing in context

Documents

market price

specific market mechanismseach

equilibrium price

product aftermarket

consumersretail markets

electronic markets

warranty service

service q