Internet Marketing

Internet Marketing E-Commerce

E-Commerce & Web Sites • Raises site performance • More online performance, e.g., email • Web-server performance is critical – look for bottlenecks • Increases personalization • Biggest in B2B – seen as convenient, cost saving and good service • Consumers fear privacy and reselling of data • Personalization based on perceived lifetime value • Personalization/e-commerce virtuous circle

Expands Site Scope • Customer acquisition costs • E*Trade 1996-7 $50 per customer and in 1998 $275 per customer • 70% of first year revs on marketing, 30% in year two • Results of high acquisition costs • Searches for methods • Premium on customer loyalty building • Desire to expand a customer’s online business

Take a Dip – The Profit Pool • Goal – take advantage of customer traffic • Products and services that fit with current customer purchases – Amazon? • Profitable items • Alliance Partners • Judge by The Profit Pool • ID different products and calculate their revenue and profit share

Profit Pool Segments • Anchor services • Service providers at core of an e-commerce site • Extension services • Valuable partners with an anchor service • Neutral services • Components without high profits or customer contact frequency

Online Selling • Redraws connections between buyers and sellers • Complementary purchases • Consistent positioning • Complicates the split of profits between pool members • Worries about losing access to customers and high referral fees

E-Commerce Buying • Unique information source • To succeed as a retail tool • Price – monetary and non-monetary costs kept lower than traditional alternatives • Assortment – match buyer desires • Convenience – superior timing, location and buying process • Entertainment – more fun than traditional

Monetary Cost • Full online price = • [Online price * (1 + tax rate)] • + shipping cost • + shopping/purchasing costs • +extra cost if returns required

Regular Price + Tax • Lower regular prices • Book industry Amazon vs. Wal-Mart • Dangers of this strategy? • Offer lower prices on all items • Exchange rate • Taxes • Tough to avoid GST – How could you do it? • Most avoid PST by not having a physical presence • Consumers in high tax provinces shift behaviour • Dangers?

Shipping Cost • Categories of goods • Digital information goods – near 0 • Digital entertainment – transmission and data storage costs • Hard goods – weight, speed of delivery • Perishables – high • Costs affect consumer decisions • Problems of shipping to home addresses • FedEx vs. UPS – Who will win?

Assortment andConvenience • Problems with traditional stores • Limited assortment, hours and advice • Physical vs. virtual inventory • Easier for e-commerce firms to add SKU’s • Centralized inventory management • Tap into repeat purchases – B2B • One-stop shopping – Chemdex • Comparison shopping – software and agents

Entertainment • Less developed due to available technology • Adult entertainment leads the way

Distribution • One distribution system or two? • Channel conflict • Goal divergence • Objectives of manufacturer and channel partners differ • Responsibility disputes • Customer handling, territories, functions, technology • Differing perceptions of reality • Control of key customers • Exclusive distribution through corp. site or contractual agreement

Proper Distribution • Disintermediation • Dropping layers of distribution channel • Reintermediating • Adding levels, e.g. auto-locating services • Reorganization • Better product • Learning about customer wants and needs • Efficient system of customer contacts • Quick and cheap market assess

Channel Benefits • Build-to-Order • Dell’s success • Real-time marketing • “Personally customized goods or services continuously update themselves to continuously track changing customer needs, without intervention by corporate personnel, often without conscious or overt input from the customer.”

Internet Benefits • Link between customer and company exists • Details of purchase are automatically available • Timing of purchase is known • Trust is established • Lower vulnerability to poaching

Intermediaries • Benefits • Know consumers • Understand local markets • Carry broad product lines within a category • Carry multiple product lines • Requires fewer contacts • Cost differences between physical and online worlds • Cost of physical contact with customers

Data-Driven Intermediaries • Can collect more data on transaction history, preference measures and triggers • Incentives • Customer coalitions • Customers join intermediaries to protect privacy and share info • Agents – don’t lose control and get benefits of customization • Seller scope • Multipurpose vendor learns more about customers

E-Commerce Analysis • Industry Description • Traditional Selling Methods • Site and Service Comparison • Concept Description • Appropriate online • Customers online • Online value • Internet Marketing Plan • Basic Financial Analysis • Fundamental flaw • Gap or weakness • Launch

Competing Against The Net • E-commerce is just another adjustment • Responses • Selective price discounts • Concentrating on late adopters • Playing on fear, uncertainty and doubt • Creating and staging experiences • Bundle pleasant surroundings and experiences with products or services • Developing a hybrid system • Use physical locations to acquire customers, develop complex relationships and create a strong brand image

Egghead Goes Virtual • Closed its small, mall-based stores in 1998 • Capitalized on brand name • Avoids sales taxes except in Oregon • Increased number of SKU’s from 2000 • Focusing on closeout material, its brand name and buying experience • Downside – more expenditures on customer acquisition, marketing and alliances

E-Commerce:Ask Three Questions • How will e-commerce change our customer priorities? • How can we construct a business design to meet these priorities? • What investments do we need to make in technology?

Rules of E-Business • Technology is no longer the afterthought in forming business strategy but the cause and driver • Ability to streamline the structure, influence, and control of the flow of information is more powerful than moving and manufacturing physical products

Rules II • Inability to overthrow the dominant, outdated business design often leads to business failure • Goal of new business designs is to create flexible outsourcing that offloads costs and makes customers happy • E-commerce allows a company to become “the cheapest,” “most familiar,” or “the best”

Rules III • Use technology to innovate, entertain and enhance the entire purchase process • Business design increasingly uses reconfigurable e-business community models • Management must align strategies, processes and applications fast, right and at the same time.

E-Business Architecture • Vision • Strategy • Cross-functional processes • Integrated applications • IT Infrastructure • Danger IT people up ahead! • FedEx Experience – warehouse, fulfillment and shipping specialist for National Semiconductor • Combines IT with JIT

Execution Framework • Provide a structure for defining, communicating and monitoring new realities • Redesign core business processes to align with organizational vision • Enable IT infrastructure to support change, innovation and business goals

Need for Leadership • Status quo • Seek a safe haven by improving the existing product mix • Return to chaos, risk, and uncertainty of new product and services

Challenges FacingMarket Leaders • Manage top-line growth – acquisitions • Meet or exceed customer expectations • Customer driven – more responsive • Market evolution – more flexible • Implement partner/alliances – competitive • Integrate multiple channels and and multiple business units

Challenges II • Brand migration and product transition issues • Implement supply chain management – shorter lead times by forecasting and component availability • Change internally to gain a competitive advantage

Guides to the Future • Emphasis will shift to e-business from e-commerce to derive the greatest value • True competitive advantage will happen when new concepts, practices and performance are combined to improve company and customer bottom lines • Harness rising consumer demands, globalization and information/communication. • Manager’s future responsibilities will change but their organizational level probably won’t

Internet Marketing