Chapter 3

1. Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence

2. The Web Catalog Model • The Web catalog model is a revenue model of selling goods and services on the Web that is based on the mail order catalog revenue model. • In the Web catalog model, a Web site replaces or supplements print catalog distribution with information on its Web site.

3. Businesses Employing the Web Catalog Model • Computer manufacturers, for example Dell and Gateway • Clothing retailers • Flowers and gifts • General discounters • Many of the most successful Web catalog businesses are firms that were in the mail order business and have simply expanded their operations to the Web.

4. Luxury Goods • For many types of products, people are still unwilling to buy through a Web site. • For example, luxury goods and high fashion items. • The Web sites of Vera Wang and Versace are not designed to generate income but to provide information to customers who would then visit the physical store. • Evian is another site geared towards affluent customers.

5. Books, Music, and Videos • Amazon.com is a hugely successful business using the Web catalog model for many reasons: • There are over 4 million books in print throughout the world, but no physical store could hold them • Books and videos are small-ticket items people are willing to buy without inspection • Amazon’s success spurred other book and music sellers to undertake e-commerce. For example: • Barnesandnoble.com, towerrecords.com

6. Digital Content Revenue Models • Firms that own intellectual property have embraced the Web as a new and highly efficient distribution mechanism. • LexisNexis is an online service that offers a variety of legal, corporate, government, etc. information. • ProQuest is a Web site that sells digital copies of published documents. • The ACM Digital Library offers subscriptions to electronic versions of its journals to its members and to libraries.

7. Advertising-Supported Model • The advertising-supported business model is the one used by network television in the U.S. • The success of Web advertising has been hampered by two major problems: • No consensus has emerged on how to measure and charge for site visitor views. • Very few Web sites have sufficient numbers of visitors to interest large advertisers.

8. Advertising-Supported Model • Web Portals • Only a few general-interest sites have sufficient traffic to be profitable based on advertising revenue alone. • Newspaper publishers • It is still unclear whether advertising helps or hurts the newspaper’s business as a whole. • Target Classified Advertisers • Employment and used-vehicle sites are successful examples of the advertising-supported revenue model.

9. Advertising-Subscription Mixed Model • In this mixed model, subscribers pay a fee and accept some level of advertising. • The New York Times and The Wall Street Journal use a mixed advertising-subscription model. • Business Week offers a variation on the mixed model theme; it offers some free content but requires a subscription to access the entire site. • ESPN sells advertising and offers a vast amount of free information, but fans can subscribe to its Insider service.

10. Fee-for-Transaction Models • The travel agency business model involves receiving a fee for facilitating a transaction. • A number of online travel agencies began doing business on the Web. • Stock brokerage firms use a fee-for-transaction model. They charge their customers a commission for each trade executed.

11. Fee-for-Transaction Models • Event Tickets • The Web offers event-promoters an ability to sell tickets from one virtual location to customers practically anywhere in the world. • Real estate and mortgage loan brokers • Online real estate brokers provide all of the services that a traditional broker might provide. • Online banking and financial services • The greatest concerns that most people have when considering moving financial transactions to the Web are security and reliability.

12. Fee-for-Services Models • The fee in this model is based on the value of the service provided. • These are neither broker services nor based on the number or size of transactions processed.Online games • Many online games sites offer premium games. • Site visitors must pay to play these games. • Concerts and films • As more households obtain broadband access to the Internet, companies will provide streaming video of concerts and films to paying customers. • Professional services • State laws have been one of the main forces preventing U.S. professionals from extending their practices to the Web.

13. Multiple Transitions Encyclopedia Britannica • Print publisher to Advertising-Supported model to Advertising-Subscription Mixed Model

14. Revenue Strategy Issues • Channel conflict – when web sites compete with existing parts of organisation • Cannibalisation – when customers are “churned” rather than the web attracting new customers • Problem: • Channel conflict or cannibalization can occur when sales activity on a company’s website interferes with existing sales channels. • Solution: • Web sites provide product information but directs customers to online and physical stores where goods can be purchased.

15. Strategic Alliances

16. Identifying Web Presence Goals • Businesses always create a presence in the physical world by building stores and office buildings. • On the Web, businesses have the luxury of intentionally creating a space that creates a distinctive presence. • A Web site can perform many image-creation tasks very effectively, including: • Serving as a sales brochure • Serving as a product showroom • Showing a financial report • Posting an employment ad • Serving as a customer contact point

17. Making Web Presence Consistent with Brand Image • Different firms, even those in the same industry, might establish different Web presence goals. • Coca Cola and Pepsi are two companies that have developed strong brand images and are in the same business, but have developed different Web presences. • The Web presence conveys the image the company wants to project.

18. Achieving Web Presence Goals • An effective site is one that creates an attractive presence that meets the objectives of the business or other organization. • Possible objectives include: • attracting visitors to the Web site • making the site interesting enough that visitors stay and explore • convincing visitors to follow the site’s links • creating an impression of corporate image • building a trusting relationship with visitors • reinforcing positive images of the organization • encouraging visitors to return to the site

19. The Toyota Site • The Toyota site is a good example of an effective Web presence. • The site provides: • a product showroom feature • links to detailed information about each product line • links to dealers • links to information about the company

20. The Toyota Site

21. Not-for-Profit Organizations • A key goal for many not-for-profit organizations is information dissemination. • The combination of information dissemination and a two-way contact channel is a key element in any Web site. • The American Civil Liberties Union and American Red Cross have created effective Web presences. • Political parties and museums also use Web sites for their image presences.

22. How the Web is Different • When firms started creating Web sites in the mid 1990s, they often built simple sites that conveyed basic information about their business. • The failure to understand how the Web is different from other presence-building media is one reason that businesses fail to achieve their Web objectives. • Firms must use the Web’s capability for two-way, meaningful communication with their customers.

23. Meeting the Needs of Web Site Visitors • Businesses that are successful on the Web realize that every visitor to their Web site is a potential customer. • An important concern for businesses is the variation in important visitor characteristics. • People who visit a Web site seldom arrive by accident; they are there for a reason. • Technology variations among visitors (e.g., connection speed) should be a concern for Web sites.

24. Many Motivations of Web Site Visitors • Creating a Web site that meets the needs of visitors with a wide range of motivations can be challenging. • to learn about products or services that the company offers • to buy the products or services that the company offers • to obtain information about warranty service, or repair policies for products they have purchased

25. Trust and Loyalty • When customers buy a product, they are also buying a service element. • A seller can create value in a relationship with a customer by nurturing customers’ trust and developing it into loyalty. • Customer service is a problem for many corporate sites. • A primary weak spot for many sites is the lack of integration between the company's call centers and their Web sites.

26. Rating E-Commerce Web Sites • Two companies routinely review electronic commerce Web sites for usability, customer service, and other factors. • BizRate.com provides a comparison shopping service and offers links to sites with low prices and good service ratings for specific products. • Gomez.com provides scorecards for electronic commerce sits in specific categories.

27. Usability Testing • Firms are now starting to perform usability testing of their Web sites. • As usability testing becomes more common, more Web sites will meet their goals. • Eastman Kodak, T. Rowe Price, and Maytag have found that a series of Web site test designs helped them to understand visitors’ needs.

28. Connecting with Customers • An important element of corporate Web presence is connecting with site visitors who are customers or potential customers. • Mass media is a one-to-many communication model, the Web is a many-to-one communication model, and personal contact is a one-to-one communication model.

29. Connecting with Customers • The Web is an intermediate step between mass media and personal contact. • Using the Web to communicate with potential customers offers many of the advantages of personal contact selling and many of the cost savings of mass media.

30. Summary • We have looked at: • Revenue models for selling on the Web • How some companies move from one revenue model to another to achieve success • Revenue strategy issues that companies face when selling on the Web • Creating an effective business presence on the Web • Web site usability • Communicating effectively with customers on the Web