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ECT 455 E-Commerce Web Site Engineering Lecture #2 Consumer Internet Commerce Agenda Market News Types of Consumers and Purchases Business Models and Value Propositions e-Commerce Value Chain Assignments – Website Analysis Project Deliverable B A Quick Poll:

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ect 455 e commerce web site engineering

ECT 455E-Commerce Web Site Engineering

Lecture #2

Consumer Internet Commerce

ECT 455 Susy Chan Ph.D.

agenda
Agenda
  • Market News
  • Types of Consumers and Purchases
  • Business Models and Value Propositions
  • e-Commerce Value Chain
  • Assignments – Website Analysis
  • Project Deliverable B

ECT 455 Susy Chan Ph.D.

a quick poll
A Quick Poll:
  • What types of shoppers are you?
  • How do you shop online?

ECT 455 Susy Chan Ph.D.

types of consumers
Types of Consumers
  • Types of Buyers
    • Impulsive Buyers: quick purchasing
    • Patient Buyers: price comparison
    • Analytical Buyers: research first
  • Shopping Experiences
    • Utilitarian: task-completion and rational
    • Hedonic: involvement and entertainment

ECT 455 Susy Chan Ph.D.

types of online purchases
Types of Online Purchases
  • Specifically Planned Purchases
  • Generally Planned Purchases
  • Reminder Purchases
  • Unplanned Purchases
  • Implications for Strategies and Design?

ECT 455 Susy Chan Ph.D.

amazon
Amazon
  • How does Amazon site support different types of shoppers, purchases, and shopping behaviors?

ECT 455 Susy Chan Ph.D.

customer expectations
Customer Expectations
  • Merchandize assortment
    • About the same number of products available as the retail store (21%)
    • About the same number of products plus specials (51%)
    • More online SKUs than store or catalog (39%)

(Global Online Retailing Report)

ECT 455 Susy Chan Ph.D.

slide9
A Technographics View of New consumer Internet Adoption

Mainstream

Number of new online consumers

Early adopters

Laggards

Time

Forrester: Now or Never

ECT 455 Susy Chan Ph.D.

meeting customer expectations
Meeting Customer Expectations
  • Top 3 Reasons for Shopping Online
    • Good selection of items
    • Competitive pricing
    • Convenience
  • Shopping carts are frequently abandoned
    • Placed products in the cart but did not complete the purchase (78%) because:
      • Shipping cost too high (45%)
      • Price check (37%)
      • Changed mind (34%)
      • Price to high (24%)
      • Check out process was long/unclear (18%)

E&Y Global Retailing

ECT 455 Susy Chan Ph.D.

user profile information
User Profile: Information

GVU Web User Survey

ECT 455 Susy Chan Ph.D.

slide13

The e-Commerce Value Cycle

Attract

React

Interact

Act

ECT 455 Susy Chan Ph.D.

the e commerce value chain
The e-Commerce Value Chain

Get and keep

customer interest

Turn interest

into orders

Service customers

Manage orders

Attract

Interact

Act

React

Catalog

Sales

static

dynamic

AdvertisingMarketing

channels

media

Order capture--

Shopping Cart

Payment

Fulfillment

goods

Customer service

Order tracking

ECT 455 Susy Chan Ph.D.

attract customers marketing
Attract Customers (Marketing)
  • Purpose
    • Build brand awareness, attract customers, and entice them to buy
  • Merchandizing Methods
    • Advertising
    • Coupons
    • Sales and Promotions
    • Frequent buyer programs
    • 1:1 marketing

ECT 455 Susy Chan Ph.D.

beyond price research and brand
Beyond Price, Research and Brand
  • Fast Search – price
  • Long search – branding, delivery time, and other product characteristics

Brynjolfssor: Search and product differentiation at an Internet Shopbot. MITSloan School of Management, Dec 2004.

ECT 455 Susy Chan Ph.D.

interact with customers sales
Interact with Customers (Sales)
  • Purpose
    • Turn interest into orders
    • Catalog, Product and Service
  • Techniques
    • Registration with Internet search engines
    • Hyperlinks
    • Onsite product search
    • Product and price comparison
    • Dynamic vs. static contents
    • Pricing

ECT 455 Susy Chan Ph.D.

act on customer instructions order management
Act on Customer Instructions (Order Management)
  • Purpose: Manage order and shopping experience
  • Order Processing:
    • Shopping cart and order aggregation
    • Order validation; Application of coupons or discounts
    • Cross selling
    • Calculation of sales, taxes, shipping and delivery charges, rolled-up order
  • Payment: handle multiple payment methods (cash, credit, credit cards, debit cards)
  • Act – Fulfillment
    • Delivering the goods ordered to their destination
    • Transmission of order information to warehouse, packing or order assembly for shipping, shipping and delivery

ECT 455 Susy Chan Ph.D.

react to inquiries service
React to Inquiries (Service)
  • Purpose: customer satisfaction, experience, and repeat visits
  • Methods
    • 24X7 service capacity
    • Proactive and Immediate feedback – voice and email
    • Access to status information
    • Self-help (FAQ)
    • Multi-language support

ECT 455 Susy Chan Ph.D.

online retail 2004 holiday seasons
Online Retail –2004 Holiday Seasons
  • Revenue growth strong.  91% of retailers reported revenue growth for the 2004 online holiday season; 17% experiencing revenues doubled. Example: PearlParadise.com: 113% growth $888m ->$1.9b
  • Customer satisfaction increases.  95% consumers were satisfied with online shopping experience; 89% in 2003, 84% in 2002
  • Free shipping remains the king of online marketing promotions (60%),Recommendations: 56% gift center, suggested items page (32%), clearance page (32%), featured sale item (31%)
  • Search engines and affiliate marketing help retailers find customers, remained the second (58%) and third (50%) most successful marketing vehicle for retailers.  “
  • Multi-channel strategies – 45% research on catalog  buy online; 21% research online  buy from catalog
  • Shop.org/BizRate 2004 eHoliday Mood study.– January 2005

ECT 455 Susy Chan Ph.D.

amazon22
Amazon
  • How does Amazon site implement the e-commerce value chain?
    • Attract
    • Interact
    • Act
    • React

ECT 455 Susy Chan Ph.D.

value propositions
Value Propositions
  • For Consumers/Customers/Users
  • For the Firm/Organization

ECT 455 Susy Chan Ph.D.

value proposition for customers
Value Proposition for Customers
  • Transform customer relationship from supplier-centered to customer-centered values
    • self service, 1:1; choices; delivery to customer location; customer needs; choice of service hours
  • Displace traditional source of values
    • Physical vs. digital value (information)
    • Economies of scale vs economy of scope
    • Mass produced vs mass customized
    • Information vs. knowledge value
    • Distribution as constraints vs. enabler
    • Local vs. global

ECT 455 Susy Chan Ph.D.

value proposition for firms
Value Proposition for Firms
  • Ability to reach a global market
  • Reduced marketing and selling expense
  • Increased efficiency of operation
  • Ability to target consumers more precisely
  • Ability to convey more accurate product and availability information

ECT 455 Susy Chan Ph.D.

four strategies
Four Strategies
  • Channel Master (Cisco; Amazon)
  • Customer Magnet (Yahoo)
  • Value Chain Pirate (Autobytel.com; e*trade)
  • Digital Distributor (Monster.com)
  • Disintermediation and reintermediation

ECT 455 Susy Chan Ph.D.

b2c business models generating revenues
Merchant Model

virtual merchants

Click & Brick

Multi-Channel

Shopping Malls

Advertising Model

Horizontal portal

Vertical portal

Personalized portal

Intermediary (Brokerage)

Buy/sell fulfillment

Buyer/demand aggregator

Virtual mall

Hypermediary (financial settlement)

Auction broker

Reverse auction

B2C Business Models: Generating Revenues

ECT 455 Susy Chan Ph.D.

merchant models virtual c b mc shopping malls
Merchant Models (virtual, C&B, MC, shopping malls)
  • Advantages:
    • Enables merchants to sell products on the Web
    • Conduct business 24-by-7,worldwide
  • An e-commerce storefront should include:
    • Online catalog of products
    • Order processing (robust shopping cart)
    • Secure online payment
    • Timely order fulfillment
  • C&B or MC – physical location, brand recognition, established customer base, cannibalization, channel integration
  • Virtual Merchant: avoid the cost of physical stores

ECT 455 Susy Chan Ph.D.

portal model
Portal Model
  • Portal sites : Give visitors the chance to find almost everything they are looking for in one place
  • Horizontal portals:Portals that aggregate information on a broad range of topics
    • Yahoo!, AltaVista, Google
  • Vertical portals : Portals that offer more specific information within a single area of interest
    • WebMD, IMDB, FirstGov
  • Requires fresh and abundant content, and robust search engine to draw traffic
  • Heavy reliance on advertising revenue, decline in effectiveness of online advertising

ECT 455 Susy Chan Ph.D.

auction model
Auction Model
  • Online auction sites
    • Act as forums through which Internet users can log-on and assume the role of either bidder or seller
    • Collect a commission on every successful auction
    • Sellers post items they wish to sell and wait for buyers to bid
  • Reserve price
    • The minimum price a seller will accept in a given auction
  • Reverse auctions
    • Allow the buyer to set a price as sellers compete to match or even beat it

ECT 455 Susy Chan Ph.D.

dynamic pricing models
Dynamic Pricing Models
  • The Web has changed the way products are priced and purchased
  • Comparison pricing model
    • Web sites using shopping bot technology to find the lowest price for a given item e.g. NextTag.com
  • Demand-sensitive pricing model
    • Group buying reduces price as volume of sales increase
  • Name-your-price model
    • Name-your-price for products and services

ECT 455 Susy Chan Ph.D.

amazon32
Amazon
  • What are their customer value propositions?
  • What are their business value propositions?
  • What are their business models?
  • Who are their competitors?

ECT 455 Susy Chan Ph.D.

the state of retailing online 7 0
The State of Retailing Online 7.0*
  • *Profitable online operations, 43 % (2000)  56% (2001) -> 70% (2002)  79% (2003)
  • Overall Operating margins  21%; catalogers 28%; online retailer  -1% (from -16% in 2002)
  • **Shoppers spent $51.3 b online in 2001, up 21% from 2000. $76 b in 2002, up 58% from 2001; expected to grow 26% in 2003 to $96 b.
  • Most popular product categories: computer HW/SW (40%), tickets (17%), books (12%)
  • **Marketing costs: Web based retailers ($10/per order), store-based ($5), and catalog-based ($7); shifting toward performance based affiliate marketing and search engine marketing (investment in operational efficiency)
  • * Overall marketing costs: $8/per order  $4/per order; Web-based ($10/order  $2/order)
  • **Customer acquisition costs $29 $14; repeat buyers 4%53% of revenue.
  • *Customer service costs $1.9 $2.3; fulfillment $6.3 $9.8
  • *24% of offline sales in 2003 were influenced by Web, up from 15% in 2002

Source: *shop.org/Forrester Research, May 2004 ** 2003 report (6.0)

ECT 455 Susy Chan Ph.D.

transition of an e customer
Transition of an E-Customer

Interactive Marketing Transaction Processing Online Relationship

Casual

Visitor

Prospect

Buyer

Repeat

Buyer

Evaluate interest Allow comparison Support/Interact

present options Enable Transaction Develop relationship

Prove reliability Push Offers

Conversion rate is low

Gartner Group

ECT 455 Susy Chan Ph.D.

next week
Next Week
  • Review reading assignments
  • Deliverable B Due
  • Market News

ECT 455 Susy Chan Ph.D.

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