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Business strategies for ecommerce I. What to consider when developing an ecommerce site • Challenges and obstacles • What matters II. Portals III. Auctions IV. Customer service

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slide1

Business strategies for ecommerce

  • I. What to consider when developing an ecommerce site
  • • Challenges and obstacles
  • • What matters
  • II. Portals
  • III. Auctions
  • IV. Customer service
slide2

An e-commerce site that's going to make money must be inviting, well-organized, secure and intuitive.

Vaughan-Nichols,. S.J. (1998). E-Commerce Step-by-Step ZDNet

http://www.zdnet.co.il/devhead/stories/articles/0,4413,2185923,00.html

slide3

Major challenges for ecommerce retailers

  • Brand development and promotion
  • Generating online sales
  • Attracting new customers
  • Boosting customer loyalty and retention
      • Improving after-sale customer service
      • Cutting costs in after-sales customer service
slide4

And

Boosting customer traffic to offline stores

Cutting costs of sales transactions

Accelerating inventory turns

Cutting general advertising and promotion costs

slide5

Major obstacles

Understanding the technical requirements for an ecommerce site

Lack of a clear business model to guide development

Insufficient corporate resources

Consumer fears about security and privacy

The difficulty of integrating ecommerce web sites into the company’s other business processes

slide6

What matters:

Having a well-designed, easy-to-use site is the most important factor in for online success

Having a strong company brand and well-known branded products

Using an effective site promotion strategy

Linking with the right search engines

Having a presence on the right portals or web communities

Offline promotion

Successfully marketing the web business

slide7

What matters in a web site

  • Information organization and architecture: is it easy to navigate? Search?
  • Currency: how frequently is content updated?
  • Knowledge: do the pages educate visitors about products and their uses?
  • Interactivity: does it offer the ability to provide feedback, ask questions, etc?
  • Customization: does it allow visitors to tailor content and information presentation?
  • Community: Does it allow visitors to share information with other visitors?
  • Speed: how quickly do pages download
slide8

What else?

  • Having contact information on every page
  • Having a site that works under minimal conditions (text-only...)
  • Making it easy for people to inquire about your services, while they are still online (mailto: links, short forms)
  • Having a way to ask your web site visitors for their e-mail addresses
  • This is an opportunity to resell them later, by sending them quality, informative helpful e-mail as a follow- up
slide9

The important question to ask is, "Can I deliver what I make or do anywhere in the world?"

1. Decide if the product or service you sell is deliverable to a Net audience

Can it be sent via the Net or delivered by physical means, including FedEx or getting on an airplane yourself?

2. Determine the added costs of delivery

If the cost of delivering is too high, stop here

3. Find an e-commerce host and get a bid

Check carefully to make sure that the services and protections you want are offered

slide10

Then:

4. Determine whether the extra revenue - minus the added cost of delivery and the e-commerce site cost - produces an adequate return

5. If it does, it’s time to go into business

You may find that these steps do not produce a clear case for starting your e-commerce project right now

If they don’t, repeat the calculation quarterly until you find it’s time to start.

slide11

What must be managed?

Ecommerce sites need a reliable technical and social infrastructure to support the:

Practice of sales skills via the Internet

Orchestration and management of customer relationships and support

Creation of new relationships with customers, suppliers, partners, and even competitors.

slide12

Strategy for marketing to consumers

Awareness

Attraction

Visit-engagement

Purchase

Repurchase

slide13

Awareness

Announcements: through letterheads, business cards, brochures, packages, newspapers, magazines and TV

Carefully chosen address: it should be similar to the company name and easy to remember

Attraction

Links from other sites

Search engines and indexes leading to the site

Site can be easily and quickly accessed

slide14

Visit/engagement

Information about products and company

Facilities: careful use of scripting, search engines, sound, video and animation

Purchase

Multiple methods: ordering form, mail, fax, phone ordering and e-mail

Payment facilities: cash, check, credit card and direct account

Delivery/booking facilities: mail, fax, call phone and e-mail, package tracking

Interactivity: offers, interaction with others

slide15

Revisit and re-purchase (stickiness)

Freshness: “What’s New”

Changing content and features

Extended interactivity: communities/clubs/user-to- user communication

Extensive help: “FAQs”

Link to other sites

Customisation: collecting user information, meeting customer needs

Personalization:, optional menu and content requiring user input

Customer loyalty and service programs

slide16

Once the business is off the ground, the next strategic decision is to grow vertically or horizontally

“Syndication is...the next-generation business architecture of the Internet”

Neil Weintraub http://www.herring.com/mag/issue46/neil.html

These are horizontally specialized web sites that form partnerships

They are “syndicated” into collective business systems that provide both superior economics for business and superior benefits to customers

Each participant of a syndicated business specializes in either physical production, virtual experiences, or infrastructure.

Producers, channels, and syndicators

slide17

Syndication divides the web-labor

For producers, the reality is that it doesn't matter so much where customers see the product as how many of them see it

Those who run channels want to attract as many customers as possible

Who produced the message is of secondary concern

As producers and channels focus on their core businesses, they are done by clerks, clearinghouses, and call centers to syndicators

This leads to aggregation and the pooling of resources

The difference between a showroom and a showroom of showrooms

slide18

Business strategies for ecommerce

I. What to consider when developing an ecommerce site

• Challenges and obstacles

• What matters

II. Portals

III. Auctions

IV. Customer service

slide19

Portals

“Portal” is a new term seen to be synonymous with gateway

It is a web site that is (or wants to be) a major starting site for users when they go online

It is also a site that users tend to visit as an “anchor site”

Most portals have adopted the Yahoo style of content categories

This involves a text-intensive, faster loading page that visitors will find easy to use and to return to

Deeper in the site are many different types of resources and services

slide20

Portal sites have attracted stock market interest because they are viewed as able to draw traffic

This means large numbers of numbers of advertising viewers and higher rates

Typical services offered by portal sites include:

Services: shopping, chat, free email, webhosting

Resources: directories of web sites, news, weather information, stock quotes, phone and map information, a facility to search for other sites

Portals are moving towards personalization to make themselves sticky

Excite is among the first portals to offer users the ability to create a site that is personalized for them

slide21

Portals are becoming large, all-purpose ecommunities with high ecommerce potential, including advertising revenue

They do have some disadvantages

They dictate the content that you are able to find

They're a good aid for new users, but they only serve up a slice of the Internet

They often point to sites that live under the same corporate umbrella as they do, rather than to the most relevant or informative site on a given topic

slide22

The term “portal space” means the total number of major sites competing to be one of the portals

Leading portals include Yahoo, Excite, Netscape NetCenter, Lycos, Go.com, MSN.com, Snap.com

With its own private array of sites when you dial in, AOL is also a portal to its own Web

A number of large ISPs also offer portals to the Web for their own users

Now, M&A

AOL --> Netscape ABC --> Go.com

Disney --> Infoseek NBC --> Snap.com

USA Networks --> Lycos

slide23

What is the future of portals?

One possibility is that they become the new desktop: the “webtop”

Sites begin to offer the types of web-based services that replace those provided by desktop software

Email, schedule and calendaring address databases, productivity applications

Then word processing, spreadsheets

This personalized desktop can be accessed from anywhere on the net with any device

The network is the computer (assuming lots of bandwidth)

slide24

Why you might like it

Ease of use

Accessibility

Privacy (no corporate surveillance)

Everything you need in one place

Lots of functionality with a cheap, small, fast PC

slide25

This would create a shift in the business model of portals

They were doorways, now they are “data guardians” and “full service providers”

They take on the responsibility for maintaining and upgrading shared software

They have to guarantee privacy, security, universal access, and reliability

They begin to compete with software companies who would rather sell individual packages to users than one server version

slide26

Another future is the enterprise portal

Large companies are developing their own customized web gateways on their intranets

These local portals give employees access to important corporate information as well as the latest news, sports scores and stock quotes

The value is in the retrieval and reporting of internal company data through a well-organized and secure web portal

For example a user can pull corporate data from IT (ERP, data warehouses, legacy programs) and view the information and its relationships on the desktop

This is individualized data-mining

slide27

One company that builds enterprise portals is Epicentric <www.epicentric.com>

Epicentric enables companies to build custom portals for their intranet and extranets by providing content and commerce aggregation and syndication technology and solutions

This requires an enterprise server, a hosted service, or a combination of the two, depending on customer needs and requirements

The Portal Server is a Java application server that supports NT and Unix Web servers

The company also licenses aggregation technology to vertical portal sites on the Web

slide28

Business strategies for ecommerce

I. What to consider when developing an ecommerce site

• Challenges and obstacles

• What matters

II. Portals

III. Auctions

IV. Customer service

slide29

Web auctions are based on the ability to negotiate in near real-time

They allow best price bargaining, guaranteed sales, minimal collusion

It is a one to many negotiation based solely around price

Some auction forms allow rounds of negotiation, others do not

The rules of the negotiation are clearly spelled out for all participants

slide30

What makes auctions work?

A successful auction must have repeat business

This requires building a loyal community

The community is based on the development and maintenance of mutual trust

Social practices create and maintain trust

Posting comments about buyers and sellers and link these comments to specific auctions

Target the advertising for auctions (appropriate newsgroups and lists)

Have clear statements about privacy and security

slide31

A standard online auction of an item will often contain a:

Registration procedure

Picture of the item

List of features

Suggested comparison price

Instructions on how to bid for the item

Forms to fill out to place your bid

Description of the rules of the auction

slide32

Item # of sites selling this item (n=100)

“Other” 49

Computer 47

Information 30

Consumer products 28

Collectibles 22

Auto equipment 17

Recreation/Travel 16

Arts and crafts 16

Financial products 9

Antiques 9

Food and beverages 5

Real estate 7

Sports equipment or 7 memorabilia

The most popular category is “other,”

which highlights the broad range of goods and services sold over the net

Beam, C. and Segev, A. (1998) Auctions on the Internet: A Field Study Working Paper 98-WP-1032 November 1998 (Revised)

slide33

Requirements

Support for a variety of auction formats

Integration of auctions with business’ back-end applications to allow automated trading processes

Security, based on cryptography and audit trails

Preventing hackers from sabotaging and buyers and sellers from cheating or disrupting the auction

Efficient notification to inform bidders of the latest bids

slide34

Different auction methods:

The commonly used auction types are

Open-cry (English) auction

Buyers gather at a physical or virtual location at a pre- specified time

Each buyer can hear or see the bid submitted by other buyers and has a limited time to offer a higher counter- bid

In physical auctions the responses must be received within seconds

In web auctions, several minutes or hours will be allowed for the response

From Kumar and Feldman (1998) Internet Auctions http://www.ibm.com/iac/

slide35

Single and multiple round sealed bid auctions

Buyers must submit bids by a specified deadline

The bid information secret is until the deadline

Then bids are evaluated and the winners are declared

Single round auctions lack the bidding frenzy of open cry auctions where bidders try outbid their rivals

In a multiround sealed bid auction there is a deadline for each round of bids

At the deadline the auction is closed or the bids from the current round are publicized and a new round of bidding begins

slide36

Dutch auctions

These are good for perishable items (food, airplane seats)

It starts with a very high asking price

The price is decreased until buyers bid and specify the number of items they will purchase at the current asking price

The bid can then be lowered to sell more while the inventory lasts

The auctioneer controls how fast the inventory sells by controlling the lowering of the bid

It closes at a pre-specified time, when the items are sold, or the price has fallen to a pre-specified level (or some combination)

slide37

The reverse auction (priceline.com)

The buyer sets a price she is willing to pay

The auction house bids the price out to sellers

Sellers compete to meet the bid

If the bid is matched, the buyer must purchase the item

The auction house takes a cut of the transaction

The Vickery auction

Each submits one sealed bid

Bids are opened simultaneously and the winner has the highest bid

But: the winner pays the price of the second highest bidder

slide38

The auction process

Initial buyer and seller registration

Authentication of parties, exchange of public keys

Creation of a profile for each trader reflecting interests in products and spending limits

Setting up a particular auction event:

Describing the items being sold or acquired and setting up the rules of the auction

The auction rules explain the:

Type and procedures (open cry, sealed bid, Dutch)

Parameters (price, delivery dates, terms of payment)

Starting and closing dates and times

slide39

Scheduling and advertising

Items to be auctioned in upcoming auctions are advertised, and potential buyers are notified

Popular auctions can be mixed with less popular ones to force people to be present in the less popular auctions

Bidding

This involves the collection of bids from buyers and implements the bid control rules of the auction

Minimum bid, bid increment, deposits required with bids...

For open cry auctions there is notification of the participants when new high bids are submitted

slide40

Evaluation of bids and closing the auction

The auction closing rules are applied and the winners and losers of the auction are notified

Trade settlement

This final step handles

Payment to the seller

Transfer of goods to the buyer

If the seller is not the auctioneer, payment of fees to the auctioneer and other agents (appraisers, consignment agents, etc.)

slide41

Auction security

Auction house policy and seller instructions dictate whether the auction is accessible to the:

Public at large

Buyers/sellers registered with the auction services

Buyers registered to participate in the current auction

Access control mechanisms enforce these rules

Security mechanisms ensure that the site is not sabotaged by an outsider

This means preventing unauthorized bids and alterations and denial of service attacks

slide42

Cryptography is important to auctions

Trusted third parties can enforce access rules and digital signing of contracts to ensure non-repudiation

Encryption can prove that an auction notice was posted and accessible during a certain time period

During bidding, encryption is needed to ensure that a bid is not tampered with, or disclosed to others

In open cry auctions, spurious bids must be prevented

These occur when the seller or auctioneer bid to prompt the highest bidder to increase the bid

This means establishing a verifiable link from each bid to a bidder

slide43

Auction houses

One-to-many auction

The house provides access to goods and services auctions them to many buyers

Consumer-to-consumer auction

The house brings together many buyers and sellers at the same time and they negotiate with each other

Reverse auction

The house allows the buyer to set the price that sellers compete to match

Business to business auction

One company auctions off projects to contractors who submit bids (procurement) or unwanted inventory

slide44

Best practices

Offer frequent auctions

Email an English auction bidder if the bid is topped

Offer secure payment processing

Send out regular email to subscribers

Provide a search engine

Divide the site into categories

Offer “phantom” bidding services for English auctions

Update the front page frequently (every 24 hours)

Run special programs to encourage customer loyalty

Offer additional services

Beam, C. and Segev, A. (1998) Auctions on the Internet: A Field Study Working Paper 98-WP-1032November 1998 (Revised)

slide45

Business strategies for ecommerce

I. What to consider when developing an ecommerce site

• Challenges and obstacles

• What matters

II. Portals

III. Auctions

IV. Customer service

slide46

Customer service: the next-to-last frontier

Comparison shopping has made branding and differentiation difficult

If all your competitors’ products can be arrayed along side yours, competition based on price differences becomes a problem

What’s left?

Managing customer relationships

"If you would like to press one, press one. If you would like to press two, press two. If you would like to press the pound key, press the pound key... "

slide47

“The golden egg in marketing is to retain happy customers, who not only keep buying from you, but also tell their friends and associates that you are the greatest company in the world”

Kuegler, T. (1999). How can we help you online today? http://www.searchz.com/Articles/0318991.shtml

“The ideal scenario ‘is to have an easy-to-use site that meets a need users can’t get in the real world’ says Meg Whitman…CEO of Ebay”

Perez, J.C. (1999). Online Stores Must Simplify, Says Panel. http://www.thestandard.net/articles/display/0,1449,2548,00.html

slide48

Goal of customer service is “fulfillment”

The web allows interactive customer services:

Instant gratification

Direct responses to immediate needs

Total and immediate responsiveness

One-to-one communication

Personal interaction through digital means (email, chat)

Successful fulfillment is a basis of the long-term relationship with the customer

slide49

Principles of customer service are well established offline

Browsing

During the sale

After the sale

Managing the environment

Q&A

Demos

Pre-sale

Creating the relationship

Selling add-ons

Closing the sale

Maintaining the relationship

Q&A

Services

Updates

Promotions

Returns

slide50

Jupiter Communications surveyed 125 major web sites (content, consumer brands, travel, retail, financial services)

42% never responded to customer inquiries or took >5 days to respond

Retailers were the best

54% responded within a day

Financial services and travel agencies were next:

35% responded with one day

Among travel agencies, 19% took >3 days

slide51

Customer service on the web

Before the sale

How do you manage the environment for the visitor?

These are design and content development issues

Pre-sale service can be based on:

Static FAQs and help pages

Emailed Q&A

Access to real-time interaction with company people

Access to demos (real-time and downloadable)

Value-added information

Access to policies (privacy, security, returns)

slide52

During the sale

This requires dynamic forms of service

Multiple fulfillment options (online and offline, including telephone ordering)

Instant verification of transaction (shopping cart and sales sales totals)

Links to add-on purchases (or suggestions about them)

Ability to end the transaction

Easy access to guarantees, warranties, and privacy information

Easy access to return policies

slide53

After the sale

Using digital means to maintain the relationship with the customer

Prompt delivery

If appropriate, links to real-time order and package tracking

Real time Q&A with company customer support (“call-me buttons”)

Using email updates to advertise sales/promotions

Easy access to clearly stated return and exchange policies

Using customer loyalty programs to raise switching costs and create lock-in

slide54

Customer loyalty strategies

Online, real time events with other customers, celebrities, and company people

Online learning and training seminars

Online diagnostics

Access to real time analytic tools, reports, charts

Automated upgrades (software)

Incentives to refer people to the site

Personalization

slide55

New technologies are providing new opportunities for customer service

This helps the bottom line

Web-based customer support is much cheaper than other forms of support (~10X cheaper)

Web fulfillment = $5

Phone fulfillment = $50

House call fulfillment = $500

Forrester Research estimated 43% savings for web based support for large companies ($650 million and up)

slide56

Examples

Teleweb hand-holding products

Call-me buttons allow customers to speak with a company support person while they are on site

Once connected, support can “push” web pages to the customer with information that helps answer their questions

This is moving back into the process and becoming important in closing the sale

Examples: Webline, InteractiveAnswers (ATT) Click’nConnect (MCI)

slide57

eService: Silknet Software http://www.silknet.com/index_ns_main.asp

Goal: to improve efficiency and increase customer enthusiasm and loyalty by

Integrating customers into the business

Engaging them in interactive, personalized exchanges

Leveraging their knowledge to manage the customer relationship

Customers benefit because they can conduct business when it is most suitable to them

Their feedback can guide the business into providing products and services that better fit their needs

slide58

It views the customer from her point of view

It keeps a record of all interest points, and purchases, service interactions, and follow up activities

It integrates fragmented customer records across lines of business, divisions, departments and legacy systems

This leads to one view of each customer

Intelligent agents guide customers and push appropriate pages when needed

Cost: $150,000 for the basic package

The price goes up for # of customers and service reps who use it

slide59

Another example is Roving Software, Inc http://www.roving.com/main.htm

Constant Contact™ software

Automatically continues a personalized dialogue with your customer

They are contacted with targeted email even after they leave your site

Software agents automatically alert customers to changes on the site, product availability, and order shipment

They are proactively asked about their satisfaction, and are alerted to promotions etc.

This enhances repeat buying and reduces service costs

slide61

Outsourcing customer service

A new option is to hand over the management of customer relationships to a company that specializes in it

PeopleSupport http://www.peoplesupport.com

Services include:

Serving your customers online 24 hours a day

Providing them with comprehensive self-help options

Repling quickly and personally to their email

Handling your order taking, fulfillment and credit card processing

Capturing useful customer data instantly

slide62

They have a button that allows two-way live online chat 7-24-365

Customers speak with “eReps”

They will design an interactive self-help knowledge base

This customized FAQ is continually upgraded and refined to suit the client’s changing customer needs

The software tracks and records customer questions, buying habits and product preferences

They provide up-to-the-minute reporting and real- time feedback on customer issues, concerns and trends