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Chapter 3 Selling on the Web: Revenue Models and Building a Web Presence Models The Web Catalog Model Advertising-Supported Model Advertising-Subscription Mixed Model Fee-for-Transaction Models Fee-for-Services Models 1. The Web Catalog Model

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Chapter 3 l.jpg

Chapter 3

Selling on the Web: Revenue Models and Building a Web Presence

Models l.jpg

  • The Web Catalog Model

  • Advertising-Supported Model

  • Advertising-Subscription Mixed Model

  • Fee-for-Transaction Models

  • Fee-for-Services Models

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1. The Web Catalog Model

  • Based on the mail order catalog revenue model.

  • Replaces or supplements print catalog distribution with information on its Web site.

    • Brand image

    • Low cost

  • Customers can place orders through the Web site or by telephone

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Businesses Employing the Web Catalog Model

  • Computer manufacturers

    • Dell and Gateway

  • Apparel Retailers

    • Land’s End , Eddie Bauer, L.L. Bean

  • Flowers and gifts

    • 1-800-Flowers

  • General Discounters

    • Walmart

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Luxury Goods

  • People are still unwilling to buy some items through a Web site.

    • Luxury goods and high fashion items.

  • Use Web sites to provide information to customers who would then visit the physical store.

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    Channel Conflict and Cannibalization

    • Channel Conflict

      • Web site interferes with its existing sales outlets or network.

      • Levi(point to retailers)

    • Cannibalization

      • Web site’s sales consume the sales that would be made in the company’s other sales channel.

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    Strategic Alliances

    • Two or more companies join forces to undertake an activity over a long period of time, they are said to create a strategic alliance.

    • An increasing number of businesses are forming strategic alliances to sell on the Web.


      • ToysRUs to sell toys

      • to sell health and beauty products.

      • Target

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    Selling Information or Other Digital Content

    • Firms that own intellectual property have embraced the Web as a new and highly efficient distribution mechanism

      • From paper to web publication

      • Catalog of information

      • Always current, searchable

      • Usually have charge for access

    • ProQuest - sells digital copies of published documents.

    • LexisNexis – legal documents, publications, and news…

    • Encyclopedia Britannica - has transferred an existing brand to the Web.

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    2. Advertising-Supported Model

    • Used by network television in the U.S.

      • Advertising revenue support operations

    • Web advertising has been hampered by two major problems:

      • No consensus has emerged on how to measure and charge for site visitor views.

        • Visitors or actual click?

      • Very few Web sites have sufficient numbers of visitors to interest large advertisers.

        • Do visitors have “right” demographics

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    Advertising-Supported Model

    • Web Portals

      • Use as “launching” site to enter the web

      • Web directory or search engine; email…

      • Only a few general-interest sites have sufficient traffic to be profitable based on advertising revenue alone. - Yahoo, AOL, MSN

    • Newspaper publishers

      • It is still unclear whether web presence helps or hurts the newspaper’s business as a whole.

    • Employment Sites

      • Advertise employment

      • Appears to be successful.


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    3. Advertising-Subscription Mixed Model

    • In this mixed model

      • Subscribers pay a fee

      • Some level of advertising.

    • The New York Times and The Wall Street Journal

      • Most content for subscribers

      • Reduced rate for print subscribers

    • Business Week offers a variation on the mixed model theme; it offers some free content but requires a subscription to access the entire site.

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    4. Fee-for-Transaction Models

    • The travel agency business model

      • Receive a fee for facilitating a transaction.

      • Orbitz – lowest air fares for 5 airlines

    • Stock brokerage firms use a fee-for-transaction model.

      • Charge their customers a commission for each trade executed.

      • Etrade, Charles Schwab

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    Fee-for-Transaction Models

    • MSN Carpoint, and provide an information service to car buyers

      • Each of these firms implements the fee-for-transaction revenue model in a slightly different way

      • Customer goes on line to find car and price

      • Site then finds local dealer who will accept deal

      • Site charges dealer a fee for service

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    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.

        • Ticketmaster

    • 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.

      • Some eliminating fee

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    5. Fee-for-Services Models

    • The fee in this model is based on the value of the service provided.

      • Not based on number of transaction.

    • Examples:

      • Games and entertainment

      • Financial advice

      • Professional services of accountants, lawyers and physicians.

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    Fee-for-Services Models

    • Online Games

      • Many online games sites offer premium games.

      • Site visitors must pay to play these games.

    • Concerts and films

      • 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.

      • General information or referral sites

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    Creating an Effective Web Presence

    • Creating an effective Web presence can be critical for even the smallest and newest firm operating on the Web.

      • Only contact that customers has

        • If only a web presence

      • Influence other stakeholder

        • Suppliers

        • Stockholders

        • Employees

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    Identifying Web Presence Goals

    • On the Web

      • Create distinctive image the company wants to project.

    • 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

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    Achieving Web Presence Goals

    • An effective site

      • creates an attractive presence

      • meets the objectives of the business

    • Possible objectives include:

      • attracting visitors to the Web site

      • making the site interesting enough

      • 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

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    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 company

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    Not-for-Profit Organizations

    • A key goal is information dissemination.

    • Two-way contact channel is a key element

    • 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.

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    How the Web is Different

    • When firms started creating Web sites in the mid 1990s

      • Conveyed basic information about their business.

    • Web is different from other presence-building media

      • Brochures

    • Web’s capability

      • Two-way, meaningful communication with their customers.

      • Email, online dialog, forms

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    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.

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    Many Motivations of Web Site Visitors

    • Creating a Web site that meets the needs of visitors

      • 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

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    Meeting the Needs of Web Site Visitors(cont’d)

    • to obtain general information about the company or organization

    • to obtain financial information for making an investment or credit granting decision

    • to identify the people who manage the company or organization

    • to obtain contact information for a person or department in the organization.

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    Making Web Sites Accessible

    • Build flexibility into the Web site’s interface.

      • Text version, no plug-ins…

      • Different for browser used

    • Many sites offers separate versions with and without frames and giving visitors the option to choose either one.

    • A good site design lets visitors choose among information attributes, such as level of detail, viewing format, and downloading format.

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    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.

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    Usability Testing

    • Firms are now starting to perform usability testing of their Web sites. - Determine if interactive contact with visitors

    • 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.

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    Customer-Centric Web Site Design

    • Putting the customer at the center of all site designs is called a customer-centric approach to Web site design.

    • Electronic commerce sites are encouraged to focus on the customer’s buying process rather than the company’s perspective and organization.

    • Technology-enabled relationship management occurs when a firm

      • obtains detailed information about a customer

      • uses that information for marketing purposes.

      • called Customer Relationship Management (CRM) or electronic customer relationship management (eCRM).

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    Connecting with Customers

    • Most businesses are familiar with two ways of reaching customers: personal contact and mass media.

    • The Web is an intermediate step between mass media and personal contact.

    • Using the Web to communicate with potential customers offers

      • advantages of personal contact selling

      • cost savings of mass media