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 • 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
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
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.
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.
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. • Amazon.com • ToysRUs to sell toys • Drugstore.com to sell health and beauty products. • Target
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.
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
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. • Monster.com
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.
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
Fee-for-Transaction Models • MSN Carpoint, CarsDirect.com and Autoweb.com 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
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
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.
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
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
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
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
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
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.
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
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.
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
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.
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.
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.
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.
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).
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