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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

Chapter 3

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

  • The Web Catalog Model
  • Advertising-Supported Model
  • Advertising-Subscription Mixed Model
  • Fee-for-Transaction Models
  • Fee-for-Services Models
1 the web catalog model
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
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
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 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
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
selling information or other digital content
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
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
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.
3 advertising subscription mixed model
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
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
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
fee for transaction models14
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
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
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
  • 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
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
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
  • 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
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
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
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
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
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
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
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
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
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
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