Download Chapter 3 - Department of Computer Science and Information Systems

Chapter 3
Selling on the Web:
Revenue Models and Building
a Web Presence
Learning Objectives
• We are going to look at:
• Revenue models for selling on the Web
• How some companies move from one revenue model to
another to achieve success
• Revenue strategy issues that companies face when selling
on the Web
• Creating an effective business presence on the Web
• Web site usability
• Communicating effectively with customers on the Web
The Web Catalog Model
• The Web catalog model is a revenue model of
selling goods and services on the Web that is
based on the mail order catalog revenue model.
• In the Web catalog model, a Web site replaces or
supplements print catalog distribution with
information on its Web site.
Businesses Employing the Web
Catalog Model
• Computer manufacturers, for example Dell and
Gateway
• Clothing retailers
• Flowers and gifts
• General discounters
• Many of the most successful Web catalog
businesses are firms that were in the mail order
business and have simply expanded their
operations to the Web.
Luxury Goods
• For many types of products, people are still unwilling to
buy through a Web site.
• For example, luxury goods and high fashion items.
• The Web sites of Vera Wang and Versace are not designed
to generate income but to provide information to customers
who would then visit the physical store.
• Evian is another site geared towards affluent customers.
Books, Music, and Videos
• Amazon.com is a hugely successful business
using the Web catalog model for many reasons:
– There are over 4 million books in print throughout
the world, but no physical store could hold them
– Books and videos are small-ticket items people are
willing to buy without inspection
• Amazon’s success spurred other book and music
sellers to undertake e-commerce. For example:
– Barnesandnoble.com, towerrecords.com
Digital Content Revenue Models
• Firms that own intellectual property have embraced the
Web as a new and highly efficient distribution mechanism.
• LexisNexis is an online service that offers a variety of legal,
corporate, government, etc. information.
• ProQuest is a Web site that sells digital copies of published
documents.
• The ACM Digital Library offers subscriptions to electronic
versions of its journals to its members and to libraries.
Advertising-Supported Model
• The advertising-supported business model is the
one used by network television in the U.S.
• The success of Web advertising has been
hampered by two major problems:
– No consensus has emerged on how to measure
and charge for site visitor views.
– Very few Web sites have sufficient numbers of
visitors to interest large advertisers.
Advertising-Supported Model
• Web Portals
– Only a few general-interest sites have sufficient traffic to
be profitable based on advertising revenue alone.
• Newspaper publishers
– It is still unclear whether advertising helps or hurts the
newspaper’s business as a whole.
• Target Classified Advertisers
– Employment and used-vehicle sites are successful
examples of the advertising-supported revenue model.
Advertising-Subscription Mixed Model
• In this mixed model, subscribers pay a fee and accept some
level of advertising.
• The New York Times and The Wall Street Journal use a
mixed advertising-subscription model.
• Business Week offers a variation on the mixed model
theme; it offers some free content but requires a
subscription to access the entire site.
• ESPN sells advertising and offers a vast amount of free
information, but fans can subscribe to its Insider service.
Fee-for-Transaction Models
• The travel agency business model involves
receiving a fee for facilitating a transaction.
• A number of online travel agencies began doing
business on the Web.
• Stock brokerage firms use a fee-for-transaction
model. They charge their customers a
commission for each trade executed.
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.
• 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.
Fee-for-Services Models
• The fee in this model is based on the value of the service
provided.
– These are neither broker services nor based on the
number or size of transactions processed.
Online games
– Many online games sites offer premium games.
– Site visitors must pay to play these games.
• Concerts and films
– As more households obtain broadband access to the
Internet, companies will provide 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.
Multiple Transitions
Encyclopedia Britannica
• Print publisher to Advertising-Supported model
to Advertising-Subscription Mixed Model
Revenue Strategy Issues
• Channel conflict – when web sites compete with existing
parts of organisation
• Cannibalisation – when customers are “churned” rather
than the web attracting new customers
• Problem:
•
Channel conflict or cannibalization can occur when
sales activity on a company’s website interferes with
existing sales channels.
• Solution:
•
Web sites provide product information but directs
customers to online and physical stores where goods can
be purchased.
Strategic Alliances
Identifying Web Presence Goals
• Businesses always create a presence in the physical world
by building stores and office buildings.
• On the Web, businesses have the luxury of intentionally
creating a space that creates a distinctive presence.
• 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
Making Web Presence Consistent with
Brand Image
• Different firms, even those in the same industry,
might establish different Web presence goals.
• Coca Cola and Pepsi are two companies that
have developed strong brand images and are in
the same business, but have developed different
Web presences.
• The Web presence conveys the image the
company wants to project.
Achieving Web Presence Goals
• An effective site is one that creates an attractive presence
that meets the objectives of the business or other
organization.
• Possible objectives include:
– attracting visitors to the Web site
– making the site interesting enough that visitors stay and
explore
– 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 the company
The Toyota Site
Not-for-Profit Organizations
• A key goal for many not-for-profit organizations is
information dissemination.
• The combination of information dissemination and a twoway contact channel is a key element in any Web site.
• 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, they often built simple sites that conveyed
basic information about their business.
• The failure to understand how the Web is
different from other presence-building media is
one reason that businesses fail to achieve their
Web objectives.
• Firms must use the Web’s capability for two-way,
meaningful communication with their customers.
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 with a wide range of motivations can be
challenging.
– 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
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.
Rating E-Commerce Web Sites
• Two companies routinely review electronic
commerce Web sites for usability, customer
service, and other factors.
– BizRate.com provides a comparison shopping
service and offers links to sites with low prices and
good service ratings for specific products.
– Gomez.com provides scorecards for electronic
commerce sits in specific categories.
Usability Testing
• Firms are now starting to perform usability
testing of their Web sites.
• 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.
Connecting with Customers
• An important element of corporate Web presence
is connecting with site visitors who are
customers or potential customers.
• Mass media is a one-to-many communication
model, the Web is a many-to-one communication
model, and personal contact is a one-to-one
communication model.
Connecting with Customers
• The Web is an intermediate step between mass
media and personal contact.
• Using the Web to communicate with potential
customers offers many of the advantages of
personal contact selling and many of the cost
savings of mass media.
Summary
• We have looked at:
• Revenue models for selling on the Web
• How some companies move from one revenue model to
another to achieve success
• Revenue strategy issues that companies face when selling
on the Web
• Creating an effective business presence on the Web
• Web site usability
• Communicating effectively with customers on the Web