Seneca College, Toronto, Main Page

MGS 523 

Introduction to Electronic Commerce 

Seneca College, Toronto, Canada

November SECTION

Outline A
September
Outline B
October
Outline C
November
Outline D
December
.
Product
Price
Promotion
Place/Location
 
. Before we move on to discuss "Promotion" in Internet Marketing it would be responsible for us to refresh what Promotion in conventional marketing terms means
  • Mass Selling
    • Advertising [paid promotional activities]
    • Publicity [non-paid promotional activities]
  • Personal Selling
    • Sales account executives selling products/services to business
  • Sales Promotion
    • brand managers working with retailers to merchandise the product
    • contests, coupons, reward programs
The Basic Promotion Objectives, according to traditional marketing, are 
  • Informing 
  • Persuading 
  • Reminding 
WTGR
..
. Another way of looking at Promotion.
The key here is not be so focused on shouting out about your product - but rather listen to what people want to hear, then give them the message in a way that will be accepted.


In MGTD06 we will introduce a concept in the world of online marketing which many might agree to, but few follow.
promotion = communication
communication = listening
listening = hearing 
© WTGR

To be successful in attracting traffic, using a good domain name and brand building, you need to be more effective at hearing what the customer wants.

WTGR

.
 
Chpt 6
The "Marketing Communications Mix"
AKA promotional mix

"... you must tell people how to find you online"
"include your email and Web URL in every traditional marketing activity"

"find new places and ways to publicize your Internet presence that you haven't included in your programs until now"

Media Planning With Internet Resources page 144

Traditional Advertising and the Internet page 145-149
- a good list showing advantage of each medium
 

.
 
Chpt 6
Banner Ads page 149-151
.
 
online ads.

Internet Ad Types
What types of Internet ads are there and which kinds work best?
by Bruce Morris 
Morris describes the different types of online advertising - of which online ads are just one component
The article "different types of ads" can be found at
 www.webdevelopersjournal.com/columns/types_of_ads.html
this article is one of several in a series.
The 5 part series by Morris is titled
  • Personalization
  • Are banner ads going the way of buggy whips?
  • What are the problems for going forward?
  • What types of ads are there and which kinds work best? (the one we are referring to here)
  • How do I get some of this for my site? 
The complete range of internet advertising can be listed as follows
  • "Regular Old" Banner Ads
  • Rich Media Banner Ads
  • Mailing Lists & Newsletters
  • Sponsorships
  • Interstials
  • Keyword Advertising
  • Coupon Deals
  • Pay Per Click or Pay Per Sale
  • Reminder Programs & Ad Auctions
.
online ads.
Susan Stellin writing in the New York Times
as carried in the Toronto Star 26Dec2000

"Like it or not, Web ads gain currency"

This article, which was carried in The Star Dec 26th, 2000, discussed interstitial ads.
interstitial is a term used in medicine to describe something between the cells, or between the layers. In online advertising, this term interstitial ads has been coined to describe those ads that pop up in your browser window as you proceed to see a new page - the ad stays there blocking the other material until you close it which is annoying - but effective since you have to notice or you can't see the other material.

Susan Stellin writes that even of we don't like this, companies will still do it because it seems to be effective. Stellin quotes a number of people in the article that talk about there various experients running interstitial ads and the main point seems to be that you have to focus these on a particular segement and the content within the interstitial ads has to be pretty kewl otherwise people just find it annoying.

.
online ads.
By Kevin Featherly, Newsbytes,  14 Dec 2000,

"Web Ads To Make Content Sites Profitable By 2005 - Forrester"
 www.newsbytes.com/news/00/159427.html

Featherly notes that "... Dot-com news, music and entertainments sites have been laying people...a new report by market analysis firm Forrester Research predicts that if such companies can hang on for just two more years, profitability will arrive. And the oldest media revenue source - advertising - once again will step in as the savior."

Feathjerly quotes Forrester media analyst Eric Scheirer
"it's very difficult for sites that are advertising-based to be profitable today. But that's changing, and very rapidly"

"Says Scheirer, as advertisers continue flocking to the Web to get the word out about their products, they will be forced to compete for many of the same "super-target" online content pages - search-query returns on Yahoo and the shopping-bot results on the MySimon.com site are two examples. But not all advertisers will be able to schedule ad appearances on those pages, nor will they wish to pay the high price those ad slots will fetch, according to the Forrester report.  Instead, the study says, the trickling will begin. Just below the "super-target" site grade  lies what Scheirer labels "premium" site pages, well-contextualized pages of content designed to work with targeted ads"

"There is no doubt, the analyst says, that the current picture is bleak, and that many online publishers could be convinced to throw in the towel now....But patience will bear fruit, the analyst insists."

.
online ads.

Banner Advertising Statistics 
"Measuring the Effectiveness of Online Campaigns"
by Charlie Morris 
This article is in five parts: 
 www.webdevelopersjournal.com/articles/banner_ads/banner_advertising_statistics.html
                       1.Introduction 
                       2.Comparing Clickthrough Ratios 
                       3.Comparing Costs 
                       4.Comparing Conversion Rates 
                       5.Comparing Your Stats to the Averages 
     
    . Often what happens when people try a new technology or process is that they adopt it and hope it will be successful - without having any certain way to verify whether the particular innovation actually adds to the effectiveness of what they are trying to do. In considering new forms of advertising online - it is important to deal with the issue of measuring the effectiveness of the various new methods to be able to clearly verify what works and what doesn't - and, this verification should be done soon in the campaign so you don't waste millions of dollars on something that doesn't work..
Some people have suggested that the anonymity of people browsing may make it difficult to measure the effectivess of online advertising however Charlie Morris points out otherwise.

Morris says "Online advertising is in fact an easy thing to measure and quantify. The Internet can provide a level of detail that no other medium can ever hope to. The online advertising business is a more mature one than many people realize, and the tools to measure the effectiveness of banner ad campaigns are there for those who know how to use them."

"Banner ads, as far as we're concerned, are sold by the page impression - each time a user views one Web page is counted as one impression. Prices are quoted in "CPM", a holdover from print ad days which means "cost per thousand". For example, if the CPM for a particular campaign is $20, then it would cost $2,000 for 100,000 impressions."

Morris explains "Banner ads yield two benefits

First, they may entice users to click on the banner and go to the advertiser's site. Each time this happens is called a "clickthrough", and the number of clickthroughs divided by the number of impressions is called the "clickthrough ratio" or "click rate". This is easy to measure, and provides a direct measurement of a banner's effectiveness.

The second benefit of ad banners is building brand recognition. Despite ad agency claims to the contrary, this is almost impossible to measure."

.
online ads.
     
    . So if we understand online ads, and if we know the theory of how they work, question is - should SMEs use them?

    Most e-business that is being build in 2001 is by small and medium sized enterprises, the big companies have all got their web sites up and running by 1999.

    So they e-business that is developing in 2001 is mostly from smaller sized companies with more limited marketing budgets - and these are companies that are wary of the mistakes made by some of the bog dot.coms in 2000.

    The question we will deal with in this following article, also by Charlie Morris, is if you decide to spend money on online ads, what is it that you should do?

    .

"Sell ads on my site?"
by Charlie Morris 
 www.webdevelopersjournal.com/articles/sell_ads_on_my_site.html

Morris begins by stating that "thanks to the huge number of ad networks and affiliate programs out there, practically any Web site, no matter how small, can sell advertising. Thanks to  the lubrication of computer networks, the world economy has reached a point at which you can buy or sell almost anything in any quantity, large or small."

The reason that it is helpful to look at this particular article by Morris, is because of the useful list he compiles of the downsides to having ads on your site.

Morris says "the tiny amount of cash you would receive from selling ads isn't worth the drawbacks"
These are some of those drawbacks noted by Morris

  • It takes a certain amount of work to get them set up and keep them running,  although with an ad network, this work is minimal. 
  • Like any other graphics, banner ads take time to load, thus making your pages slower and discouraging some visitors. 
  • Ads clutter up your pages. Who wouldn't rather have a page without ads? 
  • Ads send a certain number of visitors away. Many of those who click on a banner ad won't return to your site. 
.
Chpt 8

 
 
 
 
 
 
 
 

Chpt 8

 

"Measuring the Effectiveness of Web Site Advertising"
page 298 in the Schneider/Perry book

"As more companies reply on their web sites to make a favourable impression on potential customers, the issue of measuring web site effectiveness has become more important"

     
    . We need to be able to get a grasp on measuring the effectiveness of promotion online in order to be able to
    • justify the cost in terms of new customers obtained
    • determine the results, compared to traditional methods
    • track results so that the activity can be altered or changed if it isn't working
    WTGR
Measuring the effectiveness of traditional advertising has been done in the 1990's and 1980's through different processes.
Some people who are experts in this field use numbers related to 
  • audience size - if it is broadcast [TV or Radio]
  • circulation - if it is advertising in a periodical
  • number of addresses - if it is postal related, ie. flyers in mailboxes
  • and other formats
Traditionally when people buy advertising, they buy it from people who can "deliver"
  • 10,000 addresses of people in a town
  • 25,000 listeners in a radio program
  • 40,000 readers of a community newspaper
The pricing is based on cost per contact - the term most often used was CPM - cost per thousand
.
. Before we move on to discuss "Branding" in the context of Internet Marketing it would be a good idea to review briefly the basic concepts of branding as understood in traditional marketing.

Brand Equity
- the value a brand has
- from existing products (sold in a "brick" situation) now being sold on WWW
- for new products with no "brick" presence
Brand Association
- the favourable relationship marketing people hope becomes established with a product, eg. Nike-Jordan, 

  • Brand Recognition
  • Brand Preference
  • Brand Loyalty
  • Brand Insistence
- slides  54 - 72 brands, brand preference, brand loyalty, generic brands, trademarks

The Key Elements of Branding

  • differentiation
  • relevance - the degree to which the product can be seen by the customer as having usefulness
  • perceived value
WTGR
..
.
Chapter 3
In Chapter 3 of David Siegel's book, he makes the important point on page 31 that
"... in Internet time, brands are less sticky than you might think. It takes more effort to maintain an online brand than an offline brand"

Siegel cautions that in the "customer-led future, company brands will weaken significantly because companies will be pulled apart by their customer divisions, they should plan on restructuring and promoting product or even division brands"

well, in several cases, this is indeed already true among several consumer product companies. Toyota promotes the Lexus brand as a distinct luxury brand to disassociate itself from the mass market low price appeal of the average Toyota line-up
WTGR

...

Chapter 7
chapter 7  Why brand-build on the Internet

the authors discuss

  • a brief introduction to the concept of brand building
  • the value of a strong brand to the producer
  • the value of a strong brand to the consumer
  • brands and trustworthiness
  • brand equity
  • global brands
  • the benefits of two-way branding
  • the increase in the interest in the individualism of communication (which could also fit in the CRM - Customer Relationship Management section of IEC)
. The authors in "Brand Building on the Internet" discuss the question of increasing the individualism of communication.

This subject has developed in response to the trend for people to be less and less loyal to popular media and advertising. While the amount of TV we watch has increased from 15 to more than 25 hours a week (on average) the amount of times we flick channels has increased very sharply - meaning, simpy, we are avoiding long drawn commercial segments by watching two or three shows concurrently on different channels. As a consequence, we are effectively ignoring the TV commercials and the message is less and less effective.

Therefore, the large advertising agencies have been hopefully looking to the Internet as a medium in which advertising can be done in such a way as to have more individual contact with the viewer and therefore have a greater impact, which would eventually lead to a purchasing decision.

Companies who are going through a corporate reengineering process should recognize the opportunities available in online promotional and advertising and forgo some of the situations they have in traditional advertising, which have proven to be ineffective related to the cost involved.

WTGR

.
..
Chpt 8
"Elements of Branding"
page 305 in the Schneider/Perry book

"Marketers are attempting to create and maintain brands on the web by using rational branding. Companies that use rational branding offer to help web users is some way in exchange for viewing an ad.
Examples of Rational Branding include the free email service that yahoo;com and excite.com give people - which can only be utilized after vieiwng the ads.
 

.
The key elements of branding, which Schneider and Perry quote from ad agency Young & Rubicom
  • product differentiation
  • relevance
  • perceived value
The elements of branding as listed by Martin Lindstrom and Tim Frank Andersen
  • role
  • personality
  • achievement
  • brand backup
.

Chapter 8
chapter 8  Strategic building up of brands on the Internet

the authors discuss web segmentation

     
    . why segment? because most people believe that when they put text and images up on their web site, they are therefore communicating with everybody in the globe - this is not true. There should be a specific effort to target the material to a demographic which best fits your "perfect customer profile". You should do "target market segmentation" online just as you would do it offline in a traditional marketing situation.

    WTGR

  • Lindstrom and Andersen say (page 138) that 
    • "If a precise target group can be defined, it is likely that a personal dialogue with the users can be achived. This corresponds to a traditional dialogue where the fewer participants, the better the interaction and identification"
  • segementation of the users on the Internet
    • Lindstrom and Andersen say (page 139) that one of the overlooked potentials is the ability to invite viewers to a site to browse through, after selecting a route based on age and gender - this simple segementation can make a big difference for companies in the areas of some products such as clothing and entertainment - yet few sites do this.
  • strategic considerations regarding brand attitude
  • development of the brand platform
  • the four key brand elements
    • role
      • what is the purpose
      • how can it help consumers
      • what role will the brand have in the consumer's life
    • personality
      • what is the look and feel of the brand
      • what personality would the brand have if you described it as a real-life friend
    • achievement
      • how is the brand differentiating from competitors
      • what unique benefits does the brand offer consumers, compared to the competition
    • brand backup
      • what background, history or inventors prove the brand is clearly is trustworthy
  • web brand building
  • measurement of the communication value of the web site
  • Lindstrom and Andersen say (page 172) that 

  • "to date, the most frequently used quantitative measurement of a website's success has been the number of hits... these figures tell us nothing about the actual quality of the website. At a pinch they tell us something about how good the company has been at creating traffic... the quantitative goals should be based on a number of measurable parameters which can describe the quality of the communication on the website  ... goals should be set for
    • the number of repeat visits
    • the number of minutes the visitor spends per page
    • the number of minutes the visitor spends on the website's main activities
    • the user's behaviour at the website
      • which links/images are clicked on in what order
      • does this match what the layout intended
    • the number of emails received
    • the website's turnover and income
. ..
Establishing Brand Presence
http://www.chaseonline.com/marketing/
Larry Chase wrote a book titled "Essential Business Tactics for the Internet" (ISBN 0-471-25722-2). In this book are several good chapters on brand image, including one particular chapter #5 "Your Brand Image and the Internet". Chase is quite an authority on the subject and he makes the following observations.
It is not just big companies that worry about building brand image.

Don't obsess over your domain name, its important - but not everything, company names change (eg. Mosaic/Netscape)

  1. The key to establishing brand on the net is reputation
  2. Don't try to brand to the whole WWW, it's too big
  3. Focus on some niche markets - tribal marketing
  4. Contribute to your tribe - give people something free that is of value - get publicity for doing this
  5. predict what customers to your site want - give it to them easily with no BS
Six Tips For Attracting Traffic to Your Site http://www.chaseonline.com/marketing/
attractraffic.html
 
.
Brand 
Building

examples

 

Brand 
Building

examples

Migrating your company's image online
- some things are easy, some things are difficult (eg. Tide)
 
http://www.clothesline.com/ - in the case of products that are bought 99% in person, you can still provide  useful web  site that discusses how to better use the product
- TIDE also uses the web site to emphasize how they are involved in the community of their key target markets
 
.
Chpt 8
How Corporate Identity Guidelines Change Online
page 219

"The ability to create special effects in HTML, such as those afforded by the use of wallpapers, may create readability or recognition problems when used alongside your company logo or wordmark"

 

.
 
Chpt 8
"The true measure of a company's market identification is in its recognition"
page 217

Corporate Identity Guidelines Change Online
page 219

"The ability to create special effects in HTML [and javascript and flash] ... may create readability or recognition problems when used alongside your company logo or wordmark"
 

.
 
. In MGTC50 we will talk about the technical and business aspects of "getting" a domain name, such as registering and hosting. In MGTD06 we will discuss the marketing aspects of having a domain name.
 
MGTC50 MGTD06
Registration
Hosting
The new name endings available
CIRA Canadian Internet Registration Authority
Internic.ca
Network Solutions
A new definition of place 
delivering traffic to the site 
legal issues
Domain Name disputes
scams and ripoffs
WTGR
.
Chpt 8
Unique Domain Name
page 224

"One of the biggest areas of corporate identity confusion on the Internet is in the area of domain names ... domain name confusion can be the source of lost revenue or a damaged reputation for many organizations"
 

.
 
Domain 
Names
Domain Names
(a new definition of "place")
 http://www.GreatDomains.com/valuation.asp
"Ultimately, the value of a domain name is driven by its ability to deliver traffic and revenue to a business. This determines how much a company would pay for a domain name"

If the name you want is already taken as a domain, think of a solution name that people can remember, such as www.earache.comif you're into noise.
 
 

Tom Siebel writing in his book Cyber Rules makes a particular point of explaining the importance of developing awareness of the URL/Domain name. Siebel says "the name of the game right now is not revenue, but exposure ... many internet experts say that the battles for name recognition will be won and lost over the next three years [1999-2002] because the greatest growth in the user base willoccur during this time as more and more customers turn to online buying"

Therefore it is critical to "lock in" customer awareness of key words and phrases in order to build loyalty and catch the tip of the wave of the early momentum
WTGR

In Chapter 4 of Siebel's book, there is an interesting section titled "Who owns your company's name"

Siebel recounts the story of www.ringlingbrothers.com
http://www.ringlingbrothers.com/
which Siebel says was in fact not originally owned by the circus but by an animal-rights activist organization PETA - People for the Ethical Treatment of Animals, who used it to condemn the mistreatment of circus elephants. Siebel notes that in 1998 acourt decision gave the name to Ringling Brothers, whereupon PETA moved to www.circuses.com. PETA itself was the victim of name appropriation says Siebel when somebody registered www.peta.org in 1996 to publicize their satire of "People Eating Tasty Animals". Network Solutions eventually ruled that neither he nor PETA could use it so the squatter formed the Domain Name Rights Coalition.

People making money selling domain names
 http://www.rmsmith.com/html/buy_rent_domain_names.htmleg. www.petme.com
.
.
Domain 
Names
.
the
strategy
of holding
certain
names
Not everybody is trying to obtain all the names relevant to their business and hoard this for future use. A Reuters story in the summer of 2000 noted that giant consumer products company, Procter & Gamble had decided to sell off some names they were no longer going to use and P&G was going to sell these names through an auction process to the highest bidder.

Some examples of the names they were selling were
 
romantic.com
sensual.com
beautiful.com
sensitive.com
flu.com
scent.com
cleans.com
nails.com
etc.
read the press release from P&G's website about their domain name selloff
 

. The sell off by P&G represents perhaps, a maturity in thinking about domain names - that being the understanding that people are not stupid when they search for information on the net; they don't type in flu.com and expect all the answers to be there. However, in the beginning of the gold rush to secure rights to domains, it was considered critical to "collect" all the ones relevant to your business.

WTGR


Interestingly, a Dr. Proctor, who spells his name slightly differently, owns the domain www.proctorandgamble.com and on his sight makes comment about how procterandgamble.com poached a large number of domain names many years ago - but they forgot about misspellings !!

For a very interesting perspective on P&G's collection of names, read the critique at
 http://www.proctorandgamble.com/pgurls.htm
by Dr.Peter H. Proctor
 

.
 
 
Examples of companies trying to develop "product evangelism" by creating a community around the brand and other "especially innovative and exciting" situations Beverage companies do not sell beer, ice tea and cola on the net, why do they have web sites and what do they use them for?
http://www.snapple.com/
locations where you can buy Snapple worldwide
http://www.snapple.com/home.html
Snapple, in trying to compete against the Cola giants, Pepsi and Coke is trying to use their web site and other promotion to turn customers who are at the brand insistence stage into "evangelists". The point being not only will these people be faithful drinkers of the beverage line, but that they will be "fans" and encourage other people to drink the products.
How do you facilitate their development of fan status - by giving them kewl screen savers, let them order merchandize with the logo, win prizes, enter contest etc.

Snapple can also use the online site to gather specific name and address information of loyal customers which they will use in "direct mail" campaigns in ensure


http://www.iam.ca/all_access/content.ghtml
Molson indy page

In April of 2000, Molson's got much more reaction than it expected when it launched its TV commercial "I Am Canadian".
The web site
 www.iam.ca
on which the commercial is downloadable became, according to some accounts, the number #1 downloaded feature on the web for Canadian surfers in the spring of 2000. 

At the I AM website,
 http://www.iam.ca/touts/iam.ghtml
people can get an email address such as joe@iam.ca or joe@onlycanadian.com or joe@canadianrocks.com 

The questionnaire which you fill out to get the free email includes the statement
"we are always trying to learn more about you and your interests in order to provide the best and relevant community for Canadian beer drinkers..."

Such customer profiling techniques were done by the American cigarette companies in the 1980's in order to develop long-term brand insistence - however it was expensive to do that then due to the amount of free merchandize you had to give away - "kewl" web sites allow this customer profiling to be less costly and you can create communities of customers that in turn create a dynamic that can be very exciting

The National Post picked up on this story of Molson and their I AM CANADIAN ad and accompanying web site and ran a story by Jonathon Gatehouse on the patriotic fervor created
 http://www.nationalpost.com/home.asp?f=000414/259024
 

.
 
Customer
Relationship
Management

within
Online
Communities

One thing the medium and larger sized companies are trying to do in their Customer Relationship Management is maintain loyalty (leading to future repeat purchases) by fostering communities of customers.Click on the truck to go to a good example of how Ford fosters an on-line community through an extensive web site.

 
Chapter 7
"Expanding relationships through Worldwide Internet Communities"

"One of the most successful business models to emerge and capitalize upon the Internet's capabilities is the creation and maintenance of Internet Communities."

Key Elements of any Virtual (Online) Community

  • Community Members
    • try to create among the members a sense of ownership - that they have control over what the community does
  • Community Organizer
    • Sometimes this is technically focused - a person from an ISP, sometimes this is corporate based - a PR person from a company that produces the product in question eg. barbie.com
  • Guiding Principles
    • rules and regulations by which people interact
  • Interactivity
    • the ability to connect and speak with others through postings, chat, thumbnail galleries, etc.
    • keep barriers to entry low
    • inspire participants to be involved for a long time, thereby building "product evangelists"
Types of Communities
  • Geographically Based
  • Age-based
  • Support-based
  • Activity-based
    • sports teams
    • outdoor activities
    • games played
    • books read
    • personal opinions of movies
    • etc.
Including Activities in your Business Strategy

Rockwell has a section in Chpt 8 about communities in the busiess strategy. He makes the point that "rich content and a well-researched, targeted context make a site compelling, but it is the community element that makes a site a part of a person's life worth visiting repeatedly"
 

. This is not a new thing for online business - companies have been "community" focused long before the internet ; whatthe internet does however is greatly enhance the communication among members of the community and communication is often one of the key reasons members get together.
WTGR
.
 
.
 
Chpt 8

 
 
 
 
 
 
 
 

Chpt 8

 

"Technology Enabled Relationship Management"
page 300 in the Schneider/Perry book, 2nd Edition

"The nature of the web, with its two way communication features and traceable connection technology, allows firms to gather much more information about customer behaviour and preferences than they can using micromarketing approaches"

"Technology Enabled Relationship Management occurs when a firm obtains detailed information about a customer's behaviour

  • preferences (where the click on a site, what the spend time looking at)
  • needs (they have Windows 98, Windows ME)
  • and buying patterns (frequency, amount)
and, uses that information to 
  • set prices (offer discounts to repeats, or, like Amazon does, avoid discounts)
  • negotiate terms (30, 60 day payments)
  • tailor promotions (free upgrades, add ons, servicing)
  • add products and features (cross selling and upselling)"

  •  
    . So we have a classic case of how technology is facilitating business in the "Information Age" by allowing vendors to do things which will contribute to the CLV of each customer.
    (CLV - Customer Lifetime Value)
    WTGR
.
Technology Enabled Relationship Management = CRM Customer Relationship Management (with some qualification)
 

Technology Enabled Relationship Management would, strictly speaking, apply to customers, vendors, partners, government agencies - anything you want to have a better relationship with, using technology such as the internet

As Schneider and Perry explain on page 300, the term Technology Enabled Relationship Management is not so often used and it is more common to speak of Customer Relationship Management - that is to say using the internet to facilitate longer term relationships, and more profitable relationships with customers by using internet situations - and, like many things since 1998, you can use an "e" prefix and call it eCRM

.
 
http://www.ecrmguide.com/ This is a good portal - which covers many eCRM topics

.

Chapter 10
Chapter 10 "Online Communities - the virtual marketplaces of the future"
 
 
. The premise of online communities is "beyond geography".

As more and more of the population in North America and Europe gravitate to urban and suburban centers with the concepts of neighbours and neighbourhoods being eroded by transiency and mobility, many people are developing relationships that are not related to, and dependent on, their geographical location.

Communication technology developments have made it possible for people to create and sustain personal and business relationships which cross far distances. While this absence of a geographical requirement has freed people to engage in more relationships unbound by distance, it has also fostered a reduction in the former close relationship held between vendor and customer.

The Internet is a recent development in communications technology that allows geographically distant relationships to not only be sustained, but in fact thrive due to the particulars of the medium. Low cost frequent transmission of images and text can great a closer relationship between people and lead to a sense of "relationship" that was not previously possible.

And so it is the case that Online Communities (which started in the chat rooms and other personal communication forums) have been picked up by online organizations as something to nuture since it leads to creating that close relationship with the customer that had been lost when we went from small towns to big cities.

WTGR

.
"Why communities are so interesting to companies" page 203-205
  • concentration of customers "It is extremely useful to own these communities as by their very presence the members provide a mass of relevant information which makes targeted marketing possible"
  • "members' profiles tell a lot about their interests and needs - which is information companies can utilize in their communication and product development"
The Five Basic Needs of online communities page 212
 
  • Interest - there must be content which attracts participants and usually you plan your content based on the fact that this information cannot be obtained any other place
  • Information - there must be volume of information indexed and searchable to cover every conceivable requirement so that participants will not be drawn outside the community to other sources
  • Interaction - the ability to work interactively with the content helps create a sense of ownership among the participants. Ideally you want them to be contributors to the building of the community, not just people reading information posted on the pages.
  • Communication - there must be structure to the pages on the site which allow for message to be left and answered and there must be clearly marked contact information for the hosts so participants can be in contact with the site builders. If the community involved testimonials about experiences with a product or service the people providing the testimonials should not be selected unless they agree to provide real emial addresses, and further agree to answer emails from the community
  • Transactions - many communities are based on customers of a product who are very enthusiastic owners. These people are not content to own the product but they also want everybody else to know they own it - which is evidenced by the rise in North America and Europe of product brands in clothing eg. Ford trucks T-shirts, Nike wrist watches, Online communities are a great source for affiliated products and services in addition to the core product.

  • Eg. you wouldn't sell a Harley Davidson motorcycle on the Harley site, but you do have a selection of clothing and relatively inexpensive accessory items which you can buy.
     http://roadstore.harley-davidson.com

The Harley site, like many up and coming corporate web sites, is endeavouring to track visitors and collect demographic information by inviting frequent visitors to the page to sign up and login for access to special features. By offering rewards to regular visitors to the site, Harley is building loyalty and also increasing the opportunities to upsell and cross sell within the range of accessory items online.
.
Online
Communities
as part of
CRM
http://www.cabelas.com/
a giant sized U.S. based hunting, hiking and outdoor equipment, supplies and services company

Their extensive web site enthusiastically fosters online communities 
 www.cabelasoutdoors.com/community/
and they have a professional e-comsulting company that handles their community.

e-companies creating online communities for consumer product companies
http://www.participate.com/

"Online communities are groups of businesses, customers or  employees with common interests that interact via the Internet.  Communities allow companies to get much closer to their most    important customers through innovative programs that inspire  participation such as member-generated content, events,  member-to-member interaction and outreach efforts."


"Whether the focus is business-to-business, business-to-consumer or employee-to-employee, online community enables companies to achieve measurable business benefits. That's because online community, if managed effectively, allows businesses to:"
from participate.com's website


"Every online community has four distinct stages. 

  • create
  • convert
  • participate
  • evangelize
The first two stages depend on the traditional marketing and product decisions  a company makes. It's in the third and fourth stages - driving  participation and encouraging evangelization - that online communities contribute the most value."
 http://www.participate.com/why/index.asp#null
.

http://www.witiger.com/ecommerce/Amazon.htm

.

click to see the full section
.
 

"There is nothing more difficult to take in hand, more perlious to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things"
Nicollo Machiavelli sixteenth century Florentine philosopher
.
 
. The e-commerce business model is a direct result of the drastic changes effecting the previously well known versions of traditional business models - these versions are being stretched by many "exceptions" caused by globalization and technology - this stretching has caused the traditional business model to be almost unrecognizable due to the many additional allowances we have to make for the "e" age

WTGR

"it is getting harder for companies to deliver profitable growth on a sustained basis. It is also more difficult for many companies to hold their  ground and not fall behind. The key reasons include the dramatic increase in complexity in managing business and the increasing premium put on innovation. The complexity is due to significant and irreversible changes in  the business environment. The pace of business is accelerating beyond the ability of most corporations to  adjust. "
 http://www.strategy-business.com
/research/96201/page1.html
this article from the well-known consulting firm
Booz-Allen & Hamilton about changing business models, is divided into 7 pages online, which print out to about 12 pages if you want a hard copy

.
. Several of the texts we use in this course discuss Web Business Models. Some discuss the model in terms of 
  • what type of business they do, 
  • some discuss it in terms of how they are structured, 
  • some in terms of how they make money.(eg. provider based, user based) 
  • Some even go so far as to say the goal is not to make money, but capture market share and the model is based on that assumption.


WTGR

.
Hanson: Principles of Internet Marketing   Chpt 5   Web Business Models (not a required text)
 http://simi.stanford.edu/hanson/chapter5.html

Revenue based business models p. 131- 132 Hanson text
Hanson says of revenue based models, "the major split is between cases where providers pay for service and those where users pay"

  • Provider based revenue models
    • fees are paid to the web site by the companies wanting to read the people using the site
    • examples are the search engines that have become portals and have income driven by selling advertising space on their page which will be seen by people using the search engine to find information
  • User pay based revenue models
    • Hanson says revenues from transactions are the fastest growing benefits of being online (p. 137)
    • Hanson connects user based models to B2B sales
.

1st edition
http://www.course.com/downloads/sites/ecommerce/ch08main.html
 

Business
Models

 

2nd edition

Business
Models

 

1st edition
http://www.course.com/downloads/sites/ecommerce/ch08main.html
 

Business
Models

 

2nd edition

Business
Models
 

 

Schneider/Perry Electronic Commerce
 
 
. In both their First Edition and their Second edition, Schneider and Perry have three chapters that are titled with the word "Strategy ..."

For this section of the course, we will concentrate on Chapter #8 
Strategies for Marketing, Sales, and Promotion  there is a section (also on the web site) titled 
Business Models for Selling on the Web  see         www.course.com/downloads/sites/ecommerce/ch08main.html
WTGR

.
http://www.witiger.com/powerpoints/schneiderperry2edition/ If you want to get the powerpoints for this chapter - from the 2nd Edition, they are on the witiger.com site under the sub-directory powerpoints, click on the screen capture to the left
.
Chapter 8

the models described herein are

  • Sell Goods and Services
    • following the hope that a small company could sell product to people anywhere in the world, just as long as Fedex or UPS ship there, and if the credit card they gave for the purchase is good
  • Sell Information or Other Digital Content
    • this model has been very successful for some companies since they do not have to worry about shipping product (a weakness of many companies selling physical goods online) - but they do have to pay high costs for bandwidth charges if thousands of people are downloading content off the site
    • some of these business are completely new to the information age eg. web sites selling screensavers and wallpaper, others are reconfigurations of older businesses, eg. stock market info or sports teams info
  • Advertising-Supported
    • commonly used by TV, newspapers and magazines
    • Schneider and Perry comment that this model was seen, in the early years to have great possibilities, but since then it has been "hampered by two major problems"
    • no consensus reached on how to measure and charge for site visitor views
    • very few web sites have sufficient numbers of visitors to interest large advertisers
  • Advertising-Subscription Mixed Model
    • subscribers pay a small fee, and accept a modest level of advertising
    • New York Times newspaper  www.newyorktimes.com  is a good example - most of the content is free online, but if you want to access the crossword puzzles, you pay a small fee
  • Fee-for-Transaction Models
    • common with travel agencies 
    • the structure works when someone provides a service to another business of gathering disparate information, consolidating it, filtering it, and re-selling it to another business so that easier and faster decisions can be made
    • also starting to be used in the automotive industry among wholesalers and parts suppliers
    • common also with online stock brokerage firms
. You could also further subdivide these models into 
  • business to business, 
  • business to consumers, 
  • business to government, 
  • government to consumers, 
  • government to government, 
  • government to business.
WTGR
  • .

  •  
    main link for the books web site

     

    Turban: Electronic Commerce: A Managerial Perspective, is not a required purchase, but it does have several chapters that mirror topics we discuss from other texts in this course + it has an accompanying web site + dowloadable .ppt slides for each chapter

    Internet Business Models 
    - series on online Powerpoint slides at
     http://www.prenhall.com/divisions/bp/app/turban/cw/ppt/
     go to Chapter 2, slide 9

    The following are the "perspectives" that compose the e-business models, according to the book's authors

    • Direct Maketing vs Indirect Marketing
    • Full Cybermarketing vs Partial Cybermarketing
    • Electronic Distributor vs Electronic Broker
    • Electronic Store vs Electronic Shopping Mall
    • Generalized E-malls/stores vs Specialized E-malls/stores
    • Proactive vs Reactive Strategic Posture toward Cybermarketing
    • Global vs Regional Marketing
    • Sales vs Customer Service
    .

    ....................
    Virtual companies as a business model
     
    . Virtual companies as a concept are not new, in fact they are very old - the only thing that is the use of the adjective "virtual" and the technology which facilitates communication among the corporate components.

    Virtual companies are essentially a special way that people provide capability to clients. Instead of having to possess all the capability that all your clients need all the time, virtual organizations consist of networks of affiliated people (specialists) and organizations which, depending on the project, will get together to provide a solution to a client which one of the people in the virtual network has.

    The reason this type of structure has become spoken off in the category of business models in the year 2000 is because it allows individuals and small sized organizations to bid on tasks that may be beyond the capability of the originating consultant - yet, can still be "handled" because the consultant has, through affiliations, friendships and alliances, a virtually larger capability which can be brought in to handle a larger situation.

    WTGR

    .

     
    http://album.yahoo.com/shop?d=ha&id=1801682881&cf=10 Virtual companies as a business model
    .
    Virtual companies are not just contained to the IT business world but exist in many types of formats in business throughout the globe. One example of the diversity in applying virtual companies as a concept is the famous rap group Wu-Tang Clan.

    As TIME magazine noted, (Dec 11th issue, 2000) "The Wu-Tang "brand" blossomed in 1993. Each member of the group periodically goes off and does some solo project from which they develop additional capability and experience, at the same time keeping public their alliance and affiliation with Wu-Tang. The "brand", in the form of the bands members, continue to also put out products under the bands name as well in order to maintain the value of the "base" of their individual reps.

    The strength of the company, as explained in TIME, is "... maintaining just a small core and outsourcing everything else."
    Wu-Tang is a conglomeration of rappers that includes

    • Robert Diggs AKA RZA
      • his interview with TIME  www.time.com/time/sampler/article/0,8599,88614,00.html 
      • for those of you that don't know much about the "business" of rap and hip hop, this is a fascinating interview which exposes just how "business" oriented these people are to market share, branding building, product diversification etc.
      • Diggs "my original strategy to have artists placed in different locations, then get those different labels to work together for my brand"
    • Michael Diggs AKA Divine
    • Method Man
    • Masta Killa
    • U-God
    • Raekwon
    • Inspectah Deck
    • GZA
    • Ghostface Killah
    • ODB AKA Ol' Dirty Bastard
    • Cappadonna
    The band members have so many sites devoted to their activities that Yahoo has devoted an entire Yahoo category to them 
    http://dir.yahoo.com/Entertainment/Music/Artists/By_Genre/
    Rap_and_Hip_Hop/Wu_Tang_Clan/Band_Members/

    "Everything else" is their forays into video games, clothing, comics, movies and many other constantly new and evolving merchandise crossing over and back into music, video, movies and the internet.
     

    http://www.ninerings.net/ Wu-Tang website for their new comic book
     http://www.ninerings.net/
    http://www.activision.com/games/wutang/ Wu-Tang website for their kung fu game
     http://www.activision.com/games/wutang/
    Disclaimer:
    The author of this web page, and website does not necessarily advocate or subscribe to the lyrics, imagery or lifestyle associated with Wu-Tang Clan, [which some may find objectionable] or any other musical group noted herein. The purpose of noting this organization is strictly in the context of exploring the great diversity of business activity which is online, and reflects the diversity of business globally. The entertainment industry is often the particular area of business that adopts new technologies for creating "content" and sharing "content", yet many traditional business academics still choose to use examples from consumer product companies when discussing new ideas. The author of this website chooses to explain examples a bit differently !
    .
     
    In this section on shipping, there is reference to a text that is not specific to MGS523 - you do not have to buy this text; most of the information is "cut & pasted" below

    WTGR


     
    Shipping

    Chpt 17

    Chpt 17, page 377 Creating Stores on the Web

    Setting up a Shipping Account

    "Online means mail order, and mail order means shipping. And, being an online store, you will have customers all over the world --  some in very remote places. A significant number of them will be  used to the immediate gratification of the Web, and that means being able to get them your goods as soon as possible. The speed  with which you can deliver their orders can be critical to your business' success. Shipping is one of the few things that links you physically with your customers. While pricing, promotion, communication, and order  processing can be done virtually, the shipped package is what your customers will hold in their hands.
     

    . Therefore - one of the problems in online e-commerce is that the customer makes the decision to buy in a relatively short period of time from a convenient circumstance (shopping at home or in the office) - yet they do not receive the goods til some time in the future - in most cases , much longer than a person who would have driven out to the brick and mortar store to go shopping.

    WTGR


    The same level of speed, quality, and attention to detail you put into the Web-based portion of your  store also needs to be applied to the shipping side. You should understand that no single shipping option can cover you completely and provide maximum efficiency. The challenge is to  stitch together the various services, software, Web sites, and your  own store into a unified model that allows customers the best coverage, speed, and pricing options. Then you have to display this "shipping stew" on your site in a manner that is easy for your  customers to understand. A Web site with too many options or too few instructions is confusing to customers. When someone looks lost in a real store,  the owner will notice and be able to physically respond. On the Web you won't. Customers will turn away without your even noticing as they find that you don't offer a particular option for delivery. All you  will notice is lower sales.  All of these are reasons why something as mundane and physical as how you organize your shipping plan is incredibly important to your store. So get to know your solutions inside and out, use the Web as much as you can, and make sure your plan is clearly displayed to  users. If you maintain that and utilize the software the shipping companies offer, your customers will get nicely packaged, on-time products, and you'll get repeat business. Many of the posts on  newsgroups and much of the positive e-mail Tronix has received  from its customers concerns its attention to the details of shipping."

    Some of the text words above come from
     http://www.storebuilder.com/chapter17.html

    .
     
    Shipping

    Chpt 17

    Chpt 17,
    Setting up a Shipping Account
    • Linking Shipping with Your Web Site 
    • used when companies have a significant quantity of physical goods being sent to customers and / or coming in from suppliers
    • commonly used with companies retailing clothing, books and CDs
    .
    Shipping

    Chpt 17

    Chpt 17,
    Setting up a Shipping Account
    Linking Shipping with Your Web Site 
    • Forms related to shipping and receiving
    http://www.larkhill.com/forms.htm click on the screen capture to the left to see an example of shipping related forms used on a working web site
    http://www.fedex.com/cgi-bin/docassist.cgi?lang=ca_english&page=start FEDEX has a spot on their site where you can get commonly used forms in PDF format

    check also
     www.fedex.com/ca_english/
    services
    /documentationguidelines/

    .
    Shipping

    Problems 
    calculating 
    the cost
     
     
     
     
     
     
     
     
     

    Shipping

    Problems 
    calculating 
    the cost

    http://www.crmdaily.com/perl/story/?id=14371
    By Erika Morphy
     CRMDaily.com  October 24, 2001 

    "Last year, a report from Forrester Research revealed that 85 percent of companies surveyed could not fill orders internationally because of the complexity of shipping across borders. The most common complaint was that users could not know the final cost of a shipment when placing an order  -- and oftentimes it would be several times higher than originally estimated. "

    ...
    Morphy writes "Jupiter Media Metrix statistics show that 63 percent of online shoppers back out of a purchase when they see how much they have to pay for shipping and handling. In fact, the high
     cost of shipping -- and the almost surreptitious, last-minute manner in which it is sprung on the shopper -- is one of the  major customer complaints about online retailers."

    Morphy explains "... the problem is really that consumers, perhaps subconsciously, resent paying any
     shipping charges. When business-to-consumer (B2C) e-commerce took off a few years ago, online retailers lured  shoppers to their Web sites with the promise of free shipping.  It made sense then -- they had to build market share, and  money was no object to many of those sites.  Even as recently as last summer, Amazon and Barnes & Noble engaged in a dogfight over the same customer base, using
     free shipping as a lure. Usually, this tactic works. Toys R Us  offered free shipping on its Web site for last year's holiday  season and watched annual sales jump 300 percent,  according to news accounts. 
     Now, though, online retailers have crash-landed back to  earth. Shipping charges are here to stay, and fair-minded  consumers do see a need for them -- assuming they want  the online retailer to stay in business. Unfortunately, a lack  of standards for calculating online shipping costs and a lack  of transparency in the cost-calculation process leave a lot of  consumers feeling, well, gouged."
     

    .
    Shipping

    What do you 
    do when you 
    are outside 
    the territory 
    they ship to
     

    What do you do when you are outside the territory they ship to
    new companies like
     www.borderfree.com
    have spring up to serve U.S. companies that have not considered shipping outside the continental states

    From their web site, Borderfree.com says www.borderfree.com/bf2/jsp/com_au_our_company.jsp
    "Based in Toronto, Canada, [P: 416.480.2558] Borderfree provides U.S. merchants the most effective way to immediately drive global e-commerce revenues by offering a comprehensive end-to-end solution for serving international customers.  Offering a suite of marketing, financial, logistics and delivery capabilities, Borderfree has removed the barriers that have prevented international e-shoppers from buying from U.S. sites ..Borderfree delivers a total purchase price  including foreign currency conversion, duties, taxes, and shipping and handling costs."
     

    . The whole point of services like bordefree.com is to allow websites to extend their capabilities so they will not lose potential customers. - they want to encourage people to continue clicking through the purchase shopping cart process - instead of stopping when they get to the shipping info.

    WTGR


    who are customers of bordefree.com, companies like
    RitzCamera.com and BoatersWorld.com
    http://www.ritzcamera.com/
    in class we will go online to RitzCamera.com and show the process
    .
     
    Shipping

    the large courier and shipping companies

    UPS and FEDEX account for more than 80 % of online shipment deliveries


    UPS -  www.ups.com
    FedEx -  www.fedex.com
    DHL -  www.dhl.com
    Canada Post  www.canadapost.ca
    http://www.ups.com/using/custserv/techfaq/uis.html The UPS page which covers FAQs and other required info
    http://www.fedex.com/ca_english/services/servicefaqs.html The FEDEX FAQ page
    -they specify "Canadian" English !!
    http://www.fedex.com/ca_english/services/fedexground/ustocanada.html The FEDEX page describing the products they offer to people shipping to Canada
    .
     
    Shipping

    Chpt 17

    Returns
    Refunds
     
     
     
     
     
     
     
     

     

    Shipping

    Chpt 17

    Returns
    Refunds


    Chpt 17, page 397 Creating Stores on the Web

    Refunds
     

    . Obviously, you will do everything when you are producing physical products, to minimize defects and maximize quality - however, mistakes do happen, and - particularly when you have a new business and there are a million things to consider all at once. 

    So, no matter how you try - there will be some reasons why customers want a refund, or want to ship back products for repair, or missing parts.

    How you handle this - and how you develop contingency plans - can be a "business breaker". Keep in mind that many customers have concerns about aspects of refunding and parts, and repair - its one of the common reasons why people browse the site, but refuse to conclude the sale.

    WTGR

    .
     Creating Stores on the Web    Chpt 17, page 398

    "If you do happen to make a mistake on a customer's shipping address, forget to check off the appropriate method of shipping, or send them an incorrect item or quantity, show deep concern, apologize profusely, and offer the customer free shipping on the next order..."
     
    This web site has 10 tips which are relevant to the practical aspects of getting your store operating - several of these tips have to do with returns and refunds and shippings; they are listed below

    #4 Plan for the flood. 
    If you're a B2C, start planning for the holiday season now. It's probably your last chance to lock in customers. Miss this one and you're history. Be prepared. How many hits can your site handle in an hour? Quadruple it.  What is your contingency plan if you exceed capacity? Have subcontractors ready and waiting to step in and get you going again. 

    #5 Deliver, deliver, deliver. 
    If you burn consumers just one time, they're probably clicking somewhere else now. Consumers must know you can be trusted to deliver the products they ordered on time and undamaged. Check out the capability of your fulfillment houses and shipping vendors. Go beyond the promises and look at their systems. Get firm commitments. Your return business success depends on it. 

    #6 Make return policies easy and efficient. 
    Consumers need to know they can return a product that doesn't fit, is the wrong color, or simply isn't what they wanted. If you can't offer that service to them, you don't deserve their business. State your return policy up front and honor it-without reservation. Do not make consumers go through hoops and hurdles to get their money back. Include return labels; accept returns at a brick-and-mortar store; give a credit refund over the phone. Do whatever you can to keep your customer coming back to your site over and over again. 

    #10 Create a service recovery system. 
    Problems are going to happen. Customers understand that errors occur,  but if they experience a dazzling solution in response to a complaint,  they're even more loyal than if they had never experienced the problem.  The key word here is system. Recovery cannot be a haphazard event. It needs to be a proactive, comprehensive approach to dealing with customer problems. Bottom line: Know what you're going to do in the event things  go wrong. 

    .
    Shipping

    The effects of 
    Sept 11th

    Report: E-Tailers Not So Ship-Shape for
     Holidays [2001]
    By Erika Morphy
     CRMDaily.com - which is linked through the E-Commerce Times site
     October 18, 2001 
     www.crmdaily.com/perl/story/14222.html#story-start
    Morphy writes "Forrester Research  was not overly enthusiastic about holiday shopping prospects for online retailers -- even before September 11th. Now, the consulting
     company is warning of another problem that could affect consumer confidence unless retailers take proactive  measures: shipping. "

    Security Delays: Heightened security at ports, fortunately, is only delaying shipments by hours, not days -- so far. If U.S. Customs starts turning spot checks of containers into full searches,  however, holiday orders could be delayed until it is too late,  Forrester warned. 

    Aircraft used in shipping: Another possible cause of delays is the Civil Reserve Air Fleet
     agreement, in which such carriers as FedEx, UPS and other passenger airlines would have to make their aircraft available for military transport. Thus far, this has not happened, but if
     this agreement does go into effect, consumer shipments will  suffer. 
     

    . How do you deal with this?

    You have to be very pro-active in communicating to your customers.

    • Emphasize ordering early
    • use brick-and-mortar stores for order fulfillment
    • develop contingency plans
    • use regional distribution centers
    • partner with brick-and-mortar stores if you don't have them
    WTGR

    "Forrester also predicted new shipping-related services will develop in the long run that will change holiday shopping patterns for retailers and consumers.  Buying cycles will change, the consulting firm forecast, as shoppers buy and ship for the holidays throughout the year
     to get their gifts on time. "
    Shipping

    The effects of 
    Sept 11th

    http://www.crmdaily.com/perl/story/13549.html
    By Erika Morphy
     CRMDaily.com  September 17, 2001 

    "While there are no easy answers, the Ontario Trucking Association is now calling upon motor carriers, drivers and shippers to work together to ease the pressure at congested border crossings and keep essential deliveries moving as seamlessly as possible.  "The backlog of trucks at the major Ontario-U.S. border points is testing the limits of the North American distribution network, and no one is expecting things to change in the  foreseeable future," OTA president David Bradley said. For that reason, the OTA is stepping in to help Canadian federal and provincial authorities ensure that essential  shipments receive priority attention."

    .
    Shipping -an example of how some of the large consumer product companies have diversified into the shipping business
    .