Chapter 3:Chapter 3:Selling on the Web: Revenue Selling on the Web: Revenue Models and Building a Web Models and Building a Web
PresencePresence
Electronic Electronic Commerce, Sixth Commerce, Sixth
EditionEdition
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 22
ObjectivesObjectives
In this chapter, you will learn about:In this chapter, you will learn about:
Revenue modelsRevenue models
How some companies move from one How some companies move from one revenue model to another to achieve successrevenue model to another to achieve success
Revenue strategy issues that companies face Revenue strategy issues that companies face when selling on the Webwhen selling on the Web
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 33
Objectives (continued)Objectives (continued)
Creating an effective business presence Creating an effective business presence on the Webon the Web
Web site usabilityWeb site usability
Communicating effectively with customers Communicating effectively with customers on the Webon the Web
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 44
Revenue ModelsRevenue Models
Mail order or catalog modelMail order or catalog model Proven to be successful for a wide variety of Proven to be successful for a wide variety of
consumer itemsconsumer items
Web catalog revenue modelWeb catalog revenue model Taking the catalog model to the WebTaking the catalog model to the Web
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 55
Computers and Consumer Computers and Consumer ElectronicsElectronics
Apple, Dell, Gateway, and Sun Apple, Dell, Gateway, and Sun Microsystems have had great success Microsystems have had great success selling on the Webselling on the Web
Dell created value by designing its Dell created value by designing its entire business around offering a high entire business around offering a high degree of configuration flexibility to its degree of configuration flexibility to its customerscustomers
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 66
Books, Music, and VideosBooks, Music, and Videos
Retailers use the Web catalog model to sell Retailers use the Web catalog model to sell books, music, and videos books, music, and videos Among the most visible examples of electronic Among the most visible examples of electronic
commercecommerce
Jeff BezosJeff Bezos Formed Amazon.comFormed Amazon.com
Jason and Matthew Olim Jason and Matthew Olim Formed an online music store they called CDnowFormed an online music store they called CDnow Used the Web catalog revenue modelUsed the Web catalog revenue model
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 77
Luxury GoodsLuxury Goods
People are still reluctant to buy luxury goods People are still reluctant to buy luxury goods through a Web sitethrough a Web site
Web sites of Vera Wang and VersaceWeb sites of Vera Wang and Versace
Constructed to provide information to shoppers, Constructed to provide information to shoppers, not to generate revenuenot to generate revenue
Web site of Evian
Designed for a select, affluent group of Designed for a select, affluent group of customerscustomers
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Clothing RetailersClothing Retailers
Lands’ End Pioneered the idea of online Web shopping Pioneered the idea of online Web shopping
assistance with its Lands’ End Live feature in 1999assistance with its Lands’ End Live feature in 1999
Personal shopperPersonal shopper Intelligent agent program that learns customer’s Intelligent agent program that learns customer’s
preferences and makes suggestionspreferences and makes suggestions
Virtual model Virtual model Graphic image built from customer measurements Graphic image built from customer measurements
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Flowers and GiftsFlowers and Gifts
1-800-Flowers
Created an online extension to its telephone Created an online extension to its telephone order businessorder business
Chocolatier Godiva
Offers business gift plans on its siteOffers business gift plans on its site
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Digital Content Revenue ModelsDigital Content Revenue Models
Firms that own intellectual property have Firms that own intellectual property have embraced the Web as a new and highly embraced the Web as a new and highly efficient distribution mechanismefficient distribution mechanism
Lexis.com Lexis.com
Provides full-text search of court cases, laws, Provides full-text search of court cases, laws, patent databases, and tax regulationspatent databases, and tax regulations
ProQuestProQuest
Sells digital copies of published documentsSells digital copies of published documents
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1111
Advertising-Supported Advertising-Supported Revenue ModelsRevenue Models
Broadcasters provide free programming to an Broadcasters provide free programming to an audience along with advertising messagesaudience along with advertising messages
Success of Web advertising is hampered bySuccess of Web advertising is hampered by No consensus on how to measure and charge No consensus on how to measure and charge
for site visitor viewsfor site visitor views Stickiness of a Web site: the ability to keep visitors Stickiness of a Web site: the ability to keep visitors
and attract repeat visitorsand attract repeat visitors
Very few Web sites have sufficient visitors to Very few Web sites have sufficient visitors to interest large advertisersinterest large advertisers
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Web PortalsWeb Portals
Web directory Web directory
A listing of hyperlinks to Web pagesA listing of hyperlinks to Web pages
Portal or Web portalPortal or Web portal
Site used as a launching point to enter the WebSite used as a launching point to enter the Web
Almost always includes a Web directory and Almost always includes a Web directory and search enginesearch engine
Examples: Yahoo!, AOL, AltaVistaExamples: Yahoo!, AOL, AltaVista
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1313
Advertising-Subscription Mixed Advertising-Subscription Mixed Revenue ModelsRevenue Models
Subscribers Subscribers
Pay a fee and accept some level of advertisingPay a fee and accept some level of advertising
Typically are subjected to much less advertisingTypically are subjected to much less advertising
Used byUsed by
The New York TimesThe New York Times and and The Wall Street The Wall Street JournalJournal
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1414
Advertising-Subscription Mixed Advertising-Subscription Mixed Revenue Models (continued)Revenue Models (continued)
Business Week Business Week
Offers some free content at its Business Offers some free content at its Business Week onlineWeek online sitesite
Requires visitors to buy a subscription to Requires visitors to buy a subscription to the the Business Week Business Week print magazineprint magazine
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1515
Fee-for-Transaction Revenue Fee-for-Transaction Revenue ModelsModels
Businesses offer services and charge a Businesses offer services and charge a fee based on the number or size of fee based on the number or size of transactions processedtransactions processed
DisintermediationDisintermediation
Removal of an intermediary from a value Removal of an intermediary from a value chainchain
ReintermediationReintermediation
Introduction of a new intermediaryIntroduction of a new intermediary
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1616
Fee-for-Service Revenue Fee-for-Service Revenue ModelsModels
Fee based on the value of a service Fee based on the value of a service providedprovided
Services range from games and Services range from games and entertainment to financial adviceentertainment to financial advice
Online gamesOnline games Growing number of sites include premium Growing number of sites include premium
games in their offeringsgames in their offerings
Site visitors must pay to play these premium Site visitors must pay to play these premium gamesgames
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1717
Fee-for-Service Revenue Fee-for-Service Revenue Models (continued)Models (continued)
Concerts and filmsConcerts and films As more households obtain broadband As more households obtain broadband
access to the Internet, companies are access to the Internet, companies are providing streaming video of concerts and providing streaming video of concerts and films to paying subscribersfilms to paying subscribers
Professional ServicesProfessional Services State laws are one of the main forces State laws are one of the main forces
preventing U.S. professionals from preventing U.S. professionals from extending their practices to the Webextending their practices to the Web
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 1818
Revenue Models in TransitionRevenue Models in Transition
Subscription to advertising-supported modelSubscription to advertising-supported model
Microsoft founded its Microsoft founded its Slate Slate magazinemagazine Web siteWeb site
An upscale news and current events publicationAn upscale news and current events publication
Charged an annual subscription fee after a limited Charged an annual subscription fee after a limited free introductory periodfree introductory period
Was unable to draw sufficient number of paid Was unable to draw sufficient number of paid subscriberssubscribers
Now operated as an advertising-supported siteNow operated as an advertising-supported site
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Advertising-Supported to Advertising-Supported to Advertising-Subscription Mixed Advertising-Subscription Mixed
ModelModel Salon.comSalon.com
Operated for several years as an Operated for several years as an advertising-supported siteadvertising-supported site
Now offers an optional subscription version Now offers an optional subscription version of its siteof its site
Subscription offering was motivated by the Subscription offering was motivated by the company’s inability to raise additional company’s inability to raise additional money from investors money from investors
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 2020
Advertising-Supported to Fee-Advertising-Supported to Fee-for-Services Modelfor-Services Model
Xdrive TechnologiesXdrive Technologies Opened its original advertising-supported Web Opened its original advertising-supported Web
site in 1999site in 1999 Offered free disk storage space online to usersOffered free disk storage space online to users After two years, it was unable to pay the costs After two years, it was unable to pay the costs
of providing the service with the advertising of providing the service with the advertising revenue generatedrevenue generated
Later switched to a subscription-supported Later switched to a subscription-supported modelmodel
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Advertising-Supported to Advertising-Supported to Subscription ModelSubscription Model
Northern LightNorthern Light Founded in August 1997 as a search engine Founded in August 1997 as a search engine
with a twistwith a twist
Revenue model Revenue model Combination of advertising-supported model plus a Combination of advertising-supported model plus a
fee-based information access servicefee-based information access service
January 2002January 2002 Converted to a new revenue model that was Converted to a new revenue model that was
primarily subscription supportedprimarily subscription supported
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 2222
Multiple TransitionsMultiple Transitions
Encyclopædia BritannicaEncyclopædia Britannica Original offeringsOriginal offerings
The Britannica Internet Guide The Britannica Internet Guide Free Web navigation aidFree Web navigation aid
Encyclopædia Britannica Online Encyclopædia Britannica Online Available for a subscription fee or as part of a CD Available for a subscription fee or as part of a CD
packagepackage
19991999 Converted to a free, advertiser-supported siteConverted to a free, advertiser-supported site
20012001 Returned to a mixed modelReturned to a mixed model
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Revenue Strategy IssuesRevenue Strategy Issues
Channel conflictChannel conflict
Occurs whenever sales activities on a Occurs whenever sales activities on a company’s Web site interfere with existing company’s Web site interfere with existing sales outletssales outlets
Also called cannibalizationAlso called cannibalization
Channel cooperationChannel cooperation
Giving customers access to the company’s Giving customers access to the company’s products through a coordinated presence in all products through a coordinated presence in all distribution channelsdistribution channels
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 2424
Strategic Alliances and Channel Strategic Alliances and Channel Distribution ManagementDistribution Management
Strategic allianceStrategic alliance When two or more companies join forces to When two or more companies join forces to
undertake an activity over a long period of timeundertake an activity over a long period of time
Account aggregation servicesAccount aggregation services Increase the propensity of customers to return Increase the propensity of customers to return
to the siteto the site
Channel distribution managersChannel distribution managers Companies that take over the responsibility for Companies that take over the responsibility for
a particular product line within a retail storea particular product line within a retail store
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Creating an Effective Web Creating an Effective Web PresencePresence
An organization’s presence An organization’s presence
The public image it conveys to its The public image it conveys to its stakeholdersstakeholders
Stakeholders of a firmStakeholders of a firm
Include its customers, suppliers, employees, Include its customers, suppliers, employees, stockholders, neighbors, and the general stockholders, neighbors, and the general publicpublic
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 2626
Achieving Web Presence GoalsAchieving Web Presence Goals
Objectives of the businessObjectives of the business
Attracting visitors to the Web siteAttracting visitors to the Web site
Making the site interesting enough that Making the site interesting enough that visitors stay and explorevisitors stay and explore
Convincing visitors to follow the site’s links Convincing visitors to follow the site’s links to obtain information to obtain information
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Achieving Web Presence Goals Achieving Web Presence Goals (continued)(continued)
Objectives of the businessObjectives of the business
Creating an impression consistent with the Creating an impression consistent with the organization’s desired imageorganization’s desired image
Building a trusting relationship with visitorsBuilding a trusting relationship with visitors
Reinforcing positive images that the visitor might Reinforcing positive images that the visitor might already have about the organizationalready have about the organization
Encouraging visitors to return to the siteEncouraging visitors to return to the site
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Profit-Driven OrganizationsProfit-Driven Organizations
Toyota site
A good example of an effective Web presenceA good example of an effective Web presence
Provides links toProvides links to
Detailed information about each vehicle modelDetailed information about each vehicle model
A dealer locator pageA dealer locator page
Information about the company and the financing Information about the company and the financing services it offersservices it offers
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 2929
Toyota U.S. Home pageToyota U.S. Home page
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3030
Profit-Driven Organizations Profit-Driven Organizations (continued)(continued)
Quaker Oats
Web site does not offer a particularly strong Web site does not offer a particularly strong sense of corporate presencesense of corporate presence
Site is a straightforward presentation of links Site is a straightforward presentation of links to information about the firmto information about the firm
Redesigned site is essentially the same as Redesigned site is essentially the same as the previous versionthe previous version
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3131
Quaker Oats Old Home PageQuaker Oats Old Home Page
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3232
Quaker Oats Home Page: 1999 Quaker Oats Home Page: 1999 RedesignRedesign
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3333
Not-for-Profit OrganizationsNot-for-Profit Organizations
Key goal for the Web sites Key goal for the Web sites
Information disseminationInformation dissemination
Key element on any successful electronic Key element on any successful electronic commerce Web sitecommerce Web site
Combination of information dissemination and Combination of information dissemination and a two-way contact channela two-way contact channel
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3434
Web Site UsabilityWeb Site Usability
Motivations of Web site visitorsMotivations of Web site visitors Learning about products or services that the Learning about products or services that the
company offerscompany offers
Buying products or services that the company Buying products or services that the company offersoffers
Obtaining information about warranty, service, Obtaining information about warranty, service, or repair policies for products they purchasedor repair policies for products they purchased
Obtaining general information about the Obtaining general information about the company or organizationcompany or organization
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3535
Web Site Usability (continued)Web Site Usability (continued)
Motivations of Web site visitorsMotivations of Web site visitors
Obtaining financial information for making an Obtaining financial information for making an investment or credit granting decisioninvestment or credit granting decision
Identifying the people who manage the Identifying the people who manage the company or organizationcompany or organization
Obtaining contact information for a person or Obtaining contact information for a person or department in the organizationdepartment in the organization
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3636
Making Web Sites AccessibleMaking Web Sites Accessible
One of the best ways to accommodate One of the best ways to accommodate a broad range of visitor needs is to build a broad range of visitor needs is to build flexibility into the Web site’s interfaceflexibility into the Web site’s interface
Good site design lets visitors choose Good site design lets visitors choose among information attributesamong information attributes
Web sites can offer visitors multiple Web sites can offer visitors multiple information formats by including links to information formats by including links to files in those formatsfiles in those formats
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3737
Making Web Sites Accessible Making Web Sites Accessible (continued)(continued)
Goals that should be met when Goals that should be met when constructing Web sitesconstructing Web sites Offer easily accessible facts about the Offer easily accessible facts about the
organizationorganization
Allow visitors to experience the site in different Allow visitors to experience the site in different ways and at different levelsways and at different levels
Sustain visitor attention and encourage return Sustain visitor attention and encourage return visitsvisits
Offer easily accessible information Offer easily accessible information
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3838
Trust and LoyaltyTrust and Loyalty
A 5 percent increase in customer loyalty A 5 percent increase in customer loyalty can yield profit increases between 25% can yield profit increases between 25% and 80%and 80%
Repetition of satisfactory service can build Repetition of satisfactory service can build customer loyaltycustomer loyalty
Customer service is a problem for many Customer service is a problem for many electronic commerce siteselectronic commerce sites
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 3939
Usability TestingUsability Testing
Companies that have done usability testsCompanies that have done usability tests
Conduct focus groups Conduct focus groups
Watch how different customers navigate Watch how different customers navigate through a series of Web site test designsthrough a series of Web site test designs
Cost of usability testing is low compared to Cost of usability testing is low compared to the total cost of a Web site design or the total cost of a Web site design or overhaul overhaul
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4040
Customer-Centric Web Site Customer-Centric Web Site DesignDesign
Putting the customer at the center of all Putting the customer at the center of all site designs site designs
Guidelines Guidelines
Design the site around how visitors will Design the site around how visitors will navigate the links navigate the links
Allow visitors to access information quickly Allow visitors to access information quickly
Avoid using inflated marketing statementsAvoid using inflated marketing statements
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Customer-Centric Web Site Customer-Centric Web Site Design (continued)Design (continued)
GuidelinesGuidelines Avoid using business jargon and terms that Avoid using business jargon and terms that
visitors might not understandvisitors might not understand
Be consistent in use of design features and colorsBe consistent in use of design features and colors
Make sure navigation controls are clearly labeledMake sure navigation controls are clearly labeled
Test text visibility on smaller monitorsTest text visibility on smaller monitors
Conduct usability testsConduct usability tests
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4242
Connecting With CustomersConnecting With Customers
Personal contact modelPersonal contact model Firm’s employees individually search for, Firm’s employees individually search for,
qualify, and contact potential customersqualify, and contact potential customers
ProspectingProspecting Personal contact approach to identifying and Personal contact approach to identifying and
reaching customersreaching customers
Mass mediaMass media approachapproach Firms prepare advertising and promotional Firms prepare advertising and promotional
materials about the firm and its products materials about the firm and its products
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4343
Connecting With Customers Connecting With Customers (continued)(continued)
Addressable media Addressable media Advertising efforts directed to a known addressee Advertising efforts directed to a known addressee Also called mass media Also called mass media
One-to-many communication modelOne-to-many communication model Communication flows from one advertiser to Communication flows from one advertiser to
many potential buyersmany potential buyers
One-to-one communication modelOne-to-one communication model Both buyer and seller participate in information Both buyer and seller participate in information
exchangeexchange
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4444
Business Communication Business Communication ModesModes
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4545
SummarySummary
Models used to generate revenue on the WebModels used to generate revenue on the Web Web catalogWeb catalog Digital content salesDigital content sales Advertising-supportedAdvertising-supported Advertising-subscription mixedAdvertising-subscription mixed Fee-for-transaction and fee-for-service Fee-for-transaction and fee-for-service
Companies undertaking electronic commerce Companies undertaking electronic commerce initiatives sometimesinitiatives sometimes Form strategic alliances Form strategic alliances Contract with channel distribution managersContract with channel distribution managers
Electronic Commerce, Sixth EditionElectronic Commerce, Sixth Edition 4646
Summary (continued)Summary (continued)
Firms must understand how the Web Firms must understand how the Web differs from other mediadiffers from other media
Enlisting the help of users when Enlisting the help of users when building test versions of the Web site is building test versions of the Web site is a good way to create a site that a good way to create a site that represents the organization wellrepresents the organization well
Firms must also understand the nature Firms must also understand the nature of communication on the Webof communication on the Web