SELLING ON THE WEB:
REVENUE MODELS &
BUILDING A WEB PRESENCE
Revenue Models
Web business revenue generating models:
– Web catalog
– Digital content
– Advertising-supported
– Advertising-subscription mixed
– Fee-based
Can work for both sale types:
– Business-to-consumer (B2C)
– Business-to-business (B2B)
*Can work with one Web site, separate sites, or separate pages
Web Catalog Revenue Models
*Adapted from traditional catalog-based model, in which seller establish a brand image and is sold through printed information
*Mailed to prospective buyers
*Web sites expand traditional model to replace or supplement print catalogs and offer flexibility
– Order through Web site or telephone
– Payment though Web site, telephone, or mail
– Creates additional sales outlet
*Luxury goods
– Clients are reluctant to buy through Web
*Vera Wang and Versace
– Web sites provide information
– Shopper purchases at physical store
– Heavy use of graphics and animation
*Evian
– Uses flash animation
*Tiffany & Co
– Graphics and animation require broadband connection
Digital Content Revenue Models
*Highly efficient distribution mechanism
*Firms own written information or information rights
*ProQuest
– Sells published documents’digital copies
*Dow Jones newspaper publisher subscriptions
– Digitized newspaper, magazine, and journal content
*Sellers of adult digital content
*Association for Computer Machinery (ACM): Digital library
– Pioneered online credit card payment processing
Advertising-Supported Revenue Models
*United States network television
– Provides free programming and advertising messages
– Supports network operations sufficiently
Site visitor views problem (measuring and charging):
*Stickiness
– Keeping visitors at site and attracting repeat visitors
– Exposed to more advertising in sticky site
*Obtaining large advertiser problem
*Demographic information
– Characteristics set used to group visitors
Categories of Advertising-Supported Revenue Models
– Web portals
– Newspaper publishers
– Targeted classified advertising sites (more successful at generating advertising revenue)
Advertising-Subscription Mixed Revenue Models
*Subscribers
– Pay fee and accept advertising
– Typically less advertising
*Web sites offer different degrees of success
*The New York Times (today)
– Bulk of revenue derived from advertising
*The Wall Street Journal (mixed model)
– Subscription revenue weighted more heavily
*Print edition and online editions
– Different model versions
Fee-for-Transaction Revenue Models
*Service fee based on transaction number or size
*Web site offers visitor personal service
Value chain:
*Disintermediation– intermediary (human agent) removed
*Reintermediation– new intermediary (fee-for-transaction Web site) introduced
*Travel agents
– Receive fee for initiating transaction
– Replaced by computers
*Automobile sales
– Web site removes salesperson negotiation
– Reduces costs
– Provides buyers information service
– Stockbrokers
– Insurance brokers
– Event tickets
Event promoters use Web:
– Ticketmaster, Tickets.com, TicketWeb
– Sell original tickets
– Customers reside anywhere worldwide
*Real estate and mortgage loan brokers
–Web sites provide all traditional broker services
*Online banking and financial services
– No physical product
– Easy to offer on Web
*Web financial transactions concerns
– Trust and reliability of financial institution
*Online music
– Amazon MP3, Apple’s iTunes, eMusic, Microsoft’s MSN Music, Yahoo
*Sales revenue source
– Fee-for-transaction model
– Some sites offer subscription plans
Online Video
*Copying control
– Use DRM software
Three issues hampering sales:
1. Large file size– reduced by higher Internet connection speeds
2. Fear of online sales impairing other sales types– potential serial release pattern impact
3. Inability to play on variety of devices– DRM not platform compatible
Fee-for-Service Revenue Models
*Companies offer Web service
*Fee based on service value is not a broker service, and not based on transactions-processed number or size
*Online games
– Sales revenue source
– Advertising (older concept)
– Pay-to-play premium games
– Subscriptions
*Frequent player demographics
– 40% over age 35
Professional services:
– Limited Web use
– State laws prohibit extension of practice
– Patients may set appointments
*Major concern
– Patient privacy
*Significant barrier
– Patient diagnosis difficult without physical examination
Revenue Models in Transition
*Need to change revenue model
– When Web users’needs change
*Conditions after 2000
– Funding became scarce
– Unprofitable growth phase
– Change model or go out of business
Revenue Strategy Issues
Implementations issues:
– Channel conflict and cannibalization
– Strategic alliances and channel distribution management
– Mobile commerce
Channel Conflict & Cannibalization
*Channel conflict (cannibalization)
– Company Web site sales activities interfere with existing sales outlets
Retail distribution partner issues:
– Levis: stopped selling products on company Web site
*Site now provides product information
– Maytag: incorporated online partners into Web site
*Site now provides product information
Strategic Alliances & Channel Distribution Management
*Strategic alliance
– Two or more companies join forces
– Undertake activity over long time period
– Joining Web sites with channel distribution management firms
Mobile Commerce
*Few companies successful generating significant revenues
*NTT’s DoCoMo I-Mode service (Japan cell phone)
– Send short messages, play games, obtain weather forecasts
*Mobile commerce: $400 billion by 2012
– Requires larger memory, easier-to-use interfaces, higher screen resolutions
– E-mail, telephone, Web access, entertainment services convergence
Creating an Effective Web Presence
*Organization’s presence
– Public image conveyed to stakeholders
– Usually not important
*Until growth reaches significant size
*Stakeholders
– Customers, suppliers, employees, stockholders, neighbors, general public
*Effective Web presence
– Critical even for smallest and newest Web operating firms
Identifying Web Presence Goals
*Business physical space
– Focus on very specific objectives
– Not image driven and must satisfy many business needs
– Usually fails to convey good presence
*Web business site intentionally creates distinctive presence
Good Web site design:
– Provides effective image-creation features
– Provides effective image-enhancing features
*Making Web presence consistent with brand image
– Different firms establish different Web presence goals
*Coca Cola pages
– Usually include trusted corporate image (Coke bottle)
– Traditional position as a trusted classic
*Pepsi pages
– Usually filled with hyperlinks to activities and product-related promotions
– Upstart product favored by younger generation
Achieving Web Presence Goals
*Effective site creates attractive presence
– Meets business or organization objectives
Objectives:
– Attract visitors to the Web site
– Make site interesting
– Convince visitors to follow site’s links
– Create impression consistent with organization’s desired image
– Build trusting relationship with visitors
– Reinforce positive image
– Encourage visitors to return
Web Site Usability
*Current Web presences
– Few businesses accomplish all goals
– Most fail to provide visitors sufficient interactive contact opportunities
Improve Web presence:
– Make site accessible to more people
– Make site easier to use
– Make site encourage visitors’trust
– Develop feelings of loyalty toward organization
How the Web is Different?
*Simple mid-1990s Web sites
– Conveyed basic businesses information
– No market research conducted
Web objective achievement success:
– Sites create organization’s presence
– Sites contain standard information set
*History, objectives, mission, product information, financial information, two-way meaningful communication
Meeting the Needs of Web Site Visitors
*Successful Web businesses
– Realize every visitor is a potential customer (partner)
*Crafting Web presence
– Is an important concern
– Know visitor characteristic variations
– Visitor at site for a reason
*Web site visitor motivations
– Learning about company products or services
– Buying products or services
– Obtaining warranty, service, repair policy information
– Obtaining general company information
– Obtaining financial information
– Identifying people
– Obtaining contact information
Visitors have:
– Various needs
– Experiences
– Expectations
– Technology
Making Web sites accessible:
*Build interface flexibility
– Optional to use frames
– Offer text-only version
– Option to select smaller graphic images
– Option to specify streaming media connection type
– Option to choose among information attributes
*Offer multiple information formats
*Web site constructions goals
– Offer easily accessible organization facts
– Allow different visitor experiences
– Provide meaningful, two-way communication link
– Sustain visitor attention and encourage return visits
– Offer easily accessible information about products, services, and their use
*Controversial Web site design
– Animated graphics software use
– Some tasks lend themselves to animated Web page
Trust & Loyalty
*Creates relationship value
*Good service leads to seller trust
–Delivery, order handling, help selecting product, after-sale support
*Satisfactory service builds customer loyalty
*Customer service in e-commerce sites
Problems:
– Lack integration between call centers and Web sites
– Poor e-mail responsiveness
– Unlikely to recover money spent to attract customers
Connecting with Customers
*Important element of a corporate Web presence
*Identify and reach out to customers
Nature of Web communication:
*Personal contact (prospecting)
– Employees individually search for, qualify, contact potential customers
*Mass media
– Deliver messages by broadcasting
*Addressable media
– Advertising efforts directed to known addressee
*Internet medium
– Occupies central space in medium choice continuum
Business Communication Modes
E-COMMERCE 