Lecture 17. Electronic Commerce (2) Business to Customer E-commerce. Moving responsibilities to the customer. Self-service. The Internet as a new channel to market. Customer loyalty and relationship management. Brands.

Lecture 17. Electronic Commerce (2)

The Internet provides a new channel for selling to customers.

The new channel may provide a direct link between customers and manufacturers.

Customers can make comparisons of prices on the web.

This may encourage less loyalty to banks, for example, and more switching.

However, some authors suggest that customers are loyal to Internet sites, particularly if switching costs are greater.

Disintermediation:

Men’s Shirts (Wigand & Benjamin, 1995)

	Producer	Wholesaler	Retailer
Value-Added	$20.45	$11.36	$20.91
Selling Price	$20.45	$31.81	$52.72

Reintermediation:

New Internet-based intermediates are established which carry out the work of providing price comparisons.

E-commerce agents

Roles in the E-Commerce Marketplace

Role	Primary Purpose	Example	Economic Model	Customer Proposition
Information Provider	Attract the general public	Governments, hospitals, charities	Publishing	Accurate, free information
Commerce Participant	Make a market for the general public	Consumer product companies. brokers	Distribution	Price cuts, cheap products.
Market Maker	Create self-regenerating markets	Supermarkets, banks, major retailers	End-to-end value chain	All inclusive service, easy to buy, time-saving, lifestyle suiting.

Source: CSC Index.

Selling is not easy on the Internet

Large number of sites

Over 8000 Thomas the Tank Engine sites, a large number involving merchandising.

80% of Internet revenue from 10 sites.

Profitability still out of reach of majority of Internet retailers.

Need for customer traffic - links to portal sites such as Yahoo or Netscape.

Setting free ISP software to default page.

Provide free information as a draw.

Provide all information for a sale.

Consider security.

Link E-commerce to back office processes.

Brand is of key importance.

Selling Toys through the Internet

Toys"R"Us:

Integrate Web site with database of 61 million customers (from loyalty card).

Use to test new products which might only sell in small volumes and which company could not afford to put in shops.

Display URL on all TV/ print commercials and in stores

Buying displays on Yahoo

eToys:

$10 million on marketing.

Premier online toy store for SesameStreet.com.

Business-to-Customer strategies:

Product-based

Selling
Volumes
Short-term
Understanding the buying process.

Relationship-based

Serving
Quality
Long term
Portfolio of products meeting changing customer needs.

Product-based

Need identification
Product selection
Merchant selection
Negotiation
Purchase and Delivery
Product servicing
Use of agents

Relationship-based

Stage	Definition	Key Factors	IT Involvement
Awareness	A customer finds out that the organisation exists.	Surfing. Advertising. Brand identity. Partnerships.	Search Engines Networks.
Exploration	Customer explores home site and gains understanding of organisation.	Site layout Quality and ease of use Value of information	Home site search facility. Site design and maintenance
Expansion	The customer begins to use the Internet for transactions and accessing services	Subscription Customer relationship tracking. Integration with business processes	Provision of customer databases to support relationship marketing. Integration support.
Commitment	The customer becomes a loyal user of services, identifying with organisational values.	Information value and quality. Understanding of customer. Customer involvement	Security: Different IS access for loyal customers. Relationship tracking through customer databases. Customisation functions
Dissolution	The customer abandons the organisation due to dissatisfaction, better offers from a competitor, or changed in needs and life stage.	Relationship tracking. Continuous intelligence concerning competitor’s systems.	Internal access to competitor systems.

So how do we end up with an overall Internet strategy?

Internet strategy is becoming synonymous with information systems strategy.

Internet strategy involves considering internal and external focus.

External focus split between suppliers / partners and customers.

Focus on benefits (how?).

We need to think about:

New business strategies which incorporate e-business;

Changing organisational structure including IT-business links;

Correct technology platform;

Integrating with factory business systems;

Benching marking against other sites;

Maintenance and on-going management and development of site;

Relationship management with customers. suppliers and allies.

Last Updated by Neil McBride 29/11/99