Schwartz's webonomics: 9 principles for growing your business on the WWW

E-Commerce Strategies

1. What is a successful web site?

2. What are the guiding principles for EC strategies?

3. What are the considerations in formulating B2C strategies?

A successful web site is able to create value through realization of:

1. Virtual market characteristics: reach and richness à meaningful communication with customers

2. E-commerce needs hierarchy

Fox, C., “E-Commerce Business Models”, IIR Best Strategy Practices Symposium, Johannesburg, South Africa, November 2000

3. Web site design criteria [Turban et al., 2004, Exhibit 16.2]

– Navigation

– Consistency

– Performance

– Appearance

– Quality assurance

– Interactivity

– Security

– Scalability

Schwartz's webonomics*: 9 principles for growing your business on the WWW

1. Quantity of people visiting your site is less important than the quality of their experience

2. Marketers shouldn't be on the Web for exposure, but for results

3. Consumers must be compensated for disclosing data about themselves

4. Consumers will shop online only for information-rich products

5. Self-service provides for the highest level of customer comfort

6. Value-based currencies enable you to create your own monetary system

7. Trusted brand names matter even more on the Web

8. Even the smallest business can compete in the Web's global marketplace

9. Agility rules: Web sites must continually adapt to the market.

* Schwartz, Evan, I., Webonomics, Broadway Books, 1997

Webonomics: the study of the production, distribution, and consumption of goods, services, and ideas over the World Wide Web

Principles	Considerations
Quality of experience	– Provide values – Create an online community – Use the Web is an interactive medium
Results	– Information – Pull vs push – Targeted audience
Consumer privacy	– Provide tangible benefits in exchange for vital consumer information – Opt-in – Opt-out
Buying on-line	– Facts, news, knowledge, wisdom, and advice – Broader selection, superior product expertise, below-retail price
Self-serve	– Increased comfort, control, and convenience – Human service for special support and assistance
Value-based currency	– Reward loyal customers with points that can be redeemed for real goods and services – Relationship and trust building
Branding	– Being the first to introduce a product or service – Evoke a certain sensibility, core competency, or comfort factor – Establish an affinity with customers
Entrepreneurship	– Borderless marketplace – Human creativity, intelligence, skills matter more
Agility	– Short-lived competitive advantage – Proactive in deploying new technologies before competitors do – Let customers be your judge – Keep close tap on what customers want – Prioritize new features, improvements, and services – Develop a strategy on how best to capitalize on "disruptive technologies"

Formulating B2C strategies

Goal	Model	Strategy	Measure
Browser	Consumer	Advertising	– # of visits (CPM: cost per mil, or thousand, impressions) – # of click-through
Buyer	E-Trust	Trust building	# of visitors turned first time buyer
Repeated customer	Purchasing decision	CRM	# of repeated customer
Committed customer	E-Service	Service	# of referrals from existing customers

B2C strategy formulation considerations

Considerations

Business Model

Web-based strategies

Customer contact

(Web advertising): an attempt to disseminate information to effect a buyer-seller transaction

Consumer behavior model [Turban et al., 2004, Exhibit 4.1]:

Buyer's decision is a reaction to stimuli. The process is influenced by:

1. buyer's characteristics

2. environment

3. vendor's systems

– Banner ads

– Pop-up ads

– Op-in emailing

– Search-engine inclusion

– Associated ads: related to user’s action

– Affiliate marketing: referrals

– Commodity ads: e.g., mypoints.com

– Viral marketing: word-of-mouth

Customer trust: the psychological status of involved parties who are willing to pursue further interactions to achieve a planned goal

E-Trust model [Turban et al., 2004, Exhibit 4.6]:

Trustworthiness of:

1. Seller

2. Internet

3. Environment

– Branding

– Security mechanism

– Disclosure of latest business status, security, and privacy policies

– Transaction integrity

– Third-party mediator

Customer retention

(Customer loyalty): the degree to which a customer will stay with a specific vendor or brand

Purchasing decision model [Turban et al., 2004, Exhibit 4.3]:

1. Need recognition

2. Information search

3. Alternative evaluation

4. Purchase & delivery

5. Post purchase evaluation

Customer relationship management [Turban et al., 2004, Exhibit 4.9]: building long-term and sustainable customer relationships that add value for the customer and the company

– Touching

– Targeting

– Interacting

– Self-service

– Online networking

Customer service: a series of activities designed to enhance the level of customer satisfaction

E-Service model [Turban et al., 2004, pg.149]:

1. Requirements

2. Acquisition

3. Ownership

4. Retirement

– Personalized web pages

– FAQs

– Chat room

– Online order entry, order status tracking

– E-mail and automated responses

– Help desk, online technical support, call centers

– Online resales/classified ads

Attract visitors to your site

1. Submit your URL to search engines

e.g., http://www.google.com/addurl.html

2. Use of <META> tag

e.g., http://www.meta-tag.net

e.g., http://www.netmechanic.com/powerpack/meta.htm

3. Search engine optimization tools

e.g., http://www.trendmx.com

E-Trust model [Turban et al., 2004, Exhibit 4.6]

Determining factor	Web-based strategies
Trustworthiness of the seller	– Digital certificates/seals – BBB/third party evaluation – Brand recognition – Free samples – Return policy – Privacy & security statements – Web design
Trustworthiness of the Internet	– Encryption – SSL/SET protocols – Digital certificates
Trustworthiness of the environment	– Consumer protection law – Internet culture

Internet culture

• Low power distance à encourage involvement

• Low uncertainty avoidance à new product/idea diffusion

• Democracy à lack of social & position cue

• Openness à value information access

• Liberty à pull marketing, customization

• Equality/Egalitarian à no price discrimination

• Fraternity à viral marketing

• Anonymity à privacy & security

• Acceptance of multiple identities à less segmentation

• Anti-commercialism à permission marketing

Purchasing decision model

Phases	Web-based strategies
Need recognition	Advertising: – Banner-ads – URL on physical material – Discussion in news groups – Opt-in e-mailing
Information search	Targeting: – Search engines – Web directories – Links to external sources – Question/answer sessions
Alternative evaluation	Interacting: – FAQs, reviews, etc. – Samples & trial – Cross comparisons – Links to existing customers – Provision of evaluative models
Purchase and delivery	Self-service: – Electronic payment systems – Logistics providers and order tracking
After purchase evaluation	Online networking: – Customer support via e-mail and news group – E-mail communication and response

O'Keefe & McEachern (1998), "Web-Based Customer Decision Support System", Communications of the ACM, March.

E-Service model [Turban et al., 2004, pg.149]

Phases	Web-strategy
Requirements: assisting the customer to determine needs	- Downloadable demo - Online reviews - Video presentation - Product photos - Textual descriptions
Acquisition	- Online order entry - Negotiation - Online order status tracking - Online payment processing
Ownership	- Online user groups - Online technical support - FAQs - Resource libraries - Newsletters - Online renewal of subscriptions
Retirement	- Online resale - Classified eds