Selling on the Web: Revenue Models and Building a Web Presence

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Chapter 3

• Selling on the Web Revenue Models and Building
  a Web Presence

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Learning Objectives

• In this chapter, you will learn about
• revenue models for selling on the Web
• establishing an effective business presence on
  the Web
• meeting the needs of Web site visitors
• creating trust and building loyalty in Web site
  visitors
• testing usability in Web site design
• communicating effectively with customers on the
  Web

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The Web Catalog Model

• The Web Catalog model is a revenue model of
  selling goods and services on the Web, that is
  based on the mail order catalog revenue model.
• In the Web catalog model, a Web site replaces or
  supplements print catalog distribution with
  information on its Web site.

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Selling Goods and Services

• When the catalog model is expanded to a Web site,
  it is called a Web-catalog model.
• Dell and Gateway are examples of selling
  computers on the Web.
• Customers can place orders through the Web site
  or by telephone.

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Businesses Employing the Web Catalog Model

• Computer manufacturers, for example Dell and
  Gateway
• Apparel Retailers
• Flowers and gifts
• General Discounters

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Computer Manufacturers

• Many of the most successful Web catalog
  businesses are firms that were in the mail order
  business and have simply expanded their
  operations to the Web.
• Personal computer manufacturers, such as Dell and
  Gateway, have had great success selling on the
  Web.
• Dell has been a leader, allowing customers to
  specify the configuration of their computer.

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Luxury Goods

• For many types of products, people are still
  unwilling to buy through a Web site.
• For example, luxury goods and high fashion
  items.
• The Web sites of Vera Wang and Versace are not
  designed to generate income but to provide
  information to customers who would then visit the
  physical store.
• Evian is another site geared towards affluent
  customers.

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Apparel Retailers

• A number of apparel sellers have adopted their
  catalog sales model to the Web.
• Eddie Bauer
• Lands End
• L. L. Bean
• Talbots
• Their intentions are to have customers examine
  the clothing and place orders through the Web
  site.

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Flowers and Gifts

• Gift retailers have also successfully moved or
  expanded their revenue models to the Web.
• 1-800-Flowers has created an online extension to
  its highly successful telephone order business.
• Harry and David has opened a international Web
  site to promote its existing catalog business.

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Channel Conflict and Cannibalization

• Companies that have existing sales outlets and
  distribution networks often worry that their Web
  sites will take away sales from outlets and
  networks.
• Channel conflict can occur whenever sales
  activities on a companys Web site interfere with
  its existing sales outlets.
• This problem is also called cannibalization,
  because the Web sites sales consume the sales
  that would be made in the companys other sales
  channel.

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Strategic Alliances

• When two or more companies join forces to
  undertake an activity over a long period of time,
  they are said to create a strategic alliance.
• An increasing number of businesses are forming
  strategic alliances to sell on the Web.
• Levis has created strategic alliances with JC
  Penney and Macys.
• Amazon.com has formed strategic alliances with
  ToysRUs to sell toys and with drugstore.com to
  sell health and beauty products.

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Strategic Alliances
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Selling Information or Other Digital Content

• Firms that own intellectual property have
  embraced the Web as a new and highly efficient
  distribution mechanism.
• ProQuest is a Web site that sells digital copies
  of published documents.
• The ACM Digital Library offers subscriptions to
  electronic versions of its journals to its
  members and to libraries.
• Encyclopedia Britannica is an example that has
  transferred an existing brand to the Web.

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Advertising-Supported Model

• The advertising-supported business model is the
  one used by network television in the U.S.
• The success of Web advertising has been hampered
  by two major problems
• No consensus has emerged on how to measure and
  charge for site visitor views.
• Very few Web sites have sufficient numbers of
  visitors to interest large advertisers.

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Advertising-Supported Model

• Web Portals
• Only a few general-interest sites have sufficient
  traffic to be profitable based on advertising
  revenue alone.
• Newspaper publishers
• It is still unclear whether advertising helps or
  hurts the newspapers business as a whole.
• Employment Sites
• Employment sites are one implementation of the
  advertising-supported revenue model that appears
  to be successful.

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Advertising-Supported Model
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Advertising-Subscription Mixed Model

• In this mixed model, subscribers pay a fee and
  accept some level of advertising.
• The New York Times and The Wall Street Journal
  use a mixed advertising-subscription model.
• The Reuters wire service also uses a mixed model
  in its Web offerings.

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Advertising-Subscription Mixed Model

• Business Week offers a variation on the mixed
  model theme it offers some free content but
  requires a subscription to access the entire
  site.
• ESPN sells advertising and offers a vast amount
  of free information, but fans can subscribe to
  its Insider service.

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Fee-for-Transaction Models

• The travel agency business model involves
  receiving a fee for facilitating a transaction.
• A number of online travel agencies began doing
  business on the Web.
• Stock brokerage firms use a fee-for-transaction
  model. They charge their customers a commission
  for each trade executed.

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Fee-for-Transaction Models

• Automobile Sales
• Auto dealers buy cars from the manufacturer and
  sell them to consumers
• MSN Carpoint, CarsDirect.com and Autoweb.com
  provide an information service to car buyers
• Each of these firms implements the
  fee-for-transaction revenue model in a slightly
  different way

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Fee-for-Transaction Models

• Insurance Brokers
• Insurance companies have been slow to offer
  policies and investments for sale on the Web
• A number of intermediaries that sell insurance
  policies have emerged, for example
  Quotesmith.com
• Other Web sites that offer insurance policy
  information, comparisons, and sales include
• InsWeb, Answer Financial, Insurance.com, and
  YouDecide.com

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Fee-for-Transaction Models

• Event Tickets
• The Web offers event-promoters an ability to sell
  tickets from one virtual location to customers
  practically anywhere in the world.
• Real estate and mortgage loan brokers
• Online real estate brokers provide all of the
  services that a traditional broker might
  provide.
• Online banking and financial services
• The greatest concerns that most people have when
  considering moving financial transactions to the
  Web are security and reliability.

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Fee-for-Services Models

• The fee in this model is based on the value of
  the service provided.
• These are neither broker services or based on the
  number or size of transactions processed.
• These models range from games and entertainment
  to financial advice and the professional services
  of accountants, lawyers and physicians.

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Fee-for-Services Models

• Online Games
• Many online games sites offer premium games.
• Site visitors must pay to play these games.
• Concerts and films
• As more households obtain broadband access to the
  Internet, companies will provide streaming video
  of concerts and films to paying customers.
• Professional services
• State laws have been one of the main forces
  preventing U.S. professionals from extending
  their practices to the Web.

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Creating an Effective Web Presence

• Businesses always create a presence in the
  physical world by building stores and office
  buildings.
• The only contact that customers and other
  stakeholders have with a firm on the Web is
  through its presence there.
• Creating an effective Web presence can be
  critical for even the smallest and newest firm
  operating on the Web.

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Identifying Web Presence Goals

• On the Web, businesses have the luxury of
  intentionally creating a space that creates a
  distinctive presence.
• A Web site can perform many image-creation tasks
  very effectively, including
• Serving as a sales brochure
• Serving as a product showroom
• Showing a financial report
• Posting an employment ad
• Serving as a customer contact point

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Making Web Presence Consistent with Brand Image

• Different firms, even those in the same industry,
  might establish different Web presence goals.
• Coca Cola and Pepsi are two companies that have
  developed strong brand images and are in the same
  business, but have developed different Web
  presences.
• The Web presence conveys the image the company
  wants to project.

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Achieving Web Presence Goals

• An effective site is one that creates an
  attractive presence that meets the objectives of
  the business or other organization.
• Possible objectives include
• attracting visitors to the Web site
• making the site interesting enough
• convincing visitors to follow the sites links
• creating an impression of corporate image
• building a trusting relationship with visitors
• reinforcing positive images of the organization
• encouraging visitors to return to the site

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The Toyota Site

• The Toyota site is a good example of an effective
  Web presence.
• The site provides
• a product showroom feature
• links to detailed information about each product
  line
• links to dealers
• links to information about company

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The Toyota Site
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Quaker Oats

• Quaker Oats created Web sites that did not offer
  any corporate presence until 1999.
• In 1999, Quaker Oats changed its Web page to
  improve its general appearance and
  user-friendliness.
• The Toyota and Quaker Oats examples illustrate
  that the Web can integrate an opportunity for
  enhancing the image of a business with the
  dissemination of information.

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Not-for-Profit Organizations

• A key goal for many not-for-profit organizations
  is information dissemination.
• The combination of information dissemination and
  a two-way contact channel is a key element in any
  Web site.
• The American Civil Liberties Union and American
  Red Cross have created effective Web presences.
• Political parties and museums also use Web sites
  for their image presences.

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How the Web is Different

• When firms started creating Web sites in the mid
  1990s, they often built simple sites that
  conveyed basic information about their business.
• The failure to understand how the Web is
  different from other presence-building media is
  one reason that businesses fail to achieve their
  Web objectives.
• Firms must use the Webs capability for two-way,
  meaningful communication with their customers.

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Meeting the Needs of Web Site Visitors

• Businesses that are successful on the Web realize
  that every visitor to their Web site is a
  potential customer.
• An important concern for businesses is the
  variation in important visitor characteristics.
• People who visit a Web site seldom arrive by
  accident they are there for a reason.
• Technology variations among visitors (e.g.,
  connection speed) should be a concern for Web
  sites.

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Many Motivations of Web Site Visitors

• Creating a Web site that meets the needs of
  visitors with a wide range of motivations can be
  challenging.
• to learn about products or services that the
  company offers,
• to buy the products or services that the company
  offers,
• to obtain information about warranty service, or
  repair policies for products they have purchased

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Meeting the Needs of Web Site Visitors(contd)

• to obtain general information about the company
  or organization
• to obtain financial information for making an
  investment or credit granting decision
• to identify the people who manage the company or
  organization
• to obtain contact information for a person or
  department in the organization.

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Making Web Sites Accessible

• One of the best ways to accommodate a broad range
  of visitors needs is to build flexibility into
  the Web sites interface.
• Many sites offers separate versions with and
  without frames and giving visitors the option to
  choose either one.
• A good site design lets visitors choose among
  information attributes, such as level of detail,
  forms of aggregation, viewing format, and
  downloading format.

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Trust and Loyalty

• When customers buy a product, they are also
  buying a service element.
• A seller can create value in a relationship with
  a customer by nurturing customers trust and
  developing it into loyalty.
• Customer service is a problem for many corporate
  sites.
• A primary weak spot for many sites is the lack of
  integration between the company's call centers
  and their Web sites.

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Rating E-Business Web Sites

• Two companies routinely review electronic
  commerce Web sites for usability, customer
  service, and other factors.
• BizRate.com provides a comparison shopping
  service and offers links to sites with low prices
  and good service ratings for specific products.
• Gomez.com provides scorecards for electronic
  commerce sits in specific categories.

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Usability Testing

• Firms are now starting to perform usability
  testing of their Web sites.
• Usability testing becomes more common, more Web
  sites will meet their goals.
• Eastman Kodak, T. Rowe Price, and Maytag have
  found that a series of Web site test designs
  helped them to understand visitors needs.

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Customer-Centric Web Site Design

• Putting the customer at the center of all site
  designs is called a customer-centric approach to
  Web site design.
• Electronic commerce sites are encouraged to focus
  on the customers buying process rather than the
  companys perspective and organization.

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Identifying and Reaching Customers

• An important element of corporate Web presence is
  connecting with site visitors who are customers
  or potential customers.
• Mass media is a one-to-many communication model,
  the Web is a many-to-one communication model, and
  personal contact is a one-to-one communication
  model.

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Measuring the Effectiveness of Web Site
Advertising

• The pricing metric in mass media is called
  cost-per-thousand (CPM).
• Measuring Web audiences is more complicated.
• Banner ads are often sold on a CPM basis where
  the thousand is 1000 impressions.
• Rates vary greatly and depend on how much
  demographic information the Web site obtains
  about its visitors, but most are within the range
  of 1 to 100 CPM.

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Connecting with Customers

• Most businesses are familiar with two ways of
  identifying and reaching customers personal
  contact and mass media.
• These two ways are referred to as communication
  modes.
• Some experts also distinguish between broadcast
  and addressable media.

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Connecting with Customers

• The Web is an intermediate step between mass
  media and personal contact.
• Using the Web to communicate with potential
  customers offers many of the advantages of
  personal contact selling and many of the cost
  savings of mass media.
• GartnerGroup reported that customer-centric
  marketing strategies would be an excellent fit
  for the Internet marketplace.

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Technology-Enabled Relationship Management

• Technology-enabled relationship management occurs
  when a firm obtains detailed information about a
  customer and uses that information for marketing
  purposes.
• This is also called customer relationship
  management (CRM) or electronic customer
  relationship management (eCRM).