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ECT 455 E-Commerce Web Site Engineering

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ECT 455 Susy Chan Ph.D. 1. ECT 455. E-Commerce Web Site Engineering. Lecture #2 ... ECT 455 Susy Chan Ph.D. 6. 6/13/09. Amazon ... – PowerPoint PPT presentation

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Title: ECT 455 E-Commerce Web Site Engineering


1
ECT 455E-Commerce Web Site Engineering
  • Lecture 2
  • Consumer Internet Commerce

2
Agenda
  • Market News
  • Types of Consumers and Purchases
  • Business Models and Value Propositions
  • e-Commerce Value Chain
  • Assignments Website Analysis
  • Project Deliverable B

3
A Quick Poll
  • What types of shoppers are you?
  • How do you shop online?

4
Types of Consumers
  • Types of Buyers
  • Impulsive Buyers quick purchasing
  • Patient Buyers price comparison
  • Analytical Buyers research first
  • Shopping Experiences
  • Utilitarian task-completion and rational
  • Hedonic involvement and entertainment

5
Types of Online Purchases
  • Specifically Planned Purchases
  • Generally Planned Purchases
  • Reminder Purchases
  • Unplanned Purchases
  • Implications for Strategies and Design?

6
Amazon
  • How does Amazon site support different types of
    shoppers, purchases, and shopping behaviors?

7
The Multichannel Consumer Embraces The Net
8
Customer Expectations
  • Merchandize assortment
  • About the same number of products available as
    the retail store (21)
  • About the same number of products plus specials
    (51)
  • More online SKUs than store or catalog (39)

(Global Online Retailing Report)
9
  • A Technographics View of New consumer Internet
    Adoption

Mainstream
Number of new online consumers
Early adopters
Laggards
Time
Forrester Now or Never
10
Meeting Customer Expectations
  • Top 3 Reasons for Shopping Online
  • Good selection of items
  • Competitive pricing
  • Convenience
  • Shopping carts are frequently abandoned
  • Placed products in the cart but did not complete
    the purchase (78) because
  • Shipping cost too high (45)
  • Price check (37)
  • Changed mind (34)
  • Price to high (24)
  • Check out process was long/unclear (18)

EY Global Retailing
11
User Profile Information
GVU Web User Survey
12
(No Transcript)
13
The e-Commerce Value Cycle
Attract
React
Interact
Act
14
The e-Commerce Value Chain
Get and keep customer interest
Turn interest into orders
Service customers
Manage orders
Attract
Act
React
Interact
Catalog Sales static dynamic
AdvertisingMarketing channels media
Order capture-- Shopping Cart Payment Fulfillment
goods
Customer service Order tracking
15
Attract Customers (Marketing)
  • Purpose
  • Build brand awareness, attract customers, and
    entice them to buy
  • Merchandizing Methods
  • Advertising
  • Coupons
  • Sales and Promotions
  • Frequent buyer programs
  • 11 marketing

16
Beyond Price, Research and Brand
  • Fast Search price
  • Long search branding, delivery time, and other
    product characteristics

Brynjolfssor Search and product differentiation
at an Internet Shopbot. MITSloan School of
Management, Dec 2004.
17
Interact with Customers (Sales)
  • Purpose
  • Turn interest into orders
  • Catalog, Product and Service
  • Techniques
  • Registration with Internet search engines
  • Hyperlinks
  • Onsite product search
  • Product and price comparison
  • Dynamic vs. static contents
  • Pricing

18
Act on Customer Instructions (Order Management)
  • Purpose Manage order and shopping experience
  • Order Processing
  • Shopping cart and order aggregation
  • Order validation Application of coupons or
    discounts
  • Cross selling
  • Calculation of sales, taxes, shipping and
    delivery charges, rolled-up order
  • Payment handle multiple payment methods (cash,
    credit, credit cards, debit cards)
  • Act Fulfillment
  • Delivering the goods ordered to their destination
  • Transmission of order information to warehouse,
    packing or order assembly for shipping, shipping
    and delivery

19
React to Inquiries (Service)
  • Purpose customer satisfaction, experience, and
    repeat visits
  • Methods
  • 24X7 service capacity
  • Proactive and Immediate feedback voice and
    email
  • Access to status information
  • Self-help (FAQ)
  • Multi-language support

20
(No Transcript)
21
Online Retail 2004 Holiday Seasons
  • Revenue growth strong.  91 of retailers reported
    revenue growth for the 2004 online holiday
    season 17 experiencing revenues doubled.
    Example PearlParadise.com 113 growth 888m
    -gt1.9b
  •  
  • Customer satisfaction increases.  95 consumers
    were satisfied with online shopping experience
    89 in 2003, 84 in 2002  
  • Free shipping remains the king of online
    marketing promotions (60), Recommendations 56
    gift center, suggested items page (32),
    clearance page (32), featured sale item (31)
  •  
  • Search engines and affiliate marketing help
    retailers find customers, remained the second
    (58) and third (50) most successful marketing
    vehicle for retailers. 
  • Multi-channel strategies 45 research on
    catalog ? buy online 21 research online ? buy
    from catalog
  • Shop.org/BizRate 2004 eHoliday Mood study.
    January 2005

22
Amazon
  • How does Amazon site implement the e-commerce
    value chain?
  • Attract
  • Interact
  • Act
  • React

23
Value Propositions
  • For Consumers/Customers/Users
  • For the Firm/Organization

24
Value Proposition for Customers
  • Transform customer relationship from
    supplier-centered to customer-centered values
  • self service, 11 choices delivery to customer
    location customer needs choice of service hours
  • Displace traditional source of values
  • Physical vs. digital value (information)
  • Economies of scale vs economy of scope
  • Mass produced vs mass customized
  • Information vs. knowledge value
  • Distribution as constraints vs. enabler
  • Local vs. global

25
Value Proposition for Firms
  • Ability to reach a global market
  • Reduced marketing and selling expense
  • Increased efficiency of operation
  • Ability to target consumers more precisely
  • Ability to convey more accurate product and
    availability information

26
Four Strategies
  • Channel Master (Cisco Amazon)
  • Customer Magnet (Yahoo)
  • Value Chain Pirate (Autobytel.com etrade)
  • Digital Distributor (Monster.com)
  • Disintermediation and reintermediation

27
B2C Business Models Generating Revenues
  • Merchant Model
  • virtual merchants
  • Click Brick
  • Multi-Channel
  • Shopping Malls
  • Advertising Model
  • Horizontal portal
  • Vertical portal
  • Personalized portal
  • Intermediary (Brokerage)
  • Buy/sell fulfillment
  • Buyer/demand aggregator
  • Virtual mall
  • Hypermediary (financial settlement)
  • Auction broker
  • Reverse auction

28
Merchant Models (virtual, CB, MC, shopping
malls)
  • Advantages
  • Enables merchants to sell products on the Web
  • Conduct business 24-by-7, worldwide
  • An e-commerce storefront should include
  • Online catalog of products
  • Order processing (robust shopping cart)
  • Secure online payment
  • Timely order fulfillment
  • CB or MC physical location, brand recognition,
    established customer base, cannibalization,
    channel integration
  • Virtual Merchant avoid the cost of physical
    stores

29
Portal Model
  • Portal sites Give visitors the chance to find
    almost everything they are looking for in one
    place
  • Horizontal portalsPortals that aggregate
    information on a broad range of topics
  • Yahoo!, AltaVista, Google
  • Vertical portals Portals that offer more
    specific information within a single area of
    interest
  • WebMD, IMDB, FirstGov
  • Requires fresh and abundant content, and robust
    search engine to draw traffic
  • Heavy reliance on advertising revenue, decline in
    effectiveness of online advertising

30
Auction Model
  • Online auction sites
  • Act as forums through which Internet users can
    log-on and assume the role of either bidder or
    seller
  • Collect a commission on every successful auction
  • Sellers post items they wish to sell and wait for
    buyers to bid
  • Reserve price
  • The minimum price a seller will accept in a given
    auction
  • Reverse auctions
  • Allow the buyer to set a price as sellers compete
    to match or even beat it

31
Dynamic Pricing Models
  • The Web has changed the way products are priced
    and purchased
  • Comparison pricing model
  • Web sites using shopping bot technology to find
    the lowest price for a given item e.g.
    NextTag.com
  • Demand-sensitive pricing model
  • Group buying reduces price as volume of sales
    increase
  • Name-your-price model
  • Name-your-price for products and services

32
Amazon
  • What are their customer value propositions?
  • What are their business value propositions?
  • What are their business models?
  • Who are their competitors?

33
The State of Retailing Online 7.0
  • Profitable online operations, 43 (2000) ? 56
    (2001) -gt 70 (2002) ? 79 (2003)
  • Overall Operating margins ? 21 catalogers 28
    online retailer ? -1 (from -16 in 2002)
  • Shoppers spent 51.3 b online in 2001, up 21
    from 2000. 76 b in 2002, up 58 from 2001
    expected to grow 26 in 2003 to 96 b.
  • Most popular product categories computer HW/SW
    (40), tickets (17), books (12)
  • Marketing costs Web based retailers (10/per
    order), store-based (5), and catalog-based (7)
    shifting toward performance based affiliate
    marketing and search engine marketing (investment
    in operational efficiency)
  • Overall marketing costs 8/per order ? 4/per
    order Web-based (10/order ? 2/order)
  • Customer acquisition costs 29? 14 repeat
    buyers 4?53 of revenue.
  • Customer service costs 1.9? 2.3 fulfillment
    6.3? 9.8
  • 24 of offline sales in 2003 were influenced by
    Web, up from 15 in 2002

Source shop.org/Forrester Research, May 2004
2003 report (6.0)
34
Transition of an E-Customer
Interactive Marketing Transaction Processing
Online Relationship
Casual Visitor
Prospect
Buyer
Repeat Buyer
Evaluate interest Allow comparison
Support/Interact present options Enable
Transaction Develop relationship Prove
reliability
Push Offers
Conversion rate is low
Gartner Group
35
Next Week
  • Review reading assignments
  • Deliverable B Due
  • Market News
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