1、Selling on the Web,Chapter 3, Cengage Learning 2015,Learning Objectives,In this chapter, you will learn about: What a revenue model is and how companies use various revenue models How some companies change their revenue models to achieve success Revenue strategy issues that companies face when selli

2、ng online,Learning Objectives (contd.),How to create an effective business presence on the Web What factors enhance Web site usability How companies use the Web to connect with customers,Introduction,Online business example: progressive insurance First auto insurance company to launch a Web site (19

3、95) First to sell policies online (1997) Started providing competitors rates in 2002 Introduced female character “Flo” in 2008 Advertising and brand strategy,Revenue Models for Online Business,Web business revenue-generating models Web catalog Digital content Advertising-supported Advertising-subscr

4、iption mixed Fee-based Same model can work for both sale types Business-to-consumer (B2C) Business-to-business (B2B),Web Catalog Revenue Models,Adapted from mail-order (catalog) model Seller establishes brand image Printed information mailed to prospective buyers Orders placed by mail or phone Expan

5、ds traditional model Replaces or supplements print catalogs Orders placed through Web site Creates additional sales outlet for existing companies,Web Catalog Revenue Models (contd.),Discount retailers Some discounters began as retail operations online, e.g., O Traditional retailers now using Web cat

6、alog revenue model: Costco, Kmart, Target, and Walmart Multiple marketing channels Allows more customers to be reached at a lower cost Marketing channel examples Physical stores Web sites Mailed catalogs or newspaper insert,8,FIGURE 3-1 Combining marketing channels: two retailer examples, Cengage Le

7、arning 2015,Web Catalog Revenue Models (contd.),Adding the personal touch Many adapted catalog sales model to Web Display clothing photos categorized by type Prices, sizes, colors, and tailoring details Want customers to examine clothing online Place orders through Web site Lands End online Web shop

8、ping assistance Lands End Live (1999) Some sites offer text and video chat,Web Catalog Revenue Models (contd.),Personal shopper Learns preferences and makes suggestions Virtual model Allows customers to try clothes Graphic image built from customer measurements Problem: varying computer monitor colo

9、r settings Solutions: send fabric swatch on request and/or offer generous return policies,Fee-for-Content Revenue Models,Firms owning written information or information rights Embrace the Web as a highly efficient distribution mechanism Use the digital content revenue model Sell rights to access inf

10、ormation they own Legal, academic, business and technical content LexisNexis: offers variety of information services for lawyers and law enforcement officials Subscriptions and individual access rights to online academic journals and other publications,Fee-for-Content Revenue Models (contd.),Academi

11、c information aggregation services Purchase and resell rights in subscription packages to schools, libraries, companies, and not-for-profit institutions Dow Jones provides business-focused publications online Newspaper, magazine, and journal materials Factiva: subscriptions to individuals for purpos

12、es of business research, job searches, or investment analysis,Electronic Books,Can be read or listened to Available to a variety of devices As Kindle Barnes offers free information Mixed model includes advertising and subscription revenue (collects insider subscriber revenue) Consumers Union (Consum

13、erR) Purely a subscription-supported site Not-for-profit organization with no advertising Free information Attracts subscribers and fulfills mission,Fee-for-Transaction Revenue Models,Service fee charged Based on transaction number or size Web site offers visitor transaction information Pe

14、rsonal service formerly provided by a human agent Value chain Disintermediation Intermediary (human agent) removed Reintermediation New intermediary (fee-for-transaction Web site) introduced,Fee-for-Transaction Revenue Models (contd.),Stock brokerage firms Two rounds of disintermediation Original fu

15、ll-line brokers charged relatively high commissions Competitive edge by offering more and better advice 1970s: deregulation resulted in discount brokers First round: individual stockbrokers disintermediated from the industry value chain,31,Fee-for-Transaction Revenue Models (contd.),1990s: second ro

16、und disintermediation as discount brokers faced competition from online firms Discount brokers and full-line brokers opened new stock trading and information Web sites Brokerage firms withstanding economic downturn in 2008 offer primarily online services Example: TD Ameritrade,Fee-for-Transaction Re

17、venue Models (contd.),Insurance brokers Quotesmith offered Internet policy price quotes directly to public (1996) Independent insurance agents: disintermediated Insurance policy information, comparisons, sales sites InsWeb, I Progressive Web site Provides quotes for competitors products too The Gene

18、ral (General Automobile Insurance Services) Web site Option for motorists who may be rejected by other plans,Fee-for-Transaction Revenue Models (contd.),Event tickets Web allows event promoters to sell tickets from one virtual location to customers worldwide Online agencies earn a fee on every ticke

19、t sold Ticketmaster Web created secondary ticket market (StubHub, TicketsNow) Brokers connecting ticket owners with buyers Earn fees on tickets resold for others, buy ticket blocks Web created easy-to-find central marketplace, facilitating buyer-seller negotiations,Fee-for-Transaction Revenue Models

20、 (contd.),Online banking and financial services No physical product Easy to offer on Web Slow to take off due to concerns about security Approaches Use existing banks identification and reputation Start online bank not affiliated with existing bank (First Internet Bank of Indiana),35,Fee-for-Transac

21、tion Revenue Models (contd.),Online banking and financial services (contd.) Growing participation as services become more widely available Bill presentment service Account aggregation tools,Fee-for-Transaction Revenue Models (contd.),Travel Travel agency revenue model: receive fee for facilitating a

22、 transaction Travel sites generate revenue through: Commissions Web site advertising fees (advertising-fee revenue model) Popular travel Web sites Travelocity (based on Sabre) Expedia (Microsoft subsidiary) Orbitz (consortium of major U.S airlines),37,Fee-for-Transaction Revenue Models (contd.),Trav

23、el (contd.) Traditional travel agents squeezed out Surviving smaller travel agents specialize in cruises Assisted by Web sites, e.g., VacationsToG, with detailed cruise information or discounted package deals Reintermediation strategy: cater to a target audience (WaveH) Also supplemented by online a

24、dvertising revenue,Fee-for-Transaction Revenue Models (contd.),Automobile sales Web sites implement the fee-for-transaction revenue model differently Information service (Autobytel, E) Customer selects specific car; site determines price and finds local dealer Locate local dealers; car sells at smal

25、l premium over dealers nominal cost Dealer charged a fee for service Car salesperson: disintermediated Web site: new intermediary (reintermediation),Fee-for-Transaction Revenue Models (contd.),Real estate and mortgage loans Brokerage firms and individual real estate brokers feature online informatio

26、n on properties National Association of Realtors Web site R 2008 financial crisis Dramatically reduced number of mortgage brokers in business Successful online mortgage brokers E-LOAN Industry is resistant to disintermediation,Fee-for-Service Revenue Models,Companies offer Web service Fee based on s

27、ervice value Not a broker service Not based on transactions-processed number or size Online games Sales revenue source Advertising (older concept); pay-to-play for premium games; subscription fees Some elements of advertising,Fee-for-Service Revenue Models (contd.),Professional services Limited Web

28、use State laws prohibit extension of practice Instances of unlicensed practice can arise Patients or clients may set appointments and receive online consultation Patient/client privacy concerns Law on the Web site Legal consultations to United Kingdom residents CPA Directory United States accounting

29、 professionals site,Fee-for-Service Revenue Models (contd.),Professional services (contd.) M Online version of Martindale-Hubbell lawyer directory Prevalence of Web sites presenting health information Difficulty of diagnosing without physical exam Online consultations are emerging Cope Today Web sit

30、e Online consultations for U.S. patients,Free for Many, Fee for a Few,Economics of manufacturing Different for physical and digital products Unit cost high percentage of physical products Unit cost very small for digital products Leads to a different revenue model Offer basic product to many for fre

31、e Charge a fee to some for differentiated products Examples: Yahoo e-mail accounts Inverse logic applied to physical products: free samples to entice sales (cookie samples),Changing Strategies: Revenue Models in Transition,Companies must change revenue model To meet needs of new and changing Web use

32、rs Some companies created e-commerce Web sites Needed many years to grow large enough to become profitable (CNN and ESPN) Some companies changed model or went out of business Case studies of strategies that evolved from experience and adaptations to change,Subscription to Advertising-Supported Model

33、,Slate magazine Upscale news and current events Success expectations were high Experienced writers and editors Acclaim for incisive reporting and excellent writing Initial revenue source Annual subscription did not cover operating costs Now an advertising-supported site Part of the Bing portal Value

34、 to Microsoft: increase the portals stickiness,Advertising-Supported to Advertising-Subscription Mixed Model,S Acclaimed for innovative content Initial revenue source Advertising-supported site Needed additional money to continue operations Now offers optional subscription version Annual fee for Sal

35、on Core (premium) Free of advertising Additional content Downloadable content,Advertising-Supported to Subscription Model,Northern Light search engine includes own database Results include Web site links and abstracts of its owned content Initial revenue source Combination of the advertising-support

36、ed model plus a fee-based information access service Advertising revenue: insufficient to cover service Converted to new subscription-supported revenue model Annual subscriptions to large corporate clients Main products today include SinglePoint search engine,Multiple Changes to Revenue Models,Encyc

37、lopedia Britannica Initial Web offerings (1994) Britannica Internet Guide Encyclopedia Britannica Online Initial revenue source Paid subscription site had low subscription sales Converted to free advertiser-supported site (1999) Advertising revenues declined,Multiple Changes to Revenue Models (contd

38、.),Encyclopedia Britannica (contd.) 2001: returned to mixed model with subscription plan and free content Subscriptions comprise the major revenue source Additional revenue from online products store sales New York Times Web sites ability to adapt 1990s: advertising supported with subscription fee f

39、or specific access to premium crosswords, chess column and archived articles 2005: additional content required subscription,Multiple Changes to Revenue Models (contd.),2007: returned to advertising-supported with free access 2011: mixed revenue model First 20 articles/month free Subscription plans f

40、or continued access Pay wall: barrier triggered by specific usage level Print subscribers have unlimited access,Revenue Strategy Issues for Online Businesses,Channel conflict and cannibalization Companys Web sales activities interfere with existing sales outlets Levis and Maytag Web sites Web sites

41、no longer sell products Sites now provide product and retail distributor information Eddie Bauer Online purchases returnable at retail stores Required compensation and bonus plans adjustments to support Web site Channel cooperation made it successful,Revenue Strategy Issues for Online Businesses (co

42、ntd.),Strategic alliances Two or more companies join forces Undertake activity over long time period Yodlee account aggregation services provider Yodlee concentrates on developing the technology and services Banks provide the customers A Joined with Target and many smaller companies,Revenue Strategy

43、 Issues for Online Businesses (contd.),Luxury goods Difficult to sell online Customers want to see product in person or touch Overcome by some sites by limited online offerings Chanel Calvin Klein Jewelry sales have grown rapidly in recent years Blue Nile, I, and Costco Supported by: General availab

44、ility of independent appraisal certificates “No questions asked” return policies,Electronic Commerce, Eleventh Edition,54,Revenue Strategy Issues for Online Businesses (contd.),Overstock sales strategies Physical outlet stores being replaced with overstocks Web page sales Reach more people than phys

45、ical outlet stores Frequent updates possible,Creating an Effective Business Presence Online,Organizations presence Public image conveyed to stakeholders Usually not important Until growth reaches significant size Stakeholders Customers, suppliers, employees, stockholders, neighbors, and general publ

46、ic Effective Web presence Critical even for smallest and newest Web operating firms,Identifying Web Presence Goals,Business physical space Focus: very specific objectives Not image driven Must satisfy many business needs Often fails to convey a good presence Web business site Intentionally creates d

47、istinctive presences Good Web site design provides: Effective image-creation/ image-enhancing features,FIGURE 3-5 Web presence objectives and strategies, Cengage Learning 2015,58,Making Web Presence Consistent with Brand Image,Different firms establish different Web presence goals Coca Cola Web site

48、 pages Usually include trusted corporate image (Coke bottle) Image: traditional position as a trusted classic Pepsi Web site pages Hyperlinks to activities and product-related promotions Image: upstart product favored by younger generation Auto manufacturers Web sites,Not-For-Profit Organizations,We

49、b sites key goals Information dissemination Successful site key elements Integrate information dissemination with fund-raising Provide two-way contact channel American Civil Liberties Union (ACLU) Serves many different constituencies Web sites used to stay in touch with existing stakeholders and ide

50、ntify new opportunities for serving them,Web Site Usability,Current Web presences Few businesses accomplish all goals Most fail to provide visitors sufficient interactive contact opportunities Improving Web presence Accessible to more people Easier to use Encourage visitors trust Foster feelings of

51、loyalty toward the organization,How the Web Is Different,Simple mid-1990s Web sites Conveyed basic business information No market research conducted Web objectives often unmet Failure to understand how Web differs as a media for presence-building Web sites designed to create an organizations presenc

52、e Contain links to standard information set Success dependent on how this information offered,Meeting the Needs of Web Site Visitors,Successful Web businesses: Realize every visitor is a potential customer (partner) Varied motivations of Web site visitors Learning about company products or services

53、Buying products or services Obtaining warranty, service, and repair policy information Obtaining general company information Obtaining financial information Identifying people,Meeting the Needs of Web Site Visitors (contd.),Varied motivations of Web site visitors (contd.) Obtaining contact informati

54、on Following a link into the site while searching for information about a related product, service, or topic A challenge to meet all motivations Visitors arrive with different needs, experience, and expectation levels,Making Web Sites Accessible,Build interface flexibility options Text-only version

55、W3C Accessibility Initiative site offers useful links regarding disabilities Selection of smaller graphic images Choice of streaming media connection type User-specified information attributes Controversial Web site design issues Adobe Flash software use Some tasks lend themselves to animated Web pa

56、ges Does not work on Apple iPhone or iPad,Making Web Sites Accessible (contd.),FIGURE 3-8 Accessibility goals for business Web sites, Cengage Learning 2015,Trust and Loyalty,Creates relationship value Sustained good service leads to seller trust Delivery, order handling, help selecting product, and after-sale support Repeated satisfactory service builds customer loyalty Customer service weaknesses L