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SellingontheWeb,Chapter3,1,CengageLearning2015,LearningObjectives,Inthischapter,youwilllearnabout:WhatarevenuemodelisandhowcompaniesusevariousrevenuemodelsHowsomecompanieschangetheirrevenuemodelstoachievesuccessRevenuestrategyissuesthatcompaniesfacewhensellingonline,CengageLearning2015,2,LearningObjectives(contd.),HowtocreateaneffectivebusinesspresenceontheWebWhatfactorsenhanceWebsiteusabilityHowcompaniesusetheWebtoconnectwithcustomers,CengageLearning2015,3,Introduction,Onlinebusinessexample:progressiveinsuranceFirstautoinsurancecompanytolaunchaWebsite(1995)Firsttosellpoliciesonline(1997)Startedprovidingcompetitorsratesin2002Introducedfemalecharacter“Flo”in2008Advertisingandbrandstrategy,CengageLearning2015,4,RevenueModelsforOnlineBusiness,Webbusinessrevenue-generatingmodelsWebcatalogDigitalcontentAdvertising-supportedAdvertising-subscriptionmixedFee-basedSamemodelcanworkforbothsaletypesBusiness-to-consumer(B2C)Business-to-business(B2B),CengageLearning2015,5,WebCatalogRevenueModels,Adaptedfrommail-order(catalog)modelSellerestablishesbrandimagePrintedinformationmailedtoprospectivebuyersOrdersplacedbymailorphoneExpandstraditionalmodelReplacesorsupplementsprintcatalogsOrdersplacedthroughWebsiteCreatesadditionalsalesoutletforexistingcompanies,CengageLearning2015,6,WebCatalogRevenueModels(contd.),DiscountretailersSomediscountersbeganasretailoperationsonline,e.g.,OTraditionalretailersnowusingWebcatalogrevenuemodel:Costco,Kmart,Target,andWalmartMultiplemarketingchannelsAllowsmorecustomerstobereachedatalowercostMarketingchannelexamplesPhysicalstoresWebsitesMailedcatalogsornewspaperinsert,CengageLearning2015,7,8,FIGURE3-1Combiningmarketingchannels:tworetailerexamples,CengageLearning2015,8,CengageLearning2015,WebCatalogRevenueModels(contd.),AddingthepersonaltouchManyadaptedcatalogsalesmodeltoWebDisplayclothingphotoscategorizedbytypePrices,sizes,colors,andtailoringdetailsWantcustomerstoexamineclothingonlinePlaceordersthroughWebsiteLandsEndonlineWebshoppingassistanceLandsEndLive(1999)Somesitesoffertextandvideochat,CengageLearning2015,9,WebCatalogRevenueModels(contd.),PersonalshopperLearnspreferencesandmakessuggestionsVirtualmodelAllowscustomerstotryclothesGraphicimagebuiltfromcustomermeasurementsProblem:varyingcomputermonitorcolorsettingsSolutions:sendfabricswatchonrequestand/oroffergenerousreturnpolicies,CengageLearning2015,10,Fee-for-ContentRevenueModels,FirmsowningwritteninformationorinformationrightsEmbracetheWebasahighlyefficientdistributionmechanismUsethedigitalcontentrevenuemodelSellrightstoaccessinformationtheyownLegal,academic,businessandtechnicalcontentLexisNexis:offersvarietyofinformationservicesforlawyersandlawenforcementofficialsSubscriptionsandindividualaccessrightstoonlineacademicjournalsandotherpublications,CengageLearning2015,11,Fee-for-ContentRevenueModels(contd.),AcademicinformationaggregationservicesPurchaseandresellrightsinsubscriptionpackagestoschools,libraries,companies,andnot-for-profitinstitutionsDowJonesprovidesbusiness-focusedpublicationsonlineNewspaper,magazine,andjournalmaterialsFactiva:subscriptionstoindividualsforpurposesofbusinessresearch,jobsearches,orinvestmentanalysis,CengageLearning2015,12,ElectronicBooks,CanbereadorlistenedtoAvailabletoavarietyofdevicesAsKindleBarnesoffersfreeinformationMixedmodelincludesadvertisingandsubscriptionrevenue(collectsinsidersubscriberrevenue)ConsumersUnion(ConsumerR)Purelyasubscription-supportedsiteNot-for-profitorganizationwithnoadvertisingFreeinformationAttractssubscribersandfulfillsmission,CengageLearning2015,28,Fee-for-TransactionRevenueModels,ServicefeechargedBasedontransactionnumberorsizeWebsiteoffersvisitortransactioninformationPersonalserviceformerlyprovidedbyahumanagentValuechainDisintermediationIntermediary(humanagent)removedReintermediationNewintermediary(fee-for-transactionWebsite)introduced,CengageLearning2015,29,Fee-for-TransactionRevenueModels(contd.),StockbrokeragefirmsTworoundsofdisintermediationOriginalfull-linebrokerschargedrelativelyhighcommissionsCompetitiveedgebyofferingmoreandbetteradvice1970s:deregulationresultedindiscountbrokersFirstround:individualstockbrokersdisintermediatedfromtheindustryvaluechain,CengageLearning2015,30,31,Fee-for-TransactionRevenueModels(contd.),1990s:secondrounddisintermediationasdiscountbrokersfacedcompetitionfromonlinefirmsDiscountbrokersandfull-linebrokersopenednewstocktradingandinformationWebsitesBrokeragefirmswithstandingeconomicdownturnin2008offerprimarilyonlineservicesExample:TDAmeritrade,CengageLearning2015,31,Fee-for-TransactionRevenueModels(contd.),InsurancebrokersQuotesmithofferedInternetpolicypricequotesdirectlytopublic(1996)Independentinsuranceagents:disintermediatedInsurancepolicyinformation,comparisons,salessitesInsWeb,IProgressiveWebsiteProvidesquotesforcompetitorsproductstooTheGeneral(GeneralAutomobileInsuranceServices)WebsiteOptionformotoristswhomayberejectedbyotherplans,CengageLearning2015,32,Fee-for-TransactionRevenueModels(contd.),EventticketsWeballowseventpromoterstosellticketsfromonevirtuallocationtocustomersworldwideOnlineagenciesearnafeeoneveryticketsoldTicketmasterWebcreatedsecondaryticketmarket(StubHub,TicketsNow)BrokersconnectingticketownerswithbuyersEarnfeesonticketsresoldforothers,buyticketblocksWebcreatedeasy-to-findcentralmarketplace,facilitatingbuyer-sellernegotiations,CengageLearning2015,33,Fee-for-TransactionRevenueModels(contd.),OnlinebankingandfinancialservicesNophysicalproductEasytoofferonWebSlowtotakeoffduetoconcernsaboutsecurityApproachesUseexistingbanksidentificationandreputationStartonlinebanknotaffiliatedwithexistingbank(FirstInternetBankofIndiana),CengageLearning2015,34,35,Fee-for-TransactionRevenueModels(contd.),Onlinebankingandfinancialservices(contd.)GrowingparticipationasservicesbecomemorewidelyavailableBillpresentmentserviceAccountaggregationtools,CengageLearning2015,35,Fee-for-TransactionRevenueModels(contd.),TravelTravelagencyrevenuemodel:receivefeeforfacilitatingatransactionTravelsitesgeneraterevenuethrough:CommissionsWebsiteadvertisingfees(advertising-feerevenuemodel)PopulartravelWebsitesTravelocity(basedonSabre)Expedia(Microsoftsubsidiary)Orbitz(consortiumofmajorU.Sairlines),CengageLearning2015,36,37,Fee-for-TransactionRevenueModels(contd.),Travel(contd.)TraditionaltravelagentssqueezedoutSurvivingsmallertravelagentsspecializeincruisesAssistedbyWebsites,e.g.,VacationsToG,withdetailedcruiseinformationordiscountedpackagedealsReintermediationstrategy:catertoatargetaudience(WaveH)Alsosupplementedbyonlineadvertisingrevenue,CengageLearning2015,37,Fee-for-TransactionRevenueModels(contd.),AutomobilesalesWebsitesimplementthefee-for-transactionrevenuemodeldifferentlyInformationservice(Autobytel,E)Customerselectsspecificcar;sitedeterminespriceandfindslocaldealerLocatelocaldealers;carsellsatsmallpremiumoverdealersnominalcostDealerchargedafeeforserviceCarsalesperson:disintermediatedWebsite:newintermediary(reintermediation),CengageLearning2015,38,Fee-for-TransactionRevenueModels(contd.),RealestateandmortgageloansBrokeragefirmsandindividualrealestatebrokersfeatureonlineinformationonpropertiesNationalAssociationofRealtorsWebsiteR2008financialcrisisDramaticallyreducednumberofmortgagebrokersinbusinessSuccessfulonlinemortgagebrokersE-LOANIndustryisresistanttodisintermediation,CengageLearning2015,39,Fee-for-ServiceRevenueModels,CompaniesofferWebserviceFeebasedonservicevalueNotabrokerserviceNotbasedontransactions-processednumberorsizeOnlinegamesSalesrevenuesourceAdvertising(olderconcept);pay-to-playforpremiumgames;subscriptionfeesSomeelementsofadvertising,CengageLearning2015,40,Fee-for-ServiceRevenueModels(contd.),ProfessionalservicesLimitedWebuseStatelawsprohibitextensionofpracticeInstancesofunlicensedpracticecanarisePatientsorclientsmaysetappointmentsandreceiveonlineconsultationPatient/clientprivacyconcernsLawontheWebsiteLegalconsultationstoUnitedKingdomresidentsCPADirectoryUnitedStatesaccountingprofessionalssite,CengageLearning2015,41,Fee-for-ServiceRevenueModels(contd.),Professionalservices(contd.)MOnlineversionofMartindale-HubbelllawyerdirectoryPrevalenceofWebsitespresentinghealthinformationDifficultyofdiagnosingwithoutphysicalexamOnlineconsultationsareemergingCopeTodayWebsiteOnlineconsultationsforU.S.patients,CengageLearning2015,42,FreeforMany,FeeforaFew,EconomicsofmanufacturingDifferentforphysicalanddigitalproductsUnitcosthighpercentageofphysicalproductsUnitcostverysmallfordigitalproductsLeadstoadifferentrevenuemodelOfferbasicproducttomanyforfreeChargeafeetosomefordifferentiatedproductsExamples:Yahooe-mailaccountsInverselogicappliedtophysicalproducts:freesamplestoenticesales(cookiesamples),CengageLearning2015,43,ChangingStrategies:RevenueModelsinTransition,CompaniesmustchangerevenuemodelTomeetneedsofnewandchangingWebusersSomecompaniescreatede-commerceWebsitesNeededmanyyearstogrowlargeenoughtobecomeprofitable(CNNandESPN)SomecompanieschangedmodelorwentoutofbusinessCasestudiesofstrategiesthatevolvedfromexperienceandadaptationstochange,CengageLearning2015,44,SubscriptiontoAdvertising-SupportedModel,SlatemagazineUpscalenewsandcurrenteventsSuccessexpectationswerehighExperiencedwritersandeditorsAcclaimforincisivereportingandexcellentwritingInitialrevenuesourceAnnualsubscriptiondidnotcoveroperatingcostsNowanadvertising-supportedsitePartoftheBingportalValuetoMicrosoft:increasetheportalsstickiness,CengageLearning2015,45,Advertising-SupportedtoAdvertising-SubscriptionMixedModel,SAcclaimedforinnovativecontentInitialrevenuesourceAdvertising-supportedsiteNeededadditionalmoneytocontinueoperationsNowoffersoptionalsubscriptionversionAnnualfeeforSalonCore(premium)FreeofadvertisingAdditionalcontentDownloadablecontent,CengageLearning2015,46,Advertising-SupportedtoSubscriptionModel,NorthernLightsearchengineincludesowndatabaseResultsincludeWebsitelinksandabstractsofitsownedcontentInitialrevenuesourceCombinationoftheadvertising-supportedmodelplusafee-basedinformationaccessserviceAdvertisingrevenue:insufficienttocoverserviceConvertedtonewsubscription-supportedrevenuemodelAnnualsubscriptionstolargecorporateclientsMainproductstodayincludeSinglePointsearchengine,CengageLearning2015,47,MultipleChangestoRevenueModels,EncyclopediaBritannicaInitialWebofferings(1994)BritannicaInternetGuideEncyclopediaBritannicaOnlineInitialrevenuesourcePaidsubscriptionsitehadlowsubscriptionsalesConvertedtofreeadvertiser-supportedsite(1999)Advertisingrevenuesdeclined,CengageLearning2015,48,MultipleChangestoRevenueModels(contd.),EncyclopediaBritannica(contd.)2001:returnedtomixedmodelwithsubscriptionplanandfreecontentSubscriptionscomprisethemajorrevenuesourceAdditionalrevenuefromonlineproductsstoresalesNewYorkTimesWebsitesabilitytoadapt1990s:advertisingsupportedwithsubscriptionfeeforspecificaccesstopremiumcrosswords,chesscolumnandarchivedarticles2005:additionalcontentrequiredsubscription,CengageLearning2015,49,MultipleChangestoRevenueModels(contd.),2007:returnedtoadvertising-supportedwithfreeaccess2011:mixedrevenuemodelFirst20articles/monthfreeSubscriptionplansforcontinuedaccessPaywall:barriertriggeredbyspecificusagelevelPrintsubscribershaveunlimitedaccess,CengageLearning2015,50,RevenueStrategyIssuesforOnlineBusinesses,ChannelconflictandcannibalizationCompanysWebsalesactivitiesinterferewithexistingsalesoutletsLevisandMaytagWebsitesWebsitesnolongersellproductsSitesnowprovideproductandretaildistributorinformationEddieBauerOnlinepurchasesreturnableatretailstoresRequiredcompensationandbonusplansadjustmentstosupportWebsiteChannelcooperationmadeitsuccessful,CengageLearning2015,51,RevenueStrategyIssuesforOnlineBusinesses(contd.),StrategicalliancesTwoormorecompaniesjoinforcesUndertakeactivityoverlongtimeperiodYodleeaccountaggregationservicesproviderYodleeconcentratesondevelopingthetechnologyandservicesBanksprovidethecustomersAJoinedwithTargetandmanysmallercompanies,CengageLearning2015,52,RevenueStrategyIssuesforOnlineBusinesses(contd.),LuxurygoodsDifficulttosellonlineCustomerswanttoseeproductinpersonortouchOvercomebysomesitesbylimitedonlineofferingsChanelCalvinKleinJewelrysaleshavegrownrapidlyinrecentyearsBlueNile,I,andCostcoSupportedby:Generalavailabilityofindependentappraisalcertificates“Noquestionsasked”returnpolicies,CengageLearning2015,53,ElectronicCommerce,EleventhEdition,54,RevenueStrategyIssuesforOnlineBusinesses(contd.),OverstocksalesstrategiesPhysicaloutletstoresbeingreplacedwithoverstocksWebpagesalesReachmorepeoplethanphysicaloutletstoresFrequentupdatespossible,CengageLearning2015,54,CreatinganEffectiveBusinessPresenceOnline,OrganizationspresencePublicimageconveyedtostakeholdersUsuallynotimportantUntilgrowthreachessignificantsizeStakeholdersCustomers,suppliers,employees,stockholders,neighbors,andgeneralpublicEffectiveWebpresenceCriticalevenforsmallestandnewestWeboperatingfirms,CengageLearning2015,55,IdentifyingWebPresenceGoals,BusinessphysicalspaceFocus:veryspecificobjectivesNotimagedrivenMustsatisfymanybusinessneedsOftenfailstoconveyagoodpresenceWebbusinesssiteIntentionallycreatesdistinctivepresencesGoodWebsitedesignprovides:Effectiveimage-creation/image-enhancingfeatures,CengageLearning2015,56,CengageLearning2015,57,FIGURE3-5Webpresenceobjectivesandstrategies,CengageLearning2015,58,MakingWebPresenceConsistentwithBrandImage,DifferentfirmsestablishdifferentWebpresencegoalsCocaColaWebsitepagesUsuallyincludetrustedcorporateimage(Cokebottle)Image:traditionalpositionasatrustedclassicPepsiWebsitepagesHyperlinkstoactivitiesandproduct-relatedpromotionsImage:upstartproductfavoredbyyoungergenerationAutomanufacturersWebsites,CengageLearning2015,58,Not-For-ProfitOrganizations,WebsiteskeygoalsInformationdisseminationSuccessfulsitekeyelementsIntegrateinformationdisseminationwithfund-raisingProvidetwo-waycontactchannelAmericanCivilLibertiesUnion(ACLU)ServesmanydifferentconstituenciesWebsitesusedtostayintouchwithexistingstakeholdersandidentifynewopportunitiesforservingthem,CengageLearning2015,59,WebSiteUsability,CurrentWebpresencesFewbusinessesaccomplishallgoalsMostfailtoprovidevisitorssufficientinteractivecontactopportunitiesImprovingWebpresenceAccessibletomorepeopleEasiertouseEncouragevisitorstrustFosterfeelingsofloyaltytowardtheorganization,CengageLearning2015,60,HowtheWebIsDifferent,Simplemid-1990sWebsitesConveyedbasicbusinessinformationNomarketresearchconductedWebobjectivesoftenunmetFailuretounderstandhowWebdiffersasamediaforpresence-buildingWebsitesdesignedtocreateanorganizationspresenceContainlinkstostandardinformationsetSuccessdependentonhowthisinformationoffered,CengageLearning2015,61,MeetingtheNeedsofWebSiteVisitors,SuccessfulWebbusinesses:Realizeeveryvisitorisapotentialcustomer(partner)VariedmotivationsofWebsitevisitorsLearningaboutcompanyproductsorservicesBuyingproductsorservicesObtainingwarranty,service,andrepairpolicyinformationObtaininggeneralcompanyinformationObtainingfinancialinformationIdentifyingpeople,CengageLearning2015,62,MeetingtheNeedsofWebSiteVisitors(contd.),VariedmotivationsofWebsitevisitors(contd.)ObtainingcontactinformationFollowingalinkintothesitewhilesearchingforinformationaboutarelatedproduct,service,ortopicAchallengetomeetallmotivationsVisitorsarrivewithdifferentneeds,experience,andexpectationlevels,CengageLearning2015,63,MakingWebSitesAccessible,BuildinterfaceflexibilityoptionsText-onlyversionW3CAccessibilityInitiativesiteoffersusefullinksregardingdisabilitiesSelectionofsmallergraphicimagesChoiceofstreamingmediaconnectiontypeUser-specifiedinformationattributesControversialWebsitedesignissuesAdobeFlashsoftwareuseSometaskslendthemselvestoanimatedWebpagesDoesnotworkonAppleiPhoneoriPad,CengageLearning2015,64,MakingWebSitesAccessible(contd.),CengageLearning2015,65,FIGURE3-8AccessibilitygoalsforbusinessWebsites,CengageLearning2015,TrustandLoyalty,CreatesrelationshipvalueSustainedgoodserviceleadstosellertrustDelivery,orderhandling,helpselectingproduct,andafter-salesupportRepeatedsatisfactoryservicebuildscustomerloyaltyCustomerserviceweaknessesLackofintegrationbetweencallcent