Key Concept - Chapter 3 – Selling on the web: Revenue models and building a web presence

REVENUE MODELS
1. Web Catalog Revenue Models
-Online retailers using a variation of the mail order catalog revenue model - establish a brand image, uses the strength of that image to sell products/services with product info on websites and customers can place orders through website or phone
-Types of businesses using the Web catalog sellers:
1. Computers and consumer electronics: ex: Dell creates value by offering flexibility to customers and various ways to access info
2. Books, music, and videos: most visible examples of e-commerce
3. Luxury goods: providing heavy use of graphics, animation, and info versus generating revenue
4. Clothing retailers: customers examine clothing and place orders through website. Problem: color settings on computer monitors.
5.Flowers and gifts
6.General Discounters: many new companies have started on the web with no bricks and mortar presence – capitalize on the benefits of internet and charge lower prices. Many web discount retailers originally sold advertising on sites to subsidize low product prices.

2. Digital Content Revenue Models
-Use the web as a new and efficient distribution method.

3. Advertising supported revenue models
-was declining from 2000-2002 but has started to grow at a slower pace. Successful sites attract specific groups for direct messages.
-Success hampered by: (1)no consensus on how to measure and charge; (2)Few sites have enough visitors to interest large ad firms.
-Web portals: Web directory is a listing of hyperlinks to web pages. A portal/web portal -site that people use as a launching point and often includes a web directory and search engine
-Newspaper publishers: publish print content on web-greater exposure, large audience, but can take away sales from print editions.
-Targeted classified advertising sites: sites that target niche markets have been more successful. Ex: web employment advertising.

4. Advertising subscription mixed revenue models
-subscribers pay a fee and accept a level of advertising.
-Some newspapers including The Washington Post and the Los Angeles Times use a variation of the mixed revenue model-don’t charge subscription fees for access to web sites but offer current stories free of charge, but require visitors to pay for articles retrieved from archives. In general, newspaper sites today are relying on advertising to provide revenue.

5. Fee for Transaction Revenue Models
-businesses offer services and charge a fee based on the number/size of transactions processed.
-Disintermediation: removal of an intermediary from a value chain. Re-intermediation: introduction of a new intermediary.
-Travel agent: earn commissions on each transaction. The value added by a travel agent is information consolidation and filtering. Many travel agents now charge their customers a flat fee for processing a ticket.
-Automobile sales: removes the salesperson provides an information service to car buyers – implements the fee for transaction revenue model. Locate dealers willing to sell the car specified by the buyer for a small premium over the dealer’s nominal cost.
-Stockbrokers: charge customers a commission for each trade executed. Ex: ETRADE
-Event tickets: sell tickets from one virtual location
-Real estate and mortgage loan brokers
-Online banking and financial services: important feature offered is account aggregation - ability to obtain bank, investment, loan, and financial account information from multiple web sites and display it all in one location at the bank’s website. A bill presentment service provides an electronic version of an invoice or billing statement.

6. Fee for Service Revenue Models
-Companies are offering a variety of services on the web for which they charge a fee based on the value of the service.
-Online games: many sites relied on advertising revenue in the past, a growing number now include premium games.
-Concerts/films: selling subscriptions for delivery of videos to computers through cable modem and DSL connections.
-Professional services: laws can prevent practicing professions on the web because patients/clients could be located else where

REVENUE STRATEGY ISSUES
Channel Conflict and Cannibalization
-Channel conflict: sales activities on a company’s web site interfere with its existing sales outlets-aka cannibalization because the web site’s sales consume sales that would be made in the company’s other channels.
-Giving customers access to products through coordinated channels-channel cooperation.

Strategic alliances and channel distribution management
-Strategic Alliances: 2+ firms join forces to undertake an activity over a long period -operating in the network form of organization.
-Channel distribution managers (fulfillment managers/category managers) take over responsibility for a particular product line within a retail store. They provide more knowledge about the product line.
-Mobile Commerce: capitalize on increased bandwidth of wireless devices could be successful if the audience would be willing to pay a subscription fee or view ads.

CREATING AN EFFECTIVE WEB PRESENCE
-An organization’s presence is the public image it conveys to its stakeholders.
-Stakeholders: customers, suppliers, employees, stockholders, neighbors, and the general public.

Achieving web presence goals
Effective sites create an attractive presence that meets the objectives of the business or organization. These objectives include:
1) Attracting visitors to web site
2) Making the site interesting so visitors stay and explore
3) Convincing visitors to follow site’s links
4) Creating an impression consistent with the organization’s desired image
5) Building a trusting relationship with visitors
6) Reinforcing positive images that the visitor might already have about the organization
7) Encouraging visitors to return to the site

Not for profit organizations
-Use their websites as a central resource for communications
-A key goal for the web sites is information dissemination.
-Web allows info integration and dissemination and provides a communication link

WEB SITE USABILITY
Meeting the needs of web site visitors
-Every visitor is a potential customer so there is variation in visitor characteristics.
-Visitors are connected through different channels with different bandwidths and web browsers.
–Build flexibility by offering separate versions with and without frames and give visitors the option of choosing either one

Trust and Loyalty
-Create value in a relationship with a customer by developing customers’ trust into loyalty.
-Common weak spot is the lack of integration between the companies’ call centers and web sites and Email responsiveness

Usability testing
-Learn about visitor needs, watching different customers navigate test designs-cost of testing is low compared to the total cost of site
-Putting the customer at center of site designs -customer centric approach
-Design site around how visitors will navigate, allow visitors to access information quickly, avoid using inflated statements in product descriptions, avoid jargon, build site to work for visitors using old software, be consistent in use of design features, navigation controls clearly labeled, test text visibility on smaller monitors, make sure color combinations don’t impair viewing, conduct usability tests by having potential site users navigate through versions of site

The Nature of Communication on the web
-Two approaches called communication modes: personal contact and mass media.
-Personal contact model, the firm’s employees individually search for, qualify, and contact potential customers-prospecting.
-Addressable media are advertising efforts directed to a known addressee and include direct mail, telephone calls, and email. The internet isn’t a mass medium or a personal contact tool-the web is a tool for reaching the hard middle-markets that are too small to justify a mass media campaign yet too large to cover using personal contact.

Application
There are a variety of companies using different revenue models online to generate revenues and conduct business. For example: Ikea, a traditional bricks and mortar company that also uses a catalog revenue model, has capitalized on the benefits of the internet and has brought its catalog online. The company allows customers to view the catalog online, create a shopping cart of desired products, and purchase these products directly from the website. Ikea has extended its traditional mail-order catalog model onto the web which has helped the company reduce costs and extend its customer reach. Other companies, like MaCorr Inc have incorporated a fee for service revenue model. The company conducts market research for companies and charges a fee for the service provided.