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From Commerce to From Commerce to E-CommerceE-Commerce
(and from Marketing to E- Marketing )(and from Marketing to E- Marketing )
E-Commerica 2005E-Commerica 2005
Dr. Efthymios ConstantinidesDr. Efthymios ConstantinidesAssistant Professor Assistant Professor
Faculty of Business, Public Administration Faculty of Business, Public Administration and Technology (BBT)and Technology (BBT)University of TwenteUniversity of Twente
[email protected]@utwente.nl
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What’s so exciting about Internet?
Is E-Commerce really important?
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Fact 1: Internet=More Customer Fact 1: Internet=More Customer PowerPower
USUS Auto: 70% go to Internet and save $450 Travel: 2/3 use the Internet, 15% of tickets,
zero commission, lower rates (Travelocity, Expedia greater market capture than most airlines)
Over 2.000 travel agencies closed, airlines discontinued commissions to agents
Health: 80% search E-bay $ 34,2 bill (+44% over 2003)
11,1 bill used cars!!! Finance
– Stock trading, Insurance, mortgages, real estate
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NL Travel: 35% of vacations in 2004 booked
online 140 travel agencies out of business last
year Insurance: 60% use the Internet for
orientation, 10% of insurance contracts sold online
2004: 1,6 bln Euro online, 2005: (6 months) over 1 bln Euro online
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Why the Internet boosts Why the Internet boosts consumer power?consumer power?
Easy access to market information / transparency: savvy, information-driven consumers
More alternatives and choice
Easier transaction
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Fact 2:Fact 2: Traditional media power Traditional media power decreasesdecreases
US (2) Audiences ratings TV shows, prime TV
viewers down (50% since 1970 for the major channels)
Customers exposed to ads: 1/3 watch, 2/3 mute-switch-leave
Internet vs. TV: Internet users average about three hours a day working with the network, about 50 percent more time than the average television viewer watches TV.
Internet users watch about 20 minutes less TV than the average viewer.
10% of users prefer to miss TV than Internet
McKinsey: TV advertising in 2010: 35% as effective as in 1990
And Advertising costs increasing
Nederlanders zien slechts 18% van uitgezonden reclame 12 jan 2005
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6 Sept 2005
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Why is E-Commerce / Why is E-Commerce / E-Marketing important?E-Marketing important?
Revolution in almost all aspects of Marketing– New channel, new pricing options, individual
reach and promotions, new media communication
– Opportunities to find new product needs and launch new products
– Supports improved distribution and services
E-BusinessE-Business
E-Commerce E-Commerce
E-MarketingE-Marketing
Internet: the backboneInternet: the backbone
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E- BusinessE- Business
ERPERP
SCMSCM
PartnerPartnerAlliancesAlliances
E- CommerceE- Commerce
EmployeeEmployeeservicesservices
E- MarketingE- Marketing
E- ProcurementE- Procurement
E- LogisticsE- Logistics
KnowledgeKnowledgesharingsharing
E- FinanceE- Finance
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WWhhat is E-Commerce?at is E-Commerce?
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A collection of Web - based technologies, tools and business processes improving, supporting, supplementing or replacing traditional commercial practices
E. Constantinides
E-CommerceE-Commerce (today)(today)
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What Traditional Practices?What Traditional Practices? MARKETING RELATED (E-Marketing): Customer
Recruitment, Acquisition, Retention– Communication and interaction – Advertisement, Promotion, PR etc– Customer Data Collection, Direct Marketing– Market Research, R&D– Collaborative development of new products, services – Retailing - Selling, Invoicing, Payments, Delivery – Customer Service and CRM
PROCUREMENT (E-Procurement) SCM, LOGISTICS, Internet based EDI Online financial transactions (banking, investment,
insurances) etc
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More and more traditional firms adopt the Web as commercial strategy
Why– Traditional brick-and-mortar companies face
increasing pressures in a competitive marketing environment
– Internet: Major information source for consumer and professional buyer
A possible response is to introduce a variety of e-commerce initiatives that can improve
supply chain operation information raw materials purchase increase customer service open up markets to more customers
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Internet: An Economic, Internet: An Economic, Technological and Social Technological and Social
PhenomenonPhenomenon Online transactions revenues –
volume: (2010 10% of US retailing) Penetration rate:
1995 16 mil, today close to 1 bill users A new business environment Social effects and trends
E-Marketing and E-Marketing and the Web-Marketing Mixthe Web-Marketing Mix
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Marketing PlanningMarketing PlanningTraditional MarketingTraditional Marketing Virtual MarketingVirtual Marketing
??Product
Price
Promotion
Place
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4P Marketing Mix is unfit 4P Marketing Mix is unfit for E-Marketingfor E-Marketing
The 4Ps are not the critical factors. This because the Mix:- is focused on mass products / services - ignores customer needs, lacks interactivity - is tactical: lacks strategic dimensions- ignores the complexity of the online environment: you need more than the 4Ps to create and maintain a competitive proposition
Role of the 4Ps in E-Marketing: Role of the 4Ps in E-Marketing: elements of the Web Experienceelements of the Web Experience
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4S Web-Marketing mix4S Web-Marketing mix
Identifies the critical factors of the Online Marketing
Proposes an integrative approach for online marketing
Allows for:- Shorter planning periods and- “Flexible” strategy
Easy to conceptualize, remember,apply
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The Web - Marketing The Web - Marketing MixMix
Scope Site Synergy System
Source: E. Constantinides 1999
StrategicIssues
OperationalIssues
OrganizationalIssues
TechnologicalIssues
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Strategic and MarketingPlan
Definition of ordering and fulfilment
processes
Construction of Web frontand EDI interface
Construction of Communication interface
Identification of control processes of communication
interface
Identification of site control, support and maintenance
processes
Site testing
Site online
Typical stages of an E-Commerce ProjectTypical stages of an E-Commerce Project
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The Web - Marketing The Web - Marketing MixMix
Scope- Strategic Mission and Objectives
- Market Analysis• Competition Basis : Functionality, Reliability, Convenience, Price• Competitive analysis
- Potential Customers / Profiles:• motivation, behaviour, needs, goals, priorities, current way of fulfilling needs, customer value, Online segmentation? Technographics (Forrester), eTypes • Market Potential, Forecast, Trends
- Internal Analysis• Internal Resources, Processes, Values : Internet is sustaining or disruptive technology?
- Strategic Role • In relation to Resources, Processes and Values• Generic Roles: Informational, Promotional, Relational, Transactional, Educational etc. • Intranet, Extranet: possible added value for the organisation•Business model
Golden rule: Frequent Strategy Review
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Source: E. Constantinides
E*Trade - Amazon Strategic Decisions 1997-2001
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11
19
23
19
8
11
23
20
15
0
5
10
15
20
25
1997 1998 1999 2000 2001
Year
Num
ber o
f Str
ateg
ic D
ecis
ions
E*TradeAmazon
Source: : Constantinides E., 2004, Strategies for Surviving the Internet meltdown: The Case of Two Internet Incumbents, Management Decision Journal, vol 42, nr 1, pp 89-107
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Source: E. Constantinides
E*Trade - Amazon Strategic DecisionsPer Anshoff category
10
13
23
31
9
33
30
16
0
5
10
15
20
25
30
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Market Penetration Market Development Product Development Diversifi cation
Developm ent Strategy
Num
ber o
f dec
isio
ns 1
997-
2001 E*Trade
Amazon
Source: : Constantinides E., 2004, Strategies for Surviving the Internet meltdown: The Case of Two Internet Incumbents, Management Decision Journal, vol 42, nr 1, pp 89-107
30www.amazon.com131 product categories131 product categories
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The Web - Marketing The Web - Marketing MixMix
Scope SiteCustomer Oriented Content: Important questions to be asked:- What does the customer expect to find in my site?- Why the customer will make use of my site? - What could motivate the customer to come back to the site?Web Experience depends on a combination of factors affected by:• Domain Name, Design, Layout, Atmosphere • Simplicity, Functionality, Speed, • Findability, Navigation, Searchability (2005 research of Oneupweb:only one in eight Fortune 100
sites well optimized for search engines – 1of 11 last year, 1 of 25 in 2002)• Interactivity, Customisation• Service Online, User Feedback • Retention Strategy, Fresh Information, Fresh Features• Links• Privacy policy, customer protection• Perceived and actual security level• 4 Ps
Customer Oriented Positioning: Web Unique Selling Proposition
The Online Experience;Gold Rule: 8 seconds, 3-clicks
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Top 10 Retail Web Sites IntegratingOnline & In-Store Traffic, U.S. Home & Work, Winter 2003Retail Store Brands Index NumberCoach 2,707Neiman Marcus 1,862J. Crew 1,077Bloomingdale's 1,002Williams-Sonoma 956Pottery Barn 831Crate & Barrel 784Nordstrom 568Eddie Bauer 508Macys.com 476Source: Nielsen//NetRatings @Plan
Positive Web Experience drives more Positive Web Experience drives more Customers to physical outletsCustomers to physical outlets
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Main problem in creating Main problem in creating the right online the right online
experience:experience:Lack of knowledge on online consumer’s
and business customer’s behavior: Motivation Decision-making process Factors influencing the adoption of
products / services online
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62
30
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2735
0
20
40
60
80
Number of references
Functionality /Usability
Functionality /Interactivity
Psychological/ Trust
Content/Aesthetics
Content /Marketing Mix
Web Experience: Main Building Elements
Source: Constantinides E., 2004, Influencing The Online Consumer’s Behavior: The Web Experience, Internet Research: Electronic Networking Applications and Policy, vol 14, nr 2, pp. 111-126
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FUNCTIONALITY FACTORS PSYCHOLOGICAL FACTORS
CONTENT FACTORS
USABILITY INTERACTIVITY TRUST AESTHETICSMARKETING MIX
ConvenienceCustomer service /after sales Transaction security Design
ProfessionalCommunication
Site navigationInteraction with company personnel Customer Data Misuse
Presentation Quality
Product assortment
Information architecture Customisation Customer Data Safety
Design elements
Reliability of Fulfilment process
Ordering/payment process Network Effects
Uncertainty reducing elements
Style / atmosphere Price
Search facilities and process
Guarantees/return policies
Attractive Promotions
Site speed
Findability /accessibility
The Web Experience Building Blocks The Web Experience Building Blocks
Source: Constantinides E., 2004, Influencing The Online Consumer’s Behavior: The Web Experience, Internet Research: Electronic Networking Applications and Policy, vol 14, nr 2, pp. 111-126
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The Web - Marketing The Web - Marketing MixMix
Scope Site Synergy
•Front OfficeIntegration with Marketing Activities- Advertisement- Promotions- Communication, PR- Distribution
•Back OfficeIntegration with Organisational Processes, Values- Production, Logistics - EDI, ECR- Delivery, Invoicing, Fulfilment- Total Quality Management, Control Systems- Legacy Integration: MIS, ERP Systems, Databases
• Third parties
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The Web - Marketing The Web - Marketing MixMix
Scope Site Synergy System
- Technology trends- Programming tools, browser independence- Content Management- Security level(s)- Payment systems- Hosting- Back ups- Interfacing- Traffic Data monitoring, Performance Analysis- System Administrator - Communication Interfaces- Site Support and Maintenance