Part One: Chapter Five Web Business Models

Internet Marketing & e-CommerceWard HansonKirthi KalyanamRequests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENTTHOMSON BUSINESS and ECONOMICS5109 Natorp BoulevardMason, OH 45040Phone: (800) 423-0563

Part One: Chapter FiveWeb Business Models “A good business model begins with an insight into human motivations and ends in a rich stream of profits.” Joan Magretta, Why Business Models Matter

Using Internet to Enhance Customer Value A comprehensive customer database that captures the full range of customer interaction A method of classifying and categorizing so that interaction can be tailored to specific taste and requirements Method of forecasting future customer importance A system of allocating effort and resources to maximize the value of customer base

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers Shift from occasional transaction to continuous analysis of customer behavior

The Value of Customer Contact Web-based business models fundamentally change the way businesses interact with customers Shift from occasional transaction to continuous analysis of customer behavior Shift from value distribution to value creation

Closed Loop Marketing Tracking customers from ad click to page views to purchase or exit Learning from and responding to customer interaction at each level Expanded accountability Accelerated learning curve on pricing, product quality and other variables

Closed Loop Marketing

Evaluating Customer Contact Online customer contact comes in many forms Website visits Banner advertising Email promotions Cell phone price checks

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value Expected value of a new customer

Evaluating Customer Contact Web Chain Analysis calculates the effectiveness of online strategies Expected value of a contact: the unified contact value Expected value of a prospect: the unified visit value Expected value of a new customer Expected value of a repeat buyer

Customer Lifetime Value The ability to track, store and analyze individual behavior online allows firms to calculate the present value of the future cash flow attributed to the relationship with any one customer

Customer Lifetime Value The ability to track, store and analyze individual behavior online allows firms to calculate the present value of the future cash flow attributed to the relationship with any one customer Not every customer is created equal; high support costs can drive some customer relationship below zero value

Customer Lifetime Value

Web Benefits to Business Online strategies can bring direct and indirect benefits to firms Not every online tactic is profitable No formula for successful online business model Scale matters

Web Benefits to Businesses Cost reduction Posting manuals and customer support documents online Reducing the cost of routine sales and building loyalty and provide business benefits Supply chain coordination Improvements in the supply chain of vendors, dealers and distribution partners Improved customer knowledge, enhanced product quality and advanced branding

Web Benefits to Businesses Brand Enhancements Online world can contribute to existing equity for established brands Category Building Educate visitors about entire category and capability Can serve as an early introduction of a concept or technology Quality Improvement Companies seek to augment and enhance products with online material

Revenue Benefits Online capabilities create new revenue opportunities

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com)

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com) Entirely new streams of revenue Selling music by the song at iTunes

Revenue Benefits Online capabilities create new revenue opportunities Incremental benefits Advertising last-minute tee times for a reduced price (lastminutegolfer.com) Entirely new streams of revenue Selling music by the song at iTunes Enhanced products drive revenue At Science, online content helps drive the magazine’s print sales

Revenue Models Permission sponsorship First asks for permission like asking for age Reader then pays more attention Banner advertising Sites that have stickiness Social networking website Prospect fees Keyword-based ads Sales commissions Payment based on actual sales

Revenue Models Factors in selecting payment structure: Attitude toward risk Ability to monitor performance Current market emphasis Negotiating power

Selecting a Payment Structure Risk for Advertiser Risk for Ad Network Sponsorship Fixed Payment Banner Ads Impressions Prospect Fees Click through Commissions Purchase Increasingly Performance Based and Higher Rise for Web Site

Part One: Chapter Five Web Business Models

Part One: Chapter Five Web Business Models

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