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(Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-D

(Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-Danielsen. Overview for Class 5. Chapter 1 from Shapiro and Varian Group 1 Presentation (Nordang, Hovden, Bjerkvik, Tomren)

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(Class5 29.01.02) Information Rules - Chapter 1: The Information Economy Shapiro & Varian modifications by J.Molka-D

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  1. (Class5 29.01.02)Information Rules - Chapter 1: The Information EconomyShapiro & Varianmodifications by J.Molka-Danielsen Prentice Hall, 2002

  2. Overview for Class 5 • Chapter 1 from Shapiro and Varian • Group 1 Presentation (Nordang, Hovden, Bjerkvik, Tomren) • Group 2 Student Presentation (Valderhaug, Golka, Kristensen) • Chapter 4 from Tuban (begin 4.2-4.5) • Consumer behavior online • Demographics • Consumer purchasing decision • Matching products and customers: Personalization Prentice Hall, 2002

  3. The Information Economy Carl Shapiro Hal R. Varian Prentice Hall, 2002

  4. Systems of Products • Complementary products • Hardware/software • Client/server • Viewer/content • Product lines • High fixed cost, low incremental cost • Leads to value based pricing Prentice Hall, 2002

  5. Unique Features • Complements • Different manufacturers • Strategy for complementors as well as competitors • Compatibility as strategic choice • Standards and interconnection • Product lines • Lower quality may be more expensive Prentice Hall, 2002

  6. Information • Anything that can be digitized • Text, images, videos, music, etc. • a.k.a. content, digital goods • Unique cost characteristics • Unique demand characteristics Prentice Hall, 2002

  7. Cost structure • Expensive to produce, cheap to reproduce • High fixed cost, low marginal cost • Not only fixed, but sunk • No significant capacity constraints • Particular market structures • Monopoly • Cost leadership • Product differentiation (versioning) Prentice Hall, 2002

  8. Rights Management • Low reproduction cost is two-edged sword • Cheap for owners (high profit margin) • But also cheap for copiers • Maximize value of IP, not protection • Examples • Library industry • Video industry Prentice Hall, 2002

  9. Consumption Characteristics • Experience good • Browsing • Always new • Reputation and brand identity • Overload • Economics of attention • Hotmail example • Broadcast, point-to-point, hybrid Prentice Hall, 2002

  10. Technology • Infrastructure to store, retrieve, filter, manipulate, view, transmit, and receive information • Adds value to information • Web = 1 terabyte of text = 1 million books • If 10% useful = 1 Borders Bookstore • Value of Web is in ease of access • Front end to databases, etc. • Currency Prentice Hall, 2002

  11. Systems Competition • Microsoft-Intel: Wintel • Intel • Commoditize complementory chips • Microsoft • Commoditize PCs • Apple • Integrated solution • Worked better, but lack of competition and scale led to current problems Prentice Hall, 2002

  12. Lock-In and Switching Costs • Example: Stereos and LPs • Costly switch to CDs • Systems lock-in: durable complements • Hardware, software, and wetware • Individual, organizational, and societal Prentice Hall, 2002

  13. Network Effects • Value depends on number of users • Positive feedback • Fax (patented in 1843) • Internet (1980s) • Indirect network effects • Software • Expectations management • Competitive pre-announcements Prentice Hall, 2002

  14. Compatibility • Examples • Beta v. VHS • Sony v. Philips for DVD • Role of 3rd parties • Read v. write standards • Backwards compatibility? • Windows 95 • Windows NT Prentice Hall, 2002

  15. Basic Strategies • Go it alone • Partnerships (Java) • Formal standard setting • Widespread use • Licensing requirements • Competition in a market or for a market? Prentice Hall, 2002

  16. Policy • Understand environment • IP policy • Competition policy • Regulation • Antitrust • Electronic commerce • Contracts • Privacy Prentice Hall, 2002

  17. Information is Different…but not so different • Key concepts • Versioning • Lock-in • Systems competition, • Network effects Prentice Hall, 2002

  18. Statistics on eCommerce growth Gruppe 1 Nils Einar Nordang, Karl Johan Hovden, Jan Tore Bjerkvik, Nils Kristian Tomren Internet Exercise 3, page 35

  19. eCommerce er veksande, og framtida ser lys ut for e-businesses • Mellom 2000 og 2001, vil andelen av Internett-brukarar som handlar online øke med 50%. Globalt vil andelen av Internett-brukarar øke frå 10% til 15% . • Integrert offline og online shopping aktivitetarfører stadig til økte inntjenings-moglegheiter for bedrifter: heile 15% av alle Internett-brukarar har handla offline som et resultat av informasjon dei har funne online. • Online-sikkerheit er den største bekymringa for brukarar som ikkje har handla online. • Yngre Internett-brukarar brukar ikkje so mykje pengar som eldre brukarar.

  20. Prosentvis økning: Key numbers 2001...

  21. Landsgjennosnitt (31%) Internet brukarar i verden2000/2001 Prosent av den totale voksne befolkning Prosentvis andel av befolkninga som personlig har brukt Internett den siste månaden.

  22. Online shoppers 2000/2001 Prosent av Internett-brukarar Prosentvis andel av internett-brukarar som har kjøpt varer/tenester online den siste månaden

  23. Country average (17%) Future online shoppers Prosent av Internett-brukarar Prosent av Internett-brukarar som planlegg å kjøpe dei neste 6 månadane

  24. Norge Prosent av befolkninga som bruker Internett Vekst 2000 - 1 2000 2001 + 7% Prosentvis andel av spesifikke aldersgrupper og kjønn som er Internett-brukarar (2001) %

  25. B2B handel • B2B handel vil i USA auke veldig raskt dei neste 5 åra. Frå $336 billionar i 2000 til $6.3 trillionar i 2005. • I dag utgjer Online B2B aktiviteter 3 % av det totale markedet, men innan år 2005 vil det utgjere 42%.

  26. B2C handel • B2C handel over internett utgjorde i år 2000 $ 39 billionar. I løpet av 2003 vil dette tallet auke til $143 billionar. (Forrester Research Inc)

  27. Kjelder: • Tala er henta fråTaylor Nelson Sofres som er det 4 største foretaket innanfor markedsinformasjon på Internett • Vi har også henta statistikk frå eMarketer.com

  28. Group 2 • Anita Helene Valderhaug, Katrin Elisabeth Golka, Bjørn O. Kristensen • Internet Exercise 7, page 79. Prentice Hall, 2002

  29. Packetvideo.com • The company • Technology • Potential use of PVPlatform • Use of M-commerce

  30. The company • Exists since 1998 • First company in the world to demonstrate MPEG-4 video images streaming to mobile devices • Leading Edge Company of the Year 2001

  31. Technology • PVPlatform including: -PVAuthor (encoding) -PVServer (serving) -PVPlayer (decoding) • Runs on all wireless systems, e.g. GSM • PVAirguide

  32. Potential Use of PVPlatform Transmission of e.g.: -Financial news and online trading. - Sports highlights - SMS/video email - Movie trailers and tickets - Multiplayer role-play games

  33. Use of m-commerce • Targeted Advertisement • Two-way video communications • Instant e-commerce

  34. Chapter 4(begin)- 4.2 to 4.5Internet Consumers, E-Service, and Market Research Prentice Hall, 2002

  35. Figure 4-1EC Consumer Behavior Model Source: Zinezone, c/o GMCI Co. Prentice Hall, 2002

  36. Consumer Behavior Online (cont.) • Consumer types • Individual consumers • Commands most of the media’s attention • Organizational buyers • Governments and public organizations • Private corporations • Resellers • Consumer behavior viewed in terms of: • Why is the consumer shopping? • How does the consumer benefit from shopping online? Prentice Hall, 2002

  37. Consumer Behavior Online (cont.) • Purchasing types and experiences • 2 dimensions of shopping experiences • Utilitarian—to achieve a goal • Hedonic—because it’s fun • 3 categories of consumers • Impulsive buyers—purchase quickly • Patient buyers—make some comparisons first • Analytical buyers—do substantial research before buying Prentice Hall, 2002

  38. Consumer Behavior Online (cont.) • Direct sales, intermediation, and customer relations • Companies that sell only through intermediaries still need good relations with the end-users • Example: Ford Motor Company • Do not sell directly to consumers • Recognize that drivers of Ford vehicles think of themselves as having a relationship with the company Prentice Hall, 2002

  39. Personal Characteristics and Demographics of Internet Surfers • Environmental variables • Social variables • Cultural variables • Psychological variables • Other environmental variables Prentice Hall, 2002

  40. Personal Characteristicsof Internet Surfers • Personal characteristics and differences • Consumer resources and lifestyle • Age and gender • Knowledge and educational level • Attitudes and values • Motivation • Personality Prentice Hall, 2002

  41. Demographics of Internet Surfers • Major demographics presented include • Gender • Age • Marital status • Educational level • Ethnicity • Occupation • Household income Prentice Hall, 2002

  42. Demographics of Internet Surfers (cont.) • The more experience people have on the Web, the more likely they are to buy online • Two major reasons people do not buy online • Security • Difficulty judging the quality of the product Prentice Hall, 2002

  43. Figure 4-2Amount of Money Spent on the Web Prentice Hall, 2002

  44. Consumer Purchasing Decision Making • Roles people play in decision-making • Initiator—suggests/thinksof buying a particular product or service • Influencer—advice/views carry weight in making a final buying decision • Decider--makes a buying decision or any part of it • Buyer—makes the actual purchase • User—consumesor uses a product or service Prentice Hall, 2002

  45. Consumer PurchasingDecision Making (cont.) • Purchasing decision-making model • 5 major phases of a general model • Need identification—actual and desired states of need • Information search • Alternatives evaluation—research reduces number of alternatives, may lead to negotiation • Purchase and delivery—arrange payment, delivery, warranties, etc. • After-purchase evaluation—customer service Prentice Hall, 2002

  46. Table 4-2Purchase Decision Making Process & Support System Source: O’Keefe and McEachern, 1998. Prentice Hall, 2002

  47. Figure 4-3Model of Internet Consumer Satisfaction Source: Lee (2001) Prentice Hall, 2002

  48. Matching Products with Customers: Personalization • One-to-one marketing • Relationship marketing • “Overt attempt of exchange partners to build a long term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” • “Treat different customers differently” • No two customers are alike Prentice Hall, 2002

  49. Figure 4-4The New Marketing Model Source: GartnerGroup Prentice Hall, 2002

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