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Executive Business Panel Digital Marketplace

Executive Business Panel Digital Marketplace June, 2000 Based on Responses From 107 High Level Business Executives of Large and Mid-Sized Companies ($300M+ in Annual Sales) As Well As New Entrants. Responding Businesses Have Implemented or Plan to Implement E-Business Activities.

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Executive Business Panel Digital Marketplace

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  1. Executive Business Panel Digital Marketplace June, 2000Based on Responses From 107 High Level Business Executivesof Large and Mid-Sized Companies ($300M+ in Annual Sales)As Well As New Entrants. Responding Businesses HaveImplemented or Plan to Implement E-Business Activities.

  2. Perceptions of Digital Marketplaces

  3. Importance Digital marketplaces are currently perceived as a very important means of B2B positioning for four out of ten executives participating in the e-business space. They are expected to have even higher importance in 12 months. Importance of Digital Marketplaces As a Means of B2B Competitive Positioning (1=Not at All Important, 10=Critically Important) Mean Current In 12 Months 6.2 7.1 Source: KS&R

  4. Strategy For one-third of business executives participating in e-business, digital marketplaces are perceived as critically important to their companies’ e-business strategy. Three-fourths of executives see digital marketplaces as a business opportunity while only 13% perceive it as a threat. Importance of Digital Marketplaces to Overall E-Business Strategy (1=Not at All Important, 10=Critically Important) Mean 6.2 Perceptions of Digital Marketplaces Provide TremendousBusiness Opportunity Provide ModerateBusiness Opportunity Provide a Moderate Threatto Our Market Position Provide a Tremendous Threatto Our Market Position Have No Current Impacton Our Company Source: KS&R

  5. Benefits of Digital Marketplaces Better customer service and reduced costs seen as most beneficial aspects of digital marketplaces. Degree of Benefit From Aspects of Digital Marketplaces (1=No Benefit, 10=Great Benefit) % 8-10 Great Benefit Mean Better Customer Service Reduced Costs Speed to Market Improved Brand Positioning Access to New Domestic Markets Access to New Global Markets 7.1 6.5 6.1 6.0 5.8 4.7 Source: KS&R Key Benefits: Selected Top of Mind Verbatims • “Ability to improve our speed of responsiveness to customer needs.” • “The perception by our customers that we are a technology savvy company.” • “Better access to customers and additional avenues for revenue.” • “Ability to connect our distribution network with random buyers without a lot of advance cost.” • “Easier transactions with current customers, market penetration with new customers.”

  6. Challenges Compatibility of infrastructure seen as a problem of digital marketplaces for nearly one-half of executives of companies participating in e-business. Degree of Challenge/Problem Anticipated From Aspects of Digital Marketplaces (1=Not at All a Problem, 10=Great Problem) % 8-10 Great Problem Mean Compatibility of Technical infrastructure Loss of In-Person Customer Relationship Reduced Control Over Brand Positioning Slow Speed in Which Announced Marketplaces Are Actually Realized Direct Cost of Participation Reduced Effectiveness Due to Over-Saturation of Digital Marketplaces Indirect Costs of Participation (Internal Systems, etc.) Alliance Management Deciding in Which Digital Marketplace to Participate 6.3 5.5 5.3 5.7 5.2 4.8 5.9 5.2 5.0 Source: KS&R Challenges: Selected Top of Mind Verbatims • “Conversion of legacy data and legacy customer bases is a huge expense. ‘The Internet is not free’ -- How to charge for information with this attitude is a prevalent challenge.” • “Digital marketplaces establish a level playing field, where our broad-based distribution network is placed on a par with a one-horse player, if they happen to be in the right place.” • “Mentality to rethink our whole business process.” • “Lack of appropriate planning for e-commerce. Lack of focus.”

  7. Preferred Revenue Model Transaction most preferred digital marketplace revenue model. Digital Marketplace Revenue Model With Which Executives Are Most Comfortable Transaction Subscription Advertising Other Source: KS&R

  8. Experience With/Plans forEstablishing Digital Marketplaces

  9. Establishment of Digital Marketplace Nearly one-half of large and mid-sized businesses involved in e-business have participated in the establishment of a currently functioning digital marketplace; two out of three plan to participate in the establishment of a digital marketplace in the next 12 months. Have Established/Expect to Establish a Digital Market Place On average, those participating or planning to participate with others participate with 3 others. Current In 12 Months Source: KS&R Leadership Positions in Establishment The timeframe for establishment of currently functioning digital marketplaces was on average, 29 weeks (median of 20). Have Not Established First to Market Competitive Response Other Front office tools used are broad ranged. Names mentioned include Microsoft, Oracle, Siebel, Commerce One and in-house tools. Source: KS&R

  10. Alliances Those establishing digital markets with others are often doing so with a mix of competitors and non-competitors. Alliances in Establishing Digital Marketplaces Identified issues in working with competitors include privacy/security, systems compatibility, trust-building and restrictions on sharing of resources. Current Planned Source: KS&R

  11. Regions Supported North America is the predominant region supported by digital marketplaces. Regions Supported by Digital Marketplaces (Multiple Response) North America Europe Asia/Pacific Latin America Middle East/Africa Source: KS&R

  12. Assistance in Establishing Digital Marketplace - Internal Expertise vs. Outside Assistance Executives most often use and plan to use outside expertise for technical design, implementation of the site and strategy planning. Assistance in Establishing Digital Marketplace (Multiple Response) Outside Expertise in the Technical Design Outside Expertise in the Implementation of the Site Outside Expertise in Strategy Planning Rely Solely on Internal Expertise Outside Expertise in the Operation of the Site Other Source: KS&R

  13. Value Proposition Value proposition most often involves ease of transaction, customer service and speed of fullfillment. Perceived Value Proposition of Digital Marketplaces (Multiple Response) Ease of Transaction High Level of Customer Service Speed of Fulfillment Breadth of Choices Highest Quality Lowest Cost High Level of Customization Other Source: KS&R

  14. Revenue Model Most commonly used revenue model for digital marketplaces is transaction. Revenue Model Uses (Multiple Response) Transaction Advertising Subscription Other (e.g., Equity, Barter) Don’t Know Source: KS&R

  15. Current/Planned Experience inParticipating in Digital Marketplaces

  16. Participation Nearly one-third of companies currently offer products or services in digital marketplaces and nearly one-half procure from those marketplaces. Firms Offering Products or Services in One or More Digital Marketplaces Other Than Their Own Firms Procuring Products or Services in One or More Digital Marketplaces % Yes % Yes Source: KS&R Source: KS&R # of Current Digital Marketplaces # of Current Digital Marketplaces for Procurement 0 1 2 3-5 6-10 More Than 10 0 1 2 3-5 6-10 More Than 10 Current Average: 1.3 Expected in 1 Year: 3.5 Current Average: 2.1 Expected in 1 Year: 4.9 Source: KS&R Source: KS&R All executives estimate that 7% of their total B2B sales transactions currently occur through digital marketplaces, expecting to grow to 17% in a year.

  17. Revenue Models Experience Companies offering products and services through digital marketplaces most frequently encounter the transaction and advertising revenue models. Revenue Model(s) Experienced (Multiple Response) None Transaction Advertising Subscription Other Source: KS&R

  18. Value Nearly two-thirds of executives see value in their current digital marketplace experience with one-quarter indicating it as extremely valuable. Value of Current Digital Marketplace Experience (1=Not at All Valuable, 10=Extremely Valuable) Mean 6.1 Reasons for Value: Selected Verbatims Lower Value Higher Value • “It is insignificant at this point volume wise.” • “By using digital marketplaces, which are based solely on price, we are losing a competitive edge—our value proposition isn’t to be low cost.” • “We are not properly geared to take advantage of digital marketplaces.” • “It enables us to do more with less people.” • “It has improved speed and reduced cost.” • “Better time-to-market.” • Drives out the middle-man and reduces the number of people in a transaction.

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