Chapter 4 E-business revenue models

1. Reference Book By: Gary Schneider Chapter 4E-business revenue models

2. Web Catalog Revenue Models • In the traditional catalog-based retail revenue model, the sellers try to establish a brand image. They usually provide the prospective customers with product/service catalogs. In this model, customers usually place order by mail or phone. • This model is ideal for variety consumer items such as apparel, computers, electronics, houseware and gift. Many companies have adopted this revenue model to the online world by replacing their print catalogs with information on web sites. • In the web catalog revenue model customers now a days place online orders. Before, the only purpose of the model was to disseminate product information and price comparison. People could purchase by telephone. • This revenue model is ideal for retailers of computers, consumer electronics, books, music, clothing, flower etc. • Many B2B sellers have adopted this model to sell machineries, tools, electrical and plumbing parts etc.

3. Web Catalog Revenue Models: Multiple Market Channels • Having more than one way to reach customers is a good idea. They can be reached through retail stores and mailed order catalogs . Each different pathway is called a marketing channel. It is useful to combine multiple marketing channels to reach more customers than using one marketing channel • It is expensive to stock all items in a single physical store. So, the best idea is to store more popular items in a specific location and offer other items through web site. Thus, more customers can be reached. • Also, customers can experience products in a physical store. Then, they can order that product online by selecting various sizes, colors, specifications etc. • Also, customers can look at the products in a mailed catalogs and access the website to look at more details on the products.

4. Web Catalog Revenue Models: Stores and Web sites

5. Web Catalog Revenue Models: Catalogs and Web sites

6. Web Catalog Revenue Models: Adding the Personal Touch • Online web shopping assistance: A web customer with a question can initiate a text chat with a customer service representative or click a button on the web page to have the representative call. Example: http://www.strayer.edu/ The representative will help customers to buy the suitable product/services . • Personal shopper: An intelligent agent program that learns customer’s preferences and make suggestions. Example: https://www.shopittome.com • Virtual model: A graphic image built from customer measurements and descriptions on which customers can try clothes. It helps them to decide on purchasing online or from stores. Example: http://www.virtualoutfits.com/

7. Fee-for-Content Revenue Models • Firms that own written information/media or rights to those have embraced the web as a highly efficient distribution mechanism. These firms use digital content revenue model to sell rights to access the information. • This model have two parts: selling subscriptions and selling rights. • Selling subscriptions: This give customers the right to access all or specified part of the information. • Selling rights: It give customers to own information.

8. Fee-for-Content Revenue Models: Legal, Academic, Business and Technical Content • Whether an individual is an engineer who needs to find out if an idea he has already been patented by someone else or a physician checking on a potential prescription interaction, they can find a digital content provider online for a fee to full-access. • LexisNexis: Offers information services for lawyers, law enforcement officers, court cases and resources for law libraries. Earlier, they had to install expensive dedicated computers to get such access. • American Psychological Association: Offers access to the academic/professional journals and publications. Before there were electronic publishing, it was expensive to publish. Thus subscribers were charged a lot. Electronic publishing eliminates this problem. • ProQuest & EBSCO: Purchase the rights of academic publications and resell those to schools, libraries following subscription model.

9. Fee-for-Content Revenue Models: Online Music, Online Video • Online music: Music company was slow to embrace online music distribution as music can be easily copied once purchased. To avoid this, they started to sell music online through Apple iTunes, Google music etc. In this case, to own song you must have Apple IDs, Google IDs. Another way to prevent copying is to use Digital Rights Management (DRM) software. The users must have the software to own music. • Online video: Video content producing companies can sell/rent videos online. Also, users can watch video by paying monthly subscription fee. Regardless the revenue types, online video restricts number of devices/users to run videos and limits time to watch video. Online video delivery is made easy using HTML 5 technology without any extra software. Online video content also include TV programs that are previously recorded.

10. Advertising Revenue Models • Many online businesses display advertising on their web sites in exchange of fees charged to the advertisers. This help them to maintain web sites and content development. • The advertising-supported revenue model is the one used by the broadcast network television. This model is also used by the web sites as a part of the source of income. In this model, the advertisers fix charge following number of visitors, number of clickthroughs. • Besides, stickiness of web site is important because of its ability to keep visitors at the site. Also, it is a challenge to reach the specific population through online advertising because it is impossible to understand the background of the web site visitors. In this case, advertisers can use specialized web sites to reach the target population and they are willing to pay high rates to the web site owners. For example: advertisement of fitness related accessories in a fitness center's website. • Advertising revenue model can use strategies as to general interest and specific interest.

11. Fee-for-Transaction Revenue Models • In this model, businesses offer services for which they charge a fee that is based on the number or size of the transactions they process. Example: stock trading and online banking. • Online stock brokerage: Traditional stock brokerage firms offer advice on investments and charge commission to execute trading on behalf of investors. In this case, investors often justify commission in terms of advice they get. Discount brokers offer no investment advice and charge lower fee than the traditional brokers. Online stock brokerage combines both traditional and discount brokerage. They post investment advice on their website and, through e-newsletters and emails. They also charge lower commission fee like discount brokers since they do not need to hire executives to execute transactions.

12. Fee-for-Transaction Revenue Models • Online banking and financial services: Now a days the banks with physical buildings are offering online banking services by charging a fee. These services include balance checking, bill payment, money transfer, online check deposit etc. There are some online banks that do not have any physical buildings https://www.discover.com . They offer all services that traditional banks do. In this case, they charge lower fee than the traditional as they do not need to maintain facilities. • Besides, online banking have a service called account aggregation. They collect information related to customers’ loan, credit card and investments from different financial institutions so that the customers can have a look at all financial matters at one place.

13. Revenue Strategy Issues for E-Commerce • Channel conflict & cannibalization: Companies that have existing sales outlets often worry that their Web sites will take away sales from those outlets. This creates a channel conflict since the websites are interfering physical stores’ sales activities. The problem is also called cannibalization since the Web site’s sales consumes sales that would be done in the physical stores. • Strategic alliances: It means forming a group with other organizations so that they can achieve a bigger sales volumes. A small organization can team-up with the popular e-commerce Web sites to access a bigger customer base. • Luxury goods strategies: Luxury goods retailers sell some of the product lines through Web sites. They do not sell expensive/high-fashion products online because they want the customers to come to the stores and experience those. Rather, they post some basic information related to those products.

14. Revenue Strategy Issues for E-Commerce • Overstock sales strategies: Selling overstock items through Web site is a good strategy since it can reach to a larger customer base rather than a location. It includes a separate link to the overstock/clearance items and they are sold at discounted price. This way, the outlets do not need to overstock items. Also, selling overstock items through Web site is a good idea since the catalog can be updated very frequently than for the physical outlets.

15. Creating An Effective Business Presence Online • In the physical world, a business tries to make a presence to the stakeholders by establishing headquarters, factories, warehouses, sales centers etc. Thus, on the Web, a business can present itself in attractive ways. In case of some businesses, the customers and other stakeholders go through the Web sites to understand the presence. • Identifying Web presence goals: On the Web, a business has opportunities to come-up with an attractive Web site with the main goal of creating a distinctive presence. A good Web site design can provide many image-creation features. It can serve as a sales brochure, product showroom, a customer connection point etc. Before a business appears its presence online, it must formulate the Web presence goals as to: Attracting visitors, Making visitors stay and explore, Convincing to follow links, Creating impression consisting with brand’s/organization’s image, Building relationship, Encouraging to return to the Web site etc.

16. Creating An Effective Business Presence Online • Making Web presence consistent with brand image • Different firms, even those in the same industry, come-up with different Web pages even after they have established powerful brand images. Web presences convey brand images to the customers and it is one of the key factors for high profitability. • Luxury brand establishes Web presence differently from similar but cheaper products. They do not cram Web sites with a lot of information like cheaper brand products do. This way they try to maintain images to its customers.

17. Web Site Usability • How the Web is different: • Web acts differently from other ways in which companies have communicated with customers. Companies must improve Web presence so that it is accessible by more people and it is easier to use. Also, it makes sure that the presence encourages visitors to trust and develop loyalty to the brand. • Making the Web presence different from the physical world is important to survive in the virtual world. Businesses need to regularly research the Web presence to understand the customer needs. Previously, some companies made Web presences by including basic information on products and e-mail. But, they were understaffed to answer those e-mails that resulted in a poor brand image. • A standard Web presence should include a standard set of information on products, organization’s history, mission, vision, future plan, success stories, financial information and ways to communicate with the organization. Thus, a customer feels the brand that turns into loyalty.

18. Web Site Usability • Meeting the need of Web site visitors: • During a Web site designing, an organization needs to study the motivations behind visiting a Web site. These may include: learning about products/services, buying products/services, obtaining information on warranty, service, return policies; obtaining general information on company etc. • In addition to the motivations, there are technology issues. Visitors use different devices, Web browsers and devices to access to the Web sites with different internet speeds. Thus, all visitors have different experiences using the Web site and they pose as challenges to the Web site designers. They try to optimize Web sites for all platforms.

19. Web Site Usability • Making Web sites accessible: • One of the best ways to accommodate a broad range of visitor needs, including the of visitors with disabilities, is to build flexibility into the Web site’s interface. For example, visually impaired use special browser to access Web site contents • A site can give the visitor the option to select smaller versions of images so that the page loads on a low-bandwidth connection. If the site includes streaming videos, it allows the visitors to select streaming quality so that the visitors can best use the internet connection. • A good site design allows visitors to choose level of details, viewing format etc. The online stores presents product’s in one Web page so that the customers can look at more contents such as more details, more pictures, product reviews etc. • Accessibility goals of a business Web site: offer easily accessible facts about the business, allow visitors to experience sites in different ways, provide visitors with a meaningful both-ways communication, sustain visitor attention and encourage return visits, and offer easily accessible information on products and services including demonstration videos.

20. Web Site Usability • Usability testing: • Most companies fail to understand the needs to perform Web site usability testing. This testing is the testing and evaluation of a site by its owner to ensure ease of use for the visitors and to meet the accessibility that we already discussed. • Average e-commerce Web sites frustrate many potential customers to the point that they leave without buying anything. Even best e-commerce sites frustrates customers if it is not easy to navigate. These sites include some contact points so that the customers discuss more about the products/service. • Since usability testing is inexpensive, companies should run the testing at certain intervals. If the sites change the navigation experiences, it needs to be tested holistically.

21. Web Site Usability • Customer-centric Web site design: • A customer-centric Web site design approach must stick to the following guidelines: -design the site around how visitors will navigate, not around the company’s organizational structure; -allow quick access to the information, -avoid using inflated marketing statements, -avoid using business/technical jargons that visitors may not understand, -optimize the site for all Web browsers under all platforms, -be consistent in use of design features and colors, -make sure that navigation controls are clearly labeled, -test text visibility on a range of monitors, -check that color combinations are proper for the color-blind visitors. • Besides the regular Web designs, there are design guidelines for mobile devices to access the Web sites as follows: -text should be extremely concise, -navigation must be neatly organized and easy to see, -the set of available functions should be limited like following further links (non-mobile devices) are provided.