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ELEVENTHEDITIONELECTRONICCOMMERCEGARYP.SCHNEIDERSellingontheWebChapter31©CengageLearning2015LearningObjectivesInthischapter,youwilllearnabout:•Whatarevenuemodelisandhowcompaniesusevariousrevenuemodels•Howsomecompanieschangetheirrevenuemodelstoachievesuccess•Revenuestrategyissuesthatcompaniesfacewhensellingonline©CengageLearning20152LearningObjectives(cont’d.)•HowtocreateaneffectivebusinesspresenceontheWeb•WhatfactorsenhanceWebsiteusability•HowcompaniesusetheWebtoconnectwithcustomers©CengageLearning20153Introduction•Onlinebusinessexample:progressiveinsurance–FirstautoinsurancecompanytolaunchaWebsite(1995)–Firsttosellpoliciesonline(1997)–Startedprovidingcompetitor’sratesin2002–Introducedfemalecharacter“Flo”in2008•Advertisingandbrandstrategy©CengageLearning20154RevenueModelsforOnlineBusiness•Webbusinessrevenue-generatingmodels–Webcatalog–Digitalcontent–Advertising-supported–Advertising-subscriptionmixed–Fee-based•Samemodelcanworkforbothsaletypes–Business-to-consumer(B2C)–Business-to-business(B2B)©CengageLearning20155WebCatalogRevenueModels•Adaptedfrommail-order(catalog)model–Sellerestablishesbrandimage–Printedinformationmailedtoprospectivebuyers•Ordersplacedbymailorphone•Expandstraditionalmodel–Replacesorsupplementsprintcatalogs–OrdersplacedthroughWebsite–Createsadditionalsalesoutletforexistingcompanies©CengageLearning20156WebCatalogRevenueModels(cont’d.)•Discountretailers–Somediscountersbeganasretailoperationsonline,e.g.,Overstock.com–TraditionalretailersnowusingWebcatalogrevenuemodel:Costco,Kmart,Target,andWalmart•Multiplemarketingchannels–Allowsmorecustomerstobereachedatalowercost–Marketingchannelexamples•Physicalstores•Websites•Mailedcatalogsornewspaperinsert©CengageLearning201578FIGURE3-1Combiningmarketingchannels:tworetailerexamples©CengageLearning20158©CengageLearning2015WebCatalogRevenueModels(cont’d.)•Addingthepersonaltouch–ManyadaptedcatalogsalesmodeltoWeb–Displayclothingphotoscategorizedbytype•Prices,sizes,colors,andtailoringdetails–Wantcustomerstoexamineclothingonline•PlaceordersthroughWebsite–Lands’EndonlineWebshoppingassistance•Lands’EndLive(1999)–Somesitesoffertextandvideochat©CengageLearning20159WebCatalogRevenueModels(cont’d.)•Personalshopper–Learnspreferencesandmakessuggestions•Virtualmodel–Allowscustomerstotryclothes–Graphicimagebuiltfromcustomermeasurements•Problem:varyingcomputermonitorcolorsettings–Solutions:sendfabricswatchonrequestand/oroffergenerousreturnpolicies©CengageLearning201510Fee-for-ContentRevenueModels•Firmsowningwritteninformationorinformationrights–EmbracetheWebasahighlyefficientdistributionmechanism–Usethedigitalcontentrevenuemodel•Sellrightstoaccessinformationtheyown•Legal,academic,businessandtechnicalcontent–LexisNexis:offersvarietyofinformationservicesforlawyersandlawenforcementofficials–Subscriptionsandindividualaccessrightstoonlineacademicjournalsandotherpublications©CengageLearning201511Fee-for-ContentRevenueModels(cont’d.)•Academicinformationaggregationservices–Purchaseandresellrightsinsubscriptionpackagestoschools,libraries,companies,andnot-for-profitinstitutions•DowJonesprovidesbusiness-focusedpublicationsonline–Newspaper,magazine,andjournalmaterials–Factiva:subscriptionstoindividualsforpurposesofbusinessresearch,jobsearches,orinvestmentanalysis©CengageLearning201512ElectronicBooks•Canbereadorlistenedto•Availabletoavarietyofdevices–Amazon.com’sKindle–Barnes&Noble’sNook–KoboGlo•iTunesandGoogleplaysellbooksandmusic•Physicalandelectronicbookswillcoexistforyearstocome©CengageLearning201513OnlineMusic•Recordingindustryslowtoembrace•Largeststores:AmazonMP3,Apple’siTunes,GooglePlay•Subscriptionservicestostreammusic–PandoraInternetRadio,Spotify,Rhapsody•Complications–Nosinglestoreoffersallmusic–Individualstorespromotetheirownmusicfileformats–Someartists/recordingcompaniespartnerwithspecificstoreorboycottonlinesalesaltogether©CengageLearning201514OnlineMusic(cont’d.)•DigitalRightsManagement(DRM)software–Intendedtocurtailmusicpiracy•AmazonMP3store–FirsttoofferDRM-freeMP3format•Musicindustry–Reportsincreasedsalesin2013•Firsttimein14years©CengageLearning201515OnlineVideo•Canbesoldorrentedonline–Downloadedorstreamed•Pastlimitations–Filesize–Concernaboutcannibalizingsalesinotherchannels–Technologicalbarriersarounddevices•Overcomingtheissues–Newtechnologiesimprovingdelivery–Companiesincorporatingonlinedistributionintorevenuestrategy–Videodeliverytechnologiesbecomingtransparent©CengageLearning201516OnlineVideo(cont’d.)•Netflix–Onlineaccess–DVDrentalsbymail•Televisionshowsavailableonline–Hulu–TV.com–YouTube©CengageLearning201517AdvertisingasaRevenueModelElement•Advertisers’feesinplaceofusers’subscriptions•Advertising-supportedrevenuemodels–UsedbyUnitedStatesbroadcastnetworktelevision•Providesfreeprogrammingandadvertisingmessages•Supportsnetworkoperationssufficiently©CengageLearning201518Advertising-SupportedRevenueModels(cont’d.)•Onlineadvertisingchallenges–Difficultyofmeasuringandchargingsitevisitorviews–Stickiness•Keepingvisitorsatsiteandattractingrepeatvisitors•Exposedtomoreadv