Slide 2 1 E-Business Handout 2 Covers

Slide 2. 1 E-Business Handout # 2 Covers Course Learning Outcome # 2 Identify the elements of e-business environments and the main business and marketplace models for electronic communications and trading http: //ect. ac. ae/elearn/ David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 2 Chapter 2 Marketplace Analysis for E-Commerce David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 3 Learning Outcomes • Complete an online marketplace analysis to assess competitor, customer and intermediary and competitor use of the Internet as part of strategy development • Identify the main business and marketplace models for electronic communications and trading • Evaluate the effectiveness of business and revenue models for online businesses. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 4 What is an e-marketplace? A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 5 E-MARKETPLACE COMPONENTS: Ø Products: Goods that can be delivered over the Internet Ø front end: The portion of an e-seller’s business processes through which customers interact, including: the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway Ø back end: The activities that support online order fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery Ø Intermediary: A third party that operates between sellers and buyers to provide value added activities. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 6 Types of Intermediaries A) Brokers B) Infomediaries David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 7 Types of Intermediaries A) Brokers: including: 1. buy/sell fulfillment 2. Virtual malls 3. Metamediaries David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 8 Types of Intermediaries: Metamediaries 3. Metamediaries: bring buyers and sellers together providing independent Info. They provide access to stores + transaction services. (ex: through a metamediary, the services of related to buying a house (the purchase, mortgage, insurance, and maintenance) which are provided by a large range of unconnected companies can be electronically linked online to meet customers’ needs Metamediaries include: - Comparison agents (aggregators): Collect Info and compare between different stores - Shopping facilitators: provides services between buyers and sellers: translation, currency conversions…. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 9 Types of Intermediaries: Infomediaries B) Infomediaries (Info. + Intermediary): they provide/control Info flow between those who want the Info and those who supply it, examples are: 1. Online audience panel/research providers 2. E-mail list brokers obtaining permissions from consumers 3. Advertising networks: offer advertising services partly based on audience behavior in responding to ads. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Disintermediation, Reintermediation & Countermediation Slide 2. 10 Disintermediation: the removal of intermediaries such as distributers or brokers that formerly linked a company to its customers. Reintermediation : The creation of new intermediaries between customers &suppliers providing services such as: supplier search & product evaluation. Countermediaion: marketers can’t rely on the online existence of existing intermediaries, instead they must create their own online intermediaries. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 11 Figure 2. 7 From original situation (a) to disintermediation (b) and reintermediation (c) David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 12 Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and (c) disintermediation omitting both wholesaler and retailer Figure 2. 6 David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 13 The e-commerce environment All organizations operate within an environment that influences the way in which they conduct business, such environments create opportunities as well as threats. Strategy development should be strongly influenced by considering the environment the business operates in. To inform e-commerce strategy, the most significant influences are of: 1. the micro-environment: customers, competitors, intermediaries and suppliers. 2. Influences are provided by economic conditions, legislation and business practices 3. Technological innovations David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 14 Strategic agility: The capacity to respond to environmental opportunities and threats. Figure 2. 1 The environment in which e-business services are provided David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 15 Characteristics of strategic agility to success in strategy development: Efficient collection, dissemination and evaluation of information resources. 2. Effective process for generating and reviewing the relevance of new strategies based on creating new value for customers 3. Efficient research into potential customer value against the generated business value 4. Efficient implementation of prototypes of new functionality to deliver customer value 5. Efficient measurement and review of results from prototypes to revise further to improve proposition/end trial. 1. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 16 Conclusion: Analysis of marketspace (e-marketplace) is done by analyzing the environment’s elements on the micro and macro levels which is a key part of developing a long-term e-business plan or creating a short -term digital marketing campaign. It is essential to describe and study the online behavior of consumers between search engines, media sites and intermediaries. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 17 Figure 2. 3 An online marketplace map David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 18 Elements of an online marketplace map 1. 2. 3. Customer segments, their behavior and type of content and experiences they will be looking for. Search intermediaries: companies need to know which sites are effective in harnessing search traffic and either partner with them or try to obtain a share of the search traffic using the search engine marketing and affiliate marketing techniques. Intermediaries and media sites 4. Destination sites: sites to which the marketer is trying to generate revenues. 5. Online value proposition: a statement of the benefits of e-commerce service that ideally should not be available in competitor offerings or offline offerings David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 19 Business Model (BM): refers to How a company is going to generate revenues 1. 2. 3. 4. 5. 6. 7. Elements of a Business Model (BM): Value proposition Market/audience Revenue models and cost base Competitive environment Value chain and market place positioning Representation in the physical and virtual world Organizational structure Management David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 20 Business Model Perspectives There are three perspectives from which a business model can be viewed: 1. Marketplace position perspective: Manufacturer---retailer----intermediary 2. Revenue model perspective: the intermediary markets the product and get commission as revenue / it sells the product and gets revenues. 3. Commercial arrangement perspective: fixed prices between Manufacturer, retailer and the intermediary, but the intermediary offers other alternatives (other products). David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 21 Figure 2. 11 Alternative perspectives on business models David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 22 Examples of business models facilitated by the web: 1. 2. 3. 4. 5. 6. 7. 8. E-shop E-procurement E-malls E-auctions: e-bay Virtual communities Collaboration platforms Info. Brokerage Trust services David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 23 Revenue Models Types CPM cost per mille (thousand): number of times ads are displayed 2. CPC cost per click: number of times the ads are clicked 3. Sponsorship of site sections/content types: ex: HSBC sponsoring the money section on the orange broadband provider portal for a fixed amount per year. 4. Affiliate revenue CPA cost per acquisition: commission based. 5. Transaction fee: facilitating a transaction ex. Pay. Pal 6. Subscription access to content/service 7. Pay per view 8. Subscriber data access for email marketing a site owner has data about consumers, he has permission to send them emails, so he charges any advertiser who wants his ads to be included in the site owner’s newsletter. 1. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 24 Factors affecting revenues in ebusiness models 1. 2. 3. 4. 5. Number and size of ad units Capacity to sell advertising (what is your inventory of ads) Fee levels negotiated among different revenue models Traffic volumes Visitor engagement David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 25 Auction business models It is selecting the best match between the buyer and seller from a number of participants. It has the following roles: 1. Price discovery: establishing a realistic market price through gathering of buyers, ex: antiques 2. Efficient allocation mechanism: selling items that are difficult to distribute through traditional channels, ex: inventory with limited shelf life, or items available in specific times ex: theater tickets 3. Distribution mechanism: by attracting particular audiences 4. Coordination mechanism: by coordinating the sale of a product to a number of interested parties; broadband license for telecoms. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 26 Types of auctions 1. Forward, Upward or English auction: (initiated by seller) mainly for consumer sites such as e. Bay. Sellers set the rules. Bids are placed within a time limit and the highest bid wins. 2. Reverse, downward or Dutch auction (initiated by buyer), they are common in B 2 B, the buyer places a request for tender or quotation RFQ and suppliers compete by decreasing the price, usually the lowest price wins. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 27 Assessing future success of a company 1. 2. 3. 4. 5. The cost of acquiring a customer through marketing The contribution margin per customer (before acquisition cost) The average annual revenues from customers and revenues from banner advertising and affiliate revenues The total number of customers The customer churn rate (the proportion of customers that no longer purchase a company’s products in a time period) David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012

Slide 2. 28 Conclusion: retaining customers for repeat purchases governs the long term success of companies. B 2 B and B 2 C interactions between an organization, its suppliers and its David Chaffey, E-Business & E-Commerce Management, 5 Edition, © Marketing Insights Limited 2012 customers Figure 2. 5 th

Slide 2. 29 Terminology: Disruptive technology: new technology that help in creating new markets & value networks (social & technical resources within/between businesses. Customer journey: a description of multi-channel buyer behavior as consumers use different media to select suppliers, make purchases & gain customer support. Portal: an information & services gateway by providing search engines, directories, email, news…. . Digital rights management: Using technologies to protect the distribution of digital services or content i. e. software, movies, music…. David Chaffey, E-Business & E-Commerce Management, 5 th Edition, © Marketing Insights Limited 2012