Electronic Customer Relationships
In cyberspace, producing or service providing firms also have to stress
relationship-based marketing plans in order to achieve customer loyalty. Electronic
marketplaces offer a variety of ways to do this through direct technology links (Sarkar,
Butler, and Steinfield, 1995). Establishing a site on the World Wide Web to advertise
products, provide customer service, or elicit comments is just one option. Companies
operating in both the electronic marketplace as well as in the physical marketplace have
the unique opportunity to “sense and respond” to customer needs rather than to simply
make and sell products and services (Haeckel and Nolan, reported in Rayport and
Sviokla, 1995). USAA, for example, uses intelligent sensing methods to match a
customer need to an appropriate source of supply (Rayport and Sviokla, 1995).
Successful actors in electronic marketplaces will also try to re-impose switching
costs in the form of loyalty programs similar to frequent flyer accounts. E-Trade, for
example, awards allows those customers who are heavy traders to use its convenient
“Power E-Trade” site. Schwab provides its preferred customers with access to special
stock research reports via its “Signature Service” link. New and innovative switching
incentives like the idea of a “cool site”, a “sticky” site, or a must-visit portal have
developed rapidly and are playing an important role in attracting new customers in the
electronic marketplace. Such categorization may confer power to third parties or
cybermediaries designating these sites, especially in a situation of information overload
(Dholakia, 1995). For example, services such as Media Metrix (http://www.mediametrix.com/),
Nielsen Netratings (http://www.nielsen-netratings.com/), and CyberAtlas-Watchfire
(cyberatlas.Internet.com) have emerged to measure the traffic to, “stickiness” of, and
response efficiency of leading websites.
Disintermediation and Reintermediation: Cybermediaries and Infomediaries
As coordination and transaction costs in electronic marketplaces decrease, many
companies have to reevaluate the make-or-buy decision. It is now often cheaper to buy
than to make a product and this will ultimately result in more market activity and fewer
vertically integrated companies (Malone, Yates and Benjamin 1989). Several authors
argue that manufacturing companies in their search for competitive advantage will try to
bypass one or more of the organizations within the traditional industry value chain
(Benjamin and Wigand 1995, Orme et al. 1995). While this may hold true for certain
classes of products – especially those where asset specificity is low, those which are easy
to describe, or those which can be distributed in digital form – there are also factors that
limit disintermediation in electronic markets. Sarkar, Butler, and Steinfield (1995) argued
early that, contrary to the popular notion of disappearing intermediaries, we would
witness the emergence of “cybermediaries” [see also; Bailey, 1997 #2155]. Indeed, the commercial Internet has become so densely populated by such cybermediaries (electronic
malls, electronic trade or auction sites such as eBay and Onsale, financial brokerage firms
like E*Trade and Comdirect, and portals such as Yahoo or Lycos are examples) that Carr
(HBR, 2000, DON’T HAVE EXACT CITE) has called this the age of hypermediation.
Cybermediaries perform the new role of brokering relationships between producers and
consumers in the world of electronic commerce. They will not, however, be able to
command a margin as high as intermediaries in the physical marketplace because they do
not incur the same costs for retail space and personnel. Providers and customers are
simply unwilling to pay premium prices for the services of the cybermediaries (unless the
services are very exclusive, see Axelson 2000). Whether they choose to go direct (such as
Dell or Gateway computers) or rely on cybermediaries (such as book and music
publishers), companies wanting to be market leaders and maintain market share in the
global economy must embrace electronic commerce (Anon., 1995b).
EARLY SUCCESSES OF ELECTRONIC COMMERCE
Win-Win Auctions
One of the older, pre-Internet electronic commerce success stories is from Japan.
Prior to 1985, used car dealers had to travel to one of the physical locations where used
cars were sold to retailers. A proprietary computer and satellite communication system
called AUCNET allowed used car dealers to participate in online auctions without having
to travel physically. They could select the cars conveniently on a computer screen that
showed the cars in digital formats. Car sellers also profited from the system because they
incurred lower costs, as no cars had to be moved from one auction site to another. As
subscribed car dealers all over the country logged onto the system, increasing the number
of potential buyers, the bidding became more intense and sellers were even able to
command a 6% to 7% premium over the price they would get at a physical auction.
Buyers in the electronic marketplace were willing to pay more because they enjoyed the
convenience of desktop shopping and got a better selection of used cars (Rayport and
Sviokla 1994). In the consumer arena, eBay has been very successful in using the idea of
convenient online auctions to build a thriving c2c (consumer-to-consumer) electronic
marketplace.
Internet as the New Medium
Digital Equipment Corporation (now part of Compaq) used the Internet to publish
press releases, product announcements, new services, sales promotions, and other
information since the early 1980s. Then on October 1, 1993 it officially launched its
World Wide Web server. The server was registered with the NCSA What’s New list and
the CERN World Wide Web Servers list. It provided its entire electronic catalog with
product descriptions, pictures, and ordering information – some 4,000 documents.
Electronic ads were sprinkled across World Wide Web magazines, which allowed the
reader to click through to specific Digital advertisements. But DEC offered more than
just graphics and information. It decided to allowed all potential customers to enter an
Alpha client-server, load on their own software and take it for a “test drive.” The result:
The Online Catalog
Hello Direct Inc., a telecommunications products mail-order company in San
Jose, California, put much of its catalog on the Web and used an 800 number to take
orders. Soon thereafter, the company averaged 4,500 “hits” a day, resulting in a growing
number of E-mail inquiries. But the advantages of selling online went well beyond
eliminating some postage and printing costs. The real benefit was the two-way flow of
information between the company and its customers. While customers drilled deeper and
deeper into the site, searching for additional information about Hello Direct’s products,
they were automatically tracked. When they encountered a problem they could
conveniently use the E-mail buttons on the Web pages to ask for more detailed
information, get technical support or suggest product improvements. This helped the
company identify which products were getting the most attention and, perhaps, why that
is so, thereby reducing the high expenditures for conventional market research. It also
allowed Hello Direct to enter into one-to-one relationships with its customers, which
could not be justified in the physical marketplace due to prohibitively high marketing and
administrative costs. While Hello Direct’s online customers are still a minority, the
company’s efforts seem to pay off, as online orders are about 10% higher on average than
the print-catalog orders (Verity in Verity and Hof, 1994, Weston 1995). The online
catalog model seems to have been picked up by a variety of merchants in industries as
diverse as apparel, consumer electronics, book retailing, office supplies, and toys.
CURRENT STATE OF ELECTRONIC COMMERCE
The euphoric phase of electronic marketing ended in mid-2000. Until then, at
least in the United States, hundreds of e-commerce “business models” were being
experimented with, supported by a very buoyant stock market that provided funding for
almost any exciting e-commerce idea.
From the middle of 2000, the financial viability of e-commerce business models
came under serious scrutiny. Stock valuations collapsed in a precipitous manner and only
those e-commerce models that showed some promise of long-term viability attracted the
attention of consumers, analysts, and entrepreneurs.
What happened in the period following July, 2000 was that all the benefits and
risks of electronic marketplaces – low search costs, transaction costs, and coordination costs coupled with intense competitive rivalry and the problems of providing
“experiences” and some post-sale services – came into sudden and full view of everyone.
What had been reported about electronic transactions in esoteric journals since the 1980s
now became common everyday knowledge.
Anatomy of Failures
In simple terms, many e-commerce firms failed because of unsustainable business
models. This may seem tautological, so it is necessary to probe further. According to
Greenberg (2001):
There appear to be parallels among the deceased dot-coms, including massive
overspending, reckless capital management …and …[the lack of a] … “unique
selling proposition.” A USP is an idea or concept that sets a business apart from
all of its competitors, one that imaginatively fills a gaping void in the
marketplace. Offline, not every business requires a USP. Location, sales strategy,
impulse buying and smart advertising can keep several competing businesses
alive, even if they all sell the same thing in similar settings. Online, however, the
USP is oxygen.
Because the costs and benefits of electronic markets have become so starkly transparent,
it is necessary to provide compelling ways for benefits to consistently exceed costs. For
suppliers, this means finding consistent ways for revenues to exceed costs. For these
revenues to happen in the first place, customers must have a compelling case to buy
online. For customers, the benefits (product choice, price, and services) must exceed the
costs and risks of buying online.
Outlines for Success
At the end of 2000, a curiously contradictory state of affairs existed in the United
States: steadily rising online sales and plummeting stock prices of online marketers. This
means online customers had crossed over to the positive side of their perceived costbenefit
tradeoff but online marketers remained mostly on the negative side of their costrevenue.
In its brief history, the challenge of online marketing has shifted dramatically –
from attracting users to making the business viable and profitable. From the few
businesses that looked like long-time survivors in b2c electronic markets, and fewer still
that were profitable in b2c markets, some important factors for success are emerging:
* As a medium, the Internet can connect more people to information and to one another
faster and cheaper than any before it. Therefore – regardless of the success or failure
of specific e-commerce companies – the Internet is here to stay as a new, interactive
medium for marketing.
* Like television networks, the number of Internet-based media companies that can be
profitable is few. Again, like television networks, these new media companies usually
need a global network and a very rich, diverse content base to succeed.
*Like other successful media of the past, the overall impact of Internet has been to
transfer power from marketers to consumers. Thus, even when they are not profitable,
electronic markets enhance the customer orientation of firms,
*Products that follow the law of “digital assets” are far easier to sell on the Internet
than products that do not. Sales of airline tickets took off after airlines started using
paperless e-tickets.
*Simple online technologies such as email-based customer contacts and online filling
of order forms and registration forms are likely to provide quick returns on
investments while complex, “rich media” technologies (such as Flash, streaming
video, and “push”) will take longer to establish themselves in mass markets.
*Offline and online formats – bricks and clicks – are not antithetical as many of the ecommerce
pioneers believed. Even Amazon.com, the best known and a pioneering
name in b2c e-commerce, has teamed up with the biggest toy retailer ToysRUs and is
considering an alliance with the biggest retailer Wal-Mart.
*There are a few, special business models that could not simply exist in the pre-
Internet world. eBay – the world’s biggest c2c electronic market – is the best example
of this.
*Businesses that had long experience of “remote transactions” – catalog marketers,
telephone-based marketers, TV-based marketers – have expertise that could be
translated easily to online electronic markets.
*Electronic markets can work in all part of the supply chain. Both the sales and the
procurement end of a business can benefit from electronic markets. Companies such
as IBM, Oracle, and GE have reaped huge benefits by moving substantial parts of
their procurement to the Internet.
*In b2b (business-to-business) markets where both transacting parties are sophisticated
users of information technology, electronic markets bring immediate and substantial
benefits. Companies such as Cisco, Intel, and Dell conduct very large parts of their
marketing by online methods.
In cyberspace, producing or service providing firms also have to stress
relationship-based marketing plans in order to achieve customer loyalty. Electronic
marketplaces offer a variety of ways to do this through direct technology links (Sarkar,
Butler, and Steinfield, 1995). Establishing a site on the World Wide Web to advertise
products, provide customer service, or elicit comments is just one option. Companies
operating in both the electronic marketplace as well as in the physical marketplace have
the unique opportunity to “sense and respond” to customer needs rather than to simply
make and sell products and services (Haeckel and Nolan, reported in Rayport and
Sviokla, 1995). USAA, for example, uses intelligent sensing methods to match a
customer need to an appropriate source of supply (Rayport and Sviokla, 1995).
Successful actors in electronic marketplaces will also try to re-impose switching
costs in the form of loyalty programs similar to frequent flyer accounts. E-Trade, for
example, awards allows those customers who are heavy traders to use its convenient
“Power E-Trade” site. Schwab provides its preferred customers with access to special
stock research reports via its “Signature Service” link. New and innovative switching
incentives like the idea of a “cool site”, a “sticky” site, or a must-visit portal have
developed rapidly and are playing an important role in attracting new customers in the
electronic marketplace. Such categorization may confer power to third parties or
cybermediaries designating these sites, especially in a situation of information overload
(Dholakia, 1995). For example, services such as Media Metrix (http://www.mediametrix.com/),
Nielsen Netratings (http://www.nielsen-netratings.com/), and CyberAtlas-Watchfire
(cyberatlas.Internet.com) have emerged to measure the traffic to, “stickiness” of, and
response efficiency of leading websites.
Disintermediation and Reintermediation: Cybermediaries and Infomediaries
As coordination and transaction costs in electronic marketplaces decrease, many
companies have to reevaluate the make-or-buy decision. It is now often cheaper to buy
than to make a product and this will ultimately result in more market activity and fewer
vertically integrated companies (Malone, Yates and Benjamin 1989). Several authors
argue that manufacturing companies in their search for competitive advantage will try to
bypass one or more of the organizations within the traditional industry value chain
(Benjamin and Wigand 1995, Orme et al. 1995). While this may hold true for certain
classes of products – especially those where asset specificity is low, those which are easy
to describe, or those which can be distributed in digital form – there are also factors that
limit disintermediation in electronic markets. Sarkar, Butler, and Steinfield (1995) argued
early that, contrary to the popular notion of disappearing intermediaries, we would
witness the emergence of “cybermediaries” [see also; Bailey, 1997 #2155]. Indeed, the commercial Internet has become so densely populated by such cybermediaries (electronic
malls, electronic trade or auction sites such as eBay and Onsale, financial brokerage firms
like E*Trade and Comdirect, and portals such as Yahoo or Lycos are examples) that Carr
(HBR, 2000, DON’T HAVE EXACT CITE) has called this the age of hypermediation.
Cybermediaries perform the new role of brokering relationships between producers and
consumers in the world of electronic commerce. They will not, however, be able to
command a margin as high as intermediaries in the physical marketplace because they do
not incur the same costs for retail space and personnel. Providers and customers are
simply unwilling to pay premium prices for the services of the cybermediaries (unless the
services are very exclusive, see Axelson 2000). Whether they choose to go direct (such as
Dell or Gateway computers) or rely on cybermediaries (such as book and music
publishers), companies wanting to be market leaders and maintain market share in the
global economy must embrace electronic commerce (Anon., 1995b).
EARLY SUCCESSES OF ELECTRONIC COMMERCE
Win-Win Auctions
One of the older, pre-Internet electronic commerce success stories is from Japan.
Prior to 1985, used car dealers had to travel to one of the physical locations where used
cars were sold to retailers. A proprietary computer and satellite communication system
called AUCNET allowed used car dealers to participate in online auctions without having
to travel physically. They could select the cars conveniently on a computer screen that
showed the cars in digital formats. Car sellers also profited from the system because they
incurred lower costs, as no cars had to be moved from one auction site to another. As
subscribed car dealers all over the country logged onto the system, increasing the number
of potential buyers, the bidding became more intense and sellers were even able to
command a 6% to 7% premium over the price they would get at a physical auction.
Buyers in the electronic marketplace were willing to pay more because they enjoyed the
convenience of desktop shopping and got a better selection of used cars (Rayport and
Sviokla 1994). In the consumer arena, eBay has been very successful in using the idea of
convenient online auctions to build a thriving c2c (consumer-to-consumer) electronic
marketplace.
Internet as the New Medium
Digital Equipment Corporation (now part of Compaq) used the Internet to publish
press releases, product announcements, new services, sales promotions, and other
information since the early 1980s. Then on October 1, 1993 it officially launched its
World Wide Web server. The server was registered with the NCSA What’s New list and
the CERN World Wide Web Servers list. It provided its entire electronic catalog with
product descriptions, pictures, and ordering information – some 4,000 documents.
Electronic ads were sprinkled across World Wide Web magazines, which allowed the
reader to click through to specific Digital advertisements. But DEC offered more than
just graphics and information. It decided to allowed all potential customers to enter an
Alpha client-server, load on their own software and take it for a “test drive.” The result:
some 1,400 Alpha users were recorded daily, each filling out substantial demographic
information for DEC’s salesforce (until it had to terminate the offer in November 1995
due to legal restrictions). This rather unconventional marketing approach resulted in a
total of 6.7 million log-ons to DEC’s website in the first 18 months and made the site one
of the most successful of its time, with more that 175,000 “hits” a day (Andelman 1995,
Cronin 1994, Jones 1994). The “new media” strategy – pioneered as a customer
communications strategy by companies such as DEC and Sun Microsystems – has proved
to have worldwide appeal and represents an enduring road to success in e-commerce,
with Yahoo!, AOL, and Web.de being major examples of new online media.The Online Catalog
Hello Direct Inc., a telecommunications products mail-order company in San
Jose, California, put much of its catalog on the Web and used an 800 number to take
orders. Soon thereafter, the company averaged 4,500 “hits” a day, resulting in a growing
number of E-mail inquiries. But the advantages of selling online went well beyond
eliminating some postage and printing costs. The real benefit was the two-way flow of
information between the company and its customers. While customers drilled deeper and
deeper into the site, searching for additional information about Hello Direct’s products,
they were automatically tracked. When they encountered a problem they could
conveniently use the E-mail buttons on the Web pages to ask for more detailed
information, get technical support or suggest product improvements. This helped the
company identify which products were getting the most attention and, perhaps, why that
is so, thereby reducing the high expenditures for conventional market research. It also
allowed Hello Direct to enter into one-to-one relationships with its customers, which
could not be justified in the physical marketplace due to prohibitively high marketing and
administrative costs. While Hello Direct’s online customers are still a minority, the
company’s efforts seem to pay off, as online orders are about 10% higher on average than
the print-catalog orders (Verity in Verity and Hof, 1994, Weston 1995). The online
catalog model seems to have been picked up by a variety of merchants in industries as
diverse as apparel, consumer electronics, book retailing, office supplies, and toys.
CURRENT STATE OF ELECTRONIC COMMERCE
The euphoric phase of electronic marketing ended in mid-2000. Until then, at
least in the United States, hundreds of e-commerce “business models” were being
experimented with, supported by a very buoyant stock market that provided funding for
almost any exciting e-commerce idea.
From the middle of 2000, the financial viability of e-commerce business models
came under serious scrutiny. Stock valuations collapsed in a precipitous manner and only
those e-commerce models that showed some promise of long-term viability attracted the
attention of consumers, analysts, and entrepreneurs.
What happened in the period following July, 2000 was that all the benefits and
risks of electronic marketplaces – low search costs, transaction costs, and coordination costs coupled with intense competitive rivalry and the problems of providing
“experiences” and some post-sale services – came into sudden and full view of everyone.
What had been reported about electronic transactions in esoteric journals since the 1980s
now became common everyday knowledge.
Anatomy of Failures
In simple terms, many e-commerce firms failed because of unsustainable business
models. This may seem tautological, so it is necessary to probe further. According to
Greenberg (2001):
There appear to be parallels among the deceased dot-coms, including massive
overspending, reckless capital management …and …[the lack of a] … “unique
selling proposition.” A USP is an idea or concept that sets a business apart from
all of its competitors, one that imaginatively fills a gaping void in the
marketplace. Offline, not every business requires a USP. Location, sales strategy,
impulse buying and smart advertising can keep several competing businesses
alive, even if they all sell the same thing in similar settings. Online, however, the
USP is oxygen.
Because the costs and benefits of electronic markets have become so starkly transparent,
it is necessary to provide compelling ways for benefits to consistently exceed costs. For
suppliers, this means finding consistent ways for revenues to exceed costs. For these
revenues to happen in the first place, customers must have a compelling case to buy
online. For customers, the benefits (product choice, price, and services) must exceed the
costs and risks of buying online.
Outlines for Success
At the end of 2000, a curiously contradictory state of affairs existed in the United
States: steadily rising online sales and plummeting stock prices of online marketers. This
means online customers had crossed over to the positive side of their perceived costbenefit
tradeoff but online marketers remained mostly on the negative side of their costrevenue.
In its brief history, the challenge of online marketing has shifted dramatically –
from attracting users to making the business viable and profitable. From the few
businesses that looked like long-time survivors in b2c electronic markets, and fewer still
that were profitable in b2c markets, some important factors for success are emerging:
* As a medium, the Internet can connect more people to information and to one another
faster and cheaper than any before it. Therefore – regardless of the success or failure
of specific e-commerce companies – the Internet is here to stay as a new, interactive
medium for marketing.
* Like television networks, the number of Internet-based media companies that can be
profitable is few. Again, like television networks, these new media companies usually
need a global network and a very rich, diverse content base to succeed.
*Like other successful media of the past, the overall impact of Internet has been to
transfer power from marketers to consumers. Thus, even when they are not profitable,
electronic markets enhance the customer orientation of firms,
*Products that follow the law of “digital assets” are far easier to sell on the Internet
than products that do not. Sales of airline tickets took off after airlines started using
paperless e-tickets.
*Simple online technologies such as email-based customer contacts and online filling
of order forms and registration forms are likely to provide quick returns on
investments while complex, “rich media” technologies (such as Flash, streaming
video, and “push”) will take longer to establish themselves in mass markets.
*Offline and online formats – bricks and clicks – are not antithetical as many of the ecommerce
pioneers believed. Even Amazon.com, the best known and a pioneering
name in b2c e-commerce, has teamed up with the biggest toy retailer ToysRUs and is
considering an alliance with the biggest retailer Wal-Mart.
*There are a few, special business models that could not simply exist in the pre-
Internet world. eBay – the world’s biggest c2c electronic market – is the best example
of this.
*Businesses that had long experience of “remote transactions” – catalog marketers,
telephone-based marketers, TV-based marketers – have expertise that could be
translated easily to online electronic markets.
*Electronic markets can work in all part of the supply chain. Both the sales and the
procurement end of a business can benefit from electronic markets. Companies such
as IBM, Oracle, and GE have reaped huge benefits by moving substantial parts of
their procurement to the Internet.
*In b2b (business-to-business) markets where both transacting parties are sophisticated
users of information technology, electronic markets bring immediate and substantial
benefits. Companies such as Cisco, Intel, and Dell conduct very large parts of their
marketing by online methods.
Aucun commentaire:
Enregistrer un commentaire
veiller laisser un commentaire svp