cmpe 484
DESCRIPTION
CMPE 484. Feb 20 -22, 2001. Electricity. Insurance. Retail. Insuring. Information Technology. Telecomms. Broadcasting. Convergence. Web accelerates convergence that is already happening in the physical world. Electricity companies look at Internet access via wall sockets. - PowerPoint PPT PresentationTRANSCRIPT
Ayşe Başar Bener
CMPE 484
Feb 20-22, 2001
Ayşe Başar Bener
ConvergenceWeb accelerates convergence that is already happening in the physicalworld
Gas
Insuring
InformationTechnology
Telecomms
Broadcasting
Entertainment
Consumer Goods
Retail
Electricity
Insurance
British GasInsurance
Citigroup,many others
Electricity companieslook at Internet accessvia wall sockets
Psion + Nokia,Ericsson
British Telecom+BSkyB=BIB
Character merchandising
Consumer Direct
Disney StoresRainforest Cafe
SainsburyBarclay Square
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Implications on the Industry
Companies must make three strategic e-business choices
Choosing what e-marketto compete in wisely
Basing value propositionsaround a deep understandingof customer buying habits
E-business model
E-m
arke
ts
Customer buying behavior
Implicationsand strategic
choices
Selecting an appropriate business model
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A. Choosing E-markets Wisely
Companies must understand that e-market segments are fundamentally different
Major E-market Segments
Business toConsumer
Business toBusiness
Consumer toConsumer
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Business to Consumer OfferingsWingspan has supplemented a broad range of product offerings with a massive marketing campaign, positioning itself as a new economy, net-centric player
Source: Company web sites; Gomez Advisors
WingspanBank.com Broad Product Set• Deposit, credit, brokerage, insurance,
and mortgage offerings• Instant approval in all 50 states• Have begun to offer travel and
entertainment services through “Online Concierge”
Embrace web model of distribution - partnering with other providers to broaden offerings
• Mortgages through E-LOAN• Insurance through INSWEB
$150 million marketing campaign has helped to position them as a net-centric, yet reliable brand
Place emphasis on speed/performance of site (twice as fast as industry average)
Critical Success Factors
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Business to BusinessAlthough attention is focused on Consumer-to-Business, the potential for Business-to-Business trade over the web is enormous
Source: Forrester ResearchYear
$ B
illi
ons
(Goo
ds &
Ser
vice
s So
ld)
0
200
400
600
800
1000
1200
1400
1600
1998 1999 2000 2001 2002 2003
U.S. Business to Business
U.S. Business to Consumer
HypergrowthCommerceThreshold
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Business to Business HubsForget about E-Trade, Schwab or Amazon-Business to Business is a different animal
Business to Business Hubs
Company
Company
Company Company
Company Company
Company
Company
Business to BusinessCharacteristics
Two-way networks that mediate between buyers and sellers, creating benefits for both
Domain expertise is a must
Lots of sales calls, business processes must be understood, rules defined
Business to ConsumerCharacteristics
One-way networks that deal directly with buyers to benefit sellers
Deep knowledge of specific categories not required-witness Amazon migration across categories
Direct marketing, advertising and bulletin boards
A Hub is…• Focused on industry verticals• Aggregates buyers and sellers
Company
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Business to Business hubsWho Will Win?
• Those in large fragmented markets
• Those with the sharpest focus - “one problem one industry”
• First movers win - increasing returns business model
• Big capital spenders - customer acquisition is not cheap here
Possible Third Party Roles:• Hub manager• Payment facilitator• Information aggregator• Trusted third-party for
authentication and delivery
• Credit provision
$211 Billion
1998 2002
$750 Million
Business to BusinessHubs Grows
Estimated Market Size
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Business to Business Hub ExampleSciQuest has simplified the task of buying obscure laboratory equipment by uniting buyers and sellers in a tightly focused hub
Benefits:• Additional
distribution
• Reduced marketing costs
Benefits:• Reduced search
costs
• Low prices
• Consolidated order tracking
– SciQuest applies a markup to every item– Offers auctions and catalogue buying– Has opportunity to charge for advertising and to sell customer data
Source: Company web sites; Company prospectus
Thousands of suppliers list their
products on SciQuest’s site
Corporate scientists and researchers go to SciQuest to
buy lab equipment
SuppliersBuyers
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Opportunities for financial services firms in transaction enabling….
Consumer to Consumer MarketAlthough less clear, potential exists for banks to carve out a role in Consumer-to-Consumer segments
Enabletransformation
Reap financialrewards
Bring buyers andsellers together
• Create community for buyers and sellers
• Spend to enhance brand
• Take small responsibility for authenticating transactors
• Generally leave it up to the transactors to complete transaction
• Take % of every sale
• Assist with authentication of buyer and seller in consumer to consumer transactions
• Enable transactions through exchange of digital cash
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C. Selecting a Business Model
Information marketing andtransactional content
Build a complete value chain around activity or economic event. Market share is everything and first mover advantage is critical
Mix content and value-added services to create online properties that people return to repeatedly
Value chain innovationOffer complete transactional support for an activity along entire value chain
Transaction processingCreate a commerce and payments infrastructure that competitors can’t easily replicate
Web BusinessModel Description Example
Category killers
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Efficiency
Create new channels or alter existing ones to change the means and costs of doing business
Automate or improve functions or processes. Emphasize self-service. Build economies of scale
Event aggregationIntegrate a variety of related goods and services from many suppliers to provide an integrated experience around an event
Market segment aggregationTailor products/services from one or more suppliers to specific high value market segment of one marketing
Web BusinessModel Description Example
Channel reconfiguration
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Critical Success Factors
Virtual CustomerIntimacyCollection and intelligent analyses of customer data for forecasting customer needs
Innovation/ExperimentationExperimentation with emerging web models for continuous improvement
AlliancesDevelopment of strategic alliances to meet customer demands by utilizing core competencies of other providers
CriticalSuccessFactors
Service ExcellenceDevelopment of world class customer service over all available channels
Channel IntegrationLeveraging multiple channels to serve the on-line customer
Electronic CommunitiesDesign of value added content and functionality for strengthening relationships
The success of any Internet venture is a combination of distinctive value propositions and six main factors
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1. Customer IntimacyEvolving Methods for Deepening Customer Relationships
What the Future Holds
Emerging battleground
Current focus of many players
4. New Technology - Smart Cards, Wireless Banking, WebTV
3. Personalize Advice and Self Service
2. Customize Products and Services - Mass Customization
1. Integrate Customer Information
Incr
easi
ng d
epth
of
cust
omer
rela
tions
hip
1995 1997 1999 2001 2003 2005
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2. Service ExcellenceCustomers have a larger voice on the web - you have to listen
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Customer service continues as a key differentiator for companies engaging in electronic commerce
Dedicated Loan Consultant assigned to work with each customer
Customer support via phone, e-mail, or fax
24 hour access to status and details of loan
Proprietary software to track phone or e-mail service requests of corporate customers
Identifies customers at call in and routes to agents with the right knowledge
Resulted in $180M in incremental sales to date
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3. AlliancesCompanies must look to third party alliances to build networks and to develop products
RANGE REACH
EFFICIENCY
Product alliances
In-house products & education
Consumer access
alliances
Direct Customer access
Compelling Customer Proposition & Service
Excellence
C
C
C
C
C
P
P
P
P
E
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4. Channel IntegrationMulti-channel companies have an advantage
Multi-channelcompanies
Pure internetretailer
OnlineRevenues (1)
MarketShare
GrowthRate Hit Ratio (2) Customer
Loyalty (3)
$2.6 bn
$1.8 bn
59%
41%
260%
160%
6%
3%
25%
17%
- US-internet shopping market example -
Traditional multichannel retailers (e.g., Dell, Schwab, Eddie Bauer) are winning the race
1) First six months of 19992) % of website visitors purchasing online3) % of customers with repeated purchases
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5. Electronic CommunitiesElectronic communities will offer opportunities to strengthen vendor/customer relationships and increase efficiencies
ElectronicCatalogs
Auction/BiddingSystems
PaymentCapabilities
TransactionSecurity
Integration with MemberBack End Systems
• Decreased costs
• Streamlined processes
• Strengthened vendor/ customer relationships
• Improved information capture
Value AddedKey Elements
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Business to Business CommunitiesVerticalNet creates vertical online trading communities such as toolingonline.com by adding industry specific content to the vertical hub concept
Supplier Benefits:• Additional
distribution
• Reduced marketing costs
• Content rich site attracts and retains more visitors
Buyer Benefits:• Relevant, focused
content
• Discussion forums
• Reduced search costs
• Consolidated order tracking
VerticalNet receives:– $6,000 annual storefront hosting fee from 41 different communities– Sponsorship fees– Commissions on transactions
Source: Company web sites; Company prospectus, Forrester
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6. Innovation/SpeedThe web will continue to enable companies to offer more innovative products and services
PNC Bank NextCard
• PNC Bank recently launched an auction service for Certificates of Deposits
• Customers can bid on CD’s with interactive rates
• NextCard can perform online credit approval in 30 seconds
• Has developed a service called “1 Click Shopping” - software that automatically populates online forms with customer data
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Business ExperimentationCompanies must be willing to experiment with their business models and consider opportunities, such as outsourcing, to ensure success in this dynamic environment
New Business ModelTraditional business models must be adapted to gain new revenue streams by leveraging electronic commerce opportunities and core business strengths.
OutsourcingOutsourcing will be key to business experimentation, as the scale and capabilities of outsources can provide improved time to market and reduced risk.
“…toss out that old business plan, think weird, and try the unexpected.” Business Week
March 1999