1Digital E-Commerce: The Difference Between Selling a Product and Selling a Perpetual Customer Relationship

Contents

Executive Summary 1Headless Commerce 2SKUs in Digital Times 2Offer Management and Product Discovery 3How to Get There From Here 3 Seize the Opportunity 3About hybris 4

Digital E-Commerce: The Difference Between Selling a Product and

Selling a Perpetual Customer Relationship

Online selling of digital content, including software, games, e-books, periodicals and other digital media, if done right, can take traditional retail e-commerce a huge step further into a new and very differ-ent – but potentially highly impactful – sales and relationship-building environment.

Unlike physical goods e-commerce, selling digital content should hap-pen in the context of life. Ordering the sequel as one finishes an e-book, or an upgrade or subscription renewal while using an application, like security software, or additional resources, such as levels and expansion packs, in the context of a game, should be achieved without needing to switch to a new shopping context. And users should only be presented with relevant offers when selling is happening in context, rather than just a plethora of unrelated choices.

2Digital E-Commerce: The Difference Between Selling a Product and Selling a Perpetual Customer Relationship

Headless CommerceDigital content providers can employ “headless commerce”, when the product itself – whether a book, magazine, game, application or even a video – is the commerce front-end. With this, transactions are effected in-context, greatly increasing conversions.

The technology that enables “headless commerce” also makes it much easier for digital content publishers to support the wide array of different and constantly changing devices. For example, customers could buy and take delivery not only from their browser but also from mobile apps, tablets, and even appliances or machines. Why not read – and pay for – a travel guide from your in-car GPS or a recipe from your refrigerator door, or rent a video directly from the distributor while viewing its advertising trailer on your TV?

Achieving success with digital e-commerce requires a new way of doing things and new level of commerce functionality. The “living” nature of digital content – the fact that the product its-elf and thus the customer can always remain connected to the producer, retailer, publisher or distributor – enables a powerful new paradigm for a rich, ongoing customer relationship.

SKUs in Digital TimesWhat’s needed requires re-thinking much of what we do in retail physical goods e-commerce today. Some new concepts are key. Some existing concepts become more vital.

The most fundamental element of traditional commerce, the SKU (Stock Keeping Unit), is completely absent in a digital e-commerce environment. The SKU was created to track inventory, which does not exist for digital content. There are no stock-outs or back-orders – there is no stock to keep. Instead, digital content enables businesses to create completely diffe-rent parameters around the “products” and how they can be sold:

Multiplying that complexity, consumers use a multitude of devices to access digital content, including laptops, tablets, smartphones, and smart TVs. Sellers must decide if they are selling rights on a single device, all-access, or something in between.

→ The seller can sell specifi c rights, which can get very complex: the right to access or use for a specifi ed number of views; the right to play a game to a defi ned level; the right to make a set number of copies or loan access rights to friends or as-sociates or within a specifi c domain. All of this must be specifi ed in the “entitlement” – the replacement for the SKU.

→ Digital content can often be sepa-rated into parts: a magazine could be sold one article at a time, a cook-book one recipe at a time, software one feature at a time, a game one level at a time.

→ Digital content can be endlessly and dynamically bundled or aggregated: imagine a professor creating a digital textbook by selecting articles or chapters from a number of dispa-rate sources, or a lawyer assem-bling research one case at a time.

→ The same digital product can be sold under a variety of pricing structures; e.g. perpetual license or purchase, time-based rentals, usage-based rentals, the “free-mium” model.

3Digital E-Commerce: The Difference Between Selling a Product and Selling a Perpetual Customer Relationship

Clearly the SKU model is not appropriate for digital goods, content and services. Digital businesses will sell entitlements rather than SKUs. The traditional e-commerce catalog is inadequate.

With digital content, the sale is not over when the transaction is complete. The customer’s entitlements live on and must be managed: upgrades sold or authorized, subscriptions termi-nated or renewed, device or user assignments changed. This management of the digital relationship between seller and customer is not only necessary; it also opens doors to continu-ed revenue and enhanced customer satisfaction.

Offer Management and Product DiscoveryPresenting customers with a choice of all your products, even with the best traditional navigation techniques, is often over-whelming, but it just won’t work at all for in-context headless commerce. You need to present buyers with just the set of the most relevant choices.

Deciding what you present to users is two-fold: on the one hand, you want to enable users to find what they are looking for, optimizing “product discovery”. On the other hand, you want to present users with options, recommendations, cross-sells and up-sells you think they would choose, even if they didn’t come seeking them initially – “offer management”.

Ideally, you would use everything you know about the visitor – their history, context, location, profile, expressed desires, what page they’re on in the book, how many times they’ve tried to capture the bad guy – and present the most relevant content, products, images, navigation, lists, price, promotion, layout, etc.

As important as the function can be with physical goods, it is even more vital with a product that is delivered on mobile devices or game consoles. Forty choices might be reasonable on a 14-inch screen, but how do you present them on a smart phone? This is the issue of offer management.

Being trapped in the traditional retail e-commerce paradigm of catalogs, categories, shopping carts and check-out severely limits the nature of the relationship you can have with your di-gital customer, and that greatly limits your revenue opportunity as well as customer satisfaction.

How to Get There From HereIt would be nice if the seller could buy technology that delivers all this out-of-the-box and ready to go. Unfortunately, that is simply not available today. So when choosing a com-merce technology vendor to help you get there, you should look for five things:

→ Comprehensive offer management: cross-selling, up-selling, promotions, rules, personalization and more.

→ An underlying product and customer information data structure that maximizes flexibility and extensibility. You can’t imagine all the ways you will want to define entitle-ments, so you need a data structure capable of taking you wherever you want to go.

→ A robust set of native omni-channel, multi-device capabili-ties and an integration structure, including modern, flex-ible application program interfaces (APIs), that will enable headless commerce and devices of the future.

→ A platform that is modern, scalable, flexible and extensible to enable the limitless innovation you will surely want. And one based on open standards, so developers are easier to source and less expensive.

→ A vendor that is focused on and committed to helping companies sell digital goods and content, so you can take advantage of their past and future experience and investments.

Seize the OpportunitySelling digital content, goods, and services is different from traditional retail physical goods e-commerce – or at least it should be, if the objective is to maximize reach and revenue and to drive a rich, ongoing relationship with your customers and high satisfaction. This new approach to customer rela-tionships, enabled only by the unique nature of digital offer-ings, brings a profound change in the commerce process and requirements for your commerce platform. Most importantly, you should choose a technical strategy that anticipates these changes and supports limitless innovation – or you risk losing out on the vital opportunity to create a perpetual, and profit-able, digital customer relationship.

4Digital E-Commerce: The Difference Between Selling a Product and Selling a Perpetual Customer Relationship

Version: February 2013 Subject to change without prior notice © hybris GmbH hybris is a trademark of the hybris Group. Other brand names are trademarks and registered trademarks of the respective companies.

About hybrishybris helps businesses on every continent sell more goods, services and digital content through every touchpoint, channel and device. hybris delivers OmniCommerce™: state-of-the-art master data management and unified commerce processes that give a business a single view of its customers, products and orders, and its customers a single view of the business. hybris' OmniCommerce software is built on a single platform, based on open standards, that is agile to support limitless innovation, efficient to drive the best TCO, and scalable and extensible to be the last commerce platform companies will ever need. Both principal industry analyst firms rank hybris as a “leader” and list its commerce platform among the top two or three in the market.

The same software is available on-premise, on-demand and managed hosted, giving merchants of all sizes maximum flexibility. Over 400 companies have chosen hybris, including global B2B brands Avid, Checkpoint Software, W.W.Grainger, Thomson Reuters, 3M and Houghton-Mifflin Harcourt as well as consumer brands Waterstones, Starbucks, Bridgestone, P&G, Toys R Us, Levi's, Nikon, Galeries Lafayette, Nespresso and Lufthansa. hybris has operations in 15 countries around the globe. hybris is the future of commerce™.

Learn more about the hybris digital commerce solutions for your industry:

www.hybris.com/publishing www.hybris.com/software www.hybris.com/gaming

Version: February 2013 Subject to change without prior notice © hybris GmbH hybris is a trademark of the hybris Group. Other brand names are trademarks and registered trademarks of the respective companies.

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