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MP3 Electronic Commerce II Dealing w/Competitive Threats Fall 2000. Dealing with Competitive Threats. Strengthen brands inspire trust, communicate quality, lower search costs Create economies of scale Differentiate products / constant innovation Create switching costs - PowerPoint PPT Presentation
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MP3Electronic Commerce II
Dealing w/Competitive Threats
Fall 2000
Dealing with Competitive Threats
• Strengthen brands– inspire trust, communicate quality, lower search costs
• Create economies of scale
• Differentiate products / constant innovation
• Create switching costs– pref. databases, communities, loyalty programs
• Dominate or create distribution channels
• Leverage alliances and partnerships
Customer Acquisition Costs
CompanyAquis.
Cost
CDnow 40EarthLink 75America Online 93Credit card companies 90-100Long distance telephone companies 100Mortgage lenders 100-250
Avg. Costs: $11 - catalog; $31 - physical; $82 - online(Shop.org, 2000)
Strong Brand Can Be Extended
If you build it...
• … will they come? Maybe, but they might not return.
Vis
ito
rs
Time
Branding &Value Delivery
Scale in theMarketplace vs. Marketspace
• Turnover– 2.6 times / year– avg. book in store 20
weeks
• Inventory– shelf & warehouse
stock– 20-40% returns– little float / title
• Turnover– 26 times / year– avg. book in house 2
weeks
• Inventory– all warehouse stock– few returns– avg. 32 days of
float / title
Scale, IPOs, and DifferentiationLetting in the Little Guy
The Firm Underwriters, institutions, &
large investors
$12/share7% fee
small Investors
small Investors
small Investors
$15/share
&Online
Brokerages
small Investors
small Investors
small Investors
• Result: differentiated service enabled by scale
Commodity Products
• Time available = X
• High search costs – (e.g. time to visit a firm = X/3)– customer can only visit 3 firms
• Low search costs – (e.g. time to visit a firm = X/30)– customer can visit 30 firms
Differentiation & Switching Costs
• Differentiate the product or service via:– mass customization– preference databases & collaborative filtering– communities
• Switching costs created via:– preference databases & collaborative filtering– frequent buyer programs– communities of users– learning, compatibility, standards
Cookies• stored in a text file on your hard drive• usage
– track users (unique ID)– save passwords / prefs.– temporary storage (shopping
basket)• each cookie can only be accessed by
the domain that placed it (ads have own domain)
• may be disabled (prefs) • a cookie single user
TargetingTargeting Options• site categorization• visitor frequency• geography• domain name• service provider• SIC codes• company size (emp, $)• browser type• operating system• click stream
Privacy Issues• Policy - posting & updating
• Trust Seals– industry lead: TRUSTe– weak, effectiveness questioned
• Consumers in Control– P3P: Platform for Privacy Preferences– MS Internet Explorer 5.5 and greater
• Government Regulation
• Internal Policies
Why Communities?
• Communities create switching costs & provide a reason to return– 57% of surfers return to the same sites
• Communities generate traffic– chat boosts traffic from 50% to 300%
• Communities pre-qualify users• Community members spend more• Communities can lower support costs
Users = Value
source: InternetWorld, Wired News
Date Service Purchaser # of Users Deal $ $/UserJun-00 eGroups Yahoo 17 million $428 million 25$ Jun-00 AnyDay.com Palm 3 million $80 million 27$ Nov-99 Gamesville Lycos 2.2 million $207 million 94$ Jan-99 GeoCities Yahoo 3.5 million $3.56 billion 1,017$ Aug-98 WhoWhere Lycos 10.6 million $133 million 13$ Aug-98 PlanetAll Amazon 1.5 million $87.9 million 59$ Jun-98 Mirabilis/ICQ AOL 11 million $287 million 26$ Apr-98 WebChat InfoSeek 2.7 million $6.7 million 2$ Feb-98 Tripod Lycos 1 million $58 million 58$ Jan-98 HotMail Microsoft 9 million $400 million 44$ Oct-97 Four11 /
RocketmailYahoo 1 million $92 million $ 92
Sep-97 CompuServe AOL 2.6 million $425 million 163$
Distribution Channels
• PC Makers (Compaq, Dell, IBM, Gateway, Apple)
• Operating System (Microsoft Apple, Sun)
• Browsers (Microsoft, Netscape/AOL)
• ISPs (AOL, AT&T, @Home, BabyBells, Earthlink) • Portals (Yahoo, Excite, Infoseek, Lycos, AOL)
• Focused Aggregators (Quicken.com, Auto-By-Tel)
• Internet Appliances (WebTV, i-Opener)
• Hybrids (Pixel Co., RadioWave, Pointcast)
Web Site Promotion Schemes
• Popularity: – Banners 98%– Buttons 55%– Television 30%– Affiliate Programs
17%
• Effectiveness (Scale of 1-5):
– Affiliate Programs 4.3– Television 4.0– Banners 2.8– Buttons 2.0
Source: Iconocast.
AOL’s Cooperative Agreements
AOL Mobile Communicator:RIM and BellSouth
AOL Touchpad:Gateway
“Speed is God,Time is the Devil”