Introduction to E-commerce

Applications in the
Nursery & Landscape Industry

Dr. Charlie Hall

Professor and Extension Economist
Department of Agricultural Economics
University of Tennessee, 2621 Morgan Circle, Room 314B
Knoxville, TN 37996-4518 (865) 974-7410 crh@utk.edu

For more information, see:

www.utextension.utk.edu/hbin/
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 Flowchart of the Green Industry Marketing System

Final Consumers

Retail Landscape E-commerce

Home Centers 38%
Garden Centers 32% Contractors & Direct to
Mass Merchants 30% Maintenance Consumer

Re-Wholesale Distribution Centers

Infomediaries

Shipping Point Firms

- nursery growers
- greenhouse growers
- combination growers
- B2B alliances

Allied
Input Suppliers
Competing in a Fragmented Industry:
The Strategy Options
• Become a low-cost operator
• Specialize by product type
• Specialize by customer type
• Focus on limited geographic area
• Increase customer value via backward or
forward vertical coordination
 A recent HBR article states:
E-commerce is the first major marketing
innovation since the advent of brand management
and network television -- made possible with the
advances in information technology.
Information technology makes it
possible to take market
segmentation to another level.
-- firms can develop customer
relationship marketing
(CRM) strategies.
-- mass customization is here.
 Transaction vs Relationship Marketing

On-off Exchanges, Focus Ongoing exchanges,

Brand Management Customer Mgnt

Short-term focus Time Perspective Long-term focus

Mass Primary Personal

Communications Communication Communications

Mass markets or Market Size Markets-of-one

segments

Isolated market Customer Feedback Ongoing Dialogue

research Mechanism

Market share Criterion for “Mind Share”

Success
Fact…

The internet is a network --

each connection in the
network represents the
possibility of a
relationship.
 The Relationship Marketing Process

Customization of the
Learning about Marketing Mix
Customers
1. Products/service
1. Knowledge
acquisition Interactions 2. Communications
2. Customer 3. Channels
differentiation 4. Price
 Learning About Customers

1. Knowledge Acquisition

• Various levels of “intrusiveness”

• Unobtrusive = cookies
• When obtrusive, customers must be “engaged”
and the tactics must be creative.
• A critical factor is trust (Geocities, AOL problems)
• “Permission-based marketing”
• Specialized market research firms
 Learning About Customers

2. Customer Differentiation

• Not all customers are created equal.

Customer Lifetime Value

Price premium
Referrals
Cost savings
Revenue growth
Base profit
Acquisition costs

0 1 2 3 4 5 6 7
 Customization of the Marketing Mix

1. Customizing Products and Services

• Creating what customers want (WSJ, Levi’s, Dell,

Holiday Inn, UPS/FedEx)

• Remembering what customers want (reducing

transaction costs) - teaching/learning tradeoff.

• Anticipating what customers want (even before

they express it) – e.g. Amazon.com, MP3.com
 Customization of the Marketing Mix

2. Customizing Communications

• Banner advertisements (CPM basis) - ads placed on

selected websites or handled by 3rd-party ad-server
companies.
• Email-based marketing (cheaper than direct mail
{< $0.005 each} but better customization)
• “Experiential” marketing (NikeTowns, Land Rover
Centers) – The Experience Economy (Pine/Gilmore)
• Viral marketing (accelerate word-of-mouth) - Hotmail
 Customization of the Marketing Mix

3. Customizing Channels

• Managing multiple distribution systems can be tricky.

• Larger firms are not necessarily better, or faster.
• Have “crept” onto the web
• Had to balance commitment to existing
channels.
• The role (and function) of intermediaries is changing
dramatically - disintermediation.
Channel Changers...
 Changing paradigms:

• In traditional channels, efficiency linked to

economies of scale and strong distribution
networks.
• In e-commerce, efficiency is more a function
of velocity than mass.

• “Infomediaries” have developed:

• Market-makers (information brokers)
• Information handlers
 Types of Infomediaries

• Market-Makers (developed niche markets)

• Information handlers (record user behavior)

 Customization of the Marketing Mix

4. Customizing Price

• Personalized pricing (each user buys at a

different price)

• Versioning (customers choose the version

most appropriate for them)

• Leveling the information playing field (“bots” or

“spider” technology - automatic comparisons)
In summary….

A learning relationship is a two-way

street -- customers and firms get
smarter with each interaction;
it then becomes difficult for another
firm to duplicate the established level of
personalization,
thus establishing a sustainable
competitive advantage.
 In summary….

Marketplaces vs. Marketspaces

Marketplaces Marketspaces

Information exchange is costly Information exchange is cheap

Physical location is key Physical location is irrelevant

Efficiency driven by mass Efficiency driven by velocity

Large companies have flexibility Small companies have flexibility

Emphasis on market segments Emphasis on market niches

Intermediaries fill the channel Infomediaries fill the channel

Information sources: Websites
 Information sources: Books

It is important that a company understand

how e-commerce fits into the broader
context of its business.