Lecture 10-12

Selling on the Web:

Revenue Models and Building
a Web Presence
 Learning Objectives

• We are going to look at:

• Revenue models for selling on the Web
• How some companies move from one revenue model to
another to achieve success
• Revenue strategy issues that companies face when selling
on the Web
• Creating an effective business presence on the Web
• Web site usability
• Communicating effectively with customers on the Web
 The Web Catalog Model

• The Web catalog model is a revenue model of

selling goods and services on the Web that is
based on the mail order catalog revenue model.

• In the Web catalog model, a Web site replaces or

supplements print catalog distribution with
information on its Web site.
 Businesses Employing the Web
Catalog Model
• Computer manufacturers, for example Dell and
Gateway USA
• Clothing retailers, eg Sears
• Flowers and gifts
• General discounters

• Many of the most successful Web catalog

businesses are firms that were in the mail order
business and have simply expanded their
operations to the Web.
 Luxury Goods

• For many types of products, people are still unwilling to

buy through a Web site.

• For example, luxury goods and high fashion items.

• The Web sites of Vera Wang and Versace are not designed
to generate income but to provide information to customers
who would then visit the physical store.

• Evian is another site geared towards affluent customers,

but now look at their French site.
 Books, Music, and Videos

• Amazon.com is a hugely successful business

using the Web catalog model for many reasons:
– There are over 4 million books in print throughout
the world, but no physical store could hold them
– Books and videos are small-ticket items people are
willing to buy without inspection

• Amazon’s success spurred other book and music

sellers to undertake e-commerce. For example:
– Barnesandnoble.com, towerrecords.com
 Digital Content Revenue Models

• Firms that own intellectual property have embraced the

Web as a new and highly efficient distribution mechanism.

• LexisNexis is an online service that offers a variety of legal,

corporate, government, etc. information.

• ProQuest is a Web site that sells digital copies of published

documents.

• The ACM Digital Library offers subscriptions to electronic

versions of its journals to its members and to libraries.
 Advertising-Supported Model

• The advertising-supported business model is the

one used by network television in the U.S.

• The success of Web advertising has been

hampered by two major problems:
– No consensus has emerged on how to measure
and charge for site visitor views.
– Very few Web sites have sufficient numbers of
visitors to interest large advertisers.
 Advertising-Supported Model

• Web Portals
– Only a few general-interest sites have sufficient traffic
to be profitable based on advertising revenue alone.

• Newspaper publishers
– It is still unclear whether advertising helps or hurts the
newspaper’s business as a whole.

• Target Classified Advertisers

– Employment and used-vehicle sites are successful
examples of the advertising-supported revenue model.
Advertising-Subscription Mixed Model

• In this mixed model, subscribers pay a fee and accept some level of
advertising.

• The New York Times and The Wall Street Journal use a mixed
advertising-subscription model.

• Business Week offers a variation on the mixed model theme; it

offers some free content but requires a subscription to access the
entire site.

• ESPN sells advertising and offers a vast amount of free information,

but fans can subscribe to its Insider service.
 Fee-for-Transaction Models

• The travel agency business model involves

receiving a fee for facilitating a transaction.

• A number of online travel agencies began doing

business on the Web.

• Stock brokerage firms use a fee-for-transaction

model. They charge their customers a
commission for each trade executed.
 Fee-for-Transaction Models

• Event Tickets
– The Web offers event-promoters an ability to sell tickets
from one virtual location to customers practically
anywhere in the world, eg Ticketmaster UK

• Estate Agents and Mortgage Brokers

– Online estate agents provide all of the services that a
traditional broker might provide, eg Foxtons

• Online banking and financial services

– The greatest concerns that most people have when
considering moving financial transactions to the Web
are security and reliability, eg Halifax
 Fee-for-Services Models
The fee in this model is based on the value of the service provided.
– These are neither broker services nor based on the number or
size of transactions processed.

• Online games
– Many online games sites offer premium games.
– Site visitors must pay to play these games.

• Concerts and films

– As more households obtain broadband access to the Internet,
companies will provide streaming video of concerts and films
to paying customers.

• Professional services
– State laws have been one of the main forces preventing U.S.
professionals from extending their practices to the Web.
 Multiple Transitions

Encyclopaedia Britannica
• Print publisher to Advertising-Supported model to
Advertising-Subscription Mixed Model
 Revenue Strategy Issues

Channel conflict – when web sites compete with existing parts

of organisation
Cannibalisation – when customers are “churned” rather than the
web attracting new customers

Problem:
Channel conflict or cannibalization can occur when sales
activity on a company’s website interferes with existing sales
channels.

Solution:
Web sites provide product information but directs customers
to online and physical stores where goods can be purchased.
Strategic Alliances

Streetmap
 Identifying Web Presence Goals

• Businesses always create a presence in the physical world

by building stores and office buildings.

• On the Web, businesses have the luxury of intentionally

creating a space that creates a distinctive presence.

• A Web site can perform many image-creation tasks very

effectively, including:
– Serving as a sales brochure
– Serving as a product showroom
– Showing a financial report
– Posting an employment ad
– Serving as a customer contact point
Making Web Presence Consistent with
Brand Image
• Different firms, even those in the same industry,
might establish different Web presence goals.

• Coca Cola and Pepsi are two companies that

have developed strong brand images and are in
the same business, but have developed different
Web presences.

• The Web presence conveys the image the

company wants to project.
 Achieving Web Presence Goals

• An effective site is one that creates an attractive presence

that meets the objectives of the business or other
organization.

• Possible objectives include:

– attracting visitors to the Web site
– making the site interesting enough that visitors stay and
explore
– convincing visitors to follow the site’s links
– creating an impression of corporate image
– building a trusting relationship with visitors
– reinforcing positive images of the organization
– encouraging visitors to return to the site
 The Toyota Site

• The Toyota site is a good example of an effective

Web presence.

• The site provides:

– a product showroom feature
– links to detailed information about each product
line
– links to dealers
– links to information about the company
 Not-for-Profit Organizations

• A key goal for many not-for-profit organizations is

information dissemination.

• The combination of information dissemination and a two-

way contact channel is a key element in any Web site.

• The American Civil Liberties Union and National Trust in

the UK have created effective Web presences.

• Political parties and museums also use Web sites for their
image presences.
 How the Web is Different

• When firms started creating Web sites in the mid

1990s, they often built simple sites that conveyed
basic information about their business.

• The failure to understand how the Web is

different from other presence-building media is
one reason that businesses fail to achieve their
Web objectives.

• Firms must use the Web’s capability for two-way,

meaningful communication with their customers.
Meeting the Needs of Web Site Visitors

• Businesses that are successful on the Web realize that

every visitor to their Web site is a potential customer.

• An important concern for businesses is the variation in

important visitor characteristics.

• People who visit a Web site seldom arrive by accident; they

are there for a reason.

• Technology variations among visitors (e.g., connection

speed) should be a concern for Web sites.
Many Motivations of Web Site Visitors

• Creating a Web site that meets the needs of

visitors with a wide range of motivations can be
challenging.
– to learn about products or services that the
company offers
– to buy the products or services that the company
offers
– to obtain information about warranty service, or
repair policies for products they have purchased
 Trust and Loyalty

• When customers buy a product, they are also buying a

service element.

• A seller can create value in a relationship with a customer

by nurturing customers’ trust and developing it into loyalty.

• Customer service is a problem for many corporate sites.

• A primary weak spot for many sites is the lack of

integration between the company's call centers and their
Web sites.

• Think about how eBay builds trust among its users

 Rating E-Commerce Web Sites

• Two companies routinely review electronic

commerce Web sites for usability, customer
service, and other factors.

– BizRate.com provides a comparison shopping

service and offers links to sites with low prices and
good service ratings for specific products.

– Gomez.com provides scorecards for electronic

commerce sits in specific categories.
 Usability Testing

• Firms perform usability testing of their Web sites.

• As usability testing becomes more common,

more Web sites will meet their goals.

• Companies have found that a series of Web site

test designs helped them to understand visitors’
needs.
 Connecting with Customers

• An important element of corporate Web presence

is connecting with site visitors who are
customers or potential customers.

• Mass media is a one-to-many communication

model, the Web is a many-to-one communication
model, and personal contact is a one-to-one
communication model.
 Connecting with Customers

• The Web is an intermediate step between mass

media and personal contact.

• Using the Web to communicate with potential

customers offers many of the advantages of
personal contact selling and many of the cost
savings of mass media.
 Summary

• We have looked at:

• Revenue models for selling on the Web
• How some companies move from one revenue model to
another to achieve success
• Revenue strategy issues that companies face when selling
on the Web
• Creating an effective business presence on the Web
• Web site usability
• Communicating effectively with customers on the Web