Strategic & Tactical Tools for Ebusiness

•Control of an installed base (most important one)

• Big corporates have a large (loyal) customer base or locked-in customers
• This can be used to block cooperative standard setting or force a standards war
• Can be used to block competitors from offering compatible products, forcing them to implement a risky revolution strategy
• In startups often services or products for free, to create an installed base. Logic: build early lead, to leverage positive feedback (for you and against competitors)

•Intellectual property rights

• Valuable technology patents and copyrights -> strong position
• Normally patents > copyrights, but software copyrights can block compatibility

•Ability to innovate

• Build new intellectual property in the future
• Good engineering skills -> compromise on standards and out-engineer competition

•Manufacturing abilities

• Scale economies or strong manufacturing competences -> low-cost production
• Helps to survive standard wars (lower costs) or capture market share (low price -> more sales of standardized products)
• Benefit from open standards

•Brand name and reputation

• Brand name is a big asset in network markets and give one instant credibility -> helps to win the market

•Presence in complementary products

• Product that is highly complementary -> push for standards
• Acceptance of your technology will drive sales of other products you produce
• E.g. Intel wanted to sell more CPUs -> pushed for other standards for PC components, including interfaces between motherboards and CPUs, chipsets

First mover advantage

• First movers learn lessons earlier -> pole position
• Network effect kicks in when positive feedback is achieved with every additional customer of the network

Definition: occurs where users receive value from the fact that everyone else uses the same tool or product, all of which increase in value as more people adopt them (e.g. Windows, Mac, Facebook)

An MSP is a service, technology or product that lets two or more customer or participant groups have direct interactions. Examples of successful MSPs include PayPal, eBay, Alibaba and Facebook

retailers that sell products through a variety of channels and integrate their physical stores with their website and mobile Platform

Rise of multisided markets and network effects

• Increased numbers of customers in amazon leads to an increased number of amazon partners and their products. Amazon as the middleman benefits from an accelerated growth through positive network effects

Online Store front as limitless online catalogue

• Reduce frictions to purchase behavior
  •  Easy to search of products
  • One click purchase
•  Enables “infinite” shelf space -> businesses can service the long-tail through just in time delivery
• Interaction enables “trust” -> customer reviews
• Storefront = promotion space
  • Customer data -> recommendation engines

Disintermediation -> cut off middleman (wholesaler and retailer), which can save costs and time

Reintermediation:

• Creation of new intermediaries between customer and suppliers providing services such as supplier search and product evaluation
• Ex. Take-away Restaurant with delivery service switches to a food delivery company like deliveroo

Reduced search and transaction costs; customers able to find lowest prices

Lowered market entry costs, lower operating costs, higher efficiency

Traditional physical store merchants forced out of business -> ToysRUs

Some industries would be disintermediated

Emerging concepts:

Showrooming: Customers come into a store to review a product and then leave to purchase it online, often from another vendor

• The notion of “customer experience has emerged as being very important”

Supercharging: Connecting emotionally with the customer, as he visits a store and relates to the brand, leading to more spending

Omni-channel: convergence and integration of online and offline channels (different from multi-channel)

Virtual merchant

○Single-channel e-commerce firms that generate most of their revenue from online sales (often Platform business model)

○Must build a reputation from scratch - perhaps through online reviews. Savy in use with SoMe

○No physical store locations but face large costs in building and maintaining an order fulfillment infrastructure

○Low gross margins (like all of retail), high customer acquisition costs, steep learning curve for marketing

■The business needs efficient operations to make profits

○Common strategy: Low cost + convenience + effective and efficient fulfillment processes to ensure fast delivery

■Examples of virtual merchants: Amazon, eBay, ASOS

○New trend: virtual merchants with subscription revenue model

■Birchbox, Barkbox, whatever the fuck box

Bricks-and-clicks (Omni-channel)

• Have a network of physical stores as primary retail channel, but also have online offerings
  • Firms like: Walmart, Macy’s, Sears, Target
• While they face high costs of physical buildings and large staff, also have many advantages:
  • Brand name
  • National customer base
  • Warehouses
  • Large scale (giving bargaining power)
  • Trained staff
  • Experience in operating on very thin margins
  • Have invested heavily in purchasing and inventory control systems to control costs
  • Coordinating returns from multiple locations
• Acquiring customers is less expensive due to brand name
• Challenges include:
  • Coordinating prices across prices across channels
  • Handling returns of online purchases at retail outlets
  • Leveraging their assets on the web
  • Building a credible website
  • Hiring new, skilled staff
  • Building rapid response and order entry/fulfillment systems

Catalog merchant

• established companies that have a national offline catalog operation that is their largest retail channel, but who have recently developed online capabilities

• Their advantages:
  • Very efficient order entry and fulfillment systems
• Challenges are the same as brick and mortar stores:
  • must leverage existing assets and competencies to a new tech environment
  • Build credible online presence
  • Hire new staff

Manufacturer-direct

• single- or multi-channel manufacturers who sell directly online to consumers without the intervention of retailers.
• With direct sales, they risk to disintermediate current suppliers which could result in harm
• E.g. Apple, Dell, 
• Channel conflict occurs when retailers of products (stores also selling) must compete on price of inventory against the manufacturer (who sells directly to customer)
  • Manufacturer has the advantage of no stores, staff, or inventory
• Manufacturer-Direct firms have no marketing experience
• Don’t have a fast online order and fulfillment system in place
  • usually send bulk shipments up value chain
• Problems acquiring customers
• Coordinating supply chains with market demand
• They must switch from a Supply Push to a Demand Push model
  • Supply Push model - Products are made before orders are received and then stored in a warehouse
  • Demand push model - products are not build until order enters system
• Advantages include:
  • Owning brand name
  • Existing customer base
  • Lower cost structure because they are the creator of the goods, High Margins

1. Have a central Location to attract many shoppers
   1. A central website with good accessibility (SEO)
2. Charge high enough prices to cover costs of goods as well as marketing
3. Develop highly efficient inventory and fulfillment systems so you can offer goods at lower costs than competitors and still profit
   1. Supply chains can be a competitive advantage (supply chain simplification, lean, and just in time production ⇒ Value chain efficiency)
4. Customer behaviour
   1. Not only about price. Customers want convenience, time savings, access any time)
5. Integrated approach to offline and online is needed (omni-channel marketing)

6. Social commerce (social media), local e-commerce, and m-commerce are vital

   1. In combination with big data, people can be targeted based on their interests

Customers that visit the offline retail stores are supercharged

• Supercharging occurs when customers are nurtured in a small-footprint location that typically holds no inventory -- and fulfilled, initially (and subsequently, for repeat purchases), from an operationally efficient distribution center.

• Small stores act as showrooms, zero invertory and zero stock, order is fulfilled from warehouse and delivered to house of customers

• A customer who is exposed to the brand offline, rather than online, is not only more likely to peruse and sample a wider selection of product categories, but also is more immersed in the brand experience

• is saving costs and Retailers can generate store visits by implementing omnichannel initiatives, such as in-store pickup of online orders

MSP:

• One reason, undoubtedly, is the success of eBay--and of Rakuten and Taobao, eBay's counterparts in Japan and China, respectively.
• Another is that multisided platforms look financially more alluring than resellers.
• These marketplaces usually take a cut from each transaction, which goes almost straight to the bottom line.
• As a result, their operating costs are low and their percentage margins are high.

Re-seller

• Resellers must buy and then sell their offerings,
  • typically have higher revenues
  • but also higher capital and operating costs
    • Have to play for own deliveries, organize returns, etc
  • and lower percentage margins.

•Scale vs Scope

• High-demand products are sold more efficiently by one large reseller than by many small sellers.
• The reseller can capitalize on economies of scale in purchasing, infrastructure investments (in warehouses and distribution centers, for example), delivery, customer support, and so on

Aggregation Effects

• Some products and services have much higher value to buyers when bought together than when purchased separately from independent sellers.
• Resellers generally do better than multisided platforms (by bundling goods)

•Buyer & Seller Experience

• Multisided platforms generally create value by matching buyers with the right sellers and vice versa, and then enabling them to transact.
  • In some contexts, however, one side might not want to deal with multiple agents
  • Customer experience plays a large role in business success. The resller model enabled:
    • guaranteed fast delivery,
    • an extremely favorable and universal return policy,
    • reliable and standardized information about product characteristics and availability, and so on.
  • Customers on MSPs might not get the fast delivery or other qualities from varying entities
    • Differing service terms might annoy them
  • One-off sellers are at a tremendous disadvantage on multisided platforms:
    • They lack the expertise, credibility, and time to compete with the professional sellers in these marketplaces.

•Avoiding Market Failure

• Left to their own devices, marketplaces sometimes collapse.
  • The most obvious cause of a market failure is uncertainty about product quality or about the reliability of sellers or suppliers
  • Platform must establish a trust mechanism between parties
  • Another potential market failure of MSPs: one side has an information or bargaining advantage over the other
    • Fearful of being exploited, the weaker party is unlikely to participate

Transaction platforms (Match, Uber, Netflix)

• Digital intermediaries enabling information and services to be found and shared or bought across an ecosystem -> e.g. Marketplace -> Shared Economy Platforms
• Value creation – facilitating exchange of information and services between 3^rdparties
  • Matchmaking: value from increasing the size of the pool and then increasing the likelihood of a better match
  • Reducing friction: making interactions and transactions as easy as possible
  • Value Capture: Share of volume of transactions
• Strategic implications:
  • Architecturally Simpler
  • Easier to build from scratch
  • Simpler power dynamics in the ecosystem
  • (Generally)Cheaper to establish & sustain
  • Key risk
  • Failure to ignite network effects

Innovation platforms (AWS, Microsoft Azure)

• A collection of common functional building 6blocks that are shared with an ecosystem to innovate digital services -> e.g. Operating system, Salesforce
• Value Creation: Facilitating the innovation of new services by 3^rd parties
  • Opening up functional capabilities for 3^rd parties to innovate with
  • Resourcing developers with the capabilities they need to innovate
  • Value capture: Share of range and quality of innovation

Strategic implications

• Architecturally Complex
• Build on existing capabilities – Hard to build from scratch

e.g AirBnB

•“Merchant Side” - Easy monetisation of spare  resource / under-utilised assets

•“Customer Side” – 1) Lower Prices; 2) More interesting / genuine experiences

The Sharing Economy as “a system that activates the untapped value of all kinds of assets through models and  marketplaces that enable greater efficiency and access”  (Botsman, 2014)

Drivers by Constantiou et al (2017):

1. Allocation of idle resourcs

2. Access over ownership

3. Peer-to-Peer

Cusumano (2014) suggests the sharing economy is enabled by platform  companies that bring together

• Individuals who have under-utilised assets
• With people who would like to rent those assets short-term

Strategic similarities in platform types

• Rich ecosystems Requires cultivation to ensure successful platform growth – network effects etc
• Value creation and capture must be shared across  ecosystem to attract ecosystem members.
• Ecosystem requires governance in order to ensure  equitable share of value creation and capture –  boundary resources

Strategic differences in platform types

1) Transaction Platform                                       Innovation Platform

• Relatively common                                  Relatively rare
• Architecturally Simpler                             Architecturally complex
• Easier to build from scratch                     typically emerges from existing capabilities
• Platform is a service                                Platform enables many services
• In essence it is an application

1.The “ignition” of network effects to drive growth

• Making people benefit from more people joining, inducing a virtuous cycle
• Chicken & egg problem --> Which side should one attract first? e.g Mobilepay

2.Control over supply side offering.

• Balance of managing the control

• Managing the pricing mechanism or Managing the quality of the offering?

  • Should it be the platform owners to decide the price or the sellers?

Sharing economy platforms leverage organizational and market mechanisms in innovative ways to gain competitive advantages over incumbents

Factors:

1. Quality: Loose or right control over participants (organizational coordination mechanism into the platform user’s base) AND
2. Price: low or high rivalry (market coordination mechanism by the platform owner)

Tight control: e.g. standardizing procedures, issuing contracts

High rivalry: e.g. dynamic pricing based on supply and demand, recommending prices based on supply and demand

Low rivalry: e.g. standard prices, exchange of gifts, partially costs

Loose control: e.g. rewarding socially acceptable behavior, setting social values and community values

• Chaperones (loose control, high rivalry) --> AirBnB
• Franchisers (tight control, high rivalry) --> Uber
• Principals (tight control, low rivalry) --> Handy
• Gardiners (loose control, low rivalry) --> Couchsurfing

Organizational Coordination Mechanisms ->determine control exerted by platform

Market Coordination Mechanism -> determine rivalry between participants

Not really high entry barriers for sharing platforms (e.g. low initial costs to create network effects)

o   Network effects = key for creating value for the platform

o   Incumbents react with acquisitions (of newcomers), collaboration (with newcomers) or by creating competition (for the newcomers)

o   Car industry develops complementary business models (e.g. Car2Go)

o   Incumbents can take legal action against newcomers if they use illegal or irregular practices which give them a competitive advantage

Platforms often do not comply to the same regulations than incumbents

• Uber sued for not having licensing

Sharing platforms operate in the fluid boundaries between market and firm by combining organizational (usually applied within an organization to coordinate employees) and market coordination mechanisms (usually applied outside the boundaries of a firm) in an innovative way

§  Raises more legal, ethical and social issues (e.g. supply-side too many risks (e.g. Uber-drivers with no employee benefits))

Societal issues:

•Diminishing workers rights - Sharing Economies or Shared Serfdom - contract pay not regulated

•Avoiding responsibility for accidents - The Dark Side of the Moonlighting - platform refusing to pay compensation

•Impact and costs on society - e.g. The Hotel Zone -  pricing out local residents & ghettoization – negative  externalities

•Unfair competition against incumbents - Taxing the Taxi -  exploit loopholes to avoid regulation and taxes

Marketing is the management process responsible for identifying, anticipating and satisfying  customer requirements profitability” (Chaffey et al 2019)

E-Marketing:

E-marketing is any use of digital technology to achieve marketing objectives

Online consumption continues to grow more dominant

Reasons:

More access to internet world wide, increased speed of internet due to  broadband, increased capabilities of internet makes more users use internet, social effects / community effects that make content go viral

Consists of:

Independent demographic variables --> Background factors (Cultural, Social, Psychological)

Intervening valiables --> Market stimuli, social network communities (Brand, Marketing Communications Stimuli, Firm capabilieties)

Independent demographic variables can’t be influenced, these are background factors that are based on cultural, social and psychological behaviour. Intervening variables can be affected by marketeers.

Dependent variables --> Buyer decisions

Online consumer behaviour (4 additional variables)

• Website and mobile platform features
• Consumer skills
• product characteristics
• clickstream behaviour

Utility and trust = key factors to shop online for customers

• Utility = consumers are looking for good deals, bargains, convenience, and speed

• Trust = Due to asymetric info on products, firms must build trust through reviews online, in order for customers to buy from them. Branding is also very important, so customers recognize it and become loyal.

Online marketing can be more personalized, participatory, peer-to-peer, and communal than offline marketing -> most effective if all four features are included

5 main elements of a multi-channel marketing plan:

• website,
• traditional online marketing (SEM, display ads, e-mail, affiliate programs),
• social marketing,
• mobile marketing,
• and offline marketing

• Display Ad Marketing

  • Targeted ads that are embedded on websites, could be also non static such as videos (banner ads, rich media ads, video ads, sponsorships)

  • Cost per thousand: relatively cheap to raise brand awareness.

  • Cost per click: relatively ecpensive, but motivates ad platforms to increase trfffic to advertisers website.

  • Cost per action: Action could be everything. Pro: motivates advertiser to facilitate user activity

  • Issues:

    • Ad fraud: falsify web traffic to charge advertisers for clicks or impressions that never occurred -> big problem

    • Viewability: Served ads are not viewed due to bad positioning and ad fraud. Also, no measurement if a served ad had been seen. -> marketer still charged

    • Ad Blocking: Increase in use of software blocking ads

• Search Engine base avertising

  • SE baed marketing: Search engine based marketing refers to the use of search engines to build and sustain brands

  • SE based advertising: While search engine based advertising refers to the use of search engines to support direct sales to online consumers

    • sending messages to specific subgroups -> allows price discrimination

• Search Engine Optimisation

  • techniques to improve a website to get a higher ranking in search results (adapt page to search engine algorithm)

Web analytics: Tools that analyze the user’s website behavior

Where are the visitors coming from, What are they looking for (keyword they used to find your site), Duration of website visit,  What pages they visited

Examples along the customer journey:

• Unique visitors
• Page views, Duration, Content views
• Posts, likes, Tweets, Comments
• Enter cart page, Register, Purchase, Abandon
• Repeat customers, Social site buzz, Service request

• The answers depend on the goals of the campaign, the nature of the product, and the quality of the website you direct customers toward.
• Ultimately it’s the return on the investment (ROI) in the ad campaign that counts
  • Complicating matters is the difficulty of cross-platform attribution of sales
  • Not sufficient to look at the first channel a consumer interacted with and the last he signed up on
    • What happened in between in important

• Effectiveness of any marketing relies on the degree of accurate targeting
  • Permission e-mail click-through rates have been fairly consistent over the last five years, in the 3%–5% range.
  • The click-through rate for video ads may seem low, but it is twice as high as the rate for banner ads.
    • There are very poorly targeted
  • Search engine advertising has grown to be one of the most cost-effective forms of marketing communications
  • Direct opt-in e-mail is also very costeffective.
    • Form of targeting people who are already interested in receiving more information

• In general, the online channels (e-mail, search engine, display ads, video, and social, mobile, and local marketing) compare very favorably with traditional channels.
  • Television and print media still are most used way by consumers to find out about products
  • Good marketing will combine all kinds of medium and channels to direct multiple, harmonized messages
    • Consumers who have more touchpoints spend more

 Goal: encourage potential customers to become fans of your products and services, and engage with your business by entering into a conversation with it.

Further: encourage fans to share their enthusiasm with friends and create community of fans online —> strengthen brand and drive sales by increasing share of online conversation

brands lose substantial amount of control over what people say about their brands and where their ads appear

1. Fan acquisition: attracting people to your marketing messages

• Social ads: Social ads (Display ads on social media) encourage visitors to interact and do something social, such as participate in a contest, obtain a coupon, or obtain free services for attracting friends.

2.    Generate engagement: encouraging visitors to interact with your content and brand

• You can think of this as “starting the conversation” around your brand.

• Generate engagement through attractive photos, interesting text content, reports, etc

3.     Amplification: encouraging visitors to share their likes and comments with their friends

• Average user has 120 friends

• 20 mutual friends with which average user has two way communication

  • Amplification occurs if fans refer freinds, who do so as well, creating amplifying effects

4.     Community: stable group of fans engaged and communicating with one another over a substantial period of time about your brand

5.     Brand Strength/ Sales

• Measuring the exact numbers is difficult, but results indicate that social marketing campaigns drive sales

• Buy buttons on social media make conversion easier

Social media analytics enables companies to rapidly collect data from social media platforms and develop in-depth intelligence regarding the competitive environment

• Size of social media pages
• response time to complaints
• number of engagements (comments, likes, shares for each post)
• demographics of the people connected to a user
• Sentiment tone -  how positive, negative, or neutral the tone of the content is about the competitor.
• Relevance - how relevant or substantive the content is for the competitor.
• Keywords analysis - what and how many different keywords are used in the content about the competitor.
• Intensity analysis - how repetitively the keywords are used over time.

Social media metrics

• Brand awareness
  • number of tweets about the brand, number of followers, number of sign ups
• Brand engagement
  • conversation rate (number of comments, posts, responses)
• word of mouth
  • number of retweets, number of sharings

○

• banner ads,
• rich media,
• video,
• games,
• e-mail,
• text messaging,
• instore messaging,
• QuickResponse (QR) codes,
• and couponing. 

Understanding the behavior of users is very important

• 70% of mobile minutes occur in the home, not outside
• Smartphones are very personal, always on, always with us —> perceived as personal appendages and consumers are less tolerant of commercial intrusion. 24/7 on —> more screen time supply, decreases price. Precise location known to marketer —> location-based targeting

1. consumer-retailer interconnectedness

2. consumer empowerment

3. proximity-based consumer engagement

4. web-based consumer engagement