Electronic Commerce 043002

Chapter 3: Selling on the Web: Revenue Models and Building a Web Presence Dr. Mingli Song Dr. Mingli Song - School of Computer Science, Communication University of China, Beijing; email [email protected];

Learning Objectives 

In this chapter, you will learn about: 

Revenue models

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How some companies move from one revenue model to another to achieve success

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Revenue strategy issues that companies face when selling on the Web

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Creating an effective business presence (企业展示) on the Web

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Web site usability (可用性)

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Communicating effectively with customers on the Web2

Key Terms   

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account aggregation 帐户整合 addressable media 可寻址媒体 advertising-subscription mixed revenue model 广告 收费混合盈利模式 advertising-supported revenue model 广告支持盈利模式 bill presentment 帐单显示 cannibalization 互斥 catalog model 商品目录模式 category manager 品类管理公司 channel conflict 渠道冲突 channel cooperation 渠道合作 3

Key Terms    

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channel distribution manager 分销渠道管理公司 communication modes 沟通模式 customer-centric 以客户为中心的 demographic information 人口统计信息 disintermediation 免中介化 fee-for-service revenue model 服务费用盈利模式 fee-for-transaction revenue model 交易费用盈利模式 fulfillment manager 订单履行公司 mail order model 邮购模式 many-to-many communication 多对多的沟通 many-to-one communication model 多对一的沟通模式 4

Key Terms    

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mass media 大众媒体 one-to-many communication model 一对多的沟通模式 one-to-one communication model 一对一的沟通模式 personal contact 个人接触 personal shopper 采购员 portal (Web portal) 门户（门户网站） presence 展示 prospecting 探测法 reintermediation 再中介化 stakeholder 利益相关体 5 stickiness 黏度

Key Terms    

usability testing 可用性测试 virtual model 虚拟模特 Web catalogue revenue model Web directory 网络目录

网上目录盈利模式

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Revenue Models 

Revenue model of selling goods and services on the Web 

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Mail order or catalog model 

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Based on mail order catalog (邮寄目录) revenue model that predates the Web Proven to be successful for wide variety of consumer items (消费品)

Web catalog revenue model (网上目录赢利模式) 

Taking the catalog model to the Web 7

Computers and Consumer Electronics (家用电器) 

Apple, Dell, Gateway, and Sun Microsystems 



Have had great success selling on the Web

Dell 

Created value by designing entire business around offering high degree of configuration flexibility to its customers 8

Books, Music, and Videos 

Retailers using the Web catalog model to sell books, music, and videos (音像制品) 

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Jeff Bezos 

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Among the most visible examples of electronic commerce

Formed Amazon.com in 1994

Jason and Matthew Olim 

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Formed online music store they called CDnow Used the Web catalog revenue model 9

Luxury Goods (奢侈品) 

People are still reluctant to buy through a Web site

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Web sites of Vera Wang and Versace 

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Constructed to provide information to shoppers, not to generate revenue

Web site of Evian 

Designed for a select (精选的), affluent (富裕的) group of customers 10

Clothing Retailers (服装零售店) 

Lands’ End 

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Personal shopper (个人采购员) 

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Pioneered (首创) idea of online Web shopping assistance with its Lands’ End Live feature in 1999 Intelligent agent program that learns customer’s preferences and makes suggestions

Virtual model (虚拟模特) 

Graphic image built from customer measurements 11

Flowers and Gifts 

1-800-Flowers 



Created online extension to its highly successful telephone order business

Chocolatier (巧克力商) Godiva 

Offers business gift plans on its site

12

General Discounters (折扣店) 

Discounters sell merchandize such as computer equipment, software, consumer electronics, books, music CDs and sports equipment at extremely low prices

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Some of these Web discount retailers originally sold advertising on their sites to subsidize (弥补) their low product prices 13

General Discounters Cont’d 

Beyond.com 

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Closed its retail operation and sells the software it created for operating a Web catalog site

Buy.com 

Realizes advertising revenues were not sufficient subsidies

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Relies on volume-purchasing (大批采购) strategy to keep prices low 14

Digital Content Revenue Models (数字内容赢利模式) 

Firms that own intellectual property (知识产权) 



Have embraced the Web as new and highly efficient distribution mechanism

Lexis.com 

Provides full-text search (全文检索) of court cases (法庭案例), laws, patent (专利) databases, and tax regulations (税务法规) 15

Digital Content Revenue Models Cont’d 

ProQuest 



Sells digital copies of published documents

ACM Digital Library (数字图书馆) 

Offers subscriptions to electronic versions of its journals to members and to library and institutional subscribers

16

Advertising-Supported Revenue Models (广告支持的赢利模式) 

Broadcasters provide free programming (免费的节目) to an audience along with advertising messages (广 告信息)

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Success of online advertising hampered by 

No consensus (共识) has emerged on how to measure and charge for site visitor views 

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Stickiness (黏度) of a Web site: ability to keep visitors and attract repeat visitors

Very few Web sites have sufficient visitors to interest large advertisers (广告主) 17

Web Portals (门户) 

Web directory (Yahoo! for example) 

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A listing of hyperlinks to Web Pages

Portal or Web portal 

Site used as a launching point to enter the Web

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Almost always includes a Web directory and search engine

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Also includes other features such as free e-mail, chat room (聊天室), shopping directories, file storage services, games, etc.

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Example: Yahoo, AOL, AltaVista, and others

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Newspaper Publishers (报纸出版 商) 

Many newspapers publish all or part of their print content on the Web

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Publishers experience sales losses as a result of online distribution

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The cost of operating Web sites cannot be covered by the revenue generated from selling advertising on the sites 19

Targeted Classified Advertising (分类广告) Sites 

Web employment advertising (招聘广告) 

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Uses the same approach that search engine sites use to offer advertisers (广告主) target markets (目标市场)

Used vehicle (二手交通工具) sites 

Accept paid advertising from individuals and companies that want to sell cars, motorcycles, boats, etc.

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Give the seller the option of running the ad on the Web site or in the print version of the advertising newspaper

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Advertising-Subscription Mixed Revenue Models (广告收费混合赢利模式) 

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Subscribers (订阅者) 

Pay a fee and accept some level of advertising

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Typically subjected to (经受) much less advertising

Used by 

The New York Times (纽约时报) and The Wall Street Journal (华尔街日报)

21

Advertising-Subscription Mixed Revenue Models Cont’d 

Business Week (商业周刊) 

Offers some free content at its Business Week online site



Requires visitors to buy subscription to Business Week print magazine if they want to access the entire site

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Fee-for-Transaction Revenue Models (交易费用赢利模式) 

Businesses offer services and charge a fee based on number or size of transactions processed

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Disintermediation (免中介化) 

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Removal of an intermediary (中介) from value chain

Reintermediation (再中介化) 

Introduction of a new intermediary 23

Travel Agents (旅行社) 

A number of online travel agencies began doing business on the Web

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Expedia, Travelocity, Hotels.com, and Hotel Discount Reservations (also elong.com in China) 

In addition to earning commissions (佣金) from the transportation and lodging providers, these sites generate revenue from ads on travel info pages 24

Automobile Sales (汽车销售) 

Salespeople can help customers learn about product features, arrange financing (资金), make a purchase decision; their job also includes extracting the highest possible price

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The buyer can purchase a car without negotiating with salesperson who is then taken out of value chain

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The car salesperson is disintermediated and the Web site becomes the new intermediary 25

Stockbrokers (证券经纪公司) 

Charge their customers commission for each trade executed

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A number of discount brokers opened after the U.S government deregulated (撤消对…的管 制规定) the securities (证券) trading business in the early 1970s

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In the 1990s, discount brokers faced new competition from online firms 26

Insurance brokers (保险经纪公司) 

A number of intermediaries that sell insurance policies (保险单) from variety of companies have been online since early days of the Web

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Quotesmith 

Began business in 1984 as a policy-quoting (保单报价) service for independent insurance brokers

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Decided in 1996 to offer its service directly to the public over the Internet

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Disintermediated the independent insurance agents it formerly worked with 27

Event Tickets (票务) 

The Web offers event promoters ability to sell tickets from one virtual location to customers practically anywhere in the world (e.g. piao.com.cn)

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Online ticket agencies reduce transaction costs for both buyers and sellers of tickets

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Real Estate and Mortgage Loan Brokers (房地产与抵押贷款经纪公司) 

Provides all of the services that traditional broker might provide---except that online brokers provide them through Web sites

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IndyMac Bank Home Lending 

offers mortgage loan and seeks online review in minutes

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approved customers can print an approval letter from their computers and take it the same day to buy a new house 29

Online Banking (在线银行) and Financial Services (金融业) 

The greatest concerns that most people have are security and reliability of the financial institution

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Online banks handle only a tiny portion of the world’s financial transaction

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Two barriers are preventing a more rapid rate of growth in the online banking business: 

a lack of bill presentment (帐单显示)

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a lack of account aggregation (帐户整合) 30

Fee-for-Service Revenue Models (服务费用赢利模式) 

Fee based on value of service provided

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Services 

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Range from games and entertainment to financial advice

Online games 

Growing number of sites include premium (高价的) games in their offerings

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Site visitors must pay to play these premium games 31

Fee-for-Service Revenue Models Cont’d 

Concerts and films 

As more households obtain broadband access to the Internet 

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Companies are providing streaming (流) video of concerts and films to paying subscribers

Professional Services (专业服务) 

State laws 

One of the main forces preventing U.S. professionals from extending their practices to the Web 32

Revenue Models in Transition (转变) 

Subscription to Advertising-Supported Model 

Microsoft founded its Slate magazine Web site 

An upscale (高端的) news and current events publication

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Charged annual subscription fee after a limited free introductory period

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Was unable to draw sufficient number of paid subscribers

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Now operated as an advertising-supported site 33

Advertising-Supported to Advertising-Subscription Mixed Model 

Salon.com 

Operated for several years as an advertisingsupported site

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Now offers optional subscription version of its site

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Subscription offering 

Motivated by company’s inability to raise additional money from investors 34

Advertising-Supported to Feefor-Services Model 

Xdrive Technologies 

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Opened its original advertising-supported Web site in 1999 Offered free disk storage space online to users After two years, was unable to pay costs of providing the service with the advertising revenue generated Later switched to a subscription-supported model

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Advertising-Supported to Subscription Model 

Northern Light 

Founded in August 1997 as a search engine

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Revenue model 

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Combination of advertising-supported model plus a fee-based information access service

January 2002 

Converted to a new revenue model that was primarily subscription supported 36

Multiple Transitions 

Encyclopedia Britannica (大不列颠百科全书) 

Original offerings 

The Britannica Internet Guide 

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Encyclopedia Britannica Online 

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Available for a subscription fee or as part of CD package

1999 

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Free Web navigation aid

Converted to a free, advertising-supported site

2001 

Faced declining advertising revenues and returned to a mixed model: the advertising-subscription mixed revenue model 37

Revenue Strategy Issues 

Channel conflict (渠道冲突) 

Occurs whenever sales activities on a company’s Website interfere with existing sales outlets (店铺)

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Also called cannibalization (互斥) because the Web site’s sales consume sales that would be made in the company’s other sales channels 

Levi Strauss & Company Began selling jeans online in mid-1998 and stopped in January 2000

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Maytag’s Web site allowed customers to order directly online and after 2 years of operation it decided to incorporate online partners into its Web site store design

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Revenue Strategy Issues Cont’d 

Channel cooperation (渠道合作) 

Giving customers access to the company’s products through a coordinated presence in all distribution channels 

Eddie Bauer was selling through catalog and retail stores

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The company believed that online sales could become more attractive if customers were allowed to return unwanted products purchased online

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Eddie Bauer was able to convince all managers to support the Web site

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Strategic Alliances (战略联盟) and Channel Distribution Management 

Strategic alliance 

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Account aggregation services 

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When two or more companies join forces to undertake an activity over a long period of time Increase propensity (倾向) of customers to return to the site

Channel distribution managers (分销渠道管理公 司) 

Companies that take over responsibility for a particular product line within a retail store 40

Creating an Effective Web Presence (展示) 

An organization’s presence 

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The public image it conveys to its stakeholders (利 益相关体)

Stakeholders of a firm 

Include its customers, suppliers, employees, stockholders (股东), neighbors, and the general public 41

Identifying Web Presence Goals 

On the Web, businesses and other organizations have the luxury of building Web sites intentionally to create distinctive presence

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Each entity that establishes a Web presence should decide features the Web site can provide and which of those features are the most important 42

Achieving Web Presence Goals 

An effective site is one that creates an attractive presence that meets the objectives of business or organization

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Objectives of the business 

Attracting visitors to the Web site

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Making the site interesting enough that visitors stay and explore 43

Achieving Web Presence Goals Cont’d 

Convincing visitors to follow the site’s links to obtain information

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Creating an impression consistent with the organization’s desired image

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Building a trusting relationship with visitors

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Reinforcing positive images that the visitor might already have about the organization

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Encouraging visitors to return to the site

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Profit-Driven (赢利性) Organizations 

Toyota site 

A good example of an effective Web presence

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Provides links to 

Detailed information about each vehicle model

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A dealer locator page

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Information about the company and the financing services it offers 45

Profit-Driven Organizations Cont’d 

Quaker Oats 

Web site does not offer a particularly strong sense of corporate presence

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Site is a straightforward presentation of links to information about the firm

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Redesigned site in 1999 

Essentially the same as previous version 46

Not-for-Profit (非赢利性) Organization 

Key goal for the Web sites 



Information dissemination (传播)

Key element on any successful electronic commerce Web site 

Combination of information dissemination and a two-way contact channel 47

Web Site Usability (可用性) 

Motivations of Web site visitors 

Learning about products or services that the company offers

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Buying products or services that the company offers

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Obtaining information about warranty (担保), service, or repair policies (政策) for products they purchased

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Obtaining general information about the company or organization 48

Web Site Usability Cont’d 

Motivations of Web site visitors 

Obtaining financial information for making an investment or credit granting (授信) decision

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Identifying the people who manage the company or organization

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Obtaining contact information for a person or department in the organization 49

Making Web Sites Accessible (可进入的) 

One of the best ways to accommodate a broad range of visitor needs 

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Good site design 

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Build flexibility into the Web site’s interface Lets visitors choose among information attributes

Web sites 

Can offer visitors multiple information formats by including links to files in those formats 50

Making Web Sites Accessible Cont’d 

Goals that should be met when constructing Web sites 

Offer easily accessible facts about the organization

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Allow visitors to experience the site in different ways and at different levels

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Provide a meaningful, two-way (interactive) communication link with the organization

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Sustain (保持) visitor attention and encourage return visits

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Offer easily accessible information about products and 51 services

Trust (信任) and Loyalty (忠诚) 

Studies by business researchers 



Repetition of satisfactory service 



A 5 percent increase in customer loyalty can yield profit increases between 25% and 80%

Can build customer loyalty

Customer service 

A problem for many electronic commerce sites 52

Usability Testing 

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Companies that have done usability tests 

Conduct focus groups (焦点小组/小组讨论)

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Watch how different customers navigate through a series of Web site test designs

Cost of usability testing 

Low compared to total cost of a Web site design or overhaul (翻修) 53

Customer-Centric (中心的) Web Site Design 

Putting the customer at the center of all site designs

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Guidelines (指导方针) 

Design site around how visitors will navigate the links

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Allow visitors to access information quickly

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Avoid using inflated (夸大的) marketing statements

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Customer-Centric Web Site Design Cont’d 

Guidelines 

Avoid using business jargon (行话) and terms (词 汇) that visitors might not understand

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Build the site to work for visitors using the oldest browser software on the oldest computer connected through the lowest bandwidth connection

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Be consistent in use of design features and colors 55

Customer-Centric Web Site Design Cont’d 

Guidelines 

Make sure navigation controls are clearly labeled

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Test text visibility on smaller monitors

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Make sure that color combination do not impair viewing clarity for color-blind visitors

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Conduct usability tests 56

Connecting With Customers 

Personal contact model (个人接触模式) 

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Prospecting (探测法) 

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Firm’s employees individually search for, qualify (取得资格), and contact potential customers Personal contact approach to identifying and reaching customers

Mass media approach (大众媒体方法) 

Firms prepare advertising and promotional materials about the firm and its products 57

Connecting With Customers Cont’d 

Addressable media (可寻址媒体)  

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One-to-many communication model 

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Advertising efforts directed to a known addressee (被访地址) Also called mass media

Communication flows from one advertiser to many potential buyers

One-to-one communication model 

Both buyer and seller participate in information exchange

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Business Communication Modes

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Summary 

Models used to generate revenue on the Web    

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Web catalog, digital content sales Advertising-supported Advertising-subscription mixed Fee-for-transaction and fee-for-service

Companies undertaking electronic commerce initiatives to  

Form strategic alliances Contract with (缔结关系) channel distribution managers

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Summary 

Firms 



Enlisting (征募) help of users when building test versions of the Web site 



Must understand how the Web differs from other media

A good way to create a site that represents the organization well

Firms must also 

Understand nature of communication on the Web 61

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Toyota U.S. Home page (2004)

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Toyota U.S. Home page (2009)

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Toyota U.S. Home page (2013)

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Quaker Oats old Home Page

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Quaker Oats Home Page: 1999 Redesign

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