Differentiation of Online Businesses

1
Differentiation of Online Businesses

• Differentiation is what a company does to the
  product.
• The keys to differentiating online businesses
  are
• The creation of a distinctive and superior
  customer experience,
• The development of one-to-one relationships with
  consumers.
• The real value added by the Internet
• Ability to differentiate according to customer
  relationships,
• Provide a unique experience for each customer.
• Kotler
• Defines differentiation as the process of adding
  a set of meaningful and valued differences to
  distinguish the companys offering from
  competitors offerings.
• A company can differentiate its market offering
  along five dimensions product, services,
  personnel, channel, and image.

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Differentiation of Online Businesses

• Offline
• Differentiation emphasizes the product dimension.
  
• Online
• Differentiation by product.
• Advantages
• A greater assortment of products that companies
  are able to offer
• The ability to customize product offerings for
  individual customers.
• A powerful new avenue for differentiating by
  channel, services, and image.

3
Relative Importance of Online and Offline
Differentiation Dimensions
4
Channel Differentiation

• The Internet
• a distribution channel a communication
  channel a relationship channel,
• Used to forge one-to-one relationships with
  individual customers.
• The Internet expands
• Companies geographic range business hours
  assortment of products available
• The channel through which it can reach customers
  display a diversified assortment of offerings
  differentiate itself.

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Channel Differentiation

• There are multiple levels of online channel
  differentiation
• Product or service information online advantage
  over companies with no Web presence,
• Exploits the Internet as a communication channel.
  
• Commercial transactions online,
• Exploits the Internets as a transaction and
  distribution channel.
• The differentiation of competitors
  Internet-related service offerings.

6
Service Differentiation

• Customer service
• Ability to receive customer feedback through
  e-mail 24 hours a day,
• Ability to respond more rapidly to customer
  concerns.
• The distribution of products ordered online
• A way to differentiate services from traditional
  companies.
• Online services, such as online banking and
  securities trading
• Are becoming increasingly popular,
• Are differentiated both by the features they
  offer and the service consumption experiences.
• Supplement traditional offline services, but
  replace the traditional offline services.

7
Service Differentiation

• Customer service
• Ability to receive customer feedback through
  e-mail 24 hours a day,
• Ability to respond more rapidly to customer
  concerns.
• The distribution of products ordered online
• A way to differentiate services from traditional
  companies.
• Online services, such as online banking and
  securities trading
• Are becoming increasingly popular,
• Are differentiated both by the features they
  offer and the service consumption experiences.
• Supplement traditional offline services, but
  replace the traditional offline services.

8
Image Differentiation and the Customer Experience

• Image differentiation is strongly affected by the
  Internet.
• Experience branding
• When a company differentiates itself by creating
  a unique customer experience,
• Increases customer loyalty retention produce
  referral business.
• firms can greatly improve their ability to
  retain customers, target key customer segments
  and enhance network profitability.

9
Image Differentiation and the Customer Experience

• Differentiation has to be built upon the ability
  to create huge perceptual differences from other
  aspects of brand positioning.
• The Internets interactivity allows companies to
  respond more quickly to customer requests.
• The ever-increasing speed of the Internet allows
  companies to communicate more quickly with
  current and potential customers
• Essential to retaining current customers and
  attracting new ones.

10
Product Differentiation

• Product differentiation
• Includes customization and bundling,
• Offers a combination of products/services that
  the individual consumer needs at attractive
  prices,
• Supports one-to-one relationship building with
  each customer, critical for a companys long-term
  success.
• Product packaging
• Offline packaging are design to appeal to
  consumers, be eye-catching, compete with other
  products on store shelves, and sell the product.
• Online consumers might require products with
  more utilitarian packaging products will be
  shipped from the distributor directly to the
  consumer and thus never appear on retailers
  shelves.

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Product Differentiation

• Results
• Products dont need the expensive, colorful
  packaging for store display.
• Products only need a size and shape that is
  functional and useful for the consumer.
• Packaging minimization will reduce waste and
  reduce packaging costs.
• Lower prices, or more reinvestment in
  higher-quality, single-layer packaging
  enhancements.

12
Personnel Differentiation

• In the past, personalized service and one-to-one
  relationships required the interaction of skilled
  personnel.
• Now, the Internet allows companies to deliver
  their products and services through low-cost
  channels that automate the process and remove the
  expensive human element.
• Lower transaction marketing costs cost
  leadership advantage over offline companies.
• Cost reduction for the end user higher levels
  of service.
• BUT as more companies offer products and services
  online, this cost advantage between online and
  offline operations will gradually shrink over
  time.

13
Customer Relationship

• The Internet has made pricing information widely
  available to suppliers, customers, and
  competitors.
• Reduces price differences between suppliers,
• Reduces the importance of price competition and
  increases the importance of differentiation.
• Important to create brand loyalty and use the
  Internet to build one-to-one relationships with
  customers.

14
Customer Relationship

• Data mining is used to predict customer behavior
  differentiate product and service offerings for
  individual customers a way of fostering the
  one-to-one relationship.
• BUT this can have the opposite effect of driving
  away customers who object to providing their
  personal preferences to companies online, or who
  unexpectedly find a completely different
  customized experience every time they visit a
  company Web site.
• The solution allow the customers the freedom to
  opt-out and remain anonymous, or to provide
  personal information for customization purposes.

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Overview

• Site Environment/Atmospherics
• Tangibilize the intangible
• Build trust
• Efficient and timely order processing
• Pricing
• Customer Relationship Management
• Other Strategies
• Positioning Strategies
• Bases for Positioning on the Web
• Repositioning on the Web

Differentiation of Online Businesses Channel
Differentiation Service Differentiation Image
Differentiation and the Customer Experience
Product Differentiation Personnel
Differentiation Customer Relationship
Product-Service Differentiation Strategies
Differentiation Strategies
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Product-Service Differentiation Strategies

• Differentiation strategies
• Being the first to enter the market,
• Owning a product attribute or quality in the
  consumers mind,
• Demonstrating product leadership,
• Utilizing an impressive company history or
  heritage,
• Supporting and demonstrating the differentiating
  idea,
• Communicating the difference.

17
Site Environment/Atmospherics

• Atmospherics the in-store ambiance created by
  brick-and-mortar retailers.
• Web sites can be differentiated by providing
  visitors with a positive environment to visit,
  search, purchase, and so forth.
• Visitors want a site that
• Easily downloads,
• Portrays accurate information,
• Clearly shows the products and services offered,
• Is easily navigated.
• If customers like the home page, they will view
  additional pages and ultimately become a paying
  customer.

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Tangibilize the intangible

• An online product or service cannot be seen
  except by an image or description.
• The goal make offerings seem more tangible by
  showing them in a realistic and customer-friendly
  manner, using
• Virtual tours,
• 3-D images,
• Product image enlargements,
• Trial downloads,
• Customer reviews.

19
Customer Relationship Management

• Price is less used for differentiation barriers
  to entry decrease on the Internet,
• customer relationship management is becoming more
  predominant as a means of differentiation.
• Netflix rent movies on DVD by mail
• Customers set up personal lists of the movies
  they want to rent.
• Customers can rent three or more DVD movies at
  one timewith no return deadlines or late return
  penalties.
• After viewing a movie, customers slip it into the
  prepaid return envelope to mail it back to
  Netflix a few days later, they receive the next
  DVD on their list.
• Netflix builds customer relationships one at a
  time through customer-driven personalization and
  convenience.

20
Positioning Strategies

• Positioning
• Help to create a desired image for a company and
  its products in the minds of a chosen user
  segment,
• Concerns brands, the company itself, or
  individual products,
• Help to control brand image.
• The concept is simple To be successful, a
  company must
• Differentiate itself and its products from all
  others,
• Position itself among its competitors in the
  public's mind to carve out its own market niche.
• Positioning is the process of creating this
  image.
• A position is the resulting view of the firm or
  brand from the consumer perspective.

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Bases for Positioning on the Web

• Firms can position on the basis of
• Product or service attributes (the smallest cell
  phone),
• High-tech image (our cell phones handle
  e-mail),
• Benefits (fits in your pocket),
• User categories (best cell phone for college
  students),
• Comparison with competitors (our phone is less
  expensive than the Nokia),
• Take an integrator position (a full range of
  electronic products and services).

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Product or Service Attribute

• Attributes product or service features such as
  size, color, ingredients, speed, and so forth.
• A patented product or process, such as Amazons
  one-click check-out process, is an idea basis for
  positioning.
• iVillage allows users to build their own meal
  menus at its site using criteria such as
  ingredients and calorie counts.
  (www.ivillage.com)
• Pillsbury adds value through ideas, recipes, an
  advice service on its site (www.pillsbury.com).

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User Category

• This positioning relies on customer segments.
• It is successful when the segment has some unique
  quality that ties product benefits more closely
  to the group than to other segments.
• Kelloggs
• The company has set up an interactive Web site
  for children,
• They can register online and enter code numbers
  found on Kelloggs cereal packages, then use the
  codes as money on related Web sites or even
  earn interest in a special bank.
• Yahoo! Geo Cities
• Hosts Web user pages that are organized into
  neighborhoods based on specific interests.
• Consumers can connect with others who share the
  same interests.