MAR 6936902

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MAR 6936-902

• E-Commerce Marketing
• Spring 2003Tampa--MBA
• Business Models, Distribution, SCM Chapter 4
• Rich Gonzalez
• February 24, 2003 (Week 8)

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URLs

• http//www.listen.com/ rhapsody
• www.pressplay.com
• www.musicnet.com
• www.allmusic.com
• wsj.com
• www.ready.gov (didnt get to)

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Agenda February 24, 2003

• WSJ Article on Music
• Class Exercise
• WAP 4 Discussion
• G2C Feature
• Business Distribution and SCM Chapter 4
• Nielsen Usability Preview
• Due For March 3

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Last Time

• Successful dot.coms
• Business Models, BHAGs
• Innovation Class Exercise

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Business Ideas Left Team
Idea
BHAG

• 1. Online Paper book Rental a la Netflix
• 2. Online subscription music download service
• 3. Online complaint site re consumer complaints--

• 1. To Put Libraries out of business
• 2. Never buy a CD with songs you dont like.
• 3. Never get burned again!!

In Class Exercise
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Business Ideas Right Team
Idea
BHAG

• 1. Distribute, on a demand basis, high quality
  convenient music
• 2. Invoicing service for small businessesbill,
  collect, ACH
• 3. Satellite based ISP for remote locations

• 1. Never buy a CD from a retail store
• 2. To send a bill to every U.S. resident each
  month
• 3. Have 80 of population as customers

In Class Exercise
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For Today February 24

• Chapter 4 E-Business Distribution Systems and
  SCM
• WSJ Online The Price You Pay, Will
  MortonFebruary 11, 2003Rhapsody Walter S.
  MossbergFebruary 13, 2003

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Rhapsody Lets You Burn CDs On the Web at 49 Cents
a Song

• wsj.com www.listen.com
• Features
• Variety (Songs, Artists)
• Flexibility (Convert Files)
• Search (Known and Similar)
• Amplification
• How many tunes?
• Quality? Usability?
• Price is 49 cents/song?

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Rhapsody Lets You Burn CDs On the Web at 49 Cents
a Song

• Competitors?
• MusicNetAlliance With AOLValue Strategy?
• PressPlay www.pressplay.com/
• 200,000 SongsMembership
• What Is The Business Model?

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In Class Exercise

• Two Teams
• 1 Recorder, I Reporter (Different From Last Time)
• Discussion/Brainstorming for 10-15 Minutes
• Deliverable 1 Piece of PaperNames on One
  SideIdeas on the other

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In Class Exercise

• Objective Successful Satisfaction Of Goals
• Group C(onsumer) and Group M(usic)
• 1. Mission (What Your Purpose Is)
• 2. Specific Requirements (What You Get)
• 3. Specific Output (What You Give)
• 4. Name 1 Innovation That Would Help YOU
• Use Drucker, Porter, Kleindl, Class

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Group C---Consumers

• 1. Self-gratification, entertainment
• 2. Quality of content of songs, novelty,
  technical, fidelity. Genres that we want (we
  know it when we hear it)Price we want (will be
  individual)
• 3. Time, money, opinion, feedback, general
  attention
• 4. a) Music newsletter to send us (samples) and
  informationb) Kiosk in stores To distribute
  music

In Class Exercise
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Group M---Music Industry

• 1. Provide safe and easy access to music while
  giving added value to customers in order to
  regain market share to match prior profitability
  levels
• 2. Money, recurring relationships
• 3. Customized CDs with complete artwork which
  contain selections.Music videos, volume
  promosDownloadable artwork
• 4. Give special channels for customers to order
  special needs/selections/formatsCreate OPEC of
  Music Companies

In Class Exercise
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Stewart Brand

• Information wants to be free.
• Information wants to be expensive.

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Business Model

• The basic process flow indicating how a business
  operates.Chapter 11, p339

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Business Model

• Value Proposition
• What you give and what you get
• Value and Revenues
• How will the business win?

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Value Proposition/Cluster
The first step in the articulation of the
business model is clearly specifying the value
proposition or the value cluster for the
business

• Defining the value proposition or the value
  cluster requires answering the following
  questions
• Which target segments should the company focus
  on?
• What is the combination of customer benefits
  that is offered?
• What makes the firm and its partners better
  positioned to deliver the offering than anybody
  else?

Value Cluster
Marketspace Offering
Resource System
Financial Model
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What Do Customers Care About?

• Online

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Myth Consumers Care Only About Prices Online
Percentage of Customers Who Care About Attribute
Attribute
Source JP Morgan Report etailing and the five
Cs
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Weekly Analysis Paper 4

• Subject Emerging Business Model Drug Discount
  Card Plans
• 1.5 Pages, Cover Page
• Requirements (use bolded headings)
• A. Business Model/Value Proposition
• B. Marketing Concept Analysis
• C. Pick a Winner (Support)
• D. Pick a Loser (Support)

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Value Proposition

• Targeting senior citizensUsage, Coverage
• Huge discounts
• Claimed huge, delivered variable levels of
  discounts
• DiscountsSecurity for UnderinsuredMedical
  ServicesInformation
• Drug historycomplementary to pharmacy level
• Value to pharmacy Influence selection of
  pharmacy
• Value to pharmaceutical companiesdrug selection
• Immediacy of use at point of purchase
• One plan uses history to scan for drug
  interaction/incompatibilities
• Dynamic pricing
• Compete with pharm. companies

In Class Exercise
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Marketing Concept Apps

• Main target Seniors
• Customers want lower prices
• Customers want security
• Customers want convenience (which cards are
  accepted where?)
• Coordination between plans, medical institutions,
  pharmacy, etc.
• ProfitabilityMonthly feesProfitabilityAny
  company that can handle the complexity would have
  an SCA

In Class Exercise
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Winners Why

• Pharmaceutical Companiesthey are indispensible
• Savvy customersBy doing research, theyll find
  the best value proposition
• Care Entrée Customer service, High level, Part
  of Standards Group

In Class Exercise
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Losers Why

• Didnt Get to this

In Class Exercise
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Website Attributes/Power

• Utility
• Usability
• Marketability
• Transactionability
• Efficacy
• Kewlness

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Site/Model Evaluation Assignment Preview

• Paper
• 2 Pages Bullets With One Summary Section
• Cover Sheet
• Copies For All
• In Class Presentation
• 7 to 10 Minutes Overview, Pick a Few Main Points
• Due March 24

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Jakob Nielsens Homepage Guidelines

• 1. Communicating the Sites Purpose
• 2. Communicating Information About the Company
• 3. Content Writing
• 4. Navigation
• 5. Search
• 6. Graphics and Animation
• 7. Customization
• 8. Gathering Customer Data
• 9. Fostering Community
• Homepage Usability 50 Websites Deconstructed,
  Nielsen Tahir 2002

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For March 3

• The New E-Commerce Intermediaries, Anderson
  Anderson, Summer 2002, MIT Sloan Management
  Review
• Chapter 5 E-Business Value Strategies
• Skim Nielsen Tahir Homepage Guidelines

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End Here
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Good and Bad
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Chapter 4

• Chapter 4 E-Business Distribution Systems and SCM

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Distribution System

• Channels of distribution provide a standard of
  living for customers by moving products from
  producers to users in the most cost efficient
  manner possible.
• In traditional markets this has included
  producers and intermediaries such as wholesalers
  and/or retailers.
• Supply Chains are the flow of raw materials,
  information, finances, and final products through
  the distribution channel.

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New E-business Based Distribution Systems

• Characterized by
• Electronic linkages between all distribution
  channel members
• A greater reliance on cybermediaries and
  facilitators.
• A reduction in the number of traditional
  middlemen.
• Reduced inventory and shorter inventory cycles
• Tighter relationships between trade sellers and
  buyers.
• Power shifts from producers and retailers to the
  customer.
• Lower prices and greater variety for the
  consumer.
• Greater responsiveness to the customer.

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Distribution Channels Evolution (1)

• Channels of distribution evolve as new
  infrastructures and consumer shopping patterns
  develop.
• In the 1800's Sears took advantage of newly
  developed rail systems to build a retail empire
  by using catalogues to offer customers products
  that were not available locally.
• Sears' purchasing power allowed for a greater
  variety of products
• In the second half of the 1900's customers took
  advantage of improved highway systems to move to
  suburbs, K-Mart followed and built a discount
  empire.

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What Is Distribution

• Intermediaries, such as wholesalers and
  retailers, split large production runs into small
  amounts (breaking bulk) and create an assortment
  of products to offer a customer.
• Facilitators facilitate or help the flow of the
  transaction by physically moving the product,
  information, or funds through the distribution
  channel.

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Traditional Channel Intermediary Flows
Physical Possession Title/Ownership
Promotion
PRODUCT SOURCE
CUSTOMER
Financing Risking
Ordering Payment
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E-Business Channel Systems (1)

• Mass Customization is the process of producing
  individualized products at mass-production
  speeds.
• Cybermediaries operate in electronic markets to
  facilitate the exchange process.
• Facilitators help move the physical product
• Trucking companies and overnight shippers.
• Facilitators help payment flows
• Credit card companies and banking institutions.
• Facilitators help communication
• Advertising companies or host ISPs.

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E-Business Channel Systems (2)

• Fulfillment includes the activities necessary to
  deliver a product to a customer, including
  everything from ordering to delivery.
• E-marketplace use e-business technology to allow
  trading partners to buy and sell goods and
  services electronically.
• Private Exchange same as an e-marketplace, but
  only open to a specific firm or industry.

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E-Business Distribution System
Physical Possession
Shipper
Promotion
CUSTOMER
PRODUCT SOURCE
E-Business
Ordering
Financing Risking
Credit Card
Payment
Based on Brad Kleindl, Virtual Marketing,
Southern Business and Economic Review, Spring
1996, pp. 10-15.
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E-business Distribution Development

• Electronic Channel Captain
• A channel captain is an intermediary that
  organizes and controls the channel.
• Any company that can gain this position can
  obtain the power over other members allowing them
  to take a higher percentage of the overall
  transaction costs.

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Communication Linkages

• Communication between the firm and the customer
  can be facilitated over the Internet through the
  design of Web pages.
• Extranets are used to link businesses together
  enabling communication between companies and
  allowing for transactions.

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Power Shifts to the Consumer

• The Internet increases customers power
• The customer can become aware of a wider variety
  of providers increasing the number of alternative
  sources of supply.
• Customers are able to voice their opinions on
  businesses and products at discussion sites and
  business sites.
• Customers can use e-businesses to gain power and
  lower prices.

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Death Of The Middleman

• Disintermediation is the process of eliminating
  the middleman from the exchange process.
• Those middlemen most likely to be hurt will be
• Those who do not add value to the exchange but
  are only go-betweens, information brokers, or
  order-takers.
• Middlemen concerned about their careers should be
  sure that they are able to offer value to the
  exchange process.