Learning Objectives

1
Learning Objectives
IMPLICATIONS OF INTERNET TECHNOLOGIES

• On completion of this lecture, students will be
  able to
• Differentiate between Internet-enabled commerce
  and
• traditional commerce
• Identify the role of navigators in e-commerce
• Define the implications of richness, reach and
  affiliation.
• Outline the role of infomediaries from
  organisational
• and consumer perspectives

2
Navigation - A Separate Business

• OFF-LINE
• Consumers are in a weak position
• Retailers are relied upon to assist navigation
• Retailers exploit the consumer to gain
  competitive advantage
• Retailers exercise control over the navigation
  function because it is difficult for the consumer

Evans and Wurster, 1999
3
Navigation - A Separate Business

• ON-LINE
• Consumers can search comprehensively at
  negligible cost
• Suppliers can sell directly to the consumer
• E-retailers can focus on navigation and outsource
  fulfilment
• Pure navigators can organise information and
  assist consumers.
• Navigation is the battlefield on which
  competitive advantage will be won or lost !

Evans and Wurster, 1999
4
Navigation Three Dimensions

• Reach access and connection
• Richness depth and detail of information
• Affiliation whose interests the business
  represents

Evans and Wurster, 1999
5
Competing on Reach

• Unconstrained by physical limitations - Reach
  explodes !
• Example Navigation function (catalogue)
  separated from physical function (inventory).
• Reach can be a primary competitive differentiator

Evans and Wurster, 1999
6
Implications of Reach

• Unstable business boundaries
• Small suppliers - bypass retailers and build
  direct relationship with end consumer
• Large suppliers - lose control of navigation and
  sources of differentiation
• Suppliers must achieve the reach that the buyer
  values
• Physical retailers must treat e-commerce as a
  separate business

Evans and Wurster, 1999
7
Competing on Richness

• Two dimensions
• Depth and detail of information that the business
  can give the customer
• Depth and detail of information that it collects
  about the customer
• Richness holds enormous potential for building
  close relationships with customers

Evans and Wurster, 1999
8
Implications of Richness

• Internet enhances the ability to collect and use
  rich customer information
• Techniques can be applied to browsing behaviour,
  purchasing history and demographics
• Integrate information from a variety of sources
• Limiting factors
• Privacy constraints
• Consumer can search for and organise information

Evans and Wurster, 1999
9
Competing on Affiliation

• Whose interests the business represents
• - the consumers or suppliers
• Pure navigators opportunity to affiliate with
  consumers?

Evans and Wurster, 1999
10
Implications of Affiliation

• Consumer given greater variety and sophistication
  in terms of rich information from wide-reaching
  sources at negligible costs
• Meta Navigators - use technologies that compare
  multiple electronic retailers
• Pure navigators -v- Meta navigators

Evans and Wurster, 1999
11
Collating Consumer Information

• Companies collecting and analysing consumer
  information.
• Why?
• Target their most valuable customers
• Tailor the offerings to individual needs
• Improve customer satisfaction
• Improve customer retention
• Identify new products and services

Adapted from Hagel and Rayport, 1997
12
Current Consumer Position

• Consumer concerns about information collection
• Little in exchange for value of information
• Implications of new technologies?
• Value creation for the organisation or the
  consumer?

Adapted from Hagel and Rayport, 1997
13
Current Consumer Position

• Consumers will release personal information if
  they are getting something in return
• Consumers appreciate customised products and
  services
• Consumers resent offering information if it is
  inefficiently stored or used

Adapted from Hagel and Rayport, 1997
14
Infomediaries
act as custodians, agents, and brokers of
customer information, marketing it to businesses
on consumers behalf while protecting privacy at
the same time.
Adapted from Hagel and Rayport, 1997
15
Power Shifts to the Consumer

• Internet technologies enable consumers to
  challenge
• companies for ownership of their personal
  information
• Cookie software - capture information about
  consumer transactions
• Much more sophisticated than POS technologies
• Capture rich portraits of consumers
• Consumer in a position to monitor their own
  behaviour.

Adapted from Hagel and Rayport, 1997
16
Opportunity for Infomediaries

• Aggregate consumers and negotiate on their behalf
• Access to financial data
• Information management - a crucial source of
  value
• Access to an understanding of consumer profile
• Customer profile - immense value to commercial
  organisations

Adapted from Hagel and Rayport, 1997
17
Cost Transparency Implications of the Internet

• Companies prices and costs more transparent to
  buyers
• Search time and cost reduced
• Use of price comparison sites
• More information attainable than price alone
• Threatens retailers and manufacturers

Adapted from Sinha, 2000
18
Cost Transparency Seeing through Costs

• Companies use brands to disguise costs and prices
• Consumer - wants a brand at a fair price
• Comparison is difficult
• Web technologies minimise this compromise
• Avoid overpaying prices that are excessive

Adapted from Sinha, 2000
19
Implications of Cost Transparency for Companies

• Impairs a sellers ability to obtain a higher
  margin
• Turns some products and services into commodities
• Erodes customer loyalty to brands
• Can damage companies reputations by creating
  perceptions of price unfairness

Adapted from Sinha, 2000
20
How the Internet makes Costs Transparent

• Erodes the risk premium
• Makes the buyers search more efficient
• Lowest price more easily attained
• Encourages rational shopping
• Companies with varying prices must re-examine
  their price structure and policy
• Customers think differently about price

Adapted from Sinha, 2000
21
Managing Cost Transparency

• Price lining
• Smart pricing
• Reinforce and enhance the brand
• Bundling
• Innovation

Adapted from Sinha, 2000