A question on IVP, IBS and Customer Value

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IEC                                                            IVP, IBS & CUSTOMER VALUE

Management Development Institute of Singapore

A question on

IVP, IBS and Customer Value

(Internet and E-commerce)

UNIVERSITY OF WALES

MASTER OF BUSINESS ASMINISTRATION

MBWD5 0306A

SONG YANG

G0262693X

28/Jul/04

TABLE OF CONTENTS

                                                    Page

Introduction --------------------------------------------------------------------3

Concepts------------------------------------------------------------------------4

How the IVP affect the choice of the IBS----------------------------------7

-Three Major Differences of IVP-----------------------------------------------------7

Value-based Strategy

 - Specific Values of Customer is the Core-----------------------------------------11

Recommendation ------------------------------------------------------------14

Bibliography ----------------------------------------------------------------16

Introduction

In the offline world, products and services are advertised based on their unique selling point (USP). In the online world, an organisation’s website must be able to convey the online equivalent of the USP, the Internet Value Proposition (IVP). As organisations develop their e-business and create corporate, micro, product, and brand sites, it is extremely important to define the Internet value proposition. The IVP is the unique attributes that differentiate a site from its competitors. The importance of this is emphasised online as competitor sites are only a click away.

This assignment will first discuss the relationship between the Internet value proposition and the Internet business strategy, and secondly, the specific values of the Internet customer to consider when developing the Internet value proposition.

Concepts of IVP and IBS

Though the new way of business - digital economy, appear big opportunity to the firm, success of Internet business cannot be achieved as easily as expected. This is because the characteristics of digital media on which Internet business takes places give firms threats as well as opportunities. Characteristics of Internet such as low access cost and ease of use allow more suppliers to do business, also resulting in more furious competition. In addition, the connectivity of Internet makes it possible for customers to switch to other suppliers with more ease, resulting in huge customer fluidness. These characteristics of Internet environment made it difficult for the Internet business firms to gain profit. Moreover, the characteristics of digital media affect the market with different economic rules from those in the conventional markets. For these reasons, different directions of business strategies that fit with Internet environment are required to survive and become more important in Internet environments.

Analysis of internet business strategy should start with value. Thus, know what is internet value proposition become essential before we establish our internet business strategy.

The term Internet Value Proposition (IVP) can be best understood by breaking it down into its parts.

The Internet, sometimes called simply "the Net," is a worldwide system of computer networks, in which users at any one computer can, if they have permission, get information from any other computer. The Internet is a big resource for people to gain information and knowledge from all over the world.

Value is the inherent worth that companies offer to their customers. In other words, it defines what the customers get for their money. Company must provide unique value of product or service that distinguishes from as many of competitors as possible.

Merriam-Webster defines Proposition as “a statement containing only logical constants and having a fixed truth or value.” It is company’s factual and truthful proposal to customer.

Therefore, the internet Value Proposition (IVP) is a statement of differentiated and timely value of products or services which meet a need or solves a problem for an individual customer or group of customers. It consists of a package of benefits from which a customer is persuaded that he/she derives greater value than from a competitor's offering.

The Internet offers two key sources of value: the ability (1) to transform customer relationships and (2) to displace traditional sources of business.. Customers can now choose the hours of business they desire, receive service at their location, serve themselves, and receive focus on their particular needs. In addition, the source of value moves from physical products (atoms) to digital products (bits). As a result, the Internet is able to deliver information in digital form, mass customized for each user, easily assimilated, economically distributed, and global in its reach. Based on these two sources of value, we can outline several competitive roles that a company might adopt. These four roles compose Internet Business Strategy for company:

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Channel Master: Companies can establish a direct Internet channel to customers or other partners. Most companies use the channel to complete transactions or trade information more easily. Companies can master their Internet channel by giving customers the same level of service on the Internet as in person, by personalizing interactions to build customer loyalty, and by providing valuable new services, such as online receipts and shipping status. (example: Cisco)

Customer Magnet: Companies can use the Internet to become the dominant player in the electronic channel of a specific industry or segment, controlling access to customers and setting new business rules. ...

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