TABLE OF CONTENT
GET THE BEST OUT OF B2C 2
PREFACE 2
GENERAL INTRODUCTION TO B2C 2
COMPANY BRIEF 3
BUSINESS MODEL 4
VALUE CLUSTER 5
CUSTOMER INTERFACE 8
KEY FACTORS TO SUCCESS 10
CONCLUSION: 10
NOTES AND REFERENCE: 12
GET THE BEST OUT OF B2C
Preface
Over the last few years, many words have come into our vocabulary: e-mail, www, dotcom, Internet, e-commerce, e-business, browser, etc. All these new terms have one thing in common, belonging to the new economy --- e-commerce --- technology-mediated exchanges between parities (individuals, organizations, or both) as well as the electronically based intra- or inter-organizational activities that facilitate such exchangesO1.
The Internet has brought along new challenges for companies around the world. Never before has it been easier for a company to find customers for the products it is selling, or for customers to find the company. The Internet has also brought along many new companies who understand the possibilities that the new economy has to offer. It is moving fast, no doubt about that, but where is it going and how will it end?
In this report, I will compare and discuss the B2C model of the 2 chosen companies, who are dealing with computer hardware, TigerDirect (www.tigerdirect.com) and Logitech (www.logitech.com). Looking at their e-commerce strategy, business models and customer interface, I will try to find out their key factors of being a successful dot.com company.
General Introduction to B2C
There are 4 distinct categories can be identified O2: business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business (Figure 2.1)
While the term e-commerce refers to all online transactions, B2C stands for "business-to-consumer" and applies to any business or organization that sells its products or services to consumers over the Internet for his/her own use.
A study by the consulting firm the Boston Group pegged the 1999 B2C volume at $33.1 billion and estimated it almost doubled to $61 billion in 2000 O3; equally important is the finding that 85 percent of Internet users are also Internet shoppers O4. "Consumers prefer to shop and buy on the Internet for 3 major reasons: convenience, saving time, and comparative shopping. Shoppers can shop from anywhere in the world at any time. They can shop in the middle of the night, sitting at home in their pajamas, and with a single click of the mouse execute a purchase order. Shoppers can visit numerous vendors' sites within a short period of time. While it could take several hours to drive to shopping malls and browse the brick-and-mortar stores, they can accomplish much more shopping from the comfort of home in a few minutes. ... One of the Web's greatest advantages over traditional shopping is comparative shopping. Numerous sites let shoppers compare items and prices in preset categories. If customers know what item they want it is easy to find the site that sells it for the lowest price. If they are looking for a price range of an item, they can easily find the brand that provides the best overall quality of that item. In consumer surveys, respondents have cited additional reasons for shopping online, including the ability to buy from non-local merchants and shopping without sales pressure.O5"
Company Brief
TigerDirect Inc (a subsidiary of Systemax Inc. is part of a group of branded e-commerce web sites, direct mail catalogs, and relationship marketing selling private label and name-brand PC hardware, related computer products, and industrial products, to businesses in North America and Europe. The company was reported as the No.15 online retailer by comScore Networks in 22 July 2002 New York Times. According to the report, TigerDirect's website (http://www.tigerdirect.com) received 1.4 million unique visitors during May 2002, spending an average of $399 and accounting for 2% dollar share of market. TigerDirect has been steadily increasing its presence on the dot.com radar in the past year with huge increases in customer traffic. Under the hands-on leadership of CEO Gilbert Fiorentino, TigerDirect has attempted to maximize each customer contact, whether it is by email, catalog, visiting the website or calling its sales representatives.
"We strive to communicate with the customer using whichever medium they most prefer," says CEO Gilbert Fiorentino. "Providing multiple channels of contact allows us to communicate that we have the best buys on computers and PC related products anywhere! O6"
TigerDirect focuses on bringing the greatest deals directly to the consumer on computer hardware and related equipment. By email, TigerDirect informs consumers of the latest and greatest deals. By catalog, over 2 million individuals get a "computer store" in their mailbox every month.
"Providing our customers with the best deals in a timely fashion is crucial to us," says Richard Wallet, Executive Vice-President of Marketing Communication. "Sometimes a great offer will only last a day or two, and we want our customers to know about it! O7"
Besides the companies who are dealing with diversified brands of computer hardwires, such as TigerDirect, there are still some companies who are specialized in dealing with certain brands, one of the famous ones is called "Logitech".
Logitech designs, manufactures and markets personal interface products that enable people to effectively work, play, and communicate in the digital world. It specializes in wireless optical mice and keyboards, Web-cams, PDA keyboards and game console attachments. With sales of US$944 million in fiscal 2002 -- 28 percent more than in fiscal 2001 -- the company's balance sheet is firmly in the black.
The 22-year-old company's recent success can be attributed to consumer demand for peripherals, driven not only by a fondness for entertainment and utility, but also by a desire to capitalize on home computer purchases made in the last several years.
"You probably don't need the next Pentium chip. Your software is running fine. But to make the experience -- the interface part of it -- easier to use or more convenient and to get rid of a clunky cord, people will spend $50," Logitech chief financial officer Kristen Onken told the E-Commerce Times O8.
Business Model
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This is a preview of the whole essay
The 22-year-old company's recent success can be attributed to consumer demand for peripherals, driven not only by a fondness for entertainment and utility, but also by a desire to capitalize on home computer purchases made in the last several years.
"You probably don't need the next Pentium chip. Your software is running fine. But to make the experience -- the interface part of it -- easier to use or more convenient and to get rid of a clunky cord, people will spend $50," Logitech chief financial officer Kristen Onken told the E-Commerce Times O8.
Business Model
In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells out how a company makes money by specifying where it is positioned in the value chain O9. Briefly, the New Economy business model requires 4 choices on the part of senior management that include the specification of O10:
. A value proposition or a value cluster for targeted customers
2. A market-space offering -- which could be a product, service, information, or all three
3. A unique, defendable resource system
4. A financial model
Describing the basic framework of a business, it tells what market segment is being served, the product/service that is being provided, and the strategy adopted to produce and deliver services. In these charters, we are reviewing business model of the above 2 mentioned companies. The following comparison will mainly focus on Value clusters definition process.
Value cluster
To understand in terms of business value (to the organization) and customer value (to the users), it comes to the 1st step --- construction of a value cluster --- This topic will be explored in the following 3 categories O11:
. Choice of target customer segments. In developing value proposition, it is important to understand how customers think about or become aware of a need, and how an online experience can satisfy that need. Traditionally, when we bought something major like an automobile, we just went around asking an awful lot of people what they thought. Probably asked friends whether they liked the cars they owned; maybe even bought and read a few consumer-oriented magazines, with reports of customer-satisfaction surveys. At least new car models only come out once a year, so there are no constant necessities to face with another new model to look at. However, computer hardware doesn't seem to be released on the same schedule. Few people own scanners, digital cameras, or other computer hardware; those that do may have older models from one or two years ago, what could help a customer to get the latest trustworthy advice about what to buy? Now, with the development of on-line buying technology, people have the opportunities to seat in their pajamas, some simple clicks will enable them to view cargo gallery, compare price, place order, make payment or listen/publish personal point of view. Just as stated out by Amazon.com, "use the Internet to transform book buying into the fastest, easiest and most enjoyable shopping experience possible." TigerDiret.com and Logitech.com both targeted consumers who wanted easy, quick access to a wide range of PC devices, those who do not want to go to a physical store for shopping, and those who want to order as quickly and easily as possible.
2. Particular focal combination of customer-driven benefits. A eTailing survey illustrated that, price is indeed an important decision criteria. However, hosts of other services that imply different benefits were significantly more likely to influence the purchase decision. These included such attributes as customer support, on-lien delivery, shipping and handling, and privacy concerns (Figure 4.1.2 O12).
TigerDirect.com dedicates to offering a significant customer value package, which includes not only competitive price, but also up-to-date products with wide range of selections. Meanwhile, TigerDirect's homepage aims to provide visitors a snapshot of the best dealers in time. Besides these, TigerDirect also pays a lot attention on customer support. As said by its CEO Gilbert Fiorentino "We strive to communicate with the customer using whichever medium they most prefer, providing multiple channels of contact allows us to communicate that we have the best buys on computers and PC related products anywhere!"
Unlikely, Logitech.com elaborate its attractiveness success mainly through her branded high-level stand products, which helps to propel it to the top class. "They are pretty close to the best of breed," director of client computing Roger Kay told the E-Commerce Times. It aims to maintain strong holding of customer loyalty in long-term. Furthermore, constant products innovation keeps its web page remaining highly attractive to those Logitech fans.
3. The rationale for delivering benefit package. How can a firm beat his/her competitors? In contrast to segment choice and benefits, this step focuses on factors inside the firm (or with partners) that lead to the superior delivery of targeted benefits. The key issue is whether these unique capabilities can be linked directly to the core benefit or benefits that form the value proposition O13.
TigerDirect build its way to success though the following aspects O14:
* Use combination of Internet marketing, relationship marketing and inbound catalog sales to offer more than 40,000 products to its two million customers. Through its Be Free-powered partner marketing program, TigerDirect cost-effectively acquires new online customers and drives significant sales to its web catalog at www.TigerDirect.com
* ?Rely solely on grassroots and word-of-mouth advertising to promote its program. Through Be Free's robust partner recruitment initiatives, TigerDirect.com has experienced a significant increase in the number of marketing partners recruited into its sales channel. In fact, 30% of its affiliate partners were recruited by Be Free's FastApp recruiting tool alone
* ?In addition to the standard BFAST partner marketing service, TigerDirect.com uses Be Free's Auto-Merchandiser technology to automatically push dynamic promotions out through its online marketing partners and optimize the rotation of these promotions to help push higher margin items and thus, generate more profitable sales. This feature allows TigerDirect.com to see a higher ROI for its partner-marketing program
TigerDirect.com has experienced a 400% percent increase in web-based sales over the last year; its performance-based partner marketing program contributes a large portion of this increase.
On the other hand, as an extremely successful company in the PC hardware market, Logitech.com aims to offer the outstanding products that a consumer is looking for, it maintains a quite high-level standard, as said by Logitech chief financial officer Kristen Onken, "We're our own worst enemy, because nothing meets the standards we set for ourselves. O15"
* Professionalism -- Unlike TigerDirect, Logitech website offers only Logitech brand.
* Richness -- It offers rich and varied personal interface device. The Company's products are designed to reflect the way people want to work, play and communicate, allowing them to personalize and enrich their digital experience. In coordination with the company's strategy, Logitech.com offers rich information regarding each item
* Customer interactive & long-term relationship -- Logitech products provide user-centric solutions intended to be easy to install and easy to use, many of them combined with integrated software for seamless compatibility and added functionality. The website offers convenient access to download hardware installation programs and upgrade programs; it even offer a specific software called "Logitech Desktop Messenger" free of downloading, which will give end-users contently reminding about latest news in Logitech.com
Business model begin with a clearly definition of value proposition, it illustrating the company's understanding of whom their customers are, what is their value and how the products/service/information should be optimized to deliver this value. The next step of implementing the business model is now about moving to constructing a website, which is customer interface.
Customer Interface
There are so many website in the world, you may browse into hundreds of web-pages everyday! Why should a visitor choose a particular web page?
By providing quick, convenient access to products, product information, and prices, the Web is turning products into commodities. The ease of use of e-commerce sites is a way to differentiate a site, increase market share, and enhance a brand (Manning, McCarthy, & Souza, 1998). Seventy-nine percent of users named easy navigation as the most important characteristic of an e-commerce site (Lake, 2000). But, e-commerce sites lose up to 50% of potential online sales because users can't find what they want (Cohen and Thompson, 1999; Seminerio, 1998). Poor navigation and slow downloads helped make 83% of shoppers leave a site (Thompson, 1999a) and up to 78% of shoppers abandon their online shopping carts (BizRate, 2000; ePaynews, 2003b).
When an e-commerce site is easy to use, sales can increase. For example, after improving usability, IBM got a 400% increase in sales on IBM.com (Tedeschi, 1999) and Digital Equipment Corporation reported an 80% increase in revenue (Wixon and Jones, 1992). By making the products easier to access, removing unnecessary graphics, and making product information easier to scan, Liz Claiborne's Elisabeth.com tripled the rate at which lookers became buyers (Tedeschi, 2002a). Thirty-five percent of online consumers said they would buy more products if the products were presented better on e-commerce sites (Vigoroso, 2001b) O16.
.
The 7Cs framework offers a set of tools to deliver a tangible customer experience in the virtual space. Those leading web-based marketers who have created differentiated digital customer experience are successful because they meet the demands inherent in each of these categories. The "7Cs" is what enable the implementation of an effective site. They are context, content, community, customization, communication, connection and commerce O17:
* Context --- this is the 1st glance image for a visitor to get in touch with a website. The context of the website captures its aesthetic and functional look-and-feel. TigerDirect.com choose to focus on offering plenty of information - brands, products, models and prices, etc., this functionalism design aims to reach as many potential customers as possible; while Logitech.com presents itself simple but professional, it gives maximum prominence to the richness of products features and innovation information
* Content --- this is the digital tools, text, video, audio, and graphics, used by website to deliver compelling content should be relevant and useful to the target users. While context largely focuses on the "how" of site design, content focuses on "what" is presented. TigerDirect.com aims to give customer the maximum selection capacity, so it chooses all the possible tools to help its potential customers to 'feel' the products; however, Logitech.com mainly uses legible large photographs to deliver profound images to visitor
* Community --- it is defined as the interaction that occurs between site users, not site-to-user, but user-to-user. Communication must be tailored to specific user interests and allow fro communication to/from the customer. For instance, Landsend.com has an innovative community feature that allows 2 users to shop simultaneously. It is a virtual shopping experience. Both of TigerDirect.com and Logitech.com do not offer this feature
* Customization --- it is defined as the site's ability to tailor itself or to be tailored by each user. When the customization is initiated and managed by the firm, it is termed as tailoring; when the customization is initiated and managed by the user, it is termed as personalization. Again, the above 2 mentioned website also do not offer this feature
* Communication --- it refers the dialogue that unfolds between the site and its users. This communication can take 3 forms: site-to-user (e.g., e-mail notification), user-to-site (e.g., customer support), or two-way communication (e.g., instant messaging). Both of TigerDirect.com and Logitech.com offer customer support on-line. Logitech.com also provides software called Logitech Desktop Messenger (LDM). LDM is a free service designed to deliver software support, news and information to end-user. LDM ensures customers to have simple, speedy, and effortless access to product upgrades, technology tips, and technology news and offers that are relevant to you. It delivers information right to end-users' desktop, allowing them to take advantage of all of the advanced features of the Logitech products they own, while staying abreast of new computer-related product and service developments (Logitech and otherwise) that are applicable
* Connection --- it is the extent of the formal linkages between the site and other sites. Alliances and links established are the ways to enlarge the possibility that helps customers to find the website. Both the above 2 website do not present links to other website in their homepage, but they allow other websites to connect to their end. TigerDirect.com uses Be Free's Auto-Merchandiser technology to automatically push dynamic promotions out through its online marketing partners and optimize the rotation of these promotions to help push higher margin items and thus, generate more profitable sales. Be Free is the most effective and lowest cost way to help TigerDirect.com to acquire new customers
* Commerce --- which is the basic transactional capability of these 2 website, to sale products or services to customers
TigerDirect.com and Logitech.com have different classification on customer groups, as we have discussed in the last chapter, thus they focus on offering distinctive features of their own websites. So long as a website successfully deliver those 7Ps features, or some of them, it will have good opportunities to gain customer loyalty.
Key Factors to Success
Many companies have tried and failed to make money out of business-to-consumer e-commerce, but there are some critical success factors that can drastically improve your chances of success. Here are some of them O18
> Site design --- The availability of website design tools that are cheap and very easy to use is growing. When designing website, think simple, instead of weighing down the site with pretty graphics and flashy animations that take too long to download. The most important piece of advice is to map website carefully before begin designing. It is essential to have a clear idea of how the site will be navigated, along with a standard template to achieve a consistent look and feel. In my opinion, Simple does not all the time means only "simple", Logitech.com deliver to his customers a professional interface, this is also an efficient way to build-up its strong-holding brand
> Brand building --- Brand building for a B2C e-commerce player is as much about intelligent use of content as it is about throwing money at advertising. Internet as viral marketing is a good way to get your message to lots of people inexpensively. Use personalization features and any other innovative content that is pertinent to market as a means of pulling customers back to site repeatedly, and encouraging them to recommend others. Hang out in the newsgroups and in customer discussion forums may help
> Order delivery --- Assuming that product is physical and not digitally downloadable, web fulfillments will also handle delivery, or choose to directly engage a conventional courier service like FedEx or DHL. As provided by both of the 2 above websites, one of the most attractive features that you can provide for your online customers in this space is online order tracking. Enabling customers to find out where their parcel is and when it will be delivered is a no-brainer for a company already providing online ordering facilities. Another point is to think about the delivery options that can be offered to end-users; both expensive next-day delivery and less costly, longer delivery periods should be available so to maintain customers for whom immediate fulfillment is a low priority.
Conclusion:
In a whole, after overview of the currently on-line B2C business, we may find that the major challenges of B2C lie in O19:
* Getting browsers to buy things - your e-commerce site cannot live on traffic alone. Getting visitors to the site is only half the battle. Whether they buy something is what determines whether you win.
The so-called conversion rate for B2C e-commerce sites is still fairly low (Boston-based Yankee Group said in November 2000 that the average rate was 1 percent.). Some ways to boost your conversion rate include improving navigation, simplifying checkout process (such as one-step checkout and easily replaced passwords), and sending out e-mails with special offers
* Building customer loyalty - with so many sites out there, how can you build a strong relationship with customers? Here are some tips:
. Focus on personalization: Wide arrays of software packages are available to help e-commerce sites create unique boutiques that target specific customers. For example, American Airlines has personalized its website so that business fliers view it as a business airline and leisure travelers see it as a vacation site. Amazon, which built its own personalization and customer relationship management (CRM) systems, is well known for its ability to recognize customers' individual preferences.
2. Create an easy-to-use customer service application. Providing just an e-mail address can be frustrating to customers with questions. Live chat or, at the very least, a phone number will help.
3. Focus on making your site easy to use.
* Fulfillment - E-commerce has increased the focus on customer satisfaction and delivery fulfillment. One cautionary tale is Toys "R" Us' holiday debacle in 1999, when fulfillment problems caused some Christmas orders to de delivered late. Since then, companies have spent billions to improve their logistical systems in order to guarantee on-time delivery. Providing instant gratification for customers still isn't easy, but successful B2C e-commerce operations are finding that fulfillment headaches can be eased with increased focus and investment in supply chain and logistical technologies.
The impact of today's e-business rush remains comparable to the advent of the printing press or the industrial revolution or the California Gold Rush, yet most retail and consumer goods respondents apply an importance to it something less than strategic.
Two thirds of those with websites are not even trying to sell one item via the Web. This suggests that either they do not believe in the potential, believe the potential is not yet ripe, or do not understand how, or to what extent, the Internet poses an opportunity and a threat to their businesses today.
For many, the business case for e-business remains unclear. For example, Brian Hopping of furniture retailer Heilig-Meyers questions the viability of business-to-consumer e-business for furniture, with its high price points, challenging fulfillment logistics, and consumer need to touch and test the merchandise before purchasing. As Hopping puts it, "We don't understand how pure plays are going to make money.O20"
Notes and Reference:
O1 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp3
O2 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp4
O3 A survey commissioned by the Boston Group, "The State of Online Retailing 3.0" April 17,2000
O4 A survey commissioned by the Parade Magazine, "The Interactive Consumer: Charting the Online Shopping Revolution."
O5 Oz Effy, 2002, Foundations of e-commerce, Pearson Education Inc., USA, pp145
O6 http://www.tigerdirect.com/sectors/Help/pressrelease_pdfs/07-24-2002.pdf
O7 http://www.tigerdirect.com/sectors/Help/pressrelease_pdfs/07-24-2002.pdf
O8 Lisa Gill, 2002, The Secret of Logitech's Success, E-Commerce Times, http://www.ecommercetimes.com/perl/story/19664.html
O9 Business Models on the web, http://digitalenterprise.org/models/models.html
O10 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp71
O11 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp71
O12 Wyman, Tom. 1999. eTailing and the five Cs. J.P.Morgan Industry Analysis, 9 December
O13 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp75
O14 Source: www.befree.com
O15 Lisa Gill, 2002, The Secret of Logitech's Success, E-Commerce Times, http://www.ecommercetimes.com/perl/story/19664.html
O16 Data source: Designing E-commerce User Interfaces, http://mime1.gtri.gatech.edu/mime/papers/Designing%20ecommerce%20user%20interfaces.html
O17 J.F.Rayport and B.J.Jaworski, 2001, e-Commerce, International Edition, McGraw-Hill Book Co, Singapore, pp115
O18 Danny Bradbury, Getting the Best out of B2C
O19 Susannah Patton, The ABCs of B2C, http://www.cio.com/ec/edit/b2cabc.html
O20 B2C Strategy: Staking a Claim or Losing Ground, http://www.risnews.com/B2C/strategy.html
University of Hull, Business school, MBA Apr.2003 ~ Mar.2004
Paul S.Zhao Page 1 of 12 Print date: 11 Aug, 2003