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EBUS500.1 Week Four Lecture
e-Commerce Retailing and Service
Industries
There are many factors that influence our
strategic decisions when implementing retail and service
e-commerce systems. Just as in traditional retail stores, those
factors include practically every part of the organization. There are, of
course, other facets to e-commerce that don't have an exact match
in traditional business models. Some of the characteristics of e-commerce
that differentiate it from bricks-and-mortar stores also present the consumer
with new choices and possibilities in their shopping behaviors.
Customer Relationship Management
We have examined a number of areas where e-commerce systems make
significant gains in productivity and efficiency within the organization
possible and economical. In retailing and service markets, these include:
faster, more accurate order processing and billing; better inventory
management and control; improvements in data collection and analysis; and,
better communication with suppliers and other intermediaries, to name just a
few. A great opportunity also exists for what is commonly referred to as
Customer Relationship Management, or CRM, in consumer marketing. While we think
of CRM as most important for large corporate customers in the
industrial marketing arena, the technology of e-commerce allows us to extend our
efforts beyond the industrial customer to include individual consumers.
These efforts demand a great deal of attention to understanding the customer
base, and to managing and analyzing the flood of data that can be
collected.
In preparing a traditional retail or service business to
enter the e-commerce arena, it is necessary to examine the current state of the
business, including the product offerings, customers, competition, and internal
business processes. Will e-commerce necessitate changes in any of those items?
We must ask if the current products in our mix will sell in the
electronic market. The recent experience of on-line grocers, for
example, suggests that there may be differences dependent upon geographic
location as well as general consumer attitudes and habits. For example,
while we may think that consumer attitudes can be changed, it can often involve
a time-frame that is out of the range of reasonable expectations for the average
organization.
Similarly, if e-commerce allows us to consider geographic
expansion, we must consider local norms, customs, and habits. This is
particularly true if the firm is considering entry into foreign markets via
e-commerce, with language, business risk factors, and other differences
that must be taken into account and managed. While those items might appear as
limiting constraints to the organization, they also provide firms with new
opportunities in risk management (Weiss).
Brand Management and Metrics
Presuming that the we have examined the organization's internal
processes and matched the available technology components to efficiently and
productively continue, and hopefully improve upon, our current operations,
we then look at the external factors influencing the business. The position
of the product(s) in the marketplace, such as brand names, the customers'
familiarity with and usage of the product, and our competitive position,
should be examined to define any existing constraints as well as new
opportunities. Brand names and trademarks are a very sensitive issue,
and best addressed by examining the firm's existing contractual obligations
and business relationships with suppliers.
Smith (2002) presents a "Snapshot of Key Brand Metrics" (p.72)
that include:
Touch-point brand metrics:
-
Awareness and recognition - is the firm's marketing mix effectively
communicating what the brand represents?
-
Understanding - do customers have knowledge of what the brand stands for,
value provided, and customer benefits?
-
Relevance - how meaningful and relevant is the value of the brand to
stakeholders?
-
Credibility - is the firm credible in delivering on its promises?
-
Preference - to what extent do customers prefer your brand
over others?
Strategic brand metrics:
- Customer acquisition - what new customers are being attracted or acquired
as a result of brand-management efforts?
- Customer retention - how loyal are your customers to the brand?
- Share of wallet - how much have sales to existing customers changed as a
result of brand-management efforts?
- Price premium - what premium, if any, does your brand command over
competing brands?
- Loyalty - measures whether customers are coming back to your brand time
and time again?
Smith suggests that we ask "What are all the ways that one
of our customers or potential customers can form an impression of our brand, our
company, or our products and services?" (p. 72). However, he also notes that "No
company can measure every possible metric and get any value out of the exercise;
spreading yourself too thin yields too much information and allows too little
time to do anything with it." (p. 73).
In the past, when a number of large firms were slow to enter the
e-commerce arena, the issue of brand- or company names in web URLs gained the
spotlight due to people registering URLs for which they had no business
connection. That practice, known as "cyber-squatting" resulted in many court
cases and cease-and-desist orders from the firms that had failed to
recognize the economic value of the URL. In many cases the URLs were returned to
their rightful owners. However, if the "cyber-squatter" could show a real and
valid business relationship, say as a registered dealer, then they were allowed
to maintain ownership of the subject URL. Those days have largely
passed, as most firms have now woken up to the e-commerce marketplace and
registered their properties, but expert legal advice on this
subject is still imperative depending on the specific
situation.
Business evolution and strategic
planning
Marks (2002) presents a useful model of business-evolution to
help prioritize and track the firm's initiatives in e-commerce. The components
of the model (p. 48) are:
- Company organization and structure
- Business value chain
- Core business processes and strategic assets
- Organizational learning processes
- Corporate fitness metrics
Each of those components can be applied not only to the firm as
a whole, but to every department within the organization as well. As examples,
Marks cites Wal-Mart, Dell Computers, Hewlett-Packard, and Nokia, and
relates how they have managed change in their corporate architectures when
pursuing "survival and competitive initiatives" (p. 50).
A related initiative is taking place at Toyota (Konicki) where
the carmaker is instituting a system from Dassault Systemes S.A's 3D Product
Lifecycle Management suite that includes "design collaboration,
product-life-cycle management (PLM), and production-support applications." (p.
16). The primary aim of this billion-dollar investment is to allow for design
collaboration, and the ability to "test digital designs for 'manufacturability'
- whether the design of individual parts and assemblies of parts make them easy
to install in the car ...." (p.17). The project is a reversal of the traditional
view of manufacturing, in that, as stated by Dassault Executive Vice President
Etinenne Droit: "Toyota starts with the idea of manufacturing efficiency
and works back toward the concept and design." (p. 17). While this example is
one from a large global corporation, the same principles can be applied to firms
of any size.
Summary
All firms entering the e-retailing and service markets need to
fully examine their corporate strategies relative to internal processes, market
and competitive positions, ownership or license of brand names, and, consumer
behavior and needs. That analysis should be based on identifiable and
collectible data so as to not to bury the firm in too much, or unusable,
information. This applies to analysis of the current situation as well as
initiatives into new markets for the firm.
Two additional articles deserve mention here. Peters (2002)
presents current activity in software applications that manage the search
feature on web sites, and shows how improved site search results can assist in
attracting and retaining customers. Reed (2002) presents an interesting article
on how Mellon Financial is approaching a project to "transform our sales culture
into a cross-functional, information-sharing one by capturing and sharing our
customer-relationship information across lines of business for the first time."
(p. 39). The significance of all of these projects is in the variety
of approaches they use to find innovative, efficient, and
productive ways to deal with business problems.
Workshop Five will examine B2B e-Commerce, and,
Economics, Global, and Other Issues in e-Commerce. Please be sure to
read Chapters 6 and 12 in your Electronic Commerce text.
Also, please be reminded to submit your written assignments and
responses to the weekly discussion questions as per the schedule published
in the course syllabus.
Works Cited
Konicki, Steve (2002, April 1). Revving Up: No. 4 carmaker Toyota hopes to
leapfrog competitors with digital-modeling software that links production and
design.
Information Week, 16-18.
www.informationweek.com
Marks, Eric A. (2002, April). The New Darwinism: Corporate survival demands
synchronized business and IT changes. Optimize Magazine, 46-54.
Peters, Kurt (2002, April). When Searching is No Longer Enough: Site search
technology has undergone radical changes in the past year - and attracted a new
corps of competitors.
Internet Retailer, 30-33.
www.internetretailer.com
Reed, Kristine (2002, April). Richer Data, Richer Clients: Mellon Financial
is transforming customer relationships one file drawer at a time with simple
informational tools.
Optimize Magazine, 39-44.
www.optimizemag.com
Smith, Jeff (2002, April). A
Brand New Role For IT: Keeping an eye
on brand metrics can become part of the CIO's job.
Optimize Magazine,
71-75.
www.optimizemag.com
Turban, Efraim, Lee, J., King, D., & Chung, H. M. (2000) Electronic
commerce – A managerial perspective. Upper Saddle River, NJ: Prentice
Hall.
Weiss, Andrew (2002, April). Diversity Training For Your Dollars: Smart
businesses reduce their financial risk by spreading investments to companies,
industries, and countries other than their own.
Optimize Magazine, 64-69.
www.optimizemag.com
--
Michael E. Ewing
April 19, 2002
