Business Models for E-Commerce
Note-taking: Amy Marra and Judith Phruksaraj
Marketing in an Age of Interactive Marketing and Relationship Marketing
Professor Rau
The Importance of the Customer
Interactive Marketing and Addressability
Three Areas That Information Plays in Relationship Marketing
Ways to Improve Marketing Productivity
E-Commerce Business Plans & Business Models
Professor Prasad
Reasons to Write a Business Plan
Business Plan Summary and Details
The Importance of the Customer
Although segmentation is an important element of business, the individual customer has become the primary interest. Customer service and relationships are the focus of improvement and development in many businesses. As a result, business institutions have developed the studies of Customer Relationship Management, also known as CRM. CRM focuses on the ways and methods of targeting the right customers and maintaining customer loyalty.
The traditional marketing concept is the "transaction view." The transaction view focuses on the activity done in the pre-sale period in order to attract customers for a short-term period. In the transaction view, customers are concerned primarily about the price of the product or service offered. On the firm side, the firm is most concerned with increasing sales and profits, complying with manufacturer requirements and communicating to the public via mass advertisements and promotions.
Today, we are moving away from transaction marketing towards relationship marketing. One way in which businesses make this progression is through frequency marketing, such as frequent flier programs. Relationship marketing focuses on customer retention via customer satisfaction. Customers are most concerned about the value of the product or service that is offered rather than the price of the product. Firms are more focused on the post-sales activity in customer service for the long-term rather than the short-term as in transaction marketing. Firms communicate their product or service to their customers via customized marketing efforts.
Interactive Marketing and Addressability
Firms refer to an address as something that identifies a customer. An address points to a particular place in a database where a customer with certain qualities can be located. Firms are then able to uniquely market a product to a single customer. Since the cost of maintaining customer information has dropped significantly, most firms are now able to store and utilize specific marketing data about their customers.
The value of a lifetime customer is many times under-appreciated. Firms that are able to maintain a customer throughout a lifetime will have an overall higher asset value. Lifetime customer value is an asset measure. Firms have lower asset value if they reduce their investment in maintaining or improving lifetime customer value.
Sometimes, however, it is not possible for marketers to obtain address information. In these cases, marketers can use techniques to market a consumer. An example of one of these techniques is catalog marketers. Although they may not have an address for a customer, they can collect information for each customer's purchase pattern and then customize catalogs over time.
Three Areas that Information Plays in Relationship Marketing
Customer information is key to a marketer's job. There are three ways in which information can play a role in relationship marketing:
A number of firms have established frequent buying programs to help create a two-way communication between the customer and marketer. These programs, in turn, return significant data to help the marketer develop and implement marketing programs for the firm. When the information collected, however, is stored in a centralized database, the customer and the firm then share the two-way relationship.
Ways to improve marketing productivity
The overall idea of marketing proves to be somewhat efficient, but addressability improves it in three ways:
Ultimately, privacy must be traded off against marketing inefficiency
Though the Internet is growing, pure e-commerce sites are very few (16% of sales), catalogue purchases (5%), and stores maintain a large portion of overall sales. Clicks will never replace brick and mortar stores.
A business plan is a document that describes how a firm will make a profit selling its products or services. It is a selling document that should convey excitement and promise to potential investors. When presented to venture capitalists, they should not skim through it as though it were an executive summary. They must maintain interest in what you propose and feel excited about your product or service.
Reasons to Write a Business Plan
There are a number of reasons to write a business plan. Some of them are:
In order to write a successful business plan, certain steps must be followed:
A. Start asking the right questions
i.e., How will the customer use the site, what value will the customer gain, etc …
B. Provide piecemeal answers
C. Don’t try to get it all right away - the business plan is difficult to write and will take
practice and many drafts
Although the business plan is only a summary, it can still be quite lengthy and differ in many ways. The following bullets provide particular details and guidelines for a business plan summary:
1. How long should the business plan summary be?
The business plan summary should be about 10-15 pages in length. It should be an extension of the executive summary. This summary should be appropriate for a start-up company seeking capital and to gauge investor interest. In addition, it should mention the backgrounds of the founders of the company. Doing this will give the company more credibility.
2. How long should the full business plan be?
The full business plan should be about 10-40 pages, identifying any strategic partnerships formed. At this stage, the business should have obtained significant or later stage financing. This plan should be created after the business has been operational for a year or two. It should consist of a cover page (company name, address, main contact, and a confidentiality statement), table of contents, executive summary, company name, market opportunities, product/service offered, sales and promotional efforts, financials, and an appendix. The confidentiality statement should be a simple sentence asserting the absolute need for privacy of the document.
3. Executive Summary
The executive summary should give the reader a clear understanding of what you are proposing to do. It is a miniature version of the business plan condensed into two or three pages. Drafts should be written in order to expose any loopholes or weaknesses of the proposal.
4. The Company
The mission statement and strategy should recognize past, present and future achievements, conflict, hurdles, and goals. The people and management with direct relevant experience to the opportunity being pursued should be involved in the company. These people should have the skills, abilities, motivations and commitment to the proposed company service/product. People invest in people not the product. Thus, the people executing the ideas play a significant role and must be chosen
carefully.
5. Market
Identify the buyers and provide examples. You must quantify the benefits of the product/service and provide other measures to support your product/service. Will the product/service be a painkiller or a vitamin? Is the market you are entering growing or shrinking? A growing market can be good sign, whereas a shrinking market will prove to be risky. Objective analysis of your competition should be completed to better understand the market in which you are entering and to develop a pricing strategy. The pricing strategy is somewhat difficult to reason because it is difficult to know what kind of market will sustain your prices.
6. Product/Service
Identify key product/service features and complete a cost-benefits analysis to justify bringing your product to market. Delivery issues should be mentioned, as well as, after-sales issues. Customers are a very important element in your business, therefore, these issues must be attended to. If they are not satisfied with the product and the service, customer retention will be difficult.
7. Sales and Promotion
Identify your choice of sales channels. Analyze the costs, relationships with channel partners and competitive pressures when choosing the right sales channels. Salesperson motivation is necessary to effectively produce high sales, and consider product/service promotions to market your product.
Resources
- Association for the Advancement of Relationship Marketing
- Customer Relationship Management
- Tools for Relationship Marketing
www.sba.gov/starting/indexbusplans.html