E-commerce – Myths, Traps and Opportunities
E-commerce is not new.
In the 1970’s, proprietary mainframe computer systems enabled automated business to business relationships. The introduction of Electronic Data Interchange (EDI) created new efficiencies and growth opportunities through enterprise software such as SAP. Computer Reservations Systems (CRS) transformed travel convenience and offer critical marketing, operations and competitive resources to airlines, consolidators, ground service operators and travel agents. The Internet now provides a linkage direct to travellers. However, e-commerce is not solely reliant on the Internet. The Internet’s role today is to enable more diversified and far-reaching e-commerce – linking factories, distributors, suppliers and consumers.
The hype surrounding e-commerce reflects rapid technological developments coupled with the Internet’s image as a paradigm of change. The Internet convergence of voice, data and video technology, intelligent equipment, smartcards, EDI and virtual technologies generate great interest and enthusiasm.
Today, emerging technologies allow organisations to more efficiently target and profile both current and potential customers, improve processes, lower costs and simplify sales. However as Extranet, Internet, Intranet, home shopping, virtual call centres and other technologies develop, they create new business risks as well as solutions.
E-commerce is an expanding tool set – old, new and embryonic. The challenge is in applying these tools as an integral part of marketing channel strategy.
E-commerce in marketing channel strategy
In marketing channel strategy and product or service distribution, e-commerce offers traps and opportunities. It is not a solution or fast road to competitive advantage, eg. Amazon’s use of the Internet as a sole marketing channel is developmental. Amazon.com is unprofitable today but is investing in the future.
Dell Computers use of direct sales marketing channel strategy through telesales, the Internet and direct mail is highly successful because it is more than an e-commerce driven channel. Dell offers sales, support, financial service and technical consulting but deals directly with its customers by means that they prefer. Dell is customer focused – not e-commerce focused! Dell Online enhances its direct distribution and is expected to represent 50% of Dell’s revenues by 2000. Dell uses the Internet to optimise its supplier activities, inventories, manufacturing and shipping.
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While the Internet is a widely available information and communication medium, its ability to enable customer and market profiling and targeting is probably its greatest marketing benefit.
However, the Internet continues to struggle with transaction security, log-on failures, traffic congestion and people’s need to do business with people. Consumers provide credit card information by phone, mail and fax, but still resist sending it via the Internet.
Internet based success stories such as eBay use the Internet as a part of their e-commerce based businesses. eBay customers pay for purchases by mailing cheques. Dell Online focuses on technology comfortable customers who wish to configure computer hardware they purchase. Each uses an integrated marketing channel strategy based on customer focus.
Use of E-commerce
Today’s main drivers are product and service distribution which:
E-commerce helps businesses achieve these objectives. However its use must be integrated into an overall strategy that is customer rather than company-focused. Through e-commerce, companies and their channel partners can more readily develop new or improved products and services; better tied distribution relationships and customer service. Customer needs significantly influence the value chain through the availability, collection and evaluation of trade and customer information.
E-commerce may optimise links among manufacturers, distributors, resellers and consumers. By using systems focusing on customers, companies develop loyalty at each step in the value chain, because customer’s needs and preferences are clearly understood and met through two-way information flow.
Today, banking is a leader in developing and using E-commerce. But, banks’ focus has been more bank than customer oriented. Attempts to develop new discrete E-commerce based channels have not fully net cost reduction and performance targets – customers have spread across multiple channels. Attempts to shift customers into new channels have largely been based on a stick rather than carrot approach.
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Marketing channel design.
A customer-needs analysis provides the carrot – it matches preferences, offers benefits and provides ease of doing business. Some customers are technology comfortable while others are relationship needy. Only once customer needs are understood can successful marketing channels be designed.
E-commerce tempts many businesses
to segment customers based on value, transaction size, geography and
industry/consumer group. But
customer needs and preferences may yield significantly different profiles
and result in better channel design and improved profits.
Avoiding E-commerce traps requires integration within a customer focused marketing channel strategy based on customer needs and potential benefits.
To determining E-commerce’s role
in marketing channel strategy:
E-commerce is not simply an IT issue, it’s a business strategy issue which draws on IT capabilities.