Once segments to target have been identified, organizations need to define how to best position their online services relative to competitors according to four main variables: product quality, service quality, price and fulfilment time. As mentioned earlier, Deiseet al. (2000) suggest it is useful to review these through an equation of how they combine to influence customer percep- tions of value or brand:
Product quality×Service quality Customer value (Brand perception) = –––––––––––––––––––––––––––
Price×Fulfilment time
Strategies should review the extent to which increases in product and service quality can be matched by decreases in price and time. We will now look at some other opinions of posi- tioning strategies for e-businesses. As you read through, refer back to the customer value equation to note similarities and differences.
Chaston (2000) argues that there are four options for strategic focus to position a com- pany in the online marketplace. He says that these should build on existing strengths, but can use the online facilities to enhance the positioning as follows:
Product performance excellence. Enhance by providing online product customization.
Price performance excellence. Use the facilities of the Internet to offer favourable pricing to loyal customers or to reduce prices where demand is low (for example, British Midland Airlines uses auctions to sell underused capacity on flights).
Transactional excellence. A site such as software and hardware e-tailer Dabs.com (www.dabs.com)offers transactional excellence through combining pricing information with dynamic availability information on products listing number in stock, number on order and when expected.
Relationship excellence. Personalization features to enable customers to review sales order history and place repeat orders, for example RS Components(www.rswww.com).
These positioning options have much in common with Porter’s competitive strategies of cost leadership, product differentiation and innovation (Porter, 1980). Porter has been criticized since many commentators believe that to remain competitive it is necessary to combine excellence in all of these areas. It can be suggested that the same is true for sell-side e-commerce. These are not mutually exclusive strategic options, rather they are prerequisites for success. Customers will probably not judge on a single criterion, but on multiple criteria. This is the view of Kimet al.
(2004) who concluded that for online businesses, ‘integrated strategies that combine elements of cost leadership and differentiation will outperform cost leadership or differentiation strategies’.
Online value proposition (OVP) A statement of the benefits of online services reinforces the core proposition and differentiates from an organization’s offline offering and those of competitors.
The type of criteria on which customers judge performance can be used to benchmark the proposition.Table 5.10summarizes criteria typically used for benchmarking. It can be seen that the criteria are consistent with the strategic postioning options of Chaston (2000). Sig- nificantly, the retailers with the best overall score at the time of writing, such as Tesco (grocery retail), smile (online banking) and Amazon (books), are also perceived as the market leaders and are strong in each of the scorecard categories. These ratings have resulted from strategies that enable the investment and restructuring to deliver customer performance.
Plant (2000) also identifies four different positional e-strategic directions which he refers to as technology leadership, service leadership, market leadership and brand leadership. The author acknowledges that these are not exclusive. It is interesting that this author does not see price dif- ferentiation as important, rather he sees brand and service as important to success online.
InChapter 8we look further at how segmentation, positioning and creating differential advantage should be integral to Internet marketing strategy. We also see how the differential advantage and positioning of an e-commerce service can be clarified and communicated by developing anonline value proposition (OVP).
To conclude this section on e-business strategies, completeActivity 5.3for a different per- spective on e-business strategies.
Table 5.10
Scorecard category Scorecard criteria
1 Ease of use • Demonstrations of functionality.
• Simplicity of account opening and transaction process.
• Consistency of design and navigation.
• Adherence to proper user interaction principles.
• Integration of data providing efficient access to information commonly accessed by consumers.
2 Customer confidence • Availability, depth and breadth of customer service options, including phone, e-mail and branch locations.
• Ability to resolve accurately and readily a battery of telephone calls and e-mails sent to customer service, covering simple technical and industry-specific questions.
• Privacy policies, service guarantees, fees and explanations of fees.
• Each ranked web site is monitored every 5 minutes, 7 days a week, 24 hours a day for speed and reliability of both public and secure (if available) areas.
• Financial strength, technological capabilities and independence, years in business, years online and membership of trade organizations.
3 On-site resources • Availability of specific products.
• Ability to transact in each product online.
• Ability to seek service requests online.
4 Relationship services • Online help, tutorials, glossary and frequently asked questions.
• Advice.
• Personalization of data.
• Ability to customize a site.
• Reuse of customer data to facilitate future transactions.
• Support of business and personal needs such as tax reporting or repeated buying.
• Frequent-buyer incentives.
5 Overall cost • A basket of typical services and purchases.
• Added fees due to shipping and handling.
• Minimum balances.
• Interest rates.
Example scorecard criteria for rating e-tailers
Activity 5.3 E-business strategies for a B2C company
Purpose
To evaluate the suitability of different e-business strategies.
Introduction
Many industry analysts such as the Gartner Group, Forrester, IDC Research and the ‘big five’ consulting firms are suggesting e-business strategies. Many of these will not have been trialled extensively, so a key management skill becomes evaluating suggested approaches from reports and then selecting appropriate measures.
Questions
1 Review the summaries of the approaches recommended by IDC Research below (Picardi, 2000). Which elements of these strategies would you suggest are most relevant to a B2C company?
2 Alternatively, for a company with which you are familiar, review the six strategy defi- nition choices presented in the previous section.
Summary of IDC approach to e-business strategies
Picardi (2000) identifies six strategies for sell-side e-commerce. The approaches are interesting since they also describe the timeframe in which response is required in order to remain competitive.
The six strategies are:
1 Attack e-tailing. As suggested by the name, this is an aggressive competitive approach that involves frequent comparison with competitors’ prices and then matching or bettering them. This approach is important on the Internet because of the transparency of pricing and availability of information made possible through shopping comparison sites such as ShopSmart (www.shopsmart.com) and Kelkoo (www.kelkoo.com). As customers increasingly use these facilities then it is impor- tant that companies ensure their price positioning is favourable. High-street white- goods retailers have long used the approach of matching competitors’ prices, but the Internet enables this to be achieved dynamically. Shopping sites such as Buy.com (www.buy.com) and Evenbetter.com (www.evenbetter.com) can now find the prices of all comparable items in a category but also guarantee that they will beat the lowest price of any competing product. These sites have implemented real- time adjustments in prices with small increments based on price policy algorithms that are simply not possible in traditional retailing.
2 Defend e-tailing. This is a strategic approach that traditional companies can use in response to ‘attack e-tailing’. It involves differentiation based on other aspects of brand beyond price. The IDC research quoted by Picardi (2000) shows that while average prices for commodity goods on the Internet are generally lower, less than half of all consumers purchase the lowest-priced item when offered more information from trusted sources, i.e. price dispersion may actually increase online. Reasons why the lowest price may not always result in the sale are:
• Ease of use of site and placing orders (e.g. Amazon One-Click makes placing an order with Amazon much easier than using a new supplier).
• Ancillary information (e.g. book reviews contributed by other customers enhances Amazon service).
• After-sales service (prompt, consistent fulfilment and notification of dispatch from Amazon increases trust in the site).
• Trust with regard to security and customer privacy.