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Impact of e-commerce on marketing
2nd Oct 1999 Jagdeep Nagdev @bom7.vsnl.net.in
Hi! Everyone
I consider this to be a very interesting topic to discuss, the impact
of e-commerce on marketing executives. I feel that all the companies shall
try to directly sell their product via the net. They would not like to
invest in marketing on the net + spend more on people to market the
product. What r ur views?
6th Oct 1999
Ashok Pramanik @cncdsl.com
You are very correct. Most of the organization in have already moving towards it and alloted their major resources toward e-commerece. Ashok Pramanik [email protected]
7th Oct 1999
Tushar J. Mehta @ieee.org
"The Innovator's Dilemma", by Clayton M. Christensen (Harvard Business School Press, June 1997) has become required reading for Internet managers, marketing and e-commerce professionals, entrepreneurs and venture capitalists. I've had the pleasure of reading this book, as I'm sure many of you have, as well. In a nutshell, Christensen believes that the Net offers a superior business model with the potential that will displace those companies unable to adapt. Dr.Christensen is an Associate Professor of Technology & Operations Management, Harvard Business School www.people.hbs.edu/cchristensen/bio.html NOTE: My *only* motivation in promoting this book, is the simple fact that it's an excellent book on innovation, a wonderful source of subjective reference for business e-commerce and marketing professionals, and IMHO, highly recommended. The following Q&A with Christensen appeared in Businessweek, June 28, 1999 issue. [It was published in conjunction with the cover story, Internet Anxiety (US edition)]. A Brutal Survival Plan By Paul C. Judge Copyright © 1999, The McGraw-Hill Companies Inc. Q: What's the lesson today's managers should take away about the Internet? A: There are certain dimensions of managing the flow of information over the Internet that help make your product or service better in the marketplace you currently serve. Using the Web in ways that can sustain your existing business model is an absolute imperative. But in other ways, particularly in retailing now, the Web can be what I call a disruptive technology, and historically, those are what cause companies to fail. Q: Do you see those disruptions now? A: Oh yeah. Online trading of securities is creating an enormous disruption to the full-service brokerage firms. It's gone from 3% of trades in 1997, to 14% in 1998. And underwritings are beginning to be done over the Internet, as well. Q: What's the most common mistake made by managers confronting disruptions? A: The typical pattern is that your best customers will be among the last to embrace this sort of disruptive technology, because usually a disruptive technology does not provide the same kind of service and performance that your best customers prefer. The people who will embrace these technologies first are the ones that you have trained yourself to pay the least attention to. It can creep up on you like a stealth attack, until it's right on you. Q: How are the fundamental measures of business value being challenged? A: Look at bookselling. Once you've got a bookstore, the way to make more money when you're starting out is to try to operate the store at full capacity -- pack in as much selection and as many customers as you can fit. But after you've achieved capacity, the only way to increase business is by boosting margins. On the Internet, there is no limit on the capacity of the store, or the number of customers who can come in. Therefore, percentage margins really aren't important. What's important online is the total dollars you can bring in divided by the total amount of capital required to get those customers. I calculated that Amazon could equal the return on investment capital that a bricks-and-mortar bookseller achieved if Amazon had only 5% gross margins, vs. 30% for a traditional retailer. It's so different because of the scale available to stores online. Q: Can you point to others? A: Financial services. The impact the Web will have there is to fragment and render irrelevant the integrated financial institutions like commercial banks. It will take time for this to happen. But consider a business like credit cards, where four variables determine 99% of the variance of whether someone will pay their debts or not. You can apply for a credit card over the Net, get it over the Net, and have it serviced over the Net. Because of that, nonbanks, and ultimately Internet banks, will capture that business. Ten years ago, that was a very profitable piece of business for banks like Citi. But that will just go away. Same for the mortgage business and auto loans and small-business loans. Those kinds of things will begin to be conducted more and more by specialized financial services companies using the Net. Q: Can old-line companies that excelled before the Internet master this next phase? A: They can do it, but the only way is if they set up a completely independent organization and let that organization attack the parent. If you try to address this opportunity from inside the mainstream, the probability of success is zero. I've never seen it happen. Q: Do you expect a new business hierarchy to emerge led by the Net companies? A: You won't see the old-line retailers or brokers disappear. But to survive, those guys will have to move toward products whose metrics can't be clearly specified and measured. In retailing, there's already been one big disruptive wave: discount retailers disrupting traditional department stores. Look at the patterns: They stole the market dominance by starting with branded household goods -- not big appliances, but little ones, kitchen goods where clear metrics existed. Things you did not need to try on. Gradually, they migrated their product lines to higher and higher gross-profit-margin tiers in the market. The Internet is the ultimate wave coming in that way. Q: How can executives balance managing for a future that's being changed by the Internet without sacrificing results today? A: The current business doesn't fall apart. You need to have a different business organization concentrating on building a business model appropriate to the future, while the existing business organization can focus on being as successful as possible with the client base that's still uncomfortable with the Internet. Citi can't escape the cost of its legacy customers. But it simply can't burden the new Internet business with serving those customers, because Citi will be competing against Internet banks without those legacy customers. The only way to compete is to have an organization focused completely on the new opportunity. Businessweek also published the following piece, in its June 14, 1999 issue. (It is a commentary on Christensen's book, reflecting upon Merrill Lynch's decision to launch an on-line trading site). Commentary: Can a Merrill Be a Maverick? By Michael J. Mandel Copyright © 1999, The McGraw-Hill Companies Inc. Aaargh! That's the sound of yet another industry--Wall Street, this time--running headlong into the Innovator's Dilemma, the problem first described by Clayton M. Christensen, a Harvard business school professor, in his best-selling 1997 book of the same name. Christensen's argument is simple: When successful companies are faced with a big technological leap that transforms their markets, all choices are bad ones. Doing nothing is not an option, as Merrill Lynch & Co. and other established outfits have learned. Facing a major innovation like the Internet with a head-in-the-sand strategy can maintain profits in the short run. Long-term, however, market share and profits are going to be eaten away by low-cost upstarts. RISKY BETS. And all the alternatives have their problems. Competing with the startups by adopting their technology forces an established company to behave like a startup itself. That means making big bets on unproven technologies and markets that never may be capable of producing decent earnings. Of course, venture capitalists make such risky bets all the time, since they are prepared to accept big losses in exchange for the chance of a big gain. But at most established companies, managers, workers, and stockholders are not ready to take such enormous risks. Or Merrill could try and take a middle path--as it is already doing. Its latest plan calls for offering low-cost online trading, while still using its existing brokers to provide high-margin financial planning services. Such a fence-sitting strategy may mean getting the worst of both worlds, since it keeps the high cost structure of the established company while simultaneously incurring the enormous new expenses of setting up large-volume online trading. Indeed, Christensen's conclusion is that it is very difficult for an existing successful company to take full advantage of a technological breakthrough such as the Internet--what he calls a ''disruptive innovation.'' Instead, he argues that the best way to cope is to set up a completely separate organization that can function as a startup. Despite his depressing message, Christensen's book is drawing enormous attention these days from top managers. In part, it's because he does not blame the problems of established companies on stupid decisions by executives. Rather, he explains how the habits that led to success make it tough to deal with new technologies. For example, successful companies are usually very good at listening to what their customers ask for and then delivering it. But a disruptive new technology changes the customer base. In Merrill's case, online trading will bring in new customers with different needs and requirements than those of its existing full-service customers. What's more, under traditional planning processes, it's impossible to justify enormous investments to compete in small, yet-to-be profitable markets. Christensen writes: ''Investing aggressively in disruptive technologies is not a rational financial decision for [established companies] to make.'' The trouble is that by the time the new markets are large and profitable enough to justify the investment, they are already occupied by entrenched competitors. Merrill, for instance, is offering its retail customers low-cost online trading only after Charles Schwab & Co. and E*Trade Group Inc. established themselves. Unfortunately, there is no guarantee as to when a new market or a new innovation will be profitable--or whether it will make money at all. ''Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable,'' notes Christensen. To be sure, a well-run established company can still survive a wave of disruptive innovations, and perhaps even prosper. But if Christensen is right, the spoils of the New Economy will go to the companies and people who are willing to think like venture capitalists. That's not an easy thing to ask of managers who have succeeded by taking prudent risks with their shareholders' money and following the wishes of their faithful customers. It's a dilemma. on-line reviews of the book available at www.amazon.com Tushar J. Mehta email: [email protected] voicemail: (206) 405-2335
7th Oct 1999
Dhruv Moondhra @bom7.vsnl.net.in
Hi Jagdeep, With regards to marketing executives and the presence of e-commerce on them. I feel that as the internet economy matures, the internet will be treated as just another channel, like retail or mail order, and companies will need marketing executives who do a good job of implementing a web marketing strategy. Also, the non-internet channels will never disappear completely, so executives will still be required. Also what we need to keep in mind is that India is a cash based economy, and for that to change will take a long time. In the consumer goods segment, we can be sure, atleast in the short term, a majority of the sales of a company will still come through non-internet channels. For the business to business commerce part of the industry, even now, there is very little progress on the internet, even in the western world. Therefore I do not see a big change in the need for marketing executives. There skill sets and roles might change to encompass evolving technology, but they will still be required. regards, dhruv
8th Oct 1999
Pranav Lal @softhome.net
Hi, I wonder how well this approach will work. The internet in my opinion is still a toy for the average user. Pranav Check out my web page at http://www.members.tripod.com/slimprize/index.html
7th Oct 1999
Pramod @cgs.cgsmith.soft.net
Hi INVESTING IN A BUSINESS WEBSITE How important is it for a business to have a presence in cyberspace? Is a public website a money pit or money maker? This question has been heatedly debated by Fortune 1000 companies and small business alike. While there is no definitive answer, a recent survey of corporate executives by Spiral Media indicates that websites can enhance the bottom line. We agree. Here are our top ten reasons to establish an online outpost: go through this document and check this website http://www.learnthenet.com/english/ regards pramod
8th Oct 1999
Neena P. Kumtakar @asc.ltindia.com
Only a few companies will be able to directly sell their products via the net. Cost of internet access in India is still too high and the level of trust & level of credit card usage is low. Also, in metros, where all family members are working, few courier companies offer delivery in the evenings when people are at home. Neena
8th Oct 1999
Franklin Wayne Poley @vcn.bc.ca
Until we get those human language translating programs in operation (which will likely take quite a while) remember that English is the international language of commerce, on or off the Internet. And India has a big advantage over most countries in that respect. FWP.
10th Oct 1999
yang @vsnl.com
> > I consider this to be a very interesting topic to discuss, the impact > >of e-commerce on marketing executives. I feel that all the companies shall > >try to directly sell their product via the net. They would not like to > >invest in marketing on the net + spend more on people to market the > >product. What r ur views? My only comment is it is good this way. Any form of automation does not do away with employment. It merely means that the rest of the population can devote themselves to better tasks. -- Best regards, Yang Yen-Thaw from New Delhi *********************************************************************** YANG advocates & solicitors *********************************************************************** International business transactions, infrastructure and intellectual property (India related) Telephone +91-11-686-3103, TeleFax +91-11-696-3703 Main Office - New Delhi. Other Offices - Bangalore, Hyderabad. ***********************************************************************
11th Oct 1999
neeraj chaturvedi @hotmail.com
Hi, I absolutely agree with you. You try spreading socialism, helps little to poor. Try capitalism, you get socialism as end product. rgds neeraj >My only comment is it is good this way. Any form of automation does not do >away with employment. It merely means that the rest of the population can >devote themselves to better tasks. > >-- >Best regards, > >Yang Yen-Thaw from New Delhi >
11th Oct 1999
Manish Jain @yahoo.com
Hello, A lot is being said and written about e-commerce in India. It is really fascinating to read on it . But when it comes to actual implementation, I think we as a country are 3-4 yrs behind developed nations. This is a lot of time in a fast changing IT world. By this I mean to say that the type of commerce that is being conducted on internet in India today was conducted about 3-4 years ago in US and other developed nations. Still realtime verification of credit cards is not possible in India. Not because technology is not available in India but because laws are not present. E-commerce should really revolutionize the way trade is conducted in India. Once the telecom infrastructure and education reaches nooks and corner of India,the role of middleman will be greatly reduced enabling both manufacturer and consumer to get fair price. I think the laws should have been implemented in India at the earliest( may be 4 yrs ago) because in the Indian scenario e-commerce will take a time to catch on even when the laws are implemented. This is because in purchasing habits are quite different from the west. Physical contact( sing it , touching) with the things that we buy is very important here. A word of assurance from the sales agent comes a long way in helping us in making our final decisions on what to buy no matter whether the company manufacturing the product gives a warrenty of 5 years. The more the governments at the centre delay in implementing the laws , the more the indian trade will be at loss. Open to debate, Manish
13th Oct 1999
Niel Hirjee @cal.indiax.com
Dear Manish, > fascinating to read on it . But when it comes to actual implementation, > I think we as a country are 3-4 yrs behind developed nations. This is a > lot of time in a fast changing IT world. This could be a pandoras box waiting to be opened. If it becomes possible to do online transactions / phone based transactions with just credit cards numbers in India, there would be a huge amount of fraud. Recent statistics indicate that one in eight online transactions is the US is charged back, due to unauthorized use of cerdit card info. What the figures for India will be is anybodys guess. Our law enforcement is so poor, compared to, say, the US that it becomes a viable proposition to carry out credit card fraud and get away with it. Till our law enforcement becomes at par with the US, I dont think online CC will take off in India in a big way. Merchants will not find it worth their while to offer this facility. As an aside, our law enforcement cannot improve till be have the equivalent of the US social security number fully implemented. > Once the telecom infrastructure and education reaches nooks and corner > of India,the role of middleman will be greatly reduced enabling both > manufacturer and consumer to get fair price. But the telecom infrastructure has already reached every nook and corner of India - albeit at a low density. The role of the middleman is as important as ever even in those countries which have a better telecom infrastructure - why do you feel it will be different in India? > catch on even when the laws are implemented. This is because in > purchasing habits are quite different from the west. Physical contact( > sing it , touching) with the things that we buy is very important here. > A word of For standardized items, if the price is right, people are willing to forgo the touch and feel factor. I say this from personal experience as we have sold quite a few computers through calArcade, and that too to buyers outside Calcutta. > The more the governments at the centre delay in implementing the laws , > the > more the indian trade will be at loss. The government can pass any law, but how will that law be implemented? Does the government have the infrastructure (or even the domain knowledge) to implement cyber laws? Thank you! Regards, Niel Hirjee -- Calport Technologies Phone: +91 33 475-5884 3 Dover Road, Fax: +91 33 476-3021 Calcutta 700 019 Email: [email protected] India http://www.indiax.com/cal
