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This chapter is from the book

Goals and Objectives of This Book

There are several ways to measure success of an electronic commerce site, ranging from hard traffic numbers (which can be difficult to validate) and intangibles associated with positioning and branding, to fixed numbers associated with a Return on Investment (ROI) and increases in revenue, market share, and overall profitability.

The objective for any electronic commerce site is to get qualified customers to the right place and then make their shopping experience as efficient and easy as possible. It is also important to make the site as intuitive as possible to direct the customer through a minimal number of navigational steps, yet enable that person to make a decision in a timely manner. For an e-tail consumer, too many page views, clicks, and scrollings can get in the way of commerce taking place, and too few can leave the customer with an "incomplete" feeling. Striking a balance between getting the cash register to ring immediately and encouraging a leisure stroll down virtual aisles is important.

For a corporate customer, the emphasis needs to be on providing the content, relationships, and processes in the right context. A corporate purchasing decision may be based on a procurement specification, requiring data from multiple supplier catalogs. A decision to procure may be contingent on vendor references, pricing discounts, service agreements, and purchasing automation.

Just as there are two types of qualified visitors—those who have visited the site before and newcomers—there are also many ways to measure who they are and their interests. Similarly, there are also many ways to measure and evaluate their importance to a venture. Because many browsers are still new to the online world and perhaps even intimidated by online shopping, any objectives for the first six months of a venture should be modest.

Perhaps more so than offline merchants, e-tailers and those in B2B have many opportunities to measure the effectiveness of their work. This capability provides a wide gulf between the online and offline world, giving a strategic advantage to the merchant that chooses to use it. Ironically, the tools that we use to measure success vary widely from online to offline, and even in the online world, between B2C and B2B. This book is dedicated to those participants in electronic commerce who want to understand, analyze, and innovate their way to success.

Just as the carpenter measures twice and cuts once, we are advocating a similar attention to the accuracy of your efforts. That same carpenter also has available a wide set of power tools to make sure that the measurements are accurately used. In the pages that follow, we are also suggesting that the entrepreneur and innovator in electronic commerce set about using quality measurement and the appropriate tools of electronic business and, perhaps more significantly, business in general.

With new online power tools, B2B and B2C merchants alike can adjust supply to meet demand, shift promotional emphasis from one product or offering to another, change vendors, and help customers track orders and shipments. Very little, if any of this, was available to the offline merchant before the advent of the Internet and the Web.

Here are some expectation-setting thoughts to guide exploration into whether or not to use an aggressive set of metrics to judge success levels.

  1. Build site traffic and page views to engender confidence on the part of those who are early adopters (relative to the target population) and thereby stimulate word-of-mouth referrals.

  2. If you are a B2B site, continue to build existing relationships while fostering new ones with a friendly style of allowing purchases to happen. The same applies to B2C after a customer becomes involved, and is expanded upon by encouraging use of a credit card or personal account to make the process as simple as possible. B2B customers, of course, have purchase orders as their primary medium of transactions.

  3. Ease regular customers into the online experience with your firm.

  4. Encourage requests for further information and building of a dialog between the customer and the firm.

  5. To facilitate the site being customer-friendly in the same manner as an offline presence, put real people trained in sales and technical support, if need be, online.

  6. Add names gathered at trade shows and other places where customers appear to the database for special promotions, catalog sales, and future email of offers. In addition, the database provides the parent firm with an opportunity to customize offerings around personal tastes and preferences of each customer.

    E-Commerce Power Tools

    • Metrics: If it moves, measure it!
    • Purchasing simplicity
    • Interaction
    • Customer database
    • Personalize
    • Raise switching costs
    • Raise barriers to entry with all of the above
    • Do what the competition does, but better
  7. With intelligent information in the database, personalization programs, such as birthday and special event calendars, can be leveraged. Even in business-to-business marketing, this kind of personalization works wonders.

  8. Raise barriers to exit for customers and barriers to entry against competitors. These are primary defensive weapons any merchant can use; by "locking in" a customer, it makes it harder for competitors to dislodge that customer.

 There are several metrics and power tools that are borrowed from established business practices. ROI is a metric requested by the investment community, financial services organizations, and others and it could be measured in several ways. While seemingly simple, after a period of inflated expectations and dashed hopes from poor performance on the part of some failed dot coms, this metric should be an important part of any business plan.

Lest you think that these are metrics that apply mainly to B2C, think again. Good merchants, worldwide and across many categories, in one way or another, must be database-intensive to select one tool from the above. Raising switching costs is extremely important to assist customer loyalty in technology products. Slightly changing the pin-count on an electronic device can be the difference between locking in repeat business and losing it to competitors who "knock off" a semiconductor design.

Reduced cost of doing business is a frequently cited benefit of doing business online. Savings are anticipated from a variety of business process improvements, ranging from:

  • lower overhead costs
  • lower Selling, General and Administration Expenses
  • reduced processing time for orders
  • elimination of paper catalogs and brochures
  • reduced support personnel
  • lower marketing expenses

Significant transaction costs are often achieved in banking, travel, and online brokerage firms. Electronic commerce enables a reduction in the cost of a banking transaction from more than a dollar to approximately one cent, offline versus online. A business travel reservation offline costs $10, while an online transaction was 20 percent of that. Online brokerage transactions were $10 versus $50 from a full-service broker.

Increased revenue is another reason for investing in electronic commerce. Sources of new revenue come from:

  • new customers/accounts/buyers
  • new products and services to existing customers
  • opening up global markets
  • individualized marketing directed at existing customers

Raising levels of customer satisfaction is also important through:

  • timely and up-to-date information to customers
  • more detailed product information than through a catalog
  • 24 x 7 availability of the firm for customer information
  • online tracking of orders and shipping
  • reduced order entry errors

Other reasons include faster time to market (combining the benefits from having an Extranet with the Web site) and increased information flow through the company (the In-tranet). All of these vectors are important to consider for any electronic commerce venture.

As is obvious, each way of looking at a business activity varies because of the different combinations of business models, operating styles, and market conditions. This means the metrics used can be highly variable, both in terms of the math used to quantify results as well as the analysis needed before using the math! These variations are reflected in the diverse ways metric analyses are presented.

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