Business adoption of digital technologies for e-commerce and e-business

As managers, we need to assess the impact of e-commerce and e-business on our market­place and organizations. What are the drivers of changed consumer and business behaviour? How should we respond? How much do we need to invest? What are our priorities and how quickly do we need to act? Answering these questions is an essential part of formulating an e-business and e-marketing strategy and is considered in more detail in Part 2. To answer these questions marketing research will need to be conducted as described in Chapters 2 to 4 to determine the current levels of adoption of the Internet for different activities amongst customers and competitors in our market sector and in other sectors.

1. Drivers of business Internet adoption

Business adoption of e-commerce and e-business is driven by benefits to different parts of their organization. First and foremost, they are concerned how the benefits of e-business will impact on profitability or generating value to an organization. The two main ways in which this can be achieved are:

  • Potential for increased revenue arising from increased reach to a larger customer base and encouraging loyalty and repeat purchases among existing customers.
  • Cost reduction achieved through delivering services electronically. Reductions include staff costs, transport costs and costs of materials such as paper.

At a relatively early point in e-business adoption, a government report (DTI, 2000) identi­fied two main categories of drivers which remain relevant today:

Cost/efficiency drivers

  1. Increasing speed with which supplies can be obtained
  2. Increasing speed with which goods can be dispatched
  3. Reduced sales and purchasing costs
  4. Reduced operating costs.

Competitiveness drivers

  1. Customer demand
  2. Improving the range and quality of services offered
  3. Avoiding losing market share to businesses already using e-commerce.

More recently, in interviews with Australian businesses, Perrott (2005) identifies four key areas driving performance which are cost-benefit, competitive pressures, market advantage and value adding, i.e. improving customer satisfaction while building strong relationships.

When reviewing potential benefits, it is useful to identify both tangible benefits (for which monetary savings or revenues can be identified) and intangible benefits (for which it is more difficult to calculate cost savings). The types of potential benefits are summarized in Table 1.3.

In Chapter 5 (Figure 5.12), an alternative information-based model of value creation is dis­cussed in relation to financial services organization Capital One. This reviews new opportunities for adding value, reducing costs, managing risks and creating a new reality (transformation).

An example of an analysis performed to identify the barriers and drivers for adoption of Inter­net technologies for one market is that from Doherty et al. (2003). These authors researched the drivers and barriers to retailers’ adoption to determine the most important factors. Table 1.4 summarizes the ranking in importance for different degrees of Internet adoption from static brochureware, through an active web site containing product information (B) to a transactional site where items can be purchased (C). You can see that the two most important factors which correlate with adoption are ‘Internet target segment’, i.e. customers in their market are typically adopters of the Internet, and ‘Internet strategy’, i.e. a defined Internet strategy is in place. This suggests, as would be expected, that companies that do not have a coherent Internet or e-business strategy are less likely to use higher levels of Internet services. Many larger organizations that have responded to the challenge of e-business have created a separate e-commerce plan and separate resources to implement it. This book covers what needs to go into such a plan and the issues to consider when implementing it.

More recently, in Europe, research completed for the i2010 initiative monitored usage of the Internet by business (European Commission, 2008) and it found that around 95% of businesses in the majority of countries surveyed have Internet access although this figure masks lower levels of access for SMEs (small and medium-sized enterprises) and particularly micro-businesses (Figure 1.10).

Now read Case Study 1.2 which illustrates the benefits of setting up an online operation for a small or medium enterprise (SME). It also highlights some of the challenges of manag­ing an online business and highlights the need for continued investment to refine online services and the marketing needed to attract visitors to the web site.

2. North West Supplies extends its reach online

North West Supplies (Figure 1.11) was launched as a busi­ness in March 1999 when Andrew Camwell, a member of the RAF Volunteer Reserve at the time, spotted a gap in the UK market for mail-order supplies of military garments to people active in the Volunteer Reserve and the Air Cadet Force. Andrew, his wife Carys, and her sister Elaine Hughes, started running a mail order business out of shop premises in the village of Cemaes Bay.

The web store at www.northwestsupplies.co.uk has been online since November 2002. As it can take several months for a web site to be indexed by search engines, NWS used pay-per-click advertising (PPC – see Chapter 9)
as a method of very quickly increasing the web site’s pres­ence in the major search engines. This marketing method proved successful. The directors were pleasantly surprised as they had previously been somewhat dubious about the prospect of the Internet generating sales in their sector. Within six months of running the web site, the company had increased turnover by £20,000, but further advances would incur a high advertising cost. Following an eCommerce Review by Opportunity Wales, the company decided to tackle the issues by implementing search engine optimization (SEO – see Chapter 9) and a site redesign which included:

Improved graphic design – this was to be changed to a more professional and up-to-date look.

  • Best, featured and latest products – the introduction of a dynamic front page to entice customers to revisit the site on a regular basis. The contents of this page would feature the best sellers, and latest or featured products.
  • Reviews and ratings – to provide confidence to consumers and allow some kind of interaction with them, this would allow users to review products they have purchased and give them a star rating.
  • Cross-selling – when customers view a product there may be other products or categories that may be of interest or complementary, hence there was a proposal to allow staff to link products and categories so that these would be displayed.
  • Segmentation – the site would be split into two sections emphasizing the segmentation of product lines into military wear and outdoor wear sectors, thus being less confusing, and easier to use for the respective users (see Figure 1.11 section labelled ‘Best, featured and latest products’).
  • Navigation by sub-categories – as the product range had expanded, the additional pages created in each category made it harder for customers to find specific items or made them have to browse many pages before finding a suitable product. The introduction of sub-categories would provide a clear link to the areas of interest and contain fewer pages to browse, thus helping the customer to make a choice more easily and more quickly. A new search tool and order tracking were also seen as important parts of the online customer experience (Chapter 8).

Benefits

The owners describe the benefits of the improvements to the site as follows:

  • Increased direct sales – ‘The new launch increased sales and appealed to a broader audience – young and old.’ The annual turnover of the business has increased from £250,000 to £350,000 and this is mainly attributable to the new web site. The high- profile launch aimed at existing customers, the greater visibility in search engines, and the greater usability of the site have all contributed to this.
  • Improved promotion of the whole range of stock – ‘We started selling stuff that we hadn’t sold before.’ The changes in navigation, particularly division into two market segments (military and outdoors) and greater use of sub-categories, meant that products were easier to find and hence easier to buy, leading to increased sales of products that had previously been slow sellers.
  • New Customers – ‘We now send more items abroad.’ The better performance of the site in search engines has led to an increase in orders from new customers and from abroad. The company now has regular sales to Canada, Australia, New Zealand and various European states. 60% of orders are from new customers – not bad for a business that initially set up on the premise of a niche market for UK-based cadet forces.
  • Adding value to the brand – ‘New corporate clients could look at our Web site and see we weren’t fly-by­night and that we meant business.’ Improvements to the design have raised confidence levels in visitors and this has led to increased sales. But perhaps more significantly, the professional image of the site was a good boost to confidence for potential busi­ness partners in the emerging business-to-business division that started to trade as North Star Contracts.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).

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