CHAPTER 7: Benefits/Risks and the techniques to assess risk/benefit. Different selection of different types of e-procurement including the B2B marketplaces

Purchased goods and services are often the largest expenditure at many companies so it is of high strategic importance to drive down these costs.

Procurement: all activities involved with obtaining items from a supplier such as purchasing & inbound logistics (goods-in, transportation, warehousing), and even the distribution

Procurement performance improvements are based on
* The right price
* Delivered at the right time
* Are of the right quality
* Of the right quantity
* From the right source

Two broad categories of procurement 1) those that relate to manufacturing of products production related procurement 2) operating (non-production-related) procurement that supports the operations of the whole business and includes office supplies, furniture, Info Systems, MRO goods and a range of services from catering, buing travel, consulting and training

Two methods of buying products:
Systematic Sourcing: negotiated contracts with regular suppliers, typically in long-term relationships
Spot Sourcing: fulfillment of an immediate need, typically of a commoditized item for which it is less important to know the credibility of the supplier
+ Straight rebuy vs. Modified rebuy

Direct cost reduction are achieved through efficiencies in the process. Efficiencies result in less staff time spent in searching and ordering products and reconciling deliveries with invoices. Savings also occur due to automated validation of pre-approved spending budgets, leading to fewer people processing each order , and in less time. It is also possible to reduce the cost of physical materials (order forms and invoices).
Indirect benefits = cycle time between order and use of supplies is reduced. Greater flexibility in ordering goods from different suppliers

RISKS: authentication of identity is the main issue. People need to be satisfied about who they are dealing with. They need to know that their messages have not been intercepted or corrupted and they are legally non-repudiable (other party can??™t walk away from its commitment or will be subject to a court of law). 2/3 of companies rely on password protection when dealing with suppliers and trusted 3rd party certification is required for the level of trust to increase.
Make sure that the ROI is worth the investment
The biggest barrier to automation of e-procurement is integration with existing financial systems. Also: training/change management, supplier relationship management, catalogue management and project management. Interesting note is that people fear that a new improved process will show that they were doing a poor job in the past.

Stock control system: system highlights when reordering is required
CD/Web-based catalogue: makes it quick to find suppliers
Email/ database-based workflow systems: integrate order enrtyies, manager approval, and placement by buyer
Order-entry by website:
Accounting systems:
Integrated e-procurement/ERP systems: integrate everything above which also includes integration with suppliers??™ systems. Buying a new system may be the simplest technical option, but more expensive than trying to integrate existing systems and also requires retraining.

Electronic B2B marketplaces are known as marketplace/exchanges/hubs. They are virtual locations with facilities to enable trading between buyers and sellers. Typically they are intermediaries that part of the REINTERMEDIATION phenomenon and are independent of buyers and suppliers.

Some marketplaces go beyond procurement to offer a range of services that integrate the supply chain. These are called metamediaries: 3rd parties that provide a single point of contact and deliver of range of services between customers and suppliers (supplier evaluation, procurement, tracking, marketplace information, certification monitoring, auctions, catalogues etc.).

Some believe that the task of searching for suppliers and products may be taken over by software agents: assist humans by automatically gathering info from the internet or exchanging data with other agents based on parameters set up by the user.


Review from Chapter 5 of e-business strategy: Situation analysis, objective setting, strategy, tactics, action and control.

Marketing: management process for indentifying, anticipating and satisfying customer requirements profitably.

1) Functions carried out within an organization such as market research, brand/product management, public relations and customer service
2) Marketing approach/concept that can be used as a the guiding philosophy for all aspects of a business

The modern marketing concept encompasses these two and stresses that marketing encompasses the range of organizational functions and processes that seek to determine the needs of target markets and deliver products/services to customers and other key stakeholders such as employees and financial institutions.

Marketing orientation: Coordinating all organizational activities that impact on the customer to deliver customer requirements (customer needs met efficiently, effectively and profitably). Developing e-commerce services in response to a changing market needs is an example of this.

E-marketing: achieving marketing objectives through the use of electronic communications technology
Web/email/databases/mobile/digital TV. Search engines/affiliate marketing/online advertising/sponsorships/online PR (blogs/RSS/Viral marketing).

Customer Journey: multi-channel buyer behavior as consumers use different media to select suppliers/make purchases/gain customer support.

Multi-channel marketing strategy: how different marketing channels should integrate and support each other in terms of their proposition development and communications based on their relative merits for the customer and the company.

E-Marketing Plan:
Situation: where are we now
Objectives: where do we want to be
Strategy: how do we get there
Tactics: how exactly do we get there
Action: what is our plan
Control: did we get there

1) Situation Analysis: the aim is to understand the current and future environment in which the company operated in order that the strategic objectives are realistic in light of what is happening in the marketplace.

Demand analysis: examines the current and projected customer use of each digital channel within different target markets. Note to evaluate the different barriers to e-commerce adoption by customers.
To predict demand consider percentage of customers who: have internet access > site access > purchases influenced by online info > buy online
Persona: summary of characteristics/needs/motivations/environment of typical website users
Customer Scenario:

Competitor Analysis: new approaches from existing companies, new companies on the internet, new technologies/design techniques/online customer support that may give a competitive advantage.

Competitive Capability = (agility x reach) / time-to-market
Agility = speed at which a company is able to change strategic direction to respond to customer demands
Reach = ability to connect to potential and existing customers OR to promote products and generate new business in new markets
Time-to-market = product lifecycle from conception to revenue generation

Customer Value (brand perception) = (Product Quality x Service Quality) / (Price x Fulfilment Time)

Intermediary Analysis: web-based intermediaries such as horizontal/vertical portals in driving traffic to a site and for advertising/PR/partership.

Internal Marketing Audit: capability of the resources of the company such as its people/processes/technology to deliver e-marketing relative to its competitors.
Business effectiveness (cost-benefit analysis), marketing effectiveness (leads, sales, retention, market share, brand enhancement/loyalty, customer service) for each product line, and internet effectiveness (unique visitors, page impressions OR focus groups/questionnaires and effectiveness of the value proposition of the site).

2) Objective Setting

Financial Results (business value): online costs and contribution to profits
Customer Value: reach, cost of acquisition or cost per sale, sales per customer
Operational Processes: fulfillment times, customer support response times
Innovation and Learning (people and learning): internal satisfaction

3) Strategy: refer to six key decision in strategy on pg 233

Market/Product Positioning:
1) Offer additional info or transaction services to existing customer base
2) Address the needs of new customer segments by repackaging current info assets or by creating new business propositions
3) Attract customers to generate new sources of revenue such as advertising or sales of complementary products

Target Market Strategies:
Segmentation: identify different groups that you should approach differently. Who are they (size, market share, needs, competitors??™ value proposition to them) How are their needs changing
Target Marketing: Which do we target How can we add value
Positioning: influencing the customer??™s perception

6 I??™s of marketing: Interactivity, intelligence, individualization, integration, industry restructuring, independence of location

Mixed-mode buying: customer changes from one channel to another during the buying process

4) Tactics: methods of implementing strategy

Marketing-Mix: 4Ps = product, price, place and promotion + people, processes and physical evidence. It is a push strategy therefore does not explicitly acknowledge the needs of customers so it leads to product rather than customer orientation.

4Cs: Customer needs and wants (from a product), Cost to the customer (price), Convenience (place), and Communication (promotion)

Core product (fundamental features that meet the user??™s needs) and extended product (additional features and benefits)
Bundling: offering complementary services (flights + car rentals + hotels)

Satisficing Behavior: consumers are not entirely rational and will make a choice based on imperfect information because they do not always work diligently toward their goal of lowest price for example.
Commoditization: product selection more dependent on price that differentiating features, benefits, and value-added services
Dynamic Pricing: updated in real-time according customer type or market conditions
Aggregated Buying: collective purchasing to gain a volume discount

Promotion: site creation, maintenance and promotion are 3 separate investments. Online vs. Offline assessment depends on customers. Online promotion = search engine marketing, affiliate marketing and online advertising
Reach (potential audience), Richness (depth/detail of info to be collected/provided), and Affiliation (whose interest the seller represents ??“ consumers or suppliers).

People/Process/Physical Evidence: particularly important for service delivery

Brand equity: the assets linked to a brand??™s name that add to a service

Positive Customer Experience: content quality, adequate performance of site infrastructure (availability/speed), ease of contacting a company, quality of response, fulfillment quality, and customer privacy, reflecting the characteristics of the offline brand.

5) Actions: activities conducted by a manger to execute the plan

Level of investment and payback, training, changes in organizational structure, creating and maintaining the site

6) Control

Traditional = market research on customer views
New = analysis of web-server log files

CHAPTER 9: CRM is necessary for customer retention

Acquiring online customers is more expensive, but if you can retain loyal online customers, this accelerates profitability compared to a traditional business because it costs less and less to service them. However, you should still focus on the most profitable customer segment!

Classic customer lifecycle: stages each customer will pass through
(PAGE 391) Select ??“ Acquire ??“ Retain ??“ Extend (re-/cross/up-selling, reactivation, referrals)

Magnetic: acquisition due to promotion and an attractive site
Sticky: Retention ??“ keeping them on the site (ideally leading to revenue generation)
Elastic: Extension ??“ persuading customers to return, particularly for revenue generation

Customer centric marketing: focused on customization for a target audience
Sense and respond communications: sense users position in the customer lifecycle and send timely/relevant communications (product recommendations or reminders of abandoned shopping carts)
Permission Marketing: opt-in (usually for an incentive)
Interruption Marketing: disrupts the user??™s activity

Customer Profiling: info used to segment a customer (important for selection)
Qualified Lead: contact info coupled with an indication of a propensity to buy

IDIC approach to maintaining relationships:
Customer Identification/Differentiation/Interactions/Customization

Conversion Marketing: using marketing communication to convert 1) potential to actual customer 2) existing to repeat customers. It can be hard to do this online because the human element is important so it is useful to offer phone/live chat/e-mail contact for those who need further info or human persuasion

Performance Drivers: critical success factors that govern whether objectives are achieved: such as conversion rates and churn rates (attrition per unit of time)
^^^^attraction > conversion > retention^^^^

Online Customer Acquisition Management: acquisition can mean 1) the use of a website to acquire new customers 2) getting existing customers to migrate online

Lean-forward media means you have undivided attention (they are actively using your site). Lean-back means they could be doing something else (TV ad)

Assessing marketing communication effectiveness: cost per acquisition of a visitor/lead/sale OR Reach/Visits/Leads/Outcomes as a % of the former
Referrer: source of a website visit (paid search, affiliate marketing, online ad)
Bounce rate: single-page visit

Online PR: maximizing favorable mentions of your company, brands, products, or website on 3rd party sites (likely to be visited by your target audience)

Affiliate marketing: commission-based arrangement where you pay when leads or sales are generated for you from an affiliate site

Online sponsorship: linking of a brand with related content or context to strengthen the brand or create brand awareness

Purpose of interactive advertising (besides driving traffic to your site): delivering content, enabling a transaction, shaping attitudes, soliciting a response, or encouraging retention

Collaborative Filtering: profiling of customer interest coupled with delivery of specific info and offers (recommendations) often based on the interests of similar customers

Measures which indicate activity levels: new users – active users – dormant users – inactive users

RFM analysis = recency, frequency, and monetary value
FRAC = frequency, recency, amount, and category (other types of product purchased)

Propensity modeling: evaluate characteristics/behavior and make product recommendations (like sense and respond communication)

Three types of data tables for CRM: Personal/Profile Data ??“ Transaction Data ??“
Communications Data (channel they chose or channel that reached them)

The ultimate aim of CRM is to enable customer contact (regardless of channel)

Three core needs for a customer: need for 1) info 2) to place an order 3) post-sale support

CHAPTER 10: Initiation phase of CM ??“ Project Planning > CM > Risk Mgmt
CHANGE MANAGEMENT (CM): managing process/ structural/ technical/ staff/ culture change within and organization

Business transformation: Significant change to organizational processes (done to improve organizational performance)

Organizational change can be incremental or discontinuous/transformational change. It can also be anticipatory change or reactive change.

4 forms of organizational change: doing things better vs. doing things differently
Tuning: incremental but no immediate need
Adaptation: incremental in response to opportunity or threat
Re-orientation: transformational and anticipatory
Re-creation: transformational and reactive

Success factors for CM: management buy-in and ownership, effective project management, attract and keep the right staff, employee ownership of change


Business Process Management (BPM): improving business process with the use of info systems (which improve information flows between people)

Business Process Re-engineering (BPR): radical change to operations which often involve IT capabilities

Business Process Improvement: optimizing existing processes with IT enhancement
BPA: simply automating manual processes with IT

Planning Change: analysis > objectives > strategy > tactics > Implementation:
Project Management
Estimate: identify and sequence activities involved
Allocate Resources: both financial and human for each task
Schedule/Plan: effort time = total work; time elapsed = time based on people
Monitor/Control: going as planned; corrective action for deviations

Systems Development Lifecycle: sequence in which a system is created from initiation, analysis & design, implementation > build and maintenance

Prototyping: iterative testing process where users make suggestions before the site goes live. Rapid > Simple > iterative > incremental > user-centered

HR requirements: build a new skill set within organization or outsource

5 intrinsic characteristics of a job: skill variety > task identity > task significance > autonomy > feedback

Change agents: managers involved in controlling change transitions
^can be: collaborative, consultative, directive, or coercive^

Four types of cultural orientation
Survival: outward looking + flexible; customer driven; flat
Productivity: outward looking + ordered; sales driven; hierarchical
Human Relations: inward looking + flexible; empowerment focus; flat
Stability: inward looking + ordered; efficiency focus; hierarchical

Knowledge Management: tools for disseminating knowledge within an organization
Knowledge: applying experience to problem solving
Explicit knowledge can be expressed and recorded
Tacit knowledge is intuitive

IT-based view of KM: knowledge can be stored
People-track view of KM: KM is about improving individual skills and behavior

Knowledge Management activities: identify > create > store > share (stock = stored; flow = transferred from person to person) > use

Static (centrally controlled) > Interaction (process several employees are involved with) > Collaborative electronic workspace (self-service environment where all employees are empowered to participate)

Risk Management: identify/evaluate potential risks > develop strategies to reduce risk > implement strategies/solutions (targeting high-impact and most- likely) > monitor the risks and learn about future risks