Chapter VIll

Virtual Market Space

The new virtual business opportunities' are created by e-commerce.

World-wide economy is increasingly based on information and intangible value.

This evolution causes virtual forms of market-space. Virtual market-place is the platform to bring
together supply and demand as well as technology and economic requirements to optimize the
employment of resources and administration as well as the selling process.

In order to coordinate various commercial contacts different topic-oriented Electronic Market Places
(EM) increasingly emerge, EM is considered to be a trade system initiated for specific business
transactions. In other words, it coordinates needs of market participants within the virtual market
according to certain competition processes and a virtual market space is created due to the initiative of
a market place coordinator who has no ownership of the traded goods Therefore, in a typical virtual
market transaction, the information will be transferred from physical suppliers, information mediators
(information producers and virtual markets) and customers. Virtual market-spaces can be categorized
into four virtual spaces: a virtual information space, a virtual communications space, a virtual
distribution space and a virtual transaction space.

1. The Information Space

2.The Communication Space

3.The Distribution Space

4.The Transaction Space

as hereasant overall proflabity, whictr can be achieved either by increasing increasing the customer base
(by reaching new customer segments or geographies)

increasing the amount purchased by customers (through increased selection and new offerings)

increasing the purchase frequency (by making re-purchase convenient or rewarding, or suggesting more
usage occasions)
or decreasing costs:

reducing new service/product development costs more effective/efficient promotional spending more
effective/efficient inventory replenishment business reengineering greater capital
efficiency/effectiveness.

1. The Information Space

The virtual information space consists of new Internet-Based channels through which economics agents
can display information about themselves and

(a) the products and services which they offered. The area of greatest activity for the information Space
is the World Wide Web, an area of the Internet in which companies can set up "home pages' that allow
global reach and the ability to provide rich information. a good virtual information space is designed on
the basis of two characteristics: convenient navigation with user-friendly interface in the cyberspace and
human- oriented design with users' experience.

Turning Interest into Action

For consumers, the World Wide Web has provided a new efficient approach for gathering information
and making comparisons between competing offerings The key aim in exploiting the Information Space
is to move prospective customers further along the sales cycle by converting interest into action. This
can be done by:

Providing the basic information that customers would need, such as product information, company
contact information, areas that the company services, and what visitors can do at the site (such as on-
line purchasing. moditying billing and invoice information, browsing the product catalog. etc.)

• Buiding up buyer confidence in the company, by having a professional looking web site and providing
information that will ennance the firm's crediblity. Providing information such as a company history, a
list of accolades or favorable write-ups in the media, a list of patents owned by the company, or even
photographs of the company's facility and staff can go a long way in allaying customer fears of dealing
with a fly-by-night operation.

Providing information that will move visitors further along the sales cycle, such as contact information
for the nearest real-world retailer, comparisons with competitive offerings, or third-party evaluations of
the company's offering.
Though this is the simplest of Internet-based activities that a company can undertake, many companies
have entered into the Information Space without any strategy, providing little more than electronic
versions of their company brochures.

Content Isn't Just for Customers

However, the Information Space is not merely restricted to servicing the needs of customers and
stimulating sales. The Information Space can also be used by a company to serve the needs of other
stakeholders, such as:

prospective employees investors

supply chain partners the media

the company's own employees

with content specifically tailored to their interests. Some examples of web-mediated initiatives for
serving these other stakeholders include providing supply chain partners with a shipment status lookup
application, or allowing investors to view the annual report on-line. While these activities may not
necessarily increase a company's revenues, they certainly can help to reduce expenses and increase the
responsiveness in serving these other stakeholders.

2. The Communication Space

Distribution sparce

The Communication Space allows for companies to exchange information with the various stakeholders
in their business: their suppliers, customers, and strategic allies. Unlike the information provision activity
in the Information Space, communication in the Communication Space can go both ways.For examples,
blog systems, chat rooms and videoconferencing.

The Internet has allowed for high-speed and low-cost communication, unhindered by physical and
geographical constraints, by the use of e-mail, Usenet discussion groups, and chat rooms. This new
communication channel can be used for lobbying, influencing opinions, negotiating potential
collaborations, and the creation of communities. However, in most organizations,

this is an undeveloped area.

E-mail as a Communications Channel

The simplost use of the Communication Space is to allow customers to mak questions or provide
foodback to a company, usually through e-mail yand nor an anglo, a majorly of companies have
implemented this,. However, Simply having an o-rail link for customers to use is not enough- the
company must be

able to handle incoming e-mails and respond to them in a timely fashion.

Incoming e-mail must be treated like telephone messages, and responded to quickly, rather than like
incoming postal mail. By ensuring that it is captured properly and answered in a timely manner, you are
helping to ensure customer satisfaction. Many companies don't understand this, and waiting more than
48 hours can cause fI- will. in fact, the failure to respond to e-mail promptly is one of the single most
common reasons for lost business and lost image over the Internet. In the very least, if it is not possible
to provide a proper response in that time, a company should send a simple e-mail back to the customer
stating that the query was received and when an answer should be expected.

Follow-on Marketing with Mailing Lists

The next step up for a company would be to proactively direct content on a regular basis to its
customers. This can be done by asking visitors to subscribe to a mailing list that would provide them
with updated content on a timely basis. This way, the company can maintain top-of-mind awareness in
the potential customer, even if they never get around to visiting the site again.

Furthermore, with the right content, a company might be able to stimulate ladditional sales through
follow-on marketing. So instead of spending money on postage to send out promotional mailings or
circulars, some companies are sending out weekly e-mails outlining their new offerings and special
promotions at

considerably less expense.

Creating Communities

In the Internet marketspace, the creation of on-line communities, where like-minded individuals can
interact and exchange information, is another aspect of the Communication Space. Community creation
can encourage visitors to retur to a site more frequently, serve as a means of generating demand for a
company's as a destination site.

offerings, cultivate customer loyalty, and further reinforce a company's positioning

"Sticking' is what retail analysts call the creation of a community around a procuct in the real world. In
creating such a community, visitors are encouraged to linger longer in a store and are provided with an
incentive to return. In essence crealing a community makes a store a "fun place to shop'. Examples in
the real

world would include;

• the Disney Store, a brightly decorated store with themed merchandise thal onfers in sylore act wiles,
for kids and atractive offerings for their parents.
The key to creating a community around a product in the virtual marketspace is to augment the
customers' experience with the product, thereby encouraging them to return, which would hopefully
drive further sales. For example, community-building activities can include:

the creation of a knowledge base that will provide customers with sound

selection guides)

advice to assist with decision-making (such as movie reviews or product-

• providing information on new uses for products (such as providing recipes for a food product)

providing forums that allow customers or other stakeholders to speak with one another (such as a
'household cleaning tips' exchange)

The value in a community lies not in the product itself. Instead, it lies in what the business can do to
create new value for the customer by enriching the experiential aspects of the purchasing process,
whether it be the provision of valued content on the products, or offering a forum where customers can
speak with other likeminded individuals.

3. The Distribution Space archetin

The virtual distribution space consists of new distribution channels for variety of products and services.
The first category of products includes those products that can be efficiently distributed by means of
Internet. These are products that can be digitized and transmitted through computer networks, such as
text, pictures, digital music, digital video, software and computer games. The second category includes
such services as text, voice or video- based consulting and training. The ability to serve as a physical
distribution medium for certain goods is a unique feature of virtual distribution space. For example,
companies involved in online ticketing and reservation, digital products, financial services, tele-
medicine, etc., can best realize such advantages. This is true for companies that provide digital products.
Also for companies that have established virtual distribution other than the Internet can use the
established channel to provide after-sales services

4. The Transaction Space

The virtual transaction space consists of new Internet-based channels through which economics agents
can exchange formal business transactions, such as orders, invoices and payments; this can range from
simple email and online order forms to online ordering using a credit or debit card and online accounts.

Because most features of virtual transactions can be recorded electronically for future use by marketers,
the amount of data gathered by marketers is growing at constantly accelerating rates, consumers or
customers have certain rights to privacy and security of their information when conducting virtual
transactions.

Therefore, the protection of virtual transaction of information (whether personal or financial) is a

technological and important issue.
The majority of web sites today are what could be termed 'brochurewarg

A brochureware site essentially provides itle more than product information with a Alone number or
address for contact olectronic versions of the company's real world brochures.

Completing the Sales Cycle On-line

Howover, having a 'brochureware' web site does not necessarily mean That potential clients will follow
through by making an inquiry about a company's products. Wob-based businesses must turn interest
into action as quickly as possible, so as to avoid the potential customer's demand from leaking away.

The virtual Transaction Space provides a means of capturing this demand via hew channels by which
companies can carry out business transactions with their customers- orders, invoices, and payments.

The Pitfalls of On-line Sales

Unfortunately, conducting on-line sales with customers does raise two

issues for companies:

Delivery. Because of the global reach of the World Wide Web, some firms are finding interest from
customers in other countries, and companies must decide which geographic areas they will service. Even
if the retailer restricts the fulfillment of customer orders to a specific geographic

area

such as within North America, there are still logistical issues that must be resolved.Selling directly to the
consumer involves sending numerous single or small shipments to numerous customers, and not many
retailers can do this economically, let alone manage it. Furthermore, the addition of the shipping
charges will decrease the value proposition of a retailer's offerings, and may even make direct sales
unviable, especially for lower-value items.

2. Channel Conflict The other pitfall of selling directly to consumers is the risk of channel conflict, which
will vary depending on the structure of the retailer network. By opening up a new direct channel, a
company may alenate ils existing retail outlets by directly competing with them. For example, Compaq
faced heavy resistance from its network of retailers when it proposed the creation of a direct sales
channel. Before proceeding, a retailer should weigh the benefits of selling directly against the possible
backlash from its real-world network. Some factics being used to minimize channel conflict would
include selling items that are not available through normal retail channels, or only selling directly in
geographical areas where there is currently no retailer coverage.

Best Practices of Web Retailers

In order to overcome consumer reluctance in making use of the Transaction Space, a number of web
retailers have come up with a number of best practices:
1. Strong Branding. Branding a retail concept in the real world is all about creating an image, feeling, or
attitude within a consumer's mind. This helps create a powerful bond between the retailer and the
consumer, favorably influencing purchase behavior.On the Internet, with consumers unable to 'see' or
'touch' the merchandise they are buying, consumers tend to purchase items that are standardized so
that they know what to expect. For example, on-line clothing retailers are finding that the best-selling
clothing items on the Internet are recognizable basics such as jeans, khakis, and T-shirts. A brand is one
of the few means by which a consumer can judge the consistency and quality of an on-line offering- a
Compaq computer is a Compad computer, whereas a computer from XYZ Corporation would be a, more
nebulous entity.

1. Affiliation with an Established High-Traffic Site. Internet retailers are ensuring high visibility for their
offerings by quickly snapping up prime real estate on the shopping channels of popular on-line services
(such as AOL and Compuserve), search engines (such as Yahoo! and Lycos), and on-line communities
(such as Netscape or Microsoft Network). These established high-traffic sites, also referred to as portals,
serve as the entry points for many Internet consumers and are used by the majority of both new and
experienced users as navigational aids.Not only do these high-profile sites aggregate Internet traffic for
retailers, thereby providing a higher concentration of 'eyeballs', but from the consumer's perspective,
they serve as a form of qualification, a reassurance of the retailer's legitimacy.

2. Real-world Promotional Programs. In 1997, the IBM World Avenue Mall, which housed many on-line
storefronts, closed its doors due to lower-than-anticipated traffic. One of the reasons offered for the
cybermall's failure was inadequate promotion of the service in IBM's print and television ads Likewise, in
order for an Internet retailer to stand out from the millions of web sites, and reach potential customers
who may not use the Internet on a regular basis, they must use real world promotional programs to
increase their visibility. Becoming 'real wired' involves placing the web address on: every piece of
advertising or promotional copy that is produced, as business cards, annual reports, advertisements, and
brochures

• every piece of property owned by the retailer (such as buildings and delivery vehicles) direct mail
pieces to existing and potential customers notifying them of the web presence and what they can do
there.

4. Reduce the Cost of Acquiring Customers. Several demand generation models have emerged on the
World Wide Web, with the most popular being banner ads, portal affiliations, and syndicated selling.

Banner ads are clickable graphic links that take the Internet user to another web site, and this ad space
is sold at a fixed monthly fee.

Portal affiliations would involve an Internet retailer 'renting' space on high-traffic web sites, such as
popular on-line subscription services (such as AOL or Prodigy), search engines (such as Yahoo! or Lycos),
and Internet communities (such as Netscape or Microsoft Network).
4. The Transaction Space

The virtual transaction space consists of new Internet-based channels through which economics agents
can exchange formal business transactions, such as orders, invoices and payments; this can range from
simple email and online order forms to online ordering using a credit or debit card and online accounts.

Because most features of virtual transactions can be recorded electronically for future use by marketers,
the amount of data gathered by marketers is growing at constantly accelerating rates, consumers or
customers have certain rights to privacy and security of their information when conducting virtual
transactions.

Therefore, the protection of virtual transaction of information (whether personal or financial) is a

technological and important issue.

The majority of web sites today are what could be termed 'brochurewarg

A brochureware site essentially provides itle more than product information with a Alone number or
address for contact olectronic versions of the company's real world brochures.

Completing the Sales Cycle On-line

Howover, having a 'brochureware' web site does not necessarily mean That potential clients will follow
through by making an inquiry about a company's products. Wob-based businesses must turn interest
into action as quickly as possible, so as to avoid the potential customer's demand from leaking away.

The virtual Transaction Space provides a means of capturing this demand via hew channels by which
companies can carry out business transactions with their customers- orders, invoices, and payments.

The Pitfalls of On-line Sales

Unfortunately, conducting on-line sales with customers does raise two

issues for companies:

Delivery. Because of the global reach of the World Wide Web, some firms are finding interest from
customers in other countries, and companies must decide which geographic areas they will service. Even
if the retailer restricts the fulfillment of customer orders to a specific geographic

area

such as within North America, there are still logistical issues that must be resolved.Selling directly to the
consumer involves sending numerous single or small shipments to numerous customers, and not many
retailers can do this economically, let alone manage it. Furthermore, the addition of the shipping
charges will decrease the value proposition of a retailer's offerings, and may even make direct sales
unviable, especially for lower-value items.
2. Channel Conflict The other pitfall of selling directly to consumers is the risk of channel conflict, which
will vary depending on the structure of the retailer network. By opening up a new direct channel, a
company may alenate ils existing retail outlets by directly competing with them. For example, Compaq
faced heavy resistance from its network of retailers when it proposed the creation of a direct sales
channel. Before proceeding, a retailer should weigh the benefits of selling directly against the possible
backlash from its real-world network. Some factics being used to minimize channel conflict would
include selling items that are not available through normal retail channels, or only selling directly in
geographical areas where there is currently no retailer coverage.

Best Practices of Web Retailers

In order to overcome consumer reluctance in making use of the Transaction Space, a number of web
retailers have come up with a number of best practices:

1. Strong Branding. Branding a retail concept in the real world is all about creating an image, feeling, or
attitude within a consumer's mind. This helps create a powerful bond between the retailer and the
consumer, favorably influencing purchase behavior.On the Internet, with consumers unable to 'see' or
'touch' the merchandise they are buying, consumers tend to purchase items that are standardized so
that they know what to expect. For example, on-line clothing retailers are finding that the best-selling
clothing items on the Internet are recognizable basics such as jeans, khakis, and T-shirts. A brand is one
of the few means by which a consumer can judge the consistency and quality of an on-line offering- a
Compaq computer is a Compad computer, whereas a computer from XYZ Corporation would be a, more
nebulous entity.

1. Affiliation with an Established High-Traffic Site. Internet retailers are ensuring high visibility for their
offerings by quickly snapping up prime real estate on the shopping channels of popular on-line services
(such as AOL and Compuserve), search engines (such as Yahoo! and Lycos), and on-line communities
(such as Netscape or Microsoft Network). These established high-traffic sites, also referred to as portals,
serve as the entry points for many Internet consumers and are used by the majority of both new and
experienced users as navigational aids.Not only do these high-profile sites aggregate Internet traffic for
retailers, thereby providing a higher concentration of 'eyeballs', but from the consumer's perspective,
they serve as a form of qualification, a reassurance of the retailer's legitimacy.

2. Real-world Promotional Programs. In 1997, the IBM World Avenue Mall, which housed many on-line
storefronts, closed its doors due to lower-than-anticipated traffic. One of the reasons offered for the
cybermall's failure was inadequate promotion of the service in IBM's print and television ads Likewise, in
order for an Internet retailer to stand out from the millions of web sites, and reach potential customers
who may not use the Internet on a regular basis, they must use real world promotional programs to
increase their visibility. Becoming 'real wired' involves placing the web address on: every piece of
advertising or promotional copy that is produced, as business cards, annual reports, advertisements, and
brochures
• every piece of property owned by the retailer (such as buildings and delivery vehicles) direct mail
pieces to existing and potential customers notifying them of the web presence and what they can do
there.

4. Reduce the Cost of Acquiring Customers. Several demand generation models have emerged on the
World Wide Web, with the most popular being banner ads, portal affiliations, and syndicated selling.

Banner ads are clickable graphic links that take the Internet user to another web site, and this ad space
is sold at a fixed monthly fee.

Portal affiliations would involve an Internet retailer 'renting' space on high-traffic web sites, such as
popular on-line subscription services (such as AOL or Prodigy), search engines (such as Yahoo! or Lycos),
and Internet communities (such as Netscape or Microsoft Network).