Marketplace Analysis For E-Commerce

Slide 2.
Chapter 2
Marketplace Analysis for E-commerce
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 2.2
Introduction
• Disruptive technologies: New
technologies that prompt businesses to
reappraise their strategic approaches.
– Consider a B2B organization.
Traditionally it has sold its products through
a network of distributors. With the advent of
e-commerce it now has the opportunity to
bypass distributors and trade directly with
customers via a destination web site, and it
also has the opportunity to reach customers
through new B2B marketplaces.
Slide 2.3
Introduction
– For B2C organizations such as an e-retail
destination site there is the opportunity to
market its products through online
intermediaries such as search engines,
price comparison sites, social networks,
blogs and other publisher sites.
• Destination site: Typically a retailer or
manufacturer site with sales and service
information. Intermediaries such as media
sites may be destination sites for some.
Slide 2.4
Introduction
– Online intermediaries: Web sites which
help connect web users with content they
are seeking on destination sites. Include
new online intermediaries such as search
engines and shopping comparison sites and
traditional brokers, directories and
newspaper and magazine publishers that
now have an online presence.
• There is also the need for a process to
continually monitor the environment which
is often referred to as environmental
scanning.
Slide 2.5
Introduction
• Situation analysis: Collection and review
of information about an organization’s
external environment and internal
processes and resources in order to inform
its strategies.
• Environmental scanning and analysis
The process of continuously monitoring the
environment and events and responding
accordingly.
Slide 2.6
Figure 2.1 The environment in which e-business services are provided
Slide 2.7
Strategic agility
• The capacity to respond to these

environmental opportunities and threats is
commonly referred to as strategic agility.
• Strategic agility is a concept strongly
associated with knowledge management
theory and is based on developing a sound
process for reviewing marketplace
opportunities and threats and then selecting
the appropriate strategy options.
Slide 2.8
Strategic agility
• Traditional management models of creating a

long-term vision are flawed since our
knowledge of the future is imperfect and
marketplace conditions are changing
continuously.
Slide 2.9
Environment constraints
and opportunities
• Customers – which services are they offering via
their web site that your organization could support
them in?
• Competitors – need to be benchmarked in order to
review the online services they are offering – do they
have a competitive advantage?
• Intermediaries – are new or existing intermediaries
offering products or services from your competitors
while you are not represented?
• Suppliers – are suppliers offering different methods
of procurement to competitors that give them a
competitive advantage?
Slide 2.10
Online marketplace
• Exchange of information and commercial
transactions between consumers, businesses
and governments completed through different
forms of online presence such as search
engines, social networks, comparison sites
and destination sites.
Slide 2.11
Online marketplace analysis

• Analysis of the online marketplace or
‘marketspace’ is a key part of developing a
long-term e-business plan or creating a
shorter-term digital marketing campaign.
• Completing a marketplace analysis helps to
define the main types of online presence that
are part of a ‘click ecosystem’ which describes
the consumer behavior or flow of online
visitors between search engines, media sites
and other intermediaries to an organization
and its competitors.
Slide 2.12
Online marketplace analysis
• To help understand and summarize the online

linkages between online businesses and
traffic flows it is worthwhile to produce an
online marketplace map.
• This shows the relative importance of different
online intermediaries in the marketplace and
the flow of clicks between your different
customer segments, your company site(s) and
different competitors via the intermediaries.
Slide 2.13
Figure 2.3 An online marketplace map
Slide 2.14
The main elements of the online

marketplace map
1. Customer segments:
• The marketplace analysis should identify and
summarize different target segments for an online
business in order to then understand their online
media consumption, buyer behavior and the type
of content and experiences they will be looking
for from intermediaries and your web site.
Slide 2.15

marketplace map
2. Search intermediaries.
• These are the main search engines in each country.
Typically they are Google, Yahoo!,Microsoft Live Search
and Ask, but others are important in some markets such
as China (Baidu), Russia (Yandex) and South Korea
(Naver).
• The Google Trends tool (Figure 2.4) is a free tool for
assessing site popularity and the searches used to find
sites and how they vary seasonally, which is useful for
student assignments.
Slide 2.16
Figure 2.4 Google trends for web sites – useful for benchmarking
the growth of online intermediaries and destination sites.
Source: http://trends.google.com/websites
Slide 2.17

marketplace map
3. Intermediaries and media sites.
•Media sites and other intermediaries such as aggregators
and affiliates are often successful in attracting visitors via
search or direct since they are mainstream brands.
Companies need to assess potential online media and
distribution partners in the categories such as:
a. Mainstream news media sites or portals. Include traditional, e.g. FT.com or
Times or Pureplay, e.g. Google news, an aggregator.
b. Niche or vertical media sites, e.g. E-consultancy, ClickZ.com in B2B.
c. Price comparison sites (also known as aggregators), e.g. Money
supermarket, Kelkoo, Shopping.com, uSwitch.
d. Superaffiliates. Affiliates gain revenue from a merchant they refer traffic to
using a commission-based arrangement based on the proportion of sale or a
fixed amount. They are important in e-retail markets, accounting for tens of
percent of sales.
e. Niche affiliates or bloggers. These are often individuals, but they may be
important, for example, in the UK,Martin Lewis of Moneysavingexpert.com
receives millions of visits every month. Smaller affiliates and bloggers can be
important collectively.
Slide 2.18

marketplace map
4. Destination sites.
•These are the sites that the marketer is trying to
generate visitors to, whether these are transactional
sites, like retailers, financial services or travel
companies or manufacturers or brands.
•The OVP (Online Value proposition- A statement of
benefits of e-commerce service that ideally should
not be available in competitor offerings or offline
offline offerings) is a key aspect to consider within
planning
Slide 2.19
Marketplace channel structures

• Describes the way a manufacturer or selling
organization delivers products and services to its
customers
• Example – Distribution of CD
Slide 2.20
• The relationship between a company and its channel

partners shown in Figure 2.5 can be dramatically
altered by the opportunities afforded by the Internet.
This occurs because the Internet offers a means of
bypassing some of the channel partners. This
process is known as disintermediation or ‘cutting
out the middleman’.
Slide 2.21
Figure 2.5 B2B and B2C interactions between an organization, its suppliers and
its customers
Slide 2.22
B2B and B2C characteristics
Characteristic B2C B2B

Proportion of adopters with Low to medium High to very high
access
Complexity of buying Relatively simple – More complex – buying

decisions individual and influencers process involves users,
specifiers, buyers, etc.
Channel Relatively simple – direct or More complex, direct or via

from retailer wholesaler, agent or
distributor
Purchasing characteristics Low value, high volume or Similar volume/value. May

high value, low volume. be high Involvement.
May be high involvement Repeat orders (rebuys)
more common
Product characteristic Often standardized items Standardized items or

bespoke for Sale
Slide 2.23
Figure 2.6 Disintermediation of a consumer distribution channel showing (a)

the original situation, (b) disintermediation omitting the wholesaler, and
(c) disintermediation omitting both wholesaler and retailer
Slide 2.24
Disintermediation
The removal of intermediaries such as

distributors or brokers that formerly linked a
company to its customers
Slide 2.25
Reintermediation
• The creation of new intermediaries between

customers and suppliers providing services
such as supplier search and product valuation.
Slide 2.26
Figure 2.7 From original situation (a) to disintermediation (b) and reintermediation (c)
Slide 2.27
Countermediation
• ‘The advent of e-commerce means that

marketers cannot rely on the online presence of
existing intermediaries – instead they must create
their own online intermediaries.’
• Creation of a new intermediary
• Example:
– B&Q www.diy.com
– Opodo www.opodo.com
– Boots www.wellbeing.com www.handbag.com
– Ford, Daimler (www.covisint.com)
• Partnering with existing intermediary – Mortgage
broker Charcol and Free serve
Slide 2.28
Figure 2.8 Variations in the location and scale of trading on e-commerce sites
Slide 2.29
Figure 2.8 shows three alternatives across the continuum of

trading for trading within the electronic marketspace .The options
can be summarized as follows:
• Sell-side at supplier’s site (typically one supplier to many
customers). Examples: most e-tailers such as Amazon
(www.amazon.com) or Dell (www.dell.com).
• Sell-side at distribution portal (some suppliers to many
customers).
• Buy-side at buyer’s site (many (or some) suppliers to a single
customer). Examples: first to set this up was General Electric
Trading Post Network, now the GE subsidiary Global eXchange
Services (www.gxs.com).
• Buy-side at procurement portal (many suppliers to selected
customers).
• Neutral exchanges, marketplaces or hubs (many suppliers to
many customers). Examples: VertMarkets (www.vertmarkets.com)
and Global Composite (www.globalcomposites.com).
Slide 2.30
Figure 2.10 Example channel chain map for consumers selecting an estate agent to
sell their property. Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 2.31
Interactive activity – portals
Q1. Define portal
Q2. Is a search engine the same as a

portal? Yes, No
Q3. Is a search engine the same as a
directory? Yes, No
Q4. List search engines / portals you use

and explain why
Slide 2.32
Meta services
Search engines
Portal
Directories
‘A gateway to
information News aggregators
resources and
MR aggregators
services’
Comparers
Exchanges
Slide 2.33
Figure 2.12 Number of searches through the Google Keyword Tool

Source: Google https://adwords.google.com/select/KeywordTool
Slide 2.34
Figure 2.12 Number of searches through the Google Keyword

Tool.Source: Google
https://adwords.google.com/select/KeywordT
• For marketplace analysis it is useful for
companies to assess demand for products
and brand preferences in different countries
using tools such as the Google Keyword Tool
(Figure 2.12) which shows the volume of
searches by consumers related to clothes
in the UK in a one-month period.
• CPC is the cost per click charged to
advertisers. Google uses this tool to
encourage advertisers to use its Adwords
advertising service. Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
E-commerce Business Models
 Business model
 Set of planned activities designed to result in a
profit in a marketplace
 Business plan
 Describes a firm’s business model
 E-commerce business model

 Uses/leverages unique qualities of Internet and
Web
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 2-35
Eight Key Elements of a Business Model
1. Value proposition
2. Revenue model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
1. Value Proposition
 “Why should the customer buy from yo
u?”
 Successful e-commerce value
propositions:
 Personalization/customization
 Reduction of product search, price discovery costs
 Facilitation of transactions by managing product
delivery
2. Revenue Model
 “How will you earn money?”
 Major types of revenue models:
 Advertising revenue model
 Subscription revenue model
 Transaction fee revenue model
 Sales revenue model
 Affiliate revenue model
Insight on Society: Class Discussion
Foursquare: Check Your Privacy at the Door

 What revenue model does Foursquare use?
What other revenue models might be
appropriate?
 Are privacy concerns the only shortcoming of
location-based mobile services?
 Should business firms be allowed to call cell
phones with advertising messages based on
location?
3. Market Opportunity
 “What marketspace do you intend to
serve and what is its size?”
 Marketspace: Area of actual or potential commercial
value in which company intends to operate
 Realistic market opportunity: Defined by revenue
potential in each market niche in which company hopes
to compete
 Market opportunity typically divided
into smaller niches
4. Competitive Environment
 “Who else occupies your intended
marketspace?”
 Other companies selling similar products in the same
marketspace
 Includes both direct and indirect competitors
 Influenced by:
 Number and size of active competitors
 Each competitor’s market share
 Competitors’ profitability
 Competitors’ pricing
5. Competitive Advantage
 “What special advantages does your firm bring
to the marketspace?”
 Is your product superior to or cheaper to produce than
your competitors’?
 Important concepts:
 Asymmetries
 First-mover advantage, complementary resources
 Unfair competitive advantage
 Leverage
 Perfect markets
6. Market Strategy
 “How do you plan to promote your
products or services to attract your
target audience?”
 Details how a company intends to enter
market and attract customers
 Best business concepts will fail if not
properly marketed to potential customers
7. Organizational Development
 “What types of organizational structures
within the firm are necessary to carry
out the business plan?”
 Describes how firm will organize work
 Typically, divided into functional departments
 As company grows, hiring moves from

generalists to specialists
8. Management Team
 “What kind of backgrounds should the
company’s leaders have?”
 A strong management team:
 Can make the business model work
 Can give credibility to outside investors
 Has market-specific knowledge
 Has experience in implementing business plans
Slide 2.46
Revenue models – Publisher example

• Revenue models:Describe methods of generating
income for an organization.
• The main types of online revenue model are:
1. CPM display advertising on site. CPM stands for
‘cost per thousand’ where M denotes ‘mille’. This is
the traditional method by which site owners charge
a fee for advertising.
2. CPC advertising on site (pay-per-click text ads).
CPC stands for ‘cost per click’. Advertisers are
charged not simply for the number of times their
ads are displayed, but according to the number of
times they are clicked upon.
Slide 2.47
Online revenue model

3. Sponsorship of site sections or content types
(typically fixed fee for a period). A company can
pay to advertise a site channel or section. For
example, the bank HSBC sponsors the Money
section on the Orange broadband provider portal
www.orange.co.uk.
4. Affiliate revenue (CPA, but could be CPC). Affiliate
revenue is commission-based, for example I display
Amazon books on my site DaveChaffey.com (
www.davechaffey.com) and receive around 5% of
the cover price as a fee from Amazon. Such an
arrangement is sometimes known as cost per
acquisition (CPA).
Slide 2.48

5. Transaction fee revenue. A company
receives a fee for facilitating a transaction.
Examples include eBay and Paypal who
charge a percentage of the transaction cost
between buyer and seller.
6. Subscription access to content or
services. A range of documents can be
accessed from a publisher for a period of a
month or typically a year. These are often
referred to as premium services on web sites.
For example, I subscribe to the FT
(www.ft.com) for access to the digital
technology section for around €80 per year.
Slide 2.49

7. Pay-per-view access to documents. Here
payment occurs for single access to a
document,video or music clip which can be
downloaded. It may or may not be protected with
a password or digital rights management.
8. Subscriber data access for e-mail marketing.
The data a site owner has about its customers
are also potentially valuable since it can send
different forms of e-mail to its customers if they
have given their permission that they are happy
to receive e-mail from either the publisher or third
parties.

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Slide 2.

Marketplace Analysis for E-commerce

Figure 2.1 The environment in which e-business services are provided

• The capacity to respond to these

• Traditional management models of creating a

Online marketplace analysis

Online marketplace analysis

• To help understand and summarize the online

Figure 2.3 An online marketplace map

The main elements of the online

The main elements of the online

The main elements of the online

The main elements of the online

Marketplace channel structures

• The relationship between a company and its channel

B2B and B2C characteristics

Characteristic B2C B2B

Complexity of buying Relatively simple – More complex – buying

Channel Relatively simple – direct or More complex, direct or via

Purchasing characteristics Low value, high volume or Similar volume/value. May

Product characteristic Often standardized items Standardized items or

Figure 2.6 Disintermediation of a consumer distribution channel showing (a)

The removal of intermediaries such as

• The creation of new intermediaries between

• ‘The advent of e-commerce means that

Figure 2.8 shows three alternatives across the continuum of

Interactive activity – portals

Q1. Define portal

Q2. Is a search engine the same as a

Q4. List search engines / portals you use

Figure 2.12 Number of searches through the Google Keyword Tool

Figure 2.12 Number of searches through the Google Keyword

 E-commerce business model

Foursquare: Check Your Privacy at the Door

 As company grows, hiring moves from

Revenue models – Publisher example

Online revenue model

Online revenue model

Online revenue model

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