UNIT- 3

E-commerce can help organizations grow their business online, but the venture brings the most
success if planned properly. These steps can start organizations on the right path.
Organizations must consider several key areas when they begin an e-commerce planning
process.
 Define overall goals for e-commerce. ...
 Allocate resources to support e-commerce. ...
 Align marketing and sales strategies. ...
 Define target customers and their needs. ...
 Create a customer service plan. ...
 Invest in the right technology.

The e-Commerce planning process

This guide to the e-Commerce planning process walks you through the 6 key steps that’ll get you
up and running with e-Commerce.
It covers the key capabilities and decisions you need to drive e-Commerce success.
The first 2 steps focus on the opportunity.
It’s important to identify what the online selling opportunity is for your business. What is it that
selling online is going to do for you and your target audience?
From this, you then need to work out the sales and costs that go with selling online
to validate that opportunity.

The next 2 steps involve planning and deciding where and how you will sell online. You decide
which e-Commerce channels to use. And you work out how to deliver the idea customer
experience for your target audience.
The final steps cover how you actually sell. And once you start selling, how do you keep it
going? How do you evaluate and optimise what you sell online?
Because, online selling is an on-going operational process, You need systems and processes to
manage day-to-day operations. And you need to generate new ideas and activities to keep
customers coming back for more.
Step 1 - Identify the opportunity
The first step of the e-Commerce planning process is to identify the opportunity.
It’s about looking for an unmet shopper need which your brand can meet better than anyone
else.
First, you need to work out where your e-Commerce growth will come from. A useful tool you
can use to help you identify growth options is the Ansoff Matrix.
It’s an innovation planning tool. You look for growth from by deciding whether to go after
existing or new customers and existing or new markets.
Step 2 - Validate the opportunity
There’s no single best way to validate the opportunity you’ve found. It depends on the size and
nature of the opportunity. And your approach to opportunities and risks.
But there are some common elements you can explore to build your case. You certainly need to
consider some sort of market research to identify and quantify e-Commerce insights. And you
need to have an e-Commerce sales forecast, and how much it’ll cost you to drive those sales.
At the very least, it’s worth carrying out secondary research to see whether there’s demand for
the online service.
Size of opportunity
Your aim is to estimate the likely size of the opportunity in terms of total potential sales. You
make this forecast based on the total number of customers, and how much you think they’ll
spend.
Ideally, you want to estimate sales for ALL products in the category, and then your potential
share of those sales.
Bigger businesses will typically have more formal and more structured approaches to estimate
the size of the market.
This takes representative samples and lots of data to test for intent to purchase to determine the
level of future sales. The aim is to “prove” the opportunity is big enough to get approval to
launch.
You use this formal type of validation approach to identify only the highest potential ideas. It
screens out ideas with less potential. It aims to reduce the risk of a failure.
Smaller businesses can take a more entrepreneurial approach. They can test out ideas on a
smaller basis with smaller audiences. They can take more of an agile approach (see
our marketing innovation guide for more on this). This is where they put prototypes in front of
customers and co-create the offer and service with them.
This is still market research but with lower investment levels and lower risk. Look at what level
of service online retailers currently offer online for example. Is there a gap or opportunity there?
It’s important whichever ideas you go after, you base your choices on what customers need.
What drives your target audience to purchase online? You’re more likely to create an experience
which drives sales when you understand how customers make buying decisions.
Costs to serve
It’s also important in the validation to work out what your costs will be to support those sales.
As we cover in our guide to the online store business model, the cost mix can be very different
for online stores compared to traditional channels. The costs cover not just the set-up but the on-
going management of orders.
You need to consider digital media costs to drive traffic for example. Then, there’s the costs of
storage, returns and refunds. Delivery costs can be high, especially in the last mile. And then,
you also have to include website costs like hosting and maintenance.
Even if you choose to go through existing online retailer channels, you have to factor in what
retail margins they will take. You have to factor in additional costs like protective packaging. It’s
better to have an idea of these costs early in the e-Commerce planning process.
Step 3 - Channel planning
Once you’ve identified and validated the overall e-Commerce planning opportunity for your
business, it’s now time to think about where you will sell online.
This means identifying the online sales channels you want to play in. There’s 5 channels to
choose from.
It is possible to sell through all 5 channels. But each comes with its own advantages and
disadvantages. Most businesses start with one and then build out. You should have a priority list
of which channels to focus on.
4 of these channels involve working with third party online retailers. And the final channel
involves going direct to consumer (D2C), with no third party retailers.
Step 4 - Develop experiences
In our guide to marketing plans, we talk about the brand choice funnel.
This is where there are a series of steps consumers go through before they become loyal and
regular purchasers.
So, they need to trust your brand, be aware of your brand, be persuaded to consider it and so on.
A similar funnel process sits behind e-Commerce. There are a series of steps that need to happen
before potential shoppers become actual regular purchasers.
With the e-Commerce planning process, this drives a series of different online experiences that
you need to create to move potential customers along this journey. At the most simple level,
these break down into 5 key areas.
Step 5 - Sell, sell, sell
Once you have all these elements of the e-Commerce planning process lined up, then your focus
moves on to how to continue to sell your products online.
Sales promotions
This might sound simple, but think about the previous steps of the e-Commerce planning
process. You need to make this type of offer work at each step of the process. You need to tell
people about this sales promotion though a digital media campaign. And the message in that
campaign needs to say when the promotion starts and ends.
The promotional offer then needs to appear on the appropriate part of the website at the right
time. Your financial tracking system and supply chain system need to be set-up to manage the
change in details from the regular order price.
If it’s a buy one, get one free for example, the warehouse need to have the right packaging to
send out two items together. The delivery company need to know that there will be more items
that will be twice as heavy as normal orders. And you need to be able to check your analytics and
sales data, so that you evaluate the effectiveness of the promotion afterwards.
Online selling operations
At the start of the e-Commerce planning process, we covered opportunities like subscription
models and online exclusives. These present big opportunities. But, you also need to fit them into
each steps of the process.
So, with subscription models for example, you need digital media to highlight the subscription
offer and generate interest. You need to be able to set up your website to allow people to choose
their subscription and to manage it on-going. Do they get to choose what goes in the subscription
box for example? Or do you fix it in advance?
Step 6 - Evaluate and optimise
Once you start selling online, you should schedule a post-launch review to capture what you
learned from going through the process. And, as you manage your online store, and / or work
with online retailers, you need to continue to look for ways to improve how you sell.
On-going, it’s important to think like a retailer.
For example, how will you continue to drive traffic to your product pages? How will you drive
conversions and create great customer experiences?
What about your digital data? Can you use it to guide you as to what your customers like and
don’t like? How do you set up a dashboard to track and measure how your online business
performs? And how do you make adjustments to spend more on activities which work? And cut
out those which don’t?
Do you have the website capability to test different activations and learn from the results? If you
manage payments and delivery, how do you keep those systems working efficiently and in the
interests of the customer?
These are just some of the questions you need to answer when it comes to managing your own
online store. None are impossible. But as we said before, it’s an on-going operation to continue
to sell, sell, sell.
E-Commerce Initiatives
Any action a company makes to bring a business online or to increase its online
presence can be considered an e-business initiative. For instance, when a company creates a
website to market or sell its products, it is pursuing an e-business initiative.
Linking Objectives to Business Strategies
 Downstream strategies
– Tactics to improve the value businesses provide to customers
 Upstream strategies
– Focus on reducing costs or generating value
 Working with suppliers or inbound shipping and freight service providers
  Web use for businesses
– Attractive sales channel for many firms
– Complement business strategies, improve competitive positions
 Electronic commerce activities difficult to
measure
 First-wave e-commerce activities
– Existed without setting specific, measurable goals
– Did not face much competition
– Successes and failures measured in broad strokes
 Second-wave e-commerce activities
– Businesses take closer look at benefits and costs
– Good implementation plan
 Set specific objectives for benefits achieved and costs incurred.
Planning Electronic Commerce Initiatives

 Information technology projects

 Keys to successful implementation
 Planning and execution
 Electronic commerce initiative business plan
 Included activities
 Identifying initiative’s specific objectives
 Linking objectives to business strategies
 Setting electronic commerce initiative objectives
 Consider strategic role of project, intended scope, resources
available.
Identifying Objectives
 Typical business electronic commerce objectives
 Increasing existing market’s sales
 Opening new markets
  Serving existing customers better
 Identifying new vendors
 Coordinating more efficiently with existing vendors
 Recruiting employees more effectively
 Objectives vary with organization size

Linking Objectives to Business Strategies

 Downstream strategies
 Tactics to improve the value businesses provide to customers
 Upstream strategies
 Focus on reducing costs or generating value
 Working with suppliers or inbound shipping and freight service providers
 Web use for businesses
 Attractive sales channel for many firms
 Complement business strategies, improve competitive positions
 Electronic commerce activities difficult to measure
 First-wave e-commerce activities
 Existed without setting specific, measurable goals
 Did not face much competition
 Successes and failures measured in broad strokes
 Second-wave e-commerce activities
 Businesses take closer look at benefits and costs
 Good implementation plan
 Set specific objectives for benefits achieved and costs incurred
Measuring Benefits
 Tangible benefits of electronic commerce initiatives
 Easy to measure
 Example: increased sales or reduced costs
 Intangible benefits of electronic commerce initiatives
 More difficult to measure
 Example: increased customer satisfaction
 Identifying objectives
 Set measurable objectives even if for intangible benefits
 Using Web sites to build brands or enhance existing marketing programs
 Set goals in terms of increased brand awareness
 Measured by market research surveys, opinion polls
 Companies selling goods or services online
 Measure sales volume in units or dollars
 Complicated to measure brand awareness or sales
 Increase may be due to other things company is doing at same time or
general
improvement in the economy
 Using Web sites to improve customer service or after-sale support
 Set goals of increased customer satisfaction, reduced costs of providing
customer
service or support
 Example: Philips Lighting
 Provided Web ordering system for smaller customers
 Primary goal: reduce cost of processing smaller orders
 Built pilot Web site and had smaller customers try it
 Results: customer service phone calls from test group dropped by
80 percent
 Measurements of other electronic commerce initiatives
 Supply chain managers
 Measure cost reductions, quality improvements, faster
deliveries of ordered
goods
 Auction sites
  Set goals for number of auctions, number of bidders and
sellers, dollar
volume/number of items sold, number of registered
participants
 Virtual communities and Web portals
 Measure number of visitors
 Measure quality of visitors’ experiences 10
 Metrics
 Measurements companies make to assess benefits
 Use online surveys
 Use estimates: length of time each visitor remains
on site, how often visitors
return
 Benefit unit of measure
 Convert raw activity measurements to dollars
 Can compare benefits to costs
 Can compare net benefit of a
particular initiative to net benefits provided
by other
projects
 Difficult to measure value in dollars

Managing Costs
 Information technology project costs are difficult to estimate
 Web development uses rapidly changing hardware and software technologies
 Most changes in hardware costs are downward
 Increasing software sophistication
 Provides ever-increasing demand for newer, cheaper hardware
 Yields net increase in overall hardware costs
 Web technology can quickly destroy manager’s best-laid plans
 Total cost of ownership (TCO)
  Includes wide variety of costs related to activity
 Electronic commerce implementation TCO includes
 Costs of hardware, software, design work, outsourcing, salaries and
benefits for
employees involved in project, maintaining site once operational
 Good TCO number
 Includes assumptions about how often site would need to be redesigned in
the future
 Change management
 Information system projects involve change
 Employee concerns
 Ability to cope with changes, ability to continue to do good work,
job security
 Concerns lead to increased stress
 Change management: process of helping employees cope with changes
 Includes tactics designed to help employees feel involved with
change
 Helps employees overcome feelings of powerlessness
 Opportunity costs
 Largest and most significant costs associated with electronic
commerce initiative
 Cost of not undertaking an initiative
 Foregone benefits that company could have obtained from
electronic commerce initiative
not pursued
 Lost benefits from action not taken

Comparing Benefits to Costs

 Capital projects (capital investments)
 Major investments in equipment, personnel, other assets
 Companies have procedures to evaluate
  Range from simple calculations to complex computer simulation models
 Always reduces to comparison of benefits and costs
 Benefits exceed costs by comfortable margin
 Company invests in project
 Key part of creating electronic commerce initiatives business plan
 Identifying potential benefits
 Identifying costs required to generate benefits
 Evaluating if benefits exceed costs

Strategies for Developing Electronic Commerce Web Sites

 Evolution of Web site functions
 From static brochures (early days)
 To transaction-processing tools
 To today’s automated homes; all kinds of business processes
 Transformation occurred rapidly
 Change in site management did not occur quickly
 Now companies are seeing Web sites as collections of software applications
 To manage development and maintenance
 The Internet has changed markets and marketing channels quickly
 Creating difficulties in industry value chains
 No luxury of time
 Must explore alternatives to traditional systems development methods to succeed
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