BRAVE NEW WORLD: Traditional Companies on the Web.TRADITIONAL COMPANIES VENTURING ONTO THE WEB FACE A PERILOUS JOURNEY. BUT THE HOPE FOR NEW CUSTOMERS AND NEW REVENUES MAKES THE VOYAGE VOYAGE, marine law. The passage of a ship upon the seas, from one port to another, or to several ports. 2. Every voyage must have a terminus a quo and a terminus ad quem. WORTH THE RISK. In the race to the Internet gold fields Gold Fields Limited is one of the world’s largest unhedged producers of gold, providing investors with maximum leverage to the gold price. The company was formed in 1998 with the amalgamation of the gold assets of Gold Fields of South Africa Limited and Gencor Limited. , start-ups have little to lose compared to traditional companies with profitable business models and longstanding customer relationships. But while the risks of venturing into the Internet frontier are higher for traditional companies, the rewards may be, too, as Web shoppers seek familiar ground in the new territory. In an E-Conference panel led by Columbia Business School Columbia Business School (part of Columbia University), officially named the Columbia University Graduate School of Business, and also known as CBS, was established in 1916 to provide business training and professional preparation for undergraduate and graduate professor Eric Johnson
Eric Johnson (born August 17, 1954) is a guitarist and recording artist from Austin, Texas. , e-commerce leaders shared their pioneering experiences in the brave new world Brave New World Aldous Huxley’s grim picture of the future, where scientific and social developments have turned life into a tragic travesty. [Br. Lit.: Magill I, 79] See : Dystopia Brave New World and described the adventures other companies can expect along the way. The panel included Paula Sneed, president of e-commerce for Kraft Foods Kraft Foods Inc. (NYSE: KFT) is the largest food and beverage company headquartered in North America and the second largest in the world after Nestlé SA. The Philip Morris Company (now known as Altria Group), a company that produces tobacco products, acquired Kraft for ; Todd Tarpley, director of interactive for A&E Television Networks; and Jonah Gitlitz, president of Lillian Vernon Lillian Vernon Corporation is an American catalog merchant and online retailer that sells household, children's and fashion accessory products. In business since 1952 (when it was founded by housewife Lillian Hochberg out of her Mount Vernon, New York apartment; the business name Corp. LEARNING A NEW LANGUAGE "We really had to think hard about our communication strategies as we moved from traditional media to the Web," Sneed said. "As a mass market company, we're used to communicating with groups and groups of people. And the challenge for us was to personalize per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. the communications, so that individual consumers felt like it was meaningful to them," she added. By providing an on-line database Noun 1. on-line database - (computer science) a database that can be accessed by computers computer database, electronic database, electronic information service allowing users to search for recipes containing particular ingredients, the company created one-to-one communications for almost the first time. Learning to communicate one-to-one with individuals also presented a challenge to A&E Television Networks. "We never realized what it meant to speak directly to consumers until we moved our business to the Web. Everything we've learned in the past few years has given us a bonk on the head Bonk on the Head is a novel written by John-James Ford. Published in 2005 by Nightwood Editions, it is about coming of age in a journey that takes the protagonist through the final years of high school, a reserve regiment and the Royal Military College of Canada. in terms of speaking directly to individual people. And not just speaking to them, but having our ears open and listening to them as well," Tarpley said. MAKING NEW FRIENDS A major reward of the e-business journey for all three companies has been relationships formed between the brand and new customers. "One of the surprising things we learned was that our brands take on different shapes in different media," Tarpley said. The Biography.com Web site, which provides a searchable database Refers to databases on the Web that are searchable by typing in a query. The term is quite redundant because all databases are searchable. In fact, that is one of their major features. of 25,000 biographies, attracts a younger, more male demographic than its television counterpart. And A&E's on-line orders of home videos and other products tend to be 10-15 percent larger than sales derived from toll-free numbers promoted at the end of some A&E broadcasts, Tarpley said. Lillian Vernon has also been able to attract new and different customers through the Web. About half the people purchasing products from the Lillian Vernon Web site are new buyers. And unlike the company's print catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. , where only about 10 percent of the buyers are male, men make up about 25 percent of the company's customers on the Web. "New customers are golden for us, and having more male buyers also represents some new opportunities for the company," Gitlitz said. CONFRONTING NEW ENEMIES "One of the other surprises you often see in the Web is who's out there-- attackers or competitors you might not have seen before," Johnson observed. A&E, for example, vies for ad revenue and affiliate carriage with about 20 core competitors in the cable network space. On-line, however, where the company makes money through a mix of advertising and on-line sales of home videos and other products, the company faces about 1,000 competitors. "Our number one competitor in the off-line world (jargon) off-line world - A die-hard nethead term for non-computer-related experience. See also big room. ["Internet", Feb 1996]. is probably the Discovery Channel. On-line the biggest competitor is probably Amazon, which directly competes with us for e-commerce," Tarpley said. Kraft's content-based Web site faces a bevy bevy a flock of birds. of unfamiliar content rivals vying vy·ing v. Present participle of vie. vying vie for user's eyeballs The number of users. "There are 110 eyeballs" means there are 110 users currently online. See eyeball hang time. . The company uses its formidable reach in traditional media, and even its packaging, to draw users to its site. "It's not only the traditional competitors doing things in the Web environment that we are now competing against, it's new players in different parts of the value chain, competing with us on those aspects. It requires a whole different kind of competitive analysis and a whole different kind of defense," Sneed said. Even familiar rivals seem to be fighting harder than ever, Gitlitz noted. A Lillian Vernon catalog aimed at children, called Lily's Kids, is a good example. "There are an unbelievable number of new sites out there dealing with toys and kid stuff. And they're doing it well, and offering a lot of the promotions that we would normally offer, like discounts, free shipping, and a lot of other things. Competition is very, very keen. The Web has raised the stakes," Gitlitz said. Case Studies Kraft Foods PAULA SNEED President of E-commerce * E-BUSINESS VENTURE: Consumer Web site providing useful, food-related content. Exploring direct-to-consumer sales through on-line grocers. * WEB STRATEGY: Marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales . Also, streamlining internal processes like package design. * BIGGEST SURPRISE: "HOW easy it was for us to talk to one consumer, instead of masses of consumers. But our biggest surprises are yet to come, because on-line grocers are markedly changing our industry." * E-BUSINESS STRUCTURE: A dedicated Web unit of about 40 people. Initially, Sneed lobbied against a separate unit, arguing that the Internet should permeate permeate /per·me·ate/ (-at?) 1. to penetrate or pass through, as through a filter. 2. the constituents of a solution or suspension that pass through a filter. per·me·ate v. the entire company. In the end, the company decided a separate unit would move more quickly. A&E Television Networks TODD TARPLEY Director of Interactive * E-BUSINESS VENTURE: Six Web sites, including HistoryChannel.com and Biography.com, providing content and selling home videos and other products. * BUSINESS MODEL: 75 percent e-commerce, 25 percent advertising sales. * BIGGEST SURPRISE: "How quickly you have to scale. You can have one system in place, and before you know it, you need one much bigger than you ever anticipated." * E-BUSINESS STRUCTURE The company set up a separate Web division because the core television unit generates most of the company's revenues. Plus, the Web division needed a different compensation structure to attract and retain Web talent. Lillian Vernon JONAH GITLITZ President Gitlitz has also been president of the Direct Marketing Association and chairman of the American Advertising Federation The American Advertising Federation (AAF), headquartered in Washington, D.C., acts as the "Unifying Voice for Advertising." The AAF is the oldest national advertising trade association, representing 50,000 professionals in the advertising industry. . * BUSINESS MODEL: On-line catalog sales. The Web site currently lists a subset A group of commands or functions that do not include all the capabilities of the original specification. Software or hardware components designed for the subset will also work with the original. of the print catalog's products, but will expand next year. The company is also creating a business-to-business Web site. * BIGGEST SURPRISE: "It Works! Our existing customers like it and we're finding new customers out there...The unpleasant surprise is, the technology isn't easy. Our new site has been delayed for a few weeks." * E-BUSINESS STRUCTURE: In-house. "It's worked very well to have our Internet activities within the body of the company." Gets vs. Get-Nots? Do TRADITIONAL COMPANIES simply care less...or do they just not get it? It might be the latter. Only 31 percent of traditional company leaders classified their Internet knowledge as college level or above--compared with nearly half of dot-corn or hybrid companies. And more traditional companies say they don't yet have a business model that works.
Have you found an E-BUSINESS
MODEL THAT WORKS for you?
WHAT WORKS?
TYPE YES NO NOT SURE
Traditional 13% 58% 28%
Dot-Coms 71% 29% 0%
Hybrid 40% 15% 45%
GRADE YOURSELF on your level of internet
knowledge: "college or grad school"
KNOWLEDGE
[COLLEGE.sup.*]
TYPE WEB SMARTS
Traditional 31%
Dot-Coms 49%
Both 53%
Traditional Companies at the Conference OUR QUICK TALLY SURVEY showed that traditional company leaders plan to spend less money on their Internet infrastructure in the next two years than dot-coms or companies that classify clas·si·fy tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies 1. To arrange or organize according to class or category. 2. To designate (a document, for example) as confidential, secret, or top secret. themselves as a hybrid of traditional and dot-com.
Planned expenditure on
INTERNET INFRASTRUCTURE in next two years
EXPENDITURES
QUANTITY TRADITIONAL DOT-COMS HYBRID
Less than $5 million 52% 9% 19%
$5-24 million 28% 64% 48%
$25-49 million 14% 18% 14%
S50-99 million 6% 9% 10%
$100 million plus 3% 0% 10%
|
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion