The Real CostsShopping agents will findthe lowestprices online,butthesearch adds to the time cost.A searchforthelowestairfareat Orbitz.comorTravelocity.comcanbe minimal compared to the dollar savings,BUTthesamemaynotbetrueforabookpricesearchItdependson:Thetime it takestosearch&the savingsasapercentage ofthe itemcost. How much familiarity and experience the buyer has with the search engineAsbandwidthincreases,technologyevolves,andfirmsdevelop better online strategies,someofthesecostswilldecline.01001010100111101000010010111010010
The Real Costs • Shopping agents will find the lowest prices online, but the search adds to the time cost. A search for the lowest airfare at Orbitz.com or Travelocity.com can be minimal compared to the dollar savings, BUT the same may not be true for a book price search. • It depends on: • The time it takes to search & the savings as a percentage of the item cost, • How much familiarity and experience the buyer has with the search engine. As bandwidth increases, technology evolves, and firms develop better online strategies, some of these costs will decline
Buyer ControlThechangeinpowerfrom sellertobuyeraffectspricingReverse auction:Buyers setpricesfornewproducts andsellersdecide whetherornottoacceptthesepricesExample=Priceline.comInthe B2B market:buyersbidforexcessinventoryat exchanges +forproductsatfirmssuchasCaterpillarIntheB2Gmarket.Government buyers put out a request forproposalfor materials &laborneeded,BusinessesbidfortheworkThe governmentbuyer selects thelowestprice =having control overtheexchange01001010001111010000100101110100101
Buyer Control • The change in power from seller to buyer affects pricing. • Reverse auction: • Buyers set prices for new products and sellers decide whether or not to accept these prices. • Example = Priceline.com. • In the B2B market: buyers bid for excess inventory at exchanges + for products at firms such as Caterpillar. • In the B2G market : • Government buyers put out a request for proposal for materials & labor needed, • Businesses bid for the work, • The government buyer selects the lowest price = having control over the exchange
Buyer ControlBuyerpoweronline is based largelyonthehuge quantityofinformation &product availability on theWebOnlinebuyersarebecomingmoresophisticatedSellers are more willing to negotiate =giving powertobuyersintheexchangeSellers realize that information technologycan help thembettermanage inventories &automatefrequentpricechanges.01001010100111101000010010111010010
Buyer Control • Buyer power online is based largely on the huge quantity of information & product availability on the Web. Online buyers are becoming more sophisticated. • Sellers are more willing to negotiate = giving power to buyers in the exchange. • Sellers realize that information technology can help them better manage inventories & automate frequent price changes
Buyer ViewBuyersoftenenjoymanyonline costsavings.The Netis convenient:It is open 24/7= users can research,shop,consume entertainmentanytime.E-mail allows asynchronous communication among users at anylocationandpreventstelephonetag"withsellers.The Net is fast.Users can ordera product and receive it the following daySelf-service savestime.Customers cantrackshipments,pay bills,trade securities, check accountbalances, andhandle many other activities without waitingfor salesrepsUsers can request product information at Web sites and receive itimmediately.0700101010011170100001000110100100
Buyer View Buyers often enjoy many online cost savings: • The Net is convenient: • It is open 24/7 = users can research, shop, consume entertainment anytime. • E-mail allows asynchronous communication among users at any location and prevents “telephone tag” with sellers. • The Net is fast: • Users can order a product and receive it the following day. • Self-service saves time: • Customers can track shipments, pay bills, trade securities, check account balances, and handle many other activities without waiting for sales reps. • Users can request product information at Web sites and receive it immediately
Buyer ViewOne-stop shopping savestime:IncreasecustomerconvenienceAutoMall Online =partnerwitha numberoffirmsto provideautomobileprice comparisons, research about various models and manufacturers,financingandinsurance information,andservice optionsIntegration saves time:Web portals (Yahoo!andAOL)= allow users to quickly find many thingsthey want online.Some sites allow users tocreate individualized Web pages withnewsstock quotes, weather, and other customized information.Automation saves energy:Customers value simplicity and ease BUTthe Net makes someactivitiesmorecomplex,technologycanhelp.Customer computerscankeep trackof passwordsforWeb sites andtotrack previous purchasesat Web sites save time and energy0100101000111101000010010111010010170
Buyer View • One-stop shopping saves time: • Increase customer convenience, • AutoMall Online = partner with a number of firms to provide automobile price comparisons, research about various models and manufacturers, financing and insurance information, and service options. • Integration saves time: • Web portals ( Yahoo! and AOL) = allow users to quickly find many things they want online. • Some sites allow users to create individualized Web pages with news, stock quotes, weather, and other customized information. • Automation saves energy: • Customers value simplicity and ease BUT the Net makes some activities more complex, technology can help. • Customer computers can keep track of passwords for Web sites and to track previous purchases at Web sites save time and energy