IAWTIC 2001 Proceedings/ISBN 0858898489: M. Mohammadian (Ed.)
Infomediator Based Network for Unifying E-commerce P. J. Eronen1, J-P. Makkonen2, and J. Tarhio3 Department of Computer Science, University of Joensuu, PL 111, FIN-80101 Joensuu, Finland E-mail: pasi.eronen@cs.joensuu.fi 2 Department of Organization and Management, Helsinki School of Economics and Business Administration, PL 1210, FIN-00101 Helsinki, Finland E-mail: jyri-pekka.makkonen@ky.hkkk.fi 3 Department of Computer Science and Engineering, Helsinki University of Technology, PL 5400, FIN-02015 TKK, Finland E-mail: jorma.tarhio@cs.hut.fi 1
Abstract Despite the huge growth in E-commerce markets and development of new consumer business areas, the consumers are still having troubles in using even basic E-stores because of diversity and usability problems of these. An infomediator based network of specialized partners could provide a customer with more efficient and less time-consuming shopping in the Internet. This is achieved by freeing a customer from repeated filling of registration and transaction forms and offering a customisable personal profile. Total platform independence shall also free the customer from the location restrictions, and request marketing allows a customer to receive only the advertising that she is interested in. To be economically sound, the infomediator needs to be totally committed to its (consumer-) customers, earn their trust and offer value-added services that fulfill their needs.
1 Introduction According to Forrester Research [1], the total amount of the E-retailer sales in the North America grew to nearly 50 billion dollars in the year 2000. But in the same time more and more customers trying to participate in growing E-markets are turned away with empty hands [2]. This happens because of too complicated and diverse E-store realizations. Many problems in the customer – E-retailer relationship are due to usability issues and issues concerning registration needed to become a buying customer. So far the solutions have been simple electronic wallet [3] or passport [4] systems, where service provider helps customer either to fill the forms needed or fills them automatically according to the record of the profile database. These kinds of systems have certainly been a step towards an easier and more efficient way of electronic shopping, but they still leave much room for improvements. In this paper we introduce a new business concept based on an infomediator to make the shopping in the Web easier and more efficient for a customer. In addition to send only the most necessary data of a customer, the infomediator can also help the E-stores to personalize their storefronts for customers according to their preferences and let customers decide the kind of advertisement channel and material they are interested in. With these features more enjoyable E-shopping experience for the customer can be achieved. In the end of the paper, we discuss about the business side of the infomediator concept and its economical feasibility.
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2 Overview of the infomediator system Shopping has to be seen in larger context of fulfilling the customer needs of gaining the items or services she wants. Therefore more than help in form filling could be offered to customers. Fulfilling the customer needs is to make shopping experience for her as seamless operation as possible without any unnecessary hindering events during the shopping. To provide a customer with an easy entrance to E-stores, the customer profiling is needed to help the Estore to recognize both the customer and her unique preferences. The customer should not be made to take advantage of only one channel for shopping, but she should be supported to use different platforms available for shopping i.e. PC based Internet or WAP-phone. The customer should also be informed about new products or services she might be interested of, which is possible with help of request marketing. 2.1 Customer profiling The purpose of customer profiling in the infomediator system is to free the customer from time-consuming form filling and registration to spend her time in the E-store with her true intention – shopping. The infomediator system supports input of multiple levels of personal information (see Fig. 1), which means that if a customer will only take advantage of sending personal information to E-store, she gives only the most necessary information needed (name, shipping address, etc). The second level offers addition of customer preferences, which can be used by E-stores for personalization of their storefront to fit customers’ preferences. On the third level the easiest way of shopping is provided by adding customers’ credit card information to system. The customer is also given the total control over her profile. The customer profile record can be changed, preferences can be modified and if the customer does not need the existing profile anymore she may delete her profile from the system anytime.
system
Level 2 – In addition to personal information also the personal preferences are input into the system Level 1 – Only personal information and shipping address are input into the system
Figure 1. Levels of input information.
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Availability of the services
Level 3 – In addition to previous levels also the transaction information is input into the
IAWTIC 2001 Proceedings/ISBN 0858898489
2.2 Platform independence Platform independence provides the customer independence to choose the shopping tool that suits her needs best (PCs, PDAs, WAP-phones), which will advocate the usage of mobile terminals in customer transactions with the stores. The main reason for enhanced mobile experience is that the customer inputs in E-store are minimized after creating the profile into the infomediator system, thus helping to solve the usability problems of handheld mobile devices significantly [5]. Platform independence gives the customer mobility, making shopping possible regardless the location. The infomediator concept could also be easily applied to existing mobile commerce applications to make them more simple to use. 2.3 Request marketing It is argued that the customer preferences with storefront personalization do not necessary provide enough sound information to please the true customer needs [6]. Therefore it is well justified to offer the customer to request marketing from companies and approve it to be done through the preferred medium [7]. By requesting marketing from the areas of her interest the customer has opportunity to receive advertising concerning new products or services that she was not aware of before and therefore could not be interested of. The medium used may vary from messages to her mobile phone or e-mail to an account of her own to web advertising in profile pages of her own. One reason supporting the idea of multi-channel advertising is that advertising in mobile phones seems to be very efficient and considered appealing by customers [8,9]. Yet the customer has to have the means to alter her requests or stop advertising done according her requests. All the modifications done by the customer should be carried out immediately after the customer’s approval of those. 3 Transaction procedure The transaction begins from the point where a customer starts browsing an E-retailer’s pages. Because this particular E-store is participating infomediator’s shop network, there is a sign of the infomediator company on the store frontpage. By pressing that sign and logging in after that, the customer allows the E-store to connect to the infomediator’s databases to acquire information about the customer. If the customer has given her preferences and allowed them to be forwarded, they will be now transferred to the E-store with some basic information about the customer i.e. name and age. With this information the E-store is able to personalize its storefront to fulfill the needs of the customer. After receiving a personalized welcoming to E-store, the customer browses through Estore’s electronic catalog with help of personalized content and all the normal navigational tools i.e. search tools, categories, etc. After finding a match for her needs, the customer ends up buying the goods and checks out. By the time of the checkout, the E-store connects again to the Infomediator’s database in order to receive the customer’s shipping and credit card information. During the checkout procedures the customer may go through all of them confirming the information retrieved from the database or just let the system handle all the procedures and confirming only at the final page, where all the information concerning the purchases, shipping and prices are gathered. After confirmation the customer is being asked whether she wants the information
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concerning the goods she bought to be transferred back to the infomediator. The information concerning the purchases can be added her personal profile to keep track of the items bought by her. 4 Strategy and implementation The end of the paper discusses the strategic innovativeness of the infomediator concept. In this section we are concentrating on the infomediator’s strategy from an entrepreneurial viewpoint; we emphasize strategy more as an innovative evolution than mere a positioning task. Gary Hamel [10] predicts that the revolution of new kinds of business models and innovative strategies will threaten the companies that are locked into a one-dimensional view of innovation and strategy. The value adding electronic intermediaries that are able to do the information matching with substantially low costs are seen to restructure the traditional value chains in the EC. 4.1 Partnerships It is almost impossible for a single company to become an infomediator providing all the above-mentioned services alone. The infomediator should collect a massive database of customer profiles to provide a sound platform for service providers. The entry stage demands some basic services to be available as early as possible, because that is the only way to gain reputation in the (consumer-) customers’ eyes. A start-up without existing profiles faces this bottleneck and the fastest way to solve the problem is by partnership with other company that already has earned the trust of customers. Only co-operation will make this highly risky venture possible. The infomediator could be a partnership between a traditional and an innovative entrepreneurial company. The big companies lack the innovative culture and ability of fast movement, yet large companies can provide existing customer profiles, which are very helpful at the entry stage. It would be very expensive for a small firm to start as an infomediator from the scratch, [11]. 4.2 Strategy is based on information The infomediator’s strategic goals can be directly deducted from the characteristics of the information itself. Information is valuable only when used in the right place and time; same information can be valued differently depending on the user. In the context of the global network like Internet, the costs of reproduction and distribution are practically zero. The Infomediator should price the information based on the customer value and not on the production costs (personalized pricing). This is very effective policy in the electronic markets with fragmented niches, where personalized pricing can exploit the whole demand curve, [12]. But when the right information can be delivered effectively to the source of information demand, the value of information is huge. The infomediator can benefit from the economies of scale in the information production process and use the networks to distribute the knowledge profitably. The niche for the infomediator as a business model rises from this fact: only a company that focuses on the core of information gathering, synthesis and distributing
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can be effective enough in the electronic markets. We emphasize that the core competence of the infomediator is the gathering of data and the process of synthesis. Also the distribution of information should be outsourced because this task is a core competence itself and can be managed effectively by a specialized partner. 5 Growth as an imperative for the entry strategy Like all the knowledge and information technology based innovations also the infomediator’s main strategic goal in the entry stage is fast growth. This leads to the network effects; users prefer popular systems to not so popular systems. Network effects are the source of demand side economies of scale and positive feedback. When a system has positive network externalities it enforces positive feedback. Shapiro and Varian call the positive relationship between the popularity and value as a virtuous cycle. [13] The large customer base generates trust, which leads to fast growth of the business-tobusiness side transactions, because it would be irrational for the e-businesses to keep their own customer profiles when customers are using a universal E-shopping platform. In our opinion, the outsourcing of the customer relationship management systems is an imperative for the E-businesses to stay profitable. The era of owning the customers is over; customers choose the cheapest, the best quality and the best service available by using the infomediator. 5.1 Entirely consumer orientated This is the authors’ vision of the strategic goals of the infomediator, especially in the entry stage. The topic is widely discussed in the recent literature of the electronic and the information based business. What is missing in the literature is the strong view of the consumer orientation, that is the core of the infomediator’s horizon of possibilities. This is partially because the business-to-business markets are seen as an easy path for high margins. Also the technology used is important, but it cannot overcome the need of offering the best value experienced by the consumer. The Infomediator’s entry strategy consists of three main goals: 1. Gathering of the large base of customer profiles 2. Setting of the universal E-shopping platform and standards 3. Gaining customer (consumer side) trust and commitment • The Infomediator should align its processes with the consumer preferences → This provides a strong incentive for the business-to-business clients to start offering more services through the platform of the infomediator. • The Infomediator should offer both the convenient platform for shopping experience and the substantial benefits as a compensation for the personal information By achieving these goals, the infomediator is able to penetrate the markets and create entry barriers high enough to keep the possible latecomers out. In the infomediator business, success generates success and being first is crucial in the competition for the markets.
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5.2 Strategy is an innovation Finally, the infomediator links the customer needs and technology in the new business area that is going through fast changes. Internet as a business context is still evolving and most of the businesses are just using the Internet as today’s distribution channel for their yesterday’s products, but they are not exploiting the characteristics of the information network itself. An entrepreneurial infomediator can gain competitive advantage by using partnerships and focusing on the core of information matching. Drucker describes the entrepreneurial strategies in his thoughtful book ‘Innovation and Entrepreneurship’. According to Drucker, strategy as an innovation is about changing the utility, value and economic characters of the product. Strategy as an innovation starts always from the customers’ values, utilities and realities, [14]. Infomediator’s strategy is an innovation in the electronic commerce-context. The infomediator offers a shopping platform for the customer to customize and personalize it to fit her needs. The infomediator does not own its customers; customers own their services and they decide the channels they want to use to do their shopping. Conclusions System proposed here seems to be both technically and economically feasible way of enchansing a consumer experience of electronic shopping. It is done by providing her with both total control over the information stored about herself and freedom of the choice over the means and tools of shopping and advertising. With total commitment to the customer and her true needs without forgetting the needs of true source of revenue – the business customers, the recent sad fates of the dotcoms should be avoided. The business model we introduced in this paper bases on the network of specialised partners in the value chain. Infomediator benefits from the network effects, that are vital for the success of this kind of system. The more customer profiles infomediator can gather into its database, the more incentives it has for the business-to-business customers. Infomediator’s strategy is innovative and it changes the relationships in the electronic business by offering the consumer a tool to decide the channels and services she wants to use. We emphasized the entrepreneurial approach and innovative solutions to unify the E-commerce, that still lacks the personalized and customer friendly applications. Finally, intermediary that could solve these problems is not necessarily a large company, but a network of smaller innovative players. Some additional issues need careful consideration before true actualization of the proposed sytem. These include legislation and ethics of the customer information gathering and implementation of architecture for high class data transfer and storing security.
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