Electronic Business

Submitted To: Mr. Rehan Shaukat Submitted By: Armaghan Kabir Uzair Asif Zaid A. Khan Husnain Fareed
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Does Online Information Drive Offline Revenues? Only for Specific Products and Consumer Segments! This Article is Based Upon The Impact of Introducing an Informational Website on Offline Department

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Introduction Era of Commercialization (Informational Websites) No Transaction on Websites Preference of People to Purchase from physical stores Use internet to get information Easy to implement information website No integration on informational sites Web to Store strategy Rush of offline business causes revenue
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Introduction of website depends upon product nature Support for Hypothesis (Website Introduction) Marketing literature emphasizes that websites used for transaction 1) Positive in Short run because it draw more customers to the store
2)

Long run impact depends on customers segment, some segments increase purchases

while others reduced. Conceptual Development 3) Revenue impact is higher for sensory The introduction of website has aim to induce products customer to increase their purchases. 4) Revenue impact is higher for customers Decomposition of weekly offline buying behavior of customers living further away from the store Mt is the monetary value spent, Pt is the total 5/25/12 number of products purchased, Trt is the total

Auto Regressive Model Short Term and Long Term Responses Revenue Depends Changes in customer numbers Shopping trip per person Product bought per trip Advertisement Benefits on Website Draws customers in short run Divert these customers to more expensive
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products

H1 The introduction of an information website a) Increases in the short run the number of customer that visit the store b) Increase in the long run the money spent per product H2 The introduction of an informational website decreases shopping trips to the offline store in the long run. a) In this hypothesis the author expect the heterogeneity in the way the consumer react to the website b) We cant give priory that consumer react in certain way c) The intangible nature of e-commerce has increase the uncertainty of people of that the 5/25/12

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H3 Compare to non-sensory products, sensory products experience higher short term and long term revenues effect from the introduction of an informational website.

For sensory products customers visit store so their number of trips increase. But in case of non-sensory they will just place order and their trip will decrease which will effect revenues. The customer will have to bear a fixated cost when 5/25/12 they travel to the store but the customer

H5 Compare to customers with low website visit frequency, customers with higher website visit frequency show higher long term revenue effect from the introduction of an informational website. Other offline and online customers characteristics

The extent of prior store patronage Website flow experience The content of pages access. The customer with higher website visit will increase revenue of company because of website

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H6 Online price promotion a) Increase revenue in short run through b) Higher number of customer, while c) Money spent per product decreases
)

Non pries online communication reduce price sensitivity

H7 Non price online communication a) Increase offline revenue in the long run
)

The companies make promotion online to their offline revenues, the site

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This was 2.5 year search of customers offline purchases. The step of website introduction is (site intro step) equal to zero. While after introduction is equal to one.
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The response was 39% after 3 months and

Model 1: individual level latent class analysis (LCA1) full data set Recognizing the importance of customer heterogeneity for customer management (Ansari, Mela, and Neslin 2008), we estimate an individual level data model that groups customers according to their short term response using latent class analysis (Kamakura and Russell 1989). As the model was designed for a single performance variable (instead of all four revenue components), we explain the logarithm of the total offline revenues (adding .000001 to account for 0 revenues) of each individual consumer i in period t with the variables in Fig. 1. Eq. (2) displays the model specification:
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Model 2: VARX1 model full data set To determine the long-term effects of website introduction on the companys aggregate performance, we estimate aflexible aggregate level model relating the four revenue components to the variables of interest. Because we have little a priori knowledge about the dynamics of those effects, we employ the persistence-modeling framework (Dekimpe and Hanssens 1999) and specify Vector Autogressive (VARX) models to uncover interactions among key variables instead of determining them a priori.

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Model 3: Individual level model (LCA2) data period after website introduction In this model we keep the same three segments as those identified earlier and now examine the effects of online price pro- motions and online non-price communications. We also account for possible interactions among marketing actions, and between sensory product type and each marketing action (as suggested by our conceptual development, online communication should be especially valuable for sensory products):

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Model 4: VARX2 model period after website introduction The VARX2 model is specified as in Eq. (3), replacing the site introduction variables with the marketing variables from Eq. (4). The VARX2 model estimates the baseline of each endogenous variable and forecasts its future values based on the dynamic interactions of all jointly endogenous variables. Based on the VARX2 coefficients, impulse-response functions track. The first key observation from both models is that website introduction did not signicantly change overall offline revenue in the long run. Indeed, the coefficient for SiteIntroStep which indicates a permanent shift in revenues is insignificant for all customers in the latent class model and for each revenue component in the VARX1 model. We obtain this null result despite initial customer enthusiasm for the site, showing up in both models as significantly positive coefficients for the SiteIntro (Pulse)t variables.

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