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Chapter 5 E-business strategy 303

smaller companies (B2B) – large companies are traditionally serviced through sales repre-
sentatives and account managers, but smaller companies may not warrant the expense of
account managers. However, the Internet can be used to reach smaller companies more
cost-effectively. The number of smaller companies that can be reached in this way may be
significant, so although individual revenue of each one is relatively small, the collective
revenue achieved through Internet servicing can be large;
particular members of the buying unit (B2B) – the site should provide detailed information for
different interests which supports the buying decision, for example technical documentation
for users of products, information on savings from e-procurement for IS or purchasing
managers and information to establish the credibility of the company for decision makers;
customers who are difficult to reach using other media – an insurance company looking to
target younger drivers could use the web as a vehicle for this;
customers who are brand-loyal – services to appeal to brand loyalists can be provided to support
them in their role as advocates of a brand as suggested by Aaker and Joachimsthaler (2000);
customers who are not brand-loyal – conversely, incentives, promotion and a good level of
service quality could be provided by the web site to try and retain such customers.

Decision 3: Positioning and differentiation strategies

Once segments to target have been identified, organizations need to define how to best position
their online services relative to competitors according to four main variables: product quality,
service quality, price and fulfilment time. As mentioned earlier, Deise et al. (2000) suggest it is
useful to review these through an equation of how they combine to influence customer percep-
tions of value or brand:

Product quality × Service quality
Customer value (Brand perception) = –––––––––––––––––––––––––––
Price × Fulfilment time
Strategies should review the extent to which increases in product and service quality can be
matched by decreases in price and time. We will now look at some other opinions of posi-
tioning strategies for e-businesses. As you read through, refer back to the customer value
equation to note similarities and differences.
Chaston (2000) argues that there are four options for strategic focus to position a com-
pany in the online marketplace. He says that these should build on existing strengths, but
can use the online facilities to enhance the positioning as follows:

Product performance excellence. Enhance by providing online product customization.
Price performance excellence. Use the facilities of the Internet to offer favourable pricing to
loyal customers or to reduce prices where demand is low (for example, British Midland
Airlines uses auctions to sell underused capacity on flights).
Transactional excellence. A site such as software and hardware e-tailer Dabs.com
(www.dabs.com) offers transactional excellence through combining pricing information
with dynamic availability information on products listing number in stock, number on
order and when expected.
Relationship excellence. Personalization features to enable customers to review sales order
history and place repeat orders, for example RS Components (www.rswww.com).
These positioning options have much in common with Porter’s competitive strategies of cost
leadership, product differentiation and innovation (Porter, 1980). Porter has been criticized since
many commentators believe that to remain competitive it is necessary to combine excellence in
all of these areas. It can be suggested that the same is true for sell-side e-commerce. These are not
mutually exclusive strategic options, rather they are prerequisites for success. Customers will
probably not judge on a single criterion, but on multiple criteria. This is the view of Kim et al.
(2004) who concluded that for online businesses, ‘integrated strategies that combine elements of
cost leadership and differentiation will outperform cost leadership or differentiation strategies’.