SaaS (Software as a Service): Service-Based SW 2.0

The success of Google has led to further Web development and the next Web 2.0 wave. Google broke the stereotype of computer relying solely on OS as platform, spearheading the shift to service environment as true platform to challenge the Microsoft-dominated software domain.

Search engine giant Google provides not only search services, but also software similar to Microsoft Office directly online. After announcing its Web-based office software, Google wasted no time in introducing Google SpreadSheet. The possibility of switching from MS Excel to Google SpreadSheet for PC application has Microsoft extremely nervous. Different from previous software, the Google version utilizes the vast powers of the Internet to support various software services. Microsoft currently considers Google as its chief rival.

With Windows Vista, Microsoft launched the next generation in OS and expects to be the worldwide leader in providing MS-OS. However, more and more people are starting to take notice of service-based software, gradually moving away from the traditional method of paying a standard purchase fee. Instead, many customers choose to pay service fees according to usage. This method is called Software as a Service (SaaS) and is fast becoming the mainstream in the software market.

SaaS refers to providing software through a service model. Even though software is currently sold in package form, more and more service models like the Internet or web hosting continue to support service application. Third-party hosting has existed for quite some time, connecting from far ends at lower costs to provide software service. Hosting companies self-develop and maintain software, which is similar to the outsourcing concept of application service provider (ASP).

Compared to ASP, which progressed along with the Web, SaaS is advancing even more markedly. ASP uses software as a service center, while SaaS provides value within the customer’s service environment.

SaaS revolves around the Internet’s ability to offer software capabilities. Aside from convenient usage, it allows for monthly payment or prorated payment. In addition, usage fee can be recouped through ad revenue, reducing the fee and administration cost for customers. The unique SaaS changed the way the software market operates. The idea of licensing off-line software packages as the standard operating model license to improve sales can be combined with the Internet, integrating on/off-line businesses and making SaaS the new turning point in software business.

Challenged by Google, Microsoft is driven to develop a future plan involving on-demand SaaS. In addition, SaaS is the method of choice for international giants Oracle and SAP. After merging with Siebel, SAP initiated its SaaS business. To bring about salesforce.com, SAP has announced its intention to provide third-generation SaaS solution with the support of its R&D personnel and fellow partners.

SaaS will swiftly enter the market and expand rapidly, creating an architecture and open platform that is based on the software needs and price criteria of each user and allows customers to experience trial use. These features are quintessential to Web 2.0. Along with the development of the Web and trend toward a Web 2.0 model based on open platform, SaaS will revolutionize the way software businesses are run.

Essentials of Web Analytics Functions and Framework (Part 1)

For college students, newcomers in the real world, or aspiring enterprisers, e-business will be a likely career choice.

The growing popularity of UCC (User-Created Contents) coupled with the continuous expansion and success of online shopping malls and auctions have encouraged many small enterprises and self-employed enterprisers to dive into e-business, discovering a new opportunity in a new domain. Google took advantage of this opportunity in providing users with free web analytics service. More large portal sites are expected to follow with their free web analytics offerings.

In this hypercompetitive environment filled with merely product vendors and service providers, initiating marketing campaigns and holding promotional events to attract customers is the recent market trend. To implement the suitable strategy and operation assessment for e-business, enterprisers increasingly value the necessity of web analytics. Many large online shopping malls, portal sites, and financial sites have come to view web analytics as a prerequisite for improving online services and assessing marketing campaigns. Thus, continuous research is devoted to e-business advancement.

In the field of web analytics, what are the prerequisite analysis functions and framework? By applying past experiences in different fields, businesses can reconstruct their operating frameworks to suit different enterprise needs. Web analytics not only examines customer behavior, but it also proposes strategies and solutions to achieve operating objectives.

As mentioned before in a previous article, the definition of web analytics consists of five functions:

1. Measurement
2. Collection
3. Analysis
4. Reporting
5. Response Action

The five basic functions and their applications must not only extend beyond the e-business realm, but also expand business domain through business integration perspective and needs. In addition, with changes in the external environment, web administrators must first consider applying web analytics in customer communication platform.

- Expand Business Domain

For many years now, fewer users visit a securities company in person or call to execute transactions. Most people like to search stock news and execute online transactions via HTS (Home Trading System) terminal. Bank transactions have undergone the same change as more people opt to use online banking or ATM (Automated Teller Machine) rather than visit a bank counter in person.

In recent years, aside from managing traditional physical channel, enterprises have been striving to develop the basic framework of virtual channel. Conventional brick-and-mortar businesses such as insurance company or shopping mall have developed new operating platform via the Web. However, simply analyzing e-biz status hardly produces a complete picture of business operating results. If not for operating hardware or network measuring functions, web analytics needs to move beyond merely online data analysis and application. Enterprises currently employing web analytics not only operate e-biz, but also combine business and e-biz perspectives in attaining complete operating objectives and results.

- Broaden Customer Communication: Device Channel

Early this year at the Macworld Expo in San Francisco, Apple CEO Steve Jobs unveiled the iPhone, which combines features of mobile phone, Internet, MP3, PDA, etc. with touch input technology. Mobile phone providers and related online industries are now in a state of unease.

(Apple iPhone)

Building a convergence business by combining terminal and e-commerce via iPod, Apple plans to generate another new wave of interest. As of now, it is difficult to determine whether or not this type of terminal convergence can succeed in the future. However, newcomers in e-business will be affected by terminal convergence as well as the convergence business. As time goes by, this will become an important channel for traditional industries or partner-based businesses to reach a large amount of customers through sales, marketing, and service perspectives. The past few years have witnessed the emergence of many types of convergence, including mobile, PDA, car navigation, and home automation. Customers have many types of communication tools, including the Web. This obviously leads to enterprises rushing to expand and develop the business domain.

Based on various terminal convergence traits, customers have different preferences when choosing a platform. Their goals differ according to the type of terminal convergence. In addition, when enterprises understand customer preferences and goals, they can respond immediately as well as use the information as reference to marketing and sales adjustments. Thus, web analytics not only helps locate target users via the Web, but also tracks and applies diverse contact platforms through IT-based system. Integrated data is utilized by various platforms, expanding the application range of web analytics data.

Part 2 provides a detailed explanation about expanding application range.

Grocery Store e-CRM Philosophy (Part 2)

Online management of today is not like the early stages of Internet business in which listing products and services is sufficient. To achieve transaction or community in business, basic community service and high-quality products must be provided along with secure transaction framework. (In reality, business capabilities are becoming homogenous, epitomized by the common usage of UI and various functions.) Moreover, responding to customer needs and creating tools analyzing the ROI of this response are fast-growing trends.

In the continuous relationship between user and service provider, if the goal of acquiring users is met, web administrators of community sites and blogs aim to share information, while business sites hope to increase revenue. When both sides achieve their objectives, they can strengthen their relationship. In the multi-faceted community site, users utilizing one specific website have developed a connection with its services and obtained numerous resources through it. In addition, the satisfaction from the website's events helps maintain the relationship.

In the case of shopping mall, building customer trust in product price and quality and maintaining satisfaction throughout product usage help convert consumers into loyal regular customers. This conversion plays a crucial role in website operations.

Whether providing services or business transaction, the relationship between web administrator and customer as well as reaching a personal or enterprise goal through this relationship are areas that require time and attention. In this virtual online world where face-to-face interaction with customers is unavailable, can we establish customer trust and loyalty? If we can, what approach do we take? Everyone operating an Internet business has brainstormed about how to improve results and obtain data via web analytics.

Visiting a website via a computer and the distance this creates are part of the relationship between customer and service provider. Customer relationship maintenance begins with information collection by the eyes and ears, analysis by the brain, and response to customer needs with the mouth. This process is what web analytics examines and evaluates.

Even though the inability of face-to-face interaction is a disadvantage, online data can record every visitor behavior. This method does not involve nonstandard data management by intuition and memory, but rather standard data management based on computer system analysis, a decided advantage of Internet business. Tracking online behavior and navigation for analysis helps establish a standard and strategy for personal needs and website operating goals.

For this method, WAA identifies four important functions: measurement, collection, analysis, and reporting.

As the world's standard bearer, the United States boasts years of experience and countless cases and follows this definition. If data can be analyzed, organized, and presented clearly, it will be beneficial toward achieving website goals. However, if we only research what web analytics' objective is, we will overlook the most significant parts. From a professional standpoint, if web analytics' objective is simply analyzing websites and enabling users to easily grasp results, it will fail to satisfy the aims of web administrators and cause negative effects.

From a realistic standpoint, analyzing the behavior of visitors and customers to maximize website performance is more meaningful than web administrators utilizing usage analysis to maximize website performance. In other words, the four functions are aimed at users and customers rather than the website's capabilities. However, from the standpoint of a web analytics enterprise or consultancy company, finding a simple, easy-to-use web analytics tool and operating strategy is the top priority. Thus, the theoretical debate in web analytics arises. By reevaluating the theoretical debate in web analytics, creating a solution by understanding customer needs is more important than creating a web analytics strategy for web administrators.

Starting from the viewpoint above and combining the definition of web analytics below brings more value than analysis results.

"Measurement, collection, analysis, reporting and response action for the purpose of the understanding and optimizing of the needs for relationship between user and web service provider"

A few years ago, after supervising countless web analytics discussions and strategies, I came across a conversation that remains a powerful driving force.

Me: "To understand customers and improve service quality, web analytics is a must-have tool."
Client: "Right now, there is an abundance of analysis reports. Further discussion about analysis results is unnecessary. Please provide us with a method to quickly enhance our website performance."

To formulate strategies without deep knowledge is very risky and an ill-advised approach. In the actual business domain, however, everyone is concerned about developing a more efficient website and not analysis report content. Current online service providers all want to enhance website revenue and increase transactions, but aside from offering services, they must understand the service content and the relationship between website and users in order to reach their goals. In addition, response based on web analytics establishes sound and efficient operating strategy. Repeated analysis under a cyclical structure helps e-business websites achieve their goals, making the role of web analytics extremely vital.

E-Commerce Web Administrator's Ultimate Goal: Customer Conversion Rate

Courtesy of CCMedia Global Marketing

Website Traffic Isn't Everything

There seems to be a common misconception among e-commerce web administrators that an EC website's ability to generate traffic (cause) is equivalent to profitability (effect). They strongly believe that the ability to generate traffic (cause) guarantees total orders (effect), and thus, invest all their efforts in creating more traffic. In fact, visiting traffic does grow, but total orders might not increase accordingly, which might be the beginning of another dilemma.

It's time for EC web administrators dedicated to website traffic to change their thinking. There is a more important measure of website operations to be considered. The predicament faced by Amazon.com a few years ago serves to illustrate this point.

Amazon.com Past Predicament

With $113 per share and a reputation as the world's most successful B2C (Business to Customer) enterprise just five years after its launch in 1994, mega-large online bookseller Amazon.com has always operated under a standard profit model. Nevertheless, it held a pessimistic outlook on the future.

Amazon.com has maintained its amazing visitor count, averaging 15,000 visitors per month as early as April 2000. However, the website faced a financial deficit of over $1 billion. Even worse was the popular notion that attracting more visitors ensures sales increase. Amazon.com tried to enhance traffic, but website revenue only faltered further. At this point, it's apparent that website traffic isn't everything. Amazon.com must rely on a more worthy measure of website operations.

Emphasis on EC profit model makes customer conversion rate the new focus.

What Is Customer Conversion Rate?

Customer conversion rate refers to the percentage of website visitors that are converted to product purchasers.

Customer conversion rate ＝ Number of purchasers / Number of visitors

According to 1999 Forrest Report, 70% of EC websites fail to reach a 2% customer conversion rate. In other words, only two out of 100 visitors actually complete the purchasing process.

Why Is Customer Conversion Rate Important?

The cost of website operations is limited. Thus, creating the greatest revenue with limited cost is the primary objective of web administrators. A comparison between EC websites aiming for high traffic and EC websites striving for high customer conversion rate reveals noticeable discrepancies. For example, the former likely spends enormous marketing costs, but attracts a large quantity of visitors with little interest in the website's product. The latter gathers valuable resources to attract high quality visitors who match the website's target audience and are more likely to complete transactions.

Quality over Quantity

Aside from guiding web administrators to an ideal investment strategy, a focus on high customer conversion rate also instills a "quality over quantity" philosophy when it comes to visitor or member management. Even though increasing traffic through e-mail marketing, online advertising, and other methods also plays a crucial role, the process of understanding visiting habits and browsing behavior, providing the most suitable and satisfying contents and services, and generating purchasing actions is the more difficult challenge.

Sometimes a low customer conversion rate does not necessarily mean the EC website is providing inadequate products or attracting the wrong visitor segments. Instead, the problem lies in the inability of the transaction process or navigation path to allow visitors to complete transaction, causing them to exit the website. This situation often results in heavy visitor losses, rising operating costs, and diminishing website revenue. Even tremendous website traffic is helpless against this problem.

Solving Low Customer Conversion Rate

Web administrators can utilize a variety of advanced web analytics tools to find the cause of the problem. By analyzing the browsing behavior of visitors, these tools can help web administrators evaluate and enhance operating efficiency and modify website design to fit the preferences of key visitor segments. For example, analysis results can reveal how many visitors complete checkout in the purchasing process. The completion percentage can serve as the basis for monitoring operating performance. Web administrators can determine whether purchase pages are too complicated or online transaction security is insufficient. Changes can be made to dramatically improve customer conversion rate.

Summary

Customer conversion rate arose out of the emphasis on EC profit model, becoming the most important measure of website operations. It breaks away from the traditional idea of simply increasing website traffic to raise profit. Moreover, the concept of customer conversion rate can guide web administrators in creating better customer interaction. Conversely, if web administrators are clueless about customer conversion rate or how to provide the most suitable services, website operations might be facing imminent crisis.

Grocery Store e-CRM Philosophy (Part 1)

The alley where I live has a longstanding grocery store selling simple items such as food, drinks, and cigarettes. I visit the store about twice a week, buying a pack of cigarettes or beverages, but I encounter the owner infrequently and rarely make small talk.

After awhile, the owner grew accustomed to the brand of cigarettes I smoke. Every time I want to purchase a pack, he hands it to me before I even open my mouth. He also knows I'm married with two sons and where I live. Every time my wife or kids need to buy rice or fruits, the owner delivers them to our house without a word from us.

A similar situation developed with the owner of the bar 'n grill that my college buddies and I used to visit. The brewery next to the office is the same experience. The owner must not only know frequent customers, but also satisfy their needs to build trust and familiarity. This can increase return visits and actual revenue. Every e-business has wrestled with how to simulate real-life situations in the virtual online world in understanding customers, offering different services and information, and increasing revenue.

In a hypercompetitive environment, many small-scale stores running under an eBay-like operating method must utilize distinct services to please customers, fulfilling new or yet to be satisfied needs. To promote their financial products, numerous banks, insurance agencies, and credit card companies on the market spend tremendous efforts in producing web pages that can effectively draw customers closer to the website. These websites undergo constant upgrade and redesign. Recently, the Korean government has devoted itself to website design and higher efficiency, providing the public with multi-faceted services and information.

Offline business has a long history with and a deep understanding of customers. It involves segmenting customers based on operating targets, maintaining long-term customer relationships, and creating various strategies and tools for highly efficient business campaigns. We usually refer to this process as CRM (Customer Relationship Management). The strategic analysis for enhancing operating performance is called BI (Business Intelligence).

In reality, applying this process on the Internet Network is difficult. Past e-businesses believed website product placement, information transfer, and service provision are the most important factors. Now, they must continuously search for advantageous strategies to remain competitive against e-businesses within the same industry or mergers. Now, a good product or idea can help launch a website, attracting many enterprising individuals.

Actually, there have been countless examples of websites that fail due to unsound planning. We can see that it is imperative to create individual style to enhance competitiveness. Like offline marketing, online marketing requires a comprehensive knowledge of customers. The difference is that in online business, where visitors are anonymous, a complete marketing plan must be established.

In online business operations, to provide the best services and marketing campaign information, the key is member data and customer transaction records. Although transaction data is based on actual events, grasping customer behavior solely on purchasing information is insufficient. The reliability of member data is not significant. The main goal is to grasp the behavior of all anonymous visitors. This difficult task requires a deep understanding of customer behavior, tracking website visitors to learn their tendencies and needs. Tracking analysis of customer behavior can be presented in static reports for easy comprehension. To know whether or not the current task is meeting the standards for operating efficiency, constant testing is necessary.

In the online environment, initial web log analysis of online business merely focused on the improvement of the operating system. Now, web analytics has expanded to include customer needs and web business goals. Comprising of various reputable, visionary American companies, Web Analytics Association (WAA, www.webanalyticsassociation.org) defines web analytics as such:

"The measurement, collection, analysis, and reporting of Internet data for the purpose of understanding and optimizing Web usage"

Although it also provides a detailed definition of the reasons and contents for web log analysis, we believe they are ever-changing. The definition of web analytics should constantly evolve. Visitors of an Internet business environment are not facing other people but rather a set system. However, based on customer interaction on website infrastructure such as café, blog, community site, or online bookseller, Internet business receives periodic visits and browsing for information and purchasing actions.