Value Creation

In order for customers to visit Web sites, make initial online purchases, and then develop into return customers, companies must provide them with good reasons for doing so. In general, value creation is the process companies use to make their Web sites destinations of choice, distinguished from and with advantages over other Web sites or retail channels. A company's ability to create value increases as its Web site evolves from static, advertising-focused Web pages to a site with more interactive capabilities, including online customer support or the ability to accept electronic orders for products and services.

The Association for Computing Machinery's journal, Communications of the ACM, revealed that as the World Wide Web becomes an increasingly important medium between producers and consumers, it affects many key channels in the supply chain, including order processing, advertising, and customer support. Therefore, from a big-picture standpoint, as products move along the many points between a manufacturer's assembly line and end-users—be they individual consumers, other businesses or re-sellers—there are many opportunities to create value online. In order for this to occur, information must be gathered, organized, selected, synthesized, and then distributed, as Jeffrey F. Rayport and John J. Sviokla explained in Don Tapscott's book Creating Value in the Network Economy.

A report studying best practices in value creation among European companies, issued by 3i Venturelab and summarized in European Venture Capital Journal, identified three unique areas where value can be created during e-commerce: bringing many different groups or products together; delivering information to everyone involved in a way that is faster, richer or more meaningful than through other means; and creating alternatives to or simulations of the elements one would expect during an offline purchase, including the physical handling of products and the ability to talk to others.

Opportunities for creating value can be viewed from the standpoint of how companies interact with customers. According to Across the Board, Andersen Consulting identified that companies often attempt to create value by focusing on two specific kinds of interactions with customers: buyer-focused interactions and user-focused interactions. In a buyer-focused interaction, companies attempt to make the buying process more convenient or powerful for customers. On the other hand, user-focused interactions occur after a purchase takes place. Such interactions often involve things like online technical support, value-added information to enhance the use of a product or service, and notices about product updates.

In addition to buyer-and user-focused interactions, some companies create value based on the intentions of their customers. A company specializing in the sale of log homes could use this approach to make its Web site more meaningful for customers by listing current mortgage rates, providing links to different lenders, offering articles about choosing the right kind of log home, showcasing popular areas for building log homes, and so on. Thus, the site goes beyond mere details about a company's products or services and becomes a useful tool for customers who are seeking complementary information.

Another approach to creating value, called customer co-creation, involves customers contributing to the development or evolution of a company's product or service. According to a Planet IT article by C.K. Prahalad, Venkatram Ramaswamy, and M.S. Krishnan, "consumers are getting used to the idea of an active dialogue with providers of products and services. The emerging dialogue is not restricted to help-desk communication. Increasingly, the dialogue involves an active role in product design and testing." Microsoft used this approach by involving more than 500,000 software engineers in the testing process for Microsoft 2000 and using their feedback to make the final product better. Other examples of this type of interaction include the collaborative development of the Linux operating system—a software program used to control the basic operating functions of many Web servers.

The potential for value creation also exists when companies assist customers in the disposal of unwanted goods. For example, a company selling new office equipment might directly buy—or help a customer to sell—their old furnishings as an added service. In addition to benefiting consumers, this type of interaction also creates leasing, pricing, and promotion opportunities for companies on the sales side.

In the early 2000s, personalization and the formation of online communities were two other ways companies could create value on their Web sites, although the approaches had not been adopted on large scales. With personalization, customers' Web site experiences are customized, based on information the host company acquires about them. To accomplish this, some companies use software programs to conduct behavioral analyses of Web site visits, which reveal the most popular areas of their sites, such as pages with specific products or services. By keeping track of visitors' purchase histories, Web pages can be customized to include content or special offers that are more relevant to them. Companies also can go beyond basic personalization and engage in dynamic profiling, in which Web sites try to predict what a visitor is likely to buy. In this scenario, based on a visitor's history and the areas they are viewing during an actual visit, special software reconfigures Web pages to display items that visitor might purchase. Ultimately, the company's goal is to generate more return visits and purchases.

Finally, online communities were a channel through which value could be created. Online communities involve existing or potential users of a product or service providing support and information to one another, usually by posting messages, exchanging e-mail, or engaging in chat sessions. In addition to saving companies money in the area of customer service, online communities arguably provide a deeper, more insightful level of support to customers. A variety of different consumer experiences often result from one product or service. Online communities allow end-users to share them with one another and exchange perspectives. Because value is so important to a Web site's success, the topic likely will remain a major focus for online marketers and the customers they serve.