The Business Impact of Web 2.0
Web 2.0 technology is simply a new name for a series of inter-connected Internet components, and the internal technology infrastructure to support this inter-linkage, that combines different online software programmes with traditional Web applications to create a more user-friendly and interactive forum for information and communications exchanges. The technical architecture for Web 2.0 varies by company or organisation, including AJAX and JSON. However, outside of the technical factors, Web 2.0 creates new opportunities to link different pre-existing Web locations such as YouTube, Facebook, Twitter, and a variety of different sites to enhance business activities both internal and external. This paper describes the different risks and advantages of Web 2.0 for today’s businesses, identifying several case studies for companies that have tested Web 2.0 functionality to create a better business model and standing among competitors in similar industries.
What is Web 2.0
Web 2.0 is considered part of the “participatory Web” (Decrem, 2006, p.2). It is called participatory because it creates opportunities for internal employees to enhance their communications systems or can even allow customer groups to be more interactive and post various comments or criticisms to help businesses understand their target markets at the marketing and advertising level. Web 2.0, with the assistance of information technology experts, allows current and pre-existing computer and software systems to become inter-linked with many social media sites and interactive forums to build more cost-effective and convenient linkages to the internal and external environment.
At the internal level, in terms of operations, businesses are searching for methods to improve their operational processes by “improving process, a performance by leading and controlling processes with a means to measure or improve business function” (Santa, Ferrer, Bretherton and Hyland, 2009, p.156). At the internal level, businesses must be keenly aware of the costs associated with operational elements, all the way from production through the end product delivery, to ensure that they remain within budget and can stay competitive with a highly-evolutionary external business environment. Web 2.0 technologies can enhance several different organizational elements from a strategic viewpoint, such as enhanced online ads or even supply chain, by turning physical delivery into an Internet-based logistics process.
Web 2.0 also allows a business to regain innovation at a time where their current systems may be outdated or unable to compete with companies that have higher budget capabilities for information technology improvements. One small business expert identifies that to be genuinely innovative; business leaders must “lose the routine” and “get cosy with customers” (Alsever, 2009, p.68). Web 2.0, if the platform and model for improvements via the Internet are adequately developed in a fashion that meets business and customer needs, can allow for this innovation by linking to different social media sites (a series of free services) and change the method by which internal communications are passed throughout the business environment.
Critically, Web 2.0 maintains virtually unlimited opportunities for business to expand their online presence to many different global or domestic target audiences without the need for excess costs associated with time-honoured business function. Sites such as Twitter and Facebook, as two examples, have been shown to help political candidates have more exposure and gain a stronger foothold with voter groups. Web 2.0 and its inter-connectivity can surely accomplish this for business as well and guarantee the aforementioned cost savings in a variety of different operational elements.
Evaluation of the impact on e-business
Marketing is one of the most important functions in today’s businesses, especially within industries that have highly unpredictable market environments and strong competition in virtually every sector. Companies that have a high volume of products in their product line are continually looking for a way to build a solid brand that is preferred over competition and remains stable in their product markets. “Brand building involves quality, well-blended communications, credibility, internal marketing, and positioning” (Gerber, 2008, p.2). Quality, at the marketing level, might not only include the actual features and benefits of the product but in the choice and style of communications that are relevant to the needs of their customer groups. Especially in the e-business environment, businesses need ways to express their product and brand quality in an online environment that is uncertain and filled with mixed communications messages that can confuse or mislead clients. For companies that rely on e-business marketing to remain successful, Web 2.0 creates a platform for interactivity with customers or even blogging opportunities so that they gain real-time market research information to make operational changes that can best satisfy customers.
In traditional e-business, it has been commonplace to rely on banner-style advertising on affiliated websites to gain exposure. However, to place these advertisements strategically and in a forum where more desired customers will see them and respond, a considerable amount of corporate capital must be applied to market research efforts, such as the survey, questionnaire, or customer interviews. This can represent a need to distribute higher payroll costs which can detract from the company’s operating budget. There is also no guarantee that this type of traditional market research is going to be effective and produce results that are consistent with the company’s profit or sales goals. Web 2.0, when linked with social blogging sites (or when the company builds their blog environment), allows the business to assign only a handful of individuals to monitor the content and find out exactly what customers think of the brands and then redevelop their operational or distribution strategies to satisfy clients. In many ways, in terms of e-business, it is the real-time methodology of research that can improve the company’s competitive position with other e-business leaders in the same industry. In so many ways, Web 2.0 can eliminate the ongoing costs of banner-style advertisements and remove the dependency on other websites and affiliates that were once necessary to build a solid consumer brand.
Also, in marketing at the e-business level, companies are often looking for new and innovative ways to position their business name or particular brand so that it has a more favourable customer following. Positioning is “defining the unique qualities you want to be perceived, identifying how you want to be perceived, and then creating an image and living up to it” (businesslink.gov.uk, 2009, p.1). In the e-business environment, the positioning might involve expressing a single factor, such as price compared to the competition, and then sending this consistent message through a variety of sometimes-costly online mediums. It often takes research and monitoring of sales successes in certain markets before the business can fully understand whether it needs to reposition or simply change the style of message communications. Web 2.0, however, provides an interactive forum for customers, especially when tied to blogging sites or even video sites, that can identify whether pricing has become a positive factor or whether it is having any success at all. For the e-business leader, these interactive elements can quickly tell the company that they must shift away from pricing and choose a new positioning such as focusing more closely on quality or the lifestyles of the consumers themselves. Where in traditional marketing format it could take months or years to measure whether one message is effective, Web 2.0 can shorten this lead time of understanding by a significant margin just by browsing through pages of video or consumer-generated blogs about the business or product.
“The essence of today’s marketplace allows businesses to communicate with their consumers and business partners, use technology to offer services across borders instantly” (Aziz and Yasin, 2004, p.3).
This is especially true for companies that operate or distribute across various Internet channels. Some companies, operating without Web 2.0 functionality, have accomplished this by improving their telecommunications networks or creating costly distribution models in the e-business environment. Traditional systems such as e-mail or allowing other companies and partners to link with the firm’s intranet have provided such successes, however with the need to absorb even more costs by transforming the information technology architecture to include off-site technology support. Web 2.0 provides a new strategy and competitive advantage by removing the costs of off-site technology support, especially during a period in business time where technology is virtually necessary to satisfy clients who are now demanding real-time access to their partners or suppliers.
Potential applications, benefits and risks
The online social revolution is gaining mainstream interest in a variety of business and consumer groups (Smith, 2009). Again, sites like YouTube, MySpace and Twitter (to name a few) have given people new opportunities to offer user-generated content, publish consumer opinion, and has even given business executives a chance to speak with clients and customers through video-sharing (Smith). Where traditional bricks-and-mortar businesses were limited by geographic constraints to reach customers or potential business alliances, the social revolution removes these borders and gives new exposure and brand visibility. Using the interconnectivity of Web 2.0, such as providing a direct link to free sites such as Facebook, even business leaders can take part in marketing by avoiding the high costs of tangible literature about the business and its strategies and allow potential investors and customers to fully understand what the brand is all about and the direction it is heading. As a practical business application, Web 2.0 can even improve the company’s investment position if these services and the video content distributed sends a message that inspires confidence in the strategic goals of the company. Therefore, costs savings and better overall visibility is the best practical application of Web 2.0 development.
In terms of marketing, the fashion company ASOS has begun to take advantage of social media by creating a more interactive website that gathers real-time customer comments about ASOS (McEleny, 2009). ASOS is a pure-play clothing retailer that appeals to the younger generation, primarily, and has relied on traditional marketing mediums to highlight its clothing offerings and improve its competitive position with other youth-oriented retailers. The linkage from a traditional online format to Web 2.0 has improved their competitive position and given them higher sales success simply by allowing customers to browse interactively and give their actual opinion about fashion options, pricing, or even quality.
Even large-scale companies such as FedEx and UPS have taken advantage of the Web 2.0 phenomenon and incorporated customer-related interactivity in their websites to improve competitive position. Both of these companies have used the Internet to provide online ordering to make buying and packaging convenient for customers, but have shifted to Web 2.0 for online delivery tracing services and even customer support (Knights, 2007). What this has created for both FedEx and UPS is the new revolution in customer convenience and has even reduced their payroll reliance on physical customer service hotlines which is a tremendous advantage in terms of costs at the operational level. Further, providing customers with opportunities to buy, ship and track their merchandise movements helps improve their image of quality with consumer groups that are quickly becoming accustomed to real-time response with other competing firms in this industry. Web 2.0 also provides opportunities for companies such as these to update information easily (Apiki, 2006) and without extensive costs associated with a more advanced information technology architecture. For FedEx and UPS, Web 2.0 has completely revolutionized their relationships with customers and suppliers by having to add convenience to a previous quality-based marketing model.
IBM has taken a new approach to use Web 2.0 to improve its training capabilities at the internal recruitment and retention levels. IBM uses the virtual environment known as Second Life for training and even for mentoring existing employees (Duffy, 2009). Ernst & Young has used Web 2.0 capabilities for recruitment purposes (Duffy). Companies that once relied on expensive in-house video production and literature creation for distribution now have a unique opportunity to change their training and improve the human resources budget.
Despite these real-life business successes, there are certainly risks for innovative businesses looking to include Web 2.0 in their online e-business models. Even though online blogging capabilities allow customers to give real-time data to improve marketing research, there is a risk of allowing customers to post criticisms in an environment where other customers can easily read it; perhaps those that are loyal to the brand or business already. “Peers listen and trust these reviews” (Fichter, 2007, p.2). Businesses that apply this blogging or commentary posting forums into their business models cannot instantly control the content being posted, at least without building in some form of recognition software package that identifies harmful or unwanted words to delete the content. This can pose very high costs at the operational level. With the notion that certain peer groups in business’ desired target markets take these comments seriously and can even alter their buying behaviour based on them, this certainly represents a risk that must be considered as part of a comprehensive Web 2.0 risk management system. It might wind up, in the long-term, posing staffing problems to monitor and clear unwanted or dangerous brand-related comments that could, potentially, be more problematic than the valuable market research it can provide.
Further, it is important to identify that women, over their male counterparts, make up 80 per cent of all consumer decisions related to product purchases (Schulaka, 2009). This is highly important to note if only 20 per cent of men can be relied upon to be active brand purchase decision-makers. This poses a risk to the type of content that should be included with different Web 2.0 applications since the evidence points toward women being the majority of buyers. A company might wish to ask itself whether it should post female-oriented communications or build interactive features that must be catered to the female buying groups. A company that provides products with niche market audiences, those with specific demographics and lifestyles, might wish to reject Web 2.0 if they will be exposing their brand to mass market groups in the online environment. For example, if the company in question were providing certain boots that would only be relevant for the snow-skier, Web 2.0 might be accessible to bloggers of different varieties that can cause reputation damage to the boot manufacturer. Before adding Web 2.0 components to a company’s online e-business model, the nature of the buyer groups should be considered before making content accessible to undesired consumer market groups.
Synthesis of learning and recommendations
There is an opportunity to gain exposure using Web 2.0 to improve business, as the growth in social media has gone from a niche market to mainstream consumer lifestyle. Businesses that have spent a great deal of corporate capital looking for innovative or complicated marketing strategies, for brand-building, have unlimited opportunities to change the nature by which they reach customers and communicate their desired messages. Businesses of all varieties should recognise that sites such as Facebook and Twitter represent free opportunities to expand marketing without the costs of complex systems development at the internal level. It is mostly in areas of cost savings that businesses should consider using Web 2.0 components in their e-business models by merely relying on the technological sophistication and expertise of pre-existing online social networks to give the business more visibility; and even their internal leaders.
Companies that are looking to revolutionize or streamline their distribution systems could also look toward companies identified in case studies such as FedEx and UPS to build a new way to give customers methods to track their product from the point of origin through the delivery logistics network. Where some e-business organisations need to call centres to handle these requests, Web 2.0 can allow more cost reductions and reduce staffing levels. This would seem logical that it would reduce training costs and labour related to it and build a better customer relationship management system without a need for broad information technology support experts.
Critically, after weighing the potential pros and cons of allowing customers to post interactive content about their experiences with products, it seems more beneficial to provide these forums for marketing research purposes and marketing visibility. However, if businesses simply are not ready to absorb the potential risks of this, it is recommended that specific industries consider different methods to allow customers to become more interactive and make them feel like a part of the brand. Fashion retailers can use Web 2.0, without necessarily allowing risky blog forums, to create virtual fashion models to allow customers to try on merchandise without leaving their personal computers. People in different markets that are concerned about the risks associated without the physical touch and visualisation of merchandise and reject the Internet for buying might be more satisfied by testing products on virtual mannequins. This removes the risk of negative commentaries and also builds stronger relationships with buyers in multiple markets. Using free sites such as MySpace or Facebook can publicize these new offerings of virtual models and lure more customers to the site for this innovation.
There are unlimited opportunities for business expansion and marketing presence through the use of Web 2.0, as well as improving relationships with potential suppliers and partners in the real-time Internet environment. It provides new opportunities to build better internal staffing through training revolution and can even improve the method and quality of communications between different managers and subordinates.
The evidence provided suggests that there are far more benefits to Web 2.0 than risks, especially in terms of building a better brand, satisfying clients of all varieties and also guaranteeing significant cost savings for almost any industry type. The e-business environment demands innovation and somewhat of abandonment of traditional business operations to remain competitive and viable in ever-fluctuating external business markets. Web 2.0 should be considered by all businesses that sell products or services via the Internet and adapted with content that provides opportunities for user-generated content distribution or face being outperformed by competition that see the opportunities and incorporate Web 2.0 into their e-business models.
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