Academic journal article JITTA : Journal of Information Technology Theory and Application

A Framework for Analyzing Customer Value of Internet Business

Academic journal article JITTA : Journal of Information Technology Theory and Application

A Framework for Analyzing Customer Value of Internet Business

Article excerpt

ABSTRACT

The main objective of this paper is to investigate the customer value of the Internet business. Internet business can be viewed as a new way of value creation and provision. Internet business makes it possible for firms to create and provide higher or new values for a range of customers wider in scope than in conventional business. For this reason, customer value plays an important role in the success of the Internet business.

A new framework is developed to analyze and evaluate customer value in the Internet business. The framework is comprised of value components and value improvement directions. Customer value can be created and/or enhanced by changing two components: the "content" and "context". The value improvements of both can be achieved by quality enhancement, cost reduction, and customization. Measurements to assess customer value are derived from this framework. We also further propose the exploratory alternatives for creating or enhancing customer value in the Internet business on the basis of this framework

The framework of this paper can be used to analyze and evaluate customer value effectively and completely in various Internet businesses. It also can be used to compare the level of customer value among businesses on the Internet.

INTRODUCTION

The term of "Internet Business" is rarely seen in academic journals but widely used in the practical world. Instead, Electronic Commerce (EC) as "a new way of doing business on the electronic communication network" (ESPRIT 1997) has been broadly used to designate the Internet business. "EC" and "Internet business" are similar concepts in that both of them mean the business that actively utilizes the Internet as a business medium.

We define Internet business as a new way of business that utilizes the Internet as a medium for transactions with customers. According to this definition, the Internet business encompasses most of the businesses that utilize digital network as transaction media with customers as well as "selling and purchasing of products and services over the Internet" (Keeney 1999).

Internet business as a new way of Value Creation. Various views can be applied to Internet business. Electronic markets where Internet business takes places can reduce the buyers' cost associated with conducting transactions (transaction cost) and also reduce perceived complexity of products and asset specificity. And it has been argued to alleviate market imperfections, and result in more efficient markets (Malone et al. 1987;Malone et al. 1989; Bakos 1991). The Internet business also allows the market to expand and helps firms capture new business opportunities. A variety of new business opportunities have emerged for firms conducting business over the Internet.

The Internet business can also be viewed as a new way of creating and providing value for the customer. Firms can create value for customers in a manner that is different from that which has been achieved in conventional business. Value creation and provision in the Internet business can be performed differently from the conventional business (Rayport and Sviokla 1994).

This research focuses mainly on the third perspective and regards Internet business as a new way of value creation and distribution. From this point of view, business on the Internet is important due to its potential in terms of the creation and provision of value for the customer, which is higher than in conventional business. That is, it can enhance, create, and distribute value to a wider range of customers.

This highlights the importance of Internet business strategy based on customer value. Decisions such as selection and development of business models and website construction and its operation, and other tasks should be made based on the value for the customers. The business on the Internet should focus on the value for the customers not solely on the technology or products (Xue and Harker 2000). …

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