E-performance: The path to rational exuberance

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E-performance: The path to rational exuberance

“Successful e-commerce companies are following tried-and-true principles from the brick-and-mortar world.”

The McKinsey Quarterly, 2001 Number 1

Policy relevance:

With the Commission’s launch of a watchdog, ‘e-Business W@tch’, it is all the more of interest to have some insight in what makes good ‘e-performance’.

Main conclusions:

  • At least six months before the collapse, the data showed Internet companies suffered a ‘fatal attraction’: the more visitors they drew, the more money they lost;
  • Yet, by the time investors finally lost confidence, the tide had actually begun to turn;
  • Most measures of e-performance track variations in traffic, but the foundation of long-term profitability is lifetime customer value;
  • The e-performance scorecard on the other hand expresses two key dimensions of e-business: the efficiency of costs and the effectiveness of a site’s operations;
  • Almost none of the e-companies that lavished large sums on e-marketing campaigns achieved above-average visitor growth;
  • Some facts behind the numbers are that the content sphere is significantly overpopulated, providing decent coverage and continually creating and updating content require a large and talented staff and high off-line costs of production have been replaced by those of on-line technology;
  • Europe which came to the Internet later than the US, Europe’s community sites tend to be roughly 10 per cent more effective than their US counterparts at the same point in their life cycle;
  • The article then goes on to list some tips on how to attract, convert and retain buyers.

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