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Why a SaaS Ecommerce Platform Might Not Be Right for Digital Goods

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Companies that sell digital goods and services face very different challenges than their traditional retail counterparts when it comes to ecommerce strategy–and ecommerce technology.

Why Digital Goods and Services Are Different

Unlike traditional ecommerce, where the transaction experience effectively ends when a buyer takes delivery of a product, digital goods and services are alive. They may change over time, as in the case of a subscription that lapses, a rental that expires, or a service entitlement that is expended. Each and every attribute associated with a purchase unit, from pricing and usage rights to the actual content, may be materially different from one customer to another. And the product itself may be a vehicle for further monetization, such as a click-to-buy action within an electronic newspaper, or the in-game purchase of virtual goods and services.

On the other hand, vendors of physical products typically adhere to the simple, nearly universal blueprint set by IR Top 500 heavyweights from Amazon.com to Staples. While there may be some differentiation in features and functionality, there are relatively few differences between the basic business processes or customer experience needs of one merchant versus another. For many traditional e-tailers, competition happens mainly on dimensions such as price, reputation, and service rather than any significant distinctions in the way things are sold to people. Because of this, physical goods retailers place virtually identical demands on their ecommerce software, and they can make do with commodity applications in the form of hosted platforms, software-as-a-service (SaaS), or other outsourced ecommerce solutions.

The Need for Innovation

Nothing underscores the wild innovation necessary to succeed in digital goods more than the runaway success of plays like iTunes, Zynga, Netflix, the Android Market, and the Steam gaming network – especially when measured against competitors who opted to simply follow the conventional retail ecommerce blueprint.

Three digital success stories, three very different models of ecommerce.

Beyond simply taking and recording orders, these groundbreaking platforms each play a deep, wide, and vital role in the overall ownership experience of their respective product offerings. This stands in stark contrast with traditional ecommerce, which is primarily concerned with a merchandising and buying experience.

The Need for Digital Relationship Management

Rather than conducting online retail as we know it, the most innovative and successful merchants of digital goods and services are practicing new forms of digital relationship management focused on catering to users in a holistic fashion over a longer period of time. In this world, customer lifetime value is the ultimate metric, and the way to maximize it is to delight consumers with the effortless way in which their needs and wants are met. This means that the commerce ecosystem that delivers these requirements must often be heavily customized or even built from scratch.

Which Ecommerce Delivery Model?

As we’ve written about before on Get Elastic, your specific needs define what ecommerce delivery model you should select – build, buy or ‘leverage.’

SaaS (software-as-a-service) or other outsourced, hosted, and multi-tenant platforms work well for traditional retail, with its low complexity and uniqueness:

Purchased, packaged software platforms suit e-businesses with medium complexity and uniqueness requirements:

For projects with high levels of complexity, uniqueness, and strategic importance, such as the sale of digital goods and services, building a custom ecosystem with products that offer modular functionality is often necessary. Options are to build completely from scratch, or leverage an ecommerce platform with the flexibility to accommodate your unique needs.

For digital goods vendors, many attributes of SaaS and other outsourced solutions that make them suitable for traditional retailers end up being serious barriers to the successful execution of digital relationship management:

• The common transactions and user flows that are a hallmark of the retail ecommerce blueprint are the antithesis of successful monetization in the world of digital goods and services.
• Standardized or multi-tenanted ecommerce platforms are designed to scale on measurements applicable to the retail ecommerce blueprint. Very few of them are engineered to scale on the novel and unconventional metrics that are key to working with digital goods and services.
• The analytics and optimization tools provided in most ecommerce platforms are expressly tailored for the metrics and intervals used for selling physical goods.

We look deeper into this topic with our latest white paper: The Problem With SaaS for Digital Commerce (pdf). In this report, we examine the unique needs of vendors selling digital goods and services, and explore alternative technology solutions that are better suited for the demands of this growing sector.

Source http://www.getelastic.com/?p=10273
Fri, 09 Sep 2011 14:58:19 GMT
Tags: Ecommerce Platforms, Ecommerce Strategy,

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