Investigating the Impact of Web Site Value and Advertising on Firm Performance in Electronic Commerce

Khawaja A. Saeed, Yujong Hwang, and Varun Grover
International Journal of Electronic Commerce,
Volume 7, Number 2, Fall 2002, pp.119.

Abstract: The failure of many B2C companies has triggered widespread concern about the future prospects of such firms. Surviving and newly formed companies are reevaluating their strategies and struggling to build a sustainable business model. This paper empirically examines how customer value created through Web site interface and advertising affects firm performance in an electronic commerce context. Advertising can increase the number of visitors to a Web site. Web site features that facilitate presale, sale, and postsale tasks by increasing visitor-to-customer conversion can augment bottom-line performance measured in terms of economic value added (EVA). The results demonstrate that advertising spending alone has only a negligible impact on firm performance. A more appropriate profit-enhancing strategy for B2C companies is to complement advertising spending with a superior shopping experience that augments the value customers gain from the purchase experience. Advertising spending may act as a stimulus to increase Web site traffic. If complemented with Web site features that support customers’ purchase-requirements determination and product-ownership experience, it can enhance the performance of B2C firms.

Key Words and Phrases: Advertising expenses, customer value, Economic Value Added (EVA).