Chapter

E-Business and ECommerce

Information Technology For Management 6th Edition

Turban, Leidner, McLean, Wetherbe Lecture Slides by L. Beaubien, Providence College

John Wiley & Sons, Inc. Chapter 5

Learning Objectives

Describe electronic commerce, its scope, benefits, limitations, and types

Understand auctions and bartering Describe the major applications of business-to-consumer commerce, including service industries, and major issues faced by e-tailers Describe business-to-business applications Describe emerging EC applications such as intrabusiness and B2E commerce Chapter 5

Learning Objectives (Continued)

Describe e-government activities and consumer-to-consumer e-commerce Describe the e-commerce support services, specifically payments and logistics

Discuss the importance and activities of online advertising

Discuss some ethical and legal EC issues

Describe EC failures and strategies for success

Chapter 5

Learning Objectives
Identify the major categories and trends of e-commerce applications Identify the essential processes of an e-commerce system, and give examples of how they are implemented in e-commerce applications Identify and give examples of several key factors and Web store requirements need to succeed in e-commerce
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Learning Objectives
Identify and explain the business value of several types of e-commerce marketplaces Discuss the benefits and trade-offs of several e-commerce clicks and bricks alternatives

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The Structure of E-Commerce

Chapter 5

Introduction to e-Commerce
Electronic commerce encompasses the entire online process of
Developing Marketing Selling Delivering Servicing Paying for products and services

It relies on the Internet and other information technologies to support every step of the process
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The Scope of e-Commerce

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E-Commerce Technologies

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Categories of e-Commerce
Business-to-Consumer Virtual storefronts, multimedia catalogs, interactive order processing, electronic payment, online customer support e.g beliscity Business-to-Business Electronic business marketplaces, direct links between businesses, auctions and exchanges Intell mircroproceser to Dell Consumer-to-Consumer Online auctions, posting to newspaper sites, personal websites, e-commerce portals Ebay, olx Consmer to business (C2B) Elance freelance website

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Essential e-Commerce Architecture

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Access Control and Security

E-commerce processes must establish mutual trust and secure access between parties
User names and passwords Encryption key transformation of plain text into ciphertext. Digital certificates and signatures

Restricted access areas

Other peoples accounts Restricted company data Webmaster administration areas
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Profiling and Personalizing

Profiling gathers data on you and your website behavior and choices
User registration Cookie files and tracking software User feedback

Profiling is used for

Personalized (one-to-one) marketing Authenticating identity Customer relationship management Marketing planning Website management
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Search Management
Search processes help customers find the specific product or service they want
E-commerce software packages often include a website search engine A customized search engine may be acquired from companies like Google or Requisite Technology Searches are often on content or by parameters

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Content and Catalog Management

Content Management Software
Helps develop, generate, deliver, update, and archive text and multimedia information at e-commerce websites

Catalog Management Software

Helps generate and manage catalog content

Catalog and content management software works with profiling tools to personalize content
Includes product configuration and mass customization
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Workflow Management
E-business and e-commerce workflow management depends on a workflow software engine
Contains software model of business processes

Workflow models express predefined

Sets of business rules Roles of stakeholders Authorization requirements Routing alternative Databases used Task sequences
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Example of Workflow Management

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Event Notification
Most e-commerce applications are event driven
Responds to such things as customers first website visit and payments Monitors all e-commerce processes Records all relevant events, including problem situations Notifies all involved stakeholders Works in conjunction with user-profiling software

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Collaboration and Trading

Processes that support vital collaboration arrangements and trading services
Needed by customers, suppliers, and other stakeholders

Online communities of interest

E-mail, chat, discussion groups Enhances customer service Builds loyalty

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Electronic Payment Processes

Complex processes
Near-anonymous and electronic nature of transactions Many security issues Wide variety of debit and credit alternatives Financial institutions may be part of the process

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Electronic Payment Processes

Web Payment Processes
Shopping cart process Credit card payment process Debit and other more complex processes

Electronic Funds Transfer (EFT)

Major payment system in banking, retail Variety of information technologies capture and process money and credit card transfers Most point-of-sale terminals in retail stores are networked to bank EFT systems
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Electronic Payment Example

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Securing Electronic Payments

Network sniffers easily recognize credit card formats
Encrypt data between customer and merchant Encrypt data between customer and financial institution Take sensitive information off-line

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Components of EC (Continued)
To execute these applications, companies need the right information, infrastructure, and support services. As shown: People: Sellers, buyers, intermediaries, information systems specialists and other employees, and any other participants Public policy: Legal and other policy and regulating issues, such as privacy protection and taxation Marketing and advertising: Like any other business, EC usually requires the support of marketing and advertising Support services: Many services are needed to support EC. They range from payments to order delivery and content creation Business partnerships: Joint ventures, e-marketplaces, and partnerships are some frequently occurring relationships in ebusiness
Chapter 5 24

Auctions
The major mechanism for buying and selling on the Internet is the electronic catalog. Common mechanisms used in its implementation: electronic auctions

Electronic Auctions (e-Auctions): A market mechanism by which sellers place offers and buyers make sequential bids Forward auctions are auctions where sellers place items at sites for auction and buyers bid continuously for the items. Reverse auctions, have one buyer, usually an organization, that wants to buy a product or a service. Suppliers are invited to submit bids. Auctions are used in B2C, B2B, C2B, e-government, and C2C commerce
Chapter 5 25

Developing a Web Store

Build a website
Choose or set up web hosting Use simple design tools and templates Include a shopping cart and payment support

Market the website

Include Web page and e-mail advertising and promotions Exchange advertising with other Web stores Register with search engines and directories Sign up for affiliate programs
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Serving Your Customers

Convert visitors into loyal customers

Develop one-to-one relationship with customers Create incentives to encourage registration Use Web cookies to identify visitors Use tracking services to record and analyze website behavior and customer preferences Create an attractive, friendly, efficient store Offer fast order processing and payment Notify when orders are processed and shipped Provide links to related websites
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Managing a Web Store

Manage both the business and the website
Record and analyze traffic, inventory, sales Use CRM features to help retain customers Link sales, inventory data to accounting systems

Operate 24 hours a day, seven day a week

Protect transactions and customer records
Use security monitors and firewalls Use redundant systems and power sources Employ passwords and encryption Offer 24-hour tech support
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Seven Design Elements of Customer Interface

Context Content

Functional look and feel How it is presented What is presented Consumers and firm Consumers to consumers Chat room and message board Ability to modify itself Dialog between website and its users Links between the site and other sites Transactional capacity

Community

Customization

Communication Connection Commerce

The 7Cs of Customer Interface

Context
Sites layout and design

Content
Text, pictures, sound, and video that webpages contain

Commerce
Sites capabilities to enable commercial transactions

Community
Sites ability to enable user-touser communication

Connection
Degree to which a site is linked to other sites

Customization
Sites ability to self-tailor to different users or to allow users to personalize the site

Communication
The ways sites enable site-touser communication or two-way communication

Individualizing a Website: Customization

Commonly used customization features:

E-mail accounts: Users can send and receive e-mail from the site, using a
free, unique e-mail address

Content and layout configuration: Users can design their own homepage,
within limits, by choosing background colors, layout design, and content sources

Storage: Users can store e-mail, URLs, favorite content, or items they want to
buy

Agents: Computer programs can perform simple tasks upon request, such as
notifying a user via e-mail when a product is in stock

Personalization by User Example MyLook.com

Personalization by User Example mylook.com

Tailoring by Site Example

Tailoring ExampleAmazon Homepage for Two Users

Amazon.com Homepage for Two Different Customers

Communications

Types of communications Broadcast (1 way)

Mass mailing FAQs E-mail newsletters Content update notifications Broadcast events

Interactive (2 way)
E-mail Chat room User feedback

Hybrid

Keeping in Touch with Users: Communication

Communication Archetypes
One-to-Many, Non-Responding User: Site messages are
announcements that users receive without needing to respond

One-to-Many, Responding User: Site messages are invitations to

users to submit their comments and responses

One-to-One, Non-Responding User: User receives personalized

messages to address specific interests or needs without a need to respond

One-to-One, Responding User: User responds to personalized

messages sent by the site

B2B E-Commerce
B2B is the wholesale and supply side of the commercial process
Businesses buy, sell, or trade with other businesses

Relies on multiple electronic information technologies

Catalog systems Trading systems Data interchange Electronic funds transfers

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E-Commerce Portals
B2B e-commerce portals offer multiple marketplaces
Catalogs Exchanges Auctions

Often developed and hosted by third-party market-maker companies

Infomediaries serve as intermediaries in e-business and e-commerce transactions

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Market Research for EC

market segmentation
The process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales

Segmentation is done with the aid of tools such as data modeling and data warehousing

Market Research for EC

Tracking Customer Movements
transaction log A record of user activities at a companys Web site
clickstream behavior Customer movements on the Internet

Electronic Commerce

Market Research for EC

Web bugs Tiny graphics files embedded on e-mail messages and in Web sites that transmit information about the users and their movements to a Web server spyware Software that gathers user information over an Internet connection without the users knowledge

Market Research for EC

Limitations of Online Market Research

Too much data may be available To use data properly, it should be organized, edited, condensed, and summarized The solution to this problem is to automate the process by using data warehousing and data mining Some of the limitations of online research methods are:

Accuracy of responses Loss of respondents because of equipment problems The ethics and legality of Web tracking Lack of representativeness in samples of online users

Web Advertising

Some Internet Advertising Terminology

ad views
The number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views

Button Page click (click-through or ad click)

A count made each time a visitor clicks on an advertising banner to access the advertiser s Web site

Electronic Commerce

Web Advertising

CPM (cost per thousand impressions) The fee an advertiser pays for each 1,000 times a page with a banner ad is shown
conversion rate The percentage of visitors who actually make a purchase click-through rate (or ratio) The percentage of visitors that are exposed to a banner ad and click on it

Web Advertising

click-through ratio
The ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad

hit
A request for data from a Web page or file

visit
A series of requests during one navigation of a Web site; a pause of a certain length of time ends a visit

Web Advertising

unique visit A count of the number of visitors to a site, regardless of how many pages are viewed per visit
stickiness Characteristic that influences the average length of time a visitor stays in a site

Electronic Commerce

Web Advertising

Why Internet Advertising?

Television viewers are migrating to the Internet Advertisers are limited in the amount of information they can gather about the television and print ads Other reasons why Web advertising is growing rapidly:
Cost Richness of format Personalization Timeliness Location-basis Digital branding
Electronic Commerce

Advertising Methods

Banners
banner
On a Web page, a graphic advertising display linked to the advertisers Web page

keyword banners
Banner ads that appear when a predetermined word is queried from a search engine

random banners
Banner ads that appear at random, not as the result of the users action
Electronic Commerce

Advertising Methods

Benefits of Banner Ads

By clicking on them users are transferred to an advertisers site, and frequently directly to the shopping page of that site The ability to customize them for individual surfers or a market segment of surfers Viewing of banners is fairly high because forced advertising is used Banners may include attention-grabbing multimedia

Advertising Methods

Limitations of Banner Ads

Cost A limited amount of information can be placed on the banner Viewers have become somewhat immune to banners and simply do not notice them as they once did

Electronic Commerce

Advertising Methods

banner swapping An agreement between two companies to each display the others banner ad on its Web site

Electronic Commerce

Advertising Methods
pop-up ad

An ad that appears in a separate window before, during, or after Internet surfing or when reading email pop-under ad An ad that appears underneath the current browser window, so when the user closes the active window, he or she sees the ad interstitial An initial Web page or a portion of it that is used to capture the users attention for a short time while other content is loading
Electronic Commerce

Advertising Methods

E-Mail Advertising

E-Mail Advertising ManagementFour guidelines that marketers should consider to leverage customer insights throughout the e-mail marketing campaign lifecycle:

1. Thinking about customer experience; 2. Making privacy protection a part of their brand promise; 3. Ensuring their recipients know about their privacy protection; and 4. Measuring impact.

Advertising Strategies and Promotions Online

affiliate marketing A marketing arrangement by which an organization refers consumers to the selling companys Web site

viral marketing
Word-of-mouth marketing by which customers promote a product or service by telling others about it

Electronic Commerce

Special Advertising Topics

Permission Advertising spamming

Using e-mail to send unwanted ads (sometimes floods of ads) permission advertising (permission marketing) Advertising (marketing) strategy in which customers agree to accept advertising and marketing materials
Prentice Hall 2006
57 Electronic Commerce

E-Commerce Strategy Checklist

Questions to ask and answer
What audiences are we attempting to reach? What action do we want those audiences to take? Who owns the e-commerce channel within the organization? Is the e-commerce channel planned alongside other channels? Is there a process for generating, approving, releasing, and withdrawing content? Will our brand translate to the new channel? How will we market the channel itself?
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Managerial Issues
Managing resistance to change. Electronic commerce can result in a fundamental change in how business is done. Resistance to change from employees, vendors, and customers may develop. Education, training, and publicity over an extended time period offer possible solutions to the problem. Integration of e-commerce into the business environment. Ecommerce needs to be integrated with the rest of the business. Integration issues involve planning, competition for corporate resources with other projects, and interfacing EC with databases, existing IT applications, and infrastructure. Lack of qualified personnel and outsourcing. Very few people have expertise in e-commerce. There are many implementation issues that require expertise, such as when to offer special promotions on the Internet, how to integrate an e-market with the information systems of buyers and sellers, and what kind of customer incentives are appropriate under what circumstances. For this reason, it may be worthwhile to outsource some e59 commerce activities. Chapter 5

Managerial Issues (Continued)

Alliances. It is not a bad idea to join an alliance or consortium of companies to explore e-commerce. Alliances can be created at any time. Some EC companies (e.g., Amazon.com) have thousands of alliances. The problem is which alliance to join, or what kind of alliance to form and with whom. Implementation plan. Because of the complexity and multifaceted nature of EC, it makes sense to prepare an implementation plan. Such a plan should include goals, budgets, timetables, and contingency plans. It should address the many legal, financial, technological, organizational, and ethical issues that can surface during implementation. Choosing the companys strategy toward e-commerce. Generally speaking there are three major options: (1) Lead: Conduct large-scale innovative e-commerce activities. (2) Watch and wait: Do nothing, but carefully watch what is going on in the field in order to determine when EC is mature enough to enter it. (3) Experiment: Start some e-commerce experimental projects (learn by doing).
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Managerial Issues (Continued)

Privacy. In electronic payment systems, it may be necessary to protect the identity of buyers. Other privacy issues may involve tracking of Internet user activities by intelligent agents and cookies, and in-house monitoring of employees Web activities. Justifying e-commerce by conducting a cost-benefit analysis is very difficult. Many intangible benefits and lack of experience may produce grossly inaccurate estimates of costs and benefits. Nevertheless, a feasibility study must be done, and estimates of costs and benefits must be made. Order fulfillment. Taking orders in EC may be easier than fulfilling them. Managing the impacts. The impacts of e-commerce on organizational structure, people, marketing procedures, and profitability may be dramatic. Therefore, establishing a committee or organizational unit to develop strategy and to manage e-commerce is necessary.
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Chapter 5
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