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E-commerce -

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Use of the Internet and Web to transact business; digitally enabled transactions Builds on traditional commerce by adding the flexibility that networks and the Internet offer

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Examples of business applications that use the Internet:

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Buying and selling products and services Collaborating and communicating with business partners Gathering business intelligence on customers and competitors Providing customer service Making software updates and patches available Offering vendor support Publishing and disseminating information

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Business types include:

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Bricks-and-mortar business Clicks-and-mortar business (clicks-and-bricks) Pure-play business (also called .com's, clicks only, or virtual) New "clicks-to-bricks" trend .....? Online business that builds a showroom to accompany the business. "Showrooming" vs "Webrooming" Showrooming is where you visit the store to research but purchase online, whereas webrooming is researching online and purchasing in the store.

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Ubiquity

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Internet/Web technology available everywhere - anytime, anyplace Effect is a new "market space" A marketplace extended beyond traditional boundaries and removed from temporal, geographic locations Enhanced customer convenience Reduced transaction costs- the costs of participating in a market ....

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Global reach

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The technology reaches across national boundaries, across the globe Effect: Commerce enabled across cultural and national boundaries seamlessly and without modification. Marketspace includes, potentially, billions of consumers and millions of businesses worldwide.

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Universal standards

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One set of technology standards: Internet standards Effect: Disparate computer systems easily communicate with one another Lower market entry costs - costs merchants must pay to bring goods to market Lower consumers' search costs - effort required for consumers to find suitable products

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Richness - the complexity and content of a message

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E-commerce - supports video, audio, & text Effect: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience

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Interactivity - e-commerce can provide two way communication between merchant and consumer

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Effect: Consumers engage in dialogs that dynamically adjust the experience to the individual Consumer becomes co-participant in process of delivering goods to market

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Information density -

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The total amount and quality of information available to all market participants; has greatly increased

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Effect - Consumers

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Greater price transparency - the ease with which the customer can find out the price they will have to pay for an item Greater cost transparency - the ability to find out the actual cost to the merchant

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Effect - Merchants

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Enables merchants to engage in price discrimination - selling the same goods to different targeted groups at different prices

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Personalization & Customization

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Technology permits modification of messages, goods

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Personalization -

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Ability to target marketing messages to specific individuals by adjusting the message to a person's name, interests, and past purchases

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Customization -

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Modification of a good or service based on a user's preference

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Social technology

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Allows users to create and share content in the form of text, videos, music, photos ... Effect: New Internet social and business models enable user content creation and distribution Creation of a new "many-to-many" model of mass communications (and potential marketing)

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The Effect of the Internet and Digital Markets

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Reduce Information asymmetry Reduce Search costs Reduce Transaction costs Reduce Menu costs Enable Price discrimination Enable Dynamic pricing More use of Disintermediation

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Digital Markets The Benefits of Disintermediation to the Consumer -

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The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer

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Digital goods

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Goods that can be delivered over a digital network (music, video, software, newspapers, books Cost of producing first unit almost entire cost of product: marginal cost of producing 2nd unit is about zero Costs of delivery over the Internet very low Marketing costs remain the same Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.)

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Types of E-commerce

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Based on Participants: Business-to-consumer (B2C) Consumer-to-consumer (C2C) Business-to-business (B2B) Government-to-citizen (G2C) Government-to-Business (G2B) Government-to-Government (G2G)

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Types of E-commerce

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Based on platform used by participants: Mobile commerce (m-commerce)

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B2C -

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Businesses sell their products or services directly to consumers over the Internet May involve disintermediation Common B2C e-commerce models include: E-shop (e-tailer, e-store, on-line store) - an on- line version of a retail store E-mall - consists of a number of e-shops; serves as a gateway (portal) through which a consumer can access multiple e-shops

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Traditional B2C models utilize:

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Menu-driven pricing: company sets the price that consumers pay What about companies like Priceline.com? These types of B2C relationships utilize different pricing mechanisms: Reverse-pricing: consumer specifies the price he/she is willing to pay, the company can accept or reject it

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Consumer-to-Consumer (C2C)

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Involves business transactions between users; consumers selling directly to other consumers over the Internet Online classified ads: Craigslist.org Pricing model: Menu-driven pricing Online auction sites: eBay.com Pricing model: Forward auction - Sellers use the site as a selling channel to many buyers and the highest bid wins

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Business-to-Business (B2B)

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Involves electronic transactions among businesses; businesses buying from and selling to each other over the Internet Fastest growing segment of e-commerce B2B transactions tend to be more complex and have high security needs Uses: Purchase orders, invoices, inventory status, shipping logistics, business contracts, and other operations

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Business-to-Business (cont')

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Lowers production costs and improves accuracy by eliminating many labor-intensive tasks Reduces delivery time, inventory levels, prices Facilitates information sharing B2Bs utilize: Intranets, Extranets, Virtual private networks (VPNs) - already covered Electronic data interchange (EDI) Private industrial networks (private exchanges) Net marketplaces Exchanges

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Electronic data interchange (EDI)

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Computer-to-computer exchange of standard transactions such as invoices, purchase orders. Major industries have EDI standards that define structure and information fields of electronic documents for that industry. However, more companies increasingly moving away from private networks to the Internet for linking to other firms. E.g., procurement: businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, and so on

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Private industrial networks (private exchanges)

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Large firm using extranet to link to its suppliers, distributors, and other key business partners Owned by firm (buyer) Supports product design and development, marketing, production scheduling and inventory management, unstructured communication (graphics and e-mail) Firm may post needs and invite sellers to bid on announced products or requests for quotation (RFQs) Pricing Model: Reverse auction - vendors provide quotes (bid) to firm (buyer) on price they will sell for - buyer selects the vendor with the lowest bid or quote

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Net marketplaces (e-hubs)

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Single digital market/exchanges to connect many buyers and sellers Industry-owned or owned by independent intermediary Generate revenue from transaction fees, other services Use prices established through negotiation, auction, RFQs, or fixed prices May be vertical marketplaces for specific industries or horizontal marketplaces for goods and services that are used across a variety of industries

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Net marketplaces

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Online marketplaces where multiple buyers can purchase from multiple sellers

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E-government -

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Involves the use of Internet technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer and the various branches of government

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E-government Categories:

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Government-to-citizen (G2C) Government-to-business (G2B) Government-to-government (G2G)

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Government-to-Citizen (G2C)

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Government services provided on-line to citizens/customers Renew driver's licenses, passports, visas, Medicare Medicaid benefits, social security, food stamps, public service announcements Consumer initiated transactions with government Elections/voting, census/demographic information, file/pay taxes

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Government-to-Business (G2B)

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Government services to businesses Information about regulations, licenses; import/export/tariff information; forms Business initiated transactions to government Filing information with SEC/EEO/IRS, paying taxes/fees

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Government-to-Government (G2G) Governments exchanging information -

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Local - health department, traffic, crime State - state budget information, education, Medicaid programs, statewide criminal records, transportation National - Medicare programs, Social Security, transportation, national crime records, disaster assistance International - international trade agreements, treaties, immigration information, international arms and terrorist information

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M-commerce -

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Use of wireless mobile devices for purchasing goods and services

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Although m-commerce represents small fraction of total e-commerce transactions, revenue has been steadily growing due to following:

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Location-based services Wireless advertising Banking and financial services Games and entertainment

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E-commerce Business Models

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E-tailer - on-line retail store, sells products Service provider - sells services (not tangible products) on-line Content provider - provides digital content such as news, music, other types of intellectual property Portal - provides initial entry point to the web along with specialized content and other services

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E-commerce Business Models, cont.

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Transaction broker - processes on-line sales transactions in return for a fee Market creator - create a digital environment where buyers and sellers can meet, display products, search for products, and establish prices Community provider (social networks and web sites) - provides an on-line meeting place where people with similar interests can communicate and find useful information

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E-commerce Revenue Models

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Sales (sometimes called merchant) - earn income by selling goods, information and services Subscription - charge a subscription fee for access to material or charge for a "membership" Free/Fremium - offer basic services or content for free, but charge a premium for advanced or special features Transaction fee (sometimes called brokerage) - the company receives a fee for executing a transaction Affiliate - receive a referral fee or % of the sale/revenue when they refer a visitor to another site

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E-commerce Revenue Models, cont.

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Advertising - users are exposed to advertisements on the web Banner ads - a box running across a web page with an advertisement and link to a company's web site Pop-up ad - a small web page or box containing an ad that appears over the page you are viewing Pop-under ad - a form of pop-up ad that users do not see until they close the current web screen Spot leasing - a space on a web site or search engine that is leased for a specific amount of time to show an ad to anyone who visits that page Sponsored links - links that appear at the top or side of search engine results that are paid for by a company Viral marketing - a technique that induces users or web sites to pass on a marketing message; a word-of-mouth type of advertising

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Social Network Marketing & Social Search:

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Social e-commerce: based on digital social graph Mapping of all significant online relationships An effort to provide fewer, more relevant, and trustworthy search results based on a person's network of social contacts - the purchases of one person influences other people's interests and purchases An environment where consumers ask their friends for advice on purchases of products, services, and content Seeks to leverage individuals' influence over others in their digital social graph The target is a social network of people sharing interests and advice On-line communities are ideal venues to employ viral marketing techniques - a technique that induces web sites or users to pass on a marketing message

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Wisdom of crowds

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Based on concept that large numbers of people can make better decisions about topics and products than a single person

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Crowdsourcing -

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Where firms offer incentives to customers for solving a problem or coming up with an idea

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Prediction markets:

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Peer-to-peer betting markets on specific outcomes (elections, sales figures, designs for new products) - customer places bets or votes for or against specific outcomes.

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Crowd-funding -

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Organized web sites where individuals can ask for direct financial contributions from family, friends, and others to help fund some type of venture A way for individuals to pool their money through the Internet to support other's artistic, educational, and business efforts as well as charities and disaster relief Several models - Equity-based, lending-based, reward-based, donation-based

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Electronic payment:

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Money or script that is exchanged electronically Payment cards: credit, debit, charge, or smart cards E-cash E-check E-wallet (digital wallet) Financial Cybermediary - an Internet-based company that facilitates payments over the Internet (ex. PayPal) Micropayments - provide content providers with a cost-effective method for processing high volumes of very small monetary transaction

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E-commerce Advantages

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Decreased costs Better relationships with suppliers, customers, business partners Price transparency - all can trade at same price Round the clock 24/7/365 Global operations More information on potential customers Increasing customer involvement/feedback Improving customer service Increasing flexibility and ease of shopping Increasing the number of customers Increasing opportunities for collaboration with business partners Increasing return on investment because inventory needs are reduced Offering personalized services and product customization Reducing administrative and transaction costs

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Challenges:

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Bandwidth capacity problems Accessibility Acceptance Security issues Potential Liability Issues Taxation rules

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Which of the following best describes long tail marketing?

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Long tail marketing refers to the ability of firms to profitably market goods to very small online audiences, largely because of the lower costs of reaching very small market segments (people who fall into the long tail ends of a Bell curve).

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Which of the following best describes an e-tailer business model?

answer

An e-tailer sells physical products directly to consumers or to individual businesses.

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Which of the following is true of the effect of the universal technical standards of the Internet and e-commerce on customers?

answer

It reduces the search costs while simultaneously lowers market entry costs.

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Which of the following best defines m-commerce?

answer

The use of hand held wireless devices for purchasing goods and services from any location

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Which of the following is true of digital goods?

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The cost of producing the original first unit of a digital good is nearly the total cost of the product.

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Which of the following statements about e-commerce and business-to-business transactions is true?

answer

B2B e-commerce creates efficiencies by enabling companies to locate suppliers, solicit bids, place orders, and track shipments in transit electronically.

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Which of the following best describes the affiliate revenue model?

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In the affiliate revenue model, Web sites send visitors to other Web sites in return for a referral fee or percentage of the revenue from any resulting sales.

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Which of the following statements about the "wisdom of crowds" and crowd-sourcing is true?

answer

Crowdsourcing utilizing the "wisdom of crowds" helps companies learn from customers in order to improve product offerings and increase customer value.

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Which of the following is not one of the early key decision areas when building an e-commerce presence?

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The manager should not consider the demands of the customers at this point in order to focus on the planning process.

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Which of the following is true of the effect of information density in e-commerce markets?

answer

It increases the price transparency for consumers.

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EBay is an example of a _________________ electronic commerce category.

answer

C2C

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Which of the following is true of the effect of the ubiquitous nature of Internet on e-commerce?

answer

It reduces transaction costs for a customer.

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Which of the following statements about e-commerce and business-to-business transactions is true?

answer

If even just a portion of inter-firm trade were automated, and parts of the entire procurement process assisted by the Internet, literally trillions of dollars might be released for more productive uses.

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Google Apps, Photobucket.com, and Dropbox all provide Web 2.0 applications such as photo sharing, video sharing, and user-generated content as services. Google Apps, Photobucket.com, and Dropbox are all examples of which e-commerce business model?

answer

A service provider

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What type of e-commerce presence includes newsletter, update, and sales activities?

answer

E-mail

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Which of the following best describes behavioral targeting?

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Behavioral targeting refers to the tracking of the clickstreams (the history of clicking behavior) of individuals across multiple Web sites for the purpose of understanding their interests and intentions, and exposing them to advertisements that are uniquely suited to their interests.

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__________ are independently owned third-party Net marketplaces that connect thousands of suppliers and buyers for spot purchasing.

answer

Exchanges

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__________ is especially well suited for location-based applications, such as finding local hotels and restaurants, monitoring local traffic and weather, and providing personalized location-based marketing.

answer

M-commerce

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BarnsandNoble.com is an example of A _________________ electronic commerce category.

answer

B2C

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Which of the following best defines an electronic data interchange (EDI)?

answer

An electronic data interchange (EDI) enables the computer-to-computer exchange between two organizations of standard transactions such as invoices, bills of lading, shipment schedules, and purchase orders.

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Which of the following best describes the free/freemium revenue model?

answer

In the free/freemium revenue model, firms offer basic services or content for free, while charging a premium for advanced or special features.

question

The social commerce feature that enables a consumer to log into sites through Facebook is called a ___________________.

answer

Social sign-on

IS 3003: Ch 10 E-Commerce – Flashcards

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