Chapter 4 5-6 - e commerce - m- commerce

Chapter 5 1

Chapter 5Chapter 5

Information Technology For Management 6th EditionTurban, Leidner, McLean, Wetherbe

Lecture Slides by L. Beaubien, Providence College

John Wiley & Sons, Inc.

E-Business and E-Commerce

Chapter 5 2

Learning ObjectivesLearning 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

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Learning Objectives (Continued)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

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• 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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• 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-CommerceThe Structure of E-Commerce

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Introduction to e-CommerceIntroduction 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-CommerceThe Scope of e-Commerce

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E-Commerce TechnologiesE-Commerce Technologies

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Categories of e-CommerceCategories of e-Commerce

• Business-to-Consumer• Virtual storefronts, multimedia catalogs,

interactive order processing, electronic payment, online customer support

• Business-to-Business• Electronic business marketplaces, direct links

between businesses, auctions and exchanges

• Consumer-to-Consumer• Online auctions, posting to newspaper sites,

personal websites, e-commerce portals

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Essential e-Commerce ArchitectureEssential e-Commerce Architecture

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Access Control and SecurityAccess Control and Security

• E-commerce processes must establish mutual trust and secure access between parties• User names and passwords• Encryption key• Digital certificates and signatures

• Restricted access areas• Other people’s accounts• Restricted company data• Webmaster administration areas

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Profiling and PersonalizingProfiling 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 ManagementSearch 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 ManagementContent 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 ManagementWorkflow Management

• E-business and e-commerce workflow manage-ment 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 ManagementExample of Workflow Management

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Event NotificationEvent Notification

• Most e-commerce applications are event driven• Responds to such things as customer’s 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 TradingCollaboration 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 ProcessesElectronic 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 ProcessesElectronic 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 ExampleElectronic Payment Example

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Securing Electronic PaymentsSecuring 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)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 e-business

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AuctionsAuctions

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

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Developing a Web StoreDeveloping 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 CustomersServing 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 StoreManaging 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

Seven Design Elements of Customer Interface

Seven Design Elements of Customer Interface

• Context• Functional look and feel• How it is presented

• Content• What is presented

• Community• Consumers and firm• Consumers to consumers• Chat room and message board

• Customization• Ability to modify itself

• Communication• Dialog between website and its users

• Connection• Links between the site and other sites

• Commerce• Transactional capacity

The 7Cs of Customer InterfaceThe 7Cs of Customer Interface

Context

Site’s layout and design

Commerce

Site’s capabilities to enable commercial transactions

Connection

Degree to which a site is linked to other sites

Communication

The ways sites enable site-to-user communication or two-way

communication

Customization

Site’s ability to self-tailor to different users or to allow users

to personalize the site

Community

Site’s ability to enable user-to-user communication

Content

Text, pictures, sound, and video that webpages contain

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

Individualizing a Website: CustomizationIndividualizing a Website: Customization

Personalization by User Example—MyLook.com

Personalization by User Example—MyLook.com

Personalization by User Example — mylook.comPersonalization by User Example — mylook.com

Tailoring by Site ExampleTailoring by Site Example

Tailoring Example—Amazon Homepage for Two Users

Tailoring Example—Amazon Homepage for Two Users

Amazon.com Homepage for Two Different Customers

Amazon.com Homepage for Two Different Customers

Communications 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

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

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B2B E-CommerceB2B 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 PortalsE-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

Market Research for ECMarket 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

Electronic Commerce


• Tracking Customer Movements

transaction logA record of user activities at a company’s Web site

clickstream behaviorCustomer movements on the Internet


Web bugsTiny graphics files embedded on e-mail messages and in Web sites that transmit information about the users and their movements to a Web server

spywareSoftware that gathers user information over an Internet connection without the user’s knowledge


• 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

Electronic Commerce

Web AdvertisingWeb Advertising

• Some Internet Advertising Terminologyad viewsThe 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

ButtonPageclick (click-through or ad click)A count made each time a visitor clicks on an advertising banner to access the advertiser ’s Web site


CPM (cost per thousand impressions)The fee an advertiser pays for each 1,000 times a page with a banner ad is shown

conversion rateThe 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


click-through ratioThe 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

hitA request for data from a Web page or file

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

Electronic Commerce


unique visitA count of the number of visitors to a site, regardless of how many pages are viewed per visit

stickinessCharacteristic that influences the average length of time a visitor stays in a site

Electronic Commerce


• 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 MethodsAdvertising Methods

• BannersbannerOn a Web page, a graphic advertising display linked to the advertiser’s Web page

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

random bannersBanner ads that appear at random, not as the result of the user’s action


• Benefits of Banner Ads• By clicking on them users are transferred to an

advertiser’s 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

Electronic Commerce


• 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


banner swappingAn agreement between two companies to each display the other’s banner ad on its Web site

Electronic Commerce


pop-up adAn ad that appears in a separate window before, during, or after Internet surfing or when reading e-mailpop-under adAn ad that appears underneath the current browser window, so when the user closes the active window, he or she sees the adinterstitialAn initial Web page or a portion of it that is used to capture the user’s attention for a short time while other content is loading


• E-Mail Advertising• E-Mail Advertising Management—Four

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.

Electronic Commerce

Advertising Strategiesand Promotions OnlineAdvertising Strategiesand Promotions Online

affiliate marketingA marketing arrangement by which an organization refers consumers to the selling company’s Web site

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

Electronic Commerce

Prentice Hall © 2006 57

Special Advertising TopicsSpecial Advertising Topics

• Permission Advertising

spammingUsing 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

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E-Commerce Strategy ChecklistE-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 IssuesManagerial 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. E-commerce 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 e-commerce activities.

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Managerial Issues (Continued) 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 company’s 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) 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 5Chapter 5

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Chapter 4 5-6 - e commerce - m- commerce