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Computing Science, University of Aberdeen 1
E-Commerce – customer focus
Transactions, money, trust Attracting and keeping customers
» Key issue: trust, security Legal issues Personalization Adverts
Computing Science, University of Aberdeen 2
Transactions … in the beginning
Barter – exchange one good for another Strictly a two way thing. Exchange happens simultaneously
(mostly). Little, or no, trust needed
Computing Science, University of Aberdeen 3
Transactions – commodity money
- Exchange standard items with known (supposedly intrinsic) value.
- These standard items are more liquid, easier to exhange, move faster.
- Can store for later use.
- e.g. Weights of metal, peppercorns, sheepskin, pigs, cattle
- Limited trust in retained intrinsic value
Computing Science, University of Aberdeen 4
Transactions – representative money
Token money
- Early on, might be linked to a commodity- probably not now- `just a way of keeping score’- Even more liquid, easier to store, exchange- Need to trust that money will keep being
tradeable in future, and of not much less value
Computing Science, University of Aberdeen 5
Transactions – money
Fiat money – money that gets value, because the government and the law says it has (and because we believe it).
Paper money – only used widely in Europe for last 200-ish years, initial trust problems, bank runs.
http://en.wikipedia.org/wiki/John_Law_(economist)
Computing Science, University of Aberdeen 6
Money – modern
Cash Money held in physical capital Money in bank Money invested in bonds, equities Credit Credit and debit cards Electronic transfers of money
Computing Science, University of Aberdeen 7
Money – modern
Electronic transfer of money central to e-commerce.
Ability to accept credit (or debit) cards central to success at scale of B2C and C2C.
Standards, e.g.
https://www.pcisecuritystandards.org/
Computing Science, University of Aberdeen 8
Transactions
Evolution of money and social mechanisms has enabled us to develop two-part transactions: money and goods (or services) exchanged at different times.
Also credit Rely on
» interpersonal trust, » social reputation, » law.
Computing Science, University of Aberdeen 9
Money: trust, reliability, security
Need to be sure that it will continue being acceptable Need to be sure that it won’t lose too much value Need to trust that our electronically stored `score’ is kept safely
by bank. Need to be sure that electronic transfers out (and in) work
properly and are secure. [Banks and systems connecting them] Need to be sure that credit and debit system work correctly and
are secure. Need to trust that traders will deliver upon payment. Traders need to be sure that they will be paid if they deliver.
Computing Science, University of Aberdeen 10
PayPal
http://www.paypal.com Users set up an account, linked to a bank account or credit
card. Enables small businesses and consumers to accept credit card
payments via paypal. » A lot less overhead than accepting and processing credit card details
directly. » Reduction in overheads enables many more participants, more trade.
Various competitors available, but economic network effects in play (natural monopolies and oligopolies emerge)
In the early days, eBay tried to set-up own alternative, but users insisted on Paypal. » eBay gave up and bought Paypal instead.
Computing Science, University of Aberdeen 11
Internet Escrow
Escrow: money held by a third-party on behalf of transacting parties (roughy).
Used where transacting parties have limited trust in each other Internet escrow:
» Transaction between buyer and seller» Buyer places money in control of trusted, independent third party» If both verify delivery had taken place and is complete, then money is
released» If not, then some dispute resolution process kicks in.
E.g. http://www.escrow.com
Computing Science, University of Aberdeen 12
BitCoin
Emerged in last couple of years. Open source, peer-to-peer network to track and verify
transactions. Cut-out middlemen (financial institutions) in electronic
transactions using clever cryptograpic prototcols. http://www.bitcoin.org/bitcoin.pdf Teething problems
» No fiat from any government (relies on designer/community?)» If protocols breached, value could disappear» Value of currency is not yet sticky (no irrational, but helpful, faith in it)» Economic problems related to design (limited monetary expansion)
http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfetters/
Computing Science, University of Aberdeen 14
Customers are not all the same!
Consumer types» Individual consumers» Organizational buyers
Computing Science, University of Aberdeen 15
Customers are not all the same!
Consumer types» Individual consumers» Organizational buyers
Goal of shopping» Pragmatic: buy something useful, cheaply» Hedonistic: have fun
Computing Science, University of Aberdeen 16
Customers are not all the same!
Consumer types» Individual consumers» Organizational buyers
Goal of shopping» Pragmatic: buy something useful, cheaply» Hedonistic: have fun
Personality» Impulsive buyers — purchase quickly» Patient buyers — make some comparisons first» Analytical buyers — do substantial research before buying
Computing Science, University of Aberdeen 19
Trust/Security
Trust/Security» Will the company actually deliver the correct
product/service in reasonable shape, in a reasonable time, at correct price
» Will the customer pay up (is the credit card stolen, will it be repudiated)
Technical aspects Human aspects: Focus here on trust and, to some
extent, policies
Computing Science, University of Aberdeen 20
Trust in physical shops
Experience: shoppers trust shops they’ve used before
Appearance: shoppers trust store that look reputable
Complaints: easy to complain, shop can’t hide
Transactions are simple
Computing Science, University of Aberdeen 22
On-line Trust
Experience: I trust Amazon because I’ve used them before» Reputation: because my friends use them
– Very important with e-shops» Specific technicalities; for example,
accounts/cards compromised or not? Appearance: Do I trust Amazon because they have a
nice website?» Less important than with physical shops» Marketing helps
Computing Science, University of Aberdeen 23
On-line trust
Complaints: Harder to complain since don’t know where shop is
Transactions are complex because of delivery» Where many e-shops mess up
Third-party: do I trust Amazon more if another web site says good things about Amazon?
Computing Science, University of Aberdeen 24
Does Amazon Trust Me?
Amazon trusts me because» Experience: I’ve always paid Amazon before» Reputation: I’ve used other companies and always
paid up» Marketing: vendors generally signal that nasty
things happen to customers who don’t pay up– credit record affected– legal consequences
Computing Science, University of Aberdeen 25
Trust
We know quite a bit about how trust is established in physical shops.
We are developing mechanisms for establishing trust in e-shops» Partially technology, but human factors
(psychology, sociology, economics, law) probably matter as much
» Lack of trust mechanisms is barrier to new e-shops
Computing Science, University of Aberdeen 26
Legal Issues: Tax
In USA, one driving force behind early e-store success was lower tax» Because of a tax loophole, sales tax (VAT)
was not charged on e-commerce sales» Automatically gave price advantage to e-
commerce sites!
Computing Science, University of Aberdeen 27
Legal Issues: Intl E-Commerce
In theory, e-commerce means sites can sell globally
In practice, difficult because of different tax rules, regulations, customs, etc» More common to set up subsidiaries in
different countries, as Amazon has done Lack of global legal/regulatory
framework hinders ecommerce
Computing Science, University of Aberdeen 28
Personalization
E-Commerce sites can treat customers differently» Offer recommendations, special deals» Personalise web site» Adjust prices
In theory, “personalised shop” one of the great benefits of e-commerce
Can also take advantage of more of long tail» Don’t need to keep stock in same way as traditional shop» Can do things like Print On Demand
One-to-One MarketingBuild a long term association
Meeting customers cognitive needs Customer may have novice, intermediate or expert skill
E-loyalty—customer’s loyalty to an e-tailer costs Amazon $15 to acquire a new customer costs Amazon $2 to $4 to keep an existing customer
Trust in EC Deterrence-based —threat of punishment Knowledge-based —reputation Identification-based —empathy and common values Referrals – Viral Marketing
Personalisation…
Personalisation
“Process of matching content, services, or products to individuals’ preferences”
Build profiles – N.B. Privacy Issues Solicit information from users Use cookies to observe online behavior Use data or Web mining
Computing Science, University of Aberdeen 32
Recommendation
Build profiles» What has X bought?» What has X looked at?» Demographics: age, gender, etc
Recommendation» Rules: If X buys Harry Potter 6, recommend HP 7» Data Mining: Other people who bought Harry
Potter also bought Lord of the Rings» Collaborative: X’s overall buying profile is similar
to Y, so recommend whatever Y bought
Data Mining
Automated prediction of trends and behaviors Example: from data on past promotional mailings, find out
targets most likely to respond in future
Automated discovery of previously unknown patterns Example: find seemingly unrelated products often purchased
together Example: Find anomalous data representing data entry errors
Mining tools: Neural computing Intelligent agents Association analysis - statistical rules
Web Mining - Mining meaningful patterns from Web resources Web content mining – searching Web documents Web usage mining – searching Web access logs
searching for valuable information in extremely large databases
Computing Science, University of Aberdeen 34
Recommendations
If done well, perceived very positively» Real benefit, not just marketing spam» Credit-card companies have done this well
– Have the most purchasing data?
Data privacy issues» Can Visa sell data about you to Amazon?» Spyware to track all of your web browsing?
Computing Science, University of Aberdeen 35
Personalise Web Sites
Let customers create their own “shop front” focusing on their interest
Adjust appearance (eg, for visually disabled, or strict, religious consumers)
Do-able, not huge success
Computing Science, University of Aberdeen 36
Personalised Pricing
Companies would love to be able to charge people different amounts for the same product» Airline seats, cars, etc» Full price for people who are keen, in a
rush, don’t care about money» Discount for choosy/finicky
Computing Science, University of Aberdeen 37
Personalised Pricing
Amazon, etc have tried this, but customers hated it.
So has gone “underground” for now. Technology permits this, but society’s
expectations does not allow it
Computing Science, University of Aberdeen 38
Advertising
E-Shops (and other sites) can make money via advertising» Google makes billions from its “sponsored
links”» Amazon has adverts as well
Computing Science, University of Aberdeen 39
Web Advertising
Conventional advertising focuses on visual appeal
Less successful on web» Flashy animated banner adverts are a
nuisance and distraction
Computing Science, University of Aberdeen 40
Targeted adverts
Web allows relevant adverts to be associated with a web page» Google sponsored links based on search» Amazon could display different adverts for
sci-fi and romance novel Very effective if done well
» So Web sites can charge more for targeted adverts
Computing Science, University of Aberdeen 41
Web adverts
Initially treated like TV adverts, put huge effort into flashy multimedia banner ads
Now focusing on simple targeted adverts instead
Advertising models cannot be blindly moved from TV to web» need new models!
Computing Science, University of Aberdeen 42
E-Commerce Summary
Initially tried to make e-shops similar to high street shops. But» Need different business model» Trust issues much more important» Need appropriate legal framework
Computing Science, University of Aberdeen 43
Customer Focus Summary
Sometimes technology really helps» Recommender systems, targeted adverts
Sometimes technology works, but society doesn’t like it» Differential pricing
Trust – sine qua non
Computing Science, University of Aberdeen 44
Assessment 1
Essay due 18th November. Without delay, go to
http://www.abdn.ac.uk/~csc245/teaching/CS5038/assessment/
for more detailed instructions. Please read the instructions very
carefully – and follow them!