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Chapter5
ElectronicCommerce:StrategiesfortheNewEconomyCopyright©2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.McGraw-Hill/IrwinSTUDENTLEARNINGOUTCOMESDefineanddescribethe9majore-commercebusinessmodels.IdentifythedifferencesandsimilaritiesamongcustomersandtheirperceptionofvalueinB2BandB2Ce-commerce.CompareandcontrastdevelopingamarketingmixinB2BandB2Ce-commerce.5-2STUDENTLEARNINGOUTCOMESSummarizewaysofmovingmoneyine-commerceandrelatedissues.Discussmajortrendsthatareimpactingboththee-commerceworldandsocietyingeneral.5-3WHAT’SREPLACINGTHEDAYAFTERTHANKSGIVINGFORSHOPPINGSALES?BlackFridayistraditionallyabigdayforretailersIt’swhenChristmasshoppersspendalotofmoney,movingretailersoutoftheredandintotheblackButBlackFridaymaysoonbereplacedbyCyberMondayCyberMondayistheMondayafterThanksgivingwhenpeoplegobacktoworkandbuyproductsonline5-4WHAT’SREPLACINGTHEDAYAFTERTHANKSGIVINGFORSHOPPINGSALES?The“e”ine-commercechangesalotofthingsForexample,BlackFridayisabrick-and-mortarconcept;CyberMondayisan“e”(electronic)conceptNomatter,anykindofcommerceisstilljustcommerceAndallbusinessesmustexecutewelltosurviveandthrive5-5WHAT’SREPLACINGTHEDAYAFTERTHANKSGIVINGFORSHOPPINGSALES?Doyoushopforgiftsonline?Ifso,atwhatsitesandforwhatoccasions?What’syourtakeonpeoplespendingtimeatworktoshopforpersonalitems?Howcanbrick-and-mortarretailerstakeadvantageofCyberMonday?5-6INTRODUCTIONE-commerceischangingeverythingElectroniccommerce(e-commerce)–commerce,butitiscommerceacceleratedandenhancedbyITBuildpowerfulrelationshipswithcustomersBuildpowerfulrelationshipswithsuppliersBuildpowerfulrelationshipswithpartners5-7INTRODUCTIONBute-commerceisstillcommerceYoumusthaveaclearpath-to-profitability(P2P),aformalbusinessplanthatoutlineskeybusinessissuessuchas…CustomertargetsMarketingstrategiesOperationsstrategiesProjectedincomestatementandbalancesheettargets5-8CHAPTERORGANIZATIONE-CommerceBusinessModelsLearningoutcome#1UnderstandYourBusiness,Products,Services,andCustomersLearningoutcome#2FindCustomersandEstablishRelationshipsLearningoutcome#35-9CHAPTERORGANIZATIONMoveMoneyEasilyandSecurelyLearningoutcome#4E-BusinessTrendsLearningoutcome#55-10E-COMMERCEBUSINESSMODELS5-11B2BE-CommerceBusinesstoBusiness(B2B)e-commerce–whenabusinesssellsproductsandservicestocustomerswhoareprimarilyotherbusinessesWhereallthee-commercemoneyisBasically,it’saboutbusinessesdoingbusinesswithotherbusinessesSupplychainmanagement(fromChapter2)isabigpartofB2Be-commerce5-12B2CE-CommerceBusinesstoConsumer(B2C)e-commerce–whenabusinesssellsproductsandservicestocustomerswhoareprimarilyindividualsB2Cistheglitzye-commercelikeiTunes,eBay,etcB2Cisaprimaryfocusofthelatersectionsinthischapter5-13C2BE-CommerceConsumertoBusiness(C2B)e-commerce–whenanindividualsellsproductsandservicestoabusinessTrueeconomicinversionoftheB2CmodelFotoliaisagoodexample()Thereyoucanpostphotosandvideosandbusinesseswillpayyouaroyaltytousethem(iftheylikewhatyouoffer)YoucanalsoadvertisebusinessesonyourpersonalWebsite(calledanaffiliateprogram)andreceivemoniesforvisitorswhojumpfromyoursitetothebusiness’Websites5-14C2CE-CommerceConsumertoConsumer(C2C)e-commerce–whenanindividualsellsproductsandservicestoanotherindividual.Yousellingtoanotherperson(orthereverse)UsuallyoccursthroughanintermediarysuchaseBay5-15B2GE-CommerceBusinesstoGovernment(B2G)e-commerce–whenabusinesssellsproductsandservicestoagovernmententity.LockheedprovidingproductsandservicestoDoDFairlylargee-commercemodelintermsofrevenueMostU.S.governmententities(forsureatthefederallevel)won’tdobusinesswithyourbusinessifyoucan’tdoitelectronically5-16C2GE-CommerceConsumertoGovernment(C2G)e-commerce–whenanindividualsellsproductsandservicestoagovernmententityYousellingsomethingtothegovernmentThismarketisquitesmallandunremarkableMosttimes,“you”mustregisterasabusinessbeforesellingsomethingtothegovernment,whichwouldthenbecomeB2Ge-commerce5-17G2BE-CommerceGovernmenttoBusiness(G2B)e-commerce–whenagovernmententitysellsproductsandservicestobusinessesSBAprovidingsuretyguarantees,disasterassistance,ombudsmen,etctosmallbusinessesTSAholdingauctionsandsellingoffconfiscateditems(mosttimes,youmustbea“business”toparticipateintheseauctions)U.S.GeologicalSurvey(DOI)sellingdetailedsurveydatatobusinesses5-18G2CE-CommerceGovernmenttoConsumer(G2C)e-commerce–e-commerceactivitiesperformedbetweenagovernmentanditscitizensDoesnotfitwellatallwithinthetraditionalsupply-and-demande-commercenotionPayingtaxes,registeringvehicles,etc5-19G2GE-CommerceGovernmenttoGovernment(G2G)e-commerce–e-commerceactivitieswithinanation’sgovernment(canalsorefertoe-commerceactivitiesbetween2ormorenations’governments)Verticalgovtintegration–e-commerceamongagenciesupanddownfederalandlocallevelsHorizontalgovtintegration–e-commerceamongagencieswithinonelevel(e.g.,federal)Mainlyaboutinformationsharing,notcommerce5-20UNDERSTANDYOURBUSINESS,PRODUCTS,SERVICES,&CUSTOMERSTobesuccessful,youmust…DefineyourproductsandservicesDefineyourtargetcustomersB2B(otherbusinesses)B2C(individuals)Defineyourcustomersperceptionofthevalueofyourproductsandservices5-21WhoAreYourCustomers?BusinesstoBusinessOtherbusinessesBusinesstoConsumerIndividualsEachisdifferentandhasdifferentneedsandwants5-22CustomerProductandServiceValuePerception5-23B2C:ConvenienceVersusSpecialtyConvenienceLowerpricedPurchasedfrequentlyExample:commonfooditemsSpecialtyHigherpricedPurchasedlessfrequentlyExample:Stereos,computers5-24B2C:CommoditylikeandDigitalCommoditylikeSamenomatterwhereyoupurchaseitExamples:books,music,moviesPriceandeaseoforderingareimportantDigitalPurchasedanddeliveredovertheInternetBestproducttypeforB2Ce-commerceExamples:Music,software5-25B2C:MassCustomizationMasscustomization–theabilityofanorganizationtogiveitscustomerstheopportunitytotailoritsproductsorservicesDell–customizedcomputerpurchasesAppleiTunes–onlythemusicyouwant(notnecessarilythewholealbum)5-26B2B:MROVersusDirectMaintenance,repair,andoperations(MRO)materials(indirectmaterials)–materialsnecessaryforrunningacompanybutdonotrelatetothecompany’sprimarybusinessactivitiesSimilartoconvenienceitemsinB2COfficesupplies,repairparts,lubricatingoils5-27MROMaterialsBuyersinB2BmakelargepurchasesCanthendemandadiscount(nottrueinB2C)CanteamupwithotherbuyerstocreatedemandaggregationDemandaggregation–combiningpurchaserequestsfrommultiplebuyerswhichjustifiesalargerdiscount5-28DirectMaterialsDirectmaterials–materialsthatareusedinproductioninamanufacturingcompanyorareplacedontheshelfforsaleinretailenvironmentsRelatedirectlytoacompany’sprimarybusinessactivitiesQuality,quantity,anddeliverytimingareimportant5-29DirectMaterialsBuyerscanparticipateinreverseauctionsfordirectmaterialsReverseauction–processinwhichabuyerpostsitsinterestsinbuyingitemsandsellerscompetebysubmittingsuccessivelylowerbidsThelowestbidderwins5-30B2B:HorizontalVersusVerticalB2Be-commercetakesadvantageofe-marketplacesElectronicmarketplace
(e-marketplace)–interactivebusinessprovidingacentralmarketwheremultiplebuyersandsellerscanengageine-commerceHorizontale-marketplacesVerticale-marketplaces5-31E-Marketplaces5-32HorizontalE-MarketplaceHorizontale-marketplace–connectsbuyersandsellersacrossmanyindustriesPrimarilyforMROmaterialsAllindustriesneedofficesupplies,travel,andthelike5-33VerticalE-MarketplaceVerticale-marketplace–connectsbuyersandsellersinagivenindustryPrimarilyfordirectmaterialsEachindustryhasuniquedirectmaterialneedsCovisint()–automotiveManyothers5-34ToSummarizeB2CVaryingdemographicsandlifestylesConvenienceversusspecialtyproductsCommoditylikeanddigitalworkbestofallMasscustomizationnecessaryinsomeinstances5-35ToSummarizeB2BMROversusdirectmaterialsDemandaggregationispresentE-marketplacesarevitallyimportantHorizontal(MROmaterialsmainly)Vertical(directmaterialsmainly)5-36FINDCUSTOMERSANDESTABLISHRELATIONSHIPSYoumustfirstfindcustomersThenestablishrelationshipsOtherwise,youcan’tmakeasaleB2CandB2Btechniquesareverydifferent5-37BusinesstoConsumerNeedtodetermineyourmarketingmixMarketingmix–setofmarketingtoolsyourorganizationwillusetopursueitsmarketingobjectivesinreachingandattractingpotentialcustomersTherearemanysuchtoolsforB2C5-38B2CMarketingMixToolsRegisteringwithsearchenginesOnlineadsViralmarketingAffiliateprograms5-39RegisteringwithSearchEnginesSomesearchengineswilllistyoursiteforfreeOtherschargeafeeForanadditionalfee,yoursitecanappearattopofasearchlist(everytime)5-40OnlineAdsOnlineads(bannerads)–smalladvertisementsthatappearonothersitesTwovariationsare:Pop-upad–smallWebpageadvertisementthatappearsonyourscreenoutsidethecurrentWebsitePop-underad–pop-upadyoudonotseeuntilyoucloseyourcurrentbrowserwindow5-41OnlineAdsBanneradforaloanlendingservices5-42ViralMarketingViralmarketing–encouragesusersofaproductorservicesuppliedbyaB2CbusinesstoencouragefriendstojoininaswellBlueMountainArts()SendacardCardhaslinksotheotherpersoncansendyouacardback5-43AffiliateProgramsAffiliateprogram–arrangementbetweentwoe-commercesitesthatdirectsviewersfromonesitetoanotherIfviewersbuyatthesecondsite,thesecondsitepaysasmallfeetothefirstsiteUsuallyapercentageofthesale5-44AffiliateProgramsClick-throughsandconversionratesareimportantClick-through–countofthenumberofpeoplewhovisitonesiteanduseanadtogettoanotherConversionrate–percentageofpotentialcustomerswhoactuallybuysomething5-45AffiliatePrograms5-46BusinesstoBusinessMarketingMuchmorepersonalNotusuallydonewithgenericadsdesignedformassdistributionOftentakeplaceine-marketplaces5-47BusinesstoBusinessMarketingOnceacontactismade,therelationshipmustbeestablishedThisoftenrequiresface-to-facemeetingsMustalsointegratetheITsystemstothesupplierbusinessandcustomerbusiness5-48ToSummarizeB2CMarketingmixdrivescustomerstoWebsiteSearchengines,onlineads,viralmarketing,andaffiliateprogramsFocusonconversionratestomeasuresuccess5-49ToSummarizeB2BFrequentlyoccursinane-marketplaceRequiresestablishingformalbusinessrelationshipRequiresITsystemintegrationDoesn’tincludebroadandgenericmarketingmix5-50MOVEMONEYEASILY&SECURELYIne-commerce,mostmoneymoveselectronicallySecuritybecomesveryimportant5-51B2CPaymentSystemsCreditcardsFinancialcybermediariesElectronicchecksElectronicBillPresentmentandPaymentSmartcards5-52FinancialCybermediariesFinancialcybermediary–Internet-basedcompanythatmakesiteasyforonepersontopayanotherpersonororganizationovertheInternetPayPal()isthemostwell-known5-53FinancialCybermediaries5-54ElectronicChecksElectroniccheck–mechanismforsendingmoneyfromyourcheckingorsavingsaccounttoanotherpersonororganizationManyimplementationsMostcommonimplementationisonlinebanking5-55ElectronicBillPresentment&PaymentElectronicBillPresentmentandPayment(EBPP)–systemthatsendsbillsovertheInternetandprovidesaneasy-to-usemechanism(perhapsabutton)topayforthemiftheamountlookscorrectAvailablethroughCheckfree()andQuicken()5-56SmartCardsSmartcard–plasticcard(thesizeofacreditcard)thatcontainsanembeddedchiponwhichdigitalinformationcanbestoredandupdatedDebitcardsareanimplementation5-57B2CPaymentSystemsMustmovemoneyandotherinformationsuchasshippingaddressDigitalwalletscanhelpDigitalwallet–softwareandinformationSoftwareprovidestransactionsecurityInformationincludesdeliveryinformationandotherformsofnecessaryinformation5-58DigitalWalletsCanbe…Client-side–youcreatethisdigitalwalletandkeepitonyourcomputerServer-side(alsocalledathinwallet)–anorganizationcreatesthisforyouandkeepsitonitsservers5-59B2BPaymentSystemsBusinesscustomers…MakelargepurchasesWillnotpaywithcreditcardorfinancialcybermediaryUsefinancialEDIPayformanypurchasesatonce(perhapstheendofthemonth)5-60EDIElectronicdatainterchange(EDI)–directcomputer-to-computertransferoftransactioninformationinstandardbusinessdocuments,suchasinvoicesandpurchaseorders,inastandardformatHowbusinessescommunicatewitheachotherUsedine-marketplacesandVANs5-61EDIandaVAN5-62FinancialEDIFinancialEDI–anelectronicprocessusedprimarilywithinB2BforthepaymentofpurchasesThisiselectronicmoneyinB2BOftenoccursthroughanautomatedclearinghouse5-63Security:ThePervadingConcernSecurityisveryimportantwhenmovingmoneySomesecuritymeasures…EncryptionSecureSocketsLayersSecureElectronicTransactionsMany,manyothers5-64EncryptionEncryption–scramblesthecontentsofafilesothatyoucan’treaditwithouthavingtherightdecryptionkeyOftenthroughpublickeyencryption(PKE)–usestwokeys:apublickeyforeveryoneandprivatekeyforonlytherecipientoftheencryptedinformation5-65PublicKeyEncryption5-66SecureSocketsLayersSecureSocketsLayer(SSL)…CreatesasecureconnectionbetweenaWebclientandserverEncryptstheinformationSendstheinformationovertheInternetDenotedbylockicononbrowserorhttps://(noticethe“s”)5-67SecureSocketsLayersThe“s”inhttpsandthepadlock5-68SecureElectronicTransactionsSecureElectronicTransaction(SET)–transmissionmethodthatensurestransactionsarelegitimateaswellassecureHelpsverifyuseofacreditcard,forexample,bysendingthetransactiontothecreditissueraswellastheseller/supplier5-69ToSummarizeB2CCreditcards,financialcybermediaries,electronicchecks,EBPP,smartcards,anddigitalwalletsP
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