Chapter 8 - E-Commerce PDF

Computer Application in Management STID1103 Chapter 08 E-commerce: Digital Markets, Digital Goods Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Learning Objectives...

Computer Application in Management STID1103 Chapter 08 E-commerce: Digital Markets, Digital Goods Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Learning Objectives 10.1 Explain the features of e-commerce, digital markets, and digital goods 10.2 Explain the principal e-commerce business and technology 10.3 Understand the applications and tools for digital marketing. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved E-Commerce Today E-commerce: Use of the Internet and Web to transact business Began in 1995 when Netscape.com, accepted the first ads from major corporations and popularized the idea that the Web could be used as a new medium for advertising and sales. It grew exponentially; still stable even in a recession (2008 -2009) The new e-commerce: social, mobile, local Move from desktop to smartphone Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved What is e-commerce? Electronic commerce, e-commerce, eCommerce refers to a wide range of online business activities for products and services. A type of industry where the buying and selling of products or services is conducted over electronic systems such as the Internet and other computer networks. E-commerce is usually associated with buying and selling over the Internet or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved 8-4 What is e-commerce? (cont… ) However, most companies today use e-commerce for more than just buying and selling products online. Marketing/discovery Transaction processing Service and support Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved 8-5  6 The Scope of e-Commerce Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved E-commerce Electronic commerce encompasses the entire online process of developing, marketing, selling, delivering, servicing, paying for products and services Companies involved in e-commerce (either buyers or sellers) rely on internet-based technologies and e-commerce applications and services to accomplish marketing, discovery, transaction processing, and product and customer service processes. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved 8-7 E-Commerce vs traditional commerce 8 The major difference is the way information is exchanged and processed E-Commerce Traditional commerce using Internet or other network face-to-face, telephone lines , or communication technology mail systems automated processing of manual processing of traditional business transactions business transactions individual involved in all stages individual involved in all stages of transactions VS of business transactions pulls together all activities of business transactions, marketing and advertising as well as service and customer support Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  9 E-commerce vs E-business E-commerce the use of ICT in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals E-business the use of ICT to enhance one’ s business. It includes any process that a business organization conducts over a computer-mediated network. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  10 E-Business vs E-Commerce Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Why E-Commerce is Different (1 of 4) Ubiquity Marketspace is virtual. Ubiquitous mean it is available everywhere and at all times. Ubiquity reduces transaction costs (the cost of participating in the market) Global reach E-commerce permits transactions to cross cultural and national boundaries far more conveniently and cost effectively than in traditional commerce. Universal standards There is one set of technology standards: Internet standards Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Why E-Commerce is Different (2 of 4) Richness The Web makes it possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people. Video, audio, and text marketing messages are integrated into a single marketing message and consumer experience. Interactivity E-commerce technologies are interactive, meaning they allow for two-way communication between merchant and consumer. Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Why E-Commerce is Different (3 of 4) Information density The total amount and quality of information available to all market participants, consumers, and merchants. Information density in e-commerce markets make prices and costs more transparent. Price transparency refers to the ease with which consumers can find out the variety of prices in a market; cost transparency refers to the ability of consumers to discover the actual costs merchants pay for products. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Why E-Commerce is Different (4 of 4) Personalization/customization E-commerce technologies permit personalization: Merchants can target their marketing messages to specific individuals by adjusting the message to a person’ s clickstream behavior, name, interests, and past purchases. The technology permits customization— changing the delivered product or service based on a user’ s preferences or prior behavior. Social technology Technologies have evolved to be much more social by allowing users to create and share with their personal friends (and a larger worldwide community) content in the form of text, videos, music, or photos. Using these forms of communication, it promotes user content generation and social networking Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Key Concepts in E-Commerce – Digital Markets and Digital Goods in a Global Marketplace The Internet has created a digital marketplace where millions of people all over the world are able to exchange massive amounts of information directly, instantly, and for free. As a result, the Internet has changed the way companies conduct business and increased their global reach. The Internet reduces information asymmetry. In digital markets, consumers and suppliers can “ see” the prices being charged for goods. It is more “ transparent” than traditional markets. Digital markets are very flexible and efficient because they operate with reduced search and transaction costs, lower menu costs and the ability to change prices dynamically based on market conditions. In dynamic pricing, the price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved The Benefits of Disintermediation to the Consumer Disintermediation is the removal of organizations or business process layers responsible for intermediary steps in a value chain. Disintermediation reduces prices to consumers and also allows manufacturers to earn more profit for the product by eliminating the middle man. This diagram show a typical distribution channel that 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 customer. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Digital Goods Goods that can be delivered over a digital network Music, video, movies, software, newspapers, magazines, and books can all be expressed, stored, delivered, and sold as purely digital products. Today, all these products are delivered as digital streams or downloads Cost of producing first unit is relatively high. almost entire cost of product, however the cost of producing another unit is about zero (it cost nothing to make a copy of a music file). Costs of delivery over the Internet very low, marketing costs remain the same. Industries with digital goods are undergoing revolutionary changes Businesses dependent on physical products for sales— such as bookstores, music stores, book publishers, music labels, and film studios— face the possibility of declining sales and even destruction of their businesses. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  18 Types of E-Commerce Business-to-Consumer (B2C) e-commerce Business-to-Business (B2B) e-commerce Consumer-to-Consumer (C2C) e-commerce Business– to– Government (B2G) Government– to– business (G2B) Government– to– Citizens(G2C) Customer– to– Business (C2B) Business– to– Employees (B2E) Collaborative commerce ( c-commerce) Intrabusiness( intraorganizational) commerce Mobile Commerce (m-commerce) Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  19 Business-to-Consumer (B2C) One of the most common types of business models. Commerce between companies and consumers where a business sells its products directly to the consumer and there is no third party involved in this type of interaction. E-commerce in which the seller are organizations and the buyers are individual (also known as online retailing or e-tailing). Customers gathering information; purchasing physical goods (consumer products) or information goods (i.e. software, or e-books); and, for information goods, receiving products over an electronic network. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  20 Business-to-Consumer (B2C) In this form of e-commerce, businesses must develop attractive electronic marketplaces to sell products and services to consumers. i.e. many companies offer e-commerce Web sites that provide virtual storefronts, multimedia catalogs, interactive order processing, electronic payment and online customer support. i.e. Dell, Amazon.com, zalora, How do you perform online transaction? Use the shopping cart process. 1. Customers browse website catalogue, 2. select the products and put them on shopping cart, proceed to checkout, 3. fill-out details, 4. pay for the item (credit card, online payment), 5. the good will be shipped/delivered to the buyer. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  21 Business-to-Business (B2B) E-commerce between companies. Relationships between and among businesses. Transactions between both the sellers and the buyers that are business organization, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. It involves both electronic business marketplaces and direct market links between businesses, auctions and exchanges. i.e. Many companies offer secure internet or extranet e-commerce catalog websites for their business customers and suppliers. Producers and traditional commerce wholesalers typically operate with this type of electronic commerce E.g. Intel sell microprocessor to Dell Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  22 Consumer-to-Consumer (C2C) Commerce between private individuals or consumers. E-commerce in which an individual sells products or services to other individuals. Private individuals or consumers (sometimes businesses) can buy from and sell to one another in an auction process at an auction Web Site or classified ads at portal websites. (e.g. kay buying an iPhone 6 from Nini on Mudah.com) i.e. e-bay, alibaba.com, lelong.com, mudah.my How do you perform online transaction? 1. Login 2. Select the products/goods 3. Enter the bid 4. Win the items if you’ re the highest bidder 5. Arranging payment (paypal/online banking) 6. Products/Good delivery Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  23 Other Categories of e-Commerce Business– to– Government (B2G) E-commerce between companies and the public sector. E.g. business pay taxes, sell goods to government agencies etc. Government– to– business (G2B) E-commerce in which a government does business with other governments as well as with businesses. E.g. auctions, tenders etc. Government– to– Citizens(G2C) E-commerce in which a government provide services to its citizen via e-commerce technologies. E.g. information of all government departments, welfare scheme, application forms to be used by the citizens. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  24 Other Categories of e-Commerce Customer– to– Business (C2B) In this type of business model, the Consumer or End User provides or sells its services or products to Business. The C2B model is the reverse of the B2C model, where businesses produce services and products and for consumers. In C2B customers make known a particular need for a product or service, and suppliers complete to provide the product or service to other businesses. E.g. Individuals present several proposals for a company logo and where only one of them is selected and effectively purchased. Another platform that is very common in this type of commerce are the markets that sell royalty-free photographs, images, media and design elements, such as iStockphoto. Another example is Youtube where YouTubers sell their ad spaces to advertisers (Businesses), Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  25 Other Categories of e-Commerce Business– to– Employees (B2E) intrabusiness e-commerce in which an organization delivers product or services to its employees. Collaborative commerce ( c-commerce) E-commerce in which business partners collaborate electronically Fast food companies pair up with food delivery services Intrabusiness (intraorganizational) commerce E-commerce in which an organization uses e-commerce internally to improve its operations. Mobile Commerce (m-commerce) The buying and selling of goods and services through wireless technology. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved E-Commerce Business Models Changes in the economics of information have created the conditions for entirely new business models to appear. Here are some of the most important Internet business models that have emerged. Portal E-tailer Content provider Transaction broker Market creator Service provider Community provider Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Portal Business Models Portals are gateways to the Web Some portal include search engines like Google and Bing Portals such as Yahoo, Facebook, MSN, and AOL offer powerful Web search tools as well as an integrated package of content and services, such as news, e-mail, instant messaging, maps, calendars, shopping, music downloads, video streaming, and more, all in one place. Portal provides initial point of entry to the Web along with specialized content and other services. Portal revenue comes from advertising. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved E-Tailer Business Models Online retail stores or e-tailer sells physical products directly to consumers or to individual businesses. Variations of e-tailers are online versions of direct mail catalogs, online malls, and manufacturer-direct online sales. Example of e-tailers: Amazon, Lazada, Shoppee Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Content Provider Business Models Content providers distribute information content, such as news, digital video, music, photos, text, and artwork, over the Web. Consumers can find a wide range of content online, conveniently, and purchase this content inexpensively, to be played, or viewed. The customer may pay to access the content, or revenue may be generated by selling advertising space. Example: GettyImages.com, iTunes.com, Games.com Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Transaction Broker Business Models Transaction brokers are sites that process transactions for consumers that are normally handled in person, by phone, or by mail. The largest industries using this model are financial services and travel services Saves users money and time by processing online sales transactions and generating a fee each time a transaction occurs. Example: ETrade.com, Expedia Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Market Creator Business Models Market creators build a digital environment in which buyers and sellers can meet, display products, search for products, and establish prices for those products. They provide a platform where sellers can easily display their products and where purchasers can buy directly from sellers. Can serve consumers or B2B e-commerce Generating revenue from transaction fees. Example: eBay, iceline.com Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Service Provider Business Models Service providers offer services online such as photo sharing, video sharing, and user-generated content as services. It also provides other services such as online data storage and backup. Example: Google Apps, Photobucket.com, Dropbox Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Community Provider Business Models Community providers are sites that create a digital online environment where people with similar interests can buy and sell goods, share interests, photos, videos. Provides an online meeting place where people with similar interests can communicate and find useful information. Example: Facebook, Google+, Tumblr, LinkedIn, and Twitter; Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved E-Commerce Revenue Models E-Commerce revenue model describes how the firm will earn revenue, generate profits, and produce a return on investment. Advertising Sales Subscription Free/Freemium Transaction fee Affiliate Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Advertising Revenue Models In the advertising revenue mode, web site generates revenue by attracting a large audience of visitors who can then be exposed to advertisements. The advertising model is the most widely used revenue model in e-commerce. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Sales Revenue Models In the sales revenue model, companies derive revenue by selling goods, information, or services to customers. E-tailer Companies such as Amazon sells books, music, and other products. Content providers such as iTunes Store make money by charging for downloads of entire files such as music tracks, video streams or books. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Subscription Revenue Models In the subscription revenue model, a Web site offering content or services charges a subscription fee for access to some or all of its offerings on an ongoing basis. To be successful, the subscription model requires that the content be perceived as having high added value, differentiated, and not readily available elsewhere nor easily replicated. Example: Netflix, one of the most successful subscriber sites. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Free/Freemium Revenue Models In the free/freemium revenue model, firms offer basic services or content for free, while charging a premium for advanced or special features. For example, Pandora, the subscription radio service, offers a free service with limited play time and advertising, and a premium service with unlimited play. The Flickr photo-sharing service offers free basic services for sharing photos with friends and family, and also sells “ premium” package that provides users unlimited storage, high-definition video storage and playback, and freedom from display advertising. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Transaction Fee Revenue Models In the transaction fee revenue model, a company receives a fee for enabling or executing a transaction. For example, eBay provides an online auction marketplace and receives a small transaction fee from a seller if the seller is successful in selling an item. E*Trade, an online stockbroker, receives transaction fees each time it executes a stock transaction on behalf of a customer. https://qms.quantummetal.com/homepage/customer Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Affiliate Revenue Models In the affiliate revenue model, Web sites (called “ affiliate Web sites” ) send visitors to other Web sites in return for a referral fee or percentage of the revenue from any resulting sales. For example, MyPoints makes money by connecting companies to potential customers by offering special deals to its members. When members take advantage of an offer and make a purchase, they earn “ points” and can redeem for free products and services, and MyPoints receives a referral fee. Amazon uses affiliates who steer business to the Amazon Web site by placing the Amazon logo on their blogs / websites. Personal blogs or websites that display ads as a part of affiliate programs are paid directly by manufacturers or receive free products. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved How Has E-commerce Transformed Marketing? Internet provides new ways to identify and communicate with customers search engine marketing, data mining, recommender system, targeted email Long tail marketing A business strategy that allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved How Has E-commerce Transformed Marketing? New Internet advertising formats Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved How Has E-commerce Transformed Marketing? Behavioral targeting Many e-commerce marketing firms use behavioral targeting techniques to increase the effectiveness of banner, rich media, and video ads. Behavioral targeting refers to tracking the clickstreams (history of clicking behavior) of individuals on thousands of Web sites for the purpose of understanding their interests and intentions and exposing them to advertisements that are uniquely suited to their behavior. Behavioral targeting takes place at two levels: at individual Web sites and on various advertising networks that track users across thousands of Web sites. All Web sites collect data on visitor browser activity and store it in a database. They have tools to record the site that users visited prior to coming to the Web site, where these users go when they leave that site, the type of operating system they use, browser information, and even some location data. They also record the specific pages visited on the particular site, the time spent on each page of the site, the types of pages visited, and what the visitors purchased. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved  Figure 10.3 Website Visitor Tracking Click homepage Time Click Blouse Select Size, Color Add to Cart Shopper close browse without buying Firms analyse this information (the click) about customer interest and behaviour to develop precise profiles of existing and potential customers. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved How Has E-commerce Transformed Marketing? Website Personalization. Firms can create unique personalized web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value. Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved How an Advertising Network Works? A c o n sum e r re qu e sts a w eb p a g e fro m o n e o f m ultiple a d ne tw o rk m e m b er s ites. Th e m e rc h a n t s e rv e r c o nne c ts to a D o u ble C lick a d se rv e r. Th e D o u ble C lick a d se rve r re a d s the co o k ie a nd c he c ks a use r p ro file d a ta b a s e fo r the c o nsu m e r’ s pro file. It th e n s e le c ts a n d s erv e s th e c o ns um e r a n a p p ro p ria te b a nn e r a d b a s ed o n h is o r he r p rof ile. D o u b le C lic k c o n tinue s to fo llo w th e c o nsu m e r fro m Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Social E-Commerce Social e-commerce based on digital social graph such as Facebook which is the ability to share with and link to friends of your friends and increase the number of people you come into contact with on web sites. Features of social e-commerce driving its growth Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved What is the Role of M-Commerce in Business, and What are the Most Important M-Commerce Applications? M-commerce, the use of wireless mobile devices for purchasing goods and services. Fastest growing form of e-commerce Growing at 20 percent or more per year Main areas of growth Mass market retailing (Amazon, eBay, etc.) Sales of digital content (music, T V, etc.) In-app sales to mobile devices Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Location-Based Services and Applications Location-based services are the most interesting growth areas in m-commerce and are used by 74 percent of smartphone owners Based on GPSmap services. The GPS capabilities of smartphones make possible geoadvertising, geosocial, and geoinformation services. Geosocial services (Where friends are) Geo advertising (What shops are nearby) Geo information services (Price of house you are looking) Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved Other Mobile Commerce Services The growing popularity of m-commerce is causing businesses to develop new services and applications that extend the reach to customers. Financial account management apps Banks, credit card companies Mobile advertising market Google and Facebook are largest markets Ads embedded in games, videos, and mobile apps Copyright © 2020, 2018, 2016 Pearson Education, Inc. All Rights Reserved