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Chapter 8
E-Commerce and Web 2.0
Study Questions
Q1:
How do companies use e-commerce?
Q2:
How does e-commerce improve market efficiency?
Q2.5: How does e-commerce impact the competitive forces of the
market?
Q3:
What economic factors disfavor e-commerce?
Q4:
What technology is needed for e-commerce?
Q4.1 What are the product and market relationships in ecommerce?
Q4.2 How do you find customers and create relationships?
Q5:
What is Web 2.0?
Q6:
How can businesses benefit from Web 2.0?
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8-2
Q1: How Do Companies Use
E-Commerce?
• E-Commerce—buying and selling goods and
services over public and private networks
• Categories of e-commerce
– Merchant companies
• Take title to goods they sell
– Non-merchant companies
• Arrange purchase or sale of goods and
services owned and provided by others
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E-Commerce Merchant Companies
• Business-to-Consumer (B2C)
– Web storefront
– Customer enters storefront and manages creating own order
• Business-to-Business (B2B)
– Sales between companies
• Business-to-Government (B2G)
– Sales between government and businesses
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Non-merchant E-Commerce Companies
• Online auctions most common example
• Clearinghouses
– Provide goods and services at stated price,
arrange for delivery, but do not take title
– Amazon.com example of clearinghouse
• Electronic exchange
– Matches buyers and sellers
– Priceline.com
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Q2: How Does E-Commerce Improve
Market Efficiency?
• Disintermediation
– Elimination of middle layers in supply chain, especially
wholesale and retail links
• Improved information on prices and terms
• Knowledge about price elasticity
– Direct experiments on customers
• Amazon uses it to maximize revenue through direct
interaction
• Price sensitivity determined directly from customer
• Advertising
• Messaging
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Q2.5: How does e-commerce impact the
competitive forces of the market?
• Because of e-commerce, in most industries…
– Buyer power has increased due to access to more
suppliers and the ability to do comparative
shopping
– Entry barriers have lessened and geographic
reach has increased
– Threat of substitute products or services has
increased due to the ease of customer access
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Q3: What Economic Factors Disfavor
E-Commerce?
• Economic factors in disintermediation
– Channel conflict
– Price conflict with existing channels
– Logistics expenses increase for
manufacturer (small quantities)
– Customer-service expenses increase for
manufacturer (1 on 1 direct contact)
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Q4: What Technology Is Needed For
E-Commerce?
• Three-Tier Architecture
1. User tier (Presentation - Web browser)
2. Server tier (Logic - Web, application server)
3. Database tier (Data - DBMS server)
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Three-Tier Architecture
Figure 8-5
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Q4.1 What are the product and market
relationships in e-commerce?
Business to Consumer
• Convenience
– Lower priced
– Purchased frequently
– Example: common food items
• Specialty
– Higher priced
– Purchased less frequently
– Mass customization – the ability to give customers the
opportunity to tailor products or services
– Example: Dell – customized computer purchases
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Q4.1 What are the product and market
relationships in e-commerce? (cont.)
Business to Consumer (cont.)
• Commoditylike
– Same no matter where you purchase it
– Examples: books, music, movies
– Price and ease of ordering are important
• Digital
– Purchased and delivered over the Internet
– Best product type for B2C e-commerce
– Examples: Music, software
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Q4.1 What are the product and market
relationships in e-commerce? (cont.)
Business to Business
• Maintenance, repair, and operations (MRO) materials
(indirect materials) – materials necessary for running a
company but do not relate to the company’s primary product or
service
– Buyers in B2B make large purchases
– Can purchase through negotiation or auction
• Direct materials – materials that are used in production in a
manufacturing company or are placed on the shelf for sale in
retail environments
– Quality, quantity, and delivery timing are important
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Q4.1 What are the product and market
relationships in e-commerce? (cont.)
Business to Business
• Horizontal e-marketplace – connects buyers and sellers
across many industries
– Primarily for MRO materials
– All industries need office supplies, travel, and the like
• Vertical e-marketplace – connects buyers and sellers in a
given industry
– Primarily for direct materials
– Each industry has unique direct material needs
– Covisint (http://www.covisint.com/) – automotive
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The Dimensions of Electronic
Commerce
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Additional e-Commerce Models
• e-Government
– Government to Citizen (G2C)
• IRS
• Pa. Fish and Boat Commission
– Government to Business (G2B)
• Federal Business Opportunities
• FirstGov Portal
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Q4.2 How do you find customers
and create relationships?
• Business to Consumer
– Marketing mix – set of marketing tools
your organization will use to pursue its
marketing objectives in reaching and
attracting potential customers
•
•
•
•
Registering with search engines
Online ads
Viral marketing
Affiliate programs
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Why Internet Advertising?
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3/4 of PC users gave up some television time
Statistics not readily available on print or TV ads
Printed ads can’t be targeted to specific individuals
Cost
Richness of format
Personalization
Timeliness
Participation
Location-basis
Digital branding
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Registering with Search Engines
• Some search engines will list your site for free
– Get found by Google?
• Others charge a fee
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Cost Per Click – CPC
Cost Per Thousand Impressions - CPM
Adwords
For an additional fee, your site can appear at top
of a search list (every time). The more you are
willing to pay for the keyword, the higher your
position.
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Online Advertising
• AdSense
– Google inserts ads that match Web page content
– Google pays Web page owner for every click on
ad
– Web site owners can enroll in this program to
enable text, image, and more recently, video
advertisements on their Web sites
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Online Advertising (cont.)
Advertisement Methods
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•
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Pop-under ad—an ad that appears underneath the current browser
window, so when the user closes the active window, they see the ad
(valueclick)
Interstitials– an 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 – Opt-in Advertising (Mypoints)
– Several million users may be reached directly
– Problems: junk mail, spamming
• Pop-Up Blockers – Who stands to benefit
from these?
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E Commerce - Class II
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Q4.2 How do you find customers
and create relationships?
• Business to Consumer
– Marketing mix – set of marketing tools
your organization will use to pursue its
marketing objectives in reaching and
attracting potential customers
•
•
•
•
Registering with search engines
Online ads
Viral marketing
Affiliate programs
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Online Advertising (cont.)
• Standardized ads—on February 26, 2001, the Internet
Advertising Bureau, an industry trade group, adopted four
standard ad sizes for the Internet:
– Larger and more noticeable than banner ads
– Look like the ads in a newspaper or magazine
– Users read these ads four times more frequently
than banners
– Appear on Web sites in columns or boxes
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Viral Marketing
• Encourages users of a product or service supplied by
a B2C business to encourage friends to join in as well
– Blue Mountain Arts (www.bluemountain.com)
– Send a card
– Card has link so the other person can send you a card back
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Affiliate program
• An arrangement between two e-commerce sites that
directs viewers from one site to another
– If viewers buy at the second site, the second site pays a
small fee to the first site
– Usually a percentage of the sale
– AMAZON Associate Program
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Affiliate program (cont.)
• Click-throughs and conversion rates are
important
– Click-through – count of the number of people
who visit one site and use an ad to get to another
– Conversion rate – percentage of potential
customers who actually buy something
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Q4.2 How do you find customers
and create relationships? (cont.)
Business to Business Marketing
• Much more focused
• Not usually done with generic ads designed for mass
distribution
– Adwords can be used to target business customers
• Directories provide focused opportunities
– (Thomas Register)
• Often take place in e-marketplaces
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e-marketplaces
• Private e-marketplaces:
owned by a single company (Stapleslink.com)
– Sell-side e-marketplace:
A company sells products to qualified companies
– Buy-side e-marketplace:
A company makes purchases from invited suppliers
• Public e-marketplaces:
Usually owned and/or managed by an independent third party,
that include many sellers and many buyers; also known as
exchanges (ChemConnect Trading Center )
• Consortia:
e-marketplaces owned by a small group of large vendors,
usually in a single industry (Covisint)
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e-marketplaces (cont.)
Purchasing Models
• Catalogue Sales - Fixed price
• Auctions – Dynamic price
– Forward – Sell Side
– Reverse – Buy side
Why should you hold more Reverse Auctions than you are
required to enter?
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Q5: What Is Web 2.0?
• Refers to loose cloud of capabilities,
technologies, business models, philosophies
• “the development and evolution of web-based
communities, hosted services, and applications such
as social-networking sites, video-sharing sites, wikis,
blogs, mashup and folksonomies.” (wikipedia.org)
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Software as a (Free?) Service
• SaaS—applications that run on a server somewhere
in Internet cloud (aka. – ASP or Cloud Computing)
• Removes the need for customer investment in
hardware and support. (Use based pricing)
• Examples:
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–
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Google Docs & Spreadsheets
Google Groups
Google Earth
Google Maps
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Other Characteristics of Web 2.0
• Organic user interface
– changing interfaces frequently
• Mashups
– MyMaps—users make custom modifications to Google maps
and publish to share with others
• Participation and ownership differences
– Web 2.0 is more about participating and sharing than owning
content
– The YouTube.com challenge – Copyrights…
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Q6: How Can Businesses Benefit
from Web 2.0?
• Social Networking
– Interaction of people connected by
hobbies, friendship, business association,
medical, health, or other common trait
– Building online communities
– Facebook, MySpace
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Q6: How Can Businesses Benefit
from Web 2.0? (cont’d)
• Mashups
– “. . . a mashup is a Web application that combines
data from more than one source into a single
integrated tool; an example is the use of
cartographic data from Google Maps to add
location information to real-estate data, thereby
creating a new and distinct Web service that was
not originally provided by either source.”
(wikipedia.org)
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User-Generated Content (UGC)
• Sharing pictures, videos
• GlueTube—sharing woodworking projects and
techniques
• CNN iReport
• Flickr
• MetaCafe
• Zillow.com—free home/condominium appraisals
– Resource for house-buying process
– Users can publish opinions about transportation,
noise, schools, and so on in neighborhood
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Who Is in Control?
• Systems that deal with assets, financial
transactions, private information, and so
on require some level of control
• Some business processes are not
suitable for Web 2.0
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Study Questions
Q1:
How do companies use e-commerce?
Q2:
How does e-commerce improve market efficiency?
Q2.5: How does e-commerce impact the competitive forces of the
market?
Q3:
What economic factors disfavor e-commerce?
Q4:
What technology is needed for e-commerce?
Q4.1 What are the product and market relationships in ecommerce?
Q4.2 How do you find customers and create relationships?
Q5:
What is Web 2.0?
Q6:
How can businesses benefit from Web 2.0?
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
8-38
Chapter 8
E-Commerce and Web 2.0