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Electronic Commerce BADM 561 Dr. Cara Peters Stages in Marketing 1. Mass Production 2. Personal Selling 3. Branding 4. Customer Relationship Management Marketing Trends Production Selling Branding CRM Product Single product Few, Mass Few, Mass Many, Custom Market size Large as possible Regional National, Global Global Competitive Tools Manufacturing Channels Advertising Technology Does the Internet change marketing? Increased personalization of messages Mass customization of products & prices Using multiple channels of distribution E-commerce: a production process that converts digital inputs into value-added outputs through a set of intermediaries Modes of E-commerce Communications: Business process: delivery of information automation of business transactions Service: maintenance of relationships Transactions: exchange products/services Types of E-commerce Intra-organizational e-commerce • Called an intranet • workgroup communications, electronic publishing, sales force productivity Inter-organizational e-commerce • inventory, channel management, payment management • Existence of an extranet The Internet The world’s largest matrix of interconnected computer networks. Beginning of Computing Abacus (Babylonia, 2500 BC) Babbage: first computing engine – Circa 1800, computed Bernoulli numbers Bryon: first computer programmer – Circa 1800 Beginning of Computing Hollerith: punch card system – Analyzed 1880 census data – Became IBM in 1924 ENIAC: World’s first large scale digital computer – Electronic Numerical Integrator Analyzer & Computer – University of Pennsylvania, 1945 – Prepared bombing tables for WWII Beginning of the Internet Non-commercial • Military driven, Cold war fears • Department of Defense – ARPA (Advanced Research Projects Agency, 1958) – Created ARPANet – national nuclear-proof communication network – Wide area, packet-switching, resource- sharing communication network Beginning of the Internet Four University computer nodes were linked for host-to-host data exchange • UCLA, Stanford, UCSB, & Utah (1969) • 15 nodes connected 23 universities, NASA, & other facilities (1971) National Science Foundation: working on a high-speed network backbone • NSFNet, major component of Internet (1986) Beginning of the Internet Initially banned commercial use Led to development of an “Internet Culture” Tomlin invented email (1971) • ARAPNet contractor • Became largest Internet service • Driving growth among the masses Beginning of the Internet Transmission Control Protocol/Internet Protocol standard became common operating standard (1983) Non-commercial restrictions removed (1986) • NSFNet backbone open to all users • By 1987, number of Internet hosts 10,000+ Beginning of the Internet Berners-Lee created a program that created hypertext links (1991) • Browser interface & beginning of the World Wide Web The web took off in the 1990s • graphical user interface • mix media (picture, sound, video, etc.) • ripe for commercialization Early Internet use Early web sites lacked features which are common today Had to program in HTML code, compared to today’s WYSIWIG format Consumer fascination & commercialization spurred growth of web Advantages of Internet: Sharing Openness Low connection costs lead to sharing Common standards • Internet Protocol (IP)/Transmission Control Protocol (TCP) • Communication sending standards for the Internet Advantages cont: Ubiquity Interactive & Dynamic Networks are ever-present • anywhere, anytime, any equipment Value of a network increases with the square of the number of participants • Metcalfe’s law • Suggests value of a network rises when more people participate Ubiquity continued So, value depends on growth Reach point of inflection or critical mass Too much growth can be a negative • presence of unwanted individuals – too many who clog the system – spammers – crime Advantages cont: Redundancy Reliability • decentralized, distributed networks with multiple connections Efficiency • messages broken into packets with multiple users on one phone connection Scalability • open standards, capability to grow the network rapidly Technology Behind the Internet Digital underpinnings: its properties & information are strings of zeros/ones • Bytes of information Three factors give power to bytes • Moore’s law • Digital environments • Convergence Moore’s law Describes falling cost of technology Moore (Intel, 1965) noticed that engineers kept packing circuits more closely together • miniaturization was about 30% smaller every 18months • in fact, surface area needed for same number of components was about half Moore’s law Each new generation of chip technology, which has been released about every 18 months, can pack the same number of elements into half the space • smaller, cheaper yet more power Critics: law cannot continue • separation becomes too small Digital environments Digital technology can create life-like environments Encyclopedic: store information Procedural: follow programmed rules Participatory: user choice, command, or preference Spatial: virtual space The Power of Digital Environments Digitization can change industries • Adult entertainment – These sites generate $2 Billion in sales – Most profitable consumer sector on web – Over 11 million sites come up when search “Porn” – Yet few providers convey most of the content – “Sex” is consistently the top term on search engines The Power of Digital Environments Adult entertainment • Preview to pay – $25-40 per month for pictures & video – High margins • Upgrading sites for competition – Reliable streaming video • Increased customer service – Credit cards, personal funds transfer, telephone subscriptions The Power of Digital Environments Adult entertainment • Playboy • Danny’s hard drive • Club Jenna dot com • What will virtual reality bring about? Convergence Merging of industries, technologies, and content which used to be separate Computing, communications, & media content coming together – AOL/Time Warner Merger (Spring 2000) – Cell phones The Internet Does Have Problems Breakdowns/Outages or Delays/Lags Bandwidth: amount of data transmitted through communication channel • broadband, direct connection to National Internet Backbone, large bandwidth – Cable, DSL • dial-up, indirect path through ISP, narrowbandwidth Diffusion How Innovations Spread Throughout Society Technology Diffusion Rates (US)* Fax Radio Television Personal Computer Internet *To reach 50 million people 75 years 38 years 13 years 16 years 5 years Diffusion A process by which an innovation is communicated through certain channels over time among members of a social system • social change • spread – diseases, products, ideas – Similar pattern Four Main Elements of Diffusion Innovation Communication Time Social system Diffusion Networks Opinion leadership • Degree to which an individual is able informally to influence other individual’s attitudes/behavior with relative frequency Adopters model and imitate their peers’ behaviors • follow other consumers & innovations spread Diffusion networks Consumers are linked by relationships and communication • both strong and weak ties Eventually get a critical mass of adopters • Point at which enough individuals have adopted an innovation so further rate of adoption is self-sustaining Diffusion networks continued S-shaped curve • X axis: time/Y axis: rate of adoption • Critical mass occurs at point of inflection in curve Marketers can build a critical mass • target groups • shape perceptions of innovation • provide incentives What affects rate of adoption Relative advantage • degree to which an innovation is perceived as better than what it supercedes Compatibility • degree to which an innovation is perceived as consistent with existing values, past experiences, and needs of potential adopters What affects rate of adoption? Complexity • degree to which an innovation is perceived as relatively difficult to understand and use Trialability • degree to which an innovation may be experimented with on a limited basis What affects rate of adoption? Observability • degree to which the results of an innovation are visible to others Examples Adopter Categories Consumers can be categorized by their innovativeness Adopter category growth is related to the spread of the innovation Five common categories • innovators, early adopters, early majority, late majority, & laggards Innovators First group 2.5% of adopters Venturesome Obsessed with innovations Gate keepers Early Adopters The second group 13.5% of adopters Social and Localites Integrated into social systems Often opinion leaders Early Majority The third group 34% percent of adopters Deliberate Interact frequently with peers Important link in diffusion process • provide connections in network Late Majority The Fourth group 34% of adopters Skeptical Adoption may be economic necessity and /or result of peer pressure Adopt after most others Laggards Last 16% of adopters Traditional Almost no opinion leaders Near isolates in social system Suspicious of innovations & change Some people never adopt Other Technologies Interactive kiosks, iTV, & m-commerce Interactive kiosks Strategically placed in high-traffic areas of stores Information rich, “ultimate salesperson” Low overhead, can provide incremental sales Acceptance of machines by consumers is vital Kiosks Early tests of kiosks not successful • • • • slow, broken, not updated, few graphics misapplied content lack of consumer interest sales did not cover cost of machine As problems have been addressed, consumer acceptance has increased • 151,000 used in 2001 Kiosks Applicable to various industries • 66% of Kiosks are in retail locations – ATMs prepared consumers for kiosks – Wedding or Baby Registry – Record stores • Service providers, Governments, & Schools – Court houses and libraries Interactive Television Television with interactive content & enhancements • convergence of computer, telephone, & TV Provides richer entertainment, interaction & more information – pertaining to shows, props and people involved – programming can include richer graphics, links to Web sites, communication with others, & ecommerce iTV Three forms: set-top box- 2-screen TV Mobile phone • and to a lesser extent PDA iTV Consumers get greater choice of content, when they want to see it, & how to act on it • video & information on demand • interactive programming • diverse communication & purchasing options Control shifting to viewer • more personalized, relevant content Possible iTV features Programming credits available anytime Trivia questions in real time during show Customized/localized information (news/ weather) Videoconferencing, distance learning Constant update across shows Photo display services. Home shopping (movies/CDs) Communications (chat/email) Interactive Entertainment Guides Surveys during a program Information acquisition (retail locations; details on a news story; order a sample) Interactive Game Shows Interactive Sports (pick angle) • gambling iTV Early tests did not materialize • consumers would not fully use nor pay for the service – Initial target market: participants in interactive services – Use of PC & TV are different PC/task oriented versus TV/socially oriented The Future of iTV Consumers want additional facts pertaining to programming, alternative commentaries, & Web support • enhancements to programming 27+ million US homes have iTV today • To grow: must find those applications in which benefits > costs • Marketing research & product placement Interactive telephone In 1980s, marketers programmed phones to do a number of marketing functions – build databases, sell products, enhance image, facilitate customer service, collect data Now with the growth of cell phones, the telephone has become part of mcommerce M-commerce Mobile or Wireless Commerce • cell phones • 110 million cell phone service subscribers – In 2000, 5 million consumers used m-commerce – By 2006, 85 million will use m-commerce Growth due to needs outside the home – Europe and Japan M-commerce Large profit potential, yet face challenges • • • • narrow band-width slow connections & roaming areas signal blocks & security breaches physical (carpal tunnel/eye strain/cancer) Growth predicted among 10-24 year olds • 50% will use m-commerce by 2006 Web Site Construction Design & Content Key Terms • HTTP: hyper-text transfer protocol – Standard for transferring files on web • HTML: hyper-text mark-up language –WYSIWYG • Applets: application programs embedded in web pages (JAVA) Key Terms • URL: uniform resource locator – Web address that browser reads • Portals: gateways to the web – AOL, Netscape, Alfy • Upfront: what site visitor sees • Backend: Technology that supports content Development Considerations • • • • • • • Goals Targets Content Size Timing Budget Backend Design Various software can do this • FrontPage, Dreamweaver, Netscape (free) Free Web Hosting Sites http://www.qsites.com/, http://www.50megs.com/, http://www.angelfire.com/, http://www.bcity.com/, http://www.cybercities.com/, http://www.freeservers.com/, http://www.geocities.com/ , http://www.gurlpages.com/, http://www.tripod.com/, http://www.webprovider.com/ Look at site across different browsers Web Site Content Study with designers & consumers • optimal complexity level – one logo on each page, few graphics • design for lowest common technological denominator • should be a quick download (<7 second rule) • key features on which to be competitive? – Search, shopping cart, returns, quality photos, contact information, FAQs, feedback options Web Site Content Other considerations • Fresh content • Most sites are text based – information should be chunked – teasers link to full text (NEW!) • Simplicity is important – generally no animation, blinking images, loud colors, & blaring sounds Web Site Content Content should be based on goals of site & why people are there 3-click rule: users should be able to get to the reason they are there within 3-clicks – not always realistic • Some firms take content from other media & move it online • Copyright issues Web Site Content Front page should let consumer know what the firm is about Should contain: – logo, contact information, navigation bar, & appealing image representing enterprise and its goals • no scrolling on front page • most important content on top 1/3 of screen Design Combination of aesthetics & usability • detail, functionality, & creativity A few advertising considerations: • non-linearity of design • most users do not read, may skim • consistency – adopt page model & use it throughout the site – consider flow of page Layout Issues Layout & Design Tips online • http://webmonkey.wired.com/webmonkey/ Considerations: • Top Heading • Typeface (Arial, Chicago, Courier, Times or Geneva) – do not use ALL CAPS • Left justify text (with exception of navigation bar) • Small segments of text, chunk information, link into multiple pages • Use several small tables More Layout Considerations Colors • • • • can be powerful communication tool In 2001, study found most web sites were blue darker background, lighter type some color combinations hard to read & may vary across screens Links • no page should dead end, all should link back to home • should have operational front & back button on every page Graphics Simplicity is best • many features overdone, including page fadeins & flash • consider small, appropriate graphics or randomize graphics to display an array of images & avoid clutter • under construction signs are negative • streaming audio/video notoriously slow Privacy and Security important 66% of web users leave a site when asked for personal information 21% give false information to gain access Sites that have prominent privacy & security statements are more sticky Development Costs Small-scale, B2C sites • $20-$300 per page Full-scale, B2B sites • $65,000 for small site • $250,000 for large site Monthly maintenance fees of complex sites • $2,500 for small sites • $14,000 for large sites Web Storyboarding Design of text, content, and links to be contained in a site • Note cards • PowerPoint • Specialized software Carolina-Gifts.com