1. E-Commerce and the Entrepreneur

2. Copyright 2008 Prentice Hall Publishing 2Chapter 9: E-Commerce The Internet: Changing the Face of Business The most successful companies embrace the Internet as a mechanism for transforming their companies and for changing everything about the way they do business. The most successful companies embrace the Internet as a mechanism for transforming their companies and for changing everything about the way they do business. Business basics still apply online just as much as they do in brick-and-mortar businesses. Business basics still apply online just as much as they do in brick-and-mortar businesses. In the world of e-commerce, size matters less than speed and flexibility. In the world of e-commerce, size matters less than speed and flexibility.

3. Copyright 2008 Prentice Hall Publishing 3Chapter 9: E-Commerce The Internet: Changing the Face of Business Nearly 10 percent of the world’s population – 627 million people – has shopped online at least once. Nearly 10 percent of the world’s population – 627 million people – has shopped online at least once. Items purchased most often online: books, music, DVDs, travel services, clothing, tickets for entertainment events, electronics, and toys. Items purchased most often online: books, music, DVDs, travel services, clothing, tickets for entertainment events, electronics, and toys. In the U.S., 12 percent of total retail sales will occur online in 2010. In the U.S., 12 percent of total retail sales will occur online in 2010. Study: by 2010, the Internet will influence one-half of all retail sales. Study: by 2010, the Internet will influence one-half of all retail sales.

4. Source: National Federation of Independent Businesses.

5. Copyright 2008 Prentice Hall Publishing 5Chapter 9: E-Commerce Benefits of Selling on the Web Opportunity to increase revenues and profits Opportunity to increase revenues and profits Study: 72 percent of small online companies report increased sales, and 65 percent report higher profits. Study: 72 percent of small online companies report increased sales, and 65 percent report higher profits. Ability to expand into global markets Ability to expand into global markets Ability to remain open 24 hours a day, seven days a week Ability to remain open 24 hours a day, seven days a week Capacity to use the Web’s interactive nature to enhance customer service Capacity to use the Web’s interactive nature to enhance customer service Power to educate and inform Power to educate and inform

6. Copyright 2008 Prentice Hall Publishing 6Chapter 9: E-Commerce Benefits of Selling on the Web Ability to lower the cost of doing business Ability to lower the cost of doing business Study: 73 percent of online small companies experienced savings because of lower administrative costs. Study: 73 percent of online small companies experienced savings because of lower administrative costs. Ability to spot new business opportunities and capitalize on them Ability to spot new business opportunities and capitalize on them Ability to grow faster Ability to grow faster Power to track sales results Power to track sales results Conversion rate – the percentage of customers to a Web site who actually make a purchase. Conversion rate – the percentage of customers to a Web site who actually make a purchase.

7. Copyright 2008 Prentice Hall Publishing 7Chapter 9: E-Commerce E-Commerce 70 percent of small businesses in the U.S. have a Web presence. 70 percent of small businesses in the U.S. have a Web presence. Of those small business owners who do not have Web sites: Of those small business owners who do not have Web sites: 77 percent say their products and services are not suitable for selling online. 77 percent say their products and services are not suitable for selling online. 37 percent say they do not see any benefits of selling online. 37 percent say they do not see any benefits of selling online. Barriers: Barriers: Not knowing how or where to start Not knowing how or where to start Cost and time concerns Cost and time concerns

8. Copyright 2008 Prentice Hall Publishing 8Chapter 9: E-Commerce Factors to Consider Before Launching into E-Commerce How a company exploits the Web’s interconnectivity and the opportunities it creates to transform relationships with suppliers, customers, and others is crucial to its success. How a company exploits the Web’s interconnectivity and the opportunities it creates to transform relationships with suppliers, customers, and others is crucial to its success. Web success requires a company to develop a plan for integrating the Web into its overall strategy. Web success requires a company to develop a plan for integrating the Web into its overall strategy.

9. Copyright 2008 Prentice Hall Publishing 9Chapter 9: E-Commerce Factors to Consider Before Launching into E-Commerce Developing a deep, lasting relationship with customers takes on even greater importance on the Web. Developing a deep, lasting relationship with customers takes on even greater importance on the Web. Creating a meaningful presence on the Web requires an ongoing investment of resources – time, money, energy, and talent. Creating a meaningful presence on the Web requires an ongoing investment of resources – time, money, energy, and talent. Measuring the success of a Web-based sales effort is essential to remaining relevant to customers whose tastes, needs, and preferences constantly change. Measuring the success of a Web-based sales effort is essential to remaining relevant to customers whose tastes, needs, and preferences constantly change.

10. Copyright 2008 Prentice Hall Publishing 10Chapter 9: E-Commerce Assessing Your Company’s Online Potential 1. Does your product have broad appeal to customers everywhere? 2. Do you want to sell your product to customers outside of your immediate geographic area? 3. Can the product you sell be delivered conveniently and economically? 4. Can your company realize significant cost advantages by going online? 5. Can you draw customers to your company’s Web site with a reasonable investment?

11. Copyright 2008 Prentice Hall Publishing 11Chapter 9: E-Commerce 12 Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive.

12. Copyright 2008 Prentice Hall Publishing 12Chapter 9: E-Commerce Follow-up Investments Setting up a Web site is only the first investment: Redesign Web site Redesign Web site Buy more computer hardware Buy more computer hardware Automate or expand warehouse to meet customer demand Automate or expand warehouse to meet customer demand Integrate Web site into inventory control system Integrate Web site into inventory control system Increase customer call-center capacity Increase customer call-center capacity Lesson: Focus on your company’s core competencies and outsource all other aspects of doing business online.

13. Copyright 2008 Prentice Hall Publishing 13Chapter 9: E-Commerce 12 Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive. Myth 2: If I launch a site, customers will flock to it.

14. Copyright 2008 Prentice Hall Publishing 14Chapter 9: E-Commerce Promotion Is the Key! Print URL on everything related to your business Print URL on everything related to your business Web-based newsletters Web-based newsletters Write articles that link to your company’s Web site Write articles that link to your company’s Web site Host a customer chat room Host a customer chat room Sponsor online contests Sponsor online contests Establish a blog Establish a blog

15. Copyright 2008 Prentice Hall Publishing 15Chapter 9: E-Commerce 12 Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive. Myth 2: If I launch a site, customers will flock to it. Myth 3: Making money on the Web is easy. Study: Web retailers invest 65 percent of revenue in marketing and advertising, compared to just 4 percent for their off-line counterparts. Myth 4: Privacy is not an important issue on the Web.

16. Copyright 2008 Prentice Hall Publishing 16Chapter 9: E-Commerce Privacy Online Study: 80 percent of Internet users say that privacy of their personal information is either important or very important. Study: 80 percent of Internet users say that privacy of their personal information is either important or very important. Estimate: If online companies were able to alleviate customers’ online privacy and security issues, online retail sales would be 24 percent higher! Estimate: If online companies were able to alleviate customers’ online privacy and security issues, online retail sales would be 24 percent higher!

17. Copyright 2008 Prentice Hall Publishing 17Chapter 9: E-Commerce 12 Myths of E-Commerce Myth 5: The most important part of any e- commerce effort is technology. Myth 6: Strategy? I don’t need a strategy to sell on the Web! Just give me a Web site and the rest will take care of itself. Myth 7: On the Web, customer service is not as important as it is in a traditional retail store.

18. Copyright 2008 Prentice Hall Publishing 18Chapter 9: E-Commerce The Importance of Service on the Web Study: 57 percent of Web shoppers who fill their online shopping carts become frustrated and leave the site before checking out. Study: 57 percent of Web shoppers who fill their online shopping carts become frustrated and leave the site before checking out. Result: For every $1 they spend online, customers leave behind $4.51 in abandoned shopping carts. Result: For every $1 they spend online, customers leave behind $4.51 in abandoned shopping carts. Reasons: Reasons: Shipping and handling charges too high Shipping and handling charges too high Delivery times too long Delivery times too long Checkout process too lengthy Checkout process too lengthy Insufficient product information available Insufficient product information available

19. Copyright 2008 Prentice Hall Publishing 19Chapter 9: E-Commerce 12 Myths of E-Commerce Myth 8: Flash makes a Web site better. Lesson: Simplicity rules! Myth 9: It’s what’s up front that counts. Myth 10: E-commerce will cause brick-and- mortar retail stores to disappear. Myth 11: The greatest opportunity for e- commerce lies in the retail sector. Myth 12: It’s too late to get on the Web.

20. Copyright 2008 Prentice Hall Publishing 20Chapter 9: E-Commerce Strategies for E-Success Focus on a market niche. Focus on a market niche. Develop a community. Develop a community. Attract visitors by giving away “freebies.” Attract visitors by giving away “freebies.” Make creative use of e-mail, but avoid becoming a “spammer.” Make creative use of e-mail, but avoid becoming a “spammer.”

22. Copyright 2008 Prentice Hall Publishing 22Chapter 9: E-Commerce Strategies for E-Success Make sure your Web site says “credibility.” Make sure your Web site says “credibility.” Consider forming strategic alliances. Consider forming strategic alliances. Make the most of the Web’s global reach. Make the most of the Web’s global reach. Promote your site online and offline. Promote your site online and offline. Develop an effective search engine optimization strategy. Develop an effective search engine optimization strategy.

23. Copyright 2008 Prentice Hall Publishing 23Chapter 9: E-Commerce Search Engine Strategies Natural (organic) listings – arise as a result of “spiders,” powerful programs search engines use to crawl around the Web. Natural (organic) listings – arise as a result of “spiders,” powerful programs search engines use to crawl around the Web. Paid (sponsored) listings – short text ads with links to the sponsoring company’s Web site. Paid (sponsored) listings – short text ads with links to the sponsoring company’s Web site. Paid inclusion – when a company pays a search engine for the right to submit either selected pages or its entire Web site content for listing. Paid inclusion – when a company pays a search engine for the right to submit either selected pages or its entire Web site content for listing.

24. Copyright 2008 Prentice Hall Publishing 24Chapter 9: E-Commerce Designing a Killer Web Site Understand your target customer. Understand your target customer. Give customers what they want. Give customers what they want. Select a domain name that is consistent with the image you want to create for your company and register it. Select a domain name that is consistent with the image you want to create for your company and register it. Short Short Memorable Memorable Indicative of a company’s business Indicative of a company’s business Easy to spell Easy to spell

25. Copyright 2008 Prentice Hall Publishing 25Chapter 9: E-Commerce Designing a Killer Web Site Make your Web site easy to navigate. Make your Web site easy to navigate. Create a gift idea center. Create a gift idea center. Build loyalty by giving online customers a reason to return to your Web site. Build loyalty by giving online customers a reason to return to your Web site. Establish hyperlinks with other businesses, preferably those selling complementary products. Establish hyperlinks with other businesses, preferably those selling complementary products.

26. Copyright 2008 Prentice Hall Publishing 26Chapter 9: E-Commerce Designing a Killer Web Site Include an e-mail option an a telephone number in your site. Include an e-mail option an a telephone number in your site. Give shoppers the ability to track their orders online. Give shoppers the ability to track their orders online. Offer Web shoppers a special all their own. Offer Web shoppers a special all their own. Follow a simple design. Follow a simple design. Create a fast, simple checkout process. Create a fast, simple checkout process.

27. Copyright 2008 Prentice Hall Publishing 27Chapter 9: E-Commerce Designing a Killer Web Site Assure customers that their online transactions are secure. Assure customers that their online transactions are secure. Post shipping and handling charges up front. Post shipping and handling charges up front. Confirm transactions. Confirm transactions. Keep your site updated. Keep your site updated. Test your site often. Test your site often. Consider hiring a professional to design your site. Consider hiring a professional to design your site.

28. Copyright 2008 Prentice Hall Publishing 28Chapter 9: E-Commerce Tracking Web Results Web analytics – tools that measure a Web site’s ability to attract customers, generate sales, and keep customers coming back. Web analytics – tools that measure a Web site’s ability to attract customers, generate sales, and keep customers coming back. Only 40 percent of e-businesses use Web analytics strategically to refashion their Web sites. Only 40 percent of e-businesses use Web analytics strategically to refashion their Web sites. Commerce metrics Commerce metrics Visitor segmentation measurements Visitor segmentation measurements Content reports Content reports Process measurements Process measurements

29. Copyright 2008 Prentice Hall Publishing 29Chapter 9: E-Commerce Tracking Web Results Counter Counter Log-analysis software Log-analysis software Click-stream analysis Click-stream analysis Clustering Clustering Collaborative filtering Collaborative filtering Profiling systems Profiling systems Artificial intelligence Artificial intelligence Performance Indicators:

30. Copyright 2008 Prentice Hall Publishing 30Chapter 9: E-Commerce Measuring Online Performance Recency – the length of time between customers’ visits to a Web site. Recency – the length of time between customers’ visits to a Web site. Click-through rate (CTR) – the proportion of people who see a company’s ad online and actually click on it. Click-through rate (CTR) – the proportion of people who see a company’s ad online and actually click on it. Cost per acquisition (CPA) – the amount it costs to generate a purchase (or a customer registration). Cost per acquisition (CPA) – the amount it costs to generate a purchase (or a customer registration). Conversion (browse-to-buy) ratio – the proportion of visitors to a site who actually make a purchase. Conversion (browse-to-buy) ratio – the proportion of visitors to a site who actually make a purchase.

31. Copyright 2008 Prentice Hall Publishing 31Chapter 9: E-Commerce Ensuring Web Privacy Take an inventory of the customer data collected. Take an inventory of the customer data collected. Develop a company policy for the information you collect. Develop a company policy for the information you collect. Post your company’s privacy policy prominently on your Web site and follow it. Post your company’s privacy policy prominently on your Web site and follow it.

32. Copyright 2008 Prentice Hall Publishing 32Chapter 9: E-Commerce Ensuring Web Security Virus detection software Virus detection software Intrusion detection software Intrusion detection software Firewall Firewall