1 BA345W Announcements, 2/15/07 –Class next Tuesday (2/20) in Hamersly #108 –Class Project Concepts past due Note that students have greater degree of “control” over Class Project. Think about various forms of competitive advantage. –Writing Assignment #2 due tonight. –Students should begin reading Chapters 7 & 8 in Laudon text.

2 Today’s agenda: 2/15/07 Cover Chapters 4, 5, and 6 briefly. –Material in text is generally technical, so is not on the required reading list. –For exams, only responsible for what we cover in class Start to get into Chapter 7

Copyright © 2004 Pearson Education, Inc. Slide 4-3 Chapter 4 Building an E-commerce Web Site

4 Chapter 4: Learning Objectives Brief overview of web site “do’s” and “don’ts”. Brief overview of the spectrum of web site approaches Simple: –Use of Templates (e.g. Yahoo Stores, MySpace) –Dreamweaver or FrontPage (no database) Complex: –Web sites linked to back-end databases Application servers such as IBM WebSphere CGI scripts and SQL databases

Copyright © 2004 Pearson Education, Inc. Slide 4-5 The Eight Most Important Factors in Successful E-commerce Site Design Table 4.10, Page 232

Copyright © 2004 Pearson Education, Inc. Slide 4-6 Web Site Features that Annoy Customers Figure 4.17, Page 231

7 Jakob Nielsen, usability “guru” Nielsen Norman Group (not a visually impressive website, but easy to navigate) See his comments on “why this site has almost no graphics” –Short Answer: Download speeds –(Note: about 35% - 40% of home users still have dial up) –Recall “garish” examples of instructor sites

Copyright © 2004 Pearson Education, Inc. Slide 4-8 The Spectrum of Tools for Building Your Own E-commerce Site Figure 4.5, Page 205

Copyright © 2004 Pearson Education, Inc. Slide 4-9 Multi-tier E-commerce Architecture Figure 4.9(b), Page 212

Copyright © 2004 Pearson Education, Inc. Slide 4-10 Chapter 5 Security and Encryption

11 Chapter 5: Learning Objectives Brief discussion of common Internet-based security threats. –Viruses and other “malware.” –“Phishing” (Dilbert cartoon) Emphasis on practical information. Very brief discussion of encryption; focus on tension between privacy rights of citizens and role of government.

12 New term: “Malware” General term being used to encompass viruses, worms, spyware, adware, and any other software developed with malicious or dishonest intent. Viruses and worms are small software “programs” that run on a computer without the user’s consent.

13 How viruses spread: 2 common methods Some viruses themselves to every e- mail address in the victim’s address book. Single greatest risk of viruses often from e- mail attachments, especially “.exe” files. –Because these viruses then arrive with message from someone known to the user, they often spread very fast and far. –As a rule, don’t open or double-click on an “.exe” attachment unless you are sure what it is. –Some go further and say don’t open any attachment unless you are sure what it is. Also, Office documents (macro viruses), etc.

14 Impact of Viruses Varies substantially: –Some viruses do no tangible harm at all; e.g. user just sees some type of message appear on screen. Messages are sometimes political in nature. At other times, messages criticize Microsoft, especially since viruses usually exploit security vulnerability in Microsoft software.

15 Impact of Viruses Varies substantially: –At other end of spectrum, some viruses can wipe out the user’s hard drive, and all other storage devices connected to the PC. All information on any device may well be lost. –This is reason that truly critical information should also be backed up on storage device not connected to the PC –Viruses can also send information from the user’s PC back to the originator of the virus.

16 Security Suites: Recommendation –For personal (non-network) use, PC Magazine recommends two security suite products above others: “Editor’s Choice”: ZoneAlarm Security Suite (has become easier for novices to use, though complexities remain.) Norton Internet Security (good product, but can slow down PCs noticeably) Each cost approximately $70; user receives virus updates for a define period of time, usually 1 year. Sometimes, standalone anti-virus product better than a “suite” product (doesn’t slow PC down as much). Some routers also provide security functionality.

17 Practical security/safety tips Back up highly valuable work on a separate storage device that you are willing to keep detached from your PC and network. (“CD or USB drive in a drawer”) Only “foolproof” backup is on a detached storage device that is not infected with a virus. –USB “jump” drives becoming incredibly cheap ($15 for 1GB!) –CD-R and CD-RW discs usually less that $1/each (capacity 550MB – 700MB); if don’t have CD drive, floppy discs can store long text documents, and often cost less than 50 cents apiece Virus scanning tools often have flexible settings –Can run automatic virus scans when your computer is on, but not likely to be in use (e.g. dinner time). –Can scan just one folder, or an attached storage device

18 PC Magazine Recommendation –Backups protect user from loss of data from hard drive crash, stolen laptop, etc., in addition to possibility of damage from virus, –PC Magazine recommends Maxtor One Touch USB external hard drive as a personal (vs. network) backup solution –Can be configured for various forms of automatic backup Cost of a 200GB drive about $129 at Staples. WD 160GB “Little Black Book” external drive for $89. –For very specific, highly important information that is not too lengthy, paper backups can make sense as an additional measure. –Or, an important document to yourself using your Yahoo, G-Mail, or WOU account (server-based).

19 Phishing – the cartoon version

20 “Phishing” “Phishing” Illustration: – sent from address that appears to eBay customer service, e.g. – states “For security reasons, please update your credit card information” and provides a link, which appears to be something like –This is a link to a scam site, masquerading as eBay, which will capture your credit card information for fraudulent use. –Never follow such links; when updating sensitive account information, type URL ( directly into browser Address Bar –Newest phishing scam: that purports to be from the IRS. –WOU’s system being hit by more phishing s

21 Example of “phishing”

22 eBay and PayPal a common “phishing” target If they get login information from a eBay/PayPal user, scammers can potentially buy and sell “products,” and transfer money, from that user’s account. Scam leverages reputation user established One measure PayPal has taken to combat phishing: –After an account is established, on a PayPal screen where the credit card number must be re-entered, PayPal shows the user the last few numbers of the card in question. –PayPal now tells users that after initial setup, PayPal will NEVER ask users to enter a credit card number on a screen where PayPal hasn’t already identified the last few numbers of the card. –This is information that scammers would not know.

23 Encryption Encryption converts meaningful information, e.g. an message, into unreadable “gibberish.” The intended reader then decrypts the message and is able to read it. Well know, widely available encryption program is PGP, i.e. “Pretty Good Privacy.” Technical issues regarding how this is done beyond scope of this course.

24 Encryption and Societal Issues Should government be able to get special access to information that would allow it to intercept and decrypt citizens’ messages? –On one hand, citizens should have the right to communicate to each other privately. Example: what if citizens want to criticize government policies in their private s? –On the other hand, terrorists and criminals are known to use programs like PGP to encrypt their electronic communications. In the past, government and original developer of PGP clashed on this issue.

Copyright © 2004 Pearson Education, Inc. Slide 4-25 Chapter 6 E-commerce Payment Systems

Copyright © 2004 Pearson Education, Inc. Slide 4-26 PayPal: The Money’s in the Page 305

Copyright © 2004 Pearson Education, Inc. Slide 4-27 PayPal: The Money’s in the One of e-commerce’s major success stories: Went public in 2002; acquired by eBay October 2002 for $1.5 billion An example of a “peer-to-peer” payment system Fills a niche that credit card companies avoided – individuals and small merchants Piggybacks on existing credit card and checking payment systems Weakness: suffers from relatively high levels of fraud Note “Get Verified” program Competitors include Western Union (MoneyZap), AOL (AOLQuickcash) Citibank (C2it), to some degree Google (Google Checkout)

28 PayPal illustrates power of “de facto” industry standards “Open, ‘Official’ Industry Standard” –Established by organizations like IEEE. –Example: Wi-Fi standards, e.g b, g, n –Not always successful in the marketplace. De Facto Industry Standard –Established when a product, service, or technology is embraced by users and customers. –Classic example: Microsoft Windows –Friedman’s discussion of PayPal: eBay wanted its users to utilize Billpoint, eBay’s payment service. But users indicated “We want a standard, and we’ve picked the standard, and it’s PayPal.” –eBay’s response was to eventually give up on Billpoint and acquire PayPal. Perhaps things could get to a point where almost every Internet user will think: “We all have PayPal, who needs anything else?”

29 PayPal illustrates concept of “Network Effect” –General concept of Network Effect: As the number of people in the network increases, the value of the network to all participants increases exponentially –Network Effect: As more Internet users establish PayPal accounts, the usefulness (or value) of a PayPal account increases for everyone. If everyone has a PayPal account (i.e. it is the de facto standard), who needs anything else?

Copyright © 2004 Pearson Education, Inc. Slide 4-30 Digital Payment Systems and the Wireless Web Mobile payment (m-payments) systems not very well established yet in U.S, but with growth in Wi-Fi and 3G cellular phone systems, this is beginning to change. Supports “m-commerce” “Buy an iPod from a vending machine”

Copyright © 2004 Pearson Education, Inc. Slide 7-31 Chapter 7 E-commerce Marketing Concepts (Important for Class Projects)

Copyright © 2004 Pearson Education, Inc. Slide 7-32 Learning Objectives Identify the key features of the Internet audience Discuss the basic concepts of consumer behavior and purchasing decisions Identify and describe the main technologies that support online marketing

33 Question #1 for Marketers “Is my target customer online?” More refined version: “To what degree is my target customer online?”

34 Late 2006: “Ballpark” demographics, U.S. About 300 million people live in the U.S. There are about 110 million “households” in the U.S. 69 to 74 million households (63% to 68%) have Internet access. About 40 million households have broadband access. 30 to 35 million households still have dial-up access. Source for broadband/dial-up data: “Rewired and Ready For Combat,” Business Week, 11/7/05; Online Video Goes Mainstream, Sparking an Industry Land Grab, WSJ, 2/21/06; also “Why the Web Is Hitting a Wall,” Business Week, 3/20/06.

35 U.S. Internet usage data from Jupiter Research

Copyright © 2004 Pearson Education, Inc. Slide 7-36 Internet Audience and Consumer Behavior Demographics and access: some demographic groups have much higher percentages of online usage than other groups. In other words, online population is “demographically skewed.” Importance of this skew to marketers depends on nature of product/service. For most marketers, the most important demographic skew is related to age. Older consumers are less likely to be online.

37 Age-related demographic skew “Nearly 60% of people 65 or older do not use the Internet at all.” (Source: Park Associates, reported in Business Week, 3/20/06) For company like General Motors, which has several brands which appeal primarily to older consumers (e.g. Buick, Cadillac), this “skew” is a major factor in marketing decisions.

Copyright © 2004 Pearson Education, Inc. Slide 7-38 The Purchasing Decision Five stages in the consumer decision process:  Awareness of need  Search for more information  Evaluation of alternatives  Actual purchase decision  Post-purchase contact with firm For class project, consider: “How does the ‘generic’ model above manifest in the specific business I want to break into?”

Copyright © 2004 Pearson Education, Inc. Slide 7-39 The Consumer Decision Process and Supporting Communications Figure 7.3, Page 371

40 Generic vs. specific models Next slides  “Generic” consumer behavior models Try to determine how these generic models manifest in the industry you are focused on in your class project. Generic models should be the starting point of your analysis.

Copyright © 2004 Pearson Education, Inc. Slide 7-41 A General Model of Consumer Behavior Figure 7.1, Page 368

Copyright © 2004 Pearson Education, Inc. Slide 7-42 A Model of Online Consumer Behavior Figure 7.4, Page 372

Copyright © 2004 Pearson Education, Inc. Slide 7-43 Shoppers: Browsers and Buyers 2003 UCLA Internet Report:  About 40% of online users are “buyers” who actually purchase online  About 40% of online users research on the Web (“browsers”) and then purchase offline. Significance of online browsing for offline purchasing and vice versa should not be underestimated. Reflected in previous discuss of mixed models (bricks and clicks). E-commerce and traditional commerce are coupled and should be viewed by merchants and researchers as part of a continuum of consuming behavior. In euphoria of “E-Commerce I,” this coupling of E- Commerce and traditional commerce was not sufficiently appreciated.

Copyright © 2004 Pearson Education, Inc. Slide 7-44 Internet Marketing Technologies Cookies Advertising networks Customer relationship management (CRM) systems

Copyright © 2004 Pearson Education, Inc. Slide 7-45 Cookies Cookies: small text file that Web sites place on a visitor’s client computer every time they visit, and during the visit as specific pages are accessed. Cookies provide Web marketers with a very quick means of identifying the customer and understanding his or her prior behavior Location of cookie files on computer depends on browser version

46 Advertising Networks Will discuss again in Chapter 9, from Privacy standpoint. Advertising Networks are controversial because of the privacy issues they raise. However, Ad Networks address a key need for the advertiser who is spending the money –Advertisers want some evidence that they are not paying for their ads to be shown to users who have absolutely no interest in their product/service.

Copyright © 2004 Pearson Education, Inc. Slide 7-47 Advertising Networks Best known for ability to present users with banner advertisements based on a database of user behavioral data DoubleClick best-known example Ad server selects appropriate banner ad based on cookies, Web bugs, backend user profile databases Consequently, different users are often shown different banner ads when visiting member sites of the advertising network.

Copyright © 2004 Pearson Education, Inc. Slide 7-48 How an Advertising Network such as DoubleClick Works Figure 7.15, Page 404

49 Basic concept of a customer database While some database technology is complex, the basic concept of a customer database is not. Think of the Blockbuster Video Store. Blockbuster wants to know: –Customer name, and how to reach customer –What videos the customer has checked out, and when they are due back. –Other information that might be helpful in understanding broader customer trends. For example, history of videos the customer has checked out.

Copyright © 2004 Pearson Education, Inc. Slide 7-50 Customer Relationship Management (CRM) Systems Repository of customer information that records all of the contacts that a customer has with a firm and generates a customer profile available to everyone in the firm with an need to “know the customer” Customer profiles can contain: Map of the customer’s relationship with the firm Product and usage summary data Demographic and psychographic data Profitability measures Contact history Marketing and sales information

Copyright © 2004 Pearson Education, Inc. Slide 7-51 A Customer Relationship Management System (e.g. bank) Figure 7.16, Page 406

Copyright © 2004 Pearson Education, Inc. Slide 7-52 Channel Management Strategies Channel: Refers to different methods by which goods can be distributed and sold Channel conflict: Occurs when a new venue for selling products or services threatens or destroys existing venues for selling goods Example: online airline/travel services and traditional offline travel agencies Some manufacturers are using partnership model to avoid channel conflict Ethan Allen and local Ethan Allen retailers