Chapter 4 E-Business: Managing the Customer Experience

Chapter Objectives Describe the growth of Internet use worldwide. Define e-business and e-marketing, and list the opportunities e-marketing presents. Distinguish between a corporate Web site and a marketing Web site. List the major forms of B2B e-marketing. Explain business-to-consumer (B2C) e-marketing. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Chapter Objectives Identify online buyers and sellers. Describe some of the challenges associated with online marketing and e-business. Discuss how marketers use the communication function of the Web as part of their online marketing strategies. Outline the steps involved in developing successful e-business Web sites and identify methods for assessing Web site effectiveness. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

New E-terms E-business E-marketing E-commerce E-tailing E-zine E-mail E-space E-procurement

The Digital World Almost three-quarters of the U.S. population access the Internet at home, school, work, or public access sites What do people do online? United States – Communication, information, and purchases China – Downloading, streaming music, online gaming, videogaming, and social networking Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

The Digital World In spite of the past success and future potential of the Internet, issues and concerns relating to e-business remain The benefits and potential of e-business outweigh the concerns and problems Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

What is E-Commerce? Electronic commerce (e-commerce): Targeting customers by collecting and analyzing business information, conducting customer transactions, and maintaining online relationships with customers by means of computer networks

E-Marketing Strategic process of creating, distributing, promoting, and pricing goods and services to a target market over the Internet or through digital tools Application of electronic tools to contemporary marketing has the potential to: Greatly reduce costs Increase customer satisfaction Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

E-Marketing Online marketing - Activities that connect buyers and sellers electronically through interactive computer systems Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Copyright © 2012 by South Western, a division of Cengage Learning Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

What is Interactive Marketing? Buyer-seller communications in which the customer controls the amount and type of information received from a marketer through such channels as the Internet, and virtual reality kiosks.

What is the Internet? Worldwide network of interconnected computers that lets anyone with access to a personal computer send and receive images and data anywhere

70% of Internet Users - USA The Birth and Rise of Ecommerce The Internet World Internet Users 1990 – Fewer than 1 Million 1995 – 50 Million 2001 – 490 Million 2005 – 766 Million 70% of Internet Users - USA 2006 – 50% outside the USA The Birth and Rise of Ecommerce

The Internet Over 143 million active users in the USA Intranets Internal corporate network that allows employees within an organization to communicate with each other and gain access to organizational information Extranets Secure network accessible through a Website by external customers or organization for electronic commerce. It provides more customer-specific information than a public site.

The Internet (1 of 2) Taken from the paper “International Internet Marketing (IIM)” by Philip, R. (2004). In 1990, fewer than 1 million users were connected to the Internet. By 1995, the figure had risen to 50 million. In 2001, it grew to 490 million. In the US, where Internet usage is most advanced, 58 percent of the population had Internet access at home by July 2001 (Cantrell, 2001). The internet has become more powerful with the growing use of broadband. Broadband permits the rapid transmission of much greater quantities of information, including moving pictures. In 2002, Korea’s 15 million households had broadband service (Moon, 2002). By 2004, more than 152 million people in the United States were online with over one-third having broadband connections (Fost, 2004).

The Internet (2 of 2) In 2000 there were nearly 350 million internet users world-wide and by 2005 the number of users could be more than double to nearly 766 million (Wall street journal, 2000). Also the number of internet users is growing in other countries; this should be of concern for firms wanting to enter foreign markets. For example, although 70% of today’s internet users are currently based in the United States (Harrison-Walker, 2002), more research done by Heckman & Schmidt (2000) and Struass and Frost (2001) predict that by 2005 more than 50% of internet users will be based outside the US, and that the percent of users in the European Union will exceed the percent of users in the United States.

Four Web Functions Communication Information E-mail; Instant messaging; Chat rooms and bulletin boards; Online communities Information Search engines; Online publications; Newsgroups; Internet forums; Electronic bulletin boards; Web communities

Four Web Functions Entertainment E-Commerce Games; Radio and TV programming, including music; Streaming video of live news reports, sports, and musical performances; Electronic books E-Commerce Online auctions B2B: electronic exchanges; Extranets and private exchanges B2C: Electronic storefronts and cybermalls; Web kiosks, Online ticketing; Matchmaking

Four Web Functions

Online Consumer Marketing Lower Prices Bots (short for robots): programs that check hundreds of sites, gather and assemble information, and bring it back to the sender Convenience Worldwide access, Day or night, Customized products and information Personalization Improves the quality of the shopping experience Improves customer satisfaction

Benefits of Online Consumer Marketing Relationship Building Crucial to success Online’s personalization helps Easier for small businesses with small budgets Customer service is the key Increased Efficiency Greater profit margins Educating customers online frees salespeople from answering routine questions

A More Level Playing Field Cost Reductions Reduced start-up costs Reduced operating costs Frees funds for new marketing efforts www.virtualbank.com A More Level Playing Field Even small firms with small budgets can compete in the global marketplace Helps eliminate discrimination and allow minority businesses to succeed on their own merits AutoNetwork.com

Creating an Effective Web Presence Measuring Effectiveness Managing a Web Site Creating an Effective Web Site

Building an Effective Web Site Establish a Mission for the company’s site Identify the purpose of the site Satisfy customer needs and wants through a clear site design Managing a Web Site Update the site frequently Flag new merchandise and services Ensure that site appears to be current Update software as needed Track costs and revenues

MEASURING WEB SITE EFFECTIVENESS Click-through rate Percentage of people presented with a banner ad who click on it. Conversion rate Percentage of visitors to a Web site who make a purchase.

WEB BUSINESS MODELS • Corporate Web site Site designed to increase a firm’s visibility, promote its offerings, and provide information to interested parties. • Purpose is to build customer goodwill and assist channel members in their marketing efforts. • Other purposes include disseminating financial information; giving prospective employees the opportunity to apply online for jobs; and providing a communication channel for customers and other interested parties. .• Marketing Web site Site whose main purpose is to increase purchases by visitors. • Includes information about company history, products, locations, employment opportunities, and financial information.

Web Business Models Corporate Web site - Designed to increase a firm’s visibility, promote its offerings, and provide information to interested parties Build customer goodwill Assist channel members in their marketing efforts Marketing Web site - Aim is to increase purchases by visitors Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

B2B E-Marketing Use of the Internet for business transactions between organizations Generates sales revenue Provides detailed product description when required Increases efficiency of business transactions Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

B2B E-Marketing Tools used: EDI Web services Extranets Private exchanges Electronic exchanges E-procurement Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Proprietary B2B Transactions Electronic data interchange Exchange of sales information between buyers and sellers Requires compatible hardware and software systems Cuts paper flow, speeds the order cycle, and reduces errors Allows companies to set production schedules to better match demand Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Proprietary B2B Transactions Web services Internet-based systems that allow parties to communicate electronically with one another regardless of the computer operating system they use Rely on open source XML standards Extranets Secure networks used for e-marketing and accessible through the firm’s Web site by external customers, suppliers, or other authorized users Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Proprietary B2B Transactions Intranets Secure internal networks that help companies share information among employees Private exchanges A secure Web site at which a company and its suppliers share all types of data related to e-marketing Sometimes called c-business Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

E-procurement on Open Exchanges E-Procurement - Use of the Internet by to solicit bids and purchase goods and services from suppliers Offers benefits to the public sector Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

B2C E-Marketing Selling directly to consumers over the Internet Also called e-tailing Driven by convenience and improved security for transmitting financial information Service providers such as banks are important participants in e-tailing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Electronic Storefronts Company Web site that sells products to customers Items for purchase are placed in an electronic shopping cart Electronic shopping cart - File that holds items the online shopper has chosen to buy Increased capability of smartphones influence the growth of online shopping Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Benefits of B2C E-Marketing Competitive pricing An ideal method for savvy shoppers to compare prices from dozens of sellers Easy price comparisons through bots such as pricegrabber.com. Access and convenience Allows customers to place orders from anywhere at anytime; product tracking Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Benefits of B2C E-Marketing Personalized service Software analyzes past user purchases to customize experience Goal is to create loyal customers who make repeat purchases Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Source: Data from Nielsen Online, “Nielsen Provides Topline U. S Source: Data from Nielsen Online, “Nielsen Provides Topline U.S. Web Data for February 2010,” http://blog.nielsen.com; Data from Nielsen Online, as cited in “Nielsen Online Reports Topline U.S. Data,” Market Wire, accessed on March 25, 2010. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Challenges in E-Business and E-Marketing Safety of online payment Companies have developed secure payment systems to protect customer information Encryption - Encoding data for security purposes Secure Sockets Layer - Technology that encrypts information and provides authentication Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Privacy Issues Customers’ top security concern is protection of their personal information Through electronic signatures, parties can enter into legal contracts online Cookies and spyware allow companies to personalize customers’ Internet experience but also invade users’ privacy Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Privacy Issues To reassure customers, many online merchants have signed on with online privacy organizations such as TRUSTe Companies install firewalls to protect private corporate data Firewall - An electronic barrier between a company’s internal network and the Internet that limits access into and out of the network Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Frauds and Scams Complaints about Internet fraud are received by the Internet Crime Complaint Center (IC3) Phishing - High-tech scam that uses authentic-looking e-mail or pop-up messages to get unsuspecting victims to reveal personal information Vishing - Scam that collects personal information through voice response systems; stands for voice phishing Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Frauds and Scams Payment fraud Cardholder fraudulently claims ordered merchandise was never delivered and asks credit issuer for a chargeback Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Site Design and Customer Service Not all Web sites are well designed and easy to use Merchandise delivery and returns pose challenges Companies that have brick-and-mortar stores often have more experience satisfying customers than Internet-only retailers Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Channel Conflicts and Copyright Disputes Channel conflicts - Conflicts among manufacturers, wholesalers, and retailers Conflicts in the area of copyright law When a site hosts content to which someone else holds the rights Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Marketing and Web Communication The Internet has four main functions: E-business Entertainment Information Communication – most popular function Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Online Communities and Social Networks Firms use Internet forums, newsgroups, electronic bulletin boards, and Web communities that appeal to people who share common interests Social networking sites have grown dramatically Example: MySpace, Facebook, and LinkedIn Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Blogs and Podcasts Blog - Short for Web log— an online journal for an individual or organization Some blogs incorporate wikis, a Web page that anyone can edit Podcast - Online audio or video file that can be downloaded to other digital devices Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Blogs and Podcasts Corporate blogs can help build brand trust Employee blogs present ethical issues Companies have strict policies about the content of employee blogs Employees can be disciplined over improper blogging Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Promotions on the Web Banner ad - Strip message placed in high-visibility areas of frequently visited Web sites Pop-up ad - Separate window that pops up with an advertising message Preroll video ad - Marketing messages that play before an online video Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Promotions on the Web Widget - Tiny interactive applications that Internet users can copy and add to their own pages to play music, video, or slide shows Search marketing - Paying search engines a fee to make sure that the company’s listing appears toward the top of the search results Companies use online coupons to promote their products Example: Procter & Gamble Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Building an Effective Web Presence An e-business Web site can: Broaden customer bases Provide immediate access to current catalogs Accept and process orders Offer personalized customer service Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

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Establishing Goals What is the company’s goal for its Web site? Objectives for the Web site determines the scope of the project Create and maintain a site in-house or to contract with outside designers? Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Implementation and Interest Content – Determines whether visitors return to a site Available resources should be: Relevant to viewers Easy to access and understand Updated regularly Written or displayed in a compelling, entertaining way Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Pricing and Maintenance Variety of costs: Development Placing the site on a Web server Maintaining and updating the site Promoting the site Important for a Web site to stay current Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Assessing Site Effectiveness Web-to-store shoppers - Consumers who use the Internet as a tool to aid them at brick-and-mortar retailers Click-through rate - Percentage of people presented with a banner ad who click on it Conversion rate - Percentage of visitors to a Web site who make a purchase Engagement - Amount of time users spend on sites Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

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Watch E-Business at Evo Video Watch E-Business at Evo Aside from offering good prices, how does evogear.com offer value to the consumer? Evo has opened a large brick-and-mortar store/community art space in Seattle, Washington. Go to culture.evogear.com/ category/seattle/ to learn more about what the store offers. Do you think this store will distract or enhance the Web site? Consider potential channel conflicts, pricing strategy, convenience, and consumer behavior in your answer. Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.