Chapter 4 E-environment

Learning outcomes Identify the different elements of an organization macro-environment that impact on an organization e- business and e-marketing strategy Assess the impact of legal, privacy and ethical constraints or opportunities on a company Assess the role of macro-economic factors such as governmental e-business policies, economics, taxation and legal constraints.

Management issues What are the constraints placed on developing and implementing an e-business strategy by the e-environment? What factors influence the adoption of new digital media and how can we estimate future demand for online services? How trust and privacy can be assured for the customer while seeking to achieve marketing objectives of customer acquisition and retention?

SLEPT Factors Macro-environment Social Legal Economic Political Technological

SLEPT: Social Include the influence of consumer perceptions in determining usage of the Internet for different activities

SLEPT: Legal and ethical Determine the method by which products can be promoted and sold online Governments, on behalf of society, seek to safeguard individuals right to privacy

SLEPT: Economic Variations in the economic performance in different countries and region affects spending patterns and international trade

SLEPT: Political National governments and transnational organizations have an important role in determining the future adoption and control of the Internet and the rules by which it is governed

SLEPT: Technological Changes in technology offer new opportunities to the ways products can be marketed

Figure 4.1 ‘Waves of change’ – different timescales for change in the environment

Factors governing Internet adoption Cost of access Value proposition Ease of use Security Fear of the unknown

Internet Access Consumers and businesses who uses Internet vary according to countries Within each country, adoption of the Internet vary significantly according to individual demographic characteristics Broadband adoption

Figure 4.2 Variation in broadband subscribers per 100 inhabitants, by technology, December 2007 Source: OECD (www.oecd.org/sti/ict/broadband)

Figure 4.3 Variation in demographic characteristics of UK Internet users: (a) gender, (b) age, (c) social grade Source: eMori Technology Tracker – www.mori.com/technology/trackerdata.shtml

Consumers influenced by using the online channel 73% of Internet users agree that they now spend longer time researching products The Internet is used at every stage of the research process Consumers are more informed from a multiplicity of sources Online information and experience translates into offline purchase

Consumers influenced by using the online channel Psychographic segmentation Realistic enthusiasts Confident brand shoppers Carefree spenders Cautious shoppers Bargain hunters Unfulfilled

Motivation for use of online services Community Entertainment Product trial Information Transaction Game Survey Downloads Interaction Search Exploration News

Figure 4.4 Percentage by category who bought offline after researching online Source: BrandNewWorld: AOL UK / Anne Molen (Cranfield School of Management) / Henley Centre, 2004

Figure 4.5 Development of experience in Internet usage

B2B Profiles The percentage of companies with access Influenced online Purchase online

Figure 4.6 Percentage of businesses that order online Source: DTI (2004), Fig 7.3a

Privacy and trust in e-commerce A moral rights of individuals to avoid intrusion into their personal affairs by third parties Identity theft The misappropriation of the identity of another person without their knowledge and consent

Why personal data are valuable? Contact information Profile information Platform usage information Behavioral information (on a single site) Behavioral information (on multiple site)

Table 4.1 Types of information collected online and related technologies

Table 4.2 Types of information collected online and related technologies (Continued)

Figure 4.7 Standard information collected about web site visitors from the DaveChaffey.com site Source: Feedjit

Ethical issues and data protection Ethical issues concerned with personal information ownership have been usefully summarized by Mason (1986) into four areas: Privacy – what information is held about the individual? Accuracy – is it correct? Property – who owns it and how can ownership be transferred? Accessibility – who is allowed to access this information, and under which conditions?

Ethics – Fletcher’s view Fletcher (2001) provides an alternative perspective, raising these issues of concern for both the individual and the marketer: Transparency – who is collecting what information? Security – how is information protected once collected by a company? Liability – who is responsible if data is abused?

The eight principles for data protection Fairly and lawfully processed; Processed for limited purposes; Adequate, relevant and not excessive; Accurate; Not kept longer than necessary; Processed in accordance with the data subject's rights; Secure; Not transferred to countries without adequate protection. www.dataprotection.gov.uk

Figure 4.7 Information flows that need to be understood for compliance with data protection legislation

Anti-spam legislation To protect individual privacy and with intention of reducing spam or unsolicited commercial e-mail (UCE) ‘Sending Persistent Annoying e-Mail’ Anti-spam legislation can be viewed at http://www.spamlaws.com

Regulations on privacy and electronic communications Privacy and Electronic Communications Regulations (PECR) Act Applies to consumer marketing using email or SMS text messages Is an ‘opt-in’ regime Requires an opt-out option Does not apply to existing customers when marketing similar products Contact details must be provided Email, sms and cookies

Regulations on privacy and electronic communications The ‘From’ identification of the sender must be clear Applies to direct marketing communications Restricts the use of cookies

Understanding cookies A data file placed on your computer that identifies an individual computer Persistent Temporary or session First-party Third-party Cookies are stored as individual text files dave_chaffey@british_airways.txt FLT_VIS\K:bapzRnGdxBYUU\D:Jul-25-1999\british- airways.com\0 425259904 293574 26 1170747936 *

What are cookies used for? Personalizing a site for individual Online ordering systems Tracking within a site Tracking across sites

Viral e-mail marketing To reassure web users about threats to their personal information TRUSTe ISIS – a UK accreditation initiative getsafeonline

TRUSTe and ISIS

Checklist of compliance Follow privacy and consumer protection Inform the user Ask for consent for collecting sensitive personal data Reassure customers by providing clear privacy statements Let individual know when cookies are used Never collect or retain personal data Amend incorrect data Only use data for marketing Provide the option to stop receive information Use appropriate security technology

Legal – Sparrows eight areas Marketing your e-commerce business Forming an electronic contract Making and accepting payment Authenticating contracts concluded over the Internet E-mail risks Protecting Intellectual Property Advertising on the Internet Data protection.

1.Marketing your e-commerce business Domain name registration Using competitor names and trademarks in meta tags Using competitor names and trademarks in pay- per-click advertising Accessibility law

2.Forming an electronic contract E-commerce sites must contain easily accessible content that clearly states The company’s identity including address The main features of the goods or services Prices information The period for which the offer or price is valid Payment, delivery and fulfillment Substitution

Economic/Political Ensuring companies competitive Funding for education and technology Promoting new technology e.g. broadband 12% in UK, 70% Taiwan, South Korea Achieving government efficiencies E-government – all UK services online by 2005 Singapore ‘Intelligent Island’ Taxation regimes Legislation for offshore trading.

Figure 4.8 A framework describing the e-economy Source: Booz Allen Hamilton (2002). International E-Economy: Benchmarking The World’s Most Effective Policy for the E-Economy. Report published 19 November, London. www.e-envoy.gov.uk/oee/oee/nsf/sections/summit_benchmarking/$file/indexpage.htm © Crown copyright 2002

Figure 4.9 Leaders and laggards in e-commerce Source: © 2005 Adapted from Economist Intelligence Unit data © 2005, Economist Intelligence Unit

E-commerce and globalization The increase of international trading and shared social and cultural values Language and cultural understanding English becoming the lingua franca of commerce Tailoring e-commerce services for individual countries or regions

Localization

Localization Singh and Pereira (2005) provide an evaluation framework for the level of localization: Standardized web sites (not localized). A single site serves all customer segments (domestic and international) Semi-localized web sites. A single site serves all customers; however, there will be contact information about foreign subsidiaries available for international customers. Many sites fall into this category Localized web sites. Country-specific web sites with language translation for international customers, wherever relevant. 3M (www.3m.com) has adapted the web sites for many countries to local language versions. It initially focused on the major web sites

Localization (Continued) Highly localized web sites. Country-specific web sites with language translation; they also include other localization efforts in terms of time, date, postcode, currency formats, etc. Dell (www.dell.com) provides highly localized web sites Culturally customized web sites.Web sites reflecting complete ‘immersion’ in the culture of target customer segments; as such, targeting a particular country may mean providing multiple web sites for that country depending on the dominant cultures present. Durex (www.durex.com) is a good example of a culturally customized web site

Political factors Promoting the benefits of adopting the Internet Enacting legislation to protect privacy or control taxation Providing guidelines and assistance for compliance with legislation Setting up international bodies to coordinate the Internet

E-government The application of e-commerce technologies to government and public services Types of actions to encourage e-business: Access, participation and skills Adoption of e-business Confidence, trust and security E-Government strategies and implementation Environment for information economy firms International dimensions

Technological issues Need to be able to assess new innovation Rate of change Which new technologies should we adopt? Monitoring for new techniques Evaluation – are we early adopter Re-skilling and training Are our systems secure?

Figure 4.10 Diffusion–adoption curve

Figure 4.11 Example of a Gartner hype cycle Source: Gartner (2005) Gartner’s Hype Cycle Special Report for 2005

Figure 4.12 Alternative responses to changes in technology

Activity 4.1 List all the social, legal and ethical issues that the manager of a sell-side e-commerce web site needs to consider to avoid damaging relationships with users of his or her site or which may leave the company facing prosecution. You can base your answer on issues which may concern you, your friends or your family when accessing a web site.

Activity answer – this lecture Cookies – laws and consumer perception on placing these Are we limiting access to information from certain sections of society (social exclusion)? Privacy of personal information entered on a web site Sending unsolicited e-mail Replying promptly to e-mail Copyright Site content and promotional offers/adverts are in keeping with the different laws in different countries Providing text, graphics and personality in keeping with social mores of different countries