1. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563

2. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part One: Chapter Two A Digital World “When if ever will the astounding increase in the productivity growth, and in the growth of productivity growth, of computers end?” W. Nordhaus, The Progress of Computing

3. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The State of Being Digital Something is digital when all of its properties and information are stored as a string of zeroes and ones

4. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The State of Being Digital Something is digital when all of its properties and information are stored as a string of zeroes and ones Those zeroes and ones are called bits

5. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The State of Being Digital Something is digital when all of its properties and information are stored as a string of zeroes and ones Those zeroes and ones are called bits Everything on the Internet is digital

6. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The State of Being Digital Something is digital when all of its properties and information are stored as a string of zeroes and ones Those zeroes and ones are called bits Everything on the Internet is digital The falling cost of digital technology is one of the most powerful forces in the modern economy

7. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Understanding Moore’s Law Intel co-founder Gordon Moore observed that each generation of computer memory chips – released about every 18 months – could pack the same technology into half the space Source: AP/World Wide Photos

8. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Understanding Moore’s Law Moore’s Law applies broadly to computing and technology costs Computer speed since the 1970s has increased roughly 75 billion times The cost of technology and storage, meanwhile, has dropped sharply

9. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation The Fast Fall of Digital Storage Costs Source: Brian Hayes, “Terabyte Territory,” American Scientist 90 (May–June 2002)

10. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Putting Moore’s Law to Work Substituting digital material when possible can lead to substantial savings

11. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Putting Moore’s Law to Work Substituting digital material when possible can lead to substantial savings Sun Microsystems as early as 1995 saved hundreds of thousands of dollars by moving to online customer support

12. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Putting Moore’s Law to Work Substituting digital material when possible can lead to substantial savings Sun Microsystems as early as 1995 saved hundreds of thousands of dollars by moving to online customer support Online software distribution saved Sun an estimated $1.5 million per quarter compared to traditional distribution

13. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Substitution Other examples: Online banking services, such as automatic payroll deposit Wireless laptops for sales representatives working in the field Other potential uses: Automatic online language translations

14. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Environments Technology allows users to create virtual spaces to display information, tell stories, educate or amuse For marketers, new ways to reach consumers and promote a product

15. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Environments Augmented reality and the virtual first down line Source: ELIOT J. SCHECHTER/EPA/Landov

16. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Key Features of Digital Environments Procedural: Computers must be taught what to do in a digital environment

17. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Key Features of Digital Environments Procedural: Computers must be taught what to do in a digital environment Participatory: Effectiveness depends on ease of consumer use and interactive potential

18. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Key Features of Digital Environments Procedural: Computers must be taught what to do in a digital environment Participatory: Effectiveness depends on ease of consumer use and interactive potential Spatial: Realistic features are important but hard to create in business setting

19. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Key Features of Digital Environments Procedural: Computers must be taught what to do in a digital environment Participatory: Effectiveness depends on ease of consumer use and interactive potential Spatial: Realistic features are important but hard to create in business setting Encyclopedic: Low cost allows almost endless storage capacity

20. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Convergence Cheap and powerful digital technology has contributed to the merging of industries, technology and content

21. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Convergence Cheap and powerful digital technology has contributed to the merging of industries, technology and content One crucial area: convergence of computing, communications and media content

22. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digital Convergence Cheap and powerful digital technology has contributed to the merging of industries, technology and content One crucial area: convergence of computing, communications and media content When barriers between industries fall, marketers have greater flexibility to choose the best medium for the pitch

23. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digitizing the Marketing Process Retain and digitize existing materials Substitute digital materials into marketing process Change marketing processes to better use digital features Archive Substitute Redesign

24. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digitizing the Marketing Process Digital capabilities allow businesses to better understand their customer Key example: The online focus group

25. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Digitizing the Marketing Process Digital capabilities allow businesses to better understand their customer Key example: The online focus group Digital capabilities allow businesses to redesign and streamline transactions Key example: Airlines and the evolution of e-ticketing