Introduction to E-Commerce
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Introduction to E-Commerce. Internet Technology Provides the Vehicle for E-Commerce . Electronic Commerce is the buying, selling, and trading of goods on the Internet. Introduction to E-Commerce. Benefits of E-Commerce. Introduction to E-Commerce. Shop-at-home convenience

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Introduction to E-Commerce

Internet Technology Provides the Vehicle for E-Commerce

Electronic Commerce is the buying, selling, and trading of goods on the Internet.

Benefits of e commerce

Introduction to E-Commerce

Benefits of E-Commerce

Improved customer service

Introduction to E-Commerce

Shop-at-home convenience

Detailed product information

Customer controls transaction

Simplified ordering

Open 24/7/365

Improved Customer Service

Expanded markets

Introduction to E-Commerce

Elimination of Boundaries

Direct to customer

(no middleman)

Expanded Markets

Cost cutting

Introduction to E-Commerce

Streamlined order processing

Fewer errors in order entry

Increased speed

Lower marketing costs

Cost Cutting

Higher profits

Introduction to E-Commerce

Additional sales channel

User fee income

Advertising Income

Lower marketing costs

Higher Profits

E commerce challenges

Introduction to E-Commerce

Security & privacy

Scams & Fraud

Down time & poor service

Awkward design & functionality

Lack of retail experience

E-Commerce Challenges

Where to Use E-Commerce

  • Value Chain Analysis

  • SWOT Analysis

Chapter 2

Chapter 2

Technology Infrastructure:

The Internet and the World Wide Web

Technology overview
Technology Overview

  • Computer networks and the Internet form the basic technology structure for electronic commerce.

  • The computers in these networks run such software as:

    • Operating systems, database managers, encryption software, multimedia creation and viewing software, and the graphical user interface

Packet switched networks
Packet-Switched Networks

  • A local area network (LAN) is a network of computers close together.

  • A wide area network (WAN) is a network of computers connected over a great distance.

  • Circuit switching is used in telephone communication.

  • The Internet uses packet switching

    • Files are broken down into small pieces (called packets) that are labeled with their origin, sequence, and destination addresses.

Routing packets
Routing Packets

  • The computers that decide how best to forward each packet in a packet-switched network are called ‘routers’.

  • The programs on these routers use ‘routing algorithms’ that call upon their ‘routing tables’ to determine the best path to send each packet.

  • When packets leave a network to travel on the Internet, they are translated into a standard format by the router.

  • These routers and the telecommunication lines connecting them are referred to as ‘the Internet backbone’.

Internet protocols
Internet Protocols

  • A protocol is a collection of rules for formatting, ordering, and error-checking data sent across a network.

Internet protocols1
Internet Protocols

  • The open architecture has four key rules that have contributed to the success of the Internet.

    • Independent networks should not require any internal changes to be connected to the network.

    • Packets that do not arrive at their destinations must be retransmitted from their source network.

    • Router computers act as receive-and-forward devices; they do not retain information about the packets that they handle.

    • No global control exists over the network.

Internet protocols2
Internet Protocols

  • The Transmission Control Protocol (TCP) and the Internet Protocol (IP) are the two protocols that support the Internet operation (commonly referred to as TCP/IP).

  • The TCP controls the disassembly of a message into packets before it is transmitted over the Internet and the reassembly of those packets when they reach their destination.

  • The IP specifies the addressing details for each packet being transmitted.

Ip addresses
IP Addresses

  • IP addresses are based on a 32-bit binary number that allows over 4 billion unique addresses for computers to connect to the Internet.

  • IP addresses appear in ‘dotted decimal’ notation (four numbers separated by periods).

Domain names
Domain Names

  • To make the numbering system easier to use, an alternative addressing method that uses words was created.

  • An address, such as, is called a domain name.

  • The last part of a domain name (i.e., ‘.com’) is the most general identifier in the name and is called a ‘top-level domain’ (TLD).

Web page delivery
Web Page Delivery

  • Hypertext Transfer Protocol (HTTP) is the set of rules for delivering Web pages over the Internet.

  • HTTP uses the client/server model

    • A user’s Web browser opens an HTTP session and sends a request for a Web page to a remote server.

    • In response, the server creates an HTTP response message that is sent back to the client’s Web browser.

  • The combination of the protocol name and the domain name is called a uniform resource locator (URL).

Hypertext markup language
Hypertext Markup Language

  • HTML is a simplified programming language that includes tags defining the format and style of text elements in a document.

Html tags

  • An HTML document contains both document text and elements.

  • Tags are codes that are used to define where an HTML element starts and (if necessary) where it ends.

  • In an HTML document, each tag is enclosed in brackets (<>).

  • A two-sided tag set has an opening tag and a closing tag.

Html links
HTML Links

  • Hyperlinks are bits of text that connect the current document to:

    • another location in the same document

    • another document on the same host machine

    • another document on the Internet

  • Hyperlinks are created using the HTML anchor tag.

Html editors
HTML Editors

  • HTML documents can be created in any general-purpose text editor or word processor.

  • Sophisticated editors can create full-scale, commercial-grade Web sites with database access, graphics, fill-in forms, and display the Web page along with the HTML code.

  • Microsoft FrontPage and Macromedia Dreamweaver are examples of Web site builders.

International nature of electronic commerce
International Nature of Electronic Commerce

  • Companies with established reputations

    • Often create trust by ensuring that customers know who they are

    • Can rely on their established brand names to create trust on the Web

  • Customers’ inherent lack of trust in “strangers” on the Web

    • Logical and to be expected

Language issues
Language Issues the Web

  • To do business effectively in other cultures

    • Must adapt to culture

  • Researchers have found that

    • Customers are more likely to buy products and services from Web sites in their own language

  • Localization

    • Translation that considers multiple elements of local environment

Culture issues
Culture Issues the Web

  • Important element of business trust

    • Anticipate how the other party to a transaction will act in specific circumstances

  • Culture

    • Combination of language and customs

    • Varies across national boundaries

    • Varies across regions within nations

Infrastructure issues
Infrastructure Issues the Web

  • Internet infrastructure includes

    • Computers and software connected to Internet

    • Communications networks over which message packets travel

  • Organization for Economic Cooperation and Development’s (OECD)

    • Statements on Information and Communications Policy

      • Deal with telecommunications infrastructure development issues

Infrastructure issues continued
Infrastructure Issues (Continued) the Web

  • Flat-rate access system

    • Consumer or business pays one monthly fee for unlimited telephone line usage

    • Contributed to rapid rise of U.S. electronic commerce

  • Targets for technological solutions

    • Paperwork and processes that accompany international transactions

Revenue models1
Revenue Models the Web

  • Revenue model of selling goods and services on the Web

    • Based on mail order catalog revenue model that predates the Web Spiegel

  • Mail order or catalog model

    • Proven to be successful for wide variety of consumer items

  • Web catalog revenue model

    • Taking the catalog model to the Web

Computers and consumer electronics
Computers and Consumer Electronics the Web

  • Apple, Dell, Gateway, and Sun Microsystems

    • Have had great success selling on the Web

  • Dell

    • Created value by designing entire business around offering high degree of configuration flexibility to its customers

Books music and videos
Books, Music, and Videos the Web

  • Retailers using the Web catalog model to sell books, music, and videos

    • Among the most visible examples of electronic commerce

  • Jeff Bezos

    • Formed

  • Jason and Matthew Olim

    • Formed online music store they called CDnow

    • Used the Web catalog revenue model

Luxury goods
Luxury Goods the Web

  • People are still reluctant to buy through a Web site

  • Web sites of Vera Wang and Versace

    • Constructed to provide information to shoppers, not to generate revenue

  • Web site of Evian

    • Designed for a select, affluent group of customers

Clothing retailers
Clothing Retailers the Web

  • Lands’ End

    • Pioneered idea of online Web shopping assistance with its Lands’ End Live feature in 1999

  • Personal shopper

    • Intelligent agent program that learns customer’s preferences and makes suggestions

  • Virtual model

    • Graphic image built from customer measurements

Flowers and gifts
Flowers and Gifts the Web

  • 1-800-Flowers

    • Created online extension to its telephone order business

  • Chocolatier Godiva

    • Offers business gift plans on its site

Digital content revenue models
Digital Content Revenue Models the Web

  • Firms that own intellectual property

    • Have embraced the Web as a new and highly efficient distribution mechanism


    • Provides full-text search of court cases, laws, patent databases, and tax regulations

  • ProQuest

    • Sells digital copies of published documents

Advertising supported revenue models
Advertising-Supported Revenue Models the Web

  • Broadcasters provide free programming to an audience along with advertising messages KOMOKING

  • Success of Web advertising hampered by

    • No consensus has emerged on how to measure and charge for site visitor views

      • Stickiness of a Web site: ability to keep visitors and attract repeat visitors

    • Very few Web sites have sufficient visitors to interest large advertisers

Web portals
Web Portals the Web

  • Web directory

    • A listing of hyperlinks to Web Pages

  • Portal or Web portal

    • Site used as a launching point to enter the Web

    • Almost always includes a Web directory and search engine

    • Example: Yahoo, AOL, Altavista

Advertising subscription mixed revenue models
Advertising-Subscription Mixed Revenue Models the Web

  • Subscribers

    • Pay a fee and accept some level of advertising

    • Typically subjected to much less advertising

  • Used by

    • The New York Times and The Wall Street Journal

Advertising subscription mixed revenue models continued
Advertising-Subscription Mixed Revenue Models (continued) the Web

  • Business Week

    • Offers some free content at its Business Week onlinesite

    • Requires visitors to buy subscription to Business Week print magazine

Fee for transaction revenue models
Fee-for-Transaction Revenue Models the Web

  • Businesses offer services and charge a fee based on number or size of transactions processed PayPal

  • Disintermediation

    • Removal of an intermediary from value chain

  • Reintermediation

    • Introduction of a new intermediary

Fee for service revenue models
Fee-for-Service Revenue Models the Web

  • Fee based on value of service provided

  • Services

    • Range from games and entertainment to financial advice

  • Online games

    • Growing number of sites include premium games in their offerings

    • Site visitors must pay to play these premium games

Fee for service revenue models continued
Fee-for-Service Revenue Models (Continued) the Web

  • Concerts and films

    • As more households obtain broadband access to the Internet

      • Companies are providing streaming video of concerts and films to paying subscribers

  • Professional Services

    • State laws

      • One of the main forces preventing U.S. professionals from extending their practices to the Web

Revenue models in transition
Revenue Models in Transition the Web

  • Subscription to Advertising-Supported Model

    • Microsoft founded its Slate magazineWeb site

      • An upscale news and current events publication

      • Charged annual subscription fee after a limited free introductory period

      • Was unable to draw sufficient number of paid subscribers

      • Now operated as an advertising-supported site

Advertising supported to advertising subscription mixed model
Advertising-Supported to Advertising-Subscription Mixed Model


    • Operated for several years as an advertising-supported site

    • Now offers optional subscription version of its site

    • Subscription offering

      • Motivated by company’s inability to raise additional money from investors

Advertising supported to fee for services model
Advertising-Supported to Fee-for-Services Model Model

  • Xdrive Technologies

    • Opened its original advertising-supported Web site in 1999

    • Offered free disk storage space online to users

    • After two years, was unable to pay costs of providing the service with the advertising revenue generated

    • Later switched to a subscription-supported model

Advertising supported to subscription model
Advertising-Supported to Subscription Model Model

  • Northern Light

    • Founded in August 1997 as a search engine with a twist

    • Revenue model

      • Combination of advertising-supported model plus a fee-based information access service

    • January 2002

      • Converted to a new revenue model that was primarily subscription supported

Multiple transitions
Multiple Transitions Model

  • Encyclopædia Britannica

    • Original offerings

      • The Britannica Internet Guide

        • Free Web navigation aid

      • Encyclopædia Britannica Online

        • Available for a subscription fee or as part of CD package

    • 1999

      • Converted to a free, advertiser-supported site

    • 2001

      • Returned to a mixed model

If you build it they will come you hope

Exploring E-Commerce Model

Marketing on the Web

If you build it they will come

– you hope!


Exploring E-Commerce Model

The management process responsible for identifying, anticipating, and satisfying customer’s requirements.


The commercial functions involved in transferring goods from producer to consumer.

Product based strategies product categories

Exploring E-Commerce Model


Home Depot


Musical Instruments

More Musical Instruments

Product-based Strategies:

product categories

Customer based strategies meeting specific needs

Exploring E-Commerce Model


Business Services

Web Marketing

Customer-based Strategies:

Meeting specific needs

Target marketing

Exploring E-Commerce Model

Target Marketing

Micromarketing (go for the “niche”)

Geographic Marketing

Demographic Marketing

Psychographic Marketing


Exploring E-Commerce Model


Body Jewelry

Manx Cats

Geographic marketing

Exploring E-Commerce Model

Geographic Marketing

Living in France

Coastal California

Demographic marketing

Exploring E-Commerce Model

Demographic Marketing

Retired People

Generation X,Y, Z

Psychographic marketing

Exploring E-Commerce Model

Psychographic Marketing

Goth Stuff

High IQ

Customer behavior strategies

Exploring E-Commerce Model




Customer Behavior Strategies

Customer behavior strategies1

Exploring E-Commerce Model

Browsers – use of “triggers”.

Sports Outfitter

Customer Behavior Strategies

Customer behavior strategies2

Exploring E-Commerce Model

Buyers – ready to buy.

Barnes and Noble

Customer Behavior Strategies

Advertising strategies

Exploring E-Commerce Model

Acquiring – cost.

Conversion – cost.

Retain – cost.

Advertising Strategies

Next advertising on the web

Exploring E-Commerce Model


Advertising on the Web

Banner ads
Banner Ads Model

  • Most advertising on the Web uses banner ads.

  • A banner ad is a small rectangular object on a Web page that displays a stationary or moving graphic and includes a hyperlink to the advertiser’s Web site.

  • The most common sizes of banner ads are:

    • Full banner

    • Half banner

    • Square button

Banner ad placement
Banner Ad Placement Model

  • There are three different ways to arrange for other Web sites to display your banner ads.

  • A banner exchange network coordinates ad-sharing so that other sites run your ad while your site runs other exchange members’ ads.

  • The second way is to find Web sites that appeal to one of the company’s market segments and then pay them to carry the ads.

  • A third way is to use a banner advertising network.

Other web ad formats
Other Web Ad Formats Model

  • Another format of Web advertising is the pop-up ad.

  • A pop-up ad is an ad that appears in its own window when the user opens or closes a Web page.

  • Another type of pop-up ad is called the pop-behind ad.

  • A pop-behind ad is a popular ad that is followed very quickly by a command that returns focus to the original window

    • The window is parked behind the user browser waiting to appear when the browser is closed.

E mail marketing
E-Mail Marketing Model

  • Unsolicited e-mail is often considered to be Spam.

  • Sending e-mail messages to Web site visitors who have expressly requested the e-mail messages is a completely different story.

  • The practice of sending e-mail messages to people who have requested them is a part of marketing strategy called permission marketing.

Search engine positioning
Search Engine Positioning Model

  • Potential customers find Web sites in many different ways.

  • Some site visitors will be referred by a friend, others by affiliates, some will see the site’s URL in a print advertisement or on television.

  • Many site visitors will be directed to the site by a search engine.

Search engine positioning1
Search Engine Positioning Model

  • A search engine helps people find things on the Web.

  • A search engine has three major parts

    • The first part is called a spider, a crawler, or a robot

    • The second part is called its index or database

    • The third part of the search engine is the search utility

Search engine positioning2
Search Engine Positioning Model

  • Marketers want to make sure that when a potential customer enters search items that relate to their products or services, their companies’ Web site URL appears among the first 10 returned listings.

  • The combined art and science of having a particular URL listed near the top of a search engine results is called search engine positioning.

  • Search engine positioning is also called:

    • Search engine optimization

    • Search engine placement

Web site naming issues
Web Site Naming Issues Model

  • The legal and marketing aspects of Web site naming can be complicated.

  • Obtaining identifiable names to use for branded products on the Web is important.

  • URL brokers sell or auction domain names.

  • The Internet Corporation for Assigned Names and Numbers (ICANN) maintains a list of accredited domain name registrars.