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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Exam 1 review

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

Exam 1 review

  • Introduction to E-Commerce

Where to Use E-Commerce

  • Value Chain Analysis

  • SWOT Analysis

Exam 1 review

Value Chain 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’.

Routing packets1

Routing Packets

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).

Top level domain names

Top-level Domain Names

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

This cartoon from the new yorker illustrates anonymity on the web

This Cartoon from The New Yorker Illustrates Anonymity on the Web

Language issues

Language Issues

  • 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

  • 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

  • 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)

  • 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 models

Revenue Models

Revenue models1

Revenue Models

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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)

  • 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

  • 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

  • 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)

  • 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

  • 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

  • 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

  • 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

  • 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

Marketing on the Web

If you build it they will come

– you hope!


Exploring E-Commerce

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


Home Depot


Musical Instruments

More Musical Instruments

Product-based Strategies:

product categories

Customer based strategies meeting specific needs

Exploring E-Commerce


Business Services

Web Marketing

Customer-based Strategies:

Meeting specific needs

Target marketing

Exploring E-Commerce

Target Marketing

Micromarketing (go for the “niche”)

Geographic Marketing

Demographic Marketing

Psychographic Marketing


Exploring E-Commerce


Body Jewelry

Manx Cats

Geographic marketing

Exploring E-Commerce

Geographic Marketing

Living in France

Coastal California

Demographic marketing

Exploring E-Commerce

Demographic Marketing

Retired People

Generation X,Y, Z

Psychographic marketing

Exploring E-Commerce

Psychographic Marketing

Goth Stuff

High IQ

Customer behavior strategies

Exploring E-Commerce




Customer Behavior Strategies

Customer behavior strategies1

Exploring E-Commerce

Browsers – use of “triggers”.

Sports Outfitter

Customer Behavior Strategies

Customer behavior strategies2

Exploring E-Commerce

Buyers – ready to buy.

Barnes and Noble

Customer Behavior Strategies

Advertising strategies

Exploring E-Commerce

Acquiring – cost.

Conversion – cost.

Retain – cost.

Advertising Strategies

Next advertising on the web

Exploring E-Commerce


Advertising on the Web

Banner ads

Banner Ads

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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

  • 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.

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