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Lesson 06 e - marketing

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  • 1. System Analysis Unit - 1 Examining Concepts of Marketing Management Chapter 2 - E - marketing Lesson 6 - Components of E-commerce (B2B, B2C)Introduction: Pure-click versus brick-and-clickDo you know the meaning of e-business? companies We can distinguish between pure-click compa-Simple. It describes the use of electronics means nies, those that launched a Web site with out anyand platforms to conduct a company’s business previous existence as a firm, and brick-and-clickIn the preceding chapters we had stated that companies, existing companies that added anthough marketing on the web is one form of di- online site for information and/or e-commerce.rect marketing, we would handle it in an exclu- PURE-CLICK COMPANIES There are severalsive lesson in view of its unique characteristics kinds of pure-click companies: Search engines,and in the interest of comprehensiveness of cov- Internet Service Providers (ISPs), commerceerage. sites, transaction sites, content sites, and enablerThis lesson deals with the various components of sites.e-commerce i.e.B2C, B2B, G2C, G2B, B2G and Search engines and portals such as Yahoo! AndC2G. We already know the components of B2B Alta Vista started as search engines and laterand B2C, which involve marketing on the web. added services such as news, weather, stock re-They correspond to business buyers and the ulti- ports, entertainments, and store fronts hoping tomate customers. become the user’s point of entry on the Internet.The recent additions to these components are ISPs such as AOL and CompuServe providegovernment to consumers, government to busi- Internet and e-mail connections for a fee. Com-ness, business to government, and consumers to merce sites sell books, music, toys, insurance,government. stocks, clothes, financial services, and so on.You all might be aware of the “David Vs. Goliath Among the most prominent ones are Amazon,“ story, where the giant Goliath is feared across rediff.com and bazee.com. Transaction sites suchas he is mighty and anyone dare challenging him, as auctions and brokerages like fabmart.com andgets killed in the process and the Goliath started others take a commission for transactions con-misusing his strengths. ducted on their sites. Content sites such as The Street, New York Times, and EncyclopediaPeople started fearing Goliath, there was a small Britannica provides financial, research, and otherkid David, who was quite small, less strong at information. Enabler sites provide the hardwarephysique, but strong mentally, wanted to fight with and software that enable Internet communica-Goliath, inspite of warnings from his friends and tion and commerce.well wishers, he had a fight with Goliath, and atthe end he was successful in killing the Goliath. These sites compete using various strategies:This task he could achieve using his mind and not automartindia, a leading website for car buyinghis physique, as he knew that if he uses his phy- and related services; travelmartindia, the infor-sique, he can never fight Goliath, so to defeat mation leader in travel needs.Goliath, he need to use another strategy or strength Pure-click Web businesses reached astronomi-which will help him achieve his Goal, which was cal capitalization levels in the late 1990, in somethe secret of his success. cases for exceeding the capitalization of major3E.004U © Copy Right : Rai University 33
  • 2. System Analysiscompanies such as United Airlines or Pepsi-Cola. tailers would droop its line of computers IfThey were considered a major threat to tradi- Compaq off red to sell the same computer di-tional businesses until the investing frenzy col- rectly online. Merrill lynch hesitated to introducelapsed in 2000. online stock trading to compete with ETTrade, Schwab, and other online brokerages fearing thatDot-coms failed for a variety of reasons: Many its own brokers would rebel. Even the store –rushed into the market without proper research based bookseller Barnes & Noble delayed open-or planning. They had poorly designed Web sites ing an online site to challenge Amazon.with problems of complexity, poor navigation, anddowntime. They lacked adequate infrastructures These companies struggled with the question offor shipping on time and for answering customer how to conduct online sales with out cannibaliz-inquiries. They believed that the first company ing their own stores, resellers, or agents. Hereentering a category would win category leader- are examples of how some companies resolvedship. These companies wanted to exploit network this conflict.’economies, namely the fact that the value of anetwork to each of its members is proportional to Although brick and- slick firms face channel con-the number of other users (Metacalfe’s Law). flict issues, they probably will have more onlineSome just rushed into the market in the hope of success than their pure – click competitors. First,launching an initial public offering (IPO) while companies such as Compaq, Merrill Lynch, andthe market was hot. Barnes & noble have better known brand names; their cost of acquiring a new customer ‘ is $12To acquire customers, dot-coms spent large compared to the $82 that pure click e-tailers spendamounts on mass marketing and offline advertis- to acquire a new customer.8 second, they haveing. They relied on spin and buzz instead of using greater financial resources and access to funds.target marketing and word-of-mouth marketing, Third, they have deeper industrial knowledge andand they devoted too much effort to acquiring experience, good relationships with key suppli-customers instead of building loyal and more fre- ers, and a large customer base. Fourth, they canquent users among their current customers. They now be reached 24 hours a day, 7 days a weekdid not understand customer behavior when it and merchandise can be returned to their 9 to 5came to online surfing and purchasing. stores. And fifth, the Internet allows them to reach and serve additional customers who may be forMany dot-coms did not build a sound business away from their store locations. Gap illustratesmodel that would deliver eventual profits. The the advantages of a brick-and-click operation overease of entry of competitors and the ease of cus- a pure-click operation.tomers switching Web sites in search of batterprices forced dot-coms to accept margin-killing E-businesslow prices. Webvan, the online grocer, illustrateshow dot-coms failed to understand their market- Do you know the meaning of e-business?place. Simple. It describes the use of electronics means and platforms to conduct a company’s business.At the same time, many pure-click dot-coms aresurviving and even prospering. Others are show- The advent of the Internet has greatly increaseding losses today, but their business plans are fun- the ability of companies to conduct their businessdamentally good. faster, more accurately, over a wider range of time and space, at reduced cost, and with theBRICK – AND – CLICK COMPANIES ability to customize and personalize customer of-many incumbent companies moved quickly to ferings. Countless companies have set up Webopen web sites describing their business but re- sites to inform and promote their products andsisted adding e-commerce to their sites. They services. They have created Intranets to facili-felt that selling their product or services online tate employees communicating with one anotherwould produces channel conflict— they would and to facilitate downloading and uploading in-be competing with their offline retailers and formation to and from the company’s comput-agents, for example, Compaq feared that its re- ers. Companies have also set up Extranets with34 © Copy Right : Rai University 3E.004U
  • 3. System Analysismajor suppliers and distributors to facilitate in- Which is more important for developing an e-pres-formation exchange, orders, transactions, and ence: the agility of a pure click company, or thepayments. Bill Gates of Microsoft climes that well defined and readily identifiable resources ofMicrosoft is almost entirely run electronically; atraditional brick and mortar company?there is hardly any paper flowing through thecompany because everything is one the computer B2C (business to consumer)screen. The popular press has paid the most attention to consumer Web sites. In 2000, more than 106 mil-E-commerce lion Americans went online, with 80 percent look- ing for information, 73 percent researching a prod-What is e Commerce then? uct or service before buying it, 68 percent look-It is more specific than e-business; it means that ing for travel information, and 65 percent lookingin addition to providing information to visitors about for information on movies, books and leisure ac-the company, its history, policies, products, and tivities.job opportunities, the company or site offers totransact or facilitate the selling of products and The most frequent online consumer purchasesservices online. (in terms of the percentage of online buyers say- ing they have purchased in the category) haveE-commerce has given rise in turn of e purchas- been books (58%), music (50%), software (44$),ing and e-marketing. air tickets (29%), PC peripherals (28%), clothing (26%), views (24%), hotel reservations (20%),E-Purchasing means companies decide to pur- toys (20%), flowers (17%), and consumer elec-chase goods, services, and information from tronics (12%). The Internet is most useful forvarious online suppliers. products and services when the shopper seeksSmart e purchasing has already saved compa- greater ordering convenience (e.g., automobilesnies millions of dollars or computers). Individuals are also using the Internet to search for others to meet or date on E marketing describes company efforts to in- such sites as bharatmatrimony.com, shaadi.com,form, communicate, promote, and sell its prod- Companies must set up and operate their e-com-ucts and services over the Internet. merce Web sites carefully, as the “Marketing Memo: Succeeding with Electronic Commerce”The e term is also used in terms such as e-fi- shows.nance, e-learning , and e-service. But as some-one observed, the e will eventually be dropped Internet domains: B2B (Business towhen most business practice is online. business)E-business and e-commerce take place over four Although the popular press has given the mostmajor Internet domains: B2C (business to con- attention to business-to-consumer (B2C) websumer), B2B (business to business), C2C (con- sites, even more activity is being conducted onsumers to Consumers), and C2B (consumers to business-to-business (B2B) sites. The B2B sitesbusiness. (We will omit government relations like are changing the supplier-customer relationshipG2C, G2B, B2G and C2G). in profound ways. Forrester and Gartner, major research firms on online commerce, estimate thatInternet domains: B2B commerce is 10 to 15 times greater thanAs discussed in the beginning of the lesson, B2C commerce. Gartner estimates that by 2005,internet has unleashed a number of domains of more than 500,000 enterprises will participate ine- business/commerce. We begin by discussing e-markets as buyers, sellers, or both. These firmsthe business to consumer domain. are using B2B auction sites, spot exchanges, online product catalogues, barter sites, and other onlineActivity resources to obtain better prices. Many majorFor instructor: Please hold a 10-minute discus- enterprises, including Chevron, Ford Motor Com-sion on the following question. pany, GE, and Merck, have invested millions in3E.004U © Copy Right : Rai University 35
  • 4. System AnalysisWeb procurement systems. The result: Invoices fice allows taxpayers to download forms, submitthat used to cost $ 100 to process now cost as electronic tax returns, submit Business Activitylittle as $ 20. Statements (BAS), ask questions and receive in- formation on a variety of tax matters. As anotherActivity: example, the WA Government Electronic Mar-Has e marketing changed the attitude of the cus- ketplace (GEM) uses the internet to provide atomer-discuss this with appropriate examples comprehensive government buying service. These GEM services cover the full range of govern-B2G - Business to Government ment buying including purchasing of low valueInternet commerce commodities and public tendering for high value goods and services.This term refers to the use of the Internet byGovernment to reach its citizens for a variety of Activity:information dissemination purposes and transac-tions. For example, the Australian Taxation Of- 1. Discuss in brief the Boom and the fall of the “Dot Com” era. Points to ponder –36 © Copy Right : Rai University 3E.004U