Ch20

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  • As defined, a host is any computer connected to the Internet and capable of sending and receiving data.
  • Set up by information provider—one-way flowGuestbook allows limited feedbackSites are static, not dynamicGIF buttons allowed clicking to get information on products or services
  • Hot pots—where eye naturally travels. You want to have important stuff there
  • Ch20

    1. 1. How Important is the Internet today?<br />
    2. 2. 14<br />Internet sales are NOT important to retailers with big stores, like Office Depot ( all responses receive credit).<br />Strongly agree<br />Somewhat agree<br />Somewhat disagree<br />Strongly disagree<br />I prefer to shop at Staples<br />
    3. 3. How Important is the Internet?A Real-World Example<br />Office Depot has more than 1,267 stores in US<br />Customers in 42 foreign countries <br />Annual sales about $14.5 billion<br />Comparable store sales in North America decreased 13% from 2007 to 2008<br />33% of Office Depot’s sales came from Internet in 2008 <br />4th Largest Internet retailer in 2008<br />http://www.internetretailer.com/top500/list.asp<br />
    4. 4. Today’s Learning Objectives<br /><ul><li>Define e-commerce and illustrate its importance
    5. 5. How online advertising works
    6. 6. How online marketing benefits buyers and sellers
    7. 7. e-commerce strategies
    8. 8. The Dark Side</li></li></ul><li>Results for Exam 2<br />Mean    80.6<br />Median 81.9<br />Standard Deviation        9.9<br />Hi Score           100<br />Lo Score           38<br />After Thursday-see TAs for Q missed<br />
    9. 9. ML8<br />Second attempt—deadline Wednesday at 11:59 p.m. <br />
    10. 10. Which of the following is a major attraction of selling online (all responses receive credit)?<br />Lower cost of doing business than traditional retailers<br />Ability to gather more information about shoppers than traditional retailers<br />Ability to target different market segments<br />All of the above<br />None of the above<br />
    11. 11. First Internet Banner ad as it appeared <br />on October 25, 1994?<br />http://thelongestlistofthelongeststuffatthelongestdomainnameatlonglast.com/first66.html<br />
    12. 12. How rapidly has the market grown?<br />2009<br />2004 Facebook<br />2008<br />2001 i-Pod<br />1997<br />It took telephone 89<br />years to grow to <br />150 million users.<br />It took Facebook <br />5 years. <br />1983 Cell Phone<br />1966<br />1965<br />1928Television<br />1876 Telephone<br />
    13. 13. e-Commerce<br />e-Commerce – Conducting business transactions over the Internet, including buying and selling of products and services<br />Includes e-Marketing—marketing activities (4-Ps) over the Internet<br />Is part of e-Business—the use of electronic means (Internet, extranets, intranets) to conduct an organization’s business<br />
    14. 14. dot.com Bubble<br /><ul><li>W W W was originally a network between universities but went commercial in early 1990’s
    15. 15. Quickly became the “killer app” but nobody knew how to harness its potential
    16. 16. Majority of dot.coms burned through venture capital and ceased trading
    17. 17. Most never made a profit, some never had significant revenues</li></li></ul><li>Dot.com Bubble<br />Tech heavy NASDAQ peaked on 3/10/2000<br />
    18. 18. Reason for dot.com Bust—No Viable Business Model<br /><ul><li>Relied on spin and hype instead of marketing strategies
    19. 19. Poor research or planning
    20. 20. Spent too heavily on brand identities
    21. 21. Devoted too much effort to acquiring new “eyeballs” instead of customers and building loyalty</li></li></ul><li>Results of Internet<br />Old Economy businesses could not serve the needs of the New Economy<br />Direct selling via the Internet bypassed existing intermediaries (disintermediation).<br />“Brick-and-mortar” firms became “click-and-mortar” companies.<br />Many “click-only” companies have failed. <br />Companies must retain old skills and practices but adopt Internet technology or risk being left behind<br />
    22. 22. How many purchases have you made over the Internet (all responses receive credit)?<br />None<br />1-2<br />3-5<br />6-10<br />11 or more<br />
    23. 23. The Importance of e-Commerce Retail Sales<br />Amounts in $ billion; Source: http://www.businessweek.com<br />
    24. 24. Which of the following items have you purchased over the Internet most recently (not graded)?<br />Travel ticket (airplane or train)<br />Book<br />Auction item<br />Clothing<br />Music<br />
    25. 25. Intranet-Within the Organization<br />
    26. 26. Extranet-Select Outsiders<br />
    27. 27. Internet-Everyone is Connected<br />
    28. 28. Forces Shaping the Digital AgeInternet Explosion<br />Internet penetration in U.S. approx. 65% of homes1<br />U.S. Broadband connectivity ranks 24th Worldwide*<br />Average U.S. user visits 120.5 pages per day†<br />sources:<br />1 http://pewinternet.org<br />* www.websiteoptimization.com <br />† http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=40714<br />
    29. 29. Internet Non-Users<br />27% of adult Americans are not users<br /> Median age 61<br /> Tend to have lower incomes than online users<br /> 18% of non-users have used Internet in past<br />Reasons for not using Internet:<br />47% not interested<br />45% no access (no computer or eqpt)<br />18% lack of confidence <br />8% too expensive<br />7% waste of time<br />
    30. 30. Forces Shaping the Digital Age-New Types of Intermediaries<br />Online retailers like Amazon.com, e*Trade, and Dell started, giving rise to click-only competitors<br />New businesses started, like e-Bay, Yahoo!, Google that had not previously existed<br />Traditional stores started online channels like BN.com, Landsend.com, Tiffany.com giving rise to Brick-and-Click competitors<br />Some businesses remain Brick-and-Mortar only, such as Cartier<br />
    31. 31. Forces Shaping the Digital Age-New Types of Intermediaries(Cont’d)<br />New delivery methods — online delivery of electronic media, e.g., software, music, information, movies, pictures. <br />
    32. 32. Forces Shaping the Digital Age-Need for New Industries<br />New industries like <br />online security<br />
    33. 33. Forces Shaping the Digital Age-Need for New Industries<br />New industries like <br />online security<br />Better Business Bureau<br />
    34. 34. Forces Shaping the Digital Age-Need for New Industries<br />New industries like <br />online security<br />Better Business Bureau<br />anti-virus software<br />
    35. 35. Forces Shaping the Digital Age-Need for New Industries<br />New industries like <br />online security<br />Better Business Bureau<br />anti-virus software<br />shopping software<br />
    36. 36. Forces Shaping the Digital Age-Need for New Industries<br />New industries like <br />online security<br />Better Business Bureau<br />anti-virus software<br />shopping software<br />Shopbots (e.g., MySimon, <br />Pricescan)<br />
    37. 37. Conducting e-Commerce<br />Consumers<br />Brick-and-Mortar<br />Stores<br />Seller<br />Brick-and-Mortar Only<br />
    38. 38. Conducting e-Commerce<br />Consumers<br />Brick-and-Mortar<br />Stores<br />Seller<br />Brick-and-Mortar Only<br />e-Commerce<br />Consumers<br />Seller<br />Click Only<br />Amazon.com<br />eBay<br />
    39. 39. Conducting e-Commerce<br />Consumers<br />Brick-and-Mortar<br />Stores<br />Seller<br />Brick-and-Mortar Only<br />e-Commerce<br />Consumers<br />Seller<br />Click Only<br />Brick-and-Mortar<br />Stores<br />Consumers<br />Seller<br />e-Commerce<br />Polo<br />Barnes & Noble<br />Best Buy<br />Click-and-Mortar<br />
    40. 40. Conducting e-Commerce<br />Consumer visits website<br />Vendor<br />customer<br />
    41. 41. Conducting e-Commerce<br />Consumer visits website<br />Vendor<br />Vendor stores a cookie on consumer’s computer<br />customer<br />
    42. 42. Conducting e-Commerce<br />Consumer places order & sends payment<br />Consumer visits website<br />Vendor<br />Vendor stores a cookie on consumer’s computer<br />customer<br />
    43. 43. Conducting e-Commerce<br />https:<br />Consumer places order & sends payment<br />Consumer visits website<br />Vendor<br />Vendor stores a cookie on consumer’s computer<br />customer<br />Vendor verifies payment <br />3rd Party payer<br />
    44. 44. Conducting e-Commerce<br />Consumer places order & sends payment<br />Consumer visits website<br />Vendor<br />Vendor stores a cookie on consumer’s computer<br />customer<br />Picks up package<br />Shipping company<br />Delivers package<br />Vendor verifies payment <br />3rd Party payer<br />
    45. 45. Conducting e-Commerce<br />Cookie – a small data file created by a website and stored on the visitor’s computer. Used for:<br />Tracking<br />Authenticating <br />Maintaining specific information (e.g., shopping cart contents) <br />Cookies are not viruses or computer programs.<br />
    46. 46. Shopbot<br />Shopbot – “Comparison shoppers” or “price engines”<br /> promote price-only shopping<br /> Typically retailers either pay flat-fee to be included or per click-through<br />Shopzilla.com; pricescan.com; <br />
    47. 47. Number of Internet Hosts<br />350<br />300<br />250<br />200<br />150<br />100<br />50<br />0<br />1992<br />1996<br />2000<br />2004<br />Millions <br />
    48. 48. Web 1.0<br /><ul><li> One-way flow of information
    49. 49. Static
    50. 50. Guestbooks
    51. 51. GIF buttons</li></li></ul><li>Web 2.0<br />Second generation of web development:<br />Two-way flow of information<br />Search<br />Links<br />Authoring<br />Blogs, wikis, RSS feeds<br />Social networks<br />Dynamic<br />User generated content <br />
    52. 52. Forces Shaping the Digital AgeCustomization and Customerization<br />The Old Economy depended on economies of scale, standardization, mass produced/mass marketed goods<br />Customization and Customerization:<br />Customization--the company custom designs market offerings for customers<br />Customerization-- the customer designs the market offering and the company makes it<br />
    53. 53. Forces Shaping the Digital AgeCustomization and Customerization (cont’d)<br />Flexible manufacturing and new technologies allow production runs as small as one<br />In the New Economy customers can specify exactly what they want—<br />items can be customized (e.g., Dell Computer)<br />Or customerized (e.g., NIKEiD, or M&Ms)<br />Product configurator<br />Personalized M&Ms<br />
    54. 54. Collaborative Filtering<br />Collaborative Filtering – retailer analyzes multi-item purchases; when a customer orders an item, retailer suggests purchase of additional items based on patterns of previous customers. <br />Example: When customer orders music or movies, retailer offers suggestions of additional items. <br />
    55. 55.
    56. 56. Online Marketing<br />Web Driver – marketing activity designed to get customers to go to a website (e.g., a banner ad, print ad, or an online ad)<br />Search engine advertising – paid messages on search engines (e.g., Google) that appear when key words are used. Web driver intended to create traffic on a website. Fastest growing segment of online advertising.<br />
    57. 57. When you use a search engine how far down in the results do you look (all responses receive credit)? <br />First result only<br />First five results<br />First page<br />First two pages<br />I keep looking through the search results until I find what I am looking for<br />
    58. 58. The Importance of Search Ranking<br />Search engine rankings are critical to the success—most people do not look beyond the first page of results<br />WebCrawler 1994—first full-text Web search engine<br />Yahoo! and Altavista 1995, Google 1998<br />A new industry has grown up--Search Engine Optimizers (SEO)—to help web-developers improve search rankings<br />
    59. 59.
    60. 60. How does Google make money?<br />Free search engine (to users)<br />Market capitalization $88.5 billion<br />(NY Times market cap $750M – founded 1851)<br />Reported profit margin 25.3%<br />99% of revenue from advertising<br />1% of revenue from licensing search technology<br />Market cap 4/6/09<br />
    61. 61.
    62. 62. How Does It Work?<br />Choose key words<br />Select a price per click (pay per click)<br />Select a daily or monthly maximum<br />Your ad competes with others bidding on same key words<br />
    63. 63. Right-hand scale<br />Left-hand scale<br />in $Millions<br />
    64. 64. Online Advertising<br />Banner ads – Billboard-style messages on or linked to web pages. Used primarily for branding and raising awareness. <br />Online advertising is growing rapidly at the expense of traditional media<br />Typical banner ad rates are $1 - $60 per M (CPM). <br />But click-through rates are low.<br />
    65. 65. Size Does Matter<br />Big, aggressive, flashy ads attract more attention<br />Skyscraper ads and large rectangles can increase awareness by 40%<br />Movement increases awareness<br />
    66. 66. Affiliate Programs<br />Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor<br />MyKitchen.com<br />Hears music/sees ad<br />clicks on link<br />
    67. 67. Affiliate Programs<br />Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor<br />sees Amazon.com website<br />MyKitchen.com<br />Hears music/sees ad<br />for Amazon, clicks <br />on link<br />Amazon.com<br />
    68. 68. Affiliate Programs<br />Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor<br />Buys CD from Amazon.com<br />MyKitchen.com<br />Hears music/sees ad<br />for Amazon, clicks <br />on link<br />Amazon.com<br />$<br />
    69. 69. Shopping Carts<br />Shopping Cart (or Shopping Basket) – software that lets customers make selections from throughout a website, keeping track of all items selected, then allowing customer to “check out” all at once, like a grocery store. <br />As many as 57% of shopping<br /> carts are abandoned<br />
    70. 70. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />Landing page<br />
    71. 71. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />Landing Page<br />Bounce Rate<br />
    72. 72.
    73. 73.
    74. 74. Landing Page—Call to Action<br />
    75. 75. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />User fills shopping cart<br />
    76. 76. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />User fills shopping cart<br />57% Abandoned <br />Shopping Carts Siegel 2006<br />Purchase<br />
    77. 77. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />User fills shopping cart<br />Conversion rate &lt;2%<br />57% Abandoned <br />Shopping Carts Siegel 2006<br />Purchase<br />
    78. 78. From Ad Presentation to Purchase<br />User presented with an ad<br />Click-through Rate 0.4%<br />User views web page<br />User fills shopping cart<br />Conversion rate &lt;2%<br />57% Abandoned <br />Shopping Carts Siegel 2006<br />Purchase<br />
    79. 79. Why Do Shoppers Abandon Shopping Carts?<br />Sticker shock at total cost of order plus shipping costs<br />Technical difficulties<br />Overly complex order forms<br />Order forms take too long to download<br />Find out at check out that product <br /> is out-of-stock<br />Computer crash<br />Credit card not accepted<br />Source: Siegel<br />
    80. 80. What is the most important reason why you buy online? (all answers receive credit)<br />More convenient<br />Saves time<br />Saves money<br />More choices<br />Delivery/shipping (gifts)<br />
    81. 81. What is the most important reason you do not buy online (all answers receive credit)?<br />I do buy online<br />Fear about security of personal information<br />Don’t trust e-tailers<br />I want to touch the items before I buy<br />Returns are too difficult if I don’t like items<br />
    82. 82. Benefits of e-Commerce to Buyers<br />Online Shopping is Convenient<br />No traffic<br />Open 24/7<br />Easy<br />Private<br />Unmatched Access and Selection<br />No Physical Boundaries<br />Access to Information<br />Comparative<br />Unbiased Recommendations <br />Interactive and Immediate<br />
    83. 83. Benefits of e-Commerce to Sellers<br />Build Strong Relationships with Customers<br />Reduce Costs Through Increased Speed and Efficiency <br />Greater Flexibility<br />Pricing<br />Inventory/Assortments<br />Promotions<br />Access to Global Markets<br />Low Barrier to entry<br />
    84. 84. Reasons Brick-and-Mortar Companies Resist e-Tailing<br />Potential Channel Conflict – e.g., Levi’s and Macy’s<br />Cannibalization – take sales away from brick-and-mortar stores<br />Too expensive<br />Don’t know how—see “Internet Paradox”<br />
    85. 85. Business Models<br />Business Model: the way in which a company generates revenues and earns profits<br />e-Commerce (flowers.com; LandsEnd.com; BestBuy.com)<br />Advertising (Yahoo!; Google; NY Times)<br />Membership or Subscription (wsj.com)<br />Transaction Commissions and Fees (e-Bay)<br />Information Fees (NewsLibrary.com)<br />Referral Fees (Auto-by-Tel.com)<br />
    86. 86. Purposes of Websites<br />e-Commerce<br />Brochureware (Radio Maria)<br />Interactive (VIRTUAL MODEL)<br />Promote Goods and Services (miniusa.com)<br />Build Relationships and Goodwill Among Customers and Channel Members (benjerry.com) <br />Customer Service (amerenip.com) (sign up for electric/gas service)<br />
    87. 87. Purposes of Websites (cont’d)<br />Information/news <br />Provide content (nytimes.com)<br />Follow-up (e.g., order tracking) (ups.com)<br />Branding (cartier.com) <br />Communities-discussion groups, bulletin boards (saabnet.com)<br />EDI—electronic data interchange (exchange of business documents over Internet, extranets and Intranets)<br />

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