Introduction to Electronic Commerce

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Introduction to Electronic Commerce

• Dr. Joel Herche
• Eberhardt School of Business
• University of the Pacific

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Web Size Growth
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Number of Internet Users in North America in (000)
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1998 Sales and 2003 Projections
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Past Christmas Sales(in Millions)
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Key Terms

• E-commerce
• Term for conducting business on-line. This
  includes, for example, buying and selling
  products.
• Web page
• A document on the World Wide Web. Every page is
  identified by a unique URL (Uniform Resource
  Locator).

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Key Terms

• Browser
• Short for Web browser, a software application
  used to locate and display Web pages. The two
  most popular browsers are Netscape Navigator and
  Microsoft Internet Explorer.
• Hit
• The retrieval of any item like a page or graphic.
  For example, when a visitor calls up a Web page
  with four graphics, thats five hits, one for the
  page and four for the graphics.

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Key Terms

• HTML
• Short for HyperText Markup Language, the
  authoring language used to create documents on
  the WWW.
• Digital Cash
• A system that allows a person to pay for goods
  and services by transmitting a number from one
  computer to another. The digital cash numbers
  are unique, each one is issued by a bank and
  represents a specified sum of real money.

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Key Terms

• Smart Cards
• A small electronic device about the size of a
  credit card that contains electronic memory, and
  possibly an embedded integrated circuit.
• Uses
• Storing a patients medical records
• Storing digital cash
• Generating network IDs (similar to a token)

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Key Terms

• Java
• Java developed by Sun Microsystems, is a general
  purpose programming language that is a
  object-oriented similar to C with a number of
  features that make the language well suited for
  use on the World Wide Web.
• Digital Certificates
• An attachment to an electronic message used for
  security purposes. The most common use of a
  digital certificate is to verify that a user
  sending a message is who he or she claims to be,
  and to provide the receiver with the means to
  encode a reply.

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A Cautionary Tale

• 1768 Three Scottish printers create a
  Compendium of Knowledge the worlds most
  comprehensive and authoritative encyclopedia
• 1920 Sears buys/moves Britannica to Chicago
• 1941 Purchased by William Benton
• 1970 Willed to the Benton Foundation,
  aggressive direct sales force targeted
  middle-income families' children via grandparents
  is built
• 1990 All-time sales peak - 650 million

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The Demise of an IndustrySince 1990 Sales
Collapsed 90

• Britannica sold for 1,500 - 2,200
• 250 for Production 600 for Sales Commission
• Encarta, Grolier, and Compton - 50 - 70
• (most are given away)
• Encyclopedia on CDa Childs Toy?
• Encarta based on Funk Wagnalls
• 7 million words vs. 40 million words

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The Demise of an Industry

• Britannica did not fit technology
• Britannica CD angered sales force
• Free with printed version 1,000 Alone
• May 1995 Britannica for sale
• 18 Months No Buyers
• 1996 Sold to financier Jacob Safra for less
  than ½ of book value
• Current market is 10 of 1990 peak
• New Britannica CD/Internet product

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Britannica Lessons

• New Economics of Information
• Long Distance
• Life Insurance
• Travel
• New Buyers/New Users of Products
• Children
• The Incumbent Disadvantage

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The Future

• More Daily Users of Yahoo! Than Most Popular Show
  on Television
• Connected Homes Account for 2/3 of U.S.
  Purchasing Power
• In 2002, Broadband is Expected to be in 16
  Million U.S. Households
• (Enables Full-Motion, Switched Video)

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The Future (cont.)

• By 2010, Web-Enabled Appliances Will Outsell PCs
  101
• Telephones, TVs, Autos, POS Devices
• Auto Re-order of Household Supplies
• Car Repair/Scheduled Maintenance Records
  Customized
• Movies/Entertainment Menus

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The Future of Banking

• Interaction by ATM, Telephone, Palm Pilot,
  Internet Anywhere, Anytime
• Transfer Dollars Among Accounts, Investments, or
  other Banks
• Reporting Get All Account Information
  Consolidated in One Up-to-the-Minute
  E-Document View all Bills Electronically,
  Question an Item, Authorize and Schedule Payments

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The Future of Banking (cont.)

• Organize Expense Reports According to Custom
  Categories Totaled by Month, Compared to Original
  Budget See Current Value of all Investments
• Other Financial Services at Competitive Rates
• Insurance
• Mortgage
• Investments
• Loans/Lines of Credit
• Automated Bill Payment

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Travel

• Send dates locations to agent via e-calendar
• E-agent looks up flights/hotels and my personal
  profile
• Minutes later, I get proposed itineraries
• I check off selections email back, or press a
  button and get a live person on phone with
  choices displayed

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Travel (cont.)

• After selections, agent enters flights in my
  e-calendar, which I synchronize with palm pilot
• I can make changes or cancel via my calendar
• Expenses automatically go to companys expense
  reporting form

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Success Stories

• Dell Sells 6 Million per Day On-Line 30
  Profit Margin
• Cisco Systems Saved 550 Million per Year in
  Customer Service
• 62 (2 Billion) is via the Internet

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Success Stories (cont.)

• American Airlines Reaches 1.7 Million Prospects
  per Week for Free 30 Response Rate!
• Wells Fargo Halved its Cost per Transaction
• Reduced Customer Defections

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Good Site Basics

• 1. They Save Time
• Doctors Office Waiting Room
• DMV
• Phone Company
• 2. They Remember Who I Am
• Do not Solicit Business from Current Customers
• One Branch Talks to All
• UOP
• Medical Services
• Customer Owns the Profile
• Amazon

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Good Site Basics (cont.)

• 3. Make it Easy to Procure Service
• No Phone Call Necessary
• Each Field is Clearly Explained
• If I Call, Representative Should Have all My
  Information
• 4. Customize Products
• Wall Street Journal Interactive
• Computer Companies (Dell)

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Good Site Basics (cont.)

• 5. Focus on Customer Satisfaction
• There are Too Many Alternatives
• Automated Status Reports

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Information Flow Design
Direct Order/Status Check Capability
Customers
Customer Database
Transaction Database
Loyalty Programs
Segmentation
Distributors
Build Virtual Communities
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Focus on End Customers Viewpoint

• Hallmark Cards Inc.
• New Product Research Reminder Service
• New Customer Profile Database
• General Motors OnStar Service
• New Product Research Security
  Convenience
• Cell Phones GPS in Cars
• 24 Hour Assistance

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These Are a Few of My Favorite Things

• Amazon My e-Friend!
• Cheyenne.org
• Travelocity
• ci.buffalo.org
• lodiwine
• memphistravel.com

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Consumer Web Behavior

• Privacy! - 31.5 Say it is 1 Issue
• Internet Users Tend to Be
• 30-49 Years Old (56)
• Male (64.5)
• Upscale (44,038 Median Annual Income)
• Have lt 4 Year Degree (36)

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Consumer Web Behavior (cont.)

• ¼ of U.S. Adults are Online
• Japan, Germany, UK, Canada, Australia Follow
• In Mexico Ireland, Users Pay 90/month
  Telephone Fees for 20 Hours

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Internet Users by Region

• USERS-(000)

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How Surfers Use Internet

• Primary Activity
• Research
• Education
• Entertainment
• News
• Hobbies
• Gameplaying
• Socializing
• Investing
• Shopping

• Who Do it Often
• 50
• 37
• 31
• 30
• 18
• 14
• 13
• 12
• 1

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Online Research
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Online Research (cont.)
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Online Research (cont.)
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Online Research (cont.)
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Primary Research

• E-mail Surveys Perks?
• Web Surveys
• Problem of Self-Selection
• Online Observations
• NetTracker
• Monitoring Bulletin Boards/Chat Rooms
• Deja News Saves and Indexes Postings

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Primary Research (cont.)

• Online Experiments
• Banner Ad Effectiveness
• Online Focus Groups
• King, Brown Partners (San Francisco)

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Relationship Marketing

• A Stream of Transactions vs. Relationships
• Long Term Perspective
• 2-Way Communication
• Resources Toward Customer Retention vs.
  Acquisition
• Share of Market vs. Share of Mind
• Differentiate Products vs. Differentiate Customers

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Relationship Levels
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Relationship Marketing Benefits-Increased
Profits/Efficiency
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Internet Strategies Facilitating Relationships

• Intranets National Semiconductor
• Extranets
• Web Forms Expedia Travel
• Chats Newsgroups
• Incoming/Outgoing E-Mail

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Permission Marketing vs. Interruption Marketing

• 1. Lifetime value of new customer
• 2. Build communication suites to turn strangers
  to friends
• Take place over time
• Offer benefit to consumer to respond
• Responses alter communication moving forward
• Final call to action to measure results

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Permission Marketing vs. Interruption Marketing
(cont.)
3. Change ads to allow response 4. Measure
results of each suite-replace non-performance 5.
Measure how permission impacts performance 6.
Assign one person responsibility for permission
base 7. Decrease cost of frequency with
e-systems
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Permission Marketing vs. Interruption Marketing
(cont.)
8. Re-build web page to design for permission
acquisition 9. Regularly audit permission
base 10. Leverage permission via co-marketing
with other providers