Chapter 10
When did e-commerce begin? 1965 1983 1995 1999 2000
1995
Which of the following best illustrates the sales revenue model? eBay receives a small fee from a seller if a seller is successful in selling an item. Yelp receives a fee after steering a customer to a participating website where he or she makes a purchase. Pandora provides basic services for free, but charges a premium for advanced services. Apple accepts micropayments for single music track downloads. Netflix charges customers a monthly fee for access to its library of movies.
Apple accepts micropayments for single music track downloads. Sales revenue: Sell products, information, or services directly to users. You'll need a viable, secure
Information ________ exists when one party in a transaction has more information that is important for the transaction than the other party. transparency asymmetry complexity discrimination competition
Asymmetry Information asymmetry: reduced by the internet, exists when one party in a transaction has more information that is important for the transaction than the other party. It helps determine their relative bargaining power.
Which of the following types of e-commerce involves businesses selling goods and services directly to individuals via the Internet? B2C e-commerce B2B e-commerce C2C e-commerce M-commerce P2P e-commerce
B2C e-commerce
Craigslist is an example of: C2C e-commerce. B2B e-commerce. B2C e-commerce. M-commerce. P2P-commerce.
C2C e-commerce
Which of the following Internet business models involves a merchant creating an online digital environment that enables people with like interests to share information? Community provider Service provider Market creator Transaction broker Portal
Community provider Community provider are sites that create a digital online environment where people with similar interests can transact, share interests, videos, and videos; communicate with like-minded people; receive interest-related information and even play out fantasies by adopting online personalities called avatars.
As described in the opening case, what is the primary business model employed by YouTube? Portal E-tailer Content provider Transaction broker Market creator
Content provider Content provider: one of the fastest-growing e-commerce segments (podcast, streaming)
What are digital goods, and how does the Internet impact the market for digital goods? Short Answer
Digital goods are goods that can be delivered over a digital network. When a digital product is produced the cost of delivering that product digitally is very low. It creates new business models and is challenging bookstores, music labels, and film studios Digital markets are more transparent than traditional markets. They are very flexible and efficient. It has reduced search and transaction cost, lower menu prices, and ability to change prices based on market conditions and provide opportunity to sell directly to customer by bypassing intermediaries
Changing the prices of products based on the level of demand characteristics of the customer is called ________ pricing. menu dynamic flexible asymmetric customized
Dynamic pricing: the price of a product varies depending on the demand characteristics of customer of the supply situation for the seller.
Which of the following best illustrates the advertising revenue model? eBay receives a small fee from a seller if a seller is successful in selling an item. Yelp receives a fee after steering a customer to a participating website where he or she makes a purchase. Facebook provides a social network for free, but shows sponsored content in users' News Feeds. Apple accepts micropayments for single music track downloads. Netflix charges customers a monthly fee for access to its library of movies.
Facebook provides a social network for free, but shows sponsored content in users' News Feeds. Advertising revenue model: a website generates revenue by attracting a large audience of visitors who can be exposed to ads. Most widely used model.
Retail consumer e-commerce is growing at single-digit rates. T/F
False
The Internet increases information asymmetry. T/F
False
Traditional online marketing, such as display ads, have been replaced by video ads. T/F
False
Information asymmetry exists when there is more information about one product than there is about a similar product. T/F
False Information asymmetry: reduced by the internet, exists when one party in a transaction has more information that is important for the transaction than the other party. It helps determine their relative bargaining power.
Disintermediation does not benefit the consumer. T/F
False It lowers prices for the consumer.
What is dynamic pricing and how is it used in e-commerce? Short Answer
In dynamic pricing, the price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller. For instance, online retailers from Amazon to Walmart change prices on many products based on time of day, demand for the product, and users' prior visits to their sites. Using big data analytics, some online firms can adjust prices at the individual level based on behavioral targeting parameters such as whether the consumer is a price haggler (who will receive a lower price offer) versus a person who accepts offered prices and does not search for lower prices. Prices can also vary by zip code, based on economic characteristics of the purchaser's geographic location. Uber, along with other ride services, uses surge pricing to adjust prices of a ride based on demand.
Describe the use of personalization and customization in e-commerce. What business value do these techniques have? Short Answer
In personalization, merchants can target their marketing messages to specific individuals by adjusting the message to a person's name, interests, and past purchases. For example, Amazon.com greets each logged in user with their user name. With customization, merchants can change the delivered product or service based on a user's preferences or prior behavior. The Wall Street Journal Online allows you to select the type of news stories you want to see first and gives you the opportunity to be alerted when certain events happen. The ability of Internet technology to track customer behavior at websites, along with records of purchases and other behavior, allows merchants to create a detailed profile of a customer. These profiles can be used to create unique personalized web pages that display content or ads for products or services of special interest to each user, improving the customer's experience and creating additional value. The business value of personalization is reduced marketing costs, as you spend only the money to target customers that are more likely to be receptive and are more profitable, and improved sales results from increased customer response to personalized sites that better serve their own purposes and shopping needs. Personalization can achieve some of the benefits of using individual salespeople for dramatically lower costs.
Which of the following dimensions of e-commerce technology has the potential to raise the quality of information? Information density Richness Customization Interactivity Global reach
Information Density: e-commerce tech reduces information costs and raises quality. Provides price transparency. Helps businesses differentiate their products in terms of cost, brand, and quality
All of the following are examples of "on demand" companies except: Uber. Airbnb. Lyft. Sidecar. Instagram.
Which of the following dimensions of e-commerce technology involves engaging consumers in a dialogue that dynamically adjusts the experience to the individual? Ubiquity Personalization/customization Richness Interactivity Information density
Interactivity. Interactivity: E-commerce originally presented simple, static web sites to customers with limited possibilities of interactivity between the two. Now, most major retailers and even small shops, use a variety of ways to communicate back and forth with customers and create new relationships around the globe.
What standards are referred to when discussing universal standards as a unique feature of e-commerce? Internet technology standards Common spoken and written languages Universal measuring standards Universal advertising and media format standards EDI standards
Internet technology standards Universal Standards: There is on set of tech standards, namely internet standards. Lower market entry costs and lowers search costs.
What is the primary benefit to consumers of disintermediation? Faster service Lower costs Higher quality Greater choices None, because disintermediation primarily benefits manufacturers.
Lower costs which takes the middle man out of transactions between a customer and business.
As described in the chapter case, Uber uses the ________ revenue model. service provider market creator community provider portal transaction broker
Market Creator Market creator build a digital environment where buyers/sellers can meet, display products, search for product, and establish prices.
A marketplace extended beyond traditional boundaries and removed from a temporal and geographic location is called a(n): exchange. marketspace. online marketplace. e-hub. net marketplace.
Marketspace
What is the difference between personalization and customization, as applied to e-commerce technologies? Customization is any type of adjustment made to a product by the user; personalization refers to a business changing a product or service for the user. Personalization is any type of adjustment made to a product by the user; customization refers to a business changing a product or service for the user. Customization refers to adjusting marketing messages for a consumer; personalization refers to adjusting a product or service based on a user's preferences. Personalization refers to adjusting marketing messages for a specific consumer; customization refers to adjusting a product or service based on a user's preferences. There is no difference. Both terms refer to changing a product or communication for the consumer.
Personalization refers to adjusting marketing messages for a specific consumer; customization refers to adjusting a product or service based on a user's preferences.
Which of the following dimensions of e-commerce technology involves the integration of video, audio, and text marketing messages into a single marketing message and consumer experience? Ubiquity Personalization/customization Correct! Richness Interactivity Social technology
Richness: Information richness refers to the complexity and content on a web site. E-commerce enjoys information richness not available in traditional markets.
The effort required to locate a suitable product is called: price discrimination. search costs. menu costs. shopping costs. location costs.
Search costs: the effort required to find suitable products.
"Knowledge increases exponentially" is a phrase with which we are all familiar. How does this concept apply to the emergence of the digital firm? Short Answer
The exponential increases of knowledge is in regard to information that is readily available for buyers and sellers. Once the concept of a wheel is established, inheritors of that knowledge do not have to "reinvent the wheel." The Internet is a tool similar to the wheel: it is based on shared standards and universal tools. The Internet and shared networking technologies are allowing new techniques for attracting customers and selling customers to be developed and adapted very quickly. For example, although early Internet retailers had difficulty setting up secure credit card transactions and payment systems, today there are many systems in place as vendors step in to create shared tools for doing this. The Internet is fostering shared knowledge and, as such, propagating ever greater increases in that knowledge.
What event marked the beginning of e-commerce? The first product sold online The first domain name registered The first e-mail sent The first paid advertisements placed on a website The first product advertised online
The first paid advertisements placed on a website
What is the most profound way in which e-commerce and the Internet have changed the relationship between companies and their customers?
The most profound way in which e-commerce and internet has changed the relationship between companies and their customers is in the shrinking of information asymmetry. Information asymmetry exists when one party in a transaction has more information that is important for the transaction than the other party. That information helps determine their relative bargaining power In digital market, consumers and suppliers can "see" the prices being charged for goods, and in that sense digital markets are said to be more "transparent" than traditional markets - EX. until auto retailing sites appeared on the Web, there was a pronounced information asymmetry between auto dealers and customers. Only the dealers knew the manufacturers prices. Auto dealers' profit margins depended on this asymmetry of information. Now the web provides access to competitive pricing information. Thus, the web has reduced the information asymmetry surrounding an auto purchase. - Internet has also helped reduce information asymmetries for businesses seeking to purchase from other businesses allowing them to locate better prices and terms.
All previous mass media in modern history, including the printing press, use a broadcast model where content is created in a central location by experts. T/F
True
E-commerce refers to the use of the Internet and the web to transact business. T/F
True
Menu costs are the merchants' costs of changing prices. T/F
True
Behavioral targeting refers to targeting ad messages to a person's clickstream behavior. T/F
True Behavioral targeting: techniques to increase the effectiveness of banners, rich media, and video ads. Refers to tracking the clickstreams of people on thousands of websites to understand their interests and intentions and expose them to ads that are uniquely suited to their online behavior.
Cost transparency refers to the ability of consumers to discover what merchants actually pay for products. T/F
True Cost transparency: refers to the ability of consumers to discover the actual costs merchants pay for products. Price transparency: refers to the ease with which consumes can find out the variety of prices in a market.
In general, for digital goods, the marginal cost of producing another unit is about zero. T/F
True production costs are lowered for businesses when selling online
Removing the business process layers in a distribution channel is called: disintermediation. BPR. market segmentation. network effects. market transparency.
disintermediation Disintermediation, removing the middleman, has allowed many companies to improve their profits while reducing prices. In our example, insurance companies are using disintermediation to remove the local agent from the transaction between itself and the customer. Airlines have steadily removed the travel agent from transactions with customers thereby reducing their costs. Other industries are following in their footsteps slowly but surely.
Amazon.com is known primarily for its use of which of the following business models? Content provider Portal Market creator E-tailer Transaction broker
e-tailer an online retail store
Which of the following best illustrates the transaction fee revenue model? eBay receives a small fee from a seller if a seller is successful in selling an item. Yelp receives a fee after steering a customer to a participating website where he or she makes a purchase. Pandora provides basic services for free, but charges a premium for advanced services. Apple accepts micropayments for single music track downloads. Netflix charges customers a monthly fee for access to its library of movies.
eBay receives a small fee from a seller if a seller is successful in selling an item.
In the ________ revenue models, a firm offers some services for free but charges a subscription fee for premium services. free/freemium subscription transaction fee affiliate sales
free/freemium
Compared to digital goods, traditional goods have: lower inventory costs. lower marginal costs per unit. lower copying costs. more variable pricing. higher costs of distribution.
higher costs of distribution.
Compared to traditional markets, digital markets have: lower search costs. weaker network effects. lower delayed gratification effects. greater asymmetry. higher transaction costs.
lower search costs. search costs: the effort required to find suitable products.
In digital markets: search costs increase. menu costs decline. switching costs decline. network costs decline. information asymmetry increases.
menu costs Menu costs are the costs a firm incurs to change its prices. For example, ecommerce firms typically have low menu costs and may frequently experiment with prices Digital markets are very flexible and efficient because: they lower menu costs, reduce search and transaction costs, eliminate price discrimination, and have the ability to changes prices dynamically based on market conditions.
Content providers use ________ systems to process large amounts of very small monetary transactions cost-effectively. subscription mobile payment transaction fee micropayment affiliate revenue
micropayment Micropayment systems: provide content providers with a cost-effective method for processing high volumes of very small monetary transactions. (apple Itunes for .99 songs)
Selling the same goods to different targeted groups at different prices is called: cost customization. cost optimization. price gouging. cost personalization. price discrimination.
price discrimination
All of the following are unique features of e-commerce technology, except: personalization/customization. interactivity. price discrimination. richness. global reach.
price discrimination. Sellers can no longer sell same products at different prices to different groups of people because consumers are now able to compare items sold by other vendors to compare prices.
Market creators: save users money and time by processing online sales transactions. provide a digital environment where buyers and sellers can establish prices for products. create revenue by providing digital content over the web. sell physical products directly to consumers or individual businesses. generate revenue from advertising or from directing buyers to sellers.
provide a digital environment where buyers and sellers can establish prices for products. Market creator build a digital environment where buyers/sellers can meet, display products, search for product, and establish prices.
Transaction brokers: generate revenue from advertising or from directing buyers to sellers. save users money and time by processing online sales transactions. provide a digital environment where buyers and sellers can establish prices for products. sell physical products directly to consumers or individual businesses. provide online meeting places where people with similar interests can communicate.
save users money and time by processing online sales transactions. Transaction broker: Process transactions for consumers, saving them time and money. (travel agent or financial advisor)
Information density refers to the: richness-complexity and content-of a message. total amount and quantity of information delivered to consumers by merchants. total amount and quantity of information available to all market participants. amount of information available to reduce price transparency. amount of physical storage space needed to store data about a specific entity, such as a product or consumer.
total amount and quantity of information available to all market participants.
