Chapter 10: E-Commerce: Digital Markets, Digital Goods

E-Commerce Revenue Models

-Advertising - Ads posted on sites -Sales - Purchases made -Subscription - Access for a fee -Free/Freemium - Upgrades -Transaction fee - eBay -Affiliate - Referral fees

Electronic data interchange (EDI)

-Computer-to-computer exchange of standard transactions such as invoices, purchase orders -Major industries use EDI standards to define structure and information fields -More companies increasingly moving away from private networks to Internet for linking to other firms (example: procurement: businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, and so on)

Exchanges

-Independently owned third-party Net marketplaces -Connect thousands of suppliers and buyers for spot purchasing -Typically provide vertical markets for direct goods for single industry (food, electronics) -Proliferated during early years of e-commerce; many have failed Competitive bidding drove prices down and did not offer long-term relationships with buyers or services to make lowering prices worthwhile

E-Commerce Marketing

-Internet provides marketers with new ways of identifying and communicating with customers -Long tail marketing: Ability to reach a large audience inexpensively -Behavioral targeting: Tracking online behavior of individuals on thousands of Web sites. -Internet advertising formats include search engine marketing, display ads, rich media, and e-mail

Private industrial network (private exchange)

-Large firm using extranet to link to its suppliers, distributors, and other key business partners -Owned by buyer Permits sharing of: -Product design and development -Marketing -Production scheduling and inventory management -Unstructured communication (graphics and e-mail)

Information density

-Large increases in information density—the total amount and quality of information available to all market participants (Technology lowers costs while improving the performance of information) -Effect: Greater price transparency(the ease with which consumers can find out the variety of prices in a market) Greater cost transparency ($ merchant actually pay) Enables merchants to engage in price discrimination

Universal standards

-One set of technology standards: Internet standards Effect: Disparate computer systems easily communicate with one another Lower market entry costs—costs merchants must pay to bring goods to market. Lower consumers'search costs—effort required to find suitable products

E-Commerce Business Models

-Portal - advertising(initial point of entry; Yahoo. Google) -E-tailer(sells directly to consumers; Amazon) -Content provider - access fees, advertising (Itunes) -Transaction broker (etrade; processing online transactions) -Market creator (ebay, priceline) -Service provider - subscription fees, advertising -Community provider (social networks) - sales of virtual goods, display ads

M-Commerce

-Represents 10 percent of all e-commerce -Fastest growing form of e-commerce Especially popular in online travel industry Main areas of growth: -Retail sales at top Mobile 400 companies (Amazon, Apple) -Sales of digital content Music, TV and movies

Social Networking and the Wisdom of Crowds

-Social networks Fastest growing area of e-commerce revenues Social shopping sites: Pinterest, Kaboodle, ThisNext -Wisdom of crowds -Crowdsourcing Large numbers of people can make better decisions about topics and products than a single person -Prediction markets Peer-to-peer betting markets on specific outcomes (elections, sales figures, designs for new products)

Richness

-Supports video, audio, and text messages -Effect: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience

Personalization/Customization

-Technology permits modification of messages, goods -Effect: Personalized messages can be sent to individuals as well as groups Products and services can be customized to individual preferences

Social technology

-The technology promotes user content generation and social networking -Effect: New Internet social and business models enable user content creation and distribution, and support social networks Many-to-many model

Global reach

-The technology reaches across national boundaries, around Earth -Effect: Commerce enabled across cultural and national boundaries seamlessly and without modification Marketspace includes, potentially, billions of consumers and millions of businesses worldwide

Interactivity

-The technology works through interaction with the user -Effect: Consumers engaged in dialog that dynamically adjusts experience to the individual Consumer becomes co-participant in process of delivering goods to market

1) Which of the following is the best description of ubiquity as it relates to e-commerce technology?

A) E-commerce technology is available everywhere and anytime.

5) Which feature of Internet technology has had the most effect in the Internet's rapid spread across the globe?

A) Universal standards

The two main market retailing drivers of mobile​ e-commerce include​ ________________

Amazon and Apple The main areas of growth in mobile​ e-commerce are mass market retailers such as Amazon​ ($16.8 billion) and Apple​ (about $14​ billion)

8) Which of the following types of e-commerce involves selling products and services directly to individual consumers via the Internet?

B2C e-commerce

Business-to-Business E-Commerce: New Efficiencies and Relationships

Business-to-business (B2B) e-commerce -Commercial transactions between firms Complex Require considerable human intervention Consume significant resources (example: $100 in administrative costs for each procurement purchase) -Challenges: Changing existing systems of procurement Implementing new Internet B2B solutions

Types of E-Commerce

Business-to-consumer (B2C) (EX: BarnesandNoble.com) Business-to-business (B2B) (EX: ChemConnect) Consumer-to-consumer (C2C) (EX: eBay)

The social commerce feature that creates an environment to​ discuss, view, and text about products is considered​ __________________

Collaborative shopping

E-Commerce and the Internet

Digital goods: -Goods that can be delivered over a digital network (ex: music tracks, video, software, newspapers, books) -Cost of producing first unit almost entire cost of product: marginal cost of producing 2nd unit is about zero -Costs of delivery over the Internet very low -Marketing costs remain the same; pricing highly variable -Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.)

Key Concepts: Digital Markets and Digital Goods

Digital market effects: -Decreased information asymmetry (when one party in a transaction has more info that is important to the transaction than the other party) -Reduced search costs and transaction costs -Delayed gratification: effects dependent on product -Reduced menu costs (merchants costs of changing prices) -Increased dynamic pricing (the price of a product varies depending on the demand characteristics of the customer or supply of the seller) -Increased price discrimination -Increased market segmentation -Switching costs: effects dependent on product -Stronger network effects -More disintermediation

Web Site Visitor Tracking

E-commerce Web sites have tools to track a shopper's every step through an online store. Close examination of customer behavior at a Web site selling women's clothing shows what the store might learn at each step and what actions it could take to increase sales.

E-Commerce Today

E-commerce: use of the Internet and Web to transact business; digitally enabled transactions Began in 1995 and grew exponentially; still stable even in a recession Companies that survived the dot-com bubble burst now thrive E-commerce revolution is still in its early stages

What do companies use to automate transactions for B2B commerce and to replenish their​ inventory?

Electronic data interchange​ (EDI)

Mobile E-Commerce and Local E-Commerce

Location-based services and applications -Geosocial services -Geoadvertising: Economic foundation for m-commerce(Geoadvertising services provide advertising as well as vendor information about products or services) -Geoinformation Other mobile commerce services -Mobile banking -Mobile display advertising -Coupon services

​________________ e-commerce is the fastest growing type of​ business-to-consumer electronic commerce

Mobile

What is the fastest growing category of B2C​ e-commerce in​ 2015?

Mobile​ e-commerce represents about 26 percent of all​ e-commerce in 2015.

Building an E-Commerce Presence

Most important management challenges -Developing clear understanding of business objectives -Knowing how to choose the right technology to achieve those objectives Develop an e-commerce presence map -Four areas: Web sites, e-mail, social media, offline media Develop a timeline: milestones -Breaking a project into discrete phases

​E-hubs, better known as​ _____, are typically owned or coordinated by an industry where buyers and sellers can conduct industry business

Net marketplaces

​_____________________, also called​ e-hubs are​ industry-owned intermediaries between buyers and sellers

Net marketplaces

E-Commerce: Business and Technology

Net marketplaces (e-hubs) -Single market for many buyers and sellers -Industry-owned or owned by independent intermediary -Generate revenue from transaction fees, other services -Use prices established through negotiation, auction, RFQs, or fixed prices -May focus on direct (used in production process) or indirect goods(not used in production process) -May be vertical(specific-automobile) or horizontal marketplaces(many industries-office equipment)

​Education, exposure, and branding are typical activities that would most likely be associated with which type of​ e-commerce presence?

Offline media

The New E-Commerce: Social, Mobile, Local

Original e-commerce marketing: -Web sites -Display ads -Measures "eyeballs" and impressions of display ads Social, mobile, local e-commerce marketing: -Social media: Facebook, Twitter, Pinterest -Mobile, localized ads and apps -Measures "conversations" and "engagement"

Some Web marketplaces focus on indirect goods. Which of the following would be the best example of an indirect​ good?

Paper used to print paychecks

E-Commerce Presence Timeline

Phase 1: Planning ACTIVITY- Envison Web Presence; determine personnel MILESTONE- Website mission Phase 2: Web site development ACTIVITY- aquire content; develop a site design; arrange for hostign site MILESTONE- web site plan Phase 3: Web Implementation ACTIVITY- Develop keywords and metatags; focus on search engine optimization; identify potential sponsors MILESTONE- A functional Web site Phase 4: Social media plan ACTIVITY- Identify appropriate social platforms and content for your products and services MILESTONE- A social media plan Phase 5: Social media implementation ACTIVITY- Develop Facebook, Twitter, and Pinterest presence MILESTONE- Functioning social media presence Phase 6: Mobile plan ACTIVITY- Develop a mobile plan; consider options for porting your Web site to smartphones MILESTONE- A mobile media plan

The first phase of the​ e-commerce presence timeline includes​ _______________.

Planning

2) 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?

Richness

Among the eight unique features of​ e-commerce, which is related to a consumer being engaged with an immersive multimedia​ experience?

Richness

Micropayment systems would most likely be found with which revenue​ model?

Sales

Social E-Commerce and Social Network Marketing

Social e-commerce -Based on idea of digital social graph [Mapping of all significant online relationships] -The purchases of one person influence others' purchases Four features of social e-commerce driving growth -Social sign-on -Collaborative shopping -Network notification -Social search (recommendations) Social media: Fastest growing media for branding and marketing Social network marketing: -Seeks to leverage individuals influence over others in social graph -Target is a social network of people sharing interests and advice -Facebook's "Like button" Social networks have huge audiences -Facebook: 144 million U.S. monthly visitors

Which of the following best describes cost​ transparency?

The ability of consumers to get information about the actual cost merchants pay for products

Disintermediation to the consumer

The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer

Among the eight unique features of​ e-commerce, which is related to the ability to interact with web technology​ everywhere?

Ubiquity

Why E-Commerce Is Different

Ubiquity -Internet/Web technology available everywhere: work, home, and so on, anytime -Effect: Marketplace removed from temporal, geographic locations to become "marketspace" Enhanced customer convenience and reduced shopping costs

Unique Features of E-Commerce Technology

Ubiquity Global reach Richness Interactivity Information density Personalization/Customization Social technology

Online​ communities, like​ Facebook, utilize​ ____ as​ word-of-mouth marketing to spread information

Viral marketing

E-Commerce Presence Map

Website Platform: (Mobile, Tablet,Traditional) Activity: (Search,Display,Apps,Affiliates,Sponsorship) Email Platform: (Internal Lists,Purchased lists) Activity: (Newsletters, Updates, Sales) Social Media Platform: (Facebook, Twitter, Blogs) Activity: (Conversation, Engagement. Sharing, Advice) Offline Platform (Print, Tv and Radio) Activity: (Education, Exposure, Branding)

9) Exposing an individual to ads that are chosen and based on the online behavior of the individual is referred to as:

behavioral targeting

If you enjoy coin collecting and you notice more and more banners related to this​ hobby, companies are using​ _______________ to better understand clickstreams

behavioral targeting

​Apple's iTunes.com business is considered a successful​ ______________

content provider creates revenue by providing digital​ content, such as​ news, music,​ photos, or​ video, over the web. The customer may pay to access the​ content, or revenue may be generated by selling advertising space

The Internet has allowed customers the ability in many cases to see what merchants have to pay for products. This is called​ _____________

cost transparency

Companies can increase brand loyalty using a​ _____marketing strategy where a company asks customers to​ generate, then review and​ rate, suggestions about a company issue such as what their next product should be

crowdsourcing

7) Reducing the business process layers in a distribution channel is called:

disintermediation.

6) Varying a product's price according to the supply situation of the seller is called ________ pricing.

dynamic

A majority of businesses working with other businesses​ (e-commerce) still use​ __________________ to enable company systems to share​ invoices, shipment​ schedules, and purchase orders

electronic data interchange

When you are using your mobile device to determine where you can find a service station within five miles of your​ location, you are using a​ _______.

geoadvertising service

Using your mobile phone and using global positioning systems to identify where your best friends are meeting for dinner is called​ __________________

geosocial services

10) Geoadvertising sends ads to users based on their:

gps locations

One of the unique features of​ e-commerce is information​ density, which, in​ essence, refers​ to:

how storage and communication costs plummet while accuracy and timeliness skyrocket.

Office supplies are considered​ _______________, and not directly involved in the production process

indirect goods

If two people are trading coins and one has far more knowledge about the hobby than the​ other, this is called​ ________________

information asymmetry

In the United State​ alone, 205​ _______ people shopped online in 2015

million

The case study on Uber illustrates the importance of​ ______________ as a way to transform existing business opportunities

mobile smartphones

The social commerce feature that creates an environment to allow for friends and advertisers to send notifications to social​ users' home pages is called​ __________

newsfeed

Merchants are able to target their marketing messages to specific individuals because​ E-commerce technologies allow​ _____________.

personalization By adjusting the message to a​ person's clickstream​ behavior, name,​ interests, and past purchases merchants are able to target their customers

4) Selling the same goods to different targeted groups at different prices is called:

price discrimination

The benefit of a consumer being able to look online to find a variety of different prices for the same product is called​ ___________________.

price transparency

Paying an online journal a monthly fee for access to its content is called the​ __________ model.

subscription revenue

3) Information density refers to the:

total amount and quantity of information available to all market participants

What are sites called that process transactions for consumers that are normally handled in​ person, by​ phone, or by​ mail?

transaction brokers

Shopkick helps retailers with​ m-commerce by:

using​ location-based services to deliver coupons to mobile users when they get near to or enter a store

The phase of the​ e-commerce presence timeline that includes creating a Twitter presence is​ ________________________.

web implementation

The phase of the​ e-commerce presence timeline that includes search engine optimization is​ ______________________

web implementation

When developing an​ e-commerce presence​ timeline, which phase is associated with the correct activity​ below?

​Planning: envision web​ presence, determine personnel

Many​ e-commerce marketing firms use behavioral targeting techniques to increase the effectiveness of​ what?

​banners, rich​ media, and video ads

Purchasing aftermarket tickets from Stubhub is an example of a​ __________________ electronic commerce model

​business-to-consumer

Purchasing aftermarket tickets from Stubhub is an example of a​ __________________ electronic commerce model.

​business-to-consumer

eBay is a major organization that allows individuals to sell products to other individuals. This business model is called​ __________________

​consumer-to-consumer

Companies need to thoroughly plan a mixture of ways or methods to connect with their customers and business partners to build a cohesive​ __________

​e-commerce presence

Companies are moving rapidly to​ ______, where their customers use devices such as cell phones for purchasing goods and services at any time from any place

​m-commerce