E-Commerce and Entrepreneurship

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 2 The Internet: Changing the Face of Business The most successful companies embrace the Internet as a mechanism for transforming their companies and for changing everything about the way they do business. The most successful companies embrace the Internet as a mechanism for transforming their companies and for changing everything about the way they do business. E-commerce has launched a revolution, a new industrial order. E-commerce has launched a revolution, a new industrial order.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 3 The Internet: Changing the Face of Business In the world of e-commerce, speed and flexibility matter much more than size. In the world of e-commerce, speed and flexibility matter much more than size. High-volume, low-margin, commodity products are best suited for selling on the Web. High-volume, low-margin, commodity products are best suited for selling on the Web. Example: FreshDirect, Inc. Example: FreshDirect, Inc.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 4 The Internet: Changing the Face of Business Most commonly cited reasons among owners of small and medium-sized businesses for taking their companies to the Web: Most commonly cited reasons among owners of small and medium-sized businesses for taking their companies to the Web:  Reach new customers  Sell goods and services  Disseminate information more quickly  Keep up with competitors  Reach global markets

Source: United Nations Conference on Trade and Development: E-Commerce and Development Report, 2003

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 6 Benefits of Selling on the Web 78% of small business owners whose companies have Web sites report that their businesses benefit by having a site. Opportunity to increase revenues Opportunity to increase revenues Ability to expand into global markets Ability to expand into global markets Ability to remain open 24 hours a day, seven days a week Ability to remain open 24 hours a day, seven days a week Capacity to use the Web’s interactive nature to enhance customer service Capacity to use the Web’s interactive nature to enhance customer service

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 7 Benefits of Selling on the Web Power to educate and inform Power to educate and inform Ability to lower the cost of doing business Ability to lower the cost of doing business Capacity to improve efficiency in the purchasing process Capacity to improve efficiency in the purchasing process Ability to spot new business opportunities and capitalize on them Ability to spot new business opportunities and capitalize on them Power to track sales results Power to track sales results

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 8 E-Commerce Survey: Just 43% of U.S. companies with fewer than 100 employees have Web sites... Survey: Just 43% of U.S. companies with fewer than 100 employees have Web sites... Only 40% of those actually sell merchandise online. Only 40% of those actually sell merchandise online. Small companies account for more than 50% of all retail sales in the U.S., but they generate only 6% of online retail sales. Small companies account for more than 50% of all retail sales in the U.S., but they generate only 6% of online retail sales. Why? Why?

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 9 Factors to Consider Before Launching into E-Commerce How a company exploits the Web’s interconnectivity and the opportunities it creates to transform relationships with suppliers, customers, and others is crucial to its success. How a company exploits the Web’s interconnectivity and the opportunities it creates to transform relationships with suppliers, customers, and others is crucial to its success. Web success requires a company to develop a plan for integrating the Web into its overall strategy. Web success requires a company to develop a plan for integrating the Web into its overall strategy.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 10 Factors to Consider Before Launching into E-Commerce Developing a deep, lasting relationship with customers takes on even greater importance on the Web. Developing a deep, lasting relationship with customers takes on even greater importance on the Web. Creating a meaningful presence on the Web requires an ongoing investment of resources – time, money, energy, and talent. Creating a meaningful presence on the Web requires an ongoing investment of resources – time, money, energy, and talent. Measuring the success of a Web-based sales effort is essential to remaining relevant to customers whose tastes, needs, and preferences constantly change. Measuring the success of a Web-based sales effort is essential to remaining relevant to customers whose tastes, needs, and preferences constantly change.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive. Myth 2: If I launch a site, customers will flock to it. Myth 3: Making money on the Web is easy. Myth 4: Privacy is not an important issue on the Web.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 14 Privacy and the Web Privacy on the Web does matter! Privacy on the Web does matter! Jupiter Communications survey: 64% of Web customers distrust Web sites. Jupiter Communications survey: 64% of Web customers distrust Web sites. Post a privacy policy and stick to it. Post a privacy policy and stick to it. Safeguard information your company collects from customers. Safeguard information your company collects from customers.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 5: The most important part of any e-commerce effort is technology. Myth 6: Strategy? I don’t need a strategy to sell on the Web! Just give me a Web site and the rest will take care of itself.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 7: On the Web, customer service is not as important as it is in a traditional retail store.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 17 The Importance of Service on the Web Jupiter Research Study: 72% of online buyers cite service as a critical factor in their online shopping satisfaction. Jupiter Research Study: 72% of online buyers cite service as a critical factor in their online shopping satisfaction. Unfortunately… Unfortunately… Only 41% said they were satisfied with the service they receive from online merchants. Only 41% said they were satisfied with the service they receive from online merchants.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 18 The Importance of Service on the Web Research by Jakob Nielsen: 56% of the time an online shopper is unable to complete an e-commerce transaction. Research by Jakob Nielsen: 56% of the time an online shopper is unable to complete an e-commerce transaction. Cost: Billions of dollars in lost sales due to poor customer service. Cost: Billions of dollars in lost sales due to poor customer service.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 19 The Importance of Service on the Web Study: 75% of Web shoppers who fill their on-line shopping carts become frustrated and leave the site before checking out. Study: 75% of Web shoppers who fill their on-line shopping carts become frustrated and leave the site before checking out. Reasons: Reasons:  Shipping charges too high  Delivery times too long  Checkout process required too much information  Insufficient product information available

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 20 Tips for Reducing Shopping Cart Abandonment Rate Streamline the steps in the checkout process Streamline the steps in the checkout process Include a progress indicator on each checkout page Include a progress indicator on each checkout page Provide a link back to the items in the shopping cart Provide a link back to the items in the shopping cart Allow customers to see if an item is in stock Allow customers to see if an item is in stock

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 21 Tips for Reducing Shopping Cart Abandonment Rate Include product photos in the shopping cart Include product photos in the shopping cart Make it easy for customers to change the contents of their carts Make it easy for customers to change the contents of their carts Give customers the option of calling to resolve problems they encounter during checkout Give customers the option of calling to resolve problems they encounter during checkout Make it easy for customers to pay for their online purchases. Make it easy for customers to pay for their online purchases.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 8: Flash makes a Web site better. Myth 9: It’s what’s up front that counts. Myth 10: E-commerce will cause brick- and-mortar retail stores to disappear.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 11: The greatest opportunity for e-commerce lies in the retail sector.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company Myths of E-Commerce Myth 11: The greatest opportunity for e-commerce lies in the retail sector. Myth 12: It’s too late to get on the Web.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 26 Strategies for E-Success Focus on a market niche Focus on a market niche Develop a community Develop a community Attract visitors by giving away “freebies” Attract visitors by giving away “freebies” Make creative use of , but avoid becoming a “spammer” Make creative use of , but avoid becoming a “spammer”

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 27 Strategies for E-Success Make sure your Web site says “credibility” Make sure your Web site says “credibility” Consider forming strategic alliances Consider forming strategic alliances Make the most of the Web’s global reach Make the most of the Web’s global reach Promote your site online and offline Promote your site online and offline

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 28 Strategies for E-Success Develop an effective search marketing strategy Develop an effective search marketing strategy  Jupiter Media Metrix study: 77% of Internet shoppers go straight to a search engine to find the products and services they want.  Bad news: Business owners invest less than 1% of their marketing budgets on search engine marketing.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 29 A Search Marketing Strategy Natural listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data. Natural listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data. Paid (sponsored) listings – short text ads with links to the sponsoring company’s Web site that appear on the results page of a search engine. Paid (sponsored) listings – short text ads with links to the sponsoring company’s Web site that appear on the results page of a search engine. Paid inclusion – when a company pays a search engine for the right to submit either selected pages or the contents of its entire Web site Paid inclusion – when a company pays a search engine for the right to submit either selected pages or the contents of its entire Web site

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 30 Designing a Killer Web Site Start with your target customer. Start with your target customer. Select a domain name that is consistent with the image you want to create for your company and register it. Select a domain name that is consistent with the image you want to create for your company and register it.  Short  Memorable  Indicative of a company’s business  Easy to spell

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 31 Designing a Killer Web Site Be easy to find. Be easy to find. Give customers what they want. Give customers what they want.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 33 Designing a Killer Web Site Be easy to find. Be easy to find. Give customers what they want. Give customers what they want. Establish hyperlinks with other businesses, preferably those selling complementary products. Establish hyperlinks with other businesses, preferably those selling complementary products. Include an option, an address, and a telephone number in your site. Include an option, an address, and a telephone number in your site.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 34 Designing a Killer Web Site Give shoppers the ability to track their orders online. Give shoppers the ability to track their orders online. Offer Web shoppers a special all their own. Offer Web shoppers a special all their own. Follow a simple design. Follow a simple design.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 35 Web Site Design Tips Avoid clutter Avoid clutter Avoid huge graphics Avoid huge graphics Include a menu bar at top of page Include a menu bar at top of page Include navigation buttons Include navigation buttons Incorporate meaningful content into the site Incorporate meaningful content into the site

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 36 Web Site Design Tips Include an “FAQ” section Include an “FAQ” section Include privacy and return policies Include privacy and return policies Avoid fancy typefaces and small fonts Avoid fancy typefaces and small fonts Watch for “typos” and misspelled words Watch for “typos” and misspelled words

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 37 Web Site Design Tips Avoid small fonts on “busy” backgrounds Avoid small fonts on “busy” backgrounds Use contrasting colors for text and graphics Use contrasting colors for text and graphics Be careful with frames Be careful with frames Test the site on different browsers and different size monitors Test the site on different browsers and different size monitors

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 38 Web Site Design Tips Collect information from visitors, but don’t put them through a tedious registration process Collect information from visitors, but don’t put them through a tedious registration process Include a search function and company contact information Include a search function and company contact information Avoid automated music Avoid automated music Make sure the page looks appealing Make sure the page looks appealing Remember: Simpler is better Remember: Simpler is better

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 39 Designing a Killer Web Site Assure customers that their online transactions are secure. Assure customers that their online transactions are secure. Follow up every online transaction with an order-confirmation . Follow up every online transaction with an order-confirmation . Keep your site updated. Keep your site updated. Consider hiring a professional to design your site. Consider hiring a professional to design your site.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 40 Tracking Web Results Counter Counter Log-analysis software Log-analysis software Click-stream analysis Click-stream analysis Clustering Clustering Collaborative filtering Collaborative filtering Profiling systems Profiling systems Artificial intelligence Artificial intelligence

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 41 Return on Investment (ROI) Common measures of ROI: Cost per action (CPA) - the cost of producing a particular customer action, such as registering for a newsletter, requesting information, etc. Cost per action (CPA) - the cost of producing a particular customer action, such as registering for a newsletter, requesting information, etc. Cost per order (CPO) – the cost of generating a customer order. Can be calculated across all product lines or for a single product. Cost per order (CPO) – the cost of generating a customer order. Can be calculated across all product lines or for a single product.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 42 Ensuring Web Privacy Take an inventory of the customer data collected. Take an inventory of the customer data collected. Develop a company policy for the information you collect. Develop a company policy for the information you collect. Post your company’s privacy policy prominently on your Web site and follow it. Post your company’s privacy policy prominently on your Web site and follow it.

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 43 Ensuring Web Security Virus detection software Virus detection software Intrusion detection software Intrusion detection software Firewall Firewall Secure sockets layer (SSL) technology Secure sockets layer (SSL) technology

Chapter 13 E-Commerce Copyright 2006 Prentice Hall Publishing Company 44 Web Sites All-Outdoors Whitewater Rafting All-Outdoors Whitewater Rafting Earth Treks Inc. Earth Treks Inc. REI, Inc. REI, Inc.