Chapter 13: E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 1 E-Commerce and Entrepreneurship

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 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.

Source: Data from Internet Usage Statistics: The Big Picture, Internet World Stats, 2007,

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5 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 Chance to attract new customers Chance to attract new customers Ability of brick-and-mortar retailers to drive online customers to their stores and increase sales there Ability of brick-and-mortar retailers to drive online customers to their stores and increase sales there 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 6 Benefits of Selling on the Web Capacity to use the Web’s interactive nature to enhance customer service Capacity to use the Web’s interactive nature to enhance customer service 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 Opportunity to build credibility and brand identity among customers Opportunity to build credibility and brand identity among customers

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 7 E-Commerce National Small Business Association Survey: 60% of small companies have Web sites, but... National Small Business Association Survey: 60% of small companies have Web sites, but... Only 40% of small companies actually sell merchandise online Only 40% of small companies actually sell merchandise online Why? Why?

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 8 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 9 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive  Setting up a site and taking it live are just the beginning  Updating  Advertising and promoting  SEO strategy

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall Myths of E-Commerce 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 12 Privacy and the Web Privacy on the Web does matter! Privacy on the Web does matter! Gartner survey: 46% of online adults say that security and privacy concerns have affected their Internet purchasing behavior Gartner survey: 46% of online adults say that security and privacy concerns have affected their Internet purchasing behavior Tips: Tips:  Post a privacy policy and stick to it  Safeguard information your company collects from customers

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall Myths of E-Commerce Myth 7: On the Web, customer service is not as important as it is in a traditional retail store

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 15 The Importance of Service on the Web Study: 82% of shoppers who had experienced a frustrating online shopping experience reported that they were not likely to return to the online store, and… Study: 82% of shoppers who had experienced a frustrating online shopping experience reported that they were not likely to return to the online store, and… 28% said that they were less likely to shop at the retailer’s physical store 28% said that they were less likely to shop at the retailer’s physical store

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 16 The Importance of Service on the Web Average conversion rate for e- commerce sites is 2.4%, down from 3.1% in 2001 Average conversion rate for e- commerce sites is 2.4%, down from 3.1% in 2001 Cost: Billions of dollars in lost sales, much of it because of poor customer service Cost: Billions of dollars in lost sales, much of it because of poor customer service

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 17 The Importance of Service on the Web Study: 48% of Web shoppers who fill their on-line shopping carts become frustrated and abandon them before checking out Study: 48% of Web shoppers who fill their on-line shopping carts become frustrated and abandon them before checking out Reasons: Reasons:  Customer was comparison shopping  Shipping charges too high  Checkout process required too much time and information  Product out of stock  Customer uncomfortable with the site’s buying process

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 18 Tips for Reducing Shopping Cart Abandonment Rate Offer multiple shipping methods and provide free shipping if a customer’s purchase exceeds a minimum amount Offer multiple shipping methods and provide free shipping if a customer’s purchase exceeds a minimum amount 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 whether an item is in stock Allow customers to see whether an item is in stock

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 19 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 Include a short survey of customers who abandon their carts Include a short survey of customers who abandon their carts

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall Myths of E-Commerce Myth 8: Flash makes a Web site better Myth 9: It’s what’s up front that counts  Virtual order fulfillment Myth 10: E-commerce will cause brick- and-mortar retail stores to disappear

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall Myths of E-Commerce Myth 11: The greatest opportunity for e-commerce lies in the retail (B2C) sector  B2B sales account for more than 90% of all e-commerce transactions Myth 12: It’s too late to get on the Web

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 22 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”

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 23 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  Affiliate marketing programs 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 24 Strategies for E-Success Develop an effective search marketing strategy Develop an effective search marketing strategy  Forrester study: 67% of Internet shoppers go straight to a search engine to find the products and services they want  Search engine marketing – fastest growing segment of advertising spending

Source: State of Retailing Online 2006, Forrester Research, 2007.

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 26 A Search Marketing Strategy Natural (organic) listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data Natural (organic) listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data  Success requires a search engine optimization (SEO) strategy

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 27 Search Engine Optimization (SEO) Goal: Get your site listed at or near the top of search results listing Goal: Get your site listed at or near the top of search results listing 62% of search engine users click on a link to a site that appears on the first page of the search results 62% of search engine users click on a link to a site that appears on the first page of the search results

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 28 A Search Marketing Strategy Natural (organic) listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data Natural (organic) 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 29 Paid Listings Use paid listings to accomplish what natural listings cannot Use paid listings to accomplish what natural listings cannot Five search engines – Google, Yahoo!, MS Live Search, Ask.com, and AOL – account for 97% of all searches in the U.S. Five search engines – Google, Yahoo!, MS Live Search, Ask.com, and AOL – account for 97% of all searches in the U.S. Average cost of a keyword has risen from 39¢ in 2004 to 58¢ today Average cost of a keyword has risen from 39¢ in 2004 to 58¢ today Beware of click fraud! Beware of click fraud!  Estimate: Pay-per-click fraud rate =14%

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 30 A Search Marketing Strategy Natural (organic) listings - the result of “spiders,” powerful programs that crawl the Web, looking at key words, links, and other data Natural (organic) 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 31 Designing a Killer Web Site Start with your target customer Start with your target customer Give customers what they want Give customers what they want

Source: eBrain Market Research/Consumer Electronics Association, 2003.

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 33 Designing a Killer Web Site 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 34 Designing a Killer Web Site Make your Web site easy to navigate Make your Web site easy to navigate Create a gift idea center Create a gift idea center Build loyalty by giving online customers a reason to return Build loyalty by giving online customers a reason to return Establish hyperlinks with other businesses, especially those selling products that complement yours Establish hyperlinks with other businesses, especially those selling products that complement yours

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 35 Designing a Killer Web Site Include an option and a telephone # on your site Include an option and a telephone # on your site Offer shoppers online tracking Offer shoppers online tracking Offer Web specials Offer Web specials Look for the opportunity to cross-sell Look for the opportunity to cross-sell Use customer testimonials Use customer testimonials Follow a simple design Follow a simple design

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 36 Web Site Design Tips Avoid clutter Avoid clutter Avoid huge graphics Avoid huge graphics Include a menu bar at the top of the page Include a menu bar at the top of the page Include navigation buttons Include navigation buttons Minimize the number of clicks required to a page Minimize the number of clicks required to a page Incorporate meaningful content into the site Incorporate meaningful content into the site

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 37 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 Avoid small fonts on “busy” backgrounds Avoid small fonts on “busy” backgrounds

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 38 Web Site Design Tips 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 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 39 Web Site Design Tips 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 40 Designing a Killer Web Site Assure customers that their online transactions are secure Assure customers that their online transactions are secure Post S&H charges up front Post S&H charges up front Create a fast, simple checkout process Create a fast, simple checkout process Confirm transactions with Confirm transactions with

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 41 Designing a Killer Web Site Keep your site updated Keep your site updated Test your site often Test your site often Consider hiring a professional to design your site Consider hiring a professional to design your site

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 42 Tracking Web Results Web analytics – tools that measure a Web site’s ability to attract customers, generate sales, and keep customers coming back Web analytics – tools that measure a Web site’s ability to attract customers, generate sales, and keep customers coming back  Commerce metrics  Visitor segmentation measurements  Content reports  Process measurements

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 43 Measures of Web Site Performance Click-through rate (CTR) - the proportion of people who see a company’s online ad and actually click on it to reach the company’s Web site Click-through rate (CTR) - the proportion of people who see a company’s online ad and actually click on it to reach the company’s Web site CTR = # of clicks ÷ # of impressions

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 44 Measures of Web Site Performance Cost per acquisition (CPA) – the cost a company incurs to generate each purchase (or customer registration) Cost per acquisition (CPA) – the cost a company incurs to generate each purchase (or customer registration) CPA = Total cost of acquiring a new customer ÷ number of new customers

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 45 Return on Investment (ROI) Conversion (browse-to-buy) rate - the proportion of visitors to a site who actually make a purchase Conversion (browse-to-buy) rate - the proportion of visitors to a site who actually make a purchase Conversion rate = number of customers who make a purchase ÷ number of visitors to a site

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 46 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

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 47 Ensuring Web Security Study: 70% of Web sites have vulnerabilities that are rated from medium- to high-risk Virus detection software Virus detection software Intrusion detection software Intrusion detection software Firewall Firewall Secure sockets layer (SSL) technology Secure sockets layer (SSL) technology

E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 48 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall