Chapter 7: E-Commerce 1 Copyright 2005 Prentice Hall Inc. A Pearson Education Company E-Commerce and the Entrepreneur

Chapter 7: E-Commerce 2 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 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. In the world of e-commerce, size matters less than speed and flexibility. In the world of e-commerce, size matters less than speed and flexibility. 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.

Chapter 7: E-Commerce 4 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Benefits of Selling on the Web Only 33% of small companies have Web sites, and of those, only 24% generate revenues from online sales. Benefits include: 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

Chapter 7: E-Commerce 5 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Benefits of Selling on the Web (continued) 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 Ability to spot new business opportunities and capitalize on them Ability to spot new business opportunities and capitalize on them Ability to grow faster Ability to grow faster Power to track sales results Power to track sales results

Chapter 7: E-Commerce 6 Copyright 2005 Prentice Hall Inc. A Pearson Education Company E-Commerce Of those small business owners who do not have Web sites: Of those small business owners who do not have Web sites:  77% say their products and services are not suitable for selling online.  37% say they do not see any benefits of selling online. Barriers: Barriers:  Not knowing how or where to start  Cost and time concerns

Chapter 7: E-Commerce 7 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 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 7: E-Commerce 8 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Factors to Consider Before Launching into E-Commerce (continued) 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 7: E-Commerce 9 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Assessing You Company’s Online Potential 1. Does your product have broad appeal to customers everywhere? 2. Do you want to sell your product to customers outside of your immediate geographic area? 3. Can the product you sell be delivered conveniently and economically? 4. Can your company realize significant cost advantages by going online? 5. Can you draw customers to your company’s Web site with a reasonable investment?

Chapter 7: E-Commerce 10 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 12 Myths of E-Commerce Myth 1: Setting up a business on the Web is easy and inexpensive.

Chapter 7: E-Commerce 12 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Follow-up Investments Setting up a Web site is only the first investment. Redesign Web site Redesign Web site Buy more computer hardware Buy more computer hardware Automate or expand warehouse to meet customer demand Automate or expand warehouse to meet customer demand Integrate Web site into inventory control system Integrate Web site into inventory control system Increase customer call-center capacity Increase customer call-center capacity

Chapter 7: E-Commerce 13 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 12 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 7: E-Commerce 14 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Privacy Online Jupiter Media Matrix survey: 70% of consumers expressed concern about online privacy. Jupiter Media Matrix survey: 70% of consumers expressed concern about online privacy. Estimate: If online companies were able to alleviate customers’ online privacy and security issues, online retail sales would be 24% higher! Estimate: If online companies were able to alleviate customers’ online privacy and security issues, online retail sales would be 24% higher! 64% of Web customers distrust Web sites. 64% of Web customers distrust Web sites.

Chapter 7: E-Commerce 15 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 12 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. Myth 7: On the Web, customer service is not as important as it is in a traditional retail store.

Chapter 7: E-Commerce 16 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 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:  Could not find items they were looking for  Shopping cart too hard to find  Checking out took too long  Site did not look trustworthy  Shipping charges too high

What Web Shoppers Want Retail CustomersBusiness Customers 1. Competitive prices 1. On-time delivery 2. Well-designed presentation 2. Competitive prices 3. Good selection 3. Well-designed presentation 4. Reliable shipping 4. Good selection 5. On-time delivery 5. Easy ordering 6. Easy ordering 6. Valuable product info 7. Customer support 8. Valuable product info 8. Reliable shipping 9. Posted privacy policy 10. User-friendly navigation

Chapter 7: E-Commerce 18 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 12 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. Myth 11: The greatest opportunity for e- commerce lies in the retail sector.

Chapter 7: E-Commerce 20 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 12 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. 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 7: E-Commerce 21 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Approaches to E-Commerce On-line shopping malls On-line shopping malls Storefront building services Storefront building services Internet service providers (ISPs) and Application service providers (ASPs) Internet service providers (ISPs) and Application service providers (ASPs) Hiring professionals to design a custom site Hiring professionals to design a custom site Building a site in-house Building a site in-house

Chapter 7: E-Commerce 22 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Online Shopping Malls Advantages: Advantages:  Simplicity  Low cost Disadvantages: Disadvantages:  Lack of prominence  Lack of control over site

Chapter 7: E-Commerce 23 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Storefront-Building Services Advantages: Advantages:  Simplicity  Low cost – as little as $100 to $500 per month Disadvantages Disadvantages  Cookie-cutter approach  Handle only a limited number of products

Chapter 7: E-Commerce 24 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Internet Service Providers and Application Service Providers Provide many of the same features as store- front design services but offer more flexibility and customized designs. Provide many of the same features as store- front design services but offer more flexibility and customized designs. Can grow with a company as its online sales volume grows. Can grow with a company as its online sales volume grows. What to consider when choosing: What to consider when choosing:  Cost  Downtime  Quality of backup systems  Capacity for hosting sites

Chapter 7: E-Commerce 25 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Hiring Professionals Key advantage: Ability to customize a site, making it anything an entrepreneur wants. Key advantage: Ability to customize a site, making it anything an entrepreneur wants. Major disadvantage: Cost Major disadvantage: Cost  A custom-designed site can cost between $10,000 and $30,000  A site with complete front-office and back- office integration can cost more than $500,000!

Chapter 7: E-Commerce 26 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Building a Site in-House Key advantage: Complete control over the site and its design, operation, and maintenance. Key advantage: Complete control over the site and its design, operation, and maintenance. Major disadvantage: Cost of hiring staff. Major disadvantage: Cost of hiring staff.  Cost can reach $250,000 to $500,000.

Chapter 7: E-Commerce 27 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Strategies for E-Success Consider focusing on a market niche. Consider focusing 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 7: E-Commerce 28 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Strategies for E-Success (continued) 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 7: E-Commerce 29 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Designing a Killer Web Site Understand your target customer. Understand 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 7: E-Commerce 30 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Designing a Killer Web Site (continued) Be easy to find. Be easy to find. Give customers what they want. Give customers what they want. Build loyalty by giving online customers a reason to return to your site. Build loyalty by giving online customers a reason to return to your site. Establish hyperlinks with other businesses, preferably those selling complementary products. Establish hyperlinks with other businesses, preferably those selling complementary products.

Chapter 7: E-Commerce 31 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Designing a Killer Web Site (continued) Include an option and a telephone number in your site. Include an option and a telephone number in your 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 7: E-Commerce 32 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Designing a Killer Web Site (continued) Assure customers that their online transactions are secure. Assure customers that their online transactions are secure. Post shipping and handling charges up front. Post shipping and handling charges up front. 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 7: E-Commerce 33 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 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 Web analytics – tools that measure a Web site’s ability to attract customers, generate sales, and keep customers coming back.

Chapter 7: E-Commerce 34 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Measuring Online Performance Recency – the length of time between customers’ visits to a Web site. Recency – the length of time between customers’ visits to a Web site. Conversion (browse-to-buy) ratio – the proportion of visitors to a site who actually make a purchase. Conversion (browse-to-buy) ratio – the proportion of visitors to a site who actually make a purchase. Cost per action (CPA) – the amount it costs to produce a particular customer action. Cost per action (CPA) – the amount it costs to produce a particular customer action. Cost per order (CPO) – the amount it costs to generate a customer order. Cost per order (CPO) – the amount it costs to generate a customer order.

Chapter 7: E-Commerce 35 Copyright 2005 Prentice Hall Inc. A Pearson Education Company 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 7: E-Commerce 36 Copyright 2005 Prentice Hall Inc. A Pearson Education Company Ensuring Web Security Virus detection software Virus detection software Intrusion detection software Intrusion detection software Firewall Firewall