CS453: The Business of E-Commerce Readings: Chap. 1-2

Why E-Commerce?  Using the Internet is a given now  Let’s reflect (back perhaps) on what it offers companies  Better access to customers  Cost reductions for services provided  Opportunity to deliver new products or services that would be impossible without the network  Using the Internet is a given now  Let’s reflect (back perhaps) on what it offers companies  Better access to customers  Cost reductions for services provided  Opportunity to deliver new products or services that would be impossible without the network

Better Access to Customers  Reasons?  Quantity, frequency, quality  Explain! Examples!  Quantity, Frequency  More people can visit a site than a store  Global presence  Anytime access  Reasons?  Quantity, frequency, quality  Explain! Examples!  Quantity, Frequency  More people can visit a site than a store  Global presence  Anytime access

Better Access to Customers (2)  Quality  Learn preferences, target advertising  news and information  Offer discounts, etc.  Customer service  Two-way communication  Quality  Learn preferences, target advertising  news and information  Offer discounts, etc.  Customer service  Two-way communication

Benefits for a Traditional Business View  Global presence not as hard  Mass distribution now easier, cheaper  Maybe: costs shifted? Scalability?  Others pay part of costs (NWs, access)  Up to date info and products  Searchable  Global presence not as hard  Mass distribution now easier, cheaper  Maybe: costs shifted? Scalability?  Others pay part of costs (NWs, access)  Up to date info and products  Searchable

Has the Net Changed the Business World?  Of course, in many ways  Consider concentration vs. empowerment  Think of Walmart vs. the local small-town general store  What are some issues here?  Of course, in many ways  Consider concentration vs. empowerment  Think of Walmart vs. the local small-town general store  What are some issues here?

Concentration vs. Empowerment  Big store  Many customer benefits  Takes over  How can a small store survive?  Meet some need Walmart can’t  Niche market, specialization  Discuss: examples in E- commerce?  Big store  Many customer benefits  Takes over  How can a small store survive?  Meet some need Walmart can’t  Niche market, specialization  Discuss: examples in E- commerce?

Your Examples

Concentration vs. Empowerment  Business on the Internet supports both  Businesses supporting niche markets can succeed better than without the net  Of course large companies are successful too  Business on the Internet supports both  Businesses supporting niche markets can succeed better than without the net  Of course large companies are successful too

Changes in Competition between Businesses  Traditional roles and distributions are short-circuited  Consider what banks did 20 years ago  No other options  New combinations of loans, investing, money management, getting financial info  Banks, investment houses, insurance companies, new startups,…  Traditional roles and distributions are short-circuited  Consider what banks did 20 years ago  No other options  New combinations of loans, investing, money management, getting financial info  Banks, investment houses, insurance companies, new startups,…

Creeping Costs  SW Engineering has taught us things about system life-cycles and costs over time  How do you think these might apply to companies that begin to provide services on the Web?  Discuss!  SW Engineering has taught us things about system life-cycles and costs over time  How do you think these might apply to companies that begin to provide services on the Web?  Discuss!

SW Engin. Lessons?

 Maintenance costs over time  Success hurts  New features needed  Environment changes  Systems degrade over time  Usability matters  Scalability  Maintenance costs over time  Success hurts  New features needed  Environment changes  Systems degrade over time  Usability matters  Scalability

Commerce Value Chain  Chap. 2 of our textbook 1.The commerce value chain 2.Identifying customers 3.Marketing to customers 4.International issues 5.Legal issues  Chap. 2 of our textbook 1.The commerce value chain 2.Identifying customers 3.Marketing to customers 4.International issues 5.Legal issues

1. What’s the Commerce Value Chain?  Generally:  Value added during the process of creating and delivering a product or service  Commonly used to describe manufacturing of things  Consider Value-Added Tax (VAT) based systems  Generally:  Value added during the process of creating and delivering a product or service  Commonly used to describe manufacturing of things  Consider Value-Added Tax (VAT) based systems

Our Book’s View  Certainly a commerce-value chain (CVC here) for underlying business’ products  Also one directly tied to e- commerce  Focused on customers  Certainly a commerce-value chain (CVC here) for underlying business’ products  Also one directly tied to e- commerce  Focused on customers

Chain for Internet Systems  Attract; Interact; Act; React  Attract  Get and keep customer interest  Activities: advertising, marketing  Interact  Turn interest into orders  Content/product driven: web pages, info, query results, etc.  Activities:  Attract; Interact; Act; React  Attract  Get and keep customer interest  Activities: advertising, marketing  Interact  Turn interest into orders  Content/product driven: web pages, info, query results, etc.  Activities:

Chain for Internet Systems (2)  Act  Process and manage orders  Activities:  Order processing -- shopping carts, taxation, shipping charges)  Payment processing -- account, credit cards, third-party financial companies, etc.  Fulfillment -- deliver hard goods, packing, shipping; carry out e-service; deliver digital goods (file, software, license)  Act  Process and manage orders  Activities:  Order processing -- shopping carts, taxation, shipping charges)  Payment processing -- account, credit cards, third-party financial companies, etc.  Fulfillment -- deliver hard goods, packing, shipping; carry out e-service; deliver digital goods (file, software, license)

Chain for Internet Systems (3)  React  Service customers, order tracking, returns, warranties, rebates, help services  React  Service customers, order tracking, returns, warranties, rebates, help services

Another View  Of course it’s not linear  Not necessarily even sequential now  Of course it’s not linear  Not necessarily even sequential now Attract ReactAct Interact

Comments on This  Relatively simple ideas here  Reasonable as a framework for partitioning the domain of e- commerce topics, components  At different points in this chain  Businesses can fail or succeed  Businesses can focus  Differentiation  Can you think of an example?  Relatively simple ideas here  Reasonable as a framework for partitioning the domain of e- commerce topics, components  At different points in this chain  Businesses can fail or succeed  Businesses can focus  Differentiation  Can you think of an example?

2. Defining the Customer  With the web, anyone can be  That’s good news and bad news  General public vs. specialized companies or employees within companies  E.g. a Motorola engineer looking for ICs for a new cell-phone design  How that person’s need different than you or me buying a book or song?  With the web, anyone can be  That’s good news and bad news  General public vs. specialized companies or employees within companies  E.g. a Motorola engineer looking for ICs for a new cell-phone design  How that person’s need different than you or me buying a book or song?

Is it Important to Design for Customer Types?  Many e-commerce sites assume one kind of customer  Examples where a mismatch is a problem?  Examples of sites that don’t?  Things to consider  Home consumer vs. corporate  Novice vs. expert  Age  Many e-commerce sites assume one kind of customer  Examples where a mismatch is a problem?  Examples of sites that don’t?  Things to consider  Home consumer vs. corporate  Novice vs. expert  Age

3. Marketing on the Internet  Why does this matter more now than, say, in 2000?  Your ideas:  Why does this matter more now than, say, in 2000?  Your ideas:

Why is Marketing Different on the Internet?  Can reach many more people anywhere  More competition  Identity more easy to conceal  Who are you? Big company or not? Scam artist or market leader?  New media and multi-media the norm  Harder or not clear how to get placement, presence or attention  No longer just ads in print, TV or radio  Search, ad auctions, , blogs, YouTube,…  Can reach many more people anywhere  More competition  Identity more easy to conceal  Who are you? Big company or not? Scam artist or market leader?  New media and multi-media the norm  Harder or not clear how to get placement, presence or attention  No longer just ads in print, TV or radio  Search, ad auctions, , blogs, YouTube,…

What’s the Same?  Customer identity, needs, wants  Clear messages  Effective presentation  Tracking and measuring success  Customer identity, needs, wants  Clear messages  Effective presentation  Tracking and measuring success

Internet Customer Demographics  Remember when mom and dad didn’t surf the web? :-)  Students, university types, technologists,…  One interface, many demographics  E.g. kids and adults use search engines  Should they really be finding the same things  Note how in the non-internet world there are different marketing channels  Remember when mom and dad didn’t surf the web? :-)  Students, university types, technologists,…  One interface, many demographics  E.g. kids and adults use search engines  Should they really be finding the same things  Note how in the non-internet world there are different marketing channels

Strategies  One-to-one marketing   Profiles on sites like Google (“customers like you were also interested in…”  Mass marketing (dead or not?)  Convergence  With other media sources  Targeted ads  On sites, in applications, with query results  One-to-one marketing   Profiles on sites like Google (“customers like you were also interested in…”  Mass marketing (dead or not?)  Convergence  With other media sources  Targeted ads  On sites, in applications, with query results

Search and Marketing  Originally, search didn’t include marketing  “Gaming the system” became the norm  Search sites tied ads in with user searches  Ad auctions  Specialized search  Sites by price  Sites like Priceline  Sites like Travelocity (car or hotel with that flight?)  Originally, search didn’t include marketing  “Gaming the system” became the norm  Search sites tied ads in with user searches  Ad auctions  Specialized search  Sites by price  Sites like Priceline  Sites like Travelocity (car or hotel with that flight?)

4. International Issues  Global customers, content  Making sites work for international customers  Language; monetary conversions; taxes; shipping; customs and other laws  Customs, norms, conventions  Products for international customers  Software: internationalization  Services: sites, games, …  Privacy  Laws governing info privacy etc.  E.g. Google and Yahoo in China  Global customers, content  Making sites work for international customers  Language; monetary conversions; taxes; shipping; customs and other laws  Customs, norms, conventions  Products for international customers  Software: internationalization  Services: sites, games, …  Privacy  Laws governing info privacy etc.  E.g. Google and Yahoo in China

5. Legal Issues  Privacy  Policies  Practical security for customer info and company info  Authorization, digital signatures, etc.  Government regulation  Privacy  Export rules (e.g. cryptography)  Privacy  Policies  Practical security for customer info and company info  Authorization, digital signatures, etc.  Government regulation  Privacy  Export rules (e.g. cryptography)

Summary  Internet Commerce: a brave new world?  Some things aren’t so different?  Quickly face global and legal issues that in the past only large companies dealt with  Commerce Value Chain  A guide to organizing a business plan or a system?  A framework for talking about business’ efforts  Next: Business strategies  Internet Commerce: a brave new world?  Some things aren’t so different?  Quickly face global and legal issues that in the past only large companies dealt with  Commerce Value Chain  A guide to organizing a business plan or a system?  A framework for talking about business’ efforts  Next: Business strategies