1. © 2009 South-Western, Cengage LearningMARKETING 1 Chapter 8 E-COMMERCE AND VIRTUAL MARKETING 8-1What Is E-Commerce? 8-2The Growing Importance of E-Commerce 8-3Virtual Marketing and Distribution 8-4The Role of Promotion for E-Commerce CHAPTER 8

2. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 2 Focus Questions: Do you agree that using the Internet is the same as socializing and shopping with your friends at the mall? What problems might a business encounter if it tries to use the Internet only to sell products without realizing the other ways people use the Internet? Courtesy, CISCO SYSTEMS, INC.

3. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 3 Newsline - Page 208 Think/Pair/Share Consumers Say No to Pets.com Read it individually Think critically #1 & #2 individually Pair with two row members & discuss Share with the entire class

4. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 4 WHAT IS E-COMMERCE? GOALS Describe the 3 stages of development for e-commerce businesses. Discuss the importance of the marketing concept to successful e-commerce. 8-1

5. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 5 Marketing Matters Page 210 Make a list of the advantages & disadvantages of using the Internet to buy products and services.

6. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 6 The Expanding World of E-Commerce E-Commerce: involves business activities completed electronically via the Internet. Exchange of goods, services & information via the Internet

7. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 7 The Expanding World of E-Commerce Includes: Purchasing/Selling products Provide/Exchange Info Customer Service/Support Not all businesses can complete all their activities using the Internet but it can be used for many activities.

8. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 8 From Bricks to Clicks Click-Only Businesses: Companies that complete almost all of their business activities through the Internet. 1 st known as ~ Dot.com Businesses Ex: CustomInk.com & EastBay.com

9. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 9 From Bricks to Clicks Brick-and-Mortar Businesses: Companies that complete most of their business activities by means other than the Internet. Brick-and-Mortar – suggests that the companies relies on actual buildings, such as retail stores, offices, or factories to conduct its business. Ex: Traditional Groceries Store

10. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 10 From Bricks to Clicks Brick-and-Click Businesses: Companies that combine traditional business operations with the use of the Internet. (Combo) Ex: Kohls, JCP, Foot Locker, etc.

11. © 2009 South-Western, Cengage LearningMARKETING Information Stage Interaction Stage Full Integration Stage Chapter 8 11 Stages of Development Businesses generally progress through 3 stages as they develop their e-commerce presence on the Internet.

12. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 12 Stages of Development 1.Information Stage Simple Web site Form of one way communication Limitation - Customers cannot use the site to interact w/ the business. Ex: School Store Wikispace

13. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 13 Stages of Development 2.Interaction Stage (1 of 2) Provide Information and Interact Click to Email option – request info, ask questions, contact specific people. Provide databases – check product availability, product costs, shipping costs, delivery dates

14. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 14 Stages of Development 2.Interaction Stage (2 of 2) Limitation – offer order form for print and mail, but cannot place order directly over the Internet EX: http://jacketsnthingsambler.com/http://jacketsnthingsambler.com/

15. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 15 Stages of Development 3.Full Integration Stage Complete business transaction Place orders and pay for it online Track their shipments until delivered Obtain customer assistance at every step Advantage – Do not have to be a click-only company to use full integration.

16. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 16 Get the Message Page 213 Critically Thinking What factors might have contributed to the closing of the digital divide? How would this information impact marketers hoping to target minorities? What approach might such marketers take now that they would not have taken in 2000?

17. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 17 Success in E-Commerce Brainstorm some Advantages & Disadvantages of e-commerce. Still need to identify the target market and need consumer needs to be successful in business.

18. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 18 Advantages of E-commerce (1 of 2) Immediate access to prospective customers all over the world. Introduce new products or update product info instantaneously. Communication is no longer confined to computers. Extended to notebooks, cell phones, PDAs.

19. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 19 Advantages of E-commerce (2 of 2) Marketing Research Tool. Customer access 24/7. Products delivered to computers E-Tickets replace paper tickets. Small businesses can compete more easily with large companies

20. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 20 Disadvantages of E-commerce (1 of 3) Easy to start w/o understanding Products not described well Products not delivered on time Damaged during shipments Errors in order processing Customer service hard to obtain Returns/Defects difficult to return

21. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 21 Disadvantages of E-commerce (2 of 3) Businesses learned: Difficult to predict demands Customers expect 24/7 service Warranty/Repairs must be offered to online customers Methods to accept returns Secure websites to accept credit cards

22. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 22 One of the Greatest Disadvantages of E-commerce (3 of 3) Changing nature of competition & Customers purchasing behaviors Brick-n-mortar businesses compete geographically E-commerce compete with all businesses offering same products

23. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 23 Marketing Concept Applied to E-commerce Still need to: Understand target market Know their needs and wants How to meet/satisfy those needs and wants with a marketing mix.

24. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 24 Marketing Concept Applied to E-commerce Offer products that customers want (Product) Distribute them effectively (Place) Make purchases affordable (Price) Make ordering and payments easy (Finance) Provide info in description/pictures (Promo) Answer questions (Service) Provide expected services (Product) Solve problems at every stage of sale (Service)

25. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 25 GROWING IMPORTANCE OF E-COMMERCE GOALS Identify evidence of the growth of the Internet. Describe the various business uses of the Internet for e-commerce. 8-2

26. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 26 Growth of the Internet No one recognized the potential of the Internet when it was first developed in 1950 as the military and research tool. Over 120 Million business, organization and individual registered web sites were active worldwide in 2007. Millions more added each year.

27. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 27

28. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 28 Growth of the Internet B2C: Business-to-Consumer B2B: Business-to-Business Many people/businesses around the world do not yet purchase online or small amount Some not even connected yet. Likely to increase by million/billions in the future Lots of room for growth

29. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 29 Business Uses of the Internet Communicating (1 of 4) Internet is a very efficient and effective communications tool for both individuals and businesses. Chat Room Bulletins board Personal Messengers Webcams Online Whiteboards Social Media (Facebook, Instagram, Twitter)

30. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 30 Business Uses of the Internet Communicating (2 of 4) Quick and Inexpensive Newsletters Reports Other important information for employees and investors

31. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 31 Business Uses of the Internet Communicating (3 of 4) Provide detailed information Post hours of operations Provide contact information Provide directions and maps to locations

32. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 32 Business Uses of the Internet Communicating (4 of 4) Common for business communication Place orders Provide product info Share data Send emails Exchange documents Offer trainings Update online records If you do not post your info online you are missing many prospective customers.

33. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 33 Business Uses of the Internet Gathering Information (1 of 3) Much information is FREE Provided by government agencies, colleges, libraries, & even private businesses Other information can be purchased Research companies, professional & trade associations & businesses publish info

34. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 34 Business Uses of the Internet Gathering Information (2 of 3) Improved capacity to gather consumer info Customers encouraged to complete product registrations & warranty cards on their purchase Allows company to collect info about consumer including an email address Valuable information for future communication and promotional activities

35. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 35 Business Uses of the Internet Gathering Information (3 of 3) Websites now include: Requests for further information Requests to be added to mailing lists These options provide businesses with a list of prospective customers seeking more info.

36. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 36 Business Uses of the Internet Improving Operations (1 of 2) Internet has improved marketing activities and doing business. Salesperson can check availability of products Production manager can access transportation records and see shipment details Engineers in different locations can collaborate on product designs instantaneously.

37. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 37 Business Uses of the Internet Improving Operations (2 of 2) Businesses can compete nationally and internationally without cost of salespeople Businesses locate other businesses to assist them w/ long distance transactions. Distribution Customer Service Billing & Payment Collection

38. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 38 VIRTUAL MARKETING AND DISTRIBUTION GOALS Differentiate virtual marketing from traditional marketing. Describe distribution methods used in e-commerce. Identify distribution problems experienced by e-businesses and how they can be resolved. 8-3

39. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 39 Marketing Via the Internet E-Commerce usually requires a combination of traditional marketing and: Virtual Marketing: the completion of marketing activities primarily through the use of computer and Internet technologies

40. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 40 Virtual Marketing Examples Marketing research using online surveys and other electronic data-collection methods Distribution of electronic versions of products & services such as e-tickets & e-books Processes for making electronic payments and managing finances such as secure credit card transactions and online banking/bill payments Communication & promotion strategies such as Internet advertising, email, live chats, blogs

41. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 41 Virtual Marketing E-commerce businesses also need to be able to use traditional marketing forms Effective order processing Product storage Transportation systems (Behind the scenes stuff)

42. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 42 Virtual Marketing Issues Some customers may not be comfortable with electronic payments Companies need to have alternative payments Some customers may not search online Requires traditional advertising/promotions Need more attention to marketing planning Need knowledge of new technologies

43. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 43 Distribution for E-Commerce Distribution is the marketing function that can determine success or failure for a company in e-commerce. Major distribution changes in e-commerce: access to products ordering processing distribution methods

44. © 2009 South-Western, Cengage LearningMARKETING Traditional Distribution Chapter 8 44

45. © 2009 South-Western, Cengage LearningMARKETING Customer Orders Chapter 8 45

46. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 46 Distribution for E-Commerce Finding and Buying Products Online Increased competition Online shopping carts designed: Complete orders Make immediate payments Securely submit orders Confirmations occur almost instantaneously

47. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 47 Distribution for E-Commerce Internet has streamlined Order Processing Past – process for filling orders required a lot of paperwork to be sent to every dept involved Internet provides all the info at your fingertips Order info sent via computer to depts. involved Check order status via Internet (more on next slide)

48. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 48 Distribution for E-Commerce Internet has streamlined Order Processing Customers can check order status via Internet Reduces errors - accuracy checked more easily Save $ - on order processing & distribution costs Savings Chart to follow…

49. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 49 Cost Savings ProductSavings Computer software99% Banking services89% Airline tickets87% Stocks78% Books56% Toys and gifts48% Average Cost Savings for Businesses when Customers Use the Internet to Make Purchases

50. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 50 Distribution for E-Commerce Internet can make Product Distribution easier & less expensive Software companies do not have to produce CD – instead we download the software Government does not have to print & mail tax forms & instruction books – online forms instead Newspapers/Magazines have online editions Photographers post photos online instead of CD

51. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 51 Distribution Problems & Solutions Transaction Security (1 of 3) Transaction Security Over half of all Internet consumers make at least one online purchase every 3 months. Nearly 2/3 of all purchases started are ended before the customer submits the final order. Business loses the sale and may have lost the consumer completely due to problems with the purchasing procedures.

52. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 52 Distribution Problems & Solutions Transaction Security (2 of 3) One of the greatest concerns of customers is the security of the info they provide when placing an order online: Personal info: Name, Address, Phone #, Credit Card # 1.Personal info can be stolen or misused while it is being transmitted or stored on computer 2.Business may misuse the info after the order has been processed

53. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 53 Distribution Problems & Solutions Transaction Security (3 of 3) E-commerce companies go through great lengths to provide security for customers Advanced Security Technologies Offer the choice of fax or phone orders Bank account transfers (no credit card #) C.C. companies offer insurance so they aren’t responsible for misuse of their info Privacy policies concerning use of private info

54. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 54 Distribution Problems & Solutions Expanded Distribution & Customer Service 1/4 Distribution activities were challenging Still needed to pack and ship online orders Customers often had questions Customers often needed help with assembly If product damaged or not what they wanted, they wanted to be able to return/exchange it Customers became dissatisfied with lack of services provided w/ online purchases

55. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 55 Distribution Problems & Solutions Expanded Distribution & Customer Service 2/4 UPS & Fedex offer special delivery services to meet needs of online buyers Shipments tracked instantly online Easy returns with preprinted labels, return instructions and free pick-up services Some businesses offer arrangements for returns made to local businesses

56. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 56 Distribution Problems & Solutions Expanded Distribution & Customer Service 3/4 Customer Service centers have been set up to respond to Internet customers. Links to FAQs – immediate answers Instruction manuals, product warranties & registration, & product replacement orders can all be found online for easy access

57. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 57 Distribution Problems & Solutions Expanded Distribution & Customer Service 4/4 New businesses have been developed to serve e-commerce distribution needs. Product Fulfillment Center: provides some or all of the activities required to fill orders. Amazon.com – successful example Does not produce products Sells products of other businesses by completing ordering processing, product storage, order filling & packing and customer service.

58. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 58 THE ROLE OF PROMOTION FOR E-COMMERCE GOALS Describe how companies use promotion on the Internet. Identify ways to increase the effectiveness of online promotion. 8-4

59. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 59 Communicating with Internet Users Most people today are not using the Internet to purchase products when they are online. Only 2% of Internet users say they go online with the intention of making a purchase. Over 80% say they go online for communication purposes. Consumers more likely to gather information on products and compare alternatives.

60. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 60 Communicating with Internet Users Promotion – communication portion of marketing mix. Communicate information to encourage customers to buy the products and services Brick-n-Click & Click-Only businesses benefit from using Internet promotions Even Brick-n-Mortar businesses are developing informational websites

61. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 61 Communicating with Internet Users Advertising Expenditures 1998 - less than $2 billion on e-advertising 2007 - over $9.7 billion for advertisements Newer forms of promotions being developed: Call attention to company name/product Provide info in non-ad formats Link info to company’s website

62. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 62 Communicating with Internet Users Promotion Methods 1.Online Advertising Compete for Internet user attention Use varied sizes, colors, placements, designs Banners – across the top or bottom of page Skyscrapers – vertically on page margins Small Boxes – within the text Links – to full page advertisements

63. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 63 Communicating with Internet Users Promotion Methods Latest Technologies Pop-Ups – advertisement that opens in a new window when a web page is viewed. Video Clips – short clips to promote products Rich Media – variety of digital technologies that provide interactive multimedia experiences for users.

64. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 64 Communicating with Internet Users Promotion Methods Online Ad ~ Internet Advertising Bureau (IAB) Established standards for size, appearance, and use of Internet advertising methods. One pop-up for each visit to the website Pop-up should be labeled w/ sponsor’s name Advertising videos should be limited to 30 sec with viewer controls of video and audio

65. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 65 Communicating with Internet Users Promotion Methods 2.Web Sponsorship Effective way to build recognition of a company’s name and products with prospective customers Sponsor’s name included on web site so that visitors see the name each time they visit. Ex. Bank could sponsor a web site that helps consumers understand how to lease or finance the purchase of an automobile.

66. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 66 Communicating with Internet Users Promotion Methods 3.Priority Placement Search engines allow companies to buy a top spot on the search results list. Classified Advertising: search engines display sponsor’s name, a link to its website, and a brief description or promo message in a column beside the search results.

67. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 67 Communicating with Internet Users Promotion Methods 4.Information Websites Companies and organizations develop free websites on topics of interest to their prospective customers Believe if they inform the consumers, they are more likely to purchase related products

68. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 68 Communicating with Internet Users 5.Other types of promotion Companies develop email lists from: email addresses of previous product consumers consumers who sent inquiries to the company purchasing emails lists from other companies Provide online coupons for new products Promotions to encourage consumer requests for free samples or informational CDs.

69. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 69 Communicating with Internet Users Companies are increasingly using more informal and personalized methods of Internet communication. Online newsletters Email messages sent to regular customers Business Blogs: regularly updated online journals written by company experts. Online interest or social groups

70. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 70 Customer Satisfaction with Types of Shopping Type% satisfied Shopping online73% Shopping in stores60% Shopping with catalogs56% Most consumers are satisfied with their shopping experience when they make purchases using the Internet. Why ? ? ? Convenience, Time-Saving, One-Stop-Shopping

71. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 71 Preparing for E-Commerce Marketing Planning the Shopping Experience Website design and effective communication principles are needed to attract consumers to the business & help them make a purchase. Promotions must result in a sale and satisfy customers otherwise it was wasteful spending.

72. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 72 Features Likely to Increase Online Purchasing Close-up images of products Information on product availability Shopping with catalogs Product comparison guides An easy-to-use search function Toll-free customer service number Consumer reviews and product evaluations An easy-to-use “shopping cart” and check out feature

73. © 2009 South-Western, Cengage LearningMARKETING Chapter 8 73 Effective Promotional Tools An easy-to-remember, meaningful Internet address Well-designed online advertisements Advertisements in other media such as newspapers and TV Registration with search engines to identify the company to people gathering information about its products Customer service personnel to help customers & answer questions Info collected about: who visits, when they visit, time spent, which pages & links are most popular, & what info influences their purchases Online chat rooms, discussions & clubs to exchange info w/customers Email promotions/announcements to encourage regular visits to site