Information Technology & Data Analytics
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05-Lesson_05.pdf
Lesson 5: Electronic Commerce
Information Technology & Data Analytics
November 1st, 2021
Information Technology & Data Analytics
Chapter 5
Electronic Commerce: Strategies for the New Economy
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ADVERTISING $$ GO WHERE THE EYES ARE: 2009
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ADVERTISING $$ GO WHERE THE EYES ARE
10 Kleiner Perkins Caufield Byers (2014)
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ADVERTISING $$ GO WHERE THE EYES ARE
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Digital Advertising Spending Worldwide
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1. Ratio of your time spent on TV versus the Internet?
2. What do you do during commercials – channel surf, get something to eat, something else?
3. What’s going to happen to newspaper advertising revenue?
ADVERTISING $$ GO WHERE THE EYES ARE
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In the News
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➢ Alibaba’s shopping festival • What is 11.11?
➢ Where does it get the name from? • From the date: 11/11
➢ 2018: Broke the 200 billion yuan mark ($ 30.8 billion USD) ➢ 2019: 268.4 billion yuan ($38.4 billion USD) ➢ 2020: 474.5 billion yuan ($74.1 billion USD)
➢ Would they break the record again this year? • Analysts say no, because of:
oGovernment interventionism Tariffs oDiscounts are not as good anymore Too much work! oMany shopping festivals during the year oNew players, such as Pinduoduo
Singles Day
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Prime Day Vs. Singles Day
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Introduction
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➢ E-commerce is changing everything
➢ Electronic commerce (e-commerce) – commerce, but it is commerce accelerated and enhanced by IT
• Build powerful relationships with customers
• Build powerful relationships with suppliers
• Build powerful relationships with partners
INTRODUCTION
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➢ E-commerce is still commerce
➢ You must have a clear path-to-profitability (P2P), a formal business plan that outlines key business issues such as:
• Customer targets
• Marketing strategies
• Operations strategies
• Projected income statement and balance sheet targets`
INTRODUCTION
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E-Commerce Business Models
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E-COMMERCE FEATURES
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E-COMMERCE BUSINESS MODELS
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➢ Business to Government (B2G) e-commerce – when a business sells products and services to a government entity.
• Lockheed providing products and services to DoD
• Fairly large e-commerce model in terms of revenue
B2G E-Commerce
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➢ Business to Government (B2G) e-commerce – when a business sells products and services to a government entity.
• Lockheed providing products and services to DoD
• Fairly large e-commerce model in terms of revenue
B2G E-Commerce
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➢ Consumer to Government (C2G) e- commerce – when an individual sells products and services to a government entity
• You selling something to the government
• This market is quite small and unremarkable
C2G E-Commerce
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➢ Government to Business (G2B) e-commerce – when a government entity sells products and services to businesses
• SBA providing surety guarantees, disaster assistance, ombudsmen, etc.. to small businesses
• TSA holding auctions and selling off confiscated items (most times, you must be a “business” to participate in these auctions)
G2B E-Commerce
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➢ Government to Consumer (G2C) e-commerce – e-commerce activities performed between a government and its citizens
• Does not fit well at all within the traditional supply-and-demand e-commerce notion
• Paying taxes, registering vehicles, etc.
• Buy Securities, such as bonds, from TreasuryDirect
➢ Government to Government (G2G) e-commerce – e-commerce activities within a nation’s government (can also refer to e- commerce activities between 2 or more nations’ governments)
• Example: Northeast Gang Information System (NEGIS).
G2C and G2G E-Commerce
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➢ Business to Business (B2B) e-commerce – when a business sells products and services to customers who are primarily other businesses
• Where all the e-commerce money is
• Basically, it’s about businesses doing business with other businesses
• Supply chain management (SCM) is a big part of B2B e-commerce
• Example: FDC handles nearly half of the credit and debit card transactions in the US
B2B E-Commerce
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➢ Business to Consumer (B2C) e-commerce – when a business sells products and services to customers who are primarily individuals
• B2C is the glitzy e-commerce like Amazon, etc.
• B2C is a primary focus of the later sections in this chapter
B2C E-Commerce
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➢ Consumer to Business (C2B) e-commerce – when an individual sells products and services to a business
• True economic inversion of the B2C model
• Examples: Fotolia, Upwork, Guru, PeoplePerHour
• You can also advertise businesses on your personal Web site (called an affiliate program) and receive monies for visitors who jump from your site to the business’ Web sites
C2B E-Commerce
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➢ Consumer to Consumer (C2C) e-commerce – when an individual sells products and services to another individual.
• You selling to another person (or the reverse)
• Usually occurs through an intermediary such as eBay or Craigslist
C2C E-Commerce
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➢ Marketplace – Products or services provided by third parties.
• The marketplace operator processes the transaction
Marketplace
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➢ Understand your business and your customers
➢ Find and establish relationships with customers
➢ Move money easily and securely
E-commerce Critical Success factors
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➢ Understand your business and your customers
➢ Find and establish relationships with customers
➢ Move money easily and securely
E-commerce Critical Success factors
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➢ Understand your business and your customers
➢ Find and establish relationships with customers
➢ Move money easily and securely
E-commerce Critical Success factors
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Understand your Business, Products,
Services & Customers
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➢ To be successful, you must:
• Define your products and services
• Define your target customers
▪ B2B (other businesses)
▪ B2C (individuals)
• Define your customers perception of the value of your products and services
▪ Needs and wants
UNDERSTAND YOUR BUSINESS, PRODUCTS, SERVICES, & CUSTOMERS
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Customer Product and Service Value Perception
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➢ Convenience
• Lower priced
• Purchased frequently
• Some consumers might pay more for convenience
➢ Specialty
• Higher priced
• Purchased less frequently
• More time “shopping around”
oBest deals, service, warranty, other features
B2C: Convenience Versus Specialty
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➢ Commoditylike • Same no matter where you purchase it • Examples: books, music, movies • Differentiators:
▪ Price, ease of ordering ▪ Delivery speed, return policy
➢ Digital • Purchased and delivered over the Internet • Best product type for B2C e-commerce
B2C: Commoditylike and Digital
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➢ Mass customization – the ability of an organization to give its customers the opportunity to tailor its products or services
• Dell – customized computer purchases
• Apple iTunes – only the music you want (not necessarily the whole album)
• Clothing
• Furniture
B2C: Mass Customization
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➢ Maintenance, repair, and operations (MRO) materials (indirect materials) – materials necessary for running a company but do not relate to the company’s primary business activities
• Similar to convenience items in B2C
• Office supplies, repair parts, lubricating oils
B2B: MRO Versus Direct
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➢ Buyers in B2B make large purchases
➢ Can then demand a discount or wholesale price (not true in B2C)
➢ Can team up with other buyers to create demand aggregation
➢ Demand aggregation – combining purchase requests from multiple buyers which justifies a larger discount
MRO Materials
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➢ Direct materials – materials that are used in production in a manufacturing company or are placed on the shelf for sale in retail environments
• Relate directly to a company’s primary business activities
• Quality, quantity, and delivery timing are important
➢ Buyers can participate in reverse auctions for direct materials
➢ Reverse auction – process in which a buyer posts its interests in buying items and sellers compete by submitting successively lower bids
• The lowest bidder wins
Direct Materials
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➢ B2B e-commerce takes advantage of e-marketplaces
➢ Electronic marketplace (e-marketplace) – interactive business providing a central market where multiple buyers and sellers can engage in e-commerce
• Horizontal e-marketplaces
• Vertical e-marketplaces
B2B: Horizontal Versus Vertical
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E-Marketplaces
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➢ Horizontal e-marketplace – connects buyers and sellers across many industries
• Primarily for MRO materials
• All industries need office supplies, travel, and the like
Horizontal E-Marketplace
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➢ Vertical e-marketplace – connects buyers and sellers in a given industry
• Primarily for direct materials
• Each industry has unique direct material needs
• Covisint – automotive
• Many others
Vertical E-Marketplace
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E-Marketplaces
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E-Marketplaces
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➢ B2C
• Varying demographics and lifestyles
• Convenience versus specialty products
• Commoditylike and digital work best of all
• Mass customization necessary in some instances
To Summarize
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➢ B2B
• MRO versus direct materials
• Demand aggregation is present
• E-marketplaces are vitally important
▪ Horizontal (MRO materials mainly)
▪ Vertical (direct materials mainly)
To Summarize
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Find Customers and Establish Relationships
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➢ You must first find customers
➢ Then establish relationships
➢ Otherwise, you can’t make a sale
➢ B2C and B2B techniques are very different
FIND CUSTOMERS AND ESTABLISH RELATIONSHIPS
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➢ Need to determine your marketing mix
➢ Marketing mix
• set of marketing tools your organization will use to pursue its marketing objectives in reaching and attracting potential customers
• There are many such tools for B2C
Business to Consumer
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➢ Registering with search engines
➢ Online ads
➢ Viral marketing
➢ Affiliate programs
B2C Marketing Mix Tools
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➢ Some search engines will list your site for free
• Google Search Console
• Bing Webmaster Tools
➢ Others charge a fee
➢ For an additional fee, your site can appear at top of a search list (every time)
Registering with Search Engines
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➢ Online ads (banner ads) – small advertisements that appear on other sites
➢ Variations are:
• Pop-up ad – small Web page advertisement that appears on your screen outside the current Web site
• Pop-under ad – pop-up ad you do not see until you close your current browser window
Online Ads
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• Entry pop-up – shows up as soon as the page displays
• Scroll pop-up – shows up at some point while you are scrolling
• Exit pop-up – shows up when you are about to leave the site (mouse tracking)
• Click pop-up – you have to click on the add in order to close it. Sometimes, you cannot see your website until you click on it
• Timed pop-up – the pop-up will disappear after the set time runs out. Sometimes, you cannot see your website until you click on it
Even more pop-ups!
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Online Ads
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Banner ad for a stock brokerage
firm
Information Technology & Data Analytics
➢ Viral marketing – encourages users of a product or service supplied by a B2C business to encourage friends to join in as well
• One of the first examples: Blue Mountain Arts
• Contests (incentives)
• Shares or likes (pass –along)
• Share experiences (What am I listening to?)
• Email blasts
• Buzz marketing
Viral Marketing
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1. Gives away products or services
2. Provides for effortless transfer to others
3. Scales easily from small to very large
4. Exploits common motivations and behaviors
5. Utilizes existing communication networks
6. Takes advantage of others’ resources
Viral Marketing Strategy
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Ralph Wilson, 2012
Information Technology & Data Analytics
➢ Affiliate program – arrangement between two e-commerce sites that directs viewers from one site to another
• If viewers buy at the second site, the second site pays a small fee to the first site
• Usually a percentage of the sale
Affiliate Programs
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➢ Two key concepts for affiliate programs
• Click-through
ocount of the number of people who visit one site and use an ad to get to another
• Conversion rate
opercentage of potential customers who actually buy something
Affiliate Programs
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Affiliate Programs
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➢ Much more personal
➢ Not usually done with generic ads designed for mass distribution
➢ Often take place in e-marketplaces
➢ Once a contact is made, the relationship must be established
➢ This often requires face-to-face meetings
➢ Must also integrate the IT systems to the supplier business and customer business
Business to Business Marketing
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➢ B2C
• Marketing mix drives customers to Web site
• Search engines, online ads, viral marketing, and affiliate programs
• Focus on conversion rates to measure success
To Summarize
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➢ B2B
• Frequently occurs in an e-marketplace
• Requires establishing formal business relationship
• Requires IT system integration
• Doesn’t include broad and generic marketing mix
To Summarize
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Move Money Easily and Securely
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➢ Most money moves electronically
➢ Security is critical!
➢ There are many services to move money around
➢ Payment should be:
• Electronic
• Easy
• Secure
MOVE MONEY EASILY & SECURELY
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➢ Credit cards
➢ Financial cybermediaries
➢ Electronic checks
➢ Electronic Bill Presentment and Payment
➢ Smart cards
B2C Payment Systems
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➢ Financial cybermediary – Internet-based company that makes it easy for one person to pay another person or organization over the Internet
• PayPal is the most well-known
• Android Pay
• Apple Pay
• Samsung Pay
• Google Payments
• Simplify by MasterCard
• Venmo
• Zelle
Financial Cybermediaries
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➢ Electronic check – mechanism for sending money from your checking or savings account to another person or organization
• Many implementations
• Most common implementation is online banking
Electronic Checks
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➢ Electronic Bill Presentment and Payment (EBPP) – system that sends bills over the Internet and provides an easy-to-use mechanism (perhaps a button) to pay for them if the amount looks correct
Electronic Bill Presentment & Payment
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➢ Smart card – plastic card (the size of a credit card) that contains an embedded chip on which digital information can be stored and updated
• Debit cards are an implementation
Smart Cards
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➢ Must move money and other information such as shipping address
➢ Digital wallets can help
➢ Digital wallet – software and information
• Software provides transaction security
• Includes delivery address and other forms of necessary information
B2C Payment Systems
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➢ Can be:
• Client-side
oyou create this digital wallet and keep it on your computer (Chrome saved credit cards)
• Server-side (also called a thin wallet)
oan organization creates this for you and keeps it on its servers
▪ Android Pay, Apple Pay, Pay Pass, PayPal, Samsung Pay
Digital Wallets
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➢ Business customers:
• Make large purchases
• Will not pay with credit card or financial cybermediary
• Use financial EDI
• Pay for many purchases at once (perhaps the end of the month)
B2B Payment Systems
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➢ Electronic data interchange (EDI) • direct computer-to-computer transfer of transaction information in
standard business documents, such as invoices and purchase orders, in a standard format
➢ It is how businesses communicate with each other
➢ Used in e-marketplaces and VANs
➢ Value-added networks (VANs) oB2B service that offers information-sharing services among
organizations • Intermediary • VANs support the sending and receiving of purchase orders, for
example • Order products and send invoices electronically
EDI
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➢ Often occurs through an automated clearing house (ACH)
• ACH: Established to process the exchange of electronic transactions
• In the US: Federal Reserve and the Electronic Payments Network (EPN)
Financial EDI
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➢ Financial EDI – an electronic process used primarily within B2B for the payment of purchases
• This is electronic money in B2B
Information Technology & Data Analytics
➢ Security is very important when moving money
➢ Some security measures are:
• Encryption
• Secure Sockets Layers
• Secure Electronic Transactions
• There are others
Security: The Pervading Concern
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➢ Encryption
• scrambles the contents of a file so that you can’t read it without having the right decryption key
➢ Often through public key encryption (PKE) – uses two keys: a public key for everyone and private key for only the recipient of the encrypted information
Encryption
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Public Key Encryption
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➢ Secure Sockets Layer (SSL)
• Creates a secure connection between a Web client and server
• Encrypts the information
• Sends the information over the Internet
➢ Denoted by lock icon on browser or https:// (notice the “s”)
Secure Sockets Layers
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Secure Sockets Layers
The “s” in
https and
the padlock
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➢ Secure Electronic Transaction (SET) – transmission method that ensures transactions are legitimate as well as secure
• Helps verify use of a credit card, for example, by sending the transaction to the credit issuer as well as the seller/supplier
Secure Electronic Transactions
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➢ Tokenization – It protects credit card information while in use
• Data is replaced with a token, stored in the merchant’s system
• Actual data is stored in a secured data-vault
• The credit card data only in use while making a purchase
Securing Transactions Online
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➢ PCI DSS – Payment Card Industry Data Security Standard
• IT security standard for entities which handle credit card information
• Founding members: American Express, Discover Financial Services, JCB International, MasterCard, and Visa Inc.
➢ PCI Compliance – security guidelines include:
• Encryption
• Restricted access to cardholder data
• Security policy for personnel
➢ Based on twelve requirements
Securing Transactions Online
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1. Install and maintain a firewall configuration to protect cardholder data
2. Do not use vendor-supplied defaults for system passwords and other security parameters
3. Protect stored cardholder data
4. Encrypt transmission of cardholder data across open, public networks
5. Use and regularly update anti-virus software
6. Develop and maintain secure systems and applications
PCI Twelve Requirements
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7. Restrict access to cardholder data by business need-to-know
8. Assign a unique ID to each person with computer access
9. Restrict physical access to cardholder data
10. Track and monitor all access to network resources and cardholder data
11. Regularly test security systems and processes
12. Maintain a policy that addresses information security for all personnel
PCI Twelve Requirements
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➢ B2C
• Credit cards, financial cybermediaries, electronic checks, EBPP, smart cards, and digital wallets
• Pay for individual purchases, usually in small amounts
• Each payment must be validated
To Summarize
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➢ B2B
• Use EDI to facilitate ordering process
• VANS can provide for EDI and financial EDI
• Use financial EDI for payment of purchases
To Summarize
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➢ B2C and B2B – security:
• Overriding concern
• Encryption, SSLs, PCI DSS and others
To Summarize
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E-Business Trends
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➢ “E” is certainly changing many things in our lives
➢ Four important ones
1. Long-Tail Economics
2. Crowdsourcing
3. Virtual Goods
4. Mobile Commerce
E-BUSINESS TRENDS
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➢ Long Tail – first offered by Chris Anderson; explains e-commerce profitability in terms of a sales curve
• Brick-and-mortar businesses carry limited inventory, inventory that is popular
• E-businesses can carry huge amounts of “niche” inventory that may only sell a couple of times a year
E-Business Trend – Long Tail
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E-Business Trend – Long Tail
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E-Business Trend – Long Tail
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➢ Crowdsourcing – when businesses provide enabling technologies that allow people, instead of designated employees, to create, modify, and oversee the development of a product or service.
• Use non-paid non-employees to create value
➢ Many previous examples
• New York City’s App development contest
• Netflix and its $1 million prize for its recommendation engine
• Goldcorp $3 billion on a $575,000 prize
E-Business Trend - Crowdsourcing
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➢ Virtual good – nonphysical object
• Music
• E-cards
• Toys, weapons, clothes, and accessories you buy in online communities like Farmville and World of Warcraft
• $14 billion USD market in 2014
E-Business Trend – Virtual Goods
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➢ Mobile computing – your ability to use technology to wirelessly connect to and use centrally located information and software
➢ Mobile commerce (M-commerce) – electronic commerce transactions conducted over a wireless device such as a smartphone, laptop, or tablet PC
➢ In 2016, Mobile Games alone generated an estimated $37 billion USD
E-Business Trend – Mobile Commerce
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➢ Consumer fragmentation
➢ Free shipping, fast delivery
➢ Mobile payment
➢ Crowdfunding
➢ Chat bots and AI
E-Business Trend – Mobile Commerce
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➢ User-generated content (recommendations)
➢ Social commerce
➢ Compelling content, video content
➢ Voice commerce
E-Business Trend – Mobile Commerce
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E-Business Trend – Mobile Commerce Revenue World-Wide
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Questions?
Thank you!
