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Management Information Systems for The Information Age

Haag, S., & Cummings, M. (2013). Management information systems for the information age.

New York: McGraw-Hill.

MANAGEMENT INFORMATION - - - - -

l S~STEMS FOR THE IN_FORMATION AGE

> > Ninth Edition Stephen HAAG I Maeve CUMMINGS 1

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136

Define and describe the nine major· e-commerce business models .

. Identify the differences and similarities among customers and their perceived value of products and services in the 828 and B2C e-commerce business models.

Compare and contrast the development of a marketing mix for customers in the 828 and B2C e-commerce business models.

Summarize the various ways of moving money in the world of e-commerce and related issues.

Discuss some major trends that are impacting both the e-commerce business world and society in general.

Global Perspective Can You Name The Top 20 Web Sites?

• Exploring Google Earth Industry Perspective • Learning about investing The World of Facebook Now Includes a • Gathering competitive intelligence Full Economy

• Researching storefront software Industry Perspective • Finding hosting services Google Ups the Ante in the Mobile • Gold, silver, interest rates, and money Payments Market

• Free and rentable storage space Industry Perspective • Small Business Administration Crowds Create "Value" through • Global statistics and resources Funding

XLM/B The World Wide Web and the Internet Extended Learning Module B is a fast-paced tour of the Web and the Internet. The first focus is on learning just enough about the Web to be an effective surfer. Then, explore the technology infrastructure behind the Web that makes it all possible. Finally, conclude with an overview of the options for connecting to the Web and the emerging life of Web 2.0.

XLM/E Network Basics Extended Learning Module E provides an introduction to the vast, exciting, and dynamic field of information technology networks. The module includes discussions of what is needed to set up a small network at home, the components used to build large business networks, Internet connection possibilities, types of communications media, and network security.

ectronic Commerce ategies for the New Economy

TRAGEOUS INDUSTRY NSFORMATION: ADVERTISING

OLLARS GO WHERE THE EYES ARE

- :he world of commerce, which is now to a great ~ ent electronic comme rce or e-commerce, you

=ed to spend your advertising dolla rs well. That ean s developing effective campaigns, creating

-,,m orable advertising assets, using the appro-

: at e media mix, and placing your ads where --e eyes are. "Eyes" in this case refers to viewer- - ·p, where people will see your advertising.

n the past, most advertising dollars were _ -.ont on paper-based-media such as newspapers

:::- magazines and on TV and radio advertising.

-= e a look at the accompanying graph . Where :::-e people now spending a large portion of --eir time? Right, on the Internet. Adults spend

:~ percent of their time on the Internet. If you

:::::d in young adults and teenagers, that number - reases to 38 pe rcent.

So, where are advertisers spending their dol-

=rs t oday? Interestingly enough, not always ere people spend a lot of their time . Adults

_::en d 37 percent of their time on TV. Nearly _-e-t hird (32 percent) of all advert ising dollars

:::-e spent on TV, so the correlation the re is fairly

= d. But look at newspapers. Adults spend only .: ercent of their time with their eyes on a news- _.:: er, but advertisers spend 20 percent of their

::::: 1erti sing dollars there. You have to question

--e effectiveness of that decision .

dults spend 29 percent of their time on the -:ern et, but adve rtisers spend only 8 percent of - eir advert ising dollars there. That's a signifi- - ad-dollar-to-viewership ratio. The ratio for

- is alm ost 1-to- 1 (1 percent of viewership time

is reached by 1 percent of advertising dollars). For the Internet, on the other hand, the ratio is 3.5-to-1 . That is, 3.5 percent of viewefs hip time is reached by only 1 percent of advertising dollars.

So, where do you think this outrageous indus-

try transformation is going? In the advertising

industry, you can expect to see an increasing shift

of advertising dollars from TV and newspaper to the Internet. This certainly makes sense. If people are spending mo re time on the Internet, then businesses will focus more of their advertising dolla rs there. 1

40%

35%

30%

25%

20%

15%

10%

5%

0%

Questions

• Time Spent

• Ad Spend

1. In a typical week, what is the ratio of t he time

you spend watching TV as compared to the time you spend on the Internet?

2. When watching TV, what do you do when a commercial comes on? Do you channel surf?

Get up and get something to eat or drink? Something else?

3. When advertisers start spending fewer dollars in newspapers, what will happen to the cost of a newspaper? Will newspapers be able to

su rvive?

127

128 Chapter 5 • Electronic Commerce

f ....._

j Introduction The past 15 years of the new economy introduced by the World Wide Web have cer- tainly been interesting. There has been an entrepreneurial frenzy unlike anything the world has ever seen. Fortunes have been made and lost. Dot-com millionaires and bil- lionaires were literally created overnight- many became dot-bomb paupers in about the same amount of time.

What fueled this frenzy and is still doing so today? It's electronic commerce enabled by information technology. Electronic commerce (e-commerce) is commerce, but i is commerce accelerated and enhanced by IT, in particular the Internet. E-commerce enables customers, consumers, and companies to form powerful new relationships tha would not be possible without the enabling technologies. E-commerce breaks down business barriers such as time , geography, language, currency, and culture. In a few shon hours , you can set up shop on the Internet and be instantly accessible to millions of con- sumers worldwide.

Is there a catch? The answer is both no and yes. It's "no" because it doesn't take much effort to create your own e-commerce Web site. It's "yes" because you still haYe to follow sound business fundamentals and principles to be successful. Let's not forge that fundamentally it's still all about commerce, businesses and people buying and sell- ing products and services . E-commerce is no " silver bullet,'' as some entrepreneurs haYe found out to their chagrin.

In short, you must have a clear path-to-profitability. A path-to-profitability (P2Pj is a formal business plan that outlines key business issues such as customer targets (b~­ demographic, industry, etc.), marketing strategies, operations strategies (e.g., produc- tion, transportation, and logistics), and projected targets for income statement and bal- ance sheet items. That is to say, running an e-commerce operation is no different from running a traditional brick-and-mortar business. You must identify your customerJ. determine how to reach them with a compelling story, and so on. The major error tha most dot-com businesses made in the late 1990s- and they are no longer in existence today- is that they never developed a clear path-to-profitability.

I £-Commerce Business Models

c LEARNING O UTCOME 1 As illustrated in Figure 5.1, there are nine major e-commerce business models. We' J.: start by defining and briefly describing some of lesser known and used e-commerce models and then move on to the more prominent e-commerce models.

• Business to Government (B2G) e-commerce-occurs when a business sells products and services to a government entity. Lockheed Martin, for example, generates almost 80 percent of its revenue by providing products and services to the U.S . Department of Defense (DoD). 2

• Consumer to Government (C2G) e-commerce- occurs when an individual sells products and services to a government entity. To sell products and services to the U.S. federal government, you must register yourself as a formal business, so you're not really an individual anymore but rather an individual "doing busines as" (DBA) some organization or business.

• Government to Business (G2B) e-commerce- occurs when a government entity sells products and services to businesses. The Small Business Administration (SBA), for example, offers services such as loans, surety guarantees, disaster assistance, ombudsman, and so on.

E-Comme rce Business Models 129

SUPPLY Business originating from ...

B2B C2B G2B

B2C C2C G2C

B2G C2G G2G

• Government to Consumer (G2C} e-commerce-refers to the electronic commerce activities performed between a government and its citizens or consumers including paying taxes, registering vehicles, providing information and services, and so on.

• Government to Government (G2G) e-commerce-refers to the electronic commerce activities performed within a nation's government or between two more nations' governments including providing foreign aid and the sharing of border patrol activities.

U SINESS TO BUSINESS (B2B) E-COMMERCE

- usiness to Business (B2B} e-commerce occurs when a business sells products and .=n-ices to customers who are primarily other businesses. So, for example, when ares Rubber Company sells belts , hoses , and other rubber and synthetic products to

-:- rd Motor Company or any other manufacturer that needs those parts, this is B2B -commerce. B2B e- ~ommerce is where all the money is right now in the e-commerce

rld. It's not the flashy consumer-oriented businesses you read about and see everyday ch as eBay, Facebook, and so on. It' s the many behind-the-scenes interactions that

inesses engage in ultimately to support interacting with you as a customer, such as res selling a hose to Ford for a car that you eventually buy. Another example is First

aca Corporation. First Data Corporation is a payments infrastructure provider that y businesses use. When you pay with a credit card at most major stores, your credit

..:rrd authorization and verification is handled by First Data for the store. You may not ·e even heard of First Data, but it is one of America's top-250 largest corporations. As you can see in Figure 5.2 on the next page, businesses are taking full advantage of

:-commerce by creating and using B2B e-marketplaces. B2B e-marketplaces are virtual mar- ~;places in which businesses buy from and sell products to each other, share information - in information partnerships from Chapter 2), and perform other important activities. :.B e-marketplaces represent one of the fastest growing trends in the B2B e-commerce

el. Businesses are increasingly aware that they must create supply chain management _ ems, drive out costs, create information partnerships with other businesses, and even Tuborate with other businesses on new product and service offerings. B2B e-marketplaces

- er tremendous efficiencies to businesses fo r performinrr all of these tasks.

Figure 5.1 Nine Major E-commerce Business Models

130 Chapter 5 • Electronic Commerce

Business to Business E-Commerce Model vvith an Electronic Marketplace

Business to Consumer E-Commerce Model

~ IT~

828 Electronic

Marketplace ~. ! :• .. ·· Figure 5.2 Business to Business and Business to Consumer E-commerce Business Models

.-

.-.-.·. ··. '. . 'jl ~· · . . . . I , . ~: J . • ~

BUSINESS TO CONSUMER (B2C) E-COMMERCE Business to Consumer (B2C) e-commerce occurs when a business sell products services to customers who are primarily individuals. You are no doubt familiar with th!.: model of e-commerce. If you've ever ordered a book on Amazon (www.amazon.co purchased a CD from Circuit City online (www.circuitcity.com), or ordered a mm. from Netflix (www.netflix.com), you've participated in B2C e-commerce.

B2C e-commerce garners most of the attention these days in the popular me~ B2C e-commerce is the model that fueled the early growth of e-c ommerce in ch=c 1990s. B2C e-commerce is very much a cutthroat environment, no matter what product and service. Amazon, one of the most well-known B2C businesses , daily face. stiff competition from hundreds of other e-commerce businesses selling books , mo~­ ies, music, clothing, computers , consumer electronics, health and beauty produc-- and home and garden products .

As you can see in Figure 5.2, the B2C e-commerce business model is very diffe- ent from the B2B e-commerce business model. Consumers interact directly with bus:- nesses via the Web . Consumers surf around the Web evaluating products and service numerous separate e-commerce sites until they eventually choose one site from which - make a purchase. And while businesses prefer to enter into long-term partnerships wi- other businesses in B2B e-commerce, consumers are fickle and purchase the same type: of products and services from many different sites.

CONSUMER TO BUSINESS (C2B) E-COMMERCE

Consumer to Business (C2B) e-commerce occurs when an individual sells products services to a business. The C2B e-commerce business model is a true inversion of~ B2C e-commerce business model. In the B2C e-commerce business model, demand

E-Commerce Business Models 131

driven by the consumer and supply is driven by the business. In C2B it is inverted; the consumer drives supply and the business drives demand.3 Many people have mistak- enly lumped such sites as Priceline.com (www.priceline.com) into the C2B category. At

:iceline.com you, as a consumer, can set your price for items such as airlines tickets and otel rooms, but you (as a consumer) still provide the demand and the airline or hotel

-cill provides the supply. A good example of a true C2B e-commerce business model is offered by Fotolia nv.fotolia .com). There, as an individual, you can post your photos and videos for

sale to businesses. Businesses search through the photo and video archives, and, if they ho ose yours, will pay you a royalty fee to use the photo or video.

Affiliate programs are another good example of the C2B e-commerce business model. Through an affiliate program relationship with Amazon, for example, you can post links on your personal Web site to Amazon for products and services it sells . If

,-J sitor to your site clicks on one of those links and eventually buys the product or -ervice from Amazon, Amazon will pay you a commission fee, which is usually some small percentage of the sale. With this arrangement, you are selling advertising space -o Amazon on your Web site; hence , it is an example of the C2B e-commerce business model.

Currently, the C2B e-commerce business model represents only a fraction of the :otal revenues in the e-commerce space, but it is expected to grow as businesses real- ::ze that individuals are more than just consumers of products and services. Blogging, :or example, can easily become a C2B e-commerce business model, if you know what ;-ou're doing.

CONSUMER TO CONSUMER {C2C) E-COMMERCE

Consumer to Consumer (C2C) e-commerce occurs when an individual sells products and services to another individual. C2C e-commerce usually takes place through an mtermediary organization, such as eBay. eBay is a hybrid of both a B2C e-commerce site and a C2C e-commerce site. It is a B2C e-commerce site because it sells a service to you, illat of giving you the ability to interact in the auctioning of items. (You pay eBay only if """OU ' re the seller, not the buyer.) And it is really an intermediary supporting your engage- ment in a C2C e-commerce business model. That is, you use eBay to sell products and services to other consumers, and you use eBay to buy products and services from other consumers .

Many C2C Web sites don't really support any sort of e-commerce (i.e., money exchanging hands for products and services). Rather, they facilitate the gathering of p eople with common interests and something to share. Kazaa (www.kazaa.com) is an ex:ample of such a site because it brings together people who want to share mainly MP3 ::nusic files. Blogs might also fall into the category of C2C, as they support people shar- 1Ilg and discussing common interests. Many of these types of sites are ad-supported, meaning that they derive their revenue by selling advertising space, much like the con- ~ept of an affiliate program.

That ends our overview of the nine e-commerce business models. Although con- cep tually distinct, in practice each overlaps with one or more of the other models. The question for you now is how to execute on the e-commerce model in which your busi-

ess operates. We'll focus specifically on B2B and B2C e-commerce, since that is where ~ou'll most likely be working. We will explore three e-commerce critical success factors: 1) Understand your business and your customers; (2) Find and establish relationships 'th customers; (3) Move money easily and securely.

132 Chapter 5 • Electronic Commerce

= LEARNING OUTCOME 2

<""

r Understand Your Business, Products, Services, and Customers

To gain a competitive advantage and be successful in any business , you must clearly define the nature of your products and services, know who your target customers are, and understand how your customers perceive the use of your products and services in their business activities (for the B2B model) or in their personal lives (for the B2 C model). To create sound business strategies you have to understand the value that your customers place on your products and services.

There are many worthwhile business activities. But as important as writing a mission statement and producing glitzy marketing bro chures may be, what must come first is an objective, very down-to-earth understanding of what your business does . The reality is you can't be all things to all customers. You must answer two qqestions: (1) Who are your target customers? and (2) What is the value of your products and services as per- ceived by your customers? Let' s look at each in turn.

WHO ARE YOUR CUSTOMERS?

Just as in a brick-and-mortar business, in the e-commerce world you focus your efforts on selling to other businesses, to individual end consumers , or to some combination of the two. If you were in a business like Gates Rubber Company, which produces mostly rubber and synthetic products primarily for sale to the automotive industry and manu- facturers of such products as boats and bicycles, you would fo cus almost exclusively on the B2B e-commerce model, with other businesses as your target customers. If, however, you were selling resume writing and job placement services to individuals looking fo r careers, your customers would be B2C individual end consumers. Finally, you might b e like Monster.com (www.monster.com), which provides an electronic marketplace cater- ing to both individuals looking for careers and businesses looking for employees. If you were in a business like Monster's, your customer mix would include both end consum- ers and businesses and you'd need to carefully consider both groups of customers, their needs , and the value to them of the products and services you sell.

Many businesses in the travel industry, American Express , for example, cater to both businesses and end consumers. As an individual consumer, you might work with American Express to plan and pay for a vacation. At the same time , many businesses use the services of American Express to handle all their business travel needs.

Whatever the nature of your business, you must know who your customers are. In the world of e-commerce, that means clearly distinguishing between end consumers (B2 C) and other businesses (B2B), even if you target both. As you will see throughout this chap- ter, individual end consumers and other businesses have dramatically different needs.

WHAT IS THE VALUE OF YOUR PRODUCTS AND SERVICES AS PERCEIVED BY YOUR CUSTOMERS?

If a customer orders a product or service from your organization, it is because that customer perceives some value in what you provide- the customer either wants or needs your prod- uct or service. When we examine wants and needs, the distinctions between end consumers and businesses as customers become increasingly important and clearly evident. Let's look at product/service categories needed by each customer group in turn. (See Figure 5.3.)

Understand Your Business, Products, Services, and Customers 133

Business to Consumer (B2C)

• Convenience-low-priced but something needed on a frequent basis

• Specialty-higher-priced, ordered on a less frequent basis, and often requiring customization

• Commodityl ike-the same no matter where you buy it

• Digital-the best of all because of low cost of inventory and shipping

Business to Business (B2B)

• Maintena nce, repair, and operations (M RO) materials-necessary items that do not relate directly to the company's primary business activities

• Direct materials-materials used in production in a manufacturing company or placed on the shelf for sale in a retail environment

82C: CO NV EN IENCE VERSUS SPECIALTY In many resp ects, you can differenti- ce between convenience and sp ecialty merchandise (or services) on the b asis of p rice

:md consumers' frequency of p urchase . To end consumers , convenience merchandise is :;-pically lower priced but something they often nee d , usu ally frequen tly. Non perish able :ood items such as breakfas t cereals are a good example. From organizations such as ? eapod (www.peapod.com), you can easily order foo d items and have them d elivered to our home within 24 h ours of making the order or at p red etermined time intervals such

weekly. Consumers might pay more for these low-priced items in order to have them -conveniently."

Specialty merchan dise might be such things as h ome stereo systems, comp uters, !Jaille-brand clothing, furni ture , and the like. For consumers, these are h igh er-p riced ilian convenience merchandise) items, are typically ordered on a less -frequent b asis,

:md ofte n require some sort of customization or fea ture specifi cation. For sp ecialty mer- chandise, co nsumers will spend more time "sh opping around ,'' not only to find the best deal in terms of p rice bu t also because value for thes e items is p erceived in terms of cus- :omization, warranty, service, and other after- sales fea tures .

3 2C: COMMODITYLIKE AND DIGITAL In B2C e-commerce, as a general rule , the .:>est merch andise to sell is either commoditylike, digital, or a combination of the two . -:nis enables you to minimize your internal costs, but requires that you be innovative in - ow you offer your merch andis e an d attrac t consumers to your site.

Commoditylike merchandise, to your cus tomers, is the same regardless of wh ere -- ey purchas e it, and it is similar to convenien ce items in that respect. Books are a go od =sample. No matter wh ere you buy a particular b ook, it is the same. As a business, you :ompe te in a commoditylike environment on the basis of:

• Price • Ease of ordering

• Ease and sp eed of delivery • Your return p olicy

f course, commo ditylike business environments are typically easy to enter (i.e., they .'.:aYe low barriers to entry) and thus buyer p ower is high (from Porter's Five Forces

Figure 5.3 82C and 828 Produ cts and Services

134 Chapter 5 • Electronic Commerce

...

Model in Chapter 1). Your organization's goals in this type of environment would have to include (1) minimizing price to the end consumer and (2) minimizing your internal costs by creating a tight supply chain management system (from Chapter 2). You also want to create a "s ticky" Web site that not only attracts consumers but also encourage them to return to your site again and again.

Digital merchandise offerings are also important in the B2C e-commerce model. T he goal here is to eliminate shipping costs by delivering the digital product over the Internet once a consumer has made a purchase. Music is a good example. Apple's iTunes Web site (www.apple.com/itunes/store/) allows you to select exactly the song you want, p ay for it, and then download it from the Internet. Apple can offer each song for just 99 cents (or a little more or a little less depending on the song) because it h as no physical deliY- ery costs and no physical inventory. As this example illustrates, digital products are also advantageous (to the business and to the consumer) because they are customizable. That is , customers don't have to purchase an entire music CD-they can pick only the song or songs they want.

82C: MASS CUSTOMIZATION End consumers are often interested in customizing their purchases. In the B2C e-commerce model this need gives rise to the concept of mass customization-the ability of an organization to give its customers the opportu- nity to tailor its product or service to the customer's specifications. Customization can be appropriate and is a key competitive advantage regardless of other customer value perceptions. For example, Dell Computer (www.dell.com ) is well regarded in its market especially for being the best at allowing consumers to customize a computer purchas e. Music sites, such as Apple, now allow you to pick the songs you want instead of an entire CD. Clothing sites allow you to select from among various styles, colors, and sizes of clothing to fit your needs.

In a B2C environment, you're potentially dealing with millions of different consumers. each with unique tastes and needs. You must support the concept of mass customization.

828: MRO VERSUS DIRECT Maintenance, repair, and operations (MRO) materials (also called indirectmateria/,s) are materials that are necessary for running a modern corpo- ration, but do not relate to the company's primary business activities. MRO materials include everything from ballpoint pens to three-ring binders, repair parts for equipment, and lubri- cating oils. Thus, B2B MRO materials are similar to convenience and commoditylike items in the B2C e-commerce model.

In their purchases of these materials, however, business customers (B2B) are very different from end consumers (B2C) in many ways. For example, a business because of its volume of MRO materials purchases can bargain with suppliers for a discount (end consumers in the B2C e-commerce model usually don't have this ability). Many busi- nesses may band together to create even more volume and thus demand an even higher discount from a supplier. This practice is known as demand aggregation- the combin- ing of purchase requests from multiple buyers into a single large order, which justifies a discount from the business. If your organization is a supplier of MRO materials in the B2B e-commerce model , you will compete mostly on price (including discounts) , deli.-- ery, and ease of ordering.

Direct materials are materials that are used in production in a manufacturing com- pany or are placed on the shelf for sale in a retail environment. So , as opposed to MRO materials, direct materials relate to a company's primary business activities. It is critically

Understand Your Business, Products, Services, and Customers 135

portant that the customer business receives exactly what is needed in terms of quality, city, and the timing of delivery of direct materials.

fo r direct materials acquisition, some businesses participate in a reverse auction ough an electronic marketplace). A reverse auction is the process in which a buyer

-ts its interest in buying a certain quantity of items with notations concerning quality, :;x:cification, and delivery timing, and sellers compete for the business by submitting sue- -- ively lower bids until there is only one seller left. Reverse auctions create tremendous

wer" for the buyer because multiple sellers are competing for the same business.

328: HORIZONTAL VERSUS VERTICAL As a supplier to other businesses, you also ~ed to understand whether you are selling in a horizontal or vertical e-marketplace •ee Figure 5.4). An electronic marketplace (e-marketplace) is an interactive busi- :- providing a central market space where multiple buyers and suppliers can engage

e-commerce and/or other e-commerce business activities. E-marketplaces feature -ariety of implementations including value-added network providers (which we'll -cus s later in the chapter), horizontal e-marketplaces, and vertical e-marketplaces.

~ horizontal e-marketplace is an electronic marketplace that connects buyers and - ers across many industries, primarily for MRO materials commerce. Again, MRO

rerials include a broad of range of both products and services including office sup- es, travel, shipping, and some financial services. Because horizontal e-marketplaces

Office supplies

orizontal Travel rketplaces services

Financial services

Vertical Marketplaces

Oil and gas Retail

Figure 5.4 Horizontal and Vertical B2B Electronic Marketplace

CAN YOU NAME THE TOP 20 WEB SITES?

This is always an interesting exercise. What do you

think are the top 20 Web sites in te rms of number of

visitors and page views? Take a moment and prepare

your list before reading the list below of the top 20

Web sites for July 2011 .

You may not recogn ize a few of the sites on the above

list . Baidu is the Chinese-equ ivalent to Google. (When we

wrote th is text, it was est imated that 10.7 percent of globa

Internet users visited Baidu in a month.) Tencent QQ is a free instant messaging (IM) service in China with about 700

million registered users. TaoBao is the Chinese equival en·

to eBay. Sina is China's largest infotainment portal w itr

upwa rds of 200 million users. The rest you probably know.

1. Google

2. Facebook

3. YouTube'

4. Yahoo!

5. Blogger

6. Baidu

7. Wikipedia

8. Windows Live

9. Twitter

10. Tencent QQ

.-

13 6

11. MSN

12. Yahoo! Japan

13. Linked ln

14. Goog le, Ind ia

15. Taobao

16 . Sina

17 . Amazon

18. WordPress

19. Google, Hong Kong

20. Goog le, Germany

So, what business intelligence can you der ive fro m

that list? In a word, China. It has the highest population

in the world and the world's second largest econom y.

How much are you preparing in you r academic stu d-

ies to do business in China? What's the next great and

emerging economic frontier? Did you say Africa? How

much are you preparing in your academic studies to do

business in Africa?4

support MR O materials commerce, much of our previous discussion on B2B e-com- merce fo r MRO materials h old s tru e here.

A vertical e-marketplace is an electronic marketp lace that connects buyers and sell- ers in a given industry (e.g., oil and gas, textiles , and retail). Covisint (www.covisint.com) is a good example. Covisint provides a B2B e-marke tplace in the automotive industr;· wh ere buyers and sellers specific to that industry conduct commerce in products and services, share mission-critical information for the d evelopment of products and parts. collab orate on new ideas, and deploy infrastructure applications that enable the seamles communication of each other's proprietary IT sys tems.

To summarize, we have offered you some ideas to think about regarding the fo llowing aspects of e- commerce that will h elp you in understanding the nature of your business. produ cts, services, and cus tomers.

• Business to Consumer

• Greatly varying customer demographics, lifes tyles, wants , and needs

• Distinctions of pro ducts and services by convenience versus specialty

• E-commerce works bes t for commoditylike and digital products and services

• Mass customization adds value in some instances

• Business to Business

• Distinctions of products and services by maintenance, repair, and operations (MRO) materials versus direct materials

• Demand aggregation and negotiation capabilities enhanced for business es as cus tomers (buyer power)

• £ -marketp laces connect buyers and sellers-horizontal e-marketplaces (primarily for MRO materials) and vertical e-marketplaces (sp ecific to a given indus try)

Find Customers and Establish Relationships 137

Find Customers and Establish Relationships

You can't make a sale until you find and reach customers and establish a relationship mth them. This is marketing. There are special features of and technical considerations about marketing and creating customer relationships in e-commerce to keep in mind :hat can create a competitive advantage for you.

B USINESS TO CONSUMER

Yith well over 1 billion people on the Internet, you'd think it would be easy to find and attract customers to your B2C e-commerce site. But that's not necessarily true because all your competition is trying to do the same thing-drive customers to their Web site 3Ild encourage them to make a purchase.

First, you need to determine your appropriate marketing mix- the set of marketing tools :hat your organization will use to pursue its marketing objectives in reaching and attracting potential customers. In B2C e-commerce, your marketing mix will probably include some or all of the following: registering with search engines, online ads, viral marketing, and affili-

ce programs (and most definitely social media, which we've discussed at gTeat length). Many Web surfers use search engin es to find information and products and services.

'\hi.le some search engines will include your site for free (FreeSearch. com at www .eesearch. com is an example) , almost all the popular search engines such as Yahoo! and

Go ogle require you to pay a fee. Most of these sites will guarantee that your site appears ~ the top portion of a search list for an additional fee.

Online ads (often called banner ads) are small advertisements that appear on other sires (see Figure 5.5). Variations of online ads include pop-up and pop-under ads. A

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138 Chapter 5 • Electronic Comme rce

Figure 5.6 Amazon.corn 's Affiliate Program Is Called Associates

r

pop-up ad is a small Web page containing an advertisement that appears on your screen outside the current Web site loaded into your browser. A pop-under ad is a form of a pop-up ad that you do not see until you close your current browser window. A word of caution here: Most people don' t mind banner ads because they appear as a part of the site they're visiting. However, most people consider pop-up and pop-under ads to be very annoymg.

Viral marketing encourages users of a product or service supplied by a B2C e-commerce business to encourage friends to join in as well. Blue Mountain Arts (www.bluemountain.com) is a good example . When you use Blue Mountain to sen d an e-hirthday card (or some other type of card) , the intended recipient will receive an e-mail directing him or her to Blue Mountain' s site. Once the re cipient views th e card, Blue Mountain provides a link so that person can send you a card in return . O f course, Blue Mountain charges for each card sent, so it makes money both ways.

An affiliate program is an arrangement made between two e-commerce sites that directs viewers from one site to the other. Amazon.com is the most well-known creator of an affiliate program. If you become an Amazon associate, your e-commerce Web site directs viewers to Amazon' s site for certain purchases. If a sale results , Amazon pays you a fee , which is usually a percentage of the sale (see Figure 5 .6) . Likewise, you can pay another site to direct traffic to yours , which may he through an online ad. In some instances, affiliate programs create relationships such that a payment is made fo r each click-through. A click-through is a count of the number of people who visit one site, click on an ad, and are taken to the site of the advertiser.

In general, you want your marketing mix to drive as many potential customers as possible to have a look at your B2 C e-commerce offerings . From there , h owever, you need to focus on your conversion rate . A con version rate is the percentage of poten- tial customers who visit your site who actually buy something. So, while total views or "hits" to your e-commerce Web site are important, obviously even more so is your conversion rate.

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HE WORLD OF FACEBOOK NOW INCLUDES A FULL ECONOMY

- ere is no doubt that Facebook, which started out as

=. se emingly simple project for sharing information at _., e school, has had a significant and profound effect

:'1 our society. All you have to do is visit Facebook's

:-..atistics page at http://www.facebook.com/press/info

p?statistics and read about the depth and breadth

:"' Facebook and you will quickly come to understand

- e extent to which Facebook has permeated our lives.

And like any good innovative company, Facebook

ants more. It wants you to spend more time there; it

ants you to be connected to more communities; it wants

ou to have more friends. And now, it wants your money.

·o, Facebook has no plans to charges users. Facebook is

:reating a virtual economy with its own currency, called

=acebook credits.

Facebook began testing its currency in mid-2009 and

· lly rolled it out in 2010. Facebook now requires all

;;a me developers to accept payment using Facebook

:redits. However, that won't be the only way gam-

ers can pay; they can still use the likes of PayPal. But

=acebook is offering incentives for game developers

ho focus solely on accepting Facebook credits.

Facebook has also begun competing with Groupon

an d Living Social. Through its daily deal offerings,

=acebook users can instantly purchase real goods with

BUSINESS TO BUSINESS

Facebook credits. Users will get the daily deals in their

news feeds and are just a few clicks away from spend-

ing money. How does Facebook make money? Several

ways actually. First, when a user buys merchandise-a

daily deal, a game, whatever-Facebook keeps 30 per-

cent of the revenue and passes 70 percent along to the

merchant or developer.

Second, Facebook makes money fr.om money. When

you buy Facebook credits, there's a good chance that

some of those credits will remain in your account, that

is, you will always have some sort of balance. All the

while, Facebook will be making interest from a bank

on your money. Social Times Pro, a research firm, esti-

mated that $600 million would be moving through

Facebook's virtual economy in a 12-month period. If 10

percent stays in users' accounts, then Facebook will be

accruing interest on $60 million.

And there's a future revenue stream that Facebook

is eyeing. As we move increasingly toward mobile com-

merce and thus mobile payments, Facebook is positioning

itself as a mobile payments provider. So someday soon (or

perhaps even now), you'll be able to make a purchase on

your mobile device using Facebook credits. And that pur-

chase could be for a Starbucks coffee, an app in Apple's

store, or perhaps even a computer from Dell. 5

Finding and attracting customers to your B2B e-commerce site is much different. Businesses-customers in the B2B model- don't usually find products and services by illffing the Web or using search engines. Instead, business customers prefer to actively participate in e-marketplaces to find suppliers. Within an e-marketplace, an organization can participate in a reverse auction to find a supplier, as we discussed earlier.

Moreover, an organization can search an e-marketplace for suitable suppliers and tli en enter into negotiations outside the e-marketplace. This happens for organiza- rions needing to purchase millions of dollars in inventory, parts, or raw materials, and it occurs for organizations wanting to establish a long-term relationship with ·us t one supplier.

Relationships among businesses in B2B are very important. These relationships, ch aracterized by trust and continuity, extend into the IT realm. In the B2B e-commerce business model, you must provide a level of integration of your IT systems with those of your business partners. Once a formal business relationship has been established, the rroal is to use IT to streamline the ordering and procurement processes to create tight supply chain management systems and drive out cost, so your IT systems have to work closely together.

139

140 Chapter 5 • Electronic Commerce

I LEARNING OUTCOME 4

~

To summarize, some ideas about marketing, or finding customers and creating relatio"- ships with them, in e-commerce are:

• Business to Consumer

• Design marketing mix to drive potential customers to a Web site

• Register with a search engine; use online ads, viral marketing, and affiliate programs

• Conversion rates measure success

• Business to Business

• Businesses participate in e-marketplaces- business customers don't surf the Web. so e-marketplaces need your attention, not a broad and generic marketing mix

• Formal establishment of business relationships based on trust and continuity required

• Some level ofIT system integration between you and your customer required

• Online negotiations for pricing, quality, specifications, artd delivery timing

Move Money Easily and Securely In the world of e-commerce, you must create IT systems that enable your customers (other businesses or end consumers) to pay electronically, easily, and securely for their purchases. Of course, you can still accept credit cards as the form of payment just like in the brick-and-mortar world, but credit card payments are really an electronic form o - payment.

BUSINESS TO CONSUMER PAYMENT SYSTEMS

Your customers in the Business to Consumer e-commerce model will most often p ay for products and services using credit cards, financial cybermediaries, electronic checks. Electronic Bill Presentment and Payment (EBPP) , or smart cards.

• Financial cybermediary-an Internet-bas ed company that makes it easy for one person to pay another person or organization over the Internet. PayPal (www.paypal .com) is the best-known example of a financial cybermediary (see Figure 5.7 ). You create a PayPal account by logging on to the PayPal Web site and providing it with personal, credit card, and banking information. When you want to send money, you go to the Pay Pal site and enter the amount of money you want to send and provide information for either the person or organization you want to send the money to . You can also accumulate money in your personal Pay Pal account by accepting money from other people. You can transfer the money to one of your banking accounts , use it for other purposes, send the fund s to someone else, or just leave it there for awhile.

• Electronic check-a mechanism for sending money from your checking or saving account to ano ther person or organization. There are many implementations of electronic checks, with the most prominent being online banking.

• Electronic Bill Presentment and Payment (EBPP)-a system that sends bills (usually to end consumers) over the Internet and provides an easy-to-use mechanism (such as clicking on a button) to pay for them if the amount looks correct. EBPP systems are available through local banks or online services such as Checkfree (www .checkfree.com) and Quicken (www.quicken.com/banking_and_credit/).

UPS THE ANTE IN THE MOBILE PAYMENTS MARKET

- cco rding to Stephanie Tilenius, Google's Vice President

::.: Co mmerce, "We're about to embark on a new era of

::::im merce where we bring on line and offline together.

e believe the shopping experience has not yet been

~ansformed by technology or by magical experience .

w, you r phone can be your wallet-you just tap,

::ay, and save." Those are profound words which were

::::co mpanied by the announcement of Google Wallet,

_ mobile app that lets you pay for goods via your

: art phone .

Inside Google Wallet, you'll be able to store credit

: ;: r d information and also information relating to

:: Google debit card. When you buy merchandise

::: a physical store, you wave your Android phone

- fr ont of a reader to make payment . Once you

_ , you can select on you r screen which credit or

:: ebi t card (stored in your Google Wallet) you wish

- u se. It's based on a technology called Nea r Field

om munica t i on, or NFC, a wireless t ransmission tech-

-ol o gy developed primarily for mobile phones to

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support mobile commerce (m-commerce) and other

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Unlike most credit card companies like MasterCard,

Google won't be taking a cut of the transaction if

you use you r Goog le debit card. Instead, Google will

he lp companies to target their advertising by provid-

ing customer information, including their purchase

history. That program , called Google Offers, will

allow retaile rs to direct offers and aiscounts to spe-

cific people.

Is security a consideration? It most defin itely is .

According to Osama Bedier, Google's Vice President of

Payments, "It [security] was a fundamental consider-

ation from day 1." Google also went on to point out

that consumers are becoming more comfortable with

digital transactions, even those involving credit cards.

Acco rding to Google, a decade ago 70 percent of con-

sumers were reluctant to pay for merchandise onl ine.

Today, over 70 percent of consumers access their cred it

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141

142 Chapter 5 • Electronic Commerce

.~

• Smart card-plastic card the size of a credit card that contains an embedded chip on which digital information can be stored and updated. The chip, in this case, can contain information about how much money you have. When you swipe your card to pay for a purchase, the swiping device deducts the purchase amount from the amount you have stored on the chip. Some debit cards are implementations of the smart card concept.

The entire payment process encompasses more than accepting a form of payment. It also includes determining the shipping address for your customer. You can create a competitive advantage by having a way of asking each customer only once for his or her delivery information and storing it, thus creating a switching cost because when your customer makes another purchase, you can simply ask him or her to verify the delivery information and not have to provide it all over again. One implementation of this is called a digital wallet. A dig;Ual wallet is both software and information- the software provides security for the transaction and the information includes payment information (for exam- ple, the credit card number and expiration date) and delivery informatiqn. Digital wallets can be stored either on the client side or the server side. A client-side digital wallet is one that you create and keep on your computer; you can then use it at a variety of e-commerce Web sites. Most browsers such as Internet Explorer support your ability to create this type of digital wallet. A server-side digital wallet (sometimes referred to as a thin wallet) is one that an organization creates for and about you and maintains on its server. Many credit card issuers use this type of digital wallet to verify your credit card transactions.

All of this is significant because your customers in the B2C e-commerce model exhibit some common characteristics when paying for your products and services.

• They tend to make numerous purchases for small amounts .

• They pay for each transaction individually.

• You must validate each transaction.

BUSINESS TO BUSINESS PAYMENT SYSTEMS

Payments for products and services in the Business to Business e-commerce model are usually much different from those in the Business to Consumer e-commerce model. In B2B e-commerce, your customers tend to make ve1y large purchases and will not pay using a credit card or a financial cybermediary such as Pay Pal. Instead, other businesse will want to pay (1) through financial EDI and (2) often in large, aggregated amounts encompassing many purchases.

ELECTRONIC DATA INTERCHANGE In the B2B model, another business wants to order products and services from your organization via electronic data interchange. Electronic data interchange (EDI) is the direct computer-to-computer transfer of transac- tion information contained in standard business documents, such as invoices and purchase orders, in a standard format. Your organization can implement EDI-facilitated transac- tions in many ways; one of the more prominent is a B2B e-marketplace that supports ED I through a value-added network. A value-added network (VAN) is a B2B service that offers information-sharing intermediary services between organizations based on various stan- dards regarding the format of the information and how it will be sent and received. Using a VAN, businesses can easily, for example, order products and send invoices electronically.

FINANCIAL ELECTRONIC DATA INTERCHANGE After the ordering of products and the sending of invoices, money needs to exchange hands. This occurs via financial electronic data interchange. Financial electronic data interchange (financial EDI) is

Move Money Easily and Securely 143

electronic process used primarily within the B2B e-commerce model for the pay- - t fo r purchases. The actual reconciliation of the funds may occur through a bank or

utomated clearing house (ACH) support site such as National Cash Management ,,.ems (www.ach-eft-ncms.com).

- CURITY: THE PERVADING CONCERN

~dless of whether your customers are other businesses or end consumers, they are ¥ eatly concerned about the security of their transactions . This includes all aspects electronic information, but focuses mainly on the information associated with pay-

- rs (e.g., a credit card number) and the payments themselves, that is, the "electronic ney." Here, you need to consider such issues as encryption, Secure Sockets Layers,

Secure Electronic Transactions . This is by no means an exhaustive list but rather _ resentative of the broad field of security relating to electronic commerce.

CRYPTION Encryption scrambles the contents of a file so that you can't read it without ing the right decryption key. Encryption can be achieved in many ways: by scrambling let- in a known way, replacing letters with other letters or perhaps numbers , and other ways .

- ome encryp tion technologies use multiple keys. In this instance, you would be using blic key encryption (PKE)-an encryption system that uses two keys: a public key that ryone can have and a private key for only the recip ient (see Figure 5 .8). When imple-

-nting security using multiple keys, your organization provides the public key to all its -comers (end consumers and other businesses). The customers use the public key to

-pt their information and send it along th e Internet. When it arrives at its destination, organization would use the private key to unscramble the encrypted information.

::CU RE SOCKETS LAYERS A Secure Sockets Layer (SSL) (1) creates a secure and rr.-ate connection between a Web client computer and a Web server computer, (2)

rp ts the information, and (3) then sends the information over the Internet. SSLs p rovide good security for transferring information and are used widely by B2C

_-co mmerce Web sites. As an end consumer, you can tell your information is being trans- ed via SSL if you see either (1) the Web site address starts with h ttps:// (notice the usion of the "s") as opposed to just http:// or (2) the presence of a lock icon in the

rto m portion of your Web browser window (see Figure 5.9 on the n ext page).

-:CURE ELECTRONIC TRANSACTIONS A Secure Electronic Transaction (SET) is uansmission security method that ensures transactions are legitimate as well as secure.

Originatin g Business

• Sends the same public key to all customers

• Uses a private key to decrypt the information received

Publi c key

Encrypted information

Public key

Encry pted information

Public key

En crypted information

_.

Figure 5.8 Public Key Encrypti on (P KE) System

144 Chapter 5 • Electronic Comme rce

Figure 5.9 Secure Sockets Layer (SSL)

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The "s" in https:// and the lock icon denote a Secure Sockets Layer (SSL) .

Much like an SSL, an SET encrypts information before sending it over the lnterneL Taking it one step further, an SET enables you, as a merchant, to verify a customer' identity by securely transmitting credit card information to the business that issued the credit card for verification. SETs are endorsed by major e-commerce players includin.cr MasterCard, American Express, Visa, Netscape, and Microsoft.

To summarize:

• Business to Consumer

• Methods include credit cards, financial cybermediaries, electronic checks, Electronic Bill Presentment and Payment (EBPP), smart cards, and digital wallets.

• Consumers make numerous individual purchases for small amounts that mus t each be validated.

• Business to Business

• The use of electronic data interchange (EDI) facilitates the ordering process.

• Value-added network providers used for EDI and financial EDI.

• Financial EDI used for payment of purchases.

• Both Business to Consumer and Business to Business

• Security is an overriding concern.

• Security is provided by the use of encryption, Secure Sockets Layers (SSLs) , and Secure Electronic Transactions (SETs).

~ £-Business Trends If you look out over the e-business horizon, you can see many trends. All of the chapter- opening cases (the Outrageous Industry Transformations that start each chapter) in this book are about e-business trends that are changing entire industries. Here, we focus or: four trends destined to radically transform all industries .

ONG-TAIL ECONOMICS

about Amazon, Netflix, and Rhapsody (a competitor to iTunes). In purely finan- - terms, how would you describe their paths-to-profitability? For Rhapsody, you might - that it has no physical store , no unsold inventory that must be eventually dumped at a "- .and so on. You would, in fact , be partially correct. And you might similarly describe ~on and Netflix-no stores to manage, fewer employees , etc. Again, you would be

"ally correct. But the real key to their success lies in the Long Tail. The Long Tail-a notion first offered by Chris Anderson, Editor-in-Chief of Wired

:?'!azine, as a way of explaining e-commerce profitability-actually refers to the tail of a .-:.e- curve (see Figure 5.10). 8' 9 Figure 5.10 shows music song titles, ranked by popu- --:~-, for Walmart and Rhapsody (www.rhapsody.com). What you see is that a typical -ilinart store stocks about 25,000 songs . Because of the cost of shelf placement in a

_railing environment, that's about all Walmart can carry and make a profit. Rhapsody, -x-ever, because everything is digital and retail shelf placement costs are irrelevant, car- - 1.5 million tracks . Moreover, a full 40 percent of Rhapsody's total sales come from as in the Long Tail of the sales distribution. Hence, the importance of the notion of

~ Long Tail. I -commerce businesses that can reach the audience in the Long Tail can do so with- - the typical brick-and-mortar retail costs and expenses (representing both fixed

variable costs in break-even analysis). This is real mass customization, of which we e earlier, and also goes by the terms slivercasting (as opposed to broadcasting) and clusivity (a combination of mass production and exclusivity). In Figure 5.11 on the

~ page, we've provided inventory and sales data for Rhapsody, Netflix, and Amazon. · ce that N etflix generates 21 percent of its total sales from the Long Tail, and Amazon

_ erates 25 percent of its total sales from the Long Tail. :...ong Tail represents an entirely new business model and requires new business ~g. Traditional business thinking looks at sales in terms of economies of scale,

.::King to sell as many of one item as possible to offset fixed costs (such as shelf place- costs ). The Long Tail model is quite different. Because fixed costs are so minimal,

pso dy and iTunes can afford to sell only one or two downloads of a given song and make a profit. Walmart can't do that. In fact, Walmart will only carry music CDs

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E-Business Trends 145

Figure 5.10 The Long Tail

146 Chapter 5 • Electronic Commerce

Figure 5.11 The Long Tail Economics for Rhapsody, Netflix, and Amazon

.-

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for which it believes sales will be at least several thousand (worldwide). So, it doesn't carry niche products, whereas Rhapsody and iTunes do. The same is true for Netflix. While a typical Blockbuster rental store carries only 3,000 movie DVDs, Netflix carrie over 55 ,000. Likewise, while a typical Borders bookstore carries only 100,000 books. Amazon has over 3. 7 million book titles in inventory.

This is a significant trend in the world of e-business . Some older, more traditional brick-and-mortar financial and inventory models no longer apply. It requires a new way of thinking. It is this sort of thinking that a younger generation like you can embrace and act on.

CROWDSOURCING

In the first three chapters, we provided examples of crowdsourcing including New York City's app development contest, Glaxo 's opening of its database of 13 ,500 compounds that might cure malaria, and social "saving the world" contests. Formally defined. crowdsourcing is when businesses provide enabling technologies that allow people (i.e., crowds)-instead of designated paid employees-to create, modify, and oversee the development of a product or service. Let's look at a couple of high-powered crowd- sourcing examples.

Goldcorp is a Toronto-based gold mining company in Canada. Shortly after the turn of the 2 lst century, Goldcorp found itself literally going out of business. 1

Uncontrollable debt, labor strikes, increasing production costs, and poor gold mar- ket conditions seemed they would doom the 50-year-old company. Internal employ- ees (geologists) were unable to accurately determine the location of gold deposits on Goldcorp's 55 ,000 acres, and without the gold G oldcorp would fold .

- o , Goldcorp held a crowdsourcing contest. On the Web , it published all ofits geolog- data for the 55 ,000-acre property. It invited everyone around the world to massage

- d ata and make recommendations regarding the best place to find gold and the appro- te extraction methods. Goldcorp put up $575,000 in prize money for the person(s)

the best recommendations. Thousands of people submitted ideas, everyone from _ :illuate students in geology to retired government workers to rock-hound hobbyists.

Yere the ideas any good? Yes , over 8 million ounces of gold were extracted using the of nonpaid nonemployees. That equates to a return of $3 billion on a $575 ,000

tment. That is a true demonstration of the power of crowdsourcing. :\etflix held a similar contest, focusing on its lucrative recommendation engine. 11

- "re familiar with a recommendation engine; for Netflix it offers additional movies may want to watch based on your searches and selections. On the Web , N etflix pub-

- ed its recommendation engine algorithm plus a full year of transaction data. It also =ered an amazing $1 million in prize money to the team who could improve Netflix's ~:::ommendation engine by at least 10 percent.

Teams from all over the world competed in the contest. Every few months , Netflix ::quired all teams to upload their current work. That ensured that each team got to see

us e the best algorithm so far. In the end, the winning team improved Netflix's rec- :nmendation engine technology by 14 percent. For a multibillion-dollar company, the ~ million in prize money was small compared to the return.

\ Vhat you need to realize is that crowdsourcing signals a whole new approach to doing -iness. Think about the following examples. Each provides customers with enabling

-dmologies and allows them to create value. Because the value exists, other customers - ome a part of the community as well.

• eBay

• Facebook

• Twitter

• YouTube

• Flickr

• Craigslist

• Monster.com

nsider eBay. Its employees are not paid to post items for sale and bid on other items. -tead , eBay has created a marketplace for people like you and me. You find value there

_a:ause, perhaps, you can buy the books you need for school or get a good deal on an T 3 player. The sellers of those items find value on eBay because people like you buy eir products . Crowdsourcing isn't limited to only the Internet. Think about the show American l. It uses a variant of crowdsourcing called contribution-defined. Millions of viewers

-[ their votes for the best musician. Think carefully here. If millions of people vote for top musician, don't you think that an album by that musician will sell really well?

~ course , and that's exactly what recording studios are hoping to find. And better yet, ~-'re getting market data (i.e. , the millions of votes) for free .

RTUAL GOODS

adly defined, a virtual good is a nonphysical object. There are examples all around u- the music in your iTunes account, digital seeds in e-mails that bloom into flowers

- en you click on them (sent around Valentine's Day of course) , and a whole host ohoys, -ea.p ons, clothes, accessories, and so forth that you buy for use in online communities

E-B usiness Trends 14 7

_.

148 Chapter 5 • Electronic Commerce

Figure 5.12 The Global Online Game Market (in$ Millions) 14

- YEAR China

... 2007 $2,200

2008 $2,400

2009 $2,900

2010 $3,700

(Forecast)

2011 $4,500

(Forecast)

2012 $5,600 (Forecast)

and games like Farmville, World of Warcraft, and the like. Think about apps for yo ur smartphone. Technically each app is a virtual good.

Virtual goods is definitely an emerging e-business trend that you cannot ignore. According to market research firm In-Stat, consumers in 2007 purchased $2.1 billion worth of virtual goods. In-Stat predicted that the dollar value of virtual goods purchases would rise by 245 percent in 2010 to $7.3 billion. Further, the market research firm p re- dicted growth of another 100 percent by 2014 to more than $14 billion. 12 ($14 billion is larger than the GDP of roughly 80 individual countries in the world.)

In Figure 5 .12, you can see an unusual set of data, very much related to virtual goods. A large portion of virtual goods purchases occur in online games like World ofWarcraf.: and those offered by Zynga. ln Figure 5.12 you will notice that total worldwide gaming revenues are expected to grow by about $3 billion per year. As the online gaming marke- grows , so will the purchases of virtual goods.

Is virtual goods really a big business on a personal level? We would have to answer yeu. Just askJonJacobs.Jon is a long-time player of Entropia Universe. And Jon is quite well- known in that online community as an avid entrepreneur. In 2005 , he' paid $100,000 fo r an Entropia Universe asteroid. But a couple of years later he topped that by selling a bio dome, a mall , a stadium, and a club to John Fama Kalun. The value of the transaction was an amazing $335,000. 13

MOBILE COMMERCE

Mobile computing is a broad general term describing your ability to use technology to wirelessly connect to and use centrally located information and/or application software. Mobile computing is all about wireless connectivity-just think about how importan~ your smartphone is to you in your daily life and you'll quickly grasp the significance of this e-business trend.

Mobile commerce (m-commerce or wireless e-commerce) describes electronic com- merce conducted over a wireless device such as a smartphone, laptop, or tablet PC. Ir: Figure 5.13, you can see the mobile commerce numbers for the United States. Mobile

Korea N. Europe Japan Developing TOTAL America Countries

;.,;;. - - $1,700 $1,500 $1,600 $700 $800 $8,500

$2,600 $1,700 $2,000 $800 $900 $1 0,400

$4,000 $1,800 $2,000 $900 $1,000 $12,600

$5,000 $2,200 $2,500 $900 $1, 100 $15,400

$6,000 $2,500 $2,900 $1,000 $1,000 $18,000

$7,200 $2,900 $3,300 $1,000 $1,200 $21 ,200

Summary: Student Learning Outcomes Revisited 149

$2,500,000,000

$2,000,000,000

$1,500,000,000 $1.2 Billion

$1,000,000,000

$396 Million $500,000,000

2008 2009 2010

mmerce revenues rose by some 600 percent in just two years , from $396 million in _ J to $2.4 billion in 2010. By 2015 , it is predicted that worldwide mobile commerce

...... exceed $119 billion.

Figure 5.13 Mobile Commerce in the United States15

_.

UMMARY: STUDENT LEARNING OUTCOMES REVISITED

1. Define and describe the nine major e-commerce business models. The nine major e-commerce business models are:

• Business to Business (B2B) e-commerce-businesses selling products and services to other businesses.

• Business to Consumer (B2C} e-commerce-businesses selling products and services to individual consumers.

• Consumer to Business (C2B) e-commerce-individuals selling products and services to businesses.

• Consume; to Consumer (C2C) e-commerce-individuals selling products and services to other individuals.

• Business to Government (B2G) e-commerce-businesses selling products and services to a government entity.

• Consumer to Government (C2G) e-commerce-individuals selling products and services to a government entity.

• Government to Business (G2B) e-commerce-the government selling products and services to businesses.

• Government to Consumer (G2C) e-commerce-the government selling products and services to individuals.

• Government to Government (G2G} e-commerce- e-commerce activities within a single government or among two or more governments .

2. Identify the differences and similarities among customers and their perceived value of products and services in the B2B and B2C e-commerce business models. Customers in th e B2C e-co=erce bus in ess model are

CROWDS CREATE "VALUE" THROUGH FUNDING

Crowdsourcing can be a powerful tool for most orga-

nizations. On a personal level, you should think about

taking advantage of crowdsourcing as well. How? By

letting the crowd fund your business idea. Let's face

it, as an entrepreneur with a great idea but very lit-

tle cash, it's hard for you to find funding for your new

busine~s venture. It can be as difficult to find $25,000 in

venture capital as it can be to find $2.5 million. If this

is your first foray into a small business entrepreneurial

effort, lending institutions are even more reluctant to

lend money, no matter how small the amount.

So, many entrepreneurs are turning to crowdfund-

ing, peer-to-peer loans, and microloans. On a crowd-

funding site, you provide all the details of your idea.

Lenders, usually individuals with small amounts of

money, review all ideas and pledge an amount to the

most promising one(s). The ideas that get fully funded

by numerous small pledges then move forward with

the funding. Peer-to-peer loan sites are similar except

they focus on helping you find one lender to com-

pletely fund your idea . Finally, microloans are, in fact,

"micro," often in the range of $25 to $1,000. Lende. _

don't get interest on their money. Often, lende ·~

agree to never receive their money back, even if t he

project is successful. If they do get their money bac they typically re-invest it in another entrepreneuria

effort.

If any of these sound appealing to you, consid er

researching the following funding opportunities.

• Samuel Adams Brewing American Dream

Project-microloans to fpod-, beverage-, and

hospitality-related ventures (http://www

.samueladams.com/btad/index.aspx)

• Lending Club-peer-to-peer site connect-

ing lenders and borrowers (http://www

.lendingclub.com/home.action)

• Kickstarter.com-microloan site where lend-

ers agree to not get their money back (http:

www.kickstarter.com/)

• Kiva.com-a combination of crowdfunding

and microloans (http://www.kiva.org/) 16

.-

end consumers. They (I) exhibit greatly varying demographics, lifestyles , wants , and needs, (2) distinguish products and services by convenience versus specialty, (3) often shop for commoditylike and digital products, and ( 4) sometimes require a level of mass customization to get exactly what they want. Customers in the B2B e-commerce business model are other businesses. They (I) distinguish products and services by maintenance, repair, and operations (MRO) materials versus direct materials, (2) aggregate demand to create negotiations for volume discounts on large purchases , and (3) most often perform e-commerce activities within an e-marketplace.

150

3. Compare and contrast the development of a marketing mix for customers in the B2B and B2C e-commerce business models. A marketing mix is the set of marketing tools that your organization will use to pursue its marketing objective in reaching and attracting potential customers. In B2B e-commerce, marketing mixes do not usually include broad and generic strategies that reach all potential businesses. Instead, marketing often occurs in the context of an e-marketplace. Once a contact has been made between businesses, the development of the relationship is still formal and often includes negotiations for pricing, quality, specifications, and delivery timing.

Closing Case Study One 1 51

In B2C e-commerce, a marketing mix will include some or all of the following:

• Registering your site with a search engine.

• Online ads (small advertisements that appear on other sites), including pop-up ads (small Web pages containing an advertisement that appear on your screen outside the current Web site loaded into your browser) and pop-under ads (a form of a pop-up ad that you do not see until you close your current browser session).

• Viral marketing-encourages users of a product or service supplied by a B2C e-commerce business to encourage friends to join in as well.

• Affiliate program-arrangement made between two e-commerce sites that directs viewers from one site to the other.

4. Summarize the various ways of moving money in the world of e-commerce and related issues. B2C e-commerce payment systems most commonly include credit cards,financial cybermediaries (such as PayPal), electronic checks (with online banking being an implementation), Electronic Bill Presentment and Payment (EBPP), smart cards (credit card with an embedded computer chip on which digital information can be stored and updated) , and digital wallets (software and instructions for completing a transaction). In the B2B e-commerce business model, financial EDI is the norm. Financial EDI is an electronic process used primarily in the Business to Business e-commerce business model for the payment of purchases. Security for the electronic transfer of funds is an overriding concern. Techniques such as encryption, public key encryption (PKE), Secure Sockets Layers (SSLs), and Secure Electronic Transactions (SETs) all address this issue of security.

5. Discuss some major trends that are impacting both the e-commerce business world and society in general. Major trends include:

• Long Tail model-the tail of a sales curve which traditional businesses ignore but e-commerce businesses profit from

• Crowdsourcing-when businesses provide enabling technologies that allow people (i.e., crowds)-instead of designated paid employees-to create, modify, and oversee the development of a product or service

• Virtual goods-nonphysical objects

• Mobile commerce (m-commerce or wireless e-commerce)-electronic commerce conducte,d over a wireless device such as a smartphone, laptop, or tablet PC

en You're Big, You Can Be Your Own B2B £-Marketplace

ess to Business (B2B) e-marketplaces are the growing

in the B2B e-commerce business model. Businesses

all industries and countries can gather, perform

_ -'Tl erce functions, share mission-critical information,

= depl oy infrastructure applications that allow those ='"-'li zations to tie their internal systems to each other.

But some companies-the largest ones- don't have

to play in the generic B2B e-marketplaces. Instead, they

can build their own and literally require that their sup-

pliers participate. Once such company is Volkswagen

AG . Its B2B e-marketplace is called VWgroupsupply

.com (www.vwgroupsupply.com ).

1 52 Chapter 5 • Electronic Comme rce

Volkswagen AG offers eight brands of automobiles-

Volkswagen (passenger), Volkswagen Commercial

Vehicles, Audi, Bentley, Bugatti, Lamborghini, Seat,

and Skoda. In 2003, Volkswagen spent almost 60 billion

euros, or approximately $77 billion, on components,

automotive parts, and MRO materials for its manufac-

turing operations. When you spend that much money

with your suppliers, you can open and run your own

B2B e-marketplace.

VWgroupsupply.com handles 90 percent of

Volkswagen global purchases. Almost all requests for

quotes, c~ntract negotiations, catalog updating and

buying, purchase-order management, vehicle program

management, and payments are handled electronically

and on line through VWgroupsupply.com.

Gains in efficiency and productivity coupled with

material costs reductions have been tremendous. The

cost savings alone generated over the last three years

were more than 100 million euros, or approximately

$127 million.

Volkswagen requires that each of its 5,500 suppliers

use VWgroupsupply.com for any interactions. Suppliers

place product and pricing catalogs on the system,

respond to requests for quotes, and collaborate with

Volkswagen engineers on new product designs, all in

the safe and secure environment of Volkswagen's pro-

prietary B2B e-marketplace.

By requiring its suppliers to interact with

Volkswagen in the e-marketplace, purchasing agents

no longer have to spend valuable time searching for

information and pricing. Volkswagen has, in essence,

created a system that brings the necessary infor-

mation to the purchasing agents. This new system

within VWgroupsupply.com is called iPAD, or Internal

Purchasing Agent Desk.

Prior to the implementation of iPAD, purchasing

agents entering a purchase order for a vehicle front

module had ,t-0 use numerous separate systems to com-

plete the process . They had to retrieve information

from a supplier system and its database, query informa-

tion in Volkswagen's internal parts information system,

obtain information from a request-for-quotes data-

base, enter information into a contract-negotiation

transcript system, and interact with several other sys-

tems and databases. In all, the purchasing agent had

to log into and use seven separate systems. Analysis

revealed that Volkswagen purchasing agents were

spending 70 percent of their time finding, retrieving,

analyzing, validating, and moving information. This

took away valuable time from such tasks as negotiating

better prices with suppliers.

Using a form of an integrated collaboration en vi-

ronment, purchasing agents now participate in a si m-

ple three-step process. First, iPAD captures and sen ds

a business event to the purchasing agent, such as t he

need to order vehicle front modules. Second, iPA

attaches to that communication other necessary infor-

mation such as information about potential supplie rs

their costs, and other forms of analysis and descr ip-

tive information. Finally, iPAD sends the correspo nd-

ing business processes and work flows to be completec

electronically.

It works much like a digital dashboard, which WE

introduced you to in Chapter 3. When purchasi ng

agents log onto the iPAD portal in the morning, th e~

receive a customized Web page with announceme nts

business alerts, analyses, and digital workflows to be

completed. The purchasing agents can set out immedi-

ately to complete the tasks for the day, without havin'°

to spend 70 percent of their time finding, retrievi ng

and analyzing information. iPAD even customizes t he

Web page according to the purchasing agent's nat ive

language, something very necessary for a global ma nL-

facturer of automobiles with more than 2,000 purc has-

ing agents worldwide. 17•18

Questions

1. Volkswagen operates its own proprietary B2 B

e-marketplace in which its suppliers particip ate

What are the disadvantages to Volkswagen o

not using a generic B2B e-marketplace with

even more suppliers? What are the advanta ges

to Volkswagen of developing and using its ov. proprietary B2B e-marketplace?

2. When Volkswagen needs a new part design, i: uses VWsupplygroup .com to get its supplie rs

involved in the design process early. This cre at-

a tremendous amount of interorganization al

collaboration. What are the advantages to t he

suppliers and to Volkswagen in doing so?

3. How is Volkswagen's VWgroupsupply.com

B2B e-marketplace an example of a vertica l

e-marketplace implementation? How is it

an example of a horizontal e-marketplace

implementation? Why is it necessary

that Volkswagen combine both of these

e-marketplaces into one e-marketplace? W ha-

would be the drawbacks to creating two

different e-marketplaces-one for supplie rs c-=

direct materia ls and one for suppliers of M RO

mate rials?

4. To make effective purchasing decisions,

Volkswagen's purchasing agents need business

intelligence. What kind of business intelligence

does iPAD provide to purchasing agents for

carrying out their tasks? What additional kinds

of business intelligence not discussed in this

case could Volkswagen's purchasing agents

_ e Mobile Commerce Explosion

: ap pening right now all around you. Although the __ ageous transformation" has yet to occur, more

:: mo re people every day are turning to their smart-

-:: es for shopping convenience and comparison.

_ a Christmas gift for his girlfriend in 2010, Tri Tang

=-~ shopping for a Garmin global positioning system

: J. He found exactly what he wanted at a Best Buy

- : E fo r $184.85. But instead of dropping it into his

--: an d proceeding to the cashier, Tri pulled out his

.=--tphone and typed in the model number. He found

=Exact same Garmin GPS on Amazon's Web site for

_ - .75, with no shipping and no tax.

- · is part of a growing number of consumers using

-= · sm artphones to find the best deals, even when ::. store with the product in hand. According to Mike

e, CEO of Wal mart, smartphone-enhanced shopping

· _.sh ered in a whole "new era of price transparency. "

c::: • ol d " traditiona l model of using advertising to get

.:- umer in the store no longer works. In that old

_::el, if a retailer got a consumer in the store, it could

- ab ly assume that the consumer would make the

-a se there. Not so anymore. Once consumers find

=-th ey want in a store, they're turning to their smart-

-- rs t o compare prices and read product reviews.

- -·ording to a Nielsen survey, 38 percent of all U.S.

__ m ers now own a smartphone . In a 90-day period

arch through May of 2011, 55 percent of con-

- =--s w ho bought a "wireless " phone purchased a ":-::>ho ne with all the apps (most of them free) nee-

- o scan bar codes and compare prices.

-:::or d ing to another survey conducted by IDC

- Insi ghts, 45 percent of smartphone owners had

- - em to compare prices while in a retail store. As

_: ~ reg Girard explains it, "The retailer's advantage

Closing Case Study Two 1 53

take advantage of to make more effective

decisions?

5. IPAD manages the workflow for purchasing

agents. Describe how iPAD manages this

process including information provided, steps

to be executed, and the presentation of

information.

has eroded. The four walls of the store have become

porous." To fully comprehend how quickly this trans-

formation is generat ing speed, consider the findings

of IBM . According to Coremetrics, a division of IBM,

on Black Fr iday (the day after Thanksg iving) in 2009,

mobile devices accounted for only 0.1 percent of all vis-

its to retailers' Web sites. In 201 O's Black Friday, that

number increased to 5.6 percent, a 50-fold increase.

And it's not just limited to smartphone-enabled price

comparisons . Many smartphone owne rs are turning to

thei r smartphones fo r service. According to an Accenture

study in 2010, 73 percent of smartphone owners pre-

ferred to use their smartphones for basic assistance over

talking to a retail clerk. So, the very notion of "person-

alized " service is on shaky ground. This used to be a

stronghold for brick-and -mortar retailers, claiming that

the shopping experience was more meaningful because

shoppers were engaged by sales people instead of tech -

nology. Now it seems that smartphone-wielding savvy

shoppers prefer technology over the personal.touch.

Matt Binde r was hoping to save some money, just

like Tri Tang at the beginning of this case study. But

Matt was more than will ing to save just a couple of

dollars, whereas Tri saved almost $80. Armed with his

smartphone and Amazon's Price Check App, Matt found

a 2Gb USB drive at a Best Buy store for $11.99. When he

snapped a photo of it, his Price Check App alerted him

that Amazon had the same USB drive for $9.99. Matt

opted for the cheaper price. Now, $2 may not seem like

a lot but Matt didn't have to go anywhere else to make

his cheaper purchase. He did it right there on his phone

in the Best Buy store. As Matt explained it, "I wouldn't

dri ve somewhere else to save $2." And he didn't have

t o, th anks to the mobile commerce explosion .19• 20• 2 1

154 Chapter 5 • Electronic Co mmerce

Questions

1. Take a survey in one of your classes. What

percentage of students own smartphones?

Gather some data regarding how they use

their smartphones for shopping. Do they use a

smartphone to compare prices? Do they use a

smartphone to read product reviews? For what

other shopping-related activities do they use

their smartphones?

2. How do you think large brick-and-mortar

retailers like Best Buy and Walmart can

compete in a world quickly moving to

smartphone-enhanced shopping? Do you

think smartphone-enhanced shopping will

outrageously transform brick-and-mortar retail,

perhaps putting many retail chains out of

business? Why or why not?

3. Many retailers are creating proprietary in-

store apps for shoppers. Some of these apps

help shoppers find the location of products

in the store, while others recommend

- - · KEY TERMS AND CONCEPTS

complementary products based on product

searches. For an in-store app, say, for a

Best Buy store, identify and describe three

additional features that you believe shoppe rs

would benefit from and encourage them to

make purchases in the store.

4. Esurance (www.esurance.com ) has a slogan

that states, "People when you want them,

technology when you don't." This speaks ve l)

much to the increasing role of technology in

customer service . What do you think about

this? Can (and should) technology take over

the primary customer-facing role for an

organization, especially a retail store? Will

stores like Nordstrom lose tl;ieir competitive

advantage based on superior customer

service?

5. What about people who can't afford a

smartphone? Will they be disadvantaged wh ile

shopping? When do you think smartphones ·

become affordable to all, say in the price ran ge

of $40 to $50?

Ad -supported, 131 Affiliate program, 138 Business to Business (B2B)

e-commerce, 129 Business to Consumer (B2C)

e-commerce, 130

Electronic check, 140 Electronic commerce

(e-commerce), 128 Electronic data interchange

(EDI), 142

Marketing mix, 137 Mass customization, 134 Mobile commerce (m-commerce

wireless commerce), 148 Mobile computing, 148 Near field communication

Business to Government (B2G) e-commerce, 128

Click-througp , 138 Consumer to Business (C2B)

e-commerce, 130 Consumer to Consumer (C2C)

e-commerce, 131 Consumer to Government (C2G)

e-commerce, 128 Conversion rate, 138 Crowdsourcing, 146 Demand aggregation, 134 Digital wallet, 142 Direct materials, 134 Electronic Bill Presentment and

Payment (EBPP), 140

Electronic marketplace (e-marketplace), 135

Encryption, 143 Financial cybermediary, 140 Financial EDI (financial electronic

data interchange), 142 Government to Business (G2B)

e-commerce, 128 Government to Consumer, (G2C)

e-commerce, 129 Government to Government (G2G)

e-commerce, 129 Horizontal e-marketplace, 135 Long Tail, 145 Maintenance, repair, and

operations (MRO) materials (indirect materials), 134

(NFC), 141 Online ad (banner ad), 137 Path-to-profitability (P2P), 128 Pop-under ad, 138 Pop-up ad, 138 Public key encryption (PKE), 143 Reverse auction, 135 Secure Electronic Transaction

(SET), 143 Secure Sockets Layer (SSL), 143 Smart card, 142 Value-added network

(VAN), 142 Vertical e-marketplace, 135 Viral marketing, 138 Virtual good, 147

SHORT-ANSWER QUESTIONS

1. What is electronic commerce?

2. How can you use a B2B e-marketplace to

reduce your dependence on a particular

supplier?

3. How do convenience and specialty items differ in the B2C e-commerce business

model?

4. Why do commoditylike and digital items sell

well in the B2C e-commerce business model?

5. What is mass customization?

6. How does a reverse auction work?

ASSIGNMENTS AND EXERCISES

1. YOUR STATE AND LOCAL GOVERNMENT

E-COMMERCE ACTIVITIES Visit the Web sites

for your state and local governments. Do

some looking around and make a list of what

services, information deliveries, and transaction

processing they offer that you previously could

handle only by visiting a physical building.

How are these different from and similar

to comparable e-government activities now

offered by the U.S. federal government?

2. DEALING WITH THE GREAT DIGITAL DIVIDE

The "great digital divide" is a term coined to

address the concerns of many people that the

world is becoming one marked by "have's" and

"have not's" with respect to technology-that

is, the traditional notion of a "third world" is

now also qeing defined by the extent to which

a country has access to and uses technology.

Find out what, if anything, the United Nations

is doing about this issue and express an

opinion on whether or not you believe its

efforts will be successful. Determine if there

are organizations such as private companies or

foundations that have the digital divide high

on their agendas. For any such organizations

you find, evaluate their efforts and express

an opinion as to whether or not they will be

successful. Finally, search for a less developed

country that is making significant local efforts

to deal with the digital divide. If you can't

find one, prepare a list of the countries you

reviewed and briefly describe the cond it ions in

one of them with respect to techno logy.

Assignments and Exercises 155

7. How are vertical and horizontal e-marketplaces different?

8. What can a marketing mix include for a B2C e-commerce business?

9. What are the major types of B2C e-commerce payment systems?

10. What is the difference between a client-side

digital wallet and a server-side digital wallet?

11. How are Secure Sockets Layer~_.(SSLs) and

Secure Electronic Transactions (SETs) different?

How are they the same?

3. RESEARCHING A BUSINESS TO BUSINESS

E-MARKETPLACE Biz2Biz (www.biz2biz

.com/Marketplace!) is a B2B e-marketplace.

Connect to its site and do some looking

around. What sort of marketing services does

it provide through its Biz2BizCommunication

program? What sort of services does it provide

for creating and maintaining an electronic

catalog? If you owned a business and wanted

to join, what process would you have to

go through? How much does it cost your

organization to join Biz2Biz? What buyer tools

does Biz2Biz provide its membership?

4. LONG-TAIL EXAMPLES The Long Tail is all

around you, not just in electronic commerce.

Consider the Long Tail graph of students and

their participation in class. Some students talk

a great deal and then there are students who

say nothing at all. (The latter are in ~he tail.)

Consider people's first names. Some are very

common (the fat part of the tail) and some are

unique (i.e., in the tail) like Moon and Dweezil,

both children of Frank Zappa . Think of three

other noncommerce Long Tail examples. For

each, build a Long Tail graph.

5. FINDING THE MOST POPULAR B2C

E-COMMERCE SITES Connect to the Web and do some research to find the most popular B2C

e-commerce Web sites in terms of number of

hits or views per month. What are the sites?

Which of the sites in some way or another

support the concept of an e-marketplace

where end consumers can gather?

1 56 Chapter 5 • Electronic Comme rce

- ---· DISCUSSION QUESTIONS

1. In what ways can shopping over the Internet

be more convenient for consumers? In what

ways can it be less convenient? List at least five

products you would have no hesitation buying

over the Internet, five products you might want

to think about a bit before buying, and five

products you would never consider buying over

the Internet. Justify your reasons in each case .

2. In your opinion, according to Porter's Five

Fo rces Model (refer to Chapter 1), has

competition increased or decreased overall

as a result of the Internet and e-commerce?

Specifical ly address each of the five forces in

Porter's model.

3. Under what circumstances would it be

appropriate to conside r using viral marketing?

See if you can think of an organization w ith

an online presence that could benefit from

viral marketing but is not currently using it. It

could be your school, fo r example, or it could

be an organization you are involved with .

How would you suggest the organization go

about using viral marketing in ord er for it to

achieve the desired results? What are some

of the other marketing techniques available

- ---· CHAPTER PROJECTS

GROUP PROJECTS

• Building Value Chains: Helping Customers

Define Value (p. 289)

• Advertising with Banne r Ads :

HighwqysAndByways.com (p. 293)

• Building a Web Database System: Web-Based

Classified System (p. 297)

• Assessing a Wireless Future: Eme rging Trends

and Technology (p. 300)

• Evaluating the Next Generation : Dot-Com

ASPs (p. 301)

for an e-commerce Web site to use? Why is

it important to conside r a mix of techniques

rather than just relying on a single one?

4. In this chapter, we've identified diffe rences

between end consumers and businesses as

customers. Review those differences and

then write down the three you consider

most significant . Discuss those three. For the

differences that you did not choose as the

three most important, be prepared to justify

your decision.

5. In this chapter, w e discussed using such

t echnologies as B2B e-marketplaces to create

t ighter supply chain managements, thereby

driving out costs. If you refe r back to Chapter

2, you'll recall that another major business

initiative is customer relationship managemen t

(CRM). How can B2C e-commerce businesses

use the Internet to further enhance their

CRM initiatives? How can B2B e-commerce

businesses use the Internet to further enhance

their CRM initiatives? Does it become easier

or harder to maintain rela t ionships with

customers as businesses move toward more

electronic commerce? Why?

E- COMMERCE PROJECTS

• Free and Rentable Storage Space (p. 313)

• Gathering Competitive Intelligence (p. 313)

• Exploring Google Earth (p . 314)

• Finding Hosting Services (p. 315)

• Global Statistics and Resources (p. 316)

• Gold, Silver, Interest Rates, and Money (p. 316)

• Learning about Investing (p. 318)

• Small Business Administration (p. 319)

• Researching Storefront Software (p. 320)