Chapter Objectives

1. E-Business in Contemporary Marketing CHAPTER4 Chapter Objectives Define e-business and discuss how marketers use the Internet to achieve business success. Distinguish between a corporate Web site and a marketing Web site. List the major forms of B2B marketing. Explain business-to-consumer (B2C) e-marketing. Identify online buyers and sellers. Describe some of the challenges associated with online marketing and e-business. Discuss how marketers use the communication function of the Web as part of their online marketing strategies. Outline the steps involved in developing successful e-business Web sites and identify methods for measuring Web site effectiveness. 4 1 7 5 2 6 8 3

2. • E-business Firm that targets customers by collecting and analyzing business information, conducting customer transactions, and maintaining online relationships with customers. • Online retails sales in the U.S. totaled nearly $86 billion in a recent year. • 205 million Americans access the Internet as of May 2006, according to World Internet Statistics. • One billion people worldwide access the Internet. • More than 25 million Americans have sold something online. • A recent report estimates that the average Brit and average American spend more time online than watching television.

3. WHAT IS E-BUSINESS? • E-tailing, virtual storefronts on Web sites. • Business-to-business transactions. • Electronic data interchanges, the B2B exchange of data. • E-mail, instant messaging and other Web-enabled communication tools. • The gathering and use of demographic, product, and other information through Web contacts. • E-marketing Strategic process of creating, distributing, promoting, and pricing goods and services to a target market over the Internet or through digital tools. Examples: • Researching computer printers on CNet.com and then placing an order at Newegg.com. • Legally downloading music and videos from Apple Computer’s iTunes Web site.

4. CAPABILITIES AND BENEFITS OF E-MARKETING

5. TYPES OF BUSINESS WEB SITES • Corporate Web site Site designed to increase a firm’s visibility, promote its offerings, and provide information to interested parties. • Purpose is to build customer goodwill and assist channel members in their marketing efforts. • Marketing Web site Site whose main purpose is to increase purchases by visitors. • Many try to engage visitors in interactions that move them closer to a desired marketing outcome.

6. B2B E-MARKETING • Business-to-business (B2B) e-marketing Use of the Internet for business transactions between organizations. • Accounts for 90 percent of all e-business activity. • Accounts for 10 percent of all B2B transactions. • Increases efficiency of business transactions, which typically involve more steps than consumer transactions.

7. ELECTRONIC DATA INTERCHANGE, WEB SERVICES, EXTRANETS, AND PRIVATE EXCHANGES • Electronic data interchange. • Computer-to-computer exchanges of price quotations, purchase orders, invoices, and other sales information between buyers and sellers. • Cuts paper flow, speeds the order cycle, and reduces errors. • Allows companies to set production schedules to better match demand. • Requires compatible hardware and software systems. • Web services. • Internet-based systems that allow parties to communicate electronically with one another regardless of the computer operating system they use. • Rely on open source XML.

8. ELECTRONIC DATA INTERCHANGE, WEB SERVICES, EXTRANETS, AND PRIVATE EXCHANGES • Extranets. • Secure networks used for e-marketing and accessible through the firm’s Web site by external customers, suppliers, or other authorized users. • Give selected outsiders access to internal information. • Private exchanges. • A secure Web site at which a company and its suppliers share all types of data related to e-marketing, from product design through delivery of orders. • Sometimes called c-business, “c” for “collaboration.” • Often used for collaborating on product ideas, production scheduling, distribution, order tracking, and other business functions.

9. ELECTRONIC EXCHANGES AND E-PROCUREMENT • Electronic exchanges. • Online marketplaces that bring buyers and sellers together in one electronic marketplace and cater to a specific industry’s needs. • Use has declined because suppliers weren’t happy with process and buyers preferred to develop long-term relationships with buyers they knew. • E-procurement. • Web-based systems that enable all types of organizations to improve the efficiency of their bidding and purchasing processes. • Streamlines purchasing process and reduces costs. • Example: In North Carolina, state and local government agencies, public schools, and other public entities use e-procurement to purchase from vendors.

10. ONLINE SHOPPING AND B2C E-MARKETING • Business-to-consumer (B2C) e-marketing Selling directly to consumers over the Internet. Also called e-tailing. • Growing rapidly by convenience and improved security for transferring credit card information. • Service providers such as banks are an important segment of e-tailing. • Two types of B2C Web sites • Shopping sites such as Gap.com where customers can get product information and make purchases online. • Information sites such as Toyota.com where customers can get product information but cannot make purchases online.

11. ELECTRONIC STOREFRONTS • Electronic storefront Company Web site that sells products to customers. • Example: Walmart’s electronic storefront. • Example: Land’s End’s electronic storefront. • Items for purchase are placed in an electronic shopping cart. • Growth anticipated with the increase in broadband connections. • Broadband shoppers typically spend 34 percent more online than narrowband shoppers.

12. BENEFITS OF B2C E-MARKETING • In a recent survey, more than half of consumers said they prefer shopping online more than in stores. Lower Prices • Sixty percent of online shoppers cite lower prices as the reason for shopping online. • Internet allows easy price comparisons, including through bots such as Shopping.com. Convenience • Allow orders from anywhere at anytime; product tracking. Personalization • Software analyzes past user purchases to customize experience. • Goal is to create loyal customers who make repeat purchases.

13. ONLINE BUYERS AND SELLERS • Demographics of customers are changing as Internet penetration grows.

15. E-BUSINESS AND E-MARKETING CHALLENGES ONLINE PAYMENT SYSTEMS • Companies have developed secure payment systems to protect customer information. • Encryption, process of encoding data for security purposes. • Secure Sockets Layer, technology that encrypts information and provides authentication. • Electronic wallet, a computer data file at an e-business site’s checkout counter that contains credit card information and owner identification.

16. PRIVACY ISSUES • Customers’ top security concern is protection of their personal information. • Through electronic signatures, parties can enter into legal contracts such as mortgages and insurance policies online. • Cookies and spyware allow companies to personalize Internet experience but also invade computer users’ privacy. • To reassure customers, many online merchants have signed on with online privacy organizations such as TRUSTe. • Companies install firewalls to protect private corporate data.

17. INTERNET FRAUD • Complaints about Internet fraud are compiled by the Internet Crime Complaint Center. • Logged more than 231,000 complaints in a recent year. • Sixty-five percent of complaints referred to law enforcement concern online auctions. • Phishing High-tech scam that uses authentic-looking e-mail or pop-up messages to get unsuspecting victims to reveal personal information. • Payment fraud is also growing. • Cardholder fraudulently claims ordered merchandise was never delivered and asks credit issuer for a chargeback.

18. WEB SITE DESIGN AND SERVICE • As many as 70 percent of Internet shopping carts are abandoned before any purchase is made. • Negative experiences on Web sites can hurt a company’s future online and in-store sales. • Delivery and returns pose challenges. • Companies that have brick-and-mortar experience often have more experience satisfying customers than Internet-only retailers. CHANNEL CONFLICTS • Direct sales to customers can compete with business partners such as retailers and distributors, disputes called channel conflicts. • Example: Mattel sells only specialty products online.

19. USING THE WEB’S COMMUNICATION FUNCTION • Web has four main functions: e-business, entertainment, information, and communication. • Communication is Web’s most popular function. • Firms use e-mail to communicate with customers, suppliers, and other partners. • Spam Popular name for junk e-mail. ONLINE COMMUNITIES • Internet forums, newsgroups, electronic bulletin boards, and Web communities that appeal to people who share common interests.

20. BLOGS • Blog Short for Web log, an online journal written by a blogger. • Some incorporate wikis, a Web page that anyone can edit. • Some incorporate podcasts, video recordings that are posted online. According to iPodder.org, more than 3,000 podcasts operate worldwide. • Corporate blogs can help build brand trust. • Example: Apple’s iLounge • Builds iPod brand. • Gives Apple ideas for product improvement. • Employee blogs present ethical issues. • Negative comments can harm company. • Form of free speech that humanizes a company.

21. WEB-BASED PROMOTIONS • Companies buy banner ads and pop-up ads on Web sites customers are likely to visit. • Search marketing Paying search engines, such as Google, a fee to make sure that the company’s listing appears toward the top of the search results. • Companies use online coupons to promote their products. • Example: ValPak Marketing Systems.

22. MANAGING A WEB SITE DEVELOPING SUCCESSFUL WEB SITES

23. Planning and Preparation • What is the company’s goal for its Web site? • Determines content and design. • Determines scope. • Will the site be maintained in-house or by a contractor? • What will the site be named? Content and Connections • Content an important factor for whether visitors return to a site. • Available resources should be relevant to viewers, easy to access and understand, updated regularly, and written or displayed in a compelling, entertaining way. • Most small businesses are better off outsourcing to meet their hosting and maintenance needs.

24. Costs and Maintenance • Variety of costs: • Development. • Placing the site on a Web server. • Maintaining and updating the site. • Promoting the site.

25. MEASURING WEB SITE EFFECTIVENESS Click-through rate Percentage of people presented with a banner ad who click on it. Conversion rate Percentage of visitors to a Web site who make a purchase.