Chapter 13: E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 1 E-Commerce and Entrepreneurship.

Copyright ©2009 Pearson Education, Inc. Publishing as PrentiCopyright ©2009 Pearson Education, Inc. Publishing as Prentice Hallce Hall

11Chapter 13: E-Commerce

E-Commerce andEntrepreneurship

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice HalCopyright ©2009 Pearson Education, Inc. Publishing as Prentice Halll

22E-CommerceE-Commerce

The Internet: Changing The Internet: Changing the Face of Business the Face of Business The most successful companies The most successful companies

embrace the Internet as a mechanism embrace the Internet as a mechanism for transforming their companies and for transforming their companies and for changing for changing everythingeverything about the way about the way they do businessthey do business

E-commerce has launched a E-commerce has launched a revolution, a new industrial orderrevolution, a new industrial order



The Internet: Changing The Internet: Changing the Face of Business the Face of Business In the world of e-commerce, In the world of e-commerce, speedspeed and and flexibilityflexibility matter much more than size matter much more than size

High-volume, low-margin, commodity High-volume, low-margin, commodity products are best suited for selling on products are best suited for selling on the Web the Web

Example: FreshDirect, Inc. Example: FreshDirect, Inc.

18.8

19.4

33.4

102.3

231.0

319.1

409.4

- 50 100 150 200 250 300 350 400 450

Millions of Internet Users

Oceania/Australia

Middle East

Africa

Latin America/Caribbean

North America

Europe

Asia

Reg

ion

Number of Internet Users (in Millions)

Source: Data from Internet Usage Statistics: The Big Picture, Internet World Stats, 2007, http://www.internetworldstats.com/stats.htm.



Benefits of SellingBenefits of Sellingon the Webon the Web

78% of small business owners whose 78% of small business owners whose companies have Web sites report that companies have Web sites report that their businesses benefit by having a sitetheir businesses benefit by having a site

Opportunity to increase revenuesOpportunity to increase revenues Chance to attract new customersChance to attract new customers Ability of brick-and-mortar retailers to drive Ability of brick-and-mortar retailers to drive

online customers to their stores and increase online customers to their stores and increase sales theresales there

Ability to expand into global marketsAbility to expand into global markets Ability to remain open 24 hours a day, seven Ability to remain open 24 hours a day, seven

days a weekdays a week



Benefits of SellingBenefits of Sellingon the Webon the Web Capacity to use the Web’s interactive nature Capacity to use the Web’s interactive nature

to enhance customer serviceto enhance customer service Power to educate and informPower to educate and inform Ability to lower the cost of doing businessAbility to lower the cost of doing business Capacity to improve efficiency in the Capacity to improve efficiency in the

purchasing processpurchasing process Ability to spot new business opportunities Ability to spot new business opportunities

and capitalize on themand capitalize on them Power to track sales resultsPower to track sales results Opportunity to build credibility and brand Opportunity to build credibility and brand

identity among customersidentity among customers



E-CommerceE-Commerce

National Small Business National Small Business Association Survey: 60% of small Association Survey: 60% of small companies have Web sites, but...companies have Web sites, but...

Only 40% of small companies Only 40% of small companies actually sell merchandise onlineactually sell merchandise online

Why?Why?



Factors to Consider Factors to Consider Before Launching into E-Before Launching into E-CommerceCommerce How a company exploits the Web’s How a company exploits the Web’s

interconnectivity and the opportunities interconnectivity and the opportunities it creates to transform relationships it creates to transform relationships with suppliers, customers, and others with suppliers, customers, and others is crucial to its successis crucial to its success

Web success requires a company to Web success requires a company to develop a plan for integrating the Web develop a plan for integrating the Web into its overall strategyinto its overall strategy



Factors to Consider Factors to Consider Before Launching into E-Before Launching into E-CommerceCommerce Developing a deep, lasting relationship with Developing a deep, lasting relationship with

customers takes on even greater customers takes on even greater importance on the Webimportance on the Web

Creating a meaningful presence on the Web Creating a meaningful presence on the Web requires an ongoing investment of requires an ongoing investment of resources – time, money, energy, and talentresources – time, money, energy, and talent

Measuring the success of a Web-based Measuring the success of a Web-based sales effort is essential to remaining sales effort is essential to remaining relevant to customers whose tastes, needs, relevant to customers whose tastes, needs, and preferences constantly change and preferences constantly change



12 Myths of E-12 Myths of E-CommerceCommerce

Myth 1: Setting up a business on Myth 1: Setting up a business on the Web is easy and inexpensivethe Web is easy and inexpensive Setting up a site and taking it live Setting up a site and taking it live

are just the beginningare just the beginning UpdatingUpdating Advertising and promotingAdvertising and promoting SEO strategySEO strategy




Myth 2: If I launch a site, Myth 2: If I launch a site, customers will flock to itcustomers will flock to it

Myth 3: Making money on the Web Myth 3: Making money on the Web is easyis easy

Myth 4: Privacy is not an important Myth 4: Privacy is not an important issue on the Web issue on the Web



Privacy and the WebPrivacy and the Web

Privacy on the Web Privacy on the Web doesdoes matter! matter! Gartner survey: 46% of online adults Gartner survey: 46% of online adults

say that security and privacy concerns say that security and privacy concerns have affected their Internet purchasing have affected their Internet purchasing behaviorbehavior

Tips:Tips: Post a privacy policy and stick to itPost a privacy policy and stick to it Safeguard information your company Safeguard information your company

collects from customerscollects from customers




Myth 5: The most important part of Myth 5: The most important part of any e-commerce effort is any e-commerce effort is technology technology

Myth 6: Strategy? I don’t need a Myth 6: Strategy? I don’t need a strategy to sell on the Web! Just strategy to sell on the Web! Just give me a Web site and the rest give me a Web site and the rest will take care of itself will take care of itself




Myth 7: On the Web, customer Myth 7: On the Web, customer service is not as important as it is service is not as important as it is in a traditional retail store in a traditional retail store



The Importance of The Importance of ServiceServiceon the Webon the Web Study: 82% of shoppers who had Study: 82% of shoppers who had

experienced a frustrating online experienced a frustrating online shopping experience reported shopping experience reported that they were not likely to return that they were not likely to return to the online store, and…to the online store, and…

28% said that they were less 28% said that they were less likely to shop at the retailer’s likely to shop at the retailer’s physical store physical store



The Importance of The Importance of ServiceServiceon the Webon the Web Average conversion rate for e-Average conversion rate for e-

commerce sites is 2.4%, down commerce sites is 2.4%, down from 3.1% in 2001from 3.1% in 2001

Cost: Billions of dollars in lost Cost: Billions of dollars in lost sales, much of it because of poor sales, much of it because of poor customer service customer service



The Importance of The Importance of ServiceServiceon the Webon the Web Study: 48% of Web shoppers who fill Study: 48% of Web shoppers who fill

their on-line shopping carts become their on-line shopping carts become frustrated and abandon them before frustrated and abandon them before checking outchecking out

Reasons:Reasons: Customer was comparison shoppingCustomer was comparison shopping Shipping charges too highShipping charges too high Checkout process required Checkout process required

too much time and informationtoo much time and information Product out of stockProduct out of stock Customer uncomfortable with Customer uncomfortable with

the site’s buying processthe site’s buying process



Tips for Reducing Tips for Reducing Shopping Cart Shopping Cart Abandonment RateAbandonment Rate Offer multiple shipping methods and Offer multiple shipping methods and

provide free shipping if a customer’s provide free shipping if a customer’s purchase exceeds a minimum amountpurchase exceeds a minimum amount

Streamline the steps in the checkout Streamline the steps in the checkout processprocess

Include a progress indicator on each Include a progress indicator on each checkout pagecheckout page

Provide a link back to the items in the Provide a link back to the items in the shopping cartshopping cart

Allow customers to see whether an Allow customers to see whether an item is in stockitem is in stock



Tips for Reducing Tips for Reducing Shopping Cart Shopping Cart Abandonment RateAbandonment Rate Include product photos in the shopping Include product photos in the shopping

cartcart Make it easy for customers to change Make it easy for customers to change

the contents of their cartsthe contents of their carts Give customers the option of calling to Give customers the option of calling to

resolve problems they encounter during resolve problems they encounter during checkoutcheckout

Make it easy for customers to pay for Make it easy for customers to pay for their online purchasestheir online purchases

Include a short survey of customers Include a short survey of customers who abandon their carts who abandon their carts




Myth 8: Flash makes a Web site Myth 8: Flash makes a Web site betterbetter

Myth 9: It’s what’s up front that Myth 9: It’s what’s up front that counts counts Virtual order fulfillmentVirtual order fulfillment

Myth 10: E-commerce will cause Myth 10: E-commerce will cause brick-and-mortar retail stores to brick-and-mortar retail stores to disappear disappear




Myth 11: The greatest opportunity Myth 11: The greatest opportunity for e-commerce lies in the retail for e-commerce lies in the retail (B2C) sector(B2C) sector B2B sales account for more than B2B sales account for more than

90% of all e-commerce transactions90% of all e-commerce transactions

Myth 12: It’s too late to get on the Myth 12: It’s too late to get on the WebWeb



Strategies for E-Strategies for E-SuccessSuccess Focus on a market nicheFocus on a market niche Develop a communityDevelop a community Attract visitors by giving away Attract visitors by giving away

“freebies” “freebies” Make creative use of e-mail, but Make creative use of e-mail, but

avoid becoming a “spammer” avoid becoming a “spammer”



Strategies for E-Strategies for E-SuccessSuccess Make sure your Web site says Make sure your Web site says

“credibility”“credibility” Consider forming strategic alliancesConsider forming strategic alliances

Affiliate marketing programsAffiliate marketing programs Make the most of the Web’s global Make the most of the Web’s global

reachreach Promote your site online and offline Promote your site online and offline



Strategies for E-Strategies for E-SuccessSuccess Develop an effective search Develop an effective search

marketing strategy marketing strategy Forrester study: 67% of Internet Forrester study: 67% of Internet

shoppers go straight to a search shoppers go straight to a search engine to find the products and engine to find the products and services they want services they want

Search engine marketing – fastest Search engine marketing – fastest growing segment of advertising growing segment of advertising spending spending

2%

5%

7%

10%

11%

29%

36%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Percent of Companies

Other

E-mails to prospect lists

Comparison shopping engines

Affiliate programs

Catalogs

Organic listings

Search engine marketing

So

urc

e

Sources of New Online Customers

Source: State of Retailing Online 2006, Forrester Research, 2007.



A Search Marketing A Search Marketing StrategyStrategy Natural (organic) listingsNatural (organic) listings - the result of - the result of

“spiders,” powerful programs that crawl “spiders,” powerful programs that crawl the Web, looking at key words, links, and the Web, looking at key words, links, and other dataother data Success requires a search engine optimization Success requires a search engine optimization

(SEO) strategy(SEO) strategy



Search Engine Search Engine Optimization (SEO)Optimization (SEO) Goal: Get your site listed at or Goal: Get your site listed at or

near the top of search results near the top of search results listing listing

62% of search engine users 62% of search engine users click on a link to a site that click on a link to a site that appears on the first page of appears on the first page of the search results the search results




“spiders,” powerful programs that crawl “spiders,” powerful programs that crawl the Web, looking at key words, links, and the Web, looking at key words, links, and other dataother data

Paid (sponsored) listingsPaid (sponsored) listings – short text ads – short text ads with links to the sponsoring company’s with links to the sponsoring company’s Web site that appear on the results page Web site that appear on the results page of a search engine of a search engine



Paid ListingsPaid Listings

Use paid listings to accomplish Use paid listings to accomplish what natural listings cannotwhat natural listings cannot

Five search engines – Google, Five search engines – Google, Yahoo!, MS Live Search, Ask.com, Yahoo!, MS Live Search, Ask.com, and AOL – account for 97% of all and AOL – account for 97% of all searches in the U.S.searches in the U.S.

Average cost of a keyword has Average cost of a keyword has risen from 39risen from 39¢¢ in 2004 to 58 in 2004 to 58¢¢ today today

Beware of click fraud! Beware of click fraud! Estimate: Pay-per-click fraud rate =14% Estimate: Pay-per-click fraud rate =14%




“spiders,” powerful programs that crawl the “spiders,” powerful programs that crawl the Web, looking at key words, links, and other Web, looking at key words, links, and other datadata

Paid (sponsored) listingsPaid (sponsored) listings – short text ads with – short text ads with links to the sponsoring company’s Web site links to the sponsoring company’s Web site that appear on the results page of a search that appear on the results page of a search engineengine

Paid inclusionPaid inclusion – when a company pays a search – when a company pays a search engine for the right to submit either selected engine for the right to submit either selected pages or the contents of its entire Web sitepages or the contents of its entire Web site



Designing a Killer Web Designing a Killer Web SiteSite Start with your target customerStart with your target customer Give customers what they wantGive customers what they want

60%

64%

64%

68%

71%

86%

89%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Proportion of Shoppers

Customer reviews

Product comparisons

Zoom and rotate views ofproducts

Store locator feature

Ability to conduct keywordsearch on site

Promotional discounts

Free shipping

Fea

ture

Features that Make U.S. Shoppers More Likely to Buy from a Web Site

Source: eBrain Market Research/Consumer Electronics Association, 2003.



Designing a Killer Web Designing a Killer Web SiteSite Select a domain name that is Select a domain name that is

consistent with the image you consistent with the image you want to create for your want to create for your company and register itcompany and register it ShortShort MemorableMemorable Indicative of a company’s businessIndicative of a company’s business Easy to spellEasy to spell



Designing a Killer Web Designing a Killer Web SiteSite Make your Web site easy to navigateMake your Web site easy to navigate Create a gift idea centerCreate a gift idea center Build loyalty by giving online Build loyalty by giving online

customers a reason to returncustomers a reason to return Establish hyperlinks with other Establish hyperlinks with other

businesses, especially those selling businesses, especially those selling products that complement yours products that complement yours



Designing a Killer Web Designing a Killer Web SiteSite Include an e-mail option and Include an e-mail option and

a telephone # on your site a telephone # on your site Offer shoppers online Offer shoppers online

trackingtracking Offer Web specialsOffer Web specials Look for the opportunity to Look for the opportunity to

cross-sell cross-sell Use customer testimonials Use customer testimonials Follow a simple designFollow a simple design



Web Site Design TipsWeb Site Design Tips

Avoid clutterAvoid clutter Avoid huge graphicsAvoid huge graphics Include a menu bar at the top of Include a menu bar at the top of

the pagethe page Include navigation buttonsInclude navigation buttons Minimize the number of clicks Minimize the number of clicks

required to a pagerequired to a page Incorporate meaningful content Incorporate meaningful content

into the siteinto the site




Include an “FAQ” sectionInclude an “FAQ” section Include privacy and return Include privacy and return

policiespolicies Avoid fancy typefaces and small Avoid fancy typefaces and small

fontsfonts Watch for “typos” and Watch for “typos” and

misspelled wordsmisspelled words Avoid small fonts on “busy” Avoid small fonts on “busy”

backgroundsbackgrounds




Use contrasting colors for text Use contrasting colors for text and graphicsand graphics

Be careful with framesBe careful with frames Test the site on different Test the site on different

browsers and different size browsers and different size monitorsmonitors

Collect information from visitors, Collect information from visitors, but don’t put them through a but don’t put them through a tedious registration processtedious registration process




Include a search function and Include a search function and company contact informationcompany contact information

Avoid automated music Avoid automated music Make sure the page looks Make sure the page looks

appealingappealing Remember: Simpler is betterRemember: Simpler is better



Designing a Killer Web Designing a Killer Web SiteSite Assure customers that their Assure customers that their

online transactions are secureonline transactions are secure Post S&H charges up front Post S&H charges up front Create a fast, simple checkout Create a fast, simple checkout

process process Confirm transactions with e-Confirm transactions with e-

mailmail



Designing a Killer Web Designing a Killer Web SiteSite Keep your site updatedKeep your site updated Test your site often Test your site often Consider hiring a professional to Consider hiring a professional to

design your site design your site



Tracking Web ResultsTracking Web Results

Web analytics – tools that Web analytics – tools that measure a Web site’s ability to measure a Web site’s ability to attract customers, generate sales, attract customers, generate sales, and keep customers coming back and keep customers coming back Commerce metricsCommerce metrics Visitor segmentation measurementsVisitor segmentation measurements Content reportsContent reports Process measurements Process measurements



Measures of Web Site Measures of Web Site PerformancePerformance Click-through rate (CTR)Click-through rate (CTR) - the - the

proportion of people who see a proportion of people who see a company’s online ad and actually company’s online ad and actually click on it to reach the company’s click on it to reach the company’s Web site Web site

CTR = # of clicks CTR = # of clicks ÷ # of ÷ # of impressionsimpressions



Measures of Web Site Measures of Web Site PerformancePerformance Cost per acquisition (CPA)Cost per acquisition (CPA) – the – the

cost a company incurs to cost a company incurs to generate each purchase (or generate each purchase (or customer registration) customer registration)

CPA = Total cost of acquiring a new CPA = Total cost of acquiring a new customer customer ÷ number of new ÷ number of new customerscustomers



Return on Investment Return on Investment (ROI)(ROI) Conversion (browse-to-buy) rateConversion (browse-to-buy) rate - -

the proportion of visitors to a site the proportion of visitors to a site who actually make a purchase who actually make a purchase

Conversion rate = number of Conversion rate = number of customers who make a purchase customers who make a purchase ÷ number of visitors to a site÷ number of visitors to a site



Ensuring Web PrivacyEnsuring Web Privacy

Take an inventory of the Take an inventory of the customer data collectedcustomer data collected

Develop a company policy for the Develop a company policy for the information you collectinformation you collect

Post your company’s privacy Post your company’s privacy policy prominently on your Web policy prominently on your Web site and follow it site and follow it



Ensuring Web SecurityEnsuring Web Security

Study: 70% of Web sites have Study: 70% of Web sites have vulnerabilities that are rated vulnerabilities that are rated from medium- to high-risk from medium- to high-risk

Virus detection softwareVirus detection software Intrusion detection softwareIntrusion detection software FirewallFirewall Secure sockets layer (SSL) Secure sockets layer (SSL)

technologytechnology



All rights reserved. No part of this publication may All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, electronic, mechanical, photocopying, recording, or otherwise, without the prior written or otherwise, without the prior written permission of the publisher. Printed in the United permission of the publisher. Printed in the United States of America.States of America.

Copyright ©2009 Pearson Education, Copyright ©2009 Pearson Education, Inc. Publishing as Prentice HallInc. Publishing as Prentice Hall

Chapter 13: E-Commerce Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 1 E-Commerce and Entrepreneurship.

Documents

business ecommerce

business ability

ecommerce copyright

world of ecommerce

business capacity

face of business

new business opportunities

pearson education