Chapter Objectives

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E-Business in Contemporary Marketing
CHAPTER 4
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 m
arketing.
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.
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 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. tot
aled 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 h
ave sold something online.  A recent report est
imates that the average Brit and average
American spend more time online than watching
television.
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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 We
b-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 Computers iTunes Web site.
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CAPABILITIES AND BENEFITS OF E-MARKETING
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TYPES OF BUSINESS WEB SITES  Corporate Web site
Site designed to increase a firms visibility,
promote its offerings, and provide information
to interested parties.  Purpose is to build cu
stomer goodwill and assist channel members in
their marketing efforts.  Marketing Web site Sit
e whose main purpose is to increase purchases by
visitors.  Many try to engage visitors in inter
actions that move them closer to a desired
marketing outcome.
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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 b
usiness transactions, which typically involve
more steps than consumer transactions.
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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 cyc
le, and reduces errors.  Allows companies to s
et production schedules to better match demand.
 Requires compatible hardware and software
systems.  Web services.  Internet-based syste
ms that allow parties to communicate
electronically with one another regardless of
the computer operating system they use.
 Rely on open source XML.
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ELECTRONIC DATA INTERCHANGE, WEB SERVICES,
EXTRANETS, AND PRIVATE EXCHANGES
 Extranets.  Secure networks used for e-market
ing and accessible through the firms Web site
by external customers, suppliers, or other
authorized users. Give selected outsiders ac
cess to internal information.
 Private exchanges.  A secure Web site at whic
h 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.
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ELECTRONIC EXCHANGES AND E-PROCUREMENT
 Electronic exchanges.  Online marketplaces th
at bring buyers and sellers together in one
electronic marketplace and cater to a specific
industrys needs. Use has declined because sup
pliers werent happy with process and buyers
preferred to develop long-term relationships with
buyers they knew.  E-procurement.  Web-bas
ed systems that enable all types of organizations
to improve the efficiency of their bidding and
purchasing processes.  Streamlines purchasing p
rocess and reduces costs.  Example In North Ca
rolina, state and local government agencies,
public schools, and other public entities use
e-procurement to purchase from vendors.
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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 convenienc
e and improved security for transferring credit
card information.  Service providers such as ban
ks are an important segment of e-tailing.
 Two types of B2C Web sites  Shopping sites su
ch 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.
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ELECTRONIC STOREFRONTS Electronic storefront Co
mpany Web site that sells products to customers.
 Example Walmarts electronic storefront.
 Example Lands Ends electronic storefront.
 Items for purchase are placed in an electronic
shopping cart.  Growth anticipated with the incr
ease in broadband connections.
 Broadband shoppers typically spend 34 percent
more online than narrowband shoppers.
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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 c
ite 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 anyti
me product tracking. Personalization  Software
analyzes past user purchases to customize
experience. Goal is to create loyal customers w
ho make repeat purchases.
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ONLINE BUYERS AND SELLERS  Demographics of custo
mers are changing as Internet penetration grows.
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E-BUSINESS AND E-MARKETING CHALLENGES
ONLINE PAYMENT SYSTEMS  Companies have developed
secure payment systems to protect customer
information.  Encryption, process of encoding d
ata for security purposes.  Secure Sockets Laye
r, technology that encrypts information and
provides authentication.  Electronic wallet,
a computer data file at an e-business sites
checkout counter that contains credit card
information and owner identification.
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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 mer
chants have signed on with online privacy
organizations such as TRUSTe.  Companies install
firewalls to protect private corporate data.
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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 complain
ts referred to law enforcement concern online
auctions.  Phishing High-tech scam that uses aut
hentic-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.
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WEB SITE DESIGN AND SERVICE As many as 70 perce
nt of Internet shopping carts are abandoned
before any purchase is made.  Negative experienc
es on Web sites can hurt a companys 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 c
ustomers can compete with business partners such
as retailers and distributors, disputes called
channel conflicts. Example Mattel sells only
specialty products online.
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USING THE WEBS COMMUNICATION FUNCTION
Web has four main functions e-business,
entertainment, information, and communication.
Communication is Webs 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.
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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 Apples iLounge Builds i
Pod brand.  Gives Apple ideas for product impr
ovement.  Employee blogs present ethical issues.
 Negative comments can harm company. Form
of free speech that humanizes a company.
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WEB-BASED PROMOTIONS Companies buy banner ads a
nd pop-up ads on Web sites customers are likely
to visit. Search marketing Paying search engine
s, such as Google, a fee to make sure that the
companys listing appears toward the top of the
search results.  Companies use online coupons to
promote their products.  Example ValPak Marke
ting Systems.
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MANAGING A WEB SITE
DEVELOPING SUCCESSFUL WEB SITES
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Planning and Preparation What is the companys
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 fa
ctor 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 busine
sses are better off outsourcing to meet their
hosting and maintenance needs.
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Costs and Maintenance Variety of costs  Dev
elopment.  Placing the site on a Web server.
Maintaining and updating the site.
Promoting the site.
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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.