Unit I: Electronic Commerce Basics: Meaning of E-Commerce :
Electron Electronic ic commerce commerce is defined defined as the use of electronic electronic data transmi transmission ssion to implement or enhance any business process. E-Commerce is a new way of conducting, managing, & executing business transactions using computer & telecommunications networks. Electronic commerce is expected to improve the productivity & competitiveness of participating businesses by providing unprecedented access to an on-line global marketplace with millions of customer & thousands of products & services. Frequently people use ecommerce to refer commerce on the Internet or Web because they are the most extensive data transmission networks. The more generic definition includes electronic funds transfers which most bank customer’s use at their ATM, as well as electronic data interchange in business to business communications or intranet and extranet networks. It provides participating companies with new, more cost & time efficient means for working with customer, suppliers & development partners. The internet & related technologies & e-commerce e-commerce websites on the world wide web & corporate intranets & extrane extranets ts serve serve as the business business & technolo technology gy platform platform for e-comme e-commerce rce marketpl marketplaces aces for customer customers s & businesses in the basic categories of business to consumer (B2C), business to business (B2B) and customer to custom customer er (C2C) (C2C) ecomm ecommerc erce. e. The The essen essentia tiall proces processes ses that that should should be imple implemen mented ted in all all ecomm ecommer erce ce applicat applications ions – access access control control & security, security, personalizi personalizing ng & profilin profiling, g, search search managem management, ent, payment payment system, system, workflow management, and collaboration & trading. # Scope of Ecommerce: The range of business process involved in marketing, buying, selling & servicing of
products or services in companies that engage in e-commerce. Companies involved in e-commerce as either buyers or sellers rely on internet based technologies & ecommerce applications & services to accomplish marketin marketing, g, discovery, discovery, transacti transaction on processi processing, ng, product product & custome customerr service service processin processing. g. For e.g. electron electronic ic commerce can include interactive marketing, payment & customer support processes at e-commerce catalog & auctions sites on the www. But ecommerce also includes e-business process such as extranet access of inventory databases by customer & suppliers (transactions (transactions processing), intranet access of customer relationship relationship management system by sales & customer service reps (service & support), & customer collaboration in product development via e-mail exchanges & internet newsgroups (marketing/discovery). Many companies today are participating participating in or sponsoring three basic categories of electronic commerce applications: applications: business to consumer (B2C), business to business (B2B) & customer to customer (C2C) ecommerce. E-Commerce Process-7: [1] Access Control & Security: E-Commerce E-Commerce processes must establish mutual trust & secure access between
the parties in an e-commerce transaction by authenticating users, authorizing access, & enforcing security features For e.g. these processes establish that a customer & e-commerce site are who they say they are through user names & passwords, encryption keys, or digital certificates & signatures. The ecommerce site must then authorize access to only those parts of the site that an individual user needs to accomplish his or her particular transactions. Thus, you usually will be given access to all resources of an ecommerce site except for other peoples account, restricted company data & webmaster administration areas. [2] Profiling & Personalizing: Once you have gained access to ecommerce site, profiling processes can occur that gather data on you & your websites behavior & choices, & build electronic profiles of your characteristics & preferences. User profiles are developed using profiling tools such as user registration, cookie files, website behavior tracing software & user feedback. These profiles are then used to recognize you as an individual user & provide you with a personalized view of the contents of the site, as well as product recommendations & personalized web advertising as part of a one to one marketing strategy. Profiling processes are also used to help authenticate your identify for account management & payment purposes & to gather data for customer relationship management, marketing planning & website management. [3] Search Management: Efficient & effective search process provides a top ecommerce website capabilities that help customer find the specific product & service they want to evaluate or buy. E-commerce software packa package ges s can can inclu include de a websi website te search search engin engine e compo componen nent, t, or a comp company any may may acquir acquire e a custom customize ized d ecommerce search engine from search technology companies like Excite & Requisite technology. Search engines may use a combination of search techniques, including searches based on content (a product description for e.g.) or by parameters (above, below or between a range of values for multiple properties for a product, for e.g.) [4] Content & Catalog Management: Content management software helps ecommerce companies develop, generate, deliver, update, & archive text data & multimedia information at e-commerce websites. E-commerce content frequently takes the form of multimedia catalogs of product information. So, generating & managing catalog is a major subset of content management. Content & catalog management software work with the profiling tools to personalize the content of web pages seen by individual users. Finally, content & catalog management may be expanded to include product configuration processes that support web-based customer self service & the mass customization of a company’s products. [5] Workflow Management: Many of the businesses process in ecommerce applications can be managed & partially automated with the help of workflow management management software. E-business workflow systems for enterprise collaboration help employees electronically collaborate to accomplish structured work tasks within knowledge
based business processes. Workflow management in both e-business & ecommerce depends on a workflow software engine containing software models of the business processes to be accomplished. The workflow models express the predefined sets of business rules, roles of stakeholders, authorization require for each ecommerce process. Thus, a workflow system ensures that the proper transactions, decisions & work activities are performed & the correct data & documents are routed to the right employees, customer, suppliers & other business stakeholders. [6] Event Notification: Event notification includes notifying a company’s management so they can monitor their employees responsiveness to ecommerce events & customer & supplier feedback. Most ecommerce applications are event driven systems that respond to a multitude of events – from a new customer’s first websites access, to payment & delivery processes & to innumerable customer relationship & supply chain management activities. They is why event notification processes play an important role in ecommerce systems, since customer, suppliers, employees & other stakeholders must be notified of all events that might affect their status in a transactions. Event notification software woks with the workflow management software to monitor all ecommerce processes & record all relevant events, including unexpected changes or problems [7] Collaboration & Trading: This major category of ecommerce processes are those that support the vital collaboration arrangements & trading services needed by customer, suppliers & other stakeholders to accomplish ecommerce transactions. The essential collaboration among business trading partner in ecommerce may also be provided by internet based trading system. # Electronic Commerce Threats: Electronic commerce threats involve security throughout the “commerce
chain,” including the client computers, the messages traveling on the channel communication, both the Web and commerce server, and any hardware attached to those servers. Active content refers to programs that are embedded transparently in a client’s Web pages that engender some action to occur such as moving graphics or downloads and play audio. Malicious active content delivered by means of Internet coolies can reveal the contents of clientside files. The designer language of active contents called Java Script can be used maliciously to destroy the hard disk, disclose e-mail contents or send sensitive information to a particular Web server on the Internet. Cyber vandalism and masquerading pose serious integrity threats to Web sites. The former violation involves electronic defacing of an existing Web site while the latter is pretending to be the Web site of another entity to spread misinformation or fraud. Slowing or disrupting a computer process such as an ATM can render the service unusable or unattractive to consumers, which is a threat to the necessities of the system. The server is a vulnerable threat through its own software, or backend programs containing data, or through common gateway interface programs or utility programs residing on the server. Web servers can be structured to run at various privilege levels, which permit varying degrees of flexibility and convenience to the user. High privilege levels may be able to execute all machine instructions and have unrestricted access to any part of the system. A malevolent person trying to compromise the system could execute instructions in the high privilege mode, which would be very costly to the organization. # Emergence of Internet-2: The internet originated in the early 1960s with the US department of defense as
ARPNET. Actually that a designed as a method of secure communities in the event of a national disaster or nuclear war. The role of this network was explained to the universities, which were benefiting from defense department grants which were used for researches & scientific development & other engineering work. Later on this network is came under the control of the National Science Foundation (NSF), which originally prohibited the commercial use of the network. However by 1989, the NSF permitted 2 commercial Email services, MCI & CompuServe to establish limited connection to the internet for the sole purpose of exchanging Email transmission. During 1995, the internet was opened for full commercial use & the no. of internet hosts grew from 5 million in 1995 to 50 million in 1999. This explosive growth of hosts to the internet created a vast marketing potential for most businesses. The www & html code, which make web service possible, was the necessary component to actualize this market potential. The web represents a way of organizing information storage & retrieval to make the internet easier to use. 1. Commercial use of Internet: As personal computer became more powerful, affordable and available during the1980s, companies increasingly use them to construct their own internal network which included email software that enabled the employees to send messages; businesses wanted their employees to be able to communicate with people outside their corporate networks for promoting business. But the national science foundation (NSF) prohibited commercial network traffic on its networks and so businesses turned to commercial email services providers to handle their email needs. Large firms build their own network that used leased telephone lines to connect field offices to corporate headquarters. In 1989, the NSF permitted 2 commercial email services, MCI mail and CompuServe to establish limited connections to the internet for the sole purpose of exchanging email transmission with users of the internet. These connections allowed commercial enterprises to send email directly to internet addresses and allowed members of the research and education committees on the internet to send email directly to MCI mail and
CompuServe addresses. The NSF justified this limited commercial use of internet as a service that would primarily benefit the internet non commercial users. 2. Growth on Internet: The internet was a phenomenon that truly sneaked into a unsuspecting world. The researcher who had been so involved in the creation and growth of the internet just accepted it as a part of their working environment. People outside the research community were largely unaware of the potential offered by a large interconnected set of computer networks. Within 30 years the internet became one of the most amazing technological and social accomplishments of the 20th century. Millions of people are using today this complex, interconnected network of computers. These computers run thousands of different software packages. Every year, billions of dollars change hands over the internet in exchange in all kind of products and services. All of this activity occurs with no central coordination point or control, which is specially interesting, given that the internet began as a way for the military to maintain control while under attack. The opening of internet to business activities helped increase the internets growth dramatically; however, there was another development that work hand in hand with the commercialization of internet to spur its growth. That development was www. Advantage/Benefits of Ecommerce: A. Benefits to Organization: • • • •
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Expands the marketplace to national and international markets. Decrease the costs of creating, processing, distribution and reviewing paper based information Allow reduced inventories and overhead by facilitating pull type supply chain management. The pull type processing allows customization of products and services which provides competitive advantage to its implementers. Reduces the time between the outlay of capital and the receipt of product and services. Support business processing reengineering (BPR) efforts. Lowers telecommunication costs – the internet is much cheaper than value added networks (VANs).
B. Benefits to Consumers: • • •
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Enables consumers to shop or do other transactions 24 hours a day, all year round from almost any location. Provides consumers with more choices Provides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparison. Allow quick delivery of products and services (in some case) especially with digitized products. Consumers can receive relevant and defined information in seconds, rather than days or weeks. Makes it possible to participate in online auctions. Allows consumers to interact with other consumers in electronic communities and exchange ideas as well as compose experiences. Facilitates competition which results in substantial discounts.
C. Benefits to Society: •
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Enables more individual to work at home and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution. Allows some merchandise to be sold at lower prices, benefiting less affluent people. Enables people in third world countries and rural area to enjoy products and services which otherwise are not available to them. Facilitates delivery of public services at a reduced cost, increases effectiveness and improves quality.
Disadvantages of Electronic Commerce: Most of the disadvantages of e-commerce today however, stem
from the newness and rapidly developing pace of the underlying technologies. Businessman often calculates the return on investment before commitment to any new technology. This has been difficult to do with e-commerce, since the costs and benefit have been hard to quantify. Costs, which are a function of technology, can change dramatically even during short lived e-commerce implementation projects because the underlying technologies are changing rapidly. Many firms have had troubled in recruiting and retaining employees with technological, design and business process skills needed to create an effective e-commerce atmosphere. Another problem facing firms that want to do business on the internet is the difficulty of integrating existing databases and transaction processing software design for traditional commerce into a software that enables ecommerce. In addition to technology and software issue, many business face obstacles in conducting ecommerce. Some consumers are still somewhat fearful of sending their credit card number over the internet. Another consumer are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person. Customers are unable to inspect the product through ecommerce. Cost/benefit of employing electronic commerce is hard to quantify in traditional accounting terms for managers and investors to grasp. “OR” Limitations/Disadvantages of E-Commerce: The limitations of e-commerce are divided into 2 parts:
A. Technical limitations:
1. There is a lack of universally accepted standards for quality, security and reliability. 2. Software development tools are still evolving. 3. There are difficulties in integrating the internet and EC software with some existing (especially legacy) applications and databases. 4. Especially web servers in addition to the network servers are needed (added costs). 5. Internet accessibility is still expensive and inconvenient. B. Non-Technical Limitations:
1. Lack of physical infrastructure. 2. Requirement of information technology 3. Language barriers 4. Lack/limited financial transaction system. 5. Trust- how to trust whether a website is authentic or not. 6. E-Commerce can still be considered as expensive transaction process when we are looking at it from the perspective of third world countries. 7. Governmental rules and regulations not clear on electronic transactions. Traditional commerce Vs electronic commerce: Traditional commerce involves aggregating business
activities such as transferring funds, placing orders, sending invoices, shipping goods, and taking sales orders into elements such as market research, vendor selection, site planning, sales promotion, and payment processing. Electronic commerce employs electronic data transmissions to implement, enhance or integrate any business activity. Electronic Commerce vs. Electronic Business: Electronic Commerce is the use of electronic transmission
mediums (telecommunications) to engage in the exchange, including buying and selling, of products and services requiring transportation, either physically or digitally, from location to location. The term electronic commerce is restricting. It does not fully encompass the true nature of the many types of digital information exchanges. The term electronic business also includes the exchange of information not directly related to the actual buying and selling of goods. Increasingly, businesses are using electronic mechanisms to distribute information and provide customer support. Unit II: Business Models for Ecommerce : Business Models: Business model can be defined as architecture for product, service and information flow,
including a description of business, player, their roles and revenue sources. It is the method of doing business by which a company can sustain itself, i.e. generate revenue. Business model spell out how a company makes money by specifying where it is positioned in the value chain. In the new economy companies are creating new business models and reinventing old models. However a business model doesn’t discuss how the business mission of the company will be realized. For e.g. some of the most popular revenue generating model adopted are (i) charge fees for advertising (ii) sell goods & services (iii) sell digital contents and (iv) charge for processing the transaction that occur between 2 parties on the web. E-Business Model can be classified as follows: 1.E-Business model based on relationship of transaction parties 2.E-Business model based on relationship of transaction types 3.Classification by revenue model 4.Classification by distribution channel E-Business model based on relationship of transaction parties-4: 1. Business to Business (B2B) E-Commerce: is that model where by a company conducts its trading and
other commercial activity through the internet and the customer is another business itself. This category of electronic ecommerce involves both electronic business marketplaces & direct market links between businesses. This is supposed to be the huge opportunity area on the web. It is the wholesale & supply side of the commercial process, where businesses buy, sell or trade with other businesses. B2B electronic commerce relies on may different information technologies, most of which are implemented at eCommerce websites on the www & corporate intranets & extranets. B2B application include electronic catalog system, electronic trading system such as exchange & auction portals, electronic data interchange, electronic funds transfer & so on. Companies need to setup a backbone of B2B applications, which will support the customer requirements on the web. Many B2B e-commerce portals are developed & operated for a variety of industries by third party maker companies called info-mediaries, which may represent consortiums of major companies. For e.g. many companies offer secure internet or extranet e-commerce catalog websites for their business customer & suppliers. Also very important are B2B e-commerce portals that provide auction & exchange marketplaces for businesses. Others may rely on electronic data interchange (EDI) via the internet or
extranets for computer to computer exchange of e-commerce documents with their business customer & suppliers. Measure advantage of B2B: 1] Direct interaction with customers: This is the greatest advantage of e-business. The unknown and faceless
customer including other businesses, buying the products of a large MNC like say HLL or proctor and gamble through the distributors, channels, shops and the like, now has name, face and profile. Large MNCs pay a fortune for this information on customer buying patterns. 2] Focused sales promotion: This information gives authentic data about the likes, dislikes and preferences of clients and thus helps the company bring out focused sale promotion drives which are aimed at the right audience. 3] Building customer loyalty: it has been observed that online customers can be more loyal than other customers if they are made to feel special and their distinct identity is recognized and their functions about privacy and respected. It has also been found that once the customers develop a binding relationship with a site and its products, they do not like to shift loyalties to another site or product. 4] Scalability: This means that the web is open an offer round the clock access. This provides an access never known before, to the customer. This access is across location and time zones. Thus, a company is able to handle many more customers on a much wider geographical speed if it uses an e- business model. The company can set up a generic parent sites for all location and make regional domains to suit such requirement. Microsoft is using this model very successfully. The additional cost of serving larger segment of customers comes down drastically once a critical mass is reached. 5] Saving in distribution cost : A company can make huge saving in distribution, logistic and after sales support costs by using e-business models. Typically examples are of customer companies, airlines and telecom companies. This is because the e-business models involved the customers in the business interaction to such a level that companies are able to avoid setting of the huge backbone of sale and support force, which ordinarily would have to be set up. Types of B2B Model: 1: Maintenance, Repair & Operating (MRO) Hubs: These hubs concentrate on goods with low value. The
transaction cost is relatively higher. These hubs provide value by increasing the efficiency in the procurement process. These hubs use third party logistics supplier to deliver goods, thus enabling them to bypass existing middlemen in the channel. For examples of hubs operating in this category are mro.com, bizbuyer.com. 2: Yield Managers: This type of E-market creates spot markets for common operating resource like manufacturing capacity, labor or advertising. This functionality allows the companies to expand or contract their operations at a short notice. Yield managers add great value in situations where there is high degree of price and demand volatility, and where fixed assets can not be liquidated or acquired quickly. Utility sector is one such example. 3: Exchanges: Online exchange allows purchasing managers to effectively manage peaks and ebbs in demand and supply by allowing them to exchange commodities or near commodities for production. These exchanges maintain relationships with buyer and sellers, making it very convenient for business to conduct over exchanges. In many case buyers and sellers never see each other. Paper exchange and e-steel are examples of this of Emarket. 4: Catalog Units: These are industry specific hubs that bring many suppliers together at one easy-to-use web site. These hubs automate the sourcing of non-commodity manufacturing inputs and create value by reducing transaction costs. Catalog hubs can be either buyer or seller focused for examples some hubs would work as distributors for suppliers while others would work for buyers in their negotiations with sellers. 2. Business to Consumer (B2C) E-commerce: In this form of electronic ecommerce, businesses must develop
attractive electronic marketplaces to entice & sell products & services to consumers. It serves end consumers with products and or services. It is often associated with electronic commerce but also encompasses financial institutions and other types of businesses. B2C relationships are often established and cultivated through some form of Internet marketing. B2C includes retail sales often called e-retail and other online purchases such as airline ticket, entertainment venue ticket, hotels room and shares of stock. It also provides high value contents to consumer for a subscription fees. B2C e-business model includes virtual malls which are websites that hosts many online merchants. It is inexpensive and also has big opportunity. It reduces operational costs and is also customer convenience. Advantages of B2C e-commerce • • • •
Shopping can be faster and more convenient. Offerings and prices can change instantaneously. Call centers can be integrated with the website. Broadband telecommunications will enhance the buying experience.
How does B2C work?
B2C ecommerce is more than just an online store. It really is about managing the entire process, but just using technology as a tool for order processing and customer support. The B2C process is explained as follows: 1] Visiting the virtual mall: The customer visits the mall by browsing the online catalogue- A vary organized manner of displaying products and their related information such as price, description and availability. Finding the right product becomes easy by using a key word search engine. Virtual malls may include a basic to an advance search engine, product rating system, content management, customer support system, bulletin boards, newsletters and other components which make shopping convenient for shoppers. 2] Customer registers: the customer has to register become part of the site’s shopper registry. This allows the customer to avail of the shop’s complete services. The customer becomes a part of the company’s growing database and can use the same for knowledge management and data mining. 3] Customer buys products : Through a shopping cart system, order details, shipping charges, taxes, additional charges and price total are presented in a organized manner. The customer can even change the quantity of a certain product. Virtual mall have a very comprehensive shopping system, complete with check-out form. 4] Merchant processes the order : The merchant then processes the order that is receipt from the previous stage and fills of the necessary forms. 5] Credit card is processed: The credit card of the customer is authenticated through a payment gateway or a bank. Other payment methods can be used as well, such as debit card, prepaid cards, or bank to bank transfers. 6] Operations management: When the order is passed on the logistics people, the traditional businesses operations will still be used. Things like inventory management, total quality management, warehousing, optimization and project management should still be incorporated even through it is an e-business. Getting the product to the customer is still the most important expect of e-commerce. 7] Shipment and delivery: The product is then ship to the customer the customer can tract the order- delivery as a virtual mall have a delivery tracking module on the web sites which allows a customer to check the status of a particular order. 8] Customer receives: The product is received by the customer, and it is verified. The system should then tell the firm that the order has been fulfilled. 9] After sale service: After the sale has been made, the firm has to make sure that it maintains a good relationship with it customers. This is done through customer relationship management or CRM. Reasons why one should opt for B2C are: 1) Inexpensive costs, big opportunities: Once on the internet, opportunities are immense as companies can
market their products to the whole world without much additional cost. 2) Globalization: Even being in a small company, the Web can make you appear to be a big player which simply means that the playing field has been leveled by e-business. The internet is accessed by millions of people around the world, and definitely, they are all potential customs. 3) Reduced operational costs: Selling through the Web means cutting down on paper costs, customer support costs, advertising costs, and order processing costs. 4) Customer convenience: Searchable content, shopping carts, promotions, and interactive and user friendly interfaces facilitate customers convenience, thus generating more business. Customers can also see order status, delivery status and get their receipts online. 5) Knowledge management: Through database systems and information management, you can find out who visited your site, and how to create, better value for customers. # Challenges faced by B2C E-commerce: The two main challenges faced by B2C e-commerce are building traffic and sustaining customer loyalty . Due to the winner-take-all nature of the B2C structure, many smaller
firms find it difficult to enter a market and remain competitive. In addition, online shoppers are very pricesensitive and are easily lured away, so acquiring and keeping new customers is difficult. A study of top B2C companies by McKinsey found that: Top performers had over three times as many unique visitors per month as the median. In addition, the top performer had 2,500 times more visitors than the worst performer. Top performers had an 18% conversion rate of new visitors, twice that of the median. Top performers had revenue per transaction of 2.5 times the median. Top performers had an average gross margin three times the median. There was no significant difference in the number of transactions per customer and the visitor acquisition cost. Essentially, these masters of B2C e-commerce (Amazon, etc.) remain at the top because of effective communication and value to the customer. •
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Classifications of B2C e-commerce-4: 1. Online Intermediaries: Online intermediaries are companies that facilitate transactions between buyers and
sellers and receive a percentage of the transaction’s value. These firms make up the largest group of B2C companies today. There are two types of online intermediaries: brokers and infomediaries. An infomediary is a
Web site that provides specialized information on behalf of producers of goods and services and their potential customers. ” 2. Advertising-based models: In an advertising-based system, businesses’ websites have an inventory, which they sell to interested parties. There are two guiding philosophies for this practice: high-traffic or niche. Advertisers take a high-traffic approach when attempting to reach a larger audience. These advertisers are willing to pay a premium for a site that can deliver high numbers, for example advertisements on Yahoo! or AOL. When advertisers are trying to reach a smaller group of buyers, they take a niche approach. These buyers are well-defined, clearly identified, and desirable. The niche approach focuses on quality, not quantity. For example, an advertisement on WSJ.com would chiefly be viewed by business people and executives. 3. Community-based shrimp models: In a community-based system, companies allow users worldwide access to interact with each other on the basis of similar areas of interest. These firms make money by accumulating loyal users and targeting them with advertising. 4. Fee-based models: In a fee-based system, a firm is able to charge a subscription fee for viewers to view its content. There are varying degrees of content restriction and subscription types ranging from flat-fees to pay-asyou-go. 3. Consumer to Consumer (C2C) E-commerce: C2C electronic commerce involves the electronically-
facilitated transactions between consumers through some third party. In this model consumer sell directly to other consumers via online classified ads on auctions, or by selling personal services or expertise online. E.g. of consumer selling directly to consumer are ebay.com (auctions) and TradeOnline.com (classified ads) This type of e-commerce is expected to increase in the future because it cuts out the costs of using another company. An example on how it could change in the future from Management Information Systems, if you are driving around in a car, someone having a garage sale can transmit to your GPS advertising their garage sale. This will reach a larger population than just signs. (i) No quality control (ii) No payment guarantee (iii) Hard to pay for using cheques, ATM cards, etc. but in the future this is likely to change. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission. The sites are only intermediaries, just there to match consumers. They do not have to check quality of the products being offered. The huge success of online auctions like eBay, where consumer as well as business can buy & sell with each other in an auction process at an auction websites, makes this e-commerce model an important e-commerce alternative for B2C, C2B, & B2B e-commerce. Electronic personal advertising of products or services to buy or sell by consumers at electronic newspaper sites, consumer e-commerce portals, or personal websites is also an important form of C2C e-commerce. 4. Business to Government (B2G): (B2G) is a derivative of B2B marketing and referred to as a market
definition of "Public Sector Marketing" which encompasses marketing products and services to the U.S. Government through Integrated Marketing Communications techniques such as strategic public relations, branding, marcom, advertising, web-based communications to Uncle Sam. According to Gal Borenstein, CEO of The Borenstein Group (Fairfax-Based B2G Marketing Communications Firm), [1], the majority of government spending has been focus on fulfilling three mission areas identified in the Presidential Management Agenda (PMA) of current and past presidents: [2] 1. Empower government agencies with better Business Process to help make it more efficient. 2. Become a better customer-service provider to Public Citizen and promote visible accessibility to public records via electronic records management. 3. Create visible accountability by reducing disparate systems and centralizing functions that can be re-engineered to be measured, accounted for, and controlled by tighter oversight and controls. Consumer to Business : The C2B model, also called a reverse auction or demand collection model, enables
buyers to name their own price, often binding, for a specific goods or service generating demand. The websites collects the demand bids and then offers the bids to the participating sellers. Reverse auction.com and priceline.com are e.g. of C2B business models. Unit III E-Marketing: E-marketing can include any Internet-based promotion, including websites, targeted e-mail.
Internet bulletin boards, site where customers can dial-in and download files, and so on. The term does not have a strict meaning though, and many marketing managers use it to describe any computer-based marketing tool. The accelerating confluence of traditional print and broadcast media with new digital media like the Internet has created dynamic new channels for markets. At the same time, advertisers have begun demanding greater economic efficiency in reaching target customers. The Internet is changing the design and implementation of marketing strategies. This dynamic technology provides marketers with efficient and powerful methods of designing, promoting, and distributing products, conducting research, and gathering market information.
Traditional Vs Internet Marketing:
1.In TM the contents is static. In IM the content is dynamic. 2.TM has limited reach, IM has global reach. 3.TM requires a lot of preparation time, an IM campaign can be implemented much faster because it is much simpler. 4.TM is hard to measure effectiveness; IM allows you to measure everything. 5.In TM you pay for the publication it doesn’t matter if the prospects saw your message or not, in IM with pay per click (PPC) you pay only when your prospects enters your sight. 6.TM requires big investment; IM can be adjusted at an affordable budget. Traditional Marketing: Traditional Marketing is a social and managerial associated with the process of
researching, developing, promoting, selling and distributing a product or service. Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationship in ways that benefits the organization and its stakeholders. Traditional marketing seems to fall far short of three features. There are certain problems associated with it, which can be listed as follows: 1.Traditional marketing is often expensive. It can cost a lot of money to produce and print broachers, product sheet, and catalogues. It is also expensive to keep support personnel on hnd to answer inquires from customers, and it costs a lot of money in postage and shipping fees to send information to prospective customers. 2.Traditional marketing can be a very time-consuming process. Mistakes have to be corrected; you have to go back to the ad agency or printer to revise, add or delete, and you often have to wait for months for an ad that you have place to appear in a publication. 3.Traditional marketing often has a ‘hit and miss’ quality. Marketers often send out bulk of mails to customers and yet receive a tiny response. Moreover they feet that they do not cater to the taste of the customers or rather that they do not come across the right customer. Business has always made their presence felt by establishing shops, factories, warehouse, and office buildings. An origination’s presence is the public image it presents to its stakeholders. The stakeholders of a firm include its customer, suppliers, employees, stakeholders, neighbors, and the general public. Companies tend not to worry much about the image they project until they make their mark. Initially, they focus only on their survival. Online Marketing: Online marketing means using the power of online networks, computer, communications,
and digital interactive media to reach your marketing objectives. Online marketing will not replace traditional forms of marketing anyway. Instead, it will both add to and subtract from today’s marketing mix. It will add more interactivity. But it will subtract costs. It will add more customer choices. But it will remove marketing’s dependence on paper. It will add “information value” to products and services. But it will take away barriers to starting a business ort extending a business into international markets. And most importantly, it will turn upside down some ald notions e have held of what marketing is all about. Three new market segments are: 1. Cyber buyers: These are professionals who spend a good deal of time online, mainly at their places of businesses. These professionals often have to make complex purchasing decision that requires reams of data and difficult to locate sources of supply, all within a tight time frame. That is a perfect fit with the capabilities of online technology. 2. Cyber consumers: These are the home computer users wired up to commercial online services and the Internet. The group represents the pot of gold, and marketers simply need to ways to make it more attractive to shop and buy online than to go to the local store. 3. Cyber surfers: They use online technology to expand their horizons, challenge their abilities, and for fun. This segment is typically younger, and possesses shorter attention spans. Some of the important aspects of marketing are advertising, sales security of the transactions and the mode of payment used for payments. And all of these have had to adapt and change themselves according to the demands of the Internet. How Should Buyers Pay Online?
The marketplace, as usual, is responding quickly to this concern. A few basis models or approaches to netbased sales transactions are beginning to come into focus. They are: 1.The consumer, responding to net-based marketing presentation, sends in a cheque or calls and verbally transmits a credit card number, over the merchant’s telephone. This is a fairly traditional approach, and financial transaction takes place on the Internet. 2.The consumer (1) sets up an account with a merchant or a third party organization,(2)Leaves his or her credit number by means other that the Internet, and(3) gives the merchant the authorization to bill the account, whenever the consumer chooses to buy something.
3.The consumer leaves his or her credit card number on an unsecured online order from. With this approach, the consumer is put at some risk that the credit card number will be compromised, but the risk is perhaps not much than giving it out over the phone. 4.The consumer uses a secure client software program to transfer his or her encrypted credit card number to a secure merchant server. 5.The consumer exchanges traditional currency for some form of digital currency, and then spends units of the currency whenever and wherever he or she likes. This requires some from of ”electronic wallet” to hold the currency and account set up between the currency provider and the participating merchants. Advantages of Online Marketing
1.Online marketing offers bottom-line benefits that tie in directly to the demands placed on the organization trying to make transition into the new economy. 2.Online marketing can save money and help you stretch your marketing budget. Electronic various of catalogues, brochures, and specification sheets do not have to be printed, packaged, store, or shipped. These can be updated online, and hence you need not have to send them back to the printer for changes. This saves a lot of money. 3.Online marketing can save time and cut steps from the marketing process. Marketers no longer have to wait for one of their sales representatives to give them the desired information. 4.Online marketing gives customers another way to buy, while enabling them to take control of the purchasing process. Today, customers want more. They want more information about the products they buy, more input into the product itself, and support after the sale. 5.Online marketing can be information-rich and interactive. It appeals to information-hungry buyers and analytical buyers. 6.Online marketing can offer you instant international reach and indeed, online networks have created an instant global community. 7.Online marketing can lower barriers to entry and offer equal opportunity for access. The online world is a great leveler. And online marketing helps to lower many of the marketplace barriers that have held some would-be entrepreneurs from full participation in the free market system. E-Advertising: Advertising is a message from a company (the advertiser) to potential customers that attempts
to influence or reinforce the customers' attitudes and/or behavior toward purchasing the advertiser's products or services, or towards obtaining more information, including further marketing messages. Advertisers hoped that potential buyers would remember their slogan or jingle long enough to make a trip to the store and purchase the product. Electronic advertising is probably the best method to advertise on the internet, as people visit sites & pages and download whatever materials is in them only if they want to. Banners ads are common on such free services, such as search engines and web based email accounts which is a service to internet community, as those free services would not without the income from those advertisements. This has changed with the advent of interactivity. The new concept of interactivity’ has overpowered the traditional concept of advertising, by putting the buyer in the driver’s seat. Interactivity allows consumers to increase their control over the buying process. We are all deluged with an overflow of data. We long for a sense of mastery over the information that washes over us. Given the opportunity, we will be more selective about the kind of information we choose to receive. I interactivity give us that option. Thus, the audience is not captive any more, and the marketers would have to work harder than before to entice them. The marketing efforts will have to be information-rich and user-friendly. Web-bases advertising has become an important part of a company’s media mix Numerous companies are committing large advertising budgets to the Internet. Following are the reasons for the growing importance of e-advertisements: 1.People increasingly prefer to surf the internet rather than watch TV. 2.The target audience goes to the advertising, rather than the other way around. 3.Development of business search engines by companies such as C2B Technologies, which aim to link buyers with online bargain sites for over a million products for comparison-shopping purposes. 4.Yahoo! has a business unit which offers contests and prizes to online participants, which drive players to the websites of different clients. 5.The growth of e-business. Del computers, for example, estimate that by 2005, 85 percent of its sales will be through the Internet. 6.The Internet is not geographically restricted. Amazon.com sells 20pecent of its books to foreign destinations, whereas a physical book store serves an area of only a few square miles. Various means of Advertising: 1. E-mail: The advantage of e-mails are its low cost and its ability to reach a wide varity of targeted audiences.
Most companies develop a customer database, to whom they send e-mails. E-mail is emerging as a marketing channel that affords cost-effective implementation and batter quicker response rates than other advertising
channels. Marketers should be racing to embrace the medium. Sometimes, it may also happen the whenever marketer starts inundating prospects and customers with e-mail, the consumers may react negatively. 2. Mini-sites. Pop-ups: These ads burst upon the screens, allowing companies such as Volvo and SmithKline Beecham’s oxy acne medicine to dosh up games and product information. Mini-sites allow advertisers to market without sending people away from the site they are visiting. This type of advertisers to market without sending people away from the site they are visiting. This type of advertising also gets higher click rates. Sometimes, these can be intrusive and annoying. 3. Partnerships: While many offline companies arrange partnerships, the use of partnership is more pervasive un the New Economy. Similar to the manner in which complementary companies often collaborate to push a new technology, web companies often partner with complementary sites to quickly provide a more valueenhanced service to site visitors. One prevailing strategy is to select a customer niche and provide services that encompass the customer’s entire needs in that area. 4. Providing Information: The Web allows sites to instantly offer information that is relevant to their customer base. Many sites provide instantly accessible information to their customers as form of marketing and product differentiation. The e-commerce market for travel is very competitive, with many well-funded players. Sites try to differentiate themselves by offering vast amounts of information to their customers. Travel information can range from top restaurant and hotel information targeted towards expense account business travelers, to time-sensitive travel information to budget-minded leisure travelers. 5. Banner Swapping: Banner swapping is nothing but a direct exchange of links between websites. To be precise, company A may agree to display a banner of company B in exchange for company B displaying company A’s banner The Browsing Behavior Model: The customer behavior while interacting with an ecommerce site has impact
on the IT resources of the site and on the revenue of the e-store. Thus, it is important to be able to characterize the behavior of customer or groups of customers of an ecommerce site. The customer model captures elements of user behavior in terms of navigational patterns, e-commerce functions used, frequency of access to the various e-commerce functions, and times between access to the various services offered by the site. A customer model can be used for navigational and workload predication, so that websites can be modeled. Browsing Behavior Model of an Online Video Store: Let us use an example of an online video store to give
an informal introduction to the user behavior model of an e-commerce site. Consider an online video store in which customers can perform the following functions; 1.Connect to the home page and browse the site by following likes to bestseller videos and promotions of the week per video category. 2.Search for titles according to various criteria including keywords and title. 3.Select one of the videos that results from a search and view additional information such as a brief description of the products, price, shipping time, ranking and reviews. 4.Register as a new customer of the virtual video store. This allows the user to provide a username and a password, payment information, mailing address, and e-mail address for notification of order status and videos of interest. 5.Login with a username and password. 6.Add items to the shopping cart 7.Pay for the items added to the shopping cart. Thus, during a visit to the online video store, a customer issues requests that will cause these functions to be executed. For example, a customer may cause a search to be executed by submitting a URL that specifies the name of an application to be run the server through a server Application Programming Interface (API) and the keywords to be used in the search. The application will then execute a search in the site database and return an HTML page with all the video that match the search criteria. A customer may be classified as being in different states, according to the type of function requested during a session. For example, the customer may be browsing, searching, registering as a new customer, logging in, adding videos to the shopping cart, selecting the result of a search, or paying for the order. The possible transitions between states depend on the layout of the site. Browsing Behavior Model Graph (BBMG) : This model is in the form of graph and is called the Browser
Behavirour Model Graph (BBMG). 1. Entry: This is a special state that immediately processed a customer’s entry to the online store. This stage is part of the BBMG as a modeling convenience and does not correspond to any action initiated by the customer. 2. Home: this is the state a customer is in, after selecting URL for the site’s home page. 3. Login: A customer move to this state after requesting a login to the site. Sometimes, even a home page may ask him to login. 4. Register : To have an account created by registering with the online video-store, the customer selects the proper link for the registration page, thus making a transaction to the register state. 5. Search: A customer goes to this section after issuing a search request.
6. Browse: this is the state reached after a customer selects one of the links available at the site to view any of
the pages of the site. These links include the list of best sellers and weekly promotion. 7. Select: A search returns a list of zero or more link to videos. By selecting one of these links a customer moves to this state. 8. Add to cart: A customer moves to this stage upon selecting the button that adds a selecting video to the shopping cart. 9. Pay (billing): When ready to pay for the items in the shopping cart, the customer moves to the billing section. 10. Exit: Customers may leave the sites from any state. Thus, there is a transition from all states, except the entry state, to the exit state. Various businesses that can flourish on the internet: 1. Banking: The advent of automated teller machine has long extended banking into the realm of computer-
network-enabled services. Now, online banks are being setup exclusively to serve client through the internet, with the full range of banking services-deposits, withdrawals, fund transfer, loans and other form of transactions. Simultaneously, online financial services are being offered by other companies, bringing investment opportunities to customers. And several companies are offering e-cash services. 2. Databanks: IN the information economy, pure data is emerging as a hot commodity with the ease and low cost of delivery information over the internet pushing down prices, data-venders are building profitable businesses in the market-space. Convenient mechanisms for searching databases are making information services user-friendly as well. And importantly, businesses are also springing up to enable data shoppers to hunt for the information they need, in the form of search engines which search millions of document on the internet to track down information. 3. Music: Since, it is recorded and stored digitally; music as well as the other audio product is the perfect product for distribution over the internet. Instead of buying cassettes or CDs, customer can simply download the recording from the sites. The world’s top music levels are setting up websites form which internet shopper can buy their favorite pieces. They are also creating customer involvement by setting up virtual communities of music aficionados who can access sample, trivia, and other value added information, such as lyrics and scores, directly through the internet. 4. Retailing: Two genres of online shopping mall are being setup by digital entrepreneurs. The first consist of multimedia catalog which shopper can down load through the internet without taking physical delivery. The second verity is a super market service that offer getaways to the websites of scores of other shops, acting as a single window for virtual suppers. With electronic payment systems becoming secure, customer will soon complete entire retailing transaction on the internet. Extras: Internet Marketing: Internet marketing, also referred to as online marketing, Internet advertising, or e-
Marketing, is the marketing of products or services over the Internet. When applied to the subset of websitebased advertisement placements, Internet marketing is commonly referred to as Web advertising (also Webvertising) and Web marketing.[citation needed] The Internet has brought many unique benefits to marketing, one of which being lower costs for the distribution of information and media to a global audience. The interactive nature of Internet marketing, both in terms of providing instant response and eliciting response, is a unique quality of the medium. E-marketing is sometimes considered to have a broader scope since it refers to digital media such as web, e-mail and wireless media, but also includes management of digital customer data and electronic customer relationship management systems (E-CRM systems). Internet marketing ties together creative and technical aspects of the Internet, including design, development, advertising, and sales. Internet marketing methods and strategies encompass a wide range of services: Internet marketing does not simply entail building or promoting a website, nor does it mean placing a banner ad on another website. Effective Internet marketing requires a comprehensive strategy that synergizes a given company's business model and sales goals with its website function and appearance, focusing on its target market through proper choice of advertising type, media, and design. Internet marketing also refers to the placement of media along different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO), banner ads on specific websites, email marketing and Web 2.0 strategies. In 2008 The New York Times working with comScore published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from ads served from advertising networks, the authors found the potential for collecting upward of 2,500 pieces of data on average per user per month. [1] Advantage of Internet Marketing : Internet marketing is relatively inexpensive when compared to the ratio of
cost against the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and purchase products and services at their own convenience. Therefore, businesses have the advantage of appealing to consumers in
a medium that can bring results quickly. The strategy and overall effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis. Internet marketers also have the advantage of measuring statistics easily and inexpensively. Nearly all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers either pay per web banner impression, per click (PPC), per play (PPP), or per action accomplished. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, visit a website, and perform a targeted action. Such measurement cannot be achieved through billboard advertising, where an individual will at best be interested, then decide to obtain more information at a later time. Internet marketing as of 2007 is growing faster than other types of media.[citation needed] Because exposure, response, and overall efficiency of Internet media is easier to track than traditional off-line media — through the use of web analytics for instance — Internet marketing can offer a greater sense of accountability for advertisers. Marketers and their clients are becoming aware of the need to measure the collaborative effects of marketing (i.e., how the Internet affects in-store sales) rather than siloing each advertising medium. The effects of multichannel marketing can be difficult to determine, but are an important part of ascertaining the value of media campaigns. Limitations of Internet Marketing: Internet marketing requires customers to use newer technologies rather
than traditional media. Low-speed Internet connections are another barrier: If companies build large or overlycomplicated websites, individuals connected to the Internet via dial-up connections or mobile devices may experience significant delays in content delivery. From the buyer's perspective, the inability of shoppers to touch, smell, taste or "try on" tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services. A survey of 410 marketing executives listed the following barriers to entry for large companies looking to market online: insufficient ability to measure impact, lack of internal capability, and difficulty convincing senior management. vate network will still continue to operate though the internet access is lost. If there are multiple points of access, each one becomes a potential point of attack that the network administrator must firewall and monitor regularly. Unit VII: Consumer Oriented Electronic Commerce : Consumer - oriented ecommerce is still in its early stages, but the
question is no longer whether it will occur but rather how widely it will spread. Consumer application such as on line stores and electronic shopping malls are burgeoning but access is still cumbersome and basic issues need to be resolved. Customers can browse at their PCs, traveling through electronic shops viewing products, reading descriptions, and sometimes trying samples. These early systems sometimes provide information only and lack the means to accept orders via the keyboard. Ideally, consumers should be able to execute a transaction by clicking on the BUY button to authorize payment, and the online store's bank account would then automatically receive it from the customer's preferred payment mode. Security of on line payments remains major barrier to this feature. Customers could pay by credit card, transmitting the necessary data via modem, but intercepting messages on the internet is easy for a smart hacker, so sending a credit card number in an unscrambled message is inviting trouble. It would require either adoption of encoding (or encryption) standards or ad hoc arrangements between buyers and sellers. CONSUMER ORIENTED ECOMMERCE APPLICATION-4: 1. Personal Finance and Home Banking Management-3: The technology for paying bills, whether by
computer or telephone is infinitely more sophisticated than any on the market a few years ago. The 1980s were the day of stone age technology compared to what exists today. In that days, technology choice for accessing services were limited to touch tone phone and in some very advance cases PCs. The range of options has expanded to include PCs, interactive TV and even personal digital assistance (PDAs). Customer interest in home banking has resumed, fueled by growing comfort – or at least familiarity – with electronics, by greater demands on consumer time and by the expanding needs for information to manage the increasing complexity of house hold finances. a. Basic Services: are related to personal finance; checking and saving account statement reporting, round the clock banking with automated tailor machine (ATM), funds transfer, bill payment, account reconciliation (balancing check books) and status of payments or “stop payment request”. b. Intermediate Service: includes a growing array on home financial management services, which include household budgeting, updating stock portfolio values and text return preparation. c. Advance Services: include stock and mutual funds brokerage or trading services, currency trading and credit or debit card management.
2. Home Shopping: It has generated substantial revenues for many companies racing to develop online malls.
These malls will enable a "customer" to enter online stores, look at products, try on computerized clothes, see a reflection in a digital mirror, and purchase with overnight delivery against credit card billing. The exact operating methods of these services has yet to be determined, but the retailers are well aware of the potential opened up by the ability to transmit huge amounts of digital information into the home and to provide interactive control to the shopper. And the current television and catalog based shopping processes are expected to undergo major changes to take advantage of the technology. a. Television based Shopping: TV shopping has evolved over the years to provide a wide variety of goods ranging from collectibles, clothing, small electronics, warehouses, jewelry and computers. A customer uses his/her remote control to shop different channels with the touch of a buttons,. To target customers, channels are often specialized. In this shopping you may be able to scan your picture into the TV and see how the latest outfits look on your body before making a decision. Television based shopping enjoyed revenues of $1.2 billion in 1993. To put this into perspective, consider that in 1992 US consumers bought $42 billion of merchandise from home through mail order houses and television channels. b. Catalog Based Shopping: For this shopping a computer should be connected to the internet to launch an enquiry using a knowledge-gathering software assistant (in technical terms a mobile software agent) that roams the global networks and identifies the items in various vender catalogs that fit certain specified parameters such as price and quality. The online catalog business consists of brochures, CD-ROM catalog and online interactive catalog. 3. Home Entertainment: Another application area of ecommerce is that of home entertainment. Consider the
following scenario. A customer wishes to watch a movie. He/she browses through an online movie archive guide containing thousands of movies, music videos, award winning documentaries, soap opera episodes, concerts, and sporting events. After selecting an artistic or movies he/she sends a request to the movie distributor with the cost of the movie (eg $2.99) in the form of electronic tokens or credit card. The distributor validates the credit card and transfers the movie to their TV set-top with the necessary safeguards. a. Size of Home Market: Entertainment services are expected to play a major role in ecommerce. This prediction is underscored by the changing trends in consumer behavior. Notice the critical importance of home video to Hollywood revenues. b. Impact of Home Entertainment on Traditional Industries : The impact of the new forms of entertainment on the traditional movie industry presents a case study that is likely to be repeated in many other industries. The movie exhibition industry clearly needs to understand the implications of the convergence of several technologies into a functioning "home theater". 4. Micro transactions of information: One significant change in traditional business forced by the online information business is the creation of a new transaction category called small fee transactions for micro services. The complexity of selling micro services increases further when additional activities like account reverification are factored in. Re verification means checking on the validity of the transaction after it has been approved. Functional small money transactions require an inexpensive safety and settlement process or a major portion of the transaction value will be consumed in the verification process. Also, most of the argument in favor of using encryption is aimed at ensuring the integrity of transactions and authentication of transactions, not at economic issues that form a significant factor of business thinking. This is one of the reasons banks are reticent about electronic commerce, fearing it will not be profitable. Banks would rather deal with the evil they understand, like credit card fraud, than the lesser evil they don't comprehend, like a tamper-proof electronic cash system based on encryption. “OR” Consumer-Oriented Application: 1: Personal Finance & Home Banking Management: The newest technologies, home banking services are
often categorized as basic, intermediate, and advanced. Basic services are related to personal finance: checking and savings account statement reporting, round-the-clock banking with automated teller machines (ATM), funds transfer, bill payment, account reconciliation, and status of payments or stop payment requests. Intermediate services include a growing array of home financial management services, which include household budgeting, updating stock profile values, and tax return preparation. More advanced services include stock and mutual fund brokerage or trading services, currency trading, and credit or debit card management. 2: Home Shopping: It is already in wide use and has generated substantial revenues for many companies racing to develop online malls. These malls will enable a customer to enter online stores, look at products, try on computerized cloths, see a reflection in a digital mirror, and purchase with overnight delivery against credit card billing. The exact operating method of these services has yet to be determined, but the retailers are well aware of potential opened up by the ability to transmit huge amounts of digital information into the home and to provide interactive control to shopper. And the current television and catalog-based shopping processes are expected to undergo major changes to take advantage of the technology. 3: Home Entertainment: Another application area of e-commerce is that of home entertainment. Consider the following scenario. A customer wishes to watch a movie. S/he browses through an online movie archive guide
containing thousands of movies, music videos, award-winning documentaries, soap opera episodes, concerts, and sporting events. In addition to game technology, we are witnessing the emergence of entertainment support functions such as on-screen catalogs, such as TV guide, that inform users what’s on TV. TV guide on screen lets cable system subscribers download program schedules and other information from cable system satellite feeds. The system will customize a personalized electronic menu of entertainment options. 4: Micro-transactions of Information: To serve the information needs of the consumer, service providers whose products is information delivered over the I-way are creating an entirely new industry. Most sell any form of digital information that can be sent down a network of one sort or another; data, pictures, computer programs and services. A few sell products - sex, music, books, lingerie - through online catalogs. Online business is the creation of a new transaction category called small-fee transactions for micro-servers. For e.g. if company Z charged Rs.5 to download a customer service file ‘cs123.txt’ from its FTP server and 20000 people chose to do it every day, then Z would have Rs.1000 added to its bank account just for that one file. Now assume that there are 1000 files with similar activity. This volume of activity entails Rs1000000 changing hands in one day. MERCANTILE PROCESS MODEL: Mercantile processes define interaction model between consumers and
merchants for online commerce. This is necessary because to buy and sell goods, a buyer, seller, and other parties most interact in ways that represents some standard business processes. We, like many others, believe that a common way of doing business over the I-way will be essential to the future growth of ecommerce. A well established standard process for processing credit card purchases has contributed to the widespread dissemination of credit cards. The war against escalating online transaction-processing costs requires new weapons. And designing and implementing new mercantile processes is the most powerful weapon variable to wage that war effectively. The establishment of a common mercantile process (or set of processes) is expected to increase convenience for consumers who won't have to figure out a new business process for every single vendor. The absence of a common process for managing and completing transactions will result in electronic commerce being entangled in a mesh of bilateral ad hoc mechanism that are specific to every company doing business online. Before rushing off and developing new mercantile process models, it is prudent to review existing business process models used in the manufacturing and retailing industries. The review would provide the understanding required to determine the features needed in an architectural model designed specifically for electronic commerce. Then, of course, within the scope of such architecture, we must demonstrate the ability to solve all the problems that the current consumer oriented business process require and any new ones we may have identified for the future. The idea behind a general architecture is that it would lead to a set of methods and tools from which specific protocols can be easily implemented. MERCANTILE MODELS FROM THE VIEWPOINT OF CONSUEMRS PERSPECTIVE-3: The business process
model from a consumer's perspective consists of 7 activities that can be grouped into 3 phases: Pre-purchase phase, Purchase consummation, and post purchase interaction. 1. Pre-Purchase Phase-4: It includes search and discovery for a set of products in the large information space, capable of meeting customer requirements and product selection from the smaller set of products based on attributes comparison. The terms such as price, delivery times are also negotiated. The pre purchase phase includes: a. The consumer information search process: Information search is defined as the degree of care, perception and effort directed toward obtaining data or information related to they decision problem. The nature of consumer research behavior is undocumented in the existing literature and represents an area that must be better understood before ecommerce applications can be effectively designed. b. The organizational search process: Organizational search is an activity designed to balance the cost of acquiring information with the benefits of improved final decisions. This process is determined in part by market characteristics and by certain aspects of a firm’s present buying situation. Together, these dimensions impose a series of demand on the search process used. c. Consumer Search Experiences: It requires an examination that how particular aspects of the buyers present buying situation and the shopping experience that is being sought affects the search process. It is evident that an understanding of hedonic and utilitarian shopping can provide insight into many ecommerce consumption behavior that are normally not taken into account in the design and layout of electronic market places. d. Information Brokers and Brokerages: To facilitate better consumer and organizational search, intermediaries called information brokers or brokerages are coming into existence. Information brokerages are needed for three results; a comparison shopping, reduce search costs, and integration. 2. Purchase Consummation-3: It includes mercantile protocols that specify the flow of information and documents associated with purchasing and negotiation with merchants for suitable terms such as price, availability and delivery date; and e-payment mechanism that integrates payment into the purchasing process. Purchase consummation includes: a. Mercantile process using digital cash : In this scenario, a bank mints electronic currency (e-cash) which is simply a series of bits that the issuing banks can verify to be valid and is kept secured (un-forgeable) by the use
of cryptographic techniques. E-cash issuing banks make money by charging either buyers or sellers a transaction fee for the user their e-cash. It is similar to paper currency and has the benefits of being anonymous and easily transmitted electronically. b. Mercantile Transactions Using Credit Cards: It comprises 2 components electronic authorization and settlement. Here is a quick overview of the authorization, process. In a retail transaction, a third party processor (TPP) captures information at the point of sale, transmits the information to the credit card issue for authorization, communicates a response to the merchant, and electronically stores the information for settlement and reporting. c. Cost of Electronic Purchasing : On the surface, cash seems to be preferable to electronic payments. Firms are accepting debit less expensive than pocketing cash for transactions. Firms are attracted to electronic payment options because the consumers appear to spend more when using cards than when spending cash. 3. Post Purchase Interaction: It includes customer service and support to address customer complaints, product returns and products defects. In the ongoing relationship with the customers, this step can produce some of the most heated disagreements; every interaction becomes a zero-sum-game that either the company or the customer wins. To compound the problems, most companies designed their mercantile processes for one way merchandise flow; outbound to the customer. Product/Service search & discovery in the information space
Comparison shopping & product selection based on various attributes
Pre-purchase determination
Negotiation of terms e.g. price delivery
Placement of Orders
Authorization of Payments
Purchase Consummation
Receipt of Products
Consumer service & support (if not classified in X day return product)
Post Purchase Interaction
Fig; Steps taken by customers in product purchasing
Mercantile Process Model from the view point of Merchant “or” Order Management Cycle (OMC) from the viewpoint of Merchant in Ecommerce-8: The order to delivery
cycle from merchant perspective has been manufactured with an eye toward standardization and costs. This model is developed on the assumptions that an organization must create a set of operating standards for service and productivity, and then perform to those standards while minimizing costs of doing so. The strength of this philosophy lie in a company’s ability to take the position of low cost provider, its stress on benchmarking service and its emphasis on responsiveness as well as continuous improvements. To achieve better understanding, it is necessary to examine the order management cycle (OMC) that encapsulates the more traditional order to delivery cycle. The typical OMC includes 8 distinct activities although overlapping occur. The actual details of OMC vary from industry to industry and may differ for individual Customer inquiry & ordermay planning generation products and services. However OMC has the following steps: Presales the interactions Customer estimation & pricing of product services
Order Receipt & Entry
Order Selection & Prioritization Product service production & delivery
Order Scheduling
Order Fulfillment and Delivery
Order Billing & Account Management Post Sale Interaction
Customer Service and Support
Order Planning and Order Generation: The business process begins long before an actual order is 1. place by the customer. Order planning shows how and why lack of cohesive operation can cripple a company. Those farthest from the customer may crucial decisions and open up debt between interdependent functions right from the start. Order planning leads to order generation. The sales and marketing functions worry about order generation, and the other functions stay out of the way. Cost Estimation and Pricing : Pricing is the bridge between customer needs and company capabilities. 2. Pricing at the individual order level depends on the value of customer that is generated by each order, evaluating the costs of filling each order and instituting a system that enables the company to price each order based on its value and costs. Order Receipts and Entry : After an acceptable price quote the customer enters the order receipts and 3. entry phase of OMC. Traditionally this was under the purview of departments variously title customer service, order entry, the inside sales desk, or customer liaison. Order Selection and Prioritization: Those orders are selected which fits the company’s capabilities 4. and offer healthy profits. These orders fall into the sweet spot region which represents a convergence of great customer demand and high customer satisfaction, which in turn translates into customer retention. In addition the company can make gains by the way they handle order prioritization i.e. how they decide which order to execute faster. Order Scheduling: During this phase the prioritized orders get slotted into an actual production or 5. operational sequence. This task is difficult because the different functional departments – sales, marketing, operation or production may have conflicting goals, compensation system and organizational imperatives. Order Fulfillment and Delivery: During this phase the actual provision of the product or service is 6. made. While the details vary from industry to industry in almost every company this step has been increasing complex. Often, order fulfillment involves multiple function and locations; different parts of an order may be created in different manufacturing facilities and merged at yet another side, or order may be manufactured in one location, warehoused in the second, and installed in the third. Order Billing and Account/Payable Management: Billing is handled by the finance staffs who view 7. their job as getting the bill out efficiently and collecting quickly. It is basically designed to serve the need and interest of the company, not the customer. The bill may not be in accurate, but is usually constructed in a way more convenient for the billing department than for the customer. Post Sales Services : This phase plays an increasingly important role in all elements of a company’s 8. profit equation; customer value, price and costs. Depending on the specific of business, it can include such elements as physical installation of a product, repair and maintenance, customer training and disposal. Because of the information conveyed and intimacy involved post sales service can affect customer satisfaction and company profitability for years. Consumer Relationship Management/CRM: It is defined as the aligning of business strategy with the
corporate culture of the organization, along with customer information and a supporting information technology of the customer interactions that promote a mutually beneficial relationship between the customer and the enterprise. Primarily CRM is a business strategy, but it is a business strategy enabled by the advances in technology. Wide spread implementation customer information, enterprise resource planning system, sales force automation and integrated point of sale systems have made customer information readily available in large volume. Reduced costs and higher level of performance for database management platforms allows us to gain access to this customer information and gain new insights into our customer and their behavior through a v ariety of analysis method. CRM involves retaining both business and individual customer through strategies that ensures their satisfaction with the firm and its products. It also seeks to keep customer for a long time and to increase the number of change, the timing of transactions that the conduct with the firm. As it relates to E-business, CRM
uses digital processes and integrates customer information collected at every customer “touch point”. Customer interact with firms in person at retain stores or company offices, by mail via telephone or over the internet. Phases of CRM-3: Acquisition: You acquire new customers by promoting product/service leadership that pushes 1.
performance boundaries with respect to convenience and innovations. The value proposition to the customer is the offer of a superior product back by excellent service. Enhancement: You enhance the relationship by encouraging excellence in cross selling an up selling. 2. This deepens the relationship the value proposition to the c ustomer is an advantage with greater convenience at low cost (one stop shopping). Retention: Retaining profitable customer for life should be the aim. Retention focuses on service 3. adaptability i.e. it delivers not what the market wants, but what the customer wants. The value proposition of the customer enhances a proactive relationship that works well with the best interest of the customer. Today, leading companies focus on retention of existing customers much more than on-attracting new customers. The reason behind this strategy is simple: If you want to make money hold on to your good customer. But do not be fooled; it is not as easy as it seems. All the phases of CRM are inter-related. Each of the phases has a different impact on the customer relationships, and each can more closely tie a company with the customer life. However performing the task well in all the 3 phases is a difficult proposition, even for the best of companies. Companies often have to choose which one of these dimensions will be their primary focus. Acquisition Innovative Convergence
Enhancement Reduce cost Customer Service
Retention Listening New Products
Fig: Phases of CRM
E-Commerce Relationship Management (ECRM) Solutions: ECRM solutions are especially valuable to
companies that face the following circumstances: 1.Business is driven by mission critical customer service requirements 2.Current costs for CRM run high 3.Large volumes of information is distributed 4.A complete customer care solution is needed. ECRM solution can be deployed and managed to prove increased revenues and decreased costs for companies while improving customer service. E-CRM goals can be achieved with Internet business strategies, web based CRM specification development, web systems design, project management, interactive interface design and electronic publishing. To help organize the chaos, ECRM solutions can be grouped into 2 categories; web base solutions and web extended solutions. The web base CRM solutions are designed from the bottom up, exclusively for the internet. These are very innovative products, initially focused on the sales (E-commerce) functions. More marketing and service capabilities will be soon added. Webs extend CRM solutions are established (server based) CRM suites, originally designed for enterprise users with extensions, to include web interface functions. The Strategy of E-CRM can be visualized in 3 stages : Stages 1: Customer Information Environment: In this stage, building up of a customer information environment and acting on it forms the strong point. It consists of metrics programmes, customer information repository and monitoring customer behaviors. Stage 2: Customer Value Orientation: In this second stage, operational effectiveness is the focus. Customers want value for their money. They believe that they have got value, when the perceived benefits they receive from something exceed the costs of owning it. These components are perceived quality (obtained) and perceived sacrifice (given), which forms perceived value. Perceived quality is combination of core product & benefits and customized service benefits; in the same way perceived sacrifice is a combination of price and costs other than price.
Stage 3: Customer Loyalty: In this stage, the focus is on the integration of internal process of the organization
with the customer in creating a community. Moving costly customer services to the internet is critical to staying competitive providing customer services on the internet means a lot more than just having a website. Most companies are focused on today’s most critical business challenges – attracting and retaining customers. These companies require customer-directed e-business solutions and E-CRM to meet those requirements. Companies benefits from huge costs savings and increased revenues. Customers benefit from on-demand access to information, less hassles with better support and less expensive services. The strategy of the portals is to become global supermarkets providing everything for individual’s families and organizations. Their customer base is what stock market considers being the most important assets of these companies. ECRM Vs CRM:
1.The distribution channels are direct or through intermediaries; customer choice in ECRM while distribution channel are through intermediaries chosen by the seller in CRM. 2.Advertising provides information in response to specific customer inquiries. Advertising push and sell a uniform message to all customer. 3.Promotion and discount offers are individually tailored to customer. Promotion and discounts are offered same for all customers. 4. ECRM targets to identify and response to specific customer, behaviors and preferences. CRM targets for market segmentation. 5.Price of products and services are negotiated with each customer. Price of products and services are set by the seller for all customers. 6.New product features are created in response to customer demands. New products features are determined by the seller based on R&D. 7.ECRM measurements used to manage the customer retention; total value of the individual customer relationships. CRM measure used to manage the customer relationship market share; profit. Converting Clicks to Customers : To leverage technology and thereby realize the greatest benefit from a web
presence, a business must first know what it is after, in terms of a relationship with its customers. Assuming that the goal is to provide a website with an Emotionally Intelligent and technology management also has to appreciate possibilities with the business resources and technology constraints. Note that the technologies with the greatest degree of interactivity provide the greatest potential for a scale. A business model needs to pull everything together in a way that harmonizes with its customers; the business should use the technology at its disposal so that the odds of creating a loyal customer following are maximized. The Customer Retention Goal: Attracting and retaining customers has rapidly emerged to be the most mission-
critical function of leading businesses. Everything (products, services, pricing and the like) is a commodity. Customer retention has replaced cost-effectiveness and cost-competitiveness as the greatest concern of business executives today. It consists 5 or 10 times more to get new customers than to retain the existing ones. It is going to involve more efforts than web interactions to keep the customer brand loyal. The Power Shift: Customer are more important than business people. Companies need to do business with them in their own way. The key is integration of the various points of customer contact, including the web, contact centers, wireless and others. All customer interaction must be consistent, with clear value deliver to the customer and the company. Customer should be segmented based on the assumptions that they will predominantly choose one point of contact with business. More likely the customer will have multiple point of contact, including our websites contact centers, sales and field service representatives. They expect a consistent experience from point to point. They expect the company to be easy to do business with. Very soon the ‘e’ fancy will subside. Executive in every industry will recognize that the next major phase of the web phenomenon is actually integration with other points of contact. Blended media is a true killer solution for business. From the perspective of customer it is necessary to realize how the customer interacts with the enterprise over time, as the enterprise; Acquires the initial customer relationship Works to earn the customer’s persisting loyalty and Expands the relationship to gain a greater share of each customers purchasing potential • • •
