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Chapter 10

Chapter 10. E-commerce: Digital Markets, Digital Goods. Features of E-commerce. Related terms. Marketspace (boundaries extended) Transaction costs (costs to participate) Market Entry Costs (cost to bring goods) Search costs (costs to find products) Richness (quality message)

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Chapter 10

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  1. Chapter 10 E-commerce: Digital Markets, Digital Goods

  2. Features of E-commerce

  3. Related terms • Marketspace (boundaries extended) • Transaction costs (costs to participate) • Market Entry Costs (cost to bring goods) • Search costs (costs to find products) • Richness (quality message) • Information Density (amount and quality of info) • Price transparency (find out prices in a market) • Cost transparency (discover costs merchants pay) • Price discrimination (different prices/different audiences) • Personalization (targeted marketing) • Customization (user’s preferences determine)

  4. Digital markets and digital goods • Digital Markets • Information asymmetry reduced by Internet • Flexible and efficient • Lower menu costs • Greater price discrimination • Ability to use dynamic pricing • Can either reduce or increase switching costs • Many opportunities to sell directly to customer and bypass intermediaries (like distributors or retail outlets) • Removing organization or business process layers responsible for intermediary steps in a value chain - Disintermediation • Digital Goods • Delivered over a digital network

  5. Types of E-commerce • Business-to-consumer (B2C) • Business-to-business (B2B) • Consumer-to-consumer (C2C) • M-Commerce • B2B or B2C used in this model

  6. Internet business models

  7. E-commerce revenue models • Advertising Revenue Model (ads) • Most widely used model • Sales Revenue Model (selling to customers) • Micropayment systems (process monetary transactions) • Subscription Revenue Model (fee for subscription) • Free/FreemiumRevenue Model (initial free; then pay for more) • Transaction Fee Revenue Model (every transaction=fee) • Affiliate Revenue Model (send to websites; fee for purchases)

  8. Networking and marketing • Social networking link people together who are interested in the same areas • Social shopping (viral marketing) • “Wisdom of Crowds” (more better than few) • Crowdsourcing (use customers for solving business problems) • Many ways to market and advertise online • Long tail marketing (find patterns/demand low) • Behavioral targeting (estimated 10 times more likely to produce a customer response than a randomly chosen ad) • Metrics – use to measure the effectiveness of different behaviors (abandoned shopping cart, page visits, tracked visitor, clickstream data metrics, stickiness, unique visitor, page exposures, site exposures, etc)

  9. e-business Marketing formats

  10. B2B E-commerce • Growth rate 7%; by 2014 ($5.1 trillion) • Refers to the commercial transactions that occur among business firms • 80% of online B2B e-commerce is still based on proprietary systems for Electronic Data Interchange (EDI) • Private industrial networks (or private exchange) – Extranet; link suppliers and other business partners • Share product design and development, marketing, production scheduling, inventory mgmt, and unstructured communication; Bring together small number of strategic business partner firms that collaborate to develop highly efficient supply chains • Net marketplace (e-hubs) – single digital marketplace based on Internet technology for many different buyers and sellers; establish prices online auctions, negotiations, or quote requests, or can used fixed prices • Sell direct goods or indirect goods • Exchanges – independently owned third-party Net marketplaces that connect thousands of suppliers and buyers for spot purchasing

  11. Mobile Commerce MISC Main areas of growth • Location-based services • Software application sales • Entertainment downloads • Mobile display advertising • E-book sales • Banking and financial services • Wireless advertising and retailing • Games and Entertainment

  12. E-Commerce websites • We will discuss more for SDLC project • Business objectives, system functionality, information requirements? • In-house or outsourced? • Build? • Host? • Budgets?

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