CHAPTER 1

E-Commerce in Context (Past, Present, Future)

Reference Materials

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Strauss J & Frost R 2009, E-Marketing, 5th Edition, Pearson Education, Inc.

Marketing implications of internet technologies

• The internet has properties that create opportunities beyond those possible with the telephone, television, postal mail or other communication media. • This can be seen in terms of global reach (worldwide partnership, employee collaboration and salesperson telecommunicating), mediating technology (allowing timely communication and data sharing), the use of bits rather than atoms (Information, products and communication in digital form can be stored, sent and received nearly instantaneously) and task automation (self-service online for transactions and payment). Other properties include network externality (businesses can reach more of their market with automated communication), time moderator (consumers hold higher expectations about communication with companies), information equalizer (consumers have more access to product information and pricing), scalable capacity (huge amount of data can be stored in the server space paid for by the company), open standard (companies can access each other’s databases for a smooth supply chain) and market deconstruction (many distribution channels are performed by non-traditional firms like online travel agents). • These internet properties not only allow for more effective and efficient marketing strategy but also changed the way marketing is conducted.

E-business, e-commerce & e-marketing

• E-business is the continuous optimization of a firm’s business activities through digital technology. Digital technologies are things such as computers and the internet. • E-commerce is the subset of e-business focused on transactions. • E-marketing is the use of information technology in the process of creating, communicating, and delivering value to customers and for managing customer relationship in ways that benefit the organization and its stakeholders.

The advantages and disadvantages of e-business

• The advantages of e-business includes 24/7 access to the firm’s products and services, it overcomes the barrier of distance and allows access to global markets, it reduces cost by eliminating overheads such as rental and staff and allows customer self-service in functions such as booking a hotel or buying a plane ticket. • The disadvantages are that e-businesses cannot capitalize on markets that do not have proper technological infrastructure to support the internet. Also, e-businesses still has the issue of concern about payment. A lot of customers are not comfortable about disclosing personal and credit card information online.

The impact of e-marketing

The convenient access to digital technology has impacted the following: • Individuals – The internet has provided individual users with continuous and convenient access to information, entertainment and communication. • Communities – Communities form around shared photos (Flickr), videos (YouTube) and individual or company profiles (Facebook) • Businesses – The digital environment enhances business processes and activities across the entire organization by using computer networks to share and apply knowledge to increase efficiency and profitability and manage workflow. • Societies – Digital information enhances economies through efficient markets, more jobs, information access and communication globalization. • Governments – Reports, information, plans and statistics are made more transparent and disseminated more efficiently

The internet

• A global network of interconnected networks. • These networks consist if computers that holds files and data such as web pages, video and audio. • The three technical roles of the internet include content providers who create information, entertainment and so forth, users who access content and send email and other data over the internet, and a technology structure to move, create and view or listen to the content.

Intranet and extranet

• The intranet – a network that runs internally in an organization but uses the internet standards and browsers. • Extranet – two or more proprietary networks that are joined for the purpose of sharing information.

Internet technology changes on traditional marketing

Key elements of Web 2.0

• Power shift from sellers to buyers – Buyers are more demanding than ever because competitors are just one click away. • Improved online and offline strategy integration – this interdisciplinary understanding is important as to offer customers more than one way to buy something (e.g. Website and retail store) • Intellectual capital rules – Imagination, creativity and entrepreneurship are more important resources than financial capital. • Content is king – Marketers must be agile and flexible for blog posting and responding to consumer generated media. In this environment, corporate one-way spin is yielding to corporate and stakeholder conversation. • Refined metrics – The internet allows for tracking every mouse click, and marketers now have well-established measures such as monitoring website visitor numbers, conversion to sales and return on online investment (ROI). • Access to global markets / death of distance - The issue of place or distance is no longer important. Users from all over the world can connect to one another through the internet. • Time compression – The internet enables 24/7 access to entertainment, trade and businesses, that time no longer is differentiated to users in terms of night and day.

Web 3.0

In the near future, Web 3.0 will be a time of engagement, participation, and co-creation where consumer control, increased wireless networking, receiving-appliance convergence and merging of traditional and social media will change the marketing landscape.

How consumers are connected to social networks on mobile devices, uploading and creating content on the web and purchasing products online at anytime and anywhere, open the door for marketers to provide value for demanding customers of the future.

Web 3.0 will be defined by better technology and web applications, and possibly artificial intelligence.

Proportion of global internet users

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Negative effects with the growth of the internet

• Workaholism – less time spent with family, time shift • Global village syndrome – cultural differences are removed • Job outsourcing – due to global connection, services are outsourced (e.g. call centers being outsourced to India) • Phising – attempting to acquire sensitive by disguising as a trustworthy entity • Identity fraud and scams

Appliance convergence

This is the case where is receiving appliance is separate from the media type. Traditionally a television is used to watch a television program but today, the smart TV can be used to surf the web. The computer can also receive radio and television transmission. The LG internet refrigerator is a good example of receiving-appliance convergence. Consumers can watch television programs, view photos and web pages from the refrigerator’s touch screen.

Internet disruption

• Refers to how internet technologies fundamentally changed the structure of brick-and-mortar retailers. • Amazon for example, had transformed the way books, travel and music were sold. • Industries that offered tangible products were easily compared online and purchased at lower prices

Plateau of profitability

• Having gone through the internet boom and bust, marketers returned to their traditional roots of well-grounded strategy and sound marketing practices to conduct business, but using information technology in ways that increased the firm’s profit. This is referred to as the plateau of profitability.

E-marketing turning into ‘just marketing’

• Marketers must stay grounded in the discipline of marketing processes and simultaneously be current on new information technologies and changing e-marketing concepts to remain competitive • Charles Schwab pitted his online and offline business model against each other and allowed the most profitable methods to win. The model resulted in lower prices, incorporation of successful e-marketing strategy and faster growing accounts and assets.