E-commerce: Digital Markets, Digital Goods

CHAPTER 10

FEATURES OF E-COMMERCE

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)

RELATED TERMS

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

DIGITAL MARKETS AND DIGITAL GOODS

Business-to-consumer (B2C)Business-to-business (B2B)Consumer-to-consumer (C2C)M-Commerce

B2B or B2C used in this model

TYPES OF E-COMMERCE

INTERNET BUSINESS 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/Freemium Revenue Model (initial free; then pay

for more)Transaction Fee Revenue Model (every

transaction=fee)Affiliate Revenue Model (send to websites; fee for

purchases)

E-COMMERCE REVENUE MODELS

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)

NETWORKING AND MARKETING

E-BUSINESS MARKETING FORMATS

Growth rate 7%; by 2014 ($5.1 tri l l ion) Refers to the commercial transactions that occur among

business firms 80% of online B2B e-commerce is stil l based on proprietary

systems for Electronic Data Interchange (EDI)Private industrial networks (or private exchange ) –

Extranet; l ink 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

B2B E-COMMERCE

Main areas of growthLocation-based servicesSoftware application salesEntertainment downloadsMobile display advertisingE-book sales

Banking and financial servicesWireless advertising and retailingGames and Entertainment

MOBILE COMMERCE MISC

We will discuss more for SDLC projectBusiness objectives, system functionality, information requirements? In-house or outsourced?Build?Host? Budgets?

E-COMMERCE WEBSITES