Electronic Commerce

Selling on the Web

MIS 6453 – Spring 2006

Instructor: John Seydel, Ph.D.

Student Objectives

Compare an contrast LANs/WANs, the Internet, intranets, and extranetsDiscuss ecommerce connectivity optionsSummarize the basic ecommerce revenue modelsDiscuss why business models evolveUnderstand revenue strategy issues facing ecommerce businessesAddress what it takes to create an effective Web presenceSummarize web design principles

Some Connectivity Issues

Types of networksConnection optionsInternet2

Intranets and Extranets

Intranet (not just a LAN): Interconnected network that does not extend beyond the organization that created it; uses TCP/IP

Extranet (not just a WAN):

Intranet extended to include entities outside the boundaries of an organization

Connects companies with suppliers, business partners, or other authorized users

Public and Private Networks

Public network: Any computer network or telecommunications network available to the publicPrivate network: A private, leased-line connection between two companies that physically connects their intranetsLeased line: Permanent telephone connection between two points

Virtual Private Network (VPN)

Extranet that uses public networks and their protocols IP tunneling is uses; effectively creates a private passageway through the public InternetEncapsulation is involved; process used by VPN softwareVPN software: must be installed on the computers at both ends of the transmission; special encryption involved

VPN Architecture Example

Internet Connection ConceptsBandwidth: the primary criterion

Amount of data that can travel through a communication line per unit of time

Net bandwidth is what counts (actual speed that information travels)

Symmetric connections Provide the same bandwidth in both directions

(upload/download) Asymmetric connections provide different bandwidths for

each direction

Options: Voice-grade Broadband (data-quality) Leased lines Wireless

Voice-Grade Telephone Connections

POTS, or plain old telephone service Uses existing telephone lines and an analog

MoDem Provides bandwidth between 28 and 56 Kbps

Digital Subscriber Line (DSL); Connection methods do not use a modem Instead use Integrated Services Digital

Network (ISDN) switching Bandwidths between 128 Kbps and 256 Kbps

Broadband Connections

Higher quality; developed for transmitting data

Operate at speeds of greater than 200 Kbps

Asymmetric digital subscriber (ADSL) 100 to 640 Kbps upstream 1.5 to 9 Mbps downstream

Cable modems: transmission speeds between 300 Kbps and 1 Mbps

DSL: private line with no competing traffic

Leased-Line ConnectionsNon-shared connections between organizations and ISPs

Include: DS0 (carries only one digital signal); typically 56

Kbps telephone line T1 line (also called a DS1); carries 24 DS0 lines

and operates at 1.544 Mbps Fractional T1; provides service speeds of 128

Kbps and upward in 128-Kbps increments T3 service (also called DS3); offers 44.736 Mbps

Wireless ConnectionsSatellite

For rural areas May work in conjunction with MoDem for uploads

Bluetooth Designed for personal use over short distances (< 9 meters) Low power / low-bandwidth, with speeds of up to 722 Kbps Networks are called personal area networks (PANs) or piconets Devices can discover one another and exchange info automatically

WiFi (wireless ethernet using 802.11 protocols) Most common wireless connection technology for use on LANs Wireless access point (WAP): device required to transmit network

packets between WiFi-equipped computers and other devices Bandwidths vary (11 and 45 Mbps and up); range of about 300 ft Devices are capable of roaming

Fixed point; use repeaters from ISP to customersCellular networks: here’s the big potential for growth

Some Comparisons (Kbps)POTS – phone modem (56)Cable modem – sharing channel (300/10,000)T1 – leased line (1,544)DSL – private line (640/9,000)T3 – leased line (44,700)T3 with ATM – asynchronous transfer (622,000)Internet2 – testbed for tech (up to 10,000,000)LAN/WAN connections (e.g., ASU)

Wired (1,000,000) Wireless

802.11b (11,000) 802.11g (45,000)

Satellite – mostly for rural access (150/500)Note: we must consider the digital divide

Yet to Come . . .

Business models for the WebWeb presence conceptsWebsite critiques

eCommerce Revenue Models

Web catalogDigital contentAdvertising supportedAdvertising/subsubcription mixFee-for-transactionFee-for-service

The Web Catalog Model

Evolved from the mail-order model B2C B2B (often as extranets)

Extensively used for: Consumer electronics Entertainment (books, music, videos) Luxury goods (high value:weight ratio) Clothing retail and discount Gifts and flowers General discount

Most typically supplement traditional businesses

Consider Walmart.com Think also about websites chosen for critique

The Digital Content Model

Ideal means of exchange for digitized content: Movies and recordings Photographs Published documents (online library) Newspapers, magazines, . . . Other . . . ?

Limited, of course, to customers with broadbandAgain, often used to supplement conventional business models

The Advertising Supported Model

Examples include Portals (MSN, AccessPoint.AState, Yahoo, . . . ) Newspapers Classified ads (targeted)

Originally thought to be “goldmines”! The source of many .com failures Most survivors have evolved

Challenges How to measure the value of a visitor What to consider an exposure (click-through?) Critical mass of visitors

The Advertising/Subscription Mixed Model

Based upon the newspaper/TV model Primary costs paid by advertising Supporting revenues from subscribers

Allow nonsubscribers access to limited content Abstracts Headlines Crossword puzzles Other . . . ?

Weighting of revenues varies WSJ: more subscription Arkansas Democrat-Gazette: more advertising

The Fee-for-Transaction Model

Used extensively by Travel agents Auto sales services Stockbrokers Insurance agents Event booking Mortgage loan brokers Online banking

Represent distintermediation Removing the “middleman” Actually, a common phenomenon as organizations

move online Not a bad thing, necessarily, but can lead to

cannibalization

Fee-for-Service

Essentially a “pay-per-view” conceptSome examples

Gaming Video games (a major growth industry) Gambling

Entertainment (concerts, films, etc.) Consulting services

Medical Legal Investment

And guess what else . . . ? Extremely effective Considered a social malignancy, however Probably not a good idea to study further

eCommerce Revenue Models are Evolving

Remember the ecommerce is in its infancy; much change continues to take place in how business is done on the WebSome common transitions we’re seeing

Subscription sites toward ad-supported Ad-supported toward ad/subscription mixed Ad-supported toward fee-for-service Ad-supported toward subscription (Note the general trend away from advertising!)

The process has in numerous cases involved series of multiple transitions (e.g., Britannica)

Some Revenue Strategy Issues

Channel conflict / cannibalization Recall the 4th “P” in the marketing mix Only so much demand exists, so using multiple

channels can be inefficient and lead to loss of customer goodwill

Consider ASU’s means of distribution: F2F Online CVN Correspondence

Strategic alliances (look at the Amazon site) More important than ever The Web is just too big for someone to have much

chance of making it alone So many opportunities exist to augment

capacity/offerings/etc. with online and conventional affiliates

Creating an Effective Online Presence

Identify goals and make them consistent with firm’s brand image

Attracting visitors to the website Making the site interesting enough that visitors stay and

explore Convincing visitors to follow the site’s links to obtain

information Creating an impression consistent with the organization’s

desired image Building a trusting relationship with visitors Reinforcing positive images that the visitor might already

have about the organization Encouraging visitors to return to the site

Varies according to organization type Profit-driven Not-for-profit

Profit-Driven Organizations

Should provide links to Detailed information about each product

model A store locator page if applicable Information about the company and

services such as financing offeredShould offer a strong sense of corporate presenceNeeds to make it easy for customers to communicate with the organizationShould be attractive, yet professional

Not-for-Profit Organizations

Key goal for the websites is typically information disseminationMust also provide and facilitate two-way communications

Web Site Usability: Consider Site Visitor Motivations

Learning about products or services that the company offers

Buying products or services that the company offers

Obtaining information about warranty, service, or repair policies for products they purchased

Obtaining general information about the company or organization

Obtaining financial information for making an investment or credit granting decision

Identifying the people who manage the company or organization

Obtaining contact information for a person or department in the organization

Web Site Usability: Accessibility

One of the best ways to accommodate a broad range of visitor needs is to build flexibility into the Web site’s interfaceGood site design lets visitors choose among information attributesWeb sites can offer visitors multiple information formats by including links to files in those formatsGoals that should be met when constructing Web sites

Offer easily accessible facts about the organization Allow visitors to experience the site in different ways

and at different levels Sustain visitor attention and encourage return visits Offer easily accessible information

Trust and Loyalty

True with any business: A 5 percent increase in customer loyalty can yield

profit increases between 25% and 80%

Repetition of satisfactory service can build customer loyalty

Especially important in ecommerce Customer service is a problem for many ecommerce

sites

It’s much harder to build trust when you can’t see the person with whom you’re doing business

This is aided by making websites customer-centric

Let’s Look at Some of the Sites

General thoughtsWe’ll try to identify some criteria for judging sites

Customer-Centric Website Design

Puts the customer at the center of all site designs Guidelines Design the site around how visitors will navigate

the links Allow visitors to access information quickly Avoid using inflated marketing statements Avoid using business jargon and terms that visitors

might not understand Be consistent in use of design features and colors Make sure navigation controls are clearly labeled Test text visibility on smaller monitors Conduct usability tests

Involves connecting with customers

Connecting With CustomersPersonal contact model:

Firm’s employees individually search for, qualify, and communicate with potential customers

Prospecting – personal contact approach to identifying and reaching customers

Mass media approach: firms prepare advertising and promotional materials about the firm and its products Addressable media:

Advertising efforts directed to a known addressee Also called mass media

One-to-many communication model: communication flows from one advertiser to many potential buyersOne-to-one communication model: both buyer and seller participate in information exchange

Design Guidelines (Specifics)

Realize comparisons to print media Similarities Differences

Layout, content, & navigationFonts & colorsImage considerations

Print versus Web Delivery

Similarity: good layout is good layoutDifferences: Hyperlink ===> nonlinear capability (easy to

get lost in maze) Can’t see whole page at once Readers scan first; take longer to read Content appearance is a function of

monitor/browser settings Use sans-serif for body and serif for headings Animation (two-edged sword!)

Layout, Content, & Navigation

Short paragraphs 10 lines or less Use bullets (customized! ), tables, & headings

MarginsPages <= 3 screensDon’t underline!Navigation system (each page) Navigation bar Top, bottom, next, . . . Use frames (or don’t use frames!)

Fonts & Colors

Color info: the-light.com/colclick.html Hexadecimal codes “Browser-safe” colors

Fundamental issue: contrastSetting: best if defined within <style> tagsSafe fonts: Arial & TimesDon’t get carried away with fonts (<=3)

Images

Use sparinglyArrange to achieve balance with text and white spaceKeep small (page should take no more than 10 seconds to load at 28kbs) Reduce size Use thumbnails Add warnings

Maintain contrasts when using background images

Summary of Objectives

Compare an contrast LANs/WANs, the Internet, intranets, and extranetsDiscuss ecommerce connectivity optionsSummarize the basic ecommerce revenue modelsDiscuss why business models evolveUnderstand revenue strategy issues facing ecommerce businessesAddress what it takes to create an effective Web presenceSummarize web design principles