E-Commerce Marketing

E-CommerceMarketing University of Vaasa, 2006 Course Leader: Dr Philip Lewis

Course Objectives E-Commerce is a very new concept, it has received only very limited research. We therefore know very little about E-Commerce Marketing. There are no experts, but some know more than others. The massive number of failures in E-Commerce marketing suggest that we all have a lot to learn. Hype and over-optimism, fuelled by inexperience, wishful thinking and vested interest has often replaced objectivity in this industry. We must be objective. E-Commerce Marketing is rapidly changing all the time, therefore old literature and theories are of very limited use – we need to be up to date without forgeting the past. E-commerce students (you) are experienced E-Commerce consumers, and the marketers of tomorrow, so it is appropriate that you start to get practice in your future role of shaping the E-Commerce revolution.

Course Objectives • To Introduce You To MarketingAspects of E-Commerce • To Help You Think Objectively aboutthe Role of E-Commerce in Marketing • To Help You Think Creatively aboutthe Use of E-Commerce in Marketing • To Provide an Up-To-Date Pictureof E-Commerce Marketing • To Help you Take E-Commerce into the Future

Course Details – Language The main language of this coursewill be English, though visiting lecturersmay use Finnish or English Exam questions will be written in English and answers to the exam and the assignment must be in English But remember, it is not a language course!

Course Details – Rules • Please, no talking in class, except when askingor answering questions OR as part of a class or group discussion • The Course Assignment is compulsory(must be done) otherwise a grade for the course cannot be given • You may ask questions whenever you wish during a lecture • You are expected to participate in class-discussions – it may affect your grade

Course Details – Rules • You must attend at least 75% of all lectures (names will be taken) and be present at the presentation of your assignment • Notices of lecture cancellations and changes will be made in class and (normally) on the marketing notice board and at the department of marketing web site. Failure to attend lectures may mean you do not know what is going on. • Exceptions to the above rules and guidelines will be rare.

Course Details – Grades & Exams • Assignment = 40% • Exam = 60% • Exam Times: • 24.03.2006 • 05.05.2006

Course Details – Contents • Introduction to the Course & Subject • Interactive Communications • Where is E-Commerce Heading ? • Challenges and Requirements for E-Com Success • Users & Behaviour • Pricing, Distribution and Logistics • E&M-Business & Marketing Models • E-Commerce in the News • Short Cases • Visiting Lectures • Assignments & Presentations

Course Details – Lecture Focus The focus and expertise of lecturers is ’marketing’ and ’business’, not ’technical’.

Course Details – Assignment • Students will work in groups of about 4-6 people. Each group will: • Select one business which uses E-Commerce within its marketing. Find out as much as possible about the E-marketing in that business: how it uses E-marketing, for what purpose, with what succsess, lessons learned. Research may be conducted with the help of interviews if preferred. • Present findings in class. Each presentation must last approximately 20 minutes and the rest of the class should ask questions and discuss. • The assignment will represent 40% of the overall course grade. • 10 hours of the course will be set asside for this assignment, 6-8 hours for presentations and 2-4 hours for your own preparation discussions in-class. Other group work will need to be done in your own time (outside class).

Course Details - Lecture Hand-Outs Hand-outs will be available in the University Book shop or can be downloaded at the following internet address http://www.uwasa.fi/ktt/markkinointi/index.php?im=kuva_staff&menu=menu_henkilosto&id=lewis Hand-outs will generally only be made availableshortly before or even after lectures (for attendance reasons)

Course Details – Course Reading Any up-to-date books which you can find on the subject(they become rapidly out of date) Don’t worry, the exam is in no way a book exam, but any good books you read will help you in the exam

Course Details – Some Useful Sites • Internet Statisticshttp://dir.yahoo.com/Computers_and_Internet/Internet/Statistics_and_Demographics/ • http://www.glreach.com/globstats/index.php3 • http://www.internetworldstats.com/ • http://www.statmarket.com/ • http://www.clickz.com/stats/ • http://www.nielsen-netratings.com/ • http://webreference.com/internet/statistics.html

Course Details – Some Useful Sites Business Information: http://finance.yahoo.com/

Course Details – Contact Details If you have any questions concerning the course, please email philip.lewis@uwasa.fi, call +06 324 8211 or visit my office at Tervahovi building (Wolffintie 34) B308 Official visiting hours: Fridays 10.00-12.00

E-CommerceMarketing Exam Ideas

Exam Ideas • Introduction to the Course & Subject- What is E-Commerce?- Role of E-Commerce in Marketing / Direct Marketing- Integrated Marketing Communications • Principles of Success & Failure- Challenges facing e-commerce- Requirements for ’good’ e-commerce • Where is E-Commerce Heading- Integrating Channels- Mass Customization - Is there a future? What Benefits? Where?- The Ethical Challenge • Users & Behaviour- Customer Needs (different types of customer – B to c, B to B, B to E etc.)- Channels to customer- Adoption / Adoption Barriers / Diffusion of innovation- Segments / Segmentation (link to Mass Customization / Relationship Marketing)- Commodotization / de-commodotization • Cases- Your own case, others shown in course etc. • Visiting Lecturers- What did you learn ?

E-CommerceMarketing An Introduction

Objectives of Marketing E-Commerce Marketing Must Still Follow the General Principles of Marketing E-Commerce Marketing should incorporated throughout the marketing processes (within reason)

Your Experiences • Discussion • How much do you know about e-commerce? • Which web sites do you use? • Which e-commerce services affect your lives? • How do you see the state of e-commerce ?

What Is E-Commerce (EC) ”Electronic Commerce is an emerging concept that describes the process of buying and selling or exchanging of products, services and information via computernetworksincluding the Internet” Turban et.al 2000, p4

What Is E-Commerce (EC) Electronic Commerce Marketing and Electronic Marketing

What Is E-Commerce (EC) Kalakota & Whinston (1997): ”From a communications perspective, EC is the delivery of information, products/ services, or payments over telephone lines, computer networks, or any other electronic means.” ”From a business process perspective, EC is the application of technology toward the automation of business transactions and work flow.” ”From a service perspective, EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.” ”From an online perspective, EC provides the capability of buying and selling products and information on the Internet and other online services.”

Business to Business (B2B): Perhaps most common: Includes Inter-organization Information Systems (IOS) and Electronic Market Transactions between organisations. • Consumer-To-Consumer (C2C): • eg. Individuals selling through classified adverts in classified.com orkeltainenporssi.fi (little e-success) • eg. Auction Sites: ebay.com • eg. Intranets etc. used also for Selling What Is E-Commerce (EC)Types of Transactions (source: Turban et.al, 2000) • Business-To-Consumer (B2C): • eg. Transactions with Amazon.com shoppers

Consumer-To-Business (C2B) eg. Individuals who sell products to businesses eg. Internet requests by individuals looking for properties to buy from estate agents. What Is E-Commerce (EC)Types of Transactions (source: Turban et.al, 2000) • Non-business EC • eg. non-profit organizations, universities (original reason for internet), government agencies, libraries • Intra-business (organizational) EC • Usually through intranets • eg. training, operational activities,selling corporate products to employees

E-CommerceMarketing Significance of E-Commerce

Significance of E-commerce Be carefull not to fall into the E-Commerce ’Brainwash Trap’

? The Business of Marketing Has Always Been Changing - E-commerce is not a revolution, just an improvement

1884Michael Marks, a Russian born Polish refugee opened a stall at Leeds Kirkgate Market. 1904Acquired premises for a shop at the recently opened Cross Arcade in Leeds. This was a prestigious site and marked the transition from market stall to a covered arcade. 1985The Marks & Spencer Chargecard was launched nationally. 1986 M&S’ First edge of town store opened. Furniture sales supported by Home Furnishing catalogue. 1999Online shopping was launched on the M&S website. 1999-2006Continuous improvement of M&S stores The Business of Marketing Has Always Been Changing - E-commerce is not a revolution, just an improvement Just over 100 years Source: marksandspencer.com (2003)

The Ages Of Computerization (O’Connor et.al. 2004) PC Age (1960-90) Internet Age (1990-2000) Wireless Age / Post-Dot-Com (2000-Present)

The Internet Age

The Ages Of Computerization (O’Connor et.al. 2004) PC Age (1960-90) Internet Age (1990-2000) Wireless Age / Post-Dot-Com (2000-Present)

From Internet Age to Wireless Age

The Wireless (post-dot-com) Age ”Perhaps more important than the success of online companies….is the way that traditional businesses have adopted e-commerce and electronic marketing model” (O’Connor et.al. 2004)

The Wireless (post-dot-com) Age ”Nearly every business now has a website to provide customers with information. The more successful are taking orders online andtransacting large volumes on the internet………there have been huge opportunities in online procurement. Almost every aspect of how a business markets itself and transacts has been impacted” O’Connor et.al. 2004)

The Wireless (post-dot-com) Age m-commerce (mobile commerce) SMS (short messaging) MMS (multimedia messaging service) 3G (third Generation) Mobile Devices enabling internet and direct services

Other Examples of E-Commerce Marketing • Online Billing & Payment • Online/Direct Mobile Sales-Force and Customer Care Assistance • Online/Direct Distribution & Logistics Support • Online Self-Service

Other Examples of E-Commerce Marketing Mondex Makes Shopping Easy - (Source: Turban et. al 2000) Shopping with Mondex. Payments are made by slipping the Mondex card into a card reader in the retail terminal. Then funds are transferred immediately from the card to the terminal with no need for signatures or authorization. Newspaper vendors and small shops can use battery-powered terminals. Adding money to the card. The card can be recharged by debiting the money value to the card at specially adapted cash dispensers or by telephone. Mondex-compatible mobile phones will be able to act as your own personal mobile cash dispenser. Specially adapted pay phones will also be able to transfer funds. As well as loading up the card, you can lock it with a four-digit code to prevent misuse if stolen. Money on a locked card can only be spent by first unlocking the card with the four-figure code. Paying for a new era of electronic entertainment. Children, young people, and adults will all be able to use Mondex to pay for the new generation of Video-on-Demand films and video games supplied through the Internet. You can only spend what is on the card. Paying on the Internet. Using the Mondex wallet, e-cash can be moved from one card to another—as simply as one person can give another person physical cash. Parents will be able to use the wallet to give electronic pocket money to their children. The wallet also lets you see details of your last 10 transactions—so you can finally find out just where your cash is going! Balance reader. A small electronic key tag tells you how much money is on your card. Other properties. Mondex can store up to five different currencies at a time.

Other Examples of E-Commerce Marketing Helping Transportation in Big Cities -(Source: Turban et. al 2000) Six Million Bus Cards in Seoul Seoul Bus Association installed the contactless stored-value bus card in July 1996 for the first time in the world. The 8,013 buses of 442 routes owned by 86 companies joined this project. A total of 6 million cards were issued. About 39 percent of bus fares and 30 percent of deluxe bus fares were collected via the card. The cards are used 1.73 million times per day (900 million won) and are recharged 77,000 times per day (880 million won). Because of its popularity, supplying the IC card caused a huge bottleneck. The card-issuing machine is able to produce 30,000 cards per day, which means it takes 200 days to provide 6 million cards. The office 2,618 kiosks operated by humans are the outlets for card recharge. As of October 1998, the total investment in installing the card issuers, rechargers, clearing systems, and readers on buses was 16.8 billion won. Use of the card has been extended to cities around Seoul. From Hybrid to Combi-Card in Pusan The Hanaro Card (which means One Card in Korean) in Pusan City in Korea was designed for bus, subway, taxi, and tollgate fares in February 1998. The card is widely accepted for the bus, subway, and tollgates but not yet for taxis. More than 50 percent of fares are collected through the Hanaro Card, as summarized in the following table. The card readers are installed in 3,003 urban buses, at 581 subway entrances in 34 subway stations, in 7,579 taxis, in 341 minibuses, and at 28 tollgates. The card is basically a stored-value money card. There are two types of Hanaro Card: the hybrid (both contact and contactless chips are in the card) and contactless proximity (used for bus and subway). .......Continued on next page

.......Continued from previous page The card can be purchased and recharged at subway stations, the issuing banks (Housing & Commercial Bank, Pusan Bank, and Community Credit Cooperative), and ATMs. It takes 2,000 won (less than two U.S. dollars) to buy a card. The minimum rechargeable amount is 5,000 won, with a ceiling of 70,000 won. This card is mainly used for micro-payment. Incentive to use the card is the convenience of not carrying coins and fare tickets. The card users get a 15 percent discount (25 percent for students) on subway fares, a 3 percent to 8 percent discount on major urban buses, and a 10-won discount for minibuses. The Hanaro Card has become a necessity for Pusan citizens. The bus companies also enjoy the traceability of revenue and the reduced cost of ticket handling. However, collecting taxi fares is not widely accepted because the contact-type Hanaro Card requires online debiting. A taxi driver has to call over a wireless phone for every payment so that the amount can be transferred online to the taxi company’s bank account. This system is very expensive to use and it seems the system adopted for bus and subway, which collects money during the day at a terminal and transmits the accumulated funds to the bank once a day, would be better. Card Use Total Passengers Percentage per Day per Day Using Hanaro OperationalClassification (thousand) (thousand) Card Status Urban Bus 1,050 2,100 50 Full Subway 350 570 60 Full Minibus 90 180 50 Full Tollgate 30 200 15 Full Taxi 30 persons 1,080 0.003 Partial

Other Examples of E-Commerce Marketing Banks work on Reuters linkBy Christopher SwannPublished: August 14 2000 (FT.Com) The battle to dominate online trading of foreign exchange is heating up. In a deal long-expected by industry insiders, the three biggest foreign exchange banks - Citigroup, Chase Manhattan and Deutsche Bank - are working on a link-up with Reuters to deliver foreign exchange services over the internet. The system, to be called Atriax, follows the creation earlier in the summer of FXall, a multibank dealing currency system by Morgan Stanley Dean Witter, JP Morgan, Goldman Sachs Group, Bank of America, HSBC, Credit Suisse First Boston and UBS Warburg. Having lagged behind other segments of the financial services industry in the push to go online, the foreign exchange business seems to be rushing to catch up. But some fear this haste may be excessive. "A landgrab for the airwaves is going on at the moment," says Avinash Persaud, global head of research at State Street, which has its own foreign exchange trading system in which Deutsche Bank, among others, is participating. "Banks feel under considerable pressure to launch internet initiatives before concrete agreements have been reached over the broad business models or technology platforms," he adds. FXall, for example, has yet to decide on a technology platform for its site and some in the industry are suspicious that the consortium was rushed into announcing its foundation in order to pre-empt plans by the Citibank, Chase and Deutsche. Although neither site has yet been launched, FXall narrowly has the edge over its new rival in terms of foreign exchange market share.FXall's 13 participants command around 31.4 per cent of overall foreign exchange market revenues, compared with about 28.9 per cent for Deutsche, Chase and Citibank. "It is entirely healthy that a substantial rival should have emerged to FXall," said Simon Hills, director of regulation and risk at the British Bankers Association. With both sites actively seeking to entice new members to join, the situation is likely to remain very fluid. Nor do the large foreign exchange banks have the field to themselves. Currenex, a California-based start-up, hosts services from 25 banks including ABN Amro and Barclays Capital. .......Continued on next page

.......Continued from previous page Despite activity in the sector - some banks have signed up to more than one system as well as creating their own - foreign exchange trading on the internet is still in its infancy. As yet there are no comprehensive figures indicating how much foreign exchange is being traded over the internet. Most heads of foreign exchange banks cite figures between 5 to 10 per cent of client trades, but see this expanding rapidly. "In the next two years we could see well over 50 per cent of client trades done over the internet," said Philip Weisberg, interim chief executive of FXall. This prospect helps explain the plethora of online projects, some of which have been announced even before the details have been ironed out. With companies and fund managers showing a clear preference for multi-bank sites in which various prices and services can be compared, many of the recently created individual bank sites may never fully take off. Bank executives said that the market could support two or more multi-bank sites but that competition could nonetheless be intense. Many are looking for a precedent in the inter-bank trading, where two systems run by Electronic Broking System and Reuters share the market . However, while the move to online currency trading is expected to make it easier for corporations and fund managers to get the best deal on foreign exchange, it is likely to be something of a mixed blessing for banks. Online multibank systems will eventually allow many transactions to be processed untouched by human hand, cutting down on costly errors. It should also allow members of multi-bank systems to achieve further savings by integrating some back office functions. But direct competition between currency prices and services on multi-bank platforms is expected to erode the already wafer-thin margins of foreign exchange trading.

E-Commerce and Direct Marketing E-Commerce marketing is not always Direct Marketing, and Direct Marketing does not have to use E-Commerce. However, E-Commerce does commonly take the form of Direct Marketing and is a major step forward for Direct Marketing.

E-Commerce Marketing