1. How Important is the Internet today?

2. 14 Internet sales are NOT important to retailers with big stores, like Office Depot ( all responses receive credit). Strongly agree Somewhat agree Somewhat disagree Strongly disagree I prefer to shop at Staples

3. How Important is the Internet?A Real-World Example Office Depot has more than 1,267 stores in US Customers in 42 foreign countries Annual sales about $14.5 billion Comparable store sales in North America decreased 13% from 2007 to 2008 33% of Office Depot’s sales came from Internet in 2008 4th Largest Internet retailer in 2008 http://www.internetretailer.com/top500/list.asp

5. How online advertising works

6. How online marketing benefits buyers and sellers

7. e-commerce strategies

9. ML8 Second attempt—deadline Wednesday at 11:59 p.m.

10. Which of the following is a major attraction of selling online (all responses receive credit)? Lower cost of doing business than traditional retailers Ability to gather more information about shoppers than traditional retailers Ability to target different market segments All of the above None of the above

11. First Internet Banner ad as it appeared on October 25, 1994? http://thelongestlistofthelongeststuffatthelongestdomainnameatlonglast.com/first66.html

12. How rapidly has the market grown? 2009 2004 Facebook 2008 2001 i-Pod 1997 It took telephone 89 years to grow to 150 million users. It took Facebook 5 years. 1983 Cell Phone 1966 1965 1928Television 1876 Telephone

13. e-Commerce e-Commerce – Conducting business transactions over the Internet, including buying and selling of products and services Includes e-Marketing—marketing activities (4-Ps) over the Internet Is part of e-Business—the use of electronic means (Internet, extranets, intranets) to conduct an organization’s business

15. Quickly became the “killer app” but nobody knew how to harness its potential

16. Majority of dot.coms burned through venture capital and ceased trading

19. Poor research or planning

20. Spent too heavily on brand identities

22. How many purchases have you made over the Internet (all responses receive credit)? None 1-2 3-5 6-10 11 or more

23. The Importance of e-Commerce Retail Sales Amounts in $ billion; Source: http://www.businessweek.com

24. Which of the following items have you purchased over the Internet most recently (not graded)? Travel ticket (airplane or train) Book Auction item Clothing Music

25. Intranet-Within the Organization

26. Extranet-Select Outsiders

27. Internet-Everyone is Connected

28. Forces Shaping the Digital AgeInternet Explosion Internet penetration in U.S. approx. 65% of homes1 U.S. Broadband connectivity ranks 24th Worldwide* Average U.S. user visits 120.5 pages per day† sources: 1 http://pewinternet.org * www.websiteoptimization.com † http://publications.mediapost.com/index.cfm?fuseaction=Articles.showArticleHomePage&art_aid=40714

29. Internet Non-Users 27% of adult Americans are not users Median age 61 Tend to have lower incomes than online users 18% of non-users have used Internet in past Reasons for not using Internet: 47% not interested 45% no access (no computer or eqpt) 18% lack of confidence 8% too expensive 7% waste of time

30. Forces Shaping the Digital Age-New Types of Intermediaries Online retailers like Amazon.com, e*Trade, and Dell started, giving rise to click-only competitors New businesses started, like e-Bay, Yahoo!, Google that had not previously existed Traditional stores started online channels like BN.com, Landsend.com, Tiffany.com giving rise to Brick-and-Click competitors Some businesses remain Brick-and-Mortar only, such as Cartier

31. Forces Shaping the Digital Age-New Types of Intermediaries(Cont’d) New delivery methods — online delivery of electronic media, e.g., software, music, information, movies, pictures.

32. Forces Shaping the Digital Age-Need for New Industries New industries like online security

33. Forces Shaping the Digital Age-Need for New Industries New industries like online security Better Business Bureau

34. Forces Shaping the Digital Age-Need for New Industries New industries like online security Better Business Bureau anti-virus software

35. Forces Shaping the Digital Age-Need for New Industries New industries like online security Better Business Bureau anti-virus software shopping software

36. Forces Shaping the Digital Age-Need for New Industries New industries like online security Better Business Bureau anti-virus software shopping software Shopbots (e.g., MySimon, Pricescan)

37. Conducting e-Commerce Consumers Brick-and-Mortar Stores Seller Brick-and-Mortar Only

38. Conducting e-Commerce Consumers Brick-and-Mortar Stores Seller Brick-and-Mortar Only e-Commerce Consumers Seller Click Only Amazon.com eBay

39. Conducting e-Commerce Consumers Brick-and-Mortar Stores Seller Brick-and-Mortar Only e-Commerce Consumers Seller Click Only Brick-and-Mortar Stores Consumers Seller e-Commerce Polo Barnes & Noble Best Buy Click-and-Mortar

40. Conducting e-Commerce Consumer visits website Vendor customer

41. Conducting e-Commerce Consumer visits website Vendor Vendor stores a cookie on consumer’s computer customer

42. Conducting e-Commerce Consumer places order & sends payment Consumer visits website Vendor Vendor stores a cookie on consumer’s computer customer

43. Conducting e-Commerce https: Consumer places order & sends payment Consumer visits website Vendor Vendor stores a cookie on consumer’s computer customer Vendor verifies payment 3rd Party payer

44. Conducting e-Commerce Consumer places order & sends payment Consumer visits website Vendor Vendor stores a cookie on consumer’s computer customer Picks up package Shipping company Delivers package Vendor verifies payment 3rd Party payer

45. Conducting e-Commerce Cookie – a small data file created by a website and stored on the visitor’s computer. Used for: Tracking Authenticating Maintaining specific information (e.g., shopping cart contents) Cookies are not viruses or computer programs.

46. Shopbot Shopbot – “Comparison shoppers” or “price engines” promote price-only shopping Typically retailers either pay flat-fee to be included or per click-through Shopzilla.com; pricescan.com;

47. Number of Internet Hosts 350 300 250 200 150 100 50 0 1992 1996 2000 2004 Millions

49. Static

50. Guestbooks

52. Forces Shaping the Digital AgeCustomization and Customerization The Old Economy depended on economies of scale, standardization, mass produced/mass marketed goods Customization and Customerization: Customization--the company custom designs market offerings for customers Customerization-- the customer designs the market offering and the company makes it

53. Forces Shaping the Digital AgeCustomization and Customerization (cont’d) Flexible manufacturing and new technologies allow production runs as small as one In the New Economy customers can specify exactly what they want— items can be customized (e.g., Dell Computer) Or customerized (e.g., NIKEiD, or M&Ms) Product configurator Personalized M&Ms

54. Collaborative Filtering Collaborative Filtering – retailer analyzes multi-item purchases; when a customer orders an item, retailer suggests purchase of additional items based on patterns of previous customers. Example: When customer orders music or movies, retailer offers suggestions of additional items.

56. Online Marketing Web Driver – marketing activity designed to get customers to go to a website (e.g., a banner ad, print ad, or an online ad) Search engine advertising – paid messages on search engines (e.g., Google) that appear when key words are used. Web driver intended to create traffic on a website. Fastest growing segment of online advertising.

57. When you use a search engine how far down in the results do you look (all responses receive credit)? First result only First five results First page First two pages I keep looking through the search results until I find what I am looking for

58. The Importance of Search Ranking Search engine rankings are critical to the success—most people do not look beyond the first page of results WebCrawler 1994—first full-text Web search engine Yahoo! and Altavista 1995, Google 1998 A new industry has grown up--Search Engine Optimizers (SEO)—to help web-developers improve search rankings

60. How does Google make money? Free search engine (to users) Market capitalization $88.5 billion (NY Times market cap $750M – founded 1851) Reported profit margin 25.3% 99% of revenue from advertising 1% of revenue from licensing search technology Market cap 4/6/09

62. How Does It Work? Choose key words Select a price per click (pay per click) Select a daily or monthly maximum Your ad competes with others bidding on same key words

63. Right-hand scale Left-hand scale in $Millions

64. Online Advertising Banner ads – Billboard-style messages on or linked to web pages. Used primarily for branding and raising awareness. Online advertising is growing rapidly at the expense of traditional media Typical banner ad rates are $1 - $60 per M (CPM). But click-through rates are low.

65. Size Does Matter Big, aggressive, flashy ads attract more attention Skyscraper ads and large rectangles can increase awareness by 40% Movement increases awareness

66. Affiliate Programs Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor MyKitchen.com Hears music/sees ad clicks on link

67. Affiliate Programs Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor sees Amazon.com website MyKitchen.com Hears music/sees ad for Amazon, clicks on link Amazon.com

68. Affiliate Programs Referral fees are paid by online retailers to “affiliates” (websites), to help drive traffic to the affiliate sponsor Buys CD from Amazon.com MyKitchen.com Hears music/sees ad for Amazon, clicks on link Amazon.com $

69. Shopping Carts Shopping Cart (or Shopping Basket) – software that lets customers make selections from throughout a website, keeping track of all items selected, then allowing customer to “check out” all at once, like a grocery store. As many as 57% of shopping carts are abandoned

70. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page Landing page

71. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page Landing Page Bounce Rate

74. Landing Page—Call to Action

75. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page User fills shopping cart

76. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page User fills shopping cart 57% Abandoned Shopping Carts Siegel 2006 Purchase

77. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page User fills shopping cart Conversion rate <2% 57% Abandoned Shopping Carts Siegel 2006 Purchase

78. From Ad Presentation to Purchase User presented with an ad Click-through Rate 0.4% User views web page User fills shopping cart Conversion rate <2% 57% Abandoned Shopping Carts Siegel 2006 Purchase

79. Why Do Shoppers Abandon Shopping Carts? Sticker shock at total cost of order plus shipping costs Technical difficulties Overly complex order forms Order forms take too long to download Find out at check out that product is out-of-stock Computer crash Credit card not accepted Source: Siegel

80. What is the most important reason why you buy online? (all answers receive credit) More convenient Saves time Saves money More choices Delivery/shipping (gifts)

81. What is the most important reason you do not buy online (all answers receive credit)? I do buy online Fear about security of personal information Don’t trust e-tailers I want to touch the items before I buy Returns are too difficult if I don’t like items

82. Benefits of e-Commerce to Buyers Online Shopping is Convenient No traffic Open 24/7 Easy Private Unmatched Access and Selection No Physical Boundaries Access to Information Comparative Unbiased Recommendations Interactive and Immediate

83. Benefits of e-Commerce to Sellers Build Strong Relationships with Customers Reduce Costs Through Increased Speed and Efficiency Greater Flexibility Pricing Inventory/Assortments Promotions Access to Global Markets Low Barrier to entry

84. Reasons Brick-and-Mortar Companies Resist e-Tailing Potential Channel Conflict – e.g., Levi’s and Macy’s Cannibalization – take sales away from brick-and-mortar stores Too expensive Don’t know how—see “Internet Paradox”

85. Business Models Business Model: the way in which a company generates revenues and earns profits e-Commerce (flowers.com; LandsEnd.com; BestBuy.com) Advertising (Yahoo!; Google; NY Times) Membership or Subscription (wsj.com) Transaction Commissions and Fees (e-Bay) Information Fees (NewsLibrary.com) Referral Fees (Auto-by-Tel.com)

86. Purposes of Websites e-Commerce Brochureware (Radio Maria) Interactive (VIRTUAL MODEL) Promote Goods and Services (miniusa.com) Build Relationships and Goodwill Among Customers and Channel Members (benjerry.com) Customer Service (amerenip.com) (sign up for electric/gas service)

87. Purposes of Websites (cont’d) Information/news Provide content (nytimes.com) Follow-up (e.g., order tracking) (ups.com) Branding (cartier.com) Communities-discussion groups, bulletin boards (saabnet.com) EDI—electronic data interchange (exchange of business documents over Internet, extranets and Intranets)