E-Commerce: Doing Business on the Internet

E-Commerce:
Doing Business on the
Internet
Commerce
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The buying and selling of goods, especially on a
large scale.
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Commerce is done between businesses, individuals,
countries, and so on.
E-Commerce
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What is E-Commerce?
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Doing business online, typically via the Web
The use of the Internet and the web to transact business
Digital enabled commercial transactions between and among organizations and
individuals.
It refers to business activities conducted using electronic data transmission via the
Internet and the World Wide Web.
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Although consumer shopping on the Web was running about $50 billion per year in 2001 and $350
billion by 2004,
The First E-Commerce?
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In 1886, a telegraph operator was able to obtain a shipment of watches that was
refused by the local jeweler. Using the telegraph, he sold all the watches to fellow
operators and railroad employees. Within a few months, he made enough money
to quit his job and start his own store. The young man's name was Richard Sears.
His company later became Sears, Roebuck.
The Networked Organization
EC Definitions & Concepts
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Electronic Commerce (EC) is the process of buying,
selling, or exchanging products, services, and
information via computer networks
EC defined from these perspectives
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Communications
Business process
Service
Online
Collaborations
Community
How eCommerce works
The consumer moves through the internet to
the merchant's web site. From there, he
decides that he wants to purchase something,
so he is moved to the online transaction
server, where all of the information he gives is
encrypted. Once he has placed his order, the
information moves through a private gateway
to a Processing Network, where the issuing
and acquiring banks complete or deny the
transaction. This generally takes place in no
more than 5-7 seconds.
There are many different payment systems
available to accommodate the varied
processing needs of merchants, from those
who have a few orders a day to those who
process thousands of transactions daily. With
the addition of Secure Socket Layer
technology, eCommerce is also a very safe
way to complete transactions.
Marketplaces vs. E-marketplaces
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A marketplace is a location where goods and services
are exchanged. The traditional market square is a city
square where traders set up stalls and buyers browse the
merchandise. This kind of market is very old, and
countless such markets are still in operation around the
whole world.
An e-marketplace is an electronic exchange where firms
register as sellers or buyers to communicate and conduct
business over the Internet.
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E-Marketplace include electronic transaction
E-Marketplace components are customers, sellers, goods,
infrastructure, a front end, a back end and support services
EC Definitions & Concepts (cont.)
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E-business is a broader definition of EC that includes not just the
buying and selling of goods and services, but also
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Servicing customers
Collaborating with business partners
Conducting electronic transactions within an organization
Pure vs. Partial EC: based on the degree of digitization of product,
process, delivery agent
E-Business is not just about eCommerce or exchanging information about
goods and services between you and your customers and your and your
suppliers. It is about using the Internet for the transfer of information between
employees using your in-house systems, between branch offices, between
remote users, and between business partners, customers, suppliers and the
public .
E-Business is also about automation. You can automate many of your in-house
procedures using new sources of information. You are freed up so you can use
information and technology to let you work AT your business rather that IN
your business .
Why eCommerce is changing the Way
Businesses Operate?
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reduced costs
lower product cycle times
faster customer response
improved service quality
Internet Technology and the Digital
Firm
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Round-the-clock service: Web sites available
to consumers 24 hours a day
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Extended distribution channels:
Outlets created for attracting customers who otherwise
would not patronize
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Reduced transaction costs: Costs of
searching for buyers, sellers, etc. reduced
New Business Models
Business Model:
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Defines an enterprise
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Describes how the enterprise delivers a
product or service
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Shows how the enterprise creates wealth
The Changing Economics of
Information
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Information asymmetry: One party in a
transaction has more information than the
other
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Increases richness: Depth and detail of
information
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Increases reach: Number of people
contacted
The Changing Economics of Information
New levels of richness and reach attainable
ENABLERS
Explosion of
connectivity
Dissemination of
standards
Reach
Internet Business Models
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Virtual storefront: Sells goods, services on-line
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Information broker: Provide info on products, pricing, etc.
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Transaction broker: Buyers view rates, terms from various
sources
Online Marketplace: Concentrates information from several
providers
Content provider: Creates revenue through providing client for a
fee, and advertising
On-line service provider: Provides service, support for hardware,
software products
Virtual community: Chat room, on-line meeting place
Portal: Initial point of entry to Web, specialized content, services
Auction: Products, prices, change in response to demand. Used
in online marketplaces
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The Dimensions of Electronic Commerce
EC Definitions & Concepts (cont.)
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Traditional commerce: all dimensions are
physical
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Brick-and-mortar organizations
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Old-economy organizations (corporations)
Perform all business off-line
Sell physical products by means of physical agents
EC Definitions & Concepts (cont.)
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Pure EC: all dimensions are digital
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Pure online (virtual) organizations
New-economy organization
Sell products or services only online
Partial EC: a mix of digital and physical
dimensions
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Click-and-mortar organizations
Conduct EC activities
Do their primary business in the physical world
Electronic Markets vs.
Interorganizational Systems
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E-markets
Buyers and sellers meet
to exchange
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Goods
Services
Money
Information
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Interorganizational
Information Systems
(IOS)
Between two or more
organizations
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Routine transaction
processing
Information flow
The EC Framework and Field
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An EC Framework
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EC applications supported by infrastructure
and 5 support areas
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People
Public policy
Technical standards and protocols
Business partners
Support services
A Framework for EC
7 Unique Key ideas in Ecommerce Ecommerce
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Ubiquity
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Global Reach
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The technology works through interaction with the user
Two way communication between merchant and consumer
Information density
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Video, audio, text message are possible
The complexity and content of a message
Interactivity
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There is one set of the technology standards, namely Internet standards
Richness
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The technology reaches across national boundaries, around the earth
The total number of users or customers an eCommerce can obtain
Universal standards
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Internet/Web technology is available everywhere; at all time
The technology reduces information costs and raises quality
The total quality and amount of information available to all market participates
Personalization/Customization
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The technology allows personalized messages to be delivered to individuals as well as group
Classification of EC by the
Nature of the Transaction
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Business-to-business (B2B) : EC model in which
all of the participants are businesses or other
organizations
Business-to-consumer (B2C): EC model in which
businesses sell to individual shoppers
Business-to-business-to-consumer (B2B2C): EC
model in which a business provides some
product or service to a client business; the client
business maintains its own customers, to whom
the product or service is provided
Classification of EC by the
Nature of the Transaction (cont.)
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Consumer-to-business(C2B): individuals who
use the Internet to sell products or services to
organizations and /or seek sellers to bid on
products or services they need
Consumer-to-consumer (C2C) : consumers
sell directly to other consumers
Classification of EC by the
Nature of the Transaction (cont.)
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Mobile commerce (m-commerce)—EC
transactions and activities conducted in a
wireless environment
Location-commerce—(l-commerce)
m-commerce transactions targeted to
individuals in specific locations, at specific
times
Classification of EC by the
Nature of the Transaction (cont.)
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Intrabusiness (organizational) EC: EC
category that includes all internal
organizational activities that involve the
exchange of goods, services, or
information among various units and
individuals in an organization
Classification of EC by the
Nature of the Transaction (cont.)
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Business-to-employee (B2E): EC model in which
an organization delivers services, information, or
products to its individual employees
Collaborative commerce (c-commerce): EC model
in which individual or groups communicate or
collaborate online
E-government: Government-to-citizens (G2C):
EC model in which a government entity buys or
provides good, services, or information to
businesses or individual citizens
Business to Government Internet
commerce
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This term refers to the use of the Internet by
Government to reach its citizens for a variety of
information dissemination purposes and
transactions.
What is Business-to-Government?
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Definition: Business-to-government, meaning that the
primary focus is toward government agencies at the
national, state or local level.
Also Known As: Business-to-Government, B2G, B-to-G
Classification of EC by the
Nature of the Transaction (cont.)
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Exchange (electronic): a public e-market
with many buyers and sellers
Exchange-to-exchange (E2E): EC model
in which electronic exchanges formally
connect to one another for the purpose of
exchanging information
M-commerce or mobile commerce
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M-commerce or mobile commerce stands for electronic commerce made
through mobile devices.
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M-commerce is currently mainly used for the sale of mobile phone ring-tones and
games, it is increasingly used to enable payment for location-based services such as
maps, as well as video and audio content, including full length music tracks. Other
services include the sending of information such as football scores via SMS.
Currently the main payment methods used to enable m-commerce are:
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'M-commerce' was coined in the late 1990s during the dot-com boom. The idea
that highly profitable M-commerce applications would be possible though the
broadband mobile telephony provided by 2.5G and 3G cellphone services was
one of the main reasons for hundreds of billions of dollars in licensing fees paid
by European telecommunications companies for UMTS and other 3G licenses in
2000 and 2001.
Other examples of M-commerce applications are
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premium-rate calling numbers,
charging to the mobile telephone user's bill or
deducting from their calling credit, either directly or via reverse-charged SMS.
information-on-demand systems like news services or stock tickers,
banking and stock brokerage applications by SMS, WAP or iMode.
Advantages of M-Commerce
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The benefits of M-Commerce include customer satisfaction, cost savings, and new
business opportunities.
The Benefits of EC
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Benefits to Organizations
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Expands the marketplace to national and international markets
Decreases the cost of creating, processing, distributing, storing and
retrieving paper-based information
Allows reduced inventories and overhead by facilitating pull-type
supply chain management
The pull-type processing allows for customization of products and
services which provides competitive advantage to its implementers
Reduces the time between the outlay of capital and the receipt of
products and services
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much cheaper than
value added networks (VANs)
Benefits of EC (cont.)
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Benefits to consumers
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Enables consumers to shop or do other transactions 24 hours a day, all
year round from almost any location
Provides consumers with more choices
Provides consumers with less expensive products and services by
allowing them to shop in many places and conduct quick comparisons
Allows quick delivery of products and services (in some cases)
especially with digitized products
Consumers can receive relevant and detailed information in seconds,
rather than in days or weeks
Makes it possible to participate in virtual auctions
Allows consumers to interact with other consumers in electronic
communities and exchange ideas as well as compare experiences
Facilitates competition, which results in substantial discounts
Advantages of E-Commerce: Summary
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Electronic commerce can increase sales and decrease costs.
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A business can reduce its costs by using electronic commerce in its sales support and ordertaking processes.
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Amazon offers a feature that no normal store offers. When you read the description of a book, you also
can see "what other people who ordered this book also purchased". That is, you can see the related books
that people are actually buying. Because of features like these it is common for people to buy more
books that they might buy at a normal bookstore.
Integration into the business cycle –
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if an e-commerce site is implemented well, the web can significantly lower both order-taking costs up
front and customer service costs after the sale by automating processes.
24/7 -online shops do not close
Larger purchases per transaction –
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Electronic commerce increases sale opportunities for the seller.
Electronic commerce increases purchasing opportunities for the buyer
Lower transaction costs –
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Web advertising reaches a large amount of potential customers throughout the world.
The Web creates virtual communities for specific products or services.
A Web site that is well-integrated into the business cycle can offer customers more information than
previously available. For example, if Dell tracks each computer through the manufacturing and shipping
process, customers can see exactly where their order is at any time. This is what FedEx did when they
introduced on-line package tracking - FedEx made far more information available to the customer.
People can shop in different ways.
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Traditional mail order companies introduced the concept of shopping from home in your pajamas, and ecommerce offers this same luxury. New features that web sites offer include:
The EC Framework and Field
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An EC Framework
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EC applications supported by infrastructure
and 5 support areas
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People
Public policy
Technical standards and protocols
Business partners
Support services
Building an E-commerce Site
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The things you need to keep in mind when thinking about building an e-commerce
site include:
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Suppliers - this is no different from the concern that any normal store or mail order
company has. Without good suppliers you cannot offer products.
Your price point - a big part of e-commerce is the fact that price comparisons are
extremely easy for the consumer. Your price point is important in a transparent market.
Customer relations - E-commerce offers a variety of different ways to relate to your
customer. E-mail, FAQs, knowledge bases, forums, chat rooms... Integrating these
features into your e-commerce offering helps you differentiate yourself from the
competition.
The back end: fulfillment, returns, customer service - These processes make or break any
retail establishment. They define, in a big way, your relationship with your customer.
When you think about e-commerce, you may also want to consider these other desirable
capabilities:
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Gift-sending
Affiliate programs
Special Discounts
Repeat buyer programs
Seasonal or periodic sales
The reason why you want to keep these things in mind is because they are all difficult unless your
e-commerce software supports them. If the software does support them,
Implementing an E-commerce Site
There are three general ways to implement the site with all sorts of variations in between. The three
general ways are:
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Enterprise computing
Virtual hosting services
Simplified e-commerce
Enterprise computing means that you purchase hardware and software and hire a staff of developers to create your
e-commerce web site. Amazon, Dell and all of the other big players participate in e-commerce at the enterprise
level. To consider enterprise computing solutions an organisations will be aiming to satify the following:
Virtual hosting services give you some of the flexibility of enterprise computing, but what you get depends on the
vendor. In general the vendor maintains the equipment and software and sells them in standardised packages. Part of
the package includes security, and almost always a merchant account is also an option. Database access is
sometimes a part of the package. You provide the web designers and developers to create and maintain your site. An
example of a virtual hosting service is the type of package available at Bargain Host.
Simplified e-commerce is what most small businesses and individuals are using to get into e-commerce. In this
option the vendor provides a simplified system for creating your store. The system usually involves a set of forms
that you fill out online. The vendor's software then generates all of the web pages for the store for you. A good
examples of this sort of offering is ebay.
These are in order of decreasing flexibility and increasing simplicity.
Disadvantages of Electronic
Commerce
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Some business processes
are difficult to be
implemented through
electronic commerce.
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Return-on-investment is
difficult to apply to
electronic commerce.
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Businesses face cultural
and legal obstacles to
conducting electronic
commerce.
Major Business Pressures and the Role of
EC
The environment, pressure, and support model
How to start your own online small
business.
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E-Commerce is a six step process and all online
businesses will go through the first three steps:
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1. Create the online content. Content is King!
2. Host the content on the Internet.
3. Market the website and content.
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Businesses conducting online sales will need to continue
through the final three steps:
4. Collect and record customer orders.
5. Process payments.
6. Fulfill customer orders.
Creating The Online Content
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The one thing that controls the success or
failure of a website above all else is content.
Content is King. You customers must have a
reason to visit the first time, two weeks later,
and six months later. They need a reason to
recommend a friend to your site. The best
reason is content.
Value Added Content
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The most succesful sites learn what their customers want and then give it to
them!
What do customers want? Information!
You know something that your customers would find extremely valuable. Put it
on your website. This could be tips and tricks for using a product, how to select
a service, 5 ways to do something better - faster - easier!
Here are some ideas from successful sites:
Whitepapers - Detailed technical information and suggestions on how to use a
product. Here at the Arkansas SBDC, we offer over 300 small business fact
sheets in our BizFacts section.
News - Not the newspaper news, but industry news related to your product or
service. The kind they can't get anywhere else. Did you notice the eNews
articles on the ASBDC homepage?
Samples - Hold a monthly drawing for one or more free samples. This is a great
way to build a database of sales leads! Never offer sample hard goods with out
limiting the offer. Can you afford to mail a million plus samples?
Pretty Pictures
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Your site needs to have a professional look. Hire someone to
create your graphics. If you can't afford a professional, hire a
college or high school student.
Limit the number of pictures on your homepage. Your homepage
needs to load quickly (7-10 seconds). Your customers want to be
satisfied now. They are just one mouse click from leaving!
Use the same color scheme and navigational elements on each
page. First, this gives you a "corporate image." Second, a
common peeve among web surfers is poor navigation on most
sites.
Hosting The Content
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After creating your content, the next step is to host the content on the Internet. One
problem: most small businesses cannot afford the cost of purchasing a dedicated
web server and renting high speed Internet access lines.
The solution is simple. Rent space on a computer that's already connected to the
Internet. Thanks to cheaper hard disk drives, storage space is widely available at
very little cost. You should be able to locate a hosting service for as little as $10-20
per month, depending on features and extras.
Domain Names
As part of your hosting solution, you will also want to register a unique domain
name for your website. The domain name allows your customers to enter a shorter
and easier to remember address to your website. Having your own domain name
also will make any future changes of hosting services much less difficult.
Domain names are licensed for $35 per year. While a domain name can be
registered with any of the six authorities, it is best for novices to register a domain
name through their chosen web hosting service. Registering through a hosting
service ensures that required domain name servers (DNS) are quickly and properly
configured - a technical nightmare for both techies and non-techies. Most reputable
hosting services assist in the registering of domain names at no extra cost.
Marketing Your Website: methods for
marketing a website
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You need to market your website and market continuously. This page contains numerous
methods for marketing a website. You need to discover the methods that work best for you.
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E-mail Techniques
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E-mail Address –
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Locate and join 1-2 two large e-mail discussion lists that your target market also subscribes to. You can locate lists at PAML.
Bulk E-mail –
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Configure your e-mail software to use a signature file or tagline. Create a 4-5 line ad for your site which gets attention, gives a
reason to visit and provides the web address.
Mailing Lists –
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First and foremost, your e-mail address should include your product, industry, or company name. Personal names and intials
are for personal e-mail from friends and family.
Signature Files –
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Although commonly overlooked and discounted by most individuals and businesses, e-mail is the most effective and cost
efficient way to drive traffic to a website.
Use your customer database to email all your customers with email addresses monthly. Products like Campaign make the
process easy. Check with your e-mail service first as they may have a policy or limitations against bulk e-mail.
World Wide Web Techniques
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In addition to e-mail, there are several web marketing techniques that are highly effective. While time consuming, take the
time to register with search engines and develop reciprocal links.
Brief History of EC
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EC applications first
developed in the early
1970s
Electronic funds transfer
(EFT)
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Limited to:
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Large corporations
Financial institutions
A few other daring
businesses
Brief History of EC (cont.)
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Electronic data
interchange (EDI)—
electronic transfer of
documents:
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Purchase orders
Invoices
E-payments between
firms doing business
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Enlarged pool of
participants to include:
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Manufacturers
Retailers
Service providers
Brief History of EC (cont.)
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Interorganizational systems (IOS)
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Stock trading
Travel reservation systems
Internet became more commercialized in
the early 1990s
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Almost all medium-and large-sized
organization in the world now has a Web
site
Most large corporations have
comprehensive portals
Brief History of EC (cont.)
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EC Successes
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Pure online
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eBay
VeriSign
AOL
Checkpoint
Click-and-mortar
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GE
IBM
Intel
Schwab
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EC Failures
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E-tailors began to fail in
1999
This does not mean that
EC’s days are numbered
Large EC companies like
Amazon.com are
expanding but success or
failure is not certain