1 BA345W Announcements, 2/15/07 –Class next Tuesday (2/20) in Hamersly #108 –Class Project...

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BA345W Announcements, 2/15/07

– Class next Tuesday (2/20) in Hamersly #108– Class Project Concepts past due

• Note that students have greater degree of “control” over Class Project.

• Think about various forms of competitive advantage.

– Writing Assignment #2 due tonight.– Students should begin reading Chapters 7 & 8 in

Laudon text.

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Today’s agenda: 2/15/07

• Cover Chapters 4, 5, and 6 briefly.– Material in text is generally technical, so is not

on the required reading list. – For exams, only responsible for what we

cover in class

• Start to get into Chapter 7

Copyright © 2004 Pearson Education, Inc. Slide 4-3

Chapter 4

Building an E-commerce Web Site

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Chapter 4: Learning Objectives

• Brief overview of web site “do’s” and “don’ts”.

• Brief overview of the spectrum of web site approaches

• Simple:– Use of Templates (e.g. Yahoo Stores, MySpace) – Dreamweaver or FrontPage (no database)

• Complex:– Web sites linked to back-end databases

• Application servers such as IBM WebSphere• CGI scripts and SQL databases


The Eight Most Important Factors in Successful E-commerce Site DesignTable 4.10, Page 232


Web Site Features that Annoy CustomersFigure 4.17, Page 231

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Jakob Nielsen, usability “guru”• Nielsen Norman Group• http://www.useit.com/• (not a visually impressive

website, but easy to navigate)• See his comments on “why

this site has almost no graphics” – Short Answer: Download speeds– (Note: about 35% - 40% of home

users still have dial up) – Recall “garish” examples of

instructor sites

http://www.useit.com/




The Spectrum of Tools for Building Your Own E-commerce SiteFigure 4.5, Page 205


Multi-tier E-commerce ArchitectureFigure 4.9(b), Page 212


Chapter 5

Security and Encryption

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Chapter 5: Learning Objectives

• Brief discussion of common Internet-based security threats.– Viruses and other “malware.” – “Phishing” (Dilbert cartoon)

• Emphasis on practical information.

• Very brief discussion of encryption; focus on tension between privacy rights of citizens and role of government.

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New term: “Malware”

• General term being used to encompass viruses, worms, spyware, adware, and any other software developed with malicious or dishonest intent.

• Viruses and worms are small software “programs” that run on a computer without the user’s consent.

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How viruses spread: 2 common methods

• Some viruses e-mail themselves to every e-mail address in the victim’s address book. Single greatest risk of viruses often from e-mail attachments, especially “.exe” files.– Because these viruses then arrive with e-mail message

from someone known to the user, they often spread very fast and far.

– As a rule, don’t open or double-click on an “.exe” e-mail attachment unless you are sure what it is.

– Some go further and say don’t open any e-mail attachment unless you are sure what it is.

• Also, Office documents (macro viruses), etc.

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Impact of Viruses

• Varies substantially: – Some viruses do no tangible harm at all; e.g.

user just sees some type of message appear on screen.

• Messages are sometimes political in nature.• At other times, messages criticize Microsoft,

especially since viruses usually exploit security vulnerability in Microsoft software.

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Impact of Viruses

• Varies substantially: – At other end of spectrum, some viruses can

wipe out the user’s hard drive, and all other storage devices connected to the PC. All information on any device may well be lost.

– This is reason that truly critical information should also be backed up on storage device not connected to the PC

– Viruses can also send information from the user’s PC back to the originator of the virus.

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Security Suites: Recommendation– For personal (non-network) use, PC

Magazine recommends two security suite products above others:

• “Editor’s Choice”: ZoneAlarm Security Suite (has become easier for novices to use, though complexities remain.)

• Norton Internet Security (good product, but can slow down PCs noticeably)

• Each cost approximately $70; user receives virus updates for a define period of time, usually 1 year.

• Sometimes, standalone anti-virus product better than a “suite” product (doesn’t slow PC down as much).

• Some routers also provide security functionality.

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Practical security/safety tips• Back up highly valuable work on a separate storage

device that you are willing to keep detached from your PC and network. (“CD or USB drive in a drawer”)

• Only “foolproof” backup is on a detached storage device that is not infected with a virus.– USB “jump” drives becoming incredibly cheap ($15 for 1GB!)– CD-R and CD-RW discs usually less that $1/each (capacity 550MB

– 700MB); if don’t have CD drive, floppy discs can store long text documents, and often cost less than 50 cents apiece

• Virus scanning tools often have flexible settings– Can run automatic virus scans when your computer is

on, but not likely to be in use (e.g. dinner time).– Can scan just one folder, or an attached storage device

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PC Magazine Recommendation– Backups protect user from loss of data from hard drive

crash, stolen laptop, etc., in addition to possibility of damage from virus,

– PC Magazine recommends Maxtor One Touch USB external hard drive as a personal (vs. network) backup solution

– Can be configured for various forms of automatic backup

• Cost of a 200GB drive about $129 at Staples.• WD 160GB “Little Black Book” external drive for $89.

– For very specific, highly important information that is not too lengthy, paper backups can make sense as an additional measure.

– Or, e-mail an important document to yourself using your Yahoo, G-Mail, or WOU e-mail account (server-based).

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Phishing – the cartoon version

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“Phishing”• “Phishing” Illustration:

– E-mail sent from e-mail address that appears to eBay customer service, e.g. [email protected]

– E-mail states “For security reasons, please update your credit card information” and provides a link, which appears to be something like http://www.ebay.com/customer-service

– This is a link to a scam site, masquerading as eBay, which will capture your credit card information for fraudulent use.

– Never follow such links; when updating sensitive account information, type URL (www.ebay.com) directly into browser Address Bar

– Newest phishing scam: e-mail that purports to be from the IRS.

– WOU’s e-mail system being hit by more phishing e-mails

mailto:[email protected]

http://www.ebay.com/customer-service

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Example of “phishing”

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eBay and PayPal a common “phishing” target

• If they get login information from a eBay/PayPal user, scammers can potentially buy and sell “products,” and transfer money, from that user’s account. Scam leverages reputation user established

• One measure PayPal has taken to combat phishing: – After an account is established, on a PayPal screen where the credit

card number must be re-entered, PayPal shows the user the last few numbers of the card in question.

– PayPal now tells users that after initial setup, PayPal will NEVER ask users to enter a credit card number on a screen where PayPal hasn’t already identified the last few numbers of the card.

– This is information that scammers would not know.

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Encryption• Encryption converts meaningful

information, e.g. an e-mail message, into unreadable “gibberish.”

• The intended reader then decrypts the message and is able to read it.

• Well know, widely available encryption program is PGP, i.e. “Pretty Good Privacy.”

• Technical issues regarding how this is done beyond scope of this course.

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Encryption and Societal Issues

• Should government be able to get special access to information that would allow it to intercept and decrypt citizens’ messages?– On one hand, citizens should have the right to

communicate to each other privately.• Example: what if citizens want to criticize government

policies in their private e-mails?

– On the other hand, terrorists and criminals are known to use programs like PGP to encrypt their electronic communications.

• In the past, government and original developer of PGP clashed on this issue.


Chapter 6

E-commerce Payment Systems


PayPal: The Money’s in the E-mailPage 305


PayPal: The Money’s in the E-mail One of e-commerce’s major success stories:

Went public in 2002; acquired by eBay October 2002 for $1.5 billion

An example of a “peer-to-peer” payment system Fills a niche that credit card companies avoided – individuals

and small merchants Piggybacks on existing credit card and checking payment

systems Weakness: suffers from relatively high levels of fraud

Note “Get Verified” program Competitors include Western Union (MoneyZap), AOL

(AOLQuickcash) Citibank (C2it), to some degree Google (Google Checkout)

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PayPal illustrates power of “de facto” industry standards

• “Open, ‘Official’ Industry Standard” – Established by organizations like IEEE.– Example: Wi-Fi standards, e.g. 802.11b, 802.11g, 802.11n– Not always successful in the marketplace.

• De Facto Industry Standard– Established when a product, service, or technology is embraced by

users and customers.– Classic example: Microsoft Windows– Friedman’s discussion of PayPal: eBay wanted its users to utilize

Billpoint, eBay’s payment service. But users indicated “We want a standard, and we’ve picked the standard, and it’s PayPal.”

– eBay’s response was to eventually give up on Billpoint and acquire PayPal.

• Perhaps things could get to a point where almost every Internet user will think: “We all have PayPal, who needs anything else?”

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PayPal illustrates concept of “Network Effect”

– General concept of Network Effect: As the number of people in the network increases, the value of the network to all participants increases exponentially

– Network Effect: As more Internet users establish PayPal accounts, the usefulness (or value) of a PayPal account increases for everyone.

• If everyone has a PayPal account (i.e. it is the de facto standard), who needs anything else?


Digital Payment Systems and the Wireless Web

Mobile payment (m-payments) systems not very well established yet in U.S, but with growth in Wi-Fi and 3G cellular phone systems, this is beginning to change. Supports “m-commerce” “Buy an iPod from a vending machine”


Chapter 7

E-commerce Marketing Concepts

(Important for Class Projects)


Learning Objectives Identify the key features of the Internet audience

Discuss the basic concepts of consumer behavior and purchasing decisions

Identify and describe the main technologies that support online marketing

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Question #1 for Marketers

• “Is my target customer online?”

• More refined version: “To what degree is my target customer online?”

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Late 2006: “Ballpark” demographics, U.S.

• About 300 million people live in the U.S. • There are about 110 million “households” in

the U.S. • 69 to 74 million households (63% to 68%)

have Internet access. • About 40 million households have broadband

access. • 30 to 35 million households still have dial-up

access. • Source for broadband/dial-up data: “Rewired and Ready For Combat,” Business Week,

11/7/05; Online Video Goes Mainstream, Sparking an Industry Land Grab, WSJ, 2/21/06; also “Why the Web Is Hitting a Wall,” Business Week, 3/20/06.

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U.S. Internet usage data from Jupiter Research


Internet Audience and Consumer Behavior Demographics and access: some demographic

groups have much higher percentages of online usage than other groups.

In other words, online population is “demographically skewed.”

Importance of this skew to marketers depends on nature of product/service.

For most marketers, the most important demographic skew is related to age. Older consumers are less likely to be online.

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Age-related demographic skew

• “Nearly 60% of people 65 or older do not use the Internet at all.” (Source: Park Associates, reported in Business Week, 3/20/06)

• For company like General Motors, which has several brands which appeal primarily to older consumers (e.g. Buick, Cadillac), this “skew” is a major factor in marketing decisions.


The Purchasing Decision Five stages in the consumer decision process:

Awareness of need Search for more information Evaluation of alternatives Actual purchase decision Post-purchase contact with firm

For class project, consider: “How does the ‘generic’ model above manifest in the specific business I want to break into?”


The Consumer Decision Process and Supporting CommunicationsFigure 7.3, Page 371

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Generic vs. specific models

• Next slides “Generic” consumer behavior models

• Try to determine how these generic models manifest in the industry you are focused on in your class project.

• Generic models should be the starting point of your analysis.


A General Model of Consumer BehaviorFigure 7.1, Page 368


A Model of Online Consumer BehaviorFigure 7.4, Page 372


Shoppers: Browsers and Buyers 2003 UCLA Internet Report:

About 40% of online users are “buyers” who actually purchase online

About 40% of online users research on the Web (“browsers”) and then purchase offline.

Significance of online browsing for offline purchasing and vice versa should not be underestimated. Reflected in previous discuss of mixed models (bricks and

clicks). E-commerce and traditional commerce are coupled and

should be viewed by merchants and researchers as part of a continuum of consuming behavior. In euphoria of “E-Commerce I,” this coupling of E-

Commerce and traditional commerce was not sufficiently appreciated.


Internet Marketing Technologies

Cookies

Advertising networks

Customer relationship management (CRM) systems


Cookies Cookies: small text file that Web sites place

on a visitor’s client computer every time they visit, and during the visit as specific pages are accessed.

Cookies provide Web marketers with a very quick means of identifying the customer and understanding his or her prior behavior

Location of cookie files on computer depends on browser version

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Advertising Networks

• Will discuss again in Chapter 9, from Privacy standpoint.

• Advertising Networks are controversial because of the privacy issues they raise.

• However, Ad Networks address a key need for the advertiser who is spending the money– Advertisers want some evidence that they are

not paying for their ads to be shown to users who have absolutely no interest in their product/service.


Advertising Networks

Best known for ability to present users with banner advertisements based on a database of user behavioral data

DoubleClick best-known example Ad server selects appropriate banner ad based

on cookies, Web bugs, backend user profile databases Consequently, different users are often shown

different banner ads when visiting member sites of the advertising network.


How an Advertising Network such as DoubleClick WorksFigure 7.15, Page 404

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Basic concept of a customer database

• While some database technology is complex, the basic concept of a customer database is not.

• Think of the Blockbuster Video Store. Blockbuster wants to know: – Customer name, and how to reach customer– What videos the customer has checked out, and

when they are due back.– Other information that might be helpful in

understanding broader customer trends.• For example, history of videos the customer has

checked out.


Customer Relationship Management (CRM) Systems

Repository of customer information that records all of the contacts that a customer has with a firm and generates a customer profile available to everyone in the firm with an need to “know the customer”

Customer profiles can contain: Map of the customer’s relationship with the firm Product and usage summary data Demographic and psychographic data Profitability measures Contact history Marketing and sales information


A Customer Relationship Management System (e.g. bank)Figure 7.16, Page 406


Channel Management Strategies

Channel: Refers to different methods by which goods can be distributed and sold

Channel conflict: Occurs when a new venue for selling products or services threatens or destroys existing venues for selling goods

Example: online airline/travel services and traditional offline travel agencies

Some manufacturers are using partnership model to avoid channel conflict Ethan Allen and local Ethan Allen retailers

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