POWER School of Technology

E-Commerce & Internet Marketing

Module 1

Teacher : Mr. Vhonz Sugatan

Contact No. : 0917 – 899 – 6779

Module Name : Basic and Definitions

Course Description: E-Commerce is a basic course dealing with the Online Marketing Areas
specifically studied include understanding the sales industry and selling
occupation; promoting self-leadership, building trust, and conducting sales
dialogue; prospecting, qualifying, communicating, and relationship building,
buyer motivation, creating value, handling resistance; earning commitment;
customer concerns; and sales management using Internet.

Content of this Module:

1. Basics and definitions

2. The term E-Commerce
3. Business models related to E-Commerce
4. Technical and economic challenges

At the end of the module students should be able to:

1. How the term “E-Commerce” has been defined,

2. How the Internet has enabled this type of business,
3. What are typical categories of making business digitally,
4. What are the advantages as well as the disadvantages of digital business,
5. Which technical and economic challenges have to be mastered when doing business
electronically.

Sources:

 Introduction to E-Commerce, Combining Business and Information Technology by: Martin Kutz

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Introduction:
The term e-commerce was coined back in the 1960s, with the rise of electronic commerce – the buying and selling
of goods through the transmission of data – which was made possible by the introduction of the electronic data
interchange. Fast forward fifty years and e-commerce has changed the way in which society sells goods and
services.

E-commerce has become one of the most popular methods of making money online and an attractive
opportunity for investors. For those interested in buying an e-commerce business, this article serves to provide an
introduction to e-commerce, covering the reasons for its popularity, the main distribution models and a
comparison of the major e-commerce platforms available.

What is E-Commerce?
‘E-commerce’ and ‘online shopping’ are often used interchangeably but at its core e-commerce is much broader
than this – it embodies a concept for doing business online, incorporating a multitude of different services e.g.
making online payments, booking flights etc.

Why Do People Buy Online?

1. Lower Prices – Managing an online storefront is far cheaper than an offline, brick and mortar store.
Typically less staff are required to manage an online shop as web-based management systems enable
owners to automate inventory management and warehousing is not necessarily required (as we discuss
later). As such, e-commerce business owners can afford to pass operational cost savings on to
consumers (in the form of product or service discounts) whilst protecting their overall margin.
Furthermore, with the rise of price comparison websites, consumers have more transparency with
regard to prices and are able to shop around, typically purchasing from online outlets instead.
2. Accessibility and Convenience – Unlike many offline stores, consumers can access e-commerce websites
24 hours a day. Customers can read about services, browse products and place orders whenever they
wish. In that sense, online shopping is extremely convenient and gives the consumer more control.
Furthermore, those living in more remote areas are able to order from their home at a touch of a button,
saving them time travelling to a shopping center.
3. Wider Choice – For the past twenty years, the growth of online shopping has to a large extent been based
around increased choice. With an almost endless choice of brands and products to choose from,
consumers are not limited by the availability of specific products in their local town, city or country.
Items can be sourced and shipped globally. Interestingly, one recent study found that consumers are
actually starting to become frustrated by e-commerce sites that offer too much choice. Whichever way
you look at it though, more choice has likely been a good thing over the long term.

Naturally e-commerce has significant benefits for the consumer, but it has also been useful for
businesses too. Next, we look at some of the reasons why businesses have been quick to race into the
space.

Why Do Business Sell Online?

1. Higher Margins – Setup costs and ongoing operational costs such as rent, heating, electricity,
warehousing (if operating a drop-ship model) and inventory management are often significantly reduced
or otherwise eliminated. Further, customer service and other administrative tasks can be automated or
outsourced at a relatively low-cost. As such, higher margins can usually be achieved when selling via an
online store compared to operating an offline business.

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2. Scalability – With a brick and mortar business, the owner is often limited by the amount of people who
can physically be in the store at any one time. There is no limit when trading online. Running an e-
commerce business means tapping into a truly global market. Furthermore, online platforms enable
rapid scaling. With the emergence of social media and content marketing as well as the option of
generating traffic and conversions through pay-per-click (PPC), expanding into new regions or markets
can happen quickly. A great example of this in practice is Choxi, a business that experienced 1,023%
growth in revenue in just one year.
3. Consumer Insight / Technology – E-commerce businesses typically collate a tremendous amount of
customer data. With every element of consumer behavior being tracked, e-commerce business owners
are able to understand, tweak and improve the customer shopping experience for customers – making
data-led decisions to increase conversion rates and sales. With technology rapidly evolving, it is
important that online retailers use tools such as Google Analytics correctly to understand their
customers’ buying habits, unlocking insight from this data presents a unique advantage, not available to
offline stores. Those who leverage the right systems and technology can see their businesses grow
extremely quickly.

Module 1
1.1 The Term “E-Commerce”

1.1.1 The Wikipedia Content

Of course, we looked up the term “E-Commerce” and other related terms in the popular encyclopaedia
Wikipedia. The outcome of our research as of October 25, 2015, is documented in the subsequent lines.

E-Commerce:
Electronic commerce, commonly written as E-Commerce, is the trading in products or services using computer
networks, such as the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic
funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data
interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic
commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle, although it may
also use other technologies such as E-Mail.

E-Commerce businesses may employ some or all of the following:

1. Online shopping websites for retail sales direct to consumers,
2. Providing or participating in online marketplaces, which process third-party business- to-consumer or
consumer-to-consumer sales,
3. Business-to-business buying and selling,
4. Gathering and using demographic data through Web contacts and social media,
5. Business-to-business electronic data interchange,
6. Marketing to prospective and established customers by E-Mail or fax (for example, with newsletters),
7. Engaging in pretail for launching new products and services.

Pretail (also referred to as pre-retail, or pre-commerce) is a sub-category of E-Commerce and online retail
for introducing new products, services, and brands to market by pre- launching online, sometimes as
reservations in limited quantity before release, realization, or commercial availability. Pretail includes pre-
sale commerce, pre-order retailers, incubation marketplaces, and crowdfunding communities.” (Wikipedia
2015)

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E-Business:
Electronic business, or E-Business, is the application of information and communication technologies
(ICT) in support of all the activities of business. Commerce constitutes the exchange of products and
services between businesses, groups and individuals and can be seen as one of the essential activities of
any business. Electronic commerce focuses on the use of ICT to enable the external activities and
relationships of the business with individuals, groups and other businesses or E-Business refers to business
with help of Internet i.e. doing business with the help of Internet network. The term <E-Business> was
coined by IBM’s marketing and Internet team in 1996.” (Wikipedia 2015)

Comparing E-Commerce and E-Business we come to the subsequent conclusion :

E-Business is a more general term than E-Commerce. However, in this book we will only use the term “E-
Commerce“, because every business transaction finally is involved in selling or buying of products or services.
And the term “E-Commerce” obviously is more widespread than the term “E-Business”.

Digital Economy:
“Digital economy refers to an economy that is (substantially) based on computing technologies. The digital
economy is also sometimes called the Internet Economy, the New Economy, or Web Economy. Increasingly,
the “digital economy” is intertwined with the traditional economy making a clear delineation harder.”
(Wikipedia 2015)

We will not use the term “digital economy” further on in this book, because business is business be it
traditional or digital. And boundaries are moving every day due to technical development. However, we will
repeatedly use the term “digital” or “digitalized” to indicate that subjects or activities are based on ICT.

1.1.2 Preliminary Definition

Some authors write extremely enthusiastically like this: E-Commerce enables the comprehensive digital
execution of business processes between suppliers and their customers via global public and private
networks.

However, this definition rises some questions:

1. What does “comprehensive” mean? Does it mean the total process? Is everything digitalized?
2. What about transportation and delivery of real goods? Obviously here are some limits for
digitalization, though sooner or later 3-D-printing may change a lot…
3. Why should businesses be run electronically? Is enablement a value in itself? Or do we digitalize
businesses because we can reduce costs, accelerate processes and increase profit?

This definition, though given in many E-Commerce books, is too much marketing- minded and not helpful to
understand the advantages (and disadvantages) of “digitalized” business reasonably.

1.1.3 Final Definition

To come to a final definition of E-Commerce let us start with some constituent attributes of E-
Commerce:

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Digitalization of Business:

 This means a comprehensive usage of ICT (Information & Communication Technology) not only
within a business organization (as it has been done during the last decades by traditional (internal)
information systems), but now through a more and more seamless linking and cooperation of
information and communication systems of all involved business partners.
 The comprehensive usage of ICT has been enabled by some technologies and technical standards,
which have been accepted globally (see chapter 2 of this book).

Focus on Business Processes:

 We support business processes, of course, as we did it for the last decades, but now the total
processes, running through several organizations and crossing their boundaries, are supported.
 We automate business processes no longer only within organizations, as it was “the” traditional
objective of ICT, but now the automation is related to the total process, running through all
involved organizations, and not only to the sub-process within the own organization.
 We increase the speed of business processes. Additional potentials can be realized with the coupling
of processes between different organizations.
 We increase the economic efficiency of business processes, again through coupling of business
processes at the boundaries of the business partners.

Usage of a Global Network:

 Internet plays a dominant role and has become a universal technical infrastructure. Thus it builds a
global virtual place where every organization and person being interested in making business
can come together without geographical and time restrictions.
 Global networks allow the exchange of information without any restrictions in time and
independently from any geographical distances.
 We “know” (means: assume) that the Internet is always up and running (7·24h).

New Potentials and Opportunities for Cooperation:

 More or less independent persons and/or organizations work together.

 Business actors can come together whenever they want it or whenever there is a need.

These considerations lead to our final definition (Turban et al 2015, p. 7):

E-Commerce is the exchange of goods and services between (usually) independent organizations
and/or persons supported by a comprehensive usage of powerful ICT systems and a globally standardized
network infrastructure.

For this purpose the business partners have to couple their business processes and their ICT systems.
These systems have to work together temporarily and seamlessly and have to share, exchange and
process data during the whole business process and across the boundaries of the cooperating
organizations.

Data security and data privacy as well as the compliance with laws and other policies and procedures
have, of course, to be guaranteed.

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1.1.4 E-Commerce with the “5-C Model”

Another approach to define and explain, what E-Commerce is, comes from the so-called 5-C-model (Zwass
2014). It defines E-Commerce by five activity domains whose denominations start with the letter “C”:

Commerce:

 In the electronic marketplaces there is a matching of customers and suppliers, an establishing of the
transaction terms, and the facilitation of exchange transactions.
 With the broad move to the Web-enabled enterprise systems with relatively uniform capabilities as
compared to the legacy systems, a universal supply-chain linkage has been created.

Collaboration:

 The Web is a vast nexus, or network, of relationships among firms and individuals.
 More or less formal collaborations are created or emerge on the Web to bring together individuals
engaged in knowledge work in a manner that limits the constraints of space, time, national
boundaries, and organizational affiliation.

Communication:

 As an interactive medium, the Web has given rise to a multiplicity of media products.
 This universal medium has become a forum for self-expression (as in blogs) and self-presentation
(as, for an example, in Polyvore: www.polyvore.com).
 The rapidly growing M-Commerce (see below) enables connectivity in context, with location-
sensitive products and advertising.
 In the communications domain, the Web also serves as a distribution channel for digital
products.

Connection:

 Common software development platforms, many of them in the open-source domain, enable a wide
spectrum of firms to avail themselves of the benefits of the already developed software, which is,
moreover, compatible with that of their trading and collaborating partners.
 The Internet, as a network of networks that is easy to join and out of which it is relatively easy to
carve out virtual private networks, is the universal telecommunications network, now widely
expanding in the mobile domain.

Computation:
Internet infrastructure enables large-scale sharing of computational and storage resources, thus leading to the
implementation of the decades-old idea of utility computing.

1.1.5 Additional Terms

M-Commerce (Mobile Commerce)

M-Commerce (Mohapatra 2013, pp. 81–82) is commonly understood as the usage of mobile devices for
business purposes, especially mobile phones and PDA’s (Personal Digital Assistants).

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Main features of M-Commerce are:

 Location independence of (mobile) customers,

 High availability of services through well- established mobile phone networks,
 Increasing computing power of mobile devices,
 Interactivity of mobile devices (voice and data transfer),
 Security (when using mobile phone networks),
 Localization of customers through cell structure,
 Accessibility of customers,
 Potential of personalized services/offers.

E-Procurement (Electronic Procurement)

In general, E-Procurement (Chakravarty 2014, p. 115) is the automation of an organization’s procurement

processes using Web-based applications. It enables widely dispersed customers and suppliers to interact and
execute purchase transactions. Each step in the procurement process is captured electronically, and all
transaction data is routed automatically, reducing time and cost of procurement. Properly deployed, E-
Procurement can deliver tremendous value to enterprises in different ways.

In a narrower sense E-Procurement is seen as the ordering of MRO goods (MRO =

Maintenance/Repair/Operations) on the basis of Web-based application systems directly by the demand
carrier to reduce process costs in the area of so-called C-articles (C-articles represent a small portion of
the total financial procurement volume, but cause a significant portion of the procurement costs).

Every sales process at the same time is a procurement process or a buying process – from the point of view
of the (potential) customer. Sales processes are driven by the supplier. Procurement processes are driven by
the customer. However the exchange of goods or services has to be managed. Thus we will consider E-
Procurement as a specific view onto E-Commerce.

E-Government (Electronic Government)

The big encyclopedia Wikipedia says (search as of October 26, 2015) (Xu 2014, pp. 102–105):

E-Government (short for electronic government, also known as e-gov, Internet government, digital
government, online government, or connected government) consists of the digital interactions between
citizens and their government (C2G), between governments and government agencies (G2G), between
government and citizens (G2C), between government and employees (G2E), and between government and
businesses/commerce (G2B).

This digital interaction includes all levels of government (city, state/province, national, and international),
governance, information and communication technology (ICT), and business process re-engineering
(BPR).”

E-Administration (Electronic Administration)

“E-administration refers to those mechanisms which convert the paper processes in a traditional office into
electronic processes, with the goal to create a paperless office. Its objective is to get total transparency and
accountability within any organization.”

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E-Democracy (Electronic Democracy)

E-Democracy incorporates 21st-century information and communications technology to promote
democracy. That means a form of government in which all adult citizens are presumed to be eligible to
participate equally in the proposal, development, and creation of laws.”

1.1.6 Role of Internet

In the early years, E-Commerce was considered to be an aid to the business. In the meantime it has
become more or less a business enabler (Mohapatra 2013, pp. 10–12).

Between 1998 and 2000, a substantial number of businesses in the United States and Western Europe developed
rudimentary websites. In the dot-com era, E-Commerce came to include activities more precisely termed ‘‘Web
commerce’’ – the purchase of goods and services over the World Wide Web, usually with secure connections with
E-Shopping carts and with electronic payment services such as credit card payment authorizations.

The emergence of E-Commerce also significantly lowered barriers to entry in the selling of many types of goods;
many small home-based proprietors are able to use the Internet to sell goods. Established suppliers had to
close their shops and to change their business model to an E-Commerce model to stay profitable and in the
business (e.g. travel agencies).

Often, small suppliers use online auction sites such as eBay or sell via large corporate websites, to ensure that they
are seen and visited by potential customers.

1.2 Business Models Related to E-Commerce

1.2.1 Internet Based Business

In this chapter we list some typical business activities, which are based on the Internet. E-Commerce actors
cooperate with those firms and use them as specific service providers.

Access Provider:
The access provider ensures (technical) access to the Internet. We should have in mind, that somebody has to
pay the access provider so that we can get access to the Internet. Who pays? We or somebody else? In
many (most?) areas of the world it is a totally privatized business, though sometimes in the political arena the
access to the Internet is declared as a modern human right. Obviously there is a similarity to telephone
network(s). However, it (normally) works in this privatized form.

Traditional business models, which are somehow similar to the business of an access provider, are operators
of a technical infrastructure, e.g. telephone networks, car highways, or railways.

Search Engine:
Search engines are the most used software in the Internet. They are the starting step for many Internet-
based activities, not only but, of course, also if somebody is looking for a business opportunity. Again we
must ask: Who pays? The one, who wants to find something or someone? Or the one, who wants to be
found?

A traditional and similar business model is given by the so-called “yellow pages”, where firms are listed
and grouped according to branches and locations.

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Online Shop:
An online shop is a website, where you can buy products or services, e.g. Books or office supplies.

Traditional and similar business models are direct mail selling (no shop facility, offering of goods via a
printed catalogue, ordering by letters or telephone calls) and factory outlets (producer has own shop
facility, does not sell his products via merchants).

Content Provider:
Content providers offer content, a completely digital good, e.g. information, news, documents, music. A
specific variant of a content provider is the information broker, who is a trader of information.

Again the following question has to be put: Who pays? The one, who wants to have access to
information, The one, who wants to provide information.

Traditional business models in this area are newspaper publishers, magazine publishers, radio and television
broadcasting services or publishing companies.

Portal:
A portal is a website, which provides a set of services to the user so that he/she sometimes thinks that
he/she is using a single but very complex software system. Portals are often used in big organizations to
control the access of employees to the different ICT systems; each employee gets a specific menu of “his”/“her”
applications. Also content providers use portals, though in the narrow sense that they only deliver content
and no application systems.

Online Marketplace/Electronic Mall:

An online marketplace is a website, where suppliers and potential customers can come together like on a real
marketplace in a small town. An E-Mall is a set of online shops, which can be found on one website.

Examples of traditional and similar business models are shopping centers, omnibus orders (One person is
customer of the shop and buys for a group of people), marketplaces and buying associations.

Virtual community:
A virtual community is a platform for communication and exchange of experience. It is similar to a
virtual club or association. We always should ask: Who is the owner? Who is the person or organization
behind the platform? Who pays? The members or the visitors? The community operator?

Information Broker:
An information broker collects aggregates and provides information, e.g. information with respect to
products, prices,availabilitiesormarketdata,economical data,technicalinformation.

Here we have to ask: Can we trust the information? Is it neutral or just a product placement? Who pays? The
visitor? Some providers? Financed through advertisements?

Traditional and similar business models are magazines running tests of computers, cars, consumer goods,
restaurants.

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Transaction Broker:
A transaction broker is a person or an organization to execute sales transactions. Sometimes those brokers
are used to hide the real customer to the supplier. A transaction broker is an agent who is an expert in a
specific area and can take over parts of a business.

A similar traditional business model is the free salesman.

Online Service Provider/Cloud Service Provider (CSP):

An online service provider provides services, which can be run electronically, e.g. application software
services or ICT infrastructure services like storage or backup services. If this organization uses so-called cloud
technologies it is called a cloud service provider (ten Hompel et al 2015; Marks & Lozano 2010).

The questions, which we have to put, are: Who pays? The service user? If not, who is the customer?

This list describes a great variety of Internet-based business models. However, it will not be a complete
compilation because with new and innovative technologies new business ideas will come up and lead
to new and additional offerings.

1.2.2 Advantages and Disadvantages

E-Commerce has a lot of advantages. But as we know it from every area of our life, there is “no free lunch”. Of
course, E-Commerce has some disadvantages (see tables 1 and 2).

Advantages
For the Customer For the Provider

 Flexible shopping hours (7∙24h)  Better customer service can be offered

 No waiting queues (if net is available and  Fast communication with customer
software appropriately designed)  New customer potential through global
 Shopping at home (we don’t have to leave visibility
our apartment, refuel our car or buy a  No (traditional) intermediaries, who take away
subway ticket, look for a parking place, etc.) margins
 Individual needs can be covered (if
customization is offered)
 Global offers, more competition, pressure on
prices

Table 1: Advantages of E-Commerce

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Disadvantages
For the Customer For the Provider

 Security Risks:  Higher logistics cost (goods have to be sent

о Data theft (e.g. stealing account or credit to the customer’s location)
card numbers)  Anonymity of customers (how to make
о Identity theft (acting under our name or targeted advertisements?)
user identity)
о Abuse (e.g. third person orders goods with
our identity, gets them delivered and we
have to pay for it)

 Crime:
о Bogus firm (firm does not really exist)
о Fraud (e.g. order is confirmed, invoice has
to be paid, but goods are never delivered)

 Uncertain legal status (if something goes

wrong, can we accuse the provider?)

Table 2: Disadvantages of E-Commerce

1.2.3 Business Net Type
A more abstract categorization of digital businesses has been given 2001 by Tapscott (Meier & Stormer 2008,
pp. 34–46). He discussed the following business net types:
Business Web Agora:

 Objective: To run a marketplace for goods and values.

 Attributes: Market information available, negotiation processes established, dynamic pricing
through negotiations between market participants.
 Role of the customer: Market participant.
 Benefits: Negotiable products and services.
 Examples: eBay, auctions.yahoo.

Business Web Aggregator:

 Objective: To run a digital super market.

 Attributes: Presentation of a great variety of products, fixed prices and no negotiation between supplier
and customer, simple fulfillment from the customer’s point of view.
 Role of the customer: Customer.
 Benefits: Convenient selection and fulfillment from the customer’s point of view.
 Examples: etrade, amazon.

Business Web Integrator:

 Objective: To establish an optimized value creation chain.
 Attributes: Systematic supplier selection, process optimization for the total value chain, product
integration along the value chain.
 Role of the customer: Value driver.
 Benefits: Creation and delivery of customer-specific products.
 Examples: Cisco, Dell.

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Business Web Alliance:

 Objective: To establish a self-organizing value creation space.

 Attributes: Innovation in products and processes, trust building between different actors,
abstinence of hierarchical supervision.
 Role of the customer: Contributor.
 Benefits: Creative and collaborative solutions.
 Examples: Linux, music, download.

Business Web Distributor:

 Objective: Exchange of information, goods and services.

 Attributes: Net optimization, unlimited usage, logistics processes.
 Role of the customer: Recipient.
 Benefits: In-time delivery.
 Examples: UPS, AT&T, Telekom.

1.2.4 Web 2.0

Web 2.0 (Chen & Vargo 2014) describes World Wide Web sites that emphasize user- generated content,
usability, and interoperability. Although Web 2.0 suggests a new version of the World Wide Web, it does
not refer to an update of any technical specification, but rather to cumulative changes in the way Web
pages are made and used.

Characteristic application types of Web 2.0 are

Blogs: A blog (a truncation of the expression weblog) is a discussion or informational site published on the
World Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order
(the most recent post appears first). We normally see “multi-author blogs” (MABs) with posts written by
large numbers of authors and professionally edited. MABs from newspapers, other media outlets,
universities, think tanks, advocacy groups and similar institutions account for an increasing quantity of blog
traffic. The rise of Twitter and other “micro-blogging” systems helps integrate MABs and single-author
blogs into societal news streams.

Social Networking Services: A social networking service (also social networking site or SNS) is a platform to
build social networks or social relations among people who share similar interests, activities, backgrounds
or real-life connections. A SNS consists of a representation of each user (often a profile), his or her social
links, and a variety of additional services such as career services. SNS’s are Web-based services that allow
individuals to create a public profile, create a list of users with whom to share connections, and view and
cross the connections within the system. Most SNS’s provide means for users to interact over the
Internet, such as E-Mail and instant messaging. SNS’s incorporate new information and communication
tools such as mobile connectivity, photo/video/sharing and blogging.

Online Communities: An online community is a virtual community whose members interact with each other
primarily via the Internet. Those who wish to be a part of an online community usually have to become a
member via a specific site and necessarily need an Internet connection. An online community can act as
an information system where members can post, comment on discussions, give advice or collaborate.
Commonly, people communicate through SNS’s, chat rooms, forums, E-Mail lists and discussion boards.
People may also join online communities through video games, blogs and virtual worlds.

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Forums/Bulletin boards: An Internet forum, or message board, is an online discussion site where people can
hold conversations in the form of posted messages. They differ from chat rooms in that messages are often
longer than one line of text, and are at least temporarily archived. Also, depending on the access level of a
user or the forum set-up, a posted message might need to be approved by a moderator before it becomes
visible.

Content aggregators: An aggregator is a website or computer software that aggregates a specific type of
information from multiple online sources.

If business wants to benefit from Web 2.0 then it has to proceed in a specific way which in many aspects differs
from the traditional Web based business. The differences and conformities between the Web 1.0 (“old”) and the
Web 2.0 world (“new”) are listed in table 3.

Area Old (Web 1.0) New (Web 2.0)

Business philosophy IT enabled relationship marketing IT enabled relationship marketing
Web 2.0 technology/
Web 1.0 technology (static pages, Social technology (user-
Technology base file system, communication via E- generated content,
Mail separated from website) usability,
interoperability)
Digital part of business Transaction based: one-to-one Interaction based: dynamic, many-to-
processes interaction many interaction
Defined channels: E-Mail, phone Dynamic customer-driven touch- points
Interaction place
calls, websites, stores, etc. realized in social media
Segmentation of users and Dynamic, flexible and temporary
Traditional demographics
participants segmentation if at all
Broadcast message flow Push-based, inside-out Pull-based, outside-in
Control Firms and established organizations Social customers
Internal focus: one (part of an) Value chain through total organization
Design/analysis scope
organization or group of organizations
All interactions or conversations across
Data store 360° customer transaction data all touch points; user contributed
contents
Data analysis Subject-oriented analysis Network analysis
Transaction based:
Interaction based:
Customer life-time value (CLV),
Metrics Customer referral value (CRV), share of
share of market, RFM analysis
voice, size and engagement of
measures (RFM = Recency,
communities, sentiment
Frequency, Monetary)
Viral marketing (information is Can easily develop a viral marketing
Not possible
spread like a virus) campaign
Integral part of SCRM strategy (SCRM =
Crowd sourcing Not possible
social media CRM)
Dynamic, eWoM (electronic Word of
Customer loyalty Static, repeated patronage
Mouth), advocacy
Table 3: Comparison of Web 1.0 and Web 2.0

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POWER School of Technology
E-Commerce & Internet Marketing
Module 1

In the Web-2.0-world the traditional goods-dominant logic is replaced by a service-dominant logic. Its
premises are:

 Service is the fundamental basis of exchange.

 Indirect exchange masks the fundamental basis of exchange.
 Operant resources are the fundamental source of competitive advantage.
 Goods are a distribution mechanism for service provision.
 All economies are service economies.
 The customer is always a co-creator of value.
 The enterprise cannot value, but only offers value propositions.
 A service-centered view is inherently customer-oriented and relational.
 All social and economic actors are resource integrators.
 Value is always uniquely defined by the beneficiary.

If an enterprise wants to be successful in the Web-2.0-world it has to move from a goods focus to a
service focus. How can this be managed? The following rules may help:

 Do not produce goods but assist customers in their own value-creation processes.
 Value is not created and sold but value is co-created with customers and other value-creation
partners.
 Do not consider customers as isolated entities, but in the context of their own networks.
 Resources are not primarily tangible such as natural resources but usually intangible such as
knowledge and skills.
 Shift from thinking of customers as targets to thinking of customers as resources.
 Shift from making efficiency primary to increasing efficiency through effectiveness.

Obviously there is a strong focus on the customer and customer satisfaction as it should be in every
business. But what is really new? Is there finally a significant difference between traditional business, Web
1.0 business and Web 2.0 business? We are not sure.

1.3 Technical & Economic Challenges

1.3.1 Technical Challenges

ICT systems have to work properly not only within the boundaries of the own organization but also in
combination with ICT systems of other organizations. Interfaces between the involved systems have to
be defined and documented properly. But: How heterogeneous are the involved ICT systems allowed to
be? Is our IT infrastructure fit for E-Commerce? How do we have to change or extend our application
systems for E-Commerce?

In the digital business ICT systems are mission critical assets. How do we have to protect an ICT system
so that it is not possible to destroy it, damage it or manipulate it? Are our ICT systems secured? Are
unauthorized persons able to get access to our systems? Are payments procedures secure enough? Can
we protect the personal data of involved people, especially customer data?

Finally we have to realize, that E-Commerce depends on people. Are the people of our IT organization
qualified enough? Can we provide the necessary and significantly high technical support?

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POWER School of Technology
E-Commerce & Internet Marketing
Module 1

1.3.2 Economic Challenges

E-Commerce is not only a matter of technology. It is primarily, because it is commerce, a matter of
management and organization. The following questions have to be answered:

 Is our business processes standardized enough – at least harmonized among the participants?
 Who is allowed to participate? Are all participants trustworthy? Who makes the decision which
person or organization is allowed to participate?
 How much E-Commerce do we need to keep competitive? How do we have to change our
business model?
 What is going to happen after opening a new (electronic) sales channel? Will traditional sales
channels suffer from it?
 How can we measure the success of our E-Commerce activities? Will costs be compensated through
revenues? Will we make profit?
 How do we have to develop our relationship with customers, suppliers and other business
partners to be able to realize the advantages of E-Commerce for our organization and avoid the
disadvantages? How do we have to develop and change our business relationships?
 How do we have to redesign our business processes? How do the roles of our employees change?
Are our employees qualified for these new roles?

1.4 Activities & Exercises

1.4.1 Questions & Self Study

1. Where do you use the opportunities of E-Commerce actually in your daily life?
2. Which companies do you know which are doing E-Commerce?
3. Consider the Internet-based businesses, which we have listed above. Are they really new
business categories?
4. Find additional advantages and disadvantages of digital businesses.
5. Consider the above-mentioned technical and economic challenges of E-Commerce.
6. Try to find answers to the various questions, which we have listed.
7. What is E-Commerce? How does it differentiate from traditional business models?
8. What are different business models available for E-Commerce?
9. How can customers benefit from E-Commerce
10. What is the difference between E-Commerce and E-Business?
1.4.2 Answer the following briefly

1. We have discussed about E-Commerce, E-Business and E-Procurement. Is there any relationship
between these three terms? What is the difference between E-Commerce and E-Business? What is
the difference between E-Commerce and E-Procurement?
2. E-Commerce is so successful, because we have the Internet. Do you agree to that statement?
Why? What would happen, if tomorrow morning the Internet had been shut down? What would
happen, if tomorrow we would only have traditional telephone lines?
3. Please define the term “M-Commerce”.
4. E-Commerce has advantages as well as disadvantages. Give one example for the customer’s
perspective. Give one example for the supplier’s perspective.

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POWER School of Technology
E-Commerce & Internet Marketing
Module 1

1.4.3 Think of It!

Apply the E-Commerce elements to the administration of your university. Who are the customers? What
is delivered? What are the potentials? What are the advantages or disadvantages? Which parts have
already been digitalized? What would you recommend to the top management of the university to do
next?

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