978-0134741086 Chapter 10 Part 1

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Chapter 10, Page 157

CHAPTER 10. E-COMMERCE AND THE ENTREPRENEUR

Part 1: Learning Objectives

1. Understand the factors an entrepreneur should consider before launching into e–

commerce.

2. Explain the 11 myths of e-commerce and how to avoid falling victim to them.

3. Explain the basic strategies entrepreneurs should follow to achieve success in their

e-commerce efforts.

4. Learn the techniques of designing a killer Web site.

5. Explain how companies track the results from their Web sites.

6. Describe how e-businesses ensure the privacy and security of the information they

collect and store from the Web.

Part 2: Class Instruction

Introduction

The most successful companies are embracing the Internet not merely as another

advertising medium or marketing tool but as a mechanism for transforming their

companies and changing everything about the way they do business. E–commerce has

launched a revolution, but business basics still apply; companies still have to take care of

their customers and earn a profit.

The Internet has produced informed shoppers who are taking price out of the buying

equation due to the increase in the availability of price information. This causes retailers

to emphasize other factors, such as customer service, deep product lines, or convenience

to build long-term relationships. In addition, customers value other shoppers’ opinions

about the products they purchase and their shopping experiences with companies.

Modern shoppers expect to be able to make purchases across multiple channels, including

the Web, mobile devices, social media, television shopping channels, catalogs, and brick-

and-mortar stores.

E-commerce has removed the obstacle of size for many small business entrepreneurs. One

of the Internet’s greatest strengths is its interactive, social nature and its ability to provide

companies with instantaneous feedback, giving them the opportunity to learn and to make

necessary adjustments. The Internet has changed the face of business and it is important

for small businesses to incorporate e-business into their strategies to remain current in the

marketplace.

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Online retail sales in the United States are consistently increasing. Figure 10.1, U.S. E-

Commerce Sales shows projections through 2017. Figure 10.2, Multichannel Shopping

Methods, demonstrates trends in shopping habits of consumers. Figure 10.3, Global Retail

E-Commerce Sales shows the pervasiveness of Internet-based shopping.

Factors to Consider Before Launching into

E-Commerce LO 1

As with any proposed change or new venture, business owners must consider all variables

and challenges they face. The Internet can transform relationships with suppliers,

customers, and others. However, not every small business is ready to embrace e–

commerce. Web success requires a company to develop a plan for integrating the Internet

into its overall strategy.

Before launching an e-commerce effort, entrepreneurs should consider the following

strategic issues:

 How to exploit the Internet to transform relationships with suppliers and

vendors, customers, and other stakeholders.

 How to integrate the Internet in to its overall business strategy.

 Developing deep, lasting relationships with customers are even more important

in e-commerce.

 An ongoing investment of resources is required to create a meaningful

presence on the Internet.

Eleven Myths of E-Commerce LO 2

E-commerce already has many stories of success and failure. Make sure that you do

not fall victim to one of the following e-commerce myths:

 Myth 1: If I Launch a Site, Customers Will Flock to It. Promoting the site is

important and needs to become an integral part of the overall promotional strategy.

 Myth 2: Online Customers Are Easy to Please. Web visitors and shoppers, have

high expectations about their experience. Because Web shoppers are becoming

more discriminating, companies are finding that they must continually improve

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their Web sites to attract and keep customers. Refer to Table 101, Tips for

Improving Your Web Site’s Conversion Rate

 Myth 3: Launching an E-Commerce Site is Free – Or at Least Really Inexpensive.

One experienced e-commerce expert says that most of the Web sites that his

company creates cost between $5,000 and $10,000. It is most definitely not free or

inexpensive.

 Myth 4: Making Money on the Web Is Easy. Making money online requires an up–

front investment of time, money, and energy. Success online also requires a sound

business strategy. Getting a company’s site noticed requires more effort and

marketing muscle than ever before.

 Myth 5: Privacy Is Not an Important Issue on the Web. The Internet allows

companies to gain access to almost unbelievable amounts of information about

their customers’ online behavior. Companies then use this information to learn

more about their target customers and how to market to them more effectively, but

must safeguard their customers’ privacy and protect the information they collect

Web Site, and the Rest Will Take Care of Itself.” Launching a Web site requires a

well–thought-out strategy with a clear definition of the company’s target audience

and a thorough understanding of those customers’ needs, wants, likes and dislikes.

Online customers only have to make a mouse click or two to go to a rival Web

site.

understanding of inner workings of the industry and target market, and the strategy

to pull the various parts together. Business first, technology second.

 Myth 8: Customer Service Is Not as Important Online as It Is in a Traditional

Retail Store. The customer service experience on the Web is vitally important and

directly affects buyer behavior. Customers say convenience is more important than

 Myth 9: Flashy Web Sites Are Better Than Simple Ones. Keep the design of your

site simple so that pages download in no more than two seconds, and make sure

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that the site’s navigation is easy and intuitive. Refer to Figure 10.6, How Page

Load Speed Affects Sales.

 Myth 10: It’s What’s Up Front That Counts. Designing the back office, the

systems that take over once customers place their orders on a Web site, is just as

important as designing the site itself. According to Daryl Plummer, “The

companies with warehouses, supply-chain management, and solid customer service

are going to be the ones that survive.” Virtual order fulfillment (or drop

shipping) is utilized once a customer places an order; the company forwards the

order to a wholesaler or distributor who then ships the product to the customer

with the online merchant’s label on it. There can be problems for the online

company related to the loss of control over delivery times and service quality.

products and their shopping experience. Successful entrepreneurs’ e-commerce

sites are works in progress; they get the site online and then use Web analytics to

update it to meet changing customer demands.

Strategies for E-Success LO 3

Launching an e-business is not much different from launching a traditional offline

company, as the basic drivers are the same – have a sound business model and a well-

formulated strategy. Guidelines for building a successful e–commerce strategy for a small

company include:

 Focus on a Niche in the Market

 Develop a Community

 Listen to Your Customers and Act on What You Hear

 Attract Visitors by Giving Away “Freebies.” Give something away for free

and then sell them something else. It must be something customers’ value, but

it does not have to be expensive.

 Sell the “Experience.” Create an engaging and enjoyable online shopping

mail) is 20.9 percent and the average click-through rate (the percentage of

recipients who open an e-mail and click on the link to the company’s Web site)

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for email marketing is 3.6 percent. An e-mail‘s content should offer something

form an impression of a site’s credibility within 50 milliseconds of arrival.

Refer to Table 10.2, Twelve Guidelines for building the Credibility of a Web

Site.

 Make the Most of the Web’s Global Reach. Ignoring foreign customers makes

little sense. E-companies must design their sites with their foreign customers

content into other languages to minimize the likelihood of a company

unintentionally offending foreign customers.

 Go Mobile. The typical online shopper has expanded his or her reach across

multiple screens and screen sizes due to increasing trends of the use of smart

phones and tablets. Refer to Figure 10.7, Mobile Commerce Sales. By

of social media, mobile devices, and search engines to find the products and

services they want to purchase and the businesses that sell them.

 Promote Your Web Site Online and Off-Line. Put the company’s Web address

on everything a company publishes, from its advertisements and letterhead to

shopping bags, business cards, and even employees’ uniforms.

 Use Social Media Tools to Attract and Retain Customers. Small businesses

are responding to the opportunity to connect with customers online by adding

a number of social components to their e-commerce strategies: Facebook,

Twitter, YouTube, LinkedIn, Pinterest, and Apps. Refer to Figure 10.8, Most

Popular Social Media Networks Marketers Use.

 Develop an Effective Search Engine Optimization Strategy. The firm’s Web

search strategy must incorporate natural (organic) listings, which are search

engine listings that are the result of “spiders,” powerful programs that crawl

around the Web and analyze sites for key words, links, and other data. With

natural listings, an entrepreneur’s goal is to be displayed at or near the top of

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managing the content, key words, titles, tags, features, and design of a Web

site so that it appears at or near the top of Internet search results. Refer to

Figure 10.9, Four Building Blocks to a Successful Organic SEO Strategy.

Companies can use tips to improve their search placement results:

o Brainstorm to develop a list of key words and phrases. Use Google’s

AdWords Keyword Tool or Microsoft Bing Ads. Use these key

words in the title tags and headlines of your Web pages.

phrases they use.

o Use data analytics tools to find key words and phrases. Check blogs

and bulletin boards for key terms. Remember that customers may

misspell the words they type, so include these words in your list. Hire

services to monitor and analyze Web users’ tendencies.

o Block irrelevant results with “negative key words,” that are excluded in

a search.

o Include links to other relevant Web sites and land links on high-profile

Web sites.

o Start a blog and post videos on your site.

 Paid (sponsored) listings are short advertisements with links to the sponsoring

company’s Web site that appear on the results page of a search engine when

the user types in a key word or phrase. Product listing ads (PLAs) are paid

ads on Google that show more information, including product images, prices,

business name, and a short promotional message, than traditional text ads. A

problem facing companies that rely on paid listings and display ads is click

fraud, a situation that occurs when a company pays for clicks that are

generated by someone with no interest in or intent to purchase its products or

services.

Designing a Killer Web Site LO 4

Entrepreneurs must pay careful attention to the look, feel, efficiency, and navigability of

the Web sites and the impression their sites create with shoppers. While there are no

guarantees, the following suggestions may increase the chances for online success.

 Start with Your Target Customer.

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 Give Customers What They Want. The main reason people shop online is

convenience.

 Select an Intuitive Domain Name. It must be consistent with the image you

want to create for your company and register it. Selecting a domain name that

is short, memorable, indicative of a company’s business or business name, and

easy to spell.

 Make Your Web Site Easy to Navigate. Landing pages are the pages on

which visitors land after they click on a sponsored link in a search engine, e–

mail ad, or online ad. Two important Web site design features that online

 Create a Gift Idea Center.

 Provide Customer Ratings and Reviews.

 Use Online Videos.

 Establish the Appropriate Call to Action on Each Page.

 Build Loyalty by Giving Online Customers a Reason to Return.

 Use the Power of Social Media

 Follow a Simple Design. Some design tips include avoiding clutter and huge

graphic headers; include a menu bar, make the site easy to navigate; minimize

the number of clicks to get to a page; include meaningful content useful to

visitors; connect to social media pages, include FAQs, prominently post

privacy and return policies; include a search tool if the Web site is very large;

avoid fancy typefaces; be vigilant for writing errors; avoid small fonts; use

frames carefully, test the site on different Web browsers and different size

monitors; collect information but don’t tie up visitors immediately with a

tedious registration process; avoid automated music that cannot be cut off;

make sure the overall look of the page is appealing; remember that simpler is

almost always better.

 Create a Fast, Simple Checkout Process.

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 Provide Customers Multiple Payment Options

 Assure Customers That Their Online Transactions Are Secure.

 Establish Reasonable Shipping and Handling Charges and Post Them Up

Front.

 Confirm Transactions.

 Keep Your Site Updated.

 Test Your Site Often.

 Rely on Analytics to Improve Your Site.

 Consider Hiring a Professional to Design Your Site.

 Consider using You Be the Consultant: “A Total Makeover” at this point.

information:

 Commerce metrics. These are basic analytics, such as sales revenue generated,

number of items sold, and best sellers.

 Visitor segmentation measurements. These report information about online

shoppers and customers, including whether they are returning or new

the checkout process, and how often shoppers abandon their carts.

Other common measures of Web site performance include:

 Cost per acquisition – measures the cost that a company incurs to generate

each purchase (for customer registration).

 Average number of page views per visit – measures how much time visitors

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 Conversion (browse-to-buy) rate – measures the proportion of visitors to a

site who actually make a purchase.

 Cart abandonment rate – measure the percentage of shoppers who place at

least one item in a shopping cart but never complete the transaction.

 Search engine ranking – shows where a company’s Web site ranks in search

engines’ results pages.

Ensuring Web Privacy and Security LO 6

Privacy. The Web’s ability to track customers’ every move raises concerns over the

privacy of that information. Companies are encouraged to take the following steps to

ensure that they use information they collect in a legal and ethical manner:

 Take an inventory of the customer data collected.

 Develop a company privacy policy, a statement explaining the nature of the

information a company collects online, what it does with that information, and

what recourse customers have if they believe the company is misusing the

information.

 Virus detection software is a program that scan computer drives for viruses, or

nasty programs written by devious hackers and designed to harm computers

and the information they contain.

 Intrusion detection software is a program that constantly monitor the activity

on a company’s network server and sound an alert if they detect someone

customers’ transaction information as it travels across the Internet.

 Charge-backs are online transactions that customers dispute.