106 Part 1 Designing Customer-Oriented Marketing Strategies
CHAPTER 5
E-BUSINESS: MANAGING THE CUSTOMER EXPERIENCE
CHAPTER OVERVIEW
Things have changed drastically during the past decade in the business world. In a short time, marketing
has become the cutting–edge tool for success on the Internet. Profit-seeking businesses aren’t the only
ones that are reaping the rewards of the Internet; organizations of all kinds are beginning to emphasize
marketing’s role in setting and achieving goals. Colleges and universities, charities, museums, symphony
orchestras, and hospitals now employ the marketing concept discussed in Chapter 1—providing
customers the goods and services they want to buy when they want to buy them.
Contemporary marketing continues to perform its function of bringing buyers and sellers together; it just
does it faster and more efficiently than ever before. The Internet continues to revolutionize every aspect
of life, including marketing and commerce. New words have emerged—shopping blog, big data, phishing,
vishing, spyware, podcast. Old words have new meanings never imagined just a few years ago—Web,
surfer and server, cookies and pop-ups, banners and browsers, online and offline. And as always in the
quick pace of the business world, new abbreviations and acronyms have been created—RSS, VoIP, and
XML.
Changes in the 17th Edition
The chapter has been updated and revised, and new features have been added:
• The Opening Vignette and Evolution of a Brand profile Wayfair.com, the largest online-only
retailer of home décor goods. Originally the co-founders stumbled upon websites that sold one
specific type of item and combined multiple websites into an online company they called CSN
Stores, which they ran successfully for more than ten years. The problem? Despite the company’s
financial success, no one had ever heard of it. So Niraj Shah and Steve Conine rebranded their
company, eliminating all anonymous websites and uniting the entire product stream under a new
name, Wayfair.com. The business has a virtual inventory of nearly 7 million items and revenues
approaching $1 billion annually. The co–founders want Wayfair to become a destination website
Chapter 5 E-Business: Managing the Customer Experience 107
for its target market of women between the ages of 30 and 45 with annual incomes of between
$50,000 and $150,000. One of its successful sales strategies has been the flash sale, a time–
sensitive offering of selected merchandise at a steep discount.
• Solving an Ethical Controversy focuses on tracking fake online reviews. With companies
offering product rebates for glowing online reviews posted by customers and others hiring people
to write essentially fake reviews, comments, and blogs about goods and services they haven’t
• Marketing Success features Square, a mobile payment system. It allows shoppers to make
credit card purchases by swiping a small white plastic device that plugs into a smart phone or
tablet for a transactional fee. The challenge was to market the product without a mass-media
marketing budget. The strategy, as well as the outcome is discussed in “Square Captures Mobile
Payment Sector.”
• Career Readiness provides advice on writing your résumé when applying for jobs online, and
how to make your resume stand out of the thousands that apply in “Tips for Applying for Jobs
Online.”
• Video Case 5.2 includes an overview of e-marketing at Hubway, Boston’s online bike-sharing
system.
LECTURE OUTLINE
Opening Vignette and Evolution of a Brand— “Wayfair Makes a Name for Itself” illustrates how an online–
only retailer of home goods has become successful despite little marketing exposure. With nearly $1 billion
sales, Wayfair is poised to become a serious threat to other e-commerce businesses, including global
giant Amazon. How can the enterprise increase its exposure to its target market of women between 30
and 45? Will conventional marketing be sufficient to attract customers to websites such as Wayfair?
Chapter Objective 1: Describe the growth of Internet use worldwide.
Key Terms: e-business
PowerPoint Basic: 4
PowerPoint Expanded: 4, 5
1. The digital world
a. Worldwide Internet usage has reached more than 2.8 billion while
108 Part 1 Designing Customer-Oriented Marketing Strategies
Figure 5.1 Number of
Internet Users and
Internet Penetration
Rate (by region) What
can you infer about the
more than 86% of the U.S population access the Internet
b. Internet penetration is the percentage of a region’s population who
use the Internet
c. Asia leads the world in number of users and among individual
countries, China leads, followed by the U.S., India, and Japan
Assessment check questions
1.1. How would you describe the growth of Internet use worldwide? Worldwide,
1.2. What do most U.S. consumers do online? Nearly all U.S. consumers say
Chapter Objective 2: Explain e-business, e-marketing, and the opportunities e-marketing presents.
Key Terms: electronic marketing (e-marketing), interactive marketing
PowerPoint Basic: 5-7
PowerPoint Expanded: 6-10
1. E-business and E-marketing
a. E-business describes the wide range of business activities that
take place via Internet applications, such as email and virtual
shopping carts
b. E-business can be divided into five broad categories:
i. E-tailing, or virtual storefronts on the websites
ii. Business-to-business transactions
iii. Electronic Data Interchanges (EDI), the business-to–
Table 5.1
E-Marketing
Capabilities. Review
the five capabilities
2. Opportunities of E-Marketing
b. Personalization— Creating products to meet customer
specifications
c. Interactive marketing—Buyer–seller communications through
3. An effective online presence can improve the performance of traditional
marketing operations
Assessment check questions
2.1. Define e-marketing. E-marketing is the strategic process of creating,
2.2. Explain the difference between e-business and e-marketing. E-business
involves a wide range of activities that take place via the Internet. It is divided
2.3. What are the major benefits of e-marketing? The major benefits of e-
Chapter Objective 3: Distinguish between a corporate website and a marketing website.
Key Terms: corporate websites, marketing websites
PowerPoint Basic: 8
PowerPoint Expanded: 11
Note: Most companies
Ask students to
identify some
companies which
maintain two websites
Marketing website.
Examples include
McDonald’s, Pepsi,
Walmart, and Argo
1. Web business models
a. Virtually all businesses today have websites
2. Two types of company websites exist:
a. Corporate websites—increase visibility, promote offerings, and
provide information
Assessment check questions
3.1. Explain the difference between a corporate website and a marketing
3.2. Why would companies not sell products on their websites? Their products
might not lend themselves to online sales, or the firms may have relationships
with partners, such as dealers or franchisees, that sell their products instead.
Chapter Objective 4: List the six major forms of business-to-business e-marketing.
Key Terms: Business-to-Business (B2B), e-procurement
PowerPoint Basic: 9, 10
PowerPoint Expanded: 12–18
1. B2B E-Marketing
a. Business-to-business (B2B) e-marketing is the use of the
Internet for business transactions between organizations
2. Proprietary B2B transactions
a. Electronic Data Interchange (EDI) involves computer-to–
computer exchanges of sales information between buyers and
sellers
i. Early systems had hardware and software limitations
ii. EDI requires compatible hardware and software
systems to exchange data over a network
iii. The limitations of EDI were overcome by the
introduction of Web services
iv. Web services are Internet-based systems that allow
parties to communicate electronically with each other
regardless of the computer operating system used
b. Extranets are secure networks used for e-marketing that are
accessible through the firm’s Web site by external customers,
suppliers, or other authorized users
e. Private exchanges are secure websites at which companies and
their suppliers share data related to e-marketing
i. They are more collaborative that a typical extranet, this
type of arrangement is sometimes called c-business
ii. Participants can use these sites to collaborate on
projects and share information
3. E-Procurement on Open Exchanges
a. Electronic exchanges bring buyers and sellers together in one
electronic marketplace and cater to a specific industry’s needs
Chapter 5 E-Business: Managing the Customer Experience 111
ii. Suppliers weren’t happy with it, and buyers preferred to
cultivate long-term relationships with their suppliers
Assessment check questions
4.1. What is B2B e-marketing? How large is it relative to consumer e-marketing?
4.2. Define EDI and Web services. An EDI is a computer-to-computer exchange
of invoices, purchase orders, price quotations, and other sales information
4.3. Briefly explain how e-procurement works. E-procurement systems are Web-
based systems that enable all types of organizations to improve the efficiency of
their bidding and purchasing processes.
Chapter Objective 5: Explain business-to-consumer (B2C) e-marketing.
Key Terms: Business-to-consume (B2C) e-marketing, electronic storefronts, electronic shopping cart,
bots (shopbot)
PowerPoint Basic: 11–13
PowerPoint Expanded: 19-21
Note: Most banks
allow customers to use
could find out how
many of the students
1. B2C E-Marketing
a. Business-to-consumer E-marketing (B2C) e-marketing involves
selling directly to consumers over the Internet
2. Electronic storefronts are websites that offer items for sale to consumers
a. Internet retailers generally offer an online catalog where visitors
3. Benefits of B2C e-marketing:
a. Competitive pricing
i. The comparison of features and prices across sites is
facilitated
ii. Bots are search programs that check hundreds of sites,
112 Part 1 Designing Customer-Oriented Marketing Strategies
world at any hour of the day or night
ii. Customers are required to select a user name and
password for security
Assessment check questions
5.1. What is B2C e-marketing? B2C e-marketing uses the Internet to connect
5.2. Explain the difference between a shopping website and an informational
5.3. Discuss the benefits of B2C e-marketing. Benefits of B2C e-marketing
include competitive prices, increased access and convenience, and personalized
service.
Chapter Objective 6: Describe online buyers and sellers.
Key Terms: None
PowerPoint Basic: 14
PowerPoint Expanded: 22–23
Figure 5.2
Characteristics of U.S.
Internet Users. How
1. Online buyers and sellers
a. The typical Internet user is now likely to be between 18 and 64
years of age
Assessment check questions
6.1. Who shops online? Are the characteristics of online shoppers changing?
6.2. What are some of the capabilities e-marketers might add to their websites in
the future? E-marketers need to update their offerings at their websites at an
Chapter 5 E-Business: Managing the Customer Experience 113
Chapter Objective 7: Describe the challenges associated with online marketing and e-business.
Key Terms: encryption, Secure Sockets Layer (SSL), electronic signatures, cookies, spyware, firewall,
phishing, vishing, channel conflicts
PowerPoint Basic: 15
PowerPoint Expanded: 24-30
Square Captures
Mobile Payment
Sector
Note: Ask students to
come up with
increased due to the
recent recession.
1. Safety of Online Payment
a. Secure payment systems were developed to allow safe credit card
purchases and protect the information supplied
2. Privacy issues
a. The top security concern of online consumers is the protection of
personal information
i. Electronic signatures provide a way to obtain a form of electronic
identification and verifying the buyer’s identity with this software
ii. Cookies and spyware software allow companies to automatically
collect data from Internet browsers to track shopping and viewing
b. Organizations are also vulnerable to loss of data to hackers
i. They often install security software to keep unauthorized Internet
users from tapping into their private data
ii. A firewall is an electronic barrier between a firm’s internal network
and the Internet, that limits access into and out of the network
3. Frauds and scams
a. Internet fraud is increasing, and so is the technology designed to detect
or block it
b. Phishing uses email or pop-up messages that falsely claim to be from
familiar organizations in order to obtain personal information such as
passwords, credit card, and bank account numbers
4. Site design and customer service
a. Merchandise delivery and returns is a challenge faced by e-tailers
i. Consumers sometimes don’t want to wait for delivery of the item, or
114 Part 1 Designing Customer-Oriented Marketing Strategies
5. Channel conflicts and copyrights
a. When a manufacturer uses the Internet to sell directly to customers, it
may end up competing with its usual partners
b. Channel conflicts refer to conflicts between producers, wholesalers, and
retailers
c. Copyright infringement can occur when a site hosts content to which
someone else holds the rights
Assessment check questions
7.1. What are the major challenges to growth in e-business and e-marketing?
7.2. Describe phishing, vishing, and smishing. Phishing is a scam that uses
email or pop-up messages that claim to be from familiar banks, Internet service
providers, or other organizations asking for personal information. The purpose of
7.3. Explain how e-marketing can create channel conflicts and copyright
disputes. The Internet can generate conflict among manufacturers, wholesalers,
and retailers—so-called channel conflicts. For instance, a channel conflict could
be created when a manufacturer sells its products online and competes with its
retail partners. Copyright disputes usually arise when a site hosts content to
which someone else holds the rights.
Chapter Objective 8: Discuss how marketers use the communication function of the Web as part of
their online marketing strategies.
Key Terms: spam, blogs, wikis, podcasts, banner ads, pop-up ads, pre-roll video ads, search marketing
PowerPoint Basic: 16-18
PowerPoint Expanded: 31-38
1. Marketing and web communications
a. The Internet has four main functions:
2. Companies have long used email to communicate with their customers,
Chapter 5 E-Business: Managing the Customer Experience 115
Solving an Ethical
Controversy: Fake
Online Reviews. Are
paid online reviews a
legitimate marketing
strategy?
suppliers, and other partners
a. Links on company websites and live help using Instant
Messaging are also used for communication
b. Email is also used to inform customers about new products and
special promotions, often considered as spam or junk email
3. Online communities and social networks
a. Many firms use Internet forums, newsgroups, and social
networks to communicate
b. Online communities benefit users and organizations
c. Online forums are Internet discussion groups in which users can
send comments and questions or receive information from other
forum members
d. Newsgroups are noncommercial Internet versions of forums that
are topic-specific, resembling two-way conversations
e. Although social networking sites are popular, the value of
4. Blogs and podcasts
a. Blogs are Web pages that serve as publicly accessible journals
for individuals or organizations
b. A blog may also incorporate a wiki which is a Web page that any
5. Promotions on the web
a. Banner ads are typically small, strip messages placed in high-
visibility areas of frequently visited websites
b. Pop-up ads are separate windows that appear with an
advertising message
Assessment check questions
8.1. What are online communities and social networks? Explain how online
116 Part 1 Designing Customer-Oriented Marketing Strategies
include Internet discussion groups and social media sites (discussed in Chapter
4). Users log in and participate by sending comments and questions or receiving
information from other forum members. Companies use online communities to
ask questions and exchange information with customers.
8.2. What are blogs, wikis, and podcasts? A blog, short for Web log, is a Web
8.3. Explain the difference between a banner ad, a pop-up ad, a pre-roll video
ad, widget, and search marketing (also called search engine optimization).
Banner ads are strip messages placed in high-visibility areas of frequently visited
websites. A pop-up ad is a separate window that pops up with an advertising
Chapter Objective 9: Describe the process of developing successful e-business websites and how
to assess their effectiveness.
Key Terms: Web-to-store shoppers, click-through rates, conversion rate, engagement
PowerPoint Basic: 19–21
PowerPoint Expanded: 39-46
Career Readiness:
Tips for Applying for
Jobs Online. Think of
the challenges faced in
being one of
thousands applying for
website and consider
how well these
questions were
answered during its
1. Building an effective web presence
a. A website can serve many purposes in e-business and e-
marketing
b. It can broaden customer bases, provide immediate access to
current catalogs, accept and process orders, and offer
personalized customer service
2. Successful site development
a. Most Web experts agree that it is easier to build a bad website
than a good one
3. Establishing goals
a. What is the company’s goal for the website?
b. Objectives for the website also determine the scope of the
project
4. Implementation and interest
a. Content determines whether people return to the site, so
available resources should be:
Chapter 5 E-Business: Managing the Customer Experience 117
Figure 5.4 Measures
of Website
i. Relevant to viewers
ii. Easy to access and understand
iii. Updated regularly
iv. Written or displayed in a compelling, entertaining way
b. Firms connect to the Internet by placing the required files on a
server
5. Pricing and maintenance
a. The cost of creating a site includes development expenses, cost
of placing the site on a Web server, maintaining and updating it,
and promoting the site
i. Creating a site requires understanding how to link the
site to other information systems of the company
6. Assessing site effectiveness
a. Profitability is easy to measure in companies that generate
revenues directly from online product orders, advertising, or
subscription sales
b. Web-to-store shoppers are consumers who use the Internet as a
tool to aid their purchases made at stores
c. Revenue is not the major objective of most websites—
companies are looking for brand awareness and brand loyalty
d. Advertisers typically measure the success of their ads in terms
of click-through rates—the percentage of people presented with
a banner ad who click on it
7. Strategic Implications of Marketing in the 21st Century
a. The future is bright for marketers who continue to take
advantage of the tremendous potential of e-business and e-
marketing
Assessment check questions
9.1. What are the basic questions a company should ask itself when planning a
118 Part 1 Designing Customer-Oriented Marketing Strategies
website? The first question deals with the purpose of the website. The second
9.2. How does the type of website affect measures of effectiveness? For a
9.3. Explain the difference between click-through rate, conversion rate, and
engagement. The click-through rate is the percentage of viewers who, when
ANSWERS AND TEACHING NOTES TO CHAPTER EXERCISES
Chapter 5 Assurance of Learning Review
1. List the five e-business categories.
Answer: The five main categories of e-business are: e-tailing (virtual storefronts on websites); business-
to-business transactions; electronic data interchanges or EDI (the business-to-business exchange of
ideas); Web–enabled communication tools (email, blogs, podcasts); and Web contacts that allow for the
gathering of demographic, product, and other information.
2. Explain how a Web presence can improve the performance of traditional brick–and-mortar operations.
Answer: E-marketing to have a Web presence can lead to many benefits, including the following: global
reach (geographic limitations are eliminated); personalization (products are assembled only as orders are
3. Describe the type and purpose of information found on a corporate website.
Chapter 5 E-Business: Managing the Customer Experience 119
Answer: Corporate websites provide company profiles, their purposes and functions within particular
industries, and their overall status in the marketplace. They give overviews of the firm’s advantages and
unique features, offer information on products and services, promote specific offerings, provide contact
4. Which is larger, B2B or B2C e-marketing?
Answer: B2B e-marketing is significantly larger. According to some estimates, B2B e-commerce
revenues are more than double that of consumer transactions.
Difficulty: Easy
5. How is wireless access changing e-marketing?
Answer: One factor having a significant influence on the growth of online shopping is the increased
availability of wireless access via laptops, tablets, and smart phones. More than two-thirds of U.S. adults
6. List the reasons consumers give for why they shop online.
Answer: Consumers shop online for many reasons, including convenience, fun and relaxation, 24-hour
access, lack of geographic limitations (can shop at global markets from home), low prices, comparison