Management Information Systems
Lecture 10: E-
Commerce
Gabriella Kereszturi
MAIN POINTS
The unique features of e-commerce, digital markets, and
digital goods
The principal e-commerce business and revenue models
How has e-commerce transformed marketing?
How has e-commerce affected business-to-business
transactions?
What is the role of m-commerce in business and what are
the most important m-commerce applications?
What issues must be addressed when building an
e-commerce presence?
The Growth of E-
commerce
Retail e-commerce revenues grew 15–25 percent per year until the recession of 2008–2009, when
they slowed measurably. In 2014, e-commerce revenues are growing again at an estimated 12
percent annually.
Unique Features of E-commerce, Digital
Markets, and Digital Goods
Eight unique features of
Internet and Web as
commercial medium
Ubiquity
Global reach
Universal standards
Richness
Interactivity
Information density
Personalization/customization
Social technology
Ubiquity
Internet/Web technology available
everywhere: work, home, and so on, anytime
Effect:
Marketplace removed from temporal, geographic
locations to become “marketspace”
Enhanced customer convenience and reduced
shopping costs
Reduces transaction costs
Costs of participating in market
Global reach
• The technology reaches across national
boundaries,
around Earth
• Effect:
Commerce enabled across cultural and national
boundaries seamlessly and without modification.
Marketspace includes, potentially, billions of
consumers and millions of businesses worldwide.
Universal standards
One set of technology standards: Internet standards
Effect:
Disparate computer systems easily communicate with
one another
Lower market entry costs—costs merchants must pay
to bring goods to market
Lower consumers’ search costs—effort required to
find suitable products
Richness
Supports video, audio, and text messages
Effect:
Possible to deliver rich messages with text, audio,
and video simultaneously to large numbers of
people.
Video, audio, and text marketing messages can be
integrated into single marketing message and
consumer experience.
Interactivity
The technology works through interaction with the
user.
Effect:
Consumers engaged in dialog that dynamically
adjusts
experience to the individual.
Consumer becomes co-participant in process of
delivering goods to market.
Information density
Large increases in information density—the total
amount and quality of information available to all
market participants
Effect:
Greater price transparency
Greater cost transparency
Enables merchants to engage in price
discrimination
Personalization/Customization
Technology permits modification of messages,
goods
Effect:
Personalized messages can be sent to individuals as
well as groups.
Products and services can be customized to individual
preferences.
Social technology
The technology promotes user content
generation and social networking
Effect:
New Internet social and business models
enable user content creation and distribution,
support social networks
Many-to-many model
Effect of the Internet on the
marketplace
Reduces information asymmetry
Offers greater flexibility and efficiency because of:
Reduced search costs and transaction costs
Lower menu costs
Greater price discrimination
Dynamic pricing
May reduce or increase switching costs
May delay gratification: effects dependent on product
Increased market segmentation
Stronger network effects
More disintermediation
The Benefits of Disintermediation to the
Consumer
The typical distribution channel has several intermediary layers, each of which adds to the final cost
of a product, such as a sweater. Removing layers lowers the final cost to the consumer.
Digital goods
Goods that can be delivered over a digital network
For example: music tracks, video, software,
newspapers, books
Cost of producing first unit is almost entire cost of
product
Costs of delivery over the Internet very low
Marketing costs remain the same; pricing highly
variable
Industries with digital goods are undergoing
revolutionary changes (publishers, record labels,
etc.)
E-commerce Business and Revenue
Models
E.commerce business
models
Portal
E-tailer
Content provider
Transaction broker
Market creator
Service provider
Community provider
See this Video
https://www.youtube.com/watch?v=LOBZC9ZDY7Q
E-commerce revenue
models
Advertising
Sales
Subscription
Free/Freemium
Transaction fee
Affiliate
See this Video
https://www.youtube.com/watch?v=2yIcxe7AdM8
E-commerce marketing
Internet provides new ways to identify and
communicate with customers.
Long tail marketing:
Ability to reach a large audience inexpensively
Internet advertising formats
Behavioral targeting:
Tracking online behavior of individuals on thousands
of Web sites and within apps
Privacy concerns
Web Site Visitor
Tracking
E-commerce Web
sites have tools to
track a shopper's
every step through
an online store.
Close examination
of customer
behavior at a Web
site selling
women's clothing
shows what the
store might learn
at each step and
what actions it
could take to
increase sales.
Web Site
Personalization
Firms can create unique
personalized Web pages that
display content or ads for
products or services of
special interest to individual
users, improving the
customer experience and
creating additional value.
E-commerce Business and Revenue
Models
Social media:
Fastest growing media for branding and marketing
Social network marketing:
Seeks to leverage individuals influence over others
in social graph
The target is a social network of people sharing
interests and advice
Facebook’s “Like button”
Social networks have huge audiences
Facebook: 137 million U.S. visitors monthly
M-commerce and M-commerce
Applications
M-commerce
In 2014 is 19 percent of all e-commerce
Fastest growing form of e-commerce
Some areas growing at 50 percent or more
Main areas of growth (exclusive of location-
based services)
Retail sales at top Mobile 400 (Amazon, eBay,
etc.)
Sales of digital content (music, TV, etc.)
Consolidated Mobile Commerce
Revenues
Figure 10-9 Mobile e-commerce is the fastest growing type of B2C e-commerce and represents about 19 percent
of all e-commerce in 2014.
M-commerce and M-commerce
Applications
Location-based services
Used by 74 percent of smartphone
owners
Based on GPS map services
Types
Geosocial services
Where friends are
Geoadvertising
What shops are nearby
Geoinformation services
Price of house you are passing
Task
Read chapters 10 (textbook) and related material and
videos.
Resources
Laudon K.C. and Laudon J.P. (2016) Management Information
Systems, Global Edition, 14th ed. Prentice Hall. ISBN-13:
9780273789970
