E-commerce/Digital Marketing

An Overview to E-commerce
Commerce is based on the specialization of skills. Instead of performing all services and
producing all goods independently, people rely on each other for the goods and services they
need. For example, a person trades eggs or other goods to one of his/her neighbors in an
exchange for repairs to the fences on his/her ranch. In traditional commerce although money
has replaced bartering, the basic mechanics of commerce remain the same: one member of the
society creates something of value that another member of society desires. Commerce can be
simply defined as a negotiated exchange of valuable objects or services between at least two
parties and includes all activities that each of the parties undertakes to complete the transaction.
Commerce can be viewed from at least two different perspectives: The buyer’s viewpoint and
the seller’s view point. Both perspectives will illustrate that commerce involves a number of
distinct activities, called business process.

The buyer’s Perspective

From buyer’s perspective, commerce involves the following activities:
 Identifying a specific need;
 Search for products or services that will satisfy the specific need;
 Select a vendor;
 Negotiate a purchase transaction including delivery logistics, inspection, testing, and
acceptance;
 Make payment; and
 Perform/obtain maintenance if necessary
The seller’s perspective
From the seller’s perspective, commerce involves the following major activities:
 Conduct market research to identify customer needs;
 Create a product or service to meet those needs;
 Advertise and promote the product or service
 Negotiate a sales transaction including, delivery logistics, inspection, testing, and
acceptance;
 Ship goods and invoice the customer;

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 Receive and process customer payments; and

 Provide after sales support and maintenance
1.1. E-commerce Vis-à-vis Related Concepts
Before involving ourselves to the details of the course digital marketing /e-commerce, it would
be logical and quite helpful to students of the course to be very clear with the related and even
sometimes interchangeably used terms/concepts. These concepts, among others, include: e-
marketing, Internet marketing, e-business, e-purchasing, e-commerce, digital marketing, online
marketing, online shopping, online trading, and online selling.

Traditionally, business has been conducted in physical buildings, often referred to today as
brick-and-mortar marketplace. When the marketplace is electronic, business transactions occur
across a telecommunications network where buyers, seller, and others involved in the business
transaction—such as the employees that process transactions—rarely see or know each other and
may be physically located anywhere in the world. This process of buying and selling products
across a telecommunications network is often called electronic commerce, and the electronic
marketplace is sometimes called a marketspace.

A more comprehensive definition of e-business is “The transformation of an organization’s

processes to deliver additional customer value through the application of technologies,
philosophies, and computing paradigm of the new economy.” Three primary processes are
enhanced in e-business. These are:
Production processes: Which include procurement; ordering and replenishment of
stocks, processing of payments; electronic links with suppliers and production control
processes, among others.
Customer-Focused processes: Which include promotional and marketing efforts;
selling over the internet; processing of customers’ order and payments; and customer
support, among others.
Internal management processes: Which include employee services, training; internal
information sharing; video-conferencing; and recruiting. Electronic applications enhance
information flow between production and sales force to improve sales force productivity.

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Workgroup communications and electronic publishing of internal business information

are likewise made more efficient.

Sharing business information, maintaining business relationships and conducting business

transactions using computers connected to telecommunication network is called E-Commerce
E-commerce systems include commercial transactions on the Internet but their scope is much
wider than this; they can be classified by application type: electronic markets, EDI, and Internet
commerce.

E-commerce is …technology-mediated exchanges between parties (individuals, organizations, or

both) as well as the electronically based intra-or inter-organizational activities that facilitate such
exchanges (Jeffrey F. Rayport and Bernard J. Jaworski).Thus, e-commerce is characterized by
several attributes:
a) It Is About Exchanges of Digitalized Information Between Parties. This information
exchanges can represent communication between two parties, coordination of the flows
of goods and services, or transmission of electronic orders. These exchanges can be
between organizations, individuals, or both.
b) It Is Technology-Enabled. E-commerce uses technology-enabled transactions. The use of
the Internet browsers in the WWW to make these transactions is perhaps the best known
example of technology-enabled customer interfaces. However, other interfaces such as
ATMs, electronic date interchange (EDI) between business-to-business partners, and
electronic banking by phone also fall in the general category of e-commerce. Businesses
used to manage such transactions with customers and markets strictly through human or
face-to-face interactions; in e-commerce, such transactions can be managed using
technology.
c) It Is Technology-Mediated. Furthermore, e-commerce is moving away from simply using
technology-enabled transactions to a more technology-mediated relationship. Purchases
in the “marketplace” at Wal-Mart are technology-enabled, in that we have a human using
a cash register that is performing PC-based order processing. The difference now is that
transactions in “marketplace” are managed or mediated not so much through human
contact but largely by technology—and, in that sense, so is the relationship with the
customer. The place where buyers and sellers meet to transact is moving form the

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physical world “marketplace” to the virtual world “market-space.” Hence, the success of
a business rests on how well screens and machines manage customers and their
expectations. That’s a big difference from the past, when transactions with human-
human contact where the norm.
d) It Includes Intra-and Inter-organizational Activities that support the Exchange. The
scope of electronic commerce includes all electronically based intra-organizational
activities that directly or indirectly support marketplace exchanges. In this sense, e-
commerce affects both how business organizations relate to external parties—customers,
suppliers, partners, and competitors—and how they operate internally in managing
activities, processes, and systems.
.
The component of e-commerce of particular interest to marketers is e-marketing—the strategic
process of creating, distributing, promoting, and pricing goods and services to a target market
over the Internet or through such digital tools as fax machines, computer modems, telephones,
and CD-ROMs. E-marketing is the means by which e-commerce is achieved. It encompasses
such activities as:

 Ordering building materials from the Home Depot Web site with a guaranteed one-hour
delivery and

 Purchasing downloaded copies of The New York Times’ articles on European retailing to
use as source materials for a research paper.

According to Judy Strauss and his co-authors of “E-marketing” 3 rd edition, e-marketing is the
application of a broad range of information technologies for:
a) Transforming marketing strategies to create more customer value through more effective
segmentation, targeting, differentiation, and positioning strategies;
b) More efficiently planning and executing the conception, distribution, promotion, and
pricing of goods, services, and ideas; and
c) Creating exchanges that satisfy individual consumer and organizational customers’
objectives.

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This definition sounds a lot like the definition of traditional marketing. Another way to view it
is that e-marketing is the result of information technology applied to traditional marketing. E-
marketing affects traditional marketing in two ways:
a) First, it increases efficiency in traditional marketing functions.
b) Second, the technology of e-marketing transforms many marketing strategies. The
transformation results in new business models that add customer value and/or increase
company profitability.

1.2. The Scope of E-commerce

Electronic commerce (e-commerce) is a term popularized by the advent of commercial services
on the Internet. Internet e-commerce is however, only one part of the overall sphere of e-
commerce. The commercial use of the Internet is perhaps typified by once-off sales to
consumers. Other types of transactions use other technologies. Electronic markets (EMs) are in
use in a number of trade segments with an emphasis on search facilities and Electronic Data
Interchange (EDI) is used for regular and standardized transactions between organizations.

 Electronic market: is the use of information and communications technology to

present a range of offerings available in a market segment so that the purchaser can
compare the prices (and other attributes) of the offerings and make a purchase decision.
The usual example of an electronic market is an airline booking system.

 Electronic Data Interchange: provides a standardized system of coding trade

transactions so that they can be communicated directly from one computer system to
another without the need fro printed orders and invoices and the delays and errors
implicit in paper handling. EDI is used by organizations that make a large number of
regular transactions. One sector where EDI is extensively used is the large supermarket
chains (In Ethiopia supermarkets also?) which use EDI for transactions with their
suppliers.

 Internet Commerce: Information and communications technologies can also be used

to advertise and make once-off sales of a wide range of goods and services. This type
of e-commerce is typified by the commercial use of the Internet. The Internet can, for

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example, be used for the purchase of books that are then delivered by post or the booing
of tickets that can be picked up by the clients when they arrive at the event. It is to be
noted that the Internet is not the only technology used for this type of service and this is
not the only use of the Internet in e-commerce.

1.3. Using the web to reach customers

Technology, a major environmental force, refers to inventions or innovations from applied
science and engineering research. A new wave of technology can replace existing products and
companies. Technologies such as satellite dishes, HDTV, and digital cameras are likely to
replace or substitute for existing technologies such as cable, low-resolution TV, and film.

The power of technology to transform markets may be best illustrated by the rapid growth of the
marketspace, an information- and communication-based electronic exchange environment
mostly occupied by sophisticated computer and telecommunication technologies and digitalized
offerings. Activity that uses some form of electronic communication in the inventory, exchange,
advertisement, distribution, and payment of goods and services is often called electronic
commerce.

Many observers believe that an increased amount of purchasing will shift from marketplace to
marketspace. A marketplace is physical, as when one goes shopping in a store. In contrast a
marketspace is digital, as when one goes shopping on the Internet.

The most widely visible application of e-commerce exists in business-to-consumer interactive

marketing, involving the Internet, the WWW, and commercial online services. Many people
view these three as being the same. They are not. The Internet is an integrated global network
of computers that gives users access to information and documents. It includes millions of
corporate, government, organizational, and private networks. Many of the computers in these
networks hold files, such as Web pages, that can be accessed by all other networked computers.
Every computer, cell phones, or other networked device can send and receive date in the form of
e-mail or files over the Internet. These data move over phone lines, cables, and satellites form
sender to receiver. The Internet then consists of computers with data, users who send and

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receive the data files, and a technology infrastructure to move, create, and view or listen to the
content. The WWW (short for World Wide Web) is part of the Internet that supports a
retrieval system—that is, some kind of browser—which formats information and documents into
web pages. The web is what most people think about when they think of the Internet.
Commercial online services such as American Online offer electronic information and
marketing services to subscribers who are charged a monthly fee.

Many companies now use Internet-based technology internally to support their electronic
business strategies.
A. An intranet, for example, is an Internet/Web-based network used within the boundaries
of an organization. In other words it is a network that runs internally in a corporation but
uses Internet standards such as HTML (hypertext markup language) and browsers.
Thus, an intranet is like a mini-Internet but only for internal corporate consumption. It is
a private Internet that may or may not be connected to the public Internet. Intranets are
internal corporate networks that allow employees within a firm to communicate with each
other and gain access to corporate information.
B. Extranets, on the other hand, are corporate networks that allow communication between
a firm and selected customers, suppliers, and business partners outside the firm.
Unique features of ecommerce unlike traditional commerce

In traditional commerce, a marketplace is a physical place you visit in order to transact.

For example, television and radio are typically directed to motivating the consumer to go
someplace to make a purchase. E-commerce is ubiquitous, meaning that is it available just about
everywhere, at all times. It liberates the market from being restricted to a physical space and
makes it possible to shop from your desktop, at home, at work, or even from your car, using
mobile commerce. The result is called a market space—a marketplace extended beyond
traditional boundaries and removed from a temporal and geographic location. From a consumer
point of view, ubiquity reduces transaction costs—the costs of participating in a market. To
transact, it is no longer necessary that you spend time and money traveling to a market. At a
broader level, the ubiquity of e-commerce lowers the cognitive energy required to transact in a
market space. Cognitive energy refers to the mental effort required to complete a task. Humans

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generally seek to reduce cognitive energy outlays. When given a choice, humans will choose the
path requiring the least effort—the most convenient path.

Global Reach
E-commerce technology permits commercial transactions to cross cultural and national
boundaries far more conveniently and cost effectively than is true in traditional commerce. As a
result, the potential market size for e-commerce merchants is roughly equal to the size of the
world’s online population (over 400 million in 2001, and growing rapidly, according to the
Computer Industry Almanac). The total number of users or customers an e-commerce business
can obtain is a measure of its reach.

In contrast, most traditional commerce is local or regional—it involves local merchants or

national merchants with local outlets. Television and radio stations, and newspapers, for
instance, are primarily local and regional institutions with limited but powerful national networks
that can attract a national audience. In contrast to e-commerce technology, these older commerce
technologies do not easily cross national boundaries to a global audience.

Universal Standards
One strikingly unusual feature of e-commerce technologies is that the technical standards of the
Internet, and therefore the technical standards for conducting e-commerce, are universal
standards—they are shared by all nations around the world. In contrast, most traditional
commerce technologies differ from one nation to the next. For instance, television and radio
standards differ around the world, as cell telephone technology. The universal technical
standards of e-commerce greatly lower market entry costs—the cost merchants must pay just to
bring their goods to market. At the same time, for consumers, universal standards reduce search
costs—the effort required to find suitable products. And by creating a single, one-world market
space, where prices and product descriptions can be inexpensively displayed for all to see, price
discovery becomes simpler, faster, and more accurate. With e-commerce technologies, it is
possible for the first time in history to easily find all the suppliers, prices, and delivery terms of a
specific product anywhere in the world. Although this is not necessarily realistic today for all or
many products, it is a potential that will be exploited in the future.

Richness

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Information richness refers to the complexity and content of a message. Traditional markets,
national sales forces, and small retail stores have great richness: They are able to provide
personal, face-to-face service using aural and visual cues when making a sale. The richness of
traditional markets makes them a powerful selling or commercial environment. Prior to the
development of the Web, there was a trade-off between richness and reach: the larger the
audience reached the less rich the message.

Interactivity
Unlike any of the commercial technologies of the twentieth century, with the possible exception
of the telephone, e-commerce technologies are interactive, meaning they allow for two-way
communication between merchant and consumer. Television, for instance, cannot ask the viewer
any questions, enter into a conversation with a viewer, or request customer information be
entered into a form. In contrast, all of these activities are possible on an e-commerce Web site.
Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face
experience, but on a much more massive, global scale. E-commerce technologies have changed
the traditional tradeoff between richness and reach. The Internet and the Web can deliver, to an
audience of millions, “rich” marketing messages with text, video, and audio, in a way not
possible with traditional commerce technologies such as radio, television, or magazines.

Information Density
The Internet and the Web vastly increase information density—the total amount and quality of
information available to all market participants, consumers, and merchants alike. E-commerce
technologies reduce information collection, storage, processing, and communication costs. At the
same time, these technologies increase greatly the currency, accuracy, and timeliness of
information—making information more useful and important than ever. As a result, information
becomes more plentiful, cheaper, and of higher quality.

1.4. Benefits of the E-commerce market

.Benefits to the Organization
 Expands market to national and international markets;

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 Decrease the cost of creating, processing, distributing storing, and retrieving paper-based
information;
 Supply chain inefficiencies can be minimized with electronic commerce;
 Electronic commerce allows for many innovative business models that provide strategic
advantages and/or increase profits;
 E-commerce allows for high degree of specialization that is not economically feasible in
the physical world;
 It reduces the time between the outlay of capital and the receipt of products and services;
 E-commerce enables companies to interact more closely with customers

Benefits to Consumers
 24/7 service of transaction service and provides more choices;
 E-commerce frequently provides less expensive products with quick comparison;
 Consumers can locate relevant and detailed product information in seconds;
 E-commerce makes virtual auctions possible;
 It facilitates competitions
Benefits to the Society
More individuals work at home and less traveling for work or shopping;
Lower prices allow less affluent people to improve their living standards; and
Public services can be delivered at lower costs

Limitations of e-commerce
A. Technical Limitations
 Systems security, reliability, standards, and some communication protocols are still
evolving;
 Telecommunication bandwidths are insufficient ;
 Software development tools are still evolving and changing;
 Some e-commerce software might not fit with some hardware or it may be incompatible
with certain operating systems or components
B. Non-technical Limitations

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 The cost of developing e-commerce in-house can be very high and mistakes made due to
lack of experience may result in delays;
 Security and privacy are important in the B2C area;
 Customers do not trust unknown, faceless seller, paperless transactions, and electronic
money;
 Some customers like to touch items such as cloths, so they know exactly what they are
buying ;
 Legal issues are not yet refined;
 E-commerce doe not have enough support services;
 There could be a breakdown in human relationships and
 Internet access is still expensive and/or inconvenient for many potential customers

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