Write 2-3 pages, Arial, 12-font, double-spaced, explaining the laws of the internet has a benefit or limited E-commerce.
Write 2-3 pages, Arial, 12-font, double-spaced, explaining the laws of the internet has a benefit or limited E-commerce. Provide specific examples. You may use additional data sources to supplement your assessment of the case study. Use APA standards in citing your data sources.
Requirements: 2-3 pages
2Lesson 2: Law and the Internet Objectives By the end of this lesson, you will be able to: 3.1.3: Establish and protect a brand (includes trademark registration). 3.2.1: Identify legal and governmental aspects of e-commerce (includes legal precedent, liability concepts, international issues, ethics, jurisdiction, copyright, patents). 3.2.2: Identify and protect intellectual property. 3.2.3: Identify e-commerce taxation issues. 3.2.4: Avoid questionable practices (includes spam, spyware, selling user information). 3.2.5: Identify international trade laws.
2-2 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Pre-Assessment Questions 1. Which of the following terms pertains to products such as written materials, musical compositions and trademarks that are protected by law? a. Artistic representations b. Electronic publishing c. Intellectual property d. Copyrighted material 2. David distributes pirated software from his personal Web site. Which law is he violating? a. Internet Software Piracy Act b. North American Free Trade Agreement c. Although software piracy is highly unethical, it is not in violation of any law. d. Digital Millennium Copyright Act 3. What is the term used to refer to unsolicited e-mail messages used to advertise a product or service?
Lesson 2: Law and the Internet 2-3 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Note: Internet-related law is an emerging discipline. It constantly changes and incorporates elements of several other legal areas. Laws relating to the Internet and specifically to e-commerce are subject to change without notice. This lesson is designed to introduce you to basic legal concepts, but is not meant as a substitute for sound legal counsel in establishing and maintaining your e-commerce business. Introduction to Internet Legal Issues More than five centuries ago, the invention of the printing press changed the world. The printing press helped make information more widely available. Today, the Internet is a modern version of the same revolution. If information is power, no medium offers this power to more people than the Internet. The Internet is supplementing (and in some cases replacing) such societal hallmarks as libraries and town halls. Online services such as America Online and Microsoft’s MSN are becoming popular sources of entertainment and information. Print and broadcast media companies around the world now use the Internet as a major part of their delivery network. Internet addresses and e-mail addresses have become a requirement for professional and commercial credibility. Magazines, books and music are published and disseminated electronically, with many published in electronic format only. These advances present disadvantages as well. Besides creating societies with artificial classes, the Internet is, ironically, affecting the companies that do the most to advance it: software companies. These companies claim to be losing money because of the Internet. Many software products are becoming commodities because they can be easily duplicated, thereby depressing prices. Various elements of intellectual property have vague boundaries that can be crossed with hazy justifications. In the first days of the Internet and during the earliest stages of e-commerce, many individuals and businesses imagined the Internet as a vast, uncontrolled wilderness. However, taking commerce into an electronic virtual environment did not mean leaving legal requirements and governmental controls behind. Instead, it meant that you often needed an even better understanding of international law than you did for a traditional business. The Internet makes crossing international boundaries easier; in fact, they are often crossed without your knowledge. In general, the same business law and international commerce precedents apply across the Internet as in any other business. In many cases, precedent is specific to the jurisdiction in which the decision is made. The jurisdiction is typically determined by the physical location or address of record of the business and the customer, not necessarily that of the Web site hosting the business; this fact makes it more difficult to predict which country’s regulations might apply to a business over time. The same issues arise regarding ownership and control. Bypassing physical boundaries does not mean that you can avoid concerns about brand ownership, copyrights and patents. The Internet does not provide a mask of anonymity, hiding illegal or unethical behavior. You are likely to find that complaints by customers who feel they have been mistreated or misinformed can be distributed wider and faster than ever before, sometimes causing irrecoverable damage to a business. This lesson will discuss many of the complex issues surrounding law on the Internet. It will also address issues relating to ethical business practices in the electronic community. Such issues consist of approaches, challenges, technologies, intellectual property, protection, security and the law. OBJECTIVE: 3.2.1: Legal and governmental aspects
2-4 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Movie Time! Go to CIW Online to view a movie about this topic. Legal Issues (approx. playing time: 04:30) All movie clips are © 2011 LearnKey, Inc. Electronic Publishing Electronic publishing (EP) is the use of computers rather than traditional print mechanisms to distribute information. The term electronic publishing as used in this lesson is not limited to publishing only. It also encompasses other fields that benefit from digital technology: music, movies and video games. EP is becoming more popular because of the savings it offers over paper publishing. A CD-ROM holding more than 150,000 pages of information can be produced for less than U.S. $1, significantly less when self-publishing. Compare this amount with U.S. $1,300 or more, which is the cost of producing the same information using traditional print methods. EP is also making it easier for publishers to reach specific markets, allowing them to target particular groups within those markets. Instead of a broadcast advertising medium such as television, publishers can do narrowcast advertising (which targets a specific, typically small demographic group) on a specific Web site that is routinely accessed by certain people. One drawback of EP is that as more documents and more media such as music, movies and games are being placed on the Internet, intellectual property rights may be at risk of being violated. Computer-based theft is rising, as are the lawsuits against companies for violating patents and copyrights. Intellectual property is closely guarded in today’s digital age, and has become a controversial topic in the age of EP. Consider the examples discussed in the following sections. Example 1: Sending copyrighted material to others A little girl named Sedona loves Barbie dolls. For her birthday, her father visits www.mattel.com looking for the perfect gift. After downloading images of a custom Barbie for Sedona, he saves the Graphics Interchange Format (GIF) image of Barbie on his computer to show his wife. His wife then sends the image to a friend who is also considering a Barbie for her daughter. Can she legally send that image to a friend? Is the friend who unwittingly accepts this image of Barbie participating in a copyright violation? If so, who can be considered liable: Sedona’s parents, the recipient friend, or the ISP that provided the medium for the information dissemination? Example 2: Newsgroups and message boards An Internet user downloads a game from a newsgroup or message board. The game belongs to another subscriber who has uploaded it there, presumably for his friends to use. One Internet user downloads the game and finds it so fascinating that she immediately sends it to a dozen friends. Is this distribution an intellectual property violation? Did the first Internet user have the right to distribute the game without consulting the author? Is the newsgroup or message board liable for posting a private game to the rest of the world? narrowcast advertising Advertising that is designed to target a specific, typically small demographic group. Graphics Interchange Format (GIF) A graphics image file format commonly used in HTML documents; designated by the file name extension .gif. newsgroup On Usenet, a subject or other topical interest group whose members exchange and distribute mail messages.
Lesson 2: Law and the Internet 2-5 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Example 3: Artistic representations A user digitizes songs from an album (or clips from a movie) as a backup for personal use, and to place on a Web site later. The original user plays the songs on a computer, and copies them to portable devices. What are the limits on how the music can be copied and used? Are users who (unwittingly or not) download the songs and save them on their computers violating copyright laws? Is the Web site itself in violation? Example 4: Defamatory information An ISP hosts a Web page on a subscriber’s behalf. This page has a defamatory quality to it that offends other subscribers and users of the ISP. Is the ISP responsible for the content of the defamatory information? Or is it simply a conduit and not obligated to analyze the information it disseminates? The same questions apply to universities and corporations. Is a university or corporation liable if one of its members creates a page that offends others? These are some issues that lead many corporations, universities and ISPs to initiate strict monitoring and usage policies. Intellectual Property Issues The preceding examples demonstrate that intellectual property has become a controversial topic in the age of EP. As more material is published through electronic media, issues such as copyright, trademark and patent infringement often arise. The speed of these technical advancements has exceeded the legal system’s capacity to stay current. The U.S. legal system obviously was not developed with the digital age in mind. Increasingly, the juxtaposition of digital technology with these older laws has made interpretation necessary. Rapid computer transmission, electronic reproduction, and text and image manipulation are destined to change how the ownership of information is treated under the law. Technology threatens something with a long history of legal protection and which computers made much easier to challenge: the ownership of an idea or of information. Two branches of intellectual property The two types of intellectual property are industrial property and copyrighted material. Industrial property covers inventions, trademarks and industrial designs. Industrial property Protection is granted for industrial property in the form of exclusive rights of exploitation. Industrial designs — To be covered for industrial property protection, industrial designs must be original or novel and must be registered by a recognized governmental office, often the same office that registers patents. Essentially, such protection prevents any third party from using the design without consent of the rightful owner. Inventions — An invention is a novel idea that permits in practice the solution of a specific problem in the field of technology. Again, the protection is to prevent unauthorized persons from using, producing or profiting from the invention without consent. Trademarks and service marks — A mark is a sign, or a combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings. It may consist of distinctive words, letters, numbers, drawings or pictures, and can also include containers or packages. OBJECTIVE: 3.2.2: Intellectual property
2-6 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 International protection — Laws of a particular country are generally only of concern to or enforceable by that country. However, many countries are signatories (signed in agreement) to various international treaties designed to provide reciprocal protection. Copyrighted material Copyright covers literary, musical, artistic, photographic, audiovisual and software works. Copyright protection generally means that certain uses of the work are lawful only with the authorization of the copyright owner. The subject matter of copyright is usually described as “literary and artistic works” — that is, original creations in literature and the arts. The form in which such works are expressed may be words, symbols, music, pictures, three-dimensional objects or combinations thereof (as in the case of an opera or a motion picture). Copyright laws protect the following items: Literary works — novels, short stories, poems, computer programs, other written works Musical works — songs, choruses, operas, musicals Artistic works — drawings, paintings, etchings Photographic works — portraits, landscapes, photos of news events Audiovisual works — television broadcasting, film dramas, documentaries Software — computer programs Copyright protection is limited in time. Many countries have adopted, as a general rule, a term of protection that starts at the time of the work’s creation and ends 50 years later. The United States has modified time limits over the years but laws are based on dates of creation and copyright registration, and generally set terms for the life of the author plus a specified number of years. For specific information about U.S. copyrights, visit www.copyright.gov/faq.html or www.loc.gov/copyright. Examples of indictments for copyright violation can be found at www.cybercrime.gov/. The laws of a country relating to copyright are generally concerned only with acts accomplished or committed in that country. However, many countries have agreed to treaties designed to provide reciprocal protection in the international arena. Because computers quicken the pace of copying, transmitting and disseminating information, and because asserting ownership of something so easily transferable is difficult, computers challenge the entire idea of ownership of intellectual property. The following list enumerates some significant intellectual property issues. Copyright, trademark and patent law — What constitutes transmission of an electronic document? — How should patents be granted for algorithms and techniques? — Which aspects of a user interface or program controls can be patented? — How should domain names be allocated? Lawsuits, including future litigation New laws
Lesson 2: Law and the Internet 2-7 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Some people have characterized intellectual property law as an obsolete device suited only to protecting tangible goods. To varying degrees, information is intangible, so how can it be protected? Recent legislation has sought to modify existing laws to cover online media and other intangible goods. Because these laws are written and applied, considerable ambiguity is expected in defining intellectual property infringements. After the laws are established and understood uniformly, protection will be more easily granted to, and guarded by, the rightful owners. However, this remains a rapidly changing area of international law, often making it difficult to fully enforce current protections. Areas of Liability Areas of liability in EP can be divided into the following categories, all of which affect the Internet: Copyright, trademark and patent issues Privacy and confidentiality issues Jurisdictional issues You will look at each of these categories in some detail. The following lab directs you to some available information about legal issues relating to e-commerce, specifically information available through Yahoo.com directory links. Suppose your employer wanted to post a short business article on the company Web site, and you were asked to verify the legality of posting the article. You would want to research legal and regulatory issues relating to e-commerce in general, as well as any that apply directly to your particular business segment. Lab 2-1: Examining electronic commerce law In this lab, you will examine some legal aspects of electronic commerce on the Web. You will learn about and use some public sources for this information. 1. Open your browser. 2. Browser: In the Address field, enter dir.yahoo.com. 3. Browser: The Yahoo! home page appears. Click the Computers & Internet link, as shown in Figure 2-1.
2-8 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 2-1: Yahoo! Search Directory 4. Click the Internet link. 5. Click the Law@ link, as shown in Figure 2-2. Figure 2-2: Yahoo! Law@ link
Lesson 2: Law and the Internet 2-9 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 6. Scroll down and view the links on this page (Figure 2-3). These sites can provide additional information about legal issues in the electronic commerce environment. Figure 2-3: Yahoo! links Copyright, Trademark and Patent Issues Copyright, trademark and patent laws address the issue of ownership of intellectual property. Copyright in the United States Article 1, Section 8 of the United States Constitution gives authors exclusive rights to their own works for a limited time. Congress later enacted the 1976 Copyright Act, which protects “original works of authorship,” including literary works. The term “literary works” has been held to include computer software. Section 103 of the Copyright Act protects “compilations,” which are defined as works “formed by the collection and assembling of pre-existing materials or of data that are selected, coordinated or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” To promote creative expression, copyright protection prevents anyone but the rightful owner from copying, distributing, displaying or making derivative works from a copyrighted work. Authors may transfer their copyrights to others, such as publishing companies, if they want. Copyright law does not protect others from independently creating the same idea or concept. A copyright usually lasts for the life of the author plus a number of years, depending on its dates of creation and registration. For example, for works published in the United States after March 1, 1989, the copyright term is described as follows: OBJECTIVE: 3.2.1: Legal and governmental aspects
2-10 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 For works by private authors, 70 years after the death of the author For works produced through corporate authors, 95 years after first publication or 120 years after creation (whichever is shorter) Information about other copyright terms is available at the following page: www.copyright.cornell.edu/training/Hirtle_Public_Domain.htm. Works protected include literary works (including computer programs); musical works; pantomimes and choreographic works; pictorial, graphic and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works. Although registering a copyright is not mandatory, it is advisable because legal owners of copyrights can more easily prove authorship if they hold registered copyrights, and can seek legal remedies more easily. The basic elements of a work are: Expression. Originality. For copyright purposes, the work is considered original if it was independently created and not copied from others. Further, originality does not require novelty; that is, a work will not be denied copyright protection merely because it is similar to a work previously produced by someone else. Copyright protection does not extend to an idea or fact. Many Internet users wonder: What can copyright mean when millions of people are accessing the Internet and downloading any information they can find on any subject they desire? Some of the following issues might arise in Internet-related situations. The author of a message posted to a newsgroup is entitled to copyright protection. Although reposting the message is common, it will generally constitute a copyright violation unless the author has relinquished rights to the message or has given permission for it to be circulated. However, many newsgroups require such permission as a condition of membership. Digitized images are often transmitted and distributed on the Internet. The original creators of the digital image are protected by copyright law, assuming the original material was not in the public domain already. Beyond the initial creators, any individuals copying or scanning the image are duplicating someone else’s work in violation of copyright law. A copyright violation may occur when copying software and transmitting it over the Internet. Authors of e-mail messages own the copyrights to their work in most circumstances. Third parties cannot use the e-mail message without the owner’s consent. However, copyright law is still very unclear with respect to certain portions of the Internet. For instance, is the store-and-forward function of a mail transfer agent (or a router) owned by an ISP a form of copyright infringement? In general, intellectual property is considered copyrighted when it is produced. Problems arise in proving who produced the property and when. Even so-called hidden properties of electronic files, such as the file creation timestamp, can be manipulated. Several service businesses specialize in helping you understand and protect your intellectual property rights. A broad-based reference site is located at www.bitlaw.com. OBJECTIVE: 3.2.2: Intellectual property OBJECTIVE: 3.2.1: Legal and governmental aspects
Lesson 2: Law and the Internet 2-11 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 The courts are attempting to settle these issues. Following are three precedent-setting cases that have been decided in the digital arena. Sega Enterprises Ltd. vs. MAPHIA The courts decided in favor of Sega Enterprises, which brought suit against MAPHIA, an electronic bulletin board service (BBS). Sega Enterprises claimed that MAPHIA copied a Sega game to its BBS and made the game available for user downloads. The courts found that MAPHIA sometimes charged the users a direct fee for downloading privileges, or bartered for the privilege of downloading the Sega Enterprises game. Because the Sega Enterprises game was protected by copyright, MAPHIA violated Sega’s copyright by obtaining unauthorized copies of the game and placing them on the BBS storage medium. Napster vs. the Recording Industry Association of America (RIAA) Napster Inc. was sued in 2000 by the Recording Industry Association of America (RIAA) for allowing the free distribution of copyright-protected music through the use of peer-to-peer (P2P) file-sharing software. Using the Napster software, users could search and download almost any song title in MPEG-1 Audio Layer-3 (MP3) and other formats, allowing unlimited use and redistribution on computers, CD players and MP3 players. The RIAA claimed that Napster was promoting copyright infringement by allowing users to freely distribute and use the material without paying royalties. Napster claimed it was only providing the service and that end users ultimately decided whether or not to use, download or distribute music, for which Napster received no fees or royalties. In June 2001, the U.S. Ninth Circuit Court of Appeals upheld a lower court’s findings that Napster was in copyright violation and must remove all titles requested by the RIAA from user access. Napster continues as an Internet music distributor, but under a radically changed business model. Napster still provides music downloads, but only as a fee-based subscription service. In addition, Napster also provides commercial-free Internet radio stations, enabling users to listen to preference-targeted music playlists. Feist Publications Inc. vs. Rural Telephone Service Company In 1991 the U.S. Supreme Court heard the case of Feist Publications Inc. vs. Rural Telephone Service Company. In that case, Feist and Rural Telephone both published telephone directories that competed for advertising space. The Feist telephone directory covered 15 counties, one of which included the Rural Telephone Service area. Rural refused to license its telephone directory information to Feist; therefore Feist copied the Rural Telephone directory information. The court sided with Feist, and held that copyright protection afforded to databases (which was how Rural presented its directory information to the court) was limited, extending only to the author’s selection and arrangement of the data. The court also held that listing the names and numbers of all subscribers in a telephone service area in alphabetical order does not satisfy the minimum “original work of authorship” requirement for copyright protection. As a consequence of the Feist decision, businesses that create and maintain databases currently have very limited protection under United States copyright laws. That protection now covers only the original selection, coordination and arrangement of data, but not the data itself. Furthermore, selection, coordination and arrangement are protected only to the extent that they satisfy the creativity requirement of being an “original work of authorship.” MPEG-1 Audio Layer-3 (MP3) Popular compression standard for audio files; retains most of the sound quality of the source.
2-12 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Information Infrastructure Task Force (IITF) President Clinton formed the Information Infrastructure Task Force (IITF) in 1993. The IITF established a working group on intellectual property rights to examine the intellectual property implications of electronic publishing. In July 1994, the group published the “Green Paper,” a preliminary draft report on intellectual property rights. The working group has recognized the need to review current copyright laws in light of the fact that copying and disseminating information are easy with electronic media. The organization has been relatively inactive since 1997. Trademarks in the United States Trademark law is another area of interest in EP. Under common law and the U.S. Lanham Act, a trademark is “any word, name, symbol or device, or any combination thereof, adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured or sold by others.” Many people are familiar with the golden arches of McDonald’s and the wave design on a Coca-Cola bottle. Each of these identifying symbols is a form of property owned by the company that uses it. Besides symbols, a brand name or a company name is also one of the most common trademarks: Campbell’s Chicken Noodle Soup, Heinz Tomato Ketchup or IBM Personal Computers. Trademarks originate from the rule that no one has the right to sell products that belong to another person or company. The law recognizes trademarks as property and grants to the trader an exclusive right to use an individual mark. One way to lose the right to a trademark is by abandoning its use or by failing to renew registration. Loss of a trademark right can also occur when it is transformed or when a term degenerates into a household term, as happened with such well-known former trademark names as aspirin, cellophane, dry ice, shredded wheat, thermos and others. A direct contribution of EP to trademark law concerns domain names. A domain name is a company’s logical address or source identifier on the Internet. The holder of a domain name may be entitled to protection from the U.S. Patent and Trademark Office (PTO) if the domain name also functions as a trademark or service mark. The Lanham Act defines a service mark as one “used in the sale or advertising of service to identify the services of one person and distinguish them from the services of another.” The PTO may deny federal registration of a domain name if the mark is likely to be confused with a previously registered trademark or service mark. The test for confusion is based on the likelihood with which an average consumer in a similar marketplace would confuse the source of the product or service given similarities in sound, appearance, meaning or connotation of the two marks. Porsche Cars North America Inc. vs. Porsch.com In January 1999, the Porsche automobile company brought a trademark infringement suit against the owners of 130 domain names for allegedly infringing or diluting the Porsche trademark. Porsche’s attorneys argued that many domain name registrants use fictitious names, addresses and other false information in registering domain names to insulate themselves from service of process (in other words, to avoid prosecution). Porsche has since lost the suit and is now buying all the domain names from their owners. Lanham Act A 1964 law that was an important early step toward U.S. trademark legislation. OBJECTIVE: 3.1.3: Brands and trademarks
Lesson 2: Law and the Internet 2-13 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 The Internet agency that assigns domain names does so on a first-come, first-served basis without examining whether the proposed name would violate anyone else’s proprietary rights. The problem with the first-to-file approach is that the domain name may also function as a trademark or service mark, potentially subjecting the new user to infringement proceedings under the Lanham Act. If a domain name is challenged by another individual or organization as an infringement under trademark or service mark law, the Internet Corporation for Assigned Names and Numbers (ICANN) will place the domain name “on hold” to make the domain name unusable by anyone until the matter is resolved. Several domain name infringement suits have been brought to the courts in the United States, including the following. Intermatic Inc. vs. Toeppen Intermatic Inc. sued Dennis Toeppen to cease and desist using the domain name intermatic.com. The court ruled in 1996 that Toeppen, “by registering intermatic.com as a domain name and attempting to sell or license the name to the owner of the famous Intermatic trademark, diluted that mark under the law, since traditional trademark law applies even though the Internet is a new medium of communication.” Kaplan vs. Princeton Review Stanley Kaplan, the owner of various standardized testing preparation courses, sued competitor Princeton Review over Princeton’s use of the domain name kaplan.com. Kaplan alleged that such “bait-and-switch” tactics appropriated the goodwill and recognition associated with Kaplan’s trademark, service mark and trade name. The dispute eventually led to an out-of-court settlement and a change of domain name by Princeton. Patents in the United States Patents are another area of interest in EP. A patent, in law, is a document issued by a government conferring some special right or privilege. In the United States, the term is restricted to patents for inventions granted under federal statute. The specific attributes of novelty for which a patent is sought are called claims; thus, a patent can have several claims. The patent gives the inventor the exclusive right to use a certain process, or to make, use or sell a specific product or device for a specified time. After a patent is granted, issues of infringement or scope, or other questions related to the grant, are within the jurisdiction of the U.S. district courts. Infringement consists of knowingly and wrongfully making, using or selling someone else’s patented invention. In general, a patent protects against infringement only within the jurisdiction of the government by which it is issued. Therefore, inventors should secure a patent in all countries in which they want protection. Patent laws have been enacted in most countries. The most important applicable international treaty is the International Convention for the Protection of Industrial Property. An important issue in EP-related patent law is software, and the exact determination of what should and should not be patented. Generally, software patents do not cover the entire program; they cover only algorithms and techniques. A problem may arise when the algorithms and techniques mentioned in a patent application are formulated and used independently by other programmers from when the application was filed. Much of the legal precedence applying to software patent laws was established during the early days of the personal computer revolution in the 1980s and 1990s. Internet Corporation for Assigned Names and Numbers (ICANN) The international organization responsible for domain name registration. In 1998, inherited responsibilities originally performed by InterNIC. Performs Internet address space allocation, protocol parameter assignment and root server management. OBJECTIVE: 3.2.1: Legal and governmental aspects
2-14 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Some argue that the patent system opposes the nature of software development. Present computer programs contain thousands of algorithms and techniques; each could be considered patentable, and some are patented. For example, Apple Computer was sued because its HyperCard program was alleged to violate U.S. Patent number 4,736,308. In simplified terms, that patent protects a product that entails scrolling through a database displaying selected parts of each line of text. Separately, scrolling and display functions are ubiquitous parts of graphical programming, but the particular combination was the subject of the infringement action. Apple itself has sued Microsoft for allegedly infringing on the look and feel of what it claims is its invention of graphical rendering of information on a computer display. Diamond vs. Diehr The judicial basis for software patent eligibility is found in the 1981 case of Diamond vs. Diehr, in which the court said that “a patent could be granted for an industrial process that was controlled by certain computer algorithms.” Consequently, the U.S. PTO has used this case as a precedent for allowing patents on algorithms and techniques. The PTO’s stance on patents for algorithms and techniques has increased the granting of software patents in the United States. International intellectual property law Concerns relating to EP are in no way limited to the United States. In addition to concerns about protections, another serious issue is whether or not a country enforces its own EP-related laws. The general guidelines are typically similar for international intellectual property law to the United States. Specific details, such as copyright terms, requirements for registering trademarks, and the patent process, are specific to international jurisdictions. Patent issues can be particularly difficult because a patent is recognized only in the country in which it is issued. International patent protection requires having to apply for a patent in each applicable jurisdiction. Trade agreements between international entities typically include mutual recognition of copyright and intellectual property protections. Despite this, intellectual property continues to be a confusing and sometimes contentious area in trade relations. Charges are sometimes made of countries vigorously protecting local property while willfully ignoring violations of international copyrights, trademarks and patents. The European Union (EU) is attempting to coordinate copyright protections for its member countries. A key part of this is the EU’s Directive 2001/29/EC, the EU Copyright Directory (EUCD). Efforts are also under way through the World Intellectual Property Organization (WIPO) to coordinate international copyright protections. WIPO administers 23 international treaties relating to intellectual property protection. Information about WIPO and its efforts is available at www.wipo.int. Pending or current United States legislation As mentioned earlier, the legal reach of any copyright or patent extends only as far as the government that recognizes that particular ownership. In an effort to set forth guidelines to determine the direction of EP, certain pieces of legislation have been introduced to help enforce and protect intellectual property. OBJECTIVE: 3.2.2: Intellectual property OBJECTIVE: 3.2.1: Legal and governmental aspects
Lesson 2: Law and the Internet 2-15 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 On-Line Copyright Infringement Liability Limitation Act The On-Line Copyright Infringement Liability Limitation Act amends U.S. copyright law to exempt an online provider, such as an ISP, from liability for direct infringement, based on the intermediate storage and transmission of material over the provider’s network. The On-Line Copyright Infringement Liability Limitation Act is actually Title II of the Digital Millennium Copyright Act. This protection is valid if someone else (such as a subscriber) initiated the transmission, if the storage and transmission are automatic, and if the provider does not retain a copy for longer than necessary to perform the transmission. The Act also protects the provider from financial liability if the provider did not know that the material was infringed, and did not receive a direct financial benefit as a result of the transmission. The following activities are covered by the act: Intermediate and transient storage of materials (such as Web pages or chat room discussions) System caching Putting information on a system at the direction of users Using information-location tools (such as directories, indexes and hypertext links) The provider is exempt from claims based on the provider’s removing or disabling online access to the material when he or she learns that an infringement may have occurred, whether or not such material is in fact an infringement. Under the Act, anyone who knowingly misrepresents that online material is infringed is liable. No Electronic Theft (NET) Act The No Electronic Theft (NET) Act amends U.S. copyright law so that “financial gain” includes the receipt of anything of value, including other copyrighted works. The NET Act establishes penalties for willfully infringing on someone else’s copyright-protected material. To view a summary of the NET Act, visit the following page: www.usdoj.gov/criminal/cybercrime/netsum.htm. Digital Millennium Copyright Act (DMCA) The Digital Millennium Copyright Act (DMCA) was created to allow U.S. copyright laws to conform to WIPO treaties for international copyright standards. The DMCA has the following four main parts: Anti-Circumvention Provision — makes it illegal to manufacture, import, distribute or provide products designed to circumvent encryption, scrambling or other technologies used to prevent piracy. Integrity of Copyright Management Information (CMI) — outlaws the knowing falsification of data identifying works, copyright owners, key facts and payment royalties. Service Provider Liability — defines situations in which a service provider may be immune from damages. Webcasting — provides for the licensing of sound recordings for Webcasters and other digital audio services.
2-16 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Privacy and Confidentiality Discussing privacy and confidentiality appears paradoxical when information about anyone can often be obtained with a few keystrokes. This section discusses some ways in which some loss of privacy and confidentiality is the tradeoff required for more advanced technology. Easy access to public information As more information about individuals is collected and becomes available through the Internet, you will often hear concerns that privacy is becoming more a historical memory and less a modern reality. Individuals are concerned about the amount of information available on the Internet and to whom the information might be available. As instances of identity theft and other forms of cybercrime increase, protecting any personal information provided by your customers remains a critical issue. Several easily accessible Web sites (for example, www.switchboard.com and www.411.com) provide directory listings allowing visitors to search for any publicly listed information (name, address, phone number). Some argue that finding such information does not hurt the subscriber because it is public. However, the point is not that the information can be found, but that it can be so readily and easily found. Before the Internet was widely used, finding public information took time and effort because physical access to a telephone directory was needed. This requirement no longer exists. A browser and a connection to the Internet are all that is needed. Some services go beyond information that is generally considered publicly available. In addition to basic contact information (address, e-mail and telephone), these fee-based services will provide you with all the information they can locate about the person. The business practices of some of these services are considered questionable, and possibly illegal, and investigations are being performed into the information sources used and how the sources are accessed. Another area in which privacy and confidentiality impose on public information is court documents. Many courts have discovered that they can scan legal documents pertaining to divorces, trials, felonies and misdemeanors, and store them digitally. Besides easy retrieval and low maintenance costs, such documents can be easily indexed and searched. The disadvantage is that anyone with a browser can access these documents from anywhere in the world. Again, the crux of the matter is not that the information can be accessed, but the ease with which it can be accessed. The chances of this information being used for malicious purposes rise as it becomes available to more people. Commercial search engines and related services were developed to make it easier to find goods, services and information on the Internet. They are now increasingly used to find personal information with the amount of data recovered by a Web search of an individual’s name becoming something of a point of pride in some user communities. The popularity of this activity in the United States is demonstrated by the shift of the term “Google” from simply the name of a search engine service to a verb used to refer to the act of searching the Internet. One controversial topic that relates to accessibility of private information is the issue of wireless location privacy. On June 19, 2001, the U.S. Congressional Internet Caucus (a bipartisan group of members of the House of Representatives and the Senate working to teach their colleagues about the advantages and disadvantages of the Internet) convened a panel of experts to discuss issues of wireless location privacy. Privacy groups and members of the wireless communications industry have urged the Federal Communications Commission (FCC) to set rules for commercial use and disclosure of location information provided by cell phones and other wireless communications devices.
Lesson 2: Law and the Internet 2-17 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Resources on electronic privacy, including proposed privacy legislation, include the Center for Democracy and Technology (www.cdt.org), the Computer Security Resource Center (http://csrc.nist.gov) and the Electronic Privacy Information Center (www.epic.org). The following lab demonstrates the ease with which you can locate information, including what you might consider personal information, on the Internet. Often, this information becomes available through questionable practices by businesses, such as selling (or not protecting) user information. Suppose you are a small-business owner and you need to find current information about customers in an outdated database. You would want to use various tools available on the Internet that could help you find updated or current information about these customers. Lab 2-2: Searching for personal information on the Internet In this lab, you will search for and view information on the Internet. 1. Open your browser. 2. Browser: In the Address field, enter people.yahoo.com to access Yahoo! People Search, as shown in Figure 2-4. Figure 2-4: Yahoo! People Search 3. Enter your first and last names in the US Phone And Address Search text area. To narrow the search, you can enter a city and state. Click the Phone And Address Search button. If you are prompted that information sent over the Internet might be seen by other users, select In The Future, Do Not Show This Message, then click Yes.
2-18 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 4. Record any information you located about yourself in the space provided. 5. Try searching for information on someone else. Record the information in the space provided. Note: You can also use a number of other free sites, including Google.com, Switchboard.com and Bigfoot.com, to locate information on individuals. For more specific information, several fee-based sites exist, such as LexisNexis (www.lexis.com/). 6. If Time Permits: Go to www.ask.com and search for Internet Privacy Law. 7. Navigate through some of the links, and look for current and relevant information. Marketing and databases Marketers can track almost anything. Do you travel often? Airlines will send you frequent flier deals. Do you own a personal computer? Circulars from computer warehouses will appear in your mailbox. Are you a member of a music club? You will receive offers to join video clubs, book clubs and other music clubs. Every vendor is vying for your discretionary income, and technology enables merchants to track, index and analyze your purchases. Given the enormous appetite of marketers and the equally enormous databases that hold consumer information, privacy is rapidly disappearing. As soon as you fill out a product registration card, the vendor has learned some information about you, and can then use that information digitally. Firms that analyze purchase data sometimes sell such information. Some consumers might excuse the data analysis if it were used only for targeted advertising. Someone who recently bought a Bose audio system could be reasonably assumed to have an interest in the latest Harman Kardon digital receiver. But customers will probably perceive a misuse of data if they are suddenly swamped with sales pitches from BMW or Condé Nast as a result of their Bose purchases. However, targeted advertising works this way in some cases. Unrelated items are somehow linked together, leaving the consumer with a mailbox full of junk, either paper or digital. Concerns about identity theft and other privacy issues have caused many consumers to view the practice of selling contact information as ethically questionable. Most reputable businesses will either ask customers’ permission before sharing private information or will use the fact that the business does not share its customer information as a selling point. OBJECTIVE: 3.2.4: Questionable practices
Lesson 2: Law and the Internet 2-19 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Misuse of sensitive information In 1997, the U.S. Social Security Administration (SSA) decided to allow citizens to access their retirement projections on the Web. The user had only to enter his or her Social Security number and birth date. However, the SSA soon discovered that malicious individuals who had access to both pieces of information could get other people’s projections. Many such individuals were caught accessing other accounts. The SSA promptly closed the site. As a service to Social Security participants, the SSA site was a good idea. However, the required information to access the site was not difficult enough to deter imposters. Anyone with someone else’s Social Security number and date of birth could masquerade as that person. How did malicious individuals get the Social Security numbers? From several possible sources: access to Internal Revenue Service (IRS) documents, registration information, and even underground Web sites that trade in pirated Social Security numbers. A new law intended to protect children from pornography and privacy violations on the Internet was part of a recent United States $500 billion spending bill. The Commission on Online Child Protection passed the Children’s Online Privacy Protection Act (COPPA), effective April 21, 2000. The privacy measures prevent Web sites from collecting information about children 13 years of age and younger without a parent’s verifiable permission. The law also requires Web site operators to block access by anyone 17 or younger to materials deemed “harmful to minors” by requiring all users to provide a credit card or personal ID number. You can view the text of COPPA at www.ftc.gov/opa/2000/04/coppa1.htm. As is often the case, however, there have been unseen consequences. The exact scope of the act continues to be defined through ongoing court cases, with some providers left wondering what information and images they can or cannot supply. Some organizations are concerned about their liability in providing information, for which a minor might have a valid need for access for research projects — for example, medical reference information or works of art. The Act has also helped to drive the development and distribution of applications that screen and block access to inappropriate Web sites. These applications help to protect organizations that provide free public Internet access, such as libraries, from prosecution. Jurisdiction and Electronic Publishing Jurisdictional issues are another legal area for EP. Some estimates contend that U.S.-based corporations are losing $60 billion annually because of intellectual property infringement. As a result, the U.S. government is trying to achieve a global standard for intellectual property law. As computer crime proliferates, computer thieves disperse around the globe. To cause harm to a computer, the perpetrator need not be physically near the target. On the Internet, criminals can attack U.S. targets from outside the country. The task of catching these thieves is often thwarted by international borders. Laws are territorial; they can be applied only within the jurisdiction of the body that issued them. The Web uses Uniform Resource Locator (URL) addresses and Hypertext Transfer Protocol (HTTP) to link computers from many countries, with no regard for national or international boundaries. The same advancements in telecommunications have allowed information to be shared worldwide. This sharing creates a problem because of different intellectual property laws. For example, users in the United States can access OBJECTIVE: 3.2.1: Legal and governmental aspects
2-20 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 information in other sovereign countries that, if obtained in the United States, would violate intellectual property rights. These foreign sites often provide the same information at a lower price, so the U.S. user would naturally be attracted to them. Jurisdictional issues are difficult to resolve among the various states, and more difficult across international borders. In some celebrated cases about crackers breaking into commercial and government computers, the crackers were coming in from Europe. U.S. authorities could monitor their activities but could not apprehend them because U.S. jurisdiction did not extend to the European countries. Finally, the crackers were apprehended (with the cooperation of U.S. authorities) in their home countries, and stood trial on the grounds of conducting unwarranted and malicious espionage on foreign soil. Internet jurisdictional issues raise interesting problems. For example, gambling in most U.S. states is illegal unless conducted on American Indian-owned lands or on a riverboat. Yet dozens of online gambling sites are available. Are these legal? The U.S. Congress is considering two bills that would outlaw online gambling in the United States. In traditional commerce (even over the phone), both parties have some contact (physical or verbal) before a transaction is completed. Most electronic commerce scenarios do not offer this contact. If anything is wrong with the goods or services exchanged over the Internet, either of the parties can be sued. The U.S. Constitution requires that for one state’s court to have jurisdiction over a non-resident party, that party must have had “minimum contacts” with the court’s state. An important element of “minimum contacts” is that the non-resident “purposely established” contacts and “created continuing relationships and obligations with the citizens of another state.” How do these jurisdictional issues work on the Internet, where the participating parties may never have physical contact? Interestingly, the courts have held that physical presence is not a prerequisite for jurisdiction. That is, under particular circumstances, Internet presence alone can be sufficient to grant jurisdiction over a non-resident. Several cases have established jurisdictional precedent, including the following: In State of Minnesota vs. Granite Gate Resorts, the state attorney general in Minnesota, where gambling is illegal, successfully sued Granite Gate Resorts, a sports betting service contracting out of Nevada. A Connecticut company successfully sued a Massachusetts company in Connecticut for using an Internet domain name that it claimed infringed on its trademark. However, the cost of conducting electronic commerce should not include lawsuits. Following are some methods for protecting a site against lawsuits from other states. Do not advertise that products are available nationwide if some jurisdictions could be expected to consider them illegal. In State of Minnesota vs. Granite Gate Resorts, if the online betting page had carried a disclaimer stating “Not valid in Minnesota” and the company had attempted to exclude Minnesota residents, the state’s cause for action would have been diminished. Keep “interactivity” to a minimum. Some courts have found that when a site includes a toll-free telephone number, which presumably encourages contact (or interactivity) from out of state, jurisdictional precedence applies. Jurisdictional restrictions do not protect patents. Under international laws, a patent must be secured in every country in which the patent holder intends to do business. As mentioned earlier, WIPO attempts to promote technology sharing among member cracker A person who locates and exploits a vulnerability in a system in order to do harm.
Lesson 2: Law and the Internet 2-21 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 countries. Included in the treaties administered by WIPO are the Berne Treaty and the Paris Convention, both of which are multinational agreements governing the management of intellectual property. The following lab introduces some potential issues you might encounter as you move from selling in one country or geographical area into international sales. It also introduces a Web site that can help you to localize your Web site. Suppose you decide to begin selling your business products overseas, using your e-commerce site to take orders. You need to understand the issues relating to localizing your Web site to make it accessible to your customers, as well as legal and regulatory information. Lab 2-3: Selling Habitat For Humanity products in Europe In this lab, you will explore the various issues involved in selling your e-commerce business’s products overseas. The Habitat For Humanity Gift Shop would like to sell its products in France, the United Kingdom, Germany and Italy. If this project moves forward, the Web site will need to be translated into French, German and Italian. You will also need to determine how you will accept payment from overseas customers, and how the Habitat For Humanity Gift Shop will handle customs and import restrictions. 1. In your browser, enter www.welocalize.com, then select the appropriate language (see the Welocalize Web site in Figure 2-5). Review the information. In the space provided, list target languages supported.
2-22 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 2-5: Welocalize Web site 2. Visit http://babelfish.altavista.com/ to access translation features. Compare this site with the Welocalize site. In the space provided, identify the company providing the best value and explain your choice. 3. Because Habitat For Humanity has previously sold products only in the United States, it has offered standard shipping times and prices. Discuss how you would adjust these times and prices for European customers. 4. You need to learn about trade policies and restrictions in your new target markets. In your browser, enter http://europa.eu.int/comm/trade/index_en.htm for information about trade with the European Union (EU). See Figure 2-6.
Lesson 2: Law and the Internet 2-23 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 2-6: EU External Trade policy information 5. What payment options do you plan to offer international customers? Must they pay in U.S. dollars, or will you accept foreign currencies? In your browser, enter http://quote.yahoo.com/m3 to view a free currency conversion service offered by Yahoo! See Figure 2-7. Figure 2-7: Yahoo! Currency Conversion site
2-24 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 In this lab, you examined various issues that confront business owners hoping to expand their e-commerce presence internationally. You visited Web translation sites, considered import restrictions and explored currency conversion considerations for your business. Internet Taxation The U.S. Constitution currently prevents states from taxing transactions beyond their borders. The Supreme Court has ruled that states cannot require out-of-state companies to collect sales taxes unless Congress passes a law allowing them to do so. In 1998, the Commerce Committee of the U.S. House of Representatives passed, and the president signed, the Internet Tax Freedom Act (ITFA), which imposed a three-year moratorium on new Internet taxation. As part of the Act, Congress established the Advisory Commission on Electronic Commerce to address the issues related to Internet taxation. The Congressionally appointed members of the Commission include the following: Three representatives from the federal government — the secretary of commerce, the secretary of the treasury, and the U.S. trade representative (or delegates). Eight representatives from state and local governments (including at least one representative from a state or local government that does not impose a sales tax and one from a state that does not impose an income tax). Eight representatives of the electronic commerce industry (including small business), telecommunications carriers, local retail businesses and consumer groups. The Advisory Commission conducted a thorough study of federal, state, local and international taxation and tariff treatment of transactions using the Internet and Internet access, and other comparable intrastate, interstate or international sales activities. The Commission was assigned to produce an important policy initiative. The ITFA initially placed a three-year moratorium, due to expire October 2001, on various taxes on Internet access and e-commerce so the Commission would have time to review the issues before making recommendations. Central to the examination of these issues is the fact that the Internet is not constrained by geographical boundaries and by its very nature violates geographical boundaries that hinder other forms of commerce. The Commission analyzed the implications of personal privacy on the taxation of Internet purchases. Some of the key issues, at least with certain states, concern their inability to collect sales tax revenue from Web businesses. Businesses collect sales tax only from customers in states where they have physical presence. Many state officials are worried that as electronic commerce grows, local sales tax revenue will decline and basic services will be hurt. Many states have made efforts to limit the scope of the ITFA or to find ways around its imposed moratorium. The Advisory Commission on Electronic Commerce finished its work as of April 2000 and was dissolved. Its report recommended to Congress that the Internet tax moratorium be extended for five more years, until 2006. In 2000, the U.S. House of Representatives approved the recommendation. Final approval of the extension was announced in June 2001. During the extension period, lawmakers will develop a simplified tax plan. The commission’s report can be found at www.ecommercecommission.org. OBJECTIVE: 3.2.3: E-commerce taxation
Lesson 2: Law and the Internet 2-25 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 The act was further amended in 2004 through the Internet Tax Nondiscrimination Act, extending the moratorium through 2007 with recommendations to make the moratorium permanent. Bit tax This new area of taxation has spawned the term bit tax. A bit tax is any tax on electronic commerce expressly imposed on or measured by the volume of digital information transmitted electronically, or by the volume of digital information per unit of time transmitted electronically. It does not include taxes on the provision of telecommunications services. A bit tax proposal recommendation issued by the United Nations in 1999 immediately generated published articles from both advocates and opponents of the proposal. A major complaint is one that surfaces any time a recommendation is made to tax Internet commercial activities — that it will stifle development and slow the growth of business. International Tax and the Internet The Internet Tax Freedom Act calls for a declaration that the Internet should be free of foreign tariffs, trade barriers and other restrictions. It describes the view of the U.S. Congress that the president should seek bilateral, regional and multilateral agreements to remove barriers to global electronic commerce through the World Trade Organization, the Organization for Economic Cooperation and Development, the Trans-Atlantic Economic Partnership, the Asia Pacific Economic Cooperation forum, the Free Trade Area of the Americas, the North American Free Trade Agreement (NAFTA) and other appropriate venues. This ongoing effort continues to be supported by the U.S. Congress. Customs and E-Commerce A growing concern of e-commerce is the importance of customs. In many cases, Web shoppers can now purchase products from anyone and have the products shipped directly to them. The traditional process of importing and exporting goods has been largely regulated by customs services. These services help ensure legal compliance, and protect goods entering and leaving a country. Intentional illegal importing and exporting will always occur, but its ramifications are beyond the scope of this course. Instead, we will explore unintentional illegal activity. Many regulations and restrictions for importing and exporting can be easily overlooked in the e-commerce business. An e-commerce site could be offering goods that may have restrictions on exporting from the state of origin or restrictions at the state of entry. This discussion will not include obviously illegal items. For example, an e-commerce site that sells technical books is required to have special documentation and additional taxes when shipping to Canada. If the e-commerce retailer is not aware of these restrictions, legal difficulties could result. A software company that sells an application with high encryption capabilities could also be violating import/export and customs laws. bit tax A tax based on data transfer by volume or volume over time. OBJECTIVE: 3.2.3: E-commerce taxation OBJECTIVE: 3.2.5: International trade laws
2-26 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 The following sites contain information about various aspects of importing and exporting for different countries: Imex Exchange (www.imex.com) Federation of International Trade Associations (www.fita.org) Asia-Pacific Economic Cooperation (www.apecsec.org.sg) World Customs Organization (www.wcoomd.org) United States Customs and Border Protection (www.customs.ustreas.gov) Tariffs and E-Commerce In shipping goods across international borders, each jurisdiction has its own set of taxes called tariffs. Tariffs can be very difficult to determine. Online services are available to help international marketers know and understand them. The following sites provide some of this information: FedEx Trade Networks (World Tariff) (www.worldtariff.com) USAExportImport (www.usaexportimport.com) World Tariff is a subscription-based service requiring a one-year subscription. Tariffic is based on a pay-per-trade model and offers a free demonstration. In the pay-per-trade model, you are charged per trade transaction, facilitated by World Tariff. USAExportImport is a B2B portal that also operates a tariff subscription-based service. The service also provides applications not only to assist with tariff calculations but also to help in preparing items for shipment. You can view customs value information, review remedy investigations and download official Harmonized Tariff Schedule (HTS) information from the United States International Trade Commission (USITC) at www.usitc.gov. Information is provided by the USITC at no charge. Tariffs and trade practices and regulations are sometimes the cause of disputes. The World Trade Organization (WTO) has provided an international forum for resolving these disputes since its foundation. The WTO grew out of the General Agreement on Tariffs and Trade (GATT), replacing that body in 1995. Despite an announcement in 2002 that the WTO has plans to disband and reintegrate into a new organization, it continues to be the primary body resolving complaints about international trade practices with no obvious signs of ceasing or even reducing its operations. International tariff information can be confusing, but is critical to selling internationally. In addition, tariffs are somewhat volatile. Keeping up with tariff regulations without some assistance is nearly impossible. The following lab is designed to provide an introduction to some of the information about tariffs that is readily available on the Internet. Suppose you were planning to sell products in a neighboring country, using your e-commerce site. How would you know about the tax rates on imported and exported goods? You could use the U.S. International Trade Commission Web site to research this information for free. (Most tariff services charge fees for their assistance.) OBJECTIVE: 3.2.3: E-commerce taxation
Lesson 2: Law and the Internet 2-27 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lab 2-4: Researching tariff data on the Internet In this lab, you will visit the United States International Trade Commission (USITC) Web site, a free service, and research customs values and a sample tariff code. 1. In your browser, enter http://dataweb.usitc.gov/scripts/tariff_current.asp to access tariff and trade data on the USITC Web site, as shown in Figure 2-8. Figure 2-8: USITC tariff and trade data 2. Type Fish and click the List Items button, as shown in the previous figure. 3. Select 03011000 — Live Ornamental Fish – 01/01/1990 and click the Detail button. 4. Review the information provided (Figure 2-9).
2-28 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 2-9: Tariff and trade data for specific products 5. Click the Imports By Source Country link, shown circled in the previous figure. 6. Review the detailed customs value information, as shown in Figure 2-10. Figure 2-10: Trade database import values 7. If Time Permits: Navigate to www.usitc.gov/tata/hts/index.htm and review some of the tools provided by the USITC. In this lab, you visited the USITC Web site and viewed U.S. import tariff information.
Lesson 2: Law and the Internet 2-29 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Protecting a Brand After a brand has been established, it becomes a potential victim for others to unfairly capitalize on its success. Some analysts estimate that more than U.S. $20 billion are lost each year in e-commerce. These losses occur in the form of counterfeiting, unauthorized use of logos, domain name parodies, misinformation, rumors and impostors. Common places for misinformation and rumors are electronic bulletin boards and chat rooms. In these places, companies can be slandered with anonymity and the reputations of companies can be damaged. For example, during an 18-month period beginning in 1998, Callaway Golf, which manufactures golf clubs, was experiencing false and damaging posts on a Yahoo! message board. Through a series of legal maneuvers, the source was eventually tracked to a competitor; but as a result, Callaway’s stock price fell more than 50 percent during the period. Some multinational companies have employees specifically assigned to surf the Web and find those who are defacing or illegally using their brand. Other companies offer employees rewards if they report any infringement they encounter. For most companies, awareness of brand infringement comes from employees who report the incident because they are proud of their company and the brand they have helped to create. Another possible solution is to outsource brand infringement trackers. Companies offering assistance in this area include the following: GenuOne (part of www.opsecsecurity.com) eWatch (www.ewatch.com) Cyveillance (www.cyveillance.com) A company can also lose exclusive use of a brand if it becomes too popular and too commonplace. Companies must try to ensure that product names are used to describe a specific brand item, not a product category. Otherwise, the brand can fall into the public domain, leaving the original owner with no control over the name or its use. Companies with brands that are considered household names often monitor print and electronic media to ensure that their brand names are used properly. A portion of the advertising budget for these products is dedicated to continuing education, reminding authors and other information producers of the difference between branded product names and generic descriptions. Ethical Business Practices In addition to concerns about legal requirements, e-commerce businesses must also seriously consider the issue of ethical business practices, which is often difficult to define. The fact that an activity is not specifically illegal does not necessarily imply that it is right. By their nature, ethical business practices are sometimes harder to define as to what should or should not be allowed. Questionable practices include selling customer information without the customer’s knowledge or permission, spamming and using spyware. E-commerce is often an arena for new types of unethical practices, though many of these have their roots in traditional business. Some businesses see the practice of selling customer information as a natural extension of the practice of selling customer mailing lists by traditional businesses. Spam is seen as the next generation of junk mailing, and unwanted catalogs and product flyers often fill consumers’ mailboxes. OBJECTIVE: 3.1.3: Brands and trademarks OBJECTIVE: 3.2.4: Questionable practices spyware A software application secretly placed on a user’s system to gather information and relay it to outside parties, usually for advertising purposes. spam Unsolicited and unwanted e-mail messages; the online equivalent of junk mail.
2-30 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 The electronic community has proven very resourceful in combating some types of unethical practices. Questionable businesses can expect to find themselves identified on Web sites and Web logs (or blogs) throughout the Internet. Spammers who use valid e-mail return addresses find their own mailbox flooded with unwanted responses. Several products and Web-based services will scan your computer for signs of spyware with applications available to help block future infestations. Governmental agencies are also taking part in the fight against some of these practices. One draft regulation in the U.S. Congress would require all businesses to provide a valid “From” address on all e-mail correspondence, making it easy to identify and respond to the source. Reviews of business practices are ongoing; one issue of special interest is whether spyware, which is already generally considered unethical, should be made illegal. Reputation is key in any business. Because of the speed of communication and ease of reaching a wide audience, it is often even more important to avoid not only unethical business practices themselves but even the appearance of unethical practices. Case Study Books in a Bind All Things Text is an on-demand publishing house that specializes in e-books and short-run traditional soft-cover print books. Contact with customers is through the Internet only. The business maintains a database of print-ready works and pays the author a per-sale royalty. The author retains ownership of the works. Tony is the owner and only full-time employee of All Things Text. He is concerned about protecting the intellectual property of all the authors, but also wants to ensure that he does not leave himself open to liability suits or inadvertently violate copyright restrictions. Tony develops a standard author’s contract to be used by All Things Text. By signing this contract, the author grants Tony’s business the right to publish his or her work for sale, the right to publish a small number of copies for promotional purposes, and the right to quote up to one page of text for promotional purposes. The number of copies that can be printed for promotional purposes is not specified. * * * As a class, discuss the following issues with regard to All Things Text. Who is responsible for protecting the integrity of the copyright of materials in the business content database? Consider a possible situation. A customer purchases an e-book. The book does not have any copy protection notice and the customer uploads it to a public Web site for distribution. What entities can be held at fault for violating the author’s copyright and why? What is the potential effect if Tony chooses to sell his customer list to other book distributors? Consider both legal and customer relations issues. Who is responsible for registering international copyrights for stored content? How can Tony use the materials in the content database for advertising and promotion without first getting additional permission from the author? blog A collection of personal thoughts posted on a public Web site. Blogging is the act of adding entries to a blog.
Lesson 2: Law and the Internet 2-31 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson Summary Application project The digital revolution has created many new legal issues, most of which have yet to be formally addressed. With the ease of digital reproduction, many laws are being violated. In many cases, these violations are committed out of ignorance and a lack of understanding about the rights of others and their work. Have you or has someone you know had ownership rights infringed upon or violated by the use of some electronic means? Do you fear that something you own may be in jeopardy of infringement? What steps, if any, could you take to prevent such infringement. Visit some of the sites mentioned in this lesson to further research information about copyright violations. Skills review In this lesson, you learned that Internet law is a growing area. You saw examples of how the United States and other countries are addressing Internet-based business regulations and controls. You also considered taxation issues and the possible consequences of violating customs laws. In addition, you learned about establishing and protecting a brand, you identified legal aspects of e-commerce and you identified intellectual property and learned how to protect it. Finally, you learned how to avoid questionable business practices, and identified applicable international trade laws. Now that you have completed this lesson, you should be able to: 3.1.3: Establish and protect a brand (includes trademark registration). 3.2.1: Identify legal and governmental aspects of e-commerce (includes legal precedent, liability concepts, international issues, ethics, jurisdiction, copyright, patents). 3.2.2: Identify and protect intellectual property. 3.2.3: Identify e-commerce taxation issues. 3.2.4: Avoid questionable practices (includes spam, spyware, selling user information). 3.2.5: Identify international trade laws.
2-32 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson 2 Review 1. What are the two branches of intellectual property and what do they cover? 2. How does copyright law apply to material published on the Internet? 3. In what way does trademark law apply to the Internet and electronic publishing in the United States? 4. In what way does patent law apply to software, including applications distributed through the Internet? 5. In what way can an online provider be exempted from liability for copyright infringement? 6. What is the current legal situation in the United States regarding taxes being levied on interstate Internet purchases? 7. In the United States, what is the requirement for a state court to have jurisdiction over a non-resident party?
1Lesson 1: Electronic Commerce Foundations Objectives By the end of this lesson, you will be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 1.2.1: Distinguish between in-house and online instant storefront options for creating an e-commerce site. 1.2.2: Evaluate the advantages and disadvantages of using third-party instant storefronts. 1.2.3: Evaluate the advantages and disadvantages of using e-commerce storefront software. 1.5.3: Choose an appropriate payment method. 1.5.8: Identify and implement microcommerce concepts (includes micropayments, microtransactions). 3.1.1: Compare the advantages and disadvantages of e-commerce and traditional sales methods. 3.1.2: Identify business growth drivers and barriers.
1-2 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Pre-Assessment Questions 1. Identify three guidelines for developing an effective ordering infrastructure. 2. Which of the following statistics is true? a. In the United States and Canada, 51 percent of online users are between the ages of 18 and 21. b. Approximately 65 percent of American Internet users purchase goods on the Internet. c. Females outnumber males two to one in Internet use. d. Web users have advanced educational degrees, with 90 percent having at least a bachelor’s degree. 3. Which type of Web storefront requires the most significant investment in hardware? a. Online instant storefront b. In-house storefront c. Offline storefront d. Hybrid storefront
Lesson 1: Electronic Commerce Foundations 1-3 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Introduction to Web Commerce During the past several years, large companies and small businesses have increased their presence on the World Wide Web. Web technology has grown tremendously since the mid-1990s, when Mosaic, the first graphical browser, was introduced. By the time Netscape released its browser, home computers were expected to access the Web in even greater numbers. Home computer users grew increasingly sophisticated, and the Web evolved from an academic curiosity into a mainstream necessity. By 1996, the Web was firmly entrenched in popular culture. E-mail and Web site addresses were traded as status symbols, and organizations rushed to register domain names and set up Web servers. Company Web servers promoted company goods in a primitive form of electronic commerce. In the new century, Web commerce has grown considerably. This lesson will introduce the fundamental background for understanding the Web commerce model and exploring the advantages of deploying a Web commerce infrastructure. To meet these goals, you will focus on several operational electronic commerce sites, one of which you will build during this course. The list of companies will include the following: Travelocity.com (www.travelocity.com) — a travel-planning site that allows users to search schedules, compare prices and purchase tickets for travel. Dell Inc. (www.dell.com) — a major corporate site that allows individuals and businesses to purchase computers and computer peripherals. Barnes & Noble (www.barnesandnoble.com) — a popular online vendor site that allows users to search, sample and purchase books, music CDs, tapes and other products. Habitat For Humanity Gift Shop (www.habitatstoreonline.com) — an e-commerce site that sells merchandise that promotes Habitat For Humanity. Throughout the class, you will use a version of the Habitat For Humanity Gift Shop Web site to help you understand various aspects of electronic commerce. Impetus for Web Commerce Some experts believe that Web commerce will soon be a requirement for most businesses. According to Internet World Stats (www.internetworldstats.com), there were more than 812 million Internet users worldwide by September 2004. This number represents a growth of 125 percent from 2000 to 2004. These figures indicate that the Web is continuing to grow and that Web presence can help businesses reach customers around the world. Other statistics that support this assertion include the following: As of September 2004, 31.7 percent of Internet users were located in Asia, 28.4 percent were located in Europe, and 27.3 percent were located in North America, according to Global Reach (http://glreach.com/globstats/). As of the end of the third quarter of 2004, 66.3 million domain names were registered worldwide, according to VeriSign’s Domain Name Industry Brief (www.verisign.com/Resources/Naming_Services_Resources/Domain_Name_Industry_Brief/index.html).
1-4 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 By January 2004, the Internet consisted of an estimated 300 million hosts, according to Internet Systems Consortium Inc. (www.isc.org/index.pl?/ops/ds/). By December 2007, 74 percent of women and 76 percent of men in the United States used the Internet, according to the Pew Internet and American Life Project (www.pewinternet.org/trends.asp#demographics). At the end of the third quarter of 2004, there were 54.6 million Digital Subscriber Line (DSL) subscribers. This figure represents a 56 percent growth rate over the previous year, according to ClickZ Network (www.clickz.com). By 2002, an estimated 140 million Internet appliances were in use worldwide. An Internet appliance is a limited-use computer that accesses the Internet for browsing and e-mail. By December 2007, 92 percent of people in the United States surveyed between the ages of 18 and 29 used the Internet, according to the Pew Internet and American Life Project (www.pewinternet.org/trends.asp#demographics). English is still the leading language on the Internet, with 295 million English-speaking users as of September 2004. This figure represents 35.2 percent of Web users. The next most prevalent language is Chinese, with 110 million Chinese-speaking users on the Internet. By 2007, 72 percent of Americans who accessed the Internet spent an average of at least one hour per day online. Eighteen (18) percent of users spent an average of three to six hours per day online. Web users are well-educated: By December 2007, 93 percent of people with a college degree used the Internet, compared with 38 percent of people who did not graduate high school, according to the Pew Internet and American Life Project (www.pewinternet.org/trends.asp#demographics). Web users are upscale: In the United States, 93 percent of people with an income higher than $75,000 per year used the Internet by December 2007, compared with 61 percent of those with an annual income lower than $30,000, according to Pew Internet and American Life Project (www.pewinternet.org/trends.asp#demographics). Approximately 67 percent of Americans with Web access have used the Internet to purchase products, according to the Pew Internet and American Life Project (www.pewinternet.org/trends.asp#demographics). More than 110,000 companies have used the Internet to distribute critical company information, such as press releases. Business owners, aware of the increasing number of potential customers using the Web, are responding by making their products and services available to these online users with Web technology. Electronic Commerce Defined Commerce is the exchange of goods and services for money. Historically, commerce has been accomplished when the buying party exchanges a fee with the selling party for the goods purchased or services rendered. Barter systems notwithstanding, the fee traditionally has been paper money, checks, bank drafts, credit cards or other representations of paper money.
Lesson 1: Electronic Commerce Foundations 1-5 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Data management for traditional transactions was limited to manual or, more recently, computer-based bookkeeping. Security was largely absent in the traditional transaction model; if the buyer had to be physically present to make a purchase, the chances of fraud were low. This view was bolstered when Visa began issuing credit cards containing the cardholder’s photograph. Electronic commerce (often called e-commerce or EC) can be defined on two levels: first, as commerce conducted via any electronic medium, such as TV, fax or the Internet. The first two media have been in use long enough so that issues such as data management and security are well understood. The third medium, the Internet, has changed the nature of these issues somewhat, because it ties commerce, data management and security capabilities together. A second, broader definition of electronic commerce is more suitable to Internet users. Electronic commerce is the integration of communication transport, data management and security capabilities that allow organizations to exchange information about the sale of goods and services. These three capabilities contribute to e-commerce as follows: Communication transport services — support the transfer of information between the buyer and the seller. Unlike traditional transactions, the e-commerce communications aspects go beyond sharing a spoken language. Data management services — define the exchange format of the information. These services help establish a common digital language between applications to complete electronic transactions successfully. Security mechanisms — authenticate the source of information and guarantee its integrity and privacy. Security mechanisms are of paramount importance to e-commerce because unlike traditional transactions, electronic transactions do not require physical proximity between the buyer and seller to complete a transaction. Electronic commerce vs. traditional commerce The preceding paragraphs touched on some aspects of how electronic commerce differs from traditional commerce. These differences can be quantified more concretely. One difference is in how information is exchanged and processed. Traditionally, information was exchanged via person-to-person contact, or through telephone or postal systems. In electronic commerce, information is carried through a networked computer system. In traditional commerce, participants act on the information that accompanies a typical business transaction. In electronic commerce, physical presence is limited and almost the entire transaction processing is automated. Electronic commerce pulls together a variety of business support services, including e-mail, online directories, ordering and logistical support systems, settlement support systems, inventory control systems, and management information and statistical reporting systems. In traditional commerce, the physical proximity between the participating business entities allows nonrepudiation. It also allows a customer’s identity to be verified (authentication) with a request for a standard identification item such as a driver’s license or a passport. The electronic commerce infrastructure does not lend itself well to the traditional model: Nonrepudiation and authentication must be provided digitally. Also, that data must be kept confidential as it is passed across the Internet. Digital signatures and encryption frameworks have been developed to address these security issues. OBJECTIVE: 3.1.1: E-commerce vs. traditional sales methods OBJECTIVE: 3.1.1: E-commerce vs. traditional sales methods
1-6 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 In the following lab, you will visit various Web sites to view e-commerce trends and statistics. Suppose you plan to start your own e-commerce business and you need information about Internet growth, demographics, consumer confidence and other data. By tracking this information on the Internet, you will increase your understanding of your target audience and create a more successful business plan. Lab 1-1: Exploring e-commerce trend and statistics Web sites In this lab, you will visit several e-commerce information and statistics Web sites to search for data. The questions in this lab have no right or wrong answers because many of them involve predictions or quickly changing facts. 1. Open your browser. 2. If you are prompted that Microsoft’s Internet Explorer’s Enhanced Security Configuration is currently enabled, select In The Future, Do Not Show This Message and click OK. 3. Select Tools | Internet Options and click the Security tab. 4. Change the security level for the Internet zone to Medium. If you receive a warning that the recommended security level for this zone is High, click Yes to verify that you want to change the security level. 5. Click OK. 6. In your browser, enter www.clickz.com. ClickZ Network (Figure 1-1) is an online source for information about Internet demographics and trends. If you are prompted to install Flash, click Yes. Figure 1-1: ClickZ Network home page
Lesson 1: Electronic Commerce Foundations 1-7 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 7. ClickZ Network: Search for an article that estimates the expected growth of Internet users older than 55 years of age. If a security warning appears about sending information over the Internet, select the In The Future, Do Not Show This Message check box and click Yes. Consider what these estimates mean for the future, and record your thoughts in the following space. 8. Enter www.ecommerce-guide.com/ in your browser. ECommerce-Guide (Figure 1-2) provides articles and statistics for global e-commerce. Figure 1-2: ECommerce-Guide home page 9. In the Search ECommerce-Guide box, enter Consumer Confidence. Find the latest statistics on consumer confidence in e-commerce. Consider how consumer confidence might affect the success of your e-commerce site, and record your thoughts in the following space.
1-8 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 10. Enter www.ecommercetimes.com in your browser. E-Commerce Times (Figure 1-3) is a broad-based source for e-commerce news. Figure 1-3: E-Commerce Times home page 11. Read the current headlines and notice some of the current trends in the articles. Note some of your observations in the space provided.
Lesson 1: Electronic Commerce Foundations 1-9 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 12. Enter www.internetretailer.com in your browser. If you are prompted to display the Flash player, click Yes. Internet Retailer (Figure 1-4) provides news articles about e-commerce. Figure 1-4: Internet Retailer home page 13. Internet Retailer: Read some of the latest headlines and discuss them. 14. Class Discussion: What are your own predictions for e-commerce based on what you have learned? Does e-commerce affect your daily activities? Do you think that e-commerce is a short-term business trend or will it permanently change business? In your opinion, what factors will encourage or discourage e-commerce? Applying E-Commerce Concepts to Focus Companies The following focus companies have been chosen because of the diverse offerings they provide. They are categorized as either business-to-consumer (B2C) or business-to-business (B2B). Remember the following companies throughout the class. Compare the key concepts presented in class with the electronic commerce experiences of these specific companies. Habitat For Humanity Gift Shop (B2C) — The Habitat For Humanity Gift Shop sells merchandise that promotes Habitat For Humanity, a non-profit organization that builds homes for underprivileged families. You will modify a version of the Habitat For Humanity Gift Shop e-commerce site throughout the course.
1-10 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Travelocity.com (B2C) — This Web site is managed by Sabre Inc. (originally the Sabre group and owned by AMR Corporation). In March 2000, it became an independent company. For years the Sabre group supplied flight and travel information to travel agencies worldwide. In “traditional commerce” terms, a retail component was accessed through participating travel agencies. Dell Inc. (B2C and B2B) — Dell is a supplier of computers and computer peripherals. It was founded in 1984 and launched its Web site in 1994. Its e-commerce initiative was launched in 1996. Barnes & Noble (B2C) — This well-known bookseller is a dominant figure in the retail environment, but electronic commerce competition such as Amazon.com forced Barnes & Noble to re-evaluate its business model to include e-commerce via the Internet. In the following lab, you will view the Habitat For Humanity Gift Shop Web site and note its current features and functionality. Suppose you have been hired by Habitat For Humanity to analyze how well it reaches consumers in various demographics. You would want to compare its features with those found on other e-commerce sites. Lab 1-2: Viewing the Habitat For Humanity Gift Shop Web site Note: This lab is the first of many labs throughout the coursebook in which you will examine the Habitat For Humanity Gift Shop Web site and review each of the three focus companies chosen for this class. Your goal will be to review and compare each company with the concepts discussed in each lesson. In this lab, you will view the version of the Habitat For Humanity Gift Shop Web site currently on the Internet. 1. Open your browser. 2. Browser: Navigate to www.habitatstoreonline.com. The home page for the Habitat For Humanity Gift Shop will appear, as shown in Figure 1-5.
Lesson 1: Electronic Commerce Foundations 1-11 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-5: Habitat For Humanity Gift Shop home page 3. Spend some time looking at the features available on the site. 4. Consider the demographics discussed earlier in the lesson. How well do you think the site appeals to various groups of users? Consider international users, male versus female users, and users in different age groups. 5. Repeat Steps 2 through 4 with the other three focus sites. 6. Close the browser window. Movie Time! Go to CIW Online to view a movie about this topic. E-Business Models (approx. playing time: 05:00) All movie clips are © 2011 LearnKey, Inc. Types of Electronic Commerce Broadly speaking, the two models of electronic commerce are business-to-business (B2B) and business-to-consumer (B2C), as you have already learned. Contrary to natural reasoning, the number of business-to-business electronic commerce transactions significantly exceeds that of business-to-consumer transactions. business-to-business (B2B) An e-commerce model in which a Web-based business sells products and/or services to other businesses. business-to-consumer (B2C) An e-commerce model in which a Web-based business sells products and/or services to consumers or end users.
1-12 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Business-to-business (B2B) In the B2B model, also referred to as intercompany business, e-commerce is conducted between two separate businesses. For example, consider a Fortune 500 company that wants to allow its employees to buy sundry items such as office supplies online. It can set up an open purchase order with an office supplier and allow employees to access the supplier’s Internet site to make purchases. One characteristic of this model is multiple high-volume and low-price margins (such as 100 consumers buying a stack of notepads at U.S. $1.25 each) for each transaction. However, business-to-business e-commerce is not always characterized by high-volume purchases. Business-to-business e-commerce encompasses a variety of services that help companies optimize their supply chain, gather data for various purposes, and perform other activities that help them reduce costs and make their businesses more efficient. In recent months, more and more companies have been offering Web services as a way to reuse and resell business processes across multiple enterprises. In the following lab, you will view a B2B Web site. Suppose you were preparing a report for your company on business-to-business opportunities. Part of your report must include the B2B services offered by another company. Lab 1-3: Locating and viewing a B2B Web site In this lab, you will view the Web site of a company currently using a business-to-business model. 1. Open your browser. 2. Browser: In the Address field, enter www.works.com. 3. View and examine the Works Web site. It is set up for businesses to automate their purchasing process by using the Internet, as shown in Figure 1-6. OBJECTIVE: 1.1.1: B2B and B2C development issues supply chain The combination of the vendors from which a company receives products and raw materials and the customers to which the company provides products and raw materials.
Lesson 1: Electronic Commerce Foundations 1-13 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-6: Works home page Business-to-consumer (B2C) In the B2C model, commerce is conducted between a business and a consumer, such as a home user on a personal computer. For example, to buy books or audio CDs on the Internet, the consumer accesses the business’s Internet site and purchases the items. Often this model is characterized by low volume and high prices, but as Web sites begin to increase their customer base, as B2C sites often do, the model can also be characterized by high volume and lower-than-retail pricing margins (100 consumers buying a CD or book at a discount). Most consumers shop on the Web because of some form of discount or advantage that they cannot find at a traditional store location. In the following lab, you will examine a B2C Web site. Suppose you have been hired by an existing retail store to implement a B2C e-commerce site. You would need to note the e-commerce features available on an existing site. Lab 1-4: Locating and viewing a B2C Web site In this lab, you will view the Web site of a company using the business-to-consumer model. As you probably know, thousands of sites use this model. In this lab, you will look at one of your three focus companies, Barnes & Noble (www.barnesandnoble.com). 1. Open your browser. 2. Browser: In the Address field, enter www.barnesandnoble.com. 3. View the Barnes & Noble Web site. It is set up for consumers to search for and purchase books, music, videos and software online, and have them delivered. Click the DVDs tab shown in Figure 1-7. OBJECTIVE: 1.1.1: B2B and B2C development issues
1-14 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-7: Barnes & Noble home page 4. Enter the title Titanic in the search box shown in Figure 1-8, then click the Search button. Figure 1-8: Barnes & Noble title search 5. The search results will return a listing of DVD and VHS movies that meet the search criteria. See Figure 1-9.
Lesson 1: Electronic Commerce Foundations 1-15 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-9: Barnes & Noble search results 6. Click the top title to display details about the movie, as shown in Figure 1-10. Figure 1-10: Barnes & Noble item details If you are familiar with business-to-consumer buying on the Web, this process will seem familiar. In general, most B2C Web sites offer the same purchasing process, which has developed into an expected and understood format for the consumer. The next step the consumer takes is to add the product to his or her online shopping cart, continue shopping if desired, and then proceed to the purchase phase. Some sites offer returning customers easier purchasing by storing information gathered from past shopping sessions. Such information may include shipping addresses and credit card information.
1-16 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Microcommerce and Macrocommerce Microcommerce is a term used for e-commerce service or software purchases that are between U.S. $0.01 and $5.00 (up to five euros). Some microcommerce transactions can even be smaller than a penny. Microcommerce offerings are usually goods or services that are provided to customers on an individual basis. When a microcommerce transaction (or microtransaction) occurs, it is known as a micropayment. Many micropayments occur on a per-click basis. Such payments are, of course, small, but can add up to significant revenue. Enterprise microcommerce Enterprise microcommerce is a form of B2B commerce. A company can negotiate a contract to provide a service or product that has a very small cost associated with it (for example, a half-penny per transaction). However, this company may be able to sell this service hundreds or thousands of times a day to generate revenue. Examples of enterprise B2B-based microcommerce can include the following: Database connectivity — A company provides access to databases. Software use — A company provides software on a per-user basis. For example, a company might charge a penny ($0.01) for each use of a Java applet or PHP script that it has created. Web services — A company might provide a Web service that costs a few cents each time it is accessed. A Web service is a software component that is accessed over the Internet using the Extensible Markup Language (XML). Content — A company might provide online content and charge each time an article or learning object is accessed. Consumer-based microcommerce You are generally more likely to find examples of consumer-based microcommerce. Examples of consumer-based B2C microcommerce can include the following: Music purchases, including purchases from services such as Apple iTunes (www.itunes.com) and Napster (www.napster.com) Newspaper article purchases, including archived articles on a per-story basis Purchases of individual book chapters or portions of chapters from publishing companies Small service purchases, which can include sending voice calls Software purchases, which can include actual software as well as software service plans Member-only areas of a Web site that, for a fee, offer a no-advertisement section Purchases made on gaming and gambling sites Clip art purchases OBJECTIVE: 1.5.8: Microcommerce concepts
Lesson 1: Electronic Commerce Foundations 1-17 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Macrocommerce Macrocommerce is a term often applied to the sale of goods (for example, computer hardware) on the Internet. It is also used as a term that describes common e-commerce purchases that are over U.S. $5.00 (five euros). Benefits of Electronic Commerce Electronic commerce has the potential to markedly increase the speed, accuracy and efficiency of business and personal transactions. Establishing a Web storefront can be as simple as allowing an Internet Service Provider (ISP) to host your electronic storefront for a low cost. Some ISPs charge very low fees for Web-hosting services. Compare this structure with the costs of leasing and upkeep of a prime real estate parcel, then consider the broader reach of a Web storefront. The benefits of electronic commerce include: Instant worldwide availability. The store is always open and is accessible to a global audience. A streamlined buyer-to-seller relationship resulting from simplified communication and direct interaction. Reduced paperwork, allowing a better focus on customer needs. Reduced errors, time and overhead costs in information processing because redundant data entry requirements can be eliminated. Reduced time to complete business transactions, specifically from delivery to payment. Easier entry into new markets, especially geographically remote ones. For instance, a Web site selling Persian rugs can be accessed by customers in Australia, North America and anywhere else that an Internet connection is available. New business opportunities as entrepreneurs design innovative ways to use the Internet for commerce. Improved market analysis. The large base of Internet users can be surveyed for an analysis of the marketability of a new product or service idea. Wider access to assistance and advice from experts and peers. Improved product analysis. Businesses can collect, collate and make available their product information over the Internet. The ability to streamline and automate purchasing. Companies allow customers to generate and send purchase orders online, minimizing the costs associated with handling sales orders. Drawbacks of Electronic Commerce So far you have considered many benefits that electronic commerce offers business owners and customers. However, electronic commerce also has some disadvantages. Electronic commerce may increase vulnerability to fraud. The public network allows anyone to offer products or services for sale with anonymity, thus increasing the potential for misrepresentation or fraud. OBJECTIVE: 3.1.2: Growth drivers and barriers Internet Service Provider (ISP) An organization that maintains a gateway to the Internet and rents access to customers on a per-use or subscription basis. OBJECTIVE: 3.1.1: E-commerce vs. traditional sales methods
1-18 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Other potential problems with electronic commerce include the following. Intellectual property — Protecting intellectual property becomes a problem when duplicating information and creating illegal copies of copyright-protected material are so easy. Confidentiality — Users need to transmit confidential financial information over the Internet to pay for goods and services. That information must also move through the e-commerce system and sometimes be stored for future use. Financial data must be protected to mitigate the risk that it will be viewed when it is transmitted over the network or illegally read from storage. Taxation — If a Web user living in Illinois buys something from a Web site in California, is the purchase taxed? If so, does the buyer pay Illinois or California sales taxes? Customs and interstate boundaries — The Internet spans international boundaries. Can Web users buy a product outlawed in one country from a Web site in another country if the product is legal in the country hosting the Web site? What are the laws and how will they be governed? What about products, such as alcohol, that are governed by state law? Regulations — Government bodies and regulators may enforce restrictions that invade privacy or hinder security. What are the rules? Credit card fraud — The U.S. Electronic Funds Transfer Act stipulates a limited liability of U.S. $50 to the cardholder in case of fraud. In electronic commerce, what are the legal protections against unauthorized or fraudulent transactions? Security — Authentication, nonrepudiation, accountability and physical delivery are all handled somewhat differently under the various electronic commerce packages now in use. When will a consistent baseline be available? Trust — If a Web-based business is easy to set up, it is just as easy to tear down. In traditional transactions, the buyer and seller assess each other before completing the transaction. How does a new Web business assure customers that it will be there when they need service or support? Availability 24 hours a day, seven days a week — If constant worldwide availability is an advantage, it is also a risk. What happens to business opportunities that might be lost through service disruption? In the following lab, you will examine the Habitat For Humanity Gift Shop site and analyze its e-commerce model. Suppose you have been hired by Habitat For Humanity to make recommendations for improving its sales through e-commerce. You must examine the current site and think about how an e-commerce site will affect the business. Lab 1-5: Reviewing electronic commerce basics In this lab, you will examine the Habitat For Humanity Gift Shop Web site. You will analyze it in terms of the concepts discussed throughout this lesson. (This lab can be performed individually or as a group.) 1. Open your browser and navigate to www.habitatstoreonline.com. intellectual property Products such as written materials, musical compositions and trademarks that are protected by copyright, trademark or patent law.
Lesson 1: Electronic Commerce Foundations 1-19 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 2. Browse the Habitat For Humanity Gift Shop Web site and view its various elements. See Figure 1-11. Figure 1-11: Habitat For Humanity Gift Shop home page During your examination of the Habitat For Humanity Gift Shop Web site, consider the following issues. Write your answers in the spaces provided. 3. What type of medium is this company using to help sell its product? Why? 4. How does the company’s electronic commerce model compare with its traditional commerce model? 5. Is the company using the business-to-business or the business-to-consumer model? 6. What three advantages might the company enjoy from providing electronic commerce?
1-20 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 7. Name three drawbacks the company might encounter from providing electronic commerce. 8. If Time Permits: Repeat Steps 1 through 7 to evaluate the other three focus companies. E-Commerce Solutions Having looked at some electronic businesses, you will now examine different solutions for implementing an electronic business. You will briefly consider these now, but they will be discussed in greater detail later in the course. The choices for an e-commerce site can be categorized as: In-house solutions. Instant storefronts. In-house solution With the in-house option, a Web business must buy or develop and integrate an e-commerce software package, a service platform, redundant Internet connections, secure payment-processing network connections and round-the-clock maintenance. Generally speaking, this approach is reserved for large businesses that have the staff and financial resources to support this effort. The advantages of such a solution are considerable: complete control of the hardware and software infrastructure, and an easier integration into existing back-end enterprise systems. The disadvantages are mainly monetary: Implementing and maintaining an elaborate in-house electronic commerce system can cost more than U.S. $250,000. This cost effectively puts such systems beyond the range of most small businesses. Instant storefront The alternative to an in-house solution is to use a software package from a vendor that can provide the desired features at a lower cost. Typically, these packages require very little technical knowledge. The more advanced ones allow for customization, and also provide the necessary technology so the business can focus on selling goods and services. The two categories of instant storefront packages are online and offline (hybrid). Online storefront solution With an online package, the entire electronic commerce package is on the service provider’s infrastructure. The business accesses it with a Web browser. The advantage of an online storefront business is that it can be managed from anywhere that has an Internet connection. The business is freed from constant upgrades and other logistical issues associated with maintaining an Internet infrastructure. The disadvantage is that control of the software package is with the ISP, and maintenance can be time-consuming, depending on the speed of the Internet connection. Yahoo! Store and Open Market’s Shopsite are examples of online storefront solutions; others will be examined later in the course. OBJECTIVE: 1.2.1: In-house vs. online instant storefronts OBJECTIVE: 1.2.2: Third-party instant storefronts
Lesson 1: Electronic Commerce Foundations 1-21 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Offline/hybrid storefront solution An offline package typically requires installing software on the business’s computing infrastructure. The owner builds and maintains the online business inside the application. When the site is ready, it is uploaded to the hosting Web server to be accessed by the public. Any changes are made offline using the software and uploaded when ready. Advantages of an offline package include control (the business owns the software) and speed (changes to the store can be made quickly). The disadvantages include lack of software portability, and installation and upgrade problems. ShopFactory (www.shopfactory.com) is an example of an offline/hybrid storefront. Small-business owners do not usually have the time or energy to worry about technology. Technology should be an enabling, not a disabling, force. Often, the quickest and easiest way for a small business to establish a Web presence is an online, ready-to-use package. In the following lab, you will examine the instant storefront options provided by Verio. Suppose you are beginning to evaluate the options for creating an e-commerce site for your business. You do not have an in-house Web development team or the resources required to implement an offline storefront. You would need an online storefront option that you can implement quickly and easily. Lab 1-6: Viewing an instant storefront option In this lab, you will examine a company that offers Web site hosting through an online storefront. 1. Open your browser. 2. Browser: In the Address field, enter www.verio.com. 3. Click GO next to Get A Web Site Hosting Plan on the left side of the page. 4. Click Get An E-Commerce Hosting Plan in the menu on the left side of the page. 5. Examine the different types of e-commerce plans available. See Figure 1-12. OBJECTIVE: 1.2.3: E-commerce storefront software
1-22 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-12: Verio Web site showing e-commerce options Web Storefront Hardware and Software This section will discuss the hardware and software used in establishing a Web storefront. This list is not comprehensive, but should be used as a starting point for planning an electronic commerce-enabled site. Hardware The following hardware is required to establish an in-house Web storefront: A powerful Internet connection — T1 (or fractional T1), Digital Subscriber Line (DSL), Integrated Services Digital Network (ISDN) or T3 is suitable. A dial-up ISP account is usually not a viable or reliable option for any type of Web server. Powerful systems — Systems such as Sun Workstations or Windows 2000/Windows Server 2003 are needed to run the required servers and supporting software. End-user computers — These computers are used as in-house clients accessing your electronic commerce site. When you establish an e-commerce site using an instant storefront, the ISP will provide the server hardware and software. The only hardware requirement is the computers used by the in-house personnel responsible for managing content and processing orders. T1 A North American high-speed digital carrier used to transmit data at a speed of 1.544 Mbps; transmits a DS1 formatted signal. Digital Subscriber Line (DSL) A high-speed direct Internet connection that uses all-digital networks. Integrated Services Digital Network (ISDN) An international standard that defines the transmission of data, voice and video over digital lines at 64 Kbps. An ISDN line consists of several 64-Kbps channels, which can be combined for faster speeds. T3 A North American high-speed digital carrier used to transmit data at speeds up to 44.746 Mbps; usually used by major ISPs and other large organizations.
Lesson 1: Electronic Commerce Foundations 1-23 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Software The following software is required to establish a Web storefront: A solid and dependable Web server software package — Web server software from Apache (www.apache.org), Netscape or Microsoft will suffice. Web server software support of Secure Sockets Layer (SSL) is essential, and servers from all three companies mentioned previously support SSL. Certificates to authenticate the Web servers and encrypt traffic — Certificates can be obtained from certificate authorities such as VeriSign. An operating system. Payment infrastructure — VeriSign has the required servers and clients to implement the payment infrastructure, which includes a payment gateway. Other vendors, such as DigiCash, PayPal, Microsoft and Netscape, also provide certain components to support the payment infrastructure. A database and database management system (DBMS) — Databases are critical for storing customer and product information and catalogs. Web page development software — Although HTML can be written using a word processor, a number of benefits can be gained by using a development platform such as Microsoft Visual Studio .NET or Dreamweaver. These benefits include easier server-side development, debugging capabilities and drag-and-drop user interface design. When you purchase instant storefront services, most of these requirements will be met by the ISP. Professional staff To establish a Web storefront, you need the professional skills provided by the following personnel: Web designers, HTML writers and content developers Application programmers Network and database administrators Order fulfillment personnel Customer support personnel Depending on the size of the business and your available resources, some personnel can perform multiple tasks. Ingredients of a Web Storefront Turning a business into a Web-based enterprise can be deceptively simple, or if the business goals and expectations are not well defined, the task can also be unduly severe. The Web provides all the elements needed to turn a business into an electronic commerce-enabled organization. However, the final test is to ensure that these elements work well together. To this end, we will discuss the various aspects of ensuring that a traditional business can successfully make the transition into a Web-enabled commercial concern. database management system (DBMS) A program used to store, access and manipulate database information.
1-24 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Turning a business into a Web storefront is not a panacea, but simply an additional way to sell products and services, particularly for new businesses. If a business is well established and has excellent name recognition, turning it into a completely Web-based concern may be a mistake. For example, consider a well-established retail store such as Macy’s department store. If Macy’s decided to move completely to the Web, it would alienate customers who actually want to shop in a physical store; after all, walking the aisles of a department store is an important part of shopping for many customers. In this example, Macy’s should use the Web as a supplement to its advertising and selling infrastructure to drive people to its retail outlets, and not as the only way it does business. A newer business has more leeway in using the Web. Because it does not have the less tangible assets of name recognition and customer loyalty, it can exercise considerable freedom in how it uses the Web to conduct its business. It can truly become a virtual business by carrying no inventory and possessing no real estate. The numbers and the message are apparent: Electronic commerce is here to stay. How does one guarantee the success of a Web storefront? The seven essential ingredients for success are as follows: Generating demand Generating orders Fulfilling orders Processing payments Providing service and support Enhancing security Providing community Generating demand For the storefront to be most effective, the following two situations must occur: 1. Traffic must be attracted to the storefront. 2. “Lookers” must be converted into buyers. The success of online advertising in attracting traffic to a Web storefront and converting lookers into buyers depends on the vehicle used for online advertising. Unlike traditional forms of advertising such as direct mail and telemarketing, Internet-based advertising is constantly changing. No single form of Internet advertising has proven more effective than others. In other words, despite the impressive numbers, the best method in all situations has not yet been established. Advertisers in general so far have focused on banner ads, targeted e-mail and pop-up ads. Portal sites such as Yahoo! and America Online sell impressions and banner ads that are randomly displayed throughout their Web sites. Companies pay for the impressions based on the cost per thousand (CPM) impressions. Targeted e-mail advertising is more cost-effective, although more intrusive than banner ads. Targeted e-mail lists are constructed when consumers subscribe to services or submit online registration forms. Demographic data is collected, collated, analyzed and banner ad Clickable advertisement found on frequently visited Web sites. targeted e-mail Bulk e-mail sent to target consumers; the electronic equivalent of targeted junk mail. pop-up ad Separate advertisement window that appears either behind or in front of the page the user is viewing.
Lesson 1: Electronic Commerce Foundations 1-25 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 compiled into various e-mail lists. Merchants can then purchase these lists based on their needs. One problem with e-mail advertising is that some scam artists have begun sending e-mail messages that impersonate legitimate e-commerce businesses. The messages include links to a site that appears to be the legitimate vendor, but is actually a spoofed site. The attacker uses the spoofed site to gather confidential information from consumers, such as credit card numbers. This technique is known as phishing (you will learn more about phishing later in the course). Pop-up advertising has recently become popular. However, it is so controversial that some browsers and ISPs have implemented pop-up “blockers” to help protect users from unwanted pop-up advertising. In fact, the United States government is considering laws that would regulate how pop-up windows can be displayed and used. Generating orders After the customer has been attracted to a Web site, the next challenge is to persuade him or her to order. The biggest challenge to generating orders is making sure that the ordering process is easy to use. Designing a Web storefront requires discipline in more than software engineering; it requires that the designer understand visual design and human psychology. When developing the ordering infrastructure, remember the following guidelines. Be consistent. This attribute cannot be overstated. Consistency is the key to a good Web site. It includes making sure that all the pages have a consistent look and feel; maintaining a navigation bar on each page; using consistent background and foreground colors; and using the same font size and logos. Eliminate redundant information. If the customer provided his or her name upon entering the site, do not ask for it again on a form. Make ordering easy. Use techniques such as shopping carts and cookies. Make sure the customer does not need to manually calculate any total. For instance, if the customer orders 63 CDs at U.S. $12.98 each, display the total amount of U.S. $817.74 plus taxes, shipping and handling. Accept many substitutes. Ensure that a wide variety of payment mechanisms is available, including credit card, check, debit card, automated teller machine (ATM) card, or cash on delivery (c.o.d.). Include a bailout mechanism. Always include a phone number the customer can call with questions. If a navigation bar is being maintained, the phone number should appear on it so that the customer need not return to the main page to find the number. Fulfilling orders When the customer clicks the Order Now button, generate an order number (or any similar tracking number) and display it to indicate that the shipment is in progress. Ensure that the customer’s expectations of timely and undamaged delivery are met. Some electronic commerce software packages aid in this process by generating shipping labels and packing slips. Most customers visiting your storefront will have e-mail addresses. As part of the ordering process, you should request the customer’s e-mail address. Upon completing the order, send the customer a confirmation and tracking number by e-mail, along with a phone number to call in case of problems. spoofed site A Web site designed to look like a legitimate site. cookie A text file that contains information sent between a server and a client to help maintain state and track user activities. Cookies can reside in memory or on a hard disk drive.
1-26 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 As an example, an electronic storefront that sells books can leverage its distributors’ efficient shipping capabilities by having them drop-ship the products (in other words, shipping the product directly from the manufacturer, distributor or supplier to the consumer). By sending a UPS tracking number to customers by e-mail, the company directs users to the UPS Web site so they can track their merchandise during delivery. Processing payments Payment processing is unarguably the most enjoyable step for the electronic merchant. At this juncture, the merchant verifies and transfers funds from the customer’s credit card or checking account to his or her own bank. Approval must be timely so the merchant can expedite shipment of the order and still be sure of getting paid. Some e-commerce businesses accept traditional forms of payment, such as a check or money order sent in advance, and c.o.d. shipments. However, accepting one or more types of electronic payment is recommended. The three models for electronic payment are as follows: Cash model Check model Credit model Cash model The cash model, or e-cash, is the easiest to understand, but the hardest to implement on the Web. E-cash is analogous to the minting of electronic money or tokens. In electronic cash schemes, buyers and sellers trade electronic value tokens, which are issued or backed by some third party, usually an established bank. The buyer (customer) purchases the digital equivalent of money from an established bank and deposits it in a digital wallet, which is stored on the computer. When he or she makes a purchase from a Web site that accepts e-cash, the ordering software automatically deducts the correct amount from the customer’s digital wallet. The advantage is that during a transaction, funds are transferred immediately and no back-end processing is required. Check model Using this model, a customer presents a digital version of a check to a Web storefront. The digitized check is encrypted using the appropriate technologies (we will discuss security later in the course). The Web storefront verifies the check through its financial institution, which in turn consults the customer’s financial institution to ensure that funds are available. The biggest disadvantage of this model, at least for the storefront, is that the funds are not transferred immediately. One of the leading vendors in this area is iTransact Inc. (www.itransact.com). Later in this course, you will examine this type of payment structure. Credit model The credit model works well on the Web, partly because existing credit-card processing already uses much of the network infrastructure needed for electronic commerce. For instance, when presented with a credit card, a merchant in a traditional transaction scans the card through a reader and in turn authorizes the transaction through a financial institution. This authorization may be performed over the existing phone network using modems. OBJECTIVE: 1.5.3: Appropriate payment methods
Lesson 1: Electronic Commerce Foundations 1-27 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 On the Web, after a customer enters the credit card number on a Web order form, the Internet is used to deliver that information to an authorization server. From that point on, the transaction proceeds similarly in both the traditional commerce and the electronic commerce scenarios: Assuming that authorization succeeds and enough funds are available in the customer’s account, a capture transfers the funds from the customer’s bank to the merchant’s account. We will examine issues of payment processing in more detail later. Providing service and support It is imperative to satisfy the customer’s support needs, which include pre-sales inquiries, order tracking and post-sales support. As mentioned before, the business’s Web page must be designed to allow the customer to easily contact the merchant using an online form, e-mail address or phone number. A number of software packages cater to the specific needs encountered during service and support by offering the following advanced support features. Automatic callback — Many sites have a link that, when clicked, sends an e-mail (or phone) message to a Web business’s automatic call distribution center. This feature enables the business’s staff to call the customer back immediately, assuming the customer has a second phone line; with the push toward Voice over IP (VoIP), a single line suffices. Click-to-dial — Some sites have a link that, when pressed, initiates a phone call to a Web storefront’s operator (again, assuming that the customer has two phone lines or is using VoIP). The operator can assist the customer as he or she browses the Web site. Chat — Many sites offer a customer support chat link that starts a text-based chat session with a customer service representative. Chat links are increasingly used for technical support and for quick resolution of customer support issues. Co-browsing — After a customer has been assigned an operator through automatic callback or click-to-dial, the operator can assist the customer by sharing the Web page being viewed. Some software will show the same Web page to both the operator and the customer; a change of location by either party is reflected on both ends. Hipbone.com offers a co-browsing solution technology that is used by Oracle Corporation. Hipbone allows Oracle’s sales and service representatives to interact visually with customers or prospects over the Web during a normal telephone call. Enhancing security Security is a major concern for customers during an electronic transaction. Will the credit card number be stolen? Will someone find the customer’s home address? Although these are valid questions, customers should know that Web transactions are as secure as (if not more so than) traditional transactions in which customers routinely give their credit cards to waiters in restaurants or vendors over the phone. What is to prevent a waiter or a phone vendor from retaining the credit card number for future fraudulent charges? Customers can be made to feel more secure about transmitting personal information over the Internet when certificates are used to authenticate both parties in a transaction and when the transaction is encrypted. VeriSign (www.verisign.com) is a leading certificate vendor. With a VeriSign certificate to authenticate the parties and Secure Sockets Layer (SSL) to encrypt the traffic, Web transactions can be made very secure. Secure Sockets Layer (SSL) An encryption protocol used to protect data transmitted between a client browser and a server.
1-28 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 In the following lab, you will visit the VeriSign site to learn how to list the SSL certificates for a company. To do so, you will use an SSL connection. Suppose you have been asked how an SSL certificate will affect the user’s experience. You must demonstrate how an SSL connection works and how a user can know that the connection is secure. Lab 1-7: Viewing a site secured with SSL In this lab, you will view the VeriSign Web site. It is important to know that Thawte Consulting, a leading provider of digital certificates to Web sites and software developers, was acquired by VeriSign in December 1999. 1. Open your browser. 2. Browser: In the Address field, enter https://knowledge.verisign.com/support/ssl-certificates-support/index.html. You should see the VeriSign SSL Certificates Support page shown in Figure 1-13. Figure 1-13: VeriSign SSL Certificates Support page 3. Scroll down the page. Under the Manage Your Certificates section, click the Search button, shown in Figure 1-14.
Lesson 1: Electronic Commerce Foundations 1-29 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 1-14: VeriSign Search button 4. If you see a message indicating that you are about to view pages over a secure connection, as shown in Figures 1-15 and 1-16, click OK (or Continue). Figure 1-15: Microsoft Internet Explorer Security Alert Figure 1-16: Netscape Navigator Security Information
1-30 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 5. You are now on a secure connection. Look for the lock icon next to the address bar of your browser (shown circled in Figure 1-17). If you double-click the lock, a dialog will pop up indicating an SSL connection and the certificate information. Figure 1-17: Browser lock icon showing secure connection 6. From here, you can find a company’s SSL certificate. For example, enter Amazon in the Common Name text box and click Search to see matching certificates. Consumers who are taught data security techniques can better discern what measures are being taken and how to detect them to ensure information security and privacy. Security will be discussed in more detail later in the course. Providing community Customer loyalty is something all Web businesses hope to obtain. As much as possible, a Web storefront, through its services, sales and support, must create a “stickiness” with the customer to build loyalty and encourage repeat business. Powerful tools to achieve this result include sending special offers and new item announcements to consumers via e-mail, crediting frequent flier miles for dollars spent, and other such promotions. Amazon.com generates 58 percent of its sales from repeat customers as a result of its developed community. The Virtual Enterprise The Web connects islands of information, and the people seeking that information, from within corporate intranets and across the Internet. Sharing information without regard to physical location has prompted new forms of virtual business endeavors. A virtual enterprise is a temporary partnership of independent companies or individuals, such as suppliers of goods and services, and those suppliers’ customers. Modern
Lesson 1: Electronic Commerce Foundations 1-31 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 telephony and networking communications technologies link these parties so that they can profit from the rapidly changing business ventures and opportunities. In a virtual enterprise, parties generally share costs, skills and knowledge pertinent to that specific venture or goal. Each partner contributes skills according to specialty, and can disseminate regional information or products to a larger, possibly global, audience. This enterprise is called “virtual” because it consists of core partners but does not have a central office or a hierarchical structure. Through electronic communication, team members can work together in real time, regardless of geographic location. Partnerships are often temporary, informal and focused on special opportunities. Upon completing a venture, a virtual enterprise typically dissolves. Specific technologies that enable a virtual enterprise include the requisite Web, application and database servers, and telephony services (help desks and teleconferencing services). A Virtual Private Network (VPN) is an encrypted data stream that exists between two computers. A VPN can exist between a standard client host and a server, between a client and a firewall, or between two firewalls. A VPN allows two parties to use encryption to freely communicate across public networks, such as the Internet. Although connectivity mediums such as leased lines and frame relay allow virtual enterprises to exist, the Internet is quickly becoming the medium of choice. Creating a VPN connection across the Internet is cost effective because it allows companies to connect to each other without requiring expensive hardware and software. It is also efficient because people can connect to the Internet from practically anywhere. The scope of this course precludes discussion in any detail of the issues involved in connecting the Internet, or more specifically, an electronic commerce Web storefront, to older legacy systems and mainframes. Although many companies store information about products, orders and inventory on mainframes, the focus of this course is to examine electronic commerce concepts and issues from a higher level. Site Implementation When a new site is implemented, the development usually occurs in phases. This structure allows the site to progress step-by-step until it achieves all its goals. It is especially common when a site is being converted or upgraded to allow functional e-commerce transactions. This approach is called a phased approach or implementation. Phased approach A gradual approach is generally advisable, especially for an established business with a reputation to uphold, and customers to attract and keep. A new business with few customers can afford to take a bigger risk in moving to electronic commerce. However, as a general rule, the following steps embody a phased approach to the Web storefront: 1. Information-only Web site 2. Limited transactions 3. Full transactions 4. Legacy system integration Virtual Private Network (VPN) A secure network between two sites using Internet technology as the transport; an extended LAN that enables a company to conduct secure, real-time communication across an untrusted network.
1-32 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Proper planning is important whether you are using a phased approach or implementing the Web site all at once. Information-only Web site This phase is the digital equivalent of testing to see whether an online presence is appropriate for your business. An information-only Web site is the least intrusive and fastest way to establish a Web presence. In this stage, the business does not necessarily sell goods or services, but merely establishes an online presence to attract potential customers. In the earlier days of the Web, many businesses started using this step. Fortune 500 companies such as Coca-Cola, IBM, AT&T and newer companies such as Netscape Communications established Web presences by setting up information-only Web sites. Limited transactions After an information-only Web site has been established, the next phase is a limited-transaction Web site. At this point, the intent is not to provide a fully developed Web storefront but a rather limited form of sales using the Internet as a transaction medium. This step is characterized by very limited Web-based customer support. The emphasis is more on offering limited goods and services with two goals: getting the customer accustomed to Web transactions and solving any problems in the merchant’s ordering and delivery processes. Payment may be done through traditional means such as sending a check or giving a credit card number over the phone because the merchant may not be able or willing to deploy a fully integrated Internet security infrastructure. Full transactions The next step after limited transactions is full transactions. At this stage, items such as security infrastructure become necessities. The merchant now offers a complete digital purchase option. Other offerings at this stage include full service: product support and registration, a full catalog, and searching and querying capabilities. Legacy system integration Overlapping the full transaction transition is legacy system integration. If a merchant already has computerized inventory control and billing systems, the existing system is integrated into the Web storefront. Back-end databases are linked to the Web using browser-based front-end graphical user interface (GUI) applications (a front-end application, also known as the end-user application or end-user interface, is the part of a multi-tier application with which a user interacts). After you have established a transition path, you can continue building the ingredients for a successful electronic storefront. E-Commerce Guidelines Established companies take a slightly bigger risk in moving to a Web storefront; they risk losing customers if they move too fast or choose the digital medium exclusively over more traditional ones. Smaller companies can afford to adopt the new medium quickly because they have lower risks. Simply publishing a Web site does not constitute electronic commerce; the costs are high, but so are the advantages. Overall, the following guidelines will provide an effective path as your company moves toward a Web storefront: Know your customer and use the information you have. Notice how companies such as Amazon.com and Nabisco have used this information to their advantage. graphical user interface (GUI) A program that provides visual navigation with menus and screen icons, and performs automated functions when users click command buttons.
Lesson 1: Electronic Commerce Foundations 1-33 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Know whether you want to outsource or use in-house experts. For maximum control, the latter route is preferable; the disadvantage is its expense, and it may not be suitable for smaller companies. Outsourcing the electronic commerce infrastructure is an attractive solution for small businesses. Evolve. With standards being defined and key software (such as browsers) changing rapidly, evolution and adaptability are the keys to a successful electronic commerce site. Be flexible. Flexibility involves customer needs as well as technological needs. Businesses need to be flexible enough to accommodate varying customer needs including reverse credit, support and ensured satisfaction. Create a business framework. This guideline encompasses defining business processes and building relationships with customers and vendors. Anticipate hurdles. Some hurdles, such as expansion, will be anticipated. Others will not. Case Study Cooking Up an E-Commerce Solution El Pote de Cobre is a retail chain that sells copper cooking utensils. The chain has 10 stores, located throughout Mexico. The company does not currently have a presence on the Internet. Tina has been hired as a consultant to help the company design an e-commerce solution. She must assess the benefits, costs and risks of implementing an e-commerce site and make recommendations to the company. Tina analyzes the company’s current business model and determines that the company should immediately proceed with an offline solution that implements full transactional support. She recommends implementing the site in only Spanish at first, and then phasing in other languages as the budget permits. * * * As a class, discuss the following issues with regard to El Pote de Cobre. What benefits will be gained by offering products for sale on the Internet? What risks are involved in offering products for sale on the Internet? Should the company use the implementation approach suggested by Tina? If not, how would you change the implementation phases? What advantages are provided by offering an English version of the Web site? Tina has recommended using an offline solution. Is this the best choice?
1-34 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson Summary Application project Now that you have examined the basics of e-commerce, including some of the statistics and predictions that have been made, how has your outlook or understanding changed? Has e-commerce changed the way you do things in your personal or professional life? Were these changes made out of necessity, such as mandates in procedures at the office, or were they made for convenience, to save time and money? However you view e-commerce, it will probably affect your life to some degree as businesses continue to discover how e-commerce can better serve them and their customers. Skills review In this lesson, you learned the definition of electronic commerce and the advantages and disadvantages associated with moving to such a system. You also saw why electronic commerce is a growing area in which businesses should establish a presence. You examined the seven ingredients of a successful Web storefront and discussed how to ensure that these ingredients are used to benefit the business. Finally, you examined some of the components required in hardware and software to deploy an e-commerce Web site. Now that you have completed this lesson, you should be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 1.2.1: Distinguish between in-house and online instant storefront options for creating an e-commerce site. 1.2.2: Evaluate the advantages and disadvantages of using third-party instant storefronts. 1.2.3: Evaluate the advantages and disadvantages of using e-commerce storefront software. 1.5.3: Choose an appropriate payment method. 1.5.8: Identify and implement microcommerce concepts (includes micropayments, microtransactions). 3.1.1: Compare the advantages and disadvantages of e-commerce and traditional sales methods. 3.1.2: Identify business growth drivers and barriers.
Lesson 1: Electronic Commerce Foundations 1-35 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson 1 Review 1. What is targeted e-mail? 2. What are the two most important components of the demand-generation phase? 3. What is a Virtual Private Network (VPN)? 4. What are two possible drawbacks of electronic commerce? 5. What are the three payment models for electronic commerce?
1-36 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0
4Lesson 4: Online Product Promotion Objectives By the end of this lesson, you will be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 3.1.3: Establish and protect a brand (includes trademark registration). 3.1.4: Identify the relevance of blogging to e-commerce. 3.2.4: Avoid questionable practices (includes spam, spyware, selling user information). 3.3.6: Obtain browser and operating-system use patterns. 3.3.9: Implement banner exchange networks and referrer programs. 3.3.10: Promote and advertise an e-commerce site (includes search-engine placement options, synchronizing e-commerce promotion methods with traditional methods). 3.3.11: Implement online marketing strategies (includes incentive plans, banner ads, blogging, acceptable e-mail marketing practices).
4-2 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Pre-Assessment Questions 1. Alan has an online business that provides health tips. He has agreed to put ads from a business that sells drugstore products on his Web site. In return, the online drug store agrees to place ads on its Web site directing people to Alan’s site. Which type of online promotion method is Alan using? a. Banner exchange b. Referrer site c. Banner ad d. Targeted e-mail 2. What is the difference between a clickthrough and an impression? a. Clickthrough represents the number of times an ad is downloaded, whereas impressions represent the percentage of ad viewings that resulted in a user’s accessing an ad. b. Clickthrough represents the number of times a user clicks an ad, whereas impressions represent the number of times an ad is downloaded. c. Clickthrough is the percentage of ad viewings that resulted in a user’s accessing an ad, whereas impressions represent the total number of times an ad appears on one of the Web site’s pages in a single visit. d. Clickthrough is the percentage of ad viewings that resulted in a user’s accessing an ad, whereas impressions represent the number of times an ad is downloaded. 3. You want to make sure that search engines do not index the images on a Web page. What <meta> tag would you use to specify this?
Lesson 4: Online Product Promotion 4-3 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Online Promotion Overview A basic marketing tenet is that if customers do not know about a product, they cannot buy it. Product awareness results from promotion. Promotion means making others aware of something or someone. Types and methods of promotions are practically unlimited. Some promotions are driven by marketing campaigns, and others may be driven by public opinion or demand. Promotions can be positive or negative. All promotions are designed to build awareness. Our discussion of promotions focuses on the vehicle, not the message. The vehicle is the promotion method — that is, the means by which you are putting yourself in front of potential consumers. The message is the actual promotion, what you have to say to your potential consumers. For example, an Internet radio promotion is “how” people get the message, making it the vehicle. The message is what listeners get from radio exposure. Your ad campaign will define both the vehicle and the message. Types of online product promotion You will examine several types of online promotion. Some should be familiar, and others may not be. You will also consider the characteristics that make these promotions successful. Following is a list of common types of online promotion: Banner ads Banner exchange Referrer sites Blogs and blogads Pop-up and related ads Search engine placement Spam e-mail Targeted e-mail Opt-in e-mail Online marketing growth Internet commerce continues to grow. A 2004 study by the Dieringer Research Group found that nearly 100 million adults had made online purchases in the previous year (see www.imediaconnection.com/content/3972.asp). In the United States, marketers scaled back money spent on online advertising between 2000 and 2002, but much of this was due to the failure of a huge number of Internet-based businesses during that period. In a global February 2006 study by Web Trends Inc., 57 percent of respondents indicated that the Internet was at the center of their marketing strategy or would be in the next year. Only 4 percent of respondents said that they had no plans for Internet marketing. Sources of information about online marketing trends include the following: ClickZ Network Solutions for Marketers (www.clickz.com) iMedia Connection (www.imediaconnection.com) Interactive Advertising Bureau (IAB) (www.iab.net)
4-4 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 International marketing It is important to remember that with online marketing, you might have less control over the specific audience that sees your ad. When posting ads to popular portals and search engines, you do not always know where the ad will be seen. This may not be your desired result, depending on your marketing plan. If you are interested in attracting international customers, you should consider using localized online advertisements with appropriate regional placements. E-Commerce Promotion Considerations As with all other aspects of site design and implementation, several issues will influence your online promotion decisions. You must consider who your audience is and what, if any, exposure they might have had to your business or product in the past. Established businesses will typically have an established identity. Moving to the Internet does not necessarily mean that you should significantly change that identity. With a new business or service, you are establishing your identity and must keep in mind that word travels fast on the Internet. Your initial attempts at carving out your niche in the marketplace may propagate so far and so fast that you will not be able to change that niche in the future. B2B vs. B2C marketing As has been the case throughout the discussion of site development, your marketing decisions will be influenced by whether you are developing a B2B or a B2C site. The vehicle used to get your message out can be different between the two, as can the content and tone of your advertising message. Some general statements about marketing within a certain category can be made, but few if any definite rules. In general, a B2B site will be held more strictly to standards of professional conduct. The B2B customer is likely to be less forgiving of what might be considered obtrusive advertising, such as pop-up ads or spam e-mail. This characteristic of the B2B customer does not mean that a B2B site’s options are necessarily that limited. Some types of mass marketing, such as banner ads and opt-in e-mail, are acceptable, and even expected. For example, many B2B sites send out periodic newsletters that usually contain more advertising than any real news. The market is likely to be more accepting if a B2C site uses more aggressive marketing tactics, within reason. For example, it is not unusual for a B2C site to send daily e-mail announcements advertising current specials to former and current customers. Even the limited use of potentially annoying vehicles, such as pop-up ads, is acceptable as long as they are kept to a minimum. Even though consumers say that they do not like pop-up ads, they still click many of those ads. E-Commerce Site Categories Most Web sites that are involved with online advertising can be divided into two groups, publishers and marketers, based on how they benefit from the advertising. Publishers make money by carrying the ads. Marketers purchase ad space and make money by having people respond to the ad message. Many sites (and even some companies) depend on ad revenues, which are a primary revenue stream. One type of Web site in that category is the Web portal. Yahoo!, for example, is a portal. A portal is a Web site that many people visit and use to explore and participate in activities on the Internet. On Yahoo!, many advertisers pay for space to OBJECTIVE: 1.1.1: B2B and B2C development issues
Lesson 4: Online Product Promotion 4-5 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 place their ads. In return, Yahoo! offers Internet users reasons to come to the Yahoo! site so that the ads can be seen. Some of these services include the Yahoo! search engine, Yahoo! Mail, news, stock quotes and auctions. All these features are reasons that Internet users return to Yahoo! and that it is considered a portal. Most of these services are free, so the only form of revenue that Yahoo! can generate is to charge marketers money to place their advertising on the Yahoo! Web site. This structure makes Yahoo! an ad revenue-supported Web site. A publisher site must contain space for the marketer’s message, but that message will probably not constitute the bulk of a site: The ratio of content to advertising tends to be higher than on a marketer site. However, a marketer site will focus on advertising for its own products only rather than selling ad space for other sites, with some exceptions described later in this lesson. Publisher sites that contain heavy advertising and little content will not draw as many visitors; they may reap short-term profits, but their long-term viability will suffer. Publisher sites usually include a relatively large number of short marketing messages created by different companies. These messages can be communicated in a brief visit, and their efficacy is often measured in terms of how many users leave the publisher’s site to access the advertiser’s site. Publishers, then, have a much lower stake in keeping users at their sites, with repeat visits typically more important to them than long visits. Through its traffic volume and repeat visits, the publisher site offers visibility. Rates for placing ads are often based on the frequency with which the ads appear on the publisher site and the number of times that the ad results in a potential customer being redirected to the advertiser’s site. After a customer arrives at a Web site to purchase something (as a result of clicking a banner ad), the destination site receives a clickthrough. That means a Web user saw a banner ad on another site that interested him or her, and clicked it to go to the site offering the product or service. Some publisher sites base ad rates on a click-per-view basis, charging a per clickthrough rate. Portal sites often entice visitors to register so that they can customize the content displayed to their particular likes and needs. This feature also enables the portal site to better identify targeted ads matched to the visitors’ likes and dislikes, improving clickthrough and profitability. You will also see this in search engines, with targeted ads appearing based on the text entered as your search string. Because publishers can rely on repeat visits, they can use a value model that is not advisable for marketers. Publishers can provide directory and search engine sites, whose value consists chiefly in providing links away from the site. These types of sites are among the most successful advertising sites online. The second category is a marketer site, which differs from a publisher site in the following manner. The marketer site is the clickthrough destination, typically hoping to sell you a product or service rather than redirect you to another location. Therefore, a user will see very few banner ads for other products at other Web sites because the marketer site does not want to make it too convenient or too tempting to leave for another site. Links that take visitors away from the site, if any, are kept to a minimum. To understand this, consider the world of brick-and-mortar businesses. If you went to McDonald’s, you could order a Big Mac. But if the menu carried an ad directing you to Burger King for a Whopper, that ad would have a negative effect on the number of Big publisher site A site whose primary focus is selling ad space as a means of revenue. clickthrough An ad viewing or browser redirection resulting from a user clicking a banner ad. marketer site A site whose primary focus is selling products or services for revenue.
4-6 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Macs sold. Marketers use this same principle for visitors to their sites. They want to sell something, not send the customer elsewhere to make a purchase. A marketer has a strong interest in keeping the visitor at the site as long as possible, because the longer the visitor stays, the more chances the marketer has to convey the message. Depending on the product or service, the marketer may provide links to other sites that offer complementary products or services. For example, a site that offers sporting equipment may provide a link to another site that sells tickets to sporting events. One complements the other and will not cause users to leave and buy the same type of products elsewhere. A marketer site will often include related content that would tend to keep you at the site longer. Using the same example, a site that sells sporting equipment, the site could also offer related services, such as: Instructions for the proper care and use of sporting equipment. Official or sanctioned rules and requirements for sports and games. League management services. Schedules for major sports teams. Content of this type has two benefits for the marketer site. It addresses the primary goal of keeping potential customers at the site as long as possible. It also gives customers a reason to visit the site repeatedly, whether or not they purchase anything during the initial visit. Banner Ads Banner advertising is the most abundant form of online promotion. Banner ads have been used for many years, so their effectiveness has been tested over time. In 2002, banner ads accounted for 32 percent of online spending, down from 36 percent in 2001. Despite an ongoing drop as a percentage of total online spending, banner ads continue to be essential to online marketing. Some will say that banner ads are not effective, but statistics indicate that they are. The average response rate to banner ads for the Web is between 0.5 and 1.0 percent, which is comparable to other forms of media response rates. In fact, some studies show that Web banner ads have higher awareness rates than television ads. These rates are partially due to Web users’ active participation in the medium, whereas television is a passively received medium. When banner ads are responded to, conversion rates (from visitor to customer) are approximately 60 percent within the first 30 minutes. Banner ads seem to be effective up to four exposures per user. The user response to ads increases for each exposure up to four, after which it begins to drop. Banner ads do seem to increase site traffic and lead to sales, but they do not appear to increase brand awareness. Brand awareness is created on the Web site for the product or service, through the extensive use of a logo or slogan. Studies indicate that the best branding technique is to have the business’s logo on every page of the site. Banner ads should not be considered a magic advertising solution. Many Internet users are unhappy with the proliferation of banner ads. However, most of their frustration is directed not toward the advertisers but toward the sites hosting the banner ads. At one time, the biggest concern for advertisers was that potential customers might have configured their Web browsers not to allow the browser to download graphics. OBJECTIVE: 3.3.11: Online marketing strategies conversion rate The percentage of site visitors who decide to purchase goods or services from that site (in other words, visitors who are “converted” into site customers). OBJECTIVE: 3.1.3: Brands and trademarks
Lesson 4: Online Product Promotion 4-7 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Ad-blocking tools have become more sophisticated, with tools designed specifically to block banner ads. Banner ad terminology You need to be familiar with some terms as they relate to banner ads. The terms in Table 4-1 identify different aspects of banner ad use. Table 4-1: Banner ad terminology Ad Term Definition Ad clicks The number of times users click a banner ad Ad rotation Automatically changing ads in a given ad space, administered by the server or an ad broker Ad view See Impressions Banner An ad on a Web page that links to the advertiser’s site Booked space The number of impressions sold for an ad space Coalition for Advertising Supported Information and Entertainment (CASIE) Founded in May 1994 by the Association of National Advertisers (ANA) and the American Association of Advertising Agencies (AAAA) to guide the development of interactive advertising and marketing; www.casie.org Clickthrough The user act of clicking in response to an ad Clickthrough rate (CTR) The percentage of ad viewings that results in a user clicking an ad Click rate See clickthrough rate Click stream Recorded path of a user’s Web page visits Cost per click (CPC) An Internet marketing formula used to price banner ads; advertisers pay Internet publishers based on the number of clicks a specific ad banner receives; cost generally ranges from U.S. $0.10 to $0.20 per click; also referred to as “pay-per-click” Cost per thousand (CPM) The cost for a particular ad based on intervals of 1,000 impressions. See impressions. A Web site with a CPM rate of U.S. $20 is charging for each 1,000 times the banner is downloaded. If the site could guarantee 500,000 downloads, it could charge $10,000 for the ad ($20 times 500 thousands of impressions). Hit Each instance of a Web server sending a file to a browser; recorded in the server log file; generated for every element of the requested page, including graphics, text and objects (e.g., if a user views a page containing four graphics, five hits will be recorded in the server log — one for the page itself and one for each of the four graphics); used to measure server workload; a poor guide to visitor traffic measurement because it represents element requests rather than the actual number of visitors Impressions The number of times an ad banner is downloaded and presumably seen by visitors; correspond to net impressions from traditional media; accuracy is affected by browser caching of images and screen size versus page size
4-8 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Table 4-1: Banner ad terminology (cont’d) Ad Term Definition Log file A file that tracks actions that have occurred; maintained by Web servers to list every request made to the server; with log analysis tools, helps site managers determine where visitors are coming from, how often they return and how they navigate through a site (including how long they stayed) Page views The number of times a user requests a page containing a particular ad Unique users The number of different users who visit a site within a specific time period Visits A sequence of requests made by one user at one site; any user activity within a 30-minute time frame is considered one visit Effective banner ads Studies indicate that the highest clickthrough rate occurs between the third and fourth impressions by a given user. There are also several steps you can take to make a banner ad more interesting, which can increase clickthrough rates. Curb the temptation to make the ad too busy or confusing, which will lose the essential message. Traditional banner ads sometimes lack visual interest, but Bluestreak (www.bluestreak.com) has provided an alternative. Bluestreak creates banners that allow the viewer to interact with the ad before being linked to the destination. Many banners are on display in the Bluestreak site’s gallery. Questions Questions initiate user action and entice site visitors to click the banner. Questions can include phrases such as “Do you …?” or “Have you …?” or “Are you looking for …?” Questions may also contain the words “free,” “quick” or “try.” Calls to action A phrase can tell the user to take action. The most common call to action on banner ads is “Click here.” Others include “Go,” “Find,” “Last chance” or “Help.” These ads have become less effective with increased use because users are bombarded with increasingly desperate calls to action. Refreshed banners A banner ad will “burn out” and clickthrough rates will fall as users repeatedly see the same ad. Changing the banner periodically helps increase clickthrough. Yahoo! claims that burnout occurs in two weeks. Standard sizing Standard banner ad sizes should be used. Most publisher sites will require that the banner comply with these standard sizes before they will display it. Examples of these sizes are presented later in this lesson. Minimal file size Most users’ chief complaint about the Web is slow or impaired speed. If users must wait for the banner to download, they could become distracted, frustrated or bored. As with all Web design, download speed must be a key consideration. Making the banner ad file as small as possible will help shorten download time.
Lesson 4: Online Product Promotion 4-9 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Animation Web marketers once believed that animated banner ads received a higher clickthrough rate than static ads. This model is changing and more ads are static. One of the other drawbacks of animated banners is larger file size, resulting in longer downloads. Rich media ads The next step up from animation, rich media, such as video clips, Flash presentations and similar content, are used in banner ads to catch the consumer’s interest. As with other types of rich content, file size and download time are potential concerns. True claims Do not claim something on the banner that is not really what users will experience or learn if they do click through. Such false claims only frustrate users, who will probably click the Back button and not stay at the site. If you are paying for the ad based on the clickthrough rate, you want to attract only customers who are in your target market. Visual quality The banner should be visually attractive and have a high-quality look. Poorly designed banners have lower clickthrough rates. Color combinations work better for the average visitor than black and white or gray and white. Note that some color combinations blend together when seen by individuals with colorblindness. Obvious hyperlinks To help make the banner appear as an obvious link, applying a blue border around the image is sometimes helpful. Also, it is common to have a link labeled “Click here” in plain text under the ad. Banner sizes Both the IAB and CASIE have developed standard banner ad sizes (see www.iab.net/standards/adunits.asp). Figures 4-1 through 4-8 show examples of the most commonly used ad sizes. As mentioned earlier, Web sites selling advertising space will require that advertisers provide a banner based on these sizes because these sizes typically correspond to their rate schedules. Banner Ad Figure 4-1: Full banner (468 x 60 pixels) Banner Ad Figure 4-2: Full banner with vertical navigation bar (392 x 72 pixels) Banner Ad Figure 4-3: Half banner (234 x 60 pixels)
4-10 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Banner Ad Figure 4-4: Vertical banner (120 x 240 pixels) Banner Ad Figure 4-5: Square button (125 x 125 pixels) Banner Ad Figure 4-6: Button 1 (120 x 90 pixels) Banner Ad Figure 4-7: Button 2 (120 x 60 pixels) Banner Ad Figure 4-8: Micro button (88 x 31 pixels) The Ad Unit Task Force meets twice a year and reviews the effectiveness of new formats as they are released.
Lesson 4: Online Product Promotion 4-11 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Choosing banner ad space Choosing a Web site on which to advertise can have significant effects on the campaign. One of the benefits advertisers have when using banner ads is the ability to precisely target their markets. If an ad were to be placed randomly on a Web site such as www.yahoo.com, it would not be considered a targeted placement. Yahoo! would offer extremely high visibility, but it does not target a specific market. Tens of thousands of people use the Yahoo! Web site as a portal. Placing a banner ad on a site that is more specific to a market can result in better clickthrough. For example, imagine that a company has developed a new golf club it wants to market. Placing a banner on Yahoo! would give it high visibility, but not necessarily a high clickthrough rate. If the ad were placed on the official Web site of the Professional Golfers’ Association (www.pga.com), the same number of impressions would probably have a higher clickthrough rate. Targeted placement is one reason that choosing a site on which to advertise is an important decision. Due to the complex nature of ad placement, many companies are turning to advertising representatives to place banner ads on the Web. These advertising representatives can save the advertiser considerable time and effort by knowing where the most effective ad placement would be. They can also find other Web businesses that are willing to place ads on other sites. They make their money by taking a percentage of the revenue paid by the advertiser. Many business and publisher Web sites have a rate card, which is used as the basic guide to determine how much banner ad placement will cost. By visiting a Web publisher site and looking for the link to “advertise,” you should be able to locate the rate card and determine approximately how much ad placement will cost. However, the ad market is continually changing. If current trends continue, you might find in the future that some of the choicest ad real estate is no longer available. Some sites that traditionally acted as publisher sites no longer accept banner ads, instead finding different revenue streams such as annual subscriptions. This trend is in response to consumer complaints that banner ads are distracting and annoying. There is a growing trend for some sites to use the lack of banner ads as a way of helping entice users to that site. Finding ad space Finding ad space on a popular portal or other publisher site can be a problem. Many sites no longer provide a direct link to advertising rates, preferring to work through an advertising representative. It is often not cost-effective for a portal site to manage its own ad space. Portals that do directly manage their own ad space have typically stopped publishing their ad rates, preferring instead to have a sales representative contact you directly to negotiate ad rates. One reason for this is that most sites do not have a single set rate, but will quote a rate based on the visibility you want and the size of your advertising budget. In the following lab, you will investigate how Web portals manage advertising. Suppose you are looking at designing a new marketing campaign based on banner ads. One recent change you will find is that the Yahoo! portal site no longer publishes its ad rates, which is becoming the rule. OBJECTIVE: 3.3.11: Online marketing strategies
4-12 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lab 4-1: Determining ad rates at individual sites In this lab, you will visit sites on which you would like to advertise, and you will investigate the ad rates. 1. Browser: Navigate to www.yahoo.com. 2. Click the Advertise With Us link at the bottom of the page (see Figure 4-9). Figure 4-9: Yahoo! advertising link 3. Review the information requested. 4. Click Small Business Center. 5. Review the other advertising options offered. 6. Browser: Navigate to www.excite.com. 7. Click Advertise On Excite (see Figure 4-10). You will be redirected to AJinteractive, a site that manages advertising for Ask.com, the MaxOnline Network, Excite and iWon.
Lesson 4: Online Product Promotion 4-13 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-10: Excite advertising link In this lab, you saw how advertising is managed for Yahoo! and Excite. Until recently, these sites published their ad rates, but now require you to contact the companies for advertising information. Advertising Representatives Trying to locate the proper Web site on which to advertise can be a time-consuming and difficult task. Advertising representatives can help with decisions and placement choices, and usually can achieve greater success. These representatives and their organizations have well-established networks and statistical data that can help the marketer plan and execute a successful ad campaign. A recent trend is Internet advertising that specifically targets a regional market. For example, Local Launch! (www.locallaunch.com/) helps advertisers develop local Internet marketing plans. Regional marketing can provide a more efficient use of the marketing budget because it more directly targets the consumer and, in many cases, is less expensive than sites with a large national or international audience. In the following lab, you will visit an advertising representative Web site. Suppose you need to find a location for your ads, but the sites you visit do not provide an advertising link. As fewer major sites manage their own advertising, advertising representatives become a key link in your advertising plan. Each advertising representative has a specific list of sites supported. OBJECTIVE: 3.3.11: Online marketing strategies
4-14 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lab 4-2: Visiting an advertising representative Web site In this lab, you will visit a sample advertising representative site. 1. Browser: Enter www.winstarinteractive.com. See Figure 4-11. Figure 4-11: Winstar Interactive Media 2. Click Check Out Our Site Roster Of Top Media Brands. Review the site list (Figure 4-12). Figure 4-12: Winstar Interactive Media site roster
Lesson 4: Online Product Promotion 4-15 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 3. Click one of the company links to navigate to the client Web site. 4. Determine whether the site provides a link to advertising rates. Many sites do not publish ad rates, and instead require you to contact the company by mail or telephone for that information. 5. If Time Permits: Review the other sites. In this lab, you reviewed sites supported through Winstar Interactive Media. Banner Ad Positioning After choosing the best site on which to place the ad, the next important consideration is the ad’s position on the page. Many experts believe that to achieve the highest clickthrough rate, the banner should be at the top of the page. Web pages load into the browser from top to bottom. Therefore, if the ad is at the top, the user sees it first and will notice it more often. Depending on download speed, that banner ad may be the only thing the user sees while he or she is waiting. Obviously, this exposure is a benefit. However, some studies have indicated that other positions receive a higher clickthrough. Some advertising professionals debate that the bottom-right position seems to have a higher rate. Look at Figure 4-13 to see the position in question. Then see whether you can determine why that position might have a higher clickthrough rate than other positions. Figure 4-13: Effective banner ad placement area If you said this position has a higher clickthrough because the user is more likely to accidentally click the ad, you may be right. If the user wants to scroll down, he or she will need to position the mouse in the lower-right corner of the browser and click. If the mouse is not over that very small area, the user may miss the navigation arrow, thereby clicking the banner ad instead. This position may have a higher clickthrough, but may still not generate higher sales. Of the number of visitors who do accidentally click through and go to the site, most are probably not interested in the product or service. OBJECTIVE: 3.3.11: Online marketing strategies
4-16 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Others claim that, because English is read from top to bottom and from left to right, the banner ad is the most recent item seen before the user scrolls down. However, other studies assert that Web users do not actually read; they scan. If they scan from left to right, however, the argument may still have some merit. Other common placements are on the left margin and at the bottom. One potential concern is page size versus browser or screen size. The position in which your ad is placed does not necessarily guarantee exactly where it will be seen, or even whether it will be seen at all. Many Web pages have a recommended viewing size, such as 800 x 600. The larger the recommended size, the more likely that some visitors will need to scroll to see some of the page content. Also, some Web sites have run-on pages, which require visitors to scroll several times to get to the bottom of the page. Banner ads located where they are seen when the page first opens will have a better actual view rate. The lower the ad is placed on the page, the greater the likelihood that some visitors will never scroll to that point at which they can see the ad. However, because the user’s browser downloaded the ad, the ad host will count this as an impression. Banner Ad Exchange Networks Exchanging ad banners with other Web sites is one way marketers can help reduce advertising costs and drive business in two directions. Banner exchange enables complementary businesses to establish a convenient “one-stop shopping” environment more commonly found through portal sites. Banner exchange is effective in both B2B and B2C markets. For example, a Web-based business that offers online travel packages might want to participate in a banner ad program to help promote its site yet keep costs down. A cost-effective move would be to find a site that offers complementary but not competing services. A good choice might be to exchange banner ads with a site that offers luggage. If the owners of these sites agreed to exchange banners, they would be promoting each other’s sites but remaining in a targeted market. Several large companies have found a way to have other Web sites do most of the work of banner exchange for them. One example of this is Adobe. The Adobe Acrobat Portable Document Format (PDF) has become a de facto standard for information exchange. Adobe offers banners that can be downloaded and placed on a Web site directing users to Adobe so they can download the free Adobe Acrobat Reader program. Even though this is effectively free advertising for Adobe, it is generally considered a potentially beneficial situation for everyone involved for the following reasons: The host Web site has a standard format for posting documents. The user visiting the Web site has access to a free document reader. Adobe gets increased traffic to its Web site, possibly resulting in additional sales. A potentially easier way to take part in banner exchange is to join a banner exchange program. In a banner exchange program, a site owner agrees to display banner ads on his or her site to earn credits each time the banner is viewed. As these credits accumulate, they can be used to “pay” for displaying the owner’s banner ad on other sites. In effect, the more people who come to the site, the more banners are viewed, resulting in more points earned and more free placements in exchange. OBJECTIVE: 3.3.9: Banner exchange networks Portable Document Format (PDF) A file format that can be transferred across platforms and retain its formatting; designated by the file name extension .pdf.
Lesson 4: Online Product Promotion 4-17 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 In the following lab, you will visit a sample banner ad exchange program. Suppose you plan to use banner exchange as part of your advertising strategy. You might consider a banner exchange program because it is usually the most efficient way to find exchange partners. This lab focuses on LinkBuddies®. Other popular exchange networks include the following: HitExchange (www.hitx.net) Impressionz (www.impressionz.com) Lab 4-3: Visiting a banner ad exchange program In this lab, you will visit a banner ad exchange program. 1. Browser: Enter www.linkbuddies.com. If you are prompted to install the Flash Player, as shown in Figure 4-14, click Yes. Figure 4-14: Security Warning to install Flash Player Note: Macromedia and its products, including the Flash software, have since been acquired by Adobe Systems, Inc. The warning prompt you see may reflect this change in ownership. 2. The Linkbuddies home page will appear. Click Features Overview. 3. Read the information shown in Figure 4-15 about how the banner exchange program works. If time allows, view additional pages for more detailed information.
4-18 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-15: LinkBuddies Features Overview In this lab, you visited a banner exchange site. Banner exchange sites prompt you to join, typically at no charge, and often require only a user name and valid e-mail address. As a member, you have access to the network’s reporting and statistics capabilities, as well as ad placement services. Referrer Programs Referrer sites or programs operate differently from banner exchange programs mainly in that they direct traffic in one direction. In such an arrangement, one site pays another site for the traffic it sends. The process works as follows: Company A sells snowboards. Company A is willing to pay commissions to other companies. Company A might pay commissions for new visitors or only for new visitors who make purchases, a structure called performance-based advertising. In some cases, Company A might pay for new traffic or pay a higher commission if the new visitor makes a purchase. Company B agrees to place a banner on its Web site directing visitors to Company A’s Web site. Company B will be paid only for results. If no visitors click through from Company B’s Web site, Company B does not earn a commission. Logs must be kept so that any commission due will be paid. Logs can be kept in different ways, depending on the agreement. Common methods of tracking are cookies, special URLs, special account names and page redirections. OBJECTIVE: 3.3.11: Online marketing strategies
Lesson 4: Online Product Promotion 4-19 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 If the visitor’s browser supports cookies, it can easily be determined where the user came from and other important information. Third-party server logging software can also provide vital statistics such as specific domains that referred the visitor. Special URLs that redirect users provide only a rough estimate of clickthroughs, but are often used. A special URL that contains an ID and follows the user through the site provides more information than a simple redirection. Web retailers that have referrer programs include: Amazon.com (www.amazon.com). Barnes & Noble (www.barnesandnoble.com). BestBuyDirect (www.bestbuydirect.com). Several Web sites provide information about and links to referrer programs. Examples include: Webworker (www.referralincome.com). Managerial Technologies Libraries (www.mtclibraries.com). Internet Marketing Register (www.marketing-register.com). In the following lab, you will investigate a sample referrer program. Suppose you are considering a new advertising plan. A referrer program can be an important part of your advertising mix, assuming you can locate an appropriate site as the referrer and can negotiate an affordable commission rate. It is common for B2C retail sites to have some type of referrer program. Lab 4-4: Using a referrer program In this lab, you will learn how to establish a referrer program that pays commission based on purchases at other Web sites. You will examine the Amazon.com Associates referrer program. If at any time during the lab a dialog box prompts that you are entering a location that is not secure, click Yes to continue. 1. Browser: Enter www.amazon.com. Scroll down to the bottom, and click the Join Associates link. See Figure 4-16.
4-20 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-16: Amazon.com home page 2. On the Associates page (see Figure 4-17), you will see links for Already A Member? and for Want To Join?. Click the Sign-In Here link. Figure 4-17: Amazon.com Associates
Lesson 4: Online Product Promotion 4-21 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 3. Enter the following information on the Sign In page: My E-Mail Address Is: [email protected] My Password Is: 246ciw Your screen should resemble Figure 4-18. Click Sign In Using Our Secure Server. Figure 4-18: Amazon.com Associates Central Sign In 4. You should now be on the administration site for the Associates program. Scroll down to review quarterly referral information (see Figure 4-19). Tech Note: If the e-mail address and password did not allow you access, use the figures in the lab to understand the process. Registration may take as long as 24 hours.
4-22 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-19: Sample quarterly earnings report 5. Click Build Links, as shown in Figure 4-20. Figure 4-20: Selecting Build Links 6. Examine the Build Links page (Figure 4-21), which shows how to place and link the logos for the Amazon.com Web site. It also contains a link generator to help you create HTML code.
Lesson 4: Online Product Promotion 4-23 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-21: Amazon.com Build Links page In this lab, you reviewed features integrated in the Amazon.com affiliate referrer program. When you place the links on your site, you must enter your Associate name in the link so that the Amazon.com Web site will track customers. If those customers purchase products from Amazon.com, you will be paid a commission. Blogs and Blogads Web journals, called Web logs or blogs, have gone from an interesting curiosity to an Internet cultural phenomenon. Most blogs began as simple rambling journals, but have grown into an active media category, supplementing traditional print and existing Internet media. Recent U.S. political elections are evidence of the growing power and influence of blogs, with many political stories first appearing in blogs before being picked up by traditional media outlets. Blogs are an especially high-traffic segment of the Internet. The number of active blogs and blog users is continuing to grow. A February 2004 Pew Research Center study estimates that more than 2.5 million U.S. adults have their own blogs, and the Technorati blog research firm (www.technorati.com) estimates that 10,000 new blogs are started every day. An article discussing these studies with links to the research firms quoted is available at www.imediaconnection.com/content/3162.asp. Blog ads (known as blogads) constitute a market segment still somewhat in the process of identifying itself. Web sites like Blogads (www.blogads.com) target both bloggers (blog users) and advertisers. Mainstream advertisers are slow to embrace blog advertising, but smaller companies have found blogads to be a way to get their ads in front of a specifically targeted audience. Because of studies that indicate that blog readers tend to be slightly older and more affluent than the average Internet user (and more likely to click through on a blogad), the use of blogads is expected to increase. OBJECTIVE: 3.1.4: Blogging
4-24 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Pop-Up and Related Ads The vast number of pop-up window ads and related ads speaks to the (at least perceived) effectiveness of this type of advertising. Pop-up banners are sometimes included in this category, but the term is typically used to describe ads that appear in a separate window. One common feature is that the ads appear without the user doing anything to call or link to the ad. Pop-up ads most commonly appear before displaying the user’s target Web page, but can appear while viewing the page or upon closing the target page. Internet users generally see pop-up ads as the most intrusive and annoying type of online advertising. It is possible to get caught in a seemingly near-endless loop of pop-ups. As quick as you close one window, another opens to take its place. This general category includes windowless ads that “float” on a Web page and typically disappear after a delay. Because they do not have window controls, these ads can be especially bothersome if they do not disappear by themselves. Pop-up ad types Several ad types are grouped in this general category, including the following. Pop-up — ad appears over current browser windows Pop-under — ad appears under the active browser window and is not seen until the covering window is closed Interstitial — ad appears as a full window between the current and target pages Superstitial — ad is similar to interstitial ad, but includes richer content; preloads into the browser cache and does not appear until fully cached Some Web designers build interstitial and superstitial ads into the site design as a way of filling the time when navigating through a Web site and waiting for new destination pages to download. The ads contents are often directly related to the target Web site, but are sometimes used to purchase ad space. Pop-up ad acceptance The biggest problem with ads of this type is that many Internet users see them as an invasion, placing them in much the same category as spam e-mail and spyware. Pop-up and related ads can quickly go from a mere nuisance to an ongoing, annoying interruption. Internet security and privacy tools, including the Microsoft Service Pack 2 for Windows XP (and later versions), include the ability to block unsolicited pop-up ads. The IAB has published guidelines for pop-up advertising at the following page: www.iab.net/iab_products_and_industry_services/1421. A survey by CheckM8 Inc. (www.checkm8.com) found that 83 percent of Web advertisers either currently do adhere to these new guidelines or plan to implement these guidelines within the next few months. However, 53 percent stated that their current server technology does not support compliance. OBJECTIVE: 3.3.10: E-commerce site promotion pop-up window A small browser window that appears in front of the browser window you are viewing.
Lesson 4: Online Product Promotion 4-25 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Movie Time! Go to CIW Online to view a movie about this topic. Tags, Attributes and Search Engines (approx. playing time: 10:30) All movie clips are © 2011 LearnKey, Inc. Search Engine Placement A search engine is a database system designed to index URLs, Usenet, File Transfer Protocol (FTP) and image files. The typical search engine contains a special application called a “spider” or a “crawler.” The purpose is to map selected Web content and to return URLs to which users can link when they search for a topic. When the search engine visits a new site, it will attempt to categorize the site based on its content. Most search engine spiders look for special HTML tags that help them in the cataloging process. When a user performs a search, links to Web sites relating to the topic will be returned based on their relevance to the search topic. The important aspect to understand about the spider is that it is an automated process. A directory is basically a manual-entry database system. Web site owners who want their sites to be listed on a directory should notify the directory’s management about their sites. They will usually need to provide a URL, title and a short summary of the Web site. The main distinction between search engines and directories is in how they obtain their information. Search engines catalog entries automatically, whereas directories require manual submissions. Registering a site with all the major search engines and directories can be overwhelming because so many exist. The most effective registration is usually from a service or software package that automates the process. A number of online services request information one time, then automatically submit it to hundreds of search engines and directories simultaneously. Software is also available to help automate the search-engine placement process. Examples include the following: Site Promoter (www.sitepromoter.com) WebPosition (www.webposition.com) AddWeb (www.cyberspacehq.com) If you choose to perform your own manual submissions, you will need to visit each search engine manually and complete the process several times. The time and effort involved make that choice less appealing than using an automated service or a software package. Nevertheless, if you choose to perform manual submissions, some Web sites can help simplify the process by providing links to each of the search-engine submission pages, which will save some time. An example is AddPro at www.addpro.com/man_submit.htm. OBJECTIVE: 3.3.10: E-commerce site promotion File Transfer Protocol (FTP) An Internet protocol used to transfer files between computers.
4-26 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Search engines vs. directories The term “search engine” is used loosely in the Web community to include both search engines and directories. As previously discussed, the distinction between the two is that a search engine uses an automated process called a “spider” to discover new Web pages. The spider “crawls” around the Web following hyperlinks and indexing the content that it finds. Therefore, eventually, a search engine will find your page, assuming that a link to your site exists somewhere on the Web. However, determining the time this process will take is impossible. For this reason, it is important to submit your site to the search engines. Submitting your site speeds the process and increases your chances for higher placement in search results, thus allowing you some control over placement. A directory differs from a search engine in that it will find sites based on manual submissions only. Therefore, if you do not manually submit your site to the directory, the directory will never know of or index your site, and will never list your site in search results. Some directories, such as Yahoo! and Magellan, have their personnel visit the site to determine the content and its relevance to the submitted topic. After the review, the Web designer may receive an e-mail message asking for additional information so a site description can be created before the site is placed in the directory. The advantage to this type of directory is that search results are more likely to contain accurate content matches for any given query. However, increasing the chances for a higher placement in search results is usually not within the Web designer’s control. Which search engine or directory? How many search engines exist? It is difficult to estimate, but there are easily hundreds of sites that include a search engine component. Does this mean that you must submit your site to each of them? You could if you wanted. However, in spite of the great number of users on the Web, only the top 19 search engines are used by the majority of Web users. They are listed here in alphabetical order. AllTheWeb AltaVista AOL NetFind Ask Jeeves Direct Hit Excite Go2Net Google HotBot Infoseek Inktomi Iwon LookSmart Lycos Microsoft Netscape Northern Light WebCrawler Yahoo! Ensuring that your site is registered with these search engines and directories will cover more than 90 percent of the searches conducted on the Web. However, your site’s ranking is an entirely different matter. In the following lab, you will visit search engine placement services. Suppose you want to implement search engine placement as part of your advertising mix. You might want to consider using a search-engine placement service. As with other site types, many search engines sites no longer manage their own ad placement or publish their ad rates. Submit It!, which is part of the Microsoft Small Business Hub, manages search engine placement for you and provides you with tracking and ranking information. Some Web hosts will also provide search engine submission for you, at a fee. More recently, several sites offer free search engine submission, but the quality of service varies widely.
Lesson 4: Online Product Promotion 4-27 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lab 4-5: Using a search-engine placement service In this lab, you will visit two online services that perform the search-engine submission process for a fee. 1. Browser: Enter www.microsoft.com/smallbusiness/hub.mspx to go to the Microsoft Small Business Center home page (see Figure 4-22). For a fee, you can choose search engines and directories. You can also get statistical reports. Figure 4-22: Microsoft Small Business Center home page 2. Browser: Enter www.searchengines.com/URLsubmission.html to go to the SearchEngines.com site, as shown in Figure 4-23. This site provides links to most of the major search engines on the Internet.
4-28 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-23: SearchEngines.com 3. Browser: Enter www.searchenginewatch.com to go to the SearchEngineWatch.com Web site (Figure 4-24). This site provides information about search engines, but also includes a large amount of information about preparing your Web site and using search engines for marketing. Figure 4-24: SearchEngineWatch.com Web site In this lab, you visited sites that support search engine submission.
Lesson 4: Online Product Promotion 4-29 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 <Meta> Tags and Search Engines Statistics show that only about one of every four Web sites uses keyword and description <meta> tags, commonly referred to as metadata tags. However, the use of these tags can give your site an advantage over sites that do not use them. These <meta> tags enable most visitors to find your site initially. Without proper placement (sometimes called registration with various search engines), users will probably not find your site, unless you use some other form of promotion such as banner ads or less ethical methods such as spam e-mail. Unfortunately, not all search engines use metadata, and the ones that do often have different criteria for how metadata is used. This variable creates a daunting task for the Web designer to ensure proper placement with various search engines. Contrary to popular belief, no search engine secrets exist to guarantee you a top listing. However, Web designers can take some action to improve placement for their Web sites. Services and applications exist to make search engine placement more manageable. Before studying these services and applications, consider the most commonly used metadata tags. Keywords Some search engines will search for values specified by the CONTENT attribute on pages that use the <meta> tag NAME attribute value of “KEYWORDS,” as shown in the following example: <META NAME=”KEYWORDS” CONTENT=”keyword1, keyword2, keyword3″> Keyword values are usually separated by spaces or commas. Do not use keywords excessively; several occurrences of the same word can cause the tag to be ignored. The maximum keyword allowance is 1,000 characters; however, many believe that anything exceeding 255 characters is ignored. Description When the <meta> tag NAME attribute specifies the “DESCRIPTION” value, the CONTENT attribute value will appear as a short site description in some search engine results. The syntax for this use of the <meta> tag is as follows: <META NAME=”DESCRIPTION” CONTENT=”This site provides recipes.”> Keep this description brief: no more than 25 words (maximum allowance is 150 characters). Not all search engines recognize this tag. Robots Certain pages should not be indexed by search engines. When this is the case, the following <meta> tag syntax can be used to tell search engines not to index the page: <META NAME=”ROBOTS” CONTENT=”NOINDEX”> Other CONTENT attribute values for the “ROBOTS” value include the following: “NOFOLLOW” — prevents the crawler from following the links on the page and indexing the linked pages. “NOIMAGECLICK” — prevents the pointing of links directly to images; instead, only links to the page will be allowed. metadata Data about data.
4-30 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 “NOIMAGEINDEX” — prevents the images on the page from being indexed, but the text on the page can still be indexed. Several Web sites provide annotated lists of spiders and robots, including the following: JafSoft Limited (www.jafsoft.com/searchengines/webbots.html) WebReference.com (www.webreference.com/internet/software/agents.html) Web Robots Database (www.robotstxt.org/wc/active.html) It is best to compare the information between two or more sites, as some of these lists are not updated on a regular basis. Relevance Search results are ranked according to relevance to the given search criteria. Among searches and search engines, relevance varies. However, a few common characteristics exist, including the following. Titles — A search engine will first scan the HTML <title> tag to look for words that match the query. Beginning content — A search engine will then look for the query word(s) near the top of the document, assuming that relevant content is mentioned immediately. Frequency — A search engine will look for frequency of the query word(s), assuming that the more frequently a word appears, the more likely the document will be a good match to the search query. Now that you understand some of the key components to indexing, consider a few variables. Each search engine indexes sites to different levels, at different frequencies, then uses some proprietary steps to create relevance. For example, some search engines weigh factors such as the number of other sites that link to a given site, which may indicate the site’s popularity. Lycos and Northern Light do not consider <meta> tags, but other search engines do. Some search engines penalize the overuse of words by refusing to index a site. To conserve storage space, most search engines do not catalog common words such as “the,” “and,” “Web” or “of.” For these reasons, different search engines yield different results for the same search. Although it might be tempting to repeat a word several times or include inappropriate keywords to increase your relevance, you should strictly avoid doing so. This practice is referred to as keyword spam and will result in your site being disqualified from listing in a search engine. Most spiders and robots will disqualify a site after finding a word repeated six or more times on the same page. Another form of keyword spamming is the use of trademarked names as keywords inside <meta> tags. This practice is not only unethical but illegal and legally actionable. Keyword development and placement Keywords contribute significantly to your site’s ranking by search engines and directories. Regardless of the search engines or directories to which you will submit, consider the following guidelines: Choose keywords that are relevant to your site, and do not use misleading words. When appropriate, make keywords consist of at least two words. Include multiple keywords. If possible, choose a domain name that includes your keywords. keyword spam The use of repeated or inappropriate keywords to influence search-engine relevance ratings.
Lesson 4: Online Product Promotion 4-31 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 If possible, use keywords when naming your HTML files (for example, cellular1.htm and cellular2.htm). Test your chosen keywords on some popular search engines to see what results are returned. Then visit the sites mentioned, and look at the text and source code to see other keywords that were used. Check to see whether the keywords you have selected are commonly misspelled words (http://rinkworks.com/words/misspelled.shtml). Commonly misspelled words can be used in the <meta> tags to help users find your site, but do not misspell words on your pages. Avoid using keywords that search engines do not index, such as “to,” “the,” “and,” “or,” “of” and so forth. Use both singular and plural spellings of keywords, as well as other variations (for example, “phones,” “phone,” “telephone” and so forth). Use abbreviations (if appropriate) as well as both uppercase and lowercase spellings. Include the most appropriate keywords and phrases first. Use the HTML <title> tag to include a brief seven-word to twelve-word description of your site, using as many as three of your keywords. Many search engines use the title as the site description, so make it appealing. The length should not exceed 70 characters. Do not use all capital letters. Avoid using your company name (unless it is highly recognizable) because this practice wastes space for keywords. Create a logical descriptive summary paragraph using as many keywords as possible. Place it in the first section of the <body> of the document, within the first 200 characters. Remember that users will read this description, so it must make sense. Also, include the keywords in other areas of the document, including the last sentence. Use the ALT attribute of the <img> tag to include keywords. Avoid using graphics exclusively on your home page. Search engines read text, not graphics. Do not try to mask a field of repeated keywords with background color. Do not place a banner ad at the top of your home page. Using the ALT attribute and hyperlink this way describes keywords other than your own. Keep in mind that tables and large blocks of JavaScript can “push” text farther down the page. Make a site map with text links to everything on your Web site. Use effective internal linking between the pages of your site. Additional services As you saw in a previous lab, services that manage search engine placement for you at a fee are available. Most also provide additional services to help optimize your placement, such as: Keyword research. Keyword placement.
4-32 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 HTML coding assistance. Search engine ratings. For example, Marketleap provides Web marketing training and has a suite of free search-engine marketing tools (www.marketleap.com/services/freetools/default.htm). You can also visit Search Engine Watch (www.searchenginewatch.com) for more information about search engines, such as submission tips, comparison reviews and related resources. When deciding on your keyword values, you should know about how people enter or type search terms in a search engine. This information allows you to generate a closer match, and increases the likelihood of a hit, in your keyword list. One site that provides this information is MetaSpy (www.metaspy.com). General guidelines and placement tips are available through Search Engine Watch, part of the ClickZ Network, at www.searchenginewatch.com/webmasters/tips.html. E-Mail and Marketing The abundance of e-mail addresses makes it very tempting to use e-mail as a mass marketing tool. Several different categories of e-mail marketing have different connotations and perceptions. Spam e-mail As you have learned, spam is unsolicited e-mail or floods of inappropriate newsgroup messages. It is the Internet equivalent of bulk junk mail. Lists of e-mail addresses are gathered from discussion forums and newsgroups, or purchased from companies that specialize in creating distribution lists. Network etiquette (netiquette) forbids the use of spam. It is considered a nuisance, very much like unsolicited phone marketing calls or door-to-door sales. There have been several attempts to find legislative solutions to the problem of spam, which costs companies millions of dollars every year. However, so far, these efforts have often resulted in only limited or partial success. Spammers continue to keep pace with, or in some cases outdistance, legislation by finding loopholes and workarounds. This area of Internet business law will continue to evolve over the next several years. Despite the problems in attempting to curb spam, there are indications that some progress is being made. Early in 2005, the first successful prosecution in nine years of a spammer took place in the United States. However, even in this case, the individual could not be prosecuted for sending unsolicited e-mail, but was instead prosecuted for masking his identity while sending e-mail. The spammer was prosecuted under a Virginia state statute rather than a federal regulation. More information about the prosecution is available at www.pcworld.com/news/article/0,aid,118493,00.asp. Spam marketing With the negative connotation and nuisance of spam, clearly, a company or business that wants respect in the marketplace will not use this method. Most spam marketers are just trying to move products or services and are not considered to have merit as legitimate businesses. Schemes for making money, weight loss “secrets” and prescription drug access (with or without a prescription) are common inducements for spam e-mail marketing. It may be tempting to send out tens of thousands of unsolicited e-mail messages to gain exposure and attract consumers to your site, but the negative implications can outweigh hit An instance of a user accessing a Web page. OBJECTIVE: 3.2.4: Questionable practices
Lesson 4: Online Product Promotion 4-33 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 the results. By using a mass mailing of this type, you may find yourself acquiring an unfortunate reputation similar to that of the less ethical spammers, making an initial negative impression that you cannot repair. In addition, the possibility is that much of the spam e-mail will never actually reach its intended recipients. Large ISPs often block domains that engage in spamming. Targeted e-mail Targeted e-mail is spam that has been slightly tailored for a particular customer base. Usually, targeted e-mail uses specific e-mail addresses that have been qualified. Thus, a company that creates an e-mail list has categorized the addresses on it. For example, someone may compile a list of e-mail addresses of people interested in health food and vitamins from a magazine or store that has that data. The e-mail company compiles a list, then sells it to marketers who want to reach those people. Again, this type of marketing is not seen as legitimate and should be avoided by businesses that want to maintain a solid reputation. Opt-in e-mail Opt-in e-mail is the only legitimate form of e-mail marketing. With this method, recipients agree to receive information, and give the business permission to send it to them. This choice is usually made when a user signs up for a service and then is asked whether he or she would like to receive news and updates. Some businesses offer a choice, but “Yes” is already selected by default. This approach forces the user to make the extra effort to select “No.” In a lengthy registration process, a user might rush through the process and accept the default “Yes” selection without noticing. The business is counting on the user to overlook the “No” option. Because the user has given permission, he or she has already visited the Web site. Therefore, opt-in e-mail is not a primary marketing method, but rather a follow-up or continued form of marketing. Businesses that engage in opt-in e-mail must also use discretion when sending messages and should not treat the user’s permission as an invitation to send an unlimited number of messages. Following are some e-mail marketing firms. Use these companies at your own discretion. Opt-in Email Marketing (www.opt-in-email-marketing.org) WSPromotion (www.wspromotion.com) Constant Contact (www.constantcontact.com) E-mail filter concerns E-mail clients, operating system providers, mail servers, ISPs and independent software providers have all worked to provide a variety of anti-spam solutions. Most e-mail filtering is based on: The source (or sending) address. The size of the address list. Keywords in the message topic. Keywords in the message body. OBJECTIVE: 3.3.10: E-commerce site promotion
4-34 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 One possible result is that legitimate business e-mail can get caught and lost in the e-mail filters. This not only blocks advertising mail, such as opt-in e-mail, but can cause messages such as order summaries or shipping notices to be filtered and lost. Although there is little that can be done to prevent this on the recipient’s end, you should be aware of this potential source of customer communication and customer satisfaction problems. Ad Performance Evaluation After an online ad campaign has begun, no matter what type of campaign you select, an evaluation of its performance is required to determine its effectiveness. Depending on the size of the campaign, the data can become an information overload. To manage the performance review effectively, several companies provide software that can streamline the load and provide a clear indication of success or failure. The following company offers this service: DART for Advertisers (www.doubleclick.com) Tracking tools Did the user stay at the site? Did he or she request information or make a purchase? How long did the user stay? Where did he or she come from? Knowing this information helps marketers understand what an ad is doing and how users are responding. The only way that banner ad effectiveness can be understood is to track the process. Tracking has many components, and all must be examined to determine true effectiveness. Consider a banner ad campaign. Knowing the total number of impressions a banner has is inconclusive. The number of impressions compared with the number of clickthroughs is more conclusive. Knowing what users did after they reached the site offers even more conclusive information. Trackers can identify the number and percentage of visitors, the type of operating system, the browser type, and the domain. They can also determine traffic by the hour, day, week and month. Many services offer tracking for free if you place their logo on your site. Some also offer a service for a nominal fee so that you need not post the logo on your site. To use these tools, you need only add some HTML coding (provided by the tracker) to the pages of the site you want to track. The tracking data is then followed and stored on the tracking service’s servers for you to review and generate reports. Remember that trackers are not as powerful as log analysis tools that use the actual server logs to examine traffic. You will study log analysis tools later. Tracking and payment The way in which user activity is tracked by a Web site or advertiser is often influenced by the way advertisers pay for ad space. Common payment methods include the following: Pay-per-click — advertiser pays a set amount for each clickthrough Pay-per-lead — advertiser pays for each sales lead generated Pay-per-sale — advertiser pays for each sale resulting from a clickthrough (not commonly used with ad buys but often used with affiliate programs) Pay-per-view — advertiser pays for users viewing the banner (sometimes used on large, active sites) OBJECTIVE: 3.3.6: Browser use patterns
Lesson 4: Online Product Promotion 4-35 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 It has become more difficult to accurately track ad views because most browsers offer the user the option of not displaying Web site images, effectively blocking the banner ads. Several sites offer a tracking service, which provides critical business intelligence. A tracking service will enable you to judge the effectiveness of your site and your ads, providing a baseline for comparison. Many Web hosts also provide tracking information, though not always to this level of detail. Popular tracking sites include the following: eXTReMe Tracking (www.extreme-dm.com) (free service) Dynamic Logic (www.dynamiclogic.com) (paid service) In the following lab, you will visit a tracking service site. Suppose your ad campaign is already in place, but you want to make sure you are getting the most out of your advertising budget. A tracking service can provide you with the statistics you need and can also give you independent numbers to compare with any provided by sites hosting your ads. Lab 4-6: Examining tracking service data In this lab, you will examine a tracking service to learn how it can help generate more conclusive ad and user data. 1. Browser: Enter www.mycomputer.com (Figure 4-25) and click the Learn More link under superstats (near the bottom of the page). Figure 4-25: MyComputer.com
4-36 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 2. In the How Superstats Works box at the right, click Go, as shown in Figure 4-26. Figure 4-26: SuperStats Demo 3. Review the How Web Page Statistics Work document (Figure 4-27). Close the window when you have finished. Figure 4-27: How Web Page Statistics Work In this lab, you looked at a site that provides Web page reporting statistics.
Lesson 4: Online Product Promotion 4-37 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Offline Product Promotion This course focuses on online product promotion, but it should be mentioned that offline promotions can also be successful. One of the major reasons many companies do not use offline promotion is the cost factor. Depending on the type of promotion (radio, TV, print, promotional giveaways), the cost will probably be very high. Literally hundreds of ways exist to promote offline, but they are beyond the scope of this course. Resource ideas for offline campaigns include the following: Bag Media (www.bagmedia.co.uk) Java Jacket (www.javajacket.com) It is important to realize that the lines are beginning to blur somewhat between online and offline promotional activities as more traditional ad markets reach the Internet. Print media, newspapers and magazines will often publish the same content and attempt to attract the same advertisers on the Internet. A large number of radio stations and most major television networks have completely blurred the line further by putting their programming — and ads — online. Traditional broadcast networks make many of their most popular programs available for viewing online, and include ads targeting online viewers. These online ad breaks are often significantly shorter than their broadcast equivalents, making it more likely that the viewer will watch the ads. Ad Campaign Implementation Implementing an ad campaign can be a daunting task. Marketing considerations must include: Reviewing the advertising budget. Considering the type of campaign. Choosing an online or offline campaign (or both). Tracking campaign effectiveness. In many (if not most) cases, businesses do not have the internal resources to manage all the issues involved in an effective ad campaign by themselves. Help is available, but can require working with several different sites. A growing area of Web business support is the business hub. An example of a site of this type is the Microsoft Small Business Center (www.microsoft.com/smallbusiness/products/online/hub.mspx). Business hubs provide one-source support services, including: Domain name registration. Web site hosting. Web site and e-commerce development. Online marketing assistance. Tracking and evaluation. Costs vary between sites and depend on the services for which you contract. Most hubs offer the option of contracting and paying for only those services you need. OBJECTIVE: 3.3.11: Online marketing strategies
4-38 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Incentives Although not specific to online marketing, incentives can play an important role in an ad campaign. In general, customers’ online buying habits differ from their practices in shopping at brick-and-mortar businesses. However, customers still expect to get the maximum value for their money. By offering incentives, Web businesses give customers a reason to do business with them and to return in the future. Incentives can be in the form of discounts, credits or free items. To provide these incentives, the Web business must tell prospective customers about them and motivate the customers to visit the Web site. Many online incentives tend to mirror traditional incentives. You will typically see more incentives during gift-giving holidays. Others are more directly linked to the way business is done on the Internet, such as offering reduced or free shipping. Some businesses offer incentives for buying over the Internet rather than through other purchase methods because of the lower overhead incurred in Web-based sales. Becoming an affiliate or partner with a well-known customer incentive program is often a reliable method for generating sales. Some sites offer to market and provide coupons to customers. These coupons are sent via permission or opt-in e-mail (discussed earlier) or in some cases by the less-preferred direct e-mail marketing. Other incentives allow customers to earn credits or rewards that can be redeemed later for merchandise or services. Many sites offer “friends-and-family” types of incentives. When you make a purchase, you are offered the chance for a discount on the same item sent by the seller to your friends and family. Your friends get the discount, and the Web retailer gets another valid e-mail address for advertisement and marketing purposes. Whatever the incentive, it must be something the customer believes is valuable. The following sites help provide customer incentives: E-centives (www.e-centives.com) — provides digital coupons tailored to the shopper’s interests. MyPoints (www.mypoints.com) — provides customers a way to earn “points” toward rewards by reading e-mail, shopping online and touring Web sites. In the following lab, you will visit an online business hub and review the services provided. Small businesses often find that an online business hub provides invaluable assistance in starting, managing and maintaining an online business. Lab 4-7: Examining business hub services In this lab, you will visit the Microsoft Small Business Center and review available resources. 1. Browser: Navigate to www.microsoft.com/smallbusiness/products/ online/hub.mspx (see Figure 4-28).
Lesson 4: Online Product Promotion 4-39 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-28: Microsoft Small Business Center 2. Under the Attracting Customers heading, click Banner Advertising. Review the banner-advertising options (see Figure 4-29). Figure 4-29: Banner-advertising support features 3. Under the Attracting Customers heading, click Search Services. Review the support provided (see Figure 4-30).
4-40 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 4-30: Search services support features 4. Under the Attracting Customers heading, click E-Mail Marketing. Review the e-mail marketing support available (Figure 4-31). Figure 4-31: E-Mail Marketing support features In this lab, you visited a popular small business hub. As e-commerce continues to grow, you can expect to see more sites of this type on the Internet.
Lesson 4: Online Product Promotion 4-41 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Case Study A Crafty Marketing Strategy Sue and Wally know crafts. They understand the tools and supplies needed to create crafts for sale and what is needed to set up a successful craft booth. They thought that a Web site selling craft supplies and booth materials was a natural match for them. They have learned, however, that they do not understand online marketing. They launch a B2C Web site called Quiet Cottage Supplies. Sue needs to find a cost-effective way to increase traffic to the site. Up to now, Sue and Wally have relied primarily on word-of-mouth, along with handing out flyers and business cards at craft shows. The only online marketing in place with Quiet Cottage Supplies is the possibility that the site might be picked up automatically by a search engine robot. Sue evaluates possible online marketing plans and companies that might be able to assist her. She consults an advertising representative, who suggests getting a banner ad placed on rotation on a Web portal. After this online marketing program is in place, Sue plans to determine the effectiveness of the advertising, and make adjustments as necessary. * * * As a class, discuss the following issues with regard to Quiet Cottage Supplies. Is Sue’s decision to follow the advertising representative’s suggestion to get a banner ad placed on rotation on a Web portal an appropriate one? Is this an effective placement? Why or why not? What tools are available to help Sue evaluate the effectiveness of her ads? What statistics should she be monitoring? What types of Web sites would be appropriate candidates for banner exchange? For joining an affiliate referrer program? What should Sue use as <meta> tag keywords on the Quiet Cottage Supplies Web site? Why do interstitial and superstitial ads not meet Sue’s advertising requirements? Compare and contrast the appropriateness of banner ads, blogads and pop-up ads to advertise Quiet Cottage Supplies.
4-42 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson Summary Application project Effective product promotion on the Web is the goal of every online marketer: reaching the largest number of people for the least amount of investment possible. What type of product promotions do you think would provide the best Return On Investment (ROI)? Is it spending time and money on banner ads, or ensuring top search engine placement? What about referrer programs? Keep in mind that no fix-all solution exists for any promotional campaign. If you worked for an online promotions company, what new ideas might you have that could help your clients? Skills review In this lesson, you learned about various types of Web promotion tools. You learned about banner ads and their significance, banner exchanges and banner ad tracking. In addition, you learned about referrer programs and studied how e-mail is used in marketing. You also learned the importance of search engine submission and placement. Now that you have completed this lesson, you should be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 3.1.3: Establish and protect a brand (includes trademark registration). 3.1.4: Identify the relevance of blogging to e-commerce. 3.2.4: Avoid questionable practices (includes spam, spyware, selling user information). 3.3.6: Obtain browser and operating-system use patterns. 3.3.9: Implement banner exchange networks and referrer programs. 3.3.10: Promote and advertise an e-commerce site (includes search-engine placement options, synchronizing e-commerce promotion methods with traditional methods). 3.3.11: Implement online marketing strategies (includes incentive plans, banner ads, blogging, acceptable e-mail marketing practices).
Lesson 4: Online Product Promotion 4-43 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson 4 Review 1. Why is the number of hits a Web site receives a poor guide to measuring Web site visitor traffic? 2. How does the increased availability of broadband Internet affect banner ad size? 3. What is a rate card? 4. Why are tracking services useful? 5. How should you choose another online business with which to exchange banners? 6. How can you most effectively register your site with the major search engines and directories?
4-44 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0
3Lesson 3: Web Marketing Goals Objectives By the end of this lesson, you will be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 1.2.5: Compare features of competitor e-commerce sites. 3.1.1: Compare the advantages and disadvantages of e-commerce and traditional sales methods. 3.1.2: Identify business growth drivers and barriers. 3.3.1: Identify e-commerce marketing goals. 3.3.2: Determine global versus target (niche) product appeal. 3.3.3: Identify user interests specific to a target (niche) market. 3.3.4: Evaluate Internet demographics and their relevance (includes gender, culture, age). 3.3.5: Use surveys to determine customer preferences. 3.3.7: Evaluate product-pricing ranges and price changes. 3.3.8: Evaluate product distribution factors and methods (includes cost, distance, hard goods, soft goods). 3.3.10: Promote and advertise an e-commerce site (includes search-engine placement options, synchronizing e-commerce promotion methods with traditional methods).
3-2 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Pre-Assessment Questions 1. Before launching a new product on his Web site, Viktor wants to obtain more information about his customers. What type of data will provide him with insight into a customer’s interests, activities or opinions? 2. What method can an online business use to ensure maximum exposure to customers browsing the Web? a. Make effective use of proper procedures for search engine submissions. b. Send mass mailings via e-mail to all potential customers. c. Place links on the site to the Web sites of other businesses. d. Use an automated response to all e-mail queries. 3. Which of the following represents the correct order (from top to bottom) of the marketing pyramid? a. Strategies, Goals, Tactics b. Tactics, Strategies, Goals c. Goals, Strategies, Tactics d. Goals, Tactics, Strategies
Lesson 3: Web Marketing Goals 3-3 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Marketing Overview Products have been brought to the marketplace for hundreds of years in almost every society. The marketer’s plans and ideas for generating interest in and offering the product or service define marketing. Businesses of all sizes need marketing strategies to be successful. Naturally, some marketing strategies require more extensive planning and study before they can be successfully launched. Web marketing is still in its infancy, and marketing agencies and promotional campaigns seek to determine how to market effectively using the Web. Movie Time! Go to CIW Online to view a movie about this topic. Web Marketing (approx. playing time: 03:30) All movie clips are © 2011 LearnKey, Inc. Web Marketing Benefits We have all heard statistics that we are directly or indirectly exposed to thousands of advertisements each day. But what makes Web advertising different? Think about spending 30 minutes using the Internet. How many advertisements are you exposed to during this time? How many do you read? How many do you pursue? The effectiveness with which these advertisements target your preferences and habits depends on the marketing strategy the company designs. The Internet provides a number of ways to present advertisements that are not available in broadcast media. Advertising on the Web allows you to reach the consumer with unprecedented interactivity, immediacy and reach. In this section, you will look at some of the unique advantages of Web marketing. Personal selection When a person is exposed to a radio or television advertisement, he or she is generally a passive recipient of the message. Web advertising can become a more personal selection of the content the recipient might like to view. For example, when visiting a Web site, one might notice an ad about a low-interest credit card. It is entirely the user’s choice whether to find out more by clicking the link. The user may not even notice the ad. The benefit to the advertiser is that if the user does click the ad and visit the advertiser’s Web site, that user can be considered a qualified prospective customer. Trying to apply that scenario to radio or television, you can see it would be very difficult to turn a person into a prospect immediately without giving him or her information at the click of a button. Certainly, radio and television are giving the Web general day-to-day exposure. Most commercials on radio and television display or announce business Web addresses. However, radio and television lack the immediacy to stimulate customer interest. OBJECTIVE: 3.1.1: E-commerce vs. traditional sales methods
3-4 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Convenience Imagine hearing an advertisement on your car radio with a corresponding Uniform Resource Locator (URL) to visit for more information. Until we all have Internet access in our vehicles, that message will not be fully effective until the listener gets to a place that has Internet access. By that time, the whole ad may have been forgotten or may not seem as important. On the other hand, if you saw that same ad on the Internet, you could respond immediately. Interactivity Again, radio and television marketing offer very little interaction between the audience and the medium. Radio advertising requires the consumer to listen and develop a mental picture; television advertising presents the image to the audience. Other than those factors, the audience’s experience is limited. With Web marketing, users experience interactivity on a much higher level. They can be exposed to the same elements as in television, but they have more control over where or how they continue the experience. Another important element is that the user can generally control the amount of time spent viewing the advertisement. Some Web sites are considered static in design, meaning that they deliver only text content and images. Others can be media-rich, delivering audio, video and interaction with the Web site or other site visitors. Online communities To build a loyal following for a Web business, you must build value and include information that will keep customers coming back for more. One of the techniques used is to build online communities. These features are services that allow customers to interact with or gather information from other customers or people with similar interests or viewpoints. Online communities can consist of online chat features, bulletin boards or mailing list servers. With radio and television, the only community created might be a discussion to see whether others have seen or heard an ad, and their opinions of it. Such discussions are mostly for entertainment value and not necessarily a true form of community. Directed or opt-in e-mail Many sites offer to send visitors or customers periodic e-mail messages containing specific information that they have requested. Such information may include specials, news or events. If you decide to use bulk e-mail to promote your online business and products, opt-in e-mail allows you to give your customers the option of subscribing (or opting in) to your periodic announcements by letting them authorize their addition to your mailing list. Customized service Some sites allow users to customize what they view, thereby allowing them to filter the content they want and do not want. When users return to the site, they will have a customized view, eliminating the need to re-enter or view certain information. Uniform Resource Locator (URL) A text string that specifies an Internet address and the method by which the address can be accessed. mailing list server An e-mail server that regularly sends e-mail messages to a specified list of users. opt-in e-mail An e-mail list service that is created legitimately by subscribing only users who specifically request to be added to the list.
Lesson 3: Web Marketing Goals 3-5 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Immediate purchasing Enabling users to purchase a product or service immediately is the most powerful tool marketers can offer. The less time customers are required to wait after deciding to buy, the more likely they are to complete the purchase. Immediacy is an important advantage to marketing on the Web. If customers see something they want, the seller or business will want to complete the sale as fast as possible. The longer the wait, the more time customers have to find better prices or products or change their minds. Global reach Even the largest radio or television ad campaign does not have the reach that the simplest Web page can have. Enabling businesses with an unlimited and largely unrestricted resource to compete on a global scale is empowering. Until recently, global exposure was just a dream to most businesses, but now it is almost taken for granted. These elements have created a new marketer-consumer experience. As Web marketing exists today, marketers are still learning how to be consistently effective, and many organizations are attempting to fine-tune Web marketing to get the best results. Targeted reach The Web offers the ability to design a marketing message very specifically for a niche market. For example, you can place a banner ad on a Web site that deals with a subject of interest to your target marketplace. A quickly developing area of targeted advertising is to advertise in Web logs (blogs). Examples of Successful Web Marketing Which businesses are doing a successful job of Web marketing? Trying to narrow the answer to just a few is difficult, but we will isolate several businesses for classroom study. One of the reasons this question is so difficult is that actual figures may not be conclusive or even available. The next few examples are profiles of Web businesses that are marketing successfully. These selections were based on public information taken from financial reports of online sales from the 12 months ending in December 2000. We will study how these businesses designed their sites and how they take advantage of the previously mentioned benefits of Web marketing. The following selections cover both B2B and B2C e-commerce pursuits. Dell Inc. Dell Inc. is a rapidly growing computer systems company that sells worldwide. As of December 2000, Dell was ranked first in worldwide PC shipments. Dell’s online store opened in July 1996. It sold U.S. $41.4 billion in products and services to millions of consumers in fiscal year 2004. Sales were expected to increase by 20 percent in fiscal year 2005, based on the revenue data in the first three quarters. Site visitors can research, customize and obtain price quotes on the Dell product line; order systems online; and track orders from manufacturing through shipping. Additionally, Dell offers detailed online customer support, and gives business customers personalized information about their organizations’ approved configurations and pricing. Figure 3-1 shows a sample Dell home page. OBJECTIVE: 1.2.5: Competitor e-commerce sites
3-6 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-1: Dell home page Dell’s business model focuses on creating a direct connection with the customer. This approach allows the company to price very competitively because of the direct sale. Dell offers low prices but still provides fully customizable computers and tailored customer service. Dell’s Web site is built as a custom ASP.NET application. An ASP.NET application is one built using Microsoft’s Visual Studio .NET. It executes code on the server and renders the Web page as HTML. Much of Dell’s online business is based on Internet marketing. Dell leverages the benefits of Internet marketing in the following ways. Personal selection — Dell has an extensive online and offline advertising campaign targeting people who are interested in purchasing computers. Dell advertises using banner ads on other Web sites that provide hyperlinks to the company’s site. The company knows that the people who see the site have chosen to visit and are interested in computers. When users click a Dell ad, they are taken directly to the Dell Web site for further research, system customization and online purchasing. Interactivity — The Dell site is highly interactive, allowing potential customers to search for computers to fit their needs, customize computers online, obtain price quotes and buy the computers. Integration — Dell’s marketing presence includes targeted banner advertisements, press coverage, direct mail advertising and television advertising. The site offers customers numerous pre-purchase information options and advertises additional items. A form for requesting a catalog or e-mail newsletter is also available. One-to-one service — Besides the extensive customization options described previously, Dell’s customers can access personalized pages detailing customized product configurations and pricing, order and inventory tracking, and customer and technical support. hyperlinks Embedded instructions within a text file that link it to another point in the file or to a separate file.
Lesson 3: Web Marketing Goals 3-7 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Online purchasing — Purchasing is supported by product information and customization options. Dell also offers competitive pricing on its refurbished systems. Global reach — The Dell site is translated into various languages and customized for various countries. In addition, Dell addresses the special needs of business-to-business customers through its Premier account service and portal. The Premier portal allows a company with a Premier account to create a customized Web site that contains product information for approved products only. Pricing information can be separately negotiated for each Premier account, allowing volume discounts and other pricing benefits to be reflected automatically. Various reports are also available to allow a business to view information about the purchases its employees make. Cisco Systems Inc. Cisco Systems® is a major supplier of networking products. Cisco’s networking and computing products allow people to access or transfer information between computer systems. Figure 3-2 shows the Cisco home page. Figure 3-2: Cisco Systems home page Founded in 1984, Cisco produces routers, switches and hubs that connect the Internet. In 2003, Cisco received 90 percent of its orders over the Internet. The company also uses the Internet to reduce costs. In 2003, it saved U.S. $2.1 billion by offering key services, such as technical support and customer training over the Web, and by using the Web to streamline the supply chain and optimize the workforce. Due to the nature of its products, Cisco’s online business can be characterized as business-to-business. Much of this online business relies on the benefits of Web marketing. OBJECTIVE: 1.1.1: B2B and B2C development issues
3-8 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Personal selection — Cisco allows site visitors to select from many types of networking products. It also categorizes these products, allowing users to easily identify those products that would best suit their needs. Interactivity — The Cisco site offers online material and educational information to enable visitors to make sound choices. Integration — The Cisco site includes links from targeted banner advertisements and press coverage. A form for requesting a catalog or e-mail newsletter is also available. One-to-one service — The Cisco site offers configuration tools to help buyers determine those components that meet their needs. Online purchasing — Cisco offers different purchasing options. Products can be ordered directly from Cisco or from an authorized partner or distributor. This option gives buyers more control over selection and pricing. Global reach — The Cisco site is translated into various languages and customized for various countries. Amazon.com Amazon.com claims to offer the “earth’s biggest selection,” with millions of books, software, videos and CDs at discount prices. The company has been in business since July 1995 and is growing fast, both in the number of customers it has and in the range of product types it provides. However, until 2003, the company posted multimillion dollar losses. Finally, in 2003, the company reported a net income of U.S. $35.3 million. Figure 3-3 shows the Amazon.com home page. Figure 3-3: Amazon.com home page
Lesson 3: Web Marketing Goals 3-9 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Amazon.com’s existence depends entirely on the Internet, and the company is changing both Internet commerce and publishing industry standards. It has regularly been recognized as one of the top 10 visited sites, as a leading online shopping site, and as the largest bookseller in the United States, online or offline. Its major marketing leads come from extensive use of targeted banner and button advertisements, public relations and the Amazon.com Associates program, an online franchise program. Approximately 60 percent of the company’s orders come from returning customers. Amazon.com has created a billion-dollar business based on Internet marketing. The company takes advantage of all the benefits of Internet advertising. Personal selection — Amazon.com has an extensive targeted advertising campaign and a rigorous public relations push, ensuring that anyone who might be interested hears about the company. Therefore, those who click an Amazon.com advertisement are interested consumers and their desire to buy Amazon products is potentially high. Interactivity — The Amazon site is highly interactive, offering the user several ways to find the right product, listen to music samples, watch video clips and read reviews. Integration — Banner advertisements link to the Web site, which has almost no external links. Direct e-mail is integrated into the book search, and, during the purchasing process, the company requests the user’s permission to periodically send information. One-to-one service — Cookies and customer accounts are used to identify repeat visitors. When customers return to the site from the computer at which they made an earlier purchase, or when they log on, they receive a list of recommended products based on their purchasing history. Online purchasing — Amazon.com provides detailed product information, including book cover copy, tables of contents, customer reviews and other product-specific details. Its patented one-click payment technology for repeat visitors makes it easy to finalize a purchase. Global reach — The company operates international sites for Canada, the United Kingdom, Germany, Japan, France and China. Now that you have seen these marketing elements at work, you should have a better idea of how Web marketing has more depth and greater potential than traditional advertising. Marketing Goals Defining what you want your business to achieve is how goals are created. Before any significant steps can be taken on a project, certain areas and ideas must be carefully considered. Goals that coincide with the company’s direction must be established. Although many questions can help start the process, a common initial question is: What is my business trying to accomplish? button advertisement A type of online advertisement in which small buttons announcing other ads are placed on a Web site. Typically 120 x 60 or 80 x 60 pixels. OBJECTIVE: 3.3.1: Marketing goals
3-10 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Possible answers include the following: We want to improve customer service and satisfaction. We want to gain access to different markets. We want to sell new products. We want to automate our business process to reduce costs. Although it is a very basic question, the answer (or answers) an owner chooses is significant and is the root of larger questions to be answered later. If the real objective is identified early, the project will have a sharper focus and will be more likely to meet its goals successfully. In the sections that follow, you will examine each of the previous four answers to see how they relate to the company’s marketing goals. Improving customer service The impetus for moving to the Internet for e-commerce is not always to sell more products. Instead, a valid goal might be to increase customer satisfaction by offering more responsive customer service. An example of a company that uses the Internet to achieve this goal is Federal Express (FedEx). The company turned to the Internet, but not to ship more packages, although that decision may have incidentally increased business. Instead, FedEx decided to invest in Internet technology to better automate processes, to promote an already world-class business model, to better serve customers and to save money. This automation and customer service improvement saved the company thousands of dollars monthly on customer service, while improving customer satisfaction. FedEx ships more than 3 million packages every day. The two parties to every delivery are the sender and the recipient. Thus, FedEx could receive millions of calls to its toll-free number from people who want to check the status of their deliveries, at a potentially prohibitive cost to FedEx. However, with a tracking number and a visit to the company’s Web site, customers can now obtain that information online. In the following lab, you will visit the Dell Web site and examine the customer service options available. Suppose you have been hired by a company to improve business through its Web site. The company currently handles customer service using a technical support hotline. However, recent complaints have surfaced about long hold times. You will examine the customer service features offered by Dell and answer questions about how these features could be used to meet the company’s marketing goals. Lab 3-1: Examining customer service options on the Internet In this lab, you will look at the Dell Web site and examine how it attracts and retains customers by offering excellent customer service through the Web. 1. Browser: Navigate to www.dell.com. Dell’s home page is shown in Figure 3-4.
Lesson 3: Web Marketing Goals 3-11 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-4: Dell home page 2. Examine the features on the site. How does Dell segment its business? Which options represent business-to-business customers? Which options represent business-to-consumer customers? 3. Click the Home & Home Office link. Your screen should resemble Figure 3-5. Figure 3-5: Home & Home Office page 4. Locate the Support options (see Figure 3-6). You might need to scroll down to see them.
3-12 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-6: Service & Support section 5. Explore each of the options and consider how these options help attract and retain customers. In this lab, you viewed the Dell Web site and examined its various customer service features. Accessing different markets If the goal is to gain access to markets that were previously inaccessible, the focus changes. Do you want to be an international marketer? Ten years ago, this task would have been daunting, even for large businesses. After all, contacts or partners in foreign countries had to be established and then a strategy of distributing goods or services had to be planned. Finally, payments, conversion rates, letters of agreement and letters of credit all had to be discussed and formalized. And after such preparation, the market could still prove to be inactive and unresponsive. The process of reaching international customers can appear easy. Offer a product, establish a Web presence, promote the site, take credit card orders and ship the product. In some cases, the task can be that easy, but such cases are rare. However, the Web has made access to different markets faster, cheaper and easier. If you plan to reach a global market, you must also determine whether to localize your Web site. Localization can be very expensive and time consuming. To localize a Web site effectively requires that you hire individuals who are knowledgeable about the language and culture of the marketplace you are attempting to reach. Your marketing message must also reflect specific cultural differences. localization The process of translating Web content into a specific language in order to market products globally.
Lesson 3: Web Marketing Goals 3-13 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Accessing different markets does not guarantee that an e-commerce business will succeed. As with traditional market penetration, all the factors need to be examined to see whether the business can succeed. After those factors have been evaluated, the actual implementation will be easier than it would have been using traditional methods. In the following lab, you will visit the Dell, Barnes & Noble, and Habitat For Humanity Gift Shop sites to identify their current market penetration and to analyze the results of accessing different markets. Suppose you have been hired by Habitat For Humanity Gift Shop to globalize its operations. You would need to provide examples of e-commerce businesses that sell to a global marketplace and identify the issues associated with globalizing the Habitat For Humanity Gift Shop. Lab 3-2: Determining market globalization efforts and plans In this lab, you will look at how the Dell and Barnes & Noble Web sites handle globalization. You will also consider the Habitat For Humanity Gift Shop site in terms of its current marketplace and how suitable it is for globalization. 1. Browser: Navigate to the Dell Web site (www.dell.com). Type Argentina in the search field (see Figure 3-7) and search for information specific to Argentina. Figure 3-7: Choose A Country/Region list 2. Review the Argentina-specific information returned by the search (see Figure 3-8).
3-14 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-8: Dell site product information for Argentina 3. Click the country selection drop-down list in the upper-left corner of the page (circled in the previous figure), and select Argentina. A version of the Web site localized for Argentina will appear (see Figure 3-9). Figure 3-9: Dell site information for Argentina 4. Consider the importance of globalization to Dell’s marketing strategy, and write your thoughts in the space provided. 5. Browser: Navigate to the Barnes & Noble Web site (www.barnesandnoble.com). See Figure 3-10.
Lesson 3: Web Marketing Goals 3-15 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-10: Barnes & Noble home page 6. Look for localized versions of the site. Are localized versions available? 7. Locate information about shipping and deliveries by clicking About Shipping near the bottom of the page (see Figure 3-11). Figure 3-11: Shipping and delivery information 8. Look for information on shipping to international locations. Is international shipping available? What are the restrictions? 9. Look for information on customs and tariffs. How does Barnes & Noble handle customs and tariffs?
3-16 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 10. Consider the importance of a global marketplace to Barnes & Noble’s marketing strategy. How important do you think the global marketplace is to the company’s strategy? 11. Consider the barriers to globalization on the site. What barriers to reaching a global marketplace might arise with this site? In this lab, you examined how three e-commerce sites handle globalization. You also considered the effects of globalizing the Habitat For Humanity Gift Shop site. Selling new products Needless to say, new products that are introduced properly to the market and generate revenue are exciting for any company. Bringing a new product to market with traditional means can be very costly. As a result, many products never reach the market because they are considered too high-risk when compared with the Return On Investment (ROI). E-commerce has opened up an entirely new model for delivering new products to the market. The risk that your business or company faces to introduce a product online is much lower. However, you must ensure that the product is suitable for online sale. Questions you might ask include the following: Is the product perishable? If so, it will require special shipping, and shipping charges might be prohibitive. Is the product bulky or heavy? If so, does the cost of shipping it outweigh the benefits of offering it online? Will consumers buy the product without being able to see it in person or try it on (an item of clothing, for example)? Some consumers are hesitant to buy clothing before trying it on. Is the project subject to legal regulations? Alcohol, cigarettes or pharmaceuticals can be distributed over the Internet, but companies must take special precautions to make sure the product is distributed legally. Promotion of the product can take many forms and budget sizes. Assume that we are not talking about the enormous ad campaigns that many of the “dot.com” companies formerly conducted. With a well-placed, methodical, relatively inexpensive marketing campaign, the product can find its market niche and be a success. In the following lab, you will consider how the Habitat For Humanity Gift Shop would introduce a new product. Suppose you have been hired by the Habitat For Humanity Gift Shop to help market its expanded product line. You would need to analyze the current site, consider product suitability and discuss the ramifications of offering specific products. Return On Investment (ROI) Profit earned as a result of a project relative to the value of resources required to complete it.
Lesson 3: Web Marketing Goals 3-17 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lab 3-3: Introducing new products on the Internet In this lab, you will look at the Habitat For Humanity Gift Shop site to identify the need for introducing any new products, and you will consider the ramifications of introducing new products. 1. Browser: Navigate to the Habitat For Humanity Gift Shop Web site. 2. The Habitat For Humanity Gift Shop is considering selling handmade furniture. Consider whether handmade furniture is a suitable addition to the product line. What factors will influence your decision? What changes would the addition of this product require? 3. List three products that would be appropriate to add to the Habitat For Humanity Gift Shop catalog. Discuss how you would add them to the site. Write your answers in the space provided. In this lab, you analyzed the changes needed to introduce a new product on the Habitat For Humanity Gift Shop site. Automating business processes The more processes that can be moved away from manual labor or processing, the more efficient the business will become. Again, this statement does not fit all business models, but it is true as a general rule. If someone approached Rolls-Royce Motor Cars to sell the idea of thorough automation in the assembly line, the idea would probably encounter serious resistance. Conversely, Dell relies heavily on the automation of its Web site’s ordering and customer service processes. For many businesses, automating certain processes is part of a natural evolution and a byproduct of staying competitive in the market. Automation allows an e-commerce business to stay competitive with other businesses that have embraced the technology. When processes have been automated, the interchange with other automated systems becomes possible. This capability allows a company to save money by reducing the number of employees necessary to perform a job. It also allows companies to optimize their supply chain. Adopting a just-in-time (JIT) ordering methodology helps companies compete by reducing the excess inventory stored at any point in time. just-in-time (JIT) ordering The practice of ordering only as much inventory as is needed to fill existing and near-term predicted orders.
3-18 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 One of the challenges facing businesses today as they continue to adopt e-commerce strategies is choosing technologies that will carry them forward without requiring restructuring. Later in the course, you will study the standard frameworks that businesses are choosing for their e-commerce strategies. In the following lab, you will visit the Habitat For Humanity Gift Shop site and analyze where automation can be used to reduce costs. Suppose you have been hired by Habitat For Humanity Gift Shop as a consultant to determine how the business can reduce its costs. You might consider automating certain processes after examining other e-commerce sites. You could analyze the Habitat For Humanity Gift Shop site to identify points at which automation will help reduce costs. Lab 3-4: Determining automation benefits for an e-commerce site In this lab, you will look at the Habitat For Humanity Gift Shop site to see whether you can identify any processes that might benefit from automation. 1. Browser: Navigate to the Habitat For Humanity Gift Shop Web site. 2. Examine the Habitat For Humanity Gift Shop site and list some processes that you think would benefit from automation. Some of these elements may be related to other issues you discovered in previous labs. Other elements might be implemented in later labs. A. ________________________________________________________________________________ ________________________________________________________________________________ B. ________________________________________________________________________________ ________________________________________________________________________________ C. ________________________________________________________________________________ ________________________________________________________________________________ 3. Compare ideas with your classmates. 4. If Time Permits: Visit one or more of the other profile sites to see how automation could be implemented or improved. In this lab, you evaluated whether automation could be used to improve the Habitat For Humanity Gift Shop site.
Lesson 3: Web Marketing Goals 3-19 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Web Marketing Strategies When you are ready to implement your goals, you need to consider marketing strategies. Strategies are small, incremental steps taken toward a goal. Think of marketing as a pyramid (see Figure 3-12). At the top of the pyramid are the goals. The next level includes the strategies, and below that are the tactics. Strategies are based on specific tactics. Goals Strategies Tactics Figure 3-12: Marketing pyramid Tactics are the building blocks of strategies. Strategies are the building blocks of goals. All work together to create an effective marketing campaign. For example, assume that the goal is to enter new markets. The strategy would be to target new customers. The tactic would be to advertise to specific customers who would use the product or service. Web marketing strategies can include many focus areas, including the following: Web site design Online promotion campaigns Targeted marketing programs Search engine placement methods Traditional promotion campaigns The most effective marketing strategies typically involve multiple components that make up an integrated marketing plan. Also important is ongoing tracking and evaluation, which enables you to determine what is or is not working successfully. Web site design The era of quickly designed Hypertext Markup Language (HTML) pages has evolved into one of more sophisticated Web sites. Many site design considerations are beyond the scope of this course. However, because site design is part of a marketing strategy, you will review some major components later. Site owners should understand the reasons for Web site design: not necessarily the aesthetics of the design, but rather its functionality. The site itself needs goals, which should be supported by design strategies, which are, in turn, supported by tactics. OBJECTIVE: 3.3.10: E-commerce site promotion Hypertext Markup Language (HTML) The traditional authoring language used to develop Web pages for many applications.
3-20 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Online promotion campaigns To develop product awareness, a promotion campaign should be implemented. If you are targeting those already using the Internet, an online promotion will direct traffic to the site. Like site design, online promotion has some tested elements that should be followed for the most effective results. We will discuss the strategies and tactics of online promotions in a later lesson. Targeted marketing programs An online promotion campaign defines how the audience sees the message. It might be a broadcast message suitable for a wide range of potential consumers or a targeted message. The targeted marketing program determines who should see the message and why. For example, an online promotion might include banner ad placement on other Web sites. However, the Web sites that are chosen and the reasons for selecting them depend on the target market. If ads to promote a new home-cleaning product are placed on a Web site that focuses on sports and sporting events, the ads are probably not well targeted. If the same ads are placed on a site that focuses on home improvement topics, the ads are better targeted. Search engine placement methods If customers do not see the ads or hear about your business from another source, the only way they will find you is through search results. A problem with this method is ensuring that the site will place in the top 10 results returned. Unfortunately, there is no way to guarantee such placement. Each search engine has its own method of cataloging Web sites, ranking them and returning results. Many companies now offer services to increase your chances of getting top-10 results through persistent and proper procedures during submissions. One useful resource for learning how to best place and list a site with search engines can be found at Search Engine Watch (http://searchenginewatch.com). Search Engine Watch continually monitors the techniques and changes that the major search engines use, allowing submitters to achieve optimal placement. It also offers a periodical e-mail update to which users can subscribe. Growth Drivers and Barriers in E-Commerce For businesses trying to enter new markets, factors that encourage growth are called drivers, and those that limit growth are called barriers. Being able to identify these factors and determine their effects can make the difference between profits and losses. Drivers Following are some areas in which growth drivers exist in e-commerce. Access — A larger customer base can increase profit potential. Around-the-clock service — Time zones are no longer a hindrance to business. Standardized data interchange formats — Electronic Data Interchange (EDI) and Extensible Markup Language (XML) allow businesses to exchange and use electronic data both internally and with vendors, suppliers and customers. OBJECTIVE: 3.1.2: Growth drivers and barriers
Lesson 3: Web Marketing Goals 3-21 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Increasing bandwidth — More options are becoming available for high-speed Internet connections to allow media-rich content to be delivered more consistently. Enabling technology — Easy-to-use technology is allowing more businesses to enter e-commerce. Cost — Options to implement e-commerce are available for minimal costs. Ease of access — Internet access is becoming more widespread and, in some cases, a daily necessity. Critical mass — The growing acceptance of the Internet indicates that pursuing e-commerce makes economic sense now. Physical location — Some businesses no longer need physical stores to be successful. Diversification of offerings — Companies can expand on new and existing products and services. Centralization — An online business need not be geographically dispersed. In some cases, however, cost benefits may result from such disbursement. Barriers Following are some areas in which growth barriers exist in e-commerce. Fragmented data and data formats — Although data can be interchanged, data formats have not yet been standardized. However, many businesses are turning to XML to describe data. Fear of change — Some demographic groups continue to be wary of computers in general, specifically of online shopping and providing personal information over the Internet. Large segmentation — Defining the target market is more difficult because the audience is so much larger today. Rapid change — The models that work today on the Internet might not perform well or might become obsolete in the future. Increased competition — Easier market entry has also increased the number of businesses vying for customer attention. Physical location — Physical store locations, in which customers can handle the products before buying them, give customers a feeling of security because they can return to the location if problems occur. Saturation — Product or service uniqueness is becoming more difficult to attain. Cost — Large-scale projects can require sizable up-front investments. Restrictions — Although few laws and restrictions exist so far, regulation will probably increase. Because this area is experiencing rapid change, keeping track of current regulations, especially applicable foreign regulations, can be difficult. Distribution — Some products sold online can be difficult to ship.
3-22 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Selecting and Positioning Your Product A key consideration with any retail initiative is to carefully select the products and services you will offer. This consideration holds true for e-commerce ventures as well as more traditional ones. In fact, when selecting products and services for sale online, you must consider additional factors. Key questions you will need to answer include the following: Is the product or service a hard good or a soft good? (You will learn about hard goods and soft goods in the following section.) How much will the product cost? Is the market for the product a global market or a niche market? Is the product available to purchase locally? How will you distribute the product? How will you support the product? Will you need to offer technical support or will an online frequently asked questions (FAQ) page suffice? Hard goods vs. soft goods Some businesses offer software, music, news or advice, which are referred to as soft goods or digital goods. The term “soft goods” means that the product or service can be distributed via an electronic method, such as the Internet. The selling company can immediately distribute its products for free or for a charge. These products offer immediate gratification because the user can quickly download or view the product or service. A business that sells items such as computer hardware, clothes or books has hard goods for sale. Even though the goods can be purchased online, the delivery method typically requires the Post Office or a similar mail carrier. Whether a product is a hard good or a soft good can affect its success in online sales. Consider the previous discussion of successful e-commerce sites. Most of those companies offer hard goods: Most of them sell computers, networking equipment and telecommunications devices, and a few sell books and music. Are hard goods more successful than soft goods? The answer depends more on the product’s suitability for online selling. Consider perishables: They are hard goods, but are not very successful online. However, some other hard goods, such as personal computers, can be successfully sold online. What about soft goods? Services such as online project management are not very successful, whereas music downloads are very popular. Other considerations that affect product success can include the following. Complexity — Is physical interaction with business personnel required to order or set up the product or service? Complex products are difficult to market online. Information intensity — Does the product require intensive pre-purchase information gathering? These products are more easily marketed online. Contact — Is the product or service best marketed through physical contact? If so, it will be more difficult to market online. frequently asked questions (FAQ) A summary of answers to questions on a given topic; usually found on business or informational Web sites. OBJECTIVE: 3.3.8: Product distribution factors
Lesson 3: Web Marketing Goals 3-23 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Product pricing A very expensive or very inexpensive item might not sell well on the Internet because buyers generally want to see very expensive items to check quality, and the cost in shipping and time delays for an inexpensive item might make it less appealing. Both types of products could still be marketed online, however. Both Toyota (expensive products) and Coca-Cola (inexpensive products) have strong online marketing campaigns driving traffic to their retail channels. Moderately priced items are more easily sold online. Also, products requiring frequent price or offering changes might be an excellent choice for online marketing because changing pricing or product descriptions in a database or Web catalog is relatively easy. On the other hand, changing prices in printed catalogs can incur heavy expenses. One important point to consider when pricing your products is whether the distributors or manufacturers of the product have any pricing restrictions. Some wholesalers depend on brick-and-mortar business to generate interest for their products, and want to ensure that these companies are not driven out of business by Internet discounters. These distributors and manufacturers might require businesses to agree not to cut prices below a certain margin. The way you handle pricing changes is also important to your marketing strategy. Consider the fringe benefit of reducing prices overtly (in other words, explicitly indicating the new price that replaces the old price) instead of covertly (in other words, updating the Web site content to reflect only the new price). If done covertly, consumers may not notice the price reduction even though they would still reap the benefit of lower prices. However, if done overtly, consumers will not only reap the benefit of lower prices but will probably have a more favorable impression of the business as one that offers great sales or discounts. You should manage price changes carefully so as to avoid upsetting customers who have made recent purchases at the old (higher) price. If you make overt price changes too often, customers might start postponing purchases as long as possible, hoping to get the item at a lower price. You can minimize this concern with a 30-day rebate (the seller drops the price and the buyer can request a rebate) or similar program. Global (mass) vs. niche (micro) markets A product’s appeal can be categorized in one of two ways. The first is a global (or mass) market appeal, in which need is not constrained by geography and a large number of potential customers exists. For example, computer hardware is not specific to any geographic location; thus, it has a global (mass) appeal and is a suitable product for online marketing. Computer hardware has no geographical constraints and is a highly desirable product worldwide. The other type of appeal is a niche market appeal, which has a smaller target audience and need. Niche (micro) markets might also be served globally, but they target a very select audience. Niche marketing tries to work its way into daily life. For example, the market for mobile dog-grooming services is not constrained significantly by geography (as, for example, surfboards would be) because dog owners live all over the world, but the number of potential customers is still limited by other factors. Niche markets require a different marketing strategy from that of global markets. You must carefully target the individuals who should receive your marketing message. Instead of using broadcast advertising techniques, you must identify the interests of those who will most likely want the product you are selling, and you must use those interests to OBJECTIVE: 3.3.7: Product-pricing ranges OBJECTIVE: 3.3.2: Global vs. target (niche) OBJECTIVE: 3.3.3: User interests specific to niche markets
3-24 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 design your advertising campaign. For example, if you are selling baseballs, it would be better to buy advertising space on a Web site that publishes sporting event results than on a general interest news site. Blogs are becoming a popular choice for niche market advertising because they often have tightly targeted content. Product distribution and availability Product distribution depends largely on the distinction between hard goods and soft goods. Hard goods must be shipped, whereas soft goods may be shipped, but are typically delivered online. The methods used for hard goods distribution will probably be determined by the cost and the importance of the delivery. Product availability is another important consideration. Does the product have other local distributors or retailers? If so, the product will be more difficult to sell online. For example, a business that wants to sell cellular and wireless phones online will face extensive competition from other online companies and those with physical stores. For online marketers, such competition is one of the most difficult barriers to overcome. When a retailer has a physical location, a customer can walk into the store, examine the product in person, and then buy it. In this type of transaction, the customer has easy access to the product and a place to return it if necessary. The question then becomes: Why would the customer choose to buy a cellular or wireless phone online? Perhaps the online marketer can offer the phone for a lower price. What about shipping charges? The cost of shipping can eliminate the discount advantage of shopping online. What about a return policy? If the customer has to return the phone, he or she may be required to pay the shipping and may not be able to use the phone in the interim. On the other hand, if the phone is purchased at a storefront, the customer can return it for immediate repair or replacement. Online marketers face serious challenges with issues of this type. Ease of shipment is another important consideration for online sellers of hard goods. Is the product large, small, perishable or fragile? The legality of the product in various jurisdictions must also be considered, as must customs laws in various countries. The problems discussed here may seem less like distribution and availability issues and more like product-choice marketing issues, but the two areas are closely connected and the lines are less distinct than they are with traditional marketing. Customer service is a major selling point that will help online businesses compete with traditional retailers. Later in the course, we will discuss effective customer and product service. Important product availability and distribution questions Considering the following questions will help you formulate some of your product policies. Is the product a hard or a soft good? Is the product available locally to the customer? Will the cost of shipping outweigh the benefits of online purchasing? Who will be responsible for the cost of return shipping for unsatisfactory products? Can the product be shipped easily? Is the product governed by laws or regulations for shipping and customs? OBJECTIVE: 3.3.8: Product distribution factors
Lesson 3: Web Marketing Goals 3-25 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Identifying Your Target Market After selecting the products and services you will sell, you must identify who will buy them. Knowing your customers is important to ensuring that your marketing message reaches the right people. After you understand your customers, you can use the following types of data to hone your marketing strategy: Demographics Psychographics Focus groups Surveys Demographics Demographics is the study of groups of people based on common characteristics. Good marketers base their decisions largely on demographic studies. Demographic studies of various groups, called populations, have been conducted for many years so that marketers can learn how to best target prospective customers. Some of the most common demographic characteristics studied are as follows: Age Gender Race Income Location Education When marketers understand the details of these characteristics, they can generalize about the group. They can then target a certain market segment and predict responses somewhat successfully based on experience. When marketers have this type of information, they can best devise their campaigns to reach the target audience. For example, an advertising campaign for marketing a product that appeals to teen-agers will be very different from one that markets a product that appeals to seniors. The ads will differ in message, presentation and positioning. In the following lab, you will examine demographic information. Suppose you have been hired by a company to help it launch an e-commerce site that will sell a variety of products. You would need to identify market concerns based on current demographic data. Lab 3-5: Exploring demographics 1. Browser: Enter www.pewinternet.org and click Latest Trends to visit the Pew Internet & American Life Project Latest Trends page, as shown in Figure 3-13. This organization tracks Internet access demographics in the United States. OBJECTIVE: 3.3.4: Internet demographics
3-26 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Figure 3-13: Pew Internet & American Life Project Latest Trends page 2. Click the Who’s Online link to display current demographic information (see Figure 3-14). Figure 3-14: Demographics of Internet Users
Lesson 3: Web Marketing Goals 3-27 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 3. Consider the ways in which this demographics information supports a company’s decision to sell the following products online. Rate the products in terms of whether they will be easy or difficult to market on the Internet. Justify your reasons. A. Geriatric vitamins B. Telescopes and telescopic cameras C. Expensive jewelry D. Music videos 4. Redisplay the Latest Trends page. If the demographics appear in a pop-up window, close it. 5. Click Demographics in the Report Topics drop-down list and click Go. The Reports: Demographics page should appear. 6. Locate the “Older Americans and the Internet” article. Click the Learn More link and read the beginning of the article. How does this influence your answers in Step 3? Remember that these statistics are from only one source. Highly accurate demographics are available, but usually have an associated access fee. The following link provides a Yahoo! listing of other statistics and demographics: http://dir.yahoo.com/Computers_and_Internet/Internet/Statistics_and_Demographics/ Psychographics Psychographics is defined as a science that can help anticipate the specific positive, negative or neutral psychological impact of words, symbols, shapes, textures, colors, fonts or even scale on consumer target market groups. These ideas offer a significant creative advantage to developers of corporate identities, promotional tools and advertising campaigns. Though lifestyles can be measured several ways, the most popular method is to analyze people’s choices in the following areas. Activities and Interests — what people do with their time, including work, hobbies, vacation and entertainment Priorities — what is important to people, such as family, home, community and achievements Opinions — what people think about a variety of topics, including themselves, social issues, economics, politics and culture This information can be combined with demographics so that marketers can develop a detailed focus on their target market.
3-28 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Focus groups Another tool marketers have to evaluate product and service marketing concepts is market testing through focus groups. Focus groups can consist of employees in the marketing organization, or they may be outsourced. One outsourcing company providing this service is i.think inc. (www.ithinkinc.com). Properly administered, focus groups can provide a great deal of information about the target audience and their buying habits. However, you must carefully select the people who will participate in the focus group to make sure they represent the target consumer for your product. For example, if you are selling beauty products online, you will want to ensure that your focus group includes users who currently use beauty products. Surveys Surveys also help connect the marketer with the audience. A common type of survey is one administered after a consumer has made a purchase. This type of survey can be used to measure the customer’s satisfaction with the online shopping experience and to obtain information about the customer’s perception of your company. Even answers to a few simple questions can help alert you to potential problems with your site and give you insight into your customers. Market survey data can also be useful in helping you develop a targeted marketing strategy. A survey of this type can gather both demographic and psychographic data. Market survey development is a special art, and must be performed carefully to generate valid data. The base of users surveyed must be broad enough to be meaningful. A number of companies offer market survey services, including: MindField (www.mindfieldonline.com) InsightExpress (www.insightexpress.com) i.think inc. (www.ithinkinc.com) Other companies offer software that allows you to build your own surveys, including Perseus (www.perseus.com) and Grapevine (www.grapevinesurveys.com). OBJECTIVE: 3.3.5: Customer preference surveys
Lesson 3: Web Marketing Goals 3-29 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Case Study Pet Project Critter Comforts is a manufacturer of high-quality pet beds, shelters and habitats. It currently has stores in six major cities in the United States. Its current demographics are as follows: Sixty (60) percent of sales are to customers more than 50 years old. Seventy-five (75) percent of sales are to customers with annual incomes higher than $60,000. All customers live in the United States. Rocky has been hired to create a Web site for Critter Comforts. The company’s primary objective is to expand its customer base. Rocky recommends implementing an e-commerce site and advertising in search engines and on general interest Web sites, such as Yahoo! and MSN. He also suggests advertising on television in those cities in which Critter Comforts already has a store. * * * As a class, discuss the following issues with regard to Critter Comforts: How suitable is the product for sale over the Internet? What characteristics of the product might make Web marketing difficult? Is the market a global market or a niche market? How might selling the product on the Web expand the Critter Comforts customer base? Should Rocky have recommended globalization? What are the current customer demographics? How would you recommend advertising that better targets the anticipated customer base?
3-30 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson Summary Application project Early Web marketing was based on traditional theories and ideas. As the Internet evolved, marketers had to change their thinking quickly to incorporate new methods that would translate into successful online sales. Take a moment to reflect on the changes you have noticed in Web marketing over the years. What patterns have you noticed? If you are a veteran Web user, you might be able to remember a time when there was little or no advertising. Over the years, ad progression has involved links, then banner ads, then rotating banners, animated banners, and more recently, smaller pop-up windows requiring some sort of user action, such as reading, making a selection or closing the window. Has one type of advertising captured your attention more than others? Why? Skills review In this lesson, you examined and identified Web marketing goals and strategies. You discussed the drivers and barriers associated with growth in e-commerce, and you learned the advantages and disadvantages of hard and soft goods. You also learned about demographics and their role in Web marketing. Now that you have completed this lesson, you should be able to: 1.1.1: Identify specific business-to-business (B2B) and business-to-consumer (B2C) issues in developing an e-commerce site. 1.2.5: Compare features of competitor e-commerce sites. 3.1.1: Compare the advantages and disadvantages of e-commerce and traditional sales methods. 3.1.2: Identify business growth drivers and barriers. 3.3.1: Identify e-commerce marketing goals. 3.3.2: Determine global versus target (niche) product appeal. 3.3.3: Identify user interests specific to a target (niche) market. 3.3.4: Evaluate Internet demographics and their relevance (includes gender, culture, age). 3.3.5: Use surveys to determine customer preferences. 3.3.7: Evaluate product-pricing ranges and price changes. 3.3.8: Evaluate product distribution factors and methods (includes cost, distance, hard goods, soft goods). 3.3.10: Promote and advertise an e-commerce site (includes search-engine placement options, synchronizing e-commerce promotion methods with traditional methods).
Lesson 3: Web Marketing Goals 3-31 © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0 Lesson 3 Review 1. How does Web marketing create a more personalized approach than radio or television advertising? 2. Why is the risk of introducing a new product online lower than it is for a business with a physical store? 3. Why do moderately priced products sell better online than very expensive or very inexpensive products? 4. Why do marketers rely on demographic statistics? 5. What is psychographics and how do marketers rely on it?
3-32 E-Commerce Specialist © 2011 Certification Partners, LLC — All Rights Reserved Version 1.0
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