Chapter 10

The first paid advertisements placed on a website

Instagram

Marketspace

1995

Internet technology standards Universal Standards: There is on set of tech standards, namely internet standards. Lower market entry costs and lowers search costs.

price discrimination. Sellers can no longer sell same products at different prices to different groups of people because consumers are now able to compare items sold by other vendors to compare prices.

Interactivity. Interactivity: E-commerce originally presented simple, static web sites to customers with limited possibilities of interactivity between the two. Now, most major retailers and even small shops, use a variety of ways to communicate back and forth with customers and create new relationships around the globe.

Richness: Information richness refers to the complexity and content on a web site. E-commerce enjoys information richness not available in traditional markets.

Information Density: e-commerce tech reduces information costs and raises quality. Provides price transparency. Helps businesses differentiate their products in terms of cost, brand, and quality

Search costs: the effort required to find suitable products.

total amount and quantity of information available to all market participants.

price discrimination

Asymmetry Information asymmetry: reduced by the internet, exists when one party in a transaction has more information that is important for the transaction than the other party. It helps determine their relative bargaining power.

Dynamic pricing: the price of a product varies depending on the demand characteristics of customer of the supply situation for the seller.

disintermediation Disintermediation, removing the middleman, has allowed many companies to improve their profits while reducing prices. In our example, insurance companies are using disintermediation to remove the local agent from the transaction between itself and the customer. Airlines have steadily removed the travel agent from transactions with customers thereby reducing their costs. Other industries are following in their footsteps slowly but surely.

menu costs Menu costs are the costs a firm incurs to change its prices. For example, ecommerce firms typically have low menu costs and may frequently experiment with prices Digital markets are very flexible and efficient because: they lower menu costs, reduce search and transaction costs, eliminate price discrimination, and have the ability to changes prices dynamically based on market conditions.

lower search costs. search costs: the effort required to find suitable products.

higher costs of distribution.

Lower costs which takes the middle man out of transactions between a customer and business.

Personalization refers to adjusting marketing messages for a specific consumer; customization refers to adjusting a product or service based on a user's preferences.

True

False

False

True

False It lowers prices for the consumer.

True production costs are lowered for businesses when selling online

False

False Information asymmetry: reduced by the internet, exists when one party in a transaction has more information that is important for the transaction than the other party. It helps determine their relative bargaining power.

True Cost transparency: refers to the ability of consumers to discover the actual costs merchants pay for products. Price transparency: refers to the ease with which consumes can find out the variety of prices in a market.

True

True Behavioral targeting: techniques to increase the effectiveness of banners, rich media, and video ads. Refers to tracking the clickstreams of people on thousands of websites to understand their interests and intentions and expose them to ads that are uniquely suited to their online behavior.

The most profound way in which e-commerce and internet has changed the relationship between companies and their customers is in the shrinking of information asymmetry. Information asymmetry exists when one party in a transaction has more information that is important for the transaction than the other party. That information helps determine their relative bargaining power In digital market, consumers and suppliers can "see" the prices being charged for goods, and in that sense digital markets are said to be more "transparent" than traditional markets - EX. until auto retailing sites appeared on the Web, there was a pronounced information asymmetry between auto dealers and customers. Only the dealers knew the manufacturers prices. Auto dealers' profit margins depended on this asymmetry of information. Now the web provides access to competitive pricing information. Thus, the web has reduced the information asymmetry surrounding an auto purchase. - Internet has also helped reduce information asymmetries for businesses seeking to purchase from other businesses allowing them to locate better prices and terms.

The exponential increases of knowledge is in regard to information that is readily available for buyers and sellers. Once the concept of a wheel is established, inheritors of that knowledge do not have to "reinvent the wheel." The Internet is a tool similar to the wheel: it is based on shared standards and universal tools. The Internet and shared networking technologies are allowing new techniques for attracting customers and selling customers to be developed and adapted very quickly. For example, although early Internet retailers had difficulty setting up secure credit card transactions and payment systems, today there are many systems in place as vendors step in to create shared tools for doing this. The Internet is fostering shared knowledge and, as such, propagating ever greater increases in that knowledge.

Digital goods are goods that can be delivered over a digital network. When a digital product is produced the cost of delivering that product digitally is very low. It creates new business models and is challenging bookstores, music labels, and film studios Digital markets are more transparent than traditional markets. They are very flexible and efficient. It has reduced search and transaction cost, lower menu prices, and ability to change prices based on market conditions and provide opportunity to sell directly to customer by bypassing intermediaries

In dynamic pricing, the price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller. For instance, online retailers from Amazon to Walmart change prices on many products based on time of day, demand for the product, and users' prior visits to their sites. Using big data analytics, some online firms can adjust prices at the individual level based on behavioral targeting parameters such as whether the consumer is a price haggler (who will receive a lower price offer) versus a person who accepts offered prices and does not search for lower prices. Prices can also vary by zip code, based on economic characteristics of the purchaser's geographic location. Uber, along with other ride services, uses surge pricing to adjust prices of a ride based on demand.

In personalization, merchants can target their marketing messages to specific individuals by adjusting the message to a person's name, interests, and past purchases. For example, Amazon.com greets each logged in user with their user name. With customization, merchants can change the delivered product or service based on a user's preferences or prior behavior. The Wall Street Journal Online allows you to select the type of news stories you want to see first and gives you the opportunity to be alerted when certain events happen. The ability of Internet technology to track customer behavior at websites, along with records of purchases and other behavior, allows merchants to create a detailed profile of a customer. These profiles can be used to create unique personalized web pages that display content or ads for products or services of special interest to each user, improving the customer's experience and creating additional value. The business value of personalization is reduced marketing costs, as you spend only the money to target customers that are more likely to be receptive and are more profitable, and improved sales results from increased customer response to personalized sites that better serve their own purposes and shopping needs. Personalization can achieve some of the benefits of using individual salespeople for dramatically lower costs.

e-tailer an online retail store

C2C e-commerce

B2C e-commerce

Content provider Content provider: one of the fastest-growing e-commerce segments (podcast, streaming)

save users money and time by processing online sales transactions. Transaction broker: Process transactions for consumers, saving them time and money. (travel agent or financial advisor)

Community provider Community provider are sites that create a digital online environment where people with similar interests can transact, share interests, videos, and videos; communicate with like-minded people; receive interest-related information and even play out fantasies by adopting online personalities called avatars.

provide a digital environment where buyers and sellers can establish prices for products. Market creator build a digital environment where buyers/sellers can meet, display products, search for product, and establish prices.

Apple accepts micropayments for single music track downloads. Sales revenue: Sell products, information, or services directly to users. You'll need a viable, secure

Market Creator Market creator build a digital environment where buyers/sellers can meet, display products, search for product, and establish prices.

eBay receives a small fee from a seller if a seller is successful in selling an item.

free/freemium

micropayment Micropayment systems: provide content providers with a cost-effective method for processing high volumes of very small monetary transactions. (apple Itunes for .99 songs)

Facebook provides a social network for free, but shows sponsored content in users' News Feeds. Advertising revenue model: a website generates revenue by attracting a large audience of visitors who can be exposed to ads. Most widely used model.