ESSENTIALS OF ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT 6E Chapter 9: E-Commerce and the Entrepreneur

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1 CHAPTER 9 E-Commerce and the Entrepreneur The Internet: Changing the Face of Business Successful companies use the Internet as a mechanism for transforming their companies and for changing everything about the way they do business. Business basics still apply online. In the world of e-commerce, company size matters less than speed and flexibility. 9-2 The Internet: Changing the Face of Business Study: 86% of the world s online population has used the Internet to make a purchase. Items purchased most often online include computer hardware and software, tickets, books, music, movies, gift cards, toys and video games, and baby products. FIGURE 9.1 Online Retail Sales in the U.S Benefits of Selling on the Web Opportunity to increase revenues and profits Ability to expand into global markets Ability to remain open 24 hours a day, seven days a week Capacity to use the Web s interactive nature to enhance customer service Power to educate and inform Benefits of Selling on the Web Ability to lower the cost of doing business Ability to spot new business opportunities and capitalize on them Ability to grow faster Power to track sales results Conversion rate the percentage of customers to a Web site who actually make a purchase

2 E-Commerce The Small Business Research Board reports: 57.3% of small business owners in the U.S. have a Web site 56.1% of those sites engage in online sales. Barriers: Not knowing how or where to start Cost and time concerns Factors to Consider Before Launching into E-Commerce Web success requires a company to develop a plan for integrating the Web into its overall strategy. Creating a meaningful presence on the Web requires an ongoing investment of resources time, money, energy, and talent. Assessing You Company s Online Potential 1. Does your product have broad appeal to customers everywhere? 2. Do you want to sell your product to customers outside of your immediate geographic area? 3. Can the product you sell be delivered conveniently and economically? 4. Can your company realize significant cost advantages by going online? 5. Can you draw customers to your company s Web site with a reasonable investment? Myth 1: Myth 2: Myth 3: Myth 4: Myth 5: Myth 6: Myth 7: Myth 8: Myth 9: Myth 10: Online customers are easy to please. If I launch a site, customers will flock to it. Making money on the Web is easy. Privacy is not an important issue. The most important part of an e-commerce effort is technology. I don t need a strategy to sell online. Customer service is not important. Flashy Web sites are better than simple ones. It s what s up front that counts. Its too late to get on the Web. Myth 1: Online customers are easy to please. Experienced online shoppers tend to be unforgiving and quick click to another site if their shopping experience is subpar or they cannot find the products and information they want

3 Myth 1: Online customers are easy to please. Myth 2: If I launch a site, customers will flock to it. Promotion Is the Key! Include your URL on everything related to your business Provide phone and contact information Create Web-based newsletters Write articles that link to your company s Web site Sponsor online contests Establish a blog Myth 1: Online customers are easy to please. Myth 2: If I launch a site, customers will flock to it. Myth 3: Making money on the Web is easy. Myth 1: Online customers are easy to please. Myth 2: If I launch a site, customers will flock to it. Myth 3: Making money on the Web is easy. Myth 4: Privacy is not an important issue Myth 4: Privacy Online Study: If online companies were able to alleviate customers online privacy and security issues, the percentage of online buyers would increase from 66% to 73%. Myth 5: The most important part of an e-commerce effort is technology. Understand the underlying business... then use technology to develop an online business model that provides customer value in a profitable way

4 Myth 6: I don t need a strategy. An online strategy is critical to success Define the target audience Understand customers needs and wants Create a strategy to set your site apart from others Myth 7: The Importance of Customer Service on the Web Myth 7: Customer service is not important. Study: 22% of online shoppers expect higher levels of customer service than they do offline. Concern: Nearly 90% of online shopper reported they have had problems completing an online transaction. 84% of these shoppers said they would share their negative online shopping experience with others! FIGURE 9.3 Reasons for Abandoning Online Shopping Carts Myth 8: Flashy Web site are better than simple sites. Fast download times increase sales potential Myth 9: It s what s up front that counts. Order systems and support are critical Myth 10: Its too late to get on the Web. Web opportunities still exist Strategies for E-Success Focus on a market niche. Attract visitors by giving away freebies. Make creative use of , but avoid becoming a spammer. Promote your site online and offline. Develop an effective search engine optimization (SEO) strategy. Search Engine Strategies Natural (organic) Listings Arise as a result of spiders, powerful programs search engines use to crawl around the Web. Paid (sponsored) Listings Short text ads with links to the sponsoring company s Web site. Paid Inclusion When a company pays a search engine for the right to submit either selected pages or its entire Web site content for listing

5 Understand your target customer. Give customers what they want. Select an intuitive domain name that is consistent with the image you want to create for your company and register it. Short Memorable Indicative of a company s business Easy to spell Make your Web site easy to navigate. Add wish list capability. Use online videos. Create a gift idea center. Build loyalty by giving online customers a reason to return to your Web site. Establish hyperlinks with other businesses, preferably those selling complementary products Include an option an a telephone number on your site. Give shoppers the ability to track their orders online. Follow a simple design. Create a fast, simple checkout process. Assure customers that online transactions are secure. Establish reasonable shipping and handling charges and post them up front. Confirm transactions. Keep your site updated. Test your site often. Consider hiring a professional to design your site Tracking Web Results Web Analytics tools that measure a Web site s ability to attract customers, generate sales, and keep customers coming back. Recency The length of time between customers visits to a Web site. Click-through Rate (CTR) The proportion of people who see a company s ad online and actually click on it. Measuring Online Performance Cost per Acquisition (CPA) The amount it costs to generate a purchase (or a customer registration). Conversion (browse-to-buy) ratio The proportion of visitors to a site who actually make a purchase

6 Ensuring Web Privacy Develop a company policy for the information you collect. Post your company s privacy policy on your Web site and follow it. Ensure web security with virus and intrusion detection software, firewalls etc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America

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