The Internet has become an important part of business activity. Dozens of Internet-only companies have surfaced in many industries and numerous conventionally operated companies have adopted the Internet (Yang et al., 2004). The fresh boom in e-commerce and online shopping has left traditional retailers in a quandary about how to sell – or where to advertise (Connon, 2006). The internet has become a truly interactive medium and consequently, is opening new avenues and opportunities for organizations. E-commerce is gaining momentum in different industry sectors and its specialty lies in the fact that its business is conducted on the internet which is an ‘anytime-anywhere’ medium and gives organizations a chance to transact for 24 hours a day with little extra cost (Aditya, 2001; pg 736). One of the reasons for the rapid surge in e-commerce can be attributed to change in consumer buyer behavior. Research done by Eatock (2002) revealed that consumers are tempted to spend more on when they shop online and there are systemic differences in consumer choice behavior between internet and regular shopping. The research is valid even today because differences in online and regular shopping behavior still exist. People still hesitate to buy items like clothes etc online. There are some exceptional examples of online companies like Google, Yahoo and Amazon which have grown to become major global brands in their own right. These companies are purely online companies (e-commerce) and sell their products solely on the internet while others like Tesco, Marks and Spencer etc have successful online operations, but their online operations only supports their regular operation. Sales from Tesco.com formed 24% of the total revenue. (Tesco Company Reports, 2007)
Illustrating the effects of e-commerce on business activity
‘Online sales are not just the wave of the future: They’re the wave of the present.’ You should be riding that wave.’ (Simmons,2007; pg76). Understanding of where the consumers come from and what drives e-commerce sales is extremely important for the business. Internet consumers are not new; they are the same consumers who shop for products and offerings in shops and through different channels. The reason to buy is still the same for those consumers; the only thing that has changed is the channel. As Simmons (2007; pg 50) points out, ‘the consumers are still the same and still operate largely on emotion, it is just the channel in questions that has changed.’ The old channels – are still around but most of today’s shoppers (80% according to one survey) use the Internet to research products and offerings they are interested in long before they either buy online or walk to a shop or a dealer to see the product before buying it. This has a very strong bearing on business activities on both large and small organizations. Ian Smith (2007; pg 20) states that e-commerce is successful only when the company taps into what the consumer wants from the medium and how it can benefit advertisers. The biggest challenge as pointed out by Smith (2007) is striking a balance between the user experience and the sales and commercial side of the business.
Shopping Behavior and its effect on businesses
Marketers have pointed out noticeable differences between online and offline shopping behavior. Online consumers are able to obtain more information about both price and non-price attributes which could increase their price sensitivity for undifferentiated products. At the same time, having more information on non- price attributes could reduce price sensitivity for differentiated products (Gillies et al.,2002). When choosing among alternatives, consumers are faced with a “mixed” choice task situation (Lynch et al., 1998). Consumers make their choices using prior information already available in their memories as well as information they obtain from the external environment. When searching for information in the external environment (e.g., online store), consumers focus on those relevant attributes that are available and are diagnostic. (Online Advertising, 2007)
Dacin (2004) classifies products into two types of goods while evaluating the success of e-commerce, ‘Search good’ and ‘Experience good’. If a consumer purchases a product in a traditional environment and is able to evaluate the quality of the product prior to purchase, the product is categorized as a search good. However, if the same product is sold in an online environment, the physical cues that are available in the traditional environment are not present; the product is then classed as an experience good. This is where the online brand plays its part because the transition from a search to an experience good means that an important cue for inferring quality online is the product brand (Eatock et al., 2002). As such, the brand name within a virtual environment, through the brand value process, converts experience attributes to search attributes that are communicated visually (Meyvis, 2002). Furthermore, the increased perceived risk of transacting in the online medium heightens the effect of the product brand name. (Online behavior in focus, 2007)
Much in the same way as marketing supports selling the products, internet marketing helps to promote products over the internet. Internet marketers use high traffic sites on the internet to serve a variety of promotion requirements. Hallerman (2007) notes that online ad spend in the US increased by 32.3 per cent from 2006, up to $17.1 billion (£8.9 billion). There are various ways in which organizations decide to market online. No one type can be acclaimed as a fit for all. Discussed below are some internets marketing types which are considered good for e-commerce in terms of value for money
Search Engine – Think of the Internet as the world’s largest library, and search engines as its card catalog system for the 1 billion documents that are on the Web (Magill, 2007). Search engines create their listings by crawling across the Web to gather information from existing pages. Research by eMarketer, shows that 78% of Web users initially find sites through search engines. Pay-by-click methodology is widely adapted by organizations as it is believed to give better return on investment in the form of better response and take-up rates. It is concerned with enabling a website to have a link placed directly into search engine results for specific keywords, phrases etc. With a huge increase in the use of search engines (Google’s profit has soared over the last five years), the probability of a customer looking and clicking at an advert is much higher.
Email Marketing – E-mail marketing used to be an effective medium of advertising when internet marketing burst into scenes but, due to problems of spamming and legislations, it has lost its revered status in a very short span of time. As Bellanger et al. (2002 cited in Web 2) points out,’ eMail campaigns used to be an OK method of Internet Marketing but due to the cheapness of campaigns and lack of governing, have been totally abused’. Plethora of e-mails targeted everyday to people’s e-mail accounts have made people averse to e-mail marketing and consequently e-mail marketing has very low response rate and even lower conversion rate. Some companies even struggle to break-even. Laws with regards to e-mail marketing have also become more stringent and targeting personal e-mail addresses is illegal in the UK.
Online Marketing through affiliates – Online marketing has also found some amount of success with affiliate programs. The concept of affiliate programs is not new. Companies like Sainsbury’s, Vodafone for example are a part of the Nectar programme which is an affiliate program having 15 organizations under its umbrella (most of them from different industry sectors). Customers shopping at Sainsbury’s get certain value points which can also be added or redeemed in all the 15 affiliates. What this does, is, that its gives Sainsbury’s a chance to acquire Vodafone customers and visa-versa. Thus, it saves some amount of advertisement and marketing costs for all the organizations. Online affiliate programs are increasingly embarked on by organizations as they are seen to be generating good amount of awareness and acquisition. Researchers have pointed out that, instead of the distant relationship between an online advertiser and media owners, where the deal is strictly one-way, a well-run affiliate programme offers the opportunity to forge longer-term links between the two parties, ultimately adding value to the proposition of both. 2007)
Reciprocal Links – Reciprocal links form a vital part of any website promotion effort. The Web is only as useful as the sum of its links, as without links it is just a disparate collection of pages. Links are the glue behind the Web. To ensure that the web page has the visibility it deserves, it will need other sites to point to that particular site. A reciprocal link is a text and/or banner link to a site that, somewhere in its pages, carries a similar text/banner link to your own site (Types of Internet Marketing, 2007). A reciprocal link is a commitment. This link basically says “The site at the other end of this link feels that my site is important enough to link to, and I feel that their site is important enough that I am willing to let visitors leave my site via this link.” It involves an element of trust.
Viral Marketing – Blogging has also played its role in the rise of internet Marketing. The explosive growth of blogging and social network sites has led to predictions of the demise of traditional media such as the newspaper and advertising, as consumers turn to alternative services like these to select the news-media writing that they are interested in. (Online behavior in focus, 2007) All this has forced organizations to look into new ways of accessing customers and internet marketing.
While e-commerce has witnessed extensive growth in recent years, so has consumers’ concerns regarding ethical issues surrounding online shopping. Internet represents a ”new environment for unethical behavior” (Roman, 2006; p. 126). Findings from Citera et al. (2005) revealed that ethical transgressions are more likely to happen in e-transactions as compared to face-to-face transactions. For example, the Internet can be used effectively by a small company to appear deceptively large, as the webpage on the computer screen does not distinguish between a large and a small company. Additionally, internet transactions are carried out over a public domain. Therefore, personal and financial information that is collected can be easily stored, copied, and shared. Bush et al. (2000) assessed the perceptions of the ethical issues concerning marketing on the internet among a sample of 292 marketing executives. The ethical concerns most often mentioned regarding marketing on the internet was the security of transactions. The next three most often mentioned ethical concerns were illegal activities (e.g., fraud, hacking), privacy, and honesty/truthfulness of the information on the Internet. The same security issues are still relevant today and issues such as fraud and hacking have become even more prevalent than before.
The factors that consumers feel most concerning while shopping online are:
Privacy – Related to a variety of concerns such as unauthorized sharing of personal information, unsolicited contacts from the online retailer, and undisclosed tracking of shopping behavior.
Security – Concerned about potentially malicious individuals who breach technological data protection devices to acquire consumers’ personal, financial, or transaction-oriented information.
Online retailer fraud – Focuses on concerns regarding fraudulent behavior by the online retailer, such as purposeful misrepresentation or non-delivery of goods.
Miyazaki and Fernandez (2000) have also showed that a positive relationship exist between the percentage of privacy- and security-related statements on websites and consumers’ online purchase intentions. Later, Milne and Culnan (2004) investigated why online consumers read privacy notices across a variety of situations. They found that reading privacy notices is only one element in an overall strategy consumers use to manage the risks of disclosing personal information online. Pollach (2005) examined privacy policies of online retailers from a linguistic angle to determine whether the language of these documents is adequate for communicating data-handling practices in a manner that enables informed consent on the part of the user. Her findings highlighted that corporate privacy policies obfuscate, enhance and mitigate unethical data handling practices and use persuasive appeals to increase online retailers’ trustworthiness.
Earlier research in e-tailing has identified the following examples of unethical practices: selling a product to a customer that he/she does not need through high-pressure selling techniques, implementing deceptive or misleading influence tactics such as embellishment (to make something appear better than it is) or exaggerating the features and benefits of a product (also known as puffery) (e.g., Hyman et al., 1994; Lagace et al., 1991; Levy and Dubinsky, 1983; Roman and Munuera, 2005; Roman and Ruiz, 2005). Singh and Hill’s (2003) study focused on consumers’ concerns regarding online privacy in Germany. Their results suggested that consumers’ views about internet use and online behaviors are affected, among other things, by their views regarding privacy in general, and how they view the role of the government and the role of companies in protecting consumer privacy.
E-commerce has increased remarkably over the last decade, yet consumers’ concerns regarding ethical issues surrounding e-commerce also continue to grow.
Marketers have to learn to understand the online user’s intention rather than grabbing attention for e-commerce activities to increase sales. Advertising messages have to be personalized, contextual, localized and relevant (Magill, 2007). E-commerce does increase sales and it a good medium to communicate with the customers but the internet is slowly becoming as competitive as mass marketing. Organizations need to have compeitive strategies, resources and execution abilities to be successful in their e-commerce activities. Technology is not the main success driver, successful organizations like Tesco.com follow an internet marketing plan which encapsulates every aspect of branding and makes efficient use of internet marketing channels subsequently benefiting both the organization and the consumer.
Importance of the Website
It has been seen from the earlier discussion that the web is a fluid environment which allows visitors to quickly jump from one site to the other which means organizations have to structure their website in the most optimal manner so that it loads fast and is more customer friendly. Website is the face of the organization which interacts with the customer (Simmons, 2007). Good internet marketers make sure that their keyword justification is backed by abundant information on the site about the topic. The web site should also allow for immediate interaction. With a plethora of sites and internet marketing campaigns, it is becoming exceedingly difficult for organizations to get noticed. Even search engines keep updating and changing their algorithms which mean that organizations have to continuously find new ways to make their listing rise to the top by experimenting with links, banners, and meta tags (keywords or descriptions used by search engines). Sainsbury’s and Marks and Spencer use the affiliate marketing channel. They use this as an offer driven channel to make sure that the target audiences are those that respond well to offers and discounts. Sainsbury’s stands out in choosing organizations for affiliate marketing whose business is related in some way with them. Researchers believe that it cannot be conclusively said that one advertising medium is better than the other as there are many variables involved. Organizations can make their advertising more efficient and use the channel as a brand advertising medium.
The objective of e-commerce should be to promote the brand rather than short term sales promotion. The purpose should be to convert visitors to customers.
Ecommerce related Issues
E-commerce does pose some branding and promotion related issues. Customers searching for a particular online brand often see its fiercest competitor among the sponsored results. This might lead the customer to compare prices and product specifications and the search might actually help the competitor. According to data in a forthcoming white paper from Hitwise (2006), almost one in ten Web searches for a major brand sends users to a competitor’s site. This is becoming one of the bigger threats and concern to internet retailers. To combat this threat, Tesco writes exclusion policies into terms with affiliates and monitors competitor and affiliate listings in search results by doing searches and monitoring the sites that appear in the results. (Hopkins, 2006) It tracks the percentage of users clicking on their advertisement against competitor’s advertisement. If its competitor receives increasing numbers of visits from searches of Tesco brand, it takes action by scrutinizing their competitor’s advertisements and promotions and learns from them.
Critical success factors
For ecommerce to be successful and form an important part of the business activity, organizations need to have a strong knowledge of their customers, e-commerce should be tailor made to the needs of their target audience (Source). Argos conducts surveys and market researches before coming out with a new product portfolio and refreshing its catalogue and websites. Amazon regularly visits competitor sites and looking at their catalogues provided them with good ideas at times (Source). Tesco Direct and Tesco.com (both a subsidiary of Tesco) take special care in website development and the content displayed and advertised on their website. Their designs reflect their unique selling proposition. Tesco Direct’s USP is better value products and its site and catalogue highlights it. Sainsbury’s advertises and markets on value and variety of its products. It is also important for customer service and contact details to feature prominently to assist customers before making the purchase decision.
Ecommerce has been largely successful for organizations like Tesco which integrate their online and offline marketing activities and makes sure that its online activity is not viewed in isolation. For organizations like Tesco and Marks and Spencer, online marketing generates demand for its offline channel and visa-versa. Similar research carried out by Datamonitor (2006) revealed that retailers of high value goods report that people who visit their on-line store are much more likely to buy in a high street store, and are better informed about their requirements, having already researched the products on the web.
Ecommerce has had a significant impact on business activity, in terms of promotion, advertising and sales channel. It has also helped organizations to reduce their cost of acquisition as internet is a much cheaper medium and has a wider reach. Although, the effect of ecommerce on business activity varies according to the business sector, size, customer base and product range.