DIGITAL BUSINESS AND E-COMMERCE MANAGEMENT

DIGITAL BUSINESS
Which strategies and tactics are needed to develop and implement a digital business?
How do we work out where to put our investment?
What are the things that have to happen in an organisation to make a digital
business successful?
How should businesses select the best digital technology, media and insight sources AND E-COMMERCE
MANAGEMENT SEVENTH EDITION
to compete?

This new edition of Dave Chaffey’s bestselling book, joined this time by fellow authors Tanya Hemphill
and David Edmundson-Bird, is your guide to answering these tough questions. Written in an engaging and
informative style, Digital Business and E-Commerce Management will give you the knowledge and skills to
be able to handle the speed of change faced by organisations in the digital world.
In this seventh edition of the book, Chaffey, Hemphill and Edmundson-Bird bring together the most recent
academic and practitioner thinking. Covering all aspects of digital business including strategy, digital
communications and transformation, Digital Business and E-Commerce Management gives you the benefit of:
• A structured approach to review, plan and implement a digital business strategy for all types of
organisation
• The latest on digital marketing techniques in SEO, social media communications and content marketing
• All new case studies providing examples of organisations and their experiences of digital business
and e-commerce
• A brand new chapter introducing the concepts of digital business transformation and growth hacking
Whether you’re a student studying digital business and e-commerce, a marketer or a business manager,
Digital Business and E-Commerce Management is the essential text to help you understand and apply the
concepts of digital, strategy and implementation.
SEVENTH
Dr Dave Chaffey FCIM, FIDM is co-founder of the publisher Smart Insights. EDITION
Tanya Hemphill MSc (Dist.) Chartered Marketer MCIM MCIPR MIPM is Senior Lecturer at Manchester
EDMUNDSON-BIRD
CHAFFEY, HEMPHILL
Metropolitan University and MD of WeDisrupt.
David Edmundson-Bird MSc FRSA is Principal Lecturer in Digital Marketing at Manchester
Metropolitan University.

Front cover image © DrAfter123/DigitalVision Vectors/Getty Images Plus www.pearson-books.com DAVE CHAFFEY
TANYA HEMPHILL
DAVID EDMUNDSON-BIRD
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 DIGITAL BUSINESS
AND E-COMMERCE
MANAGEMENT

F01 DIGITAL BUSINESS AND E-COMMERC 93335 Contents.indd 1 10/05/2019 15:59

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 DIGITAL BUSINESS
AND E-COMMERCE
MANAGEMENT SEVENTH EDITION

DAVE CHAFFEY,
TANYA HEMPHILL
DAVID EDMUNDSON-BIRD

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan

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First published 2002 (print)

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ISBN: 978-1-292-19333-5 (print)

978-1-292-19335-9 (PDF)
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British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Chaffey, Dave, 1963- author. | Edmundson-Bird, David, author.
| Hemphill, Tanya, author.
Title: Digital business and e-commerce management : strategy, implementation and
practice / Dave Chaffey, David Edmundson-Bird and Tanya Hemphill.
Other titles: E-business and e-commerce management
Description: Seventh edition. | Harlow, England ; New York : Pearson, [2019]
Identifiers: LCCN 2018048265| ISBN 9781292193335 (print) | ISBN 9781292193359 (pdf) |
ISBN 9781292193366 (epub)
Subjects: LCSH: Electronic commerce. | Business enterprises--Computer networks.
Classification: LCC HF5548.32 .C472 2019 | DDC 658.8/72--dc23
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18048265&d=DwIFAg&c=0YLnzTkWOdJlub_y7qAx8Q&r=DHV3lB6NYyi5k52Oyd75rqJsjAnt
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NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

F01 DIGITAL BUSINESS AND E-COMMERC 93335 Contents.indd 4 10/05/2019 15:59

 Brief contents

Preface xiv
About the authors xxv
Acknowledgements xxvii
Publisher’s acknowledgements xxviii

Part 1 Introduction 1

1 Introduction to digital business 3

2 Opportunity analysis for digital business and e-commerce 36
3 Managing digital business infrastructure 72
4 Key issues in the digital environment 120

Part 2 Strategy and applications 177

5 Digital business strategy 179

6 Supply chain and demand 248
7 Digital marketing 303
8 Customer relationship management 365

Part 3 Implementation 449

9 Customer experience and service design 450

10 Managing digital business transformation and growth hacking 522

Glossary 609
Index 623

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F01 DIGITAL BUSINESS AND E-COMMERC 93335 Contents.indd 6 10/05/2019 15:59
 Contents

Preface xiv Drivers of consumer technology adoption 28

About the authors xxv Barriers to consumer digital adoption 29
Acknowledgements xxvii Case study 1.2: Amazon – the world’s largest
Publisher’s acknowledgements xxviii digital business? 30
Summary 32
Exercises 33
References 34
Part 1 Web links 35

Introduction 1 2 Opportunity analysis for digital business and

e-commerce 36
1 Introduction to digital business 3 Learning outcomes 36
Learning outcomes 3 Management issues 36
Management issues 3 Links to other chapters 36
Links to other chapters 3 Introduction 37
Introduction 4 Business and revenue models for e-commerce 37
The impact of digital communications on traditional Digital marketplace analysis 38
businesses 6 Case study 2.1: How Boden grew from an eight-
Inbound marketing 6 product menswear catalogue to an international
Social media marketing 7 brand with over £300 million in sales 39
Trends update: Social media usage 7 Strategic agility 41
Case study 1.1: The Uber business model 8 Case study 2.2: Unilever demonstrates
Mobile commerce 10 strategic agility 41
Trends update: Mobile usage 10 A process for digital marketplace analysis 42
What is the difference between a digital business and an Case study 2.3: Macy’s – using omnichannel
e-commerce business? 11 growth strategies to improve customer
E-commerce defined 11 experience 44
Trends update: E-commerce growth rates 12 1 Customer segments 46
Digital business defined 13 2 Search intermediaries 46
Intranets and extranets 13 3 Intermediaries, influencers and media
Different types of sell-side e-commerce 14 sites 47
Digital marketing 16 4 Destination sites 47
Trends update: Social network usage 17 Location of trading in the marketplace 49
Options for organisations to reach a digital audience 17 Review of marketplace channel structures 49
Owned, earned and paid media options 17 Location of trading in the marketplace 52
The six key types of digital media channels 18 The importance of omnichannel marketplace
The social internet and user-generated content 20 models 52
Supply chain management 21 Commercial arrangement for transactions 54
Business or consumer models of e-commerce Different types of online intermediary and
transactions 22 influencers 54
Dot Gov defined 23 Summary of the types of intermediary 55
Digital business opportunities 24 The importance of search engines 56
Drivers of digital technology adoption 25 Business models for e-commerce 56
Cost/efficiency drivers 25 Revenue models 58
Competitiveness drivers 26 Online publisher and intermediary revenue
Barriers to the adoption of technology by digital business models 58
stakeholders 27 Calculating revenue for an online business 60
Evaluating an organisation’s digital business Focus on Digital start-up companies 63
capabilities 28 Assessing digital businesses 63

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 viii Contents

Valuing tech start-ups 63 Intranet applications 102

1 Concept 64 Extranet applications 102
2 Innovation 64 Encouraging use of intranets and extranets 105
3 Execution 65 Streaming TV 106
4 Traffic 66 Voice over IP (VoIP) 106
5 Financing 66 Widgets 107
6 Profile 66 Technology standards 107
Case study 2.4: i-to-i – a global marketplace for a Examples of XML applications 107
start-up 66 Semantic web standards 108
Summary 68 Microformats 109
Exercises 69 Focus on Internal and external governance factors that
References 70 impact digital business 109
Web links 71 The Net neutrality principle 109
The Internet Corporation for Assigned Names
3 Managing digital business infrastructure 72 and Numbers (ICANN, www.icann.org) 111
Learning outcomes 72 The Internet Society (www.isoc.org) 111
Management issues 72 The Internet Engineering Task Force
Links to other chapters 72 (IETF, www.ietf.org) 111
Introduction 73 The World Wide Web Consortium
Supporting the growing range of digital business (www.w3.org) 112
technology platforms 77 Telecommunications Information Networking
Desktop, laptop and notebook platforms 77 Architecture Consortium (TINA-C,
Mobile phone and tablet platforms 78 www.tinac.com) 112
Trends update: Mobile usage 79 How can companies influence or take control of
Other hardware platforms 80 Internet standards? 112
Augmented reality 82 Open-source software 113
Digital business infrastructure components 83 Case study 3.1: Innovation at Google
A short introduction to digital technology 85 (2017 update) 114
Management issues in creating a new customer-facing Summary 115
digital service 86 Exercises 116
Domain name selection 86 References 117
Uniform resource locators (URLs) 86 Web links 119
Domain name registration 87
Managing hardware and systems software 4 Key issues in the digital environment 120
infrastructure 88 Learning outcomes 120
Layer II – systems software 88 Management issues 120
Managing digital business applications Links to other chapters 120
infrastructure 88 Introduction 121
Focus on The development of customer experiences Social factors 125
and digital services 91 Legal and ethical factors 125
Benefits of web services or SaaS 91 Economic factors 126
Application programming interfaces (APIs) 92 Political factors 127
Challenges of deploying SaaS 92 Technology factors 127
Cloud computing 94 Cultural factors 128
Examples of cloud computing web services 94 Factors affecting e-commerce buying behaviour 128
Virtualisation 96 Understanding users’ access requirements 131
Service-orientated architecture (SOA) 97 Consumers influenced by using the online
Selecting hosting providers 98 channel 131
Managing service quality when selecting Internet Motivation for use of online services 133
service and cloud hosting providers 98 Business demand for digital business services 136
ISP connection methods 98 E-commerce sales across the EU 139
Issues in management of ISP and hosting Privacy and trust in e-commerce 140
relationships 98 Privacy legislation 141
Speed of access 98 Why personal data is valuable for digital business 142
Availability 101 Worldwide regulations on privacy and electronic
Service level agreements 101 communications 145
Security 101 Viral email marketing 148
Managing internal digital communications through Other e-commerce legislation 148
internal networks and external networks 102 1 Marketing your e-commerce business 148

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 Contents ix

2 Forming an electronic contract (contract law Resource-advantage mapping 205

and distance-selling law) 149 Strategic objectives 206
3 Making and accepting payment 151 Defining vision and mission 206
4 Authenticating contracts concluded over the VMOST 207
Internet 151 How can digital business create business value? 210
5 Email risks 151 Case study 5.1: Arriva Bus redesigns its
6 Protecting intellectual property (IP) 151 m-ticket app and boosts revenue by over 17% 210
7 Advertising on the Internet 152 Objective setting 212
8 Data protection 152 The online revenue contribution 213
Environmental and green issues related to Conversion modelling for sell-side
Internet usage 152 e-commerce 213
Taxation 153 Case study 5.2: Setting the Internet revenue
Tax jurisdiction 153 contribution at Sandvik Steel 215
Freedom-restrictive legislation 154 The balanced scorecard approach to
Economic and competitive factors 155 objective setting 217
Case study 4.1: The implications of micro- Strategy definition 218
localisation vs globalisation based on consumer Selection of digital business strategy options 218
attitudes 157 Decision 1: Digital business channel priorities 220
The implications of e-commerce for international The diversification of digital platforms 221
B2B trading 159 Decision 2: Market and product development
Government and digital transformation 161 strategies 221
Internet governance 164 Decision 3: Positioning and differentiation
E-government 164 strategies 224
Technological innovation and technology Decision 4: Business, service and revenue
assessment 164 models 228
Approaches to identifying emerging technology 167 Decision 5: Marketplace restructuring 229
Summary 169 Decision 6: Supply chain management
Exercises 170 capabilities 229
References 171 Case study 5.3: Zappos innovates in the digital
Web links 173 marketplace 229
Decision 7: Internal knowledge management
capabilities 231
Part 2
Decision 8: Organisational resourcing and
Strategy and applications 177 capabilities 231
Strategy implementation 234
Failed digital business strategies 234
5 Digital business strategy 179
Digital business strategy implementation success
Learning outcomes 179
factors for SMEs 235
Management issues 179
Case study 5.4: Boo hoo – learning from the
Links to other chapters 179
largest European dot.com failure 235
Introduction 180
Focus on Aligning and impacting digital business
Development of the social business 183
strategies 238
What is digital business strategy? 187
Elements of information systems (IS) strategy 239
The imperative for digital business strategy 188
Investment appraisal 241
Digital channel strategies 188
Decisions about which business applications
Platform strategy 190
to invest in 241
Strategy process models for digital business 192
The productivity paradox 242
Strategic analysis 196
Summary 243
Resource and process analysis 196
Exercises 244
Stage models of digital business development 197
References 244
Application portfolio analysis 198
Web links 247
Organisational and IS SWOT analysis 200
Human and financial resources 201
Competitive environment analysis 202
6 Supply chain and demand 248
Learning outcomes 248
Demand analysis 202
Management issues 248
Assessing competitive threats 202
Links to other chapters 248
Competitive threats 203
Introduction 249
Sell-side threats 204
Case study 6.1: Fast-fashion retailer Zara uses its
Buy-side threats 205
supply chain to achieve competitive advantage 249
Competitor analysis 205

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 x Contents

Problems of supply chain management 252 7 Digital marketing 303

What is supply chain management and Learning outcomes 303
e-procurement? 253 Management issues 303
A simple model of a supply chain 255 Links to other chapters 303
Case study 6.2: Shell Chemicals redefines its Introduction 304
customers’ supply chains 258 Chapter structure 305
What is logistics? 261 What is digital marketing? 307
Push and pull supply chain models 262 Marketing defined 307
Focus on The value chain 263 Inbound marketing 309
Restructuring the internal value chain 265 Content marketing 309
The value stream 265 Digital marketing planning 312
Value chain analysis 266 Is a separate digital marketing plan required? 312
Value networks 267 Situation analysis 314
Options for restructuring the supply chain 269 Customer demand analysis 314
Using digital business to restructure the Qualitative customer research 318
supply chain 271 Competitor analysis 320
Technology options and standards for supply Intermediary or influencer analysis 321
chain management 272 Internal marketing audit 322
Case study 6.3: Argos uses e-supply chain Objective setting 322
management to improve customer convenience 273 Case study 7.1: The evolution of easyJet’s online
IS-supported upstream supply chain revenue contribution 325
management 274 Strategy 328
RFID and the Internet of Things 274 Market and product positioning 330
IS-supported downstream supply chain Target market strategies 331
management 274 Content strategy 335
Outbound logistics management 275 Focus on Characteristics of digital media
IS infrastructure for supply chain management 275 communications 336
Supply chain management implementation 276 1 Interactivity 336
Data standardisation and exchange 277 2 Intelligence 337
The supply chain management strategy process 277 3 Individualisation 337
Goal-setting and performance management for 4 Integration 338
eSCM 278 5 Industry restructuring 340
Managing partnerships 279 6 Independence of location 341
Managing global distribution 280 Tactics 341
Case study 6.4: RFID – keeping track starts Product 343
its move to a faster track 282 Case study 7.2: Dell gets closer to its
What is e-procurement? 283 customers online 346
Understanding the procurement process 283 Price 348
Types of procurement 284 Place 352
Participants in different types of e-procurement 285 Promotion 353
Drivers of e-procurement 286 People, process and physical evidence 355
Examples of the benefits of e-procurement 288 Focus on Digital branding 355
Case study 6.5: Honeywell improves efficiency Brand identity 356
through SCM and e-procurement 288 The importance of brand online 358
Focus on Estimating e-procurement costs 289 Actions 358
The impact of cost savings on profitability 289 Control 360
Barriers and risks of e-procurement adoption 289 Summary 360
Implementing e-procurement 291 Exercises 361
Integrating company systems with supplier References 362
systems 293 Web links 364
Focus on B2B marketplaces 295
Types of marketplace 295 8 Customer relationship management 365
The future of e-procurement 296 Learning outcomes 365
Summary 297 Management issues 365
Exercises 298 Links to other chapters 365
References 299 Introduction 366
Web links 301 Marketing applications of CRM 367

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 Contents xi

Case study 8.1: How Warby Parker disrupted the Assurance 427
eyewear industry 368 Empathy 428
What is eCRM? 371 Customer extension 429
From eCRM to social CRM 372 Advanced online segmentation and targeting
Benefits of eCRM 372 techniques 430
Customer engagement strategy 374 Sense, Respond, Adjust – delivering relevant
Permission marketing 374 e-communications through monitoring
Customer profiling 375 customer behaviour 432
Conversion marketing 376 Recency, Frequency, Monetary value (RFM)
The online buying process 379 analysis 432
Differences in buyer behaviour in target markets 380 Technology solutions for CRM 435
Differences between B2C and B2B buyer Types of CRM applications 437
behaviour 380 Integration with back-office systems 437
Influences on purchase 380 The choice of single-vendor solutions or a more
The net promoter score 382 fragmented choice 438
Customer acquisition management 383 Data quality 439
Focus on Marketing communications for customer Case study 8.2: Tesco.com increases product
acquisition, including search engine marketing, range and uses triggered communications to
digital PR, online partnerships, interactive advertising, support CRM 439
email marketing and social media marketing 383 Summary 442
The characteristics of interactive marketing Exercises 442
communications 383 References 443
1 From push to pull 383 Web links 447
2 From monologue to dialogue 384
3 From one-to-many to one-to-some and
one-to-one 384
4 From one-to-many to many-to-many
Part 3
communications 384
Implementation 449
5 From ‘lean-back’ to ‘lean-forward’ 384
6 The medium changes the nature of standard
9 Customer experience and service design 450
marketing communications tools such as
Learning outcomes 450
advertising 384
Management issues 450
7 Increase in communications intermediaries 385
Links to other chapters 450
8 Integration remains important 385
Introduction 451
Assessing marketing communications
Analysis for digital technology projects 451
effectiveness 385
Process modelling 454
Digital marketing communications 387
Process mapping 455
1 Search engine marketing (SEM) 388
Task analysis and task decomposition 455
2 Digital PR 397
Process dependencies 457
Focus on Social media and social CRM strategy 398
Workflow management 457
3 Online partnerships 409
Flow process charts 457
4 Digital advertising 410
Effort duration analysis 459
5 Email marketing 413
Network diagrams 459
6 Social media marketing 416
Event-driven process chain (EPC) model 461
Customer retention management 418
Validating a new process model 462
Personalisation and mass customisation 420
Data modelling 464
Creating personalisation 421
1 Identify entities 464
Extranets 422
2 Identify attributes for entities 464
Opt-in email 423
3 Identify relationships between entities 464
Techniques for managing customer activity
Big Data and data warehouses 464
and value 423
Design for digital technology projects 468
Lifetime-value modelling 424
Architectural design of digital business systems 469
Focus on Excelling in e-commerce service quality 426
Focus on User-centred site design and customer
Improving online service quality 426
experience management 471
Tangibles 427
Customer experience management framework 477
Reliability 427
Customer experience design 478
Responsiveness 427
Implementation 478

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 xii Contents

Usability 480 History of change and change management 530

Evaluating designs 480 The change in strategic position of digital versus
Use-case analysis 481 technology 531
Persona and scenario analysis 481 The need for digital transformation 531
Stages in use-case analysis 484 Understanding the reasons for digital transformation 532
Designing the information architecture 487 The opportunities provided by digital 532
Card sorting 488 Where does digital transformation occur? 532
Blueprints 488 Customer experience and service design 532
Wireframes 490 Customer insight 533
Customer orientation 491 Adding value 534
Elements of site design 493 Interfaces with customers 535
Site design and structure 493 Business process 536
Page design 496 The business model 537
Content design 497 New business where digital is at the heart of the
Mobile design 498 opportunity 538
Mobile site design option A. Responsive Adapting the existing business to a digital
design 498 opportunity 539
Mobile site design option B. Adaptive design 498 The framework of digital transformation 540
Mobile site design option C. HTML5 499 The process of review 540
Mobile site design option D. Separate mobile What the digital opportunity is 540
domain (screen scrape) 501 How sure the organisation is of the
Web accessibility 502 opportunity 541
Case study 9.1: Providing a better online user What level of digital the leadership of the
experience in a B2B market 504 organisation possesses 541
Focus on Security design for digital business 506 How mature as a digital business the
Secure e-commerce transactions 512 organisation sees itself 541
Principles of secure systems 513 The process of strategy 542
Approaches to developing secure systems 513 A focus on the objective for the future rather
Digital certificates 513 than solving an existing problem 542
Digital signatures 514 The process of resourcing and planning 543
The public-key infrastructure (PKI) and certificate The design of the transformation 543
authorities (CAs) 514 A programme for change 543
Virtual private networks 515 The process of deployment 543
Current approaches to e-commerce security 515 The process of living with, and evaluating, digital
Secure Sockets Layer protocol (SSL) 515 transformation 544
Certificate authorities (CAs) 515 What is growth hacking? 545
Reassuring the customer 516 Defining goals and KPIs 548
Summary 516 How to use a single metric to run a start-up 550
Exercises 517 Creating a growth hacking mindset 551
References 518 Ideal skill set of a growth hacking team 551
Web links 520 Use of Scrum, an agile methodology, in digital
marketing 552
10 Managing digital business transformation Scrum meetings 554
and growth hacking 522 Sprint planning 556
Learning outcomes 522 Daily Scrum 556
Management issues 522 Sprint review and retrospective 557
Links to other chapters 522 Developing agile marketing campaigns 557
Introduction 523 The growth hacking process 558
Case study 10.1: Transforming an entire industry 1 Product/market fit (create an MVP – Minimum
and supply chain: Spotify and Spotify Connect 523 Viable Product) 558
Definitions of digital transformation 524 Trigger 558
Definitions of digital business transformation 524 Action 559
Why is digital business transformation not just Rewards 560
about IT? 525 Investment 560
The applications portfolio – a precursor to 2 User data analysis 561
digital business transformation 525 Main areas of user testing 561
The emergence of digital transformation as a 3 Conversion rate optimisation 562
discipline 530 Key CRO elements 562

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 Contents xiii

A/B and multivariate testing 564 Principles of performance management and

Clickstream analysis and visitor segmentation 567 improvement 590
Budgeting 569 Stage 1: Creating a performance management
Case study 10.2: Learning from Amazon’s system 590
culture of metrics 571 Stage 2: Defining the performance metrics
4 Viral growth 575 framework 592
Inherent virality: Skype 576 Focus on Measuring social media marketing 596
Artificial virality: Giffgaff 577 Stage 3: Tools and techniques for collecting
Word-of-mouth virality: Zappos 577 metrics and summarising results 598
Measuring virality 577 Collecting site outcome data 599
5 Retention and scalable growth 577 Selecting a web analytics tool 600
Creating the right environment for growth hacking 579 User testing prioritisation 603
Bridging the digital and physical world 580 Summary 603
Best traditional marketing methods for growth Exercises 604
hacking 580 References 605
Case study 10.3: How Leon used PR to Web links 607
growth hack 582
Growth hacking framework 583 Glossary 609
Twenty traction channels to test 585 Index 623
Data analysis 586
Measuring implementation success 589
Focus on Web analytics: Measuring and improving
performance of digital business services 589

Lecturer Resources ON THE

WEBSITE
For password-protected online resources tailored to
support the use of this textbook in teaching, please visit
www.pearsoned.co.uk/chaffey

F01 DIGITAL BUSINESS AND E-COMMERC 93335 Contents.indd 13 10/05/2019 15:59

 Preface

In 1969, the United States was able to land two men on the Moon, only seven years after
John F. Kennedy’s famous ‘We choose to go to the Moon’ speech in Houston in 1962 as
part of NASA’s Apollo space programme. NASA used advanced computing (for the time)
to get their payload into orbit and then send the crew to the Moon and land there. Known
as the Apollo Guidance Computer (AGC), the system remained unmatched in power for
more than a decade, until the advent of the personal computing era.
Only 50 years later, a device many times more powerful than the AGC is carried around
by several billion people. Smartphones contain more computing power and offer a dizzying
array of functions compared to NASA’s computers. Even modern washing machines now
contain more computing power.
The smartphone is a gateway for many digital business opportunities, and most users of
smartphones are blissfully unaware of the intricacies of the infrastructure that supports
their telephony, their access to the Internet or the functionality of their apps. The develop-
ment of everything that underpins digital business is not straightforward and fraught with
difficulties of selecting the correct strategic direction and surviving in an increasingly harsh
competitive environment. Not all who follow the route survive. But whether it’s the start-up
businesses or an existing business, what they have in common is that those who prosper
learn to optimise to take the right strategic decisions about digital technology, digital mar-
keting and supply chain management.
This book is intended to equip current and future managers with some of the knowledge
and practical skills to help them navigate their organisation towards digital business.
A key aim of this book is to identify and review the key management decisions required
by organisations moving to digital business and consider the process by which these deci-
sions can be taken. Key questions include: What approach to digital business strategy do
we follow? How much do we need to invest in digital business? Which processes should be
our digital business priorities? Should we adopt new business and revenue models? What are
the main changes that need to be made to transform an organisation that uses technology
to a true digital business?
Given the broad scope of digital business, this book takes an integrative approach draw-
ing on new and existing approaches and models from many disciplines, including informa-
tion systems, strategy, marketing, supply chain management, operations and human
resources management.

What is digital business management?

Digital business As we will see in Chapter 1, digital business is aimed at enhancing the competitiveness of
How businesses apply an organisation by deploying innovative digital technologies throughout an organisation
digital technology and
media to improve the and beyond, through links to partners and customers and promotion through digital media.
competitiveness of their It does not simply involve using technology to automate existing processes, but is about
organisation through
optimising internal
digital transformation by applying technology to help change these processes to add value
processes with digital to the business and its customers. To be successful in managing digital business, a breadth
and traditional channels of knowledge is needed of different business processes and activities from across the value
to market and supply.
chain, such as marketing and sales, through new product development, manufacturing and

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 Preface xv

Supply chain inbound and outbound logistics. Organisations also need to manage the change required
management (SCM)
by new processes and technology through what have traditionally been support activities
The coordination of all
supply activities of an such as human resources management.
organisation, from its
suppliers and partners to From this definition, it is apparent that digital business involves looking at how elec-
its customers.
tronic communications can be used to enhance all aspects of an organisation’s supply chain
Value chain
management. It also involves optimising an organisation’s value chain, a related concept
A model for analysis of
how supply chain that describes the different value-adding activities that connect a company’s supply side
activities can add value with its demand side. The digital business era also involves management of a network of
to products and services
delivered to the interrelated value chains or value networks.
customer.

What is e-commerce management?

Value networks To set the scope of this text, in its title we reference both ‘digital business’ and ‘e-commerce’.
The links between an Both these terms are applied in a variety of ways; to some they mean the same, to others they
organisation and its
strategic and non- are quite different. As explained in Chapter 1, what is most important is that they are
strategic partners that applied consistently within organisations so that employees and external stakeholders are
form its external value
chain. clear about how the organisation can exploit digital communications. The distinction made
in this text is to use electronic commerce (e-commerce) to refer to all types of electronic
Electronic
commerce transactions between organisations and stakeholders, whether they are financial transac-
(e-commerce) tions or exchanges of information or other services. These e-commerce transactions are
All electronically either buy-side e-commerce or sell-side e-commerce and the management issues involved
mediated information
exchanges between an with each aspect are considered separately in Part 2 of the book. ‘Digital business’ is applied
organisation and its as a broader term encompassing e-commerce but also including all digital interaction within
external stakeholders.
an organisation.
Buy-side
e-commerce Management of e-commerce involves prioritising buy-side and sell-side activities and
Transactions between an
organisation and its putting in place the plans and resources to deliver the identified benefits. These plans need
suppliers and other to focus on management of the many risks to success, some of which you may have expe-
partners.
rienced when using e-commerce sites, from technical problems such as transactions that
Sell-side fail, sites that are difficult to use or are too slow, through to problems with customer service
e-commerce or fulfilment, which also indicate failure of management. Today, the social media or peer-
E-commerce
transactions between an to-peer interactions that occur between customers on company websites, blogs, apps and
organisation and its social networks have changed the dynamics of online commerce. Likewise, the frenzied
customers.
consumer adoption of mobile technology platforms via mobile apps offers new platforms
to interact with customers that must be evaluated and prioritised. Deciding which of the
many emerging technologies and marketing approaches to prioritise and which to ignore
is a challenge for all organisations!

How is this text structured?

Social media The overall structure of the text, shown in Figure P.1, follows a logical sequence: introduc-
A category of media
focusing on participation
ing the foundations of digital business concepts in Part 1; reviewing alternative strategic
and peer-to-peer approaches and applications of digital business in Part 2; and how strategy can be imple-
communication between mented in Part 3. Within this overall structure, differences in how electronic communica-
individuals, with sites
providing the capability tions are used to support different business processes are considered separately. This is
to develop user- achieved by distinguishing between how electronic communications are used, from buy-side
generated content (UGC)
and to exchange e-commerce aspects of supply chain management in Chapters 6 and 7, to the marketing
messages and perspective of sell-side e-commerce in Chapters 8 and 9. Figure P.1 shows the emphasis of
comments between
different users.
perspective for the particular chapters.

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 xvi Preface

Mobile technology Part 1: Introduction (Chapters 1–4)

platforms
Devices and services
used by consumers to Part 1 introduces digital business and e-commerce. It seeks to clarify basic terms and con-
interact with other cepts by looking at different interpretations of terms and applications through case
consumers and
companies, including studies.
smartphones, tablets
and wearable ● Chapter 1: Introduction to digital business. Describes the impact of digital communica-
technology. tions on traditional businesses and shows the difference between a digital business and
Mobile apps an e-commerce business.
A software application ● Chapter 2: Opportunity analysis for digital business and e-commerce. Introduction to
that is designed for use
on a mobile phone or new business models and marketplace structures enabled by digital communications.
tablet, typically ● Chapter 3: Managing digital business infrastructure. Background on the technology that
downloaded from an app
store. iPhone apps are
needs to be managed to achieve digital business.
best known, but all ● Chapter 4: Key issues in the digital environment. Describes the macro-environment of
smartphones support the an organisation, which presents opportunities and constraints on strategy and
use of apps, which can
provide users with implementation.
information,
entertainment or
location-based services
such as mapping.
Part 2: Strategy and applications (Chapters 5–8)
In Part 2 of the text, approaches to developing digital business strategy and applications are
reviewed for the organisation as a whole (Chapter 5), and with an emphasis on buy-side
e-commerce (Chapters 6 and 7) and sell-side e-commerce (Chapters 8 and 9).
● Chapter 5: Digital business strategy. Approaches to developing digital business strategy.
How to do strategic analysis and define strategic objectives. The link with business
strategy. How to implement a digital business strategy.
● Chapter 6: Supply chain and demand. A supply-chain perspective on strategy, with exam-
ples of how technology can be applied to increase supply-chain and value-chain efficiency.
How to manage demand. Dealing with e-procurement.
● Chapter 7: Digital marketing. Understanding digital marketing. Planning for digital
marketing.
● Chapter 8: Customer relationship management. Reviewing marketing techniques that
apply ‘digital’ for acquiring and retaining customers.

Part 3: Implementation (Chapters 9–10)

Management of digital business implementation is described in Part 3 of the text, in which
we examine practical management issues involved with creating and maintaining digital
business solutions.
● Chapter 9: Customer experience and service design. Analysis for digital projects. Business
processes. Designing a digital business. Looking at customer experience.
● Chapter 10: Managing digital transformation and growth hacking. An overview of the
key elements of digital transformation. Principles of growth hacking and measuring the
performance of digital.

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 Preface xvii

Part 1 INTRODUCTION
Chapter 1 Chapter 2 Chapter 3 Chapter 4
Introduction to Opportunity Managing Key issues in the
digital business analysis for digital digital business digital
business and infrastructure environment
e-commerce

Part 2 STRATEGY AND APPLICATIONS

Chapter 8
Chapter 5 Chapter 6 Chapter 7
Customer
Digital business Supply chain Digital
relationship
strategy and demand marketing
management

Part 3 IMPLEMENTATION
Chapter 9 Chapter 10
Customer Managing digital
experience and transformation and
service design growth hacking

Key
Sell-side e-commerce emphasis

Digital business emphasis

Figure P.1

Who should use this text?

Students
This text has been created as the main student text for undergraduate and postgraduate
students taking specialist courses or modules that cover digital business, e-commerce infor-
mation systems or digital marketing. The book is relevant to students who are:
● undergraduates on business programmes that include modules on the use of the Internet
and e-commerce; this includes specialist degrees such as digital business, e-commerce,
digital marketing and marketing, or general business degrees such as business studies,
business administration and business management;
● undergraduate project students who select this topic for final-year projects or disserta-
tions – this book is an excellent resource for these students;
● undergraduates completing work placement involved with different aspects of digital
business, such as managing digital resources or company digital communications;
● postgraduate students on specialist master’s degrees in e-commerce, digital business or
digital marketing and generic MBA, Certificate in Management or Diploma in Manage-
ment Studies that involve modules or electives for e-commerce and digital marketing.

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 xviii Preface

What does the text offer to lecturers teaching these courses?

The text is intended to be a comprehensive guide to all aspects of deploying digital business
and e-commerce within an organisation. The text builds on existing theories and concepts
and questions the validity of these models in the light of the differences between the ‘digital’
and other media. It references the growing body of literature specific to digital business,
e-commerce and digital marketing. As such, it can be used across several modules. Lecturers
will find that the text has a good range of case studies, activities and exercises to support
their teaching. These activities assist in using the text for student-centred learning as part
of directed study. Web links given in the text and at the end of each chapter highlight key
information sources for particular topics.

Practitioners
There is also much of relevance in this text for the industry professional, including:
● senior managers and directors seeking to apply the right digital business and e-commerce
approaches to benefit their organisation;
● digital managers who are developing and implementing digital business and e-commerce
strategies;
● marketing managers responsible for defining a digital marketing strategy and implement-
ing and maintaining organisational digital communications channels;
● supply chain, logistics and procurement managers wanting to see examples of best prac-
tice in using e-commerce for supply chain management;
● technical project managers who may understand the technical details of building digital
resources, but have a limited knowledge of business or marketing fundamentals.

Student learning features

A range of features has been incorporated into this text to help the reader get the most out
of it. The features have been designed to assist understanding, reinforce learning and help
readers find information easily. They are described in the order you will encounter them.

At the start of each chapter

● Chapter at a glance: a list of main topics, ‘focus on’ topics and case studies.
● Learning outcomes: a list describing what readers can learn through reading the chapter
and completing the activities.
● Management issues: a summary of main issues or decisions faced by managers related
to the chapter topic area.
● Web support: additional material on the companion website.
● Links to other chapters: a summary of related topics in other chapters.
● Introductions: succinct summaries of the relevance of the topic to marketing students
and practitioners, together with content and structure.

Within each chapter

● Activities: short activities in the main text that develop concepts and understanding,
often by relating to student experience or through reference to websites. Model answers
to activities are provided at the end of the chapter where applicable.

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 Preface xix

● Case studies: real-world examples of issues facing companies that implement digital
business. Questions at the end of the case study highlight the main learning points from
that case study.
● Real-world digital business experiences: interviews with e-commerce managers at a range
of UK, European and US-based organisations concerning the strategies they have adopted
and their approaches to strategy implementation.
● Digital trends updates (in Chapters 1 and 3): references to relevant statistical sources to
update information on the latest consumer and business adoption of digital
technology.
● Box features: these explore a concept in more detail or give an example of a principle
discussed in the text.
● ‘Focus on’ sections: more detailed coverage of specific topics of interest.
● Questions for debate: suggestions for discussion of significant issues for managers
involved with the transformation required for digital business.
● Definitions: when significant terms are first introduced in the main text, succinct defini-
tions can be found in the margin for easy reference.
● Web links: where appropriate, web addresses are given for further information, particu-
larly those that update information.
● Chapter summaries: intended as revision aids and to summarise the main learning points
from the chapter.

At the end of each chapter

● Self-assessment exercises: short questions that will test understanding of terms and
concepts described in the chapter.
● Discussion questions: questions requiring longer essay-style answers discussing themes
from the chapter, which can be used for essays or as debate questions in seminars.
● Essay questions: conventional essay questions.
● Examination questions: typical short-answer questions found in exams, which can also
be used for revision.
● References: list of books, articles or papers referred to within the chapter.
● Web links: these are significant sites that provide further information on the concepts
and topics of the chapter. All website references within the chapter, for example com-
pany sites, are not repeated here. The website address prefix ‘http://’ is omitted from
www links for clarity.

At the end of the book

● Glossary: a list of definitions of all key terms and phrases used within the main text.
● Index: all key words and abbreviations referred to in the main text.

Learning techniques

The text is intended to support a range of learning styles. It can be used for an active or
student-centred learning approach whereby students attempt the activities through reflect-
ing on questions posed, answering questions and then comparing their answer to a sug-
gested answer at the end of the chapter. Alternatively, students can proceed straight to
suggested answers in a more traditional learning approach, which still encourages reflection
about the topic.

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 xx Preface

Module guide

Table B presents one mapping of how the text could be used in different weekly lectures
and seminars through the core eleven weeks of a module where the focus is on management
issues of digital business and e-commerce.
A full set of PowerPoint slides and accompanying notes to assist lecturers in preparing
lectures is available for download at www.pearsoned.co.uk/chaffey.

Enhancements for the seventh edition

The effective chapter structure of previous editions has been retained, but many other
changes have been incorporated based on lecturer and student feedback. We now refer to
‘digital business’ throughout, rather than the dated term ‘e-business’ which we had included
from the first edition in 2002. The rationale is that the term e-business is less used now in
industry; instead, companies increasingly reference management of digital technologies,
channel strategies, digital marketing and digital transformation.
You will see from the listing of updates below that the most significant additions to the
content reflect the growth in importance of mobile marketing and commerce and inbound
marketing, including content marketing and social media marketing.
Each chapter has been rationalised to focus on the key concepts and processes recom-
mended to evaluate capability and develop digital business strategies. The main updates for
the seventh edition on a chapter-by-chapter basis are:
● Chapter 1. The chapter starts by introducing the major trends now determining selection
of digital services, which are a major theme in the text, but the focus is increasingly
around the nature of ‘digital’ as opposed to simply technology or ‘e’ components. There
are new cases on businesses where digital is at the heart of the proposition, particularly
Uber and Amazon.
● Chapter 2. Increased emphasis on new business models for digital start-up businesses, of
particular interest to students. Mini case studies on Boden and Macys have been added
to give recent examples of how businesses are evolving with changes in consumer behav-
iour because of mobile.
● There is also a new case on the Dollar Shave Club.

● Updated review of online ecosystem to explain the increasing role of omnichannel in

the customer journey.

● A focus on tech start-ups introduced. A useful guide for students to consider emerging

business models driven by technology and understand new terms, such as unicorn
businesses.
● Chapter 3. Updates to cases and enhancements to the language to reflects changes in the
technology and changes to professionals’ views of the technology, with an emphasis on
the understanding of the capability of technology rather than knowing exactly how it
works. There are many new cases and a big update to reflect changes in Google.

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 Preface xxi

● Chapter 4. A lot of updates have been made in this new edition because of changes in
consumer attitudes and behaviour. This includes discussions on showrooming, influ-
encer marketing and multiscreening. It also includes sections on M-shopping segmenta-
tion and attitudes to behavioural ad targeting. Other updates include recent political
changes and how they link to micro-localisation vs globalisation.
● This update also includes changes to data protection and privacy laws, in relation to the
2018 EU General Data Protection Regulation (GDPR). Other changes include informa-
tion on the UK government’s digital strategy and discussion around how companies are
utilising tech incubators and accelerators for innovation.
● Chapter 5. This chapter has been updated with new sections on disruptive innovation
and platform strategy. A new case study on how Zappos has innovated a marketplace
and the company’s unique culture has been added. There are also two new mini case
studies from Onedox about peer-to-peer lending and Arriva Bus and their M-ticket app.
● Chapter 6. This chapter has merged Chapters 6 and 7 from the last edition and has been
renamed ‘Supply chain and demand’. It covers supply chain management (SCM) and
e-procurement.
● Most of the updates include how technology is making the supply chain and e-pro-

curement more efficient and effective. A new case study on Zara explains how the
fashion retailer uses the supply chain to gain competitive advantage. Mini case studies
from Boots and Honeywell have also been added.
● Chapter 7. This has now become the chapter on digital marketing. It as has been updated
with an interview from the co-founder and marketing director of Country Attire, an
independent online retailer. There are also two new mini case studies, one about how
Firebox used crowdfunding to tap into a ready-made distribution network and the other
about Hotel Chocolat’s brand identity.
● Chapter 8. This chapter covers customer relationship management. It includes discus-
sions on changes to customer service expectations and the growing use of new technolo-
gies such as Live Chat. A new case study has been added, which explains how Warby
Parker has disrupted the eyewear market. There are also new mini cases from Hubspot
and First Choice.
● A discussion on eCRM versus social CRM has also been added.

● Chapter 9. This is a revised chapter, which was Chapter 11 in the last edition. It has been
renamed ‘Customer experience and service design’ and has a focus on customer experience
(CX). Updates include an interview with the Head of Digital at Domino’s Pizza UK and an
introduction to the six pillars of customer experience, as well as a CX management frame-
work. A new B2B mini case study has been added from Miele. The cyber security section
has been updated and massive security breaches at TalkTalk and Uber are discussed.
● Chapter 10. This is a completely new chapter, in line with changes in the marketplace,
which includes a section on digital transformation and growth hacking. The section on
digital transformation looks at the way organisations as a whole now have to think of
themselves when they engage in change that is centered around a digital opportunity. The
section on growth hacking is a relatively new concept that is particularly relevant to digital
start-ups, but can be applied to existing businesses too. Case studies and mini case studies
from Spotify, Hotmail, Instagram, Leon and others have been added.

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 xxii Preface

Table A In-depth case studies in Digital Business and E-Commerce Management, 7th edition

Chapter Case study

1 Introduction to digital business and 1.1 The Uber business model

e-commerce 1.2 Amazon – the world’s largest digital business?

2 Opportunity analysis for digital business 2.1 How Boden grew from an eight-product menswear catalogue to an
and e-commerce international brand with over £300 million in sales
2.2 Unilever demonstrates strategic agility
2.3 Macy’s – using omnichannel growth strategies to improve
customer experience
2.4 i-to-i – a global marketplace for a start-up company

3 Managing digital business infrastructure 3.1 Innovation at Google (2017 update)

4 Key issues in the digital environment 4.1 The implications of micro-localisation vs globalisation based on
consumer attitudes

5 Digital business strategy 5.1 Arriva Bus redesigns its m-ticket app and boosts revenue by
over 17%
5.2 Setting the Internet revenue contribution at Sandvik Steel
5.3 Zappos innovates in the digital marketplace
5.4 Boo hoo – learning from the largest European dot.com failure

6 Supply chain and demand 6.1 Fast-fashion retailer Zara uses its supply chain to achieve
competitive advantage
6.2 Shell Chemicals redefines its customers’ supply chains
6.3 Argos uses e-supply chain management to improve customer
convenience
6.4 RFID – keeping track starts its move to a faster track
6.5 Honeywell improves efficiency through SCM and e-procurement

7 Digital marketing 7.1 The evolution of easyJet’s online revenue contribution

7.2 Dell gets closer to its customers online

8 Customer relationship management 8.1 How Warby Parker disrupted the eyewear industry
8.2 Tesco.com increases product range and uses triggered
communications to support CRM

9 Customer experience and service design 9.1 Providing an effective online experience for local markets

10 Managing digital business transformation 10.1 Transforming an entire industry and supply chain: Spotify and
and growth hacking Spotify Connect
10.2 Learning from Amazon’s culture of metrics

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 Preface xxiii

Table B Module guide

Week Lecture topic Se minar or tutorial topics Notes

1 LI Introduction to digital business and Activity 1.1 Introduction Chapter 1 and

e-commerce Case study 1.2 Amazon Chapter 3
(technical
Debate 1.2 Limited SME adoption
introduction)
of digital business

2 L2 Opportunity analysis for digital Activity 2.1 Introduction Chapter 2

business and e-commerce Case study 2.1 Boden
(micro-environment)
Debate 2.1 Countermediation
Debate 2.2 Innovative business
models

3 L3 Managing digital business Activity 3.1 Introduction Chapters 3 and 4

infrastructure key environmental Case study 4.1 Globalisation
issues (macro-environment)
Activity 4.4 Government
e-communications

4 L5 Digital business strategy: (a) Activity 5.1 Digital business Chapter 5

Situation analysis and objectives Case study 5.1 strategies
setting Zappos
Debate 5.1
Digital business
responsibility

5 L5 Digital business strategy: (b) Activity 5.2 Digital channels Chapter 5

Strategy and tactics Case study 5.2 Boo.com
Debate 5.2 Board-level
representation

6 L6 Digital business applications: (a) Activity 6.1 Introduction Chapter 6

Supply chain management Case study 6.1 Zara
Case study 6.3 Argos
Debate 6.1 Value chain

7 L7 Digital business applications: (b) Activity 6.4 Introduction Chapter 6

E-procurement Case study 6.5 Honeywell
Debate 7.3 Cost savings

8 L8 Digital business applications: (c) Activity 7.3 Competitor Chapter 7

Digital marketing Case study 7.1 benchmarking

Debate 7.1 easyJet

Digital marketing
planning

9 L9 Digital business applications: (d) Activity 8.1 Introduction Chapter 8

E-CRM Case study 8.1 Warby Parker
Debate 8.1 Permission marketing

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 xxiv Preface

Table B Continued

Week Lecture topic Se minar or tutorial topics Notes

10 L10 Customer Experience (CX) Activity 9.1 Introduction Chapter 9

Mini Case study 9.1 Miele
Debate 9.2 Website design

11 L11 Digital transformation Activity 10.1 Introduction Chapter 10

Case study 10.1 Spotify
Case study 10.2 Amazon

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 About the authors

Dave Chaffey BSc, PhD, FCIM, HIDM

Dave manages his own digital business, Smart Insights (www.smartinsights.com), an online
publisher and analytics company providing advice and alerts on best practice and industry
developments for digital marketers and e-commerce managers. The advice is also created to
help readers of Dave’s books. The most relevant information is highlighted at www.smart-
insights.com/book-support.
Dave also works as an independent Internet marketing trainer and consultant for Market-
ing Insights Limited. He has consulted on digital marketing and e-commerce strategy for
companies of a range of sizes from larger organisations like 3M, Barclaycard, HSBC, Mer-
cedes-Benz and Nokia to smaller organisations like Arco, Confused.com, Euroffice, Horn-
bill and i-to-i.
Dave’s passion is educating students and marketers about the latest and best practices in
digital marketing, so empowering businesses to improve their online performance through
getting the most value from their web analytics and market insight. In other words, making
the most of online opportunities and avoiding waste.
He is proud to have been recognised by the Department of Trade and Industry as one of
the leading individuals who have provided input to, and influence on, the development and
growth of e-commerce and the Internet in the UK over the past 10 years. Dave has also been
recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ world-
wide who have helped shape the future of marketing. He is also proud to be an Honorary
Fellow of the IDM.
Dave is a visiting lecturer on e-commerce courses at different universities, including Bir-
mingham, Cranfield, Derby, Manchester Metropolitan and Warwick. He is a tutor on the
IDM Diploma in Digital Marketing, for which he is also senior examiner.
In total, Dave is author of five best-selling business books, including Internet Marketing:
Strategy, Implementation and Practice, eMarketing eXcellence (with PR Smith) and Total
Email Marketing. Many of these books have been published in new editions since 2000 and
translations include Chinese, Dutch, German, Italian and Serbian.
When offline he enjoys fell-running, indie guitar music and travelling with his family.
Tanya Hemphill BA (Hons), MSc (Dist.), Chartered Marketer, MCIM, MCIPR
Tanya runs her own digital marketing training and consultancy firm WeDisrupt (www
.wedisrupt.co.uk). She has worked with a wide range of different-sized organisations to help
them with digital marketing strategy and digital transformation, including: the Chartered
Institute of Marketing, Harvey Nash, Ingredion, KPMG, the NHS, Alder Hey Hospice,
Monsanto and AkzoNobel.
Passionate about technology, Tanya is one of the UK’s leading experts in growth hacking
for tech start-ups and is often asked to be a keynote speaker on the subject. She is an Associ-
ate Lecturer at Manchester Metropolitan University and has developed and taught MBA
units and undergraduate courses such as Retail Life.
She has also worked closely with the Chartered Institute of Marketing to speak at their
conferences, run commercial training workshops and has been a Level Verifier for a number
of their professional qualifications. Her personal blog can be found at www.digitaltanya
.co.uk and she often Tweets from @DigitallTanya.

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 xxvi About the authors

Outside of work, Tanya enjoys travelling with her family, dancing (Salsa and Ceroc) and
watching action thrillers.
David Edmundson-Bird BA (Hons), MSc, FRSA
David is Principal Lecturer in Digital Marketing & Enterprise at Manchester Metropolitan
University and has worked there since 2004. He has worked in a variety of organisations,
including Leeds Metropolitan (now Beckett) University, The University of Salford and Shef-
field Hallam University. He helped set up Manchester’s second web design agency, Sozo, in
1995 and was Chief Learning Architect at Academee from 1999 until 2002.
David set up Manchester Met’s first MSc in Digital Marketing in 2007 in collaboration
with Econsultancy and their full-time MSc Digital Marketing Communications in 2016. He
teaches full time on undergraduate, postgraduate and MBA programmes, specialising in
digital strategy, search engine marketing and content strategy. David has also worked on
many commercial programmes for clients including JD Sport and McCann Erickson. He
speaks widely about digital education and about digital transformation in the marketing
business at conferences and in the media.
Outside of work, David spends time with his family as much as possible, is an avid chef
and enjoys discovering and using new ingredients from all over the world. He is a huge fan
of Scandi-noir literature and can be seen tweeting a mixture of industry-relevant and per-
sonal tweets as @groovegenerator

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 Acknowledgements

The authors would like to thank the team at Pearson Education in Harlow, in particular
Eileen Srebernik, Andrew Miller, Rhian McKay, Angel Daphnee and Emily Anderson for
their help in the creation of this book. We would particularly like to thank the reviewers
who undertook detailed reviews for the second, third and fourth editions – these reviews
have been important in shaping the book: Magdy Abdel-Kader, University of Essex; Poul
Andersen, Aarhus Business School, Denmark; Michelle Bergadaa, University of Geneva,
Switzerland; Bruce Bowhill, University of Portsmouth; Yaw Busia, University of Middlesex;
Hatem El-Gohary, Bradford University; Janet French, Barking College; Andy Gravell, Uni-
versity of Southampton; Ulf Hoglind, Örebro University, Sweden; Judith Jeffcoate, Univer-
sity of Buckingham; Britt-Marie Johansson, University of Jönköping, Sweden; Matthias
Klaes, Keele University; Mette P. Knudsen, University of Southern Denmark; Tuula Mittila,
University of Tampere, Finland; Barry Quinn, University of Ulster; Gerry Rogers, EdExcel
Qualifications Leader; Chandres Tejura, University of North London; Ian Watson, Univer-
sity of Northumbria; Steve Wood, Liverpool John Moores University.
Thanks also to these reviewers who were involved at earlier stages with this book: Fintan
clear, Brunel University; Neil Doherty, Loughborough University; Jean-Noel Ezingeard,
Henley Management College; Dr Felicia Fai, University of Bath; Lisa Harris, Brunel Uni-
versity; Sue Hartland, Gloucestershire Business School at Cheltenham and Gloucester Col-
lege of Higher Education; Mike Healy, University of Westminster; Eric Van Heck,
Rotterdam School of Management, The Netherlands; Dipak Khakhar, Lund University,
Sweden; Robert Proops, University of Westminster; Professor Michael Quayle, University
of Glamorgan; Richard Riley, University of Central England; Gurmak Singh, University of
Wolverhampton; John Twomey, Brunel University; Gerry Urwin, Coventry University.

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 Publisher’s acknowledgements

Text Credit(s):
6 John Wiley & Sons, Inc: Danneels, E. (2004) Disruptive technology reconsidered: a critique
and research agenda. Journal of Product Innovation Management, 21, 4, 246–58.
8 Google LLC: Lecinski, J. (2012) Winning the Zero Moment of Truth. Published by Google,
available from www.zeromomentoftruth.com/. 9 UBM LLC: Pulizzi, J. (2012) Six Useful
Content Marketing Definitions, contentmarketinginstitute.com. Available at: http://con-
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Photo Credits:
41 Shutterstock: Alex Lentati/Evening Standard/Shutterstock 43 Dollar Shave Club: https://
www.dollarshaveclub.com/ 46 Shutterstock: Stuart Monk/Shutterstock.com 85 Amazon:
Paul Christian Gordon/Alamy Stock Photo 96 Getty images: SAM YEH/AFP/Getty Images
141 Alamy Images: Christian Charisius/dpa/Alamy Live News 232 Getty Images: Ronda
Churchill/Bloomberg via Getty Images 252 Getty Images: Xurxo Lobato/Contributor/Getty
images 370 Getty Images: Carolyn Cole/Los Angeles Times via Getty Images 372 Alamy
Images: RosaIreneBetancourt 10/Alamy Stock Photo 383 Getty Images: Jules Frazier/Getty
Images 404 Alamy Images: Jochen Tack/Alamy Stock Photo 417 Getty Images: Tony Wool-
liscroft/WireImage/Getty Images 420 Alamy Images: Everett Collection Inc/Alamy Stock
Photo 454 Alamy Images: True Images/Alamy Stock Photo 503 Alamy Images: CJG -
­Technology/Alamy Stock Photo 563 Shutterstock: tanuha2001/Shutterstock 578 Alamy
Images: M4OS Photos/Alamy Stock Photo 584 Alamy Images: ZUMA Press Inc/Alamy
Stock Photo 585 Alamy Images: Robert Evans/Alamy Stock Photo

Screenshot Credits:
6 Google LLC: Wayback machine archive: http://web.archive.org/web/19981111183552/
google. stanford.edu. Google and the Google logo are registered trademarks of Google
Inc., used with permission. 16 Slack Technologies: Slack workspace tool, with permis-
sion https://slack.com/ 26 Alamy Images: sjscreens/Alamy Stock Photo 26 Alamy Images:
True Images/Alamy Stock Photo 48 Google LLC: http://www.google.com/trends/ 95
Alamy Images: M4OS Photos/Alamy Stock Photo 140 Alamy Images: sjscreens/Alamy
Stock Photo 213 Arriva: Arriva Bus App 312 Bain & Company: Bain & Company (Bain.
com) resources section, which demonstrates content marketing 327 Alamy Images: Chris
Ridley – Internet Stock/Alamy Stock Photo 489 Aviva: www.aviva.co.uk 514 alva: http://
www.alva-group.com/en/the-reputational-risk-of-cyber-attacks-talktalk-case-study/ 549
Alamy Images: NetPhotos/Alamy Stock Photo 559 Alamy Images: Joe Doylem/Alamy
Stock Photo 599 David Edmundson Bird: With permission from David Edmundson Bird

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F01 DIGITAL BUSINESS AND E-COMMERC 93335 Contents.indd 38 10/05/2019 15:59
 Part
1 Introduction

Part 1 introduces digital business and its relevance to organisations,

buyers, suppliers, stakeholders and consumers. It clarifies terms and
concepts, such as the term 'digital business', and puts business,
revenue and technology models in context by reviewing alternative
applications through activities and case studies.

1 Introduction to digital business p. 3

● The impact of digital ● Digital business

communications on opportunities
traditional businesses ● Barriers to the adoption of
● What is the difference technology by digital
between a digital business business stakeholders
and an e-commerce ● Barriers to consumer digital
business? adoption

2 Opportunity analysis for digital business and

e-commerce p. 36

● Digital marketplace analysis ● Business models for

● A process for digital e-commerce
marketplace analysis Focus on. . .
● Location of trading in the ● Digital start-up companies
marketplace

3 Managing digital business infrastructure p. 72

● Digital business ● Technology standards

infrastructure components Focus on . . .
● A short introduction to digital ● The development of
technology customer experiences and
● Management issues in digital services
creating a new customer- ● Internal and external
facing digital service governance factors that
● Managing internal digital impact digital business
communications through
internal networks and
external networks

M01 DIGITAL BUSINESS AND E-COMMERC 93335.indd 1 10/05/2019 16:00

 4 Key issues in the digital environment p. 120

● Social factors ● Taxation

● Legal and ethical factors ● Freedom-restrictive
● Economic factors legislation
● Political factors ● Economic and competitive
● Technology factors factors
● Cultural factors ● The implications of
● Factors affecting e-commerce for international
e-commerce buying B2B trading
behaviour ● Government and digital
● Privacy and trust in transformation
e-commerce ● Technological innovation and
● Environmental and green technology assessment
issues related to Internet
usage

M01 DIGITAL BUSINESS AND E-COMMERC 93335.indd 2 10/05/2019 16:00

 1 Introduction to
digital business

Chapter at a glance Learning outcomes

Main topics
After completing this chapter the reader should be able to:
➔ The impact of digital ● Define the meaning and scope of digital business and the
communications on traditional
businesses 6 difference between digital business and e-commerce
➔ What is the difference between a
● Summarise the main reasons for becoming a digital business
digital business and an and barriers that may restrict it
e-commerce business? 11 ● Outline the ongoing business challenges of managing digital
➔ Digital business opportunities 24 business in an organisation, particularly tech start-ups
➔ Barriers to the adoption of
technology by digital business
stakeholders 27
➔ Barriers to consumer digital
Management issues
adoption 29
The issues for managers raised in this chapter include:
Case studies
● How do we explain the scope and implications of digital business
1.1 The Uber business model 8 to staff?
1.2 Amazon – the world’s largest ● What is the full range of benefits of introducing digital business
digital business? 30 and what are the risks?
● How do we evaluate our current digital capabilities?

Web support Links to other chapters

The following additional case studies

are available at The main related chapters are:
www.pearsoned.co.uk/chaffey
● Chapter 2 examines the principal e-commerce business and
➔ SME adoption of sell-side
marketplace models in more detail
e-commerce
● Chapter 3 introduces the technical infrastructure of software and
➔ Death of the dot.com dream
hardware that companies must incorporate to achieve
➔ Encouraging SME adoption of
e-commerce
sell-side e-commerce
● Chapter 5 describes approaches to digital business strategy
The site also contains a range of study
material designed to help improve your introduced in Chapter 1
results.

Scan code
to find the
latest updates
for topics in
this chapter

M01 DIGITAL BUSINESS AND E-COMMERC 93335.indd 3 10/05/2019 16:00

 4 Part 1 Introduction

Introduction

The Internet Organisations have now been adapting to technology opportunities based on the Internet,
The ‘Internet’ refers to the World Wide Web and mobile communications innovations to transform their businesses
physical network that links
computers across the
for more than 25 years, since the creation of the first website (http://info.cern.ch) by Sir
globe. It consists of the Tim Berners-Lee in 1991. Deploying these disruptive digital technologies has offered many
infrastructure of network opportunities for innovative businesses to transform their services and organisations.
servers and wired and
wireless communication Table 1.1 highlights some of the best-known examples, and in Activity 1.1 you can explore
links between them that some of the reasons for the success of these companies.
are used to hold and
transport data between In Digital Business we will explore approaches managers can use to assess the relevance
the client devices and of different digital technologies and then devise and implement strategies to exploit these
web servers.
opportunities. We will also study how to manage more practical risks such as delivering a
World Wide Web satisfactory customer service experience, maintaining customer privacy and managing secu-
(WWW)
The most common
rity. In this chapter we start by introducing the scope of digital business. Then we review
technique for publishing the main opportunities and risks of digital business, together with the drivers and barriers
information on the to adoption.
Internet. It is accessed
through desktop or For the author, digital business is an exciting area to be involved with, since many new
mobile web browsers opportunities and challenges arise yearly, monthly and even daily. Innovation is a given,
that display interactive
web pages of embedded
with the continuous introduction of new technologies, new business models and new
graphics and HTML/XML- communications approaches. For example, Google innovates relentlessly. Its service has
encoded text. developed a long way since 1998 (Figure 1.1), with billions of pages now indexed and other
Mobile services such as web mail, pay-per-click adverts, analytics, shopping services, social
communications networks and artificial intelligence all part of its offering. Complete Activity 1.1 or view
Digital business
processes and Table 1.1 to see other examples of the rate at which new innovations occur.
communications
conducted using mobile
devices such as laptops,
tablets, mobile phones
(including fixed access
platforms) and ubiquitous
devices with different
forms of wireless
connection, including
services on wifi, 3G, 4G,
5G and satellite.

Disruptive digital
technologies
Technologies that offer
opportunities for business
for new products and
services for buyers,
suppliers, partners and
customers and can
transform business
processes. Danneels
(2004) defined disruptive
technologies as ‘a
technology that changes
the bases of competition
by changing the
performance metrics
along which firms
compete. Customer
needs drive customers to
seek certain benefits in
the products they use
and form the basis for
customer choices Google circa 1998
between competing Source: Wayback machine archive: http://web.archive.org/web/19981111183552/google.
products.’ (There isn’t a Figure 1.1 stanford.edu. Google and the Google logo are registered trademarks of Google Inc., used
better definition and this with permission.
remains the most widely
cited definition.)

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 Chapter 1 Introduction to digital business 5

Table 1.1 Timeline of innovation in business model or communications approach

Year founded Company/site Category of innovation and business model

1994 Amazon Retailer

1995 (March) Yahoo! (yahoo.com) Directory and portal
1995 (Sept) eBay Online auction
1995 (Dec) AltaVista (altavista.com) Search engine
1996 Hotmail (hotmail.com) Web-based email
Viral marketing (using email signatures to promote service)
Purchased by Microsoft in 1997
1998 GoTo.com (goto.com), Pay-per-click search marketing
became Overture (2001) Purchased by Yahoo! in 2003
1998 Google (google.com) Search engine
1999 Blogger (blogger.com) Blog publishing platform
Purchased by Google in 2003
1999 Alibaba (alibaba.com) B2B marketplace with $1.7 billion IPO on Hong Kong stock exchange
in 2007
1999 MySpace (myspace.com), Social network
formerly eUniverse Purchased by News Corp. in 2005
2001 Wikipedia (wikipedia.com) Open encyclopaedia
2002 Last.fm A UK-based Internet radio and music community website
2003 Skype (skype.com) Peer-to-peer Internet telephony
VoIP – Voice over Internet Protocol
Purchased by eBay in 2005
2003 Second Life (secondlife.com) Immersive virtual world
2004 Facebook (facebook.com) Social network applications and groups
2005 YouTube (youtube.com) Video sharing and rating
2006 Spotify (spotify.com) Music track streaming
2009 Foursquare (foursquare.com) A location-based social media website designed for mobile access
2011 Pinterest Social network offering image sharing
2013 Slack (slack.com) Collaborative team-working tool
2014 Google Glass An example of a wearable computing device
2015 Apple Watch An example of a wearable computing device
2016 Pokémon Go Augmented reality gaming
2018 IBM Watson An example of machine learning

Activity 1.1 Innovative digital businesses

Purpose
To illustrate innovation in digital business models and communications approaches.

Questions
Virtual world
An electronic environment 1 Think about the innovation that you have witnessed during the time you have used
that simulates a mobile device. What would you say are the main businesses that work in your
interactions between
online characters known
country that have changed the way people spend their time or buy online?
as avatars.

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 6 Part 1 Introduction

2 We talk about these businesses being ‘successful’, but what is success for a start-up
business? And when does a start-up stop being a start-up?
3 What do these services have in common that you think has made them successful?

The impact of digital communications on traditional businesses

Digital During the period shown in Table 1.1, managers at established businesses have had to
transformation
determine how to apply new digital communications technologies to transform their organi-
Stolterman and Forse
describe digital sations. As we will see later in this chapter, existing businesses have evolved their approaches
transformation as the to digital business through a series of stages. Innovation is relentless, with the continuous
changes that occur in any
part of human society
introduction of new technologies, new business models and new communications
through the application of approaches. So, all organisations have to review new digital communications approaches
digital technology. Digital for their potential to make their business more competitive and also manage ongoing risks
transformation in
business occurs when such as security and performance. For example, many businesses are reviewing the benefits,
there are significant costs and risks of digital business technologies they are currently implementing as part of
changes to organisational
processes, structures and digital transformation projects.
systems, implemented to At the time of writing, there are two key opportunities of digital transformation open to
improve organisational
performance through
most businesses, which we focus on in this text: inbound marketing and mobile marketing.
increasing the application Do do we decide which one we are adding or are these remaining the same?
of digital technology.
Inbound marketing Inbound marketing
The customer is
proactive in actively
seeking out information In the digital world it is often the customer who initiates contact and is seeking information
for their needs, and
interactions with brands
by discovering information on an organisation’s digital presence. In other words, it is a
are attracted through ‘pull’ mechanism – historically it has been particularly important to have good visibility in
content, search and search engines when customers are entering search terms relevant to a company’s products
social media marketing.
or services, but also includes the need for organisations to make sure they are ‘visible’ in
Zero Moment of the social media environment too. Among marketing professionals this powerful approach
Truth (ZMOT)
to marketing is now commonly known as inbound marketing (Shah and Halligan, 2009).
A summary of today’s
multichannel consumer Google refers to this consumer decision-making before they visit a retailer as the Zero
decision-making for Moment of Truth (ZMOT) in a handbook by Lecinski (2012). This describes the combination
product purchase where
they search, review
of multi-channel influences on a purchase, as shown in Figure 1.2.
ratings, styles, prices
and comments on social
media before visiting a
retailer.

Stimulus First Second

Moment of Moment of
Truth Truth

Figure 1.2 Zero Moment of Truth

Source: Google, Lecinski (2012).

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 Chapter 1 Introduction to digital business 7

Search marketing Inbound marketing is powerful since marketing wastage is reduced. Search marketing,
Companies seek to
content marketing and social media marketing can be used to target prospects with a
improve their visibility in
search engines for defined need – they are proactive and self-selecting. But this is a weakness, since marketers
relevant search terms by may have less control than in traditional communications where the message is pushed out
increasing their presence
in the search engine to a defined audience and can help generate awareness and demand. Advocates of inbound
results pages. marketing such as Dharmesh Shah and Brian Halligan argue that content, social media and
Content marketing search marketing do have a role to play in generating demand.
‘. . . the marketing and
business process for
creating and distributing Social media marketing
relevant and valuable
content to attract,
acquire, and engage a The increasing popularity of social media is a major trend in digital business – in particular
clearly defined and social network sites (SNS) such as Facebook, Twitter and, for business-to-business users,
understood target
audience – with the LinkedIn and RSS feeds. In the last few years there has also been the rise of more private
objective of driving networks such as WhatsApp and Snapchat. Some might also include game environments
profitable customer
action.’ (Pulizzi, 2012)
such as Minecraft as a niche social media site. Added to this, the growth of blogs created
by many individuals and businesses is still a significant force, and these have become more
diverse as bloggers move away from simple text content and develop richer, often video-
based content. The focus has also moved very heavily into a mobile context, with both crea-
tion and consumption being focused on mobile devices. Social media marketing also
includes rich media such as online video and interactive applications featured on specialist
social networks such as YouTube or embedded into websites.

Trends update Social media usage

The popularity of different social platforms in different countries constantly changes.

Social media Visit this compilation to find out the latest in your region or country: http://bit.ly/
marketing
smartsocialstats.
Monitoring and facilitating
customer–customer
interaction and
participation throughout It’s important for all businesses to understand the business and revenue models of the
the web to encourage major social networks and platforms that are today so influential in shaping people’s opin-
positive engagement with
a company and its ions about brands. Figure 1.3 summarises the main types of social sites that companies need
brands. Interactions may to consider.
occur on a company site,
social networks and other
Since there are so many types of social presence, it is helpful to simplify the options to
third-party sites. manage them. For this we recommend these six categories based on chapters in Weinberg
Social media
(2010). You can see there’s more to social media than social networks:
A category of media
1 Social networking. The emphasis here is on listening to customers and sharing engaging
focusing on participation
and peer-to-peer content. Facebook tends to be most important for consumer audiences and LinkedIn for
communication between business audiences, although newer platforms such as WhatsApp and Snapchat are
individuals, with platforms
providing the capability to becoming increasingly important.
develop user-generated 2 Social knowledge. These are informational social networks such as Quora, where you can
content (UGC) and to
exchange messages and
help an audience by solving their problems and subtly showing how your products have
comments between helped others. Reddit is another site in this category, although great caution must be taken
different users. when embarking with an audience in this environment.
Social network sites 3 Social sharing. These are social bookmarking sites, such as Delicious (https://del.icio.us),
(SNS) which can be useful for understanding the most engaging content within a category.
A site that facilitates peer-
to-peer communication
4 Social news. Twitter is the best-known example.
within a group or between 5 Social streaming. Rich and streaming media social sites for sharing photos, video and
individuals through audio, such as Spotify.
providing facilities to
develop user-generated 6 Company user-generated content and community. Distinct from the other types of social
content (UGC) and to presence, which are independent of companies, these are the company’s own social
exchange messages and
comments between
spaces, which may be integrated into product content (reviews and ratings), a customer
different users. support community or a blog.

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 8 Part 1 Introduction

Really Simple
Syndication (RSS)
feeds
Blog, news or other
content is published by
an XML standard and
syndicated for other sites
or read by users in RSS
reader software services.
Now typically shortened
to ‘feed’, e.g. news feed
or sports feed.

Blog
An online presence for
content prepared by an
individual or a group of
people.

Rich media
Digital assets such as ads
are not static images, but
provide animation, video,
audio or interactivity as a
game or form to be
completed.

Social media marketing radar

Figure 1.3 Source: Smart Insights (www.smartinsights.com), with permission

Case study 1.1 considers the growth of Uber, the largest hail-riding company in many
countries.

Case Study 1.1 The Uber business model

Context million active app users and hundreds of thousands of

drivers, yet very few actual Uber employees. Bear in
This case is about the taxi-hire app company Uber –
mind that this business and its environment are rapidly
which hardly requires an introduction at all. It started as
changing, so new issues and factors will have emerged
a small app effectively offering taxi journeys to travellers
between writing, publication and reading this text. But
in San Francisco. It’s a great case study in that it shows
the history and fundamentals should remain the same.
many of the success factors needed for the launch of a
In line with other case studies in the text, the case
new digital business, but also shows the risks of alienat-
study features a summary using the key categories of the
ing customers, drivers and wider society when certain
Business Model Canvas (which is introduced in the busi-
issues are not dealt with in a way that satisfies a broad
ness models section in Chapter 2).
range of stakeholders. At the time of writing, Uber had 8

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 Chapter 1 Introduction to digital business 9

Value proposition maintaining the marketplace as it builds up to high levels

of market share in a local taxi economy.
In 2016, the Uber mission was ‘Uber is evolving the way
Typically, Uber takes between 20–30% of the price of
the world moves. By seamlessly connecting riders to
a ride, depending on local conditions. When demand is
drivers through our apps, we make cities more accessi-
high, Uber introduces ‘surge pricing’ (when a multiplier
ble, opening up more possibilities for riders and more
is added to a proposed and final price in the hailing app).
business for drivers.’
Surge is supposed to attract more drivers into the area
where demand is high but driver availability is low. It also
Consumer value proposition creates a situation where price-sensitive customers will
Uber customers hail an Uber taxi through an app, as delay a journey until the surge pricing drops.
opposed to either the traditional hailing of a cab on the Uber also has different pricing strategies for different
street or by calling a local taxi company to arrange a qualities of vehicle available in certain markets. There are
pick-up. Payment for the journey is made via a credit or premium prices charged when customers order a pre-
debit card connected to the app, so there is no need to mium grade of vehicle such as a minibus or executive
carry money for the fare. There are many occasions limousine.
where rides are offered free or discounted as part of a
promotional drive. Taxi fares are, on the whole, equal to Uber’s strategy
the existing cheapest fares or cheaper than taxis in the
Uber’s strategy is one of digital disruption. Taxi hailing is
locality, and in some cases involve a fixed-fare deal to
an industry where there are few standards and competi-
specific destinations such as airports. The same Uber
tion is widely based around price. In common with a
app can be used anywhere globally, removing the need
number of other disruptive businesses, Uber ‘doesn’t own
for consumers to try and find a local taxi provider.
the hardware’ – it takes on drivers who own the cars and
provides them with access to the ride-hailing infrastruc-
Value proposition for drivers ture. It also has a well-developed review system (which
Uber drivers are not employees of the business (a factor both consumers and drivers use). A new location will have
that became a risk factor in some countries, which we a large marketing effort to acquire and retain customers.
discuss later). Uber regards each driver as a freelance con- This will largely consist of offering many free trips to cus-
tractor, although the exact nature of this relationship varies tomers new to the app, along with significant financial
between countries and jurisdictions. Uber proposes to incentives for drivers to join Uber from other taxi compa-
drivers that it will pay them more than the local competition nies. The target is to achieve significant market share so
pays its drivers (whether freelance or employed). This is a that Uber becomes the largest player in a local market. At
relatively easy task, as most cab- and taxi-driving work is this point, Uber then starts to alter its pricing structure for
poorly paid. Uber offers more money, and thus many driv- fares and payments to drivers. The vast majority of Uber’s
ers sign up. Added to this, Uber incentivises driving at investment is ploughed into this activity. Weak and frag-
peak times (known as ‘surge pricing’), with higher sums of mented competitor marketplaces make the task straight-
money as payment. Uber can provide higher general forward. Its large pool of cash allows it to offer the best
incomes to drivers as they provide a continual supply of rates to new drivers in new markets, thus poaching drivers
hailing work via the Uber app. Ultimately, the drivers from existing taxi companies.
decide when they work, and the decision of drivers about
when to work will be driven by self-interest. Uber’s competitors
Uber has different competitors in its different geographical
Revenue model areas of operation. In the taxi-hailing business, there is the
Uber’s investment has almost all been about developing usual competition of local taxi-hire companies, whether
brand awareness in a global context, and marketing the private hire or on-street hailing. These are often limited to
proposition to local audiences and local driver communi- a particular city or regional location (although not always).
ties. This has provided them with strong brand recogni- There are also the wider app-based competitors: Lyft (in
tion. Uber doesn’t own fleets of taxis but relies on the US and some countries in Asia), Curb (in the US), Didi
owner-drivers providing the vehicles themselves – some- Chuxing (in China), Grab (in some Asian countries) and
thing in common with many local taxi-hire companies. Ola in India. Competition in China ultimately caused Uber
They make arrangements in some markets to provide to sell its Chinese operation to Didi Chuxing in early 2016.
leasing arrangements for vehicles. Other money is spent To make matters more complicated, a number of these
on the technical infrastructure supporting the ride man- Asian competitors have combined forces in various
agement. However, most money is spent developing and territories to compete with Uber directly.

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 10 Part 1 Introduction

Risk factors the use of capital in the business. The real issue is what
role autonomous vehicles will play in future society and
At the time of writing, rarely a day goes by without critical
transportation. One possible avenue of concern is that a
commentary or discussions of legal and ethical behav-
car manufacturer may decide to compete in a market-
iour by the company. In the United Kingdom, Uber was
place as a provider of autonomous taxi services into any
found to be in breach of employment laws when the tri-
number of marketplaces. Private owners of autonomous
bunal found that it should regard drivers as employees
vehicles might themselves make their cars available for
rather than freelancers. Prior to publishing this book,
private hire through a ride-sharing technology that
Uber planned to appeal against this ruling, but if the rul-
doesn’t belong to Uber. Uber’s biggest barrier to entry – its
ing is upheld this could have extreme implications for the
ability to pay new drivers significant sums of money –
way the company organises its labour.
disappears when faced with autonomous vehicles. A
In numerous cities, Uber has found itself at the wrong
significant change in direction would be necessary.
end of organised protests from existing taxi drivers – par-
ticularly in London, where black-cab taxi drivers held sev- Sources: http://nextjuggernaut.com/blog/how-uber-works-business-
model-revenue-uber-insights/
eral protests and ‘strikes’, and there were angry protests https://newsroom.uber.com/
in Asia and South America, some of which turned violent.
In Europe Uber found itself being fined for flouting local Questions
laws and regulations with regard to unlicensed drivers. It
1 As an investor in a digital business such as Uber,
also faced significant criticism when concerns about rider
which financial and customer-related metrics
safety were raised in jurisdictions where drivers were not
would you use to assess and benchmark the cur-
required to be registered taxi drivers.
rent business success and future growth potential
One of the biggest future risk factors for Uber to con-
of the company?
sider is the role of autonomous vehicles. Uber started
2 Complete a situation analysis for Uber focusing
experimenting with autonomous versions of its ride ser-
on an assessment of the main business risks that
vice in a number of US cities. Autonomous vehicles cre-
could damage the future growth potential of the
ate an interesting dilemma for the company. On the one
Uber business.
hand, it reduces the need to employ drivers – problem-
3 For the main business risks to Uber identified in
atic from an ethical perspective – however, it would
Question 2, suggest approaches the company
require the company to actually invest in the hardware of
could use to minimise these risks.
autonomous vehicles, which would have implications for

Mobile commerce Mobile commerce

and mobile business
Mobile commerce refers
to the online transactions The potential of mobile commerce and mobile business is evident from the predictions of
and communications Mary Meeker, an analyst at Kleiner Perkins Caufield Byers, who shares her insights about the
conducted using mobile
devices such as current state of the Internet in a presentation called ‘Internet Trends’ (see the link to her insights
smartphones and at the end of this chapter). One of Meeker’s bravest predictions from 2008 was that mobile web
tablets, and typically with
a wireless connection.
use would surpass desktop web use by 2014, and this has certainly turned out to be true.
Mobile business refers to The growth in popularity of mobile apps (Chapter 3), from the iPhone store, Google
the business models Android Play, Microsoft Windows app store and other handset vendors, is another signifi-
employed by
organisations that exploit cant development in mobile communications. Yahoo Flurry (2014) released a summary of
the technology categories of app usage across smartphones and tablets and it showed that 90% of mobile
surrounding such mobile
devices and allow time was in apps rather than the browser. You do have to be careful in interpreting this,
employees and though, since some app data usage is effectively browser usage within an app.
stakeholders to benefit
from the ability to be
Location-based use of mobile devices is another significant trend as users may use apps or
freed from a fixed browsers while shopping, for example (see Mini case study 1.1). Related to this activity is
location. location-based tracking of goods and inventory as they are manufactured and transported.

Trends update Mobile usage

Mobile usage overtook desktop usage as a total percentage of accessing online services
and information, but the actual amount of time spent on desktop and laptops hasn’t
changed much – they are still widely used as the prime device during office hours. Find
out the latest statistics on mobile and app usage at: http://bit.ly/smartmobilestats.

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 Chapter 1 Introduction to digital business 11

Mini Case Study 1.1 Google local results and reviews

The increasing use, success and popularity of mobile has had a significant impact on the way people use
search engines such as Google. The context of people’s use of ‘Search’, and where they do it, means that
results from the search engine have taken a big leap in the last few years.
The algorithm in Google’s search engine uses many factors to determine what results are seen, but mobile
use and location, along with the subject matter being searched for, have a big impact on what is shown.
As an example, a customer searching using the keywords ‘Chinese restaurants’ on a mobile device will
be shown an array of choices heavily geared towards choices within that locality – even though no mention
of the district occurs in the original search words. Google uses the location and the context of the mobile
device to make assumptions about the kind of results the users wants – in this case the user is likely to be
looking for a local restaurant – and reviews of local restaurants are often high in the results.
The combination of mobile context, location and other factors make for a highly relevant service that
maintains Google’s dominance in this area.

Activity 1.2 The most popular apps today

This can be completed individually or as a group activity comparing popular apps for
different mobile handsets. Review the most popular apps today, using either the app
store for your mobile phone or a compilation from an information provider such as
Flurry, comScore or Nielsen.

Questions
1 Identify the most popular categories of apps from the top 10 or 20 most popular
ones, including browser applications such as Google’s Chrome or Apple’s Safari.
2 Discuss the opportunities for companies to promote their brands or services using
apps in comparison with mobile sites delivered through web browsers.

What is the difference between a digital business and an e-commerce business?

Mobile app
A software application The rapid advancement of technology and its application to business has been accompanied
that is designed for use
on a mobile phone,
by a range of new terminology and jargon, such as e-CRM, multichannel retail and digital
typically downloaded e-procurement. Do we need to be concerned about the terminology? The short answer is
from an app store. iPhone no; Mougayer (1998) noted that it is understanding the services that can be offered to cus-
and Android apps are
best known, but all tomers and the business benefits that are obtainable through digital technology that is
smartphones support the important. However, labels are convenient in defining the scope of the changes we are
use of apps, which can
provide users with
looking to make within an organisation through using digital communications. Managers
information, entertainment within an organisation need to agree and communicate to employees, customers and part-
or location-based ners the digital transformation they are proposing through using digital technologies.
services such as
mapping.

E-commerce defined
Electronic
commerce
(e-commerce)
The scope of electronic commerce (e-commerce) is narrower than digital business. It’s
All electronically mediated often thought simply to refer to buying and selling using the Internet; people immediately
information exchanges think of consumer retail purchases from companies such as Amazon. But e-commerce can
between an organisation
and its external be considered as all electronically mediated transactions between an organisation and any
stakeholders. third party it deals with. By this definition, non-financial transactions such as customer

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 12 Part 1 Introduction

support and requests for further information would also be considered to be part of
e-commerce. Kalakota and Whinston (1997) referred to a range of different perspectives for
e-commerce that are still valid today:
1 A communications perspective – the delivery of information, products and services or
payment by electronic means.
2 A business process perspective – the application of technology towards the automation
of business transactions and workflows.
3 A service perspective – enabling cost-cutting at the same time as increasing the speed and
quality of service delivery.
4 An online perspective – the buying and selling of products and information online.

These definitions show that electronic commerce is not solely restricted to the actual buying
and selling of products, but also includes pre-sale and post-sale activities across the supply chain.

Trends Update E-commerce growth rates

There is an annual growth rate of around 10% in e-commerce sales in most countries:
http://bit.ly/smartetailstats.

When evaluating the strategic impact of e-commerce on an organisation, it is useful to

identify opportunities for buy-side and sell-side e-commerce transactions, as shown in Fig-
ure 1.4, since systems with different functionalities will need to be created in an organisation

Digital business

Buy-side Sell-side
e-commerce e-commerce

Intranet

Internet and Internet and

extranet extranet

Key
Organisational processes
Suppliers Customers
and functional units

Suppliers’ suppliers Intermediaries Customers’ customers

Figure 1.4 The distinction between buy-side and sell-side e-commerce

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 Chapter 1 Introduction to digital business 13

Buy-side to accommodate transactions with buyers and with suppliers. Buy-side e-commerce refers
e-commerce
to transactions to procure resources needed by an organisation from its suppliers. Sell-side
E-commerce transactions
between a purchasing e-commerce refers to transactions involved with selling products to an organisation’s
organisation and its customers.
suppliers.
Social media commerce is an increasingly important part of e-commerce for site owners
Sell-side since incorporating reviews, ratings and other social media interactions into a site and link-
e-commerce
ing to social networking sites can help understand customers’ needs and increase conversion
E-commerce transactions
between a supplier to sale. It can also involve group buying, using a coupon service such as Groupon.
organisation and its
customers.
Digital business defined
Digital business is broader in its scope than e-commerce. It is similar to the
Debate 1.1
term e-business, which was first coined by IBM in 1997 and described as:
Is digital business any different to
just ‘IT’? e-business (e’biz’nis) – the transformation of key business processes through
‘Digital business is just a new label – the use of internet technologies.
there is no distinction between the role
of digital business and traditional IT.’ In the sixth (and previous) edition of this book we changed from using the
term ‘e-business’ to using ‘digital business’ since it reflected the current usage
Social media in industry and research on the impact of digital technologies on business.
commerce In Figure 1.4 the key digital business processes are the organisational processes or units
A subset of e-commerce
that encourages
in the centre of the figure. They include research and development, marketing, manufactur-
participation and ing and inbound and outbound logistics. The buy-side e-commerce transactions with sup-
interaction of customers pliers and the sell-side e-commerce transactions with customers can also be considered to
in rating, selecting, buying
products and other social be key digital business processes.
media interactions. This
participation can occur on
an e-commerce site or on
third-party sites. Intranets and extranets
Digital business
The majority of Internet services are available to any business or consumer that has access
How businesses apply
digital technology and to the Internet. However, many digital business applications that access sensitive company
media to improve the information require access to be limited to qualified individuals or partners. If information is
competitiveness of their
organisation through restricted to employees inside an organisation, this is an intranet, as is shown in Figure 1.5.
optimising internal
processes with online and
traditional channels to
market and supply. Marketing Marketing / purchasing

Intranet The Internet

A private network within a
single company using Internet Extranet Extranet
Internet standards to
enable employees to
access and share
information using web Intranet
technology.

Intranet The Company The

world only world
Suppliers, Suppliers,
IT Dept customers, customers,
collaborators collaborators

Figure 1.5 The relationship between intranets, extranets and the Internet

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 14 Part 1 Introduction

Slack workspace tool

Figure 1.6 Source: with permission from Slack

Enterprise social Today, the term intranet is still used, but software services similar to Twitter and Face-
media software
book are being implemented within companies to achieve similar goals of information
Systems used inside
organisations to enable sharing and collaboration. Mini case study 1.2 shows an example of one such enterprise
real-time collaboration social media software tool, Slack (Figure 1.6).
between employees and
other stakeholders, such If access to an organisation’s web services is extended to some others, but not everyone
as customers and beyond the organisation, this is an extranet. Whenever you log on to an Internet service,
suppliers, to support
business processes such
such as that for an e-retailer or online news site, this is effectively an extranet arrangement,
as customer services, although the term is most often used to mean a business-to-business application such as
supply chain that described in Case study 6.1, where certain customers or suppliers are given shared
management and new
product development. access. We look at issues around intranets and extranets in Chapter 3.
Extranet
A service provided Different types of sell-side e-commerce
through Internet and web
technology delivered by
extending an intranet Sell-side e-commerce doesn’t only involve selling products online, but also involves using
beyond a company to
customers, suppliers and
digital technologies to market services using a range of techniques (which we will explore
collaborators. in Chapters 7 and 8). Not every product is suitable for sale online, so the way in which a
website is used to market products will vary. It is useful to review these five main types of
online presence for sell-side e-commerce, each of which has different objectives and is
appropriate for different markets. These are not clear-cut website categories since any
company may combine these types, but with a change in emphasis according to the market
they serve. As you review websites, note how organisations have different parts of the site
focusing on these five functions:

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 Chapter 1 Introduction to digital business 15

Mini Case Study 1.2 Slack

Slack is a collaboration hub that helps people work together as easily online as they do in person.
Teamwork in Slack happens online in channels, with conversations organised by topic, project, or loca-
tion, ensuring the right people are included and relevant information is in one place.
The more Slack is used across a company, the more value it provides — conversations and information
in Slack are easily searchable and shareable across departments helping teams collaborate across office
locations, time zones or functions.
Slack also integrates with thousands of other apps, including Google Drive, so that files can be shared
directly in the channels.
Slack makes working lives simpler, more pleasant and more productive.
Source: Slack 2018 www.slack.com

1 Transactional e-commerce sites. These enable purchase of products online. The main
business contribution of the site is through sale of these products. The sites also support
the business by providing information for consumers who prefer to purchase products
offline. These include retail sites, travel sites and online banking services.
2 Services-orientated relationship-building sites. These provide information to stimulate
purchase and build relationships, particularly where products are not suitable for sale
online. Information is provided through the website and e-newsletters to inform purchase
decisions. The main business contribution is through encouraging offline sales and gen-
erating enquiries or leads from potential customers, known as lead generation.
3 Brand-building sites. These sites provide an experience to support the brand. Products
are not typically available for online purchase. Their main focus is to support the brand
by developing an online experience of the brand. They are typical for low-value, high-
volume, fast-moving consumer goods (FMCG brands).
4 Publisher or media sites. These provide information, news or entertainment about a range
of topics, both on the site and through links to other sites. Media sites have a diversity
of options for generating revenue, including advertising, commission-based sales and sale
of customer data (lists).
5 Social network sites (SNS). Social networks could be considered to be in the previous
category, since they are often supported by advertising, but the influence of social net-
works such as Facebook, LinkedIn and Twitter on company and customer communica-
tions suggests they form a separate category. Ironically, Facebook has begun to regard
itself as a publishing platform.
Complete Activity 1.3 to consider examples of these different types of site.

Activity 1.3 Understanding different types of digital presence

Purpose
To help you assess how different types of digital presence are used for marketing.

Activity
Review the popularity of the different site types in your country or globally. The recom-
mended information sources are:

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 16 Part 1 Introduction

● Similar Web (www.similarweb.com) or GoCompare (www.gocompare.com) site

comparison services. Have a look to see whether these are still appropriate.
● The Hitwise Data Centers (e.g. www.hitwise.com/white-papers) available for
Australia, Canada, France, Hong Kong, Singapore, New Zealand, the UK and US.
Visit each of the sites below and then indicate which of the five categories of online
presence are their primary and secondary focus:

1 transactional e-commerce site;

2 services-orientated relationship-building site;
3 brand-building site;
4 portal or media site;
5 social network site.

Example sites
● Business media site: The Financial Times (www.ft.com). Think of a different example,
or Mashable (www.mashable.com)
● Bank, e.g. HSBC (www.hsbc.com)
● Fast-fashion retail, e.g. Missguided (www.missguided.co.uk)
● Management consultants such as PricewaterhouseCoopers (www.pwc.com) and
Accenture (www.accenture.com)
● Beverage manufacturers, e.g. Bacardi (www.bacardilimited.com) and Guinness
(www.guinness.com)
● Travel company, e.g. Kuoni (www.kuoni.co.uk)
● An end-product manufacturer such as BMW (www.bmw.com)
● Consumer site, e.g. Yahoo! (www.yahoo.com) or Money Saving Expert (www.
moneysavingexpert.com)
● Online retailer such as Amazon (www.amazon.com)

Digital marketing Digital marketing

This has a similar
meaning to ‘electronic Digital marketing is yet another field that is closely related to e-commerce and it is explored
marketing’ – both in more detail in Chapters 7 and 8.
describe the management
and execution of
How do we understand the phrase ‘digital marketing’? The first part of the description
marketing using digital illustrates the range of access platforms and communications tools that form the online
media such as the web, channels that marketers use to build and develop relationships with customers. We look at
email, digital TV, social
media and mobile media the philosophical meaning of the word ‘digital’ in more depth in Chapter 10.
in conjunction with digital Different access platforms deliver content and enable interaction through a range of dif-
data about customers’
behaviour, location and ferent online communication tools or media channels. Some are well-established techniques
personal qualities. that will be familiar to you, such as websites, search engines, email, social media sites and
text messaging. One of the most exciting things about working in digital media is the intro-
Dark social
Although dark social
duction of new tools and techniques, which have to be assessed for their relevance to a
sounds mysterious and particular marketing campaign.
perhaps illicit, it is often Recent innovations (which we discuss further in Chapters 7 and 8) include ‘dark social’
confused with the dark
web. It isn’t the same systems such as WhatsApp and Snapchat. The growth of social networks has been docu-
thing. Dark social simply mented by Boyd and Ellison (2007), who describe a social networking site as:
describes the
phenomenon where you A site which facilitates the easy creation and sharing of content with contacts. Text, audio
cannot identify the source
of traffic to an asset (such and video can be uploaded and shared with contacts (and the wider world). Content
as a landing page) in your uploaded and shared by others can be commented on and shared too. Social networking
digital realm with
analytical software such
sites general rely on users having a public or semi-public profile within the boundaries of
as Google Analytics. the site and growing and maintaining connections with other users.

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 Chapter 1 Introduction to digital business 17

Trends update Social network usage

Social media accounts for a significant amount of online usage, particularly on mobile
devices. This update shows varying use in different countries: www.smartinsights.com/
social-media-marketing/social-media-strategy/new-global-social-media-research.

Options for organisations to reach a digital audience

For organisations to be successful in their digital communications they must decide how
they invest their time and budget in the sometimes bewildering range of online communica-
tions tools. In Chapters 8 and 9 we review these tools in detail, but here is a summary of
the main options for investment.

Owned, earned and paid media options

To help develop a strategy to reach and influence a potential digital audience it has become
commonplace today to refer to three main types of media channels that marketers need to
consider (Figure 1.7):
1 Paid media. This is bought media where there is investment to pay for visitors, reach or
conversions through search, display advertising networks or affiliate marketing. Offline,
traditional media such as print and TV advertising and direct mail remain important,
accounting for a large proportion of paid-media spend.
2 Earned media. Traditionally, earned media has been the name given to publicity generated
through PR invested in targeting influencers to increase awareness about a brand. Now,
earned media also includes word-of-mouth that can be stimulated through viral and

Advertising
Paid search
Display ads
Affiliate marketing
Digital signage

Paid
Atomisation Paid
media
of content placements
into ads

Digital properties Partner networks

Website(s) Publisher editorial
Owned Earned
Blogs Influencer outreach
media media
Mobile apps Word-of-mouth
Social presence Social networks

Atomisation of conversations
through shared APIs
and social widgets

Figure 1.7 The three main options for online media investment

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 18 Part 1 Introduction

social media marketing and includes conversations in social networks, blogs and other
communities. It’s useful to think of earned media as developed through different types
of partners such as publishers, bloggers and other influencers, including customer advo-
cates. Another way of thinking about earned media is as different forms of conversations
between consumers and businesses occurring both online and offline.
3 Owned media. This is media owned by the brand. Online, this includes a company’s own
websites, blogs, email list, mobile apps or their social presence on Facebook, Linkedin or
Twitter. Offline, owned media may include brochures or retail stores. It’s useful to think
Widget
A badge or button
of an organisation’s own presence as media in the sense that they are an alternative invest-
incorporated into a site or ment to other media and they offer opportunities to promote products using similar ad
social network space by or editorial formats to other media. It emphasises the need for all organisations to become
its owner, with content or
services typically served multichannel publishers.
from another site, making
widgets effectively a mini- You can see in Figure 1.7 that there is overlap between the three different types of media.
software application or It is important to note this, since achieving this overlap requires integration of campaigns,
web service. Content can
be updated in real time resources and infrastructure. Content on a content hub or site can be broken down (atom-
since the widget interacts ised) and shared between other media types through widgets powered by program and data
with the server each time
it loads.
exchange APIs such as the Facebook API.

Digital media The six key types of digital media channels

channels
Digital communications
There are many online communications techniques that marketers must review as part of
techniques used to their digital business communications strategy or as part of planning a digital marketing
achieve goals of brand campaign. To assist with planning, Chaffey and Smith (2012) recommend reviewing the six
awareness, familiarity,
favourability and to main types of digital media channels for reaching audiences, shown in Figure 1.8. Note
influence purchase intent that offline communications should also be reviewed for their role in driving visitors to a
by encouraging users of
digital media to visit a company website or social network presence.
website to engage with
the brand or product and
ultimately to purchase
digital or offline through
traditional media 2 Online PR
channels such as by • Publisher outreach
1 Search marketing 3 Online partnership
phone or in-store. • Community participation
• Search engine • A liate mar eting
• Media alerting
optimisation (S O) • Sponsorship
• rand protection
• Paid search • Co branding
Pay per clic (PPC) • Lin building
• Paid for inclusion feeds • Widget mar eting

Offline communications Offline communication

Advertising 6 Direct mail
Website
Personal selling xhibitions
and social
Sales promotion Merchandising
presences
PR Pac aging
Sponsorship Word of mouth

4 Interactive ads 6 Social media marketing

• Site speci c media buys • Audience participation
5 Opt-in email
• Ad networ s • Managing social presence
• ouse list emails
• Contra deals • iral campaigns
• Cold (rented list)
• Sponsorship • Customer feedbac
• Co branded
• ehavioural targeting
• Ads in third party
e newsletters

Online communications Offline communications

Figure 1.8 Digital and offline communications techniques

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 Chapter 1 Introduction to digital business 19

Pay-per-click (PPC) 1 Search engine marketing. Placing messages on a search engine to encourage clickthrough
search marketing
to a website when the user types a specific keyword phrase. Two key search marketing
Refers to when a
company pays for text techniques are paid placements or sponsored links using pay-per-click (PPC), and place-
ads to be displayed on ments in the natural or organic listings using search engine optimisation (SEO).
the search engine results
pages as a sponsored link 2 Digital PR. Maximising favourable mentions and interactions with a company’s brands,
(typically above, to the products or websites using third-party sites such as social networks or blogs that are likely
right of or below the
natural listings) when a
to be visited by your target audience. It also includes responding to negative mentions
specific key phrase is and conducting public relations via a site through a press centre or blog. It is closely
entered by the search related to social media marketing.
users. It is so called
because the marketer 3 Digital partnerships. Creating and managing long-term arrangements to promote your
pays for each time the digital services on third-party websites or through email communications. Different
hypertext link in the ad is
clicked on. If a link is
forms of partnership include link building, affiliate marketing, aggregators (such as price-
clicked repeatedly, then comparison site MoneySuperMarket, www.moneysupermarket.com), digital sponsor-
this will be detected by ship and co-branding.
the search engine as click
fraud and the marketer 4 Interactive advertising. Use of digital ads such as banners and rich media ads to achieve
will not be charged. brand awareness and encourage clickthrough to a target site.
5 Opt-in email marketing. Renting email lists or placing ads in third-party e-newsletters or
Search engine
optimisation (SEO) the use of an in-house list for customer activation and retention.
A structured approach 6 Social media marketing. Social media marketing is an important category of digital mar-
used to increase the keting that involves encouraging customer communications on a company’s own site, or
position of a company or
its products in search a social presence such as Facebook or Twitter, or in specialist publisher sites, blogs and
engine natural or organic forums. It can be applied as a traditional broadcast medium – for example companies
results listings (the main
body of the search can use Facebook or Twitter to send messages to customers or partners who have opted
results page) for selected in. However, to take advantage of the benefits of social media it is important to partici-
keywords or phrases.
pate in customer conversations. These can be related to products, promotions or cus-
tomer service and are aimed at learning more about customers and providing support,
thus improving the way a company is perceived. (In Chapter 9 we identify six main
applications of social media.)
Mini case study 1.3 gives an illustration of how a small start-up business can use the com-
bination of marketing tools illustrated in Figure 1.8.

Mini Case Study 1.3 Brand new businesses and digital marketing

Small businesses face a double-edged sword with digital marketing. It can be very simple and easy to do, and
digital can provide an almost level playing field against larger incumbents. On the other hand, organic (‘free’
marketing with no media buy) digital marketing is increasingly difficult to do when many of the major social plat-
forms need to increase their advertising revenues and thus make it more difficult to achieve organic visibility.
Start-ups increasingly discover that great digital marketing and great product must go hand in hand (and
we cover this more in the sections on ‘growth hacking’ in Chapter 10). The product itself becomes part of the
marketing. Products such as Spotify and Dropbox marketed themselves through their virality. Spotify was a
relatively late arrival on the music streaming scene, but the virality of a free but legal music streaming service
was an enormous boost to its visibility to its target audience. Spotify relied heavily on early users sharing the
experience with their network of contacts on social media. In its early days, access to Spotify was by invitation
only, so the virality was created by the apparent rationing of access to the free product while it was possible
to join the paid version.
Likewise, Dropbox’s free 2GB storage offer (linked to additional free storage if you persuaded a friend to join)
was viral enough to acquire a huge audience. The lure of an additional 250MB of storage for each new customer
that a Dropbox user brought meant that Dropbox was introduced to many new users through effectively a form
of affiliate marketing. The cost of the digital marketing was borne heavily in the delivery of free product.
Freemium (where there are free and paid-for versions of a product or service) models feature very heavily
in successful viral spread of new business offerings, particularly where the product or service is delivered via
an app.

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 20 Part 1 Introduction

Multichannel and The second part of the definition of digital marketing shows that it should not be the
omnichannel
marketing
technology that drives digital marketing, but the business returns from gaining new custom-
Customer communications ers and maintaining relationships with existing customers. It also emphasises how digital
and product distribution marketing does not occur in isolation, but is most effective when it is integrated with other
are supported by a
combination of digital and
communications channels such as phone, direct mail or face to face. The role of the Internet
traditional channels at in supporting multichannel and omnichannel marketing and multichannel marketing
different points in the strategy is another recurring theme in this text. (Chapters 2 and 6, in particular, explain its
buying cycle. Omnichannel
references the importance role in supporting different customer communications channels and distribution channels.)
of social media and mobile- Digital channels should also be used to support the whole buying process or customer
based interactions in
informing purchase. journey from pre-sale to sale to post-sale and further development of customer relation-
Multichannel ships. This clarifies how different marketing channels should integrate and support each
marketing strategy other in terms of their proposition development and communications based on their relative
Defines how different merits for the customer and the company.
marketing channels should
integrate and support each The final part of the description summarises approaches to customer-centric marketing.
other in terms of their It shows how digital success requires a planned approach to migrate existing customers to
proposition development
and communications
digital channels and acquire new customers by selecting the appropriate mix of e-commu-
based on their relative nications and traditional communications. Gaining and keeping digital customers needs to
merits for the customer and be based on developing customer insight by researching their characteristics and behav-
the company.
iour, what they value and what keeps them loyal, and then delivering tailored, relevant web
Customer journey
A description of modern
and email communications.
multichannel buyer
behaviour as consumers The social internet and user-generated content
use different media to
select suppliers, make
purchases and gain
From 2004, the Web 2.0 concept increased in prominence among website owners and
customer support. developers. The main technologies and principles of Web 2.0 have been explained in an
Customer-centric influential article by Tim O’Reilly (O’Reilly, 2005). Behind the label ‘Web 2.0’ lies a bewil-
marketing dering range of interactive tools and social communications techniques such as blogs, pod-
An approach to
marketing, based on casts and social networks, which are still in use today.
detailed knowledge of Web 2.0 also references methods of exchanging data between sites in standardised for-
customer behaviour
within the target
mats, such as the feeds that merchants use to supply shopping comparison sites with data
audience, which seeks to about products offered and their prices. The main characteristics of Web 2.0 that are still
fulfil the individual needs key characteristics of successful digital brands typically involve:
and wants of customers.
Customer insight (i) Web services or interactive applications hosted on the web such as Flickr (www.flickr.
Knowledge about com), Google Maps™ (http://maps.google.com) or blogging services such as Blogger.
customers’ needs,
characteristics, preferences com or WordPress (www.wordpress.com).
and behaviours based on (ii) Supporting participation – many of the applications are based on altruistic principles
analysis of qualitative and
quantitative data. Specific
of community participation, best represented by the most popular social networks
insights can be used to such as Bebo, MySpace and Facebook.
inform marketing tactics (iii) Encouraging creation of user-generated content – blogs are the best example of this.
directed at groups of
customers with shared Another example is the collaborative encyclopaedia Wikipedia (www.wikipedia.
characteristics. org).
Web 2.0 concept (iv) Enabling rating of content and digital services – for example, social commerce on
A collection of web services
that facilitate interaction of
e-retail sites.
web users with sites to (v) Ad funding of neutral sites – web services such as Google Gmail™ and many blogs are
create user-generated based on contextual advertising such as Google AdSense™.
content and encourage
behaviours such as (vi) Data exchange between sites through XML-based data standards. RSS is based on
community or social XML, but has relatively little semantic mark-up to describe the content. Data can also
network participation,
mashups, content rating,
be exchanged through standard microformats such as hCalendar and hReview, which
use of widgets and tagging. are used to incorporate data from other sites into the Google listings (see http://
Microformats microformats.org for details). New classes of content can also be defined and mashups
A simple set of formats created.
based on XHTML for
describing and exchanging
information about objects
including product and
travel reviews, recipes and
event information.

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 Chapter 1 Introduction to digital business 21

Mashups (vii) Use of rich media or creation of rich Internet applications (RIA), which provide for a
Websites, pages or
widgets that combine the
more immersive, interactive experience. These may be integrated into web browsers or
content or functionality may be separate applications, such as that downloaded for Second Life (www.secondlife
of one website or data .com).
source with another to
create something (viii) Rapid application development using interactive technology approaches known as
offering a different type ‘Ajax’ (Asynchronous JavaScript and XML). The best-known Ajax implementation
of value to web users
from the separate types
is Google Maps, which is responsive since it does not require refreshes to display
of content or maps.
functionality.
Figure 1.9 summarises the evolution of digital and web-related technologies. Note that the
Supply chain
management (SCM) terms Web 2.0, 3.0 and 4.0 are not terms commonly used today, yet it’s useful to understand
The coordination of all the principles of Web 2.0 in particular since they are important to creating interactive,
supply activities of an integrated desktop and mobile experiences. Many sites still don’t have these
organisation from its
suppliers and partners to characteristics.
its customers.

Value chain Supply chain management

A model for analysis of
how supply chain When distinguishing between buy-side and sell-side e-commerce we are looking at different
activities can add value to aspects of managing an organisation’s supply chain. Supply chain management (SCM) is the
products and services
delivered to the customer. coordination of all supply activities of an organisation from its suppliers and delivery of
products to its customers. (The opportunities for using e-commerce to streamline and restruc-
Value network
The links between an ture the supply chain are described in more detail in Chapter 6.) The value chain is a related
organisation and its concept that describes the different value-adding activities that connect a company’s supply
strategic and non-
strategic partners that
side with its demand side. We can identify an internal value chain within the boundaries of
form its external value an organisation and an external value chain where these activities are performed by partners.
chain. Note that in the era of digital business, a company will manage many interrelated value
chains, so we also consider the concept of a value network (see Chapter 6).

Intelligent Web
Web OS
Web 4.0
Semantic Web 2018
Intelligent personal agents
Connections between information

Real-Time Web
SWRL Web 3.0 Natural Language Search
OWL 2009 Activity streams
SPARQL Lifestreaming
OpenID AJAX
Semantic Search
Social Web RSS
ATOM Widgets Microblogging
P2P RDF Mashups
Office 2.0 Memetrackers
Javascript
SOAP XML
Flash Web 2.0 Blogging Social Media Virtual worlds
The Web Java 1999
HTML
SaaS Social Networks
HTTP Directory Wikis
VR
Online Services Keyword Search Lightweight Collaboration
BBS Gopher Web 1.0 Websites
MacOS SQL 1989 Consumer online services
The Desktop SGML Groupware
Databases Multimedia
Windows CDROMs
File Servers
The Internet
Email
PC Era
FTP IRC 1977
USENET
PCs File Systems

Connections between people

Figure 1.9 Evolution of web technologies

Source: Adapted from Spivack (2009)

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 22 Part 1 Introduction

Business or consumer models of e-commerce transactions

Business-to- It is now commonplace to describe e-commerce transactions between an organisation and
consumer (B2C) its stakeholders according to whether they are primarily with consumers (business-to-
Commercial transactions
between an organisation consumer – B2C) or other businesses (business-to-business – B2B).
and consumers. Figure 1.10 gives examples of different companies operating in the business-to-consumer
Business-to- (B2C) and business-to-business (B2B) spheres. Often companies such as BP or Dell Com-
business (B2B) puter will have products that appeal to both consumers and businesses, so will have differ-
Commercial transactions ent parts of their site to appeal to these separate audiences.
between an organisation
and other organisations Referring to the well-known digital companies in Table 1.1 initially suggests that these
(inter-organisational companies are mainly focused on B2C markets. However, B2B communications are still
marketing).
important for many of these companies since business transactions can drive revenue, as
Consumer-to- for example with eBay Business Supply (www.ebay.com/rpp/ebay-business-supply), or the
consumer (C2C)
B2C service may need to be sustained through advertising provided through B2B transac-
Consumers approach
other consumers (or tions; for example, Google’s revenue is largely based on its B2B AdWords (http://adwords.
peers) with a proposition. google.com/) and advertising service, and advertising-based revenue is also important to
Consumer-to- sites such as YouTube and Facebook.
business (C2B) Figure 1.10 also presents two additional types of transaction, those where consumers
Consumers approach a
business with an offer. transact directly with other consumers (C2C) and those where they initiate trading with
companies (C2B). These monikers are less widely used (e.g. Economist, 2000), but they do
highlight significant differences between Internet-based commerce and earlier forms of com-
merce. Consumer-to-consumer interactions (also known as peer-to-peer or person-to-
person, P2P) were relatively rare, but are now very common in the form of social networks.

From: Supplier of content/service

Consumer or citizen Business (organisation) Government
Consumer or citizen

Consumer-to-Consumer (C2C) Business-to-Consumer (B2C) Government-to-Consumer (G2C)

• e ay • ransactional Ama on • ational government
• Peer to Peer (S ype) • Relationship building P transactional tax Inland
• logs and communities • rand building nilever Revenue
• Product recommendations • Media owner ews Corp • ational government information
• Social networ s Instagram and • Comparison intermediary Kel oo • Local government services
Snapchat Pricerunner
To: Consumer of content/service

Consumer-to-Business (C2B) Business-to-Business (B2B) Government-to-Business (G2B)

Business (organisation)

• Priceline • ransactional uro ce • overnment services and

• Consumer feedbac • Relationship building P transactions tax
communities or campaigns • Media Owned map business • Legal regulations
publications
• mar etplaces C

Consumer-to-Government (C2G) Business-to-Government (B2G) Government-to-Government (G2G)

• eedbac to government • eedbac to government • Inter government services
Government

through pressure group or businesses and non • xchange of information

individual sites governmental organisations

Figure 1.10 Summary and examples of transaction alternatives between businesses, consumers and
governmental organisations

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 Chapter 1 Introduction to digital business 23

Mini Case Study 1.4 Craigslist and Gumtree

There are many customer-to-customer (C2C) digital businesses. Indeed, eBay is probably one of the most
recognisable, but its growth as a major platform for brands means that it doesn’t entirely remain faithful to its
C2C roots. However, other platforms for C2C do exist. Craigslist and Gumtree probably do remain a little
more faithful to their C2C roots.
Gumtree started out as a simple classified ads site in the UK in 2000 as a way of connecting English-
speaking foreign nationals who were moving to London and needed work, accommodation and connections.
It was acquired in 2005 by eBay but retains its unique brand identity and expanded to other parts of Europe
and overseas locations where there was a significant UK expat community.
Listing is free, but users can pay to ‘promote’ a specific listing. More recently, Gumtree has moved to
allow businesses, and in particular car dealers, to advertise on the site.
Craigslist has a similar history but grew up in San Francisco in the late 1990s expanding to many other
countries over time, as well as adopting languages other than English. The site has a distinctive and at times
controversial reputation for developing relationships and selling adult services. Craigslist relies on a com-
munity policing of adverts by other Craigslist users. Most of Craigslist revenue comes from job listings.
Both of these sites remain interesting because of the community nature and feel of their organisation. The
localised C2C nature is what draws both advertisers and consumers who might not naturally be drawn to
Amazon Marketplace or eBay.

Hoffman and Novak (1996) suggested that C2C interactions are a key characteristic of the
Internet that is important for companies to take into account, but it is only in recent years
with the growth of always-on broadband connections and mobile access to the web that
these have become so popular. P2P transactions are also the main basis for some business
models for digital businesses such as Craigslist and Gumtree (see Mini case study 1.4) and
Amazon (see Case study 1.2), which are still run on a business basis, and some blogs, which
are not run by companies but by individuals.
Finally, the diagram also includes government and public services organisations that
deliver digital or e-government services. As well as the models shown in Figure 1.10, it has
also been suggested that employees should be considered as a separate type of consumer
through the use of intranets; this is referred to as employee-to-employee, or E2E.

Dot Gov defined

Dot Gov Dot Gov refers to the application of digital technologies to government and public services.
The application of digital
technologies to
In the same way that digital business can be understood as transaction and engagement with
government and public customers (citizens), suppliers and internal communications, Dot Gov covers a similar range
services for citizens and of applications:
businesses.
● Citizens – facilities for dissemination of information and use of digital services at local
and national levels. For example, at a local level you can find out when refuse is collected
and at national level it is possible to fill in tax returns.
● Suppliers – government departments have a vast network of suppliers. The potential
benefits (and pitfalls) of electronic supply chain management and e-procurement
(described in Chapters 6 and 7) are equally valid for government.
● Internal communications – this includes information collection and dissemination and
email and workflow systems for improving efficiency within government departments.
Dot Gov is now viewed as important within government in many countries. The European
Union set up ‘i2010’ (European Information Society in 2010) whose aims included
providing an integrated approach to information society and audio-visual policies in the EU,
covering regulation, research, and deployment and promoting cultural diversity. (eEurope, 2005)

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 24 Part 1 Introduction

Gumtree and Craigslist side by side

Figure 1.11 Source: sjscreens/Alamy Stock Photo; True Images/Alamy Stock Photo

Digital business opportunities

Digital business has introduced new opportunities for small and large organisations to
compete in the global marketplace. As we observed at the start of this chapter, many com-
mentators have noted that one of the biggest changes introduced by electronic communica-
tions is how approaches to transmitting and transforming information can be used for
competitive advantage. A significant commentary on the disruptive, transformational
nature of electronic communications is provided in Box 1.1.
The Internet also provides significant opportunities for many businesses to build closer
relationships with their existing digital customers and suppliers to help achieve customer
retention. Encouraging use of digital business services by customers and suppliers can
significantly reduce costs while providing a new, convenient channel for purchase and
customer service. Through providing high-quality digital services, organisations can build
lasting relationships with their stakeholders. While it is sometimes said that ‘ Your digital
customers are only a click or a finger-press away from your competitors’, this is a simpli-
Soft lock-in fication, and encouraging use of digital services can help achieve ‘soft lock-in’. This
Customers or suppliers means that a customer or supplier continues to use a service since they find the service
continue to use certain
digital services because valuable, they have invested time in learning the service or integrating it with their sys-
of the switching costs. tems and there are some costs in switching. Think of digital services you use for different
purposes. How often do you switch between them? Of course, the ideal is that the service
meets the needs of its users so well and delivers value such that they are satisfied and do
not consider switching.
Business adoption of digital technologies for e-commerce means that, as managers,
we need to assess the impact of e-commerce and digital business on our marketplace and
organisation. What are the drivers of changed consumer and business behaviour? How
should we respond? How much do we need to invest? What are our priorities and how
quickly do we need to act? Answering these questions is an essential part of formulating
a digital business and digital marketing strategy (and is considered in more detail in
Part 2). To answer these questions, marketing research will need to be conducted (as
described in Chapters 2 to 4) to determine the current levels of adoption of the Internet
for different activities among customers and competitors in our market sector and in
other sectors.

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 Chapter 1 Introduction to digital business 25

Box 1.1 Evans and Wurster on the impact of disruptive Internet technologies

Evans and Wurster of Harvard argue in their classic 1997 paper ‘Strategy and the new
economics of information’ that there are three characteristics of information that, when
combined with disruptive Internet technologies, can have a major impact on a market-
place. These characteristics of information are reach, richness and affiliation:

1 Reach. Conventionally, ‘reach’ refers to the potential number of customers a busi-

ness can interact with. The Internet enables reach to be increased nationally and
internationally at low cost through making content available via search engines.
‘Reach’ also refers to the number of different categories and products a consumer
interface (e.g. store, catalogue or website) can cover: witness the large range of
products available through digital businesses such as Amazon, eBay and Kelkoo.
com and existing companies such as easyJet.com and Tesco.com, which have used
the web to extend their product range.
2 Richness. This is a characteristic of the information itself. The Internet enables more
detailed information about products, prices and availability to be made available. It
also enables more interactivity and customisation to engage customers and to provide
more up-to-date information. But, Evans and Wurster also note that richness is limited
by bandwidth (the volume of information that can be transmitted using a communica-
tions link in a given time), the accuracy or reliability of information and its security.
3 Affiliation. This refers to the effectiveness of links with partners. In a digital context,
an organisation that has the most and richest links with other compatible organisa-
tions will be able to gain a larger reach and influence. Consider how digital businesses
such as eBay, Google and Yahoo! have successfully formed partnerships or acquired
other companies to provide new diverse information services such as social network-
ing, mapping, voice communications and digital photography, to name just a few.
In markets such as car sales, which have been transformed by the Internet, under-
standing how to improve reach, richness and affiliation is crucial. This is not because a
large proportion of people buy cars via digital means, but rather the majority research
their preferred make, model and supplier using digital tools.

Drivers of digital technology adoption

Business adoption of e-commerce and digital business is driven by benefits to different parts
of the organisation. First and foremost, businesses are concerned about how the benefits of
digital business will impact on profitability or generating value to an organisation. The two
main ways in which this can be achieved are:
● potential for increased revenue arising from increased reach to a larger customer base
and encouraging loyalty and repeat purchases among existing customers;
● cost reduction achieved through delivering services electronically – reductions include
staff costs, transport costs and costs of materials such as paper.
At an early point in digital technology adoption, a government report (DTI, 2000) identi-
fied two main categories of drivers that remain relevant today for introducing new
technology:

Cost/efficiency drivers
1 Increasing speed with which supplies can be obtained
2 Increasing speed with which goods can be dispatched
3 Reduced sales and purchasing costs
4 Reduced operating costs.

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 26 Part 1 Introduction

Competitiveness drivers
5 Customer demand
6 Improving the range and quality of services offered
7 Avoiding losing market share to businesses already using e-commerce.

More recently, in interviews with Australian businesses, Perrott (2005) identifies four key
areas driving performance: cost–benefit, competitive pressures, market advantage and
value-adding, i.e. improving customer satisfaction while building strong relationships.
When reviewing potential benefits, it is useful to identify both tangible benefits (for
which monetary savings or revenues can be identified) and intangible benefits (for which
it is more difficult to calculate cost savings). The types of potential benefits are summarised
in Table 1.2.
Doherty et al. (2003) researched the drivers and barriers to retailers’ adoption of Inter-
net technologies to determine the most important factors. Table 1.3 summarises the rank-
Brochureware ing in importance for different degrees of Internet adoption, from static brochureware
Brochureware describes (A), through an active website containing product information (B) to a transactional site
a website to which a
company has simply where items can be purchased (C). You can see that the two most important factors that
migrated its existing correlate with adoption are ‘Internet target segment’, i.e. customers in their market are
paper-based promotional
literature without
typically adopters of the Internet, and ‘Internet strategy’ (a defined Internet strategy is in
recognising the place). This suggests, as would be expected, that companies that do not have a coherent
differences required by Internet or digital business strategy are less likely to use higher levels of Internet services.
this medium.
Many larger organisations that have responded to the challenge of digital business have
created a separate e-commerce plan and separate resources to implement it. This text
covers what needs to go into such a plan and the issues to consider when implementing
it.
Case study 1.2 illustrates the benefits of setting up a digital operation for an SME. It also
highlights some of the challenges of managing a digital business and highlights the need for
continued investment to refine digital services and the marketing needed to attract visitors
to the website.

Table 1.2 Tangible and intangible benefits of e-commerce and digital business

Tangible benefits Intangible benefits

• Increased sales from new sales leads giving rise to • Corporate image communication
increased revenue from: • Enhancement of brand
– new customers, new markets • More rapid, more responsive marketing
– existing customers (cross-selling) communications, including PR
• Marketing cost reductions from: • Faster product development lifecycle enabling faster
– reduced time in customer service response to market needs
– digital sales • Improved customer service
– reduced printing and distribution costs of marketing • Learning for the future
communications • Meeting customer expectations to have a website
• Supply chain cost reductions from: • Identifying new partners, supporting existing
– reduced levels of inventory partners better
– shorter cycle time in ordering • Better management of marketing information and
• Administrative cost reductions from more efficient routine customer information
business processes such as recruitment, invoice payment • Feedback from customers on products
and holiday authorisation

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 Chapter 1 Introduction to digital business 27

Table 1.3 Summary of factors most important in encouraging digital adoption among
e-commerce retailers

Factor influencing adoption A B C

1 Internet target segment 3 2 1

2 Internet strategy 1 1 6
3 Internet marketplace 4 5 2
4 Infrastructure and development capability 2 3 5
5 Internet communications 5 6 4
6 Cost of Internet trading 8 9 10
7 Internet cost opportunity 6 8 7
8 Market development opportunity 7 4 3
9 Concerns 9 10 9
10 Consumer preferences 10 7 8

A = Internet adoption (static website), B = active website, C = digital sales (transactional site)
Source: Based on a compilation from separate tables in Doherty et al. (2003)

Barriers to the adoption of technology by digital business stakeholders

Opportunities have to be balanced against the risks of introducing digital business services,
which include strategic and practical risks. One of the main strategic risks is making the
wrong decision about digital business investments. In every business sector, some compa-
nies have taken advantage of digital business and gained a competitive advantage. But
others have invested in digital business without achieving the hoped-for returns, either
because the execution of the plan was flawed, or simply because the approaches were inap-
propriate. The impact of the Internet and technology varies by industry. Andy Grove,
Chairman of Intel, one of the early adopters of digital business, noted that every organisa-
tion needs to ask whether, for them:
The Internet is a typhoon force, a ten times force, or is it a bit of wind? Or is it a force that
fundamentally alters our business? (Grove, 1996)

This statement still seems to encapsulate how managers must respond to different digital tech-
nologies; the impact will vary through time from minor for some companies to significant for
others, and an appropriate response is required. However, there is a very compelling argument
for any organisation in the second decade of the 21st century, that managers must respond to
the digital challenge they face when their broad network of stakeholders demands it.
There are also many practical risks to manage that, if ignored, can lead to bad customer
experiences and bad news stories, which damage the reputation of the company. In the
section on digital business opportunities, we reviewed the concept of soft lock-in; however,
if the customer experience of a service is very bad, they will stop using it and switch to other
digital options. Examples of poor digital customer experience include:
● websites that fail because of a spike in visitor traffic after a peak-hour TV advertising
campaign;
● hackers penetrating the security of the system and stealing credit card details;
● a company emails customers without receiving their permission, thus annoying custom-
ers and potentially breaking privacy and data protection laws;

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 28 Part 1 Introduction

● problems with digital fulfilment of goods ordered, meaning customer orders go missing
or are delayed;
● customer service enquiries through email, contact forms and social media don’t reach
the right person and are ignored.

Debate 1.2 The perception of these risks may result in limited adoption of digital
business in many organisations, which is suggested by the data in
Limited SME adoption of digital
Figure 1.10. This is particularly the case for SMEs. (We study adoption
business
levels and drivers in this type of business further in Chapter 4.)
‘Adoption of digital business by
established SMEs is generally less than
Another approach to reviewing the strategy issues involved with
that in larger businesses. This is implementing digital business is the classic McKinsey 7S strategy instru-
principally a consequence of the negative ment (Waterman et al., 1980).
attitude of managing directors and CEOs
to the business benefits of information
and communication technology (ICT).’ Evaluating an organisation’s digital business
capabilities

Stage models Assessment of an organisation’s existing digital business capabilities is a starting point for the
Used to review how future development of their digital business strategy. We will see in Chapter 5 how different
advanced a company is
in its use of information forms of stage models can be used to assess digital business capability. An example of a basic
and communications stage model reviewing capabilities for sell-side and buy-side e-commerce is shown in Fig-
technology (ICT) to
support different
ure 1.12. This shows how companies can introduce more complex technologies and extend the
processes. range of processes that are digital business-enabled. Stage 5 includes social commerce.

Drivers of consumer technology adoption

To determine investment in sell-side e-commerce, managers need to assess how to adopt
new services such as web, mobile and interactive TV and specific services such as blogs,
social networks and feeds. (In Chapter 4, we see how such demand analysis is conducted in
a structured way.)

Stage 6 Stage 6 Supply

Site optimisation chain optimisation

Stage 5 Stage 5
Relationship building Integrate databases

Stage 4 Stage 4
Online ordering Online ordering

Stage 3 Stage 3
Interactive site Online catalogues

Stage 2 Stage 2
Brochureware site Stock availability

Stage 1 Stage 1
Email marketing Review suppliers

Sell-side e-commerce Buy-side e-commerce

Figure 1.12 A simple stage model for buy-side and sell-side e-commerce

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 Chapter 1 Introduction to digital business 29

Digital value We will see (in Chapter 5 on strategy development for digital business) how it is important
proposition (DVP)
that companies offering e-commerce services create a clear digital value proposition (DVP) to
A statement of the
benefits of digital encourage customers to use their specific digital services. Typical benefits of digital services
services that reinforces are summarised by the ‘Six Cs’, a simple mnemonic to show different types of customer
the core proposition and
differentiates from an value:
organisation’s non-digital
offering and those of 1 Content – In the mid-1990s it was often said that ‘content is king’. Well, relevant rich
competitors. content is still king. This means more detailed, in-depth information to support the buy-
ing process for transactional or relationship-building sites or branded experiences to
encourage product usage for FMCG brands.
2 Customisation – In this case mass customisation of content, whether received as website
pages such as ‘Amazon recommends’ or email alerts, and commonly known as
‘personalisation’.
3 Community – The Internet liberates consumers to discuss anything they wish through
forums, chat-rooms and blog comments. (We will explore these techniques more in
Chapters 2 and 3.)
4 Convenience – This is the ability to select, purchase and in some cases use products from
your desktop at any time: the classic 24 × 7 × 365 availability of a service. Usage of digital
products is, of course, restricted to digital products such as music or other data services.
Amazon has advertised offline using creative ads showing a Christmas shopper battling
against a gale-swept street clutching several bags to reinforce the convenience message.
5 Choice – The web gives a wider choice of products and suppliers than via conventional
distribution channels. The success of digital intermediaries such as Kelkoo (www.kelkoo
.com) and Reevoo (www.reevoo.com) is evidence of this. Similarly, Tesco.com provides
Tesco with a platform to give consumers a wider choice of products (financial, travel,
white goods) with more detailed information than is physically available in-store.
6 Cost reduction – The digital world is widely perceived as a relatively low-cost place of
purchase. Often customers expect to get a good deal as they perceive that digital traders
have a lower cost-base as they have lower staff and distribution costs than a retailer that
runs a network of high-street stores. A simple price differential is a key approach to
encouraging usage of digital services. In the late 1990s, low-cost airline easyJet encouraged
the limited change behaviour required to move from phone booking to digital booking
by offering a £2.50 discount on digital bookings.
Note that the 7Cs of Rayport and Jaworski (2003) provide a similar framework of Context,
Content, Community, Customisation, Communication, Connection and Commerce.

Barriers to consumer digital adoption

An indication of some of the barriers to using the Internet, in particular for consumer pur-
chases, is clear from a survey (Booz Allen Hamilton, 2002) of perceptions in different coun-
tries. It noted that consumer barriers to adoption of the Internet included:
● no perceived benefit;
● lack of trust;
● security problems;
● lack of skills;
● cost.
These barriers to Internet services, still present in every country, need to be taken into
account when forecasting future demand.
To complete this chapter, read Case study 1.2 for the background on the success factors
that have helped build one of the world’s biggest digital businesses.

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