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Unit III-APPLICATINS I
CONSUMER-ORIENTED APLLICATIONS
• The wide range of applications envisioned for the consumer marketplace can be broadly
classified into:
(i) Entertainment
(ii) Financial Services and Information
(iii) Essential Services
(iv) Education and Training
Consumer Life-Style Needs Complementary Multimedia Services
Entertainment Movies on demand, video cataloging,
interactive Ads, Multi-user games, on-line
discussions.
• Financial Services and Home Banking, Financial services, Information,
Financial news.
• Essential Services Home Shopping, Electronic Catalogs,
telemedicine, remote diagnostics.
Education and Training Interactive education, multiuser games,
video conferencing, on-line databases.
1. Personal Finance and Home Banking Management
(i) Basic Services
(ii) Intermediate Services
(iii) Advanced services
2. Home Shopping
(i) Television-Based Shopping
(ii) Catalog-Based Shopping
3. Home Entertainment
(i) Size of the Home Entertainment Market
(ii) Impact of the Home Entertainment on Traditional Industries
4. Micro transactions of Information
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1. Personal Finance and Home Banking Management:
• The newest technologies are direct deposit of payroll, on-line bill payment and
telephone transfers
• The technology for paying bills, whether by computer or telephone, is infinitely more
sophisticated than anything on the market a few years ago
• In 1980s were the days of “stone age” technology because of technology choices for
accessing services were limited
• For home banking, greater demands on consumers and expanding need for information,
it’s services are often categorized as basic, intermediate and advanced
(i) Basic services
• These are related to personal finance
• The evolution of ATM machines from live tellers and now to home banking
• The ATM network has with banks and their associations being the routers and the ATM
machines being the heterogeneous computers on the network.
• This interoperable network of ATMs has created an interface between customer and
bank that changed the competitive dynamics of the industry. See in next figure
• Increased ATM usage and decrease in teller transactions
• The future of home banking lies with PC’s
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(ii) Intermediate Services
• The problem with home banking in 1980 is, it is expensive service that requires a PC, a
modem and special software
• As the equipment becomes less expensive and as bank offers broader services, home
banking develop into a comprehensive package that could even include as insurance
entertainment
• Consider the computerized on-line bill-payment system
• It never forgets to record a payment and keeps track of user account number, name,
amount and the date and we used to instruct with payment instructions. See in Fig;
(iii) Advanced Services
• The goal of advanced series is to offer their on-line customers a complete portfolio of
life, home, and auto insurance along with mutual funds, pension plans, home financing,
and other financial products
• The Figure explains the range of services that may well be offered by banks in future
• The servic3es range from on-line shopping to real-time financial information from
anywhere in the world
• In short, home banking allows consumers to avoid long lines and gives flexibility.
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2. Home Shopping:
• It is already in wide use.
• This enable a customer to do online shopping
(i) Television-Based Shopping:
• It is launched in 1977 by the Home Shopping Network (HSN).
• It provides a variety of goods ranging from collectibles, clothing, small electronics,
house wares, jewelry, and computers.
• When HSN started in Florida in 1977, it mainly sold factory overruns and discontinued
items
• It works as, the customer uses her remote control at shop different channels with touch
of button. At this time, cable shopping channels are not truly interactive
(ii) Catalog-Based Shopping
• In this the customer identifies the various catalogs that fit certain parameters such as
safety, price, and quality
• The on-line catalog business consists of brochures , CD-ROM catalogs, and on-line
interactive catalogs
• Currently, we are using the electronic brochures
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3. Home Entertainment:
• It is another application for e-commerce
• Customer can watch movie, play games, on-screen catalogs, such as TV guide.
• In Home entertainment area, customer is the control over programming
• In Table tells the, What will be required in terms of Television-based technology for
this telemart to become a reality
The Telemart: Present and Future Functions
• Compressing and decoding The transition to digital
satellite a digital signal(images are and cable network head
broad
compress to reduce quantity casting involves linking the TV
of information) to decoder to reconvert into
an analog signal
• Decoding a scrambled The broad casting of pay channel
signal requires the encryption of the
signal on emission & unscrambled
• Rapid loading of program An increase in the no. of
individual on memory interactive services is possible
only if n/w overloading is
kept minimum
• Electronic money or Once separated from the telephone,
card payment terminal telemart will need a keyboard
up to the TV set in order to
ensure interactivity. The
keyboard will have a payment
connection to simplify the
billing process
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Advanced Services
Size of the home Entertainment Market:
• Entertainment services are play a major role in e-commerce
• This prediction is underscored by the changing trends in consumer behavior.
• It is shown in Table
Impact of Home entertainment on traditional industries:
• This will have devastating effects on theater business
• Economic issues might allow theaters to maintain an important role in the movie
industry
• Today average cable bill is approximately $30 a
month Industry Estimates of consumer
Expenditures
1980 ($4.7 bin) 1990 ($31.0 bin) 1993 ($37.8 bin)
Theaters 49.0% $2.3 14.5% $4.5 13.2% $5.0
Basic cable 35.0% $1.6 34.5% $10.7 36.9% $13.9
Premium cable 16.0% $0.8 16.5% $5.1 14.0% $5.3
Home video 33.8% $10.5 34.8% $13.2
Pay per view 0.7% $0.2 1.1% $0.4
4. Micro transactions of information:
• One change in traditional business forced by the on-line information business is the
creation of a new transaction category called small-fee transactions for micro services
• The customer by giving some information away for free and provide information
bundles that cover the transaction overhead.
• The growth of small-money transfers could foster a boom in other complementary
information services
• The complexity is also increased in micro services when an activity named,
reverification is entered.
• It means checking on the validity of the transaction after it has been approved
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Desirable Characteristics of an Electronic marketplace
• Critical mass of Buyers and sellers: To get critical mass, use electronic mechanisms
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• Opportunity for independent evaluations and for customer dialogue and discussion:
Users not only buy and sell products, they compare notes on who has the best products
and whose prices are outrageous
• Negotiation and bargaining: Buyers and sellers need to able to haggle over conditions
of mutual satisfaction, money, terms & conditions, delivery dates & evaluation criteria
• New products and services: Electronic marketplace is only support full information
about new services
• Seamless interface: The trading is having pieces work together so that information can
flow seamlessly
• Resource for disgruntled buyers: It provide for resolving disagreements by returning the
product.
Mercantile Process models
• Mercantile processes define interaction models between consumers and merchants for
on- line commerce
Mercantile Models from the Consumer's Perspective
(i) Pre purchase preparation: The pre purchase preparation phase include search and
discovery for a set of products to meet customer requirements
Customers can be categorized into 3 types.
1. Impulsive buyers: who purchase products quickly.
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2. Patient buyers: who purchase product after making some comparisons.
3. Analytical buyers: who do substantial research before making the decision to purchase
products or services
Marketing researchers have isolated several type of purchasing.
1. Specifically planned purchases: purchasing the goods for need.
2. Generally planned purchases: Need will be recognized based on the manufacture of
the item.
3. Reminder purchases: The shopper will be reminded of the need by some store
influence or in-store advertisement of item.
4. Entirely unplanned purchase: Purchasing the item without any need.
(a) The consumer information search process:
• Information search is defined as the degree of care and effort directed towards
obtaining data or information related to the decision problem.
• Purchase behavior in electronic markets differs from traditional retail marketing in
two ways.
1. Retailer is concerned with simply inducing purchase through the use of
marketing mix variables.
2. Retailer is interested in inducing the purchase now rather than later.
(b) The Organizational search process:
• It is the process through which an organization adapts to changes in its external
environment as new suppliers, new products and new services.
• Purchasing departments inside organizations search for information about specific
course of action such as purchase of equipment.
• In general, organizational search is an activity designed to balance the cost of
acquiring information with the benefits of improved final decisions.
(c) Consumer search experiences:
• Consumers’ motivation for search and discovery of items using online shopping
can be categorized into 2 parts
1. Utilitarian: Carrying out the shopping activity to achieve a goal.
2. Hedonic: doing shopping just because you love it.
(d) Information brokers & brokerages:
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• These are the intermediaries between consumer and organizational search.
• They are needed for comparison shopping, reduced search cost and integration.
(ii) Purchase consummation: The purchase consummation phase include mercantile
protocols.
Working of mercantile protocol is as follows.
1. Buyer contacts vendor to purchase product or service.
2. Vendor states price.
3. Buyer and vendor may or may not engage in negotiation.
4. If satisfied, buyer authorizes payment to the vendor with an encrypted transaction
containing a digital signature for the agreed price.
5. Vendor contacts his or her billing service to verify the encrypted authorization for
authentication.
6. Billing service decrypts authorization and checks buyer’s account balance or credit
and puts a hold on the amount of transfer.
7. Billing service gives the vendor approval to deliver product and sends a standardized
message giving details of transaction for merchant’s record.
8. On notification of adequate funds to cover financial transaction, vendor deliver the
goods to buyer.
9. On receiving the goods, the buyer signs and delivers receipt. Vendor then tells
billing service to complete the transaction.
10. At the end of the billing cycle, buyer receives a list of transaction .
Simplified on-line Mercantile Model
(1) Buy (2)Remittance
Customer with Merchant
Payment
need Request request
institution
(4)Delivery (3) Approval
(5)Monthly statement
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(a) Mercantile process using digital cash:
A buyer can transfer e-cash to a seller in exchange of goods. Upon receiving the e-cash
the seller can verify its authenticity by sending it to the issuing bank for verification.
The following is a generic mercantile protocols based on the use of e-cash.
1. Buyer obtains anonymous e-cash from issuing bank.
2. Buyer contacts seller to purchase product.
3. Seller states price.
4. Buyer sends e-cash to seller.
5. Seller contacts his bank or billing service to verify the validity of the cash.
6. Bank gives okay signal to seller after ensuring that the e-cash hasn’t been duplicated or
spent on other products.
7. Seller delivers the product to buyer.
8. Seller then tells bank to mark the e-cash as used currency.
(b) Mercantile transaction using credit cards:
Two major components comprise credit card transaction in the mercantile process, such
as electronic authorization and settlement.
• In retail transaction, a third-party processor (TPP) captures information at the point of
sale, transmits the information to the credit card issuer for authorization, communicates
a response to the merchant and electronically stores the information for settlement and
reporting.
• The benefits of electronic processing include the reduction in credit losses, lower
merchant transaction costs, & faster consumer checkout & merchant-to-bank
settlement
A step-by-step account of retail transaction follows:
• Step1: A customer presents a credit card for payment at a retail location
• Step2: The point-of-sale software directs the transaction information to the local network
• Step3: System verifies the source of the transaction and routes it.
• Step4: In this, transaction count and financial totals are confirmed between the terminal
and the network
• Step5: In this, the system gathers all completed batches and processes the data in
preparation for settlement
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A merchant client takes one of two forms:
• Merchants are charged a flat fee per transaction for authorization and data capture
services
• The other form of billing allows merchants to pay a ”bundled” price for authorization,
data capture, & settlement
Cost of Electronic Purchasing:
• Cash seems to be preferable to electronic payments, such as, on-line debit, credit, and
electronic check authorization
• Consumers appear to spend more when using cards then when spending cash.
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(iii) Post purchase Interaction
• Returns and claims are an important part of the purchasing process
• Other complex customer service challenges arise in customized retailing are:
Inventory issues: To serve the customer properly, a company should inform a customer right
away and if the item is in stock, a company must able to assign that piece to customer
Database access and compatibility issues: Customers should get kind of services by easy
issues like calling an 800 number
Customer service issues: To clear the doubts of customer about product
Mercantile Models from the Merchant's Perspective
• To better understanding, it is necessary to examine the order management cycle (OMC).
• The OMC includes eight distinct activities.
• The actual details of OMC vary from industry to industry and also for individual
products and services
• OMC has generic steps
(a) Order planning & Order generation.
(b) Cost estimation & pricing.
(c) Order receipt & entry.
(d) Order selection & prioritization.
(e) Order Scheduling
(f) Order fulfillment & delivery.
(g) Order billing & account/payment management.
(h) Post sales service.
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Order planning & order Generation
• Order planning leads to order generation.
• Orders are generated in a no. of ways in the e-commerce environment.
• The sales force broadcasts ads (direct marketing), sends personalized e-mail to
customers (cold calls), or creates a WWW page
Cost Estimation & pricing
• Pricing is the bridge between customer needs & company capabilities.
• Pricing at the individual order level depends on understanding the value to the customer
that is generated by each order, evaluating the cost of filling each order; & instituting a
system that enables the company to price each order based on its value & cost
Order Receipt & Entry
• After an acceptable price Quote, the customer enters the order receipt & entry phase of
OMC.
• This was under the purview of departments variously titled customer service, order
entry, the inside sales desk, or customer liaison.
Order Selection & Prioritization
• Customer service representatives are also often responsible for choosing which orders
to accept and which to decline.
• Not, all customers’ orders are created equal; some are better for the business.
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Order Scheduling
• In this phase the prioritized orders get slotted into an actual production or operational
sequence.
• This task is difficult because the different functional departments- sales, marketing,,
customer service, operations, or production- may have conflicting goals, compensation
systems, & organizational imperatives:
Production people seek to minimize equipment changeovers, while marketing & customer
service reps argue for special service for special customers.
Order Fulfillment & Delivery
• In this actual provision of the product or service is made.
• It involves multiple functions and locations.
Order Billing & Account/Payment Management
• After the order has been fulfilled & delivered, billing is given by finance staff.
• The billing function is designed to serve the needs and interests of the company, not the
customer.
Post sales Service
• This phase plays an increasingly important role in all elements of a company’s profit
equation: customer, price, & cost.
• It can include such elements as physical installation of a product, repair & maintenance,
customer training, equipment upgrading & disposal.