Online Bank Auctioning System For Port Moresby In The Distict Of Waigani

CHAPTER 3

OBJECT AND METHODOLOGY 3.1 Object Research

The object of research undertaken is to create an online E-auction for small and medium enterprise services information system to provide business advantage for both the end users and the business management in Waigani which is a suburb town in Port Moresby, the capital city of Papua New Guinea. 3.1.1 A Brief History of Waigani

Waigani is s district suburb in itself. It is located at the most central heart of the city of Port Moresby. It is one of the oldest urban town in Port Moresby. It has both suburb and residential areas for government workers and for private sectors. Waigani also is the main central location in Port Moresby which contains small to medium and large business enterprises, governmental offices and private commercial business.

In 1975 after gaining Independence from Australia, Papua New Guinea (PNG) government decided to make Waigani the central hotspot location for conducting government and private businesses. Waigani is now one of the leading urban town and residential place suitable to conduct small to medium business enterprises.

In around 2010, PNG government created a vision 2050 from village level to the National government level to help PNG grow and prosper, to create wealth and economic benefits to all walks of life. Waigani support the active participation of the community. With the creation of the target service that is easy, fast and precise, the realization of the human resource quality, the realization of people's incomes increase, the realization community care in the development and establishment of good coordination with department to all sector of societies. Waigani is one of the suburbs and town in PNG which put into use the creation of small to medium business which are intended to help small businesses grow and to prosper into medium to large enterprise .It is both a suburb and a urban town in itself and as professional services location in the city of Port Moresby with the aim of realizing a society that developed and prosperous through the empowerment of professional personnel with exploit to the potential of human resources and financial resources that exist and are available to provide a prosperous climate in small, medium and large business enterprises. Waigani is one of the oldest urban town in the Capital city of Port Moresby

3.1.2 Business Vision and Mission

Vision

The Online Auction Website’s mission is to become the recognized leader in its targeted market as a platform where people can post products for sale online. Mission

1. Improve the performance of small to medium business Enterprise providing an E-commerce opportunity.

2. Increasing role in improving information technology to support sales and purchase of products and services to support the growth of small to medium enterprises.

3. Establishing an orderly environment suitable to conduct E-business to individuals, businesses and clients.

3.1.3 E-Auction Company Organizational Structure

3.1.4 Description of Duties

Details of the main tasks and functions of organizational structure is as follows: 1. Chief Executive officer (CEO)

The General manager of the company that Oversees design, marketing,

promotion, delivery and quality of programs, products and services. He oversee all the operations, implement plans and manages financial and physical resources from the respective heads.

2. Engineering Head

Technical IT head with emphasis on business that reports directly to the CEO. The technical engineering head is responsible for the main task of administrating, implementing and maintaining the computer server networks and to ensure user experience is satisfied and maintain to the maximum use. The head also oversee business logic and to relay reports and information to the CEO.

3. Head Supply Chain

Departmental head overseeing the roles and responsibilities in E-auctioning by administrating category management, procurement, shipment and logistics from the e-business point of view.

4. Head of Marketing.

The task and roles mainly in E business to consumer, to businesses and clients by ensuring that digital, brand and affiliate marketing are advertise online. The task also correspond with the head of engineering to ensure maximum output is place on online marketing.

5. Head of Finance and Admin

The head of the finance and admin in the role of E-commerce is to work collaboratively with all respective heads and CEO and to manage, oversee the finance and admin with its resources and facilities, do financial transaction and to report directly to the CEO to implement, administer financial outcome of the company organization.

3.2 Research Methods

Research is an activity to obtain facts - facts or principles -

how to collect, record and analyze the data which must be in bedasarkan systematic science (scientific method).

3.2.1 Research Design

In doing research one of the important things is to make design research, design research is like a roadmap for researchers to lead and determine the direction of the ongoing research process correctly and appropriately to their intended purpose. Without proper design a researcher would not be able to do research well as the concerned does not have a clear direction guidance.

The study design according to Mc Millan in Ibn Hajar (1999: 102) is a plan and structure investigation used to obtain evidence - empirical evidence in answering the research questions.

3.2.2 Types and Data Collection Methods

A method that is used as a means of collecting data - the data. Therefore in this research paper the authors use the method -

methods such as:

3.2.2.1 Primary Data Sources

In this research paper the authors use the method data collection by means of direct observation to social media groups such as facebook and conducting interviews with informants.

a. Observation

The researcher conducted independent observations mainly in social media marketing group for observing the activities that are directly related to data required for system development.

b. Interview

The author conducted interviews with mainly social media marketers, buyers and sellers by discussing about the strength, weakness, opportunities and threats (SWOT analysis) with the problems occurred and how best to come up with the new system.

3.2.2.2 Secondary Data Sources

In this research paper the authors are not only using the method observation data collection and interviews. But using collecting data obtained directly from the

problem. In this writer gets the data from the files stored directly in social media groups as in Facebook mainly. Secondary data also get the vision and mission, organizational structure and a description of the task from the marketers.

Method and system development approach illustrates the stages -

stages in the research process in order to solve the problem of the initial research planning to achieve the objectives of research and development system.

3.2.3.1 Systems Approach Method

The method of system approach used by the author is the object-oriented systems .The author uses the object oriented approach because it is easy to understand and easy to use, meaning that this method is easily understandable. Object-oriented approach is a

programming paradigm that oriented to the object. All data and functions within the paradigm wrapped in a class - a class or object - the object.

Programming oriented objects made to facilitate development programs that follow the existing model in the life real which the object will interact and form a

system.

3.2.3.2 Systems Development Method

System development method we use is the development of a prototype model system because of frequent customer (customer) imagine a set of demands but not specified in detail in terms of inputs (input), process, and output (output). In the other side of a software development must specify a needs in detail from a technical point where

customers often do not understand regarding this technical stuff. Prototype model can be used to connect to confuse customers regarding technical matters and clarify the

requirements specification customers want. Prototype model starts from gathering customer requirements about the software that will be created. Then the created prototype program in order to be imagined with what customers really want for

display. Program prototype is usually a program that is not yet finished. The program is usually provide a display with the flow simulation software so that it looks such as ready-made software. The prototype program is evaluated by customer or user to find the specifications in accordance with the wishes customer or user. Here is a picture of the prototype models:

Figure 3.2. A model prototype

Source: US Rosa and M. Saladin. 2011. Learning Module Engineering Software (Structured and Object Oriented). Modula.

Duo Mock-up is something that is used as a model design used for teaching,

demonstration, evaluation design, promotion or purposes other. A mock-up is referred to as a prototype software if supplier is able to demonstrate most of the functionality of software systems and allows testing of software systems design. Iteration occurs in prototyping up in accordance with the wishes of the customer (customer) or user. On the above figure the mendergarkan pelangann (or listening to customers) is a mock up prototype where the system developer listens to the supplier or the clients specifically on what the client wants. The arrow flows to membangun memperbaiki (build repair) where the information system developer build or customized the requirement design based on the client evaluation or want. Pelanggan melihat/menguji or customer test is the prototype outcome of the system where the developer test the system and shows it to the client as a testing prototype. If the customer or the client wants further specification and redesign based on the need of the business then the prototype cycle continues till the both parties are satisfied of the outcome.

Prototype model has the following disadvantages:

a) Customers can often change - change or add - add

specification requirements because it considers the application is quickly developed, because of this iteration may cause

developers are succumbing to the customers due to the change or additional software requirements specification.

b) Developers often take a compromise with the customer to get a prototype in a short time so that the developer

more often do everything they can (without idealistic) in order to produce prototype to be demonstrated. This can lead to quality

software that is not good or even cause iterative without end.

3.2.3.3 Analysis and Design Tools

In accordance with the method used by the author system approach that is object-oriented modeling, the authors will describe the modeling

namely object-oriented Unified Modeling Language (UML). UML appears

because of the visual modeling needs to specify, describe, construct, and documentation of software systems. UML is a visual language for modeling and communication

regarding a system using diagrams and text - text support. Things - things done in object-oriented analysis and design include:

1. Use Case Diagram 2. Class diagram 3. Diagram Object 4. Sequence Diagram 5. Diagram Activity 6. Diagram Component 7. Diagram Deployment

Here's an explanation challenged each - each diagram: 1. Use Case Diagram

Use case diagrams or use case is modeling for

behavior (behavior) information systems will be made. Use Case describe an interaction between one or more actors with information system that will be created. Roughly speaking, the use case is used for know what function is in an information system and anyone who is entitled to use the function - the function. Terms naming the use case is defined name as simple as possible and can be understood. There are two main things on the use case namely the definition of what is called the actor and use case. They are:

1.1. Actors are people, processes, or other systems that interact

the information system that will be created outside the information system which will be made itself, so even though the symbol of an actor are pictures of people, but the actor is not necessarily the person.

1.2 Use case is the functionality provided by the system as

units - units that exchange messages between units or actor.

Below is an example of a use case diagram for Library Management System not to be used for the development of the online auction system but relevant to the understanding of use case diagrams.

Figure 2: Use Case diagram Example. 2. Class Diagram

The class diagram or class diagram illustrates the structure of the system In terms of the definition of the class - a class that will be created to build the system. Class have what are called attributes and methods or operations.

2.1. Attributes are variables

- variables that are owned by a class. 2.2 Operation or method is a function:

- the function of which is owned by a class.

Class - a class that exist in the structure of the system must be able to perform the function -function in accordance with the needs of the system. The

composition of the class structure is good at class diagram should have the type - the type of the following classes:

2.2.1 Class play

Classes that have the initial function is executed when the system starts. 2.2.2 Class that handles the display system.

Classes that define and set the display to user. 2.2.3 Classes are taken from defining use cases 2.2.4 Classes are taken from the data defining.

Classes are used to hold or wrap the data into a unity that is taken and saved to the database.

Here below is a Class Diagram for Library Management System as an example. From that the author can gain a solid foundation to build the class diagram for online auction system.

3. Diagram Object

Object diagram illustrates the structure of the system in terms of naming objects and objects in the system path. In the object diagram should be ensured all classes are already defined in the class diagram object must be used, because if not, the class definition cannot be accounted for Relations link on the object diagram is a relationship of wear and used in which the two objects will be connected by a link if there is an object that used by other objects.

4. Sequence Diagrams

Sequence diagrams describe the behavior of objects in use case with describe the life time of the object and the message is sent and received between objects. Therefore, to describe the sequence diagram should known objects - objects involved in a use case and its method - owned Kela method that instantiate become the object.

The number of sequence diagrams to be drawn is as much

defining a use case that has its own process or that all important use

case which has been defined interaction message has been covered in the course sequence diagrams so that more and more use cases are defined then

sequence diagram that should be made is also growing. 5. Activity Diagram

Activity diagram or activity diagram illustrates the workflow (flow

work) or the activity of a system or business process. Noteworthy here is that the activity diagram illustrates the activity of the system is not what done actors, so activities can be carried out by the system.

6. Component Diagram

Diagram components or component diagram is made to show

organization and dependencies among a collection of components in a system. Component diagrams focus on the required system components and exist in the system.

7. Deployment Diagram

Deployment diagrams or deployment diagram shows component configuration in the process of execution. Deployment diagram can also be used

to model it - the following:

7.1 Additional system describes the design devices, nodes and hardware.

7.2 Client / server system 7.3 Pure distributed systems 7.4 Re-engineering applications

3.2.4 Testing Software

Black-Box Testing focused on the functional requirements of the device

software. Thus, the black-box testing allows system software engineers to get a set of input conditions are fully use all the functional requirements for the program. Black-box testing trying to find fault in category as follows: 3.2.4.1. Function - a function that is incorrect or missing

3.2.4.2 Errors interface

3.2.4.3 Errors in data structures or external database access 3.2.4.4 Error performance and fault termination

3.3 Analysis of Existing on line E-auction syste m

Before starting with the project, we have considered some already existing on line auction systems and their functionality. Then we have decided what kind of system architecture and software technology to use.

The first part of the project is an investigation of already existing on-line auction systems around the net. We considered three of the most famous auction web sites: eBay.com, asteinrete.com and onsale.com.

The table below describes the functionality offered to the users by this three big auction systems:

Existing auction site s with functionalities

User stories Ebay.com Asteinrete.

com

Onsale. com

Homepage x x x

Registration x x x

Login x x x

Personal page x x x

Search x x x

 Excluding a word x  In a given

category x x x

 In a given city x  Having a price

from Euro to Euro x x

Browse x x x

Item page x x x

Bid x x x

Post an auction x x x

Help x x x

Change Language

Chat x

Administration ? ? ?

Table 1: Existing functionalities of three studied E-auction system.

As shown in the table, all the three systems give the possibility to register, to login to the website and have a home page with a general description of the portal. They offer also a personal page, where each user can check the status of their auctions or of their offers. Another characteristic of this portals is to have an item page, a page that describes each item on auction (with a textual description, a photo etc.). The search functionality is also very important: in addiction to a normal keyword search, eBay offers also the possibility to search excluding a given word, search in a given category, and search for auctions regarding a given city and to make price range (from € to €) search. All the three systems give also the possibility to place

a bid, to post an auction and have also some help pages that explains the aims of the portals and the functionality. None of the portals has the possibility to change language (onsale.com is in English, asteinrete.com is in Italian while eBay.com is in English but there is also the Italian version at eBay.it) and only eBay.com has a chat room for the users.

3.3.1 Existing Types of E-auction

Based on E-commerce we have studied and categorized the existing types of Auctioning given below as summary.

Auction Types

Figure 3: Type and description of Auctioning systems. Sources:http://www.ecommerce-digest.com/auctions.html

As for the undergraduate thesis project to create and online E-auction information system for electronic commerce we will be mainly using the English and some forms of Dutch auctioning system whereby necessary.

CHAPTER 2

REVIEW OF LITERATURE 2.1 Introduction

This chapter consists of review of literature related with influence of online marketing on consumers and also deals with business perspective. Then it reviews the current issues in online marketing and factors affecting adoption of online marketing. Further it provides a critique review of miscellaneous studies related with online marketing. This is followed by highlighting the research gaps and contribution of the present study.

2.2 Influence of online marketing on consumers

2.2.1 Major Characteristics of Online Consumers –

The typical Internet user of the twentieth century is young, professional, and affluent with higher levels of income and higher education (Palumbo and Herbig, 1998). They value time more than money which automatically makes the working population and dual-income or single-parent households with time constraints better candidates to be targeted by non-store retailers (Burke, 1997). Actually, both demographics and personality variables such as opinion leadership or risk evasiveness are very important factors that are considered in studies trying to determine the antecedents of Internet purchases (Kwak et al., 2002). Confirmatory work shows that income and purchasing power have consistently been found to affect consumers’ propensity to shift from brick-and-mortar to virtual shops (Co-mor, 2000).

Internet usage history and intensity also affect online shopping potential. Consumers with longer histories of Internet usage, educated and equipped with better skills and perceptions of the Web environment have significantly higher intensities of online shopping experiences and are better candidates to be captured in the well-known concept of flow in the cyber world (Sisk, 2000; Hoffman and Novak, 1996; Liao and Cheung, 2001). Those consumers using the Internet for a

longer time from various locations and for a higher variety of ser-vices are considered to be more active users (Emmanouilides and Hammond, 2000).

As Bellman et al. (1999) mention, demographics are not so important in determining online purchasing potential. Whether the consumer has a wired lifestyle and the time constraints the person has are much more influential. Risk taking propensity is also a powerful factor. E-shoppers have higher risk taking tendencies. Consumers with high levels of privacy and security concerns have lower purchasing rates in online markets but they balance this characteristic with their quest for making use of the information advantage of the environment (Kwak et al., 2002; Miyazaki and Fernandez, 2001). These educated individuals, as more confident decision makers, are much more demanding and have greater control over the purchasing process from initiation to completion (Rao et al., 1998). 2.2.2 Online Shopping Behavior - Identifying pre-purchase intentions of consumers is the key to understand why they ultimately do or do not shop from the Web market. One stream of research under online consumer behavior consists of studies that handle the variables influencing these intentions. A compilation of some of the determinants researchers have examined are: transaction security, vendor quality, price considerations, information and service quality, system quality, privacy and security risks, trust, shopping enjoyment, valence of online shopping experience, and perceived product quality. (Liao and Cheung, 2001; Saeed et al., 2003; Miyazaki and Fernandez, 2001; Chen and Dubinsky, 2003). The lists of factors having a positive or negative impact on consumers’ propensity to shop do not seem to be very different from the considerations encountered in offline environments. However, the sensitivities individuals display for each variable might be very different in online marketplaces. Factors like price sensitivity, importance attributed to brands or the choice sets considered in online and offline environments can be significantly different from each other (Andrews and Currim, 2004). Uncertainties about products and shopping processes, trustworthiness of the online seller, or the convenience and economic utility they wish to derive from electronic shopping determine the costs versus the benefits of this environment for consumers (Teo et al., 2004). Further studies aiming to

complete the full set of factors influencing consumers’ prepurchase intentions are still much awaited.

2.2.3 The Online Purchasing Process - Many studies frequently mention that there is a vast amount of window shopping taking place online but the number or the rate of surfers who turn into purchasers or regular buyers are very low (Mayer, 2002; Betts, 2001 ; Oliver, 1999). This might happen because of the lack of consumer intention to purchase an offering from the online environment at the outset. It might also happen because of various problems that arise during online shopping driving the consumer to abandon the task in the middle. Therefore, while one stream of research should identify the reasons behind the purchase reluctance of consumers, another area of concentration should be why people abandon their shopping carts and stop the purchasing process in the middle. Such attempts can help to understand how to turn surfers into interactors, purchasers, and finally, repeat purchases by making them enter into continuous interaction with this environment (Berthon, 1996).

Common reasons for purchase reluctance are the difficulties and costs of distance shipping, inadequate amount of purchase related information, troubles experienced after the purchase such as delivery or refund problems, general security fear, and various perceived risks such as financial, product-related or psychological risks (Mayer, 2002; Chen and He, 2003). On the other hand, the reasons of abandoning purchases are much more technical such as unexpected shipping costs or transaction complexity (Harvard Business Review, 2000). In other words, some consumers accept to shop from the Internet in principle but technical complexities or ineffective systems discourage them.

Regardless of the pessimistic state of events, marketers should not be hopeless about the future. Once the risks consumers perceive about shopping through the Web are reduced, the environment still promises a high potential for selected consumer segments. Studies show that consumers who search for product related information through the Web have stronger intentions to make purchases

online (Shim et al., 2001). Therefore, building on the information advantage can be expected to pay off in the future. Constructing effective decision support systems and assisting consumers with interactive decision tools are also successful attempts that need to be developed further (O’Keefe and McEachern, 1998; Barber, 2001). However, investing on the pre-purchase stages of the decision making process is not adequate. Developing and testing the effectiveness of specific “selling” strategies and tactics for the cyber market are also crucial. Studies that focus on currently unavailable but possible tools of cyber shopping in the future, such as the use of artificial shopping agents that work on behalf of consumers in the online market (Redmond, 2002), are also very valuable efforts enlightening the road for future studies.

2.2.4 Consumer Satisfaction and Loyalty in the Online Market - Investing in consumer satisfaction from the online experience and creating brand or site loyalty are critically important for companies that want to have a long run presence on the Web. There are two approaches taken to induce loyalty into consumers in an online context. One approach is to focus on concrete factors. For example, creating a convenient and well-designed online store and offering secure transactions are the keystones of satisfying e-consumers (Szymanski and Hise, 2000). However, all satisfied consumers do not become loyal. Personalization attempts and increasing the social value of online experiences are very important to make consumers build strong brand relationships in the cyber world. Although Nunes and Kambil (2001) argue the opposite, some studies find that personalized Web sites and customer communities are highly influential on the consumer brand relationship especially for experienced Internet consumers (Thorbjornsen, 2002). Besides, businesses that can create trust and increase the perceived value of online shopping can turn their satisfied consumers into loyal ones in the e-marketing environment, too (Anderson and Srinivasan, 2003). The online environment accommodates so many opportunities for creating loyalty that even offline offerings can be effectively facilitated with supporting after sale services provided through the Web (van Riel et al., 2004).

2.2.5 Models and Theory - There are certain attempts to adopt classical attitude behavior models to explain online consumer behavior. Theory of reasoned action and, consequently, theory of planned behavior are the most commonly used models aiming to determine the impact of beliefs, attitudes, and social factors on online purchase intentions. Yoh et al.’s (2003) attempt to apply theory of reasoned action (TRA) for apparel shopping on the Internet is one such successful example. Some of the other models used in similar studies include the Technology Acceptance Model (TAM) and Flow Theory which are integrated in Koufaris’s (2002) study, and Social Cognitive Theory (LaRose and Eastin, 2002). Gentry and Calantone (2002) compare theory of reasoned action (TRA), theory of planned behavior (TPB) and technology acceptance model (TAM) with respect to their effectiveness in explaining consumers’ shop bot use on the Web and find technology acceptance model (TAM) to be superior to others.

TAM (Technology Acceptance Model)

TAM was derived from the theory of reasoned action (TRA) (Fishbein and Ajzen 1975) while TRA is a general theory of human behavior; TAM is specific to IS usage.

Figure 2-9 shows TAM.

Figure 2.1 TAM (Davis 1989)

Davis asserted that perceived usefulness and ease of use represent the beliefs that lead to such acceptance. Perceived usefulness is the degree to which a person believes that a particular system would enhance his or her job performance (i.e., by reducing the time to accomplish a task or providing timely information). Perceived ease of use is the degree to which a person believes that using a particular system would be free of effort. (Davis 1989)

Two other constructs in TAM are attitude towards use and behavioral intention to use. Attitude towards use is the user’s evaluation of the desirability of employing a particular information system mis application. Behavioral intention to use is a measure of the likelihood a person will employ the application (Ajzen and Fishbein 1980 Empirical tests suggest that TAM predicts intention and use. (Davis 1989) found that TAM successfully predicted use of a word processing package. He reports that EOU (Ease of use) and U (usefulness) were significantly correlated with use of an office automation package, a text editor, and two graphics packages A limitation of TAM is that it assumes usage is volitional, that is, there are no barriers that would prevent an individual from using an IS if he or she chose to do so, Although there many factors preventing a person from using an application such as perceived user resources (Kieran Mathieson, Eileen Peacock et al. 2001) and perceived behavior control (Ajzen 2002).

2.3 The Business Perspective: Important Issues about Firms

Just as much as the effort spent to understand the consumer perspective, significant level of attention has been directed toward the firm side of the online marketing world. The most conspicuous subtitles about the firm-perspective of the topic are handled in this section.

2.3.1 Scope and Type of Activities Firms Can Perform in the Virtual Environment – Making use of the information based advantages of the Web is one major transactional area. Companies can communicate continuously with their business partners and consumers, get and disseminate information, and solve business problems immediately and effectively through the use of advanced information technologies; thus exchanging sectorial information so easily becomes an important source of efficiency for any online company (Emerick, 1996; Eder and Darter, 1998).

The Web can also be used for communicating company image and philosophy. Firms can establish an online presence, give information about themselves and their offerings and promote their philosophies very effectively through the Web (Palmer and Griffith, 1998; Palumbo and Herbig, 1998).

Companies can perform almost anything they do in the offline market in an online context. A compilation of the commonly mentioned activities include taking and placing orders, following new business opportunities, B2B marketing, consumer research, promoting and advertising offerings, increasing brand awareness, communicating with other firms, bypassing traditional channels and augmenting traditional markets, boosting service and auctions ( Palmer and Griffith, 1998; Palumbo and Herbig, 1998; Senn, 1996; Emer-ick, 1996).

2.3.2 The Strategic Value of Online Marketing – As Kline and Mehta (2001) creatively state, there is a shift in the current online vision of firms from “how to get in the game” to “how to play the game”. However, many studies emphasize what firms can do online and the advantages and disadvantages they will experience, adequate effort has still not been shown toward formulating a strategic perspective of the online marketing environment.

2.3.3 Advantages and Disadvantages of Going Online – The excitement created by the unique and innovative characteristics of the Web created a tendency to focus on the advantages created by the medium at first. However, contrary points also emerged rapidly and the pros and cons of going online began to be discussed simultaneously. The operational advantages of being online mentioned by many studies create an extensive list: becoming easily accessible from different parts and time zones of the world, being introduced to global business opportunities, decreased red tape in international operations, possibility to conduct personalized, effective and interactive advertising, the availability of marketing research and analysis tools, lower capital and overhead costs, lower operating costs, decreasing cost of capital, tax advantages, increased efficiency in business-to-business transactions, flexible ordering, better order tracking, leveling the playing field with other firms, enhancing the firm’s image by appearing to be on the cutting edge of technology, and reaching a larger audience of prospective clients (Paul, 1996; Rosen and Howard, 2000; Rozgus, 2000; Elfrink et al., 1997).

However, the disadvantages of going online are just as prevalent and, therefore, the authors of studies that discuss the pros of e-business have shown an equal effort

to note the negative sides of going cyber. Privacy and security problems, various operational, strategic and cost-based disadvantages, the difficulty of controlling online transactions and measuring outcomes, high costs of entering e-business, the difficulty of setting prices at an international level, intensified competition, cultural differences, differences in international trade laws, changes between the telecommunication infrastructure and technical standards of different countries, high costs of individual delivery, the difficulty of dealing with virtual transactions, problems about disintermediation, the fear of technology most consumers experience, the lack of socialization and tactility are only some of the most commonly encountered disadvantages of becoming an online business (Paul, 1996; Rosen and Howard, 2000). Therefore, companies need to implement a strict structure to determine the costs and the financial outcomes of going online in order to be sure that the pros exceed the cons for their business and firm (Zeller and Kublank, 2002).

The list of the advantages and disadvantages of becoming an online business is quite long. For many companies, Internet based plans are not yet a priority because of costs, system incapability and the fact that their external partners cannot participate in the business environment yet (Roth, 2000). In other words, e-commerce is the sweet spot but transforming into a real electronic business is the critical and difficult part of all this excitement (Higgins, 1999).

2.4 Current Issues in Online Marketing

As the discussions until this point clearly show, online marketing has become a new avenue for examining many of the traditional principles, models and theories of marketing with a different perspective. However, there are many studies that tackle more current issues in an online context and cannot be grouped under the other major headings in the framework. Therefore, they are compiled in this section as hot topics receiving research attention in recent years and deserving further contributions.

2.4.1 e-CRM: Building Successful Customer Relationships Online

The Web market possesses the potential to collect personal information about consumers and respond to them in an individualized manner, which is the most fundamental requirement of any CRM plan. This opportunity has triggered the need to explore how customer relationships can be built and maintained in the online environment. Adopting and implementing online CRM systems have innumerable advantages. Reduction in customer service costs, tightened customer relationships, personalized marketing messages, and mass customization opportunities are some of the benefits offered to customers through e-CRM applications (Johnson, 2002). Research findings shows that customers attribute great importance to being satisfied during and after the sales process compared to the importance they attach to satisfaction from the purchased offering (Khalifa et al., 2002). This heightens the criticality of investing in e-CRM and managing the experience of the customer successfully (Seybold, 2000).

2.4.2 The Anti-Socialization Debate

One of the major paradoxes of technology is that major technological advancements create isolation while assimilating people with a totally new and different world ( Mick and Fournier, 1998). This is exactly what happened with the diffusion of the Internet phenomenon into the lives of consumers. Past research about automated retailing systems show that, this kind of shopping is a depersonalized experience and that consumers have a negative attitude toward this effect (Forman and Sriram, 1991). Besides, this problem cannot be limited to shopping experiences. At a broader level, it is also about the weakening of social bonds because of the loyalty individual’s transfer to the communities in the virtual environment (Gray, 1996).

There are counter views that find this effect minor and argue that most individuals will slowly abandon “hanging out with virtual souls” in the Web environment (McLaughlin, 2000). Thus, it is possible to claim that the Web has absorbed some of the social value of shopping experiences but has successfully replaced them with “techno-social” ones. Companies can make attempts to build relationships

and create online communities to replace the social exchange consumers make in real life shopping scenarios (McWilliam, 2000). The ease of building strong relationships between consumers and companies can be attributed to the customized communication between the parties which cannot be achieved with mass media (Chiagouris, 2000). However, this still does not resolve the question about whether the Web can fully replace the social value of online shopping. Meanwhile, it is important to remember that marketers are just as threatened from the loss of social interactivity as consumers. The benefits companies might lose as a result of less social shopping could be another very interesting issue to work on. 2.4.3 Ethical Issues, Privacy and Security Concerns

The Internet was originally designed to be an environment accommodating a free flow of communications (Paul, 1996), thus, the legal framework for Web-based transactions are incomplete, unclear or contradictory (Wijnholds and Little, 2001). There is no governing body in this platform and handshake standards are used, which can work only as long as users have an implicit agreement to cooperate and show respect for one an-other (Umbaugh, 1996). Although there are many governmental and non-governmental units working to develop generally applicable legal impositions and rules for the cyber market, ethical concerns and the perceived risks about privacy and security problems remain as the single most important factor deterring consumers from engaging in commercial transactions in the online market without hesitation.

Privacy – One of the most commonly mentioned problems about online markets is the intrusion of privacy, which refers to the improper access, collection, monitoring, analysis, transfer and storage of confidential consumer information (Bloom et al., 1994) . The power of technology might be intentionally abused by marketers for the purpose of improving their market knowledge and response mechanisms. Thus balancing beneficial use of data sources with the privacy rights of individuals is one of the most challenging public policy issues of the information age (Wang et al., 1998) since consumers have to give up some privacy in exchange for the benefits of the Web (Robertson and Sarathy, 2002).

This created a tendency to discuss how consumers could be protected as well as how firms could reduce privacy and security concerns of individuals. There are many studies offering guidelines to win the trust of consumers, discussing the

importance of applying FTC principles or evaluating the current technologies that can protect people from privacy and security concerns (Kiely, 1997; Gregoire, 2002; Robertson and Sarathy, 2002). The frequently mentioned FTC principles are about forewarning consumers about information collection practices, giving them the chance to decide how their data should be used, giving them access or correction choices to make them feel more secure. Gauzente and Ranchhod (2001) add the length of time for which companies can access consumers’ information and the degree of intrusiveness as additional factors. It is true that there is a long list of technological tools and methods mentioned in various studies like anonymizers and crowds giving consumers the power to disguise themselves, 22ncryption technologies for coding confidential information, digital signatures ensuring authorship, or firewalls that prevent outsiders from tapping into unauthorized areas (Cranor, 1999; Reiter and Rubin, 1999; Gray, 1996; Meeks, 1999; Cooper et al., 1996; Paul, 1996). However, most online consumers do not have the technical knowledge to understand how these tools protect them. Therefore, it is essential to communicate this information to the consumer and educate and encourage them about using these tools to protect themselves. In this respect, research that could clarify the state of consumer knowledge and the level of voluntary usage of protection mechanisms by online consumers could be very enlightening.

Some studies mention the importance of self-regulation and transparency policies that can be used to supplement technology-based tools of protection. Companies can emphasize the importance they give to doing ethical business, subscribe to regulation programs, abandon collecting unnecessary information, state all terms of contract and let the benefit go to the customer in case of doubt, provide all contact information, answer questions fast and personally, and stick to the basic privacy principles of FTC but, ideally, self-regulation is preferred since universal legal control is not practical ( Peeples, 2002).

These principles are impressive but adherence to them is not an adequate condition; they must be supported with the suitable technology. However, some firms are still not adopting new protection technologies since effective security

products are so costly and hard-to-use (Lunt, 1996) regardless of how many consumers they might be losing through this ignorance.

A more current approach raises a lot of hopes in terms of securing Web sites and consumers: seals of approval. Although certifying companies with respect to how much they adhere to certain security standards seems to be a very effective solution, one interesting finding about this subject is quite disappointing. While seals of approval affect consumers positively in terms of disclosing more information, they do not significantly increase firms’ adherence to privacy policy standards (Miyazaki and Krishnamurthy, 2002). Thus, seals reduce some of the concerns consumers have about online purchases, especially if the assurance company is recognized by the consumer, but they do not solve the security problem radically on the consumer’s mind (Odom et al., 2002).

It is left to the shoulders of marketers to make consumers understand that too much fear of privacy and security problems makes it impossible to engage in any commercial activity online. If marketers do not use any tracking mechanism to record information about consumers such as cookies, it will be impossible to offer personalized offerings or services to them and the Web market will be stripped off its major advantages (Phillips, 2002; Cunningham, 2002). Though there is plenty of evidence showing that consumers with higher levels of Internet experience have less privacy and security concerns about online shopping (Miyazaki and Fernandez, 2001), novel or amateur users can also be triggered by communicating this understanding to them.

2.4.4 Trust – Trust is a highly contextual construct, therefore, identifying its antecedents for different environments is a challenging task. Various attempts have been made to uncover the factors determining consumer trust in Internet shopping, characteristics of trustworthy online transactions, and external manifestations of trust in offline environments that can be used to build trust in an online context (Cheung and Lee, 2001; Friedman et al., 2000; Cassell and Bickmore, 2000). However, some studies still argue the importance of one-to-one inter-action to build trust among transacting parties since general wisdom is that

trust needs touch (Olson and Ol-son, 2000) . Conflicting views about how to ensure and measure trust in an online context generates a valuable research area. Studies that develop scales or sub-constructs that can be used specifically to measure trust for Web-based relationships and transactions would contribute greatly to the e-marketing literature.

2.4.5 Counterfeiting / Protection of Digital Property – Another threat hosted by the Internet is its vulnerability to counterfeiting especially through the choice of domain names that should be trademarked by an institution closely affiliated with that name ( Stimson, 1998). The difficulty of applying trademark law in the online environment contributes to this problem (Simons, 2000). Similarly, the lack of copyright rules makes it difficult for companies to protect their Web site. Experience modification technologies which enable consumers to view those parts of Web sites they want and to ignore those they do not want to see is a simple example of how copyright rules and laws can be violated through such technologies (Rubin, 2001).

2.4.6 Security Threats Firms Face – There is a general tendency to think that legal, ethical, and security-related threats are directed by companies toward customers. In reality, firms are being exposed to just as many dangers as consumers by transacting with their customers online. The list of risks marketers take on by engaging in online commerce is extensive: transaction security, illegal activity, privacy, the difficulty of achieving the fundamental requirements of a safe electronic payment system, denial of service attacks, viruses and worms, eavesdropping on e-commerce communications by unauthorized persons, hackers, identity theft, repudiation (denial of electronic agreements), phantom transactions, content alteration by crackers, privacy leaks, pirating, setting up “look alike” Web sites, cookies and Web bugs, cyber terrorism, natural disasters, and counterfeiting are only the most commonly encountered ones ( Bush et al., 2000; Glassman, 1996; Bertsch and Flaherty, 2002). Few organizations have a full-fledged network security plan that can protect them against possible risks (Maloff, 1999). Therefore, it is essential that effective protection technologies are developed for

firms. Both consumers and companies need to implement all available systems to protect themselves and each other from unwanted consequences.

2.4.7 Online Marketing Research

The global and continuously interactive nature of the Internet makes it a very fertile platform for performing worldwide online marketing research and both primary and secondary research can easily be conducted through this environment (Karakaya and Karakaya, 1998; Kannan et al., 1998). It can be used for capturing personal, environmental, consumer and competitive intelligence through various online data collection techniques as well as applying more current and hi-tech methods such as virtual shop simulations (Bradley, 1999; Burke, 1996). Past research about multimedia computer representations shows that these techniques can realistically represent people, products, and situations (Urban et al., 1997) and that dynamic consumer behavior can be tracked just as successfully through computer-simulated environments as real research platforms (Burke et al., 1992), thus, increasing the confidence that can be built in collected data through the online environment.

2.5 Factors Affecting Adoption of Online Marketing by Consumers

Adoption of online marketing which has been offered by manufacturers or service providers is not easy. In fact adoption of online marketing is based on the rate of customer internet adoption instead of traditional channels which is mainly based on customer personal characteristics website properties and service properties. It means that basic factors which affect on online marketing adoption will be the same as internet adoption and also e-commerce adoption which focuses on the customers’ willingness to use internet instead of traditional channels in order to purchase a product, searching for information and using a service.

2.5.1 Customer personal characteristics

Sohn and Ahn (1999) showed that consumers’ knowledge affects their adoption of ecommerce. Liang and Huang (1998) Found that customer’s experience an important factor in online purchasing. Kim and Kwon (1999) contended that a consumer whose lifestyle is more progressive and assertive in leisure activities use

the internet more frequently and searches information through the internet more often. Limayem, Khalifa et al. (2003) added personal innovativeness as another personal characteristic in order to online shopping. Yang and Cho (1999) examined the impact of consumers’ need for cognition, and search objectives on consumer information search through the internet.

2.5.2 Website

Another group of factors that seems to be important for adoption is website related factors. The KNP Report on the Internet User (Research 1999) published by IMResearch showed that user satisfaction with the website is decided by information quantity, design, transmission speed, user-friendliness of search structure, and update pace. It suggests that website characteristics are likely to influence consumer information search through the internet.

2.5.3 Perceived risk

Besides there are several academic studies working on perceived risk. According to Koller (1988), the degree of importance of the situation determines the potential effect of risk. Customers unwillingness toward to complete online Consumers have shown reluctance to complete online transactions (Hoffman, Novak et al. 1999), primarily due to risk concerns. Therefore, perceived risk is posited as a prominent barrier of consumer acceptance of online services in an e-commerce environment. Consumer perceptions of risks inherent in product adoption and usage have been studied for many years by Bauer and Cox (1967); Dowling and Staelin (1994). This immense literature on perceived risk however has not been applied to the relatively new e-services context in an attempt to better predict evaluation and adoption.

Recent research explores the issue of perceived risk in the context of the unfairness of price by Wirtz, Kimes et al. (2003). They found perceived unfairness of pricing generates perceptions of financial risk. Other researchers Kolsaker, Kelley et al. (2004) found that perceptions of risk and convenience are strongly associated with a reluctant to purchase airline services online. Also the authenticity of the company or product is not under question; therefore, it is likely that risk

assessments of the medium rather than the product are under evaluation. Of course this research shows that cultural factors are important to using e-ticket too

F.Cunningham, H.Gerlach et al. (2005) found perceived risk is present at each stage of the consumer buying process. Their findings show the introduction of financial risk and the continued significance of performance risk at purchase stage. Previous analyses of risk types suggest that financial risk is the most important contributor to perceived risk. However, performance risk seems more important in the case of internet airline reservation services.

Although sometimes factors affecting on risk are the same as trust with negative affect on customer adoption, but there are different researches worked in trust as independent factors affecting on customer to use an online store(Lee, J.Kim et al. 2000; Ceaparu, Demner et al. 2002) as a part of third step of adoption .Some of these factors found by J.Lee et al shows that comprehensive information about products, values shared with other customers and divers means of communication can effectively increase trust, which in turn can increase customers loyalty(Lee, J.Kim et al. 2000). These factors will be important even for post-purchase adoption or at the first stages of adoption for customers who receive information about launching new service or product and step of interest which customer try to find more information about .

2.5.4 Trustworthiness

Moreover Eggers research (2000) shows that trustworthiness often depends on strength of brand name which is its reputation customer awareness of firm’s privacy policy which ensure him/her about what firm is going to do with private information. Also there are factors that affect customer’s judgments about trustworthiness such as website certificates provided by third parties or legal framework that support transaction in the website. Cheksin (1999) found six fundamental forms for communicating trust are: brand, navigation, fulfillment, presentation, up-to-date technology and seals of approval. And also there is a research by Ceaparu, Demner et al. (2002) which shows that there are three important features for customers in order to trust a website which are customer service (Contact number available, clearly state return policy, possibility of

returning a purchase at the nearby store) , testimonial and security feature representation such as text and graphic.

Based on McIvor, O’Reilly et al. (2003) research, it’s possible to find important factors which affect on customers in order to use airlines’ website for buying e -ticket. These factors can be clustered as bellow:

Real-time decision-making mechanisms

(Reduction of information asymmetry helps customer to make a decision) Up-to-date information for customers

All the websites evaluated contained up-to date information on flights, schedules, promotions and complementary services. This will help the customer to make a best decision by comparison different website. Also this way is better than old brochure which airlines provide in order to provide information for their customers)

Reductions in customers’ search and transaction costs

On-line buyers benefit from better selection in terms of choice (of airlines, flights, schedules, destinations, levels of service and complementary services); speed (time convenience of access capabilities on the Internet); and reduced transaction costs

(monetary, effort, mistakes)) McIvor, O’Reilly et al. ( 2003) Bundling products and services

Offering additional services not directly related to the core travel offering Receiving low prices/discounted fares

Customizing offerings to suit individual customer needs

New transaction structures play integral role in lowering transaction costs for customers

2.6 Factors Influencing the Consumers’ Online Information Search

The Web allows for the amassing, analysis, and control of large quantities of specialized data, which enables comparison shopping and speeds the process of finding items. The Web also facilitates trials and can provide instant gratification; customers can test products online, which may stimulate purchase. Ease of use of

technology, effectiveness of online search, and user satisfaction are antecedents of the perceived benefits of information search (Kulviwat et al., 2004). Each of these factors is shown in Figure 2.1 and discussed next.

Figure 2.2: An Online Information Search Model

Source: Kulviwat et al., 2004, p. 248 2.6.1 Ease of Use

Ease of use in the context of online search includes Web design, format, template, and user- friendly program. One key feature is interactivity, which allows consumers to personalize their information search, thereby increasing the perceived benefits of a search.

2.6.2 Effectiveness of Search

Effectiveness of search can be defined as the consumer’s ability to acquire and utilize relevant information from the external environment (Punj & Staelin, 1983). Interactive decision aids on the Internet (e.g. a wide variety of software tools including search engines), help consumers locate useful information (Bradlow & Schmittlein, 2000 ; Haubl & Trifts, 2000), such as screening alternatives and organizing pieces of messages to form a viable consideration set (Alba et al, 1997). 2.6.3 User Satisfaction

User satisfaction can be defined as an individual’s positive and/or negative reactions to the use of information or computer technology (Bailey and Pearson, 1983). Information search requires less effort online than offline. Alba et al.

(1997) contends that a significant benefit of online search and shopping is the vast number of alternatives accessible to consumers without physical strain in a brickand-mortar retail environment. For example, it takes far less time and effort to visit a virtual store than a local retail outlet. This great flexibility, in the electronic shopping environment, increases consumers’ satisfaction (Ariely, 1999). (Kulviwat al. 2004)

2.6.4 Perceived Cost of Information Search

Perceived costs consist of monetary, temporal (time), mental, psychological, and behavioral (physical) effort required in a search process. Studies (Punj & Staelin, 1983; Srinivasan, 1990) found that search costs negatively affected search activity as predicted by theory (Stigler, 1961). After all, online search is not effortless. In fact, it can be stressful as some may experience information overload. (Kulviwat et al. 2004) Bhatnagar et al. (2000) suggest that shopping online is perceived to be quite risky. Perceived risk includes fear of technology use and information overload, feeling of uncertainty and confusion, feeling of insecurity when engaging in online transactions (e.g. credit card fraud). Because technology for secure transactions (e.g. online payment) is not yet mature, security and privacy are major issues that should be addressed satisfactorily in this medium. Hence, perceived risk will induce a perception of increased cost in searching online that discourages motivation to search information online (Klein and Quelch, 1997). (Ibid)

2.6.5 Ability to Search

In addition to perceived benefit and cost, ability to search is a major determinant of information search online. Capability to search is related to knowledge education and experience (Schmidt & Spreng, 1996).

2.6.6 Buying Strategies

Buying strategies can be conceptualized as either simplifying or optimizing in information gathering. Kiel and Layton (1981) found that consumers satisfied with their previous purchases searched less information for the next purchase. Also, people seem to visit fewer stores online despite the fact that they are “just a mouse click away” from other stores. This is consistent with the idea that consumers are

limiting their search to just a few of the most popular sites. Johnson et al. (2000) found that the top 1 percent of Web sites captures 50 percent of all visits to the Web. (Ibid)

2.6.7 Situational Factor

Urgency and time pressure are situational variables. An immediate need shortens purchase decision time and therefore reduces information seeking. Time pressure reflects the consumer’s perception of time availability and sacrifice (e.g. ability to do something else or delayed use of the product).

2.6.8 Personal Factor

Research (Hoffman & Novak, 1996) found that information search is positively related to enjoyment of shopping. In the Internet environment, the extent to which potential goal-directed shoppers can find relevant and reliable information with ease should be a key determinant in their repeated use of the Web. Those browsing for fun (intrinsic enjoyment), without any shopping purpose, will be less concerned with ease of access or with reliable information. However, they may be more concerned with whether the process gives them sufficient stimulation, new interests and fun to keep them coming back.

2.6.9 Motivation to Search

Schmidt and Spreng (1996) define motivation as the desire to expend effort in gathering and processing information, which is characterized by both direction (which pieces of information are collected and processed) and intensity of the effort (the level of goal-directed arousal). Internet users appear to be primarily motivated by communication/ information needs, but do not necessarily feel shortage of time compared to non-users. Perceived cost and perceived benefit of have an impact on information search by influencing motivation to search (Moorthy et al 1997). That is, lower (higher) search costs and higher (lower) search benefits can increase (decrease) motivation to search. As discussed earlier, the ability to search seems to have a positive effect on the motivation to search. Consequently, the effects of perceived benefit, perceived cost, and ability to search should be mediated by motivation to search. (Kulviwat et al., 2004)

Early e-shoppers were largely bargain hunters, expecting the lowest prices as a reward for their risk taking. Amazon and other early e-businesses used the lure of cheaper prices to attract the shoppers online. Things have now moved on and, according to the

Goldfish e-Tail Price Index, online prices rose by 4 percent in the year up to February 2002(Goldfish.com, 2002). (Jayawardhena et al., 2003)

The Internet has unique features for the communication of promotionally priced fares to both business and general travelers. The use of the Internet by airlines to communicate information is becoming prevalent, from relatively slow beginnings in the middle years of the decade. This relates both to hard information, in the form of schedules and the availability of fare information, and to the softer areas of more general company information. Web presence is itself significant but the design of the site even more important. From a consumer perspective it must be relevant and useful, with easy navigation features so that the time spent on a visit is fruitful. Moreover, the site should invite revisiting is a critical difference in the initial motivation to visit and to contact again. In principle, the site offers a one-to-one relationship to the visitor and should have immediately communicable positive features. (Driver, 1999)

2.7 Main potential drivers for consumer adoption of online marketing 2.7.1 Accessibility and convenience

The possibility to shop anytime, from anywhere is the most obvious and most commonly cited advantage of online marketing, and was found to be the most important perceived consumer benefit of internet shopping in empirical studies by Jarvenpaa and Todd (1996-1997) and Kangis and Rankin (1996).

2.7.2 Global choice

Since the boundaries of online marketing are not defined by geography or national borders, consumer will benefit from a wide selection of vendors and products – including a wider availability of hard-to-find products (Benjamin & Wigand 1995. Hoffman et al. 1995. Alba et al 1997).

2.7.3 Online delivery

For digital products, the whole commercial cycle, including distribution, can be conducted via a network, providing instant access to products immediately when a need arises.

2.7.4 Test and trial online

Digital products can be tested over the internet prior to making purchase decisions, reducing uncertainty.

2.7.5 The real time nature of the medium

The internet can provide consumers with up-to-the minute information on prices; availability, etc. (cf. Franz 2000)

2.7.6 Time savings

Consumers may benefit from the shopping process being faster in the market space than in the market place as a result of the rapidity of the search process and the transactions (Wigand & Benjamin 1995, Krause 1998).

2.7.7 Possibilities for comparison shopping

By allowing consumers to shop in many places and conduct quick comparisons of offerings and prices (Hoffman et. Al. 1995, Hart et al. 2000), Internet market places have the ability to reduce search costs for price and product information (Bakos 1998, Strader & Shaw 1999, Rowley 2000, Bhatt & Emdad 2001). 2.7.8 Access to extensive information

An important consumer benefit is the access to greater amounts of dynamic information to support queries for consumer decision-making (Hoffman et. Al. 1995 Alba et al 1997).

2.7.9 Privacy and anonymity

The internet has the potential to offer consumers benefits with respect to a partial, or even a total privacy and anonymity/pseudonymity (Parsons 2002) throughout the purchasing process.

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