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E-Marketing, 3rd edition Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 7: Consumer Behavior © Prentice Hall 2003 Consumers in the 21st Century Internet usage is still growing. Marketers have turned their attention to practical questions such as:

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E marketing 3rd edition judy strauss adel i el ansary and raymond frost l.jpg

E-Marketing, 3rd editionJudy Strauss, Adel I. El-Ansary,and Raymond Frost

Chapter 7: Consumer Behavior

© Prentice Hall 2003


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Consumers in the 21st Century

  • Internet usage is still growing.

  • Marketers have turned their attention to practical questions such as:

    • Whether a firm’s target market is online,

    • What these customers do online,

    • What determines whether they’ll buy from a site,

    • How much of the marketing effort should be devoted to online channels.

  • Understanding online consumer behavior helps marketers design marketing mixes that provide value and thus attract and retain customers.


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The Numbers

  • 1980s: The Internet population was very small.

  • Until 1994: Slow but steady growth due to an increasing number of text-based users.

  • With the introduction of the WWW + multimedia content expansion: the number of Net users exploded.

  • In 2002: 531 million people had access to the Internet = 8.5% of the global population.


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Developed nations = 15% of the world’s population

= 88% of all Internet users

Millions of People With Home Internet Access by Region in 2002

Source: Data from Nielsen//NetRatings


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Where Are the Other 5.5 Billion People?

  • Not online!

  • In survey of non-Internet users:40% said they have no need for the Internet.

  • E-marketers’ are digging deeper for a more thorough understanding of consumer preferences online and offline.

  • Main reasons why consumers do not use the Internet: Social, cultural, technological, legal, and political issues.

  • Without major shifts some countries may not achieve high levels of Internet adoption among individual consumers for many years.

  • In these countries the B2B market will lead consumers to the Net where a fast-growing consumer market enticed businesses online.


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Biggest Reasons for Not Using the Internet Source: Pastore (2001) citing Ipsos-Reid study


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Social and Cultural Issues

  • Consumers are accustomed to touching merchandise before buying (Egypt and Mexico).

  • The marketplace = a social meeting place (Arab countries).

  • Consumers often have security and privacy concerns.

  • Payment = a problem in countries where the credit-card processing infrastructure is weak.

  • Most consumers in such countries have no credit cards or bank accounts, and local retailers accept only cash.

  • Lack of Internet education.


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Technological Issues

  • Biggest barriers to Internet adoption:

    • Low PC penetration.

    • Communications infrastructure problems.

    • Arab countries, have only 49 telephones per thousand people versus 133 phones per thousand people worldwide.

    • Internet connections, where they exist, are often slow and unreliable.

    • Phone companies charge:

      • A per minute charge for local calls.

      • ISP charges for Internet access.

    • Postal services are not reliable in many countries.


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Legal and Political Issues

  • Government censorship and regulation = slow Internet adoption.

    • The Chinese government authorizes Web sites for citizen access and keeps a tight reign on Internet cafés.

    • Egyptian government agencies block Internet ventures due to fear of losing tax money on direct sales to customers outside the country.

    • Barriers to exporting (tariffs + costly distribution channels) are slowing the adoption of e-commerce.

  • BUT a global community connected by the Internet should emerge over time, fueled by:

    • The benefits of connecting multinational businesses,

    • The lure of B2B e-business activity,

    • Increasing consumer demand led by the younger generation.


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Inside the Internet Exchange Process

  • What explain consumer buying behavior?

    • Stimuli = marketing communication messages and cultural, political, economic, and technological factors.

    • Individual buyer characteristics = income level, personality, psychological, social, and personal aspects.

    • Consumers move through a variety of decision processes based on situational and product attributes.

  • To create effective marketing strategies, e-marketers need to understand what motivates people to buy goods and services, both in the short and long term.


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Inside the Internet Exchange Process

  • The e-marketing: “...creating exchanges that satisfy individual consumer and organizational customers’ objectives.”

  • Exchange = act of obtaining a desired object from someone by offering something in return.

  • Individuals bring their own characteristics + personal resources (within a social, cultural, and technological context) to the process as they seek specific outcomes from an exchange.


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The Online Exchange Process


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Context

  • Broad technological, social, and cultural forces affect online consumer behavior.

  • Marketers need to study the consumer’s environment or context and how their influence the purchasing process.


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Technological Context

  • The Internet = a utility in most developed nations.

  • E-marketers need to consider home connection speeds + the changing landscape of digital receiving devices:

    • Connection with broadband (fast) = 20% of Americans: These users enjoy multimedia games, music and entertainment because these download quickly.

    • Access from a narrow band mobile handheld device (or 56k modem in a PC): access news, weather, stock quotes, and other data services that are low in graphics.


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Technological Context

  • PC is not anymore the only way to communicate with customers:

    • Digital receiving devices = PC, electronic pager, FAX machine, iTV (interactive TV), voice mail, handheld PDA, cell phone, and a other devices.

    • Need to learn which devices a firm’s customers and prospects own and prefer to use for various purposes, from communication through purchase and post purchase service.


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Social and Cultural Context

  • The Web is training individuals and organizations to help themselves to information, products, and virtually everything they want when and where they please = power is shifting to consumers.

  • U.S. trends are affecting online exchanges:

    • Information overload overwhelms consumers.

    • Bunkering means people are staying at home more.

    • Security and privacy are major concerns.

    • Home and work boundaries are dissolving.

    • Anywhere, anytime convenience is critical for busy people.


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Social and Cultural Context

  • U.S. trends are affecting online exchanges:

    • Time poverty creates multitasking and speeds up normal processes.

    • Demanding expectations.

    • Self-service is required.

    • Sophisticated consumers know they are in control and have choices.

    • Personalization is becoming expected.

    • Easy does it, especially when it comes to the frustrations of technology.

    • Multiple channel shopping has become the norm.


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Individual Characteristics Affecting Internet Exchanges

Characteristics specific to Internet users:

  • A positive attitude toward technology.

  • Online skill and experience play an important role in the exchange process.

  • Gender affects attitudes toward use of technology: Men are more positive about Internet shopping.

  • Language: the Internet would be more useful it had more content in the local languages of various countries.


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Individual Characteristics Affecting Internet Exchanges

  • Online shoppers tend to be more:

    • Goal oriented (= going to a specific Web site with a purpose in mind, or searching for the lowest price for a particular product + not having to deal with salespeople or crowds in the online environment, and appreciate the online product selection, convenience, and information availability)

    • Than experience oriented: having fun, bargain hunting, or just surfing to find something new. Goal oriented individuals like the idea that they.

  • 2 common traits of online shoppers: convenience or price orientation.

  • Differences in the outcomes sought online based on family life cycle.


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Consumer Resources

  • For consumers:

    VALUE = BENEFITS - COSTS

    Costs = a consumer’s resources for exchange:

    • Money,

    • Time,

    • Energy,

    • Psychic costs.


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Monetary Cost

  • Consumers need enough discretionary income to exchange for the goods and services they want.

  • What makes the Internet exchange different?

  • Consumers have to pay by credit card, debit card, electronic check, or smart card.

  • BUT not everyone is able to acquire or wants a credit card.

    = A big problem for e-marketers targeting:

    • The teen market online

    • Consumers in countries with low credit card availability.


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Monetary Cost

  • Consumers with bank accounts can use:

    • Debit cards.

    • Electronic checks: the consumer sets up an account and authorizes a third party Web site to pay a specified amount and withdraw funds from the user’s checking account.

    • Smart cards = Splash Plastic: have an electronic chip that can be coded to hold a certain amount of funds, payable by the bank or a depository company.

    • Advantages = anyone with the cash can get one and the limit of potential fraud is the amount of money coded into the card.


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Time Cost

  • Time poverty = problem for today’s consumers.

  • They want to receive appropriate benefits for the time they spend online.

  • Did the user get what she wanted for the time she invested?

    • Internet firms to be sure their sites are well organized and easy to navigate so users can quickly find what they want.

    • Search engines and shopping agents can help consumers find what they want to leverage their brief forays online.

  • The Internet’s property of time moderator helps consumers manage their scarce time. This is because users can shop, e-mail, or perform other activities anytime.

  • Time resource is a critical topic = online attention from consumers is a desirable and scarce commodity:

    • Consumers pay more focused attention to Web sites than to the content in any other medium.


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Time Cost

  • Concept of flow in Web navigation behavior:

    • Characterized by a seamless sequence of responses facilitated by machine interactivity,

    • Intrinsically enjoyable,

    • Accompanied by a loss of self-consciousness,

    • Self-reinforcing.

  • Consumers are 100% involved and not easily distracted when they are online.

  • When e-marketers capture consumer’s attention, they can make a big impression in a short time as long as the Web site is enjoyable, self-reinforcing, and engaging.


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April 2002 Global Internet Usage Source: Data from www.Nielsen//NetRatings


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Energy and Psychic Costs

  • Energy + psychic resources = closely related to time.

  • Sometime = Too much trouble to turn on the computer, log onto the Internet, and check e-mail.

  • Rising popularity of short text messaging (SMS) via cell phones and handheld mobile devices.

  • Consumers apply psychic resources when Web pages are hard to figure out or when facing technological glitches.

  • 44% of all online shoppers abandon online shopping carts at one time or another due to technical problems.


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Most Common Reasons for Failed Online Purchases

Source: Boston Consulting Group Study as reported in Wellner (2001)


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Internet Exchange

  • When exchange occurs:

    • Browser bookmarks = quick jump to favorite online retailer.

    • E-mail messages contain hyperlinks to bring consumers directly to specific information, news reports, or advertised specials.

    • The Internet has the added feature of automation to facilitate exchange.

    • CNN.com sends one sentence e-mails several times a day or week with breaking news for those who sign up for the service.


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Exchange Outcomes

  • What benefits do consumers get by exchanging all that money, time, and energy?

  • What American consumers do online and how the Internet has changed the way people behave.

  • The myriad of online activities can be categorized by the following general outcomes:

    • Relationships,

    • Entertainment,

    • Media consumption,

    • Information gathering,

    • Transactions.

    • Each is ripe with marketing opportunity.


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Relationships

  • 43% of online time = e-mail or other communication related activities:

    • It is an inexpensive way to keep in touch,

    • It is usually text based = can be easily accomplished with a slow modem or over a wireless handheld device.

    • Form new relationships with the people they meet online.

    • Spend time in chat rooms, make phone calls, and visit online dating sites.

    • Communication can take place in communities of interest.


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Relationships

  • E-mail popularity explains the success of Web based e-mail services, such as AOL (61% of the Internet population), Hotmail (60%), and Yahoo (57%)!

    • E-mail services are an important part of the traffic draw.

    • These companies bring a lot of eyeballs to their sites=They exchange these eyeballs for commissions on products sold at the site and on advertising revenues.

    • The paying customers = retailers a+ advertisers, these sites are exchanging free services with consumers.


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Proportion Performing Relationship Activities Online in the U.S.

Source: Data from www.pewinternet.org


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Entertainment

  • Consumers use the Internet for entertainment (50%).

  • Internet’s big promises= audio and visual entertainment:

    • 51% of U.S. users watch video online + 37% listen to music.

    • These activities are difficult without a fast broadband connection.

  • Only 20% of all users have broadband at home;

  • Until more do, firms won’t produce much of this type of online entertainment;

  • BUT, until more entertainment is available, mass audiences won’t be lured into paying for broadband.

    • All television content will be transmitted digitally within five years by federal mandate.

    • More devices will allow TV programs to be delivered on demand.

    • Consumers will adopt broadband as part of their cable TV service.


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Proportion Performing Entertainment Activities Online in the U.S.

Source: Data from www.pewinternet.org


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Media Consumption

  • Consumers are accessing news, weather, sports scores, and radio broadcasts over the Internet.

  • Consumers have a limited amount of time to exchange for media consumption, and that the Internet takes away from offline media time.

  • Consumers use whatever medium is handy when they want news, including a handheld PDA—another indication that the Internet has morphed from novelty to utility.

    • 33% of Internet users mentioned watching television less often,

    • 25% read magazines less frequently,

    • 23% read newspapers less often,

    • 16% listen to the radio less frequently.


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Media Consumption

  • This switch to online media consumption is why all the major media disseminate information on their Web sites:

    • The challenge is making it pay off in profits.

    • The advertising models are not paying the bills.

    • Some, like the Wall Street Journal, charge for subscriptions.

  • Online media firms must decide what strategic purpose their Web site investment serves.


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Proportion Performing Media Consumption Activities Online in the U.S.

Source: Data from www.pewinternet.org


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Information

  • Second to e-mail, consumers spend much of their time gathering research and information online:

    • Activity is especially acute during holidays and special events.

    • 73 million Americans use the Internet for health information.

    • 52 million Americans use the Internet to find job information.

  • How do Internet users find information?

    • 85% have used search engines.

    • Queries range from “the ridiculous”, to the sublime to the heartbreaking.

  • Google.com is the most popular search engine: visitors spend 25.9 minutes per month there. Users spend 10.8 minutes a month on Yahoo! and 6 minutes at MSN.

    • Google’s revenue model is entirely advertising based,

    • It has drawn a larger user base because it does not crowd the home page with offers.


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Proportion Performing Information Consumption Activities Online in the U.S.

Source: Data from www.pewinternet.org


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Buy and Shop for Products

  • 75% all Internet users seek information online prior to buying products:

    • To purchase online,

    • To purchase at a local brick-and-mortar.

  • In total, U.S., consumers spent 79% of their shopping dollars in brick-and-mortar stores, 15% online, and 6% on catalog sales.

  • Consumers might not spend more:

    • 5.5 billion people are not Internet users, and have no drive to get connected.

    • The Internet does not provide the social experience found in the physical world.

    • Consumers may not shop for most products online unless they are motivated by dissatisfaction with offline retailers.

    • Some people do not trust the Internet enough to enter personal and credit card information on Web pages.


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Online Shopping Landscape Source: Data from www.bcg.com


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Buy and Shop for Products

  • A final consideration involves the types of products appropriate for online and offline consumption, 3 types of products :

    • Search goods can be evaluated by reading about them = software, automobiles, and computers, = the most appropriate for online purchasing

    • Experience goods can only be evaluated through product use = clothing and flowers,

    • Credence goods = items that are difficult to assess without someone else’s opinion, such as expensive wine or even a book.

  • 51% of Internet users are buyers.


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Proportion Performing Transaction Activities Online in the U.S.

Source: Data from www.pewinternet.org


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