Understanding Customer Needs and Online Behaviour

1. Understanding Customer Needs and Online Behaviour MARK 430 Week 2

2. Error in Assignment 1 instructions • Question 2c • It should read • Your operational margin seems a bit low. If you increase it to 60% from 50%, what impact does that have on the “Average Order Contribution” and the CLTV?

3. During this class we will be looking at: • How customers make buying decisions • Model for customer decision making • Market research methods to understand customer needs

4. 4 steps to successful marketing strategy Understanding customer needs and online behaviour (market research, data mining, web analytics) Formulate a strategy to fill needs Implement effectively and efficiently (web usability, stickiness, advertising, search engine optimization, email marketing, pricing, distribution, product development) Build trusting relationships with customers

5. Customer-Centric Marketing Process: 3 elements Marketing Research Marketing Strategy and Tactics Focus for this week Database Marketing Acquire/Up-Sell Cross-Sell Customer Relationship Management Sales Force Management and Customer Experience

6. Benefits of Internet Marketing Research Quickly gain crucial market intelligence Act upon first-mover advantages Stay afloat in a fast-paced environment Reduce market research costs Many more…

7. Model for customer decision making: what do we need to know about our customers? Initiation • What starts the process? Source of input? Role of past experience? Friends make input? Advertising, catalogues, email? • Source of information: friends, media, web, store? Active Search? How much time? Where to shop? Store, catalogue, web? What to learn? Products / technology / user experience / trends? • Compare products? Role of price / quality? Evaluation criteria? Need to touch and feel? Impact of brand and trust? • How do buyers gain confidence? Special offers? Security / privacy assurance needed? Guarantees / refund policy? Need push to action - close sale? • Word of mouth to friends / community? Lifetime service? Relationship contract? Delivers promised value? Awareness / learning Decision Buy Post purchase

8. Popular Uses of Marketing Research How to segment the market? Who are mycustomers? What is the price elasticity? Conjoint Analysis Customer Identification Discrete Choice Modeling MarketingResearch Whendo theypurchase? What are the growth trends? Environmental Studies Buying-Habit Studies Opinion Research Competitive Analysis Who are my competitors? What do they like?

9. 3 main sources of data that e-marketers use for research purposes • Internal company records • Secondary data • Primary data

10. Source 1: Internal Company Records • Non-marketing Data: • The accounting department generates data about sales, cash flow, marketing expenses • A firm introducing a new product on its Web site wants immediate feedback on its sales. • Sales Force Data: • sales force automation software, allows representatives to input results of sales calls to both prospects and current customers • Customer Characteristics and Behavior • Web Analytics, Clickstream analysis and Data Mining • complete customer profile from all “touch points”

11. Source 2: Secondary Data • When are they used? • Need specific information not available in company or partner databases, • Need information that can be collected more quickly and less expensively than primary data. • But: • They may not meet the e-marketer’s information needs, because they were gathered for a different purpose, • The quality of secondary data need to be checked, • They are often out of date. • Internet provides easy access to secondary data about environmental factors and trends.

12. Source 2: Secondary Data • Marketing intelligence = Marketers continually scan the firm’s macro-environment for threats and opportunities. • What type of information do marketers need? • Demographic trends, • Competitors, • Technological forces, • Natural resources, • Social and cultural trends, • World and local economies, • Legal and political environments.

13. Source 2: Secondary Data Publicly Generated Data • Most Canadian and U.S. agencies provide online information in their respective areas. Stats Canada • Many global organizations, such as the International Monetary Fund (www.imf.org) are also good sources of data. • Most universities provide extensive information through their libraries, and many faculty post their research results online. • Industry- or profession-specific information is available at the sites of professional associations such as the American Marketing Association. • Most of this information is free and available to all Internet users.

14. Source 2: Secondary Data Privately Generated Data • Company Web sites provide a great overview of the firm’s mission, products, partners, and current events. • Individuals often maintain sites with useful information about companies as well. • Sites that provide statistics etc relating specifically to Internet markets such as the ClickZ Network and Jupiter Research • Large research firms put sample statistics and press releases on their sites or offer e-mail newsletters. (eg. Forrester) • Infomediaries: firms that monitor a number of media sources, presenting selected resources to users either by “pushing” material to the user’s desktop via e-mail, or by allowing users to “pull” it from a specially tailored Web site. • Free source is “Google Alerts”

15. Source 2: Secondary Data Online Databases • Commercial online databases contain publicly available information that can be accessed via the Internet. (fee based, such as Dialog) • Thousands of databases are available online, some free, some subscription-based: • News, • Industry data, • Encyclopedias, • Airline routes and fares, • Yellow Page directories, etc.

16. Source 2: Secondary Data Competitive Intelligence • Competitive intelligence (CI) = analyzing the industries in which a firm operates as input to the firm’s strategic positioning and to understand competitor vulnerabilities. • 40% of all firms regularly conduct CI activities • Some sources of CI: • Competitor press releases, • New products, • Alliances and co-brands, • Trade show activity, • Advertising strategies.

17. Source 2: Secondary Data Competitive Intelligence • The Internet simplified CI: • Competitive marketing strategies: observed on competitors’ Web sites • Web sites linked to competitors’ pages: type link:companyname.com in search tools. Why are these sites linking to my competitor and not to me? • Third-party, industry-specific sites can also provide information about competitive activities. Company profiles for public firms are available in the SEC’s online EDGAR database + investment firm sites. • User conversation: e-mail lists, newsgroups, blogs (eg. re BMWs)

18. Source 3: Primary Data • Primary data = information gathered for the first time to solve a particular problem. • When secondary data are not available managers may decide to collect their own information. • They are more expensive and time-consuming to gather than secondary data. • They are current and more relevant to the marketer’s specific problem. • They are proprietary, therefore unavailable to competitors.

19. Source 3: Primary Data Internet-Based Research Approaches • The Internet is increasingly being used for primary data collection. • Why? Declining cooperation from consumers using traditional research approaches. Telephone survey refusal rates = 40- 60%. • Increasing number of consumers online: • inexpensive and quick method • In North America, over 70% of all research firms use various online methodologies.

20. Main Internet-Based Research Approaches • Online experiments • Online focus groups • Online observation • Usability testing • Online Survey Research • E-mail surveys • Web surveys

21. Online Experiments • Experimental research attempts to test cause-and-effect relationships: • Marketers can easily test alternative web pages, banner ads, or promotional offers • A firm might send e-mail notification of 2 different pricing offers (with a link to the website), each one to a different set of customers • By tracking the click-through rate it will be a simple matter to track which pricing offer has the better “pull”

22. Online Focus Groups • Focus group research: • A qualitative methodology that attempts to collect in-depth information from a small number of participants. • Used to help marketers understand important feelings and behaviors prior to designing survey research. • 15- 30% of advertising agencies and market research firms use the Internet to conduct online focus groups.

23. Online Focus Groups – Advantages and disadvantages • Advantages over traditional focus groups: • The Internet can bring together people who do not live in the same geographic area. • Because participants type their answers at the same time, they are not influenced as much by what others say. • Quicker and less expensive to operate than offline versions. • Disadvantages • Nonverbal communication is lost online. • The authenticity problem = Without seeing people in person, it is difficult to be sure they are who they say they are (need to verify respondent authenticity).

24. Online Observation • Observation research monitors people’s behavior by watching them in relevant situations. • Online it takes the form of monitoring consumer chatting and e-mail posting through chat rooms, bulletin boards, mailing lists and blogs. • on the company site and on 3rd party and / or public sites

25. Usability Testing • Web site usability studies to watch users as they click through the firm’s Web site: • Subject and observers sometimes in the same room, sometimes watch through one-way glass • Subjects usually given specific tasks • Observers can pinpoint site design and usability problems

26. Online Survey Research • E-marketers conduct surveys using 2 main methods • Sending questionnaires to individuals via e-mail, • Posting a survey form on the Web

27. E-Mail Surveys • To prepare an e-mail survey, an organization can: • Draw a sample of e-mail addresses from its database, • Purchase a list, • Gather e-mail addresses from the Web or Usenet newsgroups. • Select a specialized + representative group to research to control who gets the questionnaire. • The researcher can send e-mail reminders to participants who have not yet responded: response rates are just as high for e-mail surveys as for traditional contact methods.

28. Web Surveys • Many companies post questionnaires on their Web pages. • Purpose: • Gather statistics about a site’s visitors (e.g. Web site registration forms) • Required, or not required? • More formal survey research on a particular topic • Response rates to online surveys are as good as or better than surveys using traditional approaches, sometimes reaching as much as 40%.

29. Web surveys - advantages • Fast and inexpensive: • Instantaneously worldwide delivery of questionnaires, • No cost for postage or an interviewer, • No printing, collating, and mailing time, • Those who complete the questionnaires do so in the first three days, • Easy to send multiple reminders if using e-mail invitations. • Can be very low cost or no-cost eg. Zoomerang has a basic service for free, and a subscription service for $599 USD • Web surveys reduce errors: • Technique reduces the complexity and time involved for respondents, • Respondents enter their answers - eliminates data entry errors when converting answers from paper questionnaires.

30. Web surveys - Disadvantages • Sample representativeness and measurement validity = No ability to draw a random sample = Researchers cannot generalize results to the entire population being studied. • Online research entails several measurement issues: • Different browsers, computer screen sizes, and resolution settings = researchers worry that colors will look different and measurement scales will not display properly online. • A comparison study between telephone and online surveys found that online users were less likely to use the two extreme scale points on a five-point scale.

31. Technology-Enabled Approaches • The Internet is an excellent place to observe user behavior • The technology automatically records actions in a format that can be easily, quickly, and mathematically manipulated for analysis. • Client-side data collection (cookies) • Server-side data collection • Log file analysis • Real-time profiling (tracking user Clickstream analysis) • Data Mining • These techniques did not exist prior to the Internet. • They allow marketers to make quick and responsive changes in Web pages, promotions, and pricing. • We will look at these techniques in detail next week