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Chapter 3 Internet Consumers and Market Research. Learning Objectives. Describe the essentials of consumer behavior Describe the characteristics of Internet surfers and EC purchasers Understand the process of consumer purchasing decision making

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learning objectives
Learning Objectives
  • Describe the essentials of consumer behavior
  • Describe the characteristics of Internet surfers and EC purchasers
  • Understand the process of consumer purchasing decision making
  • Describe the way companies are building relationships with customers
  • Explain the implementation of customer service
  • Describe the consumer market research in EC
  • Experience the role of intelligent agents in consumer applications
  • Describe the organizational buyer behavior model
the importance of customers
The Importance of Customers
  • Competition
    • “fighting” on customers
    • to succeed : control the 3Cs
  • Customers
    • customers becomes a King/Queen
    • to succeed : finding and retaining customers
  • Change
    • EC is a new distribution channel
    • to succeed : convince customers to go online and then to choose your company over the online competitors
  • The major pressures are labeled the 3Cs
a model of ec consumer behavior

Individual

Characteristics

Age, gender, ethnicity,

education, lift style,

psychological, knowledge,

values, personality

Environment

Characteristics

Social, family,

communities

Stimuli

Buyers’ Decisions

Buy or not

What to buy

Where (vendor)

When

How much to spend

Repeat purchases

Vendors’ controlled System

Marketing

Price

Promotion

Product

Quality

Others

Economical

Technology

Political

Cultural

Logistic

Support

Payments,

Delivery

Technical

Support

Web design,

Intelligent-

agents

Customer

service

FAQ,

e-mail,

Call centers,

One-to-one

A Model of EC Consumer Behavior
  • Purchasing decision begins with customer’s reaction to stimuli

Decision

Making

Process

a model of ec consumer behavior cont
A Model of EC Consumer Behavior (cont.)
  • Consumer Types
    • Individual consumers: get much of the media attention
    • Organizational buyers: do most of the shopping in cyberspace
  • Purchasing Types
    • Impulsive buyers: purchase products quickly
    • Patient buyers: purchase products after making some comparisons
    • Analytical buyers: do substantial research before making the decision to purchase products or services
  • Purchasing Experiences
    • Utilitarian: shopping “to achieve a goal” or “complete a task”
    • Hedonic: shopping because “it is fun and I love it”
variables influencing decision making process
Variables InfluencingDecision Making Process
  • Environmental Variables
  • Social variables
    • people influenced by family members, friends, co-workers, “what’s in fashion this year”, Internet communities and discussion groups
  • Cultural variables
  • Psychology variables
  • Other environmental variables
    • available information, government regulations, legal constraints, and situational factors

6

slide7
Consumer Demographics
  • Gender (61% male user & 39% female user)

WOMEN’S PURCHASES BY CATEGORY (1998)

% of Total Respondents

Buying (166)

% of Total Category

Purchases (299)

Purchases Category

Computer Software 15% 39%

Books 14% 35%

Music 11% 28%

Magazines 11% 28%

Flowers 11% 28%

Women’s Clothing 7% 19%

Computer Hardware 5% 12%

Games 5% 11%

Videos 4% 10%

Crafts & Craft Supplier 4% 10%

Toys 3% 9%

Home Furnishings 2% 6%

Children’s Clothing 2% 4%

Men’s Clothing 2% 4%

Art 2% 4%

Jewelry 1% 3%

Furniture 1% 2%

TOTAL 100%

variables influencing decision making process cont
Variables Influencing Decision Making Process (cont.)
  • Consumer Demographics (1998)
  • Age (mostly 21-30 year-old)
  • Marital status (41% married & 39% single)
  • Educational level (81% with at least some college education & 50% obtained at least baccalaureate degree)
  • Ethnicity (87% white in America)
  • Occupation (26% educational-related field, 22% computers & 22% other professionals)

© Prentice Hall, 2000

8

variables influencing decision making process cont9
Variables Influencing Decision Making Process (cont.)
  • Consumer Demographics
  • Household income (46% at least $50,000/year)
  • Internet usage profile (Internet access option, length and frequency of web use & access cost)
  • Internet access option (63% primarily form home & 58% primarily from work or school)
  • Length and frequency of use (88% access daily & 33% access 10-20 hours a week)
  • Access cost (67% pay for their own Internet access & 31% paid for by their employers)

© Prentice Hall, 2000

9

slide10

In last six months of 1998:

Consumer Buying Patterns

Experience:

  • 76% filling out a form on the Web
  • Online purchases are more than paper catalog purchases for Net buyers
  • 32% spent between $100.00-$500.00
  • Spending of less than $50.00 decreases steadily as shoppers gain experience
  • Women are more likely to purchase more in the under $50.00 level, and less likely to purchase at the above $500.00 level
consumer purchasing decision making
Consumer Purchasing Decision-Making
  • Roles that people play in the decision making process
  • Initiator : the person who first suggests or thinks of the idea of buying a particular product or service
  • Influencer : a person whose advice or views carry some weight in making a final buying decision
  • Decider : the person who ultimately makes a buying decision or any part of it - whether to buy, what to buy, how to buy, or where to buy
  • Buyer : the person who makes an actual purchase
  • User : the person who consumes or uses a product or service
consumer purchasing decision making cont

Information search

(What? From whom?)

Alternative evaluation,

negotiation and selection

Purchase and delivery

After purchase service

and evaluation

Consumer Purchasing Decision-Making (cont.)
  • The Purchasing Decision-Making Model

Need identification

(Recognition)

model of internet consumer satisfaction

3rd Party

Seal of Approval

Vendor

Reputation

Logistics Support

Trust in

Web-shopping

Customer Service

Pricing Attractiveness

Repeat Web Purchase (Brand Loyalty)

Web-site Store Front

Security

System

Reliability

Speed of

Operation

Ease of

Use

Content,

Quality

Privacy

Transaction Safety

Format

Timeliness

Reliability

Authentication

Integrity

Non-repudiation

Completeness

Model of Internet Consumer Satisfaction

Customer Satisfaction

one to one marketing
One-to-One Marketing
  • Relationship marketing
    • “Overt attempt of exchange partners to build a long term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds”
  • “Treat different customers differently”
    • Able to change the manner its products are configured or its service is delivered, based on the individual needs of individual customers
one to one marketing cont
One-to-One Marketing (cont.)
  • Customer loyalty
  • Purchase behavior
  • One of the most significant contributors to profitability
  • Increase profits; strengthen market position; become less sensitive to price competition; increase cross-selling success; save cost, etc.
  • Real world examples
    • 1-800-FLOWERS
    • Amazon.com
    • Federal Express (FedEx)
one to one marketing cont16
One-to-One Marketing (cont.)
  • Building and maintaining customer loyalty
  • Maintain continuous interactions between consumers and business
  • Make a commitment to provide all aspects of the business online
  • Build different sites for different levels of customers
  • Willing to invest capital, both human and financial, in the information systems, to insure continuous improvement in the supporting technology as it becomes available
one to one marketing cont17
One-to-One Marketing (cont.)
  • Building and maintaining customer loyalty
  • Make a commitment to use the information collected about customers in an ethical manner
  • Realistic managerial expectations in the payback period and cost recovery
  • Set acceptable standards for response time in customer service (24-48 hours); Use intelligent agents to expedite and standardize responses whenever possible
  • Ability to change and customize information and services quickly and inexpensively is a must
one to one marketing cont18
One-to-One Marketing (cont.)
  • Customer Service
    • A new look and feel

Put the burden on the

customer to treat a

problem or inquiry and

receive information

bit by bit

Install Web servers

which allow each

customer to create

individual web pages

that can be customized

to record purchases

and preferences

one to one marketing cont19

ISFLAVIA:

One-to-One Marketing (cont.)
  • Customer Service
  • Information can be directed to the customer efficiently
  • Creation of a database which records purchases, problems and requests is facilitated
  • Information can now be traced and analyzed for immediate response
  • If customer service options and solutions do not maintain the same level of excitement and interaction as the advertising and sales presentations, the level of intensity declines and the vendor runs the risk of losing customers
implementing customer service in cyberspace
Implementing Customer Service in Cyberspace
  • Product Life Cycle
  • Phase 1. Requirements: assisting the customer to determine needs
  • Phase 2. Acquisition : helping the customer to acquire a product or service
  • Phase 3. Ownership : supporting the customer on an ongoing basis
  • Phase 4. Retirement : helping the client to dispose of a service or product

© Prentice Hall, 2000

20

implementing customer service in cyberspace cont
Implementing Customer Service in Cyberspace (cont.)
  • Types of Customer Service Functions
  • Answering customer inquires
  • Providing technical and other information
  • Letting customers track accounts or order status
  • Allowing customers to customize and order online

© Prentice Hall, 2000

21

implementing customer service in cyberspace cont22
Implementing Customer Service in Cyberspace (cont.)
  • Addressing Individual Customer Needs

Companies

understand their

customers’ needs

and buying habits

better

Doing

business

via Web

Companies

customize their

future marketing

efforts

© Prentice Hall, 2000

22

tools of customer service
Tools of Customer Service
  • Personalized Web Pages
    • used to record purchases and preference
    • direct customized information to customers efficiently
  • Chat Room
    • discuss issues with company experts; with other customers
  • E-mail
    • used to disseminate information, send product information and conduct correspondence regarding any topic, but mostly inquiries from customers
  • FAQs
    • not customized, no personalized feeling and contribution to relationship marketing
tools of customer service cont
Tools of Customer Service (cont.)
  • Help Desks and Call Centers
  • A comprehensive customer service entity
  • EC vendors take care of customer service issues communicated through various contact channels
  • Telewebs
    • combines Web channels, such as automated e-mail reply, Web knowledge bases and portal-like self service with call center agents or field service personnel
  • Internet
    • a medium of instant gratification
    • demand for both prompt replies and proactive alerts
market research for ec

Research methodology,

Data collection plan

Data collection,

Data analysis

Results, Recommendations,

Implementation

Market Research for EC
  • Aims
  • Finding relationship between consumers, products, marketing methods, and marketers through information in order to discover marketing opportunities and issues, to establish marketing plans, to better understand the purchasing process, and to evaluate marketing performance

Problem definition and

Research objectives

market research for ec cont
Market Research for EC (cont.)
  • Market Segmentation
  • Market segmentation is the process of dividing a consumer market into meaningful groups for decision-making.
  • In the past, most marketing approaches have focused on group-based targeted markets, not on a personal way to identify individual consumers who actually purchased and used the products.
market research for ec cont27
Market Research for EC (cont.)
  • Market Segmentation
  • Improved methods of marketing research based on information technologies allow marketers to collect, store, and analyze detailed and personal information in a cost-efficient way.
  • Example : Wal-Mart
  • Consumer life styles shape psychographic segmentation of the market.
  • Lifestyles are typically established by consumers filling out questionnaires about their activities such as work and family, interests and opinions, etc.
market research for ec cont28

Geographic

Region

Pacific; Mountains; West North Central;

West South Central; East North Central;

East south Central; South Atlantic;

Middle Atlantic; New England

Size of city, county,

Under 5,000; 5,000 – 19,999; 20,000 –

or standard

49,999; 50,000 – 99,999; 100,000 –

metropolitan statistical area (SMSA)

249,999; 250,000 – 499,999; 500,000 –

999,999; 1,000,000 – 3,999,999; 4,000,000

or over

Population density

Urban; suburban; rural

Climate

Warm; cold

Market Research for EC (cont.)
  • Consumer Market Segmentation Tasks in the US

Segmentation Bases/Descriptors

Possible Categories

market research for ec cont29
Market Research for EC (cont.)
  • Online Market Research
  • Using online technology to conduct surveys
  • More efficient, faster, and cheaper data collection, and a more geographically diverse audience than those found in off-line surveys
  • Ability to incorporate radio buttons, data-entry fields and check boxes in the surveys
  • Eliminating the data reentry errors (from questionnaires to the computer, for analysis)
  • Not suitable for every customer or product — it is skewed toward highly educated males with high disposal income
market research for ec cont30
Market Research for EC (cont.)
  • Online Market Research
  • Risk of losing people who sign off if they had difficulty in logging on or communicating with researchers
  • Companies such as E-valuations or Northstar can conduct the research for your company
  • VALS 2 (values and lifestyles) is a well-known segmentation dividing consumers in the U.S. (developed at SRI International in California)
market research for ec cont31
Market Research for EC (cont.)
  • Online Market Research Methods
  • Process of conducting the research
    • Define the research issue and the target market
    • Identify newsgroups and Internet communities to study
    • Identify specific topics for discussion
    • Subscribe to pertinent groups, register in communities
    • Search discussion group topics and content lists to find the target market
    • Search e-mail discussion groups lists
    • Subscribe to filtering services that monitor groups
    • Read FAQ’s and instructions of your competitor
    • Enter chat rooms, whenever possible
market research for ec cont32
Market Research for EC (cont.)
  • Online Market Research Method
  • Content of the research instrument
    • Post strategic queries to news groups
    • Post surveys on your Web site
    • Offer rewards for participation
    • Post strategic queries on your Web site
    • Post relevant content to groups with a pointer to your Web site survey
    • Post a detailed survey in special e-mail questionnaires
    • Create a chat room and try to build a community of consumers
market research for ec cont33
Market Research for EC (cont.)
  • Online Market Research Methods
  • Target Audience of the Study
    • Compare your audience to the target population
    • Determine your editorial focus
    • Determine your content
    • Determine what Web services to create for each type of audience
market research for ec cont34
Market Research for EC (cont.)
  • Consumer Market Research
  • Methods of conducting a survey: personal interviews; telephone survey and mail survey
  • Online market research done on the Net, ranges from client-specific moderated focus groups conducted via chat rooms; to interactive surveys placed on Web sites
  • The Internet is providing an efficient channel for faster, cheaper and more reliable collection and transmission of marketing information even in multimediaform
market research for ec cont35
Market Research for EC (cont.)
  • Consumer Market Research
    • Mass marketing research

Process orientation

      • Two perspectives

Content orientation

      • Concept testing
    • Tracking
      • Keep track of consumers’ Web movements using cookies—files attached to a user’s browser
intelligent agents for consumers
Intelligent Agents for Consumers
  • Search Engines
    • Computer programs that can automatically contact other network resources on the Internet, searching for specific information or key words, and reporting the results
  • Intelligent Agents
    • Computer programs that help the users to conduct routine tasks, to search and retrieve information, to support decision making and to act as domain experts
    • Do more than just “search and match”
intelligent agents for consumers cont
Intelligent Agents for Consumers (cont.)
  • Intelligent Agents for Information Search and Filtering
  • Help to determine what to buy to satisfy a specific need by looking for specific products’ information and critically evaluate them
  • Example : Firefly
    • uses a collaborative filtering process that can be described as “word of mouth” to build the profile
    • asks a consumer to rate a number of products, then matches his ratings with the ratings of other consumers and, relying on the ratings of other consumers with similar tastes, recommend him products that he has not yet rated
intelligent agents for consumers cont38
Intelligent Agents for Consumers (cont.)
  • Intelligent Agents for Product and Vendor Finding
  • Bargainfinder form Andersen Consulting (a pointer)
    • queries the price of a specific CD from a number of on-line vendors and returns a list of prices (unsuccessful)
  • Jango from NetBot/Excite
    • originates the requests from the user’s site instead of from Jango’s  vendors have no way to determine whether the request is from a real customer or from the agent
    • provides product reviews
  • Kasbah from MIT Lab
    • users wanting to sell or to buy a product, assign the task to an agent who is then sent out to proactively seek buyers or sellers
intelligent agents for consumers cont39
Intelligent Agents for Consumers (cont.)
  • Negotiation Agents
  • Price and other terms of transactions are determined
  • Kasbah
    • multiple agents; classified as system where users create agents for the purpose of selling or buying goods
    • 3 strategies : anxious, cool-headed and frugal
  • Tete-@-tete
    • considering a number of different parameters: price, warranty, delivery time, service contracts, return policy, loan option and other value added services
    • being argumentative (use information acquired during the first two stages of the purchasing decision model to evaluate each single offer)
intelligent agents for consumers cont40
Intelligent Agents for Consumers (cont.)
  • Learning Agents
  • Be capable of learning individuals’ preferences and make suggestions
  • Memory Agent from IBM & Learn Sesame from Open Sesame
    • use learning theory by monitoring customers’ interactions
    • learns customers’ interests, preferences and behavior and delivers to them customized service accordingly
  • Groaphens form Netperceptions
    • personalizes content and creates customer loyalty programs with learning agent technology
organizational buyer s behavior

Characteristic

Retail Buyers

Organizational Buyers

Demand

Individual

Organizational

Purchase volume

Smaller

Larger

Number of customers

Many

Fewer

Location of buyers

Dispersed

Geographically concentrated

Distribution structure

More indirect

More direct

Nature of buying

More personal

More professional

Nature of buying influence

Single

Multiple

Type of negotiations

Simpler

More complex

Use of reciprocity

No

Yes

Use of leasing

Lesser

Greater

Primary promotional method

Advertising

Personal selling

Organizational Buyer’s Behavior
  • Consumer Types
  • Individual customers Vs. Organizational buyers
organizational buyer s behavior cont

Individual

Influences

Age; gender; ethnicity; education, lift style; psychological; knowledge; values; personality

Interpersonal Influences

Authority; status; persuasiveness

Organizational

Influences

Policies and procedures; organization structure; centralized/decentralized; systems used; contracts

Buyers’

Decisions

Buy or not; What to buy;

Where (vendor);

When; Delivery terms

Payments

Stimuli

Marketing

Price

Promotion

Product

Quality

Others

Economical

Technology

Political

Cultural

Vendors’ Controlled Systems

Logistic support

Payments, delivery

Technical support

Web design, Intelligent-

agents

Customer service

FAQ,E-mail,

Call Centers,

One-to-one

Organizational Buyer’s Behavior (cont.)
  • Behavioral Model

Decision Making Process (Group or Individual)

© Prentice Hall, 2000

management issues
Management Issues
  • Reasons for customers visiting a web site:
  • Benefit from lots of graphics (negative too, slows interaction)
  • Easy linking when browsing for products and information
  • Easy entry into specific product lines or service areas
  • Foolproof experience to keep the customer focused on the immediate need and not get lost or placed off track