Ecommerce Chap 03

1© Prentice Hall, 2000

Chapter 3Internet 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� 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

� 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

� Purchasing decision begins with customer’s reaction to stimuli

Vendors’ controlled System

Logistic

SupportPayments,Delivery

Technical

SupportWeb design,Intelligent-agents

CustomerserviceFAQ,e-mail,Call centers,One-to-one

DecisionMakingProcess

Stimuli

MarketingPrice

PromotionProductQuality

OthersEconomicalTechnology

PoliticalCultural

Buyers’ Decisions

Buy or notWhat to buy

Where (vendor)When

How much to spendRepeat purchases

IndividualCharacteristics

Age, gender, ethnicity,education, lift style,

psychological, knowledge,values, personality

EnvironmentCharacteristics

Social, family,communities


� 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”

A Model of EC Consumer Behavior (cont.)

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


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

WOMEN’S PURCHASES BY CATEGORY (1998)

Purchases Category% of Total Category

Purchases (299)% of Total Respondents

Buying (166)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%

� Consumer Demographics (1998)

Variables Influencing Decision Making Process (cont.)

� 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 (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)



Consumer Buying Patterns

In last six months of 1998:� 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

0

10

20

30

40

50

Pe

rce

nt

lessthan$50

$50-$100

$100-$500

$500or

more

Don'tknow

Amount Spent on Webin Last 6 Months of 1998

< 1 Year

1 - 3 Years

> 4 Years

Experience:


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


After purchase serviceand evaluation

Purchase and delivery

Alternative evaluation,negotiation and selection

Information search(What? From whom?)

� The Purchasing Decision-Making Model

Consumer Purchasing Decision-Making (cont.)

Need identification(Recognition)


Model of Internet Consumer Satisfaction

Customer Satisfaction

Logistics Support

Customer Service

Pricing Attractiveness

Web-site Store Front

3rd PartySeal of Approval

Trust inWeb-shopping

VendorReputation

Repeat Web Purchase (Brand Loyalty)

Security

Authentication

Privacy Transaction Safety

Non-repudiationIntegrity

SystemReliability

Speed of Operation

Ease of Use

Content,Quality

Format

Reliability

Completeness

Timeliness


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.)

� 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)


� 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


� 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


� Customer Service� A new look and feel

Install Web serverswhich allow eachcustomer to create

individual web pagesthat can be customized

to record purchasesand preferences

Put the burden on thecustomer to treat a

problem or inquiry andreceive information

bit by bit



� Customer Service

ISFLAVIA:ISFLAVIA:


� 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

� 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


� Types of Customer Service Functions

Implementing Customer Service in Cyberspace (cont.)

� Answering customer inquires� Providing technical and other information� Letting customers track accounts or order

status� Allowing customers to customize and

order online


� Addressing Individual Customer Needs

Doingbusinessvia Web

Companiesunderstand theircustomers’ needsand buying habits

better

Companiescustomize their

future marketingefforts

Implementing Customer Service in Cyberspace (cont.)



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


� Help Desks and Call Centers

Tools of Customer Service (cont.)

� 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

� Aims

Problem definition and

Research objectives

Research methodology,

Data collection plan

Data collection,

Data analysis

Results, Recommendations,

Implementation

� 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


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 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.


� Consumer Market Segmentation Tasks in the US

GeographicRegion

Pacific; Mountains; West North Central;West South Central; East North Central;East south Central; South Atlantic;Middle Atlantic; New England

Size of city, county, or standardmetropolitan statistical area (SMSA)

Under 5,000; 5,000 – 19,999; 20,000 –49,999; 50,000 – 99,999; 100,000 –249,999; 250,000 – 499,999; 500,000 –999,999; 1,000,000 – 3,999,999; 4,000,000or over

Population densityClimate

Urban; suburban; ruralWarm; cold


Segmentation Bases/Descriptors Possible Categories


� 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


� 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)


� 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


� 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


� 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


� 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 multimedia form


� 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

� 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 Information Search and Filtering

Intelligent Agents for Consumers (cont.)

� 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 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



� 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)



� 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

� Consumer Types

Demand Individual OrganizationalPurchase volume Smaller LargerNumber of customers Many FewerLocation of buyers Dispersed Geographically concentratedDistribution structure More indirect More directNature of buying More personal More professionalNature of buying influence Single MultipleType of negotiations Simpler More complexUse of reciprocity No YesUse of leasing Lesser GreaterPrimary promotional method

Advertising Personal selling

Characteristic Retail Buyers Organizational Buyers� Individual customers Vs. Organizational buyers


Organizational Buyer’s Behavior (cont.)

� Behavioral Model

Vendors’ Controlled Systems

Logistic supportPayments, delivery

Technical supportWeb design, Intelligent-agents

Customer serviceFAQ,E-mail,Call Centers,One-to-one

Decision Making Process (Group or Individual)

Stimuli

MarketingPrice

PromotionProductQuality

OthersEconomicalTechnology

PoliticalCultural

Interpersonal Influences

Authority; status; persuasiveness

IndividualInfluences

Age; gender; ethnicity; education, lift style;

psychological; knowledge; values; personality

OrganizationalInfluences

Policies and procedures; organization structure;

centralized/decentralized; systems used; contracts

Buyers’Decisions

Buy or not; What to buy;Where (vendor);When; Delivery termsPayments

© Prentice Hall, 2000


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

Documents

Ecommerce Chap 03