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

1. E-Marketing, 3rd editionJudy Strauss, Adel I. El-Ansary,and Raymond Frost Chapter 7: Consumer Behavior © Prentice Hall 2003

2. 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.

3. 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.

4. 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

5. 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.

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

7. 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.

8. 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.

9. 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.

10. 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.

11. 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.

12. The Online Exchange Process

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. Consumer Resources • For consumers: VALUE = BENEFITS - COSTS Costs = a consumer’s resources for exchange: • Money, • Time, • Energy, • Psychic costs.

21. 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.

22. 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.

23. 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.

24. 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.

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

26. 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.

27. Most Common Reasons for Failed Online Purchases Source: Boston Consulting Group Study as reported in Wellner (2001)

28. 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.

29. 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.

30. 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.

31. 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.

32. Proportion Performing Relationship Activities Online in the U.S. Source: Data from www.pewinternet.org

33. 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.

34. Proportion Performing Entertainment Activities Online in the U.S. Source: Data from www.pewinternet.org

35. 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.

36. 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.

37. Proportion Performing Media Consumption Activities Online in the U.S. Source: Data from www.pewinternet.org

38. 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.

39. Proportion Performing Information Consumption Activities Online in the U.S. Source: Data from www.pewinternet.org

40. 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.

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

42. 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.

43. Proportion Performing Transaction Activities Online in the U.S. Source: Data from www.pewinternet.org