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Online Consumer Behavior

Online Consumer Behavior. Different Types of Buyers. B2B Small business 1-75 employees Over 25 million businesses 66% buy online, 50% have web sites Large business 250+ employees 90% buy online & have websites Approximately 7 million businesses. Different Types of Buyers. B2C

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Online Consumer Behavior

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  1. Online Consumer Behavior

  2. Different Types of Buyers • B2B • Small business 1-75 employees • Over 25 million businesses • 66% buy online, 50% have web sites • Large business 250+ employees • 90% buy online & have websites • Approximately 7 million businesses

  3. Different Types of Buyers • B2C • US population is over 286 million • 4.6% of world population • Aging • Becoming more ethnically diverse • Growth in non-traditional households (76.5%)

  4. Cyberspace Demographics • 64% of US population is online • 32% of users have college degree • Higher incomes • Most users tend to be 35-54 years old • Teens (12-17) most rapidly growing group • Digital wallets • 100% of college students are online

  5. Cyberspace Demographics • 52% of Internet users are women • make most retail decisions • 70% of online sales are by women • Minority Groups • 26% of African Americans online • 49% of Hispanics • 69% of Asian Americans

  6. Cyberspace Demographics • 49% of users are in a city • 70% of homes in Portland & Seattle online • Only 14% of users are rural consumers • 8% of Internet users have a disability • 4% are blind

  7. World Usage Statistics (2005)

  8. What consumers do online • Communicating • email most used function • ICQ fastest area of growth • Seeking information • Most sought information online is travel • 35% of buyers book flights online • 26% of consumers track stocks online

  9. Online Dating Industry • $516 million in revenues (2005) • Over 850 online dating services • 59% of daters find it “difficult” to meet someone new • Most likely place to meet people: • Work (22%), Internet (18%), Bars (18%), Clubs (11%) • Downsides: stigma & anonymity (married)

  10. Key Players • Match.com • Yahoo! Personals • eHarmony • Lavalife • Traditional dating firms • It’s Just Lunch • Social networking communities

  11. Match.com • Conceived in 1993 • Owned by Interactive Corporation • Ticketmaster • World’s largest online dating firm • 900,000 paying subscribers • 12 million profiles posted • January (2004), 29.6 million unique visitors

  12. Match.com • Partnered with several firms • America Online & Microsoft’s MSN • Subscriptions as low as $12.99 per month • New services include: • video, off line speed dating, friend list, travel site, MatchLive off line events

  13. What consumers do online • Purchasing • B2C sales are steadily growing • Higher income consumers more likely to buy online • Women more likely to purchase online • 81% of college students have purchased online • US & European Teens spent $1.3 billion online in 2001

  14. What consumers do online • Gaming • 30% of all Internet users play games online • 62% of young adults • 41% of those 50+ • Men are more loyal & largest group of gamers • Prefer football & outer space games • Women prefer business simulations & classic arcade games

  15. Gaming Industry • U.S. video game market, $6.9 billion in revenue (1999) • PC Game market, $1.5 billion in revenue • Online game revenue, $106 million (1999) • From: Sony Everquest, Electronic Arts Ultima Online, and Microsoft’s Asheron’s Call • $10/month subscription fee • Online game revenue, predicted to be over $800 million by 2005

  16. Gaming Industry • Traditional video and PC games cost millions of dollars to produce • Sell for about $30 each • Online games are less complex and can be made for approximately $75,000

  17. The Groove Alliance • Game making firm • Started with Real Pool on CD-Rom • Trade show success • 3D Groove Plug In • Ability to embed ads on pool table • Real Pool sold out right to Shockwave.com

  18. The Groove Alliance • Since that time sold many more games • Non-exclusive licensing agreements • Tank Wars • Merchandising rights retained by Groove Alliance

  19. What Consumers do online • Entertaining • Online music most popular among those less than 20 years old • Online music sales will be over $5.4 billion (2005) • Napster: Peer-to-Peer exchange phenomena • iPod & iTune phenomena

  20. Online shopping differs • Online consumer behavior differs • Quality cues • Stability of firm and product quality hard to judge • Cognitive difficulty • Consumers get frustrated when they cannot easily find information

  21. How is the Internet Unique? • Product features • Search versus Experience goods • Search: products & services that are easy for a consumer to evaluate • predictable brand names, can test product features • Experience: difficult to understand and evaluate • complex, highly subjective

  22. How is the Internet Unique? • Flow (peak/optimal experience) • seamless sequence of responses • loss of self-consciousness • intrinsically enjoyable & self-reinforcing • Experienced by web users • Balance between capability & challenge • Implies skill & learning on web

  23. How is the Internet Unique? • Community • Rules that define membership • A strong, brand focus • Collaborative production of material by members • Repeat use by members • Social bonds

  24. Types of communities • Personal communities: small network of linked individuals • direct communication within a small group • Extended communities: many small sub-groups within an overarching structure • flexible in scale and scope • more personalization in smaller niches

  25. Benefits of Community • Changes width & breadth of referrals • most consumers rely on 3 people for WOM • easy access to experts to more precise information

  26. Negative Consumer Behaviors • Social isolation • Increased usage online leads to • Decline in social interaction • Increase in depression • Internet addiction • Loss of sleep • Loss of physical relationships

  27. Negative Consumer Behaviors • Anti-corporate activism • Unprecedented consumer power • Complaint & hate websites • www.complaints.com • www.walmart-blows.com • www.gapsucks.org • Corporate reactions • Buy, Monitor, Respond, Ignore

  28. Interactivity & The Six I’s of Customer Satisfaction Using Technology to be More Customer Focused

  29. OnStar • Started in 1995 • Nation’s leading provider of in-vehicle safety, security, & communications services • Wirelss & Global Positioning systems • Telematics • 4 million subscribers • 2005, Standard on all new GM vehicles • More than 50 models

  30. OnStar • Over 10 years, serviced 53+ million subscriber interactions • Average month: • 383,000 routing calls • 43,000 remote door unlocks • 23,000 road side assistance • 27,000 remote vehicle diagnostic checks • 15,000 emergency service requests • 400 stolen vehicle assistance

  31. OnStar • Advanced Automatic Crash Notification System (AACN) • Started in Malibu, 26 models by 2006 • Hands free calling (2000) • 630 million minutes sold to subscribers • New Command Center • With OnStar sound studio for digital broadcasting

  32. OnStar • Strategic Alliances • Leading public safety & emergency medical organizations • Association of Public Safety Communications Officials (APCO) • Agencies supporting efforts to find missing children • America’s Most Wanted

  33. OnStar • Award-winning advertising campaign • “Real Stories” launched in 2002 • Users share life changing experiences • 2005, OnStar brand reached 100% brand awareness among new vehicle buyers • 80% of subscribers will only consider vehicles with OnStar for next purchase

  34. Growth in Interactive media • Technology now offers more control of information marketers’ receive • Interactivity is one area where marketers can use technology to more effectively reach out to the consumer

  35. Dimensions of Interactivity • Selectivity • extent to which users are offered content choices • such as entertainment or shopping • expands consumers’ options & content • able to deliver to more relevant & personalized information to the customer

  36. Dimensions of Interactivity • Ease of effort • extent to which users must exert themselves to access content • consumer confusion & frustration with systems should decrease overtime

  37. Dimensions of Interactivity • Use monitoring • extent to which the system monitors use • monitor information, choices, track behaviors • feedback to marketer, greater control with use of databases • raises privacy issues

  38. Dimensions of Interactivity • Responsiveness • degree to which a medium reacts to a user • circumvent users’ prejudgments to prevent screening out of material • allow for more focused shopping experiences • can better cross sell

  39. Dimensions of Interactivity • Ease of Adding Content • extent to which users may add material to the system that a mass audience can access • users become sources of information • word of mouth/brand advocates • consumer complaints become more relevant

  40. Dimensions of Interactivity • Interpersonal Communication Potential • extent to which media facilitates interpersonal communication • Person-to-person interaction • bi-directionality of communication & relationship • greater involvement with other consumers & the marketer

  41. Dimensions of Interactivity • Asynchronicity • extent to which messages can be preserved and shifted at convenient times • message permanence • can combine information in personally relevant ways

  42. Interactivity • Responsiveness is the most common feature used on web sites • Systems are not yet meeting all consumer needs

  43. Selling Online And Channel Issues

  44. Channels of Distribution • Supply channel brings materials & supplies to manufacturer • Distribution channel moves product from manufacturer to consumer • thought to make the process of getting product to market more efficient • Can carry broader product lines & categories • Are closer to the customer & can develop knowledge/profile of target market

  45. Channel Functions • Market makers • Buyers agents • Seller agents • Payment enablers • Fulfillment providers • Context providers

  46. Two-Level Three-Level Four-Level Five-Level Manufacturer Manufacturer Manufacturer Manufacturer Agent Wholesaler Wholesaler Retailer Retailer Retailer Consumer Consumer Consumer Consumer The Channel Structure

  47. Distribution Strategies • Direct distribution: manufacturer to buyer • Build-to-order direct sales • mass customization • Dell (1999) selling $40 million worth of computers on the web daily • 75% of orders placed online • 50% technical support online • 2002 extended direct sales to kiosks in retail malls • try product, place order on kiosk

  48. Distribution Strategies • Direct digital distribution: some products will be completely digital someday • music, airline tickets, hotel reservations, video games, magazines, newspapers, movie tickets, financial services • Internet’s ease of creating direct distribution channels already impacting industries

  49. Distribution Strategies • Disintermediation--dropping layers of distribution channel • travel agents, financial services, florists • Delta sold 13% of tickets online in 2000 • 2001, travelers spent $19.4 billion purchasing tickets online • Reintermediation--add layers • real estate

  50. Distribution Strategies • Some firms have created exclusive distribution agreements • Levi’s (1998 manufacturer sells online; 2000 exclusive arrangements created) • Multichannel Distribution--2 or more distribution channels to better reach customers • Gateway: web site, telephone, retail stores • Charles Schwab: 24/7 channel strategy

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