Chapter 3 Internet Consumers and Market Research

1. Chapter 3Internet Consumers and Market Research

2. 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

3. 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

4. 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

5. 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”

6. 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

7. 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%

8. 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

9. 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

10. 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

11. 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

12. 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)

13. 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

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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.

27. 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.

28. 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

29. 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

30. 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)

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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”

37. 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

38. 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

39. 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)

40. 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

41. 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

42. 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

43. 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