E-Marketing 4/E Judy Strauss, Adel I. El-Ansary, and Raymond Frost

1. E-Marketing 4/EJudy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 7: Consumer Behavior 7-1

2. Chapter 7 Objectives • After reading Chapter 7 you will be able to: • Discuss general statistics about the Internet population. • Describe the Internet exchange process and the technological, social/cultural and legalcontext in which consumers participate in this process. • Outline the broad individual characteristics and consumer resources that consumers bring to the online exchange. • Highlight the four main categories of outcomes that consumers seek from online exchanges. 7-2

3. The Hanover Story • Hanover Direct’s 4 million customers buy through 12 different catalogs and Web sites. • 99% of telephone customers complete an order; only 2% of all online visitors buy during a visit. • Consumer research revealed several reasons for shopping cart abandonment: • Technical difficulties. • Consumer indecision at final check-out page. • By monitoring online behavior, Hanover has achieved 33% improvement. 7-3

4. Consumers in the 21st Century • The Internet has grown faster than any other medium in history. • In 2004, 958 million people had access, representing 16% of the global population. • Internet usage in developed nations has reached a critical mass, leading marketers to ask more questions about consumer behavior on the Internet. 7-4

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. 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.

8. Inside the Internet Exchange Process • What explains 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.

9. 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.

10. The Internet Exchange Process Technological, Social/Cultural and Legal Context Internet Exchange Outcomes Connect Enjoy Learn Trade Individual Characteristics Resources Marketing Stimuli • Exchange refers to the act of obtaining a desired object by offering something in return. • Exchange occurs within a technological, social/cultural, and legal context. 7-5

11. Technological Context • 35% of online Americans connect to the Internet with a broadband connection. • Broadband has increased by 20% in the past 2 years. • The U.S. is only the 10th largest broadband market. • Broadband users exhibit different online behavior than those using mobile handheld devices or dial up. 7-6

12. Top Broadband Country Markets New Data: http://www.internetworldstats.com/dsl.htm 7-7

13. Social and Cultural Contexts • Social/cultural trends have a huge effect on online exchanges. • Information overload overwhelms consumers. • Time poverty creates multitasking and contributes to a stressful environment. • Home and work boundaries are dissolving. • Consumers seek convenience and have high expectations regarding customer service. • “free, perfect, now!” • Consumers cannot do without Internet access: “online oxygen.” 7-8

14. Social and Cultural Contexts, cont. • Self-service is required. • Sophisticated consumers know they are in control and have choices. • Privacy and data security are paramount. • Online crime worries consumers. http://www.ic3.gov/media/annualreports.aspx 7-9

15. Legal Context • Legal factors were discussed in Chapter 5. • Despite piracy laws, illegally used software abounds. • In spite of the new Can-Spam law, the number of unsolicited emails has increased. • However, when the recording industry sued thousands of illegal music file downloaders, consumer behavior changed. • In 2002, 37% of online consumers shared music files. • Only 23% shared files in 2004. 7-10

16. Individual Characteristics & Resources • http://www.pewinternet.org/index.asp • Individual characteristics affect Internet use. • Age, income, education, ethnicity, and gender • Attitudes toward technology • Online skill and experience • Goal orientation • Convenience or price orientation • Family life cycle • Consumer resources for exchange • Money, time, energy and psychic costs 7-11

17. Monetary Cost • The Internet exchange doesn’t use cash or paper checks for online transactions. • Many forms of digital money: • Credit and debit cards. • Electronic checks through a third-party such as PayPal. • Smart cards or Splash Plastic. • Other innovative forms are appearing in other countries. 7-12

18. Time Cost • Online attention is a desirable and scarce commodity. • Worldwide, the average user goes online 29 times/month, 49 minutes each time. • Some researchers believe that consumers pay more focused attention online than with other media. • Hoffman and Novak applied the concept of flow to online behavior. 7-13

19. Flow • The state occurring during during network navigation which is: • Characterized by a seamless sequence of responses facilitated by machine interactivity • Intrinsically enjoyable • Accompanied by a loss of self-consciousness • Self-reinforcing

20. Global Usage: 2002 to 2004 New Data: http://www.nielsen-netratings.com/resources.jsp?section=pr_netv&nav=1 7-14

21. Energy and Psychic Costs • It takes effort to log on and check email, especially for dial-up users. • Consumers apply psychic resources to understand information or when facing technical problems. • Shopping cart abandonment and failed online purchases have numerous causes. • Technical reasons. • The consumer may be “window shopping,” comparing several carts at once. 7-15

22. Exchange Outcomes • There are 4 basic things that people do online: • Connect • Enjoy • Learn • Trade • Each is ripe with marketing opportunity. • Data Sites • http://www.clickz.com/stats • http://www.nielsen-netratings.com/ • http://www.comscore.com/press/data.asp • http://www.pewinternet.org/trends.asp • http://www.internetworldstats.com/stats.htm • http://www.webreference.com/internet/statistics.html 7-16