SECTION 3: Customer added value, Consumer behavior

1. SECTION 3: Customer added value, Consumer behavior

2. Added Value • The factors of production provide “things” which raise the unit price of a product

3. Product attributes model of consumer value (Richard Croome, Meredith Lawley and Bishnu Sharma, University of the Sunshine Coast)

4. How to make customers happy • A critical success factor for B2C is to find what customers want  market research • In addition to price, customers want convenience, service, and quality and they often want to enjoy the experience of online shopping

5. Virtual value chain • Original VC model treats info only as a supporting element • But info itself can be a source of value • Example: FedEx online tracking • DHL now can notify you via email when package is delivered at your home • Example: Amazon recommendations • Idea is to look for ways to create value using info • Info includes just about anything you can digitize

6. Information as added value • An example of using the VVC to create such services includes the FedEx Corporation which recently created a customer designed website to track packages by using their air bill number • FedEx has been able to capitalize using the VVC by adding value for the customer (for free) and in turn has increased customer loyalty in an intensely competitive market.

7. Personalization • Ability of the seller to create an element of personalization for each individual consumer • Can use technology to track browsing and buying of each consumer • With that information seller can • tailor product pattern by showing items of interest • Offer incentives that appeal to that consumer’s sense of value • Provide services that attract consumer back to Web site

8. “Design it your way” • Internet for easy self-configuration  creates a large demand for personalized products and services • Manufacturers can meet that demand by using-mass customization strategy

9. Mass-customization • In on-line clothing retail, customers can order bespoke outfits based on their exact measurements and preferences, choosing from a range of over 100 colors • Businesses such as Beyond Fleece and French Rags have seen astonishing growth around 500% customer growth in 2002 based on this model • These businesses control all manufacture so that customers can order other items in future in exactly matching colors • Interestingly, sales consultation is done by agents personally, but once on board, the personal nature of the relationship can be exploited efficiently through direct control of the design, marketing and manufacture • This “mass customization” has proved profitable because every item is made to order, contrasting with the existing model in which styles are ordered a year in advance and stockpiled, which often sees product being marked down and sold off at the end of the season. (Source: Rogers 2003)

10. Amazon.com • Amazon decided to build its own warehouses in order to increase the speed and reliability of its delivery of online orders. • Amazon has sought to add value in the sales and fulfillment activities, seeing this as a core competency • However, the investment in new facilities required to serve new markets or to offer a step change in capacity have carried a crippling cost, and indeed Amazon has closed several facilities where capacity has been under-utilized • More recently, Amazon has adopted a more flexible approach and also acts as a marketplace for other sellers that supply other goods and services, even offering lower prices from other suppliers on goods it sells itself. (Source: Amit & Zott 2001)

11. Consumer behavior online • Companies are operating in an increasingly competitive environment (=Internet) • Companies treat they customers like royalty as they try to lure them to buy their products and services • Finding and retaining customers is a major critical success factor for most business • One of the keys to building effective customer relationship is an understanding of consumer behavior online

12. Consumer behavior model(Hawkins et al., 1998)

13. Purchase decision making process and support system • Need recognition • Information research • Evaluation, negotiation, selection • Purchase, payment and delivery • After-purchase service and evaluation

14. Purchase decision making process and support system • Need recognition • Web advertising • Discussion forums • URL on physical material • Information research • Virtual catalogs • Web directories and classifiers • Search on web site • Information brokers • Evaluation, negotiation, selection • FAQs and other summaries • Discussion forums • Referees • Samples and trials • Cross-site comparision

15. Purchase decision making process and support system • Purchase, payment and delivery • Ordering of product or service • Arrangement of delivery • Credit cards, virtual banking • Logistic providers and package tracking • After-purchase service and evaluation • Customer support via email, Instant messages (IM), chat, news groups, • discussion forums • Refereeing and feedback

16. Model of the online buying decision process(Richard Croome, Meredith Lawley and Bishnu Sharma, University of the Sunshine Coast)