Relation to text This slide relates to material on p. 113 and Figure 4-1 of the text. Summary Overview This slide shows the stages in the consumer decision-making process and the relevant internal psychological processes that relate to each stage. These stages include: Problem recognition – consumer perceives a problem or need or want and becomes motivated to solve or satisfy it Information search – looking for information needed to make a decision Alternative evaluation – considering other brands or alternatives Purchase decision – actual purchase of the product or service Post-purchase evaluation – compares level of performance with expectations and results in consumer becoming satisfied or dissatisfied Also included in this slide are the relevant internal psychological processes that occur at each stage of the decision process. These include: Motivation – factors that compel a consumer to take a particular action Perception – the process by which consumers receive, select, organize, and interpret information to create a meaningful picture Attitude formation – overall feeling toward, or an evaluation of, an object Integration – the way product knowledge, meanings, and beliefs are combined to evaluate two or more alternatives Learning – process by which individuals acquire the purchase and consumption knowledge they apply to future related behavior Use of this slide This slide can be used to introduce the consumer decision making process and the relevant internal psychological processes that occur during each stage of this process.
Relation to text This slide relates to material on pp. 113-114 of the text. Summary Overview The first stages of the decision-making process is problem recognition, which occurs when the consumer perceives a need and becomes motivated to solve the problem. Problem recognition is caused by a difference between what the consumer wants and what the consumer has. Recognition that there is a problem can be triggered by both internal and external factors. Some of the sources of problem recognition are: Out of stock – consumers use their existing supply and it must be replenished Dissatisfaction – consumers become dissatisfied with the current state of affairs and/or product being used New needs/wants – changes in consumers’ lives often result in new needs/wants Related products/purchases – other needs are stimulated by the purchase of a product Market-induced recognition – marketers encourage consumers to be dissatisfied with their current situation, and they try to create new needs and wants New products – innovative products are introduced and brought to the attention of consumers Use of this slide This slide can be used to show the various sources of problem recognition. Advertisers attempt to respond to, as well as influence, problem recognition, as this is where the consumer purchase process begins.
Relation to text This slide relates to material on pp. 115-116 and Figure 4-2 of the text. Summary Overview To better understand the reasons underlying consumer purchases behavior, marketers devote considerable attention to examining motives, which are factors that compel a consumer to take a particular action. One of the most popular approaches to understanding consumer motivation is based on the classical theory of human motivation by Abraham Maslow. His hierarchy of needs theory postulates five basic levels of human needs, arranged in a hierarchy based on their importance. There are several points regarding this theory of motivation that should be made. Lower-level needs are an ongoing source of motivation for consumer purchase behavior People are unlikely to move through the needs hierarchy in a stair-step manner. Because basic, lower level needs are met in most developed countries, marketers often target consumers’ higher-level needs in order to sell products. Advertising can be used to show how a brand can fulfill these needs. Use of this slide This slide can be used to introduce Maslow’s hierarchy of needs and how marketers must determine which of those needs their product or service will meet to make a sale.
Relation to text This slide relates to material on pp. 118-119 of the text. Summary Overview The second stage of the consumer decision making process is information search . Once consumers perceive a problem or need they begin to search for information needed to make a purchase decision. The various sources of information are shown on this slide. Personal sources – friends, relative, co-workers Market sources – information from advertisers, salespeople, in-store displays and the Internet Public sources, etc. – articles in magazines or newspapers Personal experience – handling, examining, or using the product Use of this slide This slide can be used to show the various sources consumers use in the information search stage of the decision process. Determining how many and which sources of external information to use involves several factors, including the importance of the purchase decision, the effort needed to acquire information, the amount of past experience, the degree of perceived risk associated with the purchase, and the time available.
Relation to text This slide relates to the information on page 119 of the text. Summary Overview Knowledge about how consumers acquire and use information from external sources is important to marketers in formulating communication strategies. This slide shows the key information needed from and about consumers. Use of this Slide Use this slide to introduce the topic of perception and how it influences advertising.
Relation to text This slide relates to material on pp. 122-116 of the text, which discusses the alternative evaluation process. Summary Overview After acquiring information during the information search stage the decision process, the consumer moves to alternative evaluation. In this stage, the consumer compares the various brands or products he or she has identified as being capable of solving the consumption problem or satisfying needs. The brands identified as potential purchase options are referred to as the consumer’s evoked set. The evoked set is usually a manageable number of brands which can be compared closely. The goal of most advertising and promotional strategies is to increase the likelihood that a brand will be included in the consumer’s evoked set and considered during alternative evaluation. Advertisers use top of mind awareness and reminder advertising to help get their brands into the evoked set. Use of this slide This slide can be used to discuss the alternative evaluation process and the concept of the evoked set.
Relation to text This slide relates to material on p. 124 of the text. Summary Overview Evaluative criteria are the dimensions or attributes of a product or service that are used to compare different alternatives. Two types of criteria are: Objective – based on concrete attributes that are tangible and can be directly judged or experienced by the consumer, such as price or warranty. Subjective – based on abstract attributes that are intangible and more subjective in nature, such as style, appearance, or product image. Use of this slide This slide can be used to show the type of criteria used by consumers to evaluate alternatives.
Relation to text This slide relates to material on pp. 126-128. Summary Overview This slide shows the last three steps of the consumer decision-making process, which includes integration processes and decision rules, the actual purchase decision, and post-purchase evaluation. Use of this slide This slide can be used as part of a discussion about how consumers make purchases based on decision rules, that a purchase decision is not the same as the actual purchase, and that the consumer decision process does not end with the purchase.
Agenda : E - Marketing• Markets and e-marketspace• E-marketing strategies – Product development strategy – Pricing on the Internet – Branding and traffic building – Web site promotion and advertising• Types of e-Markets (product, pricing)• Advertising (placement, promotion)• Search engine positioning (example) 1
Consumer Behavior• The process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and wants• The study of when, why, how, and where people do or do not buy a product. It blends elements from psychology, sociology, socialanthropology and economics
Economics• Consumer Choice and Budget Constraint• Utility Maximizing Rule• “The consumer is a rational person, who tries to use his or her money income to derive the greatest amount of satisfaction, or utility, from it “• Preferences: Each consumer has preferences for certain of the goods and services that are available in the market. Utility will be different for every individuals because all individuals have different taste and preferences
Consumer Decision Making Decision-Making Psychological Process Problem recognition Motivation Information search Perception Alternative evaluation Attitude formation Purchase decision IntegrationPostpurchase evaluation Learning
Sources of Problem Recognition New Needs New Needs Out of Stock Out of Stock Dissatisfaction Dissatisfaction or Wants or WantsRelated Products,Related Products, Market-Induced Market-Induced New New Purchases Purchases Recognition Recognition Products Products
Maslow’s Hierarchy of Needs Self-actualization needs (self-development, Self-actualization needs (self-development, realization) realization) Esteem Esteem (self-esteem, recognition, status) (self-esteem, recognition, status) Social Social (sense of belonging, love) (sense of belonging, love) Safety Safety (security, protection) (security, protection) Physiological Physiological (hunger, thirst) (hunger, thirst)
Information Search es a l sourc Person Market sou rces Pub lic s our cesPe rso nal exp erie nce
Perception• Marketers want to know – How consumers sense external information – How they select and use sources of information – How information is interpreted and given meaning
Evaluation of Alternatives All Available BrandsBrand A Brand B Brand C Brand D Brand EBrand F Brand G Brand H Brand I Brand JBrand K Brand L Brand M Brand N Brand O Evoked Set of Brands Brand B Brand EBrand F Brand I Brand M
Evaluative Criteria Brand Evaluation Brand Evaluation Subjective SubjectiveObjective AttributesObjective Attributes Attributes Attributes Price Price Image Image Features Features Style Style Warranty Warranty Performance Performance Service Service
Categories of consumers• Impulsive buyers: purchase quickly• Patient buyers: make some comparisons first• Analytical buyers: do substantial research before buying 12
Functions of marketsThree main functions of markets – Matching buyers and sellers – Facilitating the exchange of information, goods, services, and payments associated with market transactions – Providing an institutional infrastructure, such as a legal and regulatory framework, that enables the efficient functioning of the market 13
E-Marketplaces• Electronic marketplaces (e-marketplaces or marketspaces), changed several of the processes used in trading and supply chains – Greater information richness – Lower information search costs for buyers – Diminished information asymmetry between sellers and buyers – Ability of buyers and sellers to be in different locations14
E-Marketplacese-marketspace A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronicallyinfomediaries Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others E.g., http://www.abebooks.com15
E-Marketplaces• Marketspace components front end The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway back end The activities that support online order-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery16
Electronic Catalogs and Other Market Mechanisms electronic catalogs The presentation of product information in an electronic form; the backbone of most e-selling sites• Issues to consider: 1. Interactivity 2. The degree of customization 3. Integration with business processes 4. Search capabilities 5. Ease of updating18
Electronic Catalogs and Other Market Mechanisms• Two approaches to creating customized catalogs – Let the customers identify the parts of interest to them from the total catalog – Let the system automatically identify customer characteristics based on the customer’s transaction records19
Electronic Catalogs and Auctions as EC Market Mechanisms electronic shopping cart An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop auction A competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids20
Auctions As EC Market Mechanisms• Limitations of Traditional Off-line Auctions – The rapid process may give potential buyers little time to make a decision – Bidders must usually be physically present at auctions – Difficult for sellers to move goods to an auction site – Commissions are fairly high21
Auctions As EC Market Mechanisms forward auction An auction in which a seller entertains bids from buyers reverse auction (bidding or tendering system) Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; primarily a B2B mechanism22
Auctions As EC Market Mechanisms “name-your-own-price” model Auction model in which a would-be buyer specifies the price (and other terms) he or she is willing to pay to any willing and able seller. It is a C2B model that was pioneered by Priceline.com23
Auctions As EC Market Mechanisms• Limitations of E-Auctions – Minimal security – Possibility of fraud24
Bartering and Negotiating Online bartering The exchange of goods or services e-bartering (electronic bartering) Bartering conducted online, usually by a bartering exchange bartering exchange A marketplace in which an intermediary arranges barter transactions25
EC in the Wireless Environment: M-Commerce mobile commerce (m-commerce) E-commerce conducted via wireless devices m-business The broadest definition of m-commerce, in which e-business is conducted in a wireless environment26
E-Marketing StrategiesThe essential issues of marketing are also referred to as the four Ps of marketing mix:• Product: Physical item or service that a company is selling• Pricing: Amount the customer pays for the product• Placement: How the product/service gets to the customer, sometimes called “place” referring to “where” a product/service is sold• Promotion: Any means of spreading the word about the product 27
E-Marketing Strategies (cont.)There are extra three Ps as the extended marketing mix:• People: Right person, trained well, motivated• Process: Providing services to customers• Physical evidence: Case studies, testimonials 28
Market segmentation• The identification of specific portions of a market and targeting them with specific advertising messages• Divides the pool of potential customers into segments• The practice of targeting very small market segments - micromarketing 29
Market Segmentation Key Topics • Geographical segmentation – Marketing mixes are customized geographically• Segmenting Consumer Markets • Demographic segmentation – Most popular type• Segmenting Business – Demographics are closely Markets related to needs, wants and• Segmenting usage rates International Markets • Psychographic segmentation - Lifestyle, social class, and personality-based segmentation • Behavioral segmentation • Using multiple segmentation
Market Segmentation GeographicSegmentation VariablesWorld Region City or or Country Metro Size Country Neighborhood Region Density City Climate
Market Segmentation Demographic Segmentation Variables• Age Occupation• Gender Education• Family size Religion• Family life cycle Generation• Income Nationality• Ethnicity
Market Segmentation Behavioral Segmentation Variables• Occasions Loyalty Status• Benefits Readiness Stage• User Status Attitude Toward• User Rates the Product
Market Segmentation Key Topics • Demographic segmentation – Industry, company size, location • Segmenting Consumer • Operating variables – Technology, usage status, Markets customer capabilities • Segmenting Business • Purchasing approaches Markets • Situational factors • Segmenting – Urgency, specific application, size International Markets of order • Personal characteristics – Buyer-seller similarity, attitudes toward risk, loyalty7- 34
Market Segmentation Key Topics • Geographic segmentation – Location or region • Segmenting Consumer • Economic factors – Population income or level of Markets economic development • Segmenting Business • Political and legal factors Markets – Type / stability of government, • Segmenting monetary regulations, amount of bureaucracy, etc. International Markets • Cultural factors – Language, religion, values, attitudes, customs, behavioral patterns7- 35
Acquisition, conversion, retention• The first step in doing business on the web is to acquire or draw visitors to the site itself• The second step is converting those first time visitors into customers by persuading them to make a purchase or register with the site, etc.• Customers who return to the site one or more times after making their first purchases are retained customers 36
Advertising• Advertising is all about communication between: – a company/organization and its current customers – a company/organization and potential customers – a company/organization and its former customers• To be effective, firms should send different messages to each of these audiences 37
Types of Internet advertising/marketing• Banner ads: most popular, different sizes and styles• Pop-up ads: popular, another type is pop-behind• E-mail marketing: powerful, economical, legal implications, spam• Affiliate marketing: commission-based, benefit of the selling site’s brand in exchange for the referral 38
E-mail Marketing• Fast, cheap, far-reaching• Define the reach – The span of people you would like to target, including geographic locations and demographic profiles• Determine the level of personalization – Personalized direct e-mail targets consumers with specific information and offers by using customer names, offering the right products at the right time and sending promotions• Response rate – Shows campaign success or failure by measuring the percentage of responses generated from the target market
E-mail Marketing• Improve customer service – Add an e-mail link to Web site – E-mail systems set up so that incoming e-mails will be sorted automatically and directed to the appropriate people – Track location of orders, inform customers of when to expect delivery and possible delays and providing information such as the carrier’s name• Permission-based marketing – A company can market its products and services to people who have granted permission – Internet mailing lists include contact information for people who have expressed interest in receiving information on certain topics
Search Engine Positioning• Potential customers find web sites in many different ways• Some site visitors will be referred by a friend, others by affiliates, some will see the site’s URL in a print advertisement or on television• Many site visitors will be directed to the site by a search engine 41
Search Engines• Search-engine ranking important to bring consumers to a site – Method used by search engines to rank your Web site will determine how "high" your site appears in search results• Make sure all Web pages have been published on the Web and linked correctly• By registering with search engines a company will increase traffic to its site
META Tags• META tag – An HTML tag that contains information about a Web page – Does not change how Web page is displayed – Can contain description of page, keywords and title of page• Most search engines rank your site by sending out a spider to inspect the site – The spider reads the META tags, determines the relevance of the Web page’s information and keywords and ranks the site according to that visit’s findings• Examine competitors’ sites to see what META tags they are using• Top ten results
Search-Engine Registration• Submit keywords and a description of business• Search engine will add information to its database• Registering will increase the possibility that a site will make an appearance in search-engine results• Many search engines do not charge a fee for registering – AltaVista, Yahoo!, Lycos, Excite, Google and Ask Jeeves • Ask Jeeves uses natural-language technology that allows people to enter their search subjects in the form of questions
Banner Advertising• Banner ads – Located on Web pages, act like small billboards, usually contain graphics and an advertising message – Benefits include: • Increased brand recognition, exposure and possible revenue – Side panel ads or skyscraper banners • Advertisements that lie vertically on Web sites – Banner advertisements are losing their effectiveness • Industry has calculated click-through rates at around .5 percent – Place logo on banners, enhancing brand recognition
Buying and Selling Banner Advertising• Buy advertising space on sites that receive a large number of hits and target a similar market• Selling ad space provides additional income• Monthly charges for online advertising rarely used• CPM (cost per thousand) – A designated fee for every one thousand people who view the site on which your advertisement is located
Buying and Selling Banner Advertising• Unique visitors versus total number of hits – Visiting any site registers one unique visit – Hits are recorded for each object that is downloaded – To determine the value of a Web site for advertising purposes, use the number of unique visitors, not total hits• Advertising payment options – Pay-per-click: you pay the host according to the number of click-throughs to your site – Pay-per-lead: you pay the host for every lead generated from the advertisement – Pay-per-sale: you pay the host for every sale resulting from a click-through
Buying and Selling Banner Advertising• Selling advertising space – Provide appropriate contact information on your Web site – Register with organizations that will sell your space for you • These companies typically charge a percentage of the revenue you receive from the advertisements placed on your site • ValueClick, DoubleClick, AdSmart and LinkExchange
ValueClick Feature• ValueClick acts as a broker for people who want to buy and sell advertising space• Gives you the option of targeting specific markets• To buy advertising through ValueClick: – Design a banner – Contact a representative of ValueClick to determine what program best fits your advertising needs – Pre-pay for the service based on the number of visitors you want to receive, a minimum fee is required
ValueClick Feature• Offers many segmented markets for advertising – Segmented markets are people or companies that are grouped together based on similar characteristics• Earnings depend on number of click-throughs resulting from the advertisements• Pays host monthly if revenues are greater than certain amount• Offers four options for publishing advertisements on your site – ValueClick Affiliate, Premium, AdVantage and AdVantage Plus programs