Ecommerce Chap 03


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Ecommerce Chap 03

  1. 1. Chapter 3Internet Consumers and Market Research © Prentice Hall, 2000 1
  2. 2. Learning ObjectivesDescribe the essentials of consumer behaviorDescribe the characteristics of Internet surfers andEC purchasersUnderstand the process of consumer purchasingdecision makingDescribe the way companies are buildingrelationships with customersExplain the implementation of customer serviceDescribe the consumer market research in ECExperience the role of intelligent agents in consumerapplicationsDescribe the organizational buyer behavior model © Prentice Hall, 2000 2
  3. 3. The Importance of CustomersThe major pressures are labeled the 3Cs 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 © Prentice Hall, 2000 3
  4. 4. A Model of EC Consumer Behavior Individual EnvironmentPurchasing Characteristics Characteristics Age, gender, ethnicity,decision education, lift style, Social, family, psychological, knowledge, communitiesbegins with values, personalitycustomer’s Buyers’ Decisionsreaction to Stimuli Buy or not Marketing Others Decisionstimuli Price Economical Making What to buy Where (vendor) Promotion Technology Product Political Process When Quality Cultural How much to spend Repeat purchases Vendors’ controlled System Logistic Technical Customer service Support Support FAQ, Payments, Web design, e-mail, Delivery Intelligent- Call centers, agents One-to-one © Prentice Hall, 2000 4
  5. 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 cyberspacePurchasing 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 servicesPurchasing Experiences Utilitarian: shopping “to achieve a goal” or “complete a task” Hedonic: shopping because “it is fun and I love it” © Prentice Hall, 2000 5
  6. 6. Variables Influencing Decision Making ProcessEnvironmental 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. 7. Consumer Demographics Gender (61% male user & 39% female user) WOMEN’S PURCHASES BY CATEGORY (1998) % of Total Category % of Total RespondentsPurchases Category Purchases (299) Buying (166)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% © Prentice Hall, 2000 7
  8. 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. 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. 10. Consumer Buying PatternsIn last six months of 1998: Experience: 76% filling out a form on the Web 50 < 1 Year 1 - 3 Years Online purchases are more than > 4 Years paper catalog purchases for Net 40 buyers 30 Pe rce nt 32% spent between $100.00- $500.00 20 Spending of less than $50.00 decreases steadily as shoppers 10 gain experience Women are more likely to 0 purchase more in the under $50.00 less than $50- $100- $100 $500 $500 Dont or know level, and less likely to purchase at $50 more the above $500.00 level Amount Spent on We b in Last 6 M onths of 1998 © Prentice Hall, 2000 10
  11. 11. Consumer Purchasing Decision-MakingRoles that people play in the decision makingprocess 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 © Prentice Hall, 2000 11
  12. 12. Consumer Purchasing Decision-Making (cont.) The Purchasing Decision-Making Model Need identification (Recognition) Information search (What? From whom?) Alternative evaluation, negotiation and selection Purchase and delivery After purchase service and evaluation © Prentice Hall, 2000 12
  13. 13. Model of Internet Consumer Satisfaction 3rd Party Seal of Approval Vendor Reputation Logistics Support Trust in Customer Service Web-shopping Pricing Attractiveness Customer Repeat Web Purchase Web-site Store Front Satisfaction (Brand Loyalty) Security System Speed of Ease of Content, Privacy Transaction Reliability Operation Use Quality Safety Format Timeliness ReliabilityAuthentication Integrity Non-repudiation Completeness © Prentice Hall, 2000 13
  14. 14. One-to-One MarketingRelationship 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 © Prentice Hall, 2000 14
  15. 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 Federal Express (FedEx) © Prentice Hall, 2000 15
  16. 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 © Prentice Hall, 2000 16
  17. 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 © Prentice Hall, 2000 17
  18. 18. One-to-One Marketing (cont.) Customer Service A new look and feel Install Web servers Put the burden on the which allow each customer to treat a customer to createproblem or inquiry and individual web pages receive information that can be customized bit by bit to record purchases and preferences © Prentice Hall, 2000 18
  19. 19. ISFLAVIA: 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 © Prentice Hall, 2000 19
  20. 20. Implementing Customer Service in CyberspaceProduct 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. 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. 22. Implementing Customer Service in Cyberspace (cont.)Addressing Individual Customer Needs Companies understand their customers’ needs and buying habits better Companies Doing customize their business future marketing via Web efforts © Prentice Hall, 2000 22
  23. 23. Tools of Customer ServicePersonalized Web Pages used to record purchases and preference direct customized information to customers efficientlyChat Room discuss issues with company experts; with other customersE-mail used to disseminate information, send product information and conduct correspondence regarding any topic, but mostly inquiries from customersFAQs not customized, no personalized feeling and contribution to relationship marketing © Prentice Hall, 2000 23
  24. 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 © Prentice Hall, 2000 24
  25. 25. 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 Researchdefinition and methodology, Data Results, Research Data collection collection, Recommendations, objectives plan Data analysis Implementation © Prentice Hall, 2000 25
  26. 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. © Prentice Hall, 2000 26
  27. 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. © Prentice Hall, 2000 27
  28. 28. Market Research for EC (cont.) Consumer Market Segmentation Tasks in the USSegmentationBases/Descriptors Possible CategoriesGeographic Pacific; Mountains; West North Central;Region West South Central; East North Central; East south Central; South Atlantic; Middle Atlantic; New EnglandSize of city, county, Under 5,000; 5,000 – 19,999; 20,000 –or standard 49,999; 50,000 – 99,999; 100,000 –metropolitan statistical 249,999; 250,000 – 499,999; 500,000 –area (SMSA) 999,999; 1,000,000 – 3,999,999; 4,000,000 or overPopulation density Urban; suburban; ruralClimate Warm; cold © Prentice Hall, 2000 28
  29. 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 © Prentice Hall, 2000 29
  30. 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) © Prentice Hall, 2000 30
  31. 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 © Prentice Hall, 2000 31
  32. 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 © Prentice Hall, 2000 32
  33. 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 © Prentice Hall, 2000 33
  34. 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 multimedia form © Prentice Hall, 2000 34
  35. 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 © Prentice Hall, 2000 35
  36. 36. Intelligent Agents for ConsumersSearch Engines Computer programs that can automatically contact other network resources on the Internet, searching for specific information or key words, and reporting the resultsIntelligent 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” © Prentice Hall, 2000 36
  37. 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 © Prentice Hall, 2000 37
  38. 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 © Prentice Hall, 2000 38
  39. 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) © Prentice Hall, 2000 39
  40. 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 © Prentice Hall, 2000 40
  41. 41. Organizational Buyer’s Behavior Consumer Types Individual customers Vs. Organizational buyersCharacteristic Retail Buyers Organizational BuyersDemand Individual OrganizationalPurchase volume Smaller LargerNumber of customers Many FewerLocation of buyers Dispersed Geographically concentratedDistribution structure More indirect More directNature of buying More personal More professionalNature of buying influence Single MultipleType of negotiations Simpler More complexUse of reciprocity No YesUse of leasing Lesser GreaterPrimary promotional Advertising Personal sellingmethod © Prentice Hall, 2000 41
  42. 42. Organizational Buyer’s Behavior (cont.) Individual Interpersonal Organizational Influences Influences Influences Age; gender; ethnicity; Authority; status; Policies and procedures; education, lift style; persuasiveness organization structure; psychological; knowledge; centralized/decentralized; values; personality systems used; contracts Stimuli Buyers’ Marketing Others Decision Making Decisions Process (Group Buy or not; What to buy; Price Economical or Individual) Promotion Technology Where (vendor); Product Political When; Delivery terms Quality Cultural Payments Vendors’ Controlled Systems Behavioral Logistic Technical Customer Model support Payments, support Web design, service FAQ,E-mail, delivery Intelligent- Call Centers,© Prentice Hall, 2000 © Prentice Hall, 2000 One-to-one agents 42
  43. 43. Management IssuesReasons 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 © Prentice Hall, 2000 43