lecture material on consumer behavior online for e-business management students

1. CUSTOMER BEHAVIOR AND
RELATIONSHIP MARKETING

2. CLASSIC ECONOMIC THEORY – PURCHASER TRIES TO
ACHIEVE MAXIMUM BENEFITS WITH MINIMAL
FINANCIAL, TIME AND ENERGY RESOURCES.
It would be correct only when purchaser would be able to
convert money amount to value he/she gets. Theory cannot
explain the variety of consumer behavior and irrationality.

3. CUSTOMER PURCHASE
PROCESS
COMPLICATIONS
COMPLICATIONS
COMPLICATIONS
COMPLICATIONS
COMPLICATIONS

4. PROBLEM RECOGNITION
• FUNCTIONAL NEEDS – what do I need?
• PSYCHOLOGICAL NEEDS – what do I want?
• The job of marketing specialist is to convert psychological need to functional
one

5. INFORMATION SEARCH
INTERNAL (inside your head)
EXTERNAL ( internet, magazines, friends)
RESEARCH CAN BE INFLUENCED BY SEVERAL
FACTORS:
– Is it worth to search?
– Locus of control
– Risk assessment
A lot more information tojai
Consumers are more active while searching

6. EVALUATION OF ALTERNATIVES
What can be evaluated?
PRICE
BRAND
APPEARANCE
ACCESABILITY
etc

8. THE MOMENT OF PURCHASE
• IMPORTANT: not the last step of purchase process
• CONTINUITY
• SERVICE, GUARANTEES, WARRANTY

9. POST PURCHASE
•
•
•
•
POST PURCHASE REASSURANCE
COGNITIVE DISSONANCE
SHOWING HOW TO USE THE PRODUCT
CONSUMERS SHOULD NOT BE WORRIED THAT THEY SPENT TO MONEY

10. THIS PROCESS:
– ONE WAY MARKETING COMMUNICATIONS, PUSHED TO THE
CONSUMER
– RELIED ON INFLUENCING DECISIONS AT TWO DISTINCT
POINTS IN THE PURCHASE PROCESS - INFORMATION
GATHERING AND AT THE POINT OF PURCHASE

11. THIS PROCESS:
– ONE WAY MARKETING COMMUNICATIONS, PUSHED TO THE
CONSUMER
– RELIED ON INFLUENCING DECISIONS AT TWO DISTINCT
POINTS IN THE PURCHASE PROCESS - INFORMATION
GATHERING AND AT THE POINT OF PURCHASE

12. CONSUMER DECISION JOURNEY
TODAY THE CONSUMER DECISION JOURNEY HAS MORPHED INTO A NON-LINEAR
DECISION PROCESS THAT INVOLVES MULTIPLE INFORMATION TOUCH POINTS, VARIOUS
INFLUENCERS, AND STRONG WOM AND FEEDBACK CULTURE.
Each phase provides marketers with
an opportunity to interact with
consumers to influence purchase
decisions, build brand loyalty, and
engage in two-way conversations.

13. WHAT HAVE CHANGED?
NOISE: The proliferation of media and products requires marketers to find
new ways to get their brands included in the initial-consideration set that
consumers develop as they begin their decision journey. Advertising or sales
promotion alone cannot cut-through.
TWO-WAY: A shift away from one-way communication — from marketers to
consumers — toward a two-way conversation, requires that marketers have a
more systematic way to satisfy customer demands and manage word-ofmouth.
ALIGNMENT: Aligning all elements of marketing (strategy, spend, channels,
and message) with the journey that a consumer undertakes when they make
purchasing decisions. The moments of maximum influence.
LOYALTY: The research identifies two different types of loyalty, this
challenges companies to reinvent their retention or loyalty programmes and
the way they manage the customer experience post purchase

19. (1) Consideration Set
CONSUMERS ARE SEEKING, PULLING, INFORMATION INTO THEIR
DECISION MAKING PROCESS (RATHER THAN RELYING ON
MESSAGES THAT ARE PUSHED BY A BRAND)
2/3 OF TOUCH POINTS INVOLVED CONSUMER DRIVEN MARKETING
ACTIVITIES:
–
–
–
–
ONLINE PRODUCT REVIEWS
WORD-OF-MOUTH RECOMMENDATIONS FROM SOCIAL NETWORKS
IN-STORE INTERACTIONS
PRIOR EXPERIENCES WITH THE BRAND
INFLUENCE OF THESE CHANNELS GROWN (DUE TO ENTRANCE OF DIGITAL
MARKETING)

20. (2) Active Evaluation
THE CIRCULAR DECISION JOURNEY ALSO ALLOWS FOR CONSUMERS TO
CONSTANTLY RE-EVALUATE EARLIER DECISIONS
CAR BUYING PROCESS
CONSUMERS BEGIN EVALUATING OPTIONS WITH A SPECIFIC SET OF MODELS
IN MIND > AS THEY RESEARCH, THEY EXPAND THEIR CONSIDERATION SET
(FROM 4 TO 6 CARS)
SO, WHERE THE LINEAR MODEL FOCUSED ON REDUCING BRAND/PRODUCT
CHOICES, THE CIRCULAR JOURNEY ALLOWS CONSUMER’S CONSIDERATION
SET TO FLUCTUATE DURING THE EVALUATION PROCESS.

21. WHERE IT COUNTS - MOST INFLUENTIAL TOUCH POINTS

22. (3) Moment of purchase
Throughout the circular decision making process, consumers are bombarded
with information from a variety of sources. Consequently, their actual
decision is made at the point of purchase.
In their article The Consumer Decision Journey, McKinsey found that brands
in the initial consideration set are up to three times more likely to be
purchased than those brands that are not in the consideration set.

23. (4) Post-purchase
•
•
Given the circular nature of the consumer decision making process,
monitoring WOM and other digital conversations is essential to ensure the
brand promise is being met throughout the consumer experiences, as well as
protect brand equity. The strong and influential nature of feedback, through
various digital tools, offers brands opportunities to provide timely, proactive
post-purchase service that can position a brand more favorably in the
consumers consideration set during future decision journeys.
As the Internet gains further in-home penetration and dependency,
consumers will continue to evolve their decision making process, spurring
two-way conversation between the consumer and brands. This new decision
journey process challenges marketers to be consistent and relevant to their
target consumer across all media channels. Additionally, marketers need build
brand awareness to break through the proliferation of media and products to
gain initial consideration. Finally, marketers must establish systematic ways
and methods for managing consumer demands and word-of-mouth.

24. ZMOT (Zero moment of truth) model
TRADITIONAL
MARKETING MODEL
P&G first realised the idea of ‘moments of truth’ in 2005, they said that the first
moment was “in front of the shelf,” and that the “second moment of truth” was
gained through product trial and experience.

25. The aim of ZMOT is to explain how the consumer’s research and
decision-making journey on the way to purchase is now fundamentally
different, that there’s a step prior to P&G’s first moment of truth,
called ZMOT.

27. What to do?
1.
2.
3.
4.
Align – Marketers will need to align their resources with “where
consumers spend their time.” The “evaluate” and “advocate” stages will
likely become more significant to consumers than the “consider” and
“buy” stages, and marketers will have to respond accordingly.
Link – Marketers need to ensure that every message about a product or
service is consistent across every touch-point or channel.
Lock – Marketers must “lock in” a customer’s attention by providing
direct, opt-in channels, such as email promotions, Facebook and Twitter
feeds, and apps that truly benefit the customer. This means allocating
resources to content that engages the customer at every stage of their
journey.
Loop – Marketers must accommodate that process with a continuous
loop that mines data, uses it to create valuable, relevant content, and
then analyses consumer response. Edelman uses Amazon as a classic
example: The customers can rate products, which it shares with other
customers; Amazon then analyses and uses that information to create
personalised recommendations.
Source: Edelman, 2011 http://csi.mckinsey.com/Knowledge_by_region/Global/consumerengage.aspx

28. http://www.youtube.com/watch?v=F3CBWI4ZYbQ

29. Centaur

30. TRADITIONAL
CONSUMER
CENTAUR
CYBER CONSUMER
A HYBRID CONSUMER: A COMBINATION
OF TRADITIONAL AND CYBER, RATIONAL
AND EMOTIONAL, AND WIRED AND
PHYSICAL.

31. BASIC PROPOSITIONS
1.
2.
THE NEW TECHNOLOGIES DO NOT REPLACE THE OLD.
PEOPLE ARE COMPLEX, RETAINING THE SAME ENDURING
HUMAN NEEDS EVEN AS THEY ADAPT TO NEW
TECHNOLOGIES AND BEHAVIORS.

32. WHO IS THE CENTAUR?
ONLINE POPULATION
– EARLY INTERNET USERS: “GEEKY WHITE GUYS”
– THE ONLINE POPULATION IS MORE LIKE THE OFFLINE,
GENERAL POPULATION  DIVERSE SEGMENTS
– NOT BASED ON DEMOGRAPHIC FACTORS, BUT RATHER ON
ONLINE EXPERIENCES, WIRED LIFESTYLE, TIME PRESSURE,
PURCHASES FROM CATALOGS
HETEROGENEOUS
– GENERATION Y

33. Types of “centaurs”
1.
2.
3.
4.
Connectors: New users; more offline purchase
Samplers: Light users
Simplifiers: Efficiency seekers
Routiners: Go online for information but not primarily
interested in shopping
5. Surfers: Heavy users; spend lots of time online;
Searching multiple domains
6. Bargainers: Online price comparison; Shop for the best
buy
7. Funsters: Looking for information in entertainmentoriented domains
McKinsey Report

34. Segment
Important Facts
Online Time
7 hours per month.
Simplifiers
50% of total online purchases.
49% have been online for over 5 years.
Longest online tenure.
Surfers
8% of active user population.
32% of online time usage—far more than
any other segment.
More than the average 9.8 hours
per month.
Less than the average of 9.8 per
month.
Connectors
36% active user population.
40% have been online under two years.
42% have made online purchases.
Bargainers
8% of active user population
52% are eBay users
Less than the average of 9.8 per
month.
Routiners
6% have purchased online.
They visit fewer domains.
9.8 hours per month.
Sportsters
4% of active user population.
7.1 hours per month.
User Segments Based on Online Viewing Behavior
Source: Adapted from McKinsey and MediaMetrix study

35. MYTHS OF THE CYBERCONSUMER
1.
2.
3.
4.
5.
6.
7.
PEOPLE DON’T WANT TO BE TROUBLED WITH SHOPPING
EFFICIENCY IS ALL THAT MATTERS
CONSUMERS WANT TO GET THE BEST PRICE
CONSUMERS ARE EITHER ONLINE OR OFFLINE
EASE OF VISITING STORES WILL LEAD TO MORE PURCHASING
THE INTERNET IS INHERENTLY FASCINATING AND ATTRACTIVE
EVERYTHING HAPPENS ONLINE

36. FACTORS INFLUENCING BUYING PROCESS
PSYCHOLOGICAL
SOCIAL
RANDOM
Motive
Past experience
Opinion
Culture
Social class
Family
Friends
Influence groups
Environment
Time
Reason for buying
Mood

37. * MASLOW HIERARCHY OF NEEDS

38. * SIMPLIFIED VERSION

39. PARADOX OF CHOICE
http://videos.howstuffworks.com/ted-conferences/1819-barryschwartz-on-consumer-behavior-video.htm

40. RELATIONSHIP MARKETING
RELATIONSHIP MARKETING IS A STRATEGY DESIGNED TO FOSTER
CUSTOMER LOYALTY, INTERACTION AND LONG-TERM
ENGAGEMENT. THIS CUSTOMER RELATIONSHIP MANAGEMENT
(CRM) APPROACH FOCUSES MORE ON CUSTOMER RETENTION
THAN CUSTOMER ACQUISITION.
Contrast to transactional marketing that focuses on single, "point
of sale" transactions

41. IN-CLASS ASSIGNMENT
• Reading
• Presentation of case studies

43. Relationship Lifecycle
Baines, et al, 2011, p. 568

44. Loyalty Ladders
Traditional
Marketing
Partners
Members
Members
Advocates
Advocates
Clients
Clients
Customers
Relationship
Marketing
Partners
Repeat Cust
1st Time Cust
Prospects
Prospects
Suspects
Payne et al 1995
Kotler 1997
Baines, et al 2011

45. 4 steps to successful marketing strategy
Understanding customer needs and online behaviour
(market research, data mining, web analytics)
Formulate a strategy to fill needs
Implement effectively and efficiently (web usability,
stickiness, advertising, search engine optimization, email
marketing, pricing, distribution, product development)
Build trusting relationships with customers