© farhan mir 2007 ims e-commerce & applications bba (hons) 7 th internet consumer & market...

© Farhan Mir© Farhan Mir

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E-Commerce & E-Commerce & ApplicationsApplicationsBBA (Hons) 7BBA (Hons) 7thth Internet Consumer & Internet Consumer & Market ResearchMarket ResearchLectures 7,8,9Lectures 7,8,9

Course Lecturer: Farhan MirCourse Lecturer: Farhan Mir


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Learning ObjectivesLearning ObjectivesDescribe the essentials of consumer behavior

Describe the characteristics of Internet surfers and EC purchasers

Understand the process of consumer purchasing decision making

Describe the way companies are building relationships with customers

Explain the implementation of customer service

Describe the consumer market research in EC

Experience the role of intelligent agents in consumer applications

Describe the organizational buyer behavior model


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The Importance of The Importance of CustomersCustomers

CompetitionCompetition

“fighting” on customers

to succeed : control the 3Cs

CustomersCustomers

customers becomes a King/Queen

to succeed : finding and retaining customers

ChangeChange

EC is a new distribution channel

to succeed : convince customers to go online and then to choose your company over the online competitors

The idea is to understand the needs and The idea is to understand the needs and requirements of the customer and the changes requirements of the customer and the changes in his behaviorin his behavior

The major pressures are labeled the 3Cs


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Ritchey Design Learns Ritchey Design Learns about Customersabout Customers

The ProblemRitchey Design, Inc. is a relatively small Ritchey Design, Inc. is a relatively small designer and manufacturer of mountain designer and manufacturer of mountain bike components bike components

Sells its products to distributors and/or Sells its products to distributors and/or retailers, who then sell them to individual retailers, who then sell them to individual consumers consumers

Its 1995 Web site was more a status Its 1995 Web site was more a status symbol than a business tool symbol than a business tool


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Ritchey Design Learns Ritchey Design Learns about Customers about Customers (cont.)(cont.)

Visitors could get information on Team Visitors could get information on Team Ritchey or find out where Ritchey Ritchey or find out where Ritchey products were sold products were sold

It did not give customers all the It did not give customers all the information they wantedinformation they wanted

It did not enable the company to gain It did not enable the company to gain insight into its customers’ wants and insight into its customers’ wants and needsneeds


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The SolutionIn late 1995, Ritchey reworked the Web In late 1995, Ritchey reworked the Web site so that the company could hear from site so that the company could hear from its customers directly its customers directly

set up customer surveys on the site offered visitors who answer the surveys a chance to win free Ritchey productsvsitors enter their names and addresses and then answer questions about the company’s products


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Web Trader software automatically Web Trader software automatically organizes and saves the answers in a organizes and saves the answers in a database and is used to help make database and is used to help make marketing and advertising decisionsmarketing and advertising decisions

Questions are changed to learn Questions are changed to learn customers’ opinions about any new customers’ opinions about any new products Ritchey developsproducts Ritchey develops

Saves $100,000 on product development Saves $100,000 on product development per yearper year


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An online catalog educates retailers and An online catalog educates retailers and consumers about the technological consumers about the technological advantages of Ritchey’s high-end advantages of Ritchey’s high-end components over competitors’ parts components over competitors’ parts

Visitors browse the product catalog that Visitors browse the product catalog that includes detailed descriptions and includes detailed descriptions and graphics of Ritchey’s products graphics of Ritchey’s products


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The Resultsritcheylogic.comritcheylogic.com sells only team items sells only team items such as t-shirts, bags, water bottles, and such as t-shirts, bags, water bottles, and other gear directly to individuals onlineother gear directly to individuals online

The company does not sell bike parts to The company does not sell bike parts to individuals directly online because it individuals directly online because it wants to maintain its existing distribution wants to maintain its existing distribution system system

Dealers can place orders on the site Dealers can place orders on the site


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The site is basically used in B2C EC only The site is basically used in B2C EC only for the basic activities in Internet for the basic activities in Internet marketing:marketing:

communicating with customersconducting market researchdelivering advertising


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What we can learn …Illustrates the benefits a company can derive from changing its Web site from a passive one to one with interactivityInteractive Web site allows the company to:

learn more about its customerseducate customersuse the site for customer service


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A Model of EC Consumer A Model of EC Consumer BehaviorBehaviorPurchasing decision begins with customer’s reaction to stimuli

Vendors’ controlled System

Logistic

SupportPayments,Delivery

Technical

SupportWeb design,Intelligent-agents

CustomerserviceFAQ,e-mail,Call centers,One-to-one

DecisionMakingProcess

Stimuli

MarketingPrice

PromotionProductQuality

OthersEconomicalTechnology

PoliticalCultural

Buyers’ Decisions

Buy or notWhat to buy

Where (vendor)When

How much to spendRepeat purchases

IndividualCharacteristics

Age, gender, ethnicity,education, lift style,

psychological, knowledge,values, personality

EnvironmentCharacteristics

Social, family,communities


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Consumer Behavior Online Consumer Behavior Online (cont.)(cont.)

Customer types—Individual consumers who commands most of Individual consumers who commands most of the media’s attentionthe media’s attention

Organizational buyersOrganizational buyers

Governments and public organizations

Private corporations

Resellers

Consumer behavior viewed in terms of:Why is the consumer shopping?Why is the consumer shopping?

How does the consumer benefit from shopping How does the consumer benefit from shopping online?online?


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Purchasing TypesImpulsive buyers: Impulsive buyers: purchase products quicklypurchase products quickly

Patient buyers: Patient buyers: purchase products after making some purchase products after making some comparisonscomparisons

Analytical buyers: Analytical buyers: do substantial research before do substantial research before making the decision to purchase products or servicesmaking the decision to purchase products or services

Purchasing ExperiencesUtilitarian: Utilitarian: shopping “to achieve a goal” or “complete a shopping “to achieve a goal” or “complete a task”task”

Hedonic: Hedonic: shopping because “it is fun and I love it”shopping because “it is fun and I love it”

A Model of EC Consumer Behavior A Model of EC Consumer Behavior (cont.)(cont.)


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Variables InfluencingVariables InfluencingDecision Making ProcessDecision Making Process

Environmental Variables

Social variablesSocial variablespeople influenced by family members, friends, co-workers, “what’s in fashion this year”, Internet communities and discussion groups

Cultural variablesCultural variables

Other environmental variablesOther environmental variablesavailable information, government regulations, legal constraints, and situational factors

6


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Looking at a online Looking at a online Consumer (Average)Consumer (Average)

The statistics are US basedThe statistics are US based


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Consumer Demographics (1998)

Variables Influencing Variables Influencing Decision Making Process Decision Making Process (cont.)(cont.)

Age (mostly 21-30 year-old)Age (mostly 21-30 year-old)

Marital status (41% married & 39% single)Marital status (41% married & 39% single)

Educational level (81% with at least some Educational level (81% with at least some college education & 50% obtained at least college education & 50% obtained at least baccalaureate degree)baccalaureate degree)

Ethnicity (87% white in America)Ethnicity (87% white in America)

Occupation (26% educational-related field, Occupation (26% educational-related field, 22% computers & 22% other professionals)22% computers & 22% other professionals)

© Prentice Hall, 2000 8


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Consumer DemographicsGender (61% male user & 39% female user)Gender (61% male user & 39% female user)

Purchases Category% of Total Category

Purchases (299)% of Total Respondents

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%


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Variables Influencing Variables Influencing Decision Making Process Decision Making Process (cont.)(cont.)

Consumer Demographics

Household income (46% at least $50,000/year)Household income (46% at least $50,000/year)

Internet usage profile (Internet access option, Internet usage profile (Internet access option, length and frequency of web use & access cost)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)



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Consumer Consumer Decision-Making Decision-Making EssentialsEssentials


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Consumer Purchasing Decision-Making: Consumer Purchasing Decision-Making: RolesRoles

Roles that people play in the decision making process

Initiator : Initiator : the person who first suggests or thinks of the person who first suggests or thinks of the idea of buying a particular product or servicethe idea of buying a particular product or service

Influencer : Influencer : a person whose advice or views carry a person whose advice or views carry some weight in making a final buying decisionsome weight in making a final buying decision

Decider : Decider : the person who ultimately makes a the person who ultimately makes a buying decision or any part of it - whether to buy, buying decision or any part of it - whether to buy, what to buy, how to buy, or where to buywhat to buy, how to buy, or where to buy

Buyer : Buyer : the person who makes an actual purchasethe person who makes an actual purchase

User : User : the person who consumes or uses a product the person who consumes or uses a product or serviceor service


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After purchase serviceand evaluation

Purchase and delivery

Alternative evaluation,negotiation and selection

Information search(What? From whom?)

The Purchasing Decision-Making Model

Consumer Purchasing Decision-Consumer Purchasing Decision-Making Making (cont.)(cont.)

Need identification(Recognition)


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Customer Customer Satisfaction & Satisfaction & LoyaltyLoyalty


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Model of Internet Consumer Model of Internet Consumer SatisfactionSatisfaction

Customer Satisfaction

Logistics Support

Customer Service

Pricing Attractiveness

Web-site Store Front

3rd PartySeal of Approval

Trust inWeb-shopping

VendorReputation

Repeat Web Purchase (Brand Loyalty)

Security

Authentication

Privacy Transaction Safety

Integrity

SystemReliability

Speed of Operation

Ease of Use

Content,Quality

Format

Reliability

Completeness

Timeliness


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Organization want loyal Organization want loyal customers (Satisfied customers (Satisfied Customers) but how?Customers) but how?

Answer: Relationship Marketing Answer: Relationship Marketing (One-to-One Marketing)(One-to-One Marketing)


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One-to-One MarketingOne-to-One Marketing

Relationship marketing ““Overt attempt of exchange partners to Overt attempt of exchange partners to build a long term association, build a long term association, characterized by purposeful cooperation characterized by purposeful cooperation and mutual dependence on the and mutual dependence on the development of social, as well as development of social, as well as structural, bonds”structural, bonds”

“Treat different customers differently”Able to change the manner its products Able to change the manner its products are configured or its service is delivered, are configured or its service is delivered, based on the individual needs of based on the individual needs of individual customersindividual customers


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How One-to-One How One-to-One Relationships Are Relationships Are Practiced Practiced (cont.)(cont.)Doing business over the Internet enables companies to:

Communicate better with customersCommunicate better with customers

Understand customers’ needs and buying Understand customers’ needs and buying habits better habits better

Improve and customize their future Improve and customize their future marketing effortsmarketing efforts


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One-to-One Marketing One-to-One Marketing (cont.)(cont.)

Customer loyaltyPurchase behaviorPurchase behavior

One of the most significant contributors to One of the most significant contributors to profitabilityprofitability

Increase profits; strengthen market position; Increase profits; strengthen market position; become less sensitive to price competition; become less sensitive to price competition; increase cross-selling success; save cost, etc.increase cross-selling success; save cost, etc.

Real world examplesReal world examples1-800-FLOWERS Amazon.comFederal Express (FedEx)


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Customer Loyalty & E-Customer Loyalty & E-LoyaltyLoyaltyCustomer loyalty—degree to which

customer stays with vendor or brandImportant element in consumer Important element in consumer purchasing behaviorpurchasing behavior

One of the most significant contributors One of the most significant contributors to profitabilityto profitability

E-loyalty—customer’s loyalty to an e-tailer

Learn about customers’ needsLearn about customers’ needs

Interact with customersInteract with customers

Provide customer serviceProvide customer service


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Building and maintaining customer loyalty


Maintain continuous interactions between Maintain continuous interactions between consumers and businessconsumers and business

Make a commitment to provide all aspects Make a commitment to provide all aspects of the business onlineof the business online

Build different sites for different levels of Build different sites for different levels of customerscustomers

Willing to invest capital, both human and Willing to invest capital, both human and financial, in the information systems, to financial, in the information systems, to insure continuous improvement in the insure continuous improvement in the supporting technology as it becomes supporting technology as it becomes available available


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Customer Service


Information can be directed to the customer Information can be directed to the customer efficientlyefficiently

Creation of a Creation of a databasedatabase which records purchases, which records purchases, problems and requests is facilitatedproblems and requests is facilitated

Information can now be traced and analyzed for Information can now be traced and analyzed for immediate responseimmediate response

If customer service options and solutions do not If customer service options and solutions do not maintain the same level of excitement and maintain the same level of excitement and interaction as the advertising and sales interaction as the advertising and sales presentations, the level of intensity declines and the presentations, the level of intensity declines and the vendor runs the risk of losing customersvendor runs the risk of losing customers


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Types of Customer Service Functions

Implementing Customer Implementing Customer Service in Cyberspace Service in Cyberspace (cont.)(cont.)

Answering customer inquiresAnswering customer inquires

Providing technical and other Providing technical and other informationinformation

Letting customers track accounts or Letting customers track accounts or order statusorder status

Allowing customers to customize Allowing customers to customize and order onlineand order online



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Addressing Individual Customer Needs

Doingbusinessvia Web

Companiesunderstand theircustomers’ needsand buying habits

better

Companiescustomize their

future marketingefforts

Implementing Customer Implementing Customer Service in Cyberspace Service in Cyberspace (cont.)(cont.)



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Tools of Customer ServiceTools of Customer Service

Personalized Web Pagesused to record purchases and preferenceused to record purchases and preference

direct customized information to customers direct customized information to customers efficientlyefficientlyChat Roomdiscuss issues with company experts; with discuss issues with company experts; with other customersother customers

E-mailused to disseminate information, send product used to disseminate information, send product information and conduct correspondence regarding information and conduct correspondence regarding any topic, but mostly inquiries from customersany topic, but mostly inquiries from customers

FAQsnot customized, no personalized feeling and not customized, no personalized feeling and contribution to relationship marketingcontribution to relationship marketing


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Help Desks and Call Centers

Tools of Customer Service Tools of Customer Service (cont.)(cont.)

A comprehensive customer service entityA comprehensive customer service entity

EC vendors take care of customer service issues EC vendors take care of customer service issues communicated through various contact channelscommunicated through various contact channels

TelewebsTelewebscombines Web channels, such as automated e-mail reply, Web knowledge bases and portal-like self service with call center agents or field service personnel

InternetInterneta medium of instant gratificationdemand for both prompt replies and proactive alerts


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How to know what the How to know what the customer wants customer wants online?online?

Answer: Online Market ResearchAnswer: Online Market Research


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Market Research for ECMarket Research for EC

Aims

Problem definition and

Research objectives

Research methodology,

Data collection plan

Data collection,

Data analysis

Results, Recommendations,

Implementation

Finding relationship between consumers, products, Finding relationship between consumers, products, marketing methods, and marketers through marketing methods, and marketers through information in order to discover marketing information in order to discover marketing opportunities and issues, to establish marketing opportunities and issues, to establish marketing plans, to better understand the purchasing plans, to better understand the purchasing process, and to evaluate marketing performanceprocess, and to evaluate marketing performance


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Market Research for ECMarket Research for EC

Goal–find information and knowledge that describes relationships among

ConsumersConsumers

ProductsProducts

Marketing Marketing methodsmethods

MarketersMarketers

Aim—find relationship between

Discover marketing Discover marketing opportunities and opportunities and issuesissues

Establish marketing Establish marketing plansplans

Better understand Better understand the purchasing the purchasing processprocess

Evaluate marketing Evaluate marketing performanceperformance


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Online Market Research

Market Research for EC Market Research for EC (cont.)(cont.)

Using online technology to conduct surveysUsing online technology to conduct surveys

More efficient, faster, and cheaper data More efficient, faster, and cheaper data collection, and a more geographically collection, and a more geographically diverse audience than those found in off-diverse audience than those found in off-line surveysline surveys

Ability to incorporate radio buttons, data-Ability to incorporate radio buttons, data-entry fields and check boxes in the surveysentry fields and check boxes in the surveys

Not suitable for every customer or product Not suitable for every customer or product — it is skewed toward highly educated — it is skewed toward highly educated males with high disposal incomemales with high disposal income


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Market Research for ECMarket Research for EC (cont.)(cont.)Procter & GambleProcter & GambleExample: Internet market research

expedites time-to-market for Procter & Gamble

In the past developing a major new In the past developing a major new product, from concept to market launch, product, from concept to market launch, took over 5 years took over 5 years

In September 2000 introduced In September 2000 introduced Whitestrips on the Internet, offering the Whitestrips on the Internet, offering the product for sale on P&G’s Web siteproduct for sale on P&G’s Web site


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Market Research for ECMarket Research for EC (cont.)(cont.) Procter & GambleProcter & Gamble (cont.)(cont.)Online research was facilitated by data Online research was facilitated by data

mining conducted on P&G’s huge mining conducted on P&G’s huge historical data and the new Internet datahistorical data and the new Internet data

Internet created a product awareness of Internet created a product awareness of 35 percent before shipments were made 35 percent before shipments were made to stores to stores

Revolutionized process of studying the Revolutionized process of studying the product concept, segmenting the market, product concept, segmenting the market, and expediting product development and expediting product development


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Various tools are used to conduct consumer market research:

Questionnaires Questionnaires

Surveyors Surveyors

Telephone surveysTelephone surveys

Focus groupsFocus groups

Important first to understand how groups of consumers are classified


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Market Research for EC Market Research for EC (cont.)(cont.)Market Segmentation

Market segmentation is the process of Market segmentation is the process of dividing a consumer market into dividing a consumer market into meaningful groups for decision-making.meaningful groups for decision-making.

In the past, most marketing approaches In the past, most marketing approaches have focused on group-based targeted have focused on group-based targeted markets, not on a personal way to identify markets, not on a personal way to identify individual consumers who actually individual consumers who actually purchased and used the products.purchased and used the products.


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Online Market Research


Risk of losing people who sign off if Risk of losing people who sign off if they had difficulty in logging on or they had difficulty in logging on or communicating with researcherscommunicating with researchers

Companies such as E-valuations or Companies such as E-valuations or Northstar can conduct the research for Northstar can conduct the research for your companyyour company


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Limitations of Online Limitations of Online Market Research MethodsMarket Research Methods

Accuracy of responses

Loss of respondents because of equipment problems

Ethics and legality of Web tracking

Focus group responses can lose something in the translation from an in-person group to an online group

Eye contact and body language are Eye contact and body language are lostlost

Anonymity is necessary to elicit an Anonymity is necessary to elicit an unguarded responseunguarded response


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Intelligent Agents for Intelligent Agents for ConsumersConsumers

Search EnginesComputer programs that can Computer programs that can automatically contact other network automatically contact other network resources on the Internet, searching for resources on the Internet, searching for specific information or key words, and specific information or key words, and reporting the resultsreporting the results

Intelligent AgentsComputer programs that help the users Computer programs that help the users to conduct routine tasks, to search and to conduct routine tasks, to search and retrieve information, to support decision retrieve information, to support decision making and to act as domain expertsmaking and to act as domain experts

Do more than just “search and match”Do more than just “search and match”


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Intelligent Agents for Information Search and Filtering

Intelligent Agents for Intelligent Agents for Consumers Consumers (cont.)(cont.)

Help to determine Help to determine what to buywhat to buy to satisfy a specific to satisfy a specific need by looking for specific products’ information need by looking for specific products’ information and critically evaluate themand critically evaluate them


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Organizational Organizational Buyer’s BehaviorBuyer’s Behavior


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Organizational Buyer’s Organizational Buyer’s BehaviorBehaviorConsumer Types

Demand Individual OrganizationalPurchase volume Smaller Larger

Number of customers Many Fewer

Location of buyers Dispersed Geographically concentrated

Distribution structure More indirect More direct

Nature of buying More personal More professional

Nature of buying influence Single Multiple

Type of negotiations Simpler More complex

Use of reciprocity No Yes

Use of leasing Lesser Greater

Primary promotional method Advertising Personal selling

Characteristic Retail Buyers Organizational Buyers

Individual customers Individual customers Vs.Vs. Organizational buyers Organizational buyers


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Organizational Buyer’s Organizational Buyer’s Behavior Behavior (cont.)(cont.)

Behavioral Model

Vendors’ Controlled Systems

Logistic supportPayments, delivery

Technical supportWeb design, Intelligent-agents

Customer serviceFAQ,E-mail,Call Centers,One-to-one

Decision Making Process (Group or Individual)

Stimuli

MarketingPrice

PromotionProductQuality

OthersEconomicalTechnology

PoliticalCultural

Interpersonal Influences

Authority; status; persuasiveness

IndividualInfluences

Age; gender; ethnicity; education, lift style;

psychological; knowledge; values; personality

OrganizationalInfluences

Policies and procedures; organization structure;

centralized/decentralized; systems used; contracts

Buyers’Decisions

Buy or not; What to buy;Where (vendor);When; Delivery termsPayments

© farhan mir 2007 ims e-commerce & applications bba (hons) 7 th internet consumer & market...

Documents

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