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Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical

AnalysisAuthor(s): Xueming Luo and Mojtaba SeyedianSource: International Journal of Electronic Commerce, Vol. 8, No. 2 (Winter, 2003/2004), pp.95-118Published by: M.E. Sharpe, Inc.Stable URL: http://www.jstor.org/stable/27751098 .

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Contextual Marketing and Customer-OrientationStrategy forE-Commerce: An Empirical AnalysisXueming Luo andMojtaba SeyedianABSTRACT: Theories from nformationsystems nd strategicmarketing re integrated odevelop a framework orunderstandingthedirect,mediated, and moderated influencesof contextual marketing and customer-orientation strategy on site satisfaction. Empiricaltesting shows that customers7 perceived contextual marketing and customer-oriented strategies are associated with site satisfaction nd loyalty. eparting from hesimple linearassociation approach, thestudy lso investigates hemoderating roleofprivacyconcernsand sitedesign complexity nd themediating roleofperceived sitevalue. It indsthat heinfluence f contextualmarketing nd customer-orientationstrategy n sitesatisfaction smoderated by theperceived complexityof thesitedesign but notby consumerprivacyconcerns. These influencesmay also be mediated by perceived sitevalue. Overall, thecontextualmarketing pproach of providing personalized, real-time nformationocustomers t thepointof needwill obtain competitive dvantage in -commerce.KEYWORDS AND PHRASES: Consumer behavior, contextualmarketing,customerorientation, Internet marketing, privacy concerns.

Electronic commerce has not been as successful as expected bymany companies in the business-to-consumer sector.With more than $10 billion investedon theWeb, large companies find that less than 1 percent of strategic customer on-line profile isuseful [13,26]. This does notmean that e-commerce isfutile and there are no e-commerce winners (e.g., 1-800-contacts). As Aufreiter,Ouillet, and Scott note, the fundamental factor that setsWeb winners apart issuperior marketing in obtaining customer knowledge and satisfaction [3].Echoing thisview, Kenny and Marshall hold that thekey to attracting repeatvisits and customer loyalty is "contextual marketing," which they define asthe practice of providing personalized information to customers at thepointof need in real-time [26]. Thus businesses may enhance Web users' satisfaction and loyalty [12,39], materializing enormous e-opportunities, by providing contextual information to customers in real-time [12, 32, 39]. Given thepotential importance of contextual marketing, it is surprising that scholarshave not yet empirically investigated this subject in the literature.The present study is an initial, exploratory step inempirically investigatingthe associations between the perceived importance of contextual marketingand e-business customer orientation strategies, and user satisfaction withInternet storefronts. It also studies the linkbetween off-line business strategy(market/customer orientation) and on-line commerce development. Departing from the simple linear association approach (e.g., [54]), it investigates themoderating

role of privacy concerns and site design complexityand the

The authors gratefullyacknowledge thevaluable and constructive comments ofthe IJEC reviewers and ofProfessorVladimir Zwass.InternationalJournalofElectronic Commerce /Winter 2003-4, Vol. 8,No. 2,pp. 95-118.Copyright ? 2004ME. Sharpe, Inc.All rights reserved.1086-4415/2004 $9.50 + 0.00.

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96 XUEMING LUOANDMOJTABASEYEDIAN

mediating role ofperceived site value. The framework of the study integratesbusiness theories such as contextual marketing and privacy concerns in information systems [16,18,26,32,36], customer orientation in strategicmarketing[27, 35], and site value in advertising [10,11].

Literature Review and HypothesesContextual MarketingAccording toKenny and Marshall, contextual marketing refers to the extenttowhich e-businesses use theubiquitous Internet toprovide customers withrelevant information in the right context and in real-time [26]. Contextualmarketing is important because users are already information-overloaded.What theyneed most is relevant information provided in real-time at thepointof need.

Empowered customers are in control in the information age. They opt inonly to themost relevant messages on their screens [40]. In fact,most consumerswho go on-line for a specific purpose tend to be impatient [40, 52]. If abanner ad is not relevant to a customer's information search, itwill not besuccessful. Someone searching forNational Football League results will seean on-line promotion of life insurance as irrelevant and out-of-context?eitherway, unlikely to generate satisfaction or purchase intention/decision.Tobias observes, consistently with theview of contextual marketing, that online promotions which interrupt consumers, "regardless of their interests atany given time or place," are "unlikely tobe either attractive or successful"[50,p. 133]. No wonder Kenny and Marshall declare that "the focus of e-commerce will shift from content to context, knocking many websites into irrelevance" [26, p. 119]. An interesting example of contextual marketing on theInternet is Johnson & Johnson's Tylenol Web advertising campaign. Whenever the stock market (i.e., theDow Jones Industrial Average) drops bymorethan 100 points, banner ads forTylenol pop up on on-line brokers' sites [26].Thanks to theubiquitous nature of the Internet,marketers have never been soempowered to effectively and efficiently achieve the goal ofmarketing?delivering themessage for the right product (headache reliever) to the right customer (on-line brokers) at the right time (collapse of stock market). At aminimum, Johnson and Johnson's campaign may reinforce thebrand imageand promote Tylenol awareness in real-time, thereby ultimately leading topurchase intention and brand loyaltyAnother noteworthy example of contextual marketing is the promotion ofVolvo's new model S60 sedan on-line. On October 15,2000, Volvo, allied withAOL via theAOL Welcome Screen and theAOL Auto Center, gave shoppers$2,100 indiscounts and other offerings throughWeb links. The strategicWebbanner placements accelerated customer awareness and response. This online contextual marketing campaign farsurpassed Volvo's expectations. Itwasreported that 80 percent of the customers who purchased Volvo models in thefollowing twomonths were first-timebuyers.


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INTERNATIONALJOURNAL F ELECTRONIC COMMERCE 97

The Internet isbecoming ubiquitous and will eventually be accessible fromeverywhere. Ubiquity will allow businesses to remain in contact with theircustomers 24 hours per day. Advanced technologies (e.g.,wireless and mobile technologies) and the Internet are reaching customers whenever andwherever theywant. The tools of contextual marketing may include wirelessphones, personal digital assistants, interactive Web-connected kiosks, electronicwallets, and many other access technologies. Mobile devices and Internetaccess will let contextual marketers link real-life situations tovirtual information and offerings.Wireless carrierNIT DoCoMo's I-mode service in Japan,for instance, offers wireless access to hotel reservations, restaurant locators,ski resorts, real-time stock exchange statistics, and much more [26].Contextual marketing strives to findoutwho the customers are,where theyare located, and what they are doing. The firmshould actively understand itscustomers and actively deliver itsmessage at the appropriate time and place.From the firm'sperspective, contextual marketing isactive and dynamic. Fromthe customer's perspective, however, itmay be passive and reactive?the customer passively receives information presented at a given time and place,and either responds or ignores it.Companies thatmaster the complexity of theubiquitous Internet and contextual marketing may gain substantial competitive advantages: more efficient targeting ofmarket segments and offering a more valuable product at apremium price. Contextual marketing gives companies more ways to connectto their customers and opportunities tobetter exploit such relationships. Forexample, Simon Properties, the largest retailmall developer, gives customersmobile devices tomake e-wish lists or toplace orders forhome delivery. Thisenables Simon to track shoppers and provide individual retail tenantswithpurchase data at a price. In turn, retail tenants can utilize the real-time shopping data in order to offer timely, relevant promotions and coupons.

Providing contextual information to customers at the right time is in linewith the theory of real-timemarketing [32,36,40]. Real-time marketing refersto the extent towhich the firmcan offerproducts and services at the customer'slocation, in real-time, based on the customer's choices and actions [40]. AsMcKenna notes indiscussing the switch froma firm-to-customer approach toa customer-to-firm approach, marketers once used to target customers viabroadcast but now need to invite them invia dialogue [32].Aided by theemerging technologies, marketers may initiate real-time dialogues with their customers and provide themwith interactive services. Such conversations andinteractive services may help companies to "cut through themarket chaos inthemarketspace and establish binding relationships with their customers"[32, p. 87]. In the real-time world, traditional marketing connections to customers (e.g., focus groups, consumer surveys) are not enough

to build customer loyalty and brand. Instead, companies need to engage, via informationtechnology in a continuous dialogue with customers about product development, experience with theproduct, service support among suppliers, distributors, and the like.Dialogue with consumers is important in that it is thewayfirms can achieve context and ultimately obtain greater customer loyalty andsuperior performance.


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The time-value or time-sensitivity of information has been described as"themost significant factor inmanagerial decision-making" in an off-line environment [14,p. 509]. In the dynamic, turbulent electronic market, the valueof information depreciates quickly and, thus, its time-sensitivity should beeven greater. This means that capability for real-time communication and contextualmarketing may become a key issue of strategic planning and a sourceof competitive advantage for e-business to gain customer repeats visits andsatisfaction. Therefore, the firsthypothesis states:HI: User perception of the importance ofcontextualmarketing is related tosatisfactionwith Internet storefronts.

Customer OrientationElectronic business will soon become the usual way of doing business [47].This means that customer-orientation strategywill play a critical role in generating competitive advantage inboth off-line and on-line environments (e.g.,[27,35]). Customer-oriented strategy is theoretically grounded in themarketing concept that emerged in the early 1950s. More recently, themarketingconcept has evolved into the core of strategicmarketing, including the threecomponents of customer orientation, attainment of objectives and profitability, nd integration ofmarketing function with other functional areas (e.g.,[21, 22, 24, 35, 54]).Consistent with the strategic marketing literature (e.g., [8, 35]), customerorientation is the belief that understanding and satisfying customer needsshould be an organization's priorities [9,22, 23, 25, 54]. Thus customer orientation focuses on thedynamic interactions between the firmand its customers,competitors, and internal stakeholders. As a core concept, itholds thatallmembers of a firmmust continuously create superior value forcustomers, and mustdo so better than the competitors. A customer orientation ormarket orientationhas long been deemed an important resource of competitive advantage inthe long run (e.g., [8, 33, 34]). A firmwith amarket orientation may attain ahigh level of customer satisfaction and superior performance through a betterunderstanding of its customers, competitors, and environment (e.g., [8,21,27,28,35]). There is ample empirical evidence to support thepositive influence ofcustomer orientation on the firm's performance [8,20, 27, 35, 28, 54].In the context of e-commerce, the importance of customer focus has beennoted in the customer resource life-cyclemodel (e.g., [15, 24, 25]). Essentially,thismodel shows how a firm can develop and manage customer relationships toenhance competitiveness and create a strategic advantage. In the firmlevel framework forplanning e-commerce, Raghunathan andMadey identifycustomer orientation as a critical ingredient in superior customer management [37].As Krauss explains, "companies thatbuild e-business models onmeeting fundamental customer needswill prosper" [31,p. 9; emphasis added].No wonder, then, that in a survey of e-businesses, Aufreiter, Ouillet, and Scottfound that top performers were distinguished (from the less successful ones)by their superior marketing skills and their commitment to long-term cus


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tomer satisfaction [3]. Intimate knowledge of their customers was the criticalsource of competitive advantage. Nonetheless, the importance of customerorientation fore-commerce has been largely ignored in the literature.The theory of customerization expounded in a recent study byWind andRangaswamy is an interesting parallel to the customer orientation view forecommerce [55]. They describe customerization as the redesign ofmarketingfrom the customer's perspective, or put differently, the transformation ofmarketing practices from seller-centric tobuyer-centric. This is thenext revolution inmass customization in that it involves not only mass customizationfrom the IT-intensive production side but also customerized marketing fromthe side of IT-intensive marketing and customer interfaces [55]. In theory,customer orientation and customerization strategies are all essentially customercentric,beginning with customer analysis and focusing on current and potentialcustomer needs [27, 35].In off-linemarkets, according toKohli and Jaworski, market orientationmay lead topositive customer attitudes and behaviors [27]. Senior management reports that customer satisfaction, positive word ofmouth, and repeatbusiness are all outcomes of a firm's strategic customer orientation. Therefore,Kotier asserts, customer orientation promotes customer satisfaction [29].In the same vein, if firm in the virtual marketspace is committed tomeet itscustomers' real needs wherever the customers are and whenever theyhave aneed, its customers are more likely to perceive that the firm is practicing acustomer-orientation strategy, and thuswill feel satisfied and become loyal tothe sites. Therefore:

H2: User perceptions of the importance ofcustomer-orientation strategy isrelated to satisfactionwith Internet storefronts.Departing from the simple linear association approach [e.g., 46, 54], thediscussion that follows will explore when and how contextual marketing orcustomer orientation matters, given themoderating role of privacy concerns

and site design and themediating role of perceived site value.

TheMediating Role of Site ValueSite value refers to the extent towhich users perceive aWeb site as useful,important, and valuable [1,26, 31,48]. Amit and Zott state thatvalue creationis an important factor in the success of an e-business [1]. The associationsbetween theperceived importance of contextual marketing and customer orientation and perceived e-satisfaction may bemediated by theperceived valueof the site. Customers adopt thedisruptive innovation of the Internetmainlybecause itoffers them superior value [48]. The benefits of a site are generallyheld tobe its convenience, ubiquity, low entry cost, and the absence of time orspace limitations. A user who does not perceive a site as valuable may neverbother to experience theubiquitous medium, and in consequence attitudinalsatisfaction will be less likely to surface. The literature on advertising supports themediating role ofWeb ad value in the relationship between on-line


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ad attributes and attitudes toward Web ads [10, 11]. From the consumer'spoint

of view, advertising value isposited as an overall index of theworth ofadvertising. Ad value may measure the overall performance of the advertising industry [10]. Based on the exchange theory,Ducoffe predicts and supports themediating role of on-line ad value indetermining attitudes towardWeb ads [10]. By the same token, for e-commerce exchanges tobe evaluatedpositively in the post-purchase stage, buyer and seller must both give andreceive value. Site value, therefore, is believed tomediate the associationsbetween perceived importance of contextual marketing and customer orientation and perceived satisfaction with Internet storefronts.

H3: Site value mediates therelationship between theperceived importance ofcontextualmarketing and satisfactionwith Internet storefronts.H4: Site value mediates therelationship between theperceived importance ofcustomer-orientation strategyand satisfactionwith Internet storefronts.

TheModerating Role of Privacy ConcernsIn order to successfully implement a contextual marketing strategy and customer-oriented offering of tailored information to individuals, it isnecessarytohave detailed, click-by-click customer information. As consumers take controlof information about themselves, however, privacy concerns may becomean obstacle to e-commerce development [16]. Consumer privacy is often defined as the right to be let alone. It refers to personal information about anindividual's body, personal behavior, personal communication, and personaldata. Customer privacy concerns are important because most people eitherhave yet to shop on the Internet or have left the electronic market because ofconcerns about privacy and security (e.g., [17, 18, 19, 30]). In fact, Internetprivacy concerns have prompted responses from both government and business. In a survey of 1,123 advertising agencies and client organization decision-makers, Bush, Bush, and Harris found that "security/privacy issues aremajor barriers to utilizing the Internet as amarketing tool" [5,p. 25].Whenusers are very concerned about their privacy, theywill be less likely toprovide true and detailed information toWeb business. This reduces the effectiveness of contextual marketing and customer orientation strategies. Thuscontextual marketing and customer orientation strategies will be less likely todraw positive attitudinal satisfaction fromusers with high privacy concerns.

H5: Users' privacyconcernsmoderate therelationship

between theperceivedimportance ofcontextualmarketing and satisfactionwith Internet store

fronts.More specifically,user privacy concernsweaken this relationship.H6: Users' privacy concernsmoderate therelationship between theperceivedimportanceofcustomer orientation and satisfactionwith Internet storefronts.More specifically,user privacy concernsweaken thisrelationship.


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TheModerating Role of the Complexity of Site DesignIn addition toprivacy concerns, the complexity of site design may limit theeffectiveness of contextual marketing and a customer-oriented e-business strategy. Complexity of site design refers to thedegree towhich sites are difficulttonavigate, present an uncluttered screen, and provide easy checkout service(e.g., [51]).Most customers need simple-to-use navigation. If they find aWebsite hard tonavigate or it is too time-consuming to findwhat theyneed, theymay simply stop browsing or even leave so as not towaste more time. In suchcases, customers are less likely to respond to contextual marketing and a customer-oriented strategy.Contextual marketing and customer orientation strategies will be less likely togenerate positive attitudinal satisfaction among userssurfing complicated sites. The various associations discussed above are presented graphically inFigure 1.

H7: Perceived complexity of sitedesign moderates therelationship betweenperceived importance of contextualmarketing and satisfactionwith Internetstorefronts. ore specifically,perceived complexity of site design weakens thisrelationship.H8: Perceived complexity of sitedesign moderates therelationship betweenperceived importance ofcustomer orientation and satisfactionwith Internetstorefronts. ore specifically,perceived complexity of site design weakens thisrelationship.

MethodData for this studywere collected with an intercept surveymethod in a northeastern state of theUnited States. Several research interviewers were recruitedand trained for the purposes of this project. They were instructed that thesubjects had tobe individuals familiarwith the Internet through at least oneyear of on-line experience. Using this screening criterion for Internet use, researchers excluded 37 participants. A total of 22 potential interviewees wereeither unwilling or unable toparticipate. As a result, from 239 interviews, 180questionnaires (valid response rate of 75.31% =180/239) were collected anddeemed complete and useful for thepurposes of this research. A similar intercept-based survey methodology can be found in the literature (e.g., [10,11]).Among the 180 subjects interviewed, 51 percent of the Internet users werefemale and 49 percent male. The respondents ranged in age from 19 to 53,with a mean of 23 years. Most of theusers (80%) connected to theWeb usinglocal Internet service providers (e.g., Buffnet), and 15 percent used on-lineservice providers (e.g.,AOL). On average, the interviewed users spent sevenhours per week on theWeb and had more than four years of on-line experience. In terms of shopping on-line, all the subjects had some purchase experience. More than 75 percent of them reported having made at least threepurchases via theNet.


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Contextual Marketing

Satisfaction

Customer Orientation

Privacy ConcernsSite Complexity

Site Complexity"Privacy Concerns

- Main Relationships. Moderating Relationships

Figure 1.A Model of the Studies Relationships

Since the research was limited to business-to-consumer e-commerce, respondents were instructed to report their evaluation of each statement basedupon their experience with Internet storefront sites selling books, CDs, computers, traveling, and similar items. The level of analysis with storefrontWebsites is in line with the existing e-commerce literature (e.g., [49]). After all,customer attitudinal perceptions of theWeb as awhole have been utilized inthe literature (e.g., [6,10,46,48]). Inparticular, Ducoffe concluded that a general approach toWeb advertising, rather than a focus on a specific on-line ad,would help todetermine whether any generalizable criteria account for consumers' valuations of and attitudes towardWeb ads [10].All themeasurement scales in the final questionnaire were multiple itemswith Likert-type seven-point scales, anchoring at 1 ("strongly disagree")and 7 ("strongly agree"). The measures used in the study are found inAppendix A.The perceived importance of contextual marketing was measured by a newscale developed inaccordance with the established scale-development procedures suggested by Churchill [7] and later revised byAnderson and Gerbing


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[2]. In particular, a series of focus groups and interviews were conducted forscale-item generation, scale purification, and scale validation. For instance, toachieve the face validity of contextual marketing, thedomain of the constructwas carefully specified after consultation of published works on the theory ofcontextual marketing (e.g., [26,38]) and the theory of real-timemarketing [32,36]. Qualitative interviews were conducted with some open-ended questionsin a semi-structured and undisguised questionnaire. As a result, a pool of 28itemswas generated in order to capture thewireless, ubiquitous, relevant,personalized, contextual, and real-time concepts included in the contextualmarketing domain. Exploratory factor analysis (maximum likelihood withvarimax rotation) was then done on the items using a separate sample of 79respondents in a pretest. To achieve better internal consistency reliability andvarious types of validity (e.g., convergent and discriminant validity throughtheuse of confirmatory factor analysis), themeasurement was purified withthis independent sample of 79 respondents. The number of itemswas finallyreduced to six for the formal survey of the 180 respondents. The validity ofthe scale is discussed indetail at the end of this section. Great care was takento achieve the construct face validity of thekeymeasure of the perceived importance of contextual marketing.The resulting measure for contextual marketing seems justified in that thecontextual marketing practice, by definition, is characterized by utilizing

multiple access points, such aswireless phones, PDAs, kiosks, and e-wallets,by proactively reaching customers wherever they are, by focusing on the rightcontext and real-time value, and by being therewhenever and wherever yourcustomer is ready to purchase. As a result, the final six-item scale assessesWeb user perceptions of the importance ofusing wireless phones that connectto the Internet,developing features that "come tome" in real-time, using kiosksinmalls to find shopping discounts, using wireless devices to shop on-line,using e-wallets when checking out, and developing banner ads thatpertain topersonal interests and needs.The scale for customer orientation of e-business was developed based onthe existing measures in the literature [8, 35, 28]. In the strategic marketingliterature, the customer orientation scale is awell-established, widely accepted,and very influential construct. Ithas four items: assess the extent towhich ebusinesses should be concerned with customer satisfaction, build a long-termrelationship with shoppers, put more emphasis on adding value for shoppers, and commit to serving user needs.

Privacy concerns were assessed though an existing five-itemLikert-type scale[30, 42, 43, 44, 45, 52]. Examples of the items on the scale include: "I am concerned about the security of personal information," "I am worried about thesecurity of financial transactions," "When sending e-mail, I feel concerned thatitmay be read by someone without my knowledge," "I detest that theWeb isbecoming a haven for junk e-mail," and "I am concerned thatmy personalinformation may be used without my consent." Since the factor analysis ofthese items (maximum likelihood with varimax rotation) found only one underlying factor,a summated score of these five itemswas used in the analysis.The scale of site value consisted of three separate Likert-type items. Itwasa new scale developed on the basis of the existing measure of ad value [10].


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Grounded in exchange theory, ad value refers to an overall representation oftheworth of advertising to consumers, or the extent towhich advertising isuseful, important, and valuable to them [11].Conceptually, ad value could bethe basis for site value in that these two constructs both try to capture thedegree towhich perceived benefits are delivered to consumers. Empirically,as reported in the advertising literature, the ad value scale achieves the desired reliability and face, discriminant, and convergent validity (cf. [10, 11]).The ad value scale was generalized by Chen andWells to create an importante-commerce effectiveness metric: thewidely used scale of attitude toward asite [6]. Site value strives to assess thedegree towhich users agree that a site isvaluable, useful, and important to them.The measure of site-design complexity consists of four items, developed onthe basis of the three-item Likert-type scale of site design by Szymanski andHise [49]. This measure assesses Web users' perceptions of statements like 'Ttry to avoid navigating complex InternetWeb sites," "I like plain Web sitesthat take less time to load," "Presenting an uncluttered screen on theWeb isimportant," "Easy check-out is important forme when shopping on-line."Site satisfaction was measured by five Likert-type items. This scale wasdeveloped by expanding on the two items used inSzymanski and Hise's studyof e-satisfaction [49]. Examples of the items include "I feel satisfied with theconvenience of Internet storefront sites," "I am satisfied with information onthe Internet storefront sites," "I am satisfied with on-line products and services," "Overall, I am pleased with my experience with Internet storefrontsites," and "Overall, I am satisfied with my experience with Internet storefront sites."

Following Anderson and Gerbing's guidelines, all themeasurement modelswere evaluated with multiple criteria: unidimensionality, reliability, construct validity, and convergent and discriminant validity [2]. Evidence wasfound for the internal consistency of all the constructs except complexity ofWeb design. As reported inTable 1,Cronbach's alpha was 0.82 forcontextualmarketing, 0.84 for customer-orientation strategy, and 0.84 forprivacy concerns. Site value and user satisfaction with Internet storefrontswere also foundtopossess sufficient reliability, because Cronbach/s alpha was 0.93 and 0.92,respectively.Confirmatory factor analyses (CFA) were employed to test themeasurement model with all the constructs. The CFA results supported the unidimensionality, convergent validity, and discriminant validity of the six-factormeasurement model afterdropping one indicator of the contextual marketingconstruct. The loadings of all the items on their corresponding constructs (thedetails of the loadings can be found inAppendix A, which shows the CFAresults for themeasures from the standpoint of structural equation modeling)were significant at p < 0.05 (t ranges from3.10 to 28.81, as shown inAppendixA), demonstrating adequate convergent validity. Owing to the insignificanceof themodification indices and estimated residuals fromCFA, unidimensionalitywas also achieved. In addition, the discriminant validity of themeasuremodel was supported by checking thepairwise correlations inTable 1 (correlations range from0.04 to 0.52, different from 1.0).Another approach, suggestedbyAnderson and Gerbing [2], confirmed the discriminant validity of the con


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CONTEXTUSTORI

CONTEXT.00

CUSTORI.28**.00VALUE.34**.52**SATISF.29**.47**OMPLEX.07.31**PRIVACY0.06.37**a .82.84M.25.37SD.02.11

Table.orrelationatrix.

**p

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106 XUEMING LUO ANDMOJTABASEYEDJAN

structs bymeans of parameter estimates, their associated f-values, and the average variance extracted. The overall model goodness-of-fit indexes also supported thevalidity of the overall measurement model ([%2 284] = 640.35, p -0.000, comparative fit index [CFI] = 0.907, the goodness-of-fit [GFI] = 0.895,adjusted goodness-of-fit [AGFI] = 0.876, root-mean-square error of approximation [RMSEA] - 0.062).

Analysis and ResultsHypothesis 1predicts that theperceived importance of contextual marketingis associated with satisfaction with Internet storefronts. As reported inTable2,when site satisfaction is thedependent variable, the estimated coefficient ofcontextual marketing inmodel 1 is 0.17 (f- 2.45, p < 0.01). Therefore, HI issupported. The regression results also support H2 in that the coefficient ofcustomer orientation is 0.42 (t= 6.25, p < 0.01).

Results of Site Value as a MediatorBaron and Kenny suggest a process to test formediation [4]. It involves threeregression equations: one regressing thedependent variable (site satisfaction)on the independent variables (contextual marketing, customer-orientationstrategy), the second regressing themediator (site value) on the independentvariables, and the third regressing thedependent variable on both themediatorand the independent variables. Specifically, the following three equationswere estimated to testwhether site value mediates the effects of contextual

marketing and customer-orientation strategy on site satisfaction.Model 1: Site satisfaction = q + ft,Contextual Marketing + ?,2Customer Orientation + e{,Model 2: Site value = q, + ?^ Contextual Marketing + ?22CustomerOrientation + e2;Model 3: Site satisfaction = q + ?^ Contextual Marketing + ?^2Customer Orientation + b33Site value + e3;

According to Baron and Kenny, four conditions must hold in order to establish amediation effect: (1) the independent variable must have an impacton the dependent variable in the firstmodel, (2) the independent variablemust have an impact on themediator in the second model, (3) themediatormust have an impact on thedependent variable in the thirdmodel, and (4) theimpact of the independent variable on thedependent variable must be less inthe thirdmodel than in the second [4].The results inTable 2 indicate, as predicted inH3 and H4, that site valuemediates the associations between perceived importance of contextual marketing and customer-orientation strategy and site satisfaction. Inmodel 1, thecoefficients of contextual marketing and customer-orientation strategy are significant, satisfying condition 1. Inmodel 2, the coefficients are also significant,satisfying condition 2. Inmodel 3, the coefficient of site value is significant,


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_Model

1

Dependent variablesiteatisfaction

Independentvariables? tContextmarketing0.17.45?

ustomerorientation0.42 6.25?

Sitealue

j?20.25

adj.2.24

F29.06a

Model2 odel 3

Sitealueiteatisfaction

?0.213.25?0.02.33.46

7.16?0.10.67b

0.7112.19a

0.320.59

0.310.58 0.58a5.11?

Table.tandardizedegressionoefficientsnd-Statisticsesults.

ap 0.01(one-tailed)p< 0.05(one-tailed)


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108 XUEMING LUOANDMOJTABASEYED1AN

meeting condition 3.A comparison of the coefficients inmodel 3 and model 1indicates that the effects of independent variables aremuch less after addingthe site value in the regression, as required by condition 4. In sum, these results suggest that site value is amediator variable. In addition, it isworthnoting that the total associations between perceived importance of contextualmarketing (customer orientation) and site satisfaction should equal the sumof the direct effect and mediated effect.The total effects can be calculated bythe formulas ?n + ?21x ?33 = 0.07 + 0.21 x 0.71 = 0.32 forcontextual marketing,and ?12 + ?22 x ?33 = 0.42 + 0.46 x 0.71 = 0.75, for customer orientation. Sincethese total associations are rather sizable, thepotential influence of perceivedimportance of contextual marketing and customer orientation on site satisfaction seemed tobe strong.It should also be noted that a separate structural equation modeling (SEM)testof the combined model generated similar results for thehypotheses testing. The complete results of the SEM testwill be found inAppendix B. Thestructuralmodel's goodness-of-fit statistics lend support to the fullmodel ([%2113] = 348.94, p - 0.000, CFI = 0.912, GFI = 0.905, AGFI - 0.891, RMSEA =0.059). As a result, themediation role of the sitevalue, in associations betweencontextual marketing and customer orientation strategies and site satisfaction, is supported both by the SEM approach and the least-squares estimationinTable 2.

Results of Privacy Concerns and Complexity ofSite Design as ModeratorsSharma, Durand, and Gur-Arie suggest a process to test formoderated relationships [41]. It too involves three regression equations: one regressing thedependent variable (site satisfaction) on the independent variables (contextualmarketing and customer-orientation strategy), a second regressing thedependent variable on both themoderators and independent variables, and athird regressing the dependent variable on themoderators, the independentvariables, and theproduct of themoderators and independent variables. Thefollowing three equations are estimated:

Model 4: Site satisfaction = a1 + ? uContextual Marketing + ? 12Customer Orientation + ex)Model 5: Site satisfaction ? (22 ? 2i ontextual Marketing + ? 22Customer Orientation + b23Privacy Concerns + b24Site Complexity +Model 6: Site satisfaction = a3 + ? 31 ontextual Marketing + ? 32 ustomerOrientation + ? 33 rivacy Concerns + ? 34 ite Complexity + e3;Sharma et al. note that if moderating effectexists, the coefficients (? 33, 34)should be significant from zero [41], and model 6 should have greater ex

planatory power thanmodel 2.Alternatively, ifthere isno moderating effect,model 6 should not explain thevariance of the dependent variable more thanmodel 5, and the coefficients of the product (?33, ?34) should not be different


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from zero. Thus, ifthe change in explained variance frommodel 5 tomodel 6isnot significant,model 4 and model 5 need tobe compared inorder todetermine whether themoderator has a direct effect on thedependent variable.H5 (H6) predicts that the associations between perceived importance ofcontextual marketing (customer-orientation strategy) and site satisfaction willbe reduced when users have a high level of privacy concerns. The test resultsof themoderating effect are reported inTable 3. Inmodel 6, the coefficients ofContextual Marketing x Privacy and Customer Orientation x Privacy are notsignificant. Therefore H5 and H6 are not supported.Furthermore, H7 (H8) predicts that the effect of theperceived importanceof contextual marketing (customer-orientation strategy) on site satisfactionwill be reduced when e-businesses have complex site design. Inmodel 6, thecoefficients of Contextual Marketing x Complexity and Customer Orientation x Complexity are -0.17 and -0.20, respectively. Since they are both significant at the 0.01 level,H7 and H8 are supported.

Conclusion and Future ResearchAlthough e-commerce has taughtmany a company a lesson in the past fewyears, itwill offer enormous opportunities in the future thanks tonew technology and Web development. Learning that aWeb site in and of itself doesnot equal an e-commerce strategywas awake-up call. Putting strategic emphasis on acquiring and utilizing superior marketing skills in order toobtaincustomer knowledge and user satisfaction and loyalty arewhat makes aWebwinner. Creating a satisfying on-line experience for customers is one of themost important ways to develop a more competitive and profitable e-business. Before very long the term "e-business" may no longer be used, becauseevery business will be an e-business using the Internet and theWeb [50, 52].How to fulfill the core objectives of business?delivering business benefitsand value to customers in real-time and in the right context?will again be atop priority ofmanagers and academic researchers. Instead ofwaiting forcustomers to come to their sites, e-businesses need touse thepower of the Internetto reach the customers proactively. The contextual marketing approach ofproviding personalized information to customers at thepoint of need in real-timeis thekey to attracting repeat visits and thereby improving bottom-line profitability.The Internet and theWeb are not just selling channel. They are also a powerful tool forbuilding stronger and more loyal customer relationships. With thehelp ofubiquitous technology, customer needs and wants can be better understood and satisfied with contextual solutions regardless of place and time. Intimate knowledge of customer needs is the critical source of competitiveadvantage. For this reason, a customer-orientation strategymay determine theultimate success of e-commerce (e.g., [27, 35]). In the virtual marketspace, thevictorious companies will be the ones that build e-business models on thebasis of understanding and satisfying core customers wherever they are locatedand whenever theyneed theproduct. Therefore, a customer-oriented strategy,


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Independentariables

Model

ContextarketingCustomerrientation

Privacy

WebomplexityContextarketingrivacyContextarketingomplexityustomerrientationrivacy

0.17 .42

2.45?6.25?

Customer orientation* Webcomplexity

R2 adj.R2 F

0.25 .2429.06?

Model

ModelC

a 0.15 .48 -0.10-0.06

/ 2.23?.36a-1.380.82

a 0.12 .49 -0.15-0.07

-0.080.17-0.01

f 1.81b6.27?-2.18?0.95-1.09

-2.42?-0.15

-0.20

-2.52?

0.260.2515.44?

0.31 .28 .63?

Table.tandardizedegressionoefficientsnd-Statisticsorheoderationest.

?p

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combined with contextual marketing, should be of critical importance fore-commerce.This study extends the e-commerce literaturewith several contributions:(1) it theorizes the association between perceived importance of contextual

marketing and customer orientation strategies and site value aswell as satisfaction, (2) it is the first empirical investigation to demonstrate the importance and implications of contextual marketing, contributing to theapplicability and generalization of real-time and contextual marketing theories, (3) it articulates and validates a contingency view of the perceived importance of contextual marketing and customer-orientation strategy, extendingfrom "Does contextual marketing or customer orientation matter?" to "Whenand how does contextual marketing or customer orientation matter more?"The study found that the associations between perceived importance of contextualmarketing and customer orientation and e-satisfaction aremoderatedby the complexity of site design but not by consumer privacy concerns. Theseassociations may carry out through the delivered value toWeb users.

Managerial ImplicationsThis study has several implications for firms thatwish tobuild a successfulfuture on the Internet. First, electronic marketers should understand thatWebusers are already information-overloaded. What they need most is relevantinformation provided in real-time at the point of need. This means that contextualmarketing is important for the success of e-businesses. The winners ine-commerce will be the firms that can touch customers directly and individually, in real-time,whenever they are ready topurchase [3, 26]. Such firmswillhave tobecome direct marketers, retargeting and tailoring theirmessages todifferent customers indifferent contexts. Contextual marketing will give companies a better chance to reach customers and improve their financial performance by selling products at thepoint of need at the right place and time. Asan example, consider Mobil's Speed Pass. It shows that customers will gomiles out of theirway to find aMobil gas station. Another example is thewireless carrierNIT DoCoMo's I-mode, which offerswireless access forhotelreservations, on-line flight reservation, and much more. Nevertheless, contextual marketing is no more a panacea than any other approach. Failuressuch as PointCast suggest thatmarketer-active (customer-passive) delivery ofcontent may not meet all of the customer's needs on-line. This serves as a

warning that the contextual marketing solution should not be regarded as aguaranteed success.Second, e-businesses, like off-linebusinesses, should adopt a customer-orientated strategy.Only Web sites that build e-business models based onmeeting customer needs and wants will survive and prosper. Ultimately, superior

marketing skills and commitment to customers' long-term satisfaction willdetermine the future ofWeb businesses. The winning companies will be theones thatmaster database-marketing tools and understand their customers'current and potential needs at thepoint of need.


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Theoretical ImplicationsA limitation of this study is that itonly investigates the associations betweenperceived importance of contextual marketing and site satisfaction from theperspective ofWeb users [26, 32]. Future research might fruitfully evaluatethese factors from theperspective ofWeb businesses. New views on e-practices and strategies will make itpossible to generalize the study's findings.The importance of customer orientation for e-commerce has been largely ignored in the literature. The present study is an exploratory step in extendingthe theory ofmarket orientation into an on-line business situation [8,27, 35,49]. Webb, Webster, and Krepapa note that only a few studies evaluate market-orientation strategy from the standpoint of customers [54]. The presentstudy alleviates this deficiency by evaluating the perceptions ofWeb users.Additional research in the context of e-commerce may shed light on the synergy between the customer orientation of amarketing concept and the customer resource life-cyclemodel (e.g., [15, 24, 37]). There is a great need forempirical evidence to test the theory of customer relationship managementforenhancing competitiveness and creating a strategic advantage. Given thetheoretical importance of e-satisfaction, future research should empiricallyexplore itspossible consequences in the areas of purchase intensity and frequency and of complaint behavior. The study introduces site value as anothermeasure ofWeb business effectiveness based on the ad value theory in theadvertising literature [10,11]. Future research isneeded tomodel other antecedents and consequences of site value (e.g., [1]). Finally, one may expressconcern about the broad scope of the items in the contextual marketing scale.The scale has two dimensions, the "come tome" dimension and the "channelbreadth" dimension (kiosks,Web, mobile), which defines contextual marketing in a broader context and also relates to the issue of on-line/off-lineintegration. Future research should formulate a narrower definition, focusingon what actually happens in contextual marketing rather than on the platforms (wireless, kiosks).

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Appendix

CFAesultsfheeasuresMeasurementodelatha

Contextualarketing

Itsmportantoritesoevelopannerdshatertaino yersonalnterestsndeedsnightontext

Usingirelessevicesohopn-linesmportanto e

Itsmportantoritesoevelopeatureshatcomeo e"neal-timeItsriticaloseiosksn allsoindhoppingiscounts

Itsmportantoseirelesshoneshatonnectohenternetohopnlinennylace

I eeltsriticalosen-wallethenheckingutc

Customerrientation

Internettorefrontiteshoulduildong-termelationshipithhoppersInternettorefrontshouldeoncernedithustomeratisfactionnternettorefrontshouldutoremphasisnddingalueohoppers

Internettorefrontshouldommitoervingsereeds

Siteatisfaction

I eelatisfiedithheonveniencefnternettorefrontitesI amatisfiedithnformationnnternettorefrontitesamatisfiedithn-lineroductsnderviceselection

OverallamleasedithyxperiencennternettorefrontitesOverallmatisfiedithyxperiencennternettorefrontites

Sitealue

aStandardvariance

weightaluextracted)

0.820.75b0.76)

0.74.15 .75.28 .60.41 .68.38

0.84 .59b0.81)

0.57.39 .89.55 .86.42

0.92.76b0.88)

0.740.51.740.57.944.11.954.21

0.93


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Internettorefrontitesreeryaluableo e.94bInternettorefrontitesreerysefulo e.96Internettorefrontitesreerymportanto e.84

Privacyoncerns

I amoncernedboutheecurityfersonalnformation.87b

Whenending-mail,eeloncernedhattmayeeadyomeoneithoutynowledge.88

I amorriedboutheecurityfinancialransactions.67I etesthatheebsecomingavenorunk-mail.85

I amoncernedhatyersonalnformationayesedithoutyonsent.34

Complexityfiteesign

I ryovoidavigatingomplexnternettorefrontites.37bPresentingnnclutteredcreennnternettorefrontitessmportant.37

Easyheck-outsmportantorehenhoppingn-line.75Iikelainnternettorefrontiteshatakeessimeooad.48

aoodness-of-fittatistics:2(284)40.35,.000,FI.907,FI.895,GFI.876,MSEA.062.

bixedarameter.

ctemasroppednheinalnalysisueoooreliabilityndalidity.

(0.88)

28.817.47

0.84(0.80)

15.2110.18

14.654.49

0.61(0.53)

3.10 .893.55


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Figure Bl. SEM Test of theMediating Role of Site ValueNotes: Goodness-of-fit statistics: %2[ = 113) = 348.94; p = 0.000; CFI = 0.912; GFI = 0.905;AGFI = 0.891 ;RMSEA = 0.059.

Appendix BSEM Results of the Combined ModelA separate structural equation modeling (SEM) test of the combined modelwas also carried out. The mediating role of site value (in the associations between perceived importance of contextual marketing and customer-orientation strategies and site satisfaction) is supported by both the SEM approachand the regression approach. The results of the SEM test are reported in Figure Bl.XUEMING LUO ([email protected]) is an assistant professor in theDepartment ofMarketing in theCollege of Business Administration at theUniversity of Texas atArlington. Before joining theUniversity of Texas atArlington faculty, ewas on thefacultyofStateUniversity ofNew York at Fredonia. He obtained his doctoral degreeof business administration from Louisiana Tech University. His research interests include Strategic Marketing, E-Business Strategies, Knowledge Management, and International Marketing/Business. Dr. Luo has published in the Journal ofBusiness Research,InternationalJournalofResearch inMarketing, JournalofAdvertisingResearch, IndustrialMarketing Management, Journal f InteractiveAdvertising, and Journalof Internet ommerce, among others.MOJTABA SEYEDIAN ([email protected]) is currentlytheChair of theDepartment of Business Administration at SUNY Fredonia. He has a Ph.D. in Economicsfrom SUNY Binghamton. Dr. Seyedian's teaching and research interests are in

multidisciplinary areas.

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