consumer behavior: in today's online world

Consumer BehaviorWafa Hozien, Ph.D.

Assistant Professor, Virginia State Universitywhozien@vsu.edu

Based On: What marketers misunderstand about online reviews By Itamar Simonson and Emanuel Rosen, HBR: Jan-Feb 2014, pages 23-5.

Driving DecisionsO Simonson and Rosen (2014) wrote:

What marketers misunderstand about online reviews

O Managers need to analyze what is driving buying decisions

O Managers need to adjust strategies

What marketers misunderstand about online reviews By Itamar Simonson and Emanuel Rosen, HBR: Jan-Feb 2014, pages 23-5.

Then. . .O The way consumers used to process

information:O “You get what you pay for”O Is Brand A better than Brand B?O Dependent on information provided

by manufacturers

Now. . .O Consumers today. . .

O Consult Social MediaO User generated reviewsO Expert opinionsO Peer to peer information

Every MarketerO Is aware of online reviewsO But many ignore it

Unable to ChangeO Marketing products like they did a

decade agoO There needs to be a shiftO To account for future customers and

opinions of existing customers

Created Two ToolsO The Influence Mix and theO O continuumO To help marketers

Customer PurchaseO Influenced byO (P) Prior preferences, Beliefs and

ExperiencesO (M) Information from MarketersO (O) Input from Other people and

from information services

P=Prior Preferences; M=Marketers; O=Other/Information Services

This is the INFLUENCE MIX

O Think of it as. . . Zero Sum GameO The greater the reliance on one

source, the lower the need for the others

O If the impact O on a purchase decision about a food processor goes up, the influence of M or P or both goes down

P=Prior Preferences; M=Marketers; O=Other/Information Services

O has increased weightO But there are exceptionsO Milk – habitual purchaseO Tends to be dominated by P O Toothbrush – can be swayed by M –

brand, packaging, point of purchase messages, etc.

P=Prior Preferences; M=Marketers; O=Other/Information Services

P=Prior Preferences; M=Marketers; O=Other/Information Services

Questions for Companies

O To what extent do consumers depend on O when making decisions about their products?

O Answer: On the O continuumO The closer product is closer to O

dependent end the greater shift in how consumers evaluate info about it

P=Prior Preferences; M=Marketers; O=Other/Information Services

Product Falls on O Continuum

O Then consider the strategic implications in four realms

O Competitive PositionO CommunicationO Market ResearchO Product Segmentation

P=Prior Preferences; M=Marketers; O=Other/Information Services

Competitive PositionO In domains where customers depend

on O O Branding takes less importanceO Newcomers find relatively low

barriers to entry

P=Prior Preferences; M=Marketers; O=Other/Information Services

CommunicationO O dependent purchase decisionsO For example: CamerasO Less dependent on celeberity

endorsement and banner ads useless

O Because Opinion Matters MostO Weight of Trusted Reviews Overrides

ads

P=Prior Preferences; M=Marketers; O=Other/Information Services

Therefore. . .O These types of companies need to O Generate user interest andO Promote ongoing flow of authentic

and positive content

P=Prior Preferences; M=Marketers; O=Other/Information Services

Market ResearchO Usually aims to measure PO It tries to predict the kinds of

products consumers will like by assessing their preferences

O Purchase decisions reliant on O

P=Prior Preferences; M=Marketers; O=Other/Information Services

What to Measure?O Instead of Measuring individual

consumers’ preferences, satisfaction and loyalty

O Marketers should redirect resources to the

O Systematic tracking, coding and quantifying of information

O From review sites, user forums, and other social media

P=Prior Preferences; M=Marketers; O=Other/Information Services

Where to TargetO Shoppers in brink and mortar stores

are often more susceptible to M than online shoppers are

P=Prior Preferences; M=Marketers; O=Other/Information Services

Product SegmentationO Products location varies from country

to countryO What might be a hot commodity in

Ireland may not be in the United States

P=Prior Preferences; M=Marketers; O=Other/Information Services

Strategy ChangeO When communicating with segments

that relay on M, a company can use advertising to build top of mind awareness, persuade customers, and position its offerings

O Those strategies do not work for segments that rely on O

O The degree to which customers rely on O varies situationally

P=Prior Preferences; M=Marketers; O=Other/Information Services

Point of No ReturnO Increased reliance on ReviewsO Yelp, TripAdvisor, and others are

reliable sourcesO Consumers are increasing becoming

researchers of product information

Start with AmazonO 30% of US consumers begin online

purchase by going to Amazon to read product reviews

O Google: Customers consult 10.4 sources of information before purchasing

P=Prior Preferences; M=Marketers; O=Other/Information Services

The App VariableO Consumers who use apps such as

shopsavvy to compare pricesO Minimize the weight of M on their

decisions O Even when doing Brick and Mortar

shopping

Successful CompaniesO Closely track sources of information

their customers turn toO Find the combination of marketing

channels and tools best suited to the ways those consumers make decisions

P=Prior Preferences; M=Marketers; O=Other/Information Services

QuestionsO Why do you think

Marketers ignore online reviews?

O Give an example of a recent purchase you have made. What did you relay on in the Influence Mix? Why?

O In groups of two:O Give a company

example of the use of:O Competitive PositionO CommunicationO Market ResearchO Product

Segmentation