chapter 3 : internet consumers and market research
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Chapter3
Internet Consumers, and
Market Research
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LearningObjectives
Describe the essentials of consumerbehavior
Describe the characteristics ofInternet surfers and EC purchasers
Understand the decision-making
process of consumer purchasingDescribe the way companies arebuilding relationships with customers
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LearningObjectives(cont.)
Explain the implementation of customerservice and its relationship with CRM
Describe consumer market research in ECUnderstand the role of intelligent agents inconsumer applications
Describe the organizational buyer behaviormodel
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BuildingCustomerRelationships:
RitcheysbikesonlineThe Problem
Ritchey Design, Inc. is a relatively small
designer and manufacturer of mountainbike components
Sells its products to distributors and/orretailers, who then sell them to individual
consumersIts 1995 Web site was more a statussymbol than a business tool
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BuildingCustomerRelationships:
RitcheysbikesonlineVisitors could get information on TeamRitchey or find out where Ritchey
products were soldIt did not give customers all theinformation they wanted
It did not enable the company to gaininsight into its customers wants andneeds
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BuildingCustomerRelationships:
RitcheysbikesonlineThe Solution
In late 1995, Ritchey reworked the Web
site so that the company could hear fromits customers directlyset up customer surveys on the site
offered visitors who answer the surveys a
chance to win free Ritchey productsvisitors enter their names and addresses andthen answer questions about the companysproducts
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BuildingCustomerRelationships:
RitcheysbikesonlineWeb Trader software automaticallyorganizes and saves the answers in a
database and is used to help makemarketing and advertising decisions
Questions are changed to learncustomers opinions about any new
products Ritchey develops
Saves $100,000 on product developmentper year
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BuildingCustomerRelationships:
Ritcheysbikesonline
An online catalog educates retailers andconsumers about the technological
advantages of Ritcheys high-endcomponents over competitors parts
Visitors browse the product catalog thatincludes detailed descriptions and
graphics of Ritcheys products
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BuildingCustomerRelationships:
RitcheysbikesonlineThe Results
ritcheylogic.comsells only team items
such as t-shirts, bags, water bottles, andother gear directly to individuals online
The company does not sell bike parts toindividuals directly online because it
wants to maintain its existing distributionsystem
Dealers can place orders on the site
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BuildingCustomerRelationships:
RitcheysbikesonlineThe site is basically used in B2C EC onlyfor the basic activities in Internet
marketing:communicating with customers
conducting market research
delivering advertising
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BuildingCustomerRelationships:
RitcheysbikesonlineWhat we can learn
Illustrates the benefits a company can
derive from changing its Web site from apassive one to one with interactivity
Interactive Web site allows the companyto:
learn more about its customerseducate customers
use the site for customer service
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ConsumerBehaviorOnline
Model of consumer behavior online
independent(or uncontrollable) variables
interveningor moderatingvariables
decision-making process
dependent variables
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Figure3.1
ECConsumerBehaviorModel
Source: Zinezone, c/o GMCI Co.
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ConsumerBehaviorOnline(cont.)
Consumer types
Individual consumers
Commands most of the medias attention
Organizational buyersGovernments and public organizations
Private corporations
ResellersConsumer behavior viewed in terms of:
Why is the consumer shopping?
How does the consumer benefit from shoppingonline?
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ConsumerBehaviorOnline(cont.)
Purchasing types and experiences2 dimensions of shopping experiences
Utilitarianto achieve a goalHedonicbecause its fun
3 categories of consumersImpulsive buyerspurchase quickly
Patient buyersmake some comparisonsfirst
Analytical buyersdo substantial researchbefore buying
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ConsumerBehaviorOnline(cont.)
Direct sales, intermediation, and customerrelations
Companies that sell only through intermediariesstill need good relations with the end-users
Example: Ford Motor Company
Do not sell directly to consumers
Recognize that drivers of Ford vehicles thinkof themselves as having a relationship withthe company
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PersonalCharacteristicsand
DemographicsofInternetSurfers
Environmental variablesSocial variables
Cultural variables
Psychological variables
Other environmental variables
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PersonalCharacteristics
ofInternetSurfers
Personal characteristics anddifferences
Consumer resources and lifestyleAge and gender
Knowledge and educational level
Attitudes and valuesMotivation
Personality
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DemographicsofInternetSurfers
Major demographics presentedinclude
GenderAge
Marital status
Educational level
EthnicityOccupation
Household income
D hi f I S f
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DemographicsofInternetSurfers
(cont.)
The more experience people have on theWeb, the more likely they are to buy
online
Two major reasons people do not buyonline
Security
Difficulty judging the quality of the product
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Figure3.2
AmountofMoneySpentontheWeb
C P h i D i i
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ConsumerPurchasingDecision
Making
Roles people play in decision-making
Initiatorsuggests/thinksof buying aparticular product or service
Influenceradvice/views carry weight inmaking a final buying decision
Decider--makes a buying decision or any
part of itBuyermakes the actual purchase
Userconsumesor uses a product orservice
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ConsumerPurchasing
DecisionMaking(cont.)
Purchasing decision-making model5 major phases of a general model
Need identificationactual and desired states
of needInformation search
Alternatives evaluationresearch reducesnumber of alternatives, may lead to
negotiationPurchase and deliveryarrange payment,delivery, warranties, etc.
After-purchase evaluationcustomer service
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ConsumerDecision
MakingProcess(cont.)
Product brokering:Deciding what product to
buyMerchant brokering:Deciding from whom(from what merchant) to buy a product
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Table3.1PurchaseDecisionMakingProcess&Support
System
Source: OKeefe and McEachern, 1998.
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Figure3.3
ModelofInternetConsumerSatisfaction
Source: Lee (2001)
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MatchingProductswith
Customers:Personalization
One-to-one marketing
Relationship marketing
Overt attempt of exchange partners tobuild a long term association, characterizedby purposeful cooperation and mutualdependence on the development of social,
as well as structural, bonds
Treat different customers differently
No two customers are alike
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Figure3.4
TheNewMarketingModel
Source: GartnerGroup
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MatchingProductswith
Customers:Personalization(cont.)
Issues in EC-based one-to-one marketingCustomer loyaltydegree to which customerstays with vendor or brand
Important element in consumer purchasingbehavior
One of the most significant contributors toprofitability
Increase profitsStrengthen market position
Become less sensitive to price competition
Increase cross-selling success
Save costs, etc.
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MatchingProductswith
Customers:Personalization(cont.)
Issues in EC-based one-to-one marketing
Meeting customers cognitive needsorganize
customer service to meet needs of each skill setNovice
Intermediate
Expert
E-loyaltycustomers loyalty to an e-tailerLearn about customers needs
Interact with customers
Provide customer service
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MatchingProductswith
Customers:Personalization(cont.)
Issues in EC-based one-to-one marketingTrust in EC
Deterrence-based trustthreat of
punishmentKnowledge-based trustgrounded inknowledge about trading partners
Identification-based trustempathy and
common values between partnersValue of EC referrals
Word-of-mouth
Delivery of good or service sparks other
users
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Figure3.5
TheECTrustModel
Source: Lee and Turban (2001)
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MatchingProductswith
Customers:Personalization(cont.)
PersonalizationProcess of matching content, services, orproducts to individuals preferences
Alternative methodsSolicit information from usersUse cookies to observe online behaviorUse data or Web mining
Personalization applied throughRule-based filteringContent-based filteringConstraint-based filteringLearning-agent technology
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MatchingProductswith
Customers:Personalization(cont.)
Personalization (cont.)
Collaborative filtering examples
Backfilp.comrecommends restaurantsC5solutions.compersonalized messages viacell phones
Mysimon.comassists in purchase decision-making process based on user information
Legal and ethical issuesPrivacy issues
Permission-based personalization tools
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DeliveringCustomerService
inCyberspaceCustomer service
Traditional: do the work for the customerEC delivered: gives tools to the customerto do the work for him/herself (log:tracking, troubleshooting, FAQ) with
Improved communicationAutomated process
Speedier resolution of problems
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DeliveringCustomerService
inCyberspace(cont.)
Product life cycle and customer service
Phases of product life cycleRequirements: assisting the customer todetermine needs
Acquisition: helping the customer to acquire aproduct or service
Ownership: supporting the customer on anongoing basis
Retirement: helping the client to dispose of aservice or product
Service must be provided in all of them
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DeliveringCustomerService
inCyberspace(cont.)E-serviceonline help for onlinetransactions
Foundation of serviceresponsible andeffective order fulfillment
Customer-centered servicesorder tracing,configuration, customization, security/trust
Value-added services--dynamic brokering,online auctions, online training andeducation
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DeliveringCustomerService
inCyberspace(cont.)Customer relationship management (CRM)
CRM in actioncustomer-focused EC
Make it easy for customers to do business onlineBusiness processes redesigned from customerspoint of view
Design a comprehensive, evolving EC architecture
Foster customer loyalty by:Personalized service
Streamline business processes
Own customers total experience
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CustomerRelationship
Management(CRM)
Customer service functions
Provide search and comparison capabilities
Provide free products and services
Provide specialized information and services
Allow customers to order customized
products and services
Enable customers to track accounts or orderstatus
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CustomerRelationship
Management(CRM)(cont.)Customer service tools
Personalized Web pages
Used to record purchases and preference
Direct customized information to customersefficiently
FAQs
Customers find answers quickly
Not customized, no personalized feeling and nocontribution to relationship marketing
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CustomerRelationship
Management(CRM)(cont.)Tracking tools
Customers track their orders saving time andmoney for allExample: FedExs package tracking
Customer service tools (cont.)Chat roomsdiscuss issues with companyexperts and with other customers
E-mail and automated responseDisseminate general informationSend specific product informationConduct correspondence regarding any topic(mostly inquiries from customers)
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CustomerRelationship
Management(CRM)(cont.)
Customer service tools (cont.)Help desks and call centers
A comprehensive customer service entityEC vendors take care of customer service issuescommunicated through various contact channels
Telewebs combine
Web channels (automated e-mail reply)
Web knowledge bases (portal-like self service)Call center agents or field service personnel
Troubleshooting toolsassist customers insolving their own problems
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CustomerRelationship
Management(CRM)(cont.)Justifying customer service and CRMprograms2 problems
Most of the benefits are intangibleSubstantial benefits reaped only from loyalcustomers, after several years
Metricsstandards to determine
appropriate level of customer supportResponse and download times
Up-to-date site and availability of relevant content
Others
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CustomerRelationshipManagement(CRM)
1-800-FLOWERS
Buy by telephone, retailshops, and online
Online and offlinepromotions
E-mail order confirmation
Blackstar (music retailer)
Thanks customers by e-
mailProvides toll-free telephonenumber
Provides tracking system
Amazon.com
Convenience, selection,value, special services
E-mail order confirmation
Personalized services
Federal Express (FedEx)
Package tracking service
Ability to calculate delivery
costs, online shippingforms, arrange pickup, findlocal drop box
Examples of superb customer service
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MarketResearchforEC
Aim findrelationship between
ConsumersProducts
Marketingmethods
Marketers throughinformation
In order to improvecustomer service
Discover marketingopportunities and issues
Establish marketingplans
Better understand thepurchasing process
Evaluate marketingperformance
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Figure3.6
MarketResearchProcess
Market segmentationdivideconsumer market into groups to
conduct marketing research,advertising, sales
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MarketResearchforEC(cont.)
Conducting online market researchpowerful tool for research regarding:
Consumer behavior
Discover of new markets
Consumer interest in new products
Internet-based market researchInteractiveallowing personal contact
Gives better understanding of customer,market, and competition
Table 3 2
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Table3.2OnlineMarketResearchProcess&
ResultsOnline market research methodsfast,cheap, data collection
Source: Based on Vassos (1996), pp. 66-68.
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MarketResearchforEC(cont.)
Online market research methods (cont.)
Conducting Web-based surveys
Limitations of online researchNot suitable for every customer or product
Skewed toward highly educated males withhigh disposable income
May be unreliable, biased
More knowledge is needed
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MarketResearchforEC(cont.)
Online market research methods (cont.)Data miningsearching for valuable businessinformation in extremely large databases
New business opportunities generated byconducting:
Automated prediction of trends andbehaviors
Automated discovery of previously unknownpatterns and relationships
Web miningmining meaningful patternsfrom Web resources
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MarketResearchforEC(cont.)
Datamining (cont.)
Major characteristics and objectives of datamining:
Relevant data difficult to find in huge databases
Tools help find information buried in corporatefiles or public records
Miner uses data drills for easy access to
answers, may find valuable, unexpected resultsTools combined with spreadsheets for easyanalysis of results
Yields: associations, sequences, classifications,clusters, forecasting
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MarketResearchforEC(cont.)
Limitations of online market research
too much data may be availableneed
business intelligence to organize, edit,condense, and summarize it
accuracy of responses
loss of respondents because ofequipment problems
ethics and legality of Web tracking
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MarketResearchforEC(cont.)
Online shoppers tend to be wealthy,employed, and well educated
The lack of clear understanding of theonline communication process and howonline respondents think and interact incyberspace
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Figure3.7
AFrameworkforClassifyingECAgents
The purchasing decision-making process: agentclassification
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Need identificationhelps determine what to buytosatisfy a specific need by looking for specific productsinformation and critically evaluating them
Examples:Salesmountain.comspecifically requested items forindividual customers
Discogs.comsample and buy music
Netcactus.comhelp choose gifts
Querybot.com/shoppinglooks for deals and finds relatedinformation on requested items
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Product brokering
Example: Firefly
Used a collaborative filteringprocess thatcould be described as word-of-mouth tobuild the profile
Asked a consumer to rate a number ofproducts
Matched his ratings with the ratings ofother consumers
Relied on the ratings of other consumerswith similar tastes, recommended productsthat he has not yet rated
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Merchant brokeringintelligent agents for findingvendors
Bargainfinder from Andersen Consulting (firstproduct brokering agentno longer exists)Queried the price of a specific CD from a number of onlinevendors and returned a list of prices (unsuccessful)
Jango (embedded in excite program)Originates the requests from the users site instead of fromJangos vendors have no way to determine whether therequest is from a real customer or from the agent
Provides product reviews
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Merchant brokering (cont.)
Kasbah from MIT Lab (product & servicescomparison agent)no longer operating
Users wanting to sell or to buy a product, assign thetask to an agent who is then sent out to proactivelyseek buyers or sellers
Purchase and deliveryarrange payment and
delivery of goods
After sale service and evaluationautomaticanswering agents respond to customer queries and
remind them of maintenance needs
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Negotiationprice and other terms oftransactions are determined
Kasbah
Multiple agentsusers create agents for the purpose ofselling or buying goods
3 strategies: anxious, cool-headed and frugal
Tete-@-tete (no longer in operation)Parameters: price, warranty, delivery time, servicecontracts, return policy, loan option and other valueadded services
Use information acquired during the first two stages ofthe purchasing decision model to evaluate each singleoffer
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IntelligentAgentsin
Customer-relatedApplications(cont.)
Other EC agents
Auction support agentsFraud and detection protection agents
Character-based interactive (animated)
agentsLearning agent
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IntelligentAgentsin
Customer-relatedApplications(cont.)Organizational buyerbehavior
Purchase sameproducts as individuals
Transaction volumesmuch larger
Terms of negotiationsand purchasing morecomplex
Purchasing processmore important than toan individual buyer
Behavioral model oforganizational buyers
Influencing variables
different from those ofindividual buyers
Organizationpurchasing guidelinesand constraints
Interpersonalinfluences are factors(authority)
Group decision making
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OrganizationalBuyerBehavior
InternetMarketinginB2B(cont.)
Organizational buyer behavior
number of organizational buyers is much
smaller than the number of individualbuyers
transaction volumes are far larger
terms of negotiations and purchasing aremore complex
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Figure3.8AModelofBusiness
BuyerBehavior
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OrganizationalBuyerBehavior
InternetMarketinginB2B(cont.)
Methods for B2B online marketingTargeting customers
contact all of its targeted customersindividually when they are part of a well-defined group
affiliation service
advertising
Electronic wholesalersintermediary sells directly to businesses, butdoes so exclusively online
O
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OrganizationalBuyerBehavior
InternetMarketinginB2B(cont.)
Other B2B marketing servicesDigital Cement
provides corporate marketing portals that helpcompanies market their products to businesscustomers
National Systemstracks what is going on in an industry
Business Townprovides information and services to smallbusinesses, including start-ups
Vantagenetoffers free tools that help increase traffic to acompanys Web site
O i i l B B h i
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OrganizationalBuyerBehavior
InternetMarketinginB2B(cont.)
Affiliate programs
Placing banners on another vendors Web
siteContentalliance program in whichcontent is exchanged so that all canobtain some free content
Infomediaries
Online data mining services
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ManagementIssues
Understanding consumers
Consumers and technology
Response timeIntelligent agents
Market research
CRM and EC integrationMeasuring customers satisfactionfrom a Web site
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CRMApplicationsandTools(cont.)
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CRMApplicationsandTools(cont.)