chp 7 online customer behavior

CHAPTER 7

ONLINE CONSUMER BEHAVIORDIPLOMA IN INTERNATIONAL BUSINESS

(BUS2513)

Learning Objectives

1. Describe the factors that influence consumer behavior online.

2. Understand the decision-making process of consumer purchasing online.

3. Distinguish online consumer from traditional consumer.

Types Of Markets

1) Consumer

2) Business

Consumer Market

Purchasers and household members who intend to consume or benefit from the purchased products and do not buy products to make products.

The nature of customer complaints

Source: Neill Denny, “Why complaining is our new hobby,” from Marketing Magazine, 26 November 1998, p. 16. Reprinted with permission.

Buying Behavior

The decision processes and acts of people involved in buying and using products.

Consumer Buying Behavior

The decision processes and purchasing activities of people who purchase products for personal or household use and not for business purposes.

Consumer Behavior Model

Level Of Involvement

An individual’s intensity of interest in a product and the importance of the product for that person.

Levels Of Involvement

Enduring

Situational

Consumer Problem Solving

7 Characteristics of Three Types Characteristics of Three Types

of Consumer Decision Makingof Consumer Decision MakingTable6.1

Types ofTypes ofDecisionDecision

Routine

ConsumerConsumerInvolvementInvolvementIn PurchaseIn Purchase

Limited

Extensive

One of a few brands, sellers and product characteristics evaluated

Characteristics ofCharacteristics ofConsideration SetConsideration Set

InformationInformationSourcesSourcesConsultedConsulted

ConsumerConsumerInvolvementInvolvementIn PurchaseIn Purchase

Several brands, sellers and product characteristics evaluated

Many brands, sellers and product characteristics evaluated

Low

Moderate

High

Internalsourcesused

Internaland someexternalsources

Internaland manyexternalsources

As littleas possible

Some timeinvested

Much timeinvested

Routinized Response Behavior

The consumer problem-solving process used when purchasing frequently purchased, low-cost items needing very little search-and-decision effort.

Limited Problem Solving

The consumer problem-solving process employed when buying occasionally or when they need to obtain information about an unfamiliar brand in a familiar product category.

Extended Problem Solving

A consumer problem-solving process employed when purchasing unfamiliar, expensive, or infrequently bought products.

Impulse Buying

An unplanned buying behavior resulting from a powerful urge to buy something immediately.

Consumer BuyingDecision Process

A five-stage purchase decision process that includes problem recognition, information search, evaluation of alternatives, purchase, and postpurchase evaluation.

A Model of Consumer Buying ProcessA Model of Consumer Buying ProcessFigure6.1

Slide6-1

PostpurchaseEvaluation

NeedRecognition

InformationSearch

AlternativeEvaluation

PurchaseDecision

Consumer Buying Process

SituationalInfluences

SocialInfluences

MarketingInfluences

8

Influences on Consumer Behavior:Influences on Consumer Behavior:Figure6.5

Social Influences

• Culture• Subculture• Social Class• Reference Groups• Family

Marketing Influences

• Product• Price• Placement• Promotion

Situational Influences

• Physical Surroundings• Social Surrounding• Time• Task• Momentary Conditions

Consumer Buying Process

Consumer Buying Decision Process/Possible Influences on the Process

Problem Recognition

Difference between desired state and actual condition.

Aspects Of Information Search

Internal Search

External Search

3

Information SearchInformation Search

InternalInternal

InformationInformationSourcesSources

GroupGroup

MarketingMarketingPublicPublic

ExperientialExperiential

Internal Search

An information search in which buyers search their memories for information about their products that might solve their problem.

External Search

An information search in which buyers seek information from sources other than memory.

Evaluation Of Alternatives

Consideration Set

Evaluative Criteria

Framing Alternatives

4

Alternative EvaluationAlternative Evaluation

Attitudes

AlternativeEvaluation

Subjective Criteria Objective Criteria

“Four Wheel Drive”“Ability to Tow 10,000 lbs”“Compact Disc Player”“Seats Seven”

“Sporty Image”“Popular”“Great Stereo”“Rugged Image”

Cognitive Dissonance

A buyer’s doubts shortly after a purchase about whether the decision was the right one.

Sample ads of cognitive dissonance

Situational Influences

Influences resulting from circumstances, time, and location that affect the consumer buying decision process.

Categories OfSituational Factors

Physical Surroundings

Social Surroundings

Time Perspective

Reason For Purchase

Buyer’s Mood/Condition

Psychological Influences

Factors that in part determine people’s general behavior, thus influencing their behavior as consumers.

Types Of Perception

Information Inputs

Selective Exposure

Selective Distortion

Selective Retention

Motives

An internal energizing force that directs a person’s behavior toward satisfying needs or achieving goals.

Motive for buying organic foods

Maslow’s Hierarchy of NeedsMaslow’s Hierarchy of Needs

Vacations, College Courses

Charitable Organizations

Auxiliary Needs:Friendship and Belonging

Esteem Needs: Status, Respect, Self-esteem Prestige Brands

Club Memberships

Greeting Cards

Locks, Insurance

Flour, Green Beans,

Water Supply

Safety Needs:Physical and Financial Security

Physiological Needs:Food, Water, Rest, Sex, Air

Self-Actualization Needs: Self-Fulfillment

Needs Products

Sources Of Learning

Behavior Consequences

Information Processing

Experience

Attitude

An individual’s enduring evaluation of feelings about and behavioral tendencies toward an object or idea.

Components Of Attitude

Cognitive- knowledge or information

Affective- feelings or emotions

Behavioral- actions regarding object or idea

Personality And Self-Concept

Personality – internal traits and behavioral tendencies

Self-Concept – perception or view of oneself

Lifestyle

An individual’s pattern of living expressed through activities, interests, and opinions.

Lifestyle Affected By:

Age

Education

Income

Social Class

Role

Actions and activities that a person in a particular position is supposed to perform based on expectations of the individual and surrounding persons.

Consumer Socialization

The process through which a person acquires the knowledge and skills to function as a consumer.

Types Of Family Decisionmaking

Reference Group

A group that a person identifies with so strongly that he or she adopts the values, attitudes, and behavior of group members.

Types Of Reference Groups

1. Membership

2. Aspirational

3. Disassociative

Opinion Leader

A member of an informal group who provides information about a specific topic to other group members.

Examples OfOpinion Leaders And Topics

Social Class

An open group of individuals with similar social rank.

Culture

The accumulation of values, knowledge, beliefs, customs, objects, and concepts of a society.

Subcultures

A group of individuals whose characteristic values (religion, etc.) and behavior patterns are similar and different from those of the surrounding culture.

U.S. Ethnic Subcultures

African American

Hispanic

Asian American

How about Malaysian ethnic subcultures?

6

Postpurchase EvaluationPostpurchase EvaluationFigure6.4

DissatisfactionLowValue

NeedRecognition

InformationSearch, etc.

Satisfaction

HighValue

LoyaltyLong TermRelationship

How Value Perceptions Can Influence Postpurchase Behavior

Types of Online Shoppers

Time-starved consumers: Usually found in a house with two sources of income. They are willing to pay higher prices or costs more to save time shopping, no matter whether they like it or not on-line buying experience.

Shopping avoiders :Do not like shopping and may use the Internet just to avoid the crowd, queue or traffic congestion.


New technologist:Usually young people and comfortable with

technology, online shopping because "it's cool".

Time-sensitive materialist atau click-and-mortar consumers:Only use the Internet to view the products they prefer

to make purchases from traditional stores for taking security or other reasons.


Traditionals : Just like a traditional store. Probably not going to do shopping online.

Hunter-gatherers: 20 percent of the total number of on-line customers. Like to compare prices and find the best prices.


Brand loyalists:Purchase online for a particular brand as it gets more benefits.

Single shoppers:16 percent of the total number of on-line customers. Liked the Internet not only for shopping but also for banking, communication, playing games, news and other activities.

Online Purchase Decision Aids

Shopping Portals:comprehensive portals

linked to many different vendorscomparison shopping sitesthere is a comparison tool

niche orientedhave specialized in a product(cattoys.com)there is a referral fee quotationthere is a portal that has a formal

relationship with partners


Shopbots (Shopping robot) dan Agent (Shopping agent):

A review tools (Scout) Web to customers who specify the search criteria. Different Shopbots using different search methods.

Zdnet.com/computershopper – computerOffice.com – office furniture

Business Rating Sites:Enhance the rating of the various types of e-tailer and

online products based on many criteria.Gomez.comBizrate.com


Trust Verification Sites:Works to assess and confirm whether a given e-

tailer is reliable or not. For example, TRUSTe, BBBOnLine, Secure ASSURE and Ernst & Young. TRUSTe Stamp available on e-tailer Web site reflect the credit. E-tailer has to pay to TRUSTe to use such stamps.

Other Shopping Tools:Escrow services- 3rd party to assure qualityCommunities of consumers

Learning about Consumer Behavior Online

A Model of Consumer Behavior OnlineThe purpose of a consumer behavior model is

to help vendors understand how a consumer makes a purchasing decisionIndependent (or uncontrollable) variables – personal

characteristics and environmental characteristicsIntervening or moderating variables – market stimuli

and EC systems (vendor-controlled)Dependent variables – buyers’ decisions

– Personal CharacteristicsHigher education and/or income levels are

associated with more online shopping.More experience people have with Internet

shopping, the more likely they are to spend more money online.

Most-cited reasons people do not purchase:Shipping charges (51%)Difficulty in judging the quality of product (44%)Cannot return items easily (32%)Credit card safety (24%)

– Environmental Characteristics

Social – people are influenced by family members, friends, coworkers, and trends. Of importance are Internet communities, discussion groups.

Cultural/community – where people live influence what they buy. Rural shoppers differ from urban shoppers, Europe shoppers differ from Asian shoppers.

The ConsumerDecision-Making Process

Roles people play in the decision-making process: Initiator – the person who suggests a product/service Influencer – a person whose advice influence

purchasing decisionDecider – the person who makes the buying decisionBuyer – the person who makes an actual purchaseUser – the person who consumes or uses a

product/service

The ConsumerDecision-Making Process

Online Consumer decision making models:Generic Purchasing-Decision ModelCustomer Decision Model in Web PurchasingOnline Buyer Decision Support Model

Generic Purchasing-Decision Model

Consists of five phases:Need identification – consumer convinced the

need of a product/serviceInformation search – on various alternatives to

satisfy the needEvaluation of alternatives – a set of criteria is

developed to help evaluation and comparisonPurchase and delivery – payment, purchase

warrantiesAfter purchase evaluation – customer service

and evaluation of usefulness

Web Purchasing Model

Each of the phases of the purchasing model can be supported by Consumer Decision Support System facilities and Internet and Web facilities.

CDSS facilities support the specific decisions in the process.

EC technologies provide necessary mechanisms and enhance communication and collaboration.

Online Buyer Decision Support Model

Online Buyer Decision Support Model – Part 1

Buyer behaviorIdentify and manage buying criteriaSearch for products and merchantsCompare alternatives

DSS Design Choices (Current Transaction)Product representationOptions to support searchingOptions to compare alternatives

Online Buyer Decision Support Model – Part 2 & 3

Comparing alternativesPrice negotiationShipping optionsFinance center

Cross-transaction ConcernsPersonalizationUser preferencesCustomer help

Online versus traditional consumer

Technology adoptionOnline consumer is best predicted by Internet self-

efficacy, followed by perceived financial benefits.

Convenience and Decision SupportOnline consumer only desire is convenience and

timesaving.Depth and breadth of information available on the

Internet meets the consumer’s need of information to make purchase decision.


Market dynamicsMore alternatives can be considered online because of

lower search costs and greater availability of information.

Online consumers becoming less price conscious over time.


Loyalty and trustThe ability to customize products/services and

transactional environment online is far beyond the capability of traditional store.

Consumer loyalty to access competitor’s site is only a click away.

Trust for online consumer is an expectation based on past performance, a strategy to reduce uncertainty, a willingness to rely on an exchanging partner, and a perception of reliability.


Products versus servicesProducts are tangible and services are intangible in

traditional commerce but both products and services are intangible online.

Online shopping consumers concern about risk for products than services, more concern about perceived ease of use for services rather than products.


Site design The impact of the shop window are correlated to the impact of

a site’s home page but the impact of store layout versus site layout has some differences.

Thus, more study is needed to examine what design elements affect online consumer behavior.


Empowerment, persuasion and entertainment The ability to shop worldwide at anytime from virtually any

location with the availability of real-time product and competitor information increase consumer’s sense of freedom and power.

Personalized welcome pages and tailored recommendations list provide customers with a powerful feeling of discovery.

Online consumers can react to persuasive media more often than a human at selling.

Online shopping is also a form of entertainment and/or social interaction.

chp 7 online customer behavior

Technology

solving process

consumer behavior

consumer problem

generic purchasing

consumer decision

online shopping

decision processes

information