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Describe the factors that influence consumer behavior online

Understand the decision-making process of consumer purchasing online

Describe how companies are building one-to-one relationships with customers

Discuss the issues of e-loyalty and e-trust in EC

Describe consumer market research in EC Describe Internet marketing in B2B,

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Describe the objectives of web advertising and its characteristics

Describe the major advertising methods used on the Web

Describe various online advertising strategies and types of promotions

Describe permission marketing, ad management, localization, and other advertising-related issues

Understand the role of intelligent agents in consumer issues and advertising applications advertising applications

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The Problem Small business designing and manufacturing

mountain bike components 1995 Web site was a status symbol rather

than a business tool The site did not:

Offer enough customer information Enable the company to gain insight into

their customers’ needs and wants

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The SolutionCustomer surveys introduced the site

Web Trader automatically saves and organizes answers in the database—this information is used to make marketing decisions

Created an electronic product catalog Visitors can browse through the product catalog with detailed descriptions and graphics of products

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The ResultsConsumers can purchase bikes, parts,

accessories, bags, water bottles and Dealers can:

Place orders on the site Learn about new products quickly Site used for market research, communicating with customers and advertising

What we learnChange from a passive Web site (just having a presence online) to one with interactivity can bring tremendous benefits to a company in terms of finding out customer wants and needs and how to market products effectively to them

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Business today very competitiveCompanies treat customers as royaltyFinding and retaining customers key Need to understand consumer

behavior Done through various models A consumer model—an understanding of how a consumer makes a purchase decision

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EC consumers composed ofIndividual consumersOrganizational consumers

Most bulk purchase happens in this groupGovernmentsPrivate corporationsResellers

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Two types of variablesPersonal characteristics (demographic)

Environmental variables Social Cultural/community Other (legal, political, technological, government regulations, etc)

Consumer behavior viewed in terms of:Why is the consumer shopping?How does the consumer benefit from

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Social variables—people influenced by:

Family members, friends, co-workers, “what’s in fashion this year”; chat rooms

Cultural/community variables—where the consumer lives

Other environmental variables: Available information, government regulations, legal constraints, etc

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Age and gender Marital status Educational level Ethnicity

Occupation Household income Personality Lifestyle characteristics

This is a simplified version of what consumers do but the process of purchasing a product can be more complex especially if the product is new

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Roles people play in decision-makingInitiator—suggests/thinks of buying a

particular product or serviceInfluencer—advice/views carry weight

in making a final buying decisionDecider—makes a buying decision Buyer—makes the actual purchaseUser—consumes, uses a product or

service

One or more individuals may play these roles; advertisers and marketers need to target them

Knowing the decision making process, marketers can Predict Improve Influence consumer decision to buy

Two models are discussed here Generic and CDSS (consumer decision support system)

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6 major phases of a general model1. Need identification2. Information search3. Evaluation of alternatives 4. Purchase and deliver5. After-purchase evaluation6. Repeat purchase

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DECISION PROCESS

Need recognition

Information search

Evaluation, selection

Purchase, payment, delivery

After purchase

CDSS SUPPORT

Agents and event notices

Virtual catalogues

FAQs/summaries, samples and trials; testimonies

Ordering of product, arranging delivery

Customer support (email, newsgroup)

INTERNET & WEB SUPPORT

Banner ads, newsgroups

Web directories, internal search and external search engines, information brokers

Discussion in newsgroups, cross site comparisons

Electronic cash and virtual banking

Logistics providers and package tracking

Discussions in newsgroups

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A more effective model is described as one-on-one marketing, Each customer treated in a unique way Marketing and advertising fit customer

profile and needs Achieved through personalization and

customization Relationships seen as a two-way street:

Customer information is collected and placed in a database

Customer’s profile is developed Generate “four P’s” of marketing:

Product Place Price Promotion

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One-on-one marketing possible throughPersonalization—the matching of services, products, and

advertising content to individual consumer

User profile—the requirements, preferences, behaviors, and demographic traits of a particular customer.

Cookie/web bug—a data file that is placed on a user’s hard drive by a Web server, frequently without the user’s consent, that collects info on the user’s activities at a site

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Major strategies used to compile user profiles include:Solicit information directly from the

user.Observe what people are doing onlinePerform marketing researchBuild from previous purchase patternsMake inferences (from information

provided by customers on other issues)

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Customer loyalty—degree to which the customer stays with vendor or brand Major objective of one-to-one B2C and B2B

marketing A significant contributor to profitability

More costly to acquire a customer than keep one Strengthens a company’s market position since

loyal customers are shielded from competition Two broad types of customers:

Loyalists who Are emotionally attached to the company Rationally chose the company as the best Find it bothersome to shift

Migratory customers Change lifestyle Angered by poor service Find more option through EC

E-loyalty—customer’s loyalty to an e-tailerLearn about customers’ needs

Interact with customersProvide customer service

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Factors that affect satisfaction Information quality

Accuracy Richness of content Format of content (multimedia) Timeliness—updated constantly

System quality Ease of navigation Ease of use Response time Security settings and privacy assurance04/21/23 24

Factors that affect satisfaction Service quality

Responsiveness Assurance/warranty Empathy –understanding, sympathy,

compassion, kindness etc Other solutions

Fast and time-saving service 24/7 operations Better prices Free promotions, gift ideas and sales Cut down shipping costs and delivery times Ask for less information about customers

and provide more information on the product

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Key in creating loyalty and retention of customers

Ability to create satisfaction is a competitive advantage and differentiating factor

80% of satisfied online customers shop again and recommend the site

About 90% dissatisfied ones never come back

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Trust—psychological status of involved parties who are willing to pursue further interactions to achieve a planned goal EC vendors must establish high levels of

trust with current and potential customers Will the parties keep their promise to deliver Pictures not the same as the actual product Particularly important in global EC since:

Legal action is hard to undertake Differences in culture, business

environments Security concerns deter revelation of credit

card

Level of trust determined by:Degree of initial success experienced with EC

Well-defined roles and procedures for all parties involved

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Trust can be decreased by:Any user uncertainty regarding the technology

Lack of initial face-to-face interactionsLack of enthusiasm among the parties

Solutions:Brand recognition and co-branding

Improve security mechanisms throughTrust certification and seals, Third party evaluation of vendors

Trust certificates and seals Evaluate vendors using 3rd parties Let users and buyers evaluate products Have a return policy, warranties &

insurance Free samples Have privacy statements and

guarantees Co-branding with big companies and

vendors Good Web design

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The goal isFind information and knowledge that

describes relationships among consumers and products

Establish marketing plan and better understand the purchasing process

Evaluate market performanceOn the Web, the goal is to turn a

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EconomyIndustry Firms ProductsPricing

DistributionCompetitionPromotionConsumer

purchasing behavior

Market research includes gathering information about:

Can be both online and offline Common tools include:

QuestionnairesSurveys (through emails and telephone)

Focus groupsObservationInterviews

Important first to understand how groups of consumers are classified

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Market segmentation—process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales

Main ways of segmenting the marketGeographic

Region Size of city, county or district

Population density Climate Language

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Demographic Age Occupation Gender Education Family size Religion Race, Income Nationality

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Cognitive, affectiveAttitude, benefits sought, loyalty, usage rate, perceived risk, internet shopping experience, etc

Psychographic Social class Lifestyle Personality

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Conventional methods of research earlier mentioned are expensiveInternet Research is

Faster and more interactiveCan cover a large geographical area

Cheaper and yet sophisticated since its reach and richness is extensive

Larger sample which improves the reliability of results

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Online market research aims to: Find, explain & predict online buying

behavior Find out why some customers buy online and

others do not Establish purchase patterns for individuals

and groups Find the factors that encourage online

buying Identify real buyers from mere browsers Understand how individuals navigate Web Get optimal Web design that engages clients

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Knowing these answers helps a vendor to properlyPriceAdvertiseDesign the Web site and Provide appropriate customer service

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The main ones are:One-on-one by e-mailFocus groups in chat-roomsQuestionnaires placed on Web sites for

tracking customers’ movements on the Web through Transaction logs (record of user activities on a company’s web site)

Click-stream behavior (or movt on Internet)

Cookies Web bugs Spy-ware Web analytics (data and web mining) Voting polls Web-based surveys Hearing directly from customers

creating customer scenarios

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Tracking customer movements—learn about customers by observing their behavior rather than by asking them questionsTransactionClickstream behaviorCookiesWeb bugs

How to get respondentsIncentives such asGamesPrizesFree softwareDiscounts

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Accuracy of responses Loss of respondents because of

equipment problems Ethics and legality of Web tracking Focus group responses can lose

something in the translation from an in-person group to an online groupEye contact and body language are lostAnonymity is necessary to elicit an

unguarded response

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Lack of representativeness in samplesOnline shoppers tend to be wealthy, employed, and well educated; results may not be extendable to other markets

Lengthy analysis arising from huge volumes of data

Solutions to some of the problems:Automate process of data analysisOutsource the research to third parties

The right kind of sampling is achieved through verification of target audience or demographic Anonymity causes a loss of information

about demographics and characteristics of the respondents

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Data mining—the process of searching a large database to discover previously unknown patterns; automates the process of finding predictive information

New business opportunities generated by conducting:

Automated prediction of trends and behaviors

Automated discovery of previously unknown patterns and relationships

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Web mining—application of data mining techniques to discover meaningful patterns, profiles, and trends from both the content and usage of Web sitesWeb content miningWeb usage mining

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Advertising is an attempt to disseminate information in order to affect a buyer-seller transaction

Interactive marketing—marketing that allows a consumer to interact with an online seller2-way communication & e-mail capabilities

Vendors also can target specific groups and individuals

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Ad views—number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views.

Button—a small banner that is linked to a Web site

Page—HTML document Click—a count made each time a

visitor clicks on an advertising banner to access the advertiser ‘s Web site

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CPM (cost per thousand impressions)—fee an advertiser pays for each 1,000 times a page with a banner ad is viewed

Hit—request for data from a Web page Visit—a series of requests during one

navigation of a Web site; a pause of request for a certain length of time ends a visit

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3/4 of PC users gave up some television time

Well educated, high-income Internet users a desired target for advertisers

Internet is by far the fastest growing communication medium

Advertisers want a medium with such potential reach, locally & globally

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CostCheaper, updated any time with little cost

Richness of formatUse of text, audio, graphics, and animationGames, entertainment & promotions

combined Personalization

Can be interactiveTargets specific interest groups/individuals

Banner—on a Web page, a graphic advertising display linked to the advertiser’s Web page

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Banner swapping—an agreement between two companies to each display the other’s banner ad on its Web siteDirect link between sitesAd space bartering

Banner exchanges—markets in which companies can trade or exchange placement of banner ads on each other’s Web sites (bcentral.com)

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Pop-under ad—an ad that appears underneath the current browser window, so when the user closes the active window, they see the ad

Interstitials– an initial Web page or a portion of it that is used to capture the user’s attention for a short time while other content is loading

E-mailSeveral million users may be reached

directlyProblems: junk mail, spamming

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URL (Universal Resource Locators)Advantages:Minimal cost is associated with it

Submit your URL to a search engine and be listed

Keyword search is used

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Advertising in chat roomsVirtual meeting groundFree addition to a business siteAllows advertisers to cycle through

messages and target the chatter againMore effective than bannersUsed for one-to-one connections

Advertorial—an advertisement “disguised” to look like an editorial or general info