assessing consumer reactions to unfamiliar internet businesses richard yalch, u. washington –...
Post on 19-Dec-2015
215 views
TRANSCRIPT
Assessing Consumer Reactions to Unfamiliar Internet Businesses
Richard Yalch, U. Washington – Seattle
Eric Spangenburg, Washington State - Pullman
What Do These Sites Have In Common?
• Pets.com
• Furniture.com
• Garden.com
• Etoys.com
• Kozmo.com
• PlanetRx
• WebVan/HomeGrocer
All have closed
And the bankruptcies haven’t stopped
BizTravel closed on September 24th
Buy.com, facing a Sept 1 deadline for losing its credit card processing, ran a Not Going Out of Business Sale
See f***company.com for a daily log
Consumer Problems with Internet Shopping Can be Serious
• CyberRebate
• Founded by Joel Granick, 24-year old law school student
• Based on CompUSA–Office Depot Promos
• “Free After Rebate”
CyberRebate in February 2001
• 6th most popular shopping site
• 7.7 million unique visitors
• Lois Lazan purchased $8,000 worth and got a full refund for everything
CyberRebate in May, 2001
CyberRebate
• May 18th 2001 – filed for bankruptcy
• Owe $83 million in consumer rebates
• Some individuals owed $80,000!
Possible Consumer Fallout
• Increased concern about the financial viability of internet retailers
• Willingness to pay more in order to purchase from a safer business. (WSJ, Aug 13, 2001)
– Large firms like Amazon are raising their prices and still increasing their market share
Point of Difference
• Brick & Mortar– See the investment in real estate & merchandise– Speak to live person– Possess product upon purchase
• Pure Internet Site– Investment is hidden– Interact with computer program– Wait for product to be delivered
Market Problem(Asymmetric Information)
• When evaluating a store in cyberspace, consumers have little information about the store’s operations
• Who manages it, where are the products inventoried, how do they handle customer problems, & what is their financial status
• These qualities must be inferred from whatever information is available
Solution to Market Problem (“Signaling”)
Problem for Relatively New Internet Retailers
• How do you signal to consumers that you are a “safe” choice?– Advertise? – Offer free shipping? – Associate with a celebrity?– Develop a slick, professional site?– Hope customer service improves your 3rd party
ratings?
Research Questions
• What are the perceived risks for internet shopping?
• What information sources are used to select shopping sites?
Research Questions
• How do consumers predict their likely satisfaction before purchasing from an unfamiliar internet retailer?
• Does the preference for certain types of information vary depending on customer characteristics such as extent of internet shopping experience and level of perceived risk?
Cue Utilization Model
• Olson & Jacoby
• Product Information Evaluated in 2 Ways
• Predictive Value – How useful is the cue in predicting actual performance?
• Confidence Value – How well can the consumer understand and use the cue?
Cue Utilization ModelPager Example
LowUsefulness
High Usefulness
Low Confidence
FrequencyRange
PagingSensitivity
High Confidence
Retail Outlets
ConsumerReports
Cue Utilization ModelPager Example
Low Usefulness
High Usefulness
Low Confidence
FrequencyRange
PagingSensitivity
High Confidence
Retail Outlets
ConsumersReport
Cue Utilization ModelPager Example
Low Usefulness
High Usefulness
Low Confidence
FrequencyRange
PagingSensitivity
High Confidence
Retail Outlets
ConsumersReport
Cue Utilization ModelPager Example
Low Usefulness
High Usefulness
Low Confidence
FrequencyRange
PagingSensitivity
High Confidence
Retail Outlets
ConsumersReport
Cue Utilization ModelPager Example
Low Usefulness
High Usefulness
Low Confidence
FrequencyRange
PagingSensitivity
High Confidence
Retail Outlets
ConsumerReports
Cue Utilization Research
• Schellinck
• Moderating Effects of
– Time Pressure
– Perceived Risk
High Time PressureSchellinck
Low Usefulness
High Usefulness
Low Confidence
High Confidence
High Risk PurchasesSchellinck
Low Usefulness
High Usefulness
Low Confidence
High Confidence
Research Objective
• To apply the cue utilization model to understand how consumers evaluate new or unfamiliar internet shopping sites
Electronic Shopping
Too Many Choices?
Manufacturer’sAuthorization1-800
Number
Research Method
• Developed a questionnaire booklet that presented subjects with an internet shopping scenario
• Followed this with a series of scales measuring their reaction to the site and internet shopping.
Research Procedure
• After reading through the shopping scenario, respondents evaluated the risks in shopping on the internet and indicated how they would evaluate the attributes of internet shopping sites.
Questionnaire
• 5 Sections
1- Internet Shopping Experience
• Years using internet
• Hours per week using internet
• Different types of items purchased (e.g, airline tickets, books, music, clothes, etc).
2 - Sources of Information(judged importance)
1. Friend’s recommendation
2. Newspaper or magazine article
3. Online discussion group
4. Online advertisement
5. Association with brick & mortar store
6. Found with search engine
7. Found in search for lowest price
3 - Causes of Internet Shopping Risk(likelihood of occurring?)
1. Receive a defective product
2. Delayed shipment
3. Product never arrives
4. Product costs more than expected
5. Product not the same as what was ordered
6. Unable to return the product
7. Unable to get a refund
8. Product does not perform as described
4 - Internet Site Evaluation Judged usefulness &
Confidence in ability to understand
Lowest price3rd Party ratingsTelephone numbersStreet addressesCompany history Professional lookExtensive product info Manufacturer endorsedFree shipping
Easy returnsDiscussion groupsPrint adsRadio/tv adsSophisticated PersonalizationAccept all credit cardsCelebrity endorsementsShipment tracking
5- Risk Coping Methods(use or not?)
1. Contact Better Business Bureau
2. News stories
3. Look for financial information
4. Trust credit card company
5. Don’t worry
6. Other?
Results
• 403 WSU undergraduates completed the booklet as part of their marketing course research requirement
% Purchasing Different Products on the Internet
0%
10%
20%
30%
40%
50%
60%
% Purchasing
AirlinesClothesBooks, cdsComputerElectronicsFinancial
Importance of Internet Information Sources
1
2
3
4
5
6
7
8
9
FriendPrice SearchNews or MagBrick & MortarSearch EngineOnline adOnline Discussion
MySimon-type Site
Perceived Risk of an Internet Purchase
4.4 4.3 4.2 4.1 4.13.8 3.8
3
1
2
3
4
5
6
7
Delayed Shipments Bad Performance No Refund No Return
Costs More Different Product Defective Product Never Arrives
Very likely Little Concern about Most Severe Problem
Cue Utilization Model
• Usefulness in predicting
• Confidence in using
• 17 different store site characteristics
• XY – scatter plot/Quadrant Analysis
Exhibit 6Usefulness-Confidence Analysis
Celebrity
CompanyHistory
3rd PartyRatings
StreetAddress
Personalization
Radio/tv
Print ads
DiscussionGroups
FreeShipping
EasyReturns
ProductInformation
CreditCards
ProfessionalLook
TelephoneNumber
LowestPrice
ShipmentTracking
ManufacturerEndorsement
LowConfidence
HighConfidence
LowUsefulness
HighUsefulness
Usefulness-Confidence Analysis
Celebrity
CompanyHistory
3rd PartyRatings
StreetAddress
Personalization
Radio/tvPrint ads
DiscussionGroups
FreeShipping
EasyReturns
ProductInformation
CreditCards
ProfessionalLook
TelephoneNumber
Low estPrice
ShipmentTracking
ManufacturerEndorsement
LowConfidence
HighConfidence
LowUsefulness
HighUsefulness
Most Valuable
Usefulness-Confidence Analysis
Celebrity
CompanyHistory
3rd PartyRatings
StreetAddress
Personalization
Radio/tvPrint ads Discussion
Groups
FreeShipping
EasyReturns
ProductInformation
CreditCards
ProfessionalLook
TelephoneNumber
Low estPrice
ShipmentTracking
ManufacturerEndorsement
LowConfidence
HighConfidence
LowUsefulness
HighUsefulness
Least Valuable
Exhibit 6Usefulness-Confidence Analysis
Celebrity
CompanyHistory
3rd PartyRatings
StreetAddress
Personalization
Radio/tv
Print ads
DiscussionGroups
FreeShipping
EasyReturns
ProductInformation
CreditCards
ProfessionalLook
TelephoneNumber
LowestPrice
ShipmentTracking
ManufacturerEndorsement
LowConfidence
HighConfidence
LowUsefulness
HighUsefulness
Valuable – High Risk & Low Time Pressure
Exhibit 6Usefulness-Confidence Analysis
Celebrity
CompanyHistory
3rd PartyRatings
StreetAddress
Personalization
Radio/tv
Print ads
DiscussionGroups
FreeShipping
EasyReturns
ProductInformation
CreditCards
ProfessionalLook
TelephoneNumber
LowestPrice
ShipmentTracking
ManufacturerEndorsement
LowConfidence
HighConfidence
LowUsefulness
HighUsefulness
Valuable – HighTime Pressure
Moderating Effect of Prior Internet Shopping Experience
on Cue Utilization
• Split sample based on prior shopping experience – None 15.4%– 1-2 categories 48.4%– 3 or more categories 36.2%
Major Cues
• Factor Analysis of 17 Usefulness & Confidence Ratings
• 3 factor structure explained about 70% of the variance
3 Factors• Shopping Convenience
– Free shipping, easy returns, lowest price, accept all credit cards, extensive product descriptions, track shipments
• Company Information– company history, street address, telephone number,
manufacturer endorsement, 3rd party ratings, professional look
• Promotions– Radio/TV ads, print ads, celebrity endorsements,
personalization, discussion groups
Cue Ratings by Prior Internet Shopping Experience
44.5
55.5
66.5
77.5
8
Convenience
Information
Promotion
Convenience
Information
Promotion
Non Light Heavy
ConfidenceUsefulness
Moderating Effect of Perceived Risk on Cue Utilization
• Median split based on perceived risk – Low 49 %– High 51 %
Cue Ratings by Perceived Risk
4
4.5
5
5.5
6
6.5
7
7.5
8
Convenience
Information
Promotion
Convenience
Information
Promotion
Low Risk High Risk
UsefulnessConfidence
Conclusions - 1
• Consumers perceive only a moderate amount of risk when shopping on the internet
• Electronic shopping agents are second to friends as a source of retail site location
Conclusions - 2
• Support for the use of the Cue Utilization Model to assess Internet shopping sites
• Usefulness and confidence varied across the different characteristics
Conclusions - 3
• Most useful attributes were those related to actual transaction– Free shipping, easy return, credit cards,
telephone numbers extensive product information, professional look
• Items used to promote sites were considered least useful
– Advertising, 3rd party recommendations, hosting discussion groups, celebrity associations
Conclusions - 4
• Experienced shoppers were relatively more concerned with returns, inexperienced shoppers with free shipping
Conclusions - 5
• Factor analysis showed 3 major considerations
– Convenience in shopping
– Company information
– Promotions
• Experienced and low risk shoppers were more confident than inexperienced and high risk shoppers
Marketing Implications
• Pure internet shopping sites face a difficult dilemma as many of the activities used to promote a new site (mass media advertising and celebrities) have become associated with high marketing costs and likely failure.
• 3rd Party rating services may not be well-understood or trusted.
• Internet shopping sites associated with brick & mortar stores have an inherent credibility that may give them the marketing edge.
Fear of Being Amazoned?
Barnes & Nobled?
Low versus High Risk Shoppers
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50
Low Risk
High Risk
MostUseful
FreeShipping
EasyReturns
FreeShipping
EasyReturns
Celebrity
Celebrity
CompanyHistory
CompanyHistory
CreditCards
CreditCards
StreetAddress
StreetAddress
LowestPrice
LowestPrice
DiscussionGroups
DiscussionGroups3rd Party
Ratings
3rd PartyRatings
ManufacturerEndorsement
ManufacturerEndorsement
TelephoneNumber
TelephoneNumber
MostPredictive
LeastPredictive
LeastUseful
TrackShipment
TrackShipment
ProductInformation
ProductInformation
PrintAds
Radio/TVAds
PrintAds
Radio/TVAds
Personalization
Personalization
ProfLook
ProfLook
Experienced and Inexperienced Shoppers
4
5
6
7
8
4 5 6 7 8 9
Experienced
Inexperienced
MostUseful
LeastUseful
MostConfident
LeastConfident
FreeShipping
FreeShipping
ProductInformation
ProductInformation
EasyReturns
EasyReturnsTrack
Shipments
TrackShipments
LowestPrice
LowestPrice
CreditCards
CreditCards
ProfessLook
ProfessLook
TelephoneNumber
TelephoneNumber
Manufacturer
Manufacturer
Celebrity
Celebrity
3rd Party
3rd Party
DiscussionGroups Discussion
Groups
CompanyHistory
CompanyHistory
StreetAddress
StreetAddress
Ads
Ads