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BUSN 2032 E-Marketing

Lecture 5 Consumers and Technology

Why do people do what they do?

What do women want?Men are from Mars - Women are from Venus

Consumer decision making process

Age of Anxiety - “cocooning”

ConsumerDecision

Situations

Problemrecognition

Information search

Evaluation and selection

Store choice and purchase

Postpurchase processes

Situations

Demographics

Socialstatus

Referencesgroups

Household

Emotions

Personality

Motives

Perception

Learning(memory)

Marketingactivities

Culture

Values

Consumer lifestyle

Attitudes/Needs

Experiences

Overall model of consumer behaviourNeal et al, 1999

Problem recognition

Search

Evaluation and selection

Store choice and purchase

Post purchase processes

Context / situation

Attitudes and needs

Consumer decision processes

Context / Situation

Experiences

Consumer Behaviour

Satisfying needs and wants is a central part of the definition of marketingCB focuses on understanding needs and wants and helps build the links back to strategic market decision making

Definitions of consumer behaviour

The behaviour that consumers display in seeking, purchasing, using, evaluating and disposing of products, both goods and services, and ideas, social causes and places that they expect will satisfy their needsprocess,not just buying but also using and disposing of these products Bednall, Watson and Kanuk, 1997

Definitions of consumer behaviour cont.

Those actions directly involved in obtaining, consuming, and disposing of products and services, including the decision processes that precede and follow these actions

Engel, Blackwell & Miniard

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Consumers onlineMarketers have turned their attention to practical questions such as:

Whether a firm’s target market is online, What these customers do online, What determines whether they’ll buy from a site and return to a site,How much of the marketing effort should be devoted to online channels.

Understanding online consumer behavior helps marketers design marketing mixes that provide value and thus attract and retain customers.

Inside the Internet Exchange ProcessWhat explains consumer buying behavior?

Stimuli = marketing communication messages and cultural, political, economic, and technological factors. Individual buyer characteristics = income level, personality, psychological, social, and personal aspects. Consumers move through a variety of decision processes based on situational and product attributes.

⇒ To create effective marketing strategies, e-marketers need to understand what motivates people to buy goods and services, both in the short and long term.

U.S./Canada182.8 (33%)

Europe/Middle East

141.6 (27%)

Asia Pacific110.0 (21%)

Latin America13.4 (3%)

Rest of World83.5 (16%)

Millions of People With Home Internet Access by Region in 2002Source: Data from Nielsen//NetRatings

Developed nations = 15% of the world’s population = 88% of all Internet users

Where Are the Other 5.5 Billion People?

In survey of non-Internet users:40% said they have no need for the Internet.

⇒ E-marketers’ are digging deeper for a more thorough understanding of consumer preferences online and offline.

Main reasons why consumers do not use the Internet: Individual, social, cultural, technological, legal, and political issues.

⇒ Without major shifts some countries may not achieve high levels of Internet adoption among individual consumers for many years.

In these countries the B2B market will lead consumers to the Net where a fast-growing consumer market enticed businesses online.

Demographic

Gender - men adopt earlierYounger people adopt earlierMore highly educated, higher income level Digital divide - gap between online users and those not online eg richer countries and poorer countries, between ethnic groups

Categories of consumers

innovatorsearly adoptersearly majoritylate majoritylaggards

More information, greater experience, less risk, positive influence of others in the social networks

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Consumer InnovatorsDogmatism

Low in Dogmatism (open minded) - more likely to prefer innovative products. Prefer advertising messages that stress factual difference and product benefits. Show the reasons why.High in Dogmatism (closed

minded) - likely to choose established brands. New products may be accepted if presented in an authoritative manner (eg presented by a celebrity etc)

Schiffman, Bednall, Watson & Kanuk (1997) page 128

Adoption of innovation -Rogers

knowledge of innovation - driven by communication and consumer needspersuasiondecisionimplementationconfirmation

Persuasion

Rate of adoptioncomplexitycompatibilityobservabilitytrialabilityrelative advantage

Context / Situation

Broad technological, social, and cultural forces affect online consumer behavior.

Marketers need to study the consumer’s environment or context and how their influence the purchasing process.

Technological Issues: Barriers to Internet adoption

Low PC penetration Communications infrastructure problems.

Arab countries, have only 49 telephones per thousand people versus 133 phones per thousand people worldwide. Internet connections, where they exist, are often slow and unreliable. Phone companies charge:

A per minute charge for local calls. ISP charges for Internet access.

Government censorship and regulation = slow Internet adoption.

Social and Cultural ContextPower is shifting to consumers.

U.S. trends are affecting online exchanges:Information overload overwhelms consumers.Bunkering means people are staying at home more. Security and privacy are major concerns. Home and work boundaries are dissolving. Anywhere, anytime convenience is critical for busy people.

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Individual Issues

EmotionInvolvementFlowChallengeControlSelf EfficacyAttitude to technology

EmotionsEmotion - state of mental readiness that arises from a cognitive appraisal of events or thoughtsis an experienceis often accompanied by physiological processes beating heart, sweaty palmsoften expressed physicallymay result in specific actions to affirm or cope with emotionsPositive or negative in valence and high or low in arousal

DifferentiatingAffect, moods, emotions and attitudes have often been used interchangeablyMoods may be longer lasting than emotion; but still are transient and particular to times and situations (Gardner 1985) Affect is often used as the umbrella termAttitude is sometimes seen as distinct from emotion -an overall evaluationAttitude does not necessarily require arousal Others have emphasised that attitudes contain distinct cognitive and feeling elements linked to action (A-B-C theory)

Appraisal theoryEmotions arise in response to appraisals one makes of something of relevance to one’s well beingAppraisal is an evaluation and interpretationsomething of relevance - an incident or episode that happens to one’s selfSee for example Roseman’s (1991) Appraisal Theory of EmotionFrijda (1986) Stimulus event - event coding -appraisal action readiness action / arousal

Mood and information processing -some conflicting or controversial findings

Recent research highlights a controversy (Hirschman and Stern 1999) Batra and Stayman suggests that positive mood results in more heuristic processing Bagozzi suggests that this is because the activation state in positive moods my be low - no dangerBut if the decision is interesting or important (high in involvement) then positive affect facilitates careful, systematic cognitive processing making it more efficient and effective (Hirschman and Stern 1999; Isen, 2001) Also influences how information is categorised and thought aboutPositive affect encourages variety seeking e.g. IBM and FUD fear, uncertainty and doubt

Need for Affect (Maio and Esses, 2001)

Reliable scale for individual difference “need for affect” which is parallel to “need for cognition”Distinct from other measuresBoth an approach and avoidance scaleNeed for affect positively related to the need for cognition - not thinkers and feelers dichotomy

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Emotional responses are generally shown to be important

PleasureDominanceArousal Specifically enjoying online shopping

Flow

Flow - the holistic sensation that people feel when they act with total involvementConcept of flow in Web navigation behavior: 1. Characterized by a seamless sequence of responses

facilitated by machine interactivity, 2. Intrinsically enjoyable, 3. Accompanied by a loss of self-consciousness, 4. Self-reinforcing.Intrinsic enjoymentPerceived controlConcentration / attention focus

Involvement

“Degree of personal relevance” Peter and Olsen, 1987

Involvement lies in the person not the product or purchase per seInvolvement may be situational or enduring

compare water heaters and music

Personal Personal characteristicscharacteristics

Product Product characteristicscharacteristics

EnduringEnduringinvolvementinvolvement

SituationSituation

A basic model of consumer involvementA basic model of consumer involvement

Felt Felt involvementinvolvementSituational Situational

involvementinvolvement

Self concept, personality traits,

Price, symbolic meaning, risk

Time, physical, social, task definition, antecedent state

Control

Need for control onlineNeed for convenience

Self efficacy

An individual’s assessment of his or her ability to perform a behaviourSelf efficacy is a major factor that underlies intrinsic motivationPerception of ability to use computers and internet Perceived skill level

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Technology Acceptance ModelSuccessfully applied to spreadsheets, voice mail, tele-medicine - also useful for Internet shopping adoption

TAM

Ease of use - the degree to which a person believes that using a system will be free of effort Usefulness - the degree to which a person believes that using a particular system will enhance performance

Usefulness

Ease of useAttitude Behaviour

Motives for shopping

Personal - role playing, diversion, self gratification, learning about new trends, physical activity, sensory stimulation Social - communicating, peer group attraction, status and authority, pleasure in bargainingHow does Internet shopping compare?

Shopping Alternatives

StoresInternetCatalogue shopping and direct mailHome shopping ---Party planVending machine

Retail choice an interaction of:Retail marketing strategy

store image by attribute (advertising and other promotions, price, merchandise mix, store personnel etc) or gestalt store location, brands

Personal characteristics of shopperpersonal and social motivation, shopping orientation, lifestyles, perceived risk

Situational influences *************time shortages, time of day, task definition, mood

Gestalt or BuzzBody ShopHastings Street NoosaBunnings WarehouseNike World?Paris?Can this feeling be captured in words? Or easily related to attributes?

Promotion

Advertising - TV, letterbox drops, newspapersSpecial events and entertainmentAds featuring price, specials, discounts -loss leaders

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Price

Walmart - lower prices always -successful positioning on price

Purchase process

Ease of buyingPayment optionsDeliveryAfter sales serviceSalesperson or contact person/personalisation

Online consumers

More powerful, demanding and utilitarianConsumer loyalty online is low overallConsumers perceive risk higher online -credit card fraud and not receiving the right productsMore goal oriented than experience orientedMore price oriented

Consumer Resources

For consumers:

VALUE = BENEFITS - COSTS

Costs = a consumer’s resources for exchange: Money, Time, Energy, Psychic costs.

Money, Time, Energy, Psychic Cost

⇒ Consumers have to pay by credit card, debit card, electronic check, or smart card.Did the user get what she wanted for the time she invested?

Internet firms to be sure their sites are well organized and easy to navigate so users can quickly find what they want. Search engines and shopping agents can help consumers find what they want to leverage their brief forays online.

⇒ Energy + psychic resources = closely related to time. ⇒ Sometime = Too much trouble to turn on the computer,

log onto the Internet, and check e-mail. ⇒ Rising popularity of short text messaging (SMS) via cell

phones and handheld mobile devices.

4Wrong product arrived and couldn’t return it

15Product took too long to arrive

4Ordered product but never came20Had to contact customer service

5Site made unauthorized charge to my credit card

26Got logged off / system crashed

8Tried/failed to contact customer service

32Product not available/in stock

9Site wouldn’t accept credit card45Site was confusing/couldn’t find product

10Returned the product48Page took too long to load

%Reason Given%Reason Given

Most Common Reasons for Failed Online PurchasesSource: Boston Consulting Group Study as reported in Wellner (2001)

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Website influencers

Value added search mechanismsPositive challenge and stimulation

Value added search mechanisms

Created by internet retailer - bestseller listFrom a third party - links to other sites such as bookclubscustomers themselves - book reviews

Challenge - positive

Shopping sites challenging and stimulating like a real world shopping centre or an electronic game

Postpurchase consumer behaviour

PurchasePurchase RepurchaseRepurchaseEvaluationEvaluationUsageUsage

Postpurchase Postpurchase dissonancedissonance

Product Product disposaldisposal

Consumer Consumer complaintscomplaints

Post Internet Exchange

When exchange occurs:

Browser bookmarks = quick jump to favorite online retailer. E-mail messages contain hyperlinks to bring consumers directly to specific information, news reports, or advertised specials. The Internet has the added feature of automation to facilitate exchange.Specialist intermediaries for complaints www.ecomplaints.com

Relationships43% of online time = e-mail or other communication related activities:

It is an inexpensive way to keep in touch, It is usually text based = can be easily accomplished with a slow modem or over a wireless handheld device. Form new relationships with the people they meet online.Spend time in chat rooms, make phone calls, and visit online dating sites. Communication can take place in communities of interest.

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EntertainmentConsumers use the Internet for entertainment (50%).

Internet’s big promises= audio and visual entertainment:

Only 20% of all users have broadband at home; Until more do, firms won’t produce much of this type of online entertainment;

Media Consumption

Consumers are accessing news, weather, sports scores, and radio broadcasts over the Internet.

⇒ Consumers have a limited amount of time to exchange for media consumption, and that the Internet takes away from offline media time.

⇒ Consumers use whatever medium is handy when they want news, including a handheld PDA—another indication that the Internet has morphed from novelty to utility.⇒ 33% of Internet users mentioned watching television less often, ⇒ 25% read magazines less frequently, ⇒ 23% read newspapers less often,⇒ 16% listen to the radio less frequently.

InformationSecond to e-mail, consumers spend much of their time gathering research and information online:How do Internet users find information?

85% have used search engines.

Google.com is the most popular search engine: visitors spend 25.9 minutes per month there. Users spend 10.8 minutes a month on Yahoo! and 6 minutes at MSN.

Google’s revenue model is entirely advertising based,

Problems with high Internet use

HomeNet Project at Carnegie Mellon found significant declines in social interaction and higher levels of loneliness and depressionStanford study - watch less television shop less in stores, reading newspapers

Review Questions1. What are some of the social, cultural,

technological, and legal issues that slow Internet adoption in some nations?

2. What is an exchange?3. What individual characteristics influence online

behavior?4. What are the four costs that constitute a

consumer’s resources for exchange?5. How can e-marketers facilitate Internet

exchange?

Discussion Questions

1. Why would a growing B2B market lead consumers onto the Internet in countries where penetration was previously low?

2. What might e-marketers do to accommodate consumers who are experiential shoppers?

3. Do you consider the concept of flow an explanation for what some observers call Internet addiction? Explain your answer.

4. How might e-marketers capitalize on consumer interest in relationships as an outcome of Internet activity?