Internet Consumers n 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

Preston University North Campus Karachi


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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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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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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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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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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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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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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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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.Preston University North Campus Karachi


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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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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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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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Major demographics presentedinclude

GenderAge

Marital status

Educational level

EthnicityOccupation

Household incomePreston University North Campus Karachi

D hi f I S f


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(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 Preston University North Campus Karachi


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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)Preston University North Campus Karachi


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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: GartnerGroupPreston University North Campus Karachi


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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.Preston University North Campus Karachi


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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 servicePreston University North Campus Karachi


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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

usersPreston University North Campus Karachi


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Figure3.5

TheECTrustModel

Source: Lee and Turban (2001)



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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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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 toolsPreston University North Campus Karachi


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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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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 themPreston University North Campus Karachi


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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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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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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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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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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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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

OthersPreston University North Campus Karachi


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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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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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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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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, forecastingPreston University North Campus Karachi


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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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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


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


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


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 needsPreston University North Campus Karachi


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IntelligentAgentsin


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 Preston University North Campus Karachi


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IntelligentAgentsin


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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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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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

BusinessTownprovides 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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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.)

Internet Consumers n Market Research

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