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E-Commerce BBA (Hons) Internet Consumer & Market Research Lectures 10,11,12 Course Lecturer: Farhan Mir © Farhan Mir 2014 IMS Learning Objectives Describe the essentials of consumer behavior Describe the characteristics of Internet surfers and EC purchasers Understand the process of consumer purchasing decision making Describe the way companies are building relationships with customers Explain the implementation of customer service Describe the consumer market research in EC Experience the role of intelligent agents in consumer applications Describe the organizational buyer behavior model © Farhan Mir 2014 IMS The Importance of Customers The major pressures are labeled the 3Cs Competition “fighting” on customers to succeed : control the 3Cs Customers customers becomes a King/Queen to succeed : finding and retaining customers Change EC is a new distribution channel to succeed : convince customers to go online and then to choose your company over the online competitors The idea is to understand the needs and requirements of the customer and the changes in his behavior © Farhan Mir 2014 IMS Ritchey Design Learns about Customers The Problem Ritchey Design, Inc. is a relatively small designer and manufacturer of mountain bike components Sells its products to distributors and/or retailers, who then sell them to individual consumers Its 1995 Web site was more a status symbol than a business tool © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) Visitors could get information on Team Ritchey or find out where Ritchey products were sold It did not give customers all the information they wanted It did not enable the company to gain insight into its customers’ wants and needs © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) The Solution In late 1995, Ritchey reworked the Web site so that the company could hear from its customers directly set up customer surveys on the site offered visitors who answer the surveys a chance to win free Ritchey products vsitors enter their names and addresses and then answer questions about the company’s products © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) Web Trader software automatically organizes and saves the answers in a database and is used to help make marketing and advertising decisions Questions are changed to learn customers’ opinions about any new products Ritchey develops Saves $100,000 on product development per year © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) An online catalog educates retailers and consumers about the technological advantages of Ritchey’s high-end components over competitors’ parts Visitors browse the product catalog that includes detailed descriptions and graphics of Ritchey’s products © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) The Results ritcheylogic.com sells only team items such as t-shirts, bags, water bottles, and other gear directly to individuals online The company does not sell bike parts to individuals directly online because it wants to maintain its existing distribution system Dealers can place orders on the site © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) The site is basically used in B2C EC only for the basic activities in Internet marketing: communicating with customers conducting market research delivering advertising © Farhan Mir 2014 IMS Ritchey Design Learns about Customers (cont.) What we can learn … Illustrates the benefits a company can derive from changing its Web site from a passive one to one with interactivity Interactive Web site allows the company to: learn more about its customers educate customers use the site for customer service © Farhan Mir 2014 IMS Understanding Consumer Behavior Understand the dynamics of online consumers © Farhan Mir 2014 IMS A Model of EC Consumer Behavior Purchasing decision begins with customer’s reaction to stimuli Individual Characteristics Age, gender, ethnicity, education, lift style, psychological, knowledge, values, personality Environment Characteristics Social, family, communities Buyers’ Decisions Stimuli Marketing Others Price Economical Promotion Technology Product Political Quality Cultural Buy or not What to buy Where (vendor) When How much to spend Repeat purchases Decision Making Process Vendors’ controlled System Logistic Technical Customer service Support Payments, Delivery Support Web design, Intelligentagents FAQ, e-mail, Call centers, One-to-one © Farhan Mir 2014 IMS Consumer Behavior Online (cont.) Customer types— Individual consumers who commands most of the media’s attention Organizational buyers Governments and public organizations Private corporations Resellers Consumer behavior viewed in terms of: Why is the consumer shopping? How does the consumer benefit from shopping online? © Farhan Mir 2014 IMS A Model of EC Consumer Behavior (cont.) Purchasing Types Impulsive buyers: purchase products quickly Patient buyers: purchase products after making some comparisons Analytical buyers: do substantial research before making the decision to purchase products or services Purchasing Experiences Utilitarian: shopping “to achieve a goal” or “complete a task” Hedonic: shopping because “it is fun and I love it” © Farhan Mir 2014 IMS Variables Influencing Decision Making Process Environmental Variables Social variables people influenced by family members, friends, co-workers, “what’s in fashion this year”, Internet communities and discussion groups Cultural variables Other environmental variables available information, government regulations, legal constraints, and situational © Farhan Mir factors 6 2014 IMS Looking at a online Consumer (Average) The statistics are US based © Farhan Mir 2014 IMS Variables Influencing Decision Making Process (cont.) Consumer Demographics (2006) Age (mostly 20-30 year-old) Marital status (41% married & 39% single) Educational level (82% with at least some college education & 50% obtained at least baccalaureate degree) Ethnicity (87% white in America) Occupation (26% educational-related field, 22% computers & 22% other professionals)© Farhan Mir 2014 IMS Consumer Demographics Gender (61% male user & 39% female user) Purchases Category Computer Software Books Music Magazines Flowers Women’s Clothing Computer Hardware Games Videos Crafts & Craft Supplier Toys Home Furnishings Children’s Clothing Men’s Clothing Art Jewelry Furniture TOTAL % of Total Category % of Total Respondents Buying (166) Purchases (299) 15% 14% 11% 11% 11% 7% 5% 5% 4% 4% 3% 2% 2% 2% 2% 1% 1% 100% 39% 35% 28% 28% 28% 19% 12% 11% 10% 10% 9% 6% 4% 4% 4% 3% 2% © Farhan Mir 2014 IMS Variables Influencing Decision Making Process (cont.) Consumer Demographics Household income (46% at least $50,000/year) Internet usage profile (Internet access option, length and frequency of web use & access cost) Internet access option (63% primarily form home & 58% primarily from work or school) Length and frequency of use (88% access daily & 33% access 10-20 hours a week) Access cost (67% pay for their own Internet access & 31% paid for by their employers) © Farhan Mir 2014 IMS 9 Some figures from 2007 comScore Networks has announced the results of the first complete review of consumer e-commerce for the year 2007, reporting that sales at domestic online retailers surged to $153 billion for the year. Excluding online Travel, comScore reports sales totaled $73.7 billion, reflecting a growth rate of approximately 30% vs. the year 2006. © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS Source: http://www.sellitontheweb.com/ezine/news0556.shtml © Farhan Mir 2014 IMS Shop.org Statistics © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS Consumer DecisionMaking Essentials © Farhan Mir 2014 IMS Consumer Purchasing Decision-Making: Roles Roles that people play in the decision making process Initiator : the person who first suggests or thinks of the idea of buying a particular product or service Influencer : a person whose advice or views carry some weight in making a final buying decision Decider : the person who ultimately makes a buying decision or any part of it - whether to buy, what to buy, how to buy, or where to buy Buyer : the person who makes an actual purchase User : the person who consumes or uses a product or service © Farhan Mir 2014 IMS Consumer Purchasing DecisionMaking (cont.) The Purchasing Decision-Making Model Need identification (Recognition) Information search (What? From whom?) Alternative evaluation, negotiation and selection Purchase and delivery After purchase service and evaluation © Farhan Mir 2014 IMS Customer Satisfaction & Loyalty © Farhan Mir 2014 IMS Model of Internet Consumer Satisfaction 3rd Party Seal of Approval Logistics Support Vendor Reputation Trust in Web-shopping Customer Service Pricing Attractiveness Web-site Store Front Customer Satisfaction Repeat Web Purchase (Brand Loyalty) Security Privacy Transaction Safety System Reliability Speed of Operation Ease of Use Content, Quality Format Timeliness Authentication Integrity Reliability Completeness © Farhan Mir 2014 IMS Organization want loyal customers (Satisfied Customers) but how? Answer: Relationship Marketing (One-to-One Marketing) © Farhan Mir 2014 IMS One-to-One Marketing Relationship marketing “Overt attempt of exchange partners to build a long term association, characterized by purposeful cooperation and mutual dependence on the development of social, as well as structural, bonds” “Treat different customers differently” Able to change the manner its products are configured or its service is delivered, based on the individual needs of individual customers © Farhan Mir 2014 IMS How One-to-One Relationships Are Practiced Doing business over the Internet enables companies to: Communicate better with customers Understand customers’ needs and buying habits better Improve and customize their future marketing efforts © Farhan Mir 2014 IMS One-to-One Marketing (cont.) Customer loyalty Effects Purchase behavior One of the most significant contributors to profitability Increase profits; strengthen market position; become less sensitive to price competition; increase cross-selling success; save cost, etc. Real world examples 1-800-FLOWERS Amazon.com Federal Express (FedEx) © Farhan Mir 2014 IMS Customer Loyalty & E-Loyalty Customer loyalty—degree to which customer stays with vendor or brand Important element in consumer purchasing behavior One of the most significant contributors to profitability E-loyalty—customer’s loyalty to an e-tailer Learn about customers’ needs Interact with customers Provide customer service © Farhan Mir 2014 IMS One-to-One Marketing (cont.) Building and maintaining customer loyalty Maintain continuous interactions between consumers and business Make a commitment to provide all aspects of the business online Build different sites for different levels of customers Willing to invest capital, both human and financial, in the information systems, to insure continuous improvement in the supporting technology as it becomes available © Farhan Mir 2014 IMS One-to-One Marketing (cont.) Customer Service : One of the essence of Customer Satisfaction Information can be directed to the customer efficiently Creation of a database which records purchases, problems and requests is facilitated Information can now be traced and analyzed for immediate response If customer service options and solutions do not maintain the same level of excitement and interaction as the advertising and sales presentations, the level of intensity declines and the vendor runs the risk of losing customers © Farhan Mir 2014 IMS Implementing Customer Service in Cyberspace (cont.) Types of Customer Service Functions Answering customer inquires Providing technical and other information Letting customers track accounts or order status Allowing customers to customize and order online © Prentice Hall, 2000 21 © Farhan Mir 2014 IMS Tools of Customer Service Personalized Web Pages used to record purchases and preference direct customized information to customers efficiently Chat Room discuss issues with company experts; with other customers E-mail used to disseminate information, send product information and conduct correspondence regarding any topic, but mostly inquiries from customers FAQs not customized, no personalized feeling and contribution to relationship marketing © Farhan Mir 2014 IMS Tools of Customer Service (cont.) Help Desks and Call Centers A comprehensive customer service entity EC vendors take care of customer service issues communicated through various contact channels Telewebs combines Web channels, such as automated e-mail reply, Web knowledge bases and portal-like self service with call center agents or field service personnel Internet a medium of instant gratification demand for both prompt replies and proactive alerts © Farhan Mir 2014 IMS How to know what the customer wants online? Answer: Online Market Research © Farhan Mir 2014 IMS Market Research for EC Aims Finding relationship between consumers, products, marketing methods, and marketers through information in order to discover marketing opportunities and issues, to establish marketing plans, to better understand the purchasing process, and to evaluate marketing performance Problem definition and Research objectives Research methodology, Data collection plan Data collection, Data analysis Results, Recommendations, Implementation © Farhan Mir 2014 IMS Market Research for EC Goal–find information and knowledge that describes relationships among Consumers Products Marketing methods Marketers Aim—find relationship between Discover marketing opportunities and issues Establish marketing plans Better understand the purchasing process Evaluate marketing performance © Farhan Mir 2014 IMS Market Research for EC (cont.) Online Market Research Using online technology to conduct surveys More efficient, faster, and cheaper data collection, and a more geographically diverse audience than those found in off-line surveys Ability to incorporate radio buttons, data-entry fields and check boxes in the surveys Not suitable for every customer or product — it is skewed toward highly educated males with high disposal income © Farhan Mir 2014 IMS Market Research for EC (cont.) Procter & Gamble Example: Internet market research expedites time-to-market for Procter & Gamble In the past developing a major new product, from concept to market launch, took over 5 years In September 2000 introduced Whitestrips on the Internet, offering the product for sale on P&G’s Web site © Farhan Mir 2014 IMS Market Research for EC (cont.) Procter & Gamble (cont.) Online research was facilitated by data mining conducted on P&G’s huge historical data and the new Internet data Internet created a product awareness of 35 percent before shipments were made to stores Revolutionized process of studying the product concept, segmenting the market, and expediting product development © Farhan Mir 2014 IMS Market Research for EC (cont.) Various tools are used to conduct consumer market research: Questionnaires Surveyors Telephone surveys Focus groups Important first to understand how groups of consumers are classified © Farhan Mir 2014 IMS Market Research for EC Online Market Research If you don’t know how to do it then companies such as E-valuations or Northstar can conduct the research for your company © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS © Farhan Mir 2014 IMS Limitations of Online Market Research Methods 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 inperson group to an online group Eye contact and body language are lost Anonymity is necessary to elicit an unguarded response © Farhan Mir 2014 IMS Intelligent Agents for Consumers Search Engines Computer programs that can automatically contact other network resources on the Internet, searching for specific information or key words, and reporting the results Intelligent Agents Computer programs that help the users to conduct routine tasks, to search and retrieve information, to support decision making and to act as domain experts Do more than just “search and match” © Farhan Mir 2014 IMS Intelligent Agents for Consumers Intelligent Agents for Information Search and Filtering Help to determine what to buy to satisfy a specific need by looking for specific products’ information and critically evaluate them For Organization these intelligent agents are a very useful source of consumer information and analytical calculation of this information could really provide closer insight to consumer buying behavior © Farhan Mir 2014 IMS Organizational Buyer’s Behavior © Farhan Mir 2014 IMS Organizational Buyer’s Behavior Consumer Types Individual customers Vs. Organizational buyers Characteristic Demand Purchase volume Number of customers Location of buyers Distribution structure Nature of buying Nature of buying influence Type of negotiations Use of reciprocity Use of leasing Primary promotional method Retail Buyers Individual Smaller Many Dispersed More indirect More personal Single Simpler No Lesser Advertising Organizational Buyers Organizational Larger Fewer Geographically concentrated More direct More professional Multiple More complex Yes Greater Personal selling © Farhan Mir 2014 IMS Organizational Buyer’s Behavior (cont.) Individual Influences Interpersonal Influences Organizational Influences Age; gender; ethnicity; education, lift style; psychological; knowledge; values; personality Authority; status; persuasiveness Policies and procedures; organization structure; centralized/decentralized; systems used; contracts Stimuli Marketing Others Price Promotion Product Quality Economical Technology Political Cultural Behavioral Model Decision Making Process (Group or Individual) Buyers’ Decisions Buy or not; What to buy; Where (vendor); When; Delivery terms Payments Vendors’ Controlled Systems Logistic support Technical support Customer service Payments, delivery Web design, Intelligentagents FAQ,E-mail, Call Centers, One-to-one © Farhan Mir 2014 IMS