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Chapter 4 Consumer Behavior, Customer Service, and Advertising Prentice Hall 1 Learning Objectives 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 Explain how personalization is accomplished online Describe consumer market research in EC Prentice Hall 2 Learning Objectives (cont.) Explain the implementation of customer service online and describe its tools Describe the objectives of Web advertising and its characteristics Describe the major advertising methods used on the Web Describe various online promotions Prentice Hall 3 Exhibit 4.1 EC Consumer Behavior Model Prentice Hall 4 Consumer Behavior Online Consumer 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? Prentice Hall 5 Variables in the Purchasing Environment Social variables—people are influenced by: Family members, friends, co-workers, “what’s in fashion this year” Cultural/community variables—where the consumer lives Other environmental variables: Available information, government regulations, legal constraints, situational factors Prentice Hall 6 Consumer Purchasing Decision Making Roles people play in decision-making Initiator—suggests/thinks of buying a particular product or service Influencer—advice/views carry weight in making a final buying decision Decider—makes a buying decision or any part of it Buyer—makes the actual purchase User—consumes or uses a product or service Prentice Hall 7 General Purchasing Decision-Making Model 5 major phases of a general model 1. Need identification 2. Information search 3. Evaluation of alternatives 4. Purchase and deliver 5. After-purchase evaluation Prentice Hall 8 How One-to-One Relationships Are Practiced One-to-One marketing: Marketing that treats each customer in a unique way. Relationships as a two-way street: Customer information is collected and placed in a database Customer’s profile is developed and … Generate “four P’s” of marketing: Product Place Price Promotion Prentice Hall 9 Exhibit 4.5 The New Marketing Model Prentice Hall 10 How One-to-One Relationships Are Practiced (cont.) 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 Prentice Hall 11 Personalization Personalization—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—a data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site Prentice Hall 12 Personalization (cont.) Major strategies used to compile user profiles include: Solicit information directly from the user. Use cookies or other methods to observe what people are doing online Perform marketing research Build from previous purchase patterns Prentice Hall 13 Collaborative Filtering Collaborative filtering—a personalization method that uses customer data to predict, based on formulas derived from behavioral studies, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles Prentice Hall 14 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 15 Prentice Hall Trust in EC 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 Particularly important in global EC transactions Prentice Hall 16 How to Increase EC Trust Trust can be decreased by: Any user uncertainty regarding the technology Lack of initial face-to-face interactions Lack of enthusiasm among the parties Brand recognition is very important in EC trust EC security mechanisms can also help solidify trust 17 Prentice Hall Market Research for EC Market research includes gathering information about: Distribution Competition Promotion Consumer purchasing behavior Economy Industry Firms Products Pricing Prentice Hall 18 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 Prentice Hall 19 Market Segmentation Market segmentation—process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales Geography Demographics Psychographics (Lifestyle) Benefits sought Powerful tool for research regarding: Consumer behavior Discover of new markets Consumer interest in new products Prentice Hall 20 What Are We Looking For in EC Market Research? Online market research attempts to find: Purchase patterns for individuals and groups Factors that encourage online purchasing How to identify real buyers and browsers How an individual navigates Optimal Web page design Major factors used for prediction are: Product information requested Number of related emails Number of orders made What products/services are ordered Gender Prentice Hall 21 EC Market Research (cont.) Interactive Internet-based market research Allows personal contact with customers Provides marketing organizations with greater ability to understand customer, market, and competition Identify early shifts in product and customer trends Enables marketers to identify products and marketing opportunities Develop products that customers really want to buy Prentice Hall 22 Online Market Research Methods Web-based surveys Free software to create survey forms and analyze results is available at supersurvey.com websurveyor.com Online focus groups—help overcome some problems that limit the effectiveness of Webbased surveys (sample size, partial responses) Prentice Hall 23 Online Market Research Methods (cont.) Tracking customer movements—learn about customers by observing their behavior rather than by asking them questions transaction log A record of user activities at a company’s Web site clickstream behavior Customer movements on the Internet Web bugs Tiny graphics files embedded in e-mail messages and in Web sites that transmit information about users and their movements to a Web server spyware Software that gathers user information over an Internet connection Prentice without the user’s knowledge 24 Hall 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 in-person group to an online group Eye contact and body language are lost Anonymity is necessary to elicit an unguarded response Prentice Hall 25 Data Mining 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 Sample data mining applications Retailing and sales distribution Banking Airlines Prentice Hall 26 Web Mining Web mining—application of data mining techniques to discover meaningful patterns, profiles, and trends from both the content and usage of Web sites Web content mining – discovering info from web documents. Web usage mining – analyzing Web access logs Web mining is critical for EC due to the large number of visitors to EC sites 27 Prentice Hall Limitations of Online Market Research Lack of representativeness in samples of online users Online shoppers tend to be wealthy, employed, and well educated; results may not be extendable to other markets 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 Prentice Hall 28 Delivering Customer Service in Cyberspace Customer service—a series of activities designed to enhance customer satisfaction (the feeling that a product or service has met the customer’s expectations) Traditional: do the work for the customer EC delivered: gives tools to the customer to do the work for him/herself E-service—customer services supplied over the Internet. Three levels of e-services: Foundation of service Customer-centered services Value-added services Prentice Hall 29 Delivering Customer Service in Cyberspace (cont.) Value chain for Internet service Customer acquisition (pre-purchase support) Customer support during purchase—provides a shopping environment that is efficient, informative, productive Customer fulfillment (purchase dispatch)—timely delivery Customer continuance support (post- purchase)— maintain the customer relationship between purchases Prentice Hall 30 Customer Relationship Management Customer relationship management (CRM)—a customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company Building a customer-centered EC strategy Focus on the end customer Systems and business processes designed for ease of use Foster customer loyalty Prentice Hall 31 Customer Service Tools Personalized Web pages Used to record purchases and preference Direct customized information to customers efficiently E-mail and automated response Disseminate general information Send specific product information Conduct correspondence regarding any topic (mostly inquiries from customers) Prentice Hall 32 Customer Service Tools (cont.) Call center—a comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Telewebs—call centers that combine Web channels with portal-like selfservice; combine Prentice Hall 33 Metrics Metrics—measures of performance; may be quantitative or qualitative Security and privacy On-time order fulfillment Return policy Navigability Response times Site availability Download times Timeliness Prentice Hall 34 Web Advertising 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 seller Two-way communication and e-mail capabilities Vendors also can target specific groups and individuals Enables truly one-to-one advertising Prentice Hall 35 Internet Advertising Terminology 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 (ad clicks and click throughs) Prentice Hall 36 Internet Advertising Terminology (cont.) 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 or file Visit—a series of requests during one navigation of a Web a site; a pause of request for a certain length of time ends a visit Prentice Hall 37 Why Internet Advertisement? 3/4 of PC users gave up some television time Well educated, high-income Internet users are a desired target for advertisers Internet is by far the fastest growing communication medium Advertisers are interested in a medium with such potential reach, both locally and globally Prentice Hall 38 Why Internet Advertisement? (cont.) Cost Online ads are cheaper than those in other media Ads can be updated at any time with minimal cost Richness of format Use of text, audio, graphics, and animation Games, entertainment, and promotions are easily combined in online ads Personalization Can be interactive Can target specific interest groups and/or individuals Prentice Hall 39 Exhibit 4.11 Adoption Curves for Various Media Prentice Hall 40 Advertising Networks Advertising networks (ad server networks)— specialized firms that offer customized Web advertising, such as brokering ads and helping target ads to selected groups of consumers One-to-one targeted ads and marketing can be: Expensive Very rewarding Very effective Prentice Hall 41 Advertisement Methods Banner--on a Web page, a graphic advertising display linked to the advertiser’s Web page Keyword banners Random banners Benefits of banner ads Customized to the target audience or one-to-one ads Utilize “force advertising” marketing strategy Direct link to advertiser Multi media capabilities Prentice Hall 42 Advertisement Methods (cont.) Limitations of banner ads High cost Click ratio—the ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad Declining click ratio—viewers have become immune to banners Prentice Hall 43 Advertisement Methods (cont.) Banner swapping—an agreement between two companies to each display the other’s banner ad on its Web site Direct link between one site to the other site Ad space bartering Banner exchanges—markets in which companies can trade or exchange placement of banner ads on each other’s Web sites (bcentral.com) Credit ratio of approximately 2:1 Still the largest Internet advertising medium Prentice Hall 44 Advertisement Methods (cont.) 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-mail Several million users may be reached directly Problems: junk mail, spamming Prentice Hall 45 Advertisement Methods (cont.) Advertising in chat rooms Virtual meeting ground Free addition to a business site Allows advertisers to cycle through messages and target the chatter again and again Advertising can become more thematic More effective than banners Used for one-to-one connections Advertorial—an advertisement “disguised” to look like an editorial or general information Prentice Hall 46 Advertising Strategies Associated ad display (text links)—an advertising strategy that displays a banner ad related to a term entered in a search engine Ads as a commodity—direct payment made by the advertisers for ads viewed Viral marketing (advocacy marketing)—word-ofmouth marketing by which customers promote a product or service by telling others about it Customizing ads—one-to-one advertisement (Webcasting) Prentice Hall 47 Online events, promotions, and attractions Online events, promotions, and attractions Promotions designed to attract visitors are regular events on thousands of Web sites Contests Quizzes Coupons Giveaways Bargains on the Internet Lottery Free samples Prentice Hall 48