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Chapter 4
Online Consumer Behavior,
Market Research, and
Advertisement
Learning Objectives
1. Understand the decision-making process of
consumer purchasing online.
2. Describe how companies are building one-to-one
relationships with customers.
3. Explain how personalization is accomplished online.
4. Discuss the issues of e-loyalty and e-trust in EC.
5. Describe consumer market research in EC.
6. Describe the objectives of Web advertising and its
characteristics.
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Learning Objectives
7. Describe the major advertising methods used on the
Web.
8. Understand how advertising is done in social
networks and the Web 2.0 environment.
9. Describe various online advertising strategies and
types of promotions.
10.Describe permission marketing, ad management,
localization, and other advertising-related issues.
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Learning About Consumer Purchasing
Online
• A GENERIC PURCHASING-DECISION MODEL
– Need identification
– Information search
• product brokering
Deciding what product to buy.
• merchant brokering
Deciding from whom (from what merchant) to buy products.
– Evaluation of alternatives
– Purchase decision and delivery
– Postpurchase behavior
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Learning About Consumer Purchasing
Online
• CUSTOMER DECISION SUPPORT IN WEB PURCHASING- See
Exhibit 4.1 (CDSS)
• PLAYERS IN THE CONSUMER DECISION PROCESS
– Initiator – first person who thinks or suggests a product
– Influencer - first person who advices
– Decider
– Buyer
– User
Marketer should have rule to target all players
• ONE-TO-ONE MARKETING
– EC can match product/service with individual customer
– Treat every customer in a unique way
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Personalization, Loyalty, Satisfaction, and
Trust in EC
• personalization
The matching of services, products, and
advertising content with individual consumers and
their preferences.
• The matching is based on:
- user profile
The requirements, preferences, behaviors, and
demographic traits of a particular customer.
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Personalization, Loyalty, Satisfaction, and
Trust in EC
• The major strategies used to compile user profiles
include:
– Solicit information directly from the user
• Questionnaires
– Observe what people are doing online
• Cookie: A data file that is placed on a user’s hard drive by a
remote Web server, frequently without disclosure or the user’s
consent, that collects information about the user’s activities at
a site.
– Build from previous purchase patterns- amazon.com
– Perform marketing research
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Personalization, Loyalty, Satisfaction, and
Trust in EC
– Make inferences
• Collaborative filtering
• Behavioral targeting
The use of information collected on an individual’s Internet
browsing behavior to select which advertisements to display to
that individual.
• CUSTOMER LOYALTY
– Customer loyalty is the degree to which a consumer will stay
with a specific vendor or brand.
– e-loyalty (customer acquisition and retention)
Customer loyalty to an e-tailer or loyalty programs delivered
online or supported electronically.
– Main factors to determine
loyalty: Satisfaction and trust
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Personalization, Loyalty, Satisfaction, and
Trust in EC
• SATISFACTION IN EC
– Many things influence online customer satisfaction including
customer service. This is important to monitor as decreased
satisfaction could lead to decreased sales.
• TRUST IN EC
– trust
The psychological status of willingness to depend on another
person or organization.
– Trust is very important in EC because of the lack of direct human
interaction between the customer and the merchant.
– Merchants are able to increase the amount of trust their
customers have through brand recognition, security mechanisms
and business transparency.
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Market Research for EC
• MARKET SEGMENTATION RESEARCH
• The objective of market research is to find information that describes
the relationships between customers, products, marketing methods
and marketers to assist a firm in both marketing and advertising
plans. On the Web the objective is to turn browsers into buyers.
• Information gathered about: economy, industry, firms, competition,
products, pricing, promotion and consumer behavior.
• MARKET SEGMENTATION RESEARCH
• Market segmentation is the process of dividing a customer market
into logical groups for conducting market research, advertising, and
sales. Markets are segmented so that they can be more easily
managed and so marketing strategies can be applied to specific
subsets of the population.
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METHODS FOR CONDUCTING
MARKET RESEARCH ONLINE
• Online market research is very similar to the
research that would be done off-line. The Internet
can make the process quicker and easier.
Researchers go through the same steps online in
determining what needs to be researched.
• The major methods include Web surveys, focus
groups, direct feedback, customer scenarios,
customer tracking, and analysis of clickstream data.
WHAT ARE MARKETERS LOOKING FOR IN EC
MARKET RESEARCH?
• Explain and predict buying behavior
• Why some customers are online shoppers
whereas other are not?
• What are the purchase patterns?
• Answers to these questions help vendors in
ads, pricing, designing their websites,
providing better customers services.
Market Research for EC
• TMARKET RESEARCH FOR ONE-TO-ONE
– Direct Solicitation of Information
• Implementing Web-Based Surveys
• Online Focus Groups – through chat rooms
• Hearing Directly from Customers
– Data Collection in the Web 2.0 Environment
• Discussion forums, polling, blogging, chatting, live
chat, collective wisdom for intelligence
(brainstorming), find expertise, data in videos,
photos, and other rich media.
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Market Research for EC
– Observing Customers’ Movements Online
• transaction log
A record of user activities at a company’s Web site.
• 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.
• Cookies
• spyware
Software that gathers user information over an Internet
connection without the user’s knowledge.
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Market Research for EC
• Analysis of B2C Clickstream Data
Data that occur inside the Web environment; they provide a trail of
the user’s activities (the user’s clickstream behavior) in the Web site.
Customer movements on the Internet.(web site, web pages, how
long he stays, order of pages visited, e-mial addresses send and
receive).
• Web mining
The use of data mining techniques for discovering and extracting
information from Web documents and Web usage.
– Collaborative filtering
market research and personalization method that uses
customer data to predict, based on formulas derived from
behavioral sciences, what other products or services a
customer may enjoy; predictions can be extended to other
customers with similar profiles
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Market Research for EC
• LIMITATIONS OF ONLINE MARKET RESEARCH AND HOW TO
OVERCOME THEM
– The major limitation of online market research is the sample and
characteristics of Web users. These Web users may not typify
the population at large, so marketers must ensure that they are
aware of the demographics of those they are researching.
• BIOMETRIC MARKETING
– Clickstream data represents a computer not a person
– biometrics
An individual’s unique physical or behavioral characteristics that
can be used to identify an individual precisely (e.g. fingerprints).
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Web Advertising
• OVERVIEW OF WEB ADVERTISING
– interactive marketing
Online marketing, facilitated by the Internet, by
which marketers and advertisers can interact
directly with customers, and consumers can
interact with advertisers/vendors.
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Web Advertising
• SOME BASIC INTERNET ADVERTISING
TERMINOLOGY
– ad views
The number of times users call up a page that has
a banner on it during a specific period; known as
impressions or page views.
– button
A small banner that is linked to a Web site. It can
contain downloadable software.
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Web Advertising
– click (click-through or ad click)
A count made each time a visitor clicks on an advertising
banner to access the advertiser’s Web site.
– click-through rate
The percentage of visitors who are exposed to a banner
ad and click on it.
– click-through 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.
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Web Advertising
– conversion rate
The percentage of clickers who actually make a
purchase.
– CPM (cost per thousand impressions)
The fee an advertiser pays for each 1,000 times a
page with a banner ad is shown.
– hit
A request for data from a Web page or file.
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Web Advertising
– page
An HTML (Hypertext Markup Language) document
that may contain text, images, and other online
elements, such as Java applets and multimedia
files. It can be generated statically or dynamically.
– stickiness
Characteristic that influences the average length
of time a visitor stays in a site.
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Web Advertising
– unique visits
A count of the number of visitors entering a site,
regardless of how many pages are viewed per
visit.
– visit
A series of requests during one navigation of a
Web site; a pause of a certain length of time ends
a visit.
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Web Advertising
Advertising Online and Its Advantages
Web ad is growing rapidly because:
•
•
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•
•
•
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Cost
Richness of format
Personalization
Timeliness – fresh and timely
Location-basis – sent to a specific locations (zones)
Linking – link from ad to storefront
Digital branding
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Online Advertising Methods
• BANNERS
– Static banners
On a Web page, a graphic advertising display linked
to the advertiser’s Web page.
– keyword banners
Banner ads that appear when a predetermined word
is queried from a search engine - as the result of the
user’s action.
– random banners
Banner ads that appear at random, not as the result
of the user’s action.
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Online Advertising Methods
– Benefits of Banner Ads
• The major benefit of banner ads is that, by clicking on
them, users are directly transferred to the shopping page of
an advertiser’s site.
• The ability to customize them for individual surfers or a
market segment of surfers.
– Limitations of Banner Ads
• The major disadvantage of banners is their cost
• A limited amount of information can be placed on the
banner
• Customer indifference – customers give no attention
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Online Advertising Methods
• pop-up ad (ad spawning)
An ad that appears in a separate window before,
after, or during Internet surfing or when reading
e-mail.
• pop-under ad
An ad that appears underneath the current
browser window, so when the user closes the
active window the ad is still on the screen.
Both are considered intrusive
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Online Advertising Methods
• E-MAIL ADVERTISING
– E-Mail Hoaxes – Non real products, scams
– Fraud – phishing (financial) or spoofing (force you
to go to link to download something)
– E-Mail Advertising Methods and Successes
• CLASSIFIED ADS (usually free)
– These ads use a consistent and familiar format
that can be used in several locations.
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Online Advertising Methods
• SEARCH ENGINE ADVERTISEMENT
– URL Listing (free)
– Keyword Advertising (google ads)
– search engine optimization (SEO)
The craft of increasing site rank on search engines; the optimizer
uses the ranking algorithm of the search engine (which may be
different for different search engines) and best search phases, and
tailors the ad accordingly.
– Google: The Online Advertising King
• viral marketing
Word-of-mouth method by which customers promote a
product or service by telling others about it.
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Advertising in Social Networks and the
Web 2.0 Environment
• social network advertising
Online advertising that focuses on social networking sites.
– Types of Social Network Advertising
• Direct advertising that is based on your network of
friends.
• Direct advertising placed on your social network site.
Similar to banner ad
• Indirect advertising by creating “groups” or “pages”.
Targeting subscribers or fans
– Sponsored Reviews by Bloggers
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Advertising in Social Networks and the
Web 2.0 Environment
• ADVERTISING IN CHAT ROOMS AND FORUMS.
Example: A toymaker opens a chat room
• VIDEO ADS ON THE WEB AND IN SOCIAL
NETWORKING
– Video Ads : podcast series, youtube
• Success factors: quality, interest, and length
– Tracking the Success of an Online Video Campaign
• Web video analytics: A way of measuring what viewers do
when they watch an online video.
• VIRAL MARKETING IN SOCIAL NETWORKS
– SEARS.COM: allow sharing of dress selection
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Advertising Strategies
• affiliate marketing
A marketing arrangement by which an organization
refers consumers to the selling company’s Web site.
• ADS AS A COMMODITY (PAYING PEOPLE TO WATCH
ADS)- mypoints.com
- Customers are paid to read ads by the advertisers
- personalized ads are ads that have been selected or
created based on a user’s profile
• SELLING SPACE BY PIXELS
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Advertising Strategies
• Sec Exam 3-4 PERSONALIZED ADS AND
OTHER
PERSONALIZATION
– Personalized ads are ads that have been selected or created
based on a user’s profile
– Webcasting
A free Internet news service that broadcasts
personalized news and information, including seminars,
in categories(news, sports, products) selected by the
user.
• ONLINE EVENTS, PROMOTIONS, AND ATTRACTIONS
– Live Web Events (concerts, shows, debates)
- Brings huge crowd to the web site
- preparation through e-mails, banner ads,game…etc
- Example : Cisco router ASR 1000
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Special Advertising Topics
• PERMISSION ADVERTISING
– Spamming – one-to-one ads
Using e-mail to send unwanted ads (sometimes floods of
ads).
– permission advertising (permission marketing)
Advertising (marketing) strategy in which customers
agree to accept advertising and marketing materials
(known as “opt-in”).
• ADVERTISEMENT AS A REVENUE MODEL
– dot-com failures (200-2002)
– Small site (having niche area like sport) can survive –
Ex: playfootball.com
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Special Advertising Topics
• MOBILE MARKETING AND ADVERTISING
– mobile advertising (m-advertising)
Ads sent to and presented on mobile devices.
- Exaple: blyk.co.uk mobile operator that offer subscribers
217 free txt msgs, 43 minutes free voice calls per month
if they agree to receive 6 ads per day.
• AD CONTENT
- Ad content can have a large effect on customer’s response and
their interest in whatever is being advertised
- Content is very important to increase stickiness.
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Special Advertising Topics
• SOFTWARE AGENTS IN MARKETING AND ADVERTISING
APPLICATIONS
- Intelligent agents help online shoppers find and compare
products, resulting in significant time savings.
• localization
- The process of converting media products developed in one
environment (e.g. country) to a form culturally and linguistically
acceptable in environments outside the original target market.
- Web page translation is one aspect of internationalization.
- blue/white background
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