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E-Commerce – customer focus

Attracting and keeping customers
» Issue: security, trust
Legal issues
 Personalisation
 Adverts

Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Customers are different!

Consumer types
» Individual consumers
» Organizational buyers

Goal of shopping
» Pragmatic: buy something useful, cheaply
» Hedonic: have fun

Personality
» Impulsive buyers—purchase quickly
» Patient buyers—make some comparisons first
» Analytical buyers—do substantial research before buying
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Consumer
Behaviour
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Prentice Hall, 2002
Consumer Satisfaction
Dr. Ehud Reiter, Computing Science, University of Aberdeen Prentice Hall, 2002
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Security/Trust

Security/trust
» Will the company actually deliver the
correct product in reasonable shape, in a
reasonable time, at correct price
» Will the customer pay up (is the credit card
stolen, will it be repudiated)
Technical aspects
 Human aspects: Focus here on trust

Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Trust in physical shops
Experience: shoppers trust shops
they’ve used before
 Appearance: shoppers trust store that
look reputable
 Complaints: easy to complain, shop
can’t hide
 Transactions are simple

Dr. Ehud Reiter, Computing Science, University of Aberdeen
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On-line trust

What makes you trust an e-commerce
shop?
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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On-line Trust

Experience: I trust Amazon because I’ve
used them before
» Reputation: because my friends use them
» Very important with e-shops

Appearance: do I trust Amazon because
they have a nice website???
» Less important than with physical shops
» Marketing helps
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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On-line trust
Complaints: Harder to complain since
don’t know where shop is
 Transactions are complex because of
delivery

» Where many e-shops mess up

Third-party: do I trust Amazon more if
another web site says good things
about Amazon (???)
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Does Amazon Trust Me?

Amazon trusts me because
» Experience: I’ve always paid Amazon
before
» Reputation: I’ve used other companies and
always paid up
» Marketing: Amazon threatens nasty things
to customers who don’t pay up
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Trust
We know how trust is established in
physical shops.
 We are developing mechanisms for
establishing trust in e-shops

» Partially technology, but psychology and
sociology probably matter more
» Lack of trust mechanisms is barrier to new
e-shops
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Legal Issues: Tax

In USA, one driving force behind early
e-store success was less tax
» Because of a tax loophole, sales tax (VAT)
was not charged on e-commerce sales

Automatically gave price advantage to
e-commerce sites!
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Legal Issues: Intl E-Commerce
In theory, e-commerce means sites can
sell globally
 In practice, difficult because of different
tax rules, regulations, customs, etc

» More common to set up subsidiaries in
different countries, as Amazon has done

Lack of global legal/regulatory
framework hinders ecommerce
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Personalisation

E-Commerce sites can treat customers
differently
» Offer recommendations, special deals
» Personalise web site
» Adjust prices

In theory, “personalised shop” one of
the great benefits of e-commerce
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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One-to-One Marketing
Build a long term association
Meeting customers cognitive needs
 Customer may have novice, intermediate or expert skill
E-loyalty—customer’s loyalty to an e-tailer
 costs Amazon $15 to acquire a new customer
 costs Amazon $2 to $4 to keep an existing customer
Trust in EC
 Deterrence-based —threat of punishment
 Knowledge-based —reputation
 Identification-based —empathy and common values
 Referrals – Viral Marketing
Personalisation…
Personalisation - Marketing Model
“Treat different customers differently”
Prentice Hall, 2002
Personalisation
“Process of matching content, services, or
products to individuals’ preferences”
Build profiles – N.B. Privacy Issues
 Solicit information from users
 Use cookies to observe online behavior
 Use data or Web mining
Recommendation

Build profiles
» What has X bought?
» What has X looked at?
» Demographics: age, gender, etc

Recommendation
» Rules: If X buys Harry Potter 6, recommend HP 7
» Data Mining: Other people who bought Harry
Potter also bought Lord of the Rings
» Collaborative: X’s overall buying profile is similar
to Y, so recommend whatever Y bought
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Data Mining
searching for valuable information in extremely large databases
Automated prediction of trends and behaviors
 Example: from data on past promotional mailings, find out
targets most likely to respond in future
Automated discovery of previously unknown patterns
 Example: find seemingly unrelated products often purchased
together
 Example: Find anomalous data representing data entry errors
Mining tools:
 Neural computing
 Intelligent agents
 Association analysis - statistical rules
Web Mining - Mining meaningful patterns from Web resources
 Web content mining – searching Web documents
 Web usage mining – searching Web access logs
Recommendations

If done well, perceived very positively
» Real benefit, not just marketing spam
» Credit-card companies have done this well
– Have the most purchasing data?

Data privacy issues
» Can Visa sell data about you to Amazon?
» Spyware to track all of your web browsing?
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Personalise Web Sites
Let customers create their own “shop
front” focusing on their interest
 Adjust appearance (eg, for visually
disabled, or strict Muslims)
 Doable, not huge success

Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Personalised Pricing

Companies would love to be able to
charge people different amounts for the
same product
» Airline seats, cars, etc
» Full price for people who are keen, in a
rush, don’t care about money
» Discount for choosy/finicky
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Personalised Pricing
Amazon, etc have tried this, but
customers hated it.
 So has gone “underground” for now.
 Technology permits this, but society’s
expectations does not allow it

Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Advertising

E-Shops (and other sites) can make
money via advertising
» Google makes billions from its “sponsored
links”
» Amazon has adverts as well
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Web Advertising
Conventional advertising focuses on
visual appeal
 Less successful on web

» Flashy animated banner adverts are a
nuisance and distraction
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Targeted adverts

Web allows relevant adverts to be
associated with a web page
» Google sponsored links based on search
» Amazon could display different adverts for
sci-fi and romance novel

Very effective if done well
» So Web sites can charge more for targeted
adverts
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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Web adverts
Initially treated like TV adverts, put huge
effort into flashy multimedia banner ads
 Now focusing on simple targeted
adverts instead
 Advertising models cannot be blindly
moved from TV to web

» need new models!
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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E-Commerce Summary

Initially tried to make e-shops similar to
high street shops. But
» Need different business model
» Trust issues much more important
» Need appropriate legal framework
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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E-Commerce Summary

Sometimes technology really helps
» Recommender systems, targeted adverts

Sometimes technology works but
society doesn’t like it
» Differential pricing
Dr. Ehud Reiter, Computing Science, University of Aberdeen
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