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Chapter 3
Internet Consumers and
Market Research
© Prentice Hall, 2000
1
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
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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
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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A Model of EC Consumer Behavior (cont.)
Consumer Types
Individual consumers: get much of the media attention
Organizational buyers: do most of the shopping in cyberspace
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”
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Variables Influencing
Decision Making Process
Environmental Variables
Social variables
people influenced by family members, friends, coworkers, “what’s in fashion this year”, Internet
communities and discussion groups
Cultural variables
Psychology variables
Other environmental variables
available information, government regulations,
legal constraints, and situational factors
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Consumer Demographics
Gender (61% male user & 39% female user)
WOMEN’S PURCHASES BY CATEGORY (1998)
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%
© Prentice Hall, 2000
39%
35%
28%
28%
28%
19%
12%
11%
10%
10%
9%
6%
4%
4%
4%
3%
2%
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Variables Influencing Decision
Making Process (cont.)
Consumer Demographics (1998)
Age (mostly 21-30 year-old)
Marital status (41% married & 39% single)
Educational level (81% 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)
© Prentice Hall, 2000
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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)
© Prentice Hall, 2000
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Consumer Buying Patterns
In last six months of 1998:
Experience:
50
< 1 Year
1 - 3 Years
> 4 Years
40
Percent
76% filling out a form on the Web
Online purchases are more than
paper catalog purchases for Net
buyers
32% spent between $100.00$500.00
Spending of less than $50.00
decreases steadily as shoppers
gain experience
Women are more likely to
purchase more in the under $50.00
level, and less likely to purchase at
the above $500.00 level
© Prentice Hall, 2000
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20
10
0
less
than
$50
$50- $100$100 $500
$500 Don't
or
know
more
Amount Spe nt on We b
in Last 6 M onths of 1998
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Consumer Purchasing Decision-Making
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
© Prentice Hall, 2000
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Consumer Purchasing Decision-Making
(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
© Prentice Hall, 2000
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Model of Internet Consumer Satisfaction
3rd Party
Seal of Approval
Logistics Support
Vendor
Reputation
Trust in
Web-shopping
Customer Service
Pricing Attractiveness
Customer
Satisfaction
Web-site Store Front
Repeat Web Purchase
(Brand Loyalty)
Security
Privacy
Transaction
Safety
System
Reliability
Speed of
Operation
Ease of
Use
Content,
Quality
Format
Timeliness
Authentication
Integrity
Non-repudiation
Reliability
Completeness
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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One-to-One Marketing (cont.)
Customer loyalty
Purchase behavior
One of the most significant contributors to profitability
Increase profits; strengthen market position; become
less sensitive to price competition; increase crossselling success; save cost, etc.
Real world examples
1-800-FLOWERS
Amazon.com
Federal Express (FedEx)
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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One-to-One Marketing (cont.)
Building and maintaining customer loyalty
Make a commitment to use the information
collected about customers in an ethical manner
Realistic managerial expectations in the payback
period and cost recovery
Set acceptable standards for response time in
customer service (24-48 hours); Use intelligent
agents to expedite and standardize responses
whenever possible
Ability to change and customize information and
services quickly and inexpensively is a must
© Prentice Hall, 2000
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One-to-One Marketing (cont.)
Customer Service
A new look and feel
Put the burden on the
customer to treat a
problem or inquiry and
receive information
bit by bit
© Prentice Hall, 2000
Install Web servers
which allow each
customer to create
individual web pages
that can be customized
to record purchases
and preferences
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ISFLAVIA:
One-to-One Marketing (cont.)
Customer Service
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
© Prentice Hall, 2000
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Implementing Customer Service in
Cyberspace
Product Life Cycle
Phase 1. Requirements : assisting the customer
to determine needs
Phase 2. Acquisition :
helping the customer to
acquire a product or
service
Phase 3. Ownership :
supporting the customer
on
an ongoing basis
Phase 4. Retirement :
helping the client to
dispose of a service or
product
© Prentice Hall, 2000
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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
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Implementing Customer Service in
Cyberspace (cont.)
Addressing Individual Customer Needs
Companies
understand their
customers’ needs
and buying habits
better
Companies
customize their
future marketing
efforts
Doing
business
via Web
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
Results,
Recommendations,
Implementation
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Market Research for EC (cont.)
Market Segmentation
Market segmentation is the process of
dividing a consumer market into
meaningful groups for decision-making.
In the past, most marketing
approaches have focused on groupbased targeted markets, not on a
personal way to identify individual
consumers who actually purchased and
used the products.
© Prentice Hall, 2000
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Market Research for EC (cont.)
Market Segmentation
Improved methods of marketing research based
on information technologies allow marketers to
collect, store, and analyze detailed and personal
information in a cost-efficient way.
Example : Wal-Mart
Consumer life styles shape psychographic
segmentation of the market.
Lifestyles are typically established by
consumers filling out questionnaires about their
activities such as work and family, interests and
opinions, etc. © Prentice Hall, 2000
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Market Research for EC (cont.)
Consumer Market Segmentation Tasks in the US
Segmentation
Bases/Descriptors
Possible Categories
Geographic
Region
Pacific; Mountains; West North Central;
West South Central; East North Central;
East south Central; South Atlantic;
Middle Atlantic; New England
Size of city, county,
or standard
metropolitan statistical
area (SMSA)
Under 5,000; 5,000 – 19,999; 20,000 –
49,999; 50,000 – 99,999; 100,000 –
249,999; 250,000 – 499,999; 500,000 –
999,999; 1,000,000 – 3,999,999; 4,000,000
or over
Population density
Climate
Urban; suburban; rural
Warm; cold
© Prentice Hall, 2000
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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, dataentry fields and check boxes in the surveys
Eliminating the data reentry errors (from
questionnaires to the computer, for analysis)
Not suitable for every customer or product —
it is skewed toward highly educated males
with high disposal income
© Prentice Hall, 2000
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Market Research for EC (cont.)
Online Market Research
Risk of losing people who sign off if they
had difficulty in logging on or
communicating with researchers
Companies such as E-valuations or
Northstar can conduct the research for
your company
VALS 2 (values and lifestyles) is a wellknown segmentation dividing consumers
in the U.S. (developed at SRI
International in California)
© Prentice Hall, 2000
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Market Research for EC (cont.)
Online Market Research Methods
Process of conducting the research
Define the research issue and the target market
Identify newsgroups and Internet communities to
study
Identify specific topics for discussion
Subscribe to pertinent groups, register in communities
Search discussion group topics and content lists to
find the target market
Search e-mail discussion groups lists
Subscribe to filtering services that monitor groups
Read FAQ’s and instructions of your competitor
© Prentice Hall, 2000
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Market Research for EC (cont.)
Online Market Research Method
Content of the research instrument
Post strategic queries to news groups
Post surveys on your Web site
Offer rewards for participation
Post strategic queries on your Web site
Post relevant content to groups with a pointer to
your Web site survey
Post a detailed survey in special e-mail
questionnaires
Create a chat room and try to build a community
of consumers
© Prentice Hall, 2000
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Market Research for EC (cont.)
Online Market Research Methods
Target Audience of the Study
Compare your audience to the target
population
Determine your editorial focus
Determine your content
Determine what Web services to create
for each type of audience
© Prentice Hall, 2000
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Market Research for EC (cont.)
Consumer Market Research
Methods of conducting a survey: personal
interviews; telephone survey and mail survey
Online market research done on the Net,
ranges from client-specific moderated focus
groups conducted via chat rooms; to
interactive surveys placed on Web sites
The Internet is providing an efficient channel
for faster, cheaper and more reliable
collection and transmission of marketing
information even in multimedia form
© Prentice Hall, 2000
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Market Research for EC (cont.)
Consumer Market Research
Mass marketing research
Process orientation
Two perspectives
Content orientation
Concept testing
Tracking
Keep track of consumers’ Web
movements using cookies—files attached
to a user’s browser
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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Intelligent Agents for Consumers (cont.)
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
Example : Firefly
uses a collaborative filtering process that can be described
as “word of mouth” to build the profile
asks a consumer to rate a number of products, then
matches his ratings with the ratings of other consumers
and, relying on the ratings of other consumers with similar
tastes, recommend him products that he has not yet rated
© Prentice Hall, 2000
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Intelligent Agents for Consumers (cont.)
Intelligent Agents for Product and Vendor Finding
Bargainfinder form Andersen Consulting (a pointer)
queries the price of a specific CD from a number of online vendors and returns a list of prices (unsuccessful)
Jango from NetBot/Excite
originates the requests from the user’s site instead of
from Jango’s  vendors have no way to determine
whether the request is from a real customer or from the
agent
provides product reviews
Kasbah from MIT Lab
users wanting to sell or to buy a product, assign the
task to an agent who is then sent out to proactively
seek buyers or sellers
© Prentice Hall, 2000
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Intelligent Agents for Consumers (cont.)
Negotiation Agents
Price and other terms of transactions are determined
Kasbah
multiple agents; classified as system where users
create agents for the purpose of selling or buying goods
3 strategies : anxious, cool-headed and frugal
Tete-@-tete
considering a number of different parameters: price,
warranty, delivery time, service contracts, return policy,
loan option and other value added services
being argumentative (use information acquired during
the first two stages of the purchasing decision model to
evaluate each single offer)
© Prentice Hall, 2000
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Intelligent Agents for Consumers (cont.)
Learning Agents
Be capable of learning individuals’ preferences and
make suggestions
Memory Agent from IBM & Learn Sesame from
Open Sesame
use learning theory by monitoring customers’
interactions
learns customers’ interests, preferences and behavior
and delivers to them customized service accordingly
Groaphens form Netperceptions
personalizes content and creates customer loyalty
programs with learning agent technology
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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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
© Prentice Hall, 2000
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,
FAQ,E-mail,
IntelligentCall Centers,
agentsHall, 2000 One-to-one
© Prentice
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Management Issues
Reasons for customers visiting a web site:
Benefit from lots of graphics (negative
too, slows interaction)
Easy linking when browsing for products
and information
Easy entry into specific product lines or
service areas
Foolproof experience to keep the
customer focused on the immediate need
and not get lost or placed off track
© Prentice Hall, 2000
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