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5/24/2017 1 Describe the factors that influence consumer behavior online Understand the decision-making process of consumer purchasing online Describe how companies are building one-toone relationships with customers Discuss the issues of e-loyalty and e-trust in EC Describe consumer market research in EC Describe Internet marketing in B2B, 5/24/2017 2 Describe the objectives of web advertising and its characteristics Describe the major advertising methods used on the Web Describe various online advertising strategies and types of promotions Describe permission marketing, ad management, localization, and other advertising-related issues Understand the role of intelligent agents in consumer issues and advertising applications advertising applications 5/24/2017 3 The Problem Small business designing and manufacturing mountain bike components 1995 Web site was a status symbol rather than a business tool The site did not: Offer enough customer information Enable the company to gain insight into their customers’ needs and wants 5/24/2017 4 The Solution Customer surveys introduced the site Web Trader automatically saves and organizes answers in the database—this information is used to make marketing decisions Created an electronic product catalog Visitors can browse through the product catalog with detailed descriptions and graphics of products 5/24/2017 5 The Results Consumers can purchase bikes, parts, accessories, bags, water bottles and Dealers can: Place orders on the site Learn about new products quickly Site used for market research, communicating with customers and advertising 5/24/2017 6 What we learn Change from a passive Web site (just having a presence online) to one with interactivity can bring tremendous benefits to a company in terms of finding out customer wants and needs and how to market products effectively to them 5/24/2017 7 Business today very competitive Companies treat customers as royalty Finding and retaining customers key Need to understand consumer behavior Done through various models A consumer model—an understanding of how a consumer makes a purchase decision 5/24/2017 8 EC consumers composed of Individual consumers Organizational consumers Most bulk purchase happens in this group Governments Private corporations Resellers 5/24/2017 9 Two types of variables Personal characteristics (demographic) Environmental variables Social Cultural/community Other (legal, political, technological, government regulations, etc) Consumer behavior viewed in terms of: Why is the consumer shopping? How does the consumer benefit from shopping online? 5/24/2017 10 5/24/2017 11 Social variables—people influenced by: Family members, friends, co-workers, “what’s in fashion this year”; chat rooms Cultural/community variables—where the consumer lives Other environmental variables: Available information, government regulations, legal constraints, etc 5/24/2017 12 Age and gender Marital status Educational level Ethnicity Occupation Household income Personality Lifestyle characteristics This is a simplified version of what consumers do but the process of purchasing a product can be more complex especially if the product is new 5/24/2017 13 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 Buyer—makes the actual purchase User—consumes, uses a product or service 5/24/2017 14 One or more individuals may play these roles; advertisers and marketers need to target them Knowing the decision making process, marketers can Predict Improve Influence consumer decision to buy Two models are discussed here Generic and CDSS (consumer decision support system) 5/24/2017 15 6 major phases of a general model 1. Need identification 2. Information search 3. Evaluation of alternatives 4. Purchase and deliver 5. After-purchase evaluation 6. Repeat purchase 5/24/2017 16 DECISION PROCESS CDSS SUPPORT INTERNET & WEB SUPPORT Need recognition Agents and event notices Banner ads, newsgroups Information search Virtual catalogues Evaluation, selection Web directories, internal search and external search engines, information brokers FAQs/summaries, samples Discussion in newsgroups, and trials; testimonies cross site comparisons Purchase, payment, delivery Ordering of product, arranging delivery Electronic cash and virtual banking Logistics providers and package tracking After purchase 5/24/2017 Customer support (email, newsgroup) Discussions in newsgroups 17 A more effective model is described as one-on-one marketing, Each customer treated in a unique way Marketing and advertising fit customer profile and needs Achieved through personalization and customization Relationships seen as a two-way street: Customer information is collected and placed in a database Customer’s profile is developed Generate “four P’s” of marketing: Product Place Price Promotion 5/24/2017 18 5/24/2017 19 One-on-one marketing possible through 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/web bug—a data file that is placed on a user’s hard drive by a Web server, frequently without the user’s consent, that collects info on the user’s activities at a site 5/24/2017 20 Major strategies used to compile user profiles include: Solicit information directly from the user. Observe what people are doing online Perform marketing research Build from previous purchase patterns Make inferences (from information provided by customers on other issues) 5/24/2017 21 Customer loyalty—degree to which the customer stays with vendor or brand Major objective of one-to-one B2C and B2B marketing A significant contributor to profitability More costly to acquire a customer than keep one Strengthens a company’s market position since loyal customers are shielded from competition Two broad types of customers: Loyalists who Are emotionally attached to the company Rationally chose the company as the best Find it bothersome to shift Migratory customers Change lifestyle Angered by poor service Find more option through EC 5/24/2017 22 E-loyalty—customer’s loyalty to an e-tailer Learn about customers’ needs Interact with customers Provide customer service 5/24/2017 23 Factors that affect satisfaction Information quality Accuracy Richness of content Format of content (multimedia) Timeliness—updated constantly System quality Ease of navigation Ease of use Response time Security settings and privacy assurance 5/24/2017 24 Factors that affect satisfaction Service quality Responsiveness Assurance/warranty Empathy –understanding, sympathy, compassion, kindness etc Other solutions Fast and time-saving service 24/7 operations Better prices Free promotions, gift ideas and sales Cut down shipping costs and delivery times Ask for less information about customers and 5/24/2017 25 provide more information on the product Key in creating loyalty and retention of customers Ability to create satisfaction is a competitive advantage and differentiating factor 80% of satisfied online customers shop again and recommend the site About 90% dissatisfied ones never come back 5/24/2017 26 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 Will the parties keep their promise to deliver Pictures not the same as the actual product Particularly important in global EC since: Legal action is hard to undertake Differences in culture, business environments Security concerns deter revelation of credit card 5/24/2017 27 Level of trust determined by: Degree of initial success experienced with EC Well-defined roles and procedures for all parties involved Realistic expectations as to outcomes from EC 5/24/2017 28 Trust can be decreased by: Any user uncertainty regarding the technology Lack of initial face-to-face interactions Lack of enthusiasm among the parties Solutions: Brand recognition and co-branding Improve security mechanisms through Trust certification and seals, Third party evaluation of vendors 5/24/2017 29 Trust certificates and seals Evaluate vendors using 3rd parties Let users and buyers evaluate products Have a return policy, warranties & insurance Free samples Have privacy statements and guarantees Co-branding with big companies and vendors Good Web design 5/24/2017 30 The goal is Find information and knowledge that describes relationships among consumers and products Establish marketing plan and better understand the purchasing process Evaluate market performance On the Web, the goal is to turn a browser into a buyer 5/24/2017 31 Market research includes gathering information about: Economy Industry Firms Products Pricing 5/24/2017 Distribution Competition Promotion Consumer purchasing behavior 32 Can be both online and offline Common tools include: Questionnaires Surveys (through emails and telephone) Focus groups Observation Interviews Important first to understand how groups of consumers are classified 5/24/2017 33 Market segmentation—process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales 5/24/2017 34 Main ways of segmenting the market Geographic Region Size of city, county or district Population density Climate Language 5/24/2017 35 Demographic Age Occupation Gender Education Family size Religion Race, Income Nationality 5/24/2017 36 Cognitive, affective Attitude, benefits sought, loyalty, usage rate, perceived risk, internet shopping experience, etc Psychographic Social class Lifestyle Personality 5/24/2017 37 Conventional methods of research earlier mentioned are expensive Internet Research is Faster and more interactive Can cover a large geographical area Cheaper and yet sophisticated since its reach and richness is extensive Larger sample which improves the reliability of results 5/24/2017 38 Online market research aims to: Find, explain & predict online buying behavior Find out why some customers buy online and others do not Establish purchase patterns for individuals and groups Find the factors that encourage online buying Identify real buyers from mere browsers Understand how individuals navigate Web Get optimal Web design that engages clients 5/24/2017 39 Knowing these answers helps a vendor to properly Price Advertise Design the Web site and Provide appropriate customer service 5/24/2017 40 The main ones are: One-on-one by e-mail Focus groups in chat-rooms Questionnaires placed on Web sites for tracking customers’ movements on the Web through Transaction logs (record of user activities on a company’s web site) Click-stream behavior (or movt on Internet) 5/24/2017 41 Cookies Web bugs Spy-ware Web analytics (data and web mining) Voting polls Web-based surveys Hearing directly from customers creating customer scenarios 5/24/2017 42 Tracking customer movements—learn about customers by observing their behavior rather than by asking them questions Transaction Clickstream behavior Cookies Web bugs 5/24/2017 43 How to get respondents Incentives such as Games Prizes Free software Discounts 5/24/2017 44 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 5/24/2017 45 Lack of representativeness in samples Online shoppers tend to be wealthy, employed, and well educated; results may not be extendable to other markets Lengthy analysis arising from huge volumes of data 5/24/2017 46 Solutions to some of the problems: Automate process of data analysis Outsource the research to third parties 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 5/24/2017 47 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 5/24/2017 48 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 Web usage mining 5/24/2017 49 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 2-way communication & e-mail capabilities Vendors also can target specific groups and individuals 5/24/2017 50 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 5/24/2017 51 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 Visit—a series of requests during one navigation of a Web site; a pause of request for a certain length of time ends a visit 5/24/2017 52 3/4 of PC users gave up some television time Well educated, high-income Internet users a desired target for advertisers Internet is by far the fastest growing communication medium Advertisers want a medium with such potential reach, locally & globally 5/24/2017 53 Cost Cheaper, updated any time with little cost Richness of format Use of text, audio, graphics, and animation Games, entertainment & promotions combined Personalization Can be interactive Targets specific interest groups/individuals Banner—on a Web page, a graphic advertising display linked to the advertiser’s Web page 5/24/2017 54 Banner swapping—an agreement between two companies to each display the other’s banner ad on its Web site Direct link between sites 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) 5/24/2017 55 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 5/24/2017 56 URL (Universal Resource Locators) Advantages: Minimal cost is associated with it Submit your URL to a search engine and be listed Keyword search is used 5/24/2017 57 Advertising in chat rooms Virtual meeting ground Free addition to a business site Allows advertisers to cycle through messages and target the chatter again More effective than banners Used for one-to-one connections Advertorial—an advertisement “disguised” to look like an editorial or general info 5/24/2017 58