Chapter – I

Introduction to E-Commerce and Consumer Behaviour

1.1 Introduction to E-Commerce

The launch of the World Wide Web gave rise to the concept of online
shopping. The first Worldwide Web server was created by Tim Berners-Lee in the
year 19901. In the year 1991, it was made open for commercial use. In 1994, some
advances took place in this field and it leads to starting of online banking services by
some banks. In the same year, an online pizza shop was started by Pizza Hut2.
Amazon, an American-based company launched its first online shopping site in the
year 1995. In India, the first online shopping website fabmart.com (later renamed
Indiaplaza) was launched in the year 19993. Online shopping is changing the way
consumers buy goods and services. With rapid development in communication
technology, many companies have started their online shopping websites and also
launched mobile App to make online shopping more convenient. With the increase
in online shopping websites in India and worldwide, the competition also increased.
To fight competition, companies engaged in online shopping started to offer goods
and services at very low prices. These companies also make use of the internet to
communicate with consumers and potential consumers to sell goods and services and
also to get feedback from consumers about services provided by them. The Internet
has been used by the customers not only to buy the products but also to compare
products, to know the features of products, to know reviews about the product to be
purchased, etc. The Internet has provided an opportunity for companies to reach
millions of potential customers from around the globe. Online shopping websites
provide an option to customers to purchase a variety of products including clothing,
electronics, beauty, kitchen Appliances, home decoration, furniture, books, etc.
Search engine like Google is widely used by the customers to get detail about the
product before buying a product online.

Due to the rise in globalization and the tremendous increase in the use of the
internet, the way of shopping is changing day by day. As people become busy and
techno-savvy, they prefer online shopping to the traditional way of shopping. The
development of mobile technology and the introduction of 4G technology, leads to an
increase in the use of smartphones. The number of smartphone users is increasing
continuously and is likely to reach over 760 million in 20214. The smartphone makes

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online shopping easier than ever. Online shopping companies like Amazon, Flipkart,
Shopclues, Snapdeal, etc. have already introduced their mobile App. Shopping
through a mobile App is easier than shopping through the website and due to mobile
App customers can shop from any place at any time without any geographical and
time restrictions. The continuous rise in the use of the internet will lead to an increase
in the online buyer in the future and it will heighten the customer’s perceptions and
expectations.

The number of online shopping websites and portals is likely to be rise at a

high rate due to the continuous increase in the number of internet users in India and
worldwide. The recent studies indicate that the number of internet users will grow
very fast in near future due to lower cost of data usage, reduction in prices of
smartphones, and increase in the network coverage area. Now a day, the number of
active internet users and online shoppers growing at a high rate not only in urban areas
but also in rural areas.

The development and advances in networking technology, data processing,

multimedia, e-commerce bring many opportunities for companies and business
enterprises. Many companies are spending millions of money, time, and efforts to
build new online business models and trying to find new ways to generate revenue.
Online shopping not only providing convenience in shopping but also make it possible
to exchange views, ideas with others through online platform. To sell products on an
online shopping portal, the company also needs to conduct consumer surveys like in
offline shopping to understand the habits, likes-dislikes, current trends, spending
habits, etc. Consumer buying behaviour is changing continuously due to e-commerce.
E-commerce making an impact on the overall buying behaviour of the consumer.
Consuming habits of the consumer have undergone major changes in the coming
years. The disposable income of the middle-class people is rising and they more tend
to spend more than saving money. E-commerce has provided them an opportunity for
potential consumers to purchase a variety of goods and services without visiting the
physical store. The tendency of use and throw also getting develop in the Indian
consumers due to the availability of a variety of products from the globe at affordable
prices. E-commerce makes the new products available to purchase very quickly as
compared to the physical store. In online shopping, customers can take their own time
to make a final purchase decision. But online shopping lacks a “touch and feel”
experience while shopping.

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1.2 Meaning of E-Commerce

E-commerce stands for electronic commerce. E-commerce means dealing in

goods and services by using electronic devices like computers, mobiles, and laptops
having internet accessibility. E-commerce is generally called online shopping. Online
shopping is the process of buying and selling goods and services over the internet5. E-
commerce involved the transfer of goods or services from the seller to the buyer by
using one or more electronic media or methods. E-commerce often refers to selling
goods and services online. Any kind of commercial transaction facilitated through the
internet is called e-commerce. E-commerce is that model of business which facilitates
firms and individuals to buy and sell products over the internet. E-commerce is that
platform where nearly all imaginable products and services are available including
books, rail tickets, movie tickets, electronics products, kitchen appliances, groceries,
etc.

E-commerce uses various information and communication technologies in

carrying various activities such as business transactions and exchanging information.
E-commerce includes delivery of products or services, information, and payment
through electronic mode. E-commerce is an internet marketplace that facilitates
retailers, buyers, third parties, and others to exchange information related to products
and services. E-commerce is a type of trading by the use of the latest means of
information and communication technology. In e-commerce processes, all aspects of
trading are involved like the creation of a virtual marketplace, providing product
information, accepting the order, receiving money, and delivering the order. Online
shopping makes it possible to purchase goods and services without leaving the home
place.

E-commerce helps business organizations to reach a large number of potential

customers than earlier. Small traders are also engaged in e-commerce activity through
some giant portals like Amazon, Flipkart, Snapdeal, etc. Now a day, several small
traders starting their websites for the online selling of goods and services.

1.3 Definitions of E-Commerce

Following are well known definitions of E-Commerce6,

The World Trade Organization defines e-commerce as, "e-commerce is the

production, distribution, marketing, sales or delivery of goods and services by
electronic means."

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 The Organization for Economic Co-operation and Development (OECD)
defines e-commerce as “commercial transactions, involving both organizations and
individuals, that are based upon the processing and transmission of digitized data,
including text, sound and visuals images and that are carried out over open networks
(like, the internet) or closed networks (like, AOL or Mintel) that have gateway onto
an open network.”

1.4 Global History of E-Commerce

The internet is the basis of online shopping. Without the internet online
shopping and E-commerce is not possible. On 29th October 1969, ARPANET –
Advanced Research Projects Agency Network, has sent the first message ‘LOGIN’
from one computer to other. The message was very short, even though receiving
computer has received only the first two characters “LO”7. In 1970, further,
development took place in communication technology, and scientists Robert Hahn
invented a new technology for data transmission called “TCP / IP”. In 1983,
ARPANET has used “TCP / IP” technology and assembled a “network of network”
and was able to send a message from one computer to multiple computers
successfully8. In 1990-91, computer scientist Tim Berners-Lee from Switzerland
introduced the World Wide Web, which makes it possible not only to send files from
one computer to other but also made capable to anyone to retrieve information on the
web who is on the internet. The invention of WWW has changed the world in one or
more ways. The invention of the internet has opened a wide range of possibilities and
e-commerce is one of them. Below given timeline helps to understand the global
history of e-commerce9.

 1979 – Michael Aldrich has connected domestic television and computer

with a telephone line for selling groceries online. This system was named
AKA VideoTex.
 1981 – Thomson Holidays, selected 66 travel agents from England and
connected all of them so they can extract Thomson Holidays information
online which made them able to understand what Thomson Holidays offer
to their customers so they can serve customers instantly. This event is
considered as first Business to Business (B2B) online shopping.
 1982 – Minitel (an online service that can be accessed by telephone lines)
was invented by a France-based telecom company. Minitel was used to

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 make online shopping, booking of train tickets, chat with others, and other
basic things that we are doing today on the internet.
 1984 – Tesco launched its first online shopping system. It was the first
online Business to Customer (B2C) system. This online shopping system
coined a new concept Online Shopping Basket which was then renamed as
Online Shopping Trolley.
 1990 – Introduction of first-ever web browser World Wide Web (WWW)
by Tim Berners-Lee. Later on, the name web browser changed to Nexus.
The invention of WWW is the real milestone in the history of e-commerce
and the internet.
 1991 – The NSFNET was the backbone of the internet but was not available
for commercial use. In 1991, NSF (National Science Foundation) was
allowed to use NET for commercial purposes. This gave a major boost to
the e-commerce industry. In 1991 only, the University of Minnesota
launched “Gopher”, the first ‘point and click’ web browser which can be
used to navigate files on the internet.
 1992 – J.H.Snider had published a book called “Future Shop: How new
technologies will change the way we shop and what we buy”. The book was
much effective and represents the future of the E-Commerce business and
how it will evolve with the Internet.
 1994 – Netscape come up with an encryption certificate which became a
very trustworthy means of transmission of data over the internet. Due to
encryption technology, people started trusting to share personal information
over the internet. This year, Pizza Hut offers online ordering on its
webpage.
 1995 – It is the year when NFS started to charge fees for the registration of
Domain names. About 12000 Dot Com (.com) domains get registered in
that year only. Domain yahoo.com also got registered in 1995. Pierre
Omidyar founded eBay.com and today's e-commerce giant Amazon started
selling books online in 1995 for the first time.
 1996 – The number of internet users reached 400 million and online sales
surpass over $1 billion for the year.
 1998 – PayPal came into existence. It makes online payment easy, secure,
and trustworthy. This year google.com was launched by the Google
Corporation.

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  2003 – Apple launched iTunes, the first major commercial digital music
store.
 2008 – Online purchases are made through mobile phones for the first time.
It makes online shopping more convenient than ever.
 2012 – Online sales surpass $1 trillion.

1.5 Evolution of E-Commerce in India

The rapid development in communication technology results in rapid growth

in internet and smartphone penetration in India. Introduction of 4G technology and
availability of internet data at affordable prices, the number of internet users reached
718.74 million in 2019, and smartphone users reached 502 million in 2019. An
increase in usage of the internet and smartphone results in the rapid growth of the e-
commerce industry in India. India’s e-commerce market reaches $50 billion and is
expected to reach $99 billion in 2024. The growth in e-commerce has changed the
way of shopping in many ways. A large number of people prefer to purchase products
and services online rather than going to a physical store. This trend of growth in e-
commerce will further boost in the future due to the many advantages of online
shopping over offline shopping. The current growth is not the result of one or two
days but it is achieved after the long journey. Therefore there is a need to understand
the history of e-commerce in India. Below given timeline helps to understand the
history of e-commerce in India10.

 1995 – Launch of dialup internet in 6 cities of India

 1996-97 – Launched first online matrimonial site bharatmatrimony.com in
India.
 1997 – Launch of online banking by ICICI bank
 1999 – Launch of first online departmental store fabmart.com, later it was
renamed as Indiaplaza. Rediff also introduced online shopping this year.
 2000 – Online shopping site launched by IndiaTimes. In the same year,
bazee.com was launched which is dedicated to buy and sell pre-owned
products. Later on, bazee.com was acquired by USA-based company eBay.
 2002 – Launched online rail ticket booking facility by Indian Railway. First-
time Indian people feel safe while making online payments through credit
cards because this site was under the surveillance of the government.
 2003 – Launch of online air ticket booking by Air Deccan.

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  2005 – Launched online air ticket booking site MakeMyTrip.com.
 2007 – Launched bookmyshow.com, dedicated to making online booking of
movies show in the multiplex.
 2007 – Sachin Bansal and Binny Bansal from India launched Flipkart. Flipkart
introduced many new ideas in online shopping. Deep Discount strategy and
excellent customer service have created a long-lasting impact on online
shoppers. Flipkart makes online shopping popular and convenient. Flipkart
was acquired by US-based retail chain Walmart in 2018.
 2009 – launched Myntra.com, initially engaged in personalized products.
Later, the company expanded its catalog to retail fashion and lifestyle
products.
 2012 – An Indian fashion and lifestyle e-commerce portal jobong.com was
launched. It was the most visited site in India in 2013.
 2013 – An USA base company Amazon launched its site in India. Initially, it
started with electronics products and now expanded into fashion, lifestyle,
kitchen Appliances, healthcare, digital content, and many more. Amazon is
India’s top e-commerce site.
 2014 – Flipkart acquired online portal Myntra.
 2017 – Flipkart acquired online portal eBay.in.

1.6 Global Scenario of E-Commerce Sales

The Worldwide E-commerce industry is growing very rapidly. Yet the share
of the offline retail market is much more than the online retail market but the growth
of e-commerce shopping cannot be ignored. E-commerce playing a very important
role in providing huge employment opportunities to people directly and indirectly. An
increase in the number of internet users is one important reason for the rapid growth
of the e-commerce industry in the world.

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 Worldwide E-Commerce Sales
7000 6542

6000 5695

4927
Sales in Billion US$ 5000
4206
4000 3535
2982
3000
2382
1845
2000 1548

1000

0
2015 2016 2017 2018 2019 2020* 2021* 2022* 2023*
Year

Figure 1.1 : Growth of Worldwide E-commerce Sales

(Source: emarketer.com, Market Analysis, 202011)

*Forecasted Data

Figure no. 1.1 shows that the sale of e-commerce in the world was $1548
billion in 2015 and it increased to $ 3535 billion in 2019. It means sales is increased
by 128% from 2015 to 2019. It is further forecasted that worldwide e-commerce sales
will increase to $ 4206 billion in 2020 and it will reach $ 6542 billion in 2023.

1.7 Growth of E-Commerce in India

Indian market is one of the large markets in the world. Business organizations
from around the globe are attracted to the Indian market due to the large number of
consumers in the Indian market. In India, e-commerce is not attracting customers from
city areas but also attracting customers from rural areas. Customers from rural areas
are getting habited gradually to use branded products. With rising smartphone
penetration, rise in internet penetration, and increasing consumer disposable income,
the E-commerce business in India is expected to reach $200 billion by 202712.

Online penetration of retail was 4.7% in 2019 and is expected to reach 10.7%
by 2024. Indian e-commerce business will touch $99 billion by 2024, increasing at
27% CAGR over 2019-202413. Grocery and fashion/Apparels items are likely to be
the key driver in the growth of e-commerce. The Government e-marketplace was
launched in 2016. After three years of the inauguration, saw the total cumulative

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procurement by state and central governments of Rs.24183 crores ($3.46 billion) in
the financial year 2019 and has determined a target of Rs.50000 crore ($7.15 billion)
in the financial year 202014.

Growth of E-Commerce in India

180 167.8
160
142.9
140
116.3
120

100 90.1
74.7
80 67.5 62.8
60 49.6 48.9
35.2
40
22.7
20 12.1

0
2015 2016 2017 2018 2019 2020*

Online Spending in $ Billion Online Buyers in Million

Figure 1.2 : Growth of Online Users and Spending by Online Users in India

*Forecasted data

(Source: Forrester Research Online Retail Forecast, 2015-2020, Asia-Pacific15. )

Figure no. 1.2 shows that the number of online buyers in India is increased at
a high rate from 49.6 million in 2015 to 142.9 million in 2019 and these numbers are
expected to rise to 167.8 million by 2020. There are many reasons behind the rapid
growth of e-commerce users including convenience, increase in disposable income,
variety of products offered by e-commerce portals, discounts, etc. The spending by
online users also increased by a very high rate from $ 12.1 billion in 2015 to $ 62.8
billion in 2019. This spending is likely to be reached to $ 74.7 billion in 2020. The
rapid growth in spending on online shopping shows that the disposable income of
Indian people is increasing very speedily. It shows the tendency of people to save less
and spend more. India’s e-commerce market

1.8 Country-Wise Growth in Internet Users

Internet is the base of e-commerce. Now a day, not only e-commerce but most
industries and sectors in the world depend on the internet. Internet becomes a necessity
for all types of industries and it is the base of the e-commerce industry. It is observed

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that e-commerce is growing with the growth in internet and telecommunication
technology and with the increase in the number of internet users. Without the internet
e-commerce become impossible.

Figure 1.3 : Top Twenty Countries with the Highest Number of Internet Users

(Source: Data published by Facebook and International Telecommunication Union,

202016)

Figure no. 1.3 shows that there is a tremendous change in the number of
internet users from the year 2000 to 2020. The number of users was increased rapidly
in multiple hundreds of percentage. China is in the top position with 854 million users

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as far as the number of internet users is concerned. India is in the second rank with
560 million internet users. The growth rate of internet users in India is far more than
that of China. The internet user’s growth rate from the year 2000 to 2020 for China
was 3796% whereas that of India was 11200%. We can observe the highest growth
rate i.e. 94199% in Bangladesh which is very surprising. The growth in internet users
is the major factor responsible for the growth of the e-commerce industry in India.

1.9 Types of E-Commerce Business

E-commerce has involved the trading of goods as well as services. Physical

goods, digital products like software, music, etc., and many services are made
available through an e-commerce platform. There are mainly four types of e-
commerce viz. B2B, B2C, C2C, and B2G17.

1.9.1 Business-to-Business (B2B) :

As the name is given, in this type of e-commerce trading is done between two
businesses. It means seller and buyer both are involved in trading as part of their
business. Electronic trading between supplier and manufacturer, manufacturer and
wholesaler, wholesaler and retailer, etc. are an example of business to a business e-
commerce model. In this type of e-commerce business, no party is the final
buyer/consumer.

Manufacturer
Supply goods
as per order Order Processing

Wholesaler Manufacturer’s Website

Places an order for goods

Figure 1.4 : Business to Business Model

1.9.2 Business-to-Customer (B2C) :

In this type of e-commerce, there is trading between business and final

customers. In this type, business plays the role of seller and the remaining population
becomes a customer. Many businesses offer a variety of goods and services to
potential customers through e-commerce channels. Customers place an order for

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needed goods or services through an e-commerce website or mobile App and get
goods or services at their doorstep. Exa. amazon.in, flipkart.com, tatacliq.com, etc.

Business Organisation
Supply goods
/ Services as Order Processing
per order

Final Website / e-commerce

Customer Places an order for platform
goods/ services

Figure 1.5 : Business-to-Customer Model

1.9.3 Customer-to-Customer (C2C) :

This is the modern form of e-commerce business. In this type of e-commerce

business, both buyer and seller are customers. It facilitates online transactions between
two customers. Here consumer sells products directly to other consumers through an
online platform made available by third parties like ebay.in, olx.com, quikr.com, etc.
Some third parties provide e-commerce platform services for free of cost whereas
some charge fees from customers.

Third party e-commerce

platform
Place an Sees an
advertisement advertisement

Send product
Customer Customer
Send money
Want to sell Want to buy
product product
Figure 1.6 : Customer-to-Customer Model

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1.9.4 Business-to-Government (B2G) :

Business to government model facilitates the business organization to bid for

an auction organized by the government for upcoming projects or any products or
services needed by the government. Now a day near about all government sectors
accept the bid for their auction through online mode to make the auction fairer and
more impartial.

Place an Government’s Website

advertiseme Place bid for
nt of an an auction
auction

Government Business Organisation

Figure 1.7 : Business-to-Government Model

1.10 Advantages of E-Commerce Business

E-commerce business is a rapidly growing business not in India only but

worldwide. Customers getting attracted to online shopping due to its many
advantages. Following are some advantages of an e-commerce business:

1.10.1 Convenience :

Convenience in shopping is the most important advantage of an e-commerce

platform. We can access e-commerce websites at any time at any place subject to the
availability of an internet connection. We can buy goods or services at any time from
anywhere without visiting the physical store. It saves time in traveling from home to
the physical store. E-commerce website accepts orders 365 days of a year i.e. 24 x 7
service.

Once the product is delivered to the customer, the customer can return it if
he/she does not like it or found any defect in the product. E-commerce portal provides
free return pickup services and gets the refund of money as per terms and conditions.
Overall e-commerce shops provide convenience in shopping.

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1.10.2 Detail Product Information

Online shopping portals provide detail and complete information about every
product offered for selling on the portal. It is similar like we visit the physical store
and get product information from the seller. E-commerce shops provide product
information with photos, videos, etc. All such information helps the customer to
decide either to buy the product or not.

1.10.3 Customers Reviews

Online shopping portals allow the customers to comment on the product they
have purchased from their store. Customers can mention his/her experience or opinion
about the product. These comments may be positive or negative. Portals display all
those comments called reviews. Based on reviews given by earlier customers, the new
customer can decide either to purchase the particular product or not. Reviews are
absent in the case of the physical store.

1.10.4 Competitive Price

Generally, online stores offer products at very competitive prices. They offer
products at lower prices than the price offered by the physical store. on some special
occasions or festivals like Diwali, New year, etc. many e-commerce portals offer
products at a very deep discount. Due to lower price, it helps customers to save some
money.

1.10.5 Wider Choice

Due to thousands of registered vendors with online shops, online shops can
offer a variety of products. Customers get wider choices for the particular product.
Customers can choose the needed product from a wider range of brands, quality, and
price. In a physical store, the customer has to choose from a limited number of
varieties of products. Customers can get the latest trended and fashionable products
from national as well as from the international market with wider selection option.
Online stores give a faster response to customers/market demands.

1.10.6 No Rush

In a physical store, we face the problem of customer rush and sometimes it

makes shopping difficult. If many customers are there in the physical shop at a time,
the seller may not provide proper attention to each customer and may not be able to
provide complete information about the product. But in the case of the online shop,

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there is no problem with customer rush. Thousands of customers can buy the product
at a time without any difficulty. Customer can take their own time to make purchase
decisions without any time limit.

1.10.7 Time and Money saving

Online shopping helps in saving customers time and money. As customers

need not be required to visit the physical store, it saves customers time as well as
money. When the customer goes outside for shopping, they spend more on other
things like eating, traveling, impulse buying, etc. than what they spend on the actual
product they want to purchase.

1.11 Dis-Advantages of E-Commerce Business

As every coin has two sides, in spite of several advantages of an e-commerce

business, it is not free from limitations and disadvantages. Following are some key
disadvantages of an e-commerce business :

1.11.1 Risk of Financial Fraud

In case of online shopping, customer has to pay for the product by using a
debit card, credit card, net banking, mobile wallet, or some time they offer cash on
delivery option. Many customers make pre-payment for the product through mobile
wallets, net banking, debit card, or credit card. If proper precautions are not taken by
the customer then their sensitive financial data can be hacked by the hacker and it may
put the customer in heavy financial loss. In the case of the physical store, the
possibilities of financial fraud are very less as compare to online shopping. Due to the
risk of financial loss, customers prefer to choose the cash on delivery option.

1.11.2 Lack of Hands-on Inspection

In the case of online shopping, customers lack hands-on inspection of the

product. Customers have to rely on the picture and description of the product provided
on the online shopping portal. It lacks pre-purchase inspection of the product. Also,
actual demonstration of the product is not possible which is required in the case of
some products generally for electronic products. Online shops do not provide the
facility of touch and feel products that they wish to buy.

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1.11.3 Burden of Shipping Cost

Many times, online shops charge shipping charges for product delivery.
Generally, they provide free shipping only if customer purchases products up to a
certain value and therefore if free shipping is not offered then the product becomes
more costly than the physical store.

1.11.4 Longer Delivery Time

The customer has to wait some days after placing an order for getting the
product delivered to their doorstep. Some time product gets stuck somewhere in the
courier partner warehouse due to some reason and it results in a delay in delivery. If
the product gets delivered after a long time, that product may no longer be needed by
the customer. In the case of the physical store, customers get product delivery
immediately.

1.11.5 False Information

The customer has to rely on the information or description about the product
provided on the online portal. It is not possible for physical checking of product before
actual delivery. Some e-commerce portal provides false and misleading information
about the product.

1.11.6 Cheap Quality Product

As physical inspection and handling of the product are not possible before
delivery, some e-commerce portal sells the very cheap product to the customers by
displaying attractive images and misleading information on the portal. Customers get
cheated by sending them lower-quality products.

1.11.7 Lack of Privacy

Another main disadvantage of an e-commerce portal is the lack of security of

customer's personal information. Before making the actual purchase of the product, a
customer needs to provide personal information like name, address, email id, phone
number, etc. all this information may be stolen by the hacker and can be misused for
personal benefit.

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1.12 Challenges in E-Commerce Business

We can observe rapid growth in e-commerce in the last few years. People from
all parts and all categories accepting this new form of shopping. But, some challenges
are there that create a barrier to the growth of e-commerce companies. Following are
some key challenges in front of e-commerce companies :

1.12.1 Customer’s Exploding Expectations

With the growth in the e-commerce industry, retailers all over the world trying
to build their reputation and image. They are trying to provide a great shopping
experience to their customers. It increases customer's shopping expectations from the
online shop also. As customers’ expectations are ever-changing it becomes difficult
for online portals to meet customers ever exploding expectations. It is a challenging
job for an e-commerce portal to meet customers’ expectations.

1.12.2 Agility Challenge

Agility means the capability of the business to introduce advancements,

deploy digital content, change according to season, etc. rapidly. Many e-commerce
portals facing problems in changing or moving rapidly as per customers’ needs. It is
generally because they can’t integrate new advancements with their existing systems
and it makes market penetration harder.

1.12.3 Personalization Approach

Retailers at the physical store trying to give a better-personalized shopping

experience to customers. They are better at maintaining a one-to-one relationship with
customers. Online portal facing problem in making a one-to-one relationship with
customers. It becomes difficult for online portals to provide a personalized shopping
experience to customers.

1.12.4 Nurturing Customer Loyalty

Customer loyalty is very important for any business organization because

acquiring a new customer is more costly than retaining existing customers. Therefore,
every business organization trying to generate loyal customers by providing them
good service and assortments but due to deep competition in the e-commerce industry,
it becomes difficult for the e-commerce business to generate loyal customers.
Retaining existing customers for a long time is a very challenging job for online shops.

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1.12.5 Return Policy

Near about 60% of customers check the return and refund policy before
making the actual purchase on an online shop. For some products, e-commerce portals
do not provide a return facility and they restrict the customers from making online
purchases of such products. It is a challenging job for E-commerce businesses to give
peace of mind to customers by allowing them to return the product they are not
satisfied with, without damaging the business through losses in reputation and
shipment cost.

1.12.6 Competition

With the growth in the e-commerce industry the number of e-commerce

players also increasing rapidly. Many new e-commerce businesses enter the market
with new and innovative ideas. Ever-increasing competition compels all e-commerce
players to sell the product at a lower price by compromising the profit ratio. E-
commerce companies facing problems in maintaining profit ratio.

1.12.7 Data Security

Customer data security is a very challenging job for e-commerce companies.

Customers provide their data like name, address, email id, phone number, and
financial details like debit card/credit card/ net banking, etc. information while
purchasing products. All this information may be hacked by hackers and they may
misuse it for their benefit. E-commerce companies taking utmost care to keep
customer's data secure but even though sometimes hackers hack the customers' data
and it adversely affects customers as well as affects companies’ reputation.

1.12.8 Fake and Fraudulent online shops

With the increase in internet users and the use of social media, many fake and
fraudulent online shops entered the market. They make false promises about the
product and they cheat the customers by eating their money by not sending products
or by sending cheap quality products. It creates a bad image of all online shops in the
minds of customers. Restricting such fraudulent companies is very challenging for the
entire e-commerce industry.

18
1.13 Introduction to Consumer Buying Behaviour

A person engaged in the product consumption process is a consumer.

Consumer behaviour was a new concept that emerged in the mid-to-late 1960s. it has
emerged from other fields such as economics, behavioural science, and marketing.
Consumer buying behaviour is the behaviour that consumer shows at the time of
searching, purchasing, using, disposing and evaluating products and services.
Consumer behaviour is concentrated on how consumers make decisions to spend their
resources like time, money, and effort on the consumption of different products and
services. Consumer buying behaviour includes what consumers buy, why they buy,
how they buy when they buy, how frequently they buy, how they evaluate the product
after purchase, and how they dispose of it.

1.14 Meaning of Consumer Behaviour

Consumer buying behaviour is a mixture of consumer's preferences, plans,

opinions, and determinations concerning customer's responses in the market while
purchasing a product. Consumer behaviour includes activities that a person takes
while purchasing and consuming products and services, including the social and
mental processes that precede and follow these activities.

Consumer buying behaviour is a complex and vast subject. Understanding

consumer buying behaviour is very complex. It is very difficult to predict with
accuracy, how the consumer will act in a given situation. All marketers trying to
influence consumer behaviour in the desired manner. The success and failure of the
business are highly dependent on how effectively marketers influence consumer
behaviour in the desired manner.

Consumer behaviour is not constant and it keeps changing always. Consumer

buying behaviour is changing with the change in technology and trading pattern. With
emerging of online shopping, consumer buying behaviour has changed dramatically.
For instant, earlier consumers were giving more preference to save money and they
tend to spend only on basic requirements and on luxuries products for some times
only.

1.15 Definitions of Consumer Behaviour

The following definitions are well known definitions of Consumer

Behaviour18

19
 American Marketing Association (AMA), “Consumer behaviour as “The
dynamic interaction of cognition, behaviour and environmental events by which
human beings conduct the exchange aspect of their lives.”

Peter D. Bennett, ed. Dictionary of Marketing Terms, “Consumer

behaviour refers to the actions and decision processes of people who purchase goods
and services for personal consumption.”

1.16 Types of Consumers Buying Behaviour

High Low
Involvement Involvement

Significant Complex Variety Seeking

differences Buying Buying
between brands Behaviour Behaviour

Few Dissonance Habitual

differences Reducing Buying
between brands Behaviour Behaviour

Figure 1.8 : Types of Consumers Buying Behaviour

1.16.1 Complex Buying Behaviour

Complex buying behaviour is observed when consumers buying expensive

and infrequent products. Customers are highly involved in buying process and do
detailed research before buying the product. Consumers take more time to reach a
final purchase decision. They search for product information through different sources
like the internet, friends, relatives, etc. Buying behaviour while buying a car or a house
is an example of complex buying behaviour.

1.16.2 Dissonance Reducing Behaviour

In the case of this type of buying behaviour, the consumer is highly involved
in purchasing process but they are not able to distinguish between different brands of
the products they want to buy. ‘Dissonance” can occur when consumers are worried
about either he has chosen the correct brand. Exa. the consumer has purchased one

20
laptop based on convenience and price, and then he has searched for if his choice was
correct.

1.16.3 Variety Seeking Buying Behaviour

In this situation, consumers purchase different products from the same
category or different categories not because they were not satisfied with earlier
purchases but they seek a variety of products. Consumers are not highly involved in
buying process.

1.16.4 Habitual Buying Behaviour

In this type of buying behaviour, consumers have low involvement in the

buying process. Buying behaviour while buying products that are purchased by the
consumers frequently without having strong brand loyalty is considered as habitual
buying behaviour. Exa. purchase of groceries, daily use items, etc.

1.17 Models of Consumer Buying Behaviour

There are two models of consumer buying behaviour namely Traditional

Models and Contemporary Models

1.17.1 Traditional Models

Following are types of traditional models of consumer buying behaviour

1.17.1.1 Economic Model

This model of buying behaviour focuses on the idea that consumers buying
preference is based on the fact that consumers trying to get more benefit from products
while minimizing costs. One can forecast consumer behaviour by analyzing economic
indicators like the price of competitive products and consumer's purchasing power.
For an instant, a consumer will purchase the product that is being offered at a lower
price to get maximum benefit. If the purchasing power of a consumer increases, it will
allow a consumer to purchase more quantities of the same product.

1.17.1.2 Learning Model

This model is based on the fact that consumer buying behaviour is governed
by the need to fulfill basic and learned needs. Basic needs include clothing, shelters,
and food, while learned needs include guilt and fear. A consumer preferably purchased
things that will fulfill their needs and provide satisfaction. For instance, a consumer

21
will be postponed to buy a laptop to buy food, but once the need for food gets satisfied,
he will purchase a laptop.

1.17.1.3 Psychoanalytic Model

This model takes into consideration the fact that consumer buying behaviour
is highly influenced by the conscious and subconscious minds of the consumer.
Sigmund Freud has discussed three different levels of consciousness i.e. identity, ego,
and superego, and all these influence the buying process and buying behaviour. For
an instant, a hidden symbol and sign in the name or logo of the company may affect
the subconscious mind of the consumer and it may influence the consumer to buy that
product instead of buying the product of another company.

1.17.1.4 Sociological Model

This model focuses on the fact that a consumer's buying behaviour depends on
the consumer's influence and role in society. A consumer's buying behaviour is also
influenced by the culture in the society he/she associated with. For instance, a manager
and a clerk live in the same community, both may purchase the product of the same
brand or company because they both are associated with the same society.

1.17.2 Contemporary Models

Contemporary Models includes the following models

• Howard-Sheth Model
• Engel-Kollat-Blackwell Model
• Nicosla Model
• Stimulus-Response Model

1.17.2.1. Howard-Sheth Model

In Howard-Sheth Model, the concept of stimulus-response is used to explain

the consumer's brand choice behaviour.

22
 Figure 1.9 : Howard-Sheth Model

(Source : https://theinvestorsbook.com/howard-sheth-model.html)19
Four important elements of Howard-Sheth Model
A. Input Variables
B. Hypothetical Constructs
C. Output variables
D. Exogenous variables

A. Input Variables

Input variables include informational clues regarding the characteristics of the

product like its price, quality, uniqueness, availability, and service. It is a stimulus
result of marketing activities of the brand and the social environment of the consumer.

It can be further classified into three categories: –

i. Significant Stimuli:

It refers to the physical features of a product. It comprises the price of the

product, its quality, its uniqueness, accessibility in the market, and the type of service.

ii. Symbolic Stimuli:

It refers to visual features of the product that are represented by salespeople

and marketing tactics used by the brand. Publicity and promotional messages were

23
done by the seller to develop a psychological influence on buyers’ perception of the
features of the product.

iii. Social Stimuli:

Social stimuli comprise the social environment of customers which provide

market information and affect his/her buying decision. It consists of reference groups,
families, and the social class of consumers in general.

B. Hypothetical constructs

It is the one that reveals the main part of Howard Sheth's model. It contains all
such psychological variables that affect the buyer’s behaviour while making buying
decisions.

i. Perceptual constructs:

It describes the system in which buyers acquire, perceive information, and

process input variables. It is an important component as it affects the selection of
brands and also the purchase by the consumer. It includes: –

ii. Sensitivity to information-

Buyer’s understanding and sensitivity level towards the information received

by him.

iii. Perceptual bias-

Buyers' partialness towards a particular brand is based on each brand’s

perception.

iv. Information search-

To make proper decisions, the consumer looks out for getting more
information.

v. Learning Constructs:

Learning constructs relates to consumers' level of knowledge, opinion,

confidence, attitude, and final decision on selection of brand and products.

24
vi. Motive-

It refers to the ultimate reason for purchasing the product.

vii. Choice criteria-

Choice criteria are the standard which buyer uses for selecting a product or
brand.

viii. Brand Comprehension-

Consumers present a state of information about the brand pertained by him.

xi. Attitude-

Attitude is the readiness of buyers to buy the brand’s product.

x. Confidence-

Confidence is the result of the trust that consumers have in a specific brand.

xi. Intention-

It is the ultimate selection of a particular brand that results from the motive of
the consumer, his attitude, preference criteria, and confidence.

xii. Satisfaction-

It is the post-purchase benefit derived by the consumer from the product,

whether it has satisfied his/her expectations or not.

C. Output Variables

It is the result of the decision-making process of the purchaser that can be seen
through his noticeable response towards input variables. Five output variables are
arranged in order from attention to actual purchase.

These output variables are: –

25
i. Attention-

Attention is the consumer's state of alertness regarding understanding the

information provided to the buyer.

ii. Brand Comprehension-

It is the buyer’s awareness regarding the products and brand.

iii. Attitude-

It is the purchaser's behaviour and interest towards a specific product that

depends on his/her likes and dislikes.

iv. Intention-

Consumer intention is the main aim of purchasing a particular product.

v. Purchase Behaviour-

At last, the consumer finally purchases the product which is the result of all
the above components.

D. Exogenous Variables

These are other external forces that are indirectly involved in the buying
decision-making process of the consumer but have a vital impact on buyers buying
decisions. These are the environmental factors that affect buyer behaviour of the
buyer.

These variables are as below: –

i. Purchase Importance-

It is the level of importance and value of the purchase as perceived by the

buyer which affects his/her preference for the brand.

26
ii. Personality Variables-

These are the personal qualities of a buyer that affect his decisions while
purchasing a product such as a self-esteem, ego, anxiety, dominance, and
authoritarianism.

iii. Culture-

Culture refers to the ideas, values, and beliefs of consumers that make up
his/her motive to buy the product.

iv. Social class-

It is the social group of an individual includes his friend, family, and reference
groups that influence the decisions for selecting a particular brand.

v. Organization-

The Authority, power, and status of the consumer are defined by their
interaction with different social groups. This formal and informal interaction of
consumers affects his hypothetical constructs.

vi. Time Pressure-

It means the period when the product of a preferred brand is not available and
the consumer is under pressure to look for other alternatives available and take a
timely decision.

vii. Financial Status-

Financial status refers to the inability of an individual for buying a product that
confines him/her from purchasing it.

27
1.17.2.2. Engel-Kollat-Blackwell Model

Engel-Kollat-Blackwell Model was created to describe the increasing, fast-

growing body of knowledge related to consumer behaviour.

Figure 1.10 : Engel-Kollat-Blackwell Model

(Source : http://harrywood93.blogspot.com/2012/04/ekb-model.html)20

This model has gone through several revisions to improve its vivid ability of
the basic relationships between components and sub-components.

This model consists of four stages;

A. First stage: decision-process stages

The main focus of this model is on five basic decision-process stages:
1.Problem recognition
2.Search for alternatives
3.Alternate evaluation
4.Actual purchase
5.Outcomes.
But it is not needed for every consumer to go through all these phases; it depends on
whether it is prolonged or repetitive problem-solving behaviour.
B. Second stage: Information input
At this stage, the buyer gets information from several sources, which also
affects the problem recognition stage of the buying decision-making process. If the

28
buyer still does not reach the exact decision, the search for external information will
be initiated to reach a choice or in some cases, if the buyer experiences dissonance
because the selected alternative is less satisfactory than expected.
C. Third stage: information processing
This stage includes the consumer’s, attention, exposure, acceptance,
perception, and retention of incoming information. The buyer must first be exposed
to the message, allocate space for this information, understand the stimuli, and hold
the message by transferring the input to long-term memory.
D. Fourth stage: variables influencing the decision process
This stage includes individual and environmental factors that affect the entire
decision process. Individual characteristics include values, motives, personality, and
lifestyle. The social influences are family, culture, and reference groups. Situational
influences, like the buyer's financial condition, also influence the buying decision
process.

1.17.2.3. Nicosla Model

Professor Francesco M. Nicosia developed this model in 1966. This model

throws light on the relationship between the company and its potential consumers.

Figure 1.11 : Nicosla Model

(Source: https://sist.sathyabama.ac.in/sist_coursematerial/uploads/SBAA7009.pdf)21

The model suggests that advertisement from the organization first influences
the tendency of the buyer towards the service or product. Based on the situation, the

29
consumer will have a certain attitude towards the product. This may result in a seek
for the product or an evaluation of the product characteristics by the consumer. If the
above step satisfies the buyer, it may result in a positive response, with a decision to
purchase the product otherwise creates a negative image about the product. This
model describes that the consumer and the firm are associated with each other, the
firm tries to influence the buyer and the buyer is influencing the firm by his buying
decision.

The Nicosia model is divided into four fields:

A. Field 1: The firm’s attributes and the consumer’s attributes.

The first field is divided into two subfields. The first field deals with the firm’s
communication efforts and marketing environment that affect the competitive
environment, consumer attitudes, and characteristics of the target market. The second
field specifies the consumer characteristics e.g., personality, experience, and how he
notices the promotional idea toward the product. In this stage, the buyer forms his
attitude regarding the firm’s product based on his understanding of the message.

B. Field 2: Search and evaluation.

The buyer will initiate to search for other firm’s brands and evaluate the firm’s
brand in comparison with substitute brands. In this case, the firm encourages the
consumer to buy its brands.

C. Field 3: The act of the purchase.

The result of motivation will be encouraging the consumer to buy the firm
products from a specific retailer.

D. Field 4: Feedback of sales results.

This model analyses the feedback of the consumer and the firm after buying
the product. The firm will benefit from its sales information as feedback, and the
buyer will use his experience with the product in making purchase decisions in the
future.

This model of consumer behaviour offers no detailed clarification on the

internal factors, which may influence the personality of the buyer, and how the buyer
develops his attitude regarding the product. For example, the buyer may find the
firm’s message very motivating, but virtually he cannot buy the firm’s brand because
it contains something forbidden according to his beliefs.

30
1.17.2.4. Stimulus-Response Model

This is another consumer behaviour model. In the above model, marketing

stimuli and other stimuli enter the consumer's “black box” and generate certain
responses.

Figure 1.12 : Stimulus-Response Model

(Source : http://misbullshit.blogspot.com/2015/11/consumer-buying-behavior-
stimulus.html)22

Marketing management should try to understand what goes in the mind of the
consumer i.e. the “black box”. The characteristics of Consumers influence how the
consumer perceives the stimuli. The decision-making process governs what buying
behaviour is undertaken. The stimulus-response model is called a black-box model, is
one of the simple types of buyer behaviour models. Environmental stimuli, such as
culture and economics technology and combine with marketing stimuli, like the price,
product, and promotion, inside the black box, where decisions are made. Stimulus-
Response Model ignores reasons within the customers and emphases environmental
and marketing factors that cause their response.

1.18 Factors Affecting Consumer Buying Behaviour

There are several factors affecting consumer behaviour. These all factors make
consumer buying behaviour. Due to the impact of several factors, consumers respond
to marketing programs differently. For the same price, product, distribution, and
promotion their responses are different. The factors make a different effect on each

31
consumer and therefore we observe different-different buying behaviour. However,
some factors have more effect, while others have less effect on consumer behaviour.
Following are some factors that affect consumer behaviour23:

1.18.A. Cultural Factors:

Cultural factors have the deepest and broadest impact on consumer behaviour.
It mainly includes the following sub-factors

1. Broad Culture:

Culture is a dominant and powerful determinant of personal needs and desires.

Culture can be defined as the way of doing, the way of living, and the way of
worshiping. The pattern of life is highly dependent on the consumers’ culture. Culture
has a vital effect on preference and needs. Consumers react according to their culture.

Every culture has its customs, values, beliefs, and traditions and, which
determine a preference, needs, and overall consumers behaviour. The child gets a set
of attitudes, values, perceptions, preferences, interests, and behaviour from family and
also from other social institutions like school, college, etc. All these cultural factors
determine the buying behaviour of consumers toward products, services, and
marketing strategies of a firm.

Culture is replicated in terms of the following:

i. Woman education
ii. Family life/social system
iii. Role of women
iv. Approach to life
v. Geographic factors
vi. Ethics in economic dealings
vii. Approach to work and leisure
viii. Residence pattern
ix. Impact of other cultures, and so on

These all factors affect when what, where, from whom, how much, and how many
times the product should be bought and used.

32
2. Subcultures:

Each culture consists of other smaller subcultures. Each subculture gives a

more precise identification of members who belong to it.

Subculture includes:

i. Nationality:

Every nation has its own unique culture that controls and gives shape to
citizen's behaviour. For example, Japanese culture, Indian culture, African culture,
American culture, Chinese culture, etc. Consumers of different countries have
different behaviour toward the company’s strategies and products.

ii. Religion:

It is a very powerful determinant of buyer needs and wants. Every religion has
its culture in terms of values, rules, rituals, and procedures that have an impact on
people who belongs to it. Generally, consumer behaviour is directly and indirectly
determined by religion in terms of products that are ritualistically and symbolically
associated with the celebration of numerous religious festivals, events, and holidays.
Religions like Hindus, Christians, Buddhists, Muslims, etc., influence clothing choice,
career aspiration, food preference, and overall life pattern.

iii. Racial Groups:

In each culture, we find several racial groups; each of them is different in terms
of habits, needs, professions, roles, preferences, and use of products. Each racial group
has different buying behaviour.

For example, in India, we find several racial groups like Banya, Kshatriya, Patel,
Scheduled Tribe Brahmin, Scheduled Caste, Shepherded, and so on. These racial
groups have their norms, cultural values, habits, standards, etc., that govern buying
behaviour of the people who belong to them.

iv. Geographical Regions:

Each geographic area represents the precise culture and varies in preference,
terms of needs, usage rates, habits, and uses of products.

33
Food, clothing, residence, vehicle, etc., are determined by regional culture and
climate.

3. Culture of Social Classes:

Social classes consist of differences in occupation, income, roles in society,

education, and so on. Social class has its own culture which affects consumers'
behaviour. Social classes reflect in their speech patterns, dress, social status,
recreational preferences, value orientation, etc.

They show different product and brand preferences in the case of education,
clothing, home furniture, automobiles, and leisure activities. In India, we can identify
three social classes i.e. upper, middle, and lower class. Philip Kotler classifies the
following social classes, each of them differs in terms of needs, income, preference,
skills, habits, Approach toward life, career orientation, etc.

i. Upper-upper class

ii. Lower upper class

iii. Upper middle class

iv. Middle-class

v. Working class

vi. Upper lower class

vii. Lower-lower class

1.18.B. Social Factors:

Social factors influence consumer behaviour. Consumer response to brand, product,

and company is highly influenced by various social factors like reference groups,
family, and roles and statuses.

34
Following are some dominant social factors determining consumer behaviour:

1. Family:

It is one of the most dominant social factors influencing consumer behaviour.

In the case of the joint family system, it is the more dominant factor. Values,
traditions, and preferences are transmitted from parents to children inherently.

Family members constitute the most influential primary reference group. From
family, its member gets an orientation toward politics, religion, self-worth, ambition,
love, respect, and so on. Need, buying habits, consumption rate, preference, etc. are
determined by the family.

In every family, husband-wife, elders, children, and other members have

varying influences on the purchase decision. Some products are husband dominant;
some products are children dominant; some products are wife dominant etc.

2. Reference Groups:

Philip Kotler states “A person’s reference group consists of all the groups that
have a direct (face-to-face) or indirect influence on the person’s attitudes or
behaviour.”

Following are some reference groups that influence consumers behaviour

i. Primary Reference Groups:

They are informal groups such as friends, family members, relatives, co-
workers, and neighbors with whom the person interacts continuously. Opinions,
habits, and lifestyles of these groups directly affect persons buying decisions.

ii. Secondary Reference Groups:

The formal groups such as professional groups, trade unions, religious groups,
etc., affect purchasing decisions of the consumer.

35
iii. Aspiration Groups:

An individual is not a member of such groups but that person likes to belong
to such groups. He imitates the preference, habits, and buying patterns of those groups.

For example, youngsters like to belong to sportsmen, film stars, professional groups,
etc.

iv. Dissociative Groups:

These groups include such groups whose behaviour or values a person dislikes
or rejects. A person tried to behave differently than such groups. In the case of
automobiles, television, clothing, books and magazines, home furniture, cigarettes,
etc., the reference groups have a high direct impact on buyers’ buying decisions.

3. Roles and Statuses:

A person plays several roles in many groups in his entire life. He has to play
different roles in the office, family, club, or social organization. A person plays
various roles like a person is a husband for his wife, father for his children, friend for
his friends, son for his parents, member of social organization and boss for his
department, etc.

Each role carries some status. For example, the manager has more status than
the supervisor. Generally, people choose such products which represent their roles
and statuses in society.

4. Social Customs and Traditions:

Social customs, traditions, or beliefs can be associated with caste, religion, or

economic aspects. Such customs determine the needs of products on various occasions
and thereby it affects consumer behaviour.

5. Income Level:

Income has a great effect on the needs and wants of consumers. Product
preferences of the poor consumers and the rich consumers are different. In the case of
a brand, quality, costs, and novelty there is a notable difference between the poor and
the rich buyers.

36
1.18.C. Personal Factors:

Personal factors also affect buyers buying decisions. Personal factors are
associated with the consumer himself. These factors mainly include age, occupation,
stage in the life cycle, economic circumstances, personality, and lifestyle. Following
are some personal factors influencing buyers buying behaviour

i. Age and Stage in Life Cycle:

A man passes through many stages of his life cycle, like infant, child, young,
adult, and old. Need and preference for product changes with change in life cycle
stage. For example, the needs and preferences of the child are notably different that
than of an adult person. The age and life cycle stage influences buyers buying
decisions to a great extent.

ii. Occupation:

Buying and using pattern of the buyer also depend on the person’s occupation.
Need and preferences of teachers, industrialists, doctors, artists, scientists, managers,
workers, supervisors, traders, etc., are significantly different from each other.

iii. Economic Circumstances:

Product preference, quality, quantity, and frequency of buying are also

affected by buyers’ economic circumstances. Economic circumstances consist of
disposable income, level of savings, income stability, assets, borrowing power, etc.
People purchases products by considering these economic circumstances.

iv. Life Style:

People with the same social class, occupation, and culture may have a different
lifestyle. Lifestyle is generally reflected in terms of clothing patterns, activities,
interest, status consciousness, achievements, spending, and savings, helping others,
working style, etc. The lifestyle of people influences their buying behaviour to a great
extent.

37
v. Personality:

Personality characteristics, such as self-confidence, individualism, difference,

courage, mental balance, firmness, sociability, patience, etc., influence needs and
preferences for the product. Every person purchases such product which suits his
personality. Personality influence buying decision in case product like automobiles,
clothing, shoes, perfumes, etc.

vi. Gender:

Gender affects buying behaviour. Some products are female-dominated while

some are male-dominated.

Need and preferences for products are highly influenced by the gender of the person.
Gender of buyer influences buyers buying behaviour.

vii. Education:

The education of a person also affects buying behaviour. Need and product
preferences of less educated, highly educated, moderately educated and illiterates are
considerably different from each other. The stage of education like primary,
secondary, college, etc. also affects buyers’ behaviour.

1.18.D. Psychological Factors:

Psychological factors also affect consumer's buying behaviour. The dominants

factors include perception, motivation, beliefs, learning, and attitudes. It is not easy to
measure the influence of psychological factors as they are internal factors.

i. Motivation:

Motivation significantly affects consumer buying behaviour. Motivation is

highly related to human needs. Human being has many needs at a given time. Some
needs are physiological or biogenic arising due to thirst, hunger, or discomfort. Other
needs are psychological or psychogenic arising due to recognition, belonging, or
esteem.

38
ii. Perception:

It is a process by which a person selects, organizes, and interprets gathered

information to create a meaningful image of the world. Person motivational act
depends on one’s perception of the situation. It is very strongest factor affecting
behaviour. The stimuli – product, incentives, advertising Appeal, or anything are
perceived differently by the different consumers due to differences in perception.

iii. Learning:

Learning means relatively permanent changes in behaviour arising from

experience. If the consumer has satisfactory experience of buying and consuming the
products, he is more likely to talk favourably or purchase the same again. Most buying
decisions depend on the self-experience or experience of others, whose opinions
having a value in buying decisions.

iv. Beliefs:

People hold some beliefs about the company itself, the company’s goods or
services, and people act accordingly. Belief means descriptive thought holds by a
person about something. Beliefs may be based on opinion, knowledge, or faith.
Beliefs may not be based on facts or reality. People may have negative beliefs about
the superior product, or they may hold positive beliefs about the inferior product.
Positive and negative beliefs about products affect their purchase decisions.

v. Attitudes:

An attitude is a person’s emotional feelings, enduring favourable or

unfavorable evaluations, and action tendencies toward some idea or object. Different
people have different attitudes toward almost everything, such as clothes, food,
company, religion, politics, music, product, and so on. The attitude of the consumer
affects the buying behaviour of the consumer.

1.19 Decision-Making Process in Online Shopping

Making the final decision to purchase any product involved many factors. The
final purchase decision depends on several factors. Generally, the following steps are
involved in the decision-making process in the case of online shopping

39
1.19.1. Identification of need

The first stage in buying decision-making is the identification of a need. It is

the stage at which consumers realize that they need some product or service to satisfy
their desire or need.

1.19.2. Information search

At this stage, consumers search for information about the product or service
online by using search engines like Google, Bing, etc. They also use social media like
YouTube to get more information about the product or services. The consumer also
visits many e-commerce websites like Amazon, Flipkart, TATA Cliq, etc., and trying
to get maximum information about the product or services he/she wishes to buy.

1.19.3. Evaluation stage

At this stage, consumers evaluate different alternatives offered by different

companies. Consumers look for a product or service which is likely to be satisfying
his/her need at the maximum level. Consumer visits to evaluate the product based on
quality, price, features, etc. Generally, consumers check for prices on different e-
commerce portals.

1.19.4. Purchase Decision

After evaluation of alternative, the consumer makes a final purchase decision

and place an order with the online e-commerce website. They choose such e-
commerce companies which provide products at a lower price, giving better services
and reliable one.

1.19.5. Purchase Evaluation

Once the product reached the consumer, they use it and evaluate if the product
or service met their expectations. This stage is very important because positive or
negative opinions about the product or service are getting generated at this stage. If a
product or service is not up to the mark, then create a negative image about the
company or brand and he/she is not likely to suggest anyone buy the same.

40
References :

1. Bakos,Y.,1998, "The Emerging Role of Electronic Marketplaces on the

Internet", Communications of the ACM, 41(8), pp. 35-42.
2. Furger, R., 1996, "Shopping Online: What You Need to Know", PC World,
7(2), pp. 320-321.
3. Nalini, E., 2005, “A Study on the Impact of Internet Shopping Among Indian
Consumers”, Ph.D., thesis, University of Madras, Chennai, India
4. Number of Smartphone Users likely to be Doubled by 2022, Retrieved from
https://www.business-standard.com/article/news-cm/number-of-smartphone-
users-in-india-likely-to-double-to-859-million-by-2022-
119051000458_1.html accessed on 14.05.2019
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