Chapter 3

Internet Consumers and

Market Research

Prentice Hall, 2000

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

A Model of EC Consumer Behavior

Purchasing
decision
begins with
customers
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

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, whats 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)
WOMENS PURCHASES BY CATEGORY (1998)

Purchases Category
Computer Software
Books
Music
Magazines
Flowers
Womens Clothing
Computer Hardware
Games
Videos
Crafts & Craft Supplier
Toys
Home Furnishings
Childrens Clothing
Mens 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%

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)
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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)
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Consumer Buying Patterns

In last six months of 1998:

Pe r c e n t

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

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Experience:

50

< 1 Year
1 - 3 Years
> 4 Years

40

30

20

10

less
than
$50

$50- $100$100 $500

$500 Don't
or
know
more

Amount Spent 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
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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
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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

Security
Privacy

Authentication

Transaction
Safety

Integrity

System
Reliability

Speed of
Operation

Ease of
Use

Format
Non-repudiation
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Reliability

Repeat Web Purchase

(Brand Loyalty)

Content,
Quality

Timeliness
Completeness
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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

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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)
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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
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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
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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:
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
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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
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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

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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
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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
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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 group-based targeted markets, not on
a personal way to identify individual consumers
who actually purchased and used the products.

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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.
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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
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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, data-entry 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

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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 well-known
segmentation dividing consumers in the U.S.
(developed at SRI International in California)

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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 FAQs and instructions of your competitor
Enter chat rooms, whenever possible
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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

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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

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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
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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
cookiesfiles attached to a users browser

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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
Do more than just search and match

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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
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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 on-line
vendors and returns a list of prices (unsuccessful)

Jango from NetBot/Excite

originates the requests from the users site instead of from
Jangos 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

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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)

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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
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Organizational Buyers 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

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Organizational Buyers Behavior (cont.)

Individual
Influences
Age; gender; ethnicity;
education, lift style;
psychological; knowledge;
values; personality

Stimuli
Marketing
Others
Price
Promotion
Product
Quality

Prentice Hall, 2000

Organizational
Influences

Authority; status;
persuasiveness

Policies and procedures;

organization structure;
centralized/decentralized;
systems used; contracts

Decision Making
Process (Group
or Individual)

Economical
Technology
Political
Cultural

Behavioral
Model

Interpersonal
Influences

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
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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
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