1. Chapter 3
Internet Consumers and
Market Research
© Prentice Hall, 2000 1

2. 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
© Prentice Hall, 2000 2

3. 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 3

4. A Model of EC Consumer Behavior
Individual Environment
Purchasing Characteristics Characteristics
Age, gender, ethnicity,
decision education, lift style, Social, family,
psychological, knowledge, communities
begins with values, personality
customer’s
Buyers’ Decisions
reaction to Stimuli
Buy or not
Marketing Others Decision
stimuli Price Economical
Making
What to buy
Where (vendor)
Promotion Technology
Product Political Process When
Quality Cultural How much to spend
Repeat purchases
Vendors’ controlled System
Logistic Technical Customer
service
Support Support FAQ,
Payments, Web design, e-mail,
Delivery Intelligent- Call centers,
agents One-to-one
© Prentice Hall, 2000 4

5. 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”
© Prentice Hall, 2000 5

6. Variables Influencing
Decision Making Process
Environmental Variables
Social variables
people influenced by family members, friends, co-
workers, “what’s in fashion this year”, Internet
communities and discussion groups
Cultural variables
Psychology variables
Other environmental variables
available information, government regulations,
legal constraints, and situational factors
6

7. Consumer Demographics
Gender (61% male user & 39% female user)
WOMEN’S PURCHASES BY CATEGORY (1998)
% of Total Category % of Total Respondents
Purchases Category Purchases (299) Buying (166)
Computer Software 15% 39%
Books 14% 35%
Music 11% 28%
Magazines 11% 28%
Flowers 11% 28%
Women’s Clothing 7% 19%
Computer Hardware 5% 12%
Games 5% 11%
Videos 4% 10%
Crafts & Craft Supplier 4% 10%
Toys 3% 9%
Home Furnishings 2% 6%
Children’s Clothing 2% 4%
Men’s Clothing 2% 4%
Art 2% 4%
Jewelry 1% 3%
Furniture 1% 2%
TOTAL 100%
© Prentice Hall, 2000 7

8. Variables Influencing Decision
Making Process (cont.)
Consumer Demographics (1998)
Age (mostly 21-30 year-old)
Marital status (41% married & 39% single)
Educational level (81% with at least some college
education & 50% obtained at least baccalaureate
degree)
Ethnicity (87% white in America)
Occupation (26% educational-related field, 22%
computers & 22% other professionals)
© Prentice Hall, 2000 8

9. Variables Influencing Decision
Making Process (cont.)
Consumer Demographics
Household income (46% at least $50,000/year)
Internet usage profile (Internet access option, length
and frequency of web use & access cost)
Internet access option (63% primarily form home &
58% primarily from work or school)
Length and frequency of use (88% access daily & 33%
access 10-20 hours a week)
Access cost (67% pay for their own Internet access &
31% paid for by their employers)
© Prentice Hall, 2000 9

10. Consumer Buying Patterns
In last six months of 1998:
Experience:
76% filling out a form on the Web 50 < 1 Year
1 - 3 Years
Online purchases are more than > 4 Years
paper catalog purchases for Net 40
buyers
30
Pe rce nt
32% spent between $100.00-
$500.00
20
Spending of less than $50.00
decreases steadily as shoppers 10
gain experience
Women are more likely to 0
purchase more in the under $50.00 less
than
$50- $100-
$100 $500
$500 Don't
or know
level, and less likely to purchase at $50 more
the above $500.00 level Amount Spent on We b
in Last 6 M onths of 1998
© Prentice Hall, 2000 10

11. Consumer Purchasing Decision-Making
Roles that people play in the decision making
process
Initiator : the person who first suggests or thinks of
the idea of buying a particular product or service
Influencer : a person whose advice or views carry
some weight in making a final buying decision
Decider : the person who ultimately makes a buying
decision or any part of it - whether to buy, what to buy,
how to buy, or where to buy
Buyer : the person who makes an actual purchase
User : the person who consumes or uses a product or
service
© Prentice Hall, 2000 11

12. Consumer Purchasing Decision-Making
(cont.)
The Purchasing Decision-Making Model
Need identification
(Recognition)
Information search
(What? From whom?)
Alternative evaluation,
negotiation and selection
Purchase and delivery
After purchase service
and evaluation
© Prentice Hall, 2000 12

13. Model of Internet Consumer Satisfaction
3rd Party
Seal of Approval Vendor
Reputation
Logistics Support Trust in
Customer Service Web-shopping
Pricing Attractiveness
Customer Repeat Web Purchase
Web-site Store Front Satisfaction (Brand Loyalty)
Security
System Speed of Ease of Content,
Privacy Transaction Reliability Operation Use Quality
Safety
Format
Timeliness
Reliability
Authentication Integrity Non-repudiation
Completeness
© Prentice Hall, 2000 13

14. One-to-One Marketing
Relationship marketing
“Overt attempt of exchange partners to build a
long term association, characterized by purposeful
cooperation and mutual dependence on the
development of social, as well as structural,
bonds”
“Treat different customers differently”
Able to change the manner its products are
configured or its service is delivered, based on the
individual needs of individual customers
© Prentice Hall, 2000 14

15. 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 cross-
selling success; save cost, etc.
Real world examples
1-800-FLOWERS
Amazon.com
Federal Express (FedEx)
© Prentice Hall, 2000 15

16. One-to-One Marketing (cont.)
Building and maintaining customer loyalty
Maintain continuous interactions between
consumers and business
Make a commitment to provide all aspects of the
business online
Build different sites for different levels of
customers
Willing to invest capital, both human and
financial, in the information systems, to insure
continuous improvement in the supporting
technology as it becomes available
© Prentice Hall, 2000 16

17. One-to-One Marketing (cont.)
Building and maintaining customer loyalty
Make a commitment to use the information
collected about customers in an ethical manner
Realistic managerial expectations in the payback
period and cost recovery
Set acceptable standards for response time in
customer service (24-48 hours); Use intelligent
agents to expedite and standardize responses
whenever possible
Ability to change and customize information and
services quickly and inexpensively is a must
© Prentice Hall, 2000 17

18. One-to-One Marketing (cont.)
Customer Service
A new look and feel
Install Web servers
Put the burden on the which allow each
customer to treat a customer to create
problem or inquiry and individual web pages
receive information that can be customized
bit by bit to record purchases
and preferences
© Prentice Hall, 2000 18

19. 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
© Prentice Hall, 2000 19

20. Implementing Customer Service in
Cyberspace
Product Life Cycle
Phase 1. Requirements : assisting the customer
to determine needs
Phase 2. Acquisition : helping the customer to
acquire a product or
service
Phase 3. Ownership : supporting the customer on
an ongoing basis
Phase 4. Retirement : helping the client to
dispose of a service or
product
© Prentice Hall, 2000 20

21. Implementing Customer Service in
Cyberspace (cont.)
Types of Customer Service Functions
Answering customer inquires
Providing technical and other information
Letting customers track accounts or order
status
Allowing customers to customize and
order online
© Prentice Hall, 2000 21

22. Implementing Customer Service in
Cyberspace (cont.)
Addressing Individual Customer Needs
Companies
understand their
customers’ needs
and buying habits
better
Companies
Doing
customize their
business
future marketing
via Web
efforts
© Prentice Hall, 2000 22

23. Tools of Customer Service
Personalized Web Pages
used to record purchases and preference
direct customized information to customers efficiently
Chat Room
discuss issues with company experts; with other
customers
E-mail
used to disseminate information, send product
information and conduct correspondence regarding any
topic, but mostly inquiries from customers
FAQs
not customized, no personalized feeling and contribution
to relationship marketing
© Prentice Hall, 2000 23

24. 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 24

25. 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 Research
definition and methodology, Data Results,
Research Data collection collection, Recommendations,
objectives plan Data analysis Implementation
© Prentice Hall, 2000 25

26. 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.
© Prentice Hall, 2000 26

27. Market Research for EC (cont.)
Market Segmentation
Improved methods of marketing research based
on information technologies allow marketers to
collect, store, and analyze detailed and personal
information in a cost-efficient way.
Example : Wal-Mart
Consumer life styles shape psychographic
segmentation of the market.
Lifestyles are typically established by consumers
filling out questionnaires about their activities
such as work and family, interests and opinions,
etc.
© Prentice Hall, 2000 27

28. Market Research for EC (cont.)
Consumer Market Segmentation Tasks in the US
Segmentation
Bases/Descriptors Possible Categories
Geographic Pacific; Mountains; West North Central;
Region West South Central; East North Central;
East south Central; South Atlantic;
Middle Atlantic; New England
Size of city, county, Under 5,000; 5,000 – 19,999; 20,000 –
or standard 49,999; 50,000 – 99,999; 100,000 –
metropolitan statistical 249,999; 250,000 – 499,999; 500,000 –
area (SMSA) 999,999; 1,000,000 – 3,999,999; 4,000,000
or over
Population density Urban; suburban; rural
Climate Warm; cold
© Prentice Hall, 2000 28

29. 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
© Prentice Hall, 2000 29

30. 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)
© Prentice Hall, 2000 30

31. Market Research for EC (cont.)
Online Market Research Methods
Process of conducting the research
Define the research issue and the target market
Identify newsgroups and Internet communities to study
Identify specific topics for discussion
Subscribe to pertinent groups, register in communities
Search discussion group topics and content lists to find the
target market
Search e-mail discussion groups lists
Subscribe to filtering services that monitor groups
Read FAQ’s and instructions of your competitor
Enter chat rooms, whenever possible
© Prentice Hall, 2000 31

32. Market Research for EC (cont.)
Online Market Research Method
Content of the research instrument
Post strategic queries to news groups
Post surveys on your Web site
Offer rewards for participation
Post strategic queries on your Web site
Post relevant content to groups with a pointer to your
Web site survey
Post a detailed survey in special e-mail questionnaires
Create a chat room and try to build a community of
consumers
© Prentice Hall, 2000 32

33. Market Research for EC (cont.)
Online Market Research Methods
Target Audience of the Study
Compare your audience to the target population
Determine your editorial focus
Determine your content
Determine what Web services to create for each
type of audience
© Prentice Hall, 2000 33

34. Market Research for EC (cont.)
Consumer Market Research
Methods of conducting a survey: personal
interviews; telephone survey and mail survey
Online market research done on the Net,
ranges from client-specific moderated focus
groups conducted via chat rooms; to
interactive surveys placed on Web sites
The Internet is providing an efficient channel
for faster, cheaper and more reliable
collection and transmission of marketing
information even in multimedia form
© Prentice Hall, 2000 34

35. Market Research for EC (cont.)
Consumer Market Research
Mass marketing research
Process orientation
Two perspectives
Content orientation
Concept testing
Tracking
Keep track of consumers’ Web movements
using cookies—files attached to a user’s
browser © Prentice Hall, 2000 35

36. 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”
© Prentice Hall, 2000 36

37. Intelligent Agents for Consumers (cont.)
Intelligent Agents for Information Search and
Filtering
Help to determine what to buy to satisfy a specific need by
looking for specific products’ information and critically
evaluate them
Example : Firefly
uses a collaborative filtering process that can be described as “word
of mouth” to build the profile
asks a consumer to rate a number of products, then matches his
ratings with the ratings of other consumers and, relying on the
ratings of other consumers with similar tastes, recommend him
products that he has not yet rated
© Prentice Hall, 2000 37

38. 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 user’s site instead of from
Jango’s ⇒ vendors have no way to determine whether the request
is from a real customer or from the agent
provides product reviews
Kasbah from MIT Lab
users wanting to sell or to buy a product, assign the task to an
agent who is then sent out to proactively seek buyers or sellers
© Prentice Hall, 2000 38

39. Intelligent Agents for Consumers (cont.)
Negotiation Agents
Price and other terms of transactions are determined
Kasbah
multiple agents; classified as system where users create agents
for the purpose of selling or buying goods
3 strategies : anxious, cool-headed and frugal
Tete-@-tete
considering a number of different parameters: price, warranty,
delivery time, service contracts, return policy, loan option and
other value added services
being argumentative (use information acquired during the first two
stages of the purchasing decision model to evaluate each single
offer)
© Prentice Hall, 2000 39

40. Intelligent Agents for Consumers (cont.)
Learning Agents
Be capable of learning individuals’ preferences and make
suggestions
Memory Agent from IBM & Learn Sesame from Open
Sesame
use learning theory by monitoring customers’ interactions
learns customers’ interests, preferences and behavior and
delivers to them customized service accordingly
Groaphens form Netperceptions
personalizes content and creates customer loyalty programs
with learning agent technology
© Prentice Hall, 2000 40

41. Organizational Buyer’s Behavior
Consumer Types
Individual customers Vs. Organizational buyers
Characteristic Retail Buyers Organizational Buyers
Demand Individual Organizational
Purchase volume Smaller Larger
Number of customers Many Fewer
Location of buyers Dispersed Geographically concentrated
Distribution structure More indirect More direct
Nature of buying More personal More professional
Nature of buying influence Single Multiple
Type of negotiations Simpler More complex
Use of reciprocity No Yes
Use of leasing Lesser Greater
Primary promotional Advertising Personal selling
method © Prentice Hall, 2000 41

42. Organizational Buyer’s Behavior (cont.)
Individual Interpersonal Organizational
Influences Influences Influences
Age; gender; ethnicity; Authority; status; Policies and procedures;
education, lift style; persuasiveness organization structure;
psychological; knowledge; centralized/decentralized;
values; personality systems used; contracts
Stimuli Buyers’
Marketing Others Decision Making Decisions
Process (Group Buy or not; What to buy;
Price Economical or Individual)
Promotion Technology Where (vendor);
Product Political When; Delivery terms
Quality Cultural Payments
Vendors’ Controlled Systems
Behavioral Logistic Technical Customer
Model support
Payments,
support
Web design,
service
FAQ,E-mail,
delivery Intelligent- Call Centers,
© Prentice Hall, 2000 © Prentice Hall, 2000 One-to-one
agents 42

43. Management Issues
Reasons for customers visiting a web site:
Benefit from lots of graphics (negative too,
slows interaction)
Easy linking when browsing for products and
information
Easy entry into specific product lines or service
areas
Foolproof experience to keep the customer
focused on the immediate need and not get
lost or placed off track
© Prentice Hall, 2000 43