27751098

Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical Analysis Author(s): Xueming Luo and Mojtaba Seyedian
Source: International Journal of Electronic Commerce, Vol. 8, No. 2 (Winter, 2003/2004), pp. 95-118 Published by: M.E. Sharpe, Inc. Stable URL: http://www.jstor.org/stable/27751098 . Accessed: 28/08/2013 05:44
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Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical Analysis

Xueming Luo andMojtaba Seyedian
ABSTRACT: Theories from information systemsand strategicmarketingare integratedto a for framework understanding thedirect,mediated, and moderated influences develop
of contextual testing shows marketing and customer-orientation perceived contextual strategy marketing on site satisfaction. that customers7 and customer-oriented Empirical strat
and loyalty. egies are associated with site satisfaction Departing fromthe simple linear association approach, the studyalso investigatesthe moderating roleof privacy concerns and sitedesign complexityand themediating roleof perceived sitevalue. Itfindsthatthe of contextualmarketingand customer-orientation influence strategyon site satisfaction is moderated by theperceived complexity of the site design but not by consumer privacy concerns. These influences may also be mediated by perceived sitevalue. Overall, the to cus contextual marketingapproach of providing personalized, real-timeinformation tomersat thepoint of need will obtain competitiveadvantage ine-commerce. AND PHRASES: Consumer behavior, contextual marketing,customer ori
privacy concerns.
KEYWORDS
entation,
Internet marketing,
Electronic commerce has not been as successful as expected by many compa sector.With more than $10 billion invested nies in the business-to-consumer on theWeb, large companies find that less than 1 percent of strategic cus tomer on-line profile is useful [13,26]. This does not mean that e-commerce is futile and there are no e-commerce winners (e.g., 1-800-contacts). As Aufreiter, Ouillet, and Scott note, the fundamental factor that setsWeb winners apart is in obtaining customer knowledge and satisfaction [3]. superior marketing this view, Kenny and Marshall hold that the key to attracting repeat Echoing visits and customer loyalty is "contextual marketing," which they define as the practice of providing personalized information to customers at the point of need in real-time [26]. Thus businesses may enhance Web users' satisfac enormous e-opportunities, tion and loyalty [12,39], materializing by provid to customers in real-time [12, 32, 39]. Given the contextual information ing potential importance of contextual marketing, it is surprising that scholars have not yet empirically investigated this subject in the literature. The present study is an initial, exploratory step in empirically investigating
the associations between the perceived importance of contextual marketing and e-business customer orientation strategies, and user satisfaction with Internet storefronts. It also studies the link between off-line business strategy (market/customer orientation) and on-line commerce development. Depart ing from the simple linear association approach (e.g., [54]), it investigates the role of privacy concerns and site design complexity and the moderating
The authors gratefully acknowledge thevaluable and constructive comments of the IJEC reviewers and of Professor Vladimir Zwass.
InternationalJournalofElectronic Commerce /Winter 2003-4, Vol. 8,No. 2, pp. 95-118. Copyright ? 2004ME. Sharpe, Inc.All rights reserved. 1086-4415/2004 $9.50 + 0.00.
96 XUEMING LUO AND MOJTABA SEYEDIAN
mediating role of perceived site value. The framework of the study integrates business theories such as contextual marketing and privacy concerns in infor customer orientation in strategic marketing mation systems [16,18,26,32,36], in site and value [27, 35], advertising [10,11].
Literature Review
Contextual Marketing
and Hypotheses
toKenny and Marshall, contextual marketing refers to the extent According towhich e-businesses use the ubiquitous Internet to provide customers with relevant information in the right context and in real-time [26]. Contextual is important because users are already information-overloaded. marketing What theyneed most is relevant information provided in real-time at the point
of need.
customers are in control in the information age. They opt in Empowered to most most consum relevant messages on their screens [40]. In fact, the only ers who go on-line for a specific purpose tend to be impatient [40, 52]. If a banner ad is not relevant to a customer's information search, itwill not be successful. Someone searching forNational Football League results will see
an on-line
ther way, unlikely to generate satisfaction or purchase intention/decision. Tobias observes, consistently with the view of contextual marketing, that on line promotions which interrupt consumers, "regardless of their interests at any given time or place," are "unlikely to be either attractive or successful" [50, p. 133]. No wonder Kenny and Marshall declare that "the focus of e-com merce will shift from content to context, knocking many websites into irrel evance" [26, p. 119]. An interesting example of contextual marketing on the Internet is Johnson & Johnson's Tylenol Web advertising campaign. When ever the stock market (i.e., theDow Jones Industrial Average) drops by more than 100 points, banner ads forTylenol pop up on on-line brokers' sites [26]. Thanks
promotion
of
life
insurance
as
irrelevant
and
out-of-context?ei
to the ubiquitous nature of the Internet,marketers have never been so to effectively and efficiently achieve the goal ofmarketing?de empowered for the right product (headache reliever) to the right cus the message livering tomer (on-line brokers) at the right time (collapse of stock market). At a minimum, Johnson and Johnson's campaign may reinforce the brand image in real-time, thereby ultimately leading to and promote Tylenol awareness intention and brand loyalty purchase Another noteworthy example of contextual marketing is the promotion of Volvo's new model S60 sedan on-line. On October 15,2000, Volvo, allied with Screen and theAOL Auto Center, gave shoppers AOL via theAOL Welcome $2,100 in discounts
placements
and other offerings through Web

accelerated customer awareness
links. The strategicWeb

and response. This on
banner
line contextual marketing campaign far surpassed Volvo's expectations. reported that 80 percent of the customers who purchased Volvo models were first-timebuyers. following two months
was It in the
INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE
97
The Internet is becoming ubiquitous and will eventually be accessible from to remain in contact with their everywhere. Ubiquity will allow businesses customers 24 hours per day. Advanced technologies (e.g., wireless and mo bile technologies) and the Internet are reaching customers whenever and wherever theywant. The tools of contextual marketing may include wireless kiosks, elec phones, personal digital assistants, interactive Web-connected tronicwallets, and many other access technologies. Mobile devices and Internet access will let contextual marketers link real-life situations to virtual informa tion and offerings. Wireless carrier NIT DoCoMo's I-mode service in Japan, for instance, offerswireless access to hotel reservations, restaurant locators, ski resorts, real-time stock exchange statistics, and much more [26].
Contextual marketing strives to find out who the customers are,where they are located, and what they are doing. The firm should actively understand its customers and actively deliver its at the message appropriate time and place. From the firm's perspective, contextual marketing is active and dynamic. From cus the customer's perspective, however, it may be passive and reactive?the tomer passively receives information presented at a given time and place, and either responds or ignores it. thatmaster the complexity of the ubiquitous Internet and con Companies textual marketing may gain substantial competitive advantages: more effi cient targeting ofmarket segments and offering a more valuable product at a premium price. Contextual marketing gives companies more ways to connect to their customers and opportunities to better exploit such relationships. For example, Simon Properties, the largest retailmall developer, gives customers mobile devices to make e-wish lists or to place orders forhome delivery. This enables Simon to track shoppers and provide individual retail tenants with purchase data at a price. In turn, retail tenants can utilize the real-time shop ping data in order to offer timely, relevant promotions and coupons. Providing contextual information to customers at the right time is in line with the theory of real-time marketing [32,36,40]. Real-time marketing refers to the extent to which the firm can offerproducts and services at the customer's in real-time, based on the customer's choices and actions [40]. As location, notes in discussing the switch from a firm-to-customer approach to McKenna a customer-to-firm approach, marketers once used to target customers via broadcast but now need to invite them invia dialogue [32].Aided by the emerg ing technologies, marketers may initiate real-time dialogues with their cus tomers and provide them with interactive services. Such conversations and interactive services may help companies to "cut through themarket chaos in and establish binding relationships with their customers" the marketspace In the real-time world, traditional marketing connections to cus [32, p. 87]. tomers (e.g., focus groups, consumer surveys) are not enough to build cus tomer loyalty and brand. Instead, companies need to engage, via information a technology in continuous dialogue with customers about product develop ment, experience with the product, service support among suppliers, distribu tors, and the like. Dialogue with consumers is important in that it is theway firms can achieve context and ultimately obtain greater customer loyalty and superior performance.
98 XUEMING LUO AND MOJTABA SEYEDIAN The time-value or time-sensitivity of information has been described as "the most significant factor inmanagerial decision-making" in an off-line en vironment [14, p. 509]. In the dynamic, turbulent electronic market, the value of information depreciates quickly and, thus, its time-sensitivity should be even greater. This means that capability for real-time communication and con textual marketing may become a key issue of strategic planning and a source of competitive advantage for e-business to gain customer repeats visits and satisfaction. Therefore, the firsthypothesis states: HI: User perception of the importance of contextual marketing is related to satisfaction with Internet storefronts.
Customer
Orientation
[21, 22, 24, 35, 54]). Consistent with the strategic marketing literature (e.g., [8, 35]), customer orientation is the belief that understanding and satisfying customer needs should be an organization's priorities [9, 22, 23, 25, 54]. Thus customer orien tation focuses on the dynamic interactions between the firm and its customers, competitors, and internal stakeholders. As a core concept, itholds that all mem must continuously create superior value for customers, and must bers of a firm do so better than the competitors. A customer orientation or market orienta tion has long been deemed an important resource of competitive advantage in the long run (e.g., [8, 33, 34]). A firmwith a market orientation may attain a high level of customer satisfaction and superior performance through a better understanding of its customers, competitors, and environment (e.g., [8,21,27, 28,35]). There is ample empirical evidence to support the positive influence of customer orientation on the firm's performance [8, 20, 27, 35, 28, 54]. In the context of e-commerce, the importance of customer focus has been noted in the customer resource life-cyclemodel (e.g., [15, 24, 25]). Essentially, thismodel shows how a firm can develop and manage customer relation a to create and enhance ships competitiveness strategic advantage. In the firm level framework forplanning e-commerce, Raghunathan and Madey identify customer orientation as a critical ingredient in superior customer manage ment [37]. As Krauss explains, "companies that build e-business models on customer fundamental needs will meeting prosper" [31, p. 9; emphasis added]. No wonder, then, that in a survey of e-businesses, Aufreiter, Ouillet, and Scott found that top performers were distinguished (from the less successful ones) their skills their commitment and to long-term cus by superior marketing
Electronic business will soon become the usual way of doing business [47]. This means that customer-orientation strategy will play a critical role in gen erating competitive advantage inboth off-line and on-line environments (e.g., [27,35]). Customer-oriented strategy is theoretically grounded in themarket in that the early 1950s. More recently, the marketing ing concept emerged core into has evolved the of strategic marketing, including the three concept customer of attainment of objectives and profitabil orientation, components and of with other functional areas (e.g., function ity, integration marketing
INTERNATIONALJOURNAL OF ELECTRONIC COMMERCE
99
[55]. They describe customerization as the redesign ofmarketing from the customer's perspective, or put differently, the transformation of marketing practices from seller-centric to buyer-centric. This is the next revo in that it involves not only mass customization lution inmass customization from the IT-intensive production side but also customerized marketing from the side of IT-intensive marketing and customer interfaces [55]. In theory, cus tomer orientation and customerization strategies are all essentially customer centric, beginning with customer analysis and focusing on current and potential customer needs [27, 35]. In off-line markets, according to Kohli and Jaworski, market orientation [27]. Senior manage may lead to positive customer attitudes and behaviors ment reports that customer satisfaction, positive word ofmouth, and repeat business are all outcomes of a firm's strategic customer orientation. There
tomer satisfaction [3]. Intimate knowledge of their customers was the critical source of competitive the importance of customer advantage. Nonetheless, orientation for e-commerce has been largely ignored in the literature. The theory of customerization expounded in a recent study by Wind and an is to customer the orientation view for e Rangaswamy interesting parallel commerce
fore,Kotier asserts, customer orientation promotes customer satisfaction [29]. In the same vein, ifa firm in the virtual marketspace is committed to meet its a customers' real needs wherever the customers are and whenever they have need, its customers are more likely to perceive that the firm is practicing a customer-orientation strategy, and thuswill feel satisfied and become loyal to the sites. Therefore: H2: User perceptions of the importance of customer-orientation strategy is related to satisfactionwith Internet storefronts. from the simple linear association approach Departing [e.g., 46, 54], the that follows will explore when and how contextual marketing or discussion customer orientation matters, given themoderating role of privacy concerns and site design and themediating role of perceived site value.
The Mediating
Site value
Role of Site Value
refers to the extent towhich users perceive a Web site as useful, [1,26, 31,48]. Amit and Zott state that value creation important, and valuable is an important factor in the success of an e-business [1]. The associations between the perceived importance of contextual marketing and customer ori entation and perceived e-satisfaction may be mediated by the perceived value of the site. Customers adopt the disruptive innovation of the Internetmainly because itoffers them superior value [48]. The benefits of a site are generally held to be its convenience, ubiquity, low entry cost, and the absence of time or space limitations. A user who does not perceive a site as valuable may never bother to experience the ubiquitous medium, and in consequence attitudinal satisfaction will be less likely to surface. The literature on advertising sup role ofWeb ad value in the relationship between on-line ports themediating
ad attributes and attitudes toward Web ads [10, 11]. From the consumer's as an overall index of theworth of point of view, advertising value is posited measure the overall Ad value may performance of the advertis advertising. on the Based exchange theory,Ducoffe predicts and sup ing industry [10]. ad value in determining attitudes toward role of on-line the ports mediating Web ads [10]. By the same token, for e-commerce exchanges to be evaluated stage, buyer and seller must both give and positively in the post-purchase tomediate the associations receive value. Site value, therefore, is believed between perceived importance of contextual marketing and customer orien tation and perceived satisfaction with Internet storefronts.
H3: Site value mediates the relationship between theperceived importance of contextual marketing and satisfaction with Internet storefronts. H4: Site value mediates the relationship between theperceived importance of customer-orientation strategy and satisfaction with Internet storefronts.
TheModerating
Role of Privacy Concerns
In order to successfully implement a contextual marketing strategy and cus tomer-oriented offering of tailored information to individuals, it is necessary tohave detailed, click-by-click customer information. As consumers take con trol of information about themselves, however, privacy concerns may become an obstacle to e-commerce development [16]. Consumer privacy is often de fined as the right to be let alone. It refers to personal information about an individual's body, personal behavior, personal communication, and personal data. Customer privacy concerns are important because most people either have yet to shop on the Internet or have left the electronic market because of concerns about privacy and security (e.g., [17, 18, 19, 30]). In fact, Internet privacy concerns have prompted responses from both government and busi ness. In a survey of 1,123 advertising agencies and client organization deci issues are sion-makers, Bush, Bush, and Harris found that "security/privacy a as to tool" the Internet barriers [5, p. 25]. When marketing utilizing major users are very concerned about their privacy, theywill be less likely to pro Web business. This reduces the effec vide true and detailed information to tiveness of contextual marketing and customer orientation strategies. Thus contextual marketing and customer orientation strategies will be less likely to draw positive attitudinal satisfaction from users with high privacy concerns. H5: Users' privacy concerns moderate the relationship between theperceived importance of contextual marketing and satisfactionwith Internet store user privacy concerns weaken this relationship. fronts.More specifically, H6: Users' privacy concerns moderate the relationship between theperceived importance of customer orientation and satisfaction with Internet storefronts. More specifically, user privacy concerns weaken this relationship.
101
The Moderating
Role of the Complexity of Site Design
In addition to privacy concerns, the complexity of site design may limit the effectiveness of contextual marketing and a customer-oriented e-business strat egy. Complexity of site design refers to the degree towhich sites are difficult to navigate, present an uncluttered screen, and provide easy checkout service (e.g., [51]).Most customers need simple-to-use navigation. If they find aWeb site hard to navigate or it is too time-consuming to findwhat they need, they may simply stop browsing or even leave so as not towaste more time. In such cases, customers are less likely to respond to contextual marketing and a cus tomer-oriented strategy. Contextual marketing and customer orientation strat egies will be less likely to generate positive attitudinal satisfaction among users surfing complicated sites. The various associations discussed above are pre sented graphically in Figure 1.
H7: Perceived complexity of site design moderates the relationship between perceived importance of contextual marketing and satisfaction with Internet More specifically, perceived complexity of site design weakens this storefronts. relationship. H8: Perceived complexity of site design moderates the relationship between perceived importance of customer orientation and satisfaction with Internet More specifically, perceived complexity of site design weakens this storefronts. relationship.
Method
Data for this study were collected with an intercept survey method in a north eastern state of theUnited States. Several research interviewers were recruited and trained for the purposes of this project. They were instructed that the subjects had to be individuals familiar with the Internet through at least one year of on-line experience. Using this screening criterion for Internet use, re searchers excluded 37 participants. A total of 22 potential interviewees were either unwilling or unable to participate. As a result, from 239 interviews, 180 (valid response rate of 75.31% =180/239) were collected and questionnaires deemed complete and useful for the purposes of this research. A similar inter can be found in the literature cept-based survey methodology (e.g., [10,11]). 180 51 percent of the Internet users were the interviewed, subjects Among
female and 49 percent male. The respondents ranged in age from 19 to 53, with a mean of 23 years. Most of the users (80%) connected to the Web using local Internet service providers (e.g., Buffnet), and 15 percent used on-line service providers (e.g., AOL). On average, the interviewed users spent seven hours per week on the Web and had more than four years of on-line experi ence. In terms of shopping on-line, all the subjects had some purchase experi ence. More at least three than 75 percent of them reported having made purchases via theNet.
102 XUEMING LUO AND MOJTABA SEYEDIAN Privacy Concerns Site Complexity Contextual Marketing
Satisfaction
Customer Orientation Site Complexity

"Privacy Concerns
- Main Relationships . Figure Moderating Relationships of the Studies Relationships
1. A Model
Since
the
research
was
limited
to business-to-consumer
e-commerce,
re
spondents were instructed to report their evaluation of each statement based upon their experience with Internet storefront sites selling books, CDs, com Web puters, traveling, and similar items. The level of analysis with storefront sites is in line with the existing e-commerce literature (e.g., [49]). After all, Web as a whole have been utilized in customer attitudinal perceptions of the In particular, Ducoffe concluded that a gen the literature (e.g., [6,10,46,48]). Web advertising, rather than a focus on a specific on-line ad, eral approach to criteria account for con would help to determine whether any generalizable sumers' valuations of and attitudes toward Web ads [10]. scales in the final questionnaire were multiple items All themeasurement with Likert-type seven-point scales, anchoring at 1 ("strongly disagree") used in the study are found inAp and 7 ("strongly agree"). The measures pendix A. The perceived importance of contextual marketing was measured by a new in accordance with the established scale-development proce scale developed dures suggested by Churchill [7] and later revised by Anderson and Gerbing
103
contextual, and real-time concepts included in the contextual personalized, domain. marketing Exploratory factor analysis (maximum likelihood with varimax rotation) was then done on the items using a separate sample of 79 a respondents in pretest. To achieve better internal consistency reliability and various types of validity (e.g., convergent and discriminant validity through the use of confirmatory factor analysis), themeasurement was purified with this independent sample of 79 respondents. The number of items was finally reduced to six for the formal survey of the 180 respondents. The validity of in detail at the end of this section. Great care was taken the scale is discussed to achieve the construct face validity of the key measure of the perceived im portance of contextual marketing. for contextual marketing seems justified in that the The resulting measure contextual marketing practice, by definition, is characterized by utilizing multiple access points, such as wireless phones, PDAs, kiosks, and e-wallets,
[2]. In particular, a series of focus groups and interviews were conducted for scale-item generation, scale purification, and scale validation. For instance, to achieve the face validity of contextual marketing, the domain of the construct was carefully specified after consultation of published works on the theory of contextual marketing (e.g., [26,38]) and the theory of real-time marketing [32, interviews were conducted with some open-ended questions 36]. Qualitative in a semi-structured and undisguised questionnaire. As a result, a pool of 28 items was generated in order to capture the wireless, ubiquitous, relevant,
by proactively reaching customers wherever they are, by focusing on the right context and real-time value, and by being therewhenever and wherever your customer is ready to purchase. As a result, the final six-item scale assesses Web user perceptions of the importance of using wireless phones that connect to the Internet, developing features that "come to me" in real-time, using kiosks inmalls to find shopping discounts, using wireless devices to shop on-line, using e-wallets when checking out, and developing banner ads that pertain to personal interests and needs. The scale for customer orientation of e-business was developed based on in the literature [8, 35, 28]. In the strategic marketing the existing measures literature, the customer orientation scale is awell-established, widely accepted, and very influential construct. It has four items: assess the extent towhich e businesses should be concerned with customer satisfaction, build a long-term relationship with shoppers, put more emphasis on adding value for shop pers, and commit to serving user needs. an Privacy concerns were assessed though existing five-item Likert-type scale [30, 42, 43, 44, 45, 52]. Examples of the items on the scale include: "I am con cerned about the security of personal information," "I am worried about the security of financial transactions," "When sending e-mail, I feel concerned that "I detest that the it Web is may be read by someone without my knowledge," a haven for junk e-mail," and "I am concerned thatmy becoming personal information may be used without my consent." Since the factor analysis of these items (maximum likelihood with varimax rotation) found only one un derlying factor, a summated score of these five itemswas used in the analysis. The scale of site value consisted of three separate Likert-type items. Itwas a new scale developed on the basis of the existing measure of ad value [10].
104 XUEMING LUO AND MOJTABA SEYEDIAN in exchange theory, ad value refers to an overall representation of of advertising to consumers, or the extent towhich advertising is useful, important, and valuable to them [11]. Conceptually, ad value could be the basis for site value in that these two constructs both try to capture the degree towhich perceived benefits are delivered to consumers. Empirically, as reported in the advertising literature, the ad value scale achieves the de
Grounded theworth
valuable, useful, and important to them. The measure of site-design complexity consists of four items, developed on the basis of the three-item Likert-type scale of site design by Szymanski and Hise [49]. This measure assesses Web users' perceptions of statements like 'T try to avoid navigating complex Internet Web sites," "I like plain Web sites that take less time to load," "Presenting an uncluttered screen on the Web is me is check-out for when on-line." important," "Easy important shopping Site satisfaction was measured by five Likert-type items. This scale was on the two items used in Szymanski and Hise's developed by expanding study of e-satisfaction [49]. Examples of the items include "I feel satisfied with the convenience of Internet storefront sites," "I am satisfied with information on the Internet storefront sites," "I am satisfied with on-line products and ser vices," "Overall, I am pleased with my experience with Internet storefront sites," and "Overall, I am satisfied with my experience with Internet store
front sites."
sired reliability and face, discriminant, and convergent validity (cf. [10, 11]). The ad value scale was generalized by Chen and Wells to create an important e-commerce effectiveness metric: thewidely used scale of attitude toward a site [6]. Site value strives to assess the degree towhich users agree that a site is
Following Anderson and Gerbing's guidelines, all themeasurement mod els were evaluated with multiple criteria: unidimensionality, reliability, con struct validity, and convergent and discriminant validity [2]. Evidence was found for the internal consistency of all the constructs except complexity of Web design. As reported in Table 1,Cronbach's alpha was 0.82 for contextual strategy, and 0.84 for privacy con marketing, 0.84 for customer-orientation cerns. Site value and user satisfaction with Internet storefrontswere also found to possess sufficient reliability, because Cronbach/s alpha was 0.93 and 0.92,
respectively. Confirmatory factor analyses (CFA) were employed to test themeasure ment model with all the constructs. The CFA results supported the unidimen sionality, convergent validity, and discriminant validity of the six-factor measurement model after dropping one indicator of the contextual marketing construct. The loadings of all the items on their corresponding constructs (the details of the loadings can be found in Appendix A, which shows the CFA from the standpoint of structural equation modeling) results for themeasures were significant at p < 0.05 (t ranges from 3.10 to 28.81, as shown inAppendix A), demonstrating adequate convergent validity. Owing to the insignificance of themodification indices and estimated residuals fromCFA, unidimension was In addition, the discriminant validity of themeasure also achieved. ality model was supported by checking the pairwise correlations inTable 1 (correla tions range from 0.04 to 0.52, different from 1.0). Another approach, suggested by Anderson and Gerbing [2], confirmed the discriminant validity of the con
1.00
1.33 0.84 4.88
SATISF COMPLEX PRIVACY
1.00
4.62 0.31** 0.61
1.00
1.00 0.08 0.04
1.08 0.92 5.24
VALUE
0.76** 1.00 0.14 1.44 5.61 0.25** 0.93
CONTEXT CUSTORI a 0.82 0.84 0.34** 0.52** VALUE M 5.37 4.25 0.47** SATISF SD 1.11 1.02 0.28** CUSTORI 1.00 0.29** 0.31** COMPLEX 0.07 0.37** -0.06 PRIVACY Table Correlation 1. Matrix.
CONTEXT 1.00 ** p<0.01
106 XUEMING LUO AND MOJTABA SEYEDJAN
structs by means of parameter estimates, their associated f-values, and the av erage variance extracted. The overall model goodness-of-fit indexes also sup = = 640.35, p ([%2 284] ported the validity of the overall measurement model = = 0.907, the goodness-of-fit [GFI] 0.895, 0.000, comparative fit index [CFI] = error of 0.876, [AGFI] root-mean-square approxi adjusted goodness-of-fit mation [RMSEA] - 0.062).
Analysis
and Results
1 predicts that the perceived importance of contextual marketing Hypothesis is associated with satisfaction with Internet storefronts. As reported in Table 2,when site satisfaction is the dependent variable, the estimated coefficient of inmodel 1 is 0.17 (f - 2.45, p < 0.01). Therefore, HI is contextual marketing supported. The regression results also support H2 in that the coefficient of customer orientation is 0.42 (t = 6.25, p < 0.01).
Results of Site Value as a Mediator

mediation [4]. It involves three suggest a process to test for one the variable (site satisfaction) dependent regressing regression equations: on the independent variables (contextual marketing, customer-orientation (site value) on the independent strategy), the second regressing themediator variables, and the third regressing the dependent variable on both themedia tor and the independent variables. Specifically, the following three equations were estimated to testwhether site value mediates the effects of contextual on site and customer-orientation satisfaction. strategy marketing Baron and Kenny 1: Site satisfaction = q + ft, Contextual Marketing + ?,2 Model Customer Orientation + e{, Model 2: Site value = q, + ?^ Contextual Marketing + ?22Customer Orientation + e2; Model 3: Site satisfaction = q + ?^ Contextual Marketing + ?^2 Customer Orientation + b33 Site value + e3; to Baron and Kenny, four conditions must hold in order to es According effect: (1) the independent variable must have an impact tablish a mediation on the dependent variable in the first model, (2) the independent variable must have an impact on themediator in the second model, (3) themediator must have an impact on the dependent variable in the third model, and (4) the impact of the independent variable on the dependent variable must be less in the thirdmodel than in the second [4]. The results in Table 2 indicate, as predicted inH3 and H4, that site value mediates the associations between perceived importance of contextual mar and customer-orientation strategy and site satisfaction. Inmodel 1, the keting coefficients of contextual marketing and customer-orientation strategy are sig nificant, satisfying condition 1. Inmodel 2, the coefficients are also significant, satisfying condition 2. Inmodel 3, the coefficient of site value is significant,
0.71 12.19a
Site value Site satisfaction
0.21
0.46
? t ' ? Model 2 Model
0.33 0.02 1.67b 0.10 7.16? 3.25? 3
85.11? 40.58a 0.58 0.59 0.31 0.32
1 _ Model
j?2 0.25
F 29.06a Standardized Coefficients Table 2. Regression f-Statistics and Results.
Dependent Site satisfaction variables
Customer 0.42 6.25? Context 0.17 2.45? orientation marketing ? t variables Independent Site value 0.24 R2 adj.
0.05 ap < bp< 0.01 (one-tailed) (one-tailed)
108 XUEMING LUO AND MOJTABA SEYED1AN
model 3 and model 1 meeting condition 3.A comparison of the coefficients in indicates that the effects of independent variables are much less after adding the site value in the regression, as required by condition 4. In sum, these re sults suggest that site value is a mediator variable. In addition, it is worth noting that the total associations between perceived importance of contextual marketing (customer orientation) and site satisfaction should equal the sum effect. The total effects can be calculated by of the direct effect and mediated the formulas ?n + ?21 x ?33 = 0.07 + 0.21 x 0.71 = 0.32 for contextual marketing, and ?12 + ?22 x ?33 = 0.42 + 0.46 x 0.71 = 0.75, for customer orientation. Since these total associations are rather sizable, the potential influence of perceived importance of contextual marketing and customer orientation on site satisfac tion seemed to be strong. It should also be noted that a separate structural equation modeling (SEM) test of the combined model generated similar results for the hypotheses test B. The ing. The complete results of the SEM testwill be found inAppendix = structuralmodel's goodness-of-fit statistics lend support to the full model ([%2 = = = = CFI GFI AGFI RMSEA 0.000, 0.912, 348.94, p 0.905, 0.891, 113] role of the site value, in associations between 0.059). As a result, themediation contextual marketing and customer orientation strategies and site satisfac tion, is supported both by the SEM approach and the least-squares estimation in Table 2.
Results of Privacy Concerns and Complexity of

Site Design as Moderators rela moderated Sharma, Durand, and Gur-Arie suggest a process to test for one It too involves three tionships [41]. regression equations: regressing the on variable the variables (site satisfaction) (contex dependent independent tual marketing and customer-orientation strategy), a second regressing the on both themoderators and independent variables, and a dependent variable third regressing the dependent variable on themoderators, the independent variables, and the product of themoderators and independent variables. The following three equations are estimated: Model 4: Site satisfaction = a1 + ? u Contextual Marketing + ? 12 Customer Orientation + ex) + ? 2i Model 5: Site satisfaction ? (22 Contextual Marketing + ? 22 + Customer Orientation b23 Privacy Concerns + b24 Site Complexity + Model 6: Site satisfaction = a3 + ? 31 Contextual Marketing + ? 32 Cus + tomerOrientation Site Complexity + e3; ? 33 Privacy Concerns + ? 34 Sharma et al. note that ifamoderating effect exists, the coefficients (? 33, ? 34) should be significant from zero [41], and model 6 should have greater ex effect, planatory power thanmodel 2. Alternatively, if there is no moderating model 6 should not explain the variance of the dependent variable more than model 5, and the coefficients of the product (?33, ?34) should not be different
109
from zero. Thus, if the change in explained variance frommodel 5 tomodel 6 is not significant, model 4 and model 5 need to be compared in order to deter mine whether themoderator has a direct effect on the dependent variable.
H5 (H6) predicts that the associations between perceived importance of contextual marketing (customer-orientation strategy) and site satisfaction will be reduced when users have a high level of privacy concerns. The test results effect are reported in Table 3. Inmodel 6, the coefficients of of themoderating Contextual Marketing x Privacy and Customer Orientation x Privacy are not are not supported. significant. Therefore H5 and H6 H7 Furthermore, (H8) predicts that the effect of the perceived importance of contextual marketing (customer-orientation strategy) on site satisfaction will be reduced when e-businesses have complex site design. Inmodel 6, the x coefficients of Contextual Marketing Complexity and Customer Orienta tion x Complexity are -0.17 and -0.20, respectively. Since they are both sig nificant at the 0.01 level, H7 and H8 are supported.
Conclusion
and Future Research
a company a lesson in the past few Although e-commerce has taught many enormous it will offer years, opportunities in the future thanks to new tech a and Web development. Learning that Web site in and of itself does nology not equal an e-commerce strategy was a wake-up call. Putting strategic em on and acquiring utilizing superior marketing skills in order to obtain phasis customer knowledge and user satisfaction and loyalty are what makes aWeb winner. Creating a satisfying on-line experience for customers is one of the most important ways to develop a more competitive and profitable e-busi ness. Before very long the term "e-business" may no longer be used, because Web [50, 52]. every business will be an e-business using the Internet and the to fulfill the core objectives of business?delivering How business benefits a and value to customers in real-time and in the right context?will again be cus and of academic researchers. Instead of for top priority managers waiting tomers to come to their sites, e-businesses need touse the power of the Internet to reach the customers proactively. The contextual marketing approach of pro information to customers at the point of need in real-time viding personalized is the key to attracting repeat visits and thereby improving bottom-line profit ability. Web are not just selling channel. They are also a power The Internet and the ful tool forbuilding stronger and more loyal customer relationships. With the help of ubiquitous technology, customer needs and wants can be better under stood and satisfied with contextual solutions regardless of place and time. In of customer needs is the critical source of competitive timate knowledge a customer-orientation strategy may determine the For this reason, advantage. ultimate success of e-commerce (e.g., [27, 35]). In the virtual marketspace, the victorious companies will be the ones that build e-business models on the ba sis of understanding and satisfying core customers wherever they are located and whenever they need the product. Therefore, a customer-oriented strategy,
1.81b
-0.95 -2.42? -2.18? 6.27? -1.09 -0.15
-2.52? 0.31 0.28 9.63?
Model 6C
-0.07 -0.01 0.12 0.49 -0.15 -0.08 -0.17
-0.20
2.23? 6.36a -0.82 -1.38
0.26 0.25 15.44?
Model 5
-0.06 0.15 0.48 -0.10
(VIF effect the variables minimize multicollinearity of used to than 1.12 from 10). level less cMean-centered 3.48, critical ranges Standardized Coefficients 3. Table T-Statistics Regression the Moderation for and Test. 6.25? 2.45? 29.06? 0.25 0.24
Model 4
0.17 0.42
Independent variables
Context Complexity marketing * Customer Privacy orientation * Context Privacy marketing * Customer * Web Customer orientation Web complexity orientation marketing complexity Context Privacy R2 R2 adj.F
bp 0.05 < (one-tailed) 0.01 ?p< (one-tailed)
OF ELECTRONIC COMMERCE INTERNATIONALJOURNAL
111
combined with
e-commerce.
contextual marketing,
should be of critical importance
for
This study extends the e-commerce literature with several contributions: (1) it theorizes the association between perceived importance of contextual customer orientation and and site value as well as satis marketing strategies the impor faction, (2) it is the first empirical investigation to demonstrate tance and implications to the of contextual marketing, contributing applicability and generalization of real-time and contextual marketing theo ries, (3) it articulates and validates a contingency view of the perceived im portance of contextual marketing and customer-orientation strategy, extending from "Does contextual marketing or customer orientation matter?" to "When and how does contextual marketing or customer orientation matter more?" The study found that the associations between perceived importance of con textual marketing and customer orientation and e-satisfaction are moderated by the complexity of site design but not by consumer privacy concerns. These Web users. associations may carry out through the delivered value to
Managerial
Implications
This study has several implications for firms thatwish to build a successful future on the Internet. First, electronic marketers should understand that Web users are already information-overloaded. What they need most is relevant information provided in real-time at the point of need. This means that con textual marketing is important for the success of e-businesses. The winners in e-commerce will be the firms that can touch customers directly and individu are ready to purchase [3, 26]. Such firms will ally, in real-time, whenever they to have to become direct marketers, retargeting and tailoring theirmessages different customers in different contexts. Contextual marketing will give com panies a better chance to reach customers and improve their financial perfor mance by selling products at the point of need at the right place and time.As an example, consider Mobil's Speed Pass. It shows that customers will go miles out of theirway to find a Mobil gas station. Another example is the wireless carrier NIT DoCoMo's I-mode, which offerswireless access forhotel
reservations, on-line
is no more a panacea than any other approach. Failures textual marketing such as PointCast suggest thatmarketer-active (customer-passive) delivery of content may not meet all of the customer's needs on-line. This serves as a as a warning that the contextual marketing solution should not be regarded Second, e-businesses, like off-line businesses, should adopt a customer-ori entated strategy. Only Web sites that build e-business models based on meet ing customer needs and wants will survive and prosper. Ultimately, superior marketing skills and commitment to customers' long-term satisfaction will
guaranteed success.
flight
reservation,
and
much
more.
Nevertheless,
con
determine the future ofWeb businesses. The winning companies will be the ones thatmaster database-marketing tools and understand their customers' current and potential needs at the point of need.
Theoretical
Implications
A limitation of this study is that it only investigates the associations between importance of contextual marketing and site satisfaction from the perceived perspective ofWeb users [26, 32]. Future research might fruitfully evaluate these factors from the perspective ofWeb businesses. New views on e-prac tices and strategies will make itpossible to generalize the study's findings. The importance of customer orientation for e-commerce has been largely ig nored in the literature. The present study is an exploratory step in extending the theory ofmarket orientation into an on-line business situation [8, 27, 35, 49]. Webb, Webster, and Krepapa note that only a few studies evaluate mar ket-orientation strategy from the standpoint of customers [54]. The present study alleviates this deficiency by evaluating the perceptions ofWeb users. Additional research in the context of e-commerce may shed light on the syn the customer orientation of a marketing concept and the cus between ergy tomer resource life-cycle model (e.g., [15, 24, 37]). There is a great need for to test the evidence theory of customer relationship management empirical for enhancing competitiveness and creating a strategic advantage. Given the theoretical importance of e-satisfaction, future research should empirically in the areas of purchase intensity and fre explore its possible consequences behavior. The and of quency complaint study introduces site value as another measure ofWeb business effectiveness based on the ad value theory in the advertising literature [10,11]. Future research is needed tomodel other ante of site value (e.g., [1]). Finally, one may express cedents and consequences concern about the broad scope of the items in the contextual marketing scale. me" dimension and the "channel The scale has two dimensions, the "come to breadth" dimension (kiosks,Web, mobile), which defines contextual market a ing in broader context and also relates to the issue of on-line/off-line a integration. Future research should formulate narrower definition, focusing on what actually happens in contextual marketing rather than on the plat forms (wireless, kiosks).
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a Standard (variance
0.82 (0.76) 0.75b
(0.81) 0.59b 0.84
(0.88) 0.76b 0.92
0.93
t weight value extracted) 0.94 14.11 0.74 10.51 0.74 10.57 0.95 14.21
0.68 8.38 0.74 9.15 0.75 9.28 0.60 7.41
0.89 8.55 0.57 6.39 0.86 8.42
for It important is develop interests to banner sites that pertain ads personal and needs my in right context
It is important to use wireless phones that connect to Internet the to shop online in any place
for It important is develop to sites that features real-time "come in me"
CFA Results the of Measures Measurement patha model
kiosks It is in critical find malls to discounts shopping use Using is devices important wireless to on-line shop me I feel to it critical is an use e-wallet when checking outc
Overall Ipleased with experience Internet storefront am my on sites Overall am satisfied with Imy on experience Internet storefront sites build Internet should long-term sites storefront with relationship shoppers a Internet storefronts should put emphasis more on adding value to shoppers Internet storefronts should be concerned with customer satisfaction Isatisfied feel with the convenience of Internet storefront sites with on-line products services and selection am I with Internet satisfied information storefront sites am onIsatisfied Internet to storefronts commit should serving needs user
Appendix A
Contextual marketing
Customer orientation Site satisfaction Site value
(0.88)
(0.80) 0.84
(0.53) 0.61
15.21 14.65 28.81 17.47 10.18 4.49
3.55 3.10 3.89
Goodness-of-fit X2(284) CFI 0.000, 640.35, GFI 0.907, AGFI 0.895, 0.876, RMSEA 0.062. statistics: p = a = When I it feel e-mail, sending that be by 0.88 knowledge concerned without read may my someone Ithat information be concerned personal am without used 0.34 my consent may Presenting Internet uncluttered storefront is 0.37 sites important an screen on final dropped Item the in to due analysis reliability poor validity. and c was
Ithe about concerned information personal 0.87b of security am Iabout worried financial the transactions security of 0.67 am Itry to avoid navigating Internet 0.37b complex storefront sites I detest is Web that the becoming junk haven for 0.85 e-mail a like plain I Internet time take to that sites less storefront load 0.48 is important Easy check-out for 0.75 on-line when shopping me Internet storefront sites very are valuable to me 0.94bInternet storefront sites are very important to me 0.84 Internet storefront sites are very useful to me 0.96
Complexity design site of Privacy concerns Fixed b parameter.
Figure Bl. SEM Test of the Mediating

Notes: AGFI = Goodness-of-fit 0.891 ;RMSEA statistics: %2[ = 0.059. = 113) =
Role of Site Value

p = 0.000; CFI = 0.912; GFI
348.94;
0.905;
Appendix
SEM Results of the Combined Model

A separate structural equation modeling (SEM) test of the combined model was also carried out. The mediating role of site value (in the associations be tween perceived importance of contextual marketing and customer-orienta tion strategies and site satisfaction) is supported by both the SEM approach and the regression approach. The results of the SEM test are reported in Fig
ure Bl.
XUEMING LUO (luo@fredonia.edu) is an assistant professor in theDepartment of Marketing in the College of Business Administration at theUniversity of Texas at he was on the Arlington. Before joining theUniversity of Texas atArlington faculty, facultyof State University ofNew York at Fredonia. He obtained his doctoral degree
of business clude administration from Louisiana Dr. Luo Strategic Marketing, ternational Marketing/Business. E-Business Tech University. His research interests and in Strategies, Knowledge Management, in the Journal has published Business of In
InternationalJournalofResearch in Marketing, Journalof Advertising Research, Industrial Interactive Com Journal of Marketing Management, Advertising, and Journalof Internet
merce, among others.
Research,
MOJTABA SEYEDIAN
ment of Business SUNY from
Administration
(seyedian@fredonia.edu) is currently theChair of the Depart

at SUNY Fredonia. teaching He has a Ph.D. in Economics are Dr. Seyedian's and research interests in
multidisciplinary
Binghamton. areas.

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Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical Analysis Author(s): Xueming Luo and Mojtaba Seyedian

Contextual Marketing and Customer-Orientation Strategy for E-Commerce: An Empirical Analysis

96 XUEMING LUO AND MOJTABA SEYEDIAN

and other offerings through Web

links. The strategicWeb

INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

INTERNATIONALJOURNAL OF ELECTRONIC COMMERCE

Role of Site Value

200 XUEMING LUO AND MOJTABA SEYEDIAN

Role of Privacy Concerns

INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

Role of the Complexity of Site Design

Customer Orientation Site Complexity

- Main Relationships . Figure Moderating Relationships of the Studies Relationships

INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

1.33 0.84 4.88

SATISF COMPLEX PRIVACY

4.62 0.31** 0.61

1.00 0.08 0.04

1.08 0.92 5.24

0.76** 1.00 0.14 1.44 5.61 0.25** 0.93

CONTEXT 1.00 ** p<0.01

106 XUEMING LUO AND MOJTABA SEYEDJAN

Results of Site Value as a Mediator

Site value Site satisfaction

? t ' ? Model 2 Model

0.33 0.02 1.67b 0.10 7.16? 3.25? 3

85.11? 40.58a 0.58 0.59 0.31 0.32

F 29.06a Standardized Coefficients Table 2. Regression f-Statistics and Results.

Dependent Site satisfaction variables

0.05 ap < bp< 0.01 (one-tailed) (one-tailed)

108 XUEMING LUO AND MOJTABA SEYED1AN

Results of Privacy Concerns and Complexity of

INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

and Future Research

-0.95 -2.42? -2.18? 6.27? -1.09 -0.15

-2.52? 0.31 0.28 9.63?

-0.07 -0.01 0.12 0.49 -0.15 -0.08 -0.17

2.23? 6.36a -0.82 -1.38

0.26 0.25 15.44?

-0.06 0.15 0.48 -0.10

bp 0.05 < (one-tailed) 0.01 ?p< (one-tailed)

OF ELECTRONIC COMMERCE INTERNATIONALJOURNAL

should be of critical importance

112 XUEMING LUO AND MOJTABA SEYEDIAN

OF ELECTRONIC COMMERCE INTERNATIONAL JOURNAL

Marketing Research, 28, 2 (1991), 190- 201.

224 XUEMING LUO AND MOJTABA SEYEDIAN

0.82 (0.76) 0.75b

(0.81) 0.59b 0.84

(0.88) 0.76b 0.92

0.68 8.38 0.74 9.15 0.75 9.28 0.60 7.41

0.89 8.55 0.57 6.39 0.86 8.42

for It important is develop to sites that features real-time "come in me"

CFA Results the of Measures Measurement patha model

Customer orientation Site satisfaction Site value

15.21 14.65 28.81 17.47 10.18 4.49

3.55 3.10 3.89

Complexity design site of Privacy concerns Fixed b parameter.

118 XUEMING LUO AND MOJTABA SEYEDIAN

Figure Bl. SEM Test of the Mediating

Role of Site Value

SEM Results of the Combined Model

(seyedian@fredonia.edu) is currently theChair of the Depart

0.76 1.00 0.14 1.44 5.61 0.25 0.93