Chapter 3

Internet Consumers and

Market Research

© Prentice Hall, 2000 1

 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
 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
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
Stimuli Buyers’ Decisions
reaction to 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

 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
 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
 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
 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
 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
 Consumer Buying Patterns

In last six months of 1998:

76% filling out a form on the Web
Experience:
50
< 1 Year

Online purchases are more than 1 - 3 Years

> 4 Years

paper catalog purchases for Net 40

buyers
32% spent between $100.00- 30

Percent
$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 Spe nt on We b

in Last 6 M onths of 1998
© Prentice Hall, 2000 10
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
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

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
 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

 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

 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
 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
 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

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
 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
 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

 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
 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
 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
 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 Research

and methodology, Data Results,
Research Data collection collection, Recommendations,
objectives plan Data analysis Implementation

© Prentice Hall, 2000 25

 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
 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
 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
 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
 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
 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
© Prentice Hall, 2000 31
 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
 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

 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
 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
 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
© Prentice Hall, 2000 36
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
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
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
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
 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
 Organizational Buyer’s Behavior (cont.)
Individual
Influences
Age; gender; ethnicity;
education, lift style;
psychological; knowledge;
values; personality
Interpersonal Organizational
Influences Influences
Authority; status; Policies and procedures;
persuasiveness organization structure;
centralized/decentralized;
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 support service
Payments, Web design, FAQ,E-mail,
delivery Intelligent- Call Centers,
© Prentice Hall, 2000 agentsHall, 2000 One-to-one
© Prentice 42
 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