copyright © 2015 springer education 1 lecture 3 ref: chapter 9 c onsumer behaviour and m arketing...

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Lecture 3ReF: chapter 9

CONSUMER BEHAVIOUR AND MARKETING AND ADVERTISING IN

E-COMMERCE

LEARNING OBJECTIVES

1. Describe factors that influence online consumer

behaviour.

2. Understand the decision-making process of online

consumer purchasing.

3. Discuss the issues of e-loyalty and e-trust in electronic

commerce (EC).

4. Understand segmentation and how companies are

building one-to-one relationships with customers.

5. Explain how consumer behaviour can be analyzed for

creating personalized services.

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LEARNING OBJECTIVES

6. Understand consumer market research in e-commerce.

7. Describe the objectives and characteristics of Web

advertising.

8. Describe the major advertising methods used on the

Web.

9. Learn mobile marketing concepts and techniques.

10. Describe various online advertising strategies.

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9.1 LEARNING ABOUT ONLINECONSUMER BEHAVIOR

Consumers can be divided into two groups:1. Individual consumers.2. organizational buyers (including governments,

private corporations, resellers, and non-profit organizations).

These two types of buyers tend to have different purchasing behaviours and usually are analyzed differently.

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9.1 LEARNING ABOUT ONLINE CONSUMER BEHAVIOR

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Companies are operating in an increasingly

competitive environment.

Therefore, sellers try to understand

customers’ needs and influence them to buy

their products and services.

Customer acquisition and retention are key

success factors, both offline and online.

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A Model of Online Consumer Behaviour Market researchers have tried to understand

consumer shopping behaviour, and develop various models to summarize their findings.

The purpose of designing a consumer behaviour model is to help vendors understand how a consumer makes a purchasing decision.

Through understanding the decision process, a business may be better able to influence the buyer’s decision through improved product design or advertising.

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A Model of Online Consumer Behaviour

It includes two major parts:

1. Influential factors.

2. The attitude-behavior decision process.


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A Model of Online Consumer Behaviour1. Influential factorsFive dimensions are considered to affect

consumer behavior:1. consumer characteristics.2. environmental characteristics.3. merchant and intermediary

characteristics. (NOT controllable by the sellers).4. Product/service characteristics.5. EC system. (controllable by the sellers).


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2. The attitude behavior process:

The decision-making process, which usually starts with awareness of the situation and a positive attitude and ends with the buyer’s decision to purchase and/or repurchase.

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9.2 THE CONSUMERPURCHASING DECISION

PROCESS

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9.2 THE CONSUMER PURCHASING DECISION PROCESS

A GENERIC PURCHASING-DECISION MODEL The purchasing decision process is another major

element in analyzing consumer behaviour:– Consist of five major phases:

1. Need identificationConvince the consumer that the product or service

the seller offers will fill the gap between the actual and desired need.

2. Information search– Product brokering (deciding what product to

buy).– Merchant brokering (Deciding from what

merchant to buy a product).

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• A GENERIC PURCHASING-DECISION MODEL3. Evaluation of Alternatives

The consumer will use the collected of information to develop a set of criteria to evaluate and compare alternatives.

4. Purchase and Deliveryafter evaluating the alternatives, consumer will make the purchasing decision, arrange payment and delivery.

5. Post-purchase BehaviorCustomer services and evaluation of usefulness of the product (e.g., “this product is really great!”).

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Players in the Consumer Decision Making Process

The following are the five major roles:

1. Initiator: The person who recognizes and suggests the

need to buy a specific product or service.

2. Influencer: The person who tries to convince other people

to make a purchase.

3. Decider: The person who makes the final buying decision.

4. Buyer: The person who purchases the product or service

and pays for it.

5. User: The customer that purchases and uses the product.

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9.3 LOYALTY, SATISFACTION,AND TRUST IN E-COMMERCE

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9.3 LOYALTY, SATISFACTION, AND TRUST IN E-COMMERCE

Customer Loyalty:

The chance that previous customers will continue to repurchase or repatronize a product/ service from the same vendors over an extended period of time.

Increased customer loyalty can be accomplished by treating people in the way that they expected to be treated (or better).

Loyalty can result in cost savings and increased revenue in various ways:

1. lower marketing and advertising costs.

2. lower transaction costs.

3. lower customer turnover expenses.

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E-loyalty :

refers to a customer’s loyalty to an e-tailer or a manufacturer that sells directly online, or to online loyalty programs.

Factors may affect customer loyalty and e-loyalty: The quality of the relationship between retailers and

their customers. Customer loyalty is composed of trust, satisfaction,

and commitment. Satisfaction and trust are particularly important

because they will lead to commitment.

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Satisfaction in EC: Satisfaction is one of the most important success

measures in the B2C online environment which lead to higher loyalty.

A framework for online consumer satisfaction by correlating the end-user satisfaction perspective with:

1. The service quality.

2. System quality.

3. Information quality .

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Trust in general:

The willingness of one person to believe in the actions taken by another person. It is a perception variable.

Trust in EC There are several definitions of trust in e-commerce

since there are different types of trust. Examples are: Consumer trust in sellers. Consumer trust in the computerized system. Trust between buyers and sellers. Trust in foreign trading partners. Trust in EC intermediaries. Trust in online advertisements. Most EC trust concentrate on consumer trust.

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EC Trust Models Several models are available to explain the factors

that may affect online trust. E.x., a research done to examined the various

aspects of EC trust and developed a cause-effect framework.

According to this model, the level of trust is determined by three main categories of factors:

1. Trustworthiness of Internet merchants.

2. Shopping channels.

3. Structural assurance associated with the business and regulatory environment.

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EC Trust Models

How to Increase Trust in EC:

Strategies for building consumer trust in EC :

Improve Your Website.

Objective Third-Party Seals.

Establish Trustworthiness.

Online Word of Mouth.

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9.4 MASS MARKETING,MARKET SEGMENTATION,AND RELATIONSHIPMARKETING

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Online marketing is different from traditional

marketing whereby online customers can be

individually identified and targeted.

This individually targeted marketing is called one-to-

one marketing or personalized marketing.

It is a part of the relationship marketing that treats

each customer in a unique way to fit the profile and

needs of that customer.

9.4 MASS MARKETING, MARKET SEGMENTATION, AND RELATIONSHIP MARKETING

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Traditional marketing approaches:

1. Mass marketing.

2. Market segmentation.

3. Relationship (one-to-one) marketing.

Mass Marketing and Advertising

Traditionally, marketing efforts were designed to attract everyone in the market (the “masses”).

E.x., using a newspaper or TV ad usually means one-way communication.

E.x., Putting banner ads on an Internet portal so that everyone who accesses the website can see the message is a typical example of online mass marketing.


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Market segmentation:

The strategy that involves dividing a large group of consumers into smaller segments and then implementing suitable advertisements to target each segment.

Criteria for Market Segmentation

For effective market segmentation, the following are common criteria that companies use:

1. Geographic. Region; size of city, county, population density; climate and language.

2. Demographic. Age, occupation, gender, education, family size, religion, race, income, nationality and urban.

3. Psychological (lifestyle). Social class, lifestyle, personality, activities, values, and attitudes.


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Criteria for Market Segmentation:

Psychological (lifestyle). Social class, lifestyle,

personality, activities, values, and attitudes.

4. Cognitive, affective, behavioural. Attitudes,

benefits, loyalty status, readiness stage, usage rate,

perceived risk, user status, innovativeness, usage

situation, involvement, Internet shopping experience.

5. Profitability. Valued customers are placed

6. Risk core. High or low-risk customers are placed in a

special category.


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Relationship (One-to-One) Marketing

Relationship marketing is different from traditional

marketing in that it focuses on building long-term

relationships with customers.

To achieve this, the seller must have a much deeper

understanding of its customers on a one-to-one basis.

By obtaining the information faster, easier, and at a

lower cost for online customers.

When such information is analyzed, it becomes

valuable for one-to-one marketing.


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Relationship (One-to-One) Marketing

How One-to-One Relationships are Practiced:

Markets should apply a cyclical, four phase process in

order to fulfill their goals of managing relationships

with the individual customer.


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9.5 PERSONALIZATIONAND BEHAVIORALMARKETING

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9.5 PERSONALIZATION AND BEHAVIORALMARKETING

There are three generic strategies for one-to-

one marketing:

1. Personalization.

2. Behavioural targeting.

3. Collaborative filtering.

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1) Personalization:

The matching of advertising content and vendors’ services with customers based on their preferences and individual needs.

1. Using Personalized Techniques to Increase Sales

Vendors to provide personalized services to customers in order to increase customer satisfaction and loyalty.

E.x., Amazon.com, which provides many personalized services.

The most common activity is product recommendations.

2. Web Cookies for Data Collection

Cookies are small files sent from a website and stored in a designated area in your computer. They allow companies to save certain information for future use.

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2) Behavioural Targeting uses Consumer browsing behaviour information,

and other information about consumers…

To design personalized ads that may influence consumers better than mass advertising does.

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3) Collaborative Filtering

When new customers come to a business, it would be useful if a company could predict what products or services are of interest to them without asking or viewing their previous records.

This method is called collaborative filtering.

Using proprietary formulas, collaborative filtering automatically connects the preferences and activities of many customers that have similar characteristics to predict preferences of new customers and recommend products to them.

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9.6 MARKET RESEARCHFOR E-COMMERCE

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9.6 MARKET RESEARCH FOR E COMMERCE

To sell more effectively, it is important to conduct proper

market research to find information and knowledge about

consumers and products. Market researchers:

Gathering information about competition, regulations, pricing,

strategies, and consumer behaviour.

The market researcher’s goal is to

1. Identify marketing opportunities and problems.

2. Provide input for marketing planning.

3. Find out how to influence the purchasing process.

4. Evaluate the success of promotions and advertisements.

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Objectives and Concepts of Online Market Research:

To find information that describes the relationships between customers, products, marketing methods and marketers.

Market research assists a firm in both their marketing and product mix decisions.


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Representative Market Research Approach

Information related to customers can be collected by:

1. Soliciting information from customers online (e.g.,

via interviews, questionnaires, use of focus groups,

or blogging).

2. Observing what customers are doing on the Web by

using transaction logs and cookies.

3. Using data, text, and Web mining, or collaborative

filtering techniques to analyze the available data.


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Representative Market Research Approach

Data Collection and Analysis.

Online Surveys.

Web-Based Surveys.

Online Focus Groups.

Hearing Directly from Customers.

Data Collection in Social Networks and Other Web 2.0

Environments.


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Observing Customers’ Movements Online

To avoid some of the problems of online surveys, some marketers choose to learn about customers by observing their behaviour.

1. A transaction log (for Web applications):

A user file that records the user’s activities on a company’s website from the computer log.

2. Cookies.

3. Web Bugs:

Tiny (usually invisible) objects concealed in a Web page or in e-mail messages. They transmit information about the user and his/her movements to a monitoring site (e.g., to find out if the user has viewed certain content on the web page).


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Observing Customers’ Movements Online

4. Spyware:

Software that enters your computer like a virus does, without your knowledge. It then enables an outsider to gather information about your browsing habits.

5. Web Analytics:

Dealing with the monitoring, collecting, measuring and evaluating, and reporting tasks related to Internet data and activities.

6. Clickstream data:

data that describe which websites users visit, in what order, and the time spent on each. This is done by tracking the succession of “clicks” each visitor makes.

7. Web mining:

The use of data mining techniques for both Web content and usage in Web documents in order to discover patterns and hidden relationships.


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9.7 WEB ADVERTISING

Internet advertising

The delivery of ads to Internet users in order to influence people to buy a product or a service.

is growing very rapidly, especially in B2C, and companies are changing their advertising strategies to gain a competitive edge.

Three types of Internet ads:

1. Search.

2. Display/banner ads.

3. Mobile ads. The Advertising Cycle

Many companies are treating advertising as a cyclical process.

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9.7 WEB ADVERTISING

Basic Internet Advertising Terminology: Ad views: The number of times users call up a page that

has a banner on it during a specific period.

Button: A small banner that is linked to a website; may contain downloadable software.

Click (ad click): A count made each time a visitor clicks on an advertising banner to access the advertiser’s website.

CPM (cost per mille, i.e., thousand impressions):

The fee an advertiser pays for each1,000 times a page with a banner ad is shown.

Conversion rate: The percentage of clickers who actually make a purchase.

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9.7 WEB ADVERTISING

Basic Internet Advertising Terminology: Click-through rate/ratio (CTR): The percentage of

visitors who are exposed to a banner ad and click on it.

Hit: A request for data from a Web page or file.

Landing page: The page a viewer is directed to after having clicked on a link. In online marketing, this page is used to convert the person from a viewer to a buyer.

Page : An HTML (Hypertext Markup Language) document that may contain text, images, and other online elements, such as Java applets and multimedia fi les; may be generated statically or dynamically.

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9.7 WEB ADVERTISING

Advertising Online and Its Advantages: Cost. Online ads usually are cheaper than ads in

traditional media. Media richness. Web ads can include rich and

diversified media (e.g., videos, animation). Easy updating. Updating can be done quickly and

inexpensively. Personalization. Web ads can be either one-to- one

or addressed to population segments. Location-based. Using wireless technology and GPS,

Web advertising can be location based. Linking to shopping. It is easy to link from an online

ad to a vendor’s web store. Usually, it can be done in one click.

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9.8 ONLINE ADVERTISING METHODS: FROM E-MAIL TO SEO AND VIDEO ADS

1. Classified Ads

These ads usually use text, but lately may include photos. The ads are grouped according to classification (e.g., cars, rentals).

2. Display Ads

These are illustrated advertisements that use graphics, logos, colors, or special designs. These ads are usually not classified, but they can be combined.

3. Interactive Ads

These ads use online or offline interactive media to interact with consumers and to promote products, brands, and services.

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4. Banner:

A display that is used for advertising on a Web page (words, logos, etc.). A banner ad is frequently linked to an advertiser’s Web page. When users “click” on the banner, they are transferred to the advertiser’s site.

Banner Swapping:

Banner swapping means that company A agrees to display a banner of company B in exchange for company B’s displaying company A’s banner.

Banner exchanges :

Marketplaces that allow multiple websites to barter space for banners. Such an intermediary finds partners for such trades.

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5. Pop-up ad (ad spawning):

Appears due to the automatic launching of a new browser window when a visitor accesses or leaves a website.

6. Pop-Up Videos:

7. E-mail Advertising:

The use of e-mails for sending commercial messages to users.

8. Search Engine Advertisement and Optimization:

Placing online ads on Web pages that show results from querying a search engine.

9. Keyword Advertising:

Links the appearance of ads with keywords specified by the advertiser.

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Search engine optimization (SEO):

A process that improves the visibility of a

company or brands on the results page

displayed by a search engine.

SEO is performed in all types of online

searches, including video search, social

network search, and image search.

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9.9 MOBILE MARKETING AND ADVERTISING

Mobile marketing :

Frequently defined as the use of mobile devices and wireless infrastructure as a means of marketing and advertising.

Mobile marketing takes several forms, such as using SMS (e.g., Twitter), as well as games and videos.

Mobile Advertising:

“Advertising tailored to and delivered through wireless mobile devices such as smart phones (e.g. Blackberry, iPhone, Android, etc.), feature phones (e.g. lower-end mobile phones capable of accessing mobile content), and media tablets (e.g. iPad, Samsung Galaxy Tablet, etc.).”

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One solution to the flood of ads that people receive via e-mail that is used by advertisers is:

Permission advertising or permission marketing:

in which users register with vendors and agree to accept advertisements.

Affiliate Marketing and Advertising:The revenue sharing model in which an

organization refers consumers to a seller’s website.

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Developing an Online Advertising Plan:

1. Determine the goal of the advertising Project.

2. Identify target customers.

3. Choose media and advertising tools.

4. Develop action and implementation plans.

5. Develop performance measurement and

monitoring plans.

6. Execute plans and evaluate performance.

copyright © 2015 springer education 1 lecture 3 ref: chapter 9 c onsumer behaviour and m arketing...

Documents

consumer characteristics

consumer behaviour model

consumer shopping behaviour

consumer market research

attitude behavior process

springer education9

ecommerce learning objectives

buyers decision