Consumer Behaviour , Customer Service & Advertising

1. Consumer Behaviour, Customer Service & Advertising

2. Learning Objectives • Describe the factors that influence consumer behavior online • Understand the decision-making process of consumer purchasing online • Describe how companies are building one-to-one relationships with customers • Discuss the issues of e-loyalty and e-trust in EC • Explain how personalization is accomplished online • Describe consumer market research in EC • Explain the implementation of customer service online and describe its tools • Describe the objectives of Web advertising and its characteristics

3. EC Consumer Behaviour Model

4. Consumer Behavior Online • Consumer types • Individual consumers who commands most of the media’s attention • Organizational buyers • Governments and public organizations • Private corporations • Resellers • Consumer behavior viewed in terms of: • Why is the consumer shopping? • How does the consumer benefit from shopping online?

5. Variables in the Purchasing Environment • Social variables • People are influenced by family members, friends, co-workers, “what’s in fashion this year” • Cultural/community variables • Where the consumer lives • Other environmental variables: • Available information, government regulations, legal constraints, situational factors

6. Personal CharacteristicsPersonal Differences • Age and gender • Marital status • Educational level • Ethnicity • Occupation • Household income • Personality • Lifestyle characteristics

7. Consumer Purchasing Decision Making • Roles people play in decision-making • Initiator • suggests/thinks of buying a particular product/service • Influencer • advice/views carry weight in making a final buying decision • Decider • makes a buying decision or any part of it • Buyer • makes the actual purchase • User • consumes or uses a product or service

8. General Purchasing Decision-Making Model • Five major phases of a general model • Need identification • Information search • Evaluation of alternatives • Purchase and deliver • After-purchase evaluation

9. How One-to-One Relationships Are Practiced • Relationships as a two-way street: • Customer information is collected and placed in a database • Customer’s profile is developed • Generate “four P’s” of marketing: • Product Place • Price Promotion

10. How One-to-One Relationships Are Practiced [2] • Doing business over the Internet enables companies to: • Communicate better with customers • Understand customers’ needs and buying habits better • Improve and customize their future marketing efforts

11. The New Marketing Model

12. Personalization • Personalization • the matching of services, products, and advertising content to individual consumer • User profile • the requirements, preferences, behaviors, and demographic traits of a particular customer • Cookie • a data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site

13. Personalization [2] • Major strategies used to compile user profiles include: • Solicit information directly from the user. • Use cookies or other methods to observe what people are doing online • Perform marketing research • Build from previous purchase patterns

14. Collaborative Filtering • Collaborative filtering • a personalization method that uses customer data to predict, based on formulas derived from behavioral studies, what other products or services a customer may enjoy • predictions can be extended to other customers with similar profiles • Variations of collaborative filtering • Rule-based filtering, content-based filtering, activity-based filtering • Legal and ethical issues • Privacy issues • Permission-based personalization tools

15. Customer Loyalty & E-Loyalty • Customer loyalty • Degree to which customer stays with vendor or brand • Important element in consumer purchasing behavior • One of the most significant contributors to profitability • E-loyalty • customer’s loyalty to an e-tailer • Learn about customers’ needs • Interact with customers • Provide customer service

16. Trust in EC • Trust • psychological status of involved parties who are willing to pursue further interactions to achieve a planned goal • EC vendors must establish high levels of trust with current and potential customers • Particularly important in global EC transactions • Level of trust determined by: • Degree of initial success experienced with EC • Well-defined roles and procedures for all parties involved • Realistic expectations as to outcomes from EC

17. How to Increase EC Trust • Trust can be decreased by: • Any user uncertainty regarding the technology • Lack of initial face-to-face interactions • Lack of enthusiasm among the parties • Brand recognition is very important in EC trust • EC security mechanisms can also help solidify trust

18. Market Research for EC • Goal–find information and knowledge that describes relationships among • Consumers • Products • Marketing methods • Marketers • Aim—find relationship between • Discover marketing opportunities and issues • Establish marketing plans • Better understand the purchasing process • Evaluate marketing performance

19. Market Research for EC [2] • Economy • Industry • Firms • Products • Pricing • Distribution • Competition • Promotion • Consumer purchasing behavior • Market research includes gathering information about:

20. Market Research for EC [3] • Various tools are used to conduct consumer market research: • Questionnaires • Surveyors • Telephone surveys • Focus groups • Important first to understand how groups of consumers are classified

21. Market Segmentation • Market segmentation • Process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales • Geography Demographics • Psychographics Benefits sought • Segmentation is done with the aid of tools: • Data modeling • Data warehousing

22. Conducting Market Research Online • Powerful tool for research regarding: • Consumer behavior • Discover of new markets • Consumer interest in new products • Internet-based market research • Interactive—allowing personal contact • Gives better understanding of customer, market, and competition

23. What Are We Looking For in EC Market Research? • Major factors used for prediction are: • Product information requested • Number of related e-mails • Number of orders made • What products/services are ordered • Gender • Online market research attempts to find: • Purchase patterns for individuals and groups • Factors that encourage online purchasing • How to identify real buyers and browsers • How an individual navigates • Optimal Web page design

24. EC Market Research [2] • Interactive Internet-based market research • Allows personal contact with customers • Provides marketing organizations with greater ability to understand customer, market, and competition • Identify early shifts in product and customer trends • Enables marketers to identify products and marketing opportunities • Develop products that customers really want to buy

25. Online Market Research Methods • Web-based surveys • Free software to create survey forms and analyze results is available at • supersurvey.com • websurveyor.com • Online focus groups • Help overcome some problems that limit the effectiveness of Web-based surveys (sample size, partial responses)

26. Online Market Research Methods [2] • Tracking customer movements • Learn about customers by observing their behavior rather than by asking them questions • Transaction • Clickstream behavior • Cookies • Web bugs

27. Limitations of Online Market Research Methods • Accuracy of responses • Loss of respondents because of equipment problems • Ethics and legality of Web tracking • Focus group responses can lose something in the translation from an in-person group to an online group • Eye contact and body language are lost • Anonymity is necessary to elicit an unguarded response

28. Data Mining • Data mining • the process of searching a large database to discover previously unknown patterns; automates the process of finding predictive information • New business opportunities generated by conducting: • Automated prediction of trends and behaviors • Automated discovery of previously unknown patterns and relationships

29. Data Mining [2] • Data mining tools and techniques: • Neural computing • Intelligent agents • Association analysis • Sample data mining applications • Retailing and sales distribution • Banking Broadcasting • Airlines Marketing

30. Web Mining • Web mining • application of data mining techniques to discover meaningful patterns, profiles, and trends from both the content and usage of Web sites • Web content mining • Web usage mining • Web mining is critical for EC due to the large number of visitors to EC sites

31. Limitations of Online Market Research • Lack of representativeness in samples of online users • Online shoppers tend to be wealthy, employed, and well educated • results may not be extendable to other markets • The right kind of sampling is achieved through verification of target audience or demographic • Anonymity causes a loss of information about demographics and characteristics of the respondents

32. Delivering Customer Servicein Cyberspace • Customer service • A series of activities designed to enhance customer satisfaction (the feeling that a product or service has met the customer’s expectations) • Traditional: do the work for the customer • EC delivered: gives tools to the customer to do the work for him/herself • E-service • Customer services supplied over the Internet • Foundation of service • Customer-centered services • Value-added services

33. Delivering Customer Servicein Cyberspace [2] • Value chain for Internet service • Customer acquisition (pre-purchase support) • Customer support during purchase—provides a shopping environment that is efficient, informative, productive • Customer fulfillment (purchase dispatch)—timely delivery • Customer continuance support (post- purchase)—maintain the customer relationship between purchases

34. Customer Relationship Management • Customer relationship management (CRM) • A customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company • Building a customer-centered EC strategy • Focus on the end customer • Systems and business processes designed for ease of use • Foster customer loyalty

35. CRM [2] • Actions for successful EC strategy • Deliver personalized services • Target the right customers • Help the customers do their jobs • Let customers help themselves • Streamline business processes that impact the customers • “Own” the customer ’s total experience by providing every possible customer contact • Provide a 360-degree view of the customer relationship

36. Customer Service Tools • Personalized Web pages • Used to record purchases and preference • Direct customized information to customers efficiently • E-mail and automated response • Disseminate general information • Send specific product information • Conduct correspondence regarding any topic (mostly inquiries from customers)

37. Customer Service Tools [2] • Call center • A comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Telewebs—call centers that combine Web channels with portal-like self-service; combine • Justifying CRM programs—two problems • Most of the benefits are intangible • Substantial benefits reaped only from loyal customers, after several years

38. Metrics • Response times • Site availability • Download times • Timeliness • Security and privacy • On-time order fulfillment • Return policy • Navigability • Metrics—measures of performance; may be quantitative or qualitative

39. Web Advertising • Advertising • An attempt to disseminate information in order to affect a buyer-seller transaction • Interactive marketing • Marketing that allows a consumer to interact with an online seller • Two-way communication and e-mail capabilities • Vendors also can target specific groups and individuals • Enables truly one-to-one advertising

40. Internet Advertising Terminology • Ad views • Number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views. • Button • A small banner that is linked to a Web site • Page • HTML document • Click • A count made each time a visitor clicks on an advertising banner to access the advertiser ‘s Web site (ad clicks and click throughs)

41. Internet Advertising Terminology [2] • CPM (cost per thousand impressions) • fee an advertiser pays for each 1,000 times a page with a banner ad is viewed • Hit • request for data from a Web page or file • Visit • a series of requests during one navigation of a Web a site; a pause of request for a certain length of time ends a visit

42. Why Internet Advertisement? • 3/4 of PC users gave up some television time • Well educated, high-income Internet users are a desired target for advertisers • Internet is by far the fastest growing communication medium • Advertisers are interested in a medium with such potential reach, both locally and globally

43. Why Internet Advertisement? [2] • Cost • Online ads are cheaper than those in other media • Ads can be updated at any time with minimal cost • Richness of format • Use of text, audio, graphics, and animation • Games, entertainment, and promotions are easily combined in online ads • Personalization • Can be interactive • Can target specific interest groups and/or individuals

44. Advertising Networks • Advertising networks (ad server networks) • Specialized firms that offer customized Web advertising, such as brokering ads and helping target ads to selected groups of consumers • One-to-one targeted ads and marketing can be: • Expensive • Very rewarding • Very effective

45. Targeted Advertisements:The DoubleClick Approach • One-to-one targeted advertisements can take many forms • 3M Corp. wants to advertise its multimedia projectors • 3M approaches DoubleClick, Inc. and asks the firm to identify such potential customers • How does DoubleClick find them? • Using cookies, DoubleClick (doubleclick.com/us) monitors people browsing the Web sites • Finds those people working for advertising agencies

46. DoubleClick • DoubleClick then prepares an ad about 3M projectors that greets targeted people whenever they browse participating sites • How is this financed? • DoubleClick charges 3M for the ad • Fee is then split with the participating Web sites that carry the 3M ads • Based on how many times the ad is matched with visitors

47. DoubleClick [2] • DoubleClick expanded the service—Dynamic Advertising Reporting and Targeting (DART): • Advertising control • Ad frequency determination • Providing verifiable measures of success • DoubleClick brings: • The right advertisement to • The right person at • The right time

48. Advertisement Methods • Banner • On a Web page, a graphic advertising display linked to the advertiser’s Web page • Keyword banners • Random banners • Benefits of banner ads • Customized to the target audience or one-to-one ads • Utilize “force advertising” marketing strategy • Direct link to advertiser • Multi media capabilities

49. Advertisement Methods [2] • Limitations of banner ads • High cost • Click ratio • the ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad • Declining click ratio • viewers have become immune to banners

50. Advertisement Methods [3] • Banner swapping • An agreement between two companies to each display the other’s banner ad on its Web site • Direct link between one site to the other site • Ad space bartering • Banner exchanges • Markets in which companies can trade or exchange placement of banner ads on each other’s Web sites (bcentral.com) • Credit ratio of approximately 2:1 • Still the largest Internet advertising medium