Prentice Hall, 2002 Chapter 4 Internet Consumers, E-Service, and Market Research

Prentice Hall, 2002

Chapter 4

Internet Consumers, E-Service, and

Market Research

Prentice Hall, 20022

Learning Objectives

Describe the essentials of consumer behaviorDescribe the characteristics of Internet surfers and EC purchasersUnderstand the decision-making process of consumer purchasingDescribe the way companies are building relationships with customers


Explain the implementation of customer service and its relationship with CRMDescribe consumer market research in ECUnderstand the role of intelligent agents in consumer applicationsDescribe the organizational buyer behavior model

Learning Objectives (cont.)


Opening Vignette: Building Customer Relationships: Ritchey Design, Inc.

Ritchey Design, Inc.Small business designing and manufacturing mountain bike components1995 Web site was a status symbol rather than a business toolThe site did not:

Offer enough customer informationEnable the company to gain insight into their customers’ needs and wants


Building Customer Relationships: Ritchey Design, Inc. (cont.)

The static Web site becomes an interactive marketing tool

The company cut a deal with SBT software for Web Trader

A software package that allows companies to sell products over the InternetIt also collects information from customers

Ritchey’s Design Inc. obtained a low price for the software by:

Testing the package for SBTPutting the SBT logo on their site


Building Customer Relationships: Ritchey Design, Inc. (cont.)

Customer surveys introduced the siteInduced customers to complete surveys by offering opportunity to win Ritchey products

Web Trader automatically saves and organizes answers in the databaseInformation used to make marketing decisions

Created an electronic product catalogConsumers find detailed descriptions and pictures of productsDealers can obtain information and order over the Web


Advantages

Company saves cost on product development <-know customer react earlier (before it is in the stores)Retailers/Consumers can learn products quicklyCompany earns benefits from changing its Web site from passive to interactiveCompany needs to control 3C to succeed or survive

Competition : the intensity of competitionsCustomer : the strength of customersChange : Magnitude of the changes

By a strategy


EC Consumer Behavior Model

Source: Zinezone, c/o GMCI Co.


Consumer Behavior Online (cont.)

Consumer types for online can be :1. Individual consumers : buy for consumption

Commands most of the media’s attention

2. Organizational buyers : buy to create products/services

Governments and public organizationsPrivate corporationsResellers

Consumer behavior can be viewed in terms of:Why is the consumer shopping?How does the consumer benefit from shopping online?



Purchasing types and experiences2-dimension of shopping experiences

Utilitarian—to achieve a goalHedonic—because it’s fun

3-category of consumersImpulsive buyers—purchase quicklyPatient buyers—make some comparisons firstAnalytical buyers—do substantial research before buying



Direct sales, intermediation, and customer relations

Companies that sell only through intermediaries still need good relations with the end-usersExample: Ford Motor Company

Do not sell directly to consumersRecognize that drivers of Ford vehicles think of themselves as having a relationship with the company


Personal Characteristics and Demographics of Internet Surfers

Environmental variablesSocial variables : people are influenced by family, friends coworker and fashionCultural variables : Make different thinkingPsychological variables : Other environmental variables : information, government regulations, legal constraint and situation factors


Personal Characteristicsof Internet Surfers

Personal characteristics and differences : these variables are unique to individual customers

Consumer resources and lifestyleAge and genderKnowledge and educational levelAttitudes and valuesMotivationPersonality


Demographics of Internet Surfers

Major demographics presented include

GenderAgeMarital statusEducational levelEthnicityOccupationHousehold income


Demographics of Internet Surfers (cont.)

The more experience people have on the Web, the more likely they are to buy onlineTwo major reasons people do not buy online

Security (30%)Difficulty judging the quality of the product (20%)Believed that buying on Web is not reliable (9.3%)Process complicated(4.5%)Have an unfavorable experience (1.9%)


Amount of Money Spent on the Web


Consumer Purchasing Decision Making

Roles people play in decision-makingInitiator—first suggests/thinks of buying a particular product or service

Influencer—advice/views carry weight in making a final buying decision

Decider--makes a buying decision or any part of it e.g. whether, what, how or where to buy

Buyer—makes the actual purchase

User—consumes or uses a product or service

If more than one individual plays these roles, how to make marketing and advertising strategies?


Consumer PurchasingDecision Making (cont.)

Purchasing decision-making model : 5 major phases of a general model

Need identification—actual and desired states of needInformation searchAlternatives evaluation—research reduces number of alternatives, may lead to negotiationPurchase and delivery—arrange payment, delivery, warranties, etc.After-purchase evaluation—customer service

*** process may not in this order


Purchase Decision Making Process & Support System

CDSS : Consumer Dicission Support SystemSource: O’Keefe and McEachern, 1998.


Model of Internet Consumer Satisfaction

Source: Lee (2001)

• a repeat Web purchase depends on customer satisfaction


Matching Products with Customers: Personalization

One-to-one marketingRelationship marketing (Mowen and Minors,1998)

“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”

Simple idea: “Treat different customers differently”

No two customers are alike


Practical way

Using software agent as a toolOne customer at a time by establishing learning relationship with each customer, starting with the most valuable customersLearning means relationship get better in every new interaction Customer tells a company of some needs and the company customizes its productProducts more valuable for customer created high customer loyalty


The New Marketing Model

Source: GartnerGroup


Matching Products with Customers: Personalization (cont.)

Issues in EC-based one-to-one marketingCustomer loyalty—degree to which customer stays with vendor or brand

Important element in consumer purchasing behaviorOne of the most significant contributors to profitability

Increase profitsStrengthen market positionBecome less sensitive to price competitionIncrease cross-selling successSave costs, etc.



Issues in EC-based one-to-one marketingMeeting customers cognitive needs—organize customer service to meet needs of each skill set

NoviceIntermediateExpert

E-loyalty—customer’s loyalty to an e-tailerLearn about customers’ needsInteract with customersProvide customer service



Issues in EC-based one-to-one marketingTrust in EC

Deterrence-based trust—threat of punishmentKnowledge-based trust—grounded in knowledge about trading partnersIdentification-based trust—empathy and common values between partners

Value of EC referralsWord-of-mouthDelivery of good or service sparks other users


The EC Trust Model

Source: Lee and Turban (2001)



PersonalizationProcess of matching content, services, or products to individuals’ preferencesAlternative methods

Solicit information from usersUse cookies to observe online behaviorUse data or Web mining

Personalization applied throughRule-based filteringContent-based filteringConstraint-based filteringLearning-agent technology



Personalization (cont.)Collaborative filtering examples

Backfilp.com—recommends restaurantsC5solutions.com—personalized messages via cell phonesMysimon.com—assists in purchase decision-making process based on user information

Legal and ethical issuesPrivacy issuesPermission-based personalization tools


Delivering Customer Servicein Cyberspace

Customer serviceTraditional: do the work for the customerEC delivered: gives tools to the customer to do the work for him/herself (log: tracking, troubleshooting, FAQ) with

Improved communicationAutomated processSpeedier resolution of problems


Delivering Customer Servicein Cyberspace (cont.)

E-service—online help for online transactions

Foundation of service—responsible and effective order fulfillmentCustomer-centered services—order tracing, configuration, customization, security/trustValue-added services--dynamic brokering, online auctions, online training and education



Product life cycle and customer servicePhases of product life cycle

Requirements: assisting the customer to determine needsAcquisition: helping the customer to acquire a product or serviceOwnership: supporting the customer on an ongoing basisRetirement: helping the client to dispose of a service or productService must be provided in all of them



Customer relationship management (CRM)CRM in action—customer-focused EC

Make it easy for customers to do business onlineBusiness processes redesigned from customer’s point of viewDesign a comprehensive, evolving EC architectureFoster customer loyalty by:

Personalized serviceStreamline business processesOwn customer’s total experience


Customer Relationship Management (CRM)

Customer service functionsProvide search and comparison capabilitiesProvide free products and servicesProvide specialized information and servicesAllow customers to order customized products and servicesEnable customers to track accounts or order status


Customer Relationship Management (CRM) (cont.)

Customer service toolsPersonalized Web pages

Used to record purchases and preferenceDirect customized information to customers efficiently

FAQsCustomers find answers quicklyNot customized, no personalized feeling and no contribution to relationship marketing



Tracking toolsCustomers track their orders saving time and money for allExample: FedEx’s package tracking

Customer service tools (cont.)Chat rooms—discuss issues with company experts and with other customers

E-mail and automated responseDisseminate general informationSend specific product informationConduct correspondence regarding any topic (mostly inquiries from customers)



Customer service tools (cont.)Help desks and call centers

A comprehensive customer service entityEC vendors take care of customer service issues communicated through various contact channels

Telewebs combineWeb channels (automated e-mail reply)Web knowledge bases (portal-like self service) Call center agents or field service personnel

Troubleshooting tools—assist customers in solving their own problems


1

3

4

5

2

RealTime

Company

Customer

Customer

Customer

ProductAdvertisingSalesDistribution

2002 +A Real Time Company is able to quickly test and implement new innovations whether the idea comes from the company or the customer.

[No Real Time companies currently exist in today’s market.]

ProductAdvertisingSalesDistribution

CustomerDriven

Company

Customer

Customer

Customer

Needs

1990s-2005A Customer-Driven Company must meet three requirements. First, it hasmodified its channels of communication to also “listen” to customers.Second, it has determined which data to capture among the plethora ofdata. Finally, it has determined how to effectively use customer

information to create and deliver better products and services back to thecustomer.

Dbase MrktingDriven

CompanyProduct

AdvertisingSalesDistribution

Customer

Customer

Customer

1960s-1980sDatabase Marketing, as we know it today, appeared in theearly 1980s as companies began using databasemanagement systems to “close-the-loop” and measuremarketing program results to better target future marketing

efforts.

Sales Driven

Company Product

Advertising

Sales

Distribution

Customer

“How”

1900-1950sA Sales-Driven Company is one that createstop-of-mind awareness, beats the bushes forbusiness, and pushes its products into themarket. Advertising, sales and distributionare critical to a company of this nature.

Product Driven

Company

Customer

“What”Product

19th CenturyA Product-Driven Companycreates a product and pushes itout the door; the focus is on“what” the company sells.

Marketing Timeline



Justifying customer service and CRM programs—2 problems

Most of the benefits are intangibleSubstantial benefits reaped only from loyal customers, after several yearsMetrics—standards to determine appropriate level of customer support

Response and download timesUp-to-date site and availability of relevant contentOthers



1-800-FLOWERS Buy by telephone, retail shops, and onlineOnline and offline promotionsE-mail order confirmation

Blackstar (music retailer)Thanks customers by e-mailProvides toll-free telephone numberProvides tracking system

Amazon.comConvenience, selection, value, special servicesE-mail order confirmationPersonalized services

Federal Express (FedEx)Package tracking serviceAbility to calculate delivery costs, online shipping forms, arrange pickup, find local drop box

Examples of superb customer service


Market Research for EC

Aim– find relationship between

ConsumersProductsMarketing methodsMarketers through information

In order to improve customer service

Discover marketing opportunities and issuesEstablish marketing plansBetter understand the purchasing processEvaluate marketing performance


Market Research Process

Market segmentation—divide consumer market into groups to conduct marketing research, advertising, sales


Market Research for EC (cont.)

Conducting online market research—powerful tool for research regarding:

Consumer behaviorDiscover of new marketsConsumer interest in new products

Internet-based market researchInteractive—allowing personal contactGives better understanding of customer, market, and competition


Online Market Research Process & Results

Online market research methods—fast, cheap, data collection

Source: Based on Vassos (1996), pp. 66-68.



Online market research methods (cont.)Conducting Web-based surveysLimitations of online research

Not suitable for every customer or product Skewed toward highly educated males with high disposable income

May be unreliable, biasedMore knowledge is needed



Online market research methods (cont.)Data mining—searching for valuable business information in extremely large databasesNew business opportunities generated by conducting:

Automated prediction of trends and behaviorsAutomated discovery of previously unknown patterns and relationships

Web mining—mining meaningful patterns from Web resources



Datamining (cont.)Major characteristics and objectives of data mining:

Relevant data difficult to find in huge databasesTools help find information buried in corporate files or public records“Miner” uses “data drills” for easy access to answers, may find valuable, unexpected resultsTools combined with spreadsheets for easy analysis of resultsYields: associations, sequences, classifications, clusters, forecasting


A Framework for Classifying EC Agents

The purchasing decision- making process: agent classification


Intelligent Agents in Customer-related Applications (cont.)

Need identification—helps determine what to buy to satisfy a specific need by looking for specific products information and critically evaluating them

Examples:Salesmountain.com—specifically requested items for individual customersDiscogs.com—sample and buy musicNetcactus.com—help choose giftsQuerybot.com/shopping—looks for deals and finds related information on requested items



Merchant brokering—intelligent agents for finding vendors

Bargainfinder from Andersen Consulting (first product brokering agent—no longer exists)

Queried the price of a specific CD from a number of online vendors and returned a list of prices (unsuccessful)

Jango (embedded in excite program)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 agentProvides product reviews



Merchant brokering (cont.)Kasbah from MIT Lab (product & services comparison agent)—no longer operating

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

Purchase and delivery—arrange payment and delivery of goods

After sale service and evaluation—automatic answering agents respond to customer queries and remind them of maintenance needs



Negotiation—price and other terms of transactions are determined

KasbahMultiple agents—users create agents for the purpose of selling or buying goods3 strategies: anxious, cool-headed and frugal

Tete-@-tete (no longer in operation)Parameters: price, warranty, delivery time, service contracts, return policy, loan option and other value added servicesUse information acquired during the first two stages of the purchasing decision model to evaluate each single offer


Intelligent Agents in Customer-related Applications

Other EC agentsAuction support agentsFraud and detection protection agentsCharacter-based interactive (animated) agentsLearning agent

Documents

Prentice Hall, 2002 Chapter 4 Internet Consumers, E-Service, and Market Research