Chapter 4 Consumer Behavior, Online Market Research, and Customer Relationship Management

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. Explain how personalization is accomplished online. Discuss the issues of e-loyalty and e-trust in EC.

Learning Objectives (cont.) Describe consumer market research in EC. Describe CRM, its methods, and its relationship with EC. Explain the implementation of customer service online and describe its tools. Describe Internet marketing in B2B, including organizational buyer behavior.

Learning about Consumer Behavior Online Model of consumer behavior online independent (or uncontrollable) variables intervening or moderating variables decision-making process dependent variables

Learning about Consumer Behavior Online

Learning about Consumer Behavior Online (cont.) Independent variables Personal characteristics Environmental variables Social variables Cultural/community variables Other environmental variables

Learning about Consumer Behavior Online (cont.) Intervening (moderating) variables variables are those that can be controlled by vendors Dependent variables: the buying decisions customer makes several decisions “to buy or not to buy?” “what to buy?” “where, when, and how much to buy?”

Consumer Decision Making Process Roles people play in the decision making process Initiator Influencer Decider Buyer User

Consumer Decision Making Process (cont.) 5 phases of the generic purchase decision model: need identification information search evaluation of alternatives purchase and delivery after-purchase evaluation

Consumer Decision Making Process (cont.)

Consumer Decision Making Process (cont.)

One-to-One Marketing and Personalization in EC One-to-one marketing: Marketing that treats each customer in a unique way Personalization: The matching of services, products, and advertising content to individual consumers User profile: The requirements, preferences, behaviors, and demographic traits of a particular customer

One-to-One Marketing and Personalization in EC (cont.) Major strategies used to compile user profiles Solicit information directly from the user Observe what people are doing online Build from previous purchase patterns Perform marketing research

One-to-One Marketing and Personalization in EC (cont.) 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

One-to-One Marketing and Personalization in EC (cont.) Collaborative filtering: A personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles

One-to-One Marketing and Personalization in EC (cont.) Customer loyalty Customer loyalty: Degree to which a customer will stay with a specific vendor or brand Increased customer loyalty produces cost savings through: lower marketing costs lower transaction costs lower customer turnover expenses lower failure costs E-loyalty: Customer loyalty to an e-tailer

One-to-One Marketing and Personalization in EC (cont.) Trust in EC Trust: The psychological status of involved parties who are willing to pursue further interaction to achieve a planned goal Trust is influenced by many variables

One-to-One Marketing and Personalization in EC (cont.)

One-to-One Marketing and Personalization in EC (cont.) How to increase EC trust between buyers and sellers trust is determined by: degree of initial success that each party experienced with EC and with each other well-defined roles and procedures for all parties involved realistic expectations as to outcomes from EC

One-to-One Marketing and Personalization in EC (cont.) Issues in personalization brand recognition security mechanisms help solidify trust disclose and update latest business status and practices to potential customers and to build transaction integrity into the system guarantee information and protection privacy through various communication channels

Market Research for EC Goal of market research is to find information and knowledge that describes the relationships among: consumers products marketing methods marketers

Market Research for EC (cont.) Aim of marketing research is to: discover marketing opportunities and issues establish marketing plans better understand the purchasing process evaluate marketing performance develop advertising strategy

Market Research for EC (cont.) Market segmentation: The process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales Market research tools data modeling data warehousing

Market Research for EC (cont.) What are we looking for in EC online research? personal profile that helps marketers explain and predict online buying behavior

Market Research for EC (cont.) Online market research methods Web-based surveys Online surveys are easy: SurveyMonkey Online focus groups Hearing directly from customers Customer scenarios Tracking customer movements DoubleClick

Market Research for EC (cont.) Transaction log A record of user activities at a company’s Web site Clickstream behavior Customer movements on the Internet; and, what the customer is doing there

Market Research for EC (cont.) Cookies, Web Bugs, and Spyware Web bugs: Tiny graphics files embedded on e-mail messages and in Web sites that transmit information about the user and their movements to a Web server Spyware: Software that gathers user information, through an Internet connection, without the user’s knowledge Analysis of B2C clickstream data

Market Research for EC (cont.) Limitations of online market research too much data may be available—need business intelligence to organize, edit, condense, and summarize it accuracy of responses loss of respondents because of equipment problems ethics and legality of Web tracking

CRM and Its Relationship with EC 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

CRM and Its Relationship with EC (cont.) Classification of CRM programs Loyalty program Prospecting Save or win back Cross-sell/up-sell eCRM: Customer relationship management conducted electronically

CRM and Its Relationship with EC (cont.) Extent of service Customer acquisition (prepurchase support) Customer support during purchase Customer fulfillment (purchase dispatch) Customer continuance support (postpurchase)

CRM and Its Relationship with EC (cont.) Benefits of CRM Provides: choices of products and services fast problem resolution and response easy and quick access to information Limitations of CRM Requires integration with a company’s other information systems which is costly Difficult to support mobile employees

CRM Applications and Tools: Delivering Customer Service in Cyberspace CRM applications improve upon traditional customer service by means of easier communications and speedier resolution of customer problems Customer service adds value to products and services It is an integral part of a successful business

CRM Applications and Tools (cont.)

Internet Marketing in B2B Organizational buyer behavior number of organizational buyers is much smaller than the number of individual buyers transaction volumes are far larger terms of negotiations and purchasing are more complex

Internet Marketing in B2B (cont.)