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

2. © Prentice Hall 20042 Learning Objectives 1.Describe the factors that influence consumer behavior online. 2.Understand the decision-making process of consumer purchasing online. 3.Describe how companies are building one- to-one relationships with customers. 4.Explain how personalization is accomplished online. 5.Discuss the issues of e-loyalty and e-trust in EC.

3. © Prentice Hall 20043 Learning Objectives (cont.) 6.Describe consumer market research in EC. 7.Describe CRM, its methods, and its relationship with EC. 8.Explain the implementation of customer service online and describe its tools. 9.Describe Internet marketing in B2B, including organizational buyer behavior.

4. © Prentice Hall 20044 Ritchey Design Learns about Customers The Problem Ritchey Design, Inc. is a relatively small designer and manufacturer of mountain bike components Sells its products to distributors and/or retailers, who then sell them to individual consumers Its 1995 Web site was more a status symbol than a business tool

5. © Prentice Hall 20045 Ritchey Design Learns about Customers (cont.) Visitors could get information on Team Ritchey or find out where Ritchey products were sold It did not give customers all the information they wanted It did not enable the company to gain insight into its customers’ wants and needs

6. © Prentice Hall 20046 Ritchey Design Learns about Customers (cont.) The Solution In late 1995, Ritchey reworked the Web site so that the company could hear from its customers directly set up customer surveys on the site offered visitors who answer the surveys a chance to win free Ritchey products vsitors enter their names and addresses and then answer questions about the company’s products

7. © Prentice Hall 20047 Ritchey Design Learns about Customers (cont.) Web Trader software automatically organizes and saves the answers in a database and is used to help make marketing and advertising decisions Questions are changed to learn customers’ opinions about any new products Ritchey develops Saves $100,000 on product development per year

8. © Prentice Hall 20048 Ritchey Design Learns about Customers (cont.) An online catalog educates retailers and consumers about the technological advantages of Ritchey’s high-end components over competitors’ parts Visitors browse the product catalog that includes detailed descriptions and graphics of Ritchey’s products

9. © Prentice Hall 20049 Ritchey Design Learns about Customers (cont.) The Results ritcheylogic.com sells only team items such as t-shirts, bags, water bottles, and other gear directly to individuals online The company does not sell bike parts to individuals directly online because it wants to maintain its existing distribution system Dealers can place orders on the site

10. © Prentice Hall 200410 Ritchey Design Learns about Customers (cont.) The site is basically used in B2C EC only for the basic activities in Internet marketing: communicating with customers conducting market research delivering advertising

11. © Prentice Hall 200411 Ritchey Design Learns about Customers (cont.) What we can learn … Illustrates the benefits a company can derive from changing its Web site from a passive one to one with interactivity Interactive Web site allows the company to: learn more about its customers educate customers use the site for customer service

12. © Prentice Hall 200412 Learning about Consumer Behavior Online Model of consumer behavior online independent (or uncontrollable) variables intervening or moderating variables decision-making process dependent variables

13. © Prentice Hall 200413 Learning about Consumer Behavior Online (cont.)

14. © Prentice Hall 200414 Learning about Consumer Behavior Online (cont.) Independent variables Personal characteristics Environmental variables Social variables Cultural/community variables Other environmental variables

15. © Prentice Hall 200415 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?”

16. © Prentice Hall 200416 Consumer Decision Making Process Roles people play in the decision making process Initiator Influencer Decider Buyer User

17. © Prentice Hall 200417 Consumer Decision Making Process (cont.) 5 phases of the generic purchase decision model: 1.need identification 2.information search 3.evaluation of alternatives 4.purchase and delivery 5.after-purchase evaluation

18. © Prentice Hall 200418 Consumer Decision Making Process (cont.) Product brokering: Deciding what product to buy Merchant brokering: Deciding from whom (from what merchant) to buy a product

19. © Prentice Hall 200419 Consumer Decision Making Process (cont.)

20. © Prentice Hall 200420 Consumer Decision Making Process (cont.)

21. © Prentice Hall 200421 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

22. © Prentice Hall 200422 One-to-One Marketing and Personalization in EC (cont.)

23. © Prentice Hall 200423 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

24. © Prentice Hall 200424 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

25. © Prentice Hall 200425 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

26. © Prentice Hall 200426 One-to-One Marketing and Personalization in EC (cont.) Variations of collaborative filtering: Rule-based filtering Content-based filtering Activity-based filtering Legal and ethical issues in collaborative filtering Invasion-of-privacy issues Permission-based personalization tools to request customer permission

27. © Prentice Hall 200427 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

28. © Prentice Hall 200428 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

29. © Prentice Hall 200429 One-to-One Marketing and Personalization in EC (cont.)

30. © Prentice Hall 200430 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

31. © Prentice Hall 200431 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

32. © Prentice Hall 200432 Market Research for EC Goal of market research is to find information and knowledge that describes the relationships among: consumers products marketing methods marketers

33. © Prentice Hall 200433 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

34. © Prentice Hall 200434 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

35. © Prentice Hall 200435 Market Research for EC (cont.) Conducting market research online faster and more efficient than off-line methods accesses a more geographically diverse audience large studies done much more cheaply not well developed at this time

36. © Prentice Hall 200436 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

37. © Prentice Hall 200437 Market Research for EC (cont.) Procter & Gamble Example: Internet market research expedites time-to-market for Procter & Gamble In the past developing a major new product, from concept to market launch, took over 5 years In September 2000 introduced Whitestrips on the Internet, offering the product for sale on P&G’s Web site

38. © Prentice Hall 200438 Market Research for EC (cont.) Procter & Gamble (cont.) Online research was facilitated by data mining conducted on P&G’s huge historical data and the new Internet data Internet created a product awareness of 35 percent before shipments were made to stores Revolutionized process of studying the product concept, segmenting the market, and expediting product development

39. © Prentice Hall 200439 Market Research for EC (cont.) Online market research methods Web-based surveys Online focus groups Hearing directly from customers Customer scenarios Tracking customer movements

40. © Prentice Hall 200440 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

41. © Prentice Hall 200441 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

42. © Prentice Hall 200442 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

43. © Prentice Hall 200443 Market Research for EC (cont.) Online shoppers tend to be wealthy, employed, and well educated The lack of clear understanding of the online communication process and how online respondents think and interact in cyberspace

44. © Prentice Hall 200444 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

45. © Prentice Hall 200445 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

46. © Prentice Hall 200446 CRM and Its Relationship with EC (cont.) Scope of CRM 1. 1.Foundation of service 2. 2.Customer-centered services 3. 3.Value-added services

47. © Prentice Hall 200447 CRM and Its Relationship with EC (cont.) Extent of service 1. 1.Customer acquisition (prepurchase support) 2. 2.Customer support during purchase 3. 3.Customer fulfillment (purchase dispatch) 4. 4.Customer continuance support (postpurchase)

48. © Prentice Hall 200448 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

49. © Prentice Hall 200449 CRM and Its Relationship with EC (cont.) CRM implementation issues Steps in building EC strategy focused on customer: 1. 1.focus on the end customer 2. 2.systems and business processes that are designed for ease of use and from the end customer’s point of view 3. 3.efforts to foster customer loyalty

50. © Prentice Hall 200450 CRM and Its Relationship with EC (cont.) Five factors required to implement a CRM program effectively: 1. 1.Customer-centric strategy 2. 2.Commitments from people 3. 3.Improved or redesigned processes 4. 4.Software technology 5. 5.Infrastructure

51. © Prentice Hall 200451 CRM and Its Relationship with EC (cont.) Justifying customer service and CRM programs Metrics: Standards of performance; may be quantitative or qualitative

52. © Prentice Hall 200452 CRM and Its Relationship with EC (cont.) Web-related metrics a company uses to determine the appropriate level of customer support: Response time Site availability Download time Timeliness Security and privacy On-time order fulfillment Return policy Navigability

53. © Prentice Hall 200453 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

54. © Prentice Hall 200454 CRM Applications and Tools (cont.) Classifications of CRM applications Customer-facing applications Customer-touching applications Customer-centric intelligence applications Online networking and other applications

55. © Prentice Hall 200455 CRM Applications and Tools (cont.) Customer-facing applications Customer interaction center (CIC): A comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Intelligent agents in customer service and call centers

56. © Prentice Hall 200456 CRM Applications and Tools (cont.)

57. © Prentice Hall 200457 CRM Applications and Tools (cont.)

58. © Prentice Hall 200458 CRM Applications and Tools (cont.) Autoresponders: Automated e-mail reply systems (text files returned via e-mail), which provide answers to commonly asked questions Sales force automation (SFA): Software that automates the tasks performed by sales people in the field, such as data collection and its transmission

59. © Prentice Hall 200459 CRM Applications and Tools (cont.) Customer-touching applications Personalized Web Pages E-Commerce Applications Campaign Management

60. © Prentice Hall 200460 CRM Applications and Tools (cont.) Web Self-Service Activities conducted by users on the Web to provide answers to their questions (e.g., tracking) or for product configuration Self-tracking Self-configuration and customization

61. © Prentice Hall 200461 CRM Applications and Tools (cont.) Customer-centric applications Data reports Data warehouse A single, server-based data repository that allows centralized analysis, security, and control over the data

62. © Prentice Hall 200462 CRM Applications and Tools (cont.) Data analysis and mining Analytic applications automate the processing and analysis of CRM data can be used to analyze the performance, efficiency, and effectiveness of an operation’s CRM applications Data mining involves sifting through an immense amount of data to discover previously unknown patterns

63. © Prentice Hall 200463 CRM Applications and Tools (cont.) Online networking and other applications Forums Chat rooms Usenet groups E-mail newsletters Discussion lists

64. © Prentice Hall 200464 CRM Applications and Tools (cont.) Mobile CRM the delivery of CRM applications to any user, whenever and wherever needed Voice communication people are more comfortable talking with a person, even a virtual one, than they are interacting with machines. The smile and the clear pronunciation of the agent’s voice increases shoppers’ confidence and trust

65. © Prentice Hall 200465 CRM Applications and Tools (cont.)

66. © Prentice Hall 200466 CRM Applications and Tools (cont.) Role of knowledge management and intelligent agents in CRM Automating inquiry routing and answering queries requires knowledge Generated from historical data and from human expertise and stored in knowledge bases for use whenever needed Intelligent agents support the mechanics of inquiry routing, autoresponders, and so on

67. © Prentice Hall 200467 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

68. © Prentice Hall 200468 Internet Marketing in B2B (cont.)

69. © Prentice Hall 200469 Internet Marketing in B2B (cont.) Methods for B2B online marketing Targeting customers contact all of its targeted customers individually when they are part of a well- defined group affiliation service advertising Electronic wholesalers intermediary sells directly to businesses, but does so exclusively online

70. © Prentice Hall 200470 Internet Marketing in B2B (cont.) Other B2B marketing services Digital Cement provides corporate marketing portals that help companies market their products to business customers National Systems tracks what is going on in an industry BusinessTown provides information and services to small businesses, including start-ups Vantagenet offers free tools that help increase traffic to a company’s Web site

71. © Prentice Hall 200471 Internet Marketing in B2B (cont.) Affiliate programs Placing banners on another vendor’s Web site Content alliance program in which content is exchanged so that all can obtain some free content Infomediaries Online data mining services

72. © Prentice Hall 200472 Managerial Issues 1. 1.Do we understand our customers? 2. 2.What do customers want from technology? 3. 3.How is our response time? 4. 4.How do we measure and improve customer service? 5. 5.Is CRM for real?

73. © Prentice Hall 200473 Managerial Issues (cont.) 6. 6.Do we have to use electronically supported CRM? 7. 7.Should we use intelligent agents? 8. 8.Who will conduct the market research? 9. 9.Are customers satisfied with our Web site? 10. 10.Can we use B2C marketing methods and research in B2B?

74. © Prentice Hall 200474 Summary 1. 1.Essentials of consumer behavior. 2. 2.The online consumer decision- making process. 3. 3.Building one-to-one relationships with customers. 4. 4.Online personalization. 5. 5.Increasing loyalty and trust.

75. © Prentice Hall 200475 Summary (cont.) 6. 6.EC customer market research. 7. 7.CRM, its technologies, and EC connection. 8. 8.Implementing customer service online. 9. 9.B2B Internet marketing and organizational buyers.