1. ©2006 Prentice Hall7-1 E-Marketing 4/E Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 7: Consumer Behavior

2. ©2006 Prentice Hall7-2 Chapter 7 Objectives After reading Chapter 7 you will be able to: Discuss general statistics about the Internet population. Describe the Internet exchange process and the technological, social/cultural and legal context in which consumers participate in this process. Outline the broad individual characteristics and consumer resources that consumers bring to the online exchange. Highlight the four main categories of outcomes that consumers seek from online exchanges.

3. ©2006 Prentice Hall7-3 Hanover Direct’s 4 million customers buy through 12 different catalogs and Web sites. 99% of telephone customers complete an order; only 2% of all online visitors buy during a visit. Consumer research revealed several reasons for shopping cart abandonment: Technical difficulties. Consumer indecision at final check-out page. By monitoring online behavior, Hanover has achieved 33% improvement. The Hanover Story

4. ©2006 Prentice Hall7-4 The Internet has grown faster than any other medium in history. In 2004, 958 million people had access, representing 16% of the global population. Internet usage in developed nations has reached a critical mass, leading marketers to ask more questions about consumer behavior on the Internet. Consumers in the 21 st Century

5. ©2006 Prentice Hall Where Are the Other 5.5 Billion People? Not online! In survey of non-Internet users:40% said they have no need for the Internet.  E-marketers’ are digging deeper for a more thorough understanding of consumer preferences online and offline. Main reasons why consumers do not use the Internet: Social, cultural, technological, legal, and political issues.  Without major shifts some countries may not achieve high levels of Internet adoption among individual consumers for many years. In these countries the B2B market will lead consumers to the Net where a fast-growing consumer market enticed businesses online.

6. ©2006 Prentice Hall Reason% % No need for it40Content not of interest / relevance 2 Don’t have a computer33Not my choice/decision at work 2 Not interested in it25Content not in my language 1 Don’t know how to use it16Cost for ISP/access cost 1 Cost (general)12Cost for local telephone and toll service charges 1 Not enough time to use it 8 Don’t know how to get it 3Other 4 Current PC can’t access Web 2Unsure 2 Biggest Reasons for Not Using the Internet Source: Pastore (2001) citing Ipsos-Reid study

7. ©2006 Prentice Hall Consumers in the 21st Century Internet usage is still growing. Marketers have turned their attention to practical questions such as: Whether a firm’s target market is online, What these customers do online, What determines whether they’ll buy from a site, How much of the marketing effort should be devoted to online channels. Understanding online consumer behavior helps marketers design marketing mixes that provide value and thus attract and retain customers.

8. ©2006 Prentice Hall Inside the Internet Exchange Process What explains consumer buying behavior? Stimuli = marketing communication messages and cultural, political, economic, and technological factors. Individual buyer characteristics = income level, personality, psychological, social, and personal aspects. Consumers move through a variety of decision processes based on situational and product attributes.  To create effective marketing strategies, e-marketers need to understand what motivates people to buy goods and services, both in the short and long term.

9. ©2006 Prentice Hall Inside the Internet Exchange Process The e-marketing: “...creating exchanges that satisfy individual consumer and organizational customers’ objectives.” Exchange = act of obtaining a desired object from someone by offering something in return. Individuals bring their own characteristics + personal resources (within a social, cultural, and technological context) to the process as they seek specific outcomes from an exchange.

10. ©2006 Prentice Hall7-5 Exchange refers to the act of obtaining a desired object by offering something in return. Exchange occurs within a technological, social/cultural, and legal context. The Internet Exchange Process Technological, Social/Cultural and Legal Context Individual Characteristics Resources Internet Exchange Outcomes Connect Enjoy Learn Trade Marketing Stimuli

11. ©2006 Prentice Hall7-6 Technological Context 35% of online Americans connect to the Internet with a broadband connection. Broadband has increased by 20% in the past 2 years. The U.S. is only the 10 th largest broadband market. Broadband users exhibit different online behavior than those using mobile handheld devices or dial up.

12. ©2006 Prentice Hall7-7 Top Broadband Country Markets New Data: http://www.internetworldstats.com/dsl.htmhttp://www.internetworldstats.com/dsl.htm

13. ©2006 Prentice Hall7-8 Social and Cultural Contexts Social/cultural trends have a huge effect on online exchanges. Information overload overwhelms consumers. Time poverty creates multitasking and contributes to a stressful environment. Home and work boundaries are dissolving. Consumers seek convenience and have high expectations regarding customer service. “free, perfect, now!” Consumers cannot do without Internet access: “online oxygen.”

14. ©2006 Prentice Hall7-9 Social and Cultural Contexts, cont. Self-service is required. Sophisticated consumers know they are in control and have choices. Privacy and data security are paramount. Online crime worries consumers. http://www.ic3.gov/media/annualreports.aspx

15. ©2006 Prentice Hall7-10 Legal factors were discussed in Chapter 5. Despite piracy laws, illegally used software abounds. In spite of the new Can-Spam law, the number of unsolicited emails has increased. However, when the recording industry sued thousands of illegal music file downloaders, consumer behavior changed. In 2002, 37% of online consumers shared music files. Only 23% shared files in 2004. Legal Context

16. ©2006 Prentice Hall7-11 http://www.pewinternet.org/index.asp Individual characteristics affect Internet use. Age, income, education, ethnicity, and gender Attitudes toward technology Online skill and experience Goal orientation Convenience or price orientation Family life cycle Consumer resources for exchange Money, time, energy and psychic costs Individual Characteristics & Resources

17. ©2006 Prentice Hall7-12 The Internet exchange doesn’t use cash or paper checks for online transactions. Many forms of digital money: Credit and debit cards. Electronic checks through a third-party such as PayPal. Smart cards or Splash Plastic. Other innovative forms are appearing in other countries. Monetary Cost

18. ©2006 Prentice Hall7-13 Online attention is a desirable and scarce commodity. Worldwide, the average user goes online 29 times/month, 49 minutes each time. Some researchers believe that consumers pay more focused attention online than with other media. Hoffman and Novak applied the concept of flow to online behavior. Time Cost

19. ©2006 Prentice Hall Flow The state occurring during during network navigation which is: Characterized by a seamless sequence of responses facilitated by machine interactivity Intrinsically enjoyable Accompanied by a loss of self-consciousness Self-reinforcing

20. ©2006 Prentice Hall7-14 Global Usage: 2002 to 2004 MetricQuantity April 2002June 2004August 2007 Number of sessions/visits for the month182934 Number of domains visited485769 Web Pages per Person per Monthn.a.1,0011518 Page views for each session433444 PC time spent per monthn.a.24 hours31:25 hours Time spent online for the month10 hours23 hours31 hours Time spent per session32 minutes49 minutes56 minutes Duration of page viewed44 seconds46 seconds45 seconds New Data: http://www.nielsen-netratings.com/resources.jsp?section=pr_netv&nav=1http://www.nielsen-netratings.com/resources.jsp?section=pr_netv&nav=1

21. ©2006 Prentice Hall7-15 Energy and Psychic Costs It takes effort to log on and check email, especially for dial-up users. Consumers apply psychic resources to understand information or when facing technical problems. Shopping cart abandonment and failed online purchases have numerous causes. Technical reasons. The consumer may be “window shopping,” comparing several carts at once.

22. ©2006 Prentice Hall7-16 Exchange Outcomes There are 4 basic things that people do online: Connect Enjoy Learn Trade Each is ripe with marketing opportunity. Data Sites http://www.clickz.com/stats http://www.nielsen-netratings.com/ http://www.comscore.com/press/data.asp http://www.pewinternet.org/trends.asp http://www.internetworldstats.com/stats.htm http://www.webreference.com/internet/statistics.html