A Model Of Consumer Patterns Online

Del Monte operates in an exceedingly competitive global food industry. Furthermore to manufacturing canned vegetables & fruits for human use, Del Monte produces pet food such as Gravy Teach, 9 Lives, and Meow Mixture. Therefore, using general market trends the company constantly looks for ground breaking ways to increase its competitive advantage. The business also decided to implement social multimedia. Once Del Monte made a decision to deploy interpersonal media projects, the business had to decide how best to use social media research to aid its diverse product line-in this case dog food.

The Solution

The basic idea was first to hook up and collaborate with dog lovers via internet sites. Since the corporate and business IT department was not equipped to cope with communal network research, Del Monte hired Market Tools Inc. , a market research organization.

With the help of Market Tools Inc. , Del Monte started out offering an internet platform for customers to chat and comment on blog entries about different Del Monte products. Utilizing their propriety software, Market Tools monitors millions of relevant websites in the blogsphere as well as message boards in social networks, in order to identify key ideas and conditions that consumers are thinking about, analyze them, and then anticipate consumer behavior styles. To analyze the accumulated data, Del Monte teamed up with Umbria (a section of J. D. Ability and Affiliates), a pioneer in attracting market intellect from the online community. Umbria aided in further evaluation of and in profiling the gathered information. Such examination is usually done by using computerized tools such as monitoring consumer connections, studying consumers' sentiments, and using cultural analytics methods (e. g. , see Hedin, et al. 2011 and Jayanti 2010). Through the use of social mass media, Del Monte can perform market research a lot more efficiently. The conventional procedure was to use questionnaires or focus groups which were expensive and difficult to load with qualified individuals. Using social mass media, Del Monte can gather a lot of the same or even more qualitative data faster with less price. All that is required now could be to monitor customer conversations, accumulate the data, and examine the vast amount of information. The program also helps subgroup creation, idea technology, and -panel creation. The results of the analysis help Del Monte understand its customers and consequently plan its marketing activities, communication strategies, and customer support applications. The results also help evaluate the success of marketing promotions, how well the business processes accomplished the goals, and better justify suggested new activities.

The Experiment

Del Monte used the above mentioned software first to assist in improving its dog treat, Snausages Breakfast time Bites. For guidance, Del Monte relied on its dog lover's social community. By monitoring customer sites and by placing questions to customers to stimulate conversations, Del Monte used text message analysis methods to investigate the partnership between pet dogs and their owners. Del Monte concluded that owners of small pet dogs would be the major customers of Snausages Breakfast Bites. The company also found dissimilarities due to the years of owners, and learned other people-dogs romantic relationships. Next, a tiny test of the superior dog food was produced and analyzed in the physical market. Due to both social mass media and physical research, the product design decisions were modified. Also, marketing deals were modified. The product markets better because the dogs think its great. Finally, the new approach solidified the community of dog fans who are happy that their thoughts are considered.

The Results

Product cycle time was reduced by more than 50 percent to only six months, and Del Monte could develop a better marketing communication strategy. Furthermore, the evaluation helped the business better understand customers and their purchasing activities as well as predicting market movements and determining and anticipating opportunities.

Note: Similar research on pet cat food was conducted in 2012 in an paid survey, by Kelton Research, using e-mail invitation and an paid survey. For details see Meow Combination (2012).

Sources: Put together from Metal (2008), Greengard (2008), Hedin et al. (2011), Jayanti (2010), Meow Combination (2012), Wikivest (2012), and Market Tools (2008).

What we can learn

The opening circumstance illustrates that market research can be useful in a competitive market by providing insights for better product development and online marketing strategy. In this case, the company accumulated data online from its socially-oriented customers. Market Tools Inc. watched conversations (over 50 an incredible number of them) on blogs and talk rooms to find the "tone of the clients. " The gathered data were then analyzed. The results of the examination helped Del Monte improve its dog food and devise new marketing strategies. General market trends, as seen in the case, relates to consumer habit, purchasing decision making, behavioral marketing, and advertising strategies; each one of these topics are addressed in this chapter.

9. 1 Learning About Consumer Tendencies Online

Companies are working in an significantly competitive environment. Therefore, they please customers and influence them to buy their goods and services. Finding and retaining customers are major critical success factors for some businesses, both offline and online. Among the key elements in building effective customer interactions is an understanding of consumer shopping behavior online.

A Style of Consumer Patterns Online

For generations, market experts have tried to comprehend consumer shopping action, and have summarized their results in various models. The goal of a consumer behavior model is to help distributors understand how a consumer makes a purchasing decision. If a firm understands your choice process, it might be in a position to better influence the buyer's decision, for example, through advertising or special campaigns.

Before examining the buyer behavior model's variables, let's describe who the EC consumers are. Online consumers can be divided into two types: specific consumers (who get a lot of the multimedia attention) and organizational potential buyers, who do most of the actual shopping on the net in terms of dollar level of sales. Organizational customers include governments, private organizations, resellers, and nonprofit organizations. Purchases by organizational clients are usually used to add value to materials or products. Also, organizational potential buyers may purchase products for resale with no further improvements. We discuss organizational purchasing in detail in Chapter 5 (e-procurement) and can focus on specific consumers in this section.

The reason for a consumer patterns model (for folks) is to show factors that influence consumer patterns. Exhibit 9. 1 shows the essential components of a consumer tendencies model. The model is composed of two major parts: important factors and the consumer decision process.

[Insert Display 9. 1 here]

Influential factors. Five proportions are considered to impact consumer behavior. They are consumer characteristics, environmental characteristics, vendor and intermediary characteristics (which are at the most notable of the display and are believed uncontrollable from the seller's perspective), product/service characteristics (such as market stimuli), and EC systems. The last two are largely handled by the sellers. Exhibit 9. 1 illustrates the major parameters in each influential dimension. A far more detailed explanation is provided in Online Record W9. 1.

The attitude-behavior decision process. The consumer decision process usually begins with a positive attitude and ends with the buyer's' decision to acquire and/or repurchase. A favorable attitude would lead to a stronger buying intention, which in turn would bring about the real buying behavior. Previous research has shown that the linkages among the previously mentioned three constructs are quite strong. For example, Ranganathan and Jha (2007) discovered that earlier online shopping experiences have the best associations with online purchase goal, accompanied by customer concerns, website quality, and computer self-efficacy. Therefore, creating a positive consumer frame of mind performs a central role in the ultimate purchase decision.

The Major Influential Factors

These factors land into the pursuing categories:

Personal characteristics. Personal characteristics, that are shown in the top-left portion of Exhibit 9. 1, make reference to demographic factors, specific choices, and behavioral characteristics. Several websites provide information on customer buying practices online (e. g. , emarketer. com, clickz. com, and comscore. com). The major demographics that such sites track are gender, get older, marital status, educational level, ethnicity, job, and household income, which can be correlated with Internet use and EC data. Men and women have been found to understand information in a different way depending on the levels of purchase self confidence and inside knowledge (Barber et al. 2009). A recent study by Crespo and Bosque (2010) implies that shopping experience has a significant effect on consumer frame of mind and intention to acquire online.

Psychological factors such as personality and lifestyle characteristics are also analyzed by marketers. These variables are briefly pointed out in a number of places throughout the written text. The reader who's thinking about the impact of lifestyle differences on online shopping may see Wang et al. (2006).

Product/service factors. The second band of factors relates to the product/service itself. Whether a consumer determines to buy is afflicted by the nature of the product/service in the transfer. These may include the purchase price, quality, design, brand, and other related qualities of the product.

Merchant and intermediary factors. Online orders may also be damaged by the merchant that delivers the product/service. This group of factors includes merchant reputation, size of business deal, rely upon the merchant, etc. For instance, people feel more secure when they obtain Amazon. com (because of its reputation) than from a no-name retailer. Other factors such as marketing strategy and advertising can also play a significant role.

EC systems. The EC system for online trades (e. g. , security safety, payment mechanism, etc) offered by the merchant may also have results. EC design factors can be divided into motivational and hygiene factors. Motivational factors were found to be more important than hygiene factors in getting online customers (Liang and Lai 2002). Perceived usability is highly related to user inclination for commercial websites (Lee and Koubek 2010).

Motivational factors. Motivational factors will be the functions available on the website to provide immediate support in the transactional process (e. g. , search engine, shopping carts, multiple payment methods).

Hygiene factors. Hygiene factors are functions on the web site whose main goal is to avoid possible trouble in the process (e. g. , security and product status traffic monitoring).

Environmental factors. The surroundings in which a purchase occurs may impact a consumer's purchase decision. As shown in Display 8. 1, environmental parameters can be grouped into the following categories:

Social variables. People are influenced by family members, friends, coworkers, and "what's popular this season. " Therefore, public parameters (such as customer endorsement, word-of-mouth) play an important role in EC. Of special importance in EC are Internet areas (see Chapter 7) and discussion groups, in which people speak via chat rooms, electronic bulletin boards, twitting, and newsgroups. These issues are discussed in various places in the written text.

Cultural/community variables. It creates a major difference in what folks buy if a consumer lives near Silicon Valley in California or in the mountains in Nepal. Chinese shoppers may differ from French customers, and rural consumers may differ from metropolitan ones.

Other environmental variables. Included in these are aspects such as available information, authorities regulations, legal constraints, and situational factors.

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Section 9. 1 Review Questions

1. Describe the major components and composition of the consumer online purchasing action model.

2. List some major personal characteristics that affect consumer patterns.

3. List the major environmental factors of the purchasing environment.

4. List and describe five major merchant-related parameters.

5. Describe the relationships among attitude, intention, and actual habit in the behavior process model.

9. 2 The Consumer Purchasing Decision-Making Process

Consumer behavior is a major element in the process of consumers' decisions to get or

repurchase.

A Generic Purchasing-Decision Model

From the consumer's point of view, a general purchasing-decision model includes five major stages (Hawkins and Mothersbaugh 2010). In each phase, we can identify several activities and, in a few, a number of decisions. The five phases are (1) need id, (2) information search, (3) analysis of alternatives, (4) purchase and delivery, and (5) postpurchase activities. Although these stages offer a standard guide to the consumer decision-making process, one should not assume that every consumer's decision-making process will always proceed in this order. In fact, some consumers may check out a specific period and then revert to a prior phase, or they could skip a phase altogether. The phases are discussed in additional information next.

Need recognition. The first stage occurs whenever a consumer is faced with an imbalance between the actual and the desired states of a need. A marketer's goal is to get the consumer to recognize such imbalance and then influence the consumer that the merchandise or service owner offers will complete this gap.

Information search. After determining the need, the consumer searches for home elevators the many alternatives available to satisfy the need. Here, we distinguish between two decisions: what product to buy (product brokering) and from whom to buy it (merchant brokering). Both of these decisions can be individual or combined. Inside the consumer's search for information, catalogs, advertising, campaigns, and reference groups could impact decision making. In this period, online product search and contrast engines, see examples at shopping. com, buyersindex. com, and mysimon. com, can be very helpful. (See decision aids in Chapter 3. )

Analysis of Alternatives. The consumer's information search will eventually make a smaller group of preferred alternatives. From this set in place, the would-be buyer will further measure the alternatives and, if possible, negotiate terms. With this period, a consumer will use the collected information to build up a couple of criteria. These criteria will help the buyer evaluate and compare alternatives. For online consumers, the actions may include analysis of product prices and features.

Purchase and delivery. After assessing the alternatives, the buyer will make the purchasing decision, arrange repayment and delivery, purchase guarantees, and so forth.

Postpurchase activities. The final phase is a postpurchase period, which consists of customer service and evaluation of the usefulness of the merchandise. Customer services and consumer satisfaction will cause positive experience and word-of-mouth (e. g. , "The product is absolutely great!" or "We really received good service whenever we possessed problems. "). If the customer is satisfied with the product and services, commitment will increase and repeat acquisitions will occur afterward.

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Several other purchasing-decision models have been proposed. A vintage (1925) model for describing consumer message processing is the Attention-Interest-Desire-Action (AIDA) model at Wikipedia (see 'AIDA' at Wikipedia). It argues that consumer processing of any advertising meaning (part of the information search stage) includes the next four phases:

1. A-Attention (Awareness). The first step is to get the customers' attention.

2. I-Interest. By demonstrating features, advantages, and benefits, the customer becomes enthusiastic about the merchandise.

3. D-Desire. Convice the customers that they want the merchandise or service which it will suit their needs.

4. A-Action. Finally, the buyer will take action toward purchasing.

Now, some analysts also add another notice to create AIDA(S), where:

5. S-Satisfaction. Customer satisfaction will generate higher commitment and lead to repurchase after using a product/service. (Loyalty, satisfaction, and trust are talked about in Online Record W9. 2. )

A recent version of AIDA is the AISAS model suggested by the Dentsu Group that is designed to online behavior. The model replaces "decision" with "search" and offers "share" to show the increased word-of-mouth effect on the Internet. This implies that consumers proceed through a process of Attention-Interest-Search-Action-Share in their online decision process. This model is specially suitable for cultural commerce.

Customer Decision Support in Web Purchasing

The preceding general purchasing-decision model was trusted in research on consumer-based EC. Within the Web-based environment, decision support comes in each period. The platform that is illustrated in Online File W9. 3 shows that each one of the stages of the purchasing model, which were described before, can be supported by both a consumer decision support system (CDSS) that helps the process and Internet and Web-aiding facilities. The CDSS facilities support the specific decisions along the way. Generic EC technologies and analytics provide the necessary mechanisms as well as enhanced communication and collaboration tools. Specific implementation of this construction and explanations of some of the terms are given throughout this chapter and the entire text.

The planner of B2C marketing needs to consider the net purchasing models in order to better impact the customer's decision-making process (e. g. , by effective one-to-one marketing and advertising).

[Insert Show 9. 2 here]

Online Document W9. 1 shows a model for an online site that helps buyer searching and decision making. This model revises the generic model by explaining a purchasing framework. The model is split into three parts. The first includes three levels of buyer action (see top of show): identify and take care of buying criteria, search for products and stores, and compare alternatives. Below these activities are boxes with decision support options that support the three top boxes (such as product representation). .

The second area of the model (on the right) has a package that includes price, financial terms, shipping and guarantee discussions. These become relevant when alternatives are likened. The 3rd part at the bottom of the display, major concerns are cited.

Players in the buyer Decision Process

Several differing people may play jobs in various stages of the consumer decision process. The following are five major assignments:

1. Initiator. The individual who first suggests or feels of the thought of buying a specific product or service.

2. Influencer. A person whose advice or view bears some weight to make your final purchasing decision.

3. Decider. The person who finally makes a buying decision or any part of it-whether to buy, what things to buy, how to buy, or where you can buy.

4. Buyer. The person who makes a genuine purchase.

5. User. The individual who consumes or runs on the product or service.

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A solo person may play all the tasks if the product or service is for personal use. In cases like this, the marketer must understand and focus on such individuals. In many situations, however, differing people may play different tasks. For example, a recently graduated engineer suggested to buy an automobile for his mother, which was as well as recommendations from his father and friends. Finally, he adopted his father's advice to buy the car. When more than one individual comes into play, it becomes more difficult to properly concentrate on advertising and marketing. Different marketing work may be designed to target folks who are playing different assignments.

Section 9. 2 Review Questions

1. List the five stages of the universal purchasing-decision model.

2. Use a good example to make clear the five phases in the common purchasing-decision model.

3. Describe the supporting functions available in Web-based purchasing.

4. Describe AIDA and AISAS models and assess their distinctions in illustrating an internet purchasing patterns.

5. Describe the major players in a purchasing decision.

9. 3 LOYALTY, SATISFACTION, AND RELY UPON E-COMMERCE

Good online marketing activity can create positive effects, which are generally seen as trust, client satisfaction, and loyalty. Devotion is the purpose of marketing, while trust and client satisfaction are factors that could affect customer devotion.

CUSTOMER LOYALTY

One of the major goals of marketing is to increase customer devotion (recall the Netflix circumstance). Customer devotion refers to a deep commitment to repurchase or repatronize a preferred product/service continuously in the future, thereby causing recurring same-brand or same brand-set purchasing, despite situational affects and marketing work that have the actual to cause moving over action. Customer acquisition and retention is a critical success factor in e-tailing. The trouble of acquiring a new customer can be more than $100; even for Amazon. com, which has a huge reach, it is more than $15. In contrast, the expense of maintaining an existing customer at Amazon. com is $2 to $4.

Attracting and retaining devoted customers remains the main issue for any offering company, including e-tailers. Increased customer loyalty can cause cost savings to a company in a variety of ways: lower marketing and advertising costs, lower deal costs, lower customer turnover expenditures, lower failure costs such as warrantee claims, etc. Customer loyalty also strengthens a company's market position because dedicated customers are placed away from the competition. Furthermore, customer loyalty can result in high amount of resistance to competitors, a reduction in price awareness, and an increase in favorable word of mouth.

Loyalty programs were created more than 100 years before and are widely used among airlines, suppliers, hotel chains, banking institutions, casinos, car leases, restaurants, and credit card issuers. But now, devotion programs have been computerized and expanded to all types of businesses. For example, Octopus Hong Kong (octopuscards. com), a stored-value cards operator, launched a reward program for consumers targeted at increasing card consumption across Hong Kong. Pay back points are gained by purchasing at lots of leading stores across the place, including Wellcome, Watsons, UA Cinemas, and McDonald's. Each Octopus credit card can store up to at least one 1, 000 rewards points, which is often redeemed on another purchase. FANCL, start to see the company atfancl. com, a Japanese cosmetics and health-care company, offers the "FANCL point program" where consumers earn FANCL items that are preserved for gift redemption.

However, the intro of Internet technologies and sociable networking has the potential to undermine brands and discourage customer commitment. The customers' potential to look, compare, get quick advice from friends, and change to different suppliers becomes easier, faster, and less costly, given aid from search engines and other technology. Furthermore, customers are less loyal to the brand as a result of lower switching costs for those to take benefit of special online offers and offers, as well concerning try new things.

It is interesting to note that companies have found that loyal customers wrap up buying more when they may have an optional website that to shop. For instance, W. W. Grainger, a big industrial-supply company, found that faithful B2B customers increased their buys greatly when they started using Grainger's website (grainger. com). (See Chapter 4 for more information. ) Also, dedicated customers may refer some other clients to a site, especially with word of mouth in social networks. Therefore, it's important for EC companies to increase customer loyalty. THE NET offers enough opportunities to take action.

E-Loyalty

E-loyalty refers to a customer's devotion to an e-tailer or a maker that sells directly online, or even to loyalty programs provided online or supported electronically. Companies can foster e-loyalty by studying their customers' needs, interacting with customers, and providing superb customer support. Another way to obtain information is colloquy. com, which specializes in devotion marketing.

In an online environment, merchant scores could possibly be the source of social communication and are from other consumers, not merely relatives and buddies. It is interesting to notice that positive customer reviews have appreciable impact on repurchase intention. It is not the total amount of reviews that influences customer repurchase motive, but the ratio of positive reviews. This boosts e-loyalty. (For reviews and recommendations in social networks, see Section 7. )

Also, online ratings and person to person may undermine the effects of challengers' low prices. For instance, Amazon. com has higher prices than Fifty percent. com, but Amazon. com continues to be preferred by many customers. The difference is the fact that Amazon. com has customer reviews and other personalization services, and 50 %. com will not.

Many factors may have an effect on customer commitment and e-loyalty. A typical model is to check on the partnership quality between suppliers and their customers, which frequently comprises trust, satisfaction, and dedication. Satisfaction and trust are specifically important because they'll lead to dedication. For example, a recent study by Cyr (2008) found that e-loyalty is afflicted by trust and satisfaction across different cultures. Hence, we shall further discuss both of these factors.

SATISFACTION IN EC

Satisfaction is one of the most crucial success measures in the B2C online environment. Customer satisfaction is associated with several key effects (e. g. , do it again purchase, positive person to person, etc) and it can result in higher customer commitment. A survey signifies that 80 percent of highly satisfied online consumers would shop again within two months, and 90 percent would recommend Internet retailers to others. However, 87 percent of dissatisfied consumers would permanently leave their Internet sellers without any claims (Cheung and Lee 2005).

Satisfaction has received considerable attention in studies of consumer-based EC. For instance, ForeSee Results, an internet customer satisfaction measurement company, developed the American CLIENT SATISFACTION Index (ACSI) (theasci. org) for measuring customer satisfaction with EC. THE CLIENT Admiration Group (customerrespect. com) also provides an index to measure customers' online experiences. The Customer Respect Index (CRI) includes the following components: straightforwardness, responsiveness, transparency, principles, attitude, and level of privacy.

Researchers have suggested several models to clarify the formation of satisfaction with online shopping. For instance, Cheung and Lee (2005) proposed a construction for consumer satisfaction with Internet shopping by correlating the end-user satisfaction perspective with the service quality viewpoint. The framework is shown in Display 9. 3.

The potential to anticipate consumer satisfaction can be handy in creating websites as well as advertising and marketing strategies. However, website designers also needs to focus on the nature of website features including navigational, aesthetic, and information design (Cyr 2008). Different features have different effects on customer (dis)satisfaction. If certain website features, such as stability of content, loading speed, and usefulness fail to perform properly, customer satisfaction will drop drastically. On the other hand, if features such as those make the consumption enjoyable, amusing, and useful, they could cause a significant jump in customer satisfaction.

[Insert Show 9. 3 here] Factors that Impact Consumer Satisfaction with Internet Shopping

TRUST IN EC

Trust is the emotional position of depending on someone else or organization to achieve a well planned goal. When people trust one another, they have confidence that their deal partners will keep their pledges. However, both parties in a transaction assume some risk. Within the electronic marketplace, vendors and customers do not meet in person. The buyer can easily see a picture of the merchandise but not the merchandise itself. Assurances of quality and delivery time can be easily made-but will they be maintained? To cope with these issues, EC suppliers need to establish high degrees of trust with current and prospects. Trust is particularly important in global EC ventures because of the difficulty of taking legal action in conditions of a dispute or fraud and the potential for conflicts induced by dissimilarities in culture and business conditions.

In addition to retailers and purchasers trusting each other, both will need to have rely upon the EC processing environment and in the EC infrastructure. For example, if people do not trust the security of the EC infrastructure, they'll not feel safe about using bank cards to make EC acquisitions.

EC Trust Models

Trust in e-commerce is often called online trust. Several models have been help with to clarify the factors which could affect online trust. For instance, Lee and Turban (2001) analyzed the various areas of EC trust and developed the model shown in Online Record W9. 2. Matching to the model, the level of trust depends upon numerous variables (factors) shown on the left side and in the middle of the show. The display illustrates the complexness of trust romantic relationships, especially in B2C EC.

[Enter Exhibit 9. 4 here] EC Trust Model

A newer model expands previous ones to include internal and external factors. Internal factors are directly related to online services provided by owner, and exterior factors are those that contain indirect interactions (Salo and Karjaluoto 2007).

How to improve Rely upon EC

Consumer trust is important to successful online retailing; it is definitely the "currency" of the web. The following are representative strategies for building consumer rely upon EC.

Improve Your Website. The most important factor that affects online trust is the quality of the website. Cyr (2008) found that the navigational, aesthetic, and information design of a site affect consumer trust. Gregg and Walczak (2010) reported a confident marriage between website quality and trust. Higher perceived website quality induces higher trust and price high quality predicated on a study of 701 eBay users. Therefore, how to create the EC website that gives high-quality information and navigational experience is an integral to increase consumer rely upon the website.

Affiliate with a target Third Party. This approach is aimed at building consumer trust by affiliating the customer with trusted third celebrations. Internet stores can put hypertext links on the websites to trusted targets, including reputable companies or well-known portals. These reputable companies are able to transfer brand collateral to the web stores because companies with brands accomplish trust. Internet stores can also use third-party seals of acceptance such as TRUSTe (truste. com) and BBBOnline (bbbonline. org), the web version of the BBB. Escrow providers and reputation finders (e. g. , cyberalert. com and cymfony. com) are also useful. These companies provide business-critical cleverness about how brands are being used on the web as well as research about spying on businesses.

Working against EC trust are experiences about scams on the Internet, especially when unknown parties are involved. Reputation systems which were described in Chapter 7 can impact trust either positively or adversely.

Establish Trustworthiness. Trustworthiness can be achieved through three important elements: integrity, competence, and security. Integrity conveys a standard sense of the power of the web store to develop an image of strong justice and accomplish all the claims which may have been designed to the clients (i. e. , supplying a money-back promise with the products and clearly proclaiming the guarantee insurance policy on the site). Another indication of trustworthiness can be an Internet store's competence. Stores can promote the belief of competence by providing a professional website. Finally, EC security mechanisms can help solidify trust. Dell was the first Laptop or computer manufacturer to kick off a web secure shopping make sure to online shoppers making purchases at its website.

Other Options for Facilitating Trust

Several other methods are used to accomplish trust on the Web. For example, tying cognitive style to communication with customers (Urban, et al. 2009, discussed later in the section) is designed to build trust. Another method is that of reputation.

Reputation-Based Systems. Reputation is the thoughts and opinions of the public toward a person, a group of people, or a business. It is a key point in many areas, such as business, online communities, and social position. Reputation-based systems are used to establish trust among people of online communities where parties without prior understanding of each other use the feedback off their peers to evaluate the standing of the peers in the community. For details, see 'Reputation' at Wikipedia. For a comprehensive overview and exactly how to design a reputation system, see Dellarocas (2010).

A major player in this area is Yelp. com, which aggregates reviews that contain highly subjective judgments. Its system permits likewise minded users to spot one another.

Online Word of Mouth. Due to the increased interpersonal activities on the web, online word of mouth is also influencing trust level.

A analysis by Awad and Ragowsky (2008) found that online word-of-mouth quality impacts online trust and its result varies across genders. In general, guys value their capacity to post online, whereas females value the responsive involvement of other consumers. Online word of mouth may occur in several varieties, such as consumer online responses and participation in social mass media forums. Hence, fostering positive person to person is a powerful strategy to build stronger trust in a web site.

SECTION 9. 3· REVIEW QUESTIONS

1. Describe customer commitment and e-loyalty.

2. Describe the use of business intellect and analytical software for e-loyalty.

3. Describe the problem of rely upon EC and how to increase it.

4. What affects consumer satisfaction online? Why do companies need to monitor it?

5. How do trust be increased in EC?

6. Define reputation-based systems and associate them to trust in EC

9. 4 Mass Marketing, Market Segmentation, and Relationship Marketing

One of the greatest advantages of EC is its capability to match products (services) with specific consumers. Such a match is named one-to-one marketing, an integral part of the partnership marketing that snacks each customer in a unique way to match advertising with the customer's account and needs. Let's first observe how the one-to-one strategy improved from traditional marketing techniques.

From Mass Marketing to One-to-One Marketing

Three major basic strategies are being used in marketing and advertising: mass marketing, market segmentation, and romantic relationship (one-to-one) marketing.

Mass Marketing and Advertising

Marketing efforts usually were geared to everyone (the "masses"). For instance, using a magazine or TV advertising usually means one-way social communication to prospects who view it. Such an effort may be effective for brand popularity or for producing a new service or product. It can be conducted on the Internet as well. Adding banner ads on an Internet portal to send emails to everyone who accesses the website is a typical example of mass marketing.

Example. In 2005, Ford Motor unit Company launched a roadblock way on the web to promote its F-150 vehicle. (A "roadblock" refers to running a commercial on all major Television set channels at the same time, so viewers cannot switch programs to flee the commercial. ) On your day of the introduction, Ford positioned static banner ads for 24 hours on the three leading Internet portals-AOL, MSN, and Yahoo!-launching a 3-month plan. Some 50 million Web surfers found Ford's banner. An incredible number of them clicked on the banner, pouring onto Ford's website at a rate that come to 3, 000 per second. Ford claimed that the traffic resulted in a 6 percent increase in sales within the first three months of the advertising campaign.

[End of example]

Market Segmentation

Market segmentation refers to the practice of promoting something or service to a subset of customers or prospects. For example, cosmetic product companies may put their adverts mostly in magazines geared toward women. Therefore that the market is segmented by the gender of consumers. One benefit of market segmentation is the fact that marketing and advertising efforts can match sections better than the "mass, " providing a better response rate. Also, the expense of achieving the sections may be lower, and marketing attempts can be faster (e. g. , e-mails are sent to fewer people, or banner advertising are positioned on fewer websites). THE WEB enables more effective market segmentation, but it addittionally improves romantic relationship marketing, or one-to-one marketing.

Criteria for Market Segmentation.

For effective market segmentation, the following are common conditions that companies use:

Geographic. Region; size of city, county, or Standard Metropolitan Statistical Area (SMSA); people density; climate; dialect.

Demographic. Age, profession, gender, education, family size, religious beliefs, race, income, nationality, urban (or suburban or rural).

Psychological (lifestyle). Friendly category, lifestyle, personality, activities, VALS typology (see 'VALS typology' atstrategicbusinessinsights. com).

Cognitive, affective, behavioral. Attitudes, benefits sought, loyalty status, readiness stage, usage rate, recognized risk, user status, innovativeness, usage situation, participation, Internet shopping experience.

Profitability. Respected customers are placed in a special category.

Risk center. Low-risk customers are in a particular category.

[Comp: please cover from the sun the bullet list]

Statistical and data mining methods can be used to identify valuable segments for campaign or advertising. Modern companies assign a number of segments with their customers, often dynamically defining segments and temporarily regrouping customers for specific campaigns. By segmenting customers, companies could begin more specialized communications about their products. Much of this relies on the company's understanding its business ways of the extent that they know their most desired segments. For example, if a bank has structured its website on deriving almost all of its profits from fee-income products offered in its investment services line of business, customers for this bank will probably have different choices and characteristics from those finance institutions offering only personal savings accounts. Segmenting customers predicated on their preferred occupation or desired product features can disclose interesting factual statements about their different choices and conducts.

A simple way to do segmentation online is to go to a specialised website or portal and advertise to its tourists. For example, when you go to ivillage. com, you reach largely women. Advertising in Internet areas and internet sites usually provides you with market segmentation. Significantly, advertising is being placed on interpersonal networking sites (such as Facebook). Remember that U. S. shelling out for public network advertising keeps growing speedily (see Chapter 7). Some Weblogs that focus on specific niche categories (e. g. , see paidcontent. org or fark. com) are more appealing to advertisers.

Relationship (One-to-One) Marketing

Relationship marketing is different from traditional marketing for the reason that it focuses on building long-term associations with customers. To carry out so, owner will need to have a more deeply knowledge of its customers on the one-to-one basis. To take action, merchants need to know their customers' information. Such information can be obtained faster, easier and cheaper for online customers. When such information is examined it become valuable for one-to-one marketing.

Although segmentation can give attention to a group of customers, it might not exactly be good enough because the majority of the competition can take up similar strategies. It may be wise, therefore, to switch the mark for marketing from a group of consumers to each individual. Instead of providing an individual product to as much customers as it can be, marketers want to sell as many products as you can to 1 customer-over a long period of time. To do this, marketers need to concentrate on building unique connections with specific customers on the one-to-one basis.

One-to-one marketingis a way for marketers to get to know their customers more intimately by understanding their personal preferences and then providing personal marketing communication.

One-to-one means not only interacting with customers as individuals, but possibly providing customized products and personalized messages based on the customer's tastes. The major characteristics of one-to-one marketing as compared to mass marketing and market segmentation are illustrated in Exhibit 9. 5.

[Insert Show 9. 5 here]

How One-to-One Romantic relationships Are Practiced

Although some companies experienced one-to-one marketing programs for a long time, it could be much more beneficial to institute a corporate-wide insurance plan of creating one-to-one human relationships around the Web. This can be done in several ways. For instance, Exhibit 9. 6 shows a possible one-to-one marketing cycle. The cyclical process includes four levels: id of customer choice, differentiation of products/services, interaction with customers, and customization (individualized service). The process can start at any point in the circuit. For new customers, it usually begins with "Customer gets marketing subjection" (at the top right area of display). The customer then decides on how to respond to the marketing visibility and makes the purchase decision (e. g. , whether to buy the product online or offline; if online, whether to buy as an individual or to use group purchasing). When a sale is manufactured, customer information is accumulated (lower left spot) and then it is placed in a databases. Then, a customer's profile is developed, and the so-called four Ps of marketing (product, place, price, and campaign) are designed based on the profile, over a one-to-one basis. All this can be carried out in the net environment.

[Insert Show 9. 6 here]

Unfortunately, many businesses view their relationships with customers as particular orders. However, customers do not take a look at them this way; view their marriage with a small business as romance, not individual relationships. Imagine if businesses could go beyond what is just transacted with their customers when evaluating the quality of the service they offer and appearance at the overall relationship with a customer across all channels? What if using this method they could add a customer's feeling, would like and needs into the equation. This approach is growing now as a theory of customer dynamic (see Ziv 2010) which is practice on the net as a one-to-one strategy.

One of the benefits of doing business over the Internet is that it enables companies to better talk to customers and better understand customers' needs and buying habits. These improvements, in turn, enable companies to improve and frequently personalize their future marketing efforts. For instance, Amazon. com can e-mail customers announcements of the availability of catalogs in their regions of interest when they are released; Expedia. com will ask consumers where they will probably take a flight to and then e-mail them information about discount rates to their destination. Information on these key principles that are part of personalization are talked about in Section 9. 5.

Section 9. 4 Review Questions

1. Define and explain mass marketing.

2. Define market segmentation. How is segmentation done?

3. Define one-to-one marketing. What are its advantages?

4. Describe the one-to-one marketing cyclical process.

5. How is the data of a person profile used by the marketers?

9. 5 Personalization and Behavioral Marketing

Internet marketing helps the use of market segmentation and one-to-one marketing. Here we addresses three key issues related to one-to-one marketing: personalization, behavioral targeting, and collaborative filtering.

Personalization in E-Commerce

Personalization refers to the matching of services and advertising content to individuals predicated on their tastes. The matching process is dependant on just what a company knows about the individual customer. This knowledge is usually known as a user profile. The user profile defines customer choices, actions, and demographics. It could be generated by getting information immediately from the user; observing what people are doing online through the use of tools like a cookie-a data document that is placed on a user's hard drive by a distant Web server, frequently without disclosure or the user's consent, that collects information about the user's activities at a niche site; building information from prior purchase patterns; accomplishing marketing research (see Section 9. 6); and making inferences from information known about similar consumers.

Once a customer profile is produced, an organization can match the profile with a database of products, services, or advertisings. Manual matching is time-consuming and expensive; therefore, the coordinating process is usually done by computerized software agents. One-to-one matching can be applied through several different methods. One well-known method is collaborative filtering (reviewed later in this section).

Many vendors provide personalization tools that assist in customer acquisition and retention. Types of such distributors are Get Sidecar, seegetsidecar. com and Magnify 360, see magnify360. com.

Cookies in E-Commerce

The use of cookies is a well-known method that permits the id of customers' future goes to on a single personal computers. See 'cookies' at Wikipedia. .

Are cookies bad or good? The answer is "both. " When users revisit Amazon. com or other sites, customers are greeted by their first name. How does Amazon. com know a user's identity? By using cookies! Vendors can offer consumers with considerable personalized information if they use cookies that indicate a consumer's go back to a site. Cookies can provide marketers with an abundance of information, which in turn can be used to target advertisings to them. Thus, marketers get higher rates of "click-through, " and customers can view the most relevant information. Cookies can also prevent repetitive ads because distributors can arrange for a consumer not to see the same ad twice. Finally, advanced data mining companies (e. g. , provided by SPSS and Sift), can evaluate information in cookie data files so companies can better meet their customers' needs.

However, some individuals object to cookies because they don't like the idea that "someone" is watching their activity on the web. Users who do nothing like cookies can disable them. On the other hand, some consumers may want to keep the friendly cookies. For instance, many sites acknowledge a person as a subscriber so that they do not need to register many times.

For information on deleting cookies from you Web browser see 'deleting cookies' at whitecanyon. com.

Using Personalized Ways to Increase Sales

Companies make an effort to provide personalized services to customers in order to increase customers' satisfaction and commitment. A perfect example is Amazon. com which gives many personalized services. Most popular there are product recommendations. Amazon. com creates automatically such tips based on the purchasers' purchasing and surfing around histories, and after purchasing of other customers with similar purchasing record (see Scharge (2008) for details). Another company, MotherNature. com, see atmothernature. com, is using data and word mining to investigate each site visit based on the customer's preferences and buying patterns. It is able to track everything from the success rate of online campaigns to trends you can use in site personalization. Unique services can be facilitated when the companies learn about their customers. Such information is provided, see 'personal service' at rapleaf. com.

Behavioral Marketing and Collaborative Filtering

One of the most popular means of coordinating customers with advertisings is to apply technologies based on customer behavior on the net. It is essentially a one-to-one strategy. We discuss here the essentials of this procedure, which is recognized as behavioral targeting, and provide brief information on one method for carrying it out.

Behavioral Targeting

Behavioral targeting uses information gathered about an individual's Web-browsing behavior, like the pages they have visited or the searches they may have made, to be able to choose an advertisement to display to that specific. Many vendors believe this assists them deliver online advertising to users who then would be affected by the advertisings. Behavioral concentrating on can be used on its own or in conjunction with other varieties of targeting, such as using factors like located area of the customers or demographics. Google is reported to test its "interest-based advertising" to make ads more relevant and useful. Representative vendors of behavioral targeting tools are Predictad. com, Adlink. com, Adaptlogic. com, Boomerang. com, Criteo. com, and Valueclick. com. For more information see at Wikipedia. . A major approach to behavioral targeting is collaborative filtering.

Collaborative Filtering

It would be useful if the company could predict what products or services are appealing to a person without asking the client immediately. Collaborative filtering is a way that tries to do just that; it uses the choices and activities of customers with similar characteristics to make user information of new customers and make product suggestions to them. Many personalization systems derive from collaborative filtering; see more info at backflip. com and choicestream. com. The declaration "Those who bought this item also bought the following items:" is a typical statement produced by collaborative filtering, which intends to persuade a consumer by directing to choices of other consumers.

Other Methods

In addition to collaborative filtering, other methods for identifying users' profiles are:

Rule-based filtering. A company asks consumers a series of yes/no or multiple-choice questions. The questions may range from private information to the specific information the client is looking for on a specific website. Certain behavioral habits are predicted using the gathered information. From this information, the collaborative filtering system derives behavioral and demographic rules such as, "If customer age group is greater than 35, and customer income is above $100, 000, show Jeep Cherokee ad. Otherwise, show Mazda Protg advertising. "

Content-based filtering. With this system, vendors identify customer choice by the attributes of the merchandise(s) they plan to buy. Predicated on user preferences, the vendor's system will recommend additional products with similar features to the user. For instance, the machine may recommend a text-mining book to customers who have shown interests in data mining, or recommend more action videos after a consumer rented one.

Activity-based filtering. Filtering guidelines may also be built by enjoying the user's activities on the Web.

For more about personalization and filtering, see personalization and filtering at Wikipedia.

Legal and Ethical Issues in Collaborative Filtering

Information often is collected from users without their knowledge or authorization. This raises several honest and legal questions, including invasion of privateness issues. Several suppliers offer permission-based personalization tools. With these, companies ask the customer's permission to get questionnaires and ads. (See Section 14 for much more on level of privacy issues, and Section 8. 10 for information about authorization marketing. )

In November 2010, Facebook declared the probability of rolling out a Web-based advertising network that focuses on ads based on the recipients' behavior and the action with their Facebook friends. Level of privacy groups aren't happy and want to pressure Facebook to cancel task.

Social Mindset and Morphing in Behavioral Marketing

Social psychology is the branch of mindset that handles how people think about, effect, and relate to one another. Research has discovered that shoppers do what's popularly known as 'thinslicing' when they are out shopping. Thinslicing is a method of considering (psychologist call it heuristic-thinking) that involves ignoring the majority of the information available, and instead using (slicing off) a few salient information cues, often social in nature, along with a set of simple, but usually smart mental guidelines to make intuitive decisions. Psychologists have identified six universal heuristics (mental guidelines) that buyers use to process thinsliced information; cultural shopping tools are powerful because they funnel these heuristic to make purchase decisions more likely. For details see Marsden (2009).

One level the public psychology displays in communal shopping (see Chapter 7); interpersonal shopping harnesses the individuals capacity for interpersonal learning, learning from the knowledge and experience of others we know and/or trust. This cultural learning faculty is part of the social intelligence, the ability to understand and learn from one another and profit from interpersonal situations. But sociable shopping tools also work at a more important level, by participating in to cognitive biases in how people are inspired by other folks when shopping.

Cognitive styles and morphing. Cognitive styles define how people process information is now a topic of research by behavioral researchers with respect to Internet marketing and advertising. Specifically, an attempt is made to connect the net with users in the cognitive style they preferred. This may make one-to-one advertising information far better. MIT designed an empathetic Web that can be used to determine how a user processes information and then responds to each visitor's cognitive style. For a thorough description see Urban et al. (2009).

Use of Customer Data source Marketing

Personalized services tend to be predicated on information the merchant gets from commercial data source marketing services (e. g. , see Strauss and Frost 2009). A unique exemplory case of such service is Rapleaf.

Example. Rapleaf is a data source marketing startup (rapleaf. com). Performing primarily as B2B organization, Rapleaf's databases of consumer information helps businesses section customers, understand consumer penetration across sociable press, plan online marketing campaigns, find influential customers for a person romantic relationship management, and investigate fraud.

The company provides businesses with information about the trustworthiness of individual customers. It really is like credit card verification. However the information provided (e. g. , demographic) on each customer allows sellers to provide individualized services. Individuals can see their own level of reputation (and ideally improve it) and they can better understand their online footstep. For how the company gathers information, what they know about you, how they use the information, and what level of privacy concerns can be found see Metal (2010).

[End of example]

Section 9. 5 Review Questions

1. Define personalization and list some advantages of personalization.

2. Describe cookies in EC.

3. Define behavioral targeting.

4. Define collaborative filtering.

5. Explain how one-to-one advertising is performed with cookies and behavioral targeting.

9. 6 Market Research for E-Commerce

In order to sell products well, it's important to execute proper market research to find information and understanding of consumers and products. The market researcher's goal is to discover marketing opportunities and issues, to establish marketing plans, to better understand the purchasing process, also to evaluate marketing performance. On the net, its goal is also to research the market and tendencies of online customers. (e. g. , see Strauss and Frost 2012). General market trends includes gathering information about subject areas including the economy, industry, firms, products, pricing, circulation, competition, promotion, and consumer purchasing patterns.

Objectives and Ideas of Market Research Online

Investigation of EC marketplaces can be conducted through standard methods or it could be done with the assistance of the web. Although cell phone or retail center research will continue, involvement in Internet research methods is on the rise. General market trends that uses the web frequently is faster and better and allows the researcher to access a more geographically diverse audience than those within offline surveys. Also, on the net, market analysts can conduct an extremely large study a lot more cheaply than with offline methods. Even telephone surveys can cost just as much as $50 per respondent. This can be too expensive for a tiny company that requires several hundred respondents. An paid survey will definitely cost a fraction of your similarly sized cell phone survey and can expedite research noticeably, as shown in Case 9. 1 about P&G. The increased sample size in internet surveys can theoretically increase the correctness and the predictive functions of the results. McDaniel and Gates (2012) provide a comprehensive review of online general market trends technology, methods, tools, issues, and honest considerations.

Case 9. 1

EC Application

Internet Market Research Expedites Time-to-Market at Procter & Gamble

For ages, Procter & Gamble (see P&G information at pg. com), Johnson & Johnson, and Colgate-Palmolive have been competition searching for personal care products. Developing a major new product from theory to market launch used for taking more than 5 years. First, a concept test was conducted: The firms sent product images and descriptions to prospective customers, asking whether they might buy the product. When the opinions was negative, they attempted to enhance the product theory and then repeated the previous concept test. Once positive response was achieved, test products were mailed away, and the customers were asked to complete thorough questionnaires. When customers' replies met the companies' required goals, the firms would focus on mass Tv set advertising.

However, thanks to the web, it took P&G only 31/2 years to get Whitestrips, a teeth-brightening product, onto the marketplace and a sales degree of $200 million a year-considerably quicker than it experienced taken in days gone by with other dental care products. In September 2000, P&G substituted its traditional test model with a Web-based model for Whitestrips. The company spent almost a year studying who was coming to the website and buying the product and collecting replies to online questionnaires, which was much faster than the old email ones.

The online research, which was facilitated by data mining conducted on P&G's huge historical data (stored in a data warehouse) and the new Internet data, determined the most enthusiastic groupings. These included teenage women, brides-to-be, and young Hispanic Us citizens. Immediately, the company started to concentrate on these segments with appropriate advertising. The Internet created a product knowing of 35 percent (an extremely high level), even before any shipments were designed to stores. This recognition created a huge demand for the merchandise by enough time it became available in stores.

In 2006, P&G started out using on-demand alternatives from RightNow Solutions, see 'RightNow Technologies'at rightnow. com, including study tools that execute thoughts and opinions polls among specific segments of consumers who have opted in to the company's general market trends programs (reported by PR Newswire 2006).

In 2008, P&G started to experiment with responses collected at Facebook and other social networks. Such an information solicitation can be good for successful advertising of products since people can multiply the term around by word of mouth.

From these experience, P&G discovered important lessons about flexible and creative ways to approach product invention and marketing. The complete process of learning the product principle, segmenting the marketplace, and expediting product development has been revolutionized. As of 2009, all major competition established groupings on Facebook, developed islands in Second Life, and use LinkedIn and Twitter to converse and study from customers. They shorten the time-to-market and progress feedback from customers, as shown at Johnson & Johnson (see the closing case of the section) and in Ploof (2009). In 2010 2010, P&G launched its "Future Friendly" marketing campaign to raise awareness about greener products and greener procedures within its "sustainability eye-sight. "

Sources: Put together from TMCnet. com (2006), Buckley (2002), Ploof (2009), Makower (2010), and


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