Transcript Chapter 4

Chapter 4
Consumer Behavior,
Online Market Research, and
Customer Relationship Management
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 oneto-one relationships with customers.
4. Explain how personalization is
accomplished online.
5. Discuss the issues of e-loyalty and e-trust
in EC.
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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Learning about Consumer
Behavior Online
Model of consumer behavior online
independent (or uncontrollable) variables
intervening or moderating variables
decision-making process
dependent variables
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Learning about Consumer
Behavior Online (cont.)
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Learning about Consumer
Behavior Online (cont.)
Independent variables
Personal characteristics
Environmental variables
Social variables
Cultural/community variables
Other environmental variables
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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?”
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Consumer Decision
Making Process
Roles people play in the decision
making process
Initiator
Influencer
Decider
Buyer
User
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Consumer Decision
Making Process (cont.)
5 phases of the generic purchase
decision model:
1.
2.
3.
4.
5.
need identification
information search
evaluation of alternatives
purchase and delivery
after-purchase evaluation
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Consumer Decision
Making Process (cont.)
Product brokering: Deciding what product to
buy
Merchant brokering: Deciding from whom
(from what merchant) to buy a product
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Consumer Decision
Making Process (cont.)
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Consumer Decision
Making Process (cont.)
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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
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One-to-One Marketing and
Personalization in EC (cont.)
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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
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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
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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
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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
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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
lower
lower
lower
marketing costs
transaction costs
customer turnover expenses
failure costs
E-loyalty: Customer loyalty to an e-tailer
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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
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One-to-One Marketing and
Personalization in EC (cont.)
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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
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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
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Market Research for EC
Goal of market research is to find
information and knowledge that
describes the relationships among:
consumers
products
marketing methods
marketers
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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
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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
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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
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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
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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
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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
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Market Research for EC (cont.)
Online market research methods
Web-based surveys
Online focus groups
Hearing directly from customers
Customer scenarios
Tracking customer movements
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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
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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
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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
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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
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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
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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
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CRM and Its
Relationship with EC (cont.)
Scope of CRM
1. Foundation of service
2. Customer-centered services
3. Value-added services
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CRM and Its
Relationship with EC (cont.)
Extent of service
1. Customer acquisition (prepurchase
support)
2. Customer support during purchase
3. Customer fulfillment (purchase
dispatch)
4. Customer continuance support
(postpurchase)
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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
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CRM and Its
Relationship with EC (cont.)
CRM implementation issues
Steps in building EC strategy focused on
customer:
1. focus on the end customer
2. systems and business processes that are
designed for ease of use and from the end
customer’s point of view
3. efforts to foster customer loyalty
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CRM and Its
Relationship with EC (cont.)
Five factors required to implement a
CRM program effectively:
1.
2.
3.
4.
5.
Customer-centric strategy
Commitments from people
Improved or redesigned processes
Software technology
Infrastructure
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CRM and Its
Relationship with EC (cont.)
Justifying customer service and CRM
programs
Metrics: Standards of performance;
may be quantitative or qualitative
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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
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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
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CRM Applications and Tools (cont.)
Classifications of CRM applications
Customer-facing applications
Customer-touching applications
Customer-centric intelligence applications
Online networking and other applications
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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
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CRM Applications and Tools (cont.)
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CRM Applications and Tools
(cont.)
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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
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CRM Applications and Tools
(cont.)
Customer-touching applications
Personalized Web Pages
E-Commerce Applications
Campaign Management
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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
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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
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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
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CRM Applications and Tools
(cont.)
Online networking and other
applications
Forums
Chat rooms
Usenet groups
E-mail newsletters
Discussion lists
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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
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CRM Applications and Tools (cont.)
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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
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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
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Internet Marketing in B2B (cont.)
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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 welldefined group
affiliation service
advertising
Electronic wholesalers
intermediary sells directly to businesses, but
does so exclusively online
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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
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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
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Managerial Issues
1. Do we understand our customers?
2. What do customers want from
technology?
3. How is our response time?
4. How do we measure and improve
customer service?
5. Is CRM for real?
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Managerial Issues (cont.)
6. Do we have to use electronically
supported CRM?
7. Should we use intelligent agents?
8. Who will conduct the market research?
9. Are customers satisfied with our Web site?
10. Can we use B2C marketing methods and
research in B2B?
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Summary
1. Essentials of consumer behavior.
2. The online consumer decisionmaking process.
3. Building one-to-one relationships
with customers.
4. Online personalization.
5. Increasing loyalty and trust.
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Summary (cont.)
6. EC customer market research.
7. CRM, its technologies, and EC
connection.
8. Implementing customer service
online.
9. B2B Internet marketing and
organizational buyers.
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