Consumers and the Internet

1
Consumers and the Internet

• Describing consumers
• Understanding online consumption
• Recognizing marketing opportunities

2
Dawning of a New Era for Consumers in an Online
environment
3
Consumers and the Internet

• Growth of online sales a result of
• Advances in computer technology and subsequent
  availability of information for consumers.
• However, public fears are a major holdback of
  realizing the Internet's full potential.
• Another problem has been the demographic
  characteristics of internet users vs. non-users
• Known as the Digital Divide
• Certain products specifically aimed at heavy
  Internet users (e.g., records, software) and
  products/services that require a high level of
  customization (e.g., airline tickets) have seen
  largest growth.
• Another issue has been the relative ease with
  which consumers can compare prices of different
  retailers, resulting in intense price
  competition.
• This has had a huge impact offline as well,
  driving technology prices down.
• Legislation has limited taxation of Internet
  sales in the U.S., in an attempt to "jump start"
  this innovation.

4
Perspectives in Perspective A
Consumer Focus

• Need to understand how consumers obtain resources
  in an Internet environment
• Who uses the Internet to receive resources?
• What do they receive?
• How do they receive it?
• Need to leverage this knowledge to create and
  implement marketing strategy

5
Why Are We Doing This???

• Cant just condense a CB text and expect it to
  make sense...
• This is not traditional consumer behavior
• New ways to consume online
• New things to consume online
• New types of consumers? (Accountability,
  addressability)
• Transaction-related activities are important
• Consumer psychology is very relevant, but its
  not everything
• Need to focus on exchanges

6
Who Are Online Consumers?

• Two types of insights
• Descriptive (who, what, where, when)
• Inferential (why???)

7
Online Consumers

• Descriptive Insights
• Demographics and psychographics
• Who they are...
• A profile of the typical user
• 1990s Playground for the educated wealthy
  Male, 30s, professional, college educated, income
  gt 62K.
• Today With better technology, more comfort and
  acceptance, there is very little difference
  between online and offline consumers.
• The Digital Divide has become MUCH narrower!
• So who are they?
• 51 women, income x 49K

8
Online Consumers

• Descriptive Insights
• Demographics and psychographics
• Who they are...
• A profile of the typical user
• Some characteristics of online consumers

9
Descriptive Variables
See also http//elab.vanderbilt.edu/research/pape
rs/html/manuscripts/baseline/internet.demos.july9.
1996.html
10
Descriptive Variables
11
Proportions of Internet Users in the Population
of Each Region from 2000 to 2004 Source Compiled
from data at Cyberatlas.com (1/05)
12
Geographic differences?
Upper Midwest 59 are online Minnesota,
Wisconsin, North Dakota, South Dakota
Mountain States 64 are online Colorado, Utah,
Idaho, Nevada, Wyoming, Montana
Industrial Midwest 56 are online Illinois,
Indiana, Ohio, Michigan
Pacific Northwest 68 are online Washington,
Oregon

• New England 66 are online Maine, New
  Hampshire, Vermont, Massachusetts, Rhode Island,
  Connecticut

Midwest 55 are online Missouri, Nebraska,
Oklahoma, Kansas, Iowa
Mid-Atlantic Region 58 are online New York,
Pennsylvania, New Jersey, Delaware
California 65 are online
Capital Region 64 are online Washington D.C.,
Maryland, Virginia
Southeast Region 57 are online Florida,
Georgia, South Carolina, North Carolina
Border States 60 are online Texas, New
Mexico, Arizona
South 48 are online West Virginia, Kentucky,
Tennessee, Alabama, Mississippi, Louisiana,
Arkansas
13
Descriptive Variables
14
Age Differences?

• Age
• Average age online 43.06
• Seniors (Fastest growing age group to adopt
  online technology!)
• Includes 85, not just 55.
• Equal to all other groups in email use
• Pre-teen and teens are the next fastest

15
Other Differences?

• Education
• Still high users are more educated
• Higher incomes, more access to technology
• Ethnicity
• Hispanic American (Fastest growing minority group
  online)

16
Gender Differences?

• Male and female Internet users engage in some
  online activities at different rates. 
• Check news, weather, and sports (67.1 males vs.
  56.7 females)
• Health services or practices (39.8 females vs.
  29.6 males)
• Financial purposes
• Trade online (12.6 males vs. 5.3 females)
• Banking online (19.3 males vs. 16.5 females)
• A larger percentage of male Internet users
  reported using the Internet for
  entertainment-oriented activities.
• Online games (45.3 male vs. 39.1 female)
• Viewed TV/movies or listened radio (21.9 male
  vs. 15.9 female)
• Men and women responded similarly for the
  remaining categories surveyed. 
• Email 82.8 male, 85.1 female
• Job search 16.9 male, 16.0 female
• Online chatrooms/listservs 18.4 male, 16.3
  female.

17
Income Differences?
Table 3-1  Online Activities of Internet Users
by Household Family Income, 2001Percent of
Internet Users Age 3
Source NTIA and ESA, U.S. Department of
Commerce, using U.S. Census Bureau Current
Population Survey Supplements
  Source NTIA and ESA, U.S. Department of
Commerce, using U.S. Census Bureau Current
Population Survey Supplements
18
Descriptive Variables
19
Online Consumers

• Descriptive Insights
• Demographics and psychographics
• Who they are...
• A profile of the typical user
• Some characteristics of online consumers
• VALS

20
A Psychographic Approach
21
Descriptive Variables
22
Online Consumers

• Descriptive Insights
• Demographics and psychographics
• Who they are...
• A profile of the typical user
• Some characteristics of online consumers
• VALS
• What they do
• Behavioral measures

23
Digital Tools
24
Defining Online Segments

• What is a segment?
• Identifiability
• Sufficiency
• Addressibility
• Online segments?
• Psychographics Demographics?
• Demographics Behavior?

25
Defining Online Segments

• What is a segment?
• Identifiability
• Sufficiency
• Addressibility
• Key Demographic Segments Online
• Older Americans
• Younger Americans
• Newer Americans

26
Selling to Seniors
Older Americans, In millions
27
Seniors, Again

• Behavioral Data
• 31 online (32 million) in 2005
• 78 online daily
• Demographic Data
• Age 55 and up, Retired
• Have money (control 77 of US assets)
• Psychographic data
• Concerned about security issues
• Surf with purpose (healthcare, leisure)
• http//www.suddenlysenior.com

28
Younger Americans

• Behavioral Data
• 94 of teens have Internet access
• Average 12 hrs/wk online
• Not much online shopping, though
• So why do marketers care?
• Demographic Data
• Big spenders, in the future
• (483M in 2000, est. 12.5B in 2007 US and
  Europe)
• Use pre-paid cards
• Psychographic Data
• Provides insight for developing brand awareness
  and loyalty

29
Spending Time
30
Spending Money
31
Younger Americans

• Behavioral Data
• 94 of teens have Internet access
• Average 12 hrs/wk online
• Not much online shopping, though
• So why do marketers care?
• Demographic Data
• Big spenders, in the future
• (483M in 2000, est. 12.5B in 2007 US and
  Europe)
• Use pre-paid cards http//www.visabuxx.com
• Psychographic Data
• Provides insight for developing brand awareness
  and loyalty http//www.gurl.com

32
Newer Americans Hispanics

• Behavioral Data
• 55 access content in Spanish ?uniquely
  accessible group
• Enables targeted marketing http//www.yupimsn.com
• Demographic Data
• Fastest growing minority group online (in 2002,
  growth in general online pop 3, Hispanic 13)
• Psychographic Data
• Like technology, esp. home media devices
• Emphasis on quality-of-life issues

33
Why Segmentation Matters
34
Understanding Consumers with Inferential Insights

• Some caveats
• For every resource, there is a theory
• The environment causes problems with theories
• The role of resources (The WHY!!!)
• Look at nature of each resource
• Understand what motivates peoples behaviors with
  it
• Understand how Internet fits in
• Identify/develop marketing opportunities

35
Back to Resource Exchange Money

• What is it? (Fungibility!)
• The meaning of money
• Does it change on the Internet?
• Change of form? (e.g., cash and poker chips)
• Loss of tangibility effects
• Do consumers money behaviors change?
• Different types of money for different goals
• No physical form
• New ways
• Person to Person (e.g. Paypal)
• Cybercash or digital cash (e.g., eCash)

36
Playing with Money

• Facilitating effects of the Internet
• New ways to receive it
• Surf for cash (e.g., paidforsurf.com)
• Email chain letters (http//hoaxbusters.ciac.org/H
  BChainLetters.shtmlwalkingman)
• New ways to transfer it http//www.paytrust.com
• New ways to use it (online gambling, auctions)
• Inhibiting effects of the Internet
• Show me the money (i.e., Security fears)
• Internet Fraud issues

37
The Internet and Information

• What is it?
• Earliest benefit of the Internet
• From data communications
• To information repository
• Information as information
• E.g., News, communication
• Information as product
• E.g., Entertainment
• Information as service
• E.g., tax, medical information

38
Information For Its Own Sake
39
More Information

• Using information as a resource
• E.g., Decision making search, evaluation, choice

Information Search
Information Evaluation
Choice and Satisfaction
40
More Information

• Positive and Negative effects of the Internet
• Search lots of information/too much information
• How much to get? (Economics of information)
• What is the quality of the information?
• Evaluation how to structure the information
• Effort/accuracy (cost/benefit) approaches
• Heuristics
• Choice confidence and satisfaction

41
Information Processing
Decision Quality
Amount of Information
42
More Information

• Positive and Negative effects of the Internet
• Search lots of information/too much information
• How much to get? (Economics of information)
• What is the quality of the information?
• Evaluation how to structure the information
• Effort/accuracy (cost/benefit) approaches
• Navigation, Navigation, Navigation!
• Heuristics (Rules of Thumb)
• Importance of Bookmarks, Favorites, etc.
• Choice confidence and satisfaction

43
More Information

• Positive and Negative effects of the Internet
• Search lots of information/too much information
• How much to get? (Economics of information)
• What is the quality of the information?
• Evaluation how to structure the information
• Effort/accuracy (cost/benefit) approaches
• Heuristics
• Choice confidence and satisfaction
• Consumer must feel confident and satisfied
• http//www.orbitz.com
• http//www.pricegrabber.com

44
More Resources, More Theories

• Goods (aka products, in marketing)
• Type and quality assessment
• Search, Experience, Credence
• Form
• Physical v. digital

45
Goods

• Internet affects on Goods
• Search goods Can facilitate consumers' ability
  to obtain attribute information.
• But may have a damaging effect on decision
  quality.
• Experience goods Difficult to provide enough
  experience for consumers to assess the benefits
  of the product online
• Can lead to Online search Offline purchase
• Credence How to help consumers form a set of
  beliefs about the quality of the product?
• Access to other people's beliefs about the
  quality of the product such as product
  testimonials

46
Still more resources

• Services, status, and Love (emotion)
• Less well understood
• Less often leveraged
• More highly personalized
• Services
• Characteristics
• Intangibility Cant touch
• Inseparability Service not separate from
  consumption
• Heterogeneity Differences exist in the
  delivery of services
• Perishability If service is under-consumed then
  it is lost, cannot be stored

47
Services

• Characteristics
• Intangibility (cant touch), inseparability
  (service not separate from consumption),
  heterogeneity (differences exist in the
  delivery of services), perishability (if
  service is under-consumed then it is lost, cannot
  be stored)
• Internet effects of Services
• Blurred lines between resources
• Intangible services have become deliverers of
  goods
• E.g., ISPs now deliver news, email, music, etc.
  (AOL.com)
• Impact of Characteristics are Reduced
• Automated services reduce heterogeneity (Good or
  bad?)
• E.g., Stock trading (etrade.com)
• Online companies reduce effects of perishability
  (itunes.com) and inseparability (service always
  exists, unlike physical locations 24-hour
  banking USBank.com)
• Rich Experiences
• Does the internet create a rich online service
  experiences?

48
Status

• The rank or evaluation of one person, relative to
  a comparison group of peers)
• Based on ones motivation for Self-affirmation
  and Social Influence
• Self-affirmation Feel good about ones self
• Social Influence Managing the impressions of
  others (called Impression management)
• Marketers use Scarcity theory to induce these
  status motivations
• Done through creating consumer exclusivity
• Exclusive goods (Luxury Cars), services
  (Nightclubs), information (Wall Street Journal),
  love (Warranties)

49
Status

• Internet affects of Status
• The Internet may help obtain scarce resources
• Scarcity through creating exclusivity
• E.g., Exclusive products
• http//www.ecopod.co.uk/
• E.g., Log-ins, restricted access, etc.
• http//www.facebook.com/login.php
• E.g., Anonymity
• http//yro.slashdot.org/article.pl?sid05/12/15/00
  28256tid95tid17
• Demonstrating high levels of Internet-related
  skills may confer higher status
• E.g., identity theft, hackers
• MafiaBoy 1.7 billion for Yahoo!, ebay, and Amazon

50
Love

• Love (Emotional Well-Being)
• Characteristics (Putting a price on love its
  a great deal. Contact 1000 potential soul mates
  for less than the price of a couple of theater
  tickets!)
• Based on emotional reciprocity (caring for
  others, not just self)
• Internet effects of Love
• Positive Effects
• Facilitates communication opportunities
• Facilitates social networks
• Negative Effects
• New ways to exploit ? New crimes ? New Laws
• To catch a Predator
• Loss of interpersonal relationships?
• http//www.terwillegar.com/cyber__wedding_.html

51
Looking Ahead

• Marketers and the Internet Environment
• Constraints and opportunities
• Need to understand what consumers are doing
• To develop products that meet needs
• To leverage their interactions to meet marketing
  objectives
• Focus on changes to company structure
• Implications for marketing action