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Online%20Consumer%20Behavior

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Title: Online%20Consumer%20Behavior


1
Online Consumer Behavior
2
Different Types of Buyers
  • B2B
  • Small business 1-75 employees
  • Over 25 million businesses
  • 66 buy online, 50 have web sites
  • Large business 250 employees
  • 90 buy online have websites
  • Approximately 7 million businesses

3
Different Types of Buyers
  • B2C
  • US population is over 286 million
  • 4.6 of world population
  • Aging
  • Becoming more ethnically diverse
  • Growth in non-traditional households (76.5)

4
Cyberspace Demographics
  • 64 of US population is online
  • 32 of users have college degree
  • Higher incomes
  • Most users tend to be 35-54 years old
  • Teens (12-17) most rapidly growing group
  • Digital wallets
  • 100 of college students are online

5
Cyberspace Demographics
  • 52 of Internet users are women
  • make most retail decisions
  • 70 of online sales are by women
  • Minority Groups
  • 26 of African Americans online
  • 49 of Hispanics
  • 69 of Asian Americans

6
Cyberspace Demographics
  • 49 of users are in a city
  • 70 of homes in Portland Seattle online
  • Only 14 of users are rural consumers
  • 8 of Internet users have a disability
  • 4 are blind

7
World Usage Statistics (2005)
Region of World Population Internet Penetration 5 yr. Growth Rate
Africa 14 1.8 258
Asia 57 8.9 183
Europe 11 36.8 161
Middle East 4 8.3 312
8
What consumers do online
  • Communicating
  • email most used function
  • ICQ fastest area of growth
  • Seeking information
  • Most sought information online is travel
  • 35 of buyers book flights online
  • 26 of consumers track stocks online

9
Online Dating Industry
  • 516 million in revenues (2005)
  • Over 850 online dating services
  • 59 of daters find it difficult to meet someone
    new
  • Most likely place to meet people
  • Work (22), Internet (18), Bars (18), Clubs
    (11)
  • Downsides stigma anonymity (married)

10
Key Players
  • Match.com
  • Yahoo! Personals
  • eHarmony
  • Lavalife
  • Traditional dating firms
  • Its Just Lunch
  • Social networking communities

11
Match.com
  • Conceived in 1993
  • Owned by Interactive Corporation
  • Ticketmaster
  • Worlds largest online dating firm
  • 900,000 paying subscribers
  • 12 million profiles posted
  • January (2004), 29.6 million unique visitors

12
Match.com
  • Partnered with several firms
  • America Online Microsofts MSN
  • Subscriptions as low as 12.99 per month
  • New services include
  • video, off line speed dating, friend list, travel
    site, MatchLive off line events

13
What consumers do online
  • Purchasing
  • B2C sales are steadily growing
  • Higher income consumers more likely to buy online
  • Women more likely to purchase online
  • 81 of college students have purchased online
  • US European Teens spent 1.3 billion online in
    2001

14
What consumers do online
  • Gaming
  • 30 of all Internet users play games online
  • 62 of young adults
  • 41 of those 50
  • Men are more loyal largest group of gamers
  • Prefer football outer space games
  • Women prefer business simulations classic
    arcade games

15
Gaming Industry
  • U.S. video game market, 6.9 billion in revenue
    (1999)
  • PC Game market, 1.5 billion in revenue
  • Online game revenue, 106 million (1999)
  • From Sony Everquest, Electronic Arts Ultima
    Online, and Microsofts Asherons Call
  • 10/month subscription fee
  • Online game revenue, predicted to be over 800
    million by 2005

16
Gaming Industry
  • Traditional video and PC games cost millions of
    dollars to produce
  • Sell for about 30 each
  • Online games are less complex and can be made for
    approximately 75,000

17
The Groove Alliance
  • Game making firm
  • Started with Real Pool on CD-Rom
  • Trade show success
  • 3D Groove Plug In
  • Ability to embed ads on pool table
  • Real Pool sold out right to Shockwave.com

18
The Groove Alliance
  • Since that time sold many more games
  • Non-exclusive licensing agreements
  • Tank Wars
  • Merchandising rights retained by Groove Alliance

19
What Consumers do online
  • Entertaining
  • Online music most popular among those less than
    20 years old
  • Online music sales will be over 5.4 billion
    (2005)
  • Napster Peer-to-Peer exchange phenomena
  • iPod iTune phenomena

20
Online shopping differs
  • Online consumer behavior differs
  • Quality cues
  • Stability of firm and product quality hard to
    judge
  • Cognitive difficulty
  • Consumers get frustrated when they cannot easily
    find information

21
How is the Internet Unique?
  • Product features
  • Search versus Experience goods
  • Search products services that are easy for a
    consumer to evaluate
  • predictable brand names, can test product
    features
  • Experience difficult to understand and evaluate
  • complex, highly subjective

22
How is the Internet Unique?
  • Flow (peak/optimal experience)
  • seamless sequence of responses
  • loss of self-consciousness
  • intrinsically enjoyable self-reinforcing
  • Experienced by web users
  • Balance between capability challenge
  • Implies skill learning on web

23
How is the Internet Unique?
  • Community
  • Rules that define membership
  • A strong, brand focus
  • Collaborative production of material by members
  • Repeat use by members
  • Social bonds

24
Types of communities
  • Personal communities small network of linked
    individuals
  • direct communication within a small group
  • Extended communities many small sub-groups
    within an overarching structure
  • flexible in scale and scope
  • more personalization in smaller niches

25
Benefits of Community
  • Changes width breadth of referrals
  • most consumers rely on 3 people for WOM
  • easy access to experts to more precise
    information

26
Negative Consumer Behaviors
  • Social isolation
  • Increased usage online leads to
  • Decline in social interaction
  • Increase in depression
  • Internet addiction
  • Loss of sleep
  • Loss of physical relationships

27
Negative Consumer Behaviors
  • Anti-corporate activism
  • Unprecedented consumer power
  • Complaint hate websites
  • www.complaints.com
  • www.walmart-blows.com
  • www.gapsucks.org
  • Corporate reactions
  • Buy, Monitor, Respond, Ignore

28
Interactivity The Six Is of Customer
Satisfaction
  • Using Technology to be
  • More Customer Focused

29
OnStar
  • Started in 1995
  • Nations leading provider of in-vehicle safety,
    security, communications services
  • Wirelss Global Positioning systems
  • Telematics
  • 4 million subscribers
  • 2005, Standard on all new GM vehicles
  • More than 50 models

30
OnStar
  • Over 10 years, serviced 53 million subscriber
    interactions
  • Average month
  • 383,000 routing calls
  • 43,000 remote door unlocks
  • 23,000 road side assistance
  • 27,000 remote vehicle diagnostic checks
  • 15,000 emergency service requests
  • 400 stolen vehicle assistance

31
OnStar
  • Advanced Automatic Crash Notification System
    (AACN)
  • Started in Malibu, 26 models by 2006
  • Hands free calling (2000)
  • 630 million minutes sold to subscribers
  • New Command Center
  • With OnStar sound studio for digital broadcasting

32
OnStar
  • Strategic Alliances
  • Leading public safety emergency medical
    organizations
  • Association of Public Safety Communications
    Officials (APCO)
  • Agencies supporting efforts to find missing
    children
  • Americas Most Wanted

33
OnStar
  • Award-winning advertising campaign
  • Real Stories launched in 2002
  • Users share life changing experiences
  • 2005, OnStar brand reached 100 brand awareness
    among new vehicle buyers
  • 80 of subscribers will only consider vehicles
    with OnStar for next purchase

34
Growth in Interactive media
  • Technology now offers more control of information
    marketers receive
  • Interactivity is one area where marketers can use
    technology to more effectively reach out to the
    consumer

35
Dimensions of Interactivity
  • Selectivity
  • extent to which users are offered content choices
  • such as entertainment or shopping
  • expands consumers options content
  • able to deliver to more relevant personalized
    information to the customer

36
Dimensions of Interactivity
  • Ease of effort
  • extent to which users must exert themselves to
    access content
  • consumer confusion frustration with systems
    should decrease overtime

37
Dimensions of Interactivity
  • Use monitoring
  • extent to which the system monitors use
  • monitor information, choices, track behaviors
  • feedback to marketer, greater control with use of
    databases
  • raises privacy issues

38
Dimensions of Interactivity
  • Responsiveness
  • degree to which a medium reacts to a user
  • circumvent users prejudgments to prevent
    screening out of material
  • allow for more focused shopping experiences
  • can better cross sell

39
Dimensions of Interactivity
  • Ease of Adding Content
  • extent to which users may add material to the
    system that a mass audience can access
  • users become sources of information
  • word of mouth/brand advocates
  • consumer complaints become more relevant

40
Dimensions of Interactivity
  • Interpersonal Communication Potential
  • extent to which media facilitates interpersonal
    communication
  • Person-to-person interaction
  • bi-directionality of communication relationship
  • greater involvement with other consumers the
    marketer

41
Dimensions of Interactivity
  • Asynchronicity
  • extent to which messages can be preserved and
    shifted at convenient times
  • message permanence
  • can combine information in personally relevant
    ways

42
Interactivity
  • Responsiveness is the most common feature used on
    web sites
  • Systems are not yet meeting all consumer needs

43
Selling Online
  • And Channel Issues

44
Channels of Distribution
  • Supply channel brings materials supplies to
    manufacturer
  • Distribution channel moves product from
    manufacturer to consumer
  • thought to make the process of getting product to
    market more efficient
  • Can carry broader product lines categories
  • Are closer to the customer can develop
    knowledge/profile of target market

45
Channel Functions
  • Market makers
  • Buyers agents
  • Seller agents
  • Payment enablers
  • Fulfillment providers
  • Context providers

46
Two-Level
Three-Level
Four-Level
Five-Level
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Agent
Wholesaler
Wholesaler
Retailer
Retailer
Retailer
Consumer
Consumer
Consumer
Consumer
The Channel Structure
47
Distribution Strategies
  • Direct distribution manufacturer to buyer
  • Build-to-order direct sales
  • mass customization
  • Dell (1999) selling 40 million worth of
    computers on the web daily
  • 75 of orders placed online
  • 50 technical support online
  • 2002 extended direct sales to kiosks in retail
    malls
  • try product, place order on kiosk

48
Distribution Strategies
  • Direct digital distribution some products will
    be completely digital someday
  • music, airline tickets, hotel reservations, video
    games, magazines, newspapers, movie tickets,
    financial services
  • Internets ease of creating direct distribution
    channels already impacting industries

49
Distribution Strategies
  • Disintermediation--dropping layers of
    distribution channel
  • travel agents, financial services, florists
  • Delta sold 13 of tickets online in 2000
  • 2001, travelers spent 19.4 billion purchasing
    tickets online
  • Reintermediation--add layers
  • real estate

50
Distribution Strategies
  • Some firms have created exclusive distribution
    agreements
  • Levis (1998 manufacturer sells online 2000
    exclusive arrangements created)
  • Multichannel Distribution--2 or more distribution
    channels to better reach customers
  • Gateway web site, telephone, retail stores
  • Charles Schwab 24/7 channel strategy

51
The Go-to-Market Strategy
  • A plan for reaching serving the right customers
    in the right markets through the right channels
    with the right products and the right value
    proposition
  • Total customer experience
  • Attract most desirable customers
  • High sales
  • Lowest possible cost

52
The Go-to-Market Strategy
  • An integrated multi-channel model
  • Low cost, low touch channels
  • Direct mail, Internet, Telephone
  • High cost, high touch channels
  • Volume distributors, Value-added partners, Field
    sales forces
  • Take better advantage of low cost, low touch
    channels where appropriate

53
The Go-to-Market Strategy
  • Make multiple channels work together
  • Channels take on specific roles within the sales
    cycle
  • Move lead generation to telephone sales
  • Integrate the channels through information
    systems
  • Management Information System (CRM)
  • Designed for a specific target market
  • Goal seamless customer experience

54
Distribution Issues
  • Channel Cannibalization loss of sales in one
    channel when a new one is created
  • sales shifting from catalog to online
  • Channel conflict can exist
  • Goals diverge among channel members
  • Disputes arise over responsibility for functions
    technology

55
Staples
  • Sells office supplies, business services,
    furniture, and technology
  • Locations in six countries
  • 11 billion in annual sales
  • 1 billion in online revenues (2001)
  • 1,400 stores, catalog, kiosks
  • Website first established in 1998

56
Staples
  • Staples thought web would cannibalize other sales
  • web actually increased sales
  • Average yearly spending of small business
    customers increased 600 ? 2800 when shopped
    online
  • When buyers shop all 3 channels, purchases are
    4.5 times greater than if shop only 1 channel

57
Web Channels
  • Clicks only
  • 1998 Venture capital firms provided 26 billion
    to Internet start-ups
  • Average return for venture Internet start-up
    funds 25 (1998)
  • Leading funds returning 100
  • Most opportunities were cash burning companies
  • just launched their services
  • not attracted a customer base

58
Web Channels
  • Mid-2000 IPO Internet Bubble
  • An estimated 700-1000 of these Internet start-ups
    went bust
  • Boo.com
  • Toysmart.com
  • Brandwise.com
  • Clickradio.com

59
The Case of Amazon.com
  • Opened virtual doors in 1995
  • Evloved from books to department store
  • Sells products in 220 countries
  • Created first catalog in 2001

60
The Case of Amazon.com
  • Personalized customer interaction
  • Top etailer for brand recognition customer
    satisfaction
  • 2003, earned first quarterly profit not tied to
    the holiday shopping season
  • Exclusive partnerships with Target, Circuit City,
    Toys R Us, and Babies R Us

61
Web Channels
  • Bricks clicks
  • 70 of online retailers are bricks clicks
  • outnumber clicks only
  • In 2000, 33 of total bricks clicks sales were
    from the Internet

62
The Case of Walmart
  • Opened in 1962
  • Largest mass merchandiser
  • 1.4 million employees, 4000 stores
  • 218 billion in annual sales
  • 100million customers visit each week
  • 2001-2002 sales growth was 14
  • First website in 1995

63
Walmart.com
  • Founded in January 2000, initially independent
    from Wal-Mart Stores, Inc.
  • Eventually integrated as separate business unit
  • Return policy for online purchases in store
  • Offers more than 600,000 stock keeping units

64
Walmart.com
  • When independent had sales tax advantage
  • Considering rolling out in-store kiosks
  • Strategy Serve customers in the way they want
    to be served where they want to be served

65
Etailing
  • Internet retailing 3rd most significant
    transformation of retail industry
  • 1950s--shopping malls arrived
  • 1970s--large discount stores nationwide chains
    arrived
  • 1990s--Internet arrival
  • 50 of Internet users were shopping online (2001)

66
Etailing
  • 3.5 billion spent on online shopping in month of
    March, 2001
  • top categories travel apparel
  • Amazon sales leader 15.1 of online purchases,
    EBay second 14.5
  • Online customer acquisition costs are 18 per
    person
  • Online returns average 8 of online purchases
  • higher in some categories, such as apparel

67
What consumers want from online storefronts
  • Convenience--75 of shoppers go online for this
    reason
  • want it for returns too
  • Information
  • about store policies, product information,
    contact information,
  • Sears estimates that 10 of its store appliance
    sales are influenced by information from
    Sears.com

68
An Etailer Predicament
  • Shopping Basket Abandonment
  • 65 of consumers leave their shopping basket
    before sale is completed
  • Reasons
  • Sticker shock at total shipping costs
  • 40 experience technical difficulties
  • Too complex order forms that take too long to
    download
  • stock-outs, computer crash, rejected credit card,
    change mind at last minute

69
Customer Relationship Management (CRM)
  • Managing the Individual Marketing Relationship
    Using Technology

70
Marketing to Individuals
  • Segment homogenous group similar
    characteristics/buying behaviors
  • A one-to-many communication model
  • With CRM, marketers target the individual
  • Direct interaction to create customer value,
    benefit the marketer, build relationship
  • A one-to-one interactive communication model

71
Individual Personalization
  • Beyond era of mass marketing
  • Product differentiation through personalization
  • unique solution for each individual
  • features that benefit the individual
  • match customer tastes without waste
  • Yet, hard for consumers to sort through so many
    options hard to implement

72
Choice Assistance
  • Online techniques databases can assist
    consumers in locating the best options for
    themselves
  • set of products
  • determine individuals tastes needs
  • make recommendation
  • simplify selection

73
Lands End
  • Opened in 1963 as the Lands End Yacht Stores
  • Averaged 15 mail orders per day
  • Bought by Sears in 2002 for 1.9 billion
  • 2005, Fifteenth largest mail order firm
  • Annual sales of over 1.3 billion
  • Target quality-conscious, middle-age consumers
    with traditional casual apparel

74
Lands End
  • Direct merchant that acts as its own intermediary
  • Multi-channel merchant
  • Catalogs, stores, and website
  • 269 million catalogs mailed in 2001
  • 16 outlet and inlet stores in three countries
  • Website online in 1995, initially offering 100
    products
  • Today, every product in catalog sold online

75
Lands End
  • 15 million web site visitors (1999)
  • 61 million in revenue
  • Considered worlds largest apparel website
  • Known for customer service
  • First firm with 24/7 order taking 800 number
  • Lands End Live (talk with personal shopper)

76
Lands End
  • Website also customer service oriented
  • Lands End My Personal Shopper (live chat)
  • Online style advice
  • Swim suit fitting
  • Three-dimensional model
  • Build an oxford shirt

77
Lands End
  • Online orders filled through catalog warehouse
  • Size of 16 football fields
  • Sort 10,000 pieces per hour
  • Ship 150,000 orders per day
  • Example of CRM using a multi-channel model
    resulting in seamless customer experience

78
Peppers Rogers Group
  • 13 offices around the world
  • From US to Turkey
  • 400 annual seminars
  • Coined term one-to-one marketing
  • Turned into CRM
  • Know customer use that information to increase
    ROI

79
Implementation One-to-One Marketing
  • Focus on share of customer
  • Communicate to customers as individuals
  • Initiate maintain dialogues to learn
  • Use the Internet Databases to track,
    understand, communicate with individuals
  • Differentiate customers, spend more on those
    who are more valuable

80
Summary CRM steps
  • Identify record customers
  • Sort them by needs, ideally treat as individuals
  • Interact with them effectively
  • Record interactions
  • Customize marketing offer
  • Update information in databases
  • Sell the same customers more products in future
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