UNDERSTANDING CUSTOMERS

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UNDERSTANDING CUSTOMERS

• LECTURE 2
• 15.823
• Spring 2001

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Understanding consumers

• Decision Flow Chart --Information Processing
  Theory
• Traditional Buying
• Internet Value
• Market Research
• Why is Conversion so Low on Web sites?
• B2B vs B2C

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FLOW COMPONENTS
PRECIPITATING CIRCUMSTANCES INPUT SEARCH SHOPPING
ACTIVITIES DECISION RULES ACTION TRIGGERS POST
PURCHASE PROCESSING
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KEY CONCEPTS
LIMITED INFORMATION PROCESSING MOTIVATION,
INVOLVEMENT, AND SEARCH LONG AND SHORT TERM
MEMORY HEURISTIC DECISION RULES WORD-OF-MOUTH
COMMUNICATION ULTIPERSON DECISION MAKING
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INPUT
Exposure, Attention Motivation Search
DECISION MAKING
Comprehension Memory, Recall, Forgetting Attitudes
Decision Rules
INFORMATION PROCESSING MODEL
OUTPUT
Buy Use, Evaluate Communicate
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CLASS EXAMPLES

• Traditional Buying

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WHAT VALUE DOES INTERNET ADD?
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VALUE ADDED

• More Information
• Enhance Comparison Shopping
• More Variety
• Availability and Delivery
• Minimize Time and Travel
• Less Discrimination -- Clerk Bias
• Privacy/Security (or Risk)
• Limit Impulsive Buying (Keeney)

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CLASS EXAMPLE

• Internet

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MARKET RESEARCH

• Traditional Flow Chart
• Focus Group
• Protocol Analysis / tracking Why We Buy
• Statistics
• Internet Flow Chart
• Observe Site Use/Use Testing
• Click Stream Analysis
• Experimentation

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MARKET RESEARCH (CONT)

• Paco Underhill -- Anthropological
• film and analyze
• e.g. longer in store/more buy
• recommend self/store layout
• Inman and Winer-- 4,200 Field Intercepts
• 59 unplanned
• 30 specific plan (list)
• 11 mixed (plan but switch)
• Depends on Display, Deal Proneness, Greater Income

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CONVERSION RATES

• Empirically only .5 to 3 of single visits
  result in a sale -- 1-6 over 3 months
• In actual stores 20 to 50 buy if they visit?
  (Underhill 48 in Chain Store)
• Why so low on Internet?

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WHY?

• Data problem not real? Many visits.
• Browsing?
• Security? Risk of Fraud? Credit Card.
• Not Understand? Too Much Variety
• Not Enough Information? Critical question not
  answered.
• Not Motivated? NO Close the sale? No Promotion.
• Not Trust? Site, Info, fulfillment.
• Poor Delivery Perception? Complaint Resolution?
• Want to Touch and Feel?
• Not Sure Price is a Good One?
• Just Being Smart? Take Price and Buy in
  Traditional Outlet?
• Not Support Multi-channel
• No Advice (like sales person)
• No Word of Mouth Advice

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Enter site
100
Browse
70 leave
30
Consider
29.5 leave
.5
Buy
One of the largest web sales volume sites
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What Makes Industrial Different
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INDUSTRIAL BUYINGDIAGNOSING THE CUSTOMER
Steps in buying specification approved
bidders bids select buying Participants domina
nt influencer multi-person DECISION MAKING
UNIT matrix
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INDUSTRIAL BUYINGDIAGNOSING THE CUSTOMER
Information sources how fit in
process reliance Buying Criteria performance co
st quality delivery service Criteria Importance
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BUSINESS TO BUSINESSGENERIC PROCESSES
Sequential Dominant
Staff
Manager
D
Outside
Manager
Outside
D
Approval
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Business To BusinessGeneric Processes
Dominant Influencer (D1)
Staff
Suppliers
Managers
D1
W.O.M. Outside Info
Approval By Top Management
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BUSINESS TO BUSINESSGENERIC PROCESSES
W.O.M. info
Team
Staff
W.O.M. info
W.O.M. info
Manager
Manager
Supplier
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Changes

• Ordering -- Automation
• Sales Force Automation
• Buy/Rebuy -- Sales Person and Internet
• Auctions/bidding
• Shorten Channel
• Customer Relationship Management
• eLeads
• eService

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TAKE AWAY

• Think How Customer Makes Decision
• Flow Chart Tool -- Limited Information processing
• Add Value with Internet and Build Conversion
• B2B Multi-person Decision Unit