What Consumers Shop For And Buy Online
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Copyright © 2007 Pearson Education, Inc. Slide 7-1
E-commerce
Kenneth C. Laudon
Carol Guercio Traver
business. technology. society.Third Edition
Copyright © 2007 Pearson Education, Inc. Slide 7-2
Chapter 7
E-commerce Marketing Concepts
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NetFlix Develops and Defends Its BrandClass Discussion
What was NetFlix’s first business model? Deliver DVD to your mailbox
Why did this model not work? DVD scratched and slow customer services response
What new model did it develop? renting movies online
Why is NetFlix attractive to customers? An edge is its interface. Through its shareable friendship lists of
favorites, the site utilizes an element of social networking How does NetFlix distribute its videos? Video-on-demand and deliver video
online by video streaming What is NetFlix’s “recommender system?” collaborative filtering system for
personalization How does NetFlix use data mining? Data mining data analysis of movie
VOD movie rating Is video on demand a threat to NetFlix? Yes NetFlix starts VOD in 2005
Copyright © 2007 Pearson Education, Inc. Slide 7-4
Consumers Online: The Internet Audience and Consumer Behavior
Around 175 million Americans (67% of total population) had Internet access in 2005
Growth rate has slowed no of online customers increase slowly
Intensity 強烈程度 and scope 範圍 of use both increasing but the degree of usage differentiation increases
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Internet Audience and Consumer Behavior
Some demographic groups have much higher percentages of online usage than other groups
Demographics to examine include: Gender Age Ethnicity 種族地位 Community Type Income Education
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Type of Internet Connection: Broadband Impacts
52 million Americans had broadband access by end of 2005
Broadband audience quite different from dial-up audience: Wealthier More educated More middle-aged Greater intensity and scope of use
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Lifestyle Impacts
Intense Internet usage may cause a decline in traditional social activities
Social development of children using Internet intensively instead of engaging in face-to-face interactions or undirected play may also be negatively impacted
The more time people spend on the Internet, the less time spent using traditional media
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Consumer Behavior Models
Attempt to predict/explain what consumers purchase and where, when, how much and why they buy.
Consumer behavior models based on background demographic factors and other intervening, more immediate variables
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A General Model of Consumer BehaviorFigure 7.1, Page 367
SOURCE: Adapted from Kotler and Armstrong, 2006.
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Background Demographic Factors Cultural
Culture and subculture E.g. Culture: Chinese, American, European E.g. Subculture: 廣東人、北方人、台灣人
Social Reference groups
Direct Indirect Opinion leaders (viral influencers) Lifestyle groups
Psychological Psychological profiles
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Factors That Predict Online Buying BehaviorFigure 7.2, Page 371
SOURCE: Lohse Bellman, and Johnson, 2000.
The more factors you have, the more chanceYou will purchase online
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The Purchasing Decision
Five stages in the consumer decision process: Awareness of need Search for more information Evaluation of alternatives Actual purchase decision Post-purchase contact with firm
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The Consumer Decision Process and Supporting CommunicationsFigure 7.3, Page 371
Pure type
traditional
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A Model of Online Consumer Behavior
Adds two new factors: Web site capabilities Consumer clickstream behavior
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A Model of Online Consumer BehaviorFigure 7.4, Page 372
Independentvariables
Interveningvariables
Backgroundfactor
Market stimuliWebsite capabilities
The website provides a certain degree ofEffects on consumer behavior
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Shoppers: Browsers and Buyers
About 63% of online users purchase online; an additional 12% research online, but purchase offline
Significance of online browsing for offline purchasing and vice versa should not be underestimated
E-commerce and traditional commerce are coupled and should be viewed by merchants and researchers as part of a continuum of consuming behavior
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Online Shoppers and BuyersFigure 7.5, Page 375
SOURCE: Based on data from eMarketer, Inc., 2005a; Shop.org, 2005; authors’ estimates.
Buy offline
Traditional all offline
Usually, a consumer will buy certain electronic product online if the website is provided by the manufacturer directly
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What Consumers Shop for and Buy Online
Online sales divided roughly into small ticket and big ticket items Top small ticket categories (apparel 衣服 , books,
office supplies, software, etc.) have similar characteristics—sold by first movers, small purchase price, physically small, high margin items, broad selection of products available
Purchases of big ticket items (travel, computer hardware, consumer electronics) expanding
Copyright © 2007 Pearson Education, Inc. Slide 7-19
What Consumers Buy Online—Small Ticket ItemsFigure 7.6, Page 376
SOURCE: Based on data from eMarketer, Inc., 2004b.
服裝
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What Consumers Buy Online—Large Ticket ItemsFigure 7.6, Page 376
SOURCE: Based on data from eMarketer, Inc., 2004b.
Copyright © 2007 Pearson Education, Inc. Slide 7-21
Intentional Acts: How Shoppers Find Vendors Online
Over 85% of shoppers find vendor sites by typing product or store/brand name into search engine or going directly to the site
Most online shoppers plan to purchase product within a week, either online or at a store
Most online shoppers have a specific item in mind
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Why More People Don’t Shop Online
Major online buying concerns: Security Privacy Shipping costs Return policy Product availability Shipping issues/delays
Copyright © 2007 Pearson Education, Inc. Slide 7-23
Trust, Utility, and Opportunism in Online Markets Trust and utility among the most important factors shaping
decision to purchase online Consumers are looking for utility (better prices, convenience) Asymmetry of information can lead to opportunistic behavior
by sellers What is Information Asymmetry?
Typically it is the seller that knows more about the product than the buyer, however, it is possible for the reverse to be true: for the buyer to know more than the seller.
Consumers also need to trust merchants before willing to purchase
Sellers can develop trust by building strong reputations for honesty, fairness, delivery
Copyright © 2007 Pearson Education, Inc. Slide 7-24
Basic Marketing Concepts Marketing: The strategies and actions firms
take to establish a relationship with a consumer and encourage purchases of products and services
Internet marketing: Using the Web, as well as traditional channels, to develop a positive, long-term relationship with customers, thereby creating competitive advantage for the firm by allowing it to charge a higher price for products or services than its competitors can charge
Copyright © 2007 Pearson Education, Inc. Slide 7-25
Basic Marketing Concepts (cont’d)
Firms within an industry compete with one another on four dimensions: Differentiation Cost Focus Scope
Marketing seeks to create unique, highly differentiated products or services that are produced or supplied by one trusted firm (“little monopolies”)
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Feature Sets
Defines as the bundle of capabilities and services offered by the product or service
Includes: Core product Actual product Augmented product
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Feature SetFigure 7.7, Page 379
SOURCE: Kotler and Armstrong, 2006.
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Products, Brands and the Branding Process
Brand: A set of expectations that consumers have when consuming, or thinking about consuming, a product or service from a specific company
Branding: The process of brand creation Closed loop marketing: When marketers are able to directly
influence the design of the core product based on market research and feedback E-commerce enhances the ability to achieve
Brand strategy: Set of plans for differentiating a product from its competitor, and communicating these differences to the marketplace
Brand equity: estimated value of the premium customers are willing to pay for a branded product versus unbranded competitor
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Marketing Activities: From Products to BrandsFigure 7.8, Page 381
Closed loopmarketing
e.g. iPod iPod shuffle; campbell soap
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Are Brands Rational 有理性的 ? For consumers, a qualified yes:
Brands introduce market efficiency by reducing search and decision-making costs E.g. SONY, Canon and Panasonic
For business firms, a definite yes: Brands lower customer acquisition 獲得物 cost
Why? Customer spends less time in product research Brands increase customer retention 保持 (loyalty) Successful brand constitutes a long-lasting (although not
necessarily permanent) unfair competitive advantage E.g. i-pod
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Can Brands Survive the Internet? Brands and Price Dispersion yes
Researchers initially postulated 假設 that Web would result in “Law of One Price” Did not occur, and e-commerce firms continue to
rely heavily on brands to attract customers and charge premium prices
Price dispersion 分散 – the difference between the highest and lowest prices in a market
Research evidence indicates that brands are alive and well on the Internet, and that consumers are willing to pay premium prices for products and services they view as differentiated
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Internet Marketing Technologies
Web transaction logs Cookies and Web bugs Databases, data warehouses, and data
mining Advertising networks Customer relationship management (CRM)
systems
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The Revolution in Internet Marketing Technologies
Three broad impacts: Internet has broadened the scope of
marketing communications Internet has increased the richness of
marketing communications Internet has greatly expanded the
information intensity of the marketplace
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Web Transaction Logs 網站瀏覽及交易記錄 Built into Web server software Records user activity at a Web site WebTrends a leading log analysis tool Can provide treasure trove 貴重的發現物 of
marketing information, particularly when combined with: Registration forms Shopping cart database
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Cookies Small text file that Web sites place on a visitor’s client
computer every time they visit, and during the visit as specific pages are accessed Where is it used? Website login webmail, e-
banking, online shopping Cookies provide Web marketers with a very quick
means of identifying the customer and understanding his or her prior behavior
Location of cookie files on computer depends on browser version Cookies have limited life-span 有效生命期 and will
expire once disconnected from the website. How to clear cookies in IE? Tools Internet
options delete … delete cookies
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Netscape Cookie ManagerFigure 7.11, Page 391
Copyright © 2007 Pearson Education, Inc. Slide 7-37
Web Bugs
Tiny (1 pixel) graphic files embedded in e-mail messages and on Web sites
Used to automatically transmit information about the user and the page being viewed to a monitoring server
http://www.eff.org/Privacy/Marketing/web_bug.html
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Insight on Society: Should Web Bugs Be
Regulated? Class Discussion Are Web bugs innocuous 無害的 ? It depends on the
nature of the graphics Or are they an invasion of personal privacy? Yes
Do you think your Web browsing should be known to marketers? Yes
What are the different types of Web bugs? GIF/JPEG, Flash, ActiveX
What are the Privacy Foundation guidelines for Web bugs? Information collected for internal use instead of disclosure other business purpose.
What protections are available? Anti-spyware or Anti-phishing tools
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Databases 資料庫 and Data Warehouses 資料分析
Database: Software that stores records and attributes Database management system (DBMS): Software used to create,
maintain, and access databases SQL (Structured Query Language): Industry-standard database query
and manipulation language used in a relational database, e.g. SELECT * FROM user
Relational database: Represents data as two-dimensional tables with records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element you can create your relational DB using MS Access
Data warehouse: Database that collects a firm’s transactional and customer data in a single location for offline analysis by marketers and site managers
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A Relational Database View of E-commerce CustomersFigure 7.12, Page 395
63
relations
This relational DB contains 4 tables
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Data Mining
Set of analytical techniques that look for patterns in data of a database or data warehouse, or seek to model the behavior of customers
Types include: Query-driven, e.g. SELECT * FROM user WHERE sex
= “M” Model-driven based on data pattern Rule-based predictive modeling Collaborative filtering making automatic predictions
(filtering) about the interests of a user by collecting taste information from many users (collaborating). The underlying assumption of CF approach is that those who agreed in the past tend to agree again in the future
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The relationship between Data Mining and PersonalizationFigure 7.13, Page 397
SOURCE: Adomavicius and Tuzhilin, 2001b ©2001 IEEE.
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Insight on Technology: The Long Tail: Collaborative Filtering and Recommender Systems
- Class Discussion What are “recommender systems.” Give an example you
have used. It aims at providing personalized product recommendations to customers, e.g. www.amazon.com
What is “collaborative filtering?” slide 41 What is the “long tail” and how do recommender systems
support sales of items in the tail? E.g. type “holiday in Asia” instead of “holiday” in search
box What are some of the reasons that collaborative filtering
fails? The underlying assumption that customer current preference based on past choices and data sparsity 貧乏
How can human editors, including consumers, make recommender systems more helpful? Be more participative
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Advertising Networksis a collection of (often unrelated) online
advertising inventory. Online advertising inventory comes in many different
forms. This inventory can be found on websites, in RSS feeds, on blogs, in instant messaging applications, in adware, in e-mails, and on other sources.
Best known for ability to present users with banner advertisements based on a database of user behavioral data
DoubleClick best-known example Ad server selects appropriate banner ad based on
cookies, Web bugs, backend user profile databases
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How an Advertising Network such as DoubleClick WorksFigure 7.14, Page 401
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Customer Relationship Management (CRM) Systems
Repository 貯藏 of customer information that records all of the contacts that a customer has with a firm and generates a customer profile available to everyone in the firm with a need to “know the customer”
Customer profiles can contain: Map of the customer’s relationship with the firm Product and usage summary data Demographic and psychographic data Profitability measures Contact history Marketing and sales information
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A Customer Relationship Management SystemFigure 7.15, Page 403
SOURCE: Compaq, 1998.
12
3
聚集
Examples: telecom company, e.g. SmartoneJobseeker agent, e.g. jobsdb.com
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Market Entry Strategies
For new firms: Pure clicks/first mover Mixed “clicks and bricks”/alliances
For existing firms: Pure clicks/fast follower Mixed “bricks and clicks”/brand extensions
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Generic Market Entry StrategiesFigure 7.16, Page 404
Online only
Online withTraditional shop
(results of merging)
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Establishing the Customer Relationship
Permission marketing: Obtain permission before sending consumer information or promotional messages (example: opt-in e-mail register yahoo, hotmail email account)
Affiliate marketing: Relies on referrals; Web site agrees to pay another Web site a commission for new business opportunities it refers to the site
Viral marketing: Process of getting customers to pass along a company’s marketing message to friends, family, and colleagues. E.g. forward email from one to another
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Establishing the Customer Relationship (cont’d)
Blog marketing: Using blogs to market goods through commentary and advertising
Social network marketing: Similar to viral marketing, e.g. online forum or community
Brand leveraging: Process of using power of an existing brand to acquire new customers for a new product or service, e.g. SONY introduce VAIO computer series
Copyright © 2007 Pearson Education, Inc. Slide 7-52
Customer Retention: Strengthening the Customer Relationship
Mass market-personalization continuum ranges from mass marketing direct marketing micromarketing personalized, one-to-one marketing
One-to-one marketing: Involves segmenting the market on a precise and timely understanding of an individual’s needs, targeting specific marketing messages to these individuals and then positioning the product vis-à-vis 古式的( 法 ) competitors to be truly unique
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The Mass Market-Personalization ContinuumFigure 7.17, Page 411
Soft-drink
Specific producte.g. cooker or memory stick
Fitness/golf Club - membership
Telecom package
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Other Customer Retention Marketing Techniques
Customization: Changing the product (not just the marketing message) according to user preferences e.g. allows user change mobile phone case
Customer co-production: Allows the customer to interactively create the product, e.g. DELL
Transactive content: Results from the combination of traditional content with dynamic information tailored to each user’s profile, e.g. order pizza online or order movie ticket online
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Other Customer Retention Marketing Techniques (cont’d)
Customer service tools include: Frequently asked questions (FAQs) Real-time customer service chat systems
(intelligent agent technology or bots) Automated response systems
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Net Pricing Strategies
Pricing (putting a value on goods and services) an integral part of marketing strategy
Traditionally, prices based on: Fixed cost Variable costs Market’s demand curve
Price discrimination: Selling products to different people and groups based on their willingness to pay
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Net Pricing Strategies (cont’d)
Free products/services: Can be used to build market awareness
Versioning: Creating multiple versions of a good and selling essentially the same product to different market segments at different prices
Bundling: Offers consumers two or more goods for one price
Dynamic pricing: Auctions Yield management discount to seat, room etc.
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Channel Management Strategies
Channel: Refers to different methods by which goods can be distributed and sold
Channel conflict: Occurs when a new venue for selling products or services threatens or destroys existing venues for selling goods
Examples: online airline/travel services and traditional offline travel agencies
Some manufacturers are using partnership model to avoid channel conflict e.g. TV advertisement of Broadway and Chung Yuen
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Online Market Research
Market research: Involves gathering information that will help a firm identify potential products and customers
Two general types: Primary research getting original data
directly about the product and market Secondary research data gathered by
industry experts, trade associations; data gathered by your company
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Insight on Business: ZoomerangClass Discussion
What are the advantages of an online survey service? A channel in handling customer complains,
suggestions, and feedback Identify a strategy for obtaining client feedback
What features make Zoomerang surveys easy to implement when compared to traditional survey instruments? http://info.zoomerang.com/ http://info.zoomerang.com/zoomerang_flash/index.html
What are some of Zoomerang’s weaknesses? Design issue – consistency, survey objective
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