Online Consumer Behavior Different Types of Buyers

Online Consumer BehaviorOnline Consumer Behavior

Different Types of BuyersDifferent Types of Buyers

B2BB2B• Small business 1-75 employeesSmall business 1-75 employees

– Over 25 million businessesOver 25 million businesses

• 66% buy online, 50% have web sites66% buy online, 50% have web sites

• Large business 250+ employeesLarge business 250+ employees• 90% buy online & have websites90% buy online & have websites

– Approximately 7 million businessesApproximately 7 million businesses

B2B PurchasingB2B Purchasing

• 40% of all B2B sales are done online40% of all B2B sales are done online

• More than $4.8 trillion in salesMore than $4.8 trillion in sales

Different Types of BuyersDifferent Types of Buyers

B2CB2C

US population is over 286 millionUS population is over 286 million• 4.6% of world population4.6% of world population• Aging Aging • Becoming more ethnically diverseBecoming more ethnically diverse• Growth in non-traditional households Growth in non-traditional households

(76.5%)(76.5%)

Internet UsageInternet Usage

46% of sessions are to conduct 46% of sessions are to conduct business business

27% are recreation driven 27% are recreation driven

70% of users connect from home70% of users connect from home• 44% online 1+ hours per day44% online 1+ hours per day

Consumers see web as critical for Consumers see web as critical for access to information access to information • But consumers can be But consumers can be misledmisled

Cyberspace DemographicsCyberspace Demographics

64% of US population is online64% of US population is online

32% of users have college degree32% of users have college degree• Higher incomesHigher incomes

Most users tend to be 35-54 years oldMost users tend to be 35-54 years old• Teens (12-17) most rapidly growing Teens (12-17) most rapidly growing

groupgroup– Digital walletsDigital wallets

• 100% of college students are online100% of college students are online


52% of Internet users are women52% of Internet users are women• make most retail decisionsmake most retail decisions

– 70% of online sales are by women70% of online sales are by women

Minority GroupsMinority Groups• 26% of African Americans online26% of African Americans online• 49% of Hispanics49% of Hispanics• 69% of Asian Americans69% of Asian Americans


49% of users are in a city49% of users are in a city• 70% of homes in Portland & Seattle 70% of homes in Portland & Seattle

onlineonline• Only 14% of users are rural Only 14% of users are rural

consumersconsumers

8% of Internet users have a 8% of Internet users have a disabilitydisability• 4% are blind4% are blind

World Usage Statistics World Usage Statistics (2005)(2005)

RegionRegion % of % of World World PopulatioPopulationn

% % Internet Internet PenetratiPenetrationon

5 yr. 5 yr. Growth Growth Rate Rate

AfricaAfrica 14%14% 1.8%1.8% 258%258%

AsiaAsia 57%57% 8.9%8.9% 183%183%

EuropeEurope 11%11% 36.8%36.8% 161%161%

Middle Middle EastEast

4%4% 8.3%8.3% 312%312%

What consumers do onlineWhat consumers do online

CommunicatingCommunicating• email most used functionemail most used function• ICQ fastest area of growthICQ fastest area of growth

– multi-tasking & work communicationsmulti-tasking & work communications

Seeking informationSeeking information• Replacement of the libraryReplacement of the library• Most sought information online is travelMost sought information online is travel

– 35% of buyers book flights online35% of buyers book flights online– 26% of consumers track stocks online26% of consumers track stocks online

What are college students What are college students doing?doing?

College studentsCollege students

• 67% browse for topics of interest67% browse for topics of interest

• 62% conduct academic research62% conduct academic research

• 41% get news online41% get news online

• 31% make travel plans31% make travel plans


PurchasingPurchasing

• B2C sales are steadily growingB2C sales are steadily growing

• Higher income consumers more likely to buy Higher income consumers more likely to buy onlineonline

• Women more likely to purchase onlineWomen more likely to purchase online

• 81% of college students have purchased online81% of college students have purchased online

• US & European Teens spent $1.3 billion online US & European Teens spent $1.3 billion online in 2001 in 2001


GamingGaming• 30% of all Internet users play games 30% of all Internet users play games

onlineonline– 62% of young adults62% of young adults– 41% of those 50+41% of those 50+

– Men are more loyal & largest group of gamersMen are more loyal & largest group of gamers– Prefer football & outer space gamesPrefer football & outer space games

– Women prefer business simulations & classic Women prefer business simulations & classic arcade gamesarcade games

Gaming IndustryGaming Industry

U.S. video game market, $6.9 billion in U.S. video game market, $6.9 billion in revenue (1999)revenue (1999)• PC Game market, $1.5 billion in revenuePC Game market, $1.5 billion in revenue

Online game revenue, $106 million (1999)Online game revenue, $106 million (1999)• From: Sony Everquest, Electronic Arts Ultima From: Sony Everquest, Electronic Arts Ultima

Online, and Microsoft’s Asheron’s CallOnline, and Microsoft’s Asheron’s Call• $10/month subscription fee$10/month subscription fee

Online game revenue, predicted to be over Online game revenue, predicted to be over $800 million by 2005$800 million by 2005

Gaming IndustryGaming Industry

Traditional video and PC games Traditional video and PC games cost millions of dollars to producecost millions of dollars to produce• Sell for about $30 eachSell for about $30 each

Online games are less complex Online games are less complex and can be made for and can be made for approximately $75,000approximately $75,000

The Groove AllianceThe Groove Alliance

Game making firmGame making firm

• Started with Real Pool on CD-RomStarted with Real Pool on CD-Rom• Trade show successTrade show success• 3D Groove Plug In3D Groove Plug In• Ability to embed ads on pool tableAbility to embed ads on pool table

Real Pool sold out right to Real Pool sold out right to Shockwave.comShockwave.com

The Groove AllianceThe Groove Alliance

Since that time sold many more Since that time sold many more games games • Non-exclusive licensing agreementsNon-exclusive licensing agreements

– Tank WarsTank Wars

• Merchandising rights retained by Merchandising rights retained by Groove AllianceGroove Alliance

What Consumers do onlineWhat Consumers do online

EntertainingEntertaining• Online music most popular among Online music most popular among

those less than 20 years oldthose less than 20 years old

• Online music sales will be over $5.4 Online music sales will be over $5.4 billion (2005)billion (2005)

– Napster: Peer-to-Peer exchange Napster: Peer-to-Peer exchange phenomenaphenomena

– iPod & iTune phenomenaiPod & iTune phenomena

Online Dating IndustryOnline Dating Industry

$516 million in revenues (2005)$516 million in revenues (2005) Over 850 online dating servicesOver 850 online dating services

• 59% of daters find it “difficult” to meet 59% of daters find it “difficult” to meet someone newsomeone new

• Most likely place to meet people: Most likely place to meet people: – Work (22%), Internet (18%), Bars (18%), Work (22%), Internet (18%), Bars (18%),

Clubs (11%)Clubs (11%)

Downsides: stigma & anonymity Downsides: stigma & anonymity (married) (married)

Key PlayersKey Players

Match.comMatch.com Yahoo! PersonalsYahoo! Personals eHarmonyeHarmony LavalifeLavalife Traditional dating firmsTraditional dating firms

• It’s Just LunchIt’s Just Lunch Social networking communitiesSocial networking communities

Match.comMatch.com

Conceived in 1993Conceived in 1993 Owned by Interactive CorporationOwned by Interactive Corporation

• TicketmasterTicketmaster

World’s largest online dating firmWorld’s largest online dating firm• 900,000 paying subscribers900,000 paying subscribers• 12 million profiles posted12 million profiles posted• January (2004), 29.6 million unique January (2004), 29.6 million unique

visitorsvisitors

Match.comMatch.com

Partnered with several firmsPartnered with several firms• America Online & Microsoft’s MSNAmerica Online & Microsoft’s MSN

Subscriptions as low as $12.99 per Subscriptions as low as $12.99 per monthmonth

New services include:New services include:• video, off line speed dating, friend list, video, off line speed dating, friend list,

travel site, MatchLive off line eventstravel site, MatchLive off line events

What drives usageWhat drives usage

Growth of technologyGrowth of technology

Time starved lifestyleTime starved lifestyle

Information hungryInformation hungry

Changes in Changes in marketingmarketing• Greater focus on Greater focus on

direct marketing direct marketing initiativesinitiatives

Reasons Consumers Buy Reasons Consumers Buy Online Online

ConvenienceConvenience– repeat purchaserepeat purchase– one-stop shoppingone-stop shopping

AssortmentAssortment– millions of productsmillions of products– comparison shoppingcomparison shopping

Save moneySave money– bargains, taxes, free shipping bargains, taxes, free shipping

Yet online context is Yet online context is differentdifferent

Online consumer behavior differs Online consumer behavior differs from real lifefrom real life

Quality cues• Stability of firm and product quality Stability of firm and product quality

hard to judgehard to judge Cognitive difficulty

• Consumers get frustrated when they Consumers get frustrated when they cannot easily find informationcannot easily find information

How is the Internet How is the Internet Unique?Unique?

Product features Search versus Experience goodsSearch versus Experience goods

• Search: products & services that are Search: products & services that are easy for a consumer to evaluateeasy for a consumer to evaluate– predictable brand names, can test product predictable brand names, can test product

featuresfeatures

• Experience: difficult to understand Experience: difficult to understand and evaluateand evaluate– complex, highly subjectivecomplex, highly subjective


Flow (peak/optimal experience)(peak/optimal experience)• seamless sequence of responsesseamless sequence of responses• loss of self-consciousnessloss of self-consciousness• intrinsically enjoyable & self-reinforcingintrinsically enjoyable & self-reinforcing

Experienced by web usersExperienced by web users• Balance between capability & challengeBalance between capability & challenge• Implies skill & learning on webImplies skill & learning on web


Community• Create involvement, loyalty, traffic, & profitsCreate involvement, loyalty, traffic, & profits• Changes control of marketers Changes control of marketers

– Requires collaboration rather than orchestrationRequires collaboration rather than orchestration

Virtual communities rebuild declining Virtual communities rebuild declining social connections social connections • ICQ fastest growing part of InternetICQ fastest growing part of Internet• AOL has 19,000 chat rooms accessed at AOL has 19,000 chat rooms accessed at

onceonce• Six of twenty most heavily trafficked web Six of twenty most heavily trafficked web

sites were community based in 1998sites were community based in 1998

Community Community CharacteristicsCharacteristics

Use of Use of communication communication toolstools

Rules that define Rules that define membershipmembership

A strong focusA strong focus Collaborative Collaborative

production of production of material by material by membersmembers

Repeat use by Repeat use by membersmembers

Social bondsSocial bonds

Growth can be Growth can be problematic problematic because focus can because focus can be lost & content be lost & content breaks down breaks down

Types of communitiesTypes of communities

Personal communities: small network of Personal communities: small network of linked individuals linked individuals • mainly direct communication within a small mainly direct communication within a small

group that is familiar with one anothergroup that is familiar with one another Extended communities: many small sub-Extended communities: many small sub-

groups within an overarching structure groups within an overarching structure • flexible in scale and scopeflexible in scale and scope• create more personalization in smaller nichescreate more personalization in smaller niches

Ways to Communicate Ways to Communicate

Rings of personal, direct linksRings of personal, direct links• Email networks/listservsEmail networks/listservs

– Can use groupware for joint content creationCan use groupware for joint content creation– Size/growth may hurt rings Size/growth may hurt rings

Content trees with messages going Content trees with messages going through a central pointthrough a central point• Bulletin boards with hierarchies by topic Bulletin boards with hierarchies by topic

areaarea– Help maintain focus but allow for growthHelp maintain focus but allow for growth

Membership rulesMembership rules

Strong communities seem to have Strong communities seem to have strict membership rulesstrict membership rules

– initiation rites & challenging tasks create tiesinitiation rites & challenging tasks create ties– strong interests & passionsstrong interests & passions

Weak communities have lenient rulesWeak communities have lenient rules– consumers tend not to commitconsumers tend not to commit– can still be used, but firms attempt to can still be used, but firms attempt to

escalate membershipescalate membership

Benefits of CommunityBenefits of Community

Changes width & Changes width & breadth of breadth of referralsreferrals

• most consumers most consumers rely on 3 people for rely on 3 people for WOMWOM

• easy access to easy access to experts to more experts to more precise informationprecise information

Benefits of CommunityBenefits of Community

Attractive content & loyaltyAttractive content & loyalty• builds more contentbuilds more content• reduces member turnoverreduces member turnover• leads to more hours on a siteleads to more hours on a site• creates trust & collaboration with creates trust & collaboration with

consumersconsumers Form of marketing researchForm of marketing research Potentially sell profile informationPotentially sell profile information

EBay’s Community Mission EBay’s Community Mission

We help people trade practically anything on earth. We help people trade practically anything on earth. EBay was founded with the belief that people are EBay was founded with the belief that people are honest and trustworthy. We believe that each of honest and trustworthy. We believe that each of our customers, whether a buyer or a seller, is an our customers, whether a buyer or a seller, is an individual who deserves to be treated with respect. individual who deserves to be treated with respect. We will continue to enhance the online trading We will continue to enhance the online trading experiences of all our constituents—collectors, experiences of all our constituents—collectors, hobbyists, small dealers, unique item seekers, hobbyists, small dealers, unique item seekers, bargain hunters, opportunistic sellers, and bargain hunters, opportunistic sellers, and browsers. The growth of the EBay browsers. The growth of the EBay community community comes from meeting and exceeding the comes from meeting and exceeding the

expectations of these special people.expectations of these special people.

Hard to utilizeHard to utilize

Predicted to be a great Internet Predicted to be a great Internet business modelbusiness model

Many firms not able to capture it Many firms not able to capture it for profitabilityfor profitability

Those that exist have declining Those that exist have declining membership rates & are costly to membership rates & are costly to maintainmaintain

Negative Consumer Negative Consumer BehaviorsBehaviors

Social isolationSocial isolation• Increased usage online leads toIncreased usage online leads to

– Decline in social interactionDecline in social interaction– Increase in loneliness & depressionIncrease in loneliness & depression– Less likely to shop in person, read the paperLess likely to shop in person, read the paper

Internet addictionInternet addiction• Loss of sleepLoss of sleep• Loss of physical relationshipsLoss of physical relationships

Negative Consumer Negative Consumer BehaviorsBehaviors

Anti-corporate activismAnti-corporate activism• Unprecedented consumer powerUnprecedented consumer power• Complaint & hate websitesComplaint & hate websites

– www.complaints.comwww.complaints.com– www.walmart-blows.comwww.walmart-blows.com– www.gapsucks.orgwww.gapsucks.org

Corporate reactionsCorporate reactions• Buy, Monitor, Respond, IgnoreBuy, Monitor, Respond, Ignore

Interactivity & Interactivity & The Six I’s of Customer The Six I’s of Customer SatisfactionSatisfaction

Using Technology to be Using Technology to be

More Customer FocusedMore Customer Focused

OnStarOnStar

Started in 1995Started in 1995 Nation’s leading provider of in-vehicle Nation’s leading provider of in-vehicle

safety, security, & communications safety, security, & communications servicesservices

– Wirelss & Global Positioning systemsWirelss & Global Positioning systems– TelematicsTelematics

4 million subscribers4 million subscribers 2005, Standard on all new GM vehicles2005, Standard on all new GM vehicles

– More than 50 modelsMore than 50 models

OnStarOnStar

Over 10 years, serviced 53+ million Over 10 years, serviced 53+ million subscriber interactionssubscriber interactions

Average month:Average month:• 383,000 routing calls383,000 routing calls• 43,000 remote door unlocks43,000 remote door unlocks• 23,000 road side assistance23,000 road side assistance• 27,000 remote vehicle diagnostic checks27,000 remote vehicle diagnostic checks• 15,000 emergency service requests15,000 emergency service requests• 400 stolen vehicle assistance400 stolen vehicle assistance

OnStarOnStar

Advanced Automatic Crash Advanced Automatic Crash Notification System (AACN)Notification System (AACN)• Started in Malibu, 26 models by 2006Started in Malibu, 26 models by 2006

Hands free calling (2000)Hands free calling (2000)• 630 million minutes sold to 630 million minutes sold to

subscriberssubscribers New Command CenterNew Command Center

• With OnStar sound studio for digital With OnStar sound studio for digital broadcastingbroadcasting

OnStarOnStar

Strategic AlliancesStrategic Alliances• Leading public safety & emergency Leading public safety & emergency

medical organizationsmedical organizations– Association of Public Safety Association of Public Safety

Communications Officials (APCO)Communications Officials (APCO)

• Agencies supporting efforts to find Agencies supporting efforts to find missing childrenmissing children– America’s Most WantedAmerica’s Most Wanted

OnStarOnStar

Award-winning advertising campaignAward-winning advertising campaign• ““Real Stories” launched in 2002Real Stories” launched in 2002

– Users share life changing experiencesUsers share life changing experiences

2005, OnStar brand reached 100% 2005, OnStar brand reached 100% brand awareness among new vehicle brand awareness among new vehicle buyersbuyers

– 80% of subscribers will only consider 80% of subscribers will only consider vehicles with OnStar for next purchasevehicles with OnStar for next purchase

Growth in Interactive Growth in Interactive mediamedia

Marketers are:Marketers are:

• Searching for new segmentsSearching for new segments

• Wanting more efficient targetingWanting more efficient targeting

• Demanding more relevant consumer Demanding more relevant consumer informationinformation

Growth in Interactive Growth in Interactive mediamedia

Technology now offers more Technology now offers more control of information marketers’ control of information marketers’ receivereceive

Interactivity is one area where Interactivity is one area where marketers can use technology to marketers can use technology to more effectively reach out to the more effectively reach out to the consumerconsumer

Dimensions of InteractivityDimensions of Interactivity

SelectivitySelectivity• extent to which users are offered content extent to which users are offered content

choiceschoices• such as entertainment or shoppingsuch as entertainment or shopping

• expands consumers’ options & contentexpands consumers’ options & content• able to deliver to more relevant & able to deliver to more relevant &

personalized information to the customerpersonalized information to the customer


Ease of effortEase of effort

• extent to which users must exert extent to which users must exert themselves to access contentthemselves to access content

• consumer confusion & frustration with consumer confusion & frustration with systems should decrease overtimesystems should decrease overtime


Use monitoringUse monitoring

extent to which the system monitors extent to which the system monitors useuse

• monitor information, choices, track monitor information, choices, track behaviorsbehaviors

• feedback to marketer, greater control feedback to marketer, greater control with use of databaseswith use of databases– raises privacy issuesraises privacy issues


ResponsivenessResponsiveness

• degree to which a medium reacts to a degree to which a medium reacts to a useruser

• circumvent users’ prejudgments to circumvent users’ prejudgments to prevent screening out of materialprevent screening out of material

• allow for more focused shopping allow for more focused shopping experiencesexperiences

• can better cross sellcan better cross sell


Ease of Adding ContentEase of Adding Content

• extent to which users may add extent to which users may add material to the system that a mass material to the system that a mass audience can accessaudience can access

• users become sources of informationusers become sources of information• word of mouth/brand advocatesword of mouth/brand advocates

– consumer complaints become more consumer complaints become more relevantrelevant


Interpersonal Communication PotentialInterpersonal Communication Potential• extent to which media facilitates extent to which media facilitates

interpersonal communicationinterpersonal communication• Person-to-person interactionPerson-to-person interaction

• bi-directionality of communication & bi-directionality of communication & relationship relationship

• greater involvement with other consumers greater involvement with other consumers & the marketer& the marketer


AsynchronicityAsynchronicity

• extent to which messages can be extent to which messages can be preserved and shifted at convenient preserved and shifted at convenient timestimes

• message permanence message permanence • can combine information in personally can combine information in personally

relevant waysrelevant ways

InteractivityInteractivity

Responsiveness is Responsiveness is the most common the most common feature used on feature used on web sitesweb sites

Systems are not Systems are not yet meeting all yet meeting all consumer needsconsumer needs

Customer FocusCustomer Focus

In addition to interactivity, marketers In addition to interactivity, marketers have other tools that they use to have other tools that they use to improve customer satisfactionimprove customer satisfaction

Interconnection Interface Interactivity Involvement Integrity Individualism

InterconnectionInterconnection

Using networks to connect to Using networks to connect to individualsindividuals• Internet is the world’s largest Internet is the world’s largest

computer networkcomputer network• Other technological & human Other technological & human

networksnetworks

Requires establishing a network Requires establishing a network business strategybusiness strategy

InterfaceInterface

Creating digital assets that can be Creating digital assets that can be displayed or purchaseddisplayed or purchased• Ease of use is especially importantEase of use is especially important• Primarily about communicationPrimarily about communication

An Effective interface should be An Effective interface should be designed to move people through the designed to move people through the buying processbuying process• May require cooperation of all functions May require cooperation of all functions

of a business of a business

InteractivityInteractivity

Facilitates relationship marketingFacilitates relationship marketing• Define previouslyDefine previously

• Makes it easier and less expensive toMakes it easier and less expensive to– create dialogue with customerscreate dialogue with customers– gather consumer information gather consumer information – give consumers greater choice & optionsgive consumers greater choice & options

InvolvementInvolvement

Drawing customers into the Drawing customers into the marketing experience & relationshipmarketing experience & relationship• increasing customer commitmentincreasing customer commitment

• truly adding value for the customertruly adding value for the customer– providing valuable informationproviding valuable information– building unique experiencesbuilding unique experiences– creating products/services that a customer creating products/services that a customer

relies on exclusivelyrelies on exclusively

IndividualismIndividualism

Getting beyond segmentation to Getting beyond segmentation to understanding and tracking individualunderstanding and tracking individual• direct marketing direct marketing

Can be a spectrum from use Can be a spectrum from use monitoring to interactive dialoguemonitoring to interactive dialogue

Databases used to Databases used to mass customize; mass customize; communicate to individual; measure effectiveness communicate to individual; measure effectiveness of messagesof messages

IntegrityIntegrity

Privacy, security, Privacy, security, confidentiality confidentiality crucialcrucial

Ethics become Ethics become especially importantespecially important

Raises issues: Raises issues: unsolicited emailunsolicited email

storing sensitive storing sensitive informationinformation

Selling Online Selling Online

And Channel IssuesAnd Channel Issues

Marketing Mix

Product Strategy

Pricing Strategy

Promotion Strategy

Channel Strategy

component

LogisticsManagementcomponent

DistributionStrategy

The Marketing Mix

Channels of DistributionChannels of Distribution

Supply channel brings materials & brings materials & supplies to manufacturersupplies to manufacturer

Distribution channel moves product moves product from manufacturer to consumerfrom manufacturer to consumer

– thought to make the process of getting thought to make the process of getting product to market more efficientproduct to market more efficient

– Can carry broader product lines & categories Can carry broader product lines & categories – Are closer to the customer & can develop Are closer to the customer & can develop

knowledge/profile of target marketknowledge/profile of target market

Channel FunctionsChannel Functions

Market makersMarket makers Buyers agentsBuyers agents Seller agentsSeller agents Payment enablersPayment enablers Fulfillment providersFulfillment providers Context providersContext providers

Product Flow Negotiation Flow Ownership Flow Information Flow Promotion Flow

Manufacturer

TransportationCompany

Wholesalers

Retailers

Consumers

Manufacturer

Wholesalers

Retailers

Consumers

Manufacturer

Wholesalers

Retailers

Consumers

Manufacturer


Wholesalers

Retailers

Consumers

Manufacturer


Wholesalers

Retailers

Consumers

The Five Flows

Two-Level

Manufacturer

Consumer

Three-Level

Manufacturer

Retailer

Consumer

Four-Level

Manufacturer

Wholesaler

Retailer

Consumer

Five-Level

Manufacturer

Agent

Wholesaler

Retailer

Consumer

The Channel Structure

Distribution StrategiesDistribution Strategies

Direct distribution: manufacturer to buyerDirect distribution: manufacturer to buyer• Build-to-order direct salesBuild-to-order direct sales

– mass customizationmass customization

• Dell (1999) selling $40 million worth of Dell (1999) selling $40 million worth of computers on the web dailycomputers on the web daily– 75% of orders placed online75% of orders placed online– 50% technical support online50% technical support online– 2002 extended direct sales to kiosks in retail malls2002 extended direct sales to kiosks in retail malls

– try product, place order on kiosktry product, place order on kiosk


Direct digital distribution: some Direct digital distribution: some products will be completely digital products will be completely digital somedaysomeday

– music, airline tickets, hotel reservations, music, airline tickets, hotel reservations, video games, magazines, newspapers, movie video games, magazines, newspapers, movie tickets, financial servicestickets, financial services

Internet’s ease of creating direct Internet’s ease of creating direct distribution channels already distribution channels already impacting industriesimpacting industries


Disintermediation--dropping layers dropping layers of distribution channel of distribution channel • travel agents, financial services, floriststravel agents, financial services, florists

– Delta sold 13% of tickets online in 2000Delta sold 13% of tickets online in 2000– 2001, travelers spent $19.4 billion 2001, travelers spent $19.4 billion

purchasing tickets onlinepurchasing tickets online

Reintermediation--add layers add layers • real estatereal estate


Some firms have created exclusive Some firms have created exclusive distribution agreements distribution agreements

– Levi’s (1998 manufacturer sells online; 2000 Levi’s (1998 manufacturer sells online; 2000 exclusive arrangements created) exclusive arrangements created)

Multichannel Distribution--2 or more Multichannel Distribution--2 or more distribution channels to better reach distribution channels to better reach customerscustomers

– Gateway: web site, telephone, retail storesGateway: web site, telephone, retail stores– Charles Schwab: 24/7 channel strategyCharles Schwab: 24/7 channel strategy

The Go-to-Market StrategyThe Go-to-Market Strategy

A plan for reaching & serving the A plan for reaching & serving the rightright customers in the customers in the rightright markets markets through the through the rightright channels with the channels with the rightright products and the products and the rightright value value propositionproposition

Total customer experienceTotal customer experience• Attract most desirable customersAttract most desirable customers• High salesHigh sales• Lowest possible costLowest possible cost


An integrated multi-channel modelAn integrated multi-channel model Low cost, low touch channelsLow cost, low touch channels

• Direct mail, Internet, TelephoneDirect mail, Internet, Telephone High cost, high touch channelsHigh cost, high touch channels

• Volume distributors, Value-added Volume distributors, Value-added partners, Field sales forcespartners, Field sales forces

Take better advantage of low cost, Take better advantage of low cost, low touch channels where low touch channels where appropriateappropriate


Make multiple channels work togetherMake multiple channels work together Channels take on specific roles within Channels take on specific roles within

the sales cyclethe sales cycle• Move lead generation to telephone sales Move lead generation to telephone sales

Integrate the channels through Integrate the channels through information systemsinformation systems• Management Information System (CRM)Management Information System (CRM)

Designed for a specific target marketDesigned for a specific target market• Goal: seamless customer experienceGoal: seamless customer experience

Distribution IssuesDistribution Issues

Channel Cannibalization: loss of sales Channel Cannibalization: loss of sales in one channel when a new one is in one channel when a new one is createdcreated• sales shifting from catalog to online sales shifting from catalog to online

Channel conflict can existChannel conflict can exist• Goals diverge among channel membersGoals diverge among channel members• Disputes arise over responsibility for Disputes arise over responsibility for

functions & technologyfunctions & technology

StaplesStaples

Sells office supplies, business Sells office supplies, business services, furniture, and technologyservices, furniture, and technology

Locations in six countriesLocations in six countries $11 billion in annual sales$11 billion in annual sales

• $1 billion in online revenues (2001)$1 billion in online revenues (2001) 1,400+ stores, catalog, kiosks1,400+ stores, catalog, kiosks Website first established in 1998Website first established in 1998

StaplesStaples

Staples thought web would cannibalize Staples thought web would cannibalize other salesother sales• web actually increased salesweb actually increased sales

Average yearly spending of small business Average yearly spending of small business customers increased $600 customers increased $600 $2800 when $2800 when shopped onlineshopped online

When buyers shop all 3 channels, When buyers shop all 3 channels, purchases are 4.5 times greater than if purchases are 4.5 times greater than if shop only 1 channelshop only 1 channel

Web ChannelsWeb Channels

Clicks onlyClicks only

1998: Venture capital firms provided $26 1998: Venture capital firms provided $26 billion+ to Internet start-upsbillion+ to Internet start-ups

– Average return for venture Internet start-up funds 25% Average return for venture Internet start-up funds 25% (1998) (1998)

– Leading funds returning 100%+ Leading funds returning 100%+

Most opportunities were cash burning Most opportunities were cash burning companies companies • just launched their servicesjust launched their services• not attracted a customer base not attracted a customer base


Mid-2000: IPO Internet BubbleMid-2000: IPO Internet Bubble An estimated 700-1000 of these An estimated 700-1000 of these

Internet start-ups went bustInternet start-ups went bust–Boo.comBoo.com–Toysmart.comToysmart.com–Brandwise.comBrandwise.com–Clickradio.comClickradio.com

The Case of Amazon.comThe Case of Amazon.com

Opened virtual doors in 1995Opened virtual doors in 1995

Evloved from books to department Evloved from books to department store store

Sells products in 220+ countriesSells products in 220+ countries

Created first catalog in 2001Created first catalog in 2001

The Case of Amazon.comThe Case of Amazon.com

Personalized customer interactionPersonalized customer interaction

Top etailer for brand recognition & Top etailer for brand recognition & customer satisfactioncustomer satisfaction

2003, earned first quarterly profit not 2003, earned first quarterly profit not tied to the holiday shopping seasontied to the holiday shopping season

Exclusive partnerships with Target, Exclusive partnerships with Target, Circuit City, Toys R’ Us, and Babies R’ Circuit City, Toys R’ Us, and Babies R’ UsUs


Bricks & clicksBricks & clicks

• 70% of online retailers are bricks & 70% of online retailers are bricks & clicks clicks – outnumber clicks onlyoutnumber clicks only

• In 2000, 33% of total bricks & clicks In 2000, 33% of total bricks & clicks sales were from the Internetsales were from the Internet

The Case of WalmartThe Case of Walmart

Opened in 1962Opened in 1962 Largest mass merchandiserLargest mass merchandiser

• 1.4 million employees, 4000 stores1.4 million employees, 4000 stores• $218 billion in annual sales$218 billion in annual sales• 100million customers visit each week100million customers visit each week• 2001-2002 sales growth was 14%2001-2002 sales growth was 14%

First website in 1995First website in 1995

Walmart.comWalmart.com

Founded in January 2000, initially Founded in January 2000, initially independent from Wal-Mart Stores, independent from Wal-Mart Stores, Inc.Inc.

Eventually integrated as separate Eventually integrated as separate business unitbusiness unit• Return policy for online purchases in storeReturn policy for online purchases in store

Offers more than 600,000 stock Offers more than 600,000 stock keeping unitskeeping units

Walmart.comWalmart.com

When independent had sales tax When independent had sales tax advantageadvantage

Considering rolling out in-store Considering rolling out in-store kioskskiosks

Strategy: “Serve customers in the Strategy: “Serve customers in the way they want to be served where way they want to be served where they want to be served…”they want to be served…”

What consumers want What consumers want from online storefrontsfrom online storefronts

Convenience--75% of shoppers go Convenience--75% of shoppers go online for this reasononline for this reason• want it for returns toowant it for returns too

InformationInformation• about store policies, product about store policies, product

information, contact information, information, contact information, – Sears estimates that 10% of its store Sears estimates that 10% of its store

appliance sales are influenced by appliance sales are influenced by information from Sears.cominformation from Sears.com


SpeedSpeed• want option of same day deliverywant option of same day delivery

Privacy & SecurityPrivacy & Security• want privacy policywant privacy policy• studies show apprehensiveness about studies show apprehensiveness about

purchasing online with credit cardpurchasing online with credit card– yet 59% of sample reported using themyet 59% of sample reported using them


ServiceService• want timely, human feedbackwant timely, human feedback

SimplicitySimplicity• want simple, easy to use site want simple, easy to use site

technologytechnology

ConvergenceConvergence• want sites that feel like offline storeswant sites that feel like offline stores

EtailingEtailing

Internet retailing 3rd most Internet retailing 3rd most significant transformation of retail significant transformation of retail industryindustry• 1950s--shopping malls arrived1950s--shopping malls arrived• 1970s--large discount stores & 1970s--large discount stores &

nationwide chains arrivednationwide chains arrived• 1990s--Internet arrival1990s--Internet arrival

– 50% of Internet users were shopping 50% of Internet users were shopping online (2001)online (2001)

EtailingEtailing

$3.5 billion spent on online shopping in $3.5 billion spent on online shopping in month of March, 2001month of March, 2001

– top categories: travel & appareltop categories: travel & apparel– Amazon sales leader: 15.1% of online Amazon sales leader: 15.1% of online

purchases, EBay second: 14.5%purchases, EBay second: 14.5%

• Online customer acquisition costs are $18 Online customer acquisition costs are $18 per personper person

• Online returns average 8% of online Online returns average 8% of online purchasespurchases– higher in some categories, such as apparelhigher in some categories, such as apparel

Etailer DecisionsEtailer Decisions

Service levelService level Products & AssortmentProducts & Assortment Inventory turnsInventory turns PricesPrices Returns & After Market ServiceReturns & After Market Service Trust & PrivacyTrust & Privacy Payment facilitationPayment facilitation

An Etailer PredicamentAn Etailer Predicament

Shopping Basket AbandonmentShopping Basket Abandonment• 65% of consumers leave their shopping 65% of consumers leave their shopping

basket before sale is completedbasket before sale is completed• Reasons:Reasons:

– Sticker shock at total & shipping costsSticker shock at total & shipping costs– 40% experience technical difficulties40% experience technical difficulties– Too complex order forms that take too long Too complex order forms that take too long

to downloadto download– stock-outs, computer crash, rejected credit card, & stock-outs, computer crash, rejected credit card, &

change mind at last minutechange mind at last minute

Customer Relationship Customer Relationship Management (CRM)Management (CRM)

Managing the Individual Managing the Individual Marketing Relationship Using Marketing Relationship Using TechnologyTechnology

Marketing to IndividualsMarketing to Individuals

Segment: homogenous group similar Segment: homogenous group similar characteristics/buying behaviorscharacteristics/buying behaviors• A one-to-many communication modelA one-to-many communication model

With CRM, marketers target the With CRM, marketers target the individual• Direct interaction to create customer value, Direct interaction to create customer value,

benefit the marketer, & build relationshipbenefit the marketer, & build relationship• A one-to-one interactive communication A one-to-one interactive communication

modelmodel

Individual PersonalizationIndividual Personalization

Beyond era of mass marketingBeyond era of mass marketing Product differentiation through Product differentiation through

personalizationpersonalization• unique solution for each individualunique solution for each individual• features that benefit the individualfeatures that benefit the individual• match customer tastes without wastematch customer tastes without waste

Yet, hard for consumers to sort through Yet, hard for consumers to sort through so many options & hard to implementso many options & hard to implement

Choice AssistanceChoice Assistance

Online techniques & databases can Online techniques & databases can assist consumers in locating the assist consumers in locating the best options for themselvesbest options for themselves• set of productsset of products• determine individual’s tastes & needsdetermine individual’s tastes & needs• make recommendationmake recommendation• simplify selectionsimplify selection

Lands EndLands End

Opened in 1963 as the Lands’ End Yacht Opened in 1963 as the Lands’ End Yacht StoresStores• Averaged 15 mail orders per dayAveraged 15 mail orders per day

Bought by Sears in 2002 for $1.9 billionBought by Sears in 2002 for $1.9 billion

2005, Fifteenth largest mail order firm2005, Fifteenth largest mail order firm

Annual sales of over $1.3 billionAnnual sales of over $1.3 billion

Target quality-conscious, middle-age Target quality-conscious, middle-age consumers with traditional casual apparelconsumers with traditional casual apparel

Lands EndLands End

Direct merchant that acts as its own Direct merchant that acts as its own intermediaryintermediary

Multi-channel merchantMulti-channel merchant• Catalogs, stores, and websiteCatalogs, stores, and website

– 269 million catalogs mailed in 2001269 million catalogs mailed in 2001– 16 outlet and inlet stores in three countries16 outlet and inlet stores in three countries– Website online in 1995, initially offering 100 productsWebsite online in 1995, initially offering 100 products

Today, every product in catalog sold onlineToday, every product in catalog sold online

Lands EndLands End

15 million web site visitors (1999)15 million web site visitors (1999)• $61 million in revenue$61 million in revenue• Considered world’s largest apparel websiteConsidered world’s largest apparel website

Known for customer serviceKnown for customer service• First firm with 24/7 order taking & 800 First firm with 24/7 order taking & 800

numbernumber• Lands End Live (talk with personal Lands End Live (talk with personal

shopper)shopper)

Lands EndLands End

Website also customer service Website also customer service orientedoriented

• Lands End My Personal Shopper (live Lands End My Personal Shopper (live chat)chat)

• Online style advice Online style advice • Swim suit fittingSwim suit fitting• Three-dimensional modelThree-dimensional model• Build an oxford shirtBuild an oxford shirt

Lands EndLands End

Online orders filled through catalog Online orders filled through catalog warehousewarehouse• Size of 16 football fieldsSize of 16 football fields• Sort 10,000 pieces per hourSort 10,000 pieces per hour• Ship 150,000 orders per dayShip 150,000 orders per day

Example of CRM using a multi-Example of CRM using a multi-channel model resulting in channel model resulting in seamless customer experienceseamless customer experience

CustomizationCustomization

Mass customization: combines Mass customization: combines individual level information with individual level information with flexible manufacturing processesflexible manufacturing processes• Web is efficient method of gathering Web is efficient method of gathering

information & inputting it into information & inputting it into productionproduction

Democracy of goods: technology Democracy of goods: technology can make available what used to be can make available what used to be only for the very richonly for the very rich

Different types of Different types of customizationcustomization

AdaptiveAdaptive: same basic product, users : same basic product, users filter possibilitiesfilter possibilities

CosmeticCosmetic: standard product, presented : standard product, presented differentlydifferently

TransparentTransparent: unique products without : unique products without alerting customersalerting customers

CollaborativeCollaborative: dialogue to articulate : dialogue to articulate needs, identify offerings, & customize needs, identify offerings, & customize products products

ImplicationImplication

Can personalize as a point of Can personalize as a point of differentiation & create differentiation & create competitive advantagecompetitive advantage• products & web sites become products & web sites become

problem solving toolsproblem solving tools• online banking industry exampleonline banking industry example

Relationship BuildingRelationship Building

EffortsEfforts

Communication Communication techniquestechniques

Push communication techniquesPush communication techniques• direct, forced communication direct, forced communication

– email advertisements, banners/pop-ups, publicity email advertisements, banners/pop-ups, publicity

Pull techniquesPull techniques• indirect, on-demand communicationindirect, on-demand communication• more interactivemore interactive

– viral marketing efforts, sign up for newsletter, viral marketing efforts, sign up for newsletter, links links

Creates value for Creates value for bothboth parties parties

Communication goalsCommunication goals

Create specific communication Create specific communication goals to build relationshipsgoals to build relationships

sales/transactionssales/transactions

dialogue/discussions dialogue/discussions

research/gathering informationresearch/gathering information

service/disseminate informationservice/disseminate information

support/problem solvingsupport/problem solving

lead acquisition/new opportunitieslead acquisition/new opportunities

Strategies Underlie these Strategies Underlie these GoalsGoals

Marketers’ strategiesMarketers’ strategies

--lifetime customer lifetime customer valuevalue

--targeted messagestargeted messages-distribution efficiency-customer dialoguecustomer dialogue

Involving consumers Involving consumers is importantis important

Consumers’ Consumers’ strategiesstrategies

--life savings & rewardlife savings & reward

--fewer irrelevant onesfewer irrelevant ones

--wider availability

--seller responsivenessseller responsiveness

Adding value is keyAdding value is key

Different Types of Different Types of RelationshipsRelationships

One half of relationship involves One half of relationship involves creating value for customers by creating value for customers by exceeding expectationsexceeding expectations

Can market at different individual Can market at different individual levels, focusing on:levels, focusing on:• acquisition, development, or retentionacquisition, development, or retention• Can calculate potential ROI to figure Can calculate potential ROI to figure

out where best to focus effortsout where best to focus efforts

AcquisitionAcquisition

Initial cost of bringing in a new Initial cost of bringing in a new customercustomer

Can be reduced with online activitiesCan be reduced with online activities Should answer 3 questions, which are Should answer 3 questions, which are

enhanced with online activity:enhanced with online activity:• what to say to the customerwhat to say to the customer• when to make contactwhen to make contact• how much to spend on communicating how much to spend on communicating

with each customer with each customer

DevelopmentDevelopment

Expanding on share of customer Expanding on share of customer • Additional business from current customersAdditional business from current customers

Rely on learning and Rely on learning and personalizationpersonalization

Match or build services to tastesMatch or build services to tastes Customize to individualCustomize to individual

• Bundling may occurBundling may occur• Trust & reliability become importantTrust & reliability become important

RetentionRetention

Focus on keeping business and Focus on keeping business and loyalty of current customersloyalty of current customers

Online enhancements can Online enhancements can inexpensively support loyaltyinexpensively support loyalty• Include product support with original Include product support with original

salesale• May want to subsidize retention, even May want to subsidize retention, even

if it is a short-term lossif it is a short-term loss

Peppers & Rogers GroupPeppers & Rogers Group

13 offices around the world 13 offices around the world • From US to TurkeyFrom US to Turkey

400 annual seminars400 annual seminars

Coined term one-to-one marketing Coined term one-to-one marketing • Turned into CRMTurned into CRM

– Customer based business strategiesCustomer based business strategies– Know customer & use that information to increase Know customer & use that information to increase

ROIROI

Case studiesCase studies

Implementation: One-to-Implementation: One-to-One MarketingOne Marketing

Focus on share of customerFocus on share of customer Communicate to customers as Communicate to customers as

individualsindividuals• Initiate & maintain dialogues to learn Initiate & maintain dialogues to learn

– but marketers must be responsivebut marketers must be responsive Use the Internet & Databases to track, Use the Internet & Databases to track,

understand, & communicate with individualsunderstand, & communicate with individuals• Differentiate customers, spend more Differentiate customers, spend more

on those on those who are more valuablewho are more valuable

Implementation continuedImplementation continued

Customer speak->marketer listen, Customer speak->marketer listen, make togethermake together• Customer makes offer to group of Customer makes offer to group of

marketers, self-selection to create marketers, self-selection to create productproduct

Success is measured as lifetime Success is measured as lifetime value of a customer value of a customer • Single customer, more products (share Single customer, more products (share

of customer)of customer)

Summary CRM stepsSummary CRM steps

Identify & record Identify & record customerscustomers

Sort them by Sort them by needs, ideally treat needs, ideally treat as individualsas individuals

Interact with them Interact with them effectivelyeffectively

Record interactionsRecord interactions

Customize Customize marketing offermarketing offer

Update Update information in information in databasesdatabases

Sell the same Sell the same customers more customers more products in futureproducts in future

Organizing a Marketing Organizing a Marketing DepartmentDepartment

Marketing department Marketing department organizationorganization

Organized by:Organized by:• geography (region)geography (region)• product (product management)product (product management)• brands (brand management)brands (brand management)• customercustomer

– often used for e-commerceoften used for e-commerce– executive viewexecutive view --broad understanding of --broad understanding of

full marketplacefull marketplace

Customer managementCustomer management

Specialization by customer portfolioSpecialization by customer portfolio Manager “owns” a group of customers Manager “owns” a group of customers

and is responsible for their activityand is responsible for their activity• customers are tracked & attempt is made customers are tracked & attempt is made

to get greater “share of customer”to get greater “share of customer” Weakness is the range of knowledge Weakness is the range of knowledge

needed for successful managementneeded for successful management

Databases & Data MiningDatabases & Data Mining

Operational Data ToolsOperational Data Tools

Techniques marketers use to learn Techniques marketers use to learn more about their own operations, more about their own operations, competitors, and customerscompetitors, and customers

Includes:Includes:• databasesdatabases data warehousesdata warehouses• cookiescookies server log filesserver log files• web analyticsweb analytics

DatabaseDatabase

Collection of data structured for quick Collection of data structured for quick retrieval of pieces for analysis & applicationretrieval of pieces for analysis & application

HistoryHistory– 1960s-how much your firm spent on 1960s-how much your firm spent on

advertising this yearadvertising this year– 1980s-advertising dollars by state & year1980s-advertising dollars by state & year– 1990s-drill down to city/month/zip code1990s-drill down to city/month/zip code– 2000s-predictive, based on past, what are we 2000s-predictive, based on past, what are we

likely to spend in future? How will this affect likely to spend in future? How will this affect sales?sales?

Database Database

Benefits of use Benefits of use • Identify best/worst customersIdentify best/worst customers• Better target promotions to customersBetter target promotions to customers• Help customers find what they needHelp customers find what they need• Establish two-way communication with Establish two-way communication with

customerscustomers• Integrate data across business divisionsIntegrate data across business divisions• Track competitorsTrack competitors

Database Database

Marketing Data collected Marketing Data collected • MarketsMarkets• SegmentsSegments• CompetitorsCompetitors• SuppliersSuppliers• PartnersPartners

Data Data

Consumer data collectedConsumer data collected• Demographics, geodemographicsDemographics, geodemographics• Transaction historiesTransaction histories• LifestyleLifestyle• Behaviors Behaviors

– clickstream, time spent on siteclickstream, time spent on site

• Technical specifications Technical specifications – browser typebrowser type

DatabasesDatabases

Marketers: suited for CRM Marketers: suited for CRM activitiesactivities• customer contactcustomer contact• identify customers for special offersidentify customers for special offers• cross or up-sellingcross or up-selling• tailoring advertising messagestailoring advertising messages• predicting purchase ratespredicting purchase rates

Database Planning & Database Planning & DesignDesign

Usually done by IT departmentUsually done by IT department• Plan to decide what they want & Plan to decide what they want &

where to get it fromwhere to get it from• Organized by files, records, & fieldsOrganized by files, records, & fields

In-house database: build from In-house database: build from company datacompany data

Compiled database: buy from Compiled database: buy from others who collect data others who collect data

Double ClickDouble Click

Online advertising firmOnline advertising firm• Started in 1996Started in 1996

Purchased data warehouse firm Purchased data warehouse firm Abacus in 1999Abacus in 1999• Owns database with over 3.5 billion Owns database with over 3.5 billion

transaction from 90+ million US transaction from 90+ million US householdshouseholds– Largest proprietary buyer behavior database Largest proprietary buyer behavior database

in USin US

Double Click’s AbacusDouble Click’s Abacus

Abacus Database ProductsAbacus Database Products• B2C Alliance: consumer focused B2C Alliance: consumer focused

catalog & specialty retail marketerscatalog & specialty retail marketers– Data from over 90 million householdsData from over 90 million households

• B2B Alliance: direct response B2B Alliance: direct response marketersmarketers– Data from over 75 million business Data from over 75 million business

contacts that are actively purchasingcontacts that are actively purchasing

Double Click’s AbacusDouble Click’s Abacus

Abacus Database ProductsAbacus Database Products• Retail Solutions: specialty retailers who want to Retail Solutions: specialty retailers who want to

increase store traffic within a defined trade increase store traffic within a defined trade areaarea– Highly targeted mailings for increased store salesHighly targeted mailings for increased store sales

• Data Management Solutions: customized Data Management Solutions: customized solution for targeting “right” customers with solution for targeting “right” customers with “best” offer“best” offer– Multichannel databases, cross channel measurement, Multichannel databases, cross channel measurement,

data processing, and strategic/analytic services to data processing, and strategic/analytic services to assess your customers’ behaviorsassess your customers’ behaviors

Data WarehousingData Warehousing

Store houses for massive amounts Store houses for massive amounts of dataof data

Data MiningData Mining

Software systematically sifts Software systematically sifts through databases looking for through databases looking for significant patterns & correlationssignificant patterns & correlations

Used to create predictive relationships Used to create predictive relationships • profile credit card purchasesprofile credit card purchases• probability a customer will purchase probability a customer will purchase

$500 of goods from a catalog$500 of goods from a catalog• more than filtering, make predictionsmore than filtering, make predictions

Jiffy LubeJiffy Lube

Began data warehouse project (1998)Began data warehouse project (1998)• Head of marketing, IT, Enterprise data Head of marketing, IT, Enterprise data

managermanager Took 7 months to planTook 7 months to plan

• Longer to load 35 million vehicle recordsLonger to load 35 million vehicle records• When Parent, Pennzoil, bought Quaker State When Parent, Pennzoil, bought Quaker State

added another 15 million recordsadded another 15 million records Used to profile most profitable customers Used to profile most profitable customers

• Target them with direct mail offers of services Target them with direct mail offers of services that match their intereststhat match their interests

Privacy Sensitive ToolsPrivacy Sensitive Tools

Cookies: small data files automatically Cookies: small data files automatically placed on a user’s browser by a web placed on a user’s browser by a web site’s serversite’s server• used to track & gather informationused to track & gather information

Bugs: electronic GIF images placed by Bugs: electronic GIF images placed by 3rd party media & research 3rd party media & research companiescompanies• collects cookie information collects cookie information on more

than one site

Privacy Sensitive ToolsPrivacy Sensitive Tools

Server Logs: plain text files that track Server Logs: plain text files that track web dataweb data• interpreted by reporting programsinterpreted by reporting programs

– user’s name, place requested, whether file was user’s name, place requested, whether file was received or not, size of file, browser used, received or not, size of file, browser used, date/time of request, presence of firewall or notdate/time of request, presence of firewall or not

– traffic counterstraffic counters

Web Analytics: collecting, organizing & Web Analytics: collecting, organizing & analyzing data for marketing analyzing data for marketing applicationsapplications

Marketing ResearchMarketing Research

Overview of Marketing Overview of Marketing ResearchResearch

Primary vs Secondary ResearchPrimary vs Secondary Research Qualitative vs Quantitative MethodsQualitative vs Quantitative Methods Research processResearch process

• state problem/question, develop plan, state problem/question, develop plan, collect & organize data, analyze data, collect & organize data, analyze data, report resultsreport results

Traditional research moving onlineTraditional research moving online New methods developing for e-New methods developing for e-

commercecommerce

Methods Moving OnlineMethods Moving Online

QualitativeQualitative• Focus GroupsFocus Groups Online Online BrainstormingBrainstorming• InterviewsInterviews Chat AnalysisChat Analysis

QuantitativeQuantitative• SurveysSurveys PanelsPanels• ReviewsReviews Conjoint analysisConjoint analysis• SimulationsSimulations

Online Focus GroupsOnline Focus Groups

Earliest use documented in 1994Earliest use documented in 1994 Outgrowth of chat room technologyOutgrowth of chat room technology Originally limited to Internet topicsOriginally limited to Internet topics Serious trade publication coverage Serious trade publication coverage

began about 1998began about 1998 Now used for wide variety of topicsNow used for wide variety of topics Researchers divided on applicabilityResearchers divided on applicability

ProcessProcess

Determine target populationDetermine target population Arrange technical resources & logisticsArrange technical resources & logistics Recruit sampleRecruit sample Re-screen sampleRe-screen sample

• Identity & Internet, computing ability & resourcesIdentity & Internet, computing ability & resources Conduct focus group(s)Conduct focus group(s) Prepare transcriptsPrepare transcripts Generate analysis and reportsGenerate analysis and reports

DemonstrationDemonstration

AdvantagesAdvantages

SpeedSpeed• Avg. turnaround time 5 business daysAvg. turnaround time 5 business days

– Transcripts available immediatelyTranscripts available immediately– Analysis and reports generated soonerAnalysis and reports generated sooner

Cost savingsCost savings • Travel Travel • Focus group facility rental/cateringFocus group facility rental/catering• TranscriptionTranscription

Access difficult-to-reach populationsAccess difficult-to-reach populations• Specific user groupsSpecific user groups

AdvantagesAdvantages

Quality of ResponseQuality of Response• Less opportunity for only a few Less opportunity for only a few

participants to dominate (potentially)participants to dominate (potentially)• Inclusive: most respondents answer Inclusive: most respondents answer

every questionevery question• Anonymity increases participants' Anonymity increases participants'

candor and interaction with moderatorcandor and interaction with moderator• Private treatment of "sensitive" topicsPrivate treatment of "sensitive" topics

DisadvantagesDisadvantages

Online populations not Online populations not representativerepresentative

No auditory and visual cuesNo auditory and visual cues• Tone of voice, Facial expressions, Body Tone of voice, Facial expressions, Body

language, Gestures, Group interactionslanguage, Gestures, Group interactions Reliance on "emoticons” Reliance on "emoticons”

, “JK” & “LOL”, “JK” & “LOL” Participant ResourcesParticipant Resources

• Level of Internet experience, Typing/Writing Level of Internet experience, Typing/Writing skills, Quality of computer and softwareskills, Quality of computer and software

Other IssuesOther Issues

Other IssuesOther Issues• Site securitySite security• False identitiesFalse identities• Attention to topic vs. external stimuliAttention to topic vs. external stimuli• Maximum of 6 respondents suggestedMaximum of 6 respondents suggested• Labor IntensiveLabor Intensive

Still Experimental...Still Experimental...

Measuring Effectiveness of Measuring Effectiveness of Interactive MediaInteractive Media

Began with Web AdvertisingBegan with Web Advertising

MeasurementMeasurement

Most Measures Most Measures tell cost effectivenesstell cost effectiveness• not tell if achieved desired effectnot tell if achieved desired effect

Can refine media & creative choice in real Can refine media & creative choice in real timetime

Hit & Stickiness were first widely Hit & Stickiness were first widely accepted standardsaccepted standards• Found to be weak, but still used widely todayFound to be weak, but still used widely today• Potential Industry Standard?Potential Industry Standard?

HitsHits

The number of files served from a pageThe number of files served from a page When a visitor requests a page & it is When a visitor requests a page & it is

served, hits are the number of ads in the served, hits are the number of ads in the pagepage• 3 banner ads, 1 graphic, 1 sponsorship--5 hits3 banner ads, 1 graphic, 1 sponsorship--5 hits

• Fails to identify contact between ad & visitor Fails to identify contact between ad & visitor • Does not track what happens after page opensDoes not track what happens after page opens

ClicksClicks

Click Through: when a visitor clicks on a Click Through: when a visitor clicks on a banner ad, activates link, & goes to sitebanner ad, activates link, & goes to site

– does not capture purchase informationdoes not capture purchase information

Click Rate: Percentage of times ad is Click Rate: Percentage of times ad is clicked divided by number of times clicked divided by number of times servedserved

– ad on Yahoo comes in front of a visitor 500 times, ad on Yahoo comes in front of a visitor 500 times, it is clicked 10 times, =2% click rateit is clicked 10 times, =2% click rate

Conversion Rate: rate of those who click Conversion Rate: rate of those who click & buy & buy (=buyers/viewers)(=buyers/viewers)

ImpressionsImpressions

Opportunity to see an ad/number of times Opportunity to see an ad/number of times available for viewingavailable for viewing

CPM--cost per thousand--pricing CPM--cost per thousand--pricing mechanism for adsmechanism for ads• vary for value of host sitevary for value of host site• 2001 average CPM was $33/1,000 impressions2001 average CPM was $33/1,000 impressions

Pages: Number of pages downloaded from Pages: Number of pages downloaded from a site (but visitor may not view each a site (but visitor may not view each page)page)

VisitorsVisitors

The total number of people who visit a The total number of people who visit a web site in a period of time web site in a period of time • If someone visits multiple times, each time is If someone visits multiple times, each time is

counted (duplication)counted (duplication)

Unique visitor: unduplicated number Unique visitor: unduplicated number of people visiting in period of timeof people visiting in period of time• identified by cookies or IPidentified by cookies or IP

Eyeballs: number of site visitors that Eyeballs: number of site visitors that see an adsee an ad

StickinessStickiness

Stickiness: total impressions/month Stickiness: total impressions/month divided by unique visitors/monthdivided by unique visitors/month• captures attractivenesscaptures attractiveness

Other relevant terms:Other relevant terms:• Rate -- cost of placing adRate -- cost of placing ad

– 2000, CPM for health & fitness $42.50 2000, CPM for health & fitness $42.50 averageaverage

– 2000, CPM for general news $37.47 average2000, CPM for general news $37.47 average

Other relevant termsOther relevant terms

Reach--Percentage of users visiting Reach--Percentage of users visiting site and exposed at least once in site and exposed at least once in campaigncampaign

Frequency--number of times visitor is Frequency--number of times visitor is exposed in campaignexposed in campaign

Run--specified length of time an ad will Run--specified length of time an ad will run on a siterun on a site• There are firms that specialize in these There are firms that specialize in these

metricsmetrics

Usability StudiesUsability Studies

An Emerging TechniqueAn Emerging Technique

Usability Usability

The measure of the quality of a The measure of the quality of a user's experience when interacting user's experience when interacting with a product/system with a product/system • Applies to a Web site, software Applies to a Web site, software

application, mobile technology, or any application, mobile technology, or any user-operated deviceuser-operated device

Oops I shook the whole Oops I shook the whole cabinetcabinet

My comp has gone Nuts!My comp has gone Nuts!

Hey I am really confusedHey I am really confused

Its so clear!!!!Its so clear!!!!

ImportanceImportance

No manual for a Web siteNo manual for a Web site Large number of optionsLarge number of options Loss of sales - 50% of the potential Loss of sales - 50% of the potential

sales from sites are lost because sales from sites are lost because consumers cannot find what they wantconsumers cannot find what they want

Loss of repeat visits - 40% of visitors do Loss of repeat visits - 40% of visitors do not return to a site when their first visit not return to a site when their first visit results in a negative experienceresults in a negative experience

Goals for usability testingGoals for usability testing

Diagnosing problems Diagnosing problems Comparing alternatives Comparing alternatives Verifying that you have met goalsVerifying that you have met goals

• Elements: eElements: ease of learning, ease of ase of learning, ease of use,use, m memorability, error emorability, error frequency/severity, sfrequency/severity, subjective ubjective satisfactionsatisfaction

Steps in Usability TestingSteps in Usability Testing

Plan scope, issues, participants, Plan scope, issues, participants, location, budgetlocation, budget

Develop scenariosDevelop scenarios Recruit test participants Recruit test participants Conduct usability testingConduct usability testing Draw conclusions from resultsDraw conclusions from results

Sample Test ContentsSample Test Contents

Do users complete a task successfully? Do users complete a task successfully? If so, how fast do they do each task? If so, how fast do they do each task? Is that fast enough to satisfy them? Is that fast enough to satisfy them? What paths do they take in trying? What paths do they take in trying? Do those paths seem efficient enough to Do those paths seem efficient enough to

them? them? Where do they stumble?— What problems do Where do they stumble?— What problems do

they have?— Where do they get confused? they have?— Where do they get confused? What words or paths are they looking for that What words or paths are they looking for that

are not now on the site? are not now on the site?

Use of the test resultsUse of the test results

Compile the data from all participants Compile the data from all participants List the problems List the problems Sort the problems by priority and frequencySort the problems by priority and frequency Develop solutionsDevelop solutions

• Get expert advice if the solutions are not Get expert advice if the solutions are not obvious obvious

Fix the problems Fix the problems Test the revised version to ensure you Test the revised version to ensure you

made the right design decisions made the right design decisions

Online Consumer Behavior Different Types of Buyers

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