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Introduction to E-Commerce
PRINCIPLES OF MANAGEMENT :

Compiled By: Er. Ayush Shrestha [ 9841515311 ]

Lesson 4: Consumer behavior, Customer
service, and Advertising

Compiled: Er. Ayush Shrestha

Topics 4
4 Retailing in EC: Products and services
1. Learning about consumer behavior online
2. The consumer decision making process
3. One-to-one marketing and personalization in EC
4. Market research for EC
5. Delivering customer service in cyberspace
6. Web advertising
7. Advertising methods
8. Advertising strategies and promotions
9. Special advertising topics
10. Managerial Issues

Compiled: Er. Ayush Shrestha

4.1 Learning about consumer behavior online 5
 A Model of Consumer Behavior Online

The purpose of a consumer behavior model is to help vendors understand how a consumer
makes a purchasing decision

 Independent (or uncontrollable) variables can be categorized as personal

characteristics and environmental characteristics

 Intervening (or moderating) variables are variables within the vendors’ control. They
are divided into market stimuli and EC systems

 The decision-making process is influenced by the independent and intervening

variables. This process ends with the buyers’ decisions resulting from the decision-
making process

 The dependent variables describe types of decisions made by buyers

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Consumer Behavior Model 6

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 The independent variables
 Personal characteristics
 Environmental variables
 Social variables
 Cultural/community variables
 Other environmental variables
 The intervening (moderating) variables
 The dependent variables: the buying decisions

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4.2 The consumer decision making process 9

 Roles people play in the decision-making process

 Initiator – the person who suggests a product/service
 Influencer – a person whose advice influence purchasing decision
 Decider – the person who makes the buying decision
 Buyer – the person who makes an actual purchase
 User – the person who consumes or uses a product/service

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 A Generic Purchasing-Decision Model
1. Need identification
2. Information search
3. Evaluation of alternatives,
4. Purchase and delivery
5. Post-purchase behavior

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4.3 One-to-one marketing and personalization in EC 11
one-to-one marketing
Marketing that treats each customer in a unique way

Mass Marketing
• Marketing efforts traditionally were targeted to everyone
• Targeted marketing—marketing and advertising efforts targeted to groups (market
segmentation) or to individuals (one-to-one)—is a better approach

market segmentation
The process of dividing a consumer market into logical groups for conducting marketing
research and analyzing personal information

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  Personalization 14
The matching of services, products, and advertising content with individual consumers and

their preferences

The major strategies used to compile user profiles include the following:
• Solicit information directly from the user
• Observe what people are doing online
• Build from previous purchase patterns
• Make inferences

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4.4 Market research for EC 15

Methods for Conducting Market Research Online

• Market research that uses the Internet frequently is faster and more efficient and allows
the researcher to access a more geographically diverse audience
• Web market researchers can conduct a very large study much more cheaply than with
other methods

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What are marketers looking for in EC market research? 16
• What are the purchase patterns for individuals and groups (market segmentation)?
• What factors encourage online purchasing?
• How can we identify those who are real buyers from those who are just browsing?
• How does an individual navigate—does the consumer check information first or do
they go directly to ordering?
• What is the optimal Web page design?

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Market research for one-to-one approaches
• Direct solicitation of information (surveys, focus groups)
• Observing what customers are doing on the Web
• Collaborative filtering

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 Observing Customers
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 transaction log

A record of user activities at a company’s Web site

 clickstream behavior

Customer movements on the Internet

 Web bugs

Tiny graphics files embedded in e-mail messages and in Web sites that
transmit information about users and their movements to a Web server

 spyware

Software that gathers user information over an Internet connection without

the user’s knowledge

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• clickstream data
Data that occur inside the Web environment; they provide a trail of the user’s activities
(the user’s clickstream behavior) in the Web site

• collaborative filtering
A market research and personalization method that uses customer data to predict,
based on formulas derived from behavioral sciences, what other products or services a
customer may enjoy; predictions can be extended to other customers with similar profiles
Variations of collaborative filtering include:
• Rule-based filtering
• Content-based filter

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 Limitations of Online Market Research and How to Overcome Them

 To use data properly, one needs to organize, edit, condense, and summarize it,
which is expensive and time consuming

 The solution to this problem is to automate the process by using data

warehousing and data mining known as business intelligence

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4.5 Delivering customer service in cyberspace 23

Customer service
• Traditional: do the work for the customer
• EC delivered: gives tools to the customer to do the work for him/herself (log:
tracking, troubleshooting, FAQ) with
• Improved communication
• Automated process
• Speedier resolution of problems

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Product life cycle and customer service
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Phases of product life cycle
• Requirements : assisting the customer to determine needs
• Acquisition : helping the customer to acquire a product or service
• Ownership : supporting the customer on an ongoing basis
• Retirement : helping the client to dispose of a service or product
• Service must be provided in all of them

E-service—online help for online transactions

• Foundation of service—responsible and effective order fulfillment
• Customer-centered services—order tracing, configuration, customization, security/trust
• Value-added services--dynamic brokering, online auctions, online training and education

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Customer relationship management (CRM)

CRM in action—customer-focused EC
 Make it easy for customers to do business online
 Business processes redesigned from customer’s point of view
 Design a comprehensive, evolving EC architecture
 Foster customer loyalty by:
• Personalized service
• Streamline business processes
• Own customer’s total experience

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4.6 Web advertising 26
interactive marketing
Online marketing, facilitated by the Internet, by which marketers and advertisers can
interact directly with customers and consumers can interact with advertisers/vendors

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SOME BASIC INTERNET ADVERTISING TERMINOLOGY 27
 ad views
The number of times users call up a page that has a banner on it during a specific
period; known as impressions or page views
 button
A small banner that is linked to a website; may contain downloadable software
 page
An HTML (Hypertext Markup Language) document that may contain text, images,
and other online elements, such as Java applets and multimedia files; may be
generated statically or dynamically
 click (ad click)
A count made each time a visitor clicks on an advertising banner to access the
advertiser’s website
 CPM (cost per mille, i.e., thousand impressions)
The fee an advertiser pays for each 1,000 times a page with a banner ad is shown
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 conversion rate
The percentage of clickers who actually make a purchase 28
 click-through rate/ratio (CTR)
The percentage of visitors who are exposed to a banner ad and click on it
 hit
A request for data from a Web page or file
 visit
A series of requests during one navigation of a website; a pause of a certain
length of time ends a visit
 unique visit
A count of the number of visitors entering a site, regardless of how many pages
are viewed per visit
 stickiness
Characteristic that influences the average length of time a visitor stays in a site

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Why Internet Advertising? 29

 Precise targeting  Customer acquisition

 Interactivity  Personalization
 Rich media (grabs  Timeliness
attention)  Location-basis
 Cost reduction  Linking
 Digital branding

 advertising networks
Specialized firms that offer customized Web advertising, such as
brokering ads and targeting ads to select groups of consumers

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4.7 Online Advertising methods 30
 banner

On a Web page, a graphic advertising display linked to the advertiser’s Web page

 keyword banners

Banner ads that appear when a predetermined word is queried from a search engine

 random banners

Banner ads that appear at random, not as the result of the user’s action
 banner swapping
An agreement between two companies to each display the other’s banner ad on its Web site
 banner exchanges
Markets in which companies can trade or exchange placement of banner ads on each
other’s Web sites
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 pop-up ad 31
An ad that appears in a separate window before, after, or during Internet surfing or when reading
e-mail

 pop-under ad

An ad that appears underneath the current browser window, so when the user closes the active
window the ad is still on the screen

 interstitial

An initial Web page or a portion of it that is used to capture the user’s attention for a short time
while other content is loading

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 E-Mail Advertising
 E-mail advertising management
 E-mail advertising methods and successes
 Newspaper-Like and Classified Ads
 Search Engine Advertisement
 Improving a company’s search-engine ranking (optimization)
 Paid search-engine inclusion

 associated ad display (text links)

An advertising strategy that displays a banner ad related to a key term entered in a search
engine
 Google—The online advertising king
 Advertising in Chat Rooms, Blogs, and Social Networks

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 Other Forms of Advertising
 advertorial

An advertisement “disguised” to look like editorial content or

general information
 Advertising in newsletters
 Posting press releases online
 advergaming

The practice of using computer games to advertise a product, an

organization, or a viewpoint

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4.8 Advertising strategies and promotions 34
 affiliate marketing

A marketing arrangement by which an organization refers consumers to the selling

company’s Web site

 With the ads-as-a-commodity approach, people are paid for time spent viewing an ad

 viral marketing

Word-of-mouth marketing by which customers promote a product or service by telling

others about it

 Webcasting

A free Internet news service that broadcasts personalized news and information, including
seminars, in categories selected by the user
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Online Events, Promotions, and Attractions
• Live Web Events 35
• Admediation
Third-party vendors that conduct promotions, especially large-scale ones
• Selling space by pixels

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4.9 Special advertising topics 36
 PERMISSION ADVERTISING

 spamming

Using e-mail to send unwanted ads (sometimes floods of ads)

 permission advertising (permission marketing)

Advertising (marketing) strategy in which customers agree to accept advertising and

marketing materials (known as “opt-in”)

 Advertisement as a Revenue Model

 Measuring Online Advertising’s Effectiveness

 ad management

Methodology and software that enable organizations to perform a variety of activities involved
in Web advertising (e.g., tracking viewers, rotating ads)
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 localization 37
The process of converting media products developed in one environment (e.g., country) to a
form culturally and linguistically acceptable in countries outside the original target market

 Internet radio

A Web site that provides music, talk, and other entertainment, both live and stored, from a variety
of radio stations
 Wireless Advertising

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Managerial Issues

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1. Do we understand our customers?

2. Should we use intelligent agents?

3. Who will conduct the market research?

4. Are customers satisfied with our Web site?

5. Can we use B2C marketing methods and research in B2B?

6. How do we decide where to advertise?

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7. What is our commitment to Web advertising, and how will we coordinate Web and
traditional advertising?

8. Should we integrate our Internet and non-Internet marketing campaigns?

9. What ethical issues should we consider?

10. Are any metrics available to guide advertisers?

11. Which Internet marketing/advertising channel to use?

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Assignment
Deadline: 25th January 2019

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1. Describe the Various advertising strategies and types of promotions.

2. For your ecommerce site how you are going to do Market segmentation and
building one-to-one relationships with customers.

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Thank You

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Any Question?

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