Online consumer purchasing decision process

For any company which provides services or sells goods either online or offline, it is important to understand the consumer buying behaviour. This process is divided into five steps:

1 - Problem recognition:

• real need: thirst.
• generated need, for example, you do not need that particular product, nevertheless you want it because you have seen it in an ad.

2 - Info search:

• BA.com
• Alitalia.it
• easyJet.com
• Lastminute.com

3 - Evaluation of alternatives: the amount of information searched depends on high (more expensive items with longer duration and a degree of risk such as computers) or low involvement (fast consumer goods, such as shampoo).

4 - Purchase decision/action: buy or not buy it.

5 - Post-purchase evaluation: after you have bought and used a product you may ask the following questions:

• Has it satisfied me?
• Will I use the same multi-channel again?
• Am I pleased with the delivery method?

The consumer purchasing process is the same for "real" shopping as well as for online purchasing. However, the great advantage that the Internet has against the "physical" companies is that it is easier and less time consuming searching information online. The more information you have the better you are in evaluating alternatives and this makes you a powerful consumer. Yet, despite the huge amount of information gathered online it is still difficul if not impossible making the best decision.

Built the perfect website

In order to turn browsers into buyers the website has to be build in the most effective way as possible.

Before creating a website the company has to know perfectly its consumers and it has to clearly determine its objectives.



The main objectives of a company's website may be:

• to sell products (e-tailing) or services


• to provide free services (gmail)


• to provide information about the company, its products and services


• to support distribution channel members (links for suppliers, customers, partners, etc...)


• to create a platform for virtual community (facebook)

Any website designer has to bear in mind that users or potential ones arrive at the site with:

• a short attention spam


• a task in mind or an information need


• want accomplish this by scanning not reading, unless s/he has found the information needed


• previous experience of other websites


• possibly limited connection speed

Market Research for EC

Market research is an important part on the process of placing the right product on the right place at the right price.
On the web, the market research’s main objective is to turn browsers into buyers. Different methods exist that help companies to carry out this challenging task.
They are:

• Web-based surveys.
• Online focus group.
• Hearing directly from customers.
• Customer scenarios.
• Tracking customers movements.

Last year I bought a collection of CDs on http://www.mediashopping.it/ and since then I have been receiving e-mails advertising announcing its new products.
A couple of weeks ago I received an e-mails asking to complete a survey, useful for mediashopping in order to understand my musical tastes.
In less than ten minutes I completed it and sent back.

I would say that online market research works better than the “physical” one for the following reasons:

• There is not the need to send back the survey by post.
• People are always in a hurry and they don’t like to be stopped on the street.
• People may surf the net when they are more relaxed and, therefore, more willing to replay.
• Information can be tracked without the consumer knowing it.

Google

The founders of Google, the worldwide known and the most used search engine, built their fortune on web advertising.

Google offers different types of web advertising:

• A company may pay per key words.


• A company may pay per click.


• The cost of ads depends on which order the company wishes to appear (fist page, first few lines on the first page, etc…).


• The ads on the right side of the Google web page are more expensive than the others.

The pay per click Google revenue model has raised some concerns among the online advertisers which are afraid that someone deliberately clicks on the ads in order to generate more income.
The threat of being deceived has been tackled by the Google staff thanks to the introduction of a software that can determine click fraud.

The Google staff is always looking for new ways that will increase their profits. The latest revenue models introduced are:

• Google earth where a costumer can find businesses (Starbucks, for example).


• The possibility to download videos after a payment has been made.


• The consultation of books which is not free of charge.

Even if some people consider this search engine a threat for their businesses and others are concerned about the way it collects and stores information in order to find out ways to become even more innovative and to please its users, Google has become a global brand impossible to ignore.

Web Advertising

Recent researches have showed that consumers spend more time surfing the net and less time watching television or reading newspapers. This new trend has given birth to a new way of advertising: web advertising.
In order to keep their profits high or to increase them, in order to attract more customers and to strengthen brand awareness in consumers’ minds, many companies decided to advertise their products online.

Ads online are cheaper and most effective that TV ads, for example.
Moreover, the advertiser is able to track the amount of time people spend looking at the ad.
Another advantage of web advertising is that on the Internet a company can show its “uniqueness” without any constraints, due to the fact that until now the Internet is not regulated. For this reason, ads that have been banned from the TV and are considered illegal can be put on the web; this is the case of some Nike’s ads as well as some Virgin’s ads.
In addition to this, online ads can be personalized and can become interactive, adding clips, games or videos.

While banners are in decline (only the 3% of consumers click through), other ways of web advertising work incredibly well:

• Affiliate marketing: cross promote each other products, for example amazon logo and a coffee shop.


• Viral marketing: an online word-of-mouth. Gmail strategy of recommend a friend works very well.


• Chat-rooms: you can promote your product on facebook, myspace or youtube.


• E-mail advertising: can be customized. People tend to respond better to e-offer made via e-mail.

It is assumed that if you search information on the Internet you have already an intention to buy. It can be for this reason that web advertising works very well.

Electronic Retailing

Nowadays more and more people shop online, therefore, the prospect of higher future profits has pushed manufacturers into selling their products through the Internet.

Another advantage of the e-tailing (retailing conducted over the Internet) is that it makes easier for a company to sell directly to the customer, cutting out the intermediaries and saving on costs.

Thanks to this new way of doing business, consumers or potential ones can easily switch between three different channels:

• physical store
  
• catalogue in hard copy


• online catalogue/purchasing online
  

Argos, the well known English bricks-and-mortar retailer, which sells office supplies, furniture, consumer electronics, sporting goods (products that sell well on the Internet), offers to its consumers the possibility to browse its online catalogue, find the desired object and buy it. However, the company is well aware of the facts that lots of people do not like online shopping and for this reason it carries on printing its own catalogue in hard copy.

All the three channels mentioned above target the same customer, therefore a conflict between them may arise.

The channel conflict matrix analyses how different types of channel conflicts should be resolved. Regarding the physical catalogue, in the long run it is likely that it will disappear, mainly due to the high publishing cost and, therefore, it can be positioned on the second quadrant of channel conflic matrix: accept the decline of the threatened channel.
On this quadrant the relative importance of the threatened cahannel is low, while the risk of conflict between different channels is high.

However, another hypotesis is that the online catalogue and the one in hard copy may coesist without impact on the business.
It will fall in the fourth quadrant: ignore; here both the relative importance of the threatened channel and the risk of conflict between channels are low. In this case the online catalogue may become more specialized on technological items, while the one in hard copy may be more focused on furniture. This can be a fair option for the coexitence of both catalogues.

In conclusion, even if the online shopping creates new customers, the retailers should not forget about the already existing ones.

Loyalty

During the class held the 6th November 2007 we spoke about loyalty and how e-businesses can built it. This is not an easy task: it is more simple to be loyal to a real store than to an online one. Moreover the intrduction of E-commerce decreases loyalty due to the fact that the customers' ability to shop, compare and switch to different vendors have became easier, faster and less expensive.

However, some websites have been able to successfully built loyalty and satisfaction among their customers. This is the case of eBay which, according to the video shown during the class, is now the 59th economy of the world.
eBay reached its position thanks to the feedbacks that are written after any transaction performed. Then these comments are converted into score.
The website fully respects all the requirements needed to make customers loyal and satisfied:

• information quality
• system quality
• service quality

Furthermore, its success comes from the users' trust, which is an important global e-commerce issue due to the difficulty in taking legal action in cases of dispute or fraud and due to the potential conflicts caused by differences in culture and business environment.

eBay now is so well established in the Internet landscape that lots of people have decided to start making a living based on the online auction.

E-business models and revenue models

Usually, in order to be well-informed on what is happening in Italy, I read the Corriere della Sera website. As almost all online magazines and newspapers, it gains its revenue from advertising: as you are surfing that website, pop-ups advertising various companies (mainly Italian companies) appear on your screen, while other are fixed.

Moreover, there is the section "corriere store" where a reader can buy historical front pages (for example, the front page written the 21st July 1969 which announces the first man on the moon) or articles in which he/she is interested. This section is not free of charge and an additional shipping fee is required, it changes depending on the destination.

The Corriere della Sera website offers to the reader also the possibility to search for a job, to consult the yellow pages and dictionaries and to find a house among other things. All these sections can be considered added values: an extention of what the business is offering.

Porter's Five Forces

Due to the introduction of the online booking, the travel agencies are going through negative period. Nowadays more and more people book tickets on the Internet, the number of websites which offer this option is huge, from the airlines websites (BA, Alitalia, Ryanair) to travelling search engines (eDreams, Expedia, VolaGratis).
Porter’s five forces give a clear explanation on what happened to those agencies after online booking had been employed by airlines companies.

• Power of suppliers: the power shifted from the middleman (travel agencies) to the suppliers (airlines companies) which now can reach the final users.
• Power of buyers: as the consumers are not interested from whom they are going to buy and as they tend to compare costs in order to find the best option, their power increased thanks to the online booking. Moreover, the switching costs are lower and, consequently, the buyers became even more powerful.
• Rivalry/competition: is high in this sector, at the present, almost all companies offer the possibility to book tickets online.
• Barriers to entry: are low, a characteristic of the Internet is that it breaks down regional barriers.
• Availability of substitutes: the threats generate by the availability of substitutes are high due to the large number of airlines companies which are doing the online booking.

E-business revenue models

In order to buy some books for my MBA course, I started to search them on the Internet. In particular I was looking for the International Marketing book, "International Marketing Strategy" published by Pearson.

As usual, I googled the name and, among the websites found by Google, I clicked on the Pearson's website. This website gives to the customer the possibility to buy online. It has two e-business models: B2C, business to consumer, due to the fact that the customer is the final user of the product and B2B, business to business, because it deals with universities.

The Pearson website gains its revenues by selling the books online, moreover, it can be seen as a way to reinforce the brand awareness throughout advertising the published books.

Concerning the security system, the website endeavour to prevent unauthorised access to the information through strict security procedures regarding its storage and disclosure, as required by the Data Protection Acts of 1984 and 1998. When you place orders through this site or access your account information, they automatically send you to a secure server, provided your browser accepts Secure Sockets Layer encryption.