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Module: Competing in the Network Economy

TOPIC 4: New Business Opportunities, Web Advertising Methods and Strategies4.1 Learning about consumer behavior online.

Consumer decision-making process.4.2 Building one-to-one relationships with customers.

Loyalty and trust in E-Commerce.

4.3 Market research in E-Commerce.4.4 Internet marketing in B2B.4.5 Web advertising and its characteristics.4.6 Major advertising methods used on the Web.4.7 Online advertising strategies and promotions.4.8 Permission marketing, advertisement management,

localisation, and other advertising-related issues.4.9 Intelligent agents in marketing and advertising.

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Module: Competing in the Network Economy

Case Study: Ritchey Design Learns about Customers

• The Problem– Ritchey Design, Inc. is a

relatively small designer and manufacturer of mountain bike components

– Sells its products to distributors and/or retailers, who then sell them to individual consumers

– Its 1995 Web site was more a status symbol than a business tool

• The Problem (cont’d)– Visitors could get

information on Team Ritchey or find out where Ritchey products were sold

– It did not give customers all the information they wanted

– It did not enable the company to gain insight into its customers’ wants and needs

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Module: Competing in the Network Economy

• The Solution– Ritchey reworked the

Web site to hear from its customers directly

– Online customer surveys – Offered visitors who

answer the surveys a chance to win free Ritchey products

– Visitors enter their names and addresses and then answer questions about the company’s products

Case Study: Ritchey Design Learns about Customers

• The Solution (cont’d)– Web Trader software

automatically organises and saves the answers in a database and is used to help make marketing and advertising decisions

– Questions are changed to learn customers’ opinions about any new products Ritchey develops

– Saves $100,000 on product development p.a.

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Module: Competing in the Network Economy

• The Solution (cont’d)– An online catalog

educates retailers and consumers about the technological advantages of Ritchey’s high-end components over competitors’ parts

– Visitors browse the product catalog that includes detailed descriptions and graphics of Ritchey’s products

Case Study: Ritchey Design Learns about Customers

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Module: Competing in the Network Economy

• The Results– ritcheylogic.com sells

only team items such as t-shirts, bags, water bottles, and other gear directly to individuals online

– The company does not sell bike parts to individuals directly online because it wants to maintain its existing distribution system

– Dealers can place orders on the site

Case Study: Ritchey Design Learns about Customers

• The Results (cont’d)– The site is basically used

in B2C EC only for the basic activities in Internet marketing:

• communicating with customers

• conducting market research

• delivering advertising

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Module: Competing in the Network Economy

• What we can learn …– Illustrates the benefits a company can derive

from changing its Web site from a passive one to one with interactivity

– Interactive Web site allows the company to:• Learn more about its customers• Educate customers• Use the site for customer service

Case Study: Ritchey Design Learns about Customers

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Module: Competing in the Network Economy

4.1: Learning About Consumer Behavior Online

• Model of Consumer Behavior Online (see next slide)– Independent (or uncontrollable) variables

• Personal characteristics

• Environmental variables (e.g., social, cultural/community,etc)

– Intervening (vendor-controlled ) variables• Market stimuli

• EC systems

– Decision-making process• Influenced by the Independent and Intervening variables

– Dependent variables (the buying decisions)• Types of decisions made by buyers

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Module: Competing in the Network Economy

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Module: Competing in the Network Economy

4.1: Consumer Decision Making Process

• Roles people play in the decision-making process:– Initiator

• The person who first suggests buying a product or service

– Influencer• A person whose advice/view carries some weight in making the

final purchasing decision

– Decider• The person who ultimately makes a buying decision or any part

of it

– Buyer• The person who makes an actual purchase

– User• The person who consumes or uses a product or service

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Module: Competing in the Network Economy

4.1: Consumer Decision Making Process

Generic Purchase Decision Model:• It has 5 stages:

1. Need identification

2. Information search

3. Evaluation of alternatives

4. Purchase and delivery

5. After-purchase evaluation

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Module: Competing in the Network Economy

4.1: Consumer Decision Making Process

A Customer Decision Model in Web Purchasing• It is used to show that each of the 5 stages in the generic

purchase-decision model can be supported through the Internet or the Consumer decision Support System (CDSS). See Exhibit 4.2.

Online Buyer Decision Support Model• This model is divided into three parts (see Exhibit 4.4):

– The first part examines the three stages of buyer behavior: identify and mange buying criteria; search for products and merchants; and compare alternatives.

– The second part examines price, shipping, and finance.

– The third part examines personalisation, preferences and customer help.

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