Module 5 | Online Consumer Behavior and Implications for Marketing

Module Description:
This module discusses and explains online consumer behavior and its implications for marketing.
Purpose of the Module:
To discuss and explain online consumer behavior and its implications for marketing
Module Outcomes:
At the end of the course, students must have a general idea of how to understand online consumer behavior and its
implication for marketing.

Lesson 1 | Customer Characteristics

Note
This lesson is retrieved from Chaffey, D., & Ellis-Chadwick, F. (2016). Digital Marketing: Strategy, Implementation and
Practice (6th ed.). United Kingdom: Pearson Education Limited.

Customer Characteristics
Understanding the individual nature of customers is fundamental to marketing practice and planning. Research has
identified that there are many factors which influence online behavior (Keen et al., 2004) and over the market segments that
use the Internet and digital services has changed significantly, so it is important for digital markets (a) to be aware of
important behavior variables, and (b) to understand how to model online consumer behavior.
According to Doherty and Ellis-Chadwick (2010), it is possible to look back and see that the types of individuals using the
web have changed significantly since 1995. In those early days, online shoppers tended to be young males, who were
generally better educated and wealthier that their contemporaries. They also had both the confidence and desire to
experiment with the Internet, which at the time was an exciting new channel (Donthu abd Garcia, 1999; Korgaonkar and
Wolin, 19990. Some companies specifically targeted these types of customers and developed services to suit their needs.
Research suggests there are two key areas which can prove very fruitful when aiming to identify consumer variables:
1.      Demographic variables. Doherty and Ellis-Chadwick (2010) suggest that any personal attributes that tend to remain
static throughout an individual’s lifetime, or evolve slowly over time – such as age, gender, race, etc. – can be defined
as demographic variables. Key elements of a consumer’s demographic profile that have been found to influence online
behavior include variables such as income, education, race, age (Hoffman et al., 2000); gender (Slyke, 2002); and life-style
(Brengman et al., 2005), cultural and social make-up that influence online behavior (e.g. Shiu and Dawson, 2004).
2.      Psychological and behavioral variables. Any aspect of a consumer’s perceptions, beliefs and attitudes that might
influence online behavior, and in particular a consumer’s intention to shop, can be defined as a psychographic/behavioral
variable. Indeed, there has now been a significant amount of research exploring how the consumer’s character or personality
might influence their online behavior (George, 2004). Cheung et al. (2005) suggest that the impact of a wide range of
behavioral characteristics, such as knowledge, attitude, innovativeness and risk aversion, can have a significant effect on a
consumer’s intention to shop.
By studying the variables which influence the consumer’s experiences in the online environment ‘it becomes possible to
analyze their future intentions to continue to use digital services and to shop online’ (Wolfinbarger and Gilly, 2003). For
example, the impact of consumer’s personal experiences of, say, convenience, site design and security might affect their
overall satisfaction with a particular website. Another important point is that by studying variables associated with a
consumer’s experiences, digital marketers begin to understand how to increase loyalty and trust through websites and online
services. As use of the digital environment has grown, further research has been carried out which given us an even greater
understanding of the online customer experience.
According to Rose and Hair (2011) ‘customer interactions with an organization’s website creates opportunities for positive
experiences that can lead to long-term relationship building’.
The concept of online customer experience has been widely studied in contexts ranging from service delivery to retailing and
tourism (e.g., Arnold et al., 2005; Tsai, 2005). An important point to consider is that past experiences will provide the basis for
future evaluations. According to Arnold et al. (2005), the antecedents or background to the online experience consist of an
important list of concepts which can positively or negatively influence or motivate the consumer to engage with a digital
offer:
1.      Information processing (IP) is very important as it shapes how consumer deals with available data and information
that will influence their future behavior. IP involves the mental process and senses an individual uses to interpret the world
they inhabit.
2.      Perceived ease of use also needs consideration by digital marketers, as the easier a website or mobiles site is to use
the more likely a customer will have a positive online experience (Cheung et al., 2005).
3.      Perceived usefulness refers to the extent to which the digital offer fits with the customer’s daily life, for instance,
shopping, booking train tickets, banking (Arnold et al., 2005). It is here that digital marketers can really start to develop a
path to consumer benefits.
4.      Perceived benefits: if a customer feels they will be rewarded in some positive way by engaging with a digital offer this
is likely to generate support for an online brand (Arnold et al., 2005).
5.      Perceived control: if a customer is a skilled user of the digital technology in question, then they will feel they are able
to function successfully in this environment.

Figure 5. Framework for understanding online customer experiences

Source: Rose and Hair (2011)
6.      Skill refers to the customer’s ability to use the technology to achieve their desired goals (Klein and Ford, 2002). It has
been found that individuals lean by doing in the Internet environment and so build their skill set over time – e.g. the more
frequent the visitor to a website the higher their exposure and greater their ability to engage with this digital content.
7.      Trust and risk play an important role in how a customer behaves online. Inexperienced Internet can feel vulnerable
and fear the unknown (Tan and Sutherland, 2004). Customers should be able to achieve their buying goals without feeling
they are exposed to undue risk – e.g. financial, social risk, personal risk. Marketers should seek to find ways to limit the risk of
engaging with their online offer and seek to build trust through developing online relationships.
8.      Enjoyment is an outcome of a positive online experience.
A digital marketer should consider how each of these antecedents can influence a customer’s motivations to engage with the
digital offer and also look for opportunities to create competitive advantage by overcoming potential barriers. These eight
antecedents can influence how the customer thinks (cognitive state) and feels (affective state) about their online experience
and affect the outcomes of any subsequent behavior. If the customer has a positive experience this will increase the
likelihood of the customer being satisfied and having positive repurchase intentions.
Note: To see the actual references in this lesson, please check the book:  Chaffey, D., & Ellis-Chadwick, F. (2016). Digital
Marketing: Strategy, Implementation and Practice (6th ed.). United Kingdom: Pearson Education Limited.

Lesson 2 | Consumer Personas

Note
This lesson is retrieved from Chaffey, D., & Ellis-Chadwick, F. (2016). Digital Marketing: Strategy, Implementation and
Practice (6th ed.). United Kingdom: Pearson Education Limited.

Consumer Personas
A persona is fictional profile typically informed by research that represents a particular target audience. Personas are a tool
which can help in understanding online customer characteristics and behavior. Creating personas is a powerful technique for
developing customer-centered online strategies. Company presences and campaigns and form part of marketplace analysis.
They have been used for a long time in research for segmentation and advertising, but in recent years have also proved
effective for improving website design by companies that have applied the technique.
Marketers can also develop secondary personas and complementary personas to provide a fuller range of options.

Customer scenarios can be developed for each persona. For an online bank, scenarios might
include:
·         new customer opening an online account;
·         existing customer transferring an account online;
·         existing customer finding an additional product.
The customer persona/scenario approach has the following benefits:
·         foster customer-centricity;
·         identifies detailed information needs and step required by customers;
·         can be used to test existing website designs or prototypes and to devise new designs;
·         can be used to compare and test the strength and clarity of communication of
proposition on different websites;
·         can be linked to specific marketing outcomes required by site owners.
Here are some guidelines and ideas on what can be included when developing a persona. The
start or end point is to give each persona a name.
1.      build personal attributes into personas:
·         demographic – age, sex, education, occupation and, for B2B, company size, position
in buying unit;
·         psychographic – goals, tasks, motivation;
·         webographics – web experience (months), usage location (home or work), usage
platform (dial-up, broadband), usage frequency, favorites sites.
2.      Remember the personas are only models of characteristics and environment:
·         Design targets;
·         Stereotypes;
·         Three or four usually suffice to improve general usability, but more may be needed for
specific behaviors;
·         Choose one primary persona whom, is satisfied, means others are likely to be
satisfied.
3.      Different scenarios can be developed for each persona, as explained further below.
Write three of four, for example:
·         Information-seeking scenario (leads to site registration);
·         Purchase scenario – new customer (leads to sale);
·         Purchase scenario – existing customer (leads to sale).
Once different personas have been developed that are representative of key site-visitor types
or customer types, a primary persona is sometimes identified. Wodtke (2002) says:
Your primary persona needs to be a common user type who is both important to the business
success of the product and needy from a design point of view – in other words, a beginner
user or a technologically challenged one.
 
 Lesson 3 | The Buying Process
Note
This lesson is retrieved from Chaffey, D., & Ellis-Chadwick, F. (2016). Digital Marketing: Strategy, Implementation and
Practice (6th ed.). United Kingdom: Pearson Education Limited.

The Buying Process

According to Kotler et al. (2001), there are different stages in the buying process. At each stage the, the purpose (from both
the buyer’s and supplier’s perspective) is a particular outcome:
·         Awareness;
·         Interest;
·         Evaluation;
·         Trial;
·         Adoption.
This set of outcomes, sometimes known as the hierarchy response model, have been considered in the digital market.
Chaffey and Smith (2012) describe them as:
1.      problem recognition;
2.      information search;
3.      evaluation;
4.      decision;
5.      action (sale or use of online service);
6.      post-purchase.
Figure 6 gives a summary of how digital media can be used to support the different stages in the buying process. The boxes
on the left show the typical stages that new prospect passes through.
It is worthwhile reviewing each to the stages in the buying process referred to in Figure 6 in order to highlight how effective
the Internet can be when used at different stages to support the marketing communications objectives. Of course, the exact
stage of the buying decision varies for different products and different types of customers, so an alternative approach is to
develop channel chains, which reflect these differences. In general, digital media support the consumer buying process as
follows.
1.            Consumer: unaware. Company: generates awareness (of need, product or service)
Generating awareness of need is conventionally achieved principally through the mass media used in offline advertising. The
Internet is relatively ineffective at this since it tends to have a more limited impact and reach than television, radio or print
media. However, display advertising or paid search marketing can be used to supplement offline awareness-building. Online
equivalent of word-of-mouth or recommendations from friend or colleagues, perhaps influenced by a viral marketing
campaign, can also create awareness of need. Some companies have effectively developed brand awareness by means of PR
and media mentions concerning their success on the Internet, with the result that even if a customer does not have a current
need for a product, that customer may be aware of the source when the need develops.
 Figure 6. A Summary of how digital media can impact on the buying process for a new purchaser
1.            Consumer: aware of need, develop specification. Company: position features, benefits and brand
Once a consumer is aware of a need and is considering what features and benefits are required from a product or online
service, then they may turn straight to the web to start identifying the range of features available from a particular type of
product through using a generic search using search engines such as Google or Yahoo! So influencing consumers through
search engine marketing and affiliate marketing is important at this stage. Specification development effectively happens at the
same time as supplier search and more suppliers can be evaluated in greater depth than traditionally.
Intermediaries well known within a sector, such as Kelkoo (www.kelkoo.com), can be important in supplier search and can help
in evaluation. However, they are less dominant than they were with changes in the way that sites are ranked.
2.            Consumer: supplier search. Company: generates leads (engage and capture interest)
Once customers are actively searching for products, the web provides an excellent medium to help do this. It also provides a
good opportunity for companies to describe the benefits of their websites and obtain qualified leads. The digital marketer must
consider the methods that a customer will choose for searching and then ensure that the company or its product is featured
prominently on these sites whether they are search engines, aggregators or affiliate intermediaries.
3.            Consumer: evaluate and select. Supplier: assist purchase decision
One of the most powerful features of websites is their facility to carry a large amount of content at relatively low cost. This can
be turned to advantage when customers are looking to identify the best product. By providing relevant information in a form
that is easy to find and digest, a company can use its website to help in persuading the customer. For example, the Currys site
enables customers to readily compare product features side-by-side, so they can decide on the best products for them. Thanks
to the web, this stage can now overlap with earlier stages. Brand issues are important here since a new buyer naturally prefers
to buy from a familiar supplier with a good reputation – it will be difficult for a company to portray itself in this way if it is
unknown and has a slow, poorly designed or shoddy website.
4.            Consumer: purchase. Company: facilitate purchase
Once a customer has decided to purchase, then the company will not want to lose the custom at this stage! The website should
enable standard credit-card payment mechanisms with the option to place the order by phone or mail. Online retailers pay
great attention to identifying factors that encourage customers to convert once they have added a product to their ‘shopping
basket’. Security guarantees, delivery choices and free delivery offers, for example, can help increase conversion rates.
5.            Consumer: port-purchase evaluation and feedback. Company: support product use and retain business
The Internet also provides great potential for retaining customers since:
·                  value-added services such as free customer support can be provided by the website and these encourage repeat visits;
·                  feedback on products can be provided to customers – the provision of such information will indicate to customer that
the company is looking to improve its service;
·                  email can be used to give regular updates on products and promotions and encourage customers to revisit the site;
repeat visits to sites provide opportunities for cross-selling and repeat selling through personalized sales promotions messages
based on previous purchase behavior.