Understanding Customer Needs
and Online Behaviour
MARK 430
Week 2
Error in Assignment 1
instructions
 Question 2c
 It should read
 Your operational margin seems a bit low. If you
increase it to 60% from 50%, what impact does
that have on the “Average Order Contribution” and
the CLTV?
During this class we will be looking
at:
 How customers make buying decisions
 Model for customer decision making
 Market research methods to understand
customer needs
4 steps to successful marketing strategy
Understanding customer needs and online behaviour
(market research, data mining, web analytics)
Formulate a strategy to fill needs
Implement effectively and efficiently (web usability,
stickiness, advertising, search engine optimization, email
marketing, pricing, distribution, product development)
Build trusting relationships with customers
Customer-Centric Marketing Process: 3
elements
Marketing Research
Marketing Strategy
and Tactics
Customer Relationship
Management
Sales Force Management
and Customer Experience
Focus for this
week
Database Marketing
Acquire/Up-Sell
Cross-Sell
Benefits of Internet Marketing
Research
Quickly gain crucial market intelligence
Act upon first-mover advantages
Stay afloat in a fast-paced environment
Reduce market research costs
Many more…
Model for customer decision making: what do we need
to know about our customers?
Initiation
Awareness
/ learning
Decision
Buy
Post purchase

What starts the process? Source of input? Role of
past experience? Friends make input? Advertising,
catalogues, email?

Source of information: friends, media, web, store?
Active Search? How much time? Where to shop?
Store, catalogue, web? What to learn? Products /
technology / user experience / trends?

Compare products? Role of price / quality?
Evaluation criteria? Need to touch and feel? Impact
of brand and trust?

How do buyers gain confidence? Special offers?
Security / privacy assurance needed? Guarantees /
refund policy? Need push to action - close sale?

Word of mouth to friends / community? Lifetime
service? Relationship contract? Delivers promised
value?
Popular Uses of Marketing Research
How to
segment
the market?
Who are my
customers?
What is
the price
elasticity?
Conjoint
Analysis
Customer
Identification
When
do they
purchase?
Discrete Choice
Modeling
Marketing
Research
Buying-Habit
Studies
Opinion
Research
What do
they like?
Environmental
Studies
Competitive
Analysis
Who are my
competitors?
What are
the growth
trends?
3 main sources of data that e-marketers
use for research purposes
 Internal company records
 Secondary data
 Primary data
Source 1: Internal Company Records
 Non-marketing Data:
 The accounting department generates data about
sales, cash flow, marketing expenses
 A firm introducing a new product on its Web site wants
immediate feedback on its sales.
 Sales Force Data:
 sales force automation software, allows
representatives to input results of sales calls to both
prospects and current customers
 Customer Characteristics and Behavior
 Web Analytics, Clickstream analysis and Data
Mining
 complete customer profile from all “touch points”
Source 2: Secondary Data
 When are they used?
 Need specific information not available in company or partner
databases,
 Need information that can be collected more quickly and less
expensively than primary data.
 But:
 They may not meet the e-marketer’s information needs, because
they were gathered for a different purpose,
 The quality of secondary data need to be checked,
 They are often out of date.
 Internet provides easy access to secondary data about environmental
factors and trends.
Source 2: Secondary Data
 Marketing intelligence = Marketers continually scan the
firm’s macro-environment for threats and opportunities.
 What type of information do marketers need?
 Demographic trends,
 Competitors,
 Technological forces,
 Natural resources,
 Social and cultural trends,
 World and local economies,
 Legal and political environments.
Source 2: Secondary Data
Publicly Generated Data
 Most Canadian and U.S. agencies provide online information in
their respective areas. Stats Canada
 Many global organizations, such as the International Monetary
Fund (www.imf.org) are also good sources of data.
 Most universities provide extensive information through their
libraries, and many faculty post their research results online.
 Industry- or profession-specific information is available at the
sites of professional associations such as the American
Marketing Association.
 Most of this information is free and available to all Internet users.
Source 2: Secondary Data
Privately Generated Data

Company Web sites provide a great overview of the firm’s mission,
products, partners, and current events.

Individuals often maintain sites with useful information about
companies as well.

Sites that provide statistics etc relating specifically to Internet markets
such as the ClickZ Network and Jupiter Research

Large research firms put sample statistics and press releases on their
sites or offer e-mail newsletters. (eg. Forrester)

Infomediaries: firms that monitor a number of media sources,
presenting selected resources to users either by “pushing” material to
the user’s desktop via e-mail, or by allowing users to “pull” it from a
specially tailored Web site.
 Free source is “Google Alerts”
Source 2: Secondary Data
Online Databases
 Commercial online databases contain publicly
available information that can be accessed via the
Internet. (fee based, such as Dialog)
 Thousands of databases are available online,
some free, some subscription-based:





News,
Industry data,
Encyclopedias,
Airline routes and fares,
Yellow Page directories, etc.
Source 2: Secondary Data
Competitive Intelligence

Competitive intelligence (CI) = analyzing the industries
in which a firm operates as input to the firm’s strategic
positioning and to understand competitor
vulnerabilities.


40% of all firms regularly conduct CI activities
Some sources of CI:





Competitor press releases,
New products,
Alliances and co-brands,
Trade show activity,
Advertising strategies.
Source 2: Secondary Data
Competitive Intelligence
 The Internet simplified CI:
 Competitive marketing strategies: observed on competitors’ Web
sites
 Web sites linked to competitors’ pages: type
link:companyname.com in search tools. Why are these sites
linking to my competitor and not to me?
 Third-party, industry-specific sites can also provide information
about competitive activities. Company profiles for public firms are
available in the SEC’s online EDGAR database + investment firm
sites.
 User conversation: e-mail lists, newsgroups, blogs (eg. re BMWs)
Source 3: Primary Data
 Primary data = information gathered for the first time to solve a
particular problem.
 When secondary data are not available managers may
decide to collect their own information.
 They are more expensive and time-consuming to gather than
secondary data.
 They are current and more relevant to the marketer’s specific
problem.
 They are proprietary, therefore unavailable to competitors.
Source 3: Primary Data
Internet-Based Research Approaches
 The Internet is increasingly being used for primary data
collection.
 Why? Declining cooperation from consumers using
traditional research approaches. Telephone survey
refusal rates = 40- 60%.
 Increasing number of consumers online:
 inexpensive and quick method
 In North America, over 70% of all research firms use
various online methodologies.
Main Internet-Based Research
Approaches
 Online experiments
 Online focus groups
 Online observation
 Usability testing
 Online Survey Research
 E-mail surveys
 Web surveys
Online Experiments
 Experimental research attempts to test cause-and-effect
relationships:
 Marketers can easily test alternative web pages, banner
ads, or promotional offers
 A firm might send e-mail notification of 2 different pricing offers (with
a link to the website), each one to a different set of customers
 By tracking the click-through rate it will be a simple matter to track
which pricing offer has the better “pull”
Online Focus Groups
 Focus group research:
 A qualitative methodology that attempts to collect indepth information from a small number of participants.
 Used to help marketers understand important feelings
and behaviors prior to designing survey research.
 15- 30% of advertising agencies and market research firms
use the Internet to conduct online focus groups.
Online Focus Groups – Advantages and
disadvantages
 Advantages over traditional focus groups:
 The Internet can bring together people who do not live in the
same geographic area.
 Because participants type their answers at the same time, they
are not influenced as much by what others say.
 Quicker and less expensive to operate than offline versions.
 Disadvantages
 Nonverbal communication is lost online.
 The authenticity problem = Without seeing people in person, it is
difficult to be sure they are who they say they are (need to verify
respondent authenticity).
Online Observation
 Observation research monitors people’s behavior by
watching them in relevant situations.
 Online it takes the form of monitoring consumer chatting
and e-mail posting through chat rooms, bulletin boards,
mailing lists and blogs.
 on the company site and on 3rd party and / or public sites
Usability Testing
 Web site usability studies to watch users as they click through the
firm’s Web site:
 Subject and observers sometimes in the same room, sometimes
watch through one-way glass
 Subjects usually given specific tasks
 Observers can pinpoint site design and usability problems
Online Survey Research
 E-marketers conduct surveys using 2 main methods
 Sending questionnaires to individuals via e-mail,
 Posting a survey form on the Web
E-Mail Surveys
 To prepare an e-mail survey, an organization can:
 Draw a sample of e-mail addresses from its database,
 Purchase a list,
 Gather e-mail addresses from the Web or Usenet
newsgroups.
 Select a specialized + representative group to research to
control who gets the questionnaire.
 The researcher can send e-mail reminders to participants
who have not yet responded: response rates are just as high
for e-mail surveys as for traditional contact methods.
Web Surveys
 Many companies post questionnaires on their Web
pages.
 Purpose:
 Gather statistics about a site’s visitors (e.g. Web site
registration forms)
 Required, or not required?
 More formal survey research on a particular topic
 Response rates to online surveys are as good as or better than
surveys using traditional approaches, sometimes reaching as much
as 40%.
Web surveys - advantages
 Fast and inexpensive:

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Instantaneously worldwide delivery of questionnaires,
No cost for postage or an interviewer,
No printing, collating, and mailing time,
Those who complete the questionnaires do so in the first three
days,
 Easy to send multiple reminders if using e-mail invitations.
 Can be very low cost or no-cost eg. Zoomerang has a basic
service for free, and a subscription service for $599 USD
 Web surveys reduce errors:
 Technique reduces the complexity and time involved for
respondents,
 Respondents enter their answers - eliminates data entry errors
when converting answers from paper questionnaires.
Web surveys - Disadvantages
 Sample representativeness and measurement validity
= No ability to draw a random sample
= Researchers cannot generalize results to the entire population
being studied.
 Online research entails several measurement issues:
 Different browsers, computer screen sizes, and resolution settings =
researchers worry that colors will look different and measurement
scales will not display properly online.
 A comparison study between telephone and online surveys found that
online users were less likely to use the two extreme scale points on a
five-point scale.
Technology-Enabled Approaches
 The Internet is an excellent place to observe user
behavior
 The technology automatically records actions in a format that
can be easily, quickly, and mathematically manipulated for
analysis.
 Client-side data collection (cookies)
 Server-side data collection
 Log file analysis
 Real-time profiling (tracking user Clickstream analysis)
 Data Mining
 These techniques did not exist prior to the Internet.
 They allow marketers to make quick and responsive changes
in Web pages, promotions, and pricing.
 We will look at these techniques in detail next week