Consumer Behavior Online
October 24, 2002
Haejin Yun
Oct. 24, 2002
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Centaur
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Centaur
Traditional
Consumer
Centaur
Cyber
Consumer
A Hybrid Consumer: A combination of
Traditional and Cyber,
Rational
and Emotional, and
Wired and
Physical.
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Convergence
• The combination of old and new, traditional approaches
and new approaches based on new technologies. Rather
than an either/or approach, the focus of convergence is on
"both." This goes beyond the more narrow definition of
"convergence" as a combination of technologies.
• Convergence within the consumer: The new possibilities
created by the technology and the enduring behaviors of
human beings.
• More than the bricks-and-clicks business model
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Basic Propositions
1. The new technologies do not replace the
old.
2. People are complex, retaining the same
enduring human needs even as they adapt
to new technologies and behaviors.
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5 Cs
•
1.
2.
3.
4.
5.
Marketing challenges brought by the
Centaur
Customerization
Virtual Communities
Channel Options
Competitive Value Equation
Choice Tools
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•
•
•
•
•
•
•
Sally Anderson
Looks at a tiny city on the southern coast of Norway
through a video cam.
Receives and forwards a joke by email
Picks up and read the day’s newspaper
Grocery shopping at a local supermarket (careful
selection of fruits, smell of coffee, promotion coupon,
purchase of discount shampoo for her husband
Buys “Sally’s own” shampoo and other personal
products at Reflect.com.
Chats with her friends who she happens to meet at
the counter
Returns a pair of Nine West shoes that she bought
online at Nordstrom
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Sally Anderson
• Tries on some dresses and perfumes while waiting for
the time when her daughter’s soccer practice finishes
• Buys a book that her friend strongly recommended at
Amazon.com.
• Enjoys an afternoon sipping cappuccino at Barnes &
Noble
• Sends a care package of her son’s favorite foods to his
dorm every two weeks through Peapod
• Book a flight for her son at Hotwire.com
• Checks different pricing for a same digital picture
frame and purchase the cheapest
• Visits iVillage.com before her visit to her doctor
• Watches TV commercials with her husband
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Who is the Centaur?
• Online Population
– Early Internet users: “geeky white guys”
– The online population is more like the offline,
general population  Diverse segments
– Not based on demographic factors, but rather
on online experiences, wired lifestyle, time
pressure, purchases from catalogs
• Heterogeneous
– Generation Y
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•
1.
2.
3.
4.
Who is the Centaur?
McKinsey Report
Connectors: New users; more offline purchase
Samplers: Light users
Simplifiers: Efficiency seekers
Routiners: Go online for information but not
primarily interested in shopping
5. Surfers: Heavy users; spend lots of time online;
Searching multiple domains
6. Bargainers: Online price comparison; Shop for the
best buy
7. Funsters: Looking for information in entertainmentoriented domains
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Myths of the Traditional
Consumer
1.
2.
3.
4.
5.
6.
Only the elite want customerization
Price is the bait set by the seller
The consumer is on the couch
Location, location, location
Consumers are islands
Customers will accept what you tell them
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Myths of the Cyberconsumer
People don’t want to be troubled with shopping
Efficiency is all that matters
Consumers want to get the best price
Consumers are either online or offline
Ease of visiting stores will lead to more
purchasing
6. The Internet is inherently fascinating and
attractive
1.
2.
3.
4.
5.
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Human Motivations
1.
2.
3.
4.
5.
Self-affirmation
Symbolic meaning
Scripts for shopping
Experience
Social influences
•
Transaction efficiency or Information efficiency
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Describe Online Consumers
• How ?
A. Demographics: Age, Education, Income,
Gender…
B. Pychographics: Religious values, Social vaules,
Personality traits …
C. Scarborough Research (1999): Combined
demographic data with lifestyle data.
• Why Shop Online?
A. Time saving, Convenience, Best price, One-stop
Shopping
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Money
• The form of money affects its meaning to consumers;
The difference in tangibility
• Desired transactions  Prefer the actual act of the
transaction (Giving up money is not painful)
• Undesired transaction  Prefer the digital and less
salient form of payment
• The Internet environment separates the meaning of
money from its physical being, may facilitate
transaction for unexpected, undesired or aversive
transactions, but may discourage transaction that
provides the consumer with pleasure.
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Information
• Two types of online information
1. Information as an end
–
–
Information is a product itself
eg. Read online news
2. Information as a means to an end
–
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eg. Information search to buy a car or
calculating the level of body fat
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•
Information
Information in the decision-making process
– Information Search  Information Evaluation
 Choice
Information Search
1. The Internet facilitates Information Search or
makes it difficult ?
A. Facilitates through the wide array of
information available on the Internet & the
variety of search engines
B. Taxes consumers’ processing ability 
Economics of information & Information
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Information
• Economics of Information
1. People will continue searching for information as
long as the benefits of each new piece are not
exceeded by the costs of it.
2. As the costs decrease, the number of alternatives (the
size of a consideration set) increases.
• Information Overload
1. Given limits to people’s processing capabilities,
larger amounts of information to consider may result
in poorer quality decision.
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Information
Information evaluation
• How consumers structure the information in
decision making (create a representation of the
information): past experience or environmental
factors
• Effort/Accuracy approach
The more effort people invest, the more accurate
the final decision may result
• Decision Heuristic
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Goods
• Types of goods
• 1. Search: The benefits of consumption can be
understood just with attribute descriptions.
2. Experience: Can be evaluated only after being
consumed.
• 3. Credence: Can't be easily evaluated even after being
consumed.
• Forms of good
• 1. Physical
• 2. Digital
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Goods
How the Internet affects …
• 1. Search goods: Can facilitate consumers' ability to
obtain attribute information. But may have a
damaging effect on decision quality.
• 2. Experience goods: Difficult to provide enough
experience for consumers to assess the benefits of the
product  Offline trial & Online purchase
• 3. Credence: How to help consumers form a set of
beliefs about the quality of the product?  Access to
other people's beliefs about the quality of the product
such as product testimonials
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Services
Differences between goods and services
• Goods
– Tangibility
– Specificity (Particularism)
• Services
– Inseparability: Service cannot be separated from its
consumption
– Heterogeneity: The variation that may exist because a
service is performed by different people in a different
places at different times.
– Perishability: Cannot be stored in warehouses
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Status
• Status: The rank or evaluation of one person,
relative to a comparison group of peers
• Scarcity: the motivating factor for Status
• How the Internet affects …
– The Internet may help obtain scarce resource
– Demonstrating high levels of Internet-related skills may
confer a higher status
– The impersonality of the Internet may decrease
hierarchical communications patterns.
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Love
• The effects of the Internet on emotional
well-being
– Very positive: Online social support groups
– But may decrease the amount of interpersonal
interaction
– Fewer social cues  only for informational
communication ?
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An Involvement Continuum for
E-Commerce
• Phase I: Familiarity with the Internet and use of
the Internet by employees
• Phase II: The Internet used to communicate
features and benefits of its products or services
• Phase III: Conduct transactions-related activities
online
• Phase IV: Front-end applications augmented by
back-end applications
– Front-end applications: customer service applications
– Back-end applications: sales lead database, orderprocessing software
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Company Revenue, Structure,
and Process
• Netcentricity: The percentage of revenues due to
online activity as a portion of the total revenues
earned by a company
• Platform approach: Operating in a team across
different organizational functions
• Internet time  Expectation about the amount of
time shortened
• Information acceleration Product cycles
shortened
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Challenges of the Internet: 5 Cs
• Company
– Employee growth rate: higher in the infrastructure
segment, lower in the intermediary segment
– Decreased employee productivity due to Web surfing
• Channel
– The Internet as a distribution channel
– Infomediaries: Manage the transmission of distributionrelated information
• Consumer
– Lower search costs  Empowered consumers
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Challenges of the Internet: 5 Cs
• (Market) Condition
– Marketing activities more directly affected by the
environmental factors such as technology and public
policy.
• Competition
– Internet Time  Shorter product cycles & Decreased
product differentiation
– Strategic alliances rather than zero-sum approaches (eg.
AOL & Time Warner merger)
– Same product & different means of consumption (eg.
E*TRADE vs. Merrill Lynch)
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