2 paragraph
Chap. 7-9 & 12-14
Assess how the readings and assignments in this phase can be applied to your career or your course of study.
E-marketing by Frost Taylor & Francis89781351744843
chapter 7
This chapter is about the 88 percent of US consumers who use the internet. Before we delve into understanding them and their behavior, it is important to think about the 12 percent of Americans who don’t use the internet. It would not benefit a company to build a Web presence if its market were mostly in that minority percentage. The less-connected groups tend to be older, less educated, live in rural areas, and have a lower income (according to Pew Internet & the American Life Project). Pew suggests that 34 percent of nonusers have no interest in going online and do not think that doing so enhances their lives, while another 32 percent cite that it is too difficult to use. An additional 19 percent cites the expense of the internet or owning a computer as the reason they do not use the internet (Anderson and Perrin, 2016). Chapter 4 describes many social, cultural, techno logical, legal, and political issues as the main reasons that consumers do not use the internet in emerging economies. Without major shifts, some countries may not ever achieve high levels of internet adoption among individual consumers, although high cell phone adoption may change this picture eventually.
The number of non-internet users has continued to decline over the last couple of decades (Exhibit 7.1). Globally, internet use is still growing, but at a slower pace than in the past. In 2017, 3.6 billion people had access to the internet, representing a 24 percent increase from 2014. Internet usage in developed nations has reached a critical mass, and marketers now ask practical questions such as whether a firm’s target market is online, what these customers do online, what determines whether they’ll buy from a site, and how much of the marketing effort should be devoted to online channels. This chapter addresses typical consumer behavior among internet users in the United States in order to discover the answers to some of these questions. One thing is sure: “Today, consumer behavior incorporates a lot more technology than it did 10 years ago,” according to Scott Schroeder, CEO, Cohorts.
Inside the Internet Exchange Process
Many stimuli, characteristics, and processes explain consumer buying behavior. Stimuli that can motivate consumers to purchase one product rather than another include marketing communication messages and cultural, political, economic, and technological factors. Individual buyer characteristics such as income level and personality also come into play, along with other psychological, social, and personal aspects. Finally, consumers move through a variety of decision processes based on situational and product attributes. Marketing knowledge about consumer behavior is quite complex, and although we make many generalizations, individual differences are also important.
EXHIBIT 7.1 Offline Population Has Declined Substantially Since 2000 Source: Pew Research Center surveys of U.S. adults, 2000–2016. Data from 2016 includes survey conducted March 7–April 4 and March 30–May 3, 2016
To create effective marketing strategies, e-marketers need to understand what motivates people to buy goods and services, both in the short and long term (i.e., develop brand loyalty). Exchange is a basic marketing concept that refers to the act of obtaining a valued object from someone by offering something in return. When consumers purchase a product, they are exchanging money for desired goods or services. However, many other types of marketing exchanges can be made, such as when a politician asks citizens to exchange their votes for his or her services.
Exhibit 7.2 summarizes the basic internet exchange process—a graphical representation to help focus this discussion. Individuals bring their own characteristics and personal resources to the process as they seek specific outcomes from an exchange. This process occurs within a technological, social/cultural, and legal context. The exchange is often motivated by marketing stimuli—the topic of Part IV of this book.
Technological Context
The internet has moved from novelty to utility in the United States and most developed nations. It is critical for e-marketers to understand the current state of ever-changing internet technology if they want to entice consumer exchanges. “Let’s Get Technical” boxes within the text assist in this process, and the Semantic Web and other innovations mentioned in Chapter 1 bear watching. Here we focus upon two important developments affecting online consumer behavior today—home connection speeds and the changing landscape of digital receiving devices such as cell phones.
About 81 percent of online Americans connect to the internet at home with broadband (fast) internet service (“The Digital Divide,” 2017). Consumers connecting with broadband exhibit different online behavior than do those accessing from a mobile handheld device. Broadband users enjoy more multimedia games, music, and entertainment because data caps are typically higher than those of mobile devices (see the “Let’s Get Technical” box).
EXHIBIT 7.2 The Basic Internet Exchange Process
Let’s Get Technical—Broadband Options
You are trying to decide whether to get a high-speed internet connection for your apartment. You know of the different options—cable modems, DSL, satellite, and LTE—but you are not quite sure how they are different and would rather not buy more than you need. You need to know about broadband connections to the home and their options.
The information channels that form the internet backbone have amazing carrying capacities and are constantly being upgraded by firms such as Cisco, Sprint, and AT&T. However, consumers pay for the last mile along the path to the internet, the connection to the consumer’s home. Various wired and wireless alternatives are available.
The wired alternatives make use of two wires that are already connected to the user’s home—the phone line and the cable TV line. These wires can do double duty to carry internet content on one channel while they perform their normal functions on the other channels.
Digital Subscriber Line
Digital subscriber line (DSL) technology refers to a family of methods for transmitting at speeds up to 8 Mbps (8 million bits per second) over a standard phone line. DSL uses the phone line already installed in consumer homes, allowing users to simultaneously make phone calls and surf the Web because the data travel outside of the audible voice band. Users must install a DSL modem; some computer manufacturers offer these modems as a preinstalled item, and some phone companies supply them. The major phone companies have deployed the infrastructure to support DSL technology, but they were a bit late to the game and have been playing catch-up with cable modems. As a result, phone companies aggressively price DSL service to attract cable subscribers.
Cable Modems
Cable modems allow transmission of internet traffic over the cable TV wire connected to the home. The speed of transmission over a cable modem ranges between 20 Mbps and 100 Mbps. The major problem cable companies may face is having too many subscribers! This problem arises because subscribers in a cable neighborhood share bandwidth. The more the subscribers who share, the less bandwidth is available to repartition. Therefore, if a neighborhood becomes saturated with sub scribers, each subscriber will experience delays.
Cable companies have two big advantages—early market penetration and a much bigger information pipe. The early adopters opted for cable modems because they were the first technology available. This early usage also gives cable modems the advantage of diffusion via word of mouth. The cable companies solved their infrastructure issues early and can now focus on establishing value-added services such as the following:
video-on-demand
CD-quality audio
online games available for download and purchase.
Each value-added service provides a barrier to entry for the phone companies. Why purchase a service with fewer features? And because providing each service requires a learning curve, phone companies will experience difficulty catching up.
Cable also has a higher maximum speed than DSL. Nonetheless, phone companies continue to question the actual versus advertised speed of cable. However, if both networks are properly supported, cable still wins the battle.
One way the phone companies are competing is through price. DSL typically undercuts cable, though there are regional variations in price. In some cases, the companies will waive the installation fee if the user signs up for an extended period of service.
Wireless Broadband Options
Three smaller competitors in the broadband game are satellite, fixed wireless, and mobile wireless. Satellite broadband is offered through HughesNet. The major limitation is limited bandwidth that does not scale well with the increase in the number of subscribers. Also the return channel for uploads tends to be slow as compared with cable.
Fixed wireless access is best categorized by distance and bandwidth. Some systems are designed to work over a range of miles, effectively replacing wired access to the home. Other systems operate over a range of up to hundreds of feet, providing local connectivity within the home or office. In either scenario, the bandwidth of the system determines its suitability as a broadband connection.
Mobile wireless is available over the cell phone network. With cell phone towers already in place in many areas, Web access via cell phone would seem to be a natural outgrowth. The cell phone network is reliable and in most areas the communication is already digital. LTE networks operate up to 36 Mbps for download and 16 Mbps for upload. This is on par with cable for most meaningful applications. With so many vendors offering unlimited data, it will be interesting to see if home owners abandon their cable modems and transfer all data through their cell phones, in the same way that many abandoned their voice land lines when cell phones became available. Smartphone users and laptop road warriors are leading the charge to popularize LTE services. Ultimately, users want access to anything, anytime, anywhere, and from any device.
Ninety percent of US homes have three or more internet-connected devices (Novak, 2014). Television is still the killer medium; however, consumers spend an average of 1.5 hours online each day. Although DVR (Digital Video Recorder) devices, which allow owners to record television programs and watch them at a later time, have been adopted by just over half of US households (“82% of U.S . . .” 2017), this technology will grow in use. Furthermore, media streaming services have grown more popular than ever. Netflix, one of the most popular streaming services that allows customers to watch television and movie content for a monthly fee, has grown from 25 million subscribers in 2012 to nearly 53 million in 2017 (available at Netflix.com). As DVR and streaming services adoption grow, consumers will truly be able to watch any television program on demand while at home or on the road.
EXHIBIT 7.3 Americans’ Daily Media Use as of 2017
As shown in Exhibit 7.3, among online US residents, internet use is quickly catching up to tele vision (195 minutes per day for internet versus 240 for television), according to an eMarketer study in 2017. Time spent reading newspapers and magazines accounts for just about 15 minutes per day, according to this study.
The key is to learn which devices a firm’s customers and prospects own and prefer to use for connecting. Companies send data to customers’ digital receiving devices such as the PC and mobile device. Users can now access stock prices, FedEx package tracking information, airline schedule changes, weather, and more over their smartphones while in an Uber car on the way to a client meeting or the airport.
Social and Cultural Contexts
The days of marketers holding consumers captive for the 30 seconds of a TV commercial are quickly coming to a close, and captivity in front of a display ad online is virtually nonexistent. The Web is training individuals and organizations to help themselves to information, products, and practically everything they want when and where they please. Thus, power is shifting to consumers, as mentioned in Chapter 1. For example, consumers walk into brick-and-mortar car dealerships and open their smartphones to discuss automobile options and pricing with salespeople.
One of the most important social trends is that consumers trust each other more than they trust advertising or companies online. The increase in user-generated content in special interest communities has consumers looking to each other for advice. For example, Askapatient (askapatient.com) hosts thousands of posts about side effects of various medicines. Consumers visit the site to see if other people experience the side effects that they experience, and what to expect for a new drug, and many find it to be more reliable than information from pharmaceutical companies. When female adults were asked the question, “Do you prefer videos by companies which produce cosmetic products or from personal accounts and bloggers?” 40 percent preferred bloggers and/or personal accounts, while 29 percent preferred cosmetics companies (“Do You Prefer . . .” 2017). This example highlights the importance consumers place on user-generated content, and the truly in-tuned marketers are not only monitoring this content, but engaging in the conversation.
The following general social/cultural trends also greatly affect online exchanges:
Sophisticated consumers know they are in control and have choices—they use the information provided by Askapatient.com to help their medical doctors make treatment decisions.
Information overload overwhelms consumers. It creates an attention economy—the idea that information may be infinite, but the demand for it is limited by human capacity. This serious problem is compounded by the internet and is one reason why consumers have little tolerance for spam (unsolicited e-mail).
Multitasking speeds up normal processes and lowers attention to each task. By example, the Millennials, a consumer segment born between 1974 and 1994 (also called Generation Y), are great multitaskers, likely to watch several television screens with sporting events at home, connect with friends via their smartphones, and monitor sports scores on the internet at the same time. Notably, 102.6 million adults use the internet while watching television.
Home and work boundaries are dissolving. Many US internet users have access to the internet both at home and at work. In fact, 12.6 million people report working from home always or most of the time, up from 10 million in 2013 (Nielsen-Scarborough, 2017). The home has become more like a center of life and home office for many; this trend will increase as more Americans work and live in different cities and rarely visit the physical office.
I want what I want when I want it. Anywhere, anytime convenience is critical for busy people. They want to view online content, shop or pay bills anytime of the day or night from any geographic location online or not, and receive deliveries when convenient for them, not for the firm or package delivery service, which explains the popularity of services such as Amazon Prime (two-day delivery) and Prime Now (two-hour delivery). Online users access the internet from mobile devices, sending e-mail, text messages, photos, and searching the Web for a variety of content. Consumers have high expectations that firms will answer e-mails and social media posts quickly and generally perform as expected—otherwise they will take to Twitter to share the news about the underperforming company.
Self-service is required. Empowered customers want to log on, find information, make purchases, track package shipments, check their accounts, and make inquiries anytime, 24/7. Furthermore, they want to do these tasks on a computer via the internet and on the go. It is an interesting contradiction: Consumers want to help themselves when they feel like it and be pampered by firms at other times.
Privacy and data security are paramount. Customers want marketers to keep their data confidential. They also want to safeguard children from websites they find objectionable. Consumers want marketers to ask permission before sending commercial messages to their devices. However, Internet of Things (IoT)-connected devices such as voice-controlled speakers, which listen for consumers’ voice commands to know when to be launched into action find and share information with consumers, may present more privacy and data security challenges as they continue to grow more popular among consumers.
Legal Context
Chapter 5 presents a thorough discussion of legal factors affecting e-marketers, so we mention only one factor here. It wasn’t until recently that ethical and legal factors had a quantifiable effect on consumers. In spite of piracy laws, illegally used software abounds. In spite of the Can-Spam law in the United States, the number of unsolicited e-mails has actually increased. Digital products are often not viewed as “actual” products, and many consumers feel no hesitation about obtaining illegal copies.
Individual Characteristics and Resources
Beyond general social and cultural trends, individuals vary in their online behavior. Some of this variance is based on differences in characteristics, such as demographics and attitudes, and some is based on the resources consumers bring to the exchange process.
Individual Differences
Internet users have several characteristics that differentiate them from nonusers, and similarly, users differ in their needs and desires. The first variable involves demographics. Age, income, education, ethnicity, and gender all affect internet use. For example, 99 percent of 18- to 29-year-olds use the internet, as compared with 64 percent of those ages 65 and older (“Pew Internet & American Life Survey,” 2016). Additionally, black and Hispanic teenagers are more likely than white teenagers to use mobile instant messaging apps such as WhatsApp (“Pew Internet & American Life Survey,” 2016).
The second variable is a positive attitude toward technology. Internet users who purchase products online tend to hold the attitude that technology helps make their lives richer and easier. See the “Let’s Get Technical” box for differences in broadband option selection, indicating techno logy differences. Third, online skill and experience play an important role in the exchange process. Consumers who have been using the internet for more than three years tend to be more adept than new users at finding information and products quickly, resulting in less frustration and less shopping cart abandonment.
Next, two researchers found that online shoppers tend to be more goal oriented than experience oriented while shopping (Wolfinbarger and Gilly, 2001). Goal-oriented behavior often includes going to a specific website with a purpose in mind, or searching for the lowest price for a particular product. Experience orientation relates to having fun, bargain hunting, or just surfing to find something new. Goal-oriented individuals like the idea that they don’t have to deal with salespeople or crowds in the online environment, and they appreciate the online product selection, convenience, and information availability. When consumers are looking for experiential shopping, it makes sense that they would find this element more often in brick-and-mortar stores than online.
Marketers thoroughly explore the differences in online behavior for their target markets and then design marketing mixes accordingly. It is especially important to provide options as markets continue to fragment to increasingly smaller target groups.
Consumer Resources
Chapter 2 introduced the value equation showing that consumers perceive value as benefits minus costs. These costs constitute a consumer’s resources for exchange: money, time, energy, and psychic costs.
Monetary Cost
Consumers need enough discretionary income to exchange for the goods and services they want—and to afford a computer and ISP connection for internet access. What makes the internet exchange different, however, is that consumers usually can’t pay cash or don’t write paper checks for online transactions. Instead, consumers pay by credit card, debit card, or digital wallet. While many consumers in developed nations use credit cards, not everyone is able to acquire or wants a credit card. This problem is big for marketers targeting the huge teen market online and for those targeting consumers in countries with low credit card availability.
Time Cost
Time poverty is a problem for today’s consumers, so they want to receive appropriate benefits for the time they spend online. Companies want to ensure that users get what they wanted for the time invested by making their sites well organized and easy to navigate so users can quickly find what they want.
The internet’s property of time moderator, discussed in Chapter 1, helps consumers manage their scarce time. Users can shop, e-mail, or perform other activities anytime, 24/7—a big advantage for working parents who can only find the time to shop late at night after the kids are in bed.
Time resource is a critical topic because online attention from consumers is a desirable and scarce commodity. The clutter of websites now parallels that of other media—with some differences. Some researchers believe that consumers pay more focused attention to websites than to the content in any other medium. When in front of a television, consumers are easily distracted by other people or activities in the environment. The same holds true for the passivity of radio listening. Consumers seem to pay more attention to print media but may still flip pages quickly. Hoffman and Novak at Vanderbilt University applied the concept of flow from psychology to Web navigation behavior (see the eLab at elab.vanderbilt.edu). They define flow as:
the state occurring during network navigation which is: 1) characterized by a seamless sequence of responses facilitated by machine interactivity, 2) intrinsically enjoyable, 3) accompanied by a loss of self-consciousness, and 4) self-reinforcing.
According to this concept, consumers are 100 percent involved and not easily distracted when they are online. Whether they are in a goal-oriented or experiential shopping trip online, they are focused. Therefore, once e-marketers can capture a pair of consumer eyeballs or earlobes, they can make a big impression in a short time as long as the website is enjoyable, self-reinforcing, and engaging.
Psychic Costs
Closely related to time are psychic resources.
Consumers apply psychic resources when Web pages are hard to figure out or when facing technological glitches. Baymard Institute (2017) estimates that $260 billion in sales for online retailers can be recovered by improving factors impacting design and flow in the checkout experience. At one time or another all users abandon carts due to technical problems and other issues—buying just gets to be too much trouble. Consumers may abandon their shopping carts because they got distracted, weren’t sure of the return policy or shipping price, or couldn’t remember their username or password, among other reasons.
Internet Exchange
Then comes the actual moment when exchange occurs. Browser favorites help consumers quickly jump to their favorite online retailer when looking for a product or making a purchase. In addition, e-mail messages from firms often contain hyperlinks to bring consumers directly to specific information, news reports, or advertised specials. The internet has the added feature of automation to facilitate exchange. For example, news sources often send one-sentence e-mails several times a day or week with breaking news for those who sign up for the service. Also, Amazon.com sends consumers a link to a new book by a previously purchased author. These automated e-mails facilitate the exchange process.
Exchange Outcomes
Just what benefits do consumers get by exchanging all that money and time? The Pew Research Center conducts continuing research entitled Internet and the American Life. Along with comScore Media Metrix, Nielsen//NetRatings, the ClickZ network, and information from many other sources, we now have a rich understanding of what American consumers do online and how the internet has changed the way people behave. Using these generalizations, marketers look for differences in their target markets and then build online and off-line strategies to meet their needs.
People do only five basic things online—connect, create, enjoy, learn, and trade. Each is ripe with marketing opportunity. In the following sections, we categorize the myriad of online activities into these areas of consumer need and desire. Looking at it this way helps marketers remember that profits come from focusing on the customer.
Connect
Unlike any other medium, the internet allows consumers to interact with individuals and organizations using multimedia in two-way communication. Around 3.7 billion consumers use e-mail worldwide (Tschabitscher, 2017). E-mail is still the internet’s “killer app” worldwide, in spite of spam. Consumers communicate online because it is an inexpensive way to keep in touch, and because it is usually text based so it can be easily accomplished over a wireless handheld device. In addition, consumers make new connections with the people and business partners they meet online that sometimes carry over to the physical world. E-mail popularity explains the success of Web-based e-mail services such as Outlook (Microsoft) and Gmail (Google).
Consumers also spend time instant messaging (IM), use the internet to make phone calls (Skype), online dating applications, and more. Consumers exchange time and energy to build relationships with friends and family, and even to work out problems with companies.
Create
This need to connect was one springboard for the Web’s social networking sites, where users can create profiles, upload pictures and other content, and connect with friends and colleagues. Content creation is the highest form of user engagement because they are participating by adding to the Web’s offerings, as discussed in Chapter 1. Facebook is the most popular site with over 2 billion monthly active users worldwide (according to Facebook.com). For professionals, LinkedIn sets the standard, with over 467 million members in 2016 (according to LinkedIn.com). LinkedIn members include executives from all Fortune 500 companies.
User-content creation for uploading has grown so quickly and is so vast that we created a separate category of exchange outcome for this edition of E-Marketing. The biggest activity involves sharing digital photos at sites such as Facebook, which reports that nearly 20 percent of its users share content more than once per day. Users also create or post comments to blogs and create videos for YouTube and for a myriad of online contests for user-created television commercials (e.g., the Doritos Super Bowl Contest). It is no wonder that users create all these videos for uploading—nearly half of all internet users enjoy watching videos on social media sites. You’ll find social media strategies to capitalize on this trend in later chapters.
Enjoy
Many consumers use the internet to enjoy entertainment (Exhibit 7.4). Two-thirds browse for fun, sometimes on experiential shopping trips, as previously mentioned. One of the internet’s big promises, however, is audio and visual entertainment. American adults ages 18–64 watch between 116 and 654 minutes of online video per week (“The State of Traditional . . .” 2017), and this figure will continue to rise in coming years due to the increasing popularity of streaming services. As this occurs, online entertainment content will grow considerably and become just one of the choices for consumers deciding how to spend time online.
EXHIBIT 7.4 Proportion Enjoying Entertainment Online in the United States
One way for marketers to keep their fingers on the pulse of internet users is to monitor search terms entered at Google, Bing, and other search engines. Popular search items tend to change every month with breaking news events or holidays, and a glance at the most-entered searches in 2017 validates this, with the top five being 1) Hurricane Irma, 2) iPhone 8, 3) iPhone X, 4) Matt Lauer, and 5) Meghan Markle according to Google.
Learn
Consumers access information to learn things online such as news, driving directions, travel information, jobs, weather, sports scores, and radio broadcasts over the internet. E-marketers have known for some time that consumers only have a limited amount of time to exchange for media consumption and that the internet takes away from off-line media time, as consumers are increasingly turning to the internet to access the news.
How do internet users find information for learning? Many are loyal to particular media sites, often prompted by breaking news e-mails and push notifications. Queries range from the vanity search (“How many times does my name come up on Google?”) to the soul searching (“Who is God?”) and ridiculous (“what is what”) to the heartbreaking (“My mom has breast cancer—what should I do?”).
Trade
Most consumers shop, buy, or conduct other transaction-oriented activities online. Eight out of 10 US consumers have purchased products online (“Online Shopping and E-Commerce,” 2017), and a majority make travel reservations online. Due to its popularity, several firms offer special software to assist bidders in finding value at eBay, one of the most popular and longest running online auction websites.
It is important to note that many internet users seek information online prior to buying products. Sometimes they use this information to purchase online, and sometimes they purchase at a local brick-and-mortar store—many consumers purchase offline based on information they get online.
Chapter Summary
The internet has grown more quickly than any other medium in history. In 2017, 88 percent of US consumers had access to the internet. Yet 12 percent are not online, due to various issues, as well as the idea that many activities cannot be replaced by the internet.
The basic marketing concept of exchange refers to the act of obtaining a desired object from someone by offering something in return. Individual consumers bring their own characteristics and personal resources to the process as they seek specific outcomes from an exchange. All of this inter action occurs within a technological, social/cultural, and legal context. Among the US social/cultural trends affecting online exchanges are consumers’ paramount trust in each other, information overload, multitasking, I want what I want when I want it, home and work boundary blur, self-service, and concerns about privacy and data security.
Internet users tend to have a more positive attitude toward technology and be more adept and experienced with computer usage. Gender affects attitudes toward use of internet technology, and age and ethnicity can also affect internet usage. Online shoppers tend to be more goal oriented and be either convenience or price oriented.
The main costs that consumers exchange for benefits are money, time, and psychic costs. The internet exchange can be facilitated by browser bookmarks, e-mail messages with hyperlinks, automated e-mails from websites seeking to attract visitors, and social media updates. The main consumer activities online can be categorized by these general outcomes: connect, create, enjoy, learn, and trade. Each outcome represents a marketing opportunity for savvy e-marketers.
Exercises
Review Questions
What is an exchange?
What are some of the trends affecting online exchanges in the United States?
What individual characteristics influence online behavior?
What are the costs that constitute a consumer’s resources for exchange?
How can e-marketers facilitate internet exchange?
In what ways do consumers create content for the Web?
Discussion Questions
Can an attention economy exist in countries where internet penetration is low? Explain your answer.
What might e-marketers do to accommodate consumers who are experiential shoppers?
Do you consider the concept of flow an explanation for what some observers call internet addiction? Explain your answer.
How might e-marketers capitalize on consumer interest in relationships as an outcome of internet activity?
What are the reasons for the growth in social networking online?
Why do you think that consumers trust each other more than they trust companies? What can marketers do about this?
Web Activities
Customers face many barriers when purchasing online. It has been estimated that as many as 60 percent of all purchases are abandoned midstream. Working in groups, try to develop ways that online retailers can help more site visitors be converted to buyers.
Check out your local newspaper classified ads online, then examine Craigslist for your local area. Why do you think that Craigslist and eBay have taken share from newspaper classifieds? What advice do you have for newspapers to regain customers?
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