Understanding Customer Needs and Online Behaviour

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Understanding Customer Needs and Online Behaviour

• MARK 430
• Week 2

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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?

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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

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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
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Customer-Centric Marketing Process 3 elements
Marketing Research Marketing Strategy and Tactics
Focus for this week
Customer Relationship Management Sales Force
Management and Customer Experience
Database Marketing Acquire/Up-Sell Cross-Sell
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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
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Model for customer decision making what do we
need to know about our customers?

• 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?

Initiation
Awareness / learning
Decision
Buy
Post purchase
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Popular Uses of Marketing Research
How to segment the market?
Who are mycustomers?
What is the price elasticity?
Conjoint Analysis
Customer Identification
Discrete Choice Modeling
MarketingResearch
Whendo theypurchase?
What are the growth trends?
Buying-Habit Studies
Environmental Studies
Opinion Research
Competitive Analysis
Who are my competitors?
What do they like?
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3 main sources of data that e-marketers use for
research purposes

• Internal company records
• Secondary data
• Primary data

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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

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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-marketers 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.

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Source 2 Secondary Data

• Marketing intelligence Marketers continually
  scan the firms 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.

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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.

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Source 2 Secondary Data Privately Generated Data

• Company Web sites provide a great overview of the
  firms 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 users
  desktop via e-mail, or by allowing users to
  pull it from a specially tailored Web site.
• Free source is Google Alerts

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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.

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Source 2 Secondary Data Competitive
Intelligence

• Competitive intelligence (CI) analyzing the
  industries in which a firm operates as input to
  the firms 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.

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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
  linkcompanyname.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 SECs online EDGAR database investment
  firm sites.
• User conversation e-mail lists, newsgroups,
  blogs (eg. re BMWs)

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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
  marketers specific problem.
• They are proprietary, therefore unavailable to
  competitors.

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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.

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Main Internet-Based Research Approaches

• Online experiments
• Online focus groups
• Online observation
• Usability testing
• Online Survey Research
• E-mail surveys
• Web surveys

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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

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Online Focus Groups

• Focus group research
• A qualitative methodology that attempts to
  collect in-depth 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.

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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).

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Online Observation

• Observation research monitors peoples 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

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Usability Testing

• Web site usability studies to watch users as they
  click through the firms 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

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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

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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.

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Web Surveys

• Many companies post questionnaires on their Web
  pages.
• Purpose
• Gather statistics about a sites 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.

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Web surveys - advantages

• Fast and inexpensive
• 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.

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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.

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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