Personalized marketing and mass customization techniques through Web sites seem to be at a preliminary stage, at least for the moment. This is a fact that requires knowledge and evaluation of the consumer’s requirements but, most importantly, it requires the constant study of the consumer’s behavior in the store and generally the data created by him/her (POS data).
As far as Consumer Behavior Analysis is concerned, this seems to be completely unknown in the Internet environment (Hoffman and Novak, 1996). The fact is that Web changes the nature of communication between firms and customers and customers have considerable control over which messages they receive by visiting Web sites and being exposed to marketing communications (Watson et al, 1998). This fact means that we need to re-examine and understand the consumer buying process within the virtual shopping environment.
Consumers progress through the rational stages of problem/need recognition, information search, evaluation of alternatives, purchase decision and post-purchase behavior (Bettman, 1979; Engel et al., 1996; Howard, 1989). In other words, the consumer in the physical environment passes through five stages during his buying process (Kotler, 1992), as described in Figure 1.
FIGURE 1
The development concept of a Virtual Store should use the above model as a guide, trying to offer the proper services to the consumer at every stage of the shopping process and support him/her effectively. Generally, Consumer Behavior theory should be used to inform design choices for the implementation of significant aspects of a virtual store and more particularly for it’s dynamic behavior.
On the other hand, business processes will be more effective by utilizing information gathered through an intelligent interface. Consumer (profiles, preferences), Navigation (shopping behavior) and Sales data will facilitate business processes to design effective strategies and reach the final consumer at a more tailored, personalized and efficient way.
Before moving on to the discussion of the various frameworks, we need to mention that the research perspective used in this work is the Decision Making Perspective. The reasons for choosing this perspective include:
- Internet provides all the adequate conditions (technology enabled) to guide consumers effectively in the rational steps of need recognition, information search, evaluation of alternatives, purchase behavior and post purchase behavior.
- Computer-Human interaction is a more personal and less influenced by external factors (i.e. other peoples’ opinions) process, which means that there is a great potential for consumers to follow a rational-based approach in their shopping activity. This means that shopping over Internet is based mostly on a Decision Making perspective (five stages model) following a rational way of collecting, evaluating and disposing of information.
- An information intensive, fully supportive and personalized environment like Internet will incite consumers to follow somehow the guidelines and paths set for them by the system, due to the fact that such an environment will serve their needs and wishes in the most effective manner.
- All the above factors characterize Internet as a comfortable and pleasant shopping environment, guiding and inciting consumers to use and enjoy its facilities, by following the rational stages of their shopping process easily and fast.
It should be mentioned that such an environment could create enthusiasm to consumers and make them purchase (4th stage of the buying process) the specific product immediately and by-pass the first 3 stages. Also, such an environment could create needs more easily than a traditional one due to the personalized marketing techniques being applied. On the other hand, information search and evaluation of alternatives (2nd and 3rd stage of the buying process) can take place at the same time by using multi-criteria searching machines, which increase the speed of the purchase process and contribute to consumer satisfaction and enthusiasm. Finally, post purchase behavior (5th stage) can be supported and controlled effectively by the after sales support services offered by the virtual store, utilizing the technology capabilities (i.e. answer to consumer’s questions directly by e-mail).
Based on the above, we can concluded that the Five Stages Model of the Consumer Buying Process may be transformed in a Virtual Shopping Environment, which means that:
- Consumers may not follow the path from stage 1 to stage 5 sequentially but by-pass some stages. For example consumers may purchase the products they want straightly through shopping lists or purchase a product that is being recommended to them based on their profiles.
-
Consumers may follow a different than the traditional decision path. By using, for example, a search engine, consumers may be at different stages of the Five Stages Model at the same time, e.g. information search and evaluation of alternatives. Another example refers to the situation when a consumer purchases a product and a personalized advertisement is displayed to him instantly, creating him/her a new unpredictable need.
3. Definition of Internet Consumer Behavior Framework (ICBF), Consumer Support Model (CSM) and Business Support Model (BSM)
This section defines some theoretical concepts on which the philosophy, architecture and design of an Electronic Retail Store can be based on. More specifically, this chapter specifies the overall structure of the system based on five components: Consumer (C), Business (B), Internet Consumer Behavior Framework (ICBF), Consumer Support Model (CSM), and Business Support Model (BSM). It illustrates the inputs and outputs provided by and to each of these components and shows how these inputs and outputs can be handled and exploited by the virtual business environment, in order to ensure business effectiveness and consumer satisfaction. Technology plays a significant role in the whole process, by providing the required tools and components to instantly and easily apply effective marketing and sales techniques, in order to approach and influence consumers. The ICBF of the virtual retail store is presented first, followed by the presentation of CSM and BSM. Finally, an overall framework is presented, incorporating inputs and outputs of information between the above models within the virtual marketplace.
3.1. Internet Consumer Behavior Framework specification (ICBF)
Internet represents an information intensive environment, owing, at the same time, the information processing capabilities required to support it. Undoubtedly, the electronic shopping environment should take advantage of the huge technology capabilities, for supporting effectively their customers at each stage of the buying process.
The key element for providing services to consumer is to know “who the Internet Consumer is and how he/she reacts to certain conditions/situations”. For this purpose, in this document we design the Internet Consumer Behavior Framework (ICBF) as the core concept/tool upon which strategic marketing and sales planning can be based. ICBF collects and provides all the necessary data that a marketing/sales manager wishes to have in order to analyze them and design effective marketing/sales strategies, always under the perspective of better satisfying consumer needs and wishes and “bringing money to the company”.
The Internet Consumer Behavior Framework specification includes the following data categories:
A. Consumer Data: All the data that characterize each consumer separately (i.e. demographics, preferences). These data enable marketing analysts to build consumer profiles, segment the market into segments using specific criteria, target the most attractive consumer segments and position existing or new products effectively. The whole process is based on the personal characteristics and preferences that each consumer has, which compose the enabling factor for applying personalized marketing/sales strategies over Internet. Consumer data are divided into the following categories: Identification, Demography, Consumption Habits and Preferences, Segment Affiliation, Pre-Sales Communication.
B. Sales Data: Sales data refer to the data created by consumers through their interaction with the system. These data include sales per specific products or product categories, in relation to dimensions like time, consumer characteristics, etc. The great potential rests in combining this information with consumer data, getting the valuable understanding of “which consumer buys which products and when”. The Sales data are divided in the following categories: Purchase Behavior, Post-Purchase Behavior, Predicted Behavior, and Credit Worthiness.
C. Navigation Data refer to the consumer’s behavior through the store, the consumer navigation habits, “click-throughs” etc. While the cost of collecting these data in a traditional store is very high, in a virtual store environment this cost is minimized, based on the capabilities offered by technology. More specifically, a traditional store has to use techniques like video tapping in order to monitor consumer behavior within a store, while a virtual store can monitor this in many different ways, which are more effective, accurate, quick and low in cost. Using these data, we can monitor, analyze, predict and finally guide consumer through a shopping activity. The Navigation data are divided in the following categories: Visits, Entrance, Exit, Response to Promotions, First Visit, Last Visit and Searching.
3.2. Consumer Support Model (CSM)
The fact is that Web-Consumers are well informed and very demanding regarding services offered to them and seek for high quality information and treatment. So, once we have defined the Internet Consumer Behavior Framework (ICBF), we need to understand how to use these data to offer better services to Web Consumers, i.e. to support consumers at every stage of their buying process. For this purpose we use the Five Stages Consumer Buying Process Model (Kotler, 1992), as described above, in order to define a Consumer Support Model (CSM) within an electronic shopping environment.
This model defines the phases of the shopping activity that need support and how can this be implemented by the processes of the virtual retail store. For example, it defines which methods of advertising should be employed in the need recognition phase for a specific customer, based on his/her personal characteristics and preferences. Figure 2 illustrates the support provided to customers by the electronic retail store environment (Sales and Marketing strategies) during their shopping process.
FIGURE 2
The input for the effective operation of the Consumer Support Model (CSM) is the data provided by the Internet Consumer Behavior Framework (ICBF). These data are being processed by the CSM in order to design effective promotional and generally business strategies always under the objective of providing support and satisfy the end-consumer.
The fact is that technology capabilities enable a virtual shopping interface to offer information to consumers, so that consumers “are captured in the virtual store”, in the sense that they are attracted by facing information tailored to their needs and preferences. The competitive advantage of a virtual store in comparison to a traditional store is the fact that the virtual store not only knows about the customer (this could also happen in the traditional marketplace) but mainly offers him/her attractive and personalized information directly and for every subject requested. This is very difficult to achieve in a traditional environment, due to human resources restrictions, working hours, service lead time, limited information available for all potential subjects requested, etc.
3.3. Business Support Model (BSM)
Apart from supporting services to consumers (CSM), ICBF also provides input to the Business Support Model (BSM), in order to support business processes. BSM defines the framework of supporting every key business process (Figure 3) by utilizing the ICBF data.
FIGURE 3
The ICBF data categories is a crucial “business weapon” in the design and implementation of effective marketing, sales and inventory management policies and strategies. All data categories are contributing significantly to every business process with an exception being the product replenishment process, where the sales data are enough for the effective planning and implementation of inventory handling and continuous replenishment processes.
CSM and BSM aim both to support the end consumer. The only difference between them is that CSM refers to the “direct” support of the consumer by the system during the shopping process (i.e. sales recommendation based on personal characteristics), while BSM has a more indirect character, due to the fact that the input provided by ICBF is correlated with the supplier companies’ information files (what suppliers really know about their consumers).
However, the Business Support Model (BSM) could be characterized as part of the Consumer Support Model (CSM), in the sense that the main objective of every company participating in electronic retailing (Retailer or Supplier) is to satisfy consumers in the most effective way.
3.4. The overall framework
The overall model describing the Consumer Behavior activity over Internet in relation with the Internet Consumer Behavior Framework (ICBF) the Consumer Support Model (CSM) and the Business Support Model is described in Figure 4.
FIGURE 4
This overall framework illustrates the information flow among consumers and businesses through the utilization of the above mentioned models. The fact that advertising is not providing input to CSM refers to the case of non-targeted advertising. In this scenario we have a one-to-many communication of an advertising message, which cannot be characterized as a procedure supportive to the consumer, especially within Internet environment, where technology offers the possibility to advertise in a more targeted and personalized way.
All the other information is being used to support consumers, either straightly through the CSM or through the BSM. It should be clarified that the straight use of CSM refers to the scenario where the Retailer (without the co-operation of the Suppliers) exploits the data collected by the virtual interface on his own and supports consumers in the virtual retail store. The case of BSM refers to the scenario where the Retailer provides the data to his Suppliers and they support consumers through the Retailer’s interface. In the second scenario we have the case of the Supplier being hosted at Retailer’s facilities, resembling the case of the traditional way of in-store promotion and advertising at Retailer’s facilities (i.e. Super-Markets).
4. Relating the Virtual Store Components to the Overall Framework
In this section we look at the above framework from a different perspective, by relating it to the components of an advanced virtual store environment. More specifically, we examine the phases at which the various data (ICBF) are produced, either as a result to the user’s input or action, and the way these are exploited in order to support the consumer (CSM) or the business processes (BSM). We assume that a separate component of the virtual store supports each different phase in the shopping process. The virtual store components that we examine include the following:
-
Store visualization: this component implements the visual look of the virtual store, i.e. the way the corridors, shelves, products etc. look. The structure and look of the virtual store define, to a great extent, the navigation through the system and the paths and links that can be followed.
-
Product recommendation: this component acts as a personal seller in-store, suggesting certain products based on consumer input or independently for advertising purposes.
-
Intelligent searching: this is a facility allowing the user to look for certain products or product characteristics, using one or more search criteria.
-
Shopping facilitation: this component covers anything that has to do with the shopping process as such, i.e. the selection of the products, the filling-in of the market basket, the purchase, the payment and finally the delivery of the products to the end consumer.
-
Consumer Data Gathering: this component observes each consumer during the whole of his/her stay in the virtual store, in order to monitor specific behaviors and preferences, ideally in association with his/her demographic information.
-
Advertising: an advertising module is a necessary component of an advanced virtual store environment. This is used for independent product advertising, for promoting specific sections of the store or the virtual store itself.
Obviously, consumers’ interaction with each of the above components produces certain data, which compose the ICBF. These data are further exploited to support the consumer and the various business processes. The way this is done is summarized in Table 1.
TABLE 1
On the first column of the table we show the virtual store components, as explained above. The next two columns describe the data input, i.e. information needed to support a component, and data output, i.e. information produced as a result of processing and consumer interaction with a component. Columns three, four and five show how the output data support the Retailer, Supplier (BSM) and Consumer (CSM) respectively.
For example, product recommendation component needs as input consumer demographic data and past-sales data (sales history per consumer), in order to propose a tailor-made product or a product as close as possible to the preferences of a certain consumer. This component offers as output useful sales data and marketing/sales correlation results, i.e. data relating the response of consumers to a specific product recommendation with their demographic information, needs and preferences. Furthermore, these data help retailers increase their sales, as they allow for effective product recommendations and, thus, for increased product sales. Suppliers are benefited by the fact that they can measure the effectiveness of a specific promotion/product recommendation, identify new consumer needs and use this as an advertisement tool. Finally, consumers are getting support in their search for product information, need recognition (creates them a need as they face a product tailor-made to their needs) and purchase decision process (consumers may purchase instantly a product that is being recommended to them and also suits them).
This table composes a map based on which the virtual retailer can exploit the information provided (technology enabled) in a sensitive and effective way, in order to support its business partners (suppliers), consumers and the Virtual Retail Store itself.
4. Conclusions
As digital technology and consumer behavior evolve, marketers need to continuously enhance the value of their digital marketing offering. In an interactive two-way, addressable world, it is the consumer, and not the marketer, who decides with whom to interact, what to interact about, and how to interact at all (Field, 1996). This requires that marketers acquire a good knowledge of the consumer behavior within such an environment and understand their habits and preferences, in order to market products and services that meet their needs. To this end, they have the technology capabilities on their side, as the virtual retail environment provides them with an enormous amount of information they can use to enhance their understanding of the consumer.
The framework presented in this paper sets the initial bases for understanding this great potential, as it clarifies the various types of consumer information that exist in the virtual shopping environment (ICBF) and the way these support consumer services (CSM) and business processes (BSM). In addition, the table relating the overall framework with the components of a virtual store presents some of the dimensions of support that can be provided to each involved partner in the virtual retailing process.
The objective here is not to give a thorough and detailed analysis of these models and frameworks, as this is still work in progress, but to describe a new way of approaching this new and unexploited research area. Obviously, there is still great room for research. An immediate next step would be the further refinement of the framework and the analysis of the various components of a virtual store. Such a research effort could possibly set new standards and requirements for the virtual retail environment.
References
Aldridge, D., and, Borehamwood. Purchasing on the net – the new opportunities for Electronic Commerce.
International Journal of Electronic Markets, 8, 1 (1998).
Bettman, J. An Information Processing Theory of the Consumer Choice. Reading, MA: Addison-Wesley (1979).
ECR Europe Report. How to create consumer enthusiasm – Roadmap to growth.
Engel, J. F.; Blackwell, R.D.; and Miniard, P.W. Consumer Behavior, Chicago: Dryden (1990).
Field, C., Retaling on the Internet (1996).
Hamill, J., and Gregory, K., Internet marketing in the internationalization of UK SMEs. Journal of Marketing
Management, 13, 9-28 (1997).
Hawkins, Best, Coney. Consumer Behavior-Building Marketing Strategy. McGraw Hill, Seventh Edition (1998).
Hoffman, D.L., and Novak, T.P. A new marketing paradigm for Electronic Commerce. Paper submitted for the Special Issue on Electronic Commerce for The Information Society (February 1996). [URL: http://www2000.ogsm.vanderbilt.edu/novak/new.marketing.paradigm.html]
Howard, J. A. Consumer Behavior in Marketing Strategy. Englewood Cliffs, NJ: Prentice-Hall (1989).
Kotler, P. Marketing Management – Analysis, Planning, Implementation and Control. Prentice Hall International
Editions, Eighth Edition.
Stil A., Zimmerman R.J. Direct Marketing through the Internet (1996).
Watson, R; Akselen, S.; Pitt L. Attractors: building mountains in the flat landscape of the World Wide Web.
California Management Review, 40, 2 (Winter 1998).
1 This study was partly funded by the ACTIVE (Advertising and Commerce Through Internet in the context of the Virtual Enterprise) project (EP 27046), ESPRIT Programme (Framework IV), Commission of the European Union.