CONSUMER BEHAVIOR IN DIGITAL MARKETS
CHAPTER 1
INTRODUCTION
Today,
shopping for goods and services online is becoming more of a common
practice.
Ecommerce (electronic commerce) has been around for over 40 years. Consumer-using
ecommerce really did not start to take off until around the mid 1990s.
One reason
ecommerce emerged during the 1990’s was due to the increased number of household
computers. For ecommerce to work, a consumer must have an Internet enabled device
to complete a transaction. As technology becomes cheaper and broadband Internet
becomes more accessible there is a greater chance that ecommerce will take over
the traditional businesses model.
For
my graduate project I developed an ecommerce website that that sells goods
and provides
services. For this study I do not want to only look at ecommerce in relation
to commerce, but
also look at consumer behavior while purchasing a good online. Research in
ecommerce and consumer behavior will help me better understand the market and
my future customers. To complete this study, I have collect data and information
from journal articles, newspapers and other media.
I
feel there is room for more successful online businesses and in the future, I personally
want to compete in the online marketplace. Building customer relationships
and trust is
hard for any business. Most of studies that I have look at shows consumers
react to
security, mainly processing payment and personal data online. I question if a
consumer
security concerns decreases when shopping at a well known brand such as
Walmart.com and
if the same applies for any online brand that gives an impression that
they are a
million dollar company even though they are actually a mom and pop store
from a small
suburb.
CHAPTER 2
LITERATURE REVIEW
Internet
access is practically everywhere in the United States, schools, restaurants, libraries,
retail stores, and even in random parts of some towns sometimes providing free Internet
access. The emergence of ecommerce resulted to increased competition among businesses
and is changing the traditional brick and mortar businesses to an online based operations
as a strategy to remain competitive (Hahn, Doh & Bunyaratavej, 2009, p.
12). Online sales only made up 5.7% of retail sales in 2013. In 2005 2.4% of
sales came from online and increased to 6.2% in 2014. Holiday shopping increased
4th quarter sales and decreases 1st quarter sales for the beginning of the New
Year. On average there is a negative 16.9 percent change from 4th quarter to the
1st (census, 2013). This data indicates ecommerce has been increasing over the
last nine years, but within the last years started moving sideways with little
volatility. The data only gives an idea of the US retail sector and no
indicator of global change that may occur in ecommerce. According to studies
another study, ecommerce is growing at an annual rate of 20.7 percent at a global
level on sale from $ 661 billion in 2011 to $ 963 billion in 2013 (Alrawi &
Sabry, 2009, p. 512).
The
rapid growth has resulted from increased use of broadband connection, innovative
payment products and use of smartphones. The aim of adopting ecommerce is to
meet the needs of the changing market dynamics, where merchants focus on
improving customer experience and secure way of conducting business to
establish a secure way of making transactions to create innovative payment
method and consumer oriented 4 solutions. Adoption of ecommerce always
encounters challenges associated with technology, people and money. However,
the cost of disregarding ecommerce is at times more that the cost of adopting
because it is an important tool that increase competitiveness in the business.
Traditional
business models conduct business without the use of the digital world. Traditional
businesses conduct business through physical store and business transactions carried
out on a physical basis with customers. Arguably, brick and mortar business operation
is expensive as it involves physical based marketing, establishment of physical
warehouse and stores. Traditional business model also involves paper based
billing, rent and others cost. The increased cost in traditional business model
resulted to the adoption of ecommerce, which is considered as an effective
model that assist business to gain shares, improve customer relationships and
communication and streamline business processes. There are other forces that
have promoted the evolution of ecommerce including advancement in technology.
The
availability of secure, fast and cheap technology has enabled business players
to adopt ecommerce making the market cost effective and highly competitive.
According
to U.S census in 1993, 22% of households had a personal computer. Needs among
consumers have evolved making online retailers work at identifying consumers’ needs
and their shopping behavior so they can offer innovative products. Retailers
are now focusing on customers on the basis of their demographics and spending
habits to improve the market. Ecommerce enables retailers to increase sales and
make businesses more profitable (Demil & Lecocq, 2010, p. 237).
As
the infrastructure grows around the world more and more people will be able
to barter with
each other. “The Internet has the highest adoption rate of any technology in history”
(Guptha, Malik, 2013). The Internet has helped transform commerce in many ways.
Anyone with an Internet connection can start a home-based business for free or with
little money compared to a brick and mortar business. Overhead cost is much
lower with ecommerce than traditional brick and mortar business making it
easier to compete with larger businesses than ever before. Predicting success
of an online business is nearly impossible.
Businesses
such as Google and Facebook are considered a phenomenon (winter, 2011). These
businesses did not have the goal to take over the world but instead fill a need
for a small group of people. Although these websites came out of nowhere and became
a sensation practically overnight they did start somewhat of a trend. The trend
is to give out free products to the consumer, in result, profiting from
advertising revenue.
SOCIAL MEDIA
Social
media has helped increased the rapid evolution of business operation
model from
traditional commerce to ecommerce. Social media platforms have created
new
opportunities from retailers to adopt ecommerce business model to raise
awareness of their products and promote their business brand name.
Online
social networking platform are mainly used by the population between the ages
of 18 to 29 years. This is making it an effective medium for loyalty and
branding (Cooke, 2013). 90% of user between the age of 18-29 use social media.
73% of all Internet users use social media (pew research center, 2013). Nearly
one fourth of the world uses social media (eMarkets,2013).
Social
marketing has increased providing an excellent platform for customers to give
feedback and complaints. Increased use of Internet and smartphone users is another
force that has led to the rapid evolution of ecommerce business model. The rate
of Internet users has increased from mobile devices, making retailers exploit
this increased usage to be able to market a wide range of products to a large
market.
Consumer
behavior / Security Our society has been overtaken by technology and ecommerce
and m-commerce is growing along side with the rapid growth of technology. 34%
of Internet users spend a whopping 25 to 35 hours a week browsing the Internet
and only purchasing 520 items per year (Guptha, Malik, 2013).
MOBILE
M-commerce
is using this trend renaming it “freemium” by charging a subscription fee to
use these so called free products (vinett, 2014). Using these tactics, consumers
are sucked in with the glorious word “free” but then they will be forced to pay
a fee for premium content (vinett, 2014). This type of marketing strategy is
ingenious, mobile game apps, such as Candy Crush Saga, are notorious for these
practices. Since mobile devices are used 23% of the time for games (Peslak,
Shannon, Ceccucci, 2011) targeting consumers through game apps is a good idea.
Mobile
technologies such as smartphones and tablets have also boosted Ecommerce (Demil, 2010). An article from CNN
reports that Americans are using smartphones and tablet apps more than PC’s.
While web use is still 500 times lower on mobile browsers compared to personal
computers (CNN , 2013). Over 50% of the world owns their own personal cell
phone (Gorham, 2000) and 82% of adults in the United States have their own
mobile phone (Peslak, Shannon, Ceccucci, 2011). 84% of individuals in the
United States use the Internet for pleasure and business (ITU, 2013).
SECURITY
The
main challenge involves security concerns despite the decrease in incidences of
fraud from 2009 to 2010. During this period, the cost of counter attacking
frauds increased; as a result, of the increase in volume and more lucrative
sectors (Benbasat, 2012). The nature of online fraud has become more
sophisticated overwhelming customers because of fear to shop and make
transactions online. Poor digital marketing skills are the second challenge
affecting ecommerce. In some businesses, ecommerce is still a new concept, where
marketing team in online retail shops are working towards developing marketing
approaches and effective ways of reaching consumers.
Traditional
business relationships began with a handshake and conversation. When a consumer
is shopping online for a product trusting a company is a gamble. The Internet
is full of brilliantly thought out schemes to scam consumers to get all they
have.
The
majorities of consumers are aware of these schemes and do their best to avoid them.
Since consumers are aware of these schemes they are very careful when shopping online.
Security measures from payment processors and Internet security verified webpages
helps consumers build confidence when ordering online (Benbasat).
STRATEGIES
Poor
marketing strategy have a negative impact on sales, customer acquisition, brand
equity and retention. Poor integration technology has a negative impact on customer
experiences (Cavalcante, Kesting, 2011). It becomes difficult for customers to shop
and make payments over the Internet when retailers have not integrated a back
end system seamlessly with frontend systems. Some online businesses lack a
multichannel option of making payment leading to a negative impact on their
businesses (Ondrus, Lyytinen, & Pigneur, 2009).
An
online merchant has to establish effective ways of promoting their products to make
business effective, and enable the business to survive in a competitive and
dynamic business environment. There are areas of operation which businesses
need to focus to streamline their operation including enhanced conversion rate.
Consumers use the Internet to make a comparison and choose products. Therefore,
businesses are investing in digital marketing and data analytic tools to make their
consumers loyal customers. Enhancing fraud control is another priority in online
merchants because security is the main problem that needs to be addressed to develop
trust on ecommerce among consumers. Online retailers need to identify areas of
risk and establish effective measures to address these security hitches.
Online
merchants are focusing on developing diverse payment channels and optimizing
their business model. (Ondrus, Lyytinen, & Pigneur, 2009, p. 7). Many tools
have been introduced to give consumers confidence insuring a safe checkout. One
form of security is to secure pages with hypertext transfer protocol secure
(https://) instead of the traditional http://. This protects transmission of
sensitive information such as passwords, credit card details, and personal
information with the expectation that encryption guarantees privacy (netcraft,
2013).
There
is only consumer confidence if the consumer understands the security features.
70% of males are aware of the secure protocol and 58% of women are aware (Jabar,
Ishak, Sani, Sidi, Supian, Mustapha, 2013). Another barrier for fraud in ecommerce
is the security of the payment process. When checking out online you must
provide your personal information and type of payment. Since you cannot trade
cash for a good online, consumers must use alternative forms of payment. This
is what concerns people the most. “more than a third of Internet users globally
who do not shop online cite distrust to online payments as their reason for not
making purchases” (PR Newswire, 2014).
The
most popular way to make online payment is through the use of credit cards. 65% of online payments are done using credit,
16% eWallets, and only 9% using bank transfer (Alessandro, Riccardo, 2009).
When paying with credit card the consumer must have trust in the electronic
business. A study was done on university students ages between 20 – 30 years
old shows that 48.8% find that providing credit card information over the web
to be unsafe and 18.8% feel safe using credit cards online with 32.9% indifferent
to the idea (Yi Yi, Mahomood, Dominica 2009).
CHAPTER 3
SURVEY RESULTS
The
survey conducted for my research included 66 undergraduate students ageing from
18 – 32 shows that ecommerce is steady with traditional commerce. Everyday we hear
positive and negative news about online security. Media outlets tell us how we
can protect ourselves more while using the Internet. The survey reviles that
consumers are more confident shopping online when they are more informed about security.
Only 35% of people believed that more information decreased security concern.
This identifies that even though the Internet is typically an unsafe place
for consumers, we are willing to use it
to trade goods.
From
this survey I also asked how much time participants spent shopping online and in
stores. Both online and in store were relatively close. 2-5 hours resulted as the
highest response on both questions. Consumers that shop in store 2 – 5 hours
per week resulted in 51.1% of survey results. Survey results for online
shopping 2 – 5 hours was 35.5%. My previous research showed that people spend
25 to 35 hours a week browsing the Internet and only purchasing 520 items per
year (Guptha, Malik, 2013).
Consumer
confidence leads to consumers spending more online. The majority of participants
said they would not purchase luxury goods online. Results showed that 57.8% of
participants would avoid purchasing goods valued greater than 500$.
CHAPTER 4
CONCLUSION
In
conclusion ecommerce has been on a steady incline over the last 15 years. Security
and tangibility issues prevent some consumers from shopping online. Even with security
concerns consumers are still willing to shop online. Online businesses must change
their business model to reinforce security measures and consumer trust into
their brand.
Traditional
brick and mortar businesses might not be as cost effective as an online retail,
but have more consumer trust overall. Until ecommerce can guarantee a 100% security
traditional commerce will be winning the ball game.
A
few ways ecommerce can gain consumer trust is by providing information about
security. Trust marks on a website can intergrade trust into a brand. A
business
must show
positive social presents. And finally a privacy statement that informs consumers
that they are protected.
Although
ecommerce is considered risky, consumers enjoy the convenience that
comes with
shopping online. Electronic commerce is not going take over commerce any
time soon, but
has potential if security risk can be minimized to zero.
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VITA
Graduate School
Southern Illinois University
John Quigley
Southern Illinois University
Carbondale
Bachelor of Science, Agriculture
Business Economics, May 2012
Research Paper Title:
CONSUMER BEHAVIOR IN DIGITAL MARKETS
Major Professor: Katherine Frith
TUGAS PERILAKU KONSUMEN :
Latar Belakang :
Hari ini, belanja barang dan jasa secara online menjadi lebih dari umum praktek. E-commerce (perdagangan elektronik) telah ada selama lebih dari 40 tahun. Konsumen-menggunakan e-commerce benar-benar tidak mulai lepas landas sampai sekitar pertengahan tahun 1990-an. Salah satu alasan e-commerce muncul selama tahun 1990 adalah karena jumlah Peningkatan komputer rumah tangga. Untuk e-commerce untuk bekerja, konsumen harus memiliki perangkat internet-enabled untuk menyelesaikan transaksi. Sebagai Menjadi teknologi murah dan internet broadband lebih mudah diakses Menjadi ada kesempatan yang lebih besar bahwa e-commerce akan mengambil alih model bisnis tradisional.
Untuk proyek
pascasarjana saya mengembangkan situs e-commerce yang menjual barang-barang
yang dan Menyediakan layanan. Untuk studi
ini saya tidak ingin hanya melihat e-commerce dalam hubungannya untuk perdagangan, tetapi juga melihat perilaku konsumen saat membeli secara
online baik. Penelitian di e-commerce dan perilaku konsumen akan membantu saya
lebih memahami pasar dan pelanggan masa depan saya. Untuk menyelesaikan studi
ini, saya harus mengumpulkan data dan informasi dari Artikel jurnal, surat
kabar dan media lainnya.
Saya merasa ada
ruang untuk bisnis online lebih sukses dan di masa depan, saya pribadi ingin
Bersaing di pasar online. Hubungan pelanggan bangunan dan kepercayaan sulit untuk setiap bisnis.
Sebagian besar studi yang saya miliki lihat yang menunjukkan konsumen
bereaksi terhadap
keamanan, terutama memproses
pembayaran dan
data pribadi online. Saya mempertanyakan apakah menurun masalah keamanan konsumen saat berbelanja di sebuah merek terkenal seperti Walmart.com dan jika Sama Berlaku untuk setiap merek online yang Memberikan kesan bahwa mereka adalah perusahaan juta dolar meskipun mereka sebenarnya seorang ibu
dan pop toko dari pinggiran kota kecil.
Kesimpulan :
Kesimpulannya
e-commerce telah di lereng yang stabil selama 15 tahun terakhir. Masalah
keamanan dan berwujud mencegah beberapa konsumen dari belanja online. Bahkan
dengan menyangkut keamanan konsumen masih bersedia untuk berbelanja online.
Bisnis online harus mengubah model bisnis mereka untuk memperkuat
langkah-langkah keamanan dan kepercayaan konsumen ke merek mereka.
Batu bata dan
mortir bisnis tradisional mungkin tidak sebagai biaya efektif sebagai ritel
online, tetapi memiliki lebih banyak kepercayaan konsumen secara keseluruhan.
Sampai e-commerce dapat menjamin 100% keamanan perdagangan tradisional akan
memenangkan pertandingan bola.
Beberapa cara
e-commerce dapat memperoleh kepercayaan konsumen adalah dengan memberikan
informasi tentang keamanan. Tanda kepercayaan pada sebuah situs web dapat
intergrade kepercayaan menjadi sebuah merek. Bisnis
harus
menunjukkan hadiah sosial yang positif. Dan akhirnya pernyataan privasi yang
menginformasikan konsumen bahwa mereka dilindungi.
Meskipun
e-commerce dianggap berisiko, konsumen menikmati kenyamanan yang
dilengkapi
dengan belanja online. Electronic commerce tidak akan mengambil alih
perdagangan apapun
dalam waktu
dekat, tetapi memiliki potensi jika resiko keamanan dapat diminimalkan dengan
nol.
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