The impact of the Internet and the World Wide Web on commerce has been immense.
While business-to-business electronic commerce still accounts for the majority of electronic transactions, it is its business-to-consumer counterpart that has attracted most of the attention. Though relatively smaller, it is still a large and fast growing segment of the economy with estimates of over 40 million households in the US alone buying online by the year 2003 (Rowen, 1999).
The changes that electronic commerce has brought have been sweeping. We have new goods and services and new ways of selling them such as reverse auctions
(Priceline.com) and international “yard sales” (Ebay and Half.com). Geographical and temporal boundaries have enabled consumers to buy anything from anywhere at anytime.
Much of the power that formerly rested in the hands of the vendors now lies in the hands of consumers. With the assistance of technology they can search for better prices and drive them down across the board. They can offer their opinions and read product reviews from customers worldwide creating a better educated consumer.
All these changes have happened at rapid speeds and new and old companies have struggled to stay afloat in this new volatile commercial space. Without any prior
knowledge on what models work, they have proceeded primarily through trial and error and the lucky ones, such as Amazon and Ebay, have risen to the top. Many others have quietly disappeared (Dutta et al., 1998).
One of the biggest challenges that e-stores have faced and continue to deal with is understanding their customers. While a lot is known about how consumers think and act in the brick-and-mortar world, there has not been enough time and effort put into
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understanding the electronic consumer. The e-consumer, as we have defined him in this thesis, has the double identity of both a traditional consumer and a computer user. At the same time, we have observed the emergence of the e-store that also bears a double identity. It is a traditional store where the Information Technology has come to the foreground and has actually become the store itself. Understanding how e-consumers think and act in e-stores requires the convergence of three research disciplines:
Information Systems, Marketing, and Psychology.
In this thesis, we have combined those three reference disciplines to help us
understand online consumer behavior. We first developed a theoretical framework based on traditional consumer behavior research and environmental psychology. We also compared it to the Technology Acceptance Model (TAM) from the Information Systems field. We then performed three online field studies where we tested our framework and reached a set of conclusions and guidelines for better understanding of e-consumers and better e-store design that can lead to customer retention and higher sales.
The findings of the three studies are shown in Appendix D and they can be summarized as follows:
8.1. The shopping experience counts
We have found that the shopping experience of the e-consumer can have a significant impact on both her intention to return to a specific e-store as well as the number of
unplanned purchases she makes. We measured three attitudinal variables: perceived control, shopping enjoyment, and concentration. When we tested their impact on customer intention to retum, our results varied in each of the three empirical studies. In the first study, perceived control was significant for new and repeat customers and
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concentration was significant for new customers only. In the second study, only shopping enjoyment was significant for new customers while in the third study only perceived control was significant for new customers (We did not test for repeat customers in the second and third studies.)
We believe that these results are not contradictory but that they should be interpreted in aggregate. They indicate that the shopping experience of an e-consumer is significant.
We have found that it can have an impact on customer intention to return but the nature of that impact may vary depending on the product and type of e-store. Further research is necessary to determine how that impact varies, i.e. which attitudinal variables are
significant under what circumstances.
We also tested how well TAM predicts customer intention to return. Since the e- consumer is a computer user we expected that the dependent variable of TAM, user technology acceptance, would be equivalent to customer intention to return to an e-store.
We found that perceived usefulness of the e-store was a significant predictor but that perceived ease of use was not. Initially, we intended to compare TAM with out consumer behavior framework and select one of the two models as the best for predicting customer intention to return. However, both had equally predictive power so we decided to
combine the four attitudinal variables of perceived control, shopping enjoyment,
concentration, and perceived usefulness under the category of consumer experience and attitudes in our overall framework. That way, our consumer behavior framework
becomes more comprehensive in its description of the shopping experience on the web.
We also found that the number of unplanned purchases was influenced by the e- consumer shopping experience. All three attitudinal variables of perceived control,
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shopping enjoyment, and concentration had a positive relationship with unplanned
purchases in our second empirical study. We did not find the same relationship in the first study. This may be due to the different products. When renting movies, customers may be much less likely to rent more movies than they had planned initially. The short term of the rental may inhibit such purchasing behavior. However, movie renters may make unplanned purchases of cross-selling products, such as candy and popcom.
Unfortunately, we did not measure such purchases on our first study. On the other hand, book buyers may be more inclined to make unplanned purchases of the same product. In other words, when they enter a bookstore, online or offline, they are more likely to buy more books than they originally intended.
Finally, we also tested the relationship between the shopping experience of e- consumers with the length of their visit at an e-store and the level of their exploratory behavior. We found no significant relationships between those variables.
The above results have very important implications. While traditional factors such as product quality, customer service, and loyalty programs can increase customer intention to retum to a store online as they would offline, the importance of the shopping
experience on the web has not yet been shown in a comprehensive study such as ours.
The nature of electronic commerce makes the shopping experience seem less important at first sight. Being a limited medium, the web can only stimulate the sense of vision and partly that of hearing. It does not allow consumers to touch, taste, or smell products and it lacks the ability to let consumers and sales-people physically interact (despite some online interaction). Also, it does not provide many of the social aspects of shopping in the physical world, such as trying products out, which make it an enjoyable experience.
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We have found, however, that e-stores must pay attention to their customers’
shopping experience. Providing them with an enjoyable experience where they feel in control and where their attention is focused on the purchasing task at hand is critical to increase customer loyalty, especially among new customers. With more choices and lower switching costs, e-consumer loyalty has dramatically decreased (Anonymous, 1998: Morissette et al., 1999). It is, therefore, essential for e-stores to find ways to make the shopping experience on the web more positive, enjoyable, and fulfilling. We discuss some of those ways in the next sections of our summary of findings.
Our findings also have important implications for unplanned purchases. E-stores need to provide an enjoyable experience that keeps e-consumers concentrated on their
purchasing task. That way they are more likely to make unplanned purchases probably due to the higher probability they will notice and respond to marketing promotions.
Given the unprecedented levels of control e-consumers have over what they see and do on the web, it is crucial for e-stores to enhance the consumer experience leading to more unplanned purchases that translate to an increase in overall sales.
8.2. The e-store must appear useful
When we tested TAM with e-consumers we found that perceived usefulness is a very significant predictor of customer intention to retum among new customers. Consistent with past research that has shown that customers want convenience, control, and power when they shop online (Jarvenpaa and Todd, 1997), we found that if they do not perceive an e-store as being useful, they will not return to it. Lower switching costs on the web make customers more demanding and they will demand that an e-store enable them to shop better and more efficiently. Further research is necessary to determine how e-stores
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can make themselves appear more useful to e-consumers. We speculate, however, that e- stores can increase their perceived usefulness both by providing as much technology as possible to aid the purchase decision making process (such as search engines, one-click checkouts, recommendations) as well as constantly researching the needs of the
customers in terms of products and services and providing them at the right prices.
8.3. |New customers are different than repeat ones
Having established that the shopping experience can have a significant impact on e- consumer behavior, we tested various individual and system design factors that can enhance and improve the shopping experience.
An important individual factor according to our findings is customer tenure. Based on our first study findings, the experience of new customers is different than that of repeat customers both in the factors that are significant as well as the magnitude of their impact.
As discussed above. only perceived control had a significant impact on repeat customers”
intention to retum indicating that as customers become loyal to an e-store they may adopt a more utilitarian style of shopping where enjoyment is less important. We also found and indication that product involvement may increase its positive relationship with shopping enjoyment the more times customers return to the same store. Therefore, e- stores need to rely more heavily on factors other than product involvement to enhance the enjoyment of new customers.
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8.4. Value-added information and positive challenges enhance the consumer experience
The two system design factors that, according to the findings from the two first empirical studies, have the largest impact on the consumer experience are value-added search mechanisms and positive challenges. E-stores need to create unique content such as subjective product categorizations, reviews, and recommendations and incorporate them in innovative search mechanisms. Customers who use such mechanisms have been found in our studies to enjoy their experience and concentrate more on their purchasing activities.
At the same time, the environment of the e-store needs to provide positive challenges, such as those created by games and sports. One way to do that is through the use of value-added search mechanisms. Also, contests, polls, interactive functions, and so on may be able to challenge e-consumers positively. We found that challenges can make the shopping experience more enjoyable and help customers focus their attention better.
8.5. Customer need specificity can determine consumer behavior
Different e-consumers have different needs and they all vary in how specific they are.
Some customers come to an e-store knowing exactly what they want to buy. Others are less certain. Some may not have any idea of what they will buy. They just know they want to shop. The customers’ need specificity can influence what they do when they visit an e-store. We found that the more specific a customer’s needs are, i.e. the more she knows what she wants to buy, the less likely she is to use value-added search
mechanisms. Also, we found that customers with low need specificity who use value-
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added search mechanisms have a more enjoyable shopping experience and feel more in control.
E-stores can design their virtual storefronts so that customers can find and use search mechanisms appropriate to their need specificity. If a customer visits an e-store unsure of what he wants to buy and all he can find is a search engine where he must type the name of the product, he will likely be frustrated and never return. If, however, he is presented with the option of using value-added search mechanisms such as product suggestions and customer reviews, he can use them to increase his need specificity, make an informed purchasing decision, and be more satisfied with his experience. On the other hand customers who visit an e-store knowing exactly what product they want to buy, would like to use a straightforward non-value-added search mechanism such as a search engine that uses product names. If presented only with search mechanisms that use more
subjective value-added information, he may get frustrated and abandon his search.
8.6. The importance of customer personality is weak
We used the sensor-intuitor scale of the Myers-Briggs Type Indicator (MBTI) to test whether personality type is an important determinant of online consumer behavior. We expected that use of different web site features, specifically search mechanisms, would vary according to where consumers lie on the sensor-intuitor scale. Since sensors are more practical, more objective, and prefer short-term solutions we predicted that they would favor non-value-added search mechanisms offering objective information that can be used for quick and efficient searches. We predicted that intuitors, who are more
intuitive, more subjective, and like to see how ideas are related to each other would prefer
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to use value-added search mechanisms that provide additional subjective information on products and show how products can be connected in different categories.
Our results showed the opposite to be true. According to both the first and third empirical studies, sensors are more likely to use value-added search mechanisms and intuitors are more likely to use non-value-added ones. This was very surprising and it may be an indication that personality type is still not well understood, especially in the context of consumer behavior and more specifically online behavior. However, when we consider earlier definitions of sensors and intuitors we are better able to explain these results. Sensors rely more heavily on external information to make decisions, thus their use of value-added search mechanisms that provide a lot of additional information.
Intuitors, on the other hand, use more internal information such as instincts and previous knowledge and therefore use non-value-added search mechanisms that provide only minimal external information.
We also expected that when consumers used the search mechanism that is appropriate to their personality they would have a more positive experience. However, our results provided no support for our hypotheses.
Personality type intuitively appears to be important in many facets of our lives
including our purchasing behavior. However, our results do not support that expectation.
Our non-positive results may be a reflection of the narrowness of this study. We only examined one dimension of personality (sensor-intuitor) using only one measuring instrument (the MBTI). More research is necessary to replicate this study and also examine the other three dimensions of the MBTI as well as use different personality
measurement instruments.
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8.7. | Online Consumer Demographics do not determine behavior.
Past research on online consumer behavior has yielded mixed results regarding the importance of online consumer demographics on behavior and attitudes (Jarvenpaa and Todd, 1997a, 1997b; Korgaonkar and Wolin, 1999). In our studies we looked at the possible effect of gender and age. We found no significant relationship between those variables and online consumer attitudes and behavior. This may be a reflection of the
“equalizing” effect of the Internet and the web. Due to its restrictive nature and its young age, electronic commerce may impose standards on the purchasing behavior of all
consumers regardless of age and gender. As the technology and e-consumers mature, the strength of the effect that demographics can have will likely increase and online
customers will form clearer segments according to their demographic makeup.
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9. Future Research
The studies that comprise this thesis were extensive but only managed to scratch the surface of what determines online consumer behavior and attitudes. Much further research is necessary until we have a clear picture of the major factors that influence the way people feel, think, make decisions, and purchase on the web. This thesis should be seen as the stepping stone to future research. Some issues that can be examined are:
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We have seen that the impact of the shopping experience may be determined by the context in which the consumer is making a purchase. Further research can determine the types of products or e-stores where certain attitudinal variables are more
important. Perhaps for leisure products (such as music and books), shopping
enjoyment is more important whereas for utilitarian products (such as detergent and construction equipment) perceived control has a larger impact. It is possible that shopping enjoyment and concentration are more significant determinants of consumer behavior in e-stores that are more interactive in nature such as online auctions. More research can verify or reject our speculations.
There are many other web site factors that can influence the shopping experience.
Future research can study the impact of features such as product value co-creation (e.g. customer reviews and product customization), personalized content, and streamlined sound and video. With the proliferation of broadband technologies, the shopping experience on the web becomes richer and more engaging. Will we see consumers demanding an even more enjoyable experience in exchange for their loyalty? Or will we see them lose more control over what they see and do since
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advertisements that look like TV commercials will now be easily served to their computer?
Will we see the emergence of a global consumer? The ability to buy from anywhere in the world at anytime brings consumers from all over the world into one
international marketplace. Here they can exchange information, interact socially, and influence each other’s purchasing decisions. Does this lead to a more universal consumer profile where cultural and ethnic factors matter less? Research similar to that we conducted in this thesis will have to be replicated in different parts of the world to determine whether consumers will remain different or become more similar with time.
How does the knowledge about online consumer behavior affect the overall strategic development of web-based companies? Knowing that customer loyalty is highly dependent on shopping enjoyment could, for example, shift the mission statement of an online retailer from simply a provider of goods to a comprehensive site where customers can buy, interact, have fun, and enjoy themselves. The strategic
implications of research on online consumer behavior remain an uncharted termitory.
This is an exciting time. One where the matters of science fiction have become everyday reality. The enthusiasm and momentum of the Internet revolution has resulted in a lot of innovative and spontaneous development in electronic commerce. However, it is necessary to step back and take a more rigorous and scientific look at this new
commercial environment. Such an approach will help electronic commerce develop in a structured, efficient, and effective way. This thesis has taken some of the first steps
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