The Impact of Interactive Media on Consumer Buying Behavior

Table of Contents

1. Introduction
1.1 Definition
1.1.1 Interactive Media
1.1.2 Television Home Shopping
1.2 Research Question and Objectives
1.3 Course of Work

2. Framework of Television Home Shopping
2.1 Proceeding and Technique
2.2 The Target Audience

3. Analysis of Television Home Shopping
3.1 Analysis of Success Factors
3.1.1 Marketer’s View
3.1.1.1 Fit to the CRM Model
3.1.1.2 Further Factors for Success
3.1.2 Consumer’s View
3.2 Summary of the Results

4. Future Prospects and Research

List of References

1. Introduction

1.1 Definition

1.1.1 Interactive Media

Interactive media in this paper describes direct marketing which contains elements that enable customers to interact with a company, such as online computer services, television home shopping and interactive TV (Stephens et al. 1996, p. 193). Over the years the term direct marketing was used in various meanings. It first described a way of selling products and services to customers without an intermediary. Companies that applied this kind of distribution used salespeople, who visited customers or sold their products in their own stores (Kotler et al. 2007 p. 961). Later the term was used as a description of a new method of distribution including mail order and ordering by telephone, which replaced the intervention of a sales person or a retail outlet (McCorkell 2003, p. 565).

Today the Direct Marketing Association (DMA) defines direct marketing as “an interactive system of marketing which uses one or more advertising media to effect a measurable re- sponse and/or transaction in any location”. This definition emphasizes that there has to be a measurable reaction, which means an inquiry or an order (Kotler et al. 2007 p. 961).

Often direct marketing is also regarded in the meaning of direct relationship-marketing. Companies save all the information they have about their customers in databases in order to build long and profitable relationships with them. According to this, beside direct sale, direct and tailored communication is also carried on (Kotler et al. 2007 p. 961). The communication of direct marketing is always interactive, because it provides an individual interaction between the company and the customer. In contrast to traditional mass communication methods, direct marketing addresses individual people.

Depending on its different definitions, various types of direct marketing can be distinguished, such as direct advertising (e.g. direct mail), direct response marketing (e.g. coupons, tele- shopping), telemarketing, catalogue marketing, and e-commerce (Schmidt 2004, p. 148).

In this paper the terms interactive media and direct marketing will be used in conjunction with direct distribution and the companies’ interactive communication with its customers that goes along with it. This definition limits the distribution channels to the home shopping channels catalogue, television, and Internet and includes the communication which encourages cus- tomers to order products or services and which is able to build profitable relationships with them.

1.1.2 Television Home Shopping

The definition of home shopping acts on the comprehension of interactive media as defined for this paper in the previous chapter. It is conceptualized as a continuous construct captur- ing the quality of an electronic two-way-communication between a buyer and a seller (Alba et al. 1997, p. 38). That means the buyer uses the distribution channels at home and orders either via electronic media or via telephone. The two dimensions of interactivity are the re- sponse time and response contingency, which can be immediate (Alba et al. 1997, p. 38).

Television home shopping is a special type of direct response marketing and can be subdi- vided into three types: infomercials, short-term infomercials, and home-shopping channels. Infomercials are longer than average advertisement and ranges in its duration from 3 to 60 minutes. Short-term infomercials are much shorter, often they take less than two minutes. Home-shopping-channels are devoted entirely to selling products via television on a 24-hour- a-day basis (Agee/Martin 2001, p. 35). All three types appear to the viewer as a program rather than a commercial. The offered products in short-term infomercials are usually books, small home appliances or music. Infomercials and home-shopping-channels predominantly deal with jewelry, lamps, dolls, clothing, tools, and entertainment electronics (Kotler et al. 2007 p. 981).

Television shopping formats always consist of segments containing demonstrations with testimonials, the offer, price, payment options, telephone number, and a repeated call for action (Agee/Martin 2001, p. 35).

The other channels of home shopping are catalogue marketing and e-commerce. Catalogue marketing is the promotion and sale of goods through catalogues distributed to various target groups. Traditionally it is a form of mail order, which targets consumers who value the convenience of choosing products at home (Jobber et al. 2005, p. 341).

Purchasing goods and services via Internet, also called e-commerce includes a variety of electronic platforms, such as sending orders via electronic data interchange (EDI) or via email. It is driven by digitalization and networking (Kotler et al. 2007 p. 982). For a company there are four possibilities to appear in online media. A company can build up its own home- page, place online advertising, use email or participate in open communication groups (Kot- ler et al. 2007 p. 985). To use the Internet as a distribution channel, a company has to create a homepage, which contains a description of the company, a digital catalogue including the products’ attributes, availability, and the price. Further information such as news, technical information, brochures, and contact data are useful as well (Kotler et al. 2007, p. 985).

1.2 Research Question and Objectives

In Germany, the market for home shopping is booming. Television constantly gains impor- tance for direct marketing activities. In 2000 the turnover of Germany’s three most successful television home shopping companies Home Shopping Europe (HSE), QVC and RTL Shop reached a total of €392 million; in 2004 it increased to approximately €871 million. Today, statistically speaking every sixth German has ordered a product or service from a television home shopping channel, 5,6 million of them even do it on a regular basis (Kotler et al. 2007, p. 981).

Television home shopping today gains €1,2 billion and the market research institution Gold- media in Berlin expects a €1,6 billion turnover until 2012 (Eck 2009, p. 41). The television home shopping companies achieve better results than they had ever before. The company QVC, based in Düsseldorf increased its turnover in the last year and achieved its second best result since its formation twelve years ago (Erlinger 2009a, p. 13). The television home shopping channel 1-2-3.tv GmbH currently closed its business year with the best result since its formation four years ago (Erlinger 2009b, p. 37) and the market is not saturated yet (Fuhr 2007, p. 36).

This market situation leads to the fact that in spite of the economical crisis companies invest a lot of money in the development of home shopping. For example QVC plans to invest ten million Euros in 2009, mainly in developing Internet and IT-systems (Eck 2009, p. 41). In the past it has improved its logistics and achieved to shorten the delivery period to the customer by twenty percent (AZ 04.03.2009).

Not only in Germany television home shopping is considered to be a growth market. In the United States the market for home shopping and mail order grew by 10% to a value of over US$172 billion in 2004. The European home shopping market grew from €67 billion in 2003 to more than €68 billion in 2004 (Walsh/Gwinner 2009, p. 112).

This paper deals with the question why television home shopping, as a part of interactive media, is so successful and what specific impact it has on the consumers’ buying patterns. In the earlier definition it was subdivided into the three types: infomercials, short-term infomer- cials, and home-shopping channels. This paper will concentrate on the latter. Television home shopping channels will be analyzed exemplary, because above all shopping within these channels is one of the most interactive ways of home shopping and reveals some intri- guing and interesting results concerning consumer manipulation techniques and consumer behavior.

The main objective is to find out why offering products and services via television has changed the consumers’ buying behavior until now and what can be expected for the future.

1.3 Course of Work

At first chapter 2 will deal with the paper’s framework. It will analyze how television home shopping works. It will describe the buying process and will survey the techniques used to encourage customers to order the offered products. It will show that television home shopping programs are paragons of relationship marketing. Due to the fact that identifying the customers’ characteristics and needs is a basic requirement to be successful in the market, the customers’ typical characteristics will be identified roughly.

Chapter 3 will then deal with the analysis of television home shopping, answering the question why exactly it is so successful. At first chapter 3.1.1 will concentrate on the marketers’ point of view. Assuming that customer relationship management plays a decisive role for companies’ success today, it analyses the fit of television home shopping to the model of CRM. It will be demonstrated that it perfectly fits to the generic CMR model and therefore exactly fulfills all requirements for an effective customer relationship management. In the following part further factors for success will be examined.

Chapter 3.1.2 will then deal with the consumers’ view. At first it will be stated what is of importance for them during the buying process and which factors play a decisive role for their buying behavior. This chapter elaborates what the consumers’ reasons for television home shopping are. It will be illustrated that home shopping provides the perfect terms for the today’s customers’ way of life of and that it goes along with strong advantages shopping in retail stores cannot keep up with.

Subsequently chapter 3.2 will answer the research questions by summarizing the results, which means that it will state the reasons for the success of television home shopping chan- nels. Concluding the last chapter 4 will give some recommendations concerning future re- search options.

[...]