Buying on the Web? Isn't that dangerous? - Consumer Behaviour on Internet Shopping: Consumer Profiles, Decision Processes, Drivers and Barriers in the Virtual Environment -

TABLE OF CONTENTS

ABSTRACT

LIST OF FIGURES

LIST OF TABLES

1. INTRODUCTION
1.1. Motivation and
1.2. Research

2. CHARACTERISTICS OF INTERNET CONSUMERS
2.1. The online
2.2. Current
2.3. Online
2.4. Shopper types/segmentation
2.4.1. Motivation-based
2.4.2. Benefit-oriented
2.4.3. Adoption-based
2.5. Implications

3. CONSUMER DECISION MAKING ON THE INTERNET
3.1. Problem
3.2. Information
3.2.1. Information quality
3.2.2. Price search behavior
3.3. Evaluation of
3.3.1. Intelligent shopping
3.3.2. Virtual
3.4. Choice/purchase
3.5. Post purchase
3.6. Implications

4. POTENTIAL DRIVERS OF INTERNET SHOPPING
4.1. Benefits of online
4.2. Satisfaction and Web brand
4.3. Site design
4.3.1. Product fit and media
4.3.2. Atmospheric
4.4. Implications

5. ACCEPTANCE BARRIERS TO INTERNET SHOPPING
5.1. General
5.2. Security
5.3. Privacy
5.3.1. Privacy perceptions and consumer
5.3.2. Information practices and policies of Web
5.4. Reducing risk
5.5. Implications

6. CONCLUSION
6.1. Final
6.2. Further

REFERENCES

ABSTRACT

This paper attempts to gain a better understanding of consumer behavior on Internet purchases. To address this objective a secondary literature survey was conducted. In the first part, the paper focuses on characteristics of Internet consumers through briefly exploring online demographics and activities, and then through classifying several shopper types. Second, the established five stages model of the consumer decision process is examined in the online shopping context. Third, potential drivers of Internet shopping are derived, focusing on benefits of online shopping, Web loyalty and Web site design quality. The fourth part deals with acceptance barriers to Internet shopping, in particular with general barriers, security issues and privacy concerns. Implications for online marketers are derived after each part of the paper. Finally, several conclusions, a summary of implications and further notes are presented at the end.

LIST OF FIGURES

Figure 1 Online purchase penetration in Q4 2000

Figure 2 Customer Decision Making Process

Figure 3 Incentives that triggered a first time online purchase

Figure 4 Benefits of online shopping

Figure 5 Components of Web brand loyalty

Figure 6 Encouraging loyal online customers to switch a Web site

Figure 7 EC Environment Characterization

Figure 8 Product Characterization

Figure 9 Impact of bad experience on future online shopping behavior

LIST OF TABLES

Table 1 Opportunities to stimulate online purchasing

Table 2 Influence of first purchase satisfaction

Table 3 Reasons for purchase at certain stores

Table 4 Functional desires of Web sites

Table 5 Factors affecting consumer choice of online stores

1 INTRODUCTION

“There is no reason anyone would want a computer in their home” (Olson, 1977) Ken Olson, president, chairman and founder of Digital Equipment Corporation,

1.1 Motivation and

The Internet and its phenomenon has already a remarkable impact on society. People integrate the Internet more and more into their daily lives due to the versatile opportunities the Internet offers them. Electronic commerce (e-commerce) on the Internet is growing substantially, showing that more and more people access the Internet and get converted into online shoppers and online purchasers.

The Internet has already a major influence on marketing strategies of corporations. This influence will continue to grow and lead to structural changes for the whole business world. In order to participate on this process companies must view the Internet as an opportunity instead of a threat. A major factor for successful competing on the Internet is the understanding of consumer behavior. This behavior drives the Internet economy. The Internet does not only function as a new communication medium, which can be used as another distribution channel, but it does create an entirely new marketplace. This means for the consumer to experience not only another purchasing opportunity (like catalogs), but the possibility to surf within this new marketplace - a virtual world - to an almost infinite number of destinations to gain and evaluate information and decide on a purchase. Hence it is very interesting to explore the specific consumer behavior in this new, virtual environment - the electronic market represented by the Internet.

The main objective of this paper is to sketch a picture of current online shopper characteristics and the decision process consumers follow on the Internet. Furthermore, potential drivers and acceptance barriers towards Internet shopping are discussed and implications for online marketers derived.

The structure of the paper is as follows: Chapter two provides very briefly some statistics about the online market, demographics of Internet users and their online activities, in particular their shopping activities. Furthermore, different approaches of classifying shopper typologies are presented briefly. Chapter three focuses on the buyer decision process, comparing the classical five steps model with conditions of the Internet and giving some deeper insight on selected issues. Chapter four deals with potential drivers of Internet shopping, in particular with benefits of online shopping, Web brand loyalty, and the importance of Web site design. Chapter five pays attention to acceptance barriers to Internet shopping. General barriers are discussed as well as security and privacy issues particularly as important influencing factors. Each of the above mentioned chapters close with derived implications for online marketers. Chapter six summarizes in the conclusion the results of this paper as well as the implications for online marketers, which were given after each main chapter. The paper closes with further notes and carefully pronounced further research suggestions.

1.2 Research

The present paper is derived from recent academic literature and empirical surveys. Taking the enormous pace of progress of the surveyed subject - the Internet - into account, major sources of this paper were academic articles, Internet sources and . A variety of surveys have been considered as well as several books in the area of consumer behavior and industrial psychology. Although a large range of sources were utilized, some data could not be obtained due to financial limitations of the author (no ability to purchase data). However, the exploited sources should be sufficient enough to give an proper insight into consumer behavior on the Internet.

The dominance of US literature and surveys in this paper is justified by the fact that the US market holds a leading position in Internet adoption and hence most scientists and researchers have focused on the US market. This might change in the future with the evolving importance of other markets in the world. So far, there are several indicators that consumer online behavior in other countries develops not tremendously different from the US market and hence the paper focuses on this market.

In order not to go beyond the scope of this paper attention is given to a broad range of topics, but sometimes not as deeply as the author might have wished, for instance considering more several consumer typologies/orientations. Furthermore, the range of topics is also limited. For instance, it is important to note for companies that consumers who shop for personal purposes have different demands and preferences than users who shop for business purposes on the Web. Also geographical differences of consumer behavior on the Web can be significant, but could not be explored in more detail in order to stay within the scope of this paper.

2 CHARACTERISTICS OF INTERNET CONSUMERS

The tremendous and relatively fast adoption of the Internet is not only a consequence of permanent technological progress, but also accelerated trough changing needs of consumers. Far-reaching shifts in society transform consumer behavior in general and influence the acceptance of the Internet and electronic commerce (e-commerce) in particular. Negative growth birth rates and rising median age in developed countries will lead to demographic changes in society, raising, for instance, a growing need for relationships between firms and consumers to satisfy older customers. More women in the workforce will change for instance time perception of many potential customers and more single households will cause a demand for new products and services. As a consequence, future consumers will be dramatically different from past or even present consumers. They will be more demanding, more time-deprived, more information intensive, and highly individualistic (Sheth and Sisodia, 1997).

Since more and more consumers today integrate the Internet into their daily life, many of them start to shop electronically. It is interesting for retailers to gain more knowledge about the characteristics of these Internet consumers in order to be able to optimize marketing efforts and adjust strategic decisions.

The first part of this chapter provides very briefly some statistics about the online market, demographics of Internet users and their online activities, in particular their shopping activities. In the second part different approaches of classifying shopper typologies are presented briefly. The chapter closes with implications for marketers.

2.1 The Online

According to recent figures from Nua (2002a) the Internet users worldwide accounted for roughly 10% of the world population, 580.8 million people were using the Internet (in May 2002). This figure breaks down to 185.8 million users in Europe, 182.8 million users in the USA and Canada, and 167.9 million surfers in the Asia-Pacific region. China is thereby a very fast growing market with currently around 57 million users (Nielsen/NetRatings, 2002). It is projected that there are between five and eight million users in Africa, most of them in North and South Africa (Nua, 2002b). For South Africa, the number of Internet users is estimated to be 2.9 million users (World Wide Worx, 2002). Although these figures might differ according to other surveys, it still gives an impressive picture of the online market. Countries with very high Internet penetration - the mature markets - are Iceland (70%), Sweden (65%), Denmark (60%), Hong Kong (60%), and the US with 59% (Nua, 2002a). Another interesting fact is that English will lose importance as a language spoken on the Web. According to figures from Global Internet Statistics (2002) 228 million English speaking people use the Internet compared to 339 million Non-English speaking, whereby the number of Non-English speaking users will grow faster in the near future.

Considering the economic sizes of these online markets, the figures differ enormously. According to Shop.org (2002) online shoppers in the US spent $51.3 billion online in 2001, 21% more than the year before. The estimation for 2002 is $72.1 billion for the US market (which would mean an increase of 41%). Multi-channel retailers are among the most profitable, while 56% of US online retailers reported profitable online operations in 2001. For Europe, Forrester Research (2002) predicts the online market to be worth Euro 33 billion. To summarize, the growing online market is of significant importance for many companies, thus consumer behavior on the Web is worth investigating.

2.2 Current

In mature Internet markets (see chapter 2.1) the demographic profile is converging toward the general structure of the society. According to a report of the U.S. Department of Commerce (2002) the American demographic profile of the Internet user is developing toward a common profile. Concerning the general age distribution it is evident that the very young (under 10 years) and older people (above 55 years) are lacking in the Internet adoption process. Gender is approximately equally distributed. Concerning the educational attainment, the typical Internet user is still more educated than the average, but the lower educated groups are catching up. Approximately 80% of people with bachelor degrees or higher use the Web compared to about 40% of people having a high school degree or less. Family income is also still an indicator for Internet usage, almost 70% of people with an family income of $50000 or higher surf the Web while only around 35% of people with family income of $25000 are connected in some way to the Internet. But, Web use is growing faster among people in lower family income brackets.

According to several studies this general development of demographic profiles is similar in other countries adopting the Internet, although there are huge differences concerning the current status. Europe shows a very diverse picture of demographic profiles as well as Asia. Concerning Africa and South America the Internet usage is more privileged to higher income and educated households, although there are some exceptions.

2.3 Online

People on the Web are engaging in several activities, and once again, several studies reveal slightly differing percentages of activities. According to a report of the U.S. Department of Commerce (2002) 84.0% of individuals online engage in email, and 67.3% conduct product/service information search as the main activities followed by looking for news, weather, sports (61.8%). Playing games is ranked fourth (42.1%) and online product/service purchases are made by 39.1% of Web users. These figures show that the Internet is not longer mainly used as a medium for information, but also perceived more and more as a transaction tool, representing an electronic market.

The term online shopping is used as employing the Internet to research or browse products, compare prices, etc., but not necessarily for purchasing. In contrast, the term purchasing online is used as ordering a product or service online and completing the purchase/ transaction online.

According to The Boston Consulting Group (BCG) (2001), 78% of Internet users shop online and 55% purchase online in the US which lays slightly in contrast to the report of the U.S. Department of Commerce (2002). These figures place the USA in a leading position concerning business to consumer e-commerce adoption in contrast to less developed markets, for instance in South Africa 26% of Web users having shopped online (Webchek, 2002).

Most respondents of the GVU’s Tenth World Wide Web User Survey (GVU) (1998) survey shop for personal reasons 1-2 times per month (31%) or less than once per month (27%). Females are reported to shop more than males (21%, 3-5 times per month compared to 15%, 3-5 times per month for males). Concerning the frequency of purchasing, 43% of users purchase at least once per month and 38% less than once a month (GVU, 1998). On average users make ten transaction and spend $460 annually, 48% of online purchasers spend more than $500, 20% between $200 and $500, and 32% spend less than $200 online per year (The Boston Consulting Group, BCG, 2000a).

An interesting point is that women, at least in the USA, will strongly dominate online purchasing activities in the future. Women either make or influence some 80% of all household purchases - equivalent to $ 1.5 trillion annually and made already 56% of all online shopping in 1999 with a rising tendency. With a more than 74% of women dealing with household financial matters, they have immense spending power (Feather, 2000, pp.80-84). Such purchasing power signals a change what products will sell well online.

Men and women shop for different items on the Web. Men are more likely to purchase computer software and hardware. Men spend more money shopping online because they are still the dominant buyers of big-ticket items like computers. Women, on the other hand, are more likely to buy books, music, greeting cards, flowers, groceries, and travel services. Clothing is one of the fastest-growing online shopping categories and women already buying clothing online four times as often as men (Feather, 2000, pp.80-84). These findings are generally in line with findings from the GVU (1998) concerning the products purchased in categories.

A more recent survey of the BCG (2001) revealed that the leading product category purchased by Internet users, books (28%), is now accompanied by music/videos (26%) and computer software (23%). Compared to a study one year earlier (BCG, 2000a) all product categories grew, some with very strong rates. The clothing sector expanded from 10% to 22%, the leisure travel category grew from 11% to 20%, and remarkably 17% of users have purchased toys compared to 4% the year before. The results of the more recent study are presented in figure 1.

illustration not visible in this excerpt

Figure 1 Online purchase penetration in Q4 2000

(The Boston Consulting Group, 2001, p.10)

According to a GVU survey (1998) 30% of the US non-purchasers on the Web were somewhat likely or very likely to purchase online in the future. Additionally, 41% of the respondents located in Europe said that they thought they will be doing online purchasing ‘somewhat more’ over the next 6 months. These statements and development of products sold on the Web show that the online market penetration is still in its early stages and implies a vast potential for online retailers.

2.4 Shopper types/segmentation

The Internet continues to grow and is in some countries already adopted by more than half of its inhabitants (see chapter 2.1). This leads to a very diverse picture of users in terms of demographic and psycho graphic profiles. Since many users turn (sooner or later) into online purchasers, there is a strong demand for online market segmentation from the business site. The following three sub- chapters briefly sketch different approaches from researchers and firms, characterizing online consumers.

2.4.1 Motivation-based

Wolfinbarger and Gilly (2001) developed an segmentation approach, based on whether the motivation to search online is either primarily goal-oriented (for efficiency) or experiential (for fun). These two different shopper types have different preferences and expectations online.

The goal-oriented shoppers are more transaction-oriented and desire to purchase what they want quickly and without distraction. Wolfinbarger and Gilly (2001) found in their study that 71% of these respondents planned their online purchase previously. The authors suggest that goal-oriented shoppers are interested in online shopping because of four specific attributes: convenience and accessibility, selection, availability of information, and lack of sociality. Importantly, these goal-oriented attributes are associated with increased freedom and control. As they experience little pressure to purchase before they are absolutely ready they are not impulsive.

The experiential shopper is more likely in categories where shoppers have an ongoing, hobby-type interest. Wolfinbarger and Gilly (2001) found in their study that 29% of respondents had been browsing when they made their purchase. The authors suggest that experiential shoppers are motivated to shop online due to four important factors: involvement with the product class, positive sociality, positive surprise, and bargain hunting. The most desirable outcome of these shoppers is fun or the shopping experience itself which is important or more important than the goal.

2.4.2 Benefit-oriented

The approach of Windham and Orton (2000) tries to consider the main benefit each online shopper seeks when shopping online. The consumption pattern of online consumers differ due to the fact that everybody has different needs and is therefore looking for different benefits using the Web. Windham and Orton (2000) distinguish six types of online shoppers:

- Convenience Shoppers
- Price-Sensitive Shoppers
- Comparison Shoppers
- Brand-Loyal Shoppers
- Focused Shoppers
- Storefront-Adverse Shoppers

Convenience Shoppers shop regularly at the same sites, and for the same product categories, because the sites are familiar (due to long term experience) and thus shopping is more timesaving. To a certain extend time is more valuable than money, especially for commodities. These type of shoppers are extremely loyal and therefore an ideal target for brand-extension strategies in sites they currently favor. It is expected that this section of shoppers will get proportionally smaller as the online market grows.

Price-Sensitive Shoppers are looking for the lowest price of a product on the Web. They will switch sites easily if a lower price is offered and they are not discouraged by the inconvenience of learning about new site functionalities and filling out new profiles. Online coupons, rebates, and other incentives appeal to this crowd. It is expected that this section of shoppers will get proportionally larger as the online market grows.

Comparison Shoppers like to compare extensively before deciding for the best deal which doesn’t necessarily has to be the cheapest offer. The principle of comparing, and the thrill of the hunt are more important to these kind of shoppers and hence presenting enough information and special promotional offers are favored. It is expected that this section of shoppers will get proportionally larger as the online market grows.

Brand-Loyal Shoppers are closely related to Convenience Shoppers, but more conservative in terms of needing brand recognition to feel comfortable. They become very loyal to the sites they trust and familiarity is a major selection criteria. This group may favor offline brands which come online with a credible offering, although strong online brands are considered as well. It is expected that this section of shoppers will get proportionally larger as the online market grows.

Focused Shoppers approach online shopping with a mission. They search at specific Websites, buy and move on, and thereby they claim to be resistant to online offers and banner ads. Their utilitarian shopping behavior is a hybrid of people who shop for convenience and people who dislike shopping in general. It is expected that this section of shoppers will stay proportionally the same as the online market grows.

Storefront-Adverse Shoppers dislike crowds and basically the physical act of shopping. For them the Web provides a welcome relief. They may be good targets for Website brands extending their brand to new product categories as well as for brick-and-mortar companies moving their brand online. It is expected that this section of shoppers will stay proportionally the same as the online market grows.

2.4.3 Adoption-based

Another segmentation approach was developed by the BCG (2001) who distinguished consumers due their position on the adoption curve of the Internet (the time they have been online the first time). Pioneers have been online since pre-1997 and belong to the first wave of online consumers. Early Followers have been online since 1997 to 1998 and First-of-the-Masses engage in Internet use since 1999. Mass market are users which have been online since 2000. These different shopper types have typically unique behavior patterns and demographic backgrounds.

2.5 Implications

Since general shifts in society will lead to more time-deprived consumers the Internet might provide interesting alternatives products and services, compared to the traditional marketplace. The expectations of future consumers are high. Because they are highly individualistic and information intense the Internet might offer many companies new niche markets which would normally be not economically efficient.

Since the Internet market is already relatively big and continues to grow, products categories sold on the Internet successfully will widen. Hence, there are still plenty opportunities for companies to engage on the Web and participate on this growth.

The maturation stage of Internet adoption is very diverse among different regions and countries throughout the world. Marketers who attempt to target several countries have to consider very different degrees of purchasing power and the growing importance of other languages than English on the Web. Different maturation stages also account for different shopper types as usually the first adopters are more educated and male. Thus, products/services offered in this markets should fit to the actual stage of market adoption.

While the demographic profile of the Internet user is converging with the society profile, more and more older people access the Web. As a consequence, for instance, some consumers are more averse, as risk perception tends to grow with age. Since more people are shopping online and more non-purchasers are planning to buy online in the future on the Web, opportunities to gain these consumers as first time purchasers are very interesting. Companies can try to focus on these consumers since they are may be more opened for marketing measures and maybe more easy to influence due to a lack of experience. Other demographic developments are interesting, too. The catching up of lower income groups are with Internet use provide marketers new potential online buyers groups. Thus marketer should analyze if they can offer products/services typically demanded by these groups or if they can offer specifically designed products/services for these groups. Different appeals for addressing these groups might have to be considered. Since females shop more than men online and also will spend more online in the future, concerned Web sites should adjust their product range, communication patterns and promotional activities.

Segmentation Approaches Considering the growing need for online market segmentation it is evident that shoppers do not have the same motivations purchasing online and also different levels of experience. Marketers usually have to focus on a specific market segment with a certain demographic profile like in offline world. Several segmentation approaches may appeal, but it is advisable to decide on one segmentation approach and focus on the targeted customer segment.

Motivation-based segments: Different desired outcomes drive attitudes and consumer behavior. Marketers can differentiate between goal-oriented and experiential customers because they demand totally different site features and content. Trying to satisfy both shopper types at the same time would lead to conflicts. Marketers have to take into account that goal-oriented shoppers prefer easy-to- access and easy-to-use information about products or services. A wide product selection range and effective customer service are more important than entertaining content and community features. For this customer type a high degree of control over what kind of information to receive is valuable. Additionally, an important feature is to allow the user to delay a purchase during the process and to come back later to continue where the process was interrupted. In contrary, marketers focusing on the experiential shopper should realize that this shopper type is more interested in content and community. Before emphasizing and communicating experiential benefits/site features to customers, marketers need to identify a base of key users who are regular users and who are involved with the product category. Then they can try to deliver a unique or surprising experience (i.e. reading of reviews, excitement of bidding).

Benefit-oriented segments: Marketers should focus on one or two shopper types utilizing this segmentation approach in order to maximize the value/benefit for the customer. Convenience Shoppers and Storefront-Adverse Shoppers might be good targets for product extension strategies within the brand, due to familiarity and time saving advantages. Since Price-Sensitive Shoppers like monetary incentives it is difficult to hold them over the long term, because there always will be a competitor with better prices. Comparison Shoppers should be offered comparison possibilities through clear and easy product information listing and other technical features. Since Brand-Loyal Shoppers are not so much focused on price, but rather value the whole site experience, should focus on building trust and confidence. Once these customers are satisfied they might be a valuable consumer base. The Focused Shoppers favors time efficient shopping without distraction tools. Thus, providing easy search and transactions are beneficial.

Adoption-based segments: Because Pioneers and Early-Followers are expected to be more experienced with Web use, they can be offered more complex features such as site personalization or advanced communication tools in order to enhance the perceived value. On the contrary, First-of-the- Market and Mass Market users are more likely to be less technology oriented, so an offer of easy to search and easy to buy features might trigger increased purchases in this segment.

3 CONSUMER DECISION MAKING ON THE INTERNET

In the previous chapter several aspects of Internet consumer characteristics has be discussed. This chapter focuses on the different processes a consumer experiences when buying on the Web.

Several general models of buying behavior has been developed in order to get an insight of the process, which consumers follow in making a purchase decision. The traditional model of consumer decision process consists of five stages. As shown in figure 1, the first stage is the problem recognition, followed by the information search and then by the evaluation of alternatives. The fourth stage involves the purchase decision and the fifth stage the post purchase experience.

illustration not visible in this excerpt

Figure 2 Customer Decision Making Process

(Sheth, 2000, p.156)

In the traditional marketplace the model is widely examined and accepted. However, the model is yet applied very little to the new circumstances of the online market. Understanding the consumer decision process on the Internet is crucial in meeting customer expectations and deliver value to the customer in order to create a competitive advantage. Buttler and Peppard (1998) addressed this issue by comparing this consumer behavior model in the traditional marketplace with the virtual marketspace. For this purpose they examined the extensive problem solving situation in the first instance, due to the lack of experience in online shopping and the perceived risks in payment security for most of the potential customers. With more experience, however, many purchases can be categorized as limited problem solving approaches, which simplifies some procedures along the stages. Habits and preferences of Websites will be established, leading to specific consumer expectations.

This chapter investigates each of the traditional decision making stages of consumers in the context of the Internet in a separate part. Furthermore, specific issues falling into these stages are treated in sub- chapters in order to give an deeper insight into the consumer decision process on the Internet.

3.1 Problem

The first stage of the consumer decision process is the problem recognition. It consists of the awareness that there is a problem, which has to be solved. This first stage triggers all following stages of a consumer decision process.

Most of the problems are probably (still) recognized in the offline world as people live most parts of their lives (still) in the offline world where this problems occur. Wolfinbarger and Gilly (2001) found out that typically 71% of online shoppers access the Web with a specific idea what to purchase. These buyer types are classified as goal-oriented shoppers (Wolfinbarger and Gilly, 2001), the other 29% of users - the experiential shoppers - are more fun and entertainment oriented and tend to shop more impulsively. For this type of buyer problem recognition can also be triggered on the Web.

In terms of consumer problem recognition, companies are now able to know and anticipate the consumer’s needs in better way, due to growing databases of consumer information. It is possible to assist and thereby influence the potential customer in providing highly personalized offers, which may trigger a purchase. For the buyer this can lead to a less complex decision and increased effectiveness which can result in an improved relationship. Unfortunately, most firms fail to exploit the potential of these technologies and offer incentives and promotional activities which are too undifferentiated (i.e. unsolicited emails). The problems connected with these practices are discussed in chapter five.

Brand awareness remains essential in this stage, communicating a clear message to the targeted potential customers and raising consciousness for a potential solution to their needs. In addition, women are more likely in the online environment to look for familiar brick-and-mortar or catalog names.

3.2 Information

After the initial stage of problem recognition the consumer takes action to gain knowledge. In the literature this stage is called the information search stage. The consumer seeks information for decision-making, an opportunity for the marketer to provide necessary information.

The degree of perceived risk can influence this stage of decision process. In low-risk situations, consumers are likely to use very simple information searches and evaluation, whereas in high-risk situations, consumers are likely to engage in complex searches and evaluation tactics (Schiffman and Kanuk, 2000, p.445). Different forms of perceived risks are covered in chapter five.

The sources of information with the most influence are those that are perceived by consumers to be the most trustworthy. According to a survey of Windham and Orton (2000) the four most important information sources for finding out about Web sites are:

1. Recommendation, word of mouth (100%)
2. Magazines/newspaper articles (95%)
3. Search engines/links on portals (83%)
4. Advertising (TV, radio, billboards) (67%)

The first source is related to friends, who often send interesting links via email. The second most cited choice, magazines and newspaper articles, is more related to a long term perspective. This is because companies must proof over time their ability to perform successfully in all relevant criteria before media instances risk their reputation as independent sources. The third source for Web site search is also quite important, with 83% of consumers using search engines and links on portals. This is the most effective online opportunity to get recognized by the potential customer. Prospects for marketers concerning this interesting fact will be discussed later in the implications chapter.

Once customers have found interesting and satisfying Web sites in a specific area of interest, they tend to bookmark them and use them in future activities. According to Feather (2000) nearly 80% of users who’ve been online for at least 2 years navigate the Web almost exclusively via their favorites list. This list gets revised regularly to keep it manageable. About 60% of users go directly to the Web sites of names they recognize, and most surfers do not keep more than 20 or 30 Web sites in their favorites list (including search engines, weather sites, stock trading sites, bulletin boards and so on). Hence, the number of electronic retailers bookmarked onto favorites lists will certainly not be more than 20, which could indicate that there may not be more than one or two electronic retailers per product category on any user’s favorite list. Having a place on a favorites list, avoids the problem to being recognized by a search engine. Additionally, given that the Internet lacks a stimulation of senses, bookmarks might be a good support for the internal search - similar to the evoked set. Hence, it should be very important for marketers to be positioned on this list.

The navigation process on the Web site and the product/service information search itself should be as easy as possible, as many consumers experience serious difficulties of finding the right product/service (see chapter 5.1). These issues relate mainly to Web site design which is treated later in chapter 4.3.

Due to the fact that information is virtually free and the cost of accessing information is negligible, there is a danger of information overload on the Internet. Information overload occurs when one learns more about the available alternatives and the search becomes psychologically costly (Wilkie, 1994). In order to cope with these difficulties the human being tends to simplify its problem, which is one reason for strong brand loyalties. To avoid information overload for the customer and to improve the general quality of the Web site experience, it is useful to have a closer look at information quality aspects and price search behavior pattern, as discussed in the following two sub-chapters.

3.2.1 Information quality

One can derive that providing the right information in the optimal amount is a crucial issue influencing the customers purchase choice in a computer-mediated environment. This general idea is supported by Olshavsky (1985), who found that customers are willing to evaluate a product or service, based on their purchase decision criteria, when the offered information meets their needs. If this requirement is not fulfilled, the product or service is less likely to be considered by the consumer at all.

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