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E-shoppers in Different ways of Making Decisions
NOVEMBER 2013 · 
Keywords: online retailing, marketing,after-sales service
New customers differ significantly from veteran ones regarding demands for online shopping information, and online stores should design marketing strategies based on different concerns of these two distinctive groups of shoppers.
 

“The behavioral differences between new and existing customers are more prominent and patterned in online retailing than in traditional models”, says Associate Professor Xianghua LU from the Department of Information Management and Information Systems, School of Management at Fudan University. E-commerce is one of her research subjects. She and her assistants collected data from over 4000 women’s garments stores based on taobao.com from November 11, 2010 to September 4, 2011 and has conducted empirical comparative study on data related to the service demands of both new and existing customers. She has discovered that the stores’ service provisions of information access, credibility assurance and after sales support had more influence on new customers than on existing customers, while the latter are more concerned with information related to product features and the online display of the array of products.

The research paper points out that the findings are a good inspiration for online stores in designing differentiated website functions, service and operation strategies according the different demands of new and existing customers so as to further improve their customer relations management capacity.

What are the Differences?

The differences between the new and the existing customers have always been the focus of marketing in traditional retailing. Online retailing differs greatly from the traditional model in shopping environment, consuming process and decision-making factors. Therefore, it is not viable to replicate the usual practices of traditional retailing in online retailing. With the rapid development of China’s online retailing market, online stores will adopt more meticulous customer relations management strategies. Hence it is of vital importance to better identify and understand the difference in the demand between new and existing customers based on the characteristics of online retailing.

According to the definition of taobao.com, customers who shopped only once at a certain online store in the past 6 months are regarded as new customers while those who shopped twice or more at the store are considered existing customers.

During the research, Ms. LU and her assistants designed an empirical comparative study on the basis of the data collected from women’s garment stores on taobao.com to analyze the differences between new and existing customers’ demand on information access, product comparison, credibility assurance and after service.

In retailing, the biggest difference of the new and the existing customers lies in their experience in dealing with retailers. Lots of studies have shown that people’s real-life experience has a major effect on their ensuing behavior. New customers make their shopping decision mainly on the basis of personal presumption and the either abstract or presentational features of retailers or products; experienced existing customers, on the other hand, base their decisions on the specific and systematic features of retailers and products.

During the information-collecting phase, a customer’s objective is to search for products that meet his needs. Retailers should provide convenient channels to facilitate the customer’s information-searching demand, which is defined as “the demand for information access”. In the product-assessing phase, the customer needs more information related to products and retailers to make comparisons. Hence, retailers must provide ample information to sustain his “demand for product comparison”. After that, the customer enters shopping decision-making phase, predicting possible transactional risks related to the retailer of his own choosing and making a final decision. Therefore, he demands that the online retailer provide certain degree of “credibility assurance service” to offset his anxiety and the possible loss predicted. Last but not the least, due to the logistics and possible returns associated with online shopping, after service will also be an important factor affecting the final decision-making. He would also expect to have some ex ante commitment from the retailer, which is called “the demand for after service support”.

These presentational demands during the shopping process are similar with both new and existing customers. However, existing customers usually have more information on retailers, including not only visual information but also the speed and time of response as well as the quality of after service; they always readjust their assessment criteria on the basis of first-hand experience, raising or lowering the expectation of demand—leading to an evident difference from new customers in this respect.

Ms. LU proposed two hypotheses on each of the four phases and tried to validate them through the analysis of real data.

1. The demand for information access. Whether retailers can help customers reduce the cost of product-searching has a major influence on the purchasing behavior of the latter. Specifically, if retailers take initiative in providing services and technology supporting fast information-searching, ensuring timely communication, they can accelerate customers’ decision-making process.

New and existing customers also differ considerably in channels for accessing information. Related studies have shown that with the increase of a customer’s shopping experience and knowledge with a certain retailer, the number of times for him to use external search engines and other sources for product information will decrease. He is prone to use shopping history as a shortcut to access the retailer’s information; even if he is not familiar with the products in question, he will also make use of his previous experience in purchasing similar products to reduce the demand on such information channels as the retailer’s product advertisement and sales service. In contrast, a new customer lacks direct shopping experience with the retailer so he expects convenient and fast channels to access the retailer’s information. Therefore, the ability of the latter in providing such channels will have a major influence on the purchasing behavior of the former.

Thus, the researchers have proposed two hypotheses:

Hypotheses 1: A better provision of information access service from retailers will increase customers’ purchase;

Hypotheses 2: A better information access service is more effective on new customers than on existing customers.

2. The Demand for Product Comparison. Although both new and existing customers have evident demand for product comparison, existing customers demand more essential information on products and property parameters of similar products to assess whether the products meet their needs due to their autonomous shipping behavior; plus, based on their pleasant past experience with the retailers, they are more confident in shopping and expect one-stop purchases but have higher demand on the variety of products at the same time. Whereas, for new customers, due to the lack of intuitive perception on retailers and their products, their understanding of the text or imagery information of products is presentational and abstract, unable to support decision-making. Therefore, the processing of comparative product information will be so fast and rough that other channels are needed for more information either through direct communication with retailers or other external sources to complete the product comparison. As a result, their demand for product comparison is less paramount than existing customers; and also because of the first-time shopping, they tend to buy less from retailers to mitigate possible risks, hence lower demand on the variety of products.

Thus, the researchers have proposed two hypotheses:

Hypothesis 1: A better product comparison service from retailers increases customers’ probability to buy;

Hypothesis 2: A better product comparison service is more effective on new customers than on existing customers.

3. The demand for credibility Assurance. Because the expected risks of online shopping are higher than that of traditional shopping, they become an important factor for a customer to decide whether to buy from certain retailers. Compared with new customers, experienced existing customers are familiar with the real risks associated with retailers so that they can readjust their assessment on the credibility assurance from retailers on top of external credibility assurance information. Generally, the recurrence of purchase from customers demonstrates the reduction of expected risks on retailers. Therefore, existing customers become less sensitive to external credibility symbols or assurance measures.  

Thus the researchers have proposed two hypotheses:

Hypothesis 1: A better credibility assurance from retailers increases customers’ probability to buy;

Hypothesis 2: A better credibility assurance is more effective on new customers than on existing customers.

4. The demand for after service. Goods delivery and return services are important drivers for customer loyalty. The demand for after service is much higher in online retailing than in traditional model because the completion of orders is dependent on the delivery service provided by retailers. Retailers’ commitment in fast and safe order execution and product returns influences customers’ expectations on service quality, which, in turn, affects their decision-making.

Compared with new customers, existing customers have had first-hand experience in the after service commitments of retailers such as the speed of delivery, “cash on delivery” and “7-day unconditional returns” so that they are able to make accurate prediction on the quality of after service. As a result, they have a lower demand on retailers’ after service information and pay less attention to all kinds of commitment on retailers’ webpages. But for new customers, the better the after service commitment is, the more encouraged they are to buy.

Thus the researchers have proposed two hypotheses:

Hypothesis 1: A better after service from retailers increases customers’ purchase volume;

Hypothesis 2: A better after service is more effective on new customers than on existing customers.

Making a Difference

Ms. LU and her assistants have collected demand-related data on both new and existing customers of taobao.com, according to the four phases. Specifically, in terms of information access, apart from letting customers search for the their online store through taobao’s search engine, retailers can also buy taobao’s sponsorship banners or other advertisements to increase the probability of their webpages to be found, while reducing customers’ costs of searching. Meanwhile, chatting tools are an active channel for retailers to provide information concerning customer inquiries. Therefore, the researchers assess retailers’ information access service with two major criteria: whether they have purchased sponsored search and how fast they respond to customers’ inquires.

In terms of product comparison service, the researchers collected data on the average word count of product-related texts, the number of pictures as well as the number of products available in the online store. As for credibility assurance, retailers’ scores are mainly based on whether they have participated in taobao’s customer assurance program. Last but not the least, retailers’ after service is assessed on their scores in shipping and delivery as well as on the refund dispute rates published by taobao.

According to the statistics, 27,562 entries of data from 2,384 online women’s garment store are considered valid. In terms of daily turnover, the average is 5,307 yuan for the sample stores; there has been no evident difference of transaction amount between new and existing customers—both average around 2,650 yuan. This has indicated that new and existing customers are equally important to retailers in general. The research findings have further indicated that for individual retailers, it is absolutely necessary to readjust operating tactics according to the makeup of their customer basis.

Through the data analysis, the researchers have proved all eight hypotheses to be true. This means that the extent to which retailers satisfy customers’ demand during different phases has a direct impact on the latter’s decision-making and purchase volumes; retailers’ provision of information access, credibility assurance and after service has a larger influence on new customers than on existing ones. Moreover, in terms of product comparison, text information and the number and variety of products have proven to be more influential on existing customers than on new ones.

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PROFILE
卢向华
信息管理与信息系统系副教授
Associate Professor from Department of Information Management and Information Systems, School of Management at Fudan University. Her research interest covers Information System Management, Virtual Community, IT Outsourcing Management.
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