Abstract The advent of the internet has created an opportunity for sellers to compete using internet-based mechanisms by either hiding or revealing market information. Too much information in the hands of the consumer means sellers lose some leverage and less of information means lower customer trust and loyalty. Research however has shown that digital personalisation is able to tailor information to fit the needs of customers. This paper aims to review various literatures on digital personalisation and internet-based selling mechanisms and how the personalisation of these mechanisms could influence and persuade customer interest.
Introduction The lives of people and their style of living have been very well influenced in recent years by the Internet which has created an Electronic Commerce (EC) platform for companies and their partners to conduct business and perform electronic transactions (Zhang, 2005). The editor-in-chief of International Journal of Electronic commerce which is the leading scholarly journal on Electronic Commerce defined E-commerce as “sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks” (Zwass , 1996).
Through E-commerce, companies are able to reduce constraints such as time of delivery of products and information, space required for storing products and cost of doing business which together enhances their ability to connect and to interact with their E-commerce customers and partners. To take advantage of this revolutionary opportunity and draw from its benefits many organisations are competing within the ecosystem E-Commerce (Bowen, 2000).
To be able to attract and retain customers, companies who are involved in electronic commerce have had to make use of differentiation methods and personalisation technologies to make their offerings unique and to tailor these offerings to meet specific preferences of their customers. According to (Wind and Rangaswamy, 2000), personalization enables businesses to research on the behaviours of customers so as to develop suitable strategies for marketing and to deliver the appropriate product or service to the intended targeted customer.
(Wind and Rangaswamy, 2000) further found that out of the many existing benefits of electronic commerce, perhaps the most vital component is it’s the ability to give consumers a flexible and personalised relationship. The advent of internet based selling, has also increased transparency in markets therefore benefiting customers greatly as they are now more able to discern properly the product or service that best satisfies their needs and at a price they deem fit(Granados and Gupta et al. , 2008).
In contemporary website building, owners present the users with the option of creating their own page within the website, an example being ‘My Banking Page’ , whose benefits is not only limited to the feeling of ownership but also gives the user the opportunity to interact in ways which he deems comfortable and suitable (Deitel and Deitel et al. , 2001). The search engine site called “Excite” offers “My Excite Start Page” which enables the user to select the content and style shown at their page when they log in.
Amazon is also able to recommend CDs or DVDs to a user based on their history of book purchases (Rayport and Jaworski, 2001). This paper provides an in-depth literature review to show how through Electronic Commerce, businesses are able to digitally personalise their offerings to target a certain consumer base and also how internet based selling mechanisms help to influence customers. The paper is structured in two sections. The first section of this article is organised to explain the definition and effect of digital personalisation.
The second section will provide facts on internet based system designs and how certain selling mechanisms such us pricing are personalised to influence customers. Questions to be discussed will include: ? ? How do online technologies impact information available to consumers? What strategies do firms use through internet-based selling to influence consumers? Digital Personalisation – Product and Service Offerings Phillips (2003) defines digital personalisation as “using artificial intelligence to find patterns in customers’ choices or demographics and to deduce projections from them”.
A good example of this is Amazon. com’s personalised book and music recommendations. Amazon is able to keep record of the buying patterns of its web-site visitors and then the next time the customer revisits, Amazon is able to recommend similar or related products to the customer. This is quite a good selling pitch to customers who are cash-rich and yet time-poor and yet most customers are still unsure about this sales push (Nunes and Kamil, 2001). A study done by (Yang and Yen et al.
, 2000) showed that information available on the internet doubled every 18 months from 1997 and the number of home pages continues to increase at an even faster rate. Users of the internet are therefore facing the problem of information overload when trying to retrieve information. This fact has therefore given rise to the search by users of the web to find more intelligent ways to conduct information filtering and gathering from the massive web files (Li and Zhong, 2004).
Digital personalisation therefore enables a company to create a one-to-one relationship with its customers by studying the customer’s choice patterns. In relation to products and services, the needs, tastes, preferences and interests of people differ and could evolve with time. Consequently, digital personalisation is a marketing strategy within the electronic commerce environment proposed to provide that one-to-one relationship between the organisation and its customer (Allen and Kania et al. , 1998).
To dive further into digital personalisation in products and service offering it is important to understand the difference between and website that has been personalised and one that is non-personalised. Digital Personalisation Methods used within Product/Service Offerings Various web experts have identified different approaches to digital personalisation in product and service offerings and according to (Krulwich and Burkey, 1996), the two main types or approaches to personalisation are Prescriptive Personalisation and Adaptive Personalisation.
Prescriptive personalisation relates to the type of personalisation which is activated by the site’s interaction with the user. Understanding the user could emanate from the customer’s profile, clicking behaviour, customer activity and history, the customer’s interests & preferences, what site the customer came from (Search engine or facebook), time of day and even the season(Wyer and Srull, 2013). With prescriptive personalisation, a customer’s interaction with the website triggers a change to the usual static display of products and services to match the user’s activity.
This type of personalisation is usually referred to as segmentation as visitors to the website are often broken down into segments to make targeting easier. Prescriptive personalisation can be divided further into Explicit and Implicit personalisation. Adaptive personalisation is an advancement of prescriptive personalisation (Patel, 2003). Unlike the prescriptive personalisation which makes use of the user’s previous data to determine what content to show, adaptive personalisation goes further to observe real-time behaviour of the user on the site.
“Baynote is a leading provider of personalized customer experience solutions for multi-channel retailers” Baynote (2013). Baynote is able to look for implicit patterns using an affinity engine and collective intelligence to analyse live data (Macmanus, 2013). Figure 1 shows an image example of what Baynote’s technology is able to accomplish. Cameras are split into categories and subcategories. This adaptive personalisation technology creates a category for canon cameras and a sub-category for expensive canon cameras within that category. Figure 1: Baynotes’ recommendation technology. Source: (Macmanus, 2013).
The technology for adaptive personalisation models the ‘user’ by analysing their behaviour and then the system uses this new found knowledge to personalise and display the content automatically while the user is still live of the website (Basu and Hirsh et al. , 1998). This personalisation approach also predicts the experience as expected by the user before and during the interaction. Contrary to the prescriptive type where segments are created, the adaptive type applies a self-managed set of business rules that evolves continuously as the customer evolves and as the customer’s patterns change.
Online systems design –Mechanisms for customer influence and persuasion The effect of the internet revolution on the ability of companies to compete for consumers using market information cannot be overemphasized (Kahn and Strong et al. , 2002). Cost to consumers for searching for information has reduced and consumers now have the option of choosing between multiple purchasing channels and products (Granados and Gupta et al. , 2008). Companies are also progressively able to use online technologies to hide, reveal, distort or accurately present market information to their advantage.
Before the introduction of the internet, a firm’s competitive strength was mostly based on its product offerings and price. Now however, firms are able to design and implement strategic selling mechanisms which tend to influence transparency within the market and information accessibility within the market. (Zhou and Dresner et al. , 2008) asserts that increases in market transparency created by the internet are beneficial to consumers because it gives them the opportunity to better discern the product that is more suitable to them at a better price.
He further believes that the internet gives companies the flexibility to personalise information for their various consumers using their selling mechanisms. Market transparency as defined by (Granados and Gupta et al. , 2008) is the level at which information about products and market prices are available and accessible. Market transparency reduces the level of doubt in the minds of the consumer and acts as a means of influencing them to either make a purchase or develop a relationship with the company.
Ebay which is a very successful online retailer base its strategy on providing consumers with a market where they can access and compare information to enable them make a suitable purchase. Blue Nile, an online store which sells jewelry, increased sales from $14 million in 1999 to $72 million in 2004 by publishing content which educated male consumers on how to buy and engagement ring (Acohido, 2003). As shown in figure 2, customers who are new to the diamond market will be keen to visit this site to at least get an understanding of the product they seek. Figure 2: How to choose a diamond at Blue Nile online.
Source: (Bluenile. com, 2013) Market transparency can be categorized in terms of the type of information revealed. The information type to be focused on in this report will be price and product information which are both heavy consumer influencing tools and how they can be personalised to appeal to specific customer targets. Price transparency This relates to the availability of information on market prices such as historic prices, quotes and discount offers that may help both the buyer and the seller determine the price they are willing to trade at (Elliott and Speck, 2005).
(Hahn and Kauffman, 2002) suggests that consumers knowing too much about the market price may be disadvantageous to firms as more information about price could increase consumer price sensitivity leading to a downward price pressure due to the customers been aware of lower alternative prices. There are trade-offs to the price transparency mechanism because while it could attract more buyers, the seller could also lose out due to the well informed consumer (Granados and Gupta et al. , 2008). This trade-off threat to businesses could however be neutralised through personalised pricing.
The office of fair trading OFT(2013), describes personalised pricing as “ the practice where businesses may use information that is observed, volunteered, inferred, or collected about individuals’ conduct or characteristics, to set different prices to different consumers (whether on an individual or group basis), based on what the business thinks they are willing to pay”. Personalised pricing could lead to some consumers being offered discounts while others pay higher prices than they would have if the price set was the same for all consumers.
The personalisation technology discussed earlier on page 4 makes this pricing mechanism possible. Through price transparency, information is made available to customers about market prices and by the customer’s clicking pattern or behaviour businesses are able to collect data to understand the needs of the customer in other to tailor content, product and price to meet their expectation. The ability to personalise pricing enables businesses to practice more accurately: ? ? ? Search Discrimination, where the same product is priced differently to different buyers (Mikians and Gyarmati et al.
, 2012). Example is where Alan and Satya are interested in buying the same phone from the same online store. By profiling them, the seller offers different prices to Alan and Satya knowing from his profile that he has visited many other competitor stores and so might be more sensitive to price than Alan. Targeted Discounting, where previous shopping habits tend to generate vouchers and discounts. A test run by Wall Street Journal indicated that shoppers, who arrive on a site through a link at a price comparison site, consistently get lower product prices (Soltani and Valentino-Devries, 2013).
Most sellers who use the targeted discounting mechanism seem to specifically target bargain hunters even when the buyer no longer interested in that particular offer. Dynamic Pricing, where fluctuation in price occurs due to the product demand and availability. This means that sellers have the flexibility to suddenly change product prices by tracking such factors as demand forecasts and competitors’ prices and then displaying the new prices using electronic labels (Thomson, 2013). Europe’s largest retailer of home improvement products ‘Kingfisher’ already uses the dynamic pricing system.
Using the mechanism means that if the demand for a product increases for example when the queen of England wears a “Reiss” dress, the retailer using dynamic pricing could immediately increase the price of the product. Product transparency According to (Johnson and Levin, 1985) a decrease in the cost of searching for information relating to a product reduces price sensitivity of consumers, strengthens their relationship with a website and also increases their retention. Product transparency refers to the availability of product information.
Johnson and Levin found that the absence of product information arouses the suspicion of the consumer against that product. Buyers have different need, tastes and preference and so would be more willing to return to a website which provides the necessary information about a product to enable the buyer to make a purchasing decision (Lewis and Sappington, 1994). Interface is the largest maker of carpet tile in the world and boasts of been able to reveal their complete product life cycle information for customers to review and compare with their competitors (Interfaceflor.
co. uk, 2013). Conclusion This literature review suggests that consumers are more likely to visit an internet-based selling site if the site owners provide them with not just any information but the needed information. Sellers are able to do this by been product and price transparent which will then pull customers to the site and then using personalisation software technologies, companies can collect customer data in other to tailor their offerings to meet the specific needs of customers.
Different companies apply market transparency mechanisms differently, while some reveal enough accurate information to capture the interest of its audience others use technology to conceal information to lure in its target audience (Granados and Gupta et al. , 2006). Major online companies like Amazon and Walmart use digital personalisation to recommend products for customers based on their shopping pattern or behaviour which in effect reduces the time spent by customers on finding some products.
While internet-based selling provides companies with the flexibility of tailoring the information that can be given to consumers, the system design of the price transparency and product transparency aspect are not exactly independent (Shaw, 2003). For instance, in a situation where a company’s system design offers multiple products information, consumers would want to see the matching price to facilitate the decision to purchase.
Additionally, customers are more likely to demand information on a product so as to compare across competitors site unless the product in question is a commodity where customers may just go in for the lowest priced offer. Despite the few limitations associated with online mechanisms, it is however clear from the literature review that personalisation of the product and price information has the capability of influencing customers to revisit and establish a relationship with the firm. Reference Acohido, B. 2003. He turned web site in the rough into online jewel.
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