Which marketing segment best describes your online spending habits?
With estimates that one-third of the estimated $53 billion spent online this year will come during the holiday season, perhaps a revision of the classic Christmas poem is in order – 'twere the days before Christmas, when all through the house, came the sound of 'click-click' of a computer mouse.
A new study by Brigham Young University business professors reveals the lifestyles and attitudes of busy e-shoppers, complete with marketing implications for e-retailers like Amazon and Land's End who are eager to increase activity among existing customers while swaying people who are online but don't shop to set aside their cautious ways.
"Internet shopping is bigger than ever, but there's still a lot of room for improvement and understanding," says BYU business professor Bill Swinyard. "Fear about credit card fraud persists among those who are online but aren't shopping – that is costing firms millions."
Non-shopper households comprise 36.9 percent of all online households, which represents a great deal of money that could be funneled from traditional retailers to the coffers of e-retailers, says Swinyard, who is joined on the study by fellow Marriott School of Management professors Chad R. Allred and Scott M. Smith.
Funded by the J.C. Penney Retail Research Fund, the researchers' study draws on nearly 2,000 responses to an online questionnaire to describe the lifestyles of three online shopper segments and three online non-shopper segments, which break out as follows:
E-Shopping Leaders represent the largest share of holiday online spending – nearly one in four dollars spent by this group during the holidays is spent online. They find traditional shopping tiresome and are looking for reasons to shop online even more than they already do. Although they have only slightly above-average computer literacy, e-Shopping Leaders find the online purchasing process easy to understand and use.
E-Value Seekers are the opinion leaders of online shopping. Members of this segment spent an average of $376 online for the holiday season, or 22 percent of their personal holiday spending. It is the wealthiest and oldest of the segments. E-Value Seekers are an ideal target customer for e-retailers. They are distinctively unaffected by any hassles connected with online shopping, like merchandise returns or shipping charges.
Socializers get great social value out of traditional shopping – 92 percent of this segment is female. They like to be waited on, want to see things in person before buying and believe traditional stores provide better prices. Socializers like the convenience of occasional online shopping, but hate any hassle caused by it.
Fearful Conservatives have the lowest financial resources of any group but are not the smallest holiday spenders – they average more than $1100 annually. More than any other segment they are fearful of Internet purchasing, citing apprehension because of credit card fraud. They think they have the necessary skill to shop online, but they have no support group to help them overcome their fears.
"Not My Thing"-ers simply choose not to shop online. They possess the computer literacy but prefer local stores, believing prices and promotions are better, and disliking online shipping charges. If and when these individuals decide to shop online, they are in a position to make a considerable impact to the market.
Tech Muddlers have the lowest computer literacy of any group. Stated plainly and simply, they do not know how to shop online. They have the lowest income of any group and have the slowest Internet connections. Tech Muddlers also have trouble searching the Internet and figuring out the online ordering process, and they are afraid of online buying.
The study also found that compared with online non-shoppers, online shoppers are younger, wealthier, better educated, have higher computer literacy and are bigger retail spenders. They spend more time on their computer and are less fearful about financial loss resulting from online transactions, said Swinyard. "However, fears over credit card fraud span all of the segments. If they could be minimized, there would be a substantial increase in overall online spending."
Some suggestions for overcoming customers' fears and other recommendations for improving online business this holiday shopping season include:
Help customers take the initial plunge by routinely providing "hand-holding" assistance like "New to Online Shopping? Click Here" links to tutorials that let people experiment with the checkout procedure before having to commit themselves.
Provide greater safeguards in the form of easier payment systems and greater reassurances that security is a priority. It's clear that displaying guarantees or certificates of safety is insufficient and unconvincing to the naive user. A step in the right direction is eBay's $2,000 "insurance coverage" for some sellers.
Improve technical literacy by providing education and simplifying technologies. Store-based shopping tutorials, simplified shopping carts and simplified checkout are necessary for the naive shopper. Conducting strenuous "error-testing" -- figuring what happens if a shopper clicks the "back" key during a critical checkout step -- will help "dummy-proof" the experience.
Energize the market to influence the computer literate and less fearful "Not My Thing-ers" by opportunity. Overcoming their shopping reluctance will require promotional strategies and loyalty programs to remind them of online shopping opportunities and to keep them active.
Offer social interactions through user forums, message boards, chat rooms and other community-building events. These will not replace customers' needs for social interaction, but if a prospect is encouraged to chat with other customers the option is available. Forums and message boards also give newcomers more resources and bolster their courage to checkout.
Personalize services such as follow-up phone service and live online chats with service personnel and personal shoppers. Almost half of respondents "want to see things in person before buying" and agree "it would be a real hassle to return merchandise bought online." More fashion e-retailers must permit prospective buyers to see things in person before buying and provide precise dimensioning measurements and sizing.
Provide ambiance-enhancers in the form of virtual versions of physical stores' decor, displays, lighting, salesperson uniforms and music. Simple technologies such as background video streaming and music are available to e-retailers. As more households move to broadband connections and as compression technologies improve, these should be examined as enhancements to the online experience.
Encourage opinion leaders, 57 percent of whom say that "none of their friends shop on the Internet," to influence their friends to action. Online vendors should reach out to opinion leaders with greater reward systems for buyer referrals and for passing along Internet education through a contest and award/reward system, with a resulting emotional or loyalty commitment to the site.
E-retailers who continue to assume that all online visitors are alike will continue to miss opportunities to maximize the loyalty of their existing customer base, to attract customers from other sites and to educate and convert non-customers, said Swinyard.
"Of course, online vendors know their business, and now they have a greater opportunity to know their customers."