E-Commerce in a Web 2.0 World: Using Online Business Communities to Impact Consumer Price Sensitivity

E-Commerce in a Web 2.0 World: Using Online Business Communities to Impact Consumer Price Sensitivity

Shirin Alavi, Vandana Ahuja
Copyright: © 2013 |Pages: 18
DOI: 10.4018/ijom.2013040103
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Abstract

This paper details the usage of online communities to influence consumer price sensitivity for expensive, medium, and low cost products by formulating a research instrument, which is accomplished through an extensive literature review of price effects prevalent in the online domain. The research study further examines the impact of reference price effect, difficult comparison effect, price quality effect, and switching cost effect on consumer price sensitivity and proceeds to segment consumers into groups which demonstrate similar characteristics. Organisations benefit by identifying the strategically significant consumers in each category and target them appropriately rather than investing in a blanket promotion program. The objective is to enable organisations to identify consumers demonstrating future profit or relationship potential and devise strategies to impact price sensitivity by responding to price search intentions, improving product perceptions, improving consumer experiences, informing consumers about new schemes, and improving product perceived value. Most valuable consumers are those who depict consistent behaviour across all three product typologies. Valuable consumers identified through a customer portfolio analysis can be leveraged by hosting appropriate content in an online business community and subsequently using customers engaged through business online communities as important sources of competitive advantage. Due to these benefits, online business communities may generate more profitable sales than transactional marketing methods.
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2. Literature Review

2.1. Transaction Marketing

Transaction marketing is characterised by one off exchanges, brand management, short-term focus, mass markets, mass communication, market share, brand equity and profitability of transaction, (Bickert, 1992).

2.2. Relationship Marketing

Relationship marketing is emerging as the new phenomenon, due to technological advances direct marketing is staging a comeback, leading to a relationship orientation. This paradigm of marketing emphasises value creation rather than value distribution, (Sheth & Parvatiyar, 1995).

Relationship marketing is characterised by ongoing exchanges, customer management, long-term focus, personal communication, ongoing dialogue, markets of one, mind share, lifetime time value of customer and customer equity, (Harker, 1999).

2.3. Profitable Customers

Customer profitability is a measure of revenue generated from the consumer less marketing expenses less expenses pertaining to cost-to-serve.

2.4. Strategically Significant Customers

Consumers are important for organizations if they have substantial revenue potential (in terms of profitability) or if they have sizeable relationship potential (by virtue of superior contacts, presence in influential groups or networks and prospective capabilities for becoming opinion and trustworthy leaders who an influence large consumer groups).

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