Factors Affecting Customer Buying Decisions in the Internet - Research Proposal Example

FACTORS AFFECTING BUYING DECISIONS IN THE INTERNET, A COMPARATIVE STUDY By Factors Affecting Buying Decisions in the Internet, A Comparative Study of the Retail and Banking Industries Introduction The Internet is gradually becoming one of the basic distribution channels. Thousands of companies apply to the benefits of Internet connectivity, to pursue increased profits and to expand their market presence. It would be fair to say that the Internet exemplifies a reliable extension of the basic distribution systems and provides companies with three particular strategic benefits: (1) it offers companies a unique opportunity to reach new markets; (2) it help reduce the costs; and (3) it help improve the service through better information about products and services and convenient multimedia solutions (Connolly, Olsen & Moore, 1998). Today, when more and more customers choose the Internet for shopping, companies realize the vast distribution potential of the Internet and its solutions. No surprise that both retail and banking companies adopt a new networked vision of the distribution reality and engage in the development and implementation of technologically justified distribution strategies. That customers are coming closer to the Internet and come to see the online reality as the source of purchasing, distribution, and consumer benefits is difficult to deny. Yusta, Monge and Vega (2005) are correct, when they say that the Internet is changing the purchasing habits of consumers, who no longer view the Internet as a purely information channel but choose to use it as the instrument of taking relevant purchasing decisions. However, the process of adopting the Internet as a distribution channel is characterized by a number of features and factors. To begin with, whether customer adopt the Internet as a form of a distribution channel depends on the level of the perceived trust toward Internet companies and the level of security (Al-Hajri & Tatnall 2008; Polasik & Wisniewski 2009; Yusta, Monge & Vega 2005). Second, the adoption of the Internet distribution channels by consumers is integrally linked to their demographic variables, including age and experience with the Internet as a medium of information exchange (Polasik & Wisniewki 2009). Finally, favorable attitudes toward Internet are cited among the basic enablers of adopting the Internet as a distribution channel among different groups of customers (Lin & Yu 2006). Lin and Yu (2006) refer to perceived usefulness, anxiety and playfulness, and novelty seeking as the factors that may contribute to the implementation of the Internet as mean of communication for customers. The recent findings show online retail sales as the fastest growing Internet business domain: in March, Internet sales grew 15% compared with the same period a year ago (Riqby 2010). The rise was inspired by warm weather and the need to shop for new clothes – clothing retailers displayed 27% growth compared with February (Riqby 2010). Footwear and accessories were the fastest growing market areas, with 58% and 55% increase respectively (Riqby 2010). In a similar fashion, online banking displays steady growth rates and is currently ahead of call centers and ATMs (Burger, 2010). Today, “online banking is increasing at 27 annual percent compared with 7 percent for call centers and 0.5 percent for ATMs” (Burger 2010). More and more banking institutions and retailers come to recognize the unlimited distribution potential of the Internet and thus face the need to explore the factors that predetermine customers’ adoption of the Internet distribution channels. Statement of the problem Factors affecting consumer online buying decisions are mostly similar for the retail and banking industry: past experiences with using the Internet, perceived usefulness and convenience, security and perceived risks contribute to positive and negative online buying decisions. In case of online banking, perceived risk and security are of primary importance, while in retail industry customers will operate a complex combination of factors, including potential savings and perceived convenience of purchasing online. Sometimes, customers choose not to sacrifice the convenience of traditional stores for the sake of online purchases: for example, specialty food consumers will tend toward direct sales channels and specialty food outlets (Canavan, Henchion & O’Reilly 2007). As a result, it is possible that the type of product will also play its role in governing online purchasing decisions in different groups of consumers. Given the relevance of the Internet distribution channels and the levels of their adoption by consumers, as well as the role which they may play in better cost-efficiency and profitability of retail and banking operations, this study will seek to research the factors that affect customer buying decisions in the Internet. The research question is formulated as “factors affecting customer buying decisions in the Internet”. Review of literature The current state of literature regarding customer purchasing decisions in the Internet is rather scarce. Because the Internet as a distribution channel is relatively young, researchers did not have enough opportunities to investigate online buying decisions in more detail. Actually, the lack of available information about customer purchasing decisions in the Internet confirms the significance of the current study. Today, literature provides brief information about customer buying decisions online, as well as factors that influence purchasing decisions in both the retail and the online banking industries. That consumers are growing more conscious with regard to the Internet as a distribution channel is difficult to deny. More and more customers adopt the Internet as the source of better purchasing and product solutions. A number of studies provides interesting information regarding the use of the Internet in purchasing: for example, Yusta, Monge and Vega (2005) write that “the adoption of the Internet as a distribution channel by customers is closely related to a number of psychological factors and barriers, including their own attitudes toward the Internet, the level of trust toward the Internet, and the perceived risk of making purchases online” (Vega, 2005). Polasik and Wisniweski (2009) support this assumption, saying that the Internet implementation in Poland displays patterns and trends similar to those in the developed countries; in other words, experience with the Internet as the medium of information exchange demographic variables are the two basic predictors of adopting online banking services in Poland. Al-Hajri and Tatnall (2008) go further and reconsider the Internet implementation as the factor that can either benefit or disrupt consumer relations with banks, and thus banks must be mindful in the development of online distribution strategies. According to Lin and Yu (2006), the decision to adopt the Internet as a distribution channel can also be influenced by perceived usefulness, convenience, playfulness and even novelty seeking. McKennie, Winklhofer and Ennew (2006) assert that past experiences with the Internet as a purchasing channel are the key drivers of extent of using financial services online. All these authors confirm the growing adoption of the Internet as a distribution channel in both retail and banking sectors. It should be noted, that risk perceptions can mediated by a number of factors – for example, a generically-branded website will mediate the influence of perceived risks on purchasing decisions online (Boshoff, Schlechter & Ward 2009). This information is of particular importance for retail and banking companies that want to attract more customers to use their online solutions. However, not always do consumers view the Internet as a solution to their distribution issues. It appears, that the type of the product may have a marked impact on whether consumers adopt the Internet in their buying decisions. According to Canavan, Henchion & O’Reilly (2007), specialty food is among the products which retailers would rather purchase in specialized outlets or through direct sales channels, instead of using the Internet. Jayawardhena, Wright and Dennis (2007) write that convenience is not always the determining factor in choosing particular types of online retail services and again support the assumption that prior purchase is the basic element driving positive attitudes toward online retail distribution. Obviously, additional research is required to explore the impact of the product and service type on the online purchasing decisions. Today, the research regarding insurance services and grocery products online is virtually absent, but businesses can readily access and use empirical information and findings that touch banking and retail decisions online. Here, Khurama (2009) explores various dimensions of quality online banking services, including easiness to use and privacy of personal information. Gandy (2009) describes the development of online banking services as a potential threat to conventional banking and recognizes that the adoption of the Internet as a distribution channel changes the delivery and financial services landscape and the way financial professionals communicate with their customers. In terms of retailing, Lee and Kim (2009) analyze online gift purchasing experiences and provide a link between consumer purchasing and gift purchasing experiences. Today, the internet retailing literature is wide-ranging, but while the strategic role of the Internet is widely recognized, professional businessmen lack sufficient knowledge regarding the factor that may influence purchasing decisions of consumers in the Internet. Methodology and procedure For the current research, questionnaires will be used. The use of questionnaires is justified by the need to research customer perceptions regarding the decisions they tend to make online (Saunders, Lewis & Thornhill 2007). Both qualitative and quantitative analyses will be used, to arrive to a more accurate conclusion. Target population will include students and academic staff. Data collection and analysis Data collection will be performed via questionnaires, which the researcher will administer electronically among research subjects. The research subjects will use email to send back their responses. SPSS software and Microsoft Excel will be used for quantitative analysis. Strengths and weaknesses The current research will provide a novel insight into how consumers take purchasing decisions and what factors govern them. The objectives of the study are well-known, and that the study will utilize both quantitative and qualitative techniques is one of its basic strengths: in this way, the researcher will be able to reach accurate results. However, the study utilizes a narrow focus on the problem – the objects of the current research analysis include only insurance industry and groceries. Moreover, questionnaires will address only a particular group of people (i.e., students and the academic staff). As a result, the researcher expects that this research will become only the starting point in the subsequent analysis of other online purchasing factors and determinants. Ethical considerations To avoid ethical conflicts and conflicts of interest, “all participants will have to provide a written informed consent” (Saunders, Lewis & Thornhill 2007). The form of consent will be distributed among all participants and only those who send the signed form will receive questionnaires. No names or other personal information will be used. All questions will be standardized. Any discrimination will be avoided. All participants will have the right to withdraw from the study at any stage. Preliminary results will be sent to all participants, to avoid misunderstanding or misinterpreting their answers. All participants will receive the copy of the final research results. Tentative time schedule The process of research will cover two months. The first two stages will include the detailed literature review and the development of the questionnaire form (2 weeks). The process of administering questionnaires among research participants will take 1 week. Data analysis will cover 2 weeks, and two more weeks for the analysis of practical and theoretical implications. Conclusion The current research will seek to analyze online customer purchasing decisions in the banking and retail industries. Both qualitative and quantitative analyses will be used to achieve more accurate results. The main goal of the research is to explore and compare the factors that drive or inhibit consumer purchasing decisions in online insurance and retail grocery industries. The research will close the existing gap in literature regarding the decisions which Internet users take regarding online purchases. Reflective section I believe that this research will close the existing gap in literature about consumer decisions online. I hope that my research will shed the light on the factors that govern consumer purchasing decisions in retail and banking industries. References Al-Hajri, S & Tatnall, A 2008, ‘Adoption of Internet technology by the banking industry in Oman: A study informed by the Australian experience’, Journal of Electronic Commerce in Organizations, vol. 6, no. 3, pp. 20-36. Boshoff, C, Schlechter, C & Ward, S 2009, ‘The mediating effect of brand image and information search intentions on the perceived risks associated with online purchasing on a generically-branded website’, Management Dynamics, vol.18, no. 4, pp. 18-28. 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