CHAPTER-1

Introduction To Online Marketing

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Introduction to Online Marketing

1.1.
Introductio
This chapter aims to elucidate the theoretical linkages and provides
definitions
and classification of basic concepts used in the study. The chapter starts with
explanation of basic terms that relate to the study like Online Marketing,
Trust,
Perceived risk and Consumer Behavior and ends with providing basic definitions
and classifications of the subject under study that is types of perceived risk in
online shopping.

1.1.1 Online
Marketing
Online Marketing is defined as the art and science of selling products and/or
services over digital networks, such as Internet and cellular phone
1
networks .
Here the art of online marketing refers to discovering the right online
marketing
mix of strategies which attracts the target market for actually converting
into
sales. Here the science of online marketing refers to selecting the online
marketing
strategies to be applied and evaluating the success of those online marketing
strategies through research and analysis.

Online marketing is also referred as i-marketing, web marketing,

internet
marketing or e-marketing. E-commerce (electronic commerce) is type of online
marketing and is defined as the art and science of selling products and/or services

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over the Internet . Online shopping is the process consumers go through to

purchase products or services over the Internet.

1.1.2 Online Trust and

Online Shopping
Trust is a complex and abstract concept and is often used interchangeably with
3

related concepts such as credibility, reliability or confidence . Thus it is

difficult
to define trust and to identify the elements that construct it. According to the
Oxford English Dictionary trust is defined as confidence in or reliance on some
quality or attribute of a person or thing, or the truth of a statement. Trust in
general refers to a dependence on the integrity, ability or character of a person or
4

a thing .Almost every aspect of a persons life is based on some form of trust.
Trust has been widely studied in different disciplines with each discipline
having
its own understanding of the concept and different ways of operationalzing it.
Online trust refers to consumers trust directed towards e-commerce web sites
or
merchants on the Internet and only applies to Business to Consumer (B2C) e5

commerce transactions .Trust in context of Internet or Online shopping is

defined as the belief that the Internet shopper has in an Internet merchant and
is
willing to engage in an Internet shopping transaction, even with the possibility
of
loss, based on the expectation that the merchant will engage in generally
acceptable practices, and will be able to deliver the promised products or

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services .

1.2
Perceived
Perceived risk is defined as the nature and amount of uncertainty perceived by
7

consumers in completing particular purchase decision . Two elements,

uncertainty
8

and consequences may play a significant role in perceived risk . Difficulty of

identifying buying goals and matching these goals with product or brand offerings
leads to uncertainty. Consequence is associated with performance (whether
products perform as expected) and psychological goals (what will others think of
me). In the online context, perceived risk is defined as the expectation of any loss
9

or any negative consequences as a result of online shopping .

1.2.1 Types of
perceived risk
Perceived risk is multifaceted and its essence cannot be captured by a
single
concept. There are a variety of risk types including financial, performance,
physical, social, convenience, psychological, source, privacy

10

11 12 13

Perceived financial risk

Perceived financial risk is defined as concern over any financial loss that might be
14

incurred because of online shopping . There may be financial loss due to hidden

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costs, maintenance costs or lack of warranty in case of fault .Also there may be
possibility that the product will not be worth the financial price and might be
available cheaper.

Perceived performance risk

Perceived performance risk is defined as concern over the functionality of the
communication channel i.e. Internet

15

. Product ordered with specific color and

quality as displayed on the web sites may not match with the delivered product.

Perceived time loss risk

Time loss risk is defined as concern over the amount of time required to receive
16

the product . This risk involves the waiting time for the product or any time
due to technological difficulty encountered in browsing through the web site
or
time lost in returning or exchanging the product.

Perceived physical risk

Perceived physical risk refers to chances of any physical injury because of online
17

shopping . This risk may involve the fear of experiencing eyestrain because of
frequent exposure or viruses affecting the system while shopping.

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Perceived social risk

Perceived social risk involves the likelihood that online shopping will affect
the
18
way others think of the online prospective shopper . For example, if a consumer
purchases a product online his friends may hold him in higher esteem or may
think he is cool or may think that he is trying to show off.

Perceived psychological risk

Perceived psychological reflects concern about the psychological discomfort
and
19
tension that may arise because of online shopping . Apart from feeling
uncomfortable and experiencing unnecessary tension while online shopping,
customers may also have the feeling of too much socially isolated.

Perceived source risk

Source risk involves concerns about the difficulty in ascertaining the
reliability
and expertise, reputation, trustworthiness and believability of some online
20

companies .

Perceived privacy risk

Perceived privacy risk refers to concern over the loss of sensitive and proprietary
21

information .

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1. Consumer
3 Behavior
Consumer behavior is defined as behavior that consumers display in searching
for, purchasing, using, evaluating and disposing of products and services that they
22

expect will satisfy their needs . Consumer behavior also deals with consumer
decision making process and all external and internal influences that should be
considered to make product final choice of consumers in buying decision process.
Thus the main purpose for studying consumer behavior is to comprehend why and
how consumers make their purchase decisions. These insights enable marketers
to
design more effective marketing strategies, especially today, when
advanced
technologies enable marketers to collect more data about consumers and target
them more precisely.

Impact of digital technologies in marketing

strategies
Greater customization of products, services and promotional messages is allowed
23

by digital technologies than do older marketing tools . These digital technologies

enable marketers to adapt the elements of the marketing mix to consumers
needs
more quickly and efficiently, and to build and maintain relationships
with
customers on a much greater scale.

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1. The linkage of Online Marketing,

4 Trust, Perceived Risk and
Consumer
Behavior
The growth of Internet and its user base globally in recent years has been truly
phenomenal. Twenty to fifty (20-50) percent of the total population in most of the
24

developed countries are using the internet . Report released by

Internet
25

Advertisement and Mobile Association of India , indicates very robust growth of

Internet penetration in India. As per the report, the Internet penetration for
people
having used the Internet at least once has grown by 40 percent from 32.2 million
in September 2006 to 46 million in September 2007. According to the Telecom
26

Regulatory Authority of India , there was 40% growth of broadband connections

reaching 2.69 million in October 2007 from the 1.92 million in October 2006.

With increasing computer literacy and broadband penetration, the Indian

consumer is becoming more and more net savvy, and this is observed not only
in
27
the six major metros, but also in the tier II cities to a large extent . The report
also
states that the number of people who can use the Internet unaided has tripled over
the past seven years, and stands at 65 million. Growth in Internet penetration as
per the industry estimates is around 2 percent monthonmonth currently and is
expected to double over the next few years. Online shopping and bill payments,
matrimonial and sports are the three main purposes emerged out of internet usage

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28

with almost 40% growth over last year . This implies that tremendous
potential
exists for using internet for purpose of purchasing goods and services and it is
expected that the Internet will become a universal medium to obtain
information
29
and to buy and sell products or services . But as per the Internet Readership
Survey 2007,

30

online shopping accounted for only 1.2 percent of total Internet

indicating that many users are reluctant to make purchases on the Internet.
Thus,
31 32
there is still much room for online shopping to grow. Perceived risk
and lack
of trust

33 34

are the main cited reason for consumers not purchasing online.

Developing trust in online shopping environment is especially challenging

because of the lack of direct contacts with the physical stores, salesperson and
35

physical products in the digital world .

Consumers experiences are different while purchasing the same product through
36

online or offline . In a physical store, consumers can see, touch, try and feel the
product and its quality which is absent in online shopping. In online environment
37 38
consumer interact in a virtual environment through the website
.
interface
Online shopping medium has its own drawbacks such as reduced opportunities for

sensory shopping, social shopping, and face to- face interactions with sales
personnel, and the postponement of the consumption or enjoyment of tangible
goods. Thus owing to the conventional procedures, security concerns and existing
habits, shopping for Indians implies physical purchase of products that have a

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high touch feature. Due to its in-home characteristics, online shopping may
be
associated with risks similar to other in-home shopping methods (e.g. mail
order,
39
television shopping, print catalog shopping) . Such risk is perceived due to
40
uncertainty and consequences of buying . As a result trust and risk taking or

amounts of perceived risk are very important aspects of online shopping

41 42

Perceived risk is understood to decrease among people who have an online

43

shopping experience .

Trust is critical to the study of online business because it has a significant effect
44

on consumer behavior . The concept of trusting beliefs means that a potential

online shopper believes that the online store is benevolent, competent, honest
or
45
predictable . Thus trust is a prime mechanism for reducing uncertainty in Internet
46

shopping .

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Refere
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