M A S T E R ' S T H E S I S
Mobile Commerce
The use of M-commerce by Customers Today
Md. Shahidul Islam Sheikh
Luleå University of Technology Master Thesis, Continuation Courses
Electronic Commerce
Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce
To my Beloved Parents
Acknowledgements
The research described in this Master’s thesis was carried out during fall 2005 at Luleå University of Technology, under the division of Industrial Marketing and e-Commerce. I would like to acknowledge the support to many.
Above all it is a pleasure to express my utmost gratitude to Tim Foster, Ph. D. candidate and Instructor at Luleå University of Technology, who provided a continuous support after my thesis work. It is due to his patient encouragement and persistence that I was nudged to accomplish my work on time. Without his help it would not have been possible to accomplish my Master’s degree, which I will always fervently remember.
I am obliged to pay homage to all my beloved family members respectively. My eldest brother Mr. Md. Yunus Ali Sheikh and sister-in-law Mrs. Munni always encouraged me to accomplish my study by knowing the circumstances. My second eldest brother Mr.
Md. Anisur Rahman, who has always supported me financially and emotionally during my entire study period to abroad. Without his support I would not have been dreamt a dream to study abroad. My gratitude goes to my brothers Mr. Shaheen, Shakil and Lincoln, sisters Mrs. Sultana, Mrs. Sazeda and Miti, sister-in-law Mrs. Koli and Mrs.
Akhi, brother-in-law Mr. Panna, Mr. Azijul and Mr. Jaman, who have always encouraged me by extending their emotional support to accomplish my study. My cares goes after my beloved niece Zarin, Zainab and Adiba, nephew Yafi, Rozafi and Nafiz, who I have always missed being afar.
I would like to express my gratitude to Mr. Atanu Nath and Mrs. Parmita Saha, PhD students at Luleå University of Technology, who have always guided me in numerous ways despite having their own research workload. My special thanks go to the family of Mrs. Mursheda, Mr. Musa and Mr. Niamat Ullah Miah, who have always inspired me emotionally and made it a home away from home during my stay in Sweden.
My special thanks also go to my friends Linus, Sumon and Shuvra, who have always helped and stood by me in any circumstances during my thesis work. I wish to further thank my friends Nizam, Rayhan, Taposh, Zillu, Ruhul, Tapan Da, Tanim and Bappy, who have always inspired me and extended their warm regards being friends. I would like to thank all CLEO members to extend their help and being friendly during work.
A special thank also goes to Lars Bäckström, Carola Strandberg, Anna Carin Larsson and the esteemed Librarians, who have always helped me to provide valuable feedback related to educational and administrative purposes. I would also like to thank all the interviewees, who had extended their valuable time after my thesis through interview.
I would also like to express my fervent gratitude to Sweden and the people, where I have had a chance to accomplish my Master’s degree.
Md. Shahidul Islam Sheikh January 04, 2006
Mobile commerce (m-commerce) refers to the ability to conduct wireless commerce transactions using mobile applications in mobile devices. The initial debate on m- commerce was characterized by a high level of optimism, followed by a more nuanced and realistic approach. It is a new concept and is emerging in a context of an established norms, rules and standards. The purpose of this study is to provide a better understanding on how m-commerce can be used by customer today. In order to attain the purpose, three research questions are stated focusing on the benefits of m-commerce, the buying process of m-commerce, and the obstacles of m-commerce. Methodologically, two different case studies were conducted, one in the West (Sweden) and one in the East (Bangladesh), with interviews of consumers as the primary data collection tool employed. The findings show that the benefits of micro-payments are widely acceptable as of now as compare to other services of m-commerce. The adoption rate of m-commerce will increase based on the ease of its use. Regarding the buying process for m-commerce, a variation on a more traditional e-commerce model is developed. Finally, significant obstacles were found which are important when considering the development of m-commerce services.
Browsing costs are rather high with a mobile device and a slow Internet connection can lead to indifferences in use. However, proper support from the Government could further support the growth of m-commerce.
1.1 Background... 1
1.2 Problem Discussion ... 3
1.3 Purpose and Research Questions ... 6
1.4 Demarcations ... 6
1.5 Disposition of the Thesis ... 6
2. Literature Review... 8
2.1 The Benefits of M-commerce ... 8
2.1.1 Mobile Financial Services... 8
2.1.2 Mobile Advertising ... 12
2.1.3 Mobile Entertainment ... 14
2.1.4 Mobile Shopping... 16
2.1.5 M-commerce Service Technologies for Consumer ... 17
2.2 The Buying Process of M-commerce ... 19
2.2.1 Information Search on the Internet ... 21
2.2.2 Online Buying Behaviour ... 22
2.2.3 Online Shopping Experience ... 23
2.2.4 Transformation of Traditional Business to Online Business ... 24
2.3 The Obstacles to Adopt M-commerce for General Users... 26
2.3.1 Security Challenge... 26
2.3.2 Customer Trust in M-commerce... 27
3. Conceptual Framework... 30
3.1 Benefits of Adopting M-commerce ... 30
3.2 The Buying Process of M-commerce ... 30
3.3 The Obstacles toward Adoption of M-commerce... 31
3.4 Emerged Frame of Reference ... 32
4. Methodology... 33
4.1 Research Purpose ... 33
4.2 Research Approach ... 34
4.3 Research Strategy... 34
4.4 Data Collection Method... 35
4.5 Sample Selection... 36
4.6 Data Analysis... 36
4.7 Validity and Reliability... 37
4.7.1 Validity ... 37
4.7.2 Construct Validity... 37
4.7.3 Reliability... 38
5. Empirical Data Presentation ... 39
5.1 Case one: M-commerce in Sweden a Western Perspective ... 39
5.1.1 Benefits of m-commerce... 39
5.1.2 Buying process of m-commerce ... 42
5.1.3 Obstacles of m-commerce adoption... 45
5.2 Case two: M-commerce in Bangladesh an Eastern Perspective ... 46
5.1.1 Benefits of m-commerce... 46
5.1.2 Buying process of m-commerce ... 49
5.1.3 Obstacles of m-commerce adoption... 51
6. Analysis... 54
6.1 Analysis of Research Question 1: Benefits of M-commerce... 54
6.1.1 Within-Case Analysis ... 54
6.1.2 Cross-case Analysis ... 57
6.2 Analysis of Research Question 2: Buying process of M-commerce ... 59
6.2.1 Within-Case Analysis ... 59
6.2.2 Cross-case Analysis ... 63
6.3 Analysis of Research Question 3: Obstacles of M-commerce... 66
6.3.1 Within-Case Analysis ... 66
6.3.2 Cross-case Analysis ... 70
7. Findings and Conclusions ... 73
7.1 How can the benefits of m-commerce be described? ... 73
7.2 How can the buying process when using m-commerce be described?... 75
7.3 How can the obstacles of m-commerce be described? ... 76
7.4 Implications... 78
7.4.1 Implications for Practitioners... 79
7.4.2 Implications for Theory ... 79
7.4.2 Implications for Future Research... 80
References... 81 Appendex
List of Figures
Figure 1: Evolution of m-commerce growth ... 2
Figure 2: Outline of the thesis... 7
Figure 3: Prepaid reloading via Mobile Banking system ... 12
Figure 4: A mobile advertising scenario for m-commerce ... 13
Figure 5: Access to information at WAP enabled phones ... 18
Figure 6: The Consumer-decision Making Process... 20
Figure 7: Based on the P. Kotler’s framework (2003)... 23
Figure 8: Transformation of traditional buying/selling process to online ... 25
Figure 9: Two components of customer trust in m-commerce ... 28
Figure 10: Emerged Frame of Reference... 32
Figure 11: Research Methodology... 33
Figure 12: M-commerce Buying Process ... 75
List of Tables Table 1: Mobile micro-payments framework with examples ... 9
Table 2: Mobile macro-payments framework with examples ... 10
Table 3: The Benefits of adopting m-commerce ... 57
Table 4: The buying process of m-commerce... 63
Table 5: Obstacles of M-commerce... 70
1. Introduction
This chapter will provide a background that will present the area of Electronic Commerce (E-commerce) and it’s evolution into Mobile commerce (M-commerce). This will be followed by a problem discussion that will justify the purpose and research questions of the study. Finally, a disposition of thesis will be presented.
1.1 Background
E-commerce is defined as any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact (Aldin, Brehmer & Johansson, 2004), whereas McIvor, Paul & Huang (2000) stated that the e- commerce is considered as a process of doing business electronically which involves automation of various business-to-business and business-to-consumer transaction. E- commerce is not just considered as a single entity of technology but a combination of technologies where applications, processes, business strategies are necessary to do business electronically. (ibid)
The approach of e-commerce should be defined in a broad terms since the Internet is now at the forefront of discussion relating to the transaction over Internet. Therefore, this focus is more explicitly followed in a way where e-commerce involves the undertaking of normal commercial, government, or personal activities by means of computers and telecommunications networks; and includes a wide variety of activities involving the exchange of information, data or value-based exchanges between two or more parties (Kao & Decou, 2003).
E-commerce has revolutionized traditional commerce and boosted sales and exchanges of merchandise and information, with the introduction of the World Wide Web (Lee, Kou &
Hu, 2004). In the 1990’s wireless networks burst onto the scene with promises of big payoffs that rarely materialized (Kalakota, 2001). E-commerce had begun to change the ways of thinking as well having provided new venues for doing business. The new opportunities of Internet trading were constantly exploited and vast fortunes were made seemingly overnight. As a consequence, it looked as though there was not a day that passed without reports of a new venture creation and claims of new e-commerce models (Timmers, 2000).
E-commerce technologies such as the Internet have been most prevalent in business arena and the greatest potential of e-commerce application lies through the suitable business transaction (McIvor, Paul & Huang, 2000). Adopting e-commerce in the business environment is considered advantageous which subsequently lead to the development of an e-commerce model (Kao & Decou, 2003). E-commerce has attracted significant attention to the infrastructure of burgeoning demands of real-time business. This high profile attention has resulted in significant progress towards strategies, requirements, and development of e-commerce applications (Varshney, Malloy & Snow, 2002).
More recently, the advent of wireless and mobile technology as a subset of e-commerce has created both new opportunities and new challenges for the business community. The emergence of wireless and mobile networks has made possible the admission of e- commerce as a new application and research subject in the area of m-commerce, which is defined as the exchange or buying and selling of commodities, services, or information on the Internet through the use of mobile handheld devices. M-commerce has come forward to become the hottest new trend in business transactions (Lee, Kou & Hu, 2004).
Figure 1: Evolution of m-commerce growth Source: Lembke (2002, p. 52)
M-commerce is an emerging discipline involving applications, mobile devices, middleware and wireless networks. While most of existing e-commerce applications can be modified to run in wireless environment, m-commerce also involves many more new applications that become possible only due to the wireless infrastructure (Varshney, Malloy & Snow, 2002). It is a rapidly evolving arena, both strategically and technologically (Stoica, 2001). M-commerce is considered as an effective way of delivering e-commerce to consumers regardless the time and location. To gain the advantages of m-commerce, companies have begun to offer m-commerce options for their consumers in addition to the e-commerce they already provide (Lee, Kou & Hu, 2004).
In its present state, m-commerce can be viewed as an extension of conventional, Internet based E-commerce, which adds a different mode of network and accommodates different end users’ characteristics. The prediction states that the mobile and wireless system will
control the Internet industry in the future and it will materialize the e-commerce and m- commerce into a singular blended entity. M-commerce is defined as a means of conducting commercial transactions via a “mobile” telecommunications network using a Communication, Information, and Payment (CIP) device such as a mobile phone or a palmtop unit (Sharma et al., 2003). In another sense, m-commerce is simply defined as a way of exchanging products, ideas and services between mobile users and the service providers (Jukic et al., 2003). M-commerce is creating entirely new service opportunities such as payments, banking and ticketing transactions through wireless device. Secure payment and ease of use are key features of m-commerce, along with immediacy,
rsonalization, and location awareness (Nokia, 2005).
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E-commerce has resulted a tremendous impact for many companies to interact with their prospective customers and e-business had the similar impact on either side of supplier and employee. In same manner, it is too early to predict about the triumph of m- commerce and it can only be speculated that it will have even greater impact since its tentacles spread everywhere. Mobile infrastructure and devices, applications and experiences, and relationships and supply chains are the unique evident for m-commerce success (Kalakota, 2001). Considering the promising success of m-commerce many companies are implementing and developing their Internet facilitated E-commerce activities; since a new wave of technology-driven has innovated. This innovative technology has brought the progress in wireless technology and the numbers of mobile devices are expected to increase rapidly (Baumöl et al., 2003).
The above mentioned discussion implies that m-commerce can be interpreted as a subset of e-commerce by referring to those e-commerce activities which involves wireless technologies i. e., mobile devices like headphones, personal digital assistants or handheld computers. E-commerce and m-commerce are having the conceptual differences based on the mobility or the location, respectively. Regardless to the transactions and information access, the location of m-commerce users can be determined which unleashed the new form of services and transactions. On the other side, corporations can reach specific users anytime and anywhere, not only with regard to a specific person, but also with regard to a specific geographical region, which again enables new forms to disseminate information to consumers. (ibid)
1.2 Problem Discussion
M-commerce is the successor of today's PC-based, wired, e-commerce technology. The evolving success of mobile communication is transforming the e-commerce (wired environment) into m-commerce (wireless environment) and the users of mobile devices (PDAs, smart phones etc.) are considered as a large group of potential market (Aungst &
Wilson, 2005). According to Lu et al., (2003) the prediction about wireless environment can be stated as the future of wireless Internet has already arrived, but simply at different places at different points in time. M-commerce is a new concept and expected to constitute a significant future market worldwide (Lembke, 2002).
Wireless internet users are expected to rise worldwide from 96 million in 2001, to more than a billion in 2006 (Leem et al., 2004). The third generation technology (3G) has
innovated the new features in mobile technology and revolutionized to the new consumers market. In July of 2003, a million of new consumers are expected to make video calls, watching live football and checking e-mail through their mobile smart phones (Aungst & Wilson, 2005). Lembke (2002) further stated that the introduction of 3G technology will become more widely available, the benefits and exciting potential of this technology will become more apparent to financial audiences and consumers alike. The subsequent aftermath of wireless technology and mobile computing applications in marketing have been over hyped (Aungst & Wilson, 2005).
Mobile technologies have gained much attention with consumer oriented products and applications. It has been used as a tool of augmented business strategies to support organizational processes with the integration of Internet based technologies. Employees now have the possibility to remain connected to the company’s network at any times when they are away from office through using the mobile devices like cell phone, personal digital assistants (PDAs) and laptops with built-in wireless modems. It eliminates the need for location-dependent connections with corporation’s information system (Gribbins et al., 2003).
Wireless technology is no longer considered as a novelty and its location is everywhere.
It has eradicated the complex functionality in mobile technology and added new functions to smoothen the consumer lifestyle. Today's, business people are accessing their e-mails, placing orders and logging on to the company networks from the road; and the young professionals are not tethered to their wired-line desktop computers and are buying smart phones (personal digital assistants (PDAs)/phone combinations). Wireless technology has become ingrained in all walks of global people’s life with in the last few years (Aungst & Wilson, 2005).
Wireless technology is getting mature and evolving with the leading edge of modernization and the mobile computing technology will be used to solve the business problem. Wireless market segments are emerging at various growth rates with the emphasis of different mobile technologies. And almost everyone has some form of a wireless/mobile device. Customers are now much more intended to track their order through hand held device like personal digital assistants (PDA). (ibid)
Mobile access will encourage more efficient use of the Internet. Mobile users will access to the Internet from hand-held devices with limited storage and display capability.
Wireless will make it practical to use the Internet from virtually anywhere (Yen & Chou, 2000). But different technological factors of m-commerce can impact the potential usability of mobile application. Compare to the wired method of connecting devices, mobile devices possess smaller display screens, awkward methods for inputting data, limited processing power, lower bandwidth capabilities, and the need for greater security and user identification. These disadvantages would cause a consumer’s indifference to use the devices and it will impact the acceptance of m-commerce in consumer market place (Gribbins et al., 2003).
Although consumers-oriented areas have been primarily concerned for wireless technologies, but the enterprise environment has a growing interest for using this technology. M-commerce can enhance business efficiency by distributing information to the workforce remotely and by offering new channels on which to interact with customers. Organizations are able to manage the mobile technologies to automate and streamline business process may obtain the benefits of improved productivity, lowered operational cost, increased customer satisfaction, and improved decision-making process (Gribbins et al., 2003).
M-commerce service provider has no shortage of enthusiasm to meet the consumer’s needs. A high level optimism was characterized at the early stage of m-commerce followed by more nuanced and realistic approach. Many users are still uncertain to welcome the new technology and it may be too early for them to contemplate the idea.
Though there is market enthusiasm and huge number of mobile device users on market to underpin the potential market of m-commerce but widespread acceptance is still unknown. There has been a tendency to over hype the m-commerce development and its associated technologies that are not yet ready to be fully implemented by business (Lembke, 2002).
M-commerce technology is entirely different from e-commerce where processing is accomplished through the internet via a browser and being connected through wired Internet connection (Aungst & Wilson, 2005). Shopping through mobile device is considered as underwhelming. Aside from the standard procedure of billing and pricing process, the mobile device interface is inadequate for the online shopping considering its size, color, speed of data transferring etc. Additionally, an incompatible device makes a deep impact for burgeoning m-commerce prospect (Baumöl, Stiffel & Winter, 2003).
The convergence of Internet and wireless technology has enabled the communication system through mobile phones and PDA. Wireless internet via mobile devices (WIMD) is creating an unparalleled opportunities for m-commerce to leverage the benefits of mobility. It allows consumers and businesses to build connectivity by transcending time and place, increasing accessibility and expanding their social and business networks.
Users participating in mobile communications and service activities will be benefited with the facility of ubiquity, convenience, localization, and personalization (Lu et al., 2003).
Business marketers are trying to build a long-term relationship with their customers but the trust is still considered one of the focal point. Trust is a complex social phenomenon that reflects technological, behavioural, social, psychological, as well as organizational aspects of interactions. Every business transaction requires an element of trust and it becomes mandatory, especially those conducted in the uncertain environment of e- commerce. Consumers are also concerned about security and privacy in the wireless environment. It often arises with new web enabled mobile technology which supports enhanced capabilities for collection, storage, use and communication of personal information. Recent reports of concerns about privacy on wireless Internet are on the rise (Lu et al., 2003). To gain the market acceptance, the m-commerce service provider has to
make sure about the security related matter as well as the convenience to use. Branding and proper implementation of strategies would boost consumers’ confidence to uptake m- commerce (Lembke, 2002).
A business process can be profitably converted to wireless/mobile computing, adding value to the organization, the next step is to determine what factors will effect successful deployment of the technology. Wireless/mobile computing brings to m-commerce many opportunities but also many technological challenge (Aungst & Wilson, 2005). In its infancy stage, m-commerce needs to address many of the challenges that place ahead (Chen, 2005). However, despite the differences, it’s been believed that the e-commerce framework to be appropriate for m-commerce as well (Baumöl, Stiffel & Winter, 2003).
The purpose of this study is to provide a better understanding on how m-commerce can be used by customers today.
1.3 Purpose and Research Questions
To be able to achieve the stated purpose above, following research questions will be further investigated:
RQ1. How can the benefits of m-commerce be described?
RQ2. How can the buying process when using m-commerce be described?
RQ3. How can the obstacles of m-commerce be described?
1.4 Demarcations
Due to the limited amount of time available for this study, an attempt has been made to narrow the focus. This study will focus on the use of m-commerce by users today, rather than the mobile device maker because a lot of information found online is mainly focused on m-commerce services which are created for the users. Therefore, this study will concentrate on the prospective opportunities of m-commerce service from consumer perspective; and a very little attention will be paid on m-commerce service provider.
1.5 Disposition of the Thesis
This thesis is divided into seven chapters. In the first chapter, the reader has received an introduction to the field of study, followed by a problem discussion, a presentation of the overall purpose of the study, the research question to be investigated and the demarcations of the study. In the second chapter, the reader is provided with a literature review of previous research conducted with in the area of overall purpose, which serve as
theories for the study. The conceptual framework, following the literature review and presented in chapter three, further delineates the theories that will be used. Chapter four describes and motivates the choices of methodology made for this thesis. In chapter five, the collected empirical data is presented. The empirical data that has been gathered is then examined and analyzed in chapter six. In the seventh and final chapter, findings and conclusions are drawn based on the findings of the research conducted. At the end of seventh chapter, implications for further research are presented. The disposition of the thesis is illustrated in Figure 2 below.
Figure 2: Outline of the thesis
Chapter 1: Introduction
Chapter 2: Literature Review
Chapter 3: Conceptual Framework
Chapter 4: Methodology
Chapter 5: Empirical data presentation
Chapter 6: Data Analysis
Chapter 7: Findings and Conclusion
2. Literature Review
The purpose of this chapter is to provide an overview base on the previous chapter’s background, the problem discussion as well as overall purpose and research questions.
An endeavour in this chapter is to provide relevant literature relating to each of the three stated research questions. Finally a conceptual framework of the theories will be presented and that will function as a frame of reference in the empirical research.
2.1 The Benefits of M-commerce
Mobile devices are widely accepted due to the convenience and it will evolve into
“personal trusted devices” which pack users identity, purchasing power and benefiting various aspects of their daily lives. It plays an important role for users in order to facilitate the vision of an intelligent ambience, by collecting and communicating various personal habits and preferences, and enabling their environments to sense and react (Ravi et al., 2003). Wireless communications and services are enabled by the convergence of two technologies, the Internet and wireless technology such as mobile phones and personal digital assistant (Liu et al., 2003). And today's mobile devices fulfill this need for real-time information and communication independent of the user’s location (Stoica, 2001).
A user can connect to the Internet wherever and whenever they want since the mobile Internet has unique strengths over the stationary Internet (Lee & Benbasat, 2004).
Abundant information has indicated the proliferation of wireless Internet via mobile devices which is creating unparalleled opportunities for m-commerce to leverage the benefits of mobility. It allows consumers and businesses to build connectivity by transcending time and place, increasing accessibility, and expanding their social and business networks (Liu et al., 2003). Therefore, the proponents claim that the m- commerce will surpass e-commerce in growth and scale because of the enhanced mobile internet attributes (Lee & Benbasat, 2004).
2.1.1 Mobile Financial Services
The rapid pace adoption of next-generation mobile handsets has created opportunities for new and innovative mobile services. One of the most promising, while still marginally adopted, are mobile financial services. The wide penetration and personal nature of mobile phones, the overall stability of mobile communication technologies, and the positive experiences with m-commerce payments have made mobile solutions applicable for a variety of financial services. Today, mobile payments are mainly used to pay for popular mobile content and services since there are few alternative payment solutions available. More generally, security and convenience have been suggested as the key drivers for the growth of m-commerce. Personal mobile devices are effective in identifying the payer and confirming the transaction. Despite the claims of insecurity, the users seem to be willing to use quite simple mechanisms (Mallat et al., 2004).
Mobile Payments
Mobile payments are expected to become one of the most important applications in m- commerce (Mallat et al., 2004). M-commerce involves m-payment, which is defined as the process of two parties exchanging financial value using a mobile device in return for goods or services (Nambiar & Lu, 2005). Varshney (2003), stated that mobile payments can be divided into macro (more than $10) and micro-payments (less than or equal to
$10). Therefore, a widespread use of mobile phone has emerged a number of payment schemes which allow the payment or goods/services from the mobile device (Nambiar &
Lu, 2005).
Micro-payments can be implemented when a user make a toll call equal to the cost of item paying via wireless vending service. Another way of micro-payment is to buy prepaid numbers from a service provider, bank or credit card company and transfer the payment (Varshney, 2003). Remote mobile micro payments enable purchases of mobile content and services such as news, games, tickets, and location-based services. Mobile micro-payments at unmanned point of sale (POS) include applications such as purchase of soft drinks or items from vending machines and payments on self-service stations, for example paying for gas without cash at hand. Mobile micro-payments at manned POS include small purchases at shops, kiosks, and fast food restaurants. While there are several pilot projects utilizing manned POS mobile payments, the use of these solutions has been marginal as the traditional payment methods are often more convenient in these purchase situations (Mallat et al., 2004).
Table 1: Mobile micro-payments framework with examples Micro Payment -10€/$
Remote
Mobile content -Ring tones -Logos -Information -Games Parking
POS, Manned
Small purchases in shops, kiosks and fast food restaurant
POS, Unmanned
Vending Self -Service -Soda
-Tickets -Cigarettes -Instant photos -Launderette Gas
Toll
Ticketing Person-to-person Payments Source: Adapted from Mallat et al. (2004, p. 43)
Micro-payments Service Provider in Finland, Helsinki City Transport offers a mobile subway and tram ticket which is an example of a successful mobile payment service.
Customers can order a one hour SMS ticket via their mobile phones by sending a SMS message to a service number. Approximately 55% of the tram tickets and nearly 10% of all individual tickets for Helsinki public transportation are currently purchased via a
mobile phone. According to Helsinki City Transport, mobile ticket users have been satisfied with the new service, which has also reduced the problem of traveling without a ticket. (ibid)
Macro-payments are electronic payment systems, which are designed to securely allow payments ranging in value from approximately one dollar to several thousand dollars to be made, are known as macro-payment systems. Payments larger than this are usually using traditional bank transfers over private banking networks (Zhu & Ma, 2005). Macro- payments can be used to pay for larger purchases both electronically (e-commerce, mobile ticketing, gaming) and on manned and unmanned POS (restaurants, retail shopping, and so forth). Mobile macro-payments face more competition from well- established traditional payment instruments. However, solutions developed for user authentication in macro-payments provide possibilities for a variety of different services such as passage control, digital signatures, and mobile government services (Mallat et al., 2004).
Table 2: Mobile macro-payments framework with examples Macro Payment +10€/$
Remote
Internet Purchases -Physical goods -Digital content or services -Prepaid card reloads
POS, Manned
Restaurants Retail shopping Taxi payments
POS, Unmanned Car wash
Ticketing Person-to-person Payments Source: Adapted from Mallat et al. (2004, p. 43)
Macro-payments Service Provider The Finnish Population Register Centre together with Finnish telecom operator is developing a mobile authentication service based on a wearable public key infrastructure (WPKI) solution. Mobile authentication can be used for m-government services and digital signatures both on Internet and mobile networks and is expected to be available for users later this year. (ibid)
Billing Solutions for Mobile Payments Currently, a common way to charge mobile payments is to add them to a monthly mobile phone bill. The advantages of operator billing are that it is widely available to customers and requires no additional service enrollment. In Great Britain, Vodafone provides the m-pay service which is operator billing-based mobile payment solution. It can be used to pay for purchases on the Internet or at WAP sites. When a consumer visits a merchant’s Internet site and wants to
make a purchase using m-pay, he or she logs in to the payment service by user name and password. In the service, the consumer checks the details and accepts payment. The payment is then authorized and charged to the mobile phone bill or, for prepaid customers, deducted from the airtime credit. (ibid)
In a credit card billing scheme, mobile payments are included in the consumer’s credit card bill. Another billing solution is to provide customers with a separate account for mobile payments. Separate accounts reduce credit risk but administering them may be inconvenient for customers. In a direct debit solution, the customer’s bank account is immediately debited with the mobile payments. This solution is convenient for users because it utilizes the current bank account and requires no additional administration from the customer. (ibid)
Billing Solutions Service Provider for Mobile Payments The Dutch company Moxmo offers mobile payment solution based on direct debit to a bank account. When making a purchase via Moxmo mobile payment service, the consumer gives the merchant his or her mobile phone number. Moxmo IVR then calls the consumer and asks for a PIN, which the consumer enters via the mobile telephone keys to confirm the purchase and the payment is debited to the consumer’s mobile wallet. Similarly, the consumer can charge or discharge his or her mobile wallet against a settlement bank account, or pay to another mobile phone directly. Retailers can integrate these types of payment functionality using Moxmo’s Web services interface. (ibid)
Mobile Banking
Mobile banking services are valued by users because of the inherent time and place independence, and the overall effort-saving qualities. Mobile banking services enable users to receive information on their account balances via SMS. The new WAP and Java- enabled mobile phones using General Packet Radio Service (GPRS) support a wider variety of banking services such as fund transfers between accounts, stock trading, and confirmation of direct payments via the phone’s microbrowser. The mobile services are typically modified versions of the Internet banking services of the particular bank and the architectures are backed by several banking industry consortiums. (ibid)
Mobile Bank Service Provider Several European banks have introduced successful mobile financial services for smart phone users. Scandinavian Nordea bank provides users with a wireless banking application, which is built using the same back-office infrastructure as its Internet bank (Mallat et al., 2004). City Bank has started their mobile banking system in order to provide advanced customer service (CITI Bank, 2002).
Figure 3: Prepaid reloading via Mobile Banking system
Step 1 Step 2 Step 3 Step 4
Step 5 Step 6 Step 7 Step 8 Enter your Bank Code Enter Account ID
Step 9 Step 10
Enter your MPIN Wait for system confirmation
Source: www.citibank.com.ph , (2002)
The Figure 2.3 presents an idea of prepaid reloading via mobile banking system (CITI Bank, 2002). Customers can use WAP over GPRS to track their account and credit card transactions and transfer funds between accounts. Furthermore, they can pay bills and trade equities using a menu-based interface. There is also a connection to the Solo Market, a virtual marketplace, where users can make payments by using the WAP service (Mallat et al., 2004).
2.1.2 Mobile Advertising
Mobile advertising is a very important class of m-commerce; it augments location information with personalization and delivers the obtained history of user’s purchases habits. Advertising on mobile devices has large potential due to the very personal and intimate nature of the devices and high targeting possibilities (Göthlin et al., 2004). By keeping track of user’s purchasing habits and current location, a targeted advertising campaign can be performed. Figure 4 illustrates that the mobile users are informed about various on-going events. Messages can be sent to all users who are currently in a certain area (identified by advertisers or even by users) or to certain users in all locations.
Depending on interests and personality types of individual users, advertisers could decide whether a “push” or “pull” form of advertising is more suitable (Varshney, 2003). Most users did not mind being pushed for mobile location-aware services information, as long
as they really needed the information. (Göthlin et al., 2004). It has been demonstrated in several trials that mobile users are willing to receive advertising messages with incentives (Varshney, 2003).
Figure 4: A mobile advertising scenario for m-commerce Source: Varshney (2003, p. 241)
A location-aware or location-based service is a service where a user’s behavior is mostly driven by location information. And proximity-triggered mobile advertising is a special case of location-based notification services. Notification services are user-driven, e.g.
getting a notification when a set of conditions is met. On the other hand, advertising is typically not user-driven, i.e. the recipient does not request or pull the advertisements from a server, but they are pushed to him/her instead (Göthlin et al., 2004). These services utilize a user’s location to provide location-aware content including information on restaurants, devices, users, and products. When a mobile user enters an area, the list of services and location information can be provided based on current preferences or the history of choices. For instance, one user might be interested in knowing the availability and waiting time at one or more restaurants close to his/her current location (pull).
Another user might like to be informed when one of his/her friend is located in the same general area (push) (Varshney, 2003).
Mobile Advertising Service Provider Many wireless carriers including AT&T wireless, BT Cellnet, and Vodafone are offering mobile advertisements using opt-in approach. In Japan, several portals are pushing simple advertising contents to iMode phone users. To create a uniform set of guidelines for wide scale use of mobile advertising, the Wireless Advertising Association and Wireless Marketing Association have merged, thereby bringing many players in mobile advertising together including Unilever, AOL, Nokia, Orange, Vodafone, and Lycos. (ibid)
Any user in a specific location
Mall/stores Advertising
Database
Location Information Database
Wireless Service Provider
User Preference Database Sale
Specials
Specific users in any location
2.1.3 Mobile Entertainment
Mobile entertainment (m-entertainment) is concerned with providing amusing and enjoyable services for users via wireless technology to mobile devices. Most people make some form of traditional ‘pure’ entertainment part of their daily lives, bringing these forms of content to mobile devices is an appealing notion. Mobile entertainment is a Business-to-Consumer service which is done during leisure time (Baladi & Thaung, 2002). Mobile Entertainment Services and Games (B2C) are applications providing entertainment services to users on a per event or subscription basis. These include video- on-demand, audio-on-demand, and interactive games. It appears that mobile games will become one of the drivers of the wireless Internet, especially if group connectivity and response time issues can be addressed (Varshney, 2003).
Mobile Gaming
Mobile devices offer the opportunity to play games nearly everywhere. Moreover, networked games allow individual players to interact with other people and to participate in a larger gaming world, which also provides for new business opportunities (Schaller et al., 2004). Advances in mobile computing and wireless communication technology enable the creation of games with appealing graphics and game play on a variety of mobile devices ranging from smart-phones to PDA’s and other portable computing devices (Stichling et al., 2004). Therefore, the popularity of mobile games played on portable handsets is increasing and the huge possibilities for growth in this area are already being taken seriously by traditional “mobile telecommunications” handset vendors. Device makers are designing GSM handsets with hardware and user interfaces specifically designed for gaming as exemplified by Nokia with their recent N-gage device. In essence these new devices offer players the ability to play head to head with their friends or any other players at any time and in any place (McCaffery & Finney, 2004).
Mobile Music
A key advantage of mobile music is having user’s phone and music player in the same small device. Nokia has developed many mobile phones with integrated technologies to play music, either from a digital music player or an FM stereo radio. A user can hear Stereo FM radio, tune in to visual radio to see the screen of mobile device, listen music as well as to download digital music tracks in AAC format. Instead of carrying a MP3 player a user can carry a mobile phone as a substitute (Nokia, 2005).
According to the Nokia Vice President Ilkka Raiskinen (2002), mobile music will be an important area of digital services for customer convenience and their convenience is considered as a key. Elisa Communications and Nokia have together developed a mobile music service for mobile device users in Finland, where they can purchase digital music in a protected file format. The music bought from the online music store is downloaded to the user's computer and then transferred to the device (Nokia, 2002).
Mobile Video
The advanced smartphones entering the mass market are capable of playing video files, which paves the way for new types of rich mobile multimedia services for users (Sutinen et al., 2004). Providing a successful video offering to mobile devices requires coordination with and cooperation of the mobile operator (Gerstel, 2005), because of the high data rate requirements on the wireless link (Sutinen et al., 2004). Most of today’s video services are developed in conjunction with the operator, who in turn helps to market the service to customers. That marketing can bring in hundreds of thousands of potential users, quickly raising the need to have an appropriately scaled serving infrastructure (Gerstel, 2005).
Distinctive Benefits of Mobile Entertainment
Successful mobile entertainment services must blend in to the world of mobility, by focusing on the moments users will spend on the wireless Internet. Distinctive characteristics of the mobile environment make m-entertainment qualitatively different from online entertainment (Baladi & Thaung, 2002).
Ubiquity: The ubiquity of the services permit the enjoyment of them wherever the user feels the need, for example, while in the train or waiting at the airport. It also allows the use of services at locations where no one can observe the consumer. This increases the anonymity of the wired Internet where others can often observe the user and computer screens. As gambling and adult entertainment are commonly socially unaccepted, the ubiquity promotes these services. (ibid)
Accessibility: The services are available at any time and immediately. It has been observed that many users access wireless services in niche time and have different usage patterns than people who go online through PCs. While typical PC users go online for 30 minutes or more per session i-Mode users’ sessions average less than two minutes – a time span during which normal PCs are not even booted. They tap into the service three to four times per day, often while commuting by train or during free time throughout the day. (ibid)
Reachability: From a push-perspective, mobile services allow connection with a user, with his permission, anywhere and anytime. This allows immediate interaction in communication applications and furthermore enhances the possibilities to contact possible partners for multiplayer games. From a service provider’s point of view it enables the transmission of time-critical information (e.g. betting information, cinema starting times) to interested users. (ibid)
Localization: The entertainment services can be customized to the user’s location. This allows better targeted infotainment and transaction-based entertaining services (e.g.
mobile coupons). Furthermore a new class of multiple-user interactive outdoor adventure games that blends the virtual and the real world (e.g. treasure hunts) is possible using location-based information. (ibid)
Personalization: Wireless devices are regarded as very personal items and the interface can be customized to one specific person. Personalized services create strong customer relationships, thus encouraging transactions while preventing users from switching to different services. This tendency is varied by the fact that Japanese i-Mode users, who personalize their phones with entertaining icons, ring-tones, cartoons, buddy programs and individual browsing preferences, have led i-Mode to the lowest global churn rate.
(ibid)
2.1.4 Mobile Shopping
Mobile extends users ability to make transactions across time and location and creates new transaction opportunities. It is important to note that only a part of the purchasing process is conducted with the mobile terminal. The basic point is that user needs to know what he/she wants in advance of making a mobile purchase. Moving forward, it seems most likely that a shopping list might be created with a web interface, which may then be executed from a mobile. At the current stage of technological development the customer must ideally be faced with a one-button purchase experience for mobile shopping. The purchase suggestions will often be based on the user’s past behavior patterns (Müller- Veerse, 1999).
Mobile Retailing
Mobile retailing is an interesting m-commerce application to use a smartphone to order pizza from a delivery service; this might be even more appealing than ordering the pizza via internet, because it takes a long time to boot the PC or a PC might not be available.
M-commerce combined with location identification creates new value, for example, when ordering a taxi or a pizza the vendor can automatically know where the service is to be delivered. However, there will be a large space for e-retailers to become m-retailers, when the personalization and location issues are well addressed. Books, CDs and groceries are often items, which the user knows well and where he needs just a tool to make a purchase. The purchase will be made when the user has spare time, independently of the shop opening hours and physical location. (ibid)
Mobile Ticketing
Mobile electronic purchase or reservation of tickets is one of the most compelling proposed services, because ticket reservation/purchasing is hardly a pleasant expertise today. Either one has to go in person to a ticket booth, or has to call an agency or the outlet. Calling outside opening hours means having to go through a lengthy IVR (Intelligent Voice Response) system. It is clearly more convenient to select and book tickets for movies, theatres, opera and concerts directly from the mobile device, because often the decision to purchase is made while outside or on the move among friends (Müller-Veerse, 1999).
This is one of the first WAP applications being seen in various markets. It will take some time until the process is fully automated, because even if today many movie theatre schedules are on the web, this does not mean that it is possible to make a purchase or a reservation there and then. In most cases, due to lack of back end integration, one still has to call to book the ticket. A first step on the way to full automation of the transaction would be to offer one-button dial to the ticket issuer. The travel market and especially the frequent business traveler market is likely to be an early WAP growth market. Using a WAP handset, train, plane, bus and boat tickets could be booked in a similar manner to movie tickets. The argument goes that m-commerce will be the driver of market growth in this arena, rather than a phenomenon, which lags behind wireline commerce growth.
(ibid)
Mobile Ticket Service Provider
A mobile ticket shop installation is already in place for commercial operations in Norway by Telenor Mobil with Across Wireless’ WAP platform for both, cinema and theatre tickets. The subscribers can even make payments for the tickets with their GSM phone. A ticketing application trial has also been developed in Germany by Intershop and Danet consultants (part of the Deutsche Telekom group), which includes reservations in the first phase, but is likely to be extended to film reviews and mobile payment as well. (ibid) Mobile Auctions
It includes applications that allow users to buy or sell certain items using multicast support of wireless infrastructure. These applications require that group membership not be adversely affected by brief wireless disconnectivity or intermittent connectivity as observed in many wireless networks of today. An example could be airplanes competing to buy a landing time slot during runway congestion (a proposed solution to air-traffic congestion problem) (Varshney, 2003).
2.1.5 M-commerce Service Technologies for Consumer
Short Message Service (SMS)
Text messaging is one of the simplest and most useful means of mobile communication (Nokia, 2001). Since 1992 Short Message Service (SMS) has provided the ability to send and receive text messages via mobile phones (Müller-Veerse, 1999). Each message can contain up to 459 alphanumeric characters (Nokia, 2005). After historically finding it was expected that SMS will show rapid further growth with the number of messages doubling every half a year, during the year 1998 SMS started suddenly to explode in the GSM markets. In October 1999, there were about 2 billion SMS messages sent per month within the GSM world (Müller-Veerse, 1999), and more than 50 billion SMS messages were sent across the world's GSM networks in the first quarter of 2001 (Nokia, 2001).
About 90% of SMS messages are voice mail notifications or simple person-to-person messaging. The rest is mobile information services, such as news, stock prices, sport,
weather, horoscope, jokes etc. Additionally, SMS e-mail notification, SMS chat and downloading of ringing tones has been offered recently in several markets. SMS services can be customized using SIM toolkit technology. SMS is an ideal technology for pushing information from one-to-one or one-to-few. SMS will benefit from the hype created with the arrival of WAP and many m-commerce applications will be initiated using both SMS and WAP as a platform (Müller-Veerse, 1999).
Wireless Application Protocol (WAP)
The WAP is a communication standard that enables portable electronic devices to receive and interpret data. Public access to the Internet commenced in 1990 but the WAP commenced in 1997 (Fenech, 2000). In 1999, a variety of WAP enabled products were released and made numerous opportunities in communication system (Steenderen, 2002).
WAP is one of the key enabling technologies of m-commerce as it allows mobile users to access the Internet from a mobile device. It makes possible the introduction about the novel ideas of m-commerce, which is specifically designed for the mobile user, and takes full advantage of distinctive characteristics (James et al., 2002).
Figure 5: Access to information at WAP enabled phones Source: Nokia.com, (2005)
The effect of WAP on Information Services
Information delivery can be quicker, made more convenient to users and corporations and available to more people, as there are many more users of mobile phone around the world than the users who have access to the Internet. In some rural areas mobile access is available even where there is no landline infrastructure and definitely no access to computers (Steenderen, 2002).
Steenderen, (2002) stated some examples on how information services can deliver the immediate access for consumer through wireless access:
o Wireless access to Internet content, therefore providing immediate access to the information they need.
o Access to corporate IT-systems and extranets.
o Corporations can offer their services and also create totally new services for their mobile customers.
o Wireless access to personal information, e.g. e-mail; calendars; to do lists; screen text headers for their voice mail messages.
o Intelligent telephony services: through access to their personal and other customer-related services.
The Benefits of Using WAP
WAP means freedom to the end user which offers an easy-to-use and highly portable communications and information tool. Devices using WAP-based micro browsers can access an array of innovative, value-added services, which are rapidly coming to consumer the market. (ibid)
o Checking the bank account balance and carrying out transactions.
o Mobile phone alert for a threshold, for example when a stock limit has been reached.
o On-line tickets, for example, changing a flight.
o "Infotainment", for example, the weather, sports, traffic information, yellow pages.
o Define a shopping list and receiving updated delivery times or triggering the delivery.
o Voice and fax mail notifications.
o Access to Internet e-mail.
o Document sharing or collaborative working.
2.2 The Buying Process of M-commerce
Consumer behavior is an important aspect from several points of view. In a marketing perspective knowing the consumer behavior is important in order to facilitate the promotional activities so that the consumer can be aware of their product choices as well as brand preferences. Consumers also need to gain insight into their own behavior if they are to spend their income optimally. The study of consumer behavior is considered as one of the rich domain from science perspective, in which to test economic, cognitive, economic–psychological and social–psychological theories (Antonides & Van Raaij, 1998). Recognizing consumer behavior on the Internet is increasingly important since e- shopping has begun to penetrate the mass market (Rowley, 2000).
Information Search
Information Evaluation
Purchasing Decision
Post-purchase Behaviour Problem Identification
Figure 6: The Consumer-decision Making Process
Source: Rowley (2002, p.21)
The consumers buying behavior is a predominant approach for marketing area, it explains the fundamentals of consumer behavior, describes the consumer buying process as learning, information-processing and decision-making activity (Constantinides, 2004).
There are numerous theories, models, and concepts in consumer behavior field, but the consumer decision making process is one of the most important theories to understand (Peter & Donnelly, 2000). In this process a consumer decides to make a purchase and then goes through a series of steps in order to make it. These steps can be described as a series of actions and are presented in Figure 6 (Rowley, 2002).
The Consumer-decision Making Process
The first step of the decision-making process, problem identification, occurs whenever the consumer sees a significant difference between his or her current state and some desired or ideal state. Once a problem has been recognized, consumers need sufficient information to resolve it. Information search is then the process in which the consumer
surveys his or her environment for appropriate data to make a reasonable decision. Much of the effort that goes into a purchase decision occurs at the next stage, information evaluation, where a choice must be made from the available alternatives. Once the relevant options from a category have been collected and evaluated, a choice must be made among them. The decision rules at this stage, purchase decision, can range from very simple and quick strategies to complicated processes requiring a lot of attention and awareness processing. Finally, the post-purchase behavior deals with influencing the actual purchase situation as well as the person’s satisfaction with the decision. (Solomon, Bamossy, & Askegaard, 2002).
A distinction is frequently made between high and low involvement purchasing, implying that in practice the actual buying activity can be less or more consistent with this model, depending on the buyer's perceived purchasing risks. High or low degree of involvement is also a question of buyer experience; products purchased for the first time, in general, require more involvement than frequently purchased products. Next to identifying the steps of the buying process and the potential role of marketing in each stage, marketers are eager to comprehend how purchasing choices and decisions are made, how consumers are likely to react to innovation and how to predict the outcome of the customer-vendor interaction (Constantinides, 2004).
2.2.1 Information Search on the Internet
Information search is an integral part of the consumer decision making process (Rowley, 2002). This is the second stage of the decision-making process (McColl-Kennedy &
Fetter Jr., 2001). The Internet contributes to this function by providing an efficient and convenient tool to search for a vast amount of product or service related information (Rowley, 2002). The electronic market as an interorganizational information system that allows the participating buyers and sellers in some market to exchange information about prices and product offerings. In electronic marketplace, technology helps consumers find information more easily, thereby reducing the problems of imperfect information (Kulviwat, Guo & Engchanil, 2004).
Search costs are lower in a virtual market than in brick-and-mortar markets. Thereof, consumers have the incentive to search for more information online compared to an offline search. In electronic marketplace buyers are able to find sellers who better match their needs. The emergence of technology has made it possible for consumers to search and find among thousands of merchants at lowest prices. Technology has also reduced the costs of communicating information by improving the quality and speed of information processing and consumer decision making by providing the right information at their finger tips. (ibid)
Information search has been a traditional research stream in behavioral sciences, particularly in marketing (Kulviwat,Guo & Engchanil, 2004). Therefore, understanding information search is crucial for designing effective marketing communication campaigns because it represents the first stage at which marketing can provide information, and therefore influence consumers’ decisions (McColl-Kennedy & Fetter Jr.,
2001). There are several variables impacts to search information online, perceived benefit and cost are the two major determinants which derived from information economics (Kulviwat, Guo & Engchanil, 2004).
Perceived Benefit of Information Search
Search benefits are defined as outcomes that increase one's utility or provide value by facilitating achievement of higher level goals or values. Prior research found that perceived benefits of search were positively related to search activity. One important consumer benefit associated with marketing on the Web is the access to greater amounts of dynamic information to support queries for consumer decision making. Further, the interactive nature of the Web environment allows for deep, nonlinear searches initiated and controlled by customers. Hence marketing communications on the Web are more consumer-driven than those provided by traditional media. In addition, recreational uses, manifested in the form of nondirected search behavior, can be an important benefit to consumers intrinsically motivated to use the medium (Kulviwat, Guo & Engchanil, 2004).
The Web enables to analyse and control the large quantities of specialized data, which allow comparison shopping and speeds the process of finding items. It also facilitates trials and can provide instant gratification; customer can test product online, which may stimulate purchase. Perceived benefit is positively related to the motivation to search online. Therefore, ease of use of technology, effectiveness of online search, and user satisfaction are antecedents of the perceived benefits of information search. (ibid)
Perceived Cost of Information Search
Perceived costs consist of monetary, temporal (time), mental, psychological, and behavioral (physical) effort required in a search process. Perceived cost is negatively related to the motivation to search online and it affects negatively on search activity.
Overload information in online can cause stress full for a user but it is not considered effortless. Shopping online is perceived to be quite risky and the perceived risk includes fear of technology use and information overload, feeling of uncertainty and confusion, and feeling of insecurity when engaging in online transactions (e.g. credit card fraud).
Because technology for secure transactions (e.g. online payment) is not yet mature, security and privacy are major issues that should be addressed satisfactorily in online medium Hence, perceived risk will induce a perception of increased cost in searching online that discourages motivation to search information online. (ibid)
2.2.2 Online Buying Behaviour
The continuous expansions of online buyers are surprisingly expanding. Therefore, understanding the behaviour of online consumer is a priority issue to compete in the fast expanding virtual marketplace. These developments are gradually transforming e- commerce into a mainstream business activity while at the same time online consumers
are maturing and virtual vendors realize the importance and urgency for a professional and customer-oriented approach (Constantinides, 2004).
Other stimuli: Personal and Environmental Uncontrollable Factors
Demographic, personal, cultural, sociological, economic, legal, environmental etc.
Marketing Stimuli Buyer’s Decision Process Buyer’s Decision (Traditional Marketing
Mix)
Problem Identification, Search, Trust Building, Evaluation of alternatives, Choices, Post purchase Behavior
Product choice, Brand choice, Dealer choice, Purchase timing
Forces Influencing the Online Consumer’s Behavior
Web Experience:
Online Controllable Marketing Factors
Figure 7: Based on the P. Kotler’s framework (2003) Sources: Constantinides (2004, p. 113).
Online marketers can influence the decision making process of the virtual customers by engaging traditional, physical marketing tools but mainly by creating and delivering the proper online experience through web with combination of online functionality, information, emotions, cues, stimuli and products/services. The marketing tools and actors under the control of the e-marketer can influence or shape the online consumer's behavior during the virtual interaction. The traditional buying behavior frameworks found in marketing textbooks (Kotler, 2003) and the Web experience is new in this scenario. In Figure 7 a new category of controllable elements - the Web experience has been added to the factors influencing the online consumer. (ibid)
2.2.3 Online Shopping Experience
"Online shopping experience" or "virtual experience" is a crucial aspect of e-commerce marketing issue. Online shopping experience is a process of four stages describing the successive steps of an online transaction. Considering that an online customer is not simply a shopper but also an information technology user one can argue that the online experience is a more complicated issue than the physical shopping experience. The Web experience can be defined as the consumer's total impression about the online company resulting from his/her exposure to a combination of virtual marketing tools “...under the marketer's direct control, likely to influence the buying behavior of the online consumer (Constantinides, 2004)
The Web experience embraces elements like searching, browsing, finding, selecting, comparing and evaluating information as well as interacting and transacting with the online firm. The virtual customer's total impression and actions are influenced by design, events, emotions, atmosphere and other elements experienced during interaction with a given Web site, elements meant to induce customer goodwill and affect the final outcome of the online interaction. It should be noticed here that the Web experience is important not only for Web sites marketing products or services but also for sites targeting customers interested in informational content (news, weather, sports etc.), sites acting as online intermediaries and generally to all types of Internet ventures competing for the attention of the online public. (ibid)
2.2.4 Transformation of Traditional Business to Online Business
According to Vaidyanathan & Devaraj (2003) transformation of buying and selling process into online work according to a certain process. Buyer usually approves a vendor base on the need they recognize. Seller approves a customer using credit feed from credit bureaus and other selection criteria. Buyer orders goods and services through purchase order and seller accepts purchase order. Both parties guarantee payment and receipt of goods using a letter of credit. Seller sends an invoice and buyer accepts the invoice for being sure that the order was accordingly. Seller initiates the order by shipping the goods using a logistics provider. Buyer accepts goods/services within the provided time by sellers and buyer verifies the quality of received goods/services. Buyer approves payment, gets financed if needed, makes payments using financial institutions and seller accepts the payments. Sometimes disputes may rise from the buyer side after receiving the products and then it resolves by sellers base on the stipulated conditions. (ibid) Most recent debate is focused on the identification and analysis of factors that one way or another can influence or even shape the online consumer's behaviour and a good deal of research effort is focused on modeling the online buying and decision-making process.
Many researchers do not see any fundamental differences between the traditional and online buying behavior, it is often argued that a new step has been added to the online buying process which is the step of building trust or confidence (Constantinides, 2004).
Therefore, the advent of online services has made it possible to transform the traditional buying/selling process into online environment. As seen in Figure 8 the fundamental buying/selling process does not change significantly in online; however, new risks have been introduced. There is an established perception that online businesses are faster and this has changed the relationship between suppliers and sellers. Buyers expect rapid fulfilment and suppliers have to work in maximum synchronization with the sellers. As with the traditional model, this online transformation of buying/selling process works very well when the supply chain and backend services are connected and work together.
The performance and efficiency of the online process depends on the presence of this connectivity. If the supply chain and backend services function well, the online process will be efficient and will perform as expected for the online community of buyers and sellers (Vaidyanathan & Devaraj, 2003).
