Online Customer Satisfaction in the Face of Uncertainty: Evidence from Third Party Ratings

Transcription

1 College of Management Online Customer Satisfaction in the Face of Uncertainty: Evidence from Third Party Ratings Jifeng Luo, Sulin Ba and Han Zhang

2 Retail e-commerce Observation 1: The e-commerce share of overall retail sales remains modest. Observation 2: The e-commerce share varies across product categories. Observation 3: Online shoppers generally visit few stores and gravitate toward a preferred site over time. Observation 4: Surveys of online customers indicate that a significant percentage were not satisfied. More research is needed to better understand what factors influence customer evaluation of online experience and satisfaction and how.

3 Uncertainty: Separation of Buyers and Sellers Shopping: Physical store-based electronic commerce

4 Uncertainty: Separation of Buyers and Sellers Product uncertainty Retailer uncertainty

5 Research Questions What role does uncertainty play in online consumer satisfaction? What can retailers do to mitigate the negative impacts of uncertainty?

6 Literature and Theory Background Literature Relevance Examples Customer Satisfaction Factors influencing customer satisfaction Wolfinbarger and Gilly 2003, Kotha et al Uncertainty Consumer Search Signal Theory Buyer behavior is inherently uncertain Consumers engage in active search/ experience to alleviate uncertainty Consumers infer higher quality from expensive investment or higher price Bauer 1960, Pavlou et al Lynch and Ariely 2000, Nelson 1970, Ratchford 1982 Kirmani and Rao 2000, Wolinsky 1983

7 Theoretical Framework Product Uncertainty Retailer Uncertainty H1 - Online Customer Satisfaction Website Design Customer Service Pricing H1: Product uncertainty negatively influences online customer satisfaction.

8 Theoretical Framework Product Uncertainty Retailer Uncertainty H1 H2 - Online Customer Satisfaction Website Design Customer Service Pricing H2: Retailer uncertainty negatively influences online customer satisfaction.

9 Theoretical Framework Product Uncertainty Retailer Uncertainty H1 H2 Online Customer Satisfaction H3a H3b H3c Website Design Customer Service Pricing Literature shows customer service, website design, and price lead to customer satisfaction. How do they impact online customer satisfaction?

10 Theoretical Framework Product Uncertainty H1 Retailer Uncertainty H2 H3b + H3a + Online Customer Satisfaction Website Design Customer Service Pricing H3a: Better website design could mitigate the negative impact of product uncertainty on online customer satisfaction. H3b: Better website design could mitigate the negative impact of retailer uncertainty on online customer satisfaction.

11 Theoretical Framework Product Uncertainty Retailer Uncertainty H1 H2 Online Customer Satisfaction H3a + H3b + H4a + H4b + Website Design Customer Service Pricing H4a: Better customer service could mitigate the negative impact of product uncertainty on online customer satisfaction. H4b: Better customer service could mitigate the negative impact of retailer uncertainty on online customer satisfaction.

12 Theoretical Framework Product Uncertainty Retailer Uncertainty H1 H2 H5a - H3b + H4a + H3a + H4b + H5b - Online Customer Satisfaction Website Design Customer Service Pricing H5a: Online consumers are willing to pay a higher price to reduce product uncertainty. H5b: Online consumers are willing to pay a higher price to reduce retailer uncertainty.

13 Summary of the Data Bizrate survey data: Collected in summer Ratings from customers at both check out and after delivery ; total of 15 ratings. For each store, we collected all customers ratings. 49 stores: 9 selling books, 40 selling clothing 9957 observations Alexa.com traffic data: Daily visits of Web users on average in the previous three months

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15 Variable Operationalization Product uncertainty: two types of products Clothing (experience goods) Books and magazines (search goods). Retailer uncertainty: proxied by the inverse of traffic data for each store (Kirmani and Rao 2000). Customer Satisfaction: multiple-item measure consisting of overall rating and would shop here again. Apply factor analysis to the 13 ratings: Three factors, frequently investigated in literature, emerged. Alleviate multicollinearity problems

16 Factor Analysis of the Bizrate Survey Data Components Variable Costumer support Order tracking On-time delivery Product met expectation Product availability Ease of finding product Site design Clarity of product info Product selection Shipping options Shipping charges Price Charges displayed Factor Name Composite Reliability Customer Service 0.88 Website Design 0.88 Pricing 0.81

17 Methodology Random effects model with robust standard errors clustered by retailer was used.

18 Descriptive Statistics and Correlations Constructs Mean SD Customer Satisfaction Website Design Customer Service Pricing E (product dummy) Website traffic Number of Ratings Online Age Channel Public Customer Certified

19 Constant Website design Customer service Pricing E (Product uncertainty) R (Retailer uncertainty) Uncertainty-Reduction Effects Website design * E -- Customer service * E -- Pricing * E -- Model 1 Model 2 Model 3 Model (0.072) (0.088) (0.083) (0.08) 0.041*** (0.009) (0.026) (0.027) (0.016) 0.822*** 0.854*** 0.826*** 0.830*** (0.021) (0.023) (0.018) (0.020) 0.024*** *** (0.009) (0.047) (0.037) (0.008) (0.024) (0.035) (0.038) (0.025) * * *** *** (0.013) (0.015) (0.015) (0.015) 0.065** (0.027) (0.032) (0.048) Website design * R Customer service * R Pricing * R Control Variables 0.065** (0.029) (0.025) (0.039) (0.011) 0.068*** (0.017) *** (0.011) 0.053*** (0.017) (0.026) (0.011) 0.068*** (0.017) *** (0.012) Number of ratings ns ns ns ns Effects of Uncertainty and Retailer Characteristics Online age ns ns ns ns Channel ns ns ns ns Public ns ns ns ns Customer certified *** (0.033) *** (0.027) ** (0.028) ** (0.028) R 2 (adjusted) χ 2 statistics for product uncertainty interactions ** 10.84** 9.95*** χ 2 statistics for retailer uncertainty interactions *** 18.07***

20 Effects of Uncertainty and Retailer Characteristics Impact of of retailer product website uncertainty design, customer Wald service, test test and for for the pricing the joint significance joint The Wald significance statistic of terms of was with terms retailer with (p < uncertainty.01) product for (R) uncertainty website design, (E) χ2(4) (p χ2(4) < =.01) = 20.60, 12.35, for customer p p < < service, and (p <.01) for pricing.

21 Product Uncertainty and Reduction

22 Retailer Uncertainty and Reduction

23 Hypotheses Supported Product Uncertainty Retailer Uncertainty H1 H2 H5a - H3b + H4a + H3a + H4b + H5b - Online Customer Satisfaction Website Design Customer Service Pricing

24 Key Results Uncertainty matters Customers care more about retailer uncertainty Website design can help reduce product uncertainty Customer service can help reduce retailer uncertainty

25 Contributions Real world observations Separate uncertainty into two categories Direct and indirect uncertainty-reduction effects

26 Managerial and Research Implications Guidance in online strategy and resources allocations Identify features critical to satisfaction Importance of service delivered through information systems How to place into consideration set for new or unknown retailers Design website from the perspective of search costs Brand building is still important

27 Potential Research Extensions Both products are low price items. Fruitful to add additional dimension of price Results based on comprehensive scales by researchers would be a plus. Disaggregate service into different dimensions. Study what dimensions are important. Different aspects of satisfaction

28 Thank You!

29 Bizrate.com Ratings Appendix For Reference as Needed

30 Effects of Uncertainty and Retailer Characteristics (to be continued)

31 Effects of Uncertainty and Retailer Characteristics (continued)

32 Fixed Effects Estimates

33 Model 1 Model 2 Model 3 Model 4 Constant Website design Customer service Pricing E (Product uncertainty) R (Retailer uncertainty) Uncertainty-Reduction Effects (0.15) 0.040*** (0.009) 0.820*** (0.008) 0.026*** (0.009) (0.076) (0.022) Website design * E -- Customer service * E -- Pricing * E -- Website design * R Customer service * R Pricing * R Control Variables (0.134) (0.029) 0.853*** (0.027) (0.036) (0.070) (0.020) 0.064** (0.030) (0.028) (0.037) (0.114) (0.029) 0.828*** (0.027) (0.036) (0.057) ** (0.016) 0.062** (0.030) (0.028) (0.037) * (0.010) 0.068*** (0.011) *** (0.010) Number of ratings ns ns ns ns Online age ns ns ns ns Channel ns ns ns ns Public ns ns ns ns Customer certified ns ns ns ns (0.104) (0.025) 0.830*** (0.027) 0.027*** (0.009) (0.052) ** (0.015) 0.055** (0.026) (0.028) * (0.009) 0.069*** (0.011) *** (0.010) EC2SLS Estimates of Customer Satisfaction R 2 (adjusted) χ 2 statistics for product uncertainty interactions * χ 2 statistics for retailer uncertainty interactions *** 39.02***

34 Summary of the Key Findings