Promotion Strategy and Customers’ Behaviour: Taobao

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Table of Contents

Introduction
Aims and Objectives
Research Questions
Overview of Taobao
Literature Review
Sample Selection
Methodology
Conclusion
References

Introduction

Business organisations must understand the behaviour of their consumers to sustain them as the most crucial tools for their success. Attempts to sustain customers involve putting in place appropriate marketing strategies that require a research on the reasons behind motivation of consumers to buy certain products and services.

Developing such capacity is pivotal in ensuring that marketing promotions are developed to target the right audience, which is capable of responding positively to a marketing campaign. The purchasing behaviour of consumers is often segregated in terms of various demographic factors such as age, gender, socio-economic status, and religion among others.

This implies that marketing strategies are developed consistently with the characteristics of the target audience so that resources including time and money are not channelled to marketing efforts for non-existing markets or a target audience, which is not likely to respond positively.

This dissertation paper proposes a research to establish the relationship between promotional strategies and customers’ behaviour within Taobao marketplace. Customers’ behaviour in the context of this dissertation is used to refer to the “study of individuals, groups, or organisations and the processes they use to select, secure, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on consumers and society” (Blackwell & Engel 2006, p.11).

To study this aspect within the context of Taobao marketplace, the dissertation appreciates that studying customers’ behaviour is an immense challenge even in the well-defined markets. In fact, according to Armstrong (2001), even experts in the field of consumer behaviour find it incredibly difficult to study the aspect (p.252).

However, this challenge is addressed in the dissertation by attempting to study consumer behaviours among the Taobao marketplace in the context of how consumers respond to specific marketing strategies that are engineered for a specific target audience.

Any research must meet specific aims and objectives (Creaswell 2008). For this purpose, the structure of the dissertation paper begins with the discussion of the aims and objectives of the proposed research followed by research questions in the first section. The second section discusses various findings as documented in the past literature on customers’ behaviour and marketing strategies.

This helps to set a solid foundation to base the analysis of the results of the proposed research in the efforts to determine whether Taobao marketplace differs from other researched market segments. While conducting primary research, it is difficult to study a whole population because of funding constraints together with the difficulties experienced in the analysis of large amounts of data within minimal time constraints.

Consequently, in the last section of the dissertation paper, efforts are made to discuss the sampling technique that is deployed to define a sample that is representative of Taobao marketplace and the methodology of data collection and analysis.

Discussion of the sample is particularly important to help in the elimination of sampling biasness, which may impede the capacity of the selected sample to be representative of the characteristics of the consumer behaviours of the entire population of Taobao marketplace.

Aims and Objectives

Taobao marketplace operates in an online environment through interception of B2C (business-to-consumer) and C2C (consumer-to-consumer) strategies. This implies that the two main functions of business (buying and selling) are conducted via technological intervention of the internet.

Therefore, it is anticipated that the target population for Taobao marketplace is characterised by different buying behaviours in comparison with the physical marketplace that embraces the face-to-face interaction strategy with organisational selling agents and consumers.

Based on this theoretical hypothesis, the proposed research in this dissertation paper is aimed at reviewing the literature in the field of online consumer behaviour in the effort to set a parameter for comparing and contrasting the findings of the main primary research. In this endeavour, secondary data, as documented in books, journals, magazines, and reliable web resources is pivotal.

The objective is to identify the possible effective promotional strategies that would help to yield the success of an organisation that conducts business in an online environment such as Taobao marketplace. Realisation of this objective is crucial in helping to attain the overall objective of the research: to explore the relationship between online promotional strategy and consumer behaviour.

Another central objective is to develop a model for explaining online consumer behaviour in the context of the Chinese market. This aim is realised through examining the impact of online consumer behaviour in the context of China and its impacts on Taobao marketplace online promotion strategy.

Research Questions

Two main research questions will be considered in the main research. These are:

How do Taobao customers respond to different promotional strategies?
Are there ways for ensuring that customers develop similar attitudes together with motivation to purchase in an online environment that is realised through B2C and C2C technologies?

Overview of Taobao

Taobao depends on e-commerce to execute its business functions. E-commerce refers to a commercial activity that is executed electronically. It is enhanced by the internet, which boosts the connectivity between sellers and consumers across the globe (Xiaoni & Prybutok 2004). After the industrial revolution of early 20^th century, the dawn of e-commerce comprised one the mega episodes that have made economic history of people to revolution.

The internet and e-commerce have broken down the geographical demarcations so that businesses require only a single physical location from where all customer procurement and chain supply tasks are executed for the business to operate effectively. Worldwide electronic commerce market is developing at an alarming rate. Lorenzo (2010) estimates this growth as worth €400 billion.

Taobao is the largest network of retail and business units. The networks are committed in building a global preferred network of retail and business area. Alibaba Group founded it in 2003. Taobao operates two main e-commerce platforms. These are business across C2C (consumer-to-consumer) and B2C (businesses-to-consumer). During the first quarter of 2008, more than 6200 people joined Taobao. A large number of them covers mostly online shopping population (Taobao Marketplace 2013).

During the first quarter of 2008, Taobao’s transactions were in excess of 18.8 billion with an annual turnover in excess of 433 million by 2007. According to a 2007 third-party authority research, Taobao occupies more than 70% of China’s online shopping market share (Taobao Marketplace 2013). For C2C market, Taobao occupies more than 80% in terms of market share.

To date, Taobao has emerged a first choice for conducting online business transactions of a majority of internet users and online entrepreneurs together with business society. In October 2005, Taobao announced to create 1 million jobs within a time span of five years.

This was one of the promotional techniques deployed by Taobao to prove that, apart from helping consumers to gain the utility of products and services that are sold through retail and business networks, it also has a responsibility of meeting the needs of the communities, which it serves in terms of provision of employment. The main question is whether such a promotional technique translates to increased sales for an organisation conducting business in an online environment.

Literature Review

Preference of an organisation’s products and services in comparison to another organisation’s merchandise implies that there is a psychological driving force, which influences the behaviour of consumers. Organisations influence consumers to purchase their products and services through promotion strategies (Maktoba, Ian & Sonny 2011: Paco 2008). This suggests there is a relationship between consumer behaviour and promotional or marketing strategies.

According to Solomon (2004), customers’ behaviour is shaped by interactions of a customer with certain environmental and marketing stimuli. Marketing stimuli comprise price, promotion, place, and product. In an online marketing environment, place is not an important marketing stimulus since a business organisation requires only one physical location to execute all business functions.

Environmental stimuli consist of aspects that shape the buying patterns of consumers such as demographic, cultural, technological, and economic components (Kardes et al. 2011). For buyers to make a purchase, decision processes are important. These processes include “problem recognition, information search, alternative evaluation, purchase decision, and post purchase behaviour” (Solomon 2004, p.67).

Decision processes are shaped by myriads of buyer traits among them being attitudes, perceptions, lifestyle, motivations, products knowledge, and personality. While studying consumer behaviour, Foxall (2005) and Kardes et al. (2011) insist that it is crucial for an organisation to develop an adequate knowledge base on factors that influence products choice, dealer selection, and amount of purchase, brand choice decisions, and purchase timing of customers.

This model suggests that consumers make certain buying decisions through prior possession of information on a given problem, which is solved by a given product or service on offer. The work of Solomon claims, “In reality, many decisions are not made in the awareness of a determined problem by the consumer” (2004, p.81). Even though this may be true, it is crucial to note that a product or a service must satisfy a given need that prompts a customer to seek a service or a product in the marketplace.

The internet has provided an effective and easy way of accessing information concerning products and services. Hence, it is one the most effective promotional tools, which can help to create various stimuli, which might motivate consumers to purchase various goods and services.

Foxall (2005) argues that, apart from considering the utility of products or a service, consumers also shape their buying behaviours depending on the easiness through which they have information about products and services (p.45). Khosla (2010) further develops this argument by claiming that a consumer executes both internal and external searches to gain the full information on products that would satisfy his or her needs in the most profound manner.

Sources of external information comprise public advertisements, commercial advertisements, and personal information based on products and services experience (Khosla 2010). Currently, people prefer gaining information without hassles. This makes search engines instrumental in effecting the promotion of an organisation seeking to sell to an emerging breed of consumers.

Unfortunately, such consumers require to be convinced that the products they buy will satisfy their needs. Recognition of this essential need has prompted many online marketing organisations to deploy social media as a platform for enhancing a two-way communication between consumers and sellers.

The need to keep the consumer informed coupled with the provision of the means through which they can post their concerns or areas where they need clarifications to be made has led to the emergence of new technological methods of conducting businesses such as the B2C and C2C criteria (Kalakota & Whinston 2008).

While this technologies can run on a standard personal computer, the increasing number of people with mobile devices, which support platforms for financial transactions has made it possible for the two technologies to adopt mobile devices. Thus, technology is an essential factor that shapes the buying behaviour of consumers in the 21^st century market place. Taobao has recognised this factor and developed technological selling platforms that are guided by the development of B2C and C2C.

The question the organisation needs to address is how effective the online business model is in enhancing competitive advantage of Taobao in terms of shaping consumers’ behaviour so that they can respond positively to its promotional strategies.

Many organisations have recognised the benefits that may result from full exploitation of the new wave of the mobile internet. This wave is making organisations benefit immensely in hiking their value-added services together with enhancing their competitive advantage. From the contexts of the customers that are targeted by these organisations including Taobao, mobile applications provide easy means of facilitating customers to access their information.

This information is available right in their pockets and stored within the applications that run from their smart phones. With regard to Zhang and Adipat (2005), “mobile applications are everywhere in categories of games, social networking, productivity tools, infotainment, data management, and utilities” (p.293).

This availability of mobile applications in a variety of forms makes consumers receive mobile supported contents in a superior way compared to classical channels of mobiles among them being the short message services and mobile browsing.

Consistent with this line of argument, consumers may have three significant benefits accruing from having the ability to gain access to their data via mobile applications. These are volume, speed, and ease of accessibility to advertisements. This advantage forms the basis of success of mobile devices in helping to build good relationships with customers.

The modern-day consumers live in a world in which they anticipate getting anything at the time they want it. Therefore, the time within which consumers are able to access whatever information they want is an immense concern that organisations need to address if at all they want to capture this population that is incredibly time cautious.

Indeed, while attempting to access one’s data through desktops and notebook computers, the patience of consumers is metered since they have to wait until booting is complete followed by the loading of internet via 3G or 4G network and then starting the search process to receive their data, which is essential in helping to make buying decisions. Taobao deploys mobile applications to enhance successful execution of these purchasing processes because they save time.

When the application loads on the mobile device, the consumer will have access to all information he or she needs within minimal time. Surprisingly, in case updating of some information is required, it is accomplished in the applications’ background. Consequently, consumers are given an opportunity to access other data while in the mean time waiting the application to finish loading.

In appreciation of this benefit, Myers et al. Laments, “mobile apps are becoming so functional and popular among consumer especially by considering that nearly half of all corporate-issued devices will be mobile” (2006, p.39). To the consumers, this means that their data will be available right in their pockets.

In a nation that is served by the 3G network, consumers have limitations for storing large amounts of their information in the virtual memories of the internet. However, mobile application has the capacity to keep magnificent volumes of data including catalogues and videos. They then use this information to influence other consumers.

This implies that the deployment of mobile applications to execute marketing strategies makes it possible for an organisation to use loyal customers to market or promote their products in the absence of inputs of organisations’ resources (Xiaoni & Prybutok 2004). An additional benefit is also realised in that the data is kept within the mobile application, thus prompting improvement of experiences of users who are largely the consumers.

Although the era of billboards advertising is not yet over, mobile advertising is rapidly catching up. Interestingly, this trend is not anticipated to stop any time soon. Opposed to the localised placement of billboards, mobile advertisement enables consumers to have a constant accessibility to advertisement any time they wish. Therefore, for Taobao, there is no need for timing when to place advertisements.

In any marketplace, many scholars have found that understanding consumer behaviour plays a variety of roles in influencing the promotional techniques that will best help to win consumers.

For instance, Ward and Lee (2006) argue that understanding customers’ behaviour may reveal that consumers are influenced to buy through logical arguments while they are persuaded to make purchases in some situations through emotional messages or through the creation of promotional strategies, which evoke symbolic appeals (p.8). Studies in consumer behaviour contend that behaviours among people arise at an individual or group level and hence the logic behind market segmentation.

Consumer behaviour is studied for a variety of reasons. The single most important reason is to help in developing a winning marketing or promotional strategy for an organisation’s products and services (Carmody 2004). This underlines the significance of the need to study whether there is any relationship between promotional techniques and consumer behaviour in an online marketplace.

Existence of a positive relationship implies that online selling organisations such as Taobao should engineer applications, which support promotions via mobile devices. Understanding customers’ behaviour means that promotions can be timed precisely (Carmody 2004). For instance, studies in customers’ purchasing patterns may reveal that most consumers buy certain products such as electronic items at the end of the month when they receive their salaries.

Consequently, while using social media, advertisements for such products are made aggressively a few days before the end of the month. Understanding customers’ behaviour also gives an indication to a seller on how to prepare financially to successfully place new products and product lines. In this context, Armstrong (2001) argues that few customers mostly embrace new products upon their first placement in the marketplace.

For Taobao, this means that adequate funds are required while attempting to place new products online to ensure that the organisation remains afloat before market picks when customers share their experiences about the products or when the organisation manages to convince potential customers about the usefulness of a product.

Online consumers have distinctive behaviours compared to consumers who buy products from physical locations of an organisation. Abhamid, McGrath, and Khatibi (2007) support this assertion by claiming, “Online consumers are demanding different relationships from service providers (p.543). They have more focus on service quality and effectiveness in exchange of prices (Anderson & Srinivasan 2003).

They also conduct an evaluation of quality experiences since they consider high-quality services that are rendered by a given organisation to comprise one of the most important service attributes, which are essential in helping to shape their buying behaviour (Abhamid & McGrath 2005).

This means that, in the context of determining the relationship between customers’ behaviours and promotional strategies in Taobao marketplace, findings on the studies that determine the features of a service, which most of the customers shopping in an online environment look for are important once incorporated in the analysis of the result findings.

With the rapid growth in the number of people who are engaged in social media, many people acquire information about a service or a product experience from their friends or followers. Organisations that sell online should then consider perusing postings made by their customers to determine whether their service delivery methods satisfy the preconceived needs of customers when they buy a product or a service from an organisation (Abhamid, McGrath & Khatibi 2007).

From these theoretical arguments, in the effort to create awareness of the existence of an organisation, social media is incredibly helpful. Such a strategy for building positive brand image is opposed to traditional approaches for brand communication in which organisations mainly focused on “controlling what was said about their products and brands by dominating communication channels with carefully planned messaging” (Anbu & Mavuso 2012, p.319).

However, in the modern business environment, control of messages is immensely difficult since the ability of customers to access information through online interactions has become incredibly sophisticated.

The significance of effecting communication strategies for marketing the service brand through social media is ardent bearing in mind, “today, customer communication takes the form of bilateral dialogue” (Rust, Zeithaml & Lemon 2004, p.117). This often entails online communication through B2C and C2C as evidenced by the case of Taobao.

Sample Selection

Empirical studies begin with the selection of an appropriate sample size depending on the desired statistical confidence levels. According to Scott, “sample size is an important feature of any empirical study in which the goal is to make inferences about a population from a sample” (2011, p.87). Therefore, a sample that will yield a powerful tool for making statistical inferences revealing the consumption behaviour of the entire population is necessary.

In the determination of this sample size, some parameters must be known. They include “confidence interval (margin of error), size of the population, confidence level, and standard deviation” (Saunders, Thornhill & Lewis 2009). Population size refers to the number of people who fit within the demographics of an empirical study.

In the context of this research, the total number of people forming the Taobao market place is necessary. However, although it is not known, it does not make the research impossible to execute since it is common for the population to be unknown in empirical studies (Saunders, Thornhill & Lewis 2009). The only important thing here is to determine the most appropriate demographic group to study.

According to the data released by a Taobao report, low-income consumption levels are at “3 percent, 17 percent for lower middle income consumption, 61 percent for middle, and 15 percent for higher middle income consumption” (Taobao Marketplace Index, 2013). High-income consumption level accounts for only 3 percent. According to the same report, white-collar consumer accounts for 41 percent while students account for only 13 percent.

In the context of age demographics, 33 percent of the total buyers are in the age gap of between 0-25 years, 35 percent are in the age gap of 25-30 while those in the age gap of 30 to 35 account for 14 percent (Taobao Marketplace Index, 2013). This means that 79 percent of Taobao’s customers are in the age group of between 0 and 35.

This group is a sufficient target group to focus on especially by noting that such an age group has probabilities of positively embracing e-commerce as an acceptable mode of business transactions. Therefore, the people targeted by the primary research are from the middle class society, and those who have employment (aged between10-35 years).

Having established the target audience of the research, the other mega challenge is to establish the confidence interval. Samples are not perfect (Bryman 2008). Hence, setting the limits of the error that is permissible in the research is necessary.

“The confidence level determines how much higher or lower than the population researchers are willing to let their sample mean to fall” (Scott 2011, p.89). Although a researcher has the freedom of determining the range within which a sample mean should fall in, a standard value of +/-5 is chosen for this research.

For statistical analysis, it is necessary to choose an appropriate confidence level. For an empirical research, the mostly used confidence levels are 90 percent, 95 percent, and 99 percent (Smithson 2003, p.67). In the proposed research, 95 percent confidence interval will be deployed. Standard deviation is yet another important parameter in the determination of sample size for utilisation in a primary research.

It refers to the degree in which the interviewees’ responses should vary. 0.5 is utilised in this research since “it is the most forgiving number that ensures that a sample is large enough” (Scott 2011, p.89). Choosing a large sample is important since a larger sample attracts representativeness of the population characteristics.

A given confidence level corresponds to a given Z score value. For 95 percent confidence, Z score value is 1.96. With this value, it becomes possible to calculate the required sample size using the formula-

(Scott 2011). When the chosen values are substituted in this equation, the value of sample size is 385.

Methodology

Conducting a business in online environments implies that a physical contact between customers and sellers rarely takes place. This means that holding face-to-face interviews with customers of Taobao in the effort to garner information on their motivation for buying is incredibly difficult and an unreliable method of data collection. Indeed, garnering data for this research requires deployment of more than one technique.

To enhance transaction through the B2C and C2C criteria, the seller and buyer share contact information including telephone numbers and e-mail contacts. The researcher proposes to utilise contact information of customers of Taobao contained in the organisation’s database to e-mail questionnaires, conduct telephone interviews, and where possible to request some of the customers who are successfully incorporated in the sample for a face-to face-interview.

The researcher also determines various proportional strategies deployed by Taobao and the impacts of such strategies on the selling capability of the company. Through the questionnaires and the telephone interview, the audience provides information on how they knew about Taobao and their perception about online payments and procurement. This information helps in the determination of correlation and relationship between marketing strategy and consumer behaviours within Taobao marketplace.

Conclusion

Different customers require different promotional strategies to place products and services of an organisation to them. For online shoppers, it is hypothesised by the dissertation that such shoppers have a particular buying behaviour, which requires specific promotional strategies. The hypothesis suggests that a relationship exists between customers’ behaviour and promotional strategy.

While this may be true for organisations selling through physical premises, minimal research has been conducted to determine this relationship for online marketplace especially in China. In the effort to seal this gap, the dissertation proposes a research to determine a relationship between customers’ behaviour and promotional strategies used by Taobao.

For Taobao, majority of the online shoppers are middle class and in the age group of between 0 and 35 years. Consequently, the research will be based on this target group by use of e-mailed questionnaires, face-to-face interviews and telephone interviews as the main primary methods of data collections for a sample of 385 Taobao online shoppers. Analysis will then be conducted to determine the correlation and hence the relationship between the two aspects.

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