A Qualitative Approach to Understand Consumer Groups and Decision-Making Process in Online Group Buying: An Exploratory Study

A Qualitative Approach to Understand Consumer Groups and Decision-Making Process in Online Group Buying: An Exploratory Study

Lin Xiao (Nanjing University of Aeronautics and Astronautics, Nanjing, China) and Chuanmin Mi (Nanjing University of Aeronautics and Astronautics, Nanjing, China)
Copyright: © 2019 |Pages: 23
DOI: 10.4018/IJWSR.2019040102

Abstract

This exploratory study used a qualitative approach to segment consumers in an online group buying context based on benefits pursued. 58 participants who have online group buying experience were interviewed. A cluster analysis was conducted on the interview data. The authors found three sub-groups of consumers: economic shoppers, balanced shoppers, and destination shoppers. A hierarchical decision-making process model was developed for different sub-groups of consumers. The results showed that these three sub-groups of consumers are different in terms of their decision-making process. This study overcomes the shortcomings of traditional segmentation studies by proposing a new segmentation method.
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1. Introduction

Online group buying (OGB) is an e-business model that is popular and successful in many countries, such as the United States (U.S.) and China. Groupon.com, which is the most successful OGB website in the U.S. has global revenue of $2.84 billion in 2017 and nearly 50 million active customers (Statista, 2018). In China, the revenue of OGB reached 999.2 billion Yuan (equivalent to 147 billion US dollars), an increase of 71.5% compared to 2016 (Analysis International, 2018).

Despite the rapid growth of OGB, profitable OGB websites are said to be in a minority. According to a report by Analysis International (2018), the top 3 group buying websites accounted for 91.73 per cent of the market share in China. By January 2017, more than 6000 group buying websites appeared in China, of which only 213 are still operating, accounting for less than 4% of the total number of group buying websites (Xiaoziqianbao, 2017). Thus, it is extremely difficult for group buying website to survive in the e-marketplace, since they compete not only with each other, but also with traditional brick-and-mortar stores and other online shops. E-commerce research has long supported the view that to ensure the success of online business, it is important for e-vendors to understand their target customers (Delafrooz, Paim, Haron, Sidin, & Khatibi, 2009). This understanding of consumer behavior will allow group buying websites operators to have a greater competitive advantage in this marketplace. However, this knowledge is lacking, as researchers have paid limited attention to this critical phenomenon. In particular, two research gaps have been identified.

First, most studies in this area have focused on the factors influencing consumers’ purchase intention (Cheng & Huang, 2013), repurchase intention (Zhang, Lu, Gupta, & Gao, 2015), and impulsive purchase intention (Liu, Li, & Hu, 2013) on group buying website, few studies have tried to explore the distinct groups of consumers who are similar in terms of particular characteristics, such as needs, motivations, or behaviors in the OGB context. In other words, a particular group of consumers may share similar characteristics, such as motivations, needs, or behaviors. This understanding can help e-marketers in OGB make effective marketing strategies tailored to different groups of consumers. This information can be obtained through segmentation, a technique that is popular in marketing and e-commerce context (Ganesh, Reynolds, Luckett, & Pomirleanu, 2010). However, most of the studies in the literature segmented consumers based on criteria such as behavioral variables, motivations, or preferred store/online store attributes. Segmentation studies based on the benefits sought by consumers is largely ignored. Benefit refers to the needs that consumers seek to gratify through using OGB websites for shopping (Park & Sullivan, 2009, p.5). According to the literature, benefits-based segmentation is more effective in assisting OGB vendors to position their product, introduce new products, price, advertise and distribute products (Botschen, Thelen, & Pieters, 1999).

Second, understanding the differences in terms of benefits pursued by each group of customers is not enough for OGB vendors. Understanding WHY these benefits are important to them, and how to provide these benefits to each customer group would offer more practical value (Olson & Reynolds, 2001) as such an understanding actually illustrates consumer decision making process in OGB behavior (Olson & Reynolds, 2001). Marketing literature has emphasized that knowing what are the “salient choice criteria”, (i.e. benefits sought) consumers use to evaluate the choice alternatives in their online shopping behavior is the first and essential step in understanding the consumer decision making process. Exploring why these factors are important to them is the cornerstone to understanding consumer decision making as such a deep understanding about consumers would allow us to know the personal goals and values they aim to achieve in this behavior, and provide businesses with a more strategic marketing direction (Olson & Reynolds, 2001). Thus, in order to know exactly how each group of online group buyers make their choice, it is necessary to develop their hierarchical decision-making process models for illustrating fundamental differences among them in terms of the benefits they seek and personal goals they wish to achieve (Hung, Chen, & Lin, 2015).

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