Measuring customer online visiting behavior and its impact on purchase decision and profitability

Abstract

Effective relationship marketing requires accurate measurement of customer tenure/loyalty and a thorough understanding of its impact on firm performance. Although such studies are plentiful for brick-and-mortar firms, few exist for Internet-based E-tailers. Given the visit-intensive customer behavior online, past methods and theories on customer bases analysis and lifetime-profitability relationship based on purchase events may not apply in an e-commerce context. This dissertation proposes a measurement framework that incorporates customers' online visiting behavior both at the in-session, "micro" level and at the long-term, "macro" level using three metrics: session duration, number of pages viewed and online customer lifetime (OCL). Both stochastic model and neural networks are designed and validated for the measurement of OCL. We then study the relationship between customers' online visiting behavior and firm performance by studying five propositions that relate to whether (1) there exists a positive relationship between OCL and customers' purchase intention, (2) customer who spends longer time or view more pages in a session is more likely to buy, (3) customer with longer online lifetime contribute more to firm's profit, (4) customer with longer session duration and more page viewed is more profitable and (5) product type has an impact on the lifetime-purchase and lifetime-profitability relationship.