2.2 Current Situation of E‐commerce in Taiwan
2.2.2 Introduction of Viral Marketing
In terms of the word‐of‐mouth concept, it belongs to the category of viral marketing.
Jeffery (1996) proposed the concept, viral marketing. It is a marketing technique, which uses social networks increase brand awareness in order to achieve other marketing objectives.
Word‐of‐mouth can be delivered or enhanced by the network effects of the Internet.
Currently, video clips, e‐books, e‐mail, and text message are viral marketing media. According to the report from Electronic Commerce Times (2010), the volume of mobile advertisement increases 14.3% in 2009, and the output of mobile advertisement will reach 7.2 billion USD in 2012. The successful purchasing rate of mobile advertisement is 5.3 times than normal Internet ads. The click through rate (CTR) of text message is 3% and the CTR of normal Internet ads is 0.2% only. Other than text message, social network is another effective
method to implement e‐commerce. Based on the research from Shu (2010), the main merit of social network is the interaction with all the community. It is a good channel for a company to control the relationship with customers and promote products. It is anticipated that
companies with integrated service such as CRM and viral marketing will generate great sales volume and brand awareness.
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2.3 Current Situation of Skincare Online Shopping in Taiwan 2.3.1 Market Size of Online Shopping in Taiwan
Based on the report from Market Intelligence & Consulting Institute [MIC’s] (2009), , it shows that the global market size of online shopping increased from 640.7 billion USD in 2006 to 782 billion USD in 2008 which is an increase of 22%. As for 2009, the market size is 830.3 billion USD; growth rates were 6.2%. MIC anticipates the market size will reach 951.4 billion USD; growth rates will be 14.6%. The average growth rate from 2006 to 2010 is over 10%.
Therefore, the government is promoting and building broadband infrastructure. Until 2012, the high‐speed broadband network (30 Mps) will reach 80 percent coverage goal. The high coverage of high‐speed Internet in Taiwan will have the potential to increase the usage of online shopping.
Figure 2‐1, Global Online Shopping Market Size
Source: MIC (2009)
The Internet plays a crucial role and brings the world a new life style and it influences people’s purchasing behaviors, too. According to the survey of 1,033 Taiwanese women from AC Nielson (2010), it indicates that the main reasons for Taiwanese women to shop online are no time limitation, convenience of comparing price, and convenience of accepting the
products. Virtual channels become new methods for sellers to increase sales volume; likewise, buyers are capable of obtaining their merchandises via virtual channels. Based on survey from AC Nielson (2010), Yahoo!, PChome, and PayEasy is the most popular website for female online shoppers in Taiwan.
According to the report of Businesstrata.com (2009), Taiwanese online shopping market size increases 1,340 million NTD in 2006 and 2,390 million in 2008. The growth rate is 80%, which is much higher than the global growth rate. Among them, online auction market scale grows from 51.6 billion NTD to 1,056 billion NTD; online shopping market scale increases from 82.4 billion NTD to 133.4 billion NTD. MIC regards total online shopping market is expected to be 311.6 billion NTD in 2010; online auctions will reach 142.7 billion NTD, market size will be up to 168.9 billion in online shopping.
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Figure 2‐2, Taiwan Online Shopping Market Size Source: Businesstrata.com (2009)
2.3.2 Merits of Online Shopping
Taiwan Network Information Center (TWNIC, 2009) released the "Taiwan Internet Use"
report; it shows that online population is 15.8 million, which accounts for 68.94% in
Taiwanese population. Among the online shoppers, 90% of the Internet users are people age from 12 to 34. According to the report of Businesstrata.com (2009), it shows that Taiwanese online shopping market continues growing per year. The market size of online shopping grows 30% in 2009 , which contributes 320.8 billion NTD. 68% of online shoppers are people age from 15 to 34. Based on the report of AC Nielsen (2009), women did online shopping and auction than men did at 5%, which means women are more likely to shop online than men.
According to the report from Lu (2009), the number of female working online shopper increases at 37.1%, and the male working online shopper occupies 30.4%. Even during the financial crisis, the number of online shopper still grows.
In summary, based on the thesis from Chang and Chen (2005), we can conclude that five factors cause the promising and booming situation of online shopping: lower price,
convenience, special price, gift, and freedom. As for lower price, online sellers reduce the personnel and logistic cost, and therefore the prices are much lower than physical shops. As for convenience, online shoppers do not have to be limited by time and place. They can shop anytime they wish and any place they are. Shoppers can find many kinds of commodities via worldwide searching engine. Furthermore, the buyers can receive their goods at home. When it comes to special price and gift, when the products are on sale, the price will be much lower than shoppers’ expectation. Freedom is another attraction for online shoppers. The shoppers can shop online without clerk’s disturbance. Because of the merits of online shopping, it is more and more popular and accepted by all ages. Besides, channel is another important issue for online shoppers to access to products. In Taiwan, portal is the most popular channel for online shoppers to access the products. According to the survey for 1,033 Taiwanese women from AC Nielson (2010), Yahoo!, PChome and PayEasy are the most popular websites for female online shoppers. In short, it is concluded that the market size of online shopping grows because of the five merits mentioned above, and it will contribute more output per year.
Based on the report of MIC (2009), in the online shopping sales revenue, tourism
products accounted for the largest proportion, which accounts for 48.5%; 3C product keeps at
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11%. Because of the female consumers, clothing boutique and beauty care products have been leading the catching up. Respectively, they increase from 3% to 10% and from 5.7% to 7.9%.
Figure 2‐3, Taiwan Online Shopping Market Scale Distribution (Unit: 100 Million NTD) Source: MIC (2009)
Taiwan Online Shopping Market Scale Distribution
2008 2009
Turnover Market Share Growth
Rate Turnover Market
Share
Growth Rate
(100 Million
NTD) (%) (%) (100 Million
NTD) (%) (%)
Tourism 701 52.5 14.1 818.8 48.5 16.8
Skincare 105.6 7.9 56.2 156.2 9.3 48
Clothing 140.3 10.5 68.8 219.1 13 56.2
Books 33.8 2.5 18.2 40.2 2.4 19
3C 143.4 10.8 21.4. 171.5 10.2 19.3
Ticket
Booking 80.8 6.1 17.5 94.1 5.6 16.5
Others 129 9.7 47.6 188.9 11.2 46.4
Total 1334.1 100 24.9 1668.7 100 25.6
Table 2‐2, Taiwan Online Shopping Market Scale Distribution Source: MIC (2009)
2.3.3 Consumer Behavior of Online Shoppers in Taiwan
MasterCard (2010) releases a report and it indicates that nearly 70 percent of people in Taiwan get online because of shopping. In this report, the average period of Taiwanese people of using the online shopping was 3.4 years. In summary, it is clear to conclude that many Taiwanese people are willing to shop online and would like to spend more time on online shopping.
The behavior and habit for Taiwanese online shoppers is another issue related to Taiwanese online shopping market. A survey to 10,642 Taiwanese people conducted by
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EOLembrain (2009), 85% of interviewees shop on PChome and 74% of interviewees shop on Yahoo!. The survey also indicated that online shoppers prefer online shops than online auction. They think online shops offer better and more reliable method to pay products. For example, online shoppers can purchase products from online shops with installment. They also believe online shops have better reputation than online auction providers do. Based on the survey of InsightXploerer (2006) to 5,363 Taiwanese people, 12.5% of interviewees purchase the product after clicking the online commercial. According to another report from MIC (2009), the average monthly click of each online commercial is 3,000 times. Based on the above‐mentioned studies, it is anticipated that 375 visitors will purchase the product after they click the e‐advertisement. Besides the online advertisement, there are other method to trigger online shoppers’ desire. According to the thesis from Wu and Chen (2005), it indicated that promotions of online shopping could be divided into price‐oriented and
non‐price‐oriented promotion. For example, discount and coupon belong to price‐oriented promotion. Special gift belongs to non‐price‐oriented promotion. The report from Chou, Xue and Shi (2006) shows the top two promotion activities for the online shoppers are discount and coupon.
In summary, based on the studies in Chapter 2.3, the online shopping market is growing now, and the growth rate is 30% in 2009. The online shoppers in Taiwan prefer price‐oriented promotion such as discount and coupon to non‐price‐oriented promotion.
2.4 Characteristics of Target Consumers
Strauss and Howe (1991) identified Y generation as people who are born between 1982 and 2000. The group of people is those who use the Internet most, and they can receive latest information extremely easy because of big progress of the Internet. Skincare product is one of their data they collect and perceive. Lin (2005) conducted a research based on some variables:
sincerity, exindicatement, competence, upper class, ruggedness, mildness, elegance, and liveliness. The result shows that the people age 20 to 30 have higher preference on exindicatement, elegance, and liveliness. They have lower degree tendency of sincerity, competence, upper class, ruggedness, and mildness. The consequence indicates that the Y generation people like to express themselves in many ways. Brand and product they use are two of the platform of showing themselves. When it comes to spokesperson, it is a path to perceive target customers’ characteristic. The young generation people prefer the advertising objects that will inspire the desire of purchasing such as artist, actor, singer, and virtual character to be the spokesperson. In summary, according to the comparison of young and old generation, it is concluded that young generation prefer something vivid and exciting to trigger their purchasing desire such as famous artist, actor, singer and virtual character. The elder generation prefer practical and convincing object to inspire their purchasing desire such as expert and typical consumers.
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Generation
Young Generation Mature Generation
Sincerity ●
Exindicatement ●
Competence ●
Upper Class ●
Ruggedness ●
Mildness ●
Elegance ●
Brand Preference
Liveliness ●
Artist ●
Signer ●
Actor ●
Visual Character ●
Expert ●
Spokesperson
Typical Consumer ●
Table 2‐3, Characteristics of Target Consumer Source: Lin (2005)
2.5 Consumer Behavior of Skincare Industry 2.5.1 Product Function Preference
Based on the Pollster’s survey to 1,042 Taiwanese women who use facial skincare product (2009), it found that 83.25% of the interviewees care about moisturizing function.
There are 43.24% of interviewees cares about whitening function and the group is mainly women age from 15 to 24. 18.14% of interviewees needs the function of pore convergence.
From the figure shows below, moisturizing and whitening function are what women age from 15 to 35 care the most when they chose skincare products.
Figure 2‐4, Analysis of Age and Function toward Facial Skincare Products Source: Pollster (2009)
According to another survey to 5,818 women age 15 to 65 in Taiwan from Pollster (2009), it is not difficult to find the distribution of women’s preferences. The survey is clearer to illustrate what the female need and require for the skincare market. It also indicated that women concern about the products with whitening and moisturizing functions, each accounts for 36.8% and 36.77% among the interviewees. It shows that most women want to achieve is white and moist skin condition.
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Figure 2‐5, Features that Female Care for Skincare Products Source: Pollster (2009)
The frequency for women using facial skincare product is an important variable of influencing skincare industry sales. According to the Pollster’s survey to 1,042 women in Taiwan (2009), there are 70.9% of women use facial skincare products at least once a month.
About 49.7% of women use facial skincare products at least once a week; while only 5.9% of the respondents do not care about maintenance of the skin. In this survey, almost 92.9% of the respondents do skin maintenance by themselves. Among these DIY respondents, the highest proportion in the interviewees is 26‐30 years old, which accounts for 37.5%. People age 21‐25 years old accounts for 15.0%. Among the interviewees, the products they purchase most frequent are moisture products (44.6%) and whitening products (30.5%). To sum the conclusion of survey mention above, there is 64% of the skincare consumer age from 20 to 30 and the product features they care most are moisture and whitening. The director of public
relations of Watson, Zhou (2009), says “In the skincare market proportion, men and women were in the 20% and 80%. Main customers are getting younger and younger. Girls (15 to 20 years old) account for 20% market share; ladies (20 to 30 years old) account for 40% market share; women (30 to 50 years old) account for 40% market share.” She also indicates the age of users will decrease and the frequency of using skincare products will become more and more.
2.5.2 Purchasing Channel Preference
Other than the functions that the female preference for skincare products, purchasing channel is another issue that women concern when they buy skincare products. According to the thesis from Wu and Chen (2005), there are more and more channels for women to compare price, and evaluate products. In the skincare industry, department store is no longer the major place for shopping. Now, people are able to achieve the commodities via online shops, and it is more convenient and faster. Online shoppers are capable of receiving the product information in advance, so online channels have more and more consumers, and they can achieve the latest fashion worldwide. Other than the online channels, open‐shelf is
another booming channel of selling skincare goods. Open‐shelf is famous for giving a trial.
Based on the thesis from Fang and Lu (2009), the channels surges in the recent years. Because of trial of product, the costumers start to trust the quality of open‐shelf brands, so that there
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are tons of open‐shelf brands on the market. Gilbert and Jackaria (2002) indicated that discount influenced consumer behavior most and trial sample is the method of influencing consumers’ decision. McGuiness (1995) indicated trial sample inspire the desire of consumers to purchase new products.
Figure 2‐6, Analysis of Age and Channels where Women Buy Skincare Products Source: Pollster (2009)
According to the survey to 5,029 Taiwanese women from Pollster (2009), it also investigates the most category of skincare product that women purchase most via online shopping. The result shows that skincare products accounts for 58%. The beauty products account for 19%; the slimming products account for 10%. The makeup accounts for 8%, and perfume accounts for 4% among the total market share.
Figure 2‐7, Most Cosmetic Product Women Buy Online Source: Pollster (2009)
The average price that women spend on the products is another main point to affect the skincare market size. According to the report from Chang (2008), the average annual price for women buying skincare is NT$2,130. The average item for the women to buy skincare product is six items per year. The average price for each skincare product that women buy is NT$355.
According to the survey to 5,029 women in Taiwan from Pollster (2009), it shows that about 36.87% women spend 1,001 NTD to 3,000 NTD on skincare products per year. There are 33.84% women spend less than 1,000 NTD on skincare products per year. About 16.84%
women spend 3,001 NTD to 5,000 NTD on skincare products for each year. There are 12.45%
women spend more than 5,001 NTD on skincare products annually. It concludes that unmarried women spend no more than 3,000 NTD on skincare products on average.
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Figure 2‐8, Annual Expense on Skincare Products from Women Source: Pollster (2009)
General Manager of MasterCard, Chang (2010), said that there would be nearly 80
percent of Taiwanese people willing to shop online in the next 6 months. From this survey, it is also found that more than 86% of people in Taiwan do research and investigation before shop online and the Taiwanese online shoppers spent 5,439 NTD per month in average.
2.5.3 Brand Loyalty
Brand loyalty is the key issue for a company to generate profit. Cunningham (1956) proposed brand loyalty concept, and Howard and Sheth (1969) emphasized the important of brand loyalty. Brand loyalty refers to a concept consists of a consumer’s commitment to repurchase or continue using the brand and can be demonstrated by repeated buying of a product or service or other positive behaviors. According to the report from Liu (1995), the
quality, advertisement, price, and packing of the product will influence the brand loyalty of customer. The report from Liu (1995) also indicates that the brand loyalty in Taiwan is divided into three degree: Very high, high, and low. In general, women age from 20 to 30 tend to have low brand loyalty. However, elder women have higher brand loyalty than younger women. As for the customer with high brand loyalty, they have more concerns about product brand, convenience of purchasing, and product price. Based on the study of brand loyalty, it is clear to point out brand loyalty is an important part to deal with CRM and increase the product value to customers.
3. Company Introduction
The company, I Company, is founded in Taipei, Taiwan in 2005. The capital of I Company is 5 million NTD. The company can be divided into two departments: Public Relation (PR) Department and Skincare Department. In terms of PR Department, it provides coordination between companies and the media. For example, I Company plan the whole process of press conference for L’Oreal. Besides, planning of seminar also belongs to its service. Skincare and public relation department are the main department in the company. Skincare department is founded in 2009. It is a new department, and the CEO hopes 30% revenue of the company can be generated from this business unit. The CEO focuses on public relation department, and he does not have effective plan for this department, so I would like to propose this plan.
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According to the financial statement from the CEO, the total sales volume of O Product is NT$10,800. The manufacturing and personnel cost is totally NT$264,000. It is obvious that I Company did not earn any profit from O Product. Currently, company website (http://www.O Product.com) is the only marketing channel of O Product. The six‐month accumulating click is totally 2,670. It is clear that I Company, O Product and the company website are not famous enough in the skincare market. On the other hand, the popularity of O Product is low so that the target customer cannot contribute any profit to the company. Due to the reasons
mentioned above, the main factor causing unprofitable situation is the ineffective marketing plan and channel.
4. STP Analysis of O Product
4.1 Segmentation
Wended (1956) proposed marketing segmentation theory, which means a sub‐set of a market made up of people or organizations sharing with one or more characteristics causing them to demand similar product and services based on qualities of those products such as price or function. Therefore, target market of O Product can be segmented by five variables:
age, gender, customer characteristic, consumer behavior and brand loyalty.
According to the studies of Chapter 2, the women age from 20 to 30 occupy 40% of skincare market share. Moisturizing (36.77%) and whitening (36.8%) functions are the features that skincare consumers care most when they chose skincare products. As for the purchasing channel, except the physical channel such as department store and drug store, online shop is the biggest virtual channel for the skincare customers to purchase skincare products, which accounts for 13% among skincare market. In terms of the purchasing decision‐making, family, friend and online public evaluation are the main factors to affect consumers’ decisions. Based