Chapter 1 Introduction 简介
Report showed that the size of transaction of China's e-commerce market in 2014 was 12.3 trillion yuan (RMB), the size of the transaction is expected to reach 24.2 trillion yuan (RMB) in 2018. Among them, the penetration rate of online shopping in the total retail sales of social consumption goods was 10%, the growth rate was 48.7%, it is the backbone to promote the development of the e-commerce market, of which O2O business growth was 42.8%, it is the new force that can not be ignored in current Chinese economic development (Xiao, Wang, Lenzer and Sun, 2017). Currently, there are already 43% of Chinese enterprises which carry out online and offline business at the same time. For example, Alibaba carry out offline strategy, through investment in Yintai business and comprehensive use of Yintai mall stores, data of goods and members to break the plight of development of the retail industry; JUMEI, Jingdong, VIPSHOP and other e-business enterprises have also opened offline retail experience shops to promote online and offline complementary development. Wanda Group combined with Baidu, Tencent to set up Wanda e-commerce, through the use of its own strong line of commercial real estate and retail store resources to integrate information, so that it has formed online consumption, offline experience shopping closed-loop (Xiao, Wang, Lenzer and Sun, 2017).
To carry out online retail is the extension of the original business of offline retailers to the network. Network channels can be cost-effective to complete transactions. However, mutual integration of traditional retail and online retail is not smooth. In general, the current status of online retail business carried by traditional retailers is not optimistic, most retail companies face low return on investment, poor earnings prospects and other challenges. The channel strategy of vast majority of well-known offline retailers who have opened online stores is not successful (Huang, Pan and Liu, 2017).
Online and offline combination broadens original marketing channels, limited resources within and outside an enterprise will be re-configured, in the process, there may be resources robbed, that is, channel conflict phenomenon. Brynjolfsson and Rahman (2009), Ansari, Mela, Neslin (2008) found that the problem of channel conflict is the biggest problem faced by enterprises in expanding online marketing to carry out network marketing. Customer groups of original entity channels migrate to network channels, so that sales of offline stores is transferred to online stores, which in fact has little effect on the overall sales and performance improvement of enterprises (Brynjolfsson and Rahman, 2009; Ansari, Mela, Neslin, 2008). In addition, in order to open up an outlet as soon as possible for online channels, most of traditional retailers have taken a series of incorrect marketing strategy. This strategy not only cultivates consumers’ bad consumption habits, for example, consumers are only willing to buy products through online channels, if they can not buy products through online channels, they are also not willing to purchase through online channels, resulting in substitution effects (Cassab and MacLachlan, 2009).#p#分页标题#e#
Suning was founded in 1990, it was one of China's largest electrical appliance distributors with more than 1,600 offline stores. In order to deal with the impact of e-commerce on sales of offline stores, Suning began to implement O2O strategy in 2013. Choi, Chen and Chung’s (2017) research on Suning indicated that O2O strategy only made Suning’s original consumers transfer to the online shops, the consumer growth of the offline stores stagnated, the overall marketing revenue growth rate was not as what was expected. Considering from Figure 1, since Suning officially implemented O2O strategy in 2013, proportion that its online sales revenue accounted for in the total revenue increased from 21.1% in 2013 to 42.2% in 2016, proportion of the off line sales revenue in the total income dropped from 78.8% in 2013 to 57.8% in 2016, showing that after the implementation of O2O strategy, Suning’s online income increased significantly, while the offline income growth was stagnant or even reduced, which proved that there was a channel conflict phenomenon in Suning’s O2O strategy, part of Suning’s offline customers and new customers were transferred to the online stores. Huang, Pan, Liu (2017) believed that Suning O2O coordination marketing failed to be implemented well, the O2o only made part of the customers and new customers transfer from offline consumption to the online consumption, Suning's O2O did not improve consumers’ amount and frequency of spendint in Suning's stores, and it did not bring more new consumers, namely, the O2O did not bring substantial growth in overall income for Suning.
1.2.2 Theoretical significance
According to the theory of consumer multi-channel choice behavior, consumers will compare different channels, if different channels bring customers different perceptions, it may produce customer migration behavior, eroding original channels to result in substitution phenomena (Verhagen and Dolen, 2009) However, many studies have also proved that there is coordination effect between online and offline channels (Avery, Steenburgh and Deighton, 2009. How retailers using multi-channel strategy achieve channel coordination performance is the biggest problem in online and offline channel integration (Verhagen and Dolen, 2009; Avery, Steenburgh and Deighton, 2009). According to 4P marketing theory, product strategy, promotion strategy, price strategy will affect the choice of consumers for online and offline channels to lead to customer migration. It is visible that substitution effect may be due to inconsistencies of online and offline channel marketing strategies.
Based on the theory of 4P marketing mix, this study combined with the theory of coordination and the theory of multi-channel customer behavior to study multi-channel coordination marketing strategy, the theoretical significance of this study was not only from a theoretical level to analyze causes of channel conflict and channel coordination, but also from a theoretical level to explore how enterprises develop marketing strategies to obtain multi-channel coordination effect.#p#分页标题#e#
Based on the theory of 4P marketing mix, this study will combine with the theory of coordination and the theory of multi-channel customer behavior to study multi-channel coordination marketing strategy, the theoretical significance of this study is not only from a theoretical level to analyze causes of channel conflict and channel coordination, but also from a theoretical level to explore how enterprises develop marketing strategies to obtain multi-channel coordination effect.
1.2.2 Practical significance
Challenges for enterprises to take O2O strategy come from both inside and outside, in order to obtain O2O coordination effect, enterprises need to develop more complex marketing decisions. This study aims at the core issue of multi-channel retailers - multi-channel co-marketing to explore the channel integration of multi-channel retail enterprises, thus it has some practical significance (Huang, Pan and Liu, 2017), which is embodied in the following aspects. First, multi-channel marketing strategy should take customers as the core. This study aims at multi-channel consumer to carry out research, which can help Suning to better understand consumers’ psychological perception for online and offline marketing strategies. Second, the research on the coordination of online and offline marketing strategies can help Suning to realize that online and offline channels are not independent, and there is a certain relationship between the marketing strategies of different channels. Third, this study will be conducive to improving the degree of attention that the traditional retailer- Suning’s paying to channel integration, prompting this kind of enterprises to focus on the coordination between different channels.
1.3 Research aim and objectives
The aim of this research is to take Suning Appliance as an example, from the perspective of channel coordination to study the marketing strategy of online and offline combination. Based on the research aim of this study and the marketing theory, the following research objectives were developed.
Research objective 1: combined with 4P marketing theory, coordination theory and multi-channel consumer behavior theory to analyze O2O coordination marketing strategy;
Research objective 2: through quantitative research and questionnaire survey to understand consumers’ evaluation on Suning’s O2O marketing strategy;
Research objective 3: from the perspective of product strategy, price strategy, promotion strategy to make recommendations on how Suning implement its online and offline coordination strategy in the future.
1.4 Research questions
Based on research aim and research objectives, the following research questions need to be analyzed and discussed in the study.
Research question 1: what are the characteristics of purchasing behavior of multichannel consumers? What is the importance of channel coordination for O2O marketing? How O2O coordination marketing is achieved?#p#分页标题#e#
Research question 2: What is consumers' evaluation on Suning’s online and offline marketing strategies? What are characteristics of their buying behavior in Suning’s online and offline stores? Is there a correlation between their evaluations on Suning’s online or offline marketing and their buying behavior in Suning’s online and offline stores?
Research question 3: How Suning carries out good channel coordination marketing from the perspective of price, product and promotion? How Suning expands the overall sales revenue through O2O and avoid channel conflict and substitution effect from the perspective of channel coordination?
Chapter 2 Literature Review 文献综述
2.1 Theoretical basis
2.1.1 Coordination theory
Coordination theory argues that coordination is cooperative, synchronous, or collective act of each subsystem in an open system (Huang, Pan and Liu, 2017). Yan (2011) was from the perspective of cooperation benefit to compare the four aspects of product development, material procurement, finished product production and marketing activities of enterprises, and he found that in the marketing activities, collaboration can help enterprises to obtain greater cooperation benefit than the other three aspects, he pointed out that collaborative marketing can contribute to an enterprise’s more economies of scale and diffusion benefits. Martín-Herrán and Taboubi (2015) described collaborative marketing as the establishment of alliances between different enterprises, through cooperation to carry out a series of marketing activities, under the circumstance of sharing resources, channels to share marketing costs, consolidate the marketing network to ensure the smooth implementation of marketing activities.
Most of the initial coordination research focuses on discussing the collaborative marketing between different processes of an enterprise or between different enterprises. Until recently, there has been discussion on channel coordination effect of multi-channel retailers, which has gradually found that marketing coordination can be achieved among different online channels and different offline channels, this coordination can effectively promote customer satisfaction and customer loyalty (Yan, 2011).
2.1.2 Theory of 4P marketing mix
In 1967, E. Jerome McCarthy (1960) proposed a marketing mix method taking 4Ps as the core, namely: product, which focuses on the function of development, it requires that products should have a unique selling point, the functional demands of a product should be on the first place; price, according to different market positioning to develop different pricing strategies; place, companies focus on training distributors and establishment of sales network, contact between a company and its consumers is carried out through distributors; promotion, it should be a series of marketing behavior including brand advertising, public relations, promotion and other marketing behavior (McCarthy, 1960).#p#分页标题#e#
With the development of science and technology, economy and society, market environment and consumption habits have been very different from those in the past. Many scholars have questioned 4P theory and put forward many new theories on marketing mix, but these theories take 4Ps as the prototype, on the basis of 4Ps to extend, supply or refine. 4P marketing mix still has a huge research and application value in collaborative marketing. Neslin, Grewal, Leghorn et a1 (2006) pointed out that the implementation of collaborative marketing should follow the nature of marketing, from product, price, place and promotion, these four key dimensions to operate, can more effectively enhance the efficiency of business activities, making full use of existing advantages.
2.1.3 Theory of multi-channel consumer buying behavior
Multi-channel consumer behavior refers to the behavior of consumers’ use of two or more channels to purchase products or services. Multi-channel consumers will use a reasonable cost to exchange for the maximum proceeds, taking this as a starting point to compare a variety of channels, so as to make rational choice of subjective judgments and decision-making (Matsui, 2012; Wallace, Johnson, Umesh, 2009). Steinfield, Adelaar, Liu (2005) showed that consumers’ willingness of purchase from traditional retailers who open online stores is less than from pure online retailers. Traditional retailers should deepen their understanding of multi-channel consumer behavior and make their multi-channel operations be in line with consumer behavior (Steinfield, Adelaar and Liu, 2005). Compared with traditional single channels, the Internet makes multi-channel consumer behavior more complex (Matsui, 2012). Study on multi-channel consumer behavior can help to understand the driving factors of multi-channel consumption, which will help to judge the impact of multi-channel marketing activities on customer behavior, so as to analyze the interaction mechanism among consumer channel selection behavior, channel attributes, customer self-efficacy (Wallace, Johnson, Umesh, 2009; Steinfield, Adelaar, Liu, 2005).
2.2 O2O coordination effect and substitution effect
2.2.1 O2O coordination effect
Multi-channel marketing increases enterprises’ chances of reaching consumers, and consumers can receive diverse services and information through different channels (Xiao and Dong, 2015), making it easier for consumers to buy. Multi-channel sales can reduce a customer's searching costs, improve the fairness and transparency of price. Enterprises adopt multi-channel strategy, which enables them to share multiple channels of customer information and logistics equipment, personnel to save business costs, thus establishing cost advantages. Wu (2017) also found that when consumers receive marketing incentives from a variety of channels, they can effectively reduce their perceived risk of new channels, and they are more likely to have multi-channel consumption behavior.#p#分页标题#e#
Hahn (2009) argued that well-known traditional retailers have a great reputation, which helps them to have more advantages than less well-known online retailers. Hammervoll (2009) proved that in most cases, performance of dual-channel supply chain is better than performance of purely retail channels and pure electronic channels. Martín-Herrán and Taboubi (2015) argued that multi-channel communication efficiency leads to a higher degree of customer satisfaction and loyalty. Multi-channel strategy allows customers to receive more channel marketing strategies to promote business performance growth (Verhagen and Dolen, 2009). It can be seen that, to carry out multi-channel coordination can also form a coordination effect (Wallace, Johnson and Umesh, 2009).
2.2.2 O2O substitution effect
Introduction of website as a channel of information will bring more negative effects to entity channel, most of the website visitors will seldom visit entity stores, the costs for all product categories are reduced (Scarpi, Pizzi and Visentin, 2014), namely, there is a "substitution effect." At the same time, the implementation of multi-channel strategy will stimulate consumers’ free rider behavior, for example, a consumer finds product information by visiting a company's website, and he buy products in another physical store (Choi, Chen and Chung, 2017).
It can be seen from the above research that, O2O coordination marketing can bring many positive influence to an enterprise. However, it should be noted that O2O has substitution effect, which has a negative impact to corporate marketing performance.
2.3 O2O coordination marketing strategy
Hahn and Kim (2009) thought that a physical merchant needs to think more about customer needs, its own development needs and cost elements in the development of multi-channel marketing strategy. Product strategy, promotion strategy and price strategy will affect consumers' choice of online and offline channels.Kwon and Lennon (2009) believed that which coordination development model traditional retailer should choose is affected by retail format, an enterprise’s own resources and market demand changes and trend. They further pointed out what kind of channel coordination strategy should be adopted by enterprises is affected by nature of products, costs of retailers, competitors’ strategies, and market competition, retailers can be based on their own situation, from different levels to lay out multi-channels.
Aghekyan-Simonian, Forsythe and Kwon (2012) took strategic resource sharing as the core of coordination development to sum up two kinds of coordination development models of online retail and offline retail business: first, complementing each other, that is, online shops and entity retail shops sell the same goods; second, they are independent, online and offline retail shops aim at different target markets and implement different marketing mix strategies.Huang et al. (2017) studied the mechanism of multi-channel coordination marketing to form different coordination strategies. For instance, considering product strategy, there is a substitution effect of differences between online products and offline products in terms of type, specifications and other aspects on consumers’ multi-channel purchase behavior (He et al., 2016). From the perspective of price strategy, when there is a big difference between online and offline prices, there is a substitution effect on consumers’ multi-channel purchase behavior (Choi, Chen and Chung, 2017). In the aspect of promotion strategy, when there are big differences between online and offline promotion strategies, it will have a substitution effect on the multi-channel purchase behavior of consumers (Xiao and Dong, 2015). It needs to combine with consumers’ purchase decision-making process, through judging trade-off costs to maximize benefits.#p#分页标题#e#
The above researches are based on 4P marketing theory, from product, promotion, price and other aspects to describe the impact of O2O marketing strategy on consumers’ multi-channel purchase behavior, as well as how an enterprise is based on 4P theory to develop O2O coordination marketing strategy.
2.4 Consumers’ multi-channel purchase behavior
From a product standpoint, Verhagen and Dolen (2009) pointed out that product variety was an important variable affecting consumers’ multi-channel buying behavior, in the conditions of paying the same costs, consumers are more willing to purchase from the online or the offline channels, which can provide more rich products, products with higher brand awareness and better quality. Cassab and MacLachlan (2009) from the perspective of product information and services to analyze that as the network can provide more information about product, price, data, and buying evaluation, therefore, consumers tend to choose to understand and collect product information online, and this eventually has an important role in promoting consumers’ making purchase decisions. And Hammervoll (2009) also mentioned that offline sales allows consumers to has a more intuitive feeling towards goods, good consumption environment at the same time also can bring good consumer experience to consumers, this is advantage of offline marketing.
Price is an important factor for consumers in choosing consumption channels. Many consumers prefer to buy products or services online because products or services provided by online channels are cheaper than those offered by physical channels. Verhagen, Dolen (2009), Ansari, Mela and Neslin (2008) compared price and price dispersion degrees of online channels, offline channels and combination of the two channels, the research showed that prices of products sold through offline channels were the highest, prices of products from the combined online and offline channels were the second, prices of products sold through pure online channels were the lowest.
As consumers spend more and more time on the web, so online business promotion information is more likely to be received by consumers, consumers may pay more attention to online stores and make buying decisions (Brynjolfsson, Hu and Rahman, 2009). With the development of e-commerce, online shopping promotions are increasingly influential, the promotions are more and more frequent, the favorable margin is also increased largely, the most famous is Chinese Singles festival on November 11 each year, the success of the festival has also derived a series of online shopping festivals, such as the “Double 12”, “6.18” and so on. Strong online promotions and weak offline promotion is an important factor in promoting consumers’ online spending.
The above study are based on the theory of multi-channel consumer behavior to figure that consumers will compare different channels, if different channels can bring different customer perceptions, customers may choose the most favorable channels for their own, resulting in substitution phenomena (Verhagen and Dolen, 2009 ). Product strategy, promotion strategy, price strategy will affect consumers’ choice of online and offline channels to lead to customer migration. It is inferred that substitution effect is likely to be caused by the inconsistency of online marketing strategies.#p#分页标题#e#
The above studies describe the importance of coordination marketing for O2O and how companies can implement O2O coordination marketing strategy from product, price and promotion. At the same time, they also introduce the characteristics of consumers' multi-channel consumption behavior. The above research has great reference significance for the development and implementation of Suning’s O2O coordination marketing strategy. However, it should be noted that Kwon and Lennon (2009) pointed out that O2O coordination marketing strategy should take into account their own resources of retail enterprises and market trends, consumer trends and many other issues. The above studies only describe that in the general state, how enterprises implement O2O coordination marketing strategy. Suning, as one of China's largest O2O companies, faces the competitive environment with a lot of particularity, for example, China's e-commerce is strong, Suning is facing strong competitors, including Alibaba, Jingdong, etc. At the same time Chinese consumers’ multi-channel buying has many of its own characteristics, they are sensitive about price and there is low brand loyalty and so on. These external factors can affect Suning’s O2O strategy. This study will be based on the above theoretical and empirical research conclusions, combined with the actual market competition faced by Suning to explore the O2O coordination marketing, such research results may be the most appropriate for Suning.
Chapter 3 Methodology 方法论
3.1 Research method
This study adopted quantitative research as the research method. Quantitative research determines the quantity of things, it expresses problems and phenomenon by quantity, and then to analyze, test, interpret to gain significance.
Qualitative research is the study of using historical review, literature analysis, visit, observation, participation and experience to explore whether a research object has this or that attribute or trait (Saunders, Lewis and Thornhill, 2007). In this study, the aim of the study was to understand and judge the degree of consumers’ satisfaction with Suning’s O2O coordination marketing, and further analyze to what extent this kind of satisfaction affected customers’ buying behavior, rather than discussing the nature of coordination marketing and whether Suning should adopt O2O coordination marketing. Therefore, using quantitative research is more appropriate for this study.
3.2 Research instrument
In this study, questionnaires will be used for collecting quantitative data. Benefits of using questionnaire first lie in that it helps researchers to spend less manpower and financial resources to collect data on a research object within a short period of time, and questionnaire is a structured survey, the expression form of the questions, the order of asking questions, the way to give answers are fixed and it is a way of communicating by text, so that it is impossible for any individual, whether a researcher or an investigator to ring subjective bias to research (Saunders, Lewis and Thornhill, 2007). Second, results of the questionnaires facilitate statistical analysis, so that researchers can obtain the desired research conclusions through data analysis and mining (Creswell, 2003). Limitation of questionnaire is that many studies need to understand respondents’ intentions, motivations, and thinking processes, while questionnaire is often ineffective in investigating such problems, or this kind of questionnaire is more difficult to design (Saunders, Lewis and Thornhill, 2007). Questionnaires are finished by respondents themselves, so the quality of the research results is often not guaranteed, and the recovery rate of questionnaire is difficult to be guaranteed. This study aims to evaluate the success and failure of Suning's O2O marketing strategy by understanding the views of a large number of consumers and quantifying their views. Therefore, the use of questionnaires in this study is appropriate, and the use of interviews requires a lot of time, and interview results are not suitable for quantification, so interview is not appropriate for this study. In order to improve the quality and recovery rate of the questionnaire, the author will give each person a small gift to encourage them to fill out the questionnaire and timely submission of the questionnaire.#p#分页标题#e#
The questionnaire survey aims at Suning’ consumers, it is expected to investigate 150 objects who have purchased electrical products from Suning stores. The questionnaires will be distribute and taken back through the network, the author will be through the Chinese online survey Website “So Jump” to implement the investigation. Content of the questionnaire includes three parts, the first part is to introduce the purpose of the questionnaire and how to fill out the questionnaire, the second part will be from three aspects: product, price and promotion to understand consumers’ evaluation on O2O coordination strategy, questionnaires of this part will be expressed by using Likertscale method, from 1 to 5, representing from “strongly disagree” to “strongly agree”. The third part of the questionnaire will examine the respondents' personal information, including gender, age, occupation, income, educational background and so on.
3.3 Research hypothesis
Neslin, Grewal, Leghorn, et al. (2006) pointed out that the implementation of coordination marketing should follow the essence of marketing, from product, price, place and promotion, these four key dimensions to operate, so that it can more effectively improve enterprise efficiency of business activities by making more use of existing advantages. Neslin, Grewal, Leghorn, et a1. (2006) were from the perspectives of product, price and marketing strategy to discuss the reasons leading to channel conflict caused by differences between online and offline marketing strategies. Based on Neslin, Grewal, Leghorn, et a1.’s (2006) research, it has formed the following research hypothesis.
Research hypothesis 1: online products and offline products are consistent to a certain extent in terms of category, specifications and other aspects can effectively improve the channel coordination effect of O2O.
Research hypothesis 2: online products and offline products are consistent to a certain extent in terms of price can effectively improve the channel coordination effect of O2O.
Research hypothesis 3: online products and offline products are consistent to a certain extent in terms of promotion can effectively improve the channel coordination effect of O2O.
3.4 Data analysis
This study will use SPSS 21.0 for data analysis, SPSS is a widely used statistical software, it is powerful and it is operated simply to acquire accurate statistical results to fully meet the needs of this study, so it is chosen as a data analysis software. The first step is to test the reliability and validity of the questionnaire. The validity test of the questionnaire will be tested by using factor analysis. The data analysis includes four steps. The first step is to test the reliability and validity of the questionnaire, validity test will use factor analysis to test the structural validity of the questionnaire. Reliability test is through Cronbach α to determine whether the reliability of the questionnaire is qualified, if Cronbach α is greater than 0.6, the questionnaire reliability will be qualified. The second step is to carry out descriptive statistics on the questionnaire data and evaluate the questionnaire results according to Best’s (1997) criteria. If the score given by the respondents is more than 4.23, indicating that they have a high degree of consent for the questionnaire, and if it is less than 1.8, indicating that the respondents are highly disagreeing with the questionnaire. Third step is using T test to compare consumers’ evaluation on Suning’s online and offline marketing strategies, if <0.05, showing that there are statistical difference between the two. The fourth step will be using correlation analysis to analyze if there is a statistically significant correlation between the number of consumers’ buying products on Suning online stores and their evaluation on Suning’s online products, prices and promotional strategies, as well as the number of times of consumers’ purchasing products through Suning’s offline stores and their evaluation on Suning’s offline products, price, and marketing strategy. If consumer's evaluation on Suning's online marketing strategy is significantly higher than their evaluation on Suning’s offline marketing strategy, while consumers’ evaluation on Suning’s online / offline stores is directly proportional to the numbers of their purchase through Suning’s online / offline stores, it shows that Suning fails to carry out its O2O coordination marketing well, its O2O just let some customers and new customers transfer from offline consumption to online consumption, Suning's O2O fail to increase consumers’ spending and frequency of purchase in Suning and bring more new consumers, that is, O2O does not bring substantial growth in overall income for Suning.#p#分页标题#e#
3.5 Research ethics
The research data and conclusions of this study will be used in this research and will not be used for other commercial purposes. The survey data of this research will be stored in a private mailbox. Anyone without permission will not be exposed to these data and information. Thus, it protects personal privacy to a large extent. The author will personally be involved in data collection, statistics and analysis process to avoid possible errors and data inveracity.
3.6 Time arrangement
This research is expected to last about 102 days, whether the author can collect the required sample data in time is essential for carrying out this study smoothly, thus the author will use the China’s questionnaire survey Website: So Jump to investigate, this is China's most professional questionnaire survey Website, there would be a lot of people who are willing to participate in the survey there, So that the author will quickly the samples needed. The specific schedule of this study is shown in the following table and the Gantt chart.
The costs for this research mainly include the purchase of statistical software, transportation costs, communication costs, etc. (specific costs are shown in the table below). The costs for completion of this research can be borne by the author and it will not hinder the smooth implementation of the research.