RATIONAL INTEGRATIVE MODEL OF ONLINE CONSUMER DECISION MAKING
Padmini Patwardhan and Jyotika Ramaprasad
ABSTRACT: Based on traditional rational consumer theories about beliefs preceding intent to act and knowledge preceding behavior, this study proposed, and empirically tested, a hierarchical path model of decision making in the online environment, focusing on the Internet's role in two decision stages: pre-purchase search and evaluation, and actual purchase. Both direct and indirect effects were posited in the sequential model using four Internet related variables: pre-purchase search beliefs, purchase beliefs, actual pre-purchase search, and actual purchase.
The empirical test was conducted among consumers in the United States and India with 291 respondents taking the online survey (186 for the United States, 105 for India). For both U.S. and Indian respondents, each conceptualized stage of online decision making was significantly impacted by the stages preceding it, either directly or indirectly. In terms of direct effects, an antecedent Internet belief variable (pre-purchase search beliefs) impacted a consequent belief variable (purchase beliefs), and an antecedent action variable (pre-purchase search) impacted a consequent action variable (purchase). Further, the consequent belief variable (purchase beliefs) impacted the immediately following antecedent action variable (pre-purchase search). In terms of indirect effects, all antecedent variables impacted consequent variables at each stage of the model.
The applicability of traditional models to the e-shopping process is still a new area of study, with some (e.g. Hoffman and Novak 1996) holding that traditional decision making patterns will prevail and others (e.g. Peterson, Balasubramanian, and Bronenberg 1997) suggesting that they are likely to change. Within the context of such discussion, the purpose of this study was to propose a rational model of online decision making and empirically examine the application of rational hierarchy theories to the Internet environment. The cross-cultural applicability of this study's proposed model was also explored by surveying Internet users in countries at different stages of e-shopping adoption: the United States and India.
Many traditional consumer decision-making models are based on the assumption that the consumer is rational and adaptive (Moorthy, Ratchford, and Talukdar 1997). These models propose a series of mental and motor steps (Howard and Sheth 1969) that envisage decision making as progressing from problem/need recognition, through information search and evaluation and purchase decision, to post purchase behavior (Schmidt and Spreng 1996). The various models that have emerged differ slightly in the number of steps (Haubl and Trifts 2000) and the nomenclature used for the steps, but at their core they maintain a knowledge-attitude-behavior sequence (Lavidge and Steiner 1961). Such an approach assumes a rational, goal-oriented approach to decision making, as the consumer moves from awareness and knowledge (cognitive stage) to liking and preference (affective
stage) to conviction and purchase (conative stage) (Aaker and Myers 1982).
Criticism of linear and staged rational models has led us to understand that the product, consumer, buying situation, and other factors may not only reverse or change the hierarchy (in any possible combination), but also result in abbreviated or expanded hierarchies (see e.g., Crozier and McLean 1997; Sheth 1974). Ray (1973) suggests that three combinations appear to represent a majority of the situations: 1) the rational hierarchy (cognitive, affective, conative), often called the learning hierarchy because of its behavioristic approach, 2) the dissonance attribution hierarchy (conative, affective, cognitive), and 3) the low-involvement hierarchy (cognitive, conative, affective). Miracle (1987) adds the dependency hierarchy (affective, cognitive, conative) for Japanese television commercials.
In addition, MacKenzie and Lutz's (1989) theory of consumer preference formation also assumes a rational sequence, where beliefs inform attitudes and attitudes inform intent to act. Beliefs are information (true or otherwise, based on fact or opinion) that consumers have about an object (Duncan and Olshavsky 1982; Petty and Cacioppo 1981), while attitudes are evaluative (like/dislike) and are based on this information. Beliefs have received considerable attention in multi-attribute models of consumer preference formation.
Because the Internet appears to lend itself to such decision-making, a conceptual model was developed bringing these
3 JournalofInteractiveAdvertising Fall 2005
rational theories together (where knowledge precedes behavior and beliefs precede intent to act). Consumer use of the Internet is generally assumed to be more purposive and goal-directed, and therefore more "rational," at least at this point in time. In addition, online shoppers are far more likely to operate under conditions of higher involvement presaging more active information seeking and processing (Petty and Cacioppo 1981, 1983). In the rational model, pre-purchase search is followed by purchase. The Internet collapses in one medium the search for information and the act of purchasing, making it a perfect venue for the operation of this study's two-stage rational model. In online shopping contexts, consumers' need for information is large because of the lack of real interaction with the product, because such information is easily available on the Internet, and because the Internet also allows direct purchase. The Internet's vast capacity for information storage, search and retrieval, information customization, and interactive communication makes it an efficient medium for accessing, organizing, and communicating information (Peterson, Balasubramanian, and Bronnenberg 1997). Informational use of the Internet can significantly reduce pre-purchase anxiety among consumers (Ghose and Dou 1998) and pre-purchase sales information appears to be a major part of a web site's value (Bruner 1997). Thus potential informational benefits include increased search efficiency, better product evaluation, and enhanced transaction convenience (Zeng and Reinartz 2003).
The empirical test of the conceptual model was conducted for online consumers in both the United States and India, presenting an opportunity to test the cross-cultural validity of the proposed model among consumers at different stages of Internet and e-shopping adoption. Specifically at the time of the study, overall Internet penetration in the two countries stood at 62% of the total U.S. population and 16% of the Indian population, while e-commerce penetration stood at 32% of American Internet users and about four percent of Indian Internet users (TNS Interactive-Global eCommerce Report 2002). The U.S. Department of Commerce reported online retail transactions by American consumers in the year 2001 at U.S. $33.7 billion (Pastore 2002). Comparable figures for India stood at about U.S. $100 million (Rs. 450 crores) in 1999-2000, of which retail and business-to-consumer transactions constituted only about U.S. $11 million (Rs. 50 crores) (Times of India 2000).
The rationale underlying the choice of India was multi-fold. First, while decision models are routinely tested using American consumers, theory-driven studies of Indian
consumers are practically non-existent. Second, economic liberalization since the 1990s has seen a shift from socialism to capitalism in India which, in turn, is fostering a culture of consumer spending similar to that of more developed societies. Third, India's largest export to the United States is its pool of computer technology professionals and it may not be wrong to assume that Internet users in India are reasonably familiar with various online activities, whether they shop online or not. Finally, there is some evidence to suggest that Indians have begun leapfrogging the digital divide and Internet users in that country are using online resources to inform their purchase decisions (Patwardhan 2003).
Conceptual Path Model of Rational Decision Making
Several barriers to actual online purchase have been reported, including consumer concerns and transaction anxiety (Korgaonkar and Wolin 1999), payment security and distribution issues, perceptions of informational rather than transactional value of the Internet (Zeng and Reinartz 2003), lack of face-to-face contact in online shopping (Times of India 2000), as well as product factors like need for physical experience (e.g., perfumes) and complexity of purchase (e.g., real estate). However, it is equally evident that e-shopping is becoming an increasingly global phenomenon with over 15% of global Internet users transacting online, and 18% intending to do so in the next six months (TNS Interactive-Global eCommerce Report 2002). In many consumer surveys, convenience, interactivity, and shopping ease are often mentioned as primary reasons for the growth of consumers' e-shopping activities (Ghose and Dou 1998; GVU survey 1998; Korgaonkar and Wolin 1999). While some consider only the final act of buying a product online as defining the transactional nature of e-shopping, others include an entire range of activities from purchase-related information searches, use of price and brand comparison tools, use of online coupons and discounts, and interaction with marketing personnel via web sites, to actual purchase and post-purchase use of the Internet. This expansive definition of online purchase activities can be broken down into three basic, staged components of consumer decision making--pre-purchase search and evaluation, actual use/purchase, a