American Businesses Embrace Chinese Marketing Secret

Chad Brooks, BusinessNewsDaily Contributor

To compete in the future, ecommerce businesses will need a more personal touch, a new study suggests.

The research found that although online marketplaces are usually thought of as distant and impersonal, they can generate loyalty, interactivity and repeat transactions by creating personal and social relationships with their customers.

In the past, it's been assumed that online shoppers prefer impersonal transactions, but the study argues that both online retailers and customers inherently desire a more social and personal relationship.

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As part of the study, researchers — led by Paul Pavlou, a professor at Temple University's Fox School of Business — studied data from TaoBao, a popular Chinese online marketplace. They examined the effectiveness of using computer-mediated-communication (CMC) technology, like instant messaging, to build personal relationships — or swift guanxi,  a Chinese term for this kind of relationship marketing, and turn impersonal, onetime shoppers into loyal, committed, long-term customers through personal rapport.

The instant-messaging technology used on TaoBao allows buyers and sellers to interact immediately and to use emoticons and avatars in the negotiation and verification of the transaction details. In addition, all of the customers' messages related to a specific product are shown in a message box, while the feedback system provides users with textual and numerical evaluations of buyers and sellers that further establish rapport.

The study discovered that with the use of CMC tools — including instant messaging, message boxes and feedback — TaoBao achieved a loyalty rate of more than 70 percent of its customer base. Researchers said loyalty rates that high are typically associated with only brick-and-mortar retailers.

"The role of CMC tools in establishing swift guanxi via interactivity, presence and trust suggests that buyer-seller interaction can easily and quickly transform strangers into acquaintances," the researchers wrote. "In terms of repeat transactions, the effective use of CMC tools creates a significant opportunity for online sellers who wish to reinforce swift guanxi with buyers via building buyers' trust."

Pavlou said it is clearly in online retailers' best interest to spend time learning about how technology can improve their relationship with customers.

"The future of electronic commerce lies in personal relationships virtually enabled by social technologies," he said.

The study, co-authored by Carol Xiaojuan Ou of Tilburg University and Robert M. Davison of the City University of Hong Kong, is published online in the information-systems journal MIS Quarterly.

This story was provided by BusinessNewsDaily, a sister site to LiveScience. Follow Chad Brooks on Twitter @cbrooks76 or BusinessNewsDaily @BNDarticles. We're also on Facebook & Google+. This story originally published on BusinessNewsDaily.

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