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consumers’ online purchase behaviour and loyalty. The focus on
cost-reduction activities
would offer the online vendors a new perspective of attracting and/or retaining consumers.
In organizational operation, TCs are consistently advocated as a key factor in deciding the
vertical integration of firms, contract forms and buyer-seller collaboration (Rindfleisch and
Heide 1997). A buyer, be it a firm or an individual, incurs not only a purchase cost, but also a
host of other costs associated with the particular transaction. TCs are an inevitable part of
consumer purchase and consumption experiences (Tyagi 2004).
In online environments with
incomplete information, consumers may be concerned about how secure the online site is,
how their personal data will be used, and whether or not the website can be trusted (Ruiz-
Mafé
et al.
2009, Luo
et al.
2010, Hong and Cha 2013). As an illustration, consider a
consumer intending purchase of a new personal computer (PC) online. Although the
consumer might be aware of certain product attributes such as PC configuration,
features and
peripherals that he or she would like to have, there might be considerable ambiguity
regarding the product’s performance, reliability, and the web site from which the purchase in
contemplated, further, considerable uncertainty could also stem from the online medium that
does not offer a direct experience of the product as in an offline environment. In such
instance, the consumer might perceive high level of uncertainties
and risks of online shopping,
resulting in an increase in perceived overall TCs associated with online shopping.
The advantages of online shopping, such as convenience, better price, variety of products,
would alleviate some of the concerns regarding online shopping (Kim and Kim 2004, Clemes
et al.
2013), thereby reducing the costs associated with online shopping. These costs and
their effects on consumers’ psyche may influence consumers’ choice of online store, their
attitude,
intention, final purchasing decision and future purchase behaviour toward an online
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store. With low TCs, consumers would choose an online vendor for transactions; with low
TCs, consumers would display their loyalty to an online vendor, spend more, generate large
transactions,
buy more products, pay a premium price, and refer more people and bring in
more business. By lowering TCs perceived by consumers, online vendors could attract people
to their sites, convert visitors into purchasers, create barriers to switching for customers,
build
long-term relationships with customers in ways that cannot easily be replicated by
competitors, and ultimately, increase market share and earn real profits in the rough-and-
tumble world of online marketing. Therefore, TC reduction can be positioned as a powerful
marketing tool available to the online vendors (Chircu and Mahajan 2006). Chircu and
Mahajan (2006) also state that lowering TCs perceived by online consumers is a strategic
issue that should be of interest to strategy researchers and practitioners because of the
positive economic consequences that it has for businesses.
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