Demographics and Behavior of the Chilean Internet Population
Miguel Rafael H. Mendoza,
Assistant Professor of Marketing at the Business and Economics School, University of Chile. He is a commercial engineer, and did his graduate work at University of Colorado at Boulder where he obtained his Master of Arts Degree in Economics and Master's in Business Administration. He wrote the book “Marketing directo: Conceptos y aplicaciones” and he is author of several publications on direct marketing and database marketing. He conducts executive seminars in Latin America on direct marketing and database marketing.
Miguel Mendoza, Universidad de Chile, Diagonal Paraguay 257, Santiago, Chile.
Director of the Continuing Education program in Computer Science at the School of Business and Economics of University of Chile. He holds a degree in commercial engineering and he teaches “Marketing and Business on the Internet” and “Design and Management of Databases for using in Direct Marketing”. He has been involved in the development and marketing of software especially designed for direct marketing.
Jose Antonio Alvarez, Universidad de Chile, Diagonal Paraguay 257, Santiago, Chile.
Miguel Mendoza, Universidad de Chile, Diagonal Paraguay 257, Santiago, Chile.
Jose Antonio Alvarez, Universidad de Chile, Diagonal Paraguay 257, Santiago, Chile.
This paper presents the results of a study of Internet users in the city of Santiago. A random sample of 1145 households representing three strata of population was selected. The results show that the typical Internet user is young, male, highly educated, with a high income level, connecting to the Internet from the place of work or study, spending most of the time on-line browsing through the World Wide Web. As far as the use of the Net for commercial transactions is concerned, only 10% of users have bought something on-line. It appears from the study that, for the time being, the Internet is more useful as a communication medium for building relationships and generating leads than it is to buy or sell products.
The growth of the Internet has been witnessed in most countries around the world. As of January 1997 there were a total of 824,791 Internet domains, with 507,513 or 62% of those commercial domains [Networks Wizards, 1997]. Also, the number of hosts grew from 313,000 in 1990 to 16,146,000 in 1997. If we assume ten users per host as estimated by the Internet Society, it can be presumed that at this date there are approximately 160 million people with access to the Net. It is also the case that the Non-US host registration has shown dramatic growth.
Nevertheless, despite the broad scope of the Internet, the majority of the studies about Internet population and demographics have been done considering the US and Canadian markets only [Cyberatlas, 1997]. Most of these studies attempt to determine the demographic characteristics, usage, interests and on-line activities of Internet users. Common findings among these studies are that the use of the Net varies with gender, with age, and with socioeconomic status. However, they also show that as the Internet is getting larger, reaching a higher percentage of the US population, the demographic makeup is changing.
This work has two objectives: 1) to provide information about awareness and usage of the Internet in the Chilean market, and 2) to identify the demographic characteristics of people using the Internet in Chile. The generic purpose of this research was to obtain information to offer a better understanding of the Chilean Internet market to all the institutions involved in the development of Internet. The lack of reliable information about the size and characteristics of Internet users is an obstacle for adopting it as an important platform for doing business on-line.
Characteristics of the Chilean Market
During the last decade the computer and telecommunication industries have experienced significant growth in the Chilean economy, positioning the country at the leading edge in the Latin American context. Actually, the penetration level is 5.04 computers for every one hundred inhabitants, a very large figure compared to Argentina, which has the second highest rate of penetration (1.34 per one hundred inhabitants), and well above the regional average of 1.22. This level of penetration allows the country to have a broad base of computers, an environment potentially supportive of the conduct of business over the Internet. Telecommunications and computers companies have also fueled the growth of the Internet within companies and households alike. Chile has 15 access providers. It is estimated that the Net has 40,000 regular paying users and more than 60,000 non-paying users [“Chile cabalga la tercera ola.”, 1996, September]. According to [Network Wizards (1997)], Chile is ranked 43th in a global context with 15,885 hosts and 891 Chilean domains (cl). However, these statistics do not consider Chilean companies using the domains net or com.
In Latin America, the total number of hosts registered is 163,488. Brazil, Mexico and Chile are the leaders with 47.19%, 18.25% and 9.72% respectively [Network Wizards, 1997]. Considering the penetration level measured as the number of hosts per inhabitant in different Iberoamerican countries we find Spain in first place followed by Chile, Uruguay and Argentina (Figure 1).
For a country of 14 million people the use of the Internet offers enormous opportunities for doing business globally. The Internet allows Chilean companies to reach a huge market. According to a recent [FIND/SVP (1997)]study, there are more than 31.3 million Internet users in North America alone. The [Intelliquest (1997)] study for the fourth quarter of 1996 reports finding 47 million American adults using the Internet/on-line services. The Spring '97 release of the Internet Demographic Survey from [CommerceNet/Nielsen Media Research (1997)] reports that of 220 million people age 16 and over in the United States and Canada, 23% (about fifty million) are using the Internet, and 17% are using the Web. Morgan Stanley estimates there will be 152 million users by the end of the decade [Meeker & DePuy, 1996]. (See the CyberAtlas site for a comprehensive list of organizations conducting Internet surveys. Differences in the figures above are most likely due to the definition of Internet users that each estimate considers and the time the study was conducted, as dramatic increases in the user population are occurring in a matter of months.)
From a business standpoint a key factor fostering Internet growth is the efficiency of the channel and the low cost associated with access to micromarkets around the world. The reduction of geographic constraints make the concept of “zero distance” a reality, which is very attractive for a country like Chile, especially in relation to the communication process. Also, the size of the company becames less important, since the Internet tends to make size differences less meaningful. As [Jacobs and Clevenger (1997)] point out, the Internet offers a digital environment where marketers can efficiently deliver their message to large or small groups of actual or potential customers. Nevertheless, marketers must still rely on traditional media to let their market know where to find them.
From a consumer standpoint the Net allows consumers access to information and products that otherwise would not be available to them, or for which access would be very expensive. However, by the same token, businesses face a great challenge since they have to react more quickly to cope with the knowledge consumers possess and the attention they demand when they buy goods and services.
Another challenge businesses face is to get consumers to attend to their messages. With other mass media consumers are passively exposed to the message. However, Internet messages are more difficult to find and easier for the consumer to ignore, unless the consumer purposefully seeks information about a company or its products. For this reason brands and incentives will become much more important factors when doing business on the Net, in order to have the consumer come back again.
Methodology of the Study
To obtain a reliable picture of Internet users in Chile we performed an exploratory survey in August 1996 in the city of Santiago. We select a random sample of 1145 households representing three strata of the population, excluding low income groups, or approximately 45% of the total population. Contrary to most studies done in the US and Canada using an unrestricted random digit dialed telephone survey, in our study an interviewer personally visited each household asking questions about the use of computers, knowledge of and access to the Internet. The field work also allows the interviewer to assess and ask about socioeconomic and demographic conditions of the subject. We used a stratified nonproportional sample dependent upon socioeconomic stratum. The field work was done during two weekends in order to find household members at the time they were visited. In the first phase 1145 households were visited and asked about Internet knowledge, familiarity with computers, and place of access to the Internet for those who had access. Of the total sample of 1145 households, 42.1% of the people interviewed did not know what the Internet was, 27.5% only mentioned that it was something related to computers, and 30.4% knew that the Internet was a global network of computers. Additionally, people were familiar with computers in approximately 40 percent of the households, using them at home or in their place of work or study.
Of the households with access to computers only 81 had a connection to the Internet, equivalent to approximately 6% of the total sample. The last figure means a penetration level of about 3% of the total number of households.
To those with access to the Internet a 25-item questionnaire was delivered and picked up a week later. A completed questionnaire, by a household member older than 17 years, was returned by 61 households. Through this kind of survey we avoided the bias produced by telephone surveys, since in Chile people are not used to giving information over the phone or filling out forms over the Internet.
Major Findings of the Study
The sample of the population of Santiago was classified into three socioeconomic segments. This classification considers several variables such as place of residence, type of home construction, services available to the household and possessions owned. Segment 1 corresponds to an upper middle class, with an income level that allows them to buy most of the goods and services they wish. Segment 2 corresponds to a middle class with average income and Segment 3 was the lower middle class stratum. Among all survey respondents connected to the Internet, 46.9% belonged to Segment 1, 23.5% to Segment 2, and 29.6% to Segment 3.
With respect to the source of Internet access, the majority of Segment 1 respondents (67.7%) said they have access to the Internet from home. On the other hand, in Segment 2 the majority of people (58.6%) have access to the Internet from work and in Segment 3, most of the people (55.6%) have access from an educational institution. When the question changed to the place where they usually connect to the Net, more people connect from work than from home or school (37.7%). Even though some people have access to the Net from home, they are more likely to access the Internet from the workplace.
More than 60% of users do not pay anything for their connection. This percentage goes up to about 80% in Segment 3 of the population. Approximately 20% of users pay less than $40.00 for their connection, and another 20% pay between $40.00 and $100.00.
1.- Demographics of the Chilean Internet population
Figures 2 and 3 shows that 68% of users have university degrees and 13.1% have graduate degrees. Thus, most Chilean users are highly educated. Only 18% have high school or technical school diplomas only. Most Chilean Internet users are students, followed by professionals, entrepreneurs and salaried workers.
With respect to gender, more than two-thirds of users were male. However, it is interesting to note that the greater presence of males on the Internet is more representative of Segment 1 and less of Segments 2 and 3. What is surprising is that in Segment 3 the trend is reversed, with the majority of users being female. This suggests that when Internet becomes adopted by the majority of the population the demographics will reflect population characteristics much more closely.
As Figure 5 indicates, about 40% of users are in the age range 18–23, with an average age of the users of 27.8. The percentage of Internet users tends to decrease when people get older, with only 8.1% of users older than 42. It is interesting to note that in Segment 2 and 3 more than 50% of users are in the range 18–23. Only in Segment 1 did we find users older than 48. These statistics support the idea that the Internet will be growing at very high rates in the future since younger people will be Internet-literate and their descendants will be born in an Internet environment.
With respect to income level, in Segment 1 more than 80% percent of users have income greater than $2500.00 monthly. In Segments 2 and 3, 50% and 100% respectively earn less than $1200 a month. Income level is measured as net income or take-home pay.
Thus, the typical Chilean user of the Internet is a young, male, highly educated person who might but does not necesssarily belong to an upper income group. As the Internet market grows and penetrates more deeply into the middle class the profile of the typical user will not only change with respect to gender, but also with respect to age and level of education.
2.- Access, frequency and type of serviced demanded
Figure 6 shows that most of people who connect to the Internet do so through a Internet access provider, and a small percentage through an on-line commercial service. However, in Chile there are very few on-line services and the services they provide are very limited. In Chile users do not have access to well-known companies such as America Online and others.
Although the majority of people do not pay for connections, this is not the case in Segment 1, in which more than 60% pay for the connection. This percentage drops to 33% in Segment 2 and zero in Segment 3. When people do not pay for the service, their employer or other organizations, mainly universities and schools, pay for the connection.
When people in Segment 1 were asked to report their last time of connection, 68% said that they connected during the previous week. In Segments 2 and 3 this percentage decreased to 50% and 44%, respectively. Additionally, Figure 7 shows duration of connections among the three segments. In Segment 1, 80% of people generally stay connected less than an hour, a percentage that decreases to 75% in Segment 2 and goes up in Segment 3 to 94%. Thus people in Segment 3 connect with less frequency, but each time they connect they spend more time on the Net.
With respect to the applications used at the last time of connection (Figure 8), the majority of users in Segment 1 named the World Wide Web. In Segments 2 and 3 the most used application was electronic mail. Segment 3 shows much more use of FTP (File Transfer Protocol) for downloading computer files than any of the other segments. When people were asked about the frequency of use of these applications (Figure 9) the most used is the WWW followed by electronic mail and FTP. Again, Segment 1 shows a high propensity for using the web, Segment 2 electronic mail and Segment 3 FTP. Since many of the users of Segment 3 are students, a closer inspection shows that FTP is used mainly for downloading freeware, shareware and images.
It is interesting to notice that in Segments 1 and 2 more than 20% of users connect to the Net at least once a day. This percentage goes down to 10% for Segment 3. Likewise if we consider the times people connect in a regular week, about 80% in Segment 1 connect at least once. This percentage decreases to 50% and 30% for Segments 2 and 3, respectively. This fact confirms previous findings that suggests that the heaviest users of the Net are in Segment 1.
3.- Behavior on the Internet
3.1.- Reasons for using the Net
Figure 10 shows the main findings regarding the way people use the Net. Most people access the Internet for browsing or exploring, mentioning this behavior as a reason for about 80% of the times they connect. This percentage goes up to almost 90% in Segment 1 and goes down to about 55% of the connections in Segment 3.
The second activity people do is search for information on companies and organizations (more than 60% of the time they connect). The third activity, very close to the second one, is the search for information about products and services (almost 60% of the time). In fourth place, we found that in about 50% of the cases people like to look for new things at their favorite sites. The pattern of behavior found in Chile is very similar to the one found in the studies done by Commercenet/Nielsen in the USA and Canada.
Commercial transactions on the Net
As for commercial transactions on the Internet, about 13% of the time people use the net for purchasing products or services. When users were asked if they have bought products on the Net, about 11% of them responded positively (see Figure 11). However, no one in Segment 3 has made a purchase through the Internet. Segment 2 appears to be the most willing to buy over the Internet. About 70% of the people who have bought on the Net spent between $12.00 and $50.00. Nobody spent less than 12 dollars and in about 30% of cases they made purchases for more than $50.00. To date, the Internet has proven to be an effective means of communication for companies but it has not proven itself as a successful means for selling products.
The Internet has become an important new medium available to business. In Chile, its use has paralleled that of other countries, especially the USA and Canada. The profile of a typical Internet user is that of a young male, highly educated with a high income level. However, when the technology reaches other and broader segments of the population the main characteristics of the typical users, youth and education, will become increasingly less important.
Although some people have access to the Internet from home, particularly the upper-income segment, they tend to connect from the place of work or study. For the same reason more than 60% of users do not pay themselves for the connection: their employers, universities or schools pay for the connections.
Most of the time people spend on the Net browsing or exploring it through the use of the World Wide Web. Electronic mail and downloading freeware, shareware and images are others uses very popular among students.
With respect to the exploitation of the Internet for commercial transactions, its use is in its infancy with only about 10% of respondents reporting that they have bought something via the Net. For example, in March of this year a new site (cybermarket.cl) was launched that includes a supermarket, bookstore, drugstore and hardware store. Currently, the site is visited daily by about 300 people, 15 of whom will register themselves to become clients and only 6 of whom are buying, mainly from the supermarket. So far there has been no advertising for the Cybermarket. Most of people who visit the site get to know it through personal references or recommendations.It is too early to evaluate the performance of the cybermarket. However, it is interesting to note that people who have bought from the virtual store repeat their purchases. Thus, as soon as people become familiar with this type of use of the Net, and also when we can provide clients with a standardized security system for electronic commerce, we can expect a major increase in online sales.
Currently, even though there is great potential for electronic commerce, in Chile the Internet is more useful as a communication medium for networking and building personal relationships
The authors wish to thank the Computer Unit of the School of Business and Economics of University of Chile for its support for this research.