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An intelligent simulation model of online consumer behavior

Article  in  Journal of Intelligent Manufacturing · August 2012

DOI: 10.1007/s10845-010-0439-7

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J Intell Manuf (2012) 23:1015–1022
DOI 10.1007/s10845-010-0439-7
An intelligent simulation model of online consumer behavior
Gültekin Çağil · Mehmet Bilgehan Erdem
Received: 14 July 2009 / Accepted: 12 July 2010 / Published online: 30 July 2010
© Springer Science+Business Media, LLC 2010
Abstract This paper describes the design of an Intelligent
Simulation Model of Online Consumer Behavior (ISMOCB)
that incorporates a knowledge base using some form of the
Artificial Intelligence methods such as Naïve Bayes Classi-
fier and Artificial Neural Networks. This study investigates
modeling online consumer behavior by using demographic
characteristics such as age, gender, marital status, educa-
tional status, monthly income and number of people in the
family. This will provide producing more synthetic data and
creating an “Artificial Database” which includes the demo-
graphics of online consumers and their purchase transactions.
The model is built for online shopping based on empirical
data gathered in Turkey via an online survey. Two different
inference systems are used for which product group is chosen
by whom has which demographic characteristics. The qual-
ity of the data, gathered exclusively for this project, allows a
fine validation of the simulation results.
Keywords Intelligent simulation · Data mining ·
Artificial Database · Bayesian classification ·
Artificial Neural Networks · Consumer behavior
Introduction
Online sellers have long been able to design a useful
and aesthetically appealing Web site, collect detailed cus-
tomer information, and develop electronic relationships with
G. Çağil · M. B. Erdem (B)
Department of Industrial Engineering, Sakarya University,
Adapazari, Esentepe, Turkey
e-mail: berdem@sakarya.edu.tr
G. Çağil
e-mail: cagil@sakarya.edu.tr
customers and suppliers. These practices are established,
well tested and maturing, so electronic marketing is tack-
ling larger problems these days. Affected factors of network
customer buying provide valuable quality assurance, service
and marketing data. But the challenge is to use the data to
make decisions that result in substantive action (Xue-wu et al.
2006). To use research data to solve problems in design, mar-
keting, installation, distribution and after sale use and mainte-
nance, one should have a basic understanding the relationship
between purchasing behavior and consumer demographics.
E-commerce is a type of electronic trade based on
advanced computer network technology and communication
technology platform, which brings dramatic change of the
concept of traditional market in its qualitative area for both
the time scale and spatial dimension. E-commerce makes the
market boundaries dimmer owing to the difference among
the traditional geography, political opinion and ideology. The
rapid development of E-commerce has drawn a vast attention
from government, enterprises and academic scholars, and the
researches focus on two aspects: electronic commerce tech-
nology and marketing management under the environment of
e-commerce. For marketing management, the key research
point lies in the modeling of consumer behavior. However,
the consumer demand and behavior are so complicated that
it is almost impossible to establish completely quantitative
model because we can hardly collect all the precise data on
product sales revenue, related marketing activities and large
quantity of consumer information, we can only do quantita-
tive analysis to make all the possible predictions of consumer
behaviors based on many suppositions (Liu 2007).
For the kind of complex, hybrid system, which include
continuous events, discrete events and decision-making
events, modeling process involves many nonstructural, non-
quantitative matters, it’s too complex to describe them with
traditional mathematical methods, the artificial intelligent
123
1016
technologies can be used to solve this complex problem.
Intelligent Simulation Model of Online Consumer Behavior
(ISMOCB) technology can solve this nonstructural, qualita-
tive matter and reach the goal through reasoning.
Decision process of online consumer models in the sim-
ulation model is rendered by different inference systems.
Online consumers wandering in the intelligent simulation
model have a free will to buy or not to buy and have choices.
Therefore this model will make it possible to derive signifi-
cant data from limited survey data. An “Artificial Database”
which includes demographic attributes of online consumers
can be built with this synthetic dataset.
In this study demographic attributes such as age, gender,
marital status, educational status, monthly income, occupa-
tional status and number of people in the family are con-
sidered at the same time different from previous studies
which focus on demographic modeling of online consumer
behavior.
This paper structure is arranged as follows: first is a brief
introduction, second is related work review; third is defining
the demographic attributes, fourth is Intelligent Simulation
Model of Online Consumer Behavior (ISMOCB) with dif-
ferent techniques of artificial intelligence such as Bayesian
Classification, Artificial Neural Networks and implementa-
tions and finally conclusions.
Related work
When investigating the behavior of complex systems the
choice of an appropriate modeling technique is very impor-
tant (Robinson 2004). The choice of modeling technique, the
relevant literature spanning the fields of Economics, Social
Science, Psychology, Retail, Marketing, OR, Artificial Intel-
ligence, and Computer Science has been reviewed. Within
these fields a wide variety of approaches are used which
can be classified into three main categories: analytical meth-
ods, heuristic methods, and simulation. Often a combina-
tion of these is used within a single model (Greasley 2005;
Schwaiger and Stahmer 2003; Siebers et al. 2009). After a
thorough investigation of the relevant literature, simulation
has been identified as being the most appropriate approach
for our purposes.
Although people placed quite high expectation on com-
puter simulation in the 1960s, computer simulation did not
flourish in social and behavioral science field. Until the
1990s, with the increase of computer procession speed, lots
of scholars picked up simulation as a tool to study differ-
ent social process again. Owing to the broad field in social
science, a lot of simulation models swell up recently from
pure game theory simulation to the micro world simulation
in social science. However, no clear social scientists group in
computer simulation has come into being. Axelrod thought
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J Intell Manuf (2012) 23:1015–1022
that it was due to the fact that simulation efforts scattered
in other magazines besides social magazines, and simulation
purpose focuses on three points: process forecast, principle
test and result discovery (Axelrod 1997).
Demographic attributes
Before building a simulation model one needs to understand
the particular problem domain (Chick 2006). In order to gain
this understanding, some demographic attributes has been
investigated.
The search for the right demographic variables can be
seen in some of the latest efforts by e-retailers to attract and
retain their customers. Wallace (2000) notes the emphasis
on women “as the salvation for some dot-commerce com-
panies”. The increasing use of the Internet by women, their
growing economic power and their dominant influence on
household shopping behaviors are positive reasons for this
emphasis (Wallace 2000). Others are concerned that women-
focused sites run the risk of missing out on male shop-
pers. Boo.com, for instance, was strongly positioned for the
women’s apparel market but disappointing results has ended
its tenure.
A brief literature review supporting the hypotheses regard-
ing the following demographic characteristics of a
consumer—gender, age, education, total gross monthly
household income, and family composition—is reported
next.
Gender: Women and men seem to differ in their shop-
ping orientation. Although sex roles have blurred, shop-
ping is still a gendered activity, particularly in married
households (Fisher and Arnold 1990). For working women,
shopping along with other household tasks, become a partic-
ular challenge (Thompson 1996) and can be associated with
negative feelings. Time-pressured working women, in par-
ticular, have been observed and targeted by direct marketers
(Schiffman and Kanuk 1997). Shopping is also recreational
for women, generating positive feelings (Bellenger and Kor-
gaonkar 1980). The influence of gender on shopping is likely
to be quite complex.
Age: Consumers’ needs, interests, and resources vary
according to age. Previous studies indicate that consumer
innovativeness is lower among older consumers. Older con-
sumers also tend to be satisfied with conventional shopping
methods (May and Greyser 1989), on the other hand, report
mixed evidence regarding the influence of age on consumers’
tendency towards non-store shopping.
Education: Adoption behavior is likely to be influenced
by education as innovators tend to be more educated than
non-adopters. Previous studies have found a positive rela-
tionship between in-home shopping and education (Darian
1987; Donthu and Garcia 1999). What is more, Internet users
J Intell Manuf (2012) 23:1015–1022 1017

have above-average education (Darian 1987; Hoffman et al. Initializing system data
Setting simulation clock
1996). Initializing system's state and
Income: Previous studies support the positive relationship events
between in-home shopping and consumer income. Darian
(1987) found that households in the middle income groups
were most likely to be in-home shoppers. Internet-using Using knowledge base and inference
households are also likely to have higher than average income engine find which transactions will
happen
(Darian 1987; Hoffman et al. 1996).
Family Composition: Number and age of children con-
stitute a major component of the family and household life
cycle concept (Gilly and Enis 1982; Schaninger and Danko Dealing with events
1993). The presence/absence of children as well as the age of
the youngest child has a significant influence on households’ Advance the
simulation clock
needs, resources and expenditures (Solomon 1999). Darian
(1987) found housewives and part-time female workers with
Updating system sate and statistic
preschool children to be one group of potential in-home data
shoppers.

Intelligent simulation model YES

Continue ?

Methods and concepts

Simulation can be used to analyze the operation of dynamic
and stochastic systems showing their development. There are
many different types of simulation, each of which has its spe-
cific field of application (Siebers et al. 2009). There has been a
fair amount of modeling and simulation of operational man-
agement practices, but people management practices have
often been neglected although research suggests that they
crucially impact upon an organization’s performance (Schiff-
man and Kanuk 1997). One reason for this relates to the
key component of people management practices, an orga-
nization’s people, who may often be unpredictable in their
individual behavior.
During the recent past, the interest in research and appli-
cation of Artificial Intelligent (AI) simulation models has
increased substantially. These successful application areas
include aircraft control, missile control, human behavior rep-
resents, or computer generation force (CGF) (Liu 2007).
The overall aim of our study is to investigate the link
between different demographic attributes of online consum-
ers and product groups chosen by them. This strand of work
focuses on the inference system that makes the decision of
whether buying a product from a product group or not. This
paper aims to understand and predict how Intelligent Simu-
lation Model of Online Consumer Behavior (ISMOCB) can
determine the decision processes of new consumers in the
model. In this manner more synthetic data can be derived by
the knowledge base of intelligent model.
The inference systems used in the model will be intro-
duced below. These are Bayesian Classification and Artificial
Neural Networks.
NO
Print Simulation results
Fig. 1 System simulation flow diagram
Simulation strategy
The system simulation strategy adopts the producing con-
sumer population and making choices. When the simula-
tion clock is advanced a simulation unit, the consumer will
make the decision of purchase and choice events. The expert
knowledge base and reasoning engine will find these events
that content to occurring conditions, make the corresponding
treatments and change the variable value of system state (each
different demographic attribute of the consumer, the prod-
uct groups and etc.). The system state changes from S(C) to
S(C+C). By this purchasing simulation clock is advanced,
the simulation system will run continuously. The simulation
flow diagram is shown on Fig. 1.
Naïve Bayes Classifier
Bayesian decision theory is the basis of statistical classifi-
cation methods (Duda and Hart 1973). It provides the fun-
damental probability model for well-known classification
procedures such as the statistical discriminant analysis.
The Naive Bayes Classifier technique is based on the so-
called Bayesian theorem and is particularly suited when the

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dimensionality of the inputs is high. Despite its simplicity,
Naive Bayes can often outperform more sophisticated clas-
sification methods (Cagil et al. 2008).
Naive Bayes classifiers can handle an arbitrary number
of independent variables whether continuous or categorical.
Given a set of variables, X = {x1 , x2 , x3 , . . . , xn }, we want
to construct the posterior probability for the event C j among
a set of possible outcomes C = {c1 , c2 , c3 , . . . , cd }. In a
more familiar language, X is the predictors and C is the set
of categorical levels present in the dependent variable. Using
Bayes’ rule:
p(C j /x1 , x2 , x3 , . . . , xn ) ∝ p(x1 , x2 , x3 , . . . , xn /C j ) p(C j )
where p(C j |x1 , x2 , x3 , . . . , xn ) is the posterior probability of
class membership, i.e., the probability that X belongs to C j .
Since Naive Bayes assumes that the conditional probabilities
of the independent variables are statistically independent we
can decompose the likelihood to a product of terms:

n 3
p(X/C j ) ∝ p(xk /C j )
k=1
and rewrite the posterior as:

n
p(C j / X ) ∝ p(C j ) p(xk /C j )
k=1
Using Bayes’ rule above, we label a new case X
with a class level C j that achieves the highest posterior
probability.
Although the assumption that the predictor (independent)
variables are independent is not always accurate, it does sim-
plify the classification task dramatically, since it allows the
class conditional densities p(xk |C j ) to be calculated sepa-
rately for each variable, i.e., it reduces a multidimensional
task to a number of one-dimensional ones. In effect, Naive
Bayes reduces a high-dimensional density estimation task
to one-dimensional kernel density estimation. Furthermore,
the assumption does not seem to greatly affect the poster-
ior probabilities, especially in regions near decision bound-
aries, thus, leaving the classification task unaffected (Statsoft
2008).
Intelligent simulation of online consumer behavior with
Naïve Bayes Classifier
The demographic attributes concerned in this paper include
gender, age, marital status, educational status, occupation,
monthly income and number of people in the family. Online
consumer’s demographic attributes are presented in columns
of the matrix in Table 3. The gender is defined as grouping
online consumers as male or female, while the age is defined
as assembling consumers into one of the following groups in
Table 1.
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J Intell Manuf (2012) 23:1015–1022
Table 1 Age group
Group Age
1 <18
2 18–24
3 25–34
4 35–44
5 44–59
6 >59
Table 2 Product group
Group Product group
1 Cells and Mobile Phones
2 Computers and Comp. Parts
Books
4 Health and Cosmetics
5 Electronics
6 Clothes
7 Mp3 Players
8 Music
9 E-Ticket
10 Others
The marital status is defined as single, married or other.
The educational status is defined as primary school, second-
ary school, high school, college, undergraduate and gradu-
ate/or higher. The occupational status is defined as public,
private, own, student and unemployed.
Product groups used in the model are categorized as in
Table 2.
Empirical data was collected through a mail survey on
shopping behavior in Turkey. The simulation model is based
on this empirical data. An example view of this dataset is
given in the Table 3.
The simulation model is built by using this empirical data.
Each attribute’s data was inspected to observe which attri-
bute fits which statistical distribution. Based upon these sta-
tistical distributions, various attributed online consumers are
generated randomly. Furthermore Naive Bayes Classification
method is used for which product group is chosen by whom
has which demographic characteristics.
In the simulation model, an online consumer, consumer’s
choice and number of the consumers which have same attri-
butes and same decisions are represented as a raw of the
matrix. A brief example of simulation outputs is shown in
Table 4.
J Intell Manuf (2012) 23:1015–1022 1019

Table 3 Example of empirical

dataset collected through online Gender Age Marital Educational Occupational Monthly Family Product
survey status status status income composition group

2 1 2 4 1 3 3 1
1 3 1 2 4 7 4 2
2 2 2 3 4 9 4 3
1 4 2 3 2 1 3 4
… … … … … … … …
1 4 1 1 3 5 2 2

Table 4 A brief example of

simulation outputs ID Gender Age Marital Educational Occupational Monthly Family Product Quantity
status status status income composition group

546 1 2 2 3 4 3 5 8 33
547 1 2 2 3 4 4 4 1 15
548 1 2 2 3 4 4 4 3 170
549 1 2 2 3 4 4 4 5 16
550 1 2 2 3 4 4 4 8 10
551 1 2 2 3 4 5 5 2 31
552 1 2 2 3 4 5 5 3 35
553 1 2 2 3 4 6 4 1 23

Artificial Neural Networks
Traditional statistical classification procedures such as dis-
crimInant analysis are built on the Bayesian decision the-
ory (Duda and Hart 1973). In these procedures, an under-
lying probability model must be assumed in order to cal-
culate the posterior probability upon which the classifica-
tion decision is made. One major limitation of the statis-
tical models is that they work well only when the under-
lying assumptions are satisfied. The effectiveness of these
methods depends to a large extent on the various assump-
tions or conditions under which the models are developed.
Users must have a good knowledge of both data properties
and model capabilities before the models can be successfully
applied.
Neural networks have emerged as an important tool for
classification. The recent vast research activities in neural
classification have established that neural networks are a
promising alternative to various conventional classification
methods. The advantage of neural networks lies in the follow-
ing theoretical aspects. First, neural networks are data driven
self-adaptive methods in that they can adjust themselves to
the data without any explicit specification of functional or
distributional form for the underlying model. Second, they
are universal functional approximators in that neural net-
works can approximate any function with arbitrary accuracy
(Cybenko 1989; Hornik 1991). Since any classification pro-
cedure seeks a functional relationship between the group
membership and the attributes of the object, accurate identi-
fication of this underlying function is doubtlessly important.
Third, neural networks are nonlinear models, which makes
them flexible in modeling real world complex relationships.
Finally, neural networks are able to estimate the posterior
probabilities, which provide the basis for establishing classi-
fication rule and performing statistical analysis (Richard and
Lippmann 1991).
Artificial Neural Networks are relatively crude electronic
networks of “neurons” based on the neural structure of the
brain. They process records one at a time, and “learn” by
comparing their classification of the record (which, at the
outset, is largely arbitrary) with the known actual classifica-
tion of the record. The errors from the initial classification
of the first record is fed back into the network, and used to
modify the networks algorithm the second time around, and
so on for many iterations.
In the training phase, the correct class for each record
is known, and the output nodes can therefore be assigned
“correct” values—“1” for the node corresponding to the cor-
rect class, and “0” for the others. It is thus possible to com-
pare the network’s calculated values for the output nodes
to these “correct” values, and calculate an error term for
each node. These error terms are then used to adjust the

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Table 5 Parameters of ANN architecture Intelligent simulation of online consumer behavior with
Network type Feed Forward Back Propagation (FFBP) ANNs
Training function Levenberg–Marquardt (TRAINLM)
Learning function Gradient Descent with Momentum (GDM) Backpropagation is the generalization of the Widrow-Hoff
Performance function Mean Square Error (MSE) learning rule to multiple-layer networks and nonlinear dif-
Transfer function Tangent Sigmoid (TANSIG) ferentiable transfer functions. Input vectors and the corre-
Number of hidden 1
sponding target vectors are used to train a network until it can
layers approximate a function, associate input vectors with specific
Number of neurons 10 for input, 10 for hidden, 1 for output output vectors, or classify input vectors in an appropriate way
each layer as defined. Networks with biases, a sigmoid layer, and a lin-
Epoch size 35 ear output layer are capable of approximating any function
with a finite number of discontinuities.
weights in the hidden layers so that, hopefully, the next Properly trained backpropagation networks tend to give
time around the output values will be closer to the “correct” reasonable answers when presented with inputs that they
values. have never seen. Typically, a new input leads to an output

Fig. 2 a Training, validation

and test graph. b Training sets
and validation checks

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J Intell Manuf (2012) 23:1015–1022
similar to the correct output for input vectors used in training
that are similar to the new input being presented. This gen-
eralization property makes it possible to train a network on
a representative set of input/target pairs and get good results
without training the network on all possible input/output
pairs.
The online survey dataset consists of 527 consumers and
their transactions. 756 subjects participated in the survey,
7 of them were discarded because of missing data, leaving
749 respondents in the final sample. Of the sample, 70.36%
(n = 527) reported that they had experience in purchasing
online, and 29.64% of subjects (n = 22) reported that they
did not experienced online shopping for various reasons. 85%
of the dataset (450) is used for training set and the rest (77)
is used for the test dataset.
A feed forward back propagation network which has three
layers is used in the model. Input layer has 10 neurons, hid-
den layer has 10 neurons and output layer has one neuron.
Levenberg-Marquardt (trainlm) training algorithm is used in
the model. Hidden layer size and number of neurons per hid-
den layer are determined with trial and error method. The
network ran through about 35 training epochs in 11 s. The
architecture of ANN model and its parameters are shown in
Table 5.
There are generally four steps in the training process:
1. Assemble the training data.
2. Create the network object.
3. Train the network.
4. Simulate the network response to new inputs.
The network has achieved a significant training success as
seen in Fig 2a, b.
The simulation results of Neural Networks perform bet-
ter then Naive Bayes Classifier technique results. The rea-
son behind this situation is that the advance of ANNs learn-
ing algorithm. The performance of ANN can be improved
with changing its parameters by trial and error. FFBP Neu-
ral Network does not require any rule base or expert opin-
ion. With appropriate dataset and learning rules, ANN has
better results. The experimental results show that Neu-
ral Network Classification performance converge 89% real
data.
Conclusions
Different from the previous researches based on demo-
graphic attribute-based simulation, various attributes such
as age, gender, marital status, educational status, monthly
income, occupational status and number of people in the
family have been considered at the same time. Furthermore
different inference systems are used such as Naïve Bayes
1021
Classifier and Artificial Neural Networks to determine which
product group will be chosen by which online consumer
has which demographic attributes. As a consequence of our
Intelligent Simulation Model of Online Consumer Behavior
(ISMOCB), decision process handled by the inference sys-
tem provided independent and various synthetic data. Now
it is possible to build an “Artificial Database” that includes
demographic attributes and purchase transactions of online
consumers.
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