Marketing_on_the_Internet

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					                                           Decision Support Systems 27 Ž2000. 383–393
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       Marketing on the Internet — who can benefit from an online
                          marketing approach?
                                                    a,)
                       Melody Y. Kiang                    , T.S. Raghu b, Kevin Huei-Min Shang                       c

       a
           Information Systems Department, College of Business Administration, California State UniÕersity, Long Beach, CA 90840, USA
              b
                  School of Accountancy and Information Management, College of Business, Arizona State UniÕersity, Tempe, AZ, USA
                c
                   Operations and Decision Technologies, Graduate School of Management, UniÕersity of California, IrÕine, CA, USA
                                                           Accepted 25 October 1999



Abstract

    The research builds upon the literature in electronic commerce and past research in marketing with the objective of
understanding factors that impact a product’s adaptability to online marketing. A review of marketing channel choice
literature reveals a set of factors and channel choice functions that are considered important in making channel decisions.
Using this as a basis, four major channel functions, namely, product customization, availability, logistics, and transaction
complexity are considered relevant in understanding the implications for Internet marketing. By building upon previous
research in the area of channel selection, we provide a means of classifying Internet marketing initiatives based on product
characteristics. The classification scheme based on product characteristics can help analyze the significance of each factor on
the success of a firm’s online marketing approach. Further, the classification scheme is used to discuss decision support
implications. q 2000 Elsevier Science B.V. All rights reserved.



Keywords: Electronic commerce; Channel selection; Internet marketing; Product classification




1. Introduction                                                           they commit substantial capital investment on Inter-
                                                                          net marketing and risk the possibility of interfering
   The potential of the Internet as a commercial
                                                                          with their current channels. In this research, we
medium and market has been documented in a vari-
                                                                          focus on the use of the Internet as a virtual storefront
ety of publications w17,20x. Despite overwhelming
                                                                          where products are sold directly to customers. We
statistics regarding Internet development, both suc-
                                                                          contend that product characteristics play a major role
cessful and unsuccessful cases of Internet marketing
                                                                          in the successful marketing of a product on the
have been reported w15,16x. There is no proven suc-
                                                                          Internet. We build a product characteristics based
cessful method that can help management evaluate
                                                                          classification framework to study the implications of
how beneficial Internet marketing could be before
                                                                          using the Internet as a marketing channel.
                                                                             Channel selection is a complex task for both
  )
      Corresponding author. E-mail: mkiang@csulb.edu                      researchers and practitioners in marketing. Although

0167-9236r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 1 6 7 - 9 2 3 6 Ž 9 9 . 0 0 0 6 2 - 7
384                            M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393

Internet marketing has boomed in recent years, most             literature, the types of channels can be divided
companies have used it mainly for advertising or                broadly into direct and indirect marketing ap-
promoting corporate images. Not many companies                  proaches. Most companies do not sell their products
have fully utilized the power of Internet marketing as          or services directly to the final users for three rea-
a new channel for handling transactions on the Inter-           sons: Ž1. lack of financial resources to carry out
net. The existing research in channel design and                direct marketing; Ž2. decreased cost-effectiveness
selection has only considered the traditional chan-             Že.g., selling gum or other low-price consumer goods
nels, including direct and indirect marketing ap-               directly.; Ž3. to focus on the core business w21x.
proaches. There is no documented results or research            Internet marketing shares some of the characteristics
that provide a systematic method to guide evaluation,           of both direct and indirect marketing forms. How-
planning, and execution of the channel choice deci-             ever, the extant literature in channel selection only
sion when it comes to Internet marketing. The re-               classifies products into direct or indirect marketing
search done in Ref. w30x provides a comprehensive               and cannot be applied directly to Internet marketing
review of research in traditional channel selection             choice. Several product and market factors determine
and is used as the basis for building our model. In             channel choice Žthese are summarized in column 2 of
this paper, we extend and modify their work to                  Table 1. w30x. These factors can be classified based
include the new transactionrdistribution channel, In-           on the function performed by the channel in fulfill-
ternet marketing.                                               ing customers’ requirements. The classification
    In this study, we first identify the product factors        scheme of Ref. w30x groups the factors into eight
that may impact the selection of transaction chan-              channel functions and provides their implications for
nels. This is done through a thorough review of the             channel choice Žsee Table 1, column 1.. Although
literature in both traditional marketing channel selec-         the Internet is an entirely new channel, it has many
tion and the new online marketing approach and                  of the same characteristics as those of conventional
identification of the key benefits of Internet market-          channels. We believe studying the factors considered
ing. Product factors that have impacted the success-            significant in conventional channel selection can also
ful capitalization of Internet marketing are added to           help in analyzing the characteristics of Internet mar-
the current list of factors identified by previous              keting. However, there are factors that either were
marketing research.                                             considered less important in conventional channel
    The rest of the paper is organized as follows. A            literature or are unique to online marketing that need
summary of the review is presented in Section 2. To             to be added to the analysis Žindicated in bold letters
better understand the type of products or services              in Table 1, column 2..
selling on the Internet, Section 3 gives the classifica-            In Section 2.2, we identify the key advantages of
tion of retailing on the Internet. Here, the findings           Internet marketing recognized by companies partici-
from Section 2 are used as the basis for building the           pating in Internet marketing. The findings are then
classification grid. Section 3 also discusses the deci-         used as the basis for extending the channel selection
sion support implications of the classification. Sec-           theory to encompass online marketing.
tion 4 concludes the research with a summary of
contributions and a direction for future research.
                                                                2.2. The adÕantages of internet marketing

2. Literature review                                               Marketing activity occurs through three types of
                                                                channels: distribution, transaction, and communica-
                                                                tion channels w28x. Although this study focuses on
2.1. Current research in channel selection                      using the Internet as a new transaction andror distri-
                                                                bution channel, there are substantial interactions and
    Marketing channel decisions are among the most              overlap among the activities performed by the three
critical decisions facing management. In marketing              types of channels. Therefore, we need to consider the
                                       M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393                                         385

Table 1
Channel choice functions Žadapted from Rangan et al. w30x.
Customer’s                  Product-market factor                Reference              Marketing implications
requirement of              identified in the
channel functions           literature
Ž1. Product                 Searching time, technical,           w3,22,26,36x           Use direct marketing if high, indirect if low.
information                 complexity, rate of                                         Internet can be used as a communication
                            technology                                                  channel in either case. If product complexity
                                                                                        is high, Internet is well suited.
Ž2. Product                 Adjustment,                          w3,8,36x               Use direct marketing if high, indirect if low.
customization               customization, customer                                     Internet is ideal if factors associated
                            importance, product                                         with customization are highly critical for
                            novelty, ease of value                                      market success,
                            added, specialty goodsa
Ž3. Product                 Product criticality,                 w8,26x                 Use direct sales if Important, indirect if
quality                     significance of purchase                                    Unimportant.
assurance                                                                               These factors are not critical in choosing
                                                                                         Internet as a channel.b
Ž4. Lot size                Purchasing effort, unit              w7,22,26,36x           Use direct if Large, indirect if Small.
                            value, extent of usage,                                     If demand volatility is high, Internet can
                            order size, gross                                           be chosen as the channel.c
                            margin demand
                            volatility
Ž5. Assortment              Assortment, one-stop                 w7,8x                  Use direct if Nonessential, indirect if
                            shopping, market                                            Essential.
                            decentralization                                            Use the Internet if market decentralization is
                                                                                        not essential. Other factors are not critical in
                                                                                        choosing Internet as a channel.
Ž6. Availability            Frequency of usage, time             w3,7,26,36x            Use direct if Not critical, indirect if Critical.
                            of consumption                                              Use the Internet if these factors are critical
                            replacement rate,                                           to product success.
                            frequency of purchase,
                            convenient location
Ž7. After-sales             Waiting time, need for               w7,26x                 Use direct if Not critical, indirect if
service                     service                                                     Critical.
                                                                                        For a digital product where need for service
                                                                                        is critical, Internet is well suited.d
Ž8. Logistics               Need for special                     w6,36x                 Use direct if Complex, indirect if Simple.
                            equipment,                                                  Use the Internet if digital products or if
                            transportation                                              logistics factors are simple.
                            convenience
Ž9. Transaction             Order complexity                     w2,35x                 Use the Internet if transaction complexity
complexity                                                                              is high to reduce time and error in
                                                                                        transactions processing.
   a
      New factors are boldfaced.
   b
      Due to the ubiquitous nature of Internet Commerce, the authentication of a company is used as the surrogate for quality assurance of
the product. Therefore, companies with established reputation Žbrand name. tend to do well in electronic commerce w9,11,29x.
    c
      The main reason that prevents potential customers from using the Internet is security concerns. As Internet marketing matures, we
expect to see transactions of various lot sizes to occur on the Internet. Theoretically, the lot size just needs to be large enough to ensure the
coverage of its delivery cost.
    d
      This is true for companies that provide digital products. Also for companies that have established distribution channels other than the
Internet can use the established channel to provide after-sales services.


effect of Internet marketing on all aspects of market-                       of Internet marketing. The extant literature in Elec-
ing activities to be able to recognize the true benefits                     tronic Commerce has documented various advan-
386                            M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393

tages for companies to sell directly on the Internet.           to Internet marketing. The four new factors are: Ž1.
These advantages can be classified into those three             ease of value addition to the product w32,37x; Ž2.
channels based on the functions performed:                      specialty of goods w14,19,24x; Ž3. order complexity
Ø As a communication channel: information ex-                   w2x; and Ž4. convenient location w27,34x. Three of the
   change between sellers and buyers.                           four factors can be grouped into one of the eight
       - For accessing, organizing, and communicat-             channel functions proposed by Rangan et al. w30x
       ing information.                                         ŽThese are boldfaced in Table 1.. We have also
       - To improve interactivity and perceptual expe-          added a new channel function in Table 1, namely
       rience w28x.                                             transaction complexity, an issue that was not consid-
       - To gather information about customers via              ered in traditional channel selection literature. Using
       surveys and contests for new product develop-            the Internet to handle transactions can help prevent
       ment and introduction, relationship building and         human errors, and thus reduce transaction costs espe-
       personalization w10,15,18,25x.                           cially for complex transactions, such as those that
Ø As a transaction channel: sales activities.                   traditionally require trained personnel or experts Že.g.,
       - To improve visibility and reach a much big-            travel agents and stockbrokers..
       ger customer base w23x.                                      When analyzing the importance of each channel
       - To improve revenues by exploiting cross-sell-          function to online marketing, we based the analysis
       ing opportunities w13x.                                  on the advantages of Internet marketing identified in
       - To streamline transaction processing, thereby          Section 2.2. We separate the marketing process into
       reducing task complexity, paperwork and trans-           three channels and only focus on the advantages that
       action costs w2,23,25,31x.                               have direct impact on the online transaction and
       - To customize promotion and sales to individ-           distribution processes. Product information, which is
       ual customers and improve flexibility w18x.              a function of the communication channel, should not
Ø As a distribution channel: physical exchange of               be a factor to consider when selecting the transaction
   productsrservices.                                           channel. Companies can take advantage of the Inter-
       - To eliminate huge inventories, storage costs,          net as a communication channel for exchanging and
       utilities, and space rental, etc. w4x.                   communicating information with customers but not
       - To shorten supply chain and reduce commis-             for directly placing orders and making transactions.
       sion and operating costs w12x.                           In other words, the Internet can be used very well for
   The ability to serve as both a transaction and               information but not necessarily for marketing. On the
physical distribution medium for certain goods is a             other hand, the instant communication feature of the
unique feature of Internet marketing. Companies in-             Internet allows the companies to quickly respond to
volved in online ticketing and reservation, digital             market changes and customer preferences and to
products, financial services, tele-medicine, etc., can          customize its promotion and goods to individual
best realize such advantages.                                   customers in a more timely fashion. Moreover, be-
   Using the Internet as a distribution channel cannot          cause the Internet access is not limited by any physi-
only reduce the delivery cost substantially, but also           cal boundary and is available 24 h a day, it allows
ensure instant delivery of productsrservices. Thus,             companies to provide convenient access to a broader
we extend the traditional dichotomy of direct or                customer base. The logistics function is expanded
indirect marketing to include the Internet as an alter-         here to include the consideration of distributing digi-
native channel for transactionrdistribution. The last           tal or informational products or services that is perti-
column of Table 1 briefly describes the decision                nent to the success of Internet marketing. Thus, it
choices involved in choosing one of the three chan-             appears that product information, product quality
nels for product marketing.                                     assurance, lot size, assortment, and after-sales ser-
   To summarize, we make four new additions to the              vice functions are less important factors to consider
traditional factors that affect channel choice. These           in Internet marketing. Therefore, we utilize product
new factors are found to be important for Internet              customization, availability, logistics, and transaction
transaction based on a review of several cases related          complexity as the basis for building our framework
                                     M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393                              387

to evaluate the suitability of marketing the products                       w28x further categorized the products or services along
or services on the Internet.                                                three dimensions that are more relevant in the con-
                                                                            text of the Internet: cost and frequency of purchase,
                                                                            value proposition, and degree of differentiation.
3. Classification of productsr services selling on
                             r                                              These three dimensions constitute eight different
Internet                                                                    combinations.
                                                                               Peterson et al. w28x suggested that when products
    To help understand the effect of each channel                           are expensive and infrequently purchased, an Internet
function to Internet marketing, we first need to pro-                       marketer is more likely to carry such a product.
vide the classification of products or services selling                     However, the traditional retailer is favored when
on the Internet. There is a broad range of products                         there is a need to personally inspect the product prior
and services marketed on the Internet that range                            to purchase. When the value proposition is intangible
from consumable goods to durable goods. Services                            or informational Ždigital products., the Internet mar-
marketed on the Internet also range from online                             keter is favored.
newspapers to business-wide consultation. The clas-                            Peterson et al. w28x provide a classification of
sification criteria of different products or services are                   Internet products or services based on product char-
still controversial. The traditional method is to clas-                     acteristics and likely consumer decision sequences,
sify products by their tangibility, nature and needs,                       and the implications of the Internet for consumer
and buying behavior w21x. This kind of classification                       marketing. However, no justification is provided for
may be suitable for a traditional marketing environ-                        selecting the three dimensions used in their classifi-
ment but does not seem as appropriate in categoriz-                         cation. In this research, we have reviewed the mar-
ing products or services on the e-market. According                         keting channel choice literature and have identified a
to Ref. w28x, a better way to group products or                             set of factors and channel choice functions that have
services on the Internet is by separating them into                         been considered important in making channel deci-
search or experience goods. Search goods are goods                          sions. We have arrived at four major channel func-
that can be evaluated using external information,                           tions that we believe are relevant to Internet market-
whereas, experience goods have to be personally                             ing: product customization, availability, logistics, and
evaluated. If a product is a search good, it is more                        transaction complexity. Three of the four channel
suitable and likely to be marketed on the Internet. On                      functions match well with the three dimensions sug-
the other hand, if a product is an experience good,                         gested in Peterson et al. w28x as follows. The produc-
then marketing this product on the Internet is less                         tion customization function considers factors such as
possible. This classification gives us a clear picture                      adjustment, customization, and customer importance
of product suitability for marketing on the Internet                        that correspond well with the differentiation potential

Table 2
Product and service classification grid Žadapted from Ref. w28x.
Dimension 1:                      Dimension 2:                     Dimension 3:            Examples of products and services
outlay and                        value proposition                differentiation
frequency of                                                       potential
purchase
Low outlay,                       Tangible                         High                    Wines, softdrinks, cigarettes
frequently purchased              or physical                      Low                     Milk, eggs
goods                             Intangible or                    High                    Online newspapers and magazines
                                  informational                    Low                     Stock market quotes
High outlay,                      Tangible or                      High                    Stereo systems, automobiles
infrequently                      physical                         Low                     Precious metal ingot of
purchase                                                                                   known weight and purity
goods                             Intangible or                    High                    Software packages
                                  informational                    Low                     Automobile financing, insurance
388                                 M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393

Table 3
Expanded product and service classification grid
Logistics      Product              Transaction        Availability       Sample of cases           Major productsrservices
               customization        complexity
Digital        High                 High               Critical           GM Žfinancial service.    Installment, finance,
Product                                                                                             calculator
               TechrDSS             TechrDSS           TechrDSS           Direct Credit             Personal financing,
               implications:        implications:      implications:                                options, credit report
               Profiling and        Wizards and        Server side
               customization        Customization      monitoring
               agents to push       tools to assists   tools to ensure
               products and         users in           uninterrupted
               services.            placing orders.    service
               Intelligent          Using past
               agents for           transactions to
               customized           guide present
               setting of users     transactions.
               options.
               Personalized
               tracking
               mechanisms to
               monitor
               customer
               preferences
                                                                          Secure Tax, William       Tax services
                                                                          Certified Public
                                                                          Account.
                                                                          Brooks and Company
                                                       Not critical       TravelBids, Expedia,      Online auction or sales
                                                                          Travelocity.com           of travel-related products,
                                                                                                    online ticketing
                                                                          Southwest Airlines,       Online travel,
                                                                          United Airlines,          reservations
                                                                          American Airlines,
                                                                          etc.
                                                                          Compaq                    Business consulting
                                                                                                    services
                                                                          Dartnell                  Software, services,
                                                                                                    Consulting
                                    Low                Critical           ESPN, CNN, Business       Online news
                                                                          Week, Golf Digest         magazines
                                                                          AudioNet                  News, CDs, live audio
                                                                          Canadian Insurance        Online insurance
                                                                          Electronic News           News
                                                                          You First                 Personal Health
                                                                                                    Assessment
                                                       Not critical       Intuit.com, Soleau        Online software
                                                                          Software                  ordering
                                                                          Dell Computer,            Software, services
                                                                          IBM, Cisco, Micron
                                                                          Headbone Interactive      Software, games
                                                                          Internet.net,             Software
                                                                          Onsale.com, Insight,
                                                                          Adobe System,
                                                                          OfficeMax
               Low                  High               Critical           First Commerce Bank       Online banking
                                          M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393                              389

Table 3 Žcontinued.
Logistics             Product                  Transaction        Availability    Sample of cases          Major productsrservices
                      customization            complexity
                      TechrDSS                                    Not critical    Prudential Securities,   Insurance
                      implications:                                               InsurePoint
                      Embedder user                                               FIC Insurance Groups,    Online brokerage
                      configurable                                                EU Trade.com             services
                      design for
                      products.
                      Data mining to
                      cluster
                      customers for
                      targetting
                      advertising and
                      promotions.
                                               Low                Critical
                                                                  Not critical
Physical              High                     High               Critical        Sharper Image            Small appliances, gifts
products
TechrDSS              TechrDSS                 TechrDSS           Not critical    Chrysler, Toyota         Automobile
implications:         implications:            implications:                                               Computer hardware
Multimedia            Supply chain             Wizards and
tools for             partnerships             tools to
enhancing             to enhance               enhance user
perceptionr           relations and            experience in
experience.           DSS to                   placing orders.
Exploiting            increase
e-business            efficiency
to improve            of partnersr
logistics             customers.
through supply        Interorganiztion-
chain relations.      tional systems
Logistics             to share
management            logistics
tools.                information
                      for better
                      decision making.
                                                                                  IBM, Dell Computer
                                                                                  Micron, Gateway 2000,
                                                                                  Internet.net
                                                                                  Onsale.com, Insight      Computer hardware
                                                                                  Microage                 Appliances
                                                                                  Cisco                    Network hardware
                                                                                  OfficeMax                High-end office
                                                                                                           equipment
                                               Low                Critical        Virtual Vineyard         Wines
                                               TechrDSS                           1-800-Flowers            Flowers
                                               implications:
                                               Automated
                                               order
                                               processing
                                               tools to
                                               optimize
                                               logistics.
390                              M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393

Table 3 Žcontinued.
Logistics      Product            Transaction       Availability      Sample of cases            Major productsrservices
               customization      complexity
                                                                      Godiva                     Chocolate
                                                                      Amazon, Barnes and         Books
                                                                      Noble’s, Rosewell          Books
                                                                      Cyberspace                 Computer books
                                                                      Playboy                    Magazines
                                                                      Levi’s                     Apparel
                                                                      Cdnow!, N2K                CDs
                                                                      Wal-mart                   Specialty items
                                                    Not critical
               Low                High              Critical          Monitor Medical            Online medicine
                                                                                                 ordering
               TechrDSS                             Not Critical
               implications:
               Grouping and
               profiling
               customers for
               advertising
               and promotions.
                                  Low               Critical          Wal-Mart                   Wines, cigarettes, food
                                                                      Office-Max                 Low price stationary
                                                                      BargainFinder (failure)    Shopping mall
                                                                      Downtown Anywhere
                                                                      Mall (failure)
                                                                      IBm World Avenue
                                                                      Cybermall (failure)
                                                    Not critical




dimension. As Peterson et al. w28x stated, Internet-re-            product or service is suited for marketing on the
lated marketing can result in extreme price competi-               Internet. The Internet can ease transaction process-
tion when products or services are incapable of                    ing, especially for handling complex orders w2x,
significant differentiation. The availability function             thereby reducing paperwork, increasing efficiency
looks at the frequency of usage, time of consump-                  w23x, replacing professionals tasks w31x, hence, reduc-
tion, and replacement rate, and is related to the first            ing the transaction cost w25x. One example is the
dimension which ranges from low-cost, frequently                   purchasing of custom made blinds. The order needs
purchased goods to high-cost, infrequently purchased               to specify all detailed measurements, color code,
goods. The logistics function has been redefined to                style, brand, etc., for each blind ordered. It can take
focus on the difference between the logistics of                   an operator over 30 min to process one average size
digital vs. physical products. This function is the                house order with 15 to 20 windows. By using the
same as the tangibility dimension discussed in Ref.                Internet to place an order, it cannot only save the
w28x. Thus, our classification scheme provides justifi-            processing time Žhence, save the operator cost. but
cation for Peterson et al. w28x framework based on                 also reduce the chance of human error and customer
traditional marketing channels literature.                         dispute. For business-to-business transactions, short-
   We further refine the classification scheme by                  ening the processing time also means the seller can
incorporating the transaction complexity as an addi-               maintain a lower inventory level and reduce other
tional dimension. We believe this is a critical dimen-             related overhead for handling excessive inventory.
sion, especially in the context of e-business, where it            Thus, transaction complexity should in itself be con-
deserves careful examination to determine whether a                sidered as an important dimension in making channel
                               M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393                       391

choice decisions. Based upon the above discussion,              4. Conclusion
we have expanded Table 2 to include a transaction
complexity dimension Žsee Table 3..                                 The rapid development of online computing tech-
   We collected an informal list of companies that              nology makes it imperative for businesses to seri-
market their products or services on the Internet               ously consider the Internet to avoid losing competi-
ranging from online bookstores to insurance compa-              tive advantage. A Web site gives direct contact
nies. Some companies provide physical products as               between the organization and the consumer. How-
well as intangible Žinformational. services. A sample           ever, product characteristics play an important role in
of these companies appears in Table 3 based on the              whether the organization benefits from utilizing the
classification scheme presented in this section. We             Web as a means of direct sales w33x. The research
would like to add here that the list of companies               builds upon the literature in both electronic com-
presented here is for illustrative purposes only, and is        merce and past research in marketing with the objec-
not intended to be an exhaustive compilation of                 tive of understanding what factors have the most
companies doing business online.                                impact on a product’s adaptability to online market-
                                                                ing.
3.1. Decision support implications                                  Table 3 links the product and service character-
                                                                istics of Table 1 to the company cases collected.
   While our research provides a decision support               Among the four functions, logistics has the dominant
framework for channel choice in online marketing,               effect on the channel selection decision because digi-
important decision support issues need to be tackled            tal products can take advantage of using the Internet
once a channel choice has been made. We believe                 for both transaction and delivery processes. The
our classification framework helps us understand the            second important function is the product customiza-
decision support needs in using the Internet as a               tion potential of the products or services, and that is
marketing channel. For instance, high product cus-              followed by the transaction complexity and the im-
tomization requires extensive profiling and cus-                portance of product availability. Consider some im-
tomization tools to identify and target individual              plications of Table 3, where most successful online
customers. Highly sophisticated tracking tools to               marketing companies belong to either companies that
monitor changing customer preferences are neces-                provide digital products or services or physical prod-
sary to maintain the flexibility of the online market-          ucts with high customization potential. This outcome
ing channel. When both product customization and                matches well with Peterson’s prediction. One obser-
transaction complexity are high, wizards and tools              vation from Table 3 is that the effect of product
Žthat may utilize past orders as a guide. are needed            availability seems to be less important for Internet
to assist customers in placing orders. When product             marketing. Both types of products or services Že.g.,
customization is low, one would still need tools that           frequently vs. infrequently purchased goods. were
can broadly cluster customers for target marketing.             observed in our sample of online businesses. As
Customer clustering could be based on a combina-                Internet marketing matures, we expect to see transac-
tion of demographics and past interactions. If a                tions of various price ranges and sizes to occur.
physical product is being marketed online, sophisti-                For digital products or services with low product
cated multimedia tools could be used to enhance user            customization and low transaction complexity, the
experience and knowledge about the products w1x. In             Internet may not provide a new competitive advan-
addition, supply chain management would be critical             tage to the company. For tangible goods, the most
to keep inventories low. When a physical product                important factor that determines the suitability of
has high customization needs, forging strategic sup-            Internet marketing is the potential of product cus-
ply chain relations and building of decision support            tomization. With a high potential of product cus-
tools to optimize manufacturing and delivery effi-              tomization, if convenient location is also important,
ciency are critical. A summary of decision support              then products with low transaction complexity, such
and technology issues is presented in Table 3 under             as wines and chocolates, still have a high possibility
columns 1 to 4.                                                 to do well on the Internet. For products with high
392                            M.Y. Kiang et al.r Decision Support Systems 27 (2000) 383–393

transaction complexity, both low and high availabil-            chance of survival on the Internet, and to reduce the
ity products can sell well on the Internet; for exam-           uncertainty involved in expensive capital investment.
ple, the online banking and tax preparation services            Ž3. For companies that have already participated in
on the Internet. When both the transaction complex-             the online commerce, the key factors identified in
ity is low and the product availability is not critical,        our model will help the companies to reevaluate their
we do not recommend using the Internet as a new                 projects and correct or avoid potential mistakes done
channel for handling transactions based on the cur-             by their predecessors. For example, a company that
rent infrastructure. For tangible goods with low prod-          sells commonly found tangible goods on the Internet
uct customization, unless the transaction complexity            still can develop a niche business by offering deliv-
is high and product availability is critical, we do not         ery service to nearby locations as added product
see much opportunity for Internet marketing. All                customization.
cases appearing in Table 3 are successful cases
except BargainFinder, Downtown Anywhere Mall,
and IBM World Avenue Cybermall, which belong to                 References
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