book.chapter Objective 1: grasp changing online tastes

Consumer behavior on the Internet is primarily influenced by attitudes towards technology, rather than traditional demographic indicators. As the general population, which includes over 88 million individuals in the United States, begins to engage in online purchasing, astute Internet enterprises will modify their offerings, services, and marketing strategies to cater to the preferences of this burgeoning demographic. Traditional methods of market research, such as demographic analysis, fall short in predicting the number of consumers who will choose to shop online. This is because there are three distinct factors that shape each consumer's decision-making process: their perspective on technology, their household income, and their personal motivations. Individuals who are optimistic about technology perceive online shopping as a more efficient and hassle-free alternative to traditional shopping. Conversely, those who are skeptical about technology often view online shopping as impersonal and lacking human interaction. Additionally, individuals with an annual income exceeding $40,000 are more likely to have the financial means to purchase a computer than those with lower incomes. Personal motivations also play a crucial role, with the primary drivers being the desire to advance one's career through learning, the need to connect with family or like-minded individuals, and the pursuit of entertainment. Forrester Research has conducted an extensive survey involving 250,000 consumers to segment the U.S. population based on these criteria. Internet companies vying for the attention of online consumers should concentrate on the needs or driving forces that are most significant to their potential clientele. To effectively target the early adopters, who make up 29% of the population or 60 million consumers with a collective spending power of $3 trillion and are characterized by their technological optimism and substantial incomes, companies should: - Craft messages that appeal to career-driven early adopters by emphasizing themes of efficiency and superior choices. These individuals value their time highly and seek to accomplish tasks swiftly and effectively. - Address the family-oriented early adopters with themes of reliability, safety, and unity. This group appreciates convenience and a sense of community. - Engage the entertainment-seeking early adopters by offering cutting-edge, enjoyable, and trendy products and services. This demographic has a fleeting attention span and prioritizes an exceptional online experience. It is anticipated that the majority of early adopters will transition most of their consumer spending to online platforms by the end of 2002. Industries that predominantly cater to early adopter markets, such as financial service providers, travel agencies, booksellers, music stores, computer manufacturers, and communication suppliers, are already experiencing the transformative impact of the Internet on their business models. However, for electronic commerce to expand beyond a $100 billion niche market, it must begin to attract mainstream consumers in larger numbers. Mainstream consumers, who represent 43% of the population and control 45% of the nation's personal spending, are divided into two broad categories: the low-income technology optimists, comprising 47 million adults with approximately $0.5 trillion in spending power, and the high-income technology skeptics, consisting of 41 million adults with $2.4 trillion in disposable income. To captivate mainstream consumers, Internet companies must create a seamless experience that bridges the online and physical worlds. Low-income optimists will view the Internet as an extension of the physical world, while high-income pessimists will only engage with the Internet if they feel entirely comfortable with it. Therefore, to win over mainstream consumers, businesses must ensure that their electronic systems are adept at handling orders placed online, in person, by mail, or by telephone. They must eliminate any disparities in service levels between online and traditional businesses. Additionally, they should advertise consistently through non-Internet marketing channels, such as television and print media, as mainstream consumers form their opinions based on these sources of information. In this endeavor, traditional companies possess several advantages over Internet startups and may ultimately dominate this market segment. However, traditional companies are confronted with a strategic conundrum. They must decide whether to invest in an Internet business and risk alienating their existing customers or to wait until the Internet business landscape becomes more clearly defined, potentially ceding first-mover advantages to competitors. This dilemma is particularly acute for companies that serve the low-income technology-skeptical market, which still accounts for approximately 29% of the population. These companies include major consumer packaged goods manufacturers, superstore retailers, automakers, and banks. For these companies, even if they have an outstanding website, the majority of their customers may remain unaware of it due to a lack of PC ownership, workplace PC usage, or access to the Internet. The solution to this strategic dilemma is straightforward: companies cannot afford to overlook the Internet. Instead, they need to devise an online strategy that addresses the needs of their mainstream customers and encourages the technologically hesitant to follow suit. Wise companies will either focus their Internet strategy on the high-income technology skeptics within their customer base or concentrate on the low-income technology optimists. To avoid falling victim to the laggard dilemma, businesses can take practical steps such as segmenting individual brands and products and developing tailored Internet marketing strategies for each. They should continue to utilize multiple distribution channels, allowing laggards, mainstream consumers, and early adopters to purchase in the manner they find most comfortable. Additionally, they should assist slower mainstream consumers in transitioning their interactions with the company to the Internet, as they are more likely to feel at ease with a familiar brand or company rather than an Internet startup. In the battle for Internet dominance, although startups have initially taken the lead with early adopters, it is not too late for traditional companies to enter the fray and compete effectively. Early adopters have only just begun to explore online shopping, and mainstream consumers have not yet fully embraced it. As the composition of Internet consumers evolves to include mainstream and even laggard consumers, traditional companies are likely to gain an advantage. This is because mainstream consumers naturally gravitate towards familiar companies and brands. To adapt to this shift in consumer dynamics, startups must increase their visibility in the physical world, which often requires promoting their brands through traditional media. The early adopters may be the pioneers of electronic commerce, but the ultimate victory lies in securing the loyalty of the mainstream consumer base. The contest for mainstream consumers will differ significantly from the efforts to attract early adopters. By 2003, it is projected that over three-quarters of high-income technology optimists will be engaged in online shopping, representing a market opportunity worth $70 billion to $80 billion for Internet businesses. Ultimately, the destiny of electronic commerce rests in the hands of mainstream consumers. The question remains whether Internet shopping will experience a growth spurt and then plateau as a $100 billion market—merely double the size of the mail-order catalog business—or whether it will expand significantly more. The outcome hinges on the decisions made by the 88 million individuals that constitute the mainstream. For traditional companies, the multi-channel imperative is a significant advantage. Despite the challenges traditional companies face in creating effective websites, it is far more arduous and costly to establish a network of retail stores or train a team of skilled telephone service representatives. Moreover, traditional companies already possess established brands that consumers trust, whereas startups must build their brand recognition from scratch. However, traditional companies with a large mainstream customer base must contend with the presence of laggards among their clientele. Even as a minority, laggards can impede progress towards embracing new business models. It is challenging for companies to pursue Internet opportunities when they are aware that some of their consumers may never make the transition. Consequently, many traditional companies end up tailoring their Internet strategies to accommodate their least likely Internet consumers, an approach that is the least favorable among the options available, yet it is the one most frequently adopted.