Electronic Interactivity in the Australian Marketplace: Some Observations, Issues and Predictions


Chris Hodkinson and Geoffrey Keil (1996) ,"Electronic Interactivity in the Australian Marketplace: Some Observations, Issues and Predictions", in AP - Asia Pacific Advances in Consumer Research Volume 2, eds. Russel Belk and Ronald Groves, Provo, UT : Association for Consumer Research, Pages: 116-127.

Asia Pacific Advances in Consumer Research Volume 2, 1996      Pages 116-127


Chris Hodkinson, University of Queensland

Geoffrey Keil, Universtiy of Queensland


The potential of the electronic marketplace is huge. The future commercial potential for Australian domestic entertainment and information services are $3-9 billion for 1999 rising to $68-105 billion in 2009 (BSEG, 1995), and $24 billion for home-shopping alone by 2005 (I-Way, 1995, p. 1.1). The developments and potential of interactive electronic media appear certain to alter marketing practices and strategies. These changes will cause companies to review how they do business and how they relate to their customers. Such technological changes to the marketing environment will also induce changes in the behaviour of consumers as they avail themselves of these new services.

This paper, which is largely descriptive, will discuss the nature of these changes in marketing strategy and consumer behaviour. It will define electronic interactivity and discuss its features with respect to current marketing media including the Internet in World Wide Web (WWW) format [It is recognized that the Internet/WWW was not originally intended to be a marketing medium, and that it performs many non-marketing functions. However, it is the most popular and the most recent example of electronically interactive marketing.]. Current types of commercial Internet/WWW presence will be discussed together with the technical constraints affecting the widespread use of electronically interactive marketing in Australia. Consumer behaviour issues implicit to the us of electronically interactive media will be identified and discussed followed by some observations of the effect of EI on marketing strategy.


Electronic Interactivity Defined

For the purposes of this paper, "Electronic Interactivity" (EI) is defined as "an electronic marketing information environment featuring two-way communication in which the consumer can control the search for, and acquisition of, personally relevant information and (if desired) place an electronic order in the same medium for the purchase of goods or services ".

A number of electronic marketing media are already available which satisfy the above definition. These include interactive cable television, the Internet (in WWW format), and among others an Australian commercial computer-based ordering network "Gemnet" (Narayanan, 1995). The three essential elements of EI environments that distinguish them from other electronic media are: the enablement of the consumer’s natural information search behaviours, the consumer’s control over the information system (and hence the order of information acquisition), and the consumer’s ability to place an order via the same electronic medium.

Some marketers point to existing US cable television sales channels as examples of EI media. However, while such systems are delivered electronically and elicit consumer orders, they do not meet the criteria for EI media because the consumer possesses no control over the information order or content. In such cable television selling, advertising messages are merely presented as #infotainment’ and the consumer is free to respond by placing an order via a feedback device or by telephone. By contrast, the Internet/WWW when used for marketing purposes does meet the definition of a genuinely interactive electronic marketing environment. In relation to existing EI media, this article will concentrate on the Internet/WWW because they are truly electronically interactive and are seen as the vanguard of future EI marketing media.

The Internet/World Wide Web

The terms "Internet" and "World Wide Web" are used somewhat interchangeably by the popular press because the two concepts are hard to separate. By way of explanation, the Internet is a world-wide communications network comprising a large number of interconnected computers of widely varied levels of sophistication. Among these are the common domestic or business PC’s typically used by consumers for on-line enquiries of the Internet. These PC’s are equipped with communications interface devices (modems) which allow data transmission via telephone lines or dedicated data cabling. Other faster and more sophisticated computers are used as #file servers’ on which information is stored. Such #servers’ are equipped with high-speed data links, and multi-line modems which can accommodate many simultaneous enquiries.

The World Wide Web is merely a user-friendly network-wide application that utilises the communications structure of the Internet. The World Wide Web application facilitates the connection to information sites and allows the inclusion of pictures, diagrams, and images. The WWW facility can in turn be accessed by PC using one of a number of common specially designed software packages such as "Netscape".

The information that is available on the Internet/WWW is generated by companies and private individuals often with the aid of interface software specialists. The information is stored on a #server’ computer to be distributed to on-line inquirers. The screens on which an individual’s or company’s information are displayed are commonly referred to as "home pages".

The home pages placed on the servers are stored in a specialised format referred to as "Hypertext". Hypertext is a non-sequential arrangement of information, that allows the user or reader to connect information together by means of different paths or links. Thus, the user or reader can choose the order in which the information is displayed, and choose whether to access any of the information offered by the links (Nielsen, 1990). In the WWW, a hypertext document is typically a combination of text, pictures and highlighted active areas on the screen which are preprogrammed to facilitate the inquirer’s information search, by displaying further information related to the highlighted key word or diagram. When the inquirer places the mouse cursor on the relevant highlighted area, a #click’ of the mouse button links the inquirer to another information display which is related to the original enquiry topic. Such links may be to related topics presented on the home pages of other companies or individuals often on a #server’ elsewhere in the world-wide network.

An on-line enquiry on the Internet/WWW first requires the user to connect to their local Internet service provider to enable their computer to link up with the Internet world-wide communications network. Once connected to the Internet it is then necessary to load a suitable WWW #browser’ programme such as "Netscape". If the inquirer knows the electronic address (the "URL") of the item or company of interest, he or she can enter the URL details and instruct their computer to link to the destination server that holds the required informationBfor example the home page of the IBM company. However, since there are many millions of home pages present on the Internet/WWW, if the electronic address of the desired information is unknown, it will be necessary to utilise one of the "search engines" available on the Internet/WWW to locate the desired information. The search engines provided vary in features and the way in which their data is assembled. Some scan every word of each home page they have #read’. Other search engines scan only topics, titles, text, or hypertext links. An individual’s initial enquiry about a topic of interest may require some experimentation and a number of successive search enquiries to locate relevant information. Once located, the electronic addresses of personally relevant home pages can be stored on the Internet/WWW browser’s "bookmark" system for easy later access.

Current Types of Commercial Presence on the Internet

Marketing researchers describe the Internet/WWW as a Computer Mediated Environment (CME) because the scope of human communication must be expressed through the facilities offered by the PC. Although there has been considerable interest in the Internet/WWW

..."to date virtually no scholarly effort has been undertaken by marketing academics to understand hypermedia Computer Mediated Environments, both as media for marketing communications and as markets in and of themselves". (Hoffman and Novak, 1995b, p.3).

Hoffman and Novak (1995b) describe EI marketing on the Internet as a discontinuous innovation due to the computer-mediated character of the communication, the (limited) two-way communication, and the hypertext display format. Alternatively, EI marketing on the Internet/WWW can be seen as an evolution of consumer-directed media. In which case, the lack of "scholarly effort" is typical of the consumer-directed media area rather than an omission to study the dynamics of the Internet/WWW specifically.

However the Internet/WWW is conceptualised or perceived, it is a commercial reality with over eighty thousand servers presenting commercial information. As a consequence, EI marketing practice now leads marketing theory development, and #Web page designers have had to experiment with information presentation formats. In the rush to #set up hop’ on the Internet/WWW, very few firms have identified the needs and wants of Internet/WWW consumers (Hoffman and Novak, 1995a). From observation of the commercial approaches already in use, Hoffman and Novak (1995b) developed a taxonomy of six functional categories of commercial web home pages. Since the Internet/WWW is rapidly evolving, the Hoffman and Novak taxonomy is not exhaustive, as inevitably new types of sites will evolve and be documented. Table 1 below tabulates the characteristics of the six commercial approaches identified by Hoffman and Novak (1995b).

The InternetBThe "Model T" of EI Marketing?

At present access to the Internet/WWW requires a suitable PC, some degree of computer literacy, and a data link via a commercial access provider or a local service provided by an employer or educational institution. Thus, there are at present considerable consumption costs and barriers to entry associated with the use of the Internet/WWW. Due to these requirements the people who are registered Internet/WWW users at present tend to be of above average education and income (Gupta, 1995; Commercenet/Nielsen, 1995). However, the mode of access of Internet/WWW users is changing rapidly. At the end of 1994 the majority of Internet/WWW users obtained access through their employer or educational institution, but by June 1995 the majority did so via commercial providers (Gupta, 1995; Commercenet/Nielsen, 1995). Certainly in Australia the Internet/WWW appears to have caught the public’s imagination with over 192 000 homes (July 1995) and many businesses connected to the Internet/WWW (Plunkett, 1995b), despite competition from other purpose-designed EI systems such as America On Line, Compuserve, and Prodigy. In Australia a commercial on-line system "On Australia" was launched in July 1995 by Microsoft and Telstra as an alternative on-line system to the Internet/WWW. Poor response from both on-line service providers and consumers forced a repositioning of the product in February 1996 from that of an #Internet competitor’ to that of an #Internet service provider offering additional features’ (Chester, 1996c). Microsoft later announced that it was exiting from this joint venture with Telstra. There is also some evidence of a shakeout in the US on-line market with some on-line service providers similarly repositioning themselves as the Internet/WWW becomes predominant (Figallo, 1995).

While the Internet/WWW is as yet a fledgling EI marketing environment, it does pave the way for the adoption of future EI systems by allowing innovative consumers to play with (ie learn to use) the technology as it develops. For marketers, "the Internet is where we’re going to learn what it takes to people’s attention in a crowded, confused, and conflicting electronic environment" (Verity, 1994, p. 39). The proposed inclusion of the Internet/WWW as an Optus pay television channel can only assist the mainstream adoption of the Internet/WWW in Australia. Similarly, the marketing of simpler non-PC Internet/WWW interface devices such as Apple’s proposed "Pippin" (Yelland, 1996) may speed the adoption of Internet/WWW and related services such as E-mail throughout the community.

Commercial usage of the Internet is currently characterised as having many browsing consumers but few buyers (Churbuck, 1995) and as a consequence doubts have been expressed as to the marketing future of the Internet/WWW and on-line marketing generally. There are many reasons for the slow increase in sales.

"Two motives may underlie information-seeking, namely, acquisition of information as a means to some further end (in the consumer context often the purchase of a brand) and information seeking out of curiosity in order to learn more about the environment. In the latter case the acquisition of information is an end in itself". (Steencamp et al., 1992, p. 438).

Thus, given the novelty of the medium, many Internet/WW users are simply #surfing the #Net’ without purchase intentions. Also, purchasing in an EI environment is a new concept for consumers, especially for physical goods where there is often a desire to see or handle the product. In addition, payment methods in an EI environment are perceived as being fraught with security problems with some 62% of Internet/WWW users expressing serious concerns (Gupta, 1995). Consumers are presently advised not to quote their credit card numbers and especially any related PIN’s over the Internet. There are also practical problems with accessing data on the Internet/WWW due to the slow rate of data transfer via conventional telephone lines and domestic modems which typically operate at 14.4 Kb/s, although existing data compression techniques effectively allow faster transmission rates to be achieved. In addition, the Internet/WWW is a confusing and anarchic environment. Since most home pages include links to other hypertext documents, the content of the Internet/WWW could be unkindly characterised as an endless collection of cobwebbed signposts pointing to a disorganised mass of information, only some of which is intended to be sales oriented.



In summary, the present lack of commercial success for the Internet/WWW does not mean that EI systems are doomed to failure, but rather that the Internet/WWW is merely a forerunner of EI environments to come, just as the model T Ford was a forerunner of modern cars. It is reasonable to assume that those consumers who are currently exploring the Internet/WWW, having made the move into the EI environment are unlikely to resile from the use of EI media in the future. Similarly, companies which have established a presence on the Internet/WWW are unlikely to withdraw from the medium, due to its low cost and its continuing rapid growth.

Technical ConstraintsBThe Australian Case

The data speed and access problems outlined above suggest that fully-interactive electronic marketing systems must also await changes in Australian national communications infrastructure. At present data delivery to the home and many offices is via the conventional two-wire copper telephone line. The standard telephone service wiring has a typical data transfer speed of 64 Kb/sec. As current modem users are aware, such speeds are too slow for the practical transfer of large data files and pictures. Telstra is rapidly changing most public exchanges over to digital switching, and many households wishing to obtain faster data access will soon have the option of requesting and paying for an ISDN (Integrated Services Digital Network) connection which will improve the data speed to 2 Mb/sec (potentially 30 channels @ 64 Kb/sec) once the connection to the home is upgraded to a single coaxial cable. ISDN connections should be available at most suburban domestic sites by the end of 1996. However, at $3000B$4000 for the necessary hardware and connection fees (Horey, 1996), plus ongoing charges, they are too expensive for typical domestic subscribers. ISDN-type links are also available through existing cable television providers at a significantly reduced rental. However, cable modem hardware costs still amount to over $1000. Although ISDN connections have the potential to improve the data transfer speed, they are not capable of full-speed live picture transmission.

Another option is to increase data transmission speed to a maximum of 6 Mb/sec via existing copper telephone lines by using ADSL (Asymmetric Digital Subscriber Line) technology. ADSL systems can deliver video pictures via the existing telephone line. However, the system is as yet only under experimental trial by Telstra in Victoria (Australia). It therefore appears that full-speed live picture transmission and full two-way EI will require an optical fibre cable to be connected to the home to give "broadband" communications. The data transfer speeds available through such cables will be in the order of 5B65 Mb/sec, a 1000-fold increase over that presently achieved by the existing telephone lines. Such an optical fibre cable is cpable of carrying "up to 3000 simultaneous telephone calls or 100 digitally-compressed video channels with today’s technology" (I-Way, 1995, pp. 4.3). Telstra already has some 1.8 million kilometres of digital optical fibre cabling in its network (Plunkett, 1994a).

Though the provision of optical fibre cable is desirable, the estimated cost of placing 85% of suburban consumers on-line is currently estimated at some $25B40 billion (BSEG, 1995, p. vii). While recognising the desirability of such optical fibre communications, the federal government is simply unable to fund such an expansion directly and is relying upon the demand for suburban domestic cable television to fund the provision of suburban optical fibre service cabling, and the associated coaxial cable domestic connection (ie a hybrid optical fibre/coaxial connection).

Concerns as to the potential iniquity of providing superior domestic data communications only in high density urban areas has led to a federal government proposal to progressively provide optical fibre services nationally to community node points such as universities, libraries, and community centres by the year 2005 (BSEG, 1995). However, the direct connection of optical fibre cable to a majority of homes will still probably be some way off even at that time. It is likely that improvements in data compression techniques for transmission will further improve the speed of conventional or hybrid cabling thereby providing an intermediate technology.

Considerable research and development is currently under way to achieve real-time or downloadable video to the home. While real time video may have to await the broadbanding of the communications links, it is likely that "video on request" will be possible within five years. With the "video on request" technology a device like a solid-state video recorder (ie no moving parts) will take a few minutes to download a movie from an ISDN-type line to be replayed later at one’s convenience. Such a video device may itself be an intermediate technology since with broadband domestic data transmission a single optical fibre pair will be capable of carrying telephone services and up to 1000 channels of television or data. At that time, there may be a reduction in the need for home recording facilities since many programmes will eventually be available upon demand from a central computer, thus negating the current major role of VCR’s as time-shifting devices.

Once such high-speed communications links are available to the home, they will carry data for many business, and entertainment functions. For example, it is likely that utility companies will also connect domestic water and electricity meter outputs to the cable to eliminate the need for physical meter reading. These remote services will often be in use simultaneously with telephone calls and cable television. The control of the large amount of data traffic will be a complex task to which PC’s are eminently suited. "The PC will probably become the information appliance for those with the knowledge and skills to unlock the potential of the on-line world" (BTCE, 1995, p. 132)

The move towards PC control of the data link will diminish the differences between present household devices such as televisions and computers. For example, a PC monitor is merely a higher resolution television screen and PC’s can already be optioned with a television card and will soon be available with Digital Video Disk drives able to store full length movies or up to 18 gigabytes of information. Thus the PC, which has already in part become an entertainment device due to games and CD-ROMs will eventually develop into an entertainment and #infotainment’ centre for the household, managing utility and personal communications and data storage. It appears likely that the television screen will become merely one of the many peripherals of the domestic PC.

Once this succession of infrastructure and appliance development has been achieved, EI marketing systems will be capable of providing virtual reality activities and moving pictures at real-time speed. This will enable a quantm leap in EI marketing techniques and the facilities available to the consumer.

The Limitations of EI Marketing

The current slow speed of data transfer affects the speed of enquiry via EI systems. Similarly, the #richness’ of the communication available to the consumer is also limited by the current home page format and features. However, EI marketing will develop rapidly and become increasingly sophisticated. Even when the speed and scope of communications is improved, EI marketing is unlikely to replace personal selling, which is the most flexible mode of communication available to marketers. EI systems will certainly become a vital information source for many consumers, even though many purchases will still be made in the physical presence of the goods in shops.

Consumer behaviour factors will limit the effectiveness of EI systems at least in the short term for a number of reasons. First, consumers must learn how to be effective information searchers in the new EI environments, and in the present PC-based format it is unlikely that all consumers could achieve the necessary level of skill. Second, Australian consumers are not yet used to off-site purchasing and historically have displayed reservations about mail order direct marketing. Third, consumers are attracted to stores for entertainment, information, or fantasy (Leinberger, 1993). The entertainment value of 'going shopping' especially in the more entertainment-oriented shopping centres is difficult to emulate via a computer screen. However, EI shopping will possess a considerable novelty of its own for some time. The addition of virtual reality interfaces will add to the realism and novelty of EI media.

In summary there are limits to the 'richness' of communication possible via EI technologies, and there arc limits to the attractiveness and stimulation offered by the such systems, although both aspects will improve overtime. It is likely that with the availability of broadband data links (and hence full-speed picture transmission), that EI systems will offer a videolink to a salesperson, thus adding the facility of personal selling and full person-to-person two-way communication to EI media.


The move towards EI marketing is in part driven by advancing technology and is dependent upon enabling changes to communications infrastructures. Many articles in the general press concentrate merely on aspects of the technology involved and ignore the consumer behaviour issues implicit in the foreshadowed changes. However, human factors will affect the rate of adoption and the success of the new EI media.



Already, the new information appliances are changing consumer behaviour, with one survey in the US showing that average weekly family usage of the home PC exceeds the time spent watching television (Armstrong, 1994). New consumer skills will be required, and marketers will require new insights into the nature of the communications processes operating in EI environments and the behaviour of consumers within the same environment. In the current experimental phase of EI media, the commercial sites on the Internet/WWW are little more than adaptations of existing mass media techniques. Thus there appear to be considerable scope for new information presentation formats which more closely match the cognitive processes of consumers. EI marketers will need to assume a consumer-oriented orientation rather than the present product or sales-oriented approach.

EI and Traditional Models of Consumer Communication

The Internet/WWW medium incorporates characteristics of both personal and impersonal communications models. This section will first discuss interpersonal communications models followed by impersonal communications models. Traditionally dyadic communications processes have been represented by models similar to that shown in Figure 1.

In this model of dyadic communication the sender encodes the desired message and transmits it via an appropriate medium, for example by voice or by written communication. The message receiver then decodes the message and attaches meaning(s) to it within the realm of their personal experience. In person-to-person communication, the receiver unconsciously and/or consciously provides feedback to the sender via a range of gestures, facial expressions, voice intonation, and body language. Thus, person-to-person communications are presently the 'richest' form of human communication due to the high level of feedback which allows the sender to check that the desired message has been communicated, in that the receiver has derived the meaning that the sender intended. This is precisely the reason that marketers often use the expensive technique of personal selling for products with complex attributes.

The amount of feedback available, and hence the efficiency of interpersonal communication is affected by the transmission medium used. For example, the message receiver's body language and facial expressions are not evident to the sender in communications via conventional telephones. Ile efficiency of communication is also affected by the amount of physical and/or psychological ,noise' present in the environment of either party and within the transmission medium itself. In EI environments, the 'noise' has a number of components, including the technical difficulties and malfunctions that can occur in both the computers and the data communications. Another component of 'noise' is due to the human operator seeking to express a wide range of human communication through the 'narrow' range of options offered by the computer methodology. For example (at present) human gestures and voice are not transmitted by EI media. The range of enquiry and communications options are constrained by both the methodology and the technology.

In considering the Internet/WWW communications process it should be noted that the communication takes place not between humans, but from human via local computer to server computer and back to the inquirer's PC. Any human presence at the home page server end is only intermittent for server maintenance or the answering of e-mail enquiries. In terms of the interpersonal communications model, the inquirer is subjected to local 'noise' and encodes their desired enquiry via the limited home page options displayed on their PC. The encoded message/enquiry, subjected to the inherent Internet/WWW system 'noise', is received by the relevant home page server which responds to the message received. The response message, again subjected to system 'noise', is sent to the remote inquirer and displayed on their PC where it is then decoded by the human inquirer.

There are a number of salient differences between this model and the interpersonal communications model previously discussed. The inquirer/sender is responsible both for encoding the enquiry (in coordination with the home page options offered) and also for decoding the returned response. A surrogate feedback facility is often available via an e-mail option presented on the home page. Such e-mail responses are compiled at the host server, awaiting interpretation (ie decoding) and processing by a human to form and transmit an organisational response.

Impersonal communications such as mass-media advertisements, in contrast to the dyadic communication discussed above, are directed to a large and diffuse audience, only a small percentage of which perceives the message. Of those message receivers, only a small proportion find the message content relevant. The Internet/ WWW should be considered as a new consumer-directed medium, because unlike the mass-media its content does not impinge upon essentially uninterested consumers. Thus relatively little "accidental exposure" should occur (refer to Section 3.4 for further discussion). In EI media, nterested consumers must seek out information that is relevant to them.

For mass-media communications, direct and instantaneous feedback has traditionally been unavailable. However, delayed feedback has been inferred indirectly from the subsequent actions of message receivers. Data such as sales figures, the number of complaints received, or perhaps the number of votes received by the political candidate are often interpreted in this way. Depending on the nature of the commercial site offered on the Internet/WWW much more direct feedback is available. This can be achieved by the use of an access counter which records the number of consumers who have visited the site. If purchase can be made from the home page, the relative ratio of buyers to visitors can be informative. Similarly, subject to changes in the competitive environment, changes to the design of home pages can be tested for their effect on visitor numbers and buyers. Such direct statistics have not generally been available for mass-media advertising, the analyses of which are often subject to confounding changes in competitive activity. Indeed, Hauser (1985) predicted that the improved feedback obtained from new electronic media will spawn sophisticated analysis systems which will "..uncover price and promotion elasticities with previously unattainable precision" (p. 346).





Traditional communications models of mass-media such as the one displayed below in Figure 3 (Hoffman and Novak, 1995b) are based on the traditional one-to-many nature of previous mass-media.

However, according to Hoffman and Novak (1995b), the Internet/WWW offers a radical departure from traditional marketing environments for two reasons. First, the hypertext nature of information that it can provide, ie the non-sequential display of information which is responsive to the inquirer’s needs, and second, the potentially many-to-many nature of the communications, due to the fact that each inquirer can also become an information source. Hoffman and Novak (1995b) believe the radically different nature of the medium and the communication require a new communication model which is shown in Figure 4. The model is a modification of a previous model by Steuer (1992) and has as its primary focus the relationship between the sender and the mediated environment with which he or she interacts. The sender/provider of information is also potentailly a receiver because of the interactive nature of the environment.



Consumer Search and Information Processing and EI

In an EI environment the nature of consumers’ information search activities will change. Presently consumer information search usually requires some physical travel, the scope of which is dependant on the consumer’s propensity to search (a combination of situational and personal characteristics) and the number of retailers reachable by the consumer within those self-imposed search constraints. The availability of retail services on-line may increase information search efficiency and effectiveness. On-line consumer search will initially posses a novelty effect and aid consumer confidence (subject to the consumer possessing the necessary computer search skills). However, as the numbers of on-line retailers increase, the difficulty of effective on-line search will also increase. For instance, for a consumer wishing to purchase a CD-ROM music disk, there is little difficulty in searching up to five or seven on-line store catalogues, but when the number of on-line stores rises to 20, 50, or 500 for an identical product, practical search limitations will become apparent. At present the amount of data available in the marketing environment to a typical consumer typically exceeds their determination and available search time to retrieve it. With large on-line EI systems, even though the physical component of search may largely be removed, the amount of data available may exceed the consumer’s ability to search within the electronic environment. There will therefore be a need for software which would search for and summarise data fro on-line retailers for a particular good. Such "butler" software may be provided as a commercial service or as an extension of the search engines and "best of" lists that are essential tools for navigating the Internet/WWW at present.

With the removal of many of the physical barriers to consumer search activity and the increasing numbers of businesses present on the Internet/WWW, the consumer information environment will be enriched to the point of potential consumer information overload (Miller, 1956; Bettman, 1978). While it is recognised that consumers naturally limit their information uptake to prevent information overload (and there is no reason to believe that consumers will behave any differently in an EI environment) it is apparent that there will be a demand for software to assist information search by locating and summarising relevant data. Such an approach has the potential to improve search efficacy and efficiency and deliver better quality consumer information since it may be derived from a wider range of information sources and represent a wider range of options to the consumer. If the volume of electronic retailers increases to the anticipated level, such software will become essential for the efficient consumer search of EI environments.

Previous consumer behaviour research has shown that there are two prevalent strategies for making purchase decisions for high involvement purchases. These are "choice by processing attributes" (CPA) and "choice by processing brands" (CPB) (Bettman, 1978), although other hybrid choice strategies have been observed. In general CPA strategies are used when a consumer has sufficient knowledge to decide between product features, and the CPB approach when the consumer does not possess the complex knowledge required to analyse product features, especially in the case of highly complex products. The CPB approach is essentially a brand-based buying decision that is often used to reduce perceived risk. In an ideal EI information environment the consumer will be able to choose information to facilitate product selection by either method. Eventually intelligent software may be able to display summarised information in a way that suits the user’s previously-displayed cognitive and decision-making style.

The Nature Of Information Offered On The Internet

Thus far, the above discussion of the Internet/WWW has considered sales and marketing sites, and has assumed that such sites contain only advertising and sales information. Such is not the case. Many sites contain institutional, product, and brand information. In addition, the material presented in each of these categories may be intended to inform, persuade or remind consumers. Alternatively, if the AIDAS (McColl-Kennedy et al., 1993, p. 387) heirarchy of effects model is considered, it is clear that typical Internet/WWW sites address all components of the model. In addition, many sites offer (either internally or via hypertext links) informative and entertaining material only peripherally related to sales objectives, thus recognising the needs of those who #surf the #net’ merely for entertainment, or who do so merely as a respite from specific #net searching tasks. These features, together with the vagaries of search engines, and the mischeivous attachment of inappropriate keywords to home pages create a marketing medium of extreme #noise’ in which even the most purposive or task oriented enquiry can be hijacked by the complex and anarchic nature of the environment. Thus the accidental exposure of a consumer to unsolicited information occurs frequently in the Internet/WWW medium, just as it does when consumers scan a newspaper or the yellow pages directory.

The Diffusion of Innovation of EI

At present the barriers to the use of the Internet/WWW are significant. The widespread use of EI marketing media is dependent upon a number of key enabling factors within the community. These inlude increases in: domestic computer ownership, computing power, computer literacy, and computer connectivity.

Computers are currently installed in approximately 38% of Australian homes and this figure is expected to rise to 46% in 1996 (I-Way, 1995, p.1.1). Children appear to be a key factor in the purchase and thus the adoption of home PC’s. PC’s are present in some 60% of Australian households with children in the 12B17 age-group (Plunkett, 1995b). In addition, the computing power available in a computer chip has doubled approximately every 18 months. Recent rapid increases in computing power have made multimedia computing possible (the blending of some combination of words, sound, still images, and moving pictures). CD-ROM drives, already present in 9.5% of Australian home PC’s are purchased as a computer peripheral for over 90% of new units (Plunkett, 1995b). This has led to an explosion of CD-based product catalogues. Such catalogues are not EI media because there is no attached customer-to-supplier communications channel. However, they have performed a missionary function by allowing both businesses and consumers to use PC’s for the dissemination of commercial information via illustrated CD-ROM catalogues.

Computer literacy is a diminishing natural barrier to the consumer adoption of PC-based EI systems. The restructuring of many western economies has necessitated the mid-life retraining and re-education of middle-aged baby boomers thus boosting computer literacy. The #Nintendo generation’ of youngsters have a high level of computer familiarity due to the popularity of computer games which now tend to be based on a PC-based rather than on a games console. Their "...understanding of high-tech products are uniquely different from those of previous generations" (Bamossy and Jansen, 1994, p. 144). There is therefore an increasing base of computer-literate consumers who may be amenable to the adoption of EI marketing systems. If devices such as "Pippin"(Yelland, 1996) are indeed manufactured and sold, their dual role as both CD-based games consoles and Internet/WWW interfaces will lower the barriers to the use of the Internet/WWW and accelerate its rate of adoption.

Computer connectivity, which was once the province of large mainframe systems, is now spreading to PC’s. In the office environment this is typically via local area networks (LAN’s) with external communications facilities attached to the LAN server. Home PC’s by contrast have a low degree of connectivity, with some 3.1% presently equipped with a modem to allow data transmission via existing telephone lines (Plunkett, 1995b). The currently low level of home PC connectivity is therefore a significant barrier to the use of PC’s for interactive marketing for all but the use of CD-ROM catalogues. However, the potential for connectivity is present, with an estimated 1.2 million Australian homes and some 350 000 businesses equipped with a multimedia PC and within reach of an optic fibre cable (Plunkett, 1995b). Increasing computing power, multimedia capability, and computer literacy thus will provide a fertile environment for the growth of EI systems.

In relation to the rate of adoption of EI shopping, the speed of adoption of new products and technologies is influenced by factors (Hawkins et al., 1994, p. 415) which include: the type of consumer group involved, the type of decision required, the relative advantage offered by the product, and its compatability, complexity, trialability, and observability. Considering these factors in relation to the Internet/WWW, the consumer group involved is of above average income and education with a relatively high level of computer literacy (Gupta, 1995; Commercenet/Nielsen, 1995). If they are already computer owners and users, their actions to achieve adoption will only require the purchase of a modem and the selection of an Internet/WWW service provider.

For those who: do not own a computer, are not computer literate, or are financially or educationally disadvantaged, there are significant barriers to Internet/WWW usage.

The relative advantage ffered by the Internet is difficult to identify. At present the Internet/WWW is little more than an experimental and intriguing novelty. It is a complex product/service, the main user benefit of which is simply as a new source of information, some of which is commercial. Despite its complex nature, from the point of view of capturing new customers, trialability and observability are easily achieved. In addition, the medium is compatible with previous mass media functions, but is uniquely different in nature due to its #many-to-many’ communications structure and the degree of consumer control over information acquisition. For the decreasing numbers of consumers who are computer-illiterate, the adoption of EI shopping will require learning new skills and behaviours. To achieve widespread adoption, purpose-designed EI systems will have to be more user friendly than the Internet/WWW at present.

Since the commercial use of the Internet/WWW is in its infancy, the current users could be described as innovators or early adopters. For these consumers the Internet/WWW provides both a source of entertainment and information. While retail grocery shopping is as yet unavailable on-line in Australia, the potential for time-saving on such mundane shopping activities is well recognised. However, there is a view that "products that need to be touched, felt, handled, or examined prior to purchase do not easily lend themselves to in-home electronic shopping" (George, 1987, p. 51). This limitation could apply to durables and specialty goods, but possibly not to standard grocery items. However, for Australian consumers the commercial information on the Internet/WWW at present tends to facilitate only the search for specialty goods. Since most commercial sites are US-based, the ordering and shipping of larger items to Australia is uneconomic. Ironically current Internet/WWW users, because of their busy lifestyle are typically "cash-rich" and "time-poor" and may not have the time to use many of the entertainment facilities eventually provided by high-speed data links to the home.

For other consumers the benefits of EI shopping may not be so apparent, and the barriers to its adoption include factors such as discretional income and computer literacy. "Its acceptance will be demographically patchy, with intensive use by some sectors of the community, and minimal familiarity, let alone use, by others" (BTCE, 1995, p. 132). The greatest potential benefits of EI is to remote areas of Australia where the adoption of such systems may in part overcome the #tyranny of distance’ which has affected communications and commerce in our country. However, the computer and educational skills necessary to effectively use such systems are presently not common in the remote rural areas that could benefit most from the introduction of such systems, although large remote mine-site communities may possess the necessary technical and skills infrastructure. There is thus a danger that the adoption of EI systems will be split along educational and affluence boundaries in our society, giving birth to "information rich@@and "information poor" classes.


Having outlined the likely course of the development of communications and EI systems, it is appropriate to consider what effects these will have on business activities and strategies.

Strategic Effects

Undoubtedly the pace of business will increase as the speed and ease of communication increases. Competition will also become much more intense as the EI consumer, whether domestic or business-based, will have access to a larger information environment. The timeliness and volume of the available information will tend to shift the #balance of power’ from the marketer to the consumer (Ray, 1985). These factors in turn wll increase retailing and business efficiency by highlighting uneconomic players and subjecting them to more national and often international competition.

Other less obvious "green" benefits could include improvements in the range of consumer information, and direct consumer-to-manufacturer contact, reducing the need for printed promotional material or consumer travel (I-Way, 1995, p. 9.5). Such transport-telecommunications substitution occurs when "...computers and communications are used to perform, without the use of transport, activities that would otherwise require travel by people or transport of goods" (Mitchell & Skyrme, 1995b). The increased communication between the consumer and the manufacturer will force improvements in manufacturer-to-consumer response mechanisms. Currently, most businesses design their information systems for use by their internal customers, ie sales staff and executives. In future, many firms will have to redesign their information systems to deliver high-quality and attractive information to their external customers including end-users and market channel members.

The widespread development of EI marketing environments will also affect the structure of distribution channels. Traditional functions of channel members include: breaking bulk, taking title, the storage and physical distribution of goods, provision of product information, customer contact, warranty agency, maintenance of channel relations, and some role in promotional management (Kotler, 1983). Many of these roles have grown to allow functional specialisation, for example, to allow the manufacturer to concentrate on manufacturing. In addition the systems have grown to avoid the manufacturer having to do business with hundreds or thousands of individuals. Many of these channel member tasks will be facilitated by EI systems, to the point that the manufacturer may be able to electronically assume some of the channel roles and achieve economies of scale, economies of distribution, better control over marketing and a possible reduction in prices as distributive and communications efficiency increases. Such developments could be termed vertical integration or a move toward manufacturer-based direct marketing. Initiatives of this type by manufacturers of durable goods may mean that their EI sites would only display their own brand/s. Consumers would thus be unable to comparison-shop across brands at sites of this type, but comparisons could be made between the manufacturer’s individual sites either manually or via third party providers. Alternatively, manufacturer’s confident of the competitive advantage of their products may provide links to competing manufacturer’s sites for comparison purposes.

As new EI systems are developed, some marketing channel members and roles may disappear as marketing channels shorten. This "disintermediation" (Spalter, 1995), may spawn a need for new marketing facilitator roles such as information suppliers. However, some of these roles may be subsumed by manufacturers as they move #closer’ to their customers. There will also be a need for other consumer advisory/information supplier roles such as comprehensive on-line consumer magazines giving independent evaluations of products and possibly also aggregated supplier information. These could be provided on a subscription basis in a similar manner to existing consumer magazines, alternatively, they may allow selected advertising and offer a free service.

The development of EI marketing environments will affect current strategies in relation to the four P’s. Possible effects are as follows:


Product feedback to manufacturers and service providers may be improved by the potentially closer contact with their customers. The improved communication could provide faster product feedback and assist with product development and customisation for specific market segments thus facilitating the application of the marketing concept. Conversely, because of the increasingly global nature of EI markets, products could also becme more uniform to reduce manufacturing , promotional, and servicing costs.

The nature of some products may change, for example a considerable amount of publishing will be placed on-line to reduce costs. More importantly, as the pace of business and technology increases, on-line publishing will reduce the lead time to get #into print’ and thus ensure the currency of the content.


As more stores and services go on-line and the consumer information environment becomes more "perfect" there will be a natural tendency for prices to converge for the same consumer good. Though international differences in prices may appear, it may not be possible for Australian consumers to take advantage of better-priced international offers, eg for an American refrigeratorBfreight and import duty may make the deal uneconomic (not to mention unsuitable due to differences in electrical specifications). Where such physical distribution or technical specification barriers do not exist, EI marketing will facilitate the development of a truly global economy as there will be a tendency for the prices of similar goods to converge both domestically and internationally.

The predicted convergence of pricing may also stimulate non-price competition among retailers as a competitive reaction, for example the attachment of intangibles to tangible products and vice versa. Terms of trade, delivery, associated offers, and warranties could be used effectively depending on the nature of the good involved. Perhaps unexpectedly these moves may strengthen the value of a brands or retailer names as intangibles that lead to the selection of a particular offer by a consumer. Previous research into #videotex’ marketing in the 1980’s showed that there was a "...positive relationship between the propensity to purchase via #videotex’ and brand familiarity" (George, 1987, p. 51). This suggests that consumers new to on-line purchasing may rely upon major brand names as a risk-reduction strategy, again enhancing the value of major brands.

Another possibility is that manufacturers may choose to market directly to the consumer in which case the manufacturers will be able to strictly control pricing, promotion and distribution.


The nature of promotional activity could also change. At present most promotional messages are delivered via the #shotgun approach’ of the mass media which provides no direct feedback channel for the consumer. This lack of two-way communication is often compensated by the use of personal selling at some stage in the marketing process. Personal selling is an expensive sales method and conflicts often arise between the salesperson’s simultaneous roles as both a sales generator and a provider of consumer information. The pressure to make the sale can influence the information provided to the consumer. As a result consumers may experience cognitive dissonance in relation to the product and the information provided to them at the time of the sale.

The development of new EI environments may have a threefold effect upon this situation. First, it may reduce the reliance placed upon the mass media, allowing the EI approach to address particular consumer segments more directly. Second, the two-way communication available in EI environments will tend to reduce the information supply burden presently placed upon sales staff. Third, the two previous factors may well cause a general reduction in the use of personal selling as a marketing technique. Goods that were previously hard to explain could be demonstrated as animations in EI environments (Jacobs, 1995). Despite this, it is likely that personal selling will remain a strong component of the marketing of goods traditionally regarded as being in the "unsought" category, such as insurance or funeral services.

Promotional philosophies are likely to change under the influence of EI developments. Whether or not manufacturers use EI technology to prsue vertical integration, due to the global nature of EI environments manufacturers will inevitably become increasingly involved in the provision of information and the control of promotional activities. This will often require changes to corporate organisational structures and manufacturer-to-channel-member relationships.

As mentioned, the mass media approach targets consumers indiscriminately. However, in EI media the computer-literate consumer will be free to browse for personally relevant information. This means that a wide range of information would have to be provided to allow consumers to find a product or service, entice them to enquire further, and finally to purchase the product or service. "Marketing on-line works best if it is subtle and customised for the individual prospect" (Conroy, 1995, p. 30). Accordingly, promotional material will have to be closely related to possible motives and situations in which a consumer may desire a particular product. Thus appropriate key words will have to be provided to allow product information to be displayed in response to as wide a range of consumer motives, purchase occasions and behavioural keys as possible. Consider the example of a #video on demand’ service. The service would be listed via the keyword "movies". Major movie stars would also be listed separately eg "Mel Gibson". Other motivational keys would also have to be listed eg "bored?" or "action movies".The subsequent promotional/informational/infotainment data screens provided should tap the consumer’s motivation and mode of enquiry. The sequence of screens presented would culminate in offering the inquirer the opportunity to pay for and download the movie.


Despite the move into the EI environment, achieving place utility will still be a final requirement for a transaction to take place. Although the use of EI environments may enable the separation of traditionally-associated sales and delivery functions thereby lowering sales costs. "For example, imagine what would happen to Ford’s marketing costs if they could use a Web server in place of TV and showrooms" (Anonymous,URL http://www.homefair.com/homefair/ imply, 1995). However, the nature of the good itself will affect the mode of delivery. For internationally-downloaded software the EI system and the home PC provide place utility. Similarly, general information services and specialist consultants such as medical specialists could also use the electronic system for service delivery. Customer-service can also be enhanced by the use of EI environments via on-site information kiosks, and off-site via PC-based communications (Plunkett, 1994b).

By contrast, physical goods will still require delivery. In existing retailing systems, the consumer often performs the delivery function. For example, in the case of supermarkets, the final consumer assembles his or her own assortment of goods and facilitates delivery, thereby minimising handling and delivery costs. The cost savings produced by existing self-delivery systems are generally not evident, and should not be under-estimated.

EI grocery shopping will become at least a niche market. There is some recent evidence in American attitudinal studies that "64% of consumers dislike shopping" (for groceries) (Johnson, 1994, parenthesis added) and there are signs that a "replenishment mentality" is emerging among consumers in relation to habitual ly-consumed goods (Johnson, 1994). This suggests that consumers may wish to avoid supermarket shopping for convenience goods, thereby freeing time for more stimulating pursuits. The net effect of EI grocery shopping on product pricing is unclear. However, it is likely that the cost of delivered goods would be marginally higher than at present. For example, one American grocery shopping service "Peapod" accepts electronic orders, and manually shops at existing supermarkets for the specified groceries, which arc provided at actual supermarket prices plus an additional charge of 8% and $7.50 per order delivery (Andel, 1995). The concept could be extended to provide full "auto shopping" (MTA, 1995) whereby all basic household commodities would be replenished automatically. To achieve widespread adoption, such services will have to approach or even undercut existing supermarket prices. This may be possible if the volume of home and automated shopping allows a reduction in the number of retail supermarkets, and a consequential reduction in the retailing costs of the supermarket chains. This scenario could provide a window of opportunity for existing supermarket and wholesaling chains whose distribution centres are already equipped with automated order assembly equipment, although the elimination of the self-delivery service component and the low margins available would require the development of highly efficient home delivery systems.

The Rise Of Entrepreneurial Finns

Apart from altering the nature of the four P's, an EI environment may expand the consumers' range of choice by assisting the growth of niche businesses. Presently the scale of business operations is often determined by the need of the business to use mass marketing techniques and media. Frequently business analyses show that a business must be of a certain size to be able to afford sufficient mass marketing to capture the desired level of patronage. While economic studies of the Internet/WWW are as yet in their infancy, a recent study has calculated the cost of reaching consumers as low as one two-thousandth of the current cost of reaching a consumer via an advertisement in a US daily paper (Anonymous, URL http://www.homefair.com/homefair/compare.html, 1995).

The scale of operation of a business is often in part dictated by the cost of finding customers and this in turn dictates the amount of working capital required. Since the capital requirements tend to be large, capital is often a major barrier to entry to a business. Conversely, under capitalisation is a common reason for business failure especially if promotional activities are affected by budgetary constraints. Thus, it is seen as likely that the development of EI marketing will reduce the barriers to entry for small and medium business by allowing marketing costs to fall relative to production costs (Anonymous, URL http://www.homefair.com/homefair/ imply.html, 1995). Many highly computer-literate innovators will be able to start businesses with less capital and run them at the scale they desire due to reductions in the cost of finding customers. In an EI environment, many new businesses could be started by highly computer literate entrepreneurs seeking niche (or larger) markets (Corkindale, 1995). While many of these shoe-string businesses will be under-capitalised, many will succeed due to highly-motivated owners with a lack of preconceptions about the way business should be done-and a lack of corporate inertia. They will thus be able to respond rapidly to business opportunities and threats. The sheer inertia of existing corporate cultures, including preconceptions about the nature of their business and the manner in which it is done, may mean that more than a few entrepreneurial Davids will challenge existing Goliaths.


Although EI is in its infancy, increasing numbers of on-line services will become available as the communications technologies change over the next decade. There is great interest in El marketing, and its development will offer an increasing range of consumer services for those able to use the technology, especially for those consumers in high-density urban environments who will have access to high speed data links.

El appears certain to alter the structure of marketing channels and threaten the existing roles of some intermediaries, while offering the potential for manufacturers to subsume the roles of existing channel members. The relative power of large manufacturers could therefore increase, while retailers find the level of competition becoming more intense.

Consumers information search and shopping behaviours will be modified by the availability of EI services and 'direct' marketing

will increase. Many new services will come into existence including the provision of electronic consumer information services to assist the searching of large EI information environments. While potential conflicts may occur between manufacturers and retailers, it appears that the changes will lead to increased marketing efficiency, competition, and consumer amenity.


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Chris Hodkinson, University of Queensland
Geoffrey Keil, Universtiy of Queensland


AP - Asia Pacific Advances in Consumer Research Volume 2 | 1996

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