Consumer and market research, and advertising are critical to the sustained development of a successful and long-lasting e-commerce enterprise. While it is certainly possible to conduct business without much attention to these strategic components, successful firms use these functions to overcome the limits imposed by product life cycles, as well as other changes in the marketplace. The main challenge for the personnel performing these functions is one of managing the "information flood", or overload, as forecast by Alvin Toffler in Future Shock (1970), (Turban, et. al., p. 495).

 

 

Even though the internet/information revolution is still in its infancy, the number of choices available to the average consumer are absolutely astounding when compared with traditional marketplaces. One of the major changes that has been brought about by this revolution is the consumers need and desire for comparative information on available products, services, and companies. The consumer now knows that price, quality, and other product measures, can vary greatly between both traditional and online retailers. In the online forum, the consumer is also more aware of and has a higher degree of respect for issues of security, fraud, product warranty, and so on.

 

The e-commerce firm can leverage those consumer needs by presenting images to the consumer that accentuate brand-awareness, trust, value, and, convenience. The traditional assumption that consumers are largely driven by price does not necessarily apply in the e-business environment, especially when dealing with complex, non-commodity type products. Recent research indicates that "... Pricing remains one of the few untapped levers" (Cortese, 2002, pp. 40) for achieving and maintaining corporate profitability. Companies have long concentrated on cost issues, but strategic pricing, together with product promotion and advertising, can have an even larger impact on the firm's profitability.

 

Part of this pricing leverage stems from the firm's understanding of the consumer. ". . . knowing, say, which customers are likely to pay more and when -- IT-powered pricing strategies can have a big impact on the company's bottom line." (Cortese, 2002, pp.40). Note the requirement of knowing the customer and anticipating his or her buying behavior. The principal problem becomes one of being able to distill the available consumer information into a meaningful road-map to guide the pricing and promotional strategies, without falling into the trap of information overload.

 

Consumer research used to be very simple in traditional marketplaces. We knew when the local labor force received their paychecks and, therefore, when they would be most able or likely to purchase products. Similarly, we knew that certain goods would be most popular during certain seasons. In the e-commerce environment, however, the potential audience is becoming so large and varied that such simple views of the environment will do little to help guide us in strategy formulation.

 

 

In essence, market research encompasses several intelligence gathering, analysis, and dissemination activities. Those activities span a wide range, from determining the consumers need for a new or existing product, to competitive analysis, sales forecasting and planning, sales force compensation, and, capital project planning, just to name a few. However, it all centers on a few key issues.

 

First and foremost is accuracy. The sources of information must be accurate, or adequate allowance must be made for possible errors. We are all familiar with Type I and Type II research errors, accepting false hypotheses or rejecting true ones. Secondly, but just as important, is presentation of results and recommendations. The latter must be tailored to the audience (i.e. management) in such a manner as too convey the meaning of the research results relative to the business problem at hand.

 

As an example of this, consider the sales forecasting situation. In performing this function for Bigelow-Sanford Carpet, I had a number of problems to overcome, not the least of which was a good source of data from the MIS Department. The other key problem that I faced was the presentation of the information. When I began, the sales reports were strictly "by product" without any summary data, making it an incredibly tedious chore to gather information at a higher level, such as a product line. We had over six thousand identifiable varieties of our products, so you can imagine the difficulties involved.

 

The reporting systems we had at the time were programmed in COBOL, and there was a great resistance to any effort to enhance those systems lest they "break". In order to overcome this, I built a parallel database for marketing analysis purposes using the Statistical Analysis System (S.A.S.) which was far easier to use for scenario analysis and reporting purposes. Much to the amazement of the MIS staff, I could categorize and summarize the entire product line on demand with very little programming effort. The key was the design of the data files.

 

That seemingly simple advance in reporting capabilities had an even greater impact on forecast accuracy. For years, numerous people had to labor over the details in the numbers, with limited success, yet great expenditure. The key advantage to me was the way in which I could present sales data to the executives. Rather than having to waste the executives' time and mine with the details of each and every product, we could examine products within certain groups and base our forecasts on our knowledge and expectations for those groups. This served as a reality check as well as a time saving method, and was very useful in my overall forecasting strategy to apply a modified Delphi technique by surveying the company executives' expectations.

 

At about that time Andrew S. Grove, CEO of Intel, authored a book entitled "High Output Management" (1985, c1983)which presented a novel way to present forecasting data for executive consumption. Here is a representation of the table form that Dr. Grove suggested in his book:

 

Month	January	February	March	April	May
Actual Sales:	105	87	98	120	130
Forecast from:
August	101
September	103	86
October	107	78	85
November	110	80	90	116
December	99	76	95	120	137
January		90	92	100	120
February			87	95	140
March				130	127
April					135
Forecast, Deviation from Actual
August	4
September	2	1
October	-2	9	13
November	-5	7	8	4
December	6	11	3	0	-7
January		-3	6	20	10
February			11	25	-10
March				-10	3
April					-5

 

The President of the company saw this in Dr. Grove's book and asked me to implement it in our reports. This presentation made it a bit clearer as to where our forecasts were most lacking or off-the-mark, and made it easier to practice management by exception to get the situation, and the forecast, under better control. Of course, as a result of the S.A.S. software, I could generate a number of other significant and useful statistics and present them in the same manner with little programming time and effort.

 

Another excellent example of information presentation dates back to the 1800's with Florence Nightingale and the unique graphing techniques she devised to present research statistics on mortality rates during the Crimean War. I have used this example many times in my career to show that not everything has been invented during the computer revolution. It is a little known fact that in addition to being a pioneer in nursing and the medical profession, she was also a pioneer and an astounding innovator in the field of statistics (Small, 1998)

 

 

Just as in its traditional counterpart, e-commerce advertising must accomplish the basic tasks of attracting consumer attention and interest, presenting the product and corporate image, and bringing the customer back for more. Graphic design still applies as in traditional methods, but the avenues for distribution can differ significantly due to the nature of the internet. Where traditional stores might not enter into a cooperative advertising agreement with a manufacturer or supplier, e-commerce implementations broaden the possible advertising relationships between companies. In a large part, this is due to the fact that web sites represent advertising space (i.e. screen space) that can be sold without regard to relevance to the hosting sites' products and services. The e-commerce model thereby more closely resembles advertising on radio or television as opposed to print media ads, especially when considered in the context of multimedia presentations.

 

There are certain advantages to e-commerce advertising, especially in terms of generating data on customer or viewer traffic. Where traditional modes depend on, for example, expensive and time-consuming customer surveys to measure readership of a printed magazine and ad recall, e-commerce technology allows the firm to analyze visitor traffic patterns very easily and in a short period of time. This can be useful, but again, data and analysis preparation and presentation is critical.

 

Even with the technical advantages of the internet e-commerce model, one must also be aware of the difficulty in attracting the customer. First and foremost, the customer must be able to find the site. One cardinal rule for the e-commerce firm is to publish the web site URL in as many places as possible, including the product packaging, company stationery, business cards, and in traditional media ads. This is easy to miss with the seeming importance of internet "search engines". While they shouldn't be ignored, search engines and the current technology that drives them should be recognized as products that have a long way to go to reach maturity and true usefulness. The main problem in the past, which is just now gaining more attention, is that search engines would collect almost anything from anybody making submissions for site inclusion. Very little effort was placed on the part of search engine operators to verify, rate, or make other editorial decisions on submitted URLs. The end result has been to find millions of "matches" to most searches, with limited tools available to narrow the search. On the subject of search engines, one should also closely examine claims by companies to get your URL listed, and especially any claims as to the position your URL will fill on any given index list.

 

As consumers become more technically aware, and as software publishers add more controls to allow for blocking of advertisements and spam email, it will become increasingly difficult for advertisers to continue some of the more annoying techniques of presenting their messages. In a recent article by Gregg Keizer (2002) in PC World Magazine, this subject is well summarized with the statement "... there are no bad advertisements, only bad practices" (p. 111). The bad practices mentioned in that article do not bode well for those advertisers, for they certainly won't gain any respect from the technically adept consumer. One also has to wonder about the ROI and the actual sales generated by sites employing such devious methods.

 

 

The study of consumer behavior, market research, and advertising are critical to successful e-commerce enterprises. The methods we use to gather the information, analyze it, and present it to decision-makers, must be as accurate, dependable, and understandable as possible. Here again, Alvin Toffler's warning about the "information flood" (Turban, et. al., p. 495) should be remembered lest we bury ourselves in a mountain of irrelevant data.

 

Workshop Four will examine e-Commerce Retailing and e-Commerce Service Industries. Please be sure to read Chapters 2 and 5 in your Electronic Commerce text.

 

Also, please be reminded to submit your written assignments and responses to the weekly discussion questions as per the schedule published in the course syllabus.

 

 

Cortese, Amy (2002). Flexing Price: Pressed by tough times, some companies are using data not just to cut costs, but to boost prices in ways that don't bite back. CIO Insight, 11, 39-45.

 

Grove, Andrew S. (1985, c1983). High Output Management, New York, NY: Vintage Books

 

Keizer, Gregg (2002, May) It's an Ad, Ad, Ad, Ad World: Welcome to pop-up purgatory: Why ads are taking over the Web - and how to take back your browser, PC World Magazine, 109-112. www.pcworld.com

 

Small, Hugh (1998) Paper from Stats & Lamps Research Conference organised by the Florence Nightingale Museum at St. Thomas' Hospital, 18th March 1998. On the Florence Nightingale Museum web site at www.florence-nightingale.co.uk/

 

Toffler, Alvin (1970). Future Shock, New York, NY: Random House

 

Turban, Efraim, Lee, J., King, D., & Chung, H. M. (2000) Electronic commerce - A managerial perspective. Upper Saddle River, NJ: Prentice Hall.