30-Dec-2014&

  
A New Marketing Paradigm for
Electronic Commerce
DONNA L. HOFFMAN
THOMAS P. NOVAK
Owen Graduate School of Management
Vanderbilt University
Nashville, Tennessee, USA
The World Wide Web possesses unique characteristics that distinguish it in important
ways from traditional commercial communications environments. Because the Web
presents a fundamentally different environment for marketing activities than traditional media, conventional marketing activities are becoming transformed, as they are often difficult to implement in their present form. In this article, we discuss the idea
that these changes portend an evolution in the ھ marketing concept and argue that in
order for marketing efforts to be successful in this new medium, a new business para- digm is required. In this new approach, the marketing function must be reconstructed
to facilitate electronic commerce in the emerging electronic society underlying the Web.
Keywords computer-mediated environments, marketing concept and corporate
strategy, marketing on the Internet, World Wide Web
The World Wide Web, the first and current networked global implementation of a hyper- media computer-mediated environment (CME), is increasingly being recognized as an
important emerging commercial medium and marketing environment (Hoffman &
Novak, 1996). An important consideration in the business analysis of the Web as a media
environment is to recognize that it possesses unique characteristics that distinguish it in
important ways from traditional commercial environments. First, the Web is a virtual, many-to-many hypermedia environment incorporating interactivity with both people and computers. Thus, the Web is not a simulation of a real- world environment, but an alternative to real-world environments (see, for example, de
Long, 1995), where consumers may experience telepresence (Steuer, 1992), the perception of being present in the mediated, rather than real-world, environment. As such, it allows users of the medium to provide and interactively access hypermedia content, and to
communicate with each other. These unique forms of interactivity, ھ machine interaction؛ and ھ person interaction,؛ respectively, have contributed to the rapid diffusion of the Web
as a commercial medium in the last several years (Hoffman et al., 1995). Second, consumer capability in the virtual environment and challenges posed by the
environment introduce a competency issue that does not exist as fundamentally in the
physical world. This competency issue involves flow, which is the ھ process of optimal
experience؛ achieved when motivated consumers perceive a balance between their skills
and the challenges of their interaction with the CME (Csikszentmihalyi, 1990). Flow is a

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central construct when considering consumer navigation on commercial Web sites (Hoff- man & Novak, 1996). Third, within this interactive virtual environment, consumers actively engage in the
process of network navigation. This behavior can be contrasted with the more passive
media experience of television viewing, for example. These active behaviors including
both experiential (e.g., ھ netsurfing؛) and goal-directed (e.g., ھ online shopping؛) behaviors compete for consumers’ attention. These two broad categories of on-line behavior
have important implications for the commercial development of the Web. These new concepts, thenذ (1) interactivity in a many-to-many communications en- vironment, (2) flow, and (3) experiential and goal-directed behaviorsذ mean that the
World Wide Web presents a fundamentally different environment for marketing activities
compared to traditional media. Thus, conventional marketing activities such as advertising may be difficult to implement in their present form and require reconstruction in
forms more appropriate for the new medium. In this article we discuss the strategic impli- cations of these new concepts for the commercial Web environment and examine how the
marketing function in this new medium is being transformed as a result. The article is organized as follows. First, we examine how the World Wide Web as a
commercial medium and market is unique. Next, we discuss the ways in which the mar- keting function must be reconstructed to accommodate the unique features of this new
medium. Finally, we discuss the unfinished business that lies ahead.
The Web is Unique
A Many-to-Many Communications Model
The traditional marketing communications model for mass media (e.g., Lasswell, 1948;
Katz & Lazarsfeld, 1955) holds that mass communication is a one-to-many process
whereby a firm (F) transmits content through a medium to a large group of consumers
(C). As sketched in Figure 1, three key features underlie all models of mass media effects: (1) The medium is important only as a conduit for the transfer of information from
(F) to each (C), (2) the consumers, literally an ھ audience,؛ are considered to be homoge- neous in their tastes with respect to the information being transmitted, and (3) there is no
interaction present among consumers and firms. Figure 2 shows the new model underlying marketing communications in a hyperme- dia CME like the Web (Hoffman & Novak, 1996). Here we see a many-to-many mediated
communications model in which (1) consumers can interact with the medium and with
each other, (2) firms can provide content to the medium and interact with each other, (3)
firms and consumers can interact, and, in the most radical departure from traditional mar- keting environments, (4) consumers can provide commercially oriented content to the
medium. In this mediated model, the primary relationships are not between sender and re- ceiver, but rather with the CME with which they interact. In this new model, information
or content is not merely transmitted from a sender to a receiver, but instead, mediated en- vironments are created by participants and then experienced.
Flow in Computer-Mediated Environments
Central to the marketing question of how to develop the Web into a worthwhile consumer
experience is the idea of flow (Csikszentmihalyi, 1990; Trevino & Webster, 1992), the
concept of optimal experience extensively researched in a variety of contexts for the last
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20 years. Recently, Hoffman and Novak (1996) extended and developed the flow construct in the context of computer-mediated environments like the Web. They identified
four properties that define flow during network navigation. Flow is: (1) characterized by
a seamless sequence of responses facilitated by machine interactivity (the clicks and key- boarding that characterize interacting with the computer); (2) intrinsically enjoyable; (3)
accompanied by a loss of self-consciousness; and (4) self-reinforcing. Flow is important because it has a clear set of antecedent conditions and conse- quences that have implications for Web-based marketing efforts. For the flow state to be
experienced, the consumer must perceive skills and challenges to be in balance and above
a critical threshold and the consumer must be paying attention. The consequences of flow
in CMEs (Hoffman & Novak, 1996), including increased learning, increased exploratory
and participatory behaviors, and more positive subjective experiences, are important be- cause they suggest that a critical objective of a commercial Web site is to facilitate the
flow experience. For example, we may predict that when in flow in a particular Web site, a consumer will be more likely to remember the brand name, feel good about the brand, and be more likely to return on a subsequent occasion.
Goal-Directed and Experiential Navigation Behaviors
Hoffman and Novak (1996) observed that consumers engage in two general categories of
behavior in computer-mediated environments like the Web: goal-directed and experiential. Goal-directed behavior corresponds to a directed search mode of network navigation
in which the consumer is extrinsically motivated to find a particular site or piece of infor- mation on a site. On the other hand, experiential behavior is intrinsically motivated and
corresponds to a nondirected, exploratory search mode. Both types of network navigation behavior are relevant because Hoffman and
Novak (1996) hypothesize that for some, if not most, consumers, experiential behavior
(i.e., browsing and ھ Net surfing؛) dominates a consumer’s early flow experiences on
A New Marketing Paradigm 45
Figure 1. Traditional one-to-many marketing communications model for mass media. From Hoff- man and Novak (1996). Downloaded by [Chulalongkorn University] at 20:56 30 December 2014
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the Web. But over time, as consumers learn more about how to navigate in a CME, goal-directed behavior will also lead to flow experiences. This has important implications for the types of commercial Web sites that are designed to attract new users to the
Web. For example, the exploratory, fun experience that facilitates flow is one way consumers learn how to use the Web and become comfortable with it over time. This im- plies that much-discussed applications like home banking and home grocery shopping
(goal-directed activities) will not be sufficient to stimulate adoption of this medium by
new and inexperienced users.
Reconstructing the Marketing Function for New Media
We argued earlier that the World Wide Web is a unique, new communications medium, distinct from traditional media, with important implications for marketing activities. In
this section we discuss the idea that marketing activities are difficult to implement in
their present form and must be reconstructed into a paradigm more compatible with
new media environments like the Web. First, we argue for an evolution in the marketing concept so that business may better include the consumer in the marketing process. Then we discuss the factors marketers must consider as they labor to recreate marketing activities in forms more appropriate for the Web, including creating the infrastructure for electronic commerce, developing interactive customer environments, enabling
innovative content, and constructing new models for the measurement of consumer be- havior in new media.
46 D. L. Hoffman and T. P. Novak
Figure 2. A new many-to-many model of marketing communications. From Hoffman and Novak
(1996).
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The Evolution of the Marketing Concept
Market orientation operationalizes the well-known ھ marketing concept؛ (see, for exam- ple, Houston, 1986) in which firms attempt to uncover and satisfy customer needs at a
profit, and refers to the ھ organization-wide generation of market intelligence pertaining to
current and future customer needs,؛ along with the dissemination and responsiveness of
the organization to such intelligence (Kohli & Jaworski, 1990). Kohli and Jaworski
(1990) suggest that a market orientation will be more related to business performance
under conditions of intense competition and unstable market preferences. Since these
conditions, along with technological uncertainty, face and will continue to face firms de- veloping new offerings in the Web for years to come, and since a market orientation can
represent a significant competitive advantage for a firm in such cases, it follows that
firms interested in Web-based business efforts adopt a market orientation. Yet, surprisingly, as it is currently evolving, not enough is being done to include the
consumer in the development of emerging media (Dennis & Pease, 1994). Instead, devel- opments are being driven largely by the one-to-many mass communication model represented in Figure 1 that presumes the growth of a passive mass ھ audience؛ rather than het- erogeneous users seeking varied experiences. Yet in order to adopt a market orientation,
firms must understand not only their customers, but also the environment in which they
interact. However, very little in the way of on-line consumer research is currently being
conducted, perhaps because in information-intensive environments, the marketing function is often performed by other functional areas (Glazer, 1991) that may not be as familiar with the marketing function as marketers. The current technological and market turbulence of the Web represents more than
mere technological evolution. This is because the computer-mediated environment underlying the Web consumer experience is many-to-many, as sketched in Figure 2. Thus, we
argue that successful Web marketing efforts will require an evolution in the marketing
concept to where the firm not only attempts to discover and meet customer needs profitably, but also engages in marketing activities that are consistent with the new metaphors
that are arising in this emerging medium. For example, consider a current practice that reflects traditional models. A well- known difficulty from a business perspective is that most Web sites have been unable to
induce visitors to register, especially when no payment is required to consume content. But if the firm does not know, at a minimum, the characteristics of those visiting its Web
site, application of the marketing concept becomes challenging. One proposed solution is
to centralize the registration process, collecting demographic and psychographic information from consumers for resale at both the within-site and across-site levels to Web sites
interested in linking consumer navigation and transaction behavior with consumer mar- keting variables (Internet Profiles Corporation, 1996). But a new paradigm for electronic commerce constructed from considering the Web
as a many-to-many communications medium might suggest decentralizing the registration process so that the consumer retains ownership of his or her personal information
and benefits by selling it to commercial Web sites who may desire it. Developing such a
concept would not only facilitate registration, but also would allow the consumer to participate in and benefit from the process.
In such cases, then, the role of marketing moves from ھ merely؛ satisfying customer
needs to including an altruistic, cooperative goal of facilitating the development of the
market itself, one that explicitly includes the consumer. This is consistent with a recent
report by the National Academy of Sciences (U.S. Congress, 1994): ھ In the new business
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environment, cooperation may prove more rewarding than competition, and informationsharing more fruitful than information control.؛ Several propositions from Glazer (1991) regarding information intensive marketing
environments support our extended marketing concept. Specifically, information leads to
ھ issues of access sharing, and creating opportunities for use.؛ Greater involvement in
strategic alliances is proposed to lead to an ھ extended cooperation framework.؛ Further,
in information-intensive environments such as the World Wide Web, attention will be fo- cused less on competitive strategy and more on cooperative strategy. Both theoretical and empirical research is necessary to more fully investigate our
proposition that the marketing concept must be broadened to include new views of (1) the
consumer as an active individual in an interactive process, and (2) effective business
strategy in an emerging many-to-many medium as a cooperative effort that includes the
customer.
Transforming Marketing for New Media
The idea that marketing and communication activities in information-intensive environ- ments must be transformed and reconstructed has been recognized by numerous researchers (e.g., Glazer, 1991; Reid, 1991; Blattberg et al., 1994; Stewart & Ward, 1994;
Venkatesh et al., 1993; van Raaij, 1993). For example, Reid (1991) has argued that in
order to maintain a virtual community on the Internet, users have had to deconstruct and
reconstruct the nonverbal communication that exists in interpersonal communication by
typing their feelings out in ASCII and constructing a notational system to convey emotion (e.g., emoticons such as ھsmileys,؛ as discussed in Reid, 1991). In addition, the online medium has the potential to transform the individual’s identity, resulting in a relative
anonymity of users in these environments. In a marketing context, this hinders personal
selling at the same time that it encourages negative word-of-mouth activity (i.e., brand or
corporate ھflaming؛).
Most important from a marketing perspective, however, is the manner in which the
Web transforms the marketing function. For example, the many-to-many communication
model turns traditional principles of mass media advertising (based on the one-to-many
communication model) inside out, rendering application of advertising approaches that
assume a passive, captive consumer difficult, if not impossible (Hoffman & Novak, 1994).
Thus, marketers must reconstruct advertising models for the interactive, many-to- many medium underlying the Web. Such models must account for the fact that consumers actively choose whether or not to approach firms through their Web sites, and ex- ercise unprecedented control over the management of the content they interact with.
Informational and image ھ Internet presence sites؛ (Hoffman et al., 1995) provide exam- ples of such new forms of Web-based advertising. To a large extent, many of the original structures that have been constructed to facilitate electronic commerce on the Web are characteristic of a primitive, simple society, bound by ھ mechanical solidarity؛ (Durkheim, 1933), with a common consciousness and
internalized set of shared values. These shared values arise largely from the metaphors in
place in traditional media. Thus, banner ads on sponsored content sites are referred to as
ھ billboards,؛ commercial Web providers are called ھ publishers,؛ and advertisers and Web
publishers alike seek measurement models that are consistent with traditional broadcast
and print media (Novak & Hoffman, 1996). In large part, we believe these origins ac- count for the current trend toward viewing the Web as another mass media that can de48 D. L. Hoffman and T. P. Novak
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liver ھ eyeballs؛ to advertisers. However, as the Internet continues to evolve into a com- plex, heterogeneous virtual society, ھ organic solidarity؛ will develop from an increasing
interdependence between people pursuing different goals. This produces an increasing di- vision of labor, which will transform existing paradigms and require new models of coop- eration, competition, and profitability to emerge. Therefore, marketers should focus on playing an active role in the construction of
new organic paradigms for facilitating commerce in the emerging electronic society un- derlying the Web, rather than infiltrating the existing primitive mechanical structures. Consider the nascent attempts by previously proprietary commercial on-line services to
exercise control over both consumer access to the Web and the ability of consumers to
provide content to the Web. Increasingly, the commercial on-line services are becoming
consumer gateways to the Web and becoming more like user-friendly Internet Service
Providers than closed, proprietary networks. Yet, as these services reinvent their businesses in the context of many-to-many de- centralized open networks, they are beginning to reshape themselves under a broadcast
cable model in which a series of Web site selections will be offered to consumers as
ھ channels؛ easily accessible by a simple point-and-click interface. Web sites not en- dorsed may be accessible, but would require knowledge of the URL; it would be less
likely that consumers would seek out such content. In some cases, consumers may not
even know additional content exists, let alone how to access it. Such attempts, following
from the traditional one-to-many mass model of communication effects, obviously do
take full advantage of the medium’s unique features and hold enormous implications for
how the Web will develop as a commercial medium. At a minimum, it implies the devel- opment of homogenized content that would appeal to a mass audience, with attendant
negative implications for niche or small Web sites lacking mass audience appeal. This erroneous view of the Web as a traditional broadcast medium also largely explains the U.S.
Justice Department’s recent efforts to censor ھ indecent؛ content on the Internet (American Civil Liberties Union et al. v. Janet Reno: Buckwalter, 1996).
In contrast, the effective marketer will be actively constructing new models for mar- keting on the Web, based upon an increasingly diverse and complex virtual society. Such
efforts will contribute to the establishment of organic solidarity within the heterogeneous
market defined by segments of consumers and firms doing business on the Web.
It is still too soon to predict the form these efforts might take, even as the business
models emerge (Hoffman et al., 1995). Yet it seems clear that (1) steps to build the infrastructure for electronic commerce, (2) mechanisms that take advantage of the medium’s
ability to be truly interactive, and (3) attempts to develop stimulating and exciting content-rich sponsored environments hold tremendous promise toward this goal.
Create the Infrastructure for Electronic Commerce. In a recent report on Electronic Enterprises, the Office of Technology Assessment (U.S. Congress, 1994) noted that ھ be- cause exchange transactions will increasingly be carried out electronically and online,
the network will in many instances serve as the market.؛ While it has been said for tra- ditional media that ھ the medium is the message؛ (McLuhan, 1964), with the Web it is
also true that ھ the medium is the market.؛ The establishment of broadly based, ھ inte- grated destination sites؛ (Hoffman et al., 1995) like GNN (www.gnn.com), HotWired
(www.hotwired.com), and Pathfinder (www.timeinc.com) supports this observation
and leads us to argue that as media increase in their interactive and navigational capa- bilities, they move from serving as communication and marketing channels to serving
as markets.
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Press (1993) speculates that the Internet as a marketplace has the potential to make
markets more efficient. This is particularly so for the Web because it not only offers the
opportunity to provide full information to consumers about goods and services, but also
lends itself to rich detail and specificity regarding such information, especially compared
to traditional media. There is also greater probability of a well-informed consumer, since
the consumer has greater control over the search process. Such control is likely to facilitate a highly developed form of, for example, price comparison shopping. Thus, com- pared to conventional markets, the cost of information should be lower and the information quality should be higher (and closer to ھ perfect؛), leading to a higher degree of
market efficiency (Stigler, 1961). Therefore, the market represented by the Web also has
the potential to be a more efficient market than conventional markets. [See, however, Schickele (1993) for an opposing viewpoint.]
However, before this can occur, the infrastructure must be built. The current diffi- culty transmitting sensitive data, such as credit card numbers and the like, securely over
the Internet is transforming traditional payment processes. Until secure systems are
widely implemented on the Web, the lack of them represents a significant barrier to adoption of the Web for commercial transactions. Thus, new systems must be developed to
permit virtual transactions directly over the network. These may take the form of ھ digital
cash؛ (e.g., Medvinsky & Neuman, 1993; Rose, 1994) or credit card number encryption, allowing commercial transactions to take place directly rather than through parallel traditional channels such as 1-800 telephone numbers. Equally important will be on-line dynamic content directories both within a site and
across the Web. With over 30 million Web pages on 275,600 servers indexed by Digital
Equipment Corporation’s Alta Vista search index (www.altavista.digital.com) as of Octo- ber 11, 1996, and the number growing daily, efficient ways to help consumers sort and
search through the myriad of offerings available will be critical. Research in consumer de- cision making suggests that, in the absence of heuristics, decision effectiveness degrades
in the presence of too much information (Keller & Staelin, 1987, 1989; Meyer & Johnson, 1988). Thus, the challenge for marketers will be to develop, in conjunction with consumers, rule-based systems for the organization of content that exploit the principles of
network navigation and facilitate flow (see Hoffman & Novak, 1996, for more discussion).
Develop Interactive Customer Environments. Chatterjee and Narasimhan (1994) observe
that as a distribution channel, the Web possesses (1) extremely low entry and exit barriers
for firms, (2) increasing irrelevance of distribution intermediaries, and (3) the capability
to not only keep pace with market change, but accelerate it. Because the Web increases
the power of the consumer and decreases the power of the firm, compared to traditional
channels of distribution, the consumer and the firm approach ھsymmetrical power؛ and
the best communication efforts are likely to be ھ collaborative؛ rather than ھ autonomous؛
(Mohr & Nevin, 1990). Glazer (1991) notes that in the presence of higher information intensity, channel
power shifts in favor of consumers and a breakdown occurs in formal distinctions between producer and consumer. In the information-intensive Web environment, the firm is
no longer broadcasting a single communication to many consumers, but in effect is tailoring its communications according to consumers’ varied interests and needs. This is currently implemented through the unique process of network navigation in which the consumer chooses what information (if any) to receive from the firm. Thus, marketers must
begin to examine the manner in which these more collaborative communication efforts
should proceed.
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These shifts in channel power hold important implications for consumer participation
in the marketing process. For example, consumers may collaborate not only in idea gen- eration and product design, but also in the marketing communication effort itself. This is
because interactivity in the Web gives consumers much greater control of the message. Such control may manifest itself in startlingly new ways: For example, it is feasible for
consumers interested in purchasing big-ticket durables such as cars or appliances to
broadcast their interest and solicit open bids from different firms (Cutler, 1990). Similarly, Digital has enjoyed success with their innovative program of making the Alpha
AXP computer systems available to potential customers for ھ test drive؛ over the Web
(Jarvenpaa & Ives, 1994). Such activities are possible because the process of network navigation in the Web is
characterized by open access to information. The original motivation for developing an
ھ internetwork؛ of computers, on which the Web is based, was to enable geographically
dispersed computers representing diverse platforms to link and communicate so they
could economically share costly resources (Hafner & Lyon, 1996; Roberts, 1988). The
Internet thus developed in a rich and exciting atmosphere of intellectual curiosity fostered
in an unconstrained and creative environment (Licklider, 1988; Miya, 1990).
Enable Innovative Content. Marketers can utilize the opportunities for customer interaction inherent in the Web in numerous ways, including (1) the design of new products, (2)
the development of product and marketing strategy, and (3) the innovation of content. The evolution of content on the Web is dependent upon not only the evolution of existing
metaphors and communication codes from traditional media, but also new techniques and
conventions inherent in the possibilities of the medium itself (Biocca, 1992). One impli- cation of this is that the content (and business models) that will make the Web commer- cially successful have likely not been invented yet, and may require more than a simple
continuous innovation of existing content (Grossman, 1994). As evidence that a discontinuous evolution in content will be required to fuel the
growth of the Web, witness the difficulties experienced in applying traditional content to
the alternative new interactive multimedia, such as pay-per-view, video-on-demand, and
interactive TV. Few applications have yet to meet with consumer acceptance in test mar- kets, and even fewer have come online in any significant way (Schwartz, 1994). To gen- erate and evaluate ھ future content,؛ the consumer must somehow be placed in a future
frame of reference. Promising product development techniques include Information Ac- celeration (Urban et al., 1994; Hauser et al., 1993), and virtual reality and role-playing
ھ informances؛ approaches being developed at firms such as Interval Research Corporation (Kirkpatrick, 1994). Hoffman and Novak (1996) have argued that flow will lead to increased quality time
in a hypermedia CME like the Web. Thus, content developers should seek to facilitate the
flow experience, as it has numerous positive consequences. One important consideration
is whether and at what point in the process consumers are likely to become bored (e.g., when network navigation is not sufficiently challenging) or anxious (e.g., when network
navigation is too difficult), increasingly the likelihood of ھsite jumping.؛
Construct New Marketing Models. The limitations of relying on old paradigms become
apparent when we consider the ھ more is better؛ logic implicit in current approaches to
measuring consumer activity on sponsored content Web sites. Driven by traditional mass
media models, exposure-based counting methods implicitly seek to achieve unstated
mass audience levels, since in traditional media, ھ advertising effectiveness؛ is tied to ratA New Marketing Paradigm 51
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ings or circulation models where larger numbers are preferred. Yet on the Web, advertising effectiveness can be explicitly tied to customer response, and the possibility exists of
developing new measurement systems that capture the value of a single consumer’s visit
and subsequent response in new and innovative ways. New bases for market segmentation will also be needed for Web-based marketing efforts because consumers vary in their ability to achieve flow. Research can determine the
variables that relate to a consumer’s propensity to enter the flow state, and such information can be used to develop marketing efforts designed to maximize the chances of the
consumer achieving flow. Since ھ repeat purchase,؛ that is, repeat visits to a particular
Web site, will be increased if the environment facilitates the flow state, the marketing objective on the first visit (i.e., ھ trial؛) will be to provide for these flow opportunities. Pricing strategy is also relevant here. Commercial on-line service pricing models are
largely based upon connect time and usage charges. Such schemes have the effect of dis- couraging usage and, increasingly, consumers are demanding flat-rate pricing schemes. In
the short run, flat-rate systems encourage consumer experimentation and system use (National Academy of Sciences, 1994, Chapter 5). Continued use feeds demand because, as
the anecdotal record shows, usage tends to be ھ addicting.؛ This suggests that pricing algorithms that encourage browsing will encourage usage (Hawkins, 1994). In the long run, usage-based pricing may be more appropriate as the Web matures as a medium, one day
becoming as ubiquitous as the telephone (National Academy of Sciences, 1994, Chapter 5).
The Unexplored Frontier
We have argued that the traditional one-to-many media communications model, with its
attendant implications and consequences for marketing theory and practice, has only limited utility in emerging many-to-many media like the World Wide Web, and that a new
marketing paradigm is required for this emerging communication medium. In this para- digm, new rules of cooperation and competition can emerge in which marketers focus on
playing an active role in the construction of new standards and practices for facilitating
commerce in the emerging electronic society underlying the Web. As a first step, we have outlined a number of research issues that deserve further study,
including the necessity of broadening the marketing concept, constructing efficient markets
on the World Wide Web, developing innovative and interactive commercial environments, and building new models for measuring consumer behavior in such environments. The Web as both medium and market is more likely to be successful if it frees consumers from their traditionally passive role as receivers of marketing communications, gives them much greater control over the search for and acquisition of information rele- vant for consumer decision making, and allows them to become active participants in the
marketing process. Firms have the opportunity to reap the benefits of this innovation in
interactivity by being closer to the customer than ever before. However, much of the current rush to erect commercial Web sites and develop stan- dards for this new medium misses an important point. That is because most activity is
based on a still primitive commercial infrastructure based upon old paradigms from traditional markets. In its current incarnation, most consumption behavior on the Web takes
place divorced from the broader social contexts that consumers exist in.
In this sense, commerce in cyberspace is incomplete, and many critical social issues
remain only weakly addressed. These include privacy, equal access, social interaction, presence and identity, and consumer confidence, and the issue of local standards applied
to global markets. But if it is the broader social context, that is, the sense of connection
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with other humans and with society, that consumers ultimately desire from the Web,
rather than the ability to purchase goods and services, then the full benefits of the Web
will not be realized until the medium encompasses the true richness of human interaction. This means that the Web must become a virtual environment in which individuals
and firms can develop persistent identities and reputations, in the same manner that it is
done in the physical world (Electric Communities, 1995). We believe that the revenue
opportunities and product development possibilities from commercializing the Web in the
context of human society dwarf the currently available business options.