Book Review: Who's on First?

In the customer-centric world of the Internet, the key to success is knowing who your customers are and what they want -- a tall order for any organization, but doubly so when the relationship with customers is primarily a virtual one. E-businesses are under enormous pressure to customize the Web experience for each consumer, using a personal touch to offer choices targeted specifically at him or her.

While personalization appears to be the name of the game on the Web, there still may be the need to generalize about the basic traits of different segments of Internet customers. That's the premise behind Forrester Research Inc. analyst Mary Modahl's recent book Now or Never: How Companies Must Change Today to Win the Battle for Internet Consumers (HarperCollins Publishers Inc., 2000, CAN$41.50).

According to Modahl, when it comes to determining whether consumers will or won't go on the Internet, how much they'll spend and what they'll buy, demographic factors such as age, race and gender don't matter anywhere near as much as the consumers' attitudes toward technology. Using Forrester Research-developed "Technographics", Modahl divides Internet users into four groups: high-income technology optimists, low-income technology optimists, high-income technology pessimists and low-income technology pessimists.

To determine whether someone is a technology optimist or pessimist, Forrester Research developed a set of questions that probe how people feel about technology. People who score high are classified as technology optimists, while low-scoring individuals are considered pessimists.

The trick is understanding how each segment will use e-commerce and how quickly they will begin buying on-line, Modahl says, adding that even technology pessimists can eventually become Internet shoppers.

Reaching Early Adopters According to Modahl, the battle for Internet consumers begins with the early adopters -- high-income technology optimists. Internet start-ups need to attract early users in order to survive, while traditional brick-and-mortar companies who move on-line too slowly risk losing these affluent, technology-savvy consumers, Modahl warns.

According to Forrester Research, nearly all early adopters say they expect to shop on-line, and the time lag between when they first go on-line and when they start shopping is shrinking. Three years ago, the only consumers who shopped on-line were those who already had three or four years of Internet experience, Modahl states. By 1999, this time lag had collapsed to just 18 months.

Other research outlined in the book shows early adopters spend twice as much on average in their second year as they did in their first. Modahl forecasts that by 2003 more than three-quarters of high-income technology optimists will be on-line shoppers. Based on U.S. market figures, these consumers represent a US$70 billion to US$80 billion market opportunity for Internet businesses, she says.

Knowing these early adopters will be on-line is not enough, however. According to Modahl, to get them to buy on-line, marketers must tap early adopters' primary motives for going on the Internet -- self-advancement, affiliation with other people or enjoyment. She asserts early adopters can be segmented further into three basic groups, based on their motivations: Fast Forwards, high-income optimists motivated by career needs; New Age Nurturers, high-income optimists motivated by family needs; and Mouse Potatoes, high-income optimists motivated by entertainment needs.

The Battle for the Mainstream While many e-businesses concentrate on satisfying the needs of virtual veterans on the Web, they need to continually evolve their on-line strategies in order to address the interests of the growing mainstream population of Web users, Modahl advises. Because ultimately, she says, mainstream consumers hold the fate of electronic commerce in their hands, due to the fact they constitute approximately 43 per cent of the population in the United States.

Companies that want to expand their on-line businesses beyond early adopters must alleviate the security fears and budget limitations that keep mainstream consumers from becoming Internet shoppers, Modahl writes. She adds the most effective way to understand mainstream users is to divide them into two broad categories: high-income pessimists and low-income optimists.

One of the toughest challenges of understanding Internet consumers, according to Modahl, is figuring out why high-income technology pessimists don't use their PCs or go on-line more often. Forrester's research indicates some high-income pessimists do indeed dislike technology altogether, while others are afraid of crashing their computers or making mistakes. However, most high-income pessimists are simply apathetic about the Internet, Modahl says.

The main issue is one of familiarity, she writes. High-income pessimists are uncomfortable with learning new ways of doing things, but they will, if the technology is easy enough and the activity becomes familiar enough, she says.

Citing the example of Fidelity Investments, Modahl describes how the financial services company has managed to coax high-income pessimists into using its on-line service. By providing an easy-to-use Web interface and establishing brand consistency among its on-line and off-line marketing efforts, Fidelity has built up the confidence of more reticent technology pessimists, Modahl says.

E-businesses can also coax on-line the low-income technology optimist segment of Internet users, she says. While the disposable income of this user segment appears at first glance to represent a relatively insignificant market opportunity, Modahl suggests skeptics look again.

Among low-income optimists, roughly 24 per cent are under 30 years of age; in the general population, only 14 per cent of adults are under 30, Modahl asserts. Young people tend to be career-oriented Techno-strivers or fun-loving Gadget Grabbers. They have low incomes because they are just starting out, but their earning potential can be expected to rise as they advance in their careers and get married to form dual-income couples. Digital Hopefuls tend to be at the other end of the scale, being family-oriented retirees who use the Internet to stay in touch with their children and grandchildren, Modahl explains.

According to Modahl, in order to capture the business of a mainstream Web audience, e-businesses need to use a multichannel approach that encompasses sales, service and advertising. This is where traditional brick-and-mortar organizations have an advantage over Internet start-ups, because they already possess familiar brands and trained support staff.

Avoiding the Laggard Trap Among the general consumer population is a large group of customers which Modahl refers to as Sidelined Citizens -- these are low-income pessimists who may never follow a traditional business on-line. Oftentimes, an e-business struggling to meet the needs of its mainstream consumers will find itself pulled back into the old ways of doing things by the low-income pessimists among its customer base, Modahl says.

The dilemma becomes: Should they invest heavily in Internet businesses, possibly well in advance of their consumers, or should they wait and risk missing the window of opportunity? Modahl calls this dilemma the Laggard Trap. Her advice to e-businesses is to match their Internet strategies as closely as possible to their mainstream consumers, then pull along the laggards as best they can. Companies who have a large group of low-income pessimists as customers should choose one of the following strategies to provide focus to their Internet strategy: move up the income scale to high-income pessimists; or focus across the attitude scale toward low-income optimists.

Modahl warns that e-businesses need to take a realistic approach to laggard consumers, however. Some of them may never go on-line at all. The presence of laggards in their customer base should not dissuade organizations from seizing Internet opportunities targeted at mainstream consumers in general, she adds.

Drawing on real-life examples such as E-Trade, Charles Schwab, Disney, America Online, AT&T, Lands' End and Fingerhut, the second half of Now or Never examines how organizations can exploit Internet business models and avoid being drawn into doing business in the old way. Modahl suggests that although start-ups have seized the lead with early Internet adopters, it's not too late for traditional companies to compete successfully. Early adopters have only just begun shopping on-line in the last year, and mainstream consumers have yet to start purchasing en masse, she says.

But as the title of the book asserts, it's now or never for traditional organizations to drive forward with e-commerce strategies that will capture the business of mainstream Web users.

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