Stewart Adam, Senior Lecturer, School of Marketing, RMIT University, Level 14, 239 Bourke Street, Melbourne, 3000. Email: stewart.adam@rmit.edu.au
Dr Kenneth R Deans, Senior Lecturer, Department of Marketing, University of Otago, P.O. Box 56, Dunedin, New Zealand. Email: kdeans@commerce.otago.ac.nz
This paper describes a work-in-progress study which aims to compare current commercial use of the Internet across standard industrial classifications (SIC) and contrast intent and outcomes by organisations. While the initial phase involves researching Australian and New Zealand organisations, the intention is to extend the study with collaborators in the Americas, Asia and Europe. The research follows on from studies such as Ho (HREF 1) and a more recent study conducted in New Zealand during 1997 (Deans and McKinney, 1997) [HREF 2]. The study acknowledges that the Internet occupies a unique role in commerce and government in that it may be seen as knowledge media (Eisenstadt, 1995) [HREF 3], new media and marketing channel (Adam, 1998; Adam and Westberg, 1998; Hoffman and Novak, 1996). It is hypothesised that this broader interpretation impacts on return on investment calculations thereby necessitating a study of company intentions, strategies and expenditure concerning Internet usage. The paper presents a background to the current research which saw fieldwork commence in Australia and New Zealand in February 1999; results of a longitudinal study in New Zealand as an antecedent to the present study; as well as a discussion of a pretesting of the online survey instrument used for the WebQUAL Audit in Australia and New Zealand. Conclusions are drawn and plans for extending the study globally are discussed.
Increasing use of the Internet, as well as rapid development of associated technologies is maintaining impetus to the growth of electronic marketing. Pattinson and Brown (1996) illustrate however, that as pervasive as the Internet now is, it is only one technology used in electronic commerce. Development of Internet (Web) technologies ranging from browsers to search engines and on to extension of the hypermedia language, including XML and various ‘add-ons’ and ‘plug-ins’ and ‘applets’, has continued unabated from 1993 after early military and academic use of the Internet from the late 1960s. The rapid adoption of the Internet, or more particularly the Web, is symptomatic of the rapid diffusion of technology with ever shorter life cycles, as opposed to diffusion of social ideas, political causes and such products as fast moving consumer goods (FMCG) where the diffusion process is often a more drawnout process. The rapid rate of diffusion of the Internet in commerce and government is due to the roles it occupies: knowledge media, new media and marketing channel. The Internet's knowledge media role is largely as an information source, and more often than not focuses on the Internet's role in flexible teaching and learning. The role of the Internet in formal education is not the focus of this study. The term new media is used to describe the marketing communication role organisations increasingly ascribe to the Internet. It is of note that a KPMG survey of 146 Australian and 163 New Zealand organisations finds that "five of the top six business functions currently performed electronically via the Internet relate to communication" (1999, p5). One question that arises is whether the new media may replace the old, or if they might converge. For example, the integration of television and the Web while technically a reality, is yet to reach the commercialisation stage. Turning to the third role, it is of note that marketing channels are collections of organisations and individuals connected by bidirectional flows of information, legal title to goods, services and payments (or debt). Channel members are self-serving in the sense that they seek profit from the value they add for other channel members. They only exist while they add value for their customers. Their customers may be the next member in the demand chain (nee supply chain) or indeed the end-consumer. Here too, the Internet or rather the use of Extranets is playing a role, particularly between those involved in conversion operations, whether in manufacturing or the services sector and suppliers. As Steinfield, Kraut and Plummer point out, additional co-ordination costs may arise if outsourcing, and that here again, networks such as the Internet can assist. [HREF 4]. The co-ordination of value-adding tasks within organisations increasingly involves the Internet in its Intranet guise.
Whichever of the three Internet roles one focuses on, there is the important underlying notion that organisations only exist while the transaction costs of obtaining a good or service via the intermediary are lower than if the customer dealt directly with the supplier in the market. An example from the financial services sector illustrates the point that the Internet has great appeal to many organisations because it enables transaction costs to be reduced. The transaction cost to a bank is some 10 cents per transaction where the Internet is presently used. This may be contrasted with some 70 cents for a telephone banking transaction, $1.10 for an automatic teller transaction and up to $1.70 for a transaction conducted in a High street outlet. And in another example, we might see customers of full service sharebrokers such as J.B. Were turn to lesser cost brokers which use the Internet (such as E*Trade) to carry out broking transactions at a fixed (lower) cost to the customer, but at the same time offer the same level of customer service. This is not to say that reduced costs are automatically reflected in the prices consumers pay. An adaptation of economist Ronald Coase's notion of transaction costs sees the following involved: channel member search costs; information search costs; purchase decision evaluation costs; compliance (policing and enforcement) costs (Downes and Mui, 1998).
Transaction based commerce is the acknowledged driver of Internet development in the United States. Australian Bureau of Statistics (ABS, 1999) figures for March indicate that there was an increase of 50 percent in the numbers of adult Australians accessing the Net to 4.2 million. However use of the Internet to conduct transactions is low in that the ABS (1999) reports that only 7 percent of adults with online access, or 2 percent of all Australian adults, used the Web to transact business. Fewer still ( 1 percent) used the Web to transfer funds or pay their bills. In March, 1999 the United States’ Computer Industry Almanac [HREF 5] estimated the Internet had 147 million users (classed as accessing the Net at least once a week) worldwide. It predicted 320 million users in the year 2000, and 720 million by 2005. The United States leads the way with 76.5 million users, and this is predicted to grow to 207 million by 2005. Japan has 9.75 million, the UK 8.1 million, Germany 7.14 million, and Canada has 6.49 million Web users. Australia is 6th with 4.2 million users. In addition, the aforementioned KPMG study of Australian and New Zealand companies makes the point that "while many organisations are using the Internet for information, exchange, publishing and some customer service activities, very few are using the channel for transactional services such as order-taking, procurement, product delivery and payment" (1999, p.5). In regard to payment, it must be acknowledged that some 65 percent of all non-cash transactions in Australia in 1997 were electronic, with 1.5 billion transactions generating movement of $A16 Trillion (DIST, 1998). However only a very small proportion involved the Internet. Business users dominate usage of the Internet, with the Australian Bureau of Statistics reporting in November 1998 that of 1.6 million Australian users, some 1.09 million were business users. Case studies from the United States show a similar interest by business users (Henry, Cooke and Montes, 1997).
Literature on commercial Internet use tends to fall into two categories. On one hand there are 'gee-whiz' commentaries on the numbers of websites and commercial potential of the Internet and these often contain 'how to' suggestions on how to 'push' or'pull' potential customers. In this category, Hoffman, Novak and Chaterjee refer to the Hermes survey of Web users and point to the fact that this study showed that "Web users found [that] gathering purchase-related information was the most preferred Web activity" [HREF 6]. It would appear that little has changed, judging by ABS information . The second category of commentary tends to focus on the website side of Internet use and the place of electronic networks in commerce. Ho's 1997 study and the Deans and Kinney (1997) study both examine business websites with the aim of establishing a framework to evaluate the websites. Ho (1997) claims to have developed such a framework from a customer perspective, however it is not clear if the four types of value creation identified by the graduate students involved were ranked and rated by customers. The four types of value creation identified by Ho (1997) are: Timely; Custom; Logistic and Sensational. It appears that websites from a "list of industries ... commonly used in the business literature" were selected in that study. Regrettably, the literature in question is not identified. It is for this reason, among others, that further studies are needed to examine the nature of business usage of the Internet. Business users need to be polled. So too do non-profit and institutional users. It is suggested that standard industrial classification schemes such as SIC and ANZSIC warrant use when making comparisons between web usage by industries and countries.
Business users are far more cost driven, anticipatory and precise in specifying their requirements than end-consumers are when buying goods and services. Also, trust between buyer and seller is likely to have developed in the case of businesses dealing with each other, and to have developed prior to using electronic networks. As Blenkhorn and MacKenzie (1996) point out, there is greater interdependency between the parties involved in business-to-business marketing than in the case of consumer marketing. This being the case, it is not surprising that business use of the Internet is much higher than is yet the case with consumers transacting directly with suppliers and thereby bypassing traditional intermediariestermed 'disintermediation' and sometimes 'reintermediation'. Another difference between consumer and business markets is that business users have often developed relationships prior to online engagement and are willing to use the Internet as an extension of such familiar electronic modes as electronic data interchange (EDI) using value adding networks by third parties such as GE. The place of relationships in determining turnover and profitability is beyond dispute in this market sector (Gronroos, 1994; Gummesson, 1997; Mattsson, 1997; Palmer, 1997; Payne, 1997; Ravald and Groonroos, 1996; Selnes, 1995). The study of online relationship management is therefore vital when examining business use of the Internet.
It has already been stated that the aim of many organisations is to engage in marketing communications using the Internet. It is also of note that this communication is increasingly on a targeted, preferably one-to-one basis, and thereby attempts to gain a measured response from a measured dollar input (Peppers and Rogers, 1995; Peters, 1998). Gaining such outcomes is the aim of direct marketing organisations. Glasner [HREF 7] points out that Barry Diller’s long-term bet is that the Internet is the best direct marketing tool ever created. Barry Diller should know, as he is CEO of home shopping and cable TV company USA Networks, which embraces Home Shopping Network and Ticketmaster Online in the United States. Diller’s interest is interactivitysomething which free-to-air television just does not offer. His interest in interactivity is reflected in the fact that Ticketmaster Online agreed to buy 61.5 percent of the portal site Lycos and thus use Lycos for direct marketing HSN and Ticketmaster offers.
Another aspect of modern marketing is alluded to by Pine and Gilmore (1998). They suggest that whether one looks to image food chains such as Hard Rock CafÈ and Planet Hollywood or an ocean cruise aboard the 2,600 berth Disney Magic with its themed restaurants, engaging experiences are increasingly sought by customers. These authors suggest that this applies to both consumer and business marketing. Walt Disney calls such buyers 'guests' and acknowledges that they "value what the company reveals over a duration of time" (Pine & Gilmour, 1998 p.99). That is relationships develop over time, but require staged events to maintain interest and engagement. The authors go further and point out that "experiences are inherently personal, existing only in the mind of an individual who has been engaged on an emotional, physical, intellectual, or even spiritual level" (1998, p.99). These researchers sort such "experiences into four broad categories according to where they fall along the spectra of the two dimensions" (Pine & Gilmour, 1998 p.102) (See Figure 1). The richest experiences are claimed to lie at a "sweet spot" where the spectra meet. It is suggested here that this is an aspect which marketing organisations might already be incorporating in Website design. If they are not, then it might signal the fact that existing content and form are being communicated via a new medium, as opposed to new forms of engagement in the digital age as one might expect to appeal to younger computer games users. The answer to "Why should I come back to this commercial website?" should be "for the engaging experience". But is it?
Online content providers seek commercial returns from investment in online marketing communications and marketing channel activities. Deans and McKinney (1997) were among early researchers examining the objectives, strategies and techniques used by commercial websites. A 1998 study conducted for the Australian Department of Industry, Science and Tourism (DIST) also provides some clarity in this matter, as does the aforementioned KPMG study (1999). However, a more open and comprehensive picture is needed of integrated marketing communications strategy using new media as well as use of the Internet as a marketing channel is needed coupled with the reasoning behind such use, and identification of the measures of success these organisations use. The current study in Australia and New Zealand is an extension of the Deans and McKinney (1997) study. It is intended that in the near future, collaborators in Asia, the Americas and Europe will extend this audithereafter referred to as the WebQUAL Audit (WebQUAL).
Early in 1997 Deans and McKinney conducted a three phase investigation which aimed to examine the rationale behind a web presence and how such a presence was evaluated. To achieve this, 300 commercial sites were systematically selected from 12,000 registered domain names. The content of these sites was analysed under various headings:
- Ease with which site could be found,
- Content,
- Layout,
- Graphic elements,
- Menu systems,
- Feedback forms,
- Number of links,
- Presence of search tags,
- Date last modified.
This led to three broad categories: undeveloped, developed and well developed. The second phase entailed making contact with each site manager and administering a short questionnaire addressing issues similar to those detailed above. Finally, a series of in-depth interviews was conducted to add a qualitative dimension.
Their study in 1997 showed few companies had strategic intent behind their online activities, and showed that many did not integrate their online marketing communications with other aspects of their promotional programs. Often, the reason organisations gave for maintaining a website was because immediate competitors did so. The researchers have now revisited these sites as an ongoing longitudinal study.
Of the 300 sites originally analysed, 87% still had a web presence in 1999. To retain the original number (300) It was decided to add and review 40 new sites randomly selected from the 17,888 available in New Zealand. After all the analyses have been carried out these 40 will be compared to the original 260 to determine if any significant differences exist. Several criteria were added to the content analysis measures to take account of:
- the changes in the underlying website technology (Java, web authoring packages etc.)
- the accessibility to the technology
- improved website design skills.
Initial results indicate that significantly more companies have based their electronic communications strategy closely to the guidelines set for more 'traditional' promotional activity and communication strategy. Previously the two were independent and often inefficiently in conflict. Also, whilst sites are generally more sophisticated, they are also easier to locate and easier to navigate. Of great interest to the researchers was the considerable increase in the number of transaction based parts of sites (as distinct from entirely sales based sites)
The trends determined from this study have provided great insight and improved the quality and effectiveness of the survey instrument and methodology used in this study, the WebQUAL Audit.
As previously stated, it is hypothesised that a perspective of the Internet as occupying three roles in commercial use impacts on return on investment calculations thereby necessitating a study of company intentions, strategies and expenditure concerning Internet usage.
The WebQUAL study aims to establish the following:
- Why business and government maintain Internet websites as well as Intranet and Extranet infrastructure.
- The budgets expended on this technology.
- How the technology is used. (E.g. From transactions to maintaining and enhancing the scope of relationships).
- Criteria used to measure return on investment and the 'success' of this technology.
- Business and government ratings of their own websites compared with content analysis by the researchers and subsequent independent panels.
- Organisational responsibility for this technology
- The interconnectedness of Internet technology and other aspects of marketing such as marketing communications via other media.
- Perceived return on investment.
WebQUAL entails auditing the way in which Australian and New Zealand business and government use the Internet including expenditure and expected returns from the use of Intranets and Extranets. The audit entails ascertaining objectives, budgets, success criteria, and undertaking content analysis of websites from a sample frame of respondent domain names. The intended study utilises Web browser form technology and email to survey the February, 1999 population of 81,563 Australian (See Table 1) and 17,888 New Zealand (See Table 2) domain names. While studies such as those by DIST (1998) and by Keig & Co [HREF 8] report on the growth and 'viewing' habits of Internet users, it is difficult to identify non-commercial studies concentrating on the experiences of business and government conducting business using Internet technologies. This particular academic research aims to ensure that business planning is less likely to occur in a vacuum, with a concomitant wastage of shareholder and other funds. There is a knowledge gap concerning whether or not there is integration between marketing communications using such traditional media as television, radio, print (mass media) as well as direct marketing techniques such as database marketing with use of the Internet. Furthermore there remains a gap in the scientists' and practitioners' minds as to the measures of effectiveness and efficiency used when communicating via 'new media'. Likewise the nature of transactions and the means of maintaining relationships is poorly understood. Neither the DIST nor KPMG studies provide this information. The KPMG study reports that less than half of companies they define as 'leaders' and some 30 percent of 'followers' are undertaking some form of cost-benefit analysis on integrating e-commerce into business activities (1999, p.10). This is too nebulous a result given the amount of money spent on marketing communication in general and on Websites in particular.
Publication of the findings from the 1999 study and subsequent extension of the study into North America, Asia and Europe should provide greater understanding of the opportunities for business and provide continuing links between university researchers and organisations involved.
A brief synopsis of the methodology employed is provided so that a multidisciplinary readership might provide guidance in this and future research:
Phase 1
The audit invites, via email, the marketing managers (or equivalents)
of a sample frame of 2,413 Australian organisations with an active
web presence (Websites) and 559 organisations in New Zealand to
participate in the study. Selection of the sample frame in each
country involved identifying every 32nd domain name and then
obtaining the email address for the organisation. Typically,
the email address involved a 'webmaster' (webmaster@org.com.au), or
an administration officer (admin@coy.com.au) or the sales function
(sales@coy.com.au). The most difficult domains to identify were from
the edu.au and org.au category for three reasons - either the domain
name name was not in active service; or the state could not be
identified (www.organisation.nsw.gov.au or
www.school.vic.edu.au); or the website failed to provide an
email address.
|
Domain Names |
Population |
Sample Frame |
|
com.au |
64,913 |
|
|
au.com |
3,394 |
|
|
asn.com |
860 |
|
|
edu.au |
3,546 |
|
|
gov.au |
1,360 |
|
|
net.au |
4,342 |
|
|
org.au |
2,964 |
|
|
oz.au |
184 |
|
|
Total |
81,563 |
2,548 |
|
Domain Names |
Population |
Sample Frame |
|
.ac.nz |
172 |
|
|
.co.nz |
14336 |
|
|
.gen.nz |
407 |
|
|
.govt |
330 |
|
|
.iwi.nz |
9 |
|
|
.net.nz |
880 |
|
|
.org.nz |
1327 |
|
|
.school.nz |
427 |
|
|
Total |
17888 |
559 |
The organisation domain names and email addresses were placed in an Oracle database on a RMIT Faculty of Business UNIX server and a unique user validation code generated for each organisation in the sample frames from Australia and New Zealand. Each potential respondent was sent an explanatory email requesting that the relevant marketing manager, or equivalent, respond to the online survey. Response entailed visiting a website on the RMIT Faculty of Business server, entering the validation code, and proceeding to complete the survey [HREF 9]. This method also enables follow-up emails to be sent only to those who have yet to respond. Organisations are only permitted to make a single response. Where an error has occurred, or an organisation wishes to withdraw from the study, respondents are asked to contact the researchers. A number of frequently asked questions (FAQs) are also mounted in a moderated conference area using WebBoard conference software.
Resulting data is imported to SPSS for statistical analysis either as TAB delimited text, or using ODBC drivers, into the SPSS statistical package.
Pretesting of the methodolgy took place in early February, 1999 among practitioners and academics in Australia, New Zealand and the United Kingdom. The results of this pretesting, while interesting, are not indicative of the responses sought on such matters as investment levels in Websites, Intranets and Extranets.
Phase 2
The second phase of the WebQUAL study entails the researchers
undertaking content analysis of the sites which respond and comparing
respondents' rankings (minimum of first three) and ratings (on a
five-point Likert scale) with those made by the researchers on a
number of criteria. The criteria were developed from criteria
used at AusWeb97 for Website judging purposes.
During 1999, It is also intended to have postgraduate marketing students at the University of Otago and RMIT University undertake further content analysis of the same sample of websites for comparison purposes. The results of Phase 2 and its extensions will also be published.
With the continuing increase in adoption of the Internet in marketing comunications and as marketing channel mirrored by increasingly sophisticated development software, an increasing number of companies are more strategically focused and are successfully integrating their web based communications with their more traditional tools and techniques. However, more detailed and ongoing analyses and investigations are required to determine whether these objectives are reviewed on a regular basis and whether measures of success exist.
Related to this work, the researchers hope to establish critical success factors across a range of site clusters e.g. industrial, consumer, not for profit, industry sectors / product categories. The medium term aim is to identify geographic and / or cultural diferences as the survey is 'rolled out' internationally. At this early stage in the WebQUAL Audit study no conclusions are available. However, building on the success and results to date from the longitudinal study in New Zealand, the researchers hope to establish critical success factors across a range of site clusters e.g. industrial, consumer, not for profit, industry sectors / product categories. The medium term aim is to identify geographic and / or cultural diferences as the survey is 'rolled out' internationally. The methodology and analysis of early results are to be discussed at AusWeb99.
Australian WebQUAL development to date has been partially funded by a RMIT Faculty of Business research grant and matched by funds contributed by Stewart Adam. New Zealand WebQUAL development to date has been funded by two research grants from the Department of Marketing, University of Otago, Dunedin. The authors acknowledge PERL, PHP and SQL programming assistance by Dr John M. Wharington of Tycho Software and Hossein Zadeh, RMIT Faculty of Business Computer Services Group.
Stewart Adam and Kenneth R. Deans, © 1999. The authors assign to Southern Cross University and other educational and non-profit institutions a non-exclusive licence to use this document for personal use and in courses of instruction provided that the article is used in full and this copyright statement is reproduced. The author also grants a non-exclusive licence to Southern Cross University to publish this document in full on the World Wide Web and on CD-ROM and in printed form with the conference papers and for the document to be published on mirrors on the World Wide Web.