If there's one tried-and-true statement about the effects of e-commerce on today's business world and consumers, it's that there are no tried-and-true statements. Consumers are finally getting the gist of things and realizing how e-commerce can improve their lives-whether through access to product information, added convenience, lower costs or improved selection. Business models are created and discarded constantly as both up-and-coming and established business race to be the first click for e-commerce consumers.
One of the companies that's been at the forefront of the study of the Internet and e-commerce is technology analysis firm Forrester Research in Cambridge, Massachusetts. Vice president of research Mary Modahl has culled her 11 years of experience studying the Internet in her recent book, Now or Never: How Companies Must Change Today to Win the Battle for Internet Consumers (HarperBusiness, $27). In it, she shares the knowledge of the dotcom consumer through "technographics," Forrester's new take on demographics as well as where the Internet will lead the business model.
Entrepreneur.com: What is "technographics"?
Mary Modahl: Technographics is basically a way to segment consumers just like psychographics or demographics except that it's custom-made for the Internet economy. It specifically looks at how consumers behave online and particularly what their shopping behavior is.
Entrepreneur.com: In your book, you discuss three main types of technographic groups-the early adopters, the laggards and the mainstreamers. What types of consumers make up these groups? Why are they important?
Modahl: The huge divide among consumers is really around attitudes toward technology. Some consumers are optimists about technology: They like it, they like to learn about it, they don't mind trying something new. Others are very pessimistic about technology, even fearful. This is really the biggest single divide among consumers when it comes to looking at online shopping behavior.
Once you further divide these groups by income, what you find is early adopters tend to be people with higher incomes who like technology. The real laggards tend to be people who have lower incomes and don't like technology. And the mainstream is really composed of two big broad groups: high-income individuals who are uncomfortable with technology and low-income individuals who love technology.
Entrepreneur.com: Why are early adopters important?
Modahl: They're the first market for anybody coming online. And they're the initial target; that's where your first revenues will come from and do come from. I think that in particular, New Age Nurturers, who are family-oriented early adopters, are very important because they tend to be brand trendsetters among the population. What they do tends to hold a lot of credence with the mainstream, and they can really set the trend. So reaching those folks in particular is important.
Entrepreneur.com: What obstacles need to be overcome to attract mainstream groups?
Modahl: For the high-income pessimist, it's really about familiarity. High-income pessimists don't like new stuff so you have to make your Web site and your offerings as familiar as possible for these people who are a little bit uncomfortable about something new. Low-income optimists are seeking ultimate convenience. This is the younger generation. They expect information [instantly] on anything they're interested in. They're looking for speed and relevance in Web sites, which is a little bit different from the high-income pessimists, who want to feel comfortable and familiar.
Entrepreneur.com: How is the Internet changing the traditional business model and revenue streams?
Modahl: It really changes all the elements of the revenue stream. It typically makes it possible to offer a new product or value, perhaps even changing the definition of value in a product. If you look at the ways products are sold in traditional channels and the way they're sold on the Internet, you'll often find a new kind of value proposition on the Internet.
The Internet is also affecting pricing. It's making pricing much, much more competitive. And you see lower pricing levels overall as well as more variability in pricing on the Internet.
Then finally, it often changes your customer base. If you look at a product that's sold in the traditional marketplace, often that same product will find new customers online, people that maybe never bought it before. Take the example of eBay. This business has roots in want advertising-people listing their old swingset for sale. And now all of a sudden, eBay is serving a whole new group of people, who are essentially creating part-time jobs by listing stuff for sale on eBay and profiting from it. A whole new customer base has been created in this medium that really didn't exist in the parent business, if you will, which was the want advertiser.
Entrepreneur.com: How is business being affected by high ad revenues-some businesses may be making more money on the ads they sell than on the products they offer.
Modahl: I think you see a lot of cross-over of one revenue type for another in Internet businesses. A lot of that is due to the immaturity of the market, where people are really still trying to figure out what the revenue models are in a lot of industries.
Entrepreneur.com: Do you think that will change as business on the Internet matures?
Modahl: [It will] to some extent, although we're actually in a second generation of business model development. There was a first wave of radical business I talk about in the book. And right now as we're going forward, you're seeing second wave efforts to rejigger and attack the business models of dotcoms. I think we're still in period of turmoil on this. Eventually I would expect more stability.
Entrepreneur.com: In a chapter called "Company Value," you discuss building a brand. What are some unique challenges in this area for Internet companies?
Modahl: When it comes to building a brand, one of the most difficult aspects of that is that people will pick up and use your name and logo all over the Internet. People will write about you and talk about you, and you really don't have the kind of control people have been used to associating with branding. In fact, control really doesn't apply in this world. So while obviously you need to try and be consistent about your messages, it's actually much more important to be able to exchange in a dialogue-two-way conversation and things that no one party controls. And that can be very scary.
Entrepreneur.com: How are intangible assets changing business?
Modahl: Intangibles have certainly become very important in valuing companies. You can't really put a value on somebody's technology know-how or customer base, not the kind of hard value you put on factory assets. That's an important aspect of the new economy.
One thing I would say about intangible assets is that their value is variable. What is an incredibly valuable brand can be real third-rate goods the next day. And the volatility of value is a real challenge for management in the Internet economy. You can have great technology know-how and leadership, and that can be worth millions, even billions, of dollars, and you can lose that leadership in six months and find that's it worth a tiny fraction of what it was worth six months ago. That kind of volatility is something that everybody is really trying to get more accustomed to.