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Electronic Commerce:
Interaction Does Make A Difference

Steven L. Telleen, Ph.D.
Principal
iorg.com


There are two major schools of electronic commerce strategists. The first sees electronic commerce as an extension of brick and mortar concepts into the virtual world. They specialize in identifying the tweaks and add-ons that electronic conversion requires or allows, never questioning that their assumptions on how buyers and sellers find each other and interact might change dramatically. In fact, many are selling advice based on the principle that electronic commerce will amplify the very characteristics that are most at risk to be undermined as the new marketplaces begin to unfold.They find the dissolution of their comfortable marketing formulas and practices to be unthinkable. To them, electronic commerce is about applying  technology, not changing the foundation of the buyer-seller interaction.
 
But the truth is, many of today's marketing conventions are based on - and dependent on - the lack of interactivity in traditional location-transparent communication.

Print media (starting with the printing press) vastly expanded our ability to distribute information over wider areas, because the writer no longer had to accompany the message, and a large number of messages could be created and distributed. In fact, the writer often was not aware of all the places the message found its way. It was the beginning of location transparent communication. While print did allow interaction at a distance, the interaction was slow and therefore of limited capability in commerce situations. The main use of print was a one-way,  broadcast of information by sellers to large numbers of individually anonymous potential buyers - mass markets. 

Varients of mass market approaches remain the basis of commerce today. Marketing programs are based on trying to identify sets of buyers with similar buying criteria or characteristics (identifying the market segment) so they can be sold to without direct interaction. When properly identified, the segment information is used to target information to the group and to collect "feedback" on unmet needs. As everyone figures this out, the game shifts to segmenting smaller and smaller markets to create unique differentiators. Most one-to-one marketing approaches in electronic commerce are an attempt to apply mass market approaches to the new interactive medium, rather than a shift in the buyer-seller paradigm.

This emphasis on markets evolved to compensate for inefficiencies in bringing together buyers and sellers in a marketplace that lacked interactivity. The importance of brand, for example, has been largely due to the inability of buyers to share good information on location and quality of goods and experiences. The base was too distributed and the communication too inefficient, so brand became a substitute for shared experience. And once established, brands and branding became more a function of investment in image than a function of shared collective customer experience. Granted consumer and public affairs groups provided some shared customer experience, but both buyers and sellers were burdened by the lack of location transparent interactivity.

The early days of electronic communication only amplified this problem. Broadcast media expanded the location transparency of the message, but actually reduced the interactivity between buyers and sellers, and buyers with other buyers. The telephone extended both location transparency and interactivity, but was limited by its one at a time connection and its ability to use only one sense - hearing. Markets and branding not only became more prominant, the power to control markets shifted heavily toward the sellers and away from the buyers. 

A graphical version of this is seen below. If we consider two axes, one for location transparency and the other for interactivity, we get a conceptual space that easily divides into four quadrants. As we can see, prior to the printing press, location transparency was low. The advent of the printing press raised the level of location transparency, but lowered the level of interactivity. Electronic media raised the location transparency even more, but did little for interactivity. Today's commerce models are all based on the technologies that cluster in or close to the upper left-hand quadrant. When the printing press catipulted us into that quadrant for the first time, some 450 years ago, the change in communication completely restructured the way buyers and sellers came together, culminating in the large corporate  "market making" culture of the last half of this century.

The Internet (today's backbone for electronic commerce) catpults us into an entirely new quadrant - one we have never operated in before. There is good reason to believe this will change everything - overthrowing, rather than amplifying the existing conventions of commerce.

This brings us to the second school of electronic commerce strategists. They see the potential for a major shift in the very foundation of how buyers and sellers are brought together. 
 
This shift will be so profound that over time the whole economy will restructure - not as a virtual version of today's supply chains, stores and malls, but as a virtual bazaar of custom goods and services and electronic exchanges of commodity goods and services.

 Nothing will have fixed prices - the combination of instantaneous, location-transparent, interactive communication will create near frictionless marketplaces moderated by impartial computer programs. Individuals will become increasingly comfortable operating in these auctions and exchanges as both buyers and sellers of goods and services. This recognition that we all are sometimes buyers and sometimes sellers already is breaking down the conceptual separation of business-to-business and business-to-consumer thinking. One is the process from the buyer's perspective, the other from the seller's perspective. In the new model both become marketplaces where buyers and sellers interact and easily change roles from one to the other.

The shift in the communication space represented above is why the eBay model is more profitable than the Amazon model. EBay provides the infrastructure to let anyone be a buyer or a seller on a moments notice. They are a utility, not a retail outlet. Companies like advoco and Monster Talent Market are pioneering a similar model for bringing buyers and sellers together in the personal and professional service marketplace.Companies like MetalSite are pioneering the concept on the supply side. For more examples see the "Auctions and Exchanges" section of EC Tools on this site.

This shift in communication also is why customer interaction processes at leading edge EC companies incorporate people back into the system. Customers may want to service themselves much of the time, but they want the ability to talk back, and have immediate, interactive access to a person, on their terms, when they feel the need. All aspects of commerce are moving from the left side to the right side of the communication space presented above. 

The world is changing, and pieces of the future are to be found everywhere. They remain fragmented, but integration is just a matter of time. 
 
 

After all, buyers and sellers have fears, habits and blind spots to overcome before most marketplaces can reach a critical mass to begin operating efficiently.

That is the big challenge now. When and how will the culture change - what dislocations will arise and how will we address them?

Related article:
Electronic Commerce: clinging to the tip of the iceberg


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Originally Published August 1999
For more information contact: stevet@iorg.com
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