Going Online is Different

Today Every business must think about its online presence. Only a few years ago, having a website was deemed sufficient to be a Web-based firm, but today this is no longer the case. Search engine listings, blogs, social media pages, mobile apps and video channels are now making a firm’s online image more complicated to build and harder to manage.

When businesses go online, they quickly discover that the rules are different, and knowing these rules is essential for online success. This series of articles will discuss these rules, and how firms can use them to gain success online. Topics to be covered in future articles include designing an online strategy, the essential online market analysis, online business models, building a site to support your business strategy, measuring online success and implementing a Web-based project.

This article will discuss why going online is different, why the Internet is a new business environment which must be addressed on its own terms.

Online Drivers

There are three online drivers which underlie the entire Internet, and make it one of the most disruptive business environments in which one must operate.
Digitalization - Everything on the Internet: text, video, sound, photographs, etc. is in a digital format which can be easily transmitted and stored by computers and networks. For businesses this means that digital content is easy to copy and to share with others, and that each copy is as good as the original.
Underlying Technology - The Internet is based on a number of different technologies, each one advancing at a rapid rate. This creates an atmosphere of constant change and updating, as new technologies rapidly replace old ones. This makes it harder for firms to embrace and use new technologies as the pace of change may be faster than the firm can profitably absorb.
Technology-based Interface - People must access the Internet through some type of technology-based interface: a computer screen, a mobile phone, a keyboard, etc. Each of these interfaces imposes its own constraints and limitations on the user experience, and firms must understand how their visitors wish to interact with them.

Firms going online or already operating in the online world must understand how these online drivers affect their particular business. For example firms selling physical goods will be less affected than those selling digital goods in terms of unauthorized duplication, but may be more affected as a new digital technology replaces one of their physical products. Most importantly, forms must understand the effects of the technology-based interface. Online firms interact with customers only through this interface, and it greatly affects the user experience each customer will have.

Online Competitive Environment

In addition to these underlying technology drivers, the online competitive environment is also quite different from the traditional offline world.

Competition is different online. Rather than competing firm-against-firm offline, in the online world companies must now compete across business sector boundaries and between alliances of companies. Competitors can appear from entirely different businesses, even from anywhere around the world. For example an automobile retailer must now compete not only with other local dealerships, but also with online dealerships, leasing companies, best-price finding sites, used car sites, auction sites and free classified advertisements. Each of these competitors may require a different strategy to successfully compete.

Everything moves faster online. Competitive actions and responses occur at faster rates due to the online drivers described above, and the ability of online firms to rapidly make changes to their business models. In addition a major industry merger or partnership can create a new competitor overnight, and a new technology can destroy an older technology. Successful online companies must develop a strategy that can adapt rapidly and easily to changing market conditions.

Customers are different online. New products and services yield new customer behaviors, and these new behaviors in turn create new customer requirements, especially online. For years people carried music using portable cassette tape and CD players. Capacity was limited and selection was mainly commercial tapes and CDs, or poor-quality tapes copied over and over. The introduction of solid-state MP3 players, and in particular the iPod, changed consumer expectations in terms of quantity and quality and altered consumer behavior, as the number of people with earbuds walking down the street will demonstrate.

Consumer behavior is also changing as they move online and connect to others using tools such as social media. As people connect easily with large numbers of other like-minded people, power has shifted from firms to consumers. Marketing is no longer about pushing out a message to consumers, but about creating an engaging way to pull them in and interact with them. However, even though we can now connect with many more people, we still tend to cluster with groups of people who share common interests. Just as in the offline world, we join online groups and frequent websites which have a particular interest to us.

Finally, participation in the online world varies. Some people will be very active, creating unique content and talking about content that others have produced. Others will be less active, joining groups, reading and watching content, and posting occasional comments. Many more will be mostly inactive, mainly watching from the sidelines or not even participating at all. Each of these levels of participation requires its own approach to reach an engage with potential customers.

Do note that participation can also vary by individual. One may be very active in some groups and almost inactive in others, depending on one’s particular interests. The online world is a very complex web of relationships and interactions.

More Degrees of Freedom Online. While all of these make doing business online more challenging, there are also unique opportunities. An online business frequently has more degrees of freedom than an offline business. While an offline business will incur significant costs to set up each physical store, an online business can set up multiple online stores, each tailored to a particular market in terms of quality, service price, etc. Many different business models are possible, and online firms frequently use two or three different models as part of a flexible strategy.

Moving online is not a simple process, and firms wishing to move into the online world or improve existing online performance, must develop a plan which is realistic and provides a clear roadmap.

A version of this article appeared in 2011 on the PowerRetail website as Getting Started Online: Assessing Your Opportunity.

 

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