Obstacles on the Internet

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E-commerce is the driving force for businesses looking to establish an Internet presence today. From brick-and-mortar stalwarts to dot-com start-ups, companies are spending millions of dollars to create and promote their e-commerce capabilities.

There's just one problem: A new Advertising Age survey on the future of e-commerce has found that while an increasing number of people are researching products online, most of them go elsewhere when they're ready to buy. Furthermore, the study shows, the outlook for the future looks grim unless marketers start making changes in their Internet strategies right now.

Consider:

* Product and age don't matter when it comes to buying trends. Across all product and service categories and for all age groups, people are more likely to use the Internet as a source of information about products than they are to actually purchase the products online -- and they don't expect that to change in the future.

* While today's Internet users say they expect to do more information-gathering and buying online in the future, their security and privacy concerns, unless addressed by marketers, will restrict the growth of e-commerce.

The exclusive survey, designed for Ad Age by Applied Research & Consulting, a New York-based research company specializing in branding and public opinion, polled current Internet users to find out how they are using the Internet and how they expect that use to change in the future. It covers five age categories, with the youngest group ranging in age from 13 to 17 and the oldest category including people age 56 and older.

While age was a factor in some areas, Internet users generally tended to see eye to eye on major issues -- and that could be bad news for e-commerce sites hoping to cash in as the younger, Web-savvier generation matures.

Overall, users see the Internet as an extremely reliable source of product and service information. A majority (59%) of respondents said information gleaned on the Internet is just as trustworthy and reliable as information from traditional sources, such as TV and print media.

In fact, the Internet has become a required informational tool in the purchase decision-making process. Half of respondents (51%) would not consider a major purchase without first doing some online research, with 60% of the youngest age group agreeing with this question.

That trend will continue. Whether they are using a search engine to find a site, get price and destination information for travel or find reviews and prices for consumer electronic equipment, all age groups expect to use the Internet even more over the next several years.

Respondents also expect their online purchases to increase. However, this increase in e-purchasing is quite small compared to the expected increase in informational uses of the Internet. In other words, the current gap between informational use and e-purchasing is widening, not closing.

Importantly, younger users are no more likely than older respondents to increase their purchasing on the Web. When looking across all product and service categories, the widening gap between information users and online purchasers shows up among younger respondents as well.

For marketers engaging in a waiting game -- hoping younger consumers will be more familiar with the Net and therefore more comfortable with purchasing products and services over the Internet -- this may be a losing strategy.

Rather than waiting for consumers to overcome purchasing barriers on their own, the survey suggests marketers can take several steps to narrow the gap between seeking information and making purchases online.

Clearly, the widespread strategy of getting one's name out there plays a big role in encouraging e-purchases. Driving traffic to a Web site, even for informational purposes, is a key step in getting consumers to purchase the site's products and services. But this has been the main Internet strategy for the the past several years, and the gap between Web site visits and purchases is growing rather than shrinking.

To change that pattern, marketers need to address two other critical areas: security concerns and brand equity.

The survey suggests that concerns about transaction security form the single biggest barrier to purchasing products and services on the Web. The majority of respondents (58%) said they do not believe there is any way to make buying and selling products over the Internet secure.

At least some of this discomfort is driven by concerns about the accountability of Web sites. Only a minority of respondents (34%) said they were just as comfortable giving their credit card information to a site as they were when dealing with a store clerk or a person on the phone.

Respondents from all age groups are also aware of the growing amount of personal information available on the Net and the extent to which this affects their privacy; 85% believe this privacy intrusion will increase.

Much of this perceived decrease in privacy is blamed on companies that track where respondents go on the Net and then sell that information to marketers. The majority (76%) of respondents -- particularly the older ones -- believe this to be an increasing, negative trend.

It's no real surprise that security is of paramount importance to Internet users. Respondents are aware that cookies are placed on their computers without their permission and their movements on the Internet are tracked. They wonder if their financial information, bank accounts and credit card information can also be recorded without their knowledge.

A key way to reduce this concern, our survey analysis shows, is by cultivating brand equity. As in more traditional consumer venues, brand equity appears to play a major role in decisions about product and service purchases over the Internet.

However, the huge increase in the number of e-commerce companies in the past several years has left the consumer with relatively few well-known brands to choose from. Although a great deal of effort has been expended in cultivating brand awareness, that doesn't necessarily translate into brand equity.

More importantly, very few advertising, marketing or communications campaigns have sought to develop key brand attributes that speak to consumer needs such as security. In fact, brand-awareness efforts typically portray Internet companies as quirky, fun and interesting, but pay little attention to the core attributes that would make potential consumers feel more comfortable about engaging in e-purchases.

The core brand attributes that consumers say Internet companies should embody fall into two basic areas: ease of use (e.g., simplicity, speed, convenience) and security (e.g., privacy, trustworthiness, transaction security).

Although the relative importance of these attributes varies somewhat among the different age groups, the top five brand attributes for each group speak to these two basic concerns.

Overall, the Internet remains an appropriate venue for advertising. Although feelings are somewhat mixed, 91% of online users believe that advertising on the Net is on the rise. This trend is perceived more positively by younger respondents, suggesting that resistance to Internet advertising will decrease over time.

Furthermore, most respondents ages 13 to 25 believe the collection of personal information for marketing purposes is a positive trend, as long as they are given a choice in the matter, as well as compensation -- such as free Internet access -- for their loss of privacy.

The single biggest complaint about Internet advertising is rooted in frustration over the decrease in access speed caused by ads rather than resentment of the advertising itself.

But is advertising on the Web the best way to reach the Internet consumer? We asked respondents where they would most likely hear about various products and services in order to determine the most appropriate advertising venues for each category.

The Internet emerges as the most appropriate location for advertising Internet services such as auction sites, search engines and e-directories.

Ads for high-tech products (e.g., computers) and more established e-services (e.g., financial and travel services) frequently are noticed in multiple media, including the Web, TV and print, perhaps suggesting that a more integrated media-buying strategy is called for.

Advertising at brick-and-mortar outlets should be part of the strategy for Web sites selling more traditional products such as clothing and books. Respondents tend to notice advertising for these categories in their associated venues (i.e., print media and in stores), as well as online or on TV.

In much the same way, radio advertising should be considered, in addition to online and TV ads, for sites selling music products or tickets to events such as concerts, movies and sports.

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