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Consumer Opportunity, Ability and Motivation as aFramework for Electronic Market ResearchTroy J. Strader & Anthony R. Hendrickson

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Consumer Opportunity, Ability andMotivation as a Framework forElectronic Market Research

TROY J. STRADER AND ANTHONY R. HENDRICKSON

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A b s t r a c tPast research has focused on transac-tion cost economics as a framework forelectronic market (e-market) research.This takes a simplistic view of consu-mers as economic agents whose pri-mary decision-making criterion is theminimization of transaction costs. Wepropose that the factors that potentiallydetermine e-market success or failurecan be better identified using the Abil-ityMotivationOpportunity frameworkfrom consumer behavior. This looks atadditional factors not considered bytransaction cost-based research andtakes a less simplistic view of consu-mers. We hypothesize that factors thatincrease consumers opportunity to par-ticipate in e-markets, their ability to doso, and their motivation to purchasethrough the on-line channel, will deter-mine the ultimate success of e-markets.This provides a new direction for elec-tronic market research.

A u t h o r sTroy J. Strader (tstrader@iastate.edu)is Assistant Professor of ManagementInformation Systems in the Departmentof Logistics, Operations, and MIS atIowa State University, USA. Hereceived his PhD in BusinessAdministration (Information Systems)from the University of Illinois atUrbana-Champaign in 1997. Hisresearch interests include electroniccommerce, strategic impacts ofinformation technology, andinformation economics.Anthony R. Hendrickson(hndrcksn@iastate.edu) is AssistantProfessor of Management InformationSystems in the Department of Logistics,Operations and MIS at Iowa StateUniversity, USA. He received his PhDin Business Administration (ComputerInformation Systems and QuantitativeAnalysis) from the University ofArkansas in 1994. His research interestsinclude virtual organizations,psychometric measurement, and object-orientation.

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INTRODUCTION

An important electronic commerceresearch issue is to identify the factorsthat affect electronic market (e-mar-ket) success in the global economy,individual industries, and specific elec-tronic markets or electronic saleschannels. Why do some e-marketssucceed while others fail? The purposeof this article is to propose a newframework for analyzing and predict-ing the impact of e-markets on eachof these levels. Our study looks atthese issues from the consumer per-spective. The factors that provide in-centives for sellers and transactionintermediaries are outside the scopeof this paper.Past research has focused on trans-

action cost economics as a frameworkfor electronic market research (Bakos1991; Benjamin and Wigand 1995;Gurbaxani and Whang 1991; Lee1998; Malone and Rockart 1991;Malone, Yates and Benjamin 1987,1989). This takes a simplistic view ofconsumers as economic agents whoseprimary decision-making criterion isthe minimization of transaction costs.We propose that the factors that po-tentially determine success or failurecan be better identified using theAbilityMotivationOpportunity fra-mework from consumer behavior(MacInnis and Jaworski 1989). Thislooks at additional factors not consid-ered by transaction cost-based re-

search and takes a less simplistic viewof consumers. We hypothesize thatfactors that increase consumers op-portunity to participate in e-markets,their ability to do so, and their moti-vation to purchase through the on-line channel, will determine the ulti-mate success of e-markets.The following sections describe the

findings of our study. We first identifyfactors that affect consumer opportu-nity, ability and motivation. We thencombine this into an overall analysisframework. Finally, we identify man-agerial implications that can be pro-jected from our study and discuss theconclusion and research implicationsof our study.

Factors That Affect ConsumerOpportunity to Use ElectronicMarkets

Increasing consumer opportunity toaccess e-markets affects the success ofe-markets across the economy as awhole. Lack of opportunity for con-sumers to access e-markets makes theremaining issues moot. Consumer op-portunity is a necessary, but insuffi-cient, condition for e-market success.Factors that affect consumer opportu-nity include existence of an informa-tion infrastructure such as theInternet and World Wide Web, avail-ability of this infrastructure for com-mercial purposes, consumer access to

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personal computers and modems thatenable them to access the infrastruc-ture from home or at work, andInternet service providers (ISPs) thatoffer this access. This is a primaryreason that the current potential fore-market success in the United Statesis far greater than in areas like Africathat do not have a widely availableinformation infrastructure.

Factors That Affect ConsumerAbility to Use ElectronicMarkets

Given that consumers have the oppor-tunity to participate in electronic mar-kets, the next issue is whether theyhave the ability to do so. Increasingconsumer ability to use e-marketsaffects the success of e-markets in anindividual industry involving a set ofrelated products. Lack of consumerability makes their motivation to use aparticular e-market a moot point.Ability, as opportunity, is a necessary,but insufficient condition for e-marketsuccess.A first factor is the consumers level

of computer literacy. Lack of compu-ter literacy makes consumers unableto use an e-market, even if they haveaccess. Other factors relate to consu-mer ability to gather product informa-tion in the e-market. Either theconsumer must have personal know-ledge of the industrys products, ordescription standards must exist forsufficiently describing the productsthrough the on-line interface, or abroker must be available that cansupport consumer information-gath-ering and purchase decision-making.Consumers often show their ability topurchase products through their cur-rent use of on-line channels forsearching for production information(Ramaswami, Strader and Brett1998).Consumer ability as a factor that

affects e-market success can be illu-strated by examples in the music andbook industries. Jason and MatthewOlim founded CDnow Inc. from thebasement of their Ambler, Pennsylva-nia home. Jason Olim, a jazz fan

frustrated by skimpy selections in mu-sic shops, came up with the idea of acyberstore that could offer every jazzalbum made in the US and 20,000imports. Shoppers place their orderswith CDnow (cdnow.com), which, inturn, contacts distributors. Most disksare delivered to the customers doorin 24 hours (Rebello, Armstrong andCortese 1996). E-markets are success-ful in this industry because consumershave knowledge of the product, it iseasy to describe the product beingoffered (artist and title), and there isno need for a transaction broker.Books are another product that

consumers purchase on-line. Onebookseller on the Web is Amazon.-com Books. Their site advertises aspotlight book, book of the day, titlesin the news, featured books, andbooks that are hot this week. Some oftheir books are discounted by asmuch as 30%. By clicking on booktitles, and some authors, more de-tailed information can be accessed(Amazon.com 1998). It is no longernecessary either to go to a bookstoreto buy a book or to find mail-orderbookstores through a print advertise-ment. Again, e-markets are successfulin this industry because consumershave knowledge of the product, it iseasy to describe the product beingoffered (author and title), and there isno need for a transaction broker.

Factors that Affect ConsumerMotivation to Use ElectronicMarkets

Given consumer opportunity to ac-cess e-markets, and their ability toparticipate in them, the remainingissue is to motivate the consumer touse a particular e-market, or on-linesales channel, in a given industry.Consumer motivation is of primaryconcern to managers considering, orcurrently using, an on-line sales chan-nel for selling their products, andseveral factors affect the level of mo-tivation for consumers to use a givene-market.Consumers can be motivated to use

a site by reducing their purchase

costs. Product prices, or transactioncharges such as those for using abroker, can be reduced in the on-linechannel to draw consumers to thesite. It also reduces the costs to searchfor information about product prices,features, and so forth. For digitizableproducts it may also be possible toreduce distribution costs given theability to electronically distribute theproduct instead of using traditionalphysical distribution. This is particu-larly possible for products such ascomputer software. Consumers canalso be educated to see that in manyinstances it is more convenient to usee-markets than to use traditional mar-kets (such as retail stores). The pur-chase type may also determinewhether an e-market is used. E-mar-kets are especially useful for analyticalpurchases, but only have limited usefor impulse purchases.The final factor, and likely the most

important, is reduction of risk as aconsumer motivator to purchase in e-markets. A perceived lack of on-linesecurity, potentially resulting in stolencredit card numbers, and so forth, canresult in e-market failure. Addition-ally, higher-priced products that in-crease potential loss fromunscrupulous sellers may reduce thelikelihood of success for an e-market.There is also a distribution risk in theform of potential damage to productsthat need to be physically shipped.Strategies to increase consumer moti-vation to use a particular electronicmarket (or on-line sales channel) arediscussed in the managerial implica-tions section.

ELECTRONIC MARKET IMPACTANALYSIS FRAMEWORK

Our framework, shown in Figure 1,illustrates how various issues combineto produce electronic market successor failure. While we focus mainly onconsumer issues, this framework alsopoints out how sellers and intermedi-aries are important components.Electronic market success is asso-

ciated with the number of transac-tions completed through the on-line

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channel. The more transactions com-pleted through an e-market, thegreater the success of the e-market.Transactions involve not only consu-mer participation, but also seller parti-cipation. Intermediary participation isshown by a dotted box because it mayor may not be required depending onthe nature of the transaction. Factorsthat affect seller and intermediary par-ticipation are outside the scope of thisstudy.Figure 1 focuses on the consumer

issues related to electronic marketsuccess. It illustrates how the indivi-dual factors can be combined into ananalysis framework. Some of the ma-jor issues related to consumer oppor-tunity, ability and motivation arelisted on the far left of Figure 1. Asthe examples illustrate, if consumersdo not have the opportunity to parti-cipate in e-markets then e-marketswill fail. If consumers have the oppor-tunity to participate but not the abil-ity then e-markets are likely to fail inan industry. Finally, if consumers havethe opportunity and ability to partici-pate, but not the motivation to use aparticular e-market, then that specifice-market, or on-line sales channel, islikely to fail. E-market successes areassociated with situations where con-sumer opportunity, ability and moti-vation all coexist.

MANAGERIAL IMPLICATIONS

In this study we identified specificfactors that affect each of the consu-mer issue areas. The managerial im-plications that arise from our studyare associated with strategies that canbe employed to increase consumermotivation. Opportunity and abilityare often outside the scope of man-agerial control, but companies may beable to motivate customers to buytheir products through an on-linechannel.

Increasing Opportunity. It may bedifficult for an individual company toincrease their customers opportunityto purchase on-line, but the increase infamily PC ownership, and use of theInternet through ISPs, may increaseopportunity across the economy as awhole. This has positive repercussionsfor firms that want to move toward anon-line sales channel. Consumer op-portunity likely falls within the realm ofpublic policy. If governments feel thatelectronic markets benefit the econo-my, then we may see public moneybeing spent to increase access. In 1998the US government showed supportfor electronic markets through the In-ternet Tax Freedom Act (ITFA). On26 February 1998, President Clintonendorsed the ITFA. He is quoted assaying, I support the Internet Tax

Freedom Act now before Congress,because it takes into account the rightsof consumers, the needs of businesses,and the overall effect of taxation on thedevelopment of Internet commerce.We cant allow unfair taxation to weigh[the Net] down and stunt the develop-ment of the most promising neweconomic opportunity in decades(Internet Tax Freedom Act 1998).

Increasing Ability. Increasing cus-tomer ability may also prove difficultfor companies, but, as younger peoplewho have used personal computersthroughout their education becomeadults, the proportion of consumerswho have the ability to participate inelectronic commerce will increase.Companies may also use traditionalmarketing methods to educate theircustomers about the new on-linechannel. Getting customers to use thee-market will give them experiencewith it and increase their confidencein their ability to participate. Finally,industries that do not have commonproduct description standards can de-velop them so customers can be con-fident that they know exactly whatthey are buying. These descriptionstandards should use text and graphicsfor now, but may use other multi-media, such as video and audio thatare commonly available on the Web,in the future. If firms in an industrysee a benefit to increasing their con-sumers abilities to participate in elec-tronic markets, then industryconsortiums may be formed to ad-dress the issues involved.

Increasing Motivation. Individualcompanies have the most direct effecton their customers motivation to pur-chase on-line. They can offer lowerproduct prices in the e-market, or theycan reduce transaction charges. Theycan also educate their customers aboutthe convenience of using the e-market.But, the most important issue forcompanies to address is to minimizetheir customers risk related to e-mar-ket transactions. Offering a secure sitewhere customers are confident thatthey will receive the product that theypurchased quickly and in the rightcondition is vital. While being the low-cost provider in an e-market is a good

Consumer OpportunityCommercial Internet/WWWPCs/ModemsInternet Service Providers

Consumer AbilityComputer literacyKnowledge of product areaProduct description standardsLimited need for brokerConfidence in decision making

Consumer MotivationLower pricesLower transaction costsMore convenienceAnalytical purchaseMinimized risks

ConsumerParticipation

IntermediaryParticipation

SellerParticipation

ElectronicMarketTransactions

ElectronicMarketSuccess

Figure 1. AbilityMotivationOpportunity Framework for Electronic Market Research

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short-term strategy, being a trustedseller in an e-market is a better long-term strategy. Being a trusted earlyentrant in an e-market can result inlong-term success and a large numberof loyal customers. We have seen thiswith Amazon.com and CDNow.

CONCLUSION AND RESEARCHIMPLICATIONS

Previous electronic market researchtook a simplistic transaction costminimization view of consumers. Thishas been useful up to a point, butfuture electronic market researchneeds to look more deeply at consu-mer behavior in these new on-linemarkets. Our framework identifies anumber of electronic market researchissues and illustrates how they arerelated to each other. The overallconclusion of this study is that e-market success, or failure, is likelyaffected by consumers opportunity,ability, and motivation to participatein e-markets. This provides a newdirection for future e-market research.

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Internet Tax Freedom Act (1998)Clinton Administration Support[http://www.house.gov/cox/nettax/Web-clinton.html] accessed15 September 1998.

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MacInnis, D.J. and Jaworski, B.J.(1989) Information Processing fromAdvertisements: Toward an

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Malone, T.W. and Rockart, J.F. (1991)Computers, Networks and theCorporation, Scientific American265: 12836.

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