The Relevance of Brands for Electronic Commerce Results From an Empirical Study of Consumers in Europe

As the use of the Internet continues to grow among consumers, firms need to assess the requirements of individual branding-strategies in the context of electronic commerce. Although branding has been an integral part of the marketing mix for a long time, the issue of brand orientation and consumer loyalty in the context of the Internet has not yet seen the same attention. This paper presents results from a major empirical study on Electronic Commerce in the automotive industry in Europe. The study analyzes the impact of the Internet and Electronic Commerce on the relevance of brands, as well as on the information behavior and decision variables of online consumers. The results show that, compared to offline environments, branding strategies play an even more important role in online environments. The paper also summarizes some of the consequences of these developments for online branding strategies, such as personalization methods and one-to-one marketing. 1 The Challenge: Offline Brands for Online Consumers Brands are typically associated with products and services that have been offered for a long period of time, and as a result, have developed deeply anchored and clear images in the mind of the end consumer[1][3]. As the informational parts of economic processes are being conducted through digital means of communication in the context of Electronic Commerce, the role of brands could be in for a change [2]. While branding strategies have been discussed at length in the context of traditional marketing management strategies, less research has been conducted on the question of how the Internet is impacting the role and the relevance of brands [2][16]. 0-7695-0981-9/01 $1 A number of differences between both environments potentially plays a role in this context, among them interactivity, information richness and personalization [17][2]: • Interactivity: While in traditional marketing environments the brand-leader can control products and contents, as well as the surrounding context, this relationship is much less obvious in online environments. The (passive) recipients of marketing activities are becoming parts of interactive communication processes, able to exchange experiences about the product directly with other customers, e.g. within online communities. • Information richness: Information displayed on a Web site can become a direct and integrated part of the evaluation process of a brand. Rich data can be provided to help educate the consumer on the origins of a product or technical specifications. • Personalization: Instruments such as one-to-one marketing and the customer-specific information that it creates facilitate the marketing of individualized products to a much greater extent than was possible in the past with mass marketing. In this vein, the Internet provides the means to create a variety of virtual customer-specific brands, depending on the context and individual Web site design that is being used [5][15]. This paper addresses the role of brands in online environments, in particular the consumer market for automobiles. The analysis is based on a major study on the potential for automotive sales and distribution in Electronic Commerce that was been conducted in Europe in 1999. After outlining the research setting in Section 2, the results are discussed in Section 3. Section 4 summarizes the paper and presents a number of conclusions. 0.00 (c) 2001 IEEE 1 Proceedings of the 34th Hawaii International Conference on System Sciences 2001 2 Research Setting and Hypotheses In addition to some of the basic functions of brands, such as product identification, orientation, and segmentation of product and service categories, more sophisticated interrelations have to be considered, such as the signalling of quality standards and levels of prestige [11]. Given that consumer brand orientation is generally strongest and most differentiated with complex, high involvement goods that require significant explanation, an analysis of the automotive sector seems adequate [1][12][16]. High involvement is generally based on factors such as high financial expenses, high personal risk, and long purchasing cycles. As a result, consumer remorse tends to be low in cases where brands are switched. New intermediaries emerge that are highly visible to the consumer. Although these intermediaries have no manufacturing facilities of their own, some of them feature significant retail brands. They originate from industry areas outside of traditional automobile retail and marketing structures, such as AutoByTel (newly founded) or CarPoint (founded by Microsoft). To analyze the impacts of Electronic Commerce on the automotive industry, an empirical study has been conducted among 5,055 consumers in Europe. Survey participants were primary car users, i.e., those individuals that are using the automobile, most of all members in a household. These users are likely to be well informed about car-related purchasing decisions. Even if they are not responsible for the purchasing decisions alone, they are likely to have significant influence on these decisions. Representativity was guaranteed by the use of panels of market research companies [9][16]. The countries were selected according to the importance of the national automotive industry, as well as the affinity of consumers for the Internet and its penetration (Table 1). Table 1: Basic Figures of Cars Online Europe 1999[9] Aspect Characteristic, Comment Survey period November 1998 to March 1999 Survey Method Questionnaires in written form, anonymous, offline in representative panels, organized by market research companies, including GfK/Nürnberg in Germany, partner firms in other countries. Addresee Primary car users Sample Total number of responses from 5 European countries: 5.055. Selection of countries according to Internet penetration and importance of automotive industry : Germany: 1,031, France: 1,017, Spain: 958, Sweden: 1.059, England: 990 Data set 229 questions, approx. 1.9 Mio. data points. Cars Online Europe 1999 represents one of the largest empirical surveys of this type, to date Representativity Representativity regarding socio-demographic factors has been assured via T-Tests. 0-7695-0981-9/01 $10 Following a thorough literature review, four hypotheses can be extracted that summarize the discussion on branding in online environments, specifically the impact of the Internet: • on the general importance of brands [2][3]; • on the process of information gathering, such as the use of additional (neutral) sources of information, and the role of previous experiences and brands in Electronic Commerce (indirect impact) [16][20]; • on the price vs. brand dominance in the purchasing process [4][6][8][11]; • on the possibility for individualized information and following individualized brands [17][13]. Basically, brands represent the product and service portfolio of a manufacturer and allow for an emotional differentiation in the form of orientation and the subjective generation of trust [1]. Together with the lack of personal ties, the wealth of information available on the Internet can lead to a depersonalization of relationships and following decrease of consumer loyalty [11][20]. In addition, negative examples, perpetuated in the press, can increase the perceived risks of online purchases, in particular in the case of less well-known brands. Online branding strategies have to assess the question of how established brands, such as BMW or reputable retail brand, such as Amazon.com, can provide online consumers with orientation and help build trust. In this case, the brand represents the entire range of products that is offered by a particular vendor. As a consequence, we would expect the brand orientation to increase on the Internet: H1: The importance of brands increases as the use of the Internet for information and purchas-