Cognitive Lock-In and the Power Law of Practice

The authors suggest that learning is an important factor in electronic environments and that efficiency resulting from learning can be modeled with the power law of practice. They show that most Web sites can be characterized by decreasing visit times and that generally those sites with the fastest learning curves show the highest rates of purchasing. T he widespread use of information technology by buyers and sellers is thought to increase competition by lowering search costs. " The competition is only a click away " is a common phrase in the popular press and an oft-cited reason for the failure of Internet ventures to achieve profitability. A potential result of reduced search costs is a decrease in brand loyalty and an increase in price sensitivity. At the extreme, there is the fear of a price-cutting spiral that drives out profits—labeled in the popular press as " perfect competition " or " frictionless capitalism, " but more correctly called Bertrand competition (Bakos 1997; for a discussion, see Brynjolfsson and Smith 2000; for dissenting reviews, see Alba et al. 1997; Lal and Sarvary 1999; Lynch and Ariely 2000). As a result, there has been interest in how to retain customers in electronic environments. The most commonly discussed solution is creating loyalty to Web sites, so research attempts to identify which sites exhibit greater loyalty or " stickiness " and speculates about what causes repeat visits. The most common loyalty metric is the frequency and cumulative duration of visits. For example, eBay is listed on the New York Times top ten stickiest sites because, though it has relatively few users, visitors spend approximately 90 minutes a month there, according to Web rating services such as Media Metrix. Consequently, eBay is thought to be highly successful. Other loyalty metrics relate visiting loyalty and purchasing loyalty, such as the number of visits per purchase, which is termed the " browse to buy " or " look to book " ratio (Schonberg et al. 2000), to the percentage of customers who become repeat customers (Win 2001). In this article, we describe a mechanism and model for understanding the development of loyalty in electronic environments and an accompanying metric based on an empirical generalization from cognitive science, the power law of practice (Newell and Rosenbloom 1981). For an intuitive understanding of the mechanism, imagine a user visiting a Web site to purchase a compact disc (CD). This …