Investigating Internet Channel Opportunities and Challenges: Managers' Experiences Across Five Industries

The development and execution of business models is a complex process to begin with, and it becomes even more complex when we factor in the Internet. The purpose of our study is to understand how organizations, in an effort to transform business practices, incorporate the Internet and integrate it with their existing marketing channels. This exploratory investigation uncovers the opportunities and challenges facing five organizations in their efforts to transform their existing channel strategies to incorporate the Internet. The study reveals the intricate manner with which strategies are applied in order to balance the opportunities afforded by the Internet with the challenges of channel strategy transformation. In the tradition of other qualitative approaches used in previous business research (e.g., Bendapudi and Leone, 2002; Noble and Mokwa, 1999; Workman, 1993), we conducted a series of in depth-interviews with senior executives from five nationally recognized firms in order to build a grounded understanding of Internet channel transformation. This study discusses the results and implications of this investigation. Our article is organized in five sections. We begin by briefly reviewing literature that identifies advantages to adding the Internet channel. This is followed by a review of our study methodology. Next we discuss the findings from the in-depth interviews organized by the opportunities and challenges that accompany Internet use. Then we discuss the managerial implications of this study and offer conclusions and directions for future research. PERSPECTIVES ON FIRMS' INTERNET USE In this section, to place our data within proper context, we review three important perspectives on firms' use of the Internet discussed in the literature that were prominently mentioned in our interviews with marketing executives: leveraging information, direct-to- consumer marketing, and value-chain efficiency. Leveraging Information Leveraging information is the process in which firms collect, process, and use information to add value to their business processes and outcomes. The degree to which firms leverage information using technology in ways that benefit the firm as well as its customer is a factor critical to business success (Glazer, 1991). Rayport and Sviokla (1995) point to the importance of creating value through physical product as well as informational offerings. Additionally, marketers are often interested in how interfirm communication practices help firms to manage business outcomes (Mohr et al., 1996; Anderson and Narus, 1990). The Internet enables the direct provision of multimedia information from firms to consumers, independent of location. In the business-to-business context, the Internet can facilitate the flow of information between firms. One method by which firms are able to leverage incoming or outgoing information involves interactivity. Interactivity signals a shift from broadcast marketing to firm-customer conversations (Deighton, 1996) and is defined as the two-way communication and provision of hypermedia content between individuals and firms (Alba et al., 1997; Hoffman and Novak, 1996). Of particular importance to our research is how the Internet has influenced the two-way flow of communication between firms and their customers, resulting in strengthened customer-firm relationships. Firms are moving from traditional mass marketing practices to strategies based upon leveraging information and developing interactive relationships with consumers. Established business models may give way to new approaches that use information technology to transform existing business processes and strategies (Day, 1998). Direct-to-Consumer Marketing Direct-to-consumer marketing takes place when the manufacturer communicates and engages in selling activities directly to the end consumer. In so doing, the manufacturer often disintermediates the retailer and takes on new channel functions. …