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408 Part Three Key System Applications for the Digital Age

The universal technical standards of the Internet and e-commerce greatly
lower market entry costs—the cost merchants must pay simply to bring their
goods to market. At the same time, for consumers, universal standards reduce
search costs—the effort required to find suitable products.
Richness
Information richness refers to the complexity and content of a message.
Traditional markets, national sales forces, and small retail stores have great
richness: They are able to provide personal, face-to-face service using aural and
visual cues when making a sale. The richness of traditional markets makes
them powerful selling or commercial environments. Prior to the development
of the Web, there was a trade-off between richness and reach: The larger the
audience reached, the less rich the message. The Web makes it possible to
deliver rich messages with text, audio, and video simultaneously to large num-
bers of people.

Interactivity
Unlike any of the commercial technologies of the twentieth century, with the pos-
sible exception of the telephone, e-commerce technologies are interactive, mean-
ing they allow for two-way communication between merchant and consumer.
Television, for instance, cannot ask viewers any questions or enter into conversa-
tions with them, and it cannot request that customer information be entered into
a form. In contrast, all of these activities are possible on an e-commerce Web site.
Interactivity allows an online merchant to engage a consumer in ways similar to
a face-to-face experience but on a massive, global scale.

Information Density
The Internet and the Web vastly increase information density—the total
amount and quality of information available to all market participants,
consumers, and merchants alike. E-commerce technologies reduce information
collection, storage, processing, and communication costs while greatly increas-
ing the currency, accuracy, and timeliness of information.
Information density in e-commerce markets make prices and costs more
transparent. Price transparency refers to the ease with which consumers
can find out the variety of prices in a market; cost transparency refers to the
ability of consumers to discover the actual costs merchants pay for products.
There are advantages for merchants as well. Online merchants can dis-
cover much more about consumers than in the past. This allows merchants
to segment the market into groups that are willing to pay different prices and
permits the merchants to engage in price discrimination—selling the same
goods, or nearly the same goods, to different targeted groups at different prices.
For instance, an online merchant can discover a consumer’s avid interest in
expensive, exotic vacations and then pitch high-end vacation plans to that
consumer at a premium price, knowing this person is willing to pay extra for
such a vacation. At the same time, the online merchant can pitch the same
vacation plan at a lower price to a more price-sensitive consumer. Information
density also helps merchants differentiate their products in terms of cost,
brand, and quality.

Personalization/Customization
E-commerce technologies permit personalization: Merchants can target
their marketing messages to specific individuals by adjusting the message

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