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Internet Shopping, Consumer Search And Product Branding

Article in Journal of Product & Brand Management · September 1999

DOI: 10.1108/10610420010316302 · Source: CiteSeer

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 An executive summary for
managers and executive Internet shopping, consumer
readers can be found at the
end of this article search and product branding
Michael R. Ward
Assistant Professor, Department of Agricultural and Consumer
Economics, University of Illinois, Urbana-Champaign, Illinois, USA
Michael J. Lee
Graduate Student Department of Economics, University of Illinois,
Urbana-Champaign, Illinois, USA

Keywords Brands, Internet, Consumer behaviour, Shopping

Abstract Recent interest in the Internet as a medium for commerce has raised questions
about the usefulness of branding on the World Wide Web. Examines whether consumers
use brands as sources of information when shopping on the Internet. Applying theory
from the economics of information, predicts that recent adopters of the Internet will be
less proficient at searching for product information and will rely more on brands. As they
gather more experience on the Internet, their search proficiency should rise and their
brand reliance should fall. These hypotheses are tested and confirmed using usage and
opinion survey data from the Internet community. The results suggest that branding can
facilitate consumers' acceptance of electronic commerce.

Introduction
Rapid growth Commerce on the Internet, or e-commerce, has experienced rapid growth
during its infant years. The pace is not expected to slacken. Forrester
Research estimates that online sales in the USA amounted to $7.8 billion in
1998, and forecasts that this form of electronic commerce will reach $108
billion by 2003. While this would still amount to under 5 percent of all retail
sales in 2003, it would represent a dramatic increase in Internet retailing.
Investors seem to believe that the volume of e-commerce will grow
considerably. For example, Amazon.com, a leader in electronic retailing,
now has a market capitalization of $22 billion, greater than either Sear's or
all of America's bookstores put together.
Variety of choices Online shoppers appear to be attracted to the ease with which they can find
products on the Internet, the detailed product information available and the
variety of choices offered. Because of the relative ease of vendors setting up
shop, myriads of smaller retailers have embraced the Internet. However, with
the proliferation of online retailers, sellers are having difficulty
distinguishing their products or services from their competitors', especially
those of unscrupulous fly-by-night companies. Consumers often bypass these
problems by relying on branded products. Ernst & Young recently reported
that 69 percent of those surveyed stated that brand names play a significant
role in their online buying decisions. As a result, marketing through
established brands may be required on the Internet, even though consumers'
cost of information gathering seems quite low.
We investigate the ability of brand names to convey product information to
potential buyers as a substitute for consumer's own information-gathering
activities. It has long been debated whether advertising is used solely to
promote brand loyalty (Dixit and Norman, 1978) and thus tends to be
anticompetitive (Comanor and Wilson, 1974) or if it conveys information
more efficiently than alternative mechanisms (Nelson, 1970, 1974). We find

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6 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000, pp. 6-20, # MCB UNIVERSITY PRESS, 1061-0421
 evidence that suggests that consumers with more years of Internet experience
are more efficient at gathering product information on their own and that
they also tend to rely less on brand names when purchasing. We infer that
brand names are substitutes for consumers' direct information gathering ± at
least on the Internet ± and thus may contribute to market efficiency.
Our findings are based on data from Georgia Institute of Technology's
Graphics, Visualization and Usability (GVU) center Eighth Survey of
Internet Usage. The GVU has conducted semiannual surveys of Internet
usage since 1994. GVU's Eighth Survey, conducted in October 1997,
includes information about respondents' product search behavior, brand
reliance and a measure of their Internet experience. We use these differences
in Internet experience to track a natural progression from a relatively naive
consumer who relies on brand information to a relatively savvy consumer
who has less need of brand information. Unlike the near ubiquitous
experiences and understanding consumers have with traditional retailing,
knowledge of the Internet and how to shop using it varies widely. The
newness of the Internet and the relationship between Internet experience and
shopping proficiency allow us to identify effects that may not be apparent for
other forms of retailing.

The Internet information and uncertainty

Exchange of data The Internet was originally designed for the exchange of data between
decentralized computers and has evolved into the World Wide Web[1]. The
ease of publishing on the Web has facilitated the adoption of this technology
by consumers and producers of goods alike. With the help of search engines
like Altavista and Excite or portals like Yahoo! and AOL, consumers can
obtain product information and often make purchases with much less effort
than through other distribution channels. Likewise, with the low cost of Web
publishing, firms can offer more product information through this medium
than most others. This results in more product information, on balance, being
supplied to consumers than ever before.
Plentiful product information may not alleviate all the problems of consumer
search for two reasons. First, despite the increased availability of product
information, it is still not costless to obtain (Brynjolfsson and Smith, 1999).
On the Internet, search for information may involve a non-trivial navigation
of hyperlinks between Web sites and an intelligent usage of the search
engines and directories. For many users, especially those inexperienced to
the Internet, finding product information may be frustrating. Indeed, 46
percent of those surveyed in the GVU's Ninth Survey in 1998, indicated that
they had trouble finding new information. Thus, although consumers may
often like to obtain all available information, they may not practically be able
to do so.
Residual uncertainty Second, even with the information available, some uncertainty about product
quality is likely to linger. Although some product characteristics can be
easily illustrated or described on a Web site, other product characteristics
require consumption before their quality are known. For example, firms can
and do sell food products from their Web sites. A firm could state the price,
ingredients, and availability of its product, but it would have difficulty in
both verifying the truthfulness of this objective information and describing
subjective information, such as flavor or feel. As a result, some residual
uncertainty about the product features is likely to remain.
The costs of search and the unverifiable nature of some product
characteristics pose challenges to consumers. Both problems limit the

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 7

 amount of confidence a consumer may have about a product's quality. These
problems apply to all forms of retailing, but have specific consequences
when applied to the Internet. Because of the low costs of setting up a Web
site, unreputable firms offering low quality products could potentially claim
their products are of high quality, earn a profit before the ruse is uncovered,
and then quickly disappear. Thus, even though the Internet can easily
provide more information than other distribution channels, the ease with
which scams can develop may induce consumers to require more information
in order to purchase.

Branding as an assurance of quality

Market failure Information asymmetries between buyers and sellers can result in market
failure (Akerlof, 1970). Buyers are only willing to pay the expected value of
the products offered for sale. Sellers of a high quality product, however, may
withhold their product if their costs exceed this price. Since this biases their
expectations upward, buyers revise their expected value of products offered
for sale downward. This, in turn, could deter sellers from offering relatively
higher quality, more expensive products. The resulting adverse selection on
the part of sellers can ultimately lead to a market failure, one in which only
the lowest quality products are offered for sale. For example, in GVU's
Eighth Survey, the second leading reason (38 percent of all respondents) why
consumers do not purchase more products and services on the Internet is
because they believed product quality is difficult to judge. In order for
markets to work, or work more efficiently, some mechanism must be adopted
to relieve the information asymmetry.
Nelson (1970, 1974) argues that brand advertising may be such a
mechanism. He makes the distinction between two types of goods: search
and experience. A search good's quality is verifiable on inspection, whereas
an experience good's quality is difficult to judge on inspection. Therefore,
only on the purchase and usage of an experience good can its true quality be
revealed. A firm advertising a search good can directly inform its customers
of its product's quality. In contrast, information regarding the merits of
experience characteristics are inherently unverifiable and may not seem
credible to consumers. Where it is available, producers of experience goods
can seek credibility from third-party sources, such as Underwriters
Laboratory and Consumer Reports. But third-party information may be hard
to come by for the many new products offered by smaller firms operating on
the Internet.
High product quality Economic models based on Nelson's work show that an established brand
name can signal high product quality (Klein and Leffler, 1981; Kihlstrom
and Riordan, 1984; Milgrom and Roberts, 1986). Essentially, high quality
producers advertise their brand heavily, but only expect to recoup the cost of
the advertising from many repeat purchases. Low quality producers cannot
mimic this behavior because the true product quality will be revealed before
enough purchases have been made to recoup its investment in advertising. If
a seller chooses to produce a high quality product, it can overcome the
asymmetric information problem and differentiate itself from the low quality
producer by developing a brand name and advertising more[2]. In these
models, companies create brand-name equity to assure consumers of high
product quality[3].

Relying on brands versus searching

Brand names are just one source of information; most consumers also conduct
some form of product search (Stigler, 1961; Carlson and MacAfee, 1983;

8 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 Benabou, 1990, 1993). A general conclusion is that, since search is costly, in
terms of time and effort, consumers will stop short of becoming perfectly
informed. If brand advertising signals useful product information, consumers
may rely on it as an ``expensive'' source of information (Butters, 1977;
Pashigian and Bowen, 1994; Png and Reitman, 1995).
We test for this substitutability between consumers' use of brands and search
by relating it to a measure that should be associated with exogenous changes
in search costs. Specifically, consumers should become more proficient at
searching for information on the Internet as they gain more experience with
it. Navigating and evaluating information found on the World Wide Web can
be daunting. Looking for information from search engines, directories and
portals are skills developed with use. Indeed, authors have noted that a
certain amount of experience is needed before one develops the proper skills
to flow in an intermediated environment such as the Internet (Hoffman and
Novak, 1996). Moreover, beyond merely finding relevant information, one
must evaluate its credibility. Time and experience are required to learn the
credibility-assuring institutions that have developed on the Web (e.g. site of
the day, moderated rather than unmoderated newsgroups).
Reliance on brand names If proficiency in searching the Internet increases with experience or over time,
should decrease then reliance on brand names should likewise decrease. Internet search
proficiency is likely to increase as users gain more experience with the
medium. Increased proficiency decreases the cost of gathering and evaluating
information, specifically product information. Alternatively, consumers can
rely on well-known brand names as shortcuts in evaluating the merits of
different products. Unlike search costs, increased Internet experience is not
likely to make consumers more proficient at inferring product quality from
brand names. Therefore, as the ``price'' of searching, relative to using brands,
falls with increasing Internet experience ± and if they are substitutes ± more
experienced consumers should rely on brands less.
Applying this argument to the Internet at its current point of development is
likely to be more fruitful than applying it to other distribution channels. This
is because current Internet users differ widely in their level of their
experience with the medium and this experience is likely to have significant
impacts on their usage proficiency. Other media used for obtaining consumer
product information, such as traditional retailing, telemarketing and catalog
shopping, are all developed enough that variation in consumers' search
abilities is not likely to be linked with identifiable measures of consumers'
experience with the media. Thus, we are exploiting a natural experiment that
occurs because the adoption of the Internet is not yet ubiquitous.
Ordered logistics To empirically test the hypothesis of brand reliance, we use survey data
regression collected semiannually by the GVU center at the Georgia Institute of
Technology. Though there are data limitations (discussed later), we will
statistically analyze the relationship between brand reliance, search proficiency
and experience on the Internet. Using cross-tabulations and ordered logistic
regressions, we find evidence of increased search proficiency and decreased
brand reliance as experience on the Internet increases. We infer from this that,
on the Internet at least, use of brands and search are substitutes and, therefore,
brands convey useful information.

Description of the data

The results of GVU's World Wide Web User Surveys, begun in 1994, have
been made publicly available for academic research. These semiannual
surveys record users' opinions and usage patterns for a large number of

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 9

 Web-based activities. These survey data, however, pose two general
problems to researchers. First, collected at high-exposure sites, the data may
not fully represent the characteristics of the population of interest ± all
individuals who use the World Wide Web. Only those with a disposition
toward highly-trafficked sites such as Netscape and Yahoo! are likely to be
included in the samples. Second, only those willing to spend the time filling
out the questionnaires were included. This creates a self-selection problem:
those who answer the surveys may not represent the population of interest.
However, self-selection should not affect within sample comparisons as
much as comparing the GVU sample to other similar data. Comparisons
between less experienced users to more experienced users, as in our analyses,
do not depend much on whether the sample of less experienced users are
different, on average, from the population of less experienced users.
Specialized surveys We employ GVU's General Information and Opinions on Internet Commerce
Questionnaires from the Eighth Survey (October, 1997). GVU's survey
strategy is to require all respondents to answer general demographic questions
and then proceed to specialized surveys on particular Internet-related topics
(e.g. privacy, publishing, shopping, commerce, etc.). General demographic
information is available for about 10,000 respondents for each survey, with
1,500 to 4,000 respondents answering questions from specialized surveys. For
our analyses, we used answers related to online shopping proficiency from
one specialized survey and brand reliance from another, as well as general
demographic information. However, since respondents were not required to
answer all the specialized surveys, only 1,671 of the 2,946 respondents in the
shopping survey are among the 1,987 respondents in the Internet commerce
survey that asks about brand reliance[4].
From the general demographics survey, the variables obtained from all
respondents include gender, race, marital status, educational status, income,
age, and the number of years the respondent has been using the Internet.
Summary statistics of the demographic variables for both the shopping and
branding surveys are reported in Table I. It is clear from this table, that the
GVU samples do not reflect the population at large. In particular, survey
respondents include a smaller proportion of blacks, a larger proportion of
males, individuals with a college education or an advanced degree, people
with higher incomes, and younger people than the general population. It is
likely, however, that these samples better reflect the population of people
who use the Internet.
Important determinant? From the Internet commerce survey, a question is asked whether a Web site
having a well-known brand name is an important determinant in product-
purchasing decisions. The eight possible responses can be grouped into four
broad categories that indicate different levels of brand reliance (see Table II).
Our measure of brand reliance differs from the raw responses in two ways.
First, while it is clear that a brand being ``necessary'' is more stringent than a
brand being ``preferred'', it is not clear if any of the ``depends'' choices are
more stringent than the others. Therefore, we aggregate all of the ``depends''
choices into one category. Second, while respondents were able to select
more than one category, few did (see Table III)[5]. For those who did select
more than one category, we put them into a category between the two they
had selected. A series of questions from the online shopping survey measure
how successful respondents are at shopping online, how long it takes
respondents to find what they are looking for and how long it takes for them
to give up their product search. These questions are asked separately for both
personal and professional shopping.

10 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 Searching sample Branding sample
Male 62.7 67.2
Black 1.8 1.5
Married 45.1 43.4
Divorced 11.5 11.9
Living together 10.1 10.8
In college 5.5 5.3
Some college 28.3 27.4
College Grad 28.8 29.4
Post Grad 20.1 21.8
Income $20,000-$40,000 26.6 25.6
Income $40,000-$50,000 12.1 11.9
Income $50,000-$75,000 19.4 19.5
Income over $75,000 19.7 19.6
Income not say 11.5 11.5
Age 25-39 39.8 40.9
Age 40-64 43.9 43.5
Age over 64 3.6 3.3
Internet experience six to 12 months 18.7 16.7
Internet experience one to three years 35.1 34.0
Internet experience three to six years 20.5 22.4
Internet experience over seven years 8.7 11.3
Observations 2,829 1,954

Table I Descriptive statistics ± percent of sample with characteristic

Q: How important is each of the following when you consider ordering a product/
service over the Web (even if you have never done so). (Please check all that apply.)
That the company and/or products have a well-known brand name:
Possible answer: Coded as:
Site must have this Require
I prefer sites that have this Prefer
Doesn't matter to me Don't care
Depends on what I'm ordering Depends
Depends on how much I'm spending Depends
Depends on how well I know the company Depends
Depends on what information is being collected Depends
Don't know Dropped from sample
Q: When you are intentionally searching for product/service information, what
percentage of the time do you find what you are looking for?
Possible answers are: All (close to 100 percent), Most (close to 75 percent), Half
(close to 50 percent), Few (close to 25 percent), None (close to 0 percent), Not
applicable
Q: On average, how many minutes do you spend searching before you find the first
piece of useful product/service information?
Possible answers are: Less than five minutes, five to 15 minutes, 15-30 minutes,
30-60 minutes, More than 60 minutes, Don't know, Not applicable
Q: How many minutes on average does it take you to give up a search if you cannot
find the product/service information you were looking for?
Possible answers are: Less than five minutes, five to 15 minutes, 15-30 minutes,
30-60 minutes, More than 60 minutes, Don't know, Not applicable

Table II. Electronic commerce questions from GVU 8

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 11

 and and and and
``Require'' ``Prefer'' ``Depends'' ``Don't care'' Total
Require 130 33 26 1 190
68.4% 17.4% 13.7% 0.5% 100.0%
Prefer 33 609 245 6 860
3.8% 70.8% 28.5% 0.7% 100.0%
Depends 26 245 560 50 781
3.3% 31.4% 71.7% 6.4% 100.0%
Don't care 1 6 50 408 465
0.2% 1.3% 10.8% 87.7% 100.0%
Total 190 860 781 465 1,954
100.0% 100.0% 100.0% 100.0%

Table III. Description of branding responses

Tests and results

Proficient at seeking Our two hypotheses are that more experienced Internet users are more
product information proficient at seeking product information and purchasing items on the Web
and that more experienced Internet users rely less on brand names. The data
that indicate experience, proficiency and brand reliance are categorical
variables that take on a small number of discrete values. Therefore, we test
these hypotheses with cross-tabulations and test for a random allocation
across cells.
Tables IV and V report cross-tabulations for the percentage of the time
respondents claim success in finding the product they are looking for and the
time spent searching for a product online with Internet experience. There is a
general trend towards both more success and quicker searches for more
experienced people. For example, the percentage of people who are
successful shopping more than half the time (the Most and All categories)
rises from 61 percent for those with under six months of Internet experience
to 72 percent for those with over seven years' experience. Likewise, the
percentage of people requiring less than 15 minutes (the top two categories)
rises from 68 percent to 75 percent. Differences across individuals with
different amounts of Internet experience are statistically significant at the

Internet experience
Under 6 6-12 1-3 4-6 Over 7
Success rate months months years years years Total
None 5 2 4 1 2 14
(0% of the time) 1.07% 0.39% 0.41% 0.17% 0.82% 0.50%
Few 56 50 75 43 13 237
(25% of the time) 11.94% 9.67% 7.61% 7.52% 5.35% 8.50%
Half 122 120 222 134 54 652
(50% of the time) 26.01% 23.21% 22.52% 23.43% 22.22% 23.39%
Most 222 261 548 300 125 1,456
(75% of the time) 47.33% 50.48% 55.58% 52.45% 51.44% 52.24%
All 64 84 137 94 49 428
(100% of the time) 13.65% 16.25% 13.89% 16.43% 20.16% 15.36%
Total 469 517 986 572 243 2,787
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Note: Each cell contains both the count of respondents and the column percentage.
The 2 value for differences across columns is 29.9 which, with 16 degrees of
freedom, is significant at the 2 percent level

Table IV. The relationship between Internet experience and online shopping
success rate

12 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 Internet experience
Under 6 6-12 1-3 4-6 Over
Time searching months months years years 7 years Total
Less than five 101 132 236 177 84 730
minutes 22.95% 26.29% 24.89% 31.72% 35.00% 27.16%
5-15 minutes 199 213 432 242 97 1,183
45.23% 42.43% 45.57% 43.37% 40.42% 44.01%
15-30 minutes 93 103 194 93 39 522
21.14% 20.52% 20.46% 16.67% 16.25% 19.42%
30-60 minutes 27 35 69 33 14 178
6.14% 6.97% 7.28% 5.91% 5.83% 6.62%
More than 20 19 17 13 6 75
60 minutes 4.55% 3.78% 1.79% 2.33% 2.50% 2.79%
Total 440 502 948 558 240 2,688
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Note: Each cell contains both the count of respondents and the column percentage.
The 2 value for differences across columns is 33.2 which, with 16 degrees of
freedom, is significant at the 1 percent level

Table V. The relationship between Internet experience and time spent searching
for products online

2 percent level in Table IV and the 1 percent level in Table V. These results
suggest that search proficiency increases with experience.
Ambiguous applications Table VI reports the cross-tabulation for the time before one gives up
product search and Internet experience. The theory previously outlined has
more ambiguous implications for this table. More proficient searchers may
be willing to search longer if they are more confident of eventual success,
but may give up sooner if they expect results more quickly. It is not clear a
priori which effect should dominate. Nonetheless, the table indicates
statistically significant differences across individuals with different levels of
experience. For example, the percentage of people giving up within 30
minutes (the top three categories) falls from 77 percent for those with under
six months of Internet experience to 68 percent for those with over seven

Internet experience
Under 6 6-12 1-3 4-6 Over 7
Time to give up months months years years years Total
Less than five 41 30 53 26 17 167
minutes 8.91% 5.92% 5.53% 4.63% 7.17% 6.13%
5-15 minutes 138 174 256 157 72 797
30.00% 34.32% 26.69% 27.99% 30.38% 29.26%
15-30 minutes 172 186 340 205 72 975
37.39% 36.69% 35.45% 36.54% 30.38% 35.79%
30-60 minutes 77 88 235 139 46 585
16.74% 17.36% 24.50% 24.78% 19.41% 21.48%
More than 32 29 75 34 30 200
60 minutes 6.96% 5.72% 7.82% 6.06% 12.66% 7.34%
Total 460 507 959 561 237 2,724
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Notes: Each cell contains both the count of respondents and the column percentage.
The 2 value for differences across columns is 47.3 which, with 16 degrees of
freedom, is significant at the 1% level.

Table VI. The relationship between Internet experience and time until online
search given up

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 13

 years' experience. These results are consistent with the hypothesis that
search proficiency increases with experience.
Statistically significant Table VII reports the cross tabulation of Internet experience and measures of
brand reliance. Again, the differences across respondents with different
levels of experience are statistically significant. The table indicates a rather
steady decline in brand reliance with experience. For example, the
percentage of people ``requiring'' a brand name falls from 11 percent to 7
percent between the least and most experienced Internet users, the
percentage who at least ``prefer'' a brand name falls from 48 percent to 34
percent and the percentage who ``don't care'' rises from 16 percent to 27
percent. These results suggest that reliance on brand information falls as
people gain experience on the Internet.
Search proficiency It is possible that the above findings are a result of a relationship between
demographic variables and experience. For example, it is possible that more
educated people both have more experience and are more proficient at
searching, which leads them to be less brand reliant. In this case, the effect of
experience net of education could be negligible. In order to control for this,
we also ran ordered logit regressions of the search proficiency and brand
reliance variables against variables measuring gender, race, gender, marital
status, educational status, income, age, and experience. Doing so requires
that we impose a parametric structure on the data rather than the non-
parametric cross-tabulations above. Specifically, the categories for product
search and brand reliance are assigned ordinal values from 1 to 5 and 1 to 7
in the case of the brand reliance regression.
The results of the ordered logit regressions are reported in Table VIII. In
general, they confirm the findings from the cross tabulations. Internet
experience tends to increase measures of search proficiency and decrease
brand reliance, all else held constant. We found only a few of the

Internet experience
Under 6 6-12 1-3 4-6 Over 7
Brand reliance months months years years years Total
``Don't care'' 49 54 156 93 60 412
16.01% 16.56% 23.46% 21.28% 27.27% 21.08%
Between ``Don't 5 3 22 10 7 47
care'' and 1.63% 0.92% 3.31% 2.29% 3.18% 2.41%
``Depends''
``Depends'' 64 76 171 117 55 483
20.92% 23.31% 25.71% 26.77% 25.00% 24.72%
Between ``Depends'' 40 33 69 63 24 229
and ``Prefer'' 13.07% 10.12% 10.38% 14.42% 10.91% 11.72%
``Prefer'' 107 127 195 127 63 619
34.97% 38.96% 29.32% 29.06% 28.64% 31.68%
Between ``Prefer'' 6 7 2 2 1 18
and ``Require'' 1.96% 2.15% 0.30% 0.46% 0.45% 0.92%
``Require'' 35 26 50 25 10 146
11.44% 7.98% 7.52% 5.72% 4.55% 7.47%
Total 306 326 665 437 220 1,954
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Notes: Each cell contains both the count of respondents and the column percentage.
The 2 value for differences across columns is 60.7 which, with 24 degrees of
freedom, is significant at the 1% level.

Table VII. The relationship between Internet experience and reliance on brand
names

14 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 Search Time Time to give Brand
success searching up search reliance
Male 0.057 ±0.219* ±0.222* ±0.010
Black 0.149 0.239 0.239 0.210
Married 0.144 0.019 0.031 ±0.023
Divorced 0.040 0.285+ 0.044 0.088
Living together 0.053 ±0.050 0.221+ ±0.148
In college ±0.206 ±0.203 ±0.221 0.147
Some college ±0.136 0.104 0.038 ±0.062
College Grad ±0.364* ±0.077 ±0.120 ±0.031
Post Grad ±0.464* 0.051 ±0.092 ±0.010
Income $20,000-$40,000 0.218+ ±0.523* ±0.326* ±0.013
Income $40,000-$50,000 0.391* ±0.623* ±0.463* 0.119
Income $50,000-$75,000 0.177 ±0.426* ±0.203 0.003
Income over $75,000 0.165 ±0.634* ±0.516* 0.050
Income not say 0.160 ±0.426* ±0.555* 0.191
Age 25-39 0.031 ±0.160 ±0.054 ±0.133
Age 40-64 0.013 ±0.094 ±0.241+ 0.057
Age over 64 ±0.638* ±0.023 ±0.633* 0.548+
Internet experience 6-12 months 0.289* ±0.042 0.058 ±0.057
Internet experience 1-3 years 0.364* ±0.026 0.407* ±0.498*
Internet experience 3-6 years 0.457* ±0.241+ 0.381* ±0.442*
Internet experience over 7 years 0.646* ±0.299+ 0.355* ±0.621*
Observations 2,787 2,688 2,724 1,954
Concordant 55.7% 53.1% 55.7% 55.4%
Note: The table does not report the various intercept coefficients. Asterisks and plus
signs denote statistical significance at the 1 percent and 10 percent levels

Table VIII. Ordinal logit estimates of consumer Internet search behavior

demographic variables to have significant effects on shopping behavior. Men

both spend less time searching and give up searching more quickly than do
women. Race has no effect and marital status only has a marginal effect.
Education appears to make people less successful at search. People with
higher incomes may be more successful searchers, even though they spend
less time searching and give up their searches sooner. Senior citizens seem to
be particularly poor online searchers. Nevertheless, none of the demographic
variables ± other than Internet experience ± significantly affects brand
reliance.
Link between brand Our previous discussion hypothesized a link between brand reliance and
reliance and experience experience on the Internet. Since brands are used as time-saving devices to
signal quality, the opportunity cost of time should be related to the reliance
of brands. More specifically, those with a higher opportunity cost of time
should rely more on brands. And since individuals with greater incomes
generally have higher time costs, they should be more brand reliant. Other
research finds evidence to confirm that higher incomes are associated to a
greater dependence on brand names as a source of information (Pashigian
and Bowen, 1994; Png and Reitman, 1995).
Our ordered logit regressions provide a direct test of the relationship between
income, a measure of opportunity cost of time and brand reliance. These tests
failed to find a significant relationship. We suspect this was owing to
measurement problems in the income variable. First, income represents an
imperfect measure of an individual's opportunity cost of time. Other
idiosyncratic factors affecting opportunity cost, such as fondness for the
Web, may be related to higher incomes. Second, while the respondents'

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 15

 current income is reported on the surveys, no information can be obtained for
the respondents' permanent income which more closely related time costs.
Those individuals with a much higher permanent income than current
income ± such as college students ± may be more reliant on brand names. If
this is the case, then the expected relationship between brand reliance and
income will be confounded.
Significant statistical In summary, our results indicate that a significant statistical relationship
relationship exists between Internet experience and both search proficiency and brand
reliance. Thus, we find some evidence to validate the hypothesis that as
individuals gain more search experience on the Internet, these individuals
will be less reliant on brand names as a signal for product quality. Instead,
more experienced searchers may opt to find more direct product information
to discern product quality.

Conclusion
Our results indicate that as individuals gain more experience using the
Internet, they are more likely to search for alternative sources for information
and be less reliant on product branding. This finding is consistent with the
substitutability of brand advertising for search, especially for consumers with
relatively high search costs. We infer that this supports for the notion that
branding does not merely promote product loyalty. It also conveys useful
product information that tends to make markets more efficient. Our results
suggest a number of possible hypotheses for further study.
First, we conjecture that as the Internet population matures, brand reliance to
assure product quality may give way to reliance on direct product
information, more easily found because of the decreasing costs of search.
Our findings could have implications for the future of branding and the level
of advertising on both the Internet and in general. As more consumers obtain
access to the Internet and gain proficiency at searching for product
information, producers may find that they need not advertise as heavily to
signal their products' features. The advertising that producers do purchase is
likely to be directed toward consumers with higher search costs, or those
without Internet access. If so, advertising on the Internet, where consumers
have relatively low search costs, may not reach levels comparable to other
media, e.g. television, newspapers, magazines.
Increase in level of quality Second, the Internet may lead to a general increase in the level of quality of
consumer products[6]. Brands are an imperfect mechanism for assuring
product quality. In particular, we found evidence that direct product search
may be a more efficient mechanism, at least for experienced Internet users. If
so, the total cost of assuring product quality may fall due to the Internet,
making firms' investment in quality more lucrative.
Third, we might expect that markets for consumer goods will become more
efficient because of the commercialization of the Internet. Our results also
suggest that consumers are more informed about the products they search for
on the Internet than if they had to rely information gathered through
traditional means. Otherwise, they would not be willing to forego reliance on
information conveyed through brand advertising. Models of product search
(e.g. Carlson and McAfee, 1983) suggest that inefficient firms are viable
only because consumers lack information about more efficient and less
expensive alternatives. Lower search costs due to the Internet may lead to a
weeding out of these inefficient firms.

16 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 In general, many of the existing models of decision making under imperfect
information may apply to the advent of the Internet. Whether or not our
specific results hold up under scrutiny, it is generally believed that the use of
the Internet will decrease in the cost of gathering and conveying information.
If so, models that rely on information costs could yield interesting
differences between Internet and non-Internet based activities. Thus, future
research that applies to models based on adverse selection, moral hazard,
free-riding or costly search to the Internet could be especially fruitful.

Notes
1. For a brief and fascinating look at the early history of the Internet, read pages 3-13 of the
Internet System Handbook by Daniel Lynch and Marshall Rose. For a good (and probably
the most authentic) history of the World Wide Web, visit the birthplace of the Web ±
CERN ± at www.w3.org
2. See Nichols, 1998, for a particularly robust test of this theory.
3. There are obviously many non-economic reasons for creating brand equity. A recent
paper argues that brands are instrumental in creating personality-specific relationships
between a firm and its customers (Fournier, 1998).
4. We limited our sample to those over 17-years of age because we expected more
respondent error among those who claim to be 17 years or under. Had we included these
respondents, 1,756 of the 3,144 shopping survey respondents would be among the 2,107
individuals who answered the Internet commerce survey.
5. Only 311 out of a sample of 2,072 selected more than one category for this question.
6. But see Lynch and Ariely (1998) for the view that increased availability of price
information may not make demand more price sensitive if information about quality is
more important.

References
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performance'', Journal of Political Economy, Vol. 89 No. 4, pp. 615-41.

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 Lynch, J. and Ariely, D. (1998), ``Electronic shopping for wine: how search costs for
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satisfaction with merchandise, and retention'', working paper November, <http://
ecommerce.mit.edu/forum/papers/ERF104.pdf>
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Nichols, M. (1998), ``Advertising and quality in the US market for automobiles'', Southern
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&

18 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

 This summary has been Executive summary and implications for managers and
provided to allow managers executives
and executives a rapid
appreciation of the content Online branding will be different
We are still not sure what to make of e-commerce ± especially where the
of this article. Those with a
target of the firm is the ordinary consumer. At the core of our dilemma is
particular interest in the
whether the brand will perform the same function as it has in traditional
topic covered may then read
retailing or indeed whether brands are needed at all.
the article in toto to take
advantage of the more Ward and Lee investigate the way in which consumers use the brand as a
comprehensive description source of information and assurance about product quality when shopping
of the research undertaken via the Internet. This investigation seeks to parallel the fact that, in
and its results to get the full traditional consumer markets, brands are shorthand for quality and
benefit of the material assurance. Furthermore, as Ward and Lee point out that ``. . .with the
present proliferation of online retailers, sellers are having difficulty distinguishing
their products or services from their competitors', especially those of
unscrupulous fly-by-night companies''.
Despite this situation, Ward and Lee's contention is that more experienced
Internet users will rely less on the brand in making a product selection. The
authors note evidence suggesting the transference of brand impact to
Internet shopping ± 69 percent of respondents in one survey reported that
brands play a significant role in product choice online. Despite the potential
for more information, buyers remain uncertain about the claims and
descriptions made by those promoting products and services on the Internet.

Product quality ± is this the principal message from a brand?

We can recognise that the brand is a surrogate for assurance about product
quality but this does not mean that communicating product quality is the only
purpose for a brand. Indeed, most adherents to the brand marketing model
would contend that the brand encapsulates a series of messages from the
seller ± quality, lifestyle associations, image and value for money are all
possible brand elements. And, to make matters worse, some proponents of
brand marketing would argue that it is difficult to deconstruct a brand.
Despite this contention, it remains a recognisable fact that the brand's main
effect is to communicate a message of confidence and assurance about the
product and, by doing so, relieve people of the need to think about what
choice they will make. The question facing us is therefore to ask whether ±
given the Internet's superiority as a source of product information ± this
need for a short-cut remains valid.
Ward and Lee report that as consumers ``. . . gain more experience of using
the Internet, they are more likely to search for alternative sources for
information and be less reliant on product branding''. Rapid information
search, coupled with the support of intelligent agents, negates the need for
product quality assurance. But this does not mean that the brand become
irrelevant. Instead, the brand takes on a different role ± perhaps less
dominant in consumer choice but still important.

A strong brand is not enough ± you need good information, too

Internet retailers need to appreciate that product branding cannot replace
the need to provide information on product features. Saying that this is
``Blogg's widget'' won't do. You need to explain the features of ``Blogg's
widget'' because the consumer can obtain information about ``Smith's
widget'' and ``Brown's super-widget'' with ease.
In creating the brand we have, in the past, relied on images and allusions to
communicate our product quality message. On the Internet these methods

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000 19

 will work less well. Instead, brand managers will need to use product
features and the provision of information as the basis for branding. We will
not be able to abuse a brand, since the consumer can substantiate our claims
and compare what we offer to other products or services. As Ward and Lee
suggest, this change in the role of the brand will have a profound impact on
overall product quality since ``. . . the total cost of assuring product quality
may fall . . . making firms' investment in quality more lucrative''.
As the Internet grows in importance we can anticipate that this change in the
role of the brand will strengthen. However, any change will be mitigated by
other factors since the Internet is not a static medium.

Brands on the Internet ± information, time and technology

The number of Internet users continues to grow rapidly ± with each passing
day thousands more people plug in and start to search around. For the
foreseeable future the numbers of inexperienced Internet-users will
outnumber experienced users. Given this situation, the brand will retain its
role for some time to come.
The growing number of users is matched by the rapid expansion of
information. The result of this trend is that the amount of information available
becomes unmanageable within the time consumers allocate to Internet search.
Once again consumers will seek short cuts to information processing ± the
same process as created the strength on consumer brands off-line.
However, technology offers solutions to Internet search and information-
processing problems. Such technologies as sophisticated search engines and
``shopping bots'' allow consumers to filter information however they wish. It
is likely that, in the near future, consumers will permit technology to
undertake all but the final stage of product selection. Since the ``shopping
bot'' is (we hope) rational and unemotional, the use of these elements in
branding will not apply. The main concerns will be whether the product does
what we want, is readily available and is at the right price.

A bleak future for the product brand?

I do not believe we are anywhere near the death of the product brand.
However, brand advertising as we know it will diminish for many products
because electronic product search does not need to incorporate brand
preferences. Brand messages will be focused on the existing user ± aiming to
maintain the custom rather than to attract new customers. Furthermore, not
all the factors that influence purchase are rational and tangible, meaning
that the product brand will continue, albeit in a less dominant form.
The shift away from product brands to corporate and service brands will
continue. As consumers we may be concerned about the ethics and behaviour
of the manufacturer as well as the way in which that firm reflects our
personal ``world view''. Similarly, the branded retailer or service business
will begin to take a more prominent place in our purchasing decision.
Factors such as customer service, after-sales care, information quality and
delivery are all elements that lie under the control of the retailer.
Brands will remain and, in some ways, become more important. But the
traditional product branding model is losing its power. The Internet
represents one place where product branding is eroded and joins media
fragmentation and production technology as nails in the coffin of the
classical brand management.

(A preÂcis of the article ``Internet shopping, consumer search and product

branding''. Supplied by Marketing Consultants for MCB University Press.)

20 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 9 NO. 1 2000

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