Archive, Dr. Sarwar

Cosmopolitan University

SUCCESS OF VIRTUAL COMMUNITY AS A LOOSELY COUPLED SYSTEM

- by Dr. M. SARWAR

INTRODUCTION

1. 1 The WWW as Effective Channel

1. 2 The WWW as Model of Marketing Communications

1. 3 The WWW as Commercial Medium

1. 3-1 Benefits to Consumers

1. 3-2 Benefits to the Producers and Venders

1. 3-2 (1) Distribution

1. 3-2 (2) Marketing Communications

1. 3-2 (3) Operational Benefits

2. 0 VIRTUAL COMMUNITIES

2. 1 A Unique Medium

2. 2 Virtual Communities: Interactive Societies in the Internet

INTRODUCTION

With the emergence of electronic media, a Loosely Coupled System enables efficient and detailed communication irrespective of location and time boundaries. Using Loosely Coupled Systems, complex goods and services can be produced or developed by cooperating partners located in different sites. Loosely Coupled Systems include networks, cooperations, alliances, partnerships, consortiums, working groups of legal and economically independent enterprises. The creation of value partnerships functions only with intensive information exchange. The new possibilities of electronic information and communication permit a radical improvement of this information exchange irrespective of geographical location and time zone.

Loosely Coupled Systems not only lead to new forms of market organization but also require different considerations for application of the marketing mix. If there are so far distribution channels such as supermarkets, specialised trade, department stores, shipping and direct sale, quite different sales channels can develop in the future, as soon as the functions of trade are unbundling. If the past channels furnished usually all functions of the purchase, logistics, the assortment compilation, the consultation of customers, the collection and the distribution, individual functions can be separated from it in electronic environments.

Traditional and hierarchically structured enterprises produce their products themselves. They avail themselves in addition either of their own sales field service or intermediaries like the trade or commercial agents. In the case of Loosely Coupled Systems, sales forms new intermediaries. On the one hand the selling specialised enterprises will take over the selling of products, for which networks are created in cooperation. On the other hand, other forms of intermediaries or even different forms of sales markets will develop.

The Virtual Community is a special form of a Loosely Coupled System. Virtual communities are societies of persons and organisations in the Cyberspace. The rise of virtual communities in on-line networks has set in motion an unprecedented shift in power from venders of goods and services to the customers who used to buy them. If a technology is on a roll, as the Internet today, positive feedback translates into rapid growth: success feeds on itself. The rapid growth of the Internet, in particular, the World Wide Web (WWW), has led to an enormous number of suppliers/venders and consumers participating in a world-wide online marketplace. The rapid adoption of the Internet as a commercial medium has caused producers and venders to experiment with innovative ways of marketing to consumers in computer-mediated environments (CME). These developments on the Internet are always expanding beyond the utilisation of the Internet as a communication medium to an important view of the Internet as a new market.

1.1 The WWW as Effective Channel

Anecdotal evidence suggests that Web-based commercial efforts are more efficient and possibly even more effective than efforts mounted in traditional channels. Initial conjectures on efficiencies generated by online commercial efforts suggests that marketing on the Web results in "10 times as many units sold with 1/10 the advertising budget". It is about one-fourth less costly to perform direct marketing through the Net than through conventional channels. This fact becomes especially critical in the face of shrinking technology and product life cycles and increasing technological complexity.

1.2 The WWW as Model of Marketing Communications

Producers and Venders use various media to communicate with their current and potential customers. Marketing communications perform three functions: to inform, to remind, and to persuade. The traditional one-to-many marketing communications model for mass media is shown below in Figure 1. In this model, firms (F) provide content through a medium to a mass market of consumers (C). The first two functions of marketing communications may be performed by a traditional communication model. And the persuasion function necessary for differentiating a product or brand is limited by the unidirectionality of traditional mass media.

Figure - 1

Marketing Model of One-to-Many Communications

The Internet, a revolution in distributed computing and interactive multimedia many-to-many communication, is dramatically altering this traditional view of communication media. As Figure-2 indicates, the new many-to-many marketing communications model defining the Web offers a radical departure from traditional marketing environments.

Figure-2

Marketing Model of Many-to-Many Communications

Figure-2 shows that the Internet offers an alternative to traditional mass media communication. As a marketing and advertising medium, the WWW has the potential to change radically the way firms do business with their customers by blending together publishing, real-time communication broadcast and narrow cast. As an operational model of distributed computing, the "Net" supports Discussions Groups (e.g.USENET), Multi-player Games and Communications System (e.g. MUD, Chat), File Transfer (FTP) and remote log-in (TELNET), E-mail and global information access and retrieval systems e.g. WWW. From a business and marketing view point, the most exciting developments are occurring on that portion of the Internet known as the World Wide Web.

Computer-mediated Communication is different from oral and print communication. In that many people can talk to many other people, all at the same time, with everybody talking all at once and the software handling the sequencing.

The most important from marketing perspective is a many-to-many communication model in which consumers can interact with the medium, producers and venders can provide content to the medium and in the most radical departure from traditional marketing environments, consumers can provide commercially oriented content to the medium. In this mediated model, the primary relationships are not between sender and receiver to exchange only ideas, but rather with the computer mediated environments with which they interact. In this model, information or content is not merely transmitted from a sender to a receiver, but instead, mediated environments are created by participants and then experienced. In other words, the customers can inform themselves on quality, competitive prices, opportunities, developments etc. They can also exchange product experiences.

1.3 The WWW as Commercial Medium

The benefits of the virtual community go to both customer and vender. As a commercial medium, the Web offers a number of important facilities which can be examined at both the customer and producer/vender levels. In this way, both demand and supply issues can be addressed. Customer benefits arise primarily from the structural characteristics of the medium and include availability of information, provision of search mechanisms, and online product trial, all of which can lead to reduced uncertainty in the purchase decision. Producer and firm benefits arise from the potential of the Web as a medium of distribution channel, marketing communications, and a market in and of itself. However, the real commercial potential of virtual communities will begin to emerge only as they aggregate a critical mass of members and develop rich transaction capabilities.

1.3-1 Benefits to Consumers

The major consumer benefit associated with marketing on the WWW is the access to greater amounts of dynamic and relevant information to support queries for consumer decision making. The Hermes survey of Web users found gathering purchase-related information was the most preferred Web activity. Further, the interactive nature of the Web and the hypertext environment allow for deep, non-linear searches initiated and controlled by customers. Hence marketing communications on the Web are more consumer-driven than those provided by traditional media. In addition, recreational uses of the medium, manifested in the form of non-directed search behaviour, can be an important benefit to consumers intrinsically motivated to use the medium.

The ability of the Web to accumulate, analyse, and control large quantities of specialised data can enable comparative shopping and speed the process of finding items. The Web facilitates trial and provides instant gratification; customers can test products online which may stimulate purchase. There is also the potential of wider availability of hard-to-find products and wider selection of items due to the width and efficiency of the channel. In addition to the above, the advantages for industrial consumers are reduced costs to buyers from increased competition in procurement as more suppliers are able to compete in an electronically open marketplace. This increase in competition leads to better quality and variety of goods through expanded markets and the ability to produce customised goods.

1.3-2 Benefits to the Producers and Venders

Virtual communities help producers and venders expand their markets on two levels: through capabilities that are unique to the virtual community business model and through capabilities that are more broadly available in network-based environments. Elements specific to virtual communities that help venders expand their markets include (1) Reduced Search Cost (2) Increased propensity for customers to buy (3) Enhanced ability to target (4) Greater ability to tailor and add value to existing products and services. The producers and venders will also benefit elements more broadly applicable to network environments e.g. (1) Lower capital investment (2) Broader geographic reach (3) Less assistance of Intermediaries.

1.3-2(1) Distribution

Producer and vender benefits arise partly from the use of the Web as a distribution channel. First, the Web potentially offers certain classes of providers participation in a market in which distribution costs or cost-of-sales shrink to zero. This is most likely for producers and venders in publishing, information services or digital product categories. For example, digital products can be delivered immediately, hence such businesses may encounter massive disintermediation or even the gradual elimination of middleman. Moreover buyers and sellers can access and contact each other directly, potentially eliminating large portions of the marketing communication cost and constraints imposed by such interactions in the terrestrial world. This may also have the effect of shrinking the channel and making distribution much more efficient. Time to complete business transactions may be reduced as well, translating into additional efficiencies for the firm. Second, business on the Web transfers more of the selling function to the customer, through online ordering and the use of fill-out forms, thus helping to bring transactions to a conclusion. This permits a third benefit in the form of capture of customer information. The technology offers the firm the opportunity to gather market intelligence and monitor consumer choices through customers' revealed preferences in navigational and purchasing behaviour in the Web. However, there are many social, legal and technological issues and drawbacks at the present level of technology which prevent firms from fully capitalising on this benefit.

1.3-2(2) Marketing Communications

Currently, most producers and venders use the WWW primarily to deliver information about the products and services and for both internal and external communication with other firms and consumers. The interactive nature of the medium offers another category of producer and vender benefits since it is especially conducive to developing customer relationships. This potential for customer interaction, which is largely synchronous under current implementations, facilitates relationship marketing and customer support to a greater degree than ever before possible with traditional media. Web sites are available on demand to consumers 24 hours a day. The interactive nature of the medium can be used by producers and venders to hold the attention of the consumers by engaging the consumers in an asynchronous "dialogue" that occurs at both parties' convenience. This capability of the medium offers unprecedented opportunities to tailor communications precisely to individual customers, allowing individual consumers to request as much information as desired. Further, it allows the producers and venders to obtain relevant information from customers for the purpose of serving them more effectively in the future. The simplest implementations involve engaging customers through the use of email buttons located strategically on the site. More sophisticated implementations may involve fill-out forms and other incentives designed to engage customers in ongoing relationships with the firm. The objective of such continuous relationship-building is dual-pronged: to give consumers information about the firm and its offerings and to receive information from consumers about their needs with respect to such offerings. Most importantly, the Web offers opportunity for competition on the "speciality" axis instead of the price axis. From a marketing perspective, it is rarely desirable to compete solely on the basis of price. Instead, producers and venders attempt to satisfy needs on the basis of benefits sought, which means pricing is dependent upon value to the consumer, not costs. Such opportunity arises when the offering is differentiated by elements of the marketing mix other than price. This results in the delivery of value-laden benefits, for example, convenience through direct electronic distribution of software, or enjoyment through a visually-appealing and unusual Web site. As evidence that this is occurring, consumers indicated that price was the least important product attribute considered when making online purchases. The ability to compete on dimensions other than price will become especially critical in categories where brands are perceived as substitutes, since it allows for more opportunities to differentiate along other dimensions.

1.3-2(3) Operational Benefits

Operational benefits of Web use for industrial sellers are reduced errors, time, and overhead costs in information processing; reduced costs to suppliers by electronically accessing on-line databases of bid opportunities, online abilities to submit bids, and online review of awards. In addition, creation of new markets and segments, increased generation of sales leads, easier entry into new markets specially in remote markets and faster time to market is facilitated. This is due to the ability to reach potential customers easily and cheaply and eliminate delays between the different steps of the business sub-processes.

Virtual communities are already beginning to emerge; their continued growth will have widespread consequences for most traditional businesses.

2.0 VIRTUAL COMMUNITIES

It is anticipated that Virtual Communities will reshape both traditional industry structures and business organisation. They are likely to change the way companies manage specific business functions, particularly those which operate at the customer interface, like marketing.

2.1 A Unique Medium

It is observed that as a distribution channel, the Web possesses 1) extremely low entry and exit barriers for firms; 2) increasing irrelevance of distribution intermediaries; and 3) the capability to not only keep pace with market change, but accelerate it. Because the Web increases the power of the consumer and decreases the power of the producer and vender, compared to traditional channels of distribution, the consumer and the producer/vender approach "symmetrical power" and the best communication efforts are likely to be "collaborative" rather than "autonomous".

In the presence of higher information intensity, channel power shifts in favour of consumers and a breakdown occurs in formal distinctions between producer and consumer. In the information intensive Web environment, the firm is no longer broadcasting a single communication to many consumers, but in effect tailoring its communications according to consumers' varied interests and needs. This is currently implemented through the unique process of network navigation in which the consumer chooses what information to receive from the producer and vender. Thus, producers and venders must begin to examine the manner in which these more collaborative communication efforts should proceed.

2.2 Virtual Communities: Interactive Societies in the Internet

Virtual Communities are a relatively new phenomenon in the modern age. Virtual Communities are communities of entities, e.g. individuals, organisations which interact each other for particular purposes, e.g. entertainment, support, shared interests, trade etc., via the Internet. As such, Commercial Virtual Communities (CVCs) are interactive societies of Producers, Venders and Customers in the Internet.

Virtual Communities are "social aggregations that emerge from the Internet when enough people carry on those public discussions long enough, with sufficient human feeling, to form webs of personal relationships in cyberspace". Community in cyberspace has burgeoned in part due to a public lament over the disappearance of informal public spaces in our real existence and in part due to the pioneering spirit of "Netsurfers" who are attracted to virtual community by means of interacting with other people on a completely novel level.

According to Rheingold and others, the notion of virtual community is not to be dismissed as a technological, cyberpunk fantasy in which people increasingly live in; chained to their computer terminals, experiencing life through dehumanising technology rather than through human contact and intimacy. Indeed, Rheingold waxes eloquent about the passionate character of his on-line relationships within cyberspace and particularly within the WELL (Whole Earth Lectronic Link), a San Francisco-based conference site. His relationships in the WELL community have spilled over into his personal life, he has attended weddings, births, and funerals of his fellow WELL community members. Commenting on the strength of the bond within virtual communities, he notes:

"People in virtual communities use words on screens to exchange pleasantries and argue, engage in intellectual discourse, conduct commerce, exchange knowledge, share emotional support, make plans, brainstorm, gossip, feud, fall in love, find friends and lose them, play games, flirt, create a little high art and a lot of idle talk. People in virtual communities do just about everything people do in real life, but we leave our bodies behind. You can't kiss anybody and nobody can punch you in the nose, but a lot can happen within those boundaries. To the millions who have been drawn into it, the richness and vitality of computer-linked cultures is attractive, even addictive."

One of these rich and vital computer-linked cultures is the Internet Relay Chat (IRC), a multi-user synchronous "chat" line that was designed for social rather than business use. The IRC is comprised of various channels that indicate the subject matter being discussed in order to manage the traffic flow resulting when hundreds of people use the IRC simultaneously. Users type words on their screens which instantaneously reach other users. They must use a series of symbols in order to communicate efficiently with each another and develop a unique sense of community based on the unconventional boundaries of the medium.

Rheingold claims that his "sense of place" within his WELL virtual community is strong, partly because it serves as what Oldenburg (1991) refers to as the last of the three essential places in people's lives: the place they live, the place they work, and the place they gather for conviviality. These third places, Oldenburg argues, are where community is built and sustained.

Nevertheless, virtual community as a concept is still amorphous due to a lack of shared mental models about what exactly constitutes a community in cyberspace. Until the vagaries of communication within this new technological development are more firmly understood, the conceptualisation of on-line community may remain somewhat vague. The extension of community into cyberspace is a natural outgrow of the shift from an emphasis on the public to the private in the United States. The notion of community is a "public" concept in that it entails a collectivity of sorts. But virtual community has a private quality about it; it may be who we are as private individuals that constitutes our membership in certain communities, e.g., virtual communities based on political ties or communities of interest based on world view, hobbies, or professional status. Thus, a private character is ascribed to the idea of community as our individuality increasingly defines our choice of community membership, despite the nature of community as a social bond. The virtual communities are based on people's desire to meet four basic needs: interest, relationship, fantasy and transaction.