Available online at www.sciencedirect.com
Journal of Interactive Marketing 23 (2009) 11 - 22
www.elsevier.com/locate/intmar
⁎
Mays Business School, Texas A&M University, 4112 TAMU, College Station, TX 77843-4112, USA
Abstract
During the past decade, developments such as the rapid growth of the Internet, digitization of information products, and digitization of the information attributes of non-information products, has necessitated businesses to fundamentally rethink, as well as institute major changes in, their marketing strategies. Against this backdrop, we present a critical assessment of extant research on marketing strategy in an Internet-enabled environment viewed through the lens of research published in previous volumes of the Journal of Interactive Marketing (JIM), and speculate on the future of interactive marketing in the contexts of marketing practice, research in marketing and marketing education. Looking back, it is evident that marketing strategy and marketing operations have been transformed by the Internet in many ways. Looking ahead, it can be expected that marketing strategy and marketing operations will be even more extensively integrated and blended in the Internet-enabled market environment in the future. © 2009 Direct Marketing Educational Foundation, Inc. Published by Elsevier B.V. All rights reserved.
Keywords: Marketing strategy; Electronic commerce; e-Commerce; Internet marketing; Interactive marketing
Introduction
The evolution of the marketplace into an Internet-enabled market environment and the digitization of information products, over the past decade, have had a major impact on contemporary marketing thought and practice. For a growing number of products, the competitive landscape has evolved from a predominantly physical marketplace to one encompassing the physical marketplace and the electronic marketplace — an Internet-enabled market environment. The term digital revolution is widely used to refer to the rapid advances in technology underlying the production of information products in digital form and their marketing and distribution over the Internet. These technological advances have also significantly impacted the marketing of non-information pro-
⁎
Corresponding author.
E-mail addresses: Varadarajan@tamu.edu (R. Varadarajan),
Yadav@tamu.edu (M.S. Yadav).
ducts as a consequence of the digitization of their information attributes.
Against this backdrop, this paper provides a retrospective and a prospective on marketing strategy in an Internet-enabled interactive environment. The remainder of the paper is organized as follows. First, we briefly discuss marketing strategy in an Internet-enabled environment and propose an organizing framework. Second, we provide a review, synthesis and critique of research on marketing strategy in an Internet-enabled environment viewed through the lens of research published in previous volumes of the Journal of Interactive Marketing (JIM).
Given that research focusing on issues pertaining to marketing strategy and the Internet has been published in a number of other major journals as well, the scope of our review and synthesis is admittedly modest, since it is limited to relevant articles published in the first ten volumes of the JIM (1998–
2007). Third, we speculate on the future of interactive marketing and avenues for future research. We conclude the paper by drawing attention to the potential impact of emerging Web 2.0 technologies on marketing.
1094-9968/$ - see front matter © 2009 Direct Marketing Educational Foundation, Inc. Published by Elsevier B.V. All rights reserved. doi:10.1016/j.intmar.2008.10.002

12 R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22
Marketing strategy in an Internet-enabled environment: an organizing framework
Interactive marketing
A cursory examination of the literature suggests that the terms interactive marketing, Internet marketing, e-commerce, digital marketing, and online marketing are often used interchangeably. Similarly, in reference to marketing strategy, the terms interactive marketing strategy, Internet marketing strategy, e-commerce strategy, digital marketing strategy, and online marketing strategy are used interchangeably. While the terms e-commerce and e-commerce strategy are generally used in a more restrictive sense in reference to marketing, the terms e-business, e-business model and e-business strategy are used in a broader context encompassing multiple functional areas in an organization. The term e-business model is used to refer to fundamentally new ways of competing by leveraging the potential of the Internet. Although terms such as e-commerce and
Internet marketing are deeply entrenched in the business lexicon, the phenomenon that is actually being referred to is
Internet-enabled marketing. In fact, in a growing number of organizations worldwide, much if not all of marketing seems to be evolving to Internet-enabled marketing.
For purposes of this paper, building on the American Marketing Association's definition of marketing (Marketing News
2007), we define interactive marketing as follows: “ Interactive marketing refers to the use of an information infrastructure network and devices connected to the network for mediating interactions between an organization and its customers in the context of activities and processes employed by the organization for creating, communicating, and delivering products that offer value to customers in an exchange.” (For an alternative defi-
nition of interactive marketing, see Shankar and Malthouse
2006). A few clarifications regarding the proposed definition
may be useful. First, since the growth of the Internet has been instrumental in peer-to-peer marketing becoming increasingly pervasive, we use the term
“ organization
” to also refer to individuals. Second, the definition does not limit the scope of interactive marketing to any specific technological platform that is used for mediating interactions. Third, the term
“ interactions
” is used broadly to encompass all communication and transaction-related contacts between an organization and its customers
(including both end customers and intermediate customers, and exchange partners such as “ clients ” in certain professional service contexts).
Marketing strategy in an Internet-enabled environment
Two issues are central to competitive business strategy
(strategy at the business unit level encompassing and integrating strategy across multiple organizational functions such as marketing, manufacturing, and finance), and competitive marketing strategy (strategy at the marketing function level): (1) a business's choice of “ where to compete ” (i.e., product-markets in which to compete), and (2) “ how to compete in the chosen product-markets.” (A firm's choice of business arenas in which to compete is an issue central to corporate strategy). At the business unit level, “how to compete” is generally used to refer to how a business should deploy resources at its disposal in order to achieve and maintain defensible competitive positional advantages (e.g., cost and/or differentiation advantage) in the marketplace. At the marketing function level, “how to compete” encompasses a business's actions and deployment of marketing resources at its disposal to facilitate the achievement and maintenance of competitive positional advantages in the marketplace. A business's marketing strategy related actions and resource deployments manifest as competitive marketing behavior in the marketplace. Marketing resources include asset stocks that reside in the marketing function (e.g., marketbased relational assets such as brand equity, channel equity and customer equity) and financial resources invested in or expended toward various marketing activities such as advertising, consumer and trade sales promotion, distribution, personal selling, and product development.
The multiplicity of marketing strategy decisions that an established business is faced with when competing in an
Internet-enabled environment occupy different positions along a continuum. One end of the continuum represents decisions concerning augmentation of a business's current marketing strategy by leveraging the potential of the Internet. The other end represents decisions that entail radical departures from the current marketing strategy (i.e., competing in fundamentally new and different ways by leveraging the potential of the
Internet). Illustrative of marketing strategy decisions that entail augmentation of the current strategy, to varying degrees, by leveraging of the potential of the Internet are the following:
1.
Relative emphasis on traditional channels versus the Internet for providing product-related information to customers, communicating with customers, promoting to customers, and transacting with customers.
2.
Relative emphasis on marketing direct to customers via the
Internet versus through intermediaries (traditional, electronic, and/or hybrid intermediaries).
3.
Leveraging the potential of the Internet to innovate, customize and personalize in the realms of product, price, promotion, distribution and customer relationship management
(e.g., product innovations, product customization, and product personalization).
An organizing framework
A business's marketing strategy decisions are influenced by
a multiplicity of factors. Fig. 1 presents a conceptual framework
delineating the following five broad sets of factors as principal drivers a business's marketing strategy in an Internet-enabled
market environment (see Varadarajan and Yadav 2002):
• Firm characteristics (Link 2 —> 1)
• Industry structure characteristics (Link 3 —> 1)
•
Product characteristics (Link 4
—>
1)
•
Buyer characteristics (Link 5 —> 1)
• Macro environment characteristics (Link 6 — >1).

R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 13
Fig. 1. Marketing strategy in an Internet-enabled market environment. Characteristics highlighted in Boxes 2, 3, 4, 5, and 6 are representative of those that assume added relevance for competing in an Internet-enabled market environment. Aspects of marketing strategy highlighted in Box 1 are illustrative of new ways of competing that are available to firms as a result of the emergence of the Internet and Internet-related infrastrucutre. See text for clarification regarding linkages not depicted in the figure.
Marketplace performance and financial performance are shown as the outcomes of marketing strategy. As shown in Box
6 of Fig. 1, of specific interest in the broader context of the
macro environment are those characteristics pertaining to the
Internet and Internet-related technological infrastructure. Similarly, the characteristics highlighted in Boxes 2 to 5 are representative of those that assume added relevance in the context of competing in an Internet-enabled environment (e.g., information resources and information processing skills in Box 2; market thinness in Box 3; information products in digital versus non-digital form in Box 4; better informed buyers due to lower information search costs in Box 5). Viewed along a continuum, the marketing strategy related issues highlighted in Box 1 are representative of issues pertinent to competing in an Internetenabled environment ranging from augmentation of a business's present marketing strategy by leveraging the potential of the Internet to competing in fundamentally new ways by leveraging the potential of the Internet.
In the interest of simplicity, only direct linkages are shown in
Fig. 1. For instance, although changes in the technological
component of the macro environment (the market environment becoming increasingly Internet-enabled) can impact on marketing strategy, both directly (i.e., link 6→1) as well as indirectly
(e.g., link 6→4→1 and link 6→5→1), the latter are not shown
in Fig. 1. Similarly, plausible linkages in the opposite
direction (e.g., link 1→2 denoting the effect of a business's marketing strategy on resources such as brand equity and customer equity that it might accumulate over time) are not shown in the figure. Also not shown in the figure are linkages denoting feedback effects of marketplace performance and financial performance on marketing strategy. In the next section, we review, synthesize and critique prior research on marketing strategy in an Internet-enabled environment in the context of the proposed framework.
Table 1 presents two types of representative research on
marketing strategy in an Internet-enabled environment explored in the past issues of the Journal of Interactive Marketing that lend support for the face validity of the proposed framework: (1) research exploring broad issues (within boxes), and (2) research exploring relationships (linkages between boxes) delineated in
Fig. 1. Although the studies enumerated in Table 1 do not cover
all of the boxes and linkages delineated in Fig. 1 they never-
theless provide support for the face validity of the proposed framework. The less studied boxes and linkages are suggestive of future research opportunities. A more extensive list of studies
is presented in Table 2. However, given that a number of these
studies span multiple boxes and linkages delineated in Fig. 1, we
refrain from classifying them along lines similar to Table 1.
Using the organizing framework presented in Fig. 1 as a lens
to review and synthesize research with a marketing strategy focus published in the first ten volumes of the Journal of
Interactive Marketing, certain areas of emphases become evident. In general, we find evidence of considerable research on buyer characteristics (Box 5), and the link between marketing strategy and marketplace performance (link 1→7). Firm characteristics (Box 2) and the increasing importance of information

14 R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22
Table 1
Representative research on marketing strategy in an Internet-enabled market environment: Broad issues (within box) and relationships (linkages) illustrated in Fig. 1
and explored in the Journal of Interactive Marketing
Box 1: Marketing strategy
Online price and price dispersion between multichannel retailers and pure Internet retailers (Xing, Yang, and Tang 2006)
Box 5: Buyer characteristics
Consumer's Internet experience and preference for online versus online channel across stages of the buying process (Frambach, Roest, and Krishnan 2007)
Box 6: Internet and Internet-related infrastructure
Word-of-mouth communication within online communities (Brown, Broderick, and Lee 2007)
Link 2 →1: Firm characteristics →
Marketing strategy a
Adaptive learning about evolving needs and preferences of individual customers
→ proactive customer relationship management (next product to market, to which
customer, when to contact, how to contact) (Sun, Li, and Zhou 2006) Profiling of e-customer clusters
→ interactive personalization (mass customization, one-to-
one personalization, co-creation) (Miceli, Ricotta, and Costabile 2007) Use of the Internet as a platform for customer engagement in product innovation (Sawhney,
Verona, and Prandelli 2005)
Link 4 →1: Product characteristics
→
Marketing strategy
Optimal product line strategy and optimal pricing for an information product transitioning from offline in analog form to online in digital form (Venkatesh and Chatterjee 2006)
Link 1 →7: Marketing strategy →
Marketplace performance
Quality of web-based services → marketplace performance (customer satisfaction, customer loyalty, trust, perceived value, willingness to pay more, cross-buying)
(Fassnacht and Köse 2007) Interactive marketing intensity (e-marketing penetration)
→ marketplace performance (new customers gained, sales growth, market
share) (Brodie, Winklhofer,
Coviello, and Johnston 2007) Relative emphasis on pre-sale and post-sale services by e-retailers
→ marketplace outcomes (repurchase intention and overall service
rating) (Posselt and Gerstner 2005) Use of anthropomorphic information agents in online stores
→ marketplace outcomes (consumers' attitude toward the website, product and purchase intention)
(Sivaramakrishnan, Wan, and Tang 2007) Price partitioning in an Internet retailing environment (types of surcharges, relative amount of surcharges, and method
of presentation of surcharges
→ consumers'
purchase intentions (Xia and Monroe 2004) Provision of smart versus knowledgeable online recommendation agent to aid consumer decision making
→ consumer decision making process → marketplace
outcomes (perceived product fit, satisfaction with search) (Punj and Moore 2007)
The scope of some of these research studies extends well beyond the context in which they are cited here. They include investigation of other linkages, mediating effects, and moderating effects.
a It should be noted that adaptive learning about the evolving needs of customers, developing profiles of clusters of e-customers, and use of the Internet as a platform for engaging customers in co-creation of innovations are not explicitly discussed in the articles cited under the rubric of firm characteristics
— distinctive skills and resources. Our intent in listing them as representative of link 2→1 is to highlight the kinds of skills and resources that firms may be required to develop in order to effectively compete in an Internet-enabled market environment.
technology resources and information processing skills are
implicit in some articles (as noted in footnote a Table 1).
However, the specific role that such factors play in marketing strategy in an Internet-enabled market environment are explored in considerable length only in some of the published works (e.g.
Sawhney, Verona and Prandelli 2005). Research focusing on the
digitization of selected products and/or specific characteristics of products and marketing strategy conducive to superior performance for such products in an Internet-enabled environment
(Box 4 and link 4→1) is another theme that one encounters in the literature. In contrast, issues related to industry structure and its implications for marketing strategy in an Internet-enabled environment (Box 3 and link 3→1) are largely absent from the literature.
With this broad assessment of relative emphases as a backdrop, the next section presents a more detailed discussion of selected issues and themes in the literature. Guided by our
prior conceptual work in this area (Kalaignanam, Kushwaha, and Varadarajan 2008; Varadarajan and Yadav 2002; Varadarajan, Yadav, and Shankar 2008; Yadav and Varadarajan 2005a,
2005b), we view extant work as focusing on three broad areas
related to the deployment of resources for leveraging the
potential of the Internet (see Table 2): (1) communication and
interaction between firms and their customers; (2) communication and interaction between firms; and (3) augmentation of the marketing mix decisions. While making a distinction between these three areas is useful for exposition purposes, it is important to note that they can be related. Indeed, changes observed in the marketing mix decisions of firms (research area
3) are driven in large measure by changes related to communication processes in the marketplace (research areas 1 and
2). Given the scope of our article, we focus primarily on those issues where a critical mass of articles has emerged in the literature. Thus, our review is designed to be selective rather than comprehensive. A more detailed discussion follows.
Communication and interaction between firms and customers
Human – computer interaction
Rayport, Jaworski, and Kyung (2005, p. 67) note that how
firms manage their interfaces with customers and other entities represents “ the next frontier of competitive advantage for many businesses.” A number of research efforts have focused on how specific elements of the online interface impact online navigation behavior. Image interactivity, a component of the overall perceived interactivity of an online interface, favorably impacts

R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 15
Table 2
Selected marketing strategy themes and issues addressed in the Journal of Interactive Marketing (1998–2007)
Selected issues explored Representative articles Research focusing on deployment of
Resources resources to leverage the
Potential potential of the Internet for:
Communication and interaction between firms and customers
Human
– computer interaction
Online communities
Image interactivity
Animation
Waiting time
Time planning style
Consumer-generated content
Trust in electronic environments
Personalization
Motivation to participate
Effects of temporal/spatial separation
Signals of trust
Intelligent agents
Decision making
Communication and interaction between firms
Web-enabling organizational processes
Supply chain management Businessto-business interfaces
Rayport, Jaworski, and Kyung (2005); Fiore, Jihyun, and
Hyun-Hwa (2005); Chan Yun and Kihan (2005);
Dellaert and Kahn (1999); Weinberg (2000);
Cotte et al. (2006)
Hagel; Hennig-Thurau et al. (2004); Bickart and Schindler (2001)
Smith, Menon, and Sivakumar (2005); Chiou and Cheng (2003)
Biswas and Biswas (2004); Yoon (2002); Wang, Beatty, and
Foxx (2004); Milne and Culnan (2004); Sheehan (1999)
Thorbjørnsen et al. (2002); Dholakia (2005); Moe and Fader (2004);
Redmond (2002); Sivaramakrishnan, Wan, and Tang (2007);
Jank and Kannan (2006); Miceli, Ricotta, and Costabile (2007);
Grewal, Hardesty, and Iyer (2004); Vesanen and Raulas (2006);
Iacobucci and Arabie (2000); Forsythe, Chualan, Shannon, and Gardner (2006)
Anderson (1999)
Quinn (1999)
Chakraborty, Lala, and Warren (2002)
Augmentation of marketing mix decisions
Product decisions Digitization
Product digitizability
Marketplaces of the artificial
Pricing decisions Pricing mechanisms
Price search Online auctions Price dispersion
Advertising and promotion Banner ad processing Pop-up ad decisions processing Online visibility
Optimization Multi-channel marketing Product and process
Distribution channel decisions utility Retention rates Profitability
Bellman et al. (2006); Sawhney, Verona, and Prandelli (2005)
Wind and Rangaswamy (2001); Weathers and Makienko (2006)
Dolan and Moon (2000); Jensen et al. (2003)
Heyman, Orhun, and Ariely (2004); Xia and Monroe (2004)
Xing, Yang, and Tang (2006)
Baye, Morgan, and Scholten (2004); Cao and Gruca (2004);
Pan, Ratchford, and Shankar (2004)
Drèze and Hussherr (2003); Lam, Chau, and Wong (2007)
Moe (2006): Briggs, Krishnan, and Borin (2005)
Drèze and Zufryden (2004)
Balasubramanian, Raghunathan, and Mahajan (2005)
Dholakia, Zhao, and Dholakia (2005); Verhoef and Donkers (2005)
Kumar and Venkatesan (2005)
outcomes such as buyers' attitude toward the seller and purchase intentions (Fiore, Jihyun, and Hyun-Hwa 2005). These effects are mediated through perceptions of telepresence (i.e., a realistic experience facilitated by computer-mediated technology) and
instrumental value (i.e., perceived utilitarian benefits). Chan Yun and Kihan (2005) report that increasing levels of animation in
online environments may not always have favorable outcomes.
They find evidence for an inverted-U relationship between the level of animation and measures of advertising effectiveness
(recognition and attitude toward the ad).
Research has also examined perceptions of waiting time during online navigation, which can have significant implications for an individual's likelihood of continuing an online interaction. Dellaert and Kahn (1999) manipulate waiting time in an experiment and find that delays encountered during online navigation are generally associated with negative outcomes, but the severity of these outcomes can be reduced by managing the delay (e.g., by providing some indication of how much waiting time can be expected). The delay-related perceptions of individuals also are likely to be subject to a variety of biases. For instance, Weinberg (2000) shows that individuals are unable to accurately judge how long they had waited during an online browsing session. Finally, research by Cotte, Chowdhury,
Ratneshwar, and Ricci (2006) suggests that there could be substantial heterogeneity in terms of the time planning styles that customers bring to an online session. While some customers can be analytical (i.e., they seek primarily utilitarian benefits), others may be spontaneous (i.e., they seek primarily hedonic benefits). Results show that time planning style impacts how individuals conduct online browsing, search for information, and engage in online shopping.
Online communities
Hagel (1999) notes that online or virtual communities
—
Internet-enabled aggregations of consumers who may share a common interest or characteristic — can facilitate not only new forms of communication but also new types of business models.
A wide range of considerations motivate consumers to particpate in online communities (e.g., social interaction, economic
incentives, and a concern for other consumers; see Hennig-
Thurau, Gwiner, Walsh, and Gremler 2004). Bickart and
Schindler (2001) find that consumers exhibit a preference for

16 R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 consumer-generated content in online communities relative to other online sources that are viewed as being directly controlled by a firm (e.g., a firm's website providing product-related information). The extent to which consumers rely on recommendations provided in online communities can vary across consumers depending upon whether their shopping goals are
utilitarian or hedonic (Smith, Menon, and Sivakumar 2005);
expertise of the recommender has a significant influence only when a consumer's shopping goal is utilitarian. The increasing strategic significance of online communities is highlighted by research showing that they can impact perceptions of firms
(Chiou and Cheng 2003). Firms with a poor pre-existing brand
image appear especially vulnerable to unfavorable consumergenerated content in online communities.
Trust in electronic environments
Due to the characteristic of electronic purchase transactions
(e.g., spatial and temporal separation of purchase and delivery), combined with concerns such as privacy, the issue of online trust
has emerged as an important topic in the literature (e.g., Bart et al. 2005). Consumers' inability to fully evaluate tangible
products can accentuate such trust-related concerns. However, signals such as brand reputation and investments in advertising
can alleviate such concerns (Biswas and Biswas 2004; Yoon
2002). Signals aimed at trust development are particularly
important for small online retailers (Wang, Beatty, and Foxx
2004). As firms develop strategies to enhance trust, the importance of taking note of differences that exist among consumers is highlighted by the following representative research findings. While most consumers report being concerned about privacy issues in electronic environments (Milne and Culnan
2004), these concerns are more pronounced among women
(Sheehan 1999).
established cluster analysis techniques can be used to explore such differences and develop specific personalization strategies for different customer segments. For additional details on this issue, see Murray and Häubl (accepted for publication) and
Montgomery and Smith (accepted for publication).
Going beyond the issue of personalization, there is growing recognition of the need to look more closely at how the electronic environment can facilitate (or, in some cases, even impede) decision making. An analysis of two national samples by Forsythe, Chualan, Shannon, and Gardner (2006) indicates that consumers perceive a number of benefits to be associated with online shopping (e.g., convenience, selection, ease of shopping, and entertainment). Consumers also report several risks and impediments (e.g., financial risk considerations, inability to evaluate tangible products, and inconvenience of certain electronic shopping interfaces). Several research efforts
listed in Table 2 focus either directly or indirectly on how these
benefits can be enhanced while simultaneously eliminating or alleviating risk perceptions associated with online shopping.
Summary
The studies reviewed in this section highlight the increasing significance of online interfaces that connect firms with their customers. An important theme that is reflected frequently in the emerging evidence relates to the substantial heterogeneity that appears to exist in customers' responses to such interfaces.
Identical features of an online interface can often elicit a wide range of customer responses, although the underlying behavioral reasons for those differences are not understood very well. This complicates the task of designing, managing, and optimizing online interfaces that link firms and customers.
Communication and interaction between firms
Personalization
Personalization of consumers' online shopping experience
has attracted considerable research attention. Thorbjørnsen et al.
(2002) show that personalized websites are more effective for
enhancing brand relationships with customers compared to online communities. Data for personalizing website and the online shopping experience can be acquired from post-purchase surveys (Dholakia 2005) or click-stream data pertaining to
navigation behavior (Moe and Fader 2004). These data can also
be utilized to develop intelligent agents to facilitate consumers'
decision making in electronic environments (Redmond 2002;
Sivaramakrishnan, Wan, and Tang 2007), or targeted promotions
(Jank and Kannan 2006), resulting in longer-term and mutually-
beneficial relationships. Different consumers prefer different
levels and types of personalization (Miceli, Ricotta, and
Costabile 2007) and some consumers may even react unfavorably to certain types of personalization strategies (see Grewal,
Hardesty, and Iyer's (2004) study that presents different prices to
different customer groups). Therefore, firms must carefully examine such differences, and their implications for organiza-
tional processes (Vesanen and Raulas 2006), when developing a
personalization strategy for managing their online interactions
with customers. Iacobucci and Arabie (2000) argue that well-
Using Porter's (1988) value-chain framework, researchers
have sought to understand the impact of the Internet on interand intra-organizational activities related to marketing and how these activities ought to be redesigned and reconfigured in light of the changing marketplace environment. The focus of this relatively under-developed area of research is generally on issues such as web-enabling organizational processes, supply chain management, and online business-to-business interfaces.
Anderson (1999) discusses opportunities for
“ web-enabling ” a wide range of activities pertaining to procurement and supply
chain management. Building on a similar theme, Quinn (1999)
views business-to-business relationships as an ecosystem that must be carefully examined and managed. He argues that
Internet-related technologies provide opportunities to create a higher level of visibility of on-going internal operations and interactions with external business partners. Enhancing this visibility has the potential of increasing the efficiency of activities performed in complex business-to-business settings.
As these activities are coordinated and conducted through websites, it is important to understand factors that impact the
perceived effectiveness of such online interfaces. Chakraborty,
Lala, and Warren (2002) find four significant drivers of per-
ceived website effectiveness in business-to-business contexts:

R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 17 informativeness, organization, transaction-related interactivity, and personalization. It is worth noting that several characteristics of the online interface had no significant impact: nontransaction-related interactivity, privacy/security, accessibility, and entertainment. The finding with respect to privacy/security, in particular, is surprising given its frequent mention in the popular press and the confidential, high-dollar nature of many business-to-business transactions.
Summary
In contrast with consumer-centered research reviewed in the previous section, empirical research in JIM on issues related to communicating and interacting with businesses remains limited.
However, a number of articles in the journal have recognized the need to look more closely at the potential of the Internet to transform business-to-business communication and interaction processes. We speculate that the failure of hundreds of new online business-to-business enterprises during the early 2000s may have raised questions about the viability of this research area, dampening researchers' interest. Furthermore, getting access to data in this online research context (compared to the online business-to-consumer context) may be more challenging, thus impeding efforts to develop an active research program.
Augmentation of the marketing mix decisions
Product issues
Digitization allows firms to create what Bellman, Johnson,
Lohse, and Mandel (2006, p. 22) refer to as
“ marketplaces of the artificial.” One characteristic of these marketplaces is that, in the context of tangible products, product information can be readily
unbundled from the physical product. Bellman et al. (2006) note
that this characteristic allows firms to present an expanded assortment of products and more customized design options.
Digitization also has significant implications for how new pro-
ducts are created, produced, and marketed (Sawhney, Verona, and Prandelli 2005; Wind and Rangaswamy 2001). In the case of
digitizable products (e.g., music), offering direct electronic delivery is an important additional benefit for both consumers
(i.e., immediate consummation of the purchase process) and firms (i.e., no need for costly physical fulfillment activities).
Direct and immediate delivery of digitizable products has also created new opportunities related to wireless services (e.g., maps, bill payment, and other information services). Weathers and Makienko (2006) highlight another important productrelated characteristic that can play an important role in online shopping environments: the extent to which a product can be evaluated prior to purchase and consumption. They report that online retailers selling products that cannot be evaluated adequately prior to purchase have a higher failure rate.
Pricing issues
Dolan and Moon (2000) review the characteristics of the emerging electronic marketplace and discuss several implications for three different pricing mechanisms: price set by a firm; price that is negotiated; and price that is established via a competitive bidding process. They conclude that, overall, the wider and easier availability of price information increases consumer power in the marketplace and creates a tendency of price levels to decrease.
A number of research efforts have focused on the behavioral
aspects of pricing. Jensen, Kees, Burton, and Turnipseed (2003)
find that the potentially biasing impact of seller-provided advertised reference prices is reduced in online environments.
However, there is also evidence that some psychological biases still persist. For instance, in the case of partitioned prices (e.g., shipping costs showed separately), consumers tend to make price-related judgments that do not adequately adjust for the
add-on pricing component in a transaction (Xia and Monroe
2004). In online auction settings, Heyman, Orhun, and Ariely
(2004) show that consumers may provide higher bids due to two
psychological effects: the quasi endowment effect (i.e., consumers develop a sense of product ownership during the bidding process) and the opponent effect (i.e., increase in the subjective value of a product when the behavior of other bidders is perceived as competitive).
A second stream of research has focused on the pricing behavior of firms in the electronic marketplace. In particular, the issue of price dispersion (i.e., the magnitude of price variation for a given product across firms) has attracted much attention. Xing,
Yang, and Tang (2006) find that prices (of DVDs) in online branches of multi-channel retailers tend to be higher compared to the prices of pure-play firms that do not have a physical presence.
They also find that prices tend to converge over time, thus
reducing price dispersion. Baye, Morgan, and Scholten (2004)
argue that the observed pricing behavior of firms in online environments appears consistent with a
“ clearinghouse model
” in which firms change price levels randomly to create uncertainty for other competitors. Price dispersion can also
stem from differences in service levels across firms (Cao and
Gruca 2004). Pan, Ratchford, and Shankar (2004) review extant
research on price dispersion and conclude that price dispersion is affected by firm, market, and product characteristics.
Advertising and promotion issues
Research efforts in this area have focused on how consumers process commercial messages in online settings and how firms can make their online advertising strategies more effective.
Using an eye-tracking methodology, Drèze and Hussherr (2003) investigate the processing of banner ads. Their results suggest that consumers tend to direct attention on a computer screen in a manner that pushes banner ads to the periphery of their visual
field (see also Lam, Chau, and Wong (2007) for an eye-tracking
study of how consumers process an array of thumbnail images from left to right). Therefore, as the processing of certain banner ads is likely to be at pre-attention levels, brand awareness and ad recall are more appropriate measures of advertising effectiveness compared to the traditional measures based on click-through
rates (CTR). Moe's (2006) study of pop-up ads suggests that
contextual factors (e.g., when and where an ad is placed during an online session) can significantly impact advertising effectiveness. In light of such findings, it is evident that firms must devote considerable efforts to develop and implement an online
advertising and promotion strategy. Briggs, Krishnan, and

18 R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22
Borin's (2005) detailed case study indicates that firms can expect
a good return on efforts aimed at carefully coordinating online advertising with other channels such as television, radio, and print. Such efforts, collectively, determine a firm's online visibility (Drèze and Zufreyden 2004), an important determinant of traffic levels at the websites of firms.
Distribution channel issues
Although multi-channel marketing is a topic that preceded the Internet, the emergence of the electronic marketplace has
spurred renewed research interest in this area. Balasubramanian,
Raghunathan, and Mahajan (2005) present a conceptual frame-
work in which consumers' channel choices are explained by making a distinction between two different types of utilities: product utility (which depends of product characteristics), and process utility (which focuses on how the product is acquired).
Process utility can consist of both instrumental components
(e.g., getting a lower price in a specific channel) and noninstrumental elements (e.g., enjoyment from the social aspects of a specific channel). While having different channel options presents many benefits for consumers, they do have to incur learning costs as they switch from one channel to another
(Dholakia, Zhao, and Dholakia 2005).
From the perspective of firms, the retention rate of a customer can vary significantly depending upon the specific channel in
which that customer was initially acquired (Verhoef and
Donkers 2005). Compared to radio, television, and direct mail,
initial acquisition via a website is associated with higher
retention rates. Kumar and Venkatesan (2005) report numerous
benefits for firms that implement multi-channel marketing strategies. Customers who shop across multiple channels provide higher revenues, higher share of wallet, and tend to be more active than single-channel customers. The likelihood that single-channel customers will become multi-channel customers depends on many factors; the likelihood increases if customers purchase across multiple product categories, engage in more frequent purchases, and/or communicate more frequently with the firm.
Summary
Taking a collective view of extant work on all four marketing mix elements in electronic environments, considerable progress can be noted on several fronts. Product digitization, and the challenges and opportunities stemming from that change, represent a driving force behind research efforts in this area.
That is, much of the existing work focusing on the pricing, advertising, and distribution decisions of firms can be traced to product-related digitization. Even in the case of tangible products, the feasibility of digitization of many pre- and postpurchase activities highlights the need for marketers to rethink many marketing mix decisions.
Summary
Over the past decade, research focusing on the marketing strategy implications of the Internet has progressed along three main fronts: (1) communication and interaction between firms and their customers; (2) communication and interaction between firms; and (3) augmentation of marketing mix decisions.
These research efforts have significantly enhanced our understanding of how customers behave in networked, electronic environments and the marketing strategy implications of their behavior. Research area 1 has focused on issues such as humancomputer interaction, online communities, trust formation, and personalization. There is evidence of significant heterogeneity across consumers in terms of how they interact with and respond to the online interfaces of firms. In general, much less has been learned about Internet-enabled communication and interaction activities within and between firms (research area 2).
Research efforts in this area remain limited, although there appear to be numerous opportunities stemming from the need to redesign inter- and intra-organizational processes. Finally, research area 3 (augmentation of marketing mix decisions) has generated substantial interest. Digitization of products, and the impact of the market environment becoming Internet-enabled on consumers’ pre- and post-purchase activities, are important drivers of research endeavors in this area.
Future research directions
Looking back a couple of years prior to the emergence of the
Internet, it is debatable as to whether anyone had the prescience to predict the nature, scope and extent of impact that the Internet and Internet related infrastructure would have on marketing practice, marketing education and research in marketing.
Bearing this caveat in mind, we discuss in brief some broad directions for future research that seem to hold promise.
Success producers versus failure preventers in an
Internet-enabled environment
In an exploratory study, Varadarajan (1985) suggests that
competitive strategy variables can be broadly classified as success producers versus failure preventers. Under the scenario of response functions for an array of competitive strategy variables being S-shaped, he posited that the response functions for success producers can be expected to differ from those for failure preventers in the following respects. All else being equal:
• Success producers will evidence a positive relationship between the level of effort and the associated outcome (e.g., sales, market share) over a relatively wide range (i.e., the range between the minimum threshold level of effort and saturation level of effort).
• Failure preventers will evidence a positive relationship between the level of effort and the associated outcome (e.g., sales, market share) over a relatively narrow range. In order to prevent failure of the overall effort spanning multiple competitive strategy variables, the level of effort expended on failure preventers must be above the minimum threshold for the effort to have a positive effect on the outcome variable of interest. However, unlike success producers, increasingly higher levels of effort above the minimum threshold will not result in correspondingly higher levels of positive outcomes.

R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 19
Relative to the physical marketplace, the Internet-enabled market environment offers an even richer empirical setting (i.e., a broader array of contextual and competitive strategy variables) for reexamining this issue. Research efforts building on this framework have the potential to provide a delineation of success producers and failure preventers in the context of the Internetenabled environment. While some researchers have focused on the relationship between e-retailer performance and factors such as web site atmospherics (e.g., ease of navigation) and features
(e.g., availability of interactive decision aids), a question that merits careful consideration is whether these are intrinsically failure preventers.
Determinants of performance of platform firms versus user firms
A broad distinction can be made between platform firms in the electronic marketplace that provide software as infrastructure service (e.g., infrastructure service provided by eBay which enables interested buyers and sellers to participate in auctions in the electronic marketplace; infrastructure service provided by
Google which enables advertisers to reach customers more efficiently and effectively in the electronic marketplace) versus user firms that use such infrastructure services to conduct business in the electronic marketplace. Still other firms such as
Amazon seem to be engaged in both. By leveraging the supply chain and logistics systems that it uses to run its own business,
Amazon has introduced a number of services including rack space in its warehouses, spare computing capacity on its servers, data storage on its disk drives, and software code that was written to run its business operations. Through its service called Simple Storage Service, Amazon rents space on its disk drives to programmers and businesses to store data. Through its service called Fulfillment by Amazon, it lets small and midsize businesses rent space at Amazon warehouses to store their inventory. When customers place orders with these businesses,
Amazon receives instructions to ship the items ordered from its
warehouse (Hof 2006). These developments highlight the need
for research that can shed insights into the determinants of marketplace and financial performance of firms in the above categories.
Emerging business models — software as a service utility
Paralleling the growth of the Internet and its potential to serve as a distribution channel for information products in digital form, there has been a heightened interest among businesses in issues relating to marketing of information products at the aggregate level, as well as in reference to specific types of information products such as marketing of software, movies and video games. Case in point is the recent trend toward marketing software as a service (service utility). Unlike the traditional business model of companies purchasing software and installing it on their equipment, a relatively recent business model that has made significant inroads in certain software application categories is the selling of software as a subscription service accessed over the Internet. Recent research on the characteristics of software applications with greater potential to migrate to the
Internet and delivered as a service, the economics of the competing business models, and capabilities that firms should nurture in order to be able to compete effectively in an environment in which the marketing of software as a service
grows in importance (Dubey and Wagle 2007) points to the
potential and need for further research in this area.
Duration of first-mover advantages in an Internet-enabled market environment
In a recent article, Varadarajan, Yadav, and Shankar (2008)
present a conceptual framework and propositions distinguishing between potential sources of first-mover advantage that can be expected to have a greater effect versus a lesser effect in the
Internet-enabled market environment (IME) relative to the physical market environment (PME). Along similar lines, an issue that merits exploration in future research is whether the duration of specific sources of first-mover advantage will be shorter or longer in the IME relative to the PME.
Online behavior, targeted advertising and public policy
The ability to track the online behavior of individuals has enabled firms competing in an Internet-enabled environment to achieve a greater degree of granularity in targeting individual customers. Computer-aided personalization of product offerings and promotions guided by a customer's past purchases and/or online behavior at a specific website (e.g., Google, Yahoo,
Amazon, Orbitz) has been in vogue for some years. However, in their attempts to achieve an even greater degree of granularity in targeting individual customers, advertisers have teamed up with
Internet service providers to track the behaviors of individuals across websites. This recent development has raised privacy concerns, and calls by privacy advocates and lawmakers for regulations that set limits on web tracking across web sites by
Internet service providers. Some lawmakers have opined that tracking across websites should be governed by the same sort of
“ opt-in ”
rules that govern telephone and cable hookups (Johnson
2008). Public policy issues such as whether firms should be
allowed to track the online behavior of individuals across websites only with their consent, and the implications for online advertising and promotion of proposed regulations governing such practices, constitute potential avenues for future research.
Social media and interactive marketing
In 2005, Business Week published a cover story titled,
“
Blogs Will Change Your Business
”
(Baker and Green 2005).
The following are among the questions highlighted in Dwyer and Varadarajan (2008) in regard to competing in an envi-
ronment in which the Internet has evolved into a host for millions of conversations about products and ideas: What motivates consumers to be participants in blogs generally and corporate blogs specifically? What can firms do to be heard by key constituencies in the blogosphere? What role can corporate blogs (firm level, business unit level, brand level, etc.) play in a

20 R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 business's marketing strategy and customer relationship management programs? Given that consumers are limited in the time they can spend in the blogosphere, how important will it be for firms to attract customers to interact in their corporate blogs in the broader context of competition between rivals?
In 2008, Business Week published a follow-up cover story titled, “ Beyond Blogs: What Business Needs to Know ”
(Baker and Green 2008). In addition to blogs, the evolving social
media, the focus of the 2008 article, encompasses social networks such as Facebook and MySpace, video sites such as
YouTube, and mini blogs such as Twitter. One can expect that questions pertaining to the implications of the evolving social online media for marketing practice will be the focus of a considerable body of future research in marketing.
The future of interactive marketing
Over the years, marketing as a field of study has evolved into a number of specialized streams and sub-streams of inquiry including the following:
1.
Streams of inquiry based on the object that is being marketed:
Marketing of goods, services, experiences, people, places, ideas, high-technology products, information products, etc.
2.
Sub-streams of inquiry based on the object that is being marketed: Marketing of a specific class of services (e.g., health care services marketing), a specific type of experience
(e.g., sports marketing), a particular type of information product (e.g., software products marketing), etc.
3.
Streams of inquiry based on specific types or groups of customers being targeted: Marketing to individual consumers or households (business-to-consumer marketing), businesses
(business-to-business marketing), government institutions, specific ethnic groups (ethnic marketing, multicultural marketing), consumers residing in specific geographic areas
(e.g., rural marketing), specific demographic groups (the children, the elderly, the poor, and the affluent), etc.
4.
Streams of inquiry based on the geographical scope of marketing: Export marketing, international marketing, global marketing, marketing in developing countries, etc.
5.
Streams of inquiry based on the devices and infrastructure facilitating marketing: Interactive marketing/e-commerce
(enabled by a networked information infrastructure and devices connected to the network), telemarketing (enabled by the telephone and telecommunications infrastructure), direct marketing/mail order marketing (enabled by the postal system and parcel delivery infrastructure), etc.
6.
Streams of inquiry based on the type of organization that is engaged in marketing: Marketing by for-profit organizations, marketing by not-for-profit organizations (social marketing), etc.
7.
Streams of inquiry based on the orientation of the organization that is engaged in marketing: Marketing with a transactional orientation, marketing with a relational orientation (relationship marketing), governed by an overarching organizational philosophy (customer-centric/customer-focused marketing), etc.
8.
Streams of inquiry based on some distinctive characteristic of marketing: Cause-related marketing, green marketing, etc.
9.
Streams of inquiry based on the principal marketing objective: Defensive marketing (focused on the retention of present customers), etc.
In the same vein, an examination of articles published in previous volumes of the Journal of Interactive Marketing reveals reference to the following: convergence marketing, database marketing, direct marketing, e-marketing, interaction marketing, interactive marketing, network marketing, permission marketing, reverse marketing, and viral marketing. Some of these terms are used interchangeably and others in reference to specific marketing practices.
Against this backdrop, reflecting on the future outlook for interactive marketing within the broader context of marketing raises some interesting issues. On the one hand, the emergence of specialized fields of study in a discipline is generally a sign of the growth and maturation of the discipline. On the other hand, in the absence of compelling justification for a specialized inquiry, proliferation of increasingly specialized streams of inquiry in a field is unlikely to either yield new insights or meaningfully contribute toward advancing knowledge in the field.
In the broader context of the above caveat, we view the emergence of interactive marketing as a specialized field of study as a reflection of the maturation of the field.
Nevertheless, we also believe that it might be beneficial to initiate a conversation on the future of interactive marketing as a specialized field of inquiry and its place within the broader field of marketing. The need for such a conversation is that the distinctive characteristic of interactive marketing — the mediation of interaction between an organization and its customers by an information infrastructure network (e.g., the Internet) and information and communication devices connected to the network (e.g., computers, mobile phones)—is increasingly becoming an integral element of marketing for most products in most market contexts. As the overlap in the substantive scopes of marketing and interactive marketing increases, the greater will be the need for and challenge of delineating the essential building blocks (e.g., concepts, theories, and substantive issues) of interactive marketing as a specialized field of inquiry.
The prospect that interactive marketing, over time, will be an integral part of practically all of marketing poses some questions that merit further reflection:
• If interactive marketing were to be an integral element of practically all of marketing in practice, how and on what basis should the substantive scopes of these two fields of inquiry be disentangled?
• What criteria would constitute a valid basis for distinguishing and clarifying the connections between marketing and interactive marketing?
•
What would constitute the major components of a research agenda focused on interactive marketing?
• What concepts, theories, and substantive topics are be unique to the emerging field of interactive marketing?

R. Varadarajan, M.S. Yadav / Journal of Interactive Marketing 23 (2009) 11–22 21
•
From the perspective of course development and education, as the myriad facets of interactive marketing are fully integrated in various marketing courses with a substantive focus, what specific content will make a stand-alone course on interactive marketing distinctive?
Conclusion
During the past decade, developments such as the rapid growth of the Internet, digitization of information products, and digitization of the information attributes of non-information products, has necessitated businesses to fundamentally rethink, as well as institute major changes in their marketing strategies. Effective integration of the Internet into a firm's marketing strategy and marketing operations is increasingly becoming a competitive imperative. In fact, judging from recent business developments and trends reviewed in JIM
(Barwise and Farley 2005; Brodie, Winklhofer, Coviello, and
Johnston 2007; Sultan and Rohm 2004), this already appears
to be happening in a number of industries and productmarkets.
The findings of a recent global survey of executives
(The
McKinsey Quarterly 2007) focusing on current and planned
investments by companies in various Web 2.0 technologies (e.g.,
Web services, collective intelligence, peer-to-peer networking, social networking, really simple syndication, podcasts, wikis, blogs, and mash-ups) are particularly noteworthy from the standpoint of their potential impact on marketing. 70% of the respondents report using some combination of Web 2.0 technologies to interface with customers (customer-to-business feedback, customer services, entering new markets and acquiring new customers in existing markets), 75% to manage collaboration internally (product design and development and knowledge management), and 51% to interface with suppliers and partners (purchasing, better interface integration and better communication). Interestingly, in a follow-up survey
(The
McKinsey Quarterly 2008), only 21% of the executives reported
being satisfied with their firms' efforts to deploy Web 2.0 tools and technologies. Thus, while many important elements of the future seem to be already all around us, many unresolved questions and issues still remain for further exploration.
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