Firms' Web sites are becoming an increasingly important component of their customer service systems. Yet there is a dearth of research-based insights and guidelines concerning the roles, functionalities, and effective design of Web sites. In this article we describe and discuss findings from a three-phase, multimethod research study aimed at filling this literature void. We first propose and validate a descriptive taxonomy of customer needs amenable to online fulfillment. Complementing this taxonomy, we next propose, and offer preliminary validation of, a five-stage conceptual model for understanding and predicting the development of a firm's Web site design and functionality. Findings from our study suggest that firms' Web sites are by and large in the early stages of development with respect to their ultimate potential, but that executives in leading service firms have begun to conceptualize and plan for subsequent stages. We conclude the article with managerial implications and important avenues for further research.