Customers Rule_

Document Sample
Customers Rule_ Powered By Docstoc
					CUSTOMERS RULE!
Why The e-Commerce Honeymoon Is Over And Where Winning Businesses Go From Here
ROGER BLACKWELL and KRISTINA STEPHAN

ROGER BLACKWELL is professor of marketing at Ohio State University’s College of Business and president of Blackwell Associates, Inc., a marketing consulting firm. In addition to serving on the boards of directors of a number of NYSE and Nasdaq corporations, Dr. Blackwell is also the author of From Mind to Market and coauthor of Consumer Behavior. He is a graduate of the University of Missouri and Northwestern University. KRISTINA STEPHAN is vice president and partner of Blackwell Associates, Inc. She is the coauthor of Contemporary Cases in Consumer Behavior and many published articles on consumer behavior, retailing and supply chain management. Ms. Stephan is a graduate of Ohio State University. Dr. Blackwell’s Web site is located at http://www.rogerblackwell.com.

SUMMARIES.COM is a concentrated business information service. Every week, subscribers are e-mailed a concise summary of a different business book. Each summary is about 8 pages long and contains the stripped-down essential ideas from the entire book in a time-saving format. By investing less than one hour per week in these summaries, subscribers gain a working knowledge of the top business titles. Subscriptions are available on a monthly or yearly basis. Further information is available at http://www.summaries.com.

Customers Rule! - Page 1

MAIN IDEA The early hype was that e-commerce would quickly supercede and replace the traditional ways of doing business. Reality has now set in, and it is becoming increasingly clear business success will depend on a “blended” strategy – which combines the best features of conventional commerce with the new ways to reach customers made possible by Internet technologies. In particular, it has become clear there is no magic formula to making money using the Internet. Those companies which prosper will be those who do the business fundamentals better than anyone else: • Capturing and retaining customers. • Building and growing quality brands. • Amassing highly efficient logistics and distribution systems. • Continuing to grow and generate increasing profits by constantly finding new and better ways to serve customers. The heart of any long-term winning business strategy is the realization that ultimately customers decide which business models, retail formats, sales techniques and strategies they like and feel comfortable with. Therefore, the decisions on how best to incorporate the Internet into those areas will be made on an industry-by-industry basis. For some, the Internet will be vitally important while for others it will be much less important. And for individual firms, business success will depend less on e-commerce capabilities and more on their ability to develop customer-driven solutions, master the key commerce functions p rofitably and wow customers. In short, those firms which take note of and cater to the way their customers want to do business will do well, while companies that focus on just one side or the other of e-commerce will struggle to survive.

The 8 Key e-Commerce Concepts 1 2 3 4 5 6 7 8 The Internet is one phase in an evolutionary process. The “commerce” side of e-commerce is vitally important. The consumer is the key ingredient of any future success. Market segmentation is vital for online selling. Branding must combine online and off-line activities. Customer satisfaction, not popularity, is the key factor. Focus on customer needs when innovating. The most efficient supply chain always wins in the end.

The 10 e-Commerce Strategies of the Future 1 2 3 4 5 6 7 8 9 10 Add a physical presence to e-tail operations. Focus on solving customer problems, not technology. Don’t worry about being first mover – be the final victor. Develop an “octopus” brand. Evolve from free to fee. Add a human dimension. Multichannel to sell to new market segments. Sell and source the global marketplace. Develop strategic alliances on e- and commerce-sides. Harness the Internet to create a lean demand chain.

Section 1 – 8 Key e-Commerce Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 2 - 5 Section 2 – 10 e-Commerce Strategies of the Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 6 - 8

Customers Rule! - Page 2

Section 1

8 Key e-Commerce Concepts

Concept

2

The “commerce” side of e-commerce.

Main Idea The 8 Key e-Commerce Concepts 1 2 3 4 5 6 7 8 The Internet is one phase in an evolutionary process. The “commerce” side of e-commerce is vitally important. The consumer is the key ingredient of any future success. Market segmentation is vital for online selling. Branding must combine online and off-line activities. Customer satisfaction, not popularity, is the key factor. Focus on customer needs when innovating. The most efficient supply chain always wins in the end.

Supporting Ideas Concept 1 The Internet is one phase of an evolution.

It is more important for companies to master the “commerce” side of the e-commerce equation than it is for companies to master the “e” side. Why? Because regardless of what type of business field you are in, unless you can efficiently perform the activities required to get goods from the producer to the consumer, you won’t be competitive. For example, look at the world’s most successful business models – Wal-Mart, GE, Sony and Microsoft. These companies have each evolved over time by shifting functions within their supply chains to whichever entity is best able to perform that function. As a result, their marketing activities become more targeted and their supply chain output is maximized while their energy, capital and human resource inputs are minimized. They serve customers better than any competitor does. Good businesses have available what consumers want to buy. And that only becomes feasible and possible if the business has: 1. Actual experience in what customers will or won’t buy. 2. A passion for some product or lifestyle. 3. Better market information. With that in mind, online businesses:
n

Should have an experienced Chief Buyer as their number two in command – with sufficient industry experience to be able to gauge where the retail market is heading. Should cater to niche markets – because it is easy to connect electronically to people with specific passions. Will need to address their product sourcing requirements adequately – probably by forming strategic alliances with physical world distributors and manufacturers. Must analyze and interpret thoroughly the marketing data being provided by customers and non-customers. Need to address logistical challenges carefully – since typically half or more of all marketing costs are logistics derived. Have to price products judiciously – to allow for higher shipping costs and other expenses. Must generate a profit which is commensurate with the amount of risk involved.

Rather than being a revolutionary new way to do business, it is now becoming clear the Internet is instead a step in the ongoing evolution of commercial markets. Like the introduction of the telephone, electricity and computer technology have changed the commerce landscape in the past, the Internet is a business enabler opening up new channels of distribution. In an evolving marketplace, survival comes down to the matter of adaptability. Those businesses which learn from the experiences of the dot-coms and take on board the best practices in using the Internet to reach customers and enhance their experience will do well. By contrast, both dot-coms or brick-and-mortar firms who resist change will have significant competitive disadvantages. They simply won’t be able to compete with businesses harnessing both sides of the e-commerce dynamic. In the final analysis, the Internet does not present business with a magic formula for making money out of thin air. The foundation principles of success are still the same: 1. Develop customer-driven solutions. 2. Master the commerce functions needed to generate profits. 3. Wow customers through new and existing sales channels. Or, in other words, the most successful companies will harness the Internet technologies better to do what they have always done well – letting customers have more of what they want. “Business leaders recognize that the Internet is not a fad. Firms that cater only to the Internet, however, will suffer a fate similar to that of the pet rock or the lava lamp unless they quickly learn the methods of commerce that created successful brick-and-mortar firms. In the new marketplace, all firms, regardless of size, industry or technological orientation, must compete for the minds and wallets of consumers. Dot-com firms, at least the few that survive the massive shakeout, need to study and perfect the old-fashioned fundamentals that provide the winning edge that most of the dot-com firms lack.” – Roger Blackwell and Kristina Stephan

n

n

n

n

n

n

“The results to date of a majority of pure-play Internet businesses have been dismal, but there is hope for some of the ideas, technologies and models they have pioneered. Just as molecular biologists are sequencing the human genome in search of cures for cancer, e-tailers can find their own miracle cures in a laboratory they probably least expect – the traditional retailers, catalogers and wholesalers. Business-to-consumer and business-to-business firms alike can master the basics of doing business, including knowing and attracting customers, sourcing products, building brands, establishing highly efficient logistics and distribution systems and posting impressive growth rates and profits. It is these fundamentals that continue to evade even the most hotly hyped dot-com firms. And that is why most of them, in their purest forms, will die if they don’t steal a page from the playbook of the firms that have successfully forged the business landscape as we know it today.” – Roger Blackwell and Kristina Stephan “Those who fail to learn the lessons of history are doomed to repeat them.” – Winston Churchill

Customers Rule! - Page 3

Concept

3

The consumer is the key ingredient.

Consumers will always be more important than technology because they alone determine what succeeds or fails in the marketplace. Technology may make many products feasible, but consumer acceptance separates the winners from the losers. And thus business leaders try and match technology with human behavior rather than asking consumers to alter their behavior to meet new technology possibilities. Broadly speaking, the process by which consumers make decisions has three stages: Pre-Purchase Activities The Purchase Transaction Post-Purchase Evaluation

In addition to developing segmentation strategies for consumers, e-tailers must do something similar rather than attempt to do “everything under the sun”. The most successful e-tailers will:
n n n

Focus on unique, specialty products not available in stores. Sell items not accessed locally – like real estate in other cities. Offer a limited product selection online – so customers are forced to go to a physical store to get additional products. Run online sales for clearance items – offering exceptional bargains and other incentives. Sell low-volume or physically bulky items. Focus on digital products which are delivered online. Concentrate on selling add-ons to existing customers – repeat orders, parts, instruction books, replenishment items.

n

n n n

1. Pre-Purchase Activities This is where consumers recognize they have a need, search for information on various alternatives and evaluate which price / benefit package best meets their needs. 2. The Purchase Itself In this stage, the consumer actually buys and pays for their goods. Their perceptions of this experience also have numerous flow-on effects. 3. Post-Purchase Evaluation After a purchase, the consumer will usually evaluate whether or not they felt they received value-for-money. This will form the basis for whether or not they give referrals for their friends and associates to follow suit. Businesses should be gathering data so they can understand how consumers make their purchase decisions. That information can then be used to develop strategies for improving and enhancing results. “In the end, none of this is really about technology; it is about customers. They will decide which retail formats will win and which ones will lose. The fact of the matter is that consumers demand convenience, ease of buying and returning, selection and service, but most of the early dot-com firms based their strategies on the assumption people want new technology and are driven mostly by low prices. Nothing could be more wrong as a basis for designing successful e-strategies.” – Roger Blackwell and Kristina Stephan Concept 4 Market segmentation is important.

“E-tailing works very well for a few segments for specific products and special situations. Find those customers and deliver the product well online and off-line, and you can expect substantial profits and enhanced shareholder value. Fail to understand the concept of market segmentation and what it takes to deliver a marketing mix that delights that segment, and e-commerce fails as surely, and probably more rapidly, than any other form of commerce.” – Roger Blackwell and Kristina Stephan Concept 5 Brand with both online & off-line strategies.

Everyone today knows there are large numbers of people worldwide with daily access to the Internet. Therefore, they ask, “Just how big will global e-tailing be in the next ten years?” While it is impossible to answer this question completely, by identifying market segments or groups of individuals with similar interests, lifestyles and preferences, some forecasts can be made. Specifically, three key market segments are: 1. Net Nerds – who spend at least 11 hours per week on the Net and who already buy most of their computer-related products, consumer electronics, CDs/videotapes online. 2. Daily Dependents – for whom the Internet is a must-have research tool. They will only buy online if there are substantial benefits offered. 3. Average Janes and Joes – who use the Internet occasionally. They will buy quite a bit if made offers more attractive than local stores can match.

For most firms, product categories and consumer segments, the Internet will continue to be more important as a marketing tool and a brand builder than a sales channel. In other words, more consumers will use the Internet to search for and evaluate products than will actually purchase online. In terms of brand perception, consumers never differentiate between what they experience online and off-line. With that in mind, the smart approach is to deliver a brand experience consistently across all online and off-line channels. That way the brand personality has an opportunity to shine through and hopefully resonate with the consumer. Since well positioned brands are intended to move products out of commodity status and into a higher pricing position, it is also important that a brand not be promoted until all the logistical issues have been addressed. Operational systems that fail to deliver what’s promised will hardly build brand equity. Similarly, if the brand promises personal service, strategies need to be put in place whereby the online branding experience matches up. In branding terms, the quickest and surest way to lose a customer is to break a promise. “The most important asset on a firm’s balance sheet is something that is not actually on the balance sheet – the firm’s brand. It is the difference between a car and a Mercedes; a cup of coffee and a grande of Starbuck’s house blend.” – Roger Blackwell and Kristina Stephan “Branding is more important here than it is off-line. People have to remember your name and type it in. There are no Coke cans or Golden Arches to remind them.” – Mark Brier, former vice president, Amazon.com Today we think of ourselves as a 360-degree brand. One position. One voice. Anytime. Anyplace. Worldwide. Period.” – Leslie Wexner, CEO, Victoria’s Secret

Customers Rule! - Page 4

Concept

6

Customer satisfaction, not popularity.

Retailers have always talked about “traffic” – the number of people coming into their stores. E-tailers talk about “eyeballs” – the number of people who see their Web site. But both these metrics are wide of the mark when it comes to the real acid test which is “wallets” – how many consumers actually buy something. The best businesses are constantly focusing on how to increase their share of their customers’ wallets by creating and strengthening the emotional connection between the customer and their brand. In other words, creating satisfied customers dictates the road to the future for both retailers and e-tailers. Many of the established principles of customer service have become more important in the Web world, not less important. The business leaders focus on “multichannel integration” – reaching and serving customers with a consistent experience no matter where or when they may want to shop or do business. Note that multichannel integration extends beyond the experience. It also embraces brand consistency, loyalty strength and pricing consistency across a number of channels. Cumulatively, all of these factors will combine to create sensations in the hearts of customers that, over time and multiple interactions, will generate and strengthen that emotional connection between customer and brand. “Understanding what satisfies customers requires analysis of what causes customers to defect. First-mover advantage, all the rage in e-circles, can capture consumers’ attention and eyeballs, but who cares who gets consumers first if they’re unhappy with the experience. Flawed and complicated systems, bad delivery experiences and overall poor customer service will devastate any customer-retailer relationship and wipe out any first-mover advantage.” – Roger Blackwell and Kristina Stephan Concept 7 Focus on customer needs to innovate.

3. Complexity This is the degree to which new technologies are perceived as difficult to understand and use. Generally speaking, consumers dislike reading instruction manuals and want to be spend as little time as possible learning how to use new technology. Therefore, products that are simple to understand and use are more likely to succeed than highly technical products with steep learning curves. 4. Ability for consumers to try before committing Consumers like being able to try before they buy. Sampling is very much a tried and proven sales method that delivers results. Retailers setting up their own Web sites should let consumers experiment with and try using the Web site, perhaps even while they are in store where help is close at hand. And e-tailers may benefit by setting up kiosks in shopping malls where consumers can experiment a little. 5. The visibility of the results generated When a consumer starts using a new product, they are more likely to feel good about it if the benefits are visible to their friends and neighbors. That observability enhances their feelings of satisfaction and accomplishment. These five variables should be used to rate the likelihood new products will succeed in the marketplace. But even if all factors are in alignment, problems can still arise in getting a new technology to achieve critical mass. For example, even though e-tailing may rate highly in every area, the consumer uptake for this channel has been sluggish. Accordingly, an e-tailer will need to do more. For example, e-tailers should: Develop personal relationships with consumers – by making individualized offers through e-mail. n Offer reasons to visit the Web site – perhaps special offers not available in store or points in a loyalty program. n Provide up-to-the-minute information – about new fashions, products that compliment previous purchases, service information and so forth. In short, e-tailers need to continually provide reasons for continuing to use the new technology. Over time, the emphasis will then shift from attracting new customers to selling more to established customers.
n

Many businesses place a high emphasis on innovation. The tricky thing is that even if you have a great product, a high quality marketing plan, slick advertising and a great distribution system, you can still fail in moving an innovation from trial status to mass market acceptance. In general, the commercial success of a new innovation will depend on five variables: 1. Relative advantage This is the degree to which potential customers perceive a new product will offer significantly greater benefits than those provided by their current products. Generally speaking, new technologies which offer marginal benefits won’t be able to dislodge the incumbents. Only if consumers see there are loads of tangible new benefits will they make an effort and switch to a new product. Thus, e-tailing will need to deliver loads of added value to appeal to consumers. 2. Compatibility This measures how the new product is or is not consistent with the existing practices and past experiences of consumers. In simple terms, this is the reason why Business-to-Business Internet applications are forecast to grow rapidly in the next few years. The physical distribution system is already in place, and will not need to change for Business-to-Business commerce requirements.

“The market lures entrepreneurs each day with the most intoxicating bait of all – possibility. Do it right, and you might be the next Bill Gates or Steven Case. Many entrepreneurs follow the examples set by the Cinderella success stories of the Internet craze: don’t look at the possibilities of the marketplace and just salivate; go for it; innovate. But if you don’t do your homework, the only riches you can expect are the experiences you will get from having completed the process rather than the monetary riches from long-term, profitable sales. Like other areas of e-commerce, the Internet strategies depend on how well you know the ‘commerce’ side of e-commerce, and there are plenty of lessons available on how to introduce innovative products successfully.” – Roger Blackwell and Kristina Stephan “Managers often ask, ‘What is the single biggest mistake executives make when introducing new products?’ Our answer is, ‘Failing to understand the time it takes to gain acceptance of new products’. Many managers believe when a new product is released, people either buy it or they don’t. Yet rarely, if ever, does the market work that way.” – Roger Blackwell and Kristina Stephan

Customers Rule! - Page 5

Concept

8

The most efficient supply chain wins.

In the first wave of dot-com enthusiasm, the terms B-to-B (business-to-business) and B-to-C (business-to-consumer) were highly vaunted. From a long term perspective, the most efficient business supply chains of tomorrow will be B-to-B-to-C. This application has the potential to completely rewrite every known rule of commerce in the coming years. B-to-B-to-C

Any retailer who fails to use B-to-B to decrease their buying and operational costs will be at a severe competitive disadvantage to those who do. n Similarly, any retailer which allows its competitors to use new technology to market to profitable market niches without doing something comparable is not acting prudently. In sum total, it is very likely today’s retail business models will ultimately evolve into new models that combine the best features of traditional retailing and e-tailing. The Internet will not completely supercede traditional retailing and marketing but will become an important tool. All of which suggests blended strategies which combine the best features of retailing and e-tailing will work best.
n

B-to-B

B-to-C

Already, many B-to-B supply chains are migrating to the Internet as firms try to enhance their efficiency. Often, doing so delivers substantial cost savings with only little change in the fundamental ways things have always been done in the business world. As more and more business functions move to the Internet, transaction costs are lowered and new operating efficiencies are unleashed. A number of new entities also emerge, including: n Sell-side portals – groups of suppliers who work together to reach more buyers than any one would have reached on the strength of their own efforts. (Examples: Chemdex, Amphire, Broadlane, Industria, Promedix and Ventro Life Sciences).
n

“We believe that, after the dust settles, many firms will find the secrets to success in the new economy by revisiting the strategies that brought them success in the past. Strategies that deliver better shopping experiences to customers, provide better value and increase customer satisfaction and loyalty will create the best-of-breed blended businesses of the future. The key will be, as it has been in the past, to adapt and update these strategies to meet the changing needs of customers – and today, that means exploring the avenues technology has to offer. Gearing up for the future mass adoption of the Internet and predicting the right mix of retail strategies to meet customers’ wants are very important, but not at the peril of profits and growth in the present. It is subject to the same principles observed in the e-volution of commerce for hundreds of years.” – Roger Blackwell and Kristina Stephan “Retailers such as Wal-Mart and The Limited have worked for decades with their supply chain partners to develop efficiencies and cost savings for each channel member. In turn, they have been able to pass those advantages on to customers in terms of lower prices, in-stock merchandise and greater levels of customer service. The Internet provides new opportunities for capturing even more advantages up and down the channel. Yet some firms will resist migrating to the Web even today, which is OK if the supply chain operates as efficiently off-line as it would on the Internet. But when competitive supply chains or channel members experience lower costs and enhanced customer service levels because of online efficiencies, firms not willing to change will be left to sell to and partner with other remaining competitively disadvantaged firms. Eventually, the most efficient supply chain will win in the marketplace.” – Roger Blackwell and Kristina Stephan “Whether online or off-, retailing is not about technology; it is about solving customers’ problems better than current solutions and competitors. And though we don’t believe that e-tailing is the end-all, be-all of traditional instore shopping, incorporating the Internet into your arsenal of strategic weapons is a must.” – Roger Blackwell and Kristina Stephan “We believe that all businesses, whether they are retailers, manufacturers or service organizations must develop aggressive e-commerce strategies because the Internet is here to stay and its adoption rate is still growing.” – Roger Blackwell and Kristina Stephan “We believe in the institution of marriage between traditional firms and e-commerce. We just don’t believe that all of these marriages will last.” – Roger Blackwell and Kristina Stephan

n

Buy-side portals – where buyers collaborate to organize an exchange where suppliers can come to. (Example: PaperExchange.com). Market exchanges – where firms all up and down any supply chain can come to purchase any products or services they need directly without the need for wholesalers or distributors. (Examples: MRO.com, Grainger.com, BizBuyer.com and ProcureNet).

Note that as many supply chains move to the Internet, long-lasting relationships up and down the supply chain are strengthened rather than weakened. The irony of the digital business era isn’t the widespread disintermediation that was always forecast but the redesign of established supply chains. Or, more specifically, the Internet allows firms that had already mastered the lessons of business previously to find new and better ways to apply those same lessons to enhance the cost effectiveness of their supply chains even more. Once almost all supply chains have become Internet based, attention will then turn more intensively to the B-to-C side of the equation. Here, the question will not be about technology. Nor will it be e-tail versus retail operations. Instead, the focus will be squarely on finding the best way to solve the customers’ problems using whatever mix of online and off-line strategies that make sense. In this context, it is quite likely: n Every business will ultimately need to incorporate the Internet into its arsenal of tools – because the Internet is here to stay and will increase in size.
n

Any business that fails to make available online information about itself risks being missed out completely when consumers do their pre-purchase research of all their available options. This will become increasingly important in the coming years.

Customers Rule! - Page 6

Section 2

10 e-Commerce Strategies of the Future

Strategy

2

Focus on solving customer problems.

Main Idea The 10 e-Commerce Strategies of the Future 1 2 3 4 5 6 7 8 9 10 Add a physical presence to e-tail operations. Focus on solving customer problems, not technology. Don’t worry about being first mover – be the final victor. Develop an “octopus” brand. Evolve from free to fee. Add a human dimension. Multichannel to sell to new market segments. Sell and source the global marketplace. Develop strategic alliances on e- and commerce-sides. Harness the Internet to create a lean demand chain.

Consumers don’t always want to use the latest and greatest technology but they are willing to try anything that solves their problems better than whatever they currently use. Smart businesses acknowledge this fact by:
n

n n

Giving consumers a logical reason to try a new product – additional benefits not previously available. Providing a low-cost no-risk opportunity to try the technology. Keeping it simple – so new users don’t get frustrated and abandon their efforts. Only introducing new technology which is compatible with what cosnumers currently like and use.

n

Supporting Ideas Strategy 1 Add a physical presence to e-tail.

Making the results highly visible – so peers, family and people each consumer admires can do likewise. In other words, the success stories of the future will be those businesses that help customers solve problems better. Companies that invent technology and then try and find applications have the cart before the horse. In some cases, solving problems better will require expanded online sales capabilities. Others may find it makes more sense to invest in better stores and train staff more thoroughly. Neither approach is any better or worse than the other – it really comes down to what customers feel the most comfortable with.
n

Pure-play dot-coms should add a bricks-and-mortar presence to their business models because:
n

Strategy

3

Don’t think first-mover, think final victor.

n

That will provide customers with a place to try merchandise before they are asked to buy. And while they are there, customers can also touch, feel and try on additional products creating add-on sales opportunities. Customers like face-to-face contact – when they have a problem to solve or they can’t make up their minds about a selection. Shopping is partly a social experience. A physical store enhances that experience.

This will provide customers with a place they can return products and immediately be given exchange products. The ability of customers to leave with the product in hand is highly desirable, especially when it is considered that up to 30-percent of items sold through mail-order catalogs are typically exchanged. n A bricks-and-mortar store adds to the feelings of trust – and suggests the business will be there to serve customers in the future. It seems likely many e-tailers will add a physical presence by forming strategic alliances with traditional retailers. This will be particularly useful if both partners bring different or new customer segments to the mix.
n

Being first to the market with a nice Web site doesn’t mean much if consumers prefer doing business face-to-face instead. What’s more important is good execution. If the logistics aren’t right, it becomes totally irrelevant who was first to market. In addition, traditional retailers who wait to join the e-tail bandwagon until they can deliver the same quality experience provided by their retail stores may find that can acquire the remnants of failed first-movers. That would provide the retailer with online customer lists, software and systems that may be highly beneficial. Or, alternatively, a retailer may form a strategic alliance with a pure-play e-tailer to derive comparable benefits. The personal computer industry illustrates well the dangers of being a first-mover. None of the early success stories (Atari, Commodore, Kaypro, Tandy or Osborne) are in the same league as companies that came later including Dell and Compaq. A similar story is likely to emerge with the early dot-coms. Thus, traditional retailers should: n Understand where e-tail can expand markets, build the brand and increase customer loyalty. n Have a board of directors who understand all the issues – and who are prepared to move quickly if an opportunity to acquire an e-tail operation arises.
n

“Early dot-coms missed the importance of having a bricks-and-mortar presence because they assumed that e-tailing would replace in-store retailing, rather than just enhance it. For the most part, consumers are still leery about e-tail’s give-your-information-to-a-machine-and-hope-for-thebest model. Customer concerns are minimized when they know they have a ‘place to go’ when there is a problem with the transaction. This is one of the reasons traditional retailing will never disappear, nor will most other businesses where personal relationships are important in thes elling process.” – Roger Blackwell and Kristina Stephan

Concentrate on managing the basic commerce functions well – to generate earnings and access to capital for acquisitions.

“If customers try a new brand first and are disappointed, they probably won’t return to the site. First movers that don’t have quality customer service systems and efficient operations often turn out to be ‘first losers’. Traditional retailers that joined the e-tail bandwagon before they could deliver the same quality experience their customers had come to expect suffered the same fate as some of the ill fated first movers.” – Roger Blackwell and Kristina Stephan

Customers Rule! - Page 7

Strategy

4

Develop an “octopus” brand.

Strategy

6

Add a human dimension.

An octopus brand has a number of tentacles reaching customers, with each tentacle being a different communication method. The message is always the same, but because that message comes in many different formats, the brand is strengthened so it will break through the background noise and get noticed. In practice, this branding strategy means in-store promotions, advertising and the Internet all present the same branding message. An effective octopus brand: n Will harness the Internet – to inject some personality and pizzazz into the brand. n May include a line of branded products and services.
n

When humans are in the loop on a sales transaction, there is more likelihood the original sale will close. In addition, cross-selling suggestions are more likely to be acted upon, and the accuracy rate of the order will usually be higher. Overall, customer satisfaction is enhanced. Thus, it makes sense to add the human touch to an e-tail operation. How?
n

Make it possible for people to order online or if they prefer talk to a customer service rep and order by phone. Allow customers to ask questions – which are answered in real time by a live person at the other end. Carry out one-to-one marketing – contacting past customers when new products matching or complementing previous purchases become available. Allow customers to track their order status online – and have their questions answered by a logistics expert if they’re unable to understand the information.

n

n

Delivers a consistent experience – whether the customer shops in person or via the Internet. Has a warm, human dimension – with information about the CEO, the company’s philosophy, social programs, etc. Will be able to be positioned individually – by offering personalization and other features.
n

n

n

“The challenge for many e-tailers will be overcoming the experience and consumer trust inherent to established brands and bricks-and-mortar storebrands. Traditional retailers, however, may find long-term opportunities by using the Internet to offer specialty, private-label products not yet available in store.” – Roger Blackwell and Kristina Stephan Strategy 5 Evolve from free to fee.

“Increasingly, the Internet will solve many customer service problems without the need for a firm’s personnel to be involved. That saves the firm’s most important resource – its people – to interact with customers in out-of-the-ordinary glitches or in need of personal attention.” – Roger Blackwell and Kristina Stephan Strategy 7 Multichannel market to new segments.

The early dot-coms in their haste to attract eyeballs created a consumer mind-set that everything available on the Internet should be free. Clearly, that is an unsustainable business model, and therefore more and more e-tailers are starting to charge for services that used to be free. The key is to offer a better customer solution than is currently available elsewhere. If you do that and create added value, customers will be willing to pay for it. And, most likely, those who aren’t willing to pay for it most likely wouldn’t have been profitable customers anyway. The larger proportion of consumers are perfectly willing to pay for things they value, and don’t expect something for nothing. Implementing a free-to-fee conversion often requires some creativity and ingenuity. For example: n E*Trade, Charles Schwab and othe online brokerage businesses charge minimal fees for online trades but make bank interest on funds that have been deposited with them for investment.
n

The Internet is a great way for traditional retailers to begin serving new groups of customers. For large firms, niche markets can be offered tailored products. For small firms, the Internet expands reach and potential customer pools. Firms may use the Internet to:
n

Test consumer reaction to potential new offers or new products – before committing resources to marketing. Offer seasonal items year-round. Market to consumers located in countries where there are no physical stores. Discount slow-moving inventory and close-out stock. Sell existing product lines to established customers more efficiently and with lower costs. Offer items which have a low turn rate. Reach new segments of customers – with package offers built around current product lines. Serve low-volume customers that were previously too expensive to contact.

n n

n n

n n

n

Priceline makes money on the float as well – earning interest on funds provided to purchase airline tickets and travel services. AOL gives away 200 hours of free access to new customers but offsets that by offering a 480-page book showing “how to get the most from your online adventure” for $24.95 plus $3.95 shipping charge. Every time a new customer buys the book, AOL has recouped the lost fees from its free offer. Plus AOL charges hefty fees to the advertisers for “pop-up” ads which appear on screen.

n

Sell direct to consumers – without intermediaries or middlemen. n Target rural or small-town areas which are not large enough to support a store. n Extend product lines – by adding items that are too bulky, too expensive or too seasonal to stock in a real life store. All in all, the Internet is rapidly becoming the key sales channel many marketers love. It has the ability to scale up or down, depending on the specific needs of the retailer. And its reach is quickly becoming second to none.
n

Customers Rule! - Page 8

Strategy

8

Sell and source the global marketplace.

Strategy

10

Create a lean demand chain.

The Internet allows a business not only to have customers worldwide without the risk of building and operating stores but also to source products from global suppliers. The ability to sell globally is especially important for niche retailers who have a small domestic target market. When all the niche markets in each country are consolidated, a sizable market, filled with opportunities, will become clearly identifiable. Many of these customers will be willing to pay premium prices for products and services aligned with interests they feel passionate about. However, quite possibly even more significant is the ability to source additional products online. For many years, the bricks-and-mortar heavyweights have locked up their suppliers in exclusive arrangements. The Internet makes it possible for retailers to improve their profits by making it easy to search for alternative suppliers located anywhere in the world. “Small firms that attract customers throughout the world willing to pay premium prices for them to source, procure and ship specialty products are likely to find success on the Internet. But these firms must concentrate on performing commerce functions even more efficiently globally than domestically if they are to generate acceptable profit margins.” – Roger Blackwell and Kristina Stephan Strategy 9 Develop strategic alliances.

The conventional supply chain is: Manufacturer Wholesaler Retailer Customer

By contrast, a demand chain takes the customer perspective: Customer Needs Channel Partners Customer Deliverables

In other words, the key competitive battles of the twenty-first century will be supply chain versus supply chain, and not traditional retail versus e-tailing. The real challenge is to build the most efficient demand chain feasible which will be able to deliver precisely what the customer wants, when they want it and for the least amount of money possible. “How consumers order and buy their products is but a small part of the process. The e-tailers with the most efficient and cost-effective supply chains will beat their dot-com competitors, and physical retailers will do the same. When you begin to weigh the odds of e-tailing taking over a high percentage of retail sales, look at the supply chain issues. Unless the e-tail supply chain (which shifts many functions that consumers do for free in the traditional model to a supply chain member) becomes more efficient than the traditional store-based channel, e-tailing’s prevalence is limited.” – Roger Blackwell and Kristina Stephan “The future of business will be decided by people and the degree to which new sales and marketing formats fit consumer behavior and lifestyles better than existing ones. In the end, customers rule – they decide what the future retail and business landscape will look like by adopting some technologies and changes and rejecting others. The future of business-to-business e-commerce rests on its ability to execute on the promise of more efficient supply chains and more satisfied customers. As blended strategies become the mainstream, e-commerce will be absorbed into the all-encompassing, umbrella definition of commerce.” – Roger Blackwell and Kristina Stephan “The predictions of many have spelled doom and gloom for traditional retailers. We disagree. In fact, we believe retailers would be wise to continue improving on their greatest strength – the shopping experience in their stores.” – Roger Blackwell and Kristina Stephan “Much media attention has fallen on the Internet as a new selling tool. We like to think of it as a marketing tool. If you want to build brand and market your company and products, go online. If you want to build profits, go off-line. We believe e-commerce will occupy a place in the business books of the next century, not as the final chapter but as a catalyst to another stage in the evolution of commerce – one in which customers continue to rule.” – Roger Blackwell and Kristina Stephan

Retailers need strategic partners who can not only build their Web sites but also add value in the process. Similarly, e-tailers need allies who can add credibility and muscle to the execution of the key commerce functions. The Internet makes it possible for both sides of these alliances to find and contact each other to initiate discussions. The process by which many of these alliances develop is quite straight forward and basic: 1. The key business functions required to deliver customer solutions are defined. 2. For each function, a decision is made on whether this is performed most efficiently in-house or by outsourcing. 3. The core business functions are identified and retained internally. 4. Partners who can perform the non-core functions are identified and approached. 5. You decide what to offer your partners to get their best cooperative efforts and create trust. The prevailing practice in creating strategic alliances is the equity stakes model – in which firms pick their partners based on speculation of their future profitability. That way, new firms get marketing assistance in exchange for stock and most often royalties on future sales. These alliances can turn out to be highly lucrative opportunities for retailers to add revenue.

© Copyright 2001 All Rights Reserved Summaries.Com


				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:34
posted:10/6/2008
language:English
pages:9