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Industry Perspectives:
A State-of-the-Market Report on Web Business
Fastwater Rapids vol. 1.20, 07May99
by Mary Laplante
On April 5, we packed our bags, kissed our spouses goodbye, and headed
off on four weeks of crisscrossing the continent to attend, host, and participate
in half a dozen industry and company events. We delivered two Fastwater
seminars on Web business measurement. We moderated the two-day Electronic
Commerce Symposium at spring Internet World in LA. We sat on a panel
of industry experts at the net.Genesis customer conference. We spoke
on the subject of Web business trends at the monthly meeting of the New
York chapter of the Association of Internet Professionals. And we
cruised the show floor at the Internet Electronic Commerce expo looking
for hot new products, services, and technologies. These events put
us in touch with companies of all shapes and sizes who are in various stages
of establishing and growing Web businesses. Hearing about their trials
and tribulations gave us a great opportunity to do a reality check on the
state of the network economy. What's working? Where are
the successes? What are the next big challenges? What issues
are top-of-mind for Web business managers?
Success: Acknowledging Customer Power
It's obvious that acquisition and retention are key success factors for
any Web business, and much of what we heard in presentations, discussions,
and demonstrations focused on serving customers as the means to those ends.
But in a few cases, we noticed a new mindset that goes beyond a commitment
to customer service. A key observation to emerge from our month on
the road is that successful Web businesses are beginning to rethink their
strategies and operations to accommodate the brave new world of customer
power.
One of the fundamental changes brought about by the Web as a platform
for business interaction is a shift in the power balance between buyers
and sellers. Armed with more information and the ability to quickly
identify and engage alternative suppliers, customers can now assume control
of the business relationship. In the business-to-consumer world,
for example, there are a plethora of sites selling books, CDs, flowers,
travel, and food; since most of the prices are comparable, service becomes
a competitive advantage (or disadvantage). If you can't find the
book or CD that you want and buy it quickly and easily on Amazon.com, barnesandnoble.com
and CDNow are just click or two away, to quote what's become conventional
wisdom. In business-to-business commerce, companies like United Technologies
cut a planned $7 million expenditure on printed circuit boards by 25% with
an online bidding event hosted by FreeMarkets Online Inc. One supplier
with whom United had an existing relationship reduced its price for a particular
lot by 52%. It's unlikely that United would have received such a deep discount
from a current partner using a traditional procurement process.
We see more and more references and anecdotes like these every day.
The shift towards customer control of the business relationship is well
underway, and will become a permanent characteristic of the network economy.
If this profound change is inevitable, how does a Web business respond?
One answer lies in making an equally profound change in the business itself,
shifting its center of gravity from the supplier to the customer.
Although this might seem obvious, it is not easy, and the implications
are significant. Consider your company’s own Web site, for example.
It probably reflects your company's image of itself -- it externalizes
an internal perspective. It is designed to get customers to do what
you want them to do, rather than what they themselves want to do.
Smart companies are beginning to understand that a successful Web business
is engineered in just the opposite fashion. They acknowledge that
the customer is in control, and they are designing their businesses and
their sites from the customer's perspective in order to engage and retain
him or her.
At Internet World, several panels comprising representatives from Web
retailers like Travelocity and Garden Escape highlighted the issues that
are driving the development of truly customer-centric Web sites.
Their experiences can be cast as a set of guiding principles for other
Web businesses.
Principle #1: Deliver an experience that the customer can’t get
in the physical world. Terry Jones, chief information officer
at Sabre, Inc., and president of its Travelocity online travel business,
said that the big challenge for online travel suppliers is conversion --
turning lookers into bookers. Citing results from studies conducted
by the Georgia Institute of Technology and Shop.org, an online retailers
association, primary obstacles include consumer concern over security and
credit card fraud. To overcome those obstacles, Travelocity strives
to offer experiences that users can't get in the physical world.
The goal is to make the value of the site's services so compelling that
visitors are willing to set aside their fears about entering their credit
card numbers. Jones demonstrated Travelocity's hotel booking pages
to illustrate his point. In addition to getting information about
properties and standard rates, the site displays a calendar that users
can click on to determine room type availability and special rates for
specific days. This encourages booking right then and there, instead
of finding out about the property and then calling your favorite travel
agency to get the rest of the information required to commit to a reservation.
Note that the reservation would be booked through the Sabre system either
way; with functionality on the Travelocity site, Sabre is making its Web
business processes customer-centric by giving them direct access to that
system.
Principle #2: Integrate the Web business with the customer’s work
processes. Sally Von Bargen, president of stock image supplier
Photodisc, picked up the theme of customer-focused design in a later panel.
Her company's customers typically search for stock photos while in the
midst of a creative process -- they access online Photodisc catalogs while
using applications like Photoshop and Quark on their desktops. This
observation led Photodisc to conceptualize its site as a workplace for
its customers and to design its functionality with their work processes
in mind. This optimizes the users' ability to do what they want to
do when they want to do it. An example is a feature called Lightbox
that allows users to view different images that can be purchased immediately
or stored in a personal lightbox for later retrieval.
Principle #3: Match the business’s ability to meet customer need
with the ability of the Web to deliver value. Lisa Sharples of
Garden Escape added a third dimension to customer-centric business design
-- leveraging the medium to provide value. She observed that Web
business success lies in matching up the ability to meet consumer needs
with the ability of the Internet to deliver unique and distinct value.
An example is Garden.com's interactive garden designer, which helps customers
visualize the layout of their gardens and guides them in the selection
of plants that are appropriate for certain conditions and climate zones.
By using the Web's interactivity, Garden.com also boosts the average value
of sales by making it easy for customers to buy everything they need at
one time.
Garden Escape, Travelocity, and Photodisc apply these principles with a
very specific objective in mind: their goal is to capture the customer
"in a buying moment," to quote Von Bargen. These companies understand
the value of their business from the customer's perspective, and they know
when the buying moment occurs. By designing their Web sites to facilitate
their customers' processes rather than their own business processes, they
are maximizing their chances of consummating transactions. While
the speakers at Internet World represented Web retailers, the principles
of customer-centric business that they are using to develop their sites
are equally applicable in the business-to-business arena, as illustrated
in our case study on National Semiconductor. This company specifically
designed its Web business to facilitate the process by which design engineers
order samples, which in turn drives semiconductor sales.
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