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September 14, 1998

Collaborate And Conquer

As electronic commerce grows more competitive, direct and mass marketing strategies are yielding to a cheaper, more efficient way of dealing over the Internet

By John Hagel III

he contrast could not be more stark. On the one hand, there is the never-ending torrent of hype surrounding the Internet and the profound changes it will unleash. On the other, there is the reality that most companies-once the hype has been stripped away-are using the Internet to do what they have always done, just cheaper and faster.

Cheap and fast is good. But something much more fundamental may be emerging, its outlines only barely visible today, but holding the promise of significant opportunities for adding value. The Internet may be enabling, and forcing, a redefinition of marketing. Mass marketing and direct marketing may be overtaken by collaboration marketing.

Despite their differences, mass marketing and direct marketing share two attributes. First, both are intrusive-they involve targeting and reaching out to potential customers, sending them messages whether or not they have requested them. Second, they tend to view marketing as a bilateral process, involving two parties: the marketer and the customer.

The Internet undermines both attributes. In an environment where marketing messages are proliferating and where potential customers can effortlessly "zap" these messages, intrusive marketing approaches may have less and less impact. Steadily declining click-through rates on Internet advertising provide an early indicator of this diminishing effect.

Bilateral communication may be a necessary constraint imposed by traditional media, but is it the most effective approach in an environment that uniquely allows many-to-many communication?

As shelf space constraints dwindle and demands on the customer's attention escalate, the Internet allows for a different approach to marketing. Collaboration marketing leverages the unique capabilities of the Internet by building upon three basic principles:

* Attract. Potential customers need to be drawn in, rather than targeted and intruded upon.

* Help. To draw potential customers and keep them, help them maximize the value they receive from the purchase and use of specific products and services.

* Leverage. Provide tailored help by mobilizing the resources of third parties and packaging these resources to meet the needs of each individual.

At one level, there is nothing revolutionary about these principles. Word of mouth is a powerful marketing tool attracting people to vendors with superior products and services. Good salespeople always try to help the customer in the decision process and after the purchase. Smart salespeople will try to draw in other parties as appropriate to help their customers. The computer industry in particular has developed a complex and sometimes bewildering array of specialized channels to add value around the basic purchase of a computer.

Building Relationships
The Internet offers the opportunity to institutionalize these "best practices." In the process, it lets vendors build trust with customers and learn more about them than has ever been possible.

How does collaboration marketing work in practice? Look at the example of InformationWeek 500 member Charles Schwab Corp., one of the leading discount brokers and a pioneer of collaboration marketing techniques.

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