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September 14, 1998

Collaborate And Conquer

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On its Web site, Schwab has assembled a broad range of third-party resources designed to help stock investors. Schwab's Advisor Source connects investors with more than 5,000 independent investment managers to give them detailed advice on their investment strategies. The Analyst Center assembles a wide range of third-party information services relative to stock investment delivered by companies such as Dow Jones, Standard and Poor's, and First Call. Automated analytical tools such as Schwab's IRA Analyzer help investors develop tailored investment strategies. Finally, Schwab's One Source offers investors more than 800 mutual-fund products from a variety of third parties.

While third parties provide much of the help delivered to the customer, Schwab becomes the architect of this help; it develops detailed profiles of the needs and preferences of each customer and it builds a strong, trust-based relationship with investors. Through collaboration marketing, Schwab attracts new investors to its site and learns more about these investors than the conventional discount broker.

Three Degrees Of Collaboration
The Web lets companies create a marketing model that focuses on relationships with customers rather than on image and transactions. Here are three stages of that model.
Stage One: Companies systematically deploy a variety of techniques, including configuration and other analytical tools, search engines, collaborative filtering technology, online tutorials, and frequently-asked-question bulletin boards. These help customers get more value from purchasing and using products or services. Companies also mobilize third-party resources to enhance customer value.
Stage Two: While helping potential customers online, companies capture detailed and comprehensive profiles of customers' needs and preferences, to understand the broader use of their products or services. This information can then be used to expand and tailor the "help function" in the first stage, as well as to expand and refine the products and services sold to the customer.
Stage Three: The information, insight, and trust garnered in the first two stages increases the rate of success in converting prospects into customers and then into repeat purchasers.
DATA: INFORMATIONWEEK
Cisco Systems Inc., also in the InformationWeek 500, provides another example of collaboration marketing. Virtually every story on electronic commerce includes a mandatory reference to Cisco's success in online sales. Yet virtually all these stories miss perhaps the most significant aspect of Cisco's online initiatives. They go into great detail about the lower cost of customer support online, the substantial cost savings achieved by reducing the number of print catalogs and technical documents required, and the ability to save money by offering online software fulfillment. These are significant, but they have little to do with collaboration marketing.

A close look at Cisco Connection Online, Cisco's Web site, suggests it is taking collaboration marketing to heart, yielding more value than cost savings. Cisco has sold direct to large corporations from the outset. To reach small and midsize businesses, Cisco has had to rely on a broad range of third-party channels. While the specific capabilities of these channels differ considerably, theyshare one thing in common: They jealously guard information about their account relationships and make it difficult for Cisco to determine the identity, much less the needs and preferences of, these accounts.

With CCO, all of this may change. CCO helps to connect potential customers with an array of channel partners. To help potential customers connect with the right channel partner, CCO asks them to answer a few questions about themselves and their needs.

With this simple process, Cisco accomplishes a number of things. It builds trust with potential customers by delivering tailored value to them in the form of a referral to a specific channel partner that can meet their individual needs. It leverages the capabilities of many channel partners to add value for customers in purchasing and using Cisco products. And, perhaps most important, it begins to develop a profile of these potential customers that previously were hidden behind the protective veil drawn by the channel partners.

By implementing this collaboration marketing technique, Cisco has the opportunity to become the central "switch," connecting customers with a tailored selection of channel partners and, in the process, becoming the owner of an integrated profile of each customer. If successful, Cisco will transform the distribution channel structure of the industry, establishing account control over small and midsize businesses as well as its traditional large business customer base, while leveraging the specialized skills of a variety of third parties.

Both Sides Benefit
Collaboration marketing builds value for the vendor and the customer in three distinct stages. The first includes systematically deploying a variety of techniques-such as configuration and other analytical tools, search engines, collaborative filtering technology, online tutorials, and frequently-asked-question bulletin boards-to help customers get more value from products or services. A central element of this stage is the systematic mobilization of third-party resources to enhance customer value. The vendor becomes the architect of the relationship while expanding the relationship to include others.

In the second stage, the process of helping potential customers online captures detailed and comprehensive information profiles of their needs and preferences, with a particular focus on understanding the broader use of products or services. This information can then be used to expand and tailor the "help function" in the first stage, as well as to expand and refine the products and services sold to the customer.

In the final stage, the information, insight, and trust garnered in the first two stages increases the rate of success in converting prospects into customers and then into repeat purchasers.

Using the Internet, vendors can expand the range of help cost effectively offered to potential customers as well as significantly expand the range and depth of customer information profiles captured.

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