InformationWeek

September 14, 1998

Collaborate And Conquer

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In physical markets, this help and information capture might be feasible only for large customers. In the online environment, these same capabilities can be deployed for all customers, regardless of size. The Net also makes it easier to coordinate resources provided by third parties, transforming marketing from a bilateral process to a multilateral process.

As vendors implement collaboration marketing techniques, one key question will arise: Is the vendor Web site the right place to do this or can it be more effectively delivered at least in part on third-party Web sites?

Vendors tend to assume they must use their own sites tobuild relationships with potential customers. In this view, third-party Web sites, at best, only serve as funnels to draw traffic as quickly as possible to the vendors' Web sites.

To illustrate an alternative approach, Intuit, the leading vendor of personal financial management software, has a major Web site of its own, Quicken.com. Yet, it has built a partnership with a leading virtual community online, Parent Soup, to sponsor an area within Parent Soup called Armchair Millionaire. This relationship helps Intuit to reach a specific kind of customer-women with children-and build relationships with them through collaboration marketing on the Parent Soup site.

Vendors often assume everything must be done on their own Web site. In the process, they miss the opportunity to leverage others' resources.

Collaboration marketing is just beginning to take shape, and much still needs to be learned. But it is already an example of the innovative use of the Internet to create business value in ways not possible in physical markets.

The Internet shifts the key economic bottleneck from scarce shelf space to scarce customer attention. In this environment, collaboration marketing may not just be an opportunity, it may be a necessity if vendors want to capture, retain, and earn an adequate return on customer attention. As more and more options compete for the inherently limited attention of each customer, the vendors who can offer the most help to customers are likely to be in the best position to capture and retain their attention.

In the process, they also will learn more about their customers and use this insight to sell more products and services over a longer period of time. Mass marketing and direct marketing-with their intrusive, two-way communication models-will continue to play a role, but collaboration marketing is likely to determine who wins and who loses in the intensely competitive world of electronic commerce.

Cheaper and faster may be necessary, but far from sufficient. The real opportunity-and challenge-is to rethink business approaches to leverage the unique capabilities of electronic networks.

John Hagel III is a partner in the Palo Alto, Calif., office of McKinsey & Co., and leader of McKinsey's global electronic commerce practice. He is the author of Net Gain: Expanding Markets Through Virtual Communities (Harvard Business School Press, 1997).

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