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November 16, 1998

Beyond The Transaction

Online sales are only part of the E-business life cycle; to succeed, companies must customize service and adapt to change

By Bill Blundon and Allen Bonde

E-Commerce:
The Next Step

Selling Overseas

Beyond Transactions

Billing Via The Web

E-Business Roundtable

All signs point to a bright future for electronic commerce.

he U.S. Commerce Department estimates the value of business-to-business E-commerce transactions will be more than $300 billion in 2002. Even today, a recent survey by the Extraprise Group Inc. says 46% of companies use their intranets to support E-commerce. And a Nielsen Media Research report says 20 million consumers made purchases on the Internet in the past year.

To be sure, these are impressive figures, but online sales transactions are overrated. Successful E-commerce is about relationships, not just transactions. Companiesmust address the complete "Internet customer life cycle," in which they can provide customized products, deliver personalized service, and adapt to change.

The old maxims of marketing--know your customer, focus on value, leverage the brand, and provide good customer service--still apply. But the Internet is changing the dynamic between companies and their customers. The trend is being driven by three factors: the power of choice, a community of one, and constant change.
diagram

Power of Choice
The Internet's main impact on business is that customers are no longer constrained by access to local merchants or vendor catalogs. In addition, E-commerce sites are open 24 hours a day, seven days a week. The combination of convenience and choice shifts the balance of power to the buyer. This dynamic will accelerate over the next few years, as the Extensible Markup Language and intelligent agents provide the foundations for automated shopping.

When online vendors focus only on sales, they force customers to focus only on price. But even companies that have a significant cost advantage typically don't wish to compete on price alone. Of course, providing collateral and offering goods for sale will always be the heart of E-business. But to succeed online, companies need to use the Internet to expand their focus and build ongoing relationships with their customers. To do this, at each stage of the Internet customer life cycle, the seller has to differentiate, add value, and cross-sell additional products or services.

One way to increase customer loyalty is to add features that let buyers personalize the site, automate product selection and comparison, and communicate instantly with a sales or service representative. E-commerce sites are also competing by developing community-building features--for example, members-only sites that let people with similar interests communicate with each other. Examples of this approach are Web sites from Dell Computer and Ingram Micro.

Another important trend in E- commerce is to use telephony integration to provide immediate access to a customer service or sales representative, which can greatly improve the chances of generating a sale. CustomerNow software from Sitebridge Corp. creates a live dialog between a company rep and a customer over the Web, via screen sharing and a chat-based communications protocol. In the near future, IP telephony will bridge call centers and commerce sites.

Clearly, providing value before a sale is important--but it's not enough. Companies with E-business programs also have to offer customers value after the sale. Research from the Extraprise Group shows that customer support after the sale is the most important aspect of business Internet spending--56% of surveyed companies list it as the most vital feature of their site. Vendors such as Inference Corp. and Motive Communications Inc. are addressing this with knowledge-management tools and applications for support-chain automation that automate manual tasks and create self-service customer care.

Community of One
One of the most difficult lessons marketing professionals learn is that there is no such thing as "a market." At best, markets are an approximation of buying criteria across relatively homogenous groups of individuals, groups, or companies. In developing an E-commerce program, there's one overriding design consideration: Markets don't buy anything, individuals do.

The ideal market for most sellers is a "market of one," where mass customization is the rule. Personalization and customization features can provide individualized attention to each customer. Software from Aptex Software, Net Perceptions, and Personify lets businesses profile, target, and analyze the behavior of online prospects and clients.

Personalized content and services can also be extended to partners and distributors throughout the value chain, thanks to initiatives such as the Information and Content Exchange, a new protocol for managing electronic assets between networked partners and affiliates. It can create a new generation of syndicated publishing and Web superstores.

Constant Change
When it comes to E-business, change is the rule. Expanded E-business programs touch many business processes, from marketing to customer support and cross-selling. In most companies, these processes have multiple owners and many constituencies. That means change in one area to support Internet selling can affect many others.

Constant change requires continual improvement. Once again, while the Internet increases the rate of change, the technology makes it easier to change the way applications are developed and deployed.

Companies should design commerce applications that make minimal assumptions about the consumer's browser in order to assure maximum accessibility to the site. When the majority of application logic resides on the server, the architecture is supportive of change, since enhancements on the server can be propagated immediately to the client browser. Designing for a generic browser environment limits the ability to take advantage of any one browser's unique capabilities--but it means sites can be updated constantly for the ever-changing demands of the consumer.

Thinking beyond the transaction also means looking at the supply chain and ways to measure the success of digital initiatives. Many early E-commerce programs focused exclusively on the demand side, but companies now are looking at streamlining the vendor-supplier relationship as well. The reason is simple: The convenience of buying a product over the Internet is of little value if the product can't be produced economically and delivered expeditiously. Plus, for every sale, there is at least one purchase.

Some leading companies are using Internet technology to automate procurement. Existing electronic data interchange systems are being replaced or augmented by extranet connections that will ultimately extend throughout the supply chain. Products from Ariba Technologies, CommerceOne, Netscape, and others have bundled these capabilities into packaged solutions. New standards, such as Open Buying on the Internet, offer to guarantee the interoperability of these software products and facilitate adoption.

Measuring the return on E-business relies on traditional metrics such as lower cost of sales, increased customer retention, decreased operating costs, and higher unit margins. To measure the results, E-commerce programs need to capture information on customer buying patterns, customer retention, and cost of sales.

E-business--and the technology, that supports its continual improvement--can lower the barriers between buyer and seller. But the challenge for online vendors isn't reaching customers or selling to them. The goal is to use the Internet to create a personalized and long-term relationship that's profitable for both parties.

Bill Blundon is executive VP and Allen Bonde is director of advisory services at the Extraprise Group (www.extraprise.com), a consulting organization that specializes in E-business.