Business isn’t what used to be. It’s increasingly about blogging, buzz marketing, pay-per-click ads, search engine optimisation and, just like the Phoenicians all that time ago, the global sharing and selling of knowledge, goods and services.
Little more than 10 years ago the Internet was little more just another business buzzword. A buzzword however that kept increasing in use, along with other nouns like ‘revolution’ and ‘transformation’. Big words and, some alleged at the time, a lot of hype.
Yet it was true. Internet technology was not only changing people’s lives in how they communicated with each other – witness the rapid emergence of email – but also how global business traded and defined themselves. Exceptional talents lay behind some of the early e-commerce names – Yahoo, Demon, Planet Online, Telinco, the Internet Book Shop, eBay, Vossnet, nCipher, BibioTech, Binary Star, Netscape and Dixons Freeserve. A few became household brands; others have since slipped from view.
For consumers, the benefits of internet commerce have been huge: cheap ‘phone calls, digital music downloads, buying online, often with the help of price comparison websites. It’s also hugely widened the range of goods available, saving large amounts of time and eliminating the inconvenience of limited shopping hours and lack of choice. Shopping online has not just made prices cheaper thanks to increased transparency.
For business, the internet has brought even more changes: template and automation tools, email, sophisticated analytics, buzz marketing, you name it, the ability to reach consumers quickly, discreetly and – the real advantage – cheaply. The internet has completely revolutionised the way business is done. Indeed, many businesses main tool remains just email and the internet with few if any staff.
Payment transactions have been revolutionised. Even a few years ago many would not think of sending sensitive information like bank account details over the internet. Yet today many businesses rely completely on their clients trusting them with deeply sensitive personal information, often using Internet banking in preference to telephone banking or a local branch.
Then, there’s how we network together – again, a word that has taken on a different dimension with the internet – with professional networking. Just look at LinkedIn. LinkedIn has an estimated 20 million users bringing together professionals from more than 150 different backgrounds.
A powerful business combination
It’s not just about the power of the internet. Digital technology is also having a huge effect on the way business sells and promotes their products, services and credibility. Shifting media consumption is changing consumers’ information sources says analyst Benjamin Ensor. Take, he says, how financial services sell and market themselves. “Digital technologies have unleashed a range of new information and entertainment technologies. Europe’s rapidly growing broadband penetration is encouraging Net users to spend more time online. The result is a fragmenting audience for mass media and the growth of a range of new information sources like comparison-shopping sites, discussion boards and blogs, changing the way financial firms need to market them.
And new entrants are making financial services increasingly competitive. Direct banks, direct insurers, and supermarket banks are exploiting new distribution channels to win customers with better rates, better service, or both. And of course, comparison shopping websites increase transparency, making it easy for customers to shop around.
The buying patterns are also changing in a big way due to the new channels, services and technologies. Financial channels like mobile phones and the Web and new technologies like chat and SMS continue to change consumers’ financial behavior, encouraging cross-channel interactions says Mr Ensor. “Many financial firms struggle to work out which channels customers want. Trust in financial firms is declining. Financial scandals in countries like Italy and the UK have tarnished the entire retail financial services industry in these countries. A shocking number of consumers distrust both financial firms and advisors. Established firms can no longer rely on what was traditionally one of their greatest assets — trust.”
The next revolution
Web 2.0 has already had a huge impact on business – particularly for collaboration and content use. Web 2.0 basically means it is easier to build applications and services around the internet. Content and user participation are a richer, more effective experience. It also has a profound experience on how businesses use Web 2.0 to reach their target audience through advertising – and business is still coming to grips with its impact. Many Web 2.0 sites rely on members of the public to swop and add information, whether it’s writing their own blogs or posting content such as videos or photos. And these sites are amongst the fastest growing on the internet, such as social networking sites like MySpace and Bebo. And because these sites are popular, it means the potential for advertising and product placement becomes a great deal more powerful.
A recent report from Gene Phifer and David Mitchell Smith at Gartner reckons the impact of Web 2.0 will have an on-going impact on business in the future. “CEOs and top managers will need to identify which key organisational business and technical processes will most likely be impacted and, in many cases, redefined by web business models,” they said. “Although the organisation’s web business model in the first wave of the dot-com boom was seen primarily as a marketing adjunct, except for highly targeted industries that were media- and information-based, and other industries such as travel, its web business model will now affect a range of non-sales and marketing-related processes, including manufacturing, research and development and finance.”
Certainly social websites like MySpace, which Rupert Murdoch snapped up for €374m and attracts approximately one in four Americans, are now starting to prove their worth. The secret, it seems, is to create website features that encourage users to use the website more often. That means creating features that allow them to join social or even political causes. Recently Yahoo and eBay also got onboard, backing a MySpace initiative to allow users to bring their own network and profiles to such sites. It’s all about advertising, of course, and data mining – but using information that doesn’t alienate end users in the process.
Threats and opportunities
The opportunities for many SMEs has also been stupendous, offering the chance of global exposure, all from a few clicks of a computer mouse. Yet business, small and large, needs to continually differentiate itself from the competition. Some experts predict that as consumers become increasingly confident with using the internet, the ability to price services and goods will come under increasing pressure.
The client experience will also need to be enhanced they say, particularly in retail services. It’s one thing selling a widget at a competitive price; but how do you ensure loyalty the next time, especially if you can compare prices with other widget sellers with a few mouse clicks?
Also, how does business finesse the hugely complex of pricing, be it online or at source, as well as offering price guarantees while managing regular promotions? It’s a fearsomely complex process to handle.
Yet plenty of opportunities remain. Like finding out what your clients really want – and in real-life conditions. One method is to host chat boards or discussion forums where your clients can actively discuss your service or products, often rating them and then sharing this information with other clients. P&G and Unilever are both large conglomerates which do this. The internet, said a branding officer recently for one of the world’s biggest retailers, has the ability to involve consumers with a brand or services in a much richer way than so-called conventional media. “We find that when we get the right ‘pull’ for consumers into interacting with the brand, consumers spend much more time and are much more involved than they are when they’re watching a TV commercial or reading a magazine.”
US retailers still lead the online boom
Online retailing is proving a goldmine for many businesses. US online retail reached €112bn in 2007 points out Sucharita Mulpuru from Forrester Research and is projected to grow to an eye-watering €216bn by 2012. “Business-to-consumer eCommerce continues its double-digit year-over-year growth rate,” she says, “in part because sales are shifting away from stores and in part because online shoppers are less sensitive to adverse economic conditions than the average US consumer.” Despite the continued growth of the internet channel, online retailers face several challenges to growth says Mulpuru. “Online stores are broadly perceived as a second choice for shoppers, online retail is becoming increasingly seasonal, and online shoppers rarely admit to browsing, which can drive valuable incremental dollars during their Web shopping experiences.”
Mulpuru also claims online retail is less sensitive to economic shocks because online shoppers tend to be more affluent than average consumers – their overall retail behaviour exhibits less sensitivity to changes in economic conditions. “In fact, only 20 percent of consumers in a survey that we conducted prior to the holidays — just as the subprime mortgage conundrums were gaining traction — said that they would reduce spend during the holiday season due to uncertainly around the US economy. In contrast, other surveys canvassing the entire US population report significant consumer cutbacks in spending in 2008.”
Yet their spending patterns are likely to remain. Consumers who have been buying via the Internet for more than five years, shopping online become second nature, commented a recent PricewaterhouseCoopers report. “They shop across a broad range of categories. Some are buying very high value items, like cars. Consumers with less experience buy fewer categories of goods online, but their willingness to shop across categories increases as they become more accustomed to the technology. They are also prepared to consider buying higher value items. The current crop of novice online consumers is more adventurous than the net novices of a few years ago. While today’s net vets started out by buying simple items, like books and CDs, net novices nowadays are starting by buying clothes online.”
The personal touch
The internet has had a liberating effect for many businesses. However Peter Robinson, director of information technology consulting at BDO Story Hayward in London, says that people, despite the dramatic changes technology has bought, people still tend to buy from people, especially when it comes to professional services. “People are generally price-led when it comes to retail goods. But in terms of selling services, relationships remain key. With our key clients we have an extranet service where we can share key points of information, work plans and draft letters together. That gets us closer to our clients. It also makes business generally that more accessible. People buy from people they like, especially in the beginning. Or they buy the culture. It’s not just about a glossy proposal.”
Yet technology now has become a fundamental component of the way a company chooses to plan their strategy. It helps companies reach well beyond boundaries to create new value from which they can profit, often handsomely. Only a few years ago, much of this would have been thought unachievable. Customers are now active participants in your business. Managing to navigate the new economy brings huge pitfalls. But it also – as the Phoenicians discovered with their own new economy – brings huge rewards.
