Value, not Presence, Leads to Web Success
Distribution channels are at the core of customer relationships - something that Levi Strauss forgot when it forbade retailers from selling jeans and Dockers on the net. Eventually realizing that the Internet did not give the company the channel power it expected, Levi's quit direct selling on the Web and left online selling of its clothing to retailers.
In the years of the Internet's infancy, the path to success was simple: Get on. Get a Web site up and running and you were on your way.
That mentality is what authors Nick Earle and Peter Keen label the .com mentality - and today, as Levi's found out, it's obsolete. Just being on the Internet is no longer enough; Internet companies who are successful over the long term are those that find a way to create value for their customers and make a profit.
In other words, write the authors, you have to replace the old .com mentality with a new .profit one. Their book, From .com to .profit, lays out a framework to guide companies in making the transition.
The framework is based on what the authors identify as the six drivers of value: logistics, relationships, channels, branding, financial dynamics and intermediaries. These six value drivers lead to six value imperatives - what companies must do if they are to create value and make a profit - that form the core of the book. The value imperatives are as follows:
- Perfect your logistics. Use the Internet to halve your inventory and your overhead and streamline your supply chain. You'll then be able to afford everything else - marketing, price reduction, service and technology - that will position you to take advantage of other Internet opportunities.
- Cultivate your long-term customer relationships. Build a mass of critical repeat customers, add collaborators to your site, and cement relationships through community.
- Harmonize your channels on behalf of your customer.Forget about channel conflict. Give customers a choice and let them pick what works best for them. (This was the value driver that Levi's ignored when it tried to monopolize its distribution channels.)
- Build a power brand. For the Internet, aim to build relationships brands, not product brands. The most successful brands become portals; consumers use those brands as the cornerstones of their online choices.
- Transform your capital and cost structures. The goal is negative working capital and minimal invested capital. What brick-and-mortar companies might label financial assets are considered liabilities in the Internet world.
- Build value-adding intermediation. The best strategy is to become the intermediary of choice in a certain niche.
Packed with examples that clearly demonstrate how and why these imperatives will lead to long-term profitability, From .com to .profit is an insightful addition to the growing literature on Internet-based success.