Capitalizing on the internet opportunity

Opinions about the impact of the internet on customer relationships have evolved along three lines. Some firms still hold to the view that prevailed in the 1990s, that the resulting market transparency would cause margins to shrink and loyalty to become even more transient (Porter, 2001). As firms gained experience with the internet, some replaced their anxiety with enthusiasm over the possibilities for cutting customer service costs while tightening connections with customers. More recently, a revisionist argument has been made that digital technologies - and especially the internet -offer only limited advantages because the applications are readily copied (Carr, 2003).

Persuasive evidence that most business-to-business (B2B) firms have been able to use the internet to leverage existing advantages and avoid the adverse consequences of increasing market transparency come from our survey of 165 senior managers on the impact of the internet on their ability to manage customer relationships. We found that 25 percent saw the internet as a major opportunity whereas only one percent saw it as a major threat. A further 57 percent saw the internet as a minor opportunity and only 13 percent said it was neither

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Journal of Business & Industrial Marketing 20/4/5 (2005) 160-168

e Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858620510603837]

a threat nor an opportunity. To better understand these overall judgments we also asked them about 15 possible consequences of the internet for customer relationships.

Overall the internet was judged to offer opportunities to reduce customer service costs, while tightening customer relationships by encouraging dialogue, linking more parts of customer contact and enabling the personalization of communications. Fears of channel conflict, price wars and new business models disrupting their markets have been overshadowed by these opportunities. However, a closer look at the results reveals that this optimistic interpretation is potentially misleading, and that most firms won't realize the expected benefits. Instead the gains will likely go to the firms that were already proficient at forging close customer relationships.

How the data were collected

A representative sample of senior marketing, sales, and MIS managers and executives was drawn using a database combining information from Dun & Bradstreet and Market Place. SIC codes were selected from the manufacturing, transportation, public utilities, wholesale and retail trade, finance, insurance and real estate sectors. Companies located in all 50 states with more than 500 employees were included in the sample.

The questionnaire was mailed to the most senior person responsible for customer relationship management (CRM) initiatives who was also knowledgeable about the competitive strategy and performance of the firm. The cover letter explained how to access the questionnaire on the web if the participant preferred. The web survey was password protected and designed to look as similar as possible to the paper survey. Two weeks after the mailing, follow-up telephone calls were used to remind people to complete the survey and surveys were remailed if requested. 1,100 surveys were sent out in the first mailing, and a second wave was sent out about four weeks later to 900 new contacts. The two mailings had similar response rates and the final response rate was 17 percent with 24 percent of respondents choosing to complete the survey via the internet. Data collection was completed in March 2001.

There were no significant differences between the firms that responded compared to the sample frame in their industry, number of employees and geographic location. The majority of businesses were B2B (at 54 percent) while 24 percent were business to consumer (B2C) and 22 percent sold to both B2B and B2C markets. This paper is based on the 165 respondents from the B2B portion of the sample. Early respondents were compared to late respondents. Of the 100 variables in the survey, only two showed a statistically significant difference for early and late respondents, less than

Journal of Business & Industrial Marketing 20/4/5 (2005) 160-168

e Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858620510603837]

George S. Day and Katrina J. Bens what one would expect by chance at the 5 percent level. There were no statistically significant differences between the internet and paper forms of the survey. Although the firms in the sample all had more than 500 employees, we asked respondents to answer from the perspective of a specific business unit or division competing in a distinct market. Thus 20 percent of these businesses had less than 500 employees, 67 percent had between 500 and 4,999 employees and 12 percent had more than 5000 employees. The selection criteria tilted the respondents toward marketing and/or sales management so they made up 78 percent of the sample. Another 8 percent were in general management and the majority of the remainder were in technology management.

Because the strategies of these relationship leaders emphasize connecting with customers, and their organizations are already aligned to this priority, they will use the internet to enhance their advantage. To help B2B companies assess whether they are likely to gain, stay where they are, or fall behind in the competition for customer relationships, we have extracted three lessons:

1 relationship leaders will leverage the internet to stretch their lead;

2 the transformative impact of new market models has been modest; and

3 the internet will complement the existing channels.

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