The promise of efficiency gains

The size of the opportunity to reduce customer service costs (because customers could self-serve) was the third most important determinant of the overall judgment about the internet. This reflects a noticeable shift of the goals of CRM projects from revenue enhancement to cost containment.

GE Capital's Card Services division has harnessed the internet to improve the efficiency of pre-approved direct mail, one of the core customer acquisition processes it offers to its retail clients. These are the credit offers that try to entice you

with "Congratulations! You've been pre-approved." In the paper world, the prescreen process involves departments such as credit screening, marketing, creative agencies, fulfillment, plastic embossing and so on, with abundant places for delay and error. This paper process has been converted to a very fast and low cost, web-enabled sequence of activities so a customer can connect via a modem to make a purchase and establish credit in one seamless process.

Skeptics about the internet believe that most of the prospective cost savings will be captured by customers because their bargaining power has been enhanced (Porter, 2001). Indeed, in the respondents view two of the biggest threats were "expanding the competitive set" and "facilitates customers switching," both of which are accepted indicia of customer bargaining power. Nine percent of the B2B respondents said their firms were seriously threatened because there were more competitors who would undermine longstanding relationships or be used by their customers as bargaining chips to push down the price level. But when we put these two threats into the broader context of all threats and opportunities we found they had little relationship with the overall judgment of the consequences of the internet. As shown in Table II, the coefficients of these variables in the regression equation are not significant, which means that while the threat from more competitors and easier switching can be ignored, the prospects of price pressure are far outweighed by the other benefits.

Similarly, the potential threats from auctions and buying groups were found to be symptoms of deeper underlying problems. For example, the seven percent who were seriously threatened by customers initiating reverse auctions were invariably in mature markets with few differences among competitors, or lacking close relationships with their key customers. One manager at a large detergent chemical maker shared the poignant tale of a long-standing and seemingly loyal customer who abruptly announced they were preparing a reverse auction to open up the business to more suppliers. This supplier was assured they would be invited to bid and would be favorably considered - so long as they were price competitive! Perhaps an auction was inevitable, but the fact they were taken by surprise suggests they weren't very close to their customer, nor were they perceived as a supply partner.

Advertising With Circulars

Advertising With Circulars

Co-op Mailing means that two or more businesses share in the cost and distribution of a direct mail campaign. It's kind of like having you and another non-competing business split the cost of printing, assembling and mailing an advertising flyer to a shared same market base.

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