When and why is the internet an opportunity

What explains the varying levels of enthusiasm for the internet? In particular, what distinguishes the firms that saw the internet as a major opportunity from the others? Was it because their market environments were especially conducive, or were they better equipped to exploit the opportunities than their rivals? In fact we found both factors were at work.

The following sets of variables were used in the multiple regression equation in Table III[4], where the dependent variable was the overall judgment about the internet: 1 Attributes of the market:

• growth rate of the total market;

• loyalty of customers in the market;

• customer perceptions of differences among competitive alternatives; and

• ability of customers to judge the quality of the product or service on the web.

2 Attributes of the firm. These were grouped into three categories:

George S. Day and Katrina J. Bens

Table III When and why is the internet an opportunity?

Independent variables

Parameter estimates (t-values)

Intercept

Market share rank

Total number of channels

Loyalty of customers

Customer-relating capability

Focus of strategy

Number of customers

Customer perceptions of differences

Market growth rate

Number of employees

Ability to judge quality on net

Use of CRM software

CRM initiatives

G.G98 (-1.2) G.G72 (G.89) G.G46 (- G.57) (G.47) (G.G2) (G.13)

G.G36 G.G18 G.G12

Notes: Dependent variable = Overall, what is the effect of the internet on your ability to manage customer relationships? RADJ = 0.10; *= p < 0.05; **= p < 0.01

• Strategy and capabilities:

- focus of strategy on delivering superior value through close customer relationships; and

- capability in developing and managing customer relationships relative to competitors.

• Prowess with CRM technology:

- utilization of CRM software to coordinate customer communications, interactions and service support activities; and

- progress with CRM initiative compared to direct competitors.

• Demographics:

- market share; and

- number of employees.

A further correlate was the total number of channels used by the firm because the number available is an attribute of the market and the number used is a strategic choice.

The main story from the multiple regression analysis, using all these variables, is that the overall judgment about the impact of the internet on customer relationships mainly depends on the number of channels, the market share rank, whether the customers are loyal, and the customer relating capability. The assessment of the customer relating capability was based on a reverse coded questions asking "Overall, how does your business compare with your competitors in developing and managing relationships with valuable customers" on a scale where 1 = significant advantage and 5 = significant disadvantage.

To learn what set apart the 25 percent of firms that saw the internet as a major opportunity for strengthening customer relationships we next used a continuous ratio logit model to compare this group with the rest of the sample, using a reduced set of variables. The results in Table IV show that those who see the greatest opportunity are: much better at managing customer relationships than their rivals; and have a lower market share rank which suggests that smaller firms see the internet as a way to easily add another channel to reach their customers and close the gap with larger rivals with broader channel systems. These results were especially valuable in extracting useful lessons for managers.

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