Online Success Requires Firm DM Foundation

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There's no question that the Internet has changed the way financial service organizations focus their sales and marketing efforts. But the real issue is whether the business paradigm has changed. The answer is an emphatic no!

The financial services environment has seen unprecedented changes in recent years, including the explosion of Internet commerce and the passage of the Gramm-Leach-Bliley Act, also known as the Financial Modernization Act.

These developments have had a significant impact on business operations. On the insurance side, for example, online sales are unquestionably making a dent in agent and broker sales. This will increase exponentially as issues such as acceptance of electronic signatures are resolved. Similar changes are taking place in banking, as much of the backroom operations have been relegated to cyberspace and online banking has displaced countless tellers.

The bottom line, however, is that consumers are still individuals looking to do business with companies and people they can talk to and whom they trust to provide a good product with good value and good service. And the fact is, too, that the principles of direct marketing are the same whether online or offline. Success comes from managing and building customer relationships. The Internet has not eliminated the role of traditional media -- or personal sales, for that matter -- it has changed it.

In the new world, most agents and brokers will not be able to survive simply selling traditional lines of insurance. Bankers will not survive on checking accounts and loans. They will have to go further to extend their services -- becoming financial planners able to help their customers coordinate and plan for a full range of financial needs. Agents and bankers will be cross-trained and moved into a kind of offline financial services portal. And where cross-expertise doesn't exist, partnerships will develop to allow companies to provide a full range of financial services.

Agents and brokers will learn how to use technology to their advantage, utilizing e-mail, for example, to respond to customers, providing quotes and information that, while time-sensitive, may not require an immediate response. Web sites will provide information and education and establish people and companies as a source of information.

Quote services, gaining numbers and momentum daily, are one of the greatest challenges for insurance agents and brokers, and are one of the most compelling reasons to maintain a strong offline presence. Branding will be one of the prerequisites for success as consumers point and click their way through the purchase of commodity insurance. Aggregators, whose goal it is to provide one source of information and to ensure a stickiness that keeps individuals coming back to one source, will compete with comprehensive corporate-sponsored communities.

Successful portals and Internet communities will not only rely on site content, however. Success also will require offline marketing to ensure that individuals are not pushed to competitors' products.

Not only will traditional marketing and advertising methods be an integral part of cyberspace, but bricks-and-mortar institutions are used to complement the online experience. Many of the highly touted online banks are finding that their customers want a person with whom to conduct at least some of their business. An online presence may be OK for commodity products, but financial services from investments to insurance must have a foundation of clicks and mortar. Even online pioneers are learning this lesson. Charles Schwab, for example, has begun to create traditional marketing materials and even open offices to provide that personal touch for those consumers who demand it.

A database marketing strategy will grow in importance as sales become more complicated and customer relationships get more critical.

The information- and service-intensive financial world is particularly well-suited for the integration of online and offline marketing. Many products, although not all, require an extensive exchange of information. Dollar amounts can be high and, especially in the investment world, frequent transactions are common. Already existing distribution channels with loyal customers are not about to go away. All of these characteristics contribute to an interdependency of marketing channels.

Market characteristics also contribute to create a synergy between online and offline marketing. Groups with common interests form the basis for Internet communities, as well as target markets for more traditional media. Deregulation in banking has eliminated geographic boundaries, making the market an excellent target for the global reach of the Internet.

Demographics and psychographics are an interesting issue. Those purchasing financial products online tend to be sophisticated in financial services and technology. On the other hand, because of the intricacies of many of these products, these same individuals rely on long-term, personal relationships with their financial advisers.

At one time, pundits predicted that television would kill radio. They were wrong. And many of those that yesterday predicted the demise of more traditional distribution channels in sales and service of financial products are taking a new view. In fact, many of the most successful companies are taking the savings that can be realized via cyberspace marketing and putting these funds back into more traditional channels, such as mail and broadcast, in part to drive additional people to the Web. The fact is that new technologies will make traditional media even stronger because the disciplines of marketing still apply and consumer needs still need to be addressed.

In an industry that is increasingly characterized by a multitude of products and services, what is required is a mix of distribution of products and information. Because ultimately, it is the individual who will choose how he or she want to do business and it is the company that offers choices and knows how to integrate the online and offline market that will gain consumers' loyalty and business.

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