Imagine you are a Fortune 1000 marketer and a supplier offers direct mail services for free. The supplier has its own products to sell to your customers and offers a split of revenues on all sales of 15 percent. What do you do?
Apparently, when it comes to the Web, you accept such a deal. This movement has picked up speed in the past six months as many dot-coms and application service providers have realized their own future of going it alone is doomed because of the high cost of customer acquisition and lack of further venture capital to fuel their money-losing ways. Their most obvious evolutionary step is to partner with traditional brick-and-mortar corporations that already have established customer bases. This shift in strategy means that they now offer traditional companies the stickiness that will be the holy grail of attracting customers on the Web. The cost is free, and the dot-coms and ASPs even promise a revenue share. As corporations are approached, they will need to consider which of two paths they follow.
The two choices for corporations.
In one corner are the pesky dot-coms and ASPs that offer their tools and trinkets to desperate corporations seeking a quick fix for providing online customers with rich experiences. An example is the many dot-coms or ASP players with fee-based human resource software, accounting or Web site building applications that are striking partnerships with traditional corporations with small business customer bases.
In the other corner is a relatively new breed of players that have figured out that messing with a corporation’s customer base is like asking for a right hook to the head. These companies have chosen to work with corporations and become their silent partners. They do not seek to monetize the end-user or blatantly promote their brand name to that end-user. An example is Inktomi, a provider of search engines to players such as Sun, Cisco and Ameritech. A simple fee-for-service arrangement with the corporation means these silent partners look after the corporation’s interest and do not endanger the corporation’s client base.
The risk of losing customers one by one.
Corporations that partner with a brand-
conscious dot-com offering free services have set in motion the wheels to being knocked out and losing their entire customer base. The dot-com has a virtual “fish in a barrel” to shoot in the form of a zero-cost customer acquisition for their offerings. Conversely, silent partners work on a fee basis with the corporations and pose no threat to their customer base.
Trafficking customers is not a good thing. Allowing a third-party dot-com or ASP player with its own brand into an existing customer relationship is potentially disastrous. First, the corporation’s brand suffers as it introduces third parties that flaunt their own dot-com brands. No marketer would allow a call center supplier to use their own brand name when answering inbound calls for the firm or an ad agency to promote its brand, so why allow a third-party dot-com or ASP to enter into the fray of the customer relationship?
Second, a traditional corporation can lose customers for which no amount of revenue share can compensate. Most dot-coms and ASPs are simply siphoning traffic at virtually no cost. Most CEOs would go through the roof wondering how their e-commerce department managed to allow 25,000 customers to become customers of a third-party brand in return for 1 percent of the cost of a pencil.
Consider the very real possibility that a third party either would offer service levels inconsistent with the corporation’s or encourage the customer to visit the company directly, bypassing the partnering corporation entirely. The dot-com could introduce competing brands via its own banner ads or other offerings. Is a revenue share worth this risk?
Forces that will eliminate the trend.
E-commerce will begin to fall under the marketing umbrella. The marketing departments of large corporations own the customer and are mandated with creating an integrated, brand-focused customer experience across all contact points. As the Web becomes yet another business channel for corporations, the management of a customer’s Web experience will become the responsibility of marketing departments. Marketing departments in turn will shun the dot-com revenue share deals in favor of their traditional method of fee-for-services with marketing suppliers.
Corporations will realize the importance of brand. As MasterCard says, “Some things are priceless.” Your child’s first step, your autographed Mickey Mantle card and your identity. This will give a huge boost to silent partners that can protect their brand identity.
Dot-coms will go out of business.
Another factor in the elimination of the revenue share model is that dot-coms and ASPs are going out of business. The bloodletting has begun as dot-com businesses with little or no hope of profitability have their pipeline to dumb money cut off.
Silent partners, on the other hand, are guaranteed long-term revenue streams from the corporations for which they do work and will be key components of much-needed marketing infrastructure required by traditional corporations.
What will replace revenue share deals? As tales of stolen customers are shared, marketers will scrutinize marketing partners and systematically eliminate those that simply monetize their customer base. Next to go will be those that insist on promoting their brands, followed by those that cannot provide any strategic services or insights. Silent partners in the form of suppliers and partners who can offer private label relationships are the best alternative for corporations seeking to protect their customer relationships.
However, private labeling and rich customer experiences alone will not be enough for the marketing departments that must integrate the Web into their overall portfolio. Marketers will begin to ask:
• Can the partner provide strategic insights to my online goals of retention, up-sell or acquisition?
• Do they provide strategic insights into the behavior of online users in my segment?
• Can they analyze customer interactions with my site and provide insights on customer behavior?
• Will they ultimately help me better segment and market to my customers?
• Will they manage the entire solution, or am I required to incur internal technology costs to meet my marketing mandate?
• Will I own the data that results from the partner’s interaction with my customers?
Strengthening long-term customer relationships.
Marketers must own and strengthen all customer contact points and seek partners that will silently participate to help them reinforce their brands to help integrate their online channel into their overall marketing strategy.
To date, most corporations either have failed to deliver a compelling Web experience or jumped into the arms of dot-coms for quick solutions and will soon realize the threat to their customer base if they do not choose their partners wisely.
• David Ceolin is CEO of Digital Cement, a provider of corporate marketing portals based in Westboro, Mass.
