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France Shucks Old Habits at Start of DM Explosion

PARIS – Despite two huge storms in three days that all but destroyed France’s forests at the end of 1999 – the last year of the old century, the new year and new century have begun with an incredible boom that is putting France at the head of the line in breaking the Internet and the new economy.

And all this is happening despite a socialist government that still seems to apply archaic principles: a law limiting the work week to 35 hours; development of an excessive public service sector, an area in which all other developed countries are making deep cuts; a tax system growing ever heavier, etc.

Despite the government, however, the economy is doing better and better. All indicators are flashing green. The stock exchange had a record year. The CAC 40 (the French Dow Jones) rose nearly 30 percent. It almost seems as if France is pulling up the European economy all by itself.

What happened? France was hit – and violently – by the wave of the “Internet and the new economy,” an explosion of start-ups and mega mergers that suddenly reconfigured the whole landscape of distribution and services.

Whole sectors of middlemen – suppliers, resellers and other vendors – are disappearing. In less than two years the banking and insurance industries have been transformed. Telecoms are exploding.

Major Internet players are coming to Europe and to France. The stock market spins around technology shares just as it does in the US.

Analyze the cause of this earthquake more closely and you come up with five principal components:

First, a new way of assessing the value of a business built around its client capital – actual or potential.

Second, a perversion of start-ups where more than 50 percent of developmental budgets are invested in advertising to seduce investors as much as customers. The result: the Internet world is everywhere even though real turnover is still quite modest.

Third, this visibility only exacerbates the panic that has gripped too many businesses who have held back for too many years from making needed reforms in their companies.

Fourth, as a result, panic-stricken companies have opened their arms to consultants and service providers of customer relationship management, e-business, and e-CRM who all claim to have THE solution, key in hand, of how to turn the business toward the customer and the Internet world. You need only look at the deluge of seminars and conferences on this subject.

Fifth, more advanced companies – mostly distributors – are putting whole war machines into place designed to enlarge their businesses by capitalizing on their existing clients.

Here are a few examples:

In 1999 PPR, Pinault Printemps Redoute (the latter now operating under the trade name Redcats), sold goods worth 180 million French francs ($30 million) online from its 45 different sites.

The group is an access provider through its Mageos subsidiary which has 350,000 subscribers. Subscription cost is cheaper than the average in France, running from 60 to 100 francs ($10 to $17) a year compared to the more customary 100 to 150 francs.

The portal is accessible to 8 million French cardholders from such retail and mail order outlets as Printemps, Fnac, Conforoama or Finaref who can pay for their Internet purchases with their card.

PPR also owns insurance and financial services companies which henceforth will be organized in a way to maximize the synergies among the different branches of the group, and do so more or less on the Internet.

The LVMH group two years ago began to invest some of its growing wealth on the Net in France as well as in the US. In January the company launched a new site, “Ze Project” dedicated to a new concept of financial services.

The site has no content – neither product or service – but launched with a publicity blitz targeted at business media. It won immediate notoriety among the public and the professionals.

Now the site managers are in a strong position to calmly negotiate for content with market leaders who don’t want to miss out on a potential opportunity – and are ready to do so without first asking themselves about the real potential of a site built by a group that has no experience in the financial services area.

But where are the direct marketing professionals in all this? In all candor you don’t hear much about them, given all the brouhaha about the Internet, CRM and e-commerce.

But they are working discretely somewhat outside the Internet world: They continue to develop knowledge about their clients, are investing heavily in call centers, and launching innovative programs to keep the clients they have and make them more loyal.

They’re concluding partnership agreements with companies that have lists of what we might call educated consumers, and they make a profit. At least for now.

Direct marketing in France is changing turf. In becoming relationship marketing, DM is a defensive tool traditional business can use against the predators of the Internet. And DM in France is becoming more professional with budgets devoted to this discipline literally exploding; so are the results.

As for the pioneers of the Internet, they will need the spirit and the courage to reinvent their business everyday. As Marcel Proust put it, “the true road to discovery does not consist in finding new scenery but in looking at it with new eyes.”

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