From Transactions to Relationships: The Next Web Frontier

The Web has come of age in a very short time. Many of us have matured our thinking about the Web business model from the initial focus on publishing and advertising to the winning model of direct-to-customer transactions. And the most successful are actually driving real business over the Web in significant volume.

But despite all these successes, it’s clear that the Web is little more than a vending machine. Indeed, it might as well be a bubble gum machine. When you go to buy gum, the bubble gum machine doesn’t know whether this is your first visit or your 50th; whether it’s your first purchase or your 21st purchase. And, if something goes wrong and no bubble gum comes, chances are good that your complaint letter will fall into a black hole and you’ll never hear from this machine again.

A lot of Web sites are like that. Few deliver on the promise of true relationship management. Even the most successful e-commerce players out there still fight for business one transaction at a time. And all that advertising spending – both online and offline – goes toward acquiring the same customers over and over again, only to lose them to another transaction-focused competitor until you spend more to acquire them again.

This is no way to do business. If we don’t break this cycle, the Web will become little more than a trading floor for commodity products. From the shopping bots searching for the lowest prices on everything imaginable to’s play for world domination, the Web is conspiring to defeat the brand marketer and merchandiser. Even the Fortune 500s, with extraordinary brand equity in the terrestrial world, will need to fight for their lives to hang on to their core asset: their customer base. Doing so will require a fundamental shift from a focus on transactions to a focus on relationships.

Relationship management is not just about customer acquisition. It’s about differential customer treatment and customized value propositions. It’s about real-time personalized merchandising and on-the-fly lifetime value calculation and optimization.

Today, the gap between this promise of the Web and the reality of what is being executed is enormous. Far from delivering on this promise of 1-1 real-time marketing, the Web is becoming a massive set of transactional tactics, driven by a mass advertising approach. As a result, the tough lesson learned by those with the temerity to measure results is that the Web is adding costs without revenues.

Indeed, we’re seeing channel shift without lift. Major companies with massive Web expenditures cannot prove that the Web delivers truly incremental revenue performance. And, with all this customer churn, all this customer acquisition spending, all this focus on low-margin product transactions without any focus on customer optimization, it’s clear that a massive philosophical shift is required for companies to change the economics of doing business over the Web.

Even if you make the required philosophical shift, the technical requirements are daunting. With hundreds of tiny companies hawking proprietary technologies that don’t work well together, even the Fortune 500s are held captive by their reliance on incompatible subscale applications built by dozens of start-ups with uncertain long-term viability.

Similar to this focus on one transaction at a time rather than true customer optimization is the emphasis by even major companies on guerrilla tactics, rather than a strategic plan to build competitive advantage.

What will such a plan involve? Rigorous audience measurement, householding of customer data and e-mail address at a minimum, followed by personalized customized

e-mail promotions, ad serving partnerships, data management, message and content management, and cross-channel customer history to name just a few. And given the start-up nature of this industry, with its lack of standards and true compatibility, companies will need to cobble together this architecture from the parts made available by multiple start-ups.

But, most importantly, such a plan will require relentless focus on the quality of the customer experience, especially post-sales service, delivery and support.

This is where the rubber meets the road. Marketers who will win the battle for the customer in the next century will be as focused on engineering a quality customer experience as they are on communications and pricing. They’ll be data hounds and operations-focused. They will, in fact, be a new breed altogether. And, they’ll need to move well beyond the start-up technology partners to get there.

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