Build a site and be prepared

Computer Industry Report,  May 7, 1999  

Tags: e-business, E-business/E-commerce, International Data Corp., INTERNET, MARKETINGWeb

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As in the movie Field of Dreams ("If you build it, they will come"), some corporations have found fortuitously that if they build an e-commerce Web site, business will come to them. However, for most sites, planning and implementing a successful site involve a lot more than luck. As we enter the stage when e-commerce is rapidly becoming a de facto channel, some lessons and words of advice from the pioneers may be instructive to other users as well as the vendor community attempting to provide services and products to e-commerce Web sites.

The issues mentioned by users in discussing their Web site implementation and operation fall into four principal categories:

* Internal politics and mission(s) of the Web site.

* Effective design of the site so that it is appealing and navigable by customers/prospects. The key is to design for speed, simplicity, and international use.

* Effective use of the site to improve customer retention and the lifetime value of the customer. The back-end fulfillment is as important as the front end that garners customer purchases, many said. A major answer is customer service by whatever means available.

* The constant need to continually update and improve the site - and associated expenses.

The costs are sobering. Interviews with 100 early e-commerce Web site executives as part of Web Sellers Speak: Learning from the Leaders (IDC #17973, January 1999) found the average initial cost of constructing a site was $5.9 million, and the average ensuing annual costs were nearly as much: $4.3 million. More than half the respondents spent more than $1 million to develop their sites, and 22% said they spent more than $5 million. The development cost includes all IT costs, content development costs, and marketing and promotion.

The executives who participated in IDC's Web Sellers Speak survey ranged in size from Fortune 500 firms to Internet pure-plays. Because of the size of the sample and the fact that subjects were chosen for their leadership, this study is not projectable to the population of online merchants. Slightly more than half the firms identified themselves as consumer-oriented companies while only 8% said they sold strictly to businesses. Nearly 40% said they sell to both consumer and business markets.

The primary motivation for turning to the Web for sales was to acquire new customers. The second most compelling reason was to increase customer loyalty. The executives are aware of the value of customer retention and the personalization tools that may be used via the Web to increase customer loyalty. (See Customer Relationship Management on the Web: Unlocking E-Commerce Profits, IDC #18909, April 1999 and Mass-Customization Marketing: Maximizing Value of Customers, IDC #17726, December 1998.)

IDC also spoke with additional e-commerce sites whose executives agreed to let their words of advice be quoted. Still other users were interviewed for Lead Electronic Commerce Users: Getting the Enterprise Network Ready (IDC # 16602, September 1998).

POLITICS AS USUAL

As with any major corporate undertaking, the universal advice was to be sure to have the support of the top executives. This is the same mantra that has been echoed in every major IT evolution, but the slightly unusual twist in the e-commerce effort is that in several instances, the development of the Web site effort was led by marketing or line-of-business organizations. Some involved IT, and others outsourced the entire effort. Regardless of who implemented the site, the breadth and impact of the effort reverberates throughout the company and thus needs endorsement.

One reason senior management support should be involved is this: "Here's your opportunity to reengineer your business for the first time in decades. Don't lose this opportunity. Don't just automate the existing processes; change them," advised Alan Boehme, director of business planning, DHL Worldwide Express.

"It's much more political rather than technical. There's got to be a constant lobbying effort with key executives in the company. Remember that the Internet and electronic commerce is focused on customer needs and not selling product. You'll be more successful if you remember to focus on your customers rather than selling product," advised Jeremy Jaffe, vice president of e-commerce at Liberty Financial.

"Do not underestimate the challenge of turning up a new channel. E-commerce is a new channel, and there are a lot of challenges. Get management buy-in from the highest level possible. There are a lot of obstacles and you are going to need help getting them out of the way," added Ron Claybo, director of commerce services, PC Connection.

"E-commerce is a very big idea and has the potential to significantly impact the entire corporation. As such, the strategy for e-commerce has to align with the overall corporate strategy at the senior management level. It then needs to permeate the whole corporation. Everybody has to get on board and resources need to be assigned, along with ownership. It is also important to coordinate this entire effort to maximize ROI," observed Dick Callahan, vice president of marketing at Corporate Software and Technology.