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Lessons Learned from the Downfall of Dot-Coms

Business headlines today are filled with stories of high-profile dot-coms that
crashed and burned, despite all the venture capital funding, hype and publicity
received. This turn of events show that success online is not directly proportional to
the amount of capital a business has. Here’s how small businesses can thrive in
e-commerce, and with some chutzpah, fight side-by-side with the well-oiled
dot-coms.

By Nach Maravilla
Power HomeBiz Guides



Every online entrepreneur must understand the simple rule of doing business on the
Internet: customers rule!

Consumer power drive today’s economy. With a simple click of the mouse, the
customer can decide whether your business deserves his dollars or not. A recent
Bain and Company study finds that over 2,000 customers in three retail segments
-- apparel, groceries, and consumer electronics/appliances -- suggest that 10
percent of customers cite better service as the reason they shop online. With the
information explosion on the Internet, the balance of power has shifted from the
manufacturer to the retailer, and now down to the consumer, as consumers
become more jaded, cynical and savvy about marketing.

Many dot-coms have crashed and burned because they thought that the basic
principle of satisfying customers is now passe in the “new economy.” Take the
now-classic case of Boo.com, a well-oiled and much-hyped luxury goods e-tailer.
The demise of Boo.com was a result of its focus on technologies that, while
innovative and ahead of its time, were too cumbersome and complicated for
customers. It mistakenly thought that the warning on its homepage: “This site is
designed for 56K modems and above” could appease potential customers of its
slow-loading graphics. There was too much style over substance, that for many, it
was more trouble than it was worth to actually buy something. After only six
months and burning nearly $200 million, Boo.com, the poster child of Internet
excess, had to say goodbye.

There is one clear lesson that is emerging from the recent shake-up in the dot-com
world: only the businesses, whether big or small, that serves their customers right
will be left standing. The key driver of online success (or failure) is the customer
experience. As the novelty of online shopping wears off, online customers will
place more focus on the quality of service. Despite all the venture capital financing
received, the big dot-coms will fail if it does not serve its customers correctly.

Small businesses should take heed ­ you have a fighting chance if you treat your
customers right! You may not have the huge capital, the best technology or the
hype and publicity of these well-oiled dot-coms; others do not even have staffs!
However, you can still compete effectively online by focusing on your customers,
figuring out what they want and need and making life easier for them. Focus on
getting the basics right: superior service leads to satisfied customers; satisfied
customers lead to referrals and referrals are the most effective way to build a wide
customer base.

The crucial thing is to learn to integrate customer experience in your business
strategy. Here are the three steps:

1. Identify your customer’s goals and your goals.

The first step is to identify your best customer segment and understand their needs
precisely. Not all customers are profitable, so tailor your offer to your best
customers. To do so, you need to get clear answers to questions like:

* Who are your target customers? Know the demographics of your visitors.
Demographics are a powerful information to help you better respond to your
customer needs. With this information, you can set out your site to your target
market by clearly defining your site’s business plan and marketing goals.

* What do customers want from your site? Remember, not all


customers are
profitable, so you need to identify your best customers and tailor your offer to
them. Make sure to understand what your best customers really need and why
they have defected. By learning the purpose of your visitors, you are in a much
better situation to provide them with what they want. The better you serve their
purposes, the more they will appreciate your site.

* Why are they visiting your site and would they return after their first visit? Do
everything to entice your customers to identify themselves to you, such as special
discounts or other incentives. Despite privacy concerns, you would be surprised by
how much information customers will willingly volunteer ­ if they think you are
trustworthy! Study online competitors, off-line competitors, and any “comparable”
dot-coms that are facing similar issues in a different market.

* What technology do they use, what features are they familiar with, and how long
do they want to spend at our site? A lot of online businesses fail because either
their designs are far too bandwidth intensive, or it did not do its homework and has
zero knowledge of the customer’s ability and usage of the site.

2. Your company’s mission should be to provide great customer experience.

You must commit yourself to creating the best possible customer experience for
your site. Some brick-and-mortar organizations making a crossover to
e-commerce have ingrained behaviors and attitudes that hinder delivering superior
customer service. If other people are involved in your online business ­ from
independent web designers, to programmers or marketing personnel ­ make sure
that everyone shares your vision. If you have employees, it is best that you assign
one of them to be your customer service champion whose main job is to oversee
how the company is continuously improving its service. Linking rewards to service
is also an effective way to promote better service. Your organization’s goal should
be to provide a great customer experience that makes it quicker and easier for
customers to buy your products or services.

Use objective data. Solicit customer feedback, run survey forms, or get a friend to
evaluate the site. Gather and use information to improve your relationship with all
of your customers. However, refrain from sending them with frequent direct mail or
with unsolicited e-mail. As much as possible avoid selling your customer
information to anyone: it will anger your customer for violating your promise of
protecting his or her privacy.

On the Internet, showing brochures and sales promotions alone is not going to cut
it with the consumers. While competitive pricing is the first step, the role of every
online entrepreneur is to become relationship-focused if his or her business is to
survive. In terms of technology, it is crucial that online companies invest in
technology but there is no need to go overboard. Use available technology to
improve customer service and manage costs.

3. Keep an eye on customer experience.

It is essential to continually monitor and improve customer experience. Watch (and
respond to) customer e-mails, actively listen to feedback and comments, and
occasionally involve outside experts to give objective guidance.

A great customer experience can result in strong word-of-mouth exposure,
positive publicity, and increased revenues. However, customer experience is never
perfect. Building a greater customer experience is not an event, but a continuous
process towards online success.

About the Author

Nach Maravilla is the Publisher of Power HomeBiz Guides at
http://www.powerhomebiz.com, an online magazine designed to stimulate the
entrepreneurial mind. Visit PowerHomeBiz.com today and learn from its many
articles, tools and resources to help you start, manage and grow a small business,
whether online or traditional.

 

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