A Boom That Could Bust You

Dec. 21, 2004
Traditional sales methods are vital despite the e-commerce explosion.

I know someone who recently bought a new car. He wanted to buy a Honda. He was a loyal customer and knew all about the vehicle he planned to purchase. It would have been his fifth Honda. He purchased a Subaru instead. Here's what happened: On a Sunday afternoon, he spent two hours at the local Honda dealership negotiating with a salesman to ultimately to be told the deal he proposed wouldn't work out. No way. Good-bye. Thanks for your previous four purchases. A few weeks later, he decided to increase the amount he was willing to spend for a down payment, and he logged on to the Web site of an auto-buying service to review his options. He discovered that one of them was a Subaru Forester. Through the free service, he was connected to a nearby dealership that offered a vehicle comparable to the Honda, at an acceptable price, without wasting his time. And the Subaru dealership even sent a personalized card thanking him for his inquiry that arrived at his home the next day. A week later he was driving his new Subaru. The moral of this story is not that e-commerce works better than traditional sales methods. It is this: Despite the many ways Internet commerce can improve sales, traditional sales methods designed to build trusted relationships with your customers are still vital. All the Internet really does is give you another way to do this. Consider the previous example. If the Honda dealership had met his needs, the buyer wouldn't have thought to research another option online. And when he did log on, he found a Subaru dealer that was ready to meet those needs. A modern conduit connected buyer and seller; tried-and-trued salesmanship closed the deal. Another old-fashioned sales mantra that's critical to ecommerce success: Know your customers. The Internet is making them smarter. "What you are seeing is a fundamental shift on the part of consumers [toward using] computers as tools to provide information they need to make informed buying decisions," said Ken Esterow, vice president of AutoVantage, an auto club that offers a free online-car-purchasing service. Esterow said users of AutoVantage's buying service mirror the users of America Online, Yahoo!, and other popular Internet products: highly educated, largely middle income, and mostly male. But that audience is expanding. As computer prices fall and the Internet becomes more accessible, more consumers are using e-commerce. Esterow said AutoVantage's buying service receives 35,000 unique new-car-purchase requests a month. That's a 50% increase from last year, and that growth rate is expected to continue. A recent report from the U.S. Dept. of Commerce stated that 100 million people will be connected to the Internet by the end of 1998 -- up from merely 3 million in 1994. These users likely will be spending $300 billion via Internet sales by 2002, the report concluded. Despite these dramatic growth projections, the Internet isn't for everyone -- at least not right now. Sometimes, in fact, selling on the Internet can hurt your company, according to Michael Zoldan, a principal with Chicago-based Whittman-Hart Inc., a technology services provider. Zoldan sees a distinct line between established electronic business-to-business commerce, such as Electronic Data Interchange (EDI), and business-to-consumer Internet commerce. Expect the coming growth to be mainly in the business-to-business area, he says, largely because in the universe of consumer products, relatively few lend themselves to electronic sales. He gives the example of buying flowers, which is as much an emotional and sensory experience as it is a business transaction. It doesn't often lend itself to a point-and-click environment. The same is true for high-end stereo equipment, Zoldan says. You want to hear what you are going to buy. Esterow agrees that the current Internet technology can't reproduce exactly the sensory aspects of buying. But he makes two points: First, the technology will improve, and with it ways for consumers to experience products will improve; second, there is a difference between shopping and buying. Consumers still can walk around a bookstore and touch all the books, knowing that when they get home they can order the same books from an online bookstore (with lower overhead) for a better price. Zoldan's more cautious approach to ecommerce is something new in the heady Web world, where many companies have rushed to post Web sites and establish online sales. He warns that simply slapping up a Web site to sell your widgets could reduce your market share not increase it, because it makes that portion of your market more vulnerable to competitors. "You cannot pirate your traditional sales channel for a flash-in-the-plan channel over the Internet," he says. "Companies that have made a lot of money the past 10 to 15 years using the traditional network of sales reps can't pirate that channel. It won't expand your pie. It will make your pie smaller." Companies can combat this by positioning online services as a different product, such as some investment companies have done. But that, too, doesn't equate to automatic success. It's deadly when your competitor is only a few clicks away; and this makes building a solid relationship with customers even more vital. As Zoldan says: "There is no URL loyalty."

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