Sent: 21-04-2009 13:18:01
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Have company strategies kept pace with Internet development?
I recently wrote a series of articles for the ATC Digest entitled, the Second Web War. They were about the way we will need to deal with the Web going forward. This is a brief summary of the series.
As I point out in the Digest article, we have all become very familiar with the World Wide Web and now use it for a plethora of activities. We communicate with people all over the world, we look up details of things we are interested, make cinema reservations, check sports results (especially for me checking how my favourite team in the UK has performed) and follow the news anywhere in the world, all by just tapping away at the keyboard.
Whilst we may have come a long way in the last twenty years, we are really only at the beginning of the journey. The Internet of today may not be the nascent technology of the late 90's, but it is still in its infancy. The question is, are companies gearing themselves up for what lies ahead? Or, are many stuck in the paradigms that were developed when we all had to learn very quickly about 'this new medium'? Whilst many are aware that Web 2.0 is happening, have strategies been updated to reflect the way people are now using the Web and more importantly, will be using it in the future?
According to a report from the Boston Consulting Group (BCG) entitled "Arming for the Second Web War", Internet access and usage is growing at a very fast rate. The gap between generations is probably getting wider as younger people today think, interact and buy in ways that Baby Boomers are far less likely to embrace. The growth of sites such as Facebook and YouTube are clear examples of that. Makes you start to appreciate what our parents must have gone through when they had to change their mind set when faced with the new technology called Television!
Without a doubt, the Internet is becoming increasingly important to all aspects of industry and the financial services industry is not excluded. At the moment most purchases are still being made the old fashioned way, in person. Whilst there is a growth in the number of transactions undertaken via the telephone, even that is still small in comparison to face to face transactions. Pure online transactions actually account for a very small proportion of all transactions. But, as the BCG authors point out, taking that statistic at face value can be very misleading as it does not reflect what is really going on.
BCG found that web sites generated significant revenue indirectly by shaping decision processes than they do in generating direct online sales. Their analysis suggests the web can be up to six times more important than it would appear when you just look at direct sales.
As the authors of the article state, members of Generations X & Y plus the under 20 set may contribute relatively little to your profitability today, but by 2027 they are expected to drive almost three quarters of all financial services revenues in the US. Not only that, financial services relationships have been found to be relatively 'sticky' especially those established when people are quite young, getting to know them now is sowing the seeds of future revenue growth. The generation that has grown up with the Web and online social networking have a very different mind set to those of us who have had to adapt our thought processes to accommodate this new medium.
The BCG found that many companies currently using the web are not effectively utilising the medium to; get people to their sites, keep people on their sites and then bring them back to their sites. As the authors of the report state, whilst many financial service firms have improved their online offerings, most are simply not meeting expectations in comparison to the standards set by the best online companies.
Instead, the BCG argue that the new challenge is to influence a complex search path that occurs largely online and frequently in sites that are beyond the control of the target company. For the strategies to be effective it requires a large amount of hyperlinking to partner and affiliate organisations, significant use of banner ads, sponsored links on search engines. Interestingly, according to the BCG, the Web now commands approximately 30% of customer 'eyeballs' but is only allocated 5% of advertising dollars. The Digest article outlines the reasons why the BCG suggest this is the case and outlines why those reasons really no longer apply.
However, having got people to the site, the second strategy is to keep them there. Best practice companies aim to make the online experience something that will have a positive influence on the potential customer and maintain their interest. This is augmented by the use of on line promotions such as special discounts and information about the purchase history of the customer enabling offers to be made reflecting the interest of the customer.
The really worrying thing is that no one in the financial services industry has yet been able to develop what the BCG describe as the effortless online experience afforded by the likes of Amazon to its customers. At some point the reality of the situation must be realised and remedial action taken, before it is too late and the web savvy companies have moved in to the financial services space, as is already happening (e.g. Amazon are seriously considering using their network to move into financial services).
The last constituent of the strategy outlined by the BCG authors is to ensure that customers come back to the web site again, and again. That obviously revolves around the critical element of customer satisfaction. Flawless execution of both any online and/or offline elements of any transaction is critical but, the BCG suggest that even this is not enough. The Digest articles' outline why and illustrates what the best web strategies are to achieve this.
The articles appear in editions 57 & 58 of the ATC Digest. For details visit https://www.atcbiz.com.au/store.php
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