Customers are right, after all

As the dust settles following the dot-com shake-out many investors have learnt some hard lessons. The naive valuation models in which the worth of dot coms was measured according to the number of registered customers and the potential for cross-selling has proved to be, at best, suspect.

As the dust settles following the dot-com shake-out many investors have learnt some hard lessons. The naive valuation models in which the worth of dot coms was measured according to the number of registered customers and the potential for cross-selling has proved to be, at best, suspect.

This valuation approach was understandable given that the markets were trying to understand this technological phenomenon. However, a simple fact has emerged from the debris, which reflects the different dynamics operating in the online environment and which many observers claim will make the difference between failure and success.

It doesn't matter how many customers are registered on a website; what matters is how many are buying. And the number buying will be determined by not only goods and pricing but the quality of service that consumers have come to expect.

This simple point has been obscured as many companies have rushed to adopt a technology infrastructure that includes the latest developments from auto-responsive emails to person- alised pages while only giving a passing nod to the quality of the message.

Sean Kelly, an IT industry consultant, says: "They [customers] know when they are being patronised by a portal which attempts to be personal but is a crude attempt to influence their behaviour." The key to success, according to Kelly, is to craft a message based on customers' needs.

This may sound an easy enough task, but a true understanding of customer needs requires a complete u-turn in traditional business thinking. Nowhere is the resistance to this more obvious than in the growing arena of customer relationship management (CRM).

This latest wave of technology, in theory, enables an enterprise to put the customer at the forefront. But a peek behind the scenes of most CRM implementations shows that the customer still ranks a poor second. The drive for implementation is still based, in the main, on traditional cost-cutting factors.

Kevin Lucas, an industry analyst, says: "It is much more fundamental to focus on the outreach to customers and not get held up on the technology areas because these are changing and developing all the time."

Focusing on the customer requires investment in technology - but a different kind of technology than that which the e-vendors are talking up. What is needed is sophisticated business intelligence systems to discover events, trends and patterns in data which allows the supplier to comprehend and even anticipate customers' needs.

The UK's own, but very brief dot-com darling, Lastminute.com, has woken up to this need and has made significant investments in transaction analysis software which will aid in building demographic profiles of customers. The aim is to give customers what they want.

The upshot is that the enterprise should be wary of getting caught up in the technological whirlwind which has spat out a few high-profile bricks and mortar and dot-com victims. To be sure, the technology is there to be leveraged, but the chief focus should be on the customer.

As Mr Kelly says: "It is unforgivable in e-business to ask for customer data twice. It is expected that the supplier will alert the customer to opportunities that are known to be of interest to the customer."

* This column is provided by TBC Research, an events, publishing and research company. Contact: www.tbcresearch.com