Chapter 1 "Managing change is the single most important capability we must have in our personal and business lives. Those who can lead in a constantly changing landscape are the winners. Those who require stability and certainty will inevitably fail." THE FORCES OF CHANGE The Japanese have built the challenges of change into their language: Their word for change is composed of two characters. One stands for "danger, " the other for "opportunity." Business opportunities do not come without inherent dangers. The greatest opportunity for businesses is to focus on their relationships with customers. This is especially true during times of great change, such as we have been experiencing and will continue to experience into the foreseeable future. Companies that fail to build closer ties with customers are headed into dangerous territory.
Author Eudora Welty wrote that "Relationship is a pervading and changing mystery." Managing successful business relationships is like managing a multiplex theater. With relationship multiplexing each relationship must be managed as an independent business, yet they all have to function within the strategies and overview of the whole. Each relationship has its own individual dynamics, and its own successes and failures. Each is influenced by the whole but independent as well. Each has its own challenges and requirements, research needs and information systems. Some get renewed. Others close to bad reviews. Successful companies and their executives must be sufficiently flexible to manage a variety of relationships, situations, challenges, and opportunities.
Successful companies are focusing on building improved direct relationships with their end users, whether it's through advertising, direct sales and marketing organizations, or telemarketing. Those who depend on agents and other middle-men for their sales will find it essential to develop a direct relationship with their customers in order to understand their business plans and objectives and to design products and services to meet those needs.
An example of an industry that is forming direct relationships with customers after years of being disconnected from them is the automotive industry. While state laws still prohibit consumers from purchasing cars directly from manufacturers, more than a fifth of new car buyers claim they are bypassing the traditional middleman-auto dealers-in such transactions. This process of disintermediation is a concept that retailers and other marketing middlemen will need to grasp, if they still want to be around-albeit in a markedly changed form-in 2005.
As volumes of other research demonstrates, the auto market is not unique. Early Internet adopters routinely use the Web to research and often purchase other big ticket items, including computer equipment and software, travel, financial services and even their homes.
Several disintermediation agents have materialized to facilitate dialogue between home buyers and sellers, including Cyberhomes.com and Realtor.com and while those sites still refer either to multiple listing services or specific real estate agents, a new site has emerged called Forsalebyowner.com that takes real estate agents out of the loop altogether.
While it is easy to understand the impact such consumer information power is having on the purchase of big-ticket items, the technology also has begun impacting the consumption of everyday products from laundry detergent to toilet paper. Early tests by on-line grocery marketer Peapod have led to an expanded deployment of the service and encouraged others like ShopperNet to enter the market.
The services essentially are positioned as a convenience service for consumers, allowing them to shop and order common grocery items that do not require personal purchasing, though they also offer such personal choice products as produce and prepared gourmet food items.
While on-line shopping is seen as a convenience for consumers, it also represents a huge shift in information power that also could take the traditional middleman-grocery store chains-out of the loop. By housing a database on what these on-line shopping households purchase, they assume the role that retailers' UPC scanners held for the past 25 years. They also place the power of that information back into the hands of the marketers, who can utilize that information to entice product sampling, or brand loyalty via direct incentives or affinity marketing efforts with on-line consumers.
Traditional marketing communications, including advertising, sampling, and consumer promotion will need to adapt to this marketplace and the historic practice of trade promotion could be completely disintermediated by it. A growing percentage of purchase decisions can be expected to be made through direct communications with the manufacturer, diminishing the impact of in-store communications and the role of the retailer and dealer.
While these shifts will not completely alter traditional shopping behavior for all consumers, they will substantially alter them for some of the most desirable groups, particularly those households with enough discretionary income to be computer owners and on-line users.
This, according to former Coca-Cola marketing executive Peter Sealey, could cause a fundamental class shift among consumer groups, creating what he refers to as a retail ghetto of unwired consumers who are forced to purchase products at conventional retailers and at substantially higher prices than those of information-empowered on-line consumers.
Meanwhile, mass-marketers will continue to adopt on-line methods of traditional marketing communications to extract new efficiencies in reaching targets. Consumer sales promotion giant Catalina Marketing, for example, is introducing Super Markets Online, a service that would enable consumers to print out coupons on their home computers.
But if disintermediation is going to impact consumer markets, it also is impacting business-to-business markets such as advertising and media buying. Ultimately, the speed of that disintermediation will be determined by each industry's acceptance of information and trading technologies, but a key observation of this book is that such progressions are inevitable.