Rainer Famulla
To read offline:
Download this article [A4, PDF, 37K]
PDF Help Fault Lines in Customer Management Financial Services companies are offered an immense
opportunity to improve customer management. The breakthrough of eCommerce,
along with advances in data mining and management, makes it possible for
companies to gather and track data on individual customers, gain greater
insight into what they need and want, and offer personalized solutions.
The same forces also open up "fault lines"—breaks in
industry value chains—that may allow some incumbent players to pull away from
current competitors while also opening up possibilities for new entrants to
emerge and attract customers from incumbents. What are these fault lines, and
what must companies do to either take advantage of the opportunity they pose or
mitigate the risk?
The New Entrant's Advantage One fault line can emerge between current players and
startup challengers. The Internet is a new channel, and in some industries and
instances it can be the sole or primary channel (with some telephone backup).
In such situations, new entrants will have an advantage over "brick and mortar"
incumbents. Able to build their information databases from scratch, new
entrants can have less costly infrastructures and will not face the incumbents'
problem of integrating data across legacy systems.
Excelling on Key Capabilities Companies that can offer specific solutions to customers'
needs will undoubtedly be able to take customers away from those that are
unable to do so. Fault lines will arise, then, when certain companies prove to
be superior in their ability to:
- Integrate and analyze data. Excellent companies will be able
to integrate data across multiple channels (if necessary), select the most
relevant data, and use it to derive meaningful insights and thereby offer
useful customer solutions.
- Encourage customers to take an active role on the Internet.
The advantage will go to companies able to (a) migrate most customers to the
Internet channel, thereby lowering the cost to serve them, and (b) encourage
customers to express their preferences directly, so that the company can offer
a tailored response.
- Make use of the potential of virtual communities. Beyond
browsing web pages, customers use the Internet to join in virtual communities
of people with a similar interest or need. Companies can participate,
individually or as part of a network, by offering information, products, and
services to the community. Advantage will go to companies able to attach
themselves to the most successful communities.
- Operate at Internet speed. Speed—the acceleration of the pace
at which activities are performed on the Internet—is an important component of
many aspects of customer management. Companies able to operate at speed will
break away from competitors.
New Business Models Yet another set of fault lines is created by the emergence
of new eCommerce business models designed to offer consumers flexible solutions
that more closely meet their needs. Accenture has identified four such
buyer-driven models:
Auctions: The auction model can take
several forms. In traditional auctions (e.g., E-Bay), sellers try to obtain the
highest price for their products. In "reverse" actions (e.g., Priceline),
buyers express their needs and price requirements for products and services
they want. Bargain Finding Engines (e.g., Lending Tree) present a list of
alternative options according to customer defined criteria.
Product Configurators: A Product
Configurator personalizes products to the specific needs of a customer. For
example, NextCard provides a credit card that offers flexible terms depending
on a customer's credit situation and allows customers to personalize the look
of the card.
Solutions Providers: A Solutions
Provider aggregates a comprehensive set of products and services. A good
example is Microsoft's MSN Money Central which offers checking, savings, loans,
and investments from various providers and includes other tools, help, etc.
Intentions Value Networks (IVNs): IVNs
consist of multiple companies that offer cross-industry solutions meant to
satisfy individual consumers' aggregate life needs. For example, when
relocating to a new city, a consumer will want help in learning about the
neighborhood and schools, finding and financing a home, arranging the move,
etc.
The most obvious fault lines appear between companies
following traditional seller-driven models and those adopting one of the
consumer-driven models above. The latter will have an advantage.
More subtle fault lines also exist between these new
business models. These are:
- Networks versus Product Providers.
Companies that offer discrete products/services will be at a disadvantage
relative to community or network-based models such as Solutions Providers or
IVNs. Greatest advantage will go to those who succeed in creating a community
or aggregating the products/services: They may be able to control customer
knowledge, set terms for other companies participating in the community, and
extract greater value from transactions. To mitigate this risk, providers need
to determine how to participate in the value of the partnership. One way is to
take an equity state in the aggregator.
- Auctions versus Networks. While
network-based models may have the advantage over product providers, they are at
risk from the Auction model. Auctions offer a low- price solution, and are
ideal for customers who need little information or assistance and want to buy
on price. What happens, though, when customers switch to an auction model at
the time of transaction—after they have benefited from the knowledge and
personalized solution offered by community models? .
The same situation has long existed in offline retail sales
of personal computers: A customer goes to the full-service computer store and
takes advantage of its highly trained salesperson to get educated and find the
best computer solution, then walks down the street to a discount computer store
to purchase that same computer for less. On the Internet, it's even easier: the
customer does not need to say goodbye to the helpful salesperson and walk down
the street; the discount retailer is only a "click" away.
For Auction companies, this fault line is an opportunity:
They may be able to take customers at the point of transaction, which
translates into more profits on a relatively lower amount of investment. For
Network-based companies, the fault line poses a threat. One way to lessen its
impact is to reinforce the attributes that community- based business models
need to succeed in the first place— development of a strong brand, access to
valuable information and decision making tools, and a variety of uniquely
personalized offerings that are difficult to replicate. Some form of loyalty
program for community members who buy through the IVN—discounts or the
accumulation points—may also help to mitigate the risk of member defection.
Tying ongoing service and warranty programs to the products may also help as
customers may not receive as good of service from more cost focused providers.
The Internet is dramatically transforming customer
management. Both incumbents and new companies need to understand where fault
lines are forming and find ways to turn the potential disruption to their
advantage.
Rainer Famulla is a partner in the
Accenture Financial Services practice. He is based in Washington D.C.
For more information, please
contact us.
 To Top
|