A free lunch or stealing your lunch Harsh lessons from internet selling

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A free lunch or stealing your lunch?Harsh
lessons from internet selling

• Mungo Dunnett
• BSA Conference, 17 May 2006

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A few equations to ponder
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A few equations to ponder

• Online high sales volume
• High sales volume profit
• Online high net worth
• High net worth profit
• Online leading sales proposition
• Online no need for brand
• no need for personal service
• nice low automation costs
• Dont be seduced by the easy promise

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There are some tough dependencies here

• It depends on
• Who you are
• Who you deal with
• How you normally win business
• How you normally keep business
• How you normally keep people happy
• And there are two huge challenges
• Getting the functionality right
• Making it profitable

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Functionality
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At least these are all within your control

• Get to the point quickly (only one chance)
• Keep it updated and online (only one chance)
• Simple and attractive functionality
• Corporate consistency
• Help desk
• But how many FS websites fail these simple
  tests?
• Before anyone has started reading them
• Before any money has been made

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Biggest mistake over-complicating the
functionality

• Remember function over form
• Customers visit FS sites for specific product
  reasons
• Not to look at pretty pictures
• Or to be cross-sold or told all about your
  brand values
• 90 want to see the product check rates move
  money
• You are one click from goodbye
• Complexity adds little value but adds crucial
  time
• Dont leave responsibility for the site with
  marketers must be owned by operational people
• Dont build in extra gadgetry just because you can

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Simple and effective (example 1)
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Simple and effective (example 2)
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Simple and effective (example 3)
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But functionality alone isnt enough

• You are in a new and specialist channel
• UKs favourite online brands (YouGov, 3/06)
• Google
• BBC.co.uk
• eBay
• Streetmap
• Friends Reunited
• Nectar
• Tiscali
• Times Online
• Topshop
• Yell.com

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These are heavyweight brands
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These are heavyweight brands
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With retailers design skill
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With retailers design skill
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Getting into the game is not cheap

• 2006 customers are more savvy in online issues
• They are able to assess value more quickly
• And value certainly includes appearance
  functionality
• Think of the top sites
• The richness of information
• The ease of usage
• The back-up
• The ease of finding it via search engines
• The brand strength
• This is no longer an infant distribution channel

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Making it profitable
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It costs money to get into the game

• Typically entailing
• Web design
• Maintenance
• Customer support
• Not at bricks and mortar level but material
  operational changes (and costs) are necessary
• But the real difficulty lies in generating
  adequate revenue

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Repeated tale of low profit

• Online is often positioned (justified?) as a
  defensive move
• Or one whose purpose is to drive sales volume
• But sales targets are frequently missed
• And profit targets are very rarely hit
• Because customers simply dont act as expected
• They skim read (research for purchase
  elsewhere)
• And they tend to buy monoline only
• If they visit your online store at all, theyre
  only looking

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The problem with e-marketing

• It would appear to offer all the right things
• Low-cost distribution channel
• Without dependence on others
• With the opportunity to partner easily
• And access to the disappearing HNW customers
• But the result has been consistently
  disappointing
• Acquisition volumes are closely tied to best-buy
  status
• Processing issues are expensive and troublesome
• But most of all customers do not generate
  projected profits
• Primary issue lack of engagement with customers

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The main problem that FS customers have

• Emerging repeatedly from research studies
• Customers have little idea how to identify value
  in the financial services market
• This is not the customers fault it never is!
• In the Retailing world, this sort of customer
  confusion is considered fatal
• The pervasive problem with mainstream FS
  e-marketing is that it simply is not conveying
  value only a commoditised convenience

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How online customers behave (B.Socs, 2005-06)

• Dominant characteristics
• More financially astute and confident
• Higher balances
• Less likely to seek ongoing rapport with their
  local branch or any staff member
• Multiple accounts, but with tendency towards
  fragmented purchasing
• Tend to search carefully for best-buy products
  (or to take advice that steers them to best buys)
• Low retention rates
• Active in moving their investment funds (often
  between a small number of familiar brands)
• Little expectation that any one organisation can
  be relied upon for consistently good rates

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The key characteristics from a marketing
perspective

• c. 50 indicated they had already decided to use
  the company before any significant contact was
  made
• They had already familiarised themselves with the
  market to their satisfaction
• Choice based on rate
• Want impersonal but smooth transactional
  efficiency
• Characterised by remoteness of relationship

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The resultant danger

• This is a sector with a significant latent
  customer warmth
• But that is increasingly dealing with customers
  who primarily want
• Cheap products
• Efficiently sold and serviced
• With only the necessary minimum of customer
  involvement
• And where price is no guarantor of profit

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A sustainable strategy is essential

• You cannot afford to use online as an expedient
  add-on (or prop) to your existing activities
• It wont be good enough to attract customers
  effectively
• And it wont make you money
• Key implication for e-marketing are you simply
  targeting customers whose only interest is rate?
• Or is this the default customer being acquired
  because rate is the only language you use?
• It is strategically essential to identify other
  value generators that are feasible and
  profitable
• Your e-marketing will not create value otherwise

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This channel has its own particular dynamics

• At the heart of retail FS difficulties the loss
  of the personal touch
• Competitive pricing and efficient service are
  necessary
• But there needs to be a stronger customer
  connection
• As the industry compresses, the dynamics around
  sales and market share are changing
• Sustainable e-profit now depends on
  cost-effective targeting of specific customers
• Cannot be done with generic or poorly focused
  messages
• Depends on a properly informed contact strategy
• Radically different from traditional customer
  management
• Not simply a technological solution

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OXFORD AND EDINBURGH
Mungo Dunnett Associates 11 Polstead Road, Oxford
OX2 6TW Tel [phone] Email
info_at_md-as.com Web www.md-as.com