The Online CMO by Philip Hallenborg

Michael E. Porter’s teachings on Competitive Advantage offer a fundamental choice for us e-business managers when adopting a strategy. We can try to do things cheaper than our competitors, or we can do things differently and stand out. Doing both is obviously great – but in reality a rare utopist condition. This is a useful starting point when looking at what e-businesses are asking on-line customers to do in their on-line configurators, how that relates to our customers’ willingness to pay and what this means in terms of internal resource allocation and level of operating expense.

As most players set out to do better things on-line for customers in terms of social networks, blogs, user interfaces, customized experience and navigation, I cannot help wondering whether or not this will affect the customers’ willingness to pay i.e. whether this is a differentiation in the eyes of the customer and a true factor of competition in the markets addressed. Being different does not equal differentiation in the context of competitive advantage. If having a highly advanced site, infrastructure and organization around on-line does not lead to a higher willingness to pay for your products then you are better off chasing a cost advantage – lean and mean.

When I look at the biggest on-line players (predominantly on-line retailers in consumer electronics) in Scandinavia there are some key takeaways. Most of the successful players lack complex navigation options let alone advanced Web 2.0 technology. Most of them have simple first page matrix type layouts with product images that recognize the value of on-line real estate and the essence of calling the customer to action. All of them will state upfront what delivery times are and product availability / stock levels. All of them offer very few config options that focus entirely on a shortlist of services up sells. All of them offer standard integrated payment methods and simple checkout.

I am not saying that e-businesses should regress to e-commerce 1.0. Nevertheless, you need to keep in mind that some of the most successful online plays in high ePen Scandinavia can grow faster than traditional offline players with similar product mix and pricing from higher net revenue levels. They boast healthy gross margins even considering stellar growth. Getting the basics right seems to work and it suggests that the marginal revenue on the table for leading online development may not always motivate the marginal cost.

In designing your online solution you need to make some bold choices. The more focused choices you make, the greater the likelihood of your customers finding it simple to make one choice only – to buy from you. A wise man from recruitment firm Korn/Ferry once gave me a piece of advice. He said: “be very focused and specific in your CV, it will ultimately make you a much more attractive candidate, even for jobs where your focused profile has little relevance”.

The truth is many players have never succeeded in creating additional willingness to pay for the option to tailor their offering, because they have never taught the market to perceive this as a unique differentiator. My recommendation is to be very careful in offering a vast array of customer choices and options and save the money spent on maintenance and ruling. My gut feel is that it will give you higher convergence, lower costs and a better customer experience.