Customers Rule!: Why the E-Commerce Honeymoon Is Over & Where Winning Businesses Go from Here [Hardcover]

Customers Rule!, by Roger Blackwell and Kristina Stephan, is a back-to-earth management guide for the 21st century that emphasises traditional business strategies incorporated with--but never overshadowed by--the Internet. Blackwell, an Ohio State University marketing professor, and Stephan, vice president of a consulting firm that bears her coauthor's name, note that even after the dot-com shake-out many firms still place too much emphasis on the "e" side of e-commerce and give short shrift to basics that connect them with consumers and suppliers. Dissecting companies that failed because of this (like Boo.com, the erstwhile sportswear e-tailer), along with those appearing to prosper by recognising it, the authors emphasise that "business fundamentals, such as adding value for customers, establishing vendor relationships, controlling costs and conserving cash" remain the key to success. They discuss specifics that combine Old and New Economy ideas in original ways, such as using omnipresent bricks-and-mortar establishments such as Kinko's for third-party distribution of online orders. No matter the business, the authors contend, the optimal result is a "blended strategy" that enhances customer and supply-chain relationships, decreases inventory and expenses, increases efficiencies and reaches new customers. Their book proposes concrete methods for combining time-honoured tactics with today's technology to do just that. --Howard Rothman

Despite some outdated conclusions, Ohio State University marketing professor Blackwell and Stephan, a vice-president of Blackwell's consulting firm, convincingly assert that e-commerce represents an evolutionary step, not the death of traditional retail. Retailers must incorporate the Web's best with other good business practices. The last chapter outlines strategies to make one's company appear everywhere that consumers seek retail products--the secret, they argue, to future retailing success.

Copyright 2001 Cahners Business Information, Inc.

Blackwell (marketing, Ohio State Univ.; From Mind to Market, LJ 11/1/97) and Stephan (coauthor, Contemporary Cases in Consumer Behavior), president and vice-president, respectively, of the marketing and consulting firm Blackwell Associates, declare that the 21st century will represent a shift of power in the consumption of goods and services, with the customer acting as ultimate master. The answers to two basic questions will determine the future of e-commerce. First, will consumers who use the Internet for communication, information, and entertainment also use it for buying? Second, will entrepreneurs ever make a profit selling consumer products on the Internet? The authors believe that a successful blending of a bricks-and-mortar store with a strong Internet presence will determine whether or not a company will thrive in the new economy. In detail, they discuss examples of companies that have made this transformation, such as L.L. Bean, Victoria's Secret, Sherwin Williams, and Nordstrom. The authors go on to describe the strategies that firms can use to survive in a "blended" retail environment, as well as tips on how to use the Internet as a marketing tool. Although there is much written on this topic, the authors present their information clearly and without unnecessary jargon. Recommended for business and marketing collections in public and academic libraries. Bellinda Wise, Nassau Community Coll. Lib., Garden City, NY
Copyright 2001 Reed Business Information, Inc.

Blackwell, a professor at Ohio State, asserts that "pure-play dot-coms that fail to offer something traditional retailers don't or can't . . . will die unless they establish a physical presence . . . ." He is also the author of From Mind to Market: Reinventing the Retail Supply Chain (1997). Now he argues that consumers override technology in importance, that few consumers do their shopping online, that the Internet is more important as a marketing tool than as a sales channel, that online retailing will at best achieve profitability levels that correspond to catalog operations, and that the most successful businesses will be ones that belong to the most efficient supply chains. Blackwell goes on to demonstrate how to "master the 'commerce' rather than the 'e' of e-commerce." David Rouse
Copyright © American Library Association. All rights reserved

"Roger Blackwell is the preeminent expert on how and why people buy, and his new book arms businesses with much needed cutting-edge strategies to succeed far into the future." Geoffrey A. Moore, author of Crossing the Chasm and Living on the Fault Line

"Roger Blackwell and Kristina Stephan demonstrate the importance of the customer revolution and how winning businesses can build profitable approaches based on the best of in-store and on-line strategies. Rich with examples, the authors show why many early approaches failed because they ignored the key commerce functions of logistics, product analysis and sourcing, and how to build a marriage that lasts -- blending "e" and "commerce" together to delight the foundation of all strategies, the customer." Patricia B. Seybold, author of Customers.com and The Customer Revolution

"Roger Blackwell is one of the most formidable thought leaders working on the Net today. He's right: the impact of the Net is just beginning." Seth Godin, author of Permission Marketing and Unleashing the Ideavirus

"When I began my career, Blackwell's Strategic Marketing was my business bible. As I deal with the new economy, e-commerce, and 'digital discontinuity,' Customers Rule! will become its successor. Carl Gustin, chief marketing officer, Kodak

"This is a must-read for anyone who wants to be successful in twenty-first-century business."Tami Longaberger, president and CEO, The Longaberger Company

"Dr. Blackwell gets it right once again. Customers Rule! cuts through all the clutter regarding e-commerce with a straightforward plan to win." Christopher M. Connor, chairman and CEO, Sherwin-Williams

Customers Rule! The high-tech honeymoon is over and customers are choosing the winners today — and it doesn't matter to them whether those businesses operate out of a storefront or reach them through a computer screen. Any company that's still debating whether the future belongs to traditional bricks-and-mortar stores or the dot-coms is probably already losing the battle.

Retail executives, consultants, and marketing firms alike have been jumping on the e-commerce bandwagon, proclaiming the end of retail as we know it. The numbers tell a different story. It's become clear that the Internet is not a revolution in retail — it's an evolutionary force and nothing more. No one can deny that the Internet has changed the way we live, communicate, and work, but the Internet is not where the retail war is being waged.

Today's battles are being fought supply chain against supply chain. The weapons are consumer-savvy sales, marketing and fulfillment organizations, multichannel retail, distribution and marketing operations, and yes, the Internet. The mission is complex and demands new skills and strategies, but the goal is a simple one: solving customers' problems better than their competitors and with better-than-current solutions.

Roger Blackwell and Kristina Stephan have spent years watching, analyzing, and advising the players. In Customers Rule! they offer case studies that reveal the inside story of successful operations like Victoria's Secret, L.L. Bean, Nordstrom's, Sherwin-Williams, and a dozen other corporations — companies that have created a blended strategy that combines the best of online and offline commerce. They also reveal the flaws that made companies like Boo.com, eToys, and Pets.com road kill on the information superhighway.

In Customers Rule! you'll learn about the crucial operational requirements for success in today's hyperaccelerated, hypercompetitive retail environment, discover how to reach online customers (and keep them once you do), observe successful online and offline branding strategies, and see how successful companies are creating customer satisfaction 24/7, 365 days a year. There's much more, but Blackwell and Stephan's principal message is that a blended strategy which preserves the best of the old and takes the best of the new is the surest way to success.

"Roger Blackwell is the preeminent expert on how and why people buy, and his new book arms businesses with much needed cutting-edge strategies to succeed far into the future." Geoffrey A. Moore, author of Crossing the Chasm and Living on the Fault Line

"Roger Blackwell and Kristina Stephan demonstrate the importance of the customer revolution and how winning businesses can build profitable approaches based on the best of in-store and on-line strategies. Rich with examples, the authors show why many early approaches failed because they ignored the key commerce functions of logistics, product analysis and sourcing, and how to build a marriage that lasts -- blending "e" and "commerce" together to delight the foundation of all strategies, the customer." Patricia B. Seybold, author of Customers.com and The Customer Revolution

"Roger Blackwell is one of the most formidable thought leaders working on the Net today. He's right: the impact of the Net is just beginning." Seth Godin, author of Permission Marketing and Unleashing the Ideavirus

"When I began my career, Blackwell's Strategic Marketing was my business bible. As I deal with the new economy, e-commerce, and 'digital discontinuity,' Customers Rule! will become its successor. Carl Gustin, chief marketing officer, Kodak

"This is a must-read for anyone who wants to be successful in twenty-first-century business."Tami Longaberger, president and CEO, The Longaberger Company

"Dr. Blackwell gets it right once again. Customers Rule! cuts through all the clutter regarding e-commerce with a straightforward plan to win." Christopher M. Connor, chairman and CEO, Sherwin-Williams

Dr. Roger D. Blackwell is professor of marketing in the Max M. Fisher College of Business at Ohio State University and the author of From Mind to Market and coauthor of Consumer Behavior. He serves on the boards of several NYSE, NASDAQ, and private corporations in retailing, technology, and distribution and is president of Blackwell Associates, a marketing consulting firm.

Kristina Stephan is vice president of Blackwell Associates and coauthor of Contemporary Cases in Consumer Behavior, and serves on the boards of a transportation and logistics firm and the United States Figure Skating Association.

CHAPTER 1

THE E-VOLUTION OF COMMERCE

Right now, in technology hotbeds from Silicon Valley to Bangalor, India, young would-be Internet millionaires, armed with big ideas for business-to-consumer Web businesses, great domain names, and short-but-sweet business plans, are being turned down by the very same venture capitalists -- the VCs -- who brought you Amazon.com, Priceline.com, TheGlobe.com, CommerceOne, and Intel.

Why? It's not because these hopefuls have bad ideas. It's because the VCs have finally realized a basic truth of Internet business: Any pure-play business-to-consumer (B-to-C) Internet company that doesn't have a foot planted firmly in the real world-with experienced management teams, a physical presence, efficient distribution systems, and ability to make a profit-is doomed to fail. This is something we've believed almost from the beginning of the Internet explosion based on over thirty years of in-depth research of consumer behavior and a decade of work in the area of logistics. And this isn't exclusive to the business-to-consumer arena. A great majority of business-to-business (B-to-B) business plans and up-and-running commerce sites require the same foundation -- at a minimum -- for mass acceptance and long-term survival.

In short, the afterglow of America's brief but impassioned affair with dot-coms quickly gave way to the harsh light of the morning after, in which swinging technology investors find themselves murmuring the familiar phrase "What have I done?"

In the frenzy of the last few years, hundreds of new Internet start-ups have gone public-initially to great success on Wall Street. But how many have made good on their promises of soaring sales, retail revolution, and pie-in-the-sky returns? Nearly none! The exception to the rule may prove to be eBay, because it illustrates the most fundamental principle of commerce: customers rule! One of the fundamental keys to eBay's rapid growth is that it solves consumers' buying problems better than any solution available before its arrival on the retail scene, thus allowing it to attract and retain customers on a profitable basis. How many other dot-coms can say the same?

And what of the bricks-and-mortar enterprises, maligned for their slow service, complex logistics, and high costs, pronounced (prematurely) extinct as dinosaurs of the "old economy" at the glorious birth of the "new economy"? Ironically, following in these dinosaurs' footsteps is probably a dot-com's last chance for success. In the twenty-first century, it is the flexible, most agile dinosaur that wins-not just because of its power but because of how it does business. Traditional retailers and manufacturers that have survived the mass consolidation of the 1980s and 1990s have in place a host of consumer-driven strategies designed to grow profits quarter after quarter and enhance shareholder value year after year. Some of these strategies were designed to make shopping pleasant, efficient, and cost-effective for consumers; others were implemented to streamline the supply chain and continue economies of scale, brand loyalty, scalability (bizspeak for "big-time growth and acceptance by the masses"), and sustainable profit margins.

Yet not every dinosaur can survive. Evolution beckons only those companies that can adapt their bricks-and-mortar strengths to the warp-speed, borderless, instantaneous response-oriented new economy. This transformation can, and will, create a new breed of competitor-a truly new economy enterprise that combines the best of "e" (technology) and "commerce" (the exchange of goods and services). It is as inevitable and trackable as the evolution of biological life: The species that continue to evolve and adapt to consumer-driven, technology-fortified forms will most likely survive in the future. That's why we like to think of this era in business history as another evolutionary stage of commerce rather than a radical, revolutionary one.

We realize that our contrarian position may not be as heretical now as when we first advanced it in 1997, but it continues to go against the grain of net orthodoxy still found in business today. Onetime net-stock bull Henry Blodgett of Merrill Lynch has lately been telling anyone who will listen that he believes 75 percent of dot-com retailers will be gone in five years. Add Goldman Sachs & Company's report promising that more than half the public e-tailers will be gone by the end of 2001 and you begin to see that the rosy picture of the dot-com landscape has turned murky. Our prediction was that dot-com entrepreneurs and new-breed e-tailers would have to establish some form of a physical presence or risk becoming roadkill on the information superhighway, alongside such IPO notables as Toysmart.com, Ubid.com, and Boo.com. Be either one-a dot-com company with no bricks-and-mortar presence or a bricks-and-mortar firm sans an Internet presence-and you're destined for extinction in the e-volution of commerce.

GET OFF YOUR LAZY ASS(ET)S

Often, the greatest benefit of innovation is not the innovation itself, but the hand-wringing, head rubbing, and night sweats it causes among even the brightest thinkers and strategists. Rewind to the mid-1990s and the hoards of brash e-entrepreneurs taunting the most seasoned retail executives with an "I know something you don't know and it's going to take you down" chorus. At first, some retailers chose to ignore the threats, others responded without much long-term, strategic thinking, and some entered e-commerce cautiously, watched mostly from the sidelines, and took lots of notes. But the attention these e-businesses would gain in the next few pivotal years would stir the beehives at giants as mighty as General Electric and Wal-Mart.

Never has the adage "timing is everything" had more validity than when reaping the financial rewards of the record-breaking IPOs of the latter 1990s. One after another pure-play dot-coms popped up on the Web and quickly became the darlings of the financial community. Even the most successful, profitable, and established retailers, from Wal-Mart (or more recently Wal*Mart) to The Limited, temporarily fell out of favor with Wall Street, which cast its attention instead on newcomers TheGlobe.com, Amazon, Yahoo!, MP3, iVillage, and PlanetRx.com. Few traditional retailers could ignore the pressures of the financial community to expand into e-commerce, even though many of their strategies were half-baked and their execution lackluster.

Their CEOs had to answer to shareholders and analysts demanding strategies for e-tail and e-commerce retaliation even though those making the demands were often unsure what they were asking the CEOs to do. Many of these executives, wringing their hands, answered with strategies that were based primarily on technology for the sake of technology. Some companies hoped to get a stock boost from jumping on the e-tail bandwagon, such as Consolidated Stores' KBkids.com venture, which became a technologically sound site but had difficulty delivering products to customers in time for holiday gift giving or reaching positive profit margins. Others hoped to get a new-economy positioning, such as Banc One's online banking venture, Wingspan, which was designed to update Banc One's image with a new e-presence and online banking product. Each strategy gave analysts a reason to pump up the parent companies' valuations until dismal results were released.

For many traditional retailers, the e-tailing arena was entirely unfamiliar. With no experience and little research in hand, these retailers jumped in more to satisfy the analysts who cover their stock than to satisfy their customers. And to accomplish this misguided effort, they spent millions on e-strategies that resulted in profit drains and unsatisfied customers. Contrary to what financial types may believe, ultimately it is customers who create shareholder value, not financial analysts.

These same retailers would never spend millions on a traditional marketing program (such as revamping product lines and store layouts, lengthening store hours, instituting toll-free customer service hotlines, or increasing in-store promotions) unless it were entrenched in the desire to serve customers better. The ability to tout technological advancement was the driver that justified massive allocations and board approval for an e-commerce initiative, but they forgot the simple lesson that customers decide what will succeed and what will fail.

And that wasn't their only mistake: Driven by the dot-coms, retailers underestimated how much profits count, regardless of the initiative. The financial community was more forgiving toward the profit woes of Amazon.com than those of such firms as Consolidated Stores, Banc One, and other established organizations, even when many of their losses could be traced back to their e-ventures. The punishment for missing their numbers, regardless of reason, was swift and certain: lowered ratings and plummeting stock prices. On the other hand, e-businesses benefited from news of increased hits and sales and partnership agreements between new and old economy giants. Amazon's stock price climbed in 1999 despite the fact that it reportedly spent an average of $113 to get each new customer and its bottom-line deficit was growing dramatically. Analysts bought Jeff Bezos's vision of dominating the future of e-tail, which at that time many still considered the end-all, be-all of commerce. Amazon was proving it could perform several commerce functions well (customer service, fulfillment, and branding) and that it had scalability. The Street saw Bezos as the Henry Ford of the Internet, and analysts decided to bet on the inventor rather than the meek also-rans.

Similarly, many early dot-coms and e-tailers (with roots in the physical world) raced to establish themselves on the Internet with a "throw caution to the wind" attitude toward their business models. "Whatever it takes" was their motto, and for many, that attitude rem...