NONE: Re: ONLINE-ADS>> Differentiation on the Web

Re: ONLINE-ADS>> Differentiation on the Web
Fri, 23 Oct 1998 07:25:10 -0500 (CDT)


>But on the Web, the competitive playing field is more level
>in many ways than in the real world. Once you've driven
>someone to your Web front door, the experiences they realize
>are difficult to differentiate. A requisite for any
>sustainable competitive advantage is that it be based upon
>assets or talents not possessed by competitors.

At the IDC Internet Executive Forum a few weeks ago, Jeffrey
Rayport, Associate Professor at the Harvard Business School
made a very interesting presentation on "Exploiting the
Virtual Value Chain in Web Commerce." I'm going to breifly
summarize a few of his points, plus add my own commentary.

Based on Prof. Rayport's research of traditional brick and
mortar service businesses, revenue per employee is directly
related to length of tenure. Namely, businesses with high
turnover have less productive employees than business with
low turnover (all things being equal). Additionally,
customer satisfaction is directly related to employee
retention. Specifically, high-scoring customer service
stores averaged 54% turnover, while low-scoring customer
service stores averaged 83% turnover (with data points along
the entire spectrum). Finally, employee job satisfaction is
related to high customer service. My distallation of Prof.
Rayport's conclusions: In most brick and mortar service
businesses, employees ARE the competitive advantage. Moving
to the Web...

He went on to draw a very abstracted model of what a Web
business looks like. In his view, there are only three
pieces: Infrasturcture (which is the delivery or backbone),
Context (which is the environment or transaction), Content
(which is the knowledge or substance). Collectively, these
three pieces represent the value proposition to the
customer. Further, he concluded that Infrastructure is a
commodity (we all buy from Sprint, MCI, Dell, SUN, etc).
Content largely comes from branded providers (newspapers,
data services, etc) or is an outright commodity (weather,
stock quotes, etc). This leaves Context, which is really the
GUI, the sense of community, the affinity that a user feels
to a given site, maybe even the brand. Everything comes down

So what is the take away? In service businesses, the
employee IS the business. On the Web, employees are replaced
by context. Context IS the business. Therefore the best
context will win. Human factors, usability, interface
design, heuristics, navigation, look and feel -- these are
the things that create competitive advantage. Recently,
there was a post praising the "viral" marketing at CDNow.
Others have pointed to Amazon's book suggestion database.
AutoByTel delivers a better experience than analog car
shopping. [Insert other examples here...]

If you agree with Prof. Rayport's analysis, all these Web
businesses have a competitive advantage BECAUSE of their
context. And context is something that is difficult to
replicate in many or all instances (or why isn't BMG beating
CDNow, or Barnes and Noble beating Amazon or GM beating
AutoByTel, etc). In point of fact, perhaps driving people to
your Web front door is a commodity (eyeballs are eyeballs),
not the visit. And however difficult, the ability to
differentiate the end-user experience once on your Web site
creates an extremely sustainable competitive advantage.

Does this mean that the context IS the brand? At a minimum,
perhaps a large component of the brand proposition or your
brand's attributes come down to CONTEXT -- the fuzzy
affinity visitors feel when on your site. Maybe we should
all be spending more time with the eyeballs that actually
visit our site, than on getting them to visit in the first

Joel Gehman, Internet Marketing Analyst
408-428-6600 x6904

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