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Lessons Learned From The Downfall Of Dot-Coms

Even companies with millions in capital died when the .COM bubble burst. In this article Nach gives us some tips on how to compete with the big guys online.

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By: Nach Maravilla
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July 27, 2002
  1. · Lessons Learned From The Downfall Of Dot-Coms
  2. · Batting Online With The Big Guys (contd.)

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Lessons Learned From The Downfall Of Dot-Coms
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Every online entrepreneur must understand the simple rule of doing business on the Internet: customers rule!

Consumer power drive today's economy. With a simple click of the mouse, the customer can decide whether your business deserves his dollars or not. A recent Bain and Company study finds that over 2,000 customers in three retail segments -- apparel, groceries, and consumer electronics/appliances -- suggest that 10 percent of customers cite better service as the reason they shop online. With the information explosion on the Internet, the balance of power has shifted from the manufacturer to the retailer, and now down to the consumer, as consumers become more jaded, cynical and savvy about marketing.

Many dot-coms have crashed and burned because they thought that the basic principle of satisfying customers is now passe in the "new economy." Take the now-classic case of Boo.com, a well-oiled and much-hyped luxury goods e-tailer. The demise of Boo.com was a result of its focus on technologies that, while innovative and ahead of its time, were too cumbersome and complicated for customers. It mistakenly thought that the warning on its homepage: "This site is designed for 56K modems and above" could appease potential customers of its slow-loading graphics. There was too much style over substance, that for many, it was more trouble than it was worth to actually buy something. After only six months and burning nearly $200 million, Boo.com, the poster child of Internet excess, had to say goodbye.

There is one clear lesson that is emerging from the recent shake-up in the dot-com world: only the businesses, whether big or small, that serves their customers right will be left standing. The key driver of online success (or failure) is the customer experience. As the novelty of online shopping wears off, online customers will place more focus on the quality of service. Despite all the venture capital financing received, the big dot-coms will fail if it does not serve its customers correctly.

Small businesses should take heed you have a fighting chance if you treat your customers right! You may not have the huge capital, the best technology or the hype and publicity of these well-oiled dot-coms; others do not even have staffs! However, you can still compete effectively online by focusing on your customers, figuring out what they want and need and making life easier for them. Focus on getting the basics right: superior service leads to satisfied customers; satisfied customers lead to referrals and referrals are the most effective way to build a wide customer base.

The crucial thing is to learn to integrate customer experience in your business strategy. Here are the three steps:

1. Identify your customer's goals and your goals.

The first step is to identify your best customer segment and understand their needs precisely. Not all customers are profitable, so tailor your offer to your best customers. To do so, you need to get clear answers to questions like:
  • Who are your target customers? Know the demographics of your visitors. Demographics are a powerful information to help you better respond to your customer needs. With this information, you can set out your site to your target market by clearly defining your site's business plan and marketing goals.
  • What do customers want from your site? Remember, not all customers are profitable, so you need to identify your best customers and tailor your offer to them. Make sure to understand what your best customers really need and why they have defected. By learning the purpose of your visitors, you are in a much better situation to provide them with what they want. The better you serve their purposes, the more they will appreciate your site.
  • Why are they visiting your site and would they return after their first visit? Do everything to entice your customers to identify themselves to you, such as special discounts or other incentives. Despite privacy concerns, you would be surprised by how much information customers will willingly volunteer if they think you are trustworthy! Study online competitors, off-line competitors, and any "comparable" dot-coms that are facing similar issues in a different market.
  • What technology do they use, what features are they familiar with, and how long do they want to spend at our site? A lot of online businesses fail because either their designs are far too bandwidth intensive, or it did not do its homework and has zero knowledge of the customer's ability and usage of the site.

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