By Budd Margolis

Without technology there would be no digital revolution. But consumers could care less about how something works. In fact, the technology is often considered a turn off to the deployment and uptake of new applications. The consumer worries about many issues: will it work, will it be superseded, will it be outdated before I learn how to use it, am I wasting my money?

Success will be won by those who make the technology transparent and who concentrate on the consumer. Knowing the consumer then becomes paramount to everyone's strategy.

Today's consumer is little changed by technological evolution or innovation. We still buy for the same reasons. What then does the technology add? Digital TV will offer new channels with improved quality. Generally, what consumers and viewers around the world want is an improved service, more choice at an acceptable price. When people complain about the abundance of choice they are actually saying that they have no training in how to filter out the abundant channels of information. They are overwhelmed and who could blame them? Imagine walking into a library for the first time? Thousands of books, dozens of shelves and categories.

Eventually the technology will provide solutions such as filtering personal agents to help people with the infoglut overload. Schools should start the process of teaching children how to develop personal systems for information organisation.

Digital TV will speed up the convergence of several forms of communication and will eventually provide interactive channels of communication. Interactivity will lead the consumer to product on demand as well as instant communication. For many, this new service will provide quick and efficient product and entertainment sourcing services. Not everyone will use the service. Those who do will be technologically savvy and will fit the time poor/income rich profile. Eventually the uptake hurdle will be reached and the system will become a mass market success. There is no doubt to this fact as governments around the world are making the shift from analogue to digital transmission standards. What is in doubt is how long it will take before the systems are truly global and transparent in our lives. I believe we are looking 8-10 years ahead. But those early adopters are usually among your most valued customers so if they reflect just 5% of the population, they may in fact produce 15-20% of your turnover.

Those looking for the digital system and market to stabilise are in for some upset. We must remember that there is greater change to come about than we have experienced to date. Change will happen much faster and the consequences will be felt instantly. So listening to the consumer and changing accordingly will be a critical survival skill.

On one hand, I recommend adaptability but on the other we must present a stable and consistent environment to the consumer. How do we do both? Some consumers want to trust and rely on the same application while others seek instant gratification and constant updating. Technology exists to present various formats to each consumer. Database mining will provide the information to build relationships, expand sales and retain customers. The trick will be in knowing just how to manage each relationship properly. The consumers can provide some information and their actions can narrow your focus but not every consumer follows their own patters consistently and at times, as in any relationship there will be highs and lows to its success.

The lessons of traditional retail still apply to the consumer no matter the technology. Design of web sites could benefit from knowledge of how the products and shelves or gondolas in a grocery store are strategically placed. Web design is in particular a sore subject. Most web sites under-whelm and are mere interactive brochures which use overwhelming and resource depleting graphics as well as minimalist and often counter productive direct marketing techniques. Slow and interactive annual reports or massive lists and images of products does little more than reflect the print medium and often frustrate the consumer.

How many companies know the value of their customers? How much of an investment does new customer acquisition require or how much does customer retention cost? Many failed ventures can be directly attributed to lack of such basic knowledge. Often new distribution channels are pulled before they can prove themselves just because no one knew how long it would take to acquire a sufficient customer base. The confused process of developing any new concept is natural and necessary. Making to many mistakes is just foolish.

Some customers are extremely loyal and produce an above average income. Some customers will end up costing you and the only way to survive them is to set and track limits. Great customer care, quality control, sales presentation and service is not just great for customers but essential for improving the bottom line. Companies must know how far to invest to receive maximum benefit otherwise they create waste.

Competition is a vital ingredient in developing the market. I use the McD's vs. BKING analogy often to express what is going on. Some of us are fans or loyal customers of McDonalds. They provide a high value for money nutritious, varied and consistent meal. No matter where you are in this world, you know that among the 24,000 McDonalds restaurants (3 open every day) that you will receive exactly the same quality and taste for your meal.

Imagine you are a Burger King loyal customer. You are starved and pass by a McDonalds just as the doors open and a waft of Au de Quarter Pounder with cheese drifts through to your olfactory nerves. A loyal Burger King customer would not consider that this is a place to stop and eat. They do not like McDonalds, have not eaten at one in ten years and do not care to start now no matter how hungry.

Some customers are disloyal and only care about convenience or price as well. And some are vegetarian and have openly recently been catered to. In India, McDonalds had a difficult challenge as both cow and pig product is offensive to the Hindi and Muslim faiths. The answer was to develop a spicy chick pea Maharishna Burger. Innovation to regional tastes and flexibility to the consumer and their culture proved successful. It is remarkable achievement for a company that generally relies on transparent consistency.

Taking a concept globally may be efficient but one has to understand the regional consumer trends and behaviour first in order to succeed.

What McDonalds and Burger King have done to the world of burger consumption is remarkable but without the combined ad & marketing spend of both companies the market would not be nearly as productive. The burger world is not without its problems but generally they continue to produce and provide a popular product. McD's is the world's largest supplier of toys to children and is always searching for the next campaign to build their customer base. It is an endless struggle for any company as customers are won and lost daily.

The most important advice I can give anyone is to let the customer know up front and as soon as possible, what the benefit to them is. Think of the customer as someone who is asking the question "what is in it for me?" and then keep answering it. Build up more information later but do get the "benefit" message across fast!

Today the better ecommerce/Internet sites reflect typical or traditional retail stores. Egghead.com decided to close what was once a chain of 200+ stores and to concentrate exclusively on e-commerce. iQVC which is considered one of the top retailers on the internet projects 98' sales to be $50m and has expanded with Canadian and UK sites. iQVC's web site is a model of efficiency and provides every link on the home page. Fast growing markets include travel, stock, music and car sites which provide research and have transactional capabilitie for direct sales. Existing companies benefit greatly from their already hard won and established base of loyal customers. Amazon.com is a new entry but they have made the necessary investment to benefit from their pioneering efforts and should soon be vastly profitable. There are many examples of those that can do it right and they present many lessons we can all benefit from. Knowing the basic formulas that are succeeding is the first step towards developing your own channel of distribution. My hope is that everyone builds an interactive retail site that best serves their own particular customers. Copying others will miss the mark too often and therefore presents and unnecessary risk. Develop your own solutions but learn from the best.

Shoppers do not want to search for products. But one must maintain the search qualities of a site in order to service those who require direct access. But a scrambled shelf tactic can produce significant results. Many usually have no preconception of what it is they want. Often purchases are made as a form of entertainment or personal reward. They prefer to be lead through a store and if you group products according to category your likelihood of increased spend is boosted. Your customer may need shampoo but if you can encourage them to consider additional items such as conditioner and moisturiser you have increased their spend.

Think how a store is laid out and why it developed in that way. Developing and driving traffic properly is an art form based upon centuries of trade and consumer behaviour.

Once consumers decide they like something they will often want more of it or additional products from the now trusted supplier.

The more consumers have to select and wait, the less likely they are to make the purchase. Banner advertising is slowly loosing its effectiveness and to many it is a growing annoyance. The result of this trend will be further innovation. Eventually customers acquisition will require a much better model.

Consumers have been trained toward seasonality and special events and sales. This behaviour of course is different around the world but there is no adequate reason why one could not identify the factors in each market that drives sales and then implement them.

Consumers often like impulse buy opportunities and with the power of the database, one could provide targeted offers to each customer. Sometimes a customer will return often to a location as they require additional information or are looking for the ultimate purchase excuse. If the same customer makes two visits why not offer them a 10% discount to buy now and try. The investment in gaining a first time customer is often rewarded as they are then more likely to provide repeat custom and as we know, without repeated custom business would die off quick. More than half of all sales come from repeat purchasers.

Your customers require a high standard of customer service in order to develop trust and to commit their loyalty. In many ways, this is a great area to develop an advantage over your competition. Customers want to know about the security of their transaction and personal information, will the company survive long term so any warranties can be guaranteed, what is the returns policy, specifics about delivery and credit, can they speak to operators instead of endless voice automated message and who can they complain to and where can they log their testimonials of approval?

In many ways, customer satisfaction activity reflects the basic functions of a community. I do not think we are moving towards the Disney Village level of community. Some families may trust their safety, environment and children's education to a corporate entertainment company represented by a rather cute rodent but I think and deeply hope it is just an aberration of a micro minority of deeply loyal and devoted fanatic customers.

People want to talk to real people. Always provide a quick access to the human interface. But if the CSR's (customer service representatives) are not properly motivated and do not possess the right attitude, your about to insult your best customers. Loosing a good customer is painful indeed. If your average customer spends $500, they may just influence several of their friends who would also curtail their spend. Gaining back lost customers is very expensive and customer retention programmes are a much better investment.

Little niceties such as gift wrapping or purchase advice means a lot to the customer. The extra effort usually pays off long term if properly managed.

Fraud is uppermost in the consumer's mind because the media misreport the reality of the situation. Most customers today are protected by a limited liability of about $50 USD. VISA says it has not had a single incident of a card number being compromised on the Internet. And the term secure server in no way means that transactions are secure.

Merchants on the other hand can face full liability as well as minimal, $15 USD charge back fees. Fraud detection is a complicated, expensive and essential aspect of your business. It is an involved topic in its own right and one I can not tackle at this opportunity but transactional security deserves as much effort as possible.

One has to develop warning systems to possible fraud. Some likely initial indicators are:

• Shipping address and cardholder address are different

When a fraudulent order is recognised do not cancel the order but buy some time to proceed with a further investigation and credit check. If it is a legitimate customer, they'll assume your site is broken and probably never return. If it is a scam artist, you've just tipped them off and sent them back underground. Instead, display a friendly message saying there was "a problem with the order" and give the visitor your phone number to complete the order.

There are software solutions that provide recommendations to the merchant and they are costly and useful but it is doubtful we will reach zero tolerance anti-fraud systems for some time yet. IT has always been a cost of doing business factor and should be considered as such. Expect to see an expansion of the use of certified bill presentment and payment via the Internet to help alleviate online fraud.

Home shopping is really home delivery which we used to call mail order. Delivery and packaging, QA and all the various logistics of such an operation are heavily involved and require high standards for efficient operation and therefore require a considerable investment. Just look at what Amazon.com has plowed into its warehouse and shipment systems. Many companies such as QVC the $2b+ television shop channel have much of this in place and their success reflects the ease by which they could enter the interactive retail ecommerce market.

E-commerce profitability today means more than managing your own business, you need to enable this supply chain to be as simple and direct as possible. As the market develops greater efficiency and global competition becomes even fiercer, the merchants who will survive and prosper will be those who look at how to control every cost factor.

New deployment should emerge from what already is well established within a company. New procedures should be streamlined and simplified as much as possible. The elegant and simple concept takes longer to develop and requires more thought and expenditure but it does produce greater benefit especially over the long term.

Initial sales and response can be misleading. When change is being considered remember that consumers are like a school of fish. If you are scuba diving and are surrounded by a school of fish you will soon learn that sudden moves create much chaos while slow and smooth movements interact well with the school which changes and responds in perfect syncopation.

Branded products and suppliers will have a huge advantage to begin with. New entrants will suffer elongated periods of time in order to develop the customer trust and relationship factor.

Dynamic trade, auctions, personalised shopping agents and the concept of patents for business concepts will create new business, more confusion for the consumer and equal amount of new threats and opportunities to the interactive merchant. Global trade presents a series of unique challenges and eventually we will witness some developing nation consumer backlash to the "overhyped" Western model of marketing and commerce.

The future holds out many exciting new methods for creating new business. With the growth of the world's middle class population and the interactive consumer market via digital convergence, we will see an overall increase in the consumer market. But, people will spend for the same reasons and new distribution channels will take sales away from that income which would have been directed through more traditional retail sites and systems. Traditional retailers will fight back and many will regain loss market share by active participation in these new distribution channels.

This new digital arena for interactive sales depends upon the science of direct marketing. To ignore the valuable contribution this discipline offers is to navigate without training. Not recommended. The internet is a hot bed of media interest but it does not compare to the next level of activity which the digital TV convergence revolution will provide. Certainly we will learn some lessons from this crude and immature internet media. But the Internet will be a term phased out quickly by DTV which will overwhelm and swallow the Internet. IT will still take some time and will change constantly but soon we will be dealing with content issues rather than technological ones. Once we reach a state of transparency, the market will indeed become massive. If, digital interactive services redirect 10-15% of a nations trade it will certainly be large enough to be considered as mainstream commerce.

One thing we know for sure and that the fight for the digital consumer is about to begin for real and what we do not understand heavily outweighs what we do know. Those who listen and respect the consumer will have an advantage throughout this turbulent period. Those looking for short-term gain will be weeded out. Tomorrow's consumer will want many more features, advantages and benefits at a greater value from their supplier. In return they will reward you with their custom, hard earned income and loyalty.

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© Budd Margolis / Through the Loop Consulting Ltd 1998-2000