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In the 1947 film classic Miracle on 34th Street, the real Santa Claus works at Macy’s and tells customers about toys they should buy from other retailers. The boss decides Santa is certifiable. In fact, he was just ahead of his time. More than half a century later, that fairy-tale Kris Kringle could serve as a good example of one of the smarter new strategies in e-commerce. The strategy is to find a core group of customers and try to satisfy a whole range of related desires, even if that means sometimes steering sales to other companies. In other words, companies should stop thinking about themselves based on product lines or traditional lines of business. Instead, companies should start thinking in terms of lines of customers. In recent years, many companies have paid lip service to this sort of "customer-centric" strategy. They talk of the lifetime value of a customer, implying that they want to lengthen relationships. Companies talk of increasing their "share of wallet." But companies almost always stop well short of imagining how they could truly fit into their customers’ world. Instead, they think about how customers could fit into theirs. Companies merely try to sell more of their existing products and services, over longer periods. But why should a car buyer have to purchase the car from one company and the insurance from another? The answer is that car companies think that they are in the car business, not the insurance business. However, to the customer the car and the insurance are part of the same transaction. There is no longer any excuse for narrow thinking. The Internet makes it trivial for a car company to link up with an insurer. The car company would get a cut of each insurance transaction while making customers happier. This lines-of-customer approach isn’t limited to consumer businesses, either. Alliant, an old-line company that distributes food supplies to restaurants, looked at its customers and realized that what they most wanted was time—time to spend on new menus, to target new customers, and to deal with high employee turnover. So, Alliant, working with a team of my colleagues, came up with TheSauce.com, so restaurateurs can order everything from one place. Users can order products Alliant doesn’t carry and take delivery from any of a host of distributors, not just Alliant. They also can arrange services, such as insurance and financing, that never would have been considered within Alliant’s purview. In addition, TheSauce is setting up a chat area on-line so restaurateurs, who usually are lone operators, can share helpful hints. If you are going to try to rethink your business and organize it around your customers, here are three key principles to consider: IT ISN’T ABOUT MARKET RESEARCH. It isn’t about focus groups, either. It is about living with your customers, in their world. Alliant came up with TheSauce after experiencing the lives of its customers. Alliant employees were in the trucks, waited on tables, sweated in the kitchens alongside the cooks. To reinvent an Eastern European fertilizer company, other colleagues of mine first spent several weeks living and working on farms. This company was struggling to compete with much bigger players that could offer farmers whopping discounts. It also had to overcome longstanding ties farmers had with their local farm supply stores. While our client had a high-quality product, it engendered zero brand loyalty. The solution was to give each farmer a computer and build a Web site that would provide farmers everything they needed to improve the economics of their farms. At the site, farmers have a convenient way to buy farm equipment, seed, and fertilizer. They can arrange such important services as overnight delivery of spare tractor parts. The fertilizer company also went well beyond its traditional role as a supplier of physical goods. It set up an exchange, where farmers could sell crops, and provided weather forecasts updated every hour and commodity prices updated every 15 minutes. Farmers used to get that information from weekly newspapers. Selling vats of chemicals wasn’t going to make the farmers lifetime customers. But they surely would become loyal the first time a weather update alerted them to stay up all night to harvest their crops before a big storm. DON’T JUST AGGREGATE, INTEGRATE. There are all kinds of Web sites that aggregate information about everything from financial planning to moving. But you need to integrate all the information. A new Web site called Homefair.com touts itself as helping people with everything that they need to plan a move. Not quite. The site does allow people to stop cable television, telephone, and other services at their old addresses and then start them up again at another. But customers then have to await word from each individual utility provider, rather than getting a single confirmation from Homefair. Homefair also should let people track their moving truck, so they are confident about their move-in date. It should help them order curtains and other things that they will want quickly as they settle into their new home and should provide a list of local resources, such as doctors, electricians, and plumbers. Maybe Homefair employees need to spend a little time in moving trucks and inside customers’ heads. PREPARE FOR A NEW REVENUE MODEL. Don’t just think about generating revenue directly from your customers. Instead, think about getting small amounts of revenue from lots of different sources, as you steer your customers to other companies’ sites and take a piece of each transaction that occurs there. A large financial-services firm we are working with wants to go way beyond peddling financial products on-line. It wants to give customers everything they need to plan and manage their finances. That means offering information, products, and guidance about not only investing, but also insurance, health care, retirement, and estate planning. As the company and its customers build a community together, our client will be able to get to know its customers well enough to offer them increasingly relevant information on the Web site. This firm won’t charge for most of the site’s content, but there will be lots of opportunities for revenue. The firm could, for instance, get a small fee each time a customer does business with an estate planner or retirement community that he reaches through our client’s Web site. In other words, the main thing wrong with the Santa model of e-commerce is that he didn’t take a cut from each sale he steered to a Macy’s competitor. He also didn’t go far enough in helping customers. Imagine how grateful they would have been if he had offered to assemble toys to keep them from staying up into the wee hours of Christmas morning. Maybe in the next Miracle remake.
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