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Shaking Hands On the Web
Jack Welch said something the other day that brought me up short: "Human relationships are declining in the selling game." It jarred me because I'd been wondering whether maybe the exact opposite was true: In the Internet Age, as products become commoditized and buyers compare prices and features continually, maybe human relationships would become one of the few differentiators that could command significant margins. It isn't happening, says General Electric's CEO. But whatever is happening, it goes to the heart of how we'll all do business in our revolutionized economy.
Let's admit first that "relationship" is one of the most abused words in business. Dot-com CEOs like to say, "We have relationships with two million customers," but that's usually a lie. It means two million customers have placed at least one order. How many never come back and never will? It's fashionable now for virtually anyone who sells anything to say he has a relationship with the buyer. But that isn't for the seller to say; only the buyer's opinion counts when it comes to judging this connection.
Welch knows personal sales relationships aren't disappearing. In selling expensive, mission-critical products like power turbines and aircraft engines, those bonds always matter. But what's amazing is how deeply the Net - in less than 2,000 days of existence as a business tool - has pushed into the realm of big-ticket sales that previously would have demanded heavy personal flogging. Example: Radiologists who own GE's CT scanners and MRI machines can go to the Net and try out new GE software that improves the machines' efficiency on spinal exams; if the doctors like it, they can buy it for $65,000, as 65% of them do. Three years ago only a few visionaries imagined that someone would buy a $65,000 product without seeing or even speaking to a salesperson. You can understand why Welch says, "The old belly-to-belly selling is less and less effective."
It is for sure, yet some companies are emphasizing it more than ever. For example, most of the big, incumbent retail brokerages face a common problem: Online brokers are stealing the industry's old source of profits, trading commissions, by cutting them almost to zero. So incumbent brokers figure the only way to make money now is to cultivate relationships, leading customers to like and trust them enough to buy high-margin products and services like front-end-load mutual funds and financial planning advice. That's one reason brokers are all calling themselves something else, like financial advisors, and trying harder than ever to get belly to belly with you.
?They're assuming, as are many business people, that the Net is destined to be a death pit of merciless price competition. Yet it needn't be, as the Amazon paradox shows. I travel a lot and talk with all kinds of people, and I'm struck by how many of them speak passionately about their retail experience with Amazon.com. It's about the only retail experience they seem to love - and of course it involves no human beings. If we accept that human relationships are invariably the most rewarding parts of our lives, how can people get so cranked up about an experience in which they don't see, touch, or hear another soul?
The answer is that Amazon creates a more human relationship than most people realize. Customers love Amazon not because it offers the lowest prices - it doesn't - but because the experience has been crafted so carefully that most of us actually enjoy it. That is not primarily a technological achievement. It results from many people at headquarters obsessing over what customers want in a fundamentally new kind of relationship, the online experience. No matter what becomes of Amazon, it has taught us something new.
I've asked the most prominent chiefs in the shrinking club of Net firms still standing - Jeff Bezos of Amazon, Jerry Yang of Yahoo - my favorite question for business people everywhere: What is the source of your competitive advantage? None of these three said anything about technology. They all said essentially the same thing: creating a customer experience is superior to anything my competitors can create.
? We're seeing the outlines of how the Net revolution is transforming selling. Some million-dollar products will still be sold person to person. Other products, like many bought from Wal-Mart and other big retailers, will get reordered automatically without any human interaction. And millions of others between these extremes will shift toward the Net, where human buyers will make choices based on a new kind of interaction. It will be fascinating to watch. In this way as in many others, the Net puts everything out in the open. We'll soon see who has relationships with their customers and who doesn't.
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