This Crisis will bring a Paradigm Shift on the Internet

Crisis, What Crisis? Bring forth the Internet

As we spin into the depths of this worldwide economic crisis, the opportunity for companies to move to more Crisis in Chinese Charactersefficient, effective and measurable marketing activities online seems perfectly obvious, if not natural. The time has never been more appropriate for companies to ramp up online activity because their consumer will be increasingly on the other end waiting for them. I identify below five main reasons why the consumer will be more than ever present on the Internet specifically because of the economic downturn.

(1) In this period of crisis, there is a very real likelihood that people will spend even more time online in the near-term because the web will offer a cheaper alternative way to spend time (watch YouTube or Daily Motion videos) and find entertainment (on a myriad game sites) than, say, going out to dinner in a restaurant or going to the flicks. Rather than going outside to buy a newspaper, free subscriptions will bring people online (or the news will be downloaded to their mobile phone). Doing banking/finances on line (a cost benefit for the embattled banks to save on bank tellers), paying your paperless bills (save on postal costs) and other administrative tasks will bring people to their computer.

(2) The internet is the most expedient way to do networking — especially important for those people without a job (linkedin, monster, etc.). The Millennials will need to have the “older” generations on board to hire them, but in general, the custom of business networking on line is beginning to build already. This notion reinforces a tenet I have long held which is that your presence online will become your most effective CV or resumé (see here for a prior post).

(3) There are plenty of new applications and sites that now make searching for a bargain substantially easier, specifically the price comparison machines, such as Kelkoo, PriceGrabber, Shopzilla… And this point goes beyond the notion that you can get better information from internet sites (and peer-to-peer reviews, etc.)

(4) In times when travel may be too expensive, there are now many virtual ways just to stay in touch with your friends and family (skype for face to face, facebook for group hugs or twitter, jaiku for group pecks). Essentially, the internet social media networks are intrinsically designed for harder economic times. Not all of them will survive, of course, but each will be forced to carve out its niche, its purpose and the likelihood is that the economic crisis will bring much needed acuity to each social media network’s positioning.

(5) And, finally, the truth is that items sold on line will be cheaper in fact and in perception. When you add the cost of getting in your car (time is money…), consuming fuel with the risk of traffic infractions to go to the brick & mortar (only to find a less informed salesperson) the chances are that the consumer is in effect going to find the Internet a cheaper way to consume. With people and companies forced to work harder and longer hours to survive, time for personal shopping will decline ipso facto. Retirees who have already shown a propensity to hit the ‘net, will do so even more (note to self: big business in keyboards will large keys). Driving to the store hardly eases with age. And, lest we forget that, with driving, there is the added nuisance of polluting the environment. Clearly, on the supply side, more and more companies will move to e-commerce platforms (expensive as they may be initially) because they offer a higher margin business model once the critical mass is reached. Moreover, having one’s own e-commerce site is a useful counter force for the brand/company against a distribution network whose strength in the balance of power has become hard to manage.

Vortex Internet

With the backdrop of the demographic and sociological surge of online traffic, plus the terrific growth numbers in developing countries, it all makes me believe that we are truly in the vortex of the paradigm shift. Beyond the crisis, we will come out different, truly changed in our behaviour and, specifically, our relationship with the Internet. With the oft mentioned Chinese expression (pictogram above), in times of crisis, yes there is danger and great opportunities. The danger lies in the fact that the crisis may be worse than expected and certainly the Internet will not solve everything. And the Internet has its own dangers in terms of potentially dehumanizing relationships or rendering us captive to the 17″ screen…  That said, nonetheless, it is worth noting that since the Internet and the e-companies have already experienced their own bubble-bursting and crisis, they have created more durable models, filled with more substantial content and purpose.  In the process, Internet companies are (perhaps inherently less fat and) potentially more resistant to the current crisis than many brick & mortar brethren.

All the same, the economic crisis presents a golden opportunity for the Internet. How to play it? That will be the subject of another post. 

UPDATE FEB 8, 2009: I found this article written by Le Monde on Jan 30, 2009, showing that clearly this idea above is gaining traction in France:  La Recession accélère la rupture entre le virtuel et le réel.

16 thoughts on “This Crisis will bring a Paradigm Shift on the Internet

  1. I just watched an interview with director of John Lewis stores. He said that internet sales are significant and growing fast.

  2. In the US, retailers are implementing very aggressive online discounts. Every website is giving deep online discounts to shoppers and according to comscore, Cyber Monday sales volume was up 15% higher than in 2007. Since every website is offering deep discounts, it will be important for brands to create online strategies that offer value (and generate site traffic/interactivity) without diminishing the value of their brand.

  3. C’est tres intéressant et je partage ton point de vue (même si c’est plus vrai dans les faits aux US qu’en France qui reste tjrs un peu arrièriste…)

  4. Internet sales of electronics has grown dramatically. Cheaper online prices vs. B+M stores are easily found, and sales help at these stores is so underinformed that a major reason to go there is largely gone.

    As evidence of the traction of internet sales (in case any was necessary), there is a large cottage industry now of internet coupon sites. Often a way for stores to offer discounts they choose not to publicize.

  5. Minter – Good piece. I believe that the already more Web-savvy users will not significantly change their habits. It’s really everyone else who will be adopting a more efficient and effective approach online out of necessity…

  6. @mgoitein: it is hard to imagine being more plugged in!! With you.
    @Ted: checked it out. I am thinking that this particular vortex may not last much more than 3 years (length of the vorticism movement), but we will definitely come out of it different…
    @vivianna and rlearner: the temptation to hit discounting (or couponing) is potentially dangerous… Hopefully, people will continue to innovate and add value. I think we may enter a stage where Internet freebies that we really love (have perceived and real value), but that are not able to find a profitable economic model, will eventually be end up being able to charge for their services…

  7. Hi Minter–

    Vivianna, I agree with you. In fact, we have a story coming out next week on behindthechair.com specifically about this issue: “Premium Salons: Should they Discount Services and Products OR NOT”

    The number one question salons are asking is how do I protect my long-term brand and service price point if I discount right now. Look at Neiman Marcus who is sending what looks like Kohls postcards twice a week with huge discounts splashed across the covers. There is no question this will seriously affect their long-term brand. They’re drowning and this is their life raft. I’m sure they’re feeling as though they’ll just have to deal with the brand effects of these radical decisions later.

    Another thought– here’s an interesting statistic– 87% of all ONLINE product research results in an OFFLINE purchase(Forrester). We see this too. We recently rebranded the entire Barbicide brand including new website, promotions program, etc. Behindthechair.com is the ONLY place they advertise. We placed the same product promotion on behindthechair.com to sell that they offered to all the distributor stores and Sallys. We sold about 30 sets of the promotion- nothing, really. Yet, that one product lifted 40% in the next 2 months across the store channel during the campaign! Online shopping versus brick and morter has so many factors that must be taken into account. The most important is context- We sell well into 7 figures of educational DVD’s, books, etc, BUT we sell a negligible amount of sundry items, even though we have over 5,000 available. Believe me, I learned this the hard way. Here’s my assessment. The user has to change her behaviour if she decides to shop online for her beauty supplies products- she buys them at distributor stores and calls in orders to her distributor. Our sampling campaigns are off the charts for response and our lift is significant for products in distributor channels that are seen the first time on BTC. But, for me to ask a salon owner to purchase her beauty products online at behindthechair.com, it forces her to change her behaviour. Yet, to ask her to buy her education from behindthechair.com maintains the correct context of behindthechair.com- a place to be educated– about techniques, collections and of course, new products. She EXPECTS to purchase her education on behindthechair.com and I don’t have to change her behaviour, because she’s aleady being educated here- the sale stays in teh right context.

    It’s been an interesting ride with behindthechair.com- especially having started the site late in 1999. EVERYONE thought I was crazy. But, as I always say, “Vision is seeing what nobody else sees, BUT it’s never celebrated until everyone else sees it!”.

    A very warm holiday wish to all of you–

    Mary
    mary@behindthechair.com

  8. Have found excellent the approach on Internet (I support technology very much) but I really have one general concern: how can we avoid the danger of substitution of human real and face to face exchange by digital communication???

  9. @mary: Thanks for your comment and I have certainly enjoyed watching your journey. Lots of change management and context setting indeed. When looking at the difference between selling education and tools, I think there is also a phenomenon of wanting to touch and feel the tool which will drive people to brick&mortar locations to make the final purchase (the better informed for having visited your site). When you buy a DVD, it makes no "tangible" difference whether you buy instore or online.

    @George: Absolutely agree with you that we must maintain the human touch. Lovemarks (as in my following post) often know how to keep the human touch. At the very least, when in the virtual sphere, there is the deeper sense of personalisation that is possible via a well constructed CRM. And, for example, having human beings at the end of call centres or online help desks (chat room format) can be a serious competitive advantage these days.

  10. for your Crisis/Internet piece, could not agree more – I think that anything that will make things easier/cheaper/faster for the customer will stay for a long time (like the p&g commercials back then about "liquide vaisselle" that works so fast it's almost a leisure provider…).
    To me it goes beyond the internet, cause I think that customers will tend to be channel neutral (connecting indifferently on PC, mobile, console…) but mostly focus on utility, innovation, connection/engagement with brands and peers. What strikes me here again is that all the examples you've given are clearly around these values, yet our marketers really are pushing out the same old messages to customers…

    Saturday, I went to have a haircut at Provost. They offered me their new loyalty card (digital data entry yeah…) but no difference from what Carrefour/Auchan/Fnac would do. How is that about proximity, service? It seems to me that not even the Salon Manager believed in the system.

  11. @Tony: Yes, it will ultimately all be about mobility… I think that my post is maybe a bit short sighted in that regard — it will depend on how fast we move along the curve of increased functionality and (lower) cost on the access to the internet via telephones etc. Once that access is rendered more accessible and fast, everything I said will be applicable to mobile solutions.

    In the near-term, meanwhile, with the economic climate being what it is, the more traditional Internet access via the computer will surely continue to dominate.

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