The Internet is dissolving the distinction between business-to-business and business-to-consumer marketing. The Net allows consumers to act more like businesses, by affording them the powers traditionally held only by large companies. Thus, the tools of business-to-business marketing can be wielded in the consumer market. Certain middlemen Internet companies are trying to capitalize on this trend, often to the detriment of the traditional retailer. Often the strategies of these middlemen attack consumers' interests, as well. But there are shining counterexamples. The marketer who fully understands this trend will be able to adapt and thrive, while the one who doesn't will perish.
There are several traditional characteristics of business-to-business transactions (between the corporate seller, and the corporate buyer) that do not exist in business-to-consumer transactions. The chart below delineates some of the traditional distinctions.
| Business-to-business | Business-to-consumer |
| Because of large scale of corporate purchases, each individual buyer has a quantifiable effect on the bottom line of the seller. | The relationship is one-way: the seller reaches the consumer through the various tools of marketing. |
| Every business that is a buyer is also a seller. Businesses are both users and producers. | Individuals are simply consumers. |
| The buyer has the resources to gather reliable information about a seller's products, and make informed comparisons among competitors. | Individuals rely primarily on advertising and word-of-mouth to make purchase decisions. |
| Each industry has its own press who provide a forum for discussion and disseminating news. | The average consumer does not have the time or money to read specialized industry news. |
Consumers and businesses do share characteristics when they decide to purchase something. Both are heavily influenced by peer decisions - businesses are just trying to keep up with the Jones, Incs. In a business, very few people make most of the purchasing decisions. These individuals gather information from the people who work for them or the company, and designate experts to make decisions on their behalf. And finally, both businesses and consumers expect the press to provide outside, disinterested expert advice.
Because of the World Wide Web, individuals are now able to act more like businesses when buying and selling. The Internet allows consumers to expect the ability to provide direct feedback to the seller and receive a direct response from the seller. Before the advent of the Internet, the best consumers could expect was a 1-800 number, with inconvenient hold times and often under-prepared operators. Letters to companies would sometimes merit a response after some undetermined time. Now, consumers expect e-mail queries to be answered quickly and expertly.
Now, consumers can easily accumulate comprehensive information about any product they choose. They can find out specific, detailed information about products and companies unavailable, or difficult to obtain, before the explosion of both corporate and independent websites. The sheer volume of information now available is astounding; look at governmental sites with Senate transcripts, patent search servers, Microsoft's Terraserver, which has terabytes of governmental satellite images covering the world, and the unending vortex of pages in such large corporate sites as IBM and Apple.
The Internet in its many guises also gives consumers to expert advice and specialized forums for discussion. Usenet, mailing lists, and chat rooms allow people to trade information at a tremendous rate and microscopic level of specialization. Thus, consumers don't need to rely on advertisements or the press to learn about or compare products.
The most important advance the Internet is essaying is the coordination of groups of consumers into organized market forces. Like-minded consumers, without any outside influence, already have the power to act en masse. The speed by and the extent to which chain mail spreads is perhaps the best example. Others include the overnight popularity of the site hamsterdance.com, and the phenomenon known as the Slashdot Effect. During the Super Bowl, millions of people logged on because of a Victoria's Secret commercial. Over time, these mass actions will only become more common.
Web companies are working now to become the middlemen to assist the coordination of consumer groups. The most common intention of these middlemen-companies, like E-Bay, DoubleClick, and Yahoo!, is to replace the individual, specialized retailer as the buffer between consumer and supplier. These companies are racing each other for the mindshare of consumers. Their methods necessarily include the creation of large databases of consumer information. All these companies are engaged, in some manner, in the classic game of getting information from the user in exchange for improved service. With the Web, the numbers are exponentially larger than they ever were before. Armed with this information, their business plans expect billions of dollars of revenue; and many people seem to believe those plans. These Internet businesses have stock prices and market capitalizations that continue to rocket blazingly to the stratosphere. There are three divisions of Internet commerce middlemen: aggregators, consumer data collectors, and information distributors.
Some companies are working to aggregate consumers. Auction sites such as E-Bay do this simply by providing a useful market space. Their most powerful asset is a credible brand, with not only a cachet of usability but also trustworthiness. Open e-commerce sites are dependent on trust. There are other companies that successfully aggregate consumers. News sites and portals provide a strong enough service to compel people to create accounts. There are also community-based sites (Geocities, AOL) that have enough mindshare to potentially drive auctions or other community-based commerce, but would need careful management to establish credibility in that arena with their constituents. Sites like Geocities have active consumers who joined to build their own pages and thus participate in a community, while subscription-services like the New York Times are primarily still involved in the traditional one-way flow of information and marketing.
Instead of convincing consumers to participate, a more refined strategy is to simply collect consumer information invisibly. Companies are data-mining and building consumer-profile databases online. Amazon and other e-tailers track the purchase history and trends of their consumers. DoubleClick and Matchlogic, which use cookies to track users online, are currently only exploiting the data to sell targeted advertising. They're moving, however, into the market of acting as consumer advocates. This move is not for noble purposes, of course; it's only their bottom line in mind. They intend to get to the point where they can kill retailers and make any demand of sellers by sheer market force. Potentially, the day will come when Matchlogic will be able to go to a car manufacturer and say, "We know all the people in the Cincinnati region who fit your criteria for SUV buyers, and those who are actually surfing the Web to read information about new cars. How much are you going to pay for us to open a dialogue between you and these people?"
Even smarter are the companies that are collecting both business and consumer information. It's a stated goal of the content-distributing companies to eliminate retailers. One of the major players is Infospace. Infospace supplies a number of portals, including Netscape, MSN, AOL, and Lycos with directories - yellow pages, white pages, maps - that are heavily cross-referenced and synchronous to the real-world directories. For example the sales staff of the national Yellow Pages distributor sells ads for the books and for Infospace's websites simultaneously. Infospace also supplies price comparison searches. Infospace sees no reason why this guarantee of lowest price and convenience won't make them a sort of online Wal-Mart, eliminating any need for a wide variety of retailers. As they argue, all that's needed is a variety of suppliers. Interestingly, Infospace markets itself just as a backend to the portals. They could kill off the portals as easily as other retailers.
Of the three categories, only the auctions aren't built on a mercenary business model. They bring all consumers and sellers to the same level. Interestingly, Amazon is trying to move into the auction market. If Proctor & Gamble wished, they could sell their products on E-Bay. But so can Joe Q. Public, while reaching the same potential audience. What's the role of the advertiser in this? Well, a quick perusal of the sites demonstrates that there's a lot of really crappy advertising on auctions. This amateur advertising is rather amateurish, unsurprisingly. There's certainly a need for the professional expertise of the advertiser.
The other companies are predatory and mercenary; they intend to bilk or decimate companies and manipulate consumers. These information-collectors have business models based on the proprietary nature of their as-large-as-possible databases. However, they don't have to be. An open-source style effort to "empower" consumers by collecting market data for them and using the information to negotiate/broker with companies would make everyone happy. People like contributing to databases that provide service to them (see UBL, lyrics.ch, CDDB). Firefly's (originally Agents Inc.) technology was all about this, but they couldn't get together a good business plan other than being bought by Microsoft.
From the viewpoint of the marketer, the trust model at the core of not only the auction sites but all electronic transactions is compelling, and bears discussion. What causes the average person to place trust in an E-Bay transaction is utterly different from any previous model. The transaction takes place between two people who have no connection, and no contact (except by e-mail) between each other. They base their trust in endorsements from other unknown people. This system of trust ends up working about as well, in fact, as the one which affords a giant company like Ford a trustworthy reputation. Because the trust is placed not in a corporate brand, I don't believe that people will be loyal to particular auction sites. My take on E-Bay's future success is that its hold on the market is potentially fragile, because the underlying tech and interface is pretty low-quality. Every few months E-Bay goes down again. A well-advertised and demonstrably better competitor could replace E-Bay.
I'm not terribly convinced of Internet consumer loyalty, though the powerful brand equity of companies like Amazon, which has placed a very strong emphasis on consumer relations, may be proving me wrong. If Internet brand loyalty is high, the causes need to be explored. It's not inconceivable that the overwhelming scope of the Web is scaring people into brands they trust. As users become more sophisticated, I suspect, as in the offline world, brand loyalty will lessen. Similarly, companies are only just learning how to translate offline brand equity into online credibility. Fidelity seems to be making the transition well. News organizations such as CNN, ESPN and the New York Times seem to be doing the best job of establishing brand credibility. Of course, their product, information, translates better to the web right now than the higher-bandwidth video and music of the film and music industry.
The new power of the individual consumer is wonderful. It will cause heartburn and even infarctions for traditional businesses. However, treating individuals with the respect and attention that Fortune 500 companies have always merited is not only possible in the Information Age, but is now imperative. The advertisers that know for a fact that there's a clear line between selling to the consumer and selling to industry should stay away from the World Wide Web. Online, individuals are big business.