Who "owns" the customer? - changing environment of the financial services industry - Panel Discussion

Chief Executive, The, Sept, 1999 by J.P. Donlon

THE DOT-COM REVOLUTION

Arnie Pollard (CE): Has it been the "dot-com" Internet revolution that's really been the force that has moved us from a business society that wasn't customer driven, to one that is customer-centric?

Barry Sternlicht (Starwood Capital): It has certainly accelerated the process. None of us would ever say we didn't focus on the customer before. But given the gatekeeper possibilities of the Internet - for example, different companies are trying to replace the travel agent and become agents online. It would enable and allow these three or four portals to become the gatekeepers for travel, and those companies go from Carlson to the Web to Expedia or Travelocity or Preview Travel. And we really haven't gained anything. In fact we've lost this great opportunity to own that customer directly, maintain control over the relationship, and extend the products we can sell.

The problem is we need credibility with the customer. If they don't think you're credible, they'll have a chance to go to Fodor's - in our business - or some other intermediator and say, "Your product is not as good as his product." Again, we can brand it; we can do great advertising; we can try to build an emotional connection. But at the end of the day if he tries the product and it isn't what he expected, it's a lost issue.

Morris: There's an enormous power shift going on here, and it accelerates a process that was already in the works. And that is that a consumer now can make a decision a click away, and doesn't have to go and sit down face-to-face with somebody. Clearly, unbundling is accelerating at a rapid rate, and consumers have more choices. There's no longer a cross-sell model that I can see in financial services that works. The only protection in the long run is value creation for the consumer. Brand will help you in the short run, but what are you doing that's special?

The other issue is the power of being agnostic, or of not having a particular fleet of products you are selling that you have a vested interest in. This is another area where some of the dot-com companies have a differentiatable advantage, because they don't have a particular ax to grind. They're willing to shop on behalf of the customer to try to solve the customer's needs. But I do believe down the road there could be the revenge of the bundler, where you're able to save the customer time, and in a very trusted, leveraged way put it all together for the customer. You may not be manufacturing the products, but you'll have various relationships, you'll shop on behalf of the customer, and in a customized way build a package of products.

Ted Spooner (Corillian): That is Intuit's business model. If you look at Intuit as a consumer software provider traditionally and look at what they're doing in Quicken.com, they don't want to be a dotcom in the original sense. They want to be a Met Life; they want to be an American General; they want to be a bundler ultimately. But they really want to acquire not only real, fundamental business relationships that are supported by a very low-cost distribution channel, but also want to add advice, because they want to more deeply penetrate that relationship.