articles by xbridgers
Business Money, March 2003
Four years of experience has taught us that the online channel is not for everyone. Many lenders waste enormous resources trying to develop an effective online strategy. They never will. Others ignore the channel, squandering enormous untapped opportunities. Which type of lender are you?
There are many issues to consider before deciding whether your organisation should invest in the online channel. The first set, consisting of three key criteria, are discussed below:
Criteria 1: Your Brand
For commercial finance, the online channel is for making money -- not for brand building. However, a strong brand is more important online than in other channels - where humans are able to reassure the customer that you are a reputable business partner.
Typically a strong brand will yield a higher return on the same investment in the online channel than a weaker brand. The channel is similar to direct marketing in that respect. If your brand is already used effectively in acquiring customers via direct marketing campaigns, similar results are likely possible online.
Criteria 2: Your Target Decision Maker
The online channel is currently most effective in targeting small businesses. A rapidly increasing number of entrepreneurs enjoy using the web to research financial products for their own business. Other corporate decision makers (e.g., Financial Directors, Purchasing Managers) respond online less effectively.
This small company focus is changing. For example in the invoice finance market, the average turnover for businesses seeking facilities three years ago was £300,000. Today average turnover has grown to just over £1 million. Recently the largest UK lending facility originated via the online channel closed for a company with £45 million of turnover.
Over the next several years the channel will become more effective in targeting larger companies. For now however, the online channel remains best for targeting smaller organisations - and at targeting the owners of small businesses in particular.
Criteria 3: Management Information Systems
Online customers have very high service expectations. They expect instant gratification and demand that every business process works seamlessly. A single weak link can kill an entire online strategy. Accordingly every aspect of your online strategy must be thoroughly measured, seamlessly monitored and continuously analysed.
You can't fix what you don't know. Without deep, highly integrated information systems to track every customer behaviour and business process - both online and offline - you are unlikely to be successful. If you lack such systems, outsource this function to someone who does.
Other Criteria:
The above criteria form first set of considerations. There are many others important to consider before investing online. The channel is by far the most complicated and most demanding. Because of this, very few lenders get it right. Those who do get it right enjoy a very profitable new channel with superior long-term growth prospects.