Designing and Packaging Products for E-Business

Two powerful forcesthe proliferation of selling channels and growing customer demand for personalizationare revolutionizing product development. The ability to package and build offerings to be marketed, sold and serviced through online channels will be a critical factor in determining the winners and losers in the new economy.

“Product channel readiness”that is, a product’s readiness for sale through a combination of online and offline channelswill become an increasingly important driver of revenue and profit growth. Product development will become less about building a better mousetrap and more about building one that is easy to buy.

Inherently simple or easily configurable consumer products are most readily translated to the web. Thus it is not surprising that according to a 1999 eMarketer survey, the top three categories in terms of e-commerce revenues were travel, computers and books respectively. In the B2B sector, a wide variety of products (e.g., electronic components, petrochemicals, aerospace equipment) have transitioned to e-business, thanks in part to new trading communities and the greater sophistication of the B2B buyer.

Still, most marketing managers are failing to rethink their product strategies to reflect the impact of e-business. Consider that four years into the e-business revolution, the most common excuse retailers cite for not going online is that their “products are not appropriate for web sales.” According to the 1999 eMarketer data, nearly half (47%) of retailers not currently engaged in e-business still feel this way.

In the short run, these organizations are forfeiting significant opportunity, ceding online sales to competitors who are actively working to simplify, configure and repackage products to enable web sales. In the long run, firms that do not find ways to make all products adaptable for e-business will lose revenue and market share.

By contrast, leading companies will increasingly focus on:

• Designing “channel-ready” products that are optimized for specific sales and distribution channels, including the e-channel;
• “Mass customizing” these products and services to the needs of specific customer segments.

The new end game of product marketing will be to build complex products and solutions that are channel “transparent” and configurable to individual customer needs. This means that sales and marketing executives must master the business discipline of product channel readiness. Specifically, they will need to:

1. Gather external data about how products are sold, distributed and bought
. In particular, firms will need to examine the changing requirements of their customers, channels and competitors. For example, customer pressure for convenience and ever-shorter cycle times has given rise to hybrid distribution systems that combine online shopping and direct fulfillment. This is illustrated by Kozmo.com, the online convenience store that enables customers to choose top videos, CDs and books as well as drugstore and minimart items from its site, and receive their order within an hour via bicycle delivery.
2. Optimize products around new design and development criteria such as simplification, mass customization and embedded service and support. For example, software developers Microsoft and Intuit have overcome the lack of retail sales support offered in computer superstores by embedding self-help knowledgebases and easy online customer support into their popular Office and Quicken products.

3. Invest in a range of enabling technologies such as configurators (e.g., Trilogy, Cybrant, Concentra) and personalization engines (e.g., Macromedia, Personify, Net Perceptions) to facilitate sales through low-touch, self-serve channels like the web. For instance, Mattel enables Barbie fans to custom-configure their doll with hundreds of possible permutations (e.g., hair and eye color, outfits) on its Barbie.com site. Chrysler, meanwhile, tracks 220 specific car options, features and other attributes across its customer and prospect base to model and forecast demand, reducing the cost of “mass customizing” these cars in the factory.

Using these critical principles of product channel readiness, e-business winners will figure out ways to sell and market simple, complex and engineered products seamlessly through online and offline channels. Less innovative companies, on the other hand, may find themselves caught in a mousetrap of their own making.