Is Web 2.0 the Answer to the Price Wars?


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Last week I spoke at the Electronic Retailing Association’s annual Mid-Winter Conference about Web 2.0. From the conversations I had there, a few things were pretty clear…

One is that retailers are getting absolutely hammered on price, and it’s mainly because of the transparency of the web. In response, they’re cutting prices. Can anyone say “death spiral?”

The other is that there’s this interest/fear dynamic that’s prevalent among online retailers regarding social networking and Web 2.0. The session was packed with marketers that wanted to understand what they could do to better understand, and hopefully leverage, some of the new Web 2.0 tools in their marketing plans.

The topic of my talk was that while Web 2.0 is making it more challenging for marketers in all verticals, not just retail (because with 70M blogs in the blogosphere, you’re kidding yourself if you think you’re still in control of your brand), it also can hold the key to building brand loyalty and finding ways to compete that don’t involve perpetuating the “sale mentality.” I was absolutely blown away by the interest in this topic among the retailers.

The talk was chock full of examples. To wit:

Circuit City implemented customer reviews on their website, resulting in thousands of new site visits due to Google indexing these pages and ranking them highly in their search results (i.e. good SEO). The visitors that hit their site through these pages had 94% more site visits, 60% higher buyer/visitor conversion rate, purchased 43% higher priced items, and had 50% higher average order sizes.

I saw a lot of note-taking going on!

The net of my talk was that for any of the Web 2.0 initiatives to work, retailers have to let go of control, and let visitors have their say, whether they agree with them or not. This scares marketers to death. But in 2007, all of your customers know how to find customer reviews, forums, product reviews, etc. You can choose to host them or not. But if you don’t, your customers will just go someplace else. Since it’s happening anyway, you might as well do it and reap the benefits, including increased customer loyalty and decreased reliance on price as a differentiator.

Could this signal the tipping point, when retailers decide that the benefits to implementing Web 2.0 far outweigh their concerns? Time will tell.

Joe Lichtenberg
Joe Lichtenberg, the vice president of Marketing and Business Development with Eluma, combines his expertise in technology with his passion for social networking Lichtenberg helps marketers successfully integrate new media into their marketing strategies via the power of branded online communities. He holds a master of science from Boston University.


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