Do Business Well

Amazon.com used to use the theme “Earth’s Biggest Book‑store.” No longer. They’ve changed it. The new theme is “Earth’s Biggest Selection.”

Person of the year Jeff Bezos, CEO of Amazon.com, says, “It’s very natural for a customer to wonder, can you really be the best place to buy music, books and electronics? In the physical world, the answer is almost always no. But on the Internet all the physical constraints go away.” (A sign of the times: The company recently registered “Amazoneverywhere.net as a Website name.)

All the physical constraints may go away on the Internet, but what about the mental constraints? What about the mind of the prospect. What’s an Amazon.com?

If Xerox is copiers, IBM is computers, Cadillac is big cars, and Volkswagen is small cars, then Amazon.com is an Internet bookstore.

If Amazon.com is an Internet bookstore, then how come the site has also been able to successfully sell music CDs? And if they can successfully sell music CDs, why can’t they also sell toys and electronics?

Look around your community at big bookstores like Borders or Waldenbooks. Do they sell toys and electronics? No. But they do sell music CDs. Ergo: The customer associates music CDs with bookstores.

“There’s no reason for Amazon not to sell other merchandise,” said Bill Gates recently. Yes, there is. It’s called “perception,” and it’s a critical attribute of the human mind. Amazon.com means Internet bookstore. Not auctions, gifts, home improvement products, toys, video games, electronics, software, DVDs, or videotapes.

You see Amazon.com thinking all over the physical world. Blockbuster means video rentals. “There’s no reason for Blockbuster Video not to sell other merchandise,” someone at corporate headquarters probably muttered to themselves a number of years ago. So Blockbuster Music was born.

After years of losses, the company finally faced the music and spun off the division in 1999. The new name: Wherehouse Music.

Boston Chicken meant rotisserie chicken. “There’s no reason for Boston Chicken not to sell other food products,” figured top management. So the company changed the name of its stores to Boston Market and added turkey, meat loaf, and ham to the menu.

Were you surprised that Boston Chicken recently went bankrupt? Vanity strikes again.

“You’ll see more Amazon-like cases in which a company that is strong in one online area expands its product offerings,” adds Bill Gates. Sure, you will. Line extension is very popular in corporate America, almost as popular as stock options. Both feed the corporate ego.

What is terribly confusing is the fact that line extension can work . . . in the short term. But almost never in the long term.

This is especially true if you are the first in a new category. When you are the first, when you dominate a new category, you can be successful in the short term taking the line-extension route. You may pay the price later, but you can easily fool yourself into thinking that you are going in the right direction when you broaden your approach.

Take Yahoo!, for example. Incredibly the company’s mission statement is “to be all things to all people” (a phrase reportedly repeated as a mantra by many Yahoo! executives).

Starting as a search engine on the Internet, Yahoo! has now expanded its Website to include the following features: auctions, calendars, chat rooms, classifieds, e-mail, games, maps, news, pager services, people searches, personals, radio, shopping, sports, stock quotes, weather reports, and yellow pages.

To further its goal of being all things to all people, Yahoo! has also spent a small fortune on a raft of acquisitions.

$5 billion for Broadcast.com, a service that delivers audio and video over the Internet.

$3.7 billion for GeoCities, a home-page service.

$130 million for Encompass, a technology company that makes
software to more easily link consumers to Internet services.

$80 million for Online Anywhere, a technology that allows the company to deliver information and services to a wide variety of non-PC devices.

Is Yahoo! successful? (Silly question, the company is worth $114 billion.)

Sure, Yahoo! is successful, but the brand had the enormous advantage of being the first search engine on the Internet. As a result, Yahoo! received an inordinate amount of publicity.

Yahoo! became a celebrity brand. In one seventeen-month period, in six thousand different news media, Yahoo! received an astounding forty-five thousand citations, far greater than any other Internet site.

Nothing succeeds like excess. With enough favorable media mentions, Mussolini Merlot might become a popular brand of Italian wine.

But nothing lasts forever. The media will move on to the next hot Internet brand, leaving Yahoo! in the uncomfortable position of having to spend its own money to communicate its identity.

What’s a Yahoo!? Not an easy question to answer when you are “all things to all people.”

Leaders tend to self-destruct when they blow themselves up. When you try to be everything, you end up being nothing.

Apple started as a personal computer hardware company, then moved into software, operating systems, and personal digital assistants. Apple lost its way, its CEO, and almost its entire existence until Steve Jobs retook the reins and refocused Apple on its core business, easy-to-use and “insanely great” personal computers.

Possibly related posts: (automatically generated)
Online Marketing, Success in Business, Website Strategies part 2

• Marketing planning stage: implementation through the marketing mix
• Making a Plan: how to construct a simple and workable business plan part 6
• The Management Team
• Ask Yourself: Would You Invest?
• Separation or integration of online operations?
• Five Predictions for trends in Internet Marketing : WEBPROMOTE
• How Your Business Situation Helps Shape Your Plan
• Targeting Your Plan continue...
• E-MARKETING Planning Process
• Part Science, Part Art— and Online Market¬ing Programs Guided by Strategy
• Company Strategy: What's Your Identity?

3 Comments »