Understanding the full impact of the internet on your business regarding your customers, suppliers and competitors power of influence is becoming more and more important given the access to information they all have or can get. Customers have better access and so have more information to choose more freely who they want to shop with, suppliers can lock-in customers more easily and competitors can analyse their closest rival behaviour by researching them online through websites and forums etc.

What is your organisation doing to minimise this onslaught of power influence?  You need to understand where the power is coming from before you can combat it.

The internet has grown to become a haven of knowledge for customers, especially with regards to product comparison services provided by intermediaries such as www.moneysupermarket.com and www.kelkoo.com. The knowledge gained from having so much information about so many supplier products puts the customer in an incredibly strong position. Suppliers are put in a predicament where the definitive factor of motivating customers to purchase includes quality, price, and value. Irrespective of the way a customer decides on their purchase, suppliers must ensure that if their prices are high, relative to competition, quality perception must be foolproof. If products are cheap then it is important to ensure that the quality of service is watertight; people may not value so much the physical quality in this instance, but they may expect prompt delivery within the time promised.

The internet has liberated the customer through knowledge, it has led to a bargaining power which customers can and do exploit, especially with standardised products that are readily available on many sites. If you sell services or products directly to the consumer, perhaps you should consider what it is that the consumer values most from your products and then capitalise on that. Understand what your competitors have done and ask yourself whether you can do the same but better.

Within a Business to Business relationship, there is still the supplier and then the customer. Just like the example above, businesses can do the same. They have a mission to adhere to; generally it is to satisfy the needs of stakeholders and perhaps to lower costs as much as possible without jeopardising the quality of its services or product. Consequently, businesses shop around for the best balance of perceived quality and low price from their suppliers. They will also use a few suppliers’ prices to ensure the benchmark is realised and not exceeded. With the onset of the internet, business customers are now able to analyse the benchmark a lot more easily, accurately and cheaply. Not only does the internet provide this medium for information, it can now facilitate the quick and easy change process from one supplier to the next with minimal hassle of time and cost. As the saying goes ‘your competitors are only a click away!’

As is always the case in business – if a supplier performs below the expected line of value (poor service, quality or non-competitive prices), then the customer will more than likely turn their back on loyalty. However, with the onset of internet price comparison and switch availability, loyalty may well become less and less widespread. Your customers rely on you to be consistent value for money; this includes the quality of product or service compared to price. Instead of worrying about the increasing bargaining power of customers it would pay dividends to your organisation if you concentrated on your current customers. Whatever your customer values, ensure you capitalise on those factors. Customers who only focus on price ignoring loyalty will only ever cost you more in the long run.

From the viewpoint of a customer in business, try to answer the following questions. What is it that you require from a supplier? What do you already do to find the most suitable supplier? Taking the information mentioned previously, do you exclusively decide on price, or is it a mixture or reputation, quality and experience?

Although it has been suggested that constantly changing customers should be avoided, as a customer you do want to be treated fairly.  As such you will need to find the perfect partner for your business; until this happens though, the internet provides a perfect medium to search. Such a variety of information has allowed a healthy level of competition to grow in all sorts or markets, allowing consequent quality and innovation improvements. This can only be a good thing for prospective customers (unless the supplier owns a monopoly or duopoly over your product requirements, in which case the internet might not have so much use!).

If suppliers want your business, they need to understand that customers will not stand for changes beyond the industry standard, for example, incremental price increases and the delivery quality dropping. Only then can customers consider a supplier trustworthy enough to build a relationship. Essentially there is a balance developing. The internet reduces their power and increases yours, as long as the supplier delivers on their promise they will be rewarded with loyalty, if not, then the internet takes over and customers simply walk on.

You may find though that suppliers try to regain some power by exploiting the advances in internet technology. For example, they may insist on using electronic data interchange to trade with you. Here the customer might be reluctant to change their arrangement due to costs associated with switching caused by software lock-in. This method of trading does allow the power of the supplier to be partially regained. A supplier’s website may extend this – once a customer has invested time to understand a supplier website to select and purchase products they may not wish to repeat this with a competitor. Obviously though his works both ways, if the site is too complex people won’t invest their time as other suppliers will exist.

Competitors who use the internet to do business or reach customers do not have a particularly hard time doing so. The internet is principally a good means of providing information-based services at a lower cost. Starting a company in this industry and releasing new digital products and services can be easy and cheap compared to the offline alternative. Take the example of service fulfilment over the internet, this service provides a new online channel replicating what would essentially be an offline procedure. By partially removing a need for human intervention and paper requirement by making the process automated, you get a system which provides a service at lower cost. This saves the organisation money, which can then be passed on to the end consumer or kept as margin, either way it allows for a competitive advantage on price if the market required it.

The occurrence of this must be monitored carefully to avoid the technology and success of the technology becoming too large, taking too high a segment of the market. This will also place significant barriers for you to either imitate or improve on. Bear in mind that internet services are much easier to imitate than traditional services, just as you may be able to capitalise on new ideas so can competitors with your own. This ability to easily copy and improve reduces the lifecycle of your products. This in turn means you need to consider new products/services more quickly and more regularly to maintain competitive advantage; sustainable advantage is more likely if you attain intellectual rights over technology.

Competition has increased enormously thanks to the internet, appreciate no change is going to remain new for long, change is continuous. Minimise supplier power by benchmarking value from others. Maximise your power as a supplier by offering value to customers which outweighs your competitors.