Adding relationship value in the internet age
As the digital age spreads like a virus, locally owned “bricks and mortar” businesses are threatened with extinction. Major companies like Circuit City, Borders, and Tower Records have already succumbed to this competitive threat. The proliferation of disruptive internet-based solutions has forced many traditional businesses to re-think their value propositions in order to keep their fans coming back.
“Showrooming” happens when customers visit a physical store to get the look and feel of products, but then go online to buy products at a cheaper price from online vendors who don’t bear the expense of maintaining stores or employees. Shifting costs to local companies and profits to online vendors is just one consequence, however. Many businesses will fail as a result of customers migrating to low-cost online vendors. And when local showrooms close down, customers are forced to choose from an ever expanding universe of products without the support of local experts to help them make wise choices.
In the future, successful local bricks and mortar companies will find ways to offer premium services to satisfy local customers. Competing against high volume, low-margin online vendors based on price alone is impossible. However, local companies can know their customers better than any computer database ever will, so the way to thrive in the internet age is to add value above and beyond merely delivering products to the people who need them. Businesses need to change their value proposition so much so that customers prefer to pay more, locally, not out of community interest (although there is that element), but out of self-interest, because the additional expertise shared makes it worth paying a bit more for the product itself. Thanks to the internet, all local businesses are now in the service business.
Financial advisors have been competing with the internet longer than most. Charles Schwab was founded in 1971 and brokerage commissions were deregulated in 1975. For over 40 years, the transaction price of selling 100 shares of IBM stock has come down – now it’s free. So why haven’t all investors migrated to the online brokers? The answer is in the service that advisors are able to provide their clients.
May-Investments focuses on 3 key service areas. First, we are proactive in managing how much risk clients take. In risky markets, we can reduce clients market exposure. If clients are served the same portfolio at the top of the market as when stocks are cheaper, then they might as well go to a passively managed portfolio and buy the cheapest fund out there. But May-Investments can add value by keeping abreast of market trends and adjusting risk exposure depending on what is happening in the market.
Second, May-Investments believes in proactive planning as well. We work with each client’s team of professionals to implement a series of planning meetings to discuss and address other risks to a successful retirement, and to develop a picture of what a successful retirement looks like to each individual client, in order to develop a plan to achieve that individualized goal. Finally, May-Investments believes in proactive communications. Our blog and e-mail tools address clients’ portfolios specifically. Our bi-annual economic updates provide information not just about what happened in the past, but also focus on how clients are positioned for what we expect down the road.
Local businesses that offer expertise, customization, proactive communication and personalized advice will continue to do well, even in the new internet age.