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Abstracts The bold items in the margin describe the subject matter and are keywords for text retrieval. The final reference number under each abstract is also used for this purpose (see reprint service on p. 77)

Value chains, supply chain, demand chain, inventory systems, business-to-business

Abstracts Each abstracted article is awarded 0–5 stars for each of four qualities: (1) depth of research (2) value in practice (3) originality of thinking (4) readability for non-specialists. No abstract is included for any article awarded less than seven stars overall. The other end of the supply chain J. Holmström, W. E. Hoover Jr, P. Louhiluoto and A. Vasara THEORETICAL, WITH EXAMPLES. The McKinsey Quarterly, 2000, No. 1, p. 63 (9pp) Starts from the principle that suppliers should work more closely with their customers to give them better value. Points out that ‘improvements’ to a supplier’s own supply chain (reducing inventory, making to order) may actually be disbeneficial to the customer. Equally, a supplier that integrates with his customer’s demand chain (eg by supplying in response to knowledge of the customer’s inventory management system) benefits the customer at a cost to himself. Suggests that the answer lies in adopting both schemes at once — shortening the supply chain by either manufacturing or packaging to order, while also shortening the demand chain by supplier knowledge of customer inventory, or advance planning, systems. Points to Dell as the ultimate example. Gives further example of a university bookstore integrating with a publisher to produce books to order based on course reading lists, with advantages to publisher, bookstore and students. Gives brief case study of a commodity goods supplier. That the ideas, once absorbed, seem so obvious is a tribute to the clarity with which they are expressed. Research: ✽ Ref: 2101

Internet, businessto-business, extranets, channels

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Practice: ✽✽✽ Originality: ✽✽✽ Readability: ✽✽✽✽

You’ve got sales C. Kaydo CASE STUDY. Sales and Marketing Management (US), October 1999, p. 29 (6pp) Quotes Forrester’s estimate of $1.3trn business-to-business market by 2003. Contends that most business-to-business sites are not meeting customer expectations of simplicity: the majority do not enable customers to initiate a sale online, and fewer still allow the online creation of a purchase order. Most are not trying to win new accounts on the Web, but to convert existing customers to Web usage. Points out

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Abstracts that business-to-business transactions are necessarily more complex than buying a book from Amazon. Focuses on the problem of channel strategy. Looks at the experience of four US companies (Applied Industrial Technologies, National Semi-Conductor, Xerox and PHH Vehicle Management Services). Considers how these set up private extranet links for large customers, how they try to integrate Web operations with internal sales teams and/or distributors, and how far the Web helps in the development of relationships — or their creation with customers who may not have had direct access to the company before. Lists four major mistakes to avoid in setting up an e-commerce system. Reading between the lines of these case studies may suggest that channel conflict is, for all four companies, a fundamental problem, and the means used to deal with it are frequently an uneasy compromise. Research: ✽✽ Practice: ✽✽✽ Originality: ✽✽ Ref: 2102

Internet, business-to-business

Readability: ✽✽✽

Business-to-business shopping spree E. Strout EVALUATIVE. Sales and Marketing Management (US), October 1999, p. 42 (4pp) Relates the author’s experiences in buying from six business-to-business websites (ecost.com, officemax.com, staples.com, grainger.com, sears.com and marshall.com). The bulk of the article is in the form of a table, listing what each site sells, how easy it is to navigate, product availability, customer support, ease of ordering, what the author ordered, follow-up, ability to track the order online, and lessons to be learned. Reports ‘generally impressive’ experience, with efficient ordering and delivery; sites can offer lessons to anyone selling online. But indicates disappointment at lack of follow-up by salesperson to online orders. A slight piece, but interesting as a comparative study of differing approaches to online selling. Research: ✽✽ Ref: 2103

Business-to-business, segmentation, scoring

Practice: ✽✽

Originality: ✽✽

Readability: ✽✽✽

A segmentation you can act on J. Forsyth, S. Gupta, S. Haldar, A. Kaul and K. Kettle THEORETICAL, WITH EXAMPLES. International Journal of Customer Relationship Management (UK), Vol. 2, No. 2, p. 145 (9pp) (reprinted from McKinsey Quarterly with permission of the publishers) Claims that easy cases of ‘actionable segmentation’ are rare: value-based segments generally do not fit neatly into demographic ones. Looks at the problems of segmenting when it is impossible to allocate individual customers to specific pre-determined segments. Identifies four

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Abstracts methods for solving this dilemma — targeting and self-selection (both of which side-step the problem), scoring models and dual-objective scoring. Gives examples of customer self-selection — eg different package sizes, use of coupons, airline pricing, different brand name/price/ packaging/shelf position for identical products appealing to different segments. Goes on to discuss scoring models, in the context of businessto-business, based on customer answers to a very few key questions, with example. Introduces concept of dual-objective scoring (DOS), which trades a small amount of precision in delineating segments for a significantly increased ability to identify the customers who belong in each. Gives several examples. Ends with prediction that one-to-one mass customisation is unlikely to replace segmentation, quoting cost and lack of data on competitors’ customers or non-users. A useful introduction to very basic segmentation for those who are not, or think they cannot be, involved in it. Those already involved may find the bit on dual-objective segmentation interesting; the whole is probably more valuable for business-to-business than consumer marketers. Research: ✽✽ Ref: 2104

Brands, marketing, value reporting, finance directors

Practice: ✽✽

Originality: ✽✽

Readability: ✽✽

Connecting market research with shareholder value D. Haigh THEORETICAL. Journal of Brand Management, Vol. 7, No. 3. p. 153 (8pp) Claims that the value added to a company by brands is of increasing importance to marketers, finance directors, company analysts and the City. Asserts that brands add value by lifting the demand curve; illustrates by reference to conflicting performance of identicalspecification cars with strong and weak brand presence. Holds that changing accountancy standards include a desire to reflect a company’s true worth by including consideration of intangible assets — including brands. But there is an information gap: ‘value reporting’ of such items as cash flows, asset revaluation, analysis of shareholder returns, customer and staff satisfaction and attitudes, brand performance, innovation and new product development is lacking. Hence a growing need for marketing research, which is asserted to be an integral tool in valuations. Reports a survey by Brand Finance plc of companies’ and independent analysts’ views concerning current practices in branding, marketing and financial reporting. Suggests that finance directors are increasingly involved in brand strategy projects; that they demand more consistent market and brand tracking; that their relationship with market research must become ‘more direct’; and that brand management is steadily entering their remit. The need for company balance sheets to reflect the kind of assets (not always intangible) long ignored by accountants is sensibly expressed. The idea that these late converts to common sense might

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Abstracts end up running marketing departments is horrifying, and, I trust, unrealistic. (See the important article by Srivastara, Shervani and Fahi abstracted in New Marketing Directions, Vol. 1, No. 4.) Research: ✽✽ Ref: 2105

Customer recruitment, profitability, channels, modelling

Practice: ✽✽

Originality: ✽✽

Readability:✽✽✽

RecruitmentPlanner — A methodology for optimising recruitment spend on higher value customers T. Bradley A NALYTICAL . Journal of Financial Services Marketing (UK), Vol. 3, No. 3, p. 271 (10pp) Alleges that customer recruitment by companies is often product focused, without consideration for future customer profitability. Describes a proprietary system for recruiting customers according to their individually predicted future contributions. Indicates how a model is built, using historical data collected at recruitment time from a cohort of existing customers and subsequent performance data for that cohort, in order to predict future profitability of new recruits having similar characteristics. Gives example (not clear whether this is actual or constructed) of differing profitabilities by recruitment channel and product offered in the insurance business; indicates how channel usage and offer terms can be manipulated to improve overall profitability. Claims this system allows the user to manage, in combination, these variables: recruitment medium, terms of offer to each individual or group, whom to recruit or refuse, and geographical target areas. Some interesting ideas, which need not be confined to financial services or dependent on proprietary systems. Well worth a look by marketers in any product area with multiple customer recruitment channels. Research: ✽✽ Ref: 2106

E-commerce, channel conflict, value chain, partnerships

Practice: ✽✽✽ Originality: ✽✽

Readability: ✽✽✽

Mad as hell R. Garner JOURNALISTIC. Sales and Marketing Management (US), June 1999, p. 55 (6pp) Relates how US dealers and distributors are fighting back against manufacturers selling direct online. Discusses strategies for managing channel conflict, quoting research to show that nearly three-quarters of companies see this as increasing; gives instances of ‘power-chaining’ where a manufacturer puts his inventory on a VAR’s Web page, or turns online customers over to a dealer for supply of goods (as Hewlett-Packard, for example, does). States the problem is ‘how to reward valuable partners for services previously rendered’. Suggests

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Abstracts that e-commerce is not an all-or-nothing proposition: Sun Microsystems has adopted a slowly-slowly approach. Shows research that suggests projected increase in online sales is likely to be more at expense of other direct channels than indirect. A subject that demands much more, and deeper, analysis: exactly what are intermediaries in the distribution chain being paid for? But an interesting start. Research: ✽✽ Ref: 2107

Customer service, channels, integration

Practice: ✽✽

Originality: ✽✽

Readability: ✽✽✽

Managing profitable customer relationships in the new economy M. Jacobs SURVEY. International Journal of Customer Relationship Management (UK), Vol. 2, No. 3, p. 217 (7 pp) Discusses variety of customer service channels — voice, e-mail, Web, IVR, fax, Internet collaboration, kiosks — indicating pros and cons of each. Insists that good customer service, especially in an asynchronous environment, demands the ‘media blending’ of all these channels, leading to company response in the manner and medium requested by the customer. States that the objective must not be to optimise employee operations, but to enhance customer experience. Emphasises the need to allow customers the opportunity to talk to live representatives; staff time saved by use of impersonal channels should be redeployed into relationship building through personal communications where these are required. A sensible look at the need to integrate customer service channels. The short paragraph on Internet collaboration is particularly interesting. Research: ✽ Ref: 2108

Internet, channels, trading zones

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Boon or burden? The Internet may be both for ‘John Doe’ companies J. C. McCune SURVEY. Management Review (US), June 1999, p. 54 (5pp) Considers how e-commerce affects middle-of-the-road, non-tech companies, both business-to-business and business-to-consumer. Concludes that many have ‘obligatory’ websites that have made little or no apparent difference to their affairs, but that others have found the Web brings them closer to their customers. But states that price wars are constant on the Internet, and customers more in control; customers use shop assistants for guidance and advice, but buy on the Net for best price. Discusses the ‘death of the middleman’, with reference to Compaq’s conflict with its dealers over direct selling: notes that some two-thirds of retailers are shunning the Internet because of channel conflict. Looks at the rise of trading zones in business-to-business and

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Abstracts predicts their consolidation into one per industry. Quotes from surveys by Ernst and Young into success factors for online selling, and reasons why consumers buy online. Considers that Web trading forces companies to reconsider the real nature of their businesses. A journalistic rather than a scientific survey, but interesting for the light thrown on ordinary US experience rather than on the familiar trendsetters. Research: ✽✽ Ref: 2109

Internet, mail order, channels, distribution

Practice: ✽✽✽ Originality: ✽

Readability: ✽✽✽

Consumer acceptance of the Internet as a channel of distribution D. Van den Poel and J. Leunis SURVEY. Journal of Business Research (US), Vol. 45, No. 3, p. 249 (8pp) Investigates the viability of the Web as a channel of distribution. Researches (via 193 Dutch users of e-mail) preparedness to use two store channels (supermarket and speciality store) and two non-store channels (Web and mail order), and the importance for consumers of three ‘risk relievers’ (price reduction, well-known brand and money-back guarantee) in each. Researches also preparedness to buy on the Internet a series of products/services at different price levels, some of which involve physical delivery through the Web. Shows that, for the products concerned (cheap radio and expensive TV) a speciality store scores best, followed by supermarket and Internet (statistically indistinguishable), with mail order miles behind. Concludes that the Internet is not regarded as just another mail-order channel, and suggests two reasons. Shows that all three risk relievers are highly significant, both singly and in combination, in raising propensity to buy; inclusion of all three allows the Internet to mount a serious challenge to speciality stores. Finds a highly significant difference between willingness to use the Internet as a purchasing medium and as a combined purchase and delivery medium. Accepts that the survey sample was inevitably not representative of the total population, and ends with recommendations for further research. An interesting piece of research, with findings that should be particularly worrying for those totally wedded to traditional mail-order methodologies. Research: ✽✽✽ Practice: ✽✽✽ Originality: ✽✽✽ Readability: ✽✽✽ Ref: 2110

Database selection, responsiveness, probability

Ordering database selections by probability of response D. Dupin THEORETICAL. Journal of Database Marketing (UK), Vol. 7, No. 3, p. 280 (4pp) Challenges the traditional approach to cell-by-cell hierarchical selections of names from a database, on the grounds that some names will qualify

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Abstracts for more than one cell; these names will be overrepresented towards the top of the hierarchy of cells, and will respond at predictably better rates than corresponding single-cell names; this distorts the relative response rates of individual cells. Demonstrates, from constructed example, the consequences of reversing the hierarchy. One table (Table 3) is irritatingly and misleadingly misprinted, but the thesis is convincing and potentially important. This author has consistently (and correctly) maintained that duplicate qualification of names for selection in different sets has consequences insufficiently understood by practitioners. Research: ✽✽✽✽ Practice: ✽✽✽✽ Originality: ✽✽✽✽ Readability: ✽✽✽ Ref: 2111

Modelling, market research, attitudinal data

Attitude and behaviour: A marriage made in heaven? S. Koslowsky THEORETICAL. Journal of Database Marketing (UK), Vol. 7, No. 3, p. 246 (8pp) Discusses the problem of obtaining and using attitudinal data. Describes, with the help of a constructed example, how the results of a small-scale survey can be correlated with existing transactional, behavioural or sociodemographic data on a database to build and validate a predictive model. Indicates that the value of this type of modelling to predict ‘soft’ data will vary with circumstances. Table 4 is badly misprinted, and Figure 4 has a minor error. Otherwise this is a clear, easy-to-read, elementary introduction to modelling based on small-scale market research: the methodology holds good regardless of the type of predictions sought. Research: ✽✽ Ref: 2112

Selection, decision engines, ROI

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Practice: ✽✽✽ Originality: —— Readability: ✽✽✽

The impact of a one-to-one decision engine on direct marketing J. Berry THEORETICAL. Journal of Targeting, Measurement and Analysis for Marketing (UK), Vol. 8, No. 3, p. 209 (13pp) Introduces the concept of a decision engine as a piece of software enabling optimal promotional decisions to be made about individual persons across a range of alternatives. Emphasises the alleged difference between determining which treatment is best for a group of customers, and which is best for each individual. Gives a constructed example of an optimising approach (using a proprietary decision engine) to selection for three offers versus an allegedly traditional non-optimised method; shows also the effect, in the latter case, of altering the sequence of selections. Discusses the taking into account of different final ROI from product ordering by different customers, the effect of

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Abstracts minimum ROI criteria, and rules about minimum contact intervals. Touches on problems of data availability, process change and testing. Concludes debate should be about how, not whether, to use decision engines. A clearly written article with interesting ideas, even though the examples do seem tailored to fit the thesis. The reiteration of the fashionable, and largely irrelevant, nostrum (in this context) of one-to-one marketing is a minor irritant. Research: ✽✽✽ Practice: ✽✽✽ Originality: ✽✽ Ref: 2113

Relationship marketing, database marketing, interaction

Readability: ✽✽✽

The interaction data framework: Measuring the suitability of the customer database for relational strategies J. C. Hoekstra and E. K. R. E. Huizingh THEORETICAL. Journal of Database Marketing (UK), Vol. 7, No. 3, p. 232 (14pp) Contends that, with the shift in marketing focus from transactions to relationships, changes arise both in the need for a customer database and in the type of data that needs to be collected. Stresses that a relationship is a two-sided phenomenon, involving interaction; that shortterm objectives like sales volume should be replaced by long-term objectives such as customer satisfaction, and market share by share of customer. Discusses three dimensions of data, and the changes required from historical practice in relation to each dimension: data should be about individual customers, not merely groups; they should relate to future activity, not merely historical; they should include ‘external’ data, not merely the internal data derived as a by-product of ordering. Describes at length a field study in the Netherlands among some 100 assorted companies to determine the extent to which companies had interaction data that fulfilled these criteria. Concludes that companies are still at a transitional stage from transaction to relationship marketing; however, marketing-oriented companies are better equipped. Long-time direct marketers may well feel that this article merely expresses as a theoretical concept something they have been doing in practice for decades, and smile at hearing it described as new. But for others, better late than never. Research: ✽✽ Ref: 2114

Customer management, CRM

Practice ✽✽

Originality: ✽✽

Readability: ✽✽✽

Why CRM is NOT enough M. Stone SURVEY. Customer Management (UK), March 2000, p. 21 (4pp) Gives a short survey of a variety of customer management methodologies, with guidance on how and where each might be used,

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Abstracts emphasising the overlap between them. Methodologies listed are one-to-one, transparent marketing, CRM, personalised standard offers, top vanilla, spot-sell (through agent or stand-alone), auctioning and partnership. Lists the factors that might influence a choice of which method, or mix of methods, to use. A brisk run-down on fashionable customer management theories, making it clear that CRM is not the only answer. Research: ✽✽ Ref: 2115

Practice: ✽✽

Originality: ✽

Readability: ✽✽✽

Life-cycle-based donor performance analysis B. Miller and J. van Wyk THEORETICAL, WITH EXAMPLE. International Journal of Non-profit and Voluntary Sector Marketing (UK), Vol. 5, No. 1, p. 73 (8pp) Contends that the mass of data available in databases can lead to data overload, making database audits a tool for understanding database compositional changes — but that such audits often themselves create statistical overload. Suggests a life-cycle model, which classifies donors into new, transitional, core, lapsed and deeply lapsed, and provides paths for movement between categories. Recommends an analysis of this model, with special attention to the ‘continuation rate’ of donors; then shows how this model can be used for forecasting as well as historical analysis. Gives a real-life example (with changed name) of a charity using this method to improve results.

Life cycle, performance analysis, donors

A clear account of a simplified approach to life-cycle analysis whose value is by no means confined to non-profit organisations. Research: ✽✽ Ref: 2116

Lifetime value, recruitment, donors

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How much are new donors worth? Making donor recruitment investment decisions based on lifetime value analysis T. M. Aldrich CASE STUDY. International Journal of Non-profit and Voluntary Sector Marketing (UK), Vol. 5, No. 1, p. 81 (9pp) Summarises an investigation into future expected lifetime value, by recruitment source, of donors to Sight Savers International. Notes inadequacy of previous methods of measuring recruitment effectiveness. Indicates practical problems of forecasting future value from historical data, namely increasing inadequacy, as one goes back in time, of data for earlier periods; use of new recruitment sources in more recent periods; the difference between ad hoc and committed giving; and the need for a dynamic model. Emphasises that these problems cannot be perfectly overcome, but that a practical model, using assumptions where

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Abstracts necessary, is possible. Shows in outline how this is done, and provides resultant ROI figures for each recruitment method as of July 1999. A clear account, whose value is not limited to non-profit organisations. Research: ✽✽✽ Practice: ✽✽✽ Originality: ✽✽ Ref: 2117

Loyalty, smart cards, Tesco, Sainsbury, Boots

Readability: ✽✽✽

A classic example of a misnomer: The loyalty card S. Worthington SURVEY. Journal of Targeting, Measurement and Analysis for Marketing (UK), Vol. 8, No. 3, p. 222 (12pp) Claims that loyalty cards are not truly about loyalty, but rather that they offer a conduit for a flow of information and rewards between suppliers and consumers: holds that this exchange is potentially of much greater value to both parties than any supposed ‘loyalty’. Looks at the origin of loyalty schemes in the UK in the Co-op movement, and notes modern schemes in a number of other countries. Considers how cards are used in some of the more prominent schemes; looks at the success of Tesco in the UK grocery market, and concludes that some part was played by its Club Card — much of it as a result of being a ‘first mover’. Looks at the development of ‘smart’ cards, especially by Shell and Boots. Discusses the uses made by Tesco, Sainsbury and Boots of the consumer data made available by card users so as to subdivide their clientele. Concludes that no one should regard a loyalty programme as a bolted-on accessory: it should be part of an organisation’s central strategy. The Holy Grail of such a strategy should be the acquisition of enough data to enable the retailer to offer the one-to-one service previously available from a corner shop. An unexciting but sane look at the real, as distinct from the advertised, value of ‘loyalty’ cards. But is the quest for the Holy Grail truly a sensible way for most of us to spend our time? Research: ✽✽ Ref: 2118

Loyalty, satisfacton

Practice: ✽✽

Originality: ✽

Readability: ✽✽✽

Whence consumer loyalty? R. L. Oliver THEORETICAL. Journal of Marketing (US), Vol. 63 (special issue), p. 33 (12pp) Holds that there is a relationship between satisfaction and loyalty — but it is asymmetric: loyal customers tend to be satisfied, but satisfied customers are not necessarily loyal.. Considers the place of customer satisfaction in loyalty, and asks what proportion of the latter is due to the former. Concludes that satisfaction is necessary to loyalty formation, but lessens in importance as other factors emerge, such as personal

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Abstracts determinism (‘fortitude’) and social bonding, both institutional and personal. Distinguishes phases of loyalty — cognitive (based on knowledge and experience), affective (based on liking), conative (based on intention to purchase), and action (readiness to act). Discusses obstacles to loyalty, such as consumer idiosyncrasies and switching incentives. Opines that ultimate loyalty cannot be achieved by all marketers, owing to the nature of many products or to customer disinterest; lists five desiderata for its achievement, which are likely to be missing, for example, from food and household products and commodity-like items. Discusses current trends that militate both for and against formation of loyalty. Ends with suggestions for direction of further research. An easier-to-read article than most of its kind: should give practitioners some insight into the theorising that lies behind such nebulous concepts as satisfaction and loyalty. Research: —— Practice: ✽✽✽ Originality: ✽✽✽ Readability: ✽✽✽ Ref: 2119

Satisfaction, market research, customers

The almighty customer L. Wah JOURNALISTIC. Management Review (US), Vol. 88, No. 2, p. 16 (7pp) Claims that most companies are still locked into the business of conducting satisfaction surveys, even though it is now recognised that ‘satisfied’ customers can prove fickle. Holds that it is necessary to understand customers, who are now moving from the information age to the knowledge age, and looking towards the bio-materials age. Suggests a profile of a customer in 2020. Suggests that ‘zero-defect’ and even ‘zero-time’ strategies are now just antes to compete, not differentiators. Condemns reliance on traditional customer surveys, and gives two instances of their spectacular failure. Asks how to identify latent, unexpressed customer need, and suggests a strategy of ‘mutually dependent learning’, and ‘practising with customers’. Quotes Honda as an exemplar of this technique. Predicts that future customers will be ever more demanding and will become the drivers of the business process: ‘Make customers the head of marketing …’ Suggests customers do not just want personalised products (how can you personalise toothpaste?), but individualised service. Another glimpse of a brave new world where the customer is king. Funny thing is, the news has not reached any of my suppliers — not yet. Personally I would settle for zero-defect and/or zero-time, if I could find anyone offering either. Research: ✽ Ref: 2120

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Abstracts Internet, retail

From retailing to e-tailing J. D. Calkins, M. R. Farello and C. S. Shi SURVEY. The McKinsey Quarterly (US), 2000, No. 1, p. 140 (5pp) Opines that store-based retailers now setting up on the Web have some advantages over pure Internet companies. Lists the three fundamentals of e-tailing as content, community and commerce. Describes four e-tailing business models: channel supporter, category killer, auctioneer and vertical portal. Reveals seven levers for an incumbent retailer on the Web: exploit the possession of two channels; maximise each transaction value; exploit your low customer acquisition costs; exploit alternative revenue streams; use Internet-based purchasing; reduce customer churn; maximise prices. Recommends consideration of a separate e-tail company. Some excellent advice for retailers about to dip a toe in the Internet water. Research: ✽ Ref: 2121

Internet, interactive television

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The Internet and interactive television K. O’Donovan SURVEY. Admap (UK), March 2000, p. 29 (2pp) Looks at the growth of iTV (predicted to generate $7bn in e-commerce by 2004) and its likely impact on the Internet ($380bn by 2003). Opines that iTV will ‘avoid the confusing mess of the Internet’ and put control back in the hands of broadcasters — unlike US development of ‘the Web on TV’. Suggests that consumers will not relinquish their PCs in order to access the Internet via TV, since the PC has many other uses. Holds that iTV and the Internet are complementary, with each having potential the other lacks. Raises interesting questions about the difference between iTV (where the viewer is seen as a captive audience for the advertiser) and the Internet (where the advertiser is the passive recipient of the consumer’s demands). Is this right, can they co-exist, or who will win? Research: ✽ Ref: 2122

E-commerce

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What happened in January? R. A. Oliva JOURNALISTIC. Marketing Management (US), Summer 1999, p. 51 (4pp) Asks why observation suggests that, within particular firms, interest in e-commerce seems to grow in sharp bursts rather than as a smooth continuum. Notes Forrester’s prediction that business-to-business ecommerce will top $100bn by 2003, compared with consumer e-sales of $12bn; comments that growth towards that volume will be stepped rather than linear. Notes that the activity, potential and value of a

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Abstracts network increase as the square of the number of its members (Metcalfe’s law): ie as members increase arithmetically, value increases quadratically. Suggests that this may cause people to overestimate the uptake of new technology in its early stages, but to underestimate later developments. Quotes G. A. Moore’s division of technology adopters within markets into Innovators, Early Adopters, Early Majority, Late Majority and Laggards, forming a bell curve — but with a ‘chasm’ of time between Early Adopters and the Early Majority. Surmises that similar dynamics may operate within a single organisation. Suggests that 1994–95 was the Innovators age in e-commerce, with 1995–97 for Early Adopters, followed, for many firms, by the ‘chasm’. As finally the Early Majority starts to climb on board, a tornado effect sets in: at this stage it is essential to prioritise efforts. A short article which mostly draws on others’ work — but is valuable for its crystal clarity in expounding important concepts. Research: ✽ Ref: 2123

Data warehousing, enterprise resource planning

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Information rich, knowledge poor? J. Teresko and D. Bartholomew JOURNALISTIC. Industry Week (US), Vol. 248, No. 3, p. 19 (5pp) Notes the development, since the early 1980s, of the concept of data warehousing, accounting in 1997 for $2.1bn revenue in the US software market, and forecast to grow towards $5bn. Observes this started in the consumer goods sector, and instances particular uses for the concept that developed later in other industries. Points to two instances of Web-enabled solutions to data-warehousing problems, and discusses analytic applications in the business-intelligence and knowledgemanagement fields. Notes the recent convergence of data warehousing and enterprise resource planning (ERP): believes that the former will shape future offerings of the latter. Looks forward to closed-loop systems when data stored in a data warehouse, developed and analysed, can be incorporated in operational systems. An interesting glance at recent developments in the application of data-warehousing techniques. May convince some laggards of the need to get on board. Research: ✽ Ref: 2124

Privacy, ethics, direct mail, telemarketing

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Direct marketing and privacy R. Christy and S. Mitchell THEORETICAL. Journal of Targeting, Measurement and Analysis for Marketing (UK), Vol. 8, No. 1, p. 8 (12pp) Discusses extent of, and reasons for, consumer privacy concerns in relation to direct mail and telemarketing. Suggests the two main areas of

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Abstracts concern are unwelcome sales approaches and unease about availability of personal data. Suggests in capitalist society it is acceptable for sellers to approach potential buyers; this gives rise to the concept ‘OK to approach, unless …’. Also holds that worries about availability of data principally spring from a feeling of loss of control, particularly with reference to selling or swapping of data. Discusses business ethics in relation to privacy, asking what business’s purposes are: discusses need for long-term considerations. Considers what are the reasonable expectations of different participants in the personal data business, and how these expectations can be met by ethical behaviour all round. Concludes that, even when everyone behaves reasonably, it is still impossible to avoid residual problems: ‘risks are inherent in the decision to use direct marketing techniques’. However, these residual problems can be addressed by a combination of regulations, codes of behaviour, registration schemes and goodwill recovery procedures. A useful introductory run through, for those new to the issues, of the underlying privacy concerns of consumers. A bit too optimistic about the answers: the sweetly reasonable tone of this piece will not solve all the problems Research: —— Ref: 2125

Stock market, valuations, investment, risk premium

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Has the market gone mad? S. Tully EVALUATION. Fortune (US, published in Switzerland), Vol. 141, No. 2, p. 56 (5pp) Asks why it seems that the inmates are running the (stock market) asylum. Spells out the accepted method for valuing a stock, based on expectation of future earnings plus cost of capital. Indicates that, given a cost of capital in line with past experience, future earnings of major high-tech stocks would have to grow at more than 30 per cent per annum compound for 20 years if they were to meet investor expectations. Proceeds to offer four possible alternative rational explanations for current events: the market is riding a tide of babyboomer retirement dollars; great companies make great stocks; the risk premium (which forms part of the cost of capital) is shrinking; and in the knowledge economy profits really can grow faster than ever. Dismisses all of these. Is left with final conclusion (which has been conspicuously wrong over past years) that the market is madly overvalued and cannot maintain this level. The logic is irrefutable, and the conclusion is inevitable — in the long run. The question, as ever, is one of timing. Research: ✽✽ Ref: 2126

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Abstracts High tech, DCF, valuation, dot-coms

Valuing dot-coms D. Desmet, T. Francis, A. Hu, T. M. Koller and G. A. Riedel THEORETICAL. The McKinsey Quarterly, 2000, No. 1, p. 148 (10pp) Notes that some commentators on capital markets regard the valuation of new high-tech companies as impossible. Claims that use of classic DCF analysis, buttressed by micro-economic analysis and probability weighting, will produce rational valuations — although without removing uncertainty. Suggests that such an analysis should start by postulating a company’s predicted revenues in, say, ten years’ time, then working out its year-on-year discounted revenues back to the present. Does this with Amazon.com, using four alternative scenarios and making further assumptions for each scenario about operating margins, capital requirements, operating costs, etc. This gives a DCF value for each scenario; each is then multiplied by a probability factor to give an expected value. The sum of these four expected values ($23bn) is the market value of Amazon.com at 31 October 1999. Shows the wide swings produced by altering the probability factors: this is a symptom of uncertainty. Considers how many customers at what average revenue, acquisition cost and churn rate would be needed to meet predicted revenues. Suggests current valuations are not truly irrational, but merely reflective of uncertainty levels. The methodology is impeccable, but might have carried more conviction had the authors been ignorant of the actual Amazon share price when they started. Still, a clear and interesting exposition for aspiring market traders. Research: ✽✽✽ Practice: ✽✽✽ Originality: ✽✽✽ Readability: ✽✽✽✽ Ref: 2127

Graphs, statistics, tables, charts

What we can and cannot get from graphs, and why A. Ehrenberg EXPLICATORY. Journal of Targeting, Measurement and Analysis for Marketing (UK), Vol. 8, No. 2, p. 113 (20pp) Contends that graphs, if they are to convey tangible information, should have a verbalised story-line; graphs can be good at illustrating simple qualitative patterns, but do not deal well with numbers or quantities. Bases this on the nature of short- and long-term memory, and people’s relatively poor visual memories; illustrates with simple, and amusing, examples. Notes the difference between recognition (visual) and recall (verbal). Indicates the case for (well-constructed) tables, rather than graphs, for some purposes, with further examples. Adds appendix, with devastating critique of the Economist’s criticism of a graph in the Far Eastern Economic Review. For anyone involved in preparing visual presentations, this article is a must. Research: ✽✽ Practice: ✽✽✽✽ Originality: ✽✽✽ Readability: ✽✽✽✽✽ Ref: 2128

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