Relationship Life Cycles and Net Markets

Relationship Life Cycles

However, one might ask, “where does the relationship life cycle fit with all this talk of the New Economy?” The answer to this question is quite simple. One needs only to look at the characteristics of the product or service that is the focus of the question. In the general Net Market model today the focus has been on processes that require the following:

  • Visibility
  • Transparency
  • Frictionless
  • Liquidity

Visibility represents the openness that processes need to attract in order for many buyers and sellers to interact Such processes include Auctions where efficiency is enhanced when the offer is highly visible to multiple buyers; or in the case of a reverse auction, the deal. In all cases low barriers to entry are highly desirable in order to get access to the largest part of the market.

Transparency is where the all information flows freely between interested agents in the processes. This means that there are no preferential relationships, hidden or otherwise, that would influence transactions and processes between parties. This often materializes in the form of an issue relating to ownership of the Net Market.Friction concerns itself with the speed at which data and the process in question “moves”.

Dynamic pricing (also requires visibility in some cases) needs to be as close to real time as possible. Making a “buy” decision on a stock price that is delayed 20 minutes is a very risky business. Basing a key decision for a buyer or seller in a similar manner could spell disaster.Liquidity refers to the profit that is created from a successful business that has created an impelling reason for both buyer and sellers to congregate at that location. Some have said that a centralized net market should make markets more efficient. If it succeed in making a market more efficient, that itself would make it a compelling reason for buyer and seller to attend. And that benefit could be chargeable.

The profit thus accrued would comprise the liquidity of that (net) market. The ‘what’ that brings buyers and sellers to return is “stickiness”. A centralized, public service offering needs to offer “sticky” services that create a need in the mind of the buyer and seller such that they return. When this is not achieved, the net market will fail.With this in mind, the Trading Exchange model thus has so far supported the Exchange and Integrate processes between (B2B) organizations such as those that are associated with Customer Orders or Purchase Orders.

Additionally other components of the Relationship Life Cycle were focused on Product Design and Dynamic Pricing. As it stands, Dynamic Pricing is an exciting area that will develop further and create a very creative market in and of itself. Product Design, as a B2B business process, has since more recently been applied to private exchanges and found to be less applicable to the public gaze on an open net market. This is because the nature of the characteristics of product design is not consistent with those of public net markets! For private net markets, the following characteristics hold:

  • Visibility
  • Velocity
  • Stickiness
  • Collaboration

Visibility here is similar to that defined for Public Net Market processes. Velocity may sound like friction, but it is different for good reason when applied to Private Exchanges. Velocity here implies that data and information needs to move quickly and speedily between systems and the net market itself. Additionally, business processes need to be speeded up.Stickiness refers to the reason why buyers or sellers come back to the site to do more business. In a private net market, by definition, a relationship exists between buyers and sellers and therefore business is talking place automatically. In the case of a buyer-centric private net market, many suppliers are brought together as preferred trading partners.

This would be an inefficient model to facilitate public dating services that are the bailiwick of the public net market. This is obvious as replication of the processes and integration need not take place and would not be cost effective. Competitive differentiation is at the heart of this issue and is best served through private relationships between organizations run deep. This is delivered via private exchanges and not on public net markets. More simply, why bother to pay a third person for access to a common service that is supposed to, by definition, offer uniquely competitive services?