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Service Organizations

Traditional service organizations have also had to decide on their new strategic direction in order to take or maintain a market leadership position. Organizations with traditional bricks-and-mortar-based organizational structures such as banks, mortgage brokers, and insurance companies are having to fend off the new, low-cost competition that has the ability to directly access customers in their homes, offices, or businesses over the Internet channel.

The ability to offer services at a low cost has been most apparent in the brokerage business where significant inroads into the customer base of traditional full-service brokerage houses have been made by competitors such as E*TRADE, Ameritrade, and Datekonline which operate in only the Internet marketspace. Significantly it is often the most sophisticated trader that is lured away from the expensive full-service firms to the deep-discount brokerages, the very clients from whom the traditional brokerages make money due to their high-volume transactions combined with a low research overhead cost, since many of these clients often perform their own analyses of the markets. This development has spurred full-service firms to attempt a brand reposition strategy—one that allows clients to trade online at one fee, by telephone at a second fee level, and through a human broker at a third fee level. These organizations generally have not adopted a brand creation strategy because their brands are their strength and a dramatic change in the cost-to-service-level relationship could damage expectation levels across all channels. However, it remains to be seen if this strategy is sustainable with a sophisticated client base that is able to access information and data at a low cost from multiple alternative sources.


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