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Internet Sales Strategies
Two case studies that illustrate how to harness the Internet as a sales channel.
Posted Jun 3, 2000
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At the heart of most Internet business strategies is a desire to bring companies closer to the consumer of their product, whether that be an individual or another business. Large and small companies alike are applying revolutionary technologies to automate the process of learning from and responding to customer demand. The benefits of doing so are greater loyalty, unprecedented efficiency and higher profits.

Here are two examples of how companies are developing sales strategies to leverage the Internet. While the details of each are different, all have the same goal: to use the online channel to encourage direct relationships with customers on an ongoing basis.

HP Asia Pacific: Creating a Closed Loop Marketing Network
Hewlett-Packard's Asia Pacific Commercial Channels Organization sells $3 billion worth of HP servers, PCs, printers, services and supplies to customers in 20 countries. Its customers and channel partners span seven time zones, and HP Asia provides support in five languages. While larger customers in the market are served directly by the HP sales force, all other sales go through some 60,000 resellers.

Lack of control over the reseller network, however, was a significant problem. Given the diverse territory, it was enough of a challenge to communicate a message to resellers, let alone to communicate through the resellers to final customers. HP Asia reported that without a strong program to measure campaign performance in a channel, the company had been distributing leads to resellers who often filled the orders with competitors' products. Sometimes, HP Asia was inadvertently referring customers to dealers who had no stock.

"We needed to do a better job of measuring the relationship between lead generation and revenue," says David Welch, IT Futurist at HP Asia. The company was spending 10 percent of its revenue on marketing programs, but it had great difficulty measuring the effectiveness of that annual spending. "With 60,000 channel partners in Asia alone," asks Welch, "how do you educate resellers on a new product offering or coordinate awareness of a new campaign?"

Answer: The Internet.

HP Asia became a test for Hewlett-Packard's own Front Office suite. The solution is built around marketing automation and e-commerce modules from BroadVision as well as HP's Smart Contact customer communications application. The goal was to integrate sales, marketing and call center functions and close the loop between campaign planning, execution and evaluation. By better managing leads and applying Internet marketing techniques, the company could get closer to customers than ever before and measure what worked.

The approach aimed to integrate all of the customer touch points, traditional and new: its salespeople, resellers, its Web site, the 12 call centers, even trade events and seminars. "We figured that if we could use technology to leverage our customer touch points and turn a portion of our B leads into A leads, within two to three months the project would pay for itself," Welch says.

The Net-based integrated network gave HP Asia direct feedback from its customers. While HP Asia had to be cautious not to upset its extensive reseller network by going direct, it had to watch its back, too. Riding high across Asia was that great Texan, Dell Computer. The threat of Dell's direct-channel success translating overseas set off alarms.

"We wanted to build direct-facing relationships with our customers, engage them more broadly and get to know their concerns," Welch says. At the same time, the company wanted customers to know more about HP and its products. "We wanted to find a way to bring deals and bundles directly to the market--through telemarketing or Web offers that culminate in a sale through the call center or commerce Web site--then route opportunities to the right place in the channel for fulfillment," Welch says. Previously, HP Asia didn't have a system for following leads or for maintaining relationships with customers over time.

Now, customer profiles are captured by HP's e-commerce module and fed to the BroadVision eMA marketing module. Using that database in combination with a repository of marketing business rules, HP Asia can target messages to specific customers with specific profiles.

Each campaign can be evaluated in terms of its effectiveness, cost and the revenue it generates. And future campaigns can be made more cost effective. "We don't want to spend $50 to satisfy a customer who wants a $35 InkJet cartridge," Welch says. Importantly, the solution is adaptable across the vast territories HP Asia covers. "Whatever solution we selected would need to be tuned differently for the different expectations of countries and the varying business climates, languages and cultures," says Welch. Flexibility is important for such a dispersed solution. Using standard rules for marketing, the application can be configured by local market organizations so that communication can be personalized on a one-to-one basis.

Using the Net to close the marketing loop has been a dramatic success. HP Asia was able to reduce channel switching by 100 percent. Revenues have climbed 250 percent.

Recreational Equipment Inc.: Extending a Brand Without Cannibalizing Sales
Another company that has been adept at morphing its sales channels to changing customer taste is Seattle-based outdoor outfitter, REI. This is a company that got its start as a member co-op, direct mailing thousands of catalogs to homes around the country. REI's product selection was unique, leading to an almost cult-like following. The first transformation came in the early 1980s when REI ventured into the wilds of mainstream retail. Today it has 54 retail locations, each one the embodiment of the catalog's image. The company's flagship store in Seattle has a waterfall and a cliff face for climbing.

When the Web came along REI faced the retailer's classic dilemma. Would the Internet rob brick and mortar sales and nullify that investment? REI decided that it would not. "For REI, cannibalization is a myth," says company spokeswoman Devony Hastings. "We realized early on that if someone wants to shop online and we're not online, they'll go somewhere else."

So now the company has a hot Web site. In fact, it is REI's largest channel performer. Online sales have increased two-and-a-half times over the past year and the site attracts more than one million visitors per month.

The strategy succeeded in part because REI was able, yet again, to transfer its brand image to the Internet. Along with offering a wide range of merchandise and information about store locations, the REI site lists hiking routes across the country, offers downloadable topographic maps, advice on selecting gear for various activities, and among other features, allows users to get customized content according to their particular interests--cycling or kayaking for instance. Users can also enter contests and subscribe to REI's Gearmail e-mail newsletter, which alerts them when there's an in-store event, special sale or when new merchandise arrives.

REI's experience with the Internet proves that multiple sales channels can exist without damaging each other. In fact, they can be complementary. Like the power of a well-designed physical store, the Internet can reinforce a strong brand position. The key is simply following customers and dealing with them as they wish, no matter which channel they use.

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