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.
"With 60,000 channel partners in Asia alone, how do you educate resellers on a new product offering or coordinate awareness of a new campaign?" Answer: the Internet.
It's fast becoming a cliche to say that e-commerce is going to be big. The numbers speak for themselves. Deloitte Consulting says that 91 percent of U.S. businesses will not only be up on the Net, but also doing transactions there by the end of the year, up from about 30 percent today.
These numbers reflect industry optimism about the huge opportunities of funnel sales onto the Web. But behind the scenes, sales organizations everywhere are scrambling to figure out how best to exploit those opportunities. The Internet is changing traditional relationships between buyers, sellers and middlemen. And one can only wonder what impact online selling will have on other aspects of business--production, marketing, sales and service. In short, big opportunities are ushering in big changes.
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 a few 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. These might be cross-sell, up-sell or even product awareness campaigns. For example, the system might automatically generate a personalized discount offer to a business customer who has not recently purchased toner but is due to buy it soon.
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.
Ford and General Motors:
streamline the Demand Chain
Like HP Asia, the Internet sales strategies of the major auto companies are largely about creating a direct channel to the customer. For automakers like GM and Ford, the Internet is a powerful communications tool, but it also has the potential to radically shorten the cycle of identifying consumer tastes and satisfying them.
In January, GM chairman John Smith Jr. claimed that GM's presence on the Internet would drive sales of new vehicles from 50,000 to 100,000 this year. Given the average price of a new car, he's saying that the Internet might help sell a couple of billion dollars worth of cars by year's end.
Opportunities like that were behind the launch of GM's BuyPower Web site back in October of 1997. That system allows customers to check the inventories of nearby dealerships to find a certain type of car. Customers can request "no-haggle" pricing and even apply for financing. Today, the site gets around 650,000 hits per month.
Lately the big automakers have been falling all over themselves to expand their Net presence. GM struck a deal with America Online and NetZero in January. Meanwhile, Ford launched new personalized services in partnership with Yahoo!Auto and Owner Connection. Already, Ford.com attracts more visitors to its site than any other automaker, according to Media Metrix. The deal with Yahoo! is expected to increase Ford's exposure to about 105 million online users. And according to GM's Smith, net exposure for GM's brands are expected to jump ten to fifteen times last year's levels.
"Our agreement with Yahoo! enables us to reach consumers where they spend their time online to better develop an ongoing relationship with vehicle owners throughout the lifetime of their ownership," says Ford's chief executive, Jac Nasser. The services include access to owner guides, recall notifications, Ford Credit account information, service reminders and vehicle maintenance logs. Customers can also access clubs and message boards about their vehicles and participate in online chats with Ford engineers and other company officials. "This is another element of our totally integrated e-business strategy. We are connecting with consumers through multiple touch points on their turf, at their time and on their terms," Nasser says.
Franchise laws restrict automakers from selling directly to consumers via the Web. And given the significance of an automobile purchase, many in the industry doubt customers will buy a car they haven't test-driven first. Accordingly, rather than going direct, automakers' Web sites typically refer customers to the appropriate dealer near them. They also funnel registered buyers to the dealer network for scheduled service. Meanwhile, dealers themselves are launching Web sites of their own and partnering with online automobile marketplaces like Autobytel.com and AutoWeb.com.
The Internet allows companies to collect information about consumer preferences in ways that they cannot in the physical world. Take the case of a person who goes to a dealership hoping to buy a red Ford Explorer without a sunroof. When she gets there, a professional salesperson is able to talk her into taking a yellow Explorer with a sunroof. As part of the compromise, the salesperson may even drop the price.
For Ford, this is a frightful scenario. If data show the sale of enough yellow Explorers, the manufacturer thinks people want yellow vehicles and makes more. It risks spiraling away from satisfying customers.
Connecting with consumers over the Internet, on the other hand, can produce powerful efficiency by collecting more reliable information about customer tastes directly from customers themselves. What automakers dream about is producing only what customers want. Instead of lumbering behemoths with inventory that fails to sell, Ford and GM want to be more like agile sports cars racing the right product to customers just in time.
Boosting efficiency is the goal of another arm of automakers' Internet sales strategies: the integration of auto industry supply networks. In February, the big three automakers, General Motors, Ford and DaimlerChrysler, announced they were banding together to form a single online trading network to handle the billions of dollars of parts and supplies they buy each year. The companies have begun moving their purchases--totaling nearly $250 billion a year with almost 60,000 suppliers--online. This single online presence supplanted the separate initiatives founded by GM and Ford earlier. While B2C online markets hold future promise for automakers, these back-end partnerships are already yielding huge savings.
strategically, these back-end initiatives are what are needed for automakers to respond in real time to customer tastes. There is speculation that within just a few years, manufacturers will be delivering custom manufactured cars as ordered by people on the Internet.
Like Henry Ford's fair wages, the company's announcement earlier this year that it will give a computer, printer and Internet connection to every one of its 300,000 employees worldwide is indicative of its commitment to the future. The company hopes that the computers they are starting to deliver this month will raise the level of technological savvy throughout the organization, helping to brand Ford as an innovator. Ford's goal, says Nasser, is "a totally integrated communications system, a totally integrated Internet strategy for Ford Motor Company."
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. The company's product selection was unique, and perhaps because it offered items that were available almost nowhere else, REI developed an almost cult-like following. Like so many yuppies proudly clutching starbuck's coffee cups, adventure buffs flocked to REI.
The first transformation came in the early 1980s when REI ventured into the wilds of mainstream retail. Like many consumer-direct marketers at the time, REI caught on to the retail boom in America and opened stores. It didn't expand as much as Sharper Image or J Crew, but the company now has 54 retail locations and will be opening in Tokyo soon. Importantly, what REI brought with it from the catalog was its image. The company's flagship store in Seattle, for example, is replete with a waterfall, a cliff face for climbing and all sorts of exciting displays that bring the company's enthusiasm for the outdoors inside.
Next came the Web and the big question whether or not the company needed another sales channel. Would the Internet simply rob sales from retail stores and nullify that sizable 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. "We've attracted new customers and created a new alternative for our existing customers," says Hastings. That combination is the future for all merchants, she says. Traditional catalogers are proving particularly adept at leveraging their existing expertise and infrastructure for warehousing and shipping into success online.
REI is handling the new channel remarkably well. The Web store has become the single largest performer for REI. 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.