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1/9/2002
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Building A 'High Octane' Growth Machine With Technology

Guest columnist Stephen Diorio presents 12 best practices for getting more revenue at lower costs.

For years, technology has held out an elusive promise: turning sales and marketing systems into high-performance engines of revenue growth. Most of us are still waiting for results.

While many companies spent a large portion of the sales and marketing budgets on customer-relationship management, E-business, and interactive marketing, very few got the large revenue impact they'd hoped for. The bottom line? Most companies still only get $4 to $5 of revenue for every dollar invested in sales and marketing. The problem is: Most managers spend their energy digging through over-hyped technologies and trends, instead of figuring out how to use the technology to grow the top line. For example, last year's CMP Media survey indicated that seven out of 10 solution providers planned to sell to business people, and that half of senior sales and marketing executives were involved in the selection of these services and solutions.

If you are like most executives, you're swamped evaluating hundreds of services and solutions, each claiming to grow revenue and make customers happier.

The reality is that while individual technology solutions may get headlines, only those companies that figure out how to effectively blend technologies into the sales and marketing process will get results. In this article, I'll outline 12 ways sales and marketing executives (and their agencies) can "engineer" technology into their processes to grow faster at a lower cost.

Using Technology To Grow More For Less
Technology represents a huge opportunity for marketers to get more mileage from sales and marketing budgets. The best sales and marketing managers have cleverly taken advantage of (proven) advances in communications networks, databases, and new media to stretch their sales and marketing budgets and stay a step ahead of their customers' needs. The success of companies like Dell Computer, IBM, Charles Schwab, Amazon, and e-Bay has shown us that marketers who use technology to support their selling approach can gain competitive advantages in their markets.

Getting tangible top and bottom line growth from stalled investments in CRM, E-business, call-center, and interactive marketing solutions requires a change in focus. As a starting point, examine these market leaders' experiences to better understand the keys to getting returns on their technology investment. The 12 best practices outlined below (explained in more detail in my recent book, referenced later) can help your company overcome technology roadblocks to get more revenue from your existing budgets.

Not all these suggestions will apply equally to your company. But don't watch your business brethren stumble on the road to E-business success; understand, instead, which three of these best practices can provide the greatest impact to your company. They will help IT professionals avoid others' pitfalls and prioritize which tools and support to deliver.

1. Learn to manage many channels.
Often, the "pain" starts when we try new channels and media to reach our markets. For example, in the late 1990s, when companies like Hewlett-Packard and Herman Miller Inc. first began to sell to small businesses online, they had problems mixing E-commerce with real-world selling partners. Their third-party distributors and partners were unhappy about being cut out of online sales.

To keep these important channel partners happy, those companies' first E-commerce efforts included only a few of the thousands of products they offered. Hewlett-Packard established an online beachhead by offering only a few printers and spare parts, and Herman Miller sold select office equipment targeting the "work at home" market, because their distributors did not care much about these little customers. Over time, these companies figured out the proper balance of offerings, lead management systems, and online partner services to make the combination of online and offline selling work for everyone.

2. Understand how technology changes branding.
Once the E-commerce channel was open, another problem occurred. Nobody cared. Few people thought of Herman Miller or Hewlett-Packard when they were online. In fact, according to 2000 rankings, of Netratings' Top 20 most popular Web sites, only two companies existed before the Internet: Microsoft and American Greetings. Companies have to rethink branding strategies and investment in new technology enabled marketing programs, such as viral marketing and E-care systems, to remain relevant to the changing needs of online buyers and take advantage of new media and networks.

3. Design the product to fit the channel.
When customers arrived at the Web site, the product lines confused them, making it difficult to buy. A home-office worker who contemplated buying a Herman Miller desk had a hard time determining if it would fit well in his office, unless he could physically see the desk in a store.

Herman Miller needed to adapt the way it represented products on the site, by providing architectural drawings and tools to help people "see" whether the product "fit" before paying expensive delivery charges. Marketers who do a good job repackage and design products so they can more easily be sold through the Internet channel or the mix channels have a big advantage.

4. Equip yourself to win in online markets.
Online marketplaces are giving thousands of sales and marketing managers a brutal new lesson in the golden rule: Those with the gold still make the rules. As more customers buy through these marketplaces, the balance of power will shift from seller to buyer. And the keys to success will be very different.

For example, at the time they launched their Web channel, Hewlett-Packard's distributors were reselling products whose prices might range from $400 to $800. Any customer who searched the Web could easily determine that, by driving (say) 25 miles out of her way, she could get a substantially better price on a printer. While distributors were happy to get the leads, they were understandably upset about having to cut profit margins to compete. To sell though online marketplaces like Internet auctions and business-to-business exchanges, marketers need to adapt their approaches to pricing, channel management, and marketing.

5. Find ways to add value to field sales.
If, after all this trouble, customers actually buy things on the Web site, it's very likely that your field salespeople will want to take credit for these online sales. A survey of 50 large companies that sold through many channels found that field salespeople still brought in more than 60% of sales.

Keeping these expensive selling resources happy and productive is still very important. Best in class companies have discovered nine sales "adjustments" that allow their field sales forces to use technology to sell more for less. Sales executives who find ways to add more value relative to other less expensive channels (like tele-Web and partner channels) will have a big advantage.

6. Add "interactive" to the marketing mix.
For other companies, the pain starts when marketers launch interactive direct marketing campaigns using targeted Web advertisements, search engines, and E-mail marketing programs. These interactive direct marketing tools have the potential to take the game of direct marketing to another level. They are more interactive, more measurable, easier to target, and less expensive. In many cases, they perform better.

For example, permission E-mail marketing programs are 10 times more effective than regular direct mail at getting customers to respond to marketing messages. Companies that learn how to integrate the best interactive tools into the marketing mix through disciplined experimentation and painful budget shifts will have much lower marketing costs.

7. Make the call center strategic.
When companies start to use E-mail and Web marketing to reach customers, they learn that what goes out typically comes back. Customers write back online. Until 2000, customers electronically contacted the average Fortune 500 company well under 1,000 times a week. EBay--which weekly gets over 100,000 inbound requests--paints a better picture of the future of service.

Most companies don't think ahead. Either they do not have enough people or systems in place to answer customers well, or they pass those customer E-mails to call-center reps who have day jobs answering phones. You'll need to transform the call centers into a strategic selling channel that plays traffic cop for a variety of online media and telephone communications.

8. Deliver service without humans.
Sometimes the call center isn't big enough to handle online traffic. In other cases, such as retail, there are not enough call centers. During Christmas 1998, most new online retailers, such as Toy "R" Us Inc., didn't anticipate how many people would need help buying online. To leverage human operators and keep both online and offline customers happy, companies have the opportunity to invest in software systems and process changes.

9. Build exit barriers with CRM.
Toys "R" Us had a particular problem that Christmas. When customers were unhappy with the way they were treated they could shop elsewhere. E-business has torn down many "switching costs" that used to keep apparently-loyal customers from leaving.

Geography is no longer such a good switching cost in retail. Unhappy customers leave in big numbers. This caused retail and financial industries to invest millions in expensive CRM systems. But technology alone will not solve the problem. Marketing managers have to find ways for these expensive CRM systems to actually keep customers from leaving to get their return on investment.

10. Reorganize around the customer.
These complicated CRM systems usually rely on lot of information about customers. As a result, to better target customers and offer personalized services, marketers are storing mountains of customer and prospect information. In 2000, over 30% of large companies had built very large customer databases that exceeded a terabyte, according to the META Group. By comparison, in 1990 only a handful of companies had built databases about their customers that approached that size.

Companies that can reorganize around customers and processes (instead of products and business units) will get more out of technology, customer data, and existing relationships.

11. Master networks of media and middlemen.
Auto manufacturer General Motors Corp. recognized early on that they'd need to manage an expanding number of third-party distribution channels, communications media, and partnerships when they sold online--particularly their high-growth/high-margin car related services.

The percentage of new car buyers who shop online for cars jumped from 16% to over 65%, from 1999 to 2000, according to J.D. Powers research. A new set of virtual middlemen ("infomediaries" and Web marketers, such as Auto-by-tel, Microsoft Car Point, Autosite, and Autoweb.com) began to steal customers and business from the dealer channel that GM had built. GM had to scramble to react, by building a portal into its factory, and outspending every other company in online advertising. Companies need to manage new types of distributors and deal with constant shifts in the balance of power.

12. Get the right help.
Technology has become necessary to effective sales and marketing. According to a 2000 CMP Media survey, 61% of companies reported they had deployed an E-business initiative in the majority of their business units. These modern sales and marketing programs require a very different set of skills and technical resources, and most of these have to come from outside partners.

Finding and sourcing the wide variety of skills needed to execute sophisticated E-business programs will prove more complicated than hiring an ad agency. Those that know what they are buying and who get good at buying it will have an advantage over those who make bad choices or hire unqualified agencies. Sales and marketing executives will need help from IT to better understand and manage a new breed of outsourcing service providers and agencies.

Stephen Diorio is founder and president of IMT Strategies in Stamford, Conn., and author of Beyond e: 12 Ways Technology Is Transforming Sales & Marketing Strategy (McGraw-Hill, 2001), which provides executives with a blueprint for using technology to grow revenue. He can be reached at sdiorio@imtstrategies.com.

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