In its second-largest acquisition, Amazon buys the company for $970 million.
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The benefits that Compaq gains from promoting the web channel to customers outweigh the concerns about who owns the customer. One of the prime benefits is cost avoidance, Vogt says. Orders that come in via the web site cost Compaq $25 less to process than orders that come via phone or fax. “When you do millions and millions of transactions, the operating expense avoidance really adds up,” he says.
Another benefit is that customers who place their orders electronically pay faster than other customers. And then there are the unquantifiable benefits. “Customer experience is the softer side of e-business,” Vogt says. “Selling on the web today is all about being the best mover-who can improve the customer experience.”
Compaq offers its customers the opportunity to buy electronically a number of ways-not just at Compaq.com. A major initiative in its small and mid-sized business market is to establish extranets that host private online stores for customers. Those online stores feature customized pricing for each customer, feedback and alerts about orders, warnings to the customer when it appears that someone has exceeded purchasing authority and other services.
3,000 private stores
The number of such stores grew sevenfold last year to 3,000, Carrier says. “We get customers involved through the public store, then retain them through the private stores,” Carrier says. “It doesn`t cost us anything to set up the stores.” That strategy has been working, Carrier says: The average order of customers who buy over the extranets is six times higher than the average customer and they buy two to three times more often, he says.
But while Compaq is promoting unassisted buying on the web for its small and medium-sized business clients, it also is not insisting that customers interact only via the web. It has stepped up its investment in call center technology and reps, doubling the number of reps in the past year. It constantly moves more customers to reps: Any customer who spends more than $10,000 is automatically assigned to an account manager, who initiates contact with the customer. “It`s a good approach because if you don`t do assignments like that in the SMB space, relationships get lost,” Giga`s Enderle says.
And to further promote itself to the small and mid-sized market, Compaq in March released its first e-catalog aimed at that market. The catalog features products that Compaq believes appeal to that market. And it allows Compaq to monitor what entrepreneurs are buying and adjust its offers accordingly.
Carrier says sales to small and medium-sized businesses, which Compaq defines as having fewer than 1,000 employees, grew 25% in 2001 over 2000 and in some quarters were 50% higher than the prior year. “Our goals this year are very aggressive,” he says.
Analysts note that the small and medium-sized business market is a smart one to go after-although many other technology vendors have recognized the power of that market as well and have it in their sights. “The SMB space has historically gotten short shrift from technology vendors, so it`s an emerging market for them,” Enderle says. “The winners in this market today aren`t so much taking market share from each other as they are growing the overall market faster than it would have grown otherwise.”
One problem that arises when sellers offer customers the option to buy through multiple channels is that of coordinating information about customers. Compaq has integrated its web interface with its order management system and links all information about special pricing for customers as well as its customer relationship management system into a single database.
Boosting reps’ productivity
Thus when an account manager or customer service rep receives a call from a customer, all the information comes together from the database to that person`s desktop. “It increases productivity substantially,” Carrier says. “We`re able to measure how much revenue each rep generated and what the gross margin is. We`re in the middle of the pack there now in our industry and our goal is to be No. 1.”
Reps` productivity increased 20% last year over the prior year. So far this year, productivity is increasing at an even faster rate than last year. Part of Compaq`s strategy in that area involved training the reps not only in sales skills but in the functionality of the web as well, he says.
As successful as Compaq`s strategy has been, it is not without risks, especially as it appears that the merger between Compaq and Hewlett-Packard Co. is going forward, observers say. The biggest decision will be to make sure that Compaq and Hewlett-Packard brands don`t compete with or cannibalize each other. “This shifts Compaq to the online brand and Hewlett-Packard to the retail brand,” Enderle says. “It`s a lot like GE where Hotpoint is the builder brand and GE is the retail brand.”
Whatever the potential problems, though, Compaq says it is committed to the direct-on-the web strategy. Says Vogt: “Companies that don`t drive e-business into their businesses will struggle to compete.”
How 3-D fits Compaq`s web strategy
3-D product views have worked so well at Compaq.com that Compaq Computer Corp. is rolling the technology out to other products. “Rich media is another part of our strategy,” says Patrick Vogt, vice president for the e-business group of North America. He likens 3-D presentation to the presentation of products on special displays in stores. “Using rich media is the end cap approach,” he says.
Starting with the most visible and frequently viewed products on its site, Compaq has extended 3-D to about a dozen product lines in the past two months, including Presario and Evo desktop computers and notebooks. The company says it will continue to roll out the 3-D technology from Viewpoint Corp. until all product lines feature the 3-D treatment.
The company, while not providing details, says it is expecting a substantial increase in conversion rates because customers will be able to see more details about the devices they are considering. “This is our entry point into developing a great user experience,” Vogt says. “The customer can look at the product and get a much better understanding of it.”