Consumer Goods Technology Brian O'Connell Monthly Column January, 2002 In Consumer Goods, Retailer Dance, Collaboration the Key Can two industry behemoths collaborate without driving each other crazy? For the consumer goods and retailer sectors ­ the Oscar and Felix of the business world ­ the answer was supposed to have been business-to-business packages that could finally result in the two industries finally reading from the same playbook. But big-ticket exchanges have shied away from collaborative solutions and instead focused on nuts and bolts issues like procurement and purchasing. "The much-hyped exchanges -- Transora, Novopoint, Gofish.com -- have cooled off because companies are using B2B primarily for purchasing and procurement, without focusing on the collaborative opportunities -- c- Commerce," says Jacob Jensen, head of Roland Berger Strategy Consultants' US consumer goods/retail practice. "Collaborative Commerce is expanding the business processes that take place before, during and after the all-important order. The "c" enables the "e." E-- marketplaces, otherwise known as trading exchanges, were supposed to transform the fulfillment process and foster that elusive collaborative relationship. Trouble is, consumer goods companies and retailers ­ at least the U.S.-based ones -- haven't found it so. That's why change is in the air. The folks at London-based Roland Berger, which recently issued a study called "Betting on Internet Exchanges" say that current Internet exchanges will evolve into c-Commerce business coordination platforms that could provide a scalable, web-based portfolio of collaborative services between business trading partners. "Expect 15 to 20 c-Commerce interactions for every purchase order," Jensen predicts. "These interactions will provide services ranging from inventory availability data and promotion briefings to delivery schedules and returns."  Currently, the best evidence that Internet exchanges can work for consumer goods companies is found overseas. The Roland Berger study cites European food giant Nestle as a good example of how a consumer goods company uses Internet exchanges effectively to conduct business with retailers. A founding member of Transora and other European exchanges, Nestle has built its own private exchange, NestleEZOrder which allows automated handling of the 100,000 orders Nestle takes per year from small to midsize companies. Then there's British supermarket chain Sainsbury and its Sainsbury Information Direct (SID), an Internet B2B exchange that enables Sainsbury and its suppliers to manage promotions jointly. Back here in the U.S., Wal-Mart is also following suit and is building a retailer Internet portal to connect with its global supplier network. The difference there is that Wal-Mart, like other retails giants such as Consolidated Stores, want to build their own internal Web business portals to connect with their global supplier networks. Having spent years building a brand name, they may question the upside of joining B2B collaborative exchanges so others can ride their coattails. Clearly, Internet exchanges are an idea that retailers, if not consumer goods companies, are warming to. Gartner Inc. reports that business-to-business transactions in the retail sector exceeded $433 billion in 2000, up 189% vs. 1999 sales. All told, the global B2B Internet commerce sector may reach $8.5 trillion by 2005. Still, collaborative exchanges involving consumer goods companies aren't dead ­ they're just a work in progress. Transora, a global eMarketplace consisting of 49 consumer goods companies such as Coca-Cola and Procter & Gamble, recently announced a new venture with GlobalNetXchange to form a "megahub," that allowed member firms to collaborate with multiple trading partners via a single connection. Whether existing retail clients are part of the mix is still uncertain. One trend to watch is how far and fast consumer goods companies will go to sell their own goods online directly to customers, thus cutting the retailer out completely. According to Gartner Group research, only 16% of consumer-goods companies sell directly via the Web, but that's predicted to go as high as 50% by the end of next year. Colgate-Palmolive and Polaroid have experienced sweet success there as consumers seem to like what they seen from the direct purchase route. While that means another revenue stream for consumer goods companies, it doesn't help them collaborate with retailers. In fact, Oscar and Felix could be back to square one. Business 2.0 Magazine February 16, 2001 The Watchers: Web Surveillance Firms Tracking What's Said on the Web By Brian O'Connell Anyone knows that there's a price to pay for impersonating a police officer, but what is the price to pay for impersonating a public relations officer? Try almost four years in jail and a $100 million fine. That's what Mark Simeon Jakob, a 23-year-old college student, is facing after pleading guilty last December for creating a false press release that decimated Emulex Corporation's stock. The fake release claimed that Emulex was under investigation by the Securities and Exchange Commission and would restate its earnings. Internet Wire, believing the release genuine, filed it, where it was picked up by several major financial news services. The release plunged Emulex's stock into a freefall, dropping from $110 per share to $42 in minutes, while its market capitalization by fell $2.5 billion. Said Emulex CEO Paul Folino, "This kind of electronic terrorism cannot be tolerated." Facing a March, 20001 arraignment where he could be sentenced to 46 months in jail and ordered to pay Emulex $110 million in fines, Jakob joins a burgeoning list of on-line chat room terrorists looking to damage the reputation of companies for profit, revenge, and, in some cases, for the fun of it. Emulex is hardly alone. In the past few years companies like America Online, Titan Corporation, and Impath Inc.have all been burnt by fraudulent Web posts that impacted not only their stock prices, but momentarily at least, their corporate reputations. "There's no question that the Internet is a great forum for chat room participants to vent about companies," notes Abby Notterman, attorney and counselor for Internet Clients Group, a New Jersey-based company specializing in Internet fraud assessment programs. "There's also no question that companies have a right to protect themselves against fraudulent Web posts. The questions is; how far can companies to protect themselves and how far can chat room participants go in slamming companies? We're just sorting that out right now." Surveillance Solutions Some companies are already fighting back against Web chat room abuse by hiring Web surveillance firms like E-Watch, Cyveillance, and Cyber Alert to monitor what's being said about them online.  For anywhere from $2,500 to $50,000, depending on how much information a company wants, Web surveillance firms will monitor just about anything anyone writes or says about a client company on the Web. Often these information gathering campaigns turn up former employees, disgruntled insiders or stock manipulators who usually hide behind anonymous screen names. Web tracking firms stop short of identifying the names of potential offenders, leaving it to clients to subpoena Internet bulletin board hosting firms to unmask cyber-flamers. The Internet surveillance firms see their services as turning their clients away from defensive brand-control strategies to offensive ones. "You don't want to wake up in a crisis scenario," says Nancy Sells, vice-president of E-Watch, a subsidiary of PR Newswire. "But with good Web tracking tools, companies maintain control of their brand names. The ones who've worked with us know that the best way to use Internet monitoring solutions is to deploy them before a crisis, before leaks and rumors and defamation get to the public's attention." While some Web privacy advocates claim that Internet monitoring firms are little more than electronic eaves-droppers who may be infringing on the freedom of speech rights of chat room denizens, clients say that they're providing an invaluable service. "(Web monitoring services) are a tremendous time-saver, taking the tedium out of scanning the Internet for news and stories about us," explains Aimee Weaver, public relations manager at Atlanta-based Peachtree Software, an E-Watch client. "With so many sites springing up all the time, there's no way we could keep a handle on it on our own- it'd be far too time-consuming." Industry observers say that as long as companies that hire Web tracking services ignore the trivial and focus on potentially criminal or libelous Web chat room commentary, they should remain on solid legal - and ethical - ground. "A CEO can't go running to the courts every time someone calls him a jerk in an online chat room," notes Peter Lindstrom, senior analyst of security strategies at Philadelphia-based Hurwitz Group. "But companies have every right to pay strict attention to what's being said about them on the Web. When you see what happened to Emulex, which lost millions of dollars in its stock price, I think you'll more companies conducting Web monitoring campaigns in the future. You definitely have to protect yourself." Bloomberg Wealth Manager Story April 6, 2001  "It's 11 PM - Do You Know How Happy Your Customers Are?" By Brian O'Connell Kinko's does it. 7-11, too. Hey, even Federal Express is considering going the 24/7 route. So why be surprised when independent financial advisors adopt a 24-hour, seven-day-a-week mentality with their practices? Sure, advisors go home at night but that doesn't mean their businesses are closed. With increased enhancements of their World Wide Web sites that enable clients to visit the site to peruse account records, research company stocks, or bat around sample portfolio ideas anytime, advisors are entering into a new client interaction phase. Slipping the surly bonds of the 9-5-business hour mentality, clients can don their bathrobes at 11 PM, log onto their advisor's Web site and find out what they want when they want. That means less direct communication between advisor and client but more time for advisors to work on other customer service initiatives -and some unique new Web-based services for clients. "I'm a regular on CNBC and all of my interviews are linked to my Web site so clients who missed me can link back to the Web site later on," says Michael Kresh, a Hauppauge, NY-based CFP with over $50 million in assets under management. "Not a lot of my clients are Web friendly but we're seeing more and more every day. They have busy lives too, so, for example, having a link on our site to our broker/dealer's Web site so they can check their accounts or review a quarterly report online whenever they like is a big benefit for them." Aubrey Morrow, president of San Diego-based Financial Designs is another independent financial advisor who merges his media campaigns with his Web site. "I have a radio show that's heard all over Southern California," he explains. "If someone hears us and wants more information we not only catalog that call manually on a Microsoft Outlook database we'll point them to our Web site for more information where they can take a look anytime night or day. It's a big time saver for both sides." Maximum Hours, Minimum Face Time? Is 24/7 client access a good idea for the independent advisor?  Yes, most advisors say, but only if client access to the practice is monitored as closely as a phone call or face-to-face meeting. "Increased interaction is always desirable," notes Susan Kaplan, founder and principal of Wellesley, MA-based Kaplan Financial Advisors. "But my fear is that we're making the relationship too distant instead of too personal. Too many firms are turning into "do it yourself" firms at a time when the reverse should be happening." Consequently, Kaplan sometimes feels she's between a rock and a hard place with continuous Web access to her company. "We value our Web site and have, in fact, hired a consultant to come in and polish it up for us and add some new features. But I still prefer clients to call me rather than pop-in online." For some advisors, the mix of the Web culture and an "all day, all night" client access mode is not only a sign of the times, but a necessity to those advisors in urban areas where Web-savviness is a staple. "We're definitely moving toward 24/7," says Malcolm Greenhill, CFP and one of three principals at San Mateo, Calif.-based Sterling-Wood, an independent advisory firm with over $100 million in managed assets. "We have a lot of dot.com millionaires with large positions and complex tax issues. Obviously, they all love the Web and love the freedom of accessing their own information off of our Web site." Greenhill advocates a "carrot and stick" approach to an all out Web strategy, giving clients good information online, but not everything in an advisor's arsenal. "We've plugged a new program called Portfolio 2000 into our Web network, which provides consolidated investment performance information online on a 24/7 basis," he adds. "While we want to be as amenable to our client's needs as possible, we don't let them access everything we have. We still want them talking to us face to face or over the phone." For clients that want unlimited access to an advisory firm's Web site on a 24/7 basis, that's fine - as long as they claim responsibility for decisions they make at 2 AM without the direct intervention of an advisor. "Clients who want 24/7 access to their financial advisors for "market emergencies" are usually not long term investors," says David John Marotta, principal at Charlottesville, Va.-based Morotta Asset Management. "They are probably trying to time the market. If they cannot be convinced of the ineffectiveness of market timing, they should either take responsibility for their own investments or find a financial advisor who they are convinced with consistently predict the highs and lows of the market within three weeks." For most client contact, Marotta adds, his firm still relies on phone calls and email during regular business hours. Merging Web Services with CRM So, what are advisors doing with all the extra time they have not answering questions clients are answering for themselves on the Web? Most advisors say having a Web site enables them to do the job they're paid to do - manage their clients' portfolios. Many also say that time saved from having a Web site allows them to spend more time to get to know their customers' preferences and investment tendencies better. To them, that means investing in a customer relationship management software (CRM) package that gives them an ongoing, 24/7 customer marketing technology capability of their own. "CRM helps give me an idea of what kinds of things my clients are looking for on a 24/7 basis," says Kaplan. "Any call, fax or e-mail that comes in to anyone in our company I know about." CRM is hardly a new phenomenon - it's origins date back to the 1980's when companies would store customer demographics on large computer databases - but it is becoming a staple of the financial services industry. Quite simply, CRM enables advisors and their staffs to track customer information and interactions across all channels, including call center, face-to-face meetings, Web activity and any other interaction within the enterprise.  The latest manifestation of CRM is a Web-based strategy called E-CRM that synchronizes customer relationships across even more channels, business functions and audiences. As the Internet shifts power to consumers, advisors implementing E-CRM solutions can exploit the capabilities of the Internet, allowing online collaboration, personalized e-commerce and sharing of information via their Web sites with customers.  E-CRM is becoming a hot-button issue in financial circles. According to Shaw Lively, an analyst with Framingham, Mass.-based International Data Corporation, 39 percent of financial services companies want E-CRM implemented by 2001. AMR Research says that licensing and services revenues for CRM software developers rose from $4.4 billion in 1999 to $6.8 billion in 2000, leaping to more than $20 billion. Like a lot of tuned-in experts these days, Lively says that E-CRM is the logical "next step1 after interactive Web sites for advisors. "The Internet is taking online customer service from simple portfolio access to new levels that address client preferences and demographics that can help advisors keep existing clients and make it easier to identify the attributes needed to attract new ones," he explains. "The Web has really driven the demand for faster and better customer service. Customers see the Web as a 24/7-call center new with no waiting in queue. So expectations are high." In Lively's view, the Web has created a transaction account information capability where clients can log on and see account balance or place trade. "As people started doing that, the Internet has become the predominant channel or medium for customer relationship to occur," he says. Others agree, adding that Web-based CRM applications are giving advisors real-time knowledge about their customers that lead to better service and, ultimately, more assets under management. "CRM is all about pulling together customer information to help the advisors better understand and know that customer and their needs and then communicating that knowledge to closely personalize the products and services for each customer," says Erin Kinikin, vice president of research at Boston-based Giga Information Group. "We're seeing great interest from Wall Street firms who want to use CRM analytic applications to help pull together customer transactions and portfolio information across different accounts, and show advisors customer trends over time, such as increases or decreases in deposits, account value, or transaction frequency. Knowing customer's habits and preferences is going to lead to more business for advisors." Knowing Customers Better Some Wall Street observers see the trend of blending Web-based customer outreach strategies with E-CRM as long overdue. They also say that deploying E-CRM applications is no longer a luxury but a necessity. "If you're not reaching out to customers and gathering data to help keep them satisfied with your level of service, somebody else will," notes Dean Williams, chief executive officer at Ascendix Technologies, a Dallas-based provider of CRM solutions to the financial community. "If you're in the advisory business today you have to have real time access to customer data that can be integrated with other portfolio management systems." No doubt Williams has a point. While advisory firms do maintain detailed account information, most traditionally do not integrate this information with personal details about their contacts and the history of their representatives' interaction with them. Advisors usually maintain this information individually in a variety of hard-copy files, PC databases and low level software products. E-CRM can streamline that information gathering process by tying together all related customer information enabling advisory firms to drill down into data to quickly understand current sales activities and revenue opportunities. It's a wonder, some say, that more advisors don't use E-CRM. "A great many financial advisors aren't using E-CRM tools, even though most do have Web sites now," explains Edwin P. Murrow, president of Financial Planning Consultants. "They think of themselves as financial services professional rather than as business owners and thus de-emphasize the client relationship aspect of their business." Murrow adds that the solid results garnered from advisory Web sites has increased the appetite for more client relationship tools - but only at a price they can afford. "Independent financial planners don't have a lot of money to spend," he says. "They're not at a level not where Merrill Lynch or Charles Schwab are."  Murrow estimates that most advisors can have a good E-CRM package up and running for anywhere between $2,000 to $15,000. Their Web sites, he adds, are a big piece of that puzzle. "The key is having a three-pronged CRM strategy that uses the Web as its centerpiece, so you can provide them with information on a non-threatening basis, whenever they want it" he says. Bracketing the Web platform should be some kind of text-response system where advisors can "drip" information targeted to specific customers encouraging them to act and a database or repository where you can send educational articles and newsletters to customers. "Those three components are the cornerstones of a good E-CRM program," he says. "Combined, they show that the services a financial professional offers are critical to clients, each of whom is able to get exactly what they need from their advisor because the E-CRM tools are telling that advisor what his client needs." Yet as important as a Web site can be for expanding an advisor' s marketing opportunities, e-mail may be just as vital. We've built our CRM software through our (Microsoft Outlook) e-mail service to compliment our Web access stuff," adds Kresh. "It's easy to make minor plug ins to Outlook to, for example, link to our online calendar." In doing so, Kresh now has an E-CRM package that not tells him when a client calls or e-mails, but consolidates them together and adds the data to his calendar for easy access when he eventually does talk with a client. "24/7 works both ways," he adds. "Clients can reach us whenever they want but whenever they do, we can continually log their calls, e-mails and faxes and consolidate them. It's the paperless office everyone's been talking about."  Kresh adds that clients like being able to reach his firm via the Web site and finds that they are much better prepared when they do meet to talk about money management issues. "They tell me they like the fact they don't have to play phone tag to get information they could not get without direct access to me a couple of years ago," he offers. "A lot of my clients are snowbirds so when markets are difficult they can hop online very easily to get direct information on their holdings. Then, we can get into a long conversation if necessary via the phone. I'd say that in 5 to 10 years, 25 percent of client contact will be through the Web." Pay Now or Pay Later Then again, can advisors afford not to invest in 24/7 Web and E-CRM packages that more and more customers seem to demand? Couple increased customer demand with future Web-based applications like wireless communications - a market that's projected to reach 25 million users by 2003 in the U.S., up from 1.7 million today, according to Cahners In-Stat Group - and the demand for more customer personalization tools will rise exponentially. "Customers like the ability to get information when they want it, how they want it -- over the web, on the phone, in person, or via a mobile device," says Giga's Kinikin. "Financial advisors financial advisors want to quickly see the status of customer transactions, learn about new products, and be notified of market trends. In that sense, E-CRM becomes part of a financial advisor's support structure, helping to better connect him to the products he recommends. That's a win-win for both sides."