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NEWS

Q&A with Scott Reedy
By ChannelMedia Staff

Q: Scott, you recently joined Buy.com as their VP, Sales and Merchandising. I thought it would be a good time to get updated with Buy.com and some of the changes that are going on there. What can you share with us?

A: The changes are pretty significant. First and foremost is profitability. Operational efficiency is key too. The basic model, a direct marketing model, is fundamentally being employed. We are doing so by concentrating on our marketing costs and testing new vehicles; by concentrating on a good user experience from navigation, improved search, easy checkout, great delivery, and great customer service; lastly we are doing this by keeping everything web and software based where possible. Generally speaking, every area has or is improving. We have raised our margins 300% in the last year -- we actually don't sell any products now below cost, our acquisition cost has dropped and our earn-back period is below 12 months, and our customer service metrics are tops. In fact, our customer service, which we outsource to a partner, is so good that we have jumped to the top of almost every list out there for internet resellers. Lastly, we are expanding carefully into new, profitable, categories such as Wirless/Cellular products, Consumer Electronics and Entertainment. These categories not only bring greater profits, but new customers that are non-tech buyers -- these customers are highly coveted and have a high lifetime value for us.

Q: I know you're in the middle of a "price war" - wonder how that strategy came down?

A: Interesting story. About 6 or so months ago we were about to drop our Spring Magazine (catalog). In it was a $99 or over order-size shipping offer on products in the Magazine. I am not sure whether it was planned or not, but Amazon announced their $99 on all orders just prior to our drop. Obviously we had to match it. The problem was for us that Amazon ships a vast majority of their products (especially books) via USPS. We ship via UPS and FedEx. So it costs us more. But we had no choice but to match. Then about 3 months or so later (about 2 months ago), they dropped it to $49. So in about 36 hours we made a decision. Not only to drop our shipping to free (note that is only on products that are "advertised" -- does not apply to every product, and must be over 20lbs.) PLUS offer 10% off Amazon books (once again, on advertised products). The basic principle is simple: each time they go down, we go lower. You will notice that they have not matched us in price. They can't. They sell something like $200 million a quarter in books. It represents like 50% of their quarterly gross margin. If they drop the prices to ours they cut out almost all their gross margin. Our business in books is not huge. So our drop in gross margin does not significantly impact our bottom line. In fact, we look at it as acquisition cost. You may have noticed that just the other day they dropped their free shipping offer to any order over $25 from $49. This is in direct response we are sure. Their traffic is off. Ours has increased significantly. We know it is working from a traffic standpoint. We also understand that Jeff Bezos was rather upset by the whole affair. But it is their fault. They should know by now that Scott (Blum) is not one to back down from a challenge.

Q: What are some of the new initiatives that you are leading?

A: I have a few things I am trying to get going right now. First and foremost is making sure we are building out a good team here and becoming the best at Vendor Partnerships, something I have always focused on. We are creating new programs, brushing up our current ones, getting marketing prices in line, and working on comprehensive plans. It has gone very well. We have some partners whose business is up over 100% since I started. Most of our partners sales have been consistent -- which I consider a victory given the economic conditions. The other major initiative is the launch of new media vehicles to reach a mass audience. We have launched the Magazine and recently a Newspaper Insert that is reaching 2.5M per week. I think I priced this too low because we are basically sold out of space! We have a new launch coming up in October that is very significant. I would love to tell you about it but we are keeping it under wraps until then. We are rolling it out to specific partners as we speak.

Q: How do you think the overall web is doing in terms of delivering PC and related products? What are some of its strengths and some of its challenges?

A: Our model is fundamentally the most efficient. Our challenge is simple: how do we get customers to buy more products from us. As the order size increases so do our efficiency metrics. I have always believed that significant purchases, say over $500, are fundamentally challenging over the web. So you have to figure out ways to make sure that you capture that sale. I think you will see us do more in the way of product information and through limited person-to-person touch. For example, we have launched two programs with CNET Data Services to provide detailed information and images on products, and we have launched a new test program with Linksys where they man a help-desk for us. These are working. On the Linksys program we are seeing 60-70% conversion with a higher average order size.

Q: How about a forecast for the second half of the year (can make this general to avoid sec issues).

A: We are going to have a banner Fourth Quarter. The initial plan was to be profitable during this quarter. Which, if we backed off the marketing gas pedal, I believe we would do. But we are very intent on gaining new customers and driving top-line sales, even in this difficult economic period. So it will be close. But I see us extremely poised for next year.

Q: Anything else?

A: Yes. I think folks (our vendor partners and the like) need to hear the new buy.com story. It is pretty impressive. I would like to personally extend an offer to any vendor to hear it. I am convinced that when they do they will want to join us and be part of the this Phoenix that, for all intents and purposes, is rising from the ashes. Scott (Blum) believes it will be one the the greatest web success stories out there. I wholeheartedly agree.

Scott Reedy, VP of Sales and Merchandising for Technology business at buy.com, has over 16 years in sales, marketing and merchandising in the computer retail channel. Scott has held management positions at several computer, Internet and marketing companies including DDB, Egghead.com (Onsale.com), Multiple Zones, Ingram Micro and Apple Computer.

Q&A with Symantec's Steve Cullen
By ChannelMedia Staff

While its strength has been protecting the data of its customers, Symantec seems to be doing a pretty good job of insulating itself from the tremendous challenges facing the software market, the IT industry and the global economy.

Steve Cullen, the Senior Vice President of Symantec's Consumer Division/Client Product Delivery, has an array of challenges. Today, as the person who focuses on products that go through stores (i.e. Norton and Security products), the 6 year veteran of the Company and overseer of the $350 million division is in a problem solving mode. Some have to do with increasing demand while others are more operational issues.

Q: So what keeps Steve Cullen up at night?

A: Managing shelf space. I go into a lot of stores. The shelves are not nice. Inventory is scattered all about and presence on the shelf is key. The bigger issue for us is that we sell a shrink-wrapped product. I have a notion that our customer is more sophisticated. We need to present a better offer where the customer walks in and buys one of our titles and a whole basket of related goods. The key is gleaning the data from retailers. Test and track. I read a report where Coke was losing share and they went in and studied that it was all about how the product was being merchandising on the shelf and where it was on the shelf. It turns out that a private-label brand had a better shelf position and Coke showed that they could sell and make more by changing their shelf position. I think our industry still has a lot to learn.

There's three things I have on my mind: 1) Working with retailers to manage shelf space through better display and presentation, 2) Working with retailers to better educate their employees on Symantec products, and 3) Working as partners with retailers to understand how, why and when customers buy so we can do a better job at awareness generating marketing, point of purchase in the stores, and post-sales support and customer satisfaction.

Q: What's up with Software sales at retail stores?

A: From my viewpoint, our sales and unit volume are up and have been trending up since the June quarter last year. Normally we see a trail off but we haven't. I'm hearing the channel is hurting with software but that has not been our experience. In fact, in June NPDTechworld released figures confirming that our Norton AntiVirus, Norton Internet Security and Norton Personal Firewall products are each market leaders among their respective security software markets. Norton AntiVirus has been one of the top 10 best-selling software products for the past five years and is currently the number one software product purchased with an average unit market share of 70.8 percent. Norton Internet Security has a commanding average unit market share of 83.0 percent and Norton Personal Firewall leads consumer firewalls with an average unit market share of 49.2 percent. 'Thankfully, the media has done a good job on educating consumers about viruses and the need for Internet security software.…"Kids on the Internet, security…"

We've also gone to great lengths to work closely with our partners and premier retailers and not only has this contributed to our success in software sales, but it has been validated by two recent awards we've won. Dell Computer Corporation's Software and Peripherals Group named Symantec its vendor of the year in March for our contribution to their profitability and effective support of their sales efforts in fiscal year 2002. And Staples just honored us with their Supplier of the Year award.

But a lot of success depends on blocking and tackling right? Can you do the basic stuff right. Who will screw up first? Promotions that don't line up. If we can ship on time and get products that solve right needs is what works!

Q: Then what are the really big challenges?

A: Our big challenge is our desire to sell more through our current channels while developing new channels to get even more customers. Also identifying new sales channels to sell our stuff. We have good, strong positions (in our current channels). I think they are great. E-commerce is great. We're seeing year-over-year growth in 80% range. OEM is ramping up and we have a new model in this area. Shorter time out but gave it away.

ISP Channel:
Working on a solution that will let ISP manage anti virus and security for the consumer - work config properly, definition up to date, firewalls are in place. Make sure basic housekeeping is being done. (Europe - online?)

Holiday:
Looking forward to the season and expect it to continue to fuel our business. PC Sales are good (10% RANGE YOY) and that really is a key driver to our business. Problem solving and security are positive and so is Internet connectivity. The industry trends look good, but not great. However, this is an exciting time as we are coming out with a refresh of our Internet security and problem-solving products just in time for the holiday season.

To subscribe or see archived issues of ChannelMedia please visit www.channel-media.com. We welcome your input, submissions and questions.

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Retail Digest

Novell reported a third-quarter profit and 13 percent sales gain. The networking software company has been expanding into new products like Web applications and has been expanding its consulting business after losing market share to Microsoft.

High-speed wireless Internet access becomes faster, simpler and more convenient as Starbucks and T-Mobile International, the wireless subsidiary of Deutsche Telekom and HP officially launch T-Mobile HotSpot service in Starbucks coffeehouses. Now you can trial T-Mobile HotSpot service for free at approximately 1,200 Starbucks stores in the United States. An additional 800 Starbucks locations in the US are scheduled to feature the service by the end of the year. With an eye toward global expansion, Starbucks and T-Mobile have also initiated a six-month pilot in select London and Berlin locations. "This service is a natural extension of the Starbucks coffeehouse experience, which has always been about making connections with the people and information that are important to us over a cup of coffee," said Howard Schultz, Starbucks chairman and chief global strategist. "Mobile professionals across the globe have been waiting for just such an offering: high-speed wireless Internet access in a familiar and widely available location that keeps them connected while on the road, or between the home and office. It's the right service offered in the right environment."

With more than four weeks remaining in the quarter, Adobe announced that it is reducing its third quarter revenue target range to $270 to $290 million from its previously stated target range of $300 to $320 million. In addition, third quarter pro forma earnings per share are now targeted at $0.18 to $0.23, down from the original target of $0.24 to $0.27. The Company cited lower than expected revenue in the month of July as the reason for the anticipated shortfall. "This is a difficult global business environment and I am disappointed we had to reset our Q3 targets. However, Adobe continues to be a very profitable company -- we have strong market positions and continue to invest in our long-term growth opportunities," stated Bruce R. Chizen, Adobe president and chief executive officer. Adobe plans to report its third quarter fiscal 2002 results on September 12, 2002 after the market closes.

SimpleTech, a leading manufacturer of flash-based data storage and custom and standard memory solutions, today announced the launch of the Bonzai USB Mini-Drive, the smallest portable, removable flash storage solution currently available for downloading, storing and transferring data between digital devices. Measuring just 2.5-inches x 1.3-inches x 0.25-inches (LWD), Bonzai offers storage capacity of 90 floppy disks in a sleek form factor that can be conveniently carried in your pocket, purse or briefcase. Bonzai's patent-pending technology is a breakthrough in convenience and capacity. Storage is increased by simply upgrading the removable SD or MMC flash card inside, for easy and affordable expansion. Business documents, school projects, digital pictures, MP3 music, or streaming audio and video clips can be stored on Bonzai, conveniently carried, and then shared with coworkers, classmates, friends or family.

New York Yankees manager Joe Torre joined executives from Samsung to announce the creation of an October retail sales promotion that will help raise awareness about the epidemic of domestic violence and directly benefit victims of domestic violence through Joe Torre's newly formed foundation. With the October retail sales promotion, which coincides with National Domestic Violence Awareness Month and RadioShack Corporation's Wireless Month, Samsung has created a program that ties the sale of Samsung wireless phones sold at RadioShack stores across the country to a donation that will be made to the Joe Torre Family Foundation -- a new charity dedicated to supporting women and children exposed to domestic violence.

Best Buy said it will start using Intel-based servers to run its external business integration platform for communication with vendors. The platform allows Best Buy to integrate and exchange information between disparate computer systems on site and at customer and supplier locations. "Best Buy regularly interacts with a growing number of suppliers running a variety of different internal applications, and the exchange and integration of information between companies is critical to conduct business transactions quickly and with accurate data," said Rick Hartmann, information systems leader for Best Buy. "By working closely with consultants from Intel(R) Solution Services and by using Intel-based servers as the foundation for our integration platform, we were able to cost-effectively achieve the scalability we need to address our growing supply chain without sacrificing performance." Intel worked with Best Buy to perform rigorous scalability tests on its information exchange system to ensure that Best Buy's integration platform takes advantage of the latest Intel processor features. The results showed that the Intel-based solution could handle approximately 15 times the number of transactions originally predicted, while providing Best Buy with significant cost savings. "Information exchange between companies like Best Buy and its suppliers, integration of disparate systems, cost savings and increased customer expectations are just some of the challenges faced by the retail industry today," said Rhett Livengood, director of Intel Solution Services for Intel's Software and Solutions Group. "The scalability and price performance of Intel-based servers combined with integration software enables Best Buy to integrate and deliver more accurate and timely data across its entire supply chain, as well as reduce costs for both Best Buy and its suppliers."

In time for the back-to-school season, hpshopping.com announced the Academic Purchase Program (APP), which makes buying HP consumer products more affordable for college students through special academic discounts. College students attending a qualifying college or university and obtaining a valid student I.D. can register for the special APP pricing at http://www.hpshopping.com/education. HPshopping.com developed the program to give students from a wide selection of colleges and universities access to the best technology tools for academic success.

ATI Technologies is demonstrating yet again why it is the world's number one supplier of notebook computer graphics, announcing today that its MOBILITY(TM) RADEON(TM) 7500 and MOBILITY(TM) RADEON(TM) graphics processors are the technology of choice in well over 30 Intel Pentium(R) 4 Processor notebook computer models. These notebooks began shipping in the spring and summer of 2002, in line with the adoption of the Intel Pentium(R) 4 Processor in mobile PCs. ATI has captured a commanding majority of notebook designs in this important industry transition. "The industry response for both the MOBILITY RADEON 7500 and the MOBILITY RADEON has been exceptional," says Reuven Soraya, Director of Marketing, Mobile Business Unit, ATI Technologies Inc. "Manufacturers and consumers continually rely on ATI to enhance the mobile computing experience with our rock-solid graphics performance, best-in-class software stability, industry-leading power management and advanced memory integration." The MOBILITY RADEON 7500 and MOBILTY RADEON are featured in every notebook category, spanning corporate and consumer market segments including high-end desktop replacement notebooks, mainstream high-volume notebooks, thin-and-light as well as value-oriented models.

Electronic Arts said net revenues were $312.4 million for the quarter, an increase of 88% compared to $166.1 million in the prior year. Net income was $21.8 million compared to a pro forma net loss of $16.0 million in the prior year. EA.com: Net revenues for EA.com were $19.8 million for the quarter, an increase of 21% compared to $16.4 million in the prior year. Pro forma(a) net loss was $12.8 million compared to $24.8 million in the prior year. A pre-tax charge for amortization of intangibles excluded from pro forma net loss totaled $1.3 million compared to $3.3 million last year. EA released 12 games on six different platforms during the quarter, including four on the PlayStation(R)2 computer entertainment system, two on the Xbox(TM) video game system from Microsoft(R), two on the Nintendo GameCube(TM), two on the PC, one on the PlayStation(R) and one on the Game Boy(R) Advance. Top selling titles released in the quarter included Medal of Honor Frontline(TM) on the PlayStation 2; 2002 FIFA World Cup on the PlayStation 2, PC, Xbox, Nintendo GameCube and the PlayStation; and F1 2002 on the PlayStation 2, PC and Xbox. Other top selling titles in the quarter included: The Sims(TM) Vacation Expansion Pack, The Sims(TM) and Medal of Honor Allied Assault(TM) on PC; and James Bond 007 in...Agent Under Fire(TM) on Nintendo GameCube, the PlayStation 2 and Xbox. Consolidated net revenues increased over 82% primarily due to higher sales on the PlayStation 2 and PC; sales on the Xbox and Nintendo GameCube; and increased sales of affiliated label products. On a geographic basis, revenue increased in all territories compared to the prior year: up 68% in North America, 112% in Europe, 84% in Japan and 51% in Asia Pacific.

Highlights from recent peek at Amazon.com's sales ticker:

1)Sony Clie Models Have Firm Grasp on Handheld/PDA Market reflecting Sony's aggressive marketing and growing presence in the handheld/PDA marketplace. Sony had four of the top 10 best-selling handhelds on the site this week, including the Clie PEG-T615C, Clie PEG-S360, Clie PEG-NR70V and Clie PEG-T665C. The others in the top 10 were the Palm m515 and m130 color handhelds, the Palm m105 handheld, the Handspring Treo 90, the Compaq iPAQ H3955 color pocket PC and the Toshiba e310 pocket PC. 2)Fast-growing sales of iPod digital music players (which accounted for more than 24 percent of Amazon.com's MP3 player/jukebox sales this past June) have put a shine on Apple's bottom line, and the company has announced an expansion of the iPod line with six new models. The new Apple iPods include 5 GB, 10 GB and 20 GB Mac-only models, plus Apple's first-ever Windows-compatible iPods (in 5 GB, 10 GB and 20 GB models). Suggested retail prices are $299, $399 and $499 for the 5, 10 and 20 GB models, respectively (prices apply to both Mac and Windows devices). All six new Apple iPods are currently available for pre-order at Amazon.com and should be in stock in two to four weeks. 3) Computers are increasingly becoming "total entertainment centers." Sales of multimedia speakers at Amazon.com this month are double what they were last year. Gamers are buying top-of-the-line computer speakers to get maximum realism and sonic impact from their gaming software. Many are also buying surround-sound satellite/subwoofer systems to deliver a true home theater experience while watching DVD or CDV movies on their computers. 4) Does your PDA, MP3 player or digital camera have a bad memory? Proliferation of these types of electronic products has created growing demand for additional memory storage devices. Four out of the 10 top-selling products this week in Amazon.com's Electronics Store were memory cards. Top sellers include the Viking CF128M 128 MB and CF256M 256 MB Compact Flash memory cards, the SanDisk 128 MB Secure Digital memory card and the SanDisk 128 MB Memory Stick memory card. To help customers find compatible memory cards for their electronic devices, Amazon.com and Viking Components offer the Memory Finder, a search engine on the site that surfaces compatible memory for various digital cameras, PDAs, MP3 players, photo printers and other products.

100 New Stores Opened in First Half 2002; Guidance for Strong Second Half

GameStop, the nation's largest video game and entertainment software specialty retailer, today reported sales and earnings for the second quarter ended August 3, 2002. GameStop sales increased 32.6% to $274.3 million in the second quarter of 2002, compared with $206.8 million in the prior year quarter. Sales growth resulted from a 22.9% increase in comparable store sales, as well as the sales from 100 new stores added during the first half of the fiscal year. The increase in comparable store sales was due to solid performance throughout the video game category, and was on top of a 33.1% comparable store sales increase in the prior year quarter. The continued strength in existing Sony PlayStation 2, Microsoft Xbox, and Nintendo GameCube systems, each of which realized a significant price reduction, resulted in higher than anticipated sales volume in the quarter. Net earnings for the second quarter totaled $6.1 million, or $0.10 per share, as compared to analyst consensus estimates of $0.07 per share. In the prior year quarter, the company experienced a net loss of $4.8 million, or ($0.13) per share. For the second quarter, EBITDA nearly tripled to $15.5 million from $5.2 million in the prior year quarter. R. Richard Fontaine, Chairman & Chief Executive Officer, commented, "We are pleased with our exceptional second quarter results; in particular with the strong diversity of sales over so many gaming platforms. Hardware sales were extraordinarily strong, with increases in both units and dollars; yet, the strength of our new and used software and accessories resulted in improved gross margins for the quarter."

Best Buy purchased six former Service Merchandise locations in Alabama, Florida, Indiana, Massachusetts, New York and North Carolina. Effective June 17, the selected locations were either acquired by purchase of the land and building outright or by purchase of the leasehold interest of Service Merchandise. "These locations offer us immediate presence in key markets which historically are difficult to expand in," said Pat Matre, vice president of Real Estate for Best Buy. "It helps achieve our goal of becoming the leader in the technology and entertainment industry and bringing products and services to more customers throughout the US"

PC Connection is now offering the latest generation of handheld communication devices with comprehensive service plans by VoiceStream Wireless/T-Mobile. The new devices, including the BlackBerry 5810(TM) handheld, allow users to make voice phone calls, send and receive e-mail, surf the Web, check stock quotes, and more, all from a single compact unit. The devices represent long awaited "convergence" of cell phone and PDA functionality into one device. PC Connection is the first nationwide IT solutions provider dealing directly with VoiceStream to market comprehensive product-and-service packages for the new breed of handheld communication devices. The offerings are targeted for business users ready to upgrade from analog or first generation digital communication or paging systems. "Industry analysts forecast that almost half of all business wireless data users will purchase centrally-managed service for their devices," said Robert Wilkins, Executive Vice President and head of PC Connection's Product Management group. "We recognize the value and opportunity in these trends and are meeting customer needs in real time."

Sharper Image reported sales for the month of July increased 35 percent to $31.2 million from last July's $23.2 million. Total store sales increased 23 percent to $17.9 million from $14.6 million; comparable store sales increased nine percent. Catalog sales increased 67 percent to $9.8 million from last July's $5.9 million. Internet sales, excluding auction sales, increased 56 percent. Internet sales, including auction sales, increased 25 percent to $3.5 million from last July's $2.8 million. For the second quarter ended July 31, 2002, total Company sales increased 24 percent to $99.6 million from last year's second quarter $80.2 million. Total store sales increased 20 percent to $58.4 million from $48.5 million; comparable store sales increased five percent for the second quarter. Catalog sales increased 33 percent to $29.0 million over the last year's second quarter sales of $21.8 million. Internet sales, excluding auction sales, increased 42 percent. Internet sales, including auction sales, increased 23 percent to $12.2 million from last year's second quarter sales of $9.9 million. "We are pleased that the year's positive sales trends have continued through July," said Richard Thalheimer, founder, chairman and chief executive officer. "The July comparable store sales increase of nine percent was the strongest gain for the second quarter. All our sales channels -- stores, Internet, catalog, television and wholesale -- enjoyed strong sales gains for July and the second quarter. The sales increase reflects the popularity of our Sharper Image Design proprietary and private label products and our multimedia advertising programs," Mr. Thalheimer explained. "Our aggressive store growth plans are on track. This year we've opened nine new Sharper Image stores, bringing our total store count to 118. Our goal is to open 10 to 15 percent new stores in 2002 from a base of 109 stores at the beginning of the fiscal year.

Programmer's Paradise said sales for the quarter ended June 30, 2002 was $16.9 million compared with $24.1 million for the quarter ended June 30, 2001. The quarter over quarter revenue decline reflects the continued difficult business environment and the decision to cease selling Microsoft Select and Enterprise license agreements. Net income for the quarter was $.4 million or $.09/share compared with a loss of $.6 million or ($.11)/share in the second quarter of 2001. Bill Willett stated, "We continue to be cautious regarding the economy, however our company continues to maintain a strong balance sheet with a book value of $3.05 per share."

How do you educate more than 8,000 sales representatives about the digital imaging market and an ever-growing product line? Since cloning or, more appropriate for this market, making multiple copies of sales instructors is not an option, a new e-learning strategy designed by Canon. The "Canon Know How Learning Zone" combines advanced low bandwidth delivery technology with rich media capabilities over the Internet. With the click of a button, this centralized online training source delivers to thousands of sales representatives, whenever they want and wherever they are, a unique package of instruction that contains product knowledge, tech background and the tools required to help increase sales. "Quick delivery of comprehensive information always is important, but more so when Canon introduces new products," said Mitch Bardwell, director, sales training division, Canon U.S.A., Inc. "During a product launch, data must reach the masses at the precise time. Our web-based training ensures that all information is delivered promptly and accurately."

SELLING AT RETAIL

Professionals Only, Please: The Essential Role of the Field Staff
By Beverly Ham, BDS Marketing

Chapter 3 from "The BDS Guide to Point of Contact Marketing"

It's an inescapable reality of any Point of Contact Marketing program: your campaign is only as good as the people representing you on the retail floor and elsewhere in the field.

"As far as most consumers are concerned, the men and women representing Philips Consumer Electronics at retail are Philips Consumer Electronics," said Dan Glasky, the company's director of sales support and training. "Therefore, it is essential for these individuals to exemplify the friendly, knowledgeable and professional image we want to project."

These are your front-line representatives, the people who interact directly with consumers, and they can have an enormous impact on your brand identity - either positively or negatively. Moreover, since many of them spend considerable time with retailers, they have the potential to enhance (or impair) relationships with these crucially important individuals. Most importantly, they ultimately can determine whether products are actually sold…or merely gather dust on a retailer's shelves.

The need for high quality field personnel is particularly acute for companies selling sophisticated, relatively expensive products such as home entertainment systems, DVD players, multi-line telephones, personal computers and peripherals, personal digital assistants, mobile telephones, LCD displays, flat screen televisions and other consumer electronics products. If you decide to implement a Point of Contact Marketing program to improve your retail presence and increase product sell-through, you'll need to assemble the best possible field team. This is rarely an easy task. Professionals able to successfully market high tech products to mainstream consumers must demonstrate a level of expertise -- and achieve measurable bottom-line results - that would overwhelm the typical staffing-company employee whose experience is limited to distributing food samples at the local grocery store.

RECRUITING TALENT
Before launching a recruitment effort, carefully assess your needs. If you're using an agency to help develop and implement your program, involve its people in this assessment. Presumably, they've managed similar programs, understand the campaign's labor requirements, and know the qualities necessary to be a successful in-store marketing representative.

Whether you outsource your Point of Contact Marketing program or handle it internally, it's important to answer some key questions before recruiting and hiring field representatives:

• What is your coverage model? What retail chains will be serviced, and what markets covered? Where are the storefronts located?
• How frequently will your people visit participating stores? How many people will you need?
• What kinds of people will you need to hire? What skills, knowledge and experience will they need? Do different stores or retail chains require a different type of representative?

Using this information, you can then develop a specific and detailed representative profile articulating the attributes you'd like each candidate to exemplify, as well as a skills matrix clearly delineating the talents needed to perform the role (or roles) effectively. For example, companies in the consumer electronics field usually prefer representatives who not only understand the underlying technology, but can explain it to less knowledgeable consumers. They also tend to prefer candidates with experience in a retail environment, as well as those able to exude the "spirit" of particular brands.

[This underlines a key advantage of outsourcing your program to a specialist firm, especially if you have significant labor requirements: most of the major firms maintain large databases of prospective field employees, including many who have worked on similar campaigns in the past. At BDS Marketing, our database includes information on almost 50,000 individuals. As a result, not only can we draw on a vast pool of experienced talent; we can assemble a top-notch team in a fraction of the time needed by most corporations - a valuable attribute in the fast-moving worlds of high technology and consumer electronics.]

Also important is the ability to sell in a consultative fashion. A "hard sell" approach will often backfire with consumers -- and will definitely annoy retailers, who understandably want to maintain good relationships with multiple suppliers.

Admittedly, this level of training requires an investment of time and money. Moreover, it's typically not a one-time undertaking, since training needs to be regularly updated to reflect new products, new technologies and changing market conditions. To reduce costs, many companies eschew in-person training and limit themselves to remote, Internet-based training programs. However, our experience has shown that cutting corners in training almost invariably results in reduced effectiveness on the retail floor. Achieving maximum impact requires intensive, hands on training involving instruction, role playing and constant feedback.

In addition to refining critical sales skills, this level of training promotes the development of solid, trust-based relationships between field employees, the managers supervising them and the companies they're representing. Equally important is the establishment of an effective corporate culture and sense of esprit de corps. The field team's effectiveness will expand dramatically if its members are imbued with the right attitudes and values. They should be proud of the company they're representing and genuinely believe in the products or services they're selling. They should have fun on the job and actually look forward to going to work. An enthusiastic, upbeat attitude can have an enormous impact on their ability to influence customers - and enhance relationships with retailers.

Management is an enormous issue - lengthy texts have been written on the subject - so it obviously can't be adequately covered in a brief article. But following are a few simple lessons, learned through years of managing field staff, that you might consider.

Among the most important lessons: You cannot effectively manage a field staff from corporate headquarters. Key managers and supervisors need to be in the field alongside their charges, visiting stores and talking to retailers. Also, managers should communicate with their team on a regular basis, keeping them informed of program status and helping them understand how each individual fits into the "big picture." They also should listen carefully to their staff. Field employees can be an incredibly valuable source of information and insights. Take advantage of their knowledge, and consider their suggestions thoughtfully. A good team is flexible and adaptable, able to quickly adjust to changing market conditions. Regular, two-way communications is necessary to achieve this level of adaptability.

A well-conceived Point of Contact Marketing program can produce enormous benefits and a powerful return on investment. But a program will not succeed unless it is implemented by skilled, well-trained and carefully managed professionals. The time and money invested in creating such a team is well spent indeed.

This article is the third in a series entitled "A Road Map to Sell-Through: The BDS Guide to Point of Contact Marketing." To view previous articles, please click on a link below.

Previous Articles
Article 1: Driving Sales While Building Brands
Article 2: The ROI Imperative

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RESEARCH

Digital Audio through the Stereo - Lots of solutions, but which is right?
By by Carl Holec, ARS Analyst

The rapid growth and consumer acceptance of digital music and MP3's has significantly impacted many companies. While much doom and gloom has been written about the financial losses of recording artists and record companies, many silver linings exist in this behavioral shift, starting with the hardware manufacturers. Now that consumers have built huge collections of songs on their computers, the ability to use their personal music libraries away from the computer becomes essential, and it is this need that is stimulating sales of several current and new product segments.

Since portable digital audio players began arriving in the channel nearly three years ago, sales have grown steadily and rapidly. Demand for "MP3 everywhere" has allowed companies such as SONICblue to enter established product segments like the portable CD market and achieve significant market share by simply adding MP3 capability to the traditional list of features. Today's portable digital audio market has become very competitive with a variety of unique and compelling products, but surprisingly a related market remains comparatively untapped; the digital audio player for the living room.

Before we proceed, it is important to point out that several devices do exist for bridging the digital audio gap from the computer to the stereo. However, how many people do you know that have this capability in their house? Sales of these devices have been limited so far, likely for several reasons. Retailers have not embraced the technology, products and features vary widely among the solutions, and many of the devices have been too complicated for mainstream consumers. As these issues get resolved, ARS believes it is likely that digital audio in the living room will become as popular in the near future as having a CD player attached to your stereo system is today.

To create a successful digital audio player for the living room, manufacturers must correctly answer the riddle to four key issues / feature considerations. Today's market has certainly not determined what the best price/feature combination is, which is why the current market includes such a broad gamut of solutions. That variety is good for today's leading-edge consumers who know exactly what they want, but to achieve mass-market popularity, the category will likely have to gravitate to a smaller number of solution types that meet the needs of the consumer majority.

The four key issues / feature considerations in this technology are:

1) Quality of Streaming Music

Many consumers may not realize that the quality of the audio today's solutions provide can vary significantly. The biggest variable is if the audio is "streaming" from the PC or is stored locally on the device and played back directly. Several solutions today, such as the $69 Kima Wireless (pictured below) or the $379 Motorola SimpleFi, use wireless technology (generally in the 2.4 GHz range) to stream the audio signal from the PC to the device. This can work well, but our experience has shown consumers typically get about FM quality audio (best case) and sometimes far worse. Cordless phones, wireless networks, and other things can cause interference, resulting in static or clicking. Streaming saves the cost of having a hard drive in a device, but for an audiophile the quality would most likely be unacceptable.

The alternative to streaming is local storage. Only a few products have come to market that offer this capability, and surprisingly many of them have disappeared already. HP's de100c is probably the most robust of these solutions, including a 40GB drive in it for storing thousands of songs. Compaq had a similar solution that is now discontinued, as did a company called Sima and a handful of others. Since these devices store songs locally, there is no degradation in playback and the quality piped through the stereo is determined strictly by the quality of the original file. The downside is obviously cost -- hard drives add significant cost to these devices and can add a level of complexity too.

2) Navigation?

The next major consideration in a digital audio device is navigation -- how do consumers choose what song is being played, skip to the next song, etc. The simplest devices -- like the Kima Wireless -- offer no navigation at all. They simply transmit whatever is being played from the PC to the stereo; so all control is done at the PC itself. For an inexpensive solution, this is probably fine. However, some users will want more flexibility than that.

The next step up is having basic song information and navigation functionality in the device itself or on a remote. The Motorola device mentioned earlier has a remote control in it that allows the user to skip forward or back, and also adds a nice "tag" feature that allows the user to mark a song and retrieve more information (tour dates, other CDs, etc.) on it when they get back to their computer. There is also a screen on the device that shows the current song / artist that is playing, though users have to be reasonably close the unit to read it. Solutions with this functionality typically cost upwards of $350; quite a jump for navigation alone.

Going one step further, the HP (and old Compaq device) integrate with your television to offer on-screen navigation and song information. Much like music jukebox software on the PC but designed for the living room environment, users can create "playlists", view song information, and plan out an evening of music directly through their television screen. This is by far the most user friendly, though it adds a technical level of complexity and is part of why the HP unit costs $949.

Finally, there is one other element to consider with navigation. Some devices that offer navigation require users to use specific software on the PC to store songs, create playlists, etc. While these applications are generally easy to use, some consumers may already like the music application they currently use. This can result in the user having to store songs (or at least pointers to songs) in two places, and negatively impact ease-of-use.

3) Built-in Networking

The core functionality required to connect the living room digital audio player with the PC is the home network. Whatever the connection is -- standard 2.4Ghz wireless, 900Mhz wireless, HomePNA, Ethernet - consumers are still networking their devices together. Today, MOST digital audio receivers (a general term for these products) come with some type of networking technology built in. This helps consumers with ease-of-use, but has a couple of down sides. First, networking technology costs money, so the device costs are increased to add this functionality. Second, if a user already has a home network, the functionality may be unnecessary at best or incompatible at worst. Since most customers today do not already have a home network, it is understandable that the technology is built into the devices. Ultimately, however, a wireless standard such as 802.11a should make this easier and cheaper.

4) Bonus Features

As if the issues / features above were not enough to confuse customers, some devices offer even more features to separate themselves from the masses. Perhaps the most common of these is an integrated CD player / burner. Hp's de100c uses this in two ways. First, customers can use the unit independent of a PC by burning songs directly from a CD to the hard drive. Second, customers can set up a play list and burn custom CDs right in the living room. While these features are nice, they once again add a significant cost factor to the unit. Since most users who would consider purchasing a digital audio receiver today are likely to be more comfortable burning CDs from their PC than their living room, this feature is probably overkill.

Summary:
Market trends show that there is a customer need to use the MP3s consumers have on their PC in other rooms of the house. That need will only continue to grow, and these products will likely become much more common as it does. The specific feature set / price point to make a product popular remains to be seen, though our expectation is that the "perfect" product would have a hard-drive based system with on-screen navigation, built-in 802.11b (or a) for wireless connectivity to existing wireless home networks (with perhaps an optional 802.11 access point for those who don't), a memory card reader for dumping off songs to portable MP3 players, and few other features.

Portable hard drive players cost as little as $300, so a device with this functionality should be priced under $500. At first the product would not be for everyone, but ARS believes that if it were easy to install and use, a large number of consumers might spend the money they might already be saving on retail CDs on a device such as this.

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COMMUNITY

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COMMUNITY

Changing Channels
By Steve Cross

Wow! All of a sudden I am seeing more clients using email marketing more intelligently.

Not long ago, clients would tell me they were going to use their database of users for really imaginative projects, like telling the customers what trade shows the client company would be attending (snicker) in the next few months. Why is that dumb? Because you only have a certain amount of time to establish a selling relationship with a customer, and if you burn it by overmailing, or mailing without suitable purpose (trade show schedules?), you are burning an irreplaceable resource.

Databases of users are made to be marketed to... creatively. There is a company I met with recently that emails their users to sell surplus or overstocked product. In doing this, they are offering the best deals to the best customers. That is smart marketing and productive use of email databases.

A software company I know sells third-party software to their installed base. Their margins are great! And because these are limited-time offers, which the customers signed up for, they seldom have many unsubscribes. Its like found money! The third-party guys even provide support.

We should all take a page from the book of these creative companies. They aren't over-mailing, or abusing anybody's time. Rather, they are providing the best deals to the best customers....on request. There are very few companies that overmail to me, just The Gap, and American Airlines. I seldom get offers from Amazon, even after spending nearly $100 every month with them. Funny, isn't it? And I never get offers from computer stores, either on-line or "bricks & mortar". The folks who ought to be sending, aren't.

Maybe its time to look at your email marketing strategy. Not just campaigns, or tactical stuff, but really go deeply into the strategic purposes behind email marketing. If you and your company aren't doing effective, creative email marketing to your base of customers, I'll bet some other company in your niche is planning to kick your butt by doing it. Watch out.

Steve Cross can be reached at steve@crosschannel.com, 702-492-7472. He consults on various strategic and channel issues. Watch for his upcoming book, "Changing Channels".

LISTS

NPD's Hits List of Top-Selling Software - Week of August 11 - August 17, 2002
Provided by NPD Techworld

List is based on units sold by twenty-three channel partners. For more information, please contact NPDTechworld at (703) 376-6200.