Let Your Fingers Do the Talking

P> It was bound to happen. The exploding popularity of the Internet has found its way into the high-stakes channels business. Manufacturers, resellers and distributors all have discovered the Internet as a way to improve customer service and quality control -- two key differentiators in a business where brand name recognition isn't enough anymore.

Take Comstor, for instance. The $90 million microcomputer distributor in Chantilly, Va., began determining its Internet distribution strategy in early 1995. Last December, it launched a 24-page World Wide Web site -- with information on its offerings of networking, multimedia, hardware and peripheral products from more than 120 manufacturers.

In January, Comstor followed with a Treasure Hunt promotion that posed questions on the Internet to resellers, who had to get the answers from product manufacturers and responded via the Internet. How well did the promotion work? Comstor got more than 200 qualified prospects out of more than 20,000 Web visitors who checked out the promotion.

Although the percentage was in line with Comstor's average 1 percent response rate for traditional direct mail promotions, the hunt turned out to be a great way to advertise its Built-to-Order, or BTO, systems. Most of the 20,000 visitors downloaded product information on the BTO products. The BTO line, based on individual customer configuration requirements, offers a selection of notebook, desktop, mid-tower and full-tower 486 and Intel Pentium-based systems.

So how does Comstor strike that delicate balance between enough information, but not too much? Although users of Comstor's systems can get product information, they can't access price lists. That data is privy to the company's resellers. "The challenge for a distributor is you must have the security so the reseller sees all the information, but not everyone can get to it," said Anita Creasi, vice president of marketing.

But for $5.3 billion Dell Computer Corp., the world's largest direct marketer of computer systems, distribution on the Internet posed a different problem. Because Dell uses its own direct sales teams and not resellers or distributors, giving full, easy access to Dell sales personnel was a tricky proposition because they could be lured by recruiters to Dell competitors.

"They're a real corporate asset, but it was important to the customer to have information about their sales reps. We decided it would end up being a competitive advantage and outweighed the threat of them being recruited," said Theresa Garza, vice president of federal sales. "One thing we're really trying to cut down on is phone calls," she added.

Via Dell Federal's home page, customers can contact their sales reps, access the company's product offerings on the General Services Administration Schedule and place orders. Billing and payment, however, is still done the old-fashioned, manual way. And for those federal customers who don't have Internet access, Dell provides its GSA Schedule on disk.

In addition to the home page, Dell recently started a four-month prototype of a full electronic commerce/electronic data interchange system with a federal agency, which Garza would not identify. To do a fair comparison, Dell decided to run a completely manual process of order taking, processing, billing and payment, in tandem with the EDI prototype. To nobody's surprise, "this is adding some intensity to the project," Garza said.

But once completed, the pilot effort will offer definitive proof that EDI not only improves efficiency, but customer service as well. "Almost immediately, you'll have improvements in quality. You're talking about digitally transmitted data. It's an accuracy issue because you cut down human error," she said. Doing things electronically could reduce even further Dell's 0.5 percent error rate in processing orders.

But full EDI means cutting out human beings from the equation. Not necessarily so, Garza contends. Dell's order processors can move into quality control and customer service operations instead.

Dell has been selling to the federal marketplace since 1987, both directly and through strategic partnerships with key federal systems integrators. Garza believes distribution on the Internet will change the way the company communicates with business partners, but it won't diminish their importance. "For our business, that easy access to information and easy ordering will drive the use of high-end technologies by organizations that historically haven't used the machines," she explained.

More than 75 percent of Dell's U.S. business comes from large corporate and government customers. In fact, the company was the No. 1 computer systems vendor on the GSA Schedule for three of the last four years. Gateway 2000 unseated Dell in 1995, the North Sioux City, S.D., company's first full year on the schedule.

Despite Gateway's success in the federal market last year, when it comes to distribution on the Internet, "we want to be careful and cautious," said Bill Shea, vice president of major accounts. Gateway began a major accounts program in mid-1993 to target Fortune 1000 companies, federal and state governments, and education institutions.

Although the company's Web site has been up since November, "the demand is coming from the consumer side, but the demand isn't there yet from major accounts," he pointed out.

But for Dendy Young, president and CEO of Government Technology Services Inc., Chantilly, Va., the federal government's largest reseller of microcomputers and UNIX workstations, the demand is certainly there. GTSI Online, an interactive catalog and ordering system, grew out of the need to keep up with changes in the company's offerings, which include more than 50,000 products from 500 manufacturers. On average, GTSI made 8,000 changes a month, which manually would take almost a month to compile and publish in a revised catalog.

With the interactive capability of GTSI's home page, federal customers can identify the contract that best meets their needs, compare prices, place orders and get technical support. And as the company rolls out a new version of the home page, it will expand its services to include order tracking.

Despite all the benefits of the Internet, companies aren't ready to abandon the channel strategies that made them successful. "We see the Internet as a way to improve customer service and get new customers. Depending on the adoption rate of the Internet and the ability of customers to download information, I intend to use it as part of our overall marketing mix," said Creasi.

TOP 20

GROUP 70

B/C SCHEDULE HOLDERS (MICROCOMPUTERS)

(FY '95 - $ in thousands)

1. Government Technology Services Inc.$163,601

2. Gateway 2000$81,996

3. Dell Marketing, L.P. $75,022

4. Bohdan Associates Inc.$51,948

5. Zenith Data Systems Corp.$40,307

6. Compaq Computer Corp.$38,837

7. I-NET Inc.$26,047

8. Toshiba America Information Systems Inc. $20,865

9. Zeos International Ltd.$20,174

10. Westwood Computer $18,998

11. NEC Technologies Inc.$17,700

12. Information Handling Services$15,861

13. EPS Technologies$13,987

14. Falcon Microsystems Inc.*$13,560

15. Adstin Computer Systems Inc.$12,081

16. Softmart Inc.$10,462

17. Innova Communications Inc.$10,143

18. ASAP Software Express Inc.$9,385

19. The Presidio Corp.$9,332

20. Government Micro Resources Inc.$9,251

*Purchased by Government Technology Services Inc. in 8/94

Source: General Services Administration