"Despite the hardware component," says Glen Ward, president and CEO of Virgin Entertainment America, "this is actually a cost-effective way to recruit customers." Ward points out that "pure-play" Internet companies routinely spend $200 in marketing for every customer they land, but low margins in the music business render that level of spending untenable. "With IAN, we pay between $30 and $40 per customer," he says. Since the Webplayers cost about $500, IAN can't make a profit based solely on what it receives from Virgin, but the company also sells online ads and charges a commission on sales made via the Webplayers. Ward admits that this approach is experimental, and that Virgin must also find ways to reach the millions of consumers who already have PCs. "We call our strategy V-commerce,'' he says. "Virgin will give its customers choice and convenience in whatever ways it can."
Virgin is contemplating additional marketing channels, including mail order and record clubs — touch points considered hopelessly passé. Then again, so were vinyl records.
A War Room of One's Own
Like a good sales pitch, CRM is endlessly adaptable. Already, it has spawned a healthy submarket in PRM (partner relationship management) software and now a new company, Kovair Inc., is offering SRM, or strategic relationship management. The company's VIPCenter product provides an online meeting place — Kovair co-founder and CEO Krishna Subramanian dubs it a "war room" — in which companies can provide their most important business customers with various forms of communications and customer service. Eventually, Kovair sees these VIP Centers acting as portals in which partners will not only communicate critical information about product design, distribution, and other elements of the business relationship, but also conduct a full range of transactions.
"It's a twofold value proposition," Subramanian says. "You improve your 'stickiness' with your customers, and you move a lot of mundane administrative tasks online, which saves everyone time."
Indeed, Aberdeen Group senior analyst Harry Watkins says that while VIPCenters are sold most often to vice presidents of sales, it is the sales support staff that will make the greatest use of them, posting to the sites sales data, product specifications, shipping schedules, and all manner of details that today are usually communicated via E-mail, phone, and fax. "Kovair focuses on those complex sales relationships in which there are multiple people on each side of the buyer-seller team," he says. "It's a way to address those handful of key strategic relationships you have with other companies."
Kovair did not pioneer the idea. In 1996, Dell Computer Corp. created Premier Pages for its most important business partners — Web sites that address much of the same functionality that Kovair concentrates on. But Kovair has brought the idea to market, making it widely accessible via an ASP model.
One of the first customers was Chip2Chip Inc., a San Jose, California, maker of network infrastructure semiconductors. Mike Ofstedahl, the company's vice president of sales, says his firm has created multiple VIPCenters to facilitate communications with its independent sales reps as well as major clients, including Cisco Systems Inc. "It's almost viral," he says. "Once people start using it, they love to pass it on." Ofstedahl says his company uses the VIPCenters to collaborate on product-design issues, and hopes to conduct transactions through the sites later this year.
Kovair has competition: Promptu, Conjoin Inc., and others offer similar services, although to date they have focused more on a client's marketing needs than on strategic relationship management. But Watkins predicts imminent convergence, with Kovair moving to address a greater range of its clients' internal needs, and its competitors expanding their products to address the needs of a client's business partners.
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