impossible for ideas to compete in the marketplace if no forum for
their presentation is provided or available." � �Thomas Mann, 1896
Complex Products & Services
on the Internet
Sponsored by Selectica Inc.
Business Forum organized a Luncheon Forum discussion on the above subject at the Los
Angeles Marriott Hotel in Los
Those accepting our invitation for lunch
Transamerica Business Technology
Corporation - Vice President Data Center Services * Transit
Casualty Company - Vice President Chief Information Officer * Golden
State Mutual Life Insurances Company - Director of Administrations Services * Transamerica
Occidental Life Insurance Company - Vice President Information Technology
Services * Gelsand Newman Wasserman Insurance
Company Vice President * Automobile Club of
Southern California - Group Manager Enterprise Applications * Maxicare
Health Plans Inc. - Senior Vice President General Counsel * Crest
Financial Corporation - Vice President Information Systems * HealthMed
Services - Network Administrator * Cedars
Sinai Medical Center - Director Internal Audit * 21st
Century Insurance Company - Special Projects Director
For the benefit of those of our members and
supporters who could not attend the meeting we present the following white
paper, with contacts.
KEYS TO INTERNET SELLING SUCCESS
The second wave of the e-commerce boom is building
Here�s how you can ride it.
e-commerce gains prominence, many companies have moved beyond trying to define
e-commerce. Instead, they are now looking at how to make e-commerce work
for their specific business needs. Early e-commerce success stories were
about selling relatively simple products. However, the larger opportunity is
in selling complex products and services over the Internet. Consequently, a
business-to-business commerce revolution is occurring. The global nature of
the Internet itself is enabling new business models, new relationships between
players in the value chain, and new levels of competitiveness. At the same
time, Internet technology is changing the way companies build and deploy all
software applications to employees, distributors, partners, and customers.
you might expect, the markets are responding to these changes. Technology
companies are creating new software applications to more efficiently support
the sale of complex goods and services through both traditional channels and
the new e-sales channels. Companies that have adopted this technology are
attaining a competitive selling advantage over those that have not. The focus
of this report is in understanding the nature of these systems and their
capabilities; demonstrating how a businessperson should approach the
evaluation and implementation of an e-commerce system based on the success of
companies that have successfully met this challenge.
THE EXPLOSIVE GROWTH OF E-COMMERCE
Internet economy is outpacing even the most optimistic projections of a year
ago. The majority of e-commerce activity to date has been focused on the
business-to-consumer (B2C) market. However, today most analysts view
business-to-business (B2B) e-commerce as the fastest-growing e-commerce sector. In April 1999, Forrester Research reported
that B2B e-commerce sales reached $43.1
billion in 1998 and they expected them to leap to $109.3 billion by the end of
1999. By 2003, Forrester predicts that worldwide Internet sales will reach
$3.2 trillion�an annual growth rate of 99%.
first phase of e-commerce has been characterized by the purchase of relatively
simple products bought through what might be referred to as a "pick and
pay" paradigm: buyers browse a catalog, pick a product, put it in a
shopping cart, and pay. This approach works well when the product is easy to
select (such as books, CDs, and software) or when products from different
sources are identical (such as stock trades and commodities). Consequently,
these have been the e-commerce success stories that we have heard most about (Amazon.com,
eToys, Chemdex, and so on).
GETTING TO THE NEXT PHASE: BRIDGING THE COMPLEXITY GAP
no question that pick-and-pay e-commerce is big business. Nevertheless,
tapping the full potential of the $3.2 trillion e-commerce market will take
more. What if your company makes or sells products that require buyers to
assess their needs, evaluate combinations of features and options, and make
informed decisions? A huge gap exists between the complexity of your selling
process and the simple service that e-commerce based on shopping carts
supports. In fact, recent market research from Biz Rate/NPD Group indicates
that 75% of all e-commerce shopping carts are abandoned�and this is up from
67% one year ago. This statistic highlights that even in the pick-and-pay
environment, Internet selling is failing to convert most shoppers to buyers.
This gap, if not addressed, could spell failure for any e-commerce initiative.
complex products on the Internet requires dealing with two different types of
� Product complexity arises
when products have many features that interact with one another to influence
functionality, price, and performance, as well as the manufacturing and
delivery process. Some examples include networking and telecommunications
equipment, automobiles, and computers.
� Needs complexity
selling even relatively simple products and services such as PC printers or insurance policies. The product itself
may be relatively simple, but many factors come into play when evaluating a
customer�s needs and matching those needs with the best product or
complex products requires analysis. Which model best fills specific needs
within the budget? What are the optional features? What do they do, and how
much do they cost? Are there incompatibilities among versions, makes, or
components? Traditionally, sales representatives assisting prospects have
performed this analysis. In fact, at most companies, what separates the top
sales reps from the others is how well they provide this assistance. The
rewards of selling more complex products are significant, because
complex products usually represent the higher-margin products and services in
any product line.
THE INTERNET: The Emerging Platform for Business Applications
development has paralleled the growth of e-commerce: The Internet is quickly
becoming the technology platform of choice for developing many kinds of
business software. Traditionally, companies have implemented applications such
as enterprise resource planning (ERP) or sales force automation (SFA) software
on client-server architectures. These require loading a significant part of
the application on each user�s computer. However, companies have found that
the high cost of distributing and maintaining these applications makes it
unattractive to provide them to all the users who could benefit such as
employees, distributors and even customers. This ultimately limits the
effectiveness of these applications.
the emergence of the Internet as a platform, companies now have a
cost-effective way to provide current applications and information immediately
to anyone using an Internet-enabled device. This improved communication
and information flow can enable:
New business models,
such as auctions, demand aggregation, and dynamic pricing.
New selling channels,
including customer-direct, electronic delivery of software and international distribution�which would have been
prohibitively expensive a short while ago.
Enhanced delivery through existing channels,
such as enabling telesales staff and distributors to sell much more complex products with
less training and support.
companies are discovering that the power of Internet technology is as enabling
as the Internet itself.
THE CHALLENGE: Simplifying the Purchase of Complex Products:
do you help buyers complete the purchase of complex products over the
such as Dell and Cisco have invested heavily in custom-built systems that
deliver a competitive advantage. As a result, each of these companies sells
millions of dollars worth of products a day via the Internet. Now, however, a
market is emerging for commercial software platforms that deliver this kind of
customized selling experience without investing millions on in-house
development. These platforms effectively leverage the power of the Internet to
make selling assistance available not only to prospects over the Internet, but
also to direct salespeople with notebook computers, call center telesales
personnel and distributors worldwide.
companies such as BMW, 3Com, and Fujitsu are using these Internet Selling
Systems (ISS) to change their business models, open new e-sales channels, and
radically improve the efficiency of their selling processes.
WHAT IS AN INTERNET SELLING SYSTEM?
An Internet Selling System may be defined as follows:
The ISS is developed specifically on and for the Internet platform. This means
that it uses the Internet protocol (IP) to link a server to a client running
on a browser. There are two key advantages to a system specifically
designed for the Internet platform versus one that is not: Portability and
Portability�you can deploy a system developed on the Internet
platform over your company�s intranet to inside salespeople, over your
extranet to distributors, and over the public Internet directly to your
system developed for the Internet requires no client-side software. This means that updates are available to all users
instantly, thereby keeping up with your ever-changing product environment.
An ISS manages product and needs complexity throughout the sales cycle�as
opposed to sales force automation software, which focuses on managing the
prospect information and relationships.
An ISS is a complete commercial product solution including:
facilitate developing applications without using proprietary languages and custom-developed routines.
Debugging, deployment, and maintenance tools
reduce total cost of ownership.
New releases incorporating new features
the utility of the ISS and sustain the competitive advantage of the company deploying
assisting at every step of the selling process, Internet Selling Systems make
buying a complex product or service as easy as buying a simple one. An ISS can
take the knowledge and experience of your best salesperson and product manager
and use it to guide the customer to the right selection. Using an ISS, you can
increase sales, reduce cost of sales, greatly improve customer satisfaction,
and launch entirely new business models rapidly.
major components of an Internet Selling System are:
You develop this repository as part of the ISS deployment. Ideally, it
is a single repository that stores all rules and constraints about product features,
pricing, and manufacturability. It also stores the desired behaviors regarding
marketing, up-selling/cross-selling, and upgrades that your ISS will
implement. It is important
to note that the KnowledgeBase does not need to be the primary data storage
for all this information. In fact, it should be able to reference data and
databases stored in other systems, including your sales force
automation and ERP platforms.
This is the application logic itself that runs your ISS. You may integrate it
a proprietary application server or use one that is commercially available.
This is the network that connects your users (internal sales, field sales,
distributors, or customers) to the ISS system. For an Internet-enabled system,
it may be any IP network.
This is the user interface to the Internet-based application. If you design
your application without extensive downloads (such as Java applets), the ISS
can run on almost any device capable of supporting a browser interface (even
including a PDA or a cell phone).
HOW ISS TECHNOLOGY CAN BENEFIT YOUR COMPANY
are many advantages to using an Internet Selling System to model your product
and business processes in a KnowledgeBase that enables all selling channels to
manage complexity across an Internet platform:
increase sales by:
your best selling practices. You can model many of the best selling practices of
your top salespeople in an ISS and make them available to your entire sales
average order size. Your
ISS can identify up-selling and cross-selling opportunities during the sales
process and offer related products to the buyer at appropriate times.
more sales. As
highlighted previously, 75% of Internet shopping carts are abandoned. This
means that the majority of e-commerce transactions go uncompleted.
ISS encourages users to complete their purchases by guiding them through the
sales process and providing accurate and complete information at every step.
everywhere, 24x7. With
an ISS, you�re always available to sell to anyone with Internet access. This
makes your company the easiest and most accessible firm to do business
with�and isn�t that what your customers want?
reduce cost of sales by:
in-depth product information directly into the hands of salespeople,
distributors, and customers. An
ISS gives users the ability to evaluate and specify complex products without
assistance. That, in turn, frees up product experts and technical sales
assistants for higher value-added activities.
complex customized price quotes in minutes instead of days.
ISS, salespeople or prospects can complete complex price quotes that used to
take hours or more to prepare. This gives prospects immediate responses and
saves precious selling time. The ISS then saves more time and labor by
transferring accepted proposals directly to your order-processing system,
ensuring accurate order handoff.
order accuracy and reducing costs. It costs a lot of money to fix incorrect orders on the
factory floor. Moreover, telling customers they can�t have what they ordered
doesn�t improve customer satisfaction. Many companies actually accommodate
incorrect orders and end up manufacturing products that are normally not
available just to avoid this dissatisfaction�and that costs most of all. An
ISS ensures that customers get what they order and that every order can be
built without costly custom processes�before the order is accepted.
satisfy your customers and keep them coming back by:
it easy to do business with you. Buyers will come back to your e-commerce site when
they find it simple, intuitive, helpful, and responsive to their specific
needs. They�ll get accurate quotations immediately. They�ll know they�ve
ordered the solution they need. Their orders will be filled faster and
more accurately. Returned shipments and adjustments will decrease.
Customer satisfaction will increase.
can create whole new business models by:
the connectivity of the Internet and robust ISS technology to reinvent your
connected to your salespeople, your distributors, and your customers can
change the way you operate. ISS technology can enable these changes by
enforcing new business practices, personalizing relationships, and assisting
users whenever and wherever they want help. You can use ISS technology
Support electronic exchanges that link buyers and sellers.
Enable Internet-based auctions and other dynamic pricing approaches.
Give your selling efforts a global reach that you can support
you to change almost every facet of how you sell.
ISS can do more than help you sell more and sell better�it can help you
reinvent what selling means to your company.
7 KEY STRATEGIES FOR INTERNET-BASED SELLING SUCCESS
now, you have learned that implementing an Internet Selling System will bring
many business benefits. However, you also may wonder what is involved.
Successful deployment of an ISS requires preparation, excellent communication,
and commitment. Listed below are seven key strategies collected from actual
1. Start with executive sponsorship and participation.
ISS initiative affects all areas of your company. The sales function is
clearly affected. Distributor relationships may also be impacted.
Marketing will be impacted as well, from product presentations to promotions,
packaging, and pricing. Service policies may have to adapt, and the way in
which manufacturing receives orders may have to change too. You can only
achieve this kind of cross-functional coordination with a strong commitment by
all affected areas and ultimately by top management. Otherwise, your ability
to enact change across the entire buying process may be limited. To ensure
your success, be certain you fully understand your company�s e-business
goals and how to measure success. Enumerate and quantify the benefits of your
proposed ISS to the highest degree possible to ensure that top management
understands the wide scope of potential benefits. In addition, don�t
overlook the possible competitive disadvantage of not implementing an ISS and
letting your competition beat you to the punch. In fact, the ability of the
Internet to create new competitors who seize market share and establish new
brands in record time can motivate top management to act. By clearly
articulating and quantifying a business case, you will greatly enhance your
chances for success.
2. Include all sales channels.
Internet selling strategy and your ISS do not have to compete with your
existing sales channels. In fact, as the story of Aspect Communications
demonstrates, you can use Internet technology to enable your existing sales
channel to operate more effectively. The current trend in e-business is to
blend virtual and physical channels�often referred to as "clicks and
mortar." Physical channels give you points of presence and touch that you
can use to complement the e-channel�s 24x7 availability and expanded reach.
For example, customers can order via the Internet and then choose shipping and
delivery options or, if they prefer, be advised of physical points at which
they may pick up their products. Offices or stores can act as easy return
locations, minimizing the hassle of returning products by mail or courier.
This makes it easier to buy from you in the first place.
kiosks can be another channel in a well-executed Internet sales strategy,
providing a relatively inexpensive way to expand your market presence. A kiosk
implementation can act as a virtual sales assistant with in-depth product
information and configuration capability. When linked via the Internet to a
company�s sales, distribution, and manufacturing processes, kiosks can
provide a fast and convenient way for a customer to purchase your products and
services in markets and locations that you otherwise could not reach. When you
place a kiosk in a store that stocks products from multiple manufacturers, you
showcase relevant product features and differentiate your product from the
competition. You can link the kiosk to the store�s inventory system. Then,
if the item is not in stock, the ISS can tap into your distribution network to
have one shipped directly to the customer. For distributors, an ISS can help
sell complex products that they may find intimidating or that they have not
been effectively trained to sell. The ISS can make your product line stand out
as easier to sell than competing lines, earning you valuable mind share with
your distribution channel.
you deploy your system is dependent on many factors, including the specific
physical distribution mechanisms you use today.
No one strategy is right in every situation. In fact, most companies
blend elements of the two to fit their specific needs. The most important
thing to keep in mind is that eventually an ISS can, and must, impact all
sales channels in order to be most effective. To make this happen, you should
build your ISS on a technology platform that lets you deploy it efficiently to
internal sales people, to outside salespeople using laptop computers, and to
distributors and end users over the Internet, in-store kiosks, PDAs, cell
phones�any Internet-enabled device.
3. Simplify the user experience.
is the essence of Internet selling success. In 1998, a Forrester Research
study showed that 68% of Internet shopping carts were abandoned, meaning that
two-thirds of all Internet shoppers�even with simple products�found the
process too complex and unconvincing to buy. In 1999, an updated study by Biz
Rate/NPD Group showed that the abandonment rate had actually increased to 75%.
Of those who abandoned the process, 31% cited changing their minds as the
reason, 26% bought from a competitor, and 18% bought the product offline.
enable your ISS to convert prospects to customers, you must provide an
experience that helps customers or salespeople navigate through complex needs
or products with ease. Moreover, your ISS must compel users to move from one
step to the next in a seamless flow. At the same time, this flow must be
customized to incorporate decisions and preferences that users express at each
step in the process.
accomplish this, your ISS effort should focus on simplifying the entire sales
process�from needs analysis to product configuration, pricing, financing,
and order creation. Even if you do not implement all of these capabilities
initially, you should choose an ISS platform that supports them all. You may
not be able to foresee how your needs may evolve, or where your customers or
sales force will lead you once you have deployed the system.
well-designed ISS will seamlessly leverage a single KnowledgeBase or
repository across all steps in the selling process. Simplifying the entire
process often requires a robust and comprehensive system�much more than just
a "wizard" that provides relatively simple guidance through a linear
process. Remember: your site competes with all the other sites on the
Internet�your competition is always just a mouse click away. Thus, you must
make the user experience as interactive, engaging, and simple as possible.
4. Empower your buyers to do it their way.
with comprehensive functionality and a compelling user interface, a key ISS
requirement is to let your users move through the process in any order they
choose, while at the same time guiding them to a valid and successful order.
Without prior training, visitors to your e-commerce site should find it
intuitive, easy to use, logical, and interesting. They should be able to move
through the buying process and get the information they need to make a
purchase decision. In addition, you should let your visitors roam. They should
be able to start navigating from almost any point in the buying process. Too
rigid a process may not appeal to many of your visitors. Let them change their
minds and back up at any time without having to re-enter screens of
information. Give them visual cues that tell them where they are in the
process at all times. Provide instant access to any additional information
they need. Make sure that the information you provide is precise and accurate.
systems designed for selling complex products have focused on creating and
constructing one path through the process. This linear approach was
specifically due to limitations in the underlying technology: many systems
were built on rules-based configuration engines. You can think of a
rules-based system as a series of steps that define what can or must occur as
a result of each choice users make in the buying process. In other words, if
you choose A, you can only choose B or C. If you model your buying process
like this, you can see how rigid and deterministic the associated online
experience can be for users.
recent years, newer technologies have emerged that address the issue of
inflexibility. These constraint-based technologies model your complex product
and buying environment as a combination of rules and constraints. In other
words, the modeling is done not just in terms of what must happen, but also in
terms of what cannot happen. Thus, the buyer using a constraint-based
system can explore alternatives within a range of options. For example, each
time the user makes a new decision, a constraint-based system eliminates
invalid alternatives from future consideration. The resulting experience lets
users roam through only the set of valid options in any sequence. Another
inherent advantage in constraint-based systems is that the user may begin the
process of feature selection with any feature. This is unlike a rules-based
approach, which typically requires that users begin with a particular feature
and proceed through the selection process in a specific order.
addition to considering the type of reasoning used to guide users, it is
important to understand how that reasoning is implemented. Many simple systems
require users to select a series of questions or product selections and then
submit them in a "batch" to the system for evaluation. This
approach, while simpler for programmers to deal with, frequently leads to user
frustration. How many times have you filled out an online form, or answered a
whole series of questions online, only to be told that one of the first items
was invalid or unavailable? This is the result of batch submission. Newer
systems are based on engines that run in the background and evaluate each
selection as it is made, dynamically updating options and providing user
feedback at each step. Immediate and continuous feedback ensures less user
frustration�and to more completed transactions.
summary, a constraint-based system, built on an interactive engine, will steer
users away from invalid choices and lead them to a valid solution faster than
rules-based systems. This interactive design adapts instantly to users�
choices, tailoring the solution with each click of the mouse. It tactfully
informs them when a product configuration is not feasible and guides them to a
valid alternative. The result is a more intuitive and engaging experience that
converts more prospects to customers.
5. Don�t reinvent the wheel.
companies that pioneered e-commerce invested millions in the development of
proprietary systems to do what an ISS does. Today, excellent commercial ISS
packages are available, and there are five compelling reasons to use them
instead of developing your own:
total cost of ownership. Commercial systems cost less to develop, deploy, and maintain
than systems developed in house. Make sure that a commercial system you consider
offers productivity tools to help you develop applications quickly and to
maintain them once you deploy them.
With a rapidly deployable commercial product, you can get to market faster
than by designing and implementing one in house or through a consulting
organization. In today�s Internet economy, speed is a critical key to
success�getting to market fast can make the difference between success and
focus on your core competencies. Your company is not in the ISS business.
Developing an ISS system may distract you from focusing on your core business.
This is especially true if you�re a software company that depends on your
development resources to build your own product. It is also true if your
software-development resources are in tight supply and should be focused on
your business-specific systems, rather than developing what is already
benefit of a commercial vendor�s accumulated expertise.
Commercial ISS vendors have had experience implementing guided and e-sales
solutions in many different companies and industries. Many of these best
practices are built into these products, so you can take advantage of the
lessons of others�instead of learning them the hard way for yourself.
opportunity to take advantage of new technologies and capabilities as they are
Commercial ISS vendors are constantly upgrading their software to optimize new
technologies and knowledge they gain from customer installations. They
frequently make new features available to existing users, so you get
access to a constantly improving resource.
6. Architect your ISS for success.
Internet-based ISS opens up your selling process to many different
communities. This places a large and unknown workload on your servers. This is
unlike traditional client-server systems, where you can usually predict the
load. Internet applications must be built from the ground up to support users
numbering from a handful up to thousands without significant performance
degradation. This scalability is essential to avoid Internet selling brownouts
or blackouts�the kind of publicity no one wants. Beware of systems
masquerading as Internet-ready. Raise the hood and examine the architectural
underpinnings of each system you consider. Test it out in a lab to be sure.
You cannot have too much scalability or reliability. Making wise choices here
will position you as a leader.
7. Choose the right business partners.
approach to e-commerce is to buy your ISS from a sales force automation or ERP
vendor who already powers a part of your business. The usual argument for this
approach is that the integration between ISS functionality and the other
functionality will be seamless. Although this argument has its merits, the ISS
component of most integrated systems cannot match the current best-of-breed
ISS products in performance. In addition, the architecture of most current SFA
and ERP platforms is too client-server-centric to provide the scalability and
reliability that you will need for Internet deployment.
issues were a factor in the 1980s. Today, significant advances in open systems
standards (including ODBC, JDBC, and XML), coupled with enterprise-level
software specifically designed to integrate disparate systems, make it
possible to combine best-of-breed applications with legacy applications. The
demands of an ISS application - broad functionality, interactive user
experience, and Internet scalability - make a best-of-breed solution even more
course, you need other partners in addition to a best-of-breed ISS vendor. If
you need catalog and payment capabilities, you�ll want an e-commerce
platform partner. If you need order management, you�ll want an ERP or
supply-chain management system. In addition, you need an implementation
partner who can support your customization, development, and deployment
requirements and manage the project. You need internal experts to supply
product and domain knowledge and manufacturability rules. Selecting partners
wisely and defining roles carefully are keys to project success.
THE BOTTOM LINE
ride the next wave of Internet commerce, you must be able to sell complex
products and services online. ISS technology simplifies and accelerates the
sales process, increases sales, reduces cost of sales, and increases customer
satisfaction. Knowing the technology, and applying these seven key strategies,
will help you implement your ISS quickly and effectively.
ABOUT SELECTICA, INC.
Inc., is the leading provider of Internet Selling Systems (ISS) that enable
companies to sell complex products and services more effectively through
direct sales, via traditional distribution, and directly over the Internet.
Selectica�s software is used to guide novice users through needs analysis
and product selection, and to guide experienced users, salespersons, or
distributors through product/service configuration, pricing, and order
creation. The result is increased revenue, reduced sales cycles, and more
accurate orders. Selectica�s ISS is based on a 100% Internet architecture
that delivers unmatched scalability and reliability for mission-critical
selling applications. Today Selectica powers the award-winning Internet
selling efforts of corporations such as Cisco Systems, Dell Computer, BMW,
3Com, Hewlett-Packard, and Fireman�s Fund.
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