BUSINESS-TO-BUSINESS IT: Direct connections - Direct sales, branding, PR and the internet are transforming marketing in business-to-business IT. Fran Littlewood reports

Marketing in the IT sector is without doubt becoming more

sophisticated.

Branding techniques - traditionally the forte of consumer marketing -

are being used in preference to the product-specification type of

selling previously favoured by business-to-business marketers in this

sector.

The companies’ new-found enthusiasm for branding strategies comes as

they shift toward targeting their business consumers direct, which is

making those in the sales channel rather nervous. For the resellers in

the middle, the future is far from rosy, as the big names want direct

dialogue with their customers.

’A few years ago marketing people in IT companies didn’t know what a

brand was,’ says Geoff Dowell, chairman of business-to-business

marketing agency Dowell & Associates. ’Now, instead of pushing product

down people’s throats, they are trying to put a personality to their

corporate values.’ IT companies are reaching out to the business market

via a ’look and feel’.

Coupled with this, direct marketing is on the up in the

business-to-business arena as it recognises the success this element of

the marketing mix has enjoyed in its neighbouring consumer field.

Detailed database information means IT marketers can narrow down their

target and reach specific individuals, upping their chances of

generating immediate sales leads.

And in the business field they’re fighting it out over the still

relatively untapped small and medium-sized enterprise sector, with

differing degrees of success.

The drive toward all things direct was kicked off, at least in part, by

Dell Computer. It is jostling for position in terms of PC sales in the

UK having turned its back on IT’s traditional tiered distribution

channel. According to the 1998 survey conducted by the information

technology research arm of Banner Corporation, Dell pulled in a 31%

share of desktop-PC sales to large organisations, ahead of IBM and only

just trailing Compaq.

Among smaller outfits, it achieved joint second place with Compaq,

taking a 12% market share.

Dell is also one of only a handful of players that is actually making

e-commerce - that is the sale of product direct to users over the

internet - work. David Moore, marketing manager for Dell UK Direct and

Ireland, claims the company is generating sales over the internet worth

dollars 6m (pounds 3.7m) per day worldwide and dollars 1m (pounds

600,000) per day in Europe, which must be making its rivals sit up and

take note.

Dell operates a cheaper sales model which is attractive to an

IT-literate corporate market. Some in the market predict that Compaq and

IBM in particular could follow suit. Both are adamant that they are

committed to their existing sales channel, but some in the channel are

less certain.

Their brand-building and direct-marketing drives are only serving to

fuel dealers’ fears that they will be marginalised. ’There will be a

change in the emphasis in channels - there already has been,’ says

Dowell. In the US, both players have recently kicked off some direct

activity.

Close calls

In the UK, Compaq last year set up a pounds 22m call centre in Glasgow,

by its own admission aimed at forging a closer relationship with its

small and medium-sized business customers. William Knocker, Compaq’s

director of marketing services, says a lot of Compaq’s direct-marketing

activity is now based on calls to and from the centre: ’We are changing

the approach to become far more accessible to the customer,’ and, he

claims, to the company’s channel partners too. He is at pains to point

out that sales made by the centre are fulfilled via the reseller

channel.

Resellers are sceptical, however, and believe the new approach is just a

means by which Compaq can build up a direct relationship with users so

that it can eventually squeeze out smaller resellers. Compaq did not

help dispel these fears when, earlier this year, it refused to stump up

a cash-back offer to a dealer who would not hand over the details of the

customer it was selling to.

Compaq said a condition of the promotion was that dealers hand over the

details.

Compaq argues that it targets customers direct so it can match them to

the skills of the most appropriate reseller.

IBM too has been accused of gearing up for a shift in sales channels

through its branding drive, a move viewed by resellers as designed to

get access to customers. IBM denies it has any plans to go direct. While

market players agree we will not see the complete erosion of the

reseller channel, its role is likely to change to become more

value-added and service-oriented.

Despite disputes over shifting sales channels, most IT manufacturers

will agree that they are digging deeper into the corporate pocket than

ever when it comes to forking out for an image facelift. Dowell &

Associates estimates that IT firms are spending between 3% and 5% of

their turnover on marketing and communications and that the figure is

rising, with some companies splashing out as much as 10% of their

turnover on above-the-line only. Dowell believes the bulk of the

marketing budget - between 35% and 40% - is being spent above the line,

but that direct marketing, which accounts for 20%, is growing.

Apple push

Apple has made one of the most significant branding pushes of the IT

pack this year with its pounds 2m ’Think Different’ campaign. Alan Hely,

Apple UK’s marketing director, says the campaign targeted customers in

the ’creative content’ and education fields, as well as IT decision

makers and consumers who ’needed reassuring that Apple was still around

and had a lot to offer’.

Comparing the Apple brand to Nike, he argues it is ’the only lifestyle

brand in the industry’ and says the aim is to communicate ’what Apple

stands for; it’s not about the product’.

Hely says that close to three-quarters of Apple’s marketing budget is

spent on the ’communication of the brand’ via press, poster ads, TV and

radio, with the remaining quarter spent on public relations, carried out

by Bite in the UK.

’For Apple, PR is fundamental; the press love to talk about Apple,’ says

Hely. When the company launched its latest offering, the iMac, via a

’big-bang approach’ in May, he estimates that the value of the PR in

media terms worldwide hit dollars 35m (pounds 21m). But Apple needs to

reach out to a wider audience. Hely says that next year it will fix its

aim on the SoHo arena to uncover ’how we start to readdress that market

where we have lost our way’.

IBM is also exploiting its brand equity, with its huge above-the-line

campaign positioning itself as the company that ’makes e-business a

reality’.

The company, which has a pounds 1.6bn global media spend, is driving a

consistent approach to pushing its brand worldwide, creating a one-stop

marketing shop which reflects the global nature of its products. The

centralised push follows its move a few years ago to consolidate its

advertising business into Ogilvy & Mather Worldwide.

IBM builds brand

More recently IBM streamlined its direct-marketing activity, hacking

back its roster of more than 30 direct-marketing agencies worldwide to

just four. In April it launched a centralised pounds 20m European

campaign based on its e-business theme.

According to Knocker, Compaq also is ’moving more toward a customer

focus than a product focus’ and shifting the emphasis ’into customer

segments’.

Aside from the change of direction signalled by its recent call-centre

project, it is being forced to rebrand following its dollars 9.6bn

(pounds 6bn) acquisition of Digital in June.

It marked this ’milestone in the history of Compaq’ in the UK with a

pounds 1m-plus campaign in the national and business press to ’signal at

a brand level the future direction of the company’. The ’Compaq better

answers’ push used an icon of the letter ’q’ in Compaq to pose various

questions, which the company claims it now has better answers to, due to

the greater expertise gleaned from the joint venture.

Knocker says advertising eats up close to 40% of its marketing budget,

with 30% going on sales promotion, 25% on direct marketing and the

remaining 5% on PR. Like most manufacturers it also ploughs money into a

joint marketing fund, aimed at keeping those in its distribution tier

sweet.

But not all the IT players are convinced of the branding ideology. Dell

is eschewing the trend toward the ’corporate personality’, instead

focusing its efforts on the small and medium-sized enterprise sector,

with ’99.9% of advertising in the UK directed at SMEs’. Its marketing

strategy reinforces its direct-sell approach via very targeted direct

mail, site visits by sales people, telesales, sales promotion and

response-oriented advertising.

It has 30 or 40 programmes running at any one time.

’We are trying to open up the sales process immediately. Rather than

saying ’we are Dell and this is what we’re about’, we’re saying ’we are

Dell, this is the product, this is the specification, this is the

price’,’ says Moore. ’We are trying to use the products to carry the

brand attributes. In the SME market, value for money is the key.’

He says the company is ’highly segmented’ in its approach to marketing,

splitting its potential customer base into five sectors in the UK

according to size of company, from corporate sales to The Times Top 100,

down to its consumer business and tailoring its marketing activities

accordingly.

Dell’s direct model enables it to do this, he argues: ’If you’re Hewlett

Packard (HP) or Compaq you can’t segment by employee size or company

size because you’re doing everything through a network of dealers and

you don’t have a direct relationship with your customers.’

He claims that Dell is also better able to judge the effectiveness of

different campaigns since it can monitor customer response directly.

Manufacturers who use an indirect sales model ’spend and hope’ in terms

of their marketing budget, he says.

Another company keen to extol the virtues of direct mail as a

cost-effective means of profile raising and generating sales is HP,

which is using the medium ’more and more’, according to Darren Wall,

Laser Jet printers marketing manager.

He says the company has in recent months even shifted some of its

above-the-line budget to below-the-line activities.

Direct-marketing agency Perspectives deals with the bulk of its

direct-mail push.

The direct marketing approach is bound up with its efforts to reach the

SME sector since IT is ’now going into much smaller businesses than in

the past’, and as Dell and others are discovering, there’s money to be

made in this burgeoning arena.

HP itself, together with Perspectives, has set up its Small Business

Council, which pulls together the company’s different product divisions,

designed specifically to discover how to touch the hearts and minds of

SMEs. It is using this combined marketing weight to target small

businesses, but is channelling sales through dealers.

Rationalising the mix

HP has pared its marketing down to a basic mix of direct mail and print

advertising. But the print campaigns are aimed at larger corporates.

’The difficulty we’ve seen with print advertising campaigns to SMEs is

that the media is very large and can get very expensive very quickly,’

says Wall.

He adds there is a lack of good specialist small-business press. Wall

points out that HP is moving away from television advertising, which

’hasn’t been a terribly good return for us’. TV for the

business-to-business audience doesn’t offer the right levels of

return.

But while they’re headed in the right direction, or at least a

direction, IT marketers still have some ground to cover. Indeed,

European IT marketing forum The Foundation argues that ’despite the vast

combined purchasing power of their customers, most European technology

vendors are failing to target these customers effectively and are taking

a generally slack approach to marketing.’

Lack of focus

A survey of 100 IT marketing directors carried out by The Foundation in

May saw 22% of respondents admit that their market segmentation strategy

centres around what is easiest for their own internal infrastructure,

with 31% justifying their segmentation strategy by arguing ’that’s the

way we’ve always done it’.

A third of respondents said they do not conduct any research into their

target markets, a quarter do not treat any of their market segments

differently and many marketing and sales departments within the same

vendor organisations segment the same markets differently.

Dowell says: ’Most companies are not focusing enough on where they’re

trying to mop up.’

He thinks that it is a problem prevalent among smaller IT players:

’Smaller companies, if they’re not careful, will get trodden on if they

don’t build their brands in the next couple of years.’

Dowell believes that they must focus in on their targets and stop trying

to ’capture as much as they can of the whole marketplace’.

DIRECT MARKETING ON THE UP

Direct marketing in the business-to-business field has ’developed slowly

in a quiet, revolutionary kind of way’, according to the general manager

of Emap Direct, Simon Lawrence. But a number of recent developments mean

business marketers, and IT marketers in particular, are finally taking

the lead from the consumer operators.

Over the past four or five years the development by companies such as

data provider TDS of geodemographics for business, which identify the

characteristics of businesses according to their postcode, has enabled

better profiling of business behaviour.

More recently, the merging of some of the biggest owners of business

data is paving the way for more in-depth profiling. Previously IT

marketers have had access to three sources of business information: that

filed at Companies House; publishers’ data, such as business-press

circulation lists; and directories like Yellow Pages or Thomson.

In March, Emap Direct merged with TDS, meaning customers can gain access

to the TDS data list, together with business-press circulation data from

Emap. In a separate move, Yellow Pages forged a strategic alliance with

Equifax, which boasts a significant financial-data list.

IT marketers like Dell and HP are at the forefront of the

direct-marketing push. The dynamic nature of their business, says

Lawrence, means they are constantly seeking to open up new markets such

as the SME sector, and with more data available, highly targeted

direct-marketing activities enable them to do this efficiently.

The 1997 business-to-business trends survey, published by the Direct

Mail Information Service, has shown that direct mail sent to business

managers is viewed as more useful than ever. Previous barriers to the

impact of direct mail are becoming less of an issue as marketers improve

their aim, and direct mail is ’on target to sustain its role within the

marketing mix’.

UK IT MARKETERS SLOW TO EXPLOIT INTERNET’S POTENTIAL

’In the business-to-business sector, people are only just waking up to

what the web can deliver,’ says Neil Colling, managing director of

Strategies, a specialist database-enabled web-site developer.

The US is leading the field in using the internet as a marketing tool,

with the UK market trailing behind. ’If you’re in the US and you’re in

IT that’s where people look up information - you do not have an option,’

he says. The UK market, meanwhile, has in most cases not moved beyond

posting product catalogues on web sites.

Banner advertisements, scattered across the web to attract users to

individual pages, are proving popular among IT companies, with most

dabbling in this arena. But it is an ’area that’s got a long way to go’,

according to Compaq’s William Knocker. He says that while Compaq does go

in for banner ads he is not convinced it’s working 100%. ’I don’t think

we’ve got it down to a fine art yet; we don’t have a grip on the return

we’re getting.’ He adds that ’users of the net are not that influenced

by it’.

Other IT players are trying to spice up their banner offerings to

differentiate them from the sea of electronic teasers, for example by

introducing interactive elements. And they’re wising up to the

importance of location; search engines are a popular place to put ads to

maximise exposure to internet users. But Colling points out: ’The thing

most people don’t realise is that the major way of marketing a web site

is through conventional methods.’

Colling says companies should focus on extracting registration

information from visitors to their web sites so that they can target

them via e-mail later. He says: ’The original and best-push technology

is still e-mail,’ and points out that IBM is the only company he has

seen using this technology effectively as a marketing tool.

Apart from Dell, networking giant Cisco is the only other player doing

any real e-commerce. Barriers to its take-up in the UK include the risk

of conflict between manufacturers and their sales channels. But Colling

believes that it will take off since the internet ’is an effective place

to shop’. He says once a standard PC’s price drops to pounds 200 and

internet connection charges fall, the volume of e-commerce will go up.

’I think in the next two years we will see dramatic changes,’ he

says.

PR AT THE CENTRE OF IT ACTION

PR is standing its ground as an essential part of the marketing mix.

Specialist consultancies are among those in the fastest-growing sector

in public relations, and general agencies trying to gatecrash the party

to snatch a piece of the action.

Apple, which employs Bite in the UK and monitors its PR quarter by

quarter, views it as fundamental. Alan Hely says: ’For our 4% market

share we get greater press coverage proportionally.’ Andy Tait, Intel

marketing and PR manager for Northern Europe, agrees it is a ’very

important’ part of the mix. Intel opts to keep tabs on its output with a

’large department’ in-house, generating the bulk of its PR.

Jonathan Simnett, Brodeur APlus director, argues PR is ’so important’ in

the IT marketing mix because of the rate of innovation in technology and

its complex nature. ’Advertising is good at building effective brands,

but it’s more valuable to get editorial coverage because it is effective

at explaining what a technology does.’

PR companies with specialist IT knowledge are very much in demand due to

their ability to communicate complex subject matter.

Nevertheless, some general agencies are sneaking into the top ten.

The branding push and the move away from product specification means PR

agencies have their work cut out. Tariq Khwaja, associate director at

Text 100, which numbers Microsoft among its clients, says: ’It’s the

year of the business decision-maker for technology companies.’ The

question for PRs and their clients used to focusing on technical IT

managers is ’How do I get to the boardroom?’ The answer is to push

business benefits more strongly than technical features and is seeing a

move toward PR firms promoting their clients on the back of issues such

as the Millennium Bug.

Top ten IT PR agencies

Agency                         Total income 1997            IT income

1 Text 100                      pounds 6,182,000     pounds 6,182,000

2 Brodeur APlus                 pounds 3,708,000     pounds 3,597,000

3 Firefly Communications        pounds 3,310,000     pounds 3,145,000

4 Harvard Public Relations      pounds 4,314,000     pounds 2,718,000

5 Hill & Knowlton              pounds 18,753,000     pounds 2,625,000

6 The Argyll Consultancies      pounds 2,717,000     pounds 2,527,000

7 Weber Public Relations       pounds 10,417,000     pounds 2,500,000

                                                            worldwide

8 Shandwick UK                 pounds 23,861,000     pounds 2,386,000

9 Edelman Public Relations      pounds 7,127,000     pounds 2,352,000

                                                            worldwide

10 Charles Barker BSMG          pounds 6,841,000     pounds 2,189,000

This article was first published on Marketing