Introduction to White Paper by Author

Putting the Internet to Work was published in the Spring of 1997.  Today, 14 years later, this White Paper remains both current and relevant.  More than anything, the passage of time shows that while technology may continue to advance, basic business principles do not change.  Looking back from today, it is surprising how long it takes society to adapt to these technological changes.

Other than slight changes to current terminology and references to companies no longer in existence, this White Paper could have been written today.  Back then there was a battle between “push” and “pull” technologies for distributing news.  While the technology for distributing news is no longer in flux, it remains unclear just who will survive in this new era and who will bear the ongoing costs of gathering the news.  Companies that were giants of their day, such as America Online (AOL), are now shadows of their former selves while new entrants such as Google, Facebook, LinkedIn, Twitter and Groupon are all working to ensure that they do not suffer the same fate as earlier Internet casualties.  While all these companies appear to be commercial successes today, most have yet to prove they serve a viable long term purpose for which individuals (or businesses) will continue to pay for access.

Throughout my career, I have worked with many different businesses in multiple industries.  A couple of these businesses warrant mention as being successful at utilizing Internet technology.  I am particularly proud to have led the team that envisioned, developed and implemented the business model for distributing press releases online.  This model, first introduced by Canadian Corporate News (now Marketwire) in 1996 has since been adopted by other newswire companies throughout North America.  Other information companies that have been successful at transitioning their services to the Internet include Lexis-Nexis, CCH, Reed Elsevier and Thompson Reuters, to name just a few.  What these companies have in common is that all have adapted to the Internet without devaluing their content.  The success of these companies should be studied.  It contrasts with the experience of the newspaper industry which continues to see declining revenues resulting from how they first decided to use the Internet more than fifteen years ago.

Of all the companies I have worked with during my career, the one that has most impressed me with their longevity and ongoing viability is Inquiry Management Systems (IMS).  This business provides support services to the publishing industry.  Throughout my 20+ year relationship with this company, I have seen the benefits of their long term commitment to understanding and utilizing the Internet throughout its business operations.  To my knowledge, they have never focused on Internet fads that are of questionable value.  A low tech data gathering operation when it first started in 1979, IMS invested the time and resources to figure out the best way to integrate computer and Internet technologies to improve their internal operations and as a delivery mechanism for their clients.  Their continued success is a testament to this strategy.  Had I written this White Paper today, it probably would have focused on how IMS has embraced these technologies.

This White Paper continues to present a current look at how companies can make effective use of the Internet.  While the Internet of 2011 is a vastly different mechanism than in 1997, it is clear that many businesses have been slow to understand how they can utilize this technology as an integral part of their internal operations, marketing strategy and for customer service.

There is an important lesson here for franchisors.  The Internet is far more than an advertising medium or mechanism for bringing customers through the doors of their franchised businesses.  I consider this to be the low hanging fruit for those that fail to understand the true potential of the Internet.  It provides a short term justification for “embracing” the Internet without really understanding the true value of this medium.  Advertising may even be effective for some businesses.  However, the more valuable benefits of “embracing” the Internet require more effort.  Improved internal operations, better internal communications and enhanced customer relations are all more likely to lead to long term success than short term advertising initiatives.  Those that invest in these opportunities are more likely to succeed even if the Internet is found not to be an effective advertising medium for their businesses.

I have chosen to republish this White Paper through the FranchiseFacts web site as an aid to franchisors in understanding how the Internet can be better utilized within their businesses.

Perry Shoom

FranchiseFacts

Putting the Internet to Work

A Model for Business - Consumer Relations

using the Internet

written by: Perry Shoom,

                                                                 Information Retrieval Systems

Initial Publication: Spring 1997

Republished without revision: July 2011

Introduction

Consider the Internet---not the constant hype but something far more practical. Sending computer files and messages around the world is now as easy as making a telephone call. We now have “noncompatible” computer systems working together to provide seamless data communication which is less costly than voice communications. Just four years ago, this was not within the realm of discussion.

Despite these developments, we seem to have lost our focus. We are forever waiting for the next technological breakthrough, be it newer browser features, Java, full motion video, or greater bandwidth.  In a rush to have the latest and greatest, we seem to have forgotten why we need the Internet.

The Promise

Instantaneous data communication has been a long sought after goal. From postal delivery to private courier to fax machines, daily business communication has become both faster and easier. The Internet now provides a reliable, inexpensive and fast delivery mechanism for information which exists in an electronic form. Since most information originates or resides on a computer, the Internet can reliably support over 90% of the country’s non voice communication.

But the Internet is capable of much more. It allows for what I describe as dynamic interaction. Unlike television, radio and print media, the Internet offers the capability for two way communication. From sales, marketing and advertising to customer service, research and database marketing, businesses constantly strive to communicate with the customer. The Internet simplifies these communications while providing a mechanism for direct feedback. The technology is here. It is inexpensive and accessible to businesses of all sizes. We must learn to use it.

Perhaps technology has advanced too quickly. Security and data privacy, Internet vs. intranet, fee based services, and other distractions make it difficult to focus on the real issues.

To be fair, there are a handful of success stories; Netscape, Amazon.com, Yahoo, Lycos, inquiry.com to name a few. Most organizations, however, do not yet understand the Internet, particularly what it can accomplish for them. Websites are often developed because of some vague understanding of potential benefits rather than a sound communication plan. These Websites emulate the familiar. Most often, corporate Internets exist for the sole purpose of putting out an electronic version of a corporate “brochure”. Other Websites attempt to generate income through the placement of advertisements. Both approaches assume that consumers and businesses respond to what they see on the Internet much as they would a printed brochure or an advertisement in a magazine or newspaper.

These approaches fail to recognize two important differences. First, advertising through non-Internet channels is usually unintrusive and without cost to the recipient. On the Internet, individuals pay for time spent on-line. Many are justifiably sensitive to unsolicited advertising which slows down their access to a Website and the information they seek, and to unsolicited e-mail transmissions. Websites that are simply advertisements for a company or its products are inappropriate in this business climate. The lack of business success on the Internet is detailed in a paper titled “Hope, Hype or Happening” by Dan J. Wasserman, Interactive Insights: A Multimedia Compendium, NAB’97. This paper clearly identifies the vested interests behind the current Internet hype, and provides evidence questioning the true dollar valuation of Internet-based revenues.

Building on where “Hope, Hype or Happening” leaves off, this paper presents a practical business model for sustainable implementation of Internet technology. The model is presented in the form of a case study for a fictional company named “Shoom-Mart”. Shoom-Mart is a retailer, perhaps a supermarket or department store. The shopping and purchasing habits of “Sharon Shopper”, a hypothetical consumer, are analyzed as she makes use of the Shoom-Mart Website. The second part of this model reflects how Shoom-Mart’s Internet successes are brought in-house in the form of an intranet. The lessons learned from Shoom-Mart are relevant to most business organizations, more so to service organizations and those developing Internet-based businesses.

Shoom-Mart earns the business of Sharon Shopper

Sharon Shopper visits the Website for Shoom-Mart. She may have learned of Shoom-Mart’s Website from an Internet search engine, a hyperlink listing at another Website or from Shoom-Mart’s own marketing efforts.

Sharon likely has a good reason for visiting Shoom-Mart’s Website. Perhaps she wants to contact the company, or a specific individual, and prefers to do so via the Internet. She may want to get a store address or its hours. To many, this is preferable to dealing with sophisticated corporate telephone systems and their often extended wait times. Sharon may find the Internet faster and more economical than the telephone. Perhaps Sharon has no pressing need for information and inadvertently found the Website while surfing. Regardless, Shoom-Mart now has an opportunity to assist Sharon, encourage a sale and perhaps gain some valuable information that can aid in future contact with her.

Better still, Shoom-Mart can do all this in a productive manner which reduces its own costs. No long distance charges are incurred by either party while assisting Sharon, and no staff time is required.

Assuming Sharon finds what she needs (which should be easy to do on a well designed Website), Shoom- Mart may also have reduced its print and postage charges plus the manpower required to prepare any mailing. In sufficient volume, these benefits are justification enough for Shoom-Mart’s Website. But this is just the beginning of a long term, mutually beneficial relationship with Sharon.

Shoom-Mart desires to be Sharon’s primary destination for products it carries. Its business is not about entertainment, and it has no interest in Internet surfers disinterested in its products. As such, Shoom- Mart has developed a Website which is practical, provides information often requested by telephone and mail, and is devoid of contests, games and “freebies”. The company has been most successful by focusing on bringing people into its stores. Once there, product selection, store layout and shelf presentation sell the products. Shoom-Mart’s experience is that consumers are unwilling to purchase products through other channels. Past catalog and telephone sales efforts have not been effective. Consequently, the Shoom-Mart Website does not attempt to sell any products or services through the Website.

Shoom-Mart has found that ongoing promotion of special offers is extremely popular, and has chosen to maintain this strategy on the Internet. It also views the Internet as a possible solution to one problem exposed during recent market research; consumer frustration at finding sale items out of stock. Shoom-Mart’s Website is designed to increase store traffic and assist consumers by identifying out of stock items.   Sharon, or anyone visiting Shoom-Mart’s Website, can register for a weekly e-mail service providing information on discounted products for the coming week. Since hundreds of items may be discounted in any given week, each registrant can select those product types of interest to them. A second service allows visitors to determine if the product(s) they require are in stock at the store location of their choice. After selecting a product category (from the list), then the product in question and store location, they are informed if the product is presently available or out of stock. If unavailable, an estimated availability date is provided along with a list of alternate store locations with the product in stock.

Shoom-Mart also wants to know more about Sharon. Making use of the weekly e-mail service involves a registration process. Sharon is required to answer a series of questions including basic demographic information, her product type interests, and her opinions on Shoom-Mart and its products. Sharon agrees to provide this information in order to receive the weekly e-mail notifications. Other than her e-mail address, Sharon remains unidentified. Sharon also agrees to allow Shoom-Mart to send her periodic email messages about special offers.

Shoom-Mart makes good use of this information. Each week, Sharon receives an electronic flyer, or “eflyer”, detailing product specials in her region for the coming week. The items in her custom e-flyer are limited to product types listed in Sharon’s custom profile. Periodically, Shoom-Mart will notify Sharon of special offers in those stores within her city. Sometimes, Sharon will receive discount coupons redeemable at her local store. Shoom-Mart also works closely with its suppliers. Product manufacturers allow Shoom-Mart to inform Sharon of special manufacturer discounts for those product types listed in Sharon’s custom profile. Unlike a typical direct mail list, Sharon retains full control over this process. She can change her product interests, or discontinue the service, at any time.

It’s absolutely amazing. This Website has turned into a strategic competitive advantage for Shoom-Mart. With little more than 30 minutes of additional manpower each week and no other expenses, Shoom-Mart is able to attract Sharon Shopper and thousands of other people into their stores. No added advertising or marketing costs. Just better use of pre-existing information from their databases. Shoom-Mart’s competition, which either sees no value in having an Internet Website, or has developed an ineffective Website, sees Shoom-Mart growing at their expense and is unable to determine the reason for its success.

Table one describes some rather unique Internet services offered by real corporations.

Table 1 Unique Internet Services
Company and Feature	Comments
USAir offers seat sales to select destinations. Amazon.com sells books. PeaPod offers Internet grocery shopping and delivery to the home inquiry.com integrates lead generation efforts by IT companies with information management requirements of IT customers.  Revenue is earned from placing listings and forwarding qualified leads to vendors. PointCast provides free access to category-based news and information. Service includes an innovative screen saver display carrying paid advertising. Quote.com sells access to current news and financial information from multiple sources.	A great way to fill excess capacity. Free to consumers. Greater selection than bookstores at lower cost. Likelihood of survival: excellent Many food products are purchased on impulse and presentation. Non Internet food shopping services have had limited success. Likelihood of survival: poor Services an existing need more effectively than paper based lead generation services. Ideally suited to users of technology. Likelihood of survival: excellent Advertisers may find a low response rate to advertisements on PointCast. Likelihood of survival: poor   Most consumers are probably satisfied with current sources for this information. Corporations and serious investors may have an interest in this up-to-the-minute information. Likelihood of survival: good

From Internet to Intranet

More recently, intranets have received considerable press. Shoom-Mart began to wonder if their Internet technology could aid in internal communication. After some research and discussion, it implemented firewall technology so that internal materials could not be accessed through the Internet, and allowed individual departments to launch intranet initiatives. Five departments either introduced or became dependent on intranet services over the following six months. Table two summarizes each department’s use of the intranet.

Table 2 Internal intranet Applications
Human Resources   Staff Directories   Corporate Policy Manuals Sales and Marketing   Product and Company Information   Inventory and Price Lists   Delivery Schedules	Investor and Media Relations   Financial Statements   Annual Reports   News/Press Releases   Analyst Reports

Human Resources introduced an electronic staff directory including telephone extensions and e-mail addresses, electronic versions of two large documents; the company policies manual and health plan documentation. Once a week, the department posts a list of staff training sessions including locations and times. Updating a document or directory on the intranet normally takes no more than 20 minutes. Before these materials were placed on the intranet, even minor modifications meant that complete manuals and staff lists had to be reprinted. Printing costs are now much lower. And productivity savings in the form of reduced administrative hours have allowed this department to implement an expanded staff training program.

Operations maintains inventory schedules. Each store can look at the schedule to see when they receive their next delivery, and what items are to be delivered. Schedules are updated daily. Errors are corrected prior to shipping. Courier and shipping costs have dropped since this application went live. The budget for temporary help required to address shipping errors has dropped by 90%.

Category Managers make use of inventory schedules and the out of stock feature to determine which products are most in demand. This assists them in planning changes to product offerings and purchase volumes. As a result, inventory turnover has increased and product shortages are less common. Suppliers find they now ship larger volumes of popular products, and have fewer product returns from Shoom-Mart.

Investor Relations is a time consuming task. As a publicly listed company, Shoom-Mart must maintain ongoing communications with investors, industry analysts and the media. The Investor Relations area serves as liaison between these interest groups and the company’s senior management. Since placing the company’s financial information on the intranet, these materials have been made available to all through the Internet. This has resulted in a reduced volume of telephone inquiries. Mailing and print costs have also dropped off. Furthermore, inquiries to and from senior management and outside interest groups are now handled within hours rather than days.

Retail Sales Staff also have access to inventory schedules. They are able to advise customers when out of stock items will be delivered. They can also use the Internet out of stock feature to assist in securing items that are in stock at another store. In the future, they plan to assist customers by placing special orders through the Internet. Customers will also be able to check the status of their orders through the Internet. Staff report less customer frustration in relation to product availability.

Summary

Though Shoom-Mart is a fictional organization, its internal and external communication requirements are real. The company’s use of Internet technology to optimize its relationships among staff, customers and suppliers illustrates what can be achieved in today’s competitive marketplace.

Table 3 Ten Reasons Why Websites Fail

1. Lack of strategic planning involving corporate visionaries 2. Emphasis on technology over practicality 3. Website not valued as a strategic asset 4. Control of Website residing in the company’s technology or MIS department(s). 5. Assuming that technology will market itself 6. Use of “bleeding edge” technology limits usefulness & value 7. Emphasis on appearance over functionality 8. Graphic intensive Websites too large for today’s technology 9. Use of existing company literature instead of re-writing for the Internet 10. Lack of accountability for maintaining/updating Website

Two major challenges face organizations wishing to address complex communications issues through the use of Internet technology. The first is defining in concrete terms what it wants to achieve. In Shoom-Mart’s case, for example, one goal was to develop a database of customer interests and preferences so that its marketing initiatives are more targeted. This goal was achieved by incorporating a customer registration form on the Website.

The second challenge is involving the right people in the project. In my work, I find that most organizations assign the task of developing an Internet Website solely to the department handling technology/MIS issues. The resulting product often looks good but is ineffective. (Table three provides the ten main reasons why Websites fail.) While technology specialists bring valuable skills to the table, they may not be in tune with the issues driving a business. Designing an Internet/intranet Website like that of Shoom-Mart requires a cross-disciplinary project team, e.g. marketing, customer service, operations, technology, and a clear understanding of the organization’s goals.

About the Author

Perry Shoom is the founder of FranchiseFacts, a company that provides research services for the Franchise Industry.  The company also publishes a Report incorporating the results from its National Franchisee Survey.  The 2010 Annual Report, and the Franchisee Survey that is currently in progress, can both be found at www.FranchiseFactsUSA.com. The survey is open to all franchise owners and store managers.  FranchiseFacts does not disclose identifying information that may be provided by survey respondents.

At the time this paper was written, Perry Shoom was an Internet and Business Consultant operating under the name of Information Retrieval Systems.  Perry continues to provide business and information management services as an independent consultant at this time.