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a question of scale
growing into your customer base
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rob masri: getting started

Thanks, Eric. That was very good. I learned a lot.

          [Laughing] Eric pretty much covered everything that I was going to go over so . . . 

Mr. Becker: I still have two more pages.

Mr. Masri: Then finish it up.

          My name is Rob Masri, and I am Vice President of Corporate Development and General Counsel at Multicity. I've been with the company almost from day one. We want to say thank you to Netpreneur and to Mario for all they do for our community and for our company. We've been involved with Netpreneur almost since our inception as well.

          Just to give everyone a brief background on our company, it's a very unique and interesting story. As we developed, we had one sales strategy, actually more of a marketing strategy. We developed it and grew the company into what we thought was going to be a very profitable business, but then the market turned on us and we had to shut that strategy down and restart.

          We are in the business of providing online communication tools to companies. These tools include chat rooms and message boards and instant messaging and web polls and anything that allows people to interact with the Internet or interact with each other using Internet technology.

          When we first started the company, our focus was to try to get our technology on as many websites as possible because we wanted to build what we called the first open distributed network. A lot of people who had been building Internet websites at that time had built closed-off portal sites. If you think of a traditional Internet portal, you think of Yahoo or E-Bay or AOL. These companies were trying to get you to come to their URL and sit on their property without escape unless you were to type in a new URL. Our approach was very different in that you could come to our site through http://www.multicity.com, or through any of the companies that were using our technology. As a new company began using our chat or our message board, they became part of our network, and our network began to grow exponentially. It was an interesting strategy. We got a story on the cover of The Red Herring talking about how it was a different approach from all the other people who had been building websites.

          Our goal was that we needed to make money, so we raised venture capital and were monetizing our growth through banner advertisements. It was the right thing to do at the time. This was late 1998, 1999, and early 2000. When I first started with the company, I would call different websites and basically beg them to use our chat room or our message board. A lot of people would sign up because I would give them very creative ways that they could make money from it, such as revenue shares and other things that were very popular then. At the time, one of our investors' goals, obviously, was to take our company public, and the basic Internet metrics then were traffic, stickiness, and retention. Nobody really cared about revenue.

          If you looked at Multicity at that time, we had lots of traffic because we were getting our technology on a lot of sites; we had lots of stickiness because of our type of technology; and as to retention, you can imagine that if you post a message on a message board, you're going to come back and see who has responded, so there was lots of retention. People would come back.

          One thing we did that was very unique was adding instant translation into the products because we found that a lot of companies outside of the United States began using our technology. We had websites in Brazil, in Portugal, in Spain, Japan, India, and all over the world using our technology. They found out about us through online marketing initiatives and so forth. Remember that in our concept of a distributed network, all of these technologies interconnected. If you went to a chat room at a website in Portugal, you were able to speak Portuguese with the people there. If you clicked a button called Active Chats, the entire Multicity network would be scanned and any other website that had people in their chat room would show up in a little window for you and you could click on that topic. Immediately, the chat room you were in on the Portuguese website would convert into that topic, regardless of the website it was on. It was a new way of navigating around the Internet through chat rooms and message boards and our various technologies. One of the things we found was that people would end up on websites all over the world without being able to talk to each other, so we embedded the instant translation product to facilitate interaction.

          As I said, my goal early on was to generate revenue by getting more websites to use the technology so that we could develop more impressions and get higher CPMs (the price charged for an advertisement based on the cost per thousand viewers). At the time, the CPM rate was about $10, and we were showing millions of impressions on any given day for $10 per thousand. As time went on, the CPM rates started to drop, drop, drop. They dropped to $5, $2, 50¢. Now it's something like 6¢. Then a lot of advertisers started saying, “We don't want to pay CPM anymore. We want a CPC deal—cost per clicks—or CPA—cost per actions.” It became very burdensome for us to offer the technology in the way that we were offering it at the time.

          Let me step back for just one second. Our goal was to get on as many websites as possible. Instead of calling potential customers all the time, as I and other employees in the company had been doing, we decided that we needed a better way. We employed what we called the pyramid strategy, which involved calling companies that would give us access to lots of websites, companies like Network Solutions and Web development firms. But, as Eric talked about earlier, how would we get to them? The way we got to them was through investors. We asked our investors to make introductions. We asked people we knew in the community to make introductions. It's always very important to have warm introductions made for you, because a cold call is going to take a very long time to turn in to something. 

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          Eventually, we had to basically shut down this banner advertisement model, however, because it didn't work. We weren't making the money we thought we were going to make as time elapsed, so we decided we were going to set up a direct sales team, which is where we are now. The direct sales team involves the pipelines and the funnels. We developed case studies for the various verticals that we were approaching, and asked: Which verticals do we think would benefit from our technology?

          We took our technology and developed it more into a solution than just individual products, and we combined the products into what we called a Minicity suite. We were able to sell this application that would allow companies to aggregate communities of interest around our technology to their websites. We were able to get some marquee customers like PBS, UVA, Amnesty International, and MTV that were able to help elevate us to the next level.

          I developed a quick Top 10 list of things that I learned in this evolution. First is: Don't be afraid to give the first one away to the right customer, because the right customer can bring you marquee value, money, and the case studies and endorsement that you need.

          Second: Don't give the second one away, because, at some point in time, you have to show that your product or service has value.

          Third: Set clear objectives and expectations for yourself, for your customers, and for your employees.

          Fourth: Reach out and touch your customers. It's like that old commercial on TV where the CEO walked around and gave everybody a plane ticket and got them to fly to their customers. You would be surprised how many CEOs have never even spoken to their top customers. Don't be afraid to talk to your customers and get to know them.

          Fifth: Make sure that everyone is aware that the customer is king. Your employees, everyone needs to know that.

          Sixth: Focus your efforts so that everyone in your organization is on the sales team. It's not just two or three people on the sales team; everyone needs to be on the sales team, from the receptionist to the programmer to the CEO.

          Seven: Listen carefully and offer solutions to your customers' problems. Be willing to change so that your product moves from being a “nice to have” to being a “must-have.”

          Nine, and one of the paramount things: Always under-promise and always over-deliver.

          Finally: Be mindful of the clock. You have 30 days to get it done. If it doesn't work, move to the next thing because you've got to start generating revenue for your employees and for your investors. Thanks.

 

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cory marsan: gaining momentum

Great talk, Rob. I can certainly echo a lot of those comments.

          I am Cory Marsan, Executive Vice President of Sales & Marketing at ServiceBench. I want to thank everybody. I'm pleased to be here this morning with all of you.

          I guess that I have a few qualifications relative to the topic at hand today. For better or worse, as it were, I have spent my entire career in sales and marketing. I won't go into how many years that's been, but it’s been at some very large companies. I started my career with the largest company in the world at the time, back in the early 1980s, AT&T. Over the course of the past 10 years I've been with entrepreneurial firms, starting with being one of the founders of Net 2000 Communications in 1993. We grew that from just the four founders, where we pretty much did everything and were responsible for all the sales, to an eventual sales force of 250 and 1,200 employees.

          Most recently, I've started with a company called ServiceBench, and I’m back in the saddle as EVP of Sales & Marketing there. We're a technology company headquartered in Fairfax, Virginia, and we provide a Web-based solution for more efficient supply chain management. That is, we allow manufacturers to more efficiently complete post-sale transactions with their many supply chain partners, whether that be independent servicers, parts distributors, etc., for transactions such as warranty claims, parts ordering, and dispatch. I've come a long way from telecommunications.

          In terms of our stage of development right now, we are probably somewhere between a stage two and a stage three. I'm going to spend the next few minutes sharing some of my experiences in “customer acquisition” not only at ServiceBench, but at Net 2000, as well, including some of the things you want to think about relative to customer acquisition. I love that term “customer acquisition.” I was asking if it was the new term for sales in 2002. In many cases you do find that you're acquiring these customers in interesting ways.

          At this stage, I'm going to assume that you have developed a very compelling value proposition that is a differentiator for your product or service in the marketplace. You've identified who your target market is and you've also established those very, very critical reference accounts because you're going to need them. You must begin to leverage them within their industries and potentially across other industries as well.

          So, you've had some success in stage one. How do you leverage it to get into a stage two situation? One of the first things you need to think about is your channel distribution. How are you going to sell this product? Is it going to be a direct sales force on a face-to-face basis? Are you going to use inside sales or telemarketing? Will you rely on an indirect sales force, or, potentially, combinations of all of the above?

          Let's assume that you've decided to go with a face-to-face direct sales approach. What kind of skill sets do you need to look at in hiring? In the case of ServiceBench, for example, we're a technology company that is typically selling to Fortune 500 manufacturers. It's a complex sales process that typically involves multilevel positioning. For me to hire a recent college graduate or someone with a couple of years of sales experience might save me some money in the short-term, but it will cost me in the long-term. We need very senior salespeople with proven sales track records. Not that that's always a formula for success, but that's what we are looking for.

          At this point you'd better have developed a compensation plan, and that compensation plan needs to be designed so that it attracts the type of person you're looking to hire. It's also going to be designed so that it's incenting the correct behavior, because compensation will drive behavior. Make sure that your compensation plan is in alignment with your business plan. 

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          Next, you need to think about how you are going to align the sales force. What kind of territory management do you want to apply? Again, this is going to depend very much on the products and services that you sell and the market you're selling to. There are lots of choices as far as that goes. Are you going to align by industry segments? By product specialties? Are you going to align them geographically? In the case of ServiceBench, it made sense for us to align relative to industry segments or industry verticals. We've had a lot of success in three specific verticals. One is appliances, with reference accounts such as Whirlpool, Frigidaire, and others; another is consumer electronics, with customers like Mitsubishi and Harman Kardon; and the third is lawn and garden, with accounts like Poulan, AYP, and Shindaiwa, all of which I had never heard of before November. I go to Home Depot these days and it's a whole different story. In each of these verticals, the supply chain process is somewhat unique. Also, the players seem to be fairly entrenched in various trade associations, so it makes a lot of sense to organize on a vertical basis and develop that subject matter expertise within each industry segment. On the other hand, in our early stages at Net 2000 our target customer was a middle market company willing to look at an alternative to Ma Bell. We had a pretty large nucleus of potential prospects, and it made sense to start aligning on a geographic basis. Later, as we matured within our larger markets, we began to also organize on a vertical basis within those geographic regions.

          Now that you've built the foundation, it's time to start leveraging some of those reference accounts. I'm assuming that you probably have about four or five salespeople now who are going to do that. You need to start developing some visibility surrounding your company and some credibility. Those reference accounts will help you get there. The best piece of advice I can give you relative to that is make sure you're taking care of them. To get those accounts initially, as Rob mentioned, you probably didn't make a lot of money on them. You probably had to give some things away. They took a big risk to come with you, since you're a relatively unknown company. In return for that, however, they'll give you a lot. You need to continue to cultivate that relationship and turn it into a partnership to the extent that you can. With ServiceBench, we actually put language in our initial contracts indicating that these clients would allow us to use their names in our marketing materials and would help us with testimonials. That's not to say we didn't have to earn it. It wasn't a given. Only if we were performing to the levels that we had promised, would they do so. Think about those things early on because you're definitely going to need them.

          At this stage you also want to start validating your ROI (return on investment) model. When you sold those initial customers, chances are you developed some sort of ROI formula that you could share with them. As time goes by, now you can start measuring or benchmarking. Did you, in fact, follow through and meet those performance standards that were set with those initial marquee customers? You're going to need those statistics for a couple of reasons. Certainly, they’re going to validate what you said, so you're going to add a lot more credibility. Chances are that your customers are going to want to help you work through those statistics. If you actually are meeting or exceeding the standards you set, you have a great story to tell. Your customer is going to want to tell that story internally, as well, because it validates his or her position in selecting you as a vendor in the first place. There's a win-win scenario going on here. With those statistics, I would encourage you to develop some case studies. Rob and Eric both alluded to that. Case studies are very important. They provide a compelling story of your credibility in the marketplace. Trade and business publications love to pick up stuff like that. Use them in your marketing materials, your press packs, your website, and so forth. Third party objective articles are very, very powerful.

          Another great way to advance your product is to go through associations. Understand the various trade associations that your customers work with. Look for opportunities to speak within them and speak at events in general, like the Chamber of Commerce or events such as this. As a matter of fact, I think Netpreneur News just picked up a press release that we sent out on a new product offering. Use what you can from a public relations perspective and leverage your successes. You don't necessarily have to pay for play at this stage of the game.

          Alliance partnerships are another area you want to look at. Are there potential partners out there that have complementary products or services to yours? What's in it for everyone? Make sure that there's a balance in terms of a win-win on both sides of the coin. They can help you get more feet on the street and potentially open up new markets for you. That was one of the strategies that helped put Net 2000 on the map.

          In terms of growth, you need to understand when it makes sense to expand. Seven or eight years ago, the name of the game was bigger, better, faster. I think we've learned a lot since then. Today, logic prevails. It probably makes more sense to take a conservative approach to your growth. Make sure that you've nailed your product down and you understand your market requirements before you enter new ones.

          Quickly, I have five lessons learned. Actually, I could be up here for about three hours with lessons learned, but I'll just share a few. They're in no particular order.

          Number one: As you build your business plan, your sales forecast, your sales cycle, whatever you estimate it to be, I would advise you to add about 20% to 25% to it.

          Two: Know and learn from your competition. Don't take it for granted that just because you have an advantage today you'll have one tomorrow.

          Three: Don't be afraid to make mid-course corrections. Believe it or not, we don't know it all or have a crystal ball.

          Four: Stay focused. There is a lot of opportunity for distractions. Whether it’s alliance partnerships that may or may not make sense for you or customers who want you to do custom development work that doesn't necessarily transcend into other client requirements, those things can take you away from your core competencies and core offerings. Stick to your knitting.

          Finally, and this is in concert with what Rob said: Love thy customer. It cost you a lot of money to get them. You can continue to grow those accounts, and, of course, you want to leverage them in the form of testimonials and so forth. Don't squander the position that you worked so hard to build with them. Thank you.

[continued]

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Statements made at Netpreneur events and recorded here reflect solely the views of the speakers and have not been reviewed or researched for accuracy or truthfulness. These statements in no way reflect the opinions or beliefs of the Morino Institute, Netpreneur.org or any of their affiliates, agents, officers or directors. The archive pages are provided "as is" and your use is at your own risk.

 

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