Web-based promotional product suppliers are learning what it takes to service customers online and off.

You can lead a horse to water, but you can’t make him drink.

Many Web entrepreneurs are finding that the old adage holds true as much in the online-focused world of today as it did when cowboys first coined the phrase. In the promotional products business, the paraphrase would be something like, “You can lead a client to the Web site, but you can’t make him buy online without first winning him over with some old-fashioned service.”

Competition within the online premium-sourcing business is sizzling right now, as suppliers who have dominated the industry for years scramble to respond to a bevy of start-ups seeking to dazzle prospective buyers with the latest in online innovation.

“Our surveys tell us that more than 75 percent of our customers want to be online,” says Roger Henry, president of American Identity, Kansas City, MO, whose roots as a promotional product distributor date back to 1946. “We’re starting to see a vary rapid transformation.” American Identity has been developing online “e-stores” for major clients such as BellSouth, IBM, Texaco, and Goodyear since 1997, but didn’t launch its own sourcing storefront until January 2000.

But suppliers jockeying for Internet space are starting to learn the same lesson entrepreneurs in many other e-business categories already understand: The best-looking and most user-friendly Web site in the world won’t amount to much unless there’s some solid customer service behind it.

“Everything that people think is compelling today [about product-sourcing sites] is eventually going to become standard,” says Brad Keywell. “We’re not replacing the salesperson. We’re just giving him better tools to leverage his time.” As recently as last December, Keywell was ceo of year-old Internet start-up Starbelly.com, an operation that operates 100+ online company stores. Now he’s president of Chicago-based distributor Ha-Lo Industries, which acquired Starbelly in January for $240 million in the industry’s first major online/off-line consolidation.

Online suppliers are also learning that, once you get past the Fortune 1000, most potential clients aren’t exactly ready for online-only business. “We have established personal relationships with many of our suppliers, and our requests are usually pretty unique, so we’re still relying on high-touch versus high-tech,” says Megan McDermott, purchasing manager at St. Louis-based agency The Zipatoni Co. “In scoping out off-the-shelf items or doing preliminary research, we’re definitely using the Internet as a tool. [But] if we find something we like, we’ll generally then call the supplier for more details rather than order online.”

“We’ve changed our business model,” says Matthew Alcone, ceo of Irvine, CA-based Alcone Marketing Group, which launched its PromoCity.com site in early 1999 (May 1999 promo). “Realistically, few people are willing to buy promotional merchandise off a computer screen without talking to someone first.”

Thus, PromoCity.com’s Virtual Consultant e-mail service took on a Live Consultant component in March, with 12 dedicated customer-service reps fielding e-mails and toll-free calls in real time. “We have some clients using the Internet completely,” says Alcone. “But people who want to order from scratch usually need a little hand-holding.”

“When we launched last year, it was pretty obvious that people weren’t actually waiting by their PCs,” concurs Dick Nelson, president of promotional products distributor Nelson Marketing, Oshkosh, WI. “There are always going to be people who prefer catalogs and samples.”

Some of the new kids on the block say the adherence to old-fashioned procurement modes is poppycock. “Sixty percent of [promotional product orders] are being done over the telephone already. And a lot of customers never see the product until it arrives – which often is the same day they’re distributing it,” says David Sipes, co-founder and vp-business development and marketing for Branders.com, San Mateo, CA.

The apparent need for live bodies to support the virtual business has been exemplified in two recent transactions: Starbelly.com gained bricks-and-mortar infrastructure via the Ha-Lo deal; Madetoorder.com, an operation that launched last September, added meat to its back-office bone in January by acquiring Oakland, CA-based ad specialty distributor Harwood Co. and its 40-person staff.

While new customers may not be banging down the firewalls just yet, large companies are increasingly working with Web-based operations to establish proprietary systems that streamline their ordering and fulfillment processes.

“Given the right technology, customers are willing to enter online procurement,” says Maurice Voce, vp-marketing for Madetoorder.com. Customized intranet systems, which allow global corporations to establish uniform parameters for numerous divisions involved in procurement “is how most of our customers want it,” Voce says.

However slowly the market may be shifting to the Web, there are apparently at least a few investors who think online sourcing is an idea whose time will eventually come. Branders.com announced $20 million in financing from venture capitalists in January; Redwood City, CA-based Madetoorder.com topped that with $25 million in funding in February.

Here’s a rundown of seven companies putting somebody’s money where their mouths are.

Branders.com

Internet start-up Branders.com went live in January after nearly a year’s worth of business planning. The company’s goal is to reduce the typical purchase-process window from “21 days to 10 minutes,” says ceo Jerry McLaughlin.

While McLaughlin’s background is in the Internet and venture capital worlds, company co-founder Sipes was a marketer at PepsiCo and a brand consultant with Booz Allen & Hamilton, and vp-sales Joel Fishman has been in the promotional product business for more than 20 years (most recently at Wood Associates).

In lieu of its own back-office capabilities, Branders.com has established contractual relationships with 35 product suppliers. “There is a fair level of commitment on both sides, both financially and otherwise,” McLaughlin says of the pacts.

Customers can search a catalog of 2,000-odd products (more will be added as the business moves forward) by price, event type, or delivery period.

Corporategear.com

New York City-based Corporategear.com is the brainchild of David Verchere, who was running an eponymous promotions shop two years ago when he “saw a big opportunity” to establish an easier way for companies to procure logoed products online. The full-service site launched in February ’99.

While he originally envisioned the operation to be an online sourcing system, Verchere began changing the business model late last year. He has patented the technology developed for the corporategear.com site and will “give it away to the industry” by transforming corporategear.com into a business-to-business exchange network for manufacturers, distributors, and corporate clients. (Product sourcing, which currently brings in about $250,000 in monthly business, will still be offered via a separate cogear.com site.)

“The biggest problem for a lot of our competitors is making the e-commerce part work,” he says. “We’ll give them that [capability], and charge a licensing fee” that will start at five percent of volume but will “evolve into something more complicated,” he says. More than 100 clients had signed on by mid-March.

Corporategear.com has about 20 employees, but should be up to 50 staffers by the end of 2000, Verchere says.

4imprint.com

Fifteen-year-old Nelson Marketing changed its name to 4imprint earlier this year. But president Nelson says the move was made more to establish a stronger global brand than to play up the 4imprint.com Web business, which launched last August.

Not that 4imprint.com isn’t a major portion of the company’s future: By February, the site was accounting for 10 percent of the company’s daily U.S. volume. “We want to drive our existing customers online,” says Nelson. But the effort will be lead by the infrastructure that has made the company a $120 million-plus operation.

“There’s some nifty technology out there, but I don’t think that’s going to dominate our industry,” says Nelson, who in March was named ceo of 4imprint parent Bemrose Corp., Beverly, U.K. “Our customers don’t have a lot of time to manipulate their logos online.”

The company has 550 employees worldwide (200 in the U.S.), including 140 customer service reps. Only a handful of staffers are focused exclusively on the Web site. Online customers include Kohler Co., British Airways, Mercedes-Benz, Visa, and KPMG.

Identitynow.com

American Identity launched identitynow.com in January to offer online services to small and medium-sized companies, an area of the sourcing industry that president Roger Henry sees as “very cluttered. And it will probably become more cluttered.”

American Identity’s primary online focus remains the development of expansive “e-store” systems for major corporate clients. (The e-store it runs for IBM interfaces with Big Blue’s 90,000 employees worldwide). Competition in that realm “narrows considerably, because only the players with the appropriate infrastructure can handle it,” he says. The 12 e-stores American Identity currently manages (10 more are in development) have generated nearly $10 million in sales over a three-year period, according to a company release.

American Identity is looking to strike exclusive distribution agreements with product manufacturers in the gift market and other industries to enhance current offerings. (“No one is going to get exclusives from any ASI [suppliers],” Henry notes.)

Madetoorder.com

Launched in September ’99, Madeto-order.com evolved out of Austin James, Inc., a company that parlayed an exclusive licensing agreement with Sara Lee’s Hanes apparel division into a personalized T-shirt business in the early `90s. Sara Lee, which pitches apparel from its Hanes, Champion, and Coach brands as premium incentives, has made significant investments into madetoorder.com’s drive toward full-service product sourcing capabilities.

The company’s main target is Fortune 1000 companies that can benefit from streamlined procurement systems, says Voce. Clients include Cisco Systems, Packard Bell, and The Clorox Co.

Although the business model includes a host of proprietary software for data storage and delivery, Madetoorder.com is combining its “high-tech Web site” with a “high-touch sales team” that currently numbers 40 but could double by the end of 2000, he says.

Madetoorder.com has 110 employees overall. It currently services more than 75 national accounts and “hundreds” of smaller clients, Voce says.

PromoCity.com

Alcone’s PromoCity.com has about 45 dedicated employees. Company executives tout such technological enhancements as an InstaSample sourcing service, a catalog of more than 500,000 products, and an online database of 4,000 corporate logos. But they say the business’s main strength comes from 24-year-old Alcone’s infrastructure of nearly 1,000 employees worldwide.

“We can play into all the resources that we have,” which include a Hong Kong sourcing and manufacturing operation, warehouses in Europe, and the ability to handle a company’s premium-based campaigns in addition to supplying the products, says Alcone.

PromoCity.com is managing online corporate catalogs for top clients who use them either for internal purchasing activity, such as cable network operator Encore Media Group does, or as additional revenue streams (like the US Airways Company Store, which lets any visitor buy branded merchandise via a toll-free number).

Starbelly.com

Ha-Lo was impressed enough with Star-belly.com’s success to assume the company’s name for its own Promotional Products Group after the acquisition. Since its March ’99 launch, Starbelly.com has created more than 100 virtual company stores for clients including Nestle, Olan Mills, Rubbermaid, and Trimark Pictures.

Yet for all its technological capabilities and Web-based partnerships (with software makers and other solutions providers), Starbelly.com finds it needs some old-style customer service as well. “The relationship is still paramount in this industry,” says Keywell. “But we can create a home page that lets the customer reorder, or order new products, without having to rely on the salesperson being there every time.”

Extending client relationships beyond premium sourcing to include promotional campaign execution isn’t outside the realm of possibility, Keywell says. “Consumers could enter [UPC codes] on an Internet site, and then design their own branded T-shirt.”

Compiled B-to-B data is better than ever. There are new sources of information – and new ways of looking at it

asked to name the most glamorous business in direct marketing, few people would name business-to business data compiling.

But it is a rapidly evolving field, compared with what it was only a few years ago.

Take Experian’s Business Marketing Database. Recent upgrades by the Orange, CA-based compiler have focused on integrating disparate data sources into one platform, and filling in blanks left by contributors.

Almost all of the firms listed in Experian’s file are considered small businesses by the Small Business Administration’s definition. Which makes sense. Smaller companies have thrived in an environment consisting of a recent boom in Internet businesses, coupled with an increasingly service-oriented economy. But smaller targets move faster and are harder to hit.

Given that small companies are such a large part of Experian’s B-to-B database, the use of credit information of an individual principal is a strong indicator of a firm’s creditworthiness (among other things.) To make such determinations, Experian draws on its consumer data to augment its business file. This data has provided powerful indicators. (The use of such credit data is legal, provided it relates to the business and not to the consumer.)

“There are great opportunities for use [of consumer credit data], not just in financial services, but in all kinds of other business-to-business product areas, such as insurance, mutual funds, investment portfolios and legal services,” says Cyndi Greenglass, president of World Marketing Integrated Solutions, whose Burr Ridge, IL-based consultancy advises clients on constructing customer databases.

“Since Experian started it, all the other compilers have a me-too product,” she adds.

As with most data compilers, Experian has significantly less information on the 12 million firms in its B-to-B database than it does on the 100 million households in its consumer file. There are several reasons for this.

First, the consumer industry is more mature; consumer marketers have a longer history of exchanging data with compilers.

B-to-B marketers lack this history, and therefore tend to be more wary of exchanging data. Moreover, information on business clients is perceived as being even more proprietary than consumer information due to the relative smallness of the potential customer universe.

But supply will follow demand, and as demand for compiled data grows, so will the willingness to exchange information. “We have seen the redirection from large sales forces to small, more directed sales forces and direct marketing efforts that are backed up by the sales forces,” says Christine Martin, product line manager, B-to-B marketing products for Experian. (As is the case with consumer databases, data supplied by businesses is not selectable by contributor. An office supply company, for example, cannot request as a select names contributed by a rival firm.)

Meanwhile, Experian has developed other sources of unique data. While some of the information it uses is available through Securities and Exchange Commission filings, statistics on nonpublic companies are harder to track down. This is doubly true for new companies – a valuable market, although they are not normally tracked by the SEC.

Public records are also useful. For example, they indicate how long a company has been in business (determinable from its incorporation papers) and who the principals are. Bankruptcy filings and court actions can round out the picture.

Experian also relies on telephone directories. Yellow pages are used to confirm company names, addresses and telephone numbers, as well as to augment information about the various fields a company is in. If a firm is listed under one heading in one directory and another in a second, this information is noted. And white pages are analyzed as well – occasionally, companies are listed in free white pages directories in addition to yellow pages.

“When you think about business-to-business products and databases, uncovering businesses is the first step,” says Scott Bronstein, Experian’s director of product development and management.

Uncovering parent and offspring companies is an additional benefit from compiled B-to-B databases. “Corporate family and corporate linkage data is not available through vertical lists, says Greenglass. “That is important because it allows you to understand the relationships of different companies within a corporate tree. Large corporations do have a personality and buying preference. If you have members of a corporate family and are able to identify different family members, you will be able to create a national account or understand how to reach them.”

Meanwhile, Experian has started a new program utilizing data from space ads, such as licenses listed, the size of the ad, the number of years in business (if listed on the ad), and key executives, such as partners in a legal firm.

Experian also does an annual telephone verification in which it contacts each business and corroborates the firm’s name, address, owner, executive names and titles, how long it has been in business and the number of employees.

Given the fluid nature of corporations, annual verification may seem less than optimal. But titles – to which many marketers give greater credence – change less rapidly than personnel.

“While this presents less personalization than is ultimately desired in B-to-B, it becomes a necessary evil in the real world, says Paul del Toro, Experian’s vice president, marketing and product development for the database marketing solutions group. “There is not an NCOA-type process to help us understand the internal or external moves a contact makes.” (Often when an employee moves, he or she continues vendor relationships.)

The rise of cottage industries in online marketing is yet another challenge for compilers. Experian is now compiling and sourcing e-mail addresses, which is valuable information to have on small companies.

But this isn’t easy. Often, large companies have several e-mail addresses for various business pockets.

The most obvious difference between Experian’s original B-to-B database and the new and improved version is that the current model merges two platforms: credit and marketing information.

“Our intent is to have demographic, background, and credit information all relating to the business in one database,” says Bronstein.

Marketers are permitted to use consumer credit information if they are going to extend a loan or line of credit, or partner in a business. Within the improved B-to-B database, the integration of marketing and credit data will allow some analytic and lookup functions to be accomplished in fewer passes – in many cases just one – cutting request processing time down by hours, if not days.

The ability to determine which potential targets are overextending themselves is a powerful inducement for businesses to share their data. “For financial institutions, the enemy is not the bank across the street [that may steal a customer], it is the small [target] business that can get a credit card from one bank and then go to another bank and get another one,” says John Conte, regional director, business marketing services at Experian.

Creditors often contribute payment information, such as the length of time a business takes to pay off its debts, whether it has an open line of credit, and whether the payments are partial or in full. As an inducement, Experian does analysis and provides customer information back to participants. Roughly 6,000 companies now provide input into the Experian file.

Another industry that wants to know about creditworthiness is telecommunications. In the early days of wireless communications, approval rates for small businesses were higher than 90%. But customers would use their equipment for one or two months and then not pay.With the rise in bad debt and a shift in focus away from signing customers up and toward long-term valuation, risk analysis is coming into vogue, according to executives with Experian.

– Bankruptcy/Tax Lien/Judgment Search

This name-based search covers all types of bankruptcies, federal/state/county tax liens, and civil judgments of $50 or more

-Business Profile Report

This profile offers a picture of how a firm handles financial obligations by providing trade payment histories, public record information, and comparative payment histories with other firms in the same industry

– Business Summary Report

An evaluation service for low-balance accounts (those with debts of less than $1,000) that ranks companies from “acceptable” to “serious risk” and “bankruptcy”

– Corporate Records Search

This search offers a firm’s registration information. Data collected from the Secretary of State includes date of incorporation, status, type, officers or directors, and stock information

– Fictitious Business Name (DBA) Search

This will provide a list of trade, assumed, or “doing business as” names, as well as the owner name, address, filing number, and file date and location

– Intelliscore

A centile predictive risk score based on proven risk predictors such as trade, demographic and public record data

– International Profiles

Business profiles on international firms, provided in the currency where the company is based

– Uniform Commercial Code Search

This report enables a potential creditor to know whether collateral material has been pledged to any other creditor

THE NATIONAL BUSINESS DATABASE has approximately 13 million firms listed, which may prove daunting for a marketer to sift through. What follows are segments meeting specific industry needs that are available:

– HOTLINE DATABASE of new movers, start-ups: 300,000 on file

– COTTAGE INDUSTRIES, including home-based businesses: 1 million on file

– RISK REDUCER FILE, which eliminates roughly 10% of the names from the master file with bankruptcies, derogatory legal filings, collection accounts or patterns of excessive late payments

– BUSINESS CREDIT PRESCREENS, which include only companies that pass credit criteria specified by the customer

– BUSINESS OWNER LINK, a commingling of demographic and credit data from 1 million businesses with credit data of the business owners: 1.4 million on file