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Free-commerce? Market It.

7 Jan, 2008 By: Pat Evans imageSource

Free-commerce? Market It.

FREe-commerce was an idea that came to me during the heyday of the Internet
e-commerce explosion. Our sales force needed a way to simplify the process of
e-commerce for suppliers and manufacturers.

E-commerce represented the elimination of our paper-based order processing.
It Permitted: 

  • One firm to place an order.
  • Another firm to acknowledge the receipt of that order, send a change order
    if out of stock, create and transmit an advance ship notice, and process an
    e-payment after an electronic invoice was received.

The labor savings were astronomical, so every prospect wanted the benefits.
Two issues, however, needed to be dealt with before we could capitalize on the
huge pent up demand in this marketplace.

The first issue was that a prospect needed to face the changes that would
occur if their company implemented the solution. People are very afraid of
change even if their present solution is inadequate. We learned that we could
deal with that by educating the prospect’s employees and offering satisfied
references from early adopters of the software.

The second issue was, as they say, “stickier.” Manufacturers and large
trading partners had the money to pay for the efficiencies demonstrated in the
system but refused to pay for the smaller suppliers to be brought online because
they represented only 20 percent of the revenues to the large firms.

It was the old 80/20 principle in action. The suppliers were ubiquitous but
they elicited many small dollar orders. The manufacturers communicated with
their large suppliers utilizing an ancient technology termed EDI (electronic
data interchange). It was proprietary, cost a fortune to install, processed all
transactions through a virtual toll booth that charged per transaction and
worked well enough that it was hard to displace.

A Better Solution

Our solution utilized a newer technology coined XML (extensible markup
language), a sister technology to HTML (hypertext markup language) which of
course we are all very familiar with once having viewed a web site. The main
difference between the sister technologies was XML could be sent between
computers with no human intervention, allowing extremely fast processing of data
and a seemingly perfect environment for exploiting the huge e-commerce market of
non-connected suppliers. XML was low cost, nonproprietary, and levied no
transaction charges.

The manufacturers and large hubs would love to eliminate the labor associated
with faxed orders sent to them by the smaller suppliers because their people
have to manually type each transmission into the host computer. This represented
a slow and error prone process distasteful to the big guys, but again the bulk
of the dollars coming into the large members of this trading community were
already automated.

Let’s review that scenario. Big Guys want to eliminate labor and will not
spend money to automate small trading partners. Small partners do not possess
the mind-set to pay for automation and will continue to use slow, laborious
manual methods until forced to comply by the larger partner. The suppliers were
not about to sign and pay for a long-term commitment of monthly payments when
they felt the larger partner reaped the economic benefits. We were not going to
offer trials or guarantee that the supplier would enjoy trading electronically
since that was subjective. I do not know how this next phrase entered our
lexicon but this appeared to be a Mexican standoff, and I was being positioned
as a possible piñata.

I studied the scenario, placed all my options on paper, and waited for an
answer to materialize. Three days later I just happened to notice an ad for a
firm called U-promise. Their premise utilized a FREE concept and was pitched to
all the AOL (America Online) customers over the Internet. The plan enabled
people with children who will attend college in the future to pay for their
kids’ education by receiving discounts from third parties. U-promise signed
automakers like GM, gasoline distributors like Shell, grocery stores like Jewel
and Dominick’s and so on, so literally a percentage of every dollar the parents
spent in their normal daily lives would be forced into a trust account, which
took advantage of recent college tuition savings plans.

The plan’s simplicity was brilliant and many celebrities and top government
officials backed it. It appeared to be all based on a very simple flaw in human
character. If all parents of future college grads simply set aside a percentage
of their earnings, U-promise may not have ever existed. The sad truth is parents
are not saving in government-shielded accounts for their kids’ impending college
tuition costs. Ask them and they will reply they desire to save, but they also
want vacations and luxury items that have turned their heads and demagnetized
their parental responsibility compass.

What if we could create FREe-commerce?

What if we could have a third party pay for our prospects’ e-commerce
software and implementations? Then the answer jumped off the page! We would make
a list of items that our prospects, America’s suppliers, purchased to run their
respective businesses. The suppliers would need certain items but what would all
the suppliers need? “They all order and use office supplies” was the only answer
that appeared plausible. So I decided to perform some basic math calculations
that guaranteed our firm $750 per year from each supplier. If we needed to
receive this dollar amount each year, how much would each supplier have to spend
on office supplies annually to guarantee a sufficient gross margin to the large
office supply firm? I inserted a gross margin of five percent since I heard this
was the usual margin the office supply industry survived on. Therefore the
annual dollar amount that a supplier needed to purchase from one of the huge
office supply retailers was $18,000.

If we could locate suppliers  who  already  purchased this dollar amount
annually, and they were not present customers of the specific office supply firm
we would utilize as our partner, then I could introduce the two firms and be
paid the $750 portion from the office suppliers’ profits.

It was a beautiful thing. My firm receives the $750 each year, the supplier
receives a FREe-commerce software system with implementation, the office supply
firm receives a new customer (while committing no up front market spending) and
the manufacturer receives an electronic commerce enabled trading partner that
saves them money by increasing efficiency and eliminating all keystroke errors
prominent in the old faxed order, received and typed into the host computer
methodology. FREe allowed four partners to become more efficient, save money and
grow their businesses.

Write this down!

The #1 issue in business is traction. Start selling and you will notice that
your industry will change. Traction is defined as “adhesive friction.” You want
to start moving forward so you can be pulled instead of having to push for sales
every month.

Once you start moving forward you will notice new ways to grow your customer
base. Write all of them down.  Soon you will become competent at selling because
you understand your product and how it fares against your competition. At this
juncture you can attempt to branch out and make your product FREe by securing
third party alliances.

I used this special offer idea in the marketing of my company, Sales-BURST!!,
and which gives a perfect example of the FREe marketing concept. Now how can you
use the FREe idea to market your product to ramp up your company’s profits?

Patrick Evans is the author of SalesBURST!! World’s Fastest
(entrepreneurial) Sales Training (Wiley, October 2007), past national
spokesperson  for NOMDA/BTA, and founder of EVCOR, a small business that became
an Inc 500 winner and eventually sold for $60 million. Note: 55% of SalesBURST!!
net profits are being donated to help fight Spina Bifida. Visit
www.evansales.com for more info.

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