extranet, extra sales

Nov 01, 1999 10:30 PM  By

Giving select customers access to specialized sections of your site is true one-to-one marketing in action

As customer demand for better, more targeted service increases, selling to them via your Website may no longer be enough. Already a rapidly growing number of catalogers – particularly business-to-business marketers – are taking the next step: establishing an extranet.

With an extranet, you can give access to certain areas of your Website only to your best customers, so that you can provide them with services, information, and pricing not available to other buyers. For instance, the extranet that Allied Electronics set up last year diverts established customers of the electronics components cataloger to a customized page that allows them to place a purchase order on a line of credit, review a 60-day order history, and request quotes, among other activities. And because the extranet is tied to both the Internet and the company’s mainframe, customers can connect directly into Allied’s computer-based inventory control system. “We are able to post updates hourly or more frequently, and show every customer the exact number of parts we have in stock,” says vice president Art Pierard.

In another use of an extranet, Skymall.com, the e-commerce subsidiary of inflight cooperative cataloger SkyMall, has a promotions deal with Visa, in which the latter runs various promotions for its credit cardholders; members who qualify for a prize go to Skymall.com’s Website and enter a password that gives them access to special deals.

And thanks to its extranet, implemented this past spring, computer cataloger PC Connection can present its best customers with lists of the products that they most frequently buy, saving them the time of repeatedly combing through the product database. What’s more, some of PC Connection’s customers have scores of shipping addresses around the country and the world; within its extranet PC Connection builds menus of all those addresses so that customers can, with one mouse click, select the address they want product shipped to.

“The key is that the Internet is a tool to increase service,” says Ron Clabo, director of e-commerce for the $732.4 million PC Connection. “Businesses want efficiencies.”

And appealing to businesses’ desires can pay off. Following the introduction of its extranet business, which PC Connection calls Internet Business Accounts, the company reported that sales processed directly online during its second fiscal quarter of 1999 hit $12.2 million, an 86% leap from $6.6 million the previous year. While Clabo won’t disclose figures, he says that the increase in online sales has already covered the cost of setting up the extranet.

Speaking of cost, none of the companies we spoke to would put a price on setting up an extranet, in part because there are no extranet-in-a-box kits. What’s more, your expenses depend on how advanced your existing Web operation is (see “Getting started,” at left).

Nonetheless, “a company should budget at least $25,000 for hardware, and $2,000-$3,000 a month for maintenance,” says Alex Richardson, CEO of Lexitech Worldwide, a Branford, CT-based solutions provider. “But I wouldn’t implement an extranet unless I had $120,000 plus funds for staff costs.”

Don’t know your extranet from your intranet? You’re not alone. Compounding the confusion: No two users are likely to agree on the strict definition of any buzzword. Nonetheless, this glossary should help clarify a few of the basic, yet nonetheless easily confused, terms.

Internet: A global interconnection of computers.

World Wide Web: A subsection of the Internet, initially designed to allow people to share text-based technical documents. It has been adapted to add graphics and interactive elements, such as order forms.

Intranet: A Website that can be accessed only by the employees of a company as a means of sharing internal information.

Extranet: Start with an intranet and expand it to allow suppliers or major customers access to corporate information. Public access is restricted.

Virtual Private Network (VPN): Many companies have private networks into which their employees at different locations (and sometimes their customers and suppliers) can dial directly; a VPN is a private network that allows connections through the very public Internet; VPN security is therefore difficult to achieve and comes with a hefty price tag.

Before you speed ahead into establishing an extranet, Alex Richardson, CEO of Branford, CT-based solutions provider Lexitech Worldwide, suggests considering the four keys to success:

1) Attraction. You need to give customers a specific reason – special pricing, advanced customer service data – to go to your extranet site rather than to your general Website.

2) Interaction. Clarity and easy navigation are imperative.

3) Transaction. Don’t “blow kisses” to your extranet customers – in other words, even if your general Website isn’t transactional, your extranet sites should be.

4) Satisfaction. This might seem like a no-brainer, but make sure you have the necessary back-end to fulfill and deliver extranet orders, taking into account the increase in online volume the extranet will generate.

If you’re satisfied that you can sustain and profit from establishing extranet sites, you’ll need to round up your resources:

1) Hardware. Like your general Website, your extranet site or sites need to be hosted on server-class systems. “But it may be possible to host your extranet application on existing Website hardware,” says Tim Hess, director of research and development for Horsham, PA-based Reed Technology and Information Services. “This depends on the demand of your current Website and the anticipated usage of the extranet application.”

2) Database. “A good database of your products and services that can be accessed via a Web browser is essential to a worthwhile extranet,” Richardson says. “You might need to completely throw out your back-end and start from scratch if you don’t already have a good database.”

3) Staff. Richardson estimates that you need a team of at least three people to set up the extranet. Once the extranet is established, though, Hess contends that you need not hire additional staff to maintain it, so long as you already have an established Web support team.

4) Time. As with any other Website development project, an extranet can take anywhere from weeks to months to set up, depending on your existing infrastructure and resources.

5) Testing. “It would be wise to test a `brochureware’ extranet – one that doesn’t allow the customer to actually purchase product,” Richardson says. “Once you’ve worked out the kinks, then you can make the site transactional. It could be very expensive to launch a transactional extranet site without first testing it.”