The key to unlocking the secrets of what the ITE Group is up to in Leeds, with all its new year restructuring around the Planet Online operation, is to think ?Internet access market segmentation?.
The company, which has just merged its ESS reseller business with the fast-growing Planet Online operation, has decided it wants to focus entirely on business customers ? thereby hoping to outflank those Internet access rivals that have built up their businesses around single-user dial-up accounts (Demon, Netcom and Direct Connection spring to mind).
You won?t see Planet advertising in the consumer and national press as most ISPs do, signing up tens of thousands of direct accounts, with all the marketing, service, support and billing costs that involves. It wants to aim all its firepower at securing business accounts ? providing a range of products from analogue dial-up accounts for small businesses to fully fledged leased line networked installations supporting corporate intranets.
The sales channel for this strictly business strategy will be partly direct, partly reseller ? although it is unclear in what proportions. From PC Dealer?s discussions with the company, the impression given is that there will be a greater emphasis on direct sales, now that the 30-plus ESS sales team has been absorbed. Their experience in selling Digital, ICL and Silicon Graphics-based systems will boost Planet?s efforts to sell Internet and intranet systems into the corporate market.
While that direct sales operation may worry reseller rivals of the former ESS, Planet?s Internet service providers competitors also have things to think about. Planet has developed a branded networks strategy which aims to give it a slice of the vast dial-up home user market anyway ? the sector the likes of Demon, Netcom and Direct Connection have been going after these past few years ? without actually getting their own hands too dirty.
The branded networks initiative is aimed at key retail, direct and commercial organisations that want to offer a dial-up account branded with their own name. It directs the dial-up user to their Web sites when the user first logs on.
The many big names among the organisations which have already bitten the own-brand apple are Byte, Software City, Prestel and Talkland. They sell and administer the dial-up account and buy the Internet access from Planet accordingly. Their end-users then access the Internet through Planet?s local call rate dial-up network, and effectively regard themselves as dialling into an Internet backbone provided by the brandname supplier.
?It?s all about holding on to your customer and keeping all the aftersales with you,? says Andy Kitchener, general manager of Planet?s branded networks. He points to the Byte and Software City retail chains, which have set up Byte Net and Software City Net respectively. Software City sells a #199.99 starter pack with a 28.8Kbps fax modem, a licensed copy of Netscape Navigator, free games and a year?s online access.
The Planet Internet component is bought from the supplier in the same way as the package?s other components, so the client has a margin and can adjust retail prices accordingly.
Byte uses MS? Internet Explorer administration kit to put its own logo on the browser and set up initial links for the browser home pages to point to Byte online Web pages. The main emphasis of those Web pages is peripherals bargains ? the kind of things that someone with a PC and a new modem might still be thinking about buying.
?We want that customer to come back to us,? says Byte general manager Steve Rigby. ?We want to reinforce them buying from us. This helps them think about returning to us and checking our site out if they?re ever tempted to buy something directly on the Net.?
Kitchener reinforces the point, smacking a copy of Action?s direct catalogue down on the table, and pointing to an ad for a Netcom dial-up package. ?Where?s the sense in that?? he asks. ?Action is giving away its customer base to Netcom. They could be holding on to them and making incremental revenue and further sales from it?.
It?s a compelling argument, and forcing the Demons, Netcoms and Direct Connections of this world to think about ways of responding to the threat. Kitchener thinks that most retail chains in the UK will eventually set up their own Internet access packages this way, although some are already tied in with other suppliers. For instance, he is not worried about Uunet Pipex?s deal to get its own brand Rough Guide connectivity package into the UK?s prime retail sites for computing ? the Dixons and PC World chains.
?We can reach those channels in other ways. For instance, we could do deals with key PC suppliers who sell through those stores,? he says. ?About 90 per cent of Packard Bell sales go through the Dixons Stores Group, and a Packard Bell Net, for instance, would reach a lot of new buyers that way.?
Planet also offers Web server hosting and management facilities ? the Byte Web site, for instance, is run off a server in one of the Planet cabinets, directly attached to Planet?s Internet backbone.
Gateway 2000 is among the growing list of computer companies with servers at the Leeds site ? in fact there are two servers, one on standby. Web server management is a growing market segment, with many of Planet?s competitors offering links to their cabinets at Telehouse in Docklands.
But Planet has an advantage over most others by having its own hub operations. ?The Operations Centre is the key advantage we have over all the others. We have more control and security here than others have who use Telehouse.?
Although Kitchener is keen to promote the Branded Networks business right now. He is also wor- king on developing a reseller programme. He points to a reseller box he?s putting together for resellers that eventually get on to the Planet reseller programme. ?It will have all the usual things from mugs and salesmen?s crib cards, right through to training materials.?
Details are still pretty sketchy (or unfinalised) about reseller margins, but Kitchener points out: ?We were the first ones to market here in the UK with a reseller package, letting them have a year-on-year take on an installation. Our reseller programme lets the dealer make more service revenue from the installation, and from the ongoing revenue.?
Kitchener doesn?t think that a referral fee structure, like that offered by Uunet Pipex, has any appeal at all to the reseller channel. ?We come from a distribution background and have that mentality. The punter wants to control the sale, and wants us to supply the product. They must also make a decent enough profit on it, or they simply won?t push it. We understand that.?
So does Planet have plans, to offer its products through a distribution channel? Kitchener rules that one out. He says: ?We don?t believe distribution is the key. What we would want is just 10 or so good resellers that are properly selling the product, and complimenting the rest of what we do. They will get a lot of support from us ? training courses, referrals, collateral.
?We know what they want and we?ll deliver it.?
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