Suppliers demand to brand

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FreeMarkets Inc., a reverse auction Web site, resembles many e-marketplaces in having no avenue for suppliers to brand themselves. ‘‘We don’t really want to clog it up,’’ explained Rebecca Thompson, director of corporate marketing, who said FreeMarkets’ rigorous qualification process is enough to ensure supplier quality.

FreeMarkets, like many e-marketplaces, has no plans to allow suppliers to post branding or other marketing messages on the site. ‘‘Honestly, I don’t think that’s the direction we’ll go,’’ Thompson said.

But that appears to be precisely the direction that b-to-b marketers want e-marketplaces to go. On the sell side, marketers tend to view e-hubs as buyer-focused and as offering little opportunity for branding and other marketing messages and strategies. And marketers are talking about more than placing banner ads on e-marketplaces. They are asking for e-hubs to acknowledge offline relationships, to help suppliers market to buying teams and to facilitate the one-to-one marketing that the Internet promises.

Indeed, e-marketplaces as a whole may be ignoring the wants of a key customer: sellers. The e-marketplaces that will survive the coming shakeout will be the ones that cater to both buyers and sellers, according to a new report from Forrester Research Inc., which predicted that by 2003 only 181 e-marketplaces will survive of the thousands announced in recent months.

Today, b-to-b marketers perceive e-marketplaces as tools for buyers to cut the margins of suppliers. ‘‘The seller doesn’t get the opportunity to show the things that make it distinctive and unique,’’ said Matt DiMaria, VP-marketing for e-business software company Calico Commerce Inc. ‘‘The e-marketplaces should be serving a broader need than what’s the name of the product and how much does it cost.’’

Some observers say the lack of branding opportunities explains why suppliers so far are shying away from full commitment to e-marketplaces. Automotive suppliers have balked at joining industry e-marketplace Covisint, largely a procurement hub, in part because of questions about what sort of prominence individual suppliers will have on the site.

‘‘That’s a big part of what’s keeping suppliers out of e-marketplaces: They don’t have a way to differentiate their products and their offerings,’’ said Steve Kafka, an analyst with Forrester.

Even supplier-oriented VerticalNet Inc. has struggled to attract b-to-b marketers to set up storefronts on its 57 vertical e-marketplaces. With the backing of Microsoft Corp., the company now plans to give away 80,000 storefronts to b-to-b marketers over the next three years.

Mark Walsh, chairman-chief strategy officer of VerticalNet, which offers banner ads, storefronts and other marketing tools, has argued that suppliers better get used to a different landscape on the Internet. ‘‘Brands are under duress,’’ he said in a recent speech. The Web is a transparent medium, according to Walsh, and it will change the way companies communicate with their customers and prospects.

With information flooding the Internet, controlled company messages such as advertisements in trade journals will fade in their power to persuade. Specifications, availability and price will be even more powerful sales drivers in the Internet future, especially in spot commodity markets, such as the computer chip market. Such places that are liquid enough to function as exchanges along the lines of the Nasdaq model.

‘‘Selling is over,’’ Walsh said. ‘‘Informing is in.’’

End of the brand as we know it

Marketers and ad agency executives agree that the Internet will alter the nature of brands. Gordon Hochhalter, partner at ad agency Mobium Creative Group, Chicago, said chat rooms and other community builders on the Web will create an atmosphere in which companies have less control over their brand messages.

Brands will increasingly become a function of all customer contact points, which include the Web, call centers, product delivery and performance. In this world, the power of straight advertising messages will be diminished, Hochhalter said.

Ironically, as the Web environment gives companies less control over their brands, it may ultimately make brands--in the larger sense of brands as the aggregate customer perception of a company and its products and services--more important than ever.

‘‘People have been talking about brands becoming less important for decades, but guess what, every year they become even more important,’’ said Al Ries, chairman of branding consultancy Ries & Ries.

Even though companies won’t ultimately be able to control what customers think about them, as if they ever could, they will most likely continue to produce branding messages. And they say they want to disseminate those messages on e-marketplaces.

But by focusing primarily on e-procurement, e-marketplaces in general have so far ignored how most b-to-b companies market their goods and services. For instance, marketers complain that by focusing on the purchasing agent, e-marketplaces ignore the way products are actually specified in the real world.

‘‘There are few businesses where products and services are purchased solely by one individual without the influence of another,’’ said Mike Hensley, president of HSR Internet Services L.L.C., a unit of Internet professional services firm HSR Business to Business Inc. ‘‘The decisions are made by multiple influences, in many cases in a team format.’’

Many of the thousands of e-marketplaces being formed appear to be missing the opportunity to create sites for an entire industry, rather than simply targeting the purchasing manager. ‘‘They have missed the opportunity in many cases to create a community,’’ Hensley said. ‘‘They’re focused on building catalogs and price books.

‘‘If these e-marketplaces don’t understand it’s a team of people making a purchase, their impact will be greatly diminished. The ones that figure it out, that it’s not only the person who signs the [purchase order] but it’s also all the people who come before that, will be able to aggregate all the influences into a common environment. The industry will migrate to them.’’

What about the middleman?

Many e-marketplaces are created to disintermediate the channel. But many b-to-b marketers don’t see their distributors and dealers as unnecessary cogs. In many industries, the channel provides offline service and installation that would be cost prohibitive for manufacturers to provide.

For instance, food equipment manufacturer Hobart Corp. has decided not to abandon its channel partners in its move to e-commerce and e-marketplaces. (See related story, Page 33.) ‘‘Simply put, they won’t participate in an e-marketplace that does not have some connection to a dealer organization,’’ said Hensley, whose agency handles the Hobart account.

Others believe that e-marketplaces are fundamentally underestimating how important long-term buyer-seller relationships are in b-to-b. ‘‘I think some e-marketplaces are wanting to own more of the relationship, and in a lot of cases, that’s a mistake,’’ Kafka said. ‘‘When you think about direct materials, where the big dollar value is, those are long-established relationships and both sides have a lot invested in the relationship. They’re not about to give it to FreeMarkets or to anyone else.’’

E-marketplaces are also missing out on sharing with sellers the gold mine of customer buying behavior on their site, and are offering many-to-many marketing when most companies crave one-to-one marketing. Few e-marketplaces have the technology in place that many aggressive b-to-b marketers already have on their own sites to identify customers, automatically cross-sell and implement volume pricing.

‘‘They’re not offering the one-to-one selling that the Web is supposed to offer,’’ DiMaria said of e-marketplaces.

Key question

The key question is: Are many e-marketplaces fumbling away a chance to attract sellers, or will their technology and services evolve to address more sellers’ needs? ‘‘The reason e-marketplaces may not have addressed these things is that it’s early yet,’’ Hochhalter said. ‘‘It’s in the cave man phase.’’

Others agree that e-marketplaces stand poised to evolve to meet the desires of b-to-b marketers. E-marketplaces will likely create mechanisms for sellers to provide buyers with information beyond price and specifications, said Kafka. ‘‘There are relationship management [software] vendors out there like Kana, for example, who are developing products that they will actually sell to e-marketplaces, so that e-marketplaces could help suppliers with things like marketing and sales, messaging and some similar kinds of things you see on the b-to-c side in terms of push e-mails and special offers,’’ he said.

In the meantime, b-to-b marketers will continue selling through the numerous available channels out there. ‘‘I think the model that AMR is seeing emerging is treating the traditional [Internet] exchange as an additional sales channel, not a replacement channel,’’ said AMR Research Inc. analyst Randy Covill.

And one key channel marketers will be selling through is their own e-commerce Web sites. Boise Cascade Corp. is a case in point. ‘‘We’ll have an $800 million run rate by the end of the year,’’ said Kevin Koertje, the company’s director of marketing. ‘‘For us to find another site to generate as large a percentage of our overall global business it will have to be one heck of a site.’’

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