Tom Scott’s Tips

Jason Olim and CDNow

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These articles were published in U.S. 1 Newspaper on June 16, 1999.

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Software Forum: Selling on the Net

At the New Jersey Technology Council’s Software Forum,

Tom Scott will tell the assembled software developers that the

World Wide Web does, indeed, level the playing field for smaller and

medium sized firms. At the Helmsman Group, he is seeing it happen.

Scott addresses the Software Industry Track on Friday, June 18, at

7:30 p.m., at the Sheraton at Woodbridge Place. This annual forum

attracts a hefty portion of New Jersey’s software gurus. The speakers

include Roger Sparks of Princeton Softech, Rick Maloy

of Maloy Insurance, and the keynoter, Jason Olim of CD Now (see

story below). Cost: $180. Call 609-452-1010.

Helmsman has budgeting, forecasting, and planning software that

targets

the middle market, firms that do $50 million to $1 billion in sales.

"Not the Fortune 500 or the multinational," Scott says,

"they

are most likely using Hyperion or Compshare."

Scott says that his firm’s revenues exceeded $1 million last year,

and the average sale is $50,000. The company recently expanded to

14 employees at Princeton Meadows Office Center

(http://www.helmsmangroup.com).

It was founded by Kenneth Kay, the son of a Korean diplomat who

majored

in finance at the University of Chicago, Class of 1978, and earned

his MBA there as well.

"In our marketplace," says Scott, "the customers that

we win are technology conscious and value conscious. That feeds nicely

to the Internet as our marketing solution." So last spring his

company moved to a webcentric marketing approach. "We do PR and

trade shows, but our primary lead generation source is our website,

and it has become an integral part of our selling effort."

Scott, the son of a Duke history professor, majored in economics and

history at Northwestern, Class of 1979, and has a Harvard MBA. He

worked for IBM and was president of ImageScan in Lanham, Maryland,

before joining Kay. He offers these tips for marketing on the Web.

Top Of Page
Tom Scott’s Tips

Monitor the search engines. Most important is what happens

when a surfer types in the key words for your service. Do whatever

is necessary to get in the top 10. "The most important thing we

do each week is that our marketing director checks seven engines for

each key word to see whether we show up in those top 10 results,"

says Scott.

"It is just like anything else," says Scott. "If you don’t

have a human responsible for it and being creative, it won’t get

done."

Joanne Pinter, the marketing director, not only monitors the

searches but also gives the first response to all the queries. For

the top five engines she watches (Yahoo, Alta Vista, Lycos, Excite,

and Infoseek) the firm was in the top 10 for four of them. Only in

InfoSeek was it number 14.

Take banner ads on search engines themselves. "Yahoo

is by far the best, Alta Vista a strong second, and Lycos is a distant

third," says Scott. Scott bought the key words "budgeting

software" and "budgeting" on five engines. The

clickthrough

rate is 2.6 percent on Yahoo but only .6 percent on InfoSeek, a rate

that Scott attributes to InfoSeek’s appeal to consumer rather than

business surfers.

Don’t be afraid to spend money on web advertising. "We

have the key words locked up through the year 2000. That is an

important

point for players like us," says Scott. He spends a minimum of

$1,000 to $2,500 per month at a rate of $60 per 1,000 impressions.

Total spent since January is $15,000. "We are able to be the

number

one marketer in this environment, and we will reach 2 million

impressions,

cumulative, this year."

Keep an online presence in the magazines in your

marketplace.

For Helmsman, that would be http://www.CFOnet.com

and http://www.BusinessFinance

mag.com.

Monitor the metatext, the hidden code words at the top

of every file (use the page source option on the tool bar). Compare

your metatext to your competitor’s and see if the key words

synchronize.

Often the right metatext will drive a search engine to your page.

Use your site for market research. Competitive Internet

ads emphasized the pain and aggravation of budget work, but by using

organized trial and error Scott found they didn’t pull. "The

beauty

of online results is that they tell keyword by keyword, banner by

banner, which pulls what, and you drop the losers," says Scott.

He found that the best-pulling ads are animated, simple, and upbeat.

"Our conclusion is that people don’t want negativity, darkness,

and clutter. `Are you in budgeting hell?’ pulled terribly on the

Web."

"To our surprise, our best pulling banner ad pulls 3.3 percent

with Yahoo and consists merely of this statement: `Helmsman simplifies

budgeting. Click here to evaluate.’"

Resubmit your site regularly to all the search engines.

"Everybody does it. You have to update the content regularly,

so you legitimately do have something new to provide, but if you don’t

submit it regularly they think it’s old and drop you down."

Scott pays just short of $50 monthly for a consultant

http://www.submitit.com

to keep submitting his pages to 400 search engines. When the automatic

submissions don’t work, as with Yahoo, which employs live people to

do the evaluations, the marketing director submits them "by

hand"

and less frequently.

Analyze results of server logs on your website’s statistics

program . Find out where surfers are coming from and how they are

clicking through.

"All the marketing is for naught if you get to the website

and all you see is corporate speak," says Scott. "Our

competitors

talk about how great they are, but our site offers a self-running

demo. And if you are interested you will download our package for

a free 30-day trial."

At this point the human hand must intervene. "We give them a key

to unlock it. We capture some information and send literature and

then we begin teleselling," says Scott.

"The finance guys who want to get the task done — they can

evaluate it themselves if you give them the data. More than one of

our clients has said that they really liked that we trusted them with

our whole product," says Scott. The potential client enters some

data onto the demo and then the Helmsman salesperson, by telephone,

shows how the software will crunch their numbers. "Most of our

competitors would take 12 days, not 12 hours, to build a similar

prototype,"

says Scott.

Another plus: such extensive use of the web reduces travel expenses.

"Before, it was normally a two-visit sales process. We let the

website be another sales person. We can sell twice as much as we could

in traditional mode," says Scott.

At least in the financial software marketplace, well-educated finance

professionals are computer savvy. But concentration on web marketing

does completely exclude another portion of the market, those that

never surf.

Has all of this web marketing brought results? Absolutely, says Scott.

"Ninety percent of our sales originated through the Web."

But don’t play dirges for Willie Loman. "No client bought the

product without a human sales effort. We believe the future is this

way."

— Barbara Fox

Top Of Page
Jason Olim and CDNow

<B>Jason Olim and his twin brother Matthew Olim

have grown their business, CDNow, from the basement of their parents’

house to the point where one of the world’s leading technology

companies,

Sun Microsystems, is taking out full-page ads in the New York Times

to brag about how it has been CDNow’s platform from the start. CDNow

recently merged with Music Boulevard, also on a Sun platform, and

so CD shoppers can choose from more than 500,000 sound samples, read

reviews, and buy digital downloads of full-length albums from

http://www.CDNow.com.

Olim has become an inspiration for all the start-up entrepreneurs

who hope that chutzpah and creativity will substitute for deep pockets

and corporate support. That’s why he was chosen as the keynote speaker

for the NJ Technology Council Software Forum on Friday, June 18, at

7:30 p.m. at the Sheraton at Woodbridge Place. Cost: $180. Call

609-452-1010.

The young web-entrepreneur was hand-selected by Mel Biada, of

the Council’s Software IT group and chairman of Bluestone Software

(http://www.bluestone.com) in Mount Laurel. "I think

CDNow personifies the internet start-up. I think Jason is familiar

with what it takes to start a business from a financial perspective

— how to keep stock valuations at the appropriate level and

compete

against the Amazons of the world — and he has a good cross section

of technical experience." The conference will also include panels

on web-enabled applications, security, and web-powered businesses.

Panelists include Tom Scott of the Helmsman Group (see above).

In the book "The CDNow Story Rags to Riches on the Internet,"

written with his brother and Peter Kent (Top Floor Publishing,

1998), Olim tells the quintessential tale of how starting big can

be a disadvantage. "Some of our competitors assumed that going

into business on the Internet is just like opening a traditional real

world store. These large established companies believed they could

quickly dominate online music sales just as they dominate real-world

sales." But based on an initial investment of $20,000, in three

years CDNow had a 33 percent share of the entire online music

business.

That doesn’t mean the small start-up won’t have some harrowing times.

"When things went wrong, having no one to turn to was a real

problem,"

Olim writes. "For instance, there was the night we had a system

crash. Just one of those things — we never did find out what had

happened."

"This was late in 1994 while we were still in the basement. We

were grossing around a $1,000 a day, which gave us a gross profit

of about $150 a day, so money was still quite tight," writes Olim.

"One evening the computer system just locked up. We had backups

but we had never really tested them, and in any case, we didn’t have

everything backed up. We had backed up irreplaceable data

related

to the operations of the store, but we hadn’t backed up the operating

system."

"It was on nights like this that we’d realize we were just a

couple

of kids in a basement. We may have been running one of the world

largest

Internet stores, but we were just tired 25-year-olds working by

ourselves

below ground level."

"It was a really scary night. We had no spare disk drives, and

we simply didn’t have cash for that sort of luxury. And we felt that

we couldn’t be down for a minute. We were living on the float in those

days. As it turned out, we lost perhaps $500. Back then, it was enough

to really hit us hard."

The business changes daily. Just last week Sony Music Entertainment

announced it would solve the problem of insufficient on-site retail

stock in retail stores by setting up digital vending machines in

retail

stores. Customers will be able to choose digital files from 4,000

albums and — after 15 minutes processing — take them home

as CDs, DVDs, or minidisks.

But the Olims have gained a huge head start: "The expertise

required

to build an online music store — making it easy to use, figuring

out the tricks of online merchandising, making the store personal,

making the most of potential sales — involves newly developed

skill that take time to acquire, but our staff has these skills: the

very best people in this business work for CDNow," says Olim.

Olim says that five C’s should determine whether a business will work

on the web:

Choice is one of the great gifts of this channel of

distribution,

because by freeing the store from space limitations, much wider choice

can be provided.

Convenience. Over 50 percent of U.S. households have two

incomes, 25 to 49-year-olds who simply don’t have enough time.

Control, mechanisms such as search boxes and fuzzy-search

technology — the system by which the consumer can access the

available

choices.

Community, something that comes from the content, a sense

of place, the reviews.

Customization, the customized E-mail newsletter, the

customized

store. How else, without the Internet, could you customize a store?

"Every business will be changed by the Internet, but if

you’re looking for a product category that really fits the net

perfectly,

one that will be changed enormously by the new technology, look for

a product that can be digitally distributed," says Olim, "then

check to see if it fits this concept of the Five Cs."


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