Aiming for SavingsBy Edward Cone | Posted 2004-03-01 Email Print
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Gun buyers want more than just information. They want a relationship. So Remington Arms went online and triggered more response than anticipated.
Aiming for Savings
In 1998, Remington's owners retained investment bank Goldman Sachs to explore options for the company, but after more than a year no deal emerged. Gun makers are largely ignored by Wall Street, in part because litigation aimed at handgun manufacturers has tarred their reputation by association, however inaccurately. Instead of flipping the company, the bankers have gotten their returns by means of special dividends and bond sales amounting to over $100 million. That has kept debt highabout $270 million after a refinancing in early 2003, which included a $30 million equity investment from New York-based Bruckmann, Rosser, Sherrill & Co.
Remington's first Web site, launched in April 1998, was developed and managed by the company's marketing and information-technology groups. But without clear ownership by either group, the site stagnated. The 1999 product line didn't get posted until April of that year. With management recognizing the need to exploit its online presence, Moore became Remington's first dedicated Internet employee in October 1999, reporting to Grecco's Business Development unit.
IBM was brought in to help with strategy and design. In addition to IBM's business and technical expertise, Moore liked the way IBM learned Remington's business and culture, but he also appreciated that Remington would be self-sufficient after the consultants were gone. IBM designed and built the database of retailers and customers, and designed the Web site, which Remington then built itself. Locating the talent to both design and maintain the site through what Moore calls the "constant churn" of new products and technologies has been a major challenge. Some projects required political skill, toocompleting the dealer locator took almost four years, in part because wholesalers were reluctant to provide lists of their customers for fear Remington would cut them out of the distribution chain.
Remington wanted an Internet platform that would eventually allow it to integrate with the SAP software used to manage its manufacturing operations. The gun maker asked potential vendors IBM, Microsoft and SAP to develop a "working pilot" that actually interacted with its SAP system. Microsoft won the day, and in August 2001 a Microsoft partner company, Extreme Logic (now part of HP's consulting services) started work on the new site. Following the launch in February 2002, Remington handled subsequent development and management. Another Microsoft partner, OnSphere, was brought in to help prepare for the October 2003 launch of the online stores.
Remington started out hosting its own site, but it wasn't up to the task in key areas like redundancy, capacity and failover. So in October 2000, hosting was outsourced to AT&T, already Remington's phone and data-service provider. That move bought Remington time to upgrade its facilities, including the tripling of bandwidth to its headquarters, and a year later Remington brought site-hosting back in-house.
One problem with the improved site: It worked too well, drawing more visitors than Remington could easily handle. "You've whetted their appetite, made it easier for them to communicate with you, and they are doing it," Grecco says. In late 1998, when e-mails were running about 50 per day, the customer-service center could manage the volume. But as traffic grew, so did the headaches. By 1999, with visits to the site nearing two million per year, and e-mail inflow topping 1,000 per week, response time for e-mail queries went from a day or two to a week or more, with a high percentage of duplicate and follow-up e-mail from frustrated users compounding the problem. Remington had to hire part-time help to handle it all.
Remington went live with RightNow's call-center and e-mail-management software in April 2000. Since then, Remington has seen a 30% reduction in phone calls and a 50% proportional reduction in e-mail volume, as the most common questions are covered by the dynamic FAQ pages. The company still handles 8,000 phone calls per week, but it now does so more efficiently. Abandonment rates (calls ended before callers get help) ran as high as 12% in 1999; last year, the rate was about 3%. E-mail volume stayed roughly the same as it was when the project began, but now on Web traffic that's increased tenfold.
Meanwhile, sales, general and administrative costswhich include those of maintaining the Web site and customer- service effortshave held more or less steady, going from 16.7% of revenue in 1998 to 16.35% in 2002.
Just as important as providing customers with information about its products, the site also lets Remington take better aim at its ultimate customers. "We are also focused on learning more about our end-consumers and our small dealer base," says Moore. The next goal is to populate a database of 600,000 direct-mail addresses with e-mail addresses, the better to reach customers directly and cheaply.
For a company that wants to sell relationships as much as it does guns and ammo, that's a logical target.