white paper

From Brick to Click: E-Commerce Trends in Industrial Manufacturing

Cognizant White Paper

The Internet’s large-scale global penetration hasspawned an increasingly large number of technol-ogy- and Web-savvy consumers, creating a hugeopportunity for both industrial manufacturers andtheir end customers. Over the past decade, e-com-merce has evolved from a basic communicationand transaction channel between buyer and seller,to an end-to-end collaboration medium betweenall stakeholders. This collaboration is driven bycompanies looking to increase sales by offeringonline product recommendations and promotions,as well as end-customers seeking the rich and per-sonalized online experience that many retail Websites offer.

As a recent article in Managing Automationnotes:

“The industrial manufacturing sector isleading the U.S. economy out of therecession on the strength of a number ofkey growth strategies. Selling into newindustries, innovating to develop newproducts and services, and leveraging theInternet to pick up the pace of businessare the top growth drivers. Of the 1,176respondents to the survey, 71% said theironline strategy would be important orcritical. The Internet, it turns out, hastaken center stage in this recovery.”

The future of effective e-commerce lies in theability to deliver a buyer-centric and engagingonline experience that enables customers tointeract and transact with the brand and allows

manufacturers to reduce administrative costs,increase sales and improve brand loyalty. This isachieved by reducing costs through the followingmeans: Ensuring a minimum-touch, 100%accurate order in the least possible time;understanding customer needs and behavior todeliver specific marketing messages to influencedecision makers; and providing a rich customerexperience by leveraging rich Internet application(RIA) technologies, easy access to data to helpwith buying decisions, and online post-purchasesupport.

To achieve the above stated objectives,industrial manufacturers will need to:

� Aggressively adopt B2C and retail best prac-tices.

� Target customers with buyer-specific onlinepromotions, recommendations and messages.

� Increase brand visibility by utilizing social net-working tools.

� Open new markets and channels throughalternate business models, such as mobilecommerce.

In this paper, we will analyze how these trendsand objectives align to provide an effective e-commerce solution through the adoption of thefollowing key drivers:

� Expedite the shopping process.

� Enhance the customer experience.

� Evolve using future trends and tools.

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E-Commerce Challenges Faced byIndustrial Manufacturers

The business-to-business (B2B) e-commercemodel primarily adopted by industrialmanufacturers has evolved from transactionalto collaborative, closely involving the customerin each step of the buying process. This focus oncustomer intimacy is replicated primarily byadopting key practices of the business-to-consumer (B2C) model. The union of these twobusiness models is driven both by supply anddemand. Industrial manufacturers want toprovide a B2C-like experience to the customerby offering product recommendations andpromotions. Moreover, industrial customersexpect the same rich and personalizedexperience that retail sites offer.

The adoption of e-commerce by industrialmanufacturers has been unexpectedly slow,although its importance has been recognized bythe industry for a long time. Over the lastdecade, while many manufacturers haveexpressed an interest in incorporating Webtechnology into their existing platforms, veryfew have actually implemented it. This slow rateof adoption is due to challenges faced bymanufacturers, as depicted in Figure 1.

For the purpose of easily understanding the e-commerce challenges faced by industrialmanufacturers and possible solutions, let usconsider the case of a large U.S.-based HVACmanufacturer that asked us to help revamp its e-commerce portal from multiple stand-aloneapplications catering to functions such as ”search,””order,” ”cart processing,” etc., to a single RIAtechnology-based portal (see Figure 2, next page).

Some of the improved e-commerce capabilitiesthis manufacturer realized due to this revampwere:

� Better navigation and robust cart capabilities.

� Improved pricing and availability.

� Multiple search and display options.

� Marketing tools to help cross-sell and up-sellproducts through promotions and featuresdisplayed on the portal.

E-Commerce Solution Framework

The success of an industrial manufacturing e-commerce solution is dependent onimplementing or adopting the three key driversnamed above: Expedite the shopping process,enhance the customer experience and evolve,using future trends and tools.

E-Commerce

Challenges

OrderingAnalytics

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B2C reta

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The customer should have the

ability to perform multiple bulk

and quick orders.

Complex promotions taking into consideration geography, terms & conditions, minimum order quantity, book-by and ship-by dates are offered by B2B e-commerce sites.

Track customer and ordering

related details to help analyze and

determine product sales &

purchasing trends to help drive

efficiencies.

Customer Promotions

C

T

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r

Quickly search and

identify products of choice,

coupled with a fast

shopping cart checkout

process.

Figure 1

Manufacturing Obstacles

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Expedite the Shopping Process

In today’s dynamic business enviroment, it iscritical to enable the customer to effectivelysearch, identify products of his choice andquickly complete the shopping purchase. Toensure that the customer is completely satisfiedwith the shopping experience, it is important toprovide multiple search and ordering options. Inthe new e-commerce portal for our HVACmanufacturing client, its customers were providedwith multiple search and ordering options, withthe ability to filter on the basis of specificattributes and order quickly with the quick-orderand copy-paste components from the portalhome page, as indicated in the screenshot below(see Figure 3). The portal also displays productsthat have been “recently viewed and purchased”and have been “popular customer buys” to aid inexpediting the entire shopping process. The usercan also compare multiple products acrossdifferent attributes, including price, to help make awell-informed purchasing decision.

Enhance the Customer Experience

The two key drivers to enhancing the overallcustomer experience are customer-centricmarketing and a rich online experience.

� Customer-centric marketing: Customer-focused marketing campaigns and promotions -- an integral part of B2C sites -- are slowlybecoming essentials for B2B e-commerce.These campaigns can be in the form of banners,recommendations and promotions. For exam-ple, in the e-commerce portal built for the HVACmanufacturer, customer-specific promotionswere displayed prominently on the home page.The manufacturer used this real estate to effec-tively up-sell and cross-sell products when cus-tomers searched and purchased items of theirchoice, as indicated in the screenshot on thenext page (see Figure 4).

� Rich online experience: E-commerce sites areincreasingly leveraging RIA technologies todeliver an enhanced and personalized shop-ping experience, enabling customers to easily

Figure 2

Figure 3

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perform actions such as comparing multipleproducts, product search, adding to the cartand checkout. A well-designed RIA provides aseamless shopping experience, visually guid-ing the customer from one step to the next,providing the continuity that’s lacking in manyof today’s e-commerce sites. The site shouldalso be compatible with social media toolssuch as Twitter, blogs and forums to help cus-tomers make an informed buying decision.

We used RIA technology (Adobe Flex) todevelop the e-commerce portal for the HVACmanufacturer to help enhance the customershopping experience (see screenshot of theshopping cart, Figure 5, below). After imple-menting the new e-commerce portal, theHVAC manufacturer witnessed an increase inparts sales by close to 150% within one yearand an increase in volume of online orders by300% for the same period. The portal wasavailable to customers 24/7 with 96% uptime.

Evolve Using Future Tools and Trends

Social networking tools, mobile capability andanalytics will play a critical role in the future ofe-commerce in the industrial manufacturingindustry.

1. Social networking tools: Industrial manufac-turers and stakeholders across the B2B supplychain, such as dealers, distributors, retailers,etc., have largely acceptedonline social media technolo-gies as useful marketing toolsand have identified them asdesirable components in amajority of marketing cam-paigns. Industrial manufactur-ers can easily leverage Web 2.0tools such as Twitter, Facebookand LinkedIn to build brandawareness and customer loyal-ty. This can be achieved

After implementing the new e-commerce portal, the HVAC manufacturerwitnessed an increase inparts sales by close to150% within one year andan increase in volume ofonline orders by 300% for the same period.

Figure 4

Figure 5

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through viral marketing, marketing throughrelevant blogs and participation in online busi-ness communities, which are all differentsocial media marketing techniques.

As the sales decision in a B2B channel is pre-dominantly relationship driven, it is critical forindustrial manufacturers to determine the var-

ious social media tools(blogs, wikis, profession-al forums, etc.) beingutilized by customersand ensure appropriatepresence across thesemultiple mediums to ini-tiate ongoing conversa-tions and continuouslyunderstand customerbusiness needs. Thisway, social networkingtools open up an oppor-

tunity for industrial manufacturers to take amore engaging, personalized and interactiveapproach with their customers.

2.Mobile: As e-commerce and in-store channelsconverge with the growth of mobile networks,customers of industrial manufacturing compa-nies will have the ability to check the Internetfor online promotions, product descriptions andreviews by past purchasers via their mobile andsmart phones. Mobile devices help customersmake quick decisions by helping them access

online information on the spot rather than hav-ing to research an item later. The key require-ment for the successful adoption ofm-commerce is the availability of a single-clickcheck-out process, which will help eliminate theeffort required to enter payment and shippingdetails by customers. The single-click check-outprocess is implemented by integrating the e-commerce and m-commerce engines, allowingfor a seamless flow of payment and shippingdetails between the two sales channels. This --along with enhanced user experience and theflexibility offered by smart phones -- will enablem-commerce to be the sales channel of choicefor industrial manufacturers.

3.Analytics: Reporting and subsequent analy-tics allow industrial manufacturers to gainvaluable insights on the following aspects:

� A real-time view into the Web store andmarketing campaign performance.

� Monitoring lead conversion and Web sitemetrics, helping to maximize site effective-ness.

� Analyzing cart abandonment and identify-ing up-sell opportunities.

� Performance of promotions and cam-paigns.

� Visibility into live transactions or customerdetails.

The key requirement for the successful adoption

of m-commerce is the availability of a single-clickcheck-out process, which

will help eliminate theeffort required to enterpayment and shippingdetails by customers.

E-Commerce Benefits

for Industrial Manufacturers

Lower drop-out

rates

Fewer returns

Increased site stickiness and customer

loyalty

Ability to create a “brand

experience” online

Larger averageorder size and an

increased number of items sold

Rich Internet application features such as high quality product imagery, detailed product specs and tools for product comparison results in a more educated customer, and hence fewer returns for the industrial manufacturer.

Industrial manufacturers are able to showcase unique elements of their brand in their e-commercesite and use this channel as a trueextension of their offline brand identity.

Having convenient tools helps make the e-commerce site stickier and allows customers to spend more time exploring the various products available, thereby increasing sales.

Industrial manufacturers can encourage larger orders and increase the number of items sold, utilizing tools to combine or customize products, displaying related products and presenting products in packages or groups.

In

H

he

Rich e-commerce technology reduces the number of customers that drop out during the transaction. RIA decreases drop-outs due to issues with comparison shopping, a lengthy check-out process and site unreliability.

Figure 6

Virtual Business Virtues

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© Copyright 2010, Cognizant.All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or oth-erwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.

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Haymarket House28-29 HaymarketLondon SW1Y 4SP UKPhone: +44 (0) 20 7321 4888Fax: +44 (0) 20 7321 4890Email: infouk@cognizant.com

About Cognizant

Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and businessprocess outsourcing services. Cognizant’s single-minded passion is to dedicate our global technology andinnovation know-how, our industry expertise and worldwide resources to working together with clients tomake their businesses stronger. With over 50 global delivery centers and more than 95,600 employeesas of September 30, 2010, we combine a unique global delivery model infused with a distinct culture ofcustomer satisfaction. A member of the NASDAQ-100 Index and S&P 500 Index, Cognizant is a ForbesGlobal 2000 company and a member of the Fortune 1000 and is ranked among the top informationtechnology companies in BusinessWeek’s Hot Growth and Top 50 Performers listings.

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For more information on how to drive your business results with Cognizant, contact us at inquiry@cog-nizant.com or visit our website at www.cognizant.com.

References

Emily Sue Sloane, “Internet Is Engine of Manufacturers’ Growth,” Managing Automation, April 19,2010. http://www.managingautomation.com/maonline/news/read/Internet_Is_Engine_of_Manufacturers__Growth__Study_Says_33391

About the Author

Ashwin Nayan Rai is a Consultant in the Manufacturing & Logistics Practice within CognizantBusiness Consulting. He has five years of experience executing sales and marketing projects for leading U.S.-based industrial manufacturing and automotive companies, with a specific focus on e-commerce and incentives management. Ashwin can be reached atAshwin.NayanRai@cognizant.com.

E-Commerce Benefits for IndustrialManufacturers

The benefits from e-commerce sites incorporat-ing the aforementioned approaches range fromstronger brand building with end customers, toincreased average order size. Other benefits aredepicted in Figure 6 (see previous page).

The future of effective e-commerce lies in theability to deliver a buyer-centric and engaging

online experience that enables customers tointeract and transact with the brand byexpediting the shopping process, enhancing thecustomer experience and evolving using futuretools and trends. This will result in increasedcustomer utilization and conversion, as well asincreasing sales through the online channel. Assuch, our approach is to help industrialmanufacturers successfully navigate andcomplete the journey from “brick to click.”