A01 chaf6542 06 se fm indd

Drive to

traditional

Drive to

e-channel

100,000 Unique visitors

10.0%

11,100 Online leads

20.0%

5.00%

10.00%

5.00%

1.00%

0.50%

2,355

1,000,000

Traditional channels

10.0%

110,000

20.0%

27,000

40.0%

11,910

Online sales

Offline inbound

enquiries

Online leads

Online sales

RESPONDENTS from channel

Response efficiency

Conversion to lead efficiency

Conversion to sale efficiency

LEADS generated from channel 

OUTCOMES from channel

E‑channel service 

contribution

The proportion of  service‑ 

 type processes that 

are completed using 

electronic channels.

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213

Chapter 5  Digital business strategy

ROPO

 is a term coined to describe research published by Google (2010) meaning ‘Research 

Online Purchase Offline’. This study reviewed the role of the Internet in the decision process 

for mobile and broadband contracts involving the Vodafone website and stores in Germany 

based on a panel of 16,000 web users and questionnaires about their intent and purchase. 

For both of these services, the contract was signed online by around a third of the audi-

ence. However, a significant proportion signed the contract offline. The matrix presented 

in Figure 5.15 is a good framework for evaluating and summarising multichannel behaviour 

since it also shows the situation where research is offline and purchase occurs online. This 

behaviour is particularly common for products such as, in this case, handsets, where con-

sumers want to evaluate their purchase online.

An example of objective setting within a particular company, then at a relatively early 

stage of adoption, is provided by Case study 5.2 and for different industries in Activity 5.2.

ROPO

Research Online 

Purchase Offline.

Figure 5.15

Research Online Purchase Online example

Source: Google.

Research...

Pur

chase...

Online

Mobile buyer

22%

37%

Online

Offline

9%

32%

Offline

Case Study 5.2

Setting the Internet revenue contribution at Sandvik Steel

Sandvik Steel, a company selling into many international 

markets, provides a good illustration of how Internet rev-

enue contribution can be used to set objectives for dif-

ferent geographical markets.

When  dot‑  com mania was at its height, so‑called 

old economy companies, such as Sweden’s Sandvik, 

tended to be overshadowed as the brash new online 

stars took the limelight.

But now that the collapse of Internet and other tech‑

nology stocks has injected a harsh dose of reality into 

the stock market and business scene, many established 

names are back in favour again.

As the experience of Sandvik, founded in 1862, 

shows, skilful use of the Internet can lead to huge 

improvements in links with customers and suppliers, 

bringing considerable cost savings.

Based north of Stockholm in Sandviken, the com‑

pany’s activities seem remote from the virtual world of 

the Internet. It makes cutting tools, speciality steels and 

mining and construction equipment.

However, the group is a  long‑  time advocate of IT. Its 

annual IT budget is some SKr1bn.

‘We first formulated our IT strategy in 1969,’ says 

Clas Ake Hedstrom, the chief executive. ‘We didn’t fore‑

see the Internet.’ Only recently, he adds, has IT moved 

from serving the company to benefiting customers.

Transferring its 30‑ year‑  old IT experience to the age 

of the web requires more than a deep understanding 

of technology, says Arnfinn Fredriksson, director of 

Internet business development at the group’s Coromant 

tooling business.

‘The major challenges are not IT and systems, but 

“soft” things such as attitudes, insights and getting 

people to understand and accept that this is part of their 

daily work.’ This means focussing hard on business 

needs and cutting through the Internet hype.

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Sandvik Steel, the speciality steel operation, also 

goes beyond transactions to find solutions for its cus‑

tomers. Its extranet enables users to obtain worldwide 

stock information, catalogues and training aids, as well 

as take part in online discussions.

At both Coromant and Sandvik Steel, digital business 

activities are mainly directed towards enhancing links 

with customers. ‘Customer value comes when our prod‑

uct is used, not when it is purchased,’ Mr Fredriksson 

says.

Thus, Coromant allows customers not only to 

buy tools over the web but also to design their own 

 products – within parameters set by Coromant – and 

receive advice on how best to use them.

Choosing the right cutting tools and using them 

effectively can save around 10% of the total cost of 

manufactured components. The digital business strat‑

egy had to take account of this.

It also had to avoid channel conflict, the bypassing 

of its traditional sales outlets. Most Coromant tools are 

sold directly to customers, but 40% goes through resell‑

ers. Moreover, there are big regional variations: more 

than 80% of sales in the Nordic region are direct, while 

most North American sales are indirect.

The company’s approach was to work with the tra‑

ditional sales channels. ‘So many companies try to 

bypass traditional channels and lose sales and relation‑

ships,’ Mr Fredriksson says.

It is the relationship with the customer – including 

greater personalisation and an extended reach into 

global markets – which will be the most important pillar 

of its digital business strategy in the long term, he says.

This is what provides real competitive advantage. 

Shifting existing customers to the Internet, winning new 

ones and saving costs are also important. But other 

companies will be doing the same.

At present, only a small part of Coromant’s orders 

are transacted over the web. Nordic countries are lead‑

ing the way. Around 20% of all orders from Denmark are 

online and 31% of those from Sweden.

The proportion in the US, however, is only 3%, since 

most business goes through distributors and is con‑

ducted by EDI (electronic data interchange), the  pre‑ 

 Internet means of e‑commerce.

Over the next six months, the company hopes to 

raise the US figure to 40%. Mr Fredriksson hopes that 

in two years, between 40 and 50% of total orders will 

come via the web.

To enhance its online service to customers, Coromant 

plans to offer each one a personalised web page. This 

will enable the company to offer new products, materi‑

als and advice on productivity improvements. Training 

will also be part of this expanded web offering, which 

Coromant aims to have in place later this year.

For both Coromant and Sandvik Steel, the value of 

the web lies in strengthening and expanding relation‑

ships with customers. In the case of Coromant, with some 

25,000 standard products, there are numerous customers 

buying low volumes. With Sandvik Steel, however, a small 

number of customers buy a high volume of products.

‘Our aims were to have 200 key customers using the 

extranet by a fixed time; and a confirmation from at least 

80% of key customers that they consider the extranet 

to be a major reason to deal with Sandvik,’ says Annika 

Roos, marketing manager at Sandvik Steel.

By putting the Internet at the heart of its business, 

the Sandvik group intends to penetrate deeply into the 

minds and ambitions of its customers. ‘The challenge is 

not just doing digital business, it is becoming a digital 

business,’ she adds.

Source: Andrew Fisher, Sandvik Steel, 4 June 2001.