Take My Device, Please - Industry Trend or Event

Industry Standard, The, Sept 4, 2000 by Alexei Oreskovic

These expenses can be hefty, however. At a time when online businesses are trying to trim their customer-acquisition costs (currently averaging $250, according to a McKinsey survey), giving each customer an electronic device worth several hundred dollars seems counterproductive. But proponents maintain that information appliances are much more cost-effective than, say, an ad during the Super Bowl.

PORTABLE POTENTIAL

For Boston-based Fidelity Investments, giving away hardware devices was necessary to establish a cutting-edge offering. Last fall, the company began offering free Research in Motion Interactive 950 pagers (retailing for $359 each) to customers of its InstantBroker wireless service. The pagers, says Fidelity spokesman Jim Griffin, help drive adoption for the InstantBroker service. "It's not just [about] putting ads in newspapers. Another way is to offer incentives like this."

InstantBroker customers receive stock alerts and execute trades with the two-way pagers, giving Fidelity a $14.95 commission on each market order. Griffin would not comment on how much more often InstantBroker members trade than regular customers, but he concedes pager recipients are "more hard-core users. They want to keep in touch with the marketplace."

It's also unclear how many transactions each customer needs to make for these pagers to produce a profit. Fidelity wouldn't reveal the price it paid for the devices, but the popularity of similar initiatives at the brokerage hint at the model's viability. Besides the RIM pagers, the company has offered its customers wireless Palm VIIs and Web-enabled cell phones. Griffin adds that Fidelity is participating in a pilot program in which customers receive free desktop Internet terminals made by IBM.

Not all businesses are convinced such a scheme will benefit them, though. Sanjay Upeal, Webvan's VP of solution engineering and integration, is interested in the possibilities that information appliances bring to the online grocery business, but he isn't ready to deploy them yet.

A portable device with a touchscreen or an "always-online" broadband device makes much more sense for a Net grocer. While such devices are technologically appealing, Webvan still needs to figure out a viable model for them. "To get into providing the appliance for the customer, either as a giveaway or a rebate, requires a commitment from the customer to purchase," notes Upeal, "We will have to look at how we can commit the customer."

What's more, many people may buy their own Web appliances through traditional channels. Consumers "may get the appliance from a retail store, or they may already have one," adds Upeal. If so, "all we have to do is construct either an application or a portal on the appliance."

In some cases, sites can limit their costs by forging alliances with the right partners. Through a cashless deal with 3Com, San Francisco-based ZDTV doled out 5,000 Webcams to viewers during its first year on the air without affecting its customer-acquisition costs. 3Com recognized the benefit of constant exposure on a national TV show and a Web site. Similarly, Motorola is subsidizing Ticketmaster.com's giveaway of Ticketmaster-branded pagers that alert owners of upcoming concerts and sporting events. While consumers get the pagers at no charge, says Ticketmaster.com President Tom Stockham, Motorola collects a monthly fee from users for providing the paging service.