Insight Enterprises, Inc. History

Address:

1912 West Fourth St.
Tempe, Arizona 85281
U.S.A.

Telephone: (602) 902-1001
Fax: (602) 902-1141

Public Company
Incorporated: 1988
Employees: 695
Sales: $342.8 million (1996)
Stock Exchanges: NASDAQ
SICs: 5961 Mail Order Houses

Company Perspectives:

Insight exists to satisfy its customers and is committed to total customer satisfaction. With commitment comes a keen awareness that creating satisfied customers involves every aspect of the operation, from understanding their needs and providing the products and services they demand, to ensuring that every policy, procedure, and operation is customer focused. With all this in place, Insight still believes that the most critical cornerstone of customer satisfaction is creating strong relationships.

Company History:

Insight Enterprises, Inc. specializes in the direct marketing of brand-name microcomputers, peripherals, and software through catalog, phone, and Internet sales. The company's customer-focused account executives sell to price-conscious, computer-literate end users in U.S. and Canadian home, business, government, and education markets. Insight also offers services to manufacturers who outsource their marketing, sales, or distribution activities.

Insight seeks to provide customers--motivated by convenience, choice, and price--with a computer superstore delivered to their mailboxes. Its goal is to be the best direct marketer in the world through broad product selection and value pricing, one-stop shopping for customers, readily available products, expert technical advice before sales, speedy delivery, and support after sales with a continuing relationship between account executives and customers.

Entrepreneurial Beginnings, the 1980s

Eric Crown was working as a retail computer sales person when, moved by the entrepreneurial spirit, he decided to earn more money for himself instead of someone else. Perhaps recalling a college paper he wrote, he started to act on his idea for a computer mail order company. Despite the paper's "C" grade, he went on to create a multimillion dollar direct mail business--no small thing given the challenges of direct marketing computers. As one industry executive told Direct: "Anybody can start a computer catalog--that's not difficult. What is difficult is to succeed against the inherent odds." To prosper as a direct marketer, Crown would need to overcome the notoriously small profit margins in computer catalogs and fierce competition from other catalogs, discount retailers, superstores, and resellers. Each of his direct marketing efforts would require a high response level and significant sales. Yet he succeeded brilliantly.

Eric Crown and his brother Tim established Hard Drives International in 1986 and began selling mass storage computer products. They borrowed $2000 on a credit card, rented 100 square feet of office space, and bought an ad in Computer Shopper magazine selling hard drives. Their advertised price was less than the brothers could buy the hard drives for, but the Crowns calculated that prices would drop between the time of buying the ad and its actual appearance. The result was $20,000 in hard drive sales and a better profit than even they expected.

In 1988 Hard Drives International evolved into Insight Direct. Insight marketed mass storage products through ads in computer magazines and inbound toll-free telephone lines. In 1991 the company added product lines, including name-brand personal computers, software, and peripherals. By 1992, Insight spent $1.5 million each month on ads in print media.

Growth Years During the 1990s

In 1993 the company added catalogs to market more than 20,000 computer-related products, including hard drives, CD-ROM drives, and software. At this time, the company also began using outbound telephone account executives who focused on larger, corporate customers.

Insight's account executives became one of the hallmarks of the company. They worked for volume sales and customer loyalty, hoping to establish long-term relationships with their customers. As Eric Crown explained: "We're not so much after market share as we are after customer share." Typically, two out of every three sales went to existing customers.

Experienced account executives cultivated strong relationships with their clients so that Insight would become the primary source for their computer-related purchases. Eric Crown termed the overriding principle of the sales force "solution selling." Insight routinely extended weekly training to its already knowledgeable account executives. Corporate goals for profitability were shared freely--and were well known&mdash¯ong sales staff. As Diane Cyr explained in Direct, "The sales model here is all Crown ... if you're good you get rich, and if you're not you get out. Miss your goal by one cent, no bonus. Exceed your goal, and you might go on a Caribbean cruise, take a trip to New Orleans, or personally get handed 500 bucks by Eric Crown himself. The more you sell, the bigger the rewards, the bonuses, the commission percentage. Reps are even empowered to offer volume discounts, cut deals, do whatever it takes to get the customer." The result was an 8 percent call response rate to catalogs in 1995, with one-third converted to sales.

Insight's 800-number system contributed to establishing strong relationships between its 300 account representatives and customers. The company maintained more than 1,000 toll-free telephone numbers linked with specific catalogs and promotions. Each catalog or promotion was assigned an individual 800 number, which connected to specific account executives. So account representatives were linked by their areas of expertise--whether small business, geographic area, or whatever&mdashø a given catalog or promotion. This system made targeting and tracking customers easy. Account executives also had individual toll-free telephone numbers, so they could be contacted repeatedly, giving customers the opportunity to speak with an individual who was familiar with them instead of whichever representative just happened to answer the phone.

Another innovation--Insight's own brand of computer--debuted in 1993. Insight combined Intel Corporation's Pentium microprocessor and cutting-edge bus technology to create a state-of-the-art machine. The Pentium microprocessor provided the capabilities needed for three-dimensional graphics, calculating, and video applications, and the bus technology interfaced add-on cards (for example, graphics, networking, or modems) with the microprocessor. Priced lower than competitors' models, Insight's system offered high-speed graphics workstation applications, as well as use as a server for computer networks. As time went on, Insight downplayed its own products. Sales of its computers eventually shrank from 30 percent of the company's total sales to less than 10 percent. The company discontinued the sale of Insight brand computers in 1996, opting to concentrate on its strengths in marketing and fulfillment instead of developing its own products.

Insight also first offered outsourcing services to leading manufacturers such as Toshiba, AST, Samsung, Conner Peripherals, and Motorola in 1993. Essentially, Insight assumed marketing, sales, accounting, and/or distribution functions for these manufacturers. Insight might create catalogs or process orders from those catalogs for major industry players--with remarkable results. Toshiba Accessories' sales, for example, increased tenfold after Insight took over some of its marketing operations. By 1995, 12.2 percent of Insight's sales came from its outsourcing activity.

In 1994 Insight instituted Air Insight--a shipping service that provided hardware and software to customers on the same day that they placed orders. In doing so, the company provided its customers with a streamlined distribution system. Previously, most of the company's orders were delivered overnight.

By 1995 Insight reduced its monthly spending on print ads to $150,000. The company introduced its home page on the World Wide Web and issued the first ever Real Audio Talking Advertisement on the Internet. Insight's Internet marketing efforts drew thousands of hits and elicited about 500 catalog requests every day.

Insight also became a publicly traded company on NASDAQ in 1995. It offered 1.5 million shares of common stock at $9.00 per share and closed at $10.37 on the first day of trading. Insight accrued $245 million in sales that year, plus $6.1 million in operating earnings. Employees numbered more than 500, and the catalog house file held 1 million names.

Insight also signed a letter of intent to purchase ANDATACO, a San Diego-based system and network marketer for the UNIX client/server market, for approximately $16.8 million in late 1995. The acquisition did not materialize, however, because benefits of the move were determined to be less than anticipated. "Insight will continue to consider potential acquisitions of complementary or additional businesses even though the ANDATACO acquisition will not be completed," Tim Crown said in January 1996.

Insight broke ground for a new headquarters for its corporate and sales staff in Tempe, Arizona, in January 1996. The 103,000-square foot facility features "bullpen" sales areas with training centers. At the groundbreaking, Eric Crown said: "This building will be a state-of-the-art facility. We expect to see higher sales productivity as a result of the move, as members of our sales force are motivated by the successes of other members of the team."

Strategies for the Future

In 1996 Dataquest, a research firm, predicted that the demand for home personal computers would slow while the small and mid-size business computer market would grow. Since these are typically large repeat customers from corporations, government, and education, Insight initiated The Business Computing Source Book, a spinoff of its catalogue aimed directly at the business-to-business market. Featuring products exclusively for office applications and use, the catalog's average order was $1000, more than $300 greater than orders from Insight's consumer-oriented catalog. Dan Sager, senior vice-president of marketing for Insight, revealed: "Most computer catalogs are segmented by product category, such as Apple, PCs or UNIX. But this spin-off focuses on the target customer rather than the product." Insight expected to mail up to 12 million catalogs in 1996.

The company also instituted a networking catalog and a network manager Web site targeted for local-area network managers. According to Insight's president Tim Crown, "As with the consumer catalog, we will use extensive targeting to reduce the number of 'cold' mailings necessary to meet our goals. This strategy ensures increased response rates at a lower cost. Our networking book will further pinpoint our business catalog offerings, reaching an elite group of network product buyers." Insight's business-to-business sales grew from 33 percent of total sales to 67 percent by the end of 1995 to 80 percent by the fourth quarter of 1996. Insight also offered a leasing program in 1996 through PFO Capital Leasing of Newbury Park, California, to provide corporate customers with leasing options. Eric Crown noted: "Offering these aggressive leasing options through PFO will allow us to better meet the financing needs of business customers."

Business customers are the target market of the future, specifically corporate, government, and educational enterprises with 10 to 1000 employees. According to the 1996 annual report, "Historically, these have been Insight's best customers, and they represent the largest, most attractive segment of the computer direct marketing industry. They are computer literate, value conscious, volume buyers who purchase frequently and require little technical support. Research shows this segment also has the most potential for growth over the next few decades." Insight expects to see some rapid growth in this area, hiring more employees for outbound business-to-business telemarketing operations. Said president Tim Crown: "We continue to strengthen our position as a leading source for business buyers through increased marketing activities and outbound telemarketing.... [W]e anticipate a large percentage of our future sales growth to be affected by enhanced outbound telemarketing efforts and alternative marketing methods."

The company also envisions an increase in Internet-generated sales. Eric Crown told Success magazine in November 1996 that "we're up to 50,000 accesses per day on our Web site. We do a couple of million in annual sales on the Internet. Our goal there is $20 million in annual sales. It helps to have the newest gee-whiz displays. We have rotational pictures--you look at a product and spin it. We'll ship you 3-D glasses. We've added real-time audio: As soon as you click on it, it talks to you."

Though catalog circulation doubled in 1996, Insight expects that it will decrease in coming years as the company begins to target its best prospective customers and focus on existing customers. According to Dan Sager, senior vice-president of marketing, "The future of direct marketing is in supplanting the face-to-face selling approach."

Principal Subsidiaries: Insight Direct, Inc.; Intech Direct Company; ITA, Inc.; Direct Alliance Corporation (formerly IA Direct, Inc.); Insight Credit Corporation; Insight Distribution Network International, Inc.

Insight Enterprises, Inc. History

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