XM Radio Builds Tight B2B Links

It's been named Product of the Year by Fortune and Invention of the Year by Time magazine. The satellite radio service from Washington-based XM Satellite Radio Inc. is riding high, with glowing press and more than 76,000 subscribers signed up since last September.

Behind the scenes, the broadcaster's success story has been helped by especially tight e-commerce links with electronics retailers, such as Circuit City and Best Buy, that sell XM-compatible radios.

After purchasing an XM Radio at an electronics store, subscribers pay $10 per month to receive 100 digital channels of radio programming in their cars. With music genres ranging from bluegrass to blues to big band, customers can drive across the country -- even through the backwoods of Arkansas -- and get the kind of music they like.

Even so, research shows that 80% of new consumer products fail within the first two years. To avoid becoming a statistic, XM Radio has built a lean business model and IT systems that make it easy for the electronics stores to sell XM Radios.

"One of our major objectives for the dealer support and supply chain systems was to be very easy to do business with," says Frank Patry, IT vice president at XM Radio. "Anytime you introduce a new product into existing retail outlets, you want to minimize disruption. Our success is tied directly to their ability to sell the radio."

The process begins when the customer buys an XM radio and the radio ID number is scanned at the point of sale (POS). The retailer sends that data to XM by way of a value-added network using either electronic data interchange (EDI) or XML formats.

It's important for XM to accept both the legacy EDI and newer XML formats, because retailers aren't switching to XML overnight, says Doug Laney, an analyst at Meta Group Inc. in Stamford, Conn.

When the POS data arrives at XM, it's put in a sort of quarantined holding bin, or raw database. Then the raw data is run through an automated extract, translate and load (ETL) process using the DataStage XE tool from Ascential Software Corp. in Westboro, Mass. At this point, the EDI and XML data are integrated and checked for errors before going into the clean database, Patry says.

In essence, the ETL tool is a kind of data hub that pushes and pulls data in and out of various systems, such as the Unix-based supply chain event management system, the billing system and a data mart for marketing analysis. "DataStage is overkill for many of the operational uses, but sales and marketing analytics is this tool's sweet spot," Laney says.

The radio ID number from the POS data is really the key to XM's various systems, enabling the company to track all customer interactions. To activate the service, the customer plugs in the radio ID number at XM's Web site so the company can verify it and turn on the service for that addressable device.

The XM system can even block certain channels at the customer's request, based on that radio ID number. "If you don't want the Hip-Hop Raw channel, which is uncensored hip-hop [music], we can make sure the radio won't play that channel," Patry says.

The POS data also is sent to a subscriber management system so call center personnel will know what radio the subscriber bought and where, for troubleshooting purposes. And the dealer management system uses it to make sure electronics retailers get their sales commissions.

Patry says XM worked closely with the retailers' IT departments -- by providing data translation kits, for example -- to make sure the data entering the system is clean. Errors require manual intervention and delay payments.

While XM has plans for enormous growth, right now the battleground is on the sales floors of the electronics retailers, says Stephen Blum, president of Tellus Venture Associates, a satellite broadcasting consultancy in Marina, Calif. The salespeople work on commission and will push whatever product makes them the most money in the least amount of time, whether that's a big-screen TV or high-end speakers.

"The fewer hoops those guys have to go through, both on the floor and in the back office, the more likely they are to sell your stuff," Blum says.

Patry agrees. "Our goal was to minimize how much time we added to the sale and make the turnaround of payments as quick and as clean as possible," he says.

"The answer was B2B integration," Patry adds, including clean POS data that prevents delays in distributing those all-important sales commissions.

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