A Case History

Don Klosterman Former, Sr. Vice President, Principal Parker Stephens, Inc. 2802 Knoxville Ave. Long Beach, CA 90815 714.501.5949 cell E-Mail: donklos@charter.net

As the surrogatemarketing department for this fledgling computer maker, we worked with NFL Hall of Fame Coach Bill Walsh. Parker Stephens used Mr. Walshs credibility to command respect and attention with in-store marketing.
Our strategies resulted in unprecedented in-store exposure at this normally stingy retailer.

Unique strategic differentiation gave NetRam the credibility for ease of sales. Better, it propelled NetRam from $0 to over $30million in sales in just eight months time, using only in-store marketing.

NetRam Computers Became the #1 Selling Computer Brand in Frys Electronics, the 13th Largest Computer Retailer, in only six months. It Outsold All Other Brands, Combined!

The Birth of NetRam Computers as a Viable Consumer Brand

By Don Klosterman Former Sr. Vice President, Parker Stephens, Inc.

This is a true American success story of small group of people who were armed with little more than determination on their way to creating the opportunity for themselves to become the next Dell. If only things had gone just a little different. Parker Stephens is a medium sized advertising and marketing services firm located in Costa Mesa, Ca. We are principal owned and operated by a group of seasoned advertising executives who trained and worked for years in big 10 advertising agencies such as Saatchi & Saatchi, McCann Erickson, Ogilvy & Mather, as well as Wells Rich & Green and former O.C. regional power Salvati Montgomery Sakoda which merged with Bozell and is now FCB. Additionally our key partners have client marketing experience at Sunkist Growers, Allergan Pharmaceuticals, and at IRS Records, a former division of Capitol Records. That broad experience was put to the test with this client. One day in 1997 we were introduced to a couple of motivated individuals who manufactured single units and small batches of computers, mainly for corporate customers. They made them in their very small offices in Orange County, one at a time. They had sales then of about $1.5 million per year. They wanted to increase their business, so one of the partners, a determined person, decided he wanted to sell computers at retail, and specifically at Fry's Electronics. Frys is the 13th largest computer retailer in the country, and is well known for its hardball style of relationships with its computer vendors. The partner was terribly naive as to what it takes to be successful in the retail environment, but he got on the phone one day nevertheless, called the Fry's headquarters, learned the name of the computer buyer, and became such a persistent pest for 30 days that the buyer finally caved in and granted a meeting. He was given three weeks to make his once-in-a lifetime pitch. The two NetRam partners met with us to ask for our assistance, to which we promptly declined. The world did not need, we felt, another non-descript, white box computer built by a couple of determined, yet nave guys in little more than a garage-type environment, They also had little backing, little marketing knowledge, no packaging, no positioning, no sales materials, no technical support, no retail presence whatsoever....etc. But for some reason I couldnt get it out of my mind, so later that night I decided to stop in to the Fry's store in Fountain Valley on my way home. I thought I'd be there for about 15 minutes. I ended up being there until closing, some three hours later. The reason was that I had found the Fry's sales people receptive to talking with me, and I became intrigued. Of course I posed as a 3

customer. I was able to become very friendly with one of them. The next morning I decided to stop in to the store again, and the same sales clerk from the night before was there again. This time he suspected I wasn't a customer, so I confessed and told him I was performing in-store research for a new computer company. Wed become friendly enough that he saw I had developed a genuine interest in how Frys sells computers, so he opened up to me to reveal the inner secrets of what was wrong with competitive offerings, and where the opportunities for a new computer company existed. Using that information as a foundation, I spent the good part of the next week going into most of the So. California Fry's stores, and some competitors. After this period there were some very obvious opportunities which arose for a new computer company, and that enabled our firm to put together the proper strategies which eventually lead us to what was to become a great success. During the next two weeks we put the presentation together for Fry's. I boarded a plane headed to their headquarters in San Jose along with one of the NetRam partners, and proceeded to make the presentation to the buyer. I took a direct and frank approach, laying out all the issues Id learned in my many hours in his stores. Of course, this was risky because essentially, all the issues I laid out were problems for which the buyer was responsible. I felt I had to take the aggressive road. It turned out to be the right one. To my surprise, the buyer was appreciative of all the research that had been done, but he was especially interested in the fact that we had set up NetRam as the only computer company that A) was aware of the unique competitive issues that existed at Frys; and B) had set up our marketing plan and in-store presence to uniquely address those issues. Well a few short days after the meeting we received an initial order. That then set off a frenzy back at our place, because most of the marketing materials we presented to Frys were only in concept form. All the packaging, labeling, in-store marketing and P.O.P., sales training to store personnel, returns, customer service, 800 lines, in-store factory reps, you name it, all had to be put into place in a short one month period. The two NetRam partners were barely equipped to handle the office and manufacturing duties, so it was incumbent upon us to become NetRams Marketing Department, and for me to assume the surrogate marketing director's job. Our first P.O. was for 32 machines. They were to be the industrys first Pentium II systems offered at retail, so the deadline was very tight. The launch was a complete success, in spite of some severe manufacturing issues that strained our patience, as well as that of the Frys buyer. Those 32 machines all sold within 36 hours. With some adjustments and success in the manufacturing process, and a couple of short test months at Frys, it wasnt long before we started receiving larger, substantive P.O.s, on a weekly basis. $100,000 P.O.s per week came through the fax machines. Then, a few weeks later half million dollar orders; then a million dollar orders, then two million dollar P.O.s, PER WEEK. Can you imagine? A company that was selling only $1.5 million in annual sales is now a $30,000,000 company and is on track to be a $50 million company, in its first year of retail presence!

We also started to become the favorite computer to sell of a few key store salesmen throughout the chain who were extremely influential to the rest of the sales army at Frys. Our strategy was to have a strong management presence in each of the 16 stores, identify the key sales people and make them strong advocates. That required thousands of hours of our time in the trenches. We knew we had the best computer on the market, and we added the best sales closing materials, the best in-store marketing, the best packaging, the best sales training, the best manufacturers rep presence, and the best sales commission of all the offerings. We didnt spend one dime on traditional advertising, so our profits were applied in the store where many customers would come in not having a specific brand in mind at the time of purchase. Remember that pre-launch research? We accurately determined that if we could get a small percentage of those naive buyers wed be a hit. After all, Frys is a very high volume chain, and even a small percentage of market share there can make a company successful. We devoted a strong presence to the five new Frys grand openings that occurred to huge success. Computers literally sold by the pallet load at these festive and high volume events. We used them not only as promotional launching pads, but as tremendous first impression opportunities to train the new sales forces at these new stores to sell NetRam as the Go To system. It was common to see up to three end caps and huge sales mountains of our NetRam Computers for sale, and it didnt take long for those mountains to whittle down in the form of fast register sales. We became the number one selling computer in the Frys chain, outselling all other brands, including the national brands, combined! It wasnt long that we were able to break into another major, mid-west retail chain. Sales soared. The two partners could not continue managing the company with this growth so they sold it to another party whom had been helping them with financing along the way.

Our in-store marketing was beefed up with the new owners ability to persuade NFL Hall of Fame legendary coach Bill Walsh to become company spokesperson. They had a contact who knew Mr. Walsh and since we didnt have much operating profit yet, he agreed to provide his services for few dollars and interest in the company. We worked with him in producing on screen sales videos, in-store P.O.P. materials and of course web site presence. Mr. Walshs name and likeness gave our unknown computer brand accelerated credibility that endeared NetRam not only to unknowing customers, but also, and very importantly, to the Frys sales staff who are so influential to the sales process. After all, that army of sales people held the keys to our success or failure. Our success was made possible by our ability to endear ourselves to them. Of course, using Mr. Walsh properly was critical, and we did that very well. That company decided to build a new factory in the Irvine Spectrum. It was a beautiful, state-of-the-art facility. I referred to it as The House that Parker Stephens built. Prior to that the larger orders were built by a third-party contractor in Costa Mesa. That contractor was very efficient and built computers to very high standards. We had a great thing going and felt we were on our way to becoming a true national power in the category. The new owners took over. When the new factory opened, the new owners found it extremely difficult to manufacture computers with the same high quality on which our foundation had been built. And worse, they could not deal with the new economics of the computer business. Many problematic computers left the factory and became faulty returns. This turned out to be the kiss of death. Our reputation was gravely damaged, and NetRam soon lost the Fry's account. NetRam went out of business. It was heartbreaking, to say the least. We proved however that we have the ability to successfully create a unique presence for a new brand in a very crowded field. And better, we did it without spending one dime in advertising, putting all our energies into the in-store environment to empower the consumer to buy, quickly, with knowledge and confidence. The experience also unfortunately reaffirmed to all of us that great marketing and determined effort alone dont create success. Its truly a team process. We put our many years of working for blue-chip, national brands to work for NetRam and succeeded. ----------------------- // ----------------------Bill Walsh Gets Coached for NetRam NFL Hall of Fame member and 3-time Super Bowl Champion coach with the S.F. 49ers Bill Walsh receives direction from NetRams Retail Marketing Director, Don Klosterman during a recent shoot for a video project at a Frys Electronics store. Fast growing NetRam Computers and Mr. Walsh have teamed up to promote its increasingly popular line of high quality computers that are made only with worldclass, brand name components.
(A past press photo and caption.)

Don Klosterman Former, Sr. Vice President, Principal Parker Stephens, Inc. 2802 Knoxville Ave. Long Beach, CA 90815 714.501.5949 cell E-Mail: donklos@charter.net