Pure: A quality B2B distillation

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At 32, Marcus Richardson was the youngest MD at The Caudwell Group. At 38, he reckons his B2B dealership Pure is the best in the land. He tells Michael Garwood about working a rare niche between consumer and business sales

“B2B doesn’t get any better than this.”That is the considered view of Marcus Richardson, as he opens the doors to an impressive 4,000 square-foot barn conversion in the Northamptonshire countryside.

These are the well-appointed headquarters of Richardson’s B2B dealership Pure. And these are strongs words for a business still in its relative infancy, despite impressive growth since its inception in 2006.

Richardson has a confidence about him which could easily be mistaken for arrogance. His work history, however, demands that such a statement is taken seriously.

Richardson started as a regional business manager for Genesis Communications in 1998. In 2002, he became national sales director for John Caudwell’s Corporate 4U business.

By 2004, he had founded 4U Business for the Caudwell Group, which grew to be the largest independent B2B specialist in the land, with turnover of £36 million, staff of 700 and customer connections of 6,000 per month.

Richardson, aged 32, was the youngest managing director at the Caudwell Group, and claims a paternal role in the current business market.

His 4U business was the first to introduce longer 18-, 24- and 36-month business contracts to the market. Elements of his 4U Business team, who departed with Richardson and Pure finance director Gavin Tedstone as Caudwell folded the B2B unit into his Phones 4U retail business, now prop up parts of the dealer community; notably, former directors Mike Hallam, Ian Foskett and Mike Ashby have gone on to set up Wish Communications, IGC Group and 360 Comms respectively.

He says: “I had a fantastic education; all that hard work John (Caudwell) put in to me paid off. I have run the best (business) in this sector, and I think the same of the business I have today. It doesn’t get better than this. There isn’t anyone out there better than us at what we do.

“You know, this is not a lifestyle business; with a young first-time business owner. There is an education, and a lot of hard work and intellect behind this.”

Customers and suppliers
Richardson has kept a low profile so far, but he is well known. Ask most other B2B dealers – certainly among the Yes Telecom/VPS crew – who should be watched for in the market, and they invariably mention Richardson.

And Pure has managed the increasingly rare feat to retain sales contracts with all major operators – Vodafone, T-Mobile, Orange and O2; listed here in order of the volumes Pure delivers each.

In a recessionary year, Pure posted a 25 per cent jump in profits. It manages around 17,000 connections, with a significant majority on Vodafone.

Its connections have grown by more than 50 per cent per annum, without fail. It claims to sign around 600 new customers per month, with a similar number of upgrades.

It is business it has sourced itself too; Richardson is not particularly interested in acquiring customers from failing rivals just to grow its base. He trots out the de facto and neccessary line about “quality” high ARPU business.

Despite the Vodafone slant, Richardson rejects the notion the channel cannot serve multiple masters any longer, and suggests Pure has put itself in a position with its back-office systems and sales processes that it can deal easily with all suppliers and that operators actively want to work with it.

“People ask if it is difficult to maintain network relations, and my response is always that, so long as you have invested in the infrastructure, then there is no reason you shouldn’t keep customers happy on each,” remarks Richardson.

“We spend a lot of time with the networks; at least one day per month with each. We foster those relationships. And I have invested millions in this business to acquire and retain customers; I haven’t made a lot of money so far. You need a base to work with first. This business is only four years old.”

Key Vodafone relationship
But it is growing, and it is of particular importance to Vodafone, for which it grew its managed base by 82 per cent in 2009 – against a total increase in clients of 57 per cent.

A new ‘strategic’ deal with Vodafone, which presumably guarantees Vodafone the lion’s share of Pure’s connections (Richardson won’t discuss), allows Pure to work like a “virtual service provider,” with longer-term commercial arrangements in place and increased transparency of business planning and information available to both.

So Pure gets a heads-up on coming Vodafone product releases and strategic shifts. With a view of Vodafone’s roadmap, Richardson sold off Pure’s fixed line busines, Pure Wire, in March to O2 reseller Livvy’s Group in order to be ready for Vodafone’s OneNet unifed communications proposition.

“It was a management decision to step away from it, instead of allowing possible conflict” explains Richardson.

“There’s no point investing in fixed line when we will have a complementary product, and an incredible one at that.”

The point is to deliver each some security in a traditionally volatile and unfaithful sales environment. The theory is, like with the types of contractual arrangements O2 in particular has pursued with its choicest partners, Vodafone can with Pure plan and shape a shared vision of B2B sales.

And there is empowerment for a dealer in such trust, and lines in the sand. Pure’s agreement with Vodafone sees calls from its customers to Vodafone call centres transferred to its Northamptonshire office, and account managers.

Vodafone also contacts Pure if any of its customers are in touch to request their PAC number.  It appears, almost, Vodafone is deferring with its closest partners in this long-running discussion about customer ownership.

Richardson describes the new-look Vodafone (for most of these policies have been put down in the past 18 months) as an “enabler rather than an enforcer” insofar as it listens, shares and responds with partners, instead of dictating to them.

He is also complimentary about the team it has assembled now with SME sales director Rob Shardlow and enterprise sales director Peter Kelly.

“It’s much broader than a straight set of commercials. It’s a more bespoke virtual service provider type of relationship. It is about sharing information and goals. And if you are prepared to invest in your business for the future, then it will invest in you. It might not have the strongest proposition from a commercial perspective only, but it has the infrastructure, capability and people that, combined, make it a winner.

“It has been sharpening up and is looking to take back market share. In the coming months you will see some big activity from it. My sense is Vodafone will set a new and higher standard in B2B sales. It does not want to be considered a sleeping giant.”

Rare customer types
What exactly does Vodafone, and other operators in limited volume, get from Richardson and Pure?

Richardson claims to be mining a fairly unique seam in the business sales channel, one that is fluid, and expensive to engineer and keep open, but one that can be richly rewarding also.

“Our strategy is to sign loads of customers each with small numbers of connections and to focus on providing them with the best possible customer service – to really love them so our base is very loyal. Why? Because we know that somewhere down the line there will be products like OneNet and other propositions from the networks we can sell into them as well.”

That, perhaps, seems a precarious balance to strike. After all, the broad public has been continually over-promised and under-delivered in terms of their supply of mobile pyrotechnics. And sales channels have worked for a long time in that environment with slimming margins from suppliers.

But Richardson is clear Pure, to date, has been about establishing a strong, profitable and loyal customer base, and his ambition goes well beyond normal telecoms confines.

“I am a business man. I run this business for solid customer acquisition. Once I have that customer, I can sell them what I want. The Pure logo is transportable across any other supply line – Pure Paper, Pure Pens, Pure Cars, anything.”

A refined proposition
But stationary supplies and home insurance are a way off, yet. Mobile is for now the nucleus, and Richardson’s purest objective is for his business to be “the best at everything” it does.

For common dealer practices, he thinks it is already. But sizeable growth opportunities are good distractions while he brainstorms and “discusses” these other avenues.

This very small-end of the small and medium-sized enterprise (SME) market, or the small office/home office (SOHO) sector, is a difficult customer market for resellers and operator suppliers. It is also a vast and sprawling one, without much competition for successful dealer practitioners and no easy way for operators to sell to directly.

To illustrate the market dynamic, the UK market is apparently shot for new growth: the UK population is around 65 million and operators claim around 80 million SIM cards in the market.

Within it, there are a little north of 150,000 registered SMEs in the UK, each representing telecoms business of 10-49 handsets and fought over by operators and the ultra-competitive dealer community.

There are close to four million SOHO customers, with fewer than 10 lines available to resellers. Richardson’s stated interest is in those SOHO connections, and he says turnaround is quick and competition is low: 60 per cent of customers sign-up on the day, and 70 per cent of pitches go uncontested.

Claims that the B2B market is saturated is a SME point of view only, he suggests. He cites Ofcom statistics, which claim only 55 per cent of the SOHO market is taken, with ‘users’ often choosing a consumer line for business. But saturation is not the point anyway, argues Pure, even if it is operating beyond such constraints.

“People see saturation as a lack of opportunity. We don’t. Because there is always churn. The car market is saturated, and yet people change cars every few years. So there is still an addressable market out there; it comes to how good you are at addressing it,” explains Richardson.

“And within a saturated market, there are always segments that are under-served. It’s dead simple; most dealers go for customers with 10, 15, 20 connections, say; firmly in that SME sector. They chase the ‘E’ in SME; we chase the ‘S’, and there aren’t many competing for the threes, fours and fives. So is it competitive? No, there are 2,000 fewer dealers operating in this small SME or SOHO market, and it is an expanding business sector.”

A part of the reason for its lack of competition, reckons Richardson, is the fact the SOHO market crosses the prospecting nature of SME sales with the urgency and margin-pressure of the consumer market.

The huge investment Richardson has put into Pure, by way of rechanneling most of its busines profits, underpins its advancement in such a terrain. Its various Microsoft and BlackBerry accreditations are reflective and supportive of its efforts also.

Agility is crucial.  Acquisition costs, typically high in a consumer-like SOHO market, are kept to a minimum by virtue of the internal systems and sales processes Richardson has put down. Incoming calls are answered in seconds (in under 11, to be precise). Sale-to-cash is little over 24 hours, saving all kinds of resources on SOHO legwork.

He explains: “It is very costly; it’s one up from retail. Your speed and quality has to be quick. It’s essential. From signature to connection takes 24 hours, everything is wrapped up – right up to ‘welcome’ letters. It’s like bing, bang, bosh; it’s done.

“You have got to invest heavily to operate successfully in this market. We are set up very specifically to manage that size of small business.”

Richardson adds: “The dealer market is consolidating. You have to be supremely competent and I don’t think many have invested early enough.

“We invested in all of this from the minute we opened the doors – in IT systems and staff processes.If anyone else wants to play in this space too, we would welcome it, but we set the standard here.”

Consolidating market
He goes so far as to suggest the market would do well to shed some old-school dealer operatives. Operators are seeking out businesses of his ilk, he suggests, with more professional attitudes and practices.

“The networks are actively reviewing the partner frameworks to see who meets their standards,” he observes.

One can surmise from the limited and exclusive dealer clubs operators are constructing around certain partners, and the types of commercial contracts they are tying them into, to have a sense of it. They are supporting those who have invested internally to be in it for the long haul.

Richardson does not even like the term ‘dealer’ for its negative connotations in the mobile sales channel, and suggests the sectors reputation has been muddied.

“I don’t like the term; we are far more professional than that. We have invested money to deliver quality, both now and in the future. It is not just about selling cheaply. If you are better at what you do, you will take share. If some dealers are lost as the market matures, then so be it. Maybe it will cleanse this market for the professionals in it.”

Retention and data
For a business pitching to lots of SOHO customers, “one step up from consumer” and more vulnerable to economic pressures and the vagaries of start-up trading, Pure has a pretty remarkable record in terms of both churn and data connections.

The company has reduced monthly churn by 47 per cent since last year, it said, to the equivalent of less than one per cent of its base per month. Three quarters of its churn is from ‘bad debt’. Richardson claims all its customers are on direct debit arrangements, and 24-month contracts.

Fewer than 100 connections – out of 17,000 lines across 3,000 client accounts – are out of contract at any one time.

“It’s a huge quality shout. It’s quite easy to achieve low churn if you only have only 10 or 15 very large customers. It’s quite different to achieve that with a base of 3,000 small accounts. That is an incredible testament to the work the guys here do. And we have had plenty of opportunity to move customers between networks, but we never have. We have never cannibalised our own base to keep suppliers happy.”

As well, Pure has data penetration within its base of 46 per cent – decent according to any frame of reference, but Richardson  regards this is a failure, ultimately, and a missed opportunity.

“We have 3,000 customers and only 46 per cent have got BlackBerry or any kind of data bolt-on. There is so much room for extra revenue. Why haven’t they all got data?”

In Pure’s case, it is only because suitable products have not been available until now. In the case of others, Richardson suggests an element of laziness in the sale, that they have not “opened customers’ eyes to new products and technologies.”

He says: “For us, we have always acquired customers with knowledge of different technologies coming down the line. We have built our base, and we have served it to keep it loyal and to be able to sell these other products. So we are now in a great position where we have OneNet from Vodafone,  Joined Up with O2 and some others from other operators due shortly.”

Or indeed, it would appear in stationary supply, or car and home insurance. For sure, Pure sees plenty of opportunities still, inside and outside telecoms.

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