The Piggyback Strategy

By teaming up with larger companies, Bank Earnings International has gone hog wild in the national market.

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In 1979, Bank Earnings International was a small, 15-employee consulting firm in Atlanta that specialized in streamlining bank operations. While its reputation was strong in its area, it lacked the marketing dollars and the sales force to push outside the Southeast.

Yet, scarcely a year later, BEI was selling its services across the country and growing apace. By January of this year, it had 105 employees, and gross sales were running at a rate of $13 million per year -- almost triple the revenues for 1982 -- with net income topping 16%. More to the point, the company triggered this rapid growth neither by extensive hiring of more salespeople, nor by large increases in its marketing expenditures. Instead, the principal catalyst was a joint-venture partnership with a company that had the ability to bring BEI's products to a wider market.

BEI came upon this "piggyback" approach to marketing almost by accident as a result of a chance conversation between a Dallas stockbroker and his neighbor. The stockbroker, Chip Jones, was a former Army buddy of BEI co-founder Jerry Eickhoff, while the neighbor happened to be head of corporate communications for Electronic Data Systems Corp., then a $274-million company.

One day, they got to talking about the two companies and the relative strengths and weaknesses of each. The EDS executive allowed as how -- with all its technical consultants -- his company still wasn't able to provide the hands-on operations expertise of BEI's consultants, all of whom were fotmer bankers. Then again, the Dallas company did have more than two dozen salespeople, as well as a strong national reputation among financial institutions as electronic-dataprocessing consultants. Might not BEI be able to take advantage of both by piggybacking its consulting service on EDS?

Eickhoff and BEI co-founder James P. Cotton Jr. were invited to Dallas to meet first with several top executives in EDS's banking division and then with the chairman, H. Ross Perot. "It was kind of overwhelming," recalls Eickhoff. On one wall of Perot's office hung an original Gilbert Stuart oil painting of George Washington, on another, a full-length photograph of Perot's family. A Bible lay on the credenza. Perot "wanted to see if we looked right and talked right. He wanted to find out what made us tick."

Eickhoff was equally cautious. "You've got to be sure that you're working with strong, ethical people who aren't out to steal what you do," he says. In most joint ventures, "a company has access to your trade secrets. It might choose to do a couple of jobs, learn what you do, then cut you out of the deal."

By the end of their second meeting with Perot, the executives felt sure enough of one another to shake hands on a three-year, self-renewing contract, under which EDS and BEI agreed to market joint studies to banks. According to the terms of the contract, representatives of both companies propose such studies whenever they call on clients. However, "the agreement is relatively loose," says Stuart Reeves, EDS vice-president and former head of the banking division. "BEI still does business without us, and we do business without them -- if that's what the client wants."

Since entering the EDS deal, BEI has sought out other partnerships. "We don't try to reinvent the wheel," says Eickhoff, who is also president of BEI Holding Ltd., of which the consulting company is a subsidiary. "Instead, we get into joint ventures where we take advantage of the other company's strengths, and they take advantage of the niche we've got. Together, we build something."

A case in point is BEI's recent joint venture with American Banker newspaper, which grew out of BEI's acquisition of a small Atlanta research company, Electronic Banking Inc., in August 1982. That acquisition gave BEI the capability to produce research studies, which it could then sell for $10,000 or $20,000 each. A better strategy, the company determined, might be to sell low-cost studies for $1,000to $4,000to a much broader market. But neither BEI nor its new subsidiary had experience reaching such a large audience. "We were used to getting on an airplane and visiting with every potential subscriber," says Allen Lipis, president of the subsidiary. "That doesn't work when you're selling a $2,000 study to 10,000 people."

Eickhoff wanted to find a partner that had credibility with the financial community and a means of reaching a large number of institutions through the mail. He was able to narrow the choice down to several publishing companies. "The hard part is finding out if they want to do it and getting to the right person," he says.

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