Terry Jukes - President of B2B Direct Marketing Intelligence, LLC

Amazon roars forward with same day shipping.

If you still think Amazon.com is a B2C marketer it is time to update your perspective.   Amazon sells, either directly or through their marketplace merchants, just about every B2B product category you can think of ....and is expanding their offering every month.   Your merchandising and marketing team should be checking Amazon regularly for your top selling items/brands and you should be tracking this "mother of all retailers" as you would any other competitive marketplace.  (Ideally, you are already selling on Amazon as a merchant too.)

You may not have noticed that a couple of months ago Amazon announced same day delivery service in seven major cities - Baltimore, Boston, Las Vegas, New York, Philly, Seattle and DC.....with Chicago, Indianapolis and Phoenix and probably many more to come.   The additional S&H charges for Amazon Prime customers is only $5.99 and ranges from $14.49-$18.99 for non-Prime customers.  They are also expanding their Saturday delivery services.   For those B2B direct marketers who sell from stores or show rooms  and/or sell with less delivery service, this Amazon offer is real competition and one you will want to watch/track closely.  This is especially true for B2B retailers who have any seasonal business like business gifts as same day shipping appeals to all (less price sensitive! high margin!) shoppers who procrastinate in the face of a seasonal shopping deadline.

Amazon is a significant market force, the largest and fastest growing online retailer with explosive growth in many new product categories.    In a presentation I gave at the fall NEMOA conference, I made reference to doing business with Amazon is like "sleeping with a polar bear in the Artic".   If you don't, you will freeze to death.  If you do, you risk being eaten.   Being an Amazon merchant and selling significant volume on Amazon (a good thing, albeit at reduced margins) allows Amazon to see what your top selling items are and consider selling those items themselves, directly.  Of course, they can get such competitive information elsewhere but one can't help but think the more merchants they have on their marketplace, the better the complete picture is to them.   If you are struggling with your Amazon selling strategy, please feel free to call me.  It is complicated, in my view, and warrants a high level discussion of the strategic implications and choiceful tactics.   In the meantime, never take your eyes off the polar bear.

Changes, changes....life is all about changes!

After nearly two  years serving as President of Ability Commerce, I will shortly return to my consulting practice.  I will remain as Chairman of the Advisory Board of Ability Commerce (along with Don Libey, Reggie Brady and Katie Muldoon) and will continue to advise the company on various sales and marketing issues.  (Their ecommerce platform rocks!...and in every installation has increased sales no less than 50%...often more than 100%!   If you have not seen it, you need to!)

I will be embarking on several new consulting ventures.   The first involves providing due diligence services to investment groups on acquisitions of catalog businesses.  I believe in the next couple of years there will many sale transactions in our industry as aging entreprenuers and frustrated investors seek to liquidate their equity.  It will also give me the opportunity to work closely with my good friend and business associate Don Libey. 

I also will be taking on an assignment in Asia that involves product development processes and training. I am very exciting to be doing more international work as I believe that good ol' American direct marketing know how is the best in the world.   I also believe the next wave of direct marketing innovation will involve direct ordering and fulfillment from Asia....more on that later.

So, loyal followers, please update your contact information for me to:   tjukes@b2bdmi.com, 954-383-5221. (My cell, I have given up all land lines as I am never in one place long enough to answer them!)

The best is yet to come.....

Traffic, SMAFFIC!

In a meeting with our SEO team recently I got frustrated with all the SEO talk about generating more traffic to our various client sites.   You have probably been there.   "Do this, and we will get more traffic!"   I say, traffic, smaffic!   Who cares about more traffic?   What we really want is more customers and, true to the old adage, sometimes more is less.   The outcome of SEO is not more traffic.....but more orders and, especially important, more new customers.   Increasing the volume of traffic does not necessary mean you will be increasing the volume of orders and new customers.   In fact, I have actually seen the opposite happen in some cases.   Hordes of less than qualified site visitors are about the same as hordes of people in a retail store.   The masses can mislead the retailer and sometimes their very presence can turn off qualified, targeted new customers.    Think of how such unqualified visitors might pollute your web analytics, skew your product ratings and customer comments and negatively spike your abandon rates and email response rates.   So, you don't want just more visitors in your online store, you want only those qualified to make a purchase and start out on that wonderful customer relationship path we call lifetime value.   Lifetime value.  Yes, that is the yellow brick road of multi-channel marketing that will take us to OZ and our sites should only let in those prospects who have the potential to develop lasting profitable relationships.   Saying "more traffic" is analogous to saying "more mailings" except it is easier because of the lower costs involved.  It is no more valuable.  Wasted, irrelevant traffic is just like wasted irrelevant mailings.   Focus your SEO efforts on those long tail key words and phrases that will bring in just the right customer to buy your product(s) and leave the volumes of traffic for I95!

Welcome back!

Well, as I am sure you can tell by my blog trail, I have taken a hiatus for most of the summer!  Time to get back into giving my loyal followers more ideas about how to make money as multi-channel merchants.

Last week I attend the New England Mail Order Association's (NEMOA)  fall conference.   It was a well attended and upbeat affair.  I delivered the keynote presenation entitled  "Ten balls to keep your eyes on now" along with another session about "How to turn your site into your best sales person".   Both presentations are posted on the Ability Commerce website. (http://www.abilitycommerce.com/online-marketing-education.html)

I was very impressed with the positive mood and enthusiasm at this conference and thought to myself what a difference six months can make in the "economic mood".   Sure things are still very tough but there was an air of excitment about this fall buying season amongst the group.   The economic news has turned....or at least is turning...and I think most multi-channel merchants are planning for a comeback.   

There was also a common belief that our collective future will be determined not by new technology or marketing methods but by the same old thing that has always driven the future....that is our ability to develop truly new and unique products that customers want.  Magic merchants is what we have always been and what we need to be again. 

It was also interesting to note that products and services that cater to living a simpler life seem to be flourishing.  Catagories like affordable clothing, gardening supplies, cooking/entertaining, patio furniture and bird feeders are all doing well.   Product categories that feed "conspicious consumption" or over the top "high ticket" indulences are suffering.   Even the wealthy aren't spending on some categories just because it "looks bad" in these tough times.  Ah yes, the simple life connotes a world where we don't need Hummers and McMasions, where showcase houses give way to smaller homes, where we re-use, recycle and re-claim and where we are conscious of our carbon footprint.   In my view this recession has changed our view of the American dream....for the better.   I marvel in all the new product categories that are currently being born in our world as such consumer changes evolve.

The last point that I heard at the conference that made sense to me is how the competition of multi-channel direct merchants like us (i.e. the retail store) is suffering much more than we are.   We forget sometimes how lucky we are to be flexible enough to reduce costs to meet falling demad in a recession.   Retail stores can not get out from underneath unprofitable locations as fast as we can get out from underneath unprofitable mailings.  They have been reducing inventory (selection!), staff (customer service!) and locations (availability!) as fast as they can.  Such moves feed right into the hands of direct merchants like us and the smart ones amongst us are right there to welcome those disenchanted retail customers. 

Thanks NEMOA!

Managing Costs vs. Sales: Is Your Balance Out of Whack?

OK, I'm a merchant and a marketer. I believe that nothing good happens until somebody creates a quality product or service offer, then markets and sells it well. I confess, I have that bias.

Having said that, I'm constantly astounded by the number of people in our industry who have a cost-only orientation. They believe their sole job is to reduce costs as opposed to increase sales. You know those meetings — the ones that focus only on how you can reduce costs with little or no consideration to value received.   

Thankfully, I also deal with many owners of privately held companies in the market today who are steering their companies to value creation for the customer, even if it costs more. Here are some examples of what I'm talking about:

• Some marketers have shifted their call centers offshore, only to find out that they lose the “cultural connection” with their customers that fosters upsell and cross-sell purchases and customer retention.
• Others focus only on the cost of their catalog printing, overlooking the benefits that an experienced catalog printer can bring them via co-mailing, postage discounts, variable data printing, ink-jetting, co-binding, among other things.
• Still others focus on hiring call-center workers for the lowest possible wages, without really understanding that more experienced and expensive call-center reps can yield 50 percent-plus productivity increases from upselling, cross-selling, error reduction and customer satisfaction. (And as far as your customer is concerned, that call-center rep IS your company.)
• Some have experimented with new technologies like voice over Internet protocol telephone systems to save money, only to find calls dropped or call quality diminished.  
• Lastly, others reduce expenditures on various office supplies and tools that make their payrolls less productive. The cost of new, productivity-boosting technology is often easily justified when labor savings are considered.

Don’t get me wrong: I'm not advocating reckless abandon spending, particularly in these times. On the other hand, this selling environment has us fixated on cost reductions rather than putting more of our energy into how to boost sales.

I bet all of you would like a 10 percent sales increase, as that would alleviate the pressure on a great deal of mandatory cost reductions. Spend 90 percent of your time thinking about how to increase sales and the other 10 percent managing costs. There's more to come on how to increase sales in these difficult times next week.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at TerryJ@AbilityCommerce.com.

Reflections From ACCM

Having attended more than 15 catalog/multichannel conferences (ACCM) over the past two decades, I can easily report that this one will stand out for its low attendance and "doom-and-gloom" conversations.

Yes, these aren't good economic times, but being the forever optimist, I wanted to point out several things that we should all be thinking about.

• Adversity is the mother of invention. Throughout the years, great companies have been born. Others have transformed themselves in the face of seemingly insurmountable odds. It'll happen this time again.
• When the going gets tough … you know. A new generation of crisis, problem-solving managers is being born right now. Can you see it?
• By all reports, mail prospecting is down considerably. But catalogers and other direct marketers are testing, very prudently, new media in many different ways. Those tests will bear fruit.
• It's time for many direct marketers to realize they can't be experts at all things. Now, more than ever, is the time to consider what your core competencies are, and outsource the rest. At ACCM, I heard many conversations about outsourcing e-commerce marketing, call center, fulfillment, HR and a host of other noncritical functions. This is especially true for smaller — less than $50 million in sales — companies.
• While times are tough for direct marketers, they're worse for retailers. At least direct marketers have flexibility. Most retailers have much greater fixed costs to be paid on sales volumes that are down 10 percent, 20 percent or even up to 30 percent. They're shuttering stores, reducing inventory (consumer selection) and laying off service staff. All of this presents an opportunity for the shrewd direct marketer.  
• This too shall pass. Sometimes when you're up to your neck in alligators, it's hard to remember that your original goal was to drain the swamp! We forget that recessionary cycles happen, and that they don't last forever. While car sales are down now, for example, the cars on the road today are wearing out at exactly the same rate as they were last year. The consumer can, will and must eventually return.  
• Down market cycles "cleanse" weak players. You may have an opportunity to pick up the remaining assets of your weak competitors — plan for it. 

I predict that a year from today our collective mood as direct marketers will be very different. Mark your calendars.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at Terryj@abilitycommerce.com

Are You Taking Too Many Orders Online?

I was involved in a discussion recently where the CFO of a catalog company was pleased that his company now took 80 percent of all orders online. He talked about how much money his company was saving, as processing online orders cost about a third of phone orders. I then politely asked him how overall sales were. He said bad and blamed it on the recession. 

I then asked this catalog CFO if he saw a difference between online and phone orders. Was the average order value the same? Were lines per order and units per order similar? He said online buyers were "price shoppers" and naturally spent less, about 30 percent less.

Was the return rate the same? It was slightly higher for online orders. Was the customer lifetime value of online vs. phone customers the same? He said that was hard to measure. Was the retention of online and offline buyers different? He didn't know.

The CFO's answers to these questions were less than certain. His incremental gross product margin, by the way, was approximately 80 percent. I'm sure by now you see what the overbearing financial focus was doing to results. With such high incremental gross product margin, a relatively small, $10 increase in AOV can make a big difference.

I politely suggested the following considerations to this CFO, and I suggest them to you now.

1. Study the AOV, lines per order and units per order differentials between Web and phone orders. If you see a significant differential, test calling Web orderers to confirm, and upsell them.
2. Study customer development of online vs. offline buyers. How soon and how often do they place second orders? What are their respective one-, two- and three-year values?
3. Examine any return rate differentials between online and offline customers.
4. If you sell consumable items, study what percentage of sales on those items is done online vs. offline. (Reorders of consumable products do lend themselves to online orders, more so than nonconsumable products.)
5. If you see value in increasing the percentage of phone orders, start thinking about how to shift more orders to the phone where experienced agents can upsell, cross-sell and deliver the human customer experience to ensure customer retention. (Another cataloger recently told me it dropped the 800 number from the bottom of each catalog page in an effort to drive more orders online — jeesh!)

E-mail me if you have a success story with these issues in your business. I'd like to hear it.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at terryj@abilitycommerce.com.

The More Things Change, the More They Stay the Same

The more I study online marketing, the more I'm struck by the parallels to direct mail. Take this example: The other day in a client meeting we were discussing the different clickthrough rates (response rates) to various online marketing activities (lists).

This particular client was generating Web traffic from search engine marketing (i.e., organic search), pay per click (PPC), direct entry from mailings, and previous customers and links. It was realizing that it had potential to expand each of these traffic sources (prospect lists), and each delivered a higher or lower clickthrough and conversion to order rates.

Furthermore, each source produced a different average order value and brought in new customers at a different rate, each with different one-, two- and three-year values. I couldn't help but think that the discussion, which centered around which activities (lists) to invest in (mail deeper) and how to evaluate the incremental spend on each activity (testing plan), related back to the mailing of catalogs.   

Ultimately, a spreadsheet was built that looked something like this (click on the image at the bottom of the page). Again, it started to look very much like a detailed circulation plan. Here are the five categories/activities that we decided to track:

1. Investments in search engine optimization/search engine marketing result in your site containing more keywords that drive increased search results and higher rankings. This provides lots of opportunity to increase traffic, but also lower conversion to order rates, average order values and lifetime values.
2. Investments in PPC provide slightly better economics than organic search and are more controllable.
3. E-mail … better still.
4. Direct entry - prospect. This is driven by prospect mail.
5. Direct entry - customer. And this is driven by customer mail or repeat buying activity — the best traffic you can get!

Given the brevity of this synopsis, I'm sure it'll generate more questions than answers for most. Questions are good. But take with you this final thought: The proven disciplines of planning circ activities/tests, then isolating and measuring the immediate results, remain relevant to your businesses no matter how new the technologies are.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at TerryJ@AbilityCommerce.com.

The Shifting Landscape of B-to-B

In B-to-B marketing, there are essentially five promotional channels: inbound sales, outbound sales, outside sales, Web and catalog/mail.   

Given today’s marketplace, I thought it might be useful to talk about some of the bigger changes I see happening in each channel.

1. Inbound sales. The days of having “order takers” are long gone. Today's successful companies cross-sell, upsell, retain and add value to each inbound customer experience. Try hiring more talented, sales-oriented (i.e., more expensive) reps for your call center, and measure performance statistics by inbound sales rep.

2. Outbound sales. Form a team of inside sales reps to make outbound calls to retain existing business and penetrate sites with high potential. Start by calling best customers, new sites with high potential and lapsed customers of higher value. As your reps grow and gain more experience, assign them to industry or geographical territories, and specialty product areas. If you have regional distribution centers, consider placing teams of inside sales reps at each location.

3. Outside sales. In heavily populated areas with high concentrations of customers, face-to-face meetings with sales reps can further cement profitable relationships and gain higher value orders and/or contract sales. 

4. Web. B-to-B marketers continue to invest heavily in second-generation, fully integrated e-commerce solutions that are designed to drive search engine optimization and organic new customer acquisition, increase conversion, and retain online shoppers. These new systems also drive dynamic, triggered and promotional e-mails; facilitate social marketing; and fully integrate with the feature-rich order management/enterprise resource planning systems of most companies.

5. Catalog. B-to-B marketers know they must maintain circulation and frequency of contact. However, many mail smaller catalogs, fliers or postcards designed to drive their online buyers back to their PCs. The resulting savings often are invested in new Web technologies. Offline buyers should continue receiving the full-line catalog.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at TerryJ@AbilityCommerce.com.

How to Survive a 20 Percent Drop in Sales: Time to Reset?

I met with an owner of a large multichannel B-to-B direct marketing company this week, and we discussed a common topic these days: How does one survive a 20 percent drop in sales? It's becoming clear to me and many others in the industry that the squeezes many companies are facing today are unprecedented and require significant changes, not just “tinkering.”   

Not all companies are similarly affected. But if yours is, you must be asking yourself, “Is it time to press the reset button?” When I think in these terms, I put everything on the table for discussion. There are no sacred cows. Here are some questions that you might consider asking yourself:

* What's the core strength of your business and people, that only you can do? Product development? Merchandising? Customer service?

* What functions can be done by others better, cheaper and/or faster? Areas to look at include systems, warehousing, HR, circulation and Web marketing.

* What should your new organizational structure look like? How many employees do you really need to perform critical tasks? Many new “virtual” business models are trading millions of dollars with a handful of people.

* Who should your trusted business advisers/partners/suppliers be in each area of your business? If you have vendors who aren't intimate, confidential partners with your business, you're missing out.

* Who's going to lead/drive the business five years from today? Organizational design, effectiveness and human capital development are the keys to change and future growth.

It's often said that “necessity is the mother of invention” and “when the going gets tough, the tough get going.” It's good to remember both those inspirations in these trying times. Reset and reborn businesses are good things, not to be feared but embraced. Ultimately, it'll make you stronger and more prosperous moving forward.

Terence Jukes is president of Ability Commerce, a 140-person firm that designs, builds and runs e-commerce and related marketing programs for catalog companies. He can be reached at TerryJ@AbilityCommerce.com.