Terry Jukes - President of Ability Commerce

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.

Catalogs Go Back to the Future

I'm a longtime cataloger marketer, and I'm intrigued at how the new generation of e-commerce marketers are beginning to sound more and more like circulation managers. I took part in a meeting the other day where performance variables of a particular company’s Web site were discussed. The question on the table: How do we get more out of the Web site? Here's a recap of what was discussed. (Note the similarities to catalog mailing.)

* On increasing site traffic (i.e., circ), a question was posed: How could more qualified visitors be attracted to the site through an optimal combination of organic — driven by site keywords/phrases, site links, optimal navigation, among others — and paid search?

* Then the focus shifted to response rates and conversions. What could be done to get more visitors to place orders from those site pages? Banner ads, promotional offers, cross-sells and upsells were all discussed.

* A discussion ensued about average order value and how it could be improved by driving more units and line items per order.

* Up next was customer retention. Once you have that first order, how do you keep customers coming back to your site for future purchases? Welcome e-mails, parcel inserts and ways of recognizing returning customers were all discussed.

* And lastly came the discussion about how various media — catalogs, print advertising, sales forces, e-mails, Web sites, etc. — could be used together so “1+1=3.”

If you leave out the fact that we were talking about the Web, this was exactly the type of conversation that could've taken place 20 years ago. The point is that the discipline of direct marketing has remained the same for many years. Yes, the medium has changed and the balance of the marketing mix has changed, but the disciplines of circ, response, orders, average order value, customer retention, housefiles and others are still very much the basics of the business.

Truth be told, I was glad to see it. I was also glad to see that in these difficult times, there's at least one smart company that knows that by managing the basics excruciatingly carefully, it'll survive this recession and be in better shape to prosper in the future.

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.

RFMPCP ... What?

I recently met with an experienced B-to-B direct marketer to talk about what his company is doing to “get more with less.” It's a common theme these days. We discussed how many marketers, particularly new e-marketers, weren't paying enough attention to the basics, such as RFM segmentation and a good contact strategy. The discussion then turned to how his company had improved on the tried-and-true RFM tool. Here are some key points I took away from that discussion:

• We all know that RFM is about dividing the customer file into groups of customers based on when they last ordered (recency), how often they order (frequency) and how much they order (monetary). Developing your promotion, offer and contact frequency using these variables is often referred to as “the basics," allthough I still encounter many companies who have yet to adopt this discipline.
• The next “P” stands for product. Essentially, you segment RFM into further groups by what product categories they purchased. What you often see here is that you don’t have customers who buy all categories of your products, but rather groups of customers that buy only one category of products.
• Then in today’s multichannel-integrated world comes “C,” representing the channel your customers prefer to order in. You might try to segment them into online, offline or both to start.
• The last “P” stands for price, which, as you might expect, is an increasingly important variable in this recessionary marketplace. Here, segment your customers based on whether they buy at your full catalog price or whether they wait for promotional offers — or some combination of both.

Of course, such segmentation analysis is just the beginning. What you do next is what counts. Armed with this database intelligence, you'll then want to develop offers for each segment that appeal to its respective characteristics and buying behaviors. The goal is always to obtain another incremental percentage lift in performance.

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 mailto:terrj@abilitycommerce.com.


Is 'Batch and Blast' Your E-Mail Strategy?

Lately I've heard a number of B-to-B catalogers complain about falling e-mail response rates and rising unsubscribe rates. It very quickly comes to light that, for the most part, they're following a “batch and blast” e-mail strategy. They form an offer and send it to their entire e-mail lists. No B-to-B cataloger I've ever met has a completely homogeneous customer file. In fact, it's quite the contrary: They all have groups of customers from different segments who want and need to be treated differently.

When thinking about a comprehensive e-mail program, you must consider several different types of e-mails. When used together, they're relevant and interesting to your customers. Here are a few examples to consider:

• Transactional e-mail advertisements. Most catalogers use transactional e-mails to confirm orders and shipments. As a secondary message, think about creating promotional space in these e-mails for products and services related to the items being purchased, or invite the customer to join a frequent buyer program.
• Abandoned cart e-mails. A gentle reminder of a shopping cart that you're saving for the customer, along with an offer to complete the transaction, can go a long way to recouping lost sales.
• E-mails for abandoned/inactive wish lists and shopping lists. If your site offers shopping lists, consider using the items on that list to create private sale e-mails, especially 24-hour sales for slow days.
• Private sale e-mails. Nothing attracts a shopper like an e-mail offer specifically designed for him or her. Areas to target include items previously purchased, items viewed, new items or clearance items. The trick is selecting relevant items based on the individual customer's profile.

Also, when developing e-mail offers, make sure your copy recognizes customers that order online vs. those who prefer to order by phone. Develop specific landing pages that make it very easy to order (i.e., as few clicks as possible) the offer being advertised.

Hopefully these ideas will get you moving away from a one-offer-fits-all strategy and toward more targeted, relevant offers that boost response rates and reduce the number of unsubscribes.

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.

One-to-One Marketing Is Here … and Has Been for Some Time

For years our industry has talked about true one-to-one marketing. It's the end result of all our database marketing expertise. Well, some B-to-B catalogers are still talking and not doing, making me wonder how they continue to survive.

Here are some of the better examples of one-to-one marketing I've seen recently:

• A catalog that uses variable data printing on the front cover to showcase related products to prior purchases.
• A Web site that recognizes new, returning and/or registered (i.e., signed in) visitors and presents them with custom Web pages reflecting past site visits, customer profiles and/or product purchases.
• An inbound call center that uses caller ID to match incoming calls to customer accounts in order to customize upsell and cross-sell offers.
• Customer service reps who use exception reports to alert shoppers to possible duplicate orders, duplicate payments or other potential transactional errors.
• Outbound transactional sales reps who are assigned to customer segments, demographic profiles or specific customers who understand the customer’s business enough to make appropriate product and solution recommendations.

The bottom line is that this technology has existed for some time, yet so many B-to-B catalogers continue to treat all customers in the same fashion, with little regard to profiles, shopping behaviors, past purchases or stated interests. Then those same businesses often wonder why their response rates are falling.  

So, where does your business stand when it comes to one-to-one marketing effectiveness?

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.