September 2010 – Feature: Engaging the U.S. Hispanic Consumer

The U.S. Hispanic Marketplace Breaks Records in Growth, Buying Power and Success in DRTV.

BY JACQUELINE RENFROW

U.S. Hispanic consumers are rapidly becoming one of the most important segments in direct marketing. In fact, with Hispanics constituting 15.4 percent of the total population in the United States–more than 46 million people–the industry can hardly afford to ignore them. This second largest ethnic group not only continues to grow, but so does its spending power. Despite myths, credit card use in this population is high–90 percent of U.S. Hispanics who purchase through DRTV have access to credit cards, and 46 percent use credit and 26 percent use debit when making a purchase. The collective buying power of the segment is expected to reach $1.2 trillion in 2010, up from $862 million in 2007.

“Our client case studies have shown that we experience an average of three times the call conversions when comparing the Spanish to the English version of a show,” says Eitan Cohen, president of Media Stream Direct, a Sherman Oaks, Calif.-based media buying company with more than a decade of experience in the U.S. Hispanic marketplace.

Beyond growth and spending power, marketers are finding renewed success in categories such as beauty, ingestibles, hardware, financial services and kitchenware thanks to U.S. Hispanics. And with Spanish-language advertisements drawing strength from DRTV, marketers are expanding campaigns across growing channels such as mobile and online social communities.

Growing Market, Growing Power
The most important reasons to be in the U.S. Hispanic market space are twofold: the size and the spending power.

“It is the demographic growth of the market that is driving the growth of DRTV,” says Marcelino Miyares, director of Mercury en Espanol, a division of Mercury Media in Santa Monica, Calif. “In fact, it is the population growth of the Hispanic market that is driving the population growth of much of the country. It is not necessarily that Hispanics are spending more, but rather that more Hispanics are spending.”

Along with population increase, there is a new comfort with using credit cards. In turn, marketers have seen an increase in direct-response sales via long-form television commercials. Not to mention, the demographic is more likely to purchase via direct response. An estimated 11 percent of U.S. consumers will make a purchase through DR, but that number is as high as 15 percent among the Hispanic population.

Purchasing Trends
According to Cohen, products that tend to sell the best in DRTV correlate with the interests of the Hispanic demographic such as beauty, fitness, health and housewares.

“We have been able to take English infomercials in these categories that are either successful or, in some cases, only marginally successful, and create tremendous hits with a Spanish creative,” says Cohen. Media Stream Direct recently brought the Ab Rocket infomercial to the U.S. Hispanic market. Although the product was successful over the past three years in the English version, the introduction of the Spanish version created a resurgence in response.

Miyares agrees that ingestibles, housewares and beauty products are the workhorses of U.S. Hispanic DRTV, along with music and video, diet and exercise, hardware, and financial services. In addition, language learning services and telecommunications continue to be stronger in the U.S. Hispanic marketplace versus the general market.

Miyares also believes that U.S. Hispanic DRTV has followed the general DRTV trend to push to retail. “What makes this convergent with Hispanic marketing is that Hispanic shoppers over-index at these types of retailers–Walmart, Kmart, Bed Bath and Beyond, Anna’s Linens, etc.,” says Miyares.

“I forecast that over the next 18 months, we will see a proliferation of products in the two extremes–$19.95 and $200-$400 range. The lower-priced products have been difficult to make work given the costs of limited media inventory. This problem is solving itself with the addition of more cable channels. And the higher priced products have simply been inaccessible to cash-oriented customers, but credit card penetration has reached a critical mass,” Miyares adds.

Today’s Challenges in a Unique Space

Though very lucrative, experts agree that marketers, media buyers and call centers all need to be aware of the nuances of the U.S. Hispanic market and brace for a learning curve when starting a campaign. One of the biggest challenges when marketing a product to Hispanics in the U.S. is translation into Spanish. The key, says Cohen, is not to translate but to “transcreate.” “When speaking to the Hispanic market, it is essential to understand that there are different expressions and nuances in the phrasing that simple voice dub-over cannot communicate,” says Cohen. “Taking the time to properly re-phrase the intention of each statement into appropriate Spanish dialect immediately ingratiates the viewer to the brand and the show. We’ve had several marketers come to us after working with other agencies, who simply had the show hastily dubbed over and could not explain why the campaign did not work.”

Another challenge to the U.S. Hispanic market is client patience. “The problem is that few clients truly commit,” says Miyares. “While in the general market they may test offers, media mixes and telemarketing scripts until a campaign works, the Hispanic market is more like one or two strikes and you are out.” He advises clients–who can eventually imagine their product on the shelves of a Walmart–to stick with a campaign.

Yet another challenge marketers face is properly budgeting Hispanic campaigns versus general market campaigns. In markets that are predominantly Hispanic, Spanish-language media can substantially lift retail sales and increase overall campaign performance. Interestingly, Denira Borrero, vice president of operations for Omni Direct Inc. in Miami Beach, Fla., says that English-language sales lift when running a Spanish-language campaign simultaneously. This is mostly due to the fact that U.S. Hispanics consume media and use the Internet in both languages. So the message is reinforced in their native language, but in many cases, orders are processed through English-language channels. Omni Direct was established in 1999 as a company focused on the potential of Hispanics as a U.S., not foreign, market.

Kathi Moore, CEO and president of Engagem3nt in Newport Beach, Calif., believes the biggest challenge in this market is breaking down the myths that surround it. One myth is a belief that the demographic doesn’t have credit cards, when 84 percent of Hispanic DR purchases are made via credit. Also, that the market is too small to be worthwhile. And finally, the myth that marketers don’t need to advertise in Spanish because Hispanics will catch the English campaign. However, 30 percent of the market watches only Spanish-language television and even those who watch both respect advertisements in their native language.

Callzilla, a Miami-based call center specializing in the U.S. Hispanic space, deals with the same issues as a call center for the general market–converting calls to sales and now, more than ever, third-party upsells. What’s different about a Hispanic-focused call center is how the sales agents are trained. It’s about “training, educating, retraining and monitoring ">the agents and making sure they adhere to best practices that the industry mandates,” says Neal Topf, president of Callzilla. He says there are three main challenges for call centers. First, reaching the expanding demographic. Second, call centers must be ready for an increase in credit and debit transactions. And finally, the economy has put pressure on marketers to capitalize on a new segment.

Channel Changing
DRTV continues to be the strongest media channel for both general and U.S. Hispanic DR. Cable and satellite televisions have increased in popularity over the past two years, both in channel options and distribution, even though broadcast television has taken a hit. And interactive and digital TV activity among the U.S. Hispanic market will increase over the next 18 to 24 months, according to Miyares.

One of Omni Direct’s recent successes was with the campaign for “Sobre de Oro,” marketed in non-Hispanic markets as “My Gold Envelope,” by Money 4 Gold. The campaign ran on TV, radio, online and print channels and has expanded internationally. Money 4 Gold believed its product was under-tapped in the U.S. Hispanic market and so it worked with Omni Direct to develop creative production and identify Hispanic celebrity endorsements. The campaign built a trusted name through a customized Hispanic message. Even when the category suffered bad press due to other industry players, “Sobre de Oro” withstood the hit because of its brand recognition among Hispanics.

While the buying principles for time in the U.S. Hispanic market are the same as with the general market, the universe is limited. There are far fewer cable networks, particularly in the long-form space, and even fewer in broadcast networks. This creates a high-demand, low-supply situation, according to Miyares. As more marketers begin focusing on the Hispanic market, demand for long-form media time will rise and subsequently, so will rates.

Online is increasing faster than any other channel. Since 2008, the U.S. Hispanic online population has grown faster than the non-Hispanic population in terms of visitors and time spent and pages consumed. Just two years ago, most Hispanic campaigns did not have an e-commerce website. Now, about 25 percent of U.S. Hispanic campaign orders come through the Internet. “Based on our own research and national statistics, we expect Internet usage to continue to grow in this direction,” says Borrero. “Also, because Hispanics are significantly over-indexed when it comes to the use of mobile technology, we expect to see growth in marketing through the mobile channel, even within the very short term.”

Moore says that mobile is definitely a growing segment of the demographic. Everyone is trying to monetize the channel’s value and it’s already an effective means to get outbound messages, special offers, reminders, etc., to customers. And U.S. Hispanics are conducting more business transactions via mobile than the general market.

Moore also says that grassroots event marketing is a strong channel in the U.S. Hispanic demographic. The group tends to have more family oriented outdoor events and attend large festivals in population-dense cities such as New York, Miami, San Diego and Los Angeles. It benefits a marketer to spend money and have a booth at these events.

According to Topf, there is an emerging trend in using online social media in the direct-to-customer acquisition space. Although at the moment it’s not being used much in this way, users of social media and other web applications (either on the computer or by phone) will start to see a correlation between purchases and this channel.

No matter what the channel, more and more marketers are going to arrive in the U.S. Hispanic space in the coming year. The question, according to Topf, is not “Do I have to be there [the U.S. Hispanic market], but how do I get there?”

Jacqueline Renfrow is a freelance writer, who has been writing about the direct marketing industry for the past few years.

September 2010 – Cover Story: The Father of Multichannel Retail

GVG Capital Group Chairman and CEO Love Goel Is Renowned For His Ability To Turn Consumer Brands and Retailers Into Thriving Businesses.

BY VITISIA PAYNICH

It’s no secret that general advertisers and brand marketers have throughout the years looked sideways at the direct response industry. Yet while those on Madison Avenue began tightening their belts during the recession by slashing advertising budgets, direct marketers forged ahead by delivering solid, accountable advertising via television, radio and the Internet. Love Goel, chairman and CEO of GVG Capital Group in Minnetonka, Minn., is among those who believe that direct marketers know how to effectively reach consumers using multiple channels.

Lauded as “the Father of Multichannel Retail,” Goel built Macy’s and Fingerhut into two of the top three multichannel retailers during his tenure, acquired more multichannel companies than any other private equity investor, created $30 billion in shareholder value, and advised 50 of the top 100 multichannel retailers. On Sept. 22, he will deliver the keynote address at ERA’s D2C Convention in Las Vegas.

“I am honored to talk to the leaders in the direct response and electronic retailing industry. It is a group that I have admired for a long time,” says Goel. “Today, when we literally have seconds to ‘hook’ a customer before they tune us out of their extremely busy lives, the leaders in this retail channel excel at figuring out the hook, constructing the right message and delivering it effectively. Retail leaders from all channels would benefit from learning those skills that are core to this industry.”

Electronic Retailer spoke one-on-one with Goel to learn about the things that have inspired him throughout his career and what he believes are the key elements to creating a true multichannel business.

Electronic Retailer: You achieved more during your 20s than most people do throughout their entire careers. What do you believe has been the driving force behind your early successes?

Love Goel: There are three key factors that are behind any business success, which were true for me. We had fantastic teams, pursuing a compelling vision buffeted by powerful macro trends, and we were lucky more often than not. Personally, for me, beyond those three factors was the active coaching and guidance of mentors who gave me the opportunity to take on big challenges, to fail, to learn and to grow. I cannot speak highly enough about the mentors who took chances on me.

When I coach emerging leaders, there are two key pieces of advice that I give them. First, find good mentors. Second, do not worry about the money; do something you are passionate about. If you are passionate about it, you are more likely to give it the effort it will take to excel. Once you are the best at what you do, the money will take care of itself.

ER: Did you see yourself as a visionary and if so, what challenges did you encounter when you shared that vision with others?

Goel: It is a key part of the role of any leader to define “victory” or the long-term success, and the “path” or how we get there. The biggest challenge is that you have to communicate it continuously and consistently so that all your constituents get it, and often enough that as you bring new people on board–employees, vendors, consultants–they have a chance to understand and embrace what it is you are trying to build.

ER: You played a key role in transforming two iconic American retailers: Sears and Macy’s. Given that they both had long and well-established histories as traditional bricks-and-mortar businesses, what obstacles did you face in trying to turn them around and make their brands more relevant to today’s consumers?

Goel: I was fortunate to be on great teams that had a positive impact on these companies through their evolution. As in any established and successful culture, I think it is important to celebrate key elements of your brand and heritage that resonate in the marketplace while updating the way you do certain things. In the case of Sears, we really moved into soft-lines in a big way, which made us much more relevant to the female customer and dramatically improved our sales, gross margins and profitability. At Federated (or Macy’s as it is now known), we moved to a much more multichannel approach of being available to the customer 24/7–whenever she was ready to shop. In both cases and other transformations that I have been involved in, the most challenging part is not about figuring out what needs to be done, but rather getting people on board. You do that by sequencing activities in a way that allows the team to earn small victories, inspires confidence in them about the path forward, and then hope that the momentum will take everyone all the way there.

ER: You were the only person to build three e-commerce start-ups into $1 billion+ businesses before you were 30. Tell us about those ventures.

Goel: The first two businesses were created inside the crucible of a large Fortune company (Fingerhut and then Macy’s), and the last one was a venture capital funded Silicon Valley business. The first one was the nation’s largest third-party e-commerce services company at the time, FBS, offering fulfillment, call center, marketing and merchandising services, which helped put dozens of clients like Walmart, Levi’s, Pier 1, 1-800 Flowers, USSB/DirecTV and several other companies on the Internet. The second one, Federated Direct, was the world’s largest bricks-and-clicks retailer at the time, which included over 20 e-commerce properties that comprise three of the top 100 Internet retailers–including the world’s largest retail closeout site, the first custom jewelry site, the first online flower site, the first bricks-and-clicks wedding registry, the largest birthday club and the largest general merchandise site. The last business, Personify, was the world’s largest customer profiling platform (500,000+ data points for over 100 million customers) and leading analytics provider of clickstream data to dozens of top retailers like William Sonoma, J. Crew and LL Bean.

ER: What’s more satisfying: building a company from the ground up or going into an existing company and completely turning it around?

Goel: I think they can both be equally satisfying and rewarding. The best part about any such experience is when you accomplish something that exceeds the expectations of everyone on the team and outside. It is a testament to the power of what you are trying to accomplish and the quality of teamwork that made it possible. The interesting thing is it is also the most fun–when you are in the midst of one of these missions, you can feel the palpable excitement and enthusiasm that everyone on the team has.

ER: Can you tell us more about GVG Capital Group?

Goel: At GVG Capital Group, we are passionately committed to building market leaders in the multichannel retail and consumer sector. We bring deep operating experience, industry insights, a powerful network and capital to help management teams grow their companies.

We are unique in the private equity sector for three reasons. First, we are the only firm focused exclusively on the multichannel retail and consumer sector. Second, we are led by seasoned operating executives who helped build best-in-class companies like Macy’s, Home Depot, Levi’s and Apple–so we see our role as helping companies win in the marketplace, not financial engineering. Third, because of our commitment to helping leaders and companies in our sector, we advise and serve on the boards of companies beyond our investment portfolio.

ER: Of course, you’re no stranger to direct marketing or live shopping. In fact, you’ve advised QVC, ShopNBC and a number of our members. Based on that experience, what can brand marketers and traditional retailers learn from this industry?

Goel: There are three core strengths that all retailers and brand marketers can learn from this industry. First, as I said at the outset, this industry is probably the most skilled at distilling and communicating the “hook” to customers. Second, it is an extremely data-driven business, which leads to real-time adjustments in message, price and offer. Third, losses are minimized by a culture of testing in the marketplace with real paying customers, not just focus groups. If we could all bring those disciplines to our respective retail channels and formats, we would be a lot more effective and profitable.

ER: What does it mean to be truly multichannel?

Goel: This answer requires some context because being multichannel is about more than just having a website, store, catalog, TV or mobile presence. For the first time in human history, consumers have better information about products, prices and promotions–and consequently more power–than purveyors of goods and services; especially at the point and time of sale. This dynamic has created a whole new set of consumer behaviors, which retailers ignore at their own peril. But one of the key shifts in consumer behavior is that more than two out of three customers research things online before buying offline and vice versa.

The two key elements of being truly multichannel are: first, to offer customers a seamless shopping experience whether it is research, buying or service across all channels; and second, to leverage the structural and economic advantages of a channel to enhance both the customer experience and profitability. For example, in SKU-intensive categories like apparel, footwear and domestics, it could mean placing Internet kiosks in the aisles to offer customers many more styles, colors and sizes to complement the in-store offering–which can improve same-store sales dramatically. Or, for TV and catalog marketing programs, it could mean taking orders online rather than over the phone, reducing order processing costs dramatically.

ER: Many direct marketers are successfully utilizing multiple channels such as television, radio and the Internet, while other direct marketers might be hesitant to engage in other channels like social media and mobile. How can marketers take their business to the next level by integrating these other emerging channels?

Goel: I think it all starts with the customer. How do customers prefer to shop the products and services you sell? That should serve as a guide to the level of investment and capabilities that you add across all the channels. I have seen too many companies waste a lot of money by chasing the latest fad–whether it be mobile or social media–without thinking it through, or other companies like Blockbuster and Sam Goody not do enough when it was clear that their business models were outdated.

ER: Do you believe technology has changed the profile of the average consumer?

Goel: Absolutely. It has enabled consumers with easy/free availability of information (prices, promotions) and easy access to other vendors (one click away) that has dramatically changed the way they buy. This means that the average retailer has to be that much better–it is much more difficult to get away with a shoddy retail concept like you could 10-15 years ago. You better have a clear “hook,” something compelling to offer–unique product, lower prices, better services–you get the idea.

ER: Today, marketers, retailers and e-tailers are armed with web tools (such as web analytics and behavioral analysis) to understand consumer-buying habits and really get into their minds. Do you believe most companies are utilizing that information to its full potential?

Goel: You have stumbled upon a key gap in the capability of most companies today. This is a historical challenge and opportunity. For example, when I was at Fingerhut, we had 3,000 data points on 32 million customers, and 1,500 data points on 100 million households–the availability of this data and our direct marketing capabilities made us the most profitable in our industry. We were able to do amazing things like customize each and every one of our 600 million customer interactions (mailings) each year, or perform 5-10 percent better upsell than anyone else in the industry. But, even at that time, it always surprised me that as a small $2 billion player we had the nation’s largest customer profile database. Retailers have been slow to embrace this thinking. Most of them use web tools to track basic things like conversion rate. Very few, almost none, of them really excel at utilizing the vast quantities of behavioral data available to them in tailoring their merchandising, marketing and customer service programs either for competitive advantage or greater profitability. Also, most retailers really do not know how their various channels are performing–their matchback strategies and rule of thumb cost allocations typically driven by political infighting or legacy thinking obfuscate the true efficacy of their marketing dollars. This is probably the area most rife for improvement, apart from leadership development, in the multichannel retail world.

ER: Why do you believe some direct marketers are hesitant to try mobile? Will there eventually be a sea change in this area?

Goel: I think it is challenging to offer a full, rich offering like you do on the Internet on a mobile form factor. It sounds similar to what people said about the Internet 15 years ago compared to the store or catalog. That said, direct marketers will have to figure out for their respective categories and price the right business model(s) and customer experience that works–is mobile a price discovery and promotion channel, is it an edited assortment channel, is it a social media channel or some combination of all of the above?

ER: What changes do you see occurring in the social media space?

Goel: Social media, in my mind, has two primary roles: first, to help you manage your social relationships in an easier and more meaningful way; and second, to use your social relationships to make your life better from finding a date to a job to a car, to the hottest little black dress. I think we are in the very early days where there is a lot of noise and confusion. As the dust settles over the next few years, real businesses will emerge that make the world a better place.

ER: What other trends in technology do you believe will have a dramatic impact on retailers and marketers in the long run?

Goel: I believe we are at the intersection of four powerful trends that will dramatically alter the ways people live their lives and how retailers and marketers will have to sell: 1) cloud-based data and services (think mobile apps); 2) ubiquitous, high-speed, broadband wireless connectivity; 3) always on, always connected smart devices (think smart phones, tablets, etc.); and 4) products, services and information on the Internet.

ER: What’s the best piece of advice you could offer marketers and retailers when it comes to succeeding in today’s multichannel world?

Goel: Pay attention to your customer. Deep, meaningful customer relationships are likely to be the sustainable competitive advantage in a world of channel fatigue, product and brand commoditization, advertising overload and attention fragmentation.

August 2010 – Channel Crossing: Legal

Senate Takes Aim at ‘Post-Transaction’ Marketers

On May 19, Senator Jay Rockefeller (D-W. Va.), chairman of the Senate Committee on Commerce, Science and Transportation, introduced legislation intended to end aggressive sales practices by companies involved in post-transaction offers. In fact, the reach of the bill goes far beyond the practices of post-transaction marketers and their partners. The bill, if passed into law in its current form, will completely change the face of continuity marketing in the United States.

Known as the “Restore Online Shoppers’ Confidence Act,” the bill grew out of a year-long investigation by the Senate Commerce Committee staff in response to thousands of complaints about the tactics used by a handful of companies that affiliated themselves with prominent travel, entertainment and shopping websites in order to offer subscriptions to membership programs via “interstitial” or “post-transaction” offers. These offers would be presented to consumers before the order confirmation page when a consumer completed an e-commerce transaction. After clicking on a button to accept an offer such as “$10 off this purchase,” consumers were enrolled in the membership program and their payment information was passed by the e-commerce site, where the initial purchase was made to one of the three companies managing the membership programs. If the consumer did not act to cancel his or her membership before a 30-day trial period expired, that individual’s payment information was used to charge the membership program’s recurring monthly fee until the consumer called to cancel the membership.

This business model, according to the Senate committee’s investigative staff, led to consumer confusion, a high number of credit card charge backs and general erosion in consumers’ confidence in Internet commerce, an increasingly important part of the American economy.

Taking the Transaction Out of Post-Transaction
In an effort to right the perceived wrongs of post-transaction offers, Rockefeller and the co-sponsors of the bill (Senators Mark Pryor (D-Ark.), Bill Nelson (D-Fla.), Amy Klobuchar (D-Minn.), Claire McCaskill (D-Mo.) and George LeMieux (R-Fla.) seek to make it illegal for e-commerce sites to transfer, via “data pass,” a consumer’s payment information to a third-party post-transaction marketer for the purpose of facilitating an Internet-based sale.

In addition, the bill would make it illegal for any post-transaction marketer to use a consumer’s payment information to close a sale without essentially beginning a completely new transaction. The bill outlines steps that post-transaction marketers must take before closing a sale, including 1) clearly disclosing the terms of the special offer; 2) disclosing that the post-transaction marketer is not affiliated with the website from which the consumer intended to make a purchase; and 3) clearly outlining the full costs of the offer.

In addition, post-transaction marketers may not charge a consumer without first receiving their express consent, signified by the consumer providing 1) the full account number for the account to be charged; 2) the customer’s name, address and a means of contact; and 3) an additional affirmative step such as clicking a box giving consent to be charged the disclosed amount.

It should be obvious to any marketer that the proposed requirements put in place a number of high barriers that might well destroy the commercial viability of post-transaction marketing.

Photograph by Jupiterimages/Comstock/Thinkstock

The Bill’s Impact on Continuity Marketers
The scope of the bill is not limited to post-transaction marketers and their e-commerce affiliates. It also takes aim at common continuity, or negative option, marketing practices, and proposes a new set of disclosure rules that would apply to all continuity products sold via the Internet.

The bill would ban all use of the negative option in e-commerce transactions unless marketers disclose the name of the company making the offer, a description of the goods or services and the cost of the product or service. Marketers would also be required to disclose the length of the trial offer, when billing will start, the billing interval and the steps the consumer must make to avoid the charge.

In addition, the marketer must provide the consumer with Internet and e-mail-based methods to cancel the recurring charges.

The original version of the bill included a measure that would require marketers to notify consumers, via e-mail, of a coming charge no less than 10 days before the charge would be made. It also required that the e-mail notify consumers that a charge would be made to their card, and that the e-mail includes a description of the good or service, the amount the customer would be charged and instructions for stopping the recurring charges.

When it was released in May, the 10-day notification language in the bill sent shockwaves through the direct marketing industry. However, thanks in large part to the efforts of a coalition of direct marketers and associations representing the direct marketing industry, the language mandating the 10-day notification e-mail had been removed from a working version of the bill that was released on June 6.

Although the bill has gone through the markup process and been passed out of committee, the Senate’s crowded agenda over the next few months makes it unlikely that the bill will reach the Senate floor before the midterm elections.

However, recent changes to credit card companies’ payment processor agreements have essentially enacted many of the bill’s measures designed to increase affirmative actions by consumers when they accept post-transaction marketing offers.

Going forward, marketers may want to examine their practices, as well as those of their partners to ensure compliance with the new terms of their payment processor agreements and the bill’s other measures when and if the Rockefeller bill is passed into law.

Jeffrey D. Knowles is a partner at Venable LLP and chair of the advertising, marketing and new media group. Contact Knowles at (202) 344-4860 or at jdknowles@venable.com. Stuart P. Ingis is also a partner at the Washington, D.C.-based firm. Contact Ingis at (202) 344-4613 or at singis@venable.com.

July 2010 – Channel Crossing: Payment Processing

Getting E-tailers Approved for a Merchant Account

Your payment solution is as important as determining your product’s price point and advertising format. I am using the term “payment” because it’s no longer just your Visa and MasterCard processing that is important, although they remain the heavyweights. Dependent upon your product and customer base, ACH, Discover, American Express and potentially Pay Pal and Bill Me Later are payment alternatives you may consider. Additionally, it is critical to fully understand the options and restrictions on your payment accounts so you do not spend time during your most responsive period discussing how much you are able to process and whether your funds might be held. While certainly there are additional nuances that determine an e-tailer’s ability to obtain a payment account, the primary areas for concern for merchant processors are: i) Product, ii) Compliance and iii) Credit.

Knowing the Risks
The product determines the price range, contingent (or forward) liability and relative risk to the payment processor. All else being equal, a smaller ticket translates into less payment risk. This makes sense as each of us are more concerned about a $499 item on our bank statement than we are a $49 item and consequently, we are more apt to charge back the higher ticketed item. Moreover, we will expect more from the higher ticketed item. If I purchased a $499 juicer, I am expecting far more from that product than I am from a lesser-priced utility knife. I am more inclined to return or charge back the higher ticketed juicer if I didn’t receive my full-perceived value while I am willing to let the knife slide on a couple of expectations because I do not have nearly as much invested in it.

Similarly, products that have a contingent liability or delayed delivery risk because of extended warranties or extended return periods pose a greater risk to you and your merchant processor. If, for example, I am selling a laptop computer with a three-year warranty or a weight-loss formula that has a six-month return policy, I am exposing myself and my merchant processor to a greater risk because the chargeback rules allow for a chargeback time frame of 120+ days beyond the date the product could have been returned (or put under warranty). As a result, the longer the warranty or return policy, the greater the liability. From a payment processor’s stand point, the most risky products are travel certificates that may be utilized for up to XX months in the future or a coaching or multi-level initiation fee that allows the consumer to be a wholesaler and receive coaching, benefits or income opportunities in perpetuity.

The last product risk factor is the relative satisfaction rate. If my product fails to live up to my advertising because either the product is inferior or is damaged during shipment or arrives beyond expected time frames, I am more likely to see returns. Greater returns indicate greater risk for the payment processor. Consequently, to the extent that your product meets your advertisements and fulfillment time frames and/or the benefits are easily measurable, then you lessen the risk for your payment processor. Products, on the other hand, requiring action in concert with your product (such as moderate exercise) lead to more dissatisfied customers and higher return rates.

General Guidelines

Compliance risk is a hot button among payment processors today. The FTC is applying pressure on the Card Networks, which are, in turn, applying pressure on payment processors who exact a price from the e-tailer. Unfortunately, e-tailers can not take it out on the end consumer and many e-tailers and payment processors have paid significant fines because of non-compliance with rules that were only half enforced until the first of the year. Since then, however, nearly all payment processors have been enforcing them. The good news is there are some general guidelines e-tailers can follow to ensure compliance.

Additionally, it is easier to obtain a payment account if your site is complete (or near completion). While you can use a mock-up of your website for review and approval, it is easier for the payment processor to review the actual site. The general rules that apply to all sites include:

• Listing the denomination of the currency in which the charge will appear;
• Clearly indicating the merchant’s DBA name and how the charge will appear on the consumer’s statement and in compliance with the Card Network’s descriptor rules;
• Clearly stating the return policy, (even if returns are not allowed);
• No Cross sales to other businesses where the credit card number is provided to the other business; and
• At all times, maintaining compliance with the Payment Card Industry (PCI) Data Security Standards (DSS).

Moreover, the Card Networks are taking a particular interest in continuity accounts. Any e-tailer advertising in this segment should also:

• Place the terms and conditions adjacent to the submit or ‘buy’ button;
• Place the terms and conditions in 12-point easy to read font;
• Clearly state that the consumer is enrolling into a continuity, if applicable;
• Require the consumer to check the terms and conditions boxes before proceeding;
• Maintain that any trial period be for at least 10 business days;
• Ensure billing cycles are clear and at least 30 days apart for the core product;
• Refrain from the term ‘free’ if the consumer has any product payments;
• Ensure all claims are truthful and substantiated by clinical research, if warranted; and
• Refrain from placing celebrities on the site unless their legal consent for endorsement has been obtained.

While the above are not all inclusive, it is a general guideline that will expedite the review and approval of your site.

The credit risk is the most straightforward. Payment processors seek to ensure that the business is financially able to absorb any chargebacks and returns. The amount of expected returns and chargebacks can be determined from statements for an existing merchant and are estimated for new merchants. Ideally, a payment processor obtains and reviews two years income statements, balance statements and statement of cash flows. Tax returns are ideal as they assist the payment processor in validating the financial statements and in demonstrating the amount of taxes paid. Because many eTailers do not have two years’ history, a forecast can be helpful, especially for start up businesses.

Regardless of whether your business is new or existing, you will likely need to sign a personal guarantee. The personal guarantee is a secondary source of repayment for the payment processor should the e-tailer not be able to pay their credits or returns. To properly evaluate the credit worthiness of the personal guarantor, a personal credit report is reviewed.

Should either the financial statements of the business or the personal guarantor’s credit be insufficient for approval, the payment processor may ask for either i) a second guarantor, ii) a rolling reserve or iii) a letter of credit for the benefit of the payment processor. Alternatively, sometimes the payment processor will approve the account, but at a lower processing limit than requested. While none of these solutions may be ideal, they may facilitate your payment processing account and allow you to proceed with your program.

My hope is now that you have a general understanding of how payment providers evaluate e-tailers, you can best position yourself for approval. If you are pitching a product that is inherently more difficult to get approved, then get your payment processing established well before your launch date and ensure your marketing is in compliance. Recognize your personal credit report may impact your approval. By working with a professional that has access to multiple payment processors you can maximize your ability to match your account with the payment processor that is optimal for you. Finally, e-tailing is a unique business. Be sure to work with a payment provider that specializes in your business type to save you time and allow you to achieve the most efficient cost for processing. Your payment account is critical to your business. Understand what payment processors expect from you and you will have one less obstacle in your business.

Ken Musante is president of Direct Response Payments in Eureka, Calif. Contact Musante at (877) 476-0570 or at kenm@eurekapayments.com.

July 2010 – Channel Crossing: Legal

What Is Trade Dress Law?

In the April issue, I wrote a column, “Copyright Litigation Over TV Commercials and Infomercials,” about the legal protections provided by the United States Copyright Act for creative works such as DRTV spots and infomercials. I explained how, when one is faced with a knockoff but regrettably one lacks “hard IP” protection; i.e., a patent, one nevertheless, can win in court. What’s more, in the right case, one can win millions of dollars in damages by using copyright law, the patent law’s lesser known, but not to be underestimated, “soft IP” step-sibling. Too many people in our industry focus on patents, or on the lack thereof, when faced with a competitor with a knockoff, and don’t think enough about their “soft IP” rights, such as their copyrights.

In this column, I will address another equally powerful non-patent remedy for dealing with a knockoff: trade dress law. In the absence of a patent, trademark or copyright that has been infringed, a knockoff lawsuit likely is going to invoke “trade dress.” But what exactly is that?

Trade Dress Law Basics
The best way to understand trade dress law is to first understand trademark law. Everyone is familiar with trademarks. We all recognize brand names like Snuggie, Proactiv, Extenze, etc. If a name is distinctive because it’s unique or different from others–or, if it isn’t inherently distinctive but it has had enough advertising behind it to develop “acquired distinctiveness,” also known as “secondary meaning”–it is protectable, because it means something to the consumer. It is an identifier of source. It is a brand. The less inherently distinctive a mark is, the harder it is, in litigation, to persuade a judge that it is protectable. If it is descriptive, for instance, the judge will require proof that it has been used enough in commerce, for instance, through significant advertising on television, to achieve “secondary meaning.”

After one has established the basic protectability of one’s trademark, then one has to prove that the junior user–the second-comer who is the alleged infringer–is using a mark that is so similar to the senior one that it is “likely to cause confusion” among the consumers the parties are targeting with their ad campaigns. Judges look at many factors to decide whether there is such a likelihood of confusion, such as: (a) whether there has been any actual confusion; and (b) the similarity between the appearance, sound and meaning of the two marks, in the specific manner in which those marks are usually seen or heard by the consumer, e.g., on TV, online, etc. (Context matters. Thus, even in the case of similar marks if there is something else about the junior user’s presentation of its product that would eliminate or greatly reduce the risk of confusion, then it can be an uphill battle to prove infringement. Every case is fact-specific.)

The same basic procedure, explained above, is followed in a trade dress case. In a trade dress case, you are required to first, prove the basic protectability of the alleged trade dress; and second, that there is a likelihood of confusion.

So what is protectable as trade dress? Trade dress can be anything that’s used in the “dressing up” of one’s product, to make it attractive or to help in making the sale. It can be the packaging of the product, it can be the product’s color scheme, and in some cases, it can even be the product’s own unique design features or configuration.

Are there limitations? Yes. For one thing, there is no protectable trade dress right in anything that is functional. If it’s a feature of your claimed trade dress and it’s found to be functional, as opposed to artistic, it won’t count as trade dress. Second, if the trade dress you’re claiming is the design or configuration of the product itself–as opposed to some aspect of its “dressing up”–then, just as you would have to do with a non-distinctive descriptive mark in a trademark case, you must prove that your trade dress has obtained “secondary meaning” among the consumers.

The same is true if it’s the color or color scheme that you’re claiming as your trade dress. You’ll need to prove “secondary meaning.”

Thus, if the trade dress you’re claiming is your product’s design itself, you can’t win just by saying the design is novel or unique; that’s what a patent is for. Rather, you’ll need to prove, first, that the design is non-functional; and second, that the public associates it with one source, so it’s operating like a trademark would operate. That mental association is secondary meaning.

One thing to be aware of, though, if your claimed trade dress is your product’s configuration or design, is that the U.S. Supreme Court has said that those things are almost never perceived by consumers as an identifier of source, the way a trademark would be. The same judicial skepticism occurs when the claimed trade dress is a color or color scheme. Those cases are winnable, but not easy. To win, you may need to invest in a professional survey, to test whether the public reacts to your trade dress just as it would react to a trademark, seeing it as identifying one source.

The next element to prove is “likelihood of confusion.” Just as they would do in a trademark case, the judge or jury in your trade dress case will compare your trade dress to your competitor’s, by looking at the ads of the parties in the same manner as those ads are usually encountered by consumers in the real world, after which the judge or jury will decide whether or not consumers are likely to become confused as to who’s who.

Proving Infringement
In a trade dress case though, there often is an extra issue to consider and it is the issue of the parties using different names. What I mean is, while the knockoff may have a similar trade dress, at the same time, it might have a different name. Some judges and juries have found that having a different name can reduce or even eliminate the risk of consumer confusion, depending on the facts of the case. Again, if there is no finding of a likelihood of confusion, then there is no infringement.

The first thing to do, in any situation in which you believe your product or campaign are being infringed, is to retain a good attorney who has had trade dress litigation experience. Note, that’s not the same thing as experience with utility patent litigation; the two are very different. The attorney should review the facts and advise you on your rights, chances of success, and, importantly, estimated attorneys’ fees and costs of suit. Trade dress cases are not for the faint of heart, nor for the light of wallet: they often are hotly contested; they turn on factual findings (like whether there is, or isn’t, a likelihood of confusion) that can remain in limbo undecided for many months, until those findings are finally made by a judge or jury; they can require a lot of discovery, depositions and expert witness work; and therefore, can become very expensive very quickly, if they don’t settle.

What do you win in a trade dress case, if you win? Depending on the facts, the answer can be, a lot! You can win the same or even more than you can win on a patent. “Soft IP” cases such as trademark, trade dress and copyright cases can be every bit as potent. You can win a temporary restraining order, which stops the infringement; you can win a permanent injunction; you can win damages in an amount sufficient to make you whole for whatever lost profits or other harms you can persuade the judge or jury you suffered as a result of the infringement (something that often requires a lot of expert testimony, with “dueling experts” from both sides disagreeing on the damages); you can win all of the profits that the accused infringer obtained due to the infringement; and in some cases, you can win your attorneys’ fees and costs at the end.

That’s if the case doesn’t settle. Statistically, as you may know, the reality is that most such cases do end in a settlement. Someone changes some agreed upon aspect of their product or its name or “trade dress,” someone writes a check, parties agree to coexist on certain conditions, etc.

The upshot is, if you think you’ve been infringed but you don’t have a patent, or a very strong patent, don’t give up hope. Consider your “soft IP” rights. Those rights, when wielded in the right way, could prove to be a lifesaver for you and your campaign.

Greg Sater is an attorney with Rutter Hobbs & Davidoff, a law firm based in Los Angeles. Contact Sater at (310) 286-1700 or at gsater@rutterhobbs.com.

July 2010 – Column: Shop Talk

The Short Cut to Riches Is a Long Road

One of the hallmarks of many successful “As Seen On TV” products is that they provide a short cut for consumers. Whether it’s the amount of effort necessary to prepare a meal in the kitchen, the degree of sweat and toil required to get fit or a do-it-yourself beauty product that replaces the need for expensive salon makeovers, such products frequently promise to save time and money. It makes perfect sense that such appeals would be attractive–people lead busy lives. They are looking for ways to economize their time, not to mention their pocketbook. Hence, the Kymaro Body Shaper is an inexpensive and instant way to look slimmer, just as the MicroSteamer reduces the amount of time and energy required to cook a healthy meal.

Such claims of efficiency are simple enough to make, but in today’s world of social networking, they had better stand up to scrutiny. And that’s where the short cuts end, because the time span required to develop a truly innovative product that delivers as promised can seem like an eon. Certainly, there are many “me too” products that ride the coattails of other successes, but nothing replaces the rush of being the first to market nor the reward that goes with it: the lion’s share of sales.

The Fundamentals
But when it comes to products that are introduced via DRTV, one of the first questions a product inventor or marketer should do is size up the market. It sounds so basic, but many innovators are inspired by a burning desire to solve a problem that is personally relevant to them. Yet DRTV is the broadest of mass media, so the better mousetrap they’re inventing needs to appeal to a lot of mice. In practical terms, it means that if there are approximately 115 million U.S. TV households, according to Nielsen, the product should appeal to no less than 20 percent of them. Otherwise, one could be wasting money on a medium that is simply too broad.

For example, if you have a tool for training dogs, you would research the fact that there are slightly less than 46 million U.S. homes with pooches. Voila! Your product passes the DRTV litmus test. It sounds fundamental, but many inventors make the mistake of relying on what is known as mother-in-law research: the mother-in-law said she’d buy, therefore, the assumption that an entire universe of purchasers awaits the product is extrapolated from this one bit of anecdotal data.

Frankly, the loss of perspective this illustrates is why it’s important to partner with experts who understand the marketing side of the equation. While creating a product from thin air requires tremendous creativity–what is traditionally thought of as right-brain activity–the engineering and tooling aspects of product development can be very analytical or left-brained. Few people can navigate both hemispheres with equal dexterity. Great direct marketing is no different. It requires the ability to make a persuasive, rational value argument, yet must engage a consumer emotionally to move a product from the category of “nice to have” to “must own.” It’s a road best paved with knowledge. Save the short cuts for the consumer to ensure you don’t detour your own success.

BJ Fazeli is president of BJ Global Direct and Concept 2 Consumer in Irvine, Calif. Contact Fazeli at (949) 825-5822.

July 2010 – Cover Story: A Closer Look at ERA’s Asia Committee

Committee Chairman Scott Reid Discusses the Group’s Objectives, Encouraging Member Participation and Tackling the Most Important Issues.

BY VITISIA PAYNICH

What can Electronic Retailing Association (ERA) members do to get the most from their membership? Scott Reid, the current chairman of the Asia Committee, says, “It sounds cliché but the simple answer is: get involved.” Reid, operating officer at Oak Lawn Marketing Group in Japan along with other OLM executives have participated in various ERA councils and committees over the years to help affect change within the organization, as well as in the industry.

The experience has not only given him a better understanding of how an association functions, but has also enlightened him to some of the other services that can ultimately benefit his business.

In 2005, the Asia Council evolved into the Asia Committee, acting as a bridge that connects its members from the Asia-Pacific region with ERA in the U.S. Five years later, the committee has greater ambitions–goals that would not only attract more members, but would also give ERA an even stronger presence as the leading association in that region.

Electronic Retailer sat down with the committee chairman to talk about the goals set for the Asia Committee, the key issues that are most important to the group and why others need to step up to the plate and participate.

Electronic Retailer (ER): What is the purpose of the Asia Committee?

Scott Reid: The No. 1 goal of the Asia Committee is to be an extension of ERA. By that, I mean helping the association understand how to service and meet the needs of its growing regional members in Asia. Through the committee, we hope to recruit new members, establish an understanding of the benefits that the members in Asia value and identify the specific needs of these members. What benefits will satisfy and keep them as members?

ER: What are some of the objectives that the Asia Committee has this year?

Reid: One of the objectives, which I’ve been passionate about in my own business dealings, is for the Asia Committee to take the lead in coming up with a solution for solving this counterfeiting problem. Now this isn’t a problem plaguing just our industry; it’s affecting other industries as well. And I don’t think it’s a problem we’re going to be completely able to solve. But we can begin sharing information, working together, educating people and aligning ourselves with other groups and associations that have the same goal of taking steps to find a solution.

By getting involved in advocacy, we can also try to set rules and guidelines for some of these Internet companies that enable people to sell counterfeit products on their homepages. Right now, all the responsibility to monitor these activities falls squarely on us, not on the actual websites that profit from allowing counterfeit products to be sold. At least by doing these things and making it a risk to sell counterfeit ">versions of DRTV or home shopping products, we’ll be able to decrease the amount of counterfeit products on the market. The Anti-Counterfeiting Task Force, led by ERA’s vice president of government affairs, Bill McClellan, proves that the association is doing something about it.

Another objective for the committee is to continue to raise awareness of ERA in Asia, increase membership and add value to the members in Asia. So, one of the things that we’re looking at doing is establishing a self-regulatory [policy] in the major countries.

Another goal is to bring back the Asia conference. We used to have one but we stopped a few years ago. This year, we had a networking reception that ran in conjunction with the Housewares Show in Hong Kong. We had 80 people show up and it was a good three-hour event. It was very well received, and there were many interested people getting involved in the Asia Committee and ERA.

ER: How can ERA members benefit from the work that the Asia Committee is doing?

Reid: As I mentioned earlier, get involved. The more you put into it, the more you’ll get out of it. That’s been my personal experience with any organization that I’ve been involved in. If you care about your industry or if you’re passionate about the business that you’re in, then you’re going to want to get involved in the leading organization in that industry and be a leader yourself, because the fruits of that effort will naturally take place.

ER: Are there vast differences between the markets in Asia? If so, as a committee, how do you make sure that you’re supporting the needs of each market?

Reid: First of all, I don’t think that people who live in this region of the world ever refer to it as Asia. And when you’re talking to Americans, you’ll hear words like “Asians” and “Asia” and they’re often grouped together. I’m sure this happens to Europeans in Europe, as well. People who live in this region–like China, Japan and Korea–would never refer to themselves as “Asians.” They are Chinese, Japanese, Korean, etc.

The cultures are all very different. The business practices are very different. The markets are very different. For example, Korea doesn’t have infomercials; it only has home shopping. So, people need to understand that if you do business in Asia, the way you do business in Japan is not the way you do business in China. I think when it comes to communicating that to others, the Asia Committee is weak in that area. But it’s something that we can improve on.

The blanket assumption is that everybody in Asia is interested in having a connection with the U.S., such as new products or best practices. And I think that’s the biggest value that a lot of the members in this region have is: ERA = America. By becoming a part of the organization, you will be kept up to date on what’s happening in the U.S. marketplace, and you can forge relationships with American product suppliers and vendors through networking opportunities.

But when you look at what ERA also stands for: getting involved in policy, government lobbying and making sure the industry doesn’t become over-regulated, that’s not happening in Asia. And this is a point where I think we need to get to one day so that the members are receiving a benefit in their own backyard–not just simply having a connection to the United States. So, I think that’s one of the challenges.

ER: What other key issues are important to the committee?

Reid: Anti-counterfeiting is the biggest, but self-regulation is another important issue. If we can get involved in regional specifics with regard to self-regulation and start to influence how each country regulates this industry, a) That’s good for our industry; and b) it’s a very good story for increasing the member benefits in ERA. However, it’s difficult because it must be country-specific.

ER: What initiatives are in place for growing and serving the membership in the Asia-Pacific region?

Reid: I think having these networking receptions is another action that will bring back members. Also, setting goals for having a larger vision for the committee and developing self-regulatory programs will make a difference to existing and potential members.

ER: What about providing education?

Reid: Yes. I’ve realized that this region is far more advanced than the rest of the world in terms of some technologies, such as mobile and digital signage. I’ve always felt that we’ve looked to America for best practices, especially since the infomercial came from America. But I think it’s interesting that for the first time, the U.S. can look to Asia for best practices. And we can start to give back to Europe and America and show what people are doing in Asia that can give those in the U.S. ideas of what they can do with these technologies.

That insight is also useful regionally for other members who are in Asia. For instance, Japan is ahead of some of its neighboring countries with regard to some technologies. So I do believe education should play a big part of it. And I think the education sessions that Asia can put on will not only be interesting to other members of Asia, but will also be valuable to other members of Europe and the United States.

ER: What’s the most important thing that people should understand about the Asia Committee?

Reid: I think the most important thing that people need to understand about the Asia Committee is that it’s a group that is 100 percent made up of volunteers who have busy jobs, who are taking the time to get involved in the organization and who work together to make the industry better by developing benefits for other companies in our industry. And that goes back to my earlier message.

If you want to get benefits out of your ERA membership and you’re in Asia, then get involved in the committee and start doing something. You’ll definitely reap the rewards from your efforts.

If you would like to get involved in the ERA Asia Committee, please contact Robin Greenspan at rgreenspan@retailing.org.

June 2010 – Channel Crossing: Alernative Payment

Alternative Payment Options Arrive in E-commerce

E-commerce has proved to be resilient even in a tough economy. Despite the recession, it is estimated that online sales totaled $260 billion in 2009, an increase from 2008. While consumers are still buying online, many have changed the method they use to spend their money.

When shopping offline, consumers have many ways to pay for an order, such as credit, debit, checks, store cards, gift cards, etc. The majority of transactions, however, happen with cash and without exchanging any personal information.

But online, a preferred payment method has not emerged. The majority of orders are paid by credit card, which requires consumers to give up more information than they are comfortable with. Not only is there a general discomfort and fear about exchanging financial information over the Internet, but many consumers are forced to limit credit card usage.

Credit Restrictions
The credit crunch has impacted consumer perception and forced the government to enact laws regulating the use of credit cards. This will impact consumer credit card use even more.

These changes are significant for online retailers, which is why many are looking at alternative payment options. These alternatives will offer more choices at the checkout line and attract shoppers not willing to pay with a credit card.

They also bring more value and solutions to some of the issues merchants face. Here are some ways alternative payments can benefit your e-commerce site:

Additional security. According to a Javelin research study, online retailers lost $21 billion in sales in 2008 because of security concerns. The more security and anonymity a payment option can provide, the more consumer appeal it will have. Alternative payments that don’t require customers to divulge personal and financial information will make consumers more confident at checkout.

Complementary services. Some consumers are price conscious and research the best deals, while others worry about return policies. Some alternative payments can complement a merchant’s offerings by providing promotional discounts, fraud guarantees, best price guarantees, satisfaction guarantees, cash back and rewards programs. These will give shoppers peace of mind about their purchases.

New customers. Alternative payment options appeal to different demographics. Some customers might prefer credit, others cash. Servicing consumers with their preferred method will help merchants gain new customers. In addition, alternative payment providers who work with third parties, such as banks or walk-in providers, can introduce their customer base to the e-commerce merchants. Alternatives can also help merchants service new markets like the unbanked or underbanked and those in international markets.

Adding alternative payment options to an e-commerce website is strategic. Research has shown that adding alternative payment options helps merchants increase sales, add new customers and reduce costs. When evaluating alternatives, look for ones that provide the most value for consumers and retailers, help you convert more of your own customers and bring new customers to your website.

Samer Forzley is vice president of marketing of eBillme, which is headquartered in Rye Brook, N.Y.

June 2010 – Column: Shop Talk

Great Account Management Begins with Accountability

Anyone who has ever nurtured an invention or a start-up business knows that it requires incredible focus, tenacity and passion. Once that concern is a going one, others may look at it and comment, “Why didn’t I think of that?” not realizing the trial and error and belief that have gone into creating something unique. That kind of doggedness is what separates successful direct marketing programs from also-rans, because dialing in success requires formidable determination. That is why it is paramount that new players to direct marketing partner with an experienced, enthusiastic account manager willing to say, “The buck stops here!”

Seeking the Best Candidate
One key is for marketers to align themselves with an organization that has vertically integrated resources that can be managed on a centralized basis with a single, answerable point of contact. There are so many variables that can impact a program’s success that having an expert akin to a general practitioner who can examine and diagnose the areas that need to be improved upon is vital. Such an account manager will collaborate with the team from various aspects–creative, offer and customer service are but a few examples–and make sure that the emphasis is on solving for success versus finger pointing. A solid account manager is like a good crew coach who keeps everyone in the boat rowing together in the right direction.

Thus, you should ask, “Does my account manager possess the following characteristics?”

Experience: Beware of anyone who claims the Midas touch. Direct marketing is a discipline where one learns far more from his or her missteps than from one’s occasional triumphs. Look for someone who possesses the honesty to share the totality of his or her lessons.

Analytical: Because direct marketing is essentially a numbers game, it is imperative that your account manager be able to interpret a spreadsheet. A large part of his or her job will be holding your team accountable; e.g., making sure that the media is delivering the right cost per lead, conversion rate and overall ticket, and that it is clearing at the proper levels, in the right dayparts and at a justifiable cost.

Intellectually curious: A strong account manager will also be naturally right-brained and capable of getting into the mind of the consumer to understand what will drive purchase behavior emotionally. What’s more, account managers need to be on top of the latest trends such as social networking and mobile, to assess how to best leverage them on your behalf.

Proactive: A great account manager doesn’t react to crisis; he or she anticipates it and even acts to avoid it by putting practice into action.

Aligned interests: Probe to understand how your account manager is rewarded– not just financially, but emotionally–to make sure you succeed. These benefits should be aligned with your interests, but in some organizations, where churning media is the aim, for example, that may not be the case.

Put it all together and you’re looking for an unflappable champion. One where the only thing you can hear flapping is this: their cape.

BJ Fazeli is president of BJ Global Direct and Concept 2 Consumer in Irvine, Calif. Contact Fazeli at (949) 825-5822.

June 2010 – Column: Your Association, Your Bottom Line

Advocacy–in Real-Time

Just a few weeks ago, the Electronic Retailing Association (ERA) hosted what is arguably the most important event on its annual calendar: the ERA Government Affairs Fly-In. More than 80 leaders of the direct-to-consumer (D2C) commerce community gathered in Washington, D.C., to learn more about some of the legislative and regulatory issues of critical importance to the industry, and to meet with their respective elected officials to communicate their positions on these issues to the policy makers themselves.

Not only were we there to protect and defend D2C commerce from potentially over-restrictive or otherwise unfair regulation, we were there to advocate for the industry in a much broader sense–to ensure that our elected officials and policy makers understand the importance of the industry to the economy, the number of jobs it provides and the vitality it has shown during difficult economic times.

Attendees reported a uniformly positive response from their meetings, which underscores the importance of having industry leaders come forward and let their voices be heard. While ERA staff and our lobbyist partners can–and do–advocate on our industry’s behalf on a day-to-day basis, there’s no substitute for having policy makers hear our position passionately defended by actual industry participants who are directly impacted by the policies and who have the unique ability to point out perhaps unforeseen implications and consequences.

Still, there are a number of issues looming over our industry, most notably those surrounding data-pass and advance-consent marketing.

In fact–and illustrating the remarkably fluid nature of Congressional activity–Senator Rockefeller (D-WV) introduced the much-awaited bill on data-pass marketing the very day ERA’s contingent was visiting Capitol Hill. In the midst of this dynamic environment, we were able to secure a meeting with the actual drafters of the proposed legislation approximately one hour before its introduction was made public.

Jeff Knowles of Venable LLP, Elliot Segal and Dirk van de Bunt of Guthy-Renker, David Wallace of Syndero, Litle & Co.’s Tim Litle and I met with the three members of Senator Rockefeller’s staff who authored the bill. It was a very constructive dialogue. The staff members were eager to learn more about our industry and we were able to provide valuable input–in real-time–on this fast-moving issue. I am confident that the senator’s staff left with a positive impression.

While the senator’s chief investigator on the issue assured us that the Senate Commerce Committee wants to ensure that good actors–like those in the meeting and ERA’s membership–remain active in the marketplace, we will watch very closely the staff’s reaction to our concerns and proposed amendments to the bill. However, we had a very constructive dialogue and it’s difficult to imagine an event more illustrative of the Fly-In’s importance.

Day by day, ERA is increasing its influence in Washington, due in large part to the efforts of the association’s volunteer leadership, both at events like the Fly-In and in ERA’s government affairs work throughout the year.

I encourage you to join our efforts.