March 2010 – Feature: Retail’s Back Story

When Direct-Response Fulfillment Specialists Enter The World Of Brick-And-Mortar Retailing, Life Gets A Bit More…Complicated.

By Jack Gordon

For the most part, fulfillment houses that concentrate on direct response marketing live in a different world than the warehousing and shipping operations that move entire containers or pallets full of goods to brick-and-mortar retail chains. And the DR specialists like it that way.

Most of the products found in stores like Walmart, Macy’s, Best Buy and Home Depot arrive there by means of “a completely separate industry,” says Kris Johnson, Los Angeles-based vice president of business development for fulfillment house GSI Commerce, headquartered in King of Prussia, Pa.

That other industry is welcome to its business, Johnson says. “We make more money doing direct response than shipping to retailers,” he says. “It’s when our DR clients move their products into retail stores that we start shipping pallets.”

Tony Sziklai, president of Moulton Logistics Management of Van Nuys, Calif., adds: “Unlike DRTV direct-to-consumer fulfillment–which is like a continuous manufacturing process–retail fulfillment is more sporadic and P.O.-driven. Instead of a continuous flow of consumer orders, you are dealing with date-specific orders from a variety of retailers. Each retailer tends to have different requirements, including payment terms, EDI, routing, packaging, labeling and other compliance requirements.”

There’s the rub, and that is why the industries are only separate for the most part.

A HARD DOLLAR
“I’ve been in DR fulfillment for 33 years and in retail for five years,” says Hal Altman, president of Motivational Fulfillment and Logistics Services in Chino, Calif. He says he began the retail-shipping operation in response to growing demand from DR clients. He now stores and ships retailer-bound pallets for non-DR clients, as well.

“But if I knew five years ago what I know now, I might have taken another look,” he says. “Retail is a much harder dollar. It takes more [warehouse] space and completely different technology.”

Picture two pallets full of goods standing side by side in a warehouse, occupying the same amount of space. One pallet contains 10,000 bottles of vitamin supplements that will be sent to the homes of 10,000 customers who bought them by responding to DRTV commercials. The other pallet contains 12 exercise machines and will be shipped as a single unit to, say, Costco. The vitamins represent more than $30,000 in billing and income to the fulfillment house, Altman says. The pallet of exercise machines will bring in about $35.

Of his million square feet of warehouse space, Altman says, about 600,000 square feet now are devoted to goods that will be shipped to brick-and-mortar retailers–everything from Wolfgang Puck kitchenware to lawn mowers and Microsoft Xbox game consoles. An entirely separate software system for inventory tracking and reporting is required for the retail operation.

“The retail end is a very expensive business to get into,” Altman says. “We’ve spent millions of dollars writing the software program to handle the different requirements for real-time tracking and reporting. And you’re expected to hold huge inventories.” Yet on average, he says, 10,000 pallets of retail goods represent about the same revenue volume as 400 pallets of DR products on their way to individual households.

Concept2Consumer of Irvine, Calif., the marketing, production and fulfillment arm of BJ Global Direct, uses not only different software, but separate warehouses to handle products shipped to retailers and those shipped to consumers. This makes things easier because there are night-and-day differences between the two operations, says Concept2Consumer’s chief operating officer, Marc Haskelson.

“In DR, you’re picking and packing individual items,” Haskelson says. “‘Order management’ means things like understanding that you have one bulk box with 24 items and another bulk box with 24 different items, and somebody has to pick an item out of each box in order to package the order correctly.”

When shipping pallets to retailers, fulfillment experts say, order management means something else altogether.

‘THAT LABEL IS AN INCH LOW’
When a fulfillment house ships products to a retail chain, it does so on behalf of the manufacturer or product owner. The retailer is not the client, with the power to hire or fire the fulfillment house. “Target and Walmart have no say in picking the fulfillment house,” explains Sandy Probst, vice president of sales for Innotrac Corp. of Atlanta.

This doesn’t bother retailers because they don’t need any such authority in order to maintain quality control and an iron grip on shipping, Probst says: “All they have to do is say, ‘Mr. Product Vendor, here are the conditions under which I’m placing a fulfillment order with you.’”

If those conditions aren’t met–if a truck pulls up at the retailer’s store or distribution center with goods that aren’t packaged, labeled or loaded to the retailer’s specifications–the truck can simply be turned away. Or the retailer might impose a charge for the improper delivery.

Each major retail chain has its own unique requirements, which are set out in the retailer’s routing guide–its shipper’s bible. The routing guide specifies details such as how many boxes can go on a pallet; which way the boxes must be turned; where on each box the label must be placed; where the bar coding has to be; how pallets are to be shrink wrapped; whether goods should be shipped to distribution centers or individual stores; and the time windows within which deliveries must be made.

No two routing guides are alike. Costco, Macy’s, Sears, Walgreens–each wants pallets and boxes arranged in a different way. “We shipped to more than 400 different retail chains last year,” Altman says. “Every one has its own routing guide.”

And they are picky about details. “If the routing guide says the label on the box should be one inch from the top left, they may fine you or send back the truck if it’s two inches,” says Haskelson.

These “fines” take the form of chargebacks. Some retailers impose them so aggressively that they are suspected of viewing chargebacks as a profit center. Altman says that this was one contributing factor to the 2008 bankruptcy of chain retailer Linens ‘N Things: “Their chargeback rates grew so high that manufacturers were refusing to deal with them.”

Sziklai warns: “You need a retail fulfillment house that not only does a good job shipping, but also documenting and disputing unwarranted penalties.”

When shipping to retailers, therefore, order management becomes partly a matter of careful documentation of the timing and arrangement of shipments. For instance, the fulfillment center might take photos of loaded pallets just before they are shipped. “Some retailers will try to charge back and make you prove you were right,” says Johnson. “So we need documentation to refute that. The truck was late? No it wasn’t, and the labels were correct, too. Here’s a photo.”

PURCHASE ORDERS
Another layer of complexity is added by the way that major retailers deal with purchase orders, fulfillment executives say. Orders for goods are placed by means of EDI (Electronic Data Interchange) codes–and retailers have hundreds of different EDI formats from which to choose. An EDI order from Macy’s, for example, might include a purchase-order number and instructions for, say, 50,000 units of a product, to be delivered to a certain distribution center by a particular date.

The fulfillment house’s software must be able to read and respond to the EDI format that Macy’s uses–as well as the formats used by every other retailer that stocks the products supplied by the house’s clients.

Rather than build their own interfaces to allow communication in hundreds of EDI formats, fulfillment centers usually rely on electronic middlemen called VANs (Value Added Networks), such as Commerce Hub, Mercury Commerce or Sterling Commerce. A VAN translates multiple EDI formats into programming that the fulfillment house can read, then retranslates the house’s reply information back into the retailer’s format.

LAND OF 10,000 SKUS
Direct-response fulfillment overlaps the brick-and-mortar world in a different way when a fulfillment center’s clients include the e-commerce operations of major retailers. The center packs and ships products to individual customers, as in any other direct-response operation, but the scale is vastly different from that of a typical DR campaign.

Innotrac, for instance, handles fulfillment for the websites of retailers including Target and Ann Taylor. Like any other DR clients, they have certain packaging and branding requirements pertaining to things like labels and logos, Probst says. But where a typical DR marketer offers a relative handful of products, Target’s website offers thousands.

“So the processes have to be different in terms of scale and automation,” Probst says. Three or four products sold via a DRTV campaign don’t require the same level of technological sophistication for inventory control and reporting as the 10,000 or so SKUs that a fulfillment center might handle for a big retailer’s e-commerce operation.

When a fulfillment house becomes more than a drop shipper and takes on some management responsibility for a retailer’s website, its client relationships can become more complex. For instance, Johnson says that GSI Commerce manages the web-sales operations for retailers including Dick’s Sporting Goods and American Eagle Outfitters. That means GSI has a voice in what the sites will stock.

“Suppose I work with a DRTV guy, shipping to consumers when they order from his 800 number or his website,” Johnson says. “He’s my client; he pays me.” But then suppose that the DR product moves to retail. GSI picks it up and begins to sell it on Dick’s Sporting Goods’ website. “Now my DR client is also a vendor,” Johnson says. “We become his client, too.”

Life may not be simple, exactly, when a fulfillment house deals with classic DR clients who have invented a better mousetrap and sell it directly to consumers. But life is a lot more straightforward.

Jack Gordon is a freelance writer who frequently contributes to Electronic Retailer magazine.

December 2009 – Channel Crossing: Fulfillment

Demand More of Your Fulfillment House in a Tough Economy

By Andy Arvidson

You learn everything about your vendors, clients and employees during a recession. When the economy is booming, everything’s great for everyone. It seems easy to handle all inquiries and situations. However, how does your fulfillment house handle the tough situations–the daily challenges and pressures caused by a tough economy? Does the fulfillment house step up to challenges, fight for your business and make capital investments and service enhancements when you need it the most as a marketer? Are you currently noticing a difference in service and quality from your fulfillment house? Is your fulfillment company showing any signs of uncertainty or weakness?

Most companies have a tendency to cut back on capital investments, reduce budgets and invest less overall in a recession. However, this may very well be the worst thing to do as a fulfillment company! It’s important to see potential where others cannot. At the height of the spending downturn, it is critical to see the investments made by your fulfillment house.

SEIZE THE OPPORTUNITIES
This is the perfect time to build your company’s brand; recessions typically make the strong companies even stronger. There is a huge opportunity during tough times! Companies and consumers do not stop buying in a recession. Consumers and companies simply become even more selective and buy from businesses with the best products, service and value.

It is very important for the fulfillment house to invest more in its business and clients during a recession and not the other way around to gain a competitive advantage in marketplaces.

Look for the fulfillment house to make investments in areas such as the following during a tough economic climate:

• Employee training – More planning and forecasting of order volumes with clients and an even higher sense of urgency on all matters;
• Significant technology investments in customer relationship management software and hardware;
• Scanner systems for additional accountability;
• 24-hour customer service;
• ISO 9001:2001 quality control and bestpractice certifications;
• Facilities;
• Specialized racking; and
• Company-owned fleets of vans and trucks for pickups and deliveries.

Keep in mind how important your fulfillment house is to your marketing campaign for the following reasons:

• The fulfillment house has all the data and can help increase your ROI in the most cost-effective ways.
• The fulfillment company is the last impression of the consumer’s overall buying experience.
• Satisfied customers are the best salespeople for branding and advertising your product–they are free testimonials!
• The fulfillment company protects your ROI from all angles, such as uncovering potential problems that could immediately affect your campaign, e.g., defective products, a high return rate and an increase in customer service calls and e-mails.

Insist on investment! It will pay off.

Andy Arvidson is owner of Imagine Fulfillment Services (IFS) in Torrance, Calif. He can be reached at (310) 217-4610, or via e-mail at andya@imaginefulfillment.com.

November 2009 – Column: Fulfillment and Logistics

Fulfillment as a Profit Center

By Tony Sziklai

Most direct response marketers view order fulfillment as a cost center. It’s the ugly expense on the income statement that requires constant management to keep under control. This mentality is understandable. However, it can lead to missed opportunities and profits.

Fulfillment, which includes customer service, has more consumer-engagement points than any other service. Here’s how marketers can monetize each touchpoint to transform their back-end operations into a money-making enterprise.

Boxes
Each box that you ship can pay for itself. Companies will pay you to put their literature inside your box. So long as the box is optimized for freight and the labor cost of inserting the literature is reasonable, you can profit. Also, companies such as Zadspace, of El Segundo, Calif., will pay to have full-color ads stamped on the outside of your boxes. Called “Zads,” the ads are applied during the fulfillment process and are ideal for plain brown boxes.

Rush Fees
If you are shipping from multiple bi-coastal facilities, chances are you can make extra profit from your rush fees by shipping local rushes using a standard service. It all comes down to timing and customer expectations. Determine how much time you have to deliver a local rush shipment, then work with your fulfillment vendor to make sure that the standard shipping option can get it there on time.

Customer Service Calls
Many direct response marketers are skeptical about customer-service upselling, feeling that the environment is not conducive to sales pitches. However, most marketers are shocked by how much they can make from even the most basic back-end upsell. The best upsells, in my experience, are those that are germane to the product being sold, such as warranties. Third-party upsells can also make good money as long as the talk time for pitching them does not cancel out the revenue.

Save the Sale
Since generating profit is also about controlling costs, marketers should consider a save-the-sale campaign to reduce attrition from cancellations and returns. Clients can experience recoveries as high as 60 percent.

E-mails
Consider text- and HTML-based upsells in order, shipment, return receipt and refund confirmation e-mails. Customer service e-mail responses are also good ways to pitch a warranty or discounted second unit.

Web Order Look-up
If you have a web-based order status look-up page, you should consider adding upsells. You can accomplish highly targeted offers based on what the customer is looking up, and make your pitch using rich graphics.

Technically savvy fulfillment vendors provide these kinds of query tools and can customize them to optimize the upselling process.

If your boss asks you to get more efficiency out of your fulfillment operations, you might ask “how about profit?” The back end is gold for those who know how to mine revenue from traditionally under-monetized customer touchpoints.

Tony Sziklai is president of Moulton Logistics Management in Van Nuys, Calif. He can be reached at (818) 997-1800 or via e-mail at tsziklai@moultonlogistics.com.

November 2009 – Feature: Santa Claus is Coming to Town

Keys to maximizing your direct response revenue this holiday season

By Leo Gorcey

Upsells roasting on an open fire,
Multiples flying out the door,
Holiday sales being sung by your ads,
Free S&H makes room for more!

What will direct response marketers find under the tree this holiday season? Well, with a little holiday marketing savvy, perhaps a gift-wrapped package of profit.

Most of us are familiar with the usual direct response holiday advertising challenges: Higher media costs and more advertising hitting the airwaves than snow at the North Pole. And on top of it all, a year of rough economic sledding.

The exciting news is that in direct response, we offer the best and most useful products at the lowest prices. The holiday season is the perfect opportunity for us to do what we do best.

In spite of a cloudy economic climate, this holiday season will once again find millions of Americans travelling, decorating, attending holiday parties, eating, spending time with family and friends and–of course–shopping! So how do we in the electronic retailing business seize the hidden opportunities for prosperity this holiday season? Electronic retailers can come to the rescue of holiday-harried shoppers everywhere and simplify the lives of thousands of gift givers this holiday season while increasing conversion, average order values and revenue. We are perfectly positioned to help holiday shoppers keep the joy–and reduce the stress–of gift-giving.

Let’s explore some holiday selling tips. As with any laundry list of suggestions, some you will find helpful and others might draw either a chuckle or a yawn. But I’m hoping that the following suggestions will trigger your own brainstorming–and that you’ll come up with ideas I haven’t even mentioned here.

Holiday Sales Tip #1: Tweak Your Media Offers
Look at your media offers and CTAs and identify opportunities to tweak DRTV, radio, print and web offers, too. Plant the seeds of gift-giving in your holiday media, which is the first message your prospective customer will see or hear. Create offers and CTAs that arouse desire in the minds of consumers to purchase additional products as gifts for friends and family. Try creating “multiple sets” offers under the banner of “Limited Time Holiday Specials.”

Free shipping and handling is another way to increase your response rates over the holidays. Free holiday bonus gifts (”stocking stuffers”) usually work to draw attention to holiday ads.

I can almost hear you thinking, “Yeah, we tried that one year and it had no impact on our bottom line.” Which is exactly why I recommend that seasonal holiday media offers be closely coordinated with adjustments to call-center scripting to drive the seasonal message home to the caller, resulting in both higher conversion rates and average order values (more about call center scripting in Tips 3, 4 and 5).

“Seeding” your holiday season advertising with gift-giving language and planting the suggestion that your customer can save both time and money by purchasing an additional product as a gift for a friend or family member, and linking that strategy with well-crafted call-center scripting can give you a nice bump in holiday revenue.

Holiday Selling Tip #2: Multiple Sets Combined With “Scarcity”
The holiday season is a great time to bring out specials on multiple sets (items) of almost anything–even if you’ve tried multiple-set offers and they’ve performed sluggishly in the off-holiday season.

The best multiple set upsells generally discount 20 to 50 percent off of additional sets. You can also feature additional sets at the same discounted price. For example, if you’re offering two Magic Paint Rollers for the one-unit price of $19.95 (two-for-one), you can offer an additional set of two more Magic Paint Rollers for $19.95.

You can ratchet up the urgency for callers to take action today by employing the principle of scarcity. “We have a limit of two items per household,” is an example of scarcity applied. This principle automatically suggests a higher value assigned to your product and added urgency to order “before supplies run out.” Home-shopping networks use the principle of scarcity to sell thousands of additional products by featuring a digital display which shows how many products have been sold and how many remain available at the advertised price.

Any announcement to your potential customer that this opportunity is “seasonal” can trigger the impulse part of the brain where buying decisions are made and tap into the gift-giving spirit of the holidays. Combined with a call-center script that echoes your media message, this strategy can be an effective avenue to access consumers’ buying impulses and enhance the customer experience.

Holiday Selling Tip #3: Enhanced Holiday Call-Center Scripting
Spice up your call-center scripts with phrases designed to entice shoppers to purchase additional products by building value with the use of the emotional benefits of purchasing additional DR products as gifts. For example, try adding a phrase to your seasonal call-center script like, “Why not shorten your holiday shopping list by one or two, while I have you on the phone? The Super Sweeper makes a perfect gift. While supplies last, I can add an additional Super Sweeper to your order for the special holiday promotional discount of 40 percent off. That’s an instant holiday savings of $35. And as part of our holiday savings promotion, you’ll get free shipping and handling on that second unit.”

On multiple unit upsells, I recommend the “alternate-choice” close. I’ve seen many a multiple sets upsell fail because the non-assumptive close went something like this: “Would you like to add another ‘Joyful Juicer’ to your order today?” That’s what I call a “Say No” question. It makes it far too easy for the customer to say, “No, that’s fine. I’ll just take one.”

Instead, I recommend the alternate-choice close in your call-center scripts whenever possible. When you script something like, “Do you want one or two additional units at that holiday savings price?” it makes it much easier for the caller to say yes. Whether the caller answers one or two, that’s a sale.

Holiday Selling Tip #4: Probing seasonal Questions
The holiday season is the time to throw a few probing questions into your call-center script to get your callers thinking about holiday gift-giving from the beginning of the call. The fifty-cent expression for this is “neuro linguistic programming.” The words we choose have an emotional impact on the listener/caller.

If an agent starts out the conversation with a holiday season caller by asking a question like, “So, (caller name), is this for yourself or a holiday gift for someone else?” that agent is planting a seed in the mind of the caller from the beginning of the conversation that this is the season for giving. Taken one step further, the agent becomes the caller’s personal holiday shopper–and it all starts with a single probing question.

If I’m a call-center agent, I’m also making an assumption from the beginning of the call that the caller is in the holiday gift-giving spirit. I’m assuming the holiday sale. This makes it easier for me to introduce the idea later in the call that the item the caller just purchased would make a great gift and that ordering an additional unit on this call will not only be convenient, but will save the customer money, as well. Or, as the saying goes, “Why not kill two birds with one stone?”

This is easily accomplished through a “holiday tweak” in your call-center or web scripting and a little follow-up coaching.

Holiday Selling Tip #5: “Season’s Greetings!”
Try having your call center agents answer the phone with a “Happy Holidays” or “Season’s Greetings.” This is an often-overlooked area in call centers. A simple holiday greeting at the beginning of a call can set the tone for callers to get into the gift-giving mode, making them more receptive to the idea of ordering additional units of your product(s) as gifts for family and loved ones.

Holiday Selling Tip #6: Raid the Warehouse
Now’s the perfect time to raid your warehouse and come up with creative upsells and cross-sells for holiday shoppers in the mood to buy. Items that may not seem appealing during the rest of the year may generate significant incremental revenue during the holidays. Some holiday-specific items can even be used as free premiums to increase response rates.

I recall one of the most successful DR campaigns in the last 20 years. A group of us were gathered in a conference room with the president and the CEO of the company and I asked the question, “What’s in the warehouse?” That simple question led to the president pulling out an item that had been gathering dust for who knows how long. That item was dusted off and presented as a holiday premium–a free bonus for “calling now.” The result? A huge increase in call volume which led to a handsome increase in revenue.

In summary, a dash of creative thinking mixed with a dollop of well-crafted seasonal call-center scripting to put callers in a gift-giving mindset–along with a pinch of common sense–can result in a delicious holiday confection of shopping convenience for your customers–and a surprising end-of-the-year lift in incremental profit for you.

Leo Gorcey is a direct response performance specialist with expertise in training call center teams, crafting profit-building call-center scripts, coaching DR leadership teams and partnering with direct marketers to increase revenue. He can be reached at (541) 531-7419 or via e-mail at leogorcey@leogorcey.com.

August 2009 – Cover Story: An Entrepreneur’s Tale

Even in an industry replete with success stories, Robert Roche’s stands alone.

By Tom Dellner

The direct response world has no shortage of compelling stories of visionary entrepreneurs who strike it big. They’re everywhere: inventors, marketers, pitchmen and service providers who had the vision to spot a business opportunity and the courage, drive and good fortune to transform their idea into reality.

But even in this industry of business mavericks, Robert Roche’s story stands apart. The Chicago native left the U.S. for Japan in 1989 with no particular career goals in mind. In the intervening 20 years, Roche has seen one company he founded go public on the New York Stock Exchange and has sold a 51-percent share of a second company to Japanese mobile phone giant NTT DoCoMo for $310 million.

Electronic Retailer sat down with the unassuming and straight-talking Roche for a first-person–and fascinating–account of how it all came together.

Electronic Retailer: Tell us about the inspiration behind Oak Lawn Marketing. What was the business opportunity you spotted?

Robert Roche: There really was no particular epiphany I can point to. At the time, I was teaching some English, doing some importing of goods, some translating and a little consulting. In my importing business, I was bringing in goods from the States and selling it to a wholesaler. As a part of this business–I can’t even remember exactly how it came about–I was introduced to a leading TV shopping company in Japan. We wanted to sell them some product, but they said, “If you want to sell me this product, you’ve got to be on TV.” So, next thing I know, I was on TV, my partner (Tadashi Nakamura, who is still an important part of our business today) was on TV.

And these were one-hour shows, where maybe 15 products were sold. It was live–although taped and aired later in other areas–and believe me, it was stressful. But we began selling more and more product.

Then, in Spring of 1994 I believe, I had the good fortune of being introduced to Rob Woodroffe of Interwood Direct.

He had time on CNN International and was basically looking for somebody to answer the calls in Japan. I agreed. Of course, I didn’t have a call center. I didn’t have anything. But I thought I would answer the phones myself if I had to. Rob was selling six or eight products at the time, so we imported a couple hundred of each and the phone started to ring.

So these two serendipitous events really marked our entry into the business.

ER: I have to ask about your experience in front of the camera–what was that like?

Roche: It was pretty intense. I fancy myself an accomplished Japanese speaker and I’m a pretty confident guy, but when they start rolling that camera, it’s a whole different ballgame. You lose who you are. I don’t care how cool you think you are. Once that camera’s on, everything changes. From that experience, I really gained a ton of respect for those who do well in front of a camera.

ER: So the business really came together in something of an ad hoc way?

In the early ’90s, Roche and business partner Tadashi Nakamura went on air to sell popular DRTV products.

Roche: Yes. It was all very organic. Basically, we were quite lucky–very much in the right place at the right time. The TV shopping company had been struggling a bit. They were having a hard time getting quality products. And Rob’s company was the major player internationally at the time, so, through our relationship with him, we had the pick of the litter, product wise. Also, as Rob ran the stuff on CNN, we saw which products sold best. We then took those to the TV shopping company. So I was on TV selling DD7, the Pet Mitt, Double Burner–whatever was selling on CNN.

ER: Can you describe your relationship with Rob?

Roche: I was so lucky to have Rob as a mentor. He knew the business like no one else, and I have always been motivated to learn. He was the one who explained per inquiry marketing to me, which didn’t exist in Japan at the time. I eventually bought a lot of media that way. And Rob was motivated to teach me: the more I learned the business and the better I got, the more of his product I sold.

ER: If I can back up, what brought you to Japan in the first place?

Roche: I spent a year of college in Japan (I majored in Japanese studies and economics), another year during law school and then returned in 1989 after graduating from law school. My wife, who I met the first time I traveled to the country, was Japanese. I had personal reasons to go to Japan; I didn’t go there to start a business. I went there to be there and I basically had to “fill in” my career.

ER: You mentioned the word “serendipitous”; it’s a very apt description for the way things just fell into place. But there must have been some challenges early on.

Roche: People talk about how difficult it is to do business in Japan, how it can be very challenging to go over there and do what it is they want to do. And they’re right.

But I went about things a different way. I was very industry agnostic. If I found that it was difficult to do business in a certain area, then I went in another direction. In the early days, when we were acting more as wholesalers, we faced very few barriers to what we wanted to do. When we evolved into more of a TV shopping company ourselves, then we did begin to meet with some challenges.

ER: Can you describe a few?

Roche: The most significant involved media. The television stations were not very comfortable selling media to new companies. We were new and I was a foreigner–the terrestrial stations really wouldn’t give us the time of day, to begin with. So I focused on cable.

ER: Had cable television burst on the scene yet in Japan?

Roche: No, but the explosion of cable was certainly on the way. The laws changed and we went from a few local stations to dozens of stations. I was aware of what had happened in the U.S. and believed that the evolution of the American cable business would pretty much be repeated in Japan. It wouldn’t be step for step, of course, but I knew these changes–an enormous shift in the way business was done on TV–was coming. So I was able to anticipate it to an extent.

We focused on cable and began building our business there. Eventually, we were able to staff a 24-hour call center with 10 or 15 people and assemble all the necessary infrastructure.

At first, it was a disadvantage to grow all these elements of a business–product procurement, production, media buying, teleservices–at the same time: we were like a chicken with its head cut off. But after awhile, it became a huge advantage, because we were wholly integrated. If Rob came to me and said, “Hey, we’ve got this great upsell for this product and it’s working really well,” I could walk down to the call center and implement it on the fly.

We grew to a critical mass where we were just big enough, just profitable enough, to begin taking some chances with terrestrial TV. This was in 1995-96.

ER: So how did you finally break into terrestrial television?

A longtime friend and business partner of Roche, Harry Hill joined Oak Lawn in 1999 and is now president.

Roche: We couldn’t really compete with the other TV shopping guys. In Japan, when you’re the new guy–and being foreign doesn’t help–you’re paying 20 or 30 percent more for media. It is not commoditized as it is–to an extent–in America. So media was a challenge.

Also, we wanted to run infomercials, which didn’t exist in Japan. People sold a number of products–taped live–on what were essentially hour-long variety shows. We struggled a bit with that format. We explained to the TV shopping company we were doing business with that the format was difficult and simply not cost-effective. We kept pushing the infomercial concept, how it was established, cost-effective and a proven success in America. Eventually, they had enough of us and said, “If you’re so determined to run infomercials, do it yourself!” So we did.

We went around and around, asking stations to sell us time in a half hour–most stations went off the air at midnight and came back on at 5:30 a.m.; we offered to buy time from midnight to 12:30. They wouldn’t budge.

Eventually, a company called Quantum did a partnership with Mitsui, a huge trading company in Japan. They had enough influence with the stations to convince them to sell that midnight-to-12:30 time slot for an infomercial. They did well with it and eventually grew to be about a $100 million company. They turned out to be a bit of a flash in the pan–I think they’ve been out of business for about 10 years now. But they kicked down the door, and we were able to walk in. They made the infomercial format legitimate.

We just kept our heads down and slowly began affiliating with more and more stations. And the nice thing about media in Japan is that once you get it, it’s yours. We have certain media that we’ve been buying for almost 15 years.

ER: What sort of products were you selling?

Roche: We were able to mitigate our risks. We took the best products in America–tested, true products–and sold them in Japan. They wouldn’t always work (there are lots of examples of products that kicked ass in America and did nothing in Japan), but certainly our chances of success were higher.

Our standard was whether the marketer had spent a million dollars in media on the product in America. I suppose this was not too sophisticated–we’re certainly far more data centric now–but if a company spent a million dollars on the product, you could pretty much rest assured that most of the manufacturing kinks had been worked out, they had already dealt with customer complains, etc.

ER: You’ve walked us through the development of Oak Lawn through the 1990s–when did you launch your Chinese business, Acorn International?

Roche: In 1997 and 1998, there was a rush of the TV shopping companies into China and the word was that they were doing well.

I partnered with a gentleman named Don Yang who I knew from other business dealings and for whom I had a high level of trust. But our initial dealings in China were very frustrating for me. Working with a translator was extremely uncomfortable.

CCTV was not in the business of TV shopping or selling media to foreign companies. They eventually offered us 10 or 20 minutes per day, and we decided to buy it. We only had about two months then to get everything together–the show, the call center, everything. It was painful. We limped along for awhile, then we brought in another partner, James Hu, who also had lots of TV shopping experience. At this point, I stepped back a bit from the day-to-day business. I would have them come over to Japan to learn what we were doing at Oak Lawn, but they really incubated the business themselves.

ER: What was the eventual breakthrough point for Acorn?

Roche: We found a company that marketed an electronic pocket translator called Haojixin, which translates to “good memory.” We tested the product on TV and it sold very well. We ended up buying a majority stake in the company–we now own 100 percent. The product sold like crazy, did extremely well at retail and became a huge brand in China. That brand alone–there are a number of different versions and line extensions now–does more than $100 million per year. Acorn has also done extremely well selling cell phones.

Jumping ahead to 2004, we brought in investors, raised money and eventually went public on the New York Stock Exchange in 2007. I get a lot of credit for founding the company and I suppose we were helpful in teaching them everything we had learned at Oak Lawn, but the real credit needs to go to James Hu, Don Yang and their team.

ER: Back to Oak Lawn. Can you tell us what led up to the DoCoMo deal?

Roche: Harry Hill came to the company in 1999. At about the same time, we were a part of what was called The Global Alliance, with Rob Woodroffe, Reiner Wiehofen of The Vector Group and others. Basically, we pooled our resources and formed something of a product procurement bloc. The Global Alliance eventually fell apart, but Wiehofen had introduced us to his proprietary software system that analyzed media in a very sophisticated way.

This media analytics software helped us get away from being hit-product dependent. With Harry’s help, we further refined the system and eventually developed efficiencies in the way we did business that allowed us to make a living off of merely good products–singles and doubles. Eventually, a hit product would come along which would be great, but we could make singles and doubles work.

ER: What made the analytics system work so well for you?

Roche: To oversimplify, it focuses on the return on ad spend instead of other metrics that are frequently used. It works perfectly for Japanese media, which, as I explained, is far from commoditized–it might not work as well in the States. But it gives us the information we need to better allocate media and negotiate more intelligently with the stations.

ER: Tell us a little more about Harry’s role.

Roche: We got to a point with Oak Lawn where we needed less of what might be provided by a visionary, entrepreneurial executive and more of the execution of a master craftsman. And although Harry also has tremendous vision and is as entrepreneurial as they come, that’s what he provided. So he began to take on more of a leadership role. It’s a transition that many businesses go through as they grow.

So, with me as chairman and Harry as president and with the help of our Japanese partners, Oak Lawn set about executing on and continuing to refine the efficiencies that we had developed. There’s a Japanese business term kaizen. It’s the Toyota way–a commitment to continuous improvement, even if it’s marginal improvement. That’s what we strived–and continue to strive–for. And as you get bigger, the payoffs get bigger. If you’re a small company, a marginal improvement in efficiency is just that: marginal. But when you’re doing $400 million in sales, these marginal improvements are huge, and we just dropped it all back into media.

Another key point occurred when Billy Blanks came along. He had been attempting to break through in Japan for almost a decade. Finally, we got the rights to one of his shows. The stars aligned and it was a blockbuster. We sold almost 2 millions videos–more than any other item in Japanese TV shopping history. I think it was our business efficiency that allowed us to keep it on air just enough for it to gain momentum and take off. It was a national phenomenon. Taro Aso–then the Minister of Foreign Affairs and now the Prime Minister–once led the participants in the 40th ASEAN Ministerial Meeting in an impromptu Billy’s Boot Camp session.

This really put Oak Lawn on the map in Japan and we began to draw interest from other companies; the seeds were sown for the DoCoMo deal.

ER: Explain the deal from DoCoMo’s side of the table. What did they see in Oak Lawn that most interested them?

Roche: DoCoMo sees the mobile phone as a media; they own more than half of the Japanese cell phone market and their products are world-leading, cutting-edge products. And Oak Lawn is a branding and media company. They saw how our branding, promotions, marketing and everything else we do fits very nicely with mobile as a media. They believe that we can help them leverage and optimize their customer base–which numbers more than 50 million–to which they currently market nothing but phones.

And as they began to look more closely at us, they became impressed with the fact that, like them, we were a data-centric company. We know why we do everything we do. And maybe everything we do doesn’t always work, but if it doesn’t, we know why. They also liked that our company was vertically integrated and that all levels of employees understood the importance of data centricity.

ER: What does this mean for Oak Lawn–and you personally–moving forward?

Roche: This will allow us to leapfrog other companies to an entirely new strata of business without suffering the pain. To be a truly major company, it requires a whole new mentality in management. And the management discipline and expertise that exists at DoCoMo is absolutely world class. They are thoroughbreds.

I feel completely re-engaged. This deal opens up new horizons. We have the elite of the Japanese business community to learn from now. You just can’t get access to this. We’re on a different playing field. We will now be able to apply our principles and strategies in a much bigger playground.

ER: Tell us a little bit about the life of an ex-pat businessman living in Asia. What do you like about it? What are some of the challenges?

Roche: Well, in Japan, we really didn’t live an ex-pat lifestyle. With my wife being Japanese and me knowing the culture and speaking the language, we were well-immersed in Japanese society.

China is similar to Japan in some ways, but very different in others. It’s not predictable, with well-established rules of business.

There are many bad things about China–the pollution comes to mind. The language is extremely difficult and it’s more difficult to immerse oneself in the culture. But I like to focus on the good qualities. I love being an ex-pat. I love being in Shanghai; it’s a huge, vibrant city.

And for a businessman, it feels as though we’re at the epicenter of commerce, of wealth creation. It must be like what New York City felt like in the late 19th century. There are all these Chinese entrepreneurs in the city, building Rockefeller-like dynasties. And they’re all here. Walking around in the city. Their kids go to your kids’ schools. You know some, you don’t know some, but the sense is palpable, historic and very exciting.

ER: Have you always been a risk taker and had the entrepreneurial bug?

Roche: Oh, yeah. I always had some business venture going, starting with a paper route at age 10. And my dad was an entrepreneur. He was a salesman who sold enough that he was able to buy his company. Then he moved on to something else and something else after that. His was a very colorful entrepreneurial career, to say the least.

ER: If you could sum up a few of the nuances of the Asian direct response market that would be surprising or of interest to Western DR marketers, how would you do it?

Roche: I think the similarities would come as a big surprise. The fundamentals of the business are pretty much the same. You’re buying media, putting something on TV and answering the phones.

Now how you buy the media, the lack of service companies–these are big differences. The use of credit cards is very low, too. But people are people. It doesn’t matter where you’re from–everyone wants abs of steel.

July 2009 – Channel Crossing: Retail

Having a Plan Will Save You Money

By Hal Altman

This year, the retail industry has experienced the closing, bankruptcy or near bankruptcy of some of the largest and most successful retail names of the last 25 years. Others such as Walmart, Costco, Sam’s, Target and Bed Bath and Beyond seem to not only survive, but are also able to show profits in our unstable economy.

What does this mean to the direct response industry? Less outlets to sell product that television, radio or web has worked hard to advertise, establish and create a brand for.

Retail chains have not only breathed life into direct response products, but in most cases, successfully outsold traditional direct response sales exponentially. In tough economic times, retailers search for recognized direct response product and know that with continued television and radio coverage, combined with retail exposure, this can be a win-win situation for all.

RETAIL: A NATURAL FIT
The next question is how do direct marketers prepare and get into the lucrative world of retail? The answer is easy, and doesn’t cost any more to prepare for retail distribution while you introduce your product via traditional direct response channels.

Look into a retail distribution company that can guide you through the process of packaging your merchandise so that it can be easily and inexpensively ready for a rush retail test. You don’t want to ever be caught in a position of not being able to immediately furnish your product for a retail test if the opportunity arises. Prior to manufacturing your merchandise, ask yourself the following questions:

• Can I ship this product to both direct response and retail with a simple cosmetic change of outer cartons or with the addition of a color sleeve?
• Should I apply for a UPC code in anticipation of retail sales?
• Will my merchandise be compliant with retail carton sizes?
• On the carton, did I print the ITF-14 (this number is used to uniquely identify units in the supply chain)? Did I print the weight in pounds? Did I print the country of origin? Did I print units per carton?
• Are my outer cartons marked with vendor SKU, product description (color/style/size) and number of saleable units per master?

The checklist above will not impact your fulfillment house’s handling of your direct response orders. In fact, it will cut down on some of the handling time associated with making the transition from DR to retail. It can save you the major expense in materials and labor if you plan on using the same direct response merchandise for your retail customers. It allows you to work out of one inventory for either type of order, utilizing your inventory in the most efficient way possible.

Major chains are demanding in their specific EDI and merchandise requirements. The guidelines listed will not ensure that additional labeling and/or labor will not be necessary for each individual retailer, but it is the very beginning to saving you money and time when entering the retail market.

Hal Altman is president of Motivational Fulfillment and Logistics Services in Chino, Calif. He can be reached at (909) 517-2200.

July 2009 – Super Size It

How upselling and cross-selling are giving
DR revenues an added boost

By Leo Gorcey

Do you want fries with that? Wanna super size your order today? Care to try one of our new cranberry scones with your latte? Let’s look at some earrings that would go great with that skirt you just bought. If you’re going to protect your new, car you really need undercoating. I’ll just go ahead and include that for you. It’s only $100 and we can do it while you wait. Hey, let me show you some really nice carrying cases for your new laptop. And while we’re at it, I would highly recommend the extended warranty protection.

If you’ve purchased anything in the last 20 years, chances are, you’re well aware of upselling.

Banks, cell phone companies, retailers, credit card companies and restaurants, to name just a few, are all taking the art of the upsell and the cross-sell to new heights. Grocery store checkout lanes and gas stations now sport video screens to upsell and cross-sell you while you wait to pay for your groceries or stand idly pumping your gas. All to the tune of multiplying profits.

For the purpose of this article, I’ll focus on upselling, as many of the principles I discuss here are common to both upselling and cross-selling save for the fact that a cross-sell is generally an outbound call or e-mail contact (a two-step process) and, for that reason, merits a treatment of its own.

SUPER SIZING REVENUES THROUGH UPSELLING
Upselling got a big boost in the DR world with the arrival of 800 numbers and gathered a good head of steam through the ’80s and ’90s. Now, in the new millennium, you’d be hard pressed to purchase any DR product without being offered anywhere from one to six upsells (Rush Shipping is now a commonplace upsell earning marketers a nice incremental profit). If you’re among those who count continuity, full-pay conversion attempts and third-party live revenue reads as upsells, then add a couple more upsells to the mix.

According to some direct response white papers, marketers will close a staggering 1.2 billion upsells this year. With the average upsell ticket estimated by some sources to be around $50, DR forecasters are estimating that upsells will add over 30 percent to DRTV (and other direct media) orders in 2009.

For some campaigns, the main offer barely covers the cost of product, media, call center and fulfillment. The upsell is the profit center. In short, upselling increases your average order value on a lead you already paid for.

On the other hand, we are all too aware of the challenges presented by upselling and cross-selling. As marketers face these challenges and inquire together into creative solutions, they can look forward to even more profitable DR campaigns.

WHAT MAKES A GOOD UPSELL?
A good upsell or cross-sell product is a useful accessory (or more fully featured model) that adds to the original purchase in some value-enhancing way and goes further toward creating a satisfying and complete solution to the customer’s problem. An effective upsell complements the main offer and makes it work even better.

“You like that blender? You’ll enjoy it even more with the six additional party mugs!”

A good upsell is also an irresistible bargain. “Those six party mugs are a $30 value, but if we go ahead and include them in your order today, I can give them to you for $14.95. That’s an instant savings of 50 percent. And, of course, the mugs are covered under our money back guarantee. I’ll just go ahead and add those to your order today.” Good upsell products make it easy for the customer to say “yes” without too much thought.

A POUND OF CURE
One of the biggest missteps I’ve seen in upsell scripts over the years is the failure to tie the upsell to the main offer. I’ve seen some first-position upsell conversions double, and sometimes even triple when this error was corrected (talk about leaving money on the table).

Sometimes, increasing your upsell conversions can be as simple as adding a probing question before the upsell.

A question like, “How much entertaining do you normally do?” is a great lead-in to the party mugs mentioned above and ties the upsell to the customer’s emotional ‘hot button’ of wanting to show off her new magic appliance to her friends.

Another common error in upsell scripts is the failure to re-connect with the customer after the main offer purchase is complete, making the upsell appear as an afterthought. A simple remedy for this is either a probing question to re-engage the customer or a simple transition phrase like, “I’d like to take a second to recommend you take advantage of our deeply discounted additional weights for your exercise machine…” and go into the upsell from there.

Using the word “because” has been shown to increase upsell conversions. “Because you told me earlier that you entertain a lot, I recommend we go ahead and include the extra set of color-coded party mugs because I can save you 50 percent by including them in your initial order. Will the set of six or the set of eight work better for you?”

Another ‘pound of cure’ for flagging upsells is to shorten them up. Your customer’s trust may have skyrocketed after that main purchase, but his patience can wear thin and he’ll just tune you out. Remember, an upsell is not a product the consumer was planning on purchasing. So keep the upsells and cross-sells brief and assumptive.

EFFECTIVE UPSELL POSITIONING
I’ve heard upsells read both before and after the credit card information is taken.

The results speak for themselves. Customers tend to say, “yes” two to three times more often when the upsells are presented after the credit card information is collected. This is because it’s practically effortless for a trained call center agent to make incremental sales in a “By the way” assumptive manner after the work of making the initial sale is done.

Even if your main offer is a lay-down, trust increases 400 percent after the caller plunks down that credit card. Trust is the No. 1 reason people buy. It also helps that your customer has made a strong psychological commitment by handing over the credit card and that every decision after that is easier to make.

How you position your upsells can make a big difference in conversion. It generally works best to put your most expensive upsell in the first position. Typically, the first position upsell will close highest. Then put the rest of your upsells in descending order by price. Free shipping on upsells is an effective tool for increasing upsell conversions.

Bundling upsells is another way to increase average order value (AOV). Take a couple of your mediocre or low-performing upsells and bundle them with a price point that’s less than what the customer would pay for the items separately. Many customers just can’t resist the “bundle bargain.” If the customer says “no” to the bundle, you can downsell incrementally. Bundling also cuts down the number of upsells.

Finally, the well-worn maxim of DR: “Test, test, and then test some more,” applies to upsell and cross-sell positioning in a huge way. Monitoring your upsell and cross-sell calls and metrics daily and proactively testing new and different upsell and cross-sell products–as well as different positioning, price points, premiums, scripting, configuration and training strategies–will ensure the highest and best results for your upsell campaigns.

CONTINUITY AS AN UPSELL
Many offers now include upsells with continuity (the exercise machine with a Protein Powder/Auto-Ship). The continuity upsell requires more skill than many call center staff members are equipped to impart to their agents. Having said that, the growth opportunities are considerable and revenue can be enhanced measurably with script editing and agent coaching.

An entire article could be devoted to the subject of continuity conversions.

Suffice it to say that the focus of the continuity conversion and the continuity upsell needs to be on the customer’s needs (quality, value and convenience) and on how we word conversations about continuity. For example, many marketers have replaced the phrase “auto-ship” with the softer “auto-delivery” and introduced phrases like “Smart Shopper Discount” and “locked-in low prices” to create additional value in continuity programs.

DOWN-SELLING
No conversation about upselling would be complete without a few words about down-selling. Down-selling is a great strategy if you offer RFTs with continuity, high price-point main offers (as in the case of high-end exercise equipment), continuity upsells or high price-point upsells.

For example, some campaigns now downsell from negative option continuity programs (where continuity is a part of the main offer). A typical negative option downsell will add 20 percent or more to the cost for a one-time shipment of the product thereby encouraging the caller to “…go for the continuity offer and save the 20 percent since you can cancel any time.”

This downsell, when handled skillfully, kills two birds with one stone. It serves as a second attempt to the main offer and an effective strategy to keep your caller from walking away empty handed. Another example is the downsell from a high-end exercise machine to a reconditioned model or floor model–typically for about half the price.

Good downsells can keep your agents from leaving money on the table and get your product out to the customer who is interested, but needs a lower level entry point to take action.

THE BOTTOM LINE
Upselling is easy when you remember that your main business is helping the customer. As you focus more on the problems your customers bring to you and what it really takes to offer the most satisfying and complete solution, you can open up avenues of growth and design strategies that will deliver the most desirable results for everyone. Marketers will enjoy more profitable campaigns, vendors will experience happier clients, call center agents’ jobs will be made easier, Customers will receive added value and convenience, and the electronic retailing industry will be better poised to reap the fruits of the new economy.

Leo Gorcey is a direct response performance specialist with background and expertise in training call center teams, crafting profit building call center scripts, coaching DR leadership teams and partnering with direct marketers to increase revenue. He can be reached at (541) 531-7419, or via e-mail at leogorcey@leogorcey.com.

July 2009 – ERA Directs Summer Blockbuster

With a new CEO at the helm and a redesigned format, ERA’s 2009 D2C Convention may just be the surprise hit the direct response industry has been waiting for.

By Pat Cauley

Let’s say you just walked out of a mediocre movie. This movie had many scenes that you truly enjoyed. However, it also had some scenes that could use some serious editing or even cutting. Imagine if you had the ability to go back and change whatever it was about the movie that was just so-so. This is the approach that ERA President and Chief Executive Officer Julie Coons took when looking at ways to revamp the annual ERA convention.

A LOOK BEHIND THE SCENES
“I think that if members and participants take a look at the conference as it’s now designed, they will see that their voices have been heard. From the time that I’ve been on board, both the board of directors and myself spent a significant amount of time talking to and listening to members, exhibitors and sponsors. And what you see now is a direct result of member engagement and input, and this is a plan that was well vetted and approved by the board, which I think is very much a reflection of what the members wanted to see and will see this fall,” says Coons.

She went on to describe a number of areas where feedback was taken into account when planning the D2C Convention. “This year, the trade show has a no-cost or low-cost access, to obviously enable all participants and members of the industry to be able to engage with our exhibitors, which is a tremendous value to everyone. We have adjusted the show floor to accommodate more seating and meeting space, and there are private meeting rooms on the floor that are available on a standalone basis. Free lunch will be served both days on the show floor. We’re taking that buzz that we know exists in the hotel property and moving that onto the show floor in a way that’s accessible and affordable,” says Coons.

One major change off the bat was the show’s theme. “This is a revamped show with new pricing, a new look and feel, new show-floor activities, and new excitement and buzz. We are taking the bull by the horns and we’re not letting up,” says Dave Martin, vice president of marketing at ERA.

Coons concurs, explaining that she’s most excited about the new D2C (direct to consumer) brand that ERA has adopted. “The reason that the brand is important is because I think it speaks to a much broader community of our members and broader community within the industry,” she says. Coons is also keen on the expanded education platform available for attendees. “We’ve built out education in such a robust way that we need to start the education a day earlier than in years past. The opening night party is also a day earlier on Sunday, September 15. Everything is almost happening a day earlier this year because we just have so much more to offer,” she says. And the offerings begin with a unique spin on the traditional trade show floor.

2009 ERA D2C Convention Education Tracks:

Track One–Direct Response Each of these presentations and panel discussions will prove valuable to both the veteran direct response marketer and those just testing the waters of DR. Whether it’s a discussion on how to refine under-performing campaigns, how to craft the perfect offer or when the use of celebrity endorsers justifies the expense, each session will provide actionable, real-world information from industry experts at the top of their games.

Track Two–Digital Marketing The online and mobile marketing landscape is constantly shifting, with new platforms, technologies and marketing techniques emerging on a seemingly weekly basis. Rather than explore the latest online fads, industry thought leaders will help you separate cutting-edge best practices from the hype. Each session will identify proven techniques for leveraging those digital platforms that matter–those that generate revenue. Speakers will provide three to six tangible takeaways that you can immediately put into practice in your own business to better leverage this incredibly powerful marketing medium.

Track Three–Operations and Profitability It’s an overlooked subject area, but one with perhaps the most immediate impact on your bottom line: how to operate your direct-to-consumer retail business more efficiently and identify those tools and services that can truly increase profitability. You’ll learn how to organize and harness the power of your data, getting the most out of your media buy or how the new economy will affect your business. It’s a can’t-miss track for the business owner or C-level executive.

ROLLING OUT THE RED CARPET
One of the biggest concerns about exhibiting or attending a conference is a lack of action on the trade show floor. Coons is looking to transform the show floor into a true marketplace of buyer/seller engagement. Martin stresses that pricing is key. Free show-floor-only passes, reduced pricing for additional exhibitor staff, a cyber café and an international lounge are all elements brought forward this year to elevate traffic.

“The D2C Catwalk will be very exciting, as well as the return of the new product showcase and inventors as part of the product theater,” says Martin. Coons sees the trade- show-floor dilemma as a two-part question. The first being: how do you get people on the show floor?

“Well, the first thing you do is make it lower cost and accessible to both members and non-members alike. The board has approved it and that’s at no small cost to the association, but the return is, obviously, satisfied members, exhibitors and sponsors and that will over the long run be so important to the strength of the association,” says Coons. The second question is: how do you keep people on the show floor once they’re there?

“The way you keep folks there is you have accessible seating to encourage people to stay on the show floor and really use that as a meeting space. We have standalone meeting rooms for people who want that greater degree of privacy. We have a catwalk that will be scheduled with all kinds of fun and exciting short activities, such as fashion shows and Pitchmen duels,” says Coons.

In the end, Coons says the main objective of the floor is to create a dynamic environment that attendees want to stay in. “We’re going to have an Internet café near the show floor and also have food and beverages available in and around the space. We really want to create a great cocoon where this industry will be able to bump into everyone they want to see,” she says.

CAPTURING NEW AUDIENCES
While the goal of the entertainment industry is to attract moviegoers from all walks of life, ERA is looking to expand its attendee base far beyond the usual suspects.

“We are using D2C video interviews within social media to drive new blood, a D2C blog and Twitter. We’ll do a TweetUp at the show and use Twitter beforehand on a regular basis to spread the word. We also have the use of video overviews of the education tracks, with the goal of going viral. We’re also working on targeted partnerships,” says Martin. The D2C Convention’s microsite has more features and detailed information for attendees, exhibitors, sponsors and the media than ever before.

ERA is also looking to new arenas within its own industry, which may have been left out of the fold before. “We’re having a new focus on the financial aspects of the industry, which I think is new for ERA. We’re really emphasizing the financial dynamics of this industry. This will be evolutionary for us and also bring us new audiences,” says Coons.

EDUCATION OFFERS BONUS FOOTAGE
Although ERA’s membership is comprised of well-seasoned experts in the DR profession, with the way media is rapidly changing, there is always room for a little further education. “We’ve expanded our education offerings so that we have a greater variety not only for new comers to the industry, but for veterans as well,” says Coons.

In keeping with the theme of revamp and change of an old formula, ERA is delighted to announce Montel Williams as the keynote speaker for D2C. Courtesy of Tristar Products, Williams will bring his unique formula to the table explaining to attendees how he revolutionized conventional direct response by combining elements of the infomercial with his well-known talk show format to form what he calls the “Talkmercial.” ERA Executive Vice President, Gina Mullins-Cohen, couldn’t be happier.

“This year’s education program provides attendees with a comprehensive package that covers just about every discipline imaginable representing the direct-to-consumer market. And to make it more worthwhile for attendees, we’re presenting tracks, power sessions and keynotes that range from the basic fundamentals to more advanced practices,” she explains.

To accommodate the many educational offerings, ERA has made some significant adjustments to the schedule. Among the biggest changes is the move to Sunday. While there will be educational sessions on Monday and Tuesday, the majority will take place on Sunday. This is when the tracks will be held. Mullins-Cohen adds, “The tracks are another noticeable change that will make education available to all parts of the industry–all positions and all facets.” The three tracks are direct response, digital marketing, and operations and profitability.

It’s Your Industry–Get Involved!

“The D2C event’s primary purpose is for the industry to come together in a business development oriented-environment. Having said that, it’s important that our participants understand that the association is active not just those three days, but all year long,” says Julie Coons, ERA president and chief executive officer.The ERA Leadership Dinner on Monday, September 14, is where the ERA PAC (political action committee) raises significant funds each year to give the industry the ability to go out and work with legislators on a year-round basis to help advocate for and educate them about the great things that this industry brings to consumers. For more information, contact Bill McClellan at (703) 908-1032, or via e-mail at bmcclellan@retailing.org.

SHINING A SPOTLIGHT ON DR
Another difference this year, as opposed to years past, isn’t necessarily coming from ERA, but from outside influences. The perfect storm scenario of Madison Avenue’s respect coupled with an economic downtown and the rise in popularity of affordable As Seen on TV products has heightened awareness levels in ways the industry has never seen.

Even CNBC recently had an hour-long special on the industry that portrayed it in a well-deserved, good light. So, aside from the benefits of business development, education and networking, the industry also has a reason to come together just to celebrate!

ERA and the industry know how to celebrate in grand style with its annual Awards Gala. “This year, we’re turning the awards up a notch with a more refined program along with a high-style production that will certainly shed a well-deserved spotlight on those who are fortunate enough to be called upon to step onto the stage and accept this prestigious honor,” says Ashley Cavell, ERA’s director of education.

Although ERA does not want to reveal all that it has in store for attendees at the D2C Convention, there is much speculation out there. “I think there is absolutely a heightened awareness and recognition among not only the marketing and advertising industry, but also the public to the power of direct-to-consumer marketing. ERA, as an association, is at the forefront on a year-round basis advocating for this industry. There’s no question that in these hard economic times and with the maturity of this industry, which is incredibly bottom-line oriented, the D2C is a great opportunity for the industry as a whole and ERA to be well recognized in this arena,” says Coons.

In this day and age, the very idea of a trade show can sometimes seem obsolete, especially with the advent of new technologies that make it easier for people to connect. However, this is not the case with the direct response industry. This is an industry built on personal trust, connections and relationships. “The D2C Convention is the annual place where the industry leaders and the broadest cross section of our industry come together to meet, learn and collaborate, and each one of us does it in a variety of different ways and so that’s why you see the mix of networking, business development and recognition, which you’ll continue to see with the ERA Awards Gala,” says Coons. Hopefully, you’ll register for the convention and see what all the fuss is about.

To learn more about ERA’s 2009 D2C Convention, please visit www.d2cshow.org.

July 2009 – Cover Story: Breaking Barriers in Canada

A look at how ERA’s new Canadian Council will bring new awareness to members and global marketers about the opportunities that lie to the north of the United States

By Vitisia Paynich

Five years ago, Mike Moreau was a virtual stranger to the direct response world. He had just begun working for a Canadian-based inbound call center, IMI, and he knew no one in the industry–let alone anyone at the Electronic Retailing Association (ERA). IMI had garnered great success in Canada but when it came to the States, like Moreau, no one had ever heard of the company, which is why he was brought on board.

In a previous industry, Moreau had conducted business in the U.S. and was familiar with some of the obstacles that went along with a Canadian company trying to penetrate the U.S. marketplace. Much of it had to do with the fear of the unknown about their North American neighbors–an issue that Moreau had also experienced in the DR business. “When I started to sell IMI to a DR marketer in Texas and he asked, ‘Legally and logistically, how do my calls flow into Canada and how will my fulfillment company in Chicago get the orders?’ I realized there was still that barrier. And of course, you could take that order in Timbuktu and send it anywhere, because it was all done electronically.”

This prompted Moreau to become actively involved with ERA, which began with his participation on the Membership Committee. At that point, Moreau had left IMI to form his own company, Dream Team Direct, a campaign management company and supplier agency based in Winnipeg. “The thought of creating a Canadian Council came from my work on the Membership Committee and then when I became [its] chairman and was voted onto the board of directors, I thought now this would be a good opportunity,” he explains.

Thus, in 2009, ERA officially launched the Canadian Council with Moreau as chairman and fellow board member, Steve Edelstein, CEO of The Logical Step in New Haven, Conn., serving as co-chairman.

“The mission of the Canadian Council is to educate and inform our American and international friends, as well as our ERA members, about the robust direct response market in Canada,” notes Moreau. “When you’ve got a successful program operating in the United States, the next best thing is to come up to Canada. And when you think that almost $2 billion a day in trade and services are going back and forth between Canada and the United States, it’s just amazing.”

Edelstein, who brings a U.S. perspective to the council, says, “a few things need to take place.” The first is to gain an understanding and appreciation for what this market and the Canadian consumer can generate for marketers in terms of revenue. “Also, I think it’s very important to really educate the general ERA membership and direct response constituency on cultural issues,” he says, “because one of the things that I certainly have found while marketing products in Canada is there are, albeit slight, cultural differences in terms of how the product is presented, the call to action and the overall message.”

While Moreau and Edelstein are leading the charge, other Canadian members are elated that the association is taking notice of its members to the north.

“I think it’s great,” says Ed Crain, CEO of Kingstar, a Toronto-based DR agency.

“I’ve been working in Canadian DRTV for approximately 15 years and we’ve tried to work through the CMA (Canadian Marketing Association). They tried at different times to have a DRTV panel, but I just felt that the mindset wasn’t as established as it is with ERA.”

Leaders in the Canadian DR Market

		Council Co-chair: Steve Edelstein, CEO, The Logical Step	Amir Tukulj, CEO of Thane Direct Inc.	Mark Goodale, VP and General Manager, Torstar Media Group TV	Rob Woodrooffe, chairman, Interwood Direct
Canadian Council Chairman: Mike Moreau, CEO, Dream Team Direct
		Ed Crain, CEO, Kingstar	John Dickson, owner and president, Automated Fulfillment Systems	Jean-François Quevillon, DRTV and sales manager, TVA Sales & Marketing	Richard Stacey, CEO, Northern Response (Int’l) Ltd.

EXPLORING THE MARKET
According to 2006 Census figures, Canada has a population of nearly 32 million people–comparable in size to California. The country is comprised of 10 provinces and three territories.

“Canada has a relatively strong GDP and a high consumer-spending index,” says Mark Goodale, vice president and general manager of Torstar Media Group TV, one of Canada’s largest media companies based in Toronto.

Amir Tukulj, CEO of Thane Direct in Toronto, adds that Canada is a natural extension of a U.S. marketer’s business. “You gain access to a marketplace of about 32 million affluent customers whose behavior is very similar to those in the U.S. and whose purchasing power is the same.”

While the two North American countries share certain traits, Richard Stacey, CEO of Northern Response (Int’l) Ltd–a distribution company based in Toronto–cautions that marketers must still recognize Canada as a foreign country. “Although Canada is on the same continent as the U.S. and not overseas, it still has its own issues such as currency, shipping, customer service and regulations, as well as cross-border operational issues.”

Rob Woodrooffe, chairman of Interwood Direct, a distributor in Toronto, says, “It just drives me nuts to see American companies selling products in Canada in U.S. dollars, because the currencies aren’t the same. I mean, would an American ever buy a product from a marketer in the U.S. using Canadian dollars?”

Another major difference between the U.S. and Canada is language. There are two official languages in Canada: English and French. The Quebec market, which is French-Canadian, represents more than 35 percent of total DR sales in Canada, according to Jean-François Quevillon, DRTV and sales manager at Montreal-based TVA Sales & Marketing.

DISPELLING THE MYTHS
Why are some U.S. marketers wary about this market? John Dickson, owner of Automated Fulfillment Systems located near Toronto, says they often think it’s too much trouble to bother with, and therefore, stay away. “I’ve talked to many U.S. marketers who have said, ‘Yeah, we’ve looked at Canada for a number of years and as a matter of fact, we get cross-border responses from Canadians to our U.S. advertisements, but we don’t bother to fulfill them because it’s a hassle; there are border clearances and hold-ups and when we try to fulfill from our facilities in the U.S., we get customer complaints,’” he says.

Dickson says that some U.S. marketers also believe they must pay Canadian income tax, set up a bank account and a business presence in Canada, which is untrue. “We’ve explained many times that all they have to do is register in Canada for GST (Goods and Services Tax), which we help perspective clients do and it’s quite easy to set up,” he says. “Marketers also just need to form a relationship with a good Canadian customs broker. We just happen to know one that we work with often and after that happens, all a DRTV marketer has to do is just make sure the goods come over to us in quantities that will last for a while.”

If you are considering entering the Canadian market, Stacey strongly advises conducting your due diligence before making that big leap, which means consulting with a number of key players in Canada such as distribution companies, DR firms and media agencies. This will help you decide if you’re going to approach the market on your own and establish a long-term presence in the country, team with a Canadian partner to handle a few channels of distribution, or in some cases, not enter the market at all.

Woodrooffe says, “By doing it yourself, you have all the risks and you make all the profits. By having a distributor, you share the risks and the profits.”

U.S. PRODUCTS FIND SUCCESS UP NORTH
Still not convinced that Canada is a viable market? “Everything in Canada is about one-tenth of what it is in the States,” says Goodale. “Toronto is the fourth largest market in North America–Chicago, New York and L.A. are the only three that are bigger.”

Thus, he points out if you are spending most of your energy in the fifth, sixth and seventh largest markets and bypassing Toronto, then you’re leaving a big market on the table.

And if you’re wondering what DR products do well in this marketplace, look no further than IMS or Jordan Whitney–as many of the top-ranking products in the U.S. have also found success in the Canadian marketplace. Popular household products like the Swivel Sweeper, ShamWOW and Snuggie are cleaning up in this market, while fitness items like Hip Hop Abs, TurboJam and P90X are bulking up sales. One U.S. product set to roll out in Canada in July is the Dual Saw.

TAKING TO THE CANADIAN AIRWAVES
When it comes to navigating the media landscape in Canada, one must remain cognizant of regulations.

The Quebec television market comprises three conventional channels that make up 52 percent of the market share, 24 specialty channels capturing 41 percent of market share, and a few American channels that own 1.7-percent market share.

TVA, according to Quevillon, is the largest French broadcaster in North America with 59 percent market share. The other two channels, SRC and TQS, own 29 percent and 12 percent, respectively.

Quevillon adds that most of the media time on TVA is sold on a long-term basis, therefore, the majority of DR media agencies and distributors will book 52-week contracts. Yet, Quevillon points out that while inventory may seem limited, there’s room for different clients–especially with its 24-hour, seven-day-a-week infomercial station.

ShopTV Canada also has a 24/7-infomercial station. “We have 25.5-percent of all media inventory available in Canada through [that station],” notes Goodale.

“I think the significant thing that we’ve been able to do on the media side,” says Crain, “is really secure two-minute time for our marketers and run them successfully on a consistent basis. If we’re booking two-minute time, we’re clearing 75-85 percent of our schedule. Whereas, there are periods of time in the U.S. where two-minute marketers are only clearing 25-30 percent of their schedule.”

Although stations like TVA and ShopTV Canada embrace DRTV, infomercials are not welcome on every station. For instance, the Canadian Broadcasting Corporation (CBC), the country’s national public radio and television broadcaster, is not allowed to air infomercials.

Other types of restrictions that marketers should keep in mind are with regard to product claims and testimonials that appear in a marketer’s show. “You are required to obtain a Telecaster approval number from the Television Bureau of Canada (TBC),” notes Quevillon.

“The biggest restrictions I think are around ingestibles,” says Goodale. “We and a few others are working with Health Canada to try to make that process easier and more transparent for people.” Although the process may seem daunting, Goodale says TV standards and regulations tend to be commonsense things that promote good business practices and truth in advertising.

SPEAKING THE LANGUAGE
When it comes to the English-speaking market in Canada, U.S. marketers can take comfort in knowing that they can keep their shows nearly intact with the exception of some minor tweaking perhaps to the offer or even the 800 number. However, if they want to air their programs in the Quebec market, French translation is a must.

Marketers who want to penetrate the Quebec market must not only consider translating the show on the front-end; they must also consider the logistics on the backend as well. For instance, if you have a show that is translated in French, having a French-speaking call center is just as critical.

“The average U.S. marketer doesn’t realize that if you want to get a DR product into Canada, and hopefully end up on retail shelves, you must have French on the packaging,” notes Dream Team’s Moreau. “You just can’t wing it.” In addition, product instructions also must be translated into French.

THINK MULTICHANNEL
These days, marketers know that it’s not enough to simply rely on a single distribution channel when conducting business in the U.S., and the Canadian market is no different. “I think in any market today, especially in markets that are most competitive, you have to have a multichannel strategy,” Thane’s Tukulj affirms. “Your television, Internet, credit-card syndication, catalog and retail strategies all have to work together.”

If you are running a DRTV campaign, it’s imperative to also have a supporting website.

“Over the last couple of years, we’ve seen 60 percent of television orders coming from the web and we’re running a couple of products in two-minute spots where it’s as high as 500 percent,” says Crain.

Retail is another critical channel. In fact, many experts believe taking a product to retail in Canada is a bit easier than in the U.S. Thus, it makes for a good testing ground. Stacey says the P90X is not only doing well on television in Canada, but it’s also highly successful in retail even though it isn’t available in retail in the U.S.

SEEING BEYOND A BORDER
As U.S. and other global marketers consider new ways to expand their overall business, the Canadian Council hopes they will look north.

As Moreau puts it: “We want marketers to realize that Canada is the next logical step, and that there’s enough opportunity for everybody to share in this growing market.”

June 2009 – Case Study: The Sights and Sounds of Multichannel Marketing

Songbird Hearing Inc. finds success the second time around through multichannel marketing. The disposable hearing aid company uses DRTV, online and PR to reach its target customer base.

By Vitisia Paynich

Sometimes, finding a fresh perspective might be the best solution for revamping a company’s marketing strategy. It also doesn’t hurt to have additional investment capital to help fine-tune the business model–just ask disposable hearing aid manufacturer, Songbird Hearing Inc.

After a few years of sluggish business, the Princeton, N.J.-based company decided to redirect its energy toward direct response television, online marketing and public relations in order to appeal to a more targeted consumer base. The restructuring has paid off handsomely, making it a leading competitor in the hearing aid market.

Sarnoff Corp. (formerly RCA Labs) invented the first disposable hearing aid in the late 1990s. “The mission at the time was essentially to take all of the hassle, inconvenience and expense out of purchasing a hearing aid,” explains Christopher DiCostanzo, president and CEO of Songbird. Thus, in 1997, Sarnoff launched a new business called Songbird Hearing Inc.

In its DRTV spot, making certain that the testimonials are authentic is very important to Songbird’s creative.

However, DiCostanzo says the new venture proved challenging. “At the time, the management of the company thought they would follow the disposable eye contact lens playbook,” he says. That plan, unfortunately, failed to deliver stellar results.

DiCostanzo, who previously worked for Johnson & Johnson, joined Songbird in 2002 as its vice president of marketing. And over the next couple of years, he saw the writing on the wall. The company generated fairly good business with the first version of the product–an inexpensive inner ear-style hearing aid–the problem was that Songbird lacked proper financing.

He explains that there just wasn’t enough profit margin. What’s more, the company had difficulties convincing consumers about the convenience of using disposable devices. “Buying a hearing aid back then was considered like buying a car,” DiCostanzo says. You’re going to buy some fairly expensive piece of merchandise in which a salesperson would need to navigate you through the process, especially if you’re going to invest anywhere from $2,000 to $5,000. “And then on top of that,” he notes, “you need scheduled maintenance, batteries and you’ll need to buy insurance–much like buying a car.”

In 2004, Songbird took the product off the market and went to work with some additional funding to “build a better mousetrap.” That meant bringing in a group of new talent to help improve the product and overall business model. DiCostanzo led the efforts to reposition Songbird Hearing Inc. from a professional to consumer products company.

A NEW DIRECTION
With the additional investment capital, Songbird developed a new disposable hearing aid, a behind-the-ear version, which is something DiCostanzo says the company wanted to bring to market for quite some time but didn’t have the funding. So the company launched the Songbird 400 Hour Digital Hearing Aid in August 2008 but this time with a more advanced direct response playbook.

“The big shift for us back in ‘04 was realizing that consumers don’t look at hearing loss as a medical condition,” says DiCostanzo. Instead, consumers merely consider it as just part of aging. He also points out that the hearing aid industry looks at fulfilling a medical need, as opposed to the consumer need.

DiCostanzo adds that the Songbird product is targeted to first-time users who aren’t ready to commit to everything that goes along with hearing aids. These are people with mild to moderate hearing loss who may not want to utilize the device on a full-time basis, much less pay an exorbitant amount of money for it. “Our product and the way that we now market it is uniquely positioned to communicate to those consumers and say: ‘It’s perfectly okay to come into hearing aids only wanting to use the product on a situational basis.’”

Ease of use was another selling point. The disposable digital device features a patented design that provides 400 hours of active use, and it can last up to six months. Customers can then just replace it with a new one. In addition, there are no in-office fittings, no maintenance and no batteries to replace.

Songbird later appointed DiCostanzo as its president and CEO. This gave the new executive an opportunity to surround himself with the people who could help him develop a sound multichannel marketing plan and build the Songbird brand.

“The successes and failures of ‘03 and ‘04 really helped us to hone in on the things that are the most important,” he says.

GOING MULTICHANNEL
One important goal for the company was broadening its marketing through a variety of channels. “DRTV is incredibly important to us to generate demand and drive sales, but we also market online and in print. PR is also an important part of our marketing mix,” says Ben Quigley, Songbird’s vice president of marketing.

When it came to the creative for its DRTV spots, Quigley says the company made sure it was transparent, straightforward and authentic. “So if you look at our DR spot, particularly the testimonials, we took great pains to make sure that the people giving testimonials spoke in their own words without prompting from the director,” he notes.

Quigley also contends that there are low-quality hearing products currently marketed via DR that might make others wary of the Songbird product, which has a hard offer of two payments of $39.95. To lower those barriers, the company is promoting a free trial (soft offer) so that people who may be skeptical about the technology can try the hearing aid without making a big commitment.

In late 2008, the company launched its short-form spots on various cable networks. Although Quigley says they have tested a little bit in the broadcast space, cable has been a better fit. “The nice thing about cable is that it’s pretty fractured–there are lots of channels that we can test without making a big investment.”

Songbird is currently working with New York-based ConvergeDirect to handle its DRTV media buying. The company has also aligned itself with other supporting partners such as The Logical Step of New Haven, Conn., which consults with Songbird on the backend; and Datapak Services Corp. in Michigan, which handles the fulfillment part of the business.

So, has DRTV been working for the company? “This has been a really tough economy, and there have been a number of prominent hearing aid companies that have had tough quarters,” explains Quigley. “But since we launched in October, we’ve been successful in growing the business. And in May, we exceeded some of our sales records.”

BUILDING AN ONLINE PRESENCE
Songbird hopes to keep up that momentum by continuing to focus on each of its respective marketing channels, especially on the web. Video streaming is very important to the company’s website. In fact, visitors can view the DR spot right on the homepage, as well as watch video testimonials.

The Songbird 400 Hour Digital Hearing Aid is disposable and lasts up to six months.

Another way in which Songbird is utilizing video is as an instructional tool. As Quigley explains: “Most people trying the product have no experience using a hearing aid. So, if you’re going to the sub-pages of the site, you’ve got video that’s coaching people on how to put the product on, how to adjust it; we want to arm people with that kind of information.”

Prospective customers can also access additional information about the hearing aid device by clicking the company’s FAQ page.

Quigley says Songbird also concentrates on pay-per-click and search engine marketing. In the online space, “we’re also doing e-mail marketing both as an acquisition tool for prospects and also for cultivating the relationships with our customers.”

He adds that because this is a considered purchase, prospects may need to think about the product in a couple of different ways and see Songbird several different times before they actually are ready to order. “And we use e-mail for what we call chase programs. These are programs where some people have called in but they are not quite ready to order; or they’ve come to our site but they’re not ready to buy, but they’re willing to sign up for our newsletters and to get updates. We use e-mail and offline mail to send them more information and give them discount cards and things like that to try to get them over the hump.”

PR GETS THE WORD OUT
Public relations is another channel that Songbird has actively utilized. The company currently works with Paramus, N.J.-based Rosica Strategic Public Relations.

“We’re using PR for two reasons: to try to drive sales and to drive credibility,” says Quigley. “We’ve been able to get reviews in The Hearing Journal and Prevention magazine. And we just got a really great hit on New York Newsday that was picked up by The Los Angeles Times and The Chicago Tribune.”

Quigley makes certain that any publicity that they receive in print is then brought back into the company’s marketing and advertising. For example, consumers can go to the Songbird site and access clips from publications and other media.

“So, being authentic and transparent by bringing elements in that can really support the fact that this is a high-quality product are really important in our creative,” says Quigley.

STAYING THE COURSE
With a new perspective and a marketing plan that seems to be working, DiCostanzo realizes that Songbird has a ways to go before it can achieve the type of success and notoriety that Apple and Sony have enjoyed. But for now, the goal is to simply be a key player in the hearing aid market. As DiCostanzo explains: “We’re trying to bring to the hearing-loss space what reading glasses brought to the eye care category.”