In The Mix
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How do you go from having an idea for a Web site to having millions of people find out about it in Glamour, Self, Family Circle, McCall's and W? Katherine Legatos knows firsthand how it's done--she's scored loads of media exposure since successfully launching ingredients.com, a specialty personal care and health Internet company, with partner Amy Ryberg, 29, in November 1999.
Since ingredients.com first opened for business, the New York City-based Web site has received not only attention from the media, but, more important, attention from customers. We asked Legatos, 29, to give us the ABCs on taming the wild, wild Web, as she appeared to be doing when we spoke with her on February 9th--an eternity after start-up in "Internet time."
So what does it take in the way of background and talent to make this sort of thing happen? Before she formed ingredients.com, Legatos served as director of consumer public relations and development for the largest women's online network, iVillage.com. Prior to that, she did PR for 1-800-FLOWERS and its Web site. Her skills were complemented by partner Ryberg, iVillage's first employee and head of production, whose technical expertise helped the site to become the 35th most visited on the Web, receiving 90 million hits per month.
But, Legatos insists, you don't have to have such high-level credentials to start a successful Web site. So, what is it that you do you need? She was kind enough to provide all of the answers in our close-up look at this real-life e-tailing rollout.
Scott S. Smith:You've been getting an enormous amount of media attention for a small start-up. How did you manage to accomplish that?
Katherine Legatos: We couldn't afford to hire a PR firm, so we did guerrilla marketing. I knew people in the media, and we had something newsworthy and talked about it constantly to everyone we could get to. We launched just before the holiday season, when everyone is stressed out and could use [our] products to calm and energize, so our promotion was good timing. We focused on business media to build our profile for potential suppliers and investors, and online media were especially receptive, [as were] columns on Web sites in women's magazines.
Smith:Let's start back before you had experience with any Web site. What started you on the path to where you are now?
Legatos: I started selling EstÃ©e Lauder and Cosmair at beauty counters in high school and college, so I had a chance to study usage patterns and purchasing habits for five years. A customer recruited me to work in the communications department at KPMG Peat Marwick, and later I got a marketing degree at Long Island University. I joined the marketing department at 1-800-FLOWERS and had a chance to work alongside CEO Jim McCann, whose entrepreneurial determination made it such a success. While there, back in 1994 before I'd encountered the Web, I was part of a team that worked on selling through 14 interactive platforms, including AOL and Bloomberg. A year and a half after I arrived, one of the executives went to iVillage and took me with her. Back then, it consisted of 10 people, so we all did a bit of everything, which is the ideal sort of training with an Internet company.
Smith:Does one need the level of experience you had and a marketing degree to make the odds of succeeding online realistic?
Legatos: The best way to learn about new media is to roll up your sleeves and work at a company that will give you hands-on experience, preferably in more than one area-and there are a lot of opportunities for that. What we all have in common is an ability to be flexible, a willingness to change fast and strong stomachs for the roller-coaster ride. Everyone wants to be part of the Internet revolution. But many people don't realize that you have to work in a somewhat chaotic environment, which doesn't mean the company's not stable or sound. Being able to manage the reaction in employees is very important to success in the Net world. One month we had 10 employees and moved into a temporary office, and a month later we had 10 more and had to move again and we had to get all of them working together. Not everyone can adapt that fast. Right now, we have 50 employees and we're growing fast. We use a lot of our own calming and energizing products!
Smith: What sparked the idea for the company?
Legatos: In June 1998, Amy and I started talking about how women were being empowered by the Internet and how we could serve that market. We looked at various opportunities and decided to focus on personal care and health products because we knew how big the industry was and believed that women were still underserved. At a barbecue that summer, one of the founders of iVillage told us, "If you don't do this, someone else will." It was an "Aha!" moment and we never looked back.
Smith: How did you get people to join what was in the beginning just a dream?
Legatos: We would work at each other's apartments after we got off work at iVillage around 10 p.m. every night and on weekends. We knew what we didn't know, which is critical, so we began approaching people with expertise in those areas, like product development and accounting. It took about five months to pull the initial team together. In the beginning People thought our enthusiasm was infectious, saw the opportunity, and we persuaded them about our vision of what we thought was about to happen in the market. They were willing to join us without having to be paid before we launched. Amy had a college buddy who helped us with the legal work.
We met most of the main people through various referrals. As important as finding them and raising money, our network provided us with a lot of mentoring.
Smith: How did you pick the name and in what ways did you decide you would differentiate yourself from the competition?
Legatos: We had secured 50 names before we thought of this one. Someone owned it, but we made an offer the same night and it was our first investment, a signal to investors that we were serious.
We wanted a name that conveyed the idea of natural ingredients of health and beauty, scents which have benefits that have been traditionally recognized. In 1995, aromatherapy, which is what we decided to specialize in, was only familiar to 26 percent of adults, but three years later, 45 percent knew about it. We didn't want to get into medical claims, just the idea of providing a place where people could easily order fragrances that were most in demand with benefits that were backed up by information. We think the associated properties can be transferred to other products and believe there are private-label wholesale opportunities. Advertising on our site isn't part in our model now.
Hardly anyone was offering any products for consumers exclusive to the Web when we began working on this, and that's what we wanted, and so we've been pioneers. There haven't been any models for us to follow. We do our own formulations and manufacturing. We have also packaged and marketed these in playful, aesthetically pleasing ways and tried to make the shopping experience fun. We pay attention to what other companies are doing on and off the Web, but I learned it can be crippling to obsess over potential competition.
Marketing Her Web Site
Smith: How did you raise your start-up capital?
Legatos: We accepted the first check from family and friends in December 1998, and took in amounts from $2,000 to $75,000 until we had half a million dollars. We quit iVillage on the day it announced it would be doing an IPO, and everyone there thought we were crazy. But it showed our investors how committed we were.
We built confidence because of our experience and the people we recruited to help us. Then we spoke to the Downtown Venture Conference in New York City and the organizers said we could put out a press release if we'd write it by the next day. We stayed up 'til the wee hours of the morning to get the wording right, and it went out over a commercial wire service. The next weekend, Amy got a call from a venture capital fund in Cleveland that saw the release, and eventually we raised $4.5 million. At this point, going public isn't on the horizon-we'll probably build towards that.
Smith: How did you link up with other Web sites for marketing?
Legatos: We hired LinkShare, which has this amazing system that allows you to send information about your Web site to other sites and invite them to refer visitors to you for a percentage of purchases. They have hundreds of thousands of all kinds of sites on their system, all carefully screened. It's a sophisticated, turnkey system that even small companies can afford. We used our contacts to get them interested in what we were doing. We also used our contacts to approach AOL and MSN and establish a presence on their networks.
Smith: What's been your best marketing idea?
Legatos: Sampling. We have assembled a database of customers consisting of 130,000 names and done direct mailings. Any visitors to the site get free product samples. It's very efficient in converting people into customers.
Smith: How did you go about choosing who would design and host your Web site?
Legatos: We decided to make a significant investment to hire Fry Multimedia, which gave us credibility with investors because they build many of the large sites. We have all our systems integrated, from manufacturing to accounting, using Microsoft and Great Plains software. But you don't have to be that ambitious to have a successful system. You can hire some freelance talent and a combination of smaller shops that will put together what you need.
Smith: Where do you think you'll be with the company a year from now?
Legatos: We'll keep working to invest in the business, sampling, courting media attention and building a brand with third-party endorsements.
Scott S. Smith writes about business issues for a variety of publications, including Investor's Business Daily.