Pushing The Envelope
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
People start businesses every day. Some succeed quickly; some fail right off the bat; still others percolate slowly and grow gradually, one day emerging as bona fide success stories.
At some point, every start-up business owner needs a little help-a few pieces of sound advice from professionals to help steady a new business' sometimes shaky beginnings. But good old-fashioned irony usually dictates that, just when they need it most, small-
business owners can least afford to spare the time or the expense to hire experts who can give them the advice they need.
Len and Greta Buffinton can identify with that. In August 1994, the newly married Len, 32, and Greta, 35, started a mail order catalog selling self-help, relationship and psychology books. Admittedly, they weren't experts on direct mail, but they'd done extensive research to determine whether there was a substantial market for their products. They also determined whether there would be enough subject material to keep the catalog interesting and functional. In Len's words, they wanted the catalog to offer books that were about "sensitive issues but tasteful, helpful and not just quirky."
After deciding there were more than enough books to fill a diverse catalog, the Buffintons settled on a name, Brown Wrapper Bookstore, and a cover concept to match. Despite its furtive exterior, you won't find any X-rated tomes in the Brown Wrapper catalog-just reputable literature and videos.
Designing their catalog would be no small endeavor-the Buffintons knew that. So instead of taking on the responsibility themselves, they hired a graphic artist to design the format and handle all the pre-press arrangements. Greta wrote the copy; but aside from that and offering a few layout suggestions, the Buffintons let their designer do the rest. "We told her which books should be in which category, and then we shut our mouths," says Len.
The result was a 20-page black-and-white catalog, its cover printed on full-color 100-pound stock bearing the appearance of a package wrapped in brown paper and tied with string. A "Slim Jim"-taller and wider than the standard mail order catalog-Brown Wrapper was designed to be sent in the mail without an envelope. The Buffintons printed 30,000 copies of the first catalog at a cost of approximately 50 cents apiece.
In deciding who to mail their catalog to, the Buffintons contacted a list broker who supplied them with three rosters of 5,000 names each. Unfortunately, mailings to these lists garnered an overall response of less than half of 1 percent, which Len characterizes as "just horrible." Later, the Buffintons learned the list they'd bought was
8 years old. When confronted, the list broker told the Buffintons there were "no guarantees." "That mistake cost us a lot of money, time and effort," says Len. Lesson number one.
Even as the Buffintons were putting their first batch of catalogs in the mail, they were already beginning to suspect that finding their target audience was going to be a difficult process. That's why, in later mailings, they adopted the habit of constantly testing small lists. Keeping track of the multitude of lists began to pose its own challenge, so the Buffintons decided to hire an outside company to handle database management. Lesson number two.
As any budding entrepreneur knows, growth is a tricky thing. Grow too slowly, and you miss the boat; expand too quickly, and you may harm the business. After their first fiscal year, the Buffintons' Brown Wrapper catalog had earned them $200,000, and they were eager to grow the company, but they didn't want to do anything they'd regret. They are as cautious as they are enthusiastic-with a good balance of passion and prudence. From day one, they and their five employees have handled fulfillment in-house, stocking inventory in a 3,000-square-foot warehouse adjacent to their Old Saybrook, Connecticut, commercial office. Lesson number three.
The Buffintons have made some mistakes, but they've also done a lot of things right. How can they improve on their success and make their burgeoning business grow even more? For some sage insight and advice, we've sought the help of a few experts.
Zeroing In On Your Market
Obviously, mailing to outdated addresses isn't the best way to reach your target market. Finding a savvy list broker and sticking with him or her is. "[Using] one good list broker is a very good policy," says Maxwell Sroge, owner of Maxwell Sroge Co. Inc., a mail order consulting firm in Evanston, Illinois. "The broker learns which lists work well for [your company], and that knowledge is very valuable." This doesn't mean keeping the first broker you try; it simply means once you find one you feel confident with, stay with that person.
That's what the Buffintons eventually did. After their initial bad experience, they obtained the name of a list broker with a reputation as "the guru of mailing lists." But, Sroge adds, "you can never sit back and say 'It's over; we've done it. The list is complete.' " Over the last 10 months, the Buffintons have tested 15 or 16 different lists, each bearing some 5,000 names.
Even large, well-known mail order companies aren't exempt from the need to continually test new lists. "L.L. Bean, Land's End and Spiegel rent lists," says Don Chilcutt, owner of Chilcutt Direct Marketing, a mailing list selection and management company in Oklahoma City. "They've got to constantly feed the pot because some of last year's buyers won't buy again."
If there's one thing the Buffintons couldn't have been more right about, it's the concept of continual change-both in testing mailing lists and in tinkering with their product mix to meet their customers' needs. The Buffintons believed from the outset that if customers wanted something, they'd better provide it.
For example, when customers said they would prefer to receive the Brown Wrapper catalog in an envelope, the Buffintons listened. The second catalog, a 32-page full-color booklet, was mailed in an envelope. And when customers said they would be interested in a series of relationship videos, Len found some and included them in the catalog.
A few months into the business, one thing surprised the Buffintons about their market: It was 65 percent male. With the Brown Wrapper catalog teeming with books like Get Married Now and Men Are From Mars, Women Are From Venus, they'd expected most of their customers would be women. So the Buffintons slightly altered their marketing plan by concentrating less on female markets and more on those that were nongender-specific. Len says this taught them a valuable lesson about flexibility. "In mail order," he says, "the successful companies are the ones that find a new angle or market they didn't think was there."
Chilcutt says offering your customers endless opportunities to buy from you is the best way to ensure continued patronage. He calls the practice a "continual massaging of your customer list"-and the Buffintons are already doing it right. Soon after they began mailing the second catalog, Len began putting together a "jazzy" response package that rewarded customers with a free book. "If you believe in your product," says Len, "making an offer isn't so daring."
There are numerous variables in mail order, but the one constant is that running a mail order business means finding a way to manage a multitude of names and addresses. Smart, consistent database management from the outset is a crucial ingredient for success. That's one reason the Buffintons decided to outsource Brown Wrapper's database management duties.
John Schulte, chairman of the National Mail Order Association, believes the Buffintons made the right choice. He says a lot of small to midsized companies hire a service bureau when their list gets beyond 5,000 names because at that point, managing a database becomes too complex.
"When you're developing a database from scratch, deal with a professional," says Schulte. "From the beginning, all your information has to be standardized so it's consistent." This includes uniformity of basic information, like address abbreviations, as well as knowing what additional information you want to collect regarding the people on your lists. As Schulte points out, such decisions require careful, deliberate planning at the outset.
"To determine what data they want to capture now, [mail order entrepreneurs] have to think about what they want to do in the future," says Schulte. When, what and how much a customer has bought are important tidbits to cull; date and purchase details of their first inquiry or order are also helpful. However, the most powerful piece of information you need is the source of the inquiry or purchase (which mailing list did the name come from or what advertisement did they respond to?).
All this can be somewhat mind-boggling if database management isn't your forte-and most mail order entrepreneurs start their businesses out of a love for their concept, not because they're dying to contend with humongous databases. "There are so many other things for an entrepreneur to think about," says Schulte, "it's best to have professionals helping you in certain areas."
Room To Grow
No matter how much guidance you get when starting a company, nothing can make or break your business like your own decisions. In mail order, this lesson is especially important. Because their catalog has been successful so far, the Buffintons are considering seeking venture capital to expand the business. "We're definitely looking to grow," Len says. "But at what point do you consider bringing on venture capital to take that next step in the marketing plan?"
Maxwell Sroge doesn't believe Brown Wrapper needs venture capital to expand. He says he has nothing against venture capital groups but warns, "You have to give away an awful lot of your business to bring them in." Instead, he suggests the Buffintons continue to mail small quantities, building their retained cash, and gradually increase quantities as they learn which lists work and which don't. "I would hold off going after venture capital groups for as long as possible," says Sroge, "because it's the most expensive money you can borrow."
In addition to sticking with small mailings, Sroge suggests going back to previous customers time and time again. "The fastest way to make money in the catalog business is to mail more frequently to your known customers," he says.
Schulte and Chilcutt agree. "You can't neglect the customers who have already paid you money. They've already proved themselves," says Schulte. "Your in-house list is the most valuable. You should create new offers to sell to these people. Direct marketers are not necessarily concerned with the first sale but the second and third. That's where a lot of [business owners] miss out because they don't think about cross-selling or any other type of selling to their house list as much as they should." (See "Returns to Sender" on page 124 for more on cross-selling.)
The experts agree that keeping Brown Wrapper's fulfillment in-house is an inspired idea. "There's nothing better than talking to customers yourself," says Sroge. Using an outside service is fine for huge mail order companies, according to Sroge, but he urges the Buffintons to continue to handle fulfillment themselves because "nobody will ever take better care of your customers than you."
Take It Under Advisement
According to the experts we consulted, the Buffintons are on the right track-and they have 18,000 customers on their house list to prove it. Cautious growth seems to be the best course of action. For the foreseeable future, Brown Wrapper's fulfillment will be handled in-house, and database management will remain an outside job. Meanwhile, Len recently streamlined the business's operations by setting up a live 24-hour ordering service.
Other than that, the Buffintons seem to have found a formula that works for them. They're already heeding the advice of veteran Sroge: "Stay with your game plan-and even when you get bored with it, keep doing the same thing. You may be bored, but your customers certainly aren't."
Returns To Sender
"The fastest way to make money in the catalog business is to mail more frequently to your known customers," says Maxwell Sroge, owner of Maxwell Sroge Co. Inc., a mail order consulting firm in Evanston, Illinois. In addition to that advice, Sroge offers the following pointers to mail order entrepreneurs who want to beef up their profitability:
1. Create packages, and offer them at a savings. Put together bundles of related products, and sell them as a package at a discount.
2. Up-sell or cross-sell. When a customer is on the phone, try to increase the volume of the order. This is called up-selling-offering a special on two or more products of a similar type. Another idea is to try to sell related products to the customer (this is known as cross-selling). "Once somebody is on the phone and you're doing business with them, it's usually easy to move them into another category," says Sroge. "It's the same telephone call; it just takes a few more minutes."
3. Ask suppliers to pay for space in your catalog. Also known as co-op advertising, this can be a great way to make printing your catalog mutually beneficial to you and your suppliers.
4. Ship fast. The rule in the mail order business: The quicker you ship, the more orders you'll receive. "People want things very fast today," says Sroge. "They want immediate satisfaction."
5. Offer bonuses for large orders. Reward customers who buy in bulk with bonuses (this might include discounts or additional merchandise). After all, by purchasing large quantities of your products, they rewarded you first.
Brown Wrapper Bookstore, P.O. Box 647, Old Saybrook, CT 06475, (860) 388-0362;
Chilcutt Direct Marketing, 9301 Cedar Lake Ave., Oklahoma City, OK 73114, (405) 478-7245;
Maxwell Sroge Co. Inc., 522 Forest Ave., Evanston, IL 60202, (708) 866-1890;
National Mail Order Association, 2807 Polk St. N.E., Minneapolis, MN 55418-2954, (612) 788-1673.