You’ve heard that saying—if a tree falls in a distant, unpopulated forest, and nobody hears it, does it even matter? If a brand has been invested in and had great importance attached to it by its owner, but it isn’t effectively marketed, does it matter? Brand or no brand, you’ll be in the same place without a marketing system. I’d like to tell you how I came to that understanding, and what I did about it.
It’s July 1996, and I’ve just relocated my family from Michigan to Wisconsin. I’m launching my first entrepreneurial venture after ten years as a commercial loan officer.
After investing ten years of study into the success and leadership literature, and a very successful banking career, I was now in control of a new business of my own. I quickly discovered that nothing in my traditional marketing education and big-company experience prepared me for my biggest challenge in business.
Looking back, it’s easy to see that I overvalued brand identity, in this case bought in the form of a franchise. The same mistake can be made creating your own brand identity from scratch. A brand, a brand name, brand identity, logo, slogan—these things are assets and can be valuable assets, but they are not marketing. There’s no substitute for marketing!
That first major challenge was insufficient sales. Despite having a franchise flag, the brand was new to the market.
Advertising representatives flooded into my store to pitch their programs for TV, radio, new neighbor kits, Valpak, and community coupon programs. Every charity you can imagine, in and out of the pet-related world, came to the new guy with limited money for advertising and donations. I spent a lot of money on advertising.
For our first grand opening, we ran six radio spots a day on three stations for a week, we ran TV ads and a full-circulation newspaper FSI. We were flooded with new customers, and I thought I was really smart.
Then the trouble began.
Immediately after the grand opening, revenues fell back 40% and significantly below break-even. My immediate response was to sign up for regular radio, newspaper, and coupon book marketing at costs that were not easy to digest, given we were losing money.
As the months went by, sales gradually grew but my frustration grew right along with it. Where were these sales coming from? What if I eliminated some of this marketing to achieve break-even sooner? What would the impact be? No one I knew could tell me the answer. The advertising representatives’ answers were always along the lines of “whoever spends the most wins the game.”
More than once, we had to cancel a marketing program we signed up for and arrange a payment plan to make good on what we spent because revenues didn’t grow and we couldn’t afford to continue to spend.
My frustration with this pattern of buy a program, no growth, and cancel reached its peak in 2003 when we had to close two stores in the Dallas-Fort Worth market. We entered the market in 2001 and had disastrous results. Our biggest problem, again, was an unknown brand, which translated into very slow adoption rates of our stores by new pet owners. There was no shortage of pet owners in Texas. They just didn’t know or trust us.
At the height of my frustration with advertising, I quit. I quit all advertising and informed our team we were going to work on our business model and become so good at what we did that word-of-mouth alone would generate the growth. In the meantime, I cut 100% of our advertising spend and downsized store count until we were profitable; then I immediately went to work on reinventing our value proposition.
Our franchise, at that point, was a loosely tied group of store owners who had license to do as we pleased with product, real estate, and marketing. The deal was to pay the fees, run a good, clean store, and go about building our business. The primary value-add was the monthly ad circular and buying power the franchise had given us.
We were the first franchisee to enter a major metropolitan market as the third entrant. The problem was we showed up with a generic selling proposition. This was THE reason for poor sales results. Pet owners saw no compelling reason to choose us over all the other options they had to purchase pet supplies.
We entered 2004 with the goal of creating a new Unique Selling Proposition (USP) for the company. Our process was to map out what our competitors focused on and then determine what we could do much better that didn’t match their USP focal points.
Our choices were: 1) expertise of the staff, 2) quality of our staff interactions, and 3) emphasis on organic and natural foods and supplies. Later, through the influence of Dan Kennedy, this transitioned to differentiating on how we sell our clients, the experience they have in the store, and the expertise of our store personnel. Our overall positioning is that of “trusted authority.”
For the next several years, we experienced steady growth rates of 6% to 8%. We upgraded our store personnel through hiring profiles and providing generalized pet-care training. Word-of-mouth marketing was working. We provided a good experience in the stores. Our team had good solutions for pet owners who were tired of the “know-nothing” employees at our major chain competitors.
During the period of 2004–2008, we grew to four stores, and in mid-June 2008, we completed an acquisition of five stores in Birmingham/Tuscaloosa, Alabama. After the acquisition, we upgraded the staff, invested in pet-care training, and continued with the zero marketing investment mind-set.
It also was during this period that the infamous pet food recall occurred due to lethal chemicals being found in food manufactured in China. We were inundated with frightened pet owners asking us if we knew if their food was safe. Fortunately for us, one of our customers in Dallas was a reporter for the Dallas Fox News affiliate. She knew our team had a higher level of expertise than the typical pet store so she interviewed one of our managers in the midst of the recall crisis. Sales immediately jumped 10% in our two Texas stores.
I realized at that moment that an opportunity for truly unique positioning was staring me right in the eyes. What if we could be recognized as the leading experts in every market regarding pet nutrition? Every dog and cat has to eat, so this was a big issue that we could become the “go to” place for answers.
In 2009, I was able to develop and implement a nutrition certification program with Dr. Sarah Abood, DVM Ph.D., the lead nutrition professor at Michigan State University’s School of Veterinary Medicine. Today we have more than 100 certified pet nutritionists in our 21 stores giving great advice to pet owners each day.
Then in 2010, revenues flattened to zero growth across our entire ten-store group in Alabama, Texas, and Wisconsin. I realized I needed to make a key executive change and step into direct market leadership.
I simplified a lot of the operational processes and harmonized our merchandise assortments and loyalty program with a now active and value-creating franchisor. We also improved our overall internal store culture.
The importance of marketing that internal store culture and professionalism cannot be overstated. Great direct-response marketing will accelerate the demise of a poorly run retail business.
However, it was then that I realized being a better merchant, becoming more operationally sound, tinkering endlessly with store design and real estate could only do so much. The first half of 2010 revenues declined on a same-store basis by 5%. However, through the previously mentioned changes, we were back to 3% to 4% positive sales comps by the fourth quarter of that year. Overall, we suffered through our first flat sales growth year since early in the decade.
The improvements made in 2010 bore fruit in 2011. Those improvements generated our best revenue growth year ever with companywide sales increasing 10% for the year. As the fall approached, I knew we needed something else to continue this growth. The 2011 bump was event driven around some clearly identifiable improvements—inside the store—that would not be able to generate consistent growth year after year on its own.
If we were going to become a company that grew above the industry norm year after year, we needed to learn to become marketers. I was still an advertising victim, so rather than return to old patterns, I began to do some research.
I met fellow author and entrepreneur Tony Rubleski through a mutual friend one day in my office. Tony reached out to meet again, and we met over coffee at Starbucks. At the end of the meeting, I offered my credit card to Tony and asked him to send me $250.00 of his best marketing information that I could read to help me.
I wasn’t someone who liked to enter into consulting retainer agreements. I wanted to do my own independent thinking first, then once I achieved a level of mastery, would hire consultants to leverage my effectiveness.
In that package was my introduction to Dan Kennedy. I don’t even remember the other items in the box. I read the book No B.S. Direct Marketing for Non-Direct Marketing Businesses and was instantly hooked.
I signed up for GKIC Gold Membership, read both The Ultimate Marketing Plan and The Ultimate Sales Letter, and within 60 days, had crafted our first four-page sales letter. A compiled list, suppressed against our current customer base, was purchased, and the letter was sent late in November 2011.
That first sales letter, and one reactivation postcard with concepts learned from Dan, had an immediate impact. We sent out 4,000 letters and received 206 new clients into our stores! More amazing was our reactivation postcard that had nearly a 70% response. It was the best holiday season we had ever experienced.
At that moment, I became a Dan Kennedy convert and bought nearly every book he had published. I read all of them over a two-month period. I realized for the first time that I needed to become a professional marketer of my business and less a doer of my business.
After attending a GKIC Implementation Boot Camp in Atlanta, Georgia, with my IT Director, who is now my Marketing Director, it became clear that we could, in fact, control our own destiny through a systematic plan to grow revenues.
The first thing we did was build a data warehouse and create a flow of information to the database from our loyalty program and point-of-sale systems so that we could understand our marketing math.
We learned what our first-year client profit was and began to base marketing investment decisions off that metric. We chose gross profit because we have to remove product cost from annual revenues to calculate what we can pay to acquire a new client. Additionally, we chose first-year rather than lifetime value because we didn’t want to assume long retention periods given the dynamics of retailing.
In retailing with multiple stores, volume is a challenge in designing marketing programs. Whatever we came up with had to be scalable across multiple stores and markets. Furthermore, I wanted to acquire new clients, retain the clients we had, increase frequency and annual client spend, and finally, begin to regularly reactivate lost clients.
For acquisition, we contracted with Craig Simpson of Simpson Direct to help us acquire the right mailing lists based on our best client profile and to manage the overall process of getting a monthly sales letter out in multiple markets. Craig is also invaluable in testing new concepts, format design, and copy review.
Additionally, we hired Kevin Donlan, a Dan Kennedy-trained copywriter, to improve upon my original sales letter to create a control we could mail out month after month with success.
RESOURCES
Craig Simpson is an expert in list selection and procurement and all things direct mail, functions as a freelance direct-mail project manager, and publishes the Mailbox Millionaire newsletters. Information at www.Simpson-Direct.com. His book, published by Entrepreneur Press, The Direct-Mail Solution, co-authored with Dan Kennedy, is available at all booksellers.
Earlier, I mentioned an aversion to hiring consultants. I made the time investment in studying direct-response marketing, understood the fundamentals, and now, given our scale, needed the help of experts to leverage my time and accelerate our results.
I see entrepreneurs unwilling to spend money with people who can help them get to where they want to be. They fail to make the connection of greater profits sooner offsetting the cost of the consultants.
That tells you about the early journey, during which a banker bought a brand and became a retailer, but had to learn that neither a good brand nor a good retailing operation is enough. That was then. This is what drives our 21-store chain now . . .
Armed with help from these outstanding experts, we now mail a monthly four-page sales letter in a self-mailer format. The letter emphasizes our trusted authority positioning with the elements of a good sales letter. Over the past year, the average response is 1.78% with 2,399 new clients acquired and an average ROI of 271%.
An additional acquisition strategy we employ is an alliance referral program with animal rescues and partner businesses. We offer a $25.00-off coupon to first-time clients who have adopted a pet or are first-time clients referred by business partners. It’s a value-add to our partner clients. We then pay the rescue referral a donation of $20.00 for each redemption and $10.00 to our business partners.
Through the first full year of the alliance referral program, we acquired 6,776 new clients. The overall ROI on the program the first year was 173%.
Another challenge every business has, but few grasp, is growth through marketing to the house file. Before entering Dan’s world, we were no different. We had more than 350,000 buyers in our database, and we were doing nothing to increase our share of wallet with them.
In retail, it is common for consumers to cross-shop a store with direct competitors. They follow advertised specials. We wanted to escape that commodity trap, so we invested in our nutrition certification program. It’s an extensive web-based pet-care university tool and leadership/client facing engagement training. We were positioning ourselves as experts and being the trusted authority.
Now, our marketing challenge was to learn how to market this positioning effectively to our client base. We wanted to cause them to consolidate purchases with our stores, which would lead to increased frequency and spend.
We chose a combination of education and old-fashioned bribery. Our retention and frequency enhancement marketing plan consists of the following:
1. Monthly printed eight-page newsletter to our top 500 clients per store. FSI (Free Standing Insert) is embedded into the newsletter. We haven’t determined how to measure an ROI on this yet; however, we believe enough reasons exist to continue sending it to our best clients.
2. Three holiday postcards per year to our “A” segment clients with a 10%-off offer as a thank you. Our 2013 Valentine’s Day holiday card generated an 18.44% response, an average transaction size lift of 28%, and a 417% ROI net of all costs and discounts.
3. A quarterly educational upsell sales letter using the classic buyers of “x” who don’t buy “y” concept. Examples include dental health, puppy food buyers not purchasing chew toys, dog buyers not buying flea and tick medications, etc.
• The puppy product upsell letter generated a 6.19% response, an average transaction size lift of 35.79%, and an ROI of 56 %.
• An upsell letter on fleas and ticks was a tremendous success with 23.02% response, 23.41% transaction lift, and an ROI of 683%.
4. Annual anniversary thank-you letter with a 20% Off Shopping Spree check attached. This program average is 34.36% response, transaction size lift of 39.74%, and ROI of 285% net of the discount and all fulfillment costs.
5. Three annual holiday cards to top 500 “B” segment clients with a 10%-off offer to move them up to “A” segment clients. This is a new tactic that was recently mailed and the returns are not known as this point.
6. Annual pet birthday postcard program. This is a program administered by the franchiser. We have no marketing math on this strategy. We are in the process of pulling that back to our company where it will be measured.
RESOURCES
Examples of all the marketing campaigns Steve Adams is using to implement these six parts of his marketing program can be seen at http://www.PassionateEntrepreneur.com/brand.
As I write this, we are only in the early stages of building out a much more comprehensive program that will multiply the number and combination of offers going to existing clients throughout each year.
DAN KENNEDY’S COMMENT: My friend and speaking colleague, a great success philosopher, the late Jim Rohn said, “If you follow a highly successful person in any field around for a week, there will be no mystery about why he is doing so well. You’ll say to yourself, ‘Well, look at EVERYTHING he does.’” Because Steve is in my highest level mastermind/coaching group at GKIC, the Titanium Group, I get the opportunity to see what he implements and achieves in between our three-times-a-year meetings. I can assure you, if you followed Steve as I do, you’d have the reaction Jim Rohn described five times over. Steve has just described, and is going to continue to describe, A LOT OF things he’s doing to drive new customers into his stores and, importantly, his system, and to then keep them interested and engaged, and to sell more to them by consolidating all their pet-related purchasing under his roof. Having such a complete system is, bluntly, more valuable and more important than having a cool or clever or even famous brand. It is also, admittedly, more work than relying on brand. Having such a system empowers you to derive the greatest value from a brand. If everything he’s describing seems overwhelming, take note of the fact that he built it over time, not overnight, that he is in continuous development and improvement, that he has organized a small but mighty support team around him (on staff and outside experts), and that he is all about putting marketing in place that has ongoing or evergreen use (not one-time promotions). This is the difference between “building” versus just “doing.”
I often share a metaphor with our store teams. Growing each store is like trying to fill a water bucket with a hole in the bottom.
If the bucket already has water in it, this is analogous to existing sales. Through acquisition efforts such as sales letters, FSIs, and alliance marketing programs, we turn the hose on and fill the bucket.
Through retention marketing efforts that increase share of wallet and frequency, we also increase the water line in the bucket. The problem is our bucket has a hole in the bottom that lowers the water line or sales. That is called “customer churn” in retailing.
Our strategy to remedy this problem is twofold. First, the experience in the store cannot act to make the hole bigger. We have a specific set of strategies to guarantee that each of our clients has a great experience.
The second part of plugging the hole in the bottom is to have a systematic program for reactivating lost clients. Our system is a three-step series of humorous postcards developed by Dean Killingbeck’s New Customers Now team in Howell, Michigan. Go to www.PassionateEntrepreneur.com/brand to view this hilarious, yet effective, series of postcards to bring lost clients back into our stores.
The performance of this program has been outstanding. I will share an actual three-step campaign from February–April 2013. The first month (February) we sent postcard No. 1, and 1,514 clients reactivated for a 43.47% response. They spent $56,690.00. The next month (March) we sent postcard No. 2, and that generated another 215 clients who did not respond to the first postcard. That was another 14.14% with a total of $5,632.00 spent. The third month (April) we sent the third postcard to those who did not respond to the first two. We reactivated another 109 clients from that original February list for another 13.71% in response and $3,421.00 in total spend.
So, for the entire campaign we reactivated 1,838 clients who spent $60,743.00. When we subtracted out the mailing and coupon costs, our net profit on the sum of the return transactions was $2,273.00. However, assuming only half of our typical first-year profit after product costs of $175.00, given their propensity to churn, the program delivered $161,744.00 of first-year profit against $21,193.00 of total costs for a 763% ROI.
An additional reactivation strategy we use is scripted calls. Each month, each store manager is supplied a report of his or her “A” and “B” segment clients who have churned. Their job, using a script, is to call as many as they can each month (minimum requirement is all “A” segment clients) and say sorry and find out how they can recover them. It is an educational process for them, and it heightens their awareness of this critical issue.
After an intense 18 months, we have a system that works every aspect of the water bucket. Our marketing system generates new clients, increases frequency and client spend, and reactivates lost clients month after month.
One of the principles Dan teaches is to monetize your client list, which then becomes a back-end revenue source to your primary business revenue model. Successfully building a back end then changes the economics of your business and enables you to pay more to acquire and retain clients.
Those businesses that can delay profit the longest when acquiring clients or which can spend the most to retain their best clients are in the greatest position to win in the crowded marketplace. It’s the way Main Street businesses can win against the category killers, Walmarts and other behemoth corporations.
At our company, we have a large database of buyers. We have detailed transactional history on them as well as multiple demographic and psychographic characteristics appended by client in the system.
We have a large opportunity to build a back-end revenue business model on top of our core Main Street brick-and-mortar business. Additionally, building the back end reinforces our positioning as a trusted authority.
Our back end consists of four revenue funnels: 1) paid membership, 2) how-to audio and video products with starter kits, 3) a box-of-the-month club for dogs, and 4) auto-ship of orders.
The membership program provides valuable content in the form of expert interviews, an expanded content printed newsletter, annual nutrition exams, and other benefits. A certain percentage of our clients want more education to be better pet parents. This program provides that education.
The how-to products are videos of our staff experts demonstrating how to do things such as brush a dog’s teeth as well as assess and treat common ear, eye, skin, and coat problems. We also teach how to trim nails. Another program teaches the basics of animal nutrition. All the programs are bundled with product to then implement what the client has learned.
Our box-of-the-month club is essentially like book-of-the-month clubs except the contents are a surprise. Our www.dawgbox.com is a website that gives the dog owner the opportunity to select a small-, medium-, or large-dog box and whether it’s for their dog or a gift for another. Then it simply ships each month. We have set it up as a “pay to play” program where vendors contribute to the box to bring value to the client. Again, it’s another opportunity to market to our list and extend our reach into our markets and gain new clients.
Finally, our auto-ship program is meant to defend against Amazon, increase frequency of low-frequent category clients, and offer a new option to those who haven’t responded to reactivation attempts. We also will prospect in areas outside our typical trade areas to gain incremental revenue and cross-sell our stores and other back-end products. This program is under development and expected to launch in the fourth quarter of 2013.
Since arriving on Planet Dan, I’ve learned that I CAN change what is possible in my business.
When we’ve finished implementing our back-end revenue model, our business will literally be a fortress in the marketplace.
Our stores have a continual flow of new clients, we are increasing the value of our existing retail clients through retention marketing, and each month we are consistently recapturing lost clients.
Now with a powerful back end monetizing our house list and providing another avenue to acquire new clients, our economics are changing for the better. No longer am I worried about every competitor who enters my trade area nor do I fret about Amazon and every other internet retailer. No longer am I trapped in commodity hell, focused on the next item and price promotion. My business is a powerful marketing system that cannot be easily copied or defeated.
At this point, I should say that our systems and how we develop our people and our culture all are critical pieces to our success. Without them our marketing would not work in the long run. However, our marketing is the “killer app,” if you will, that was the game-changer in our growth the past two years.
What were our overall results? In just 30 months, we grew from 10 stores to 21. Our total revenue grew 85% and employee base from 150 to more than 400. Same-store sales growth in retail is good if you achieve 5%. In 2012 our same-store sales growth for the company as a whole was 14% and through the first half of 2013 remains at 12% to 19%, depending on the month.
If you own a retail store, your job is to go to work on your reason for being. Why should people choose to shop with you? My advice is to learn how you can become the expert in your space. Then hire the right people, build a culture, and create systems that ensure your client’s experience is consistent with each visit. Finally, go build a marketing system and back end that consistently markets your expertise and the unique experience you provide. Then invest in executing on the plan month after month.
STEVE ADAMS operates exceptionally successful retail stores across the country, under the auspices of a national brand, but fueled by direct-response marketing. His retail business can be seen at www.AskPSP.com. He is also involved in e-commerce, information publishing and marketing, and consulting. His book, The Passionate Entrepreneur, presents essential, experience-based building blocks for entrepreneurial success. www.PassionateEntrepreneur.com.
DAN KENNEDY’S COMMENT: On the following pages, a few samples of Steve’s great direct-response advertising and marketing. First, you see a two-sided, oversized postcard (Figure 12.1 on page 119) with the $21.00 Gift Card Offer, plus the free nutrition consultation, and free report. You can see the PET SUPPLIES PLUS branding throughout the piece, but the emphasis is on direct-response advertising elements: specific reasons why this brand-name store is best, a Unique Selling Proposition (“no other pet store has . . .”), customer testimonials, guarantee, and, of course, the offer. If you compare this to other chains who place their emphasis on their brand, you’ll find most of these elements missing or minimized, and instead almost all the “real estate” on their direct-mail pieces is given to brand identity and logo, manufacturers’ brand names, and a coupon. And if you ran a pure split-test of their brand/image postcard vs. Steve’s direct-response postcard, his wins by wide margin. Next you’ll see a slightly different version of this postcard, personalized to the recipient in the headlines on both sides of the postcard.
The “Is Your Dog Suffering In Silence?” newspaper ad (Figure 12.2 on page 120)—also useful as a direct-mail piece noted as a reprint from the publication—has almost no branding. Obviously it is set up as an article, called “an advertorial,” not a graphic or pictorial ad. Big companies usually can’t bear to “bury the brand” with this kind of advertising despite its effectiveness, so the small-business operator can find competitive advantage here. The warning is: Don’t muck it up by plastering brand identity, logo, slogan onto it—top, side, middle, bottom, anywhere.
Finally, there’s a postcard sent only to new puppy owners (Figure 12.3, page 121.) It carries the brand name front and back, but the emphasis is on the message and the offer.
Steve is actually a Unique Selling Proposition marketer more than a Brand Marketer, which is a strategic decision to be made, considering a number of factors, including the established strength of a brand. In Chapter 13, you’ll hear from Bill Gough about the use of the very well-established brand Allstate.
To see a complete collection of Steve’s samples, visit www.PassionateEntrepreneur.com. To become a GKIC Gold Member and get full access to all my resources as Steve explained he did, take me up on the FREE OFFER on page 261.
FIGURE 12.1: Steve Adams Oversized Postcard
FIGURE 12.2: Steve Adams Newspaper Ad
FIGURE 12.3: Steve Adams Puppy Postcard
