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Sep 20, 2001
Case Study

Marketing Secrets of a Profitable, Multimillion Dollar eretailer You Probably Never Heard of

SUMMARY: Some mainstream marketers don't take DRTV (direct response television) advertisers very seriously, because infomercials and QVC plugs can seem kind of chintzy compared to a glamorous Madison Avenue branding campaign.

But, at $2 billion a year, the DRTV industry is bigger than you may think. Plus DRTV marketers are very, very good at measuring results and learning exactly what works and what doesn't, because they don't have the luxury of big branding budgets -- every single dollar they spend has to make a profit. This Case Study reveals what you can learn from the #1 best of them online.  It's...
They approach online marketing in the same way. Test, measure, learn and never spend a dime that won't make at least 11 cents back. So, DRTV marketers are great examples for everyone selling online, and everyone integrating TV with Web, to watch carefully and learn from.

CHALLENGE

Thane Inc. is one of the most successful DRTV companies in America and Canada. The 10-year old Company first put up a basic Web site without much fanfare in 1998, and cautiously watched the results. Without any active marketing, sales were fairly slow, but the trickle was enough to convince Thane it was time to invest more heavily in eretailing.

So Marty Fahncke was hired in 2000. True to cautious test-it-first Company policy, he first came on board as a consultant and, after proving himself, became Thane's VP Internet Marketing.

Fahncke had two separate goals -- he had to find ways to integrate Web marketing into Thane's offline campaigns without risking sales, plus he had to discover the best way to sell directly online. His biggest challenge was one that killed off many dot-coms -- Thane.com is not famous consumer brand name. And Fahncke could hardly spend the millions it would take to turn it into one.

CAMPAIGN

Fahncke started by optimizing and positioning the site for all the major search engines under terms that Web surfers were already looking for. He explains, "We spend $50 million on TV. We have huge awareness in people's minds for our products." So now any surfer watching a late night commercial for the AB-DOer, California Beauty products or any other Thane item would be able to easily find the site even if they never heard of Thane.com.

He also worked with the site designers to include TV-related elements. Thane.com's left navigation bar is a "Top 10 Best Sellers" list. Results are dynamically generated as TV-driven buyers find the site. If lots of commercials for Thane's Youth Cocktail product are running, that's what shows up at #1.

The site's merchandising creative directly copies TV creative in its graphics, logos and benefit-driven headlines such as "The Ultimate MidSection Workout! Burn fat & Flatten your stomach in just 10 minutes a day!" Plus Fahncke added three-to-six minute long streaming videos for each product, that are carefully edited down versions of 30-minute TV infomercials. He says, "We edit to tell the story in the most effective manner possible without duplicating stuff in the text, without saying the same thing over and over."

Next Fahncke integrated an Internet call to action in Thane's TV commercials. He says, "We did some pretty intense testing and analysis to see if we make the Web site more prominent, what does it do? If we pushed the site too hard, we actually lost revenue because classic direct response is very much the impulse buy. If you get somebody willing to spend money right then, and people know you've got a site, maybe instead of calling they'll plan to look it up and never quite make it there. They'll lose the impulse."

Many companies selling products through third party eretail stores simply hand over their standard packaging copy and graphics and expect the eretailer to take over online merchandising from there. Fahncke, whose products are sold on major sites including Bluelight.com and Target.com, takes a much more active role in online merchandising. He says, "We will quite often ask for approval of marketing materials before they are used. We create a lot of marketing materials for them. We help with banners if they need a match for look and feel. We also help in the creative process. If they want some streaming video we'll snip a 30-second or two-minute segment for them. We have a whole studio for that."

Encouraged by positive third party eretail sales, Fahncke took the next logical step and launched an affiliate marketing program through Commission Junction in January 2001. To encourage sales, he takes an unusually proactive role in affiliate relations. He says, "We have many thousands of affiliates. I communicate personally with every affiliate that contacts me. I send out a newsletter every other week to talk about specific products and tell them about new specials. My Super Affiliates - the top 20 ones bringing in thousands and thousands in revenue - those guys get personal attention, customized landing pages, graphics, advertising… we work with them closely."

Fahncke also began heavy online advertising and broadcast email campaigns to rental lists in early 2001 and now buys 8-10 million 3rd party opt-in email lists and 5-7 million banner impressions each month. However, he will never make a media buy of any type without testing it first on a CPA (cost per acquisition) basis. In order to make media owners comfortable with this proposition, he tells them, "I have proven creative and offers, and I know exactly what sales numbers can be created from that." Fahncke openly shares test results with the media owners, and then together they decide if it makes sense to continue rolling out a campaign, and on what payment basis.

In order to convert the highest number of clicks to customers, Fahncke uses specially designed (and tested) landing pages, rather than just sending clicks to his home page.

Much of Thane's profit comes from selling additional or re-order products to existing customers, such as lotions to compliment a fitness product. Web order processing is cheaper than telephoned 800 number orders, so Fahncke worked with the packaging department to add prominent "order online" instructions to all products shipped or sold in stores when possible. (Some chains, such as Walmart and KMart don't allow bounceback selling on packaging carried in their shops.)

Fahncke also encouraged customer reorders by launching free email newsletters for the most popular product lines. (See below for a link to a sample Thane newsletter.) Unlike Thane's typical hard-selling commercials, the newsletters carry almost no hint of marketing. Instead the editorial is just that -- editorial.

Fahncke says, "The strategy is a high signal to noise ratio. It's not a sale-of-the-week type message. We hardly ever advertise anything blatantly in the newsletter. People like to see information that's really useful. It's really solid quality information and once and a while I'll throw an ad at the bottom."



RESULTS

Fahnck is proud to announce that, "We have the number one Internet business in the DRTV industry." Thane's total revenues are about $500 million in all and "a significant percentage is Internet business."

In the past year Thane's online business has grown by about 700%, and as a percentage of overall revenue the eretail has risen by 200%.

These results are especially striking in the context of the current economy, which has hurt many eretailers selling non-essential items. Fahncke says, "Our products should be sensitive to the recession -- the first thing to go is that extra hundred bucks for an AB-DOer. But we have not seen it. We've weathered the downturn phenomenally well. I'm one of the few people out there still spending significant amounts online monthly. The only reason is that I'm still generating significant sales monthly."

Here are some lessons Fahncke's learned over the past year:

- TV: If you put your URL at the beginning of an infomercial, people tend to jump up and go to the Web site instead of watching the entire commercial, so they lose the "emotional tug" created by the rest of the ad, and don't convert to as many sales. Also, sales can be lost by promoting the URL more heavily than the 800 number. Fahncke recommends giving the URL and phone number absolutely equal weight in the commercial - even down to the font size they appear in on the screen. That way Web orders are an incremental gain on phone orders.

- Streaming video: About 17% of Thane.com's visitors will click on the video. Fahncke isn't sure of the exact percentage, but says these visitors are more likely to buy at a higher conversion rate. He adds, "By the time they watch the video, they've been on the site for close to 10 minutes and gotten enough information to make a good buying decision."

- BBB Logo: While Fahncke couldn't measure any specific results from the presence of a prominently placed Better Business Bureau logo, he says focus groups and online customer surveys showed it "made people feel better about purchasing from us."

- Products: The products that tend to sell the best at this time are those targeted to audiences under 50 and those that do well on QVC and the Home Shopping Network. Fahncke says, "These products don't do well in infomercials, but they do better on the Internet. These are unique items that you won't find in stores that will appeal to a niche audience." For example, Thane's sunless tanning product.

- 3rd party eretailers: "Those tend to be very, very good incremental business for us. A customer who shops at Fingerhut.com or HomeShoppingNetwork.com tends to be a captured customer who chooses that as their preferred place of purchase. They may have an account there, a history, some sort of incentive to purchase through points …."

- Site navigation: The majority of visitors tend to use that Top 10 bestsellers list as their primary method of navigation.

- Banner creative: After testing at least 100 different banner creatives over the past nine months, Fahncke admits he hasn't been able to find a common thread to those that work and those that don't. He says, "Just keep testing until you find the ones that work."

** However, he does have one radical message for other banner advertisers -- he's found that once you discover a few banners that work really well, you don't have to replace them! They don't get tired. He says, "We found 20 that work for us, and leave them alone now. If we sold just one product, we would probably only have two banners." **

- Email creative: Fahncke warns other marketers, "Don't fall into the trap that it's lists or creative alone. You need both, good creative married to a good list. The same creative will do hugely well with one list and lousy the next day with another." And vice versa. He tests about 15 creative (graphics and copy -- not offer) variations for each product find a couple of winners for each. Offer tests are separate.

- Affiliate marketing: Affiliates in Thane.com's program experience a much high sales conversion rate than they do with many other merchant's programs. When Commission Junction started revealing sales conversion figures for merchants this summer, more than 400 embarrassed merchants with low rates pulled out of the system altogether. Thane, on the other hand, found themselves frequently ranked in the top 10, and gained thousands of new affiliates as a result.

Useful links related to this article:

Sample of Thane's Beauty email newsletter:
http://www.emarketingtoher.com/sample.cfm?contentID=181


Corporate site
http://www.thaneinc.com


eretail site
http://www.thane.com


Xpedite email newsletter distribution
http://www.xpedite.com
See Also:

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