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Mar 27, 2003
Case Study

Online Directory Publishing - How to Sell Subscriptions to Both Listees and Users

SUMMARY: If you work for an ad agency producing TV commercials, you have probably heard of CreativeChannel.com. Now read the inspirational story of how this online directory got started by a female entrepreneur at her kitchen table.

Subscription site marketers and publishers will also find a wealth of useful tips and tactics on pricing, marketing and selling subscriptions to pricey business Web sites.
CHALLENGE

Most online directories are run by trade magazines, trade associations, or dotcom execs who got some VC money before it ran out. Karen Kovach, Founder CreativeChannel, comes from an unusual direction, the industry she serves.

Kovach worked both on the agency side hiring freelance producers for TV commercials, and as an independent rep helping producers get work from agencies. By 1998, she was increasingly frustrated, "There's got to be a better way to market these production companies."

She invented it, initially working at her kitchen table with a friend to build what was the world's first online database of sample commercials with producer contacts.

She quickly discovered why there was so little competition in her niche. Building a database of the world's best commercials can not be automated. "It does require the human touch. Production is very messy. We have to bring all of the different formats into one format."

Which could be seen as good news if you do not mind working hard, because the barrier to competitor entry was so high. Kovach just had to figure out a way to make enough money for the effort to be worthwhile.

CAMPAIGN

In a time when everyone was in expansion land-grab mode, Kovach bucked trends by consciously focusing her business model very tightly.

First, she decided to only carry listings for TV commercial producers.

"We had a competitor, PlanetPoint, who chose the strategy to go broad and wide. They also had photographic and graphic artists as well as illustrators. We decided instead to go deep."

She also decided to base revenues on subscriptions only. "A lot of people said they wanted to run banner ads on our site. I decided this was a site for professional use only, and we weren't going to be an advertising site. It was very tempting to take the money, but I felt we weren't being true to our mission."

That said, subscriptions from one side would not cover costs. She had to charge both the commercial producers to be included in the site, and the agencies to access it.

Which can be a very tricky chicken-and-egg problem. You need a critical mass of both sides to make either one happy enough to pay.

"It was very much yin and yang," says Kovach, "I'd go to the production community and say, 'Does this meet your needs?' and then run to the agencies and do the same with them."

Two tactics made the critical difference. First of all, TV commercials are in the public domain once they have aired, so Kovach's team grabbed the best and added them to the database immediately. Their producers would not get hotlinks, newsletter mentions or marketing help until they became site members, but at least the agency subscribers would be able to see enough content to be interested in subscribing.

Secondly, Kovach used her extensive contacts in both sides of the industry to get influential friends on board with no-cost trials at the start. Then she crossed her fingers that enough would convert to make the project profitable.

-> Side A: Selling memberships to the producers

Kovach set her pricing for producer members at under $1000 per producer. "To be honest, our pricing is too low for what we provide, but we have to realize what the market will bear."

As the recession deepened, she had to offer very flexible terms to these members. "We've tried to be cognizant of their business issues this past couple of years. So many producers had to close their doors. It's horrifying. It's a very, very tough business. We let them pay by the month, and we work with them to make sure they're doing well."

She also found that just because producers are technically savvy for their jobs, that does not always translate to being savvy on the Internet.

Kovach's marketing team ended up relying on traditional sales channels (trade shows, direct postal mail, and telephone calls). Often they had to handhold a producer on the phone while he or she took the site tour.

Selling online subscriptions in this marketplace could not be automated, at least yet.


-> Side B: Selling subscriptions to the agencies

With her intimate agency-side knowledge, Kovach was able to guesstimate how much they were already spending building in-house reference databases that CreativeChannel could replace.

She also had a good feeling for how much an agency would be able to bill back to the client. (Agencies are infamous for never paying for anything unless they can bill it back to a client.)

Based on these two figures, she set agency-subscription pricing at $6000-$26,000 depending on the size of the agency and number of seats they would want to access the database.

What about the megalithic agencies?

"We handle them on an office-by-office basis. When you try big corporate sales, the bureaucracy becomes so cumbersome. You'd have them telling individual branches that they should assume this new overhead. It didn't work, pricing wasn't always fair. What if an office only serviced one client? Selling separately into each branch was very critical."

To get the word out initially, Kovach resorted to traditional media again. Her marketing team placed edgy ads in trade journals designed to appeal to agency exec's psyches.

Instead of fat direct postal mail packages, which she felt people would see as too much work to read and would not represent her site as being "simple and easy to use", Kovach tested edgy creative on postcards. One read, "Is that a hard-drive in your pocket, or are you just happy to see us?"

The sales team offered each prospective agency a no-cost trial to try out the service. They quickly learned they had to be very flexible with the terms of the trial because so many decision-makers were involved in the subscription purchase decision and many of them were frequent travelers.

"The important thing is not to trial individuals, but entire departments. In active agencies, half of them are gone on the road at any time. At first I thought, let's not give them too long. But then I realized if they can't use the trial what good is it to them?"

The key to success was requiring that every person getting access to the trial hand over their email address and permission to be contacted with a newsletter and special announcements.

Kovach reassured trials their email would never be sold or shared with other companies. They would only get mail from CreativeChannel that was about CreativeChannel.

Kovach's editorial team put together two different regular email campaigns that would help convert trials to sales, and drive current customers back to using the site frequently so producer members would get lots of lovely business leads from them.

#1. Fortnightly email newsletter (link to sample below).

The newsletter is a fun read all by itself with newsy notes on who is doing what. It builds a strong feeling of community for the industry as a whole.

Each issue also contains lots of links back to the commercial database on the site, and you have to use your user name and password to access them.

Kovach hoped even ad execs whose trials were over would continue reading (and possibly forwarding) the newsletter because it was useful and entertaining. Ultimately they would possibly get so frustrated with not being able to get through on links that they would pay up for a subscription.

#2. Monthly broadcast email campaigns (link to sample below).

Once a month, Kovach's editorial team puts together a themed collection of commercials from the database. For example great vacation ads in January, or Superbowl ads in February.

Again the email is sent to everyone on the list, including current subscribers and lapsed trials, in hopes of driving traffic and getting a few more paid subscriptions.


For both email tactics, Kovach's tech team has set up back-end tools so her sales reps can see exactly who is opening, and who is clicking. "We use the back-end tools a lot," she notes. Of course they do not reveal too much to prospects because that might make people uncomfortable.




RESULTS

CreativeChannel current has about 10,000 paying subscribers. (This is counting all individual seats, which are mainly sold through corporate accounts.) Revenues climbed by 10 times in the past year alone. This year Kovach expects them to double again.

CreativeChannel now has almost 30,000 TV commercials in its database, an almost insurmountable barrier to entry for wanna-be competitors.

Longevity itself equals more subscriptions. "When we were early in the business, several companies said, great, we like your idea, call us when you've been in business another year," explains Kovach.

"So much is just staying the course and being there. Those people are among our biggest supporters now. When we went back to them a year later, nine times out of ten they said, 'We've been watching you.'"

"We found as we grew that agencies will tell production companies that, 'if you're not on the CreativeChannel, we won't use you.' Well, that's the best kind of marketing you can have."

More details:

- 30-40% of both producers and agencies have asked to pay month-to-month via credit card instead of annually.

- CreativeChannel's annual account renewal rate is an extraordinary 90%. Kovach says proudly, "It's huge."

Some agencies have asked, of their own accord, to pay for multiple years up front in order to save money against potential price increases.

- The marketing tactic that worked the best with producers was to constantly update them on which agencies had joined up, and to forward testimonials from other producers saying they had gotten new clients due to their membership. "Proof was extremely important to them."

- The postcards were very successful on the agency-side. Kovach visited agencies where people had taped them up to their computer monitors so they would remember to visit the site.

Networking was also critical. "I'll contact all the subscribers before a trade show and say if you'll be there, let's have a drink," says Kovach. "It's been so gratifying. They'll help introduce me to other members of the community."

However, email has been the true winner. CreativeChannel now has 27,000 email addresses on its list, which means every time they send a mailing about 17,000 agency execs are seeing what they are missing by not being subscribers. Open rates are unusually high, unsubscribe rates are unusually low.

- Kovach has learned the best subscription salespeople are always folks who have worked in the industry itself (although not necessarily in a sales position); and, who eagerly embrace a lower salary with a higher commission. "Good salespeople want to work on commission with a base. They love the challenge of bringing customers in."

"We love this business," says Kovach. "I've never really given a thought to retiring. It was never a question of let's make a bunch of money and get the hell out of here. I just like what I'm doing, and I want to do it well."

That attitude is probably why CreativeChannel is flourishing when so many of the other late '90s B2B online marketplaces, including early competitor PlanetPoint, have gone under.

Link to samples of CreativeChannel's email newsletter, and its post-Superbowl broadcast email campaign:
http://www.marketingsherpa.com/cc/ad.html


http://www.fastchannel.com

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