Giving Online Marketing a Greater Share
Chris Topping, Chief Executive Officer, Petals Decorative Accents LLC
Petals, which provides high-quality silk flowers and other decorative accessories to homes across the nation, has seen a lot of change during its sixty-seven years. Originally a wholesaler of paper flowers and then primarily a catalog sales business, Petals has evolved into an industry leader with an integrated, multi-channel marketing strategy, of which online sales is an increasingly important component.
When Steve Hicks bought the company at the end of 2003, he believed the online channel was not being exploited properly and fully. His goal was to develop it as a larger piece of the business. As a result, Petals’ overall sales increased from just under $10 million in 2004 to nearly $20 million in 2005, with online sales increasing from approximately $2 million in 2004 to $5 million in 2005. Online sales for 2006 are expected to approach $7 million—about one-third of Petals’ overall business.
Petals spent approximately $200,000 in 2005 for online marketing and will spend approximately $325,000 in 2006. (See “Related media” for a Petals’ online marketing budget.) This compares to annual spending in excess of $5 million for catalog marketing, which drives 70 percent of annual online sales. Responsible for the majority of online sales that are not attributed to catalog mailings are e-mail, paid search, and affiliate marketing.
To begin growing our online sales in 2005, we focused on two strategy areas: 1) maximizing opportunities to drive customer traffic to the online site (via wholesale/hospitality, catalog and direct e-mail, and paid search and affiliate marketing programs) and 2) enhancing the functionality of the site for improved customer experiences, ultimately resulting in higher conversion (from merely visiting to actually purchasing) and retention rates as well as building brand awareness.
Increasing Online Traffic
Part of our goal as a multi-channel marketer is to make products available for customers to see. This is a huge part of our growth strategy and what drove the decision to launch the wholesale part of our business last month. Our wholesale strategy is integral to our online marketing strategy and a complementary means to boost online traffic and sales. We view it as the creative third leg of our multi-channel marketing plan, which includes consumer catalog, consumer online, and wholesale.
Rather than Petals opening its own new stores, we’re establishing a physical presence in the marketplace through relationships with other key retailers, such as decorative accent and home accessories stores, furniture stores, and fresh floral shops.
Using branded product hang tags to clearly identify Petals, we’re working with retailers to develop effective in-store merchandising. We believe that wholesale is a viable business in itself with the added benefit of driving customers back to our retail business.
We’ve also launched a new Web site to showcase our products to potential retailers and promote relationship opportunities. The fully commerce-enabled site is scheduled to launch at the end of 2006. Retail partners who spend a minimum of $2,500 in a calendar year through our wholesale business are listed on our retail site as part of an incentive program to provide increased consumer exposure and added value for them.
Catalog and Direct E-Mail Strategy
Our print catalogs continue to be one of the most effective strategies for driving online traffic and are responsible for generating nearly three quarters of our online sales. In conjunction with catalog marketing, our direct e-mail program provides a targeted medium for the promotion of online sales by offering incentives such as free shipping, a gift with purchase, discounts on orders, and unique products available only online.
We mail our print catalogs every three to four weeks to both our customer and prospect mailing lists then support that with e-mails every two to three weeks, depending on the time of year and/or the promotion.
While our goal is always to maximize opportunities for the customer to purchase from Petals by providing multiple channels, catalog sales actually cost significantly more per transaction than online transactions. For that reason, we’re working to shift an increasing volume of business from phone orders to online orders. However, in order to build business, an understanding of how the different channels work together and how much of each to use is critical.
To be able to reduce catalog circulation, for example, you must know that certain customers have an established preference for buying online and will do so without needing a print catalog as the purchasing catalyst. We’ve been able to leverage our success in catalog direct marketing to positively impact our online marketing. Our strategies are always results-oriented, measuring variable cost/profit per new customer acquired and ROI through the use of lifetime value analysis.
Paid Search and Affiliate Marketing Programs
Petals continues to use paid search or pay-per-click programs, such as those through Google and Overture to drive traffic to the site. We bid on relevant key words (e.g., “silk flowers”) and based on our bid, our link falls into the shaded area across the top or in the upper right to call out our company more prominently.
We’ve also implemented affiliate marketing through such programs with Double-Click’s Performics product and Commission Junction, whereby the Petals banner appears on affiliates’ sites and drives traffic to Petals’ site. These programs carry no risk and can be a win-win for the affiliate merchant as well as the advertiser. Commissions are paid to affiliates only when merchandise is purchased.
Part of the company’s online marketing plan includes making enhancements to the site to improve customers’ experiences. We’ve added a strong privacy component via Hacker Safe and display its logo prominently throughout the site to build customer confidence. Since adding Hacker Safe, we’ve shown a 6 percent increase in conversions.
Petals also has put in place improved inventory visibility, which allows customers to know in real time actual product levels and availability, as well as a customer-friendly return policy with clear communication about the process. Other enhancements include drop down menus with greater detail and narrower scope to help customers locate products more quickly, specials that change every week, and a zoom feature for a higher quality view of “botanically correct” products.
We’re currently working to launch an e-catalog showing products merchandised in collections, which increases conversion rates and overall order totals. A new Welcome Center offers more background on the company and its product design and manufacturing processes to help communicate the high quality of products and build customer confidence.
As we go forward with our online marketing program, we will continue to implement a greater number of analytic tools that will show how our customers navigate through the site, where and how the traffic flows, and where customers abandon the site. This will allow us to continue to enhance the site’s structure for optimum functionality, positive customer experiences, and, ultimately, conversion to sales.
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.