September 17, 2006

Four Questions with Mike Faith, President and CEO, Headsets.com

Please welcome Mike Faith to our “Four Questions” segment!

Mike is the President and CEO of Headsets.com, a rapidly growing business located in San Francisco. Mike provides a unique perspective on marketing, focusing on an intense desire to please the customer. His interviews have appeared on CNN, the Wall Street Journal, DMNews, Catalog Age, Catalog Success, CBS Marketwatch, Inc. 500 Magazine, and FORTUNE Small Business. Mike hosts his own website and blog. Let’s see what Mike has to say.



Question #1: What can a company do to build a Customer file? How do you start database marketing without a database?


When we decided to get into marketing headsets, we looked around at the then ten or so companies that were doing it already, and their business models. There were two or three giants that were spending millions of dollars and man hours affecting corporate sales to large call centers – sure a $50,000 contract is nice, but there are only so many of them in the country in a given year, and with the offshore trend, these orders were only going to get scarcer and more fiercely contested on price. With eroded margins, the companies products wouldn’t develop, and their service would match.

At the other end of the scale, smaller outfits didn’t have the budget to advertise through the mail. They had to satisfy themselves with high margin niche products, or widen their offerings through line extension to the point that they became ‘me too’ telecoms resellers.


And just emerging were the Internet Retailers - all racing to the bottom to become the cheapest guys on the block. A “Never mind the profit, feel the volume!” mentality that meant so many companies never made it out of the rollercoaster nineties.


We felt there was a hole. According to the 1997 report of the U.S. Census Bureau, the nation’s 17 million small, non-farm businesses constituted 52 percent of the private workforce. These people, traditional office workers among them, all use the telephone in their daily lives, and as such are prime candidates for our product, yet no one was serving their needs. So we developed a catalog and solo mail offerings that we think filled the space.


Our intention from the start has been to grow by growing our category. Back in the nineties, no one except call center staff and receptionists used headsets. We strived then, and continue to strive today, to make people aware that if they use the telephone, a headset will save them hours a day - I’m sat on hold for a conference call while I type this for instance. So we targeted small companies. Conventional Direct Mail wisdom tells us that the person you mail, the contact is vitally important – and of course, the larger the company, the more true this becomes. The way we got started was by looking at the small companies, (<20>

It worked, we grew at an astonishing rate while our competition largely fell by the wayside. Once we had enough momentum, we started targeting the more traditional larger companies and the individual contacts within them, that would give us larger lifetime values, without the need to focus on anything other than Telephone Headsets.


Question #2: You have a single product line, that seems to have a long office life (telephone headsets). How does your Customer Contact Strategy differ from companies like say, Oriental Trading that has thousands of products and product lines?


Well, we have to work harder to keep in our Customers minds between purchases and to do that, we provide outstanding service and really look after our Customers. The best form of marketing you can possibly have is an enthusiastic Customer, and so we make sure each and every interaction with the Customer – from email queries, pre sales calls, post sales support – even collections calls – a opportunity to generate a Wow! experience in the Customer’s mind. It’s not easy and to do it, your organization has to build itself around its Customer Service Team.


Secondly, we mail frequently, and we mail to our entire house file. We’re not an old company by any means – just 9 years – and even our earliest customers still respond well to catalogs and offers. Could we save some marketing dollars by mailing less frequently? Yes, and we are starting to do just that, but getting the frequency right for a product with such a long life is hit and miss at best and we’d rather bear the cost of mailing more frequently that risk loosing our vital customers through neglect.


What we’ve found is that once one Customer in a company buys our products, they tend to spread into the entire company. So growth and lifetime value within a site make up for what can seem like limited opportunity at an individual level. Also the nature of our product means that new hires and new desks mean sales for us, and we target our prospecting accordingly.



Question #3: What is your online strategy? How does it tie in to your mailing strategy?


Despite the dot com in our name, we are a company that is primarily direct mail driven. We, of course, have a website (er, that would be headsets.com) but it’s different to most, in that its primary objective is to get a prospect to call our call center.


Companies and their web sites tend to fall into two groups. First are those that see the web, as a way to reduce costs associated with sales and service. If Customers are helping themselves, and the entire process is automated from end to end, they reason, they can scale indefinitely. An entirely hands off approach, like Amazon used to execute so flawlessly. (I say used to, have you tried to buy anything from Amazon recently? …shudder…) Secondly, there are those companies that want to price something based on the Customer need, or more generally the needs of the commission driven sales team - and they will let you do everything but actually place an order, or see a price. We think both these approaches are ludicrous from a Customer perspective and our site is aimed squarely in the middle. Our site is a mechanism to place an order, if that’s what the Customer wants to do, or to research a product independently (if that’s what they want to do) or to contact us through prominent placement of our 1-800-Headsets number, our Live Chat feature, email links that actually get answered (within two business hours) if they want to do that too. We strive to fill it with accurate, useful, useable information and let the Customer decide.

In fact, if all that our site achieved was to get people to pick up the phone to talk to our Customer Service Team, then that would be a perfect result. It’s only by talking to a knowledgeable and friendly CSR that a Customer can receive that Wow! experience and be sure that they are getting the right product tailored to their individual needs.


So, we do advertise through programs such as the ubiquitous Google AdWords and its cousins, and we do pay attention to search engine rankings and SEO principles in general. But that’s about all we do. We don’t email our Customers – Postal mail is so much more effective on a campaign by campaign basis. Sure, email is free, but it’s also generally only stimulates a few incremental sales – likely cannibalized from our mail program anyway, and the ill will it generates is not worth the trade in our minds. As for unsolicited email – we’ll leave that to our competition.


Question #4: Aside from Customer Service, what has surprised you about the evolution of your business? What challenges do you anticipate, as you try to grow your business beyond $100,000,000 in annual sales?


I guess the most surprising thing for me is that Headsets as a business tool still aren’t universally adopted by everyone. It’s a good thing in some ways because it means that we still have plenty of market to play with. Cell headsets, and now Bluetooth Wireless headsets are changing the picture slowly though. People are trying headsets as a ‘cellphone fashion accessory’ which in turn is making headsets more acceptable to people in general. Although we aren’t specifically marketing cellular and Bluetooth cellular headsets to businesses, the fact that everyone has a cell-phone, and more and more of them are Bluetooth enabled, means that at some point, pretty much everyone will have tried a headset out. In some way that helps our marketing efforts because the perception gap between ‘people who use headsets’ and ‘me’ shrinks in our prospects minds.

The largest challenge for us as we grow beyond $100M in sales is probably not going to be related to Product, Customer Service or to Marketing – I think we have those things nailed. It’s most likely going to come from growth itself. We’ve been growing at a pretty fast clip for a number of years, and although our headcount has remained small (we recently hired our 50th employee) at $32 million in revenue last year we are an extremely efficient company in terms of revenue per person. As we grow though, our challenge is to keep up this high level of personal productivity up, with more and more support functions, more people managing people managing people interacting with Customers. This is true of any business as it grows – some companies do it well and thrive, some do it poorly and strangle themselves out of business. I hope to model Headsets.com on the former. Ask me in 2008 and I’ll tell you how it went!

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