An Alternate Point of View on Selling/Hybrid/Branding Websites

My recent posts about homepage selling/hybrid/branding techniques resulted in a series of complementary and critical emails. One series of emails from Fred Meyers, Chairman and Founder of The Queensboro Shirt Company, resulted in a few observations worth sharing with you. Here's a sampling of Fred's observations:

• "Where have you distinguished between the influence of the actual design of the landing page as opposed to the overall selling strategy of the company? Where is the indication that the design of the landing page in an of itself has any influence at all on the behavior of the visitor? Isn't it in fact likely that there are a lot of other factors that are likely to influence a visitors behavior and the metrics you cite other than the design of the landing page?"
• "I personally feel that the landing page of a web site is part of an overall marketing strategy and all must work together. A hybrid strategy may generally be the most productive, but that is a decision that probably should be largely determined by market size and the overall 'personality' of the business, including its competitive advantages, if it has any."
• "If a test indicates a hybrid landing page outperforms one of the other approaches, and they hybrid approach is in contrast to the basic selling strategy of the business, perhaps it is not the design of the page that is responsible for the improvement, but the overall approach to the customer. In this instance I would say possibly (and probably) the prior approach was not the best one to take."
• "I don't think the analysis supports the conclusion that the hybrid landing page design, in and of itself, is the most productive format, only that more successful sites are hybrid than any other format."

There are valid points in Fred's argument. My analysis did focus on the homepage, and the analysis suggested that the homepage strongly influenced overall performance. Obviously, other factors come into play in determining whether the site is productive or not. Fred did suggest that the only way to truly know if my conclusion is appropriate or not is to do rigorous, scientific testing.

So give Fred two points for having a point of view that is different than mine. I stand behind my conclusions 100%. But I also want MineThatData to be a place where professionals can have different opinions, and can feel comfortable voicing those differences. An open and honest dialogue that supports diverse points of view is something that will be encouraged at MineThatData.

Gary Comer, Lands' End

Many of my readers already know by now that Gary Comer, founder of Lands' End, passed away after a battle with cancer.

While I didn't have a personal relationship with Mr. Comer, I did learn just about everything I know about database marketing and direct marketing from his disciples. I can honestly say that the culture Mr. Comer created at Lands' End was the absolute best culture I have worked in during my career. His disciples have gone on to do great things, both at Lands' End, and at leading direct-to-consumer merchants.

Hopefully, Mr. Comer knew how many lives he impacted. Tens of thousand of people worked at Lands' End over the years, and countless individuals benfited from Mr. Comer's philanthropic activities. Well done, Mr. Comer. May God smile upon you.

Multichannel Marketing: RSS Feeds

Multichannel retailers have been slow to move into the marketing channel known as "RSS Feeds". This is surprising, because in its simplest form, an RSS feed only takes about ten lines of programming code to write.

eBags uses RSS Feeds to notify customers about products. This is an example of a page where eBags makes an RSS Feed available. By subscribing to the feed (Google Reader is a good RSS reader for those just starting to dive into RSS), users receive periodic updates about the product classification of their choice.

This is the feed I received today, for North Face merchandise. http://response.ebags.com/bin/blog?pid=67D9A27890DBFA84BFFDE51580E8E80D

RSS Feeds have an advantage over email, in that the customer opts-in to the feed. The customer can opt-out at any time. There isn't any need for assistance from the information technology folks, the customer drives the process. RSS Feeds also bypass all can-spam problems created by email. The customer decides what she wants to receive. You decide when you want to create new information for her. Best of all, the customer uses RSS to pull your brand into her reader. She basically sees your product without ever visiting your website.

Nobody is suggesting that your web sales will triple by offering RSS Feeds. It is likely that fewer than ten percent of your visitors use RSS Feeds today. But the cost to write the programming code for an RSS feed is basically zero. Any sales you generate via a feed make an RSS initiative profitable. When Microsoft releases the next version of Internet Explorer next spring, subscribing to RSS Feeds will be much easier. So why not get a head start now, learn what works and doesn't work, and be ready to implement a good strategy next Spring?

Homepage Design and Net Sales Follow-Up

A few topics surfaced from yesterday's post on homepage design. Let's address the issues.

Question #1: Do any of the three homepage presentations (selling, hybrid, branding) drive enough traffic to offset shortcomings in conversion and average order size?

• This is a good question. Among the larger companies, the selling strategy drives the most traffic, followed by the branding strategy. In fact, the selling strategy drives enough traffic to offset lower productivity.
  
• Of course, the vast majority of businesses aren't big enough to be in this category. Among companies ranked 126-300, the selling strategy drives 10% more traffic than the hybrid strategy. The hybrid strategy drives 10% more traffic than the branding strategy.
  
• After multiplying visitors by net sales per visitor, the hybrid strategy is still more productive than the selling strategy. The branding strategy performs even worse when evaluating traffic.

Question #2: Why do the branding sites have a lower average order size?

• Part of the reason for this is that the computer-related sites are almost always selling or hybrid sites. I ran a scenario where I removed the sites that had the highest and lowest average order sizes, and highest/lowest conversion rates. After doing this, the branding sites had lower average order sizes, all other sites had significantly lower average order sizes. However, the change was not enough to offset lower conversion rates. It does seem like the branding sites fail to maximize the potential sales of each order.
  

Question #3: Can you illustrate top performing sites in each segment (selling, hybrid, branding)?

• Here's the top three in each category. You will see some sites that really sit on the fence. I struggled with classifying Sony Style (could have been in branding), and CDW (could have been in the hybrid strategy), for example.
  

• Top 125 companies, branding strategy:
  
• Dell, Talbots, Neiman Marcus
• Top 125 companies, hybrid strategy:
  
• PC Connection, Fresh Direct, Sony Style
• Top 125 companies, selling strategy:
  
• PC Mall, CDW, Office Depot

• Companies 126-300, branding strategy.
• Armani Exchange, Barrie Pace, Alienware
• Companies 126-300, hybrid strategy.
• Hanna Andersson, Wine.com, Fingerhut Direct
• Companies 126-300, selling strategy.
• AJ Madison, Databazzar.com, Atomic Park

The evaluation of sites is subjective. If ten of us tried to classify sites into branding, hybrid or selling strategy, we would probably agree on two-thirds of the sites, and disagree on the others. Based on my evaluation of the data, the differences in classification would not make much difference in the overall outcome.

I hope the information was useful. I think we demonstrated that website design does make a difference in generating profitable sales. All strategies (selling, hybrid, branding) have the potential to work well. The hybrid strategy appears to have the best chance to be productive.

Does Homepage Design Influence Net Sales?

There is a creative tension that occurs in homepage design. Businesses must constantly balance the need to sell merchandise with the desire to communicate emotional aspects of the brand. Both issues are important. In some companies, the concept of "selling" wins. In other companies, the concept of "branding" wins. In either case, driving profitable sales should be the end result.

Which style drives more business, selling, branding, or both?

I analyzed data from the top 300 businesses in the Internet Retailer Top 500. I wanted to make sure I analyzed businesses that had at least $15,000,000 in annual sales.

Next, I created three segments, segments that loosely describe the selling technique employed by the website.

• Selling Websites: These websites have a strong focus on featuring a lot of products on the homepage. Frequently, the customer has to scroll down the page to see all product. Many individual items are featured on the homepage, and numerous links make most of the website available to the customer. Examples of "selling" websites include Super Warehouse, Abt Electronics, and Drugstore.com.
• Hybrid Websites: Websites that balance selling and branding are classified as "hybrid" websites. These sites typically include the entire homepage display on your monitor, without need to scroll down. There is ample white space or empty space, so that the customer is focused on a specific area of the website. Examples of hybrid websites include Eddie Bauer, Crate and Barrel, and Collections Etc.
  
• Branding Websites: These sites embrace the customer by evoking emotion. The homepage is not about directly selling merchandise. Instead, the website creates a mood, a feeling, something that differentiates the website from all the others. Examples of "branding" websites include Patagonia, Coach and Tiffany.

After placing each website into one of the three segments, I further segmented websites into those in the top 125, and those from 126-300 (ranked by sales). These six segments (selling, hybrid and branding by big sites and smaller sites) were analyzed for conversion rate, average order size, and net sales per visitor.

First, let's review the results among the 125 top selling websites.

• Conversion Rate:
• Selling Sites = 4.55%
• Hybrid Sites = 6.08%
• Branding Sites = 5.16%
• Average Order Size:
• Selling Sites = $219
• Hybrid Sites = $204
• Branding Sites = $125
• Net Sales per Visitor:
• Selling Sites = $9.96
• Hybrid Sites = $12.40
• Branding Sites = $6.45

Next, we observe the results for websites 126 to 300.

• Conversion Rate:
• Selling Sites = 2.86%
• Hybrid Sites = 3.56%
• Branding Sites = 2.34%
• Average Order Size:
• Selling Sites = $178
• Hybrid Sites = $187
• Branding Sites = $120
• Net Sales per Visitor:
• Selling Sites = $5.09
• Hybrid Sites = $6.66
• Branding Sites = $2.81

In the spirit of full disclosure, net sales per visitor is arrived at by multiplying average conversion rates by the total average order size. This is a calculation. A different, though directionally similar result, occurs when taking the total average of net sales per visitor.

What Does The Analysis Tell Us?

The analysis clearly indicates that companies employing a "hybrid" strategy have the most productive metrics. In fact, hybrid sites are about twice as productive as branding sites. Branding sites tend to have low average order sizes. Further study needs to be done to understand if the small average order size is due to the merchandise assortment on those sites, or are due to a lack of cross-shopping done by customers due to site usability issues.

It is interesting that "selling" sites have lower conversion rates than hybrid sites. It may be possible that customers are overwhelmed by massive amount of content on selling sites, causing customers to leave before they begin shopping.

It should also be noted that there are numerous examples of each strategy (selling, hybrid and branding) working exceptionally well. There are numerous examples of each strategy delivering poor results. In other words, there are ways to make the branding strategy effective. The data suggest the hybrid strategy is simply more likely to work.

Lastly, I defend the branding sites by saying that most of the big-ticket sites, those selling computers, participate in a selling or hybrid strategy, driving up the average order size. Still, when viewing conversion rates, branding sites lag behind hybrid sites. Conversion rates at selling sites are frequently hurt by large-ticket items like computers.

Given all of the caveats, it is still clear that the design of the homepage influences the productivity of each visitor to a website. It appears likely that a hybrid strategy is most likely to maximize the net sales of each visitor to the website. Selling sites may overwhelm visitors, while branding sites may not present enough merchandise to entice consumers.

How does your website stack up, against these metrics?

Dell and Presentation of Merchandise

A fellow blogger offers commentary about Dell's homepage. Mr. Patel was not pleased with the redesign of the homepage, offering suggestions for improvement.

Recall that in August, I wrote a brief essay about branding verses selling, comparing Gap and Zappos. Mr. Patel's comments seem to lean toward a preference for "selling" on the homepage.

There is constant tension in the creative presentation of merchandise. From time to time, creative folks want to take risks, to present merchandise in a compelling and elegant manner. Customers, from time to time, visit a website with a clear idea what they want to find. When the creative folks make it difficult for the customer to find what she is looking for, sales suffer.

Database Marketers suggest that businesses test creative presentations, in order to identify which strategy works best. However, true tests that identify the best creative direction are seldom executed. There are businesses like Amazon that test many different concepts, allowing Darwinian-style evolution to drive the creative presentation process. Most other businesses make choices "in the best interest of the brand". Amazingly, both strategies have the potential to work.

$10 Off A $25 Purchase At Lowes

A few weeks ago, I received a promotion from Lowes, offering me $10 off my next purchase of $25 or more. The card they sent me expires October 7. You may assume that I will make a trip to Lowes before the week is over.

In their most recent quarterly filing, Lowes gross margin, year-to-date, is about thirty-four percent. This means that, for every dollar of merchandise sold at Lowes, sixty-six cents are paid to the vendors they purchased the merchandise from, leaving thirty-four cents of profit. Of course, Lowes must pay employee salaries and overhead and numerous other fixed costs.

Fixed costs do not come into play when considering a $10 off $25 purchase incentive. Assume that I visit Lowes tomorrow, and spend $30. I proudly present my incentive, resulting in a purchase amount of $20.

On my $30 purchase, Lowes earns about $10 of gross margin. This is why they can give me a $10 incentive. If I spend $40, Lowes earns about $12 gross margin, gives me $10, yielding $2 profit.

From a bean-counter's standpoint, the promotion makes sense, because Lowes is likely to earn profit on the transaction, or bring in customers who typically shop Home Depot or another competitor, thereby stealing a tiny amount of market share.

So the financials seem to make sense. From a strategic standpoint, do you think this is a good idea? What type of customer is Lowes training to purchase from its brand? Since I usually shop at Home Depot, or my neighborhood hardware store, I will purchase merchandise at Lowes only because of this incentive.

During my tenure at Eddie Bauer, our business performed progressively worse each year. As it became difficult to move inventory, we had in-store sales, and frequent catalog/online promotions. On the surface, these sales and promotions all appeared to work.

But direct marketers thoroughly understand the concept of "building a housefile". At Eddie Bauer, we slowly "built a housefile" of customers who liked to purchase merchandise either on sale, or with a promotion (free shipping, twenty percent off). Even if we did a good job of providing great merchandise, we eventually had a million or more loyal customers who purchased merchandise if there were something in it for them. Building a housefile of full price customers, after building a housefile of sale/promotional customers, is a very difficult proposition.

There is also the ugly circular logic that occurs when a business heads down the promotional path. If promotions and sales truly fail to deliver incremental, profitable customers, then gross margins erode, applying pressure on the profit and loss statement. Eventually, the brand must reduce expenses, or apply pressure to vendors to lower cost of goods. If the latter is challenging, then the brand must look internally to lower expenses. The process of lowering expenses seldom proves fruitful to the employees working at that company.

Promotions frequently provide a short-term lift to a business, especially a business that is not quite hitting its sales objectives. However, a "different" kind of customer is recruited to purchase from the brand. Occasionally, unintended consequences occur when recruiting customers to prop-up short-term financial results.