The 2005 CRM Elite, Part 3
Marketing Automationhas seen a 75 percent reduction in its cost-per-sale, resulting in $1 million in annual cost savings has built a third marketing medium, the Internet has seen a $100 improvement with the Internet in cost-per-sale over the radio has switched from a cost-per-thousand to a cost-per-acquisition model
Frontline Educational Products
Frontline Educational Products provides reading programs for children ages three through eight. Its core product is Frontline Phonics, a program designed to assist teachers with children learning how to read. But when marketing that product to teachers and school districts, the company faced the old saying: If only 50 percent of your marketing works it's a matter of determining what 50 percent. The company needed to add "a third leg" to its marketing campaign, according to John Lant, president and CEO of Frontline. In addition, the company had to reduce the overall cost of marketing by improving its assessment of which lead generation and marketing strategies were working.
"Our marketing budget is much smaller than most of our competitors; thus our cost per sale, beginning with our cost to acquire each lead, greatly affects our bottom line," Lant says. "In 2002 we looked to online advertising as a way to decrease our marketing costs."
Until 2002 Frontline was a direct response company that relied solely on radio and television for its marketing. A key to any successful radio/television campaign is having an easy-to-remember 1-800 number, so Frontline purchased 1-800-YES-READ. In doing so, the company lost the ability to track where leads were originating from and what medium, radio or television, was working best. Following 9/11 and the resulting economic recession, Frontline's radio and television campaigns began to take a dip in the polls. The company's cost per sale climbed and became too high. On the radio, Frontline's cost per lead ranged between $25 and $35, while its close percentage averaged out to 25 percent, generating a cost per sale of $125 to $150.
"That's expensive. If your product sales are $250, that only leaves $100 to cover overhead, cost of goods, and everything else. You'll find yourself flying close to the trees," Lant says. "We found ourselves on a two legged stool. One leg was radio, the other television. We needed to build a third leg of the stool, the I
Internet. We wanted to generate leads online and then call those leads to an outbound telemarketing campaign."
After putting the bid up for vendors, Frontline selected Omniture's SiteCatalyst Web analytics program.
SiteCatalyst measures, in real time, cost per lead for online campaigns, such as keyword buys on Google and Overtune, email campaigns, and affiliate programs. The implementation was a breeze, especially given the limited IT support Frontline had at its disposal.
"We don't have a technical staff here," Lant says. "We have a part-time IT guy who's also a student. He worked closely with the folks at Omniture. The implementation was smooth and didn't take us long to put together." In addition, Frontline uses SiteCatalyst to test the effectiveness of its outbound campaign creatives, as well as the campaign landing pages. Lant can run an email campaign and evaluate which creatives "are pulling the best," and make changes accordingly. Frontline can launch a new campaign and target thousands of recipients who are directed to two or three different landing pages, each of which carries a variation of their offer. Frontline can monitor and manage the effectiveness of its campaigns in real time, making necessary changes within hours of launching one. Lant believes this access to real-time analysis fosters data-driven versus "gut" decision-making and has been critical to the success of its online advertising and lead generation strategy. "We're a small company with a limited marketing budget and IT resources," he says. "We need to be very smart in how we spend that budget and make sure we're realizing some sort of ROI from that investment."
Lant's data-driven decisions are leading to hefty ROIs for Frontline. The company has achieved a 75 percent reduction in the cost per sale, resulting in over $1 million in annual cost savings using SiteCatalyst. Frontline's Internet business is currently averaging $30 per sale. With radio sitting at a plump $125 to $150 cost per sale, Frontline is seeing a $100 improvement that "drops straight to the bottom line." In addition, Frontline Educational has been able to move many of its online marketing providers from a cost per thousand to a cost per acquisition model thanks to a better understanding of their conversion process. This has created greater predictability in their marketing expenditures.
"Using SiteCatalyst to manage our Web site has been so successful people want to know why we don't go 100 percent in that direction and simply scale the Internet like radio and television," Lant says. "While I wish it were that easy, the Internet has become an important piece of our marketing strategy, and certainly the most profitable one." --Colin Beasty
SALES FORCE AUTOMATIONincreased sales 58 percent increased margins more than 10 percent added ability to package together complementary (e.g., Derby-related party supplies) items obtained more time-related customer data for predictive analytics
Churchill Downs, the corporate owner of the race track, the Kentucky Derby, and other horse racing venues throughout the United States, debuted its new online store only three weeks before the 2005 Run for the Roses, and enjoyed a 50-plus percent jump in online sales thanks to the store's new design, graphics, and marketing capabilities.
Due to the outstanding success of the implementation, Churchill Downs is the winner of CRM magazine's Sales Force Automation CRM Elite award.
"The Kentucky Derby brand is very well known; it's one of the highest rated horse races every year," says Atique Shah, Churchill Downs vice president of CRM and technology solutions. "We have a huge presence for online and offline sales of merchandise."
However, Churchill Downs' online store was being underutilized. "We knew it had value to it," Shah says, "but we weren't making it into a significant revenue stream." The legacy online store, developed on the Yahoo! E-commerce platform, was very flat in appearance, with no way to package together related products, to drive particular promotions, or to push sales of higher margin merchandise, according to Shah. So he felt it was time to redesign the store before the 2005 Derby, even though Churchill Downs was in the midst of several other CRM implementations for other parts of the company, including projects with SPSS, Oracle, Epiphany, and IBM.
Shah built a business case and metrics and presented them to senior company executives in early March, knowing that the Derby was only eight weeks away. "The CEO and CFO said that this was ridiculous. I didn't initially get their votes. But there are times in life when you have to take risks." So Shah continued to push for the project and shortly thereafter received a somewhat reluctant approval. Company executives, while giving him the go-ahead for the implementation, also warned Shaw that he would be held responsible for the success or failure of the newly designed store.
Shah looked at different sales automation providers, telling them that the store had to be up and running by April 17, three weeks before the Derby. That's when Derby-related sales start to spike each year, according to Shah.
Toronto's Truition said it could complete the project on time. Churchill Downs executives made sure the technology company delivered as promised by awarding a 90-day contract for design, implementation, and operation of the site from a month before the Derby to around Father's Day, another traditionally strong sales time for Derby-related merchandise.
Shah provided Truition with the merchandising and sales information and worked through a weekend with a team from Truition to design the site. Testing followed. Only three hours before going live, testing discovered an initial challenge with the payment card field. It originally accepted only 13 numbers in the field, but payment cards use 16 numbers. The glitch was easily fixed, according to Shah. "Obviously, delays were not acceptable. Failure was not an option." But beyond the glitch with the card payment field, there were no other challenges with the technology, and the new online store went live as promised on April 17.
However, banner ads from third party partners were still driving traffic to the older site that first day, a problem that was quickly fixed. Due in part to the banner ad glitch and to people's comfort levels with the old site, the Yahoo!-based store still garnered more business than the new e-store for the first couple of days, Shah says. But by day three, there was a huge spike of traffic on the new e-store.
The online store has produced a 58 percent increase in sales over last year, with the margins increasing by better than 10 percent, and provides a strong base for future sales promotions. That also provides Shah with data on what people are buying as well as the time of the day they are buying it. "In a CRM system, each data point is critical." The increased data will help the store do more in the way of predictive analytics. The success of the project more than supported Shah's accountability, improved revenues and margins of online sales, and resulted in a two-year extension of the contract with Truition.
Customers showed their approval of the new online store with both their emailed comments and their wallets, Shah says. "People said they loved the new design. The graphics and animation tell you that the essence of the [online store] is horse racing. Horse racing is quite unique. Fans feel like they own a portion of it." --Phillip Britt
Contact Editor-in-Chief David Myron at dmyron@destinationCRM.com
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