How many orders did we take last week?

How could such a simple question start so many board room arguments? Yet it does, and not because companies don’t know their numbers, and not because companies lack a unified dashboard with definitive answers. The reason is: the answer isn’t simple.

Considerations when counting orders:

• Do you count orders that are placed but not yet shipped?
• What about completed orders that are subsequently canceled?
• Do you count back orders?
• If someone calls back and adds on to an order is that one order or two?
• Do you count orders made on credit or installments before they’re paid in full or after?
• How do you count returns?

Your answers to these questions will depend on your role in the company. The operations folks are interested in call volume, and boxes shipped; the accounting folks will focus on money in the bank; the merchandising folks and marketing folks have different facets of the business to tune and must look at these numbers differently.

I’m not saying that every discussion needs to be down in the weeds of the details. Arguing over whose numbers are “right” is a waste of time. There are plenty of instances when agreeing on the definitions in advance makes sense to simplify higher-level discussions. I am saying that this shouldn’t be the only way of looking at the data. Each department needs to focus on its own customized view of the business, not to the exclusion of other perspectives but to enhance their understanding.

Simplifying and unifying the company’s view of numbers is dangerous. There are good reasons to look at the numbers from different angles and with different agendas.

I use order counts as one example. The same notion applies to each marketing program and the inter-relationship between them. The unified view is important, but it shouldn’t be the only view.

Business is complex. Reducing the complexity means losing valuable information. Sweeping the details under the rug of a dashboard serves no one’s interests.

Contact:
Ryan Gibson
The Rimm-Kaufman Group
434-970-1010, ext. 110
ryan@rimmkaufman.com
www.rimmkaufman.com

The Rimm-Kaufman Group is once again named among Inc. Magazine’s fastest growing companies

Charlottesville, Virginia, Wednesday, August 19, 2009. For the second consecutive year, The Rimm-Kaufman Group (RKG) has been honored by Inc. Magazine as one of the fastest growing private companies in America. RKG, which appeared on last year’s list at #315, is ranked at #536 on this year’s list, which is based upon percentage revenue growth over the three year period ending 2008. RKG is ranked #52 in the Advertising & Marketing segment.

Inc. Magazine —which announces this year’s list in the September issue—has been publishing its popular Top 500 list since 1982. In 2007, it expanded the list to include the Top 5000 in order “to get a better statistical picture of the overall economy,” according to the magazine’s web site.

An official press release accompanying the list indicates that the companies included are surging in spite of the economic downturn: “Despite the ongoing recession, aggregate revenue among the companies on the list actually increased to $214 billion, up $29 billion from last year, with a median three-year growth rate of 126 percent. The Inc. 5000 are responsible for creating more than 1 million jobs since their founding, making the list perhaps the best example of the impact private, fast-growing companies can have on the economy.”

This has been the case for Rimm-Kaufman Group which continues to grow and hire new employees despite the economy’s doldrums. RKG has seen its revenues grow more than 500% since 2005 by managing the search marketing campaigns of many of the nation’s top retailers.

“Only a handful of companies make the Inc 500 two years in a row,” said George Michie, RKG co-founder and CEO. “We just missed doing so, but came awfully close. Fairly remarkable for a firm that hasn’t really pursued growth aggressively. We have two full-time sales people. We’ve done two trade show booths in our history, and we’ve bought one print ad. We’ve grown not by bringing in clients by the boatload, but by keeping the clients we catch.”

Along with emphasizing RKG’s commitment to clients as a recipe for success, Michie pointed out that a commitment to employees is just as essential. “Importantly, RKG remains a good place to work. We work hard, but we remain dedicated to protecting our employees’ family time outside of the office.”

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For more on The Rimm-Kaufman Group please see www.rimmkaufman.com

For more on the Inc. 500 please see www.inc.com

Technorati Tags: Business, inc-magazine, RKG , SEM

This makes it easy to monitor the web for mentions of your brand — or for mentions of your competition, or your key execs, whatever — via a RSS reader.

I use Google Reader for RSS. Here are some of the searches I’ve set up to scan blogosphere, the news wires, Technorati, and Twitter:

(click image to enlarge)

Simple, relatively comprehensive, and free!

Technorati Tags: blog search, brand management, brand monitoring, cocomment, Feeds, Google, reputation tracking, rss, search, Social Media, technorati, twitter

When push comes to shove there are just two reasons:

1. To make more money immediately. The idea is to generate enough from incremental sales to pay for the cost of the offer.
2. To make more money in the long run. Whether introducing a new product or service in the hopes that repeat business will cover the initial losses, or turning over inventory to clear shelves for new merchandise, the idea is that losing money (or realizing losses) short term will be worth it in the end.

For simplicity, let’s focus on the first type of offer.

Suppose Fred runs a coffee stand, and on a typical Tuesday he sells 200 cups of coffee at $1 per cup. To keep the math simple, let’s say each cup costs him $0.50 in materials. On a normal Tuesday he makes $200 in revenue on $100 worth of materials, so $100 in profit.

Fred wants to make more money and thinks by slashing the price he’ll attract more business. He cuts the price to $0.75 per cup and sure enough, sales skyrocket to 300 cups. At the end of the busy day, Fred is bummed out. A $25% price cut lifted sales 50%, yet he actually lost money. His revenue went up to $225, but cost of materials went up to $150, leaving him with only $75 in profit.

Fred realizes he made a mistake. Of his normal 200 customers 150 of them buy from him every day, rain or shine. Same faces, knows them by name. What if instead of cutting the price across the board, he only cuts the price for first time customers?

This changes the math dramatically: he makes $75 in profit on the 150 cups sold to his regulars and $37.50 in profit off the 150 sold to new customers for a total profit of $112.50.

What Fred learned is that his regulars don’t need an offer to buy. Since giving a discount to these folks essentially increases the cost of the promotion, it makes it that much harder to drum up enough incremental business to make the offer work.

Now, if the discount raises average order size sufficiently even selling to the people who would buy anyway could make sense. Let’s run those numbers. On $100 in sales Acme has $50 in COGs. A 10% discount means what was $50 in margin drops to $40 ($100 – 10% * $100 – 50 = $40). Interesting! A ten percent discount cuts profits by 20%.

If we then ask: how much does the AOV need to increase to break even on this discount? the answer is more surprising still: AOV needs to increase 25% to pay for that 10% discount to a sure fire buyer.
{A $125 order before the discount has the same margin as $100 order without the discount. Essentially, you’re selling $62.5 worth of merchandise for $112.5 which yields $50 in margin}

That’s a pretty high bar, and most catalogers find that giving discounts to their most frequent buyers doesn’t make sense financially. Instead, they give discounts to those who are least likely to buy without the offer which makes the threshold much more manageable.

Fast forward to the online world. To whom do retailers email offers? To the folks least likely to buy, or the folks most likely to buy? It’s the latter. Most of our email files are made up of buyers and we flood their in-boxes with discounts.

What about our coupon friends? Most retailers offer discounts (via affiliates) to anyone who does a search on their brand name. Who are those people who search for a retailer’s trademarks? Loyal customers walking through the door to your online store.

Seems to me that this is backwards. Giving discounts to the folks most likely to buy without them, rather than to the folks who haven’t decided where they want to shop makes promotions less likely to generate profits in the short term or the long term. We not only raise the bar for short-term profitability, we condition our best customers to wait for an offer.

In an Internet Retailer article, Tracy Tee, co-founder of Delight.com talks about how Tweeting offers to those who follow Delight.com on Twitter has been hugely profitable. I wonder about that. She’s sending offers to folks who are such rabid fans of Delight.com that they follow them on Twitter!!! How many people would wager that a hold out test might prove those offers to be profit eaters?

Am I missing something?

Technorati Tags: affiliate coupons, Delight.com, discounts, email offers, internet-retailer, marketing promotions, Tracy Tee

Or do they?

Over the years a number of other service providers have approached us offering to refer their clients to us…for a fee. They usually want us to return the favor and refer our clients to them. Usually these deals are structured that the referring party collects some percentage of the revenue generated by the party that got the customer.

In the early days of our company, we signed a couple of these deals with companies we held in high regard. We figured: we need to get the word out, and we’re too cheap to buy advertising; we won’t refer our valued clients to vendors who aren’t good at what they do, that would be wrong, but if we like the other company, what’s the harm?

We only did a couple of these deals and terminated the last of them two years ago. Ultimately we found that most of the prospects referred to us weren’t a good fit for our services, and, we found that we really didn’t have any interest in pushing particular vendors on our clients. There were all kinds of headaches associated with which clients were really referred by the other party versus companies we were already speaking with and vice versa, but moreover, it just didn’t feel right.

To our thinking a company serves the people who pay them. We have no interest in serving anyone other than our clients. Indeed these deals strike us as a conflict of interest. Are we recommending said vendor because we think they’re a great choice for our client, or are we trying to make a buck off a referral? We don’t want to be in that business.

It seems that these deals are increasingly prevalent, and the number of firms seeking mutual referral deals with us keeps growing. It’s also become clear that many of these deals are non-exclusive. In other words, we might be one of many PPC firms recommended by said vendor. That raises the question: which firm is at the top of your list? The answer: the one that pays the largest commission. This starts to look very much like affiliate marketing in B-to-B services and for the same reasons we don’t think much of affiliate marketing as it’s practiced, and we don’t like commissioned sales, we don’t like this trend either.

Third Party vendor rankings work pretty much the same way as far as we can tell, but that doesn’t bother me as much. Most folks probably recognize that the rankings track closely to the amount of advertising the vendors buy and that’s to be expected. Profit making trade organizations need to take care of their advertisers and/or paid clients because they are their principal source of revenue.

But I don’t think the scope of these mutual referral networks are well understood. Seems to me folks aught to come clean and say: “Hey, I think the world of company X, but you need to be aware that they pay me a commission for referrals”.

Rest assured that if RKG speaks highly of another vendor it is because we think highly of them. You can also rest assured that if you ever hear someone say nice things about us, it’s not because we’re paying them to do so — we aren’t.

All in favor of transparency say “Aye”!

• Smart Bidding Requires Smart Clusters My monthly column for Search Engine Land in case you missed it....

Have companies trained their employees to behave like rats? When I think of commissioned sales I can’t help thinking about those rats. “Be nice to the next person who calls and I’ll give you a treat!” What ever happened to the notion of: “Do a good job for the company because…it’s your JOB…, because you take pride in your work…, because you’re not a rat”?

The cynic will say: “Behavior modification works.”

Sure it works. But with humans the rewards and punishment don’t have to be immediate. Paying fair salaries, praising good work, and respecting the opinions of the people you work with goes a long way. Promoting and giving raises to people who’ve earned them, and dismissing those who don’t meet expectations establishes a much stronger, forward looking culture. There are tangible benefits to this type of system as well:

1. It doesn’t generate fights over who gets the credit. It may be annoying when a co-worker claims credit for one of your good ideas, but not nearly so much as if it takes money out of your next paycheck. Well run companies know who their stars are and aren’t fooled by the pretenders.
2. It doesn’t provide incentive to cheat the system. Every company with a commissioned sales force can give a long list of frauds employees have perpetrated to make a buck.
3. It doesn’t require the company to create elaborate mechanisms to prevent 1 & 2.
4. It keeps folks focused on what’s best for the company. For example, consider the hostility with which commissioned sales folks greeted websites and in-store kiosks.
5. It recognizes that there is such a thing as a bad sale: whether it’s signing a client who has unrealistic goals, or selling too much computer to a senior citizen who just wants email. The short term benefits are vastly outweighed by the long term consequences to your brand.
6. Like MBO goals in general: what’s right for the company isn’t always factored into the goals and usually can’t be. The “right” thing isn’t always cut and dry, and often changes depending on the circumstances. How many times have you seen companies role out unprofitable promotions at the end of a fiscal quarter just to hit some bogus top line goal? Stupid, but very common.

I will probably be accused of being “old school”. Guilty. Undoubtedly, someone will point to case studies showing MBO goals leading to tremendous performance improvements. I don’t find that compelling logic. If a company hires poorly and/or manages poorly perhaps retraining staff with immediate carrots and sticks will raise performance levels, but that doesn’t mean it’s the right way to manage.

By hiring people who take pride in their work — encouraging them to do what’s right for the company, compensating them for consistently performing well, and firing those who perform poorly — quality people will rise to the challenge.

Clearly, this won’t work in every business. Paying fruit pickers by the peck makes sense, as migrant workers can’t develop long-term loyalties, and the goals really are pretty easily defined. But I don’t think it makes sense to treat professionals like migrant workers.

Indeed it strikes me that much of the commissioned sales/MBO garbage simply serves to “eliminate the need” for prudent management. If employee compensation is based strictly on meeting objectives then management doesn’t need to think about hiring, and doesn’t need to provide expensive training or supervision. Hire bunches, let them cannibalize each other; the strong survive, the weak quit and the management doesn’t need to go through that icky business of firing people.

Maybe this works financially in the short term, but what happens to a company’s brand in all that mess? Maybe no one cares anymore? When the goal is simply to inflate a top line and sell the company for a quick profit, maybe reputation doesn’t matter.

I prefer to work for a company built to last for generations, and I think customers and clients can tell the difference, too.

Technorati Tags: Commissioned Sales, MBO goals, Performance Bonuses, Revenue Sharing

This is isn’t a big deal for online retail yet, but it will be, in the next 6 to 18 months.

Today, HTML markup is about how data should be presented. By tagging elements on a HTML page with standard class names, microformats are about what data mean. Microformats will form the foundation of “Web 3.0″, aka the Semantic Web.

Google is starting with microformats for people (hCard) and reviews (hReview).

It seems clear Google support for the SKU microformat (hProduct) is coming soon, as there’s already documentation for it on Google WebMaster Central.

What will this mean to online retailers long-term?

• The first retailers to add hProduct tags to their product pages will enjoy an early sales advantage, as Google will present their products first because of the extra data.
• The advantage will be short-lived, as large retailers and standard e-commerce platforms will quickly jump on the band wagon.
• Retailers will chafe at the simplicity of the format. hProduct doesn’t encompass shipping, tax, bundled pricing, or even UPC. Argh. When Google miscategorizes or misprices your product atop their SERP, get ready for additional customer service calls.
• hProduct markup is essentially a product data feed, albeit with limited fields. Google’s current product search hasn’t gained much traction, but widespread hProduct data will help Google disintermediate the shopping comparison engines.
• Long term, hProduct markup will increase consumer perception of Google-as-store, eroding weaker retail brands (see “search engines atomize retailer brands”, halfway down this post.) Building a strong well-defined brand is key.
• When Google presents more SKU-centric multi-merchant data on the top left of the page, paid search on the top right becomes more crucial to get your link in front of shoppers. The paid search core competencies –optimal bidding, extensive keywords, and solid “why-shop” copy — become even more important.

What should online retailers be doing about this today?

I’d recommend keeping a close eye for mentions of hProduct on the WebMaster Central Blog.

I’d also recommend planning to add hProduct tags to your SKU pages, probably by late ‘09 or early ‘10. (Here’s the link the Google hProduct documentation again.)

For better or worse, this is where online retail is heading, and your marketing and merchandising teams will benefit from being there at the beginning.

Technorati Tags: data feed, Google, hcard, hproduct, hreview, microformat, online-retail, upc

• Geographic Impact of PPC Part 2: Retail Chains Part 2 of our study: much of the conventional wisdom around paid search driving store sales may be wrong....

We’ve followed the principle that one great programmer is worth 100 mediocre programmers. That approach has borne tremendous fruit, but it does make finding folks challenging.

We’re a LAMP (Linux, Apache, MySQL, Perl) shop, and while we prefer folks with some Linux background and some database skills, primary language is not a concern. A great programmer can learn perl.

We practice Object Oriented design and test-driven development.

If this sounds like you, or someone you know, please drop us a resume! Charlottesville Virginia is a beautiful place!

Also, have any of you had success hiring engineers through head hunters?

Technorati Tags: Charlottesville IT jobs, virginia software engineers

“We like your company but we prefer to shop online,” I said. “May we get off your mailing list?”

Totally true. My household has great RFM scores for all of these companies, but we shop almost exclusively by web.

All of the customer service reps were courteous, friendly, and polite. No problem getting off the mailing lists.

None asked me if I wanted to sign up for email.

We’re already signed up for LE email so perhaps the CSR knew that and skipped the question. Maybe. But we’re not on the email list for the other three.

Maybe they assume all NOMAIL callers are angry and would be annoyed by an email request. In 2009, I think that assumption is overly broad.

Small marketing opportunity lost.

Technorati Tags: catalog optout, catalog unsubscribe, do not mail, j jill, jjill, lands end, le, learning company, ll-bean, llbean

• http://projects.flowingdata.com/walmart/
• http://projects.flowingdata.com/target/

Random thoughts:

• Good data visualizations are rare.
• Both firms have been expanding for over 40 years.
• Walmart grew methodically by region. Target bounced around.
• Walmart is everywhere. Not news, but still mind-boggling.
• All those leases to cover!

Hat tip: Paul Kedrosky

Technorati Tags: bricks and mortar, flowing data, flowingdata, kedrosky, Nathan Yau, target, visualization, wal mart, walmart