Chapter 10. Manufactured Product Store

In the previous chapter, we deconstructed a digital product store. But the majority of online stores sell manufactured goods—physical products produced by either another company or you that must be shipped or picked up by customers.

In this chapter, we deconstruct Pacific Pillows (www.pacificpillows.com), a manufactured product store. Before starting Pacific Pillows (see Figure 10.1), owners Craig and Abby Clark owned DealCat.com, selling electronic goods such as digital cameras and computers. While selling electronics, Dealcat.com decided to stock a few hotel pillows. Sales of the pillows started to increase: Pacific Pillows was born and proved to be a much more successful business. Owners Craig and Abbey later shut down the online electronics store and focused on their new niche selling pillows and bedding that luxury hotels use.

Figure 10.1. Pacific Pillows sells pillows and beddings used by luxury hotels.

One of the great benefits about selling online is that you can inexpensively test whether there is a market for your product. By using such methods as pay-per-click advertising, you can get immediate exposure of your product and online store. Like Pacific Pillows, a lot of companies have also changed their product line. What they thought was the hottest thing on the market did not perform as expected; the product that was added as a filler unexpectedly made the most amount of money for the store. Because most of your store infrastructure is already in place, changing products is as easy as adding new products.

General Company Information

Company name: Pacific Pillows

Year business started: 1999

Year Yahoo! store started: 2004

Number of employees: 5

Company main URL: www.pacificpillows.com

Number of websites: 1

Number of unique visitors: More than 25,000 per month

Number of products: More than 45

Number of orders per day: 22

Product Information

Pacific Pillows carries luxurious pillows, down comforters, and bedding that you find at luxury hotels such as the Ritz-Carlton, Marriott, Hilton, DoubleTree, or Hyatt Hotel. Now, guests of these hotels can own the exact same down pillow or bedding they enjoyed during their stay. Pacific Pillows has more than 45 products to choose from. Customers can easily search for pillows or bedding by hotel name.

Website Layout and Advanced Features

PacificPillows.com started out with the basic easy Yahoo! point-and-click default template, with minor customization done in-house. When business proved itself as profitable, they reinvested profits into creating a more professional look. The investment was made four months after opening the online store.

Besides unique website design, some advanced features and layout modifications were implemented on the site:

• Breadcrumbs —Using breadcrumbs is a great way to let your customers know where they are in your site (see Figure 10.2). Not only does it provide an easy way to backtrack to parent sections when viewing products, but it also helps with search engine ranking.

Figure 10.2. Not only do breadcrumbs help visitors know where they are in your site and help them navigate to parent sections, but they also help with search engine optimization.

• Relocation of the Add to Cart button —Instead of defaulting the Add to Cart button to the bottom of the text, Pacific Pillows repositioned the button at the top and created a copy at the bottom of the page (see Figure 10.3). Positioning the button in both locations made it easier for customers to see and click to purchase.

Figure 10.3. Relocating the Add to Cart button helped increase sales.

• Color background of product thumbnail —Pacific Pillows added a light blue background to the product selection to make it stand out a bit more (see Figure 10.4).

Figure 10.4. A light blue background color was added to the product thumbnail and link to make it more visible.

• Newsletter signup button —Visitors can click on the newsletter signup button on the home page (see Figure 10.5).

Figure 10.5. Pacific Pillows was able to increase the average sale amount by offering pillows in sets at a discount.

The overall layout and features are simple and effective. The goal is to make it easy for customers to get your vital information and make the buying process effortless. Some websites overdo their sites with too many advanced features that make it too complicated for customers.

Product Package Deals

Pacific Pillows saw an increase in sales when the company started selling its pillows in packages (see Figure 10.5). Customers were able to purchase an individual pillow, a package of two pillows, or a package of four pillows. Creating the packages and offering an extra discount incentive resulted in an increase in the total sales order. The packages made it easier for customers to make a single-purchase transaction of multiple products.

Before implementing the choices of the packages, customers ordered one pillow 58% of the time. After the packages were implemented, a set of four pillows was ordered 43% of the time, a package of two was ordered 39% of the time, and individual pillows were ordered only 18% of the time.

Adding Credibility Banners

Customer service constantly received emails and phone calls asking if the website was secure to process credit cards. Instead of just adding a FAQ (frequently asked questions) page and telling customers that the site is secure, Pacific Pillows added a “Tested for Safety” banner on the home page (see Figure 10.6). The site security is tested by a third-party company, Safe Shopping Network (www.safeshoppingnetwork.com), which provides a directory of security-tested websites. Such banners add consumer confidence, resulting in sales. Since the banner has been online, customer service has not received an inquiry regarding site security. Although it is not part of the standard Yahoo! store feature, the seal is included with the purchase of a paid yearly listing.

Figure 10.6. Adding banners such as Tested for Safety, BBB Reliability Program, and Yahoo! Shopping Rating brings credibility to your store.

Pacific Pillows also added banners for the Better Business Bureau Reliability Program and Yahoo! Shopping Rating. Similar to the Tested for Safety banner, both add credibility to a site.

Testimonials

Including testimonials is a way to show potential customers how much other customers have enjoyed your products (see Figure 10.7). The scrolling text on the Pacific Pillows home page not only draws attention, but it also helps save space to include additional testimonials. Pacific Pillows receives at least one email per week from a customer who made a purchase because of the testimonials. So they work! Testimonials are a great way to get customers to make a purchase, especially if they are on the fence about purchasing. Some customers even ask to have their testimonial included on the website—maybe it’s their five minutes of fame, similar to having your name mentioned in a newspaper.

Figure 10.7. Pacific Pillows added testimonials to the home page.

Website Development

Instead of hiring a Yahoo! store development firm, Pacific Pillows decided to hire individual programmers. Hiring programmers for specific tasks has proved to be a cost savings for the company. Pacific Pillows turns to Elance (www.elance.com) for developers. Elance (which is part of eBay) lets you post your available projects online. After you describe your needs and requirements, you receive proposals from professionals with bid on your project. You review all the bids and select the person who best fits your requirements and budget. Elance also offers a way for you to pay the programmer through the Elance website.

Before using Elance, Pacific Pillows received a few bid proposals from other development firms, but the company found hiring individuals to be more cost-efficient.

Outsourcing

Pacific Pillows tries to outsource as much of the tasks and projects as possible, to keep overhead low. Unlike hiring full-time employees, subcontracting and outsourcing do not require paid employee benefits, such as health care. Outsourcing also enables you to pay on a commission or project base.

Some outsourcing of services includes website design and development, newsletter creation, affiliate program management, graphics design, 25% of the shipping and warehousing, email campaign management, and toll-free customer service.

Additionally, four employees do most work from their homes (two in San Diego, one in Los Angeles, and one in Buffalo, New York).

Outsourcing Your 1-800 Customer Service

If you support and respond to your own customer service phone calls but would like a backup plan, outsourcing your customer service as a backup could be the route for you. Pacific Pillows uses a 1-800 number that they can manipulate. During working hours, the phone first rings to a woman they hired through elance.com. If she is not available, it rings to another customer service person. If he is not available, it rings to the outsourced call center operated by Sunshine Communications (www.sunshine1.com). Call center packages start at $29.95, which includes 40 minutes and 75¢ for each additional minute. Other discounted packages are available for higher call volumes. During nonbusiness hours, calls just ring to the call center, which takes orders and handles minor customer service issues. For major issues, the call center takes a message and promises a call back by a certain time. Pacific Pillows maintains a log with tickets created so reps can call back all customers with any major issues.

Backend System

The built-in backend system the Yahoo! store provides has been sufficient for Pacific Pillows. Orders are retrieved and processed from within the system. For accounting purposes, orders are exported from the system and imported into QuickBooks Retail Edition.

Online and Offline Marketing Strategies

Pacific Pillows operates a $20,000 monthly advertising budget for both online and offline media advertising. The company continually tries different marketing techniques to test the return on investment (ROI) of each method. When the target ROI has been achieved, Pacific Pillows continues to increase the dollar amount for that particular marketing method.

Email Marketing—Newsletter

Not only do you have to generate new customers, but you need to create recurring customers. The monthly email newsletter (see Figure 10.8) has proven to be a great advertising avenue to develop customer retention and attract new customers. The customer email database is collected from only past customers. Pacific Pillows purchased emails list in the past, but this did not prove successful. Sending a coupon code with a significant discount in the monthly email newsletter has been a very effective way to get customers to continue to purchase products.

Figure 10.8. An email newsletter that includes coupons and special offerings is sent to customers monthly.

Pacific Pillows uses Campaigner by Got Marketing as its email newsletter–management program. Campaigner enables you to seamlessly create, track, and manage your email newsletter with the Yahoo! store. Customer email accounts are easily and automatically imported into the email newsletter program.

Using eBay

Pacific Pillows also offers 70% of its products on eBay (www.ebay.com), as shown in Figure 10.9. eBay has accounted for approximately an additional 20% in sales. Pacific Pillows outsources the management and listing of the products on eBay to an individual. Revenues from eBay not only pay for the salary of that person, but they account for a good portion of total company sales.

Figure 10.9. In addition to the Yahoo! store, Pacific Pillows opened an eBay store to increase exposure.

Pay-Per-Click Marketing

Pay-per-click marketing has been by far the most successful form of advertising. Pacific Pillows manages more than 1,000 targeted keywords across the GoogleAd and Overture (now Yahoo! Search Marketing) network.

Marketing through price-comparison websites such as www.shopzilla.com, www.bizrate.com, www.shopping.com, www.pricegrabber.com, and www.nextag.com has also been successful.

Using pay-per-click advertising has allowed Pacific Pillows to directly reach targeted customers who are specifically searching for an exact product—and it’s “pay on performance.”

Print Marketing

Print advertising in magazines has been the least effective form of marketing. Pacific Pillows has currently ceased all print advertising campaigns.

Television Commercial Marketing

Television has also not been successful. Pacific Pillows spent more than $18,000 worth of television ads, but they resulted in only a few orders. Advertising media might not be fruitful. Hopefully, you do not have to shell out $18,000 to test it, but you never know until you try it.

Affiliate Marketing

Pacific Pillows uses Commission Junction (www.cj.com) as its affiliate software system. Yahoo! store has partnered with Commission Junction to allow Yahoo! store customers to seamlessly integrate the affiliate software. You can sign up with Commission Junction by simply going to the Affiliate Program link in Store Manager.

Seventeen percent of sales is generated by affiliates. Pacific Pillows has hired PepperJam Management (www.pepperjammanagement) not only to manage its affiliate campaign (pay affiliates, tech support, create banners and links, and so on), but also to recruit super affiliates. Super affiliates are those affiliate marketing gurus who usually make up the majority of your affiliate sales. These super affiliates are serious about helping you generate sales and also know how to send you traffic. The average affiliate simply puts an affiliate link on its site. Super affiliates create advanced online marketing strategies to increase your traffic. Initial Pacific Pillows budgeted a total of $8,000 for the service but now spends $5,000 per month because of the effectiveness of the campaign and PepperJam’s capability to perform.

Tips and Recommendations from Owner Craig Abbey

First, e-commerce in general is not a scheme or the holy grail of capitalism. Running an e-commerce store takes a lot of hard work, experimentation, commitment, and desire. The key is to keep trying different business models and marketing techniques until you find a business model that works. Our first store, DealCat.com, was marginally profitable. We worked with this business for years, and it proved not to be worth our time. However, Pacific Pillows grew from this experience and has proven to be a phenomenal success.

I also would like to note that the key to marketing is to invest a little in the different advertising opportunities you find. Be conservative. When a marketing method proves itself as a rain maker, throw your money at that method. We once spent $3,000 for email marketing, and it was a total flop. But I don’t worry about this type of loss. You have to try the different methods with an amount of money you can afford to lose. Only by trying different types of marketing will you find marketing methods that work. And when you do find such methods, increased profits will flow. We are always on the lookout for new marketing opportunities and are willing to take a risk in the hopes that any given marketing opportunity will prove to be sustainable over the long term.

Now that you’ve learned how a midsize-volume manufactured website is constructed and marketed, you’ll deconstruct a high-volume website in the next chapter.