Thanks to a persistent entrepreneur in theWestern Cape, the days of sewing on buttons are finally behind us. Now when abutton goes missing, you can simply peel and stick on an inexpensivereplacement that will last through many washes. It’s convenience at its best.The story of Instant Button and the force behind it, Monique Robinson, is acase study of what to expect for those looking to bring their novel businessideas to life.Robinson grew up in an average middle-classfamily, which meant that she had to find work straight aftermatriculation. She started out as asecretary and progressed into public relations. As luck would have it, three ofthe companies she worked at during those early years were entrepreneurial businesses.
Tried, failed and tried again
Initially Robinson and her husband starteda sales and promotions firm. Already, her acute business acumen was apparent asthey jointly won the SBDC Entrepreneur of the Month Award in their first yearof operation. Atthis time Robinson decided to enter into a partnership to launch a new productin South Africa. “My new partner and I had a fantastic product with hugepotential, but failed to make it for a variety of reasons. I walked out of thatbusiness penniless. Even though it would have been easy to feel down, I tookthis tough experience as a lesson learnt and not punishment,” says Robinson.“Mistakes are part of growth, if you learn from them. I don’t believe inlooking back.”
At this point, an American associate sentRobinson a stick-on button that was selling in the USA. More determined thanever to become successful, she immediately identified a few improvements whichneeded to be made to the concept for it to succeed in South Africa.After six months of searching, whileemployed full time at a marketing agency, Robinson eventually found a patentfor the product, listed on the Internet as ‘Maggie’s Sew Free’ buttons. Sheconsulted an attorney over the telephone to learn first hand what would berequired before proceeding. Following negotiations, Maggie Rentos then agreedto award Instant Solutions the exclusive rights to the patent, and she nowearns royalties for every button sold. “She deserves it – she is the inventorand we have capitalised upon her great idea,” says Robinson.
“The attorney I had spoken to put me intouch with a person in Pretoria who submits patent applications and advised meto get in touch with the Department of Trade and Industry (DTI). I completedthe forms and the application was filed for a mere R65!” she recalls.
Robinson advises that those who do not haveaccess to similar contacts could consider filing patents via the Companies andIntellectual Property Registration Office’s (CIPRO) website. “I’m not saying itis the best way to do it but an application may not be studied by a third partyand can be amended, giving you a chance to build up finance for an attorney. TheDTI also conducted a patent search for me at very little cost,” she volunteers. Another contact sourced through a friendthen created the name Instant Button. Robinson also found a Non DisclosureAgreement that she could download for free from the Internet and adapt. Armedwith trademark protection for less than R100, Robinson proceeded to email herentire contact list an image and brief description of the Instant Button.
“I was astonished – companies like CapeUnion Mart, Woolworths and even advertising agencies responded, asking forsamples. Several successful business people that I knew replied withoutexception that they thought the idea had potential. This response catapulted meinto immediate action.” Working nights, weekends and using her leave, Robinsonwent in search of suppliers.
Morethan a year in R&D
But with every success comes challenges, asRobinson knew from first-hand experience. Suppliers would either say InstantButton could never be manufactured in SA or they would try, fail and turnRobinson down. “I faced negativity all around me, but I refused to believe thatit couldn’t be done. It took six months to finally find amanufacturer, three months to find a seamstress and nine months to produce afirst sample that survived hot/cold washing and tumble drying.
“I developed a fantastic relationship withmy suppliers and I could see that the passion was starting to affect them. Upuntil this stage not one of them charged me a cent – every sample I had wasproduced for free – they believed in me and knew that I was really seriousabout launching the product. I shared my vision with them to make them feelpart of it,” she points out. “We still use those same suppliers today – theyare an invaluable part of our team!”Testimony that Robinson managed to continuedoing her job well and maintain good relations at the office came when her bossoffered to fund the packaging for a run of 1 000 sets of buttons. A new production problem forced the concept back to thedrawing board and another four months of trials had to be carried out before itwas perfected.
As soon as she knew that she could produceInstant Button, Robinson started on a business plan. She downloaded severalbusiness plan templates from the Internet and formulated her own. “There is noroom for ‘speculation’ in a business plan. It has to be based on fact.”
Robinson believes the most important partof any business plan should be the SWOT analysis, because ‘it forces you tolook at your business from every possible angle’. “It also highlights the riskfactor. Every investor I met withstudied my SWOT with great interest,” says Robinson.“I didn’t take my business plan for grantedand had it vetted by an MBA lecturer – he believed I had a sustainable ideawith huge growth potential and gave me fantastic advice and, of course,confidence to take the next step.” This lead to crucial changes being made tothe document. A lot of time was spent researching the market and Robinson sawpotential for Instant Button in several different market categories. Sheresearched market size, dynamics and trends and has continued to do this, inrecognition of the importance of staying ahead of the field. The forecasts inher business plan were conservative, with a mid-term brand mission to putInstant Button in every person’s home sewing kit. Thereafter, Instant Buttonwill look to replace sewing kits worldwide in every market.
Findingthe right funding
The potential of the concept, coupled witha well-prepared business plan, meant that Robinson received two offers forfunding from the first five investors she saw.“I knew from previous experience that abusiness partnership is like a marriage – you need to know that person and atleast some of their background. I was not shy to ask questions – in my case Ihad a burning passion, which instilled enormous confidence in me – a positivesign that these potential investors quickly latched on to,” she says.
“I decided to hang on to the first twooffers and to continue exploring. Every investor I approached believed it to bean excellent idea, so I was able to resist the initial temptation of acceptingthe first offer. I trusted my gut feel and waited.”It was not long before Robinson attended afunction where she ran into Craig Dunlop and his wife Carla. “I had met thembefore. Carla immediately saw the potential and within a few days negotiationshad commenced,” she recalls. Even though the cash injection was not as large assome of the other offers, Robinson trusted her instincts in partnering withCraig. “We not only got on very well, but shared the same goals and morals,”she points out. “I felt comfortable in his presence and had enough backgroundresearch on him to know that I was dealing with a man of high integrity. Hefulfilled all my criteria, plus my weaknesses were his strengths, making it aperfect match.”
Takingthe local market by storm
The partners started by distributing aprofessional sales document, written by an advertising agency. Within threemonths, a 5-star hotel started stocking Instant Button and today hotel chainsin SA, Russia, Jordan, Morocco, Australia, the United Arab Emirates and manyother locations have followed suit. To crack the retail market, shipping boxeswere prepared and placed in several outlets throughout the Western Cape. Frompharmacies through to hardware stores, grocery stores and large outlets, thesesample products were sold near till points without any advertising ordemonstrations.
Over a three to four month period, between35% to 45% of stock had sold. This success lead to another big break-throughfor Robinson, as South Africa’s largest haberdashery distributor, Sunpac,applied for the exclusive distribution rights of Instant Button into retailoutlets.A deal was struck that saw Sunpac packagingthe products for distribution, and assimilating the responsibilities ofwarehousing, sales, listings, merchandising and in-store demonstrations.“We supply Sunpac with Instant Button at anagreed price and allow them to conduct sales into Pick ‘n Pay, Shoprite andSpar Supermarkets throughout the country,” says Robinson. “Waltons Stationersthen also entered into an agreement with us for direct distribution to thepublic through their outlets as far as Namibia. Over 90% of their stock isselling within three months without advertising, proving that working mothershave long been searching for this solution. Instant Button is available invarieties that perfectly match over 95% of SA school uniforms.”
In total, over 400 000 units of the productsold within 12 months of the product’s official launch.
Expandinginto lucrative export markets
Flush with the immediate local success oftheir product, Robinson and her business partner turned toward export markets.Within the first four weeks of having awarded sole regional retail distributionrights to US-based Link Marketing Group, an order for 90 000 units came throughfrom a leading fabric store in America.
“As partners, we continually review thecompany’s mission, judge what has been achieved and set new short-term andmedium-term goals to continue growing towards their targets. Our mission won’tchange, but our strategy continues to evolve, as we learn more about thevarying markets and how they differ from country to country. Flexibility is ofgreat importance in any new business, but even more so for a South Africanmanufacturer finding its feet in overseas markets. In this spirit, we arecurrently revising our retail packaging to fit in with the European market.”Having relied on Google to find over 64suitable wholesalers around the globe, Robinson would dispatch samples andstart negotiations. “Our core strength is the product and not sales ordistribution, thus we have been more than happy to make wholesalers responsiblefor the listings, distribution and merchandising. I’m a great believer inoutsourcing to specialists – it saves time and money.”“In the promotional market we have eithercold-called or sold into promotional gift houses – they have the contacts.Diners Club is one of the first corporations to buy Instant Button as acorporate give-away to clients,” she explains. “Over 90% of the wholesalers ineach category have asked us for exclusivity. We were initially motivated bythis idea, but are now very cautious in our selection, particularly in the USAwhere the territory is huge.”
The price of a button
“Targets in our agreements are veryimportant as they help to prevent distributors from upping their margins. Iftheir price is too high, they won’t achieve our targets.” For a high-volume, low-margin product suchas Instant Button, it’s vital to get pricing right, especially in exportmarkets. “You cannot ‘ride’ the exchange rate,” Robinson argues. “It’s adangerous strategy, particularly if the Rand strengthens.”
“By applying for trademark protection andpatent rights for Instant Button®, No Sew Kit™ and Instant Hem™, which are newideas that we will use to grow the business going forward, we hold theworldwide rights to a niche market that has lots of untapped potential,” saysRobinson. “We are continuing to appoint retail wholesalers globally and ournext big challenge will be to launch the ‘No Sew kit™’ into the hotelindustry.” With a track record like hers the market is set to experience apotent powerhouse of passion and professionalism.
Jan02: Robinson enters into a partnership to launch anew product in South Africa but the business fails.
Dec03: Robinson receives a ‘stick on button’ from anAmerican associate. She identifiesimprovements that need to be made and develops an interest in getting theproduct into the SA market. Maggie Rentos, inventor, awards Instant Solutionsthe exclusive rights to the patent.
Apr04: Robinson files the patent with the Departmentof Trade and Industry for a mere R65.
May04: The Instant Button brand name is born and amock-up gift pack designed. Robinson downloads and adapts free Non DisclosureAgreement and emails entire contact list an image and brief description of theInstant Button. She gets a positive response from major retailers.
Jun- Nov 04: It takes Robinson six months to find amanufacturer, all in the face of overwhelming negativity.
Mar2005 – Jun 05: The button is produced and Robinson starts a business plan,researching the markets thoroughly.
Jun- Jul 05: Robinson searches for investors andeventually runs into Craig and Carla Dunlop who provide the capital injectionneeded.
Sept– Dec 05: A sales document is developed and anadvertising agency consulted on marketing.
Jun06: To crack the retail market, shipper boxes areprepared and placed in several outlets throughout the Western Cape. Over athree to four month period, between 35% and 45% of stock sells.
Nov06: Sunpac deal for packaging and warehousing.
Jan2007: The partners turn their eyes to the exportmarket.
MoniqueRobinson’s fast Tips
Involve yourself in every aspect of yourbusiness
Protect your intellectual property
Develop good relationships with yoursuppliers
Check the bank account every day
Have your eye on your cash flow
Be proactive and not reactive
Delve into the background of anypotential partner
Don’t allow fear to form a part of yourdaily work
Make honesty a part of your businessculture
Always have a lawyer check a contractbefore signing
Have a mission – be focused
Avoid any form of negativity
For more information,email:firstname.lastname@example.org
Starbucks Coffee Is All About Culture… For A Reason
CEO Howard Schultz reveals how Starbucks does it.
- Player: Howard Schultz
- Company: Starbucks
- Market cap: $85 bn
- Established: 1971 (Schultz purchased the brand in 1987)
- Website: starbucks.com
When Howard Schultz was raising money for his first coffee shop called Il Giornale (later to be renamed Starbucks) he was finding it hard to land investors. The reason was simple: Schultz was trying to create a coffee culture where none existed.
The idea that the man on the street would pay a premium price for a cup of Italian coffee with a name he couldn’t pronounce seemed nothing short of preposterous. But that wasn’t the only reason people weren’t willing to buy into his idea. Schultz, you see, refused to talk like a proper capitalist. He kept emphasising the fact that he wanted ‘to do good’.
Schultz recounted the trouble he had finding investors during a recent visit to South Africa for the local launch of Starbucks. He spoke at a Q&A session hosted by the Wits Business School.
“My wife was eight months pregnant at the time,” says Schultz. “Her father actually sat me down and said: ‘My daughter is pregnant, and she’s working. You have a hobby. You need to get a job.”’
But, as is so typical of entrepreneurs, Schultz persevered and eventually got the funding he needed.
“The first time someone gave me $100 000, I couldn’t believe it,” he recalls.
Since those early days (the shop opened in the mid-1980s), Starbucks has grown rather prodigiously. Consider the following: By the late 1980s there were 11 Starbucks stores that employed about 100 people. A few years later, in 1992, the company went public with a market cap of $270 million. Today, it has around 24 000 stores in more than 70 countries. And its market cap? A cool $85 billion.
While growth is good, it has a tendency to birth a ravenous monster that is impossible to satiate.
“We have to add $2,5 billion in revenue every year for the next five years just to maintain our current growth rate and satisfy Wall Street,” says Schultz. “And to do this, we will need to add 80 000 employees over the next 12 months. Essentially, we’re launching a new massive company every year.”
Yet, despite this, Starbucks manages to maintain its unique culture. Just as when Starbucks was a far smaller operation, it is known for stores manned by high-energy individuals who have a clear love for the brand. How has the brand managed this? Schultz attributes it to the following seven core principles.
1. Partners not employees
Howard Schultz’s father worked as a truck driver, delivering and picking up cloth diapers in the days before Pampers. When he slipped and seriously injured himself, he was summarily retrenched. Schultz wanted to create a very different company.
One of the reasons he didn’t adopt a franchise model was that he wanted to be able to offer each employee at least some stake in Starbucks.
When the company went public, each employee became entitled to a portion of their annual salary in the form of stock options. That is still the case today, which is why Starbucks employees are called ‘partners’.
“Success is best when it’s shared,” says Schultz. “At Starbucks, we always ask: What’s in it for our people? Starbucks is accused of being great at marketing, but it spends very little on marketing. It’s all about the experience we offer in the stores.
Managers and leaders must do everything to exceed the expectations of our people so that they can exceed the expectations of our customers.
2. Regular interaction
The management of Starbucks does everything in its power to engage with employees regularly.
“We travel extensively, and the amount of face-time management has with employees across the globe is really unusual for a company of Starbucks’s size,” says Schultz.
Schultz himself, for instance, sat down with each and every new Starbucks employee in South Africa during his recent visit.
Starbucks also has what it calls ‘Town Hall Meetings’ all over the world, during which management interacts with employees in an open and informal manner.
“We tell employees that they are free to speak up during these meetings without fear of retribution. We want honest opinions,” says Schultz.
3. Respecting (and cherishing) employees
Howard Schultz is a humanist at heart, and this is reflected in the culture of the company that he created.
“The universal language of Starbucks is a deep sense of humanity,” says Schultz. “Building a company is a lot like raising children. You are imprinting a company with a culture and a set of values. Now, if a child falls, what do you do? You pick it up and comfort it. You don’t scold it. You need to take the same approach in business.”
4. Protecting the culture
Being tolerant of failure, however, does not mean the same thing as indulging bad behaviour. In fact, Starbucks is fiercely protective of its culture, and it doesn’t tolerate bad behaviour.
“We teach employees that they have a voice, and that they should speak up when they see someone doing something wrong. You can’t enable bad behaviour because it will erode a company’s culture.”
5. Spending money on employees
According to Schultz, the management teams of most large companies would be horrified to discover the amount of time and money spent on Starbucks employees.
“We have been very innovative with technology, and we have created a massive digital eco-system. Interestingly, though, we spent as much time and money focusing on the things that were employee-facing as the ones that were customer-facing.”
6. Rewarding the right things
Schultz famously stepped away from the role of Starbucks CEO for around five years, and during that time the culture of the company quickly deteriorated.
“The company lost its way. The people who were managing the company — who were all good people — were measuring and rewarding the wrong things. Things such as profit and stock price became the focus. In any business, you need to continuously ask: What is our core purpose for being? Otherwise you lose your way.”
Schultz believes that his big mistake was not selecting a successor from within the culture. When he eventually retires, he intends to choose someone from within the operation who is in touch with the culture of the brand.
7. Being human
The film Fight Club famously depicted Starbucks as the epitome of the faceless corporation taking over the globe, but the company is actually quite unique in its willingness to speak out and engage with people on a social (and even political) level.
“We are very outspoken as a company. We feel that we live in a time where the rules of engagement have changed. What I mean by this is that we need to do more for the communities that we serve. The question we ask ourselves is: What is the role of a for-profit public company? Looking at this question has resulted in us taking on social issues such as same-sex marriage, gay rights, gun control and racism.”
For example, Starbucks recently unveiled its first store in Ferguson, Missouri (which has been plagued by racial unrest) as part of a plan to support efforts to rebuild and revitalise communities.
How Merchant Capital And Retroviral Were Built To Sell
Entrepreneur chats to Dov Girnun of Merchant Capital and Mike Sharman of Retroviral. We explore why their companies attracted funders, and how the relationship can be used to grow their businesses.
The Tech Based Business
Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.
- Player: Dov Girnun
- Company: Merchant Capital
- What they do: Lending solutions for SMEs
- Est: 2013
- Investor: Rand Merchant Investment Holdings
- Shareholding: 25%
- Visit: merchantcapital.co.za
Less than two years into his business, Dov Girnun attracted the attention of Rand Merchant Investment Holdings (RMIH), a financial services investment company that includes the founders of FirstRand, Laurie Diepenaar, Paul Harris and GT Ferreira. These are no small industry players. On an investment level, they’re the funders who backed Adrian Gore when he launched Discovery and Willem Roos when he started OUTsurance.
How had Girnun found himself in the position to pitch to investors at this level? Months earlier, RMIH had launched a fintech incubator called Alpha Code. The idea was to find pre-revenue start-ups that would be the next game-changers. Their research brought them to Merchant Capital.
“We didn’t exactly fit their mandate because we were already operational and profitable,” says Girnun, “but they still really loved the business. They’d been researching the fintech space, and had recognised the potential in SME lending, which is our focus. They really wanted to invest, but at the time I was unsure if I wanted to dilute my shares further.”
Girnun already had an investor, the Capricorn Group, whose investments include Hollard, Nandos and Clientèle, and until this point he’d been careful to maintain his shareholding. His relationship with Capricorn was excellent, as the investment team added huge strategic value to the business over and above capital, and so he hadn’t been actively seeking additional funding.
And then a new opportunity presented itself. “We realised we have golden data on the SME space. How could we cross-sell to our base and monetise that data? We started chatting to RMIH, who were aligned to our thinking.
“Once I realised the value RMIH could add to our business, my whole perspective shifted. Here was an investor that could potentially help me to build a billion dollar business. I’d be diluting shares, but building a much bigger pie.”
Related: Funding Growth with Dov Girnun
The price of equity
Girnun is referring to the investment lesson that equity is cheap early on, and very expensive later, when a funder holds more shares of your business than you do. If you look for funding later, your valuation is higher, you’ve got a proven track record, and the same amount of money secures fewer shares. Sell too early, and the exact opposite happens.
This had always been Girnun’s view, but an understanding of how far the business could potentially go with RMIH’s backing was changing his mind.
There was just one challenge. While RMIH’s investment team loved Merchant Capital’s business model, investments need to be signed off by the board, which meant Girnun and his co-founder Daniel Moritz, needed to pitch to them in person, so that they could see their energy, passion and vision for Merchant Capital.
Serious, seasoned investors don’t make this easy. They need to see your passion, and how well you understand your business. They’re not there to make the experience easy.
“Even though I knew they were interested in my business, I still found the experience extremely daunting. There were very few introductions, handshakes or jokes. I was expected to launch into my pitch, and I knew that even though I had been given 20 minutes, the first two minutes would be the deciding factor. If I didn’t grab their attention in that time frame, they wouldn’t be investing in me and my business.”
Tapping into investor concerns
“I had just returned from the Endeavour international selection panel in San Francisco, and I think this played a major role in the success of my pitch,” says Girnun.
“One of my judges, a hugely successful venture capitalist from Sillicon Valley, really explained the significance of the elevator pitch to me. Imagine you’ve gotten into an elevator with the CEO of Goldman Sachs, he said. If you’re lucky, you’ve got seven floors to get them interested enough in your business to want your card, and maybe even a meeting. They can’t possibly learn everything about your business there and then — they just need enough for their interest to be piqued.
“Because you don’t know how much time you have, or who you’ll be talking to and what their area of expertise is, you can’t just learn a pitch off by heart, and you certainly shouldn’t have a power point deck that you rely on. Both are very bad ideas. Instead, you need to know your business so well, inside and out, that you can tailor your pitch to the person you’re talking to, based on what they care about.
“Because of this piece of advice, I was able to tailor the first two minutes of my pitch to the RMIH board and what they care about. If I grabbed their attention, I’d be able to hold it for the next 20 minutes, which actually ended up being close on two hours. If I hadn’t, we would have politely shaken hands after 20 minutes (if not earlier), and been on our way.”
It’s a simple, but incredibly important lesson: Know your business’s numbers inside out, and don’t try to bluff your way through any questions that relate to numbers.
“You have to know your unit economics — are you able to distill the essence of your business economics on the back of a napkin? You need to know the high level stuff and the minute details, and they all have to be at your fingertips. If they aren’t, you have no business trying to sell your company or attract investors.”
How AutoTrader Anticipated Change
AutoTrader South Africa is an online behemoth, boasting more than three million visitors each month. Not that long ago, though, the brand faced the very real possibility of extinction.
- Player: George Mienie
- Company: AutoTrader South Africa
- Established: 1992
- Visit: www.autotrader.co.za
- Trends are out there to be identified. Being caught unprepared is unacceptable.
- Change needs to be tracked through the use of a measurable KPI.
- Don’t be afraid to act pre-emptively.
- Do research. Know your customer.
- Create an unprecedented user experience.
By the mid-2000s, it was becoming clear that the world was changing. The internet was going mainstream, placing massive pressure on industries that only a few years earlier had seemed untouchable.
The print industry in particular was coming under threat, with readers moving to the internet for information. Things didn’t change overnight, though. The general decline in readership was steady but quite slow.
Like a frog sitting in a slowly-heated pot of water, it was all too easy to ignore the evidence. AutoTrader South Africa, however, was not willing to accept death by attrition.
“When it comes to the digital realm, you can never complain that some development impacted you unexpectedly. The writing is always on the wall, provided you’re taking notice,” says AutoTrader CEO George Mienie.
Long before the global shift to digital mediums started to affect AutoTrader in a real way, the company began to prepare for the inevitable.
“We knew it was coming. The shift to digital was already starting in places such as the US and Europe,” says Mienie.
“We also knew that we needed to measure this shift in a reliable way. When it comes to managing difficult change, you need a KPI that you can reliably measure.”
Comparing unique users of a website to the circulation of the magazine wasn’t reliable enough, since it was impossible to truly know how many people had used any given copy as a reference when shopping for a vehicle. Some other KPI was needed.
“We settled on leads to dealers. We wanted to track how many people had actually contacted vehicle dealers thanks to the magazine, versus how many had contacted a dealer because of the website,” says Mienie.
Finding a KPI
Tracking website leads and comparing them to magazine leads sounds like a simple idea, until you actually start to think about it. If it’s hard to know how many people used a single copy of AutoTrader as a reference, how do you figure out how many leads the mag has generated? It was a conundrum.
Tracking leads on the website would be easier, provided you were willing to harm the user-friendliness of the site. AutoTrader wasn’t willing to do this.
“We could track website leads by forcing every user to fill in some kind of form before gaining access to a dealer’s details, but we weren’t willing to do this,” says Mienie.
“Today, the average user spends a phenomenal amount of time on our site. A typical visit lasts 12 minutes, and we believe this is because our site is easy to use. While KPIs are important, they shouldn’t come at the expense of the user. Everything should be done to make the experience for the client or user as pleasant as possible.
“With this in mind, we give our software engineers a lot of freedom. They don’t need to seek permission to improve the site. If they’ve been working on something that they think will improve the website, they can run with it. You never want bureaucracy to stand in the way of improvement.”
An innovative solution
In order to effectively measure leads from both AutoTrader magazine and the website, the company came up with a very elegant solution called Call Tracker.
The solution was so elegant and transparent that even regular consumers of AutoTrader probably wouldn’t have noticed its existence.
How does it work? The number that you find for any given dealer in the AutoTrader magazine or on the website was not the same as the regular number of that dealer, although, the number was dedicated to a dealer.
Instead, it is a technology that redirected the call through the company to the dealer. Thus, giving AutoTrader the ability to measure leads via phone to the dealer, which was the most-used way in which consumers got in touch with dealers in those years.
Importantly, the company regularly placed a different number for specific dealers on the website and in the magazine, meaning AutoTrader could track exactly which platform a lead was generated from, and give the dealers useful insights into his/her dealership’s response.
AutoTrader had in essence created a reliable but simple KPI, using sophisticated technology at the time, that could be used to track consumers’ migration from print to digital.
As mentioned, the migration of users was fairly slow. AutoTrader had started monitoring the trend in 2007, but it wasn’t until 2013 that the website took over from the magazine as the core focus of the business.
In the mid-2000s, the company had printed around 230 000 magazines each month, and managed to sell 55% of those on a regular basis.
Today, it sells about 30 000 magazines a month. However, as magazine sales have declined, the number of visitors to the website has skyrocketed, with more than three million visitors to the website every month, opening more than 40 million pages.
The migration of AutoTrader magazine advertisers (sellers) and consumers (buyers) to the website wasn’t guaranteed. Getting buyers and sellers of the magazine to embrace the AutoTrader website required hard work.
“As a magazine, we had a big advantage: Potential competitors were faced with very high barriers to entry. We had the capability to compile a 600-page magazine, print it and distribute it weekly. Any new competitor would have found it hard to match us,” says Mienie. “The internet, however, obliterated those barriers. Suddenly it was much easier to compete with AutoTrader.”
AutoTrader wasn’t afraid to pre-empt the digital shift. “You need to be willing to eat yourself. One of the things we did was to place the website prominently in the magazine, knowing that it would eat into sales. We had to take a short-term hit, but we knew that we would benefit from it in the long term.” The company also placed a huge emphasis on the user experience.
“You need to be the best,” says Mienie. “You need to lead the charge and be first to market with every new development. You also need to know and respect your consumer and dealer. We believe in creating a site that is easy to use and offers more content than you’ll find anywhere else. We also make it a priority to know the consumer’s car-buying journey and car sellers’ needs.
“But, the game is changing again, fewer and fewer consumers are using the phone, and to an even lesser degree email, to get in touch with dealers. Our research over the last year shows that more than 52% of car-buying consumers don’t phone or email a car dealer, but simply take the address and visit the dealer directly.
“When it comes to managing great change within a company, research is incredibly important. But just doing research isn’t enough you need to use it effectively. The temptation exists to hog research because you don’t want competitors to get hold of it. That doesn’t work. We know exactly how much time the average consumer spends studying vehicles before buying a new car. We also know how much of that time is spent online (15 hours), and how much is spent in the physical world visiting dealers (14 hours), and this trend is shifting rapidly toward less time in the physical world and more time searching online, which means the consumer has pretty much made his choice before he leaves his screen. We give that info to our salespeople, who in turn give it to our clients (car sellers). Information needs to be disseminated.”
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