“It took about ten seconds for the light to come on,” says Shane Immelman about the first time he saw the original version of what would eventually become the Lapdesk – the unique product at the heart of The Lapdesk Company, of which Immelman is founder and CEO. It was a friend of his who originally came up with the idea for a portable ‘desk’ substitute that school children could place in their laps, providing them witha stable surface on which to write.
“This friend’s mother had a long career in education and she was aware of the enormous problem that existed in rural and under-resourced schools in South Africa where children had no desks. Together they came up with the concept but they had their own professional careers to follow and approached me with the idea, asking me whether I thought anything could be made of it,” explains Immelman.
Looking to make a change
As it happened, they’d come to the right person. Immelman, whose previous career in business had focused on product development, was looking to get involved in something different. “I had recently got my fingers burned in a previous business venture and that, together with a highly personal tragedy, had left me questioning what life was all about. These things were the catalyst that made me want to shift things. I wanted to do something more with my life than chase money – and that conversation was the starting point,” he explains.
A social entrepreneur is born
And so it was that Immelman began what was to be a life-changing journey that resulted in a unique social entrepreneurship business model. “We agreed that my friends would own the intellectual property rights and that I would own all commercial rights – that I would take the idea, invest in it and see how it could be developed further,” he explains. His idea was two-pronged – to develop a business and to address the pressing need for desks in underprivileged schools.“I believed then – and still do – that it is possible to make a profit and make a difference to society. That’s the basis for social entrepreneurship, and it’s a sound model through which everyone benefits. In fact I would go so far as tosay that I think the future of social development lies in social entrepreneurship,” he explains.
A unique model
The model is simple yet effective. The Lapdesk Company makes the Lapdesks and approaches corporates to sponsor their manufacture by advertising on the top of the desks. The Lapdesk Company then distributes the sponsored desks to needy schools. “Sponsoring companies can choose how many Lapdesks they want and where they want them distributed. Sometimes they distribute them to communities in the areas in which they operate, thus tying the project in with their marketing or corporate social investment programmes; alternatively they leave it to us to select a community in need, based on our field research,” explains Immelman.
The Lapdesk Company makes a pre-tax profit of around 8%, something for which Immelman initially attracted a degree of criticism. But as he explains, “This was never going to be a non-profit organisation – and we don’t pretend that it is. It’s a business that seeks to solve a social problem and make a moderate income at the same time. The money we make allows us to attract top talent, maintain and develop infrastructure and conduct the necessary research to develop a lasting product of the highest standard – and this means that the business is sustainable and therefore able to benefit more school children in the future.”
The model is particularly attractive to corporates because it provides them access to a powerful and patented branding platform and a chance to give back to the communities in which they operate.“When you think about it, spending money on Lapdesks makes far more sense than spending money putting your brand on a billboard in a community – and we’re cheaper by up to 300% than the next closest media type. Lapdesks help to provide children with a better education and this creates a real human connection between a brand and a community – far more so than an ordinary advert or advertising medium.
So the Lapdesks allow you to connect with parents of children, educators and to create a connection with the children themselves,” explains Immelman. And because the Lapdesks are portable and carried by children every day between home and school, they are also highly visible. He adds: “One of our requirements is that sponsoring company representatives are present at the handover of the Lapdesks to the beneficiary schools. The reason for this is that it allows companies to see where their investment is going, and it creates a connection between the company and the community which in many instances sparks a long-term relationship. Putting such people together creates a platform for companies to provide further assistance to schools, something which we see in many cases,and this helps to extend the benefit that Lapdesk seeks to provide.”
This last item was particularly important.“We knew that our sustainability and legitimacy rested to a large extent on securing the buy-in of the Department of Education (DoE) at the time. I knew that if I wanted to go into public schools distributing Lapdesks, the DoE would be critical to helping me gain access,” says Immelman, who achieved his goal in 2004 with the endorsement and approval of the DoE.
What he didn’t expect at the time was endorsement from another, equally powerful quarter. In August 2005, Archbishop Desmond Tutu became The Lapdesk Company’s patron. Seeing the potential that Lapdesks had to make a difference to needy children, Tutu expresses his support for what the company is doing in the following way: “I went to school where there were no desks. We sat on benches and when the teacher asked us to write, we knelt down on the floor and used the benches we had been sitting on as desks.
The Lapdesk fills a huge gap for our learners and educators. It formalises informal classrooms, gives dignity to learners and teachers and is a practical solution to a situation where there are few facilities and children have no surface on which to write.” Today Lapdesk is also officially endorsed and supported by the former Deputy President Phumzile Mlambo-Ngcuka and by the Chair of the National Education Portfolio Committee, Professor Shepherd Mayatula. The company works in close collaboration with the National Youth Service, a special government initiative which contributes to the development of young South Africans, and is building global relationships with Unicef andRotary.
Pilot and growth stage
But before his product had gained such accolades, Immelman put it through a rigorous pilot phase and outbound campaign that took the best part of two years, but established a presence in the market and secured the first orders.“Initially we approached CSI departments in corporates and this was really challenging, because you are one of thousands asking them to invest. We coupled this with a great deal of outbound correspondence to CEOs, HR directors and marketing departments and we got quite a few responses from this.” One of these came from Anglo American’s media and corporate communications division, which placed the very first milestone order for 500 units. Orders from Cell C and Coca-Cola in Angola followed.
At the same time, Immelman was piloting the manufacture of the product, eventually securing AAA customer prices from BASF for the base materials, thanks to the product’s social development focus.“Through trial and error we have produced a product of the highest standard, which is critical when you are manufacturing a product that children are going to use.” Each Lapdesk is built to last a lifetime and it’s also fully recyclable. The materials used from BASF carry CE-marking which means they meet the requirements of all relevant European Union Directives. “We use moulds that cost in the region of R350 000 and a particular, proprietary process that gives the desk additional strength so that it won’t shatter. The printing process is extremely expensive but incredibly durable as well, which is vitally important if we’re asking companies to sponsor Lapdesks with their branding.”
With a sound business model, a unique and sustainable product offering and a strong marketing campaign in place, orders started rolling in. The Lapdesk Company has experienced annualised growth in excess of 60% since inception. The 2008 financial year turnover for all Lapdesk operations (Africa) is forecast at R62 million, representing an increase of more than 400% on the company’s 2007 turnover. Projected turnover for all operations for the 2009 financial year is R169 million. Clients include a vast and growing mix of blue-chip corporates, international agencies and NGOs.
In 2006, Immelman was selected as an Endeavor Entrepreneur. Endeavor is a US-based organisation that works with high impact entrepreneurs in emerging markets to help them grow their businesses and create jobs for economic upliftment. The partnership has proved a powerful catalyst for the development of important relationships between The Lapdesk Company and some of the world’s leading universities, including Harvard Business School, MIT Sloan School of Management and Stanford. The company periodically hosts MBA students from these schools for internship to help them better understand social enterprise in an African context.
Beyond our borders
South Africa has become the showcase for how Lapdesk can work, but Immelman wants to see the concept spread to benefit more children, particularly in Africa, where the company is now active in 19 countries. “But I’m not interested in owning a global empire – our goals are not to grow and expand simply to make more profit. When we launch in new territories we expend a great deal of time, energy and resources identifying the right person to lead the business – they need to be well-networked and financed in order to be effective, and have a passion for wanting to improve education in their respectiv ecountries. After that it’s simple: we supply them with a manual, the product and management support and let them get on with running the business. It’s not a franchise and there are no fees involved. The business becomes theirs.” he says.
His recently-awarded Archbishop Desmond Tutu Fellowship from Oxford University and the African Leadership Institute provides him with access to young leaders across Africa, from which he can identify suitable business leaders. Combining this model with his Endeavor network and the company’s relationships with leading international business schools, Immelman plans to have established Lapdesk Territory Partners in 60 countries by 2011. “Keeping the company local, as opposed to running it from South Africa, means that Lapdesk can benefit from the local expertise, knowledge, language, contacts and services of the territory in which it is established. This facilitates a smoother process and faster delivery of Lapdesks to kids globally.” Through the Endeavor connection, Lapdesk was recently approached by a group of Harvard MBA students who have formed a syndicate and are supplying Lapdesks to universities in the US. “They will sell them to students for double the price, so for every Lapdesk purchased, one is donated to a needy child.”
Looking to the future
Immelman remains committed to rolling out Lapdesk’s vision, although he plans to hand over his role as CEO in the near future. “What I really want to concentrate on is international business development and ploughing the profits of the business into the development of new, synergistic products and services to improve the lives of the world’s poorest people. 2009 will see us commence work in India, the sub-continent and various countries in Latin America, and we already have three new products waiting to be launched. There is so much that remains to be done.”
Research and development
The company’s stated aim locally is to eradicate classroom desk shortages affecting over four million South African school children by the year 2010. To date it has distributed just over half a million desks. But as Immelman points out, “Getting to the point we are at no whas taken an immense amount of foundation-building.” When he started conducting research, Immelman was appalled at the extent of the desk shortage problem. “I had no idea of the scale of it – we are addressing a global crisis in education. When I went to school, there were 25 children in aclass and 25 desks and each child received textbooks. Seeing how some children were expected to learn was a real wake-up call for me. It served as a real motivator to come up with a solution that would plug the problem.” In additionto assessing the scope of the problem, Immelman also conducted field research to identify nodes of greatest need as well as research into the potential sponsorship market, product materials and manufacturing, and the possibility of forging a relationship with the Department of Education.
2002 Q4: Shane encounters the first draft concept of what will become the Lapdesk
2002 Q4 to 2004 Q2: Market research and product development phase, including pilots sponsored by BP and Deutsche Bank
2004 Q3: Secures official endorsement and support from Department of Education
2004 Q3: Commercial operation begins and outbound campaign starts
2004 Q4: First order from Anglo American for 500 units. Orders from Cell C and Coca-Cola follow in the same period
2005 Q3: Archbishop Desmond Tutu becomes patron of Lapdesk
2006 Q1: Secures AAA customer pricing from BASF
2006 Q2: 100 000 Lapdesks sold
2006 Q2: Lapdesk wins Proudly South African Home-Grown Award – New Company ofthe Year (SMME)
2006 Q3: Shane selected as Endeavor Entrepreneur
2007 Q2: Concludes three-year strategic partnership to 2010 with Media24 Group for The Lapdesk Company (South Africa)
2007 Q3: 1st Territory Partnership Agreement concluded
2007 Q4: Lapdesk wins Innovation Town iHero Grand Prix Award
2008 Q1: Shane selected as Schwabb Social Entrepreneur of the Year 2008 Finalist
2008 Q2: Shane appointed as ArchbishopDesmond Tutu Fellow in programme run by the African Leadership Institute & Oxford University
2008 Q3: 20th Territory Partnership Agreement concluded with Liberian partners
2008 Q3: 500 000 Lapdesks sold
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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