Making the Most of a Painful Mistake

IN JANUARY, Christophe Pettus, president of San Francisco adult product DMer Blowfish, broached the idea of scaling back the company’s paper catalog to customers in favor of its e-mail updates. The responses that came in were overwhelmingly negative: By a 5-1 margin, customers indicated the catalog was important to them.

If the margin alone isn’t surprising, consider this: Almost all of the responses that came in were from Internet-savvy consumers who subscribe to Blowfish’s weekly e-mail updates. And the updates routinely offer discounts to steer customers to the company’s Web site (www.blowfish.com).

Two years ago, says Pettus, any thought of eliminating the catalog would have been tantamount to thinking about shutting the company. At the time, the Web provided a slow trickle of orders that came in between catalog mailings. By last December the situation had reversed: Web orders had become the backbone of the company, and each mailing provided little spikes. The cost for processing each catalog sale was “fabulously expensive.”

Blowfish employees debated whether dropping the catalog would eliminate one of the elements that made the company unique. Pettus, who’d had reservations, ultimately agreed.

“The most compelling point people raised was that it’s hard to show the Web site to friends,” he says. “People see the catalog at other people’s apartments. That kind of personal recommendation is the highest quality lead you can get.”

There were even more ephemeral-but equally valid-reasons to continue the mailings. If the catalog contributed to establishing a special relationship with consumers, cutting it out because it saved a few pennies on the short-term bottom line didn’t seem like a very good idea.

“If I were going to run the company as a linear equation, I could be selling auto parts,” Pettus emphasizes. “Blowfish is a boutique. If you are a boutique you need to maintain a unique sense.”

The idea of direct marketer as boutique owner has guided many of Blowfish’s business decisions, including that of hiring intelligent employees who think working for a sex products company is cool, and who enjoy using and recommending those products. Several items in both the paper and online catalogs are labeled as endorsed by the “Blowfishies,” and a few products actually feature the employees.

Such an approach lends itself to the intimate nature of the offerings. Pettus wants Blowfish customers to feel that they are dealing with people whose opinions they respect.

“High-end sex products are not commodities,” he says. “You can’t go down to Dildo Hut and buy your dildo 20% cheaper.”

Pettus himself is involved with the customer dialogue. In addition to writing the company’s weekly update-a mixture of product announcements, sale information, advice and personal opining-he answers every question sent to [email protected], which now amounts to four or five queries a day.

To him, this is customer contact management, and is what companies that preach one-to-one and relationship marketing should aspire to. “What they are generally talking about is customized e-mail. That’s not one-to-one marketing.” Most companies, he feels, are not prepared to maintain their end of a relationship once they make a claim. Even companies that are doing well, he says, are puzzled by non-confrontational letters.

Pettus cites firms that make environmental claims as an example. An in-your-face letter will usually get a soothing note and a fact pack. But someone who writes expressing interest-a potential advocate for the company-will likely receive a message on the order of “thanks for writing.”

“Companies are not prepared to maintain their end of the conversation,” he says. In an era where e-mail provides instant communication, Pettus believes that firms will have to replicate their call center operations with e-mail facilities.

Communicating relevant information is something Blowfish strives for in its fulfillment operations. As a Web-based firm, it tries to present itself as a sophisticated shopping experience such as Amazon.com. In fact, when a customer complains that an order wasn’t shipped fast enough, Amazon.com is usually mentioned.

However, many of Blowfish’s suppliers are low-tech operations that ship merchandise on a purely paper-invoice basis, and products do occasionally drop out of stock. “We deal with weird little vendors. But we do want to smooth out the experience for our customers. It is our job to ‘impedance match,'” Pettus says, using a tech-head’s term for balancing an electrical flow in an alternating-current circuit.

Out of Control What irritates customers more than anything else is feeling out of control of the process, claims Pettus. Customers are even tolerant of waiting if they know what they’re waiting for. He feels that a customer who receives a status-of-order e-mail saying that an order will arrive in a week will be more satisfied than one who gets an order in three days without any advance notice.

Blowfish will not, however, soften its focus on converting catalog customers to Web sales. Automating the ordering process lets the company devote more time to customer communication functions. Currently, it fills around 50 orders a day with its fulfillment system working at maximum capacity. By the end of the year Pettus projects that Blowfish will send out 300 orders a day, a rate that isn’t possible if a significant amount of those orders have to be processed by hand.

Blowfish realized $13,000 net profit on $600,000 in sales in 1998. Although this is relatively low revenue, Blowfish has only four full-time employees, resulting in a revenue-to-employee level more commonly seen in electronics firms. For 1999 Blowfish has forecast revenue of $1.2 million. Much of that will be plowed back into the company to purchase more sophisticated data processing systems, and for advertising and marketing.

One area that Blowfish will probably refrain from investing in is list rental. There are 30,000 names in the company database. Twelve thousand of these individuals made a purchase in the past year. For Blowfish, list rental is expensive: Companies offering high-end sex toys tend not to offer their own list for exchange. And while Blowfish hasn’t rented any lists to date, Pettus has heard from other players in the industry that the lists don’t perform well, and that there is the risk of negative publicity if prospecting material gets into the wrong household.

Pettus is only slightly more willing to consider profiling his own database in hopes of purchasing the names of similar customers, such as from a list compiler. Besides the concerns previously mentioned, this type of analysis carries additional cost. However, Pettus would rather spend the money encouraging prospects to contact him so these issues don’t come into play.

Fugu and Robofish Pettus, who by day is a computer programming consultant, has written much of Blowfish’s internal software, including Fugu (an online shopping cart program) and Robofish (the company’s e-mail manager). When contemplating future innovations, he factors in the limitations of his inventory and the nature of his business. A cross-sales program based on transactional history, for instance, would likely require a larger selection than the 2,000 products in 1,100 product categories that the company currently maintains.

Contact programs based on customer information present their own set of problems. With his next database upgrade, Pettus intends to collect sourcing information. But he wants to do it in an up-front fashion, perhaps through a discount offer, instead of using the “elaborate schemes” he has seen employed by other firms. But, he acknowledges, “We should tell the customer we’re dong it. We’re in the sex products business. People are intensely private. We just have to eat the fact that we can’t do it with all of them.”

Blowfish has come a long way from its first mailing, a single-page flier in 1994 advertising “Painful Mistake,” an amateur bondage videotape. The company’s last catalog was 96 pages, a size Pettus says will not likely be seen again anytime soon.

This year Blowfish plans four or five 16-page mailings, with the dimensions reduced to take advantage of letter-size rates.