Ken Auerfeld is betting surfers won’t be able to resist the word “free.” His company, Thanksmuch.com in Woodmere, New York, specializes in providing free gift offers to Web shoppers.
Auerfeld formed the company in December 1999 after spending 15 years at Publishers Clearing House building profit centers around impulse buying. His job was to sell “anything other than magazines.” He became an expert in purchasing videos, music, jewelry and collectibles from all over the globe for these programs. His understanding of the particular psychology of impulse buying combined with his voluminous long-term relationships with importers made him the perfect CEO for Thanksmuch.com.
Auerfeld struck a deal with one of his suppliers to let him purchase its goods at a price as if he were buying millions of them. The price is so competitive Thanksmuch.com can make a sustainable profit from the shipping charges it levies with every purchase.
Credit card companies and consumer banks have been using this model for years, tempting their customers with statement stuffers every month. The CEO says the response rates to these credit card stuffers can be substantial. It’s not unusual for a credit card company to sell 30 million units a year, he says.
This kind of program works if there are “billions” of impressions – advertising jargon for the number of eyes viewing the offer — and attractive merchandise that has a low acquisition cost.
Working With Affiliate Programs
Thanksmuch.com had the gift part of the equation established. It now had to find the eyeballs. So it turned to the Internet.
Thanksmuch.com first targeted the wildly proliferating affiliate programs on the Web. One of its customers is BeFree.com, a large Internet affiliate company. Many of these programs allow their new recruits to choose a clock, tool set or kitchen gadget as a thank you gift for signing on.
In this case Thanksmuch.com shares a portion of the shipping cost it collects with the affiliate sponsor. Affiliate companies have flocked to this offering because Thanksmuch.com pays for the postage, handles the credit card processing and distributes the appropriate commissions with its sites.
During the course of this commerce, Thanksmuch.com is building a database of shoppers who enjoy purchasing items with a high perceived value for just the shipping charge. To thank them much, Thanksmuch.com sends them to its own Web site, thefreegiftcenter.com, where they can shop ’til they drop. “Our goal it to build a file of qualified consumers who would be interested in the promotions on our Web site,” says Auerfeld.
Thanksmuch.com had programmers working on a shopping cart program to bring this kind of marketing to the Web. But while surfing the Net, Auerfeld hit upon iQ.com’s “click and stay” technology. IQ.com’s software allows shoppers to complete an entire transaction without having to leave that Web site. “I saw it and said, ‘This is perfect for us,'” he recalls. It’s quick and it’s easy, two other important parameters for Web commerce.
Up And Running In A Week Using An ASP
The iQ.com logo appeared on the pop-up window for the incentive offer Auerfeld saw. So he called the Saratoga, California ASP on a Friday afternoon in February. He cancelled the software development project instantly and moved over to iQ.com. Thanksmuch.com was up and running the iQ.com software the following week.
The CEO said he had decided to outsource all non-core functions from the outset. “I’ve always been a fan of outsourcing,” he says, having watched it work its wonders in the old economy. Today, he feels even more strongly outsourcing is the prudent path. “It’s not wise to make an investment in technology today because things are moving too quickly. Why tie up your dollars?” he asks rhetorically.
Outsourcing became “a necessity” at Thanksmuch.com. Auerfeld chose to outsource every process that was not core. “I wanted to make sure our team was focused 100 percent on our marketing and merchandising,” he explains. He also liked the fact that outsourcing “allows a company to move fast.”
Currently, every Thanksmuch.com offer works through iQ.com’s application, which extracts the customer information Thanksmuch.com needs to process its orders.
IQ.com had established a relationship with Card Services International to process credit card orders for its customers. Thanksmuch.com was neutral on a credit card processor so decided to make life simple and use iQ.com’s selection. Auerfeld likes “the seamless operation.”
Checking On The ASP Hourly
The CEO says he monitors his ASP’s performance on an hourly basis, checking on the response times on the company’s banner ads. So far its offers pop up on over 2,000 Internet sites, reports Auerfeld.
To date, there have been no disputes. But Auerfeld has already proposed enhancements. He finds his ASP “very receptive.” He expects his ideas to be incorporated into iQ.com’s newest software release.
Lessons from the Outsourcing Primer:
- ASPs allow start-up companies to move with speed, sometimes being able to use the software within the week.
- Buyers don’t have to tie up their capital on constantly changing technology.
- Suppliers should listen to their buyers and incorporate their suggestions into the next release of their proprietary software.
- Buyers like seamless offerings.