United States, Il... "TheSavingsMall is an Internet-managed, direct-mail catalog / e-commerce membership-based shopping club that provides savings for its members when they shop at many of the United States’ high-profile catalog and e-commerce merchants. TheSavingsMall, founded and incubated at SHC Direct, a consumer marketing agency, originated as Universal Gift Pass Values (UGPV), a three-year-old program designed to allow SHC Direct to capitalize on relationships it had established with nationally prominent catalog retailers through its core consumer agency business. To lower its costs and enhance its value proposition for both customers and participating merchants, the company is transitioning it into a Web-based program. TheSavingsMall has a twofold mission. For members, it seeks to provide a unique, straightforward value proposition based on a guaranteed level of savings at participating merchants. For merchants, it seeks to provide access to a large number of highly qualified potential purchasers at relatively low, success-dependent acquisition costs. TheSavingsMall plans to become the alternative marketing medium of choice for direct-marketing merchants that have a catalog and/or Internet channel and are looking to capture new customers and increase business from current customers. The core product offerings are built around the Web-based shopping and savings membership organization that offers members 10-20 percent savings on all purchases (including shipping and sales tax) made with participating merchants such as Spiegel, The Sharper Image, BeautyJungle.com, Jos. A. Bank, Art.com, SmarterKids.com, and Hammacher Schlemmer. TheSavingsMall can also be viewed as a transaction-based, membership savings portal for the consumer marketplace. TheSavingsMall members pay an annual membership fee of $9.95. The fee covers the issuance of a TheSavingsMall (TSM) shopping number. Members must use this number (which is linked to their credit card) to make purchases at participating merchants. The savings amount appears on the credit card statement as a credit under the actual purchase. TheSavingsMall program, already functioning and in the marketplace, offers both consumers and merchants a number of competitive advantages that arise primarily from the company’s proprietary, patented technology. TheSavingsMall is currently an intrapreneurial effort led by key managers of SHC Direct. Members of the team have participated in multiple venturing opportunities, including SHC Venture LLC (dba Momentum, a credit-card loyalty program recently sold to Netcentives). Successful execution of TheSavingsMall concept will require the addition of roughly 35 to 40 highly qualified people over the plan period. Online retailing is expected to top $60 billion in 2000. Approximately 120 million people use the Internet in the United States, with roughly one-third of the active online population having made at least one purchase online. Loyalty sites such as MyPoints and ClickRewards have also been very successful in capturing a large number of members in a very short time. In 1999, an estimated 30 million consumers shopped via direct marketing, and 25 million were shopping online. TheSavingsMall’s approximately 15,000 current members are generally married, upper-middle-class men and women who have been traditionally catalog shoppers and are now migrating to the Internet for faster, easier service and good value. Within the universe of Internet users, SHC Direct is targeting three distinct segments: catalog shoppers, women who have not purchased online due to security concerns, and experienced Internet shoppers. Among merchants, TheSavingsMall likely will be most appealing to retailers with high current customer acquisition costs. Online retail spending is strongest in books, software, apparel, toys and video games, music, and health and beauty products. In January 2000, these categories alone saw $1.2 billion in sales. These are the categories of focus in TheSavingsMall’s merchant acquisition process. Many shopping malls are available to consumers to help them shop and make their experience easier. However, a specific “savings” shopping mall, which provides immediate savings, is not yet in existence. Some competitors online utilize links from existing affiliate networks that allow them to create a large network of merchants very quickly. Other competitors include fee-based shopping malls, such as NetMarket.com and MemberWorks.com, that discount their own products. Also, from a consumer perspective, TheSavingsMall competes with “charity” malls. Many sites bring together a network of merchants who in turn offer various levels of “commissions.” TheSavingsMall stands out from the competition by offering a strong merchant network, a strong value proposition for both members and merchant partners, and a vehicle for transparent, immediate savings. Through TheSavingsMall, merchants offer a special savings proposition (discount) to attract customers to their site or catalog. Consumers pay a small annual membership fee for the opportunity to enjoy this savings benefit. Using proprietary, patented technology that provides seamless identification through a special Visa number, the program allows both merchants and customers to easily identify and track the benefits realized by using TheSavingsMall. Members can use TheSavingsMall web site to find great specials, learn about the merchants, utilize the gift reminder service, click through to the merchant sites, and opt in to promotional e-mail campaigns. Like most consumer-oriented sites, TheSavingsMall will need to evolve consistently to maintain interest, and it has identified a number of future site enhancements that will be implemented during the plan period. As it acquires and tracks its vast membership base and as this member base begins to purchase, TheSavingsMall will build a very valuable database that will be used to generate direct-marketing revenue. Once TheSavingsMall reaches critical mass (approximately 500,000 members), it will offer increased attractiveness to potential advertisers and generate revenue from this source as well. TheSavingsMall will create unique commission arrangements with high-profile merchants, allowing them to participate and provide members with growing variety and unique content. Many of the product advantages are inherent in the proprietary, technological platform used to power TheSavingsMall and integrated into a member’s TSM shopping number. Members perceive value from the instant savings and view the separate card number as a safety mechanism while shopping online. Merchants are looking for partners to help them gain new customers effectively and efficiently. Very few marketing- and merchant-oriented sites are doing this. TheSavingsMall’s technology creates a seamless, efficient process on the merchants’ side. Because of the reliance on its technological platform to sustain its product advantages, TheSavingsMall will aggressively defend its intellectual property rights and the proprietary software integrated into that system. SHC Direct holds a patent for TheSavingsMall technological process. Another source of advantage lies in the data collected and the ability to process those data and interpret them for the merchant partner’s advantage. The success of TheSavingsMall depends upon building a strong member base and strong merchant network. TheSavingsMall is dedicated to multifaceted customer acquisition and retention. Initial marketing efforts will focus on strategic alliances, partnership marketing, e-mail marketing, advertising, partnership alliances/co-promotions, and public relations efforts. Strategically, by building relationships with entities that have existing distribution channels to large groups of consumers and merchants, TheSavingsMall can develop an initial customer base more quickly and with less expense than through the “traditional” e-commerce method of intensive advertising. Equally important to TheSavingsMall revenue equation is merchant participation. Merchants are universally driven to acquire new customers to meet revenue and profit needs in a highly competitive environment where the shopping habits of consumers are changing rapidly. Merchants will be sold to on a direct, targeted basis. SHC Direct has assembled a team of sales professionals experienced in selling at the executive level. TheSavingsMall will be positioned as an upscale online savings program that provides the customer with easy access to an extensive selection of high-quality, brand-name merchants and provides a unique value proposition to both members and merchants (both traditional and .com). To build brand awareness among consumers, to build awareness of TheSavingsMall with potential partners and merchant partners, and to generate credibility in the marketplace, advertising is an essential component of TheSavingsMall’s promotional efforts. However, to keep expenditures at a reasonable level, the advertising strategy will leverage other promotional efforts. TheSavingsMall, with the help of an established outside agency, will design public relations campaigns that support other marketing efforts through the media. TheSavingsMall’s success will be highly dependent upon its ability to forge strategic alliances with organizations with large customer bases that are looking to increase their added value to their customers. Such organizations include Internet service providers (ISPs), associations, other community sites, the credit card industry, and publishers, among others. E-mail marketing solicitation will also be utilized to acquire and retain customers. The SavingsMall business model, then, will have multiple sources of revenue, including membership fees paid by individual consumers, membership fees paid by organizations that allow their members to join, merchant commissions above and beyond the 10 percent rebate amount, database/promotional marketing revenues, and advertising revenues. TheSavingsMall anticipates that it will acquire roughly 4 million members by year-end 2002, of which roughly 60 percent will be “active” members. These members will spend roughly $388 million at participating merchants. This will allow the company to generate $90 million in revenue, and $14.7 million in pretax income. Among other funding needs, t...
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