56:19
SUMMARY KEYWORDS
people, e commerce, spend, product, ceo, sales, pay, sem, seo, company, business, customer, big, working, early, keywords, terms, customer service, content, industry
SPEAKERS
Damon Pistulka, Mark Scrimenti
Damon Pistulka 00:01
All right, everyone, Welcome once again to the phases of business. I’m your host, Damon Pistulka. And with me today, I’ve got our special guest, Mark Scrimenti. Mark. Welcome.
Mark Scrimenti 00:16
Thanks, Damon. It’s great to be here.
Damon Pistulka 00:17
Well, man, I am really excited to have you here because we are going to nerd out on e commerce, we’re going to talk about stuff that people we’re going to talk about scaling an e commerce business, from eight figures to nine. And now this is cool. You got the experience, you were in there really putting your back into it and doing it. And I’m just I’m excited to bring, you know, to let people hear more about it.
Mark Scrimenti 00:42
I love it. I’m looking forward to talking to to you about it. Yeah,
Damon Pistulka 00:46
yeah, man. Cuz so let’s start out like I always like to with with guests, though. First of all, if you’re listening on LinkedIn now or Facebook, one of those platforms, they’re even on Twitter, I can, I can hit you back on Twitter, too. But if you’re listening on LinkedIn, or Twitter or Facebook, let me know where you’re listening from. If you got questions for us do that, just give us a shout out, we’ll get you up on the screen. So you can you can tell us what you want to do. I got a tip, I just got text for my kid. Sorry.
But I’d lost focus for a second my phone popped up I needed to shut the the margin the thing off. But so we got the we’re going to be talking about some things. So people about the e commerce want to start out let’s talk about your background. And let’s let’s let people understand a bit more about mark and how you got into e commerce.
Mark Scrimenti 01:44
Okay. So that’s, it goes back aways. I started out as a technical writer, that was my, my first job. So we’re talking like mid 90s. I finished graduate school background and in English and master’s degree in professional writing, you know, creative person would eat, but I have to make a living. So I got into technical writing, which got me into technology, which got me into a consulting agency. And then the internet came came around, I’m like that is such, that’s the coolest thing.
You’re like that medium, that’s where I want to be. So as soon as I could, I got to an internet startup. And this was like the late 90s by now. And we were building a sales, sales process automation tool, and a number of number of cool things. But I’m from that experience, I got into UX, you know, front end design and coding, content management, I was always a writer. So I did a lot of marketing, copywriting and things like that. And I did that for a couple years, anyone on my own for four years, and I built websites.
And so I learned how to code. I did all the marketing content and strategy. So it was kind of a one stop shop for mostly small businesses, nonprofits, solopreneurs. And you know, get them a basic site, I would do the front end coding, if I needed any heavy duty back end coding, I’d hire a real developer. But yeah, that’s how I got started. And then, you know, in 2006, I was ready to do something at a bigger scale, I felt kind of isolated, working alone all the time, or working from my apartment all the time at 10.
We’re still in an apartment. And a friend of mine was working at this ecommerce company music company. And they were an early pioneer in e commerce. So they started in 96, which was pretty early and one of the first in the industry. And at that point, you know, I said, Hey, you know, you think you could use anybody with my background. And it’s like, I don’t know, and pass my resume on to the CEO. I talked to the CEO for about three hours, he asked a ton of questions within like a week I was working there.
He gave me sort of a six month trial contract, and I seem to earn his trust. That was an interesting assignment involving a transition. And and then I you know, and that’s, that’s how I started there. And then later on, I figured I found out he told me that he had been looking for a right hand, man, but because he was kind of done with the day to day operation, so this is the founder CEO, I could talk about later. And they just kind of threw me at one thing after the other and I had the chance to grow and try out different things learn. And my responsibility just increased over time.
Damon Pistulka 04:36
Yeah, yeah. So you basically kind of started at a ground level and worked your way into more of like a CEO level or something like that in this organization. That’s right. That’s that’s really pretty incredible. Dude.
Mark Scrimenti 04:50
It was fun. It was a great opportunity. Yeah, I mean, I think I was fortunate to have the opportunity wouldn’t happen all the time, or in any in every case, but it just it seemed To be a good fit for me. And I think what what made that possible for me was a hunger to learn. And that entrepreneurial spirit, and I gotta tell you, working for myself was a great setup for this. Because when you’re working for yourself, you know, you got to figure everything out on your own. I mean, obviously, you’re drawing on, you know, friends and connections for as resources, but, you know, nobody’s gonna do it, but you and you develop this mindset of like, I just, I’m just gonna figure it out.
I don’t know, I don’t know how to code, but I’m gonna figure it out. And I’m gonna do it. And so that that’s what I brought with me to ecommerce. And I think that really helped a lot, because he kind of threw me into things I’d never done before Call Center Operations. You know, I was doing some things I’d done before a lot of marketing, creative direction. But eventually, it became bigger and bigger. And it was, you know, stuff that was new to me, but I was willing to do it, because I had that mindset. Yeah.
Damon Pistulka 05:57
Yeah. That’s cool. That’s cool. So moving into this role, then as you saw more and more of the business, and and your, your setting there? was, was the growth hard to come by? Or was it was it kind of one of those things in the beginning where it was just growing so fast, you were just trying to keep up?
Mark Scrimenti 06:17
No, it was kind of stuck. So there’s a little company history, you know, again, early internet, e commerce company at that time, like in 96, you had to have a brick and mortar store to be considered legitimate, you know, so they had a brick and mortar store, but their, their long term play was always to be online.
And, you know, I’d built up the company to 40 million in sales, the founder, CEO, but the, they got some early funding from Paul Allen, the CEO was was a uniquely talented person, data scientist, math and statistics guy, you know, he read a few books on PHP, and then built the first website, not your classic CEO by any means. And, and but he was able to build a company up to 40 million, but then it kind of plateaued from there. And he was kind of done with the day to day operation by the time I got there, and you’re the people stuff he didn’t want to deal with.
And really, there was no process in place, there was no structure and processes. One of the first things I noticed, it was, you know, it was arbitrary, you know, like, either the CEO had an idea, and we’re gonna do that thing, or somebody else was coming up with an idea. But there was no process in place. So one of the first things I did was introduce agile Scrum. And I had read about it. And the whole interview process made sense to me, it seems very intuitive. And you know, I’d worked with it previously. So I got my Scrum Master training, I became the first Scrum Master, I got my certification, and then eventually handed that off to somebody else.
But that that was a big step in bringing focus and direction, you know, the ability to plan and to prioritize work and to estimate ROI and to, you know, look at trade offs. Yeah, none of that stuff was really formalized. And the other thing about this company, since it was an early ecommerce pioneers, that all the software, all the systems were homegrown. And for better and worse, and so, you know, you and I’ve talked before, how did these geological strata of you like tech, technical infrastructure, you know, and as one regime change, you know, after another and, and it was, it made it very hard to plug in off the shelf products as a result.
You know, I was as time went on, this is a little bit further down in this story, I was always looking for opportunities to plug in an off the shelf product and not reinvent the wheel. Yeah, but but when you’ve got this system, this cobbled together and it was built around a, an old catalog order processing system called e commerce tree. So it was like a Franken system with, you know, a giant octopus with inputs and outputs. You it’s really hard to find, you know, points of extensibility, you know, places to plug in, off the shelf software.
So we ended up building most of the stuff ourselves. Again, for better and worse, but like so when I when I became the first Scrum Master, like I designed this project management tool. And, you know, as I was thinking about talking to you, one thing that came to mind is that, you know, now the industry has matured so much nowadays, there’s a tool for that, you know, yes, there’s a tool for everything. And in those days, like 2007, there were there were tools, and JIRA may have been around In its early stages, for example, but it was just easier for us to create it ourselves. And it was customized for our own purposes.
So that kind of helped us with the with the project process. And then, you know, from there, there was a lot of consolidation, because we’re moving from a catalog mindset, to a digital marketing mindset. And that was also a big shift. And in this industry musical equipment. It wasn’t, it wasn’t really an early adopter industry. So they were slow to spend money in online advertising. They were still spending money in catalogs, and we were still producing catalogs at the start. So we had we and we had two brands, we had two online retail brands. And in the origins of that, go back to the fact that, you know, early SEO, sem, you want it to be number one and two in the listings.
And it was easier just to create a second website, you know, even if the content was duplicate, and it was, and you get that one and two bookings, you’d get them either way. That’s That’s why that that second site came into being but of course, after over time, it didn’t work like that. Any Yeah, penalize we’ve actually killed that killed off the second brand. That was one of the things that that I advocated for, too. And it that’s probably a recurring theme, as I talked about, this is like, you got to know what to kill. You know, if it’s not, if it’s not bringing the focus that you that you want. And you make such a great point about
Damon Pistulka 11:43
the market and just the the maturity of the industry, because you’re talking about it’s 2007 and eight, you know, let’s let’s 1314 years ago, that’s, you know, the market was way, way, way different back then. I mean, you talk about the just the competitiveness of a online retailer, is not nothing compared to now.
Mark Scrimenti 12:08
Right. Right. Yeah. And you? It doesn’t seem that long ago. And but when you think about and how much has changed, it’s a long time ago, in terms of e commerce. Yeah, the principles are the same. But again, it’s just, it’s just more mature. And it’s more stable, too. I mean, we could talk about that, too. Like, you know, the big algorithm changes of 2011 and 2012. for Google, you know, there, there was Panda and Penguin, and how that really shook up the landscape in terms of SEO, those, those two changes were meant to get rid of content farms, and at blackhat linking, and which we’re still a thing, man, so they’re, you know, yeah.
And now that stuff doesn’t fly anymore. But but that’s, that’s what you’re up against. And then suddenly, you know, depending on how you build your SEO, whatever your strategy was, you might have to redo the whole thing. Based on that algorithm change? Yeah, I think that stabilized more, as the industry has matured.
Damon Pistulka 13:12
Yeah, I know, even even now, though, it’s still though the the algorithm changes will produce quite drastic changes in your and your organic and just your natural flow of traffic to your websites. That’s
Mark Scrimenti 13:26
for sure. Yeah. I mean, you got to stay on top of it all the time. It’s, that’s for sure.
Damon Pistulka 13:29
Yeah. That’s, that’s the best way to say it. Yeah. Yeah. So interesting stuff. So you brought up a couple things about knowing when to kill things, we’ll talk about that. That that because I’m sure that as you grow from about 40 million to, you know, three, four times that you had to there had to be things like your customer service, that and and some of these other places, like you know, at 30 million, you probably could have a handful of customer service 10 customer service people or whatever it was, but when you get to three, four times that you mentioned something before we get on you say call center.
So I mean, we I mean how many people just just the the difference in scale on a customer service team for the size that the where you started and where you finished? had to be massive.
Mark Scrimenti 14:24
Yeah, what it was, in the call center was our biggest team. I think it was maybe 35 or 40 when I started and it was over 100 when it when I left. And we thought it might scale proportionally to revenues that it like one to one but it wasn’t exactly that. We were able to gain some efficiencies. But yeah, the call center was interesting because I had never done call center work before. So that was something I started out, you know, doing marketing.
And we had a content site that that showed, you know, it was just a music gear content site and had great content on the head with tons of videos. and product reviews, demos, tutorials, artists, interviews, you know, product releases, that kind of stuff, you know, all the creative direction. And then I, I introduced agile Scrum, that’s, that’s, you know, I mentioned that that already. But then I inherited the call center, and the call center was kind of in disarray. There was high, high turnover, low morale.
And so, you know, what I did was just, you know, meet with people took them out in groups, took them to lunch, just listen, you know, what’s, what’s working for you? What isn’t working for you, you know, how can we help. And then I sat with everybody, and I watched what they what they did, in person, and that I looked at a ton of data, we had a lot of data to look at call centers, great for data, lots of metrics, and then we started making changes and, and part of that was, again, having a lot of homegrown systems, we could make the changes ourselves.
So as changes in process changes in training, we changed our metric, you know, we had our metric for measuring, you know, performance, you know, everything, cut, you know, cut company, mission statement, customer Bill of Rights, employee Bill of Rights, and we saw, we saw some definite, definite improvements, we, we changed our progressive discipline policy. And then that made a difference to so like, a combination of standardization, we standardized a lot of things, but we also had flexibility.
So like striking that balance between standardization, flexibility, and over time, you know, we affected a real cultural change, were the best performers stayed for a long time. And they, they recruited their friends. Yeah. And, and, you know, our customer service. ratings were always outstanding. So like, we you know, we’d win the biz rate, platinum seal of excellence every year, and that, yeah, the top few percent of people of online retailers in North America. I think one big change, though, and that was really a big battle to fight was was pay, you know, our CSRS had not gotten a pay raise, in like, 10 years, 1011 years, and they were making 950 per hour base.
And, you know, we didn’t, we didn’t have a commission. We did have a bonus structure, though, that was based on this metric that had sort of a three, three as service five days sales component to it. And, um, you know, the, the owners wanted to see, you know, immediate return on investment, if we were going to raise the wage, you know, like, we want to see higher net GDP per call, can you can you ensure that we’ll, we’ll see those like, No, I can’t ensure that but what, you know, what I can, you know, what we did end up seeing was just, you know, much greater stability, higher retention, yeah, your employee satisfaction, we did see increases in that GPA over time.
But that stability, and like, you know, that the happy employees really made for better customer service. And, and then just, I think that that’s, that was the return that we got from that, and it was worth it. You know, so it was it wasn’t, it wasn’t as easy as saying, look, if we could raise the wages, you know, will everybody perform better? what we, what we ended up doing, there was a lot of cross training, we liked utility players, you know, so that we could throw people on a problem as it arose in real time, you know, overflow calls. That combined with specialization.
Damon Pistulka 19:21
Well, and what you’re saying though, too, is and what’s what’s often not accounted for as business is the cost of turnover. The cost of turnover is huge, but it’s real hard to measure, right? It is because you don’t have enough customer service people or enough people to take orders. How do you go is lost sales? How do you know? You know, it’s not something that’s real easy, and then how much do you lose because you’re getting people up to speed, the first x days x months and, and all that accounts towards extra costs and lost money lost productivity that it adds up, but it’s not easy to add
Mark Scrimenti 20:00
Right, right on uninsured unemployment insurance taxes, I mean, yes. multiplied in and yeah, just the get service gap service level gaps, you know, yeah, if you’ve got 40 people and four people quit, you know, in one day, you’re screwed, you know, when you have a spike, and you know, how many how many last sales resulted of that? And you can you can tell, you can look at your abandons.
Damon Pistulka 20:25
Yeah, that’s true. Yeah. So now, um, did you? Yeah, anyway, so you won’t, I won’t, I won’t get too deep into the in the customer service thing. I just think that in e commerce businesses that the the customer service department, if they’re looking at it, right, is really a sales channel. It’s a sales channel where somebody wants your products so badly that they’ve they’re talking to you, or they’ve got a problem that if you solve it and do a really good job, you got the you have the opportunity to keep them as a long term customer. Right. And I just think it’s such a key place. And like you mentioned a couple things, training and standardization are actually a few things.
And then yeah, pay, because I think and you you ended up saying, you said that there, there was a incentive based compensation forum to and and you you raise the pay, because it is such a critical role that we were in a company a few years ago, where it literally was almost nothing. As far as sales in the first when we got there, and it was two and a half $3 million in sales, just in comfort service, you know, two years later, 18 months later, something like that, because you just keep refining and training and incentivizing and showing your customer service people how to help people get what they want. Right. And, and it really, you can turn it into a lot of good revenue.
Mark Scrimenti 21:58
We found we discovered through, you know, through trial and error, like who were the best salespeople, and it wasn’t entirely trial and error. But and then, you know, of course, we routed them, you know, the calls, but and then we tried to reproduce what what they did, and, you know, a lot of knowledge sharing. Some, some people just have the knack and and, you know, our CEO had this idea that if one person can perform at this level, everyone can perform. Oh, yeah. And I’m like, no, that that’s just, that’s not true. You know, there’s just there is some art to selling in some gifts, you know, we can we can try and we can try and spread that knowledge out as much as possible.
Damon Pistulka 22:41
Yeah. But it is these are not machines. It is that’s for sure it is and your training can only go so far. And the people themselves take it from there. And there’s some people are just better than than others. Well, that’s cool. So now, in this business, that you have product on site, then did you have warehouses or multiple warehouses? or How did that work?
Mark Scrimenti 23:03
We had multiple warehouses. Yeah. Three.
Damon Pistulka 23:07
Okay, how many square feet approximately?
Mark Scrimenti 23:11
I don’t know. They were they were large. We had one in New Jersey, one in one in Mississippi, outside of Memphis. And one in Las Vegas. Okay, so, you know, cross you hit across the across the country like that to get faster deliveries? Right. Right. Yes. Our delivery like we had 96% of the country covered on today. Ground? Yeah. So our, our shipping was really outstanding. And that was actually became a big selling point for us. You know, people yeah, we could get stuff there within two days for most people without without extra cost.
Damon Pistulka 23:48
Yeah. Well,
23:49
that’s a big deal. I
Damon Pistulka 23:50
mean, look at today that at Amazon Prime, how much money do they they invest in setting up to get stuff there the next day or the day after? It’s a huge thing and an e commerce and as you grow and scale like that those multiple warehouses really allow you to, like you said, your 96% second day, across the United States.
24:12
That’s a big deal.
Damon Pistulka 24:14
Yeah, big deal, especially when you can see that.
Mark Scrimenti 24:17
Right? Right now.
Damon Pistulka 24:19
Your customers get used to it too. And then somebody else trying to get into it. And y’all it’s gonna be five, six days. I think it’s the end of the world. Right. Right. Well, that’s cool. Cool. So when when you were looking at the business overall, and you were sitting, you know, kind of getting going down the road here? What were some of the biggest structural challenges?
I mean, because you got a just, I’m trying to imagine when you go three, four times larger like that, did you have like, you know, a department that was under one person, it was fine, a couple departments, then all of a sudden you grew and now you had to have multiple people managing and again and multiple people, man Managing where you have managed before, were you able to keep the structure still really flat as you grew,
Mark Scrimenti 25:06
the structure stayed pretty flat. At some point we moved up, so so like created an extra layer of management. Yeah. And so I had three directors reporting to me, there were just two, two VPS, who reported to the CEO, me and the VP of it. While so so, you know, he was he was sis admins, developers, and the data science team also reported to him. And, and there are reasons why.
So I’m, you know, very much tried to break down silos as much as possible, like going going back to the call center, we banned the word department, you know, so that people couldn’t say, Well, you know, the returns department is on lunch break right now, like, that doesn’t exist. Like, if the returns department or the returns, people are there, then you you take the call, you know, and so, you know, one of the silos that did exist, though, was with data science, which is another subject that we can talk about, but in terms of answering your questions, a sub in terms of the structure, I think that the structure changed organically, in grew organically.
So for example, with the project team, you know, at first, I was the Scrum Master, and I was also designing products in writing requirements. And then I started hiring people to do that, you know, so I hired a UX person, I hired a couple business analysts, we brought people up through the organization to serve in some of those roles. So it started as you know, you know, I would fill in, enter the CEO would fill in at times, and then we started, we started to build a team and a department.
I mean, and then that, in that sense, our team, yeah, and same thing with marketing, we had this content site I mentioned, but it wasn’t making any money, you know, so it was so eventually that, you know, that’s something else I kill, they just kind of folded that production capacity and that talent into the digital marketing team. And used that talent on the retail sites. So for example, like with the contents that we had, we were producing at our peak 15 pieces of content per day.
So you know, three or four videos, and the rest were print pieces, but, you know, we developed this really productive content machine. But you know, that content was expensive. Yeah, you know, and, you know, there’s, there’s the gear, that the cameras, the mics, you know, all that stuff, but plus the labor, just the labor is expensive. So, you know, to me, it didn’t make sense to be spending all that that money on something that wasn’t making money, and we tried to monetize the content side, but in the, you know, again, in our industry, nobody was buying online ads, it just, there wasn’t much of a, an appetite for it.
So, um, in bringing that team together, you know, what we found was that we had a lot of the right people wrong seats, some of the wrong seats, you know, some of the wrong people.
And this is especially early on, so we had to, we had to, you know, if we could retrain somebody, we would, you know, we had to let go some people, we let go some people, but um, you know, for example, early on, we had merchandisers, we had product merchandisers, who, you know, knew their, their categories, their product, you know, guitars, drums, DJ equipment, bass, but they were working in these, you know, these very long, you know, 100 page, spreadsheets, you know, a mapping keywords, you know, to product pages, and it’s like, they hated it.
They weren’t good at it, you know, and this is something that can be and was eventually automated. But I’m like, this, that’s, and then they weren’t catalog focused still. Yeah. So so what we needed you know, like, again, with this constitution, we need people who could write, like, right for, like online SEO friendly copy, and who also had product knowledge but they also do other things like write SEO copy, which can be taught to some extent. Certainly, SEO, writing can be taught writing in itself is a little bit more of a talent I think, but you know, you need some you need some visual skill if you’re working with with the designers to build Sales guides and landing pages and so forth. Yeah,
Damon Pistulka 30:05
yeah. The I just check it out. Somebody put some comments on on LinkedIn there. But the Yeah, it is you you bring up a good point in there. And just like you mentioned that they did, just keeping your pages and I can’t even imagine this because you’re talking about on a system that probably was pretty manual. That’s, that’s you’re trying to keep your your SEO working right. And the keywords and just really, that had to be a ton of work for people. How many pages did the website? Yeah.
Mark Scrimenti 30:39
Well, we had we had our product skews. Yeah, we had more like, like 12 to 15,000. skew. Okay. So
Damon Pistulka 30:47
no other way to say it.
Mark Scrimenti 30:49
Yeah. So that’s right. It was a sprawling website. I mean, it was Oh, yeah. Yeah,
Damon Pistulka 30:54
that is that is that is, that is we got a few clients have had not quite that. And then I’ve got some that are resellers that are over 100k. And that’s, that’s, that’s a different ballgame, though. You’re, you’re with individual and this kind of products.
I gotta imagine you, you talked about this before you and I talked about this before, the the growth of the company, as you’re going through it, were there, there are things that you found in the industry, then you go, wow, this is something that, well, if we do this, we really could grow differently or grow longer. You and I talked about financing, and kind of how that helped. You really launched the company ran into into growth. explain that a little bit? And kind of how you got into that. And figure I mean, just came around to that? Sure.
Mark Scrimenti 31:45
Yeah, so financing was really the biggest driver of our growth. We, you know, we had, we had a good credit, we had a good credit line and a good relationship with the bank, we paid our bills on time, I had a good controller and a good CFO. And, and so he, you know, we were the only company, nobody out there was offering just straight out payment plans. So we, you know, and so what we started offering were these, nope, no interest payment plans. And now other our competitors, you could get a house credit card, you know, if you went to Guitar Center for setting, for example, is the 800 pound gorilla in the industry.
Yeah, you could you could apply for a house credit card, and there’s a 70% rejection rate. And then you know, if you get the card, if you’re lucky enough to get the card, you know, they’ll give you these these 1224 and 36 month, you know, interest free offers. But if you you know, if you’re late on a payment or or if you fail to make a payment, then you have this retroactive interest at 30% APR. So, you know, a lot of people end up spending a lot more than they intended, when they use that credit card, what we were offering was different. And it was, you know, basically, it’s like an old fashioned payment plan, installment plan.
So, you know, we had four weeks did a ton of experimentation. So we ended 468 1012. And eventually 18 payment plans, you know, the longer the plan, the greater the risk, of course, because you’re getting, getting that fraction upfront. So and we had, we had them set on different price ranges, different product, you know, compositions, different brands, you know, the higher end brands got the longer payment plans. And in some cases, we could even get, you know, those brands to chip in electric kick back a percentage, because it really did use the sales a lot.
Because people you know, this is a passionate, you know, these are serious habit obvious. They’re passionate about music, it’s a lifetime hobby. And it’s an expensive hobby, if you get into it, and and you know, that these musicians will have, you know, Dream instruments or let’s let’s just say Gibson, guitar, Gibson, Les Paul guitar, which is a really nice guitar, and, you know, maybe it’s 12 $100, but they’re not gonna have 12 $100 at once in their pocket to spend, especially on a guitar, you know, maybe ever, but they can afford the $100 a month. And so, you know, this was a hypothesis, I can’t take credit for that.
That was our CFO and in New Jersey, who, you know, thought of it, but we had to launch that program, and we had to test it and we didn’t, you know, when I think back, you know, everything seems obvious in retrospect, but, you know, we didn’t know if it was going to work. You know, we thought, you know, it’s extremely risky. Yeah. You know, and are other people going to copy this and you know, how we who which our competitors are most likely to do that? how likely are they to do that? And so forth?
And how do we, you know, how do we keep from losing our ass, you know, in bad debt? Yeah. And so, you know, we figured if you’ve got these, let’s just say you got a smart enough margin to work with, let’s say, you know, you’re in the 30 40%, whatever that margin is, you know, if you can afford a certain percentage of bet you can, you can afford a certain percentage of that, and you have to expect that it’s going to happen.
You know, there’s a lot, you know, a significant amount of it comes from, you know, what’s essentially fraud, like the one announce people who pay you that first payment, and they never come back, they never come back. But there’s also an even larger percentage of those people who just kind of they make it, you know, three quarters of the way through, and then they can’t, they can’t finish something comes up in their lives, and they’re not able to pay you they might they, they want to pay you, they may intend to pay you.
So we kind of worked with them. You know, we were we developed a very flexible collections. system, but but in terms of departmental growth or team growth, you know, by the time I left 20, out of those 100, people in the call center were in collections or accounts.
So, yeah, there’s a lot of risk in that plan. And so you really have to establish a model. And, you know, collections is kind of, can only be so successful. And that’s why we call it accounts, because most people really did want to pay us back. And they’re probably paying us back before they’re paying their utility bill, because they can’t get the steel anywhere else. And they just love. You know, they love this program. They love to be able to play and they want to get to, but um, anyway, sorry, I lost my train of thought there.
Damon Pistulka 36:46
Well, we were talking about you’re talking about this, I think that the one thing that’s really interesting now is you are on the leading edge of this there. I mean, now the payment plans and e commerce is really common, because people are seeing the increase in sales. But you’re one of the leaders and you guys did it on your own dime to didn’t do. Right wasn’t using an outside company, because now everybody under the sun, brick and mortar and online has it and it’s outside companies that right? firm. Yeah, firm provides a nine a 10.
Because, like, Joseph step key that I know, he helps tons of people do that with the credit through I think it’s a Sema or something like that. There’s a company name that does that. But I think it’s really interesting that you guys saw the opportunity, develop the opportunity, and then it really drove the growth because you knew how much that really helped your customers, the good customers, right?
Because there’s always going to be some, like you said that couldn’t afford it or didn’t intend to afford it. Right? Do whatever. But your customers, I assumed that that had to really drive some loyalty, because they knew then, when they bought this guitar, and they got that guitar, and they wanted something else for that guitar, they could come back and get a really nice amp and do a similar thing and afford it.
Mark Scrimenti 38:06
Yeah, absolutely. Absolutely. And it so you know, average orders of values doubled. Wow, repeat buying rates went up. So, you know, word of mouth advertising was was great. And so all of that, you know, changes everything. And it certainly changes our customer acquisition strategy, too. And, and our like, from an SEM standpoint? Yeah. It really changes that equation, because now I mean, the word all that lowers your customer acquisition costs.
Damon Pistulka 38:40
Yes, yes. Yes, exactly. I mean, you’re driving people to you, because you’re doing exactly what they need.
Mark Scrimenti 38:45
Right. And they keep coming back. And they and they would, they would keep coming back as long as we had what they needed. And that’s the feedback we got. So, I mean, it was, it was tricky to we, we would let off the reins, and we kind of test things out.
You’re always trying to, you know, figure it out, like kind of pockets of bad debt, we developed a very sophisticated model, you know, the 35 different variables, but but as it turned out, you know, especially because we were lending to, you know, people, you know, with credit scores in the five hundreds, sometimes low 500, you know, that, that, that that was you can reduce the risk if you’re only lending to people with 700 or above, but, you know, that wasn’t most of our customer base.
But, you know, we found that the way they performed with us was ended up being the biggest predictor predictor of future you know, reliability in terms of paying bat payment plans. In other words, once they get into the system, as long as they pay you, you know, sort of call it like this path to citizenship, you know, I mean, yeah, if you know where you may, you may be coming in with like no credit score or very low credit score, and but, but your credit with us becomes really Good, I don’t care about what anybody else because your your your, you know, because they’re paying us back so that that was largely the case but you know, and then as you get as you scale up, you’re like,
Huh, you know, maybe we could afford 4% bad debt, you know, because the numbers get so big, you know, but but you know, that’s dangerous, they can become a slippery slope, you know, yeah, and you really got to catch it on the front end is what I was trying to say, like, and that’s where the model comes in. Because, you know, by the time it gets to collections, it’s most of that is lost, especially at 60 days, you know, like 60 days, you know, you may as well write it off, and the collections agency isn’t going to do anything for you.
Damon Pistulka 40:40
Yeah. Well, I said, I really think that and when you think about the number of dollars that drove that’s really pretty amazing that you know, that you really supercharge your growth by by financing to meet your customers needs. That’s, that’s something. So yeah. And you mentioned, you touched on this a little bit about SEO, sem, and that kind of stuff. So So was the company spending a lot and pay per click during this time? Or was it? Was it you know, you were word of mouth in SEO? juice? Gotcha there.
Mark Scrimenti 41:16
No, the company was still spending a lot. I mean, the, the percentage declined over time. So if you you know, when I first started, from when I first started to when I ended it, it ended up being about half. But you know, so so let’s just, let’s just say, you know, to grow the company, like going back to an earlier stage, and we were spending, you know, approximately nine to 10%. of revenue. Yeah.
On on sem. And, you know, that number gradually decreased because of these, these other things that we’re talking about, as well as because of learning, you know, and just figuring out, you know, how to spend your dollars more effectively. Yeah, and that’s, you know, I mean, we tried all kinds of things, in terms of SEO, sem, you know, all the different products. You know, it’s really driven by Google, as you know, I mean, there are plenty of other options earlier on ad roll all these companies that have kind of come by the wayside, or fallen by the wayside, but maybe they’re around
Damon Pistulka 42:32
enough? Well, indeed, I mean, just just the pure magnitude of trying to manage the amount of campaigns and the amount of things that you’re trying to do on a marketing and and it had to be quite a job. And you’re thinking back, you know, the tools recently have gotten more sophisticated. And then we have the whole, you know, we can talk about Apple for a second. But that’s, that’s a whole nother can of worms, but but in those in, you know, five, six years ago, the tools weren’t nearly as, as sophisticated or seven years ago, or however long ago, it was they weren’t nearly as sophisticated as they are now.
Mark Scrimenti 43:10
Right? Well, for Yeah, for us. You know, I think we did a lot you’ve got to spend to learn. And that’s, that’s one of the things that Yeah, realized, and sometimes even you, you can waste a lot of money on sem. Oh,
Damon Pistulka 43:33
yeah, we’re
Mark Scrimenti 43:34
super fast. You can waste a ton. I mean, now, like, six, about 60% of our new customers came from from Google. So you know, it was a great source of acquisition for us. But, you know, what you’re trying to do is, you know, figure out like, increasingly better estimates for what each keyword or ad is worth. And then, you know, adjusting your spend on that. And, you know, you’ve got to have clear business goals. Yeah. And you also cannot take Google’s word for anything, no. And you have to understand that they’re, they’re optimized for their own profitability. They’re not necessarily optimized for your profitability.
There will be times when when the two are in alignment. But but by D, there are certain tools for you know, by default, like certain ad products, for which the default is, let’s say, to optimize for clicks, which what you’re paying for clicks, you know, what you really want is to optimize for conversion. And yet, and that that may be a setting in some cases, it’s a setting that you can change, you know, because they’re auto optimized. Yeah. But but if you don’t know that, if you’re not aware that you’re you’re, you’re paying for the wrong thing, and you’re wasting your money.
Another another challenge that we faced was, you know, 80% of our so yeah, we had hundreds of We had hundreds of campaigns, you know, with Oh, yeah, 15,000 skews, we had millions of keywords, literally literally millions of keywords. But about 80% of our budget was on long tail keywords versus like fat head terms. And we didn’t we didn’t bother spending on the fat head terms because they were too expensive. Like, yeah, like, you know, Gibson guitars or something. Plus the, the long tail, you know, terms are a better indicator of intent to buy, you know, like more researched this strong signal of intent.
Damon Pistulka 45:33
Yeah, yeah, you’re right. It’s just what you’re saying is, is is so true in these type of accounts, because you have to, you’re that continual process of refining, you had to use a lot of data, data mining and data analytics to go, Okay, this is this keyword. And this is what it drove in this queue and this phrase, and how much it did, and then really understanding, like you said, the value of a keyword phrase and make sure you’re, you’re buying it for the right amount of money.
Mark Scrimenti 46:07
Right, right. And a lot, a lot of people, you know, this is like we’re having basic data science, understand understanding is, is extremely important for e commerce, a lot of people don’t really get sample size, errors, you know, like, they’ll have, you know, a product out there and, and, you know, it gets five clicks, and one person buys it, like, wow, there’s a 20% conversion rate, you know, but that’s just not enough data to draw that conclusion. And, you know, that’s how you can also how you can spend a lot of money, you can waste a lot of money that way.
And, you know, one of the problems that we had with all these long term, long tail keywords is that is a paucity of data, you know, so you end up having to, you know, some of these, they don’t get clicked on that often. Yeah, and you want, you know, like, at least 100 clicks or something, before you start drawing any conclusions. And so we, you have to put them in a bucket of like products, and then you and then you aggregate the clicks. And you and you bid on that level, and you continue to refine that, that’s another thing that you have to work on.
And the other thing is that you and maybe this is obvious to people, but you know, what, what is your strategy? Like? How much are you going to spend? Like, what is what is like on customer acquisition? And, you know, one thing that worked for us is, first of all, you got it, you got to know what the lifetime value of a product will have a customer is based on what they buy. Yeah, to the extent that you can figure that out. Yeah. Um, and, you know, if, like, we were willing to spend basically our profit margin, up to our profit margin on the first sale to acquire a customer.
So you know, if we could break even on that first sale, acquire a customer, it makes sense, especially if what they bought indicates that their lifetime value is going to be really high. So like, for example, we wouldn’t spend a lot of money on Beginner Guitar kits, and any words, you know, related to that, because, you know, typically Beginner Guitar kits are played for three months, and then there’s, there’s stuffed underneath the band of closet
Damon Pistulka 48:23
never touched again.
Mark Scrimenti 48:24
Yeah, and, you know, very different if the first product they buy from you is is a 12 $100 Gibson, Les Paul, and and you’re the lifetime that potential lifetime value of that customer is much higher. So yeah, you know, you got to be thinking in those in those terms.
Damon Pistulka 48:40
Yeah. Man, this this is incredible dude, because you you you’ve I hope that people that have listened to this that are listening now and listen to it on and off if have really tried to be able to understand the depth of this because the stuff that you learned in this in this experience is invaluable going forward with with e commerce people because I mean they’re the one of the things that we found in the in the work that we’ve been doing and I’ve really only been in e commerce for about six years now.
And is that there is really no good education for e commerce. And then you go Yeah, you have to do it. Exactly. So you have to fumble your way and bust your way through it. There are some people that have been in it long enough like yourself and others that that that really they’ve learned by banging their head in the wall by refining and doing this stuff, but there’s not a factor you know, a school somewhere that’s pumping out the best e commerce people in the world for really much of anything, right and and people that have your knowledge level in the in the industry are very rare.
And it’s it’s I that’s why I get So excited to talk to you because the you could tell the depth of your knowledge and the things that you’re talking about, like when you when you talk about correlating the purchase that they made to how much you know, you’re going to spend for the keywords that drew them in based on the basis. That’s, that’s crazy, cool stuff that you have to get into. If you want to really know what you’re doing in in, in an e commerce business. That’s
Mark Scrimenti 50:25
big. Right, right. attribution models, you
50:28
know, yeah,
Mark Scrimenti 50:28
you know, how do you you want to distributed model, right?
50:32
Yeah, I know. Cool.
Mark Scrimenti 50:34
Yeah. So I mean, there’s a lot, a lot, a lot, a lot of technical stuff in the in it changes, and you got to stay on top of it, you need dedicated people. And that’s kind of like, you know, when you talked earlier about, you know, the changes in structure and stuff. We moved more from, like, we were all doing it ourselves to kind of, you know, building small teams to take care of it. That was Yeah, the main movement over time.
Damon Pistulka 50:58
Yeah. Well, you have to because you have to have more specialists.
Mark Scrimenti 51:00
Yeah. You do. Like, like sem you need, you know, you have a little team, you know, yeah, but but I, you know, we we brought everything in house like SEO, you know, here’s the thing to like Google, like, spending 5 million, spending 5 million a year, whatever, your small time for Google, if that’s a small account, what you’re gonna get is you’re gonna get a rep, who’s like, straight out of college, surely bright and charming, and they’ve been trained, but they don’t, they don’t know your business at all.
And they may not they don’t even know, Google that, well, they don’t even know their own tools that well, you know, so you, you it’s best to learn it yourself. And, and most of the stuff is not rocket science, but it’s complex enough. And it changes enough that that you need somebody who’s dedicated to stay on top of it as it evolves.
Damon Pistulka 51:49
Yeah. Well, and it’s, it’s the people that are in it. It’s a daily and hourly kind of thing, almost, if you’re launching new campaigns, that it’s significant amounts of money that can if you if it’s not done, right, can go like that. Oh, yeah, yeah,
Mark Scrimenti 52:04
we had a case where we forgot to shut off a campaign once we burned $40,000 in one day. But we learned a ton from it, because it got a ton of clicks, you know, and that’s the thing. It’s like, you know, that, that that that lean? The Lean Startup thinking lean, like everything is learning experience, there’s no failure when everything is a learning experiment, because you just learn from it, and you pivot, and you and you move on.
Damon Pistulka 52:29
Yeah. Yeah, it’s so good. Well, and so let’s, let’s, that’s great talking about your ecommerce experience. So in So now, what you’re doing, you’re a fractional CEO for people now, and I wanted to talk a little bit about how you’re helping people today. And, and do that. Thanks,
Mark Scrimenti 52:46
I appreciate that. So today, I am working as a fractional CFO. And I’ve been, I’ve got one steady client that takes up at least half of my time, and I’m looking for other clients. But I’m looking at V, you know, visionary CEO, CEOs who need help on the, you know, strategy and execution side. And or, you know, businesses could be family businesses that have kind of, they’re looking to grow, but they’ve kind of reached, you know, the ceiling, what they can do on their own, and they need some executive level, some experienced executive level, guidance or help. But they can’t afford necessarily to pay full time for SSI, or whatever, you know, and that’s okay.
You know, I can work you’d like one day, a week, you know, two days a week, you know, one, two days a month, whatever it may be, but I think, you know, especially in e commerce, so happens to my one client is not an e commerce client. But I’m itching to get some ecommerce clients, because I think I can help a lot, you know, just a broad perspective and really get my hands into a lot of different things. Yeah. So I’m enjoying it. And I, yeah, the business I’m working for it’s it’s kind of a social enterprise. And I like that aspect of it, too. But I’m eager to, you know, see what else I who else I can add
Damon Pistulka 54:18
to it. You can add to it. Yeah. Well, that’s, that’s awesome. Mark. Well, how can people get ahold of you?
Mark Scrimenti 54:25
LinkedIn is always great. I’m on LinkedIn. All right, I could get my email address. But I think I think LinkedIn is probably LinkedIn. So they’ll
Damon Pistulka 54:35
hit you up on LinkedIn marking this all do your you’re mentioned in this comment, or in this post already, where we’ll be live for as long as they keep it up. And then we’ll also have your bio in in the blog post on our website so people can get a hold of you there. And if people can’t find you, they can always talk to me because I don’t have no one else with my name in the world.
So if they can’t find me, I don’t know what you are unique. I guess Something like that. But anyway, thanks again, Mark strumenti. My pleasure on the faces of biz again, it was so cool. I’ve just man, I know we could geek out here for hours on e commerce stuff, because we didn’t even touch half the stuff we were talking, we’re thinking about because, you know, you talked about the scaling of systems and, and, you know, get into your data science. That’s just so cool band. But thanks so much.
Mark Scrimenti 55:24
I could go on for hours. We’ll do it. Hopefully we’ll do it again.
Damon Pistulka 55:28
We’ll do it again. We’ll figure out another topic that we’ll do and we’ll go again, but hey, I want to say thanks, Gil Roberson coming out of Canada’s saying she’s, she’s coming in late, but going back and listen, Gail, you’re going to get a dose of e commerce. That’s what you’re gonna get. It’s good stuff. But thanks so much, Mark. Thanks. Have a great rest of your week, everyone, and we will be back again.
Tomorrow. Which tomorrow morning, we better exit your way round table. And then tomorrow afternoon. I’m speaking with and as usual, I forgot who I’m speaking with tomorrow, but it looks good. It’s gonna be good. That’s what I always say and honest to god every time I have my brain just goes blank. But anyway, have a great day everyone. Mark, thanks so much. we’re dropping off right now and have a great rest of the day everyone right?
