Internet Marketing Summer School

Do I Need An Internet Marketing Degree?
I don't think there is such a thing as an Internet marketing degree. By the time this stuff slows down enough to get in a college course it is too late. You are studying yesterday's news and so will need to be broken of bad habits when you join an Internet marketing company. My recent post on the top 10 Summer Internet Marketing Reading seems to have reignited the debate. Here are some helpful links if you are behind in your homework (lol):

Top 10 Internet Marketing Summer Reading

Experience vs. Internet Marketing Degree on Atlantic BT's Blog

Do I Need An Internet Marketing Degree on ScentTrail

Think Like An Internet Marketer Summer School
The most important Internet marketing traits must be learned but are hard to teach. If that sounds like a vicious CATCH-22 then you are thinking like an Internet marketer already :). I've decided to create ScentTrail's Internet Marketing Summer School.

For the next 6 weeks I will post a fictional but real life test case every Sunday. Internet Marketing Summer School "students" will have one week to respond. Respond to all 6 cases means you graduate from Internet Marketing Summer School (there will be a special badge and Tee for graduates). Since Internet marketing isn't linear, if you come up with a single GREAT answer you may earn your graduation badge immediately. If you don't find out about Internet Marketing Summer School until we've started, no worries. I will link all test cases from the top of this page. If you want to gamble and do one great answer then you may graduate on the spot since trying to understand the over (costs) vs. the under (return) of any marketing idea is thinking like an Internet marketer.

Internet Marketing Summer School: Test Situation #1 BobBaker.com (fictional but real):
Your name is John Smith. You run a successful sport fishing business online. Time is now just after July 4th. You've created a $2,000,000 online sport fishing store and reseller network. You started ten years ago with a brochure site about fly fishing in Montana. The original owner's brother, Bob Baker, is a famous fly fisherman and the flies he ties are coveted. You left corporate America to buy the fledgling fly shop in Raleigh, NC thinking you would spend time fishing and becoming a retailer. You don't have enough money to not have your investment pay returns. When you purchased the business you created a branded line of Bob Baker flies that account for half your sales.

Bob Baker flies are sold by your site BobBaker.com and by small independent fly fishing stores around America. You used to have a brick and mortar store but closed it as the rent went way up and the web took off, so you are loyal to these struggling independent resellers. Here are BobBaker.com's stats:

BobBaker.com Fictional Sport Fishing Site Stats
PageRank: 4
Inbound Links: 150 with Orvis PR6 the only PR greater than yours linking in
Most Popular Page: Home, After that the Bob Baker Sport Flies category Page
Daily Traffic: Spring/Summer 5,000 unique visitors, 4Q 8,000 daily uniques
Average Order Value: $45 in spring/summer $65 in 4Q
Conversion Rate: 3.5%
Cart Abandonment: 65% in Spring/Summer 62% in 4Q
Email List: 30,000 +/- 10% and accelerating lately due to mobile customers leaving the list (you are not optimized for mobile)
Email Mail Frequency: 1x per month (you pay your wife's brother's son to help with email on Constant Contact)
Traffic Sources:

• 30% from affiliates such as independent reseller sites and your monthly emails
• 30% PPC with $3 to $1 ROAS (return on ad spend)
• 30% other referal sites such as Orvis and sport fishermen review sites some of whom you pay to have banner ads on their sites
• 10% of your traffic comes from undetermined sources. 

Mobile traffic is currently a consistent 3% with spikes to 5% when you drop a monthly email. Your sales are 50% fly fishing gear from Orvis you don't make much margin on and 50% from your line of flies with a much better margin.

Current Business Situation
You've been approached by Walmart to include your line of Bob Baker flies in their stores. Walmart wants to buy millions as a "test" of adding your flies. They want a wholesale price that is 20% below your current cost. You "manufacture" your flies in America with a group you've worked with for years. They already buy some components such as the hook from Mexico, but the body of the flies are built by machines they created. You can currently just a about meet the demand for 20,000 Bob Baker flies a year.

In addition to your Bob Baker fly brand you wholesale Orvis line and rods. Orvis accounts for most of the other million in sales. The fly fishing equipment business doesn't generate all that much net net. You are lucky if you pull out 15% from the Orvis goods, but your line of Bob Baker flies is much more profitable producing a consistent 30% net margin.

You've built your online business by being careful to NOT sell the same flies on your online store as you sell via your independent wholesale channel. By keeping the Bob Baker Exclusive brand a retail only brand you've had the freedom to promote the Bob Baker Sport brand online without too much channel conflict. Your Sport line is, on average, 20% less expensive than the Exclusive brand sold via retailers. Your resellers have asked to be able to sell your Sport line but you've reserved it for your online store so far.

You have two seasons - Spring/Summer and Christmas. Spring/Summer sales are only about 75% of your holiday sales and controlled by your resellers. Holiday sales are more in your direct control as they come almost exclusively from BobBaker.com. Last year you dropped 3 emails a month during the holiday season plus a big Black Friday and Cyber Monday sale and you set new holiday sales records on BobBaker.com. 

Last year you banked a little under $400,000 from the business. You and your family of 4 (wife of 15 years and 2 daughters both in private high school) live on just under $100,000 thanks to costs of private schools and LIFE. You also had loans from slower years that ate another $100,000, so you have an investment fund of just under $200,000 to invest now.

What should You Invest $200,000 In Now?
What do you use the $200,000 to invest in? Here are options you've been mulling over:

• Doing the Walmart deal would take at least that much capital since you would have to find a new, much cheaper, source of Bob Baker flies.
• The website is 3 years old and isn't mobile friendly. You've noticed a lot of email list churn from mobile devices when you mail your 30,000 person list over the last six months. You are good enough with Google analytics to see mobile traffic is growing and sometimes reaches 5% of your traffic especially around the holidays and after an email drop. You've met with several web development companies including Atlantic BT in Raleigh, and they can rebuild your site on a Magento platform that is easily adaptive to mobile for somewhere north of $10,000 depending on features you want. Atlantic BT was the only web developers you spoke with that suggested spending as much money on content marketing as on the site redesign.
• Giving the Sport line to your current resellers would take about half your war chest in new Point of Purchase displays and other sales support. You've been wondering if you shouldn't relent and let your resellers have the Sport line too as it might help sell the Exclusive line in their stores.
  
• You've thought about adding a paper catalog and have had meetings with companies who could help create 4 catalogs a year for about half your war chest.
• You've thought about expanding your brand with a new Pro line and branding friends who are also great fly fisherman but who haven't achieved Bob's notoriety. To create 3 new lines of 5 flies each brand in your current setup would take most of your $200,000 war chest.
• You've thought about adding more inventory and expanding your 2,000 Stock Keeping Unit website to 10,000 SKUs. This would mean selling products OTHER than Orvis and this could endanger the Orvis relationship. Adding that much inventory would take all the working capital you have and mean using the rolling line of credit from the bank.
• You could use your war chest to hire more support for your site. Currently you have a company that helped your site get launched and who controls your Content Management System. Since you only have about 10% product churn right now, you haven't minded paying the company $30,000 a year to manage your site, but you are starting to feel the limitations since it takes days to make a change and the site hasn't been kept up-to-date in any thing other than inventory. You get 4 big seasonal changes and the company moves your inventory around based on work orders, but it feels too slow and unresponsive.
  
  The company that currently manages your site has pitched you a $50,000 redesign again using their proprietary Content Management System (CMS). You've put them off because you suspect doing the redesign with them and paying them to keep the site current would eat about half of your cash reserve and you are ready to be in more control of half your business (the amount the site controls). You are torn between hiring web designer, staying the course or using Atlantic BT to redesign and seeing what they have to offer on the marketing front.

Think Like An Internet Marketer Test
What should John do with his investment capital? Is the answer already outlined above or is it a combination of things listed above? Should John do something not listed above?

How To "Enter" your answer:

• Use the comments or write your own blog post and share the link in the comments. 
• You can write a note on your Facebook page and share the link in a comment. 
• You can write me an email (mobriff(at)gmail please put Internet Marketing Summer School Test #1 in the subject line as I get a lot of spam) and I will post your reply.
• "Winners" will get an Internet Marketing Degree badge, a tee and other social points and status that doesn't cost me money (lol). 

Deadline for the BobBaker Test #1 Is Sunday July 15th.

If you discover this test after July 15th you may take it, but please limit your response time to no more than a week since that is already about 6 days more than you would have as an Internet marketer (lol).

Good luck. If you have questions email them to me at mobriff(at)gmail and please put "Internet Marketing Summer School" in the subject so I know your question isn't spam.

Marty