NEMOA Speaker: Growth Through Better Margins

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BURLINGTON, VT -- Scott E. Heller used a conversation he once had with his father to illustrate ways that business-to-business direct marketers can increase their business.

"In the early '80s my dad came to me and said, 'Are we going to grow [the company] based upon quality or based upon quantity?'" Heller said. "And we went the quality route, and, rather than go for gargantuan growth at small margins -- in effect, making it up in volume -- we said, 'Let's grow the business based upon growing the margins.'"

Heller, president of National Audio-Visual Supply, a cataloger serving the education, government and industry sectors, spoke at the New England Mail Order Association's Fall 2003 Conference's "Growing and Sustaining a B-to-B Business. Finding Real Life Solutions" session.

His company's focus on growing margins prompted a rise in gross margin by two points per year for about 10 years -- in effect, doubling its gross margin.

"We've built a very ... profitable business where we can actually afford to provide a higher level of service," he said.

Heller contrasted this with the business model in which companies sell on price and, therefore, can't afford to service customers in a satisfactory manner. He described his company as having "discount positioning" back in 1982 when the catalog was black-and-white with spot color. It had 50 pages and circulation of about 100,000.

The 2004 catalog is branded as the "official buying guide."

"Nobody else said that before, so we must be," he said. "That's part of the positioning and part of the perception."

The 254-page color book has a circulation around 800,000.

The explanation for the long-term growth: "We don't sell stuff. We sell service. We sell solutions for customers."

He discussed the importance of effective cross-sell and upsell strategies.

"If someone calls and says, 'I want that projector that's on page 22,' we say, 'Hold on a second. How are you going to use it? Where are you going to use it? What's the room like? Travel?' And that helps us understand what the customer's needs are, find out what their budget is and then we round out the sale," he said.

He added that "we never really" talk about price, and referred to the sign on his door.

"It says, 'Service. Price. Quality. Choose any two,'" he said. "Because we can't afford to do all three and service the pants off the customer. We're not a philanthropic organization. We're a profit-motivated company, and if the customer wants service and price, typically they don't get quality. If they want price and quality, we can't afford to give them service."


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