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CEOCFO Monthly Analyst |
Registering over six-hundred thousand new members per month
Advertising Sector: Services, NASD: CSAV CoolSavings.com, Inc. 360 N. Michigan
Ave. - Suite 1900, Chicago, IL
60601
Mr. Steven M. Golden, Chairman, President and
Chief Executive Officer Interview conducted by: Walter Banks Co-Publisher CEOCFOinterviews.com - December 2000 CEOCFOinterviews - Mr. Golden, can you share some of your career
accomplishments with us? Mr. Golden - “When I graduated from MSU with a B.B.A, I went into
manufacturing. Running an Internet company in certain aspects, is
very similar to managing a manufacturing business, in that you have to establish processes
to get things through a system, taking something form step A to step B. In
the 1980’s, I started a company that provided real estate information through a multi-list service to companies in Michigan. We provided tax roles and property
information. In the 80's computers worked on a prime mainframe system, so while the
computer searched for information we were able to administer advertising. This is where I honed my skills in direct marketing. I also have financial experience from working for Solomon Smith Barney. So, I
bring coolsavings.com
a unique combination of direct marketing, manufacturing and financial experience. Even with a broad background, I recognize
that I still know very little, which is why I've surrounded myself with a
lot of very smart people, giving them the opportunity to shine.” “For anyone who wants to be a CEO of a company, or is a CEO
of a company with one person or thousands of people, the greatest advice I could give them
is to know their own limitations. At CoolSavings it is my job
to watch the bottom line, I am very cost conscious about how we produce things and get
them through the system, but my primary function is as a visionary and problem solver. I
look to see what the system needs and what the public will accept.” CEOCFOinterviews - Please tell us about coolsavings.com. Mr. Golden - “There are two different aspects of CoolSavings
that need to be considered. First, we are an e-marketing company that provides consumers
with coupons or other incentives to purchase our advertisers products or
services. CoolSavings gives the consumer one place to
go before they shop in traditional bricks and
mortar stores, clicks and mortar stores or
through online retailers. It also offers the consumer a variety of value
propositions because consumers are motivated in different ways. Certain people are
motivated by coupons, others like free samples and some like
loyalty points. CoolSavings offers the
consumer the widest gambit of promotional incentives. Other web sites or
competitors in our space offer a niche solution such as just points or just
e-mail. CoolSavings offers the consumer the total savings
infrastructure.” “The second aspect to CoolSavings
that needs to be considered is the advantage to our advertisers. CoolSavings
offers advertisers the ability to work at building a good
relationship with their consumers, taking these consumers form acquisition
to loyalty, and reducing their cost along the way. We have a very sophisticated data
warehouse in which we mine our consumer data. We take every transaction that a
consumer makes on our site, or every offer that they look at,
and save that information in their individual and household profile. The advertiser gets to use not only the
direct demographic data, but also correlation data. Therefore, if someone has children and they
pulled a diaper coupon, from the correlation data, Ford
Motors target this same consumer with a mini van. This presents the advertiser
with a huge advantage in targeting their product to the right consumer at the right
time. We are not only giving the advertiser the correlation data, but we also provide them
with a wide array of incentive solutions to
motivate individual consumers, based on, as I said earlier, the
realization that not everyone is motivated in the same fashion . ” CEOCFOinterviews - Would you please tell us about the
demographics of those who register as members. Mr. Golden - “CoolSavings now has
over eleven and a half million members. We
are currently registering approximately six hundred thousand new members per
month, and sixty percent of the people who register are women in their mid thirties with a
couple of children in the household. They also tend to have a middle income,
generally around fifty five thousand dollars per year. These are the exact consumers
who the advertiser wants to reach. The breakdown of our
members also depends on the products and brands that we are offering. Every
time that we bring on a new advertiser or new product, that will encourage
new members in various demographics. One example is a new product that was announced last quarter with idine.com, a subsidiary of Transmedia Network, called CoolDining,
where consumers can register their credit card on our site and
when they go into a restaurant they can automatically obtain the discount by using their credit card. This is a
paperless coupon solution and I believe it will open our service up to a large
number of new users who aren't typical coupon clippers. So, as we add
products or services to the site, they fit different niches of people that want
to use the site.” CEOCFOinterviews - Can you tell us more about your products and
their agreements? Mr. Golden - “We have a ton of different products
today. In the couponing space, we’ve developed proprietary technology
ourselves. When we talk about the couponing space in general there is not a site out there
that is like CoolSavings, or that has depth of national bricks and
mortar retailers. None of our
competitors are presently driving traffic into the offline stores as we are.
Today we
have Walmart, Sears, JCPenney , Marshalls and
many other leading brick and mortar retailers offering incentives on our
site. We also have over five thousand local merchants posting
offers on our site today. By local I mean, the local pizza parlor or the
local dry cleaners that consumers can view based on their
geodemographics. Currently, we have a partnership arrangement on the local level with a company called
SuperCoups, a division of ADVO. On the national front, we have some
partnerships with companies such as Harte Hanks, a leading direct marketing
company. They are helping to sell the CoolSavings solution to
national retailers. In a different area of our site we have a
partnership with the Parenting Group, a division of Time Warner. With the
Parenting Group, we developed a program called CoolParenting, where the
consumer with children can come to our site, register the ages of their
children and see relevant savings and information pertinent to
their family. In April, we launched our loyalty points solution through a
relationship with Netcentives. Through this program, we're issuing millions
of loyalty points to the consumer.” W e also
have a category
newsletter program in which we send consumers who have opted-in to the
program newsletters that are relevant to specific categories such as entertainment,
health and fitness, and grocery. For this product, we look to certain
companies for content, but the engine and everything else has been built by CoolSavings. Our
rebates and free stuff products are done internally.” CEOCFOinterviews - Which product do you think will be the best
revenue producer of the future? Mr. Golden - “We will continue to produce quite a bit
of revenue through our basic service called Cool Offers. This encompasses our total couponing
effort, which also has our targeted e-mail solution in it. We
see area continuing to be very successful. This service offering is helping
advertisers drive traffic into brick and mortar stores and we see this as
a strong growth area for the company. In 2001, we see the consumer
packaged goods industry growing for us, as they begin to accept the Internet and see CoolSavings
as a viable solution. I should
mention that our lead generation, loyalty points and our category
newsletters are all succeeding quite well and
have all grown to an astronomical level within the past year. In
each of these areas we expect to really increase revenue over the next twelve
months.” CEOCFOinterviews - Can you tell us how your agreement with
Geoworks will benefit CoolSavings? Mr. Golden - “We are very excited about our agreement with Geoworks because this will allow us to enter, what I believe is the the next generation in direct marketng, delivering savings messages through wireless devices. The consumer will be able to come to our site, identify the wireless device that they are using and we will be able to deliver content to their wireless pager or telephone. I think that this is a very exciting growth area for CoolSavings. Geoworks helps us create the infrastructure for this type of solution." CEOCFOinterviews - How do you maintain your a competitive edge? Mr. Golden - “To begin with, CoolSavings
has built a complete infrastructure where we deliver multiple promotional
incentives that are under one umbrella on only one site and under one
established brand. That’s key. To have an established brand
that brings credibility not only to the consumer, but also to the advertiser. In
each one of the product areas I mentioned earlier, we compete head to head with
various competitors. In the coupon space, we compete with several different companies.
Some of them are on line and others are smaller local companies like Val Pak. In the grocery coupons area we compete with
the different supermarkets on line like Value Page. In points, we compete against MyPoints. In lead
generation, we compete against Free Shop. In category newsletters, we compete against
Life Minders. Therefore, we are competing against all of these companies
in particular niche areas. Our big advantage to the
consumer is that, instead of having to go to all of these various companies, they can find
everything they desire under one savings umbrella at CoolSavings.
And for the advertiser, the advantage gets back to the fact that all of
the consumer information is funneling into just one database.” CEOCFOinterviews - What is the basis for a CoolSavings
patent? Mr. Golden - “When we initially developed the site,
we felt that the big advantage the Internet had over other mediums out there would be, the
ability for an advertiser to build a good relationship with the consumer. The only way to
do that would be to get the consumer to identify who they were and what they were
interested in, so a relationship could be built. Going back into 1996 and 1995, we also
saw that privacy would be an issue, so we looked to establish a patent that
would protect the process by which a targeted electronic certificate (or coupon) is
issued based on registration information without the advertiser having access to the
consumer's information. That process is what we have patented and have been able to
control.” “There have been other companies in the coupon and the
certificate area, that initially might not have started out the same way that CoolSavings
did, with obtaining a registration from the consumer. As we have evolved, they looked
at our model and we thought they copied it a little too similarly. Therefore, we decided
to challenge them with our patent. Since we began our litigations several years ago,
we’ve now settled about five of them and several of them have been in seven
figure settlements. This shows the validity of our patent. We encourage other companies to
compete in this space, but if they should elect to utilize our process, then we believe
that as a company we are entitled to some royalties. Thus far we have been successful in
protecting our patent and if you look at process patents on the Internet, I think
that’s a story unto itself.” CEOCFOinterviews - What is the marketing strategy you use to let
the consumer know that you exist? Mr. Golden - “We have been very successful in
establishing a brand, and we’ve done so not only through the Internet, but we’ve
done it utilizing offline media such as television, cable and radio. The key
factor that the public in general should be aware of is that CoolSavings
has always been concerned about cost and one of the greatest costs any company can incur
is in developing their member base. Since we started this
business, we have always looked at our cost to register a member. When we look
at our online registration costs - the way we sign up
new people from the Internet - you’re talking
about millions of new registered members today. We register a new member
online for less than two dollars and fifty cents - this is extremely
effective. At the same time, when we look at cable, television and other offline
media, our blended acquisition cost, including offline and
online media, from the last quarter, was three dollars and
seventy-seven cents. We had an implied payback of less than eight months on a consumer,
which is virtually unheard of. We are continuing to improve on
this as we go forward this year. Not only have we been very effective at establishing
our logo, the piggy bank with sun- glasses, as a brand where people will recognize it and
identify with it, but we’ve done it cost effectively which is very
important.” CEOCFOinterviews - Will you have any future changes in your
marketing strategy? Mr. Golden - “We are certainly not looking to
increase cost, but trying to continually reduce the cost of our marketing and at the same
time increase the pay back. We have been very effective at this and will maintain
that going forward.” CEOCFOinterviews - What is your internal growth strategy? Mr. Golden - “We have an internal growth strategy where we consider each one of our promotional incentives as a vertical business line. According to NPD Online, we control fifty one percent of the couponing market that’s done on the Internet. The model that we've established is a horizontal infrastructure, with a number of vertical products such as points, coupons, loyalty points, etc. We have product managers and technical development teams on each vertical product. All of these products are vertical markets where we have the opportunity to dominate as we do today in coupons. And, we feel we can and we will. We also feel that we have a solution that we can private labeling going forward next year. We have built an infrastructure that other companies might choose to utilize, and we can power their own incentive solution to allow them to build a relationship with the consumer.”
CEOCFOinterviews - What is your external growth strategy? Mr. Golden - “When we look at an external growth
strategy, we are looking at not just the mergers, acquisitions or partnerships, but at the
whole gambit. When we look to add a new product or even just to strengthen a product, we
are weighing in today, with build versus buy, versus partnering, and as to what is the
most cost effective means for us to increase our market share. Cost is a major
issue.” CEOCFOinterviews - Do you have the case and/or credit for your
plans? Mr. Golden - “Today as a public company you have
currency in stock and even though our stock is what I consider to be depressed right now
and one of the best values out there, a good portion of the Internet industry is in the
same boat. We are all in a depressed area. We have an advantage over companies that are
not public today because of the fact that they might have difficulty
getting financing, where they have to show a path to profitability. So to some degree this
gives us leverage to look at various deals and to make those deals a reality. I think when
looking at deals today, people in senior management have to check their egos at
the door.” CEOCFOinterviews - Are you able to maintain your current revenue
growth, and how big is the market that would allow you to do that? Mr. Golden - “The market in general is billions and
billions of dollars. Therefore, we feel that we will maintain our growth,
and our numbers, which just keep increasing reflect that. Part of the reason why we
feel this way, is because CoolSavings has a model that is working. Our
model is delivering traffic and results. There is not another site out there that can say
they have the leading bricks and mortar players that CoolSavings does today, and that
is because we are driving traffic into the stores. We have a model that is working on an
eighty percent plus gross margin. These are key factors.” CEOCFOinterviews - Will your future growth translate into
improving margins? Mr. Golden - “When you’re working on eighty
percent margin, that’s hefty to begin with, but we’re always looking at ways to
reduce cost and of course increase efficiency so that we can increase our margin.” CEOCFOinterviews - Are there any plans for internal
restructuring? Mr. Golden - “Right now we have a great executive
management team. I think it shows a lot of
strength and commitment to our model and you can see the results thus
far - we are delivering against our model. So I
believe that the key part of our team is in place. We are always
looking for additional talent within the company to strengthen all areas, because that is
how a company grows. If I’m doing my job, my desk is the cleanest.” CEOCFOinterviews - What do you do to assist an employee with
growth within the company? Mr. Golden - “CoolSavings today has
over three hundred employees. What we believe is that an employee should be able to grow
within the company. So as opportunities arise, we would like to if at all
possible, to promote from within. We also encourage people to voice their
ideas, and as long as they can justify their thinking, not to worry if they make a
mistake, because that shows that you’re trying to take something to the next level.
We want them to show us the process and how they evolved at a decision. We are also
constantly offering various training programs, and I feel that we have a fantastic work
environment which encourages our associates to enjoy coming to work every
day.” CEOCFOinterviews - Is there a key thought that you convey to your
staff? Mr. Golden - “The Internet moves extremely quickly
and you have to encourage people to provide new ideas to stay a step ahead.” CEOCFOinterviews - What is the key thought about your CoolSavings
that should draw investors to it and maintain the confidence of your current shareholders? Mr. Golden - “Investors should want to take a look at us because our model is working. CoolSavings has built a company slowly and deliberately. It’s like the tortoise and the hare, we weren’t the first to get out to the market, and we aren’t necessarily the one with the largest registration base. If you take time to compare our registration base to others in our area, and look at the activity, the payback, and the cost for us to acquire it, there is no comparison. If you look at what model is working, where the national bricks and mortar retailers are gravitating to, and where the clicks and mortar retailers are gravitating to, and the major dot-coms, and again you’ll see it's CoolSavings. So, if you’re looking at our advertising space, just ask yourself which company has been the most successful in establishing a brand, and once again, you’ll see that it is CoolSavings. We are executing our model over a hundred and ten percent and I feel that we will receive the respect of the market and investors will wake up." CEOCFOinterviews - In closing could you tell us about the success
of your logo? Mr. Golden - "People have really
taken to the piggy-bank with sun-glasses. It
makes people smile, it makes them comfortable and most importantly it makes people
associate savings with our site. There
isn't another company in our space with such a recognizable brand identity like ours. People see the piggy-bank and they think
it’s cute, but it represents the message we want them to think about, that is saving
money, and everybody likes to save.” |
