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Jerry McLaughlin is President and Chief Executive Officer of Branders.com, the largest and lowest-priced online promotional products source in the world. Before co-founding Branders.com in 1999, Mr. McLaughlin was with Altos Ventures, a venture capital firm focused on early stage investments in companies and entrepreneurs. Previously, Mr. McLaughlin was CEO of Enwisen, the first Internet-based clearinghouse of employee benefit information between insurers and large employers; and, before that, practiced business law with Cooley Godward of Palo Alto, California, where he worked with emerging growth companies, venture capitalists, and investment bankers in Silicon Valley.
Branders.com has the largest selection of instantly customizable promotional items for the marketing, sales, and event-planning professional. All products are backed by a 100% satisfaction guarantee, as well as a lowest cost guarantee. Branders.com offers merchandise from 80 of the leading promotional products suppliers, including Champion, Hanes, Swiss Army, and Waterman, and serves more than 100,000 customers.
Branders.com is known as the “See Before You Buy” company due to the ability to actually see an image of the product with any uploaded logo embedded on it. What has this done for the company’s sales and customer satisfaction?
This feature was integral to our decision to start the company at all. Traditionally, the promotional products industry has relied on sales people visiting potential customers in their offices. As an online company, we couldn’t do that, so we wanted to do something our competitors couldn’t do. We thought allowing our customers to upload their logo and actually see it on any of thousands of items before committing to a purchase would be a qualitatively different shopping experience, and one we hoped that customers would really like. We developed and protected that technology with 7 U.S. patents and additional patents in China and across Europe. In surveys today, 88% of customers say that our See Before You Buy design studio is our website’s coolest feature. And we are the largest online promotional items company in the world – by a large margin. So we got that one right.
The company offers both a satisfaction guarantee and a lowest price guarantee. With the market as competitive as it is, how are you able to make guarantees like this? Does this have anything to do with your specific business model?
You’ve got it right: At Branders, our market position is to do two things really well—bring people excellent service and the lowest price available. And the fact that we make money while doing it has everything to do with our business model. It’s only possible because we have eliminated every middleman between the customer and her logo’d product. Our online platform removes the need for expensive, commissioned sales reps. We source and decorate our products ourselves through our operations in Mexico, the Philippines, and China. To make all that happen, I moved my family to Asia for four years. Today, my three kids can read, write, and speak Chinese with near-fluency. Direct sourcing is a simple concept, but implementing it successfully at a large scale took a sustained commitment to building those relationships in person, on the ground.
Regarding the 100% satisfaction guarantee, it’s really very simple. First, if you really do for your customers everything you say you will, 99 times out of 100 they’ll be 100% satisfied. Second, who the hell would want to work in a company that didn’t guarantee 100% satisfaction with the product or service? Life is short; in my view, we should choose to do work we can be proud of. That’s why Branders puts such a premium on delivering great customer service. We don’t offer our employees commissions for new business; what we reward is cultivation of repeat customers. The system may seem unorthodox, but to us, it makes perfect sense. Our people are motivated to take care of our customers. We think that’s a win-win.
I understand there was a rough period where the company was growing, but losing money. As co-founder of Branders.com, tell me about the steps you took to turn that around and position the company as an industry leader.
To achieve success, you have to deserve success. By 2007, we decided that our overall offering wasn’t great enough for our customers to reward us with the large-scale success we craved. So we stepped back and asked ourselves what we alone could do for customers that no one else could do. We realized that our business model had a natural cost advantage and that we could translate that cost advantage into the lowest prices in the United States. We got so good at this that we now have competitors that buy from us, mark up the product, and sell it to their own customers.
There were a lot of steps in making this a reality, but they began with a simple question: “What would we do if we really, really wanted to be able to put a quality logoed product into the hands of our customer anywhere in the United States for at least 30% less than our most efficient competitor?” Once we had asked the right question, it wasn’t too difficult to see the right answer.
Then, we committed to the truly hard work of reorganizing our staff, operations, work flows, marketing – everything – toward eliminating expense wherever we could. We did the big stuff, like deciding to buy our products directly from China. We did the small stuff, like printing on both sides of every piece of paper. (Though I’ll admit, we drew the line when one of our facilities managers wanted to ration toilet paper.) Cost savings became and remains a core operating imperative for us. Why? Because we pass those savings to our customers, ensuring they get the very best price. We guarantee it. It’s a point of honor for our team. It’s what being a Brander means.
How can business owners best utilize promotional items? What advice do you have on how to use these products to best position a company for repeat business by customers?
Every November you’ll see signs on some neighbors’ lawns promoting a candidate for office. As you may already suspect, studies show that the effect of those signs on passers-by is questionable. But here’s something you may not know: Studies also show that once a homeowner puts a candidate’s sign on her lawn, she becomes more deeply committed to that candidate. That sign outside works most strongly on the mind of the person inside the house. The act of taking a public stand for a candidate makes that person more dedicated to the candidate. And so it is with promotional items.
Once someone starts wearing your logo to work, or to the mall, or onto the field, his public display of support for your brand makes a powerful impression on his own mind. If you want to use promotional items to build your repeat business, give your customer a promotional item that he or she will use in group or public settings and you’ll be on your way to having made a great investment.
Of course, all of this works best if you work to be sure you really deserve your customers’ repeat business in the first place.
The leading industry magazine, Counselor, named you Entrepreneur of the Year this year. What is it that differentiates a successful entrepreneur from a struggling entrepreneur?
Having spent nearly two decades in Silicon Valley as a lawyer, investor, and start-up founder, I have seen dozens of entrepreneurs caught and struggling in market currents, and a much smaller number swimming easily. For entrepreneurs, the difference between fighting and riding the currents is the difference between exhaustion and exhilaration.
In my view, the greatest influence entrepreneurs have over their own long-term success is deciding which markets to enter, how to enter those markets, and when to exit. Ultimately, the two factors that matter most are demand and competition. The best entrepreneurs are passionately committed to their idea, product, or service—but, at the same time, they evaluate and re-evaluate every day whether sufficient demand exists for what they’re trying to sell, and whether effective competition is or will soon erode the effectiveness of their marketing and/or the profitability of their business.
The good news here is that both demand and competitor responses are largely discoverable or predictable. An entrepreneur can evaluate numerous ideas cheaply and pursue only the very best. But if she realizes she has made a mistake or that circumstances have changed, she should begin withdrawing her energies and resources from the less attractive situation, while seeking a more promising opportunity. Like the saying goes, if you want to win every battle, then only enter battles you can win. That’s how an entrepreneur can continually maximize her chances for success.
In your experience at Altos Ventures as well as Branders.com, what are some of the keys involved in raising capital for any entrepreneur?
If you need outside funding for your business, be prepared to put your proverbial shoulder to the wheel. One option is to work your tail off trying to convince a lot of skeptical strangers that your mediocre business will really blossom once you fertilize it with their money. A better approach is to demonstrate the viability of a high potential business before you start fundraising.
Find a business that has great growth prospects and is (or will become) naturally insulated from effective competition. Start that business on the proverbial shoestring and make it produce a profit quickly. Entice in a team of dedicated, competent specialists to help you grow it. Show convincingly that it can become very big. That’s a proven formula for raising cash and building terrific businesses.
By the way, when it comes to evaluating a business opportunity, an entrepreneur should always be more hard-nosed than any potential investor. The investor spreads risk across a portfolio of companies but the entrepreneur almost always has his or her eggs in one basket. So be very, very picky about that basket.