I submit a different way to think about wire service fees: Marketing Cost

[duanermb]

In the weird and wonderful world of wire services, I have come to many conclusions over time, and have gone somewhat back and forth on the issue.

In my mind, the debate seems to spin out of control a lot of the time. I have done as much research as I can do to define what a wire service can do for Dragonfly and what I believe it is doing to the industry as a whole.

Let's focus on only the first topic in this thread, because they are truly completely different issues. Let's look at it from a completely greedy business point of view and what I believe it can do for Dragonfly Flowers. The moralities and ethics doesn't come into this thread! PLEASE! Focus for a minute.

I also need to look at this from my perspective only. That is, we have never had a Big 3 wire service to this point. We are a new and growing business. We have dozens of ways to spend money to get orders that we have yet to try.

(This point of view may not work for more established businesses)

Why do the wire services exist?

- To create a way for florists to send orders to each other
- To be a brand that consumers can identify with
- To put a face to the unknown independent florist
- To provide training and other services to independent florists
- To gather orders for the network

Why do we become a WS florist?

- To send orders to other florists
- To get orders from other florists
- To get orders from the affiliate and .com networks
(Secondary reasons)
- To get a POS system
- To get design and other training etc.
- Marketing aids

Now, that being said and focusing on the primary reasons that we join the wire services in bold.

Why are we in business locally?

- To get orders from local customers.
- To get orders from our online presence.
- To get call ins from our networks of florist friends.

The basic gist of this, is that we want to get orders.

We can sum this up with one word, what we do to get orders from local customers? Although it takes many shapes and forms, it includes the Four P's.

Product, Pricing, Placement and Promotion.

The word is Marketing.

Marketing is an integrated communications-based process through which individuals and communities are informed or persuaded that existing and newly-identified needs and wants may be satisfied by the products and services of others.
Marketing is used to create the customer, to keep the customer and to satisfy the customer. With the customer as the focus of its activities, it can be concluded that Marketing is one of the premier components of Business Management - the other being Operations(or Production). Other services and management activities such as Human Resources, Accounting, Law and Legal aspects can be "bought in" or "contracted out".

Now that we have defined what we want from a wire service, and what Marketing is, do we see the parallels?

What does a wire service do for us?

Product: Image databases, generic, seasonal etc.
Pricing: (Well, it has to come from somewhere)
Placement: Online retailing.
Promotion: They have brands that people recognize and a huge promotion budget. (compared to us)

To some extent, and as defined by what we are seeking on a local and non-local level, and by the definition of marketing, and not by what the end result actually is, the wire services can then be further defined as a "marketing expense". (For taking our business to a different audience of consumers <-- parallel)

I came to this conclusion for some VERY important reasons. I had to think about it this way. Because, (after eliminating ethics and morality) I still don't see a clear winner in the debate about whether or not you can be profitable using a wire service. There are a hundred very successful florists who I have talked to that swear by them, and a hundred very successful florists whom I have talked to that loathe them.

Here lies the conundrum.

This conundrum also parallels marketing. Why? Because the debate is also still out on every advertising outlet we have as florists as well! Some do well with radio, some do well with recipient advertising, some do well with email blasts... The list goes on. I have to make a decision on which one I believe will net the biggest return in incoming orders. (Another parallel)

Now that I have come to the conclusion that the only way I am ever going to figure what works on the corner of Leila and McPhillips Street, in Winnipeg, Manitoba, Canada is to start trying them out myself, I can make the same assumption about the wire services.

Subsequently, after grouping the wire services in with the other potential marketing schemes that are available to us, we then need to choose between them, like any other marketing decision.

Some will succeed, some will fail. (Another parallel)

For now, the way our store is run, it will be more profitable for us to maintain our Big 3 free mentality, and put that money towards some different marketing efforts. In the future, if I see things change in the favor of the Big 3 we will allot a certain amount of our marketing budget to it, and give it a go!

(By allotting a certain amount to marketing when the decision is made, we will have no fear, and no regrets. If we then chose to cancel at a later date, that money will go back to the marketing pool, and we will try something else)

This thinking eliminates the fees from the wire service debate to some extent, which I think may be a good idea for some, others not.

The reason I throw this point of view out there is due to the last parallel.

The last parallel is that a GREAT MANY of the things we do in marketing don't have tangible up front results, but may have residual results that we can't quantify. (Like awareness marketing -$500 a month for a bus ad etc)

 

[goldfish]

Duane, I think yours is an interesting concept.

Most florists, myself included, consider the WS fees to be the cost of selling, as opposed to that of marketing.

In a nutshell, we pay a fee to a WS company to "purchase" discount orders. We also pay a fee to "purchase" a means to send out-of-state orders. That's how we subconsciously look at WS fees.

In this traditional thinking, profitability of WS operation is simply the difference between WS fees and the sum of gross margin from wire-ins + wire-outs. You use whatever calculator to add them up; if the total exceeds WS fees, you say it's profitable. If not, you point fingers at WS and scream.

That's the way it has been debated.

But if the WS fees are part of marketing expense, its value should not be judged by simply calculating the sum of profits. Rather we should be measuring its effect on growth.

I need to think about it more carefully, but thanks for presenting a new way of looking at the WS fees. You might be on something there.

 

[marie g bushnell]

How greatly said! Yes it is marketing, and where you want to spend that marketing money is trial and error, especially in the early years of business.
Trying to monitor every piece of marketing is a major job in itself.
I do believe, though, if you do a "volume" business through a wire service (s) you can make it profitable. Just follow their recipe, no extra flowers, and you can profit.

 

[Palms]

Through relay though (wire), are you not just marketing to other florists?

If you have an independent website, it should be collecting the online orders, then surely it is only the other florists that are seeing you to send you discounted orders.

Now, i do not crunch numbers like either of you two but I would prefer to direct my marketing at a more profitable market segment, i.e. weddings, funerals, 100% order value from national and local customers.

So, if it did come down to the marketing budget would you really put all that money that you pay in fees into marketing a discounted product?

I am not a wire basher by the way, never have been, never will be. But i do like marketing ideas.

I may be missing something here, it has been known on several occasions so i am not saying i am right, just throwing another idea in the pot!

 

[minotts]

Duane,
Well put.
Matt

 

[BOSS]

But if the WS fees are part of marketing expense, its value should not be judged by simply calculating the sum of profits. Rather we should be measuring its effect on growth.

But they are marketing themselves and not me and you, so while it could be considered a "marketing expense" you are still technically buying services, orders and products.

I need to think about it more carefully, but thanks for presenting a new way of looking at the WS fees.

Me too...... glad I have 3 hours drive time today...

 

[duanermb]

Through relay though (wire), are you not just marketing to other florists?

If you have an independent website, it should be collecting the online orders, then surely it is only the other florists that are seeing you to send you discounted orders.

Now, i do not crunch numbers like either of you two but I would prefer to direct my marketing at a more profitable market segment, i.e. weddings, funerals, 100% order value from national and local customers.

So, if it did come down to the marketing budget would you really put all that money that you pay in fees into marketing a discounted product?

I am not a wire basher by the way, never have been, never will be. But i do like marketing ideas.

I may be missing something here, it has been known on several occasions so i am not saying i am right, just throwing another idea in the pot!

Yes, this all may be true, but these are parts of the decision making process on your marketing decision, not necessarily part of the question that I pose.

But they are marketing themselves and not me and you, so while it could be considered a "marketing expense" you are still technically buying services, orders and products.

Technically. But it also includes a listing in directories etc. So yes, we market to other florists through it. Most florists are not even aware of Dragonfly because we are not in the system.

Also, contrary to some beliefs, the Golden Boy is still a nice marketing tool for many florists, so buying the right to use it, is a marketing expense.

 

[Palms]

I understand what you are saying but is this just academic, you are either making money or not. If yes, great. If not, not so great.

I think that playing with figures and putting them in a different column can just make something that is not lucrative look lucrative. I like simple, simple is good for me.

This is what the british government do with employment figures.:ukflag:

No offence, I so dont want to get into a wire bashing session. Maybe i am understanding it wrong

 

[BOSS]

Most florists are not even aware of Dragonfly because we are not in the system.

Is that a bad thing?

Duane, your profitable with your current M-O so maybe you'd be a good candidate to fudge your numbers, by adding in 10%-20%-30%-40% more discounted business and it's associated expenses, COGS/delivery/labor etc and determine a break even/loss point...

Remember all business generated from a wire service is discounted, but florist direct business may not be.

 

[duanermb]

Is that a bad thing?

Duane, your profitable with your current M-O so maybe you'd be a good candidate to fudge your numbers, by adding in 10%-20%-30%-40% more discounted business and it's associated expenses, COGS/delivery/labor etc and determine a break even/loss point...

Remember all business generated from a wire service is discounted, but florist direct business may not be.

I am only saying that other florists don't know who we are because we haven't opted in for National Marketing through the wires.

Again, not going to go there in this thread Mark. Just offering a different perspective on how to think about things.

Although my post may look like a "help the wire calculations look better" post, it really isn't when you think about it.

It is really about thinking more clearly about marketing dollar spending and defining what is best for our businesses, which may or likely doesn't include that business.

 

[Dorothy]

It is really about thinking more clearly about marketing dollar spending and defining what is best for our businesses, which may or likely doesn't include that business.

I hear that, loud and clear.

 

[goldfish]

I understand what you are saying but is this just academic, you are either making money or not. If yes, great. If not, not so great.

I think that playing with figures and putting them in a different column can just make something that is not lucrative look lucrative. I like simple, simple is good for me.

I think he is trying to present a somewhat abstract notion that nonetheless has a specific effect on business decisions, namely whether you should be a member of WS or not.

For example, above, you say 'you are either making money or not.' That's just one way of looking at the worthiness of WS membership. Let's call it 'profitability' thinking.

Another way is to look at 'opportunity cost'. The $300 a month you are spending on WS membership can in theory be used in some other opportunities that might have given you a better return.

"Opportunity cost" = value of the alternative opportunities that are lost because of your decision (WS membership).

For example, we are a member of FTD. I'm not going to disclose how much we are making from FTD, but let's say we make $500 a month after the membership fee.

What about if I quit and decided to spent $300 FTD membership fee on something else, like a standing order of stupid balloons. If our balloon markup is 5 x and we can sell them all ($1500), we will make $1200 a month.

This $1200 is the opportunity cost. Because it's greater than the $500 I'm making now, I am actually "losing" money, $700 each month, because of my decision of staying with WS and not buying balloons. It's like investing on a bad stock.

Historically, WS debates have revolved around two issues. One is pofitability - whether you are making money or not from WS. The other issue has not been named clearly, so it's a little difficult to define. But it revolves around the concept of opportunity cost. It's like investing. Duane's idea is analogous to it.

If you look at WS membership as one of the opportunities to spend $3-400 a month, you need to think about not just whether you are getting a positive return or not, but also whether this is the best opportunity or not. Like picking the best stock. Right?

 

[Greg J]

First off, let me state that I have not been a member of any wire service for more than ten years, so I have no axe to grind. But before I decided to pull the plug, I went through much the same thought process. But it boiled down to this for me:

The money I paid to the wire services served to build their brand, not mine.

Once I wrapped my head around that, I never looked back. That money is now spent on more frequent marketing to my existing customers, which has paid far bigger dividends for me over the last ten years.

 

[BOSS]

BOSS's Quote of the day!

But it boiled down to this for me:

The money I paid to the wire services served to build their brand, not mine.

Once I wrapped my head around that, I never looked back.

Wise words....

 

[Pam]

I used DragonFly in Winnipeg in September (I was the customer). I used them for 2 reasons:

1. I met them at the Flowers Canada Convention and wanted to support them.

2. I checked around and found out they did beautiful work.

I called the order in and used a credit card. I heard back from the recipient and they were extrememly pleased.

Our business is supported by local orders. Whether the customer is across the street or across the country, when they phone me direct they are a local order. We build our business on reputation. We rely on our own marketing, by various means, and certainly do not think that we are getting business because of the WS. We are doing them a favour by filling their orders. Each year the percentage of WS orders dwindles ... we are about 5% devoted to WS sales. The rest of our business is through the CC. My first advice to someone just opening a shop is don't go with a WS. Build your local business first. If that doesn't pay enough to keep the shop open then waiting for WS orders certainly won't do it.

 

[duanermb]

I used DragonFly in Winnipeg in September (I was the customer). I used them for 2 reasons:

1. I met them at the Flowers Canada Convention and wanted to support them.

2. I checked around and found out they did beautiful work.

I called the order in and used a credit card. I heard back from the recipient and they were extrememly pleased.

Our business is supported by local orders. Whether the customer is across the street or across the country, when they phone me direct they are a local order. We build our business on reputation. We rely on our own marketing, by various means, and certainly do not think that we are getting business because of the WS. We are doing them a favour by filling their orders. Each year the percentage of WS orders dwindles ... we are about 5% devoted to WS sales. The rest of our business is through the CC. My first advice to someone just opening a shop is don't go with a WS. Build your local business first. If that doesn't pay enough to keep the shop open then waiting for WS orders certainly won't do it.

I saw this when I didn't have a chance to write a post, and I just wanted to say thank-you very much for your kind words!

Also, thank-you for closing out this thread with some very WISE words!

 

[pattyp574]

Need some advice on Wire Services

Hi Everyone-

I am new to FlowerChat...I am the owner of a small retail flower shop in North Fort Myers FL. I am totally on the fence with the whole wire service issue. I do agree that it can be a marketing expense. There is just SOOO much overhead, labor, Cogs, and delivery involved and to only get 73 percent and then pay fees on top of it...I just don't know how I am going to make it...I only have 800 flowers right now in my shop. I am also scared to stop the service becuase it has been profitable (have received payment in my accounts every month). But the Margin is just sooo low..any advice for me??? Has anyone recently went Wire Service FREE??? If so, how did it affect your margin and your profit???

Thanks for the advice-
Patty