Lead Confidential

Ask just about anyone in the online customer acquisition space to define an “upsell,” and instead of blank looks, out 10 people you survey, you’ll get roughly 10 similar answers. It’s business practice as old as just about business itself and a crucial way for many businesses to make additional revenue. Extra value meals? An upsell. Care to start with an appetizer folks? Upsell. Look around they are everywhere offline and not surprisingly, online too. The market is sufficiently large that multi-hundred million dollar per year companies exist specializing in helping a wide variety of sites, from lead gen sites to branded commerce sites make more. The lower the margin business you run, the more you rely on upsells. A classic example comes from the online lead generation world. When email was a more viable option for generating additional revenues, many companies would run their ads at almost break-even to a loss, just so they could get address and mailing revenue.

What’s another business known to run at extremely low margins? The travel industry, especially those offering airline tickets. Now, with most online travel agencies (Orbitz, Expedia, etc.) waiving fees on purchases, they make next to nothing. It’s why their affiliate programs pay out something like 4% of revenue on good day. The airlines themselves, aren’t exactly doing wonderfully themselves. So, it’s no wonder each has various ways of upselling users who convert. If you’ve booked on Expedia, in addition to being asked if you need a hotel or car, you will find yourself scrolling through countless activities available in your destination city. I can’t blame them. Those actually make them money unlike that flight you just bought. Frequent purchasers of tickets and ad junkies, will recall another upsell as well.

Here is the image of my recent booking for LeadsCon Las Vegas being held Tuesday, February 23 and Wednesday, February 24.

Notice something on the far right hand side? It’s a $50 cash back incentive.

For years, I can remember seeing a button like this one after I make a purchase on a variety of sites, especially airline sites. And, it’s this button that has come under fire, with a press release being issued by the U.S. Senate Committee on Commerce, Science, and Transportation. The release is below, but title tells enough, “Chairman Rockefeller Requests Information from Web Retailers in ‘Mystery Charges’ Investigation.” Read the list of companies who received a request for information, and those in our space will quickly connect the dots, or in this case,the button. The list reads like a who’s who of Adaptive Marketing and Webloyalty’s biggest customers. The key to their success and the publishers is something that the direct marketing industry refers to as Card on File. You’ve just made a purchase. They now have your credit card details. That makes an upsell easier and more rewarding because a purchase related upsell, generally a subscription service, is more lucrative than a data/form based one.

Here’s how it looks today. Click on the button, which has disclaimer language underneath, and you go here, to Reservation-Rewards. This site is not run by the airline/online travel agent. It is run by Webloyalty, a company that specializes in running subscription services, with their largest acquisition channel being online upsells. This is the same company and type that you would have seen offering these same subscription programs as an insert into your credit card bill. Sending an email telling someone to get $50 their next purchase and hoping they convert doesn’t work nearly as well as someone who just purchased.

Scroll to the bottom of the page, and here is what the conversion process looks like.

Mystery charges? In this exact case it’s no mystery, but I can remember not too long ago where the distinction between offer and signup didn’t have this level of differentiation. The button didn’t have the full disclaimer and the sign-up process for the consumer didn’t require additional opting-in. Webloyalty and Adaptive Marketing have faced these issues before, especially related to their telemarketing practices when calling on behalf of credit cards and others with card on file. They’ve weathered the storm, but the results of this investigation could impact the online lead generation space as well. Given how little the broader world understands this type of upselling, it’s not hard to imagine them generalizing.

Regardless of the outcome, it’s a gray area. The companies doing card on file upsells in the past haven’t been angles. Since then, though, their practices are effective, but they haven’t been scandalous. The unfortunate truth is that I’m sure they do receive a higher than desired (by an outside governing body’s point of view) rate of people signing up who later didn’t recall doing so. Why would they? It’s an impulse purchase from a generic name. That’s the nature of the beast. That’s human nature, and there comes a point where you can only ask the companies to do so much and need to start demanding that the consumers take more responsibility. I’m sure I’d feel differently if the situation were reversed and I was paying $49.99/month+ and having difficulty canceling.

Copy of the release:

Chairman Rockefeller Requests Information from Web Retailers in “Mystery Charges” Investigation

WASHINGTON, D.C.—John D. (Jay) Rockefeller IV, Chairman of the U.S. Senate Committee on Commerce, Science, and Transportation, continued the Committee’s investigation into controversial “post-transaction” online business practices by sending letters yesterday to 16 e-retailers that appear to be involved in these practices.

Since May 2009, the Committee has been investigating three e-commerce companies—Affinion, Vertrue, and Webloyalty—to better understand their business practices on the Internet, which have been the focus of criticism by consumer advocates and have generated thousands of complaints by individual consumers. Chairman Rockefeller continued this investigation yesterday by sending information request letters to sixteen companies that have apparently allowed Affinion, Vertrue, and Webloyalty to present membership club enrollment offers to their online customers and have agreed to pass their customers’ credit card or debit card numbers to Affinion, Vertrue, and Webloyalty.

A list of the companies that received a request for information is included below:

1-800-FLOWERS.com, Inc.

AirTran Holdings, Inc.

Classmates.com, Inc.

Continental Airlines, Inc.

FTD, Inc.

Fandango, Inc.

Hotwire, Inc.

Intelius, Inc.

Movietickets.com, Inc.

Orbitz Worldwide, Inc.

Pizza Hut, Inc.

Priceline.com, Inc.

Redcats USA, Inc.

Shutterfly, Inc.

US Airways Group, Inc.

Vistaprint USA, Inc.

Yesterday, a release went out titled, “EducationDynamics and Aslanian Group Merge to Create Higher Education’s Most Comprehensive Marketing Company,” saying “Strategic Partnership Enables EducationDynamics to Expand In-Depth Market Analysis, Filling a Critical Intelligence Gap That Exists in Higher Education Marketing.”

While the release reads as a merger, I can only presume it more of an acquisition, couched in merger terms for the non-lead generation community as the Aslanian brand carries weight there. The release reads:

HOBOKEN, NJ–(Marketwire – July 20, 2009) – EducationDynamics (http://www.educationdynamics.com), higher education’s leading marketing company, today announced a merger with Aslanian Group, an industry mainstay specializing in adult student market analysis. The merger of the two entities will result in the creation of a Market Research and Analysis Division, imposing a formal infrastructure to EducationDynamics’ continuing passion for gleaning leading-edge market analysis that ultimately helps institutions find, enroll and retain students.

“This merger is a logical step that creates substantial value for client partners and stakeholders of both EducationDynamics and Aslanian Group,” explains Steve Isaac, CEO of EducationDynamics. “The newly-formed Market Research and Analysis Division will enable us to provide our client partners with a deeper range of market analysis essential to making highly informed decisions, filling a critical gap that exists in higher education marketing today.”

EducationDynamics is now uniquely positioned to provide institutions with the most comprehensive suite of technology solutions and research associated with student prospecting, enrollment and retention efforts. Client partners will benefit from the following:

– A broader and deeper range of market analysis to help institutions make strategic decisions;
– An extensive compilation of proprietary data regarding specific markets and student categories; and
– Expanded custom market research resources.

Aslanian Group was founded by veteran higher education expert Carol Aslanian, who possesses nearly 30 years of experience in the field and has helped advance the enrollment goals of more than 300 colleges and universities during that time. Under the EducationDynamics corporate umbrella, Aslanian will provide market analysis, consulting and professional development services to help institutions increase their market share of students despite an increasingly competitive landscape.

“While historically Aslanian Group has focused on assisting higher education institutions analyze regional supply and demand among adult learners, joining forces with EducationDynamics will strengthen our ability to address the ever-expanding online learning market, as well as traditional-aged markets that increasingly seek the efficiencies and convenience of instructional settings adults have always sought,” says Aslanian.

Additionally, EducationDynamics will maintain and expand the professional conferences and events currently offered by Aslanian Group, many of which have been hailed as the definitive professional development seminars for individuals involved in higher education marketing.

By most conservative estimates, generating leads for online education encompasses at least a billion dollars per year, not a tiny business, of which Education Dynamics owns a sizable piece. EducationDynamics might make the bulk of their revenues through the selling of leads to schools, but unlike others who have a business focus in online lead generation, they have always focused on building a company focused on something greater. The structure of their company shows that. They have Enrollment Services (where lead gen sits), Retention Services, and now Market Research and Analytics, all combining to create an education focused company as opposed to an online lead generation company that happens to service the education space. It’s a minor distinction in language but a large differentiator in a field where to date no leader has existed.

I have to give the folks at Education Dynamics credit. When I first heard about them trying to become an education company (and thought leader at that), all I could see were the dollars being driven through lead generation. But, they have continued to execute against their vision of being “Higher Education’s Most Comprehensive Marketing Company,” while not making the easy mistake of ignoring their profit centers or sidetracking those already in the business.