Cover Story: Finding the Perfect Balance

This year's economic retreat actually stands to help Gaiam, a product and information services company with a heavy emphasis on sustainability, position itself for greater growth in the near future.

Gaiam sells a wide variety of products — yoga and other fitness tools and instructional DVDs, apparel and linens made from organic fabrics, and assorted personal care products. Having decided a few months ago to reduce catalog circulation by 2.5 million, from the 16 million it mailed last year, the company is more heavily focused on integrating its Web-based prospecting efforts to gain comparable response, greater flexibility and far lower costs. This year it's focusing most heavily on organic and paid search, as well as its highly successful affiliate marketing program.

Although Gaiam's B-to-B unit distributes products through major retailers such as Target, Wal-Mart, Dick's Sporting Goods and Whole Foods — more than 73,000 stores total — the company has never entertained the idea of opening its own store chain. It also operates a solar division that sells renewable energy and solar energy systems direct to businesses.

None of these online programs are new to the Louisville, Colo.-based company. Born a traditional print cataloger in 1988, Gaiam's conversion to Web-based efforts has been going on for some time. But whereas some marketers continue to approach the online front with a bigger-is-better, Wild West approach, Gaiam's more interested in online profitability than runaway growth — at this point.

"We've focused our pay-per-click efforts more on efficiency, rather than simply driving high traffic and revenue," says Jason Marshall, vice president of consumer direct for Gaiam. "We've reset our contribution expectations and have been willing to sacrifice a little bit of revenue to get higher conversion rates on lower-cost terms. That's been really successful for us so far."

Efficient Keywords
Whereas Gaiam previously focused on more competitive and expensive search terms that weren't getting high conversion rates, it's narrowed its terms this year, substituting, for example, "organic clothing" or "yoga clothing," or even "Gaiam brand clothing," for simply "clothing."

Moves like this are consistent with Gaiam's intent to improve its cash position this year rather than focus too heavily on sales. "If most people out there were doing search focused on actual bottom-line contribution rather than top-line sales," Marshall points out, "they'd find that a lot of the terms they're bidding on, they're actually losing money on. That was the case with us: Some keywords weren't converting, or they were getting the sale but we were paying too much to get them."

Although it has, essentially, given up some sales by going after less popular, more profitable terms, the company's profitability has increased in low double digits, Marshall says. "There are a ton of people caught up in the relative newness of pay-per-click marketing," he notes. "They aren't paying enough attention to their bottom line — they're just excited to get the new sales. That worked for a while, but the space has gotten so competitive now that all marketers have to be smart about where they're spending their money."

Banner Ads Out, Affiliates In
As for its myriad other uses of Web-based marketing, Gaiam largely has shied away from banner advertising because banner ads typically don't convert, according to Marshall. Instead, the company has succeeded with affiliate marketing. In addition to some retargeting programs that enable Gaiam to keep up with prospects that visit its site without buying, the company has a broad range of affiliates.

Some coupon sites are effective drivers to Gaiam's site, and the company has broader affiliate programs, such as Upromise. Gaiam also targets companies that write articles about green living or fitness — the types of companies that have "a real alignment with our mission and values," Marshall says.

The key to Gaiam's affiliate marketing success is only approving affiliates that make sense for its brand. "We use LinkShare for the program," he says, "and somebody comes in and we get to approve it. You'll never see, for instance, a Gaiam ad on a car parts site. We have a fairly tightly controlled group we work with."

Gaiam runs video ads on affiliate sites in which browsers can view, say, a Gaiam yoga video ad. In addition to some other flash and static ads, Gaiam gets itself quoted in affiliates' articles about yoga, health and environmental subjects; the quotes contain links back to the Gaiam site.

Content (Really) Is King
The heavily educated nature of Gaiam's customers has led the company to beef up its content as it's continued to morph into an online company from a traditional print cataloger. In fact, last year Gaiam launched a content-only site, GaiamLife.com, which focuses on subjects its customers are interested in: yoga, exercise, sustainability and other subjects germane to Gaiam. "The site's been wildly successful," Marshall says. "Customers love it, and we're able to track how people click on our articles, then on our products to make purchases."

What's more, GaiamLife.com aids search engine optimization (SEO) efforts because it's a subdomain of Gaiam.com, helping organic ratings. "You can only rank once per term," Marshall points out. "If you type 'yoga,' Gaiam can only come up once. But if you have a subdomain, both Gaiam and GaiamLife can come up. It's a triple whammy for us, because customers love the GaiamLife site. We get two listings, and our articles teach them how to love this lifestyle." That leads to sales at Gaiam.com.

"Gaiam is a great example of a Web site that has the right level and amount of content for its customers to convert, and for search engine optimization to happen," says Ken Burke, founder, chairman and chief evangelist of MarketLive, Gaiam's e-commerce provider. "It's probably one of the best sites on the Internet for that, and certainly one of the best catalog sites."

Gaiam also presents SEO-friendly content on its pages, but makes sure that content is relevant to the customer. "Some people put garbage content on their pages for SEO," Burke says, "but it has no relevance for the customer. It might help them get better rankings, but it doesn't help the customer experience. Gaiam has done a great job of balancing the level of customer-friendly content that's also helping SEO throughout its site."

Selling Without Selling
As for the integration and conversion process of the two sites, "the primary purpose of the GaiamLife site is to educate; the secondary is to sell," Marshall says. The thought process goes as follows:

1. Devise an idea for an article, making sure it makes sense for the Gaiam brand and its customers.
2. Write the article, checking internally if there are any products the company sells that relate to it.
3. Down the right side of the GaiamLife.com page on which the article appears, display a DVD and, say, a yoga mat for a yoga-related article — both products that link to the Gaiam.com site.

"We don't want to turn this into an infomercial, and we don't want it to be like an advertorial," Marshall is quick to point out. "We've never wanted to cloud or obscure the education process by being over the top with selling."

In addition, Gaiam offers customers a free e-newsletter. As for staffing all that content production, Gaiam employs a small internal team, but most articles are written by commissioned freelancers.

Another way Gaiam has built an online following is through growing social media networks. With active profiles on Facebook, Twitter and MySpace, Gaiam attempts to fill the gap with new customers "that we can't get in a more cost-effective manner," Marshall says.

In addition to taking advantage of the surging popularity of Face-book and Twitter, Marshall's keen on Gaiam's YouTube channel. The company posts one or two health and fitness videos weekly. "A lot of them are previews of our DVDs or announcements of our new products," he says. "If, say, we launch a new product for magazine, we may do some sort of joint video with Shape, saying that the new video is coming out. We tease that video and have a link to Gaiam.com, where people can order the video."

More Internet Video Ahead
The integration of video "isn't being done a lot across the Internet," observes Burke. "But in the next two to five years, product shots on e-commerce sites will turn into product videos. There's going to be a lot more video, and not just in the text form that we have been limited to on the Internet today. Gaiam is leading the charge on this."

Gaiam's site has a customer-focused category structure. Since the company knows its top-rated product category gets clicked frequently, according to Burke, this category is promoted heavily on the site.

The articles and information on the community site are tightly integrated throughout the e-commerce site as well, which is another way of keeping customers at the forefront of its design. "I very rarely see this type of integration on e-commerce sites," Burke says. "A lot of merchants really haven't grasped the concept of community like Gaiam has."

Many people use a cataloger's e-commerce site as an order-taking tool. But Burke says, "Gaiam went in the completely opposite direction from a strategy perspective and created an experience for the customer that supports all elements of that customer."

Offering multiple payment options such as PayPal and Bill Me Later also illustrates Gaiam's focus on the customer, according to Burke. Gaiam does things like calculating tax and shipping at the shopping cart, so customers know exactly what their totals will be instead of having to go to the fourth page of checkout to find out.

"This is something that's relatively simple to do," Burke says, "but many sites don't do it."

Commitment to Mission
Maximizing your use of social sites is one thing. Being smart with search term choices is another. Succeeding with a highly profitable affiliate marketing program is still another. And gaining a loyal following for an information subdomain is yet another. But integrating these channels requires "a lot of work," Marshall says.

The key, according to Marshall, is having a top-notch management team "all committed to our mission and vision. We spend a lot of time and effort focusing on our brand, making sure it's consistent across channels and that we put our best foot forward so hopefully customers will give us a chance."

Gaiam's integrated approach appears to be working, observes Mark Kirschner, chief marketing officer for Gaiam's online marketing solutions provider LinkShare. "Gaiam aligns its promotions and creative across channels and reaps the benefit of doing so," he says, adding that Gaiam is very much on top of today's consumers' multichannel shopping habits.

Passive E-Mail Program
One means of tying it together is through e-mail marketing, although Marshall says the company is more passive than most, preferring to protect its customer file's privacy. "We're pretty conservative in that we don't blast people five days a week like other companies," he says, noting that the most Gaiam transmits is one to two e-mails a week; renting out its e-list is out of the question. As for the content of the e-mails, the company sticks to a mix of three methods:

1. branding;
2. merchandise promotions with percentage-off prices; and
3. offer-based messages, such as this percentage-off one: "10 percent off any order of $100 or more."

"At Gaiam and in my previous life, I never found acquisition e-mail list rental to work," Marshall says. "We've never found it to be profitable."

Whither the Catalog?
Gaiam's heavy focus on the online channel doesn't mean its catalog has gone away. Even though Gaiam has steadily cut back on catalog volume over the past five years, both for economic and environmental reasons, Marshall says the catalog still "ultimately drives sales and builds the brand."

Yet, according to Marshall, the catalog "tends to be more of a shopping experience," while the Web site is more of a buying experience. "Nobody pages through a Web site like they do a catalog."

While continuing to tilt the balance of catalog mailings more heavily to customers than prospects, Gaiam has cut its frequency this year from 24 to 14 mailings. That reflects the discontinuation of the Gaiam Living Arts spin-off title. "We wanted to reduce our overall impact on the environment," Marshall says, "so we consolidated the main catalog and Living Arts to one slightly larger book called Gaiam Living."

In fact, in listing Gaiam's most notable challenges ahead, Marshall points to the rising costs of producing and mailing catalogs as challenge No. 1. "Mailing catalogs profitably is our biggest challenge," he says. "But figuring out how to conduct that orchestra of channel integration is right behind it."