A Chat With March's Profile, Jason Blake, founder/president, The Pond Guy, Inc.

Catalog Success: Where's your company headquartered?
Jason Blake: Marine City, Michigan. It's about 30 miles north of Detroit.

CS: When was the company founded?
JB: The company was founded in 1996.

CS: When did you begin mailing catalogs?
JB: The company started while I was in high school; I was cleaning and servicing ponds in the neighborhood. Then I went away to college at Michigan State and I thought that I could mail out catalogs and continue to do the business while I was here in East Lansing [Mich.]. So I put a catalog together my first year … sent that out to my existing customers. I didn't really understand the catalog business at all. I just figured I would hand them out and people would buy stuff.

Luckily, the service business was able to support the catalog. I probably didn't make a dollar. In fact, I'm sure I lost money on my first catalog. I slowly started growing this list doing trade shows, advertising in magazines, yellow-page ads, word-of-mouth, etc. The catalog started to grow and become more and more dominant. By the time I graduated college in 2000, it really started going. The catalog was happening a little bit. But I still wasn't getting into buying lists.

And I still didn't understand merchandising, really. I just had these products. But I did start to do my own private-label. I started branding a few of the hot products that seemed like we sold a lot of, put my own name on them, and got those out there.

In 2001 I moved basically from my parents’ basement to the location I'm in now, which is in an industrial building. We've added on to it and actually rented more space. We have a retail store, our service business still operates out of it, and then all of our shipping and catalog services are out of this building.

A couple of years ago I met up with Tom Beddows, a consultant in the industry. He's a circulation manager — he understands cataloging. That really changed my business. It went from 6,000 customers to 25,000 customers in the course of just 12 months with being able to dip into co-ops, get lists and do different things. One of our struggles still today though is to find those lists. With our business, it's so niche, that once you find a customer they become great lifetime customers, but they're hard to find.

And over the years I've really went to … I'd say our product mix is probably close to 60 percent our own brand, 40 percent national brand. And it continues to grow larger and larger with our own brand. I really feel strongly that that's part of our success. We've really helped start to develop new products and different ways of doing things. Selling those systems has made a big difference for us. And the fact that we can satisfaction guarantee all our own products. We stand behind them, everybody knows they work — it's really helped us develop a loyal customer base.

We're not a cataloger that really sells on price. We obviously try to offer a good value, but really price isn't our No. 1 goal. The fact is that if we sell those national brands, we're going to get beat up by the big companies of the world. So having our own brands and having exclusive products has really made us as profitable and successful as we are.

CS: Would you then consider the private-label brand to be your unique selling proposition?
JB: Absolutely. And then developing stuff that isn't even out there yet. A lot of the stuff, whether it's a different way of using the product, a different way of packaging it, presenting it … we've tried to put value with our private label so that there's some exclusivity to them. So nowadays there's a national brand and our brand. Compare the two, one's usually a little bit cheaper. Our brands aren't designed to be any cheaper. We're trying to add value to them, and they actually might be a higher price point than the national brand.

CS: What's the company's primary demographics? How do you find these consumers?
JB: We're lucky now because our universe is so small that there's a lot of people out there for us still to try. And our buyers continue to buy. We've been most successful with the database co-ops — Abacus, NextAction. Those types of companies have been very successful for us because we've tried lists and we haven't found lists that are really that great. It's difficult to pinpoint a pond owner. You don't know. The only thing that you can hope for is you get a list with somebody with a decent amount of property, because you have to own a certain amount of property to own a pond — the larger pond and lakes that we do.

You could almost pull that out, and then it depends on the area of the country because some areas don't have ponds, some areas do. There's really no underlying way that we can pick these customers out. Most of our customers are obviously homeowners, they're generally almost middle-aged, they have some disposable income, they have a larger piece of property. They're putting an investment into it [their property]. Generally, people that buy their first homes, they don't have ponds.

CS: Does a certain area of the country account for a large majority of your sales?
JB: It's nationwide. There's pockets, definitely. And there's two different parts of our business. We sell pond and lake, and then we sell decorative water features. We sell products that you'd find on a golf course: a large pond or a lakefront property owner. And then we sell products to people that may be in a subdivision with a small koi pond with water features and waterfalls. So we have two different types of customers, and a lot of times they're not the same customer. The guy that owns a small subdivision lot, he can't build a big pond, so we can't convert him into that type of customer. We can convert our large pond customers into our small pond customers, but it doesn't go the other way.

So the demographics are different that way. You might find concentrations in areas where there's a densely populated area of subdivisions with half-acre lots that's right outside of a major city. And then you find places in the middle of Texas that have hundreds of acres, but there's a lot of ponds in that area. It's pretty spread out. Midwest, obviously, is our strongest because that's where we started from. But we see it moving throughout the country now.

And one thing that's helped us, too, in the economy is — we've been still growing, not as fast as we'd been before — with the housing market being as crummy as it is, people are stuck in their homes. So they're willing to put a little more investment into their homes. Meaning that, if you know you can't sell it, ‘Maybe we'll fix up the pond.’ Where before people were flipping their homes so quickly that they wouldn't put that $3,000, $4,000 investment into maybe making this thing look nice, because it really wouldn't help the resale value because they could sell it anyway. And now these homeowner associations, the people who live on a community property with one big lake in the middle, they're not going to be selling their homes. So now maybe we should invest in making this thing look good.

CS: What products/services does The Pond Guy sell?
JB: We specialize in the maintenance of ponds, lakes and water features. But our real core business, and this is something that I started really back when the company started, and it was before the “green” movement, is natural solutions to water management. The majority of our products are all-natural. And that's one of the reasons why we went to the private label in the beginning — people weren't using them [all-natural products].

It was always, ‘Throw a chemical at the problem.’ Now it's becoming more and more popular, but when we first started there wasn't a lot of natural solutions out there. We've created different strains of bacteria and different products that actually naturally keep the pond clean.

When you buy into the Pond Guy philosophy, you're buying into a proactive solution to your problem. Meaning that we don't just throw a chemical at the problem and kill it … then it comes back. We really get to the root source, which is the excess nutrients. We try to educate the customer and say, ‘This is what you need to do long term to make this pond healthy. Work with nature and not against her.’ Once people understand that philosophy and buy into it and use it, they know that it works really well. It's not a cheaper approach, it's a better approach. Years ago, the choice you had was, ‘What chemical can I throw on it?’ It was kind of like your grass. You have weeds, you spray a chemical on it, they die. Now there's more organic fertilizers and different things out there that you can use that will give you better results.

CS: So your company offer its customers a long-term solution to their pond maintenance needs.
JB: You think about a pond and you have weeds. You kill the weeds, they fall to the bottom and they rot. Now there's nutrients — it's like a compost pile. So then more weeds grow up the next year. Then you throw more chemical on and you kill them. As time goes on, you've basically created this bed for weeds to really thrive. Every year you're treating more and more and more, you get the same results. Our system actually goes in and takes those nutrients that are on the bottom — that are creating the growth from the beginning — and it removes those nutrients. So you're actually getting rid of the source of the problem, which is really that nutrient load. That's really the core philosophy of what we do — we build equipment around that. We actually manufacture aeration systems, that's another thing that we do.

A lot of the stuff we don't just private label, we actually make here. We have a bottling facility where we literally bottle all of our liquid products, doing the mixing and the formulation of them. And then we also have a manufacturing side where we actually build the aeration systems. We build this equipment here and then box it and ship it out. So we go from product start to final sale.

We also have wholesale customers — dealers and distributors — that we sell to. So not only are we selling to the public through our retail chain catalog, we also sell to other dealers. They might have a small section of their store, not so much like a Smith & Hawken or Orvis, where they've made it almost like an Orvis section, where we try to keep the Airmax brand. Pond Logic and Airmax are the two brands we've chosen for our products in our catalog. When you buy into that we have point-of-purchase displays for them that you set in your store. So if you're a specialty retailer like a pond shop, we can bring in our system and put it in your store and you can sell it.

CS: How many retail stores does The Pond Guy operate?
JB: We have one retail store here at our warehouse, we have the catalog and we have our Web site. And then we also have our service business where we actually go out to customers. There's a field salesman and people that do the installation.

CS: What's the total number of SKUs offered at The Pond Guy?
JB: We're right around 600. It's a pretty low SKU count; we don't overlap items. Our customers call us … we should be the Pond Doctor because we're really prescribing products for problems. And in most cases customers don't call and say, ‘I need items number 200 and 252.’ They say, ‘I have this problem, I have that problem: my pond's 20 years old; I'd love to have huge fish; I want my koi to do really well; my dog always drinks out of it. My kids love it, but it's always ugly. What can I do?’

Then we start from scratch: Here's a system approach that you take to fix the problem that you have. Whether it's new filtration, too many fish, you need a product, etc. So then we prescribe our products to fix their problems. That's how we sell. It's unique in that way.

We don't have a lot of overlapping products because we've chosen products that we can guarantee. Our big thing is 100 percent satisfaction guaranteed, no questions asked on anything we sell. We have to only choose products that we know people are going to like and we can get behind.

CS: How many employees do you have at the company?
JB: There's about 25 in our peak season.

CS: How many times per year is the catalog mailed?
JB: We mail it nine times a year, with a circulation just around a million right now.

CS: What's the sales breakdown by channel?
JB: Our catalog and Web site are probably 85 percent of our sales. And then our service and retail business is the other 15 percent. We're located in Michigan, and Michigan's economy has been bad for the last couple of years, so our local business has actually seen some decline, but our national business has continued to be strong. And then within our catalog and our Web site, our catalog probably constitutes for about 65 percent of our sales, and then the Web site the remainder. The catalog has been growing, but the Web site's growing a lot faster.

That's one of our weak points. One thing that we know we're going to spend a lot more energy on over the next few years is our Web site. Putting our focus that we did for our catalog into our Web site. We'd like to see our Web site generate about 70 percent of our sales. But we know that the two together, from our short existence, really do complement themselves. Having just a Web site without a catalog right now I think would be real premature. But somewhere down the road that may be the case.

CS: How many SKUs on average appear in the catalog?
JB: There's 600 SKUs in the catalog; there might be 1,000 on the Web site. We've cut our catalog's size over the last year or so. We haven't eliminated products, but we've condensed — went to a little bit smaller catalog.

CS: Has the trim size of the book been reduced?
JB: No, the actual page count. We were at 72 [pages], now we're doing 60 [pages]. We actually added SKUs and went to less pages just by better design.

CS: What are the annual sales for the company?
JB: Four to five million.

CS: How did you get started in the catalog/multichannel business?
JB: I was in college and I didn't have the ability to visit everybody [customers] that I needed to visit. So I thought, ‘Well, the next best thing would be a catalog.’ I didn't really understand the catalog business, I just knew that I could always have a phone and I could take orders.

I worked on the catalog with a local printer, and actually the guy that designed my catalog was a fellow college student — he went to the University of Michigan. So I would go from Michigan State over to the University of Michigan to work on this catalog. We spent like two-and-a-half months developing this catalog. He'd never done anything like that before, but that was his background. He wanted to get into it and he wanted it for his resume. So he helped with the catalog and we developed it and had it printed here in Michigan. The printer worked with us to obviously get the files and everything over. And believe it or not, it went really smooth.

Now today, the problems that we have today … it's amazing when we work with professionals that we were able to finish this. And it seemed like it was pretty seamless. With the printer it was all ready art and everything, I couldn't believe it. So I developed our catalog and mailed it to about 3,000 people — my initial mailing list. I think I printed probably 20,000 catalogs my first run. It was like $2 a piece, pretty expensive.

That started it and it worked really well — I had a piece of literature to hand out. Then I started doing shows, home shows. When I first started doing home shows there was nobody else doing it, so our catalog was really exciting. People didn't understand there was even products out there that did that. So for three more years I printed it while I was in college, and then continued to print every year after that. The first two years I think I printed one catalog, did one drop. And then when people called and requested a catalog I'd mail them one. The third and fourth years we started doing quarterly drops.

CS: Were the people who received the first version of the catalog original customers?
JB: Actually, I said ’96; I graduated high school in ’96. I actually incorporated the business in 1996, but I really started in ’94, ’95. That's when I actually started treating the ponds. I had a friend of mine that had a pickup and he would drive us around. That's how I got started. Once I started making some money at it in my senior year in high school, I thought, ‘Well, I better make this legitimate.’

That's when I came up with the name. I didn't have a name, really. I just went to people's houses and would knock on the door and they'd say, ‘The pond guy's here, the pond guy's here.’ You know, ‘Hi, I'm Jason.’ I think I called myself Cleaning Care for like half a year, and finally I said, ‘You know what, the Pond Guy is perfect because that's what they're going to call no matter what.’ So I just decided to go with the “Pond Guy” name. I never dreamt that it was as good as it was when I picked it.

CS: How has the name benefited your business?
JB: It defined my whole business. I think back to the beginning of my business, the success, I owe a lot of it to the name itself. I think it really, really made a big difference. Pounding pavement obviously helped, but the name is what really kept me ahead of the bunch. And it still continues to keep us that way. And it came from my customers. That's what I was called so I said, ‘OK, I can deal with that.’

CS: What do you enjoy most about the catalog/multichannel business?
JB: I've never real been in any other business, so it's hard for me to tell, but when I talk to other retailers and friends and I go to different places, I love the fact that I have all my customers’ information, which most companies that don't do a Web site or a catalog don't have. If you're just a regular retail store … You go into Best Buy everyday to buy stuff, unless you're a rewards member — which they just started and it's not even done that well — they don't know anything about their customer.

I really enjoy the fact that when a customer calls us we have a relationship with them, they have a relationship with us. We know what they've purchased, how they've purchased and we can help them that way. That information really helps us run our business. And the fact that we're not planning to any one particular spot, especially now with the economy the way it is. Being a retail store only and the economy goes bad in your area or something happens, you're out of business.

With us we've been lucky because when seasonality or different things happen — we get hurricanes down South that ruined our business there, if we get a flood in Iowa and then that business is ruined — we have another part of the country that is actually feeding our business. We're not dependent on one thing, which is really nice.

I also like the fact that when I started the business I was able to be professional working out of my parents’ basement, which with any other business I wouldn't have been able to do. I guess it's hard to say exactly what it is I love about it, but I love my job. I can't imagining doing anything else.

CS: What do you find most challenging about the catalog/multichannel business?
JB: Really it comes down to not the business itself, but the actual channel: the Internet. The Internet can be great and it can be bad. The Internet is great for us because we get exposure and we get to talk to new customers who we wouldn't have. The Internet is bad because information isn't always correct, the customers are becoming misinformed or they're price shopping.

So now we've become a company that started with price not being our motivation for our customers — it's forcing us to be more conscious with our prices. We have to be careful how we operate our business. If you have comparable products and there's someone else cheaper without the overhead or the satisfaction guarantees or the expertise or expenses that we go through to make sure our customers have a good experience, you fight that every day. Now, these people go in and out of business every day, but they disrupt while they're doing it.

That's one thing about being in a regular business: If you were in a retail store and you had a great location, people buy from you because of your location. We don't have that benefit. They buy from us solely on our price and our service. We always give good service and we always try to give a fair price, but the Internet can really mess you up because now you have to offer the service to get their business, but then they want you to match the price also. There's that fine line between the two. It can erode your margins real quick.

CS: If you hadn't gotten involved in the catalog/multichannel business, what career path would you have chosen?
JB: I graduated college with a supply chain management degree; really, my big thing is marketing and manufacturing. I always liked the manufacturing side of the business, and I'm kind of excited in the fact that I'm able to do that now. I like the marketing, and I've been able to do that with the catalog forever, but now that we're actually manufacturing and building our own stuff … like this morning I was installing a new piece of equipment.

We're installing a new bottling line so we can make pond dye. I'm still able to be hands-on and buy equipment and use equipment and have this manufacturing side of our business, which is really neat. So I think if I wasn't in retail, I'd definitely be in a manufacturing type business.

CS: What's the toughest challenge you've faced as a business owner, and how did you overcome that challenge?
JB: The big challenge was with our growth spurt. I didn't really understand the catalog business and I was getting to that point where my circulation was getting so big. Before, I could print my catalogs, throw them in the trash and still be in business. I always had that luxury. It was kind of like, ‘If it made money, it made money. I didn't have to live on it.’ That period between when I started printing so many catalogs and mailing them that if each drop wasn't successful, we could be out of business. That time in my life was a challenge.

Now we've gotten to the point where the company's a little more mature and stable. But there was a point in time when every time we mailed a catalog we hoped the phone rang, because if it didn't we didn't know if we'd be in business the next week.

We had to start borrowing money — I didn't borrow money for the first eight years I owned this business. Now we work on a line of credit a few months out of the year, which is a big difference. We had the luxury of not doing that before. Those are small challenges.

But I think in the future, again it comes back to that challenge of customers are becoming more savvy, they require way more attention, they expect more service, they expect things to be done like a Fortune 500 company no matter how big of a company you are. So we spent a lot of time developing our Web site and catalog, the same amount of time a guy that's printing a hundred million catalogs spends. We obviously don't have the same costs, circulation and printing, but we have all those some challenges. And our audience is a lot smaller and our customers expect us to be what they are.

When they come to our Web site, if you're not Amazon.com and have the same feel as that, they're not as comfortable with you. We have to really compete with that as a small business.

Right now the immediate thing is the economy; that's probably everybody's thing. That's really been our big focus: What's going to happen to our customer base as the economy gets worse? We don't know because we have no history. We have to assume that it's not going to be as bad as some, but it could be bad. And we don't know what happens with that because this business is so new and there's not really any history of this business anywhere else, so we don't know what happens.

CS: Is there much competition in your market?
JB: We do have competition, and again, it goes back to the Internet. Before the Internet, we really had minimal competition because the catalog was an expense that people didn't want to do. Now with the Internet, anyone can sell products — eBay and everything else. And we're always educating our customers. A big challenge we have is we're trying to educate our customers the proper way to do things. There's so much information out there that they're getting educated incorrectly. Even before we get to them, they have perceptions that might not necessarily be true. So we're breaking through those barriers so they understand how our products work. That's one.

Our competitors … one thing about the economy is that it has minimized our competitors. One of our big competitors was becoming the specialty pond shop — they were springing up everywhere. Ponds became very popular, like water gardens. Literally every garden center, every corner — and I say every but in the scheme of things it's pretty minimal. But there was a lot more than there was even five years ago. A lot of those guys are actually going out of business because they can't survive on retail alone. So that's helping our mail order business; driving more people to our Web site and mail order. So at the same time there's Web sites popping up and retail stores going away.