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b2b & b2c SearchPrice and MarketingPersonalization
and b2c SearchClosing Advice: Business Development b2b & b2c SearchKAREN LAKE: Can we start with an overview of what
Mercado offers the business community on the Internet?
MENACHEM COHEN: Mercado offers intuitive access to ecommerce catalogs.
We sell our catalog search service that offers buyers a very intuitive,
easy way to find the products they're looking for either on b2b
or b2c applications.
KAREN LAKE: Why is search an important part of the ecommerce process?
Why did you decide to become part of the business?
MENACHEM COHEN: Because based on our market research, we have found
that 77% of online sellers use product search as their main selling
tool. If you think about it, the first thing people do when they
go online to buy products is look for the products they want to
buy - whether it's a b2b or b2c application. It's a natural behavior.
After all, ecommerce is all about transactions, and transactions
mean products changing hands, going from the sellers to the buyers.
You can assume that an easy way to find the products people are
looking for is a natural gateway into ecommerce.
An easy way to find products is not an easy product to develop
because ecommerce catalogs are very complex. They're structured
databases. It's not easy to bridge the minds of potential buyers
or shoppers and the catalog data. We saw this as a major technological
problem to solve.
KAREN LAKE: So you're actually offering the catalog itself with
the search application or are you only selling the search application?
MENACHEM COHEN: We don't offer catalog data management functionality.
KAREN LAKE: You sit on top of the ecommerce software.
MENACHEM COHEN: Exactly. We offer our catalog search subsystem.
It is a group of servers that interfaces with the web servers, and
the application servers and the databases where the product information
is stored, and offers search of the product information.
KAREN LAKE: I'm looking at the report from Forrester Research about
search that says that 77% of the time, people say that search is
the way they normally find what they're looking for and this is
what sites use to ease navigation and drive sales. Number two is
personalization at 35% and then chat and message boards at 21%.
Can you give an example of what someone would find if they did
a search with your product? What would be different if they were
using the Mercado software rather than doing a typical search? Why
does there need to be something sitting on top of the catalog?
MENACHEM COHEN: I want to make sure it's clear that our product
is deployed at our customers' sites. If you look at some of our
customers such as Tower Records or Caterpillar or Blockbuster Video,
our catalog search subsystem is part of their website infrastructure.
So, you don't go to the Mercado site to search a product. You go
to Blockbuster.com or TowerRecords.com; and when you're searching
for a product there, you're using our search.
KAREN LAKE: It's always private labeled as a part of the customer
solution?
MENACHEM COHEN: Exactly.
The most trivial example of our functionality is misspelling. How
many people can spell Schwarzenegger? But you'd like to find his
movies. I guarantee that with 95% of the commerce applications in
the US offering Schwarzenegger movies, you can't find those movies
unless you can spell the name correctly.
KAREN LAKE: How would your software solve that?
MENACHEM COHEN: With our software you can misspell or mistype.
You don't have to use the exact terminology used in the catalog.
To give you an example of something a lot more complex, you don't
even have to use the language the catalog is in, which means you
can search an English catalog in Spanish. So, you don't even need
to speak or write English in order to search the catalog.
KAREN LAKE: So I could type it in Spanish and it'll find the item
in the English catalog.
MENACHEM COHEN: Exactly.
Here is a little more complex example of intuitive access to a
complex catalog at TowerRecords.com. When you think about Symphony
#41 by Mozart conducted by James Levine and performed by the Chicago
Symphony Orchestra, you don't need to fill in forms that all of
us are so used to when we go to most ecommerce sites. You just type
it in plain language. The order doesn't matter. You can type "Chicago,
James Levine, Mozart, Symphony #41." You can misspell it, and we
will still find it. Our product creates a bridge between your mind
and the product information.
KAREN LAKE: So the order doesn't matter and you don't have to do
a Boolean search and that kind of good stuff.
MENACHEM COHEN: Exactly.
Price and Marketing
KAREN LAKE: As you talk about the product, it sounds more sophisticated
and therefore more expensive. Is this something that small or medium-sized
businesses could afford to use? Is it a pay-as-you-go kind of model
or do you pay for the software and you're done?
MENACHEM COHEN: The pricing of the product goes by the number of
servers or CPUs that use it. If you have a smaller business, you
don't have so much traffic, and you don't need many load balancing
servers, you pay less. It also goes by the number of searchable
items in your catalog. We have entry-level pricing and it goes up
from there.
KAREN LAKE: What would be the low range and what would be the high
range?
MENACHEM COHEN: The high range would be over $1 million, the low
range would be around $100-150,000 for a complete package, which
is the software license, some very limited professional services
to help the customer get up and running with implementation, and
1-year support.
KAREN LAKE: How have you been able to get your name out? You have
a very impressive list of customers including Sun, Blockbuster,
Tower Records, Microsoft, Merrill Lynch. How do you get companies
like that to say, "We're going to trust Mercado with part of our
ecommerce solution"?
MENACHEM COHEN: First, we put in a lot of hard work. You must keep
insisting they should look at your product, evaluate it and see
how great it is. But in the end, the main reason why we got these
people to buy our product is because of how great it is. You prove
it to them. You show them the value. You show them the innovation
and the uniqueness of the product and they see it. When they see
it, they believe it. When they believe it, they buy it.
Personalization and b2c Search
KAREN LAKE: One of the things in your literature is an example
of searching for a desk or a chair. If I'm an executive secretary,
I see one thing. If I'm a student, I see another. Can you talk about
how that integrates as part of your solution and why you think that's
important?
MENACHEM COHEN: Yes. In Q2 2000, the second quarter, we launched
the concept of business-driven search- which means when people are
searching for products, the results are based not only on the product
information stored in the catalog, but also on information coming
from personalization servers and merchandising rules. Let me give
you another b2c example from the movie world because I'm a fan and
it's easier for me.
KAREN LAKE: You should be - with Tower Records and Blockbuster.
MENACHEM COHEN: If you're searching for Clint Eastwood and the
results are coming based only on the product information in the
catalog, you will get all the Clint Eastwood movies sorted by something.
It depends on how our customer wants to do it. But if we know your
user profile based on your history and that you're interested more
in westerns than in action movies, then the Clint Eastwood's westerns
will appear before his Dirty Harry and other action movies.
KAREN LAKE: You're saying that it isn't that you actually make
that choice and then the other choices are gone, but that you order
them differently based on preferences?
MENACHEM COHEN: Yes. We all know that people pay attention to the
top three, five, seven or ten search results. They don't pay great
attention to what's on the second page.
KAREN LAKE: They get tired. If they don't like the first page,
they usually leave.
MENACHEM COHEN: So you want to match the search results you display
on the first page against what they want to buy as much as possible.
In our merchandising, if we have a great sale on one of those Clint
Eastwood westerns, it will be ranked even higher to make sure you
pay attention to the fact that there's an opportunity here.
Closing Advice: Business Development
KAREN LAKE: If you had a next-door neighbor who came to you and
said, "I see what you've done with your company. I've got this great
idea for an Internet company. I've already written my business plan.
I'm ready to go out and do it." What would be the three top tips
you would give on what they should or should not do in the Internet
space to make sure they're successful?
MENACHEM COHEN: The first thing I would tell him or her is to raise
cash when you still have cash in the bank. It's easier to get a
loan from the bank if you really don't need it - same thing with
a company and funding. Get additional funding when you still have
enough cash in the bank. People worry about dilution and optimizing
valuation, and in my mind that's not the right way to do it. The
company needs funding. I believe the number one reason why companies
go out of business is simply the fact that they run out of funding.
The best way to get funding is when you still have enough cash in
the bank.
KAREN LAKE: Very, very interesting.
MENACHEM COHEN: Number two, my advice would be to create a business
model that you believe is going to work. Before you grow the company,
test the business model while the company's still small and see
if it works.If you see that it works, then start growing the company
and scale up. But test it first when you're still small. If it doesn't
work, God forbid, you can change it.
KAREN LAKE: You can change when you're small.
MENACHEM COHEN: Exactly.
KAREN LAKE: Great. Anything else?
MENACHEM COHEN: The third would be the only way to prove your product
works is by real paying customers using it for at least six months.
That means you have to get two or three real paying customers to
use your product before you know that your product really, really
works in the field. That's the advice I got from someone when I
started with Mercado and it's paid off. You have to make sure that
these two or three customers are satisfied and remain satisfied.
Even when you have fifty or a hundred customers, they should still
be satisfied customers. If I look back at my first two customers
in the US, Tower Records and Caterpillar, it's been a year and a
half and they're still satisfied. We've been working very hard to
make sure they remain satisfied. There's nothing more important
than customer service.
KAREN LAKE: That's very well thought out advice. You've been a
delight to have on the show. Thank you so much for joining us.
MENACHEM COHEN: Thank you.
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