Case Study: Marketing in a Tough Economy

How do you ensure a successful holiday selling season during a tough economy? David Lonczak, the Vice President and Chief Marketing Officer of drugstore.com, chatted with us about what — despite the recession — his team does to boost sales, retain customers, prioritize marketing initiatives, and more. Here’s a snippet of the full interview, which is available on eMarketer Total Access.

eMarketer: How has the economy forced you to alter some of your business priorities, meaning marketing priorities, technology priorities, things like that?

Mr. Lonczak: A year ago, when we saw the horrific economic impacts going on, like most companies, we had to take some steps. For example, we reduced our capital expenditures related to technology by some 30% to 40% to preserve capital, preserve cash.

With regards to marketing, we continued to lean on the analysis that we had done related to lifetime value of channels, and we constantly are looking at the cost per order per channel. And there were some channels that became less effective than others, so we adjusted our marketing mix slightly to make sure that we were continuing to be profitable, either on the first-order basis, or a lifetime-value proxy.

Earlier this year, recognizing that people were stretched to even buy some of the basics, we lowered prices on several thousand products. We featured coupons and made sure those coupons were not buried on the site. We actually added a coupon tab about this time last year, and that tab continues today as part of our global navigation.

eMarketer: Can you please be more specific about some of the areas where you increased your focus and some areas where you were forced to cut back?

Mr. Lonczak: A must-have on the site would be, for instance, your list, which is a key part of our value prop for repeat customers. What that gives customers is a complete history of their purchases on the site.

We’re continually updating that with regards to new functionality, making it easier for you to sort your purchases. You can do last purchase, or you can do it by category. You can sort by date of purchase or site, because we have Beauty.com as well as drugstore.com, [and] because it’s a shared cart.

We also announced a partnership in which we’re powering a site for Medco, which is one of the largest pharmacy benefits management companies in the country, if not the largest.

But when it came to things like adding blogging capability on the site, which is a nice to have, it wasn’t a competitive or business imperative in 2009.

eMarketer: Do mobile commerce and social commerce fit in the must-have or nice-to-have category?

Mr. Lonczak: Those are right in the gray area. We could spend a whole bunch of money developing mobile applications, a mobile-ready site. We could develop and spend a whole bunch of money on social media, widgets for Facebook, etc.

What we have done is to take a very pragmatic and systematic approach getting into these new media. And we are on mobile quite significantly. We have a store for both drugstore.com and Beauty.com on mobile, primarily right now for the BlackBerry and non-iPhones, and we do that through a partner called Digby. By partnering with them, we’re able to reduce our up-front investment.

With social media, we are out there on Twitter with several different accounts. We have Beauty.com and drugstore.com on Twitter. We have Ask the Director, which is a customer service twist to another Twitter account that we have. We are on Facebook. And we’ve been on MySpace for quite some time.

But we’re doing these things either through partnerships or affiliates, or we’re doing them in a grassroots way without spending a whole bunch of money on agencies and design. We do our own design in-house, and so it’s a matter of trading-off time, as opposed to making these urgent projects and spending a lot of money on overtime or with an outside agency. We’ve been patient in terms of getting these things live out there on Facebook.

The full version of this interview is available here, to eMarketer Total Access subscribers only. Every day they have access to new interviews with digital marketing leaders and trendsetting entrepreneurs.