Auction website revamps customer-retention tactics
Ian Aronovich began shopping government auctions for the bargains they yielded on the artifacts of the good life -- electronics, cars and jewelry. But instead of leaving with great deals, he came away with a business idea -- a website that lists auctions of government-seized and surplus items and foreclosures.
While government websites usually list their auctions and the Internet abounds with foreclosed properties on the auction block, GovernmentAuctions.org is a one-stop repository of information about such events throughout the country.
The 9-year-old site has listed everything from the mundane to the notorious, including auctions to sell off the contents of the Unabomber's hut and the belongings of Teresa Giudice of "The Real Housewives of New Jersey." Users pay a membership fee that gives them access to each auction's exact location and offerings.
But retaining members takes some serious doing. A new business model has helped, and experts said the company could target potential new members through Web tracking and social media.
A problem with renewals
At the outset, Aronovich, a lawyer, and his business partner, Michael Pesochinsky, who had Web development experience and later became a lawyer, charged users an annual membership fee of $39.95.
But when the economy began to falter, so too did the company's fortunes. Courtesy of its paltry membership renewal rate of 2 percent, revenues dropped 30 percent -- to $588,000 in 2009 from $838,000 the year before.
"We got freaked out," said Aronovich, noting that the firm was spending at least $25,000 a month on advertising alone.
Through the years, the company had grown its membership with paid ads on search engines like Google and Yahoo. Today, it contracts with marketing, customer-service and support-staff firms on the east and west coasts and in the Philippines.
Companies in India, the Philippines and Romania provide Web development, graphic design and information-gathering about auctions, said Aronovich, 40, who serves as president of Great Neck-based Cyweb Holdings Inc., which owns and operates the website, while Pesochinsky, 42, is vice president and general counsel.
Believing it was easier to retain members than attract new ones, the partners revamped their business model. They now charge a monthly membership fee of $18.95, which the firm automatically renews, although customers may cancel at any time with "no questions asked." The company also gives prospective members a three-day free trial.
The revised approach has resulted in a 60-percent renewal rate and a membership roster of more than 4,000. Revenue last year was about $940,000.
Eva Ascarza, assistant professor at Columbia University's Business School, said the move to automatic renewals was a step in the right direction. ("We are animals of inertia," she said.) The firm could further boost retention by identifying and cultivating those who "continuously and over a long period" need the information the site offers, such as developers, used-car dealers and collectors, as compared to "one-time consumers" who are simply looking to buy a house among foreclosures, she said.
Plan rates and social media
And just as cellphone companies offer a range of plans to suit different customers' needs, Ascarza said the firm should consider offering "low-users" a cheaper rate plan for limited usage while providing "need-to-know" customers with alerts and newsletters to add value to their membership.
Michael Della Penna, senior vice president in Manhattan for Responsys Inc., a San Bruno, Calif.-based marketing company, suggested posting upcoming auctions on Facebook and geographically targeting the post to Facebook members in the regions where the events will take place.
The site could also attract more members by tracking visitors with "cookies," and then targeting them with Web ads, he said, noting that "the more they come back to the website, the higher the likelihood that they will convert into paid users."
Della Penna also suggested giving users the option of registering with their "social ID" -- which simply entails clicking a social media icon on a website, rather than filling out a form. Citing a study by Janrain, a Portland, Ore.-based technology company, he said social ID registrations can add 30 percent to 50 percent more sign-ups.
AT A GLANCE
Name: GovernmentAuctions.org, Great Neck
Founders: Ian Aronovich and Michael Pesochinsky
2011 revenues: About $940,000