Why we chose integrity over profit
Making a profit is the ultimate goal of every company, regardless of the sector it operates in. But if the integrity of a company comes into question, the profit target can be rendered obsolete.
This was the lesson learnt by Letterbox Deals, a NSW-based business founded in 2009 by Jamie Bakewell, John Eptaminitakis and Kerry Wood.
Letterbox Deals supplies offers on printed catalogues, delivered to homes via a special deal with Australia Post. Clients include Optus, Domino’s and NRMA, as well as smaller, local businesses.
The founders saw a gap in what was a “rapidly fragmenting media environment”.
“We believed there was a hole in the market for a ‘best of breed’ unaddressed mail advertising service in Australia,” Bakewell says.
“We also believed that on the back of this service, we could roll out smart additions such as online advertising to further separate us from the competition.”
But in the early days, Letterbox Deals was almost forced to close its doors.
“The mistake that we made when we started this media product was really just on keeping our costs under control, which is standard start-up business practice,” Bakewell says.
“That meant we decided to distribute via a walker model… The company that owned the walker model was a listed company and we thought that was a good thing.”
“However, after the first issue, we almost had to close our doors because it became apparent the walker model didn’t provide a positive return on investment for any of the advertisers.”
“It was really a lack of understanding of the distribution and the DM market.”
Letterbox Deals decided to take a different, albeit more expensive, route.
“We instantly realised we had to commit to a much higher cost base and go with Australia Post in order to deliver a return to advertisers,” Bakewell says.
“We had to focus on the advertisers and not our bottom line.”
“We had to more or less do the next issue for free and absorb a massive, massive cost increase to retain integrity… It was a short-term pain for a long-term gain.”
And while the move was initially a bitter pill to swallow, Bakewell says it certainly paid off.
“Three years ago, we had an eight-page catalogue in Sydney and now we publish over 200 pages in all capital cities in Australia every two months, and 25 million catalogues a year,” he says.
“We just launched in New Zealand – we’ve been going there for six months – and we launched local area drops this year, and they’re being expanded massively in 2013.”
“It’s been a very rapid rise but it’s all on the back of having that advertiser integrity. We don’t run a churn model here at all. We have a 65 to 70% advertiser retention rate from issue to issue.”
Letterbox Deals, which employs about 15 staff, is on target to hit $6 million in revenue this financial year. According to Bakewell, it all comes down to integrity.
“I think integrity’s key. It has to be put over profit,” he says.
“There are a lot of small players in our industry and a lot of bad stories out there of people paying for advertising that never saw the light of day or a final issue that never went to print.”
“There’s a lot of baggage in this industry that we had no idea of until we heard some of the stories, so integrity for us has been the absolute key.”
“When we’re in meetings, we make a point of not criticising our opposition, and making sure clients make an informed choice.”
“What integrity leads to is repeat business and that’s got to underpin any business. Repeat business leads to profitability.”