* Space advertising. In its first year, the company spent more than $15,000 advertising (primarily for sales consultants) in local and regional parenting publications as well as daily newspapers. That effort brought in from 300 to 500 members, at an exorbitant cost of $30 to $50 each. While early forays into space advertising have proved to be budget busters, "we've learned our lesson," says Silver. He intends to place ads in the regional editions of select national magazines. "The cost is higher, but the efficiencies are better," he says. Silver expects to spend 40% of his marketing dollars on print advertising.
* Direct mail. This summer he entered a partnership with a large, national direct-marketing agency to conduct a direct-mail test and a telemarketing campaign. The company plans to send out 50,000 pieces in the direct-mail test and split the cost of the campaign with the agency. "We're paying the postage -- about $4,200. They cover the rest." In return, Silver will give the agency a healthy percentage of the membership fees. He hopes to get at least 1,000 more members. He estimates a national campaign could cost $250,000.
Silver's experiment trying to sell merchandise for mothers and children through a catalog had been disappointing, costing him more than $100,000 and causing his start-up to suffer a six-month-long "identity crisis." What business was he really in? In a desperate epiphany he realized he wasn't just selling baby gear. "We were really selling a relationship to mothers. Every benefit we provide -- the directories, the newsletter, the meetings -- is a marketing opportunity." So, when it came to peddling them, "we decided we don't just sell ads. We're selling a program." That program consisted of exposure in "Mom"; a listing in the network directories; direct-mail co-ops; list rental; and test marketing.
Silver won't discuss the cost per 1,000 that advertisers are expected to pay for access to his "mommy channel." But because of its status as a membership organization, Mothers' Network hopes to charge a premium over other publications in the market. In 1993, by his projections, each member would be worth $5 in mainly local and regional advertising revenues. By 1997, when the network would have a national presence, that figure would climb to $35. Besides advertisers, Silver is wooing sponsors among the ranks of large national baby-goods manufacturers like Johnson & Johnson or Gerber or Fisher Price. But large national sponsors demand more market penetration before they fork over a $50,000 to $100,000 sponsorship fee. They want at least 25% of births or a membership of 1 million. Silver predicts he'll get a more modest share of the market. Even at 500,000 members, he'd claim only 3% of the market.
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Operations
Tiny offices in midtown Manhattan, still crammed with the remnants of Silver's career as a merchandiser, serve as company headquarters. Every corner is crowded with boxes, each shelf laden with disposable bottles, bath seats, and an array of baby contraptions.
From here, memberships are processed and fulfilled. Applications are forwarded by nine area directors, who recruit members and organize local events on a commission basis. A database of members is maintained on a desktop system. Another database, of merchants and providers, is used to produce the resource listings and buying guides. Until membership applications reach a volume of 750 a month, Silver will continue to administer fulfillment in-house. Once the network expands beyond the New York region, he'll hire a fulfillment house. At headquarters, the start-up's staff consists of an information-services manager, a national sales director responsible for membership recruitment, and a local marketing coordinator, who sells ads. The office is run on less than $20,000 a month, including payroll.
Workshops take place off-site, usually at local hotels where a room can cost $150 for a couple of hours on a Saturday morning. Aside from room expenditures, there are few fixed costs associated with these events. The workshops are designed and delivered by consultants for modest fees. The cost of program curricula, developed by free-lance experts, is nominal. And the $6 fee charged at the door covers the company's outlay if 30 members attend.
The company's newsletter is also farmed out. A consulting editor, a former New York Times writer, was recently recruited to revamp it. Silver has allotted $24,000 a year for articles, but members are encouraged to submit articles for free, which cuts editorial costs. More than 50,000 copies of the September issue were slated for distribution in medical offices in New York and New Jersey.
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Finance
"Every personal asset I have is in this business," says Silver, who has invested about $250,000 and borrowed more from relatives. He even managed to settle a lawsuit for another $50,000. But despite the personal resources he's marshaled, Silver has so far failed to attract the outside investment he says he needs to roll out the concept nationally.
He attributes investors' coolness to confusion over the nature of his business. "In the beginning, when we were selling merchandise, it turned investors off," he recalls. His efforts to sell goods through a catalog and independent sales reps "made us look too much like Tupperware," he concedes. To investors as well as members, Silver's business bore too close a resemblance to multilevel marketers. "It was bad for our image." And it didn't make money.
