Retired Navy captain Bob Douglas founded the Black Dog Tavern on Martha's Vineyard in Massachusetts in 1971 as a 50-seat restaurant. He opened the place in January - a pretty good sign, in a summer vacation town, that profit wasn't the be-all and end-all for this operation.

But that was then. Today the Black Dog has several ancillary businesses, including a bakery, a catering service and a merchandise unit that generates 75% of its DM sales online.

The conversion from seasonal watering hole to multichannel merchant began in the late '90s. With its signature T-shirts and coffee mugs selling well in the store (one good customer was President Clinton, who bought a gift there for Monica Lewinsky, according to congressional transcripts), the Dog took a logical step and started a catalog. This was done as much to give off-season employment to staffers as to sell merchandise, according to CFO Dan Pucillo.

But sales grew, and when the Web came along in the mid-'90s, Black Dog bit. The company's first site was intended primarily to garner sign-ups for the catalog.

Accurate inventory counts were another problem, and customer information was siloed off, useless for other promotional purposes.

Then came the sharp dropoff in vacation travel after 2001 and a new need to control costs. The company cut back from four or five 250,000-book mailings a year to a single drop. And it refined its Web operation.

Using Web design services from Engine Ready Inc. in San Diego, Black Dog relaunched a more full-featured Web site in 2002 and resumed marketing through it in 2003.

An important part of that renewed Web commitment was figuring out how people were currently finding TheBlackDog.com, and how well existing online marketing tactics - both pay-per-click and search optimization - were converting visits into sales. Black Dog started subscribing to Conversion Analyst, Engine Ready's proprietary Web analytics tool, to track results from its paid-search campaigns and to check that the Web site was properly optimized for organic search.

As part of its Web relaunch, Black Dog began running pay-per-click ads on both its branded terms and on generic terms for the items it offered - everything from keywords for T-shirts, mugs and sweatshirts (top-selling items) to "corporate gifts" and catering services such as "unique wedding cakes." But after a short period spent watching those keywords to see which ones led visitors to the site and which got them to buy once there, Black Dog - in consultation with Engine Ready - determined that only its branded terms were performing effectively as a search marketing campaign. The generics cost too much and were too competitive.

"We were trying to make sure that we were ranking pretty high for general terms such as 'sweatshirt,' but we found that those terms weren't converting anywhere near as well as the ones where someone was looking specifically for Black Dog merchandise or searching on 'Martha's Vineyard,'" Pucillo said.

Watching the online conversions also had the effect of re-energizing the Black Dog catalog, he said. At the time of the relaunch, the company was down to one small mailing a year. But the difficulty of getting its product-quality message across on the Web convinced Black Dog to open that schedule up a bit with a product introductory mailing in the spring and then a fall/winter book. (Fulfillment is now safely and more cheaply outsourced to a company in the Midwest.)

The company also made sure to integrate its online sales function with the back end. It can use its online database to market to past or lapsed customers via e-mail and the occasional direct mail campaign.

Of course, the Web isn't the only channel - roughly 25% of sales still come through call centers.

E-commerce responsibilities are shared by Pucillo and three or four others - including the graphic designer and the buyer - share e-commerce responsibilities. And without a dedicated e-commerce executive, checking the centralized Conversion Analyst reports daily is crucial to making those Web marketing decisions.

"I'm always checking it to see what URLs people are coming through," Pucillo said. "I also like to check on daily browsing hours, the number of views we get after we update the site, and heaviest shopping days. If you're planning to do a Web sales blast, that knowledge definitely helps."

© 2006 Prism Business Media Inc.